Agree Realty Secures Strategic Capital Flexibility with Forward Offering

Agree Realty Corporation (NYSE: ADC) has completed a $391.7 million common stock offering, leveraging a forward sale agreement to secure capital while deferring dilution. The transaction highlights the company’s nuanced approach to balancing growth ambitions with risk management in a volatile market.

The Structure of Strategic Capital Planning

Agree Realty’s forward offering involved selling 5.175 million shares at a locked-in price of $75.70 per share, a deal structured through Bank of America’s forward sale mechanism. This setup allows the company to delay receiving proceeds—and issuing shares—until settlement dates up to October 2026. The arrangement offers two critical advantages:

1. Price Stability: Agree Realty avoids stock price volatility by securing the $75.70 per-share rate at the time of the deal, even as market conditions shift.
2. Operational Flexibility: Funds can be deployed gradually over 18 months, aligning with acquisition opportunities and debt-reduction priorities.

The transaction was underwritten by BofA Securities, supported by co-managers including Raymond James and Stifel, underscoring the confidence of institutional partners in Agree Realty’s strategy.

Financial Implications and Liquidity Position

As of Q1 2025, Agree Realty reported $1.9 billion in total liquidity, including unsettled forward equity. The new offering adds to this buffer, though proceeds remain contingent on future settlements. Notably, the company already tapped prior forward agreements in Q1, generating $183 million from settled shares and $181 million via its at-the-market (ATM) program.

The forward structure’s deferred settlement is a deliberate move to avoid immediate dilution. The offering represents just 4.7% of Agree Realty’s $8.37 billion market capitalization as of March 31, 2025—a manageable dilution threshold that aligns with the company’s long-term growth targets.

Debt Management and Balance Sheet Strength

Agree Realty’s pro forma net debt-to-recurring EBITDA ratio of 3.4x (excluding unsettled forward equity) signals financial resilience. Including unsettled equity, the ratio rises to 4.9x, but this metric is expected to improve as settlements occur and capital is deployed. The company’s focus on reducing leverage while pursuing acquisitions—particularly in the industrial and retail sectors—positions it to capitalize on favorable real estate fundamentals.

Risks and Regulatory Considerations

The press release underscores risks tied to macroeconomic shifts, tenant performance, and REIT qualification. However, Agree Realty’s conservative balance sheet and diversified portfolio (spanning 2,500+ properties) provide a cushion against sector-specific downturns.

Q1 2025 Results: A Preview of Strategic Execution

Agree Realty’s first-quarter results demonstrated early success from its capital strategies:
- Net operating income (NOI) rose 8.5% year-over-year.
- The company acquired $144 million in properties while deploying ATM proceeds to reduce debt.

Conclusion: A Calculated Move for Growth

Agree Realty’s forward offering is a masterclass in capital structuring. By locking in pricing today while deferring the financial impact of dilution, the company secures $391.7 million in dry powder to pursue acquisitions and deleverage—a critical strategy in an environment where interest rates and tenant demand remain uncertain.

The transaction’s 4.7% dilution is modest relative to its market cap, and the staggered settlement timeline aligns with its stated goal of maintaining a net debt-to-EBITDA ratio below 5.0x. With $1.9 billion in existing liquidity and a robust property portfolio, Agree Realty appears positioned to navigate volatility while expanding its footprint in high-demand sectors.

Investors should monitor two key metrics: ADC’s stock performance relative to its forward price (currently $75.70) and its ability to reduce net debt as settlements occur. If executed as planned, this deal could amplify the company’s growth trajectory, solidifying its standing as a top-tier net-lease REIT.