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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Mark One

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

For the quarterly period ended March 31, 2022, or

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

For the transition period fromto

Commission File Number 001-12928

AGREE REALTY CORPORATION

(Exact name of registrant as specified in its charter)

Maryland

    

38-3148187

State or other jurisdiction of incorporation or

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

organization

 

70 E. Long Lake Road, Bloomfield Hills, Michigan

    

48304

(Address of principal executive offices)

(Zip Code)

(248) 737-4190

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:  

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, $0.0001 par value

ADC

New York Stock Exchange

Depositary Shares, each representing one-thousandth of a share of 4.25% Series A Cumulative Redeemable Preferred Stock, $0.0001 par value

ADCPrA

New York Stock Exchange

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

Yes

No

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

Yes

No

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

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer 

Smaller reporting company

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

Yes

No

As of May 2, 2022, the Registrant had 75,174,452 shares of common stock issued and outstanding.

Table of Contents

AGREE REALTY CORPORATION

Index to Form 10-Q

Page

PART I

Financial Information

Item 1:

Interim Condensed Consolidated Financial Statements (Unaudited)

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

1

Condensed Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2022 and 2021

3

Condensed Consolidated Statements of Equity for the three months ended March 31, 2022 and 2021

4

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021

6

Notes to Condensed Consolidated Financial Statements

7

Item 2:

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

33

Item 3:

Quantitative and Qualitative Disclosures about Market Risk

45

Item 4:

Controls and Procedures

46

PART II

Item 1:

Legal Proceedings

46

Item 1A:

Risk Factors

46

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

46

Item 3:

Defaults Upon Senior Securities

46

Item 4:

Mine Safety Disclosures

46

Item 5:

Other Information

46

Item 6:

Exhibits

47

SIGNATURES

48

Table of Contents

AGREE REALTY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

PART I.       FINANCIAL INFORMATION

Item 1.       Financial Statements

March 31, 

December 31, 

2022

2021

ASSETS

Real Estate Investments

  

Land

$

1,658,905

$

1,559,434

Buildings

 

3,286,755

 

3,034,391

Less accumulated depreciation

 

(253,180)

 

(233,862)

 

4,692,480

 

4,359,963

Property under development

 

39,218

 

7,148

Net Real Estate Investments

 

4,731,698

 

4,367,111

 

  

Real Estate Held for Sale, net

 

 

5,676

 

Cash and Cash Equivalents

 

24,888

 

43,252

 

  

Cash Held in Escrows

 

878

 

1,998

Accounts Receivable - Tenants, net

59,411

 

53,442

 

  

Lease Intangibles, net of accumulated amortization of

$198,936 and $180,532 at March 31, 2022 and December 31, 2021, respectively

 

716,509

 

672,020

 

Other Assets, net

 

105,206

 

83,407

 

  

Total Assets

$

5,638,590

$

5,226,906

See accompanying notes to Condensed Consolidated Financial Statements.

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AGREE REALTY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

March 31, 

December 31, 

2022

2021

LIABILITIES

  

Mortgage Notes Payable, net

$

32,249

$

32,429

  

Senior Unsecured Notes, net

1,495,650

 

1,495,200

  

Unsecured Revolving Credit Facility

320,000

 

160,000

  

Dividends and Distributions Payable

17,763

 

16,881

Accounts Payable, Accrued Expenses, and Other Liabilities

63,476

 

70,005

  

Lease Intangibles, net of accumulated amortization of

$31,184 and $29,726 at March 31, 2022 and December 31, 2021, respectively

33,711

 

33,075

  

Total Liabilities

1,962,849

 

1,807,590

  

EQUITY

  

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

175,000

 

175,000

Common stock, $.0001 par value, 180,000,000 shares authorized, 75,174,580 and 71,285,311 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

8

7

Additional paid-in-capital

3,646,770

 

3,395,549

Dividends in excess of net income

(162,765)

 

(147,366)

Accumulated other comprehensive income (loss)

15,060

 

(5,503)

  

Total Equity - Agree Realty Corporation

3,674,073

 

3,417,687

Non-controlling interest

1,668

 

1,629

Total Equity

3,675,741

 

3,419,316

  

Total Liabilities and Equity

$

5,638,590

$

5,226,906

See accompanying notes to Condensed Consolidated Financial Statements.

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AGREE REALTY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

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

(Unaudited)

Three Months Ended

    

March 31, 2022

    

March 31, 2021

Revenues

 

  

 

  

Rental income

$

98,312

$

77,760

Other

 

30

 

69

Total Revenues

 

98,342

 

77,829

 

  

 

  

Operating Expenses

 

  

 

  

Real estate taxes

 

7,611

 

5,696

Property operating expenses

 

4,477

 

3,541

Land lease expense

 

402

 

346

General and administrative

 

7,622

 

6,879

Depreciation and amortization

 

28,561

 

21,489

Provision for impairment

 

1,015

 

Total Operating Expenses

 

49,688

 

37,951

Gain (loss) on sale of assets, net

 

2,310

 

2,945

Gain (loss) on involuntary conversion, net

(25)

117

Income from Operations

 

50,939

 

42,940

 

  

 

  

Other (Expense) Income

 

  

 

  

Interest expense, net

 

(13,931)

 

(11,653)

Income tax (expense) benefit

(719)

(1,009)

Net Income

 

36,289

 

30,278

 

  

 

  

Less net income attributable to non-controlling interest

 

176

 

166

Net income attributable to Agree Realty Corporation

36,113

30,112

Less Series A preferred stock dividends

 

1,859

 

Net Income Attributable to Common Stockholders

$

34,254

$

30,112

 

  

 

  

Net Income Per Share Attributable to Common Stockholders

 

  

 

  

Basic

$

0.48

$

0.48

Diluted

$

0.48

$

0.48

 

  

 

  

Other Comprehensive Income

 

  

 

  

Net income

$

36,289

$

30,278

Amortization of interest rate swaps

82

500

Change in fair value and settlement of interest rate swaps

 

20,581

 

25,146

Total comprehensive income (loss)

 

56,952

 

55,924

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

 

276

 

304

 

  

 

  

Comprehensive Income (Loss) Attributable to Agree Realty Corporation

$

56,676

$

55,620

 

  

 

  

Weighted Average Number of Common Shares Outstanding - Basic

 

71,228,930

 

62,828,897

 

  

 

  

Weighted Average Number of Common Shares Outstanding - Diluted

 

71,336,103

 

62,940,360

See accompanying notes to Condensed Consolidated Financial Statements.

