PR Newswire | Jul 26, 2021 04:05PM EDT

07/26 15:05 CDT

Agree Realty Corporation Reports Second Quarter 2021 ResultsRAISES 2021 ACQUISITION GUIDANCE TO $1.2 BILLION TO $1.4 BILLION; GROUND LEASE EXPOSURE INCREASED TO A RECORD 12.7% BLOOMFIELD HILLS, Mich., July 26, 2021

BLOOMFIELD HILLS, Mich., July 26, 2021 /PRNewswire/ -- Agree Realty Corporation (NYSE: ADC) (the "Company") today announced results for the quarter ended June 30, 2021. All per share amounts included herein are on a diluted per common share basis unless otherwise stated.

Second Quarter 2021 Financial and Operating Highlights:

* Invested approximately $366 million in 59 retail net lease properties * Approximately 30.5% of annualized base rents acquired were derived from ground leased assets * Net Income attributable to the Company decreased 11.5% to $22.3 million; 27.3% decrease per share to $0.34 * Core Funds from Operations ("Core FFO") increased 43.4% to $58.6 million; 17.3% increase per share to $0.89 * Adjusted Funds from Operations ("AFFO") increased 41.6% to $57.6 million; 15.9% increase per share to $0.88 * Declared a July monthly dividend of $0.217 per share, an 8.5% year-over-year increase * Completed dual-tranche public bond offering comprised of $350 million of 2.00% senior unsecured notes due 2028 and $300 million of 2.60% senior unsecured notes due 2033 * Completed a follow-on public offering of 4,600,000 shares of common stock, including the underwriters' option to purchase additional shares, raising net proceeds of approximately $327 million * Sold 1,178,197 shares of common stock via the forward component of the Company's at-the-market equity ("ATM") program for anticipated net proceeds of approximately $81 million * Balance sheet positioned for growth at 3.6 times proforma net debt to recurring EBITDA; 4.5 times excluding unsettled forward equity

First Half 2021 Financial and Operating Highlights:

* Invested a record of approximately $756 million in 146 retail net lease properties * Completed four development or Partner Capital Solutions ("PCS") projects * Net Income attributable to the Company increased 12.8% to $52.5 million; 12.7% decrease per share to $0.82 * Core FFO increased 42.7% to $111.9 million; 10.3% increase per share to $1.74 * AFFO increased 41.4% to $110.1 million; 9.2% increase per share to $1.71 * Settled 742,860 shares of the Company's ATM forward equity for net proceeds of approximately $47 million * Declared dividends of $1.272 per share, a 7.3% year-over-year increase

Financial Results

Net Income

Net Income attributable to the Company for the three months ended June 30, 2021 decreased 11.5% to $22.3 million, compared to $25.3 million for the comparable period in 2020. On a per share basis, net income attributable to the Company for the three months ended June 30, 2021 decreased 27.3% to $0.34, compared to $0.47 per share for the comparable period in 2020.

Net Income attributable to the Company for the six months ended June 30, 2021 increased 12.8% to $52.5 million, compared to $46.5 million for the comparable period in 2020. On a per share basis, net income attributable to the Company for the six months ended June 30, 2021 decreased 12.7% to $0.82, compared to $0.93 per share for the comparable period in 2020.

Core Funds from Operations

Core FFO for the three months ended June 30, 2021 increased 43.4% to $58.6 million, compared to Core FFO of $40.9 million for the comparable period in 2020. Core FFO per share for the three months ended June 30, 2021 increased 17.3% to $0.89, compared to Core FFO per share of $0.76 for the comparable period in 2020.

Core FFO for the six months ended June 30, 2021 increased 42.7% to $111.9 million, compared to Core FFO of $78.4 million for the comparable period in 2020. Core FFO per share for the six months ended June 30, 2021 increased 10.3% to $1.74, compared to Core FFO per share of $1.58 for the comparable period in 2020.

Adjusted Funds from Operations

AFFO for the three months ended June 30, 2021 increased 41.6% to $57.6 million, compared to AFFO of $40.7 million for the comparable period in 2020. AFFO per share for the three months ended June 30, 2021 increased 15.9% to $0.88, compared to AFFO per share of $0.76 for the comparable period in 2020.

