Agree Realty Corp 10-Q for FY2023 Q1

Agree Realty Corp (ADC)

10-Q 2023-05-04 For: 2023-03-31

Added on April 04, 2026

About this 10-Q

Agree Realty Corp filed this 10-Q on May 4, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).

Headline figures

Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $126.62M; up 28.8% from $98.34M a year earlier
Net income: $41.61M; up 15.2% from net income of $36.11M a year earlier
Diluted EPS: $0.44; down 8.3% from $0.48 a year earlier

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Maryland		38-3148187
(State or other jurisdiction of incorporation or		(I.R.S. Employer Identification No.)
Organization)
70 E. Long Lake Road, Bloomfield Hills, Michigan		48304
(Address of principal executive offices)		(Zip Code)


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.0001 par value	ADC	New York Stock Exchange
Depositary Shares, each representing one-thousandth of a share of 4.25% Series A Cumulative Redeemable Preferred Stock, $0.0001 par value	ADCPrA	New York Stock Exchange


Yes	☒	No	◻


Yes	☒	No	◻


Large Accelerated Filer	☒	Accelerated Filer	◻	Non-accelerated Filer	◻	Smaller reporting company	☐	Emerging growth company	☐


☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


		Page

PART I	Financial Information

Item 1:	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	1

	Condensed Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2023 and 2022	3

	Condensed Consolidated Statements of Equity for the three months ended March 31, 2023 and 2022	4

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3:	Quantitative and Qualitative Disclosures about Market Risk	41

Item 4:	Controls and Procedures	42

PART II	Other Information

Item 1:	Legal Proceedings	43

Item 1A:	Risk Factors	43

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	43

Item 3:	Defaults Upon Senior Securities	43

Item 4:	Mine Safety Disclosures	43

Item 5:	Other Information	43

Item 6:	Exhibits	44

SIGNATURES		45


	March 31,		December 31,
	2023		2022
ASSETS
Real Estate Investments
Land	$	2,005,606	$	1,941,599
Buildings		4,281,164		4,054,679
Less accumulated depreciation		(347,778)		(321,142)
		5,938,992		5,675,136
Property under development		73,123		65,932
Net Real Estate Investments		6,012,115		5,741,068

Cash and Cash Equivalents		11,809		27,763

Cash Held in Escrows		1,131		1,146

Accounts Receivable - Tenants, net		71,089		65,841

Lease Intangibles, net of accumulated amortization of
$286,748 and $263,011 at March 31, 2023 and December 31, 2022, respectively		803,654		799,448

Other Assets, net		86,629		77,923

Total Assets	$	6,986,427	$	6,713,189


	Three Months Ended
	March 31, 2023		March 31, 2022
Revenues
Rental income	$	126,609	$	98,312
Other		9		30
Total Revenues		126,618		98,342

Operating Expenses
Real estate taxes		9,432		7,611
Property operating expenses		6,782		4,477
Land lease expense		430		402
General and administrative		8,821		7,622
Depreciation and amortization		40,646		28,561
Provision for impairment		—		1,015
Total Operating Expenses		66,111		49,688

Gain (loss) on sale of assets, net		—		2,310
Gain (loss) on involuntary conversion, net		—		(25)
Income from Operations		60,507		50,939

Other (Expense) Income
Interest expense, net		(17,998)		(13,931)
Income tax (expense) benefit		(783)		(719)
Other (expense) income		48		—
Net Income		41,774		36,289

Less net income attributable to non-controlling interest		160		176
Net income attributable to Agree Realty Corporation		41,614		36,113
Less Series A preferred stock dividends		1,859		1,859
Net Income Attributable to Common Stockholders	$	39,755	$	34,254

Net Income Per Share Attributable to Common Stockholders
Basic	$	0.44	$	0.48
Diluted	$	0.44	$	0.48

Other Comprehensive Income
Net income	$	41,774	$	36,289
Amortization of interest rate swaps		(629)		82
Change in fair value and settlement of interest rate swaps		—		20,581
Total comprehensive income (loss)		41,145		56,952
Less comprehensive income (loss) attributable to non-controlling interest		158		276

