Increases 2023 Acquisition Guidance to At
Least $1.2 Billion
BLOOMFIELD HILLS, Mich., May 4, 2023
Agree Realty Corporation (NYSE: ADC) (the "Company") today
announced results for the quarter ended March 31, 2023. All per share amounts included
herein are on a diluted per common share basis unless otherwise
stated.
First Quarter 2023 Financial and Operating
Highlights:
- Invested approximately $314
million in 95 retail net lease properties
- Commenced five development or Partner Capital Solutions ("PCS")
projects representing total committed capital of over $19 million
- Net Income per share attributable to common stockholders
decreased 8.6% to $0.44
- Core Funds from Operations ("Core FFO") per share increased
0.6% to $0.98
- Adjusted Funds from Operations ("AFFO") per share increased
1.5% to $0.98
- Declared an April monthly dividend of $0.243 per common share, a 3.8% year-over-year
increase
- Settled 2,945,000 shares of outstanding forward equity for net
proceeds of approximately $195
million
- Balance sheet positioned for growth at 3.7 times proforma net
debt to recurring EBITDA; 4.5 times excluding unsettled forward
equity
Financial Results
Net Income Attributable to Common Stockholders
Net Income for the three months ended March 31, 2023 increased 16.1% to $39.8 million, compared to $34.3 million for the comparable period in 2022.
Net Income per share for the three months ended March 31, 2023 decreased 8.6% to $0.44, compared to $0.48 per share for the comparable period in
2022.
Core FFO
Core FFO for the three months ended March
31, 2023 increased 27.6% to $89.0
million, compared to Core FFO of $69.7 million for the comparable period in 2022.
Core FFO per share for the three months ended March 31, 2023 increased 0.6% to $0.98, compared to Core FFO per share of
$0.97 for the comparable period in
2022.
AFFO
AFFO for the three months ended March 31,
2023 increased 28.7% to $89.1
million, compared to AFFO of $69.2
million for the comparable period in 2022. AFFO per share
for the three months ended March 31,
2023 increased 1.5% to $0.98,
compared to AFFO per share of $0.97
for the comparable period in 2022.
Dividend
In the first quarter, the Company declared monthly cash
dividends of $0.240 per common share
for each of January, February and March
2023. The monthly dividends during the first quarter
reflected an annualized dividend amount of $2.880 per common share, representing a 5.7%
increase over the annualized dividend amount of $2.724 per common share from the first quarter of
2022. The dividends represent payout ratios of approximately 74% of
Core FFO per share and 73% of AFFO per share, respectively.
Subsequent to quarter end, the Company declared a monthly cash
dividend of $0.243 per common share
for April 2023. The monthly dividend
reflects an annualized dividend amount of $2.916 per common share, representing a 3.8%
increase over the annualized dividend amount of $2.808 per common share from the second quarter
of 2022. The April dividend is payable May
12, 2023 to stockholders of record at the close of business
on April 28, 2023.
Additionally, subsequent to quarter end, the Company declared a
monthly cash dividend on its 4.25% Series A Cumulative Redeemable
Preferred Stock of $0.08854 per
depositary share, which is equivalent to $1.0625 per annum. The dividend was paid on
May 1, 2023 to stockholders of record
at the close of business on April 24,
2023.
CEO Comments
"We are very pleased with our strong start to the year as we
stayed disciplined in our investment strategy and now have
visibility into at least $1.2 billion
acquired for the year," said Joey Agree, President and Chief
Executive Officer. "Our balance sheet remains in a fortified
position with more than $360 million
of forward equity and over $800
million of capacity on our revolving credit facility at
quarter end."
Portfolio Update
As of March 31, 2023, the
Company's portfolio consisted of 1,908 properties located in all 48
continental states and contained approximately 40.1 million square
feet of gross leasable area.
At quarter end, the portfolio was 99.7% leased, had a
weighted-average remaining lease term of approximately 8.8 years,
and generated 68.0% of annualized base rents from investment grade
retail tenants.
Ground Lease Portfolio
During the first quarter, the Company acquired two ground leases
for an aggregate purchase price of approximately $18.9 million, representing 6.5% of annualized
base rents acquired.
As of March 31, 2023, the
Company's ground lease portfolio consisted of 208 leases located in
32 states and totaled approximately 5.6 million square feet of
gross leasable area. Properties ground leased to tenants
represented 12.1% of annualized base rents.
At quarter end, the ground lease portfolio was fully occupied,
had a weighted-average remaining lease term of approximately 11.1
years, and generated 87.0% of annualized base rents from investment
grade retail tenants.
Acquisitions
Total acquisition volume for the first quarter was approximately
$302.3 million and included 66
properties net leased to leading retailers operating in sectors
including tire and auto service, home improvement, grocery stores,
auto parts, dollar stores, and farm and rural supply. The
properties are located in 24 states and leased to tenants operating
in 16 sectors.
The properties were acquired at a weighted-average
capitalization rate of 6.7% and had a weighted-average remaining
lease term of approximately 13.1 years. Approximately 74.9% of
annualized base rents acquired were generated from investment grade
retail tenants.
