Agree Realty(US:ADC)2025-10-22 14:02Financial Data and Key Metrics Changes - The company reported core FFO per share for Q3 at $1.09, an increase of 8.4% year-over-year, while AFFO per share rose 7.2% to $1.10, exceeding consensus by $0.02 [15][17] - The company raised its AFFO per share guidance for the year to a range of $4.31-$4.33, implying approximately 4.4% year-over-year growth at the midpoint [8][15] - The company achieved an A-minus issuer rating from Fitch Ratings, which is a significant milestone and reflects the strength of its balance sheet [7][18] Business Line Data and Key Metrics Changes - In Q3, the company invested over $450 million in 110 high-quality retail net lease properties, including the acquisition of 90 assets for over $400 million [9][10] - The weighted average cap rate for acquisitions was 7.2%, with a weighted average lease term of 10.7 years, and investment-grade retailers accounted for 70% of the annualized base rent acquired [9][10] - The company commenced five development or developer funding projects with total anticipated costs of approximately $51 million during the quarter [10][11] Market Data and Key Metrics Changes - The company has invested nearly $1.2 billion across 257 retail net lease properties spanning 40 states and 29 retail sectors in the first nine months of the year [9][10] - Occupancy for the quarter remained strong at 99.7%, with investment-grade exposure at 67% [14] Company Strategy and Development Direction - The company is increasing its full-year 2025 investment guidance to a new range of $1.5-$1.65 billion, representing a 65% increase from last year's investment volume [6][8] - The company aims to achieve a medium-term goal of $250 million in commenced development projects annually [10][11] - The company is focused on maintaining a disciplined capital allocation strategy while expanding its retail portfolio [5][7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the current investment pace and does not foresee any slowdown in 2025 [24] - The company is benefiting from a trade-down effect, with consumers shifting to its tenant base, which includes discount retailers [85] - Management noted that the store remains a critical hub for successful omnichannel operations, indicating a positive outlook for retail growth [75][78] Other Important Information - The company executed new leases, extensions, or options on approximately 860,000 square feet of gross leasable area during the quarter, with a recapture rate of approximately 104% [12][43] - The company has a fortress balance sheet with over $1.9 billion of liquidity and no material debt maturities until 2028 [7][18] Q&A Session Summary Question: Can you walk through the timing and settlement of the forward equity? - The company has about 14 million shares of forward equity outstanding, with roughly 6 million shares maturing in Q4, anticipated to be settled during that time [23] Question: Is there anything on the horizon that could slow the acquisition pace? - Management indicated no foreseeable factors that would slow down the acquisition pace in 2025 [24] Question: Are you seeing increased competition affecting cap rates? - Management stated that they have not seen any material change in cap rates year-to-date and continue to navigate the market effectively [28][29] Question: Can you provide an update on credit loss assumptions? - The company experienced about 21 basis points of credit loss in Q3 and anticipates approximately 25 basis points for the year [36][38] Question: What is the outlook for development projects? - Management expressed confidence in the growth of development projects, with a strong pipeline and ongoing partnerships with major retailers [57][78]