Agree Realty Corporation Reports First Quarter 2017 Results
BLOOMFIELD HILLS, Mich., April 24, 2017 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) (the "Company") today announced results for the quarter ended March 31, 2017. All per share amounts included herein are on a diluted per common share basis unless otherwise stated.
First Quarter 2017 Financial and Operating Highlights:
- Invested $62.1 million in 13 retail net lease properties
- Completed two development and Partner Capital Solutions ("PCS") projects
- Increased rental revenue 29.7% to $24.2 million
- Net Income per share attributable to the Company increased 54.2% to $0.56
- Net Income attributable to the Company increased 95.3% to $14.6 million
- Increased Funds from Operations ("FFO") per share 6.3% to $0.65
- Increased FFO 34.5% to $17.0 million
- Increased Adjusted Funds from Operations ("AFFO") per share 5.9% to $0.65
- Increased AFFO 34.0% to $17.1 million
- Declared a quarterly dividend of $0.495 per share, an increase of 6.5% over the dividend per share declared in the first quarter of 2016
Financial Results
Total Rental Revenue
Total rental revenue, which includes minimum rents and percentage rents, for the three months ended March 31, 2017 increased 29.7% to $24.2 million, compared to total rental revenue of $18.7 million for the comparable period in 2016.
Net Income
Net Income attributable to the Company for the three months ended March 31, 2017 increased 95.3% to $14.6 million, compared to $7.5 million for the comparable period in 2016. Net Income per share attributable to the Company for the three months ended March 31, 2017 increased 54.2% to $0.56, compared to $0.36 per share for the comparable period in 2016.
Funds from Operations
FFO for the three months ended March 31, 2017 increased 34.5% to $17.0 million, compared to FFO of $12.7 million for the comparable period in 2016. FFO per share for the three months ended March 31, 2017 increased 6.3% to $0.65, compared to FFO per share of $0.61 for the comparable period in 2016.
Adjusted Funds from Operations
AFFO for the three months ended March 31, 2017 increased 34.0% to $17.1 million, compared to AFFO of $12.7 million for the comparable period in 2016. AFFO per share for the three months ended March 31, 2017 increased 5.9% to $0.65, compared to AFFO per share of $0.61 for the comparable period in 2016.
Dividend
The Company paid a cash dividend of $0.495 per share on April 14, 2017 to stockholders of record on March 31, 2017, a 6.5% increase over the $0.465 quarterly dividend declared in the first quarter of 2016. The quarterly dividend represents payout ratios of approximately 76.6% of FFO per share and 76.4% of AFFO per share, respectively.
CEO Comments
"We are pleased to deliver another quarter of high-quality results as we continued to execute on our operating strategy," said Joey Agree, President and Chief Executive Officer of Agree Realty Corporation. "Our investments in the quarter were focused on industry-leading retailers that offer a compelling customer experience or employ a comprehensive omni-channel strategy. Looking forward, our balance sheet and our investment pipeline are very well-positioned for the future."
Portfolio Update
As of March 31, 2017, the Company's portfolio consisted of 377 properties located in 43 states and totaled 7.3 million square feet of gross leasable space. Properties ground leased to tenants accounted for 7.2% of annualized base rents.
The portfolio was approximately 99.6% leased, had a weighted average remaining lease term of approximately 10.6 years, and generated approximately 44.7% of annualized base rents from investment grade retail tenants.
The following table provides a summary of the Company's portfolio as of March 31, 2017:
| Property Type |
Number of Properties |
Annualized |
Percent of |
Percent |
Weighted |
||||
| Retail Net Lease |
342 |
$89,006 |
91.0% |
41.7% |
10.5 yrs |
||||
| Retail Net Lease Ground Leases |
32 |
7,077 |
7.2% |
86.5% |
12.8 yrs |
||||
| Total Retail Net Lease |
374 |
$96,083 |
98.2% |
45.0% |
10.7 yrs |
||||
| Total Portfolio |
377 |
$97,834 |
100.0% |
44.7% |
10.6 yrs |
| Annualized base rent is in thousands; any differences are the result of rounding. |
|
| (1) |
Represents annualized straight-line rent as of March 31, 2017. |
| (2) |
Reflects tenants, or parent entities thereof, with investment grade credit ratings from Standard & Poor's, |
Acquisitions
Total acquisition volume for the first quarter of 2017 was approximately $52.9 million and included 11 assets net leased to notable retailers operating in the discount apparel, auto parts, health and fitness and home furnishings sectors. The properties are located in 9 states and leased to tenants operating in 8 retail sectors. The properties were acquired at a weighted average capitalization rate of 7.6% and with a weighted average remaining lease term of approximately 10.6 years.
