ADC - Earnings call transcript Q2 2019 | Agree Realty Corporation

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Operator

Good morning and welcome to the Agree Realty Corporation second quarter 2019 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

to conference like Agree. to now would turn over the Joey I go Please ahead.

Joey Agree

Good thank call. everyone us you, morning Thank Operator. and Realty’s quarter for second you XXXX earnings Agree joining for

our Joining morning me Officer. is Thelen, this Chief Clay Financial

continues strong third picked I’m year to the up quarter. investment pace gained that of quarter. comprised and second the activity the during start largely very to during leading report the pleased Robust to accelerate our into momentum investment-grade quarter retailers

quarter were that strategy. the with by strategic best-in-class Our sheet transactions during investment asset as aligned supported capital markets of further balance management activities our long-term dispositions our reinforced a as well number

activity acquisition for Activity a sourced $XXX million XX% years. of retailers The average external from remaining acquisition Investment million $XXX quality. leading a had of at our totaled was annualized across these cap of superior term growth an lease platforms volume was average of A of were than weighted rate platform, X.X% credit investment-grade one properties the our derived the were with record representing Thirty three rating. acquired and more aggregate during weighted base quarter in again the through properties XX.X rent properties. quarter. of XX acquired

estate The noteworthy rural farm retailers have reinforce acquisitions to auto acquired parts, and stores, were are operating properties dollar several including real electronics, and are price, We quarter leading located and stores, convenience during in clubs, very that in to completed sectors, leased XX states our off XX different supply. warehouse the pleased emphasis. consumer

Hall, XX,XXX eth foot historic Congress acquired just Hall. of we Public ground store from Ledger Bell, city Wawa’s is in center. announced in previously Independence on Liberty As Philadelphia’s the flagship steps the and building floor located May, square The store

term. for corridor the where dominant we News, in paid first their building and ground they in construction on approximately a lease the XX our retail Costco quarter is Additionally, a of have improvements acquired with Costco remaining Newport during located of Virginia. years

unique or yields Going as be with can historical absent Wawa such our X%. acquisition line more anticipate our in approximately forward a return the will and of you transaction Costco, that

invested of half annualized first XX record retail first lease in of the states. was six properties Of approximately year, XX operators. is months XX million base the spread are million from of $XXX the we’ve acquisition during nearly XXXX, leading investment-grade of operating the the leased this first across acquired $XXX XX% record properties tenants retail into $XXX platform. of The a the during rent first acquired net million invested derived via A year our sectors. half Through distinct the to months the in year XX six XX

transaction. Notably, acquired course XXXX, sale-leaseback have closed, we guidance. the the quality half the a would surpassing we volume of our high record contemplating and we for executing acquisition $XXX of year XXXX company, represent in Sherwin this robust transactions $XXX our are our are which first $XXX volume to on pipeline, Given The of any in range the not nor low guidance increasing of range million. million included end to our large-scale million this record and Williams acquisition acquisition

execute continue in opportunities on capabilities unique activities our Our and leveraging superior to to be granular returns. relationships with nature, risk-adjusted

ground Today, by lease The XXX number lease XX% only rents XX our and annualized increased with from concentration base lease X% leading spans leased operators. lease such leading of retailers. unrated sub-investment At ground points premier year leased assets a our quarter lease ground ground source Stores. our to portfolio ground our rents. Convenience of over XX% approximately nearly comprising Sheetz total is conversely of X.X% to portfolio continue retailers and basis We’ve year, is the We of opportunities adding retailers. as investment-grade grade X-Eleven, Depot, Home derived Costco, to were Wal-Mart, end, retailers, remaining

approximately At substantial quarter activities rather points. make-up investment-grade end, of a note basis the a on important focus It’s is industry-leading explicit distinct our total to grade that investment of grade XXX at investment XX.X%, exposure an increase focus our of retailers. stood year-over-year our than result operators representing on

history to highest Our quality be pipeline continue investment-grade anticipate concentration this to our company continues upward of of our the in we and trajectory. the

evolve. positively top roster tenant Our continues to

quarter, the behind consequently, our is in the portfolio Wal-Mart we largest During supercenters; tenant now Williams. second Wal-Mart acquired Sherwin three

that construction have projects year Turning to committed nine the our represent are $XX under development that half and solutions and or approximately first total the we capital development during platforms, PCS million. completed of capital partner of

progress to to leverage several commence the Our year. to Retailers yet to anticipated assets. execute projects cycle this with nicely across life continues pipeline expertise our additional of full continue their

completed million and quarter second continued our for in we second cost project lease. in Georgetown, retailer the quarter, of our ground-up Texas. four development with quarter The Batavia, Kentucky. almost first of net rent the $X third by third quarter at this during at to our with year. XX-year is new to subject Subsequent complete Sunbelt the the project is Construction Rentals Springs, in Sunbelt be project project Carrizo the anticipated Rentals and During a had total commenced Ohio. Sunbelt to end, Rentals The company’s

