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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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o
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Agree Realty Corporation
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(Exact name of registrant as specified in its charter)
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Maryland
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38-3148187
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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31850 Northwestern Highway, Farmington Hills, Michigan
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48334
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(Address of principal executive offices)
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(Zip code)
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Large Accelerated Filer
o
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Accelerated Filer
x
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Non-accelerated Filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Page
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Part I:
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Financial Information
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Item 1.
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Interim Consolidated Financial Statements
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Consolidated Balance Sheets as of March 31, 2011 (Unaudited) and December 31, 2010
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1-2
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Consolidated Statements of Income (Unaudited) for the three months ended March 31, 2011 and 2010
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3
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Consolidated Statements of Stockholders’ Equity (Unaudited) for the three months ended March 31, 2011
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4
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Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2011 and 2010
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5-6
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Notes to Consolidated Financial Statements (Unaudited)
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7-12
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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13-19
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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20-21
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Item 4.
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Controls and Procedures
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21
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Part II:
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Other Information
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Item 1.
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Legal Proceedings
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21
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Item 1A.
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Risk Factors
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21
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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21
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Item 3.
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Defaults Upon Senior Securities
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21
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Item 4.
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{Removed and Reserved}
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21
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Item 5
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Other Information
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22
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Item 6.
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Exhibits
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23
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Signatures
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24
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March 31, 2011 (Unaudited)
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December 31, 2010
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Assets
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||||||||
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Real Estate Investments
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Land
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$ | 104,631,938 | $ | 103,693,227 | ||||
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Buildings
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229,465,248 | 227,645,287 | ||||||
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Less accumulated depreciation
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(67,599,513 | ) | (66,111,215 | ) | ||||
| 266,497,673 | 265,227,299 | |||||||
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Property under development
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248,366 | 359,299 | ||||||
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Property held for sale, net
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- | 6,522,821 | ||||||
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Net Real Estate Investments
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266,746,039 | 272,109,419 | ||||||
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Cash and Cash Equivalents
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799,239 | 593,281 | ||||||
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Accounts Receivable - Tenants,
net of allowance of $35,000
at March 31, 2011 and December 31, 2010
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1,905,672 | 1,330,129 | ||||||
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Unamortized Deferred Expenses
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||||||||
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Financing costs, net of accumulated amortization of $5,455,802
and $5,392,802 at March 31, 2011 and December 31, 2010, respectively
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1,070,194 | 1,133,194 | ||||||
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Leasing costs, net of accumulated amortization of $959,700
and $934,399 at March 31, 2011 and December 31, 2010, respectively
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788,244 | 812,295 | ||||||
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Lease intangibles costs, net of accumulated amortization of
$154,231 and $50,479 at March 31, 2011 and December 31, 2010, respectively
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8,561,163 | 8,152,248 | ||||||
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Other Assets
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807,788 | 911,801 | ||||||
| $ | 280,678,339 | $ | 285,042,367 | |||||
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March 31, 2011 (Unaudited)
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December 31, 2010
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Liabilities and Stockholders’ Equity
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Mortgages Payable
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$ | 69,774,824 | $ | 71,526,780 | ||||
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Notes Payable
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26,130,254 | 28,380,254 | ||||||
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Dividends and Distributions Payable
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4,065,134 | 5,145,740 | ||||||
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Deferred Revenue
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9,173,367 | 9,345,754 | ||||||
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Accrued Interest Payable
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250,401 | 221,154 | ||||||