The Company's outlook for acquisition volume for the full-year
2023 has been increased to at least $1.2
billion, from at least $1.0
billion previously.
Development and PCS
During the first quarter, the Company commenced five development
and PCS projects, with total anticipated costs of approximately
$19.3 million. Construction continued
during the quarter on 21 projects with anticipated costs totaling
approximately $85.9 million. The
Company completed three projects during the quarter, which included
Gerber Collision developments in Murrieta, California as well as Ocala and Venice,
Florida.
For the three months ended March 31,
2023, the Company had 29 development or PCS projects
completed or under construction. Anticipated total costs are
approximately $115.4 million,
including $59.1 million of costs
incurred as of quarter end.
The following table presents the Company's 29 development or PCS
projects as of March 31, 2023:
Tenant
|
Location
|
Lease
Structure
|
|
Lease
Term
|
|
Actual or
Anticipated Rent
Commencement
|
|
Status
|
Gerber
Collision
|
Murrieta, CA
|
Build-to-Suit
|
|
15 years
|
|
Q1 2023
|
|
Complete
|
Gerber
Collision
|
Ocala, FL
|
Build-to-Suit
|
|
15 years
|
|
Q1 2023
|
|
Complete
|
Gerber
Collision
|
Venice, FL
|
Build-to-Suit
|
|
15 years
|
|
Q1 2023
|
|
Complete
|
Gerber
Collision
|
Fort Wayne,
IN
|
Build-to-Suit
|
|
15 years
|
|
Q2 2023
|
|
Under
Construction
|
Gerber
Collision
|
Johnson City,
NY
|
Build-to-Suit
|
|
15 years
|
|
Q2 2023
|
|
Under
Construction
|
Gerber
Collision
|
Joplin, MO
|
Build-to-Suit
|
|
15 years
|
|
Q2 2023
|
|
Under
Construction
|
Gerber
Collision
|
Lake Charles,
LA
|
Build-to-Suit
|
|
15 years
|
|
Q2 2023
|
|
Under
Construction
|
Gerber
Collision
|
Lake Park,
FL
|
Build-to-Suit
|
|
15 years
|
|
Q2 2023
|
|
Under
Construction
|
Gerber
Collision
|
Springfield,
MO
|
Build-to-Suit
|
|
15 years
|
|
Q2 2023
|
|
Under
Construction
|
Gerber
Collision
|
Toledo, OH
|
Build-to-Suit
|
|
15 years
|
|
Q2 2023
|
|
Under
Construction
|
Gerber
Collision
|
Winterville,
NC
|
Build-to-Suit
|
|
15 years
|
|
Q2 2023
|
|
Under
Construction
|
Gerber
Collision
|
Woodstock,
IL
|
Build-to-Suit
|
|
15 years
|
|
Q2 2023
|
|
Under
Construction
|
HomeGoods
|
South Elgin,
IL
|
Build-to-Suit
|
|
10 years
|
|
Q2 2023
|
|
Under
Construction
|
Old Navy
|
Searcy, AR
|
Build-to-Suit
|
|
7 years
|
|
Q2 2023
|
|
Under
Construction
|
Sunbelt
Rentals
|
St. Louis,
MO
|
Build-to-Suit
|
|
7 years
|
|
Q2 2023
|
|
Under
Construction
|
Gerber
Collision
|
Blue Springs,
MO
|
Build-to-Suit
|
|
15 years
|
|
Q3 2023
|
|
Under
Construction
|
Gerber
Collision
|
Huntley, IL
|
Build-to-Suit
|
|
15 years
|
|
Q3 2023
|
|
Under
Construction
|
Five Below
|
Onalaska, WI
|
Build-to-Suit
|
|
10 years
|
|
Q3 2023
|
|
Under
Construction
|
HomeGoods
|
Onalaska, WI
|
Build-to-Suit
|
|
10 years
|
|
Q3 2023
|
|
Under
Construction
|
Sierra Trading
Post
|
Onalaska, WI
|
Build-to-Suit
|
|
10 years
|
|
Q3 2023
|
|
Under
Construction
|
TJ Maxx
|
Onalaska, WI
|
Build-to-Suit
|
|
10 years
|
|
Q3 2023
|
|
Under
Construction
|
Ulta Beauty
|
Onalaska, WI
|
Build-to-Suit
|
|
11 years
|
|
Q3 2023
|
|
Under
Construction
|
Sunbelt
Rentals
|
Wentzville,
MO
|
Build-to-Suit
|
|
12 years
|
|
Q3 2023
|
|
Under
Construction
|
Burlington
|
Brenham, TX
|
Build-to-Suit
|
|
10 years
|
|
Q4 2023
|
|
Under
Construction
|
Ulta Beauty
|
Brenham, TX
|
Build-to-Suit
|
|
10 years
|
|
Q4 2023
|
|
Under
Construction
|
Gerber
Collision
|
Lawrence, PA
|
Build-to-Suit
|
|
15 years
|
|
Q4 2023
|
|
Under
Construction
|
Gerber
Collision
|
McDonough,
GA
|
Build-to-Suit
|
|
15 years
|
|
Q4 2023
|
|
Under
Construction
|
Gerber
Collision
|
Muskegon, MI
|
Build-to-Suit
|
|
15 years
|
|
Q4 2023
|
|
Under
Construction
|
Gerber
Collision
|
Odessa, FL
|
Build-to-Suit
|
|
15 years
|
|
Q4 2023
|
|
Under
Construction
|
Gerber
Collision
|
Peachtree,
GA
|
Build-to-Suit
|
|
15 years
|
|
Q4 2023
|
|
Under
Construction
|
Gerber
Collision
|
Warner Robbins,
NC
|
Build-to-Suit
|
|
15 years
|
|
Q4 2023
|
|
Under
Construction
|
Gerber
Collision
|
Yorkville,
IL
|
Build-to-Suit
|
|
15 years
|
|
Q4 2023
|
|
Under
Construction
|
Sunbelt
Rentals
|
Ashwaubenon,
WI
|
Build-to-Suit
|
|
12 years
|
|
Q4 2023
|
|
Under
Construction
|
Sunbelt
Rentals
|
Broken Arrow,
OK
|
Build-to-Suit
|
|
12 years
|
|
Q4 2023
|
|
Under
Construction
|
|
|
Leasing Activity and Expirations
During the first quarter, the Company executed new leases,
extensions or options on approximately 511,000 square feet of gross
leasable area throughout the existing portfolio.