AFFO for the six months ended June 30, 2021 increased 41.4% to $110.1 million, compared to AFFO of $77.9 million for the comparable period in 2020. AFFO per share for the six months ended June 30, 2021 increased 9.2% to $1.71, compared to AFFO per share of $1.57 for the comparable period in 2020.

Dividend

In the second quarter, the Company declared monthly cash dividends of $0.217 per common share for each of April, May and June 2021. The monthly dividends reflected an annualized dividend amount of $2.604 per common share, representing an 8.5% increase over the annualized dividend amount of $2.400 per common share from the second quarter of 2020. The dividends represent payout ratios of approximately 73% of Core FFO per share and 74% of AFFO per share, respectively.

For the six months ended June 30, 2021, the Company declared monthly dividends totaling $1.272 per common share, a 7.3% increase over the dividends of $1.185 per common share declared for the comparable period in 2020. The dividends represent payout ratios of approximately 73% of Core FFO per share and 74% of AFFO per share, respectively.

Subsequent to quarter end, the Company declared a monthly cash dividend of $0.217 per common share for July 2021. The monthly dividend reflects an annualized dividend amount of $2.604 per common share, representing an 8.5% increase over the annualized dividend amount of $2.400 per common share from the third quarter of 2020. The dividend is payable August 13, 2021 to stockholders of record at the close of business on July 30, 2021.

CEO Comments

"We are extremely pleased with our performance during the first half of the year as we achieved record investment volume of more than $750 million," said Joey Agree, President and Chief Executive Officer. "Our activities served to further strengthen our best-in-class retail portfolio, as our ground lease exposure increased to a record of nearly 13% of annualized base rents. During the quarter we completed several strategic capital markets transactions, raising more than $1 billion to bolster our fortress balance sheet and position our Company for anticipated growth."

Portfolio Update

As of June 30, 2021, the Company's portfolio consisted of 1,262 properties located in 46 states and contained approximately 26.1 million square feet of gross leasable area.

The portfolio was approximately 99.5% leased, had a weighted-average remaining lease term of approximately 9.7 years, and generated 67.7% of annualized base rents from investment grade retail tenants.

Ground Lease Portfolio

During the quarter, the Company acquired 14 ground leases for an aggregate purchase price of approximately $113.1 million, representing 30.5% of annualized base rents acquired.

As of June 30, 2021, the Company's ground lease portfolio consisted of 134 leases located in 28 states and totaled approximately 4.0 million square feet of gross leasable area. Properties ground leased to tenants increased to 12.7% of annualized base rents.

At quarter end, the ground lease portfolio was fully occupied, had a weighted-average remaining lease term of approximately 12.5 years, and generated 89.5% of annualized base rents from investment grade retail tenants.

Acquisitions

Total acquisition volume for the second quarter was approximately $345.5 million and included 54 properties net leased to leading retailers operating in sectors including off-price retail, home improvement, auto parts, general merchandise, dollar stores, convenience stores, grocery and tire and auto service. The properties are located in 25 states and leased to tenants operating in 18 sectors.

The properties were acquired at a weighted-average capitalization rate of 6.2% and had a weighted-average remaining lease term of approximately 11.8 years. Approximately 77.3% of annualized base rents acquired were generated from investment grade retail tenants.

For the six months ended June 30, 2021, total acquisition volume was approximately $732.3 million. The 140 acquired properties are located in 35 states and leased to tenants who operate in 24 retail sectors. The properties were acquired at a weighted-average capitalization rate of 6.2% and had a weighted-average remaining lease term of approximately 12.4 years. Approximately 74.6% of annualized base rents were generated from investment grade retail tenants or parent entities thereof.

The Company's outlook for acquisition volume for the full-year 2021 is being increased to a range of $1.2 billion to $1.4 billion of high-quality retail net lease properties, from a previous range of $1.1 billion to $1.3 billion.

Dispositions

During the three months ended June 30, 2021, the Company sold seven properties for gross proceeds of approximately $27.8 million. The weighted-average capitalization rate of the dispositions was 6.7%. During the six months ended June 30, 2021, the Company divested 10 properties for total gross proceeds of $36.5 million. The weighted-average capitalization rate of the dispositions was 6.7%.

The Company is increasing the lower end of its total disposition guidance range for 2021 from $25 million to $50 million and is maintaining the upper end of the range at $75 million.