Dispositions
During the quarter, the Company sold one property net leased to Walgreens in Ann Arbor, Michigan for gross proceeds of approximately $10.5 million. The disposition was completed at a capitalization rate of 5.86%.
Development and Partner Capital Solutions
In the first quarter of 2017, the Company completed two previously announced development and PCS projects, including the Company's first Camping World in Tyler, Texas. The project is under a new 20-year net lease and had a total cost of approximately $7.5 million.
The Company also completed its previously announced Burger King in Heber, Utah. The project is the fifth Burger King in the Company's partnership with Meridian Restaurants, and is subject to a new 20-year net lease. The project had a total cost of approximately $1.7 million.
During the first quarter, construction continued on the Company's two other development and PCS projects with anticipated total project costs of approximately $12.3 million. The projects consist of the Company's first ground-up development for Camping World in Georgetown, Kentucky, and the redevelopment and expansion of an existing property in Boynton Beach, Florida for Orchard Supply Hardware (Lowe's Companies, Inc.).
Year-to-date, the Company has announced four development and PCS projects completed or currently under construction. Total project costs for the developments are approximately $21.5 million and include the following completed or commenced projects:
| Tenant |
Location |
Lease |
Lease |
Actual or |
Status |
|||||
| Camping World |
Tyler, TX |
Build-to-Suit |
20 Years |
Q1 2017 |
Completed |
|||||
| Burger King(1) |
Heber, UT |
Build-to-Suit |
20 Years |
Q1 2017 |
Completed |
|||||
| Orchard Supply |
Boynton Beach, FL |
Build-to-Suit |
15 Years |
Q3 2017 |
Under Construction |
|||||
| Camping World |
Georgetown, KY |
Build-to-Suit |
20 Years |
Q3 2017 |
Under Construction |
| (1) Franchise restaurant operated by Meridian Restaurants Unlimited, LC. |
Leasing
During the first quarter, the Company executed new leases, extensions or options on approximately 346,000 square feet of gross leasable area throughout the existing portfolio. Notable new leases, extensions or options included seven Tractor Supply stores comprising approximately 154,000 square feet across Texas, Mississippi and Louisiana, as well as a 32,147-square foot TJ Maxx in Aurora, Colorado.
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 March 31, 2017:
| Tenant |
Annualized |
Percent of |
||
| Walgreens |
$10,288 |
10.5% |
||
| Walmart |
4,224 |
4.3% |
||
| Lowe's |
3,099 |
3.2% |
||
| LA Fitness |
2,761 |
2.8% |
||
| Wawa |
2,664 |
2.7% |
||
| Mister Car Wash |
2,580 |
2.6% |
||
| Smart & Final |
2,518 |
2.6% |
||
| CVS |
2,463 |
2.5% |
||
| Dollar General |
2,415 |
2.5% |
||
| Tractor Supply |
2,183 |
2.2% |
||
| Hobby Lobby |
2,177 |
2.2% |
||
| Academy Sports |
1,982 |
2.0% |
||
| Burger King(2) |
1,907 |
1.9% |
||
| Rite Aid |
1,886 |
1.9% |
||
| Dollar Tree |
1,832 |
1.9% |
||
| 24 Hour Fitness |
1,759 |
1.8% |
||
| BJ's Wholesale |
1,709 |
1.7% |
||
| AMC |
1,585 |
1.6% |
||
| Taco Bell(3) |
1,537 |
1.6% |
||
| PetSmart |
1,535 |
1.6% |
||
| AutoZone |
1,473 |
1.5% |
||
| Other(4) |
43,257 |
44.4% |
||
| Total Portfolio |
$97,834 |
100.0% |
| Annualized base rent is in thousands; any differences are the result of rounding. |
|
| (1) |
Represents annualized straight-line rent as of March 31, 2017. |
| (2) |
Franchise restaurants operated by Meridian Restaurants Unlimited, LC. |
| (3) |
Franchise restaurants operated by Charter Foods North, LLC. |
