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Agree Realty Corporation Reports Operating Results For The Third Quarter 2012



Agree Realty Corporation Reports Operating Results For The Third Quarter 2012

PR Newswire

FARMINGTON HILLS, Mich., Oct. 29, 2012

FARMINGTON HILLS, Mich., Oct. 29, 2012 /PRNewswire/ --

THIRD Quarter 2012 Highlights:

  o Increased funds from operations for the quarter by 10%, year over year
  o Increased adjusted funds from operations for the quarter by  13%, year
    over year
  o Increased total revenues for the quarter by 20%, year over year
  o Acquired seven net leased properties for $22 million
  o Reduced Kmart annualized base rentals by 29% during 2012
  o Retenanted and disposed of remaining former Borders assets
  o Increased portfolio occupancy to 98%
  o Initiated quarterly earnings conference calls
  o Paid $0.40 per share quarterly dividend on October 9, 2012

Agree Realty Corporation (NYSE: ADC) today announced results for the quarter
ended September 30, 2012. Third quarter funds from operations (FFO) increased
to $6,052,000 compared with FFO, as adjusted, for the third quarter of 2011 of
$5,481,000.  FFO per diluted share for the third quarter of 2012 was $0.52
compared with FFO per diluted share, as adjusted, of $0.55 for the third
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.  

Third quarter adjusted funds from operations (AFFO) increased to $6,227,000
compared with AFFO, as adjusted, of for the third quarter of 2011 of
$5,505,000.  AFFO per diluted share for the third quarter of 2012 was $.54
compared to AFFO per diluted share, as adjusted, of $.55 for the third quarter
of 2011. 

Net income for the third quarter of 2012 increased to $4,025,000, or $0.35 per
diluted share, compared to net loss for the third quarter of 2011 of
$(1,855,000), or $(.19) per share.  Total revenues increased by $1,552,000 to
$9,279,000, compared with total revenues of $7,727,000 in the third quarter of
2011.

For the nine months ended September 30, 2012, FFO was $17,283,000 compared
with FFO, as adjusted, for the nine months ended September 30, 2011 of
$17,230,000.  FFO per diluted share for the nine months ended September 30,
2012 was $1.51 compared with FFO per diluted share, as adjusted, of $1.72 for
the nine months ended September 30, 2011.  FFO and FFO per share were impacted
by the 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 nine months ended September 30, 2012, AFFO increased to $17,869,000
compared with AFFO, as adjusted, of for the nine months ended September 30,
2011 of $17,615,000.  AFFO per diluted share for the nine months of 2012 was
$1.57 compared to AFFO per diluted share, as adjusted, of $1.77 for the nine
months of 2011.

For the nine months ended September 30, 2012, net income increased to
$13,857,000, or $1.21 per diluted share, compared with net income for the
comparable period last year of $6,668,000, or $.67 per diluted share.  Total
revenues increased 10.7% to $26,472,000 compared with total revenues of
$23,924,000 for the comparable period last year.

"I am pleased to report positive operating results for the quarter.  We
continue to execute on our goals of both expanding and diversifying our
portfolio. Our growth in total revenues and funds from operations are
indicative of our efforts as they both increased by double digits over the
comparable quarters," said Joey Agree, President and Chief Operating Officer.
"During the quarter, we increased our portfolio occupancy to 98%, closed on
the sale of three non-core properties, retenanted the remainder of our former
Borders assets, commenced two developments and closed on a significant number
of attractive acquisitions." 

More information about the Company's calculations of FFO and AFFO, as well as
reconciliations of net income (in accordance with generally accepted
accounting principles) to FFO, FFO, as adjusted, AFFO, and AFFO, as adjusted,
is included in the financial tables accompanying this press release.  For
2011, the Company calculated FFO, as adjusted, and AFFO, as adjusted, which
exclude from FFO and AFFO, respectively, certain non-recurring gain items that
the Company does not believe are reasonably likely to occur within two years.

Acquisitions

The Company acquired seven retail properties during the third quarter for
approximately $22 million.  The single tenant properties acquired are net
leased to Wawa in Clifton Heights, Pennsylvania, Newark, Delaware and
Vineland, New Jersey, Goodyear Tire & Rubber Company in Fort Mill, South
Carolina, Family Dollar in Spartanburg, South Carolina, AutoZone in
Springfield, Illinois, and USAA in Jacksonville, North Carolina.

