Agree Realty Corporation (NYSE:ADC) Q1 2024 Earnings Call Transcript

Haendel St. Juste: That’s helpful. Appreciate it. And I wanted to go back quickly on the commentary earlier on. I think you were saying you’re expecting less activity on the sale-leaseback side. I would have thought that with debt costs still fairly high here that a lot of these guys don’t have better alternatives than sale-leaseback, so maybe some more color on what you’re hearing or seeing on that front would be helpful. Thank you.

Joey Agree: Well, look, we’re talking to sophisticated operators as potential counterparties and former counterparties on sale-leasebacks. Most of them have extremely strong balance sheets rated triple B or higher. They’re industry leaders. For them to go enter into a sale-leaseback on a spread over where they could issue today just doesn’t make economic sense, and they have the balance sheets and liquidity profile to hope for lower rates. It’s that simple. And so I think all of them, knowing where cap rates would trade today, are holding out for honestly better pricing. And so a number of the retailers we transacted with last year on the sale-leaseback front, we’ve had discussions with them and want to continue. They’ve publicly commented on their earnings calls about sale-leaseback activity.

But in reality, I’m not sure they’re ready to stomach the pricing that is really going to clear in today’s market. And so it’s a game of wait and see. Some are getting full on their balance sheet and looking for solutions. Others are saying, hey, we’ll hold for the long-term unless the winds change. So again, the tenants that we’re doing sale-leasebacks with don’t need the money. That’s the most important thing. We’re a small piece of their overall capital stack. And so it’s almost a secondary exercise in terms of capital. It is a secondary exercise in terms of capital sourcing for them. But if it’s not favorable, they’re not going to do anything.

Operator: Thank you. We have no further questions. I will turn the call back over for closing comments.

Joey Agree: Well, thank you, everybody, for joining us this morning. We appreciate everyone’s time and look forward to seeing you in the upcoming conferences. Appreciate it. Thank you.

Operator: Thank you, ladies and gentlemen. This concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.