| (4) |
Includes tenants generating less than 1.5% of annualized base rent. |
Retail Sectors
The following table presents annualized base rents for the Company's top retail sectors that represent 2.5% or greater of the Company's total annualized base rent as of March 31, 2017:
| Sector |
Annualized |
Percent of |
||
| Pharmacy |
$14,637 |
15.0% |
||
| Restaurants - Quick Service |
6,635 |
6.8% |
||
| Grocery Stores |
6,632 |
6.8% |
||
| Discount Apparel |
5,479 |
5.6% |
||
| Auto Service |
5,452 |
5.6% |
||
| Health & Fitness |
4,888 |
5.0% |
||
| Specialty Retail |
4,672 |
4.8% |
||
| General Merchandise |
3,956 |
4.0% |
||
| Home Improvement |
3,790 |
3.9% |
||
| Warehouse Clubs |
3,749 |
3.8% |
||
| Crafts and Novelties |
3,528 |
3.6% |
||
| Farm and Rural Supply |
3,365 |
3.4% |
||
| Sporting Goods |
3,149 |
3.2% |
||
| Auto Parts |
3,092 |
3.2% |
||
| Dollar Stores |
3,038 |
3.1% |
||
| Convenience Stores |
2,830 |
2.9% |
||
| Restaurants - Casual Dining |
2,481 |
2.5% |
||
| Other(2) |
16,461 |
16.8% |
||
| Total Portfolio |
$97,834 |
100.0% |
| Annualized base rent is in thousands; any differences are the result of rounding. |
|
| (1) |
Represents annualized straight-line rent as of March 31, 2017. |
| (2) |
Includes sectors generating less than 2.5% 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 March 31, 2017:
| State |
Annualized |
Percent of |
||
| Michigan |
$13,940 |
14.2% |
||
| Texas |
8,838 |
9.0% |
||
| Florida |
7,491 |
7.7% |
||
| Illinois |
7,366 |
7.5% |
||
| Ohio |
5,779 |
5.9% |
||
| Pennsylvania |
4,095 |
4.2% |
||
| California |
3,700 |
3.8% |
||
| Mississippi |
2,857 |
2.9% |
||
| Wisconsin |
2,841 |
2.9% |
||
| Kentucky |
2,723 |
2.8% |
||
| Colorado |
2,571 |
2.6% |
||
| Kansas |
2,540 |
2.6% |
||
| North Carolina |
2,485 |
2.5% |
||
| Missouri |
2,424 |
2.5% |
||
| Other(2) |
28,184 |
28.9% |
||
| Total Portfolio |
$97,834 |
100.0% |
| Annualized base rent is in thousands; any differences are the result of rounding. |
|
| (1) |
Represents annualized straight-line rent as of March 31, 2017. |
| (2) |
Includes states 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 March 31, 2017, assuming no tenants exercise renewal options:
| Year |
Leases |
Annualized |
Percent of |
Gross |
Percent of Gross |
||||
| 2017 |
4 |
$372 |
0.4% |
22 |
0.3% |
||||
| 2018 |
14 |
2,073 |
2.1% |
352 |
4.8% |
||||
| 2019 |
14 |
4,419 |
4.5% |
377 |
5.1% |
||||
| 2020 |
17 |
2,521 |
2.6% |
219 |
3.0% |
||||
| 2021 |
28 |
5,500 |
5.6% |
336 |
4.6% |
||||
| 2022 |
20 |
3,991 |
4.1% |
377 |
5.1% |
||||
| 2023 |
30 |
5,404 |
5.5% |
502 |
6.9% |
||||
| 2024 |
37 |
9,165 |
9.4% |
882 |
12.0% |
||||
| 2025 |
35 |
6,989 |
7.1% |
547 |
7.5% |
||||
| 2026 |
37 |
4,973 |
5.1% |
451 |
6.2% |
||||
| Thereafter |
192 |
52,427 |
53.6% |
3,261 |
44.5% |
||||
| Total Portfolio |
428 |
$97,834 |
100.0% |
7,326 |
100.0% |
| Annualized base rent and gross leasable area are in thousands; any differences are the result of rounding. |
|
| (1) |
Represents annualized straight-line rent as of March 31, 2017. |
Balance Sheet
Balance Sheet
As of March 31, 2017, the Company's net debt-to-recurring EBITDA was 4.9 times and its fixed charge coverage ratio was 4.0 times. The Company's total debt to total enterprise value was 24.7%. 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 months ended March 31, 2017, the Company's fully diluted weighted average shares outstanding were 26.0 million. The basic weighted average shares outstanding for the three months ended March 31, 2017 were 26.0 million.
