8-K
AGREE REALTY CORP (ADC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date
of earliest event reported): November 1, 2022
AGREE REALTY CORPORATION
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of incorporation)
| 1-12928<br><br> <br>(Commission file number) | 38-3148187<br><br> <br>(I.R.S. Employer Identification No.) |
|---|---|
| 70 E. Long Lake Road<br><br> <br>Bloomfield Hills, MI<br><br> <br>(Address of principal<br> executive offices) | 48304<br><br> <br>(Zip code) |
(Registrant’s telephone number, including area code)
(248) 737-4190
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425<br>under the Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12<br>under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to<br>Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to<br>Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| 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 |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02. | Results of Operations and Financial Condition. |
|---|
On November 1, 2022, Agree Realty Corporation (the “Company”) issued a press release describing its results of operations for the third quarter ended September 30, 2022, and posted an updated investor presentation to its website. The press release is furnished as Exhibit 99.1 to this report. The investor presentation is furnished as Exhibit 99.2 to this report.
The information in this Form 8-K is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of such section, nor shall such information be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
| Item 9.01. | Financial Statements and Exhibits. |
|---|---|
| (d) | Exhibits |
| --- | --- |
| Exhibit | Description |
| --- | --- |
| 99.1 | Press release, dated November 1, 2022, reporting the Company’s results of operations for the third quarter ended September 30, 2022. |
| 99.2 | November 2022 Investor Presentation. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| AGREE REALTY CORPORATION | |
|---|---|
| By: | /s/ Peter Coughenour |
| Name: Peter Coughenour | |
| Title: Chief Financial Officer and Secretary |
Date: November 1, 2022
Exhibit 99.1
| 70 E. Long Lake Rd.<br><br> Bloomfield Hills, MI 48304<br><br> www.agreerealty.com<br><br> <br><br> <br><br> FOR IMMEDIATE RELEASE |
|---|
Agree Realty Corporation Reports Third Quarter2022 Results
Increases Lower End of 2022 Acquisition Guidanceto $1.6 Billion;Fortifies Balance Sheet with Over $800 Million of Capital Raised
Bloomfield Hills, MI, November 1, 2022 --Agree Realty Corporation (NYSE: ADC) (the “Company”) today announced results for the quarter ended September 30, 2022. All per share amounts included herein are on a diluted per common share basis unless otherwise stated.
Third Quarter 2022 Financial and OperatingHighlights:
| § | Invested<br> approximately $372 million in 121 retail net lease properties |
|---|---|
| § | Net<br> Income per share attributable to common stockholders decreased 11.1% to $0.46 |
| § | Core<br> Funds from Operations (“Core FFO”) per share increased 5.6% to $0.97 |
| § | Adjusted<br> Funds from Operations (“AFFO”) per share increased 7.8% to $0.96 |
| § | Declared<br> an October monthly dividend of $0.240 per common share, a 5.7% year-over-year increase |
| § | Completed<br> a public bond offering of $300 million of 4.80% senior unsecured notes due 2032 with an effective<br> all-in rate of 3.76% inclusive of prior hedging activity |
| § | Sold<br> 1,688,390 shares of common stock via the forward component of the Company’s at-the-market<br> equity (“ATM”) program for anticipated net proceeds of approximately $127 million |
| § | Commenced<br> a forward equity offering of 5,750,000 shares of common stock, including the underwriters’<br> option to purchase additional shares, raising anticipated net proceeds of approximately $382<br> million |
| § | Settled<br> 8,739,752 shares of outstanding forward equity for net proceeds of approximately $601 million |
| § | Balance<br> sheet positioned for growth at 3.1 times proforma net debt to recurring EBITDA; 4.0 times<br> excluding unsettled forward equity |
Financial Results
Net Income Attributable to Common Stockholders
Net Income for the three months ended September 30, 2022 increased 3.3% to $37.6 million, compared to $36.4 million for the comparable period in 2021. Net Income per share for the three months ended September 30, 2022 decreased 11.1% to $0.46, compared to $0.52 per share for the comparable period in 2021.
Net Income for the nine months ended September 30, 2022 increased 19.3% to $105.9 million, compared to $88.8 million for the comparable period in 2021. Net Income per share for the nine months ended September 30, 2022 increased 3.9% to $1.39, compared to $1.34 per share for the comparable period in 2021.
Core FFO
Core FFO for the three months ended September 30, 2022 increased 22.2% to $78.2 million, compared to Core FFO of $64.0 million for the comparable period in 2021. Core FFO per share for the three months ended September 30, 2022 increased 5.6% to $0.97, compared to Core FFO per share of $0.92 for the comparable period in 2021.
Core FFO for the nine months ended September 30, 2022 increased 26.4% to $222.4 million, compared to Core FFO of $175.9 million for the comparable period in 2021. Core FFO per share for the nine months ended September 30, 2022 increased 9.9% to $2.92, compared to Core FFO per share of $2.65 for the comparable period in 2021.
1
AFFO
AFFO for the three months ended September 30, 2022 increased 24.8% to $77.6 million, compared to AFFO of $62.1 million for the comparable period in 2021. AFFO per share for the three months ended September 30, 2022 increased 7.8% to $0.96, compared to AFFO per share of $0.89 for the comparable period in 2021.
AFFO for the nine months ended September 30, 2022 increased 28.0% to $220.5 million, compared to AFFO of $172.3 million for the comparable period in 2021. AFFO per share for the nine months ended September 30, 2022 increased 11.3% to $2.89, compared to AFFO per share of $2.60 for the comparable period in 2021.
Dividend
In the third quarter, the Company declared monthly cash dividends of $0.234 per common share for each of July, August and September 2022. The monthly dividends reflected an annualized dividend amount of $2.808 per common share, representing a 7.8% increase over the annualized dividend amount of $2.604 per common share from the third quarter of 2021. The dividends represent payout ratios of approximately 73% of both Core FFO per share and AFFO per share.
For the nine months ended September 30, 2022, the Company declared monthly cash dividends totaling $2.085 per common share, an 8.4% increase over the dividends of $1.923 per common share declared for the comparable period in 2021. The dividends represent payout ratios of approximately 71% of Core FFO per share and 72% of AFFO per share.
Subsequent to quarter end, the Company declared an increased monthly cash dividend of $0.240 per common share for October 2022. The monthly dividend reflects an annualized dividend amount of $2.880 per common share, representing a 5.7% increase over the annualized dividend amount of $2.724 per common share from the fourth quarter of 2021. The dividend is payable November 14, 2022 to stockholders of record at the close of business on October 31, 2022.
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 November 1, 2022 to stockholders of record at the close of business on October 24, 2022.
CEO Comments
“Our record year-to-date investment volume was underpinned by several strategic capital markets transactions during the quarter, bolstering our fortress balance sheet and providing us with significant liquidity in a dynamic macro environment," said Joey Agree, President and Chief Executive Officer. “Our industry-leading portfolio and balance sheet are well positioned to not only withstand the current environment, but to capitalize on opportunities across all three of our origination platforms.”
PortfolioUpdate
As of September 30, 2022, the Company’s portfolio consisted of 1,707 properties located in 48 states and contained approximately 35.8 million square feet of gross leasable area.
At quarter-end, the portfolio was 99.7% leased and had a weighted-average remaining lease term of approximately 8.9 years. Investment grade retailers represented 67.5% of annualized base rents.
2
Ground Lease Portfolio
During the quarter, the Company acquired eight ground leases for an aggregate purchase price of approximately $27.6 million, representing 7.5% of annualized base rents acquired.
As of September 30, 2022, the Company’s ground lease portfolio consisted of 201 leases located in 32 states and totaled approximately 5.3 million square feet of gross leasable area. Properties ground leased to tenants represented approximately 12.7% of annualized base rents.
At quarter end, the ground lease portfolio was fully occupied and had a weighted-average remaining lease term of approximately 11.4 years. Investment grade retailers represented 88.4% of annualized base rents.
Acquisitions
Acquisition volume for the third quarter totaled $360.2 million and included 98 properties net leased to leading retailers operating in sectors including dollar stores, auto parts, farm and rural supply, grocery store, home improvement, and consumer electronics. The acquired properties are located in 29 states and leased to tenants operating in 21 sectors.
The properties were acquired at a weighted-average capitalization rate of 6.2% and had a weighted-average remaining lease term of 11.1 years. Approximately 72.7% of annualized base rents acquired were generated from investment grade retail tenants.
