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| 8-K - FORM 8-K - AGREE REALTY CORP | v310723_8k.htm |
Agree Realty Corporation Reports Operating Results for the First Quarter 2012
FARMINGTON HILLS, Mich., April 26, 2012 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) today announced results for the quarter ended March 31, 2012.
FIRST Quarter 2012 Highlights:
- Raised $35.1 million in gross proceeds from secondary common equity offering in 2012
- Acquired three net leased properties for $6 million in the auto parts, auto service and financial institution retail sectors
- Announced development in Rancho Cordova, CA in the pharmacy sector
- Completed Landlord's work on McDonald's relocation project in Southfield, MI
- $0.40 per share quarterly dividend paid April 10, 2012
First quarter funds from operations (FFO) was $5,507,000 compared with FFO in the first quarter of 2011 of $6,317,000. FFO per diluted share for the first quarter of 2012 was $0.50 compared with $0.63 for the first quarter of 2011. FFO and FFO per share decreased due to an increase in the weighted average shares outstanding as the result of the common share offering in January 2012, the disposition of various non-core properties, and the impact of the Borders bankruptcy in February 2011. A reconciliation of net income to FFO is included in the financial tables accompanying this press release.
Net income for the first quarter of 2012 was $4,742,000, or $0.43 per diluted share, compared to net income for the first quarter of 2011 of $4,700,000, or $.47 per share. Total revenues were $9,193,000, compared with total revenues of $9,209,000 in the first quarter of 2011.
"We are pleased with our quarterly results, including our recently completed follow-on equity offering which further bolstered the Company's strong balance sheet," said Joey Agree, President and Chief Operating Officer. "This additional capital will further enable the Company to execute on our growing development and acquisition pipeline, which currently consists of approximately $60,000,000 of net lease opportunities in 11 states and 6 retail sectors," said Joey Agree, President and Chief Operating Officer.
Capital Markets/Balance Sheet
In the first quarter of 2012, the Company completed an underwritten public offering of a total of 1,495,000 shares of common stock, including the exercise of the underwriter's over-allotment option, resulting in gross proceeds to the Company of approximately $35,100,000. The proceeds were used to reduce amounts outstanding under the Company's credit facility and for general corporate purposes.
The Company's debt to total market capitalization was approximately 24% as of March 31, 2012, compared to approximately 32% as of December 31, 2011. The strengthening of the balance sheet resulted primarily from the impact of the follow-on equity offering and the reduction in debt due to the consensual deed-in-lieu of foreclosure process relative to four former Borders properties.
Dividend
The Company paid a cash dividend of $0.40 per share on April 10, 2012 to shareholders of record on March 30, 2012. The dividend is equivalent to an annualized dividend of $1.60 per share and represents a payout ratio of 80% of FFO for the quarter.
Portfolio
At March 31, 2012, the Company's total assets were $291,583,000 and its portfolio consisted of 85 properties located in 21 states with a total of 3.4 million square feet of gross leasable space. The portfolio was 96% leased at the end of the quarter.
The Company's construction in progress balance totaled approximately $5,489,000 at March 31, 2012.
Acquisitions
The Company acquired three retail properties during the first quarter for approximately $6 million. The three properties acquired are single tenant buildings net leased to National Tire & Battery ("NTB"), JPMorgan Chase Bank and Advance Auto Parts.
Dispositions
The Company conveyed the former Borders properties in Columbia, Maryland, Germantown, Maryland, Oklahoma City, Oklahoma and Omaha, Nebraska, which were subject to non-recourse mortgage loans in default, to the lender pursuant to a consensual deed-in-lieu-of-foreclosure process during March, 2012 that satisfied the loan of approximately $9.2 million. The Company sold the former Borders office location in Ann Arbor, Michigan for net proceeds of approximately $640,000 in March 2012.
Development Activity
In March 2012, the Company closed on a land parcel in Rancho Cordova, California to be developed for an industry leader in the pharmacy sector. Construction is expected to be completed in the first quarter of 2013.
In addition, the Company has completed landlord's work in Southfield, Michigan and turned the site over to McDonald's. Tenant's construction is expected to be completed by the third quarter of 2012.
