Agree Realty Corporation Reports Fourth Quarter and Full Year 2023 Results

Fourth Quarter ATM Activity Creates $500 Million of Leverage Neutral Investment Capacity

ROYAL OAK, Mich., Feb. 13, 2024 /PRNewswire/ — Agree Realty Corporation (NYSE: ADC) (the “Company”) today announced results for the quarter and full year ended December 31, 2023. All per share amounts included herein are on a diluted per common share basis unless otherwise stated.

Fourth Quarter 2023 Financial and Operating Highlights:

  • Invested approximately $199 million in 70 retail net lease properties
  • Completed four development or Developer Funding Platform (“DFP”) projects representing total committed capital of over $16 million
  • Net Income per share attributable to common stockholders of $0.44 was unchanged year-over-year
  • Core Funds from Operations (“Core FFO”) per share increased 3.4% to $0.99
  • Adjusted Funds from Operations (“AFFO”) per share increased 5.2% to $1.00
  • Declared a December monthly dividend of $0.247 per common share, a 2.9% year-over-year increase
  • Sold 3.8 million shares of common stock via the forward component of the Company’s at-the-market equity (“ATM”) program for net proceeds of approximately $236 million
  • Balance sheet well positioned at 4.3 times proforma net debt to recurring EBITDA; 4.7 times excluding unsettled forward equity

Full Year 2023 Financial and Operating Highlights:

  • Invested or committed $1.34 billion in 319 retail net lease properties
  • Commenced 13 development or DFP projects for total committed capital of approximately $54 million
  • Net Income per share attributable to common stockholders declined 7.0% to $1.70
  • Core FFO per share increased 1.6% to $3.93
  • AFFO per share increased 3.1% to $3.95
  • Declared dividends of $2.919 per share, a 4.1% year-over-year increase
  • Raised over $370 million of gross equity proceeds through the Company’s ATM program
  • Closed on an unsecured $350 million 5.5-year term loan at a 4.52% fixed rate inclusive of prior hedging activity
  • Ended the year with over $1.0 billion of total liquidity including availability on the revolving credit facility, outstanding forward equity, and cash on hand

Financial Results

Net Income Attributable to Common Stockholders

Net Income for the three months ended December 31, 2023 increased 12.9% to $44.1 million, compared to $39.1 million for the comparable period in 2022. Net Income per share for the three months ended December 31st of $0.44 was unchanged compared to the same period in 2022.

Net Income for the twelve months ended December 31, 2023 increased 12.1% to $162.5 million, compared to $145.0 million for the comparable period in 2022. Net Income per share for the twelve months ended December 31st decreased 7.0% to $1.70, compared to $1.83 per share for the comparable period in 2022.

Core FFO

Core FFO for the three months ended December 31, 2023 increased 16.8% to $99.7 million, compared to Core FFO of $85.3 million for the comparable period in 2022. Core FFO per share for the three months ended December 31st increased 3.4% to $0.99, compared to Core FFO per share of $0.96 for the comparable period in 2022.

Core FFO for the twelve months ended December 31, 2023 increased 22.3% to $376.5 million, compared to Core FFO of $307.7 million for the comparable period in 2022. Core FFO per share for the twelve months ended December 31st increased 1.6% to $3.93, compared to Core FFO per share of $3.87 for the comparable period in 2022.

AFFO

AFFO for the three months ended December 31, 2023 increased 18.8% to $100.3 million, compared to AFFO of $84.4 million for the comparable period in 2022. AFFO per share for the three months ended December 31st increased 5.2% to $1.00, compared to AFFO per share of $0.95 for the comparable period in 2022.

AFFO for the twelve months ended December 31, 2023 increased 24.2% to $378.7 million, compared to AFFO of $304.9 million for the comparable period in 2022. AFFO per share for the twelve months ended December 31st increased 3.1% to $3.95, compared to AFFO per share of $3.83 for the comparable period in 2022.

Dividend

In the fourth quarter, the Company declared monthly cash dividends of $0.247 per common share for each of October, November and December 2023. The monthly dividends declared during the fourth quarter reflected an annualized dividend amount of $2.964 per common share, representing a 2.9% increase over the annualized dividend amount of $2.880 per common share from the fourth quarter of 2022. The dividends represent payout ratios of approximately 75% of Core FFO per share and 74% of AFFO per share, respectively.

For the twelve months ended December 31, 2023, the Company declared monthly cash dividends totaling $2.919 per common share, a 4.1% increase over the dividends of $2.805 per common share declared for the comparable period in 2022. The dividends represent payout ratios of approximately 74% of both Core FFO per share and AFFO per share.

