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Agree Realty Reports Second Quarter 2018 Results And Provides Mid-Year Update

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Agree Realty Reports Second Quarter 2018 Results And Provides Mid-Year Update

INCREASES INVESTMENT GUIDANCE; APPOINTS TWO NEW DIRECTORS

PR Newswire

BLOOMFIELD HILLS, Mich., July 23, 2018 /PRNewswire/ -- Agree Realty Corporation (NYSE:ADC) (the "Company") today announced results for the quarter ended June 30, 2018.  All per share amounts included herein are on a diluted per common share basis unless otherwise stated.

Second Quarter 2018 Financial and Operating Highlights:

  • Invested $104.3 million in 29 retail net lease properties
  • Increased rental revenue 27.7% to $32.1 million
  • Net Income per share attributable to the Company decreased 26.9% to $0.41
  • Net Income attributable to the Company decreased 13.1% to $12.9 million
  • Increased Funds from Operations ("FFO") per share 5.6% to $0.71
  • Increased FFO 24.3% to $22.3 million
  • Increased Adjusted Funds from Operations ("AFFO") per share 5.7% to $0.70
  • Increased AFFO 24.5% to $22.2 million
  • Declared a quarterly dividend of $0.54 per share, a 6.9% increase over the dividend per share declared in the second quarter of 2017
  • Received a Baa2 investment grade credit rating from Moody's Investors Service

First Half 2018 Financial and Operating Highlights:

  • Invested $207.1 million in 63 retail net lease properties
  • Completed five and commenced three development and Partner Capital Solutions ("PCS") projects
  • Increased rental revenue 27.7% to $63.1 million
  • Net Income per share attributable to the Company decreased 16.2% to $0.94
  • Net Income attributable to the Company decreased 0.3% to $29.4 million
  • Increased FFO per share 7.4% to $1.41
  • Increased FFO 26.8% to $44.4 million
  • Increased AFFO per share 6.8% to $1.40
  • Increased AFFO 26.1% to $44.0 million
  • Declared dividends of $1.06 per share, a 6.0% increase over the dividends per share declared in the first half of 2017

Mid-Year 2018 Update:

  • Increases 2018 acquisition guidance to a range of $350 million to $400 million
  • Increases 2018 disposition guidance to a range of $50 million to $75 million
  • Appoints Craig Erlich and Greg Lehmkuhl to its Board of Directors

Financial Results

Total Rental Revenue

Total rental revenue, which includes minimum rents and percentage rents, for the three months ended June 30, 2018 increased 27.7% to $32.1 million, compared to total rental revenue of $25.2 million for the comparable period in 2017.

Total rental revenue for the six months ended June 30, 2018 increased 27.7% to $63.1 million, compared to total rental revenue of $49.4 million for the comparable period in 2017.

Net Income

Net Income attributable to the Company for the three months ended June 30, 2018 decreased 13.1% to $12.9 million, compared to $14.9 million for the comparable period in 2017. Net Income per share attributable to the Company for the three months ended June 30, 2018 decreased 26.9% to $0.41, compared to $0.56 per share for the comparable period in 2017.

Net income attributable to the Company for the six months ended June 30, 2018 decreased 0.3% to $29.4 million, compared to $29.5 million for the comparable period in 2017.  Net income per share attributable to the Company for the six months ended June 30, 2018 decreased 16.2% to $0.94, compared to $1.12 per share for the comparable period in 2017.

Funds from Operations

FFO for the three months ended June 30, 2018 increased 24.3% to $22.3 million, compared to FFO of $18.0 million for the comparable period in 2017.  FFO per share for the three months ended June 30, 2018 increased 5.6% to $0.71, compared to FFO per share of $0.67 for the comparable period in 2017.

FFO for the six months ended June 30, 2018 increased 26.8% to $44.4 million, compared to FFO of $35.0 million for the comparable period in 2017.  FFO per share for the six months ended June 30, 2018 increased 7.4% to $1.41, compared to FFO per share of $1.32 for the comparable period in 2017.