For the nine months ended September 30, 2022, total acquisition volume was $1.19 billion. The 303 acquired properties are located in 42 states and leased to tenants who operate in 27 retail sectors. The properties were acquired at a weighted-average capitalization rate of 6.1% and had a weighted-average remaining lease term of approximately 10.1 years. Approximately 68.1% of annualized base rents were generated from investment grade retail tenants.
The Company is increasing the lower end of its outlook for acquisition volume for the full-year 2022 to $1.6 billion and is maintaining the upper end of the range at $1.7 billion of high-quality retail net lease properties. This compares with a previous range of $1.5 billion to $1.7 billion.
Dispositions
During the three months ended September 30, 2022, the Company sold one property for gross proceeds of approximately $20.0 million. The disposition was completed at a capitalization rate of 7.2%. During the nine months ended September 30, 2022, the Company sold six properties for total gross proceeds of $44.8 million. The weighted-average capitalization rate of the dispositions was 6.5%.
The Company is increasing the lower end of its total disposition guidance range for 2022 from $25 million to $45 million and is maintaining the upper end of the range at $75 million.
3
Development and PCS
During the quarter, the Company commenced two development and PCS projects, with total anticipated costs of approximately $7.7 million. The projects include a Gerber Collision in Murrieta, California and a Sunbelt Rentals in Wentzville, Missouri.
The Company completed two Gerber Collision development projects, as well as the Burlington in Turnersville, New Jersey. The Company continued construction on the two Sunbelt Rentals projects; one Old Navy; and 15 geographically diverse Gerber Collision projects.
For the nine months ended September 30, 2022, the Company had a record 25 development or PCS projects completed or under construction. Anticipated total costs are approximately $81.5 million, including $51.0 million of costs incurred to date. For the full-year 2022, the Company anticipates commencing between $85 million and $125 million of development and PCS projects, compared to the previous range of $75 million to $125 million.
The following table presents the Company’s 25 development or PCS projects as of September 30, 2022:
| Tenant | Location | Lease Structure | Lease Term | Actual or Anticipated Rent Commencement | Status |
|---|---|---|---|---|---|
| 7-Eleven | Saginaw, MI | Build-to-Suit | 15 years | Q1 2022 | Complete |
| Gerber Collision | Pooler, GA | Build-to-Suit | 15 years | Q2 2022 | Complete |
| Burlington | Turnersville, NJ | Build-to-Suit | 10 years | Q3 2022 | Complete |
| Gerber Collision | Janesville, WI | Build-to-Suit | 15 years | Q3 2022 | Complete |
| Gerber Collision | New Port Richey, FL | Build-to-Suit | 15 years | Q3 2022 | Complete |
| Gerber Collision | Lake Park, FL | Build-to-Suit | 15 years | Q4 2022 | Under Construction |
| Gerber Collision | Ocala, FL | Build-to-Suit | 15 years | Q4 2022 | Under Construction |
| Gerber Collision | Venice, FL | Build-to-Suit | 15 years | Q4 2022 | Under Construction |
| Sunbelt Rentals | Roxana, IL | Build-to-Suit | 10 years | Q4 2022 | Under Construction |
| Gerber Collision | Fort Wayne, IN | Build-to-Suit | 15 years | Q1 2023 | Under Construction |
| Gerber Collision | Johnson City, NY | Build-to-Suit | 15 years | Q1 2023 | Under Construction |
| Gerber Collision | Joplin, MO | Build-to-Suit | 15 years | Q1 2023 | Under Construction |
| Gerber Collision | Kimberly, WI | Build-to-Suit | 15 years | Q1 2023 | Under Construction |
| Gerber Collision | Lake Charles, LA | Build-to-Suit | 15 years | Q1 2023 | Under Construction |
| Gerber Collision | McDonough, GA | Build-to-Suit | 15 years | Q1 2023 | Under Construction |
| Gerber Collision | Murrieta, CA | Build-to-Suit | 15 years | Q1 2023 | Under Construction |
| Gerber Collision | Springfield, MO | Build-to-Suit | 15 years | Q1 2023 | Under Construction |
| Gerber Collision | Toledo, OH | Build-to-Suit | 15 years | Q1 2023 | Under Construction |
| Gerber Collision | Winterville, NC | Build-to-Suit | 15 years | Q1 2023 | Under Construction |
| Gerber Collision | Woodstock, IL | Build-to-Suit | 15 years | Q1 2023 | Under Construction |
| Gerber Collision | Yorkville, IL | Build-to-Suit | 15 years | Q1 2023 | Under Construction |
| Old Navy | Searcy, AR | Build-to-Suit | 7 years | Q1 2023 | Under Construction |
| Sunbelt Rentals | St. Louis, MO | Build-to-Suit | 7 years | Q1 2023 | Under Construction |
| Gerber Collision | Huntley, IL | Build-to-Suit | 15 years | Q2 2023 | Under Construction |
| Sunbelt Rentals | Wentzville, MO | Build-to-Suit | 12 years | Q2 2023 | Under Construction |
4
Leasing Activity and Expirations
During the third quarter, the Company executed new leases, extensions or options on approximately 192,000 square feet of gross leasable area throughout the existing portfolio.
For the nine months ended September 30, 2022, the Company executed new leases, extensions or options on approximately 652,000 square feet of gross leasable area throughout the existing portfolio.
As of September 30, 2022, the Company’s 2022 lease maturities represented 0.2% of annualized base rents. The following table presents contractual lease expirations, assuming no tenants exercise their renewal options, within the Company’s portfolio as of September 30, 2022:
| Year | Leases | Annualized Base Rent^(1)^ | % of ABR | Gross Leasable <br> Area (“GLA”) | % of GLA | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 6 | 874 | 0.2 | % | 56 | 0.2 | % | |||||
| 2023 | 38 | 6,774 | 1.5 | % | 810 | 2.3 | % | |||||
| 2024 | 45 | 13,651 | 3.1 | % | 1,586 | 4.4 | % | |||||
| 2025 | 69 | 16,617 | 3.7 | % | 1,618 | 4.5 | % | |||||
| 2026 | 113 | 25,854 | 5.8 | % | 2,679 | 7.5 | % | |||||
| 2027 | 125 | 28,662 | 6.5 | % | 2,811 | 7.8 | % | |||||
| 2028 | 133 | 33,889 | 7.6 | % | 2,991 | 8.3 | % | |||||
| 2029 | 154 | 42,926 | 9.7 | % | 4,230 | 11.8 | % | |||||
| 2030 | 247 | 51,222 | 11.5 | % | 3,893 | 10.9 | % | |||||
| 2031 | 160 | 38,073 | 8.6 | % | 2,785 | 7.8 | % | |||||
| Thereafter | 762 | 185,310 | 41.8 | % | 12,289 | 34.5 | % | |||||
| Total Portfolio | 1,852 | $ | 443,852 | 100.0 | % | 35,748 | 100.0 | % |
The contractual lease expirationspresented above exclude the effect of replacement tenant leases that had been executed as of September 30, 2022 but that had not yetcommenced. Annualized Base Rent and gross leasable area (square feet) are in thousands; any differences are the result of rounding.
| (1) | Annualized Base Rent (“ABR”) represents the annualized amount of contractual minimum rent required by tenant lease agreements as of September 30, 2022, 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. |
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5
Top Tenants
The Company added Gerber Collision to its top tenants during the third quarter of 2022. 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, 2022:
| Tenant | Annualized Base Rent^(1)^ | % of ABR | |||
|---|---|---|---|---|---|
| Walmart | $ | 30,801 | 6.9 | % | |
| Tractor Supply^(2)^ | 20,044 | 4.5 | % | ||
| Dollar General | 19,320 | 4.4 | % | ||
| Best Buy | 18,377 | 4.1 | % | ||
| TJX Companies | 13,251 | 3.0 | % | ||
| O'Reilly Auto Parts | 13,133 | 3.0 | % | ||
| Kroger | 12,825 | 2.9 | % | ||
| CVS | 11,928 | 2.7 | % | ||
| Hobby Lobby | 11,904 | 2.7 | % | ||
| Lowe's | 11,634 | 2.6 | % | ||
| Dollar Tree | 11,613 | 2.6 | % | ||
| Burlington | 11,160 | 2.5 | % | ||
| Sherwin-Williams | 10,849 | 2.4 | % | ||
| Wawa | 9,667 | 2.2 | % | ||
| Sunbelt Rentals | 9,620 | 2.2 | % | ||
| Home Depot | 8,880 | 2.0 | % | ||
| TBC Corporation | 8,412 | 1.9 | % | ||
| Goodyear | 7,577 | 1.7 | % | ||
| AutoZone | 7,269 | 1.6 | % | ||
| Gerber Collision | 6,721 | 1.5 | % | ||
| Other^(3)^ | 188,867 | 42.6 | % | ||
| Total Portfolio | $ | 443,852 | 100.0 | % |
Annualized Base Rent is in thousands;any differences are the result of rounding.
Bolded and italicized tenants representadditions for the three months ended September 30, 2022.
| (1) | Refer to footnote 1 on page 5 for the Company’s definition of Annualized Base Rent. |
|---|---|
| (2) | Reflects Tractor Supply’s previously announced acquisition of Orscheln Farm and Home, which received approval from the Federal Trade Commission on October 11, 2022. |
| (3) | Includes tenants generating less than 1.5% of Annualized Base Rent. |
6
Retail Sectors
The following table presents annualized base rents for all of the Company’s retail sectors as of September 30, 2022:
| Sector | Annualized Base Rent^(1)^ | % of ABR | |||
|---|---|---|---|---|---|
| Grocery Stores | $ | 41,557 | 9.4 | % | |
| Home Improvement | 40,615 | 9.2 | % | ||
| Tire and Auto Service | 40,289 | 9.1 | % | ||
| Convenience Stores | 33,075 | 7.5 | % | ||
| Dollar Stores | 29,468 | 6.6 | % | ||
| General Merchandise | 29,352 | 6.6 | % | ||
| Off-Price Retail | 26,814 | 6.0 | % | ||
| Auto Parts | 25,805 | 5.8 | % | ||
| Farm and Rural Supply | 21,307 | 4.8 | % | ||
| Consumer Electronics | 20,179 | 4.5 | % | ||
| Pharmacy | 18,634 | 4.2 | % | ||
| Crafts and Novelties | 14,141 | 3.2 | % | ||
| Equipment Rental | 9,946 | 2.2 | % | ||
| Discount Stores | 9,536 | 2.1 | % | ||
| Warehouse Clubs | 9,411 | 2.1 | % | ||
| Health Services | 8,981 | 2.0 | % | ||
| Health and Fitness | 8,075 | 1.8 | % | ||
| Restaurants - Quick Service | 7,931 | 1.8 | % | ||
| Dealerships | 6,506 | 1.5 | % | ||
| Specialty Retail | 6,367 | 1.4 | % | ||
| Restaurants - Casual Dining | 4,944 | 1.1 | % | ||
| Home Furnishings | 4,892 | 1.1 | % | ||
| Sporting Goods | 4,833 | 1.1 | % | ||
| Financial Services | 4,538 | 1.0 | % | ||
| Theaters | 3,848 | 0.9 | % | ||
| Pet Supplies | 2,860 | 0.7 | % | ||
| Entertainment Retail | 2,323 | 0.5 | % | ||
| Beauty and Cosmetics | 2,208 | 0.5 | % | ||
| Shoes | 2,006 | 0.5 | % | ||
| Apparel | 1,405 | 0.3 | % | ||
| Miscellaneous | 1,153 | 0.3 | % | ||
| Office Supplies | 853 | 0.2 | % | ||
| Total Portfolio | $ | 443,852 | 100.0 | % |
Annualized Base Rentis 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. |
|---|
7
Geographic Diversification
The following table presents annualized base rents for all states that represent 2.5% or greater of the Company’s total annualized base rent as of September 30, 2022:
| State | Annualized Base Rent^(1)^ | % of ABR | |||
|---|---|---|---|---|---|
| Texas | $ | 33,091 | 7.5 | % | |
| Florida | 24,907 | 5.6 | % | ||
| North Carolina | 24,749 | 5.6 | % | ||
| Illinois | 24,302 | 5.5 | % | ||
| Ohio | 24,249 | 5.5 | % | ||
| Michigan | 23,339 | 5.3 | % | ||
| New Jersey | 21,575 | 4.9 | % | ||
| Pennsylvania | 20,999 | 4.7 | % | ||
| California | 18,637 | 4.2 | % | ||
| New York | 17,478 | 3.9 | % | ||
| Georgia | 15,859 | 3.6 | % | ||
| Virginia | 13,771 | 3.1 | % | ||
| Connecticut | 12,618 | 2.8 | % | ||
| Wisconsin | 11,542 | 2.6 | % | ||
| Other^(2)^ | 156,736 | 35.2 | % | ||
| Total Portfolio | $ | 443,852 | 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 states generating less than 2.5% of Annualized Base Rent. |
8
Capital Markets and Balance Sheet
Capital Markets
In August 2022, the Company completed a $300 million public bond offering of 4.80% senior unsecured notes due 2032 (the “2032 Notes”). In connection with the offering, the Company terminated related swap agreements of $300 million, receiving $28.4 million upon termination. Considering the effect of the terminated swap agreements, the effective all-in rate to the Company for the 2032 Notes is 3.76%.
During the third quarter, the Company entered into forward sale agreements in connection with its ATM program to sell an aggregate of 1,688,390 shares of common stock for anticipated net proceeds of $127.2 million.
In September 2022, the Company commenced a follow-on public offering of 5,750,000 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 $381.7 million after deducting fees 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.
In conjunction with the forward equity offering in September, the Company settled 8,739,752 shares under existing forward sale agreements and received net proceeds of $601.4 million. At quarter end, the Company had 5,750,000 shares remaining to be settled under existing forward sale agreements, which are anticipated to raise net proceeds of $381.7 million upon settlement.
The following table presents the Company’s outstanding forward equity offerings as of September 30, 2022:
| Forward Equity Offerings | Shares<br> <br> Sold | Shares<br> <br> Settled | Shares<br> <br> Remaining | Net <br><br> Proceeds <br> Received | Anticipated<br> <br> Net Proceeds <br> Remaining | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| September<br> 2022 Forward Offering^(1)^ | 5,750,000 | - | 5,750,000 | - | $ | 381,708,000 | ||||
| Total Forward Equity Offerings | 5,750,000 | - | 5,750,000 | - | $ | 381,708,000 |
(1) On September 28, 2022, the Company commenced a follow-on public offeringof 5,750,000 shares of common stock, including the underwriters' option to purchase additional shares. The offering closed on October3, 2022.
Balance Sheet
As of September 30, 2022, the Company’s net debt to recurring EBITDA was 4.0 times. The Company’s proforma net debt to recurring EBITDA was 3.1 times when deducting the $381.7 million of anticipated net proceeds from the outstanding forward equity offerings from the Company’s net debt of $1.6 billion at quarter end. The Company’s fixed charge coverage ratio was 5.0 times as of the quarter end.
The Company’s total debt to enterprise value was 24.1% as of September 30, 2022. 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 Agree Limited Partnership (the “Operating Partnership” or “OP”) common units into common stock of the Company.
For the three and nine months ended September 30, 2022, the Company's fully diluted weighted-average shares outstanding were 80.6 million and 75.9 million, respectively. The basic weighted-average shares outstanding for the three and nine months ended September 30, 2022 were 79.7 million and 75.4 million, respectively.
9
For the three and nine months ended September 30, 2022, the Company's fully diluted weighted-average shares and units outstanding were 80.9 million and 76.2 million, respectively. The basic weighted-average shares and units outstanding for the three and nine months ended September 30, 2022 were 80.0 million and 75.7 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 September 30, 2022, there were 347,619 Operating Partnership common units outstanding and the Company held a 99.6% common interest in the Operating Partnership.
Conference Call/Webcast
The Company will host its quarterly analyst and investor conference call on Wednesday, November 2, 2022 at 9:00 AM ET. To participate in the conference call, please dial (866) 363-3979 approximately ten minutes before the call begins.
Additionally, a webcast of the conference call will be available through 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 September 30, 2022, the Company owned and operated a portfolio of 1,707 properties, located in all 48 continental states and containing approximately 35.8 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 RETHINKINGRETAIL, please visit www.agreerealty.com.
Forward-Looking Statements
This press release contains forward-lookingstatements, including statements about projected financial and operating results, within the meaning of Section 27A of the SecuritiesAct of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “ExchangeAct”). The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statementscontained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safeharbor provisions. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “forecast,” “continue,” “assume,” “plan,” “outlook” or other similar wordsor expressions. Forward-looking statements 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 goodfaith beliefs, reasonable assumptions and the Company’s best judgment reflecting current information, you should not rely on forward-lookingstatements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’scontrol and which could materially affect the Company’s results of operations, financial condition, cash flows, performance orfuture achievements or events. Currently, one of the most significant factors, however, is the potential adverse effect of ongoing worldwideeconomic uncertainties, the current pandemic of the novel coronavirus, or COVID-19, increased inflation and interest rates on the financialcondition, results of operations, cash flows and performance of the Company and its tenants, the real estate market and the global economyand 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 risksidentified in the risk factors discussed in the Company’s Annual Report on Form 10-K and subsequent quarterly reports filed withthe Securities and Exchange Commission (the “SEC”), as well as the risks set forth below, as being heightened as a resultof the ongoing and numerous adverse impacts of the macroeconomic environment and COVID-19. Additional important factors, among others,that may cause the Company’s actual results to vary include the general deterioration in national economic conditions, weakeningof 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 theSEC. The forward-looking statements included in this press release are made as of the date hereof. Unless legally required, the Companydisclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, changes inthe Company’s expectations or assumptions or otherwise.
10
For further information about the Company’sbusiness and financial results, please refer to the “Management’s Discussion and Analysis of Financial Condition and Resultsof Operations” and “Risk Factors” sections of the Company’s SEC filings, including, but not limited to, its AnnualReport 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’swebsite at www.agreerealty.com.
The Company defines the “weighted-averagecapitalization rate” for acquisitions and dispositions as the sum of contractual fixed annual rents computed on a straight-linebasis over the primary lease terms and anticipated annual net tenant recoveries, divided by the purchase and sale prices for occupiedproperties.
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 “CoreFunds From Operations – OP Common Unitholders” and “Adjusted Funds from Operations – OP Common Unitholders”.
Contact:
Peter Coughenour
Chief Financial Officer
Agree Realty Corporation
(248) 737-4190
11
AgreeRealty Corporation
ConsolidatedBalance Sheet
($in thousands, except share and per-share data)
(Unaudited)
| December<br> 31, 2021 | |||||
|---|---|---|---|---|---|
| Assets: | |||||
| Real Estate Investments: | |||||
| Land | 1,841,259 | $ | 1,559,434 | ||
| Buildings | 3,795,181 | 3,034,391 | |||
| Accumulated depreciation | (296,304 | ) | (233,862 | ) | |
| Property under<br> development | 50,685 | 7,148 | |||
| Net real estate investments | 5,390,821 | 4,367,111 | |||
| Real estate held for sale, net | - | 5,676 | |||
| Cash and cash equivalents | 250,487 | 43,252 | |||
| Cash held in escrows | 1,027 | 1,998 | |||
| Accounts receivable - tenants, net | 68,697 | 53,442 | |||
| Lease Intangibles, net of accumulated<br> amortization of 240,244 and 180,532 at September 30, 2022 and December 31, 2021, respectively | 763,458 | 672,020 | |||
| Other assets,<br> net | 81,611 | 83,407 | |||
| Total Assets | 6,556,101 | $ | 5,226,906 | ||
| Liabilities: | |||||
| Mortgage notes payable, net | 71,721 | $ | 32,429 | ||
| Senior unsecured notes, net | 1,791,492 | 1,495,200 | |||
| Unsecured revolving credit facility | - | 160,000 | |||
| Dividends and distributions payable | 21,427 | 16,881 | |||
| Accounts payable, accrued expenses<br> and other liabilities | 85,637 | 70,005 | |||
| Lease intangibles,<br> net of accumulated amortization of 34,356 and 29,726 at September 30, 2022 and December 31, 2021, respectively | 37,117 | 33,075 | |||
| Total Liabilities | 2,007,394 | $ | 1,807,590 | ||
| Equity: | |||||
| Preferred Stock, .0001 par value per share, 4,000,000<br> shares authorized, 7,000 shares Series A outstanding, at stated liquidation value of 25,000 per share, at September 30, 2022 and<br> December 31, 2021 | 175,000 | 175,000 | |||
| Common stock, .0001 par value, 180,000,000<br> shares authorized, 88,573,248 and 71,285,311 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | 9 | 7 | |||
| Additional paid-in capital | 4,551,081 | 3,395,549 | |||
| Dividends in excess of net income | (203,040 | ) | (147,366 | ) | |
| Accumulated other<br> comprehensive income (loss) | 24,124 | (5,503 | ) | ||
| Total Equity -<br> Agree Realty Corporation | 4,547,174 | $ | 3,417,687 | ||
| Non-controlling<br> interest | 1,533 | 1,629 | |||
| Total Equity | 4,548,707 | $ | 3,419,316 | ||
| Total Liabilities<br> and Equity | 6,556,101 | $ | 5,226,906 |
All values are in US Dollars.
12
AgreeRealty Corporation
ConsolidatedStatements of Operations and Comprehensive Income
($in thousands, except share and per share-data)
(Unaudited)
| Three months<br> ended <br> September 30, | Nine months<br> ended <br> September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Revenues | ||||||||||||
| Rental Income | $ | 110,031 | $ | 87,469 | $ | 313,136 | $ | 247,722 | ||||
| Other | 34 | 68 | 147 | 189 | ||||||||
| Total Revenues | $ | 110,065 | $ | 87,537 | $ | 313,283 | $ | 247,911 | ||||
| Operating Expenses | ||||||||||||
| Real estate taxes | $ | 8,526 | $ | 6,957 | $ | 24,117 | $ | 18,812 | ||||
| Property operating expenses | 4,557 | 3,189 | 13,575 | 9,944 | ||||||||
| Land lease expense | 404 | 400 | 1,213 | 1,135 | ||||||||
| General and administrative | 6,992 | 5,687 | 22,265 | 18,806 | ||||||||
| Depreciation and amortization | 35,157 | 24,488 | 95,666 | 69,164 | ||||||||
| Provision for<br> impairment | - | - | 1,015 | - | ||||||||
| Total Operating Expenses | $ | 55,636 | $ | 40,721 | $ | 157,851 | $ | 117,861 | ||||
| Gain (loss) on sale of assets, net | 3,000 | 3,470 | 5,326 | 13,182 | ||||||||
| Gain (loss) on involuntary conversion,<br> net | (115 | ) | - | (165 | ) | 103 | ||||||
| Income from Operations | $ | 57,314 | $ | 50,286 | $ | 160,593 | $ | 143,335 | ||||
| Other (Expense) Income | ||||||||||||
| Interest expense, net | $ | (17,149 | ) | $ | (13,066 | ) | $ | (46,592 | ) | $ | (37,267 | ) |
| Income tax (expense) benefit | (720 | ) | (390 | ) | (2,137 | ) | (1,884 | ) | ||||
| Loss on early extinguishment of term<br> loans and settlement of related interest rate swaps | - | - | - | (14,614 | ) | |||||||
| Other (expense) income | 132 | - | 132 | - | ||||||||
| Net Income | $ | 39,577 | $ | 36,830 | $ | 111,996 | $ | 89,570 | ||||
| Less net income<br> attributable to non-controlling interest | 152 | 167 | 485 | 447 | ||||||||
| Net Income Attributable to Agree<br> Realty Corporation | $ | 39,425 | $ | 36,663 | $ | 111,511 | $ | 89,123 | ||||
| Less Series A<br> Preferred Stock Dividends | 1,859 | 289 | 5,578 | 289 | ||||||||
| Net Income<br> Attributable to Common Stockholders | $ | 37,566 | $ | 36,374 | $ | 105,933 | $ | 88,834 | ||||
| Net Income Per Share Attributable<br> to Common Stockholders | ||||||||||||
| Basic | $ | 0.47 | $ | 0.52 | $ | 1.40 | $ | 1.35 | ||||
| Diluted | $ | 0.46 | $ | 0.52 | $ | 1.39 | $ | 1.34 | ||||
| Other Comprehensive Income | ||||||||||||
| Net Income | $ | 39,577 | $ | 36,830 | $ | 111,996 | $ | 89,570 | ||||
| Amortization of interest rate swaps | (273 | ) | 82 | (109 | ) | 869 | ||||||
| Change in fair value and settlement of<br> interest rate swaps | (7,181 | ) | 3,300 | 29,881 | 30,676 | |||||||
