Agree Realty (ADC) Q1 FY26 earnings call: guidance and Q&A

Given $1.6 billion in hedged capital, why isn't investment guidance being raised, and does macro uncertainty affect partner decision-making?

The pipeline is robust, but the pace of investment depends on the unpredictable macro environment and the company's selective approach. Macro uncertainty does not deter tenants; the decision to not raise guidance is unilateral, reflecting caution amidst global events.

“I just didn't think it was appropriate to raise investment guidance at this time in the midst of a war with JD Vance sitting on the runway.”

asked by Jana Galan · answered by Joey Agree

With record forward equity outstanding, what is the timing for physical settlement and how does it compare to other funding sources like term loans?

The company has $100 million capacity on a delayed draw term loan at an attractive fixed rate of 4%, which is a likely first option. Approximately 8 million shares of forward equity mature in 2026 and are likely to be settled. Forward starting swaps are in place for a potential 10-year unsecured debt issuance, but with $2.3 billion in liquidity, there's no rush.

“I think there's a good chance that we settle those shares at or prior to maturity given our anticipated uses. So I would expect that those 8 million shares are likely settled at some point in 2026.”

asked by Michael Goldsmith · answered by Peter Coughenour

Are there any increases in pricing or hesitancy from tenants in the development pipeline due to global events or construction costs?

No hesitancy from tenants; brick-and-mortar retailers are expanding due to the omnichannel hub thesis. No material cost creep is observed because projects have guaranteed maximum price bids and are build-to-suit or ground lease for leading operators, not speculative.

“We're seeing absolutely no hesitancy on the part of tenants as world events unfold here. Could that be possible? Sure. But what we're seeing is the exact opposite in the middle of the conflict in the Middle East has not changed the perspective of brick-and-mortar retailers.”

asked by Smedes Rose · answered by Joey Agree

How do the recent 7-Eleven closures impact Agree Realty's portfolio and what do they signify for the convenience store sector?

Zero concerns for Agree Realty's portfolio; no stores are closing. The closures are of older, smaller format stores, while 7-Eleven and other operators are developing large-format convenience stores with extensive food and beverage offerings. This represents a multi-year evolution where traditional gas stations are transforming into highly successful, margin-rich convenience stores.

“7-Eleven is closing the stores that have roller hotdogs and Slurpees. That's the bottom line. The -- and they're constructing and we are developing on their behalf, large-format convenience stores that have food and beverage offerings that are extensive, aligned with where the convenience store space.”

asked by Smedes Rose · answered by Joey Agree

The percentage of investment-grade-rated tenants acquired has decreased; are there other quality indicators to consider?

The decrease is primarily due to the Hobby Lobby acquisition, a privately held, debt-free market leader that is not formally rated. Investment-grade status is an 'output' for Agree Realty; the focus is on the 'biggest and best operators' regardless of whether they carry a formal investment-grade rating or debt. Imputing shadow ratings would place the portfolio's IG exposure much higher.

“We don't impute a credit rating to Hobby Lobby, privately held company by the Green family. So that's the biggest piece of this year. We're talking about, again, the largest craft and hobbies retailers, a multibillion dollar revenue operator that is far and away the leader in the crafts and hobby space that is privately owned by one family.”

asked by Upal Rana · answered by Joey Agree

Beyond the general trade-down, are there specific sectors where consumers are pulling back completely, or tenant sectors of concern?

Not within Agree Realty's portfolio, but casual dining and discretionary sectors are seeing consumer pullback. The 'trade-down effect' is evident, with consumers opting for value retailers and being pinched by gasoline prices. This applies across luxury, experience, and discretionary sectors, and even in necessity-based items like groceries.

“I think if we watch the casual dining space, we're seeing with the some of the quick service restaurants, all the guys that sell bowls for $18, $22, I don't know, I don't get to them very often. It's the discretionary options where people have the ability to trade out and that goes across really all sectors.”

asked by Linda Yu Tsai · answered by Joey Agree