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Introduction & Market Context
Agree Realty Corporation (NYSE:ADC), a retail-focused net lease REIT, presented its Q1 2025 investor update highlighting strengthened guidance and strategic positioning in the evolving retail landscape. The company, which owns 2,422 properties across all 50 states, continues to emphasize its focus on high-quality retail tenants that demonstrate resilience against e-commerce disruption.
The presentation comes as Agree Realty builds on momentum from its strong 2024 performance, when the company increased its acquisition volume and maintained a fortress balance sheet. The REIT’s strategy of targeting investment-grade retailers continues to be a cornerstone of its approach, with 68.7% of Q1 2025 base rents coming from investment-grade tenants.
As shown in the company overview slide, Agree Realty has established itself as an $11.9 billion retail net lease REIT with investment-grade issuer ratings of Baa1 from Moody’s and BBB+ from S&P.
Strategic Positioning
Agree Realty’s investment strategy continues to focus on retailers that demonstrate resistance to e-commerce disruption and economic downturns. The company has been proactive in identifying promising retail concepts while avoiding troubled sectors, as evidenced by its early investments in companies like Tractor Supply (NASDAQ:TSCO), Gerber Collision, and TJX Companies (NYSE:TJX).
The REIT’s portfolio is strategically balanced across retail sectors, with no single sector exceeding 10% of annualized base rent. This diversification helps mitigate risk while maintaining exposure to high-performing retail categories. The company’s tenant base is predominantly composed of national (88%) and super-regional (11%) retailers, with only 1% being franchise operations.
The following slide illustrates Agree Realty’s investment focus areas, highlighting the company’s emphasis on omni-channel critical retailers, recession-resistant businesses, and properties with strong real estate fundamentals.
A key component of Agree Realty’s strategy has been its foresight in avoiding troubled retail sectors. The company notably reduced its exposure to Walgreens from 30% in 2012 to approximately 1% currently, demonstrating its proactive portfolio management approach. This strategic shift preceded Walgreens’ subsequent credit rating downgrades, protecting the REIT from potential negative impacts.
Financial Performance & Investment Activity
Agree Realty has increased its 2025 investment guidance to $1.3-$1.5 billion, signaling confidence in its pipeline and ability to execute. The company also raised the lower end of its 2025 AFFO per share guidance to $4.27-$4.30, representing 3.6% year-over-year growth.
In Q1 2025, the company acquired $359 million of retail net lease assets at a weighted average cap rate of 7.3%. The company’s disciplined approach to capital allocation has supported consistent earnings growth, as illustrated in its track record of execution since 2010.
The recent highlights slide provides a comprehensive overview of Agree Realty’s Q1 2025 performance, including investment volume, portfolio quality, and balance sheet metrics.
Balance Sheet Strength & Capital Allocation
Agree Realty maintains what it describes as a "fortress balance sheet" with approximately $1.9 billion in liquidity and over $917 million of outstanding forward equity. The company’s proforma net debt to recurring EBITDA ratio stands at 3.4x, reflecting its conservative leverage approach.
During Q1 2025, Agree Realty established an inaugural $625 million commercial paper program, further enhancing its financial flexibility. The company has also positioned itself for 2025 with pre-equitized capital through forward equity agreements and has no material debt maturities until 2028.
The following slide details the company’s debt maturity schedule and key capitalization statistics, highlighting its well-structured debt profile.
Agree Realty’s disciplined capital allocation strategy is guided by a conservative weighted average cost of capital (WACC) calculation. The company maintains a WACC of 5.5%, compared to what it identifies as a peer WACC of 4.7%, allowing for more sustainable investment spreads.
Portfolio Quality & Composition
The quality of Agree Realty’s portfolio remains high, with 68.7% of base rents coming from investment-grade retailers. The company’s ground lease portfolio, comprising 231 leases and 10.6% of total portfolio annualized base rent, provides additional stability with 88% of these ground leases being investment-grade and a weighted average lease term of 9.5 years.
The following chart illustrates the investment-grade composition of Agree Realty’s portfolio, showcasing the company’s focus on credit quality.
Agree Realty’s top retail sectors include grocery stores, home improvement, convenience stores, tire and auto service, dollar stores, and auto parts. This focus on necessity-based and service-oriented retail aligns with the company’s strategy of targeting e-commerce resistant sectors.
Forward Outlook & Dividend Performance
Agree Realty has declared an increased monthly cash dividend of $0.256 per share, representing a 2.4% year-over-year increase. The company has paid 158 consecutive common dividends and maintained an average AFFO payout ratio of 75% over the past 10 years, demonstrating its commitment to shareholder returns.
The following chart shows Agree Realty’s dividend growth history, illustrating the company’s track record of increasing distributions while maintaining a well-covered payout ratio.
Looking ahead, Agree Realty is positioned to capitalize on what it describes as a large and fragmented opportunity set. The company has identified over 169,000 potential net lease opportunities across various retail sectors, providing a substantial runway for future growth.
In the Q3 2024 earnings call, CEO Joey Agree had emphasized the company’s proactive steps to bolster its balance sheet, which has continued into 2025. The increased investment guidance for 2025 represents a significant step up from the approximately $850 million acquisition guidance for 2024, signaling accelerated growth plans.
Agree Realty’s consistent focus on high-quality tenants, conservative balance sheet management, and disciplined capital allocation positions the company to continue delivering stable performance in the evolving retail landscape. With substantial liquidity and a clear strategic direction, the REIT appears well-positioned to execute on its growth plans for 2025 and beyond.
Full presentation:
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