Comprehensive Income (Loss) Attributable to Agree Realty Corporation	$	40,987	$	56,676

Weighted Average Number of Common Shares Outstanding - Basic		90,028,255		71,228,930

Weighted Average Number of Common Shares Outstanding - Diluted		90,548,172		71,336,103


											Accumulated
									Dividends in		Other
	Preferred Stock			Common Stock			Additional		excess of net		Comprehensive		Non-Controlling		Total
	Shares	Amount		Shares	Amount		Paid-In Capital		income		Income (Loss)		Interest		Equity
Balance, December 31, 2022	7,000	$	175,000	90,173,424	$	9	$	4,658,570	$	(228,132)	$	23,551	$	1,392	$	4,630,390
Issuance of common stock, net of issuance costs	—		—	2,945,000		—		195,133		—		—		—		195,133
Repurchase of common shares	—		—	(35,578)		—		(2,607)		—		—		—		(2,607)
Issuance of stock under the 2020 Omnibus Incentive Plan	—		—	128,993		—		—		—		—		—		—
Forfeiture of restricted stock	—		—	(13,760)		—		—		—		—		—		—
Stock-based compensation	—		—	—		—		1,831		—		—		—		1,831
Series A preferred dividends declared for the period	—		(1,859)	—		—		—		—		—		—		(1,859)
Dividends and distributions declared for the period	—		—	—		—		—		(65,939)		—		(250)		(66,189)
Amortization, changes in fair value, and settlement of interest rate swaps	—		—	—		—		—		—		(627)		(2)		(629)
Net income	—		1,859	—		—		—		39,755		—		160		41,774
Balance, March 31, 2023	7,000	$	175,000	93,198,079	$	9	$	4,852,927	$	(254,316)	$	22,924	$	1,300	$	4,797,844

Cash dividends declared per depositary share of Series A preferred stock:
For the three months ended March 31, 2023		$	0.266

Cash dividends declared per common share:
For the three months ended March 31, 2023					$	0.720


	2023
Year Ending December 31,	(remaining)		2024		2025		2026		2027		Thereafter		Total
Lease intangibles (in-place)	$	40,994	$	51,573	$	48,530	$	45,237	$	40,564	$	188,694	$	415,592
Lease intangibles (above-market)		28,946		35,073		32,739		31,010		28,632		231,662		388,062
Lease intangibles (below-market)		(4,220)		(5,065)		(4,630)		(4,276)		(3,867)		(14,268)		(36,326)
Total	$	65,720	$	81,581	$	76,639	$	71,971	$	65,329	$	406,088	$	767,328


	March 31, 2023		December 31, 2022
Cash and cash equivalents	$	11,809	$	27,763
Cash held in escrow		1,131		1,146
Total of cash and cash equivalents and cash held in escrow	$	12,940	$	28,909


	March 31, 2023		December 31, 2022
Note payable in monthly installments of interest only at 5.01% per annum, with a balloon payment due September 2023	$	4,622	$	4,622

Note payable in monthly installments of $92 including interest at 6.27% per annum, with a final monthly payment due July 2026		3,301		3,523

Note payable in monthly installments of interest only at 3.63% per annum, with a balloon payment due December 2029		42,250		42,250

Total principal		50,173		50,395
Unamortized debt issuance costs and assumed debt discount, net		(2,331)		(2,424)
Total	$	47,842	$	47,971


