DEVELOP | ACQUIRE | PARTNER
YEARS
1994 - 2014
annual02014
4
10
AND 10-K
ANNUAL
REPORT
for the year ended
DECEMBER 31, 2014
Agree Realty Corporation (NYSE: ADC) is a
fully-integrated, self-administered, and
self-managed real estate investment trust
self-managed real estate investment trust
(REIT) focused on the acquisition and
development of properties net leased to
industry-leading retailers throughout the
United States.
Building upon the foundation of
excellence established throughout the
excellence established throughout the
past four decades, Agree Realty continues
to be a market leader in the net lease
space. At December 31, 2014, our growing
portfolio consisted of 209 assets in 37 states,
containing approximately 4.3 million
square feet of gross leasable space.
Dear Fellow Agree Shareholders,
This past year, the 20th anniversary of our listing on the New York Stock Exchange, was an opportunity to
commemorate and reflect on our two decades as a real estate investment trust. While much has changed in
the retail landscape, our business strategy and our real estate portfolio, the foundation of Agree Realty
remains one built on integrity, trust and alignment with our shareholders.
Prior to the onset of 2014, we, of course, defined our upcoming real estate objectives, but we were also
determined to undertake an evaluation and improvement of the three most important areas of our growing
business: our people, our processes and our systems. Internally, we referred to this effort as ADC 2.0 and it
entailed significant efforts from our fantastic Team.
Elite. Professionals. Delivering Results. Many of you have seen this slogan on our website, marketing
materials or posted on the walls of our offices. It speaks to our expectation of performance on an individual, as
well as a collective basis. This past year we attracted talented professionals from across the country to join our
Team and focused on creating an environment and culture of a first-class organization. Our People are our
most important resource. I am proud to say that we have some of the best.
Our culture at Agree is built on a few central Core Values: consistency, discipline, an ownership mentality,
strategic thinking and challenging ourselves to improve and learn. As we have meaningfully increased our
transactional volume and in turn grown our real estate portfolio, our Team remains grounded in these values.
They drive us to constantly evaluate and improve our processes and systems, to seek efficiencies and to
optimize and leverage technology….to never be satisfied with anything but elite.
While these efforts may not directly impact our financial results, they enable us to scale our portfolio, actively
manage our real estate assets and execute on our three external growth platforms. In a few short years, we
have tripled the size of our portfolio and transformed Agree Realty from a relative unknown into an established
retail net lease leader.
I am pleased to report the results of our 2014 activities including a review of our accomplishments and our
expanding portfolio of high-quality net lease retail properties. This past year, we committed to, and
delivered on three operational objectives: constructing a best-in-class retail net lease portfolio, delivering high-
quality earnings growth, and enhancing our robust balance sheet. Please allow me a few minutes to review the
Company’s successes in executing these three key initiatives.
Constructing a Best-in-Class Retail Portfolio:
In 2014, the Company invested a record $165.3 million in 82 retail properties net leased to 34 industry-
leading retailers at an average cap rate of 8.2%. Our acquisition, development and joint venture platforms
produced superior risk-adjusted opportunities across 15 diverse retail sectors in 24 states across the country.
We did not sacrifice quality as we expanded our portfolio from 137 properties to 209 properties. Our
100% retail portfolio, comprised of 56% investment grade tenants, remains of the highest caliber, concentrated
in recession and e-commerce resistant retail sectors, and with outstanding underlying real estate.
This past year, we acquired 77 assets for a Company record $147.5 million. These properties are
leased to 28 different tenants operating in 15 diverse retail sectors. From the inception of our acquisition
program in April 2010 through the end of 2014, the Company has acquired 139 net leased properties for an
aggregate purchase price of approximately $378 million. The retail properties acquired in 2014 had a
weighted average remaining lease term of 14.1 years, based on the date of acquisition, and are leased to
industry-leading retailers including among others, AutoZone, Aldi, Michael’s Crafts, PetSmart, O’Reilly Auto
Parts, Buffalo Wild Wings, Taco Bell and Burger King.
As our Acquisition Team sourced accretive opportunities, our Development Team and Joint Venture Capital
Solutions program completed five projects for industry-leading retailers for an aggregate cost of
nearly $18 million. These projects provided superior return on investments in first class retailers, including TJ
Maxx, Ross Dress for Less, McDonalds and Wawa. Our real estate development expertise continues to
provide a unique value proposition to our retail partners that differentiates Agree from our peers.
Constructing a best-in-class portfolio requires us to constantly evaluate our properties and tenants, and
identify potential disposition candidates. Every day we own a property is a day we choose not to sell. In 2014,
we sold four properties, including three non-core, Kmart-anchored shopping centers. These dispositions
generated nearly $13 million in proceeds, decreased the rental income derived from our shopping center
portfolio to approximately 8%, and reduced Kmart rental income to less than 3%.
As of December 31, 2014 our real estate portfolio spanned 4.3 million square feet of gross leasable area
located in 37 states and leased to industry-leading tenants across over 23 diverse retail sectors that the we
view as both e-commerce and recession resistant. Our tenants include prominent operators in, among others,
the pharmacy, home improvement, gas and convenience store, big box discount, health and fitness, quick
service restaurant, grocery, dollar store, automotive parts, casual dining, and financial services sectors. Just a
few short years ago, our portfolio was concentrated in only six retail sectors. As we continue to expand our
portfolio, we will continue to leverage our unique real estate capabilities via all three of our external
growth platforms: development, acquisitions and joint venture capital solutions.
Delivering a High-Quality Earnings Stream:
We are unquestionably focused on growing earnings; however, we have maintained our commitment to high-
quality retail properties and real estate underwriting fundamentals to achieve these ends. The impact of our
investment activity on our portfolio has been substantial. In 2014, net of dispositions, we increased our
annualized rental income by over 25%, reduced the rents generated by our top ten tenants from 65% to 52%,
and decreased our geographic concentration in Michigan from 36% to 28%.
As we continue to expand and diversify our portfolio, it is important that we do so in a manner that also
delivers consistent growth in earnings for our shareholders. In 2014, the Company increased Funds from
Operations (FFO) by 17.4% to $33.3 million and Adjusted Funds from Operations (AFFO) by 17.2% to $33.9
million. On a per share basis, FFO and AFFO both increased nearly 4%. While these results
demonstrate solid growth, the numbers alone do not account for the upgraded quality of these earnings
streams. We have simultaneously mitigated risk by disposing of lower quality non-core shopping centers,
reducing tenant concentrations, and decreasing exposures to tenants and/or assets in which we lack
confidence.
Specifically, as of December 31, 2014, core net lease assets generated 92% of our annualized base rent, as
compared to 72% at the end of 2010. Our top three tenants generated 31% of our annualized base rent as
compared to 62% at the end of 2010. Overall, our portfolio has a weighted average remaining lease term of
11.9 years and generates 56% of rental income from investment grade tenants.
Our long-term perspective matches the life of our underlying real estate assets. We have chosen against the
use of short-term debt or additional leverage to fuel year-over-year gains. We continue to employ stringent
underwriting standards in determining where, when and how to invest our capital. As a result of the accretive
investment activity and increased strength of our portfolio, our Board of Directors raised our dividend
twice in 2014 by an aggregate of nearly 10%. With conservative payout ratios of approximately 80% of FFO
and AFFO, we feel that shareholders are receiving a very attractive, well-covered dividend with solid potential
for further growth.
Enhancing a Robust Balance Sheet:
During 2014 and lead by the arrival of Brian Dickman as Chief Financial Officer, we completed a number of
capital markets transactions to further strengthen our robust balance sheet. The successful closing of an
expanded $150 million unsecured credit facility with eight leading financial institutions provided the Company
with enhanced capabilities to execute on our growing platforms. We also raised $65 million of unsecured fixed
rate debt, locking in attractively priced financing while maintaining flexibility within our real estate portfolio.
December’s follow-on equity offering raised gross proceeds of over $76 million. This was the largest and most
successful offering in the history of the Company. We attracted new institutional investors, enhanced
shareholder liquidity and eliminated the outstanding balance on our revolving credit facility.
At year-end 2014, our total debt to total market capitalization of 28.5% was amongst the strongest in
the entire REIT sector. Our $150 million revolving credit facility had nearly full capacity, providing us with the
liquidity to pursue a unique pipeline of real estate opportunities. Our balance sheet will continue to provide a
strong underlying foundation for the Company to execute on our operating strategy.
In Conclusion
Our goal remains the same: to build the premier retail net lease real estate investment trust. This past year
was another significant step towards that objective. Lastly, and as always, I would like to thank our Board of
Directors, our Management Team and, of course, our valued Shareholders, for their continued support of
Agree Realty Corporation.
Sincerely,
Joey Agree
President & Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
Commission File Number 1-12928
AGREE REALTY CORPORATION
(Exact name of Registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
38-3148187
(I.R.S. Employer
Identification No.)
70 E. Long Lake Road, Bloomfield Hills, Michigan 48304
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: (248) 737-4190
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $.0001 par value
Name of Each Exchange
On Which Registered
New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
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 and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No
The aggregate market value of the Registrant’s shares of common stock held by non-affiliates was approximately
$452,247,390 as of June 30, 2014, based on the closing price of $30.23 on the New York Stock Exchange on that date.
At February 27, 2015, there were 17,617,747 shares of common stock, $.0001 par value per share, outstanding.
Portions of the registrant’s definitive proxy statement for the annual stockholder meeting to be held in 2015 are
incorporated by reference into Part III of this Annual Report on Form 10-K as noted herein.
DOCUMENTS INCORPORATED BY REFERENCE
AGREE REALTY CORPORATION
Index to Form 10-K
PART I
Item 1:
Business
Item 1A:
Risk Factors
Item 1B:
Unresolved Staff Comments
Item 2:
Item 3:
Item 4:
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Item 5:
Item 6:
Item 7:
Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Item 7A:
Quantitative and Qualitative Disclosure about Market Risk
Item 8:
Item 9:
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Item 9A:
Controls and Procedures
Item 9B:
Other Information
PART III
Item 10:
Directors, Executive Officers and Corporate Governance
Item 11:
Executive Compensation
Item 12:
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
Item 13:
Certain Relationships and Related Transactions, and Director Independence
Item 14:
Principal Accountant Fees and Services
PART IV
Item 15:
Exhibits and Financial Statement Schedules
SIGNATURES
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PART I
Unless the context otherwise requires, references in this Annual Report on Form 10-K to the terms "registrant,”
the "Company," “Agree Realty,” "we,” “our” or "us" refer to Agree Realty Corporation and all of its consolidated
subsidiaries, included its majority owned operating partnership, Agree Limited Partnership (the “Operating
Partnership”). Agree Realty has elected to treat certain subsidiaries as taxable real estate investment trust
subsidiaries which are collectively referred to herein as the “TRS.”
Item 1:
Business
The Company
Agree Realty, 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. We were founded in 1971 by our current Executive Chairman, Richard Agree, and listed on the New
York Stock Exchange (“NYSE”) in 1994.
As of December 31, 2014, our portfolio consisted of 209 properties located in 37 states and totaling approximately
4.3 million square feet of gross leasable area. Our portfolio included 203 net lease properties, which contributed
approximately 91.6% of annualized base rent, and six community shopping centers, which generated the
remaining 8.4% of annualized base rent.
As of December 31, 2014, our portfolio was approximately 98.6% leased and had a weighted average remaining
lease term of approximately 11.9 years. A significant majority of our properties are leased to national tenants and
approximately 55.8% of our annualized base rent was derived from tenants, or parents thereof, with an
investment grade credit rating. Substantially all of our tenants are subject to net lease agreements. A net lease
typically requires the tenant to be responsible for minimum monthly rent and property operating expenses
including property taxes, insurance and maintenance.
Our assets are held by, and all of our operations are conducted through, directly or indirectly, the Operating
Partnership, of which we are the sole general partner and in which we held a 98.06% interest as of December 31,
2014. Under the partnership agreement of the Operating Partnership, we, as the sole general partner, have
exclusive responsibility and discretion in the management and control of the Operating Partnership.
As of December 31, 2014, we had 14 full-time employees, including executive, investment, due diligence,
construction, asset management and administrative personnel.
Our principal executive offices are located at 70 E. Long Lake Road, Bloomfield Hills, MI 48304 and our telephone
number is (248) 737-4190. We maintain a website at www.agreerealty.com. Our reports electronically filed with
or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act can be accessed
through this site, free of charge, as soon as reasonably practicable after we electronically file or furnish such
reports. These filings are also available on the SEC’s website at www.sec.gov. Our website also contains copies
of our corporate governance guidelines and code of business conduct and ethics, as well as the charters of our
audit, compensation and nominating and governance committees. The information on our website is not part of
this report.
Recent Developments
Investments
During 2014, we announced approximately $165.2 million of investments in net leased retail real estate, including
the acquisition of 77 properties for an aggregate purchase price of approximately $147.5 million and the
completed development of five properties for an aggregate cost of approximately $17.7 million. These 82
properties are leased to 34 different tenants operating in 15 unique retail sectors and are located in 24 states.
These assets are 100% leased for a weighted average lease term of approximately 14.1 years and the weighted
average capitalization rate on our investments was approximately 8.2%.
We calculate the weighted average capitalization rate on our investments by dividing annual expected net
operating income derived from the properties by the total investment in the properties. Annual expected net
operating income is defined as the straight-line rent for the base term of the lease less property level expenses (if
any) that are not recoverable from the tenant.
1
Dividends
During 2014, we increased our quarterly dividend twice, including an increase from $0.41 per share to $0.43 per
share in March 2014 and an increase from $0.43 per share to $0.45 per share in December 2014.
The quarterly dividend of $0.45 per share represents an annualized dividend of $1.80 per share and an
annualized dividend yield of approximately 5.8% based on the last reported sale price of our common stock on
the NYSE of $31.09 on December 31, 2014. We have paid a quarterly cash dividend for 83 consecutive quarters
and, although we expect to continue our policy of paying quarterly dividends, we cannot guarantee that we will
maintain our current level of dividends, that we will continue our recent pattern of increasing dividends per share,
or what our actual dividend yield will be in any future period.
Financing
In December 2014, we issued 2,587,500 shares of common stock at a price of $29.67 per share, including
337,500 shares purchased by the underwriters upon the exercise of their option to purchase additional shares.
After underwriting discounts and other estimated offering costs of $3.5 million, the net proceeds of approximately
$73.3 million were used to repay borrowings under our revolving credit facility, which were used primarily to fund
property acquisitions.
In July 2014, we entered into a $250.0 million senior unsecured revolving credit and term loan agreement
consisting of a new $150.0 million revolving credit facility (the “Credit Facility”), a new $65.0 million term loan due
2021 (the “2021 Term Loan”) and conforming amendments to our existing $35.0 million term loan due 2020 (the
“2020 Term Loan”).
The Credit Facility matures July 21, 2018, with an additional one-year extension at our option, subject to
customary conditions. Borrowings under the Credit Facility are priced at LIBOR plus 135 to 200 basis points,
depending on the Company’s leverage. The Credit Facility replaced our previous $85.0 million revolving credit
facility and may be increased to an aggregate of $250.0 million at our election, subject to certain terms and
conditions. As of December 31, 2014, $15.0 million was outstanding under the Credit Facility bearing a weighted
average interest rate of approximately 1.5%.
The 2021 Term Loan matures July 21, 2021. Borrowings under the 2021 Term Loan are priced at LIBOR plus
165 to 225 basis points, depending on the Company’s leverage. We entered into interest rate swaps to fix LIBOR
at 2.09% until maturity, implying an all-in interest rate of 3.74% at closing. Proceeds from the 2021 Term Loan
were used to repay borrowings under our previous revolving credit facility, which were used primarily to fund
property acquisitions. As of December 31, 2014, $65.0 million was outstanding under the 2021 Term Loan.
Additionally, conforming changes were made to certain terms and conditions of the 2020 Term Loan as part of the
agreement. The maturity date and pricing remained unchanged. As of December 31, 2014, $35.0 million was
outstanding under the 2020 Term Loan.
Dispositions
During 2014, we sold four properties for aggregate gross proceeds of $12.9 million, which resulted in a loss of
$405,000. Dispositions included three non-core community shopping centers (Ironwood Commons in Ironwood,
Michigan, Petoskey Town Center in Petoskey, Michigan and Chippewa Commons in Chippewa Falls, Wisconsin),
as well as a ground leased parcel in East Lansing, Michigan that was subject to a purchase option exercised by
the ground lessee. Ironwood Commons was reflected as property held for sale at December 31, 2013.
Leasing
During 2014, excluding properties that were sold, we executed lease extensions on over 330,000 square feet of
gross leasable area throughout the portfolio. The annual rent generated from these extensions was
approximately $1.8 million both before and after the extensions. Material extensions included a 90,500 square
foot freestanding Kmart in Oscoda, Michigan, an 86,500 square foot Kmart at Marshall Plaza in Marshall,
Michigan, a 52,300 square foot freestanding Kmart in Grayling, Michigan, a 20,000 square foot Staples at Central
Michigan Commons in Mt. Pleasant, Michigan and a 52,000 square foot Best Buy at North Lakeland Plaza in
Lakeland, Florida.
2
Business Strategies
Our primary business objective is to generate consistent shareholder returns by investing in and actively
managing a diversified portfolio of retail properties net leased to industry leading tenants. The following is a
discussion of our investment, financing and asset management strategies:
Investment Strategy
We are focused primarily on the fee simple ownership of properties net leased to national or large, regional
retailers operating in e-commerce and recession resistant sectors. Our leases are typically long term, net leases
that require the tenant to pay all property operating expenses, including real estate taxes, insurance and
maintenance. We believe that a diversified portfolio of such properties provides for stable and predictable cash
flow.
We seek to expand and enhance our portfolio by identifying the best risk adjusted investment opportunities across
our Acquisitions, Development and Joint Venture Capital Solutions platforms. Each platform leverages the
Company’s collective real estate acumen to pursue investments in net lease retail real estate.
Acquisitions: We launched our acquisitions platform in April 2010. Since its inception, we have acquired
139 properties for an aggregate purchase price of approximately $377.6 million. These properties are net
leased to over 50 different tenants representing more than 22 unique retail sectors and are located in 34
states. We pursue acquisition opportunities that meet both our real estate and return on investment
criteria and that will diversify our existing portfolio.
Development and Joint Venture Capital Solutions: We have been developing retail properties since the
formation of our predecessor in 1971 and have developed 61 of the 209 properties in our portfolio as of
December 31, 2014, including 55 of our net lease properties and all six community shopping centers. We
direct all aspects of the development process, including site selection, land acquisition, lease negotiation,
due diligence, design and construction.
We launched our Joint Venture Capital Solutions (“JVCS”) platform in April 2012. Our JVCS program
allows us to acquire properties by partnering with private developers on their in-process developments.
We offer development and construction expertise, retailer relationships, access to capital and forward
commitments to purchase that facilitate the successful completion of their projects. We typically own a
100% fee simple interest in JVCS projects upon completion.
We believe that development and JVCS projects have the potential to generate superior risk-adjusted
returns on investment in properties that are substantially similar to those which we acquire.
Financing Strategy
We seek to maintain a capital structure that provides us with the flexibility to manage our business and pursue our
growth strategies, while allowing us to service our debt requirements and generate appropriate risk adjusted
returns for our shareholders. We believe these objectives are best achieved by a capital structure that consists
primarily of common equity and prudent amounts of debt financing. However, we may raise capital in any form
and under terms that we deem acceptable and in the best interest of our shareholders.
We have historically utilized common equity offerings, secured mortgage borrowings, unsecured bank borrowings
and the sale of properties to meet our capital requirements. We evaluate our financing policies on an on-going
basis in light of current economic conditions, capital markets access, relative costs of equity and debt securities,
market value of our properties and other factors.
At December 31, 2014, our ratio of total debt to total market capitalization, assuming the conversion of limited
partnership interests in the Operating Partnership (“OP Units”), was approximately 28.5% and our ratio of total
debt to total gross assets (before accumulated depreciation) was approximately 34.1%.