Development Activity

In May 2012 the Company closed on the acquisition of a parcel of land in
Kissimmee, Florida for the development of a Wawa convenience store. Wawa is an
industry leader in the gas and convenience store sector.  Rent under the
ground lease is expected to commence in the first quarter of 2013.  In August
2012, the Company closed on the acquisition of a parcel of land in Pinellas
Park, Florida to be developed for Wawa under a ground lease with the Company.
 Rent is anticipated to commence in the first quarter of 2013.  In addition,
the Company announced that it closed on the acquisition of a parcel of land in
Casselberry, Florida for development expected to be completed by the third
quarter of 2013.

In May 2012, the Company closed on the acquisition of a land parcel in Venice,
Florida to ground lease to JPMorgan Chase Bank.  Chase is constructing a
retail bank branch on the site and rent is anticipated to start during the
fourth quarter of 2012.

Construction activity continues at the Rancho Cordova, California property
being developed for Walgreens with rent expected to commence in the second
quarter of 2013. The expansion of Miner's Super One Foods at the Company's
Ironwood Commons Center was completed during the third quarter of 2012.
Miner's expects to open in the fourth quarter of 2012.

Dispositions

The Company sold three non-core assets during the third quarter.  Aggregate
proceeds from the dispositions were approximately $9,100,000.  The
dispositions included the former Borders location in Columbus, Ohio for
approximately $1,700,000 in September 2012 as well as two Kmart anchored
shopping centers: Plymouth Commons in Plymouth, Wisconsin and Shawano Plaza in
Shawano, Wisconsin for approximately $7,400,000 in August 2012.  These Kmart
anchored shopping centers were located in tertiary markets and were identified
as having limited future opportunities due to trade area dynamics and
demographic trends.  The sale of the two Kmart anchored shopping centers,
combined with the sale of Charlevoix Commons shopping center in June 2012,
reduced the Company's annualized revenues attributable to Kmart by
approximately 29%. 

Portfolio

At September 30, 2012, the Company's portfolio consisted of 96 properties
located in 25 states with a total of 3.1 million square feet of gross leasable
space.  The portfolio was approximately 98% leased at the end of the quarter. 
Total assets were $332,678,000.

The Company's construction in progress balance totaled approximately
$13,595,000 at September 30, 2012.

Major Tenants

The following is a breakdown of base rents in effect at September 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       2,748,691             8%
CVS         2,463,490             7%
Total       $        16,706,925   48%

The Company announced the execution of a lease with HomeGoods for the building
formerly occupied by Borders in Monroeville, Pennsylvania.  HomeGoods, a
subsidiary of The TJX Companies, is an industry leading home furnishing
retailer with over 400 stores across the United States.  The Company
anticipates rent commencement in the third quarter of 2013.  In addition, the
Company entered into a lease with the City of Lawrence for the former Borders
location in Lawrence, Kansas.  Rent commences in the fourth quarter of 2012.

Annualized Base Rent of Properties

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

Type of Tenant   Annualized Base Rent   Percent of Base Rent
National         $         30,828,987   87%
Regional         $           3,259,723  9%
Local            $           1,202,215  3%
Total            $         35,290,925   100%

Lease Expirations

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

                                 Gross Leasable Area                Annualized
Expiration  Number of Leases                           Base Rent 
Year        Expiring             Square      Percent    Amount        Percent
                                Footage      of Total                 of Total
2012        1                   1,836        0.1%      $    15,147    0.0%
2013        14                  295,786      9.7%      1,038,577      2.9%
2014        19                  294,017      9.7%      1,489,933      4.2%
2015        20                  501,234      16.5%     2,469,222      7.0%
2016        15                  108,341      3.6%      1,009,807      2.9%
2017        11                  88,929       2.9%      1,692,145      4.8%
2018        10                  134,841      4.4%      1,700,824      4.8%
2019        7                   85,170       2.8%      1,820,559      5.2%
2020        6                   128,591      4.2%      1,536,778      4.4%
2021        10                  190,078      6.2%      3,239,185      9.2%
Thereafter  60                  1,216,742    39.9%     19,278,748     54.6%
Total       173                 3,045,565    100.0%    $35,290,925    100.0%

Capital Markets/Balance Sheet

The Company assumed approximately $8,580,000 of mortgage debt in conjunction
with the acquisition of the portfolio of three Wawa stores.  The interest only
mortgage debt matures in June 2016 and carries a 6.56% interest rate.

