Tenant

Location

Lease
Structure

Lease
Term

Actual or
Anticipated Rent
Commencement

Status

Mister Car Wash

Orlando, FL

Build-to-Suit

20 years

Q1 2019

Complete

Mister Car Wash

Tavares, FL

Build-to-Suit

20 years

Q1 2019

Complete

Sunbelt Rentals

Maumee, OH

Build-to-Suit

10 years

Q1 2019

Complete

Sunbelt Rentals

Batavia, OH

Build-to-Suit

10 years

Q2 2019

Under Construction

Sunbelt Rentals

Georgetown, KY

Build-to-Suit

15 years

Q3 2019

Under Construction

Gerber Collision

Round Lake, IL

Build-to-Suit

15 years

Q3 2019

Under Construction

Sunbelt Rentals

Carrizo Springs, TX

Build-to-Suit

10 years

Q4 2019

Under Construction

Hobby Lobby

Mt. Pleasant, MI

Build-to-Suit

15 years

Q4 2019

Under Construction

Big Lots

Frankfort, KY

Build-to-Suit

10 years

Q1 2020

Under Construction

Harbor Freight Tools

Frankfort, KY

Build-to-Suit

10 years

Q1 2020

Under Construction

ALDI

Frankfort, KY

Build-to-Suit

10 years

Q2 2020

Under Construction

Year

 Leases

Annualized
Base Rent⁽¹⁾

 Percent of
Annualized
Base Rent

Gross Leasable
Area

 Percent of Gross
Leasable Area

2019

5

1,517

0.9%

70

0.6%

2020

19

3,218

1.9%

232

2.0%

2021

26

5,228

3.1%

314

2.6%

2022

23

4,389

2.6%

387

3.3%

2023

39

7,148

4.2%

719

6.1%

2024

38

10,647

6.3%

1,062

8.9%

2025

42

9,908

5.9%

886

7.5%

2026

56

9,350

5.6%

963

8.1%

2027

55

12,094

7.2%

797

6.7%

2028

56

15,545

9.2%

1,187

10.0%

Thereafter

406

89,294

53.1%

5,257

44.2%

Total Portfolio

765

$168,338

100.0%

11,874

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

Annualized Base Rent represents the annualized amount of contractual minimum rent required by tenant lease agreements as of March 31, 2019, computed on a straight-line basis.   Annualized Base Rent is not, and is not intended to be, a presentation in accordance with GAAP.   The Company believes annualized contractual minimum rent is frequently useful to management, investors, and other interested parties in analyzing concentrations and leasing activity. 

Tenant

Annualized
Base Rent⁽¹⁾

 Percent of Annualized
Base Rent

Sherwin-Williams

$10,001

5.9%

Walgreens

7,729

4.6%

Walmart

6,092

3.6%

LA Fitness

5,644

3.4%

TJX Companies

5,496

3.3%

Tractor Supply

4,521

2.7%

Lowe's

4,215

2.5%

Dollar General

3,870

2.3%

O'Reilly Auto Parts

3,731

2.2%

Mister Car Wash

3,669

2.2%

TBC Corporation

3,421

2.0%

CVS

3,397

2.0%

Dave & Buster's

3,052

1.8%

Hobby Lobby

3,012

1.8%

AutoZone

3,010

1.8%

Best Buy

2,979

1.8%

Dollar Tree

2,735

1.6%

Wawa

2,664

1.6%

Burlington

2,572

1.5%

Other⁽²⁾

86,528

51.4%

Total Portfolio

$168,338

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 March 31, 2019.

(1)

Refer to footnote 1 on page 4 for the Company's definition of Annualized Base Rent. 

(2)

Includes tenants generating less than 1.5% of Annualized Base Rent.

Sector

Annualized
Base Rent⁽¹⁾

 Percent of Annualized
Base Rent

Home Improvement

$17,914

10.6%

Tire and Auto Service

14,850

8.8%

Pharmacy

12,712

7.6%

Grocery Stores

10,728

6.4%

Off-Price Retail

9,958

5.9%

Health and Fitness

8,685

5.2%

Auto Parts

7,966

4.7%

Convenience Stores

7,323

4.3%

Restaurants - Quick Service

6,616

3.9%

General Merchandise

5,924

3.5%

Farm and Rural Supply

5,622

3.3%

Dollar Stores

5,396

3.2%

Crafts and Novelties

5,391

3.2%

Specialty Retail

4,467

2.7%

Home Furnishings

4,364

2.6%

Consumer Electronics

4,335

2.6%

Other⁽²⁾

36,087

21.5%

Total Portfolio

$168,338

100.0%

Annualized Base Rent is in thousands; any differences are the result of rounding.

