PR Newswire | Oct 19, 2020 04:06PM EDT

10/19 15:05 CDT

Agree Realty Corporation Reports Third Quarter 2020 ResultsINVESTS A RECORD $471 MILLION; INCREASES ACQUISITION GUIDANCE TO $1.25 BILLION TO $1.35 BILLION BLOOMFIELD HILLS, Mich., Oct. 19, 2020

BLOOMFIELD HILLS, Mich., Oct. 19, 2020 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) (the "Company") today announced results for the quarter ended September 30, 2020. All per share amounts included herein are on a diluted per common share basis unless otherwise stated.

Third Quarter 2020 Financial and Operating Highlights:

* Invested a record $470.7 million in 97 retail net lease properties * 16.0% of annualized base rents acquired were derived from ground leased assets * Commenced three new development and Partner Capital Solutions ("PCS") projects * Net Income per share attributable to the Company decreased 19.8% to $0.39 * Net Income attributable to the Company increased 3.3% to $21.3 million * Increased Core Funds from Operations ("Core FFO") per share 3.5% to $0.81 * Increased Core FFO 33.2% to $44.5 million * Increased Adjusted Funds from Operations ("AFFO") per share 4.0% to $0.80 * Increased AFFO 33.9% to $43.8 million * Declared a quarterly dividend of $0.60 per share, a 5.3% year-over-year increase * Completed inaugural public bond offering of $350.0 million of 2.90% senior unsecured notes due 2030 * Sold 885,912 shares of common stock via the forward component of the Company's at-the-market equity ("ATM") program for anticipated net proceeds of $58.4 million * Settled 1,515,000 shares of the Company's outstanding April 2020 forward equity offering for net proceeds of approximately $88.0 million

Financial Results

Net Income

Net Income attributable to the Company for the three months ended September 30, 2020 increased 3.3% to $21.3 million, compared to $20.6 million for the comparable period in 2019. Net Income per share attributable to the Company for the three months ended September 30, 2020 decreased 19.8% to $0.39, compared to $0.48 per share for the comparable period in 2019.

Net Income attributable to the Company for the nine months ended September 30, 2020 increased 17.8% to $67.8 million, compared to $57.5 million for the comparable period in 2019. Net Income per share attributable to the Company for the nine months ended September 30, 2020 decreased 6.3% to $1.32, compared to $1.41 per share for the comparable period in 2019.

Core Funds from Operations

Core FFO for the three months ended September 30, 2020 increased 33.2% to $44.5 million, compared to Core FFO of $33.4 million for the comparable period in 2019. Core FFO per share for the three months ended September 30, 2020 increased 3.5% to $0.81, compared to Core FFO per share of $0.78 for the comparable period in 2019.

Core FFO for the nine months ended September 30, 2020 increased 32.2% to $122.9 million, compared to Core FFO of $92.9 million for the comparable period in 2019. Core FFO per share for the nine months ended September 30, 2020 increased 5.2% to $2.39, compared to Core FFO per share of $2.27 for the comparable period in 2019.

Adjusted Funds from Operations

AFFO for the three months ended September 30, 2020 increased 33.9% to $43.8 million, compared to AFFO of $32.7 million for the comparable period in 2019. AFFO per share for the three months ended September 30, 2020 increased 4.0% to $0.80, compared to AFFO per share of $0.77 for the comparable period in 2019.

AFFO for the nine months ended September 30, 2020 increased 33.7% to $121.7 million, compared to AFFO of $91.0 million for the comparable period in 2019. AFFO per share for the nine months ended September 30, 2020 increased 6.4% to $2.36, compared to AFFO per share of $2.22 for the comparable period in 2019.

Dividend

The Company paid a cash dividend of $0.60 per share on October 9, 2020 to stockholders of record on September 25, 2020, a 5.3% increase over the $0.570 quarterly dividend declared in the third quarter of 2019. The quarterly dividend represents payout ratios of approximately 74% of Core FFO per share and 75% of AFFO per share, respectively.

For the nine months ended September 30, 2020, the Company declared dividends of $1.785 per share, a 5.3% increase over the dividends of $1.695 per share declared for the comparable period in 2019. The dividends represent payout ratios of approximately 75% of Core FFO per share and 76% of AFFO per share, respectively.

CEO Comments

"We are extremely pleased with our record performance during the quarter as we deployed our war chest into a myriad of high-quality investment opportunities amidst the ongoing disruption caused by COVID-19," said Joey Agree, President and Chief Executive Officer. "Our rent collections of more than 97% during the third quarter, including 99% in September, are evidence of the stability of our best-in-class retail portfolio. Given our record year-to-date investment volume and strong pipeline, we are increasing our full-year acquisition guidance to a range of $1.25 billion to $1.35 billion. While increasing our acquisition guidance, we remain committed to our rigorous underwriting standards and we will maintain balance sheet strength and flexibility."

