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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Mark One

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

For the quarterly period ended June 30, 2022, or

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

For the transition period fromto

Commission File Number 001-12928

AGREE REALTY CORPORATION

(Exact name of registrant as specified in its charter)

Maryland

    

38-3148187

(State or other jurisdiction of incorporation or

(I.R.S. Employer Identification No.)

Organization)

 

70 E. Long Lake Road, Bloomfield Hills, Michigan

    

48304

(Address of principal executive offices)

(Zip Code)

(248) 737-4190

(Registrant's telephone number, including area code)

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: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer 

Smaller reporting company

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

No

As of August 1, 2022, the Registrant had 79,832,706 shares of common stock issued and outstanding.

AGREE REALTY CORPORATION

Index to Form 10-Q

Page

PART I

Financial Information

Item 1:

Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

1

Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2022 and 2021

3

Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2022 and 2021

4

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021

6

Notes to Condensed Consolidated Financial Statements

7

Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

34

Item 3:

Quantitative and Qualitative Disclosures about Market Risk

48

Item 4:

Controls and Procedures

49

PART II

Other Information

Item 1:

Legal Proceedings

49

Item 1A:

Risk Factors

49

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

49

Item 3:

Defaults Upon Senior Securities

49

Item 4:

Mine Safety Disclosures

49

Item 5:

Other Information

49

Item 6:

Exhibits

50

SIGNATURES

51

AGREE REALTY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per-share data)

(Unaudited)

PART I.       FINANCIAL INFORMATION

Item 1.       Financial Statements

June 30, 

December 31, 

2022

2021

ASSETS

Real Estate Investments

  

Land

$

1,762,244

$

1,559,434

Buildings

 

3,560,694

 

3,034,391

Less accumulated depreciation

 

(274,323)

 

(233,862)

 

5,048,615

 

4,359,963

Property under development

 

43,051

 

7,148

Net Real Estate Investments

 

5,091,666

 

4,367,111

 

  

Real Estate Held for Sale, net

 

 

5,676

 

Cash and Cash Equivalents

 

26,267

 

43,252

 

  

Cash Held in Escrows

 

840

 

1,998

Accounts Receivable - Tenants, net

61,406

 

53,442

 

  

Lease Intangibles, net of accumulated amortization of

$218,540 and $180,532 at June 30, 2022 and December 31, 2021, respectively

 

739,319

 

672,020

 

Other Assets, net

 

118,734

 

83,407

 

  

Total Assets

$

6,038,232

$

5,226,906

See accompanying notes to Condensed Consolidated Financial Statements.

1

AGREE REALTY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per-share data)

(Unaudited)

June 30, 

December 31, 

2022

2021

LIABILITIES

  

Mortgage Notes Payable, net

$

71,824

$

32,429

  

Senior Unsecured Notes, net

1,496,101

 

1,495,200

  

Unsecured Revolving Credit Facility

370,000

 

160,000

  

Dividends and Distributions Payable

19,385

 

16,881

Accounts Payable, Accrued Expenses, and Other Liabilities

70,338

 

70,005

  

Lease Intangibles, net of accumulated amortization of

$32,720 and $29,726 at June 30, 2022 and December 31, 2021, respectively

36,344

 

33,075

  

Total Liabilities

2,063,992

 

1,807,590

  

EQUITY

  

Preferred stock, $.0001 par value per share, 4,000,000 shares authorized, 7,000 shares Series A outstanding, at stated liquidation value of $25,000 per share, at June 30, 2022 and December 31, 2021

175,000

 

175,000

Common stock, $.0001 par value, 180,000,000 shares authorized, 79,842,743 and 71,285,311 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

8

7

Additional paid-in-capital

3,948,547

 

3,395,549

Dividends in excess of net income

(182,518)

 

(147,366)

Accumulated other comprehensive income (loss)

31,547

 

(5,503)

  

Total Equity - Agree Realty Corporation

3,972,584

 

3,417,687

Non-controlling interest

1,656

 

1,629

Total Equity

3,974,240

 

3,419,316

  

Total Liabilities and Equity

$

6,038,232

$

5,226,906

See accompanying notes to Condensed Consolidated Financial Statements.

