BLOOMFIELD HILLS, Mich.,
July 22, 2019 /PRNewswire/
-- Agree Realty Corporation (NYSE: ADC) (the "Company") today
announced results for the quarter ended June
30, 2019. All per share amounts included herein are on
a diluted per common share basis unless otherwise stated.
Second Quarter 2019 Financial and Operating
Highlights:
- Invested $182.6 million in 37
retail net lease properties
- Net Income per share attributable to the Company increased 9.2%
to $0.45
- Net Income attributable to the Company increased 43.7% to
$18.6 million
- Increased Core Funds from Operations ("Core FFO") per share
5.5% to $0.75
- Increased Core FFO 38.6% to $31.0
million
- Increased Adjusted Funds from Operations ("AFFO") per share
4.7% to $0.74
- Increased AFFO 37.5% to $30.6
million
- Declared a quarterly dividend of $0.570 per share, a 5.6% year-over-year
increase
- Completed forward equity offering for anticipated net proceeds
of approximately $199.9 million
- Settled September 2018 forward
equity offering for net proceeds of $186.0
million
- Balance sheet well-positioned at 4.4 times net debt to
recurring EBITDA
First Half 2019 Financial and Operating Highlights:
- Invested $327.2 million in 88
retail net lease properties
- Completed four development and Partner Capital Solutions
("PCS") projects
- Net Income per share attributable to the Company decreased 1.7%
to $0.92
- Net Income attributable to the Company increased 25.7% to
$36.9 million
- Increased Core FFO per share 5.1% to $1.49
- Increased Core FFO 34.2% to $59.5
million
- Increased AFFO per share 3.7% to $1.45
- Increased AFFO 32.5% to $58.3
million
- Declared dividends of $1.125 per
share, a 6.1% year-over-year increase
Mid-Year 2019 Update:
- Increased 2019 acquisition guidance to a range of $625 million to $675
million
- Increased 2019 disposition guidance to a range of $50 million to $75
million
- Appointed Simon Leopold to its
Board of Directors
Financial Results
Net Income
Net Income attributable to the Company for the three months
ended June 30, 2019 increased 43.7%
to $18.6 million, compared to
$12.9 million for the comparable
period in 2018. Net Income per share attributable to the Company
for the three months ended June 30,
2019 increased 9.2% to $0.45,
compared to $0.41 per share for the
comparable period in 2018.
Net income attributable to the Company for the six months ended
June 30, 2019 increased 25.7% to
$36.9 million, compared to
$29.4 million for the comparable
period in 2018. Net income per share attributable to the
Company for the six months ended June 30,
2019 decreased 1.7% to $0.92,
compared to $0.94 per share for the
comparable period in 2018.
Core Funds from Operations
Core FFO for the three months ended June
30, 2019 increased 38.6% to $31.0
million, compared to Core FFO of $22.3 million for the comparable period in 2018.
Core FFO per share for the three months ended June 30, 2019 increased 5.5% to $0.75, compared to Core FFO per share of
$0.71 for the comparable period in
2018.
Core FFO for the six months ended June
30, 2019 increased 34.2% to $59.5
million, compared to Core FFO of $44.4 million for the comparable period in
2018. Core FFO per share for the six months ended
June 30, 2019 increased 5.1% to
$1.49, compared to Core FFO per share
of $1.41 for the comparable period in
2018.
Adjusted Funds from Operations
AFFO for the three months ended June 30,
2019 increased 37.5% to $30.6
million, compared to AFFO of $22.2
million for the comparable period in 2018. AFFO per
share for the three months ended June 30,
2019 increased 4.7% to $0.74,
compared to AFFO per share of $0.70
for the comparable period in 2018.
AFFO for the six months ended June 30,
2019 increased 32.5% to $58.3
million, compared to AFFO of $44.0
million for the comparable period in 2018. AFFO per
share for the six months ended June 30,
2019 increased 3.7% to $1.45,
compared to AFFO per share of $1.40
for the comparable period in 2018.
Dividend
The Company paid a cash dividend of $0.570 per share on July
12, 2019 to stockholders of record on June 28, 2019, a 5.6% increase over the
$0.540 quarterly dividend declared in
the second quarter of 2018. The quarterly dividend represents
payout ratios of approximately 76% of Core FFO per share and 77% of
AFFO per share, respectively.
For the six months ended June 30,
2019, the Company declared dividends of $1.125 per share, a 6.1% increase over the
dividends of $1.060 per share
declared for the comparable period in 2018. The dividend represents
payout ratios of approximately 76% of Core FFO per share and 77% of
AFFO per share, respectively.
CEO Comments
"We are very pleased with our strong performance during the
quarter as we continued to build momentum through efficient
execution of our operating strategy," said Joey Agree, President
and Chief Executive Officer of Agree Realty Corporation. "Given our
strong year-to-date investment activity and our robust pipeline, we
are increasing our full-year acquisition guidance to a range of
$625 million to $675 million. While increasing our acquisition
guidance, and as evidenced by our high-quality investments to date,
we continue to adhere to our rigorous underwriting standards
focused on superior real estate leased to leading omni-channel
retailers."
Mr. Agree continued in highlighting the Company's new Board of
Directors appointment, "On behalf of all of our Directors, I would
like to welcome Simon Leopold to our
Board. Simon has extensive finance, capital markets, and real
estate industry expertise and we look forward to his invaluable
insights as we continue to scale our growing Company."
Portfolio Update
As of June 30, 2019, the Company's
portfolio consisted of 722 properties located in 46 states totaling
13.1 million square feet of gross leasable space.
The portfolio was approximately 99.7% leased, had a
weighted-average remaining lease term of approximately 10.1 years,
and generated approximately 54.2% of annualized base rents from
investment grade retail tenants or parent entities thereof.