	All-in
	Interest Rate ⁽¹⁾		Maturity	March 31, 2023		December 31, 2022
2025 Senior Unsecured Notes	4.16	%	May 2025	$	50,000	$	50,000
2027 Senior Unsecured Notes	4.26	%	May 2027		50,000		50,000
2028 Senior Unsecured Public Notes ⁽²⁾	2.11	%	June 2028		350,000		350,000
2028 Senior Unsecured Notes	4.42	%	July 2028		60,000		60,000
2029 Senior Unsecured Notes	4.19	%	September 2029		100,000		100,000
2030 Senior Unsecured Notes	4.32	%	September 2030		125,000		125,000
2030 Senior Unsecured Public Notes ⁽³⁾	3.49	%	October 2030		350,000		350,000
2031 Senior Unsecured Notes ⁽⁴⁾	4.42	%	October 2031		125,000		125,000
2032 Senior Unsecured Public Notes ⁽⁵⁾	3.96	%	October 2032		300,000		300,000
2033 Senior Unsecured Public Notes ⁽⁶⁾	2.13	%	June 2033		300,000		300,000
Total Principal					1,810,000		1,810,000
Unamortized debt issuance costs and original issue discounts, net					(17,389)		(17,953)
Total				$	1,792,611	$	1,792,047


	Three Months Ended
	March 31, 2023		March 31, 2022
Cash Flows from Operating Activities
Net income	$	41,774	$	36,289
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		40,646		28,561
Amortization from above (below) market lease intangibles, net		8,611		8,178
Amortization from financing costs, credit facility costs and debt discount		1,113		1,061
Stock-based compensation		1,831		1,635
Straight-line accrued rent		(3,039)		(3,135)
Provision for impairment		—		1,015
(Gain) loss on sale of assets		—		(2,310)
(Increase) decrease in accounts receivable		(2,209)		(2,845)
(Increase) decrease in other assets		(10,024)		(4,708)
Increase (decrease) in accounts payable, accrued expenses, and other liabilities		15,468		(2,274)
Net Cash Provided by Operating Activities		94,171		61,467

Cash Flows from Investing Activities
Acquisition of real estate investments and other assets		(303,382)		(413,098)
Development of real estate investments and other assets, net of reimbursements
(including capitalized interest of $539 in 2023 and $112 in 2022)		(27,687)		(33,291)
Payment of leasing costs		(38)		(45)
Net proceeds from sale of assets		—		7,643
Net Cash Used in Investing Activities		(331,107)		(438,791)

Cash Flows from Financing Activities
Proceeds from common stock offerings, net		195,133		250,684
Repurchase of common shares		(2,607)		(1,745)
Unsecured revolving credit facility borrowings		385,000		330,000
Unsecured revolving credit facility repayments		(289,000)		(170,000)
Payments of mortgage notes payable		(221)		(209)
Payment of Series A preferred dividends		(1,859)		(1,859)
Payment of common stock dividends		(65,198)		(48,771)
Distributions to non-controlling interest		(266)		(237)
Payments for financing costs		(15)		(23)
Net Cash Provided by Financing Activities		220,967		357,840

Net Increase (Decrease) in Cash and Cash Equivalents and Cash Held in Escrow		(15,969)		(19,484)
Cash and cash equivalents and cash held in escrow, beginning of period		28,909		45,250


	Three Months Ended
	March 31, 2023		March 31, 2022
Operating leases:
Operating cash outflows	$	299	$	298
Weighted-average remaining lease term - operating leases (years)		33.4		33.7

Finance leases:
Operating cash outflows	$	63	$	64
Financing cash outflows	$	21	$	20
Weighted-average remaining lease term - finance leases (years)		1.5		2.5


	2023
Year Ending December 31,	(remaining)		2024		2025		2026		2027		Thereafter		Total
Lease payments	$	897	$	1,197	$	1,197	$	1,195	$	1,042	$	28,809	$	34,337
Imputed interest		(531)		(690)		(669)		(647)		(627)		(13,863)		(17,027)
Total lease liabilities	$	366	$	507	$	528	$	548	$	415	$	14,946	$	17,310


	Scheduled		Balloon
	Principal		Payment		Total
Remainder of 2023	$	683	$	4,622	$	5,305
2024		963		—		963
2025		1,026		50,000		51,026
2026 ⁽¹⁾		629		196,000		196,629
2027		—		50,000		50,000
Thereafter		—		1,752,250		1,752,250
Total scheduled principal payments	$	3,301	$	2,052,872	$	2,056,173


	Shares	Weighted Average
	Outstanding	Grant Date
	(in thousands)	Fair Value
Unvested restricted stock at December 31, 2022	183	$	65.46

