BLOOMFIELD HILLS, Mich., July 26, 2021 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) (the "Company") today announced results for the quarter ended June 30, 2021.  All per share amounts included herein are on a diluted per common share basis unless otherwise stated.

Second Quarter 2021 Financial and Operating Highlights:

• Invested approximately $366 million in 59 retail net lease properties
• Approximately 30.5% of annualized base rents acquired were derived from ground leased assets
• Net Income attributable to the Company decreased 11.5% to $22.3 million; 27.3% decrease per share to $0.34
• Core Funds from Operations ("Core FFO") increased 43.4% to $58.6 million; 17.3% increase per share to $0.89
• Adjusted Funds from Operations ("AFFO") increased 41.6% to $57.6 million; 15.9% increase per share to $0.88
• Declared a July monthly dividend of $0.217 per share, an 8.5% year-over-year increase
• Completed dual-tranche public bond offering comprised of $350 million of 2.00% senior unsecured notes due 2028 and $300 million of 2.60% senior unsecured notes due 2033
• Completed a follow-on public offering of 4,600,000 shares of common stock, including the underwriters' option to purchase additional shares, raising net proceeds of approximately $327 million
• Sold 1,178,197 shares of common stock via the forward component of the Company's at-the-market equity ("ATM") program for anticipated net proceeds of approximately $81 million
• Balance sheet positioned for growth at 3.6 times proforma net debt to recurring EBITDA; 4.5 times excluding unsettled forward equity

First Half 2021 Financial and Operating Highlights:

• Invested a record of approximately $756 million in 146 retail net lease properties
• Completed four development or Partner Capital Solutions ("PCS") projects
• Net Income attributable to the Company increased 12.8% to $52.5 million; 12.7% decrease per share to $0.82
• Core FFO increased 42.7% to $111.9 million; 10.3% increase per share to $1.74
• AFFO increased 41.4% to $110.1 million; 9.2% increase per share to $1.71
• Settled 742,860 shares of the Company's ATM forward equity for net proceeds of approximately $47 million
• Declared dividends of $1.272 per share, a 7.3% year-over-year increase

Financial Results

Net Income

Net Income attributable to the Company for the three months ended June 30, 2021 decreased 11.5% to $22.3 million, compared to $25.3 million for the comparable period in 2020. On a per share basis, net income attributable to the Company for the three months ended June 30, 2021 decreased 27.3% to $0.34, compared to $0.47 per share for the comparable period in 2020.

Net Income attributable to the Company for the six months ended June 30, 2021 increased 12.8% to $52.5 million, compared to $46.5 million for the comparable period in 2020.  On a per share basis, net income attributable to the Company for the six months ended June 30, 2021 decreased 12.7% to $0.82, compared to $0.93 per share for the comparable period in 2020.

Core Funds from Operations

Core FFO for the three months ended June 30, 2021 increased 43.4% to $58.6 million, compared to Core FFO of $40.9 million for the comparable period in 2020. Core FFO per share for the three months ended June 30, 2021 increased 17.3% to $0.89, compared to Core FFO per share of $0.76 for the comparable period in 2020.

Core FFO for the six months ended June 30, 2021 increased 42.7% to $111.9 million, compared to Core FFO of $78.4 million for the comparable period in 2020.  Core FFO per share for the six months ended June 30, 2021 increased 10.3% to $1.74, compared to Core FFO per share of $1.58 for the comparable period in 2020.

Adjusted Funds from Operations

AFFO for the three months ended June 30, 2021 increased 41.6% to $57.6 million, compared to AFFO of $40.7 million for the comparable period in 2020.  AFFO per share for the three months ended June 30, 2021 increased 15.9% to $0.88, compared to AFFO per share of $0.76 for the comparable period in 2020.

