Agree Realty Corporation Reports Fourth Quarter And Full Year 2017 Results

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BLOOMFIELD HILLS, Mich., Feb. 22, 2018 /PRNewswire/ -- Agree Realty Corporation ADC (the "Company") today announced results for the quarter and full year ended December 31, 2017.  All per share amounts included herein are on a diluted per common share basis unless otherwise stated.

Full Year 2017 Financial and Operating Highlights:

  • Invested $393.7 million in 90 retail net lease properties
  • Commenced seven development and Partner Capital Solutions ("PCS") projects
  • Increased rental revenue 25.0% to $105.3 million
  • Net Income per share attributable to the Company increased 5.9% to $2.08
  • Net Income attributable to the Company increased 28.8% to $58.1 million
  • Increased Funds from Operations ("FFO") per share 7.1% to $2.72
  • Increased FFO 28.9% to $76.3 million
  • Increased Adjusted Funds from Operations ("AFFO") per share 7.8% to $2.70
  • Increased AFFO 29.7% to $75.7 million
  • Declared dividends of $2.025 per share, an increase of 5.5% over the dividends per share declared in 2016
  • Raised $229.1 million in gross proceeds from the issuance of 4.8 million common shares
  • Sector-leading balance sheet at 4.3 times net debt to recurring EBITDA

Fourth Quarter 2017 Financial and Operating Highlights:

  • Invested $113.6 million in 25 retail net lease properties
  • Commenced two development and PCS projects
  • Increased rental revenue 22.5% to $28.6 million
  • Net Income per share attributable to the Company increased 10.6% to $0.55
  • Net Income attributable to the Company increased 29.5% to $16.5 million
  • Increased FFO per share 10.9% to $0.71
  • Increased FFO 28.7% to $21.3 million
  • Increased AFFO per share 11.4% to $0.70
  • Increased AFFO 29.2% to $20.9 million
  • Declared a quarterly dividend of $0.520 per share, a 5.1% increase over the dividend per share declared in the fourth quarter of 2016
  • Raised $87.1 million in gross proceeds from the issuance of 1.8 million common shares

Financial Results

Total Rental Revenue

Total rental revenue, which includes minimum rents and percentage rents, for the three months ended December 31, 2017 increased 22.5% to $28.6 million, compared to total rental revenue of $23.3 million for the comparable period in 2016.

Total rental revenue for the year ended December 31, 2017 increased 25.0% to $105.3 million, compared to total rental revenue of $84.2 million for the comparable period in 2016.

Net Income

Net Income attributable to the Company for the three months ended December 31, 2017 increased 29.5% to $16.5 million, compared to $12.7 million for the comparable period in 2016. Net Income per share attributable to the Company for the three months ended December 31, 2017 increased 10.6% to $0.55, compared to $0.50 per share for the comparable period in 2016.

Net Income attributable to the Company for the year ended December 31, 2017 increased 28.8% to $58.1 million, compared to $45.1 million for the comparable period in 2016.  Net Income per share attributable to the Company for the year ended December 31, 2017 increased 5.9% to $2.08, compared to $1.97 per share for the comparable period in 2016.

Funds from Operations

FFO for the three months ended December 31, 2017 increased 28.7% to $21.3 million, compared to FFO of $16.6 million for the comparable period in 2016.  FFO per share for the three months ended December 31, 2017 increased 10.9% to $0.71, compared to FFO per share of $0.64 for the comparable period in 2016.

FFO for the year ended December 31, 2017 increased 28.9% to $76.3 million, compared to FFO of $59.2 million for the comparable period in 2016.  FFO per share for the year ended December 31, 2017 increased 7.1% to $2.72, compared to FFO per share of $2.54 for the comparable period in 2016.

Adjusted Funds from Operations

AFFO for the three months ended December 31, 2017 increased 29.2% to $20.9 million, compared to AFFO of $16.2 million for the comparable period in 2016.  AFFO per share for the three months ended December 31, 2017 increased 11.4% to $0.70, compared to AFFO per share of $0.63 for the comparable period in 2016.

