Yahoo Finance Agree Realty Corp (ADC) Q1 2024 Earnings Call Transcript Highlights: Strategic Growth and ...
Total Liquidity: Over $920 million
Hedged Capital: More than $385 million
Debt Maturities: No material debt maturities until 2028
AFFO per Share Guidance for 2024: $4.10 to $4.13, reflecting 4.2% growth at the midpoint
Acquisition Volume: $600 million guide for the year
Disposition Activity: Anticipated at $50 million to $100 million
Free Cash Flow: Approaching $100 million on an annualized basis
Investment Activity: $140 million in 50 retail properties, with a weighted average cap rate of 7.7%
Core FFO per Share: $1.01, up 3.5% year-over-year
AFFO per Share: $1.03, increased 4.6% year-over-year
Dividend: Monthly cash dividends of $0.247 per share for Q1, annualized increase of 2.9%
Net Debt to Recurring EBITDA: Approximately 4.3x, pro forma
Release Date: April 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: What was the catalyst for issuing AFFO per share guidance now, given the long history of not providing it? A: Joel N. Agree, President and CEO, explained that the decision was driven by the current uncertain macro environment, the need to demonstrate consistency and certainty in execution, and the confidence in the team's ability to adapt to the new economic conditions. The guidance aims to provide clarity and reinforce Agree Realty's commitment to consistent growth and a defensive portfolio.
Q: Can you discuss the visibility on about half of the total acquisition volume guided for the year and where those cap rates are falling? A: Joel N. Agree mentioned that the cap rates for these acquisitions are effectively in line with those from Q1, with minor variations expected due to the timing of closings. The company maintains a strict mandate of 100 basis point plus spreads without increasing risk.
Q: Have there been any changes in the pipeline given the recent movements in interest rates? A: Joel N. Agree noted that any changes in the pipeline are due to the team's increased efforts and focus on sellers ready to transact, rather than market-based transactions. The company continues to push for higher cap rates and seeks unique opportunities where they have insights or knowledge that can create value.
Q: What is driving the 50 basis point sequential increase in cap rates from Q1 to Q4? A: Joel N. Agree clarified that the composition of deals remains similar to previous quarters, with the company operating within its defined parameters and not stretching its risk profile. The increase is not due to a change in tenant credit or deal makeup.
Q: Regarding the newly signed leases with significant re-leasing spreads, can you clarify if this is a recovery or a positive rent spread? A: Joel N. Agree confirmed it is a 110% recovery, meaning rents are 10% higher than the previous terms. The leases, including those with Fresenius and O'Reilly Auto Parts, are long-term with significant escalations and involve superior operators.
Q: What are the expectations for the economic returns from the $74 million of development and DFP projects that were under construction at the end of the quarter? A: Joel N. Agree discussed that the returns depend on the project duration, with a focus on achieving approximately 50 basis point spreads over similar asset acquisitions for shorter projects. For longer projects involving new builds and entitlement processes, the required returns are significantly higher to compensate for the increased duration risk.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