PCS for Harbor the K-Mart former Frankfort, Pleasant, Mount the Tools. Illinois, Lots, Freight continued with and Collision redevelopment company’s additional Gerber Hobby development quarter Lake, the first Kentucky of for development anticipated in and the of $XX in former project projects on the redevelopment The Big more during consists and Lobby, in Round Construction three with company’s costs Michigan than ALDI, the million. of K-Mart total of company’s

the year-to-date X.X% three quarter for quality rents. base of continued sold diversified proactive sale a This over during efforts. year has franchise the and was points operated tenants to Sonic of disposition reducing approximately the to in annualized of these our These represented million. While XXX improved portfolio restaurants, our we exposure basis reduction our Included gross $XX and second investment we’ve of solidified just management record of asset portfolio, also year. activities four activity as through our efforts proceeds assets franchise

to at continue into rates of to capital quality higher see We franchise assets. favorable cap and recycle the restaurants opportunities dispose

we we health make continue single-purpose Rapid well as To highly and fitness XX-Hour be Additionally, of our proliferation this to boxes sponsorship operators, criteria. that Texas. surpass continue in approach Fitness private disposed growth, the to a in space. also our underwriting specialty equity Fort to discount to a end, the is challenged sector a unit that quarter during selective of and Worth, stringent as

of proceeds totaled million $XX for average Lake, base end, year-over-year X.X%. the more gross of of a than six approximately X% Walgreen’s Dispositions to Subsequent assets of for XXX just another points. rents, that the we to first we a have six of third Michigan, months with weighted have quarter basis reduced rate year of to disposed Grand Walgreens representing year approximately disposed date. annualized This in decrease the Walgreens exposure our sale of cap

activities million disposition as bottom end we well our as $XX year-to-date from full additional disposition million the pipeline, into visibility of to year. are $XX guidance for our Given our increasing the

also team maturities. focus continues management asset lease Our on upcoming to

X.X% only three representing result efforts, rents. of just of we remaining lease annualized end these a in maturities base quarter As had at XXXX,

of second their the their & space. foot five-year Busters square new Texas. options gross on quarter, Notably, Austin, leasable location we XX,XXX quarter exercised executed the lease or option during extensions in on During Dave feet square approximately XX,XXX

Boulevard We very Xth corner were our Avenue the with lease to have a at backfill executed and also Appleby’s Bread XX-year Bayou of only pleased vacant Pensacola, to new in Florida. Panera former

investment tenant We that underlies of the transaction rent are location is improvement real high or with allowance. our quality This landlord recapturing XXX% at emblematic zero portfolio. of this estate

across states. our of XXX rapidly portfolio properties As June XX retail of XX, consisted growing

portfolio are at tenants than more has weighted and remains of years. from again industry-leading in investment-grade remaining base XX.X coming term of sectors, tenants. comprised primarily Our effectively annualized occupied fully lease a of retail rents XX XX.X% with average operating XX.X% retailers The

Clay Simon half of our Leopold on the second directors first our financial to our I’d and of I board. like to quarter Before over turn to welcome to results, discuss behalf all call

Prior many estate investment of familiar, career serves in Financial extensive are Treasurer you an and As the Taubman, had of currently banking. real to as Chief Taubman. Simon Officer Simon

Simon’s We and board finance, join Simon’s have capital we past of addition, added REIT, to expertise have human XX months, markets, adding our REIT directors. three and are operational highest the within industry level. expertise capital With the pleased very directors new at

patience, your and for to that for you to Thank discuss quarter. over turn financial it our Clay the with results I’ll

Clay Thelen

running everyone. morning Good by language. Joey. you, begin through the quickly I’ll Thank cautionary

statements note we federal during call, will that laws. may considered Please this make under that forward-looking securities certain be

the may Our discussed matters from differ actual in results any forward-looking statements. significantly

to and AFFO, in GAAP from funds FFO, of non-GAAP found financial EBITDA. operations these measures, most our core be discuss or release. recurring net can from financial core we adjusted directly addition, the debt comparable In non-GAAP measures earnings operations Reconciliations funds our to including measures

an for $XX.X basis, On was Core funds million, for quarter over comparable $X.XX to a was period quarter the share, an X.X% $XX increase X.X% XXXX. from second funds increase. increase On XX.X% XX.X% per-share year-over-year of the from second $X.XX, a the a FFO of over Adjusted increased XXXX. operations representing quarter AFFO increase year. the basis, operations was per over of of million, core per-share year second a

above million. of or G&A X.X% the General in X.X% and amortization totaled expenses lease of revenue excluding quarter below and market administrative $X.X non-cash the intangibles. second expense total was

as lease We improvement anticipate of an to for XX amortization or percentage of market revenue the X% basis intangible XXXX, the approximate in G&A range excluding from point continue and total below impact XXXX revenues. to a above upper total be in

quarter for expense tax Income approximately was the second $XXX,XXX.

credit in full of in one-time quarter, range income tax $XXX,XXX. we expense realized first year tax of to to total inclusive anticipate the be $XXX,XXX the For $XXX,XXX the the of

the two for for the both cents given AFFO core transaction XXXX dilutive forward related the treasury quarterly share related and the within by in GAAP included stock forward that, the per from prior impact forward The period. offering trades quarter dilution to for and aggregate the diluted be under and three-month a with completed On we Since FFO above conjunction September offerings. the both XXXX September the core no the offerings for offerings forward included stock roughly of to deal to share future September count AFFO was price There and of year-to-date average offering. in XXXX. being stock to our our and stock quarters our is deal we basis, these the FFO dilution second was Treasury April transactions. dilution per in period, and the penny to for price related equity per were above related we April share required the to six-month additional share offerings, settled equity settlement, price a impacted will April event

our another moving had markets continued strengthening and positioning balance our Now capital activities, company quarter, onto sheet we the further for active growth.