Subsequent to year end, the Company declared a monthly cash dividend of $0.247 per common share for each of January and February 2024. The monthly dividend reflects an annualized dividend amount of $2.964 per common share, representing a 2.9% increase over the annualized dividend amount of $2.880 per common share from the first quarter of 2023. The January dividend is payable on February 14, 2024 to stockholders of record at the close of business on January 31, 2024. The February dividend is payable on March 14, 2024 to stockholders of record at the close of business on February 29, 2024.

Additionally, subsequent to year end, the Company declared a monthly cash dividend for each of January and February 2024 on its 4.25% Series A Cumulative Redeemable Preferred Stock of $0.08854 per depositary share, which is equivalent to $1.0625 per annum. The January dividend was paid on February 1, 2024 and the February dividend is payable on March 1, 2024 to stockholders of record at the close of business on February 20, 2024.

CEO Comments

“We are pleased with our performance in 2023 as we invested over $1.3 billion for the fourth consecutive year while adhering to our stringent investment criteria and further improving our leading portfolio,” said Joey Agree, President and Chief Executive Officer. “Looking ahead, our balance sheet is well positioned with more than $1 billion of total liquidity including over $235 million of forward equity raised late last year. We remain intently focused on prudently allocating capital to drive sustainable AFFO per share growth above our previously discussed base case of over 3% growth in 2024.”

Portfolio Update

As of December 31, 2023, the Company’s portfolio consisted of 2,135 properties located in 49 states and contained approximately 44.2 million square feet of gross leasable area.

At year end, the portfolio was 99.8% leased, had a weighted-average remaining lease term of approximately 8.4 years, and generated 69.1% of annualized base rents from investment grade retail tenants.

Ground Lease Portfolio

During the fourth quarter, the Company acquired seven ground leases for an aggregate purchase price of approximately $29.9 million, representing 14.8% of annualized base rents acquired.

As of December 31, 2023, the Company’s ground lease portfolio consisted of 224 leases located in 35 states and totaled approximately 6.1 million square feet of gross leasable area. Properties ground leased to tenants represented 11.7% of annualized base rents.

At year end, the ground lease portfolio was fully occupied, had a weighted-average remaining lease term of approximately 10.5 years, and generated 88.0% of annualized base rents from investment grade retail tenants.

Acquisitions

Total acquisition volume for the fourth quarter was approximately $187.2 million and included 50 select properties net leased to leading retailers operating in sectors including home improvement, farm and rural supply, off-price, tire and auto service, and convenience stores. The properties are located in 26 states and leased to tenants operating in 19 sectors.

The properties were acquired at a weighted-average capitalization rate of 7.2% and had a weighted-average remaining lease term of approximately 10.1 years. Approximately 70.5% of annualized base rents acquired were generated from investment grade retail tenants.

For the twelve months ended December 31, 2023, total acquisition volume was approximately $1.19 billion. The 282 acquired properties are located in 40 states and leased to tenants operating in 26 retail sectors. The properties were acquired at a weighted-average capitalization rate of 6.9% and had a weighted-average remaining lease term of approximately 11.3 years. Approximately 73.7% of annualized base rents were generated from investment grade retail tenants.

Dispositions

During the fourth quarter, the Company sold three properties for gross proceeds of approximately $6.4 million. The dispositions were completed at a weighted-average capitalization rate of 6.0%. During the twelve months ended December 31, 2023, the Company sold five assets for total gross proceeds of approximately $9.7 million. The weighted-average capitalization rate of the dispositions was 6.1%.

Development and DFP

During the fourth quarter, the Company commenced four development or DFP projects, with total anticipated costs of approximately $12.6 million. Construction continued during the quarter on 12 projects with anticipated costs totaling approximately $51.1 million. The Company completed four projects during the quarter with total costs of approximately $16.2 million. In total, the Company had 20 projects completed or under construction during the fourth quarter with anticipated total costs of $80.0 million.

For the twelve months ended December 31, 2023, the Company had a record 37 development or DFP projects completed or under construction with anticipated total costs of approximately $149.9 million. The projects are leased to leading retailers including Gerber Collision, Sunbelt Rentals, TJX Companies, Five Below and ULTA Beauty.  

The following table presents estimated costs for the Company’s active or completed development or DFP projects for the quarter and year ended December 31, 2023:

Three Months Ended

December 31, 2023

Twelve Months Ended

December 31, 2023







Number of Projects

20

37

Costs Funded During Q4 2023

$11,619

$11,619

Costs Funded Prior to Q4 2023

32,772

102,694

Remaining Funding Costs

35,593

35,593

Anticipated Total Project Costs

$79,984

$149,906

Development and DFP project costs are in thousands. Any differences are the result of rounding. Costs Funded

During Q4 2023 exclude any costs associated with projects that were completed in prior quarters. Remaining

Funding Costs exclude any costs associated with projects that were completed in Q4 2023. Costs Funded Prior

to Q4 2023 may include adjustments related to completed projects to arrive at the correct Anticipated Total

Project Costs.   

