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AGREE REALTY CORP (ADC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered steady non-GAAP growth: AFFO/share rose 4.7% to $1.04 and Core FFO/share rose 3.5% to $1.02, while diluted EPS declined 5.7% to $0.41; rental income reached $160.7M .
  • External growth accelerated into year-end: $371M invested across 127 properties with Q4 acquisitions of $341.5M at a 7.3% weighted-average cap rate and 12.3-year WALT; 73.3% of acquired ABR was investment-grade .
  • Balance sheet is pre-equitized and liquid: >$2.0B total liquidity, pro forma net debt/recurring EBITDA at 3.3x (4.9x actual); forward equity outstanding ~$920M; no material maturities until 2028 .
  • Initial FY2025 guidance targets AFFO/share of $4.26–$4.30 with $1.1–$1.3B investment and $10–$50M dispositions; management flagged treasury method dilution of ~$$0.01–$0.02 in 2025 from unsettled forwards .
  • Potential catalysts: disciplined capital deployment in a volatile rate backdrop, ground lease mark-to-market opportunities, and sustained high IG tenant mix (68.2% of ABR) .

What Went Well and What Went Wrong

What Went Well

  • Discipline and pre-equitization positioned ADC to invest without raising equity in 2025; “our discipline paid off… preemptively equitized our balance sheet raising $1.1 billion of forward equity” and “we can deploy over $1.5 billion this year… while staying within our target leverage range of 4 to 5x” .
  • Robust external growth and pipeline: Q4 acquisitions at 7.3% cap and high IG content; management had a “very strong January” and affirmed $1.1–$1.3B investment guidance for 2025 .
  • Record DFP/development activity: 41 projects completed/under construction in 2024 with ~$180M committed; platform continues to take share by bridging developer financing constraints .

What Went Wrong

  • GAAP EPS fell YoY on higher interest and D&A: diluted EPS $0.41 vs $0.44; Q4 interest expense was $29.1M, D&A $56.6M .
  • Macro and rate volatility complicate pricing; the 10-year’s swings are not resetting seller expectations, requiring continued discipline on spreads and pacing .
  • Credit and tenant-specific overhangs: management embedded 50 bps credit loss in 2025 guidance (vs ~35 bps incurred in 2024), citing Big Lots bankruptcy process and watch items (select theaters), while maintaining low exposure to challenged categories (pharmacy/dollar stores) .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Rental Income (Revenue) ($USD Thousands)$152,575 $154,332 $160,734
Diluted EPS ($)$0.52 $0.42 $0.41
Core FFO per Share (Diluted) ($)$1.03 $1.01 $1.02
AFFO per Share (Diluted) ($)$1.04 $1.03 $1.04

Segment/Exposure (ABR):

Retail SectorABR ($USD Millions)% of ABR
Grocery Stores$57.424 9.2%
Home Improvement$56.977 9.2%
Tire & Auto Service$50.125 8.1%
Convenience Stores$46.546 7.5%
Dollar Stores$45.076 7.3%
Auto Parts$39.893 6.4%
Off-Price Retail$38.579 6.2%
General Merchandise$33.904 5.5%
Farm & Rural Supply$32.572 5.2%
Consumer Electronics$24.581 4.0%
Other$195.020 31.4%
Total$620.721 100.0%

Top Tenants (ABR):

TenantABR ($USD Millions)% of ABR
Walmart$38.460 6.2%
Tractor Supply$30.800 5.0%
Dollar General$28.115 4.5%
Best Buy$21.130 3.4%
TJX Companies$19.614 3.2%
CVS$19.599 3.2%
Hobby Lobby$18.200 2.9%
Dollar Tree$18.170 2.9%
Lowe’s$17.884 2.9%
O’Reilly Auto Parts$17.798 2.9%
Other$284.335 45.7%
Total$620.721 100.0%

KPIs and Balance Sheet

KPIQ2 2024Q3 2024Q4 2024
Occupancy (%)99.8% 99.6% 99.6%
WALT (years)~8.1 ~7.9 ~7.9
IG Tenant Exposure (% ABR)68.4% 67.5% 68.2%
Properties2,202 2,271 2,370
Liquidity (Total)>$1.4B >$1.9B >$2.0B
Net Debt / Recurring EBITDA (actual)4.9x 4.9x 4.9x
Net Debt / Recurring EBITDA (pro forma)4.1x 3.6x 3.3x
Q4 Acquisitions ($) and Cap Rate——$341.5M at 7.3%
Q4 Dispositions ($) and Cap Rate——$32.0M at 7.4%
Development/DFP (2024)——41 projects; ~$179.9M total
Monthly Dividend per Share$0.250 (Jul) $0.253 (Oct) $0.253 (Oct–Dec)
Dividend Payout (AFFO %)~72% (Q2) ~73% (Q3) ~73% (Q4)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
AFFO/shareFY2024 (as of Apr 23)$4.10–$4.13 $4.11–$4.14 (Jul 23) Raised low end
AFFO/shareFY2024 (as of Jul 23)$4.11–$4.14 $4.12–$4.14 (Oct 22) Raised low end
Acquisition volumeFY2024~$600M (Apr) ~$700M (Jul) ; ~$850M (Oct) Raised twice
Disposition volumeFY2024$50–$100M (Apr) $60–$100M (Jul) ; $70–$100M (Oct) Raised low end twice
G&A (% adjusted revenue)FY20245.7–6.0% (Apr/Jul) 5.7–5.9% (Oct) Narrowed lower
Non-reimb. RE expenses (% adjusted revenue)FY20241.0–1.5% (Apr/Jul) 1.1–1.4% (Oct) Narrowed
Income & other taxFY2024$4–$5M (Apr/Jul) $4–$4.75M (Oct) Narrowed lower
AFFO/shareFY2025—$4.26–$4.30 Initial set
Investment volumeFY2025—$1.1–$1.3B Initial set
Disposition volumeFY2025—$10–$50M Initial set
G&A (% adjusted revenue)FY2025—5.6–5.9% Initial set
Non-reimb. RE expenses (% adjusted revenue)FY2025—1.0–1.5% Initial set
Income & other taxFY2025—$3–$4M Initial set

