Agree Realty(ADC) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive income, statements of equity, and statements of cash flows, along with detailed notes explaining the company's organization, significant accounting policies, real estate investments, debt, equity, and other financial instruments Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time | Metric | September 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total Assets | $9,484,030 | $8,486,446 | | Net Real Estate Investments | $8,297,241 | $7,418,108 | | Total Liabilities | $3,610,789 | $2,975,785 | | Total Equity | $5,873,241 | $5,510,661 | Condensed Consolidated Statements of Operations and Comprehensive Income This statement outlines the company's financial performance over specific periods, reporting revenues, expenses, and net income trends | Metric | Three Months Ended Sep 30, 2025 (in thousands) | Three Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2025 (in thousands) | Nine Months Ended Sep 30, 2024 (in thousands) | | :--------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Rental income | $183,191 | $154,292 | $527,701 | $456,139 | | Total Revenues | $183,222 | $154,332 | $527,909 | $456,361 | | Total Operating Expenses | $97,018 | $81,683 | $283,285 | $240,464 | | Net Income | $52,279 | $44,528 | $148,780 | $144,455 | | Net Income Attributable to Common Stockholders | $50,258 | $42,516 | $142,734 | $138,380 | | Basic EPS | $0.45 | $0.42 | $1.30 | $1.38 | | Diluted EPS | $0.45 | $0.42 | $1.30 | $1.37 | - Rental income increased by 18.7% for the three months ended September 30, 2025, and by 15.7% for the nine months ended September 30, 2025, compared to the respective prior periods[12] - Net income attributable to common stockholders increased by 18% for the three months ended September 30, 2025, and by 3% for the nine months ended September 30, 2025, compared to the respective prior periods[12] Condensed Consolidated Statements of Equity This statement details changes in the company's equity, including preferred stock, common stock, and retained earnings, over specific periods | Metric | September 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Preferred Stock | $175,000 | $175,000 | | Common Stock (Amount) | $11 | $10 | | Additional Paid-In Capital | $6,247,606 | $5,765,582 | | Dividends in excess of net income | $(581,162) | $(470,622) | | Total Equity - Agree Realty Corporation | $5,872,983 | $5,510,046 | | Common Shares Issued and Outstanding | 114,134,251 | 107,248,705 | - Common stock dividends declared per share for the three months ended September 30, 2025, was $0.768, an increase from $0.750 in the same period of 2024[13][14] Condensed Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods | Cash Flow Activity | Nine Months Ended Sep 30, 2025 (in thousands) | Nine Months Ended Sep 30, 2024 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net Cash Provided by Operating Activities | $392,821 | $340,575 | | Net Cash Used in Investing Activities | $(1,170,125) | $(537,067) | | Net Cash Provided by Financing Activities | $787,783 | $195,205 | | Change in Cash and Cash Equivalents and Cash Held in Escrow | $10,479 | $(1,287) | | Cash and cash equivalents and cash held in escrow, end of period | $16,878 | $13,237 | - Net cash used in investing activities significantly increased by 117.9% due to higher real estate acquisitions, while net cash provided by financing activities surged by 303.6% driven by common stock offerings and debt proceeds[15][243] Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and additional information supporting the condensed consolidated financial statements Note 1 – Organization This note describes the company's business, organizational structure, and its primary activities as a REIT - Agree Realty Corporation is a fully integrated REIT focused on ownership, acquisition, development, and management of retail properties net leased to industry-leading tenants[16] - As of September 30, 2025, the Company owned 2,603 properties with approximately 53.7 million square feet of gross leasable area (GLA)[19] - The Company held a 99.7% common equity interest in Agree Limited Partnership (the "Operating Partnership") as of September 30, 2025[17] Note 2 – Summary of Significant Accounting Policies This note outlines the key accounting principles and policies applied in the preparation of the financial statements - The financial statements are prepared in accordance with GAAP for