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Accounts Payable
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Capital expenditures
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239,260 | 286,078 | ||||||
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Operating
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1,358,758 | 1,427,718 | ||||||
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Interest Rate Swap
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671,410 | 793,211 | ||||||
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Deferred Income Taxes
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705,000 | 705,000 | ||||||
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Tenant Deposits
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80,402 | 80,402 | ||||||
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Total Liabilities
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112,448,810 | 117,912,091 | ||||||
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Stockholders’ Equity
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Common stock, $0.0001 par value; 13,350,000 shares authorized,
9,857,314 and 9,759,014 shares issued and outstanding, respectively
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985 | 976 | ||||||
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Excess stock, $0.0001 par value, 6,500,000 shares authorized, 0 shares issued and outstanding
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— | — | ||||||
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Series A junior participating preferred stock, $0.0001 par value, 150,000 shares authorized, 0 shares issued and outstanding
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— | — | ||||||
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Additional paid-in capital
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180,064,710 | 179,705,353 | ||||||
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Deficit
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(14,105,362 | ) | (14,702,252 | ) | ||||
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Accumulated other comprehensive income (loss)
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(647,087 | ) | (764,735 | ) | ||||
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Total stockholders’ equity—Agree Realty Corporation
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165,313,246 | 164,239,342 | ||||||
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Non-controlling interest
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2,916,283 | 2,890,934 | ||||||
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Total Stockholders’ Equity
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168,229,529 | 167,130,276 | ||||||
| $ | 280,678,339 | $ | 285,042,367 | |||||
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Three Months Ended
March 31, 2011
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Three Months Ended
March 31, 2010
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Revenues
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Minimum rents
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$ | 9,056,361 | $ | 7,891,743 | ||||
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Percentage rents
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16,057 | 465 | ||||||
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Operating cost reimbursements
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739,313 | 669,815 | ||||||
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Development fee income
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411,419 | 397,009 | ||||||
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Other income
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22,490 | 17,771 | ||||||
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Total Revenues
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10,245,640 | 8,976,803 | ||||||
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Operating Expenses
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Real estate taxes
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614,379 | 489,362 | ||||||
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Property operating expenses
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421,208 | 395,680 | ||||||
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Land lease payments
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227,161 | 96,825 | ||||||
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General and administrative
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1,441,946 | 1,251,729 | ||||||
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Depreciation and amortization
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1,627,814 | 1,343,536 | ||||||
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Total Operating Expenses
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4,332,508 | 3,577,132 | ||||||
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Income From Operations
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5,913,132 | 5,399,671 | ||||||
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Other Expense
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Interest expense, net
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(1,304,889 | ) | (1,269,757 | ) | ||||
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Income Before Discontinued Operations
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4,608,243 | 4,129,914 | ||||||
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Gain (loss) on sale of asset from discontinued operations
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- | 5,331,685 | ||||||
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Income from discontinued operations
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91,816 | 506,881 | ||||||
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Net Income
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4,700,059 | 9,968,480 | ||||||
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Less Net Income Attributable to
Non-Controlling Interest
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(160,243 | ) | (402,392 | ) | ||||
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Net Income Attributable to Agree Realty Corporation
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$ | 4,539,816 | $ | 9,566,088 | ||||
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Earnings Per Share – Basic
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$ | 0.47 | $ | 1.18 | ||||
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Earnings Per Share – Dilutive
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$ | 0.47 | $ | 1.18 | ||||
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Dividend Declared Per Share
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$ | 0.40 | $ | 0.51 | ||||
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Weighted Average Number of Common Shares Outstanding – Basic
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9,619,228 | 8,096,615 | ||||||
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Weighted Average Number of Common Shares Outstanding – Dilutive
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9,648,462 | 8,130,290 | ||||||
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Common Stock
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Additional
Paid-In
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Non-Controlling |
Accumulated
Other
Comprehensive
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|||||||||||||||||||||
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Shares
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Amount
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Capital
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Interest |
Deficit
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Income (loss)
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Balance,
January 1, 2011
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9,759,014 | $ | 976 | $ | 179,705,353 | $ | 2,890,934 | $ | (14,702,252 | ) | $ | (764,735 | ) | |||||||||||
