Agree Realty (ADC), a net-lease retail REIT, reported a strong first quarter of 2026, investing nearly $425 million across its three external growth platforms, including $403 million of acquisitions, its largest quarterly acquisition volume since 2022, at a 7.1% weighted average cap rate and an 11.3-year weighted average lease term with nearly 60% of acquired base rent from investment-grade retailers. Core FFO per share rose 8.1% year-over-year to $1.13 and AFFO per share rose 7.9% to $1.14, the highest quarterly AFFO growth since Q2 2022. The portfolio ended at 2,756 properties across all 50 states with 99.7% occupancy (up 50 basis points year-over-year), over 65% investment-grade exposure and 261 ground leases at over 10% of annualized base rent. The balance sheet is in a fortress position: pro forma net debt to recurring EBITDA of 3.2x, $2.3 billion of total liquidity, over $1.6 billion of hedged capital, a company-record $1.4 billion of outstanding forward equity (approximately 18.4 million shares) after raising roughly $660 million of forward equity via the ATM in the quarter, and no material debt maturities until 2028. Management reiterated full year 2026 AFFO per share guidance of $4.54-$4.58 (approximately 5.4% growth at the midpoint) and left investment guidance unchanged amid macro uncertainty, while raising the anticipated treasury stock method dilution impact to $0.02-$0.04 from about $0.01. The monthly dividend of $0.262 for Q1 (annualized over $3.14, up 3.6% year-over-year) was well covered at a 69% AFFO payout ratio, and was raised to $0.267 for April subsequent to quarter end. Highlights included a Hobby Lobby sale leaseback (the primary driver of lower investment-grade acquisition mix, as ADC does not impute ratings to the privately held company), continued reduction of pharmacy exposure to 3.5% of base rent, and an inaugural financial supplement adding new KPIs. Q&A centered on capital allocation and forward equity settlement, the seasonally light but ramping development/DFP pipeline (on track toward a roughly $250 million annual commencement target), stable cap rates, the convenience-store evolution, and precautionary credit-loss assumptions of 25-50 basis points versus 14 basis points recorded in Q1.
Thank you. Good morning, everyone, and thank you for joining us for Agree Realty's first quarter 2026 earnings call. Before turning the call over to Joey and Peter to discuss our results for the quarter, let me first run through the cautionary language. 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. Our actual results may differ significantly from the matters discussed in any forward-looking statements for a number of reasons. 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. I'll now turn the call over to Joey.
Thank you, Reuben, and thank you all for joining us this morning. I'm extremely pleased with our performance to start the year as we have continued to execute on all fronts. 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. While the macro backdrop remains highly unpredictable, we have never been better positioned. 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. As a reminder, we have no material debt maturities until 2028. We have married this fortress balance sheet with the highest quality retail portfolio in the country that only continues to improve. In a K-shaped economy, our industry-leading tenants stand poised to leverage their scale and value propositions to drive further share gains. We are consistently seeing leading retailers with the balance sheets and operating discipline winning across cycles and expanding their brick and mortar footprints. Our pipeline across all three external growth platforms is robust, yet our approach remains unchanged. We will stay consistent within our established investment parameters without compromising our underwriting standards.
While our investment and earnings guidance remain unchanged, I would note that we have increased our treasury stock method dilution in anticipation of an elevated stock price, and as well as the additional forward equity raised during the quarter. 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. During the first quarter, we invested nearly $425 million in 100 properties across these three platforms. Of note, during the quarter, we executed a sale leaseback with Hobby Lobby on their corporately owned stores.
As we've discussed on prior earnings calls, Hobby Lobby is privately owned, has a pristine balance sheet, and stands as a clear market leader in the craft and hobby space. They are a terrific operator and partner. As a reminder, we do not impute investment grade or shadow investment grade ratings in our IG percentage. Additional acquisitions during the quarter included a Home Depot, five Wawa ground leases in Pennsylvania and Maryland, a portfolio of 11 Sherwin-Williams stores, several Aldis, and three Walmarts located in Georgia and South Carolina. The acquired properties had a weighted average cap rate of 7.1% and a weighted average lease term of 11.3 years. Nearly 60% of base rents acquired was derived from investment-grade retailers, and we continued to add to our ground lease portfolio during the quarter.
As previously discussed, we continue to see increased activity across our development and developer funding platforms. During the first quarter, we commenced 2 new development or DFP projects with total anticipated costs of approximately $18 million. Construction continued on nine projects during the quarter, with aggregate anticipated costs of approximately $71 million. We completed four projects during the quarter, representing a total investment of approximately $23 million. Our development and DFP pipelines continue to grow significantly, and we expect development and DFP activity to meaningfully ramp in the second and third quarters, including several additional projects that commenced subsequent to quarter end.
Moving on to dispositions, we sold seven properties during the quarter for total gross proceeds of approximately $11 million at a weighted average cap rate of 6.8%. This activity included both a Jiffy Lube and Dutch Bros that were included in the grocery portfolio acquisition last year. We sold these assets approximately 300 basis points inside of where we acquired them less than one year ago, highlighting our ability to opportunistically recycle capital and harvest value across our portfolio. Our asset management team continues to do an excellent job proactively addressing upcoming lease maturities. We executed new leases, extensions, or options on over 876,000 sq ft of gross leasable area during the first quarter, with a recapture rate of over 104%. This included a Walmart Supercenter in Whitewater, Wisconsin, and a Home Depot in Orange, Connecticut.
