Fourth Quarter ATM Activity Creates $500 Million of Leverage Neutral Investment Capacity

ROYAL OAK, Mich., Feb. 13, 2024 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) (the "Company") today announced results for the quarter and full year ended December 31, 2023. All per share amounts included herein are on a diluted per common share basis unless otherwise stated.

Fourth Quarter 2023 Financial and Operating Highlights:

• Invested approximately $199 million in 70 retail net lease properties
• Completed four development or Developer Funding Platform ("DFP") projects representing total committed capital of over $16 million
• Net Income per share attributable to common stockholders of $0.44 was unchanged year-over-year
• Core Funds from Operations ("Core FFO") per share increased 3.4% to $0.99
• Adjusted Funds from Operations ("AFFO") per share increased 5.2% to $1.00
• Declared a December monthly dividend of $0.247 per common share, a 2.9% year-over-year increase
• Sold 3.8 million shares of common stock via the forward component of the Company's at-the-market equity ("ATM") program for net proceeds of approximately $236 million
• Balance sheet well positioned at 4.3 times proforma net debt to recurring EBITDA; 4.7 times excluding unsettled forward equity

Full Year 2023 Financial and Operating Highlights:

• Invested or committed $1.34 billion in 319 retail net lease properties
• Commenced 13 development or DFP projects for total committed capital of approximately $54 million
• Net Income per share attributable to common stockholders declined 7.0% to $1.70
• Core FFO per share increased 1.6% to $3.93
• AFFO per share increased 3.1% to $3.95
• Declared dividends of $2.919 per share, a 4.1% year-over-year increase
• Raised over $370 million of gross equity proceeds through the Company's ATM program
• Closed on an unsecured $350 million 5.5-year term loan at a 4.52% fixed rate inclusive of prior hedging activity
• Ended the year with over $1.0 billion of total liquidity including availability on the revolving credit facility, outstanding forward equity, and cash on hand

Financial Results

Net Income Attributable to Common Stockholders

Net Income for the three months ended December 31, 2023 increased 12.9% to $44.1 million, compared to $39.1 million for the comparable period in 2022. Net Income per share for the three months ended December 31^st of $0.44 was unchanged compared to the same period in 2022.

Net Income for the twelve months ended December 31, 2023 increased 12.1% to $162.5 million, compared to $145.0 million for the comparable period in 2022. Net Income per share for the twelve months ended December 31^st decreased 7.0% to $1.70, compared to $1.83 per share for the comparable period in 2022.

Core FFO

Core FFO for the three months ended December 31, 2023 increased 16.8% to $99.7 million, compared to Core FFO of $85.3 million for the comparable period in 2022. Core FFO per share for the three months ended December 31^st increased 3.4% to $0.99, compared to Core FFO per share of $0.96 for the comparable period in 2022.

Core FFO for the twelve months ended December 31, 2023 increased 22.3% to $376.5 million, compared to Core FFO of $307.7 million for the comparable period in 2022. Core FFO per share for the twelve months ended December 31^st increased 1.6% to $3.93, compared to Core FFO per share of $3.87 for the comparable period in 2022.

AFFO

AFFO for the three months ended December 31, 2023 increased 18.8% to $100.3 million, compared to AFFO of $84.4 million for the comparable period in 2022. AFFO per share for the three months ended December 31^st increased 5.2% to $1.00, compared to AFFO per share of $0.95 for the comparable period in 2022.

AFFO for the twelve months ended December 31, 2023 increased 24.2% to $378.7 million, compared to AFFO of $304.9 million for the comparable period in 2022. AFFO per share for the twelve months ended December 31^st increased 3.1% to $3.95, compared to AFFO per share of $3.83 for the comparable period in 2022.

Dividend

In the fourth quarter, the Company declared monthly cash dividends of $0.247 per common share for each of October, November and December 2023. The monthly dividends declared during the fourth quarter reflected an annualized dividend amount of $2.964 per common share, representing a 2.9% increase over the annualized dividend amount of $2.880 per common share from the fourth quarter of 2022. The dividends represent payout ratios of approximately 75% of Core FFO per share and 74% of AFFO per share, respectively.