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Issuance of shares under the Equity
Incentive Plan
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98,300 | 9 | — | — | — | — | ||||||||||||||||||
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Forfeiture of shares
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— | — | — | — | ||||||||||||||||||||
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Vesting of restricted stock
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— | — | 359,357 | — | — | — | ||||||||||||||||||
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Dividends and distributions declared
for the period January 1, 2011
to March 31, 2011
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— | — | — | (139,047 | ) | (3,942,926 | ) | — | ||||||||||||||||
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Other comprehensive (loss)
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— | — | — | 4,153 | — | 117,648 | ||||||||||||||||||
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Net income for the period
January 1, 2011 to March 31,
2011
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— | — | — | 160,243 | 4,539,816 | — | ||||||||||||||||||
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Balance,
March 31, 2011
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9,857,314 | $ | 985 | $ | 180,064,710 | $ | 2,916,283 | $ | (14,105,362 | ) | $ | (647,087 | ) | |||||||||||
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Three Months Ended
March 31, 2011
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Three Months Ended
March 31, 2010
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Cash Flows From Operating Activities
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Net income
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$ | 4,700,059 | $ | 9,968,480 | ||||
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Adjustments to reconcile net income to net cash provided by operating activities
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Depreciation
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1,498,761 | 1,412,700 | ||||||
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Amortization
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192,053 | 85,612 | ||||||
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Stock-based compensation
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359,357 | 276,000 | ||||||
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Gain on sale of asset
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- | (5,331,685 | ) | |||||
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(Increase) decrease in accounts receivable
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(575,543 | ) | (663,703 | ) | ||||
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(Increase) decrease in other assets
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97,815 | (56,478 | ) | |||||
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Decrease in accounts payable
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(77,156 | ) | (439,790 | ) | ||||
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Decrease in deferred revenue
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(172,387 | ) | (172,387 | ) | ||||
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Increase (decrease) in accrued interest
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29,247 | (906 | ) | |||||
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Increase (decrease) in tenant deposits
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- | (5,465 | ) | |||||
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Net Cash Provided By Operating Activities
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6,052,206 | 5,072,378 | ||||||
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Cash Flows From Investing Activities
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Acquisition of real estate investments (including capitalized interest of $-0- in 2011 and $49,255 in 2010)
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(2,925,411 | ) | (235,377 | ) | ||||
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Proceeds from sale of asset
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6,522,821 | (7,613 | ) | |||||
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Net Cash Provided by or (Used) In Investing Activities
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3,597,410 | (242,990 | ) | |||||
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Cash Flows From Financing Activities
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||||||||
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Payments of mortgages payable
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(1,751,956 | ) | (981,859 | ) | ||||
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Dividends and limited partners’ distributions paid
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(5,154,374 | ) | (4,363,977 | ) | ||||
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Line-of-credit net borrowings (repayments)
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(2,250,000 | ) | 797,500 | |||||
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Repayments of capital expenditure payables
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(286,078 | ) | (352,430 | ) | ||||
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Payments of financing costs
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- | (649 | ) | |||||
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Payments of leasing costs
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(1,250 | ) | (51,350 | ) | ||||
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Net Cash Used In Financing Activities
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(9,443,658 | ) | (4,952,765 | ) | ||||
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Net Decrease In Cash and Cash Equivalents
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205,958 | (123,377 | ) | |||||
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Cash and Cash Equivalents,
beginning of period
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593,281 | 688,675 | ||||||
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Cash and Cash Equivalents,
end of period
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$ | 799,239 | $ | 565,298 | ||||
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Three Months Ended
March 31, 2011
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Three Months Ended
March 31, 2010
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Supplemental Disclosure of Cash Flow Information
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Cash paid for interest (net of amounts capitalized)
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$ | 1,205,946 | $ | 1,310,234 | ||||
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Supplemental Disclosure of Non-Cash Transactions
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Dividends and limited partners’ distributions declared and unpaid
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$ | 4,065,134 | $ | 4,250,979 | ||||
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Real estate investments financed with accounts payable
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$ | 239,260 | $ | 617,631 | ||||
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1. Basis of Presentation
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The accompanying unaudited consolidated financial statements of Agree Realty Corporation (the “Company”) for the three months ended March 31, 2011 have been prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles for audited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The consolidated balance sheet at December 31, 2010 has been derived from the audited consolidated financial statements at that date. Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011 or for any other interim period. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.
The Company has evaluated subsequent events since March 31, 2011 for events requiring recording or disclosure in this quarterly report on Form 10-Q.
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2. Stock-Based
Compensation
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The Company estimates the fair value of restricted stock and stock option grants at the date of grant and amortizes those amounts into expense on a straight line basis or amount vested, if greater, over the appropriate vesting period.
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As of March 31, 2011, there was $4,665,000 unrecognized compensation costs related to the outstanding restricted shares, which is expected to be recognized over a weighted average period of 3.85 years. The Company used a 0% discount factor and forfeiture rate for determining the fair value of restricted stock. The forfeiture rate was based on historical results and trends.
The holder of a restricted share award is generally entitled at all times on and after the date of issuance of the restricted shares to exercise the rights of a stockholder of the Company, including the right to vote the shares and the right to receive dividends on the shares.
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Shares
Outstanding
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Weighted Average Grant Date Fair Value
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|||||||
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Unvested restricted shares at January 1, 2011
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166,850 | $ | 22.00 | |||||
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Restricted shares granted
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98,300 | 22.06 | ||||||
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Restricted shares vested
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(34,710 | ) | 21.64 | |||||
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Restricted shares forfeited
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- | - | ||||||
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Unvested restricted shares at March 31, 2011
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230,440 | $ | 22.08 | |||||
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3. Earnings Per Share
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Earnings per share has been computed by dividing the net income attributable to Agree Realty Corporation by the weighted average number of common shares outstanding.
The following is a reconciliation of the denominator of the basic net earnings per common share computation to the denominator of the diluted net earnings per common share computation for each of the periods presented:
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Three Months Ended
March 31,
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2011
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2010
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Weighted average number of common shares outstanding
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9,849,668 | 8,264,495 | ||||||
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Unvested restricted stock
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(230,440 | ) | (167,880 | ) | ||||
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Weighted average number of common shares outstanding used in basic earnings per share
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9,619,228 | 8,096,615 | ||||||
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Weighted average number of common shares outstanding used in basic earnings per share
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9,619,228 | 8,096,615 | ||||||
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Effect of dilutive securities:
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Restricted stock
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29,234 | 33,675 | ||||||
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Common stock options
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— | — | ||||||
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Weighted average number of common shares outstanding used in diluted earnings per share
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9,648,462 | 8,130,290 | ||||||
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4. Recent Accounting Pronouncements
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As of March 31, 2011, the impact of recent accounting pronouncements on our business is not considered to be material
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5. Derivative Instruments and Hedging Activity
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On January 2, 2009, the Company entered into an interest rate swap agreement for a notional amount of $24,501,280, effective on January 2, 2009 and ending on July 1, 2013. The notional amount decreases over the term to match the outstanding balance of the hedged borrowing. The Company entered into this derivative instrument to hedge against the risk of changes in future cash flows related to changes in interest rates on $24,501,280 of the total variable-rate borrowings outstanding. Under the terms of the interest rate swap agreement, the Company will receive from the counterparty interest on the notional amount based on 1.5% plus one-month LIBOR and will pay to the counterparty a fixed rate of 3.744%. This swap effectively converted $24,501,280 of variable-rate borrowings to fixed-rate borrowings beginning on January 2, 2009 and through July 1, 2013.
Companies are required to recognize all derivative instruments as either assets or liabilities at fair value on the balance sheet. The Company has designated this derivative instrument as a cash flow hedge. As such, changes in the fair value of the derivative instrument are recorded as a component of other comprehensive income (loss) (“OCI”) for the three months ended March 31, 2011 to the extent of effectiveness. The ineffective portion of the change in fair value of the derivative instrument is recognized in interest expense. For the three months ended March 31, 2011, the Company has determined this derivative instrument to be an effective hedge.
The Company does not use derivative instruments for trading or other speculative purposes and did not have any other derivative instruments or hedging activities as of March 31, 2011.
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6. Fair Value of Financial Instruments
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Certain of the Company’s assets and liabilities are disclosed at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation methods including the market, income and cost approaches. The assumptions used in the application of these valuation methods are developed from the perspective of market participants pricing the asset or liability. Inputs used in the valuation methods can be either readily observable, market corroborated, or generally unobservable inputs. Whenever possible the Company attempts to utilize valuation methods that maximize the uses of observable inputs and minimizes the use of unobservable inputs. Based on the operability of the inputs used in the valuation methods, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Assets and liabilities measured, reported and/or disclosed at fair value will be classified and disclosed in one of the following three categories:
Level 1 – Quoted market prices in active markets for identical assets or liabilities.
Level 2 – Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3 – Unobservable inputs that are not corroborated by market data.
The table below sets forth the Company’s fair value hierarchy for liabilities measured or disclosed at fair value as of March 31, 2011.
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Level 1
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Level 2
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Level 3
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Liability:
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||||||||||||
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Interest rate swap
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$ | — | $ | 671,410 | $ | — | ||||||
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Fixed rate mortgage
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$ | — | $ | — | $ | 46,209,000 | ||||||
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Variable rate mortgage
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$ | — | $ | — | $ | 22,185,000 | ||||||
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Variable rate debt
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$ | — | $ | 26,130,254 | $ | — | ||||||
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The carrying amounts of the Company’s short-term financial instruments, which consist of cash, cash equivalents, receivables, and accounts payable, approximate their fair values. The fair value of the interest rate swap was derived using estimates to settle the interest rate swap agreement, which is based on the net present value of expected future cash flows on each leg of the swap utilizing market-based inputs and discount rates reflecting the risks involved. The fair value of fixed and variable rate mortgages was derived using the present value of future mortgage payments based on estimated current market interest rates. The fair value of variable rate debt is estimated to be equal to the face value of the debt because the interest rates are floating and is considered to approximate fair value.
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7. Total Comprehensive Income (Loss)
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The following is a reconciliation of net income to comprehensive income attributable to Agree Realty Corporation for the three months ended March 31, 2011 and 2010.
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|
Three months ended
March 31, 2011 |
Three months ended
March 31, 2010 |
|||||||
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Net income
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$ | 4,700,059 | $ | 9,968,480 | ||||
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Other comprehensive income (loss)
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121,801 | (370,547 | ) | |||||
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Total comprehensive income before non-controlling interest
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4,821,860 | 9,597,933 | ||||||
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Less: non-controlling interest
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160,243 | 402,392 | ||||||
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Total comprehensive income after non-controlling interest
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4,661,617 | 9,195,541 | ||||||
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Non-controlling interest of comprehensive income (loss)
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4,153 | 11,023 | ||||||
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Comprehensive income attributable to Agree Realty Corporation
|
$ | 4,657,464 | $ | 9,206,564 | ||||
|
8.
Costs and Estimated Earnings on Uncompleted Contracts
|
For contracts where the Company does not retain ownership of real property developed and received fee income for managing the development project, the Company uses the percentage of completion accounting method. Under this approach, income is recognized based on the status of the uncompleted contracts and the current estimates of costs to complete. The percentage of completion is determined by the relationship of costs incurred to the total estimated costs of the contract. Provisions are made for estimated losses on uncompleted contracts in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income. Such revisions are recognized in the period in which they are determined. Claims for additional compensation due to the Company are recognized in contract revenues when realization is probable and the amount can be reliably estimated
.
|
|
2011
|
2010
|
|||||||
|
Cost incurred on uncompleted
Contracts
|
$ | 585,000 | $ | 1,023,348 | ||||
|
Estimated earnings
|
411,000 | 806,652 | ||||||
|
Earned revenue
|
996,000 | 1,830,000 | ||||||
|
Less billings to date
|
- | - | ||||||
|
Total
|
$ | 996,000 | $ | 1,830,000 | ||||
|
Total unbilled receivable at March 31, 2011 and 2010 was $996,000 and $1,830,000 and is included in accounts receivable – tenants on the consolidated balance sheet.
|
|
|
9.
Notes Payable
|
Agree Limited Partnership (the “Operating Partnership”) has in place a $55 million Credit Facility with Bank of America, as the agent, which is guaranteed by the Company (the “Credit Facility”). The Credit Facility was extended in January 2009 and now matures in November 2011. Advances under the Credit Facility bear interest within a range of one-month to 12-month LIBOR plus 100 basis points to 150 basis points or the lender’s prime rate, at the Company’s option, based on certain factors such as the ratio of the Company’s indebtedness to the capital value of the Company’s properties. The Credit Facility generally is used to fund property acquisitions and development activities. As of March 31, 2011, $25,380,254 was outstanding under the Credit Facility bearing a weighted average interest rate of 1.34%.
The Company also has in place a $5 million Line of Credit (the “Line of Credit”) that was extended in October 2009 and now matures in November 2011. The Line of Credit bears interest at the lender’s prime rate less 75 basis points or 150 basis points in excess of the one-month to 12-month LIBOR rate, at the Company’s option. The purpose of the Line of Credit is generally to provide working capital and fund land options and start-up costs associated with new projects. As of March 31, 2011, $750,000 was outstanding under the Line of Credit bearing a weighted average interest rate of 2.50%.
|
|
10. Mortgages Payable
|
Mortgages payable consisted of the following:
|
|
March 31,
2011
|
December 31,
2010 |
|||||||
|
Note payable in monthly installments of $39,591 plus interest at 150 basis
points over LIBOR (1.76% at March 31, 2011 and December 31, 2010).
A final balloon payment in the amount of $22,318,478 is due on July
14, 2013 unless extended for a two year period at the option of the
Company
|
$ | 23,540,828 | $ | 23,666,828 | ||||
|
Note payable in monthly installments of $153,838 including interest at 6.90% per annum, with the final monthly payment due January 2020; collateralized by related real estate and tenants’ leases
|
12,184,670 | 12,433,134 | ||||||
|
Note payable in monthly installments of $91,675 including interest at 6.27% per annum, with the final monthly payment due July 2026; collateralized by related real estate and tenants’ leases
|
10,819,962 | 10,924,291 | ||||||
|
Note payable in monthly installments of $128,205 including interest at 6.20% per annum, with a final monthly payment due November 2018; collateralized by related real estate and tenants’ leases
|
9,368,749 | 9,605,696 | ||||||
|
Note payable in monthly installments of $99,598 including interest at 6.63% per annum, with the final monthly payment due February 2017; collateralized by related real estate and tenants’ leases
|
5,836,214 | 6,036,060 | ||||||
|
Note payable in monthly installments of $57,423 including interest at 6.50% per annum, with the final monthly payment due February 2023; collateralized by related real estate and tenant lease
|
5,702,904 | 5,781,587 | ||||||
|
Note payable in monthly installments of $25,631 including interest at 7.50% per annum, with the final monthly payment due May 2022; collateralized by related real estate and tenant lease
|
2,321,497 | 2,354,450 | ||||||
|
Note payable in monthly installments of $10,885 including interest at 6.85% per annum, paid March 31, 2011
|
- | 724,734 | ||||||
|
Total
|
$ | 69,774,824 | $ | 71,526,780 | ||||
|
The Company paid off a note payable in the amount of $704,374 on March 31, 2011.
Two of the Company’s mortgage loans amounting to $8.0 million secured by two properties with 350,000 square feet of gross leasable area representing $1.2 million of annualized base rents are in default due to the bankruptcy filing of one of the Company’s tenants in February 2011.
In addition, while the Chapter 11 bankruptcy filing of the tenant is not a direct event of default under four non-recourse, cross-collateralized and cross-defaulted mortgage loans, as a result of the Oklahoma City, Oklahoma store closure and lease rejection, the Company did not pay $36,410 in monthly debt service for the loan associated with that location, which was due on May 2, 2011. The Company anticipates that the lender may, after applicable cure period, declare all four cross-collateralized and cross-defaulted mortgage loans in default and possibly accelerate the Company’s obligation thereunder. These four non-recourse mortgage loans amounting to approximately $9.4 million are secured by four properties with 103,000 square feet of gross leasable area representing $2.1 million of annualized base rents as of March 31, 2011.
|
|
The Company is negotiating with lenders regarding an appropriate course of action. The Company can provide no assurance that its negotiations with the lenders will result in favorable outcomes to the Company. Failure to restructure these mortgage obligations could result in default and foreclosure actions and loss of the mortgaged properties.
