Agree Realty raises investment guidance to $1.65B and projects 4.4% AFFO growth as portfolio expansion accelerates

Earnings Call Insights: Agree Realty Corporation (ADC) Q3 2025

MANAGEMENT VIEW

* Joey Agree, President, CEO & Director, reported "another very strong quarter at ADC as we further expanded and strengthened what we view to be the nation's leading retail portfolio." He highlighted the company's largest quarterly investment volume since 2020, with over $450 million deployed across platforms, and announced a full-year 2025 investment guidance increase to $1.5 billion to $1.65 billion, which at the midpoint is "over 65% above last year's investment volume."
* Agree stated, "Our best-in-class portfolio is paired with a fortress balance sheet that has over $1.9 billion of liquidity and no material debt maturities until 2028."
* The CEO also noted a significant milestone: "During the quarter, we received an A- issuer rating from Fitch ratings making us one of only 13 publicly listed U.S. REITs with an A- credit rating or better."
* Guidance for AFFO per share was raised to a new range of $4.31 to $4.33, with Joey Agree describing it as "approximately 4.4% year-over-year growth."
* Peter Coughenour, CFO, stated, "Core FFO per share for the third quarter of $1.09 was 8.4% higher than the same period last year. AFFO per share for the third quarter increased 7.2% year-over-year to $1.10, which is $0.02 above consensus."
* Coughenour further commented, "Our updated guidance range contemplates a minimal treasury stock method dilution in the fourth quarter as well."

OUTLOOK

* The company increased its full-year 2025 investment guidance to $1.5 billion to $1.65 billion, compared to the prior range of $1.4 billion to $1.6 billion.
* AFFO per share guidance was raised to $4.31 to $4.33 from the prior $4.29 to $4.32, with management attributing the adjustment to strong performance and year-to-date results.
* The new guidance includes an assumption for approximately 25 basis points of credit loss for the year, with Coughenour explaining, "we experienced just under that, about 21 basis points of credit loss during the third quarter."
* No material deviation in cap rates is anticipated for Q4, and the pipeline for acquisitions and development projects remains "very strong."

FINANCIAL RESULTS

* AFFO per share for Q3 was $1.10, up 7.2% year-over-year, and core FFO per share was $1.09, up 8.4% year-over-year.
* Monthly cash dividends of $0.256 per share were declared for July, August, and September, with a subsequent increase to $0.262 per share for October.
* Total liquidity at quarter end stood at $1.9 billion, and pro forma net debt to recurring EBITDA was 3.5x.
* The company settled approximately 3.5 million shares of forward equity for net proceeds of over $250 million during the quarter and had about 14 million shares remaining to be settled under existing agreements.
* Subsequent to quarter end, commitments for a $350 million 5.5-year delayed draw term loan were secured, expected to increase pro forma liquidity to $2.2 billion.

Q&A

* Nicholas Joseph, Citigroup: Asked about timing and settlement of forward equity given upcoming expirations. Coughenour responded, "we have about 14 million shares of forward equity outstanding ... roughly 6 million of those shares, the contracts mature at some point during the fourth quarter ... we would anticipate settling that at some point in 2026."
* Joseph also inquired about acquisition pace. Agree replied, "Nothing on the horizon that we see that pace slowing in 2025."
* Michael Goldsmith, UBS: Questioned cap rate trends and competitive landscape. Agree answered, "We haven't seen any material change in cap rates year-to-date ... the output this quarter was 10 basis points higher than last quarter just because of the composition."
* Goldsmith also asked about flat AFFO per share sequentially into Q4. Coughenour pointed out, "term fees received during the third quarter ... we typically don't receive much in the way of term fees."
* Jana Galan, BofA, asked about credit loss and cap rate trends for Q4 and 2026. Coughenour explained credit loss was about 21 basis points in Q3, with 25 basis points assumed for the year.
* Further analyst questions addressed ground lease growth, development platform expansion, impact of A- credit rating, and tenant exposure, with management emphasizing opportunistic strategy and robust pipelines.

SENTIMENT ANALYSIS

* Analysts expressed cautious optimism, frequently probing for risks to acquisition pace, credit loss, and cap rate pressures. Tone was generally positive, with focus on sustainability of growth and capital management.
* Management maintained a confident tone, particularly in prepared remarks, highlighting phrases like "we are confident" and "we will continue to be disciplined capital allocators." In the Q&A, management responses remained consistent and occasionally emphasized their differentiated approach, with Agree stating, "we haven't seen any material change" and "we'll continue to be extremely discerning."
* Compared to the previous quarter, both analysts and management remained slightly more upbeat, with less concern voiced about credit losses and a stronger emphasis on expansion and liquidity.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for both investment volume and AFFO per share was raised again this quarter, reflecting sustained momentum versus the prior quarter.
* The company reported a larger quarterly investment volume in Q3 compared to Q2 and executed more development and developer funding projects, signaling acceleration in external growth platforms.
* Management tone was more confident in Q3, with greater emphasis on portfolio strength, balance sheet flexibility, and the impact of the new A- credit rating.
* Analysts in Q3 focused more on the mechanics of capital deployment and the implications of the forward equity and term loan, compared to greater attention on re-leasing and watchlist management in Q2.
* There was a slight decrease in portfolio investment-grade exposure quarter-over-quarter, while occupancy remained at very high levels.

RISKS AND CONCERNS

* Management noted the assumption of 25 basis points of credit loss in guidance and explained their comprehensive definition, which includes both credit events and re-leasing downtime.
* Analysts questioned the potential impact of macroeconomic ambiguity, tariffs, and industry-specific distress, particularly in auto parts and subprime lending, but management downplayed any near-term risks to acquisition or development pace.
* No material debt maturities until 2028 and a strong liquidity position were highlighted as mitigating factors for potential risks.

FINAL TAKEAWAY

Agree Realty Corporation concluded the quarter with increased investment guidance, higher AFFO per share targets, and robust balance sheet strength, highlighted by a new A- credit rating and substantial liquidity. Management emphasized their disciplined growth strategy, continued expansion of development platforms, and confidence in portfolio performance, maintaining a positive outlook for the remainder of the year and into 2026.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/adc/earnings/transcripts]

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