Provides Initial 2025 AFFO Per Share Guidance of $4.26 to $4.30
ROYAL OAK, Mich., Feb. 11, 2025 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) (the "Company") today announced results for the quarter and full year ended December 31, 2024. All per share amounts included herein are on a diluted per common share basis unless otherwise stated.
Fourth Quarter 2024 Financial and Operating Highlights:
- Invested approximately $371 million in 127 retail net lease properties
- Commenced eight development or Developer Funding Platform ("DFP") projects for total committed capital of approximately $45 million
- Net Income per share attributable to common stockholders decreased 5.7% to $0.41
- Core Funds from Operations ("Core FFO") per share increased 3.5% to $1.02
- Adjusted Funds from Operations ("AFFO") per share increased 4.7% to $1.04
- Declared a December monthly dividend of $0.253 per common share, a 2.4% year-over-year increase
- Completed a forward equity offering of 5.1 million shares of common stock, including the underwriters' option to purchase additional shares, raising anticipated net proceeds of approximately $368 million
- Sold 0.7 million shares of common stock via the forward component of the Company's at-the-market equity ("ATM") program for anticipated net proceeds of approximately $55 million
- Settled 3.7 million shares of outstanding forward equity for net proceeds of approximately $228 million
- Balance sheet well positioned at 3.3 times proforma net debt to recurring EBITDA; 4.9 times excluding unsettled forward equity
Full Year 2024 Financial and Operating Highlights:
- Invested approximately $951 million in 282 retail net lease properties
- Commenced 25 development or DFP projects for total committed capital of approximately $115 million
- Net Income per share attributable to common stockholders increased 4.8% to $1.78
- Core FFO per share increased 3.7% to $4.08
- AFFO per share increased 4.6% to $4.14
- Declared dividends of $3.00 per share, a 2.8% year-over-year increase
- Achieved upgraded credit rating of BBB+ from S&P Global Ratings with a stable outlook
- Raised approximately $1.1 billion of forward equity via the Company's ATM program and an overnight offering
- Completed a public bond offering of $450 million of senior unsecured notes due 2034 at an all-in rate of 5.65%
- Expanded senior unsecured revolving credit facility (the "Credit Facility") to $1.25 billion while reducing pricing and extending the maturity date to August 2029 inclusive of extension options
- Ended the year with liquidity of over $2.0 billion including availability on the 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, 2024 decreased 1.6% to $43.4 million, compared to Net Income of $44.1 million for the comparable period in 2023. Net Income per share for the three months ended December 31 st decreased 5.7% to $0.41, compared to Net Income per share of $0.44 for the comparable period in 2023.
Net Income for the twelve months ended December 31, 2024 increased 11.8% to $181.8 million, compared to Net Income of $162.5 million for the comparable period in 2023. Net Income per share for the twelve months ended December 31 st increased 4.8% to $1.78, compared to Net Income per share of $1.70 for the comparable period in 2023.
Core FFO
Core FFO for the three months ended December 31, 2024 increased 7.9% to $107.6 million, compared to Core FFO of $99.7 million for the comparable period in 2023. Core FFO per share for the three months ended December 31 st increased 3.5% to $1.02, compared to Core FFO per share of $0.99 for the comparable period in 2023.
Core FFO for the twelve months ended December 31, 2024 increased 10.7% to $416.7 million, compared to Core FFO of $376.5 million for the comparable period in 2023. Core FFO per share for the twelve months ended December 31 st increased 3.7% to $4.08, compared to Core FFO per share of $3.93 for the comparable period in 2023.
AFFO
AFFO for the three months ended December 31, 2024 increased 9.1% to $109.5 million, compared to AFFO of $100.3 million for the comparable period in 2023. AFFO per share for the three months ended December 31 st increased 4.7% to $1.04, compared to AFFO per share of $1.00 for the comparable period in 2023.
AFFO for the twelve months ended December 31, 2024 increased 11.6% to $422.8 million, compared to AFFO of $378.7 million for the comparable period in 2023. AFFO per share for the twelve months ended December 31 st increased 4.6% to $4.14, compared to AFFO per share of $3.95 for the comparable period in 2023.
Dividend
In the fourth quarter, the Company declared monthly cash dividends of $0.253 per common share for each of October, November and December 2024. The monthly dividends declared during the fourth quarter reflect an annualized dividend amount of $3.036 per common share, representing a 2.4% increase over the annualized dividend amount of $2.964 per common share from the fourth quarter of 2023. The dividends represent payout ratios of approximately 74% of Core FFO per share and 73% of AFFO per share, respectively.