Portfolio Update

As of September 30, 2020, the Company's growing portfolio consisted of 1,027 properties located in 45 states and totaled approximately 21.0 million square feet of gross leasable area.

The portfolio was approximately 99.8% leased, had a weighted-average remaining lease term of approximately 9.8 years, and generated 62.2% of annualized base rents from investment grade retail tenants or parent entities thereof.

COVID-19 Rental Payment Update

As of October 16, 2020, the Company received July, August and September rent payments from 96%, 97% and 99% of its portfolio, respectively. In the aggregate, the Company received third quarter rent payments from 97% of its portfolio. The Company has entered into deferral agreements representing 3% of July rents, 2% of August rents and less than 1% of September rents. In the aggregate, the Company entered into deferral agreements representing 2% of third quarter rents.

Ground Lease Portfolio

During the quarter, the Company acquired five properties for an aggregate purchase price of approximately $83.4 million, each of which are ground leased to industry-leading tenants. Notable acquisitions included the Company's first Wegmans in Chapel Hill, North Carolina, a Walmart and Home Depot in Pittsfield, Massachusetts and a Home Depot in Paterson, New Jersey.

As of September 30, 2020, the Company's ground lease portfolio consisted of 73 properties located in 25 states and totaled approximately 2.8 million square feet of gross leasable area. Properties ground leased to tenants increased to 8.8% of annualized base rents.

The ground lease portfolio was fully occupied, had a weighted-average remaining lease term of approximately 11.6 years, and generated 91.3% of annualized base rents from investment grade retail tenants or parent entities thereof.

Acquisitions

Total acquisition volume for the third quarter of 2020 was approximately $458.3 million and included 91 properties net leased to leading retailers operating in sectors including off-price retail, home improvement, auto parts, general merchandise, dollar stores, convenience stores, grocery stores and tire and auto service. The properties are located in 26 states and leased to tenants operating in 15 sectors.

The properties were acquired at a weighted-average capitalization rate of 6.4% and had a weighted-average remaining lease term of approximately 11.5 years. Approximately 72.1% of annualized base rents acquired were generated from investment grade retail tenants or parent entities thereof. Approximately 16.0% of annualized base rents acquired were derived from ground leased assets.

For the nine months ended September 30, 2020, total acquisition volume was approximately $957.8 million. The 217 acquired properties are located in 35 states and leased to 38 diverse tenants who operate in 18 retail sectors. The properties were acquired at a weighted-average capitalization rate of 6.4% and had a weighted-average remaining lease term of approximately 11.2 years. Approximately 78.2% of annualized base rents were generated from investment grade retail tenants or parent entities thereof. Approximately 9.5% of annualized base rents acquired were derived from ground leased assets.

The Company's outlook for total acquisition volume in 2020, which includes several significant assumptions, is being increased to a range of $1.25 billion to $1.35 billion from a previous range of $900 million to $1.1 billion.

Dispositions

During the third quarter, the Company sold two properties for gross proceeds of approximately $3.5 million. The dispositions were completed at a weighted-average capitalization rate of 5.6%. During the nine months ended September 30, 2020, the Company divested 16 properties for total gross proceeds of $47.6 million. The weighted-average capitalization rate of the dispositions was 7.0%.

The Company's disposition guidance for 2020 remains between $50 million to $75 million.

Development and Partner Capital Solutions

During the quarter, the Company commenced three new development and PCS projects, with total anticipated costs of approximately $10.1 million. The projects consist of the Company's first developments with O'Reilly Auto Parts, Grocery Outlet and Tire Discounters.

Construction continued during the third quarter on the Company's second development with Harbor Freight Tools in Weslaco, Texas, which is expected to be completed in the fourth quarter of 2020.

The Company completed two development and PCS projects during the quarter, including the Company's first development with TJ Maxx in Harlingen, Texas and a Burlington and Tractor Supply in Columbus, Ohio.

For the nine months ended September 30, 2020, the Company had 10 development or PCS projects completed or under construction. Anticipated total costs are approximately $37.3 million and include the following projects:

Lease Lease Actual orTenant Location Structure Term Anticipated Rent Status Commencement

ALDI Frankfort, KY Build-to-Suit 10 years Q4 2019 Complete

Harbor Freight Tools Frankfort, KY Build-to-Suit 10 years Q4 2019 Complete

Big Lots Frankfort, KY Build-to-Suit 10 years Q1 2020 Complete

Tractor Supply Hart, MI Build-to-Suit 10 years Q1 2020 Complete

Sunbelt Rentals Converse, TX Build-to-Suit 10 years Q1 2020 Complete

Family Dollar Grayling, MI Build-to-Suit 7 Years Q2 2020 Complete

TJ Maxx Harlingen, TX Build-to-Suit 10 years Q3 2020 Complete

Burlington Columbus, OH Build-to-Suit 10 years Q3 2020 Complete

Tractor Supply Columbus, OH Build-to-Suit 10 years Q3 2020 Complete

Harbor Freight Tools Weslaco, TX Build-to-Suit 15 Years Q4 2020 Under Construction

O'Reilly Auto Parts Mayflower, AR Build-to-Suit 10 years Q4 2020 Under Construction

Tire Discounters Westerville, OH Build-to-Suit 15 Years Q4 2020 Under Construction

Grocery Outlet Port Angeles, WA Build-to-Suit 15 years Q2 2021 Under Construction

Leasing Activity and Expirations

During the third quarter, the Company executed new leases, extensions or options on approximately 106,000 square feet of gross leasable area throughout the existing portfolio. Notable leasing activity in the quarter included new twenty-year leases on three Wawa convenience stores located in the Mid-Atlantic. The three leases were previously set to expire in 2021.

For the nine months ended September 30, 2020, the Company executed new leases, extensions or options on approximately 436,000 square feet of gross leasable area throughout the existing portfolio.

As of September 30, 2020, the Company's 2020 lease maturities represented 0.2% of annualized base rents. The following table presents contractual lease expirations within the Company's portfolio as of September 30, 2020, assuming no tenants exercise renewal options:

Annualized Percent of Gross Percent of GrossYear Leases Base Rent^(1) Annualized Leasable Area Base Rent Leasable Area

2020 4 406 0.2% 73 0.3%

2021 16 2,519 1.0% 157 0.7%

2022 18 3,713 1.4% 340 1.6%

2023 39 7,729 2.9% 921 4.4%

2024 39 13,815 5.2% 1,596 7.6%

2025 58 14,196 5.4% 1,339 6.4%

2026 78 14,996 5.7% 1,519 7.3%

2027 78 17,387 6.6% 1,336 6.4%

2028 78 20,177 7.6% 1,727 8.2%

2029 105 31,367 11.8% 2,761 13.2%

Thereafter 601 138,494 52.2% 9,172 43.9%

Total Portfolio 1,114 $264,799 100.0% 20,941 100.0%

The contractual lease expirations presented above exclude the effect of replacement tenant leases that had been executed as of September 30, 2020 but that had not yet commenced. Annualized Base Rent and gross leasable area (square feet) are in thousands; any differences are the result of rounding.

Annualized Base Rent represents the annualized amount of contractual minimum rent required by tenant lease agreements as of September 30, 2020, computed on a straight-line basis. Annualized Base Rent is not, and is not(1) 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.

Top Tenants

The Company added Kroger to its top tenants during the third quarter of 2020. As of September 30, 2020, Wawa is no longer among the Company's 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, 2020:

Annualized Percent ofTenant Base Rent^(1) Annualized Base Rent

Walmart $19,643 7.4%

Dollar General 12,310 4.6%

TJX Companies 10,450 3.9%

Tractor Supply 10,295 3.9%

Sherwin-Williams 10,077 3.8%

Best Buy 8,973 3.4%

O'Reilly Auto Parts 7,959 3.0%

Hobby Lobby 7,226 2.7%

Lowe's 6,901 2.6%

Home Depot 6,841 2.6%

TBC Corporation 6,619 2.5%

Walgreens 6,594 2.5%

Burlington 6,240 2.4%

CVS 5,530 2.1%

Dollar Tree 5,168 2.0%

AutoZone 5,098 1.9%

LA Fitness 5,091 1.9%

Sunbelt Rentals 4,735 1.8%

Kroger 4,072 1.5%

Other^(2) 114,977 43.5%

Total Portfolio $264,799 100.0%

Annualized Base Rent is in thousands; any differences are the result of rounding.

Bolded and italicized tenants represent additions for the three months ended September 30, 2020.

(1) Refer to footnote 1 on page 5 for the Company's definition of Annualized Base Rent.

(2) Includes tenants generating less than 1.5% of Annualized Base Rent.

Retail Sectors

The following table presents annualized base rents for all of the Company's retail sectors as of September 30, 2020:

Percent of Q3 2020 RentSector Annualized Annualized Payments Base Rent^(1) Received^(2) Base Rent

Home Improvement $27,044 10.2% 100%

Grocery Stores 21,131 8.0% 100%

General Merchandise 19,727 7.4% 100%

Tire and Auto Service 19,629 7.4% 98%

Off-Price Retail 18,902 7.1% 84%

Dollar Stores 16,269 6.1% 100%

Convenience Stores 16,216 6.1% 100%

Auto Parts 14,831 5.6% 100%

Pharmacy 12,944 4.9% 100%

Farm and Rural Supply 11,246 4.2% 100%

Consumer Electronics 10,555 4.0% 100%

Crafts and Novelties 9,430 3.6% 100%

Health and Fitness 7,499 2.8% 82%

Home Furnishings 5,485 2.1% 100%

Restaurants - Quick Service 5,286 2.0% 98%

Health Services 5,271 2.0% 100%

Equipment Rental 5,061 1.9% 100%

Warehouse Clubs 4,988 1.9% 100%

Specialty Retail 4,949 1.9% 90%

Discount Stores 4,353 1.6% 98%

Dealerships 4,273 1.6% 100%

Theaters 3,854 1.5% 81%

Entertainment Retail 3,117 1.2% 100%

Pet Supplies 2,597 1.0% 100%

Restaurants - Casual Dining 2,207 0.8% 88%

Sporting Goods 2,020 0.8% 100%

Financial Services 2,001 0.8% 100%

Apparel 1,271 0.5% 72%

Shoes 1,019 0.4% 82%

Beauty and Cosmetics 878 0.3% 100%

Office Supplies 659 0.2% 100%

Miscellaneous 87 0.1% 100%

Total Portfolio $264,799 100.0% 97%

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.

Reflects the contractual rent paid as a percentage of the total contractual rent due for the three months ended September 30, 2020 for each respective sector. Beginning in 2020, the Company began providing supplemental disclosures due to the COVID-19 pandemic. "Contractual rent" for any period(2) means the recurring cash amount charged to tenants, inclusive of monthly base rent and recurring operating cost reimbursements due pursuant to lease agreements, for such period. "Contractual rent" has not been adjusted for any rent relief granted and includes amounts charged to tenants in bankruptcy.

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, 2020:

Annualized Percent ofState Base Rent^(1) Annualized Base Rent

Michigan $19,248 7.3%

Texas 18,632 7.0%

North Carolina 14,811 5.6%

Florida 14,784 5.6%

Ohio 13,554 5.1%

Illinois 13,546 5.1%

Pennsylvania 11,931 4.5%

New Jersey 10,570 4.0%

Georgia 10,347 3.9%

New York 9,653 3.6%

California 9,081 3.4%

Wisconsin 8,435 3.2%

Virginia 8,001 3.0%

Missouri 7,688 2.9%

Mississippi 6,932 2.6%

Louisiana 6,682 2.5%

Other^(2) 80,904 30.7%

Total Portfolio $264,799 100.0%

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.

Capital Markets and Balance Sheet

Capital Markets

During the second and third quarter of 2020, the Company entered into forward sale agreements for an aggregate of 7,795,438 shares of common stock. On September 28, 2020, the Company settled 1,515,000 shares under an existing forward sale agreement and received net proceeds of approximately $88.0 million.

At quarter end, the Company had 6,280,438 shares remaining to be settled under existing forward sale agreements, which are anticipated to raise net proceeds of approximately $376.4 million after deducting fees and expenses and making certain other adjustments as provided in the forward sale agreement and equity distribution agreements.

The following table presents the Company's outstanding forward equity offerings as of September 30, 2020:

Forward Equity Net Anticipated Shares Shares Shares Proceeds NetOfferings Sold Settled Remaining Received Proceeds Remaining

April 2020 6,166,666 1,515,000 4,651,666 $87,988,928 $270,148,200Forward Offering

Q2 2020 ATM 742,860 - 742,860 - $47,826,682Forward Offerings

Q3 2020 ATM 885,912 - 885,912 - $58,421,636Forward Offerings

Total Forward 7,795,438 1,515,000 6,280,438 $87,988,928 $376,396,518Equity Offerings

On August 17, 2020, the Company completed its inaugural public bond offering of $350.0 million of 2.90% senior unsecured notes due 2030 (the "Notes"). The public offering price for the Notes was 99.93% of the principal amount for an effective yield to maturity of 2.91%. The Notes are senior unsecured obligations of Agree Limited Partnership (the "Operating Partnership"), guaranteed by the Company and certain of their subsidiary guarantors.

Balance Sheet

As of September 30, 2020, the Company's net debt to recurring EBITDA was 4.7 times and its fixed charge coverage ratio was 4.8 times. The Company's proforma net debt to recurring EBITDA was 3.2 times when deducting the $376.4 million of anticipated net proceeds from the April 2020 Forward Offering and the ATM Forward Offerings from the Company's net debt of $1.1 billion as of September 30, 2020.

The Company's total debt to enterprise value was 24.6% as of September 30, 2020. Enterprise value is calculated as the sum of net 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 and nine months ended September 30, 2020, the Company's fully diluted weighted-average shares outstanding were 54.6 million and 51.2 million, respectively. The basic weighted-average shares outstanding for the three and nine months ended September 30, 2020 were 53.7 million and 50.6 million, respectively.

For the three and nine months ended September 30, 2020, the Company's fully diluted weighted-average shares and units outstanding were 54.9 million and 51.5 million, respectively. The basic weighted-average shares and units outstanding for the three and nine months ended September 30, 2020 were 54.1 million and 51.0 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, 2020, there were 347,619 Operating Partnership units outstanding and the Company held a 99.4% interest in the Operating Partnership.

Conference Call/Webcast

The Company will host its quarterly analyst and investor conference call on Tuesday, October 20, 2020 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, 2020, the Company owned and operated a portfolio of 1,027 properties, located in 45 states and containing approximately 21.0 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, please visit www.agreerealty.com.

Forward-Looking Statements

This press release contains forward-looking statements, including statements about projected financial and operating results,within the meaning ofSection 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," "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 or other forward-looking information. Although these forward-looking statements are based on good faith beliefs, reasonable assumptions and the Company's best judgment reflecting current information, you should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company's control and which could materially affect the Company's results of operations, financial condition, cash flows, performance or future achievements or events. Currently, one of the most significant factors, however, is the potential adverse effect of the current pandemic of the novel coronavirus, or COVID-19, 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 extent to which COVID-19 impacts the Company and its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, investors are cautioned to interpret many of the risks identified in the risk factors discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 and other filings with the Securities and Exchange Commission (the "SEC") including the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2020, as well as the risks set forth below, as being heightened as a result of the ongoing and numerous adverse impacts of 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, 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 factors discussed in the Company's reports filed with the SEC. The forward-looking statements included in this press release are made as of the date hereof. Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, changes in the Company's expectations or assumptions 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 Investor Relations section of the Company's website at www.agreerealty.com.

The Company defines the "weighted-average capitalization rate" for acquisitions and dispositions as the sum of contractual fixed annual rents computed on a straight-line basis over the primary lease terms and anticipated annual net tenant recoveries, divided by the purchase and sale prices.

Agree Realty Corporation

Consolidated Balance Sheet

($ in thousands, except share and per-share data)

(Unaudited)

September 30, 2020 December 31, 2019

Assets:

Real EstateInvestments:

Land $ 981,476 $ 735,991

Buildings 2,184,620 1,600,293

Accumulated (158,719) (127,748)depreciation

Property under 8,229 10,056development

Net real estate 3,015,606 2,218,592investments

Real estateheld for sale, - # 3,750net

Cash and cash 14,715 15,603equivalents

Cash held in 1,515 26,554escrows

Accountsreceivable - 39,309 26,808tenants

Leaseintangibles,net ofaccumulatedamortization of$114,990 and 422,373 343,514$89,118 atSeptember 30,2020 andDecember 31,2019,respectively

Other assets, 54,096 29,709net

Total Assets $ 3,547,614 $ 2,664,530

Liabilities:

Mortgage notes $ 33,304 $ 36,698payable, net

Unsecured term 237,765 237,403loans, net

Seniorunsecured 855,232 509,198notes, net

Unsecuredrevolving 20,000 89,000credit facility

Dividends anddistributions 32,522 25,014payable

Accountspayable,accrued 67,871 48,987expenses andotherliabilities

Leaseintangibles,net ofaccumulatedamortization of$23,067 and 35,533 26,668$19,307 atSeptember 30,2020 andDecember 31,2019,respectively

Total $ 1,282,227 $ 972,968Liabilities

Equity:

Common stock,$.0001 parvalue,90,000,000sharesauthorized,55,370,525 and45,573,623 $ 6 $ 5shares issuedand outstandingat September30, 2020 andDecember 31,2019,respectively

Preferredstock, $.0001par value pershare, - -4,000,000sharesauthorized

Additional 2,384,331 1,752,912paid-in capital

Dividends inexcess of net (80,627) (57,094)income

Accumulatedother (40,140) (6,492)comprehensiveincome (loss)

Total Equity -Agree Realty $ 2,263,570 $ 1,689,331Corporation

Non-controlling 1,817 2,231interest

Total Equity $ 2,265,387 $ 1,691,562

TotalLiabilities and $ 3,547,614 $ 2,664,530Equity

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,

2020 2019 2020 2019

Revenues

Rental Income $ 63,701 $ 48,020 $ 176,960 $ 135,240

Other 109 55 193 102

Total Revenues $ 63,810 $ 48,075 $ 177,153 $ 135,342

OperatingExpenses

Real estate $ 5,516 $ 3,674 $ 15,058 $ 11,016taxes

Propertyoperating 2,108 1,598 6,303 4,832expenses

Land lease 325 354 977 922expense

General and 4,756 3,832 13,999 11,746administrative

Depreciationand 17,327 11,897 47,067 32,597amortization

Provision for 2,868 - 3,996 1,609impairment

Total Operating $ 32,900 $ 21,355 $ 87,400 $ 62,722Expenses

Income from $ 30,910 $ 26,720 $ 89,753 $ 72,620Operations

Other (Expense)Income

Interest $ (10,158) $ (8,352) $ (28,307) $ (23,363)expense, net

Gain (loss) onsale of assets, 970 2,597 7,567 8,973net

Income tax(expense) (306) (184) (826) (210)benefit

Other (expense) - - 23 -income

Net Income $ 21,416 $ 20,781 $ 68,210 $ 58,020

Less Net IncomeAttributable to 136 170 444 498Non-ControllingInterest

Net IncomeAttributable to $ 21,280 $ 20,611 $ 67,766 $ 57,522Agree RealtyCorporation

Net Income PerShareAttributable toAgree RealtyCorporation

Basic $ 0.39 $ 0.49 $ 1.33 $ 1.43

Diluted $ 0.39 $ 0.48 $ 1.32 $ 1.41

OtherComprehensiveIncome

Net Income $ 21,416 $ 20,781 $ 68,210 $ 58,020

Changes in fairvalue of 24,555 (7,418) (10,714) (14,617)interest rateswaps

Realized gain(loss) onsettlement of (23,135) - (23,169) 802interest rateswaps

TotalComprehensive 22,836 13,363 34,327 44,205Income (Loss)

ComprehensiveIncomeAttributable to (152) (109) (187) (367)Non-ControllingInterest

ComprehensiveIncomeAttributable to $ 22,684 $ 13,254 $ 34,140 $ 43,838Agree RealtyCorporation

WeightedAverage Numberof Common 53,721,956 41,832,457 50,637,569 39,992,703SharesOutstanding -Basic

WeightedAverage Numberof Common 54,555,672 42,318,042 51,151,462 40,625,441SharesOutstanding -Diluted

Agree Realty Corporation

Reconciliation of Net Income to FFO, Core FFO and Adjusted FFO

($ in thousands, except share and per-share data)

(Unaudited)

Three months ended Nine months ended September 30, September 30,

2020 2019 2020 2019

Net Income $ 21,416 $ 20,781 $ 68,210 $ 58,020

Depreciationof rental 12,669 8,866 34,387 24,785real estateassets

Amortizationof leaseintangibles - 4,523 2,965 12,315 7,618in-placeleases andleasing costs

Provision for 2,868 - 3,996 1,609impairment

(Gain) losson sale of (970) (2,597) (7,567) (8,973)assets, net

Funds from $ 40,506 $ 30,015 $ 111,341 $ 83,059Operations

Amortizationof above(below) 3,964 3,381 11,552 9,882market leaseintangibles,net

Core Fundsfrom $ 44,470 $ 33,396 $ 122,893 $ 92,941Operations

Straight-line (2,294) (1,975) (5,614) (5,165)accrued rent

Deferred taxexpense - - - (475)(benefit)

Stock basedcompensation 1,233 1,033 3,471 2,972expense

Amortizationof financing 223 176 560 541costs

Non-realestate 135 66 365 194depreciation

AdjustedFunds from $ 43,767 $ 32,696 $ 121,675 $ 91,008Operations

Funds fromOperations $ 0.75 $ 0.71 $ 2.18 $ 2.06Per Share -Basic

Funds fromOperations $ 0.74 $ 0.70 $ 2.16 $ 2.03Per Share -Diluted

Core FundsfromOperations $ 0.82 $ 0.79 $ 2.41 $ 2.30Per Share -Basic

Core FundsfromOperations $ 0.81 $ 0.78 $ 2.39 $ 2.27Per Share -Diluted

AdjustedFunds fromOperations $ 0.81 $ 0.78 $ 2.39 $ 2.26Per Share -Basic

AdjustedFunds fromOperations $ 0.80 $ 0.77 $ 2.36 $ 2.22Per Share -Diluted

WeightedAverageNumber ofCommon Shares 54,069,575 42,180,076 50,985,188 40,340,322and UnitsOutstanding -Basic

WeightedAverageNumber ofCommon Shares 54,903,291 42,665,661 51,499,081 40,973,060and UnitsOutstanding -Diluted

Additionalsupplementaldisclosure

Scheduledprincipal $ 236 $ 543 $ 699 $ 2,150repayments

Capitalized 54 118 109 321interest

Capitalizedbuilding 973 240 3,248 1,200improvements

Contractualrents subject 1,000 - 3,157 -to deferral^(1)

Uncollectedcontractualrents not 494 - 2,693 -subject todeferral^(1)

(1) Beginning in the second quarter of 2020, the Company began providingsupplemental disclosures due to the COVID-19 pandemic. "Contractual rent" forany period means the recurring cash amount charged to tenants, inclusive ofmonthly base rent and recurring operating cost reimbursements due pursuant tolease agreements, for such period. "Contractual rents subject to deferral" arepresented net of amounts repaid under deferral agreements. "Uncollectedcontractual rents not subject to deferral" as used within this table excluderents that have been deemed uncollectible for purposes of ASC 842. Rents deemeduncollectible are excluded from the reported net income and funds fromoperations measures in the reconciliation above.

Non-GAAP Financial Measures

Funds from 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, excludinggains (or losses) from sales of real estate assets and/or changes in control,plus real estate related depreciation and amortization and any impairmentcharges on depreciable real estate assets, and after adjustments forunconsolidated partnerships and joint ventures. Historical cost accounting forreal estate assets in accordance with GAAP implicitly assumes that the value ofreal estate assets diminishes predictably over time. Since real estate valuesinstead have historically risen or fallen with market conditions, most realestate industry investors consider FFO to be helpful in evaluating a realestate company's operations. FFO should not be considered an alternative to netincome as the primary indicator of the Company's operating performance, or asan alternative to cash flow as a measure of liquidity. Further, while theCompany adheres to the Nareit definition of FFO, its presentation of FFO is notnecessarily comparable to similarly titled measures of other REITs due to thefact that all REITs may not use the same definition.

Core Funds from Operations ("Core FFO")The Company defines Core FFO as Nareit FFO with the addback of noncashamortization of above- and below- market lease intangibles. Under Nareit'sdefinition of FFO, lease intangibles created upon acquisition of a net leasemust be amortized over the remaining term of the lease. The Company believesthat by recognizing amortization charges for above- and below-market leaseintangibles, the utility of FFO as a financial performance measure can bediminished. Management believes that its measure of Core FFO facilitates usefulcomparison of performance to its peers who predominantly transact insale-leaseback transactions and are thereby not required by GAAP to allocatepurchase price to lease intangibles. Unlike many of its peers, the Company hasacquired the substantial majority of its net leased properties throughacquisitions of properties from third parties or in connection with theacquisitions of ground leases from third parties. Core FFO should not beconsidered an alternative to net income as the primary indicator of theCompany's operating performance, or as an alternative to cash flow as a measureof liquidity. Further, the Company's presentation of Core FFO is notnecessarily comparable to similarly titled measures of other REITs due to thefact that all REITs may not use the same definition.

Adjusted Funds from Operations ("AFFO")AFFO is a non-GAAP financial measure of operating performance used by manycompanies in the REIT industry. AFFO further adjusts FFO and Core FFO forcertain non-cash and/or infrequently recurring items that reduce or increasenet income computed in accordance with GAAP. Management considers AFFO a usefulsupplemental measure of the Company's performance, however, AFFO should not beconsidered an alternative to net income as an indication of its performance, orto cash flow as a measure of liquidity or ability to make distributions. TheCompany's computation of AFFO may differ from the methodology for calculatingAFFO used by other equity REITs, and therefore may not be comparable to suchother REITs.

Agree Realty Corporation

Reconciliation of Net Debt to Recurring EBITDA

($ in thousands, except share and per-share data)

(Unaudited)

Three months ended September 30,

2020

Net Income $ 21,416

Interest expense, net 10,158

Income tax expense 306

Depreciation of rental real estate assets 12,669

Amortization of lease intangibles - in-place 4,523leases and leasing costs

Non-real estate depreciation 135

Provision for impairment 2,868

(Gain) loss on sale of assets, net (970)

EBITDAre $ 51,105

Run-Rate Impact of Investment, Disposition and $ Leasing Activity 5,093

Amortization of above (below) market lease 3,964intangibles, net

Recurring EBITDA $ 60,162

Annualized Recurring EBITDA $ 240,648

Total Debt $ 1,153,642

Cash, cash equivalents and cash held in escrows (16,230)

Net Debt $ 1,137,412

Net Debt to Recurring EBITDA 4.7x

Net Debt $ 1,137,412

Anticipated Net Proceeds from ATM Forward (106,248)Offerings

Anticipated Net Proceeds from April 2020 Forward (270,148)Offering

Proforma Net Debt $ 761,016

Proforma Net Debt to Recurring EBITDA 3.2x

Non-GAAP Financial Measures

EBITDAreEBITDAre is defined by Nareit to mean net income computed in accordance withGAAP, plus interest expense, income tax expense, depreciation and amortization,any gains (or losses) from sales of real estate assets and/or changes incontrol, any impairment charges on depreciable real estate assets, and afteradjustments for unconsolidated partnerships and joint ventures. The Companyconsiders the non-GAAP measure of EBITDAre to be a key supplemental measure ofthe Company's performance and should be considered along with, but not as analternative to, net income or loss as a measure of the Company's operatingperformance. The Company considers EBITDAre a key supplemental measure of theCompany's operating performance because it provides an additional supplementalmeasure of the Company's performance and operating cash flow that is widelyknown by industry analysts, lenders and investors. The Company's calculation ofEBITDAre may not be comparable to EBITDAre reported by other REITs thatinterpret the Nareit definition differently than the Company.