Development and Partner Capital Solutions

In the second quarter, the Company completed three development and PCS projects with total costs of approximately $27.1 million. The projects consist of a Grocery Outlet in Port Angeles, Washington, a Gerber Collision in Buford, Georgia, and a Floor & Dcor in Naples, Florida.

During the quarter, the Company commenced its second development project with Gerber Collision in Pooler, Georgia, which is expected to be completed in the first quarter of 2022. Construction continued during the second quarter on the Company's first development project with 7-Eleven in Saginaw, Michigan, which is expected to be completed in the first quarter of 2022.

For the six months ended June 30, 2021, the Company had six development or PCS projects completed or under construction. Anticipated total costs are approximately $36.4 million and include the following projects:

Lease Lease Actual orTenant Location Structure Term Anticipated Rent Status Commencement

Burlington Texarkana, TX Build-to-Suit 11 years Q1 2021 Complete

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

Gerber Collision Buford, GA Build-to-Suit 15 years Q2 2021 Complete

Floor & D?cor Naples, FL Build-to-Suit 15 years Q2 2021 Complete

7-Eleven Saginaw, MI Build-to-Suit 15 years Q1 2022 Under Construction

Gerber Collision Pooler, GA Build-to-Suit 15 years Q1 2022 Under Construction

Leasing Activity and Expirations

During the second quarter, the Company executed new leases, extensions or options on approximately 209,000 square feet of gross leasable area throughout the existing portfolio. Notable new leases, extensions or options included a 15-year net lease with Gardner White at the Company's only former Loves Furniture store in Canton, Michigan. The approximately 70,000 square foot space was delivered to Gardner White in June and rent commenced in July 2021.

For the six months ended June 30, 2021, the Company executed new leases, extensions or options on approximately 275,000 square feet of gross leasable area throughout the existing portfolio.

As of June 30, 2021, the Company's three remaining 2021 lease maturities represented 0.2% of annualized base rents. The following table presents contractual lease expirations within the Company's portfolio as of June 30, 2021, assuming no tenants exercise renewal options:

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

2021 3 571 0.2% 28 0.1%

2022 21 3,601 1.1% 343 1.3%

2023 42 8,656 2.6% 988 3.8%

2024 41 13,681 4.1% 1,606 6.2%

2025 65 16,355 4.9% 1,554 6.0%

2026 96 19,017 5.7% 1,957 7.5%

2027 85 20,202 6.1% 1,716 6.6%

2028 90 22,926 6.9% 2,061 7.9%

2029 120 35,548 10.7% 3,077 11.8%

2030 205 40,348 12.1% 2,986 11.5%

Thereafter 590 152,283 45.6% 9,662 37.3%

Total Portfolio 1,358 $333,188 100.0% 25,978 100.0%

The contractual lease expirations presented above exclude the effect of replacement tenant leases that had been executed as of June 30, 2021 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 June 30, 2021, 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 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 June 30, 2021:

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

Walmart $22,610 6.8%

Tractor Supply 13,174 4.0%

Dollar General 12,693 3.8%

Best Buy 11,771 3.5%

TJX Companies 11,259 3.4%

O'Reilly Auto Parts 11,235 3.4%

Kroger 10,798 3.2%

Hobby Lobby 10,180 3.1%

Sherwin-Williams 10,178 3.1%

Wawa 9,127 2.7%

CVS 8,702 2.6%

Lowe's 8,451 2.5%

TBC Corporation 7,949 2.4%

Burlington 7,263 2.2%

Dollar Tree 7,012 2.1%

Home Depot 6,841 2.1%

AutoZone 5,644 1.7%

Sunbelt Rentals 5,568 1.7%

Walgreens 5,420 1.6%

CarMax 5,148 1.5%

LA Fitness 5,091 1.5%

Other^(2) 137,074 41.1%

Total Portfolio $333,188 100.0%

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 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 June 30, 2021:

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

Grocery $35,997 10.8%

Home Improvement 31,700 9.5%

Tire and Auto Service 26,607 8.0%

Convenience Stores 24,352 7.3%

General Merchandise 22,801 6.8%

Auto Parts 20,812 6.2%

Off-Price Retail 20,734 6.2%

Dollar Stores 18,496 5.6%

Pharmacy 14,942 4.5%

Farm and Rural Supply 14,687 4.4%

Consumer Electronics 13,551 4.1%

Crafts and Novelties 12,383 3.7%

Health and Fitness 6,984 2.1%

Dealerships 6,475 1.9%

Restaurants - Quick Service 6,443 1.9%

Discount Stores 5,936 1.8%

Equipment Rental 5,894 1.8%

Health Services 5,791 1.7%

Home Furnishings 5,370 1.6%

Warehouse Clubs 4,988 1.5%

Specialty Retail 4,753 1.4%

Restaurants - Casual Dining 3,865 1.2%

Theaters 3,854 1.2%

Sporting Goods 3,243 1.0%

Financial Services 3,110 0.9%

Pet Supplies 2,597 0.8%

Entertainment Retail 2,333 0.7%

Apparel 1,260 0.4%

Shoes 1,169 0.4%

Beauty and Cosmetics 1,097 0.3%

Office Supplies 860 0.3%

Miscellaneous 104 0.0%

Total Portfolio $333,188 100.0%

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

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 June 30, 2021:

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

Texas $24,222 7.3%

Florida 19,818 5.9%

Michigan 19,784 5.9%

Ohio 18,980 5.7%

North Carolina 18,820 5.6%

New Jersey 18,548 5.6%

Illinois 16,888 5.1%

California 13,553 4.1%

New York 13,502 4.1%

Pennsylvania 12,715 3.8%

Georgia 11,575 3.5%

Virginia 10,564 3.2%

Wisconsin 9,840 3.0%

Missouri 8,921 2.7%

Other^(2) 115,458 34.5%

Total Portfolio $333,188 100.0%

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

In May 2021, the Company completed a $650 million dual-tranche public bond offering comprised of $350 million of 2.00% senior unsecured notes due 2028 (the "2028 Notes") and $300 million of 2.60% senior unsecured notes due 2033 (the "2033 Notes"). In connection with the offering, the Company terminated related swap agreements of $300 million that hedged the 2033 Notes, receiving $16.7 million upon termination. Considering the effect of the terminated swap agreements, the blended all-in rates to the Company for the 2028 Notes and 2033 Notes are 2.11% and 2.13%, respectively.

The Company used a portion of the net proceeds from the offering to repay all $240 million of its unsecured term loans, including accrued and unpaid interest, and settle certain swap agreements, including termination costs. The offering, in combination with the prepayment of all the Company's unsecured term loans, extended the Company's weighted-average debt maturity to approximately 9 years and reduced its effective weighted-average interest rate to approximately 3.2%, excluding the Company's unsecured revolving credit facility.

In June 2021, the Company completed a follow-on public offering of 4,600,000 shares of common stock, including the full exercise of the underwriters' option to purchase additional shares. Upon closing, the Company received total net proceeds of approximately $327.0 million, after deducting fees and estimated offering expenses.

During the second quarter of 2021, the Company entered into forward sale agreements in connection with its ATM program to sell an aggregate of 1,178,197 shares of common stock for anticipated net proceeds of approximately $81 million. On May 6, 2021, the Company settled 164,450 shares under forward sale agreements entered into through its ATM program and received net proceeds of approximately $9.9 million.

At quarter end, the Company had 3,937,788 shares remaining to be settled under existing forward sale agreements, which are anticipated to raise net proceeds of approximately $258.7 million after deducting fees and expenses and making certain other adjustments as provided in the equity distribution agreements.

The following table presents the Company's outstanding forward equity offerings as of June 30, 2021:

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

Q3 2020 ATM 885,912 - 885,912 - $56,345,089Forward Offerings

Q4 2020 ATM 1,501,210 - 1,501,210 - $96,360,932Forward Offerings

Q1 2021 ATM 372,469 - 372,469 - $24,970,379Forward Offerings

Q2 2021 ATM 1,178,197 1,178,197 $81,072,912Forward Offerings

Total Forward 3,937,788 - 3,937,788 - $258,749,312Equity Offerings

Balance Sheet

As of June 30, 2021, the Company's net debt to recurring EBITDA was 4.5 times. The Company's proforma net debt to recurring EBITDA was 3.6 times when deducting the $258.7 million of anticipated net proceeds from the outstanding forward equity offerings from the Company's net debt of $1.4 billion as of June 30, 2021. The Company's fixed charge coverage ratio was 5.0 times as of the end of the second quarter.

