Press Releases

Agree Realty Corporation Reports First Quarter 2017 Results

BLOOMFIELD HILLS, Mich., April 24, 2017 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) (the "Company") today announced results for the quarter ended March 31, 2017.  All per share amounts included herein are on a diluted per common share basis unless otherwise stated.

First Quarter 2017 Financial and Operating Highlights:

  • Invested $62.1 million in 13 retail net lease properties
  • Completed two development and Partner Capital Solutions ("PCS") projects
  • Increased rental revenue 29.7% to $24.2 million
  • Net Income per share attributable to the Company increased 54.2% to $0.56
  • Net Income attributable to the Company increased 95.3% to $14.6 million
  • Increased Funds from Operations ("FFO") per share 6.3% to $0.65
  • Increased FFO 34.5% to $17.0 million
  • Increased Adjusted Funds from Operations ("AFFO") per share 5.9% to $0.65
  • Increased AFFO 34.0% to $17.1 million
  • Declared a quarterly dividend of $0.495 per share, an increase of 6.5% over the dividend per share declared in the first quarter of 2016

Financial Results

Total Rental Revenue

Total rental revenue, which includes minimum rents and percentage rents, for the three months ended March 31, 2017 increased 29.7% to $24.2 million, compared to total rental revenue of $18.7 million for the comparable period in 2016.

Net Income

Net Income attributable to the Company for the three months ended March 31, 2017 increased 95.3% to $14.6 million, compared to $7.5 million for the comparable period in 2016.  Net Income per share attributable to the Company for the three months ended March 31, 2017 increased 54.2% to $0.56, compared to $0.36 per share for the comparable period in 2016.

Funds from Operations

FFO for the three months ended March 31, 2017 increased 34.5% to $17.0 million, compared to FFO of $12.7 million for the comparable period in 2016.  FFO per share for the three months ended March 31, 2017 increased 6.3% to $0.65, compared to FFO per share of $0.61 for the comparable period in 2016.

Adjusted Funds from Operations

AFFO for the three months ended March 31, 2017 increased 34.0% to $17.1 million, compared to AFFO of $12.7 million for the comparable period in 2016.  AFFO per share for the three months ended March 31, 2017 increased 5.9% to $0.65, compared to AFFO per share of $0.61 for the comparable period in 2016.

Dividend

The Company paid a cash dividend of $0.495 per share on April 14, 2017 to stockholders of record on March 31, 2017, a 6.5% increase over the $0.465 quarterly dividend declared in the first quarter of 2016.  The quarterly dividend represents payout ratios of approximately 76.6% of FFO per share and 76.4% of AFFO per share, respectively. 

CEO Comments

"We are pleased to deliver another quarter of high-quality results as we continued to execute on our operating strategy," said Joey Agree, President and Chief Executive Officer of Agree Realty Corporation. "Our investments in the quarter were focused on industry-leading retailers that offer a compelling customer experience or employ a comprehensive omni-channel strategy. Looking forward, our balance sheet and our investment pipeline are very well-positioned for the future."

Portfolio Update

As of March 31, 2017, the Company's portfolio consisted of 377 properties located in 43 states and totaled 7.3 million square feet of gross leasable space.  Properties ground leased to tenants accounted for 7.2% of annualized base rents.

The portfolio was approximately 99.6% leased, had a weighted average remaining lease term of approximately 10.6 years, and generated approximately 44.7% of annualized base rents from investment grade retail tenants.

The following table provides a summary of the Company's portfolio as of March 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

342


$89,006


91.0%


41.7%


10.5 yrs

Retail Net Lease Ground Leases

32


7,077


7.2%


86.5%


12.8 yrs

Total Retail Net Lease

374


$96,083


98.2%


45.0%


10.7 yrs

Total Portfolio

377


$97,834


100.0%


44.7%


10.6 yrs




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

(1)

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

(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 2017 was approximately $52.9 million and included 11 assets net leased to notable retailers operating in the discount apparel, auto parts, health and fitness and home furnishings sectors.  The properties are located in 9 states and leased to tenants operating in 8 retail sectors.  The properties were acquired at a weighted average capitalization rate of 7.6% and with a weighted average remaining lease term of approximately 10.6 years.