For the twelve months ended December 31, 2024, the Company declared monthly cash dividends totaling $3.00 per common share, representing a 2.8% increase over the dividends of $2.919 per common share declared for the comparable period in 2023. The dividends represent payout ratios of approximately 74% of Core FFO per share and 73% of AFFO per share, respectively.
Subsequent to year end, the Company declared a monthly cash dividend of $0.253 per common share for each of January and February 2025. The monthly dividend reflects an annualized dividend amount of $3.036 per common share, representing a 2.4% increase over the annualized dividend amount of $2.964 per common share from the first quarter of 2024. The January dividend is payable on February 14, 2025 to stockholders of record at the close of business on January 31, 2025. The February dividend is payable on March 14, 2025 to stockholders of record at the close of business on February 28, 2025.
Additionally, subsequent to year end, the Company declared a monthly cash dividend for each of January and February 2025 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 3, 2025, and the February dividend is payable on March 3, 2025 to stockholders of record at the close of business on February 21, 2025.
Earnings Guidance
The table below provides estimates for significant components of our 2025 earnings guidance. In addition, the AFFO per share guidance range includes an estimate for the dilutive impact of the Company's outstanding forward equity calculated in accordance with the treasury stock method.
2025 Guidance | ||
AFFO per share(1) | $4.26 to $4.30 | |
General and administrative expenses (% of adjusted revenue)(2) | 5.6% to 5.9% | |
Non-reimbursable real estate expenses (% of adjusted revenue)(2) | 1.0% to 1.5% | |
Income and other tax expense | $3 to $4 million | |
Investment volume | $1.1 to $1.3 billion | |
Disposition volume | $10 to $50 million |
The Company's 2025 guidance is subject to risks and uncertainties more fully described in this press release and in the Company's filings with the Securities and Exchange Commission.
(1) The Company does not provide guidance with respect to the most directly comparable GAAP financial measure or provide reconciliations to GAAP from its forward-looking non-GAAP financial measure of AFFO per share guidance due to the inherent difficulty of forecasting the effect, timing and significance of certain amounts in the reconciliation that would be required by Item 10(e)(1)(i)(B) of Regulation S-K. Examples of these amounts include impairments of assets, gains and losses from sales of assets, and depreciation and amortization from new acquisitions or developments. In addition, certain non-recurring items may also significantly affect net income but are generally adjusted for in AFFO. Based on our historical experience, the dollar amounts of these items could be significant, and could have a material impact on the Company's GAAP results for the guidance period.
(2) Adjusted revenue excludes the impact of the amortization of above and below market lease intangibles.
CEO Comments
"We are very pleased with our performance this past year as we remained disciplined capital allocators during a period of dislocation, and then preemptively equitized our balance sheet raising $1.1 billion of forward equity," said Joey Agree, President and Chief Executive Officer. "We enter this year in an enviable position with over $2 billion of liquidity and attractive investment opportunities across all three external growth platforms. Given our leading portfolio, fortress balance sheet, and strong pipeline, we are confident in our ability to achieve our AFFO per share guidance for full-year 2025."
Portfolio Update
As of December 31, 2024, the Company's portfolio consisted of 2,370 properties located in all 50 states and contained approximately 48.8 million square feet of gross leasable area. At year end, the portfolio was 99.6% leased, had a weighted-average remaining lease term of approximately 7.9 years, and generated 68.2% of annualized base rents from investment grade retail tenants.
Ground Lease Portfolio
During the fourth quarter, the Company acquired six ground leases for an aggregate purchase price of approximately $41.6 million, representing 10.5% of annualized base rents acquired.
As of December 31, 2024, the Company's ground lease portfolio consisted of 229 leases located in 36 states and totaled approximately 6.3 million square feet of gross leasable area. Properties ground leased to tenants represented 10.9% of annualized base rents.
At year end, the ground lease portfolio was fully occupied, had a weighted-average remaining lease term of approximately 9.6 years, and generated 88.2% of annualized base rents from investment grade retail tenants.
Acquisitions
Total acquisition volume for the fourth quarter was approximately $341.5 million and included 98 properties net leased to leading retailers operating in sectors including auto parts, off-price retail, farm and rural supply, home improvement, tire and auto service, and crafts and novelties. The properties are located in 30 states and leased to tenants operating in 20 sectors.