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AGREE REALTY CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

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

(Unaudited)

Accumulated

Dividends in

Other

Preferred Stock

Common Stock

Additional

excess of net

Comprehensive

Non-Controlling

Total

  

Shares

  

Amount

  

Shares

  

Amount

  

Paid-In Capital

  

income

  

Income (Loss)

  

Interest

  

Equity

Balance, December 31, 2021

7,000

$

175,000

71,285,311

$

7

$

3,395,549

$

(147,366)

$

(5,503)

$

1,629

$

3,419,316

Issuance of common stock, net of issuance costs

3,791,964

1

250,683

250,684

Repurchase of common shares

(28,117)

(1,745)

(1,745)

Issuance of stock under the 2020 Omnibus Incentive Plan

125,422

648

648

Stock-based compensation

1,635

1,635

Series A preferred dividends declared for the period

(1,859)

(1,859)

Dividends and distributions declared for the period

(49,653)

(237)

(49,890)

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

20,563

100

20,663

Net income

1,859

34,254

176

36,289

Balance, March 31, 2022

7,000

$

175,000

75,174,580

$

8

$

3,646,770

$

(162,765)

$

15,060

$

1,668

$

3,675,741

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

For the three months ended March 31, 2022

$

0.266

Cash dividends declared per common share:

For the three months ended March 31, 2022

$

0.681

See accompanying notes to Condensed Consolidated Financial Statements.

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AGREE REALTY CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

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

(Unaudited)

Accumulated

Dividends in

Other

Common Stock

Additional

excess of net

Comprehensive

Non-Controlling

Total

  

Shares

  

Amount

  

Paid-In Capital

  

income

  

Income (Loss)

  

Interest

  

Equity

Balance, December 31, 2020

60,021,483

$

6

$

2,652,090

$

(91,343)

$

(36,266)

$

1,762

$

2,526,249

Issuance of common stock, net of issuance costs

4,028,410

258,105

258,105

Repurchase of common shares

(27,594)

(1,780)

(1,780)

Issuance of restricted stock under the 2020 Omnibus Incentive Plan

128,066

298

298

Forfeiture of restricted stock

(4,587)

(92)

(92)

Stock-based compensation

1,293

1,293

Dividends and distributions declared for the period

(39,906)

(215)

(40,121)

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

25,506

140

25,646

Net income

30,112

166

30,278

Balance, March 31, 2021

64,145,778

$

6

$

2,909,914

$

(101,137)

$

(10,760)

$

1,853

$

2,799,876

Cash dividends declared per common share:

For the three months ended March 31, 2021

$

0.621

See accompanying notes to Condensed Consolidated Financial Statements.

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AGREE REALTY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three Months Ended

    

March 31, 2022

    

March 31, 2021

Cash Flows from Operating Activities

 

  

 

  

Net income

$

36,289

$

30,278

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Depreciation and amortization

 

28,561

 

21,489

Amortization from above (below) market lease intangibles, net

8,178

4,756

Amortization from financing and credit facility costs

 

1,061

 

425

Stock-based compensation

 

1,635

 

1,499

Provision for impairment

1,015

Gain (loss) on settlement of interest rate swaps

501

(Gain) loss on sale of assets

 

(2,310)

 

(2,945)

(Increase) decrease in accounts receivable

 

(5,980)

 

(2,932)

(Increase) decrease in other assets

 

(4,708)

 

6,803

Increase (decrease) in accounts payable, accrued expenses, and other liabilities

(2,274)

(14,079)

Net Cash Provided by Operating Activities

 

61,467

 

45,795

 

  

 

  

Cash Flows from Investing Activities

 

  

 

  

Acquisition of real estate investments and other assets

 

(413,098)

 

(397,044)

Development of real estate investments and other assets, net of reimbursements

 

(including capitalized interest of $112 in 2022 and $75 in 2021)

 

(33,291)

 

1,683

Payment of leasing costs

 

(45)

 

(240)

Net proceeds from sale of assets

 

7,643

 

8,422

Net Cash Used in Investing Activities

 

(438,791)

 

(387,179)

 

  

 

  

Cash Flows from Financing Activities

 

 

  

Proceeds from common stock offerings, net

250,684

258,105

Repurchase of common shares

 

(1,745)

 

(1,780)

Unsecured revolving credit facility borrowings (repayments), net

 

160,000

 

146,000

Payments of mortgage notes payable

 

(209)

 

(195)

Payment of Series A preferred dividends

(1,859)

Payment of common stock dividends

 

(48,771)

 

(60,957)

Distributions to non-controlling interest

 

(237)

 

(359)

Payments for financing costs

 

(23)

 

(16)

Net Cash Provided by Financing Activities

 

357,840

 

340,798

 

  

 

  

Net Increase (Decrease) in Cash and Cash Equivalents and Cash Held in Escrow

 

(19,484)

 

(586)

Cash and cash equivalents and cash held in escrow, beginning of period

 

45,250

 

7,955

Cash and cash equivalents and cash held in escrow, end of period

$

25,766

$

7,369

 

  

 

  

Supplemental Disclosure of Cash Flow Information

 

  

 

  

Cash paid for interest (net of amounts capitalized)

$

13,367

$

15,836

Cash paid for income tax

$

1,336

$

1,794

 

 

  

Supplemental Disclosure of Non-Cash Investing and Financing Activities

 

  

 

  

Lease right of use assets added under new ground leases

$

$

6,302

Series A preferred dividends declared and unpaid

$

620

$

Common stock dividends and limited partners' distributions declared and unpaid

$

17,143

$

13,350

Change in accrual of development, construction and other real estate investment costs

$

411

$

7,179

See accompanying notes to Condensed Consolidated Financial Statements.

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AGREE REALTY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(Unaudited)

Note 1 – Organization

Agree Realty Corporation (the “Company”), a Maryland corporation, is a fully integrated real estate investment trust (“REIT”) primarily focused on the ownership, acquisition, development and management of retail properties net leased to industry leading tenants. The Company was founded in 1971 by its current Executive Chairman, Richard Agree, and its common stock was listed on the New York Stock Exchange in 1994.

The Company’s assets are held by, and all of its operations are conducted through, directly or indirectly, Agree Limited Partnership (the “Operating Partnership”), of which Agree Realty Corporation is the sole general partner and in which it held a 99.5% common equity interest as of March 31, 2022. There is a one-for-one relationship between the limited partnership interests in the Operating Partnership (“Operating Partnership Common Units”) owned by the Company and shares of Company common stock outstanding.  The Company also owns a Series A preferred equity interest in the Operating Partnership.  This preferred equity interest corresponds on a one-for-one basis to the Company’s Series A Preferred Stock (see Note 6– Common and Preferred Stock), providing guaranteed income and distributions to the Company equal to the dividends payable on that stock. Under the agreement of limited partnership of the Operating Partnership, the Company, as the sole general partner, has exclusive responsibility and discretion in the management and control of the Operating Partnership.

The terms “Agree Realty,” the “Company,” “Management,” “we,” “our” or “us” refer to Agree Realty Corporation and all of its consolidated subsidiaries, including the Operating Partnership.

Note 2 – Summary of Significant Accounting Policies

Basis of Accounting and Principles of Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for audited financial statements. The unaudited Condensed Consolidated Financial Statements reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the results for the interim period presented. Operating results for the three months ended March 31, 2022 may not be indicative of the results that may be expected for the year ending December 31, 2022.  Amounts as of December 31, 2021 included in the Condensed Consolidated Financial Statements have been derived from the audited Consolidated Financial Statements as of that date. The unaudited Condensed Consolidated Financial Statements, included herein, should be read in conjunction with the audited Consolidated Financial Statements and notes thereto, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the Company’s Form 10-K for the year ended December 31, 2021.

The unaudited Condensed Consolidated Financial Statements include the accounts of the Company, the Operating Partnership and its wholly owned subsidiaries. The Company, as the sole general partner, held 99.5% of the Operating Partnership’s common equity as of March 31, 2022 and December 31, 2021, as well as the Series A preferred equity interest.  All material intercompany accounts and transactions have been eliminated, including the Company’s Series A preferred equity interest in the Operating Partnership.

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At March 31, 2022 and December 31, 2021, the non-controlling interest in the Operating Partnership consisted of a 0.5% ownership interest in the Operating Partnership held by the Company’s founder and chairman. The Operating Partnership Common Units may, under certain circumstances, be exchanged for shares of common stock. The Company as sole general partner of the Operating Partnership has the option to settle exchanged Operating Partnership Common Units held by others for cash based on the current trading price of its shares. Assuming the exchange of all non-controlling Operating Partnership Common Units, there would have been 75,522,199 shares of common stock outstanding at March 31, 2022.

Significant Risks and Uncertainties

One of the most significant risks and uncertainties continues to be the potential adverse effect of the ongoing pandemic of the novel coronavirus, or COVID-19, and its variants.  The outbreak of COVID-19 has significantly, adversely impacted economic activity and has contributed to significant volatility and negative pressure in financial markets.  Although the duration and severity of this pandemic are still uncertain, there is reason to believe that the success of vaccination efforts and therapeutics in the U.S. will have a positive impact on businesses, as federal, state and local restrictions are lifted. However, the virus’s variants, its surges and resurgences in the population, and challenges related to vaccine immunization are still having a very fluid and continuously evolving impact on businesses and consumers.

The COVID-19 pandemic could still have material and adverse effects on our financial condition, results of operations and cash flows in the near term due to, but not limited to, the following:

reduced economic activity severely impacting our tenants’ businesses, financial condition and liquidity and  may cause tenants to be unable to fully meet their obligations to us.  Certain tenants have sought to modify such obligations and may seek additional relief and additional tenants may seek modifications of such obligations, resulting in increases in uncollectible receivables and reductions in rental income;
the negative financial impact of the pandemic which could impact our future compliance with financial covenants of our credit facility and other debt agreements; and
weaker economic conditions which could cause us to recognize impairment in value of our tangible or intangible assets.

During the quarter ended March 31, 2022, the Company collected substantially all rent payments originally contracted for in the period. However, the extent to which the COVID-19 pandemic impacts our operations and those of our tenants will still depend on future developments which are uncertain, including the scope, severity and remaining 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.

The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business and geographies. However, as a result of the many uncertainties surrounding the COVID-19 pandemic, we are not able to fully predict the impact that it ultimately will have on our financial condition, results of operations and cash flows.

Real Estate Investments

The Company records the acquisition of real estate at cost, including acquisition and closing costs. For properties developed by the Company, all direct and indirect costs related to planning, development and construction, including interest, real estate taxes and other miscellaneous costs incurred during the construction period, are capitalized for financial reporting purposes and recorded as property under development until construction has been completed.  

Assets are classified as real estate held for sale based on specific criteria as outlined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360, Property, Plant & Equipment. Properties classified as real estate held for sale are recorded at the lower of their carrying value or their fair value, less anticipated selling costs. Any properties classified as held for sale are not depreciated. Assets are generally classified as real estate held for sale once management has actively engaged in marketing the asset and has received a firm purchase commitment that is expected to close within one year. The Company did not classify any operating properties as real estate held for sale

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at March 31, 2022 and classified one operating property as real estate held for sale as of December 31, 2021, the assets for which are separately presented in the Condensed Consolidated Balance Sheets.  

Real estate held for sale consisted of the following as of March 31, 2022 and December 31, 2021 (presented in thousands):

    

March 31, 2022

    

December 31, 2021

Land

$

$

4,485

Lease intangibles - asset

1,213

 

 

5,698

Accumulated depreciation and amortization, net

 

 

(22)

Total Real Estate Held for Sale, net

$

$

5,676

Subsequent to quarter-end, a property that did not qualify as held for sale as of March 31, 2022 was sold at a price of $14.0 million, which approximated its carrying value.

Acquisitions of Real Estate

The acquisition of property for investment purposes is typically accounted for as an asset acquisition. The Company allocates the purchase price to land, buildings and identified intangible assets and liabilities, based in each case on their relative estimated fair values and without giving rise to goodwill. Intangible assets and liabilities represent the value of in-place leases and above- or below-market leases. In making estimates of fair values, the Company may use various sources, including data provided by independent third parties, as well as information obtained by the Company as a result of its due diligence, including expected future cash flows of the property and various characteristics of the markets where the property is located.

In allocating the fair value of the identified tangible and intangible assets and liabilities of an acquired property, land is valued based upon comparable market data or independent appraisals.  Buildings are valued on an as-if vacant basis based on a cost approach utilizing estimates of cost and the economic age of the building or an income approach utilizing various market data. In-place lease intangibles are valued based on the Company’s estimates of costs related to tenant acquisition and the carrying costs that would be incurred during the time it would take to locate a tenant if the property were vacant, considering current market conditions and costs to execute similar leases at the time of the acquisition. Above- and below-market lease intangibles are recorded based on the present value of the difference between the contractual amounts to be paid pursuant to the leases at the time of acquisition and the Company’s estimate of current market lease rates for the property.  In the case of sale-leaseback transactions, it is typically assumed that the lease is not in-place prior to the close of the transaction.

Depreciation and Amortization

Land, buildings and improvements are recorded and stated at cost.  The Company’s properties are depreciated using the straight-line method over the estimated remaining useful life of the assets, which are generally 40 years for buildings and 10 to 20 years for improvements. Properties classified as held for sale and properties under development or redevelopment are not depreciated.  Major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives.

In-place lease intangible assets and the capitalized above- and below-market lease intangibles are amortized over the non-cancelable term of the lease unless the Company believes it is reasonably certain that the tenant will renew the lease for an option term, in which case the Company amortizes the value attributable to the renewal over the renewal period.  In-place lease intangible assets are amortized to amortization expense and above- and below-market lease intangibles are amortized as a net adjustment to rental income.  In the event of early lease termination, the remaining net book value of any above- or below-market lease intangible is recognized as an adjustment to rental income.

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Table of Contents

The following schedule summarizes the Company’s amortization of lease intangibles for the three months ended March 31, 2022 and 2021 (presented in thousands):

Three Months Ended

    

    

March 31, 2022

    

March 31, 2021

Lease intangibles (in-place)

$

8,795

$

5,915

Lease intangibles (above-market)

 

9,636

 

6,401

Lease intangibles (below-market)

 

(1,458)

 

(1,645)

Total

$

16,973

$

10,671

The following schedule represents estimated future amortization of lease intangibles as of March 31, 2022 (presented in thousands):

2022

Year Ending December 31, 

    

(remaining)

    

2023

    

2024

    

2025

    

2026

    

Thereafter

    

Total

Lease intangibles (in-place)

$

29,842

  

$

37,665

  

$

35,021

  

$

32,596

  

$

30,157

$

156,469

  

$

321,750

Lease intangibles (above-market)

 

29,583

  

 

37,186

  

 

33,120

  

 

30,631

  

 

28,868

 

235,371

  

 

394,759

Lease intangibles (below-market)

 

(4,359)

 

(5,186)

 

(4,516)

 

(4,080)

 

(3,726)

 

(11,844)

 

(33,711)

Total

$

55,066

  

$

69,665

  

$

63,625

  

$

59,147

  

$

55,299

$

379,996

  

$

682,798

Impairments

The Company reviews real estate investments and related lease intangibles for possible impairment when certain events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable through operations plus estimated disposition proceeds. Events or changes in circumstances that may occur include, but are not limited to, significant changes in real estate market conditions, estimated residual values and an expectation to sell assets before the end of the previously estimated life. Impairments are measured to the extent the current book value exceeds the estimated fair value of the asset less disposition costs for any assets classified as held for sale.

The valuation of impaired assets is determined using valuation techniques including discounted cash flow analysis, analysis of recent comparable sales transactions and purchase offers received from third parties, which are Level 3 inputs. The Company may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of its real estate.  Estimating future cash flows is highly subjective and estimates can differ materially from actual results.

Cash and Cash Equivalents and Cash Held in Escrows

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist of deposit and checking accounts.  Cash held in escrows primarily relates to proposed like-kind exchange transactions pursued under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) and funds restricted through a mortgage agreement.  The account balances periodically exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance coverage, and as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Company had $24.0 million and $44.0 million in cash and cash equivalents and cash held in escrow as of March 31, 2022 and December 31, 2021, respectively, in excess of the FDIC insured limit.

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Table of Contents

Per the requirements of ASU 2016-18 (Topic 230, Statement of Cash Flows) the following table provides a reconciliation of cash and cash equivalents and cash held in escrow, both as reported within the Condensed Consolidated Balance Sheets, to the total of the cash and cash equivalents and cash held in escrow as reported within the Condensed Consolidated Statements of Cash Flows (presented in thousands):

    

March 31, 2022

    

December 31, 2021

Cash and cash equivalents

$

24,888

$

43,252

Cash held in escrow

 

878

 

1,998

Total of cash and cash equivalents and cash held in escrow

$

25,766

$

45,250

Revenue Recognition and Accounts Receivable

The Company leases real estate to its tenants under long-term net leases which are accounted for as operating leases. Under this method, leases that have fixed and determinable rent increases are recognized on a straight-line basis over the lease term. Rental increases based upon changes in the consumer price indexes, or other variable factors, are recognized only after changes in such factors have occurred and are then applied according to the lease agreements. Certain leases also provide for additional rent based on tenants’ sales volumes. These rents are recognized when determinable after the tenant exceeds a sales breakpoint.

Recognizing rent escalations on a straight-line method results in rental revenue in the early years of a lease being higher than actual cash received, creating a straight-line rent receivable asset which is included in the Accounts Receivable - Tenants line item in the Condensed Consolidated Balance Sheets. The balance of straight-line rent receivables at March 31, 2022 and December 31, 2021 was $44.0 million and $40.9 million, respectively. To the extent any of the tenants under these leases become unable to pay their contractual cash rents, the Company may be required to write down the straight-line rent receivable from those tenants, which would reduce rental income.

The Company reviews the collectability of charges under its tenant operating leases on a regular basis, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area where the property is located. The Company’s assessment has specifically included the impact of the COVID-19 pandemic, which represents a material risk to collectability (see Significant Risks and Uncertainties above).  In the event that collectability with respect to any tenant changes, the Company recognizes an adjustment to rental revenue. The Company’s review of collectability of charges under its operating leases also includes any accrued rental revenue related to the straight-line method of reporting rental revenue.

As of March 31, 2022, the Company has three tenants where collection is no longer considered probable. For these tenants, the Company is recording rental income on a cash basis and has written off any outstanding receivables, including straight-line rent receivables. Adjustments to rental revenue related to potentially uncollectible charges under these tenant leases had an immaterial impact to Rental Income and Net Income for the three months ended March 31, 2022.