Leasing Activity and Expirations

During the fourth quarter, the Company executed new leases, extensions or options on approximately 425,000 square feet of gross leasable area throughout the existing portfolio. Notable new leases, extensions or options included a 25,000-square foot TJ Maxx in New Lenox, Illinois, and a 210,000-square foot Walmart Supercenter in Hazard, Kentucky.

For the twelve months ended December 31, 2023, the Company executed new leases, extensions or options on approximately 1,873,000 square feet of gross leasable area throughout the existing portfolio.

As of December 31, 2023, the Company’s 2024 lease maturities represented 1.1% of annualized base rents. The following table presents contractual lease expirations within the Company’s portfolio as of December 31, 2023, assuming no tenants exercise renewal options:

Year

 Leases

Annualized

Base Rent (1)

 Percent of

Annualized

Base Rent

Gross

Leasable Area

 Percent of Gross

Leasable Area










2024

28

6,106

1.1 %

722

1.6 %

2025

73

17,153

3.1 %

1,684

3.8 %

2026

120

26,874

4.8 %

2,769

6.3 %

2027

155

34,038

6.1 %

3,119

7.1 %

2028

175

45,925

8.3 %

4,155

9.5 %

2029

182

55,189

9.9 %

5,379

12.2 %

2030

265

55,218

9.9 %

4,240

9.7 %

2031

180

42,434

7.6 %

3,119

7.1 %

2032

232

48,165

8.7 %

3,559

8.1 %

2033

193

45,005

8.1 %

3,485

7.9 %

Thereafter

706

180,258

32.4 %

11,691

26.7 %

     Total Portfolio

2,309

$556,365

100.0 %

43,922

100.0 %

The contractual lease expirations presented above exclude the effect of replacement tenant leases that had been executed as of December 31, 2023

but that had not yet commenced. Annualized Base Rent and gross leasable area (square feet) are in thousands; any differences are the result of rounding. 

(1)   Annualized Base Rent represents the annualized amount of contractual minimum rent required by tenant lease agreements as of December 31, 2023,

       computed on a straight-line basis. Annualized Base Rent is not, and is not intended to be, a presentation in accordance with generally accepted

       accounting principles (“GAAP”). The Company believes annualized contractual minimum rent is useful to management, investors, and other interested

       parties in analyzing concentrations and leasing activity.

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 December 31, 2023:

Tenant

Annualized

Base Rent(1)

 Percent of

Annualized Base Rent





Walmart

$33,864

6.1 %

Tractor Supply

28,155

5.1 %

Dollar General

26,831

4.8 %

Best Buy

19,515

3.5 %

CVS

17,310

3.1 %

TJX Companies

17,008

3.1 %

Dollar Tree

16,987

3.1 %

Kroger

16,315

2.9 %

O’Reilly Auto Parts

16,107

2.9 %

Hobby Lobby

14,637

2.6 %

Lowe’s

14,025

2.5 %

Burlington

13,770

2.5 %

7-Eleven

12,431

2.2 %

Sunbelt Rentals

12,374

2.2 %

Gerber Collision

11,880

2.1 %

Sherwin-Williams

11,423

2.1 %

Wawa

10,185

1.8 %

Home Depot

8,880

1.6 %

BJ’s Wholesale Club

8,713

1.6 %

Other(2)

245,955

44.2 %

Total Portfolio

$556,365

100.0 %

Annualized Base Rent is in thousands; any differences are the result of rounding. 

(1)   Refer to footnote 1 on page 5 for the Company’s definition of Annualized Base Rent.  

(2)  Includes tenants generating less than 1.5% of Annualized Base Rent. 

Retail Sectors

The following table presents annualized base rents for all the Company’s retail sectors as of December 31, 2023:

Sector

Annualized

Base Rent(1)

