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Agree Realty Corporation Reports Second Quarter 2022 Results

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Increases 2022 Acquisition Guidance to $1.5 Billion to $1.7 Billion;

Raises 2022 Development and PCS Guidance to $75 Million to $125 Million Commenced

BLOOMFIELD HILLS, Mich., Aug. 2, 2022 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) (the "Company") today announced results for the quarter ended June 30, 2022.  All per share amounts included herein are on a diluted per common share basis unless otherwise stated.

(PRNewsfoto/Agree Realty Corporation)
(PRNewsfoto/Agree Realty Corporation)

Second Quarter 2022 Financial and Operating Highlights:

  • Invested approximately $430 million in 121 retail net lease properties

  • Commenced five development or Partner Capital Solutions ("PCS") projects

  • Net Income per share attributable to common stockholders increased 31.7% to $0.45

  • Core Funds from Operations ("Core FFO") per share increased 9.7% to $0.98

  • Adjusted Funds from Operations ("AFFO") per share increased 10.4% to $0.97

  • Declared a July monthly dividend of $0.234 per share, a 7.8% year-over-year increase

  • Completed a forward equity offering of 5,750,000 shares of common stock, including the underwriters' option to purchase additional shares, raising anticipated net proceeds of approximately $388 million

  • Sold 1,885,880 shares of common stock via the forward component of the Company's at-the-market equity ("ATM") program for anticipated net proceeds of approximately $127 million

  • Settled 4,667,850 shares of outstanding forward equity for net proceeds of approximately $300 million

  • Balance sheet positioned for growth at 3.8 times proforma net debt to recurring EBITDA; 5.0 times excluding unsettled forward equity

First Half 2022 Financial and Operating Highlights:

  • Invested a record of approximately $860 million in 228 retail net lease properties

  • Committed a record of $74 million to 23 development or PCS projects completed or under construction

  • Net Income per share attributable to common stockholders increased 13.7% to $0.93

  • Core FFO per share increased 12.5% to $1.95

  • AFFO per share increased 13.3% to $1.94

  • Settled 8,459,814 shares of outstanding forward equity for net proceeds of approximately $551 million

  • Declared dividends of $1.383 per share, an 8.7% year-over-year increase

Financial Results

Net Income Attributable to Common Stockholders

Net Income for the three months ended June 30, 2022 increased 52.7% to $34.1 million, compared to $22.3 million for the comparable period in 2021. Net Income per share for the three months ended June 30, 2022 increased 31.7% to $0.45, compared to $0.34 per share for the comparable period in 2021.

Net Income for the six months ended June 30, 2022 increased 30.3% to $68.4 million, compared to $52.5 million for the comparable period in 2021. Net Income per share for the six months ended June 30, 2022 increased 13.7% to $0.93, compared to $0.82 per share for the comparable period in 2021.

Core FFO

Core FFO for the three months ended June 30, 2022 increased 27.1% to $74.5 million, compared to Core FFO of $58.6 million for the comparable period in 2021. Core FFO per share for the three months ended June 30, 2022 increased 9.7% to $0.98, compared to Core FFO per share of $0.89 for the comparable period in 2021.

Core FFO for the six months ended June 30, 2022 increased 28.9% to $144.2 million, compared to Core FFO of $111.9 million for the comparable period in 2021. Core FFO per share for the six months ended June 30, 2022 increased 12.5% to $1.95, compared to Core FFO per share of $1.74 for the comparable period in 2021.

AFFO

AFFO for the three months ended June 30, 2022 increased 27.9% to $73.7 million, compared to AFFO of $57.6 million for the comparable period in 2021. AFFO per share for the three months ended June 30, 2022 increased 10.4% to $0.97, compared to AFFO per share of $0.88 for the comparable period in 2021.

AFFO for the six months ended June 30, 2022 increased 29.8% to $142.9 million, compared to AFFO of $110.1 million for the comparable period in 2021. AFFO per share for the six months ended June 30, 2022 increased 13.3% to $1.94, compared to AFFO per share of $1.71 for the comparable period in 2021.

Dividend

In the second quarter, the Company declared monthly cash dividends of $0.234 per common share for each of April, May and June 2022. The monthly dividends reflected an annualized dividend amount of $2.808 per common share, representing a 7.8% increase over the annualized dividend amount of $2.604 per common share from the second quarter of 2021. The dividends represent payout ratios of approximately 72% of both Core FFO per share and AFFO per share.

For the six months ended June 30, 2022, the Company declared monthly cash dividends totaling $1.383 per common share, an 8.7% increase over the dividends of $1.272 per common share declared for the comparable period in 2021. The dividends represent payout ratios of approximately 71% of both Core FFO per share and AFFO per share.