AFFO for the year ended December 31, 2017 increased 29.7% to $75.7 million, compared to AFFO of $58.4 million for the comparable period in 2016.  AFFO per share for the year ended December 31, 2017 increased 7.8% to $2.70, compared to AFFO per share of $2.51 for the comparable period in 2016.

Dividend

The Company paid a cash dividend of $0.520 per share on January 3, 2018 to stockholders of record on December 20, 2017, a 5.1% increase over the $0.495 quarterly dividend declared in the fourth quarter of 2016.  The quarterly dividend represents payout ratios of approximately 73.1% of FFO per share and 74.5% of AFFO per share, respectively.

For the year ended December 31, 2017, the Company declared dividends of $2.025 per share, a 5.5% increase over the dividends of $1.92 per share declared in 2016. The annual dividend represents payout ratios of approximately 74.5% of FFO per share and 75.0% of AFFO per share, respectively.

CEO Comments

"We are extremely pleased with our performance in 2017 as we continued to execute across all phases of our business, further strengthening our portfolio with a number of industry-leading tenants," said Joey Agree, President and Chief Executive Officer of Agree Realty Corporation. "Our differentiated investment strategy and fortified balance sheet position us to continue delivering strong results in the upcoming year."

Portfolio Update                                 

As of December 31, 2017, the Company's portfolio consisted of 436 properties located in 43 states and totaled 8.7 million square feet of gross leasable space.  Properties ground leased to tenants accounted for 7.9% of annualized base rents.

The portfolio was approximately 99.7% leased, had a weighted-average remaining lease term of approximately 10.2 years, and generated approximately 43.9% of annualized base rents from investment grade retail tenants.

The following table provides a summary of the Company's portfolio as of December 31, 2017:

Property Type

 Number of

Properties


Annualized
Base Rent(1)


 Percent of
Annualized
Base Rent


Percent
Investment
Grade(2)


 Weighted
Average
Lease Term











Retail Net Lease

392


$108,066


90.6%


40.6%


10.2 yrs

Retail Net Lease Ground Leases

41


9,403


7.9%


84.8%


11.9 yrs

Total Retail Net Lease

433


$117,469


98.5%


44.2%


10.3 yrs

Total Portfolio

436


$119,209


100.0%


43.9%


10.2 yrs




Annualized base rent is in thousands; any differences are the result of rounding.

(1)

Represents annualized straight-line rent as of December 31, 2017.

(2)

Reflects tenants, or parent entities thereof, with investment grade credit ratings from S&P Global Ratings, Moody's Investor Service, Fitch Ratings or the National Association of Insurance Commissioners.

 

Acquisitions

Total acquisition volume for the fourth quarter of 2017 was approximately $98.1 million and included 18 assets net leased to notable retailers operating in the off-price retail, convenience stores, auto parts, tire and auto service, health and fitness, and crafts and novelty sectors.  The properties are located in 14 states and leased to tenants operating in 10 retail sectors.  The properties were acquired at a weighted-average capitalization rate of 7.1% and had a weighted-average remaining lease term of approximately 8.8 years.

For the year ended December 31, 2017, total acquisition volume was approximately $336.9 million and included 79 high-quality retail net lease assets.  The properties are in 27 states and leased to 49 diverse tenants who operate in 22 retail sectors.  The properties were acquired at a weighted-average capitalization rate of 7.4% and had a weighted-average remaining lease term of approximately 11.1 years.

Dispositions

During the fourth quarter, the Company sold eight properties for gross proceeds of approximately $15.4 million. The dispositions were completed at a weighted-average capitalization rate of 6.2%. For the year ended December 31, 2017, the Company sold 15 assets for total gross proceeds of $45.8 million. The dispositions were completed at a weighted-average capitalization rate of 6.9%.

