Agree Realty Corporation Reports Third Quarter 2023 Results

Achieves Record Investment Grade Exposure Approaching 69% of Annualized Base Rents

ROYAL OAK, Mich., Oct. 24, 2023 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) (the "Company") today announced results for the quarter ended September 30, 2023. All per share amounts included herein are on a diluted per common share basis unless otherwise stated.

Third Quarter 2023 Financial and Operating Highlights:

• Invested approximately $411 million in 98 retail net lease properties
• Completed eight development or Developer Funding Platform ("DFP") projects representing total committed capital of over $41 million
• Net Income per share attributable to common stockholders decreased 12.4% to $0.41
• Core Funds from Operations ("Core FFO") per share increased 2.1% to $0.99
• Adjusted Funds from Operations ("AFFO") per share increased 4.2% to $1.00
• Declared an October monthly dividend of $0.247 per common share, a 2.9% year-over-year increase
• Closed on an unsecured $350 million 5.5-year term loan at a 4.52% fixed rate inclusive of prior hedging activity
• Sold 1,327,130 shares of common stock via the forward component of the Company's at-the-market equity ("ATM") program for net proceeds of approximately $87 million
• Settled 4,251,771 shares of outstanding forward equity for net proceeds of approximately $290 million
• Balance sheet well positioned at 4.5 times net debt to recurring EBITDA

Financial Results

Net Income Attributable to Common Stockholders

Net Income for the three months ended September 30, 2023 increased 5.6% to $39.7 million, compared to $37.6 million for the comparable period in 2022. Net Income per share for the three months ended September 30^th decreased 12.4% to $0.41, compared to $0.46 per share for the comparable period in 2022.

Net Income for the nine months ended September 30, 2023 increased 11.8% to $118.4 million, compared to $105.9 million for the comparable period in 2022. Net Income per share for the nine months ended September 30^th decreased 9.4% to $1.26, compared to $1.39 per share for the comparable period in 2022.

Core FFO

Core FFO for the three months ended September 30, 2023 increased 23.3% to $96.4 million, compared to Core FFO of $78.2 million for the comparable period in 2022. Core FFO per share for the three months ended September 30^th increased 2.1% to $0.99, compared to Core FFO per share of $0.97 for the comparable period in 2022.

Core FFO for the nine months ended September 30, 2023 increased 24.4% to $276.8 million, compared to Core FFO of $222.4 million for the comparable period in 2022. Core FFO per share for the nine months ended September 30^th increased 0.8% to $2.94, compared to Core FFO per share of $2.92 for the comparable period in 2022.

AFFO

AFFO for the three months ended September 30, 2023 increased 25.8% to $97.6 million, compared to AFFO of $77.6 million for the comparable period in 2022. AFFO per share for the three months ended September 30^th increased 4.2% to $1.00, compared to AFFO per share of $0.96 for the comparable period in 2022.

AFFO for the nine months ended September 30, 2023 increased 26.3% to $278.4 million, compared to AFFO of $220.5 million for the comparable period in 2022. AFFO per share for the nine months ended September 30^th increased 2.3% to $2.96, compared to AFFO per share of $2.89 for the comparable period in 2022.

Dividend

In the third quarter, the Company declared monthly cash dividends of $0.243 per common share for each of July, August and September 2023. The monthly dividends during the third quarter reflected an annualized dividend amount of $2.916 per common share, representing a 3.8% increase over the annualized dividend amount of $2.808 per common share from the third quarter of 2022. The dividends represent payout ratios of approximately 74% of Core FFO per share and 73% of AFFO per share, respectively.

For the nine months ended September 30, 2023, the Company declared monthly cash dividends totaling $2.178 per common share, a 4.5% increase over the dividends of $2.085 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 quarter end, the Company declared a monthly cash dividend of $0.247 per common share for October 2023. 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 fourth quarter of 2022. The dividend is payable November 14, 2023 to stockholders of record at the close of business on October 31, 2023.

Additionally, subsequent to quarter end, the Company declared a monthly cash dividend 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 dividend is payable on November 1, 2023 to stockholders of record at the close of business on October 20, 2023.