interim financial information, reflecting normal recurring adjustments[20] - The Company consolidates the Operating Partnership, where it acts as the sole general partner[22] - Revenue recognition for operating leases includes straight-line recognition of fixed rent increases and recognition of variable rents when determinable[37] - The Company evaluates collectability of tenant charges regularly and records an adjustment to rental revenue if collectability changes[41] - The Company has elected to be taxed as a REIT and generally is not subject to federal income taxes on distributed amounts, with certain TRS activities being subject to federal income taxes[51][52] - Recent accounting pronouncements include ASU 2023-05 (Joint Venture Formations), ASU 2023-09 (Income Tax Disclosures), ASU 2024-03 (Expense Disaggregation), and ASU 2025-06 (Internal-Use Software), with the Company evaluating their impacts[65][66][67][68] Note 3 – Leases This note details the company's lease agreements, including tenant net leases and related financial impacts - Substantially all tenant leases are net lease agreements, requiring tenants to cover minimum monthly rent and property operating expenses[72] Lease Payments | Lease Payments (in thousands) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total lease payments | $187,574 | $159,566 | $541,661 | $471,652 | | Total non-variable lease payments | $166,484 | $143,320 | $480,830 | $418,900 | Future Non-Variable Lease Payments | Future Non-Variable Lease Payments (in thousands) | Total | | :------------------------------------------------ | :---- | | Future non-variable lease payments | $5,698,154 | - The Company had $45.7 million in right-of-use assets, net, and $22.5 million in corresponding lease obligations, net, for land leases as of September 30, 2025[78] Note 4 – Real Estate Investments This note provides information on the company's real estate portfolio, including acquisitions, dispositions, and impairment provisions - As of September 30, 2025, the Company owned 2,603 properties with a total GLA of approximately 53.7 million square feet and net real estate investments of $8.30 billion, up from 2,370 properties and $7.42 billion at December 31, 2024[83] Acquisitions | Acquisitions (in thousands) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Number of properties acquired | 90 | 66 | 227 | 144 | | Total purchase price | $402,635 | $216,037 | $1,090,006 | $531,361 | Dispositions | Dispositions (in thousands) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Number of properties sold | 8 | 2 | 13 | 18 | | Net proceeds | $14,615 | $6,894 | $22,772 | $63,573 | | Gain on sale of assets, net | $924 | $1,850 | $3,207 | $11,102 | Impairment Provisions | Impairment Provisions (in thousands) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Number of properties impaired | 3 | 2 | 10 | 5 | | Provision for impairment | $2,980 | $2,694 | $10,272 | $7,224 | Note 5 – Debt This note details the company's various debt instruments, including terms, outstanding amounts, and compliance with covenants - Total gross indebtedness was $3.39 billion as of September 30, 2025, comprising mortgage notes, unsecured term loan, senior unsecured notes, and revolving credit facility/commercial paper notes[89] Debt Type | Debt Type | September 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Mortgage notes payable, net | $41,718 | $42,210 | | Unsecured term loan, net | $347,900 | $347,452 | | Senior unsecured notes, net | $2,583,685 | $2,237,759 | | Unsecured revolving credit facility and commercial paper notes | $389,000 | $158,000 | | Total Principal Amount Outstanding | $3,392,141 | $2,811,904 | - The Company closed a $350.0 million unsecured term loan in July 2023, maturing in January 2029, with interest hedged to a fixed rate of 3.57% using interest rate swaps[94] - In May 2025, the Operating Partnership completed a $400.0 million public offering of 5.600% Notes due 2035 and repaid $50.0 million of 2025 Senior Unsecured Notes at maturity[102][103] - The Company established a $625.0 million commercial paper program in March 2025, backed by its $1.25 billion revolving credit facility, which matures in August 2028 (with extension options to August 2029)[106][108][113] - The Company was in compliance with all material loan covenants as of September 30, 2025[116] Note 6 – Common and Preferred Stock This note describes the company's common and preferred stock, including authorized