Future scheduled annual maturities of mortgages payable for years ending March 31, excluding the effect of mortgage defaults, are as follows: 2012 - $4,280,616; 2013 - $4,566,822; 2014 - $26,742,533; 2015 - $4,572,442; 2016 - $4,882,290 and $24,730,121 thereafter. The weighted average interest rate at March 31, 2011 and December 31, 2010 was 5.61% and 5.63%, respectively
.
|
|
|
11.
Discontinued Operations
|
During 2010, the Company sold two single tenant properties and entered into a lease termination agreement for one property. The properties were located in Santa Barbara, California, Marion Oaks, Florida and Aventura, Florida. Two of the properties were leased to Borders and one property was leased to Walgreens. During the three months ended March 31, 2010, the Santa Barbara sale provided gross proceeds of approximately $9.8 million and a gain on sale of approximately $5.3 million. In addition, in January 2011, the Company completed the sale of two Borders stores located in Tulsa, Oklahoma. The net proceeds on the transaction amounted to approximately $6.5 million and there was no gain or loss on the sale as a $440,000 impairment charge was recorded in 2010 when the property was classified as held for sale. The results of operations for these properties are presented as discontinued operations in the Company’s Consolidated Statements of Income for all periods presented. The revenues for the properties were $91,816 and $724,822 for the three months ended March 31, 2011 and 2010, respectively. The expenses for the properties were $-0- and $217,941 for the three months ended March 31, 2011 and 2010, respectively.
|
|
12. Purchase Accounting for Acquisitions
of Real Estate |
Acquired real estate assets have been accounted for using the purchase method of accounting and accordingly, the results of operations are included in the consolidated statements of income from the respective dates of acquisition. The Company allocates the purchase price to (i) land and buildings based on management’s internally prepared estimates and (ii) identifiable intangible assets or liabilities generally consisting of above-market and below-market in-place leases and in-place leases. The Company uses estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques, including management’s analysis of comparable properties in the existing portfolio, to allocate the purchase price to acquired tangible and intangible assets.
The estimated fair value of above-market and below-market in-place leases for acquired properties is recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease.
The aggregate fair value of other intangible assets consisting of in-place, above market leases, is estimated based on internally developed methods to determine the respective property values and are included in lease intangibles costs in the consolidated balance sheets. Factors considered by management in their analysis include an estimate of costs to execute similar leases and operating costs saved.
During 2011, the Company recorded $512,667 as the fair value of lease intangibles costs.
The fair value of intangible assets acquired are amortized to depreciation and amortization on the consolidated statements of income over the remaining term of the respective leases. The weighted average amortization period for the lease intangible costs is 21.8 years.
|
|
Total
|
April 1, 2011 – March 31, 2012
|
April 1, 2012 – March 31, 2014
|
April 1, 2014 – March 31, 2016
|
Thereafter
|
||||||||||||||||
|
Mortgages Payable
|
$ | 69,775 | $ | 4,280 | $ | 31,310 | $ | 9,455 | $ | 24,730 | ||||||||||
|
Notes Payable
|
26,130 | 26,130 | — | — | — | |||||||||||||||
|
Land Lease Obligation
|
18,606 | 712 | 1,425 | 1,425 | 15,044 | |||||||||||||||
|
Estimated Interest Payments on Mortgages and Notes Payable
|
19,860 | 4,150 | 6,239 | 3,898 | 5,573 | |||||||||||||||
|
Other Long-Term Liabilities
|
— | — | — | — | — | |||||||||||||||
|
Total
|
$ | 134,371 | $ | 35,272 | $ | 38,974 | $ | 14,778 | $ | 45,347 | ||||||||||
|
Three Months Ended
March 31,
|
||||||||
|
|
2011
|
2010
|
||||||
|
Net income
|