Major Tenants
The following is a breakdown of base rents in effect at March 31, 2012 for each of the Company's major tenants:
Major Tenants (A) | Annualized Base Rent | Percent of Total Base Rent |
Walgreen (31) | $ 11,495,499 | 34% |
Kmart (12) | 3,847,911 | 11 |
CVS Caremark (6) | 2,463,490 | 7 |
Total | $ 17,806,900 | 52% |
(A) Kmart exercised options to extend the lease expiration date from September 30, 2012 to September 2014 for two leases amounting to 142,700 square feet. | ||
Annualized Base Rent of Properties
The following is a breakdown of base rents in effect at March 31, 2012 for each type of retail tenant:
Retail Tenant | Annualized Base Rent | Percent of Total Base Rent |
National | $ 29,623,162 | 87% |
Regional | 2,895,990 | 9 |
Local | 1,401,577 | 4 |
Total | $ 33,920,729 | 100% |
Lease Expirations
The following table, as of March 31, 2012, sets forth lease expirations for the next 10 years for the Company's freestanding properties and community shopping centers, assuming that none of the tenants exercise renewal options or terminate their leases prior to the contractual expiration date.
Gross Leasable Area | Annualized Base Rent | ||||
Expiration Year | Number of Leases Expiring | Square Footage | Percent of Total | Amount | Percent of Total |
2012 | 7 | 20,536 | .6% | $ 161,123 | .5% |
2013 | 24 | 395,704 | 12.1% | 1,868,100 | 5.5% |
2014 | 24 | 381,560 | 11.6% | 1,820,680 | 5.4% |
2015 | 29 | 800,095 | 24.4% | 3,946,107 | 11.6% |
2016 | 15 | 93,619 | 2.9% | 706,276 | 2.1% |
2017 | 11 | 89,369 | 2.7% | 1,520,810 | 4.5% |
2018 | 8 | 98,491 | 3.0% | 1,545,574 | 4.6% |
2019 | 7 | 85,170 | 2.6% | 1,809,379 | 5.3% |
2020 | 5 | 126,991 | 3.9% | 1,510,378 | 4.5% |
2021 | 7 | 158,699 | 4.8% | 1,951,200 | 5.8% |
Thereafter | 52 | 1,032,996 | 31.4% | 17,081,102 | 50.2% |
Total | 189 | 3,283,230 | $33,920,729 | ||
Outstanding Shares and Operating Partnership Units
For the three months ended March 31, 2012, the Company's fully diluted weighted average shares outstanding were 10,754,822. The basic weighted average shares outstanding for the three months ended March 31, 2012 were 10,722,457.
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 March 31, 2012, there were 347,619 operating partnership units outstanding and the Company held a 97.05% interest.
About Agree Realty Corporation
Agree Realty Corporation is primarily engaged in the ownership, development, acquisition and management of single tenant retail properties leased to industry leading retail tenants. The Company currently owns and operates a portfolio of 85 properties, located in 21 states and containing approximately 3.4 million square feet of gross leasable space. The common stock of Agree Realty Corporation is listed on the New York Stock Exchange under the symbol "ADC."
Forward-Looking Statements
The Company considers portions of the information contained in this release to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, each as amended. These forward-looking statements represent the Company's expectations, plans and beliefs concerning future events. Although these forward-looking statements are based on good faith beliefs, reasonable assumptions and the Company's best judgment reflecting current information, certain factors could cause actual results to differ materially from such forward–looking statements. Such factors are detailed from time to time in reports filed or furnished by the Company with the Securities and Exchange Commission, including the Company's Form 10-K for the year ended December 31, 2011. Except as required by law, the Company assumes no obligation to update these forward–looking statements, even if new information becomes available in the future.
