BLOOMFIELD HILLS, Mich., Oct. 22, 2018 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) (the "Company") today announced results for the quarter ended September 30, 2018.  All per share amounts included herein are on a diluted per common share basis unless otherwise stated.

Third Quarter 2018 Financial and Operating Highlights:

• Invested $158.6 million in 52 retail net lease properties
• Increased rental revenue 23.0% to $33.6 million
• Net Income per share attributable to the Company increased 14.2% to $0.48
• Net Income attributable to the Company increased 28.1% to $15.6 million
• Increased Funds from Operations ("FFO") per share 4.3% to $0.72
• Increased FFO 17.7% to $23.5 million
• Increased Adjusted Funds from Operations ("AFFO") per share 3.7% to $0.72
• Increased AFFO 17.4% to $23.4 million
• Declared a quarterly dividend of $0.54 per share, a 6.9% year-over-year increase

Third Quarter 2018 Capital Markets Activities:

• Completed forward equity offering for anticipated net proceeds of approximately $190.0 million
• Settled March forward equity offering for net proceeds of $160.2 million
• Closed $125.0 million private placement of 12-year senior unsecured notes at a fixed interest rate of 4.32%
• Exercised accordion option to increase capacity on revolving credit facility to $325.0 million
• Balance sheet well-positioned at 4.7 times net debt to recurring EBITDA

Financial Results

Total Rental Revenue

Total rental revenue, which includes minimum rents and percentage rents, for the three months ended September 30, 2018 increased 23.0% to $33.6 million, compared to total rental revenue of $27.3 million for the comparable period in 2017.

Total rental revenue for the nine months ended September 30, 2018 increased 26.1% to $96.7 million, compared to total rental revenue of $76.7 million for the comparable period in 2017.

Net Income

Net Income attributable to the Company for the three months ended September 30, 2018 increased 28.1% to $15.6 million, compared to $12.2 million for the comparable period in 2017. Net Income per share attributable to the Company for the three months ended September 30, 2018 increased 14.2% to $0.48, compared to $0.42 per share for the comparable period in 2017.

Net income attributable to the Company for the nine months ended September 30, 2018 increased 8.0% to $45.0 million, compared to $41.6 million for the comparable period in 2017.  Net income per share attributable to the Company for the nine months ended September 30, 2018 decreased 6.6% to $1.42, compared to $1.52 per share for the comparable period in 2017.

Funds from Operations

FFO for the three months ended September 30, 2018 increased 17.7% to $23.5 million, compared to FFO of $20.0 million for the comparable period in 2017.  FFO per share for the three months ended September 30, 2018 increased 4.3% to $0.72, compared to FFO per share of $0.69 for the comparable period in 2017.

FFO for the nine months ended September 30, 2018 increased 23.5% to $67.8 million, compared to FFO of $55.0 million for the comparable period in 2017.  FFO per share for the nine months ended September 30, 2018 increased 6.6% to $2.13, compared to FFO per share of $2.00 for the comparable period in 2017.

Adjusted Funds from Operations

AFFO for the three months ended September 30, 2018 increased 17.4% to $23.4 million, compared to AFFO of $19.9 million for the comparable period in 2017.  AFFO per share for the three months ended September 30, 2018 increased 3.7% to $0.72, compared to AFFO per share of $0.69 for the comparable period in 2017.

AFFO for the nine months ended September 30, 2018 increased 22.9% to $67.4 million, compared to AFFO of $54.8 million for the comparable period in 2017.  AFFO per share for the nine months ended September 30, 2018 increased 5.9% to $2.12, compared to AFFO per share of $2.00 for the comparable period in 2017.

Dividend

The Company paid a cash dividend of $0.54 per share on October 12, 2018 to stockholders of record on September 28, 2018, a 6.9% increase over the $0.505 quarterly dividend declared in the third quarter of 2017.  The quarterly dividend represents payout ratios of approximately 75% of FFO per share and AFFO per share, respectively.

For the nine months ended September 30, 2018, the Company declared dividends of $1.60 per share, a 6.3% increase over the dividends of $1.505 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 extremely pleased with our record investment activity as well as our strategic capital markets transactions executed during the quarter," said Joey Agree, President and Chief Executive Officer of Agree Realty Corporation. "Given our unique investment platforms and our well-positioned balance sheet, we are increasing our full-year acquisition guidance to a range of $425 million to $475 million. While increasing this guidance, we remain focused on the highest-quality real estate occupied by leading omni-channel retailers."

Portfolio Update                                                               

As of September 30, 2018, the Company's portfolio consisted of 520 properties located in 45 states and totaled 10.0 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 10.1 years, and generated approximately 47.2% of annualized base rents from investment grade retail tenants.

Ground Lease Portfolio

As of September 30, 2018, the Company's ground lease portfolio consisted of 44 properties located in 18 states and totaled 1.2 million square feet of gross leasable space. Ground leased assets acquired during the quarter include a Walmart in Manassas, Virginia and a Texas Roadhouse in Pittsburgh, Pennsylvania. 