 Percent of Annualized

Base Rent





Grocery Stores

$53,240

9.6 %

Home Improvement

48,147

8.7 %

Tire and Auto Service

47,661

8.6 %

Convenience Stores

46,135

8.3 %

Dollar Stores

42,310

7.6 %

Off-Price Retail

34,920

6.3 %

General Merchandise

32,331

5.8 %

Auto Parts

31,636

5.7 %

Farm and Rural Supply

29,883

5.4 %

Pharmacy

23,701

4.3 %

Consumer Electronics

21,730

3.9 %

Crafts and Novelties

16,915

2.9 %

Discount Stores

14,399

2.6 %

Warehouse Clubs

13,699

2.5 %

Equipment Rental

12,700

2.3 %

Health Services

11,085

2.0 %

Dealerships

10,276

1.7 %

Restaurants – Quick Service

9,215

1.7 %

Health and Fitness

8,660

1.6 %

Specialty Retail

6,620

1.2 %

Sporting Goods

6,208

1.1 %

Financial Services

6,030

1.1 %

Restaurants – Casual Dining

5,594

1.0 %

Home Furnishings

4,001

0.7 %

Theaters

3,854

0.7 %

Pet Supplies

3,430

0.6 %

Beauty and Cosmetics

3,233

0.6 %

Shoes

2,875

0.5 %

Entertainment Retail

2,323

0.4 %

Apparel

1,531

0.3 %

Miscellaneous

1,239

0.2 %

Office Supplies

784

0.1 %

Total Portfolio

$556,365

100.0 %

Annualized Base Rent is in thousands; any differences are the result of rounding. 

(1)   Refer to footnote 1 on page 5 for the Company’s definition of Annualized Base Rent. 

Geographic Diversification

The following table presents annualized base rents for all states that represent 1.5% or greater of the Company’s total annualized base rent as of December 31, 2023:

State

Annualized

Base Rent(1)

 Percent of

Annualized Base Rent






Texas

$40,096

7.2 %

Florida

33,844

6.1 %

Illinois

30,816

5.5 %

North Carolina

30,778

5.5 %

Ohio

29,341

5.3 %

Michigan

27,810

5.0 %

Pennsylvania

26,126

4.7 %

New Jersey

23,122

4.2 %

California

22,191

4.0 %

New York

21,193

3.8 %

Georgia

20,564

3.7 %

Wisconsin

15,719

2.8 %

Virginia

15,270

2.7 %

Missouri

14,908

2.7 %

Louisiana

14,033

2.5 %

Kansas

13,661

2.5 %

Connecticut

12,762

2.3 %

South Carolina

12,443

2.2 %

Mississippi

12,379

2.2 %

Minnesota

11,596

2.1 %

Massachusetts

11,274

2.0 %

Tennessee

10,308

1.9 %

Oklahoma

9,419

1.7 %

Alabama

9,308

1.7 %

Kentucky

8,448

1.5 %

Indiana

8,437

1.5 %

Maryland

8,367

1.5 %

Other(2)

62,152

11.2 %

Total Portfolio

$556,365

100.0 %

Annualized Base Rent is in thousands; any differences are the result of rounding. 

(1) Refer to footnote 1 on page 5 for the Company’s definition of Annualized Base Rent.  

(2) Includes states generating less than 1.5% of Annualized Base Rent. 

Capital Markets, Liquidity and Balance Sheet

Capital Markets

During the fourth quarter, the Company entered into forward sale agreements in connection with its ATM program to sell an aggregate of 3,833,871 shares of common stock for net proceeds of approximately $235.6 million. To date, the Company has not received any proceeds from the sale of shares of its common stock by the forward purchasers.

The following table presents the Company’s outstanding forward equity offerings as of December 31, 2023:

Forward Equity

Offerings

Shares

Sold

Shares

Settled

Shares

Remaining

Net

Proceeds

Received

Anticipated

Net

Proceeds

Remaining











Q4 2023 ATM Forward Offerings

3,833,871

–

3,833,871

–

$235,618,977

Total Forward Equity Offerings

3,833,871

–

3,833,871

–

$235,618,977

Liquidity

As of December 31, 2023, the Company had total liquidity of over $1.0 billion, which includes $773.0 million of availability under its revolving credit facility, $235.6 million of outstanding forward equity, and $14.5 million of cash on hand. The Company’s $1.0 billion revolving credit facility includes an accordion option that allows the Company to request additional lender commitments of up to $750 million, or an aggregate of $1.75 billion.

Balance Sheet

As of December 31, 2023, the Company’s net debt to recurring EBITDA was 4.7 times. The Company’s proforma net debt to recurring EBITDA was 4.3 times when deducting the $235.6 million of anticipated net proceeds from the outstanding forward equity offerings from the Company’s net debt of $2.4 billion as of December 31, 2023. The Company’s fixed charge coverage ratio was 5.0 times at year end.

The Company’s total debt to enterprise value was 27.2% as of December 31, 2023. Enterprise value is calculated as the sum of net debt, the liquidation value of the Company’s preferred stock, and the market value of the Company’s outstanding shares of common stock, assuming conversion of Agree Limited Partnership (the “Operating Partnership” or “OP”) common units into common stock of the Company.

For the three and twelve months ended December 31, 2023, the Company’s fully diluted weighted-average shares outstanding were 100.4 million and 95.4 million, respectively. The basic weighted-average shares outstanding for the three and twelve months ended December 31, 2023 were 100.3 million and 95.2 million, respectively.

For the three and twelve months ended December 31, 2023, the Company’s fully diluted weighted-average shares and units outstanding were 100.7 million and 95.8 million, respectively. The basic weighted-average shares and units outstanding for the three and twelve months ended December 31, 2023 were 100.6 million and 95.5 million, respectively.

The Company’s assets are held by, and its operations are conducted through, the Operating Partnership, of which the Company is the sole general partner. As of December 31, 2023, there were 347,619 Operating Partnership common units outstanding, and the Company held a 99.7% common interest in the Operating Partnership.

Conference Call/Webcast

The Company will host its quarterly analyst and investor conference call on Wednesday, February 14, 2024 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 Investors section of the website.  A replay of the conference call webcast will be archived and available online through the Investors section of www.agreerealty.com.

About Agree Realty Corporation

Agree Realty Corporation is a publicly traded real estate investment trust that is RETHINKING RETAIL through the acquisition and development of properties net leased to industry-leading, omni-channel retail tenants. As of December 31, 2023, the Company owned and operated a portfolio of 2,135 properties, located in 49 states and containing approximately 44.2 million square feet of gross leasable area.  The Company’s common stock is listed on the New York Stock Exchange under the symbol “ADC”.  For additional information on the Company and RETHINKING RETAIL, please visit www.agreerealty.com.   

Forward-Looking Statements

This press release contains forward-looking statements, including statements about projected financial and operating results, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions.  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,” “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 or other forward-looking information.  Although these forward-looking statements are based on good faith beliefs, reasonable assumptions and the Company’s best judgment reflecting current information, you should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and which could materially affect the Company’s results of operations, financial condition, cash flows, performance or future achievements or events. Currently, some of the most significant factors, include the potential adverse effect of ongoing worldwide economic uncertainties and increased inflation and interest rates on the financial condition, results of operations, cash flows and performance of the Company and its tenants, the real estate market and the global economy and financial markets. The extent to which these conditions will impact the Company and its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence. Moreover, investors are cautioned to interpret many of the risks identified in the risk factors discussed in the Company’s Annual Report on Form 10-K and subsequent quarterly reports filed with the Securities and Exchange Commission (the “SEC”), as well as the risks set forth below, as being heightened as a result of the ongoing and numerous adverse impacts of the macroeconomic environment. Additional important factors, among others, that may cause the Company’s actual results to vary include the general deterioration in national economic conditions, weakening of real estate markets, decreases in the availability of credit, increases in interest rates, adverse changes in the retail industry, the Company’s continuing ability to qualify as a REIT and other factors discussed in the Company’s reports filed with the SEC. The forward-looking statements included in this press release are made as of the date hereof.   Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, changes in the Company’s expectations or assumptions 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 Investor Relations section of the Company’s website at www.agreerealty.com.

The Company defines the “weighted-average capitalization rate” for acquisitions and dispositions as the sum of contractual fixed annual rents computed on a straight-line basis over the primary lease terms and anticipated annual net tenant recoveries, divided by the purchase and sale prices for occupied properties.

References to “Core FFO” and “AFFO” in this press release are representative of Core FFO attributable to OP common unitholders and AFFO attributable to OP common unitholders. Detailed calculations for these measures are shown in the Reconciliation of Net Income to FFO, Core FFO and Adjusted FFO table as “Core Funds From Operations – OP Common Unitholders” and “Adjusted Funds from Operations – OP Common Unitholders”. 

Agree Realty Corporation

Consolidated Balance Sheet

($ in thousands, except share and per-share data)

(Unaudited)

December 31, 2023

December 31, 2022

Assets:


Real Estate Investments:


Land 

$                2,282,354

$                1,941,599

Buildings

4,861,692

4,054,679

Accumulated depreciation

(433,958)

(321,142)

Property under development

33,232

65,932

Net real estate investments

6,743,320

5,741,068

Real estate held for sale, net

3,642

–

Cash and cash equivalents

10,907

27,763

Cash held in escrows

3,617

1,146

Accounts receivable – tenants, net

82,954

65,841

Lease Intangibles, net of accumulated amortization of $360,061 and
$263,011 at December 31, 2023 and December 31, 2022, respectively

854,088

799,448

Other assets, net

76,308

77,923

Total Assets

$                7,774,836

$                6,713,189




Liabilities:


Mortgage notes payable, net

42,811

47,971

Unsecured term loans, net

346,798

–

Senior unsecured notes, net

1,794,312

1,792,047

Unsecured revolving credit facility

227,000

100,000

Dividends and distributions payable

25,534

22,345

Accounts payable, accrued expenses and other liabilities

101,401

83,722

Lease intangibles, net of accumulated amortization of $42,813 and
$35,992 at December 31, 2023 and December 31, 2022, respectively