Development and Partner Capital Solutions

The Company commenced two new development and PCS projects during the fourth quarter, with total anticipated costs of approximately $5.5 million. The projects consist of the Company's third and fourth development projects with Mister Car Wash, located in Orlando and Tavares, Florida.

Construction continued during the fourth quarter on five projects with total anticipated costs of approximately $35.8 million. The projects include the Company's first project with Art Van Furniture in Canton, Michigan; the Company's first two development projects with Mister Car Wash; one Burger King development in North Ridgeville, Ohio; and the Company's third project with Camping World in Grand Rapids, Michigan.

For the year ended December 31, 2017, the Company had 11 development or PCS projects completed or under construction. Anticipated total costs are approximately $62.7 million and include the following completed or commenced projects:

Tenant


Location


Lease Structure


Lease Term


Actual or
Anticipated Rent
Commencement


Status












Camping World


Tyler, TX


Build-to-Suit


20 Years


Q1 2017


Completed

Burger King(1)


Heber, UT


Build-to-Suit


20 Years


Q1 2017


Completed

Camping World


Georgetown, KY


Build-to-Suit


20 Years


Q2 2017


Completed

Orchard Supply


Boynton Beach, FL


Build-to-Suit


15 Years


Q3 2017


Completed

Mister Car Wash


Urbandale, IA


Build-to-Suit


20 years


Q1 2018


Under Construction

Mister Car Wash


Bernalillo, NM


Build-to-Suit


20 years


Q1 2018


Under Construction

Art Van Furniture


Canton, MI


Build-to-Suit


20 years


Q1 2018


Under Construction

Burger King(2)


North Ridgeville, OH


Build-to-Suit


20 years


Q1 2018


Under Construction

Camping World


Grand Rapids, MI


Build-to-Suit


20 years


Q2 2018


Under Construction

Mister Car Wash


Orlando, FL


Build-to-Suit


20 years


Q3 2018


Under Construction

Mister Car Wash


Tavares, FL


Build-to-Suit


20 years


Q3 2018


Under Construction



(1)

Franchise restaurant operated by Meridian Restaurants Unlimited, LC.

(2)

Franchise restaurant operated by TOMS King, LLC.

 

Leasing Activity and Expirations

During the fourth quarter, the Company executed new leases, extensions or options on approximately 203,000 square feet of gross leasable area throughout the existing portfolio. For the year ended December 31, 2017, the Company executed new leases, extensions or options on approximately 683,000 square feet of gross leasable area throughout the existing portfolio.

At year end, the Company's 2018 lease maturities represented less than 1.0% of annualized base rent. The following table presents contractual lease expirations within the Company's portfolio as of December 31, 2017, 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











2018

9


1,130


0.9%


255


2.9%

2019

12


2,681


2.2%


138


1.6%

2020

18


3,206


2.7%


237


2.7%

2021

29


5,905


5.0%


375


4.3%

2022

24


4,284


3.6%


394


4.6%

2023

39


6,804


5.7%


659


7.6%

2024

38


11,037


9.3%


1,069


12.3%

2025

38


8,915


7.5%


626


7.2%

2026

47


7,155


6.0%


682


7.9%

2027

38


9,716


8.2%


814


9.4%

Thereafter

206


58,376


48.9%


3,414


39.5%

Total Portfolio

498


$119,209


100.0%


8,663


100.0%




Annualized base rent and gross leasable area (square feet) are in thousands; any differences are the result of rounding.

(1)

Represents annualized straight-line rent as of December 31, 2017.

