Increases Lower End of 2022 Acquisition Guidance to $1.6 Billion;

Fortifies Balance Sheet with Over $800 Million of Capital Raised

BLOOMFIELD HILLS, Mich., Nov. 1, 2022 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) (the "Company") today announced results for the quarter ended September 30, 2022. All per share amounts included herein are on a diluted per common share basis unless otherwise stated.

Third Quarter 2022 Financial and Operating Highlights:

• Invested approximately $372 million in 121 retail net lease properties
• Net Income per share attributable to common stockholders decreased 11.1% to $0.46
• Core Funds from Operations ("Core FFO") per share increased 5.6% to $0.97
• Adjusted Funds from Operations ("AFFO") per share increased 7.8% to $0.96
• Declared an October monthly dividend of $0.240 per common share, a 5.7% year-over-year increase
• Completed a public bond offering of $300 million of 4.80% senior unsecured notes due 2032 with an effective all-in rate of 3.76% inclusive of prior hedging activity
• Sold 1,688,390 shares of common stock via the forward component of the Company's at-the-market equity ("ATM") program for anticipated net proceeds of approximately $127 million
• Commenced a forward equity offering of 5,750,000 shares of common stock, including the underwriters' option to purchase additional shares, raising anticipated net proceeds of approximately $382 million
• Settled 8,739,752 shares of outstanding forward equity for net proceeds of approximately $601 million 
• Balance sheet positioned for growth at 3.1 times proforma net debt to recurring EBITDA; 4.0 times excluding unsettled forward equity

Financial Results

Net Income Attributable to Common Stockholders

Net Income for the three months ended September 30, 2022 increased 3.3% to $37.6 million, compared to $36.4 million for the comparable period in 2021. Net Income per share for the three months ended September 30, 2022 decreased 11.1% to $0.46, compared to $0.52 per share for the comparable period in 2021.

Net Income for the nine months ended September 30, 2022 increased 19.3% to $105.9 million, compared to $88.8 million for the comparable period in 2021. Net Income per share for the nine months ended September 30, 2022 increased 3.9% to $1.39, compared to $1.34 per share for the comparable period in 2021.

Core FFO

Core FFO for the three months ended September 30, 2022 increased 22.2% to $78.2 million, compared to Core FFO of $64.0 million for the comparable period in 2021. Core FFO per share for the three months ended September 30, 2022 increased 5.6% to $0.97, compared to Core FFO per share of $0.92 for the comparable period in 2021.

Core FFO for the nine months ended September 30, 2022 increased 26.4% to $222.4 million, compared to Core FFO of $175.9 million for the comparable period in 2021. Core FFO per share for the nine months ended September 30, 2022 increased 9.9% to $2.92, compared to Core FFO per share of $2.65 for the comparable period in 2021.

AFFO

AFFO for the three months ended September 30, 2022 increased 24.8% to $77.6 million, compared to AFFO of $62.1 million for the comparable period in 2021. AFFO per share for the three months ended September 30, 2022 increased 7.8% to $0.96, compared to AFFO per share of $0.89 for the comparable period in 2021.

AFFO for the nine months ended September 30, 2022 increased 28.0% to $220.5 million, compared to AFFO of $172.3 million for the comparable period in 2021. AFFO per share for the nine months ended September 30, 2022 increased 11.3% to $2.89, compared to AFFO per share of $2.60 for the comparable period in 2021.

Dividend

In the third quarter, the Company declared monthly cash dividends of $0.234 per common share for each of July, August and September 2022. The monthly dividends reflected an annualized dividend amount of $2.808 per common share, representing a 7.8% increase over the annualized dividend amount of $2.604 per common share from the third quarter of 2021. The dividends represent payout ratios of approximately 73% of both Core FFO per share and AFFO per share.

For the nine months ended September 30, 2022, the Company declared monthly cash dividends totaling $2.085 per common share, an 8.4% increase over the dividends of $1.923 per common share declared for the comparable period in 2021. The dividends represent payout ratios of approximately 71% of Core FFO per share and 72% of AFFO per share.

Subsequent to quarter end, the Company declared an increased monthly cash dividend of $0.240 per common share for October 2022. The monthly dividend reflects an annualized dividend amount of $2.880 per common share, representing a 5.7% increase over the annualized dividend amount of $2.724 per common share from the fourth quarter of 2021. The dividend is payable November 14, 2022 to stockholders of record at the close of business on October 31, 2022.

Additionally, subsequent to quarter end, the Company declared a monthly cash dividend on its 4.25% Series A Cumulative Redeemable Preferred Stock of $0.08854 per depositary share, which is equivalent to $1.0625 per annum. The dividend is payable November 1, 2022 to stockholders of record at the close of business on October 24, 2022.