As of March 31, 2023, the
Company's 2023 lease maturities represented 0.8% of annualized base
rents. The following table presents contractual lease expirations
within the Company's portfolio as of March
31, 2023, 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
|
|
|
|
|
|
|
|
|
|
|
2023
|
16
|
|
3,722
|
|
0.8 %
|
|
389
|
|
1.0 %
|
2024
|
47
|
|
12,556
|
|
2.6 %
|
|
1,485
|
|
3.7 %
|
2025
|
71
|
|
17,584
|
|
3.6 %
|
|
1,688
|
|
4.2 %
|
2026
|
115
|
|
25,074
|
|
5.1 %
|
|
2,656
|
|
6.6 %
|
2027
|
134
|
|
31,014
|
|
6.3 %
|
|
2,906
|
|
7.3 %
|
2028
|
157
|
|
39,842
|
|
8.1 %
|
|
3,686
|
|
9.2 %
|
2029
|
164
|
|
47,324
|
|
9.6 %
|
|
4,536
|
|
11.3 %
|
2030
|
255
|
|
52,457
|
|
10.7 %
|
|
4,001
|
|
10.0 %
|
2031
|
170
|
|
39,571
|
|
8.0 %
|
|
2,901
|
|
7.2 %
|
2032
|
205
|
|
40,163
|
|
8.2 %
|
|
3,155
|
|
7.9 %
|
Thereafter
|
729
|
|
182,764
|
|
37.0 %
|
|
12,638
|
|
31.6 %
|
Total
Portfolio
|
2,063
|
|
$492,071
|
|
100.0 %
|
|
40,041
|
|
100.0 %
|
The contractual lease expirations presented above exclude the
effect of replacement tenant leases that had been executed as of
March 31, 2023 but that had not yet
commenced. 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 March 31,
2023, computed on a straight-line basis. Annualized Base
Rent is not, and is not intended to be, a presentation in
accordance with generally accepted accounting principles ("GAAP").
The Company believes annualized contractual minimum rent is useful
to management, investors, and other interested parties in analyzing
concentrations and leasing activity.
Top Tenants
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 March 31,
2023:
Tenant
|
|
Annualized
Base Rent(1)
|
|
Percent
of
Annualized Base
Rent
|
|
|
|
|
|
Walmart
|
|
$32,638
|
|
6.6 %
|
Dollar
General
|
|
23,750
|
|
4.8 %
|
Tractor
Supply
|
|
21,809
|
|
4.4 %
|
Best Buy
|
|
19,515
|
|
4.0 %
|
Kroger
|
|
16,315
|
|
3.3 %
|
Dollar Tree
|
|
15,885
|
|
3.2 %
|
TJX
Companies
|
|
14,377
|
|
2.9 %
|
O'Reilly Auto
Parts
|
|
14,315
|
|
2.9 %
|
CVS
|
|
14,118
|
|
2.9 %
|
Hobby Lobby
|
|
12,495
|
|
2.5 %
|
Lowe's
|
|
12,210
|
|
2.5 %
|
Burlington
|
|
11,408
|
|
2.3 %
|
Sherwin-Williams
|
|
10,850
|
|
2.2 %
|
Sunbelt
Rentals
|
|
10,492
|
|
2.1 %
|
Wawa
|
|
9,668
|
|
2.0 %
|
Home Depot
|
|
8,880
|
|
1.8 %
|
TBC
Corporation
|
|
8,609
|
|
1.7 %
|
Gerber
Collision
|
|
8,540
|
|
1.7 %
|
AutoZone
|
|
7,747
|
|
1.6 %
|
Goodyear
|
|
7,522
|
|
1.5 %
|
Other(2)
|
|
210,928
|
|
43.1 %
|
Total
Portfolio
|
|
$492,071
|
|
100.0 %
|
Annualized Base Rent is in thousands; any differences are the
result of rounding.