Restricted stock granted	82	$	73.24
Restricted stock vested	(51)	$	63.72
Restricted stock forfeited	(14)	$	69.00

Unvested restricted stock at March 31, 2023	200	$	68.81


	2023		2022		2021
Expected term (years)	2.9		2.9		2.9
Volatility	23.6	%	33.5	%	33.9	%
Risk-free rate	4.4	%	1.8	%	0.2	%


	Target Number	Weighted Average
	of Awards	Grant Date
	(in thousands)	Fair Value
Performance units at December 31, 2022 - three-year performance period to be completed	85	$	72.27

Performance units granted	47	$	80.34
Performance units at March 31, 2023- three-year performance period completed	(21)	$	90.17

Performance units at March 31, 2023 - three-year performance period to be completed	111	$	72.14


	Three Months Ended				Variance
	March 31, 2023		March 31, 2022		(in dollars)		(percentage)
Rental Income	$	126,609	$	98,312	$	28,297	29	%
Real Estate Tax Expense	$	9,432	$	7,611	$	1,821	24	%
Property Operating Expense	$	6,782	$	4,477	$	2,305	51	%
Depreciation and Amortization Expense	$	40,646	$	28,561	$	12,085	42	%


	All-in			Principal Amount Outstanding
Senior Unsecured Revolving Credit Facility	Interest Rate		Maturity	March 31, 2023		December 31, 2022
Revolving Credit Facility ⁽¹⁾	5.75	%	January 2026	$	196,000	$	100,000
Total Credit Facility				$	196,000	$	100,000

Senior Unsecured Notes
2025 Senior Unsecured Notes	4.16	%	May 2025	$	50,000	$	50,000
2027 Senior Unsecured Notes	4.26	%	May 2027		50,000		50,000
2028 Senior Unsecured Public Notes ⁽²⁾⁽³⁾	2.11	%	June 2028		350,000		350,000
2028 Senior Unsecured Notes	4.42	%	July 2028		60,000		60,000
2029 Senior Unsecured Notes	4.19	%	September 2029		100,000		100,000
2030 Senior Unsecured Notes	4.32	%	September 2030		125,000		125,000
2030 Senior Unsecured Public Notes ⁽²⁾⁽⁴⁾	3.49	%	October 2030		350,000		350,000
2031 Senior Unsecured Notes ⁽⁵⁾	4.42	%	October 2031		125,000		125,000
2032 Senior Unsecured Public Notes ⁽²⁾⁽⁶⁾	3.96	%	October 2032		300,000		300,000
2033 Senior Unsecured Public Notes ⁽²⁾⁽⁷⁾	2.13	%	June 2033		300,000		300,000
Total Senior Unsecured Notes				$	1,810,000	$	1,810,000

Mortgage Notes Payable
Single Asset Mortgage Loan	5.01	%	September 2023		4,622		4,622
Portfolio Credit Tenant Lease	6.27	%	July 2026		3,301		3,523
Four Asset Mortgage Loan	3.63	%	December 2029		42,250		42,250
Total Mortgage Notes Payable				$	50,173	$	50,395

Total Principal Amount Outstanding				$	2,056,173	$	1,960,395


				Total Number of	Maximum Number
				Shares Purchased	of Shares that May
				as Part of Publicly	Yet Be Purchased
	Total Number of		Average Price Paid	Announced Plans	Under the Plans
Period	Shares Purchased		Per Share	or Programs	or Programs
January 1, 2023 - January 31, 2023	—	$	—	—	—
February 1, 2023 - February 28, 2023	35,477		73.27	—	—
March 1, 2023 - March 31, 2023	101		70.09	—	—
Total	35,578	$	73.26	—	—





3.1	Articles of Incorporation of the Company, including all amendments and articles supplementary thereto (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013).
3.2	Amendment to the Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 6, 2015).

3.3	Amendment to Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 3, 2016).

3.4	Articles Supplementary of the Company, dated February 26, 2019 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on February 28, 2019).