Adjusted Funds from Operations

AFFO for the three months ended June 30, 2018 increased 24.5% to $22.2 million, compared to AFFO of $17.9 million for the comparable period in 2017.  AFFO per share for the three months ended June 30, 2018 increased 5.7% to $0.70, compared to AFFO per share of $0.67 for the comparable period in 2017.

AFFO for the six months ended June 30, 2018 increased 26.1% to $44.0 million, compared to AFFO of $34.9 million for the comparable period in 2017.  AFFO per share for the six months ended June 30, 2018 increased 6.8% to $1.40, compared to AFFO per share of $1.31 for the comparable period in 2017.

Dividend

The Company paid a cash dividend of $0.54 per share on July 13, 2018 to stockholders of record on June 29, 2018, a 6.9% increase over the $0.505 quarterly dividend declared in the second quarter of 2017.  The quarterly dividend represents payout ratios of approximately 76% of FFO per share and 77% of AFFO per share, respectively.

For the six months ended June 30, 2018, the Company declared dividends of $1.06 per share, a 6.0% increase over the dividends of $1.00 per share declared for the comparable period in 2017. The dividend represents payout ratios of approximately 75% of FFO per share and 76% of AFFO per share, respectively.

CEO Comments

"We are very pleased with our performance during the quarter as we demonstrated continued execution of our operating strategy," said Joey Agree, President and Chief Executive Officer of Agree Realty Corporation. "Given our robust pipeline and flexible balance sheet, we are increasing our full-year acquisition guidance. Simultaneously, we are increasing our disposition guidance which evidences our proactive approach and commitment to capital recycling, ensuring our portfolio comprises the highest-quality real estate leased to preeminent retailers."

Mr. Agree continued in highlighting the Company's new Board of Directors appointments, "On behalf of the entire Board, I would like to welcome Craig Erlich and Greg Lehmkuhl as Directors. Both Craig and Greg have extensive leadership and operational experience working with dynamic, industry-leading organizations. They will bring unique and invaluable perspectives as we chart the exciting future of our growing Company."

Portfolio Update

As of June 30, 2018, the Company's portfolio consisted of 481 properties located in 44 states and totaled 9.3 million square feet of gross leasable space.  Properties ground leased to tenants accounted for 7.2% 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 46.5% of annualized base rents from investment grade retail tenants.

The following table provides a summary of the Company's portfolio as of June 30, 2018:

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

437


$121,461


91.5%


43.3%


10.2 yrs

Retail Net Lease Ground Leases

41


9,618


7.2%


89.1%


11.4 yrs

Total Retail Net Lease

478


$131,079


98.7%


46.6%


10.3 yrs

Total Portfolio

481


$132,836


100.0%


46.5%


10.2 yrs




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

(1)

Represents annualized straight-line rent as of June 30, 2018.

(2)

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

 

Acquisitions

Total acquisition volume for the second quarter of 2018 was approximately $101.9 million and included 23 assets net leased to notable retailers operating in the home improvement, health and fitness, convenience store, auto parts, tire and auto service and grocery sectors.  The properties are located in 16 states and leased to tenants operating in 12 retail sectors.  The properties were acquired at a weighted-average capitalization rate of 7.2% and had a weighted-average remaining lease term of approximately 12.4 years.

For the six months ended June 30, 2018, total acquisition volume was approximately $200.6 million and included 53 high-quality retail net lease assets.  The properties are located in 23 states and leased to 30 diverse tenants who operate in 15 retail sectors.  The properties were acquired at a weighted-average capitalization rate of 7.2% and had a weighted-average remaining lease term of approximately 13.0 years.

