Agree Realty Corporation Reports Fourth Quarter And Full Year 2015 Results

03 Mar, 2016, 16:01 ET from Agree Realty Corporation

BLOOMFIELD HILLS, Mich., March 3, 2016 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) (the "Company") today announced results for the quarter and full year ended December 31, 2015. All per share amounts included herein are on a diluted per common share basis unless otherwise stated.

2015 Full Year Financial and Operating Highlights:

  • Increased Funds from Operations ("FFO") per share 10.0% to $2.39
  • Increased FFO 32.2% to $44.1 million
  • Increased Adjusted Funds from Operations ("AFFO") per share 7.5% to $2.38
  • Increased AFFO 29.2% to $43.9 million
  • Increased rental revenue 30.1% to $64.5 million
  • Invested in 74 retail net lease properties for a record $225.9 million
  • Completed or announced three development and Partner Capital Solutions projects
  • Raised approximately $92.3 million in net proceeds from the issuance of 3.0 million common shares
  • Completed $100.0 million private placement of senior unsecured notes
  • Declared dividends of $1.845 per share, an increase of 6.0% over dividends per share declared in 2014

Fourth Quarter 2015 Financial and Operating Highlights:

  • Increased FFO 30.3% to $11.8 million
  • Increased AFFO 27.5% to $11.6 million
  • Increased rental revenue 26.2% to $17.0 million
  • Acquired 14 retail net lease properties for approximately $60.0 million
  • Raised approximately $53.0 million in net proceeds from the issuance of 1.7 million common shares
  • Declared a quarterly dividend of $0.465 per share

Financial Results

Total Rental Revenue

Total rental revenue, which includes minimum rents and percentage rents, for the three months ended December 31, 2015 increased 26.2% to $17.0 million compared with total rental revenue of $13.5 million for the comparable period in 2014.

Total rental revenue for the year ended December 31, 2015 increased 30.1% to $64.5 million compared with total rental revenue of $49.6 million for the comparable period in 2014.

Funds from Operations

FFO for the three months ended December 31, 2015 increased 30.3% to $11.8 million compared with FFO of $9.0 million for the comparable period in 2014.  FFO per share for the three months ended December 31, 2015 increased 5.7% to $0.60 compared with FFO per share of $0.57 for the comparable period in 2014.

FFO for the year ended December 31, 2015 increased 32.2% to $44.1 million compared with FFO of $33.3 million for the comparable period in 2014.  FFO per share for the year ended December 31, 2015 increased 10.0% to $2.39 compared with FFO per share of $2.18 for the comparable period in 2014.

Adjusted Funds from Operations

AFFO for the three months ended December 31, 2015 increased 27.5% to $11.6 million compared with AFFO of $9.1 million for the comparable period in 2014.  AFFO per share for the three months ended December 31, 2015 increased 3.4% to $0.60 compared with AFFO per share of $0.58 for the comparable period in 2014.

AFFO for the year ended December 31, 2015 increased 29.2% to $43.9 million compared with AFFO of $33.9 million for the comparable period in 2014.  AFFO per share for the year ended December 31, 2015 increased 7.5% to $2.38 compared with AFFO per share of $2.22 for the comparable period in 2014.

Net Income

Net income attributable to the Company for the three months ended December 31, 2015 was $7.8 million, or $0.41 per share, compared with $5.6 million, or $0.36 per share, for the comparable period in 2014.

Net income attributable to the Company for the year ended December 31, 2015 was $39.0 million, or $2.16 per share, compared with $18.5 million, or $1.24 per share, for the comparable period in 2014.

Dividend

The Company paid a cash dividend of $0.465 per share on January 5, 2016 to stockholders of record on December 22, 2015.  The quarterly dividend represented payout ratios of approximately 77.0% of FFO and 78.1% of AFFO, respectively.  For 2015, the Company declared annual dividends of $1.845, a 6.0% increase over the $1.74 of annual dividends declared in 2014.