As of December 31, 2014, our total debt outstanding was $221.8 million, including $106.8 million of secured
mortgage debt that had a weighted average fixed interest rate of 4.3% (including the effects of interest rate swap
agreements) and a weighted average maturity of 5.1 years, $100 million of unsecured term loan borrowings that
had a weighted average fixed interest rate of 3.8% (including the effects of interest rate swap agreements) and a
weighted average maturity of 6.3 years, and $15.0 million of borrowings on our Credit Facility at a weighted
average interest rate of approximately 1.5%.
3
Certain financial agreements to which we are a party contain covenants that limit our ability to incur debt under
certain circumstances; however, our organizational documents do not limit the absolute amount or percentage of
indebtedness that we may incur. As such, we may modify our borrowing policies at any time without shareholder
approval.
Asset Management
We maintain a proactive leasing and capital improvement program that, combined with the quality and locations of
our properties, has made our properties attractive to tenants. We intend to continue to hold our properties for
long-term investment and, accordingly, place a strong emphasis on the quality of construction and an on-going
program of regular and preventative maintenance. Our properties are designed and built to require minimal
capital improvements other than renovations or alterations paid for by tenants. At our six community shopping
center properties, we sub contract on site functions such as maintenance, landscaping, snow removal and
sweeping. The cost of these functions is generally reimbursed by our tenants. Personnel from our corporate
headquarters conduct regular inspections of each property and maintain regular contact with major tenants.
We have a management information system designed to provide management with the operating data necessary
to make informed business decisions on a timely basis. This system provides us rapid access to lease data,
tenants’ sales history, cash flow budgets and forecasts. Such a system enables us to maximize cash flow from
operations and closely monitor corporate expenses.
Financial and Asset Information about Industry Segments
We are in the business of acquiring, developing and managing retail real estate which we consider one reporting
segment. See Item 2 “Properties" and Item 6 “Selected Financial Data" for additional financial and asset
information.
Competition
The U.S. commercial real estate investment market is a highly competitive industry. We actively compete with
many entities engaged in the acquisition, development and operation of commercial properties. As such, we
compete with other investors for a limited supply of properties and financing for these properties. Investors
include traded and non-traded public REITs, private equity firms, institutional investment funds, insurance
companies and private individuals, some of which have greater financial resources than we do and the ability to
accept more risk than we believe we can prudently manage. There can be no assurance that we will be able to
compete successfully with such entities in our acquisition, development and leasing activities in the future.
Significant Tenants
As of December 31, 2014, we lease 32 properties to Walgreens which represented approximately 21.9% of our
total annualized base rent. The weighted average remaining lease term of our Walgreens leases was 13.8 years.
No other tenant accounted for more than 5.0% of our annualized base rent as of December 31, 2014. See Item 2
“Properties” for additional information on our top tenants and the composition of our tenant base.
Regulation
Environmental
Investments in real property create a potential for environmental liability on the part of the owner or operator of
such real property. If hazardous substances are discovered on or emanating from a property, the owner or
operator of the property may be held strictly liable for all costs and liabilities relating to such hazardous
substances. We have obtained a Phase I environmental study (which involves inspection without soil sampling or
ground water analysis) conducted by independent environmental consultants on each of our properties and, in
certain instances, have conducted additional investigation, including a Phase II environmental assessment.
Furthermore, we have adopted a policy of conducting a Phase I environmental study on each property we acquire
and conducting additional investigation as warranted.
We have no knowledge of any hazardous substances existing on any of our properties in violation of any
applicable laws; however, no assurance can be given that such substances are not located on any of the
properties. We carry no insurance coverage for the types of environmental risks described above.
4
We believe that we are in compliance, in all material respects, with all federal, state and local ordinances and
regulations regarding hazardous or toxic substances. Furthermore, we have not been notified by any
governmental authority of any noncompliance, liability or other claim in connection with any of the properties.
Americans with Disabilities Act of 1990
Our properties, as commercial facilities, are required to comply with Title III of the Americans with Disabilities Act
of 1990 and similar state and local laws and regulations (collectively, the “ADA”). Investigation of a property may
reveal non-compliance with the ADA. The tenants will typically have primary responsibility for complying with the
ADA, but we may incur costs if the tenant does not comply. As of December 31, 2014, we have not been notified
by any governmental authority, nor are we otherwise aware, of any non-compliance with the ADA that we believe
would have a material adverse effect on our business, financial position or results of operations.
Item 1A:
Risk Factors
Cautionary Note Regarding Forward-Looking Statements
This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Securities
Exchange Act”). We intend such forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this
statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are
based on certain assumptions and describe our future plans, strategies and expectations, are generally
identifiable by use of the words “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” “may,” “will,” “seek,”
“could,” “project,” or similar expressions. Forward-looking statements in this report include information about
possible or assumed future events, including, among other things, discussion and analysis of our future financial
condition, results of operations, our strategic plans and objectives, occupancy and leasing rates and trends,
liquidity and ability to refinance our indebtedness as it matures, anticipated expenditures of capital, and other
matters. You should not rely on forward-looking statements since they involve known and unknown risks,
uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect
actual results, performances or achievements. Factors which may cause actual results to differ materially from
current expectations, include, but are not limited to: the global and national economic conditions and changes in
general economic, financial and real estate market conditions; changes in our business strategy; risks that our
acquisition and development projects will fail to perform as expected; the potential need to fund improvements or
other capital expenditures out of operating cash flow; financing risks, such as the inability to obtain debt or equity
financing on favorable terms or at all; the level and volatility of interest rates; our ability to re-lease space as
leases expire; loss or bankruptcy of one or more of our major tenants; a failure of our properties to generate
additional income to offset increases in operating expenses; our ability to maintain our qualification as real estate
investment trust (“REIT”) for federal income tax purposes and the limitations imposed on our business by our
status as a REIT; legislative or regulatory changes, including changes to laws governing REITs; and other factors
discussed in Item 1A. “Risk Factors” and elsewhere in this report and in subsequent filings with the Securities and
Exchange Commission (“SEC”). We caution you that any such statements are based on currently available
operational, financial and competitive information, and that you should not place undue reliance on these forward-
looking statements, which reflect our management’s opinion only as of the date on which they were made.
Except as required by law, we disclaim any obligation to review or update these forward–looking statements to
reflect events or circumstances as they occur.
Risks Related to Our Business and Operations
Global economic and financial conditions may have a negative effect on our business and operations.
Any worsening of economic conditions in our markets, including any disruption in the capital markets, could
adversely affect our business and operations. Potential consequences of economic and financial conditions
include:
•
the financial condition of our tenants may be adversely affected, which may result in tenant defaults under
the leases due to bankruptcy, lack of liquidity, operational failures or for other reasons;
current or potential tenants may delay or postpone entering into long-term net leases with us which could
lead to reduced demand for commercial real estate;
•
5
•
the ability to borrow on terms and conditions that we find acceptable may be limited or unavailable, which
could reduce our ability to pursue acquisition and development opportunities and refinance existing debt,
reduce our returns from acquisition and development activities, reduce our ability to make cash
distributions to our stockholders and increase our future interest expense;
• our ability to access the capital markets may be restricted at a time when we would like, or need, to
access those markets, which could have an impact on our flexibility to react to changing economic and
business conditions;
the recognition of impairment charges on or reduced values of our properties, which may adversely affect
our results of operations or limit our ability to dispose of assets at attractive prices and may reduce the
availability of buyer financing; and
•
• one or more lenders under the Credit Facility could fail and we may not be able to replace the financing
commitment of any such lenders on favorable terms, or at all.
We are also limited in our ability to reduce costs to offset the results of a prolonged or severe economic downturn
given certain fixed costs and commitments associated with our operations. Such conditions could make it very
difficult to forecast operating results, make business decisions and identify and address material business risks.
Single-tenant leases involve significant risks of tenant default.
We focus our development and investment activities on ownership of real properties that are net leased to a
single tenant. Therefore, the financial failure of, or other default in payment by, a single tenant under its lease is
likely to cause a significant reduction in our operating cash flows from that property and a significant reduction in
the value of the property, and could cause a significant reduction in our revenues and a significant impairment
loss. We may also incur significant losses to make the leased premises ready for another tenant and experience
difficulty or a significant delay in re-leasing such property.
Failure by any major tenant with leases in multiple locations to make rental payments to us, because of a
deterioration of its financial condition or otherwise, would have a material adverse effect on us.
We derive substantially all of our revenue from tenants who lease space from us at our properties. Therefore, our
ability to generate cash from operations is dependent on the rents that we are able to charge and collect from our
tenants. At any time, our tenants may experience a downturn in their business that may significantly weaken their
financial condition, particularly during periods of economic uncertainty. As a result, our tenants may delay lease
commencements, decline to extend or renew leases upon expiration, fail to make rental payments when due,
close a number of stores or declare bankruptcy. Any of these actions could result in the termination of the
tenant’s leases and the loss of rental income attributable to the terminated leases. In addition, lease terminations
by a major tenant or a failure by that major tenant to occupy the premises could result in lease terminations or
reductions in rent by other tenants in the same shopping centers under the terms of some leases. In that event,
we may be unable to re-lease the vacated space at attractive rents or at all. The occurrence of any of the
situations described above would have a material adverse effect on our results of operations and our financial
condition. See “—We may be subject to tenant credit concentrations that make us more susceptible to adverse
events with respect to those tenants,” below.
We may be subject to tenant credit concentrations that make us more susceptible to adverse events with
respect to those tenants.
As of December 31, 2014, we derived approximately 21.9% of our annualized base rent from Walgreens. In the
event of a default under its leases, we may experience delays in enforcing our rights as lessor and may incur
substantial costs in seeking to protect our investment. Any bankruptcy, insolvency or failure to make rental
payments, or any adverse change in its financial condition, or any other tenant to whom we may have a significant
credit concentration now or in the future, would likely result in a material reduction of our cash flows and material
losses to our company.
Bankruptcy laws will limit our remedies if a tenant becomes bankrupt and rejects its leases.
If a tenant becomes bankrupt or insolvent, that could diminish the income we receive from that tenant’s
leases. We may not be able to evict a tenant solely because of its bankruptcy. On the other hand, a bankruptcy
court might authorize the tenant to terminate its leasehold with us. If that happens, our claim against the bankrupt
tenant for unpaid future rent would be an unsecured prepetition claim subject to statutory limitations, and
therefore such amounts received in bankruptcy are likely to be substantially less than the remaining rent we
otherwise were owed under the leases. In addition, any claim we have for unpaid past rent could be substantially
less than the amount owed.
6
Certain of our tenants at our community shopping centers have the right to terminate their leases if other
tenants cease to occupy a property.
In the event that certain tenants cease to occupy a property, although under most circumstances such a tenant
would remain liable for its lease payments, such an action may result in certain other tenants at our community
shopping centers having the right to terminate their leases at the affected property, which could adversely affect
the future income from that property. As of December 31, 2014, each of our community shopping centers had
tenants with those provisions in their leases.
Our portfolio has limited geographic diversification, which makes us more susceptible to adverse events
in these areas.
Our properties are located throughout the United States and in particular, the State of Michigan (with 45
properties or 27.8% of our annualized base rent as of December 31, 2014). An economic downturn or other
adverse events or conditions such as terrorist attacks or natural disasters in these areas, or any other area where
we may have significant concentration now or in the future, could result in a material reduction of our cash flows
or material losses to our company.
Risks associated with our development and acquisition activities.
We intend to continue the development of new properties and to consider possible acquisitions of existing
properties. We anticipate that our new developments will be financed under the Credit Facility or other forms of
construction financing that will result in a risk that permanent financing on newly developed projects might not be
available or would be available only on disadvantageous terms. In addition, new project development is subject
to a number of risks, including risks of construction delays or cost overruns that may increase anticipated project
costs, and new project commencement risks such as receipt of zoning, occupancy and other required
governmental permits and authorizations and the incurrence of development costs in connection with projects that
are not pursued to completion. If permanent debt or equity financing is not available on acceptable terms to
finance new development or acquisitions undertaken without permanent financing, further development activities
or acquisitions might be curtailed or cash available for distribution might be adversely affected. Acquisitions entail
risks that investments will fail to perform in accordance with expectations, as well as general investment risks
associated with any new real estate investment.
Properties that we acquire or develop may be located in new markets where we may face risks associated
with investing in an unfamiliar market.
We may acquire or develop properties in markets that are new to us. When we acquire or develop properties
located in these markets, we may face risks associated with a lack of market knowledge or understanding of the
local economy, forging new business relationships in the area and unfamiliarity with local government and
permitting procedures.
We own certain of our properties subject to ground leases that expose us to the loss of such properties
upon breach or termination of the ground leases and may limit our ability to sell these properties.
We own certain of our properties through leasehold interests in the land underlying the buildings and we may
acquire additional buildings in the future that are subject to similar ground leases. As lessee under a ground
lease, we are exposed to the possibility of losing the property upon termination, or an earlier breach by us, of the
ground lease, which may have a material adverse effect on our business, financial condition and results of
operations, our ability to make distributions to our stockholders and the trading price of our common stock. Our
ground leases contain certain provisions that may limit our ability to sell certain of our properties. In order to
assign or transfer our rights and obligations under certain of our ground leases, we generally must obtain the
consent of the landlord which, in turn, could adversely impact the price realized from any such sale.
Joint venture investments may expose us to certain risks.
We may from time to time enter into joint venture transactions for portions of our existing or future real estate
assets. Investing in this manner subjects us to certain risks, among them the following:
• We may not exercise sole decision-making authority regarding the joint venture’s business and assets
and, thus, we may not be able to take actions that we believe are in our company’s best interests.
• We may be required to accept liability for obligations of the joint venture (such as recourse carve-outs on
mortgage loans) beyond our economic interest.
• Our returns on joint venture assets may be adversely affected if the assets are not held for the long-term.
The availability and timing of cash distributions is uncertain.
7
We expect to continue to pay quarterly distributions to our stockholders. However, we bear all expenses incurred
by our operations, and our funds generated by operations, after deducting these expenses, may not be sufficient
to cover desired levels of distributions to our stockholders. In addition, our board of directors, in its discretion,
may retain any portion of such cash for working capital. We cannot assure our stockholders that sufficient funds
will be available to pay distributions.
We depend on our key personnel.
Our success depends to a significant degree upon the continued contributions of certain key personnel including,
but not limited to, our executive officers, each of whom would be difficult to replace. If any of our key personnel
were to cease employment with us, our operating results could suffer. Our ability to retain our executive officers or
to attract suitable replacements should any members of the management group leave is dependent on the
competitive nature of the employment market. The loss of services from key members of the management group
or a limitation in their availability could adversely impact our future development or acquisition operations, our
financial condition and cash flows. Further, such a loss could be negatively perceived in the capital markets. We
have not obtained and do not expect to obtain key man life insurance on any of our key personnel.
We face significant competition.
We face competition in seeking properties for acquisition and tenants who will lease space in these properties
from insurance companies, credit companies, pension or private equity funds, private individuals, investment
companies, other REITs and other industry participants, many of which have greater financial and other resources
than we do. There can be no assurance that we will be able to successfully compete with such entities in our
development, acquisition and leasing activities in the future.
We face risks relating to cybersecurity attacks, loss of confidential information and other business
disruptions.
Our business is at risk from and may be impacted by cybersecurity attacks, including attempts to gain
unauthorized access to our confidential data and other electronic security breaches. Such cyber-attacks can
range from individual attempts to gain unauthorized access to our information technology systems to more
sophisticated security threats. While we employ a number of measures to prevent, detect and mitigate these
threats, there is no guarantee such efforts will be successful in preventing a cyber-attack. Cybersecurity incidents
could compromise the confidential information of our tenants, employees and third party vendors and affect the
efficiency of our business operations.
General Real Estate Risk
Our performance and value are subject to general economic conditions and risks associated with our real
estate assets.
There are risks associated with owning and leasing real estate. Although many of our leases contain terms that
obligate the tenants to bear substantially all of the costs of operating our properties, investing in real estate
involves a number of risks. Income from and the value of our properties may be adversely affected by:
• Changes in general or local economic conditions;
• The attractiveness of our properties to potential tenants;
• Changes in supply of or demand for similar or competing properties in an area;
• Bankruptcies, financial difficulties or lease defaults by our tenants;
• Changes in operating costs and expense and our ability to control rents;
• Our ability to lease properties at favorable rental rates;
• Our ability to sell a property when we desire to do so at a favorable price;
• Unanticipated changes in costs associated with known adverse environmental conditions or retained
liabilities for such conditions;
• Changes in or increased costs of compliance with governmental rules, regulations and fiscal policies,
including changes in tax, real estate, environmental and zoning laws, and our potential liability
thereunder; and
• Unanticipated expenditures to comply with the Americans with Disabilities Act and other similar
regulations.
Economic and financial market conditions have and may continue to exacerbate many of the foregoing risks. If a
tenant fails to perform on its lease covenants, that would not excuse us from meeting any mortgage debt
8
obligation secured by the property and could require us to fund reserves in favor of our mortgage lenders, thereby
reducing funds available for payment of cash dividends on our shares of common stock.
The fact that real estate investments are relatively illiquid may reduce economic returns to investors.
We may desire to sell a property in the future because of changes in market conditions or poor tenant
performance or to avail ourselves of other opportunities. We may also be required to sell a property in the future
to meet secured debt obligations or to avoid a secured debt loan default. Real estate properties cannot always be
sold quickly, and we cannot assure you that we could always obtain a favorable price. We may be required to
invest in the restoration or modification of a property before we can sell it. This lack of liquidity may limit our
ability to vary our portfolio promptly in response to changes in economic or other conditions and, as a result, could
adversely affect our financial condition, results of operations, cash flows and our ability to pay distributions on our
common stock.
Our ability to renew leases or re-lease space on favorable terms as leases expire significantly affects our
business.
We are subject to the risks that, upon expiration of leases for space located in our properties, the premises may
not be re-let or the terms of re-letting (including the cost of concessions to tenants) may be less favorable than
current lease terms. If a tenant does not renew its lease or if a tenant defaults on its lease obligations, there is no
assurance we could obtain a substitute tenant on acceptable terms. If we cannot obtain another tenant with
comparable structural needs, we may be required to modify the property for a different use, which may involve a
significant capital expenditure and a delay in re-leasing the property. Further, if we are unable to re-let promptly
all or a substantial portion of our retail space or if the rental rates upon such re-letting were significantly lower than
expected rates, our net income and ability to make expected distributions to stockholders would be adversely
affected. There can be no assurance that we will be able to retain tenants in any of our properties upon the
expiration of their leases.
A property that incurs a vacancy could be difficult to sell or re-lease.
A property may incur a vacancy either by the continued default of a tenant under its lease or the expiration of one
of our leases. Certain of our properties may be specifically suited to the particular needs of a tenant. We may
have difficulty obtaining a new tenant for any vacant space we have in our properties. If the vacancy continues
for a long period of time, we may suffer reduced revenues resulting in less cash available to be distributed to
stockholders. In addition, the resale value of a property could be diminished because the market value of a
particular property will depend principally upon the value of the leases of such property.
Potential liability for environmental contamination could result in substantial costs.
Under federal, state and local environmental laws, we may be required to investigate and clean up any release of
hazardous or toxic substances or petroleum products at our properties, regardless of our knowledge or actual
responsibility, simply because of our current or past ownership or operation of the real estate. If unidentified
environmental problems arise, we may have to make substantial payments, which could adversely affect our cash
flow and our ability to make distributions to our stockholders. This potential liability results from the following:
• As owner we may have to pay for property damage and for investigation and clean-up costs incurred in
connection with the contamination.
• The law may impose clean-up responsibility and liability regardless of whether the owner or operator
knew of or caused the contamination.
• Even if more than one person is responsible for the contamination, each person who shares legal liability
under environmental laws may be held responsible for all of the clean-up costs.
• Governmental entities and third parties may sue the owner or operator of a contaminated site for
damages and costs.
These costs could be substantial and in extreme cases could exceed the value of the contaminated property. The
presence of hazardous substances or petroleum products or the failure to properly remediate contamination may
adversely affect our ability to borrow against, sell or lease an affected property. In addition, some environmental
laws create liens on contaminated sites in favor of the government for damages and costs it incurs in connection
with a contamination.
We own and may in the future acquire properties that will be operated as convenience stores and gas station
facilities. The operation of convenience stores and gas station facilities at our properties will create additional
9
environmental concerns. We require that the tenants who operate these facilities do so in material compliance
with current laws and regulations.
A majority of our leases require our tenants to comply with environmental laws and to indemnify us against
environmental liability arising from the operation of the properties. However, we could be subject to strict liability
under environmental laws because we own the properties. There is also a risk that tenants may not satisfy their
environmental compliance and indemnification obligations under the leases. Any of these events could
substantially increase our cost of operations, require us to fund environmental indemnities in favor of our secured
lenders and reduce our ability to service our secured debt and pay dividends to stockholders and any debt
security interest payments. Environmental problems at any properties could also put us in default under loans
secured by those properties, as well as loans secured by unaffected properties.
Uninsured losses relating to real property may adversely affect our returns.
Our leases generally require tenants to carry comprehensive liability and extended coverage insurance on our
properties. However, there are certain losses, including losses from environmental liabilities, terrorist acts or
catastrophic acts of nature, that are not generally insured against or that are not generally fully insured against
because it is not deemed economically feasible or prudent to do so. If there is an uninsured loss or a loss in
excess of insurance limits, we could lose both the revenues generated by the affected property and the capital we
have invested in the property. In the event of a substantial unreimbursed loss, we would remain obligated to
repay any mortgage indebtedness or other obligations related to the property.
Risks Related to Our Debt Financings
Leveraging our portfolio subjects us to increased risk of loss, including loss of properties in the event of
a foreclosure.
At December 31, 2014, our ratio of total debt to total market capitalization (assuming conversion of OP Units) was
approximately 28.5%. The use of leverage presents an additional element of risk in the event that (1) the cash
flow from lease payments on our properties is insufficient to meet debt obligations, (2) we are unable to refinance
our debt obligations as necessary or on as favorable terms or (3) there is an increase in interest rates. If a
property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the
property could be foreclosed upon with a consequent loss of income and asset value to us. Under the “cross-
default” provisions contained in mortgages encumbering some of our properties, our default under a mortgage
with a lender would result in our default under mortgages held on other properties resulting in multiple
foreclosures.
We intend to maintain a ratio of total indebtedness (including construction or acquisition financing) to total market
capitalization of 65% or less. Nevertheless, we may operate with debt levels which are in excess of 65% of total
market capitalization for extended periods of time. Our organization documents contain no limitation on the
amount or percentage of indebtedness which we may incur. Therefore, our board of directors, without a vote of
the stockholders, could alter the general policy on borrowings at any time. If our debt capitalization policy were
changed, we could become more highly leveraged, resulting in an increase in debt service that could adversely
affect our operating cash flow and our ability to make expected distributions to stockholders, and could result in
an increased risk of default on our obligations.
Covenants in our credit agreements could limit our flexibility and adversely affect our financial condition.
The terms of the Credit Facility and other indebtedness require us to comply with a number of customary financial
and other covenants. These covenants may limit our flexibility in our operations, and breaches of these
covenants could result in defaults under the instruments governing the applicable indebtedness even if we have
satisfied our payment obligations. The Credit Facility contains certain cross-default provisions which could be
triggered in the event that we default on our other indebtedness. These cross-default provisions may require us
to repay or restructure the Credit Facility in addition to any mortgage or other debt that is in default. If our
properties were foreclosed upon, or if we are unable to refinance our indebtedness at maturity or meet our
payment obligations, the amount of our distributable cash flows and our financial condition would be adversely
affected.
Credit market developments may reduce availability under our credit agreements.
There is risk that lenders, even those with strong balance sheets and sound lending practices, could fail or refuse
to honor their legal commitments and obligations under existing credit commitments, including but not limited to:
extending credit up to the maximum permitted by a credit facility, allowing access to additional credit features
10
and/or honoring loan commitments. If our lender(s) fail to honor their legal commitments under our credit
facilities, it could be difficult to replace our credit facilities on similar terms. The failure of any of the lenders under
the Credit Facility may impact our ability to finance our operating or investing activities.
Our hedging strategies may not be successful in mitigating our risks associated with interest rates and
could reduce the overall returns on your investment.
We use various derivative financial instruments to provide a level of protection against interest rate risks, but no
hedging strategy can protect us completely. These instruments involve risks, such as the risk that the
counterparties may fail to honor their obligations under these arrangements, that these arrangements may not be
effective in reducing our exposure to interest rate changes and that a court could rule that such agreements are
not legally enforceable. These instruments may also generate income that may not be treated as qualifying REIT
income for purposes of the REIT income tests. In addition, the nature and timing of hedging transactions may
influence the effectiveness of our hedging strategies. Poorly designed strategies or improperly executed
transactions could actually increase our risk and losses. Moreover, hedging strategies involve transaction and
other costs. We cannot assure you that our hedging strategy and the derivatives that we use will adequately offset
the risk of interest rate volatility or that our hedging transactions will not result in losses that may reduce the
overall return on your investment.
Risks Related to Our Corporate Structure
Our charter and Maryland law contain provisions that may delay, defer or prevent a change of control
transaction.
Our charter contains a 9.8% ownership limit. Our charter, subject to certain exceptions, authorizes our directors
to take such actions as are necessary and desirable to preserve our qualification as a REIT and to limit any
person to actual or constructive ownership of no more than 9.8% of the value of our outstanding shares of
common stock and preferred stock, except that the any member of the Agree-Rosenberg Group (as defined in our
charter) (the “Agree-Rosenberg Group”) may own up to 24%. Our board of directors, in its sole discretion, may
exempt, subject to the satisfaction of certain conditions, any person from the ownership limit. However, our board
of directors may not grant an exemption from the ownership limit to any person whose ownership, direct or
indirect, in excess of 9.8% of the value of our outstanding shares of common stock and preferred stock could
jeopardize our status as a REIT. These restrictions on transferability and ownership will not apply if our board of
directors determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a
REIT. The ownership limit may delay or impede, and we may use the ownership limit deliberately to delay or
impede, a transaction or a change of control that might involve a premium price for our common stock or
otherwise be in the best interest of our stockholders.
We have a staggered board. Our directors are divided into three classes serving three-year staggered terms.
The staggering of our board of directors may discourage offers for our company or make an acquisition more
difficult, even when an acquisition is in the best interest of our stockholders.
We have a shareholder rights plan. Under the terms of this plan, we can in effect prevent a person or group from
acquiring more than 15% of the outstanding shares of our common stock because, unless we approve of the
acquisition, after the person acquires more than 15% of our outstanding common stock, all other stockholders will
have the right to purchase securities from us at a price that is less than their then fair market value. This would
substantially reduce the value and influence of the stock owned by the acquiring person. Our board of directors
can prevent the plan from operating by approving the transaction in advance, which gives us significant power to
approve or disapprove of the efforts of a person or group to acquire a large interest in our company.
We could issue stock without stockholder approval. Our board of directors could, without stockholder approval,
issue authorized but unissued shares of our common stock or preferred stock. In addition, our board of directors
could, without stockholder approval, classify or reclassify any unissued shares of our common stock or preferred
stock and set the preferences, rights and other terms of such classified or reclassified shares. Our board of
directors could establish a series of stock that could, depending on the terms of such series, delay, defer or
prevent a transaction or change of control that might involve a premium price for our common stock or otherwise
be in the best interest of our stockholders.
Provisions of Maryland law may limit the ability of a third party to acquire control of our company. Certain
provisions of Maryland law may have the effect of inhibiting a third party from making a proposal to acquire us or
of impeding a change of control under certain circumstances that otherwise could provide the holders of shares of
11
our common stock with the opportunity to realize a premium over the then prevailing market price of such shares,
including:
•
•
“Business combination” provisions that, subject to limitations, prohibit certain business combinations
between us and an “interested stockholder” (defined generally as any person who beneficially owns 10%
or more of the voting power of our shares or an affiliate thereof) for five years after the most recent date
on which the stockholder becomes an interested stockholder and thereafter would require the
recommendation of our board of directors and impose special appraisal rights and special stockholder
voting requirements on these combinations; and
“Control share” provisions that provide that “control shares” of our company (defined as shares which,
when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one
of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition”
(defined as the direct or indirect acquisition of ownership or control of “control shares”) have no voting
rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all
the votes entitled to be cast on the matter, excluding all interested shares.
The business combination statute permits various exemptions from its provisions, including business
combinations that are approved or exempted by the board of directors before the time that the interested
stockholder becomes an interested stockholder. Our board of directors has exempted from the business
combination provisions of the Maryland General Corporation Law, or MGCL, any business combination with Mr.
Richard Agree or any other person acting in concert or as a group with Mr. Richard Agree.
In addition, our bylaws contain a provision exempting from the control share acquisition statute any members of
the Agree-Rosenberg Group, our other officers, our employees, any of the associates or affiliates of the foregoing
and any other person acting in concert of as a group with any of the foregoing.
Additionally, Title 3, Subtitle 8 of the MGCL, permits our board of directors, without stockholder approval and
regardless of what is currently provided in our charter or our bylaws, to implement takeover defenses. These
provisions may have the effect of inhibiting a third party from making an acquisition proposal for our company or
of delaying, deferring or preventing a change in control of our company under circumstances that otherwise could
provide the holders of our common stock with the opportunity to realize a premium over the then-current market
price.
Our charter, our bylaws, the limited partnership agreement of the Operating Partnership and Maryland law also
contain other provisions that may delay, defer or prevent a transaction or a change of control that might involve a
premium price for our common stock or otherwise be in the best interest of our stockholders.
Our board of directors can take many actions without stockholder approval.
Our board of directors has overall authority to oversee our operations and determine our major corporate policies.
This authority includes significant flexibility. For example, our board of directors can do the following:
• Change our investment and financing policies and our policies with respect to certain other activities,
including our growth, debt capitalization, distributions, REIT status and investment and operating policies;
• Within the limits provided in our charter, prevent the ownership, transfer and/or accumulation of shares in
order to protect our status as a REIT or for any other reason deemed to be in the best interests of us and
our stockholders;
Issue additional shares without obtaining stockholder approval, which could dilute the ownership of our
then-current stockholders;
•
• Classify or reclassify any unissued shares of our common stock or preferred stock and set the
preferences, rights and other terms of such classified or reclassified shares, without obtaining stockholder
approval;
• Employ and compensate affiliates;
• Direct our resources toward investments that do not ultimately appreciate over time;
• Change creditworthiness standards with respect to third-party tenants; and
• Determine that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a
REIT.
12
Any of these actions could increase our operating expenses, impact our ability to make distributions or reduce the
value of our assets without giving our stockholders the right to vote.
Future offerings of debt and equity may not be available to us or may adversely affect the market price of
our common stock.
We expect to continue to increase our capital resources by making additional offerings of equity and debt
securities in the future, which would include classes of preferred stock, common stock and senior or subordinated
notes. Our ability to raise additional capital may be adversely impacted by market conditions. Future market
dislocations could cause us to seek sources of potentially less attractive capital. All debt securities and other
borrowings, as well as all classes of preferred stock, will be senior to our common stock in a liquidation of our
company. Additional equity offerings could dilute our stockholders’ equity, and reduce the market price of shares
of our common stock. In addition, we may issue preferred stock with a distribution preference that may limit our
ability to make distributions on our common stock. Our ability to estimate the amount, timing or nature of
additional offerings is limited as these factors will depend upon market conditions and other factors.
The market price of our stock may vary substantially.
The market price of our common stock could be volatile, and investors in our common stock may experience a
decrease in the value of their shares, including decreases unrelated to our operating performance or prospects.
Among the market conditions that may affect the market price of our common stock are the following:
• Changes in interest rates;
• Our financial condition and operating performance and the performance of other similar companies;
• Actual or anticipated variations in our quarterly results of operations;
• The extent of investor interest in our company, real estate generally or commercial real estate specifically;
• The reputation of REITs generally and the attractiveness of their equity securities in comparison to other
equity securities, including securities issued by other real estate companies, and fixed income securities;
• Changes in expectations of future financial performance or changes in estimates of securities analysts;
• Fluctuations in stock market prices and volumes; and
• Announcements by us or our competitors of acquisitions, investments or strategic alliances.
An officer and director may have interests that conflict with the interests of stockholders.
An officer and member of our board of directors owns OP units in the Operating Partnership. This individual may
have personal interests that conflict with the interests of our stockholders with respect to business decisions
affecting us and the Operating Partnership, such as interests in the timing and pricing of property sales or
refinancings in order to obtain favorable tax treatment. As a result, the effect of certain transactions on this unit
holder may influence our decisions affecting these properties.
Federal Income Tax Risks
Complying with REIT requirements may cause us to forego otherwise attractive opportunities.
To qualify as a REIT for federal income tax purposes we must continually satisfy numerous income, asset and
other tests, thus having to forego investments we might otherwise make and hindering our investment
performance.
Failure to qualify as a REIT could adversely affect our operations and our ability to make distributions.
We will be subject to increased taxation if we fail to qualify as a REIT for federal income tax purposes. Although
we believe that we are organized and operate in such a manner so as to qualify as a REIT under the Internal
Revenue Code, no assurance can be given that we will remain so qualified. Qualification as a REIT involves the
application of highly technical and complex Internal Revenue Code provisions for which there are only limited
judicial or administrative interpretations. The complexity of these provisions and applicable Treasury Regulations
is also increased in the context of a REIT that holds its assets in partnership form. The determination of various
factual matters and circumstances not entirely within our control may affect our ability to qualify as a REIT. A
REIT generally is not taxed at the corporate level on income it distributes to its stockholders, as long as it
distributes annually at least 100% of its taxable income to its stockholders. We have not requested and do not
plan to request a ruling from the Internal Revenue Service that we qualify as a REIT.
If we fail to qualify as a REIT, we will face tax consequences that will substantially reduce the funds available for
payment of cash dividends:
13
• We would not be allowed a deduction for dividends paid to stockholders in computing our taxable income
and would be subject to federal income tax at regular corporate rates.
• We could be subject to the federal alternative minimum tax and possibly increased state and local taxes.
• Unless we are entitled to relief under statutory provisions, we could not elect to be treated as a REIT for
four taxable years following the year in which we failed to qualify.
In addition, if we fail to qualify as a REIT, we will no longer be required to pay dividends (other than any
mandatory dividends on any preferred shares we may offer). As a result of these factors, our failure to qualify as
a REIT could adversely affect the market price for our common stock.
Changes in tax laws may prevent us from maintaining our qualification as a REIT.
As we have previously described, we intend to maintain our qualification as a REIT for federal income tax
purposes. However, this intended qualification is based on the tax laws that are currently in effect. We are unable
to predict any future changes in the tax laws that would adversely affect our status as a REIT. If there is a change
in the tax law that prevents us from qualifying as a REIT or that requires REITs generally to pay corporate level
income taxes, we may not be able to make the same level of distributions to our stockholders.
An investment in our stock has various tax risks that could affect the value of your investment, including
the treatment of distributions in excess of earnings and the inability to apply “passive losses” against
distributions.
An investment in our stock has various tax risks. Distributions in excess of current and accumulated earnings and
profits, to the extent that they exceed the adjusted basis of an investor’s stock, will be treated as long-term capital
gain (or short-term capital gain if the shares have been held for less than one year). Any gain or loss realized
upon a taxable disposition of shares by a stockholder who is not a dealer in securities will be treated as a long-
term capital gain or loss if the shares have been held for more than one year, and otherwise will be treated as
short-term capital gain or loss. Distributions that we properly designate as capital gain distributions will be treated
as taxable to stockholders as gains (to the extent that they do not exceed our actual net capital gain for the
taxable year) from the sale or disposition of a capital asset held for greater than one year. Distributions we make
and gain arising from the sale or exchange by a stockholder of shares of our stock will not be treated as passive
income, meaning stockholders generally will not be able to apply any “passive losses” against such income or
gain.
Excessive non-real estate asset values may jeopardize our REIT status.
In order to qualify as a REIT, at least 75% of the value of our assets must consist of investments in real estate,
investments in other REITs, cash and cash equivalents, and government securities. Therefore, the value of any
properties we own that are not considered real estate assets for federal income tax purposes must represent in
the aggregate less than 25% of our total assets. In addition, under federal income tax law, we may not own
securities in any one issuer (other than a REIT, a qualified REIT subsidiary or a TRS) which represent in excess
of 10% of the voting securities or 10% of the value of all securities of any one issuer, or which have, in the
aggregate, a value in excess of 5% of our total assets, and we may not own securities of one or more TRSs which
have, in the aggregate, a value in excess of 25% of our total assets. We may invest in securities of another REIT,
and our investment may represent in excess of 10% of the voting securities or 10% of the value of the securities
of the other REIT. If the other REIT were to lose its REIT status during a taxable year in which our investment
represented in excess of 10% of the voting securities or 10% of the value of the securities of the other REIT as of
the close of a calendar quarter, we may lose our REIT status.
Compliance with the asset tests is determined at the end of each calendar quarter. Subject to certain mitigation
provisions, if we fail to meet any such test at the end of any calendar quarter, we will cease to qualify as a REIT.
We may have to borrow funds or sell assets to meet our distribution requirements.
Subject to some adjustments that are unique to REITs, a REIT generally must distribute 90% of its taxable
income. For the purpose of determining taxable income, we may be required to accrue interest, rent and other
items treated as earned for tax purposes but that we have not yet received. In addition, we may be required not to
accrue as expenses for tax purposes some items which actually have been paid, including, for example,
payments of principal on our debt, or some of our deductions might be disallowed by the Internal Revenue
Service. As a result, we could have taxable income in excess of cash available for distribution. If this occurs, we
may have to borrow funds or liquidate some of our assets in order to meet the distribution requirement applicable
to a REIT.
14
Future distributions may include a significant portion as a return of capital.
Our distributions may exceed the amount of our income as a REIT. If so, the excess distributions will be treated
as a return of capital to the extent of the stockholder’s basis in our stock, and the stockholder’s basis in our stock
will be reduced by such amount. To the extent distributions exceed a stockholder’s basis in our stock; the
stockholder will recognize capital gain, assuming the stock is held as a capital asset.
Our ownership of and relationship with our TRSs will be limited, and a failure to comply with the limits
would jeopardize our REIT status and may result in the application of a 100% excise tax.
A REIT may own up to 100% of the stock of one or more TRSs. A TRS may earn income that would not be
qualifying income if earned directly by the parent REIT. Overall, no more than 25% of the value of a REIT’s
assets may consist of stock or securities of one or more TRSs. A TRS will typically pay federal, state and local
income tax at regular corporate rates on any income that it earns. In addition, the TRS rules impose a 100%
excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length
basis. Our TRSs will pay federal, state and local income tax on their taxable income, and their after-tax net
income will be available for distribution to us but will not be required to be distributed to us. There can be no
assurance that we will be able to comply with the 25% limitation discussed above or to avoid application of the
100% excise tax discussed above.
Liquidation of our assets may jeopardize our REIT qualification.
To qualify as a REIT, we must comply with requirements regarding our assets and our sources of income. If we
are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with
these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on
any gain if we sell assets in transactions that are considered to be “prohibited transactions,” which are explained
in the risk factor below.
We may be subject to other tax liabilities even if we qualify as a REIT.
Even if we qualify as a REIT for federal income tax purposes, we will be required to pay certain federal, state and
local taxes on our income and property. For example, we will be subject to income tax to the extent we distribute
less than 100% of our REIT taxable income (including capital gains). Additionally, we will be subject to a 4%
nondeductible excise tax on the amount, if any, by which dividends paid by us in any calendar year are less than
the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income
from prior years. Moreover, if we have net income from “prohibited transactions,” that income will be subject to a
100% tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to
customers in the ordinary course of business. The determination as to whether a particular sale is a prohibited
transaction depends on the facts and circumstances related to that sale. While we will undertake sales of assets
if those assets become inconsistent with our long-term strategic or return objectives, we do not believe that those
sales should be considered prohibited transactions, but there can be no assurance that the Internal Revenue
Service would not contend otherwise. The need to avoid prohibited transactions could cause us to forego or defer
sales of properties that might otherwise be in our best interest to sell.