The Company's outlook for acquisition volume in 2018 is being increased to a range of $350 million to $400 million of high-quality retail net lease properties. The Company's acquisition guidance, which assumes continued growth in economic activity, moderate interest rate growth, positive business trends and other significant assumptions, is being increased from a previous range of $250 million to $300 million.

Dispositions

During the second quarter, the Company sold five properties for gross proceeds of approximately $11.0 million. The dispositions were completed at a weighted-average capitalization rate of 7.1%.

For the six months ended June 30, 2018, the Company has divested of ten properties for total gross proceeds of $27.7 million. The weighted-average capitalization rate of the dispositions was 7.3%. In addition, a tenant exercised their option to purchase a property which had previously been ground leased from the Company. The option to purchase was exercised during the first quarter at a predetermined contractual price of $3.9 million

The Company's disposition guidance for 2018 is being increased to a new range of $50 million to $75 million, from a previous range of $25 million to $50 million.

Development and Partner Capital Solutions

In the second quarter of 2018, the Company completed the previously announced Camping World in Grand Rapids, Michigan. The project is subject to a 20-year net lease and had total aggregate costs of approximately $9.6 million.

The Company commenced its second project with leading Burger King franchisee TOMS King during the second quarter, with total anticipated costs of approximately $2.0 million. The project is located in Aurora, Illinois and is subject to a new 20-year net lease.

Construction continued during the second quarter on four projects with total anticipated costs of approximately $14.7 million. The projects include the Company's first PCS project with ALDI in Chickasha, Oklahoma; the Company's first project with Burlington Coat Factory in Nampa, Idaho; and the Company's third and fourth developments with Mister Car Wash in Orlando and Tavares, Florida.

For the six months ended June 30, 2018, the Company had ten development or PCS projects completed or under construction. Anticipated total costs are approximately $51.6 million and include the following projects:

Tenant


Location


Lease Structure


Lease Term


Actual or
Anticipated Rent
Commencement


Status












Mister Car Wash


Urbandale, IA


Build-to-Suit


20 years


Q1 2018


Completed

Mister Car Wash


Bernalillo, NM


Build-to-Suit


20 years


Q1 2018


Completed

Burger King(1)


North Ridgeville, OH


Build-to-Suit


20 years


Q1 2018


Completed

Art Van Furniture


Canton, MI


Build-to-Suit


20 years


Q1 2018


Completed

Camping World


Grand Rapids, MI


Build-to-Suit


20 years


Q2 2018


Completed

ALDI


Chickasha, OK


Build-to-Suit


10 years


Q3 2018


Under Construction

Burger King(1)


Aurora, IL


Build-to-Suit


20 years


Q3 2018


Under Construction

Burlington Coat Factory


Nampa, ID


Build-to-Suit


15 years


Q3 2018


Under Construction

Mister Car Wash


Orlando, FL


Build-to-Suit


20 years


Q4 2018


Under Construction

Mister Car Wash


Tavares, FL


Build-to-Suit


20 years


Q4 2018


Under Construction



(1)

Franchise restaurant operated by TOMS King, LLC.

 

Leasing Activity and Expirations

During the second quarter, the Company executed new leases, extensions or options on approximately 39,000 square feet of gross leasable area throughout the existing portfolio. Notable new leases, extensions or options included a 21,177-square foot Harbor Freight Tools in Cedar Park, Texas.

For the six months ended June 30, 2018, the Company executed new leases, extensions or options on approximately 187,000 square feet of gross leasable area throughout the existing portfolio.

At quarter end, the Company's 2018 lease maturities represented 0.3% of annualized base rents. The following table presents contractual lease expirations within the Company's portfolio as of June 30, 2018, 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

3


426


0.3%


165


1.8%

2019

13


2,941


2.2%


191


2.1%

2020

18


3,206


2.4%


237


2.6%

2021

28


5,466


4.1%


333


3.6%

2022

22


4,040


3.0%


363


3.9%

2023

43


7,506


5.7%


716


7.7%

2024

38


11,037


8.3%


1,069


11.5%

2025

40


9,237


7.0%


649


7.0%

2026

53


8,599


6.5%


869


9.3%

2027

42


10,056


7.6%


675


7.3%

Thereafter

247


70,322


52.9%


4,027


43.2%

Total Portfolio

547


$132,836


100.0%


9,294


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 June 30, 2018.