Ground Lease Portfolio
As of June 30, 2019, the Company's
ground lease portfolio consisted of 56 properties located in 21
states and totaled 2.0 million square feet of gross leasable space.
Properties ground leased to tenants accounted for 9.2% of
annualized base rents.
The ground lease portfolio was fully occupied, had a
weighted-average remaining lease term of approximately 11.1 years,
and generated approximately 89.3% of annualized base rents from
investment grade retail tenants or parent entities thereof.
Acquisitions
Total acquisition volume for the second quarter of 2019,
excluding acquisition and closing costs, was approximately
$176.1 million and included 31 assets
net leased to notable retailers operating in the off-price retail,
convenience store, auto parts, dollar store, warehouse club,
consumer electronics, and farm and rural supply sectors. The
properties are located in 20 states and leased to tenants operating
in 13 retail sectors. The properties were acquired at a
weighted-average capitalization rate of 6.7%, had a
weighted-average remaining lease term of approximately 10.6 years,
and approximately 73.1% of annualized base rents were generated
from investment grade retail tenants or parent entities thereof.
Notable acquisition activity during the second quarter included
Wawa's flagship store in downtown
Philadelphia, Pennsylvania and a
Costco ground lease in Newport News,
Virginia.
For the six months ended June 30,
2019, total acquisition volume, excluding acquisition and
closing costs, was approximately $317.2
million. The 79 acquired properties are located in 30
states and leased to 33 diverse tenants who operate in 20 retail
sectors. The properties were acquired at a weighted-average
capitalization rate of 6.9% and had a weighted-average remaining
lease term of approximately 11.6 years, and approximately 72.3% of
annualized base rents were generated from investment grade retail
tenants or parent entities thereof.
The Company's outlook for acquisition volume for the full-year
2019 is being increased to a range of $625
million to $675 million of
high-quality retail net lease properties. The Company's acquisition
guidance, which assumes continued growth in economic activity,
positive business trends and other significant assumptions, is
being increased from a previous range of $450 million to $500
million.
Dispositions
During the second quarter, the Company sold four properties for
gross proceeds of approximately $17.3
million. The dispositions were completed at a
weighted-average capitalization rate of 7.4%. During the six months
ended June 30, 2019, the Company
divested six properties for total gross proceeds of $27.4 million. The weighted-average
capitalization rate of the dispositions was 7.3%.
The lower end of the Company's disposition guidance for 2019 is
being increased to a new range of $50
million to $75 million, from a
previous range of $25 million to
$75 million.
Development and Partner Capital Solutions
In the second quarter of 2019, the Company completed its second
development with Sunbelt Rentals in Batavia, Ohio. The project is subject to
a 10-year net lease and had total aggregate costs of approximately
$1.6 million.
Construction continued during the second quarter on five
projects with total anticipated costs of approximately $20.1 million. The projects include the Company's
third and fourth developments with Sunbelt Rentals in Georgetown, Kentucky and Carrizo Springs, Texas; the Company's first
development with Gerber Collision in Round Lake, Illinois; the Company's
redevelopment of the former Kmart space in Mount Pleasant, Michigan for Hobby Lobby; and
the Company's redevelopment of the former Kmart space in
Frankfort, Kentucky for ALDI, Big
Lots and Harbor Freight Tools.
For the six months ended June 30,
2019, the Company had nine development or PCS projects
completed or under construction. Anticipated total costs are
approximately $29.6 million and
include the following projects:
Tenant
|
|
Location
|
|
Lease
Structure
|
|
Lease
Term
|
|
Actual or
Anticipated Rent
Commencement
|
|
Status
|
|
|
|
|
|
|
|
|
|
|
|
Mister Car
Wash
|
|
Orlando,
FL
|
|
Build-to-Suit
|
|
20 years
|
|
Q1 2019
|
|
Complete
|
Mister Car
Wash
|
|
Tavares,
FL
|
|
Build-to-Suit
|
|
20 years
|
|
Q1 2019
|
|
Complete
|
Sunbelt
Rentals
|
|
Maumee, OH
|
|
Build-to-Suit
|
|
10 years
|
|
Q1 2019
|
|
Complete
|
Sunbelt
Rentals
|
|
Batavia,
OH
|
|
Build-to-Suit
|
|
10 years
|
|
Q2 2019
|
|
Complete
|
Sunbelt
Rentals
|
|
Carrizo Springs,
TX
|
|
Build-to-Suit
|
|
10 years
|
|
Q3 2019
|
|
Under
Construction
|
Sunbelt
Rentals
|
|
Georgetown,
KY
|
|
Build-to-Suit
|
|
15 years
|
|
Q3 2019
|
|
Under
Construction
|
Gerber
Collision
|
|
Round Lake,
IL
|
|
Build-to-Suit
|
|
15 years
|
|
Q3 2019
|
|
Under
Construction
|
Hobby Lobby
|
|
Mt. Pleasant,
MI
|
|
Build-to-Suit
|
|
15 years
|
|
Q4 2019
|
|
Under
Construction
|
Big Lots
|
|
Frankfort,
KY
|
|
Build-to-Suit
|
|
10 years
|
|
Q1 2020
|
|
Under
Construction
|
Harbor Freight
Tools
|
|
Frankfort,
KY
|
|
Build-to-Suit
|
|
10 years
|
|
Q1 2020
|
|
Under
Construction
|
ALDI
|
|
Frankfort,
KY
|
|
Build-to-Suit
|
|
10 years
|
|
Q2 2020
|
|
Under
Construction
|
Leasing Activity and Expirations
During the second quarter, the Company executed new leases,
extensions or options on approximately 56,000 square feet of gross
leasable area throughout the existing portfolio. Notable new
leases, extensions or options included a 40,000-square foot Dave
& Buster's in Austin,
Texas.