In addition, any net taxable income earned directly by our TRSs, or through entities that are disregarded for
federal income tax purposes as entities separate from our TRSs, will be subject to federal and possibly state
corporate income tax. To the extent that we and our affiliates are required to pay federal, state and local taxes,
we will have less cash available for distributions to our stockholders.
Dividends payable by REITs do not qualify for the reduced tax rates on dividend income from regular
corporations.
The maximum tax rate for dividends payable to domestic stockholders that are individuals, trusts and estates is
20%. Dividends payable by REITs, however, are generally not eligible for the reduced rates. The more favorable
rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates to
perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT
corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our stock.
Our ownership limit contained in our charter may be ineffective to preserve our REIT status.
In order for us to qualify as a REIT for each taxable year, no more than 50% in value of our outstanding capital
stock may be owned, directly or indirectly, by five or fewer individuals during the last half of any calendar year (the
“5/50 Rule”). Individuals for this purpose include natural persons, private foundations, some employee benefit
plans and trusts, and some charitable trusts. In order to preserve our REIT qualification, our charter generally
prohibits (i) any member of the Agree-Rosenberg Group from directly or indirectly owning more than 24% of the
15
value of our outstanding stock and (ii) any other person from directly or indirectly owning more than 9.8% of the
value of our outstanding common stock and preferred stock, subject to certain exceptions. Because of the way
our ownership limit is written, including because the limit on persons other than a member of the Agree-
Rosenberg Group is not less than 9.8%, our charter limitation may be ineffective to ensure that we do not violate
the 5/50 Rule.
Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur
tax liabilities.
The REIT provisions of the Internal Revenue Code substantially limit our ability to hedge our liabilities. Any
income from a hedging transaction we enter into to manage risk of interest rate changes, price changes or
currency fluctuations with respect to borrowings made or to be made to acquire or carry real estate assets does
not constitute qualifying income for purposes of income tests that apply to us as a REIT. To the extent that we
enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-
qualifying income for purposes of the income tests. As a result of these rules, we may need to limit our use of
advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our
hedging activities because our TRS would be subject to tax on gains or expose us to greater risks associated with
changes in interest rates than we would otherwise want to bear. In addition, losses in our TRSs will generally not
provide any tax benefit, except for being carried forward against future taxable income in the TRSs.
Item 1B:
Unresolved Staff Comments
There are no unresolved staff comments.
Item 2:
Properties
As of December 31, 2014, our portfolio consisted of 209 properties located in 37 states and totaling approximately
4.3 million square feet of gross leasable area. Our portfolio included 203 net lease properties, which contributed
approximately 91.6% of annualized base rent, and six community shopping centers, which generated the
remaining 8.4% of annualized base rent.
As of December 31, 2014, our portfolio was approximately 98.6% leased and had a weighted average remaining
lease term of approximately 11.9 years. A significant majority of our properties are leased to national tenants and
approximately 55.8% of our annualized base rent was derived from tenants, or parents thereof, with an
investment grade credit rating. Substantially all of our tenants are subject to net lease agreements. A net lease
typically requires the tenant to be responsible for minimum monthly rent and property operating expenses
including property taxes, insurance and maintenance. In addition, our tenants are typically subject to future rent
increases based on fixed amounts or increases in the consumer price index and many leases provide for
additional rent calculated as a percentage of the tenants’ gross sales above a specified level.
Property Type Summary
The following table presents certain information about our properties as of December 31, 2014:
($ in thousands)
Property Type
Retail Net Lease
Retail Net Lease (ground leases)
Total Retail Net Lease
Community Shopping Centers
Total Portfolio
Number of
Properties
180
23
203
6
209
Annualized
Base Rent (1)
$45,834
5,941
$51,775
4,729
$56,504
% of Ann.
Base Rent
81.1%
10.5%
91.6%
8.4%
100.0%
% IG
Rated (2)
56.0%
89.1%
59.8%
11.8%
55.8%
W td. Avg.
Lease Term
12.3 yrs
14.7 yrs
12.6 yrs
4.9 yrs
11.9 yrs
(1) Represents annualized straight-line rent as of December 31, 2014.
(2) Reflects tenants, or parent entities thereof, with investment grade credit ratings from S&P, Moody's, Fitch and/or NAIC.
Tenant Diversification
The following table presents annualized base rents for all tenants that generated 2.0% or greater of our total
annualized base rent as of December 31, 2014:
16
($ in thousands)
Tenant / Concept
W algreens
W awa
CVS
W al-Mart
Rite Aid
Lowe's
LA Fitness
Kmart
Taco Bell (2)
Academy Sports
Burger King (3)
Kohl's
AutoZone
Total
Annualized
Base Rent (1)
$12,362
2,465
2,463
2,039
1,962
1,846
1,694
1,618
1,537
1,340
1,241
1,180
1,163
$32,910
% of Ann.
Base Rent
21.9%
4.4%
4.4%
3.6%
3.5%
3.3%
3.0%
2.9%
2.7%
2.4%
2.2%
2.1%
2.1%
58.5%
(1) Represents annualized straight-line rent as of December 31, 2014.
(2) Franchise restaurants operated by Charter Foods North, LLC.
(3) Franchise restaurants operated by Meridian Restaurants.
Significant Tenants
Walgreens operates the largest drugstore chain in the United States and trades, through its holding company
Walgreens Boot Alliance, Inc., on the Nasdaq stock exchange under the symbol “WBA”. For its fiscal year ended
August 31, 2014, Walgreens had total assets of approximately $37.2 billion, annual net sales of $76.4 billion,
annual net income of $1.9 billion and shareholders’ equity of $20.6 billion. As of August 31, 2014, Walgreens
operated 8,309 locations in 50 states, the District of Columbia, Puerto Rico and U.S. Virgin Islands.
On December 31, 2014, Walgreens and Alliance Boots GmbH completed a merger to form Walgreens Boots
Alliance, Inc. Under a reorganization merger agreement approved by Walgreens shareholders, Walgreens
became a wholly owned subsidiary of Walgreens Boots Alliance, Inc. and existing shares of Walgreens common
stock were converted automatically into shares of Walgreens Boots Alliance common stock on a one-for-one
basis.
The information set forth above was derived from the annual report on Form 10-K filed by Walgreens with respect
to their 2014 fiscal year and the current report on Form 8-K filed by Walgreens Boot Alliance, Inc. with respect to
the merger agreement. Additional information regarding Walgreens and Walgreens Boots Alliance, Inc. can be
found in their public filings. These filings can be accessed at www.sec.gov. We are unable to confirm, and make
no representations with respect to the accuracy of these reports and therefore you should not place undue
reliance on such information as it pertains to our operations.
Tenant Sector Diversification
The following table presents annualized base rents for our top retail sectors as of December 31, 2014:
17
($ in thousands)
Tenant Sector
Pharmacy
Restaurants - Quick Service
Apparel
W arehouse Clubs
Sporting Goods
Convenience Stores
Health & Fitness
Grocery Stores
General Merchandise
Restaurants - Casual Dining
Home Improvement
Financial Services
Other (2)
Total
Annualized
Base Rent (1)
$16,788
4,247
3,423
2,957
2,736
2,599
2,546
2,426
2,006
1,848
1,846
1,693
11,389
$56,504
% of Ann.
Base Rent
29.7%
7.5%
6.1%
5.2%
4.8%
4.6%
4.5%
4.3%
3.6%
3.3%
3.3%
3.0%
20.1%
100.0%
(1) Represents annualized straight-line rent as of December 31, 2014.
(2)
Includes sectors generating less than 3.0% of annualized base rent.
Geographic Diversification
The following table presents annualized base rents, by state, for our portfolio as of December 31, 2014:
18
($ in thousands)
Tenant Sector
Michigan
Florida
Ohio
Illinois
Pennsylvania
Georgia
North Carolina
Texas
New York
Missouri
Kansas
California
North Dakota
Indiana
Oregon
Tennessee
Virginia
South Carolina
Colorado
Utah
Minnesota
Kentucky
New Jersey
Alabama
Louisiana
Connecticut
Washington
Delaware
South Dakota
Maryland
Nevada
Wisconsin
Arizona
Montana
Mississippi
Oklahoma
Nebraska
Total
Annualized
Base Rent (1)
$15,718
6,899
3,516
3,269
2,796
1,780
1,747
1,529
1,551
1,411
1,273
1,238
1,222
1,201
1,134
1,063
1,038
977
821
756
637
634
590
523
396
403
339
326
326
277
224
204
175
184
151
96
80
$56,504
% of Ann.
Base Rent
27.8%
12.2%
6.2%
5.8%
4.9%
3.2%
3.1%
2.7%
2.7%
2.5%
2.3%
2.2%
2.2%
2.2%
2.0%
1.9%
1.8%
1.7%
1.5%
1.3%
1.1%
1.1%
1.0%
0.9%
0.7%
0.7%
0.6%
0.6%
0.6%
0.5%
0.4%
0.4%
0.3%
0.3%
0.3%
0.2%
0.1%
100.0%
(1) Represents annualized straight-line rent as of December 31, 2014.
Lease Expirations
The following table presents contractual lease expirations within the Company’s portfolio as of December 31,
2014, assuming that no tenants exercise renewal options:
19
Gross Leasable Area
% of
Total
(in thousands)
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Thereafter
Total
Annualized Base Rent (1)
Leases
7
9
12
16
15
15
15
12
15
12
135
263
Amount
$726
318
1,867
2,085
3,738
2,740
4,256
2,605
2,419
3,095
32,655
$56,504
% of
Total
1.3%
0.6%
3.3%
3.7%
6.6%
4.8%
7.5%
4.6%
4.3%
5.5%
57.8%
100.0%
(1) Represents annualized straight-line rent as of December 31, 2014.
Amount
152
35
134
305
344
321
256
257
221
210
2,080
4,315
3.5%
0.8%
3.1%
7.1%
8.0%
7.4%
5.9%
6.0%
5.1%
4.9%
48.2%
100.0%
Community Shopping Centers
Our six community shopping centers range in size from 20,000 to 241,458 square feet of GLA. Our community
shopping centers are anchored by national tenants.
The location and primary occupancy information with respect to the community shopping centers as of December
31, 2014 are set forth below:
Property
Capital Plaza
Location
Frankfort, KY
Year
Completed /
Renovated
1978 / 2006
Gross
Leasable
Area (Sq. Ft.)
116,212
Annualized
Base Rent (1)
$634 000
Annualized
Base Rent
per Sq. Ft (2)
$5.46
Percent
Leased at
December 31, 2014
100%
Anchor Tenants
(Lease Expiration /
Option Expiration) (3)
Kmart (2018 / 2053)
Walgreens (2032 / 2052)
Marshall Plaza
Marshall, MI
1990
119,479
$701,601
Central Michigan Commons Mt. Pleasant, MI
1973 / 1997
241,458
$927,495
$5.87
$4.50
85%
100%
Kmart (2020 / 2065)
Kmart (2018 / 2048)
JC Penney (2015 / 2035)
Staples (2020 / 2030)
Best Buy (2021 / 2028)
Beall's (2020 / 2035)
Kmart (2015 / 2065)
MC Sports (2018 / 2033)
Nor h Lakeland Plaza
Lakeland, FL
1987
171,397
$1,339 945
$7.82
100%
Ferris Commons
Big Rapids, MI
1990
169,524
$1,016 993
$6.00
100%
West Frankfort Plaza
West Frankfort, IL
1982
20,000
$108 586
$6.79
Totals
838,070
$4,728,620
$5.64
80%
95%
(1) Represents annualized straight-line rent as of December 31, 2014.
(2) Calculated as total annualized base rent divided by leased GLA.
(3) Only the tenant has the option to extend a lease beyond the initial term.
20
Item 3:
Legal Proceedings
From time to time, we are involved in legal proceedings in the ordinary course of business. We are not presently
involved in any litigation nor, to our knowledge, is any other litigation threatened against us, other than routine
litigation arising in the ordinary course of business, which is expected to be covered by our liability insurance and
all of which collectively is not expected to have a material adverse effect on our liquidity, results of operations or
business or financial condition.
Item 4:
Mine Safety Disclosures
Not applicable.
PART II
Item 5:
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Our common stock is traded on the NYSE under the symbol “ADC.” The following table sets forth the high and
low closing prices of our common stock, as reported on the NYSE, and the dividends declared per share of
common stock by us for each calendar quarter in the last two fiscal years. Dividends were paid in the periods
immediately subsequent to the periods in which such dividends were declared.
Quarter Ended
March 31, 2014
June 30, 2014
September 30, 2014
December 31, 2014
March 31, 2013
June 30, 2013
September 30, 2013
December 31, 2013
High
$31.67
$31.22
$30.82
$31.63
$30.10
$33.85
$32.48
$32.16
Low
$28.17
$29.22
$27.38
$27.09
$26.89
$28.75
$26.81
$27.77
Dividends
Declared
$0.43
$0.43
$0.43
$0.45
$0.41
$0.41
$0.41
$0.41
On February 27, 2015, the reported closing sale price per share of common stock on the NYSE was $32.83.
At February 27, 2015, there were 17,617,747 shares of our common stock issued and outstanding which were
held by approximately 139 stockholders of record. The number of stockholders of record does not reflect persons
or entities that held their shares in nominee or “street” name. In addition, at February 27, 2015 there were
347,619 outstanding OP Units held by a limited partner other than our Company. The OP Units are
exchangeable into shares of common stock on a one-for-one basis.
For 2014, we paid $1.74 per share of common stock in dividends. Of the $1.74, 80.35% represented ordinary
income, and 19.65% represented return of capital, for tax purposes. For 2013, we paid $1.64 per share of
common stock in dividends. Of the $1.64, 83.7% represented ordinary income, and 16.3% represented return of
capital, for tax purposes.
We intend to continue to declare quarterly dividends to our stockholders. However, our distributions are
determined by our board of directors and will depend upon cash generated by operating activities, our financial
condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal
Revenue Code and such other factors as the board of directors deems relevant. We have historically paid cash
dividends, although we may choose to pay a portion in stock dividends in the future. To qualify as a REIT, we
must distribute at least 90% of our REIT taxable income prior to net capital gains to our stockholders, as well as
meet certain other requirements. We must pay these distributions in the taxable year the income is recognized;
or in the following taxable year if they are declared during the last three months of the taxable year, payable to
stockholders of record on a specified date during such period and paid during January of the following year. Such
distributions are treated for REIT tax purposes as paid by us and received by our stockholders on December 31 of
the year in which they are declared. In addition, at our election, a distribution for a taxable year may be declared
in the following taxable year if it is declared before we timely file our tax return for such year and if paid on or
21
before the first regular dividend payment after such declaration. These distributions qualify as dividends paid for
the 90% REIT distribution test for the previous year and are taxable to holders of our capital stock in the year in
which paid.
During the year ended December 31, 2014, we did not sell any unregistered securities. During the fourth quarter
of 2014, we did not repurchase any of our equity securities.
For information about our equity compensation plan, please see Part III, Item 12 of this Annual Report on Form
10-K.
Item 6:
Selected Financial Data
The following table sets forth our selected financial information on a historical basis and should be read in
conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
the Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report on Form 10-
K. Certain amounts have been reclassified to conform to the current presentation of discontinued operations.
The balance sheet for the periods ending December 31, 2010 through 2014 and operating data for each of the
periods presented were derived from our audited financial statements.
Selected Financial Data
(in thousands, except per share information and other data)
2014
Year Ended December 31,
2012
2013
2011
2010
Operating Data
Total revenues
Expenses
Property costs (1)
General and administrative
Interest
Depreciation and amortization
Impairments
Total Expenses
Income From Operations
Gain on extinguishment of debt
Loss on sale of assets
Income From Continuing Operations
Gain on sale of asset from discontinued operations
Income (loss) from discontinued operations
Net income
Less net income attributable to non-controlling interest
Net income attributable to Agree Realty Corporation
Share Data
Weighted average common shares - diluted
Net income per share - diluted
Cash dividends per share
Balance Sheet Data
Real Estate (before accumulated depreciation)
Total Assets
Total Debt, including accrued interest
Other Data
Number of Proper ies
Gross Leasable Area (Sq. Ft.)
Percentage Leased
$
53,559
$
43,518
$
34,624
$
30,263
$
26,235
4,917
6,629
8,587
11,103
3,020
34,256
19,303
-
(528)
18,775
123
15
18,913
425
$ 18,488
14,967
$ 1.24
$ 1.74
$ 589,147
$ 593,580
$ 222,483
209
4,315,000
99%
3,656
5,952
6,475
8,489
-
24,572
18,946
-
-
18,946
946
298
20,190
515
$ 19,675
13,158
$ 1.50
$ 1.64
$ 471,366
$ 462,742
$ 158,869
130
3,662,000
98%
3,328
5,682
5,134
6,241
-
20,385
14,239
-
-
14,239
2,097
2,267
18,603
554
$ 18,049
11,137
$ 1.62
$ 1.60
$ 398,812
$ 370,093
$ 161,242
109
3,259,000
98%
3,469
5,662
3,957
5,200
600
18,888
11,375
2,360
-
13,735
110
(3,956)
9,889
338
$ 9,551
9,681
$ 0.99
$ 1.60
$ 340,074
$ 293,944
$ 120,032
87
3,556,000
93%
2,730
5,003
3,461
4,119
6,160
21,473
4,762
-
-
4,762
4,738
6,128
15,628
561
$ 15,067
9,191
$ 1.64
$ 2.04
$ 338,221
$ 285,042
$ 100,128
81
3,848,000
99%
(1) Property costs include real estate taxes, insurance, maintenance and land lease expense.
22
Item 7:
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements, and related
notes thereto, included elsewhere in this Annual Report on Form 10-K and the “-Special Note Regarding Forward-
Looking Statements” in Item 1A “Risk Factors” above.
Overview
We are a fully integrated REIT primarily focused on the ownership, acquisition, development and management of
retail properties net leased to industry leading tenants. We were founded in 1971 by our current Executive
Chairman, Richard Agree, and listed on the NYSE in 1994. Our assets are held by, and all of our operations are
conducted through, directly or indirectly, the Operating Partnership, of which we are the sole general partner and
in which we held a 98.06% interest as of December 31, 2014.
As of December 31, 2014, our portfolio consisted of 209 properties located in 37 states and totaling approximately
4.3 million square feet of gross leasable area. As of December 31, 2014, our portfolio was approximately 98.6%
leased and had a weighted average remaining lease term of approximately 11.9 years. Substantially all of our
tenants are subject to net lease agreements. A net lease typically requires the tenant to be responsible for
minimum monthly rent and property operating expenses including property taxes, insurance and maintenance.
We have elected to be taxed as a REIT for federal income tax purposes commencing with our taxable year ended
December 31, 1994. We believe that we have been organized and have operated in a manner that has allowed
us to qualify as a REIT for federal income tax purposes and we intend to continue operating in such a manner.
Recent Accounting Pronouncements
In April 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-08 "Reporting Discontinued
Operations and Disclosures of Disposals of Components of an Entity" which updates ASC 205 "Presentation of
Financial Statements" and ASC 360 "Property, Plant and Equipment.” The amendments in this update change the
criteria for reporting discontinued operations while enhancing disclosures in this area. Under the new guidance,
only disposals representing a strategic shift in operations should be presented as discontinued operations. For
public entities, ASU 2014-08 is effective prospectively for fiscal years beginning after December 15, 2015;
however, early adoption is permitted, but only for disposals or classifications as held for sale that have not been
reported in financial statements previously issued or available for issuance. We have elected to early adopt this
updated standard effective in the first quarter of 2014. The adoption of this guidance had an effect on the
presentation of our consolidated financial statements. Beginning in 2014, activities related to individual sales of
properties are generally no longer classified as discontinued operations except for the property classified as held
for sale as of December 31, 2013.