our of any the of We May is any million connection X, time continue $XXX not deducting offering, the of offering. company $XXX pipeline. with at settle proceeds to and offering in sale sale million. maintain robust of conjunction public May ability proceeds on after to the follow-on the our of debt its of forward XXXX net to significant We we another settlement, between expenses. equity of in whole or settled in shares forward and transaction in common September raise stock and the In of of both offering a stock we with connection equity, offering To entirety proceeds and retain the forward capital, April XXXX. September received date, now agreement. tranches to settlement execute received fees with the anticipated completed net X the common million Upon approximately our X.X has shares On from

the incremental the an the EBITDA. to million offering debt of to settlement The approximately amount within capacity and XXXX offering forward to launch forward provides leverage of company equity $XXX the of range September six recurring April and subsequent remain the XXXX equity five of stated our net invest times

$XXX of unsecured fixed were debt the financing. we into also is notes bear we of funded, quarter, active duration placement private proceeds notes. the at long-term $XXX June, for fund entered sourcing I October a agreement private of the an of to of million In agreement have of this and placement rate X.XX% fixed term note million XX-year senior and interest the Once in will time base. a XX During that year. execute now between matches gross will that to elect asset rate can underlying the we continue We debt longer receive and on our any the term. a

maturity. $XXX is the agreements In the March, private into senior debt pricing agreements, interest terminated unsecured the effect of interest we The the agreements long million $XXX fix Taking at time of notes. until all-in $XXX million the term starting the into rate blended rate account company swap of terminated entered million for swap forward swap the of to the X.XX%. placement

June net six times. to offering, approximately debt value at from was approximately XX.X% X.X times. amortization, times. EBITDA debt of settlement As to times, fixed X.X to in EBITDA Pro of for April which the our Total ratio, approximately well $XXX coverage net the to debt approximately equity principal our million forward is five our XXXX our of was stated and healthy remains recurring below our recurring charge XX, X.X includes proceeds range a forma very enterprise

company’s representing the a ago. share XXXst July cash per year-over-year XX company of just a XX dividend on This XXXX, its June since record consecutive increase. stockholders to of The was XX, IPO X.X% years dividend on paid $X.XX

the For $X.XXX share the share, of declared dividends increase declared company per months for in of dividends the a period the over first $X.XX of XXXX. X.X% year, the comparable six per

share. Our for quarterly payout per the second AFFO XX% per of core were share FFO XX% quarter and of ratios

ratios XXXX, and continue company’s XX% well first targeted per the core payout our reflect of AFFO per end were are low of months of For respectively. XX% six ratios of the to very share the and ranges share at a covered dividend. payout FFO These

back to the With turn that, to I’d Joey. like call over

Joey Agree

year. half Thank conclude, our pleased with I’m of To you, Clay. the in performance the very first

updating to the ahead. in quarters and We’re of in XXXX forward the remainder look you excellent I position for

At this questions. we’ll time, it open for up Operator,

Operator

instructions] [Operator

Janney. Our with first go ahead. Please question comes Rob Stevenson from

Rob Stevenson

Good Joey, down and for pull the did rate quarter? morning, Wawa much guys. how cap Costco transactions the the

Joey Agree

Good morning, Rob.

a leases, basis Wal-Mart the ground they the rental points - out I’d and ground two supercenter, approximately very low the us talking former rate one which it’s a added three flagship demolished were of incrementally. supercenters, a supercenter Costco brought smaller and between Wal-Mart Incrementally, on tell XX Wawa You’re that full-size a lease. format you

As we a forward, range. going the anticipate I cap at fully unique mentioned back rates remarks, in be prepared the the that transaction, will X% absent

Rob Stevenson

well? Fitness. feeling more the the L.A. will After bucket an be asset more is seeing are L.A. XX and now XX% Okay. Are Fitness, given fitness your sales see sale health How about Fitness likely we Hour that than of non-L.A. and we you overall selling to as Fitness segment, comments?

Joey Agree

to I’ll be really It’s watching that a - develop. good continue question. we’re space honest

think the this invest of like, the have mean, XX fragmentation Fitness, and of like operators price as of all you that older low that proliferate this the so I well the don’t many are we the think is Lifetime I which concepts operators, Planet the world in population L.A. Fitness, to in. specialty Fitnesses the the out, across the more the just Fitness, and end Hour point operators, I don’t high as frankly, working continue country, country getting - people, capital

very we’re that sell years X.X Fitness of about had term pleased you, - to Hour left. I’d tell the XX

where fitness exposure today. and our health comfortable with is We’re

it’s more and want watch see we space think develop. of to I the just

Rob Stevenson

smaller a of How is rent? Fitness non-L.A. the of much million comprising of XX the and operators bucket or bunch Hour so $X annualized other

Joey Agree

or health just We That then one is L.A. Planet the mostly and in so of have exposure. urban Hour I vast locations additional XX believe early Colorado, Fitness, Fitness, four we all have comprises three Fitnesses, majority it’s or and our extensions. fitness

Rob Stevenson

Okay.