Subsequent to quarter end, the Company declared a monthly cash dividend of $0.234 per common share for July 2022. The monthly dividend reflects an annualized dividend amount of $2.808 per common share, representing a 7.8% increase over the annualized dividend amount of $2.604 per common share from the third quarter of 2021. The dividend is payable August 12, 2022 to stockholders of record at the close of business on July 29, 2022.

CEO Comments

"We are extremely pleased with our performance during the first half of the year," said Joey Agree, President and Chief Executive Officer. "With our record year-to-date investment activity, strong pipeline and superior cost of capital, we are increasing our full-year acquisition guidance to a range of $1.5 billion to $1.7 billion. While increasing our acquisition guidance, we will continue to maintain our rigorous underwriting standards and focus on superior real estate leased to leading retailers. Given our strong balance sheet position and vast liquidity, we remain poised to take advantage of opportunities in a dynamic market."

Portfolio Update

As of June 30, 2022, the Company's portfolio consisted of 1,607 properties located in 48 states and contained approximately 33.8 million square feet of gross leasable area.

At quarter-end, the portfolio was 99.6% leased and had a weighted-average remaining lease term of approximately 9.0 years. Investment grade retailers represented 67.5% of annualized base rents.

Ground Lease Portfolio

During the quarter, the Company acquired eight ground leases for an aggregate purchase price of approximately $22.6 million, representing 5.1% of annualized base rents acquired.

As of June 30, 2022, the Company's ground lease portfolio consisted of 193 leases located in 32 states and totaled approximately 5.1 million square feet of gross leasable area. Properties ground leased to tenants represented approximately 13.0% of annualized base rents.

At quarter end, the ground lease portfolio was fully occupied and had a weighted-average remaining lease term of approximately 11.8 years. Investment grade retailers represented 88.7% of annualized base rents.

Acquisitions

Acquisition volume for the second quarter totaled $420.4 million and included 99 properties net leased to leading retailers operating in sectors including general merchandise, tire and auto service, home improvement, consumer electronics, and auto parts. The acquired properties are located in 33 states and leased to tenants operating in 21 sectors.

The properties were acquired at a weighted-average capitalization rate of 6.2% and had a weighted-average remaining lease term of 10.0 years. Approximately 54.5% of annualized base rents acquired were generated from investment grade retail tenants.

For the six months ended June 30, 2022, total acquisition volume was $827.6 million. The 205 acquired properties are located in 40 states and leased to tenants who operate in 25 retail sectors. The properties were acquired at a weighted-average capitalization rate of 6.1% and had a weighted-average remaining lease term of approximately 9.6 years. Approximately 65.8% of annualized base rents were generated from investment grade retail tenants.

The Company's outlook for acquisition volume for the full-year 2022 is being increased to a range of $1.5 billion to $1.7 billion of high-quality retail net lease properties, from a previous range of $1.4 billion to $1.6 billion.

Dispositions

During the three months ended June 30, 2022, the Company sold four properties for gross proceeds of approximately $16.6 million. The dispositions were completed at a capitalization rate of 7.0% and included the previously disclosed LA Fitness in Houston, Texas. During the six months ended June 30, 2022, the Company sold five properties for total gross proceeds of $24.8 million. The weighted-average capitalization rate of the dispositions was 6.0%.

The Company's disposition guidance for 2022 remains between $25 million and $75 million.

Development and PCS

During the quarter, the Company commenced five development and PCS projects, with total anticipated costs of approximately $16.5 million. The projects include a Sunbelt Rentals in Roxana, Illinois and three Gerber Collision projects in Huntley, Illinois; Johnson City, New York; and Springfield, Missouri.

The Company completed its development with Gerber Collision in Pooler, Georgia, while construction continued on the Sunbelt Rentals in St. Louis, Missouri; the Burlington in Turnersville, New Jersey; and 14 geographically diverse Gerber Collision projects.

For the six months ended June 30, 2022, the Company had a record 23 development or PCS projects completed or under construction. Anticipated total costs are approximately $74.0 million, including $39.5 million of costs incurred to date. For the full-year 2022, the Company anticipates commencing between $75 million and $125 million of development and PCS projects, up from a previous range of $50 million to $100 million.