The properties were acquired at a weighted-average capitalization rate of 7.3% and had a weighted-average remaining lease term of approximately 12.3 years. Approximately 73.3% of annualized base rents acquired were generated from investment grade retail tenants.
For the twelve months ended December 31, 2024, total acquisition volume was approximately $866.6 million. The 242 acquired properties are located in 44 states and leased to tenants who operate in 27 retail sectors. The properties were acquired at a weighted-average capitalization rate of 7.5% and had a weighted-average remaining lease term of approximately 10.4 years. Approximately 65.6% of annualized base rents were generated from investment grade retail tenants.
Dispositions
During the fourth quarter, the Company sold eight properties for gross proceeds of approximately $32.0 million. The dispositions were completed at a weighted-average capitalization rate of 7.4%.
During the twelve months ended December 31, 2024, the Company sold 26 properties for gross proceeds of approximately $98.4 million. The dispositions were completed at a weighted-average capitalization rate of 6.7%.
The Company's disposition guidance for 2025 is between $10 million and $50 million.
Development and Developer Funding Platform
During the fourth quarter, the Company commenced eight development or DFP projects, with total anticipated costs of approximately $45.1 million. Construction continued during the quarter on 14 projects with anticipated costs totaling approximately $66.6 million. The Company completed nine projects during the quarter with total costs of approximately $30.5 million.
For the twelve months ended December 31, 2024, the Company had 41 development or DFP projects completed or under construction with anticipated total costs of approximately $179.9 million. The projects are leased to leading retailers including TJX Companies, Burlington, Starbucks, 7-Eleven, Gerber Collision, and Sunbelt Rentals.
The following table presents estimated costs for the Company's active or completed development or DFP projects as of December 31, 2024:
Twelve Months Ended December 31, 2024 | |||
Number of Projects | 41 | ||
Costs Funded to Date | $120,084 | ||
Remaining Funding Costs | 59,842 | ||
Anticipated Total Project Costs | $179,926 |
Development and DFP project costs are in thousands. Any differences are the result of rounding.
Leasing Activity and Expirations
During the fourth quarter, the Company executed new leases, extensions or options on approximately 538,000 square feet of gross leasable area throughout the existing portfolio. Notable new leases, extensions or options included a 46,000-square foot Best Buy in Tucson, Arizona, and a 19,000-square foot Tractor Supply in Bristol, Virginia.
For the twelve months ended December 31, 2024, the Company executed new leases, extensions or options on approximately 2.0 million square feet of gross leasable area throughout the existing portfolio.
As of December 31, 2024, the Company's 2025 lease maturities represented 1.2% of annualized base rents. The following table presents contractual lease expirations within the Company's portfolio as of December 31, 2024, assuming no tenants exercise renewal options:
Year | Leases | Annualized | Percent of | Gross Leasable Area | Percent of Gross | ||||
2025 | 41 | $7,660 | 1.2 % | 820 | 1.7 % | ||||
2026 | 122 | 26,117 | 4.2 % | 2,648 | 5.5 % | ||||
2027 | 166 | 37,851 | 6.1 % | 3,538 | 7.3 % | ||||
2028 | 175 | 45,848 | 7.4 % | 4,085 | 8.4 % | ||||
2029 | 207 | 64,977 | 10.5 % | 6,270 | 12.9 % | ||||
2030 | 297 | 63,787 | 10.3 % | 5,070 | 10.4 % | ||||
2031 | 190 | 44,758 | 7.2 % | 3,286 | 6.8 % | ||||
2032 | 243 | 50,903 | 8.2 % | 3,742 | 7.7 % | ||||
2033 | 212 | 48,454 | 7.8 % | 3,825 | 7.9 % | ||||
2034 | 201 | 45,363 | 7.3 % | 2,930 | 6.0 % | ||||
Thereafter | 698 | 185,003 | 29.8 % | 12,364 | 25.4 % | ||||
Total Portfolio | 2,552 | $620,721 | 100.0 % | 48,578 | 100.0 % |
The contractual lease expirations presented above exclude the effect of replacement tenant leases that had been executed as of December 31, 2024, 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, 2024, 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, 2024:
Tenant | Annualized | Percent of Annualized Base Rent | ||
Walmart | $38,460 | 6.2 % | ||
Tractor Supply | 30,800 | 5.0 % | ||
Dollar General | 28,115 | 4.5 % | ||
Best Buy | 21,130 | 3.4 % | ||
TJX Companies | 19,614 | 3.2 % | ||
CVS | 19,599 | 3.2 % | ||
Hobby Lobby | 18,200 | 2.9 % | ||
Dollar Tree | 18,170 | 2.9 % | ||
Lowe's | 17,884 | 2.9 % | ||
O'Reilly Auto Parts | 17,798 | 2.9 % | ||
Kroger | 17,102 | 2.8 % | ||
Gerber Collision | 15,039 | 2.4 % | ||
7-Eleven | 14,164 | 2.3 % | ||
Burlington | 14,019 | 2.3 % | ||
Sunbelt Rentals | 13,887 | 2.2 % | ||
Sherwin-Williams | 11,809 | 1.9 % | ||
Home Depot | 10,680 | 1.7 % | ||
Wawa | 9,916 | 1.6 % | ||
Other(2) | 284,335 | 45.7 % | ||
Total Portfolio | $620,721 | 100.0 % |
Annualized Base Rent is in thousands; any differences are the result of rounding.
(1) Refer to footnote 1 on page 6 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, 2024:
Sector | Annualized | Percent of Base Rent | ||
Grocery Stores | $57,424 | 9.2 % | ||
Home Improvement | 56,977 | 9.2 % | ||
Tire and Auto Service | 50,125 | 8.1 % | ||
Convenience Stores | 46,546 | 7.5 % | ||
Dollar Stores | 45,076 | 7.3 % | ||
Auto Parts | 39,893 | 6.4 % | ||
Off-Price Retail | 38,579 | 6.2 % | ||
General Merchandise | 33,904 | 5.5 % | ||
Farm and Rural Supply | 32,572 | 5.2 % | ||
Consumer Electronics | 24,581 | 4.0 % | ||
Pharmacy | 24,550 | 4.0 % | ||
Crafts and Novelties | 20,519 | 3.3 % | ||
Discount Stores | 15,808 | 2.5 % | ||
Warehouse Clubs | 15,742 | 2.5 % | ||
Health Services | 15,297 | 2.5 % | ||
Equipment Rental | 14,943 | 2.4 % | ||
Dealerships | 13,346 | 2.1 % | ||
Restaurants - Quick Service | 11,581 | 1.9 % | ||
Health and Fitness | 11,276 | 1.8 % | ||
Sporting Goods | 7,345 | 1.2 % | ||
Financial Services | 7,187 | 1.2 % | ||
Specialty Retail | 6,919 | 1.1 % | ||
Restaurants - Casual Dining | 5,704 | 0.9 % | ||
Theaters | 3,854 | 0.6 % | ||
Shoes | 3,803 | 0.6 % | ||
Pet Supplies | 3,783 | 0.6 % | ||
Home Furnishings | 3,672 | 0.6 % | ||
Beauty and Cosmetics | 3,493 | 0.6 % | ||
Entertainment Retail | 2,323 | 0.4 % | ||
Apparel | 2,016 | 0.3 % | ||
Miscellaneous | 1,259 | 0.2 % | ||
Office Supplies | 624 | 0.1 % | ||
Total Portfolio | $620,721 | 100.0 % |
Annualized Base Rent is in thousands; any differences are the result of rounding.
(1) Refer to footnote 1 on page 6 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, 2024:
State | Annualized | Percent of Annualized Base Rent | |||
Texas | $42,218 | 6.8 % | |||
Illinois | 34,178 | 5.5 % | |||
Michigan | 33,967 | 5.5 % | |||
North Carolina | 32,412 | 5.2 % | |||
Florida | 32,410 | 5.2 % | |||
Ohio | 32,390 | 5.2 % | |||
Pennsylvania | 28,539 | 4.6 % | |||
New York | 28,134 | 4.5 % | |||
California | 25,454 | 4.1 % | |||
Georgia | 24,876 | 4.0 % | |||
New Jersey | 23,877 | 3.8 % | |||
Wisconsin | 18,122 | 2.9 % | |||
Missouri | 17,365 | 2.8 % | |||
Mississippi | 15,626 | 2.5 % | |||
South Carolina | 15,597 | 2.5 % | |||
Virginia | 15,463 | 2.5 % | |||
Louisiana | 15,221 | 2.5 % | |||
Kansas | 13,694 | 2.2 % | |||
Minnesota | 13,620 | 2.2 % | |||
Connecticut | 13,211 | 2.1 % | |||
Tennessee | 12,098 | 1.9 % | |||
Massachusetts | 11,654 | 1.9 % | |||
Indiana | 11,543 | 1.9 % | |||
Alabama | 11,091 | 1.8 % | |||
Oklahoma | 9,452 | 1.5 % | |||
Other(2) | 88,509 | 14.4 % | |||
Total Portfolio | $620,721 | 100.0 % | |||
Annualized Base Rent is in thousands; any differences are the result of rounding.