(1) Refer to footnote 1 on page 4 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 all the
Company's retail sectors as of March 31,
2023:
Sector
|
|
Annualized
Base Rent(1)
|
|
Percent of
Annualized
Base
Rent
|
|
|
|
|
|
Grocery
Stores
|
|
$51,743
|
|
10.5 %
|
Home
Improvement
|
|
$45,176
|
|
9.2 %
|
Tire and Auto
Service
|
|
$43,134
|
|
8.8 %
|
Dollar
Stores
|
|
$38,170
|
|
7.8 %
|
Convenience
Stores
|
|
$36,032
|
|
7.3 %
|
General
Merchandise
|
|
$31,092
|
|
6.3 %
|
Off-Price
Retail
|
|
$28,944
|
|
5.9 %
|
Auto Parts
|
|
$27,992
|
|
5.7 %
|
Farm and Rural
Supply
|
|
$23,537
|
|
4.8 %
|
Consumer
Electronics
|
|
$21,724
|
|
4.4 %
|
Pharmacy
|
|
$20,853
|
|
4.2 %
|
Crafts and
Novelties
|
|
$14,773
|
|
3.0 %
|
Discount
Stores
|
|
$11,842
|
|
2.4 %
|
Equipment
Rental
|
|
$10,818
|
|
2.2 %
|
Warehouse
Clubs
|
|
$10,197
|
|
2.1 %
|
Health
Services
|
|
$9,659
|
|
2.0 %
|
Health and
Fitness
|
|
$8,083
|
|
1.6 %
|
Restaurants - Quick
Service
|
|
$7,931
|
|
1.6 %
|
Dealerships
|
|
$6,506
|
|
1.3 %
|
Specialty
Retail
|
|
$6,501
|
|
1.3 %
|
Restaurants - Casual
Dining
|
|
$5,243
|
|
1.1 %
|
Sporting
Goods
|
|
$4,939
|
|
1.0 %
|
Home
Furnishings
|
|
$4,898
|
|
1.0 %
|
Financial
Services
|
|
$4,618
|
|
0.9 %
|
Theaters
|
|
$3,848
|
|
0.8 %
|
Pet
Supplies
|
|
$3,402
|
|
0.7 %
|
Beauty and
Cosmetics
|
|
$2,338
|
|
0.5 %
|
Entertainment
Retail
|
|
$2,323
|
|
0.5 %
|
Shoes
|
|
$2,206
|
|
0.4 %
|
Apparel
|
|
$1,574
|
|
0.3 %
|
Miscellaneous
|
|
$1,180
|
|
0.2 %
|
Office
Supplies
|
|
$795
|
|
0.2 %
|
Total
Portfolio
|
|
$492,071
|
|
100.0 %
|
Annualized Base Rent is in thousands; any differences
are the result of rounding.
(1) Refer to footnote 1 on page 4 for the
Company's definition 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 March 31,
2023:
State
|
|
Annualized
Base Rent(1)
|
|
Percent
of
Annualized
Base Rent
|
|
|
|
|
|
|
|
Texas
|
|
$36,244
|
|
7.4 %
|
|
Florida
|
|
27,743
|
|
5.6 %
|
|
Ohio
|
|
27,705
|
|
5.6 %
|
|
Michigan
|
|
27,173
|
|
5.5 %
|
|
Illinois
|
|
26,435
|
|
5.4 %
|
|
North
Carolina
|
|
25,100
|
|
5.1 %
|
|
Pennsylvania
|
|
23,909
|
|
4.9 %
|
|
New Jersey
|
|
22,203
|
|
4.5 %
|
|
California
|
|
21,371
|
|
4.3 %
|
|
New York
|
|
19,231
|
|
3.9 %
|
|
Georgia
|
|
17,837
|
|
3.6 %
|
|
Wisconsin
|
|
14,871
|
|
3.0 %
|
|
Virginia
|
|
14,565
|
|
3.0 %
|
|
Missouri
|
|
12,770
|
|
2.6 %
|
|
Connecticut
|
|
12,618
|
|
2.6 %
|
|
Other(2)
|
|
162,296
|
|
33.0 %
|
|
Total
Portfolio
|
|
$492,071
|
|
100.0 %
|
Annualized Base Rent is in thousands; any differences
are the result of rounding.
(1) Refer to footnote 1 on page 4 for the Company's
definition of Annualized Base Rent.
(2) Includes states generating less than 2.5% of
Annualized Base Rent.
Capital Markets, Liquidity and Balance Sheet
Capital Markets
During the first quarter, the Company settled approximately 2.9
million shares under existing forward sale agreements for net
proceeds of $195.2 million. At
quarter end, the Company had approximately 5.3 million shares
remaining to be settled under existing forward sale agreements,
which are anticipated to raise net proceeds of $362.1 million after deducting fees and expenses
and making certain other adjustments as provided in the equity
distribution agreements.