For the six months ended June 30,
2019, the Company executed new leases, extensions or options
on approximately 167,000 square feet of gross leasable area
throughout the existing portfolio.
At quarter end, the Company's 2019 lease maturities represented
0.4% of annualized base rents. The following table presents
contractual lease expirations within the Company's portfolio as of
June 30, 2019, assuming no tenants
exercise renewal options:
Year
|
Leases
|
|
Annualized
Base Rent(1)
|
|
Percent of
Annualized Base Rent
|
|
Gross Leasable
Area
|
|
Percent of
Gross
Leasable Area
|
|
|
|
|
|
|
|
|
|
|
2019
|
3
|
|
783
|
|
0.4%
|
|
28
|
|
0.2%
|
2020
|
19
|
|
3,218
|
|
1.8%
|
|
232
|
|
1.8%
|
2021
|
26
|
|
5,228
|
|
2.9%
|
|
314
|
|
2.4%
|
2022
|
23
|
|
4,389
|
|
2.5%
|
|
387
|
|
3.0%
|
2023
|
39
|
|
7,148
|
|
4.0%
|
|
719
|
|
5.5%
|
2024
|
40
|
|
11,858
|
|
6.6%
|
|
1,324
|
|
10.1%
|
2025
|
42
|
|
9,908
|
|
5.5%
|
|
886
|
|
6.8%
|
2026
|
59
|
|
10,146
|
|
5.7%
|
|
1,014
|
|
7.7%
|
2027
|
60
|
|
13,061
|
|
7.3%
|
|
1,017
|
|
7.8%
|
2028
|
60
|
|
16,590
|
|
9.3%
|
|
1,218
|
|
9.3%
|
Thereafter
|
427
|
|
96,803
|
|
54.0%
|
|
5,945
|
|
45.4%
|
Total
Portfolio
|
798
|
|
$179,132
|
|
100.0%
|
|
13,084
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized Base
Rent and gross leasable area (square feet) are in thousands; any
differences are the result of rounding.
|
(1)
|
Annualized Base Rent
represents the annualized amount of contractual minimum rent
required by tenant lease agreements as of June 30, 2019,
computed on a straight-line basis. Annualized Base Rent
is not, and is not intended to be, a presentation in accordance
with GAAP. The Company believes annualized contractual
minimum rent is frequently useful to management, investors, and
other interested parties in analyzing concentrations
and leasing activity.
|
Top Tenants
The Company added Sunbelt Rentals to its top tenants in the
second quarter of 2019. The following table presents annualized
base rents for all tenants that represent 1.5% or greater of the
Company's total annualized base rent as of June 30, 2019:
Tenant
|
|
Annualized
Base Rent(1)
|
|
Percent of
Annualized
Base Rent
|
|
|
|
|
|
Sherwin-Williams
|
|
$10,001
|
|
5.6%
|
Walmart
|
|
7,955
|
|
4.4%
|
Walgreens
|
|
7,729
|
|
4.3%
|
TJX
Companies
|
|
6,703
|
|
3.7%
|
LA Fitness
|
|
5,644
|
|
3.2%
|
Tractor
Supply
|
|
5,461
|
|
3.0%
|
Lowe's
|
|
4,215
|
|
2.4%
|
O'Reilly Auto
Parts
|
|
4,111
|
|
2.3%
|
Dollar
General
|
|
4,111
|
|
2.3%
|
Best Buy
|
|
3,676
|
|
2.1%
|
Mister Car
Wash
|
|
3,669
|
|
2.0%
|
Wawa
|
|
3,600
|
|
2.0%
|
TBC
Corporation
|
|
3,421
|
|
1.9%
|
CVS
|
|
3,397
|
|
1.9%
|
Dollar Tree
|
|
3,297
|
|
1.8%
|
AutoZone
|
|
3,104
|
|
1.7%
|
Sunbelt
Rentals
|
|
3,101
|
|
1.7%
|
Burlington
|
|
3,097
|
|
1.7%
|
Dave &
Buster's
|
|
3,052
|
|
1.7%
|
Hobby Lobby
|
|
3,012
|
|
1.7%
|
Other(2)
|
|
86,776
|
|
48.6%
|
Total
Portfolio
|
|
$179,132
|
|
100.0%
|
|
Annualized Base Rent
is in thousands; any differences are the result of
rounding.
|
|
Bolded and italicized
tenants represent additions for the three months ended June 30,
2019.
|
(1)
|
Refer to footnote 1
on page 5 for the Company's definition of Annualized Base
Rent.
|
(2)
|
Includes tenants
generating less than 1.5% of Annualized Base Rent.
|
Retail Sectors
The following table presents annualized base rents for the
Company's top retail sectors that represent 2.5% or greater of the
Company's total annualized base rent as of June 30, 2019:
Sector
|
|
Annualized
Base Rent(1)
|
|
Percent of
Annualized
Base Rent
|
|
|
|
|
|
Home
Improvement
|
|
$17,914
|
|
10.0%
|
Tire and Auto
Service
|
|
14,850
|
|
8.3%
|
Pharmacy
|
|
12,712
|
|
7.1%
|
Off-Price
Retail
|
|
12,011
|
|
6.7%
|
Grocery
Stores
|
|
10,728
|
|
6.0%
|
Convenience
Stores
|
|
9,263
|
|
5.2%
|
Auto Parts
|
|
8,440
|
|
4.7%
|
General
Merchandise
|
|
7,791
|
|
4.3%
|
Health and
Fitness
|
|
7,747
|
|
4.3%
|
Farm and Rural
Supply
|
|
6,562
|
|
3.7%
|
Restaurants - Quick
Service
|
|
6,443
|
|
3.6%
|
Dollar
Stores
|
|
6,199
|
|
3.5%
|
Crafts and
Novelties
|
|
5,391
|
|
3.0%
|
Consumer
Electronics
|
|
5,032
|
|
2.8%
|
Warehouse
Clubs
|
|
4,988
|
|
2.8%
|
Specialty
Retail
|
|
4,692
|
|
2.6%
|
Other(2)
|
|
38,369
|
|
21.4%
|
Total
Portfolio
|
|
$179,132
|
|
100.0%
|
|
Annualized Base
Rent is in thousands; any differences are the result of
rounding.