In May 2014, the Financial Accounting Standards Board issued ASU No. 2014-09 “Revenue from Contracts with
Customers” as a new Topic, Accounting Standards Codification ("ASC") Topic 606. The objective of ASU 2014-19
is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts
with customers and will supersede most of the existing revenue recognition guidance, including industry-specific
guidance. The core principle is that a company should recognize revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. In applying the new standard, companies will perform a five-step analysis
of transactions to determine when and how revenue is recognized. ASU 2014-09 applies to all contracts with
customers except those that are within the scope of other topics in the FASB ASC, including revenue from leases.
This ASU is effective for annual reporting periods (including interim periods within those periods) beginning after
December 15, 2016 and shall be applied using either a full retrospective or modified retrospective approach. Early
adoption is not permitted. The Company is currently evaluating the new guidance and has not determined the
impact, if any, this standard may have on the consolidated financial statements.
Critical Accounting Policies
Our accounting policies are determined in accordance with U.S. generally accepted accounting principles
(“GAAP”). The preparation of our financial statements requires us to make estimates and assumptions that are
subjective in nature and, as a result, our actual results could differ materially from our estimates. Set forth below
are the more critical accounting policies that require management judgment and estimates in the preparation of
our consolidated financial statements. This summary should be read in conjunction with the more complete
discussion of our accounting policies and procedures included in Note 2 to our consolidated financial statements.
23
Revenue Recognition
We lease real estate to our tenants under long-term net leases which we account 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 by us after the tenant exceeds a sales breakpoint. Contractually obligated
reimbursements from tenants for recoverable real estate taxes and operating expenses are generally included in
operating costs reimbursement in the period when such expenses are recorded.
Real Estate Investments
We record the acquisition of real estate at cost, including acquisition and closing costs. For properties developed
by us, 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.
Accounting for Acquisitions of Real Estate
The acquisition of property for investment purposes is typically accounted for as an asset acquisition. We allocate
the purchase price to land, building 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, we may use a
number of sources, including data provided by independent third parties, as well as information obtained by us as
a result of our due diligence, including expected future cash flows of the property and various characteristics of
the markets where the property is located.
Depreciation
Our real estate portfolio is depreciated using the straight-line method over the estimated remaining useful life of
the properties, which generally ranges from 30 to 40 years for buildings and 10 to 20 years for improvements.
Impairments
We review our real estate investments periodically for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Events or circumstances that may occur include, but
are not limited to, significant changes in real estate market conditions or our ability to re-lease or sell properties
that are vacant or become vacant. Management determines whether an impairment in value has occurred by
comparing the estimated future cash flows (undiscounted and without interest charges), including the residual
value of the real estate, with the carrying cost of the individual asset. An asset is considered impaired if its
carrying value exceeds its estimated undiscounted cash flows and an impairment charge is recorded in the
amount by which the carrying value of the asset exceeds its estimated fair value.
Results of Operations
Comparison of Year Ended December 31, 2014 to Year Ended December 31, 2013
Minimum rental income increased $8,508,000, or 21%, to $49,403,000 in 2014, compared to $40,895,000 in
2013. Approximately $6,809,000 of the increase is due to the acquisition of 77 properties in 2014 and the full
year impact of 18 properties acquired in 2013. Approximately $2,158,000 of the increase is attributable to five
development projects completed in 2014 and the full year impact of six development projects completed in 2013.
These increases were partially offset by approximately $341,000 due to a reduction in minimum rental income
from properties sold during 2014 that were owned for all of 2013, and approximately $101,000 due to other
minimum rental income adjustments.
Percentage rents increased to $160,000 in 2014 from $36,000 in 2013. The primary driver of the increase is
properties acquired in 2013 for which we received percentage rent in 2014.
Operating cost reimbursements increased $1,257,000, or 49%, to $3,825,000 in 2014, compared to $2,567,000 in
2013. Operating cost reimbursements increased due to higher levels of recoverable property operating expenses
as a result of our 2014 and 2013 acquisition and development activity. Our portfolio recovery rate increased to
86.1% in 2014 compared to 79.5% in 2013.
24
Other income increased to $171,000 in 2014 from $19,000 in 2013. The primary driver of the increase is non-
recurring fee income earned in 2014.
Real estate taxes increased $730,000, or 36%, to $2,766,000 in 2014, compared to $2,035,000 in 2013. The
increase is due to the ownership of additional properties in 2014 compared to 2013 for which we remit real estate
taxes and are subsequently reimbursed by tenants.
Property operating expenses increased $486,000, or 41%, to $1,679,000 in 2014, compared to $1,193,000 in
2013. The increase is primarily due to the ownership of additional properties in 2014 compared to 2013 which
contributed to higher property maintenance, utilities and insurance expenses. Our tenants subsequently
reimbursed us for the majority of these expenses.
Land lease payments increased $44,000, or 10%, to $472,000 in 2014, compared to $428,000 for 2013. The
increase is the result a property acquired in 2014 that is subject to a land lease.
General and administrative expenses increased $677,000, to $6,629,000 in 2014, compared to $5,952,000 in
2013. The increase is primarily the result of increased employee costs of $582,000 and a net increase in other
expenses of $66,000. General and administrative expenses as a percentage of total revenue decreased to
12.4% for 2014 from 13.7% in 2013.
Depreciation and amortization increased $2,613,000, or 31%, to $11,103,000 in 2014, compared to $8,489,000 in
2013. The increase was primarily the result of the acquisition of 77 properties in 2014 and 18 properties in 2013.
We recognized impairment charges of $3,020,000 in 2014, including (i) $220,000 as a result of writing down the
carrying value of Petoskey Town Center, which was under contract for sale, but not classified as held for sale at
September 30, 2014 due to contingencies associated with the contract and (ii) $2,800,000 as a result of writing
down the carrying value of Chippewa Commons due to an anchor tenant declining to exercise an extension option
which would contribute to vacancy and diminished cash flows and resulted in a fair value that was less than the
net book value of the asset. We recognized an impairment charge of $450,000 in 2013 as a result of writing down
the carrying value of Ironwood Commons, which was under contract for sale, but not classified as held for sale at
September 30, 2013 due to contingencies associated with the contract. This amount is reflected in discontinued
operations in 2013.
Interest expense increased $2,112,000, or 33%, to $8,587,000 in 2014, from $6,475,000 in 2013. The increase in
interest expense is a result of higher levels of borrowings to finance the acquisition and development of additional
properties in 2014 and 2013, including a $65,000,000 unsecured term loan entered into in July of 2014 and a
$35,000,000 unsecured term loan entered into in September of 2013.
We recognized a net loss on sales of assets of $528,000 in 2014 which was attributable primarily to a $234,000
loss on the sale of Chippewa Commons in December 2014 and a $276,000 loss on the sale of a property in East
Lansing, Michigan in August 2014 (the property was subject to a purchase option exercised by the lessee). We
also recognized a gain of $123,000 on the sale of the Ironwood Commons in January 2014. This gain is reflected
in discontinued operations in 2014. In 2013, we recognized a gain of $946,000 on the sale of a Walgreens in
Ypsilanti, Michigan. This gain is reflected in discontinued operations in 2013.
Income from discontinued operations was $15,000 in 2014 compared to $298,000 in 2013. Income from
discontinued operations in 2014 was attributable to Ironwood Commons which was classified as held for sale at
December 31, 2013 and subsequently sold in January 2014. Income from discontinued operations in 2013 was
attributable to Ironwood Commons, inclusive of the $450,000 impairment charge described above, and a
Walgreens in Ypsilanti, Michigan that was sold in January 2013.
Our net income decreased $1,277,000, or 6%, to $18,913,000 in 2014, from $20,190,000 in 2013 as a result of
the foregoing factors.
Comparison of Year Ended December 31, 2013 to Year Ended December 31, 2012
Minimum rental income increased $8,326,000, or 26%, to $40,895,000 in 2013, compared to $32,569,000 in
2012. Approximately $7,002,000 of the increase was due to the acquisition of 18 properties in 2013 and the full
year impact of 25 properties acquired in 2012. Approximately $1,185,000 of the increase was attributable to six
25
development projects completed in 2013 and the full year impact of two development projects completed in 2012.
Additionally, minimum rental income increased by approximately $139,000 as a result of other rent adjustments.
Percentage rents increased to $36,000 in 2013 from $24,000 in 2012.
Operating cost reimbursements increased $596,000, or 30%, to $2,567,000 in 2013, compared to $1,971,000 in
2012. Operating cost reimbursements increased due to higher levels of recoverable property operating expenses
as a result of our 2013 and 2012 acquisition and development activity. Our portfolio recovery rate increased to
79.5% in 2013 compared to 71.6% in 2012.
Other income decreased to $19,000 in 2013 compared to $60,000 in 2012. The primary driver of the decrease
was non-recurring fee income earned in 2012.
Real estate taxes increased $249,000, or 14%, to $2,035,000 in 2013, compared to $1,786,000 in 2012. The
increase is due to the ownership of additional properties in 2013 compared to 2012 for which we remit real estate
taxes and are subsequently reimbursed by tenants.
Property operating expenses increased $225,000, or 23%, to $1,193,000 in 2013, compared to $968,000 in 2012.
The increase is primarily due to the ownership of additional properties in 2013 compared to 2012 which
contributed to higher property maintenance, utilities and insurance expenses. Our tenants subsequently
reimbursed us for the majority of these expenses.
Land lease payments decreased $146,000, or 25%, to $428,000 in 2013 compared to $574,000 for 2012. The
decrease is the result of our purchase of the underlying land at our property in Ann Arbor, Michigan in June 2012.
General and administrative expenses increased $270,000, to $5,952,000 in 2013 compared to $5,682,000 in
2012. The increase in general and administrative expenses was primarily the result of increased employee costs
of $196,000, increased professional fees of $99,000, offset by net decreases in other expenses of $25,000.
General and administrative expenses as a percentage of total revenue decreased to 13.7% for 2013 from 16.4%
in 2012.
Depreciation and amortization increased $2,248,000, or 36%, to $8,489,000 in 2013 compared to $6,241,000 in
2012. The increase was primarily the result of the acquisition of 18 properties in 2013 and 25 properties in 2012.
Interest expense increased $1,341,000, or 26%, to $6,475,000 in 2013, from $5,134,000 in 2012. The increase in
interest expense was a result of higher levels of borrowings to finance the acquisition and development of
additional properties in 2013 and 2012, including a $35,000,000 unsecured term loan entered into in September
of 2013, a $25,000,000 secured term loan entered into in December 2012 and a $23,600,000 Commercial
Mortgage Backed Security “CMBS” financing that closed in December 2012.
In 2013, we recognized a gain of $946,000 on the sale of a Walgreens in Ypsilanti, Michigan. This gain is
reflected in discontinued operations in 2013. In 2012 we recognized a net gain of $2,097,000 on the sale of six
assets, including a vacant single tenant office property, two vacant single tenant retail properties, a Kmart-
anchored shopping center in Charlevoix, Michigan, a Kmart-anchored shopping center in Plymouth, Wisconsin
and a Kmart-anchored shopping center in Shawano, Wisconsin.
Income from discontinued operations was $298,000 in 2013 compared to $2,267,000 in 2012. Income from
discontinued operations in 2013 was attributable to Ironwood Commons, inclusive of a $450,000 impairment
charge, and a Walgreens in Ypsilanti, Michigan that was sold in January 2013. Income from discontinued
operations in 2012 was attributable to six properties that were sold during 2012, four former Borders properties
that were conveyed to the lender in March 2012, and a Walgreens in Ypsilanti, Michigan which was classified as
held for sale at December 31, 2012 and subsequently sold in January 2013.
Our net income increased $1,586,000, or 9%, to $20,190,000 in 2013, from $18,604,000 in 2012 as a result of the
foregoing factors.
Liquidity and Capital Resources
Our principal demands for funds include payment of operating expenses, payment of principal and interest on our
outstanding indebtedness, distributions to our shareholders and future property acquisitions and development.
26
We expect to meet our short term liquidity requirements through cash provided from operations and borrowings
under our Credit Facility. As of December 31, 2014, $15,000,000 was outstanding on our Credit Facility and
$135,000,000 was available for future borrowings. We anticipate funding our long term capital needs through
cash provided from operations, borrowings under our Credit Facility, the issuance of long term debt or the
issuance of common or preferred equity or other instruments convertible into or exchangeable for common or
preferred equity.
We continually evaluate alternative financing and believe that we can obtain financing on reasonable terms.
However, there can be no assurance that additional financing or capital will be available, or that the terms will be
acceptable or advantageous to us.
Capitalization
As of December 31, 2014, our total market capitalization was approximately $777,887,000. Market capitalization
consisted of $556,124,000 of common equity (based on the December 31, 2014 closing price on the NYSE of
$31.09 per common share and assuming the conversion of OP Units) and $221,762,200 of total debt including (i)
$106,762,000 of mortgage notes payable; (ii) $100,000,000 of unsecured term loans; and (iii) $15,000,000 of
borrowings under our Credit Facility. Our ratio of total debt to total market capitalization was 28.5% at December
31, 2014.
At December 31, 2014, the non-controlling interest in our Operating Partnership represented ownership of 1.94%
of the Operating Partnership. The OP Units may, under certain circumstances, be exchanged for our shares of
common stock on a one-for-one basis. We, as sole general partner of the Operating Partnership, have the option
to settle exchanged OP Units held by others for cash based on the current trading price of our shares. Assuming
the exchange of all OP Units, there would have been 17,887,565 shares of common stock outstanding at
December 31, 2014.
Debt
Revolving Credit and Term Loan Facility
In July 2014, the Company entered into a $250,000,000 senior unsecured revolving credit and term loan
agreement consisting of (i) a new $150,000,000 revolving credit facility (the “Credit Facility”); (ii) a new
$65,000,000 seven-year unsecured term loan facility (the “2021 Term Loan”); and (iii) our existing $35,000,000
unsecured term loan facility due 2020 (the “2020 Term Loan”). The Credit Facility, 2021 Term Loan and 2020
Term Loan, together, are referred to as our “Revolving Credit and Term Loan Facility”.
The Credit Facility is due July 21, 2018, with an additional one-year extension at the Company’s option, subject to
customary conditions. Borrowings under the Credit Facility are priced at LIBOR plus 135 to 200 basis points,
depending on the Company’s leverage. As of December 31, 2014, $15,000,000 was outstanding under the Credit
Facility bearing a weighted average interest rate of approximately 1.5% and $135,000,000 was available for
borrowing.
The 2021 Term Loan matures on July 21, 2021. Borrowings under the 2021 Term Loan are priced at LIBOR plus
165 to 225 basis points, depending on the Company’s leverage. The Company entered into interest rate swaps to
fix LIBOR at 2.09% until maturity, implying an all-in interest rate of 3.74% at closing. As of December 31, 2014,
$65,000,000 was outstanding under the 2021 Term Loan.
The 2020 Term Loan matures on September 29, 2020. Borrowings under the 2020 Term Loan are priced at
LIBOR plus 165 to 225 basis points, depending on the Company’s leverage. The Company entered into interest
rate swaps to fix LIBOR at 2.20% until maturity, implying an all-in interest rate of 3.85% at closing. As of
December 31, 2014, $35,000,000 was outstanding under the 2020 Term Loan.
The Revolving Credit and Term Loan Facility contains customary covenants, including, among others, financial
covenants regarding debt levels, total liabilities, tangible net worth, fixed charge coverage, unencumbered
borrowing base properties, and permitted investments. The Company was in compliance with the covenant terms
at December 31, 2014.
Mortgage Notes Payable
27
As of December 31, 2014, we had total mortgage indebtedness of $106,762,000 with a weighted average
maturity of 5.1 years. Including our mortgages that have been swapped to a fixed interest rate, our weighted
average interest rate on mortgage debt was 4.27%.
($ in thousands)
Mortgage Note Payable
Portfolio Mortgage Loan due 2016
Portfolio Mortgage Loan due 2017
Secured Term Loan due 2017
Secured Term Loan due 2018
Portfolio Mortgage Loan due 2020
Single Asset Mortgage Loan due 2020
CMBS Portfolio Loan due 2023
Single Asset Mortgage Loan due 2023
Portfolio CTL due 2026
Single Asset Mortgage Loan due 2014
Total
Maturity
Interest
Rate (1)
6.56% June 2016
6.63% February 2017
3.62% May 2017 (2)
2.49% April 2018
6.90% January 2020
6.24% January 2020
3.60% January 2023
5.01% September 2023
6.27% July 2026
4.16% June 2014
Principal Amount Outstanding
December 31, 2014
8,580
$
2,406
21,398
25,000
7,896
3,204
23,640
5,595
9,043
-
106,762
$
December 31, 2013
8,580
$
3,405
22,018
25,000
9,150
3,275
23,640
-
9,558
9,272
113,898
$
(1) Fixed rates, including the effect of interest rate swaps.
(2) The note matures May 14, 2017 and may be extended, at the Company’s election, for a two-year term to May 2019, subject to certain
conditions.
The mortgage loans encumbering our 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 a material misrepresentation, misstatement or omission 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 by the borrower, either directly or indirectly, and certain environmental liabilities. At December
31, 2014, the mortgage loan of $21,398,000 was partially recourse to us and secured by a limited guaranty of
payment and performance for approximately 50% of the loan amount.
We have entered into mortgage loans which are secured by multiple properties and contain cross-default and
cross-collateralization provisions. Cross-collateralization provisions allow a lender to foreclose on multiple
properties in the event that we default under the loan. Cross-default provisions allow a lender to foreclose on the
related property in the event a default is declared under another loan.
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2014:
($ in thousands)
Mortgage Notes Payable
Revolving Credit Facility
Unsecured Term Loans
Land Lease Obligations
Estimated Interest Payments on Mortgage
Notes Payable and Unsecured Term Loans
Total
Total
Yr 1
2-3 Yrs
4-5 Yrs
$
$
106,762
15,000
100,000
11,401
44,164
277,327
$
$
3,839
-
-
515
8,270
12,624
$
$
35,327
-
-
1,029
14,567
50,923
$
$
30,326
15,000
-
1,031
11,625
57,982
Over 5 Yrs
$
37,270
-
100,000
8,826
9,702
155,798
$
Estimated interest payments are based on (i) the stated rates for mortgage notes payable, including the effect of
interest rate swaps and (ii) the stated rates for unsecured term loans, including the effect of interest rate swaps
and assuming the interest rate in effect for the most recent quarter remains in effect through the respective
maturity dates.
Dividends
During the quarter ended December 31, 2014, we declared a quarterly dividend of $0.45 per share. The cash
dividend was paid on January 6, 2015 to holders of record on December 23, 2014.
28
During the quarter ending March 31, 2015, we declared a quarterly dividend of $0.45 per share. The cash
dividend will be paid on April 14, 2014 to holders of record on March 31, 2014.
Inflation
Our leases typically contain provisions to mitigate the adverse impact of inflation on our results of operations.
Tenant leases generally provide for limited increases in rent as a result of fixed increases or increases in the
consumer price index. Certain of our leases contain clauses enabling us to receive percentage rents based on
tenants’ gross sales, which generally increase as prices rise. During times when inflation is greater than
increases in rent, rent increases will not keep up with the rate of inflation.
Substantially all of properties are leased to tenants under long-term, net leases which require the tenant to pay
certain operating expenses for a property, thereby reducing our exposure to operating cost increases resulting
from inflation. Inflation may have an adverse impact on our tenants.
Funds from Operations
Funds from Operations (“FFO”) is defined by the National Association of Real Estate Investment Trusts, Inc.
(NAREIT) to mean net income computed in accordance with GAAP, excluding gains (or losses) from sales of
property, plus real estate related depreciation and amortization and any impairment charges on a depreciable real
estate asset, and after adjustments for unconsolidated partnerships and joint ventures. Management uses FFO
as a supplemental measure to conduct and evaluate the Company’s business because there are certain
limitations associated with using GAAP net income by itself as the primary measure of the Company’s operating
performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that
the value of real estate assets diminishes predictably over time. Since real estate values instead have historically
risen or fallen with market conditions, management believes that the presentation of operating results for real
estate companies that use historical cost accounting is insufficient by itself.
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. Further, while the Company
adheres to the NAREIT definition of FFO, its presentation of FFO is not necessarily comparable to similarly titled
measures of other REITs due to the fact that all REITs may not use the same definition.
Adjusted Funds from Operations (“AFFO”) is a non-GAAP financial measure of operating performance used by
many companies in the REIT industry. AFFO further adjusts FFO for certain non-cash items that reduce or
increase net income in accordance with GAAP. Management considers AFFO a useful supplemental measure of
the Company’s performance, however, AFFO should not be considered an alternative to net income as an
indication of the Company’s performance, or to cash flow as a measure of liquidity or ability to make distributions.
The Company’s computation of AFFO may differ from the methodology for calculating AFFO used by other equity
REITs, and therefore may not be comparable to such other REITs. Note that, during the year ended December
31, 2014, the Company adjusted its calculation of AFFO to exclude non-recurring capitalized building
improvements and to include non-real estate related depreciation and amortization. Management believes that
these changes provide a more useful measure of operating performance in the context of AFFO.
The following table provides a reconciliation of FFO and net income for the years ended December 31, 2014,
2013 and 2012:
29
Reconciliation of Funds from Operations to Net Income
Net income
Depreciation of real estate assets
Amortization of leasing costs
Amortization of lease intang bles
Impairment charge
(Gain) loss on sale of assets
Funds from Operations
December 31, 2014
$
18,913,008
Year Ended
December 31, 2013
$
20,189,611
December 31, 2012
$
18,603,594
8,361,698
125,946
2,490,585
3,020,000
404,996
33,316,233
$
6,930,145
113,101
1,633,691
450,000
(946,347)
28,370,201
$
5,726,319
106,100
1,025,077
-
(2,097,105)
23,363,985
$
Funds from Operations Per Share - Diluted
$
2.18
$
2.10
$
2.03
Weighted average shares and OP units outstanding
Basic
Diluted
15,230,205
15,314,514
13,413,526
13,505,124
11,418,937
11,484,529
The following table provides a reconciliation of AFFO and net income for the years ended December 31, 2014,
2013 and 2012:
Reconciliation of Adjusted Funds from Operations to Net Income
Net income
Cumulative adjustments to calculate FFO
Funds from Operations
Straight-line accrued rent
Deferred revenue recognition
Stock based compensation expense
Amortization of financing costs
Non-Real Estate Depreciation
Adjusted Funds from Operations
Additional supplemental disclosure
Scheduled principal repayments
Capitalized interest
Capitalized building improvements
December 31, 2014
$
18,913,008
Year Ended
December 31, 2013
$
20,189,611
December 31, 2012
$
18,603,594
$
$
$
14,403,225
33,316,233
(1,415,739)
(463,380)
1,986,835
398,248
122,861
33,945,058
8,180,590
28,370,201
(1,148,462)
(463,380)
1,812,532
326,238
66,596
28,963,725
4,760,391
23,363,985
(738,118)
(463,380)
1,657,209
285,385
65,962
24,171,043
$
$
$
$
$
$
3,599,130
263,472
145,274
$
$
$
3,478,384
566,753
87,018
$
$
$
3,164,654
149,054
170,858
Item 7A:
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to interest rate risk primarily through our borrowing activities. There is inherent roll-over risk for
borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or
predictable because of the variability of future interest rates and our future financing requirements.
Our interest rate risk is monitored using a variety of techniques. The table below presents the principal payments
(in thousands) and the weighted average interest rates on outstanding debt, by year of expected maturity, to
evaluate the expected cash flows and sensitivity to interest rate changes, assuming no mortgage defaults.
Mortgage Notes Payable
Average Interest Rate
$
3,839 $
5.36%
12,674 $
6.13%
22,653 $
6.43%
27,575 $
3.94%
2,750 $
2.86%
37,271 $ 106,762
4.50%
2015
2016
2017
2018
2019
Thereafter
Total
Unsecured Revolving Credit Facility $
Average Interest Rate
- $
- $
- $
15,000 $
1.52%
- $
- $
15,000
Unsecured Term Loans
Average Interest Rate
$
- $
- $
- $
- $
- $ 100,000 $ 100,000
3.78% -
The fair value (in thousands) is estimated at $107,814 and $97,919 for mortgage notes payable and unsecured
term loan, respectively, as of December 31, 2014.
30
The table above incorporates those exposures that exist as of December 31, 2014; it does not consider those
exposures or positions which could arise after that date. As a result, our ultimate realized gain or loss with
respect to interest rate fluctuations will depend on the exposures that arise during the period and interest rates.
We seek to limit the impact of interest rate changes on earnings and cash flows and to lower the overall borrowing
costs by closely monitoring our variable rate debt and converting such debt to fixed rates when we deem such
conversion advantageous. From time to time, we may enter into interest rate swap agreements or other interest
rate hedging contracts. While these agreements are intended to lessen the impact of rising interest rates, they
also expose us to the risks that the other parties to the agreements will not perform, we could incur significant
costs associated with the settlement of the agreements, the agreements will be unenforceable and the underlying
transactions will fail to qualify as highly-effective cash flow hedges under GAAP guidance.
In April 2012, we entered into a forward starting interest rate swap agreement to hedge against changes in future
cash flows resulting from changes in interest rates on $22,300,000 in variable-rate borrowings. Under the terms
of the interest rate swap agreement, we receive from the counterparty interest on the notional amount based on
one-month LIBOR and pay to the counterparty a fixed rate of 1.92%. This swap effectively converted
$22,300,000 of variable-rate borrowings to fixed-rate borrowings from July 1, 2013 to May 1, 2019. As of
December 31, 2014, this interest rate swap was valued as a liability of $425,000.
In December 2012, we entered into interest rate swap agreements to hedge against changes in future cash flows
resulting from changes in interest rates on $25,000,000 in variable-rate borrowings. Under the terms of the
interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one-
month LIBOR and pay to the counterparty a fixed rate of 0.89%. This swap effectively converted $25,000,000 of
variable-rate borrowings to fixed-rate borrowings from December 6, 2012 to April 4, 2018. As of December 31,
2014, this interest rate swap was valued as an asset of $274,000.
In September 2013, we entered into an interest rate swap agreement to hedge against changes in future cash
flows resulting from changes in interest rates on $35,000,000 in variable-rate borrowings. Under the terms of the
interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one-
month LIBOR and pay to the counterparty a fixed rate of 2.20%. This swap effectively converted $35,000,000 of
variable-rate borrowings to fixed-rate borrowings from October 3, 2013 to September 29, 2020. As of December
31, 2014, this interest rate swap was valued as a liability of $911,000.
In July 2014, we entered into interest rate swap agreements to hedge against changes in future cash flows
resulting from changes in interest rates on $65,000,000 in variable-rate borrowings. Under the terms of the
interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one-
month LIBOR and pay to the counterparty a fixed rate of 2.09%. This swap effectively converted $65,000,000 of
variable-rate borrowings to fixed-rate borrowings from July 21, 2014 to July 21, 2021. As of December 31, 2014,
this interest rate swap was valued as a liability of $1,047,000.
We do not use derivative instruments for trading or other speculative purposes and we did not have any other
derivative instruments or hedging activities as of December 31, 2014.
As of December 31, 2014, a 100 basis point increase in interest rates on the portion of our debt bearing interest at
variable rates would result in an increase in interest expense of approximately $150,000.
31
Item 8:
Financial Statements and Supplementary Data
The financial statements and supplementary data are listed in the Index to Financial Statements and Financial
Statement Schedules appearing on Page F-1 of this Annual Report on Form 10-K and are included in this Annual
Report on Form 10-K following page F-1.
Item 9:
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
There are no disagreements with our independent registered public accounting firm on accounting matters or
financial disclosure.
Item 9A:
Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the
participation of our principal executive officer and principal financial officer, of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act). Based on this
evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and
procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit
under the Securities Exchange Act is recorded, processed, summarized, and reported within the time periods
specified in SEC rules and forms.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Rules 13a15-(f) and 15d-15(f) under the Securities Exchange Act. Our internal control
over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with GAAP. Our internal control
over financial reporting includes those policies and procedures that:
1) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of our Company;
2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with GAAP, and that our receipts and expenditures are being made
only in accordance with authorizations of our management and directors; and
3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,
or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Under the supervision of our principal executive officer and our principal financial officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on our assessment and those criteria, our management believes that we maintained
effective internal control over financial reporting as of December 31, 2014.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting during our most recently completed fiscal
quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
Attestation Report of Independent Registered Public Accounting Firm
The attestation report required under this item is contained on page F-2 of this Annual Report on Form 10-K.
Item 9B:
Other Information
None.
32
PART III
Item 10:
Directors, Executive Officers and Corporate Governance
Incorporated herein by reference to our definitive proxy statement with respect to our 2015 Annual Meeting of
Stockholders.
Item 11:
Executive Compensation
Incorporated herein by reference to our definitive proxy statement with respect to our 2015 Annual Meeting of
Stockholders.
Item 12:
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
The following table summarizes the equity compensation plan under which our common stock may be issued as
of December 31, 2014.
Number of Securities to be
Issued Upon Exercise of
Outstanding Options, Warrants
and Rights
Weighted Average Exercise
Price of Outstanding Options,
Warrant and Rights
Number of Securities
Remaining Available for Future
Issuance Under Equity
Compensation Plans
(Excluding Securities Reflected
in Column (a))
(a)
(b)
(c)
-
-
-
-
-
-
620,071
-
620,071
Plan Category
Equity Compensation Plans
Approved by Security Holders
Equity Compensation Plans Not
Approved by Security Holders
Total
(1) Relates to various stock-based awards available for issuance under our 2014 Omnibus Incentive Plan, including incentive stock options,
non-qualified stock options, stock appreciation rights, deferred stock awards, restricted stock awards, unrestricted stock awards and
dividend equivalent rights.
Additional information is incorporated herein by reference to our definitive proxy statement with respect to our
2015 Annual Meeting of Stockholders.
Item 13:
Certain Relationships, Related Transactions and Director Independence
Incorporated herein by reference to our definitive proxy statement with respect to our 2015 Annual Meeting of
Stockholders.
Item 14:
Principal Accounting Fees and Services
Incorporated herein by reference to our definitive proxy statement with respect to our 2015 Annual Meeting of
Stockholders.
33
PART IV
ITEM 15:
Exhibits and Financial Statement Schedules
A.
The following documents are filed as part of this Annual Report on Form 10-K:
1 - 2. The financial statements and supplementary data are listed in the Index to Financial Statements
and Financial Statement Schedules appearing on Page F-1 of this Annual Report on Form 10-K.
3.
Exhibits
Exhibit No.
Description
3.1
3.2
4.1
Articles of Incorporation of the Company, including all amendments and articles supplementary thereto,
(incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q (No. 001-12928) for
the quarter ended June 30, 2013)
Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 8-K
(No. 001-12928) filed on May 9, 2013)
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 Current Report on Form 8-K (No. 001-
12928) filed on December 9, 2008)
4.3
4.4
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 Annual
Report on Form 10-K (No. 001-12928) for the year ended December 31, 1994)
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
10.1 Revolving Credit Facility and Term Loan Agreement, dated July 21, 2014, among Agree Limited Partnership, PNC
Bank, National Association and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K (No. 001-12928) filed on July 22, 2014)
10.2
10.3
First Amended and Restated Agreement of Limited Partnership of Agree Limited Partnership, dated as of April 22,
1994, as amended by and among the Company, Richard Agree, Edward Rosenberg and Joel Weiner
(incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K (No. 001-12928) for the
year ended December 31, 2012)
Second Amendment to First Amended and Restated Agreement of Limited Partnership of Agree Limited
Partnership, dated as of March 20, 2013, as amended by and among the Company, the Limited Partnership and
Richard Agree (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (No.
001-12928) for the quarter ended March 31, 2013)
10.4+ Agree Realty Corporation Profit Sharing Plan (incorporated by reference to Exhibit 10.13 to the Company’s
Annual Report on Form 10-K (No. 001-12928) for the year ended December 31, 1996)
10.5+ Amended Employment Agreement, dated July 1, 2014, by and between the Company and Richard Agree
(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (No. 001-12928) for
the quarter ended September 30, 2014)
10.6+ Amended Employment Agreement, dated July 1, 2014, by and between the Company and Joey Agree
(incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q (No. 001-12928) for
the quarter ended September 30, 2014)
34
10.7+ Letter Agreement of Employment dated April 5, 2010 between Agree Limited Partnership and Laith Hermiz
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (No. 001-12928) filed on
April 6, 2010)
10.8+ Letter Agreement of Employment dated January 2, 2014 between Agree Limited Partnership and Brian R.
Dickman (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (No. 001-
12928) filed on January 6, 2014)
10.9+ Summary of Director Compensation (incorporated by reference to Exhibit 10.10 to the Company’s Annual Report
on Form 10-K (No. 001-12928) for the year ended December 31, 2007)
10.10+* Agree Realty Corporation 2014 Omnibus Incentive Plan
10.11+ Form of Restricted Stock Agreement under the Agree Realty Corporation 2014 Omnibus Incentive Plan
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q Q (No. 001-12928)
for the quarter ended September 30, 2014)
12.1* Statement of computation of ratios of earnings to combined fixed charges and preferred stock dividends
21*
Subsidiaries of Agree Realty Corporation
23.1* Consent of Grant Thornton LLP
23.2* Consent of Baker Tilly Virchow Krause, LLP
24
Power of Attorney (included on the signature page of this Annual Report on Form 10-K)
31.1* Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Joel N. Agree, Chief Executive Officer
31.2* Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Brian R. Dickman, Chief Financial Officer
32.1* Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Joel N. Agree, Chief Executive Officer
32.2* Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Brian R. Dickman, Chief Financial Officer
101*
The following materials from Agree Realty Corporation’s Annual Report on Form 10-K for the year ended
December 31, 2013 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance
Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Income, (iii) the Consolidated
Statement of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) related notes to these
consolidated financial statements, tagged as blocks of text
As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of
Sections 11and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934
*
+
Filed herewith.
Management contract or compensatory plan or arrangement.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the registrant has not filed debt instruments relating to long-term
debt that is not registered and for which the total amount of securities authorized thereunder does not exceed
10% of total assets of the registrant and its subsidiaries on a consolidated basis as of December 31, 2014. The
registrant agrees to furnish a copy of such agreements to the SEC upon request.
15(b) The Exhibits listed in Item 15(a)(3) are hereby filed with this Annual Report on Form 10-K.
15(c) The financial statement schedule listed at Item 15(a)(2) is hereby filed with this Annual Report on Form
10-K.
35
PURSUANT to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
AGREE REALTY CORPORATION
By:
/s/ Joel N. Agree
Joel N. Agree
President and Chief Executive Officer
Date: March 6, 2015
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of Agree Realty
Corporation, hereby severally constitute Richard Agree, Joel N. Agree and Brian R. Dickman, and each of them
singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our
names in the capacities indicated below, the Annual Report on Form 10-K filed herewith and any and all
amendments to said Annual Report on Form 10-K, and generally to do all such things in our names and in our
capacities as officers and directors to enable Agree Realty Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended and all requirements of the Securities and Exchange Commission,
hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to
said Annual Report on Form 10-K and any and all amendments thereto.
PURSUANT to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities indicated on the 6th day of March 2015.
By:
By:
By:
By:
By:
By:
By:
By:
/s/ Richard Agree
Richard Agree
Executive Chairman of the Board of Directors
/s/ Joel N. Agree
Joel N. Agree
President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Brian R. Dickman
Brian R. Dickman
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
/s/ Farris G. Kalil
Farris G. Kalil
Director
/s/ John Rakolta
John Rakolta Jr.
Director
/s/ Jerome Rossi
Jerome Rossi
Director
/s/ William S. Rubenfaer
William S. Rubenfaer
Director
/s/ Leon M. Schurgin
Leon M. Schurgin
Director
Date: March 6, 2015
Date: March 6, 2015
Date: March 6, 2015
Date: March 6, 2015
Date: March 6, 2015
Date: March 6, 2015
Date: March 6, 2015
Date: March 6, 2015
By:
/s/ Gene Silverman
Date: March 6, 2015
36
Gene Silverman
Director
37
Reports of Independent Registered Public Accounting Firms
Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Income
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Schedule III - Real Estate and Accumulated Depreciation
Page
F-2
F-5
F-7
F-8
F-9
F-10
F-26
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Agree Realty Corporation
We have audited the internal control over financial reporting of Agree Realty Corporation (a Maryland corporation) and
subsidiaries (the “Company”) as of December 31, 2014, based on criteria established in the 2013 Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2014, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated financial statements of the Company as of and for the year ended December 31, 2014, and our
report dated March 6, 2015 expressed an unqualified opinion on those financial statements.
/s/ GRANT THORNTON LLP
Southfield, Michigan
March 6, 2015
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Agree Realty Corporation
We have audited the accompanying consolidated balance sheets of Agree Realty Corporation (a Maryland corporation)
and subsidiaries (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of
operations and comprehensive income, stockholders’ equity, and cash flows for each of the two years in the period ended
December 31, 2014. Our audits of the basic consolidated financial statements included the financial statement schedule
listed in the index appearing under Item 15. These financial statements and financial statement schedule are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements
and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Agree Realty Corporation and subsidiaries as of December 31, 2014 and 2013, and the results of their
operations and their cash flows for each of the two years in the period ended December 31, 2014 in conformity with
accounting principles generally accepted in the United States of America. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the Company’s internal control over financial reporting as of December 31, 2014, based on criteria established in
the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated March 6, 2015 expressed an unqualified opinion.
/s/ GRANT THORNTON LLP
Southfield, Michigan
March 6, 2015
F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders, Audit Committee and Board of Directors
Agree Realty Corporation
Bloomfield Hills, MI
We have audited the accompanying consolidated statements of operations and comprehensive income, stockholders'
equity, and cash flows of Agree Realty Corporation for the year ended December 31, 2012. These consolidated financial
statements are the responsibility of the company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. Our audit of the consolidated financial statements
included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial
statements, assessing the accounting principles used and significant estimates made by management, and evaluating the
overall consolidated financial statement presentation. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, Agree Realty
Corporation’s results of operations and cash flows for the year ended December 31, 2012, in conformity with accounting
principles generally accepted in the United States of America.
/s/ Baker Tilly Virchow Krause, LLP
Chicago, Illinois
March 8, 2013 (March 6, 2015, as to the effects of discontinued operations discussed in Note 9)
F-4
AGREE REALTY CORPORATION
CONSOLIDATED BALANCE SHEETS
As of December 31,
ASSETS
Real Estate Investments
Land
Buildings
Less accumulated depreciation
Property under development
Property held for sale
Net Real Estate Investments
2014
2013
$
195,091,303
393,826,467
(59,089,851)
529,827,919
229,242
-
530,057,161
$
162,096,646
297,464,585
(60,633,824)
398,927,407
6,959,174
4,845,504
410,732,085
Cash and Cash Equivalents
5,399,458
14,536,881
Accounts Receivable - Tenants, net of allowance of
$35,000 for possible losses at December 31, 2014 and 2013
4,507,735
3,262,768
Unamortized Deferred Expenses
Financing costs, net of accumulated amortization of
$2,690,005 and $7,009,538 at December 31, 2014 and
2013, respectively
Leasing costs, net of accumulated amortization of $543,957
and $1,425,186 at December 31, 2014 and 2013,
respectively
Lease intangibles, net of accumulated amortization of
$5,719,085 and $3,228,506 at December 31, 2014 and
2013, respectively
Other Assets
Total Assets
See accompanying notes to consolidated financial statements.
