Agree Realty Corporation Reports Third Quarter 2024 Results
Raises 2024 Acquisition Guidance to Approximately $850 MillionCapital Markets Activities Drive Record Liquidity of Over $1.9 Billion
ROYAL OAK, Mich., Oct. 22, 2024 /PRNewswire/ -- Agree Realty Corporation (NYSE:ADC) (the "Company") today announced results for the quarter ended September 30, 2024. All per share amounts included herein are on a diluted per common share basis unless otherwise stated.
Third Quarter 2024 Financial and Operating Highlights:
Invested approximately $237 million in 93 retail net lease properties
Commenced eight development or Developer Funding Platform ("DFP") projects for total committed capital of approximately $34 million
Net Income per share attributable to common stockholders increased 2.6% to $0.42
Core Funds from Operations ("Core FFO") per share increased 2.2% to $1.01
Adjusted Funds from Operations ("AFFO") per share increased 2.8% to $1.03
Declared an October monthly dividend of $0.253 per common share, a 2.4% year-over-year increase
Sold 6.6 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 $469 million
Settled 2.9 million shares of outstanding forward equity for net proceeds of approximately $176 million
Over $1.9 billion of total liquidity including availability on the revolving credit facility, outstanding forward equity, and cash on hand
Balance sheet well positioned at 3.6 times proforma net debt to recurring EBITDA; 4.9 times excluding unsettled forward equity
Financial Results
Net Income Attributable to Common Stockholders
Net Income for the three months ended September 30, 2024 increased 7.2% to $42.5 million, compared to Net Income of $39.7 million for the comparable period in 2023. Net Income per share for the three months ended September 30th increased 2.6% to $0.42, compared to Net Income per share of $0.41 for the comparable period in 2023.
Net Income for the nine months ended September 30, 2024 increased 16.8% to $138.4 million, compared to Net Income of $118.4 million for the comparable period in 2023. Net Income per share for the nine months ended September 30th increased 8.6% to $1.37, compared to Net Income per share of $1.26 for the comparable period in 2023.
Core FFO
Core FFO for the three months ended September 30, 2024 increased 6.8% to $102.9 million, compared to Core FFO of $96.4 million for the comparable period in 2023. Core FFO per share for the three months ended September 30th increased 2.2% to $1.01, compared to Core FFO per share of $0.99 for the comparable period in 2023.
Core FFO for the nine months ended September 30, 2024 increased 11.7% to $309.1 million, compared to Core FFO of $276.8 million for the comparable period in 2023. Core FFO per share for the nine months ended September 30th increased 3.8% to $3.05, compared to Core FFO per share of $2.94 for the comparable period in 2023.
AFFO
AFFO for the three months ended September 30, 2024 increased 7.4% to $104.8 million, compared to AFFO of $97.6 million for the comparable period in 2023. AFFO per share for the three months ended September 30th increased 2.8% to $1.03, compared to AFFO per share of $1.00 for the comparable period in 2023.
AFFO for the nine months ended September 30, 2024 increased 12.5% to $313.3 million, compared to AFFO of $278.4 million for the comparable period in 2023. AFFO per share for the nine months ended September 30th increased 4.6% to $3.10, compared to AFFO per share of $2.96 for the comparable period in 2023.
Dividend
In the third quarter, the Company declared monthly cash dividends of $0.250 per common share for each of July, August and September 2024. The monthly dividends declared during the third quarter reflect an annualized dividend amount of $3.00 per common share, representing a 2.9% increase over the annualized dividend amount of $2.916 per common share from the third 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 nine months ended September 30, 2024, the Company declared monthly cash dividends totaling $2.241 per common share, a 2.9% increase over the dividends of $2.178 per common share declared for the comparable period in 2023. The dividends represent payout ratios of approximately 73% of Core FFO per share and 72% of AFFO per share, respectively.
Subsequent to quarter end, the Company declared an increased monthly cash dividend of $0.253 per common share for October 2024. 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 fourth quarter of 2023. The October dividend is payable on November 14, 2024 to stockholders of record at the close of business on October 31, 2024.
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, 2024 to stockholders of record at the close of business on October 22, 2024.