AFFO for the six months ended June 30, 2021 increased 41.4% to $110.1 million, compared to AFFO of $77.9 million for the comparable period in 2020.  AFFO per share for the six months ended June 30, 2021 increased 9.2% to $1.71, compared to AFFO per share of $1.57 for the comparable period in 2020.

Dividend

In the second quarter, the Company declared monthly cash dividends of $0.217 per common share for each of April, May and June 2021. The monthly dividends reflected an annualized dividend amount of $2.604 per common share, representing an 8.5% increase over the annualized dividend amount of $2.400 per common share from the second quarter of 2020. The dividends represent payout ratios of approximately 73% of Core FFO per share and 74% of AFFO per share, respectively.

For the six months ended June 30, 2021, the Company declared monthly dividends totaling $1.272 per common share, a 7.3% increase over the dividends of $1.185 per common share declared for the comparable period in 2020. The dividends represent payout ratios of approximately 73% of Core FFO per share and 74% of AFFO per share, respectively.

Subsequent to quarter end, the Company declared a monthly cash dividend of $0.217 per common share for July 2021. The monthly dividend reflects an annualized dividend amount of $2.604 per common share, representing an 8.5% increase over the annualized dividend amount of $2.400 per common share from the third quarter of 2020. The dividend is payable August 13, 2021 to stockholders of record at the close of business on July 30, 2021.

CEO Comments

"We are extremely pleased with our performance during the first half of the year as we achieved record investment volume of more than $750 million," said Joey Agree, President and Chief Executive Officer. "Our activities served to further strengthen our best-in-class retail portfolio, as our ground lease exposure increased to a record of nearly 13% of annualized base rents. During the quarter we completed several strategic capital markets transactions, raising more than $1 billion to bolster our fortress balance sheet and position our Company for anticipated growth."

Portfolio Update

As of June 30, 2021, the Company's portfolio consisted of 1,262 properties located in 46 states and contained approximately 26.1 million square feet of gross leasable area.

The portfolio was approximately 99.5% leased, had a weighted-average remaining lease term of approximately 9.7 years, and generated 67.7% of annualized base rents from investment grade retail tenants.

Ground Lease Portfolio

During the quarter, the Company acquired 14 ground leases for an aggregate purchase price of approximately $113.1 million, representing 30.5% of annualized base rents acquired.

As of June 30, 2021, the Company's ground lease portfolio consisted of 134 leases located in 28 states and totaled approximately 4.0 million square feet of gross leasable area. Properties ground leased to tenants increased to 12.7% of annualized base rents.

At quarter end, the ground lease portfolio was fully occupied, had a weighted-average remaining lease term of approximately 12.5 years, and generated 89.5% of annualized base rents from investment grade retail tenants.

Acquisitions

Total acquisition volume for the second quarter was approximately $345.5 million and included 54 properties net leased to leading retailers operating in sectors including off-price retail, home improvement, auto parts, general merchandise, dollar stores, convenience stores, grocery and tire and auto service.  The properties are located in 25 states and leased to tenants operating in 18 sectors.

The properties were acquired at a weighted-average capitalization rate of 6.2% and had a weighted-average remaining lease term of approximately 11.8 years. Approximately 77.3% of annualized base rents acquired were generated from investment grade retail tenants.

For the six months ended June 30, 2021, total acquisition volume was approximately $732.3 million.  The 140 acquired properties are located in 35 states and leased to tenants who operate in 24 retail sectors.  The properties were acquired at a weighted-average capitalization rate of 6.2% and had a weighted-average remaining lease term of approximately 12.4 years. Approximately 74.6% of annualized base rents were generated from investment grade retail tenants or parent entities thereof.

The Company's outlook for acquisition volume for the full-year 2021 is being increased to a range of $1.2 billion to $1.4 billion of high-quality retail net lease properties, from a previous range of $1.1 billion to $1.3 billion.

