Company Overview
Agree Realty Corporation (ADC) is a fully integrated real estate investment trust (REIT) primarily focused on the ownership, acquisition, development, and management of retail properties net leased to industry-leading tenants. The Company was founded in 1971 by its current Executive Chairman, Richard Agree, and its common stock was listed on the New York Stock Exchange (NYSE) in 1994.
Headquartered in Royal Oak, Michigan, Agree Realty has built a best-in-class portfolio of 2,370 properties spanning all 50 states as of the end of 2024. The portfolio includes 229 ground leases, comprising nearly 11% of the Company's annualized base rents, and maintains a strong occupancy rate of 99.6%. Notably, approximately 68.2% of Agree Realty's annualized base rents are derived from investment-grade retailers, a near all-time high for the Company.
Agree Realty's assets are held by, and all of its operations are conducted through, Agree Limited Partnership, of which Agree Realty Corporation is the sole general partner and in which it held a 99.7% common equity interest as of September 30, 2024. There is a one-for-one relationship between the limited partnership interests in the Operating Partnership owned by the company and shares of company common stock outstanding. As of September 30, 2024, the company owned 2,270 properties, with a total gross leasable area (GLA) of approximately 47.2 million square feet. The portfolio had a weighted average remaining lease term of approximately 7.9 years. Agree Realty elected to be taxed as a REIT for federal income tax purposes commencing with the taxable year ended December 31, 1994, and it intends to continue operating in such a manner.
Business Strategy
Agree Realty's laser-focus on acquiring and developing properties net leased to industry-leading tenants has been a key driver of its long-term success. The Company's disciplined approach to capital allocation and aversion to taking on undue risk have enabled it to navigate various market environments, including the recent period of heightened volatility.
In 2024, Agree Realty demonstrated its strategic agility by investing approximately $951 million across its acquisition, development, and Developer Funding Platform (DFP) platforms. This activity spanned 282 properties in 45 states and 28 diverse retail sectors. The Company's acquisition assets were acquired at a weighted average capitalization rate of 7.5% and had a weighted average lease term of 10.4 years, with roughly two-thirds of rents coming from investment-grade retailers.
Agree Realty's development and DFP platforms also had a record year in 2024, with 41 projects either completed or under construction, representing approximately $180 million of committed capital. This platform continues to gain traction as the Company partners with retailers to help execute their store growth plans and provides struggling developers with liquidity to fund their pipelines.
Financials
From an earnings perspective, Agree Realty reported core funds from operations (Core FFO) per share of $4.08 for the full year 2024, representing a 3.7% year-over-year increase. Adjusted funds from operations (AFFO) per share, which the Company views as the best indicator of its operating performance, reached $4.14 for the full year 2024, the high end of its guidance range and reflecting 4.6% year-over-year growth.
Looking ahead to 2025, Agree Realty has issued initial AFFO per share guidance of $4.26 to $4.30, representing approximately 3.5% year-over-year growth at the midpoint. This guidance takes into account the anticipated dilutive impact of the Company's outstanding forward equity, which is expected to range from $0.01 to $0.02 per share. The 2025 AFFO per share guidance includes assumptions for dilution via the treasury stock method if ADC's stock continues to trade above $70.
Agree Realty's consistent and reliable earnings growth continues to support a growing and well-covered dividend. During the fourth quarter of 2024, the Company declared monthly cash dividends of $0.253 per common share, equating to an annualized dividend of almost $3.04 per share and representing a 2.4% year-over-year increase.
For the most recent quarter, Agree Realty reported revenue of $160,734,000, representing a year-over-year growth of 11.5%. Net income for the quarter was $43,380,000. The company generated operating cash flow (OCF) and free cash flow (FCF) of $91,397,000 for the quarter.
Agree Realty's real estate investment portfolio grew from approximately $6.61 billion in net investment amount representing 2,080 properties with 43.2 million square feet of GLA as of September 30, 2023, to approximately $7.13 billion in net investment amount representing 2,270 properties with 47.2 million square feet of GLA as of September 30, 2024.
Liquidity
Importantly, Agree Realty proactively strengthened its fortress balance sheet in 2024, raising approximately $1.1 billion of forward equity and upsizing its revolving credit facility to $1.25 billion. As a result, the Company entered 2025 with over $2 billion of liquidity, including $920 million of outstanding forward equity. This significant war chest, combined with no material debt maturities until 2028, has positioned Agree Realty to execute on its 2025 investment guidance of $1.1 billion to $1.3 billion without the need for additional equity capital.
Agree Realty's financial discipline was further validated in 2024 when S&P upgraded the Company's issuer rating to BBB+ from BBB with a stable outlook. This rating upgrade reflects the prudent and disciplined manner in which Agree Realty continues to grow the business.
As of the most recent quarter, Agree Realty reported a debt-to-equity ratio of 0.5139, indicating a relatively low level of leverage. The company held $13,240,000 in cash and cash equivalents. The $1.25 billion senior unsecured revolving credit facility had $1,101,000,000 available as of the end of the quarter. The company's current ratio and quick ratio both stood at 0.7828, suggesting adequate short-term liquidity.
Agree Realty expects its net debt to recurring EBITDA to be in their target range of 4 to 5 times in 2025, without the need for additional equity capital.
Acquisitions and Developments
During the three months ended September 30, 2024, Agree Realty acquired 66 retail net lease assets for approximately $216 million, with a weighted average lease term of approximately 9.8 years. For the nine months ended September 30, 2024, the company acquired 144 retail net lease assets for approximately $531.4 million, with a weighted average lease term of approximately 9.2 years.
In terms of development activities, during the three months ended September 30, 2024, Agree Realty commenced 8 and completed 6 development or Developer Funding Platform (DFP) projects. For the nine months ended September 30, 2024, the company commenced 17 and completed 12 development or DFP projects. As of September 30, 2024, Agree Realty had 21 development or DFP projects under construction.
Conclusion
In summary, Agree Realty's disciplined approach to capital allocation, strategic focus on high-quality retail net lease assets, and proactive balance sheet management have positioned the Company for long-term success. Despite the recent market volatility, Agree Realty remains well-equipped to navigate the current environment and capitalize on attractive investment opportunities that align with its core strategy. The company's strong financial performance, growing portfolio, and clear guidance for 2025 demonstrate its commitment to delivering value for shareholders while maintaining a robust and diversified real estate portfolio.