Earnings Guidance
Prior 2024 Guidance(1)
Revised 2024 Guidance
AFFO per share(2)
$4.11 to $4.14
$4.12 to $4.14
General and administrative expenses (% of adjusted revenue)(3)
5.7% to 6.0%
5.7% to 5.9%
Non-reimbursable real estate expenses (% of adjusted revenue)(3)
1.0% to 1.5%
1.1% to 1.4%
Income and other tax expense
$4 to $5 million
$4 to $4.75 million
Acquisition volume
Approximately $700 million
Approximately $850 million
Disposition volume
$60 to $100 million
$70 to $100 million
The Company's 2024 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) As issued on July 23, 2024.(2) 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.(3) Adjusted revenue excludes the impact of the amortization of above and below market lease intangibles.
CEO Comments
"We are very pleased with our year-to-date performance as we have accelerated investment activity while strengthening our balance sheet through proactive capital markets transactions," said Joey Agree, President and Chief Executive Officer. "During the quarter, we raised nearly $470 million of forward equity, contributing to record liquidity of over $1.9 billion. Given the continued strong performance of our portfolio and accelerating investment activity across all three external growth platforms, we are increasing full-year 2024 acquisition guidance to approximately $850 million and raising the lower end of our 2024 AFFO per share guidance to a range of $4.12 to $4.14."
Portfolio Update
As of September 30, 2024, the Company's portfolio consisted of 2,271 properties located in 49 states and contained approximately 47.2 million square feet of gross leasable area. At quarter end, the portfolio was 99.6% leased, had a weighted-average remaining lease term of approximately 7.9 years, and generated 67.5% of annualized base rents from investment grade retail tenants.
Ground Lease Portfolio
As of September 30, 2024, the Company's ground lease portfolio consisted of 223 leases located in 35 states and totaled approximately 6.1 million square feet of gross leasable area. Properties ground leased to tenants represented 10.9% of annualized base rents.
At quarter end, the ground lease portfolio was fully occupied, had a weighted-average remaining lease term of approximately 9.8 years, and generated 87.3% of annualized base rents from investment grade retail tenants.
Acquisitions
Total acquisition volume for the third quarter was approximately $215.6 million and included 66 properties net leased to leading retailers operating in sectors including general merchandise, warehouse clubs, home improvement, auto parts, tire and auto service, and grocery stores. The properties are located in 24 states and leased to tenants operating in 17 sectors. The properties were acquired at a weighted-average capitalization rate of 7.5% and had a weighted-average remaining lease term of approximately 9.8 years. Approximately 60.3% of annualized base rents acquired were generated from investment grade retail tenants.
For the nine months ended September 30, 2024, total acquisition volume was approximately $524.9 million. The 144 acquired properties are located in 37 states and leased to tenants who operate in 26 retail sectors. The properties were acquired at a weighted-average capitalization rate of 7.6% and had a weighted-average remaining lease term of approximately 9.2 years. Approximately 60.8% of annualized base rents were generated from investment grade retail tenants.
The Company's outlook for acquisition volume for the full year 2024 is being increased to approximately $850 million of high-quality retail net lease properties, from approximately $700 million previously.
Dispositions
During the third quarter, the Company sold two properties for gross proceeds of approximately $7.2 million. The dispositions were completed at a weighted-average capitalization rate of 5.8%.
During the nine months ended September 30, 2024, the Company sold 18 properties for gross proceeds of approximately $66.4 million. The dispositions were completed at a weighted-average capitalization rate of 6.3%.
The Company is increasing the lower end of its full-year 2024 disposition guidance range from $60 million to $70 million, while maintaining the upper end of the range at $100 million.
Development and Developer Funding Platform
During the third quarter, the Company commenced eight development or DFP projects, with total anticipated costs of approximately $33.7 million. Construction continued during the quarter on 13 projects with anticipated costs totaling approximately $58.9 million. The Company completed six projects during the quarter with total costs of approximately $19.0 million.
For the nine months ended September 30, 2024, the Company had 33 development or DFP projects completed or under construction with anticipated total costs of approximately $134.8 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 September 30, 2024:
Three Months Ended
September 30, 2024
Nine Months Ended
September 30, 2024
Number of Projects
27
33
Costs Funded During Q3 2024
$21,231
$21,231
Costs Funded Prior to Q3 2024
43,264
66,462
Remaining Funding Costs
47,131
47,131
Anticipated Total Project Costs
$111,626
$134,824
Development and DFP project costs are in thousands. Any differences are the result of rounding. Costs Funded During Q3 2024 exclude any costs associated with projects that were completed in prior quarters. Remaining Funding Costs exclude any costs associated with projects that were completed in Q3 2024. Costs Funded Prior to Q3 2024 may include adjustments related to completed projects to arrive at the correct Anticipated Total Project Costs.