CEO Comments

"We are very pleased with our year-to-date performance as we continue to bolster the strength of our portfolio via investment activity, with a record of nearly 69% of annualized base rents coming from investment grade retailers," said Joey Agree, President and Chief Executive Officer. "Looking forward, we are well positioned to execute on unique opportunities across all three external growth platforms, while being disciplined allocators of capital during these turbulent times."

Portfolio Update

As of September 30, 2023, the Company's portfolio consisted of 2,084 properties located in 49 states and contained approximately 43.2 million square feet of gross leasable area.

At quarter end, the portfolio was 99.7% leased, had a weighted-average remaining lease term of approximately 8.6 years, and generated 68.9% of annualized base rents from investment grade retail tenants.

Ground Lease Portfolio

During the third quarter, the Company acquired seven ground leases for an aggregate purchase price of approximately $34.7 million, representing 8.2% of annualized base rents acquired.

As of September 30, 2023, the Company's ground lease portfolio consisted of 217 leases located in 34 states and totaled approximately 5.9 million square feet of gross leasable area. Properties ground leased to tenants represented 11.6% of annualized base rents.

At quarter end, the ground lease portfolio was fully occupied, had a weighted-average remaining lease term of approximately 10.8 years, and generated 87.6% of annualized base rents from investment grade retail tenants.

Acquisitions

Total acquisition volume for the third quarter was approximately $398.3 million and included 74 properties net leased to leading retailers operating in sectors including farm and rural supply, auto parts, tire and auto service, convenience stores, off-price retail, dollar stores, home improvement, and warehouse clubs. The properties are located in 28 states and leased to tenants operating in 23 sectors.

The properties were acquired at a weighted-average capitalization rate of 6.9% and had a weighted-average remaining lease term of approximately 11.5 years. Approximately 72.5% of annualized base rents acquired were generated from investment grade retail tenants.

For the nine months ended September 30, 2023, total acquisition volume was approximately $1.01 billion. The 232 acquired properties are located in 37 states and leased to tenants who operate in 25 retail sectors. The properties were acquired at a weighted-average capitalization rate of 6.8% and had a weighted-average remaining lease term of approximately 11.5 years. Approximately 73.3% of annualized base rents were generated from investment grade retail tenants.

The Company now anticipates acquisition volume for the full-year 2023 to be approximately $1.3 billion of high-quality retail net lease properties.

Dispositions

During the three months ended September 30, 2023, the Company sold one property for gross proceeds of approximately $0.2 million. During the nine months ended September 30, 2023, the Company sold two properties for total gross proceeds of $3.3 million.

Development and DFP

During the third quarter, the Company commenced two development and DFP projects, with total anticipated costs of approximately $11.0 million. Construction continued during the quarter on 14 projects with anticipated costs totaling approximately $56.3 million. The Company completed eight projects during the quarter with total costs of approximately $41.4 million.

For the nine months ended September 30, 2023, the Company had 33 development or DFP projects completed or under construction with anticipated total costs of approximately $137.1 million. At quarter end, the Company had 16 development or DFP projects under construction with anticipated total costs of approximately $67.3 million, including $32.8 million of costs incurred.

The following table presents the Company's 33 development or DFP projects as of September 30, 2023:

Leasing Activity and Expirations

During the third quarter, the Company executed new leases, extensions or options on approximately 655,000 square feet of gross leasable area throughout the existing portfolio. Notable new leases, extensions or options included a 220,000-square foot Walmart in Wichita, Kansas, a 130,000-square foot Lowe's in North Providence, Rhode Island, and a 40,000-square foot Marshalls & HomeGoods in Napa, California.

For the nine months ended September 30, 2023, the Company executed new leases, extensions or options on approximately 1,448,000 square feet of gross leasable area throughout the existing portfolio.

As of September 30, 2023, the Company's 2023 lease maturities represented 0.3% of annualized base rents. The following table presents contractual lease expirations within the Company's portfolio as of September 30, 2023, assuming no tenants exercise renewal options:

Top Tenants

As of September 30, 2023, TBC Corporation is no longer among the Company's top tenants. The Company added BJ's Wholesale Club to its top tenants during the third quarter of 2023. 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 September 30, 2023: