Agree Realty Corporation (ADC)

Agree Realty Corporation – Q1 2025 Financial Report

Report Date: April 30, 2025
Period Covered: Three months ended March 31, 2025

Executive Summary

Agree Realty Corporation (NYSE: ADC) reported net income of $47.148 million in Q1 2025, up 4.7% from $45.014 million in Q1 2024. Total revenue rose to $169.160 million, reflecting higher rental income from recent acquisitions and strong leasing performance. Debt outstanding stands at $2.976 billion, up 5.9% from year-end 2024, reflecting active funding of new property investments.

Revenue & Profit Analysis

• Total revenue: $169.160 M (+13.2% YoY)
  – Rental income: $169.113 M
  – Other income: $0.047 M
• Net income: $47.148 M (+4.7% YoY)
  – Net income attributable to common: $45.137 M

Key Drivers:
• Acquisition activity (Q1 acquisitions of $358.2 M) lifted revenue and asset base.
• Same-store rental growth supported by CPI escalations and low vacancy.
• Controlled operating expenses kept OPEX/revenue stable.

Expense & Financing Highlights

• Operating expenses: $91.236 M (+12.6% YoY)
  – Real estate tax: $11.513 M
  – Property OPEX: $8.381 M
  – G&A: $10.771 M
  – Depreciation & amortization: $55.755 M
• Interest expense: $30.764 M (+25.7% YoY) due to higher average debt levels.
• Provision for impairment: $4.331 M (vs. $4.530 M prior year).
• Debt maturity profile well laddered; weighted-average cost of debt ~3.7%.

Balance Sheet & Liquidity

• Total assets: $8.800 B
• Total liabilities: $3.156 B
• Equity: $5.645 B
• Cash & equivalents: $11.169 M
• Revolver availability: ~$928 M
• Debt/Enterprise Value: 25.5%

Pros & Cons

Pros:

• Strong credit tenants, long WALE (~8.0 years).
• Low leverage relative to peers; ample liquidity.
• Predictable rental cash flow from net leases.

Cons:

• Rising interest expense from new debt issuance.
• Concentrated in retail net leases—subject to retail sector risks.
• Continued acquisition spend may pressure free cash flow.

Outlook & Recommendations

Maintain positive bias on ADC given stable cash flows, strong balance sheet and disciplined growth in high-quality net-leased retail. Monitor interest rate outlook and debt service coverage. Consider modest overweight in diversified REIT portfolios.

Revenue breakdown (Q1 2025):

• Rental income: $169.113 M (99.97% of total revenue)
• Other revenue: $0.047 M (0.03%)

Operating expenses (Q1 2025):

• Real estate tax: $11.513 M (6.8% of revenue)
• Property operating expense: $8.381 M (5.0%)
• Land lease expense: $0.485 M (0.3%)
• General & administrative: $10.771 M (6.4%)
• Depreciation & amortization: $55.755 M (33.0%)
• Provision for impairment: $4.331 M (2.6%)

Interest expense (net): $30.764 M (18.2%) Net income: $47.148 M

Agree Realty’s underlying net-leased retail platform continues to show stable, contracted cash flows with long-dated leases and strong tenant credit profiles. The company’s growth trajectory remains driven by disciplined acquisitions and targeted developments under its DFP program. Key health indicators — debt/EBITDA, interest coverage, unencumbered asset ratios — remain conservative for the sector.

Opportunities:

• Continued accretive acquisitions in infill markets.
• Potential to tap ATMs and preferred issuance to extend maturities.
• Land bank and development pipeline unlock future growth.

Challenges:

• Rising interest rates may increase cost of capital and pressure coverage ratios.
• Retail sector headwinds could impact tenant sales and renewals.
• Execution risk on development projects and lease-up timelines.

Overall, financial health is sound; the company is well positioned to navigate rising rates and fund growth while sustaining its dividend policy.