Leasing Activity and Expirations
During the third quarter, the Company executed new leases, extensions or options on approximately 785,000 square feet of gross leasable area throughout the existing portfolio. Notable new leases, extensions or options included a 211,000-square foot Walmart in Chillicothe, Ohio, and a 70,000-square foot Marshalls & HomeGoods in Secaucus, New Jersey.
For the nine months ended September 30, 2024, the Company executed new leases, extensions or options on approximately 1.5 million square feet of gross leasable area throughout the existing portfolio.
As of September 30, 2024, the Company's 2024 lease maturities represented less than 0.1% of annualized base rents. The following table presents contractual lease expirations within the Company's portfolio as of September 30, 2024, assuming no tenants exercise renewal options:
Year
Leases
Annualized
Base Rent (1)
Percent of
Annualized
Base Rent
Gross
Leasable Area
Percent of Gross
Leasable Area
2024
3
$271
0.0 %
24
0.1 %
2025
51
10,019
1.7 %
977
2.1 %
2026
124
27,924
4.7 %
2,819
6.0 %
2027
164
36,927
6.2 %
3,460
7.4 %
2028
176
46,297
7.8 %
4,135
8.8 %
2029
201
64,092
10.8 %
6,214
13.2 %
2030
287
60,707
10.2 %
4,879
10.4 %
2031
190
44,758
7.5 %
3,286
7.0 %
2032
243
50,240
8.4 %
3,676
7.8 %
2033
208
47,274
7.9 %
3,734
7.9 %
Thereafter
803
207,559
34.8 %
13,818
29.3 %
Total Portfolio
2,450
$596,068
100.0 %
47,022
100.0 %
The contractual lease expirations presented above exclude the effect of replacement tenant leases that had been executed as of September 30, 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 September 30, 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 September 30, 2024:
Tenant
Annualized Base Rent(1)
Percent of
Annualized Base Rent
Walmart
$37,707
6.3 %
Tractor Supply
28,191
4.7 %
Dollar General
27,591
4.6 %
Best Buy
20,382
3.4 %
TJX Companies
19,067
3.2 %
CVS
18,836
3.2 %
Dollar Tree
18,236
3.1 %
Lowe's
17,877
3.0 %
Kroger
17,102
2.9 %
O'Reilly Auto Parts
16,962
2.8 %
Hobby Lobby
16,434
2.8 %
Gerber Collision
14,179
2.4 %
7-Eleven
13,831
2.3 %
Burlington
13,361
2.2 %
Sunbelt Rentals
13,134
2.2 %
Sherwin-Williams
11,612
1.9 %
Wawa
9,916
1.7 %
Home Depot
9,591
1.6 %
Other(2)
272,059
45.7 %
Total Portfolio
$596,068
100.0 %
Annualized Base Rent is in thousands; any differences are the result of rounding.(1) Refer to footnote 1 on page 5 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 September 30, 2024:
Sector
Annualized Base Rent(1)
Percent of Annualized
Base Rent
Grocery Stores
$56,066
9.4 %
Home Improvement
55,305
9.3 %
Tire and Auto Service
49,162
8.3 %
Convenience Stores
46,077
7.7 %
Dollar Stores
44,618
7.5 %
Off-Price Retail
36,596
6.1 %
Auto Parts
33,966
5.7 %
General Merchandise
33,151
5.6 %
Farm and Rural Supply
29,963
5.0 %
Pharmacy
23,787
4.0 %
Consumer Electronics
23,606
4.0 %
Crafts and Novelties
18,752
3.1 %
Warehouse Clubs
15,617
2.6 %
Discount Stores
14,595
2.4 %
Health Services
14,249
2.4 %
Equipment Rental
14,190
2.4 %
Dealerships
12,429
2.1 %
Health and Fitness
10,882
1.8 %
Restaurants - Quick Service
10,800
1.8 %
Sporting Goods
8,162
1.4 %
Specialty Retail
7,172
1.2 %
Financial Services
6,718
1.1 %
Restaurants - Casual Dining
5,830
1.0 %
Theaters
3,854
0.7 %
Pet Supplies
3,714
0.6 %
Home Furnishings