The following table presents the Company's outstanding forward
equity offerings as of March 31,
2023:
Forward
Equity
Offerings
|
Shares
Sold
|
|
Shares
Settled
|
|
Shares
Remaining
|
|
Net
Proceeds
Received
|
|
Anticipated
Net
Proceeds
Remaining
|
|
|
|
|
|
|
|
|
|
|
September 2022 Forward
Offering
|
5,750,000
|
|
4,545,000
|
|
1,205,000
|
|
$301,350,417
|
|
$79,582,056
|
Q4 2022 ATM Forward
Offerings
|
4,104,641
|
|
-
|
|
4,104,641
|
|
$
-
|
|
$282,543,245
|
Total Forward Equity
Offerings
|
9,854,641
|
|
4,545,000
|
|
5,309,641
|
|
$301,350,417
|
|
$362,125,301
|
Liquidity
As of March 31, 2023, the Company
had total liquidity of approximately $1.2
billion, which includes $804.0
million of availability under its revolving credit facility,
$362.1 million of outstanding forward
equity, and $12.9 million of cash on
hand.
Balance Sheet
As of March 31, 2023, the
Company's net debt to recurring EBITDA was 4.5 times. The Company's
proforma net debt to recurring EBITDA was 3.7 times when deducting
the $362.1 million of anticipated net
proceeds from the outstanding forward equity offerings from the
Company's net debt of $2.0 billion as
of March 31, 2023. The Company's
fixed charge coverage ratio was 5.1 times as of the end of the
first quarter.
The Company's total debt to enterprise value was 23.8% as of
March 31, 2023. Enterprise value is
calculated as the sum of net debt, the liquidation value of the
Company's preferred stock, and the market value of the Company's
outstanding shares of common stock, assuming conversion of Agree
Limited Partnership (the "Operating Partnership" or "OP") common
units into common stock of the Company.
For the three months ended March 31,
2023, the Company's fully diluted weighted-average shares
outstanding were 90.5 million. The basic weighted-average shares
outstanding for the three months ended March
31, 2023 were 90.0 million.
For the three months ended March 31,
2023, the Company's fully diluted weighted-average shares
and units outstanding were 90.9 million. The basic weighted-average
shares and units outstanding for the three months ended
March 31, 2023 were 90.4 million.
The Company's assets are held by, and its operations are
conducted through, the Operating Partnership, of which the Company
is the sole general partner. As of March 31,
2023, there were 347,619 Operating Partnership common units
outstanding and the Company held a 99.6% common interest in the
Operating Partnership.
Conference Call/Webcast
The Company will host its quarterly analyst and investor
conference call on Friday, May 5,
2023 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 Investors section of the
website. A replay of the conference call webcast will be
archived and available online through the Investors section of
www.agreerealty.com.
About Agree Realty Corporation
Agree Realty Corporation is a publicly traded real estate
investment trust that is
RETHINKING RETAIL through the acquisition
and development of properties net leased to industry-leading,
omni-channel retail tenants. As of March 31, 2023, the Company owned and operated a
portfolio of 1,908 properties, located in all 48 continental states
and containing approximately 40.1 million square feet of gross
leasable area. The Company's common stock is listed on the
New York Stock Exchange under the symbol "ADC". For
additional information on the Company and
RETHINKING RETAIL, please visit
www.agreerealty.com.
Forward-Looking Statements
This press release contains forward-looking
statements, including statements about projected financial
and operating results, within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities
Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Company intends such
forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995 and includes this
statement for purposes of complying with these safe harbor
provisions. 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,"
"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 or other forward-looking information. Although
these forward-looking statements are based on good faith beliefs,
reasonable assumptions and the Company's best judgment reflecting
current information, you should not rely on forward-looking
statements since they involve known and unknown risks,
uncertainties and other factors which are, in some cases, beyond
the Company's control and which could materially affect the
Company's results of operations, financial condition, cash flows,
performance or future achievements or events. Currently, some of
the most significant factors, include the potential adverse effect
of ongoing worldwide economic uncertainties, the current pandemic
of the novel coronavirus, or COVID-19, and increased inflation and
interest rates on the financial condition, results of operations,
cash flows and performance of the Company and its tenants, the real
estate market and the global economy and financial markets. The
extent to which these conditions will impact the Company and its
tenants will depend on future developments, which are highly
uncertain and cannot be predicted with confidence. Moreover,
investors are cautioned to interpret many of the risks identified
in the risk factors discussed in the Company's Annual Report on
Form 10-K and subsequent quarterly reports filed with the
Securities and Exchange Commission (the "SEC"), as well as the
risks set forth below, as being heightened as a result of the
ongoing and numerous adverse impacts of the macroeconomic
environment and COVID-19. Additional important factors, among
others, that may cause the Company's actual results to vary include
the general deterioration in national economic conditions,
weakening of real estate markets, decreases in the availability of
credit, increases in interest rates, adverse changes in the retail
industry, the Company's continuing ability to qualify as a REIT and
other factors discussed in the Company's reports filed with the
SEC. The forward-looking statements included in this press release
are made as of the date hereof. Unless legally
required, the Company disclaims any obligation to update any
forward-looking statements, whether as a result of new information,
future events, changes in the Company's expectations or assumptions
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
Investor Relations section of the Company's website at
www.agreerealty.com.