| Total Comprehensive Income (Loss) | 32,123 | 40,212 | 141,768 | 121,115 | ||||||||
| Less comprehensive<br> income attributable to non-controlling interest | 121 | 185 | 630 | 465 | ||||||||
| Comprehensive<br> Income Attributable to Agree Realty Corporation | $ | 32,002 | $ | 40,027 | $ | 141,138 | $ | 120,650 | ||||
| Weighted Average Number of Common Shares Outstanding - Basic | 79,701,136 | 69,102,500 | 75,361,583 | 65,623,720 | ||||||||
| Weighted Average Number of Common Shares Outstanding - Diluted | 80,589,446 | 69,591,848 | 75,890,692 | 65,952,113 |
13
AgreeRealty Corporation
Reconciliationof Net Income to FFO, Core FFO and Adjusted FFO
($in thousands, except share and per-share data)
(Unaudited)
| Three months<br> ended <br> September 30, | Nine months<br> ended <br> September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Net Income | $ | 39,577 | $ | 36,830 | $ | 111,996 | $ | 89,570 | ||||
| Less Series A<br> Preferred Stock Dividends | 1,859 | 289 | 5,578 | 289 | ||||||||
| Net Income attributable to OP Common<br> Unitholders | 37,718 | 36,541 | 106,418 | 89,281 | ||||||||
| Depreciation of rental real estate<br> assets | 23,073 | 17,019 | 63,842 | 48,439 | ||||||||
| Amortization of lease intangibles -<br> in-place leases and leasing costs | 11,836 | 7,310 | 31,307 | 20,263 | ||||||||
| Provision for impairment | - | - | 1,015 | - | ||||||||
| (Gain) loss on<br> sale or involuntary conversion of assets, net | (2,885 | ) | (3,470 | ) | (5,161 | ) | (13,285 | ) | ||||
| Funds from Operations<br> - OP Common Unitholders | $ | 69,742 | $ | 57,400 | $ | 197,421 | $ | 144,698 | ||||
| Loss on extinguishment of debt and<br> settlement of related hedges | - | - | - | 14,614 | ||||||||
| Amortization of<br> above (below) market lease intangibles, net and assumed mortgage debt discount | 8,458 | 6,615 | 25,007 | 16,630 | ||||||||
| Core Funds from<br> Operations - OP Common Unitholders | $ | 78,200 | $ | 64,015 | $ | 222,428 | $ | 175,942 | ||||
| Straight-line accrued rent | (3,189 | ) | (3,215 | ) | (9,419 | ) | (8,779 | ) | ||||
| Stock based compensation expense | 1,514 | 986 | 4,892 | 3,967 | ||||||||
| Amortization of financing costs | 791 | 203 | 2,070 | 692 | ||||||||
| Non-real estate<br> depreciation | 248 | 159 | 517 | 462 | ||||||||
| Adjusted Funds<br> from Operations - OP Common Unitholders | $ | 77,564 | $ | 62,148 | $ | 220,488 | $ | 172,284 | ||||
| Funds from Operations Per Common Share<br> and OP Unit - Basic | $ | 0.87 | $ | 0.83 | $ | 2.61 | $ | 2.19 | ||||
| Funds from Operations Per Common Share<br> and OP Unit - Diluted | $ | 0.86 | $ | 0.82 | $ | 2.59 | $ | 2.18 | ||||
| Core Funds from Operations Per Common<br> Share and OP Unit - Basic | $ | 0.98 | $ | 0.92 | $ | 2.94 | $ | 2.67 | ||||
| Core Funds from Operations Per Common<br> Share and OP Unit - Diluted | $ | 0.97 | $ | 0.92 | $ | 2.92 | $ | 2.65 | ||||
| Adjusted Funds from Operations Per<br> Common Share and OP Unit - Basic | $ | 0.97 | $ | 0.89 | $ | 2.91 | $ | 2.61 | ||||
| Adjusted Funds from Operations Per<br> Common Share and OP Unit - Diluted | $ | 0.96 | $ | 0.89 | $ | 2.89 | $ | 2.60 | ||||
| Weighted Average Number of Common Shares and OP Units Outstanding<br> - Basic | 80,048,755 | 69,450,119 | 75,709,202 | 65,971,339 | ||||||||
| Weighted Average Number of Common Shares and OP Units Outstanding<br> - Diluted | 80,937,065 | 69,939,467 | 76,238,311 | 66,299,732 | ||||||||
| Additional supplemental disclosure | ||||||||||||
| Scheduled principal repayments | $ | 214 | $ | 201 | $ | 633 | $ | 594 | ||||
| Capitalized interest | 554 | 36 | 816 | 200 | ||||||||
| Capitalized building improvements | 3,135 | 1,921 | 6,977 | 4,376 |
Non-GAAPFinancial Measures
Fundsfrom 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.
CoreFunds 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.
AdjustedFunds 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.
14
AgreeRealty Corporation
Reconciliationof Net Debt to Recurring EBITDA
($in thousands, except share and per-share data)
(Unaudited)
| Three<br> months ended <br> September 30, | |||
|---|---|---|---|
| 2022 | |||
| Net Income | $ | 39,577 | |
| Interest expense, net | 17,149 | ||
| Income tax expense | 720 | ||
| Depreciation of rental real estate assets | 23,073 | ||
| Amortization of lease intangibles - in-place leases and leasing<br> costs | 11,836 | ||
| Non-real estate depreciation | 248 | ||
| (Gain) loss on sale or involuntary conversion<br> of assets, net | (2,885 | ) | |
| EBITDAre | $ | 89,718 | |
| Run-Rate Impact of Investment, Disposition and Leasing Activity | $ | 4,217 | |
| Amortization of above (below) market<br> lease intangibles, net | 8,374 | ||
| Recurring EBITDA | $ | 102,309 | |
| Annualized Recurring EBITDA | $ | 409,236 | |
| Total Debt | $ | 1,884,253 | |
| Cash, cash equivalents and cash held<br> in escrows | (251,514 | ) | |
| Net Debt | $ | 1,632,739 | |
| Net Debt to Recurring EBITDA | 4.0 | x | |
| Net Debt | $ | 1,632,739 | |
| Anticipated Net Proceeds from September<br> 2022 Forward Offering | (381,708 | ) | |
| Proforma Net Debt | $ | 1,251,031 | |
| Proforma Net Debt to Recurring EBITDA | 3.1 | x |
Non-GAAPFinancial Measures
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.
Net Debt
The Company defines Net Debt as total debt less cash, cash equivalents and cash held in escrows. The Company considers the non-GAAP measure of Net Debt to be a key supplemental measure of the Company's overall liquidity, capital structure and leverage. The Company considers Net Debt a key supplemental measure because it provides industry analysts, lenders and investors useful information in understanding our financial condition. The Company’s calculation of Net Debt may not be comparable to Net Debt reported by other REITs that interpret the definition 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
In September 2022, the Company commenced an underwritten public offering of 5,750,000 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 September 2022 Forward Offering is anticipated to raise net proceeds of approximately $381.7 million based on the applicable forward sale price. The Company is contractually obligated to settle the offering by September 2023. The September 2022 Forward Offering closed on October 3, 2022.
15
AgreeRealty Corporation
RentalIncome
($in thousands, except share and per share-data)
(Unaudited)
| Three months<br> ended <br> September 30, | Nine months<br> ended <br> September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Rental Income Source^(1)^ | ||||||||||||
| Minimum<br> rents^(2)^ | $ | 103,208 | $ | 81,334 | $ | 292,890 | $ | 228,494 | ||||
| Percentage<br> rents^(2)^ | - | 102 | 723 | 593 | ||||||||
| Operating<br> cost reimbursement^(2)^ | 12,008 | 9,433 | 34,967 | 26,486 | ||||||||
| Straight-line<br> rental adjustments^(3)^ | 3,189 | 3,215 | 9,419 | 8,779 | ||||||||
| Amortization<br> of (above) below market lease intangibles^(4)^ | (8,374 | ) | (6,615 | ) | (24,863 | ) | (16,630 | ) | ||||
| Total Rental<br> Income | $ | 110,031 | $ | 87,469 | $ | 313,136 | $ | 247,722 |
(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.
16
Exhibit 99.2
NOVEMBER 2022
1 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. Agree Realty Overview (NYSE: ADC) OUR COMPANY Net lease growth REIT focused on the acquisition and development of high - quality retail properties Founded in 1971 by Executive Chairman, Richard Agree Public on the NYSE since 1994 $7.9 billion (1) retail net lease REIT headquartered in Bloomfield Hills, Michigan 1,707 retail properties totaling approximately 36 million square feet in all 48 continental states Investment grade issuer ratings of Baa1 from Moody’s and BBB from S&P RE THINK RETAIL Capitalize on distinct market positioning in the retail net lease space Focus on 21 st century industry - leading retailers through our three unique external growth platforms Leverage our real estate acumen and relationships to identify superior risk - adjusted opportunities Maintain a conservative and flexible capital structure that enables our growth trajectory Provide consistent, high - quality earnings growth and a well - covered, growing dividend As of September 30, 2022 , unless otherwise noted. (1) As of October 28, 2022.