The Company's total debt to enterprise value was 24.7% as of June 30, 2021. 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 Agree Limited Partnership (the "Operating Partnership") units into common stock.

For the three and six months ended June 30, 2021, the Company's fully diluted weighted-average shares outstanding were 65.2 million and 64.1 million, respectively. The basic weighted-average shares outstanding for the three and six months ended June 30, 2021 were 64.8 million and 63.8 million, respectively.

For the three and six months ended June 30, 2021, the Company's fully diluted weighted-average shares and units outstanding were 65.5 million and 64.4 million, respectively. The basic weighted-average shares and units outstanding for the three and six months ended June 30, 2021 were 65.2 million and 64.2 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 June 30, 2021, there were 347,619 Operating Partnership units outstanding and the Company held a 99.5% interest in the Operating Partnership.

Conference Call/Webcast

The Company will host its quarterly analyst and investor conference call on Tuesday, July 27, 2021 at 9:00 AM ET. To participate in the conference call, please dial (866) 363-3979 approximately ten minutes before the call begins.

Additionally, a webcast of the conference call will be available through the Company's website. To access the webcast, visit www.agreerealty.com ten minutes prior to the start time of the conference call and go to the Investors section of the website. A replay of the conference call webcast will be archived and available online through the Investors section of www.agreerealty.com.

About Agree Realty Corporation

Agree Realty Corporation is a publicly traded real estate investment trust that is RETHINKINGRETAILthrough the acquisition and development of properties net leased to industry-leading, omni-channel retail tenants. As of June 30, 2021, the Company owned and operated a portfolio of 1,262 properties, located in 46 states and containing approximately 26.1 million square feet of gross leasable area. The Company's common stock is listed on the New York Stock Exchange under the symbol "ADC". For additional information on the Company and RETHINKINGRETAIL, please visit www.agreerealty.com.

Forward-Looking Statements

This press release contains forward-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 and subsequent quarterly reports filed with the Securities and Exchange Commission (the "SEC"), 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 atwww.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)

June 30, 2021 December 31, 2020

Assets:

Real Estate Investments:

Land $ 1,354,486 $ 1,094,550

Buildings 2,693,704 2,371,553

Accumulated depreciation (200,395) (172,577)

Property under development 6,199 10,653

Net real estate investments 3,853,994 3,304,179

Real estate held for sale, net 1,245 1,199

Cash and cash equivalents 177,046 6,137

Cash held in escrows 11,335 1,818

Accounts receivable - tenants 46,882 37,808

Lease intangibles, net of accumulated amortization of $150,435 and $125,995 601,545 473,592at June 30, 2021 and December 31, 2020, respectively

Other assets, net 72,476 61,450

Total Assets $ 4,764,523 $ 3,886,183

Liabilities:

Mortgage notes payable, net $ 32,782 $ 33,122

Unsecured term loans, net - 237,849

Senior unsecured notes, net 1,494,399 855,328

Unsecured revolving credit facility - 92,000

Dividends and distributions payable 15,029 34,545

Accounts payable, accrued expenses and other liabilities 68,196 71,390

Lease intangibles, net of accumulated amortization of $26,771 and $24,651 at 33,966 35,700June 30, 2021 and December 31, 2020, respectively

Total Liabilities $ 1,644,372 $ 1,359,934

Equity:

Common stock, $.0001 par value, 180,000,000 and 90,000,000 sharesauthorized, 68,910,373 and 60,021,483 shares issued and outstanding at June $ 7 $ 630, 2021 and December 31, 2020, respectively

Preferred stock, $.0001 par value per share, 4,000,000 shares authorized - -

Additional paid-in capital 3,248,264 2,652,090

Dividends in excess of net income (121,619) (91,343)

Accumulated other comprehensive income (loss) (8,257) (36,266)

Total Equity - Agree Realty Corporation $ 3,118,395 $ 2,524,487

Non-controlling interest 1,756 1,762

Total Equity $ 3,120,151 $ 2,526,249

Total Liabilities and Equity $ 4,764,523 $ 3,886,183

Agree Realty Corporation

Consolidated Statements of Operations and Comprehensive Income

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

(Unaudited)