CEO Comments

"Our record year-to-date investment volume was underpinned by several strategic capital markets transactions during the quarter, bolstering our fortress balance sheet and providing us with significant liquidity in a dynamic macro environment," said Joey Agree, President and Chief Executive Officer. "Our industry-leading portfolio and balance sheet are well positioned to not only withstand the current environment, but to capitalize on opportunities across all three of our origination platforms."

Portfolio Update

As of September 30, 2022, the Company's portfolio consisted of 1,707 properties located in 48 states and contained approximately 35.8 million square feet of gross leasable area.

At quarter-end, the portfolio was 99.7% leased and had a weighted-average remaining lease term of approximately 8.9 years. Investment grade retailers represented 67.5% of annualized base rents.

Ground Lease Portfolio

During the quarter, the Company acquired eight ground leases for an aggregate purchase price of approximately $27.6 million, representing 7.5% of annualized base rents acquired.

As of September 30, 2022, the Company's ground lease portfolio consisted of 201 leases located in 32 states and totaled approximately 5.3 million square feet of gross leasable area. Properties ground leased to tenants represented approximately 12.7% of annualized base rents.

At quarter end, the ground lease portfolio was fully occupied and had a weighted-average remaining lease term of approximately 11.4 years. Investment grade retailers represented 88.4% of annualized base rents.

Acquisitions

Acquisition volume for the third quarter totaled $360.2 million and included 98 properties net leased to leading retailers operating in sectors including dollar stores, auto parts, farm and rural supply, grocery store, home improvement, and consumer electronics. The acquired properties are located in 29 states and leased to tenants operating in 21 sectors.

The properties were acquired at a weighted-average capitalization rate of 6.2% and had a weighted-average remaining lease term of 11.1 years. Approximately 72.7% of annualized base rents acquired were generated from investment grade retail tenants.

For the nine months ended September 30, 2022, total acquisition volume was $1.19 billion. The 303 acquired properties are located in 42 states and leased to tenants who operate in 27 retail sectors. The properties were acquired at a weighted-average capitalization rate of 6.1% and had a weighted-average remaining lease term of approximately 10.1 years. Approximately 68.1% of annualized base rents were generated from investment grade retail tenants.

The Company is increasing the lower end of its outlook for acquisition volume for the full-year 2022 to $1.6 billion and is maintaining the upper end of the range at $1.7 billion of high-quality retail net lease properties. This compares with a previous range of $1.5 billion to $1.7 billion.

Dispositions

During the three months ended September 30, 2022, the Company sold one property for gross proceeds of approximately $20.0 million. The disposition was completed at a capitalization rate of 7.2%. During the nine months ended September 30, 2022, the Company sold six properties for total gross proceeds of $44.8 million. The weighted-average capitalization rate of the dispositions was 6.5%.

The Company is increasing the lower end of its total disposition guidance range for 2022 from $25 million to $45 million and is maintaining the upper end of the range at $75 million.

Development and PCS

During the quarter, the Company commenced two development and PCS projects, with total anticipated costs of approximately $7.7 million. The projects include a Gerber Collision in Murrieta, California and a Sunbelt Rentals in Wentzville, Missouri.

The Company completed two Gerber Collision development projects, as well as the Burlington in Turnersville, New Jersey. The Company continued construction on the two Sunbelt Rentals projects; one Old Navy; and 15 geographically diverse Gerber Collision projects.

For the nine months ended September 30, 2022, the Company had a record 25 development or PCS projects completed or under construction. Anticipated total costs are approximately $81.5 million, including $51.0 million of costs incurred to date. For the full-year 2022, the Company anticipates commencing between $85 million and $125 million of development and PCS projects, compared to the previous range of $75 million to $125 million.

The following table presents the Company's 25 development or PCS projects as of September 30, 2022:

Leasing Activity and Expirations

During the third quarter, the Company executed new leases, extensions or options on approximately 192,000 square feet of gross leasable area throughout the existing portfolio.

For the nine months ended September 30, 2022, the Company executed new leases, extensions or options on approximately 652,000 square feet of gross leasable area throughout the existing portfolio.

As of September 30, 2022, the Company's 2022 lease maturities represented 0.2% of annualized base rents. The following table presents contractual lease expirations, assuming no tenants exercise their renewal options, within the Company's portfolio as of September 30, 2022:

The contractual lease expirations presented above exclude the effect of replacement tenant leases that had been executed as of September 30, 2022 but that had not yet commenced. Annualized Base Rent and gross leasable area (square feet) are in thousands; any differences are the result of rounding.

(1)   Annualized Base Rent ("ABR") represents the annualized amount of contractual minimum rent required by tenant lease agreements as of September 30, 2022, computed on a straight-line basis. Annualized Base Rent is not, and is not intended to be, a presentation in accordance with generally accepted accounting principles ("GAAP"). The Company believes annualized contractual minimum rent is useful to management, investors, and other interested parties in analyzing concentrations and leasing activity.