|
(1)
|
Refer to footnote 1
on page 5 for the Company's definition of Annualized Base
Rent.
|
(2)
|
Includes sectors
generating less than 2.5% of Annualized Base Rent.
|
Geographic Diversification
The following table presents annualized base rents for all
states that represent 2.5% or greater of the Company's total
annualized base rent as of June 30,
2019:
State
|
|
Annualized
Base Rent(1)
|
|
Percent of
Annualized
Base Rent
|
|
|
|
|
|
Michigan
|
|
$15,799
|
|
8.8%
|
Texas
|
|
13,990
|
|
7.8%
|
Florida
|
|
10,663
|
|
6.0%
|
Pennsylvania
|
|
10,284
|
|
5.7%
|
Ohio
|
|
9,672
|
|
5.4%
|
Illinois
|
|
9,471
|
|
5.3%
|
New Jersey
|
|
8,523
|
|
4.8%
|
Georgia
|
|
7,060
|
|
3.9%
|
Missouri
|
|
5,920
|
|
3.3%
|
Louisiana
|
|
5,774
|
|
3.2%
|
Wisconsin
|
|
5,679
|
|
3.2%
|
Virginia
|
|
5,153
|
|
2.9%
|
North
Carolina
|
|
4,838
|
|
2.7%
|
Kansas
|
|
4,568
|
|
2.5%
|
Mississippi
|
|
4,565
|
|
2.5%
|
Other(2)
|
|
57,173
|
|
32.0%
|
Total
Portfolio
|
|
$179,132
|
|
100.0%
|
|
Annualized Base
Rent is in thousands; any differences are the result of
rounding.
|
(1)
|
Refer to footnote 1
on page 5 for the Company's definition of Annualized Base
Rent.
|
(2)
|
Includes states
generating less than 2.5% of Annualized Base Rent.
|
Capital Markets and Balance Sheet
Capital Markets
In September 2018, the Company
completed a follow-on public offering of 3,500,000 shares of common
stock in connection with a forward sale agreement. The Company
settled the entirety of the forward equity offering in May 2019 and received net proceeds of
$186.0 million.
In April 2019, the Company
commenced a follow-on public offering of 3,162,500 shares of common
stock in connection with a forward sale agreement. Upon settlement,
the offering is anticipated to raise net proceeds of approximately
$199.9 million after deducting fees
and expenses. To date, the Company has not received any proceeds
from the sale of shares of its common stock by the forward
purchasers.
In June 2019, the Company entered
into an agreement for the private placement of $125.0 million principal amount of senior
unsecured notes (the "Notes"). The closing of the private placement
and the issuance of the Notes will take place on a date selected by
the Company on or after July 1, 2019
and on or before October 30, 2019.
The Notes will bear interest at an annual fixed rate of 4.47% and
mature on October 30, 2031.
In March 2019, the Company entered
into forward-starting interest rate swap agreements to fix the
interest for $100.0 million of
long-term debt until maturity. The Company terminated the swap
agreements at the time of pricing the Notes. Considering the effect
of the terminated swap agreements, the blended all-in rate to the
Company for the $125.0 million
aggregate principal amount of Notes is 4.42%.
Balance Sheet
As of June 30, 2019, the Company's
net debt to recurring EBITDA was 4.4 times and its fixed charge
coverage ratio was 4.1 times. The Company's total debt to
enterprise value was 21.6%. Enterprise value is calculated as
the sum of net debt and the market value of the Company's
outstanding shares of common stock, assuming conversion of
operating partnership units into common stock.
For the three and six months ended June
30, 2019, the Company's fully diluted weighted-average
shares outstanding were 41.1 million and 39.7 million,
respectively. The basic weighted-average shares outstanding for the
three and six months ended June 30,
2019 were 40.6 million and 39.1 million, respectively.
For the three and six months ended June
30, 2019, the Company's fully diluted weighted-average
shares and units outstanding were 41.5 million and 40.1 million,
respectively. The basic weighted-average shares and units
outstanding for the three and six months ended June 30, 2019 were 41.0 million and 39.4 million,
respectively.
The Company's assets are held by, and its operations are
conducted through, Agree Limited Partnership, of which the Company
is the sole general partner. As of June 30, 2019, there were 347,619 operating
partnership units outstanding and the Company held a 99.2% interest
in the operating partnership.
Board of Directors Update
The Company is pleased to announce that Simon Leopold has joined the Company's Board of
Directors (the "Board") and will serve as a member of the Company's
Audit Committee. Mr. Leopold currently serves as the Chief
Financial Officer and Treasurer of Taubman
Centers, Inc. (NYSE: TCO) ("Taubman"). He joined Taubman in
2012 as Treasurer and Senior Vice President, Capital Markets. Prior
to Taubman, Mr. Leopold served as managing director in the real
estate investment banking groups at Deutsche Bank, KBW and
UBS.
The Board has determined that Mr. Leopold is independent in
accordance with the NYSE listing standards and the Company's
Corporate Governance Guidelines and that he qualifies as an "audit
committee financial expert" as defined in the Securities Exchange
Act of 1934, as amended.