The Company defines the "weighted-average capitalization
rate" for acquisitions and dispositions as the sum of contractual
fixed annual rents computed on a straight-line basis over the
primary lease terms and anticipated annual net tenant recoveries,
divided by the purchase and sale prices for occupied
properties.
References to "Core FFO" and "AFFO" in this press release are
representative of Core FFO attributable to OP common unitholders
and AFFO attributable to OP common unitholders. Detailed
calculations for these measures are shown in the Reconciliation of
Net Income to FFO, Core FFO and Adjusted FFO table as "Core Funds
From Operations – OP Common Unitholders" and "Adjusted Funds from
Operations – OP Common Unitholders".
|
|
|
|
Agree Realty
Corporation
|
Consolidated Balance
Sheet
|
($ in thousands,
except share and per-share data)
|
(Unaudited)
|
|
March 31,
2023
|
|
December 31,
2022
|
Assets:
|
|
|
|
Real Estate
Investments:
|
|
|
|
Land
|
$
2,005,606
|
|
$
1,941,599
|
Buildings
|
4,281,164
|
|
4,054,679
|
Accumulated
depreciation
|
(347,778)
|
|
(321,142)
|
Property under
development
|
73,123
|
|
65,932
|
Net real estate
investments
|
6,012,115
|
|
5,741,068
|
Cash and cash
equivalents
|
11,809
|
|
27,763
|
Cash held in
escrows
|
1,131
|
|
1,146
|
Accounts receivable -
tenants, net
|
71,089
|
|
65,841
|
Lease Intangibles, net
of accumulated amortization of $286,748 and $263,011
at March 31, 2023 and December 31, 2022, respectively
|
803,654
|
|
799,448
|
Other assets,
net
|
86,629
|
|
77,923
|
Total
Assets
|
$
6,986,427
|
|
$
6,713,189
|
|
|
|
|
Liabilities:
|
|
|
|
Mortgage notes payable,
net
|
$
47,842
|
|
$
47,971
|
Senior unsecured notes,
net
|
1,792,611
|
|
1,792,047
|
Unsecured revolving
credit facility
|
196,000
|
|
100,000
|
Dividends and
distributions payable
|
23,071
|
|
22,345
|
Accounts payable,
accrued expenses and other liabilities
|
92,733
|
|
83,722
|
Lease intangibles, net
of accumulated amortization of $37,494 and $35,992 at
March 31, 2023 and December 31, 2022, respectively
|
36,326
|
|
36,714
|
Total
Liabilities
|
$
2,188,583
|
|
$
2,082,799
|
|
|
|
|
Equity:
|
|
|
|
Preferred Stock, $.0001
par value per share, 4,000,000 shares authorized, 7,000
shares Series A outstanding, at stated liquidation value of $25,000
per share, at
March 31, 2022 and December 31, 2021
|
175,000
|
|
175,000
|
Common stock, $.0001
par value, 180,000,000 shares authorized, 93,198,079
and 90,173,424 shares issued and outstanding at March 31, 2023
and
December 31, 2022, respectively
|
9
|
|
9
|
Additional
paid-in-capital
|
4,852,927
|
|
4,658,570
|
Dividends in excess of
net income
|
(254,316)
|
|
(228,132)
|
Accumulated other
comprehensive income (loss)
|
22,924
|
|
23,551
|
Total Equity - Agree
Realty Corporation
|
$
4,796,544
|
|
$
4,628,998
|
Non-controlling
interest
|
1,300
|
|
1,392
|
Total
Equity
|
$
4,797,844
|
|
$
4,630,390
|
Total Liabilities
and Equity
|
$
6,986,427
|
|
$
6,713,189
|
|
|
|
|
|
|
|
|
|
|
|
|
Agree Realty
Corporation
|
Consolidated
Statements of Operations and Comprehensive Income
|
($ in thousands,
except share and per share-data)
|
(Unaudited)
|
|
|
|
|
|
Three months ended
March 31,
|
|
2023
|
|
2022
|
Revenues
|
|
|
|
Rental
Income
|
$ 126,609
|
|
$
98,312
|
Other
|
9
|
|
30
|
Total
Revenues
|
$ 126,618
|
|
$
98,342
|
|
|
|
|
Operating
Expenses
|
|
|
|
Real estate
taxes
|
$
9,432
|
|
$
7,611
|
Property operating
expenses
|
6,782
|
|
4,477
|
Land lease
expense
|
430
|
|
402
|
General and
administrative
|
8,821
|
|
7,622
|
Depreciation and
amortization
|
40,646
|
|
28,561
|
Provision for
impairment
|
-
|
|
1,015
|
Total Operating
Expenses
|
$
66,111
|
|
$
49,688
|
|
|
|
|
Gain (loss) on sale of
assets, net
|
-
|
|
2,310
|
Gain (loss) on
involuntary conversion, net
|
-
|
|
(25)
|
|
|
|
|
Income from
Operations
|
$
60,507
|
|
$
50,939
|
|
|
|
|
Other (Expense)
Income
|
|
|
|
Interest expense,
net
|
$ (17,998)
|
|
$ (13,931)
|
Income tax (expense)
benefit
|
(783)
|
|
(719)
|
Other (expense)
income
|
48
|
|
-
|
|
|
|
|
Net
Income
|
$
41,774
|
|
$
36,289
|
|
|
|
|
Less net income
attributable to non-controlling interest
|
160
|
|
176
|
|
|