In addition to the tenant-specific collectability assessment performed, the Company also recognizes a general allowance, as a reduction to rental revenue, for its operating lease receivables which are not expected to be fully collectible based on the potential for settlement of arrears. As of March 31, 2022 and December 31, 2021, this allowance was $0.8 million.

The Company’s leases provide for reimbursement from tenants for common area maintenance (“CAM”), insurance, real estate taxes and other operating expenses. A portion of the Company’s operating cost reimbursement revenue is estimated each period and is recognized as rental revenue in the period the recoverable costs are incurred and accrued, and the related revenue is earned. The balance of unbilled operating cost reimbursement receivable at March 31, 2022 and December 31, 2021 was $7.7 million and $9.1 million, respectively.

The Company has adopted the practical expedient in FASB ASC 842, Leases (“ASC 842”) that allows lessors to combine non-lease components with the lease components when the timing and patterns of transfer for the lease and non-lease components are the same and the lease is classified as an operating lease.  As a result, all rentals and reimbursements

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pursuant to tenant leases are reflected as one line, “Rental Income,” in the Condensed Consolidated Statement of Operations and Comprehensive Income.

Earnings per Share

Earnings per share of common stock has been computed pursuant to the guidance in the FASB ASC Topic 260, Earnings Per Share.  The guidance requires the classification of the Company’s unvested restricted stock, which contain rights to receive non-forfeitable dividends, as participating securities requiring the two-class method of computing net income per share of common stock.  In accordance with the two-class method, earnings per share has been computed by dividing the net income less net income attributable to unvested restricted shares by the weighted average number of shares of common stock outstanding less unvested restricted shares. Diluted earnings per share is computed by dividing net income by the weighted average shares of common stock and potentially dilutive securities in accordance with the treasury stock method.

The following is a reconciliation of the numerator and denominator used in the computation of basic and diluted net earnings per share of common stock for each of the periods presented (presented in thousands, except for share data):

Three Months Ended

    

    

March 31, 2022

    

March 31, 2021

Net income attributable to Agree Realty Corporation

$

36,113

$

30,112

Less: Series A preferred stock dividends

(1,859)

Net income attributable to common stockholders

34,254

30,112

Less: Income attributable to unvested restricted shares

(110)

(103)

Net income used in basic and diluted earnings per share

$

34,144

$

30,009

Weighted average number of common shares outstanding

  

71,471,247

  

63,048,905

Less: Unvested restricted stock

  

(242,317)

  

(220,008)

Weighted average number of common shares outstanding used in basic earnings per share

  

71,228,930

  

62,828,897

  

  

Weighted average number of common shares outstanding used in basic earnings per share

  

71,228,930

  

62,828,897

Effect of dilutive securities:

Share-based compensation

  

58,190

  

62,454

2020 ATM Forward Equity Offerings

49,009

2021 ATM Forward Equity Offerings

980

December 2021 Forward Offering

48,003

Weighted average number of common shares outstanding used in diluted earnings per share

  

71,336,103

  

62,940,360

For the three months ended March 31, 2022, 76,623 shares of common stock related to the 2021 at-the-market (“ATM”) forward equity offerings, 4,733 shares of restricted common stock (“restricted shares”) granted in 2020 and 2021, and 1,078 performance units granted in 2022 were anti-dilutive and were not included in the computation of diluted earnings per share.

For the three months ended March 31, 2021, 3,397 shares of common stock related to the 2020 ATM forward equity offerings, 664 shares of common stock related to the 2021 ATM forward equity offerings, and 6,920 shares of restricted shares granted in 2020 were anti-dilutive and were not included in the computation of diluted earnings per share.

Forward Equity Sales

The Company occasionally sells shares of common stock through forward sale agreements to enable the Company to set the price of such shares upon pricing the offering (subject to certain adjustments) while delaying the issuance of such shares and the receipt of the net proceeds by the Company.

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To account for the forward sale agreements, the Company considers the accounting guidance governing financial instruments and derivatives.  To date, the Company has concluded that its forward sale agreements are not liabilities as they do not embody obligations to repurchase its shares nor do they embody obligations to issue a variable number of shares for which the monetary value are predominantly fixed, varying with something other than the fair value of the shares, or varying inversely in relation to its shares. The Company then evaluates whether the agreements meet the derivatives and hedging guidance scope exception to be accounted for as equity instruments.  The Company has concluded that the agreements are classifiable as equity contracts based on the following assessments: (i) none of the agreements’ exercise contingencies are based on observable markets or indices besides those related to the market for the Company’s own stock price and operations; and (ii) none of the settlement provisions precluded the agreements from being indexed to its own stock.

The Company also considers the potential dilution resulting from the forward sale agreements on the earnings per share calculations. The Company uses the treasury stock method to determine the dilution resulting from the forward sale agreements during the period of time prior to settlement.

Equity Offering Costs

Underwriting commissions and offering costs of equity offerings have been reflected as a reduction of additional paid-in-capital in our Condensed Consolidated Balance Sheets.

Income Taxes

The Company has made an election to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code and related regulations. The Company generally will not be subject to federal income taxes on amounts distributed to stockholders, providing it distributes 100% of its REIT taxable income and meets certain other requirements for qualifying as a REIT. For the periods covered in the Condensed Consolidated Financial Statements, the Company believes it has qualified as a REIT. Accordingly, no provision has been made for federal income taxes. Notwithstanding its qualification for taxation as a REIT, the Company is subject to certain state taxes on its income and real estate.

Earnings and profits that determine the taxability of distributions to stockholders differ from net income reported for financial reporting purposes due to differences in the estimated useful lives and methods used to compute depreciation and the carrying value (basis) of the investments in properties for tax purposes, among other things.

The Company and its taxable REIT subsidiaries (“TRS”) have made a timely TRS election pursuant to the provisions of the REIT Modernization Act. A TRS is able to engage in activities resulting in income that previously would have been disqualified from being eligible REIT income under the federal income tax regulations. As a result, certain activities of the Company which occur within its TRS entities are subject to federal and state income taxes. All provisions for federal income taxes in the accompanying Condensed Consolidated Financial Statements are attributable to the Company’s TRS.