Three months ended Six months ended June 30, June 30,

2021 2020 2021 2020

Revenues

Rental Income $ 82,494 $ 57,476 $ 160,253 $ 113,259

Other 52 59 121 85

Total Revenues $ 82,546 $ 57,535 $ 160,374 $ 113,344

Operating Expenses

Real estate taxes $ 6,158 $ 4,840 $ 11,855 $ 9,542

Property operating expenses 3,214 1,860 6,755 4,195

Land lease expense 389 325 736 652

General and administrative 6,241 4,587 13,118 9,244

Depreciation and amortization 23,188 15,607 44,676 29,740

Provision for impairment - 1,128 - 1,128

Total Operating Expenses $ 39,190 $ 28,347 $ 77,140 $ 54,501

Income from Operations $ 43,356 $ 29,188 $ 83,234 $ 58,843

Other (Expense) Income

Interest expense, net $ (12,549) $ (8,479) $ (24,202) $ (18,149)

Gain (loss) on sale of assets, net 6,767 4,952 9,712 6,597

Income tax (expense) benefit (485) (260) (1,494) (520)

Gain (loss) on early extinguishment of term loans and settlement of related (14,614) - (14,614) -interest rate swaps

Other (expense) income (14) 23 103 23

Net Income $ 22,461 $ 25,424 $ 52,739 $ 46,794

Less Net Income Attributable to Non-Controlling Interest 114 166 280 308

Net Income Attributable to Agree Realty Corporation $ 22,347 $ 25,258 $ 52,459 $ 46,486

Net Income Per Share Attributable to Agree Realty Corporation

Basic $ 0.34 $ 0.47 $ 0.82 $ 0.94

Diluted $ 0.34 $ 0.47 $ 0.82 $ 0.93

Other Comprehensive Income

Net Income $ 22,461 $ 25,424 $ 52,739 $ 46,794

Realized gain (loss) on settlement of interest rate swaps 287 (17) 787 (33)

Other comprehensive income (loss) - change in fair value and settlement of 2,230 (2,244) 27,376 (35,269)interest rate swaps

Total Comprehensive Income (Loss) 24,978 23,163 80,902 11,492

Comprehensive Income Attributable to Non-Controlling Interest (128) (151) (294) (42)

Comprehensive Income Attributable to Agree Realty Corporation $ 24,850 $ 23,012 $ 80,608 $ 11,450

Weighted Average Number of Common Shares Outstanding - Basic 64,835,984 52,726,230 63,838,070 49,082,616

Weighted Average Number of Common Shares Outstanding - Diluted 65,185,604 53,266,740 64,079,697 49,423,546

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 Six months ended June 30, June 30,

2021 2020 2021 2020

Net Income $ 22,461 $ 25,424 $ 52,739 $ 46,794

Depreciation of rental real estate assets 16,127 11,316 31,419 21,719

Amortization of lease intangibles - in-place leases and leasing costs 6,905 4,170 12,955 7,791

Provision for impairment - 1,128 - 1,128

(Gain) loss on sale or involuntary conversion of assets, net (6,753) (4,952) (9,815) (6,597)

Funds from Operations $ 38,740 $ 37,086 $ 87,298 $ 70,835

Loss on extinguishment of debt and settlement of related hedges 14,614 - 14,614 -

Amortization of above (below) market lease intangibles, net 5,260 3,779 10,015 7,588

Core Funds from Operations $ 58,614 $ 40,865 $ 111,927 $ 78,423

Straight-line accrued rent (2,967) (1,681) (5,564) (3,319)

Stock based compensation expense 1,617 1,224 2,981 2,238

Amortization of financing costs 221 168 489 336

Non-real estate depreciation 156 121 302 230

Adjusted Funds from Operations $ 57,641 $ 40,697 $ 110,135 $ 77,908

Funds from Operations Per Share - Basic $ 0.59 $ 0.70 $ 1.36 $ 1.43

Funds from Operations Per Share - Diluted $ 0.59 $ 0.69 $ 1.35 $ 1.42

Core Funds from Operations Per Share - Basic $ 0.90 $ 0.77 $ 1.74 $ 1.59

Core Funds from Operations Per Share - Diluted $ 0.89 $ 0.76 $ 1.74 $ 1.58

Adjusted Funds from Operations Per Share - Basic $ 0.88 $ 0.77 $ 1.72 $ 1.58

Adjusted Funds from Operations Per Share - Diluted $ 0.88 $ 0.76 $ 1.71 $ 1.57

Weighted Average Number of Common Shares and Operating Partnership Units 65,183,603 53,073,849 64,185,689 49,430,235Outstanding - Basic

