Agree Realty Disagrees on Buyout

His top candidate at the time was Bedford Property (BED). Bedford ended up going private in February at a 10% premium to its stock price. Next up on his list was Agree. His firm is also eying a third REIT, which he declined to name.

Comparato says his firm valued Agree's individual properties at cap rates, or initial rates of return, of 6.35% to 7.5%, which is where he says similar properties have been trading on the private market. He admits that even these values might be conservative.

Yesterday, Agree reported first-quarter funds from operations of 58 cents a share, down from 60 cents a year and a penny below analysts' mean estimate. BB&T Capital Markets analysts attributed the underperformance to higher-than-anticipated property and corporate-level expenses.

BB&T rates Agree hold based on its fair relative valuation. "We see no catalyst for appreciation," the analysts wrote in a report, which was released before news of the Compson bid came out Wednesday morning. The analysts declined to comment on whether the new offer would provide such a catalyst.

The situation at Agree could get interesting if Compson can get some of the company's major institutional investors backing them. Agree's board would have some serious explaining to do as to why an asset sale or a privatization isn't in the best interests of shareholders.

>To order reprints of this article, click here: Reprints