Press Releases

Agree Realty Corporation Reports First Quarter 2016 Results

BLOOMFIELD HILLS, Mich., April 25, 2016 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) (the "Company") today announced results for the quarter ended March 31, 2016. All per share amounts included herein are on a diluted per common share basis unless otherwise stated.

First Quarter 2016 Financial and Operating Highlights:

  • Increased Funds from Operations ("FFO") per share 8.5% to $0.61
  • Increased FFO 27.2% to $12.7 million
  • Increased Adjusted Funds from Operations ("AFFO") per share 7.9% to $0.61
  • Increased AFFO 26.5% to $12.7 million
  • Increased rental revenue 28.2% to $18.7 million
  • Invested in 13 retail net lease properties for $38.3 million
  • Announced one new development project
  • Declared dividends of $0.465 per share, an increase of 3.3% over dividends per share declared in the first quarter of 2015

Financial Results

Total Rental Revenue

Total rental revenue, which includes minimum rents and percentage rents, for the three months ended March 31, 2016 increased 28.2% to $18.7 million compared with total rental revenue of $14.6 million for the comparable period in 2015.

Funds from Operations

FFO for the three months ended March 31, 2016 increased 27.2% to $12.7 million compared with FFO of $10.0 million for the comparable period in 2015.  FFO per share for the three months ended March 31, 2016 increased 8.5% to $0.61 compared with FFO per share of $0.56 for the comparable period in 2015.

Adjusted Funds from Operations

AFFO for the three months ended March 31, 2016 increased 26.5% to $12.7 million compared with AFFO of $10.1 million for the comparable period in 2015.  AFFO per share for the three months ended March 31, 2016 increased 7.9% to $0.61 compared with AFFO per share of $0.57 for the comparable period in 2015.

Net Income

Net income attributable to the Company for the three months ended March 31, 2016 was $7.5 million, or $0.36 per share, compared with $6.4 million, or $0.37 per share, for the comparable period in 2015.

Dividend

The Company paid a cash dividend of $0.465 per share on April 15, 2016 to stockholders of record on March 31, 2016, a 3.3% increase over the $0.45 quarterly dividend declared in the first quarter of 2015.  The quarterly dividend represents payout ratios of approximately 76.5% of FFO and 76.1% of AFFO, respectively. 

CEO Comments

"We had another strong quarter as we continue to execute our operating strategy," said Joey Agree, President and Chief Executive Officer of Agree Realty Corporation.  "During the quarter we invested in thirteen high-quality net lease properties with strong underlying real estate fundamentals located in a number of attractive markets. We have a robust pipeline of high-quality opportunities through our three distinct retail net lease investment platforms, which we are confident will produce superior risk-adjusted returns for our shareholders. With a strong balance sheet situated for continued growth, an industry-leading portfolio of retail net lease properties, and no lease expirations or debt maturities remaining in 2016, we are extremely well-positioned for the future." 

Portfolio Update

As of March 31, 2016, the Company's portfolio consisted of 291 properties located in 42 states and totaling 5.4 million square feet of gross leasable space.  Properties ground leased to tenants accounted for 8.4% of annualized base rent.

The portfolio was approximately 99.5% leased, had a weighted-average remaining lease term of approximately 11.2 years, and generated approximately 50.3% of annualized base rents from investment grade tenants.

The table below provides a summary of the Company's portfolio as of March 31, 2016:

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

262


$66,726


89.3%


47.3%


11.1 yrs

Retail Net Lease Ground Leases

26


6,287


8.4%


88.2%


13.5 yrs

Total Retail Net Lease

288


73,013


97.7%


50.9%


11.3 yrs

Total Portfolio

291


$74,766


100.0%


50.3%


11.2 yrs


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

(1)  Represents annualized straight-line rent as of March 31, 2016.

(2)  Reflects tenants, or parent entities thereof, with investment grade credit ratings from Standard & Poor's,
     Moody's, Fitch and/or NAIC.

