Agree Realty Corp. Reports Operating Results (10-K)
Agree Realty Corp. has a market cap of $227 million; its shares were traded at around $23.27 with a P/E ratio of 12.9 and P/S ratio of 6.3. The dividend yield of Agree Realty Corp. stocks is 8.8%. Agree Realty Corp. had an annual average earning growth of 0.7% over the past 5 years.
Highlight of Business Operations:We are focused primarily on the ownership, development, acquisition and management of retail properties net leased to national tenants. We were incorporated in December 1993 to continue and expand the business founded in 1971 by our current Chief Executive Officer and Chairman, Richard Agree. We specialize in developing retail properties for national tenants who have executed long-term net leases prior to the commencement of construction. As of December 31, 2010, approximately 89% of our annualized base rent was derived from national tenants. As of December 31, 2010, approximately 62% of our annualized base rent was derived from our top three tenants: Walgreen Co. (“Walgreen”) – 31%; Borders Group, Inc. (“Borders”) – 20%; and Kmart Corporation (“Kmart”) - 11%.
The majority of our mortgage indebtedness is long-term, fixed rate and non-recourse in nature. Whenever feasible, we enter into long-term financing for our properties to match the underlying long-term leases. We intend to limit our floating rate debt to borrowings under our credit facilities, which are primarily used to finance development and acquisition activities. Once project development is complete, we typically consider refinancing this floating rate debt with fixed rate, non-recourse debt. As of December 31, 2010, our total mortgage debt was approximately $71.6 million with a weighted average maturity of 7.7 years. Of this total mortgage indebtedness, approximately $47.9 million is fixed rate, self–amortizing debt with a weighted average interest rate of 6.56% and a weighted average maturity of 10.4 years. The remaining mortgage debt of approximately $23.7 million bears interest at 150 basis points over LIBOR or 1.76% as of December 31, 2010 and has a maturity date of July 14, 2013, which can be extended at our option for two additional years. In January 2009, we entered into an interest rate swap agreement that fixes the interest rate during the initial term of the variable interest mortgage at 3.744%. In addition to our mortgage debt, we had $28.4 million outstanding under our credit facilities as of December 31, 2010 with a weighted average interest rate of 1.48%. We intend to maintain a ratio of total indebtedness (including construction and acquisition financing) to market capitalization of 65% or less. At December 31, 2010, our ratio of indebtedness to market capitalization assuming the conversion of units of limited partnership interest in our Operating Partnership (“OP units”), was approximately 37.7%. The decrease in our ratio of indebtedness to market capitalization from 2009 to 2010 was primarily the result of our completion of an offering of 1,495,000 shares of our common stock and an increase in the market price of our common stock.
As of December 31, 2010, approximately 57% of our GLA was leased to Walgreen, Borders, and Kmart and approximately 62% of our total annualized base rent was attributable to these tenants. At December 31, 2010, Walgreen occupied approximately 11% of our GLA and accounted for approximately 31% of our annualized base rent. At December 31, 2010, Borders occupied approximately 19% of our GLA and accounted for approximately 20% of our annualized base rent. At December 31, 2010, Kmart occupied approximately 26% of our GLA and accounted for approximately 11% of our annualized base rent. No other tenant accounted for more than 10% of gross leasable area or annualized base rent in 2010. The loss of any of these anchor tenants or a significant number of their stores, or the inability of any of them to pay rent, would have a material adverse effect on our business.
We have operated and intend to operate in a manner to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). In order to maintain qualification as a REIT, we must, among other things, distribute at least 90% of our REIT taxable income and meet certain asset and income tests. Additionally, our charter limits ownership of our Company, directly or constructively, by any single person to 9.8% of the value of our outstanding common stock and preferred stock, subject to certain exceptions. As a REIT, we are not subject to federal income tax with respect to that portion of our income that meets certain criteria and is distributed annually to the stockholders.
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