CEO Comments

"We're extremely pleased with our execution in 2015 as we continue to thoughtfully grow the Company and strategically execute in all phases of our business," said Joey Agree, President and Chief Executive Officer of Agree Realty Corporation.  "During the course of the year, via our three investment platforms, we invested over $225 million in high-quality retail net lease properties, further diversifying and expanding our growing portfolio of industry-leading retailers.  These investments were focused on e-commerce and recession resistant sectors and reflect our ability to opportunistically leverage our unique investment platforms.  As we look into 2016, we are encouraged by our momentum and remain focused on creating value through our differentiated investment and operating strategy."

Portfolio Update

As of December 31, 2015, the Company's portfolio consisted of 278 properties located in 41 states and totaling 5.2 million square feet of gross leasable space.  Properties ground leased to tenants accounted for 8.8% of annualized base rent.

The portfolio was approximately 99.5% leased, had a weighted-average remaining lease term of approximately 11.4 years, and generated approximately 51.9% of annualized base rents from investment grade tenants.

The table below provides a summary of the Company's portfolio as of December 31, 2015:

Property Type

Number of Properties

Annualized Base Rent (1)

Percent of Annualized Base Rent

Percent Investment Grade (2)

Weighted Average Lease Term

Retail Net Lease

249

$63,658

88.8%

49.0%

11.3 yrs

Retail Net Lease Ground Leases

26

6,287

8.8%

88.2%

13.6 yrs

Total Retail Net Lease

275

69,945

97.6%

52.5%

11.5 yrs

Total Portfolio

278

$71,692

100.0%

51.9%

11.4 yrs

Annualized base rent is in thousands; any differences are a result of rounding.

(1)

Represents annualized straight-line rent as of December 31, 2015.

(2)

Reflects tenants, or parent entities thereof, with investment grade credit ratings from Standard & Poor's, Moody's, Fitch and/or NAIC.

Acquisitions

Total acquisition volume for the fourth quarter of 2015 was approximately $60.0 million and included 14 assets net leased to a diverse group of retailers operating in the general merchandise, auto parts, auto service, and deep discount sectors.  These properties were acquired at a weighted-average cap rate of 7.8% and with a weighted-average remaining lease term of approximately 10.8 years.

Total acquisition volume for 2015 was a record for the Company.  Throughout the year, the Company invested in 73 retail net lease assets for an aggregate purchase price of approximately $220.1 million.  The properties are located in 24 states and leased to 40 distinct tenants operating across 19 retail sectors.  The Company acquired these assets at a weighted-average cap rate of approximately 8.0% and with a weighted-average remaining lease term of approximately 12.2 years.

Development and Partner Capital Solutions

Total committed capital for development and Partner Capital Solutions projects for 2015 was $14.9 million, and included projects for a number of super-regional and national tenants. 

In the fourth quarter of 2015, the Company, through its Partner Capital Solutions program (formerly Joint Venture Capital Solutions program), completed the previously announced Cash & Carry Smart Foodservice in Salem, Oregon. The property is subject to a new 15-year lease and the total cost was approximately $5.8 million.

Subsequent to the end of the year in February 2016, the Company completed its previously announced Hobby Lobby project in Springfield, Ohio.  The development was completed ahead of schedule at a total cost of approximately $5.0 million and is subject to a new 15-year lease.

In addition to the Company's completed projects, the Company continues to have numerous new and ongoing development and Partner Capital Solutions projects on behalf of industry-leading tenants, which include the following:

  • a Wawa convenience store with fuel in Orlando, Florida, which is currently under construction and is leased under a 20-year ground lease agreement;
  • a Chick-fil-A in Frankfort, Kentucky, which is currently under construction and is leased under a new 20-year ground lease agreement;
  • a Starbucks in Lakeland, Florida, where the Company anticipates commencing construction in the second quarter of 2016;
  • a Burger King in Farr West, Utah, which is expected to begin construction shortly and is part of a previously announced partnership with Meridian Restaurants.

Dispositions

Throughout 2015, the Company sold eight assets for aggregate gross proceeds of approximately $29.0 million. These dispositions included three land parcels, two single tenant buildings and three non-core community shopping centers consisting of Marshall Plaza in Marshall, Michigan, Ferris Commons in Big Rapids, Michigan and Lakeland Plaza in Lakeland, Florida.

