BLOOMFIELD HILLS, Mich., July 27, 2015 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) (the "Company") today announced results for the quarter ended June 30, 2015.  All per share amounts included herein are on a diluted per common share basis unless otherwise stated.

Second Quarter Financial and Operating Highlights:

  • Increased rental revenue 35.0% to $16.1 million
  • Increased Funds from Operations (FFO) 37.3% to $11.1 million
  • Increased FFO per share 14.8% to $0.62 from $0.54
  • Increased Adjusted Funds from Operations (AFFO) 33.3% to $11.0 million
  • Increased AFFO per share 12.7% to $0.62 from $0.55
  • Acquired 19 retail net lease properties for approximately $63.5 million
  • Completed $100.0 million private placement of senior unsecured notes
  • Increased quarterly dividend by 3.3% to $0.465 per share

Financial Results

Total Rental Revenue

Total rental revenue, which includes minimum rents and percentage rents, for the three months ended June 30, 2015 increased 35.0% to $16,113,000 compared with total rental revenue of $11,933,000 for the comparable period in 2014.

Total rental revenue for the six months ended June 30, 2015 increased 30.8% to $30,677,000 compared with total rental revenue of $23,456,000 for the comparable period in 2014.

Funds from Operations

FFO for the three months ended June 30, 2015 increased 37.3% to $11,111,000 compared with FFO of $8,092,000 for the comparable period in 2014.  FFO per share for the three months ended June 30, 2015 increased 14.8% to $0.62 compared with FFO per share of $0.54 for the comparable period in 2014.

FFO for the six months ended June 30, 2015 increased 31.8% to $21,064,000 compared with FFO of $15,978,000 for the comparable period in 2014.  FFO per share for the six months ended June 30, 2015 increased 11.3% to $1.18 compared with FFO per share of $1.06 for the comparable period in 2014.

Adjusted Funds from Operations

AFFO for the three months ended June 30, 2015 increased 33.3% to $11,039,000 compared with AFFO of $8,281,000 for the comparable period in 2014.  AFFO per share for the three months ended June 30, 2015 increased 12.7% to $0.62 compared with AFFO per share of $0.55 for the comparable period in 2014.

AFFO for the six months ended June 30, 2015 increased 28.7% to $21,107,000 compared with AFFO of $16,396,000 for the comparable period in 2014.  AFFO per share for the six months ended June 30, 2015 increased 9.3% to $1.18 compared with AFFO per share of $1.08 for the comparable period in 2014.

Net Income

Net income attributable to the Company for the three months ended June 30, 2015 was $10,264,000, or $0.59 per share, compared with $2,654,000, or $0.18 per share, for the comparable period in 2014.

Net income attributable to the Company for the six months ended June 30, 2015 was $16,632,000, or $0.95 per share, compared with $8,039,000, or $0.54 per share, for the comparable period in 2014.

Dividend

The Company paid a cash dividend of $0.465 per share on July 14, 2015 to stockholders of record on June 30, 2015.  The quarterly dividend represented payout ratios of 75.0% of both FFO and AFFO.

CEO Comments

"I am extremely pleased with the Company's strong performance during the quarter," said Joey Agree, President and Chief Executive Officer.  "We delivered record earnings growth while continuing to execute on unique real estate investment opportunities that complement our best-in-class net lease portfolio. Our three external growth platforms, in conjunction with our active asset management strategy, continue to optimize long-term value for our shareholders.  We are confident that our distinct approach to retail net lease real estate produces superior investment opportunities and look forward to building on our success during the second half of the year."

Portfolio Update

As of June 30, 2015, the Company's portfolio consisted of 250 properties located in 41 states and totaling 4.9 million square feet of gross leasable space.  Retail net lease properties contributed approximately 93.7% of annualized base rent, including 9.5% of which was generated from properties ground leased to tenants.  The remaining rent was derived from the Company's five remaining community shopping centers.

The portfolio was approximately 99.4% leased, had a weighted average remaining lease term of approximately 11.8 years, and generated approximately 53.4% of annualized base rents from investment grade tenants.