Conference Call/Webcast
The Company will host its quarterly analyst and investor
conference call on Tuesday, July 23,
2019 at 9:00 AM ET. To
participate in the conference call, please dial (866) 363-3979
approximately ten minutes before the call begins.
Additionally, a webcast of the conference call will be available
through the Company's website. To access the webcast, visit
www.agreerealty.com ten minutes prior to the start time of the
conference call and go to the Invest section of the website.
A replay of the conference call webcast will be archived and
available online through the Invest section of
www.agreerealty.com.
About Agree Realty Corporation
Agree Realty Corporation is a publicly traded real estate
investment trust primarily engaged in the acquisition and
development of properties net leased to industry-leading retail
tenants. As of June 30, 2019,
the Company owned and operated a portfolio of 722 properties,
located in 46 states and containing approximately 13.1 million
square feet of gross leasable space. The common stock of
Agree Realty Corporation is listed on the New York Stock Exchange
under the symbol "ADC". For additional information, please
visit www.agreerealty.com.
Forward-Looking Statements
This press release may contain certain "forward-looking
statements" made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements are generally identifiable by use of forward-looking
terminology such as "may," "will," "should," "potential," "intend,"
"expect," "seek," "anticipate," "estimate," "approximately,"
"believe," "could," "project," "predict," "forecast," "continue,"
"assume," "plan," references to "outlook" or other similar words or
expressions. Forward-looking statements are based on certain
assumptions and can include future expectations, future plans and
strategies, financial and operating projections and forecasts and
other forward-looking information and estimates. These
forward-looking statements are subject to various risks and
uncertainties, many of which are beyond the Company's control,
which could cause actual results to differ materially from such
statements. These risks and uncertainties are described in greater
detail in the Company's filings with the Securities and Exchange
Commission, including, without limitation, the Company's Annual
Report on Form 10-K for the year ended December 31, 2018 and in subsequent quarterly
reports. Except as required by law, the Company disclaims any
obligation to update any forward-looking statements, whether as a
result of new information, future events or otherwise. For further
information about the Company's business and financial results,
please refer to the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Risk Factors"
sections of the Company's SEC filings, including, but not limited
to, its Annual Report on Form 10-K and Quarterly Reports on Form
10-Q, copies of which may be obtained at the Invest section of the
Company's website at www.agreerealty.com.
All information in this press release is as of July 22, 2019. The Company undertakes no duty to
update the statements in this press release to conform the
statements to actual results or changes in the Company's
expectations.
Agree Realty
Corporation
|
Consolidated
Balance Sheet
|
($ in thousands,
except share and per-share data)
|
(Unaudited)
|
|
June 30,
2019
|
|
December 31,
2018
|
Assets:
|
|
|
|
Real Estate
Investments:
|
|
|
|
Land
|
$
638,946
|
|
$
553,704
|
Buildings
|
1,375,773
|
|
1,194,985
|
Accumulated
depreciation
|
(112,951)
|
|
(100,312)
|
Property under
development
|
16,950
|
|
12,957
|
Net real estate
investments
|
1,918,718
|
|
1,661,334
|
Real estate held for
sale, net
|
2,074
|
|
-
|
Cash and cash
equivalents
|
5,520
|
|
53,955
|
Cash held in
escrows
|
16,909
|
|
20
|
Accounts receivable -
tenants
|
24,914
|
|
21,547
|
Lease intangibles,
net of accumulated amortization of $74,995 and $62,543 at June 30,
2019 and December 31, 2018, respectively
|
307,303
|
|
280,153
|
Other assets,
net
|
29,005
|
|
11,180
|
Total
Assets
|
$
2,304,443
|
|
$
2,028,189
|
|
|
|
|
Liabilities:
|
|
|
|
Mortgage notes
payable, net
|
$
59,670
|
|
$
60,926
|
Unsecured term loans,
net
|
237,980
|
|
256,419
|
Senior unsecured
notes, net
|
384,143
|
|
384,064
|
Unsecured revolving
credit facility
|
54,000
|
|
19,000
|
Dividends and
distributions payable
|
24,119
|
|
21,031
|
Accounts payable,
accrued expenses and other liabilities
|
48,700
|
|
21,045
|
Lease intangibles,
net of accumulated amortization of $17,426 and $15,177 at June 30,
2019 and December 31, 2018, respectively
|
27,908
|
|
27,218
|
Total
Liabilities
|
$
836,520
|
|
$
789,703
|
|
|
|
|
Equity:
|