Dispositions

During the three months ended June 30, 2021, the Company sold seven properties for gross proceeds of approximately $27.8 million. The weighted-average capitalization rate of the dispositions was 6.7%. During the six months ended June 30, 2021, the Company divested 10 properties for total gross proceeds of $36.5 million. The weighted-average capitalization rate of the dispositions was 6.7%.

The Company is increasing the lower end of its total disposition guidance range for 2021 from $25 million to $50 million and is maintaining the upper end of the range at $75 million.

Development and Partner Capital Solutions  

In the second quarter, the Company completed three development and PCS projects with total costs of approximately $27.1 million. The projects consist of a Grocery Outlet in Port Angeles, Washington, a Gerber Collision in Buford, Georgia, and a Floor & Décor in Naples, Florida.

During the quarter, the Company commenced its second development project with Gerber Collision in Pooler, Georgia, which is expected to be completed in the first quarter of 2022. Construction continued during the second quarter on the Company's first development project with 7-Eleven in Saginaw, Michigan, which is expected to be completed in the first quarter of 2022.

For the six months ended June 30, 2021, the Company had six development or PCS projects completed or under construction. Anticipated total costs are approximately $36.4 million and include the following projects:

Leasing Activity and Expirations

During the second quarter, the Company executed new leases, extensions or options on approximately 209,000 square feet of gross leasable area throughout the existing portfolio. Notable new leases, extensions or options included a 15-year net lease with Gardner White at the Company's only former Loves Furniture store in Canton, Michigan. The approximately 70,000 square foot space was delivered to Gardner White in June and rent commenced in July 2021.

For the six months ended June 30, 2021, the Company executed new leases, extensions or options on approximately 275,000 square feet of gross leasable area throughout the existing portfolio.

As of June 30, 2021, the Company's three remaining 2021 lease maturities represented 0.2% of annualized base rents. The following table presents contractual lease expirations within the Company's portfolio as of June 30, 2021, assuming no tenants exercise renewal options:

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 June 30, 2021:

Retail Sectors

The following table presents annualized base rents for all of the Company's retail sectors as of June 30, 2021:

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, 2021:

Capital Markets and Balance Sheet

Capital Markets

In May 2021, the Company completed a $650 million dual-tranche public bond offering comprised of $350 million of 2.00% senior unsecured notes due 2028 (the "2028 Notes") and $300 million of 2.60% senior unsecured notes due 2033 (the "2033 Notes"). In connection with the offering, the Company terminated related swap agreements of $300 million that hedged the 2033 Notes, receiving $16.7 million upon termination. Considering the effect of the terminated swap agreements, the blended all-in rates to the Company for the 2028 Notes and 2033 Notes are 2.11% and 2.13%, respectively.

The Company used a portion of the net proceeds from the offering to repay all $240 million of its unsecured term loans, including accrued and unpaid interest, and settle certain swap agreements, including termination costs.  The offering, in combination with the prepayment of all the Company's unsecured term loans, extended the Company's weighted-average debt maturity to approximately 9 years and reduced its effective weighted-average interest rate to approximately 3.2%, excluding the Company's unsecured revolving credit facility.

In June 2021, the Company completed a follow-on public offering of 4,600,000 shares of common stock, including the full exercise of the underwriters' option to purchase additional shares. Upon closing, the Company received total net proceeds of approximately $327.0 million, after deducting fees and estimated offering expenses.

During the second quarter of 2021, the Company entered into forward sale agreements in connection with its ATM program to sell an aggregate of 1,178,197 shares of common stock for anticipated net proceeds of approximately $81 million. On May 6, 2021, the Company settled 164,450 shares under forward sale agreements entered into through its ATM program and received net proceeds of approximately $9.9 million.

At quarter end, the Company had 3,937,788 shares remaining to be settled under existing forward sale agreements, which are anticipated to raise net proceeds of approximately $258.7 million after deducting fees and expenses and making certain other adjustments as provided in the equity distribution agreements.