 

Top Tenants

The Company added TJX Companies, AutoZone, Dave & Buster's, PetSmart and Michaels to its top tenants in 2017. 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 December 31, 2017:

Tenant


Annualized
Base Rent(1)


 Percent of Annualized
Base Rent






Walgreens


$9,215


7.7%

Walmart


4,224


3.5%

LA Fitness


4,224


3.5%

Lowe's


4,215


3.5%

TJX Companies


3,652


3.1%

CVS


3,004


2.5%

Wawa


2,664


2.2%

Mister Car Wash


2,580


2.2%

Smart & Final


2,475


2.1%

Dollar General


2,415


2.0%

PetSmart


2,234


1.9%

Tractor Supply


2,179


1.8%

Hobby Lobby


2,176


1.8%

Michaels


2,072


1.7%

Dave & Buster's


2,058


1.7%

Academy Sports


1,982


1.7%

Dollar Tree


1,939


1.6%

AutoZone


1,909


1.6%

Rite Aid


1,886


1.6%

Other(2)


62,106


52.3%

Total Portfolio


$119,209


100.0%




Annualized base rent is in thousands; any differences are the result of rounding.

(1)

Represents annualized straight-line rent as of December 31, 2017.

(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 December 31, 2017:

Sector


Annualized
Base Rent(1)


 Percent of Annualized
Base Rent






Pharmacy


$14,694


12.3%

Grocery Stores


9,136


7.7%

Health & Fitness


6,938


5.8%

Tire & Auto Service


6,534


5.5%

Off-Price Retail


6,405


5.4%

Restaurants - Quick Service


6,120


5.1%

Home Improvement


5,551


4.7%

Convenience Stores


5,298


4.4%

General Merchandise


4,643


3.9%

Crafts and Novelties


4,539


3.8%

Auto Parts


4,370


3.7%

Specialty Retail


4,261


3.6%

Warehouse Clubs


3,749


3.1%

Farm and Rural Supply


3,361


2.8%

Sporting Goods


3,171


2.7%

Dollar Stores


3,145


2.6%

Home Furnishings


3,120


2.6%

Health Services


3,066


2.6%

Other(2)


21,108


17.7%

Total Portfolio


$119,209


100.0%




Annualized base rent is in thousands; any differences are the result of rounding.

(1)

Represents annualized straight-line rent as of December 31, 2017.

(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 December 31, 2017:

State


Annualized
Base Rent(1)


 Percent of Annualized
Base Rent






Michigan


$14,394


12.1%

Texas


10,112


8.5%

Florida


8,839


7.4%

Illinois


8,190


6.9%

Ohio


6,816


5.7%

Pennsylvania


4,646


3.9%

New Jersey


4,352


3.7%

Louisiana


3,853


3.2%

California


3,697


3.1%

Kentucky


3,640


3.1%

Missouri


3,387


2.8%

Mississippi


3,283


2.8%

Wisconsin


3,258


2.7%

Other(2)


40,742


34.1%

Total Portfolio


$119,209


100.0%




Annualized base rent is in thousands; any differences are the result of rounding.

(1)

Represents annualized straight-line rent as of December 31, 2017.

(2)

Includes states generating less than 2.5% of annualized base rent.

 

Capital Markets and Balance Sheet

Capital Markets

During 2017, the Company executed several capital markets transactions to fund strategic growth and maintain a fortified balance sheet:

  • During the three months ended December 31, 2017, the Company issued 1,776,766 shares of common stock through its at-the-market equity program ("ATM program") at an average price of $49.03, realizing gross proceeds of $87.1 million. During the year ended December 31, 2017, the Company issued a total of 2,368,359 shares of common stock through its ATM program at an average price of approximately $49.17, for total gross proceeds of $116.5 million.
  • In September 2017, the Company completed a private placement of $100.0 million principal amount of senior unsecured notes. The notes have a 12-year term, maturing on September 20, 2029, priced at a fixed interest rate of 4.19%. The all-in pricing represented 165 basis points above the 12-year interpolated U.S. Treasury yield curve at the time of pricing.
  • In June 2017, the Company completed a follow-on public offering of 2,415,000 shares of common stock, which included the underwriters' full exercise of their option to purchase additional shares. Total net proceeds were approximately $108.0 million after deducting the underwriting discount and offering expenses.