|
|
|
Common stock, $.0001
par value, 90,000,000 shares authorized, 41,967,282 and 37,545,790
shares issued and outstanding at June 30, 2019 and December 31,
2018, respectively
|
$
4
|
|
$
4
|
Preferred stock,
$.0001 par value per share, 4,000,000 shares authorized
|
-
|
|
-
|
Additional paid-in
capital
|
1,522,644
|
|
1,277,592
|
Dividends in excess
of net income
|
(51,298)
|
|
(42,945)
|
Accumulated other
comprehensive income (loss)
|
(5,711)
|
|
1,424
|
Equity - Agree Realty
Corporation
|
$
1,465,639
|
|
$
1,236,075
|
Non-controlling
interest
|
2,284
|
|
2,411
|
Total
Equity
|
$
1,467,923
|
|
$
1,238,486
|
Total Liabilities
and Equity
|
$
2,304,443
|
|
$
2,028,189
|
Agree Realty
Corporation
|
Consolidated
Statements of Operations and Comprehensive Income
|
($ in thousands,
except share and per share-data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three months
ended
June 30,
|
|
Six months
ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues
|
|
|
|
|
|
|
|
Rental
income
|
$
44,875
|
|
$
33,076
|
|
$
87,219
|
|
$
65,308
|
Other
|
45
|
|
92
|
|
49
|
|
138
|
Total
Revenues
|
$
44,920
|
|
$
33,168
|
|
$
87,268
|
|
$
65,446
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
Real estate
taxes
|
$
3,720
|
|
$
2,624
|
|
$
7,342
|
|
$
5,001
|
Property operating
expenses
|
1,496
|
|
1,238
|
|
3,235
|
|
2,755
|
Land lease
expense
|
372
|
|
176
|
|
568
|
|
339
|
General and
administrative
|
3,880
|
|
3,110
|
|
7,914
|
|
6,018
|
Depreciation and
amortization
|
10,836
|
|
8,046
|
|
20,700
|
|
15,806
|
Provision for
impairment
|
1,193
|
|
1,163
|
|
1,609
|
|
1,163
|
Total Operating
Expenses
|
$
21,497
|
|
$
16,357
|
|
$
41,368
|
|
$
31,082
|
|
|
|
|
|
|
|
|
Income from
Operations
|
$
23,423
|
|
$
16,811
|
|
$
45,900
|
|
$
34,364
|
|
|
|
|
|
|
|
|
Other (Expense)
Income
|
|
|
|
|
|
|
|
Interest expense,
net
|
$
(7,455)
|
|
$
(5,961)
|
|
$
(15,012)
|
|
$
(11,426)
|
Gain (loss) on sale
of assets, net
|
2,949
|
|
2,434
|
|
6,376
|
|
7,032
|
Income tax benefit
(expense)
|
(195)
|
|
(216)
|
|
(26)
|
|
(266)
|
|
|
|
|
|
|
|
|
Net
Income
|
$
18,722
|
|
$
13,068
|
|
$
37,238
|
|
$
29,704
|
|
|
|
|
|
|
|
|
Less Net Income
Attributable to Non-Controlling Interest
|
158
|
|
145
|
|
327
|
|
329
|
|
|
|
|
|
|
|
|
Net Income
Attributable to Agree Realty Corporation
|
$
18,564
|
|
$
12,923
|
|
$
36,911
|
|
$
29,375
|
|
|
|
|
|
|
|
|
Net Income Per
Share Attributable to Agree Realty Corporation
|
|
|
|
|
|
|
|
Basic
|
$
0.45
|
|
$
0.42
|
|
$
0.94
|
|
$
0.95
|
Diluted
|
$
0.45
|
|
$
0.41
|
|
$
0.92
|
|
$
0.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Comprehensive Income
|
|
|
|
|
|
|
|
Net Income
|
$
18,722
|
|
$
13,068
|
|
$
37,238
|
|
$
29,704
|
Other Comprehensive
Income (Loss) - Change in Fair Value and Settlement of Interest
Rate Swaps
|
(3,794)
|
|
792
|
|
(7,199)
|
|
2,712
|
Total Comprehensive
Income
|
14,928
|
|
13,860
|
|
30,039
|
|
32,416
|
Comprehensive Income
Attributable to Non-Controlling Interest
|
(125)
|
|
(154)
|
|
(264)
|
|
(359)
|
Comprehensive Income
Attributable to Agree Realty Corporation
|
$
14,803
|
|
$
13,706
|
|
$
29,775
|
|
$
32,057
|
|
|
|
|
|
|
|
|
Weighted Average
Number of Common Shares Outstanding - Basic
|
40,612,372
|
|
30,821,185
|
|
39,058,743
|
|
30,811,383
|
Weighted Average
Number of Common Shares Outstanding - Diluted
|
41,141,659
|
|
31,222,221
|
|
39,745,337
|
|
31,036,694
|
|
|
|
|
|
|
|
|
Agree Realty
Corporation
|
Reconciliation of
Net Income to FFO, Core FFO and Adjusted FFO
|
($ in thousands,
except share and per-share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three months
ended
June 30,
|
|
Six months
ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
Net Income
|
$
18,722
|
|
$
13,068
|
|
$
37,238
|
|
$
29,704
|
Depreciation of
rental real estate assets
|
8,276
|
|
5,934
|
|
15,920
|
|
11,589
|
Amortization of lease
intangibles - in-place leases and leasing costs
|
2,496
|
|
2,091
|
|
4,653
|
|
4,175
|
Provision for
impairment
|
1,193
|
|
1,163
|
|
1,609
|
|
1,163
|
(Gain) loss on sale
of assets, net
|
(2,949)
|
|
(2,434)
|
|
(6,376)
|
|
(7,032)
|
Funds from
Operations
|
$
27,738
|
|
$
19,822
|
|
$
53,044
|
|
$
39,599
|
Amortization of above
(below) market lease intangibles, net
|
3,225
|
|
2,513
|
|
6,501
|
|
4,756
|
Core Funds from
Operations
|
$
30,963
|
|
$
22,335
|
|
$
59,545
|
|
$
44,355
|
Straight-line accrued
rent
|
(1,692)
|
|
(1,093)
|
|
(3,190)
|
|
(2,205)
|
Deferred tax expense
(benefit)
|
-
|
|
-
|
|
(475)
|
|
-
|
Stock based
compensation expense
|
1,026
|
|
833
|
|
1,939
|
|
1,525
|
Amortization of
financing costs
|
209
|
|
132
|
|
365
|
|
298
|
Non-real estate
depreciation
|
64
|
|
21
|
|
127
|
|
42
|