(1) Refer to footnote 1 on page 6 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
In October 2024, the Company completed a follow-on public offering of approximately 5.1 million shares of common stock, including the full exercise of the underwriters' option to purchase additional shares, in connection with forward sale agreements. Upon settlement, the offering is anticipated to raise net proceeds of approximately $368.0 million after deducting fees and expenses and making certain other adjustments as provided in the equity distribution agreements. To date, the Company has not received any proceeds from the sale of shares of its common stock by the forward purchasers.
During the fourth quarter, the Company entered into forward sale agreements in connection with its ATM program to sell an aggregate of 0.7 million shares of common stock for net proceeds of $55.2 million. Additionally, the Company settled 3.7 million shares under existing forward sale agreements for net proceeds of $228.2 million.
The following table presents the Company's outstanding forward equity offerings as of December 31, 2024:
Forward Equity | Shares | Shares | Shares | Net Proceeds | Anticipated Net | |||||
Q2 2024 ATM Forward Offerings | 3,235,964 | 2,775,498 | 460,466 | $167,006,999 | $27,822,532 | |||||
Q3 2024 ATM Forward Offerings | 6,602,317 | - | 6,602,317 | - | $468,814,372 | |||||
Q4 2024 ATM Forward Offerings | 739,013 | - | 739,013 | - | $55,229,549 | |||||
October 2024 Forward Offering | 5,060,000 | - | 5,060,000 | - | $368,042,642 | |||||
Total Forward Equity Offerings | 15,637,294 | 2,775,498 | 12,861,796 | $167,006,999 | $919,909,095 |
Liquidity
As of December 31, 2024, the Company had total liquidity of over $2.0 billion, which includes approximately $1.1 billion of availability under its Credit Facility, $919.9 million of outstanding forward equity, and $6.4 million of cash on hand. The Company's $1.25 billion Credit Facility includes an accordion option that allows the Company to request additional lender commitments of up to a total of $2.0 billion.
Balance Sheet
As of December 31, 2024, the Company's net debt to recurring EBITDA was 4.9 times. The Company's proforma net debt to recurring EBITDA was 3.3 times when deducting the $919.9 million of anticipated net proceeds from the outstanding forward equity offerings from the Company's net debt of $2.8 billion as of December 31, 2024. The Company's fixed charge coverage ratio was 4.4 times at year end.
The Company's total debt to enterprise value was 26.6% as of December 31, 2024. 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 Operating Partnership (or "OP") common units into common stock of the Company.
For the three months and twelve months ended December 31, 2024, the Company's fully diluted weighted-average shares outstanding were 104.7 million and 101.9 million, respectively. The basic weighted-average shares outstanding for the three and twelve months ended December 31, 2024 were 103.3 million and 101.1 million, respectively.
For the three and twelve months ended December 31, 2024, the Company's fully diluted weighted-average shares and units outstanding were 105.0 million and 102.2 million, respectively. The basic weighted-average shares and units outstanding for the three and twelve months ended December 31, 2024 were 103.7 million and 101.4 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, 2024, 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 12, 2025 at 9:00 AM ET. To participate in the conference call, please dial (800) 836-8184 approximately ten minutes before the call begins.
Additionally, a webcast of the conference call will be available via 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, 2024, the Company owned and operated a portfolio of 2,370 properties, located in all 50 states and containing approximately 48.8 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,", "can", "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, including our updated 2025 guidance, 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.
The Company defines the "all-in rate" as the interest rate that reflects the straight-line amortization of the terminated swap agreements and original issuance discount, as applicable.