The Company regularly analyzes its various federal and state filing positions and only recognizes the income tax effect in its financial statements when certain criteria regarding uncertain income tax positions have been met. The Company believes that its income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities. Therefore, no provisions for uncertain income tax positions have been recorded in the Condensed Consolidated Financial Statements.

Management’s Responsibility to Evaluate Our Ability to Continue as a Going Concern

When preparing financial statements for each annual and interim reporting period, management has the responsibility to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.  In making its evaluation, the Company considers, among other things, any risks and/or uncertainties to its results of operations, contractual obligations in the form of near-term debt maturities, dividend requirements, or other factors impacting the Company’s liquidity and capital resources. No conditions or events that raised substantial doubt about the ability to continue as a going concern within one year were identified as of the issuance date of the Condensed Consolidated

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Financial Statements contained in this Quarterly Report on Form 10-Q.

Reclassifications

Certain reclassifications of prior period amounts have been made in the consolidated financial statements and footnotes in order to conform to the current presentation.  

Segment Reporting

The Company is primarily in the business of acquiring, developing and managing retail real estate which is considered to be one reportable segment. The Company has no other reportable segments.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of (1) assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and (2) revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Values of Financial Instruments

The Company’s estimates of fair value of financial and non-financial assets and liabilities are based on the framework established in the fair value accounting guidance, ASC 820 Fair Value Measurement. The framework specifies a hierarchy of valuation inputs which was established to increase consistency, clarity and comparability in fair value measurements and related disclosures. The guidance describes a fair value hierarchy based on three levels of inputs that may be used to measure fair value, two of which are considered observable and one that is considered unobservable. The following describes the three levels:

Level 1 –   Valuation is based on quoted prices in active markets for identical assets or liabilities.

Level 2 –   Valuation is based on inputs other than Level 1 inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 –   Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include option pricing models, discounted cash flow models and similar techniques.

Recent Accounting Pronouncements

In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”).  The guidance in ASU 2020-06 simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. In addition, the amendments in the ASU 2020-06 also simplify the guidance in ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must be satisfied in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets.  The amendments in ASU 2020-06 are effective for the Company for fiscal years beginning after December

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15, 2021. The adoption of this guidance on January 1, 2022 did not have a material impact the Company’s financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)” (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.  The Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation.  The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.  

Note 3 – Leases

Tenant Leases

The Company is primarily focused on the ownership, acquisition, development and management of retail properties leased to industry leading tenants.  As of March 31, 2022, the Company’s portfolio was approximately 99.6% leased and had a weighted average remaining lease term (excluding extension options) of approximately 9.1 years. A significant majority of its properties are leased to national tenants and approximately 67.8% of its annualized base rent was derived from tenants, or parent entities thereof, with an investment grade credit rating from S&P Global Ratings, Moody’s Investors Service, Fitch Ratings or the National Association of Insurance Commissioners.

Substantially all of the Company’s tenants are subject to net lease agreements. A net lease typically requires the tenant to be responsible for minimum monthly rent and actual property operating expenses incurred, including property taxes, insurance and maintenance. In addition, the Company’s tenants are typically subject to future rent increases based on fixed amounts or increases in the consumer price index and certain leases provide for additional rent calculated as a percentage of the tenants’ gross sales above a specified level.  Certain of the Company’s properties are subject to leases under which it retains responsibility for specific costs and expenses of the property.

The Company’s leases typically provide the tenant one or more multi-year renewal options to extend their leases, subject to generally the same terms and conditions, including rent increases, consistent with the initial lease term.

The Company attempts to maximize the amount it expects to derive from the underlying real estate property following the end of the lease, to the extent it is not extended.  The Company maintains a proactive leasing program that, combined with the quality and locations of its properties, has made its properties attractive to tenants. The Company intends to continue to hold its properties for long-term investment and, accordingly, places a strong emphasis on the quality of construction and an on-going program of regular and preventative maintenance.  However, the residual value of a real estate property is still subject to various market-specific, asset-specific, and tenant-specific risks and characteristics.  As the classification of a lease is dependent on the fair value of its cash flows at lease commencement, the residual value of a property represents a significant assumption in its accounting for tenant leases.

The Company has elected the practical expedient in ASC 842 on not separating non-lease components from associated lease components.  The lease and non-lease components combined as a result of this election largely include tenant rentals and maintenance charges, respectively. The Company applies the accounting requirements of ASC 842 to the combined component.

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The following table includes information regarding contractual lease payments for the Company’s operating leases for which it is the lessor, for the three months ended March 31, 2022 and 2021. (presented in thousands)

Three Months Ended

    

March 31, 2022

March 31, 2021

Total lease payments

$

103,362

$

80,200

Less: Operating cost reimbursements and percentage rents

 

11,914

 

8,976

Total non-variable lease payments

$

91,448

$

71,224

At March 31, 2022, future non-variable lease payments to be received from the Company’s operating leases for the remainder of 2022, the following four years, and thereafter are as follows (presented in thousands):

 

2022

Year Ending December 31, 

    

(remaining)

    

2023

    

2024

    

2025

    

2026

    

Thereafter

    

Total

Future non-variable lease payments

$

285,903

  

$

376,785

  

$

365,734

  

$

353,794

  

$

335,943

$

1,859,443

  

$

3,577,602

Deferred Revenue

As of March 31, 2022 and December 31, 2021, there was $13.5 million in deferred revenues resulting from rents paid in advance.

Land Lease Obligations

The Company is the lessee under land lease agreements for certain of its properties. ASC 842 requires a lessee to recognize right of use assets and lease obligation liabilities that arise from leases, whether qualifying as operating or finance.  As of March 31, 2022 and December 31, 2021, the Company had $59.5 million and $59.7 million, respectively, of right of use assets, net, recognized within Other Assets in the Condensed Consolidated Balance Sheets, while the corresponding lease obligations, net, of $24.0 million and $24.1 million, respectively, were recognized within Accounts Payable, Accrued Expenses, and Other Liabilities on the Condensed Consolidated Balance Sheets as of these dates.  

The Company’s land leases do not include any variable lease payments. These leases typically provide multi-year renewal options to extend their term as lessee at the Company’s option. Option periods are included in the calculation of the lease obligation liability only when options are reasonably certain to be exercised. Certain of the Company’s land leases qualify as finance leases as a result of purchase options that are reasonably certain of being exercised or automatic transfer of title to the Company at the end of the lease term.

Amortization of right of use assets for operating land leases is classified as land lease expense and was $0.4 million and $0.3 million for the three months ended March 31, 2022 and 2021, respectively. There was no amortization of right of use assets for finance land leases, as the underlying leased asset (land) has an infinite life.  Interest expense on finance land leases was less than $0.1 million during the three months ended March 31, 2022 and March 31, 2021.

In calculating its lease obligations under ground leases, the Company uses discount rates estimated to be equal to what it would have to pay to borrow on a collateralized basis over a similar term, for an amount equal to the lease payments, in a similar economic environment.

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The following tables include information on the Company’s land leases for which it is the lessee, for the three months ended March 31, 2022 and 2021. (presented in thousands)

Three Months Ended

    

March 31, 2022

    

    

March 31, 2021

    

Operating leases:

Operating cash outflows

$

298

$

267

Weighted-average remaining lease term - operating leases (years)

33.7

36.3

Finance leases:

Operating cash outflows

$

64

$

22

Financing cash outflows

$

20

$

34

Weighted-average remaining lease term - finance leases (years)

2.5

3.5

Supplemental Disclosure:

Right-of-use assets obtained in exchange for new lease liabilities

$

$

6,302

Right-of-use assets net change

$

$

6,302

The weighted-average discount rate used in computing operating and finance lease obligations approximated 4%at March 31, 2022 and 2021.

Maturity Analysis of Lease Liabilities for Operating Leases (presented in thousands)

 

2022

Year Ending December 31, 

    

(remaining)

    

2023

    

2024

    

2025

    

2026

    

Thereafter

    

Total

Lease payments

$

900

  

$

1,197

  

$

1,197

  

$

1,197

  

$

1,195

$

29,851

  

$

35,537

Imputed interest

 

(546)

 

(711)

 

(690)

 

(669)

 

(647)

 

(14,491)

 

(17,754)

Total lease liabilities

$

354

  

$

486

  

$

507

  

$

528

  

$

548

$

15,360

  

$

17,783

Maturity Analysis of Lease Liabilities for Finance Leases (presented in thousands)

2022

Year Ending December 31, 

    

(remaining)

    

2023

    

2024

    

2025

    

2026

    

Thereafter

    

Total

Lease payments

$

252

  

$

336

  

$

6,252

  

$

$

$

  

$

6,840

Imputed interest

 

(191)

 

(252)

 

(207)

 

 

(650)

Total lease liabilities

$

61

  

$

84

  

$

6,045

  

$

  

$

$

  

$

6,190

Note 4 – Real Estate Investments

Real Estate Portfolio

As of March 31, 2022, the Company owned 1,510 properties, with a total gross leasable area (“GLA”) of approximately 31.0 million square feet. Net Real Estate Investments totaled $4.7 billion as of March 31, 2022. As of December 31, 2021, the Company owned 1,404 properties, with a total GLA of approximately 29.1 million square feet. Net Real Estate Investments totaled $4.4 billion as of December 31, 2021.

Acquisitions

During the three months ended March 31, 2022, the Company purchased 106 retail net lease assets for approximately $409.8 million, which includes acquisition and closing costs. These properties are located in 32 states and are leased for a weighted average lease term of approximately 9.2 years.

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The aggregate acquisitions for the three months ended March 31, 2022 were allocated $99.8 million to land, $249.2 million to buildings and improvements, and $60.8 million to lease intangibles. The acquisitions were all cash purchases and there was no material contingent consideration associated with these acquisitions. None of the Company’s acquisitions during the first three months of 2022 caused any new or existing tenant to comprise 10% or more of its total assets or generate 10% or more of its total annualized contractual base rent at March 31, 2022.

Developments

During the three months ended March 31, 2022, the Company commenced 15 development or Partner Capital Solutions projects. At March 31, 2022, the Company had 17 development or Partner Capital Solutions projects under construction.

Dispositions

During the three months ended March 31, 2022, the Company sold one property, which was classified as held for sale as of December 31, 2021, for net proceeds of $7.6 million and recorded a net gain of $2.3 million.

Provisions for Impairment

As a result of the Company’s review of real estate investments, it recognized a $1.0 million provision for impairment for the three months ended March 31, 2022. There was no impairment recognized during the three months ended March 31, 2021. The estimated fair value of the impaired real estate assets at their time of impairment during 2022 was $1.8 million.

Note 5 – Debt

As of March 31, 2022, the Company had total gross indebtedness of $1.86 billion, including (i) $32.4 million of mortgage notes payable; (ii) $1.51 billion of senior unsecured notes; and (iii) $320.0 million of borrowings outstanding under the Revolving Credit Facility (defined below) as of March 31, 2022.

Mortgage Notes Payable

As of March 31, 2022, the Company had total gross mortgage indebtedness of $32.4 million, which was collateralized by related real estate and tenants’ leases with an aggregate net book value of $38.7 million. The weighted average interest rate on the Company’s mortgage notes payable was 4.04% as of March 31, 2022 and 4.16% as of December 31, 2021.

Mortgage notes payable consisted of the following (presented in thousands):

    

March 31, 2022

    

December 31, 2021

Note payable in monthly installments of interest only at 3.60% per annum, with a balloon payment due January 2023

$

23,640

$

23,640

 

 

  

Note payable in monthly installments of interest only at 5.01% per annum, with a balloon payment due September 2023

 

4,622

 

4,622

 

 

  

Note payable in monthly installments of $92 including interest at 6.27% per annum, with a final monthly payment due July 2026

 

4,166

 

4,373

 

  

 

  

Total principal

 

32,428

 

32,635

Unamortized debt issuance costs

 

(179)

 

(206)

Total

$

32,249

$

32,429

The mortgage loans encumbering the Company’s properties are generally non-recourse, subject to certain exceptions for which we would be liable for any resulting losses incurred by the lender. These exceptions vary from loan to loan, but generally include fraud or material misrepresentations, misstatements or omissions by the borrower, intentional or grossly negligent conduct by the borrower that harms the property or results in a loss to the lender, filing of a bankruptcy petition

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by the borrower, either directly or indirectly, and certain environmental liabilities. At March 31, 2022, there were no mortgage loans with partial recourse to the Company.