Acquisitions

Total acquisition volume for the first quarter of 2016 was approximately $33.3 million and included 12 assets net leased to a number of notable retailers operating in the entertainment retail, specialty retail, quick service restaurant, discount and auto service sectors.  The properties are located in 9 states and leased to 13 distinct tenants operating across 9 retail sectors.  These properties were acquired at a weighted-average cap rate of 7.9% and with a weighted-average remaining lease term of approximately 6.9 years.

Development and Partner Capital Solutions

In the first quarter of 2016, the Company, through its development program, completed the previously announced Hobby Lobby project in Springfield, Ohio. The development was completed ahead of schedule at a total cost of approximately $5.0 million and is subject to a new 15-year lease.

In addition to the Company's recently completed development, construction commenced on its previously announced Burger King in Farr West, Utah.  This project is part of the previously announced partnership with Meridian Restaurants and has a total cost of approximately $1.6 million.  Rent is expected to commence in the third quarter of 2016 and the Company will own a 100% fee simple interest in the property upon the project's completion.

Subsequent to the end of the first quarter of 2016, the Company commenced the development of a new Burger King in Devils Lake, North Dakota.  This property is also part of the previously announced partnership with Meridian Restaurants and is subject to a new 20-year lease.

Leasing

During the first quarter of 2016 the Company executed new leases, extensions or options on over 31,000 square feet of gross leasable area throughout the portfolio.  Material new leases, extensions or options included a 24,153 square foot Staples in Davenport, Iowa.  The Company has no remaining lease maturities in 2016.

Top Tenants

The following table presents annualized base rents for all tenants that generated 1.5% or greater of the Company's total annualized base rent as of March 31, 2016:

 

Tenant


Annualized
Base Rent (1)


 Percent of Annualized
Base Rent






Walgreens


$12,310


16.5%

Wal-Mart


3,924


5.2%

Wawa


2,465


3.3%

CVS


2,463


3.3%

Academy Sports


1,982


2.7%

Rite Aid


1,886


2.5%

Lowe's


1,846


2.5%

Dollar General


1,795


2.4%

24 Hour Fitness


1,759


2.4%

BJ's Wholesale


1,709


2.3%

LA Fitness


1,694


2.3%

Taco Bell(2)


1,537


2.1%

Dollar Tree


1,427


1.9%

Burger King(3)


1,241


1.7%

Kohl's


1,180


1.6%

AutoZone


1,163


1.6%

Dick's Sporting Goods


1,089


1.5%

Total Top Tenants


$41,470


55.8%


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

(1)  Represents annualized straight-line rent as of March 31, 2016.

(2)  Franchise restaurants operated by Charter Foods North, LLC. 

(3)  Franchise restaurants operated by Meridian Restaurants Unlimited, LC.

Tenant Sectors

The following table presents annualized base rents for the Company's top retail sectors that generated 2.5% or greater of the Company's total annualized base rent as of March 31, 2016:

Sector


Annualized
Base Rent (1)


 Percent of Annualized
Base Rent






Pharmacy


$16,659


22.3%

Restaurants - Quick Service


5,702


7.6%

Specialty Retail


4,037


5.4%

General Merchandise


3,956


5.3%

Apparel


3,906


5.2%

Grocery Stores


3,843


5.1%

Warehouse Clubs


3,749


5.0%

Health & Fitness


3,562


4.8%

Sporting Goods


3,149


4.2%

Convenience Stores


2,599


3.5%

Restaurants - Casual Dining


2,388


3.2%

Dollar Stores


2,280


3.0%

Auto Parts


2,257


3.0%

Crafts and Novelties


1,977


2.6%

Home Improvement


1,846


2.5%

Other(2)


12,856


17.3%

Total Portfolio


$74,766


100.0%


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

 (1)  Represents annualized straight-line rent as of March 31, 2016.

 (2)  Includes sectors generating less than 2.5% of annualized base rent.