Balance Sheet

As of December 31, 2017, the Company's net debt to recurring EBITDA was 4.3 times and its fixed charge coverage ratio was 4.2 times. The Company's total debt to total enterprise value was 24.5%.  Total enterprise value is calculated as the sum of total 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 twelve months ended December 31, 2017, the Company's fully diluted weighted-average shares outstanding were 29.6 million and 27.7 million, respectively. The basic weighted-average shares outstanding for the three and twelve months ended December 31, 2017 were 29.5 million and 27.6 million, respectively.

For the three and twelve months ended December 31, 2017, the Company's fully diluted weighted-average shares and units outstanding were 30.0 million and 28.0 million, respectively. The basic weighted-average shares and units outstanding for the three and twelve months ended December 31, 2017 were 29.9 million and 28.0 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 December 31, 2017, there were 347,619 operating partnership units outstanding and the Company held a 98.8% interest in the operating partnership.

2018 Investment Guidance

The Company's outlook for acquisition volume in 2018, which assumes continued growth in economic activity, moderate interest rate growth, positive business trends and other significant assumptions, is between $250 and $300 million of high-quality retail net lease properties. The Company's disposition guidance for 2018 is between $25 million and $50 million.

Conference Call/Webcast

The Company will host its quarterly analyst and investor conference call on Friday, February 23, 2018 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 December 31, 2017, the Company owned and operated a portfolio of 436 properties, located in 43 states and containing approximately 8.7 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 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, 2017 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 February 22, 2018. 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)



December 31, 2017


December 31, 2016

Assets:




Real Estate Investments:




     Land  

$                405,457


$                309,687

     Buildings

868,396


703,506

     Accumulated depreciation

(85,239)


(69,696)

     Property under development 

25,402


6,764

Net real estate investments

1,214,016


950,261

Real estate held for sale, net

2,420


-

Cash and cash equivalents

50,807


33,395

Cash held in escrows

7,975


-

Accounts receivable - tenants, net of allowance of $296 and $50 for possible losses at December 31, 2017 and December 31, 2016, respectively

15,477


11,535

Credit facility finance costs, net of accumulated amortization of $433 and $1,262 at December 31, 2017 and December 31, 2016, respectively

1,174


1,552

Leasing costs, net of accumulated amortization of $814 and $677 at December 31, 2017 and December 31, 2016, respectively

1,583


1,227

Lease intangibles, net of accumulated amortization of $41,390 and $25,666 at December 31, 2017 and December 31, 2016, respectively

195,158


139,871

Interest rate swaps

1,592


1,409

Other assets

4,432


2,722

     Total Assets

$             1,494,634


$             1,141,972





Liabilities:




Mortgage notes payable, net

$                  88,270


$                  69,067

Unsecured term loans, net

158,171


158,679

Senior unsecured notes, net

259,122


159,176

Unsecured revolving credit facility

14,000


14,000

Dividends and distributions payable

16,303


13,124

Deferred revenue

1,837


1,823

Accrued interest payable

3,412


2,210

Accounts payable and accrued expenses:




     Capital expenditures

354


677

     Operating

10,811


4,866

Lease intangibles, net of accumulated amortization of $11,357 and $7,079 at December 31, 2017 and December 31, 2016, respectively

30,350


30,047

Interest rate swaps

242


1,994

Deferred income taxes

475


705

Tenant deposits

97


94

     Total Liabilities

$                583,444


$                456,462





Equity:




Common stock, $.0001 par value, 45,000,000 shares authorized, 31,004,9000 and 26,164,977 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively

$                           3


$                           3

Preferred stock, $.0001 par value per share, 4,000,000 shares authorized




     Series A junior participating preferred stock, $.0001 par value, 200,000 
     authorized, no shares issued and outstanding

-


-

Additional paid-in capital

936,046


712,069

Dividends in excess of net income

(28,763)


(28,558)

Accumulated other comprehensive income (loss)

1,375


(536)

Equity - Agree Realty Corporation

$                908,661


$                682,978

     Non-controlling interest

2,529


2,532

     Total Equity

$                911,190


$                685,510

     Total Liabilities and Equity

$             1,494,634


$             1,141,972

 

 

