• Liquidity: Over $2 billion, including $920 million of outstanding forward equity.
• Leverage: 3.3 times pro forma net debt to recurring EBITDA.
• Investment Activity: $371 million invested in 127 retail net lease properties in Q4 2024.
• Acquisitions: 98 assets acquired for over $341 million in Q4 2024.
• Weighted Average Cap Rate: 7.3% for Q4 2024 acquisitions.
• Weighted Average Lease Term: 12.3 years for Q4 2024 acquisitions.
• Investment Grade Exposure: 73% of annualized base rents from acquisitions in Q4 2024.
• Core FFO per Share: $1.02 for Q4 2024; $4.08 for full year 2024.
• AFFO per Share: $1.04 for Q4 2024; $4.14 for full year 2024.
• 2025 AFFO Guidance: $4.26 to $4.30 per share, representing approximately 3.5% growth.
• Dividend: $0.253 per common share monthly, equating to an annualized dividend of $3.04 per share.
• Portfolio Size: 2,370 properties across all 50 states.
• Occupancy Rate: 99.6% at year-end 2024.

• Warning! GuruFocus has detected 9 Warning Signs with ADC.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Agree Realty Corp (NYSE:ADC) maintained strategic discipline and delivered meaningful AFFO per share growth despite market volatility.
• The company proactively strengthened its balance sheet with $1.1 billion of forward equity, resulting in over $2 billion of liquidity.
• ADC's investment strategy focuses on high-quality retailers, with 73% of annualized base rents from investment-grade retailers.
• The company achieved a record year in development and DSP platforms, with 41 projects completed or under construction.
• ADC's portfolio remains strong with a 99.6% occupancy rate and significant investment-grade exposure.

Negative Points

• The volatile interest rate environment poses challenges for capital allocation and investment strategies.
• Seller pricing expectations remain high, complicating acquisition opportunities in a fragmented market.
• The company faces potential credit loss risks, with 50 basis points of credit loss assumed in 2025 guidance.
• ADC's forward equity position could lead to treasury stock method dilution if stock prices remain high.
• The retail sector faces ongoing challenges from tariffs and macroeconomic factors, impacting consumer spending.

Q & A Highlights

Q: Can you provide insight into the typical renewal process for ground leases and whether there is significant mark-to-market upside? A: Joey Agree, CEO: There is significant mark-to-market upside. The case study mentioned involved a tenant with no remaining options, initially offering to extend at a flat rate. We had offers significantly higher and required the tenant to sign a new 15-year ground lease at market rates. This is indicative of the potential upside when we regain control of the building.

Q: How do you balance the forward equity you have, considering the dividend and interest expenses? A: Joey Agree, CEO: The forward equity's interest effectively nets out the dividend due to higher rates today, resulting in minimal cash drag. The forward equity is a strategic tool for capital allocation, allowing us to execute our investment guidance without raising additional equity.

Q: Are you seeing any changes in acquisition cap rates given the current interest rate environment? A: Joey Agree, CEO: Despite volatility in the 10-year Treasury, sellers' pricing expectations remain largely unchanged. We remain disciplined in capital deployment, focusing on appropriate spreads and asset-level pricing. The volatility doesn't help reset pricing expectations in the fragmented net lease space.

Q: With investment-grade tenant exposure at an all-time high, do you expect this percentage to increase further? A: Joey Agree, CEO: Investment-grade exposure is an output of our investment strategy. While we focus on the largest and best retailers, some unrated retailers like Burlington are also valuable. The investment-grade percentage may fluctuate based on market conditions and strategic acquisitions.

Q: How do you view the sale-leaseback market, and are there opportunities for increased activity? A: Joey Agree, CEO: We've closed several sale-leasebacks with relationship tenants and expect more activity as companies evaluate their capital structures. The market's activity may increase with changes in interest rates and economic conditions, providing opportunities for strategic partnerships.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.