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, 2024 | December 31, 2023 | ||
Assets: | |||
Real Estate Investments: | |||
Land | $ 2,514,167 | $ 2,282,354 | |
Buildings | 5,412,564 | 4,861,692 | |
Accumulated depreciation | (564,429) | (433,958) | |
Property under development | 55,806 | 33,232 | |
Net real estate investments | 7,418,108 | 6,743,320 | |
Real estate held for sale, net | - | 3,642 | |
Cash and cash equivalents | 6,399 | 10,907 | |
Cash held in escrows | - | 3,617 | |
Accounts receivable - tenants, net | 106,416 | 82,954 | |
Lease Intangibles, net of accumulated amortization of $461,419 and | 864,937 | 854,088 | |
Other assets, net | 90,586 | 76,308 | |
Total Assets | $ 8,486,446 | $ 7,774,836 | |
Liabilities: | |||
Mortgage notes payable, net | 42,210 | 42,811 | |
Unsecured term loan, net | 347,452 | 346,798 | |
Senior unsecured notes, net | 2,237,759 | 1,794,312 | |
Unsecured revolving credit facility | 158,000 | 227,000 | |
Dividends and distributions payable | 27,842 | 25,534 | |
Accounts payable, accrued expenses, and other liabilities | 116,273 | 101,401 | |
Lease intangibles, net of accumulated amortization of $46,003 and $42,813 at December 31, 2024 and December 31, 2023, respectively | 46,249 | 36,827 | |
Total Liabilities | $ 2,975,785 | $ 2,574,683 | |
Equity: | |||
Preferred Stock, $.0001 par value per share, 4,000,000 shares authorized, | 175,000 | 175,000 | |
Common stock, $.0001 par value, 180,000,000 shares authorized, | 10 | 10 | |
Additional paid-in-capital | 5,765,582 | 5,354,120 | |
Dividends in excess of net income | (470,622) | (346,473) | |
Accumulated other comprehensive income (loss) | 40,076 | 16,554 | |
Total Equity - Agree Realty Corporation | $ 5,510,046 | $ 5,199,211 | |
Non-controlling interest | 615 | 942 | |
Total Equity | $ 5,510,661 | $ 5,200,153 | |
Total Liabilities and Equity | $ 8,486,446 | $ 7,774,836 | |
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, | ||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||
Revenues | |||||||||||
Rental Income | $ 160,683 | $ 144,144 | $ 616,822 | $ 537,403 | |||||||
Other | 51 | 21 | 273 | 92 | |||||||
Total Revenues | $ 160,734 | $ 144,165 | $ 617,095 | $ 537,495 | |||||||
Operating Expenses | |||||||||||
Real estate taxes | $ 13,525 | $ 10,663 | $ 46,882 | $ 40,092 | |||||||
Property operating expenses | 6,474 | 6,841 | 26,349 | 24,961 | |||||||
Land lease expense | 367 | 412 | 1,618 | 1,664 | |||||||
General and administrative | 8,897 | 8,701 | 37,233 | 34,788 | |||||||
Depreciation and amortization | 56,566 | 47,257 | 206,987 | 176,277 | |||||||
Provision for impairment | - | 2,665 | 7,224 | 7,175 | |||||||
Total Operating Expenses | $ 85,829 | $ 76,539 | $ 326,293 | $ 284,957 | |||||||
Gain (loss) on sale of assets, net | 406 | 1,550 | 11,508 | 1,849 | |||||||
Gain (loss) on involuntary conversion, net | 24 | - | (67) | - | |||||||
Income from Operations | $ 75,335 | $ 69,176 | $ 302,243 | $ 254,387 | |||||||
Other (Expense) Income | |||||||||||
Interest expense, net | $ (29,095) | $ (22,371) | $ (108,904) | $ (81,119) | |||||||
Income and other tax (expense) benefit | (1,075) | (709) | (4,306) | (2,910) | |||||||
Other (expense) income | 212 | 5 | 799 | 189 | |||||||
Net Income | $ 45,377 | $ 46,101 | $ 189,832 | $ 170,547 | |||||||
Less net income attributable to non-controlling interest | 138 | 146 | 635 | 588 | |||||||
Net Income Attributable to Agree Realty Corporation | $ 45,239 | $ 45,955 | $ 189,197 | $ 169,959 | |||||||
Less Series A Preferred Stock Dividends | 1,859 | 1,859 | 7,437 | 7,437 | |||||||
Net Income Attributable to Common Stockholders | $ 43,380 | $ 44,096 | $ 181,760 | $ 162,522 | |||||||
