Agree Realty Q4 Earnings Call Highlights

Key Points

• Agree Realty set 2026 AFFO guidance of $4.54–$4.58, which implies 5.4% year‑over‑year growth and 10% two‑year stacked growth, and management says this, combined with the current dividend yield, supports its target of roughly a 10% total operational return.
• The company raised 2026 investment guidance to $1.4–$1.6 billion supported by a pipeline above $0.5 billion (including two sale‑leasebacks and a single‑credit portfolio), after investing nearly $1.6 billion in 2025 at a ~7.2% weighted average cap rate and long lease terms with ~two‑thirds of rent from investment‑grade retailers.
• Agree ended the year with a strong liquidity and capital position — more than $2 billion of liquidity, about $1.5 billion of long‑term capital raised in 2025, a Fitch A‑ rating and pro forma net debt/recurring EBITDA of 3.8x (with no material maturities before 2028).

Agree Realty NYSE: ADC executives highlighted a year of “consistent execution” in 2025 and provided a more constructive outlook for 2026, supported by higher investment guidance, continued operating efficiencies, and what management described as a “tremendous” balance sheet position.

2025 results and 2026 outlook

Chief Executive Officer Joey Agree said the company delivered more than 4.5% adjusted funds from operations (AFFO) per share growth in 2025 while investing $1.55 billion across its three investment platforms, the second-highest annual total in company history and more than 60% year-over-year growth.

For 2026, management initiated full-year AFFO per share guidance of $4.54 to $4.58. At the midpoint, the company said this implies 5.4% year-over-year growth and 10% two-year stacked growth. Agree said that, when combined with the current dividend yield, the company views the outlook as consistent with its stated target of approximately 10% total operational return.

Chief Financial Officer Peter Agree reported that core FFO per share was $1.10 in the fourth quarter and $4.28 for the full year, representing year-over-year increases of 7.3% and 5.1%, respectively. AFFO per share was $1.11 for the fourth quarter, up 6.5% year over year, and $4.33 for 2025, which management said was the high end of guidance and represented 4.6% growth.

Investment activity, cap rates, and a higher 2026 investment guide

Agree Realty increased its 2026 investment guidance to $1.4 billion to $1.6 billion, which management said is about a 10% increase from its prior range. Joey Agree said the company’s pipeline expanded over the prior month to more than $0.5 billion, which helped support the higher outlook. In response to analyst questions, management attributed the increase primarily to two sale-leaseback transactions expected to close in the first and second quarters and a single-credit portfolio transaction, alongside improved confidence in development and developer funding platform (DFP) project starts.

During the fourth quarter, the company invested about $377 million across 94 properties, including more than $347 million of acquisitions. The fourth-quarter acquisitions carried a 7.1% weighted average cap rate and a 9.6-year weighted average lease term, with investment-grade retailers representing nearly two-thirds of annualized base rent acquired. Management noted that ground leases accounted for more than 18% of quarterly acquisitions, its largest quarterly percentage since 2021.

For full-year 2025, Agree Realty invested nearly $1.6 billion in 338 properties across 41 states. More than $1.4 billion came from acquisitions completed at a 7.2% weighted average cap rate and an 11.5-year weighted average lease term, with roughly two-thirds of rents from investment-grade retailers.

On cap rates and lease terms, Joey Agree said he did not see anything “materially changing” on the cap rate front and indicated the company would not “move up the risk spectrum.” He also said rent escalators have remained consistent with the inflationary backdrop, citing typical escalators of 7.5% to 10% every five years.

Development and DFP activity; construction cost commentary

Management said the development and DFP platforms had a record year, with 34 projects either completed or under construction representing approximately $225 million of committed capital. In the fourth quarter, the company commenced four new projects with total anticipated costs of about $35 million, continued construction on nine projects totaling about $59 million, and completed three projects at a cost of $29 million. The newly commenced projects included retailers such as Boot Barn, Burlington, Five Below, Ross Dress for Less, Ulta, and 7-Eleven.

In discussing construction costs, Joey Agree said costs “certainly aren’t going down” and described current levels as “fairly in line with last year.” He cited typical junior box vertical costs of approximately $160 per square foot, compared with about $95 per square foot pre-pandemic, and pointed to labor constraints and tariffs as additional pressures. He also said the company is working with retailers on value engineering and alternative construction methodologies, including prefabricated materials and domestic sourcing, where possible.

Portfolio operations, leasing, and dispositions

Agree Realty reported executing new leases, extensions, or options on more than 640,000 square feet of gross leasable area (GLA) in the fourth quarter and about 3 million square feet for the full year, with a 104% recapture rate. Management said only 52 leases, representing 1.5% of annualized base rent, are scheduled to mature in 2026.

At year-end, the portfolio was “approaching 2,700 properties” across all 50 states. The company said it had 251 ground leases representing more than 10% of annualized base rent, investment-grade exposure of nearly 67%, and occupancy of 99.7%, up 50 basis points since the first quarter.

Agree Realty disposed of 22 properties in 2025 for gross proceeds of just over $44 million at a 6.9% weighted average cap rate, including nine properties sold in the fourth quarter for $20 million at a 6.4% weighted average cap rate. Management said capital recycling would continue to focus on non-core assets and opportunistic sales, and described some disposition activity as driven by demand from 1031 exchange buyers and other tax-motivated purchasers. In response to a question about disposition pricing, Joey Agree said the company was targeting cap rates “in the sixes” on a blended basis.

Balance sheet actions, liquidity, and dividend

Peter Agree said the company raised about $1.5 billion of long-term capital in 2025, including about $715 million of forward equity, a $400 million bond offering, and a $350 million term loan. The company also established a $625 million commercial paper program. Management said it issued approximately $28 billion of commercial paper notes during the year and generated more than $1 million in savings versus borrowing on the revolver.

At year-end, Agree Realty reported more than $2 billion of liquidity, including revolver and term loan availability, outstanding forward equity, and cash. Pro forma net debt to recurring EBITDA was 3.8x assuming settlement of forward equity, and 4.9x excluding unsettled forward equity. The company said it had no material debt maturities until 2028. Management also highlighted its A- issuer rating from Fitch and said it launched a commercial paper program during the year.

On guidance assumptions, Peter Agree said 2026 AFFO guidance assumes credit loss of 25 basis points at the high end and 50 basis points at the low end; he said credit loss in 2025 ended at 28 basis points. He also said treasury stock method dilution related to forward equity is expected to reduce 2026 AFFO per share by about $0.01 if the stock trades near current levels.

Agree Realty declared monthly dividends of $0.262 per share for October, November, and December, which equates to an annualized dividend of over $3.14 per share and a 3.6% year-over-year increase. The company said the fourth-quarter AFFO payout ratio was 71%.

About Agree Realty NYSE: ADC

Agree Realty Corporation NYSE: ADC is a publicly traded real estate investment trust headquartered in Chicago, Illinois. Founded in 1971, the company converted to a REIT structure in 2013 and focuses on acquiring, developing and managing a diversified portfolio of retail properties under long-term, triple-net (NNN) leases. Its tenant roster spans national and regional retailers in sectors such as grocery, home improvement, convenience and specialty retail.

Agree Realty's primary business activities include sourcing and underwriting new property acquisitions, originating build-to-suit projects and executing value-add redevelopment programs.

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