2 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. RE THINKING RETAIL
3 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. consistency noun steadfast adherence to the same principles, course, or form [ kuh n - sis - tuh n - see ]
4 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. As of November 1, 2022, unless otherwise noted. (1) Reflects increased full - year 2022 acquisition guidance provided by the Compa ny on November 1, 2022. (2) Refer to footnote 1 on slide 7 for the Company’s definition of Investment Grade. (3) Reflects increased full - year 2022 development & PCS guidance provided by the Company on November 1, 2022. (4) On September 28, 2 022, the Company commenced a follow - on public offering of 5,750,000 shares of common stock, including the underwriters' allotment option. The offering closed on October 3, 2022. (5) Proforma for the settlement of the Company’s outstanding forward equity as of October 3, 2022. Recent Highlights Increased Development & PCS guidance by 5% at the midpoint to $85 million to $125 million commenced (3) 3.1x Proforma Net Debt to Recurring EBITDA as of the end of Q3 2022 (5) Declared an increased common dividend of $0.240 per share for October Approximately 5.8 million shares of outstanding forward equity available at quarter end for net proceeds of almost $382 million (4) Issued $300 million of senior unsecured notes due 2032 at an effective all - in interest rate of 3.76% 98 properties acquired in Q3 2022 for over $360 million Raised 2022 acquisition guidance by 3% at the midpoint to $1.6 billion to $1.7 billion of high - quality net lease assets (1) Fortified balance sheet with over $800 million of equity and debt capital raised during Q3 2022 Ground lease portfolio represents 12.7% of annualized base rents as of September 30 th Settled approximately 8.7 million shares of outstanding forward equity during Q3 2022 for net proceeds of approximately $601 million 72.7% of base rents acquired in Q3 2022 derived from investment grade retailers (2) 25 development or PCS projects completed or under construction for approximately $82 million as of September 30 th Sold one asset during Q3 2022 for approximately $20 million
The Country’s Leading Retail Portfolio
6 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. TENANT / CONCEPT ANNUALIZED BASE RENT % OF TOTAL $30.8 6.9% 20.0 4.5% 19.3 4.4% 18.4 4.1% 13.3 3.0% 13.1 3.0% 12.8 2.9% 11.9 2.7% 11.9 2.7% 11.6 2.6% 11.6 2.6% 11.2 2.5% 10.8 2.4% 9.7 2.2% 9.6 2.2% 8.9 2.0% 8.4 1.9% 7.6 1.7% 7.3 1.6% 6.7 1.5% Other 189.0 42.6% Total $443.9 100.0% Agree Realty Snapshot TENANT SECTOR ANNUALIZED BASE RENT % OF TOTAL Grocery Stores $41.6 9.4% Home Improvement 40.6 9.2% Tire & Auto Service 40.3 9.1% Convenience Stores 33.1 7.5% Dollar Stores 29.5 6.6% General Merchandise 29.4 6.6% Off - Price Retail 26.8 6.0% Auto Parts 25.8 5.8% Farm and Rural Supply 21.3 4.8% Consumer Electronics 20.2 4.5% Other 135.3 30.5% Total $443.9 100.0% Share Price (1) $68.35 Equity Market Capitalization (1)(2) $6.1 Billion Property Count 1,707 properties Net Debt to EBITDA 4.0x / 3.1x (3) Investment Grade % (4)(5) 67.5% Company Overview Tenants ($ in millions) Retail Sectors ($ in millions) As of September 30, 2022, unless otherwise noted. Any differences are a result of rounding. (1) As of October 28, 2022. (2) R efl ects common shares and OP units outstanding multiplied by the closing price as of October 28, 2022. (3) Proforma for the settlement of the Company’s outstanding forward equity as of October 3, 2022 . (4) Refer to footnote 1 on slide 7 for the Company’s definition of Investment Grade. (5) Reflects Tractor Supply’s previously announced acquisition of Orscheln Farm and Home, which received approval from the Fe der al Trade Commission on October 11, 2022. (5)
7 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. BEST - IN - CLASS RETAILERS WITH CONSERVATIVE BALANCE SHEETS Strong Investment Grade Portfolio 16% SUB - INVESTMENT GRADE 16% NOT RATED 68% INVESTMENT GRADE (1)(2) As of September 30, 2022. Any differences are a result of rounding. (1) Based on ABR derived from tenants, or parent entities th ereof, with an investment grade credit rating from S&P Global Ratings, Moody’s Investors Service, Fitch Ratings, or the National Association of Insurance Commissioners. (2) Reflects Tractor Supply’s previously announced acquisition of Orscheln Farm and Home, which received approval from the Federal Trade Commission on October 11, 2022. Retail Credit Type (%ABR)
8 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. INDUSTRY - LEADERS OPERATING IN E - COMMERCE RESISTANT SECTORS National and Super - Regional Retailers 2% FRANCHISE 11% SUPER - REGIONAL 87% NATIONAL As of September 30, 2022. Any differences are a result of rounding. Retail Tenant Type (%ABR)
9 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. As of September 30, 2022. (1) Refer to footnote 1 on slide 7 for the Company’s definition of Investment Grade. Any differences are a result of rounding. FEE SIMPLE OWNERSHIP + SIGNIFICANT TENANT INVESTMENT Ground Lease Portfolio Breakdown Ground Lease Credit Overview (%ABR) 88% INVESTMENT GRADE (1) 9% NOT RATED 3% SUB - INVESTMENT GRADE Ground Lease Portfolio Overview 201 Leases 12.7% of total portfolio ABR 11.4 years weighted - average lease term Top Ground Lease Tenants (% ABR) 13% 12% 12% 7% 7% 7% 4% 3% 2% 2% 13% 12% 12% 7% 7% 7% 4% 3% 2% 2%
Disciplined Investment Strategy & Active Portfolio Management
11 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. Engage in consistent dialogue to understand store performance and tenant sustainability Leverage relationships to identify the best risk - adjusted opportunities Our Investment Strategy Agree leverages its three distinct investment platforms to target industry - leading retailers in e - commerce and recession resistant sectors THREE - PRONGED GROWTH STRATEGY COMPREHENSIVE REAL ESTATE SOLUTIONS FOR LEADING RETAILERS ACQUISITIONS DEVELOPMENT PARTNER CAPITAL SOLUTIONS RETAILER RELATIONSHIPS
12 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. What Has ADC Been Investing In? The retail landscape continues to dynamically evolve as market forces cause disruption and change. To mitigate risk in a period of continued disruption, the Company adheres to a number of investment criteria, with a focus on four core principles : Focus on leading operators that have matured in omni - channel structure or those in e - commerce resistant sectors OMNI - CHANNEL CRITICAL (E - COMMERCE RESISTANCE) Emphasize a balanced portfolio with exposure to counter - cyclical sectors and retailers with strong credit profiles RECESSION RESISTANCE Strong emphasis on leading operators with strong balance sheets and avoidance of private equity sponsored retailers AVOIDANCE OF PRIVATE EQUITY SPONSORSHIP Protects against unforeseen changes to our top - down investment philosophy STRONG REAL ESTATE FUNDAMENTALS & FUNGIBLE BUILDINGS
13 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. TOP - DOWN FOCUS ON LEADING RETAILERS IN THE U.S. PAIRED WITH A BOTTOMS - UP REAL ESTATE ANALYSIS Large & Fragmented Opportunity Set REAL ESTATE FUNDAMENTALS • Rents ≤ market • Fungibility of building MARKET RENTS • Limited competition • Strong market presence COMPETITION • Access • Visibility • Demographics • Major retail corridor • Strong traffic drivers RETAIL SYNERGY ADC reviewed $52 billion of opportunities since 2018 $5.2 BILLION acquired since 2018 As of September 30, 2022.