The table below provides a summary of the Company's portfolio as of June 30, 2015:

($ in thousands)


Number of


Annualized


% of Ann.


% IG


Wtd. Avg.

Property Type


Properties


Base Rent (1)


Base Rent


Rated (2)


Lease Term

Retail Net Lease


219


$55,511


84.2%


52.6%


12.0 yrs

Retail Net Lease (ground leases)


26


6,287


9.5%


88.2%


14.3 yrs

Total Retail Net Lease


245


$61,798


93.7%


56.2%


12.2 yrs

Community Shopping Centers


5


4,155


6.3%


12.7%


4.9 yrs

Total Portfolio


250


$65,953


100.0%


53.4%


11.8 yrs












(1)  Represents annualized straight-line rents as of June 30, 2015.





(2)  Reflects tenants, or parent entities thereof, with investment grade credit ratings from S&P, Moody's, Fitch and/or NAIC.












Acquisitions

Total acquisition volume for the second quarter was approximately $63,518,000. The Company acquired 19 assets net leased to a diverse group of retailers, including those operating in the apparel, auto parts, casual dining, dollar store, financial services, grocery, health & fitness, pet supply, specialty retail and warehouse club sectors.  These properties are located in 11 states and were acquired at a weighted-average cap rate of 7.9% and with a weighted-average remaining lease term of 12.5 years.

Year to date though June 30, 2015, the Company has acquired 44 assets for an aggregate purchase price of approximately $123,175,000.   These properties were acquired at a weighted-average cap rate of 8.0% and with a weighted-average remaining lease term of 12.7 years.

Dispositions

The Company sold three assets for gross proceeds of approximately $8,150,000 during the second quarter, including Marshall Plaza, a Kmart-anchored shopping center in Marshall, Michigan.  The Company also sold a former Border's store in Lawrence, Kansas, which was the only vacant net lease asset in the portfolio, as well as an outlot to the Company's Meijer store in Plainfield, Indiana.

Leasing

During the second quarter, the Company executed new leases or lease extensions on over 106,000 square feet of space throughout the portfolio.  Material transactions included a 5-year extension, to October 2020, for a 51,500 square foot JC Penney at Central Michigan Commons, as well as 10-year extensions, to February 2028 and February 2029, for Walgreens properties in Waterford, Michigan and Grand Blanc, Michigan, respectively.  In addition, the Company signed a 10-year lease with Planet Fitness to occupy 15,400 square feet of previously vacant space at Central Michigan Commons.

Top Tenants

The following table presents annualized base rents for all tenants that generated 1.5% or greater of the Company's total annualized base rent as of June 30, 2015:


($ in thousands)


Annualized


% of Ann.

Tenant / Concept


Base Rent (1)


Base Rent

Walgreens


$12,310


18.7%

Wawa


2,465


3.7%

CVS


2,463


3.7%

Wal-Mart


2,039


3.1%

Academy Sports


1,982


3.0%

Rite Aid


1,886


2.9%

Lowe's


1,846


2.8%

24 Hour Fitness


1,759


2.7%

BJ's Wholesale


1,709


2.6%

LA Fitness


1,694


2.6%

Dollar General


1,577


2.4%

Taco Bell (2)


1,537


2.3%

Kmart


1,260


1.9%

Burger King (3)


1,241


1.9%

Kohl's


1,180


1.8%

AutoZone


1,163


1.8%

Dick's Sporting Goods


1,089


1.7%

PetSmart


1,027


1.6%

Total


$40,227


61.2%






(1)  Represents annualized straight-line rents as of June 30, 2015.

(2)  Franchise restaurants operated by Charter Foods North.


(3)  Franchise restaurants operated by Meridian Restaurants.


Tenant Sector

The following table presents annualized base rents for the Company's top retail sectors as of June 30, 2015:

($ in thousands)


Annualized


% of Ann.