Net Income Per Share Attributable to Common Stockholders | |||||||||||
Basic | $ 0.42 | $ 0.44 | $ 1.79 | $ 1.70 | |||||||
Diluted | $ 0.41 | $ 0.44 | $ 1.78 | $ 1.70 | |||||||
Other Comprehensive Income | |||||||||||
Net Income | $ 45,377 | $ 46,101 | $ 189,832 | $ 170,547 | |||||||
Amortization of interest rate swaps | (738) | (630) | (2,781) | (2,519) | |||||||
Change in fair value and settlement of interest rate swaps | 22,428 | (16,165) | 26,383 | (4,501) | |||||||
Total Comprehensive Income (Loss) | 67,067 | 29,306 | 213,434 | 163,527 | |||||||
Less comprehensive income attributable to non-controlling interest | 211 | 88 | 715 | 565 | |||||||
Comprehensive Income Attributable to Agree Realty Corporation | $ 66,856 | $ 29,218 | $ 212,719 | $ 162,962 | |||||||
Weighted Average Number of Common Shares Outstanding - | 103,336,203 | 100,279,279 | 101,099,252 | 95,191,409 | |||||||
Weighted Average Number of Common Shares Outstanding - | 104,698,851 | 100,397,096 | 101,876,304 | 95,437,412 | |||||||
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, | ||||||
2024 | 2023 | 2024 | 2023 | ||||
Net Income | $ 45,377 | $ 46,101 | $ 189,832 | $ 170,547 | |||
Less Series A Preferred Stock Dividends | 1,859 | 1,859 | 7,437 | 7,437 | |||
Net Income attributable to OP Common Unitholders | $ 43,518 | $ 44,242 | $ 182,395 | $ 163,110 | |||
Depreciation of rental real estate assets | 38,397 | 31,119 | 137,835 | 115,617 | |||
Amortization of lease intangibles - in-place leases and leasing costs | 17,652 | 15,611 | 67,128 | 58,967 | |||
Provision for impairment | - | 2,665 | 7,224 | 7,175 | |||
(Gain) loss on sale or involuntary conversion of assets, net | (430) | (1,550) | (11,441) | (1,849) | |||
Funds from Operations - OP Common Unitholders | $ 99,137 | $ 92,087 | $ 383,141 | $ 343,020 | |||
Amortization of above (below) market lease intangibles, net and assumed mortgage debt discount, net | 8,434 | 7,564 | 33,571 | 33,430 | |||
Core Funds from Operations - OP Common Unitholders | $ 107,571 | $ 99,651 | $ 416,712 | $ 376,450 | |||
Straight-line accrued rent | (3,036) | (3,200) | (12,711) | (12,142) | |||
Stock based compensation expense | 2,812 | 2,158 | 10,805 | 8,338 | |||
Amortization of financing costs and original issue discounts | 1,629 | 1,186 | 5,988 | 4,403 | |||
Non-real estate depreciation | 517 | 527 | 2,024 | 1,693 | |||
Adjusted Funds from Operations - OP Common Unitholders | $ 109,493 | $ 100,322 | $ 422,818 | $ 378,742 | |||
Funds from Operations Per Common Share and OP Unit - Basic | $ 0.96 | $ 0.92 | $ 3.78 | $ 3.59 | |||
Funds from Operations Per Common Share and OP Unit - Diluted | $ 0.94 | $ 0.91 | $ 3.75 | $ 3.58 | |||
Core Funds from Operations Per Common Share and OP Unit - Basic | $ 1.04 | $ 0.99 | $ 4.11 | $ 3.94 | |||
Core Funds from Operations Per Common Share and OP Unit - Diluted | $ 1.02 | $ 0.99 | $ 4.08 | $ 3.93 | |||
Adjusted Funds from Operations Per Common Share and OP Unit - Basic | $ 1.06 | $ 1.00 | $ 4.17 | $ 3.96 | |||
Adjusted Funds from Operations Per Common Share and OP Unit - Diluted | $ 1.04 | $ 1.00 | $ 4.14 | $ 3.95 | |||
Weighted Average Number of Common Shares and OP Units Outstanding - Basic | 103,683,822 | 100,626,898 | 101,446,871 | 95,539,028 | |||
Weighted Average Number of Common Shares and OP Units Outstanding - Diluted | 105,046,470 | 100,744,715 | 102,223,923 | 95,785,031 | |||
Additional supplemental disclosure | |||||||
Scheduled principal repayments | $ 246 | $ 232 | $ 963 | $ 905 | |||
Capitalized interest | 473 | 288 | 1,599 | 1,957 | |||
Capitalized building improvements | 2,401 | 3,122 | 12,905 | 9,819 | |||
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 Non-GAAP Financial Measures | ||||||
