What Management Said
Read the full Q1 2026 transcript ↗Please note that during this call, we will make certain statements that may be considered forward-looking under federal securities laws, including statements related to our updated 2026 guidance. Please see yesterday's earnings release and our SEC filings, including our latest annual report on Form 10-K, for a discussion of various risks and uncertainties underlying our forward-looking statements. In addition, we discuss non-GAAP financial measures, including Core Funds from Operations or Core FFO, Adjusted Funds from Operations or AFFO, and pro forma net debt to recurring EBITDA. Reconciliations of our historical non-GAAP financial measures to the most directly comparable GAAP measures can be found at our earnings release website and SEC filings.
During the quarter, we invested nearly $425 million across our three external growth platforms while further strengthening our market-leading portfolio. The $403 million of acquisitions completed during the period represents our largest quarterly acquisition volume since 2022, as we continued to source superior risk-adjusted opportunities. During the quarter, we raised approximately $660 million of forward equity through our ATM. We now enjoy $2.3 billion of total liquidity and more than $1.6 billion of hedged capital, including a company record $1.4 billion of outstanding forward equity.
At quarter end, pro forma net debt to recurring EBITDA was just 3.2x, giving us meaningful flexibility to execute regardless of capital markets volatility. Our pipeline across all three external growth platforms is robust, yet our approach remains unchanged. We'll continue to provide updates as the year progresses, and Peter will provide additional details on our guidance and inputs shortly. Turning to our external growth activity, we had an active start to the year, leveraging our unique market positioning and deep relationships with retail partners to uncover opportunities across all three platforms.
What went well
- Invested nearly $425 million across the three external growth platforms, including $403 million of acquisitions, the largest quarterly acquisition volume since 2022, at a weighted average cap rate of 7.1% and a weighted average lease term of 11.3 years.
- Core FFO per share was $1.13, an 8.1% year-over-year increase, and AFFO per share was $1.14, a 7.9% year-over-year increase and the highest quarterly AFFO per share growth achieved since the second quarter of 2022.
- Balance sheet strengthened materially: pro forma net debt to recurring EBITDA of just 3.2x, $2.3 billion of total liquidity, over $1.6 billion of hedged capital including a company record $1.4 billion of outstanding forward equity, and no material debt maturities until 2028.
- Portfolio quality improved, ending the quarter with 2,756 properties across all 50 states, occupancy of 99.7% (up 50 basis points year-over-year), investment-grade exposure over 65%, and 261 ground leases comprising over 10% of annualized base rent.
- Completed a sale leaseback with Hobby Lobby on their corporately owned stores, alongside acquisitions including a Home Depot, five Wawa ground leases, 11 Sherwin-Williams stores, several Aldis and three Walmarts, with nearly 60% of base rents acquired derived from investment-grade retailers.
- Executed new leases, extensions or options on over 876,000 square feet of gross leasable area at a recapture rate of over 104%, reducing remaining 2026 lease maturities to 29 leases or 90 basis points of annualized base rent.
What went wrong
- Development and developer funding platform (DFP) activity was light in the first quarter, with only two new projects commenced (approximately $18 million anticipated cost) and four completed (approximately $23 million), as Q1 is seasonally slow due to frost in the ground in northern markets.
- Treasury stock method dilution guidance was increased to an anticipated $0.02-$0.04 impact on full year 2026 AFFO per share, up from approximately $0.01 in prior guidance, due to a higher share price and more forward equity outstanding.
- Acquisitions of investment-grade rated tenants came down again this quarter, driven primarily by the Hobby Lobby sale leaseback since the company does not impute a credit rating to the privately held retailer.
- Investment and earnings guidance were left unchanged rather than raised, with management citing macro uncertainty (referencing conflict in the Middle East) as the reason it was not appropriate to raise investment guidance at this time.
- The AFFO per share guidance still assumes 25-50 basis points of credit and occupancy loss for the year versus only 14 basis points recorded in the first quarter, implying an assumed acceleration of losses in Q2 through Q4.
Guidance Changes
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Performance Breakdown
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Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Acquisition guidance | Investment guidance had already been raised once earlier in 2026. | Investment guidance left unchanged; management deemed it inappropriate to raise it again given macro uncertainty, while describing all three platform pipelines as extremely strong and the funnel bigger than it has ever been. | — |
| Treasury stock method dilution | Prior guidance assumed approximately $0.01 of TSM dilution impact on full year AFFO per share. | Increased to an anticipated $0.02-$0.04 impact due to a higher share price and more forward equity outstanding. | — |
| Development and DFP platforms | Set an intermediate target roughly 18 months ago of approximately $250 million of development commencements in the ground per year over about three years. | Q1 was seasonally light, but development and DFP activity is expected to meaningfully ramp in Q2 and Q3, and the company is on track to potentially hit the $250 million intermediate target this year. | — |
| Pharmacy exposure | Pharmacy once exceeded 40% of the portfolio. | Pharmacy exposure down to 3.5% of annualized base rent and now outside the top 10 sectors. | — |
| Financial disclosure / supplement | No standalone financial supplement. | Published an inaugural financial supplement adding non-GAAP metrics and KPIs (recapture rate, credit and occupancy loss, same-store rent growth, tenant ownership type). | — |
| Cap rate environment | Cap rates broadly stable over the prior roughly 18-20 months. | No material change in cap rates in nearly two years despite 10-year Treasury volatility; low price-point assets (Jiffy Lube, Dutch Bros) still trade aggressively to limited 1031 buyers. | — |
Q&A Summary
With $1.6 billion of hedged capital already raised, can you expand on the pace or size of the different platform pipelines, and does macro/rate uncertainty cause partners to delay decisions?
