Agree Realty Corporation Reports Operating Results for the Second Quarter 2012

26 Jul, 2012, 08:00 ET from Agree Realty Corporation

FARMINGTON HILLS, Mich., July 26, 2012 /PRNewswire/ --

SECOND Quarter 2012 Highlights:

  • Funds From Operations for the Quarter increased 5% year over year
  • Total Revenues for the Quarter increased 8.5% year over year
  • Acquired four net leased properties for $22 million in the home improvement, grocery, pharmacy and specialty retail sectors
  • Named preferred developer for Wawa in Florida; announced pipeline of three Wawa development projects
  • Sold Charlevoix Commons shopping center for $3,500,000, thereby reducing Kmart annualized base rentals by 10%
  • Extended maturity date of $22.9 million term loan to May 2019, including extension option
  • Increased portfolio occupancy to 97%
  • $0.40 per share quarterly dividend paid July 10, 2012

Agree Realty Corporation (NYSE: ADC) today announced results for the quarter ended June 30, 2012. Second quarter funds from operations (FFO) increased to $5,723,000 compared with FFO in the second quarter of 2011 of $5,431,000.  FFO per diluted share for the second quarter of 2012 was $0.50 compared with $0.54 for the second quarter of 2011.  The decrease in FFO per share was primarily due to the increase in the weighted average shares outstanding as the result of the common share offering in January 2012.  A reconciliation of net income to FFO is included in the financial tables accompanying this press release. 

Net income for the second quarter of 2012 increased to $5,090,000, or $0.44 per diluted share, compared to net income for the second quarter of 2011 of $3,823,000, or $.38 per share.  Total revenues increased to $9,236,000, compared with total revenues of $8,516,000 in the second quarter of 2011.

For the six months ended June 30, 2012, FFO was $11,231,000 compared with FFO for the six months ended June 30, 2011 of $11,749,000.  FFO per diluted share was $0.99 compared with $1.17 for the six months ended June 30, 2011.  FFO and FFO per share decreased due to an increase in the weighted average shares outstanding as the result of the common share offering in January 2012, the disposition of various non-core properties and the impact of the Borders bankruptcy in February 2011.  For the six months ended June 30, 2012, net income increased to $9,832,000, or $0.87 per diluted share, compared with net income for the comparable period last year of $8,523,000, or $.85 per diluted share.  Total revenues increased 4.7% to $18,244,000 compared with total revenues of $17,421,000 for the comparable period last year.

"I am extremely pleased to report positive operating results for the quarter.  Our efforts to expand and improve our portfolio have begun to materialize as our total revenues and funds from operations for the quarter have both increased over the comparable quarter," said Joey Agree, President and Chief Operating Officer. "During the quarter, we have improved our portfolio occupancy, disposed of non-core assets, made significant development announcements and exceeded our acquisition expectations." 

Acquisitions

The Company acquired three retail properties as well as the fee interest in the land underlying its Walgreens store in Ann Arbor, Michigan during the second quarter for approximately $22 million.  The single tenant properties acquired are net leased to Lowe's Home Improvement in Portland, Oregon, Dollar General Market in Cochran, Georgia, and Jared the Galleria in Baton Rouge, Louisiana.

Dispositions

The Company sold two non-core assets: the former Borders location in Omaha, Nebraska for approximately $2,750,000 in May 2012 as well as the Kmart anchored Charlevoix Commons shopping center for approximately $3,500,000 in June 2012. 

Development Activity

In November 2011, the Company announced that it had closed on the acquisition of a parcel of land in Southfield, Michigan to be ground leased to McDonald's.  McDonald's completed construction on the restaurant and opened in May 2012.

In May 2012, the Company closed on the acquisition of a parcel of land in Kissimmee, Florida to be developed for Wawa, an industry leader in the convenience and fuel store space.  Construction is expected to be completed in the second quarter of 2013.  In addition, the Company and Wawa have entered into two additional ground leases on sites in central Florida.

In May 2012, the Company closed on the acquisition of a land parcel in Venice, Florida to ground lease to JPMorgan Chase Bank.  Chase intends to construct a retail bank branch on the site.

Construction activity is in progress at the Rancho Cordova, California property being developed for a leader in the pharmacy industry and for the expansion of Miner's Super One Foods at the Company's Ironwood Commons Center.