Leasing

During 2015, and excluding properties that were sold throughout the year, the Company executed new leases, extensions or options on nearly 125,000 square feet of gross leasable area throughout the portfolio.  Material new leases, extensions or options included a 51,513 square foot JC Penney and a 15,400 square foot Planet Fitness, both at Central Michigan Commons in Mt. Pleasant, Michigan.

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 December 31, 2015:

Tenant

Annualized Base Rent (1)

Percent of Annualized Base Rent

Walgreens

$12,310

17.2%

Wal-Mart

3,924

5.5%

Wawa

2,465

3.4%

CVS

2,463

3.4%

Academy Sports

1,982

2.8%

Rite Aid

1,886

2.6%

Lowe's

1,846

2.6%

Dollar General

1,795

2.5%

24 Hour Fitness

1,759

2.5%

BJ's Wholesale

1,709

2.4%

LA Fitness

1,694

2.4%

Taco Bell(2)

1,537

2.1%

Dollar Tree

1,427

2.0%

Burger King(3)

1,241

1.7%

Kohl's

1,180

1.6%

AutoZone

1,163

1.6%

Dick's Sporting Goods

1,089

1.5%

Total Top Tenants

$41,470

57.8%

Annualized base rent is in thousands; any differences are a result of rounding.

(1)

Represents annualized straight-line rent as of December 31, 2015.

(2)

Franchise restaurants operated by Charter Foods North, LLC. 

(3)

Franchise restaurants operated by Meridian Restaurants Unlimited, LC.

Tenant Sectors

The following table presents annualized base rents for the Company's top retail sectors that generated 2.5% or greater of the Company's total annualized base rent as of December 31, 2015:

Sector

Annualized Base Rent (1)

Percent of Annualized Base Rent

Pharmacy

$16,659

23.2%

Restaurants - Quick Service

5,643

7.9%

General Merchandise

3,956

5.5%

Apparel

3,903

5.4%

Grocery Stores

3,843

5.4%

Warehouse Clubs

3,749

5.2%

Health & Fitness

3,562

5.0%

Sporting Goods

3,149

4.4%

Specialty Retail

3,147

4.4%

Convenience Stores

2,599

3.6%

Restaurants - Casual Dining

2,388

3.3%

Dollar Stores

2,280

3.2%

Auto Parts

2,267

3.2%

Home Improvement

1,847

2.6%

Other(2)

12,700

17.7%

Total Portfolio

$71,692

100.0%

Annualized base rent is in thousands; any differences are a result of rounding.

(1)

Represents annualized straight-line rent as of December 31, 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 December 31, 2015, assuming that no tenants exercise renewal options:

Year

Leases

Annualized Base Rent (1)

Percent of Annualized Base Rent

Gross Leasable Area

Percent of Gross Leasable Area

2016

2

$            277

0.4%

30

0.6%

2017

10

1,700

2.4%

114

2.2%

2018

11

1,431

2.0%

245

4.7%

2019

11

3,607

5.0%

332

6.4%

2020

17

2,608

3.6%

239

4.6%

2021

17

4,198

5.9%

236

4.5%

2022

13

2,672

3.7%

262

5.0%

2023

21

3,270

4.6%

272

5.2%

2024

27

6,342

8.8%

539

10.3%

2025

26

5,231

7.3%

396

7.6%

Thereafter

161

40,356

56.3%

2,542

48.9%

Total Portfolio

316

$        71,692

100.0%

5,207

100.0%

Annualized base rent and gross leasable area are in thousands; any differences are a result of rounding.

(1)

Represents annualized straight-line rent as of December 31, 2015.

Capital Markets and Balance Sheet

Capital Markets

During 2015, the Company completed a number of attractive capital market transactions to help fund strategic growth and maintain its strong balance sheet.  The Company raised approximately $92.3 million of net proceeds through common share offerings and its at-the-market equity program ("ATM program") and originated $100.0 million of new debt.