 

Top Tenants

The Company added O'Reilly Auto Parts and Best Buy to its top tenants in the second quarter of 2018. 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, 2018:

Tenant


Annualized
Base Rent(1)


Percent of Annualized
Base Rent






Walgreens


$9,293


7.0%

LA Fitness


5,063


3.8%

Walmart


4,224


3.2%

TJX Companies


4,217


3.2%

Lowe's


4,215


3.2%

CVS


3,398


2.6%

Mister Car Wash


3,136


2.4%

Dollar General


2,668


2.0%

Wawa


2,664


2.0%

Hobby Lobby


2,589


1.9%

Smart & Final


2,475


1.9%

AMC


2,388


1.8%

AutoZone


2,298


1.7%

PetSmart


2,234


1.7%

Tractor Supply


2,179


1.6%

O'Reilly Auto Parts


2,093


1.6%

Michaels


2,072


1.6%

Dave & Buster's


2,058


1.5%

Best Buy


2,026


1.5%

Dollar Tree


2,025


1.5%

Other(2)


69,521


52.3%

Total Portfolio


$132,836


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, 2018.

(1)

Represents annualized straight-line rent as of June 30, 2018.

(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, 2018:

Sector


Annualized
Base Rent(1)


Percent of Annualized
Base Rent






Pharmacy


$14,276


10.7%

Grocery Stores


10,539


7.9%

Tire and Auto Service


10,136


7.6%

Health and Fitness


7,871


5.9%

Off-Price Retail


6,982


5.3%

Home Improvement


6,853


5.2%

Restaurants - Quick Service


6,548


4.9%

Convenience Stores


6,520


4.9%

Auto Parts


5,620


4.2%

Crafts and Novelties


4,952


3.7%

General Merchandise


4,271


3.2%

Specialty Retail


4,261


3.2%

Theater


3,786


2.9%

Warehouse Clubs


3,749


2.8%

Home Furnishings


3,704


2.8%

Health Services


3,574


2.7%

Dollar Stores


3,484


2.6%

Consumer Electronics


3,382


2.5%

Farm and Rural Supply


3,361


2.5%

Other(2)


18,967


14.5%

Total Portfolio


$132,836


100.0%




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

(1)

Represents annualized straight-line rent as of June 30, 2018.

(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, 2018:

State


Annualized
Base Rent(1)


Percent of Annualized
Base Rent






Michigan


$16,277


12.3%

Texas


10,781


8.1%

Florida


8,974


6.8%

Illinois


8,444


6.4%

Ohio


7,400


5.6%

Missouri


5,183


3.9%

Georgia


4,692


3.5%

Pennsylvania


4,646


3.5%

New Jersey


4,352


3.3%

Louisiana


3,887


2.9%

Kentucky


3,726


2.8%

California


3,697


2.8%

Mississippi


3,696


2.8%

Other(2)


47,081


35.3%

Total Portfolio


$132,836


100.0%




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

(1)

Represents annualized straight-line rent as of June 30, 2018.

(2)

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

 

Capital Markets and Balance Sheet

Capital Markets

In March 2018, the Company completed a follow-on public offering of 3,450,000 shares of common stock in connection with a forward sale agreement. Upon settlement, the offering is anticipated to raise net proceeds of approximately $162.9 million after deducting fees and expenses. The Company has not received any proceeds from the sale of shares of its common stock by the forward purchaser.

