Agree Realty Corp 10-Q for FY2023 Q2

About this 10-Q

Headline figures

Agree Realty Corp (ADC)

10-Q 2023-08-01 For: 2023-06-30

Added on April 04, 2026

Agree Realty Corp filed this 10-Q on August 1, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Asset Derivatives

June 30, 2023

December 31, 2022

Derivatives designated as cash flow hedges:

Other Assets, net

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $129.9M; up 23.9% from $104.88M a year earlier
Net income: $40.87M; up 13.6% from net income of $35.97M a year earlier
Diluted EPS: $0.42; down 6.7% from $0.45 a year earlier

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Maryland		38-3148187
(State or other jurisdiction of incorporation or		(I.R.S. Employer Identification No.)
Organization)
32301 Woodward Avenue, Royal Oak, Michigan		48073
(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 June 30, 2023 and December 31, 2022	1

	Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2023 and 2022	3

	Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2023 and 2022	4

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 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	31

Item 3:	Quantitative and Qualitative Disclosures about Market Risk	43

Item 4:	Controls and Procedures	44

PART II	Other Information

Item 1:	Legal Proceedings	44

Item 1A:	Risk Factors	44

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 3:	Defaults Upon Senior Securities	45

Item 4:	Mine Safety Disclosures	45

Item 5:	Other Information	45

Item 6:	Exhibits	46

SIGNATURES		47


	June 30,		December 31,
	2023		2022
ASSETS
Real Estate Investments
Land	$	2,090,557	$	1,941,599
Buildings		4,476,493		4,054,679
Less accumulated depreciation		(374,917)		(321,142)
		6,192,133		5,675,136
Property under development		81,526		65,932
Net Real Estate Investments		6,273,659		5,741,068

Cash and Cash Equivalents		8,068		27,763

Cash Held in Escrows		4,179		1,146

Accounts Receivable - Tenants, net		70,929		65,841

Lease Intangibles, net of accumulated amortization of
$310,845 and $263,011 at June 30, 2023 and December 31, 2022, respectively		825,998		799,448

Other Assets, net		89,173		77,923

Total Assets	$	7,272,006	$	6,713,189


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Revenues
Rental income	$	129,876	$	104,793	$	256,485	$	203,105
Other		24		83		33		113
Total Revenues		129,900		104,876		256,518		203,218

Operating Expenses
Real estate taxes		9,874		7,979		19,305		15,591
Property operating expenses		5,821		4,541		12,602		9,018
Land lease expense		410		407		840		809
General and administrative		8,420		7,651		17,244		15,272
Depreciation and amortization		42,750		31,950		83,396		60,510
Provision for impairment		1,315		—		1,315		1,015
Total Operating Expenses		68,590		52,528		134,702		102,215

Gain (loss) on sale of assets, net		319		17		319		2,326
Gain (loss) on involuntary conversion, net		—		(25)		—		(50)
Income from Operations		61,629		52,340		122,135		103,279

Other (Expense) Income
Interest expense, net		(19,948)		(15,512)		(37,945)		(29,442)
Income tax (expense) benefit		(709)		(698)		(1,492)		(1,418)
Other (expense) income		43		—		91		—
Net Income		41,015		36,130		82,789		72,419

Less net income attributable to non-controlling interest		147		157		307		333
Net income attributable to Agree Realty Corporation		40,868		35,973		82,482		72,086
Less Series A preferred stock dividends		1,859		1,859		3,718		3,718
Net Income Attributable to Common Stockholders	$	39,009	$	34,114	$	78,764	$	68,368

Net Income Per Share Attributable to Common Stockholders
Basic	$	0.42	$	0.45	$	0.86	$	0.93
Diluted	$	0.42	$	0.45	$	0.86	$	0.93

Other Comprehensive Income
Net income	$	41,015	$	36,130	$	82,789	$	72,419
Amortization of interest rate swaps		(630)		82		(1,259)		164
Change in fair value and settlement of interest rate swaps		3,341		16,481		3,341		37,062
Total comprehensive income (loss)		43,726		52,693		84,871		109,645
Less comprehensive income (loss) attributable to non-controlling interest		157		233		315		509