(1)

Refer to footnote 1 on page 4 for the Company's definition of Annualized Base Rent. 

(2)

Includes sectors generating less than 2.5% of Annualized Base Rent.

State

Annualized
Base Rent⁽¹⁾

 Percent of Annualized
Base Rent

Michigan

$15,632

9.3%

Texas

14,202

8.4%

Florida

10,663

6.3%

Ohio

9,418

5.6%

Illinois

9,256

5.5%

New Jersey

8,538

5.1%

Pennsylvania

7,510

4.5%

Georgia

6,761

4.0%

Louisiana

5,774

3.4%

Missouri

5,544

3.3%

North Carolina

4,838

2.9%

Mississippi

4,477

2.7%

Virginia

4,250

2.5%

Other⁽²⁾

61,475

36.5%

Total Portfolio

$168,338

100.0%

Annualized Base Rent is in thousands; any differences are the result of rounding.

(1)

Refer to footnote 1 on page 4 for the Company's definition of Annualized Base Rent. 

(2)

Includes states generating less than 2.5% of Annualized Base Rent.

Agree Realty Corporation

Consolidated Balance Sheet

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

March 31, 2019

December 31, 2018

Assets:

(Unaudited)

Real Estate Investments:

Land  

$                588,295

$                553,704

Buildings

1,287,700

1,194,985

Accumulated depreciation

(106,670)

(100,312)

Property under development 

11,444

12,957

Net real estate investments

1,780,769

1,661,334

Cash and cash equivalents

22,325

53,955

Cash held in escrows

3,024

20

Accounts receivable - tenants

23,695

21,547

Lease intangibles, net of accumulated amortization of $68,985 and $62,543 at
March 31, 2019 and December 31, 2018, respectively

289,928

280,153

Other assets, net

30,596

11,180

Total Assets

$             2,028,189

Liabilities:

Mortgage notes payable, net

$                  60,303

$                  60,926

Unsecured term loans, net

256,244

256,419

Senior unsecured notes, net

384,117

384,064

Unsecured revolving credit facility

71,000

19,000

Dividends and distributions payable

21,535

21,031

Accounts payable, accrued expenses and other liabilities

39,843

21,045

Lease intangibles, net of accumulated amortization of $16,291 and $15,177 at
March 31, 2019 and December 31, 2018, respectively

27,873

27,218

Total Liabilities

$                860,915

$                789,703

Equity:

Common stock, $.0001 par value, 45,000,000 shares authorized, 38,454,782 and
37,545,790 shares issued and outstanding at March 31, 2019 and December 31,
2018, respectively

$                           4

$                           4

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

-

-

Additional paid-in capital

1,334,952

1,277,592

Dividends in excess of net income

(45,940)

(42,945)

Accumulated other comprehensive income (loss)

(1,950)

1,424

Equity - Agree Realty Corporation

$             1,287,066

$             1,236,075

Non-controlling interest

2,356

2,411

Total Equity

$             1,289,422

$             1,238,486

Total Liabilities and Equity

$             2,150,337

$             2,028,189

Agree Realty Corporation

Consolidated Statements of Operations and Comprehensive Income

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

(Unaudited)

Three months ended
March 31,

2019

2018

Revenues

Rental income

$                  42,345

$                  32,280

Other

3

46

Total Revenues

$                  42,348

$                  32,326

Operating Expenses

Real estate taxes

$                    3,622

$                    2,377

Property operating expenses

1,739

1,516

Land lease expense

195

163

General and administrative

4,035

2,862

Depreciation and amortization

9,864

7,761

Provision for impairment

416

-

Total Operating Expenses

$                  19,871

$                  14,679

Income from Operations

$                  22,477

$                  17,647

Other (Expense) Income

Interest expense, net

$                   (7,558)

$                   (5,465)

Gain (loss) on sale of assets, net

3,427

4,598

Income tax benefit (expense)

170

(50)

Other (expense) income

-

(94)

Net Income

$                  18,516

$                  16,636

Less Net Income Attributable to Non-Controlling Interest

169

185

Net Income Attributable to Agree Realty Corporation

$                  18,347

$                  16,451

Net Income Per Share Attributable to Agree Realty Corporation

Basic

$                      0.49

$                      0.53

Diluted

$                      0.48

$                      0.53

Other Comprehensive Income

Net Income

$                  18,516

$                  16,636

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

(3,405)