In May 2018, the Company entered into a new $250 million at-the-market equity program ("ATM Program") through which the Company may, from time to time, sell shares of common stock.  In addition to selling shares of common stock, the Company may enter into forward sale agreements through its ATM Program.  The Company uses the proceeds generated from its ATM Program for general corporate purposes, including funding our investment activity, the repayment or refinancing of outstanding indebtedness, working capital and other general purposes.

Subsequent to quarter end, in July 2018, the Company partially exercised the accordion option of its unsecured revolving credit facility (the "Revolving Facility") and increased its borrowing capacity from $250 million to $325 million.  At quarter end, the Company had $166 million of outstanding borrowings on the Revolving Facility.

Balance Sheet

In May 2018, Moody's Investors Service ("Moody's") assigned a Baa2 issuer rating to the Company with a stable outlook.  According to Moody's press release, the Baa2 issuer rating reflects the Company's long-standing operational history, conservative leverage policy, strong balance sheet with ample liquidity for growth, and well-laddered debt maturity schedule. Additionally, Moody's stated that the Company has a large unencumbered asset pool, a quality net lease portfolio with long-term leases and minimal near-term lease expirations, and a substantial investment grade tenant roster. 

As of June 30, 2018, the Company's net debt to recurring EBITDA was 5.4 times and its fixed charge coverage ratio was 4.2 times. The Company's total debt to total enterprise value was 28.1%.  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 six months ended June 30, 2018, the Company's fully diluted weighted-average shares outstanding were 31.2 million and 31.0 million, respectively. The basic weighted-average shares outstanding for the three and six months ended June 30, 2018 were 30.8 million and 30.8 million, respectively.

For the three and six months ended June 30, 2018, the Company's fully diluted weighted-average shares and units outstanding were 31.6 million and 31.4 million, respectively. The basic weighted-average shares and units outstanding for the three and six months ended June 30, 2018 were 31.2 million and 31.2 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, 2018, there were 347,619 operating partnership units outstanding and the Company held a 98.9% interest in the operating partnership.

Board of Directors and Corporate Governance Update

The Company is pleased to announce that Craig Erlich and Greg Lehmkuhl have joined the Company's Board of Directors. 

Craig Erlich is a Senior Vice President and General Manager of the George P. Johnson Company ("GPJ"), a global experiential marketing firm with 30 offices worldwide. Mr. Erlich has full responsibility for operations in GPJ's world headquarters in Detroit, MI and its Nashville, TN facilities. He was previously the owner, President and Chief Executive Officer of pulse220, a boutique meetings and events firm which he successfully sold to GPJ in 2015. Mr. Erlich is a two-time nominee of the Ernst & Young Entrepreneur of the Year award and holds a Bachelor of Arts in Marketing from the Eli Broad College of Business at Michigan State University.

Greg Lehmkuhl is the President and Chief Executive Officer of Lineage Logistics and oversees all facets of the company's operations worldwide. Lineage is the world's second largest provider of temperature-controlled supply chain solutions.  Prior to joining Lineage, Mr. Lehmkuhl served as Corporate Executive Vice President for Con-Way and President of Con-Way Freight, where he was responsible for overall company operating and financial performance, strategic planning and business plan development, as well as direction of the company's continuous improvement processes. Prior to Con-way, he held management positions at Delphi and Penske.  Mr. Lehmkuhl holds a Bachelor's Degree in Business from Michigan State University as well as a Master of Business Administration from Oakland University.

In May 2018, the Company announced the termination of its Rights Agreement dated as of December 7, 1998, as amended by the Amendment to Rights Agreement dated as of October 18, 2001, the Second Amendment to Rights Agreement dated as of December 8, 2008 and the Third Amendment to Rights Agreement dated as of December 20, 2017.