The Company's debt to total enterprise value was approximately 29% as of
September 30, 2012.  Enterprise value is calculated as the sum of mortgages
payable and notes payable and the market value of the Company's outstanding
shares of common stock, assuming conversion of operating partnership units.

Dividend

The Company paid a cash dividend of $0.40 per share on October 9, 2012 to
shareholders of record on September 28, 2012.  The dividend is equivalent to
an annualized dividend of $1.60 per share and represents a payout ratio of 77%
of FFO for the quarter.

Outstanding Shares and Operating Partnership Units

For the three and nine months ended September 30, 2012, the Company's fully
diluted weighted average shares outstanding were 11,238,930 and 11,082,730. 
The basic weighted average shares outstanding for the three and nine months
ended September 30, 2012 were 11,185,864 and 11,032,857.

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 September 30, 2012, there were 347,619 operating partnership
units outstanding and the Company held a 97.05% interest.

Initial Conference Call/Webcast

Agree Realty Corporation will host a live broadcast of its third quarter 2012
conference call on Tuesday, October 30, 2012 at 9:00 a.m. eastern time, to
discuss its financial and operating results. The live broadcast will be
available online at: http://www.videonewswire.com/event.asp?id=90088 and also
by telephone at USA Toll Free: 1-800-860-2442, International:1-412-858-4600,
and Canada Toll Free:1-866-605-3852.  A replay will be available shortly after
the call by telephone at US Toll Free:1-877-344-7529/Conference #10019772 or
International Toll:1-412-317-0088/Conference #10019772 until January 31, 2013.

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 97
properties, located in 25 states and containing approximately 3.1 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        Nine Months Ended
                            September 30,             September 30,
                            2012         2011         2012         2011
Revenues:
Minimum rents               $            $            $            $          
                              8,722        7,129      24,698       21,205
Percentage rent             -            -            23           22
Operating cost              542          570          1,691        1,691
reimbursements
Development fee income      -            -            -            895
Other income                15           28           60           111
Total Revenues              9,279        7,727        26,472       23,924
Expenses:
Real estate taxes           395          477          1,364        1,430
Property operating          254          305          811          910
expenses
Land lease payments         106          181          468          540
General and administration  1,317        1,090        4,153        4,052
Depreciation and            1,659        1,553        4,845        4,099
amortization
Impairment charge           -            600          -            600
Total Operating Expenses    3,731        4,206        11,641       11,631
Income from Operations      5,548        3,521        14,831       12,293
Other Income (Expense)
Interest expense            (1,344)      (970)        (3,626)      (2,885)
Gain on extinguishment of   -            2,360        -            2,360
debt
Income Before Discontinued  4,204        4,911        11,205       11,768
Operations
Gain (Loss) on sale of
asset from discontinued     (321)        -            1,747        -
operations
Income (Loss) from          142          (6,766)      905          (5,100)
discontinued operations
Net Income (Loss)           4,025        (1,855)      13,857       6,668
Net income (loss)
attributable to             118          (61)         414          229
non-controlling interest
Net Income (Loss)
Attributable to Agree       3,907        (1,794)      13,443       6,439
Realty Corporation
Other Comprehensive Income
(Loss), Net of $(5), $1,
$(20) and $1
Attributable to             (172)        21           (684)        33
Non-Controlling Interest
Total Comprehensive Income  $            $            $            $          
(Loss) Attributable to        3,735      (1,773)      12,759         6,472
Agree Realty Corporation
Basic Earnings (Loss) Per
Share
Continuing operations       $            $            $            $          
                                0.37         0.49         0.99         1.18
Discontinued operations     (0.02)       (0.68)       0.23         (0.51)
                            $            $            $            $          
                                0.35        (0.19)        1.22         0.67
Dilutive Earnings (Loss)
Per Share
Continuing operations       $            $            $            $          
                                0.37         0.49         0.98         1.18
Discontinued operations     (0.02)       (0.68)       0.23         (0.51)
                            $            $            $            $          
                                0.35        (0.19)        1.21         0.67
Weighted Average Number of
Common Shares Outstanding   11,186       9,636        11,033       9,633
- Basic
Weighted Average Number of
Common Shares Outstanding   11,239       9,667        11,083       9,669
- Dilutive

 