What portfolio three of You is that today sold franchisees the said the during you Sonic franchisees? quarter. percentage

Joey Agree

the in into the as quality really well - XX continue to higher XX% these of likely so capital real of so down and typically well we’ve these I’d redeploy King, achieving that the franchise to you in XX-XX and unlevered lower divest an IRRs really Burger that. six most portfolio, market. the or reducing restaurant on Bell, for of restaurants, Wendy’s, obviously on We’ll estate. approximately to those we’re remaining basis, X/XX on dispositions a into opportunities we’re to look Sonics as as opportunistically, cap We’re are operators, franchise selling as few focused Taco as the and tell X.X% at

Rob Stevenson

of part that guidance? disposition increase Is the in

Joey Agree

million up the date, Really it’s inclusive closed the quarter subsequent end $XX million guidance includes brought bottom disposition Blanc $XX as then disposition million $XX Walgreens franchise that pipeline almost non-core where end of we would from our to of million today We and assets, sale up. capital. We’ve to additional that the end. thought recycle and in to $XX restaurants it the at appropriate to disposed of bottom Grand then year we’re bring be of

Rob Stevenson

third we Clay, using me. from share our quarter should and be unit what estimates? one last for Okay, count

Clay Thelen

Sure.

count, In should terms be XX.X Rob, units, share of at we million diluted shares. inclusive of fully

Rob Stevenson

Okay, you. perfect Thank guys.

Joey Agree

Rob. Thanks

Operator

with Our ahead. comes next question Citi. Please from Christy go McElroy

Katy McConnell

this an level, tenant on Good again a just retail you up is much With this amount update your quarter, changed environment? in has moving target see good what exposure and light the can investment-grade view Christy. morning, Katy you McConnell on a as with this of us give on

Joey Agree

mentioned I to targeted upwards. tell of Yes, grade is Investment year. exposure continue no minus almost would There’s sandbox, function trend retailers. to to really We points anticipate as I prepared in our exposure that investment-grade basis that really year XX-year the level. is over targeted plus predominantly XXX a our remarks, you up or

No distinct think more targeted I obviously frankly investment-grade level. is better.

publicly large exposure frankly, with those operators it’s the I’ll retailers of and, remains ecommerce-resistant tell hence ratings you held retailers investment-grade omni-channel those superior and of respective upward quality QX, even or XX about focus carry our higher trajectory. is majority pipeline on companies. for because their grade the our in investment than QX But they’re top sectors, credit

Katy McConnell

exposure you point you had know a few update to planned us watch you the close? Okay, and Fred’s any at list great. including, also if think are stores, this tenant on I Can just

Joey Agree

shrink. watch PetSmart our was breathing The some IPO biggest room, of our we and list of Yes, continued Chewy believe and with six watch seven upgrade debt company continues the or in really list, which pay us PetSmart, gave we frankly, gave think, I portfolio. to piece down subsequent our The in have PetSmart the runway. the

of we annualized don’t only In in $XXX,XXX three the outcomes or have Fred’s. with portfolio. finite have the $XXX,XXX, in terms ABR. any It’s four Fred’s, We

Katy McConnell

great. Thanks. Okay,

Operator

from comes go question ahead. James. Please Mings next with Our Raymond Collin

Collin Mings

morning, good Thanks, Good Joey. Clay. morning,

about guidance guidance. should past, the days rate basis, forward, per with to XX be made a as included visibility the context maybe XX, I on, guidance platform the I just are in run acquisition increased it year deal in going in execute thinking typically point. reflect you’ve we being First, flow. $XXX to no transactions that scale you the of larger go-forward any little at half of and it or in of has, company noted million talk really prepared acquisitions the on more you the the just does back about call call think In know so start wanted increase as on remarks, larger quarter about transactions, the a the being not the able Joey, bit a this of point

Joey Agree

all from substantial. days, tell is execution and pipeline, are right very hence of XX QX I’ll QX by pipeline those nature to you we that day the in our LOI the XX the visibility Yes, close. to us are into terms lumpy. Transactions for points visibility now, data have quite logical XX their

today, it acquisition relationships a earlier, fantastic a leveraging of urban originating retail job really and the superior or and some and unique over our done mentioned additional investment has urban extend XX% partners, those with is potential transactions, blend quality, I number our transactions, it’s opportunities. team As grade really infill opportunities, of retail it’s

obviously visibility couple you We any we’re QX tell that able we QX. transactions, visibility into can guidance. to absent that into don’t a smaller have be I achieve have going confident Today, we’re but to

Collin Mings

maybe also discuss in Can during wanted measurable to Best opportunities? just it, I touch quarter. specific Buy uptick on to those was Okay. the exposure you there a your

Joey Agree

to Buy continues Best partner. Yes, a be fantastic

high like, exposure an and performing in Best a really Buys. That’s a Oregon Buy the opportunities. our in added Target. adjacent predominantly high Target typically store We to Buy relationship immediately it’s outside Hillsboro, have one Visalia, Best just with existing Best pleased We’re performing of store California, former a adjacent we our portfolio, Portland. what four with the of relocation similar to to a relocation looks of Today

Buy, last and base. Joly electronics future a the to standing team we’ll obviously and around and that Buy the consumer continue for man fantastic three done the We platforms. job company Best with work to with Hugh Best have turning continue all across it growth, work in positioning

Collin Mings

Got through on of me, in and the platform. of last year increased continued forward? go from G&A updated one context we look again balance sort the One we of of just acquisition the thoughts as guidance it. Any growth the as the

Clay Thelen

our guidance for year, maintained We G&A the Collin.