3,008,280
2,526,768
783,335
758,037
47,479,602
27,705,499
2,345,290
3,219,505
$
593,580,861
$
462,741,543
F-5
AGREE REALTY CORPORATION
CONSOLIDATED BALANCE SHEETS
As of December 31,
LIABILITIES
Mortgages Notes Payable
Unsecured Term Loans
2014
2013
$
106,762,238
$
113,897,759
100,000,000
35,000,000
Unsecured Revolving Credit Facility
15,000,000
9,500,000
Dividends and Distributions Payable
8,048,404
6,243,933
Deferred Revenue
Accrued Interest Payable
Accounts Payable and Accrued Expense
Capital expenditures
Operating
Interest Rate Swap
Deferred Income Taxes
Tenant Deposits
Total Liabilities
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value, 28,000,000 shares
authorized, 17,539,946 and 14,883,314 shares issued and
outstanding, respectively
Excess stock, $.0001 par value, 8,000,000 and 4,000,000
shares authorized, 0 shares issued and outstanding
Preferred Stock, $.0001 par value per share, 4,000,000
and 150,000 shares authorized, respectively
Series A junior participating preferred stock, $.0001
par value, 200,000 and 150,000 shares authorized,
0 shares issued and outstanding
Additional paid-in-capital
Deficit
Accumulated other comprehensive income (loss)
Total Stockholders' Equity - Agree Realty Corporation
Non-controlling interest
Total Stockholders' Equity
1,004,023
1,467,403
721,459
470,862
200,300
2,684,599
2,383,308
705,000
36,156
144,074
2,851,612
204,696
705,000
40,647
237,545,487
170,525,986
1,754
-
1,488
-
-
388,262,847
(32,584,612)
(2,059,998)
353,619,991
2,415,383
356,035,374
-
312,974,162
(23,879,151)
471,717
289,568,216
2,647,341
292,215,557
Total Liabilities and Stockholders' Equity
$
593,580,861
$
462,741,543
See accompanying notes to consolidated financial statements.
F-6
AGREE REALTY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Year Ended December 31,
Revenues
Minimum rents
Perc entage rents
Operating cost reimbursement
Other income
Total Revenues
Operating Expenses
Real estate taxes
Property operating expenses
Land lease payments
General and administrative
Depreciation and amortization
Impairment charge
Total Operating Expenses
Income from Operations
Other (Expense) Income
Interest expense, net
Loss on sale of assets
2014
2013
2012
$
49,403,352
159,664
3,824,883
170,958
53,558,857
$
40,895,131
36,074
2,567,457
19,002
43,517,664
$
32,568,972
24,474
1,970,927
59,989
34,624,362
2,765,905
1,678,965
471,840
6,629,033
11,102,702
3,020,000
25,668,445
2,035,937
1,192,538
427,900
5,952,433
8,489,207
-
18,098,015
1,785,917
967,747
574,300
5,681,828
6,240,727
-
15,250,519
27,890,412
25,419,649
19,373,843
(8,586,980)
(527,743)
(6,474,727)
-
(5,134,283)
-
Income From Continuing Operations
18,775,689
18,944,922
14,239,560
Discontinued Operations
Gain on sale of assets from discontinued operations
Income from discontinued operations
122,747
14,573
946,347
298,342
2,097,105
2,266,929
Net Income
18,913,009
20,189,611
18,603,594
Less Net Income Attributable to Non-Controlling Interest
425,017
515,036
554,150
Net Income Attributable to Agree Realty Corporation
$
18,487,992
$
19,674,575
$
18,049,444
Basic Earnings Per Share
Continuing operations
Discontinued operations
Diluted Earnings Per Share
Continuing operations
Discontinued operations
$
$
$
$
$
$
$
$
$
$
$
$
1.23
0.01
1.24
1.23
0.01
1.24
1.41
0.10
1.51
1.40
0.10
1.50
1.25
0.38
1.63
1.24
0.38
1.62
Other Comprehensive Income
Net income
Other Comprehensive (Loss) Income
Total Comprehensive Income
Comprehensive Income Attributable to Non-Controlling
Interest
Comprehensive Income Attributable to
Agree Realty Corporation
W eighted Average Number of Common Shares
Outstanding - Basic
W eighted Average Number of Common Shares
Outstanding - Diluted:
$
18,913,009
(2,583,832)
16,329,177
$
20,189,611
1,812,535
22,002,146
$
18,603,594
(708,538)
17,895,056
(373,221)
(561,587)
(533,311)
$
15,955,956
$
21,440,559
$
17,361,745
14,882,586
13,065,907
11,071,318
14,966,895
13,157,505
11,136,910
See accompanying notes to consolidated financial statements.
F-7
Total
Equity
162,224,281
35,042,226
9
-
1,657,209
(18,853,647)
-
(708,538)
18,603,594
197,965,134
93,393,049
9
(2)
1,812,532
(22,957,311)
-
1,812,535
20,189,611
292,215,557
73,302,109
8
-
(1)
1,986,835
(27,798,310)
-
(2,583,833)
18,913,009
356,035,374
$
$
$
AGREE REALTY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Accumulated
Other
Balance, December 31, 2011
Issuance of common stock, net of issuance costs
Issuance of restricted stock under the Equity Incentive Plan
Forfeiture of restricted stock
Vesting of restricted stock
Dividends and distribu ions declared for he period
Other comprehensive income (loss) -
change in fair value of interest rate swap
Net income
Balance, December 31, 2012
Issuance of common stock, net of issuance costs
Issuance of restricted stock under the Equity Incentive Plan
Forfeiture of restricted stock
Vesting of restricted stock
Dividends and distribu ions declared for he period
Other comprehensive income (loss) -
change in fair value of interest rate swap
Net income
Balance, December 31, 2013
Issuance of common stock, net of issuance costs
Issuance of restricted stock under the Equity Incentive Plan
Issuance of restricted stock under the Omnibus Incentive P
Forfeiture of restricted stock
Vesting of restricted stock
Dividends and distribu ions declared for he period
Other comprehensive income (loss) -
change in fair value of interest rate swap
Net income
Balance, December 31, 2014
Common Stock
Shares
9,851,914
1,495,000
94,850
(5,720)
Amount
985
150
9
Additional
Paid-In Capital
181,069,633
35,042,076
1,657,209
Deficit
(20,918,494)
Comprehensive Non-Controlling
Income (Loss)
(606,568)
2,678,725
Interest
11,436,044
3,375,000
87,950
(15,680)
$
1,144
337
9
(2)
$
217,768,918
93,392,712
1,812,532
14,883,314
2,587,500
81,864
2,128
(14,860)
$
1,488
259
8
-
(1)
$
312,974,162
73,301,850
1,986,835
17,539,946
$
1,754
$
388,262,847
(18,297,459)
(556,188)
18,049,444
(21,166,509)
$
$
(1,294,267)
(687,699)
(20,839)
554,150
2,655,848
$
(22,387,217)
(570,094)
1,765,984
19,674,575
(23,879,151)
$
$
471,717
46,551
515,036
2,647,341
$
(27,193,453)
(604,857)
(2,531,715)
18,487,992
(32,584,612)
$
$
(2,059,998)
(52,118)
425,017
2,415,383
$
See accompanying notes to consolidated financial statements.
F-8
AGREE REALTY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation
Amortization
Stock-based compensation
Impairment charge
Loss (gain) on sale of assets
Increase in accounts receivable
Decrease (increase) in other assets
(Decrease) increase in accounts payable
Decrease in deferred revenue
Increase (decrease) in accrued interest
Decrease in tenant deposits
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities
Acquisition of real estate investments
Development of real estate investments and other
(including capitalized interest of $263,472 in 2014,
$566,793 in 2013, and $149,054 in 2012)
Payment of leasing costs
Net proceeds from sale of assets
Net Cash Used In Investing Activities
Cash Flows from Financing Activities
Proceeds from common stock offering, net
Unsecured revolving credit facility borrowings
Unsecured revolving credit facility repayments
Mortgage notes payable proceeds
Payments of mortgage notes payable
Term loan payable proceeds
Dividends paid
Limited partners' distributions paid
Repayments of payables for capital expenditures
Payments for financing costs
Net Cash Provided by Financing Activities
2014
2013
2012
$
18,913,009
$
20,189,611
$
18,603,594
8,486,178
3,567,409
1,986,835
3,020,000
404,996
(1,244,967)
346,131
(167,263)
(463,380)
250,597
(4,491)
35,095,054
6,996,741
2,483,217
1,812,532
450,000
(946,347)
(1,102,713)
(780,069)
838,515
(463,380)
135,446
(23,814)
29,589,739
5,792,281
1,712,530
1,657,209
-
(2,097,105)
(1,358,374)
(864,294)
(1,358,147)
(463,380)
(398,779)
(19,814)
21,205,721
(143,272,607)
(75,920,083)
(64,166,390)
(16,526,566)
(354,336)
12,455,673
(147,697,836)
73,302,116
148,622,976
(143,122,976)
-
(12,766,704)
65,000,000
(25,402,637)
(590,951)
(144,074)
(1,432,391)
103,465,359
(14,619,386)
(183,310)
5,462,280
(85,260,499)
93,393,056
106,189,924
(140,219,929)
-
(3,478,383)
35,000,000
(20,859,476)
(566,619)
(122,080)
(398,879)
68,937,614
(20,349,688)
(55,960)
15,315,728
(69,256,310)
35,042,235
101,220,945
(114,134,838)
48,640,000
(3,164,654)
-
(17,663,808)
(556,188)
(424,321)
(1,641,418)
47,317,953
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, beginning of period
Cash and Cash Equivalents, end of period
(9,137,424)
14,536,881
5,399,458
$
13,266,854
1,270,027
14,536,881
$
(732,636)
2,002,663
1,270,027
$
Supplemental Disclosure of Cash Flow Information
Cash paid for interest (net of amounts capitalized)
Cash paid (refunded) for income tax
$
$
7,824,594
(355)
$
$
6,149,649
(21,543)
$
$
4,722,042
318,289
Supplemental Disclosure of Non-Cash Investing and
Financing Activities
Shares issued under equity incentive plans
Dividends and limited partners' distributions declared and
unpaid
Real estate acquisitions financed with debt assumption
$
2,390,245
$
2,401,688
$
2,175,831
$
$
8,048,404
5,631,183
6,243,933
$
$
-
$
$
4,710,446
18,220,528
See accompanying notes to consolidated financial statements.
F-9
Agree Realty Corporation
Notes to Consolidated Financial Statements
Note 1 – Organization
Agree Realty Corporation, 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. We were founded in 1971 by our current Executive Chairman, Richard Agree, and
listed on the New York Stock Exchange (“NYSE”) in 1994.
Our assets are held by, and all of our operations are conducted through, directly or indirectly, Agree Limited
Partnership (the “Operating Partnership”), of which we are the sole general partner and in which we held a
98.06% interest as of December 31, 2014. Under the partnership agreement of the Operating Partnership, we,
as the sole general partner, have exclusive responsibility and discretion in the management and control of the
Operating Partnership
The terms “Agree Realty,” the "Company," "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
Principles of Consolidation
The consolidated financial statements of Agree Realty Corporation include the accounts of the Company, the
Operating Partnership and its wholly-owned subsidiaries. The Company controlled, as the sole general partner,
98.06% and 97.72% of the Operating Partnership as of December 31, 2014 and 2013, respectively. All material
intercompany accounts and transactions are eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America (“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.
Reclassifications
The results of operations for properties that had been disposed of or classified as held for sale prior to March 31,
2014 are reported as discontinued operations. As a result of these discontinued operations, certain
reclassifications of prior period amounts have been made in the financial statements in order to conform to the
2014 presentation.
Segment Reporting
We are in the business of acquiring, developing and managing retail real estate which we consider one reporting
segment. The Company has no other reportable segments.
Real Estate Investments
We record the acquisition of real estate at cost, including acquisition and closing costs. For properties
developed by us, 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. Properties classified as “held for sale” are recorded at the lower of their carrying value or their fair
value, less anticipated selling costs.
Accounting for Acquisitions of Real Estate
The acquisition of property for investment purposes is typically accounted for as an asset acquisition. We
allocate the purchase price to land, building 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, we may use
a number of sources, including data provided by independent third parties, as well as information obtained by us
as a result our due diligence, including expected future cash flows of the property and various characteristics of
the markets where the property is located.
F-10
Agree Realty Corporation
Notes to Consolidated Financial Statements
In allocating the fair value of the identified intangible assets and liabilities of an acquired property, 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 of the real estate and the
Company’s estimate of current market lease rates for the property, measured over a period equal to the
remaining non-cancelable term of the lease.
The fair value of identified intangible assets and liabilities acquired is amortized to depreciation and amortization
over the remaining term of the related leases.
Depreciation
Our real estate portfolio is depreciated using the straight-line method over the estimated remaining useful life
of the properties, which generally ranges from 30 to 40 years for buildings and 10 to 20 years for
improvements. Properties classified as “held for sale” are not depreciated.
Impairments
We review our real estate investments periodically for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Events or circumstances that may occur include, but
are not limited to, significant changes in real estate market conditions or our ability to re-lease or sell properties
that are vacant or become vacant. Management determines whether an impairment in value has occurred by
comparing the estimated future cash flows (undiscounted and without interest charges), including the residual
value of the real estate, with the carrying cost of the individual asset. An asset is considered impaired if its
carrying value exceeds its estimated undiscounted cash flows and an impairment charge is recorded in the
amount by which the carrying value of the asset exceeds its estimated fair value.
Cash and Cash Equivalents
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 cash and money market accounts. 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.
Accounts Receivable – Tenants
The Company reviews its rent receivables for collectability 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. In the
event that the collectability of a receivable with respect to any tenant is in doubt, a provision for uncollectible
amounts will be established or a direct write-off of the specific rent receivable will be made. For accrued rental
revenues related to the straight-line method of reporting rental revenue, the Company performs a periodic review
of receivable balances to assess the risk of uncollectible amounts and establish appropriate provisions.
Unamortized Deferred Expenses
Deferred expenses include debt financing costs, leasing costs and lease intangibles and are amortized as
follows: (i) debt financing costs on a straight-line basis to interest expense over the term of the related loan;
(ii) leasing costs on a straight-line basis to depreciation and amortization over the term of the related lease
entered into; and (iii) lease intangibles on a straight-line basis to depreciation and amortization over the
remaining term of the related lease acquired.
The following schedule summarizes the Company’s amortization of deferred expenses for the years ended
December 31, 2014, 2013 and 2012, respectively:
F-11
Agree Realty Corporation
Notes to Consolidated Financial Statements
Year Ended December 31,
2014
2013
2012
Financing Costs
Leasing Costs
Lease Intangibles
Total
$
950,878
125,946
2,490,585
3,567,409
$
$
736,425
113,101
1,633,691
2,483,217
$
$
581,353
106,100
1,025,077
1,712,530
$
The following schedule represents estimated future amortization of deferred expenses as of December 31, 2014:
Year Ending December 31,
2015
2016
2017
2018
2019
Thereafter
Financing Costs
Leasing Costs
Lease Intangibles
Total
$
656,218
114,002
3,750,268
4,520,488
$
$
602,994
103,936
3,750,268
4,457,198
$
$
565,500
97,291
3,750,268
4,413,059
$
$
387,802
91,644
3,750,268
4,229,714
$
$
235,320
85,202
3,359,280
3,679,802
$
$
560,446
291,260
29,119,250
29,970,956
$
Revenue Recognition
We lease real estate to our tenants under long-term net leases which we account 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 by us after the tenant exceeds a sales breakpoint. Contractually obligated
reimbursements from tenants for recoverable real estate taxes and operating expenses are generally included in
operating costs reimbursement in the period when such expenses are recorded.
Earnings per Share
Earnings per share have been computed by dividing the net income by the weighted average number of common
shares outstanding. Diluted earnings per share is computed by dividing net income by the weighted average
common and potential dilutive common shares outstanding in accordance with the treasury stock method.
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:
2014
Year Ended December 31,
2013
2012
Weighted average number of common shares outstanding
Less: Unvested restricted stock
15,121,212
(238,626)
13,314,989
(249,082)
11,321,498
(250,180)
Weighted average number of common shares
outstanding used in basic earnings per share
14,882,586
13,065,907
11,071,318
Weighted average number of common shares outstanding
used in basic earnings per share
Effect of dilutive securities: restricted stock
Weighted average number of common shares
outstanding used in diluted earnings per share
14,882,586
84,309
13,065,907
91,598
11,071,318
65,592
14,966,895
13,157,505
11,136,910
Income Taxes
The Company has made an election to be taxed as a REIT under Sections 856 through 860 of the Internal
Revenue Code of 1986, as amended (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 each of the years in the three-year period ended December 31, 2014, the Company believes it has
qualified as a REIT. Notwithstanding the Company’s qualification for taxation as a REIT, the Company is
subject to certain state taxes on its income and real estate.
F-12
Agree Realty Corporation
Notes to Consolidated Financial Statements
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 entity are subject to
federal and state income taxes (See Note 7). All provisions for federal income taxes in the accompanying
consolidated financial statements are attributable to the Company’s TRS.
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. 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 upon 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 upon quoted prices in active markets for identical assets or liabilities.
Level 2 – Valuation is based upon inputs other than Level 1 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 April 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-08 "Reporting
Discontinued Operations and Disclosures of Disposals of Components of an Entity" which updates Accounting
Standards Codification ("ASC") Topic 205 "Presentation of Financial Statements" and ASC Topic 360
"Property, Plant and Equipment.” The amendments in this update change the criteria for reporting
discontinued operations while enhancing disclosures in this area. Under the new guidance, only disposals
representing a strategic shift in operations should be presented as discontinued operations. For public
entities, ASU 2014-08 is effective prospectively for fiscal years beginning after December 15, 2015; however,
early adoption is permitted, but only for disposals or classifications as held for sale that have not been
reported in financial statements previously issued or available for issuance. We have elected to early adopt
this updated standard effective in the first quarter of 2014. The adoption of this guidance had an effect on the
presentation of our consolidated financial statements. Beginning in 2014, activities related to individual sales
of properties are generally no longer classified as discontinued operations except for the property classified as
held for sale as of December 31, 2013.
In May 2014, the Financial Accounting Standards Board issued ASU No. 2014-09 “Revenue from Contracts
with Customers” as a new Topic, ASC Topic 606. The objective of ASU 2014-19 is to establish a single
comprehensive model for entities to use in accounting for revenue arising from contracts with customers and
will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The
core principle is that a company should recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. In applying the new standard, companies will perform a five-step
analysis of transactions to determine when and how revenue is recognized. ASU 2014-09 applies to all
contracts with customers except those that are within the scope of other topics in the FASB ASC, including
revenue from leases. This ASU is effective for annual reporting periods (including interim periods within those
periods) beginning after December 15, 2016 and shall be applied using either a full retrospective or modified
retrospective approach. Early adoption is not permitted. The Company is currently evaluating the new
guidance and has not determined the impact, if any, this standard may have on the consolidated financial
statements.
Note 3 – Real Estate Investments
F-13
Agree Realty Corporation
Notes to Consolidated Financial Statements
Real Estate Portfolio
At December 31, 2014 and 2013, the Company’s gross investment in real estate assets, including properties
under development and properties held for sale, totaled $589,147,000 and $471,366,000, respectively. Real
estate investments consisted of the following as of December 31, 2014 and December 31, 2013:
Number of Properties
Gross Leasable Area
2014
2013
209
4,315,000
130
3,662,000
Land
Buildings
Property under Development
Property Held for Sale
Gross Real Estate Investments
$
195,091,303
$
393,826,467
$
229,242
$
-
$
589,147,012
$
$
$
$
$
162,096,646
297,464,585
6,959,174
4,845,504
471,365,909
Less Accumulated Depreciation
Net Real Estate Investments
$
$
(59,089,851)
530,057,161
$
$
(60,633,824)
410,732,085
Lease Intangibles
The following table details lease intangibles, net of accumulated amortization, as of December 31, 2014 and
December 31, 2013:
Intangible Lease Asset - In-Place Leases
Less: Accumulated Amortization
Intangible Lease Asset - Above-Market Leases
Less: Accumulated Amortization
Intangible Lease Liability - Below-Market Leases
Less: Accumulated Amortization
Lease Intangible Asset, net
$
December 31,
2014
36,680,631
(3,897,008)
31,642,267
(4,111,435)
(15,124,210)
2,289,358
47,479,602
$
$
December 31,
2013
17,597,357
(1,836,593)
22,921,813
(2,392,293)
(9,585,166)
1,000,380
27,705,499
$
Tenant Leases
The properties that the Company owns are typically leased to tenants under long term operating leases. The
leases are generally net leases which typically require the tenant to be responsible for minimum monthly rent
and property operating expenses including property taxes, insurance and maintenance. Certain of our
properties are subject to leases under which we retain responsibility for specific costs and expenses of the
property. The leases typically provide the tenant with one or more multi-year renewal options subject to
generally the same terms and conditions, including rent increases, consistent with the initial lease term.