|
|
Net Income
Attributable to Agree Realty Corporation
|
$
41,614
|
|
$
36,113
|
|
|
|
|
Less Series A Preferred
Stock Dividends
|
1,859
|
|
1,859
|
|
|
|
|
Net Income
Attributable to Common Stockholders
|
$
39,755
|
|
$
34,254
|
|
|
|
|
Net Income Per Share
Attributable to Common Stockholders
|
|
|
|
Basic
|
$
0.44
|
|
$
0.48
|
Diluted
|
$
0.44
|
|
$
0.48
|
|
|
|
|
|
|
|
|
Other Comprehensive
Income
|
|
|
|
Net Income
|
$
41,774
|
|
$
36,289
|
Amortization of
interest rate swaps
|
(629)
|
|
82
|
Change in fair value
and settlement of interest rate swaps
|
-
|
|
20,581
|
Total Comprehensive
Income (Loss)
|
41,145
|
|
56,952
|
Less comprehensive
income attributable to non-controlling interest
|
158
|
|
276
|
Comprehensive Income
Attributable to Agree Realty Corporation
|
$
40,987
|
|
$
56,676
|
|
|
|
|
Weighted Average Number
of Common Shares Outstanding - Basic
|
90,028,255
|
|
71,228,930
|
Weighted Average Number
of Common Shares Outstanding - Diluted
|
90,548,172
|
|
71,336,103
|
|
|
|
|
|
|
|
|
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
March 31,
|
|
2023
|
|
2022
|
|
|
|
|
Net Income
|
$
41,774
|
|
$
36,289
|
Less Series A Preferred
Stock Dividends
|
1,859
|
|
1,859
|
Net Income attributable
to OP Common Unitholders
|
39,915
|
|
34,430
|
Depreciation of rental
real estate assets
|
26,584
|
|
19,470
|
Amortization of lease
intangibles - in-place leases and leasing costs
|
13,770
|
|
8,924
|
Provision for
impairment
|
-
|
|
1,015
|
(Gain) loss on sale or
involuntary conversion of assets, net
|
-
|
|
(2,285)
|
Funds from Operations -
OP Common Unitholders
|
$
80,269
|
|
$
61,554
|
Amortization of above
(below) market lease
intangibles, net and assumed mortgage debt discount, net
|
8,695
|
|
8,178
|
Core Funds from
Operations - OP Common Unitholders
|
$
88,964
|
|
$
69,732
|
Straight-line accrued
rent
|
(3,039)
|
|
(3,135)
|
Stock based
compensation expense
|
1,831
|
|
1,635
|
Amortization of
financing costs and original issue discounts
|
1,029
|
|
788
|
Non-real estate
depreciation
|
292
|
|
167
|
Adjusted Funds from
Operations - OP Common Unitholders
|
$
89,077
|
|
$
69,187
|
|
|
|
|
Funds from Operations
Per Common Share and OP Unit - Basic
|
$
0.89
|
|
$
0.86
|
Funds from Operations
Per Common Share and OP Unit - Diluted
|
$
0.88
|
|
$
0.86
|
|
|
|
|
Core Funds from
Operations Per Common Share and OP Unit - Basic
|
$
0.98
|
|
$
0.97
|
Core Funds from
Operations Per Common Share and OP Unit - Diluted
|
$
0.98
|
|
$
0.97
|
|
|
|
|
Adjusted Funds from
Operations Per Common Share and OP Unit - Basic
|
$
0.99
|
|
$
0.97
|
Adjusted Funds from
Operations Per Common Share and OP Unit - Diluted
|
$
0.98
|
|
$
0.97
|
|
|
|
|
Weighted Average Number
of Common Shares and OP Units Outstanding - Basic
|
90,375,874
|
|
71,576,549
|
Weighted Average Number
of Common Shares and OP Units Outstanding - Diluted
|
90,895,791
|
|
71,683,722
|
|
|
|
|
|
|
|
|
Additional
supplemental disclosure
|
|
|
|
Scheduled principal
repayments
|
$
221
|
|
$
208
|
Capitalized
interest
|
539
|
|
112
|
Capitalized building
improvements
|
702
|
|
1,100
|
|
|
|
|
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 (i)
noncash amortization of acquisition purchase price related to
above- and below- market lease intangibles and discount on assumed
debt and (ii) certain infrequently occurring items that reduce or
increase net income in accordance with GAAP. 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 items that reduce or increase net
income computed 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 its 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
March 31,
|
|
|
|
|
|
|
|
2023
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
$
41,774
|
Interest expense,
net
|
|
|
|
|
|
|
17,998
|
Income tax
expense
|
|
|
|
|
|
|
783
|
Depreciation of rental
real estate assets
|
|
|
|
|
|
|
26,584
|
Amortization of lease
intangibles - in-place leases and leasing costs
|
|
|
|
|
|
|
13,770
|
Non-real estate
depreciation
|
|
|
|
|
|
|
292
|
EBITDAre
|
|
|
|
|
|
|
$
101,201
|
|
|
|
|
|
|
|
|
Run-Rate Impact of
Investment, Disposition and Leasing Activity
|
|
|
|
|
|
|
$
4,147
|