Lease Expiration

The following table presents contractual lease expirations within the Company's portfolio as of March 31, 2016, assuming that no tenants exercise renewal options:

Year

 Leases


Annualized

Base Rent (1)


 Percent of

Annualized

Base Rent


Gross

Leasable Area


 Percent of Gross

Leasable Area











2016

0


$0


0.0%


0


0.0%

2017

10


1,700


2.3%


114


2.1%

2018

11


1,431


1.9%


245


4.5%

2019

12


4,326


5.8%


372


6.8%

2020

16


2,451


3.3%


232


4.3%

2021

22


4,812


6.4%


293


5.4%

2022

14


2,760


3.7%


266


4.9%

2023

24


3,808


5.1%


313


5.8%

2024

29


6,504


8.7%


544


10.0%

2025

30


5,886


7.9%


428


7.9%

Thereafter

164


41,088


54.9%


2,636


48.3%

Total Portfolio

332


$74,766


100.0%


5,443


100.0%


       Annualized base rent and gross leasable area are in thousands; any differences are a result of rounding.

(1)  Represents annualized straight-line rent as of March 31, 2016.

Capital Markets and Balance Sheet

Capital Markets

On March 11, 2016, the Company paid off an $8.6 million mortgage secured by three Wawa properties.   The Company has no remaining debt maturities in 2016.

During the three months ended March 31, 2016, the Company issued 53,886 shares of common stock under its at-the-market equity program ("ATM program"), realizing gross proceeds of approximately $2.1 million

Balance Sheet

As of March 31, 2016, the Company's total debt to total enterprise value was approximately 30.3%.  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 months ended March 31, 2016, the Company had 20.5 million fully diluted weighted-average shares outstanding. The Company had 20.4 million basic weighted-average shares outstanding for the three months ended March 31, 2016.

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 March 31, 2016, there were 347,619 operating partnership units outstanding and the Company held a 98.3% interest in the operating partnership.

2016 Outlook

The Company's outlook for acquisition volume in 2016, which assumes continued growth in economic activity, positive business trends and other significant assumptions, remains between $175 and $200 million of high-quality retail net lease properties.

Conference Call/Webcast

Agree Realty Corporation will host its quarterly analyst and investor conference call on Tuesday, April 26, 2016 at 9:00 AM EDT.  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 primarily engaged in the acquisition and development of properties net leased to industry-leading retail tenants.  The Company currently owns and operates a portfolio of 297 properties, located in 42 states and containing approximately 5.5 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, visit the Company's home page at 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, 2015 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 April 25, 2016. 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 per share data)



March 31, 2016


December 31, 2015

Assets:

(Unaudited)



Real Estate Investments:




Land  

$                236,700


$                225,274

Buildings

553,441


526,912

Accumulated depreciation

(59,764)


(56,401)

Property under development 

3,575


3,663

Net real estate investments

733,952


699,448

Cash and cash equivalents

3,711


2,712

Accounts receivable - Tenants, net of allowance of $35 for possible losses
at March 31, 2016 and December 31, 2015, respectively

7,807


7,418

Unamortized Deferred Expenses:




Credit facility financing Costs, net of accumulated amortization of $1,584
and $1,532 at March 31, 2016 and December 31, 2015, respectively

490


506

Leasing costs, net of accumulated amortization of $575 and $554 at March
31, 2016 and December 31, 2015, respectively

682


664

Lease intangibles, net of accumulated amortization of $12,263 and $10,578
at March 31, 2016 and December 31, 2015, respectively

76,651


76,552

Other assets

2,260


2,570

Total Assets

$                825,553


$                789,870





Liabilities:




Mortgage notes payable, net

$                  91,125


$                100,359

Unsecured Term Loans, net

99,421


99,156

Senior Unsecured Notes, net

99,177


99,389

Unsecured Revolving Credit Facility

60,000


18,000

Dividends and Distributions Payable

9,812


9,758

Deferred Revenue

425


541

Accrued Interest Payable

1,977


963

Accounts Payable and Accrued Expense:




Capital Expenditures

28


122

Operating

6,252


3,927

Interest Rate Swaps

6,138


3,301

Deferred Income Taxes

705


705

Tenant Deposits

39


29

Total Liabilities

375,099


336,250





Stockholders' Equity:




Common stock, $.0001 par value, 28,000,000 shares authorized,
20,754,264 and 20,637,301 shares issued and outstanding, respectively

2


2

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

484,511


482,514

Dividends in excess of net income

(30,452)


(28,262)

Accumulated other comprehensive loss

(6,018)


(3,130)

Total Stockholders' Equity - Agree Realty Corporation

448,043


451,124

Non-controlling interest

2,411


2,496

Total Stockholders' Equity

450,454


453,620

Total Liabilities and Stockholders' Equity

$                825,553


$                789,870





 

 

 

Agree Realty Corporation

Consolidated Statements of Operations and Comprehensive Income

($ in thousands, except per share data)






Three months ended
March 31,


2016


2015


(Unaudited)

Revenues




Minimum rents

$           18,491


$           14,554

Percentage rents

183


10

Operating cost reimbursement

1,589


1,178

Other income

(39)


1

Total Revenues

20,224


15,743





Operating Expenses




Real estate taxes

1,123


763

Property operating expenses

573


571

Land lease payments

163


132

General and administrative

2,045


1,668

Depreciation and amortization

5,085


3,553

Total Operating Expenses

8,989


6,687





Income from Operations

11,235


9,056





Other (Expense) Income




Interest expense, net

(3,649)


(2,461)

Gain (loss) on sale of assets

-


79

Loss on debt extinguishment

-


(180)





Net Income

7,586


6,494





Less Net Income Attributable to Non-Controlling Interest

125


126





Net Income Attributable to Agree Realty Corporation

$            7,461


$            6,368





Net Income Per Share Attributable to Agree Realty Corporation




Basic

$              0.37


$              0.37

Diluted

$              0.36


$              0.37









Other Comprehensive Income




Net income

$            7,586


$            6,494

Other Comprehensive Income (Loss)

(2,935)


(2,012)

Total Comprehensive Income

4,651


4,482

Comprehensive Income Attributable to Non-Controlling Interest

(77)


(87)

Comprehensive Income Attributable to Agree Realty Corporation

$            4,574


$            4,395





Weighted Average Number of Common Shares Outstanding - Basic

20,439


17,370

Weighted Average Number of Common Shares Outstanding - Diluted

20,480


17,416





 

 

 

Agree Realty Corporation

Reconciliation of Net Income to FFO and Adjusted FFO

($ in thousands, except per share data)

(Unaudited)






Three months ended
March 31,


2016


2015





Net income

$         7,586


$         6,494

Depreciation of real estate assets

3,362


2,555

Amortization of leasing costs

22


30

Amortization of lease intangibles

1,686


953

(Gain) loss on sale of assets

-


(79)

Funds from Operations

$       12,656


$         9,953

Straight-line accrued rent

(649)


(598)

Deferred revenue recognition

(116)


(116)

Stock based compensation expense

708


524

Amortization of financing costs

118


109

Non-real estate depreciation

15


16

Debt extinguishment costs

-


180

Adjusted Funds from Operations

$       12,732


$       10,068





FFO per common share - Basic

$           0.61


$           0.56

FFO per common share - Diluted

$           0.61


$           0.56





Adjusted FFO per common share - Basic

$           0.61


$           0.57

Adjusted FFO per common share - Diluted

$           0.61


$           0.57





Weighted Average Number of Common Shares and Units Outstanding - Basic

20,786


17,717

Weighted Average Number of Common Shares and Units Outstanding - Diluted

20,828


17,764









Supplemental Information:




Scheduled principal repayments

$            720


$            677

Capitalized interest

7


1

Capitalized building improvements

-


-





Non-GAAP Financial Measures

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. This measurement does 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 FFO

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.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/agree-realty-corporation-reports-first-quarter-2016-results-300256948.html

SOURCE Agree Realty Corporation

For further information: Matthew M. Partridge, Chief Financial Officer, Agree Realty Corporation, (248) 737-4190