The ground lease portfolio was fully occupied, had a weighted-average remaining lease term of approximately 11.1 years, and generated approximately 89.2% of annualized base rents from investment grade retail tenants.

Acquisitions

Total acquisition volume for the third quarter of 2018 was approximately $150.6 million and included 43 assets net leased to notable retailers operating in the off-price retail, home improvement, convenience store, auto parts, and tire and auto service sectors.  The properties are located in 20 states and leased to tenants operating in 14 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 11.5 years.

For the nine months ended September 30, 2018, total acquisition volume was approximately $351.1 million and included 96 high-quality retail net lease assets.  The properties are located in 29 states and leased to 38 diverse tenants who operate in 21 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 12.3 years.

The Company's outlook for acquisition volume in 2018 is being increased to a range of $425 million to $475 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 $350 million to $400 million.

Dispositions

During the third quarter, the Company sold six properties for gross proceeds of approximately $30.3 million. The dispositions were completed at a weighted-average capitalization rate of 7.3%.

For the nine months ended September 30, 2018, the Company has divested of 16 properties for total gross proceeds of $58.0 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 remains between $50 million to $75 million.

Development and Partner Capital Solutions  

In the third quarter of 2018, the Company completed three previously announced development and PCS projects including the Company's second project with leading Burger King franchisee TOMS King; the Company's first project with Burlington Coat Factory in Nampa, Idaho; and the Company's first PCS project with ALDI in Chickasha, Oklahoma. The projects had total aggregate costs of approximately $11.0 million.

The Company commenced three new development and PCS projects during the third quarter, with total anticipated costs of approximately $8.5 million.  The projects consist of the Company's first two developments with Sunbelt Rentals in Batavia and Maumee, Ohio and the Company's redevelopment of the former Kmart space in Mount Pleasant, Michigan for Hobby Lobby.

Construction continued during the third quarter on two projects with total anticipated costs of approximately $5.5 million. The projects include the Company's third and fourth developments with Mister Car Wash in Orlando and Tavares, Florida.

For the nine months ended September 30, 2018, the Company had 13 development or PCS projects completed or under construction. Anticipated total costs are approximately $59.6 million and include the following projects:

(1)  Franchise restaurant operated by TOMS King, LLC.

Leasing Activity and Expirations

During the third quarter, the Company executed new leases, extensions or options on approximately 54,000 square feet of gross leasable area throughout the existing portfolio. Notable new leases, extensions or options included a 20,269-square foot Old Navy in Grand Chute, Wisconsin.

For the nine months ended September 30, 2018, the Company executed new leases, extensions or options on approximately 241,000 square feet of gross leasable area throughout the existing portfolio.

At quarter end, the Company's 2018 lease maturities represented 0.2% of annualized base rents. The following table presents contractual lease expirations within the Company's portfolio as of September 30, 2018, assuming no tenants exercise renewal options:

 

Top Tenants

As of September 30 ^th, Smart & Final and Michaels are no longer among the Company's 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 September 30, 2018:

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 September 30, 2018:

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 September 30, 2018:

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. The Company settled the entirety of the forward equity offering in September and received net proceeds of $160.2 million.

In July 2018, the Company partially exercised the accordion option of its unsecured revolving credit facility and increased its borrowing capacity from $250 million to $325 million.  The Company had $14.0 million of outstanding borrowings on the revolving credit facility at quarter end.

In September 2018, the Company completed a follow-on public offering of 3,500,000 shares of common stock in connection with a forward sale agreement. Upon settlement, the offering is anticipated to raise net proceeds of approximately $190.0 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 September 2018, the Company completed a private placement of $125.0 million principal amount of senior unsecured notes. The notes have a 12-year term, maturing on September 26, 2030, priced at fixed interest rate of 4.32%.

Balance Sheet

As of September 30, 2018, the Company's net debt to recurring EBITDA was 4.7 times and its fixed charge coverage ratio was 4.1 times. The Company's total debt to total enterprise value was 25.1%.  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 nine months ended September 30, 2018, the Company's fully diluted weighted-average shares outstanding were 32.3 million and 31.5 million, respectively. The basic weighted-average shares outstanding for the three and nine months ended September 30, 2018 were 31.8 million and 31.1 million, respectively.

For the three and nine months ended September 30, 2018, the Company's fully diluted weighted-average shares and units outstanding were 32.6 million and 31.8 million, respectively. The basic weighted-average shares and units outstanding for the three and nine months ended September 30, 2018 were 32.1 million and 31.5 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 September 30, 2018, there were 347,619 operating partnership units outstanding and the Company held a 99.0% interest in the operating partnership.

Conference Call/Webcast

The Company will host its quarterly analyst and investor conference call on Tuesday, October 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 September 30, 2018, the Company owned and operated a portfolio of 520 properties, located in 45 states and containing approximately 10.0 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 October 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.

 

 

 

 

 

 

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SOURCE Agree Realty Corporation