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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 September 30, 2023, 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)

 

32301 Woodward Avenue, Royal Oak, Michigan

    

48073

(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 October 23, 2023, the Registrant had 100,519,717 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 September 30, 2023 and December 31, 2022

1

Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2023 and 2022

3

Condensed Consolidated Statements of Equity for the three and nine months ended September 30, 2023 and 2022

4

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022

6

Notes to Condensed Consolidated Financial Statements

7

Item 2:

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

32

Item 3:

Quantitative and Qualitative Disclosures about Market Risk

45

Item 4:

Controls and Procedures

46

PART II

Other Information

Item 1:

Legal Proceedings

46

Item 1A:

Risk Factors

46

Item 2:

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity

46

Item 3:

Defaults Upon Senior Securities

47

Item 4:

Mine Safety Disclosures

47

Item 5:

Other Information

47

Item 6:

Exhibits

48

SIGNATURES

50

PART I.       FINANCIAL INFORMATION

Item 1.       Financial Statements

AGREE REALTY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

September 30, 

December 31, 

2023

2022

ASSETS

Real Estate Investments

  

Land

$

2,231,535

$

1,941,599

Buildings

 

4,750,160

 

4,054,679

Less accumulated depreciation

 

(403,501)

 

(321,142)

 

6,578,194

 

5,675,136

Property under development

 

36,114

 

65,932

Net Real Estate Investments

 

6,614,308

 

5,741,068

 

  

Real Estate Held for Sale, net

 

3,202

 

 

Cash and Cash Equivalents

 

6,384

 

27,763

 

  

Cash Held in Escrows

 

3

 

1,146

Accounts Receivable - Tenants, net

77,749

 

65,841

 

  

Lease Intangibles, net of accumulated amortization of

$335,073 and $263,011 at September 30, 2023 and December 31, 2022, respectively

 

849,191

 

799,448

 

Other Assets, net

 

96,269

 

77,923

 

  

Total Assets

$

7,647,106

$

6,713,189

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)

September 30, 

December 31, 

2023

2022

LIABILITIES

  

Mortgage Notes Payable, net

$

42,952

$

47,971

  

Unsecured Term Loan, net

346,639

 

  

Senior Unsecured Notes, net

1,793,777

 

1,792,047

  

Unsecured Revolving Credit Facility

49,000

 

100,000

  

Dividends and Distributions Payable

25,131

 

22,345

Accounts Payable, Accrued Expenses, and Other Liabilities

106,755

 

83,722

  

Lease Intangibles, net of accumulated amortization of

$40,667 and $35,992 at September 30, 2023 and December 31, 2022, respectively

37,458

 

36,714

  

Total Liabilities

2,401,712

 

2,082,799

  

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 September 30, 2023 and December 31, 2022

175,000

 

175,000

Common stock, $.0001 par value, 180,000,000 shares authorized, 100,519,717 and 90,173,424 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

10

 

9

Additional paid-in-capital

5,352,063

 

4,658,570

Dividends in excess of net income

(316,083)

 

(228,132)

Accumulated other comprehensive income (loss)

33,291

 

23,551

Total Equity - Agree Realty Corporation

5,244,281

 

4,628,998

Non-controlling interest

1,113

 

1,392

Total Equity

5,245,394

 

4,630,390

  

Total Liabilities and Equity

$

7,647,106

$

6,713,189

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

Nine Months Ended

    

September 30, 2023

    

September 30, 2022

    

September 30, 2023

    

September 30, 2022

Revenues

 

  

 

  

 

  

 

  

Rental income

$

136,774

$

110,031

$

393,259

$

313,136

Other

 

38

 

34

 

71

 

147

Total Revenues

 

136,812

 

110,065

 

393,330

 

313,283

 

  

 

  

 

  

 

  

Operating Expenses

 

  

 

  

 

  

 

  

Real estate taxes

 

10,124

 

8,526

 

29,429

 

24,117

Property operating expenses

 

5,518

 

4,557

 

18,120

 

13,575

Land lease expense

 

411

 

404

 

1,252

 

1,213

General and administrative

 

8,844

 

6,992

 

26,087

 

22,265

Depreciation and amortization

 

45,625

 

35,157

 

129,020

 

95,666

Provision for impairment

 

3,195

 

 

4,510

 

1,015

Total Operating Expenses

 

73,717

 

55,636

 

208,418

 

157,851

Gain (loss) on sale of assets, net

 

(20)

 

3,000

 

299

 

5,326

Gain (loss) on involuntary conversion, net

(115)

(165)

Income from Operations

 

63,075

 

57,314

 

185,211

 

160,593

 

  

 

  

 

  

 

