Agree Realty(ADC) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Core FFO per share for Q4 2024 was $1.02, representing a 3.5$4.08, reflecting a 3.7% increase [32] - AFFO per share for Q4 2024 was $1.04, a 4.7$4.14, which is at the high end of guidance and shows a 4.6% year-over-year growth [32][35] - The company anticipates AFFO per share guidance of $4.26 to$4.30 for 2025, indicating approximately 3.5% year-over-year growth at the midpoint [13][32] Business Line Data and Key Metrics Changes - In Q4 2024, the company invested approximately $371 million in 127 high-quality retail net lease properties, including the acquisition of 98 assets for over$341 million [17] - The fourth quarter marked the highest volume and quality of acquisitions for the year, with a weighted average cap rate of 7.3% and a weighted average lease term of 12.3 years [18] - For the full year 2024, the company invested in properties across 45 states and 28 retail sectors, with approximately $867 million originating from the acquisition platform [19] Market Data and Key Metrics Changes - The company reported that investment-grade retailers accounted for over 73$1.1 billion and $1.3 billion in 2025 across all three external growth platforms [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a volatile higher interest rate environment, highlighting the importance of disciplined capital allocation [10] - The company noted a strong start to January 2025 and remains optimistic about investment opportunities [12] - Management acknowledged pressures on the low-income consumer but indicated that the high-end consumer remains stable [150] Other Important Information - The company raised approximately$1.1 billion of forward equity and has no material debt maturities until 2028 [25][30] - The monthly cash dividend declared for Q4 2024 was $0.253 per common share, representing a 2.4% year-over-year increase [35] Q&A Session Summary Question: Insights on ground lease renewals and market expectations - Management indicated significant mark-to-market upside in ground lease renewals, with specific examples of successful negotiations [39] Question: Balancing forward equity and acquisition opportunities - Management explained that the cost of forward equity is minimal due to current interest rates, allowing for ample liquidity for investment activities [42][45] Question: Trends in acquisition cap rates and seller expectations - Management noted that seller expectations have not significantly changed despite fluctuations in interest rates, emphasizing a disciplined approach to capital deployment [51][52] Question: Investment-grade exposure and future expectations - Management stated that the high percentage of investment-grade exposure is a result of their investment strategy, but they remain open to unrated retailers if pricing is favorable [64] Question: Transaction volume expectations for 2025 - Management expressed optimism about a strong first quarter and is currently focused on sourcing for the second quarter [68] Question: Update on development segment and retailer demand - Management reported strong demand from major retailers for new store openings, despite challenges in construction costs and financing [94][96] Question: Health of the consumer and impact on retail exposure - Management acknowledged pressures on low-income consumers but noted that high-end consumers remain stable, which could impact retail performance [150]