Top Tenants

The Company added Gerber Collision to its top tenants during the third quarter of 2022. 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, 2022:

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

Bolded and italicized tenants represent additions for the three months ended September 30, 2022.

(1)  Refer to footnote 1 on page 5 for the Company's definition of Annualized Base Rent. 

(2)  Reflects Tractor Supply's previously announced acquisition of Orscheln Farm and Home, which received approval from the Federal Trade Commission on October 11, 2022.

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

Retail Sectors

The following table presents annualized base rents for all of the Company's retail sectors as of September 30, 2022:

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

(1)   Refer to footnote 1 on page 5 for the Company's definition 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 September 30, 2022:

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

(1) Refer to footnote 1 on page 5 for the Company's definition of Annualized Base Rent. 

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

Capital Markets and Balance Sheet

Capital Markets

In August 2022, the Company completed a $300 million public bond offering of 4.80% senior unsecured notes due 2032 (the "2032 Notes"). In connection with the offering, the Company terminated related swap agreements of $300 million, receiving $28.4 million upon termination. Considering the effect of the terminated swap agreements, the effective all-in rate to the Company for the 2032 Notes is 3.76%.

During the third quarter, the Company entered into forward sale agreements in connection with its ATM program to sell an aggregate of 1,688,390 shares of common stock for anticipated net proceeds of $127.2 million.

In September 2022, the Company commenced a follow-on public offering of 5,750,000 shares of common stock, including the full exercise of the underwriters' option to purchase additional shares, in connection with forward sale agreements. Upon settlement, the offering is anticipated to raise net proceeds of $381.7 million after deducting fees and making certain other adjustments as provided in the equity distribution agreements. To date, the Company has not received any proceeds from the sale of shares of its common stock by the forward purchasers.

In conjunction with the forward equity offering in September, the Company settled 8,739,752 shares under existing forward sale agreements and received net proceeds of $601.4 million. At quarter end, the Company had 5,750,000 shares remaining to be settled under existing forward sale agreements, which are anticipated to raise net proceeds of $381.7 million upon settlement.

The following table presents the Company's outstanding forward equity offerings as of September 30, 2022:

(1) On September 28, 2022, the Company commenced a follow-on public offering of 5,750,000 shares of common stock, including the underwriters' option to purchase additional shares. The offering closed on October 3, 2022.

Balance Sheet

As of September 30, 2022, the Company's net debt to recurring EBITDA was 4.0 times. The Company's proforma net debt to recurring EBITDA was 3.1 times when deducting the $381.7 million of anticipated net proceeds from the outstanding forward equity offerings from the Company's net debt of $1.6 billion at quarter end. The Company's fixed charge coverage ratio was 5.0 times as of the quarter end.

The Company's total debt to enterprise value was 24.1% as of September 30, 2022. Enterprise value is calculated as the sum of net debt, the liquidation value of the Company's preferred stock, and the market value of the Company's outstanding shares of common stock, assuming conversion of Agree Limited Partnership (the "Operating Partnership" or "OP") common units into common stock of the Company.

For the three and nine months ended September 30, 2022, the Company's fully diluted weighted-average shares outstanding were 80.6 million and 75.9 million, respectively. The basic weighted-average shares outstanding for the three and nine months ended September 30, 2022 were 79.7 million and 75.4 million, respectively.

For the three and nine months ended September 30, 2022, the Company's fully diluted weighted-average shares and units outstanding were 80.9 million and 76.2 million, respectively. The basic weighted-average shares and units outstanding for the three and nine months ended September 30, 2022 were 80.0 million and 75.7 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 September 30, 2022, there were 347,619 Operating Partnership common units outstanding and the Company held a 99.6% common interest in the Operating Partnership.

Conference Call/Webcast

The Company will host its quarterly analyst and investor conference call on Wednesday, November 2, 2022 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 September 30, 2022, the Company owned and operated a portfolio of 1,707 properties, located in all 48 continental states and containing approximately 35.8 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 ongoing worldwide economic uncertainties, the current pandemic of the novel coronavirus, or COVID-19, increased inflation and interest rates 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 these conditions will impact the Company and its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence. 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 the macroeconomic environment and 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 for occupied properties.

References to "Core FFO" and "AFFO" in this press release are representative of Core FFO attributable to OP common unitholders and AFFO attributable to OP common unitholders. Detailed calculations for these measures are shown in the Reconciliation of Net Income to FFO, Core FFO and Adjusted FFO table as "Core Funds From Operations – OP Common Unitholders" and "Adjusted Funds from Operations – OP Common Unitholders".

SOURCE Agree Realty Corporation