1,920

Total Comprehensive Income

15,111

18,556

Comprehensive Income Attributable to Non-Controlling Interest

(138)

(206)

Comprehensive Income Attributable to Agree Realty Corporation

$                  14,973

$                  18,350

Weighted Average Number of Common Shares Outstanding - Basic

37,487,851

30,801,471

Weighted Average Number of Common Shares Outstanding - Diluted

38,320,307

30,851,058

Agree Realty Corporation

Reconciliation of Net Income to FFO, Core FFO and Adjusted FFO

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

(Unaudited)

Three months ended
March 31,

2019

2018

Net Income

$                  18,516

$                  16,636

Depreciation of rental real estate assets

7,643

5,654

Amortization of lease intangibles - in-place leases and leasing costs

2,157

2,085

Provision for impairment

416

-

(Gain) loss on sale of assets, net

(3,427)

(4,598)

Funds from Operations

$                  25,305

$                  19,777

Amortization of above (below) market lease intangibles, net

3,276

2,243

Core Funds from Operations

$                  28,581

$                  22,020

Straight-line accrued rent

(1,498)

(1,113)

Deferred tax expense (benefit)

(475)

-

Stock based compensation expense

913

692

Amortization of financing costs

156

166

Non-real estate depreciation

64

22

Adjusted Funds from Operations

$                  27,741

$                  21,787

Funds from Operations per common share - Basic

$                      0.67

$                      0.63

Funds from Operations per common share - Diluted

$                      0.65

$                      0.63

Core Funds from Operations per common share - Basic

$                      0.76

$                      0.71

Core Funds from Operations per common share - Diluted

$                      0.74

$                      0.71

Adjusted Funds from Operations per common share - Basic

$                      0.73

$                      0.70

Adjusted Funds from Operations per common share - Diluted

$                      0.72

$                      0.70

Weighted Average Number of Common Shares and Units Outstanding - Basic

37,835,470

31,149,090

Weighted Average Number of Common Shares and Units Outstanding - Diluted

38,667,926

31,198,677

Supplemental Information:

Scheduled principal repayments

$                       863

$                       820

Capitalized interest

90

144

Capitalized building improvements

34

34

Non-GAAP Financial Measures

Funds from Operations ("FFO or "Nareit FFO")
FFO is defined by the National Association of Real Estate Investment Trusts, Inc. ("Nareit") to mean net income computed in accordance with GAAP, excluding gains (or losses) from sales of real estate assets and/or changes in control, plus real estate related depreciation and amortization and any impairment charges on depreciable real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets in accordance with GAAP 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.

FFO should not be considered an alternative to net income as the primary indicator of the Company's operating performance, or as an alternative to cash flow as a measure of liquidity. Further, while the Company adheres to the Nareit definition of FFO, its presentation of FFO is not necessarily comparable to similarly titled measures of other REITs due to the fact that all REITs may not use the same definition.

Core Funds from Operations ("Core FFO")
The Company defines Core FFO as Nareit FFO with the addback of noncash amortization of above- and below- market lease intangibles. Under GAAP and Nareit's definition of FFO, lease intangibles created upon acquisition of a net lease must be amortized over the remaining term of the lease. The Company believes that by recognizing amortization charges for above- and below- market lease intangibles, the utility of FFO as a financial performance measure can be diminished.  Management believes that its measure of Core FFO facilitates useful comparison of performance to its peers who predominantly transact in sale-leaseback transactions and are thereby not required by GAAP to allocate purchase price to lease intangibles.  Unlike many of its peers, the Company has acquired the substantial majority of its net leased properties through acquisitions of properties from third parties or in connection with the acquisitions of ground leases from third parties. Core FFO should not be considered an alternative to net income as the primary indicator of the Company's operating performance, or as an alternative to cash flow as a measure of liquidity. Further, the Company's presentation of Core FFO is not necessarily comparable to similarly titled measures of other REITs due to the fact that all REITs may not use the same definition.

Adjusted Funds from Operations ("AFFO")
AFFO is a non-GAAP financial measure of operating performance used by many companies in the REIT industry. AFFO further adjusts FFO and Core FFO for certain non-cash and/or infrequently recurring items that reduce or increase net income in accordance with GAAP. Management considers AFFO a useful supplemental measure of the Company's performance, however, AFFO should not be considered an alternative to net income as an indication of the Company's performance, or to cash flow as a measure of liquidity or ability to make distributions. The Company's computation of AFFO may differ from the methodology for calculating AFFO used by other equity REITs, and therefore may not be comparable to such other REITs.