Tenant Sector


Base Rent (1)


Base Rent

Pharmacy


$16,659


25.3%

Restaurants - Quick Service


5,643


8.6%

Apparel


3,980


6.0%

Warehouse Clubs


3,749


5.7%

Health & Fitness


3,562


5.4%

Sporting Goods


3,378


5.1%

Grocery Stores


3,373


5.1%

Convenience Stores


2,599


3.9%

Specialty Retail


2,496


3.8%

Restaurants - Casual Dining


2,432


3.7%

Auto Parts


1,894


2.9%

Home Improvement


1,846


2.8%

Financial Services


1,738


2.6%

Dollar Stores


1,687


2.6%

General Merchandise


1,649


2.5%

Other (2)


9,268


14.0%

Total


$65,953


100.0%






(1)  Represents annualized straight-line rents as of June 30, 2015.

(2)  Includes sectors generating less than 2.5% of annualized base rent.

Lease Expiration

The following table presents contractual lease expirations within the Company's portfolio as of June 30, 2015, assuming that no tenants exercise renewal options:


(in thousands)




 Annualized Base Rent (1) 


 Gross Leasable Area 

Year


Leases


 $ Amount 


% of Total


 Sq. Ft. 


% of Total

2015


3


$416


0.6%


91


1.8%

2016


6


448


0.7%


50


1.0%

2017


10


1,813


2.7%


128


2.6%

2018


14


1,781


2.7%


286


5.8%

2019


12


3,668


5.6%


344


6.9%

2020


18


2,742


4.2%


296


6.0%

2021


17


4,448


6.7%


266


5.4%

2022


13


2,672


4.1%


262


5.3%

2023


16


2,569


3.9%


228


4.6%

2024


23


4,098


6.2%


310


6.3%

Thereafter


170


41,298


62.6%


2,660


53.7%

Vacant








29


0.6%

Total


302


$65,953


100.0%


4,950


100.0%












(1)  Represents annualized straight-line rents as of June 30, 2015.




Capital Markets and Balance Sheet

Capital Markets Activity

On May 6, 2015, the Company implemented a $100,000,000 at-the-market equity program ("ATM program") by entering into multiple equity distribution agreements through which the Company may, from time to time, sell shares of common stock.

During the three months ended June 30, 2015, the Company issued 454,514 shares of common stock under its ATM program realizing gross proceeds of approximately $13,900,000. The Company has approximately $86,100,000 remaining under the ATM program.

On May 28, 2015, the Company completed a private placement of $100,000,000 principal amount of senior unsecured notes.  The notes were sold in two series, including $50,000,000 of 4.16% notes due May 30, 2025 and $50,000,000 of 4.26% notes due May 30, 2027.  The weighted average term of the notes is 11.0 years and the weighted average interest rate is 4.21%.  Proceeds from the issuance were used to repay borrowings under the Company's unsecured revolving credit facility and for general corporate purposes.

Balance Sheet Summary

As of June 30, 2015, the Company's total debt to total market capitalization was 37.2%.  Total market capitalization 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.

For the three and six months ended June 30, 2015, the Company's fully-diluted weighted-average shares outstanding were 17,587,052 and 17,511,418. The basic weighted-average shares outstanding for the three and six months ended June 30, 2014 were 17,539,358 and 17,457,699.

The Company's assets are held by, and all of its operations are conducted through, Agree Limited Partnership, of which the Company is the sole general partner.  As of June 30, 2015, there were 347,619 operating partnership units outstanding and the Company held a 98.11% interest in the operating partnership.

Conference Call/Webcast

Agree Realty Corporation will host a live broadcast of its second quarter 2015 conference call on Tuesday, July 28, 2015 at 9:00 am EST to discuss its financial and operating results. The live broadcast will be available online at: http://www.webcaster4.com/Webcast/Page/408/9383 and also by telephone at 1-866-363-3979 (USA Toll Free) and 1-412-902-4206 (International).  A replay will be available shortly after the call until October 28, 2015 at 1-877-344-7529 (USA Toll Free, conference #10068525) or 1-412-317-0088 (International, conference #10068525).

About Agree Realty Corporation

Agree Realty Corporation is primarily engaged in the acquisition and development of properties net leased to industry leading retail tenants.  The Company currently owns and operates a portfolio of 253 properties located in 41 states and containing 5.0 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, visit the Company's home page at http://www.agreerealty.com.    