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 March 31, 2017, there were 347,619 operating partnership units outstanding and the Company held a 98.7% interest in the operating partnership.
2017 Outlook
The Company's outlook for acquisition volume in 2017, which assumes continued growth in economic activity, moderate interest rate growth, positive business trends and other significant assumptions, remains between $200 million and $225 million of high-quality retail net lease properties. The Company's disposition guidance for 2017 remains between $20 million and $50 million.
Conference Call/Webcast
The Company will host its quarterly analyst and investor conference call on Tuesday, April 25, 2017 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 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 a publicly traded real estate investment trust 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 378 properties, located in 43 states and containing approximately 7.3 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, please visit 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, 2016 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 April 24, 2017. 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 share and per share data) |
|||
| March 31, 2017 |
December 31, 2016 |
||
| Assets: |
(Unaudited) |
||
| Real Estate Investments: |
|||
| Land |
$ 319,935 |
$ 309,687 |
|
| Buildings |
737,605 |
703,506 |
|
| Accumulated depreciation |
(73,657) |
(69,696) |
|
| Property under development |
8,414 |
6,764 |
|
| Net real estate investments |
992,297 |
950,261 |
|
| Cash and cash equivalents |
2,300 |
33,395 |
|
| Accounts receivable - tenants, net of allowance of $50 for possible losses at |
13,069 |
11,535 |
|
| Unamortized Deferred Expenses: |
|||
| Credit facility finance costs, net of accumulated amortization of $127 and |
1,456 |
1,552 |
|
| Leasing costs, net of accumulated amortization of $717 and $677 at March 31, |
1,575 |
1,227 |
|
| Lease intangibles, net of accumulated amortization of $29,103 and $25,666 at March 31, |
140,652 |
139,871 |
|
| Interest rate swaps |
1,561 |
1,409 |
|
| Other assets |
5,330 |
2,722 |
|
| Total Assets |
$ 1,158,240 |
$ 1,141,972 |
|
| Liabilities: |
|||
| Mortgage notes payable, net |
$ 68,539 |
$ 69,067 |
|
| Unsecured term loans, net |
158,557 |
158,679 |
|
| Senior unsecured notes, net |
159,198 |
159,176 |
|
| Unsecured revolving credit facility |
29,000 |
14,000 |
|
| Dividends and distributions payable |
13,151 |
13,124 |
|
| Deferred revenue |
1,650 |
1,823 |
|
| Accrued interest payable |
2,671 |
2,210 |
|
| Accounts payable and accrued expenses: |
|||
| Capital expenditures |
61 |
677 |
|
| Operating |
4,956 |
4,866 |
|
| Lease intangibles, net of accumulated amortization of $8,087 and $7,078 at |
30,702 |
30,047 |
|
| Interest rate swaps |
1,404 |
1,994 |
|
| Deferred income taxes |
705 |
705 |
|
| Tenant deposits |
94 |
94 |
|
| Total Liabilities |
470,688 |
456,462 |
|
| Stockholders' Equity: |
|||
| Common stock, $.0001 par value, 45,000,000 shares authorized, 26,219,680 |
3 |
3 |
|
| Preferred stock, $.0001 par value per share, 4,000,000 shares authorized |
|||
| Series A junior participating preferred stock, $.0001 par value, 200,000 |
- |
- |
|
| Additional paid-in capital |
711,753 |
712,069 |
|
| Dividends in excess of net income |
(26,962) |
(28,558) |
|
| Accumulated other comprehensive income (loss) |
195 |
(536) |
|
| Total Stockholders' Equity - Agree Realty Corporation |
684,989 |
682,978 |