3.5	Articles of Amendment of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 25, 2019).

3.6	Amendment to Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 10, 2021).

3.7	Articles Supplementary of the Company, dated September 13, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on September 13, 2021).

3.8	Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on May 9, 2013).

3.9	First Amendment to Amended and Restated Bylaws of Agree Realty Corporation, effective February 26, 2019 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on February 28, 2019).

*22	Subsidiary Guarantors of Agree Realty Corporation

*31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Joel N. Agree, Chief Executive Officer

*31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Peter Coughenour, Chief Financial Officer

**32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Joel N. Agree, Chief Executive Officer

**32.2	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Peter Coughenour, Chief Financial Officer

*101	The following materials from Agree Realty Corporation’s Quarterly Report on Form 10-Q for the three months ended March 31, 2023 formatted in Inline iXBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income and Comprehensive Income, (iii) the Condensed Consolidated Statement of Stockholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) related notes to these consolidated financial statements.

*104	Cover Page Interactive Date File (formatted as Inline XBRL and contained in Exhibit 101)

Agree Realty Corporation

/s/ Joel N. Agree
Joel N. Agree
President and Chief Executive Officer

/s/ Peter Coughenour
Peter Coughenour
Chief Financial Officer and Secretary
(Principal Financial Officer)

Date: May 4, 2023

Guarantor	Jurisdiction of Organization
Agree 117 Mission, LLC	Michigan
Agree 2016, LLC		Delaware
Agree Central, LLC		Delaware
Agree Chapel Hill NC, LLC		Delaware
Agree Charleston WV, LLC		Delaware
Agree Columbia SC, LLC		Delaware
Agree Convenience No. 1, LLC		Delaware
Agree CW, LLC		Delaware
Agree Dallas Forest Drive, LLC		Texas
Agree DT Jacksonville NC, LLC		Delaware
Agree Farmington NM, LLC		Delaware
Agree Fort Walton Beach, LLC		Florida
Agree Grandview Heights OH, LLC		Delaware
Agree Greenwich CT, LLC		Delaware
Agree Lebanon NH, LLC		Delaware
Agree Madison AL, LLC		Delaware
Agree Marietta, LLC		Georgia
Agree M-59, LLC		Michigan
Agree MCW, LLC		Delaware
Agree Mena AR, LLC		Delaware
Agree NJ, LLC		Delaware
Agree Onaway MI, LLC		Delaware
Agree Orange CT, LLC		Delaware
Agree Oxford Commons AL, LLC		Delaware
Agree Paterson NJ, LLC		Delaware
Agree Portfolio, LLC		Delaware
Agree Roseville CA, LLC		California
Agree SB, LLC		Delaware
Agree Secaucus NJ, LLC		Delaware
Agree Shelf ES PA, LLC		Delaware
Agree Shelf PA, LLC		Delaware
Agree Southfield, LLC		Michigan
Agree Spring Grove, LLC		Illinois
Agree St Petersburg, LLC		Florida
Agree Stores, LLC		Delaware
Agree Tallahassee, LLC		Florida
Agree TK, LLC		Delaware
Agree Wawa Baltimore, LLC		Maryland
Agree Walker, LLC		Michigan
Agree Wilmington, LLC		North Carolina
DD Brownsville LLC		North Carolina
DD Hempstead LLC		North Carolina
Lunacorp, LLC		Delaware
Mt. Pleasant Shopping Center, L.L.C.		Michigan

Pachyderm Chattanooga TN, LLC	Delaware
Pachyderm Marietta GA, LLC		Delaware
Pachyderm Myrtle Beach SC, LLC		Delaware
Pachyderm Philadelphia PA, LLC		Delaware
Pachyderm Properties, LLC		Delaware
Pachyderm Riverdale GA, LLC		Delaware
Pachyderm Waite Park MN, LLC		Delaware
Paint PA, LLC		Delaware
Safari Properties II, LLC		Delaware


Date: May 4, 2023	/s/ Joel N. Agree

	Name:	Joel N. Agree
	Title:	President and Chief Executive Officer