Conference Call/Webcast

The Company will host its quarterly analyst and investor conference call on Tuesday, July 24, 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 June 30, 2018, the Company owned and operated a portfolio of 481 properties, located in 44 states and containing approximately 9.3 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 July 23, 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)



June 30, 2018


December 31, 2017

Assets:

(Unaudited)



Real Estate Investments:




     Land  

$                444,001


$                405,457

     Buildings

963,182


868,396

     Accumulated depreciation

(93,376)


(85,239)

     Property under development 

10,411


25,402

Net real estate investments

1,324,218


1,214,016

Real estate held for sale, net

12,257


2,420

Cash and cash equivalents

8,986


50,807

Cash held in escrows

-


7,975

Accounts receivable - tenants, net of allowance of $308 and $296 for possible
losses at June 30, 2018 and December 31, 2017, respectively

19,197


15,477

Credit facility finance costs, net of accumulated amortization of $611 and $433 at
June 30, 2018 and December 31, 2017, respectively

972


1,174

Leasing costs, net of accumulated amortization of $763 and $814 at June 30, 2018
and December 31, 2017, respectively

1,493


1,583

Lease intangibles, net of accumulated amortization of $51,645 and $41,390 at
June 30, 2018 and December 31, 2017, respectively

235,776


195,158

Interest rate swaps

4,062


1,592

Other assets, net

5,200


4,432

Total Assets

$             1,612,161


$             1,494,634





Liabilities:




Mortgage notes payable, net

$                  62,136


$                  88,270

Unsecured term loans, net

157,901


158,171

Senior unsecured notes, net

259,168


259,122

Unsecured revolving credit facility

166,000


14,000

Dividends and distributions payable

16,946


16,303

Deferred revenue

1,845


1,837

Accrued interest payable

3,503


3,412

Accounts payable and accrued expenses:




     Capital expenditures

43


354

     Operating

6,810


10,811

Lease intangibles, net of accumulated amortization of $13,485 and $11,357 at
June 30, 2018 and December 31, 2017, respectively

27,108


30,350

Interest rate swaps

-


242

Deferred income taxes

475


475

Tenant deposits

102


97

     Total Liabilities

$                702,037


$                583,444





Equity:




Common stock, $.0001 par value, 45,000,000 shares authorized, 31,033,259
and 31,004,900 shares issued and outstanding at June 30, 2018 and December 31,
2017, 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

935,828


936,046

Dividends in excess of net income

(32,284)


(28,763)

Accumulated other comprehensive income (loss)

4,057


1,375

Equity - Agree Realty Corporation

$                907,604


$                908,661

     Non-controlling interest

2,520


2,529

     Total Equity

$                910,124


$                911,190

     Total Liabilities and Equity

$             1,612,161


$             1,494,634

 

 

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,


2018


2017


2018


2017

Revenues








Minimum rents

$      32,129


$      25,160


$      62,872


$      49,174

Percentage rents

-


-


216


212

Operating cost reimbursement

3,490


2,881


7,055


5,225

Other

92


39


137


29

     Total Revenues

$      35,711


$      28,080


$      70,280


$      54,640









Operating Expenses








Real estate taxes

$        2,624


$        2,031


$        5,001


$        3,839

Property operating expenses

1,238


915


2,755


1,710

Land lease expense

176


163


339


327

General and administrative

3,185


2,362


6,047


4,845

Depreciation and amortization

10,559


7,704


20,562


14,728

     Total Operating Expenses

$      17,782


$      13,175


$      34,704


$      25,449









     Income from Operations

$      17,929


$      14,905


$      35,576


$      29,191









Other (Expense) Income








Interest expense, net

$      (5,961)


$      (4,411)


$    (11,426)


$      (8,547)

Gain on sale of assets, net

2,434


4,780


7,032


9,521

Income tax expense

(216)


(207)


(266)


(329)

Other (expense) income

45


-


(49)


-

Impairment charges

(1,163)


-


(1,163)


