Agree Realty(US:ADC)2025-04-23 16:04Financial Data and Key Metrics Changes - The company invested over $375 million in Q1 2025, marking the largest quarter of investment volume since Q3 2023 [6][12] - Core FFO per share was $1.04, a 3.1% increase year-over-year, while AFFO per share was $1.06, representing a 3% year-over-year increase [30][31] - The company raised the low end of its full year AFFO per share guidance to a range of $4.27 to $4.30, implying over 3.5% growth at the midpoint [13][32] Business Line Data and Key Metrics Changes - The company acquired 69 properties across all three platforms during Q1, including a lender-owned Home Depot and a sale-leaseback with a leading national grocer [16][17] - The weighted average cap rate for acquired properties was 7.3%, with a weighted average lease term of 13.4 years [17] - Nearly 69% of base rent acquired was from investment-grade retailers, with occupancy remaining solid at 99.2% [22][23] Market Data and Key Metrics Changes - The company has increased its investment guidance range for the year from $1.1 billion to $1.5 billion, representing a 47% increase over last year's investment volume [12] - The balance sheet showed $1.9 billion in liquidity and a pro forma net debt to recurring EBITDA of 3.4 times at quarter end [9][28] Company Strategy and Development Direction - The company remains focused on recession-resistant retailers that have adapted to an omni-channel strategy, believing that larger retailers will continue to gain market share [11][10] - The company plans to leverage its strong balance sheet and cost of capital to take advantage of market dislocations and disruptions [7][9] - The development pipeline is expected to grow, with a medium-term target of putting $250 million in the ground per year [165] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's stability and growth potential despite a volatile macroeconomic environment [7][11] - The company anticipates that its portfolio will be resilient to tariff impacts, with dominant retailers positioned to thrive [56][112] - Management highlighted the importance of maintaining a conservative approach to asset underwriting and portfolio construction during uncertain times [13][15] Other Important Information - The company raised $181 million of forward equity via its ATM program during the quarter, maintaining ample runway for growth [9][25] - The company has established a $625 million commercial paper program to diversify its balance sheet and tap into short-term capital [26][148] Q&A Session Summary Question: Investment guidance increase and AFFO guidance - Management confirmed that the increase in investment guidance was not offset by other detractors, with treasury stock dilution being the primary factor affecting AFFO guidance [39][40] Question: Tenant exposure and grocery strategy - Management indicated that the increase in grocery exposure was a one-off opportunity and that they continue to seek dominant grocers [50][51] Question: Development partners' appetite for new stores - Management reported no pause in development partner activities, with several retailers announcing new store openings [62][63] Question: Changes in transaction market post-tariff - Management noted no deals were pulled and competition remains limited, providing opportunities for growth [78][80] Question: Impact of tariffs on go-forward strategy - Management stated that tariffs do not significantly impact their investment strategy, as necessity-based retailers are expected to benefit [110][112] Question: Credit loss outlook - Management feels comfortable with the credit loss guidance embedded within their earnings guidance, which includes an assumption for 50 basis points of credit loss [116][118] Question: Construction cost implications - Management anticipates a 2% to 5% increase in construction costs due to tariffs but does not expect material moves in overall construction costs [124][125] Question: Development pipeline potential - Management indicated a significant development pipeline, with a medium-term target of $250 million in annual investments [165][166]