Agree Realty Receives Upgrade to BBB+ From S&P Global Ratings

Rhea-AI Summary

Agree Realty (NYSE: ADC) has received a credit rating upgrade from S&P Global Ratings, moving from BBB to BBB+ with a stable outlook. This upgrade reflects the company's strong operational performance, characterized by a highly occupied portfolio with minimal near-term lease expirations and a sector-leading investment grade tenant base. S&P also highlighted ADC's conservative financial policy and robust liquidity profile, supported by a well-structured debt maturity schedule and ample credit facility availability. Peter Coughenour, CFO, noted that the company has more than tripled its retail portfolio size since its initial rating in 2020, while improving its investment grade concentration and strengthening its balance sheet.

Positive

• Credit rating upgrade from BBB to BBB+ by S&P Global Ratings
• Highly occupied portfolio with minimal near-term lease maturities
• Sector-leading investment grade tenant base
• Conservative financial policy and strong liquidity profile
• Well-laddered debt maturity schedule with minimal near-term maturities
• More than tripled retail portfolio size since 2020
• Increased investment grade concentration
• Deleveraged balance sheet

Negative

• None.

Insights

Financial Analyst

Agree Realty's upgrade to BBB+ from S&P Global Ratings marks a significant milestone in the company's financial journey. This upgrade reflects the company's robust financial health and strategic positioning in the real estate market.

The key factors contributing to this upgrade are noteworthy:

• A highly occupied portfolio with minimal near-term lease maturities, indicating stable and predictable cash flows.
• A sector-leading investment grade tenant base, which reduces credit risk and enhances the quality of rental income.
• A conservative financial policy and strong liquidity profile, supported by a well-structured debt maturity schedule.

The company's growth strategy is particularly impressive. Since its initial rating in 2020, Agree Realty has more than tripled the size of its portfolio while simultaneously improving its tenant quality and reducing leverage. This balanced approach to growth and risk management is commendable in the REIT sector.

From an investor's perspective, this upgrade could potentially lead to lower borrowing costs for Agree Realty, which could positively impact the company's profitability and dividend-paying capacity. The stable outlook assigned by S&P suggests confidence in the company's ability to maintain its financial strength in the near to medium term.

However, investors should also consider the broader economic context. With interest rates at elevated levels, REITs face challenges in terms of financing costs and property valuations. Agree Realty's focus on retail properties also exposes it to risks associated with changing consumer behaviors and the ongoing shift towards e-commerce.

In conclusion, while this rating upgrade is undoubtedly positive news, investors should continue to monitor the company's ability to navigate the evolving retail landscape and maintain its strong financial position in a potentially challenging economic environment.

Real Estate Market Analyst

Agree Realty's upgraded BBB+ rating from S&P Global Ratings underscores its strong position in the retail real estate sector. This achievement is particularly noteworthy given the challenges faced by retail properties in recent years.

The company's success can be attributed to several key factors:

• High-quality tenant mix: Agree Realty's focus on investment-grade tenants sets it apart in the retail REIT space. This strategy minimizes default risk and ensures stable cash flows, even in uncertain economic conditions.
• Strategic portfolio management: The company's ability to maintain high occupancy rates and minimize near-term lease maturities demonstrates effective property and tenant management.
• Prudent growth strategy: Tripling the portfolio size while improving tenant quality and reducing leverage is a remarkable feat. This balanced approach to growth is rare in the REIT sector and speaks to the management's acumen.

From a market perspective, Agree Realty's performance is even more impressive when considering the broader retail real estate landscape. Many retail REITs have struggled with tenant bankruptcies, reduced foot traffic and the rise of e-commerce. Agree Realty's focus on high-quality, investment-grade tenants has likely insulated it from many of these challenges.

However, it's important to note that the retail sector continues to evolve rapidly. While Agree Realty's current strategy has proven successful, the company must remain vigilant and adaptable to changing consumer preferences and retail trends. The ability to identify and secure tenants that are resilient to e-commerce competition will be key to long-term success.

In conclusion, Agree Realty's upgraded rating reflects its strong position in the retail real estate market. For investors, this suggests a potentially lower-risk investment within the retail REIT sector, though ongoing monitoring of retail trends and the company's adaptation strategies remains crucial.

Highlights Highly Occupied Portfolio and Sector Leading Investment Grade Tenant Base

 

ROYAL OAK, Mich., July 29, 2024 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) (the "Company") today announced that S&P Global Ratings has upgraded the Company's issuer rating to BBB+ from BBB with a stable outlook.

According to S&P's press release, the BBB+ issuer rating reflects the Company's sound operating performance, supported by a highly occupied portfolio with minimal near-term lease maturities and a sector leading investment grade rated tenant base. Additionally, S&P noted the Company's conservative financial policy and liquidity profile, supported by its well-laddered debt maturity schedule with minimal near-term maturities, and ample availability under its revolving credit facility.

"The upgrade to a BBB+ credit rating is a testament to the disciplined and prudent manner in which we've grown the Company," said Peter Coughenour, Chief Financial Officer. "We have more than tripled the size of our best-in-class retail portfolio since receiving our initial rating in 2020, while simultaneously increasing our investment grade concentration and deleveraging our fortress balance sheet."

About Agree Realty Corporation

Agree Realty Corporation is a publicly traded real estate investment trust that is RETHINKING RETAIL through the acquisition and development of properties net leased to industry-leading, omni-channel retail tenants. As of June 30, 2024, the Company owned and operated a portfolio of 2,202 properties, located in 49 states and containing approximately 45.8 million square feet of gross leasable area. The Company's common stock is listed on the New York Stock Exchange under the symbol "ADC". For additional information on the Company and RETHINKING RETAIL, please visit www.agreerealty.com.   

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SOURCE AGREE REALTY CORPORATION

FAQ

What is Agree Realty's new credit rating from S&P Global Ratings?

Agree Realty (ADC) has been upgraded to a BBB+ credit rating with a stable outlook from S&P Global Ratings, up from its previous BBB rating.

What factors contributed to Agree Realty's credit rating upgrade?

The upgrade was based on ADC's sound operating performance, highly occupied portfolio, minimal near-term lease maturities, sector-leading investment grade tenant base, conservative financial policy, and strong liquidity profile.

How has Agree Realty's portfolio changed since its initial credit rating in 2020?

Since receiving its initial rating in 2020, Agree Realty has more than tripled the size of its retail portfolio while increasing its investment grade concentration and deleveraging its balance sheet.

What did S&P Global Ratings say about Agree Realty's debt structure?

S&P noted that Agree Realty (ADC) has a well-laddered debt maturity schedule with minimal near-term maturities and ample availability under its revolving credit facility.