Comprehensive Income (Loss) Attributable to Agree Realty Corporation	$	43,569	$	52,460	$	84,556	$	109,136

Weighted Average Number of Common Shares Outstanding - Basic		93,053,870		75,037,920		91,549,390		73,145,097

Weighted Average Number of Common Shares Outstanding - Diluted		93,134,385		75,570,089		91,862,290		73,474,930


											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
Issuance of common stock, net of issuance costs	—		—	3,070,997		1		205,104		—		—		—		205,105
Repurchase of common shares	—		—	(101)		—		(8)		—		—		—		(8)
Issuance of stock under the 2020 Omnibus Incentive Plan	—		—	373		—		—		—		—		—		—
Forfeiture of restricted stock	—		—	(12)		—		—		—		—		—		—
Stock-based compensation	—		—	—		—		2,177		—		—		—		2,177
Series A preferred dividends declared for the period	—		(1,859)	—		—		—		—		—		—		(1,859)
Dividends and distributions declared for the period	—		—	—		—		—		(68,688)		—		(252)		(68,940)
Amortization, changes in fair value, and settlement of interest rate swaps	—		—	—		—		—		—		2,701		10		2,711
Net income	—		1,859	—		—		—		39,009		—		147		41,015
Balance, June 30, 2023	7,000	$	175,000	96,269,336	$	10	$	5,060,200	$	(283,995)	$	25,625	$	1,205	$	4,978,045

Cash dividends declared per depositary share of Series A preferred stock:
For the three months ended March 31, 2023		$	0.266
For the three months ended June 30, 2023		$	0.266

Cash dividends declared per common share:
For the three months ended March 31, 2023					$	0.720
For the three months ended June 30, 2023					$	0.729


	2023
Year Ending December 31,	(remaining)		2024		2025		2026		2027		Thereafter		Total
Lease intangibles (in-place)	$	28,957	$	55,311	$	52,268	$	48,933	$	43,799	$	203,934	$	433,202
Lease intangibles (above-market)		19,329		36,050		33,716		31,987		29,588		242,126		392,796
Lease intangibles (below-market)		(2,868)		(5,237)		(4,801)		(4,448)		(4,034)		(16,884)		(38,272)
Total	$	45,418	$	86,124	$	81,183	$	76,472	$	69,353	$	429,176	$	787,726


	June 30, 2023		December 31, 2022
Cash and cash equivalents	$	8,068	$	27,763
Cash held in escrow		4,179		1,146
Total of cash and cash equivalents and cash held in escrow	$	12,247	$	28,909


	June 30, 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		3,077		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		49,949		50,395
Unamortized debt issuance costs and assumed debt discount, net		(2,248)		(2,424)
Total	$	47,701	$	47,971


	All-in
	Interest Rate ⁽¹⁾		Maturity	June 30, 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					(16,802)		(17,953)
Total				$	1,793,198	$	1,792,047


	Six Months Ended
	June 30, 2023		June 30, 2022
Cash Flows from Operating Activities
Net income	$	82,789	$	72,419
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		83,396		60,510
Amortization from above (below) market lease intangibles, net		17,322		16,489
Amortization from financing costs, credit facility costs and debt discount		2,225		1,884
Stock-based compensation		4,008		3,378
Straight-line accrued rent		(6,147)		(6,230)
Provision for impairment		1,315		1,015
(Gain) loss on sale of assets		(319)		(2,326)
(Increase) decrease in accounts receivable		945		(1,564)
(Increase) decrease in other assets		(10,366)		(951)
Increase (decrease) in accounts payable, accrued expenses, and other liabilities		8,560		5,465
Net Cash Provided by Operating Activities		183,728		150,089

Cash Flows from Investing Activities
Acquisition of real estate investments and other assets		(610,593)		(799,166)
Development of real estate investments and other assets, net of reimbursements
(including capitalized interest of $1,203 in 2023 and $262 in 2022)		(55,813)		(46,105)
Payment of leasing costs		(36)		(203)
Net proceeds from sale of assets		3,069		23,924
Net Cash Used in Investing Activities		(663,373)		(821,550)