Agree Realty Corporation

Consolidated Statements of Operations and Comprehensive Income

($ in thousands, except share and per share-data)











Three months ended
December 31,


Twelve months ended
December 31,


2017


2016


2017


2016

Revenues

(Unaudited)


(Unaudited)





Minimum rents

$      28,574


$      23,349


$    105,074


$      84,031

Percentage rents

32


-


244


197

Operating cost reimbursement

2,736


1,899


10,752


7,267

Other

186


50


485


32

     Total Revenues

$      31,528


$      25,298


$    116,555


$      91,527









Operating Expenses








Real estate taxes

$        2,216


$        1,424


$        8,204


$        5,459

Property operating expenses

969


815


3,610


2,484

Land lease payments

163


163


653


653

General and administrative

2,284


1,908


9,949


8,015

Depreciation and amortization

8,796


6,506


31,752


23,407

     Total Operating Expenses

$      14,428


$      10,816


$      54,168


$      40,018









     Income from Operations

$      17,100


$      14,482


$      62,387


$      51,509









Other (Expense) Income








Interest expense, net

$      (4,924)


$      (4,107)


$    (18,137)


$    (15,343)

Gain on sale of assets, net

4,148


2,831


14,193


9,964

Loss on debt extinguishment

-


(300)


-


(333)

Other income

347


-


347


-









     Net Income

$      16,671


$      12,906


$      58,790


$      45,797









Less Net Income Attributable to Non-Controlling Interest

177


173


678


679









     Net Income Attributable to Agree Realty Corporation

$      16,494


$      12,733


$      58,112


$      45,118









Net Income Per Share Attributable to Agree Realty Corporation








     Basic

$          0.55


$          0.50


$          2.09


$          1.97

     Diluted

$          0.55


$          0.50


$          2.08


$          1.97

















Other Comprehensive Income








Net Income

$      16,671


$      12,906


$      58,790


$      45,797

Other Comprehensive Income (Loss) - Gain (Loss) on Interest Rate Swaps

1,402


5,853


1,935


2,618

Total Comprehensive Income

18,073


18,759


60,725


48,415

Comprehensive Income Attributable to Non-Controlling Interest

(209)


(251)


(702)


(703)

     Comprehensive Income Attributable to Agree Realty Corporation

$      17,864


$      18,508


$      60,023


$      47,712









Weighted Average Number of Common Shares Outstanding - Basic

29,537,603


25,375,922


27,625,102


22,868,736

Weighted Average Number of Common Shares Outstanding - Diluted

29,616,353


25,473,270


27,700,347


22,959,799

 

 

Agree Realty Corporation

Reconciliation of Net Income to FFO and Adjusted FFO

($ in thousands, except share and per-share data)

(Unaudited)










Three months ended
December 31,


Twelve months ended
December 31,


2017


2016


2017


2016









Net Income

$      16,671


$      12,906


$      58,790


$      45,797

Depreciation of real estate assets

5,221


4,296


19,507


15,200

Amortization of leasing costs

43


40


163


125

Amortization of lease intangibles

3,534


2,150


12,004


8,010

(Gain) loss on sale of assets, net

(4,148)


(2,831)


(14,193)


(9,964)

     Funds from Operations

$      21,321


$      16,561


$      76,271


$      59,168

Straight-line accrued rent

(1,003)


(1,420)


(3,548)


(3,582)

Deferred revenue recognition

-


-


-


(541)

Deferred tax expense (benefit)

(230)


-


(230)


-

Stock based compensation expense

691


577


2,589


2,441

Amortization of financing costs

148


155


574


516

Non-real estate depreciation

(2)


