ADC — Agree Realty Corporation

Agree Realty Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics:

• Core FFO per share: $1.13, an 8.1% increase year-over-year.
• AFFO per share: $1.14, a 7.9% year-over-year increase, marking the highest quarterly growth since Q2 2022.
• Liquidity: Approximately $2.3 billion, including $1.4 billion of outstanding forward equity.
• Pro forma net debt to recurring EBITDA: 3.2x, with total debt to enterprise value under 29%.
• Dividend: Monthly cash dividends declared at $0.262 per share for Q1, with an increase to $0.267 for April, representing a 4.3% year-over-year increase.

2. Strategic Updates and Business Highlights:

• Investments: Nearly $425 million invested across three external growth platforms, with $403 million in acquisitions, the largest quarterly volume since 2022.
• Acquisitions: Included properties from Hobby Lobby, Home Depot, Sherwin-Williams, Aldi, and Walmart, with a weighted average cap rate of 7.1% and lease terms averaging 11.3 years.
• Development Activity: Two new development projects commenced with a total anticipated cost of approximately $18 million; nine ongoing projects with an aggregate cost of about $71 million.
• Asset Management: Successfully executed new leases/extensions on over 876,000 square feet with a recapture rate exceeding 104%.

3. Forward Guidance and Outlook:

• 2026 AFFO per share guidance: Reiterated at $4.54 to $4.58, implying approximately 5.4% year-over-year growth at the midpoint.
• Investment and Disposition Volumes: Guidance remains unchanged, with expectations for continued robust activity in development and acquisitions.
• Potential Treasury Stock Method Dilution: Anticipated impact of $0.02 to $0.04 on full-year 2026 AFFO per share due to elevated stock price and forward equity.

4. Bad News, Challenges, or Points of Concern:

• Macroeconomic Uncertainty: Ongoing unpredictability in the macro environment may influence investment pace and partner decision-making.
• Credit Losses: While no material closures are anticipated, guidance includes 25 to 50 basis points of credit and occupancy loss for the year.
• Investment-Grade Tenant Acquisitions: Decreased this quarter primarily due to the inclusion of Hobby Lobby, which is privately held and not rated.

5. Notable Q&A Insights:

• Investment Guidance: CEO Joey Agree noted that while the pipeline is strong, macroeconomic conditions and transaction selection will dictate the pace of investments.
• Tenant Behavior: No hesitancy observed among tenants despite geopolitical tensions; brick-and-mortar retailers are actively expanding.
• Cap Rate Trends: No significant changes in cap rates for investment-grade versus non-investment-grade tenants noted over the past 18-20 months.
• Private Equity Ownership: 77% of the portfolio is publicly traded, with a small component of private equity, indicating a focus on stability.
• Consumer Behavior: Observations of a "trade-down" effect among consumers, particularly in discretionary spending sectors, but no immediate concerns for the portfolio were expressed.

Overall, Agree Realty demonstrated strong financial performance and strategic execution in Q1 2026, maintaining a robust outlook despite macroeconomic uncertainties.