Recurring EBITDAThe Company defines Recurring EBITDA as EBITDAre with the addback of noncashamortization of above- and below- market lease intangibles, and afteradjustments for the run-rate impact of the Company's investment and dispositionactivity for the period presented, as well as adjustments for non-recurringbenefits or expenses. The Company considers the non-GAAP measure of RecurringEBITDA to be a key supplemental measure of the Company's performance and shouldbe considered along with, but not as an alternative to, net income or loss as ameasure of the Company's operating performance. The Company considers RecurringEBITDA a key supplemental measure of the Company's operating performancebecause it represents the Company's earnings run rate for the period presentedand because it is widely followed by industry analysts, lenders and investors. Our Recurring EBITDA may not be comparable to Recurring EBITDA reported byother companies that have a different interpretation of the definition ofRecurring EBITDA. Our ratio of net debt to Recurring EBITDA is used bymanagement as a measure of leverage and may be useful to investors inunderstanding the Company's ability to service its debt, as well as assess theborrowing capacity of the Company. Our ratio of net debt to Recurring EBITDAis calculated by taking annualized Recurring EBITDA and dividing it by our netdebt per the consolidated balance sheet.

Net DebtThe Company defines Net Debt as total debt less cash, cash equivalents and cashheld in escrows. The Company considers the non-GAAP measure of Net Debt to be akey supplemental measure of the Company's overall liquidity, capital structureand leverage. The Company considers Net Debt a key supplemental measure becauseit provides industry analysts, lenders and investors useful information inunderstanding our financial condition. The Company's calculation of Net Debtmay not be comparable to Net Debt reported by other REITs that interpret thedefinition differently than the Company. The Company presents Net Debt on bothan actual and proforma basis, assuming the net proceeds of the ATM ForwardOfferings (see below) are used to pay down debt. The Company believes theproforma measure may be useful to investors in understanding the potentialeffect of the ATM Forward Offerings on the Company's capital structure, itsfuture borrowing capacity, and its ability to service its debt.

ATM Forward Offerings and April 2020 Forward OfferingThe Company has 1,628,772 shares remaining to be settled under the ATM ForwardOfferings. Upon settlement, the offerings are anticipated to raise net proceedsof approximately $106.2 million based on the applicable forward sale prices asof September 30, 2020. The applicable forward sale price varies depending onthe offering. The Company is contractually obligated to settle the ATM ForwardOfferings by certain dates between May 2021 and September 2021. On April 20,2020, the Company commenced an underwritten public offering of 6,166,666 sharesof common stock in connection with a forward sale agreement at a publicoffering price of $60.00 per share. On September 28, 2020, the Company settled1,515,000 shares and received net proceeds of approximately $88.0 million. The4,651,666 shares remaining under the April 2020 Forward Offering areanticipated to raise net proceeds of approximately $270.1 million based on theapplicable forward sale price as of September 30, 2020. The Company iscontractually obligated to settle the offering in full by April 2021.

Agree Realty Corporation

Rental Income

($ in thousands, except share and per share-data)

(Unaudited)

Three months ended Nine months ended September 30, September 30,

2020 2019 2020 2019

Rental Income Source^(1)

Minimum rents^(2) $ 58,578 $ 44,558 $ 163,045 $ 124,789

Percentage rents^(2) - - 249 287

Operating cost reimbursement^(2) 6,793 4,868 19,604 14,881

Straight-line rental adjustments^(3) 2,294 1,975 5,614 5,165

Amortization of (above) below market (3,964) (3,381) (11,552) (9,882)lease intangibles^(4)

Total Rental Income $ 63,701 $ 48,020 $ 176,960 $ 135,240

(1) The Company adopted Financial Accounting Standards Board AccountingStandards Codification ("FASB ASC") 842 "Leases" using the modifiedretrospective approach as of January 1, 2019. The Company adopted thepractical expedient in FASB ASC 842 that alleviates the requirement toseparately present lease and non-lease components of lease contracts. As aresult, all income earned pursuant to tenant leases is reflected as one line,"Rental Income," in the consolidated statement of operations. The purpose ofthis table is to provide additional supplementary detail of Rental Income.

(2) Represents contractual rentals and/or reimbursements as required by tenantlease agreements, recognized on an accrual basis of accounting. The Companybelieves that the presentation of contractual lease income is not, and is notintended to be, a presentation in accordance with GAAP. The Company believesthis information is frequently used by management, investors, analysts andother interested parties to evaluate the Company's performance.

(3) Represents adjustments to recognize minimum rents on a straight-linebasis, consistent with the requirements of FASB ASC 842.

(4) In allocating the fair value of an acquired property, above- andbelow-market lease intangibles are recorded based on the present value of thedifference between the contractual amounts to be paid pursuant to the leases atthe time of acquisition and the Company's estimate of current market leaserates for the property. Effective in 2019, the Company began classifyingamortization of above- and below-market lease intangibles as a net reduction ofrental income.

View original content to download multimedia: http://www.prnewswire.com/news-releases/agree-realty-corporation-reports-third-quarter-2020-results-301155044.html

SOURCE Agree Realty Corporation