($ in thousands, except share and per-share data) | ||||||
(Unaudited) | ||||||
Three months ended | ||||||
2024 | ||||||
Mortgage notes payable, net | $ 42,210 | |||||
Unsecured term loan, net | 347,452 | |||||
Senior unsecured notes, net | 2,237,759 | |||||
Unsecured revolving credit facility | 158,000 | |||||
Total Debt per the Consolidated Balance Sheet | $ 2,785,421 | |||||
Unamortized debt issuance costs and discounts, net | 26,483 | |||||
Total Debt | $ 2,811,904 | |||||
Cash and cash equivalents | (6,399) | |||||
Net Debt | $ 2,805,505 | |||||
Anticipated Net Proceeds from Forward Equity Offerings | (919,909) | |||||
Proforma Net Debt | $ 1,885,596 | |||||
Net Income | $ 45,377 | |||||
Interest expense, net | 29,095 | |||||
Income and other tax expense | 1,075 | |||||
Depreciation of rental real estate assets | 38,397 | |||||
Amortization of lease intangibles - in-place leases and leasing costs | 17,652 | |||||
Non-real estate depreciation | 517 | |||||
(Gain) loss on sale or involuntary conversion of assets, net | (430) | |||||
EBITDAre | $ 131,683 | |||||
Run-Rate Impact of Investment, Disposition and Leasing Activity | $ 4,055 | |||||
Amortization of above (below) market lease intangibles, net | 8,350 | |||||
Recurring EBITDA | $ 144,088 | |||||
Annualized Recurring EBITDA | $ 576,352 | |||||
Total Debt per the Consolidated Balance Sheet to Annualized Net Income | 15.5x | |||||
Net Debt to Recurring EBITDA | 4.9x | |||||
Proforma Net Debt to Recurring EBITDA | 3.3x | |||||
Non-GAAP Financial Measures
Total Debt and Net Debt
The Company defines Total Debt as debt per the consolidated balance sheet excluding unamortized debt issuance costs, original issue discounts and debt discounts. Net Debt is defined as Total Debt less cash, cash equivalents and cash held in escrows. The Company considers the non-GAAP measures of Total Debt and Net Debt to be key supplemental measures of the Company's overall liquidity, capital structure and leverage because they provide industry analysts, lenders and investors useful information in understanding our financial condition. The Company's calculation of Total Debt and Net Debt may not be comparable to Total Debt and Net Debt reported by other REITs that interpret the definitions 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 12,861,796 shares remaining to be settled under the ATM Forward Offerings. Upon settlement, the offerings are anticipated to raise net proceeds of approximately $919.9 million based on the applicable forward sale price as of December 31, 2024. The applicable forward sale price varies depending on the offering. The Company is contractually obligated to settle the offerings by certain dates between June 2025 and June 2026.
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.
Annualized Net Income
Represents net income for the three months ended December 31, 2024, on an annualized basis.
Agree Realty Corporation | ||||||||||
Rental Income | ||||||||||
($ in thousands, except share and per share-data) | ||||||||||
(Unaudited) | ||||||||||
Three months ended December 31, | Twelve months ended December 31, | |||||||||
2024 | 2023 | 2024 | 2023 | |||||||
Rental Income Source (1) | ||||||||||
Minimum rents(2) | $ 147,839 | $ 133,274 | $ 568,961 | $ 497,736 | ||||||
Percentage rents(2) | 35 | - | 1,752 | 1,314 | ||||||
Operating cost reimbursement(2) | 18,123 | 15,151 | 66,634 | 59,307 | ||||||
Straight-line rental adjustments(3) | 3,036 | 3,200 | 12,711 | 12,142 | ||||||
Amortization of (above) below market lease intangibles(4) | (8,350) | (7,481) | (33,236) | (33,096) | ||||||
Total Rental Income | $ 160,683 | $ 144,144 | $ 616,822 | $ 537,403 | ||||||
(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