The following table presents the Company's 23 development or PCS projects as of June 30, 2022:

Tenant


Location


Lease Structure


Lease Term


Actual or
Anticipated Rent
Commencement


Status












7-Eleven


Saginaw, MI


Build-to-Suit


15 years


Q1 2022


Complete

Gerber Collision


Pooler, GA


Build-to-Suit


15 years


Q2 2022


Complete

Gerber Collision


Janesville, WI


Build-to-Suit


15 years


Q3 2022


Under Construction

Gerber Collision


Lake Park, FL


Build-to-Suit


15 years


Q3 2022


Under Construction

Gerber Collision


New Port Richey, FL


Build-to-Suit


15 years


Q3 2022


Under Construction

Gerber Collision


Johnson City, NY


Build-to-Suit


15 years


Q4 2022


Under Construction

Gerber Collision


Ocala, FL


Build-to-Suit


15 years


Q4 2022


Under Construction

Sunbelt Rentals


Roxana, IL


Build-to-Suit


10 years


Q4 2022


Under Construction

Sunbelt Rentals


St. Louis, MO


Build-to-Suit


7 years


Q4 2022


Under Construction

Burlington


Turnersville, NJ


Build-to-Suit


10 years


Q1 2023


Under Construction

Gerber Collision


Fort Wayne, IN


Build-to-Suit


15 years


Q1 2023


Under Construction

Gerber Collision


Joplin, MO


Build-to-Suit


15 years


Q1 2023


Under Construction

Gerber Collision


Kimberly, WI


Build-to-Suit


15 years


Q1 2023


Under Construction

Gerber Collision


Lake Charles, LA


Build-to-Suit


15 years


Q1 2023


Under Construction

Gerber Collision


McDonough, GA


Build-to-Suit


15 years


Q1 2023


Under Construction

Gerber Collision


Toledo, OH


Build-to-Suit


15 years


Q1 2023


Under Construction

Gerber Collision


Venice, FL


Build-to-Suit


15 years


Q1 2023


Under Construction

Gerber Collision


Winterville, NC


Build-to-Suit


15 years


Q1 2023


Under Construction

Gerber Collision


Woodstock, IL


Build-to-Suit


15 years


Q1 2023


Under Construction

Gerber Collision


Yorkville, IL


Build-to-Suit


15 years


Q1 2023


Under Construction

Old Navy


Searcy, AR


Build-to-Suit


7 years


Q1 2023


Under Construction

Gerber Collision


Huntley, IL


Build-to-Suit


15 years


Q2 2023


Under Construction

Gerber Collision


Springfield, MO


Build-to-Suit


15 years


Q2 2023


Under Construction

 

Leasing Activity and Expirations

During the second quarter, the Company executed new leases, extensions or options on approximately 102,000 square feet of gross leasable area throughout the existing portfolio.

For the six months ended June 30, 2022, the Company executed new leases, extensions or options on approximately 460,000 square feet of gross leasable area throughout the existing portfolio.

As of June 30, 2022, the Company's 2022 lease maturities represented 0.1% of annualized base rents. The following table presents contractual lease expirations, assuming no tenants exercise their renewal options, within the Company's portfolio as of June 30, 2022:

Year

 Leases


Annualized
Base Rent (1)


 % of ABR


Gross Leasable
Area ("GLA")


% of GLA











2022

4


501


0.1 %


24


0.1 %

2023

48


8,715


2.1 %


1,009


3.0 %

2024

44


13,572


3.2 %


1,581


4.7 %

2025

65


15,452


3.7 %


1,510


4.5 %

2026

108


23,495


5.6 %


2,485


7.3 %

2027

118


27,346


6.5 %


2,472


7.3 %

2028

122


32,149


7.6 %


2,834


8.4 %

2029

152


42,697


10.1 %


4,210


12.4 %

2030

242


50,585


12.0 %


3,837


11.3 %

2031

153


37,053


8.8 %


2,718


8.0 %

Thereafter

679


170,296


40.3 %


11,158


33.0 %

Total Portfolio

1,735


$421,861


100.0 %


33,838


100.0 %




The contractual lease expirations presented above exclude the effect of replacement tenant leases that had been executed as of June 30, 2022 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 ("ABR") represents the annualized amount of contractual minimum rent required by tenant lease agreements as of June 30, 2022, 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

As of June 30, 2022, LA Fitness is no longer among the Company's top tenants. The Company added Goodyear to its top tenants during the second quarter of 2022. 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 June 30, 2022:

Tenant


Annualized

Base Rent(1)


% of ABR






Walmart


$30,281


7.2 %

Tractor Supply


17,954


4.3 %

Dollar General


16,629


3.9 %

Best Buy


16,588


3.9 %

TJX Companies


13,047


3.1 %

O'Reilly Auto Parts


12,419


2.9 %

CVS


12,240


2.9 %

Hobby Lobby


11,498


2.7 %

Lowe's


10,852


2.6 %

Kroger


10,798


2.6 %

Sherwin-Williams


10,739


2.5 %

Burlington


10,435


2.5 %

Dollar Tree


9,927


2.4 %

Wawa


9,636


2.3 %

Sunbelt Rentals


9,275


2.2 %

Home Depot


8,877


2.1 %

TBC Corporation


...