36,827

36,714

Total Liabilities

$                2,574,683

$                2,082,799




Equity:


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

authorized, 7,000 shares Series A outstanding, at stated liquidation

value of $25,000 per share, at December 31, 2023 and December 31, 2022

175,000

175,000

Common stock, $.0001 par value, 180,000,000 shares authorized,

100,519,355 and 90,173,424 shares issued and outstanding at December 31,

2023 and December 31, 2022, respectively

10

9

Additional paid-in-capital

5,354,120

4,658,570

Dividends in excess of net income

(346,473)

(228,132)

Accumulated other comprehensive income (loss)

16,554

23,551

Total Equity – Agree Realty Corporation

$                5,199,211

$                4,628,998

Non-controlling interest

942

1,392

Total Equity

$                5,200,153

$                4,630,390

Total Liabilities and Equity

$                7,774,836

$                6,713,189




Agree Realty Corporation

Consolidated Statements of Operations and Comprehensive Income

($ in thousands, except share and per share-data)

(Unaudited)

Three months ended

December 31,

Twelve months ended

December 31,

2023

2022

2023

2022

Revenues






Rental Income

$      144,144

$    116,496

$    537,403

$    429,632

Other

21

35

92

182

Total Revenues

$      144,165

$    116,531

$    537,495

$    429,814








Operating Expenses






Real estate taxes

$        10,663

$        7,962

$      40,092

$      32,079

Property operating expenses

6,841

5,010

24,961

18,585

Land lease expense

412

404

1,664

1,617

General and administrative

8,701

7,856

34,788

30,121

Depreciation and amortization

47,257

37,904

176,277

133,570

Provision for impairment

2,665

–

7,175

1,015

Total Operating Expenses

$        76,539

$      59,136

$    284,957

$    216,987








Gain (loss) on sale of assets, net

1,550

15

1,849

5,341

Gain (loss) on involuntary conversion, net

–

82

–

(83)








Income from Operations

$        69,176

$      57,492

$    254,387

$    218,085








Other (Expense) Income






Interest expense, net

$       (22,371)

$    (16,843)

$    (81,119)

$    (63,435)

Income tax (expense) benefit

(709)

(723)

(2,910)

(2,860)

Other (expense) income

5

1,113

189

1,245








Net Income

$        46,101

$      41,039

$    170,547

$    153,035








Less net income attributable to non-controlling interest

146

113

588

598








Net Income Attributable to Agree Realty Corporation

$        45,955

$      40,926

$    169,959

$    152,437








Less Series A Preferred Stock Dividends

1,859

1,859

7,437

7,437








Net Income Attributable to Common Stockholders

$        44,096

$      39,067

$    162,522

$    145,000








Net Income Per Share Attributable to Common Stockholders






Basic

$            0.44

$          0.44

$          1.70

$          1.84

Diluted

$            0.44

$          0.44

$          1.70

$          1.83
















Other Comprehensive Income






Net Income

$        46,101

$      41,039

$    170,547

$    153,035

Amortization of interest rate swaps

(630)

(575)

(2,519)

(684)

Change in fair value and settlement of interest rate swaps

(16,165)

–

(4,501)

29,881

Total Comprehensive Income (Loss)

29,306

40,464

163,527

182,232

Less comprehensive income attributable to non-controlling interest

88

111

565

741

Comprehensive Income Attributable to Agree Realty Corporation

$        29,218

$      40,353

$    162,962

$    181,491








Weighted Average Number of Common Shares Outstanding – Basic

100,279,279

88,434,580

95,191,409

78,659,333

Weighted Average Number of Common Shares Outstanding – Diluted

100,397,096

88,812,510

95,437,412

79,164,386













                                                             

Agree Realty Corporation

Reconciliation of Net Income to FFO, Core FFO and Adjusted FFO

($ in thousands, except share and per-share data)

(Unaudited)










Three months ended

December 31,

Twelve months ended

December 31,

2023

2022

2023

2022









Net Income

$      46,101

$      41,039

$    170,547

$    153,035

Less Series A Preferred Stock Dividends

1,859

1,859

7,437

7,437

Net Income attributable to OP Common Unitholders

44,242

39,180

163,110

145,598

Depreciation of rental real estate assets

31,119

24,843

115,617

88,685

Amortization of lease intangibles – in-place leases and leasing costs

15,611

12,800

58,967

44,107

Provision for impairment

2,665

–

7,175

1,015

(Gain) loss on sale or involuntary conversion of assets, net

(1,550)

(97)

(1,849)

(5,258)

Funds from Operations – OP Common Unitholders

$      92,087

$      76,726

$    343,020

$    274,147

Amortization of above (below) market lease intangibles, net and assumed mortgage debt discount, net