  • In December 2015, the Company completed an underwritten public offering of 1.7 million shares of common stock at a price of $32.10 per share, resulting in net proceeds of approximately $53.0 million.
  • During the three months ended December 31, 2015, the Company issued 15,801 shares of common stock under its ATM program realizing gross proceeds of approximately $0.5 million. During the year ended December 31, 2015, the Company issued 1,318,812 shares of common stock under its ATM program at an average price of $30.31, for total net proceeds of approximately $39.3 million.
  • On May 28, 2015, the Company completed a private placement of $100.0 million principal amount of senior unsecured notes (the "Senior Unsecured Notes"). The Senior Unsecured Notes were sold in two series, including $50.0 million of 4.16% notes due May 30, 2025 and $50.0 million of 4.26% notes due May 30, 2027. The weighted average term of the Senior Unsecured Notes is 11 years and the weighted average interest rate is 4.21%.

Balance Sheet

As of December 31, 2015, the Company's total debt to total enterprise value was approximately 30.9%.  Total enterprise value 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 into common stock.

For the three and twelve months ended December 31, 2015, the Company's fully diluted weighted-average shares outstanding were 19.1 million and 18.1 million, respectively. The basic weighted-average shares outstanding for the three and twelve months ended December 31, 2015 were 19.1 million and 18.0 million, respectively.

The Company's assets are held by, and its operations are conducted through, Agree Limited Partnership, of which the Company is the sole general partner.  As of December 31, 2015, there were 347,619 operating partnership units outstanding and the Company held a 98.1% interest in the operating partnership.

2016 Outlook

The Company's outlook for acquisition volume in 2016, which assumes continued growth in economic activity, positive business trends and other significant assumptions, is between $175 and $200 million of high-quality retail net lease properties.

Conference Call/Webcast

Agree Realty Corporation will host its quarterly analyst and investor conference call on Friday, March 4, 2016 at 9:00 AM EST.  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 Invest section of the website.  A replay of the conference call webcast will be archived and available online through the Invest section of www.agreerealty.com.

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 286 properties, located in 41 states and containing approximately 5.4 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 www.agreerealty.com.  

Forward-Looking Statements

This press release may contain certain "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. 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," references to "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 and forecasts and other forward-looking information and estimates. These forward-looking statements are subject to various risks and uncertainties, many of which are beyond the Company's control, which could cause actual results to differ materially from such statements. These risks and uncertainties are described in greater detail in the Company's filings with the Securities and Exchange Commission, including, without limitation, the Company's Annual Report on Form 10-K for the year ended December 31, 2015 and in subsequent quarterly reports. Except as required by law, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events 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 Invest section of the Company's website at www.agreerealty.com

All information in this press release is as of March 3, 2016. The Company undertakes no duty to update the statements in this press release to conform the statements to actual results or changes in the Company's expectations.

 

Agree Realty Corporation

Consolidated Balance Sheet

($ in thousands, except per share data)

December 31, 2015

December 31, 2014

Assets:

(Unaudited)

Real Estate Investments:

Land  

$                    225,274

$                     195,091

Buildings

526,912

393,827

Accumulated depreciation

(56,401)

(59,090)

Property under development 

3,663

229

Net real estate investments

699,448

530,057

Cash and cash equivalents

2,712

5,400

Accounts receivable - Tenants, net of allowance of $35 for possible losses at December 31, 2015 and December 31, 2014, respectively

7,418

4,508

Unamortized Deferred Expenses:

Financing Costs, net of accumulated amortization of $3,409 and $2,690 at December 31, 2015 and December 31, 2014, respectively

3,186

3,008

Leasing costs, net of accumulated amortization of $554 and $544 at December 31, 2015 and December 31, 2014, respectively

664

783

Lease intangibles, net of accumulated amortization of $10,578 and $5,719 at December 31, 2015 and December 31, 2014, respectively

76,552

47,480

Other assets

2,570

2,345

Total Assets

$                    792,550

$                     593,581

Liabilities:

Mortgage notes payable

$                    101,584

$                     106,762

Unsecured Term Loans

100,000

100,000

Senior Unsecured Notes

100,000

-

Unsecured Revolving Credit Facility

18,000

15,000

Dividends and Distributions Payable

9,758

8,049

Deferred Revenue

541

1,004

Accrued Interest Payable

963

722

Accounts Payable and Accrued Expense:

Capital Expenditures

122

200

Operating

3,927

2,685

Interest Rate Swaps

3,301

2,383

Deferred Income Taxes

705

705

Tenant Deposits

29

36

Total Liabilities

338,930

237,546

Stockholders' Equity:

Common stock, $.0001 par value, 28,000,000 shares authorized, 20,637,301 and 17,539,946 shares issued and outstanding, respectively

2

2

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

-

-

Series A junior participating preferred stock, $.0001 par value, 200,000 authorized, no shares issues and outstanding

-

-

Additional paid-in capital

482,514

388,263

Dividends in excess of net income

(28,262)

(32,585)

Accumulated other comprehensive loss

(3,130)

(2,060)

Total Stockholder's Equity - Agree Realty Corporation

451,124

353,620

Non-controlling interest

2,496

2,415

Total Stockholders' Equity

453,620

356,035

Total Liabilities and Stockholders' Equity

$                    792,550

$                     593,581

 

 

 

Agree Realty Corporation

Consolidated Statements of Operations and Comprehensive Income

($ in thousands, except per share data)

Three months ended December 31,

Year ended December 31,

2015

2014

2015

2014

(Unaudited)

(Unaudited)

Revenues

Minimum rents

$     17,016

$     13,462

$     64,278

$     49,403

Percentage rents

(9)

13

180

160

Operating cost reimbursement

2,031

845

5,277

3,825

Other income

116

3

231

171

Total Revenues

19,154

14,323

69,966

53,559

Operating Expenses

Real estate taxes

1,663

555

4,005

2,766

Property operating expenses

357

384

1,768

1,679

Land lease payments

163

132

606

472

General and administrative

1,808

1,672

6,988

6,629

Depreciation and amortization

3,289

3,143

16,486

11,103

Impairment Charge

-

-

-

3,020

Total Operating Expenses

7,280

5,886

29,853

25,669

Income from Operations

11,874

8,437

40,113

27,890

Other (Expense) Income

Interest expense, net

(3,947)

(2,479)

(12,306)

(8,587)

Gain (loss) on sale of assets

-

(235)

12,135

(528)

Loss on debt extinguishment

-

-

(180)

-

Income from Continuing Operations

7,927

5,723

39,762

18,775

Discontinued Operations

Gain on sale of assets from discontinued operations

-

-

-

123

Income from discontinued operations

-

-

-

15

Net Income

7,927

5,723

39,762

18,913

Less Net Income Attributable to non-Controlling Interest

137

125

744

425

Net Income Attributable to Agree Realty Corporation

$       7,790

$       5,598

$     39,018

$     18,488

Basic Earnings Per Share

Continuing operations

$         0.41

$         0.36

$         2.17

$         1.23

Discontinued operations

$               -

$               -

$               -

$         0.01

$         0.41

$         0.36

$         2.17

$         1.24

Diluted Earnings Per Share

Continuing operations

$         0.41

$         0.36

$         2.16

$         1.23

Discontinued operations

$               -

$               -

$               -

$         0.01

$         0.41

$         0.36

$         2.16

$         1.24

Other Comprehensive Income

Net income

$       7,927

$       5,723

$     39,762

$     18,913

Other Comprehensive Income (Loss)

1,836

(1,962)

(1,093)

(2,584)

Total Comprehensive Income

9,763

3,761

38,669

16,329

Comprehensive Income Attributable to Non-Controlling Interest

(173)

(82)

(724)

(373)

Comprehensive Income Attributable to Agree Realty Corporation

$       9,590

$       3,679

$     37,945

$     15,956

Weighted Average Number of Common Shares Outstanding - Basic

19,063

15,364

18,003

14,883

Weighted Average Number of Common Shares Outstanding - Diluted

19,129

15,450

18,065

14,967

 