2

AGREE REALTY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except share and per-share data)

(Unaudited)

Three Months Ended

Six Months Ended

    

June 30, 2022

    

June 30, 2021

    

June 30, 2022

    

June 30, 2021

Revenues

 

  

 

  

 

  

 

  

Rental income

$

104,793

$

82,494

$

203,105

$

160,253

Other

 

83

 

52

 

113

 

121

Total Revenues

 

104,876

 

82,546

 

203,218

 

160,374

 

  

 

  

 

  

 

  

Operating Expenses

 

  

 

  

 

  

 

  

Real estate taxes

 

7,979

 

6,158

 

15,591

 

11,855

Property operating expenses

 

4,541

 

3,214

 

9,018

 

6,755

Land lease expense

 

407

 

389

 

809

 

736

General and administrative

 

7,651

 

6,241

 

15,272

 

13,118

Depreciation and amortization

 

31,950

 

23,188

 

60,510

 

44,676

Provision for impairment

 

 

 

1,015

 

Total Operating Expenses

 

52,528

 

39,190

 

102,215

 

77,140

Gain (loss) on sale of assets, net

 

17

 

6,767

 

2,326

 

9,712

Gain (loss) on involuntary conversion, net

(25)

(14)

(50)

103

Income from Operations

 

52,340

 

50,109

 

103,279

 

93,049

 

  

 

  

 

  

 

  

Other (Expense) Income

 

  

 

  

 

  

 

  

Interest expense, net

 

(15,512)

 

(12,549)

 

(29,442)

 

(24,202)

Income tax (expense) benefit

(698)

(485)

(1,418)

(1,494)

Loss on early extinguishment of term loans and settlement of related interest rate swaps

(14,614)

(14,614)

Net Income

 

36,130

 

22,461

 

72,419

 

52,739

 

  

 

  

 

  

 

  

Less net income attributable to non-controlling interest

 

157

 

114

 

333

 

280

Net income attributable to Agree Realty Corporation

35,973

22,347

72,086

52,459

Less Series A preferred stock dividends

 

1,859

 

 

3,718

 

Net Income Attributable to Common Stockholders

$

34,114

$

22,347

$

68,368

$

52,459

 

  

 

  

 

  

 

  

Net Income Per Share Attributable to Common Stockholders

 

  

 

  

 

  

 

  

Basic

$

0.45

$

0.34

$

0.93

$

0.82

Diluted

$

0.45

$

0.34

$

0.93

$

0.82

 

  

 

  

 

  

 

  

Other Comprehensive Income

 

  

 

  

 

  

 

  

Net income

$

36,130

$

22,461

$

72,419

$

52,739

Amortization of interest rate swaps

82

287

164

787

Change in fair value and settlement of interest rate swaps

 

16,481

 

2,230

 

37,062

 

27,376

Total comprehensive income (loss)

 

52,693

 

24,978

 

109,645

 

80,902

Less comprehensive income (loss) attributable to non-controlling interest

 

233

 

128

 

509

 

294

 

  

 

  

 

  

 

  

Comprehensive Income (Loss) Attributable to Agree Realty Corporation

$

52,460

$

24,850

$

109,136

$

80,608

 

  

 

  

 

  

 

  

Weighted Average Number of Common Shares Outstanding - Basic

 

75,037,920

 

64,835,984

 

73,145,097

 

63,838,070

 

  

 

  

 

  

 

  

Weighted Average Number of Common Shares Outstanding - Diluted

 

75,570,089

 

65,185,604

 

73,474,930

 

64,079,697

See accompanying notes to Condensed Consolidated Financial Statements.