Dispositions

During the quarter, the Company sold one property net leased to Walgreens in Ann Arbor, Michigan for gross proceeds of approximately $10.5 million. The disposition was completed at a capitalization rate of 5.86%.

Development and Partner Capital Solutions

In the first quarter of 2017, the Company completed two previously announced development and PCS projects, including the Company's first Camping World in Tyler, Texas. The project is under a new 20-year net lease and had a total cost of approximately $7.5 million.

The Company also completed its previously announced Burger King in Heber, Utah. The project is the fifth Burger King in the Company's partnership with Meridian Restaurants, and is subject to a new 20-year net lease. The project had a total cost of approximately $1.7 million

During the first quarter, construction continued on the Company's two other development and PCS projects with anticipated total project costs of approximately $12.3 million. The projects consist of the Company's first ground-up development for Camping World in Georgetown, Kentucky, and the redevelopment and expansion of an existing property in Boynton Beach, Florida for Orchard Supply Hardware (Lowe's Companies, Inc.).

Year-to-date, the Company has announced four development and PCS projects completed or currently under construction. Total project costs for the developments are approximately $21.5 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

Orchard Supply


Boynton Beach, FL


Build-to-Suit


15 Years


Q3 2017


Under Construction

Camping World


Georgetown, KY


Build-to-Suit


20 Years


Q3 2017


Under Construction


(1) Franchise restaurant operated by Meridian Restaurants Unlimited, LC.

 

Leasing

During the first quarter, the Company executed new leases, extensions or options on approximately 346,000 square feet of gross leasable area throughout the existing portfolio.  Notable new leases, extensions or options included seven Tractor Supply stores comprising approximately 154,000 square feet across Texas, Mississippi and Louisiana, as well as a 32,147-square foot TJ Maxx in Aurora, Colorado.

Top Tenants

The following table presents annualized base rents for all tenants that represent 1.5% or greater of the Company's total annualized base rent as of March 31, 2017:

Tenant


Annualized
Base Rent(1)


Percent of
Annualized
Base Rent






Walgreens


$10,288


10.5%

Walmart


4,224


4.3%

Lowe's


3,099


3.2%

LA Fitness


2,761


2.8%

Wawa


2,664


2.7%

Mister Car Wash


2,580


2.6%

Smart & Final


2,518


2.6%

CVS


2,463


2.5%

Dollar General


2,415


2.5%

Tractor Supply


2,183


2.2%

Hobby Lobby


2,177


2.2%

Academy Sports


1,982


2.0%

Burger King(2)


1,907


1.9%

Rite Aid


1,886


1.9%

Dollar Tree


1,832


1.9%

24 Hour Fitness


1,759


1.8%

BJ's Wholesale


1,709


1.7%

AMC


1,585


1.6%

Taco Bell(3)


1,537


1.6%

PetSmart


1,535


1.6%

AutoZone


1,473


1.5%

Other(4)


43,257


44.4%

Total Portfolio


$97,834


100.0%




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

(1)

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

(2)

Franchise restaurants operated by Meridian Restaurants Unlimited, LC.

(3)

Franchise restaurants operated by Charter Foods North, LLC.

(4)

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 March 31, 2017:

Sector


Annualized
Base Rent(1)


Percent of
Annualized
Base Rent






Pharmacy


$14,637


15.0%

Restaurants - Quick Service


6,635


6.8%

Grocery Stores


6,632


6.8%

Discount Apparel


5,479


5.6%

Auto Service


5,452


5.6%

Health & Fitness


4,888


5.0%

Specialty Retail


4,672


4.8%

General Merchandise


3,956


4.0%

Home Improvement


3,790


3.9%

Warehouse Clubs


3,749


3.8%

Crafts and Novelties


3,528


3.6%

Farm and Rural Supply


3,365


3.4%

Sporting Goods


3,149


3.2%

Auto Parts


3,092


3.2%

Dollar Stores


3,038


3.1%

Convenience Stores


2,830


2.9%

Restaurants - Casual Dining


2,481


2.5%

Other(2)