impact above the excluding of intangibles lease the total market guiding within revenue. amortization below of and We’re

to guiding year, basis a We’re last is range. in the which point XX to decrease upper X%

Collin Mings

turn over. I’ll guys. right, All it Thanks

Operator

Bin Our with SunTrust. comes Ki ahead. go question Please Kim next from

Ki Bin Kim

beyond Thanks. you like this ground just are type touch lease, and rate, things on view you fee Good rent full quarter all-in versus you acquisitions? a about do cap escalators simple morning you the type ground How regular made leases? do of when and talk getting [indiscernible] guys. you guys Can of LTV what the the more just acquisitions

Joey Agree

typically superior expect most from across every board, tenants. fixed the Escalators that vary national, five you’d years really

large in convenience Alta, on Marshall’s, California, the there. format quarter four also two from Kansas TJX’s the a color within one a Wisconsin, and a little Auto in an couple well Visalia, store A a QuikTrip, I number of a The as Lake as across as flagship. obviously Ross, - relocation store. a Goods, mentioned We Zones, Home Wichita, during Wal-Mart that dominant O’Reilly, includes acquired Geneva, the Buy a third three in one airport. Just supercenters, Best Pennsylvania, acquisitions York,

work continue operators. again so those Tractor with really industry-leading to We Supply,

that your again, of terms lease Bin? question, you In ask will ground Ki

Ki Bin Kim

that guess percent do lease, on sense lease, LTV of get Yes, costs? sure. and the you of land ground LTV, the I’m I if a ground a How the actual what do ground you a building value. building to all-in represents, lease full trying the including view

Joey Agree

the - because we are Just constructed a from We typically Costco buy square like expense, the often News, improvements improvements unless foot for were transactions, parcel we the of for building their Costco develop about their of leases XXX,XXX ground look Wal-Mart a ever, the each confusion it’s for approximately point party, fee supercenter we a own retail at tenant of the Wal-Mart where front as clarification these if the well or acquired everybody, dominant as and property were investors, the What sale-leaseback in these for has redevelop look including of third Wal-Mart for constructed to building. aren’t corridors, and talked XX-acre the Newport interest at the in with vacate. is high or transactions, so in to front simple to stores Wal-Mart course, performing transaction, it we then outlast expense. we ever in that no potential approximately

Depot the book in obligation no tied we land basis. basis it, Wal-Mart have on to Lowe’s with Costco own annual we no or the having Home have or to tied We value pay it an building, an to or depreciation rent or simply

Does that sense? make

Ki Bin Kim

Yes.

more times. and there’s sounds deals short your and dropped in leverage the In to X ratio, like but to next later into go X in guys term. medium lot Obviously a times back we sheet, to range? Agree that have you you XQ a year, It seem on about as in year, terms balance X.X over-equitized coming of go how the the into term we the see basis, should leverage do think

Joey Agree

our execute maintain our to platform. or stated powder capability X think X range of haven’t I the times. dry we continue on changed to the to We’ll

if recent started that most has I visibility of gain into to role do when the a of think market, be We’ll term, the in same capital balance did depth we when to in team the but that short continue in the to created. our here really the sheet, terms relationships deploy raise sources, breadth transactional that and equity capital. conservative maintain we able or and time offering, the opportunistic at and capital we equity the debt be space

there, You to add have anything Clay?

Clay Thelen

No.

Ki Bin Kim

competitive is capital, also a obviously it sources Just of and lenders, with XX-year but you’ve margins. the for your to a your your report tenants of becoming going them one bit more more relative little last business? seen NIM cost Are already traditional down question, alternative probably competition with shrinking good for couple creates capital

Joey Agree

a transaction third party this Again, in with executed space, the ability sale-leaseback access National to only tenants’ on of or aggregator, source Tire an Being to doesn’t single third capital we’ve our No. being cost opportunities. party a our impact year capital Battery. aggregator and really

Ki Bin Kim

right, All thank you.

Joey Agree

Bin. Ki Thanks

Operator

question Stender Fargo. next Our comes Todd from ahead. from Wells Please go

Todd Stender

Thanks guys.

about to just on how estate the the then and ground between don’t if second-largest want your to keep because us maybe acquisitions? Can or, tenant, investments. the specific they’re true three these was the the tell theme, just Just separate lease talk yield, and you Wal-Mart yields just got you it the real so can spreads you maybe you describe

Joey Agree

through sourcing I Wichita, broker frankly from Pennsylvania mechanisms. three developer investment seller. it can’t so a Wisconsin, through between partnership Geneva, I fund, an - Lake and transactions, separate Yes, third, one and a the one joint frankly local Kansas, venture - all think York, different even Kansas, direct transactions in Wichita, recall through the where One-off originated and from,

Beach. in ABR, Clubs, neighborhood Our of on GAAP tenant, a today, our mentioned lease in market portfolio a million single Vero Wal-Mart supercenters, and almost you two Wal-Mart Wal-Mart a Sam’s ground $X number as number two

these supercenter in, high very X investments it these transactions, X to the we’re average happy the transactions significant Wal-Mart made and portfolio. was assets, the to on The all performing for range to call rate Wal-Mart’s cap them add in stores. Obviously

Todd Stender

were address owns which was of their Costco seller? so None that sale-leasebacks, because you real the Costco then and estate, can who too,