Cash Flows from Financing Activities
Proceeds from common stock offerings, net		400,237		550,794
Repurchase of common shares		(2,615)		(1,821)
Unsecured revolving credit facility borrowings		636,000		680,000
Unsecured revolving credit facility repayments		(433,000)		(470,000)
Payments of mortgage notes payable		(445)		(418)
Payment of Series A preferred dividends		(3,718)		(3,718)
Payment of common stock dividends		(133,112)		(101,018)
Distributions to non-controlling interest		(266)		(478)
Payments for financing costs		(98)		(23)
Net Cash Provided by Financing Activities		462,983		653,318

Net Increase (Decrease) in Cash and Cash Equivalents and Cash Held in Escrow		(16,662)		(18,143)
Cash and cash equivalents and cash held in escrow, beginning of period		28,909		45,250


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Operating leases:
Operating cash outflows	$	299	$	301	$	598	$	598
Weighted-average remaining lease term - operating leases (years)		33.4		33.7		33.4		33.7

Finance leases:
Operating cash outflows	$	63	$	64	$	126	$	128
Financing cash outflows	$	21	$	20	$	42	$	40
Weighted-average remaining lease term - finance leases (years)		1.3		2.3		1.3		2.3


	2023
Year Ending December 31,	(remaining)		2024		2025		2026		2027		Thereafter		Total
Lease payments	$	598	$	1,197	$	1,197	$	1,195	$	1,042	$	28,809	$	34,038
Imputed interest		(353)		(690)		(669)		(647)		(627)		(13,864)		(16,850)
Total lease liabilities	$	245	$	507	$	528	$	548	$	415	$	14,945	$	17,188


	Scheduled		Balloon
	Principal		Payment		Total
Remainder of 2023	$	459	$	4,622	$	5,081
2024		963		—		963
2025		1,026		50,000		51,026
2026 ⁽¹⁾		629		303,000		303,629
2027		—		50,000		50,000
Thereafter		—		1,752,250		1,752,250
Total scheduled principal payments	$	3,077	$	2,159,872	$	2,162,949


	Number of Instruments ¹		Notional Amount¹
	June 30,	December 31,	June 30,		December 31,
Interest Rate Derivatives	2023	2022	2023		2022
Interest rate swap	3	—	$	350,000	$	—


	Total Fair Value		Level 2
June 30, 2023
Derivative assets - interest rate swaps	$	3,341	$	3,341
Derivative liabilities - interest rate swaps	$	—	$	—

December 31, 2022
Derivative assets - interest rate swaps	$	—	$	—
Derivative liabilities - interest rate swaps	$	—	$	—


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

Restricted stock granted	82	$	73.21
Restricted stock vested	(51)	$	63.74
Restricted stock forfeited	(14)	$	69.01

Unvested restricted stock at June 30, 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 June 30, 2023- three-year performance period completed	(21)	$	90.17

Performance units at June 30, 2023 - three-year performance period to be completed	111	$	72.14


	Three Months Ended				Variance
	June 30, 2023		June 30, 2022		(in dollars)		(percentage)
Rental Income	$	129,876	$	104,793	$	25,083	24	%
Real Estate Tax Expense	$	9,874	$	7,979	$	1,895	24	%
Property Operating Expense	$	5,821	$	4,541	$	1,280	28	%
Depreciation and Amortization Expense	$	42,750	$	31,950	$	10,800	34	%


	All-in			Principal Amount Outstanding
Senior Unsecured Revolving Credit Facility	Interest Rate		Maturity	June 30, 2023		December 31, 2022
Revolving Credit Facility ⁽¹⁾	5.94	%	January 2026	$	303,000	$	100,000
Total Credit Facility				$	303,000	$	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		3,077		3,523
Four Asset Mortgage Loan	3.63	%	December 2029		42,250		42,250
Total Mortgage Notes Payable				$	49,949	$	50,395

Total Principal Amount Outstanding				$	2,162,949	$	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
April 1, 2023 - April 30, 2023	—	$	—	—	—
May 1, 2023 - May 31, 2023	101		67.04	—	—
June 1, 2023 - June 30, 2023	—		—	—	—
Total	101	$	67.04	—	—





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 June 30, 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: August 1, 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 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		Michigan
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 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: August 1, 2023	/s/ Joel N. Agree

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