7,564

8,556

33,430

33,563

Core Funds from Operations – OP Common Unitholders

$      99,651

$      85,282

$    376,450

$    307,710

Straight-line accrued rent

(3,200)

(3,757)

(12,142)

(13,176)

Stock based compensation expense

2,158

1,572

8,338

6,464

Amortization of financing costs and original issue discounts

1,186

1,071

4,403

3,141

Non-real estate depreciation

527

261

1,693

778

Adjusted Funds from Operations – OP Common Unitholders

$    100,322

$      84,429

$    378,742

$    304,917









Funds from Operations Per Common Share and OP Unit – Basic

$          0.92

$          0.86

$          3.59

$          3.47

Funds from Operations Per Common Share and OP Unit – Diluted

$          0.91

$          0.86

$          3.58

$          3.45









Core Funds from Operations Per Common Share and OP Unit – Basic

$          0.99

$          0.96

$          3.94

$          3.89

Core Funds from Operations Per Common Share and OP Unit – Diluted

$          0.99

$          0.96

$          3.93

$          3.87









Adjusted Funds from Operations Per Common Share and OP Unit – Basic

$          1.00

$          0.95

$          3.96

$          3.86

Adjusted Funds from Operations Per Common Share and OP Unit – Diluted

$          1.00

$          0.95

$          3.95

$          3.83









Weighted Average Number of Common Shares and OP Units Outstanding – Basic

100,626,898

88,782,199

95,539,028

79,006,952

Weighted Average Number of Common Shares and OP Units Outstanding – Diluted

100,744,715

89,160,129

95,785,031

79,512,005


















Additional supplemental disclosure







Scheduled principal repayments

$           232

$           217

$           905

$           850

Capitalized interest

288

445

1,957

1,261

Capitalized building improvements

3,122

968

9,819

7,945

Non-GAAP Financial Measures

Funds from Operations (“FFO” or “Nareit FFO”)

FFO is defined by the National Association of Real Estate Investment Trusts, Inc. (“Nareit”) to mean net income computed in accordance with GAAP, excluding gains (or losses) from sales of real estate assets and/or changes in control, plus real estate related depreciation and amortization and any impairment charges on depreciable real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. 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, most real estate industry investors consider FFO to be helpful in evaluating a real estate company’s operations. FFO should not be considered 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.

Core Funds from Operations (“Core FFO”)

The Company defines Core FFO as Nareit FFO with the addback of (i) noncash amortization of acquisition purchase price related to above- and below- market lease intangibles and discount on assumed debt and (ii) certain infrequently occurring items that reduce or increase net income in accordance with GAAP. Management believes that its measure of Core FFO facilitates useful comparison of performance to its peers who predominantly transact in sale-leaseback transactions and are thereby not required by GAAP to allocate purchase price to lease intangibles.  Unlike many of its peers, the Company has acquired the substantial majority of its net-leased properties through acquisitions of properties from third parties or in connection with the acquisitions of ground leases from third parties. Core FFO should not be considered 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, the Company’s presentation of Core 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”)

AFFO is a non-GAAP financial measure of operating performance used by many companies in the REIT industry. AFFO further adjusts FFO and Core FFO for certain non-cash items that reduce or increase net income computed in accordance with GAAP. 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 its 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.

Agree Realty Corporation

Reconciliation of Net Debt to Recurring EBITDA

($ in thousands, except share and per-share data)

(Unaudited)





Three months ended

December 31,

2023




Net Income

$                       46,101

Interest expense, net

22,371

Income tax expense

709

Depreciation of rental real estate assets

31,119





Non-real estate depreciation

527

Provision for impairment

2,665

(Gain) loss on sale or involuntary conversion of assets, net

(1,550)

EBITDAre

$                     117,553





Run-Rate Impact of Investment, Disposition and Leasing Activity

$                         2,344

Amortization of above (below) market lease intangibles, net

7,481

Recurring EBITDA

$                     127,378





Annualized Recurring EBITDA

$                     509,512





Total Debt

$                  2,431,868

Cash, cash equivalents and cash held in escrows

(14,524)

Net Debt

$                  2,417,344





Net Debt to Recurring EBITDA

4.7x





Net Debt

$                  2,417,344

Anticipated Net Proceeds from ATM Forward Offerings

(235,619)

Proforma Net Debt

$                  2,181,725





Proforma Net Debt to Recurring EBITDA

4.3x

Non-GAAP Financial Measures



EBITDAre

EBITDAre is defined by Nareit to mean net income computed in accordance with GAAP, plus interest expense, income tax expense, depreciation and amortization, any gains (or losses) from sales of real estate assets

and/or changes in control, any impairment charges on depreciable real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. The Company considers the non-GAAP measure of EBITDAre

to be a key supplemental measure of the Company’s performance and should be considered along with, but not as an alternative to, net income or loss as a measure of the Company’s operating performance. The Company

considers EBITDAre a key supplemental measure of the Company’s operating performance because it provides an additional supplemental measure of the Company’s performance and operating cash flow that is widely

known by industry analysts, lenders and investors. The Company’s calculation of EBITDAre may not be comparable to EBITDAre reported by other REITs that interpret the Nareit definition differently than the Company.