19


78


72

Debt extinguishment costs

-


300


-


333

     Adjusted Funds from Operations

$      20,925


$      16,192


$      75,734


$      58,407









Funds from Operations per common share - Basic

$          0.71


$          0.64


$          2.73


$          2.55

Funds from Operations per common share - Diluted

$          0.71


$          0.64


$          2.72


$          2.54









Adjusted Funds from Operations per common share - Basic

$          0.70


$          0.63


$          2.71


$          2.52

Adjusted Funds from Operations per common share - Diluted

$          0.70


$          0.63


$          2.70


$          2.51









Weighted Average Number of Common Shares and Units Outstanding - Basic

29,885,222


25,723,541


27,972,721


23,216,355

Weighted Average Number of Common Shares and Units Outstanding - Diluted

29,963,973


25,820,889


28,047,966


23,307,418

















Supplemental Information:








Scheduled principal repayments

$           808


$           758


$        3,151


$        2,954

Capitalized interest

273


183


570


210

Capitalized building improvements

1,154


136


1,230


541


Non-GAAP Financial Measures

Funds from Operations ("FFO")
The Company considers the non-GAAP measures of FFO and FFO per share/unit to be key supplemental measures of the Company's performance and should be considered along with, but not as alternatives to, net income or loss as a measure of the Company's operating performance. Historical cost accounting for real estate assets 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.

The White Paper on FFO approved by NAREIT in April 2002, as revised in 2011, defines FFO as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of properties and items classified by GAAP as extraordinary, plus real estate-related depreciation and amortization and impairment writedowns, and after comparable adjustments for the Company's portion of these items related to unconsolidated entities and joint ventures. The Company computes FFO consistent with standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than the Company.

The Company believes that excluding the effect of extraordinary items, real estate-related depreciation and amortization and impairments, which are based on historical cost accounting and which may be of limited significance in evaluating current performance, can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common shareholders. However, FFO may not be helpful when comparing the Company to non-REITs.

FFO does not represent cash generated from operating activities as determined by GAAP and should not be considered an alternative to net income or loss, cash flows from operations or any other operating performance measure prescribed by GAAP. FFO is not a measurement of the Company's liquidity, nor is FFO indicative of funds available to fund the Company's cash needs, including its ability to make cash distributions. These measurements do not reflect cash expenditures for long-term assets and other items that have been and will be incurred. FFO may include funds that may not be available for management's discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties. To compensate for this, management considers the impact of these excluded items to the extent they are material to operating decisions or the evaluation of the Company's operating performance.

Adjusted Funds from Operations
The Company presents adjusted FFO (including adjusted FFO per share/unit), which adjusts for certain additional items including straight-line accrued rent, deferred revenue recognition, stock based compensation expense, non-real estate depreciation and debt extinguishment costs and certain other items. The Company excludes these items as it believes it allows for meaningful comparisons with other REITs and between periods and is more indicative of the ongoing performance of its assets. As with FFO, the Company's calculation of adjusted FFO may be different from similar adjusted measures calculated by other REITs.

 

 

Agree Realty Corporation

Reconciliation of Net Debt to Recurring EBITDA

($ in thousands, except share and per-share data)

(Unaudited)
















Three months ended
December 31,








2017









Net Income







$                     16,671

Interest expense, net







4,924

Depreciation of real estate assets







5,221

Amortization of leasing costs







43

Amortization of lease intangibles







3,534

Deferred tax expense (benefit)







(230)

Non-real estate depreciation







(2)

EBITDA







$                     30,161









Run-Rate Impact of Investment and Disposition Activity







$                       1,203

(Gain) loss on sale of assets, net







(4,148)

Other income







(347)

Recurring EBITDA







$                     26,869









Annualized Recurring EBITDA







$                   107,476









Total Debt







$                   522,399

Cash, cash equivalents and cash held in escrows







(58,782)

Net Debt







$                   463,617









Net Debt to Recurring EBITDA







4.3x

















Non-GAAP Financial Measures

Recurring EBITDA

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 recurring EBITDA and dividing it by our net debt per the consolidated balance sheet. 

Any differences are a result of rounding. 

 

 

View original content:http://www.prnewswire.com/news-releases/agree-realty-corporation-reports-fourth-quarter-and-full-year-2017-results-300602977.html

SOURCE Agree Realty Corporation

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