14 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. As of September 30, 2022. Stores counts obtained from company filings and third - party sources including Progressive Grocer, Conv enience Store News, Forbes, Biz Journals & Petroleum and Restaurant Business Magazine. (1) Reflects Tractor Supply’s previously announced acquisition of Orscheln Farm and Home, which received approval from the Federa l T rade Commission on October 11, 2022. 160,000 NET LEASE OPPORTUNITIES AND GROWING WITH BEST - IN - CLASS RETAILERS Sandbox Offers Runway for Growth Auto Parts Stores 22,900+ Farm & Rural Supply Stores 2,200+ Crafts & Novelties Stores 900+ Quick - Service Restaurants 31,800+ Equipment Rental Stores 900+ Warehouse Clubs 1,400+ Home Improvement Stores 8,400+ Consumer Electronics Stores 1,200+ Grocery Stores 10,500+ Dealerships 200+ Convenience Stores 23,500+ Off - Price Retail Stores 5,900+ Tire & Auto Service Stores 7,100+ Dollar Stores 34,700+ General Merchandise Stores 7,100+ (1)
15 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. ADC HAS INVESTED $6.9 BILLION IN HIGH - QUALITY RETAIL NET LEASE PROPERTIES SINCE 2010 Ramping Investment Activity DEVELOPMENT & PCS (2) ACQUISITIONS Investment Activity ($ in millions) (1) As of September 30, 2022, unless otherwise noted. (1) Reflects full - year 2022 acquisition and development & PCS guidance provide d by the Company on November 1, 2022. (2) Prior years represent development & PCS activity, completed or commenced. $ $220.1 $295.8 $336.8 $607.0 $701.4 $1.31B $1.39B $1.6B to $1.7B $14.9 $38.0 $62.7 $74.4 $32.4 $43.2 $40.0 $85.0 to $125.0 0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 1,300 1,400 1,500 1,600 1,700 1,800 1,900 2015 2016 2017 2018 2019 2020 2021 2022E
16 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. $29.7M $45.8M $67.6M $67.2M $49.4M $58.0M $44.8M 2016 2017 2018 2019 2020 2021 2022 FOCUSED ON NON - CORE ASSET SALES & CAPITAL RECYCLING Active Portfolio Management As of September 30, 2022. Graph is representative and does not include all dispositions. Total Dispositions 2010 - 2022: $448 million PORT ST. JOHN, FL RANCHO CORDOVA, CA MACOMB TOWNSHIP, MI OCALA, FL MICHIGAN (3) OSCODA, MI FLORIDA (2) NORTH DAKOTA (3) MINNESOTA (3) ATLANTIC BEACH, FL MT (1) & VA (1) WICHITA FALLS, TX SPRINGFIELD, IL UPLAND, CA APOPKA, FL LA (1) & PA (1) MN (2) & ND (2) MICHIGAN (3) FORT WORTH, TX OH (2) & PA (2) FLOWOOD, MS MAPLEWOOD, MN TYLER, TX BELTON, MO MI (2), NY & FL VA (3) MIDLAND, MI UT (2), ND & MT PENSACOLA, FL OH (3), WV, & VA TOPEKA, KS INDIANAPOLIS, IN KIRKLAND, WA JACKSONVILLE BEACH, FL IL (1), ND (1) & OH (1) MICHIGAN (2) ST. GEORGE, UT SC (2) & TX (1) AUSTIN, TX JACKSONVILLE, FL SC (1) & MN (1) AURORA, CO BERLIN, NJ HOUSTON, TX PORTAGE, MI CANTON, MI
Fortified Balance Sheet
18 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. $28 $4 $42 $0 $0 $50 $0 $50 $410 $100 $475 $125 $300 $300 $0 $100 $200 $300 $400 $500 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Leading With Our “Fortress” Balance Sheet CAPITALIZATION STATISTICS Equity Market Capitalization (1) $6.1 Billion Enterprise Value (1)(2) $7.9 Billion Total Debt to Enterprise Value 24.1% CREDIT METRICS Fixed Charge Coverage Ratio 5.0x Net Debt to Recurring EBITDA (3) 4.0x / 3.1x (4) Issuer Ratings Baa1 / BBB Ratings Outlooks Stable / Stable As of September 30, 2022, unless otherwise noted. (1) As of October 28, 2022. (2) Enterprise value is calculated as the sum o f n et debt, the liquidation value of preferred equity and equity market capitalization. (3) Reflects net debt to annualized Q3 2022 recurring EBITDA. (4) Proforma for the settlement of the Company’ s o utstanding forward equity as of October 3, 2022. Debt Maturities ($ in millions) SECURED UNSECURED 1 c 2022 PUBLIC BOND OFFERING EXTENDED WEIGHTED - AVERAGE DEBT MATURITY TO APPROXIMATELY 8 YEARS
19 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. STRONG CAPITAL MARKETS EXECUTION HAS PROVIDED AMPLE LIQUIDITY; $7.2 BILLION OF ACTIVITY SINCE 2010 Capital Markets Track Record Reflects gross proceeds for equity and long - term debt raised through October 3, 2022. Forward equity offerings are shown in the year they were raised, rather than settled. Capital Markets Activity ($ in millions) COMMON EQUITY UNSECURED DEBT SECURED DEBT PREFERRED EQUITY $100 $100 $100 $225 ( 30% ) $125 ( 22% ) $350 ( 26% ) $650 ( 34% ) $300 (22%) $40 $237 $229 $531 (70%) $433 (78%) $988 (74%) $1,095 (57%) $1,037 (75%) $42 (3%) $175 ( 9% ) $0 $250 $500 $750 $1,000 $1,250 $1,500 $1,750 $2,000 2015 2016 2017 2018 2019 2020 2021 2022
20 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. 5.1x 4.0x 4.5x 3.7x 4.8x 2.5x 3.5x 1.6x 4.7x 3.2x 4.8x 4.0x 4.9x 4.2x 4.5x 3.6x 4.4x 3.7x 4.9x 3.4x 5.0x 4.3x 5.0x 3.8x 4.0x 3.1x (includes outstanding forward equity offerings) ADC HAS BEEN AT OR BELOW 4.3X PROFORMA NET DEBT TO RECURRING EBITDA SINCE 2018 Low Leverage = Strong Positioning As of September 30, 2022. Proforma Net Debt to Recurring EBTIDA deducts the Company’s outstanding forward equity offerings fo r e ach period from the Company’s net debt for each period. (1 ) Proforma for the settlement of the Company’s outstanding forward equity as of October 3, 2022. PROFORMA NET DEBT TO RECURRING EBITDA NET DEBT TO RECURRING EBITDA Q1 2022 Q2 2022 Q3 2022 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q3 2019 (1)
21 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. DEDICATED TO SUSTAINABILITY AND GOOD CORPORATE CITIZENSHIP Agree Realty’s ESG Practices Embraces responsibility to be a good steward of the environment and to use natural resources carefully Focus on industry leading, national & super - regional retailers provides for a relationship with some of the most environmentally conscientious retailers in the world The Company’s award - winning headquarters buildings utilize green technologies including programmable thermostats, Low - E window glass, LEED HVAC systems and LED occupancy - sensored lighting ENVIRONMENTAL PRACTICES The Agree Wellness program focuses on Health Wellness & Financial Wellness to enhance employee well - being Ongoing professional development is offered to help all team members advance their careers The Company has recently sponsored charities including Michigan Veteran's Foundation, Leader Dogs for the Blind and Kids Kicking Cancer ADC has received awards from Globe St, Crain’s Detroit Business, and Best and Brightest in Wellness recognizing its outstanding corporate culture and wellness initiatives SOCIAL RESPONSIBILITY ADC’s Board has nine directors, seven of whom are independent; five new independent directors added since 2018 The Company formed an ESG Steering Committee during 2021 to help guide its ESG strategy The Nominating & Governance Committee has formal oversight responsibility for the Company’s ESG program The Company adopted the Sustainability Accounting Standards Board and the Task Force on Climate - related Financial Disclosures frameworks to align our disclosures with the issues most relevant to our stakeholders CORPORATE GOVERNANCE
22 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. Investment Summary Highlights FORTIFIED BALANCE SHEET HIGHEST - QUALITY RETAIL REAL ESTATE INVESTMENT GRADE ISSUER RATINGS Robust growth trajectory MULTI - YEAR TRACK RECORD OF EXECUTION Well - covered & consistent dividend
23 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. APPENDIX
24 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. Forward - Looking Statements This presentation contains forward - looking statements 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,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “forecast,” “continue,” “assume,” “plan,” references to “outlook” or other similar words or expressions. Forward - looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections and forecasts and other forward - looking information and estimates. These forward - looking statements are subject to various risks and uncertainties, many of which are beyond the Company’s control, which could cause actual results to differ materially from such statements. Certain factors could occur that might cause actual results to vary, including the potential adverse effect of ongoing worldwide economic uncertainties, the current pandemic of the novel coronavirus, or COVID - 19, 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 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 risks and uncertainties as described in greater detail in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including, without limitation, the Company’s Annual Report on Form 10 - K and subsequent quarterly reports. Except as required by law, the Company disclaims any obligation to update any forward - looking statements, whether as a result of new information, future events 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 Investors section of the Company’s website at www.agreerealty.com . All information in this presentation is as of September 30 , 2022 , unless otherwise noted . The Company undertakes no duty to update the statements in this presentation to conform the statements to actual results or changes in the Company’s expectations .