 

Agree Realty Corporation

Reconciliation of Net Income to FFO and Adjusted FFO

($ in thousands, except per share data)

(Unaudited)

Three months ended December 31,

Year ended December 31,

2015

2014

2015

2014

Net income

$         7,927

$         5,723

$       39,762

$       18,913

Depreciation of real estate assets

2,768

2,258

11,466

8,362

Amortization of leasing costs

14

32

99

126

Amortization of lease intangibles

1,046

772

4,859

2,490

Impairment charge

-

-

-

3,020

(Gain) loss on sale of assets

-

235

(12,135)

405

Funds from Operations

$       11,755

$         9,020

$       44,051

$       33,316

Straight-line accrued rent

(634)

(427)

(2,450)

(1,416)

Deferred revenue recognition

(116)

(116)

(463)

(463)

Stock based compensation expense

470

431

1,992

1,987

Amortization of financing costs

110

112

495

398

Non-real estate depreciation

16

79

62

123

Debt extinguishment costs

-

-

180

-

Adjusted Funds from Operations

$       11,601

$         9,099

$       43,867

$       33,945

FFO per common share - Basic

$           0.61

$           0.57

$           2.40

$           2.19

FFO per common share - Diluted

$           0.60

$           0.57

$           2.39

$           2.18

Adjusted FFO per common share - Basic

$           0.60

$           0.58

$           2.39

$           2.23

Adjusted FFO per common share - Diluted

$           0.60

$           0.58

$           2.38

$           2.22

Weighted Average Number of Common Shares and Units Outstanding - Basic

19,411

15,712

18,351

15,230

Weighted Average Number of Common Shares and Units Outstanding - Diluted

19,477

15,798

18,413

15,315

Supplemental Information:

Scheduled principal repayments

$            711

$            923

$         2,772

$         3,599

Capitalized interest

23

42

39

263

Capitalized building improvements

382

32

310

145

 

Non-GAAP Financial Measures

FFO

The Company considers the non-GAAP measures of FFO and FFO per share/unit to be key supplemental measures of the Company's performance and should be considered along with, but not as alternatives to, net income or loss as a measure of the Company's operating performance. Historical cost accounting for real estate assets 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.

The White Paper on FFO approved by NAREIT in April 2002, as revised in 2011, defines FFO as net income or loss (computed in accordance with GAAP), excluding gains (or losses) from sales of properties and items classified by GAAP as extraordinary, plus real estate-related depreciation and amortization and impairment writedowns, and after comparable adjustments for the Company's portion of these items related to unconsolidated entities and joint ventures. The Company computes FFO consistent with standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than the Company.

The Company believes that excluding the effect of extraordinary items, real estate-related depreciation and amortization and impairments, which are based on historical cost accounting and which may be of limited significance in evaluating current performance, can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common shareholders. However, FFO may not be helpful when comparing the Company to non-REITs.

FFO does not represent cash generated from operating activities as determined by GAAP and should not be considered an alternative to net income or loss, cash flows from operations or any other operating performance measure prescribed by GAAP. FFO is not a measurement of the Company's liquidity, nor is FFO indicative of funds available to fund the Company's cash needs, including its ability to make cash distributions. This measurement does not reflect cash expenditures for long-term assets and other items that have been and will be incurred. FFO may include funds that may not be available for management's discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties. To compensate for this, management considers the impact of these excluded items to the extent they are material to operating decisions or the evaluation of the Company's operating performance.

Adjusted FFO

The Company presents adjusted FFO (including adjusted FFO per share/unit), which adjusts for certain additional items including straight-line accrued rent, deferred revenue recognition, stock based compensation expense, non-real estate depreciation and debt extinguishment costs and certain other items. The Company excludes these items as it believes it allows for meaningful comparisons with other REITs and between periods and is more indicative of the ongoing performance of its assets. As with FFO, the Company's calculation of adjusted FFO may be different from similar adjusted measures calculated by other REITs.

SOURCE Agree Realty Corporation



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