For additional information, visit the Company's home page on the Internet at http://www.agreerealty.com
Agree Realty Corporation Operating Results (in thousands, except per share amounts) (Unaudited) | ||
Three Months Ended March 31, | ||
2012 | 2011 | |
Revenues: | ||
Minimum rents | $ 8,480 | $ 8,027 |
Percentage rent | 15 | 16 |
Operating cost reimbursements | 681 | 733 |
Development fee income | - | 411 |
Other income | 17 | 22 |
Total Revenues | 9,193 | 9,209 |
Expenses: | ||
Real estate taxes | 606 | 578 |
Property operating expenses | 428 | 421 |
Land lease payments | 181 | 178 |
General and administration | 1,408 | 1,442 |
Depreciation and amortization | 1,665 | 1,473 |
Interest expense | 1,136 | 1,009 |
Total Expenses | 5,424 | 5,101 |
Income Before Discontinued Operations | 3,769 | 4,108 |
Gain on sale of asset from discontinued operations | 908 | - |
Income from discontinued operations | 65 | 592 |
Net Income | 4,742 | 4,700 |
Net Income attributable to non-controlling interest | 146 | 160 |
Net income Attributable to Agree Realty Corporation | 4,596 | 4,540 |
Other Comprehensive Income, Net of $2 and $4 Attributable to Non-Controlling Interest |
51 |
118 |
Total Comprehensive Income Attributable to Agree Realty Corporation | $ 4,647 | $ 4,658 |
Basic Earnings Per Share | ||
Continuing operations | $ .34 | $ .41 |
Discontinued operations | $ .09 | $ .06 |
$ .43 | $ .47 | |
Dilutive Earnings Per Share | ||
Continuing operations | $ .34 | $ .41 |
Discontinued operations | $ .09 | $ .06 |
$ .43 | $ .47 | |
Weighted Average Number of Common Shares Outstanding – Basic | 10,722 | 9,619 |
Weighted Average Number of Common Shares Outstanding – Dilutive | 10,755 | 9,648 |
Agree Realty Corporation Funds from Operations (in thousands, except per share amounts) (Unaudited) | ||
Three Months Ended March 31, | ||
2012 | 2011 | |
Reconciliation of Funds from Operations to Net Income: (1) | ||
Net income | $ 4,742 | $ 4,700 |
Depreciation of real estate assets | 1,434 | 1,488 |
Amortization of leasing costs | 25 | 25 |
Amortization of lease intangibles | 214 | 104 |
Gain on sale of assets | (908) | - |
Funds from Operations | $ 5,507 | $ 6,317 |
Funds from Operations Per Share – Dilutive | $ 0.50 | $ 0.63 |
Weighted average number of shares and OP units outstanding - dilutive | 11,102 | 9,996 |
Supplemental Information: | ||
Straight-line rental income | $ 135 | $ 35 |
Stock-based compensation expense | 412 | 359 |
Deferred revenue recognition | 116 | 172 |
Scheduled principal repayments | 740 | 1,048 |
(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.
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Agree Realty Corporation Consolidated Balance Sheets (in thousands) (Unaudited) | ||
March 31, 2012 | December 31 2011 | |
Assets | ||
Land | $106,942 | $108,673 |
Buildings | 225,680 | 229,821 |
Accumulated depreciation | (67,556) | (68,590) |
Property under development | 5,489 | 1,580 |
Cash and cash equivalents | 465 | 2,003 |
Accounts receivable | 604 | 802 |
Deferred costs, net of amortization | 18,712 | 18,692 |
Other assets | 1,247 | 963 |
Total Assets | $291,583 | $293,944 |
Liabilities | ||
Mortgages payable | $52,940 | $62,854 |
Notes payable | 30,385 | 56,444 |
Deferred revenue | 2,278 | 2,394 |
Dividends and distributions payable | 4,697 | 4,071 |
Other liabilities | 3,523 | 5,957 |
Total Liabilities | $93,823 | $131,720 |
Stockholders' Equity | ||
Common stock (11,435,514 and 9,851,914 shares) | 1 | 1 |
Additional paid-in capital | 216,524 | 181,070 |
Deficit | (20,897) | (20,919) |
Accumulated other comprehensive income (loss) | (555) | (607) |
Non-controlling interest | 2,687 | 2,679 |
Total Stockholders' Equity | 197,760 | 162,224 |
$291,583 | $293,944 | |
CONTACT: Alan D. Maximiuk, Chief Financial Officer, +1-248-737-4190