Portfolio

At June 30, 2012, the Company's total assets were $315,076,000 and its portfolio consisted of 88 properties located in 23 states with a total of 3.4 million square feet of gross leasable space.  The portfolio was approximately 97% leased at the end of the quarter. 

The Company's construction in progress balance totaled approximately $7,896,000 at June 30, 2012.

Major Tenants

The following is a breakdown of base rents in effect at June 30, 2012 for each of the Company's major tenants:  

Tenant

Annualized Base Rent

Percent of Total Base Rent

Walgreens

$      11,494,744

33%

Kmart

3,467,331

10%

CVS

2,463,490

7%

Total

$      17,425,565

50%

Annualized Base Rent of Properties

The following is a breakdown of base rents in effect at June 30, 2012 for each type of retail tenant:  

Type of Tenant

Annualized Base Rent

Percent of Base Rent

National

$      30,928,870

88.6%

Regional

2,681,575

7.7%

Local

1,286,702

3.7%

Total

$      34,897,147

100.0%

Lease Expirations

The following table, as of June 30, 2012, sets forth lease expirations for the next 10 years for the Company's freestanding properties and community shopping centers, assuming that none of the tenants exercise renewal options or terminate their leases prior to the contractual expiration date.  

Expiration Year

Number of Leases Expiring

 Gross Leasable Area 

             Annualized Base Rent 

 Square Footage 

Percent of Total

 Amount 

Percent of Total

2012

3

6,836

0.2%

$       49,548

0.1%

2013

20

331,736

10.0%

1,256,770

3.6%

2014

25

383,860

11.6%

1,839,655

5.3%

2015

27

708,216

21.4%

3,530,027

10.1%

2016

15

109,591

3.3%

1,010,541

2.9%

2017

12

90,769

2.8%

1,533,410

4.4%

2018

9

100,991

3.1%

1,572,449

4.5%

2019

7

85,170

2.6%

1,809,379

5.2%

2020

6

128,591

3.9%

1,536,778

4.4%

2021

7

158,699

4.8%

1,951,200

5.6%

Thereafter

56

1,197,972

36.3%

18,807,390

53.9%

Total

187

3,302,431

100.0%

$34,897,147

100.0%

Capital Markets/Balance Sheet

The Company closed on an amended and restated $22.9 million term loan to extend the maturity date from July 2013 to May 2019, inclusive of a two year extension option. The Company has entered into an interest rate swap agreement to fix the interest rate at 3.62% for the period July 1, 2013 to maturity.

The Company assumed approximately $9,640,000 of mortgage debt in conjunction with the acquisition of a Lowe's Home Improvement store.  The assumed mortgage debt matures in June 2014 and carries a 5.075% interest rate.

The Company's debt to total enterprise value was approximately 29% as of June 30, 2012.

Dividend

The Company paid a cash dividend of $0.40 per share on July 10, 2012 to shareholders of record on June 29, 2012.  The dividend is equivalent to an annualized dividend of $1.60 per share and represents a payout ratio of 80% of FFO for the quarter.

Outstanding Shares and Operating Partnership Units

For the three and six months ended June 30, 2012, the Company's fully diluted weighted average shares outstanding were 11,213,440 and 10,990,394.  The basic weighted average shares outstanding for the three and six months ended June 30, 2012 were 11,183,229 and 10,953,463.

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, 2012, there were 347,619 operating partnership units outstanding and the Company held a 97.05% interest.

About Agree Realty Corporation

Agree Realty Corporation is primarily engaged in the acquisition and development of single tenant properties leased to industry leading retail tenants.  The Company currently owns and operates a portfolio of 92 properties, located in 25 states and containing approximately 3.4 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."

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, 2011.  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.

For additional information, visit the Company's home page on the Internet at http://www.agreerealty.com.  

Agree Realty Corporation

Operating Results (in thousands, except per share amounts)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2012

2011

2012

2011

Revenues:

Minimum rents

$ 8,497

$ 7,293

$ 16,824

$ 15,043

Percentage rent

8

5

23

21

Operating cost reimbursements

703

674

1,352

1,378

Development fee income

-

483

-

895

Other income

28

61

45

84

Total Revenues

9,236

8,516

18,244

17,421

Expenses:

Real estate taxes

602

590

1,184

1,158

Property operating expenses

285

344

692

742

Land lease payments

181

181

362

359

General and administration

1,429

1,521

2,836

2,963

Depreciation and amortization

1,795

1,413

3,395

2,833

Interest expense

1,146

1,059

2,282

2,068

Total Expenses

5,438

5,108

10,751

10,123

Income Before Discontinued Operations

3,798

3,408

7,493

7,298

Gain on sale of asset from discontinued operations

1,159

-

2,068

-

Income from discontinued operations

133

415

271

1,225

Net Income

5,090

3,823

9,832

8,523

Net income attributable to non-controlling interest

150

130

296

290

Net Income Attributable to Agree Realty Corporation

4,940

3,693

9,536

8,233

Other Comprehensive Income, Net of $17, $4, $15 and $(1) Attributable to  

Non-Controlling Interest

(563)

(106)

(512)

12

Total Comprehensive Income Attributable to Agree Realty Corporation

$ 4,377

$ 3,587

$   9,024

$   8,245

Basic Earnings Per Share

Continuing operations

$   0.33

$   0.34

$      0.66

$      0.74

Discontinued operations

0.11

0.04

0.21

0.12

$   0.44

$   0.38

$      0.87

$      0.86

Dilutive Earnings Per Share

Continuing operations

$   0.33

$   0.34

$      0.66

$      0.73

Discontinued operations

0.11

0.04

0.21

0.12

$   0.44

$   0.38

$      0.87

$      0.85

Weighted Average Number of Common Shares Outstanding - Basic

11,183

9,629

10,953

9,625

Weighted Average Number of Common Shares Outstanding - Dilutive

11,213

9,656

10,990

9,657

  

Agree Realty Corporation

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

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2012

2011

2012

2011

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

Net income

$ 5,090

$ 3,823

$   9,832

$ 8,523

Depreciation of real estate assets

1,447

1,476

2,881

2,964

Amortization of leasing costs

26

27

52

53

Amortization of lease intangibles

319

105

533

209

Gain on sale of assets

(1,159)

-

(2,067)

-

Funds from Operations

$ 5,723

5,431

$ 11,231

11,749

Funds from Operations Per Share - Dilutive

$   0.50

$   0.54

$      0.99

$   1.17

Weighted Average Number of Common Shares Outstanding - Dilutive

11,561

10,004

11,338

10,004

Supplemental Information:

Straight-line rental income

$    165

$       37

$       301

$       72

Stock-based compensation expense

412

359

824

719

Deferred revenue recognition

116

172

232

345

Scheduled principal repayments

787

974

1,527

2,022

 (1)          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 after adjustments for unconsolidated partnerships and joint ventures.  In addition, NAREIT has recently clarified the computation of FFO to exclude impairment charges on depreciable property.  Management has restated FFO for prior periods presented accordingly.  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 not all REITs use the same definition.   

Agree Realty Corporation

Consolidated Balance Sheets (in thousands)

(Unaudited)

June 30,

December 31,

2012

2011

Assets:

Land  

$ 117,453

$          108,673

Buildings

221,056

229,821

Accumulated depreciation

(65,327)

(68,590)

Property under development 

7,896

1,580

Cash and cash equivalents

618

2,003

Restricted cash

3,281

-

Accounts receivable 

761

802

Deferred costs, net of amortization

27,059

18,692

Other assets

2,279

963

Total Assets

$ 315,076

$          293,944

Liabilities

Mortgages payable

$   61,794

$             62,854

Notes payable

44,434

56,444

Deferred revenue

2,162

2,394

Dividends and distributions payable

4,715

4,071

Other liabilities

4,002

5,957

Total Liabilities

117,107

131,720

Stockholder's Equity

Common stock (11,436,044 and 9,851,914 shares)

1

1

Additional paid-in capital

216,936

181,070

Deficit

(20,531)

(20,919)

Accumulated other comprehensive income (loss)

(1,118)

(607)

Non-controlling interest

2,681

2,679

Total Stockholder's Equity

197,969

162,224

$ 315,076

$          293,944

SOURCE Agree Realty Corporation



RELATED LINKS

http://www.agreerealty.com