AGREE REALTY CORPORATION BLOOMFIELD HILLS, Mich., Oct. 23, 2017 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) (the "Company") today announced results for the quarter ended September 30, 2017. All per share amounts included herein are on a diluted per common share basis unless otherwise stated.
Third Quarter 2017 Financial and Operating Highlights:
-- Invested $69.0 million in 19 retail net lease properties
-- Commenced two new development and Partner Capital Solutions ("PCS")
projects
-- Increased rental revenue 22.6% to $27.3 million
-- Net Income per share attributable to the Company decreased 30.4% to
$0.42
-- Net Income attributable to the Company decreased 14.7% to $12.2 million
-- Increased Funds from Operations ("FFO") per share 1.6% to $0.69
-- Increased FFO 23.2% to $20.0 million
-- Increased Adjusted Funds from Operations ("AFFO") per share 4.1% to
$0.69
-- Increased AFFO 26.2% to $19.9 million
-- Declared a quarterly dividend of $0.505 per share, a 5.2% increase over
the dividend per share declared in the third quarter of 2016
-- Maintained balance sheet strength; net-debt-to recurring EBITDA of 4.7
times
Financial Results
Total Rental Revenue
Total rental revenue, which includes minimum rents and percentage rents, for the three months ended September 30, 2017 increased 22.6% to $27.3 million, compared to total rental revenue of $22.3 million for the comparable period in 2016.
Total rental revenue for the nine months ended September 30, 2017 increased 26.0% to $76.7 million, compared to total rental revenue of $60.9 million for the comparable period in 2016.
Net Income
Net Income attributable to the Company for the three months ended September 30, 2017 decreased 14.7% to $12.2 million, compared to $14.3 million for the comparable period in 2016. Net Income per share attributable to the Company for the three months ended September 30, 2017 decreased 30.4% to $0.42, compared to $0.61 per share for the comparable period in 2016. The decrease in Net Income is primarily attributable to a decrease in gain on sale of assets relative to the prior period.
Net Income attributable to the Company for the nine months ended September 30, 2017 increased 28.5% to $41.6 million, compared to $32.4 million for the comparable period in 2016. Net Income per share attributable to the Company for the nine months ended September 30, 2017 increased 4.2% to $1.52, compared to $1.46 per share for the comparable period in 2016.
Funds from Operations
FFO for the three months ended September 30, 2017 increased 23.2% to $20.0 million, compared to FFO of $16.2 million for the comparable period in 2016. FFO per share for the three months ended September 30, 2017 increased 1.6% to $0.69, compared to FFO per share of $0.68 for the comparable period in 2016.
FFO for the nine months ended September 30, 2017 increased 29.0% to $55.0 million, compared to FFO of $42.6 million for the comparable period in 2016. FFO per share for the nine months ended September 30, 2017 increased 5.7% to $2.00, compared to FFO per share of $1.90 for the comparable period in 2016.
Adjusted Funds from Operations
AFFO for the three months ended September 30, 2017 increased 26.2% to $19.9 million, compared to AFFO of $15.8 million for the comparable period in 2016. AFFO per share for the three months ended September 30, 2017 increased 4.1% to $0.69, compared to AFFO per share of $0.66 for the comparable period in 2016.
AFFO for the nine months ended September 30, 2017 increased 29.8% to $54.8 million, compared to AFFO of $42.2 million for the comparable period in 2016. AFFO per share for the nine months ended September 30, 2017 increased 6.4% to $2.00, compared to AFFO per share of $1.88 for the comparable period in 2016.
Dividend
The Company paid a cash dividend of $0.505 per share on October 13, 2017 to stockholders of record on September 29, 2017, a 5.2% increase over the $0.48 quarterly dividend declared in the third quarter of 2016. The quarterly dividend represents payout ratios of approximately 73.4% of FFO per share and 73.6% of AFFO per share, respectively.
CEO Comments
"We are pleased with our performance as our leading portfolio of net lease retail assets remains extremely stable at near full occupancy as we continue to execute our operating strategy and focus on tenants and real estate of the highest quality. Our unique investment platforms and flexible balance sheet have positioned us to increase 2017 acquisition guidance to $300 million to $325 million," said Joey Agree, President & Chief Executive Officer of Agree Realty Corporation.
Portfolio Update
As of September 30, 2017, the Company's portfolio consisted of 425 properties located in 43 states and totaled 8.3 million square feet of gross leasable space. Properties ground leased to tenants increased to 8.2% of annualized base rents.
The portfolio was approximately 99.7% leased, had a weighted-average remaining lease term of approximately 10.5 years, and generated approximately 45.2% of annualized base rents from investment grade retail tenants.
The following table provides a summary of the Company's portfolio as of September 30, 2017:
Property Type Number of Annualized Percent of Percent Weighted
Properties Base Rent(1) Annualized Investment Average
Base Rent Grade(2) Lease Term
--- --------- ------- ----------
Retail Net Lease 382 $101,763 90.3% 41.0% 10.5 yrs
Retail Net Lease Ground Leases 40 9,288 8.2% 84.6% 12.1 yrs
Total Retail Net Lease 422 $111,051 98.5% 45.4% 10.6 yrs
Total Portfolio 425 $112,792 100.0% 45.2% 10.5 yrs
=== ======== ===== ==== ========
Annualized base rent is in
thousands; any differences are
the result of rounding.
(1) Represents annualized straight-
line rent as of September 30,
2017.
(2) Reflects tenants, or parent
entities thereof, with
investment grade credit ratings
from Standard & Poor's,
Moody's, Fitch and/or NAIC.
Acquisitions
Total acquisition volume for the third quarter of 2017 was approximately $54.9 million and included 14 assets net leased to notable retailers operating in the off-price retail, convenience stores, auto parts, tire and auto service, health and fitness and home improvement sectors. The properties are located in 12 states and leased to tenants operating in nine retail sectors. The properties were acquired at a weighted-average capitalization rate of 7.4% and had a weighted-average remaining lease term of approximately 11.2 years.
For the nine months ended September 30, 2017, total acquisition volume was approximately $238.8 million and included 61 high-quality retail net lease assets. The properties are located in 25 states and leased to 45 diverse tenants who operate in 21 retail sectors. The properties were acquired at a weighted-average capitalization rate of 7.6% and carried a weighted-average remaining lease term of approximately 11.9 years.
Dispositions
During the quarter, the Company sold four properties for gross proceeds of approximately $7.8 million. For the nine months ended September 30, 2017, the Company has disposed of seven properties for total gross proceeds of $30.4 million. The Company is maintaining its disposition guidance of $30 million to $50 million for the current year.
Development and Partner Capital Solutions
The Company commenced two new development and PCS projects during the quarter, with anticipated costs totaling approximately $11.5 million. The projects include the Company's first project with Burger King franchisee TOMS King in North Ridgeville, Ohio, and the Company's third Camping World in Grand Rapids, Michigan.
During the quarter, Orchard Supply Hardware (Lowe's Companies, Inc.) commenced rent in Boynton Beach, Florida. Total project costs were approximately $3.9 million. Orchard Supply Hardware had previously executed a 15-year net lease.
Construction continued during the quarter on three projects with total anticipated costs of approximately $24.4 million. The projects include the Company's first PCS project with Art Van Furniture in Canton, Michigan, as well as the Company's first two development projects with Mister Car Wash located in Urbandale, Iowa and Bernalillo, New Mexico.
In the first nine months of 2017, the Company had nine development or PCS projects completed or under construction. Anticipated total costs are approximately $57.3 million and include the following completed or commenced projects:
Tenant Location Lease Lease Actual or Status
Structure Term Anticipated Rent
Commencement
--- ------------
Camping World Tyler, TX Build-to-Suit 20 Years Q1 2017 Completed
Burger
King(1) Heber, UT Build-to-Suit 20 Years Q1 2017 Completed
Camping World Georgetown, KY Build-to-Suit 20 Years Q2 2017 Completed
Orchard
Supply Boynton Beach, FL Build-to-Suit 15 Years Q3 2017 Completed
Mister Car
Wash Urbandale, IA Build-to-Suit 20 years Q4 2017 Under Construction
Mister Car
Wash Bernalillo, NM Build-to-Suit 20 years Q4 2017 Under Construction
Art Van
Furniture Canton, MI Build-to-Suit 20 years Q1 2018 Under Construction
Burger
King(2) North Ridgeville, OH Build-to-Suit 20 years Q1 2018 Under Construction
Camping World Grand Rapids, MI Build-to-Suit 20 years Q2 2018 Under Construction
(1) Franchise restaurant operated by
Meridian Restaurants Unlimited,
LC.
(2) Franchise restaurant operated by
TOMS King, LLC.
Leasing
During the third quarter, the Company executed new leases, extensions or options on approximately 48,000 square feet of gross leasable area throughout the existing portfolio. In the first nine months of 2017, the Company executed new leases, extensions or options on approximately 480,000 square feet of gross lease area throughout the existing portfolio. The Company has no remaining lease maturities in 2017.
Top Tenants
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, 2017:
Tenant Annualized Percent of Annualized
Base Rent(1) Base Rent
--- ----------- ---------
Walgreens $9,568 8.5%
Walmart 4,224 3.7%
Lowe's 4,215 3.7%
LA Fitness 3,713 3.3%
CVS 2,889 2.6%
Wawa 2,664 2.4%
Mister Car Wash 2,580 2.3%
Smart & Final 2,475 2.2%
Dollar General 2,415 2.1%
Tractor Supply 2,179 1.9%
Hobby Lobby 2,176 1.9%
Dave & Buster's 2,058 1.8%
Academy Sports 1,982 1.8%
Dollar Tree 1,939 1.7%
Burger King(2) 1,916 1.7%
Rite Aid 1,886 1.7%
24 Hour Fitness 1,759 1.6%
BJ's Wholesale 1,709 1.5%
Other(3) 60,445 53.6%
Total Portfolio $112,792 100.0%
======== =====
Annualized base rent is in
thousands; any differences are
the result of rounding.
(1) Represents annualized straight-
line rent as of September 30,
2017.
(2) Franchise restaurants operated
by Meridian Restaurants
Unlimited, LC.
(3) Includes tenants generating
less than 1.5% of annualized
base rent.
Retail Sectors
The following table presents annualized base rents for the Company's top retail sectors that represent 2.5% or greater of the Company's total annualized base rent as of September 30, 2017:
Sector Annualized Percent of Annualized
Base Rent(1) Base Rent
--- ----------- ---------
Pharmacy $14,933 13.2%
Grocery Stores 8,524 7.6%
Restaurants - Quick Service 6,726 6.0%
Health and Fitness 6,427 5.7%
Tire and Auto Service 6,164 5.5%
Home Improvement 5,551 4.9%
Convenience Stores 4,795 4.3%
General Merchandise 4,643 4.1%
Specialty Retail 4,261 3.8%
Off-Price Retail 4,013 3.6%
Auto Parts 3,762 3.3%
Warehouse Clubs 3,749 3.3%
Crafts and Novelties 3,521 3.1%
Farm and Rural Supply 3,361 3.0%
Sporting Goods 3,171 2.8%
Dollar Stores 3,145 2.8%
Health Services 3,066 2.7%
Theaters 2,978 2.6%
Other(2) 20,002 17.7%
Total Portfolio $112,792 100.0%
======== =====
Annualized base rent is in
thousands; any differences are
the result of rounding.
(1) Represents annualized straight-
line rent as of September 30,
2017.
(2) Includes sectors generating
less than 2.5% of annualized
base rent.
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, 2017:
State Annualized Percent of Annualized
Base Rent(1) Base Rent
--- ----------- ---------
Michigan $14,018 12.4%
Texas 9,937 8.8%
Florida 8,669 7.7%
Illinois 7,849 7.0%
Ohio 6,817 6.0%
Pennsylvania 4,646 4.1%
California 3,697 3.3%
Kentucky 3,640 3.2%
Louisiana 3,606 3.2%
Mississippi 3,283 2.9%
Wisconsin 3,258 2.9%
Missouri 3,099 2.7%
Kansas 2,979 2.6%
Georgia 2,859 2.5%
Other(2) 34,435 30.7%
Total Portfolio $112,792 100.0%
======== =====
Annualized base rent is in
thousands; any differences are
the result of rounding.
(1) Represents annualized straight-
line rent as of September 30,
2017.
(2) Includes states generating less
than 2.5% of annualized base
rent.
Lease Expiration
The following table presents contractual lease expirations within the Company's portfolio as of September 30, 2017, assuming no tenants exercise renewal options:
Year Leases Annualized Percent of Gross Percent of Gross
Base Rent(1) Annualized Leasable Area Leasable Area
Base Rent
--- ---------
2017 0 $0 0.0% 0 0.0%
2018 11 1,549 1.4% 279 3.4%
2019 13 4,125 3.7% 286 3.5%
2020 18 2,552 2.3% 220 2.7%
2021 27 5,456 4.8% 330 4.0%
2022 24 4,307 3.8% 394 4.8%
2023 36 6,250 5.5% 597 7.2%
2024 36 9,285 8.2% 907 11.0%
2025 37 7,309 6.5% 556 6.7%
2026 45 6,372 5.6% 637 7.7%
Thereafter 236 65,587 58.2% 4,057 49.0%
Total Portfolio 483 $112,792 100.0% 8,263 100.0%
=== ======== ===== ===== =====
Annualized base rent and gross
leasable area (square feet)
are in thousands; any
differences are the result of
rounding.
(1) Represents annualized straight-
line rent as of September 30,
2017.
Capital Markets and Balance Sheet
Capital Markets
During the three months ended September 30, 2017, the Company issued 589,093 shares of common stock under its at-the-market equity program ("ATM program") at an average price of $49.58, realizing gross proceeds of approximately $29.2 million.
Also within the quarter, the Company completed a private placement of $100 million principal amount of senior unsecured notes. The notes have a 12-year term, maturing on September 20, 2029, priced at fixed interest rate of 4.19%. The all-in pricing represented 165 basis points above the 12-year interpolated U.S. Treasury yield curve at the time of pricing.
Balance Sheet
As of September 30, 2017, the Company's net debt-to-recurring EBITDA was 4.7 times and its fixed charge coverage ratio was 4.1 times. The Company's total debt to total enterprise value was 25.2%. Total enterprise value is calculated as the sum of total debt and the market value of the Company's outstanding shares of common stock, assuming conversion of operating partnership units into common stock.
For the three months ended September 30, 2017, the Company's fully diluted weighted-average shares outstanding were 28.7 million. The basic weighted-average shares outstanding for the three months ended September 30, 2017 were 28.6 million.
For the three months ended September 30, 2017, the Company's fully diluted weighted-average shares and units outstanding were 29.0 million. The basic weighted-average shares and units outstanding for the three months ended September 30, 2017 were 28.9 million.
The Company's assets are held by, and its operations are conducted through, Agree Limited Partnership, of which the Company is the sole general partner. As of September 30, 2017, there were 347,619 operating partnership units outstanding and the Company held a 98.8% interest in the operating partnership.
2017 Outlook
The Company's outlook for acquisition volume in 2017 is being increased to a range of $300 million to $325 million of high-quality retail net lease properties. The Company's acquisition guidance, which assumes continued growth in economic activity, moderate interest rate growth, positive business trends and other significant assumptions, is being increased from a previous range of $250 million to $275 million. The Company's disposition guidance for 2017 remains between $30 million and $50 million.
Conference Call/Webcast
The Company will host its quarterly analyst and investor conference call on Tuesday, October 24, 2017 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 Invest section of the website. A replay of the conference call webcast will be archived and available online through the Invest section of www.agreerealty.com.
About Agree Realty Corporation
Agree Realty Corporation is a publicly traded real estate investment trust primarily engaged in the acquisition and development of properties net leased to industry-leading retail tenants. As of September 30, 2017, the Company owned and operated a portfolio of 425 properties, located in 43 states and containing approximately 8.3 million square feet of gross leasable space. The common stock of Agree Realty Corporation is listed on the New York Stock Exchange under the symbol "ADC". For additional information, please visit www.agreerealty.com.
Forward-Looking Statements
This press release may contain certain "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. 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. These risks and uncertainties are described in greater detail in the Company's filings with the Securities and Exchange Commission, including, without limitation, the Company's Annual Report on Form 10-K for the year ended December 31, 2016 and in 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 Invest section of the Company's website at www.agreerealty.com.
All information in this press release is as of October 23, 2017. The Company undertakes no duty to update the statements in this press release to conform the statements to actual results or changes in the Company's expectations.
Agree Realty Corporation
Consolidated Balance Sheet
($ in thousands, except share and per-share data)
September 30, 2017 December 31, 2016
------------------ -----------------
Assets: (Unaudited)
Real Estate Investments:
Land $371,047 $309,687
Buildings 820,138 703,506
Accumulated depreciation (80,356) (69,696)
Property under development 10,197 6,764
------
Net real estate investments 1,121,026 950,261
Real estate held for sale, net 9,003 -
Cash and cash equivalents 25,510 33,395
Cash held in escrows 1,779 -
Accounts receivable - tenants, net of allowance of $142 and $50 for 15,634 11,535
possible losses at September 30, 2017 and December 31, 2016,
respectively
Credit facility finance costs, net of accumulated amortization of $332 and 1,275 1,552
$1,262 at September 30, 2017 and December 31, 2016, respectively
Leasing costs, net of accumulated amortization of $772 and $677 at 1,601 1,227
September 30, 2017 and December 31, 2016, respectively
Lease intangibles, net of accumulated amortization of $36,875 and 184,920 139,871
$25,666 at September 30, 2017 and December 31, 2016, respectively
Interest rate swaps 1,232 1,409
Other assets 4,993 2,722
Total Assets $1,366,973 $1,141,972
========== ==========
Liabilities:
Mortgage notes payable, net $67,458 $69,067
Unsecured term loans, net 158,305 158,679
Senior unsecured notes, net 259,112 159,176
Unsecured revolving credit facility - 14,000
Dividends and distributions payable 14,930 13,124
Deferred revenue 1,452 1,823
Accrued interest payable 2,759 2,210
Accounts payable and accrued expenses:
Capital expenditures 145 677
Operating 7,381 4,866
Lease intangibles, net of accumulated amortization of $10,246 and 30,529 30,047
$7,079 at September 30, 2017 and December 31, 2016, respectively
Interest rate swaps 1,284 1,994
Deferred income taxes 705 705
Tenant deposits 96 94
Total Liabilities 544,156 456,462
------- -------
Equity:
Common stock, $.0001 par value, 45,000,000 shares authorized, 3 3
29,215,835 and 26,164,977 shares issued and outstanding at
September 30, 2017 and December 31, 2016, respectively
Preferred stock, $.0001 par value per share, 4,000,000 shares authorized
Series A junior participating preferred stock, $.0001 par value, 200,000 - -
authorized, no shares issued and outstanding
Additional paid-in capital 849,442 712,069
Dividends in excess of net income (29,136) (28,558)
Accumulated other comprehensive income (loss) (10) (536)
Equity - Agree Realty Corporation 820,299 682,978
------- -------
Non-controlling interest 2,518 2,532
Total Equity 822,817 685,510
------- -------
Total Liabilities and Equity $1,366,973 $1,141,972
========== ==========
Agree Realty Corporation
Consolidated Statements of Operations and Comprehensive Income
($ in thousands, except share and per share-data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------- -------------
2017 2016 2017 2016
---- ---- ---- ----
Revenues
Minimum rents $27,325 $22,279 $76,500 $60,682
Percentage rents - 7 212 197
Operating cost reimbursement 2,791 1,845 8,016 5,368
Other income 271 30 299 (18)
Total Revenues 30,387 24,161 85,027 66,229
Operating Expenses
Real estate taxes 2,149 1,473 5,988 4,035
Property operating expenses 931 169 2,641 1,669
Land lease payments 163 163 490 490
General and administrative 2,491 2,020 7,665 6,107
Depreciation and amortization 8,228 6,151 22,956 16,901
Total Operating Expenses 13,962 9,976 39,740 29,202
Income from Operations 16,425 14,185 45,287 37,027
Other (Expense) Income
Interest expense, net (4,666) (4,091) (13,213) (11,236)
Gain on sale of assets, net 524 4,415 10,045 7,133
Loss on debt extinguishment - (33) - (33)
Net Income 12,283 14,476 42,119 32,891
Less Net Income attributable to non-controlling interest 118 213 501 506
--- --- --- ---
Net Income Attributable to Agree Realty Corporation $12,165 $14,263 $41,618 $32,385
======= ======= ======= =======
Net Income Per Share Attributable to Agree Realty Corporation
Basic $0.42 $0.61 $1.53 $1.47
Diluted $0.42 $0.61 $1.52 $1.46
Other Comprehensive Income
Net Income $12,283 $14,476 $42,119 $32,891
Other Comprehensive Income (Loss) - Gain (Loss) on Interest Rate Swaps 203 1,378 533 (3,236)
Total Comprehensive Income 12,486 15,854 42,652 29,655
Comprehensive Income Attributable to Non-Controlling Interest (149) (229) (509) (456)
---- ---- ---- ----
Comprehensive Income Attributable to Agree Realty Corporation $12,337 $15,625 $42,143 $29,199
======= ======= ======= =======
Weighted Average Number of Common Shares Outstanding - Basic 28,573,022 23,454,083 26,988,589 22,034,389
Weighted Average Number of Common Shares Outstanding - Diluted 28,656,684 23,563,331 27,069,352 22,127,329
Agree Realty Corporation
Reconciliation of Net Income to FFO and Adjusted FFO
($ in thousands, except share and per-share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------- -------------
2017 2016 2017 2016
---- ---- ---- ----
Net Income $12,283 $14,476 $42,119 $32,891
Depreciation of real estate assets 5,101 3,947 14,286 10,904
Amortization of leasing costs 40 38 120 85
Amortization of lease intangibles 3,059 2,148 8,470 5,860
(Gain) loss on sale of assets, net (524) (4,415) (10,045) (7,133)
Funds from Operations $19,959 $16,194 $54,950 $42,607
------- ------- ------- -------
Straight-line accrued rent (860) (857) (2,545) (2,162)
Deferred revenue recognition - (309) - (541)
Stock based compensation expense 622 555 1,898 1,864
Amortization of financing costs 142 122 426 361
Non-real estate depreciation 28 19 80 53
Debt extinguishment costs - 33 - 33
Adjusted Funds from Operations $19,891 $15,757 $54,809 $42,215
------- ------- ------- -------
Funds from Operations per common share - Basic $0.69 $0.68 $2.01 $1.90
Funds from Operations per common share - Diluted $0.69 $0.68 $2.00 $1.90
Adjusted Funds from Operations per common share - Basic $0.69 $0.66 $2.00 $1.89
Adjusted Funds from Operations per common share - Diluted $0.69 $0.66 $2.00 $1.88
Weighted Average Number of Common Shares and Units Outstanding - Basic 28,920,641 23,801,702 27,336,208 22,382,007
Weighted Average Number of Common Shares and Units Outstanding - Diluted 29,004,303 23,910,950 27,416,971 22,474,948
Supplemental Information:
Scheduled principal repayments $797 $748 $2,343 $2,196
Capitalized interest 143 14 297 27
Capitalized building improvements 34 376 76 405
Non-GAAP Financial Measures
Funds from Operations ("FFO")
The Company considers the non-GAAP measures of FFO and FFO per share/unit to be key supplemental measures of the Company's performance and should be considered along with, but not as alternatives to, net income or loss as a measure of the Company's operating performance. Historical cost accounting for
real estate assets 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.
The White Paper on FFO approved by NAREIT in April 2002, as revised in 2011, defines FFO as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of properties and items classified by GAAP as extraordinary, plus real estate-related depreciation and amortization and
impairment writedowns, and after comparable adjustments for the Company's portion of these items related to unconsolidated entities and joint ventures. The Company computes FFO consistent with standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the
term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than the Company.
The Company believes that excluding the effect of extraordinary items, real estate-related depreciation and amortization and impairments, which are based on historical cost accounting and which may be of limited significance in evaluating current performance, can facilitate comparisons of operating
performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common shareholders. However, FFO may not be helpful when comparing the Company to non-REITs.
FFO does not represent cash generated from operating activities as determined by GAAP and should not be considered as alternatives to net income or loss, cash flows from operations or any other operating performance measure prescribed by GAAP. FFO is not a measurement of the Company's liquidity, nor is FFO
indicative of funds available to fund the Company's cash needs, including its ability to make cash distributions. These measurements do not reflect cash expenditures for long-term assets and other items that have been and will be incurred. FFO may include funds that may not be available for management's
discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties. To compensate for this, management considers the impact of these excluded items to the extent they are material to operating decisions or the
evaluation of the Company's operating performance.
Adjusted Funds from Operations
The Company presents adjusted FFO (including adjusted FFO per share/unit), which adjusts for certain additional items including straight-line accrued rent, deferred revenue recognition, stock based compensation expense, non-real estate depreciation and debt extinguishment costs and certain other items.
The Company excludes these items as it believes it allows for meaningful comparisons with other REITs and between periods and is more indicative of the ongoing performance of its assets. As with FFO, the Company's calculation of adjusted FFO may be different from similar adjusted measures calculated by
other REITs.
Any differences are a result of rounding.
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SOURCE Agree Realty Corporation