25 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. Non - GAAP Financial Measures This presentation includes a non - GAAP financial measure, Net Debt to Recurring EBITDA, which is presented on an actual and profo rma basis. A reconciliation of this non - GAAP financial measure to the most directly comparable GAAP measure appears on the following page. The components of this ratio and their use and utility to management are described further in the section below. In addition, this presentation includes the non - GAAP measure of Annualized Base Rent (“ABR”). ABR represents the annualized amount of contractual minimum rent required by tenant lease agreements, computed on a straight - line basis. ABR is not, and is not intended to be, a presentation in accordance with GA AP. The Company believes annualized contractual minimum rent is useful to management, investors, and other interested parties in anal yzi ng concentrations and leasing activity. Components of Net Debt to Recurring EBITDA EBITDAre is defined by Nareit to mean net income computed in accordance with GAAP, plus interest expense, income tax expense, deprecia ti on and amortization, any gains (or losses) from sales of real estate assets and/or changes in control, any impairment charges on de preciable real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. The Company considers the non - GAAP meas ure of EBITDAre to be a key supplemental measure of the Company's performance and should be considered along with, but not as an alt ern ative to, net income or loss as a measure of the Company's operating performance. The Company considers EBITDAre a key supplemental mea sur e of the Company's operating performance because it provides an additional supplemental measure of the Company's performance and opera tin g cash flow that is widely known by industry analysts, lenders and investors. The Company’s calculation of EBITDAre may not be compa rab le 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 pe riod 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 inco me or loss as a measure of the Company's operating performance. The Company considers Recurring EBITDA a key supplemental measure of the Comp any 's operating performance because it represents the Company's earnings run rate for the period presented and because it is widely fo llowed by industry analysts, lenders and investors. Our Recurring EBITDA may not be comparable to Recurring EBITDA reported by other c omp anies that have a different interpretation of the definition of Recurring EBITDA. Our ratio of net debt to Recurring EBITDA is used by m ana gement as a measure of leverage and may be useful to investors in understanding the Company’s ability to service its debt, as well as ass ess the borrowing capacity of the Company. Our ratio of net debt to Recurring EBITDA is calculated by taking annualized Recurring EBITDA and d ivi ding it by our net debt per the consolidated balance sheet. Net Debt The Company defines Net Debt as total debt less cash, cash equivalents and cash held in escrows. The Company considers the no n - GAAP measure of Net Debt to be a key supplemental measure of the Company's overall liquidity, capital structure and leverage. Th e Company considers Net Debt a key supplemental measure because it provides industry analysts, lenders and investors useful information in understanding our financial condition. The Company’s calculation of Net Debt may not be comparable to Net Debt reported by other REITs that in terpret the definition differently than the Company. The Company presents Net Debt on both an actual and proforma basis, assuming the Antic ipated Net Proceeds from Outstanding Forwards are used to pay down debt. The Company believes the proforma measure may be useful to inve sto rs in understanding the potential effect of the Anticipated Net Proceeds from Outstanding Forwards on the Company’s capital structu re, its future borrowing capacity, and its ability to service its debt. Anticipated Net Proceeds from Outstanding Forwards Since the first quarter of 2018, the Company has utilized forward sale agreements to sell shares of common stock. Selling common stock through forward sale agreements enables the Company to set the price of such sha res upon pricing the offering (subject to certain adjustments) while delaying the issuance of such shares and the receipt of the net p roc eeds by the Company. Given the Company’s frequent use of forward sale agreements, the Company considers the non - GAAP measure of Anticipated Net Proceeds from Outstanding Forwards to be a key supplemental measure of the Company's overall liquidity, capital structure and le verage. The Company defines Anticipated Net Proceeds from Outstanding Forwards as the number of shares outstanding under forward sale agr eem ents at the end of each quarter, multiplied by the applicable forward sale price for each agreement, respectively.
26 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. Net Debt to Recurring EBITDA Reconciliation Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Net Income $20,781 $22,744 $21,370 $25,424 $21,416 $23,760 $30,278 $22,461 $36,830 $33,306 $36,289 $36,130 $39,577 Interest expense, net 8,352 9,730 9,670 8,479 10,158 11,791 11,653 12,549 13,066 13,111 13,931 15,512 17,149 Income tax expense 184 328 259 260 306 260 1,009 485 390 517 719 698 720 Depreciation of rental real estate assets 8,866 9,563 10,402 11,316 12,669 13,980 15,292 16,127 17,019 18,293 19,470 21,299 23,073 Amortization of lease intangibles - in - place leases and leasing costs 2,965 3,453 3,621 4,170 4,523 5,567 6,050 6,905 7,310 8,116 8,924 10,550 11,836 Non - real estate depreciation 66 89 109 121 135 144 147 156 159 156 167 101 248 Provision for impairment 0 0 0 1,128 2,868 141 0 0 0 1,919 1,015 0 0 (Gain) loss on sale of assets, net (2,597) (4,333) (1,645) (4,952) (970) (437) (3,062) (6,753) (3,470) (1,826) (2,285) 8 (2,885) EBITDAre $38,617 $41,574 $43,786 $45,947 $51,105 $55,206 $61,367 $51,930 $71,304 $73,592 $78,230 $84,298 $89,718 Run - Rate Impact of Investment, Disposition & Leasing Activity $2,782 $1,435 $1,160 $3,015 $5,093 $3,973 $4,175 $3,939 $3,491 $3,372 $4,654 $4,104 $4,217 Amortization of above (below) market lease intangibles, net 3,381 3,618 3,809 3,779 3,964 4,333 4,756 5,260 6,615 7,654 8,178 8,311 8,374 Other expense (income) 0 0 0 (23) 0 0 0 14,614 0 0 0 0 0 Recurring EBITDA $44,780 $46,627 $48,755 $52,717 $60,162 $63,512 $70,298 75,743 $81,410 $84,618 $91,062 $96,713 $102,309 Annualized Recurring EBITDA $179,120 $186,508 $195,020 $210,868 $240,648 $254,048 $281,192 302,972 $325,640 $338,472 $364,248 $386,852 $409,236 Total Debt $931,867 $876,115 $1,026,111 $783,878 $1,153,642 $1,225,433 $1,371,238 $1,543,040 $1,542,839 $1,702,635 $1,862,428 $1,954,467 $1,884,253 Cash, cash equivalents and cash held in escrows (10,802) (42,157) (92,140) (36,384) (16,230) (7,955) (7,369) (188,381) (102,808) (45,250) (25,766) (27,107) (251,514) Net Debt $921,065 $833,958 $933,971 $747,494 $1,137,412 $1,217,478 $1,363,869 $1,354,659 $1,440,031 $1,657,385 $1,836,662 $1,927,360 $1,632,738 Net Debt to Recurring EBITDA 5.1x 4.5x 4.8x 3.5x 4.7x 4.8x 4.9x 4.5x 4.4X 4.9X 5.0X 5.0x 4.0x Anticipated Net Proceeds from Outstanding Forwards $197,356 $144,676 $437,765 $411,062 $376,396 $203,211 $189,577 $258,749 $226,455 $519,183 $262,940 $475,768 $381,708 Proforma Net Debt 723,709 689,282 496,206 336,432 $761,016 $1,014,267 $1,174,291 $1,095,909 $1,213,576 $1,138,202 $1,573,722 $1,451,592 1,251,030 Proforma Net Debt to Recurring EBITDA 4.0x 3.7x 2.5x 1.6x 3.2x 4.0x 4.2x 3.6x 3.7X 3.4X 4.3X 3.8x 3.1x
27 © 20 22 AGREE REALTY CORPORATION . ALL RIGHTS RESERVED. CONFIDENTIAL. CONTACT PETER COUGHENOUR Chief Financial Officer (248) 737 - 4190 peter@agreerealty.com