Forward-Looking Statements

The Company considers portions of the information contained in this release to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, each as amended.  These forward-looking statements represent the Company's expectations, plans and beliefs concerning future events.  Although these forward-looking statements are based on good faith beliefs, reasonable assumptions and the Company's best judgment reflecting current information, certain factors could cause actual results to differ materially from such forward–looking statements.  Such factors are detailed from time to time in reports filed or furnished by the Company with the Securities and Exchange Commission, including the Company's Form 10-K for the year ended December 31, 2014.  Except as required by law, the Company assumes no obligation to update these forward–looking statements, even if new information becomes available in the future.


 


Agree Realty Corporation

Operating Results (in thousands, except per share amounts)

(Unaudited)








Three Months Ended


Six Months Ended



June 30,


June 30,



2015


2014


2015


2014

Revenues:









Minimum rents


$    15,972


$    11,791


$    30,526


$    23,314

Percentage rent


141


142


151


142

Operating cost reimbursements


1,098


947


2,276


1,970

Other income


8


24


10


53

Total Revenues


17,219


12,904


32,963


25,479

Expenses:









Real estate taxes


863


740


1,626


1,437

Property operating expenses


416


458


987


957

Land lease payments


137


107


269


214

General and administration


1,744


1,617


3,412


3,209

Depreciation and amortization


4,117


2,591


7,671


5,105

Impairment charge


-


2,800


-


2,800

Total Operating Expenses


7,277


8,313


13,965


13,722

Income from Operations


9,942


4,591


18,998


11,757

Other Income (Expense)









Interest expense


(2,933)


(1,875)


(5,394)


(3,669)

Gain on sale of assets


3,456


-


3,535


-

Loss on debt extinguishment


-


-


(180)


-

Income Before Discontinued Operations


10,465


2,716


16,959


8,088

Gain on sale of asset from discontinued operations


-


-


-


123

Income from discontinued operations


-


-


-


15

Total Discontinued Operations


-


-


-


138

Net Income


10,465


2,716


16,959


8,226

Net income attributable to non-controlling interest


201


62


327


187

Net Income Attributable to Agree Realty Corporation


10,264


2,654


16,632


8,039

Other Comprehensive Income (loss) , Net of $31, ($19), ($8) and ($29)









Attributable to Non-Controlling Interest


1,590


(831)


(383)


(1,281)

Total Comprehensive Income Attributable to Agree Realty Corporation


$    11,854


$      1,823


$    16,249


$      6,758










Basic Earnings Per Share









Continuing operations


$        0.59


$        0.18


$        0.95


$        0.54

Discontinued operations


-


-


-


0.01



$        0.59


$        0.18


$        0.95


$        0.55

Dilutive Earnings Per Share









Continuing operations


$        0.58


$        0.18


$        0.95


$        0.53

Discontinued operations


-


-


-


0.01



$        0.58


$        0.18


$        0.95


$        0.54

Weighted Average Number of Common Shares Outstanding - Basic


17,539


14,714


17,458


14,710

Weighted Average Number of Common Shares Outstanding - Diluted


17,587


14,776


17,511


14,769



















Agree Realty Corporation

Funds from Operations (in thousands, except per share amounts)

(Unaudited)





















Three Months Ended


Six Months Ended



June 30,


June 30,



2015


2014


2015


2014

Reconciliation of Funds from Operations to Net Income: (1)









Net income


$    10,465


$      2,716


$    16,959


$      8,226

Depreciation of real estate assets


2,923


2,012


5,478


3,964

Amortization of leasing costs


1,150


29


2,103


59

Amortization of lease intangibles


29


535


59


1,052

Gain on sale of assets


(3,456)


-


(3,535)


(123)

Impairment charge


-


2,800


-


2,800

Funds from Operations


$    11,111


8,092


$    21,064


15,978










Funds from Operations Per Share - Diluted


$        0.62


$        0.54


$        1.18


$        1.06

Weighted Average Number of Common Shares Outstanding - Diluted


17,935


15,123


17,859


15,117



















Adjusted Funds from Operations (in thousands, except per share amounts)