The pipeline across all three platforms is very strong, with numerous transactions under contract or letter of intent in diligence. Pace into Q2 will be determined by the macro environment and by the company's own discretion on which deals to pursue. Any restraint is unilateral on Agree's side, not driven by partners pausing; guidance simply was not raised given the uncertain backdrop.
With a record $1.4 billion of forward equity outstanding, how are you thinking about timing of settlement relative to acquisition funding versus term loans or other sources?
The first option to term out short-term variable rate debt is likely the remaining $100 million of capacity on the delayed draw term loan at a fixed rate of roughly 4%. Of the 18.4 million shares of outstanding forward equity, the contract for about 8 million shares matures this year and those are likely settled at or prior to maturity in 2026. With $250 million of forward starting swaps fixing the base rate at 4.1%, a future issuance will be evaluated later this year, but with $2.3 billion of liquidity there is no rush.
What makes Hobby Lobby an attractive tenant and how do you view the craft space outlook?
Hobby Lobby is the far and away leader in the craft and hobby space, a multi-billion-dollar revenue operator privately owned by the Green family with effectively zero net debt that would be a high investment-grade operator if it pursued a rating. It effectively put JOANN out of business. Most of its assets are leased; it had limited owned stores and wanted to remove that real estate and management burden from its balance sheet, making this a unique sale leaseback transaction.
Are you seeing any construction cost increases or tenant hesitancy given the Middle East conflict and fluid macro backdrop, especially as you ramp development in Q2/Q3?
No hesitancy from tenants; if anything there is acceleration, with several projects commenced after quarter close and more closing in the coming weeks. Retailers view the store as the hub of an omnichannel world and continue opening stores. On cost, projects close with guaranteed maximum price (GMP) contracts from general contractors and the company does not speculate on land or small-tenant space, so no material cost creep has been seen.
Given 7-Eleven's store-closure announcement, are any of your stores impacted and what does it signal about convenience stores?
Absolutely zero concern and no stores closing in the portfolio. 7-Eleven is closing legacy small-format stores (roller hot dogs and Slurpees) while building large-format convenience stores with extensive food and beverage offerings, which Agree is developing on their behalf. The 1,200-2,000 square foot legacy gas station is going away in favor of the convenience store model (7-Eleven, Sheetz, Wawa, Kwik Trip), a multi-year evolution the company sees as a major opportunity.
What is in the guide from a credit loss perspective and are there any expected closures?
No anticipated closures; the assumptions are precautionary. The company recorded 14 basis points of combined credit and occupancy loss in Q1, while full year AFFO guidance still assumes 25-50 basis points, implying acceleration in Q2 through Q4. Management is watching only one or two assets and does not anticipate anything material this year, but thought it prudent to keep the range as is.
Is the roughly $250 million development target still realistic this year, and is there opportunity to scale above it?
The intermediate target set about 18 months ago was approximately $250 million of commencements in the ground per year over about three years, and there is a chance of hitting it this year. Q1 is generally light due to weather (frost in the ground), Q2 will be significantly larger, and Q3 is shaping up similar to Q2, with projects subject to entitlements and municipal approvals. The company is on track to hit the target.
Are you seeing any change in seller behavior or deal flow due to volatility in the 10-year Treasury?
Nothing causal. With the 10-year between 4% and 5%, the market has grown accustomed to it vacillating 10-15%. The funnel is bigger than it has ever been across all three platforms, with no notable increase or decrease in competition and little change since the do-nothing scenario coming out of 2024. The differentiator is the team's performance, scale and depth and its retailer relationship-driven transactions.
Investment-grade acquisitions came down again; outside of IG credit ratings, is there another sign of quality we should consider?
The decline was driven primarily by not imputing a credit rating to Hobby Lobby, a privately held company. Investment grade is an output, not a target; the company holds many strong operators (Publix, Chick-fil-A, Aldi, Wegmans, Hobby Lobby, Ulta) that carry little or no debt. Imputing shadow investment-grade ratings would put the portfolio around 80%, and adding ground lease exposure (which has no sub-investment-grade) would reach roughly 85-87%. The focus is on the biggest and best operators and best real estate, regardless of whether they carry a rating or debt.
Was there movement in grocery versus non-grocery cap rate trends given the quick disposition of some assets?
The grocery assets themselves were not sold; the grocery portfolio acquired included Jiffy Lube and Dutch Bros outlots that were disposed approximately 300 basis points inside where they were bought less than a year earlier. The company has no interest in owning small (~1,000-1,200 square foot) Dutch Bros or Jiffy Lube assets trading in the low fives with no residual value, and closed them in a TRS to recycle the proceeds accretively into better real estate and credit.
What percentage of your tenants are owned by private equity and how has it trended?
New supplemental disclosure on ownership type shows 77% of the portfolio by annualized base rent is publicly traded. The remainder is private, broken into privately held companies (e.g., Hobby Lobby owned by the Green family), nonprofits, ESOPs and other private ownership; private equity is only a small component of that private bucket.
What spread on yields do you get on the developer funding platform versus development, and which platforms are more competitive?
Development ranges from nine to 18 months (retrofit or ground-up) and prices approximately 75-150 basis points wider than buying a like-kind asset; DFP generally ranges six to 12 months and is tighter given the shorter horizon. The same tenants are targeted across all three platforms, so the spread is driven purely by time and duration risk, not different asset or credit types, and nothing is done on a speculative basis.
More on Agree Realty Corp
Reported 2026-04-22 · figures from the Agree Realty Corp Q1 2026 earnings call.
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