|
| Non-controlling interest |
2,563 |
2,532 |
|
| Total Equity |
687,552 |
685,510 |
|
| Total Liabilities and Equity |
$ 1,158,240 |
$ 1,141,972 |
|
| Agree Realty Corporation |
|||
| Consolidated Statements of Operations and Comprehensive Income |
|||
| ($ in thousands, except share and per share data) |
|||
| (Unaudited) |
|||
| Three months ended |
|||
| 2017 |
2016 |
||
| Revenues |
|||
| Minimum rents |
$ 24,014 |
$ 18,491 |
|
| Percentage rents |
212 |
183 |
|
| Operating cost reimbursement |
2,344 |
1,589 |
|
| Other income |
(10) |
(39) |
|
| Total Revenues |
26,560 |
20,224 |
|
| Operating Expenses |
|||
| Real estate taxes |
1,808 |
1,123 |
|
| Property operating expenses |
797 |
573 |
|
| Land lease payments |
163 |
163 |
|
| General and administrative |
2,603 |
2,045 |
|
| Depreciation and amortization |
7,025 |
5,085 |
|
| Total Operating Expenses |
12,396 |
8,989 |
|
| Income from Operations |
14,164 |
11,235 |
|
| Other (Expense) Income |
|||
| Interest expense, net |
(4,138) |
(3,649) |
|
| Gain on sale of assets |
4,742 |
- |
|
| Net Income |
14,768 |
7,586 |
|
| Less net income attributable to non-controlling interest |
193 |
125 |
|
| Net Income Attributable to Agree Realty Corporation |
$ 14,575 |
$ 7,461 |
|
| Net Income Per Share Attributable to Agree Realty Corporation |
|||
| Basic |
$ 0.56 |
$ 0.36 |
|
| Diluted |
$ 0.56 |
$ 0.36 |
|
| Other Comprehensive Income |
|||
| Net income |
$ 14,768 |
$ 7,586 |
|
| Other Comprehensive Income (Loss) - Gain (Loss) on Interest Rate Swaps |
741 |
(2,935) |
|
| Total Comprehensive Income |
15,509 |
4,651 |
|
| Comprehensive Income Attributable to Non-Controlling Interest |
(203) |
(77) |
|
| Comprehensive Income Attributable to Agree Realty Corporation |
$ 15,306 |
$ 4,574 |
|
| Weighted Average Number of Common Shares Outstanding - Basic |
25,953,097 |
20,438,729 |
|
| Weighted Average Number of Common Shares Outstanding - Diluted |
26,009,120 |
20,480,140 |
|
| Agree Realty Corporation |
||||
| Reconciliation of Net Income to FFO and Adjusted FFO |
||||
| ($ in thousands, except share and per share data) |
||||
| (Unaudited) |
||||
| Three months ended |
||||
| 2017 |
2016 |
|||
| Net income |
$ 14,768 |
$ 7,586 |
||
| Depreciation of real estate assets |
4,484 |
3,362 |
||
| Amortization of leasing costs |
42 |
23 |
||
| Amortization of lease intangibles |
2,474 |
1,685 |
||
| (Gain) loss on sale of assets |
(4,742) |
- |
||
| Funds from Operations |
$ 17,026 |
$ 12,656 |
||
| Straight-line accrued rent |
(808) |
(649) |
||
| Deferred revenue recognition |
- |
(116) |
||
| Stock based compensation expense |
683 |
708 |
||
| Amortization of financing costs |
142 |
118 |
||
| Non-real estate depreciation |
25 |
15 |
||
| Adjusted Funds from Operations |
$ 17,068 |
$ 12,732 |
||
| FFO per common share - Basic |
$ 0.65 |
$ 0.61 |
||
| FFO per common share - Diluted |
$ 0.65 |
$ 0.61 |
||
| Adjusted FFO per common share - Basic |
$ 0.65 |
$ 0.61 |
||
| Adjusted FFO per common share - Diluted |
$ 0.65 |
$ 0.61 |
||
| Weighted Average Number of Common Shares and Units Outstanding - Basic |
26,300,716 |
20,786,348 |
||
| Weighted Average Number of Common Shares and Units Outstanding - Diluted |
26,356,739 |
20,827,759 |
||
| Supplemental Information: |
||||
| Scheduled principal repayments |
$ 769 |
$ 720 |
||
| Capitalized interest |
67 |
7 |
||
| Capitalized building improvements |
15 |
- |
||
| Non-GAAP Financial Measures |
SOURCE Agree Realty Corporation
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