  

Other (Expense) Income

 

  

 

  

 

  

 

  

Interest expense, net

 

(20,803)

 

(17,149)

 

(58,748)

 

(46,592)

Income tax (expense) benefit

(709)

(720)

(2,201)

(2,137)

Other (expense) income

 

94

 

132

 

184

 

132

Net Income

 

41,657

 

39,577

 

124,446

 

111,996

 

  

 

  

 

  

 

  

Less net income attributable to non-controlling interest

 

135

 

152

 

442

 

485

Net income attributable to Agree Realty Corporation

41,522

39,425

124,004

111,511

Less Series A preferred stock dividends

 

1,859

 

1,859

 

5,578

 

5,578

Net Income Attributable to Common Stockholders

$

39,663

$

37,566

$

118,426

$

105,933

 

  

 

  

 

  

 

  

Net Income Per Share Attributable to Common Stockholders

 

  

 

  

 

  

 

  

Basic

$

0.41

$

0.47

$

1.26

$

1.40

Diluted

$

0.41

$

0.46

$

1.26

$

1.39

 

  

 

  

 

  

 

  

Other Comprehensive Income

 

  

 

  

 

  

 

  

Net income

$

41,657

$

39,577

$

124,446

$

111,996

Amortization of interest rate swaps

(631)

(273)

(1,889)

(109)

Change in fair value and settlement of interest rate swaps

 

8,324

 

(7,181)

 

11,664

 

29,881

Total comprehensive income (loss)

 

49,350

 

32,123

 

134,221

 

141,768

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

 

162

 

121

 

477

 

630

 

  

 

  

 

  

 

  

Comprehensive Income (Loss) Attributable to Agree Realty Corporation

$

49,188

$

32,002

$

133,744

$

141,138

 

  

 

  

 

  

 

  

Weighted Average Number of Common Shares Outstanding - Basic

 

97,255,143

 

79,701,136

 

93,474,182

 

75,361,583

 

 

 

  

 

  

Weighted Average Number of Common Shares Outstanding - Diluted

 

97,349,473

 

80,589,446

 

93,732,359

 

75,890,692

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, 2022

7,000

$

175,000

90,173,424

$

9

$

4,658,570

$

(228,132)

$

23,551

$

1,392

$

4,630,390

Issuance of common stock, net of issuance costs

2,945,000

195,133

195,133

Repurchase of common shares

(35,578)

(2,607)

(2,607)

Issuance of stock under the 2020 Omnibus Incentive Plan

128,993

Forfeiture of restricted stock

(13,760)

Stock-based compensation

1,831

1,831

Series A preferred dividends declared for the period

(1,859)

(1,859)

Dividends and distributions declared for the period

(65,939)

(250)

(66,189)

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

(627)

(2)

(629)

Net income

1,859

39,755

160

41,774

Balance, March 31, 2023

7,000

$

175,000

93,198,079

$

9

$

4,852,927

$

(254,316)

$

22,924

$

1,300

$

4,797,844

Issuance of common stock, net of issuance costs

3,070,997

1

205,104

205,105

Repurchase of common shares

(101)

(8)

(8)

Issuance of stock under the 2020 Omnibus Incentive Plan

373

Forfeiture of restricted stock

(12)

Stock-based compensation

2,177

2,177

Series A preferred dividends declared for the period

(1,859)

(1,859)

Dividends and distributions declared for the period

(68,688)

(252)

(68,940)

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

2,701

10

2,711

Net income

1,859

39,009

147

41,015

Balance, June 30, 2023

7,000

$

175,000

96,269,336

$

10

$

5,060,200

$

(283,995)

$

25,625

$

1,205

$

4,978,045

Issuance of common stock, net of issuance costs

4,251,771

289,748

289,748

Repurchase of common shares

(990)

(57)

(57)

Forfeiture of restricted stock

(400)

(3)

(3)

Stock-based compensation

2,175

2,175

Series A preferred dividends declared for the period

(1,859)

(1,859)

Dividends and distributions declared for the period

(71,751)

(254)

(72,005)

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

7,666

27

7,693

Net income

1,859

39,663

135

41,657

Balance, September 30, 2023

7,000

$

175,000

100,519,717

$

10

$

5,352,063

$

(316,083)

$

33,291

$

1,113

$

5,245,394

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

For the three months ended March 31, 2023

$

0.266

For the three months ended June 30, 2023

$

0.266

For the three months ended September 30, 2023

$

0.266

Cash dividends declared per common share:

For the three months ended March 31, 2023

$

0.720

For the three months ended June 30, 2023

$

0.729

For the three months ended September 30, 2023

$

0.729

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

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 restricted 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