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Agree Realty's Q1 Results Signal Resilience and Growth in Retail Real Estate

Albert FoxTuesday, Apr 22, 2025 5:29 pm ET

15min read

Agree Realty Corp. (ADC) delivered a strong performance in its first quarter of 2025, showcasing resilience in an evolving retail landscape. The real estate investment trust (REIT) reported robust growth in adjusted funds from operations (AFFO) and revenue, while also raising its full-year guidance. These results highlight the company’s disciplined strategy of investing in high-quality, net-leased retail properties and its ability to navigate economic headwinds.

Financial Highlights: A Quarter of Growth and Confidence

Agree Realty’s Q1 results were marked by several key achievements:
- AFFO per share rose 3.0% to $1.06, slightly exceeding consensus estimates of $1.04, while total AFFO grew 10.4% year-over-year to $114.0 million.
- Total revenue reached $169.2 million, surpassing analyst expectations of $166.5 million, driven by strong occupancy and rent growth.
- The company raised its 2025 AFFO guidance to $4.27–$4.30 per share, up from its prior range of $4.20–$4.25, reflecting confidence in its operational execution and portfolio strength.

Operational Strength: A Diversified and Stable Portfolio

Agree Realty’s portfolio remains a cornerstone of its success:
- 99.2% lease rate and a weighted-average remaining lease term of 8.0 years underscore the stability of its tenant relationships.
- 68.3% of annualized base rents come from investment-grade tenants, including national brands like Walmart and 7-Eleven, reducing exposure to sector-specific risks.
- The company added 69 retail net lease properties during the quarter, totaling $377 million in acquisitions, alongside four development projects valued at $24 million. This expansion aligns with its strategy to grow through high-quality, income-producing assets.

The balance sheet also remains a point of strength:
- $1.9 billion in total liquidity, including $1.2 billion in hedged capital, provides flexibility for future acquisitions and dividend payments.
- A proforma net debt-to-recurring EBITDA ratio of 3.4x reflects prudent financial management.

Strategic Moves and Investor Returns

Agree Realty’s commitment to shareholders is evident in its actions:
- The company increased its monthly dividend by 2.4% to $0.256 per share, signaling confidence in its cash flow generation.
- Full-year 2025 investment guidance was raised to $1.3–$1.5 billion, up from $1.1–$1.3 billion, underscoring its aggressive growth plans.

President and CEO Joey Agree emphasized the importance of liquidity and disciplined investing: “Our well-positioned balance sheet allows us to execute on growth opportunities while maintaining financial flexibility.”

Challenges and Outlook

While Q1 results were positive, Agree Realty is not immune to broader retail sector pressures. A 2.0% decline in net income per share to $0.42 (versus estimates of $0.43) highlights the impact of one-time costs and reinvestment in growth. However, the company’s focus on long-term tenant relationships and its diversified portfolio position it to weather economic volatility.

The stock’s 39% rise over the past 12 months reflects investor optimism in its strategy. With AFFO guidance raised and a dividend increase, Agree Realty is positioning itself for sustained outperformance.

Conclusion: A Compelling Investment Thesis

Agree Realty’s Q1 results demonstrate a REIT that is not only weathering retail sector headwinds but thriving through strategic investments and prudent financial management. Key takeaways include:
- Consistent AFFO growth: The 10.4% year-over-year increase in AFFO, coupled with raised guidance, signals operational excellence.
- Portfolio quality: 68.3% of rents from investment-grade tenants and a 99.2% lease rate provide a stable income base.
- Aggressive growth: A raised investment guidance to $1.5 billion and a robust balance sheet suggest ample opportunities to expand.

While challenges such as tenant performance and economic uncertainty persist, Agree Realty’s focus on high-quality assets and disciplined capital allocation positions it to outperform peers. For income-focused investors, its 2.4% dividend increase and strong liquidity profile make it a compelling choice. With AFFO per share now targeting $4.30 for 2025—a 6.4% increase from 2024’s $4.04—the path to long-term value creation is clear.

In a sector where differentiation is key, Agree Realty continues to prove that a focus on quality, stability, and growth can deliver results.

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