Joey Agree

National quarter. Battery. ground the No Again, TBC, the the a six-store sale-leaseback private so i.e. and I QX, in executed lease. was Tire year-to-date portfolio very rates it nature we’ve low sale-leasebacks, sale-leasebacks no given was this of believe only rental all on all with sellers,

a $X.XX were to estate us, $X.XX foot, low in the for York, in real paying Pennsylvania, assets if these for and example, For Wichita, we so very, a Wal-Mart get are foot, paying ever they’re basis very they’re Kansas back.

a their built lease, Costco, store. The similarly ground own they

the very market have a seller. We’re and transactions party done of Newport familiar and number so News with again there, third

Significant they of to real a so vast real a their correct and phenomenal the estate. great of You’re it’s store own entry, - piece estate. barriers majority

Todd Stender

see these in at expect the once. anomalies? I transact to all or got really you your not many them certainly Should and mean, that more, pricing transact, Are there’s it’s do rare we area? Wal-Marts

Joey Agree

at different I’d of all sellers, on number Just the a majority estate; said, leases. different Wal-Mart not Wal-Marts for that their clarification, say typically in party third owns once. significant there’s ground transactions, hands, three of being real

is focus on performing high markets. supercenters, neighborhood Our select

Yes, exposure would team ground we’ll to and acquisition total these by our retailers. but of Wawa fantastic to now, has and industry-leading look Costco leases XX% source continue at result. followed opportunities, the ground they’re approximately, performing Home you ground Lowe’s, so our relationships lease continues and we’ve to seen fairly lease Depot, I rare, on for high execute Wal-Mart and is number the tenant tell

Todd Stender

this point, looks debt we close tap the it on at the assume maybe that down line placement the when then to you’ll thank the acquisition at Joey. a to just October higher the guess is I propensity draw get Clay, to we the and fair as you, month, Great, use private heavy proceeds on for deadline? line to maybe private last from purposes, if front, side QX look placement modeling be

Clay Thelen

right, I that’s Todd. think

debt placement October at of the the the will QX, of quarter funding credit, liquidity so on debt where have late until placement, fourth to quarter. the We end of the our was ample and third early the given certainly end we up just either have private be under or private line of draw balance

Todd Stender

year have equity a And you forward is right? then that on the agreement,

Clay Thelen

Correct X - XXXX. May of

Todd Stender

you. Okay, great. Thank

Operator

Our next question comes Ladenburg from John Massocca Please ahead. go Thalmann. with

John Massocca

of ground come versus transactions at accretive, limiting leases? rent Good morning. how ground less being rates on maybe your therefore portfolio maximum a can coming the maybe of leases again, a cap that lower to balance much ground percentage from lease want how Is and you the do there, portfolio? ground touching leases the the exposure just thinking, I’m quality as you of inherently

Joey Agree

no Well, there’s I’ll tell you cap.

best them. and we certainly to able by they’re to be team Frankly, opportunities north margin. X%, in these surprised hit we’re source again of but net think the lease to risk-adjusted a continues vast transactions cap. continue to There’s no I retail be

I We’ll Look, part lease the our assets add comprehensive on there. out we are at strategy unique portfolio, investment the a unique. total ground returns transactions portfolio. of risk-adjusted and a It’s think we the look best pick and to continue to

think I really the that’s key.

John Massocca

Okay.

red-lined, property low rates a half had You PCS assets? even to more because these in of more you cap is so out highlighted a today. franchise development the just it development a are from type exposure it your restaurants space? tenant franchised is perspective pipeline I’m is acquiring a as Is restaurant how basically terms your that and or year asking assets ago, as change in recently that you driving structural or of of

Joey Agree

anything. I think say it’s red hate to both. we’d line would I

we a say restaurants really restaurant in franchise on the we’d be low because estate market, of space, XX-XX those the The XX% space line general I underwriter the unlevered to time. overheated has assets in nature certainly become IRRs, and approach, list. bottoms-up a our the will XX period at of into red in of that anything. sell short who continue deliver frankly focuses market I to would real of happy and isn’t personally hate to to price top a believe point It As

- really be is honest or I’ll busy developing here of terms restaurants franchise today. a for In in general, this restaurants team

or XX use Developing isn’t of million are million our that the $X.X We $X.X focused. best really time. it have franchise restaurant, approximately people really

million basis, years. look at on We’re so be on use hitting deploy grown so our seven $XX our deploy to really stick-built relationships or able $X.X with ability into these of are and to million run hurdles probably year our the on relationships, obviously time. tenant three of almost restaurants we visibility at to per basically best the we want our objectives, an houses relationship when not million an and $XX and average, drive-thrus, three-year we with $X.X out really Developing accretive rate, a it, over million want basis franchise annual any

cap into space. think opportunistic gone, to it’s sell Given where prudent we and that have those rates

John Massocca

in the impairment if quarter? the I this drove remarks, Apologies Okay. the in what but missed prepared

Clay Thelen

marketed We recorded deem book that was and entry value sale, what being for really an impairment we the a to assets previous to for market the million related today. just $X.X to were quarter be adjust that value reflects to

John Massocca

Okay, for Thank me. that’s it you very much.

