Agree Realty Finds Steady Ground in a Volatile Market with Strong Q1 2025 Results

Agree Realty Corporation (ADC) delivered a resilient first-quarter performance, showcasing disciplined execution and a portfolio built to withstand economic uncertainty. With core metrics hitting new highs and a balance sheet fortified for growth, the industrial and retail-focused REIT is positioning itself to capitalize on shifting tenant demands and rising investor appetite for stable income streams.

Financial Resilience Amid Rising Rates
Agree’s Q1 results underscore its ability to grow through a period of elevated interest rates. While net income rose 5% year-over-year to $45.1 million, the slight dip in per-share earnings to $0.42 was overshadowed by robust growth in Funds from Operations (FFO). Core FFO surged 10.5% to $112.7 million, with per-share FFO climbing 3.1% to $1.04. Similarly, Adjusted FFO (AFFO) increased 10.4% to $1.06 per share, fueling confidence in its dividend sustainability.

The dividend itself grew by 2.4% annually to an $3.072-per-share annualized rate, maintained at a prudent 72-73% payout ratio relative to AFFO and Core FFO. This cautious approach ensures ample room for reinvestment while rewarding shareholders.

Strategic Acquisitions and Diversification
Agree’s investment strategy remains laser-focused on high-barrier-to-entry properties. In Q1, it deployed $358.9 million to acquire 46 net-leased assets—primarily in grocery, auto parts, and convenience stores—secured at a weighted-average cap rate of 7.3%. These deals extended the portfolio’s weighted-average lease term to 13.4 years, locking in long-term cash flows.

The company’s development pipeline also advanced, with $24 million committed to four new projects and $79.9 million in ongoing construction. Completed developments, including sites for Starbucks and 7-Eleven, added $27.2 million in value. Notably, 68.3% of rental income now comes from investment-grade tenants, a critical buffer against tenant defaults.

A Portfolio Built for Stability
Agree’s 2,422-property portfolio spans all 50 U.S. states, maintaining a 99.2% occupancy rate—a testament to its focus on essential retail. Lease terms average 8.0 years, with ground leases (representing 10.6% of rents) offering even longer duration (9.5 years). The top tenants—Walmart, Tractor Supply, and Dollar General—reflect a deliberate tilt toward recession-resistant sectors.

Geographically, Texas, Michigan, and Illinois anchor its footprint, but the portfolio’s dispersion mitigates regional risk. CEO Joey Agree emphasized the “well-positioned” balance sheet, backed by $1.9 billion in liquidity, including a new $625 million commercial paper program. Debt metrics remain conservative: net debt to EBITDA is 3.4x (4.9x excluding forward equity), with a 25.5% debt-to-enterprise-value ratio.

Guidance and Risks
Agree raised its full-year AFFO guidance to $4.27–$4.30 per share, up from prior expectations, while boosting investment volume targets to $1.3–$1.5 billion. These revisions reflect confidence in its ability to source accretive deals. However, risks persist: rising interest rates could pressure borrowing costs, and tenant performance remains tied to consumer spending.

Conclusion: A Steady Hand in Volatile Times
Agree Realty’s Q1 results reinforce its status as a conservative, growth-oriented REIT with a portfolio engineered for stability. With AFFO growing at a double-digit pace, occupancy near 99%, and a liquidity cushion of nearly $2 billion, the company is primed to navigate economic headwinds. Its focus on long-term leases, essential sectors, and investment-grade tenants positions it to deliver consistent dividends and capital appreciation.

While macroeconomic uncertainties linger, Agree’s execution and balance sheet strength suggest it can outperform peers in a slowing economy. Investors seeking a defensive play in the retail REIT sector would do well to consider ADC, which trades at a 4.1% dividend yield—above its five-year average—and offers visible AFFO growth. This is a REIT built to weather storms, not just chase returns.