Agree Realty Corporation

Reconciliation of Net Debt to Recurring EBITDA

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

(Unaudited)

Three months ended
March 31,

2019

Net Income

$                      18,516

Interest expense, net

7,558

Income tax (benefit) expense

(170)

Depreciation of rental real estate assets

7,643

Amortization of lease intangibles - in-place leases and leasing costs

2,157

Non-real estate depreciation

64

Provision for impairment

416

(Gain) loss on sale of assets, net

(3,427)

EBITDAre

$                      32,757

Run-Rate Impact of Investment and Disposition Activity

$                        1,657

Amortization of above (below) market lease intangibles, net

3,276

Other expense (income)

-

Recurring EBITDA

$                      37,690

Annualized Recurring EBITDA

$                    150,760

Total Debt

$                    775,200

Cash, cash equivalents and cash held in escrows

(25,349)

Net Debt

$                    749,851

Net Debt to Recurring EBITDA

Non-GAAP Financial Measures

EBITDA re
EBITDAreis defined by Nareit to mean net income computed in accordance with GAAP, plus interest expense, income tax expense, depreciation and amortization, any gains (or losses) from sales of real estate assets and/or changes in control, any impairment charges on depreciable real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. The Company considers the non-GAAP measure of EBITDAreto 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 EBITDArea key supplemental measure of the Company's operating performance because it provides an additional supplemental measure of the Company's performance and operating cash flow that is widely known by industry analysts, lenders and investors. The Company's calculation of EBITDAremay not be comparable to EBITDArereported by other REITs that interpret the Nareit definition differently than the Company.

Recurring EBITDA
The Company defines Recurring EBITDA as EBITDArewith the addback of noncash amortization of above- and below- market lease intangibles, and after adjustments for the run-rate impact of the Company's investment and disposition activity for the period presented, as well as adjustments for non-recurring benefits or expenses. 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 annualized Recurring EBITDA and dividing it by our net debt per the consolidated balance sheet. 

Net Debt
The Company defines Net Debt as total debt less cash, cash equivalents and cash held in escrows. The Company considers the non-GAAP measure of Net Debt to be a key supplemental measure of the Company's overall liquidity, capital structure and leverage. The Company considers Net Debt a key supplemental measure because it provides industry analysts, lenders and investors useful information in understanding our financial condition. The Company's calculation of Net Debt may not be comparable to Net Debt reported by other REITs that interpret the definition differently than the Company.

Any differences are a result of rounding. 

Agree Realty Corporation

Rental Income

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

(Unaudited)

Three months ended
March 31,

2019

2018

Rental Income Source ⁽¹⁾

Minimum rents⁽²⁾

$                  38,722

$                  29,623

Percentage rents⁽²⁾

287

216

Operating cost reimbursement⁽²⁾

5,114

3,564

Straight-line rental adjustments⁽³⁾

1,498

1,120

Amortization of (above) below market lease intangibles⁽⁴⁾

(3,276)

(2,243)

Other⁽⁵⁾

3

46

Total Rental Income

$                  42,348

$                  32,326

(1)   The Company adopted Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC") 842 "Leases" using the modified retrospective approach as of January 1, 2019.  The Company adopted the practical expedient in FASB ASC 842 that alleviates the requirement to separately present lease and non-lease components of lease contracts. As a result, all income earned pursuant to tenant leases is reflected as one line, "Rental Income," in the consolidated statement of operations.  The purpose of this table is to provide additional supplementary detail of Rental Income.

(2)   Represents contractual rentals and/or reimbursements as required by tenant lease agreements, recognized on an accrual basis of accounting.  The Company believes that the presentation of contractual lease income is not, and is not intended to be, a presentation in accordance with GAAP. The Company believes this information is frequently used by management, investors, analysts and other interested parties to evaluate the Company's performance.

(3)   Represents adjustments to recognize minimum rents on a straight-line basis, consistent with the requirements of FASB ASC 842.

(4)   In allocating the fair value of an acquired property, above- and below-market lease intangibles are recorded based on the present value of the difference between the contractual amounts to be paid pursuant to the leases at the time of acquisition and the Company's estimate of current market lease rates for the property.  Effective in 2019, the Company began classifying amortization of above- and below-market lease intangibles as a net reduction of rental income and has reclassified prior periods for comparability.

(5)   Represents amortization of tenant inducements and/or other adjustments required to recognize rental income in accordance with GAAP.