For the twelve months ended December 31, 2023, the Company declared monthly cash dividends totaling $2.919 per common share, a 4.1% increase over the dividends of $2.805 per common share declared for the comparable period in 2022. The dividends represent payout ratios of approximately 74% of both Core FFO per share and AFFO per share.

Subsequent to year end, the Company declared a monthly cash dividend of $0.247 per common share for each of January and February 2024. The monthly dividend reflects an annualized dividend amount of $2.964 per common share, representing a 2.9% increase over the annualized dividend amount of $2.880 per common share from the first quarter of 2023. The January dividend is payable on February 14, 2024 to stockholders of record at the close of business on January 31, 2024. The February dividend is payable on March 14, 2024 to stockholders of record at the close of business on February 29, 2024.

Additionally, subsequent to year end, the Company declared a monthly cash dividend for each of January and February 2024 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 January dividend was paid on February 1, 2024 and the February dividend is payable on March 1, 2024 to stockholders of record at the close of business on February 20, 2024.

CEO Comments

"We are pleased with our performance in 2023 as we invested over $1.3 billion for the fourth consecutive year while adhering to our stringent investment criteria and further improving our leading portfolio," said Joey Agree, President and Chief Executive Officer. "Looking ahead, our balance sheet is well positioned with more than $1 billion of total liquidity including over $235 million of forward equity raised late last year. We remain intently focused on prudently allocating capital to drive sustainable AFFO per share growth above our previously discussed base case of over 3% growth in 2024."

Portfolio Update

As of December 31, 2023, the Company's portfolio consisted of 2,135 properties located in 49 states and contained approximately 44.2 million square feet of gross leasable area.

At year end, the portfolio was 99.8% leased, had a weighted-average remaining lease term of approximately 8.4 years, and generated 69.1% of annualized base rents from investment grade retail tenants.

Ground Lease Portfolio

During the fourth quarter, the Company acquired seven ground leases for an aggregate purchase price of approximately $29.9 million, representing 14.8% of annualized base rents acquired.

As of December 31, 2023, the Company's ground lease portfolio consisted of 224 leases located in 35 states and totaled approximately 6.1 million square feet of gross leasable area. Properties ground leased to tenants represented 11.7% of annualized base rents.

At year end, the ground lease portfolio was fully occupied, had a weighted-average remaining lease term of approximately 10.5 years, and generated 88.0% of annualized base rents from investment grade retail tenants.

Acquisitions

Total acquisition volume for the fourth quarter was approximately $187.2 million and included 50 select properties net leased to leading retailers operating in sectors including home improvement, farm and rural supply, off-price, tire and auto service, and convenience stores. The properties are located in 26 states and leased to tenants operating in 19 sectors.

The properties were acquired at a weighted-average capitalization rate of 7.2% and had a weighted-average remaining lease term of approximately 10.1 years. Approximately 70.5% of annualized base rents acquired were generated from investment grade retail tenants.

For the twelve months ended December 31, 2023, total acquisition volume was approximately $1.19 billion. The 282 acquired properties are located in 40 states and leased to tenants operating in 26 retail sectors. The properties were acquired at a weighted-average capitalization rate of 6.9% and had a weighted-average remaining lease term of approximately 11.3 years. Approximately 73.7% of annualized base rents were generated from investment grade retail tenants.

Dispositions

During the fourth quarter, the Company sold three properties for gross proceeds of approximately $6.4 million. The dispositions were completed at a weighted-average capitalization rate of 6.0%. During the twelve months ended December 31, 2023, the Company sold five assets for total gross proceeds of approximately $9.7 million. The weighted-average capitalization rate of the dispositions was 6.1%.

