AGREE REALTY CORP Q1 FY2025 earnings call

• The company invested over $375 million across three external growth platforms in the first quarter, the largest quarter of investment volume since the third quarter of 2023.
• The portfolio comprises 2,422 properties spanning all 50 states, with an investment grade exposure of 68.3% and occupancy at 99.2%.
• Balance sheet is strong with $1.9 billion of liquidity and over $1.2 billion of hedge capital, and no material debt maturities until 2028 with pro forma net debt to recurring EBITDA of 3.4 times at quarter end.
• Commenced four new development or Developer Funding Projects with total anticipated costs of approximately $24 million in the first quarter, continued construction on 14 projects with aggregate anticipated costs of approximately $80 million, and completed six projects with a total investment of approximately $27 million.
• Asset management team executed new leases, extensions or options on over 584,000 square feet of gross leaseable area during the first quarter.

Core FFO per share was $1.04 for the first quarter, representing a 3.1% increase compared to the first quarter of last year. AFFO per share was $1.06 for the quarter, a 3% year-over-year increase. In the first quarter, the company invested over $375 million across three external growth platforms. The investment guidance range for the year was raised from $1.1 billion to $1.3 billion to $1.3 billion to $1.5 billion. The low end of the full year AFFO per share guidance was raised to a new range of $4.27 to $4.30, representing over 3.5% growth at the midpoint.

• Raised the investment guidance range for the year from $1.1 billion to $1.3 billion to $1.3 billion to $1.5 billion. At the midpoint, this is a 47% increase over last year's investment volume.
• Raised the low end of the full year AFFO per share guidance to a new range of $4.27 to $4.30, representing over 3.5% growth at the midpoint, including anticipated treasury stock method dilution due to the significant forward equity position. Anticipate treasury stock method dilution will have an impact of roughly 2 pennies on full year 2025 AFFO per share.
• Declared monthly cash dividends of 25.3 cents per common share for January, February and March, and increased the monthly cash dividend to 25.6 cents per common share for April.

• Macro-economic environment remains volatile and unpredictable.
• Uncertainty regarding tariffs and their impact on retailers and the portfolio.
• Volatility in stock price which can affect the treasury stock method dilution impact on AFFO per share.
• Limited liquidity in investment markets and challenges in the lending markets.

Q: Good morning. So Joey, you guys raised investment guidance by $200 million. You know, you guys also mentioned the treasury stock dilution method. Were there other detracting items? Because I would have thought you guys raising that much of your investment guidance that the AFFO guidance would have been more than half a cent.

A: Hey, good morning, Ki Bin. No other detractors, obviously we've included, as Peter mentioned in the prepared remarks, approximately 2 cents of treasury method anticipated treasury method dilution that's already hit the P&L but also throughout the year. Obviously we can't predict the stock price on a daily or for an annual basis here, but we've been conservative, we think and appropriately included that treasury method dilution as it incurs and what's incurred to date. Peter can talk about any other puts and takes in there, but that's really the only offset to the investment increase.

Q: Good morning. I just wanted to ask you a little bit about some of your tenant exposure. It looks like grocery exposure went up by about 90 basis points and within that your name tenants Kroger's was up and I was just wondering is that any specific change in your strategy around groceries or is that more just sort of a one-off opportunity that you found during the quarter?

A: Good morning Smedes. That was a one-off opportunity predominantly in the quarter. I also mentioned the ACME in Bronxville, New York that we acquired as well. We'll continue to find dominant grocers across the country. There is a number in the pipeline already for the second quarter. We continue to believe that dominant grocers will gain share here given the macro obviously, but also just the challenges for small grocers to operate in a 2% margin business ex-tariffs and all the other noise out there.

Q: Hey, good morning guys. Joey, I was wondering as you are having conversations with your development partners, what's their current appetite for opening new stores? Has there been a pause? Just trying to get a broader market read there?

A: Yes, good morning RJ. We have not seen a pause to date, albeit this is a volatile and fast moving environment. The team was with a number of retailers this week and will be again with two or three in the upcoming couple of days here. We haven't seen a pause. We've actually seen announcements. Sam's Club has announced that they're opening net new stores. Kroger's made announcements in terms of remodels and net new stores in the past two weeks as well and so we have not seen that pause. We haven't had any deals frankly tabled or put on hold either yet. But obviously again this is a fluid situation which is out of our control. But again, I think when you have a discount oriented necessity based tenant roster, those tenants today I don't think are overly scared by tenant tariffs. I think a lot of them see this as an opportunity. As I mentioned in the prepared remarks, the big are getting bigger and this is what we've effectively built this portfolio and constructed around. To invest in price, they have to invest in labor and invest in omni-channel fulfillment. And tariffs will require retailers to effectively invest in price unless they're going to pass that entire tariff on to the end consumer.