shares, offerings, and ATM program activities - Stockholders approved an increase in authorized common stock from 180 million to 360 million shares in May 2025[117] - In April 2025, the Company completed a follow-on public offering of 5,175,000 common shares, anticipated to raise $386.7 million in net proceeds[119][121] - As of September 30, 2025, 7,000,000 depositary shares of Series A Preferred Stock were outstanding, with a 4.25% annual dividend rate[123][124] ATM Activity | ATM Activity (in millions) | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Shares of common stock sold under ATM programs | 2,770,222 | 9,859,024 | | Shares of common stock settled under ATM programs | 6,798,857 | 2,900,000 | | Net proceeds received | $476.6 | $175.7 | Note 7 – Dividends and Distributions Payable This note provides details on dividends and distributions declared for both common and preferred stock - Monthly common stock dividends declared were $0.256 per share for the three months ended September 30, 2025, up from $0.250 in the prior year[130] - Monthly dividends on Series A Preferred Shares were $0.08854 per Depositary Share for the three months ended September 30, 2025 and 2024[131] Note 8 – Derivative Instruments and Hedging Activity This note explains the company's use of derivative instruments, primarily interest rate swaps, for hedging purposes - The Company uses interest rate swaps to manage exposure to interest rate movements and stabilize interest expense, designated as cash flow hedges[133] - As of September 30, 2025, the Company had $650.0 million notional amount of interest rate swaps outstanding, primarily hedging SOFR-indexed debt[143] - The fair value of derivative contracts was a net liability of $1.7 million as of September 30, 2025, compared to an asset position of $17.9 million as of December 31, 2024[147] Note 9 – Fair Value Measurements This note outlines the fair value measurements of financial instruments, categorized by valuation input levels - Fair value measurements are based on a hierarchy of valuation inputs (Levels 1, 2, and 3), with derivatives classified in Level 2 due to observable market-based inputs[153][154][156] Fair Value | Fair Value (in thousands) | September 30, 2025 (Level 2) | December 31, 2024 (Level 2) | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Derivative assets - interest rate swaps | $1,369 | $17,526 | | Derivative liabilities - interest rate swaps | $3,278 | $0 | Debt Fair Value | Debt Fair Value (in thousands) | Carrying Value (Sep 30, 2025) | Fair Value (Sep 30, 2025) | | :------------------------------------------ | :------------------------------ | :-------------------------- | | Mortgage Notes Payable | $41,718 | $41,104 | | Unsecured Term Loan | $347,900 | $347,900 | | Senior Unsecured Notes | $2,583,685 | $2,544,630 | | Commercial Paper Notes | $389,000 | $389,000 | Note 10 – Equity Incentive Plan This note describes the company's equity incentive plan, including restricted shares and performance units granted to employees - The 2024 Omnibus Incentive Plan, approved in May 2024, allows for awards of up to 2,000,000 shares of common stock, with 1,721,041 shares available as of September 30, 2025[162] - Unrecognized compensation costs for restricted shares totaled $9.1 million as of September 30, 2025, expected to be recognized over a weighted average period of 1.8 years[166] - Performance units are granted to executive officers, vesting based on the Company's total shareholder return (TSR) compared to industry indices over a three-year period[168] - Unrecognized compensation costs for performance units totaled $8.4 million as of September 30, 2025, expected to be recognized over a weighted average period of 2.0 years[171] Note 11 – Commitments and Contingencies This note discloses the company's commitments and contingencies, including routine legal actions - The Company is involved in routine legal actions incidental to its business, with outcomes not expected to have a material adverse effect on its financial position or results of operations[179] Note 12 – Subsequent Events This note reports on significant events or transactions that occurred after the reporting period - No reportable subsequent events or transactions occurred between September 30, 2025, and the financial statements' issuance date[180] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting portfolio growth, acquisition and disposition activities, and detailed comparisons of financial