3

AGREE REALTY CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(In thousands, except share and per-share data)

(Unaudited)

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, 2021

7,000

$

175,000

71,285,311

$

7

$

3,395,549

$

(147,366)

$

(5,503)

$

1,629

$

3,419,316

Issuance of common stock, net of issuance costs

3,791,964

1

250,683

250,684

Repurchase of common shares

(28,117)

(1,745)

(1,745)

Issuance of stock under the 2020 Omnibus Incentive Plan

125,422

648

648

Stock-based compensation

1,635

1,635

Series A preferred dividends declared for the period

(1,859)

(1,859)

Dividends and distributions declared for the period

(49,653)

(237)

(49,890)

Amortization, changes in fair value, and settlement of interest rate swaps

20,563

100

20,663

Net income

1,859

34,254

176

36,289

Balance, March 31, 2022

7,000

$

175,000

75,174,580

$

8

$

3,646,770

$

(162,765)

$

15,060

$

1,668

$

3,675,741

Issuance of common stock, net of issuance costs

4,667,850

300,110

300,110

Repurchase of common shares

(1,052)

(76)

(76)

Issuance of stock under the 2020 Omnibus Incentive Plan

1,493

Forfeiture of restricted stock

(128)

Stock-based compensation

1,743

1,743

Series A preferred dividends declared for the period

(1,859)

(1,859)

Dividends and distributions declared for the period

(53,867)

(245)

(54,112)

Amortization, changes in fair value, and settlement of interest rate swaps

16,487

76

16,563

Net income

1,859

34,114

157

36,130

Balance, June 30, 2022

7,000

$

175,000

79,842,743

$

8

$

3,948,547

$

(182,518)

$

31,547

$

1,656

$

3,974,240

Cash dividends declared per depositary share of Series A preferred stock:

For the three months ended March 31, 2022

$

0.266

For the three months ended June 30, 2022

$

0.266

Cash dividends declared per common share:

For the three months ended March 31, 2022

$

0.681

For the three months ended June 30, 2022

$

0.702

See accompanying notes to Condensed Consolidated Financial Statements.

4

AGREE REALTY CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(In thousands, except share and per-share data)

(Unaudited)

Accumulated

Dividends in

Other

Common Stock

Additional

excess of net

Comprehensive

Non-Controlling

Total

  

Shares

  

Amount

  

Paid-In Capital

  

income

  

Income (Loss)

  

Interest

  

Equity

Balance, December 31, 2020

60,021,483

$

6

$

2,652,090

$

(91,343)

$

(36,266)

$

1,762

$

2,526,249

Issuance of common stock, net of issuance costs

4,028,410

258,105

258,105

Repurchase of common shares

(27,594)

(1,780)

(1,780)

Issuance of restricted stock under the 2020 Omnibus Incentive Plan

128,066

298

298

Forfeiture of restricted stock

(4,587)

(92)

(92)

Stock-based compensation

1,293

1,293

Dividends and distributions declared for the period

(39,906)

(215)

(40,121)

Amortization, changes in fair value, and settlement of interest rate swaps

25,506

140

25,646

Net income

30,112

166

30,278

Balance, March 31, 2021

64,145,778

$

6

$

2,909,914

$

(101,137)

$

(10,760)

$

1,853

$

2,799,876

Issuance of common stock, net of issuance costs

4,764,450

1

336,875

336,876

Repurchase of common shares

Issuance of restricted stock under the 2020 Omnibus Incentive Plan

496

22

22

Forfeiture of restricted stock

(351)

Stock-based compensation

1,453

1,453

Dividends and distributions declared for the period

(42,829)

(225)

(43,054)

Amortization, changes in fair value, and settlement of interest rate swaps

2,503

14

2,517

Net income

22,347

114

22,461

Balance, June 30, 2021

68,910,373

$

7

$

3,248,264

$

(121,619)

$

(8,257)

$

1,756

$

3,120,151

Cash dividends declared per common share:

For the three months ended March 31, 2021

$

0.621

For the three months ended June 30, 2021

$

0.651

See accompanying notes to Condensed Consolidated Financial Statements.

5