Agree Realty Corporation Reports Operating Results for the Second Quarter 2012

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

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