performance for the three and nine months ended September 30, 2025, versus 2024. It also discusses liquidity, capital resources, and non-GAAP financial measures Cautionary Note Regarding Forward-Looking Statements This note advises readers that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements subject to known and unknown risks, uncertainties, and other factors that could materially affect the Company's results[182] - Key risk factors include changes in economic conditions, tenant financial failures, concentration risks, financing risks, interest rate volatility, and the ability to maintain REIT qualification[182] Overview This section provides a high-level summary of Agree Realty Corporation's business model and real estate portfolio - Agree Realty Corporation is a fully integrated REIT specializing in net-leased retail properties, with a portfolio of 2,603 properties across all 50 states, totaling approximately 53.7 million square feet of GLA as of September 30, 2025[183][184] - The portfolio was approximately 99.7% leased with a weighted average remaining lease term of 8.0 years, and 66.7% of annualized base rent derived from investment-grade tenants[184] Results of Operations This section analyzes the company's financial performance, including revenue, expenses, and net income trends Overall This subsection provides a general overview of the company's real estate portfolio growth and its impact on rental income - The real estate investment portfolio grew from $7.13 billion (2,271 properties) at September 30, 2024, to $8.30 billion (2,603 properties) at September 30, 2025[186] - Increased rental income in 2025 is partly due to revenue recognition from acquisitions made in 2024 and 2025[186] Acquisitions This subsection details the company's property acquisition activities, including the number of properties and total purchase price | Metric | Three Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2025 | | :------------------------------------------ | :------------------------------ | :----------------------------- | | Number of properties acquired | 90 | 227 | | Total purchase price (in thousands) | $402,635 | $1,090,006 | | Weighted-average lease term (years) | 10.7 | 12.0 | | Underwritten weighted-average capitalization rate | 7.2% | 7.2% | Development and Developer Funding Platform This subsection outlines the company's development and developer funding platform activities, including project completions and commencements | Development Activity | Three Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2025 | | :------------------------------------------ | :------------------------------ | :----------------------------- | | Projects completed | 8 | 18 | | Projects commenced | 5 | 10 | | Projects under construction at period-end | 12 | 12 | Dispositions This subsection reports on the company's property disposition activities, including the number of sales and net proceeds | Disposition Activity (in thousands) | Three Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2025 | | :------------------------------------------ | :------------------------------ | :----------------------------- | | Number of properties sold | 8 | 13 | | Net proceeds | $14,615 | $22,772 | | Gain on sale of assets, net | $924 | $3,207 | Comparison of the three months ended September 30, 2025 to the three months ended September 30, 2024 This subsection compares the company's financial performance for the three months ended September 30, 2025, against the same period in 2024 | Metric (in thousands) | Sep 30, 2025 | Sep 30, 2024 | Variance (dollars) | Variance (%) | | :------------------------------------------ | :----------- | :----------- | :----------------- | :----------- | | Rental income | $183,191 | $154,292 | $28,899 | 19% | | Real estate tax expense | $13,173 | $11,935 | $1,238 | 10% | | Property operating expense | $8,243 | $6,015 | $2,228 | 37% | | Depreciation and amortization expense | $61,179 | $51,504 | $9,675 | 19% | | General and administrative expenses | $10,887 | $9,114 | $1,773 | 19% | | Interest expense, net | $35,212 | $28,942 | $6,270 | 22% | | Provision for impairment | $2,980 | $2,694 | $286 | 11% | | Net gain on sale of assets | $924 | $1,850 | $(926) | -50% | | Income and other tax expense | $225 | $1,077 | $(852) | -79% | | Net income | $52,279 | $44,528 | $7,751 | 17% | - The increase in rental income and operating expenses is primarily due to the acquisition and ownership of an increased