The following table presents the Company's outstanding forward equity offerings as of June 30, 2021:

Balance Sheet

As of June 30, 2021, the Company's net debt to recurring EBITDA was 4.5 times. The Company's proforma net debt to recurring EBITDA was 3.6 times when deducting the $258.7 million of anticipated net proceeds from the outstanding forward equity offerings from the Company's net debt of $1.4 billion as of June 30, 2021. The Company's fixed charge coverage ratio was 5.0 times as of the end of the second quarter.

The Company's total debt to enterprise value was 24.7% as of June 30, 2021.  Enterprise value is calculated as the sum of net debt and the market value of the Company's outstanding shares of common stock, assuming conversion of Agree Limited Partnership (the "Operating Partnership") units into common stock.

For the three and six months ended June 30, 2021, the Company's fully diluted weighted-average shares outstanding were 65.2 million and 64.1 million, respectively. The basic weighted-average shares outstanding for the three and six months ended June 30, 2021 were 64.8 million and 63.8 million, respectively.

For the three and six months ended June 30, 2021, the Company's fully diluted weighted-average shares and units outstanding were 65.5 million and 64.4 million, respectively. The basic weighted-average shares and units outstanding for the three and six months ended June 30, 2021 were 65.2 million and 64.2 million, respectively.

The Company's assets are held by, and its operations are conducted through, the Operating Partnership, of which the Company is the sole general partner.  As of June 30, 2021, there were 347,619 Operating Partnership units outstanding and the Company held a 99.5% interest in the Operating Partnership.

Conference Call/Webcast

The Company will host its quarterly analyst and investor conference call on Tuesday, July 27, 2021 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 Investors section of the website.  A replay of the conference call webcast will be archived and available online through the Investors section of www.agreerealty.com.

About Agree Realty Corporation

Agree Realty Corporation is a publicly traded real estate investment trust that is RETHINKING RETAIL through the acquisition and development of properties net leased to industry-leading, omni-channel retail tenants.  As of June 30, 2021, the Company owned and operated a portfolio of 1,262 properties, located in 46 states and containing approximately 26.1 million square feet of gross leasable area.  The Company's common stock is listed on the New York Stock Exchange under the symbol "ADC".  For additional information on the Company and RETHINKING RETAIL, please visit www.agreerealty.com.   

Forward-Looking Statements

This press release contains forward-looking statements, including statements about projected financial and operating results, within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions.  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," "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 or other forward-looking information.  Although these forward-looking statements are based on good faith beliefs, reasonable assumptions and the Company's best judgment reflecting current information, you should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company's control and which could materially affect the Company's results of operations, financial condition, cash flows, performance or future achievements or events. Currently, one of the most significant factors, however, is the potential adverse effect of the current pandemic of the novel coronavirus, or COVID-19, on the financial condition, results of operations, cash flows and performance of the Company and its tenants, the real estate market and the global economy and financial markets. The extent to which COVID-19 impacts the Company and its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, investors are cautioned to interpret many of the risks identified in the risk factors discussed in the Company's Annual Report on Form 10-K and subsequent quarterly reports filed with the Securities and Exchange Commission (the "SEC"), as well as the risks set forth below, as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19. Additional important factors, among others, that may cause the Company's actual results to vary include the general deterioration in national economic conditions, weakening of real estate markets, decreases in the availability of credit, increases in interest rates, adverse changes in the retail industry, the Company's continuing ability to qualify as a REIT and other factors discussed in the Company's reports filed with the SEC. The forward-looking statements included in this press release are made as of the date hereof.   Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, changes in the Company's expectations or assumptions 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 Investor Relations section of the Company's website at www.agreerealty.com.

The Company defines the "weighted-average capitalization rate" for acquisitions and dispositions as the sum of contractual fixed annual rents computed on a straight-line basis over the primary lease terms and anticipated annual net tenant recoveries, divided by the purchase and sale prices.

SOURCE Agree Realty Corporation