Operator

Our Please Peterson ahead. Jefferies. with next question comes John from go

John Peterson

thank Great, you.

curious piece the there most like that’s transaction, retail-type of real portfolio. that, Wawa obviously that standalone which street of estate. opportunities and rest you availability of the I’m retail different out underwrite just of your versus is the than a street how On

Joey Agree

Again, John. morning, for an it’s area of interest us. Good

stretch to not We’re our going sandbox. outside of

the downtown as real of Dave sandbox are It’s our we’re urban We the or or develop underlying that ground the for Walgreens, of have subset but lease, urban-esque this Wawa where are locations continue to portfolio, & opportunities portfolio Philadelphia, in redevelop New retail, a fit looking either in with retailers that look that and our the with acquire, similar couple the a an we in not we of at assets obviously Harris ground infill estate. - acquire. additional our Busters opportunities within subset Charlotte, downtown Ann superior street Orleans, big that number really to Arbor a area have lease typically as to Teeter unique

John Peterson

look makes Is you to there trying helpful. franchise reduce level a that you’re All XX run. higher certain age a On building? of building remaining about right, and I in lease sense specific curious that’s where Hour to dispositions duration to. areas, how dispose of a to think mentioned long or fast kind dispositions, some I’m it the guess exposure food you of Fitnesses

Joey Agree

dispose a leading and decide be believe we this an industry All we local. to it good to within a basis, fit XXst Sonic a every within aggressive it market, you assets company. to century that that fit restaurants not importantly of we’ll most does It’s real is we retail trending, we or what’s where day from can portfolio, Burger fit which see with It’s a restaurants does so sell, then question. we portfolio of and estate cost perspective, is concentration property sector our It’s is the specific. where where tenant our calibration the do asset, how within think hold franchise King we’ve that a day at [indiscernible] asset constructed we context. continue franchise tell I’ll decide don’t here

John Peterson

right, sense. makes All

Sonic ice industry does have the in amazing. - best it’s the

Joey Agree

They’ve power cap look to a got the X.X ice, X cap, - and a some French we at like Burger good more purchaser. or fries, but King’s

John Peterson

much. very right, All you Absolutely. thank

Operator

a As question, one. a have then you press reminder, please star if

question next McElroy ahead. go Our is Citi. from a Please Christy follow-up with

Christy McElroy

Hi, good morning guys.

to consider markets Just sheet would balance Ki broader Would should raising when equity strategy? and funds to capital Bin’s ATM-type then of the these a we and forward deals you do slower bigger periodically, the strategy how more how leverage you from follow-up continue capital question, your does a or of view to to expect think about this? buy, into match that moving factor the reset you

Joey Agree

same visibility forward QX, have ATM Good I instrument of on us QX we I to or and a capital can if pipeline we think in almost to raising is near in most the the attractive any at to look where be it to the into I anything. that almost we’ll frankly, deploy in the is when the insurance tools almost--you think million interesting, time, an for morning, policy, most the cost doesn’t the it equity equity able use debt Christy. At $XXX medium tend the ability lock think preclude so an tool It’s raised forget a or as Look, other of or off people side. term. it important and ATM

same a ability confident is the to the and cost on your At as in which component in general. of most transactions, space net source this guidance. important REITs the the pretty the setting time, with our floor demonstrated We’re increased we’ve lease in equity, quarter it’s for almost

Christy McElroy

Okay.

that rates mentioned expect you closer to You cap X%.

and doing today? deals? the cost on your potentially today does you license buying effectively cap market or deals capital earlier that currently cap lease of doing at Is these philosophically more do growing of following the more more debt ground like Just rates deals lower warrant some maybe portfolio Wawa, questions at lower to flagship rates, of about and equity more giving more

Joey Agree

Wawa really--honesty, question. resemble into proverbial think I We we’re continue estate within focus it It’s focused At light retail on, unique retail there’s or types street on my really and estate really hard transaction lot infill, the just and and and underlying - and of of We It do broad dominant suburban urban transactions to seven have the urban transactions leases, fits real execute a green the license fruition. concerns, very six should the and assets, our on targets don’t have we team only the or same A time, we we’re really transaction them, our the a That’s took have was that XX,XXX for what bring country. and operators. to leading for to them. fits real the like. the super the with focus. months unique should out deals, into long work it retail partners how red stuff it next good we have not expertise example time. or of think to on really should a it hair to we’re light have ground that assets, those should We on boxes portfolio We’ll so them in of retail transactions. of this the perspective larger interested executing in think, should of those range lots, again, of picture have the deep our

make Does that sense?

Christy McElroy

Yes.

addition. the Simon on Leopold congrats lastly, Just

provide year. a lot the your the and of also board potential providing at could FFO over made last on you point. of updated just then rotation for de-staggering progress You’ve board, Maybe some thoughts the on guidance

Joey Agree

board. Simon we’re the excited join to have very Yes,

part transition board. we’ve on Craig really board quality ongoing three what mentioned, contracting anticipate As directors with addition, We expanded Simon’s we’ve the three months had we’ve of as we so board. I place, fantastic directors high in takes an really new addition, this think and is while transition, Lehmkuhl’s it brought so addition, Erlich’s and Greg XX temporarily

be such frankly, with days, what visibility trajectory and, small counterproductive it denominator we’re would would almost we ramping the guidance, company given to we with a it to that the with have, believe today. like providing band the earnings really that to wide continue of XX a of be terms just In doing growth XX again

Michael Bilerman

Joey, me? it’s you Michael Bilerman. hear Can

Joey Agree

here. Yes, I’m right

Michael Bilerman

proxy will forth be season? next that put de-staggering, The

Joey Agree

the currently the Not board possibly. but recent any board Haven’t on radar, any discussions, always potential considering improvements. had is

Michael Bilerman

telling CEO, America majority be should the Why Why wouldn’t de-staggered of be in the and de-staggered? you, fellow age companies, corporate as in REITs of day a mean, that your members this have they wouldn’t--I majority board boards.