Development and DFP

During the fourth quarter, the Company commenced four development or DFP projects, with total anticipated costs of approximately $12.6 million. Construction continued during the quarter on 12 projects with anticipated costs totaling approximately $51.1 million. The Company completed four projects during the quarter with total costs of approximately $16.2 million. In total, the Company had 20 projects completed or under construction during the fourth quarter with anticipated total costs of $80.0 million.

For the twelve months ended December 31, 2023, the Company had a record 37 development or DFP projects completed or under construction with anticipated total costs of approximately $149.9 million. The projects are leased to leading retailers including Gerber Collision, Sunbelt Rentals, TJX Companies, Five Below and ULTA Beauty.  

The following table presents estimated costs for the Company's active or completed development or DFP projects for the quarter and year ended December 31, 2023:

Leasing Activity and Expirations

During the fourth quarter, the Company executed new leases, extensions or options on approximately 425,000 square feet of gross leasable area throughout the existing portfolio. Notable new leases, extensions or options included a 25,000-square foot TJ Maxx in New Lenox, Illinois, and a 210,000-square foot Walmart Supercenter in Hazard, Kentucky.

For the twelve months ended December 31, 2023, the Company executed new leases, extensions or options on approximately 1,873,000 square feet of gross leasable area throughout the existing portfolio.

As of December 31, 2023, the Company's 2024 lease maturities represented 1.1% of annualized base rents. The following table presents contractual lease expirations within the Company's portfolio as of December 31, 2023, 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 December 31, 2023:

Retail Sectors

The following table presents annualized base rents for all the Company's retail sectors as of December 31, 2023:

Geographic Diversification

The following table presents annualized base rents for all states that represent 1.5% or greater of the Company's total annualized base rent as of December 31, 2023:

Capital Markets, Liquidity and Balance Sheet

Capital Markets

During the fourth quarter, the Company entered into forward sale agreements in connection with its ATM program to sell an aggregate of 3,833,871 shares of common stock for net proceeds of approximately $235.6 million. To date, the Company has not received any proceeds from the sale of shares of its common stock by the forward purchasers.

The following table presents the Company's outstanding forward equity offerings as of December 31, 2023:

Liquidity

As of December 31, 2023, the Company had total liquidity of over $1.0 billion, which includes $773.0 million of availability under its revolving credit facility, $235.6 million of outstanding forward equity, and $14.5 million of cash on hand. The Company's $1.0 billion revolving credit facility includes an accordion option that allows the Company to request additional lender commitments of up to $750 million, or an aggregate of $1.75 billion.

Balance Sheet

As of December 31, 2023, the Company's net debt to recurring EBITDA was 4.7 times. The Company's proforma net debt to recurring EBITDA was 4.3 times when deducting the $235.6 million of anticipated net proceeds from the outstanding forward equity offerings from the Company's net debt of $2.4 billion as of December 31, 2023. The Company's fixed charge coverage ratio was 5.0 times at year end.

The Company's total debt to enterprise value was 27.2% as of December 31, 2023. 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 twelve months ended December 31, 2023, the Company's fully diluted weighted-average shares outstanding were 100.4 million and 95.4 million, respectively. The basic weighted-average shares outstanding for the three and twelve months ended December 31, 2023 were 100.3 million and 95.2 million, respectively.

For the three and twelve months ended December 31, 2023, the Company's fully diluted weighted-average shares and units outstanding were 100.7 million and 95.8 million, respectively. The basic weighted-average shares and units outstanding for the three and twelve months ended December 31, 2023 were 100.6 million and 95.5 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 December 31, 2023, there were 347,619 Operating Partnership common units outstanding, and the Company held a 99.7% common interest in the Operating Partnership.

Conference Call/Webcast

The Company will host its quarterly analyst and investor conference call on Wednesday, February 14, 2024 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 December 31, 2023, the Company owned and operated a portfolio of 2,135 properties, located in 49 states and containing approximately 44.2 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, some of the most significant factors, include the potential adverse effect of ongoing worldwide economic uncertainties and 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. 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".