Investment Volume: Over $375 million invested across three external growth platforms in Q1 2025. Liquidity: $1.9 billion of liquidity and over $1.2 billion of hedge capital. Forward Equity Raised: $181 million raised via ATM program in Q1 2025. Net Debt to Recurring EBITDA: 3.4 times at quarter end. Portfolio Properties: 2,422 properties spanning all 50 states with 99.2% occupancy. Core FFO per Share: $1.04 for Q1 2025, a 3.1% increase year-over-year. AFFO per Share: $1.06 for Q1 2025, a 3% increase year-over-year. Full Year AFFO Guidance: Raised to $4.27 to $4.30 per share, over 3.5% growth at midpoint. Dividend: Monthly cash dividends of $0.253 per share for Q1 2025, equating to an annualized dividend of $3.04 per share. Dividend Payout Ratio: 72% of AFFO per share for Q1 2025.

Warning! GuruFocus has detected 11 Warning Signs with ADC.

Release Date: April 23, 2025

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

Positive Points

Agree Realty Corp (NYSE:ADC) invested over $375 million across its three external growth platforms, marking the largest quarter of investment volume since Q3 2023. The company has a strong liquidity position with $1.9 billion available, including $1.2 billion of hedge capital, providing flexibility and protection against market volatility. ADC raised $181 million of forward equity via its ATM program, maintaining a robust balance sheet with no material debt maturities until 2028. The company increased its investment guidance range for 2025 from $1.1 billion-$1.3 billion to $1.3 billion-$1.5 billion, reflecting a 47% increase over last year's investment volume. ADC's portfolio occupancy remained solid at 99.2%, with a focus on recession-resistant retailers that have adapted to omnichannel strategies.

Negative Points

The macroeconomic environment remains volatile and unpredictable, posing challenges for future growth and stability. Despite raising investment guidance, the AFFO per share guidance was only increased by $0.01, partly due to anticipated treasury stock method dilution. The company faces potential impacts from tariffs, although it believes its portfolio is well-positioned to withstand these challenges. ADC's exposure to pharmacy and dollar stores has decreased, reflecting concerns about overbuilding and market saturation in these sectors. The company experienced a temporary dip in occupancy due to issues with former Big Lots locations, although resolutions are underway.

Q & A Highlights

Q: Joey, you raised investment guidance by $200 million. Were there other detracting items affecting AFFO guidance? A: Joey Agree, President and CEO, explained that the only offset to the investment increase was the anticipated treasury stock method dilution, which was conservatively included in the guidance. Peter Coughenour, CFO, added that the incremental $200 million investment should translate to about $1 million of incremental earnings, or about $0.01, and the treasury stock method dilution is expected to be closer to $0.02.

Story Continues

Q: Is there any specific change in strategy around grocery exposure, given the increase in exposure to Kroger? A: Joey Agree stated that the increase was due to a one-off opportunity, including the acquisition of an Acme in Bronxville, New York. The company continues to find dominant grocers and believes they will gain market share, especially given the macroeconomic conditions.

Q: Have you seen any changes in the transaction market post the April 2 tariff announcement? A: Joey Agree noted that competition remains limited, with the 1031 buyer market significantly reduced due to lower commercial real estate transactional volume and lending market challenges. The company sees this as an opportunity to grow its portfolio in an accretive manner.

Q: How will tariffs impact your go-forward strategy as it relates to investments? A: Joey Agree mentioned that tariffs do not significantly impact their strategy. The company continues to focus on investing in dominant retailers that sell necessity-based goods and services, which are expected to benefit in a tariff environment.

Q: Can you quantify the spread relative to the revolver for the commercial paper program, and is this benefit included in the updated guidance? A: Peter Coughenour explained that the commercial paper program allows issuing notes at 40 basis points-plus inside of the revolver's borrowing cost, which was around 5.2% at quarter-end. The impact of using commercial paper throughout the year is included in the current guidance range.

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

This article first appeared on GuruFocus.

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