Agree Realty Corporation
Funds from Operations (in thousands, except per share amounts)
(Unaudited)
                            Three Months Ended        Nine Months Ended
                            September 30,             September 30,
                            2012         2011         2012         2011
Reconciliation of Funds
from Operations to Net
Income: (1)
Net income (loss)           $            $            $            $          
                              4,025      (1,855)      13,857         6,668
Depreciation of real        1,393        1,538        4,274        4,502
estate assets
Amortization of leasing     26           188          78           241
costs
Amortization of lease       287          170          821          379
intangibles
Impairment charge                        13,500                    13,500
(Gain) Loss on sale of      321          -            (1,747)      -
assets
Funds from Operations       $            13,541       $            25,290
                              6,052                   17,283
Gain on extinguishment of                (2,360)                   (2,360)
debt
Deferred revenue                         (5,700)                   (5,700)
recognition
Funds from Operations, as   $            $            $            $          
adjusted                      6,052        5,481      17,283       17,230
Funds from Operations Per   $            $            $            $          
Share - Dilutive                0.52         1.35         1.51         2.52
Funds from Operations Per   $            $            $            $          
Share - Dilutive, as            0.52         0.55         1.51         1.72
adjusted
Weighted Average Number of
Common Shares Outstanding   11,587       10,014       11,430       10,017
- Dilutive
Adjusted Funds from Operations (in thousands, except per share amounts)
(Unaudited)
Reconciliation of Adjusted
Funds from Operations to
Net Income: (1)
Net income (loss)           $            $            $            $          
                              4,025      (1,855)      13,857         6,668
Cumulative adjustments to   2,027        15,396       3,426        18,622
calculate FFO
Funds from Operations       6,052        13,541       17,283       25,290
Straight-line accrued rent  (197)        (77)         (498)        (149)
Deferred revenue            (116)        (5,955)      (348)        (6,300)
recognition
Stock based compensation    412          323          1,236        1,042
expense
Amortization of financing   79           33           199          92
costs
Capitalized building        (3)          -            (3)          -
improvements
Adjusted Funds from         $            7,865        $            19,975
Operations                    6,227                   17,869
Gain on extinguishment of                (2,360)                   (2,360)
debt
Adjusted Funds from         $            $            $            $          
Operations, as adjusted       6,227        5,505      17,869       17,615
Adjusted Funds from         $            $            $            $          
Operations Per Share -          0.54         0.79         1.57         2.00
Dilutive
Adjusted Funds from         $            $            $            $          
Operations Per Share -          0.54         0.55         1.57         1.77
Dilutive, as adjusted
Supplemental Information:
Scheduled principal         $            $            $            $          
repayments                       802          784       2,329        2,805

 

(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.

Adjusted Funds from Operations ("AFFO") is a non-GAAP financial measure of
operating performance used by many companies in the REIT industry.  AFFO
further adjusts FFO for certain non-cash items that reduce or increase net
income in accordance with GAAP.  AFFO should not be considered an alternative
to net earnings, as an indication of the company's performance or to cash flow
as a measure of liquidity or ability to make distributions.  Management
considers AFFO a useful supplemental measure of the company's performance. 
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
Consolidated Balance Sheets (in thousands)
(Unaudited)
                                         September 30,      December 31,
                                         2012               2011
Assets:
Land                                     $                  $        108,673
                                         124,703
Buildings                                220,083            229,821
Accumulated depreciation                 (57,404)           (68,590)
Property under development               13,595             1,580
Cash and cash equivalents                543                2,003
Restricted cash                          3,281              -
Accounts receivable                      1,394              802
Deferred costs, net of amortization      24,054             18,692
Other assets                             2,429              963
Total Assets                             $                  $        293,944
                                         332,678
Liabilities
Mortgages payable                        $                  $           62,854
                                         69,572
Notes payable                            54,840             56,444
Deferred revenue                         2,047              2,394
Dividends and distributions payable      4,712              4,071
Other liabilities                        3,992              5,957
Total Liabilities                        135,163            131,720
Stockholder's Equity
Common stock (11,436,044 and 9,851,914   1                  1
shares)
Additional paid-in capital               217,348            181,070
Deficit                                  (21,199)           (20,919)
Accumulated other comprehensive income   (1,290)            (607)
(loss)
Non-controlling interest                 2,655              2,679
Total Stockholder's Equity               197,515            162,224
                                         $                  $        293,944
                                         332,678

 

SOURCE Agree Realty Corporation

Website: http://www.agreerealty.com
Contact: Alan D. Maximiuk, Chief Financial Officer, +1-248-737-4190
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