Weighted Average Number of Common Shares and Operating Partnership Units 65,533,223 53,614,359 64,427,316 49,771,165Outstanding - Diluted

Additional supplemental disclosure

Scheduled principal repayments $ 198 $ 233 $ 393 $ 463

Capitalized interest 88 30 163 55

Capitalized building improvements 2,280 1,361 2,454 2,276

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 and certaininfrequently recurring items that reduce or increase net income in accordancewith GAAP. Under Nareit's definition of FFO, lease intangibles created uponacquisition of a net lease must be amortized over the remaining term of thelease. The Company believes that by recognizing amortization charges for above-and below-market lease intangibles, the utility of FFO as a financialperformance measure can be diminished. Management believes that its measure ofCore FFO facilitates useful comparison of performance to its peers whopredominantly transact in sale-leaseback transactions and are thereby notrequired by GAAP to allocate purchase price to lease intangibles. Unlike manyof its peers, the Company has acquired the substantial majority of its netleased properties through acquisitions of properties from third parties or inconnection with the acquisitions of ground leases from third parties. Core FFOshould not be considered an alternative to net income as the primary indicatorof the Company's operating performance, or as an alternative to cash flow as ameasure of 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 items that reduce or increase net income computed inaccordance with GAAP. Management considers AFFO a useful supplemental measureof the Company's performance, however, AFFO should not be considered analternative to net income as an indication of its performance, or to cash flowas a measure of liquidity or ability to make distributions. The Company'scomputation of AFFO may differ from the methodology for calculating AFFO usedby other equity REITs, and therefore may not be comparable to such other REITs.

Agree Realty Corporation

Reconciliation of Net Debt to Recurring EBITDA

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

(Unaudited)

Three months ended June 30,

2021

Net Income $ 22,461

Interest expense, net 12,549

Income tax expense 485

Depreciation of rental real estate assets 16,127

Amortization of lease intangibles - in-place leases and leasing costs 6,905

Non-real estate depreciation 156

Provision for impairment -

(Gain) loss on sale or involuntary conversion of assets, net (6,753)

EBITDAre $ 51,930

Run-Rate Impact of Investment, Disposition and Leasing Activity $ 3,939

Amortization of above (below) market lease intangibles, net 5,260

Loss on extinguishment of debt and settlement of related hedges 14,614

Recurring EBITDA $ 75,743

Annualized Recurring EBITDA $ 302,972

Total Debt $ 1,543,040

Cash, cash equivalents and cash held in escrows (188,381)

Net Debt $ 1,354,659

Net Debt to Recurring EBITDA 4.5x

Net Debt $ 1,354,659

Anticipated Net Proceeds from ATM Forward Offerings (258,749)

Proforma Net Debt $ 1,095,909

Proforma Net Debt to Recurring EBITDA 3.6x

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 OfferingsThe Company has 3,937,788 shares remaining to be settled under the ATM ForwardOfferings. Upon settlement, the offerings are anticipated to raise net proceedsof approximately $258.7 million based on the applicable forward sale prices asof June 30, 2021. The applicable forward sale price varies depending on theoffering. The Company is contractually obligated to settle the ATM ForwardOfferings by certain dates between July 2021 and June 2022.

Agree Realty Corporation

Rental Income

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

(Unaudited)

Three months ended Six months ended June 30, June 30,

2021 2020 2021 2020

Rental Income Source^(1)

Minimum rents^(2) $ 76,200 $ 53,452 $ 147,432 $ 104,514

Percentage rents^(2) 6 16 491 249

Operating cost reimbursement^(2) 8,581 6,105 16,781 12,765

Straight-line rental adjustments^(3) 2,967 1,682 5,564 3,319

Amortization of (above) below market lease intangibles^(4) (5,260) (3,779) (10,015) (7,588)

Total Rental Income $ 82,494 $ 57,476 $ 160,253 $ 113,259

(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 bytenant lease agreements, recognized on an accrual basis of accounting. TheCompany believes that the presentation of contractual lease income is not, andis not intended to be, a presentation in accordance with GAAP. The Companybelieves this information is frequently used by management, investors, analystsand other 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.

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SOURCE Agree Realty Corporation