-









     Net Income

$      13,068


$      15,067


$      29,704


$      29,836









Less Net Income Attributable to Non-Controlling Interest

145


191


329


384









     Net Income Attributable to Agree Realty Corporation

$      12,923


$      14,876


$      29,375


$      29,452









Net Income Per Share Attributable to Agree Realty Corporation








     Basic

$          0.42


$          0.56


$          0.95


$          1.13

     Diluted

$          0.41


$          0.56


$          0.94


$          1.12

















Other Comprehensive Income








Net Income

$      13,068


$      15,067


$      29,704


$      29,836

Other Comprehensive Income (Loss) - Change in Fair Value of Interest
Rate Swaps

792


(411)


2,712


330

Total Comprehensive Income

13,860


14,656


32,416


30,166

Comprehensive Income Attributable to Non-Controlling Interest

(154)


(189)


(359)


(389)

     Comprehensive Income Attributable to Agree Realty Corporation

$      13,706


$      14,467


$      32,057


$      29,777









Weighted Average Number of Common Shares Outstanding - Basic

30,821,185


26,389,703


30,811,383


26,172,730

Weighted Average Number of Common Shares Outstanding - Diluted

31,222,221


26,457,340


31,036,694


26,240,220

 

 

Agree Realty Corporation

Reconciliation of Net Income to FFO and Adjusted FFO

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

(Unaudited)










Three months ended
June 30,


Six months ended
June 30,


2018


2017


2018


2017









Net Income

$      13,068


$      15,067


$      29,704


$      29,836

Depreciation of real estate assets

5,934


4,700


11,589


9,185

Amortization of leasing costs

41


40


84


80

Amortization of lease intangibles

4,563


2,939


8,847


5,412

Impairment charges

1,163


-


1,163


-

(Gain) loss on sale of assets, net

(2,434)


(4,780)


(7,032)


(9,521)

     Funds from Operations

$      22,335


$      17,966


$      44,355


$      34,992

Straight-line accrued rent

(1,093)


(877)


(2,205)


(1,685)

Stock based compensation expense

833


594


1,525


1,276

Amortization of financing costs

132


142


298


284

Non-real estate depreciation

21


25


42


51

     Adjusted Funds from Operations

$      22,228


$      17,850


$      44,015


$      34,918









Funds from Operations per common share - Basic

$          0.72


$          0.67


$          1.42


$          1.32

Funds from Operations per common share - Diluted

$          0.71


$          0.67


$          1.41


$          1.32









Adjusted Funds from Operations per common share - Basic

$          0.71


$          0.67


$          1.41


$          1.32

Adjusted Funds from Operations per common share - Diluted

$          0.70


$          0.67


$          1.40


$          1.31









Weighted Average Number of Common Shares and Units Outstanding - Basic

31,168,804


26,737,322


31,159,002


26,520,349

Weighted Average Number of Common Shares and Units Outstanding - Diluted

31,569,840


26,804,959


31,384,313


26,587,839

















Supplemental Information:








Scheduled principal repayments

$           828


$           776


$        1,648


$        1,545

Capitalized interest

148


87


292


154

Capitalized building improvements

42


27


76


43


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
June 30,








2018









Net Income







$                      13,068

Interest expense, net







5,961

Income tax expense







216

Depreciation of real estate assets







5,934

Amortization of leasing costs







41

Amortization of lease intangibles







4,563

Non-real estate depreciation







21

(Gain) loss on sale of assets, net







(2,434)

Impairment charges







1,163

EBITDAre







$                      28,533









Run-Rate Impact of Investment and Disposition Activity







$                        1,129

Other expense (income)







(45)

Recurring EBITDA







$                      29,617









Annualized Recurring EBITDA







$                    118,468









Total Debt







$                    647,752

Cash, cash equivalents and cash held in escrows







(8,986)

Net Debt







$                    638,766









Net Debt to Recurring EBITDA







5.4x

















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. 

 

 

Cision View original content:http://www.prnewswire.com/news-releases/agree-realty-reports-second-quarter-2018-results-and-provides-mid-year-update-300684946.html

SOURCE Agree Realty Corporation

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