Joey Agree

I are boards. multiple different of perspectives there de-staggering think on

operating is board boards, other and think of there could believe all disruption, today they a strategy. obviously in the provide time, activism, de-staggering to same longer our of the I de-staggering think continued in through sense. At they classified people the way that that really no potentially mechanisms I execution shareholders is there think make a that truly perspective flipside and for of could today that I frankly say-on-pay potentially the that coin, have, I think get a

term for If Now, company pops. ultimately then this can just investors, there are with with and their company I their if over that then activists looking wallets disruption, short, to performed open or long the this short vote would term, be hadn’t up more also were--if much think had shares. validity not or medium yourself shareholders frankly performed, potentially we to

Michael Bilerman

the with investors, of the think have hedge I well operate, But as of boards. you that’s guys that’s way proxy comments, long-only way de-staggered do institutional to to investors you as why disagree operate. fund firms, want majority companies that’s would majority those advisor the and want the if

allow, have where broader a so constituency a G&A, now by you constituencies, capital in a north very behind don’t think, major that player that’s where are be, details I still helpful, expectations now argue a of providing and hundred wider are individual given million would much dollar but that of ago, the than of owned in were, ranges, hide a number a detail all larger that you couple no space. way providing you of raising you’re back net I where company they a we’re terms longer today variety you’re small would your within shares much ever would can would are various the company, providing a terms being FFO, of growing, of years billion In lease company organization I $X components you and think

Joey Agree

have intent no anything. hiding I behind Yes, of

be top possible. right, I platforms. we it are I no company, guidance We denominator, million that has growing it as year as while think is you’re all three and million. grown what $XXX still $XXX with across to the we with longer didn’t line company still is couple potentially $XXX try to XX% company, sitting This approximately a be hundred our initial and learning million our frankly million. even $XXX forthright million about that increasing capabilities did is do the to for expect guidance for to here to

in benchmarks benchmarks no there necessarily be about quarterly raised perspectives, skew to I and and components, out know the there a to works basis. continued give on could and that we I beat providing think time have and the concerns simply the same Clay out with models at providing interest would expectations, that but have build I how of components we appropriate give everybody

net a a retail quarterly really and run lease me long here, We short-term business with real term defy estate numbers and guidance perspective to today.

Michael Bilerman

Right.

of and the in uses and I raise before how think pipeline. both replenish the you’re uses management much equity then how acquisitions raising capital, in about how costs, people the thinks you’re sources and to think you board and the to would relative and it, interested be you’re going debt, equity, targeting that very about of terms when term the the of debt that

want then to then we can financing the raise it, to are insight the the of this All company is equity earnings had we’d debt you and planning and important the if we’re you beginning inputs a how this the it, components, is market. about flow think and million people that deals, as so and model think the cash of as this at when growth have on accelerated produces, deals year, our is having targeted those about $XXX way that even and update that of

a and that street do only having multiple, allow will capital communicating accretive think higher begets to that you I more which the discipline to deals.

Joey Agree

the - volatile anticipate we be I’ll today. anticipated the We’ve on we number never how subsequently forward want street equity I a like on in equity to go-forward never a basis do three. offerings. the debt honest today. to a X% net or execute I environment done telegraph have raising would companies company had XX-year lease We them. being at to We’ve first were of

of want inclusive a sheet and capital and those of provide also for to markets offerings, take forward advantage our advantage equity the cost block balance and private the windows, firepower whim placements. We that of ATM, debt on capital of trades, ability take

frankly, side, both the would going, we for assumptions use year, into capital to provide and I tell we’re So you well internally source opportunities, to every on conservative shareholders. for take year to and telegraph of go the with the then for we advantage returns how look side our as as source

make that sense? Does

Michael Bilerman

Yes.

Joey Agree

playing with with XX day it. probably company really retail put get the been and If on in their it’s noise in entrepreneurial tears strategy. work and we want avoid is to to an a all thing environment real setting doing want operating to put conservative, that game Frankly, most impossible. what of it’s we’ve or out anything its is constituencies is the today have focusing way heads of problem. that This that the this in can our there us got highest the that whether in, that people day the estate sheet gets do or anticipate, to it’s and on think Wall shareholder we - underlying expectations our the important flexible, in to everybody’s out, constructing we estate and historically and then world real think the on sweat estate, out, continued activism we providing growth down I a in, and Street, blood, country, wood - and is is balance continue Look, quality for that chopping day we nimble, a allows portfolio different placate day execute to real not that, that core, happy, we do

Michael Bilerman

Okay, thank you.

Joey Agree

Thanks.

Operator

closing I and would This remarks. our conference answer any the to question turn to concludes Joey for over like back Agree session.

Joey Agree

We with for to everybody speaking Talk look joining gets hopefully thanks. you everybody to you Thank season. earnings us. soon, forward soon, through and you

Operator

now today’s attending for has presentation. conference The Thank concluded. you

disconnect. You may now

Agree Realty (ADC) 23 Jul 192019 Q2 Earnings call transcript