The Company has entered into mortgage loans that are secured by multiple properties and contain cross-default and cross-collateralization provisions. Cross-collateralization provisions allow a lender to foreclose on multiple properties in the event that we default under the loan. Cross-default provisions allow a lender to foreclose on the related property in the event a default is declared under another loan.

Unsecured Term Loan Facilities

In May 2021, the Company used the net proceeds from the offering of the 2028 Senior Unsecured Public Notes and the 2033 Senior Unsecured Public Notes (see Senior Unsecured Notes below) to repay all amounts outstanding under its unsecured term loans and settle the related swap agreements.  During the three months ended June 30, 2021, the Company incurred a charge of $14.6 million upon this repayment and settlement, including swap termination costs of $13.4 million and the write-off of previously unamortized debt issuance costs of $1.2 million.

Senior Unsecured Notes

The following table presents the senior unsecured notes balance net of unamortized debt issuance costs and original issue discount as of March 31, 2022, and December 31, 2021 (presented in thousands):

    

March 31, 2022

    

December 31, 2021

2025 Senior Unsecured Notes

$

50,000

$

50,000

2027 Senior Unsecured Notes

 

50,000

 

50,000

2028 Senior Unsecured Public Notes

 

350,000

 

350,000

2028 Senior Unsecured Notes

60,000

60,000

2029 Senior Unsecured Notes

 

100,000

 

100,000

2030 Senior Unsecured Notes

 

125,000

 

125,000

2030 Senior Unsecured Public Notes

350,000

350,000

2031 Senior Unsecured Notes

125,000

125,000

2033 Senior Unsecured Public Notes

 

300,000

300,000

Total Principal

 

1,510,000

 

1,510,000

Unamortized debt issuance costs and original issue discount, net

 

(14,350)

 

(14,800)

Total

$

1,495,650

$

1,495,200

In May 2015, the Company and the Operating Partnership completed a private placement of $100 million principal amount of senior unsecured notes. The senior unsecured notes were sold in two series; $50 million of 4.16% notes due May 2025 (the “2025 Senior Unsecured Notes”) and $50 million of 4.26% notes due May 2027 (the “2027 Senior Unsecured Notes”).

In July 2016, the Company and the Operating Partnership completed a private placement of $60 million aggregate principal amount of 4.42% senior unsecured notes due July 2028 (the “2028 Senior Unsecured Notes”).

In September 2017, the Company and the Operating Partnership completed a private placement of $100 million aggregate principal amount of 4.19% senior unsecured notes due September 2029 (the “2029 Senior Unsecured Notes”).

In September 2018, the Company and the Operating Partnership entered into two supplements to uncommitted master note facilities with institutional purchasers. Pursuant to the supplements, the Operating Partnership completed a private placement of $125 million aggregate principal amount of 4.32% senior unsecured notes due September 2030 (the “2030 Senior Unsecured Notes”). 

In October 2019, the Company and the Operating Partnership closed on a private placement of $125 million of 4.47% senior unsecured notes due October 2031 (the “2031 Senior Unsecured Notes”).  In March 2019, the Company entered into forward-starting interest rate swap agreements to fix the interest for $100 million of long-term debt until maturity.

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The Company terminated the swap agreements at the time of pricing the 2031 Senior Unsecured Notes, which resulted in an effective annual fixed rate of 4.41% for $100 million aggregate principal amount of the 2031 Senior Unsecured Notes. Considering the effect of the terminated swap agreements, the blended all-in rate to the Company for the $125 million aggregate principal amount of 2031 Senior Unsecured Notes is 4.42%.

All of the senior unsecured notes described in the preceding paragraphs were sold only to institutional investors and did not involve a public offering in reliance on the exemption from registration in Section 4(a)(2) of the Securities Act.

In August 2020, the Operating Partnership completed an underwritten public offering of $350 million aggregate principal amount of 2.900% Notes due 2030 (the “2030 Senior Unsecured Public Notes”). The 2030 Senior Unsecured Public Notes are fully and unconditionally guaranteed by Agree Realty Corporation and certain wholly owned subsidiaries of the Operating Partnership.  The terms of the 2030 Senior Unsecured Public Notes are governed by an indenture, dated August 17, 2020, among the Operating Partnership, the Company and U.S. Bank National Association, as trustee (as amended and supplemented by an officer’s certificate dated August 17, 2020, the “Indenture”). The Indenture contains various restrictive covenants, including limitations on the ability of the guarantors and the issuer to incur additional indebtedness and requirements to maintain a pool of unencumbered assets.  The Company terminated related swap agreements of $200 million that hedged the 2030 Senior Unsecured Public Notes, paying $23.4 million upon termination. Considering the effect of the terminated swap agreements, the blended all-in rate to the Company for the $350 million aggregate principal amount of 2030 Senior Unsecured Public Notes is 3.49%.

In May 2021, the Operating Partnership completed an underwritten public offering of $350 million aggregate principal amount of 2.000% Notes due 2028 (the “2028 Senior Unsecured Public Notes”) and $300 million in aggregate principal amount of 2.600% Notes due 2033 (the “2033 Senior Unsecured Public Notes”).  The 2028 Senior Unsecured Public Notes and the 2033 Senior Unsecured Public Notes are fully and unconditionally guaranteed by Agree Realty Corporation and certain wholly owned subsidiaries of the Operating Partnership.  The terms of the 2028 Senior Unsecured Public Notes and the 2033 Senior Unsecured Public Notes are governed by an indenture, dated August 17, 2020, among the Operating Partnership, the Company and U.S. Bank National Association, as trustee (as amended and supplemented by an officer’s certificate dated May 14, 2021, the “Indenture”). The Indenture contains various restrictive covenants, including limitations on the ability of the guarantors and the Operating Partnership to incur additional indebtedness and requirements to maintain a pool of unencumbered assets.  The Company terminated related swap agreements of $300 million notional amount that hedged the 2033 Senior Unsecured Public 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 $350 million aggregate principal amount of the 2028 Senior Unsecured Public Notes and the $300 million aggregate principal amount of the 2033 Senior Unsecured Public Notes are 2.11% and 2.13%, respectively.

Senior Unsecured Revolving Credit Facility

In December 2019, the Company entered into a Second Amended and Restated Revolving Credit and Term Loan Agreement. This agreement provided for a $500 million unsecured revolving credit facility. It also provided for a $65 million unsecured term loan facility and a $35 million unsecured term loan facility. All amounts outstanding under these unsecured term loan f