I invested the majority of last month pulling apart net lease credit structures– Real estate Earnings’s A- score, NNN REIT’s longer-dated financial obligation stack, the mechanics of how buffer range from the BBB- cliff equates into real-world strength. Each time, the concern was the exact same: just how much space does this business have before something breaks?
With Agree Real Estate (NYSE: ADC), I encountered a various issue. The space is apparent. What I can’t determine is why the business isn’t utilizing more of it.
The Numbers
Pro forma net debt-to-recurring EBITDA: 3.5 x.
That number consists of the advantage of uncertain forward equity offerings. Leaving out those, the figure is 5.1 x– still within the variety for an investment-grade net lease REIT, however a space that I believe deserves enjoying. For context, numerous BBB-rated net lease peers run in the 5.0– 6.0 x variety. The distinction is approximately $900 million in forward equity that had not yet settled since Q3 2025– timing, not credit tension.
Source: Q3 2025 Incomes Release (October 21, 2025); Q3 2025 Incomes Call Records (October 22, 2025).
Takeaway: Even omitting forward equity, both figures sit inside the typical net lease operating variety.
AFFO payment ratio: roughly 70%.
AFFO per share was available in at $1.10 in Q3, up 7.2% year-over-year. Management raised full-year 2025 assistance to $4.31–$ 4.33, suggesting 4.4% development at the midpoint. That leaves approximately 30 cents of every AFFO dollar unallocated to dividends. Compared to peers running payment ratios in the mid-70s to low-80s, ADC maintains more than many.
Source: Q3 2025 Incomes Release (October 21, 2025).
Takeaway: ADC maintains more internal capital than many net lease peers.
3 credit scores, all investment-grade.
Fitch designated ADC an A- provider score with a steady outlook on August 12, 2025, pointing out “exceptional occupant credit quality” and “sector-leading access to capital.” Moody’s rates the business Baa1, updated from Baa2 in March 2022. S&P Global Scores updated ADC to BBB+ from BBB in July 2024.
In net lease, an A-range score from any firm is unusual. Real estate Earnings brings it. ADC now brings it from Fitch. Even at its most affordable score– BBB+ from S&P– ADC sits 2 notches above the investment-grade cliff. From what I can inform, that is among the largest structural cushions in the sector.
Source: Fitch Scores (August 2025); Moody’s Investors Service (March 2022); S&P Global Scores (July 2024).
2026 financial investment assistance: $1.25–$ 1.50 billion.
Here’s the important things. ADC really released $1.55 billion in 2025. The 2026 assistance variety was available in listed below that. At the low end, it’s a $300 million pullback from what the business simply did. This might be discipline, or it might be care about offer circulation and rates. What I do understand is that ADC is picking not to completely release the capability it has actually constructed.
Source: Agree Real Estate 2025 Financial Investment Activity & & 2026 Financial Investment Outlook (January 5, 2026).
Takeaway: Management is picking restraint in spite of having space.
What Might Modification This
There are 3 signals I ‘d be looking for a modification in habits.
2026 AFFO assistance relative to agreement. The street is relaxing $4.54. If ADC guides meaningfully listed below that when Q4 results come out, it informs me the restraint is continuing. If they assist above, it may be the very first signal that management is prepared to push the accelerator.
Ex-forward take advantage of compression. That 5.1 x figure from Q3– the one without forward equity baked in– is where the genuine balance sheet lives. As those offerings settle through mid-2026, this number must compress. How quick it moves informs you whether the fortress story is structural or simply timing.
IG occupant mix drift. Since year-end 2025, roughly 66.8% of ADC’s annualized base lease originated from investment-grade occupants. I do not anticipate a significant relocation, however if it wanders listed below 65% or presses above 68%, that’s a peaceful signal about where underwriting viewpoint is heading.
What I’m Enjoying
ADC reports Q4 2025 revenues on February 10 after the close. The revenues call is February 11 at 9:00 AM ET.
The numbers narrate. Whether it alters anything– that part is yours.
Disclosure: This post is for educational functions just and does not make up financial investment guidance. The author holds no position in ADC at the time of composing.
Sources:
Agree Real Estate Q3 2025 Incomes Release (October 21, 2025)
Agree Real Estate Q3 2025 Incomes Call Records (October 22, 2025)
Fitch Scores– Agree Real Estate Corporation, A- Steady (August 2025)
Moody’s Investors Service– Baa1 (updated March 2022)
S&P Global Scores– BBB+ (updated July 2024)
Agree Real Estate 2025 Financial Investment Activity & & 2026 Financial Investment Outlook (January 5, 2026)
Benzinga Disclaimer: This post is from an unsettled external factor. It does not represent Benzinga’s reporting and has actually not been modified for material or precision.