16,461


16.8%

Total Portfolio


$97,834


100.0%




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

(1)

Represents annualized straight-line rent as of March 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 March 31, 2017:

State


Annualized
Base Rent(1)


Percent of
Annualized
Base Rent






Michigan


$13,940


14.2%

Texas


8,838


9.0%

Florida


7,491


7.7%

Illinois


7,366


7.5%

Ohio


5,779


5.9%

Pennsylvania


4,095


4.2%

California


3,700


3.8%

Mississippi


2,857


2.9%

Wisconsin


2,841


2.9%

Kentucky


2,723


2.8%

Colorado


2,571


2.6%

Kansas


2,540


2.6%

North Carolina


2,485


2.5%

Missouri


2,424


2.5%

Other(2)


28,184


28.9%

Total Portfolio


$97,834


100.0%




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

(1)

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

(2)

Includes states 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, 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











2017

4


$372


0.4%


22


0.3%

2018

14


2,073


2.1%


352


4.8%

2019

14


4,419


4.5%


377


5.1%

2020

17


2,521


2.6%


219


3.0%

2021

28


5,500


5.6%


336


4.6%

2022

20


3,991


4.1%


377


5.1%

2023

30


5,404


5.5%


502


6.9%

2024

37


9,165


9.4%


882


12.0%

2025

35


6,989


7.1%


547


7.5%

2026

37


4,973


5.1%


451


6.2%

Thereafter

192


52,427


53.6%


3,261


44.5%

Total Portfolio

428


$97,834


100.0%


7,326


100.0%




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

(1)

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

 

Balance Sheet

Balance Sheet

As of March 31, 2017, the Company's net debt-to-recurring EBITDA was 4.9 times and its fixed charge coverage ratio was 4.0 times. The Company's total debt to total enterprise value was 24.7%.  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, 2017, the Company's fully diluted weighted average shares outstanding were 26.0 million.  The basic weighted average shares outstanding for the three months ended March 31, 2017 were 26.0 million.

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, 2017, there were 347,619 operating partnership units outstanding and the Company held a 98.7% interest in the operating partnership.

2017 Outlook

The Company's outlook for acquisition volume in 2017, which assumes continued growth in economic activity, moderate interest rate growth, positive business trends and other significant assumptions, remains between $200 million and $225 million of high-quality retail net lease properties.  The Company's disposition guidance for 2017 remains between $20 million and $50 million.

Conference Call/Webcast

The Company will host its quarterly analyst and investor conference call on Tuesday, April 25, 2017 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.  The Company currently owns and operates a portfolio of 378 properties, located in 43 states and containing approximately 7.3 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, 2016 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 24, 2017. 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)



March 31, 2017


December 31, 2016

Assets:

(Unaudited)



Real Estate Investments:




Land  

$                   319,935


$                   309,687

Buildings

737,605


703,506

Accumulated depreciation

(73,657)


(69,696)

Property under development 

8,414


6,764

Net real estate investments

992,297


950,261

Cash and cash equivalents

2,300


33,395

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

13,069


11,535

Unamortized Deferred Expenses:




Credit facility finance costs, net of accumulated amortization of $127 and
$1,262 at March 31, 2017 and December 31, 2016, respectively

1,456


1,552

Leasing costs, net of accumulated amortization of $717 and $677 at March 31,
2017 and December 31, 2016, respectively

1,575


1,227

Lease intangibles, net of accumulated amortization of $29,103 and $25,666 at March 31,
2017 and December 31, 2016, respectively

140,652


139,871

Interest rate swaps

1,561


1,409

Other assets

5,330


2,722

Total Assets

$                 1,158,240


$                 1,141,972





Liabilities:




Mortgage notes payable, net

$                     68,539


$                     69,067

Unsecured term loans, net

158,557


158,679

Senior unsecured notes, net

159,198


159,176

Unsecured revolving credit facility

29,000


14,000

Dividends and distributions payable

13,151


13,124

Deferred revenue

1,650


1,823

Accrued interest payable

2,671


2,210

Accounts payable and accrued expenses:




Capital expenditures

61


677

Operating

4,956


4,866

Lease intangibles, net of accumulated amortization of $8,087 and $7,078 at
March 31, 2017 and December 31, 2016, respectively

30,702


30,047

Interest rate swaps

1,404


1,994

Deferred income taxes

705


705

Tenant deposits

94


94

Total Liabilities

470,688


456,462





Stockholders' Equity:




Common stock, $.0001 par value, 45,000,000 shares authorized, 26,219,680
and 26,164,977 shares issued and outstanding, 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

711,753


712,069

Dividends in excess of net income

(26,962)


(28,558)

Accumulated other comprehensive income (loss)

195


(536)

Total Stockholders' Equity - Agree Realty Corporation

684,989


682,978

Non-controlling interest

2,563


2,532

Total Equity

687,552


685,510

Total Liabilities and Equity

$                 1,158,240


$                 1,141,972

 

 

Agree Realty Corporation

Consolidated Statements of Operations and Comprehensive Income

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

(Unaudited)






Three months ended
March 31,


2017


2016

Revenues




Minimum rents

$                  24,014


$                  18,491

Percentage rents

212


183

Operating cost reimbursement

2,344


1,589

Other income

(10)


(39)

Total Revenues

26,560


20,224





Operating Expenses




Real estate taxes

1,808


1,123

Property operating expenses

797


573

Land lease payments

163


163

General and administrative

2,603


2,045

Depreciation and amortization

7,025


5,085

Total Operating Expenses

12,396


8,989





Income from Operations

14,164


11,235





Other (Expense) Income




Interest expense, net

(4,138)


(3,649)

Gain on sale of assets

4,742


-





Net Income

14,768


7,586





Less net income attributable to non-controlling interest

193


125





Net Income Attributable to Agree Realty Corporation

$                  14,575


$                   7,461





Net Income Per Share Attributable to Agree Realty Corporation




Basic

$                     0.56


$                     0.36

Diluted

$                     0.56


$                     0.36









Other Comprehensive Income




Net income

$                  14,768


$                   7,586

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

741


(2,935)

Total Comprehensive Income

15,509


4,651

Comprehensive Income Attributable to Non-Controlling Interest

(203)


(77)

Comprehensive Income Attributable to Agree Realty Corporation

$                  15,306


$                   4,574





Weighted Average Number of Common Shares Outstanding - Basic

25,953,097


20,438,729

Weighted Average Number of Common Shares Outstanding - Diluted

26,009,120


20,480,140

 

 

Agree Realty Corporation

Reconciliation of Net Income to FFO and Adjusted FFO

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

(Unaudited)







Three months ended
March 31,



2017


2016







Net income

$                   14,768


$                     7,586


Depreciation of real estate assets

4,484


3,362


Amortization of leasing costs

42


23


Amortization of lease intangibles

2,474


1,685


(Gain) loss on sale of assets

(4,742)


-


Funds from Operations

$                   17,026


$                   12,656


Straight-line accrued rent

(808)


(649)


Deferred revenue recognition

-


(116)


Stock based compensation expense

683


708


Amortization of financing costs

142


118


Non-real estate depreciation

25


15


Adjusted Funds from Operations

$                   17,068


$                   12,732







FFO per common share - Basic

$                       0.65


$                       0.61


FFO per common share - Diluted

$                       0.65


$                       0.61







Adjusted FFO per common share - Basic

$                       0.65


$                       0.61


Adjusted FFO per common share - Diluted

$                       0.65


$                       0.61







Weighted Average Number of Common Shares and Units Outstanding - Basic

26,300,716


20,786,348


Weighted Average Number of Common Shares and Units Outstanding - Diluted

26,356,739


20,827,759












Supplemental Information:





Scheduled principal repayments

$                        769


$                        720


Capitalized interest

67


7


Capitalized building improvements

15


-


 

 

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 as alternatives 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 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.

Any differences a result of rounding.

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/agree-realty-corporation-reports-first-quarter-2017-results-300444476.html

SOURCE Agree Realty Corporation

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