Recurring EBITDA

The Company defines Recurring EBITDA as EBITDAre with the addback of noncash amortization of above- and below- market lease intangibles, and after adjustments for the run-rate impact of the Company’s investment and

disposition activity for the period presented, as well as adjustments for non-recurring benefits or expenses. The Company considers the non-GAAP measure of Recurring EBITDA to be a key supplemental measure of the

Company’s performance and should be considered along with, but not as an alternative to, net income or loss as a measure of the Company’s operating performance. The Company considers Recurring EBITDA a key

supplemental measure of the Company’s operating performance because it represents the Company’s earnings run rate for the period presented and because it is widely followed by industry analysts, lenders and investors. 

Our Recurring EBITDA may not be comparable to Recurring EBITDA reported by other companies that have a different interpretation of the definition of Recurring EBITDA. Our ratio of net debt to Recurring EBITDA is used by

management as a measure of leverage and may be useful to investors in understanding the Company’s ability to service its debt, as well as assess the borrowing capacity of the Company.  Our ratio of net debt to Recurring

EBITDA is calculated by taking annualized Recurring EBITDA and dividing it by our net debt per the consolidated balance sheet. 



Net Debt

The Company defines Net Debt as total debt principal outstanding less cash, cash equivalents and cash held in escrows. The Company considers the non-GAAP measure of Net Debt to be a key supplemental measure of the

Company’s overall liquidity, capital structure and leverage. The Company considers Net Debt a key supplemental measure because it provides industry analysts, lenders and investors useful information in understanding our

financial condition. The Company’s calculation of Net Debt may not be comparable to Net Debt reported by other REITs that interpret the definition differently than the Company.  The Company presents Net Debt on both an

actual and proforma basis, assuming the net proceeds of the Forward Offerings (see below) are used to pay down debt. The Company believes the proforma measure may be useful to investors in understanding the potential

effect of the Forward Offerings on the Company’s capital structure, its future borrowing capacity, and its ability to service its debt.



Forward Offerings

The Company has 3,833,871 shares remaining to be settled under the ATM Forward Offerings. Upon settlement, the offerings are anticipated to raise net proceeds of approximately $235.6 million based on the applicable

forward sale price as of December 31, 2023. The applicable forward sale price varies depending on the offering. The Company is contractually obligated to settle the offerings by January 2025.

                                                                                                    

Agree Realty Corporation

Rental Income

($ in thousands, except share and per share-data)

(Unaudited)

Three months ended

December 31,

Twelve months ended

December 31,

2023

2022

2023

2022

Rental Income Source(1)







Minimum rents(2)

$    133,274

$    109,227

$    497,736

$    402,117

Percentage rents(2)

–

–

1,314

723

Operating cost reimbursement(2)

15,151

11,986

59,307

46,953

Straight-line rental adjustments(3)

3,200

3,757

12,142

13,176

Amortization of (above) below market lease intangibles(4)                                                                               

(7,481)

(8,474)

(33,096)

(33,337)

Total Rental Income

$    144,144

$    116,496

$    537,403

$    429,632

(1) The Company adopted Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 842 “Leases” using the modified retrospective approach as of January 1, 2019.  The Company adopted the practical expedient in FASB ASC 842 that alleviates the requirement to separately present lease and non-lease components of lease contracts. As a result, all income earned pursuant to tenant leases is reflected as one line, “Rental Income,” in the consolidated statement of operations.  The purpose of this table is to provide additional supplementary detail of Rental Income.

(2) Represents contractual rentals and/or reimbursements as required by tenant lease agreements, recognized on an accrual basis of accounting.  The Company believes that the presentation of contractual lease income is not, and is not intended to be, a presentation in accordance with GAAP. The Company believes this information is frequently used by management, investors, analysts and other interested parties to evaluate the Company’s performance.

(3) Represents adjustments to recognize minimum rents on a straight-line basis, consistent with the requirements of FASB ASC 842.

(4) In allocating the fair value of an acquired property, above- and below-market lease intangibles are recorded based on the present value of the difference between the contractual amounts to be paid pursuant to the leases at the time of acquisition and the Company’s estimate of current market lease rates for the property. 

SOURCE Agree Realty Corporation


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