number of properties[191] - Interest expense, net, increased by $6.3 million (22%) due to higher borrowings for property acquisitions and development, including the issuance of $400.0 million in 2035 Senior Unsecured Public Notes[193] Comparison of the nine months ended September 30, 2025 to the nine months ended September 30, 2024 This subsection compares the company's financial performance for the nine months ended September 30, 2025, against the same period in 2024 | Metric (in thousands) | Sep 30, 2025 | Sep 30, 2024 | Variance (dollars) | Variance (%) | | :------------------------------------------ | :----------- | :----------- | :----------------- | :----------- | | Rental income | $527,701 | $456,139 | $71,562 | 16% | | Real estate tax expense | $37,519 | $33,357 | $4,162 | 12% | | Property operating expense | $25,040 | $19,875 | $5,165 | 26% | | Depreciation and amortization expense | $175,872 | $150,421 | $25,451 | 17% | | General and administrative expenses | $32,990 | $28,336 | $4,654 | 16% | | Interest expense, net | $98,250 | $79,809 | $18,441 | 23% | | Provision for impairment | $10,272 | $7,224 | $3,048 | 42% | | Net gain on sale of assets | $3,207 | $11,102 | $(7,895) | -71% | | Income and other tax expense | $1,475 | $3,231 | $(1,756) | -54% | | Net income | $148,780 | $144,455 | $4,325 | 3% | - Net income attributable to common stockholders increased by $4.3 million (3%) to $142.7 million, driven by portfolio growth partially offset by increased expenses and lower gains on asset sales[204] Liquidity and Capital Resources This section discusses the company's ability to meet its financial obligations and fund future operations through available capital - The Company's principal demands for funds include operating expenses, debt payments, dividends, and future property acquisitions and development[205] - As of September 30, 2025, the Company had over $1.91 billion in liquidity, including cash and cash equivalents ($16.9 million), unsettled forward equity ($1.04 billion), and $861.0 million of availability under its Revolving Credit Facility[209] - Long-term capital needs are anticipated to be funded through cash from operations, Revolving Credit Facility borrowings, and issuance/settlement of equity or debt[210] Capitalization This subsection provides an overview of the company's capital structure, including total enterprise value and debt ratios - As of September 30, 2025, the Company's total enterprise value was approximately $11.68 billion, with total debt principal to total enterprise value at 29.0%[213] Equity This subsection details the company's equity financing activities, including stock offerings and ATM programs - Authorized common stock shares increased from 180 million to 360 million in May 2025[215] - A follow-on public offering in April 2025 of 5,175,000 common shares is expected to yield $386.7 million in net proceeds[217] - ATM programs generated $476.6 million in net proceeds for the nine months ended September 30, 2025[225] Debt This subsection provides a detailed breakdown of the company's debt portfolio, including credit facilities and notes Debt Type | Debt Type | Principal Amount Outstanding (Sep 30, 2025, in thousands) | Principal Amount Outstanding (Dec 31, 2024, in thousands) | | :------------------------------------------ | :-------------------------------------------------------- | :-------------------------------------------------------- | | Revolving Credit Facility and Commercial Paper Notes | $389,000 | $158,000 | | Unsecured Term Loan | $350,000 | $350,000 | | Senior Unsecured Notes | $2,610,000 | $2,260,000 | | Mortgage Notes Payable | $43,141 | $43,904 | | Total Principal Amount Outstanding | $3,392,141 | $2,811,904 | - The $1.25 billion Revolving Credit Facility matures in August 2028 (with extension options to August 2029) and serves as a backstop for the Commercial Paper Program[229][230] - The $350.0 million 2029 Unsecured Term Loan's credit spread decreased by five basis points in August 2025 due to an improved credit rating[233] - The Company repaid $50.0 million of 2025 Senior Unsecured Notes at maturity in May 2025[238] - All material loan covenants were in compliance as of September 30, 2025[241] Cash Flows This subsection analyzes changes in cash flows from operating, investing, and financing activities - Net cash provided by operating activities increased by $52.2 million for the nine months ended September 30, 2025, primarily due to portfolio