We remain well-positioned for the remainder of the year with just 29 leases or 90 basis points of annualized base rent maturing, which is down 60 basis points quarter-over-quarter and 260 basis points year-over-year. We ended the quarter with pharmacy exposure at 3.5% of annualized base rent, and it now falls outside of our top 10 sectors. A meaningful milestone, given that pharmacy once exceeded 40% of our portfolio. Anchored by assets such as our Walgreens on the corner of the Diag on the University of Michigan's campus and our CVS on Greenwich Avenue, we are confident in the real estate and performance of our remaining pharmacy assets. As of quarter end, our best-in-class portfolio comprised 2,756 properties spanning all 50 states. The portfolio included 261 ground leases comprising over 10% of annualized base rent.
Our investment-grade exposure stood at over 65%, and occupancy is strong at 99.7%, up 50 basis points year-over-year. Before I hand the call over to Peter, I'd like to thank and compliment the tremendous work he and his team did on the creation of our inaugural supplement. We have taken feedback from a number of constituents and created a first-class document that provides investors and analysts with a thorough picture of our portfolio and financials. Peter, thank you, and take it away.
Thank you, Joey. Starting with the balance sheet, we were very active in the capital markets during the first quarter, selling 8.7 million shares of forward equity via our ATM program for anticipated net proceeds of approximately $658 million. This represents yet another company record for equity raised in the quarter and underscores our ability to raise equity at scale via our ATM and in a cost-efficient manner. At quarter end, we had approximately 18.4 million shares of outstanding forward equity, which are anticipated to raise net proceeds of approximately $1.4 billion upon settlement. Additionally, during the period, we drew $250 million on our previously announced $350 million delayed draw term loan. As a reminder, we entered into forward starting swap to fix SOFR through maturity in 2031. Inclusive of those swaps, the term loan bears interest at a fixed rate of 4.02%.
We also took further steps to hedge against interest rate volatility, entering into $50 million of forward starting swap during the quarter. In total, we now have $250 million of forward starting swap, effectively fixing the base rate for a contemplated 10-year unsecured debt issuance at roughly 4.1%. Combined with the approximately $1.4 billion of outstanding forward equity, we have over $1.6 billion of hedged capital, which provides critical visibility into our intermediate cost of capital, particularly amidst recent geopolitical and macro uncertainty. At quarter end, we had liquidity of approximately $2.3 billion, including the aforementioned forward equity, availability on a revolving credit facility, term loan, and cash on hand. Pro forma for the settlement of all outstanding forward equity, our net debt to recurring EBITDA was approximately 3.2x.
Our total debt to enterprise value is under 29%, and our fixed charge coverage ratio, which includes the preferred dividend, remains very healthy at 4.2x. Our sole short-term or floating rate exposure was comprised of outstanding commercial paper borrowings at quarter end. As Joey mentioned, we continue to have no material debt maturities until 2028. Our balance sheet is extremely well-positioned to execute on our robust investment activity across all three external growth platforms. Moving to earnings, Core FFO per share was $1.13 for the first quarter, which represents an 8.1% increase compared to the first quarter of last year. AFFO per share was $1.14 for the quarter, representing a 7.9% year-over-year increase, which is the highest quarterly AFFO per share growth achieved since the second quarter of 2022.
As Joey noted, we are reiterating our full year 2026 AFFO per share guidance of $4.54-$4.58, which implies approximately 5.4% year-over-year growth at the midpoint. We provide parameters on several other inputs in our earnings release, including investment and disposition volume, general and administrative expenses, non-reimbursable real estate expenses, as well as income tax and other tax expenses. Our current guidance also includes anticipated treasury stock method dilution related to our outstanding forward equity. Provided that our stock continues to trade around current levels, we anticipate that treasury stock method dilution will have an impact of $0.02-$0.04 on full year 2026 AFFO per share. This is up from approximately $0.01 in our prior guidance due to both a higher share price and more forward equity outstanding.
As always, the impact could be higher or lower if our stock price moves significantly above or below current levels. During the quarter, we recorded approximately $2.4 million of percentage rent, up from $1.6 million in the first quarter of last year. Roughly a third of the increase was driven by strong same-store sales performance across this group of leases, as we have actively targeted leases with potential percentage rent upside. The remainder reflects a timing shift as certain tenants that have historically paid percentage rent in Q2 contributed in Q1 of this year. Our growing and well-covered dividend continues to be supported by our consistent and durable earnings growth. During the first quarter, we declared monthly cash dividends of $0.262 per common share for January, February and March.
The monthly dividend equates to an annualized dividend of over $3.14 per share and represents a 3.6% year-over-year increase. Our dividend is very well covered with a payout ratio of 69% of AFFO per share for the first quarter. We anticipate having over $140 million in free cash flow after the dividend this year, an increase of over 10% from last year. This provides us another source of cost-efficient capital while maintaining a healthy and growing dividend. Subsequent to quarter end, we announced an increased monthly cash dividend of $0.267 per common share for April. This represents a 4.3% year-over-year increase and equates to an annualized dividend of over $3.20 per share.
Our inaugural financial supplement this quarter includes several non-GAAP financial metrics and key performance indicators, including our recapture rate, credit and occupancy loss, and same-store rent growth. The enhanced disclosures are intended to provide better visibility into our operations and highlight the high-quality nature of our tenancy and portfolio, reflecting our best-in-class execution. We also hope the supplement serves as a one-stop resource that centralizes the key information needed to understand the performance and drivers of our business. With that, I'd like to turn the call back over to Joey.
Thank you, Peter. Operator, at this time, let's open it up for questions.