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Balance sheet & liquidityExpanded credit facility to $1.25B; $450M notes; >$1.4B–$1.9B liquidity; forward equity raised >$2.0B liquidity; ~$920M forward equity; pro forma net debt/EBITDA 3.3x; no maturities until 2028 Stronger liquidity and de-risked leverage
External growth cadenceRaised 2024 acquisition guidance twice to $850M Affirmed 2025 $1.1–$1.3B; “strong January”; conservative pacing amid rate volatility Higher planned volume with caution
Developer Funding Platform25 DFP/dev projects H1; 33 YTD by Q3 Record 41 projects in 2024; platform bridges construction finance gaps Scaling; demand sustained
Macro: rates and pricingN/A10Y swings not resetting seller expectations; discipline on spreads Volatility requires discipline
Tariffs / procurementN/ATariffs likely flow to consumers; large retailers’ diversified sourcing mitigate impacts Ongoing macro headwind
Portfolio qualityIG exposure ~67–68%; occupancy ~99.6–99.8% IG 68.2%; occupancy 99.6%; WALT ~7.9 years Stable-high quality
Ground lease upsideN/ACase study shows significant mark-to-market on expirations Positive opportunity
Credit loss & tenant watchN/A50 bps credit loss embedded; Big Lots bankruptcy process; low exposure to challenged sectors Conservative buffer

Management Commentary

  • “Our discipline paid off… preemptively equitized our balance sheet raising $1.1 billion of forward equity… leverage stood at just 3.3x pro forma net debt to recurring EBITDA. We can deploy over $1.5 billion this year… without raising any additional equity.” — Joey Agree, CEO .
  • “We… entered into $200 million of forward-starting swaps… fixing the base rate for a contemplated 10-year unsecured debt issuance at ~3.7%… provides us with $1.1 billion of hedged capital to fund investment activity in 2025.” — Peter Coughenour, CFO .
  • “We are confident in our ability to achieve our AFFO per share guidance for full-year 2025.” — Joey Agree, CEO .
  • “Core FFO per share was $1.02… AFFO per share was $1.04… initial AFFO per share guidance of $4.26 to $4.30 for full year 2025.” — Peter Coughenour, CFO .
  • “Our three-pronged platform… is a one-stop shop for acquisitions, development and developer funding solutions… unmatched in the industry.” — Joey Agree, CEO .

Q&A Highlights

  • Ground lease renewals can unlock significant mark-to-market; case study showed sizable recapture requiring a new 15-year lease to retain control .
  • Forward equity: treasury method dilution (~$0.01–$0.02) expected if stock trades above forward price; cash drag minimal given higher interest rates offsetting dividends .
  • Acquisition pricing vs rates: rate volatility (10Y swings) complicates seller expectations; ADC will maintain disciplined deployment and avoid front-loading Q1 volumes .
  • DFP/development returns must compensate for duration risk; ADC targets tighter spreads for short-duration projects, wider spreads for 12–18 month builds .
  • Credit watch: 2025 guidance includes 50 bps credit loss allowance; Big Lots bankruptcy process continues; limited theater exposure monitored; low pharmacy/dollar store appetite .

Estimates Context

  • We attempted to retrieve S&P Global consensus estimates for quarterly EPS and revenue, but they were unavailable due to data access limits at this time. As a result, explicit comparisons to Wall Street consensus cannot be provided here. Values would otherwise be retrieved from S&P Global.
  • Given ADC’s REIT model, investor focus centers on AFFO/FFO metrics; management’s FY2025 AFFO/share guidance ($4.26–$4.30) provides the anchor for expectations .

Key Takeaways for Investors

  • Fortress balance sheet and ~$920M forward equity create flexibility to fund $1.1–$1.3B of 2025 investments without raising equity; pro forma leverage at 3.3x reduces financing risk .
  • Non-GAAP earnings momentum intact: AFFO/share $1.04 and Core FFO/share $1.02 in Q4, supporting a well-covered monthly dividend (~73% AFFO payout) .
  • Rate volatility remains a headwind for acquisition pricing; ADC’s disciplined spread framework and pacing should mitigate return compression .
  • Ground lease portfolio provides embedded mark-to-market optionality on renewals, with recent case studies indicating substantial recapture opportunity .
  • Conservative credit posture (50 bps loss embedded) and limited exposure to challenged categories (pharmacy/dollar stores) help defend cash flows amid macro/tariff uncertainty .
  • Strong retailer demand for new stores and DFP support an active pipeline across auto parts, off-price, grocers, and home improvement—aligned with ADC’s “omnichannel hub” thesis .
  • Traders should watch for quarterly updates on investment cadence versus cap rate spreads, treasury-method dilution from forward equity, and any tenant-specific resolutions (e.g., Big Lots) as near-term stock drivers .