At first glance it's easy to take a look at the funds from operations (FFO) numbers from Agree Realty (NYSE:ADC) and determine that business is flat or going in the wrong direction. However, I think such a conclusion would be a bit short-sighted.

For the quarter, FFO came in at $0.59 per share versus $0.60 a year ago, and the FFO performance through the first six months of the year are similarly flat. Revenue, on the other hand, was up 5.6% for the first quarter and 5.6% through the first six months. Minimum rents, which one could argue are more important, increased at the slightly faster rate of just over 6%.

The expenses that are eating into the company's revenue growth are general and administrative expenses and interest expense. The latter is most likely driven by increased interest expense on its note payable, because its other debt (mortgages payable) are all at fixed rates. Assuming the second quarter is following the same pattern as the first quarter, the higher G&A expense is being driven by increased salaries, healthcare expenses, Sarbanes-Oxley compliance, and employee stock awards. Faster expense than revenue growth is not something I like to see, but this isn't uncommon for a number of small companies this year.

Slower growth in operating expenses, with continued revenue growth, is one step toward achieving FFO growth in the second half of this year and next. The other step is a development project the company has in progress, which will add 14,820 square feet for leasing. This project is expected to be completed in the third quarter and should begin to contribute to the company's results in subsequent quarters.

I haven't looked to see if there are any announcements of tenants for the new development, but my hope would be for some diversification away from Walgreens (NYSE:WAG), Borders Group (NYSE:BGP), and Sears Holdings (NASDAQ:SHLD). These are all fine companies, but they collectively contribute two-thirds of the company's revenues.

While investors wait for signs of growth, Agree offers them a 5.9% yield that is 83% covered by FFO. Even with normal adjustments to FFO for tenant improvements and other items, the dividend should be adequately covered. All things considered, that's a pretty good combination.

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At the time of publication, Nathan Parmelee had no interest in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.