(Unaudited)



Three Months Ended


Six Months Ended



June 30,


June 30,



2015


2014


2015


2014

Reconciliation of Adjusted Funds from Operations to Net Income: (1)









Net income


$    10,465


$      2,716


$    16,959


$      8,226

Cumulative adjustments to calculate FFO


646


5,376


4,105


7,752

Funds from Operations


11,111


8,092


21,064


15,978

Straight-line accrued rent


(608)


(316)


(1,206)


(604)

Deferred revenue recognition


(116)


(116)


(232)


(232)

Stock based compensation expense


521


515


1,045


1,043

Amortization of financing costs


116


91


225


182

Non-Real Estate Depreciation / Amortization


15


15


31


29

Loss on Debt Extinguishment


-


-


180


-

Adjusted Funds from Operations


$    11,039


$      8,281


$    21,107


$    16,396










Adjusted Funds from Operations Per Share - Diluted


$        0.62


$        0.55


$        1.18


$        1.08










Supplemental Information:









Scheduled principal repayments


$         683


$         895


$      1,360


$      1,801

Capitalized interest


$              2


$            58


$              3


$         114

Capitalized building improvements


$             -


$            76


$             -


$            76










(1)   Funds from Operations ("FFO") is defined by the National Association of Real Estate Investment Trusts, Inc. (NAREIT) to mean net income computed in accordance with U.S. generally accepted accounting principles (GAAP), excluding gains (or losses) from sales of property, plus real estate related depreciation and amortization and any impairment charges on a depreciable real estate asset, and after adjustments for unconsolidated partnerships and joint ventures.  Management uses FFO as a supplemental measure to conduct and evaluate the Company's business because there are certain limitations associated with using GAAP net income by itself as the primary measure of the Company's operating performance.  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, management believes that the presentation of operating results for real estate companies that use historical cost accounting is insufficient by itself.

FFO should not be considered as 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.

Adjusted Funds from Operations ("AFFO") is a non-GAAP financial measure of operating performance used by many companies in the REIT industry.  AFFO further adjusts FFO for certain non-cash items that reduce or increase net income in accordance with GAAP and for non-recurring items that are not reflective of ongoing operations.  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. Note that, during the year ended December 31, 2014, the Company adjusted its calculation of AFFO to exclude non-recurring capitalized building improvements and to include non-real estate related depreciation and amortization.  Management believes that these changes provide a more useful measure of operating performance in the context of AFFO.

Agree Realty Corporation

Consolidated Balance Sheets (in thousands)

(Unaudited)








June 30,


December 31,



2015


2014

Assets:





Land  


$               209,268


$        195,091

Buildings


478,807


393,827

Accumulated depreciation


(60,456)


(59,090)

Property under development 


467


229

Net real estate investments


628,086


530,057






Cash and cash equivalents


2,871


5,399

Accounts receivable 


5,693


4,508

Deferred costs, net of amortization


65,785


51,271

Other assets


2,632


2,345

Total Assets


$               705,067


$        593,580






Liabilities





Notes Payable:





Mortgage notes payable


$               102,997


$        106,762

Unsecured revolving credit facility


15,000


15,000

Unsecured term loans


100,000


100,000

Senior unsecured notes


100,000


-

Total Notes Payable


317,997


221,762






Deferred revenue


772


1,004

Dividends and distributions payable


8,554


8,048

Other liabilities


7,117


6,731

Total Liabilities


334,440


237,545






Stockholder's Equity





Common stock (18,053,529 and 17,539,946 shares)


2


2

Additional paid-in capital


402,916


388,263

Deficit


(32,265)


(32,585)

Accumulated other comprehensive income (loss)


(2,443)


(2,060)

Non-controlling interest


2,417


2,415

Total Stockholder's Equity


370,627


356,035



$               705,067


$        593,580






 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/agree-realty-corporation-reports-operating-results-for-the-second-quarter-2015-300119161.html

SOURCE Agree Realty Corporation

Copyright 2015 PR Newswire

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