growth and interest rate swap settlements[242] - Net cash used in investing activities increased by $633.0 million, driven by a $557.8 million increase in property acquisitions and a $34.9 million increase in real estate development[243] - Net cash provided by financing activities increased by $592.6 million, largely due to a $409.0 million increase in net borrowings from the Revolving Credit Facility and Commercial Paper Program, and a $300.9 million increase in common stock issuance proceeds[243] Material Cash Requirements This subsection outlines the company's significant future cash obligations and funding plans Obligation | Obligation (in thousands) | 2025 (remaining) | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | | :------------------------------------------ | :--------------- | :--- | :--- | :--- | :--- | :--------- | :---- | | Mortgage Notes Payable | $262 | $629 | $0 | $0 | $42,250 | $0 | $43,141 | | Revolving Credit Facility and Commercial Paper Notes | $389,000 | $0 | $0 | $0 | $0 | $0 | $389,000 | | Unsecured Term Loan | $0 | $0 | $0 | $0 | $350,000 | $0 | $350,000 | | Senior Unsecured Notes | $0 | $0 | $50,000 | $410,000 | $100,000 | $2,050,000 | $2,610,000 | | Land Lease Obligations | $499 | $2,022 | $1,884 | $1,855 | $1,846 | $34,702 | $42,808 | | Estimated Interest Payments on Outstanding Debt | $32,138 | $126,300 | $125,032 | $119,238 | $96,998 | $323,523 | $823,229 | | Total | $421,899 | $128,951 | $176,916 | $531,093 | $591,094 | $2,408,225 | $4,258,178 | - Anticipated total costs for 12 development projects under construction are approximately $88.6 million, to be funded by cash from operations or other capital resources[246] Dividends This subsection details the company's dividend declarations for both common and preferred stock - Monthly common stock dividends declared were $0.256 per share for the quarter ended September 30, 2025, representing a 2.4% increase over the annualized dividend amount in the same period of 2024[248][249] - Monthly dividends on Series A Preferred Shares were $0.08854 per Depositary Share for the quarter ended September 30, 2025[251] Recent Accounting Pronouncements This section discusses the impact of recently issued accounting pronouncements on the company's financial reporting - The Company refers to Note 2 for a summary and anticipated impact of applicable accounting pronouncements[252] Critical Accounting Policies and Estimates This section highlights the significant accounting policies and estimates requiring management's judgment - Management uses judgment in applying accounting policies and making estimates, which affect reported amounts; no material changes to these policies were made during the reporting periods[253] Non-GAAP Financial Measures This section presents and reconciles non-GAAP financial measures used to evaluate the company's operating performance Funds from Operations ("FFO" or "Nareit FFO") This subsection defines Funds from Operations (FFO) as per Nareit guidelines, a key metric for REITs - FFO is defined by Nareit as net income excluding gains/losses from real estate sales and depreciation/amortization, considered helpful for evaluating real estate company operations[254] Core Funds from Operations ("Core FFO") This subsection defines Core FFO, an adjusted measure of FFO, used for comparing performance across peers - Core FFO adjusts Nareit FFO by adding back noncash amortization of acquisition purchase price related to lease intangibles and debt discount, facilitating performance comparison to peers[256] Adjusted Funds from Operations ("AFFO") This subsection defines Adjusted Funds from Operations (AFFO), a further refined non-GAAP performance metric - AFFO further adjusts FFO and Core FFO for certain non-cash items, serving as a supplemental measure of operating performance[259] Reconciliations This subsection provides reconciliations of net income to FFO, Core FFO, and AFFO | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Funds from Operations - Operating Partnership common unitholders | $112,926 | $94,566 | $324,321 | $284,004 | | Core Funds from Operations - Operating Partnership common unitholders | $122,354 | $102,943 | $351,000 | $309,141 | | Adjusted Funds from Operations - Operating Partnership common unitholders | $123,117 | $104,769 | $354,756 | $313,325 | | FFO per common share and partnership unit - diluted | $1.01 | $0.93 | $2.94 | $2.81 | | Core FFO per common share and partnership unit - diluted | $1.09 | $1.01 | $3.18 | $3.05 | | AFFO per common share and partnership unit - diluted | $1.10 | $1.03 | $3.22 | $3.10 | Item 3. Quantitative and Qualitative Disclosures about Market Risk This section discusses the Company's exposure to market risks, primarily interest rate risk, and its strategies for managing these risks, including the use of interest rate swap agreements. It provides a breakdown of outstanding debt by maturity and weighted average interest rates - The Company is exposed to interest rate risk through borrowing activities, with inherent roll-over risk as borrowings mature[261] - Interest rate risk is managed by monitoring variable rate debt and converting it to fixed rates, and through interest rate swap agreements[266] Debt Type | Debt Type | 2025 (remaining, in thousands) | 2026 (in thousands) | 2027 (in thousands) | 2028 (in thousands) | 2029 (in thousands) | Thereafter (in thousands) | Total (in thousands) | | :------------------------------------------ | :----------------------------- | :------------------ | :------------------ | :------------------ | :------------------ | :------------------------ | :------------------- | | Mortgage Notes Payable | $262 | $629 | $0 | $0 | $42,250 | $0 | $43,141 | | Revolving Credit Facility and Commercial Paper Notes | $389,000 | $0 | $0 | $0 | $0 | $0 | $389,000 | | Unsecured Term Loan | $0 | $0 | $0 | $0 | $350,000 | $0 | $350,000 | | Senior Unsecured Notes | $0 | $0 | $50,000 | $410,000 | $100,000 | $2,050,000 | $2,610,000 | - A hypothetical 100-basis point increase or decrease in market interest rates would change annual interest expense by $3.9 million, assuming no change in outstanding variable-rate borrowings[274] Item 4. Controls and Procedures This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the most recently completed fiscal quarter - The Company's disclosure controls and procedures were effective as of the end of the reporting period[275] - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[276] PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings and risk factors Item 1. Legal Proceedings This section states that the Company is not involved in any material litigation beyond routine business operations, with outcomes not expected to have a material adverse effect - The Company is not involved in any material litigation, only routine litigation covered by liability insurance[277] Risk Factors This section directs readers to the Company's Annual Report on Form 10-K for a comprehensive discussion of potential risks and uncertainties - For a discussion of potential risks and uncertainties, refer to the 'Risk Factors' section in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[278] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details common stock repurchases made during the three months ended September 30, 2025, primarily for satisfying tax obligations related to restricted stock vesting - During the three months ended September 30, 2025, the Company withheld shares from employees to satisfy estimated statutory income tax obligations related to the vesting of restricted stock awards[279] Common Stock Repurchases | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :------------------------------------------ | :----------------------------- | :--------------------------- | | July 1, 2025 - July 31, 2025 | 37 | $72.52 | | August 1, 2025 - August 31, 2025 | 766 | $73.46 | | September 1, 2025 - September 30, 2025 | 23 | $72.62 | | Total | 826 | $73.40 | Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[281] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[282] Item 5. Other Information This section confirms that no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended September 30, 2025[283] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including amendments to Articles of Incorporation, Bylaws, certifications, and interactive data files - Exhibits include various amendments to the Company's Articles of Incorporation and Bylaws, as well as certifications pursuant to the Sarbanes-Oxley Act[285][287] - The report includes Inline iXBRL formatted financial statements and a Cover Page Interactive Data File[285][286] SIGNATURES This section contains the official signatures of the company's authorized officers, certifying the report's accuracy - The report is signed by Joel N. Agree, President and Chief Executive Officer, and Peter Coughenour, Chief Financial Officer and Secretary, on October 21, 2025[291]