8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT: July 30, 2004

AGREE REALTY CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MARYLAND
(State of other jurisdiction of
incorporation or organization) (Commission File Number)
1-12928

31850 Northwestern Highway
Farmington Hills, MI 48334
(Address of principal executive offices) 38-3148187
(I.R.S. Employer
identification No.)

(Registrant’s telephone number, including area code) (248) 737-4190

TABLE OF CONTENTS

	Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
	Item 12. Results of Operations and Financial Condition
SIGNATURE
EXHIBIT INDEX
Press Release, dated July 29, 2004

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

(c)	Exhibits
Exhibit 99.1 -	Press Release issued by Agree Realty Corporation, dated July 29, 2004

Item 12. Results of Operations and Financial Condition

     The information under this caption is furnished by Agree Realty Corporation (the “Company”) in accordance with Securities Exchange Commission Release No. 33-8216. This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

     On July 29, 2004, the Company issued a press release describing its results of operations for the second quarter ended June 30, 2004. A copy of the press release is attached as Exhibit 99.1 to this report. In the earnings release, the Company used the non-GAAP financial measure of Funds from Operations (“FFO”). A reconciliation of FFO to the comparable GAAP financial measure (Net Income) is contained in the attached earnings release. Disclosure regarding the definition of FFO used by the Company and why the Company’s management believes the presentation of FFO provides useful information to investors is included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2003.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.

AGREE REALTY CORPORATION
 

/s/ Kenneth R. Howe  

Vice President, Finance, Chief 

Financial Officer 

DATED: July 30, 2004

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release of Agree Realty Corporation dated July 29, 2004

EX-99.1

EXHIBIT 99.1

AGREE REALTY CORPORATION
31850 Northwestern Hwy.
Farmington Hills, MI 48334 (248) 737-4190
Fax: (248) 737-9110

PRESS RELEASE — FOR IMMEDIATE RELEASE

CONTACT: Kenneth R. Howe, Chief Financial Officer

(248) 737-4190

AGREE REALTY CORPORATION REPORTS SECOND QUARTER
2004 OPERATING RESULTS

Second Quarter 2004 Highlights:

Financial Information

• Diluted FFO per share of $0.62

• $0.485 per share quarterly dividend paid July 13, 2004

     FARMINGTON HILLS, MI (July 29, 2004) — Agree Realty Corporation (NYSE: ADC) today announced results for the quarter ended June 30, 2004. For the second quarter, funds from operations increased 17.6% to $4,451,000 compared with funds from operations in the second quarter of 2003 of $3,784,000. Diluted funds from operations per share were $0.62 per share compared with $0.73 per share for the second quarter of 2003. Net income increased to $3,057,000, or $0.47 per share on a diluted basis, compared with net income for the second quarter of 2003 of $2,374,000, or $0.53 per share. Total rental revenues increased 6.6% to $7,354,000, compared with total rental revenues of $6,896,000 in the second quarter of 2003. A reconciliation of net income to FFO is included in the financial table accompanying this press release.

     For the six months ended June 30, 2004, funds from operations increased 17.5% to $8,721,000 compared with funds from operations for the six months ended June 30, 2003 of $7,421,000. Diluted funds from operations per share were $1.22 per share compared with $1.44 per share for the second quarter of 2003. Net income was $5,953,000, or $.92 per share on a diluted basis, compared with net income for the comparable period last year of $4,618,000, or $1.03 per share. Total rental revenues increased 7.2% to $14,698,000, compared with total rental revenues of $13,708,000 for the comparable period last year.

Funds from Operations

     Management considers Funds from Operations (“FFO”) to be a useful supplemental measure to evaluate operating performance. The Company considers FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses on dispositions and excluding depreciation, FFO can help one compare the operating performance of a company’s real estate between periods or as compared to different companies. FFO is defined by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) to mean net income computed in accordance with generally accepted accounting principles (“GAAP”), excluding gains (or losses) from sales of property, plus real estate related depreciation and amortization. FFO should not be considered as an alternative to net income as the primary indicator of the Company’s operating performance or as an alternative to cash flow as a measure of liquidity. In addition, our method of calculating FFO may not be comparable to the methods used by other REITs and, accordingly may be different from similarly titled measures reported by other companies.

Dividend

     We paid a cash dividend of $0.485 per share on July 13, 2004 to shareholders of record on June 30, 2004. The dividend is equivalent to an annualized dividend of $1.94 per share and represents a payout ratio of 78.2% of funds from operations for the quarter.

Portfolio Results

     At June 30, 2004, Agree Realty Corporation’s total assets were $193,971,000. At quarter end our portfolio consisted of 52 properties totaling 3,522,931 million square feet located in 14 states. The portfolio was 99% leased at the end of the quarter. During the quarter we commenced construction on a single tenant property located in Flint Township, Michigan. The budgeted cost for this project is $3,500,000 and we expect to complete the development in the fourth quarter 2004.