Adjusted Funds from
Operations
|
$
30,570
|
|
$
22,228
|
|
$
58,311
|
|
$
44,015
|
|
|
|
|
|
|
|
|
Funds from Operations
per common share - Basic
|
$
0.68
|
|
$
0.64
|
|
$
1.35
|
|
$
1.27
|
Funds from Operations
per common share - Diluted
|
$
0.67
|
|
$
0.63
|
|
$
1.32
|
|
$
1.26
|
|
|
|
|
|
|
|
|
Core Funds from
Operations per common share - Basic
|
$
0.76
|
|
$
0.72
|
|
$
1.51
|
|
$
1.42
|
Core Funds from
Operations per common share - Diluted
|
$
0.75
|
|
$
0.71
|
|
$
1.49
|
|
$
1.41
|
|
|
|
|
|
|
|
|
Adjusted Funds from
Operations per common share - Basic
|
$
0.75
|
|
$
0.71
|
|
$
1.48
|
|
$
1.41
|
Adjusted Funds from
Operations per common share - Diluted
|
$
0.74
|
|
$
0.70
|
|
$
1.45
|
|
$
1.40
|
|
|
|
|
|
|
|
|
Weighted Average
Number of Common Shares and Units Outstanding - Basic
|
40,959,991
|
|
31,168,804
|
|
39,406,362
|
|
31,159,002
|
Weighted Average
Number of Common Shares and Units Outstanding - Diluted
|
41,489,278
|
|
31,569,840
|
|
40,092,956
|
|
31,384,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Information:
|
|
|
|
|
|
|
|
Scheduled principal
repayments
|
$
745
|
|
$
828
|
|
$
1,607
|
|
$
1,648
|
Capitalized
interest
|
113
|
|
148
|
|
203
|
|
292
|
Capitalized building
improvements
|
926
|
|
42
|
|
960
|
|
76
|
|
|
|
|
|
|
|
|
Non-GAAP Financial
Measures
|
|
Funds from
Operations ("FFO or "Nareit FFO")
FFO is defined by the National Association of Real Estate
Investment Trusts, Inc. ("Nareit") to mean net income computed in
accordance with GAAP, excluding gains (or losses) from sales of
real estate assets and/or changes in control, plus real estate
related depreciation and amortization and any impairment charges on
depreciable real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures. Historical cost
accounting for real estate assets in accordance with GAAP
implicitly assumes that the value of real estate assets diminishes
predictably over time. Since real estate values instead have
historically risen or fallen with market conditions, most real
estate industry investors consider FFO to be helpful in evaluating
a real estate company's operations.
|
|
FFO should not be
considered an alternative to net income as the primary indicator of
the Company's operating performance, or as an alternative to cash
flow as a measure of liquidity. Further, while the Company adheres
to the Nareit definition of FFO, its presentation of FFO is not
necessarily comparable to similarly titled measures of other REITs
due to the fact that all REITs may not use the same
definition.
|
|
Core Funds from
Operations ("Core FFO") The Company defines Core FFO as
Nareit FFO with the addback of noncash amortization of above- and
below- market lease intangibles. Under GAAP and Nareit's definition
of FFO, lease intangibles created upon acquisition of a net lease
must be amortized over the remaining term of the lease. The Company
believes that by recognizing amortization charges for above- and
below- market lease intangibles, the utility of FFO as a financial
performance measure can be diminished. Management believes
that its measure of Core FFO facilitates useful comparison of
performance to its peers who predominantly transact in
sale-leaseback transactions and are thereby not required by GAAP to
allocate purchase price to lease intangibles. Unlike many of
its peers, the Company has acquired the substantial majority of its
net leased properties through acquisitions of properties from third
parties or in connection with the acquisitions of ground leases
from third parties. Core FFO should not be considered an
alternative to net income as the primary indicator of the Company's
operating performance, or as an alternative to cash flow as a
measure of liquidity. Further, the Company's presentation of Core
FFO is not necessarily comparable to similarly titled measures of
other REITs due to the fact that all REITs may not use the same
definition.
|
|
Adjusted Funds
from Operations ("AFFO") AFFO is a non-GAAP financial
measure of operating performance used by many companies in the REIT
industry. AFFO further adjusts FFO and Core FFO for certain
non-cash and/or infrequently recurring items that reduce or
increase net income in accordance with GAAP. Management considers
AFFO a useful supplemental measure of the Company's performance,
however, AFFO should not be considered an alternative to net income
as an indication of the Company's performance, or to cash flow as a
measure of liquidity or ability to make distributions. The
Company's computation of AFFO may differ from the methodology for
calculating AFFO used by other equity REITs, and therefore may not
be comparable to such other REITs.