Amortization of above
(below) market lease intangibles, net
|
|
|
|
|
|
|
8,611
|
Recurring
EBITDA
|
|
|
|
|
|
|
$
113,959
|
|
|
|
|
|
|
|
|
Annualized Recurring
EBITDA
|
|
|
|
|
|
|
$
455,836
|
|
|
|
|
|
|
|
|
Total Debt
|
|
|
|
|
|
|
$
2,056,173
|
Cash, cash equivalents
and cash held in escrows
|
|
|
|
|
|
|
(12,940)
|
Net Debt
|
|
|
|
|
|
|
$
2,043,233
|
|
|
|
|
|
|
|
|
Net Debt to
Recurring EBITDA
|
|
|
|
|
|
|
4.5x
|
|
|
|
|
|
|
|
|
Net Debt
|
|
|
|
|
|
|
$
2,043,233
|
Anticipated Net
Proceeds from September 2022 Forward Offering
|
|
|
|
|
|
|
(79,582)
|
Anticipated Net
Proceeds from ATM Forward Offerings
|
|
|
|
|
|
|
(282,543)
|
Proforma Net
Debt
|
|
|
|
|
|
|
$
1,681,108
|
|
|
|
|
|
|
|
|
Proforma Net Debt to
Recurring EBITDA
|
|
|
|
|
|
|
3.7x
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
|
|
EBITDAre
EBITDAre is 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 EBITDAre 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
EBITDAre a 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 EBITDAre may not be comparable to EBITDAre reported
by other REITs that interpret the Nareit definition differently
than the Company.
|
|
Recurring EBITDA
The Company defines Recurring EBITDA as EBITDAre with 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 is used by
management as a measure of leverage and may be useful to investors
in understanding the Company's ability to service its debt, as well
as assess the borrowing capacity of the Company. Our ratio of
net debt to Recurring EBITDA is calculated by taking annualized
Recurring EBITDA and dividing it by our net debt per the
consolidated balance sheet.
|
|
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. The Company presents Net Debt on both an actual and
proforma basis, assuming the net proceeds of the Forward Offerings
(see below) are used to pay down debt. The Company believes the
proforma measure may be useful to investors in understanding the
potential effect of the Forward Offerings on the Company's capital
structure, its future borrowing capacity, and its ability to
service its debt.
|
|
Forward Offerings
In September 2022, the Company commenced an underwritten public
offering of 5,750,000 shares of common stock, including the full
exercise of the underwriters' option to purchase additional shares,
in connection with forward sale agreements. To date, the Company
has settled 4,545,000 shares and received net proceeds of
approximately $301.4 million. The 1,205,000 shares remaining under
the September 2022 Forward Offering are anticipated to raise net
proceeds of approximately $79.6 million based on the applicable
forward sale price as of March 31, 2023. The Company is
contractually obligated to settle the offering by September 2023.
In addition, the Company has 4,104,641 shares remaining to be
settled under the ATM Forward Offerings. Upon settlement, the
offerings are anticipated to raise net proceeds of approximately
$282.5 million based on the applicable forward sale prices as of
March 31, 2023. The applicable forward sale price varies depending
on the offering. The Company is contractually obligated to settle
the ATM Forward Offerings by certain dates between November 2023
and December 2023.
|
Agree Realty
Corporation
|
Rental
Income
|
($ in thousands,
except share and per share-data)
|
(Unaudited)
|
|
|
|
|
|
Three months
ended
March 31,
|
|
2023
|
|
2022
|
Rental Income
Source(1)
|
|
|
|
Minimum
rents(2)
|
$ 115,790
|
|
$
91,441
|
Percentage
rents(2)
|
1,246
|
|
635
|
Operating cost
reimbursement(2)
|
15,145
|
|
11,279
|
Straight-line rental
adjustments(3)
|
3,039
|
|
3,135
|
Amortization of (above)
below market lease intangibles(4)
|
(8,611)
|
|
(8,178)
|
Total Rental
Income
|
$ 126,609
|
|
$
98,312
|
(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.
|
|
(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.
|
|
(3) Represents
adjustments to recognize minimum rents on a straight-line basis,
consistent with the requirements of FASB ASC 842.
|
|
(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.
|
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SOURCE Agree Realty Corporation