Annualized Base Rent of our Properties

The following is a breakdown of base rents in place at June 30, 2004 for each type of retail tenant:

National	$	23,341,820	88	%
Regional		1,985,713	8
Local		1,142,458	4
Total	$	26,469,991	100	%

Lease Expirations

     The following table shows lease expirations for the next 10 years for our freestanding properties and community shopping centers, assuming that none of the tenants exercise renewal options.

					June 30, 2004
			Gross Leasable Area						Annualized Base Rent
	Number
Expiration	of Leases		Square			Percent					Percent
Year	Expiring		Footage			of Total			Amount		of Total
2004		10		29,959			.85	%	$	187,436		.71	%
2005		19		151,367			4.30			851,599		3.22
2006		36		174,024			4.94			1,421,049		5.37
2007		13		68,330			1.94			458,597		1.73
2008		23		383,138			10.88			1,443,045		5.45
2009		8		157,990			4.48			686,281		2.59
2010		7		213,135			6.05			1,243,929		4.70
2011		6		178,903			5.08			1,116,688		4.22
2012		—		—			—			—		—
2013		1		51,868			1.47			492,746		1.86
Total		123		1,408,714			39.99	%	$	7,901,370		29.85	%

Operating Partnership Units

     As of June 30, 2004 there were 673,547 operating partnership units outstanding.

     Agree Realty Corporation owns, manages and develops properties which are primarily single tenant properties and neighborhood community shopping centers, located in fourteen (14) states and leased to major retail tenants.

     Agree Realty Corporation considers portions of the information contained in this release to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 27E of the Securities Exchange Act of 1934, both as amended, with respect to the Company’s expectation for future periods. Such statements are, by their nature, subject to certain risks and uncertainties. The Company cautions that, as a result of a number of factors, actual results could differ materially from those set forth in this presentation. Other risks, uncertainties and factors that could cause actual results to differ materially than those projected are detailed from time to time in reports filed by the Company with the Securities and Exchange Commission, including Forms 8-K, 10-Q and 10-K.

     For additional information, visit the Company’s home page on the Internet at http://www.agreerealty.com

Agree Realty Corporation
Operating Results (in thousands, except per share amounts)
(Unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
	2004		2003		2004		2003
Revenue
Minimum rents	$	6,552	$	6,052	$	12,921	$	11,984
Percentage rent		16		10		41		51
Operating cost reimbursements		689		721		1,540		1,440
Unconsolidated entities		97		113		194		231
Management fees and other		—		—		2		2
Total Revenue		7,354		6,896		14,698		13,708
Expenses
Real estate taxes		475		445		928		913
Property operating expenses		410		428		1,099		1,033
Land lease payments		185		185		370		370
General and administrative		663		567		1,296		1,123
Depreciation and amortization		1,087		1,003		2,170		2,009
Interest expense		1,159		1,675		2,263		3,259
Total Expenses		3,979		4,303		8,126		8,707
Income before minority interest
and discontinued operations		3,375		2,593		6,572		5,001
Minority interest expense		318		339		619		653
Income before discontinued operations		3,057		2,254		5,953		4,348
Income from discontinued operations		—		120		—		270
Net Income	$	3,057	$	2,374	$	5,953	$	4,618
Net Income — per share	$	0.47	$	0.53	$	0.92	$	1.03
Reconciliation of Funds from Operations
to Net Income
Net income	$	3,057	$	2,374	$	5,953	$	4,618
Depreciation of real estate assets		1,065		1,039		2,127		2,080
Amortization of leasing costs		11		14		22		29
Gain on sale of assets		—		—		—		—
Minority interest		318		357		619		694
Funds from Operations	$	4,451	$	3,784	$	8,721	$	7,421
Funds from Operations — per share	$	0.62	$	0.73	$	1.22	$	1.44
Weighted average number of shares
and “OP” units outstanding		7,146		5,156		7,147		5,156

Agree Realty Corporation
Consolidated Balance Sheets (in thousands)
(Unaudited)

	June 30,			Dec 31,
	2004			2003
ASSETS
Real estate investments, at cost	$	230,997		$	221,225
Accumulated depreciation		(40,593	)		(38,476	)
Cash and cash equivalents		199			1,004
Cash — restricted		—			4,310
Rents receivable		147			622
Investments in and advances to unconsolidated entities		324			330
Deferred costs, net of amortization		1,303			1,387
Other assets		1,594			1,284
Total Assets	$	193,971		$	191,686
LIABILITIES AND STOCKHOLDERS’ EQUITY
Mortgages payable	$	54,906		$	55,967
Construction loans		1,569			1,569
Notes payable		30,400			26,500
Other liabilities		5,162			5,640
Total Liabilities		92,037			89,676
Total Minority Interest		5,788			5,822
Common stock		1			1
Additional paid-in capital		109,174			108,252
Accumulated deficit		(11,548	)		(11,228	)
Unearned compensation		(1,481	)		(837	)
Total Stockholders’ Equity		96,146			96,188
	$	193,971		$	191,686