$ | 4,700,059 | $ | 9,968,480 | ||||
|
Depreciation of real estate assets
|
1,592,050 | 1,400,791 | ||||||
|
Amortization of leasing costs
|
25,301 | 19,027 | ||||||
|
Gain on sale of fixed asset
|
- | (5,331,685 | ) | |||||
|
Funds from Operations
|
$ | 6,317,410 | $ | 6,056,613 | ||||
|
Weighted Average Shares and Operating Partnership Units Outstanding – Dilutive
|
9,996,015 | 8,477,909 | ||||||
|
Year ended March 31,
|
||||||||||||||||||||||||||||
|
2012
|
2013
|
2014
|
2015
|
2016
|
Thereafter
|
Total
|
||||||||||||||||||||||
|
Fixed rate mortgage
|
$ | 3,756 | $ | 4,011 | $ | 4,282 | $ | 4,572 | $ | 4,883 | $ | 24,730 | $ | 46,234 | ||||||||||||||
|
Average interest rate
|
6.56 | % | 6.56 | % | 6.56 | % | 6.56 | % | 6.56 | % | 6.56 | % | — | |||||||||||||||
|
Variable rate mortgage
|
$ | 524 | $ | 556 | $ | 22,461 | — | — | — | $ | 23,541 | |||||||||||||||||
|
Average interest rate
|
3.74 | % | 3.74 | % | 3.74 | % | — | — | — | — | ||||||||||||||||||
|
Other variable rate debt
|
$ | 26,130 | — | — | — | — | — | $ | 26,130 | |||||||||||||||||||
|
Average interest rate
|
1.38 | % | — | — | — | — | — | — | ||||||||||||||||||||
|
3.1
|
Articles of Incorporation and Articles of Amendment of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-11 (Registration Statement No. 33-73858), as amended
|
|
3.2
|
Articles Supplementary, establishing the terms of the Series A Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K (No. 001-12928) filed on December 9, 2008)
|
|
3.3
|
Articles Supplementary, classifying additional shares of Common Stock and Excess Stock (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K (No. 001-12928) filed on December 9, 2008)
|
|
3.4
|
Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Form 10-K (No. 001- 12928) for the year ended December 31, 2006)
|
|
4.1
|
Rights Agreement, dated as of December 7, 1998, by and between Agree Realty Corporation, a Maryland corporation, and Computershare Trust Company, N.A., f/k/a EquiServe Trust Company, N.A., a national banking association, as successor rights agent to BankBoston, N.A., a national banking association (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-3 (No. 333- 161520) filed on November 13, 2008)
|
|
4.2
|
Second Amendment to Rights Agreement, dated as of December 8, 2008, by and between Agree Realty Corporation, a Maryland corporation, and Computershare Trust Company, N.A., f/k/a EquiServe Trust Company, N.A., a national banking association, as successor rights agent to BankBoston, N.A., a national banking association (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K (No. 001-12928) filed on December 9, 2008)
|
|
4.3
|
Amended and Restated Registration Rights Agreement, dated July 8, 1994 by and among the Company, Richard Agree, Edward Rosenberg and Joel Weiner (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-K (No. 001-12928) for the year ended December 31, 1994)
|
|
4.4
|
Form of certificate representing shares of common stock (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-3 (No. 333-161520) filed on August 24, 2009
|
|
*31.1
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Richard Agree, Chief Executive Officer and Chairman of the Board of Directors
|
|
*31.2
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Alan D. Maximiuk, Vice President, Chief Financial Officer and Secretary
|
|
*32.1
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Richard Agree, Chief Executive Officer and Chairman of the Board of Directors
|
|
*32.2
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Alan D. Maximiuk, Vice President, Chief Financial Officer and Secretary
|
|
Agree Realty Corporation
|
|
/s/ RICHARD AGREE
Richard Agree
|
|
Chief Executive Officer
|
|
and Chairman of the Board of Directors
|
|
(Principal Executive Officer)
|
|
/s/ ALAN D. MAXIMIUK
Alan D. Maximiuk
|
|
Vice President, Chief Financial Officer and
|
|
Secretary
|
|
(Principal Financial and Accounting Officer)
|
|
Date: May 10, 2011
|
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
No Customers Found
No Suppliers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|