|
Agree Realty
Corporation
|
Reconciliation of
Net Debt to Recurring EBITDA
|
($ in thousands,
except share and per-share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
June 30,
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
$
18,722
|
Interest expense,
net
|
|
|
|
|
|
|
7,455
|
Income tax (benefit)
expense
|
|
|
|
|
|
|
195
|
Depreciation of
rental real estate assets
|
|
|
|
|
|
|
8,276
|
Amortization of lease
intangibles - in-place leases and leasing costs
|
|
|
2,496
|
Non-real estate
depreciation
|
|
|
|
|
|
|
64
|
Provision for
impairment
|
|
|
|
|
|
|
1,193
|
(Gain) loss on sale
of assets, net
|
|
|
|
|
|
|
(2,949)
|
EBITDAre
|
|
|
|
|
|
|
$
35,452
|
|
|
|
|
|
|
|
|
Run-Rate Impact of
Investment and Disposition Activity
|
|
|
|
|
|
|
$
1,641
|
Amortization of above
(below) market lease intangibles, net
|
|
|
|
|
3,225
|
Other expense
(income)
|
|
|
|
|
|
|
-
|
Recurring
EBITDA
|
|
|
|
|
|
|
$
40,318
|
|
|
|
|
|
|
|
|
Annualized Recurring
EBITDA
|
|
|
|
|
|
|
$
161,272
|
|
|
|
|
|
|
|
|
Total Debt
|
|
|
|
|
|
|
$
739,166
|
Cash, cash
equivalents and cash held in escrows
|
|
|
|
|
|
(22,429)
|
Net Debt
|
|
|
|
|
|
|
$
716,737
|
|
|
|
|
|
|
|
|
Net Debt to Recurring
EBITDA
|
|
|
|
|
|
|
4.4x
|
|
|
|
|
|
|
|
|
|
|
|
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Non-GAAP Financial
Measures
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EBITDAre
EBITDAreis defined by Nareit to mean net income computed in
accordance with GAAP, plus interest expense, income tax expense,
depreciation and amortization, any gains (or losses) from sales of
real estate assets and/or changes in control, any impairment
charges on depreciable real estate assets, and after adjustments
for unconsolidated partnerships and joint ventures. The Company
considers the non-GAAP measure of EBITDAreto be a key
supplemental measure of the Company's performance and should be
considered along with, but not as an alternative to, net income or
loss as a measure of the Company's operating performance. The
Company considers EBITDArea key supplemental measure of the
Company's operating performance because it provides an additional
supplemental measure of the Company's performance and operating
cash flow that is widely known by industry analysts, lenders and
investors. The Company's calculation of EBITDAremay not be
comparable to EBITDArereported by other REITs that interpret
the Nareit definition differently than the Company.
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Recurring
EBITDA The Company defines Recurring EBITDA as
EBITDArewith the addback of noncash amortization of above-
and below- market lease intangibles, and after adjustments for the
run-rate impact of the Company's investment and disposition
activity for the period presented, as well as adjustments for
non-recurring benefits or expenses. The Company considers the
non-GAAP measure of Recurring EBITDA to be a key supplemental
measure of the Company's performance and should be considered along
with, but not as an alternative to, net income or loss as a measure
of the Company's operating performance. The Company considers
Recurring EBITDA a key supplemental measure of the Company's
operating performance because it represents the Company's earnings
run rate for the period presented and because it is widely followed
by industry analysts, lenders and investors. Our Recurring
EBITDA may not be comparable to Recurring EBITDA reported by other
companies that have a different interpretation of the definition of
Recurring EBITDA. Our ratio of net debt to Recurring EBITDA, which
is used by the Company as a measure of leverage, is calculated by
taking annualized Recurring EBITDA and dividing it by our net debt
per the consolidated balance sheet.
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Net
Debt The Company defines Net Debt as total debt less cash,
cash equivalents and cash held in escrows. The Company considers
the non-GAAP measure of Net Debt to be a key supplemental measure
of the Company's overall liquidity, capital structure and leverage.
The Company considers Net Debt a key supplemental measure because
it provides industry analysts, lenders and investors useful
information in understanding our financial condition. The Company's
calculation of Net Debt may not be comparable to Net Debt reported
by other REITs that interpret the definition differently than the
Company.
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Any differences are a
result of rounding.
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Agree Realty
Corporation
|
Rental
Income
|
($ in thousands,
except share and per share-data)
|
(Unaudited)
|
|
|
|
|
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Three months
ended
June 30,
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Six months
ended
June 30,
|
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2019
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2018
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2019
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2018
|
Rental Income
Source(1)
|
|
|
|
|
|
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|
Minimum
rents(2)
|
$
41,508
|
|
$
31,006
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|
$
80,230
|
|
$
60,580
|
Percentage
rents(2)
|
-
|
|
-
|
|
287
|
|
216
|
Operating cost
reimbursement(2)
|
4,900
|
|
3,490
|
|
10,013
|
|
7,055
|
Straight-line rental
adjustments(3)
|
1,692
|
|
1,093
|
|
3,190
|
|
2,213
|
Amortization of
(above) below market lease intangibles(4)
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(3,225)
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(2,513)
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(6,501)
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(4,756)
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Other(5)
|
45
|
|
92
|
|
49
|
|
138
|
Total Rental
Income
|
$
44,920
|
|
$
33,168
|
|
$
87,268
|
|
$
65,446
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|
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(1) The
Company adopted Financial Accounting Standards Board Accounting
Standards Codification ("FASB ASC") 842 "Leases" using the modified
retrospective approach as of January 1, 2019. The Company
adopted the practical expedient in FASB ASC 842 that alleviates the
requirement to separately present lease and non-lease components of
lease contracts. As a result, all income earned pursuant to tenant
leases is reflected as one line, "Rental Income," in the
consolidated statement of operations. The purpose of this
table is to provide additional supplementary detail of Rental
Income.
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(2) Represents
contractual rentals and/or reimbursements as required by tenant
lease agreements, recognized on an accrual basis of
accounting. The Company believes that the presentation of
contractual lease income is not, and is not intended to be, a
presentation in accordance with GAAP. The Company believes this
information is frequently used by management, investors, analysts
and other interested parties to evaluate the Company's
performance.
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(3) Represents
adjustments to recognize minimum rents on a straight-line basis,
consistent with the requirements of FASB ASC 842.
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(4) In
allocating the fair value of an acquired property, above- and
below-market lease intangibles are recorded based on the present
value of the difference between the contractual amounts to be paid
pursuant to the leases at the time of acquisition and the Company's
estimate of current market lease rates for the property.
Effective in 2019, the Company began classifying amortization of
above- and below-market lease intangibles as a net reduction of
rental income and has reclassified prior periods for
comparability.
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(5) Represents
amortization of tenant inducements and/or other adjustments
required to recognize rental income in accordance with
GAAP.
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SOURCE Agree Realty Corporation