As of December 31, 2014, the future minimum rental income to be received under the terms of all non-
cancellable tenant leases is as follows:
For the Year Ending December 31,
2015
2016
2017
2018
2019
Thereafter
Total
$
54,370,464
53,876,771
53,123,664
51,646,088
48,813,782
414,382,007
676,212,776
$
Since lease renewal periods are exercisable at the option of the tenant, the above table only presents future
minimum lease payments due during the current lease terms. In addition, this table does not include amounts
F-14
Agree Realty Corporation
Notes to Consolidated Financial Statements
for potential variable rent increases that are based on the CPI or future contingent rents which may be received
on the leases based on a percentage of the tenant’s gross sales.
Of these future minimum rents, approximately 25.4% of the total is attributable to Walgreens as of December 31,
2014. The loss of this tenant or the inability of it to pay rent could have an adverse effect on the Company’s
business. No other tenant contributed 5.0% or more of the Company’s total revenues as of December 31, 2014.
Deferred Revenue
In July 2004, the Company’s tenant in a joint venture property located in Boynton Beach, FL repaid $4,000,000
that had been contributed by the Company’s joint venture partner. As a result of this repayment, the Company
became the sole member of the limited liability company holding the property. Total assets of the property were
approximately $4,000,000. The Company has treated the $4,000,000 as deferred revenue and accordingly, will
recognize rental income over the term of the related leases.
The remaining deferred revenue of approximately $1,004,000 will be recognized as minimum rents over
approximately 2.2 years
Land Lease Obligations
The Company is subject to land lease agreements for certain of its properties. Land lease expense was
$471,840, $427,900, and $574,300 for the years ending December 31, 2014, 2013 and 2012, respectively. As
of December 31, 2014, future annual lease commitments under these agreements are as follows:
For the Year Ending December 31,
2015
2016
2017
2018
2019
Thereafter
Total
$
514,653
514,653
514,653
515,569
508,528
8,825,546
11,393,602
$
The Company leased its executive offices from a limited liability company controlled by its Executive Chairman’s
children. Under the terms of the lease, which expired on December 31, 2014, the Company was required to pay
an annual rental of $90,000 and was responsible for the payment of real estate taxes, insurance and
maintenance expenses relating to the building.
2014 and 2013 Acquisitions
During 2014, the Company purchased 77 retail net lease assets for approximately $148,400,000, including
acquisition and closing costs. These properties are located in 23 states and 100% leased to 28 different tenants
operating in 14 unique retail sectors for a weighted average lease term of approximately 14.1 years. The
underwritten weighted average capitalization rate on our 2014 investments was approximately 8.2%. None of
our investments during 2014 caused any new or existing tenant to comprise 10% or more of our total assets or
generate 10% or more of our total annualized base rent at December 31, 2014.
The aggregate 2014 acquisitions were allocated $29,969,000 to land, $95,977,000 to buildings and
improvements, and $22,265,000 to lease intangible costs. The acquisitions were substantially all cash
purchases and there was no contingent consideration associated with these acquisitions.
During 2013, the Company purchased 18 retail net lease assets for approximately $73,269,000, including
acquisition and closing costs. These properties are located in 13 states and 100% leased to 13 different tenants
operating in 10 unique retail sectors for a weighted average lease term of approximately 10.9 years. The
underwritten weighted average capitalization rate on our 2013 investments was approximately 8.0%. None of
our investments during 2013 caused any new or existing tenant to comprise 10% or more of our total assets or
generate 10% or more of our total annualized base rent at December 31, 2013.
F-15
Agree Realty Corporation
Notes to Consolidated Financial Statements
The aggregate 2013 acquisitions were allocated $13,535,000 to land, $53,565,000 to buildings and
improvements, and $6,872,000 to lease intangible costs. The acquisitions were substantially all cash purchases
and there was no contingent consideration associated with these acquisitions.
We calculate the weighted average capitalization rate on our investments by dividing annual expected net
operating income derived from the properties by the total investment in the properties. Annual expected net
operating income is defined as the straight-line rent for the base term of the lease less property level expenses
(if any) that are not recoverable from the tenant.
Unaudited Pro Forma Information
The following unaudited pro forma total revenue and income before discontinued operations, for 2014 and 2013,
assumes all of our 2014 acquisitions had taken place on January 1, 2014 for the 2014 pro forma information,
and on January 1, 2013 for the 2013 pro forma information:
Supplemental pro forma for the year ended December 31, 2014 (1)
Total revenue
Income before discontinued operations
$57,840,000
$19,369,000
Supplemental pro forma for the year ended December 31, 2013 (1)
Total revenue
Income before discontinued operations
$50,549,000
$20,023,000
(1) This unaudited pro forma supplemental information does not purport to be indicative of what our operating results would have been had
the acquisitions occurred on January 1, 2014 or January 1, 2013 and may not be indicative of future operating results. Various
acquisitions were of newly leased or constructed assets and may not have been in service for the full periods shown.
Impairments
As a result of our review of Real Estate Investments we recognized the following real estate impairment
charges for the year ended December 31:
Continuing operations
Discontinued operations
Total
2014
2013
2012
$ 3,020,000 $
- $
-
450,000
$ 3,020,000 $
450,000 $
-
-
-
In 2014, we recognized impairment charges of $220,000 and $2,800,000, respectively, for Petoskey Town
Center and Chippewa Commons, which were included in continuing operations. Petoskey Town Center was
under contract for sale, but not classified as held for sale at September 30, 2014 due to contingencies
associated with the contract, and a $220,000 impairment charge was taken to write down the carrying value of
the property to an amount that reflected the sales price. The property was subsequently sold in the fourth
quarter. In the second quarter, an anchor tenant at Chippewa Commons declined to exercise an extension a
lease extension option which we deemed would contribute to vacancy and diminished cash flows and result in
a fair value that was less than the net book value of the asset. A $2,800,000 impairment charge was taken to
write down the carrying value of the property to an amount that reflected management’s best estimate of fair
market value.
In 2013, we recognized an impairment charge of $450,000 for Ironwood Commons, which was included in
continuing operations at the time of the impairment charge. Ironwood Commons was under contract for sale,
but not classified as held for sale at September 30, 2013 due to contingencies associated with the contract,
and a $450,000 impairment charge was taken to write down the carrying value of the property to an amount
that reflected the sales price. The property was subsequently reclassified as property held for sale and the
impairment charge was included in discontinued operations as of December 31, 2013.
Note 4 – Debt
F-16
Agree Realty Corporation
Notes to Consolidated Financial Statements
As of December 31, 2014, we had total indebtedness of $221,762,200, including (i) $106,762,000 of mortgage
notes payable; (ii) $100,000,000 of unsecured term loans; and (iii) $15,000,000 of borrowings under our Credit
Facility.
Revolving Credit and Term Loan Facility
In July 2014, the Company entered into a $250,000,000 senior unsecured revolving credit and term loan
agreement consisting of (i) a new $150,000,000 revolving credit facility (the “Credit Facility”); (ii) a new
$65,000,000 seven-year unsecured term loan facility (the “2021 Term Loan”); and (iii) our existing $35,000,000
unsecured term loan facility due 2020 (the “2020 Term Loan”). The Credit Facility, 2021 Term Loan and 2020
Term Loan, together, are referred to as our “Revolving Credit and Term Loan Facility.”
The Credit Facility is due July 21, 2018, with an additional one-year extension at the Company’s option, subject
to customary conditions. Borrowings under the Credit Facility are priced at LIBOR plus 135 to 200 basis points,
depending on the Company’s leverage. The Credit Facility replaced the Company’s previous $85,000,000
revolving credit facility, which was extinguished concurrent with the closing of the Credit Facility, and may be
increased to an aggregate of $250,000,000 at the Company’s election, subject to certain terms and conditions.
As of December 31, 2014, $15,000,000 was outstanding under the Credit Facility bearing a weighted average
interest rate of approximately 1.5% and $135,000,000 was available for borrowing.
The 2021 Term Loan matures on July 21, 2021. Borrowings under the 2021 Term Loan are priced at LIBOR
plus 165 to 225 basis points, depending on the Company’s leverage. The Company entered into interest rate
swaps to fix LIBOR at 2.09% until maturity, implying an all-in interest rate of 3.74% at closing. Proceeds from
the 2021 Term Loan were used to repay borrowings under our previous revolving credit facility, which were used
primarily to fund property acquisitions. The 2021 Term Loan may be increased to an aggregate of $75,000,000
at the Company’s election, subject to certain terms and conditions. As of December 31, 2014, $65,000,000 was
outstanding under the 2021 Term Loan.
The 2020 Term Loan matures on September 29, 2020. Borrowings under the 2020 Term Loan are priced at
LIBOR plus 165 to 225 basis points, depending on the Company’s leverage. The Company entered into interest
rate swaps to fix LIBOR at 2.20% until maturity, implying an all-in interest rate of 3.85% at closing. Proceeds
from the 2020 Term Loan were used to repay borrowings under our previous revolving credit facility, which were
used primarily to fund property acquisitions. The 2020 Term Loan may be increased to an aggregate of
$70,000,000 at the Company’s election, subject to certain terms and conditions. As of December 31, 2014,
$35,000,000 was outstanding under the 2020 Term Loan.
The Revolving Credit and Term Loan Facility contains customary covenants, including, among others, financial
covenants regarding debt levels, total liabilities, tangible net worth, fixed charge coverage, unencumbered
borrowing base properties, and permitted investments. The Company was in compliance with the covenant
terms at December 31, 2014.
Mortgage Notes Payable
As of December 31, 2014, we had total mortgage indebtedness of $106,762,000 with a weighted average
maturity of 5.1 years. These mortgages are collateralized by related real estate with an aggregate net book
value of $147,020,000.
Including mortgages that have been swapped to a fixed interest rate, our weighted average interest rate on
mortgage debt was 4.27% as of December 31, 2014 and 4.38% as of December 31, 2013.
Mortgages payable consisted of the following:
F-17
Agree Realty Corporation
Notes to Consolidated Financial Statements
Note payable in monthy interest-only installments of $48,467 at
6.56% annum, with a balloon payment in the amount of
$8,580,000 due June 11, 2016; collateralized by related real
estate and tenants’ leases
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
Note payable in monthly principal installments of $50,120 plus
interest at 170 basis points over LIBOR, swapped to a fixed
rate of 3.62% as of December 31, 2013. A final balloon
payment in the amount of $19,744,758 is due on May 14, 2017
unless extended for a two year period at the option of the
Company, subject to certain conditions, collateralized by
related real estate and tenants’ leases
Note payable in monthly installments of interest only at LIBOR
plus 160 basis points, swapped to a fixed rate of 2.49% with
balloon payment due April 4, 2018; collateralized by related
real estate and tenants' leases
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
Note payable in monthly installments of $23,004 including
interest at 6.24% per annum, with the final balloon payment of
$2,766,628 due February 2020; collateralized by related real
estate and tenant lease
Note payable in monthly installments of interest only at 3.60%
per annum, with balloon payment due January 1, 2023;
collateralized by related real estate and tenants' leases
Note payable in monthly installments of $35,673 including
interest at 5.01% per annum, with the final balloon payment of
$4,034,627 due September 2023; collateralized by related real
estate and tenant lease
Note payable in monthly installments of $91,675 including
interest at 6.27% per annum, with a final monthly payment due
July 2026; collateralized by related real estate and tenants’
leases
Note payable in monthly installments of $60,097 including
interest at 5.08% per annum, with a final balloon payment in
the amount of $9,167,573 due June 2014; collateralized by
related real estate and tenants’ leases
December 31,
2014
December 31,
2013
$
8,580,000
$
8,580,000
2,405,976
3,405,384
21,398,078
22,017,758
25,000,000
25,000,000
7,896,078
9,149,944
3,204,294
3,275,170
23,640,000
23,640,000
5,595,327
-
9,042,485
9,557,942
-
9,271,561
Total
$
106,762,238
$
113,897,759
F-18
Agree Realty Corporation
Notes to Consolidated Financial Statements
The following table presents scheduled principal payments related to our debt as of December 31, 2014:
For the Year Ending December 31,
2015
2016
2017 (1)
2018 (2)
2019
Thereafter
Total
$
3,839,239
12,674,337
22,652,591
42,575,206
2,750,347
137,270,518
221,762,238
$
(1)
Includes $19,744,758 which represents the ending balance of a mortgage note payable due in 2017. The note matures May 14, 2017
and may be extended, at the Company’s election, for a two-year term to May 2019, subject to certain conditions.
(2)
Includes the $15,000,000 outstanding balance under the Credit Facility as of December 31, 2014. The Credit Facility matures on July
21, 2018 and may be extended for one year at the Company’s election, subject to certain conditions.
The mortgage loans encumbering our 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 a material misrepresentation, misstatement or omission 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 by the borrower, either directly or indirectly, and certain environmental liabilities. At
December 31, 2014, the mortgage loan of $21,398,000 is partially recourse to us and is secured by a limited
guaranty of payment and performance for approximately 50% of the loan amount.
We have entered into mortgage loans which 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.
The Company was in compliance with covenant terms for all mortgages payable at December 31, 2014.
Note 5 – Common Stock
In September 2012, we filed, and the SEC deemed effective, a shelf registration statement that expires in
September 2015. The securities covered by this registration statement cannot exceed $250,000,000 in the
aggregate and include common stock, preferred stock, depositary shares and warrants. We may periodically
offer one or more of these securities in amounts, prices and on terms to be announced when and if these
securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities
offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any
offering.
We completed a follow-on offering of 2,587,500 shares of common stock in December of 2014. The offering,
which included the full exercise of the overallotment option by the underwriters, raised net proceeds of
approximately $71,511,000 after deducting the underwriting discount. The proceeds from the offering were used
to pay down amounts outstanding under the Credit Facility and for general corporate purposes.
We completed a follow-on offering of 1,650,000 shares of common stock in November of 2013. The offering
raised net proceeds of approximately $48,758,000 after deducting the underwriting discount. The proceeds from
the offering were used to pay down amounts outstanding under our previous revolving credit facility and for
general corporate purposes.
We completed a follow-on offering of 1,725,000 shares of common stock in January of 2013. The offering,
which included the full exercise of the overallotment option by the underwriters, raised net proceeds of
approximately $44,954,000 after deducting the underwriting discount. The proceeds from the offering were used
to pay down amounts outstanding under our previous Credit Facility and for general corporate purposes.
Note 6 – Dividends and Distribution Payable
F-19
Agree Realty Corporation
Notes to Consolidated Financial Statements
The Company declared dividends of $1.74, $1.64 and $1.60 per share during the years ended December 31,
2014, 2013 and 2012; the dividends have been reflected for federal income tax purposes as follows:
For the Year Ended December 31,
Ordinary Income
Return of Capital
$
2014
1.398
0.342
$
2013
1.372
0.268
$
2012
1.200
0.400
Total
$
1.740
$
1.640
$
1.600
On December 2, 2014, the Company declared a dividend of $0.45 per share for the quarter ended December
31, 2014. The holders OP Units were entitled to an equal distribution per OP Unit held as of December 31,
2014. The dividends and distributions payable are recorded as liabilities in the Company's consolidated
balance sheet at December 31, 2014. The dividend has been reflected as a reduction of stockholders' equity
and the distribution has been reflected as a reduction of the limited partners' non-controlling interest. These
amounts were paid on January 6, 2015.
Note 7 – Income Taxes
The Company is subject to the provisions of Financial Accounting Standards Board Accounting Standard
Codification 740-10 (“FASB ASC 740-10”), and has analyzed its various federal and state filing positions. The
Company believes that its income tax filing positions and deductions are documented and supported.
Additionally the Company believes that its accruals for tax liabilities are adequate. Therefore, no reserves for
uncertain income tax positions have been recorded pursuant to FASB ASC 740-10. The Company’s Federal
income tax returns are open for examination by taxing authorities for all tax years after December 31, 2010. The
Company has elected to record any related interest and penalties, if any, as income tax expense on the
consolidated statements of operations and comprehensive income.
For income tax purposes, the Company has certain TRS entities that have been established and in which certain
real estate activities are conducted.
As of December 31, 2014, the Company has estimated a current income tax liability of $0 and a deferred income
tax liability in the amount of $705,000. As of December 31, 2013, the Company had estimated a current income
tax liability of $0 and a deferred income tax liability in the amount of $705,000. This deferred income tax balance
represents the federal and state tax effect of deferring income tax in 2007 on the sale of an asset under section
1031 of the Internal Revenue Code. This transaction was accrued within the TRS entities described above.
During the years ended December 31, 2014, and 2013, we recognized total federal and state tax expense
(benefit) of ($14,000), and $3,000, respectively.
Note 8 – Derivative Instruments and Hedging Activity
The Company is exposed to certain risks arising from both its business operations and economic conditions.
The Company principally manages its exposures to a wide variety of business and operational risks through
management of its core business activities. The Company manages economic risk, including interest rate,
liquidity and credit risk primarily by managing the amount, sources and duration of its debt funding and, to a
limited extent, the use of derivative instruments.
The Company’s objective in using interest rate derivatives is to manage its exposure to interest rate movements
and add stability to interest expense. To accomplish this objective, the Company uses interest rate swaps as
part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve
the receipt of variable rate amounts from a counterparty in exchange for the Company making fixed rate
payments over the life of the agreement without exchange of the underlying notional amount.
In April 2012, we entered into a forward starting interest rate swap agreement to hedge against changes in
future cash flows resulting from changes in interest rates on $22,300,000 in variable-rate borrowings. Under the
terms of the interest rate swap agreement, we receive from the counterparty interest on the notional amount
based on one-month LIBOR and pay to the counterparty a fixed rate of 1.92%. This swap effectively converted
$22,300,000 of variable-rate borrowings to fixed-rate borrowings from July 1, 2013 to May 1, 2019. As of
December 31, 2014, this interest rate swap was valued as a liability of $425,000.
F-20
Agree Realty Corporation
Notes to Consolidated Financial Statements
In December 2012, we entered into interest rate swap agreements to hedge against changes in future cash
flows resulting from changes in interest rates on $25,000,000 in variable-rate borrowings. Under the terms of the
interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one-
month LIBOR and pay to the counterparty a fixed rate of 0.89%. This swap effectively converted $25,000,000 of
variable-rate borrowings to fixed-rate borrowings from December 6, 2012 to April 4, 2018. As of December 31,
2014, this interest rate swap was valued as an asset of $274,000.
In September 2013, we entered into an interest rate swap agreement to hedge against changes in future cash
flows resulting from changes in interest rates on $35,000,000 in variable-rate borrowings. Under the terms of the
interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one-
month LIBOR and pay to the counterparty a fixed rate of 2.20%. This swap effectively converted $35,000,000 of
variable-rate borrowings to fixed-rate borrowings from October 3, 2013 to September 29, 2020. As of December
31, 2014, this interest rate swap was valued as a liability of $911,000.
In July 2014, we entered into interest rate swap agreements to hedge against changes in future cash flows
resulting from changes in interest rates on $65,000,000 in variable-rate borrowings. Under the terms of the
interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one-
month LIBOR and pay to the counterparty a fixed rate of 2.09%. This swap effectively converted $65,000,000 of
variable-rate borrowings to fixed-rate borrowings from July 21, 2014 to July 21, 2021. As of December 31, 2014,
this interest rate swap was valued as a liability of $1,047,000.
Companies are required to recognize all derivative instruments as either assets or liabilities at fair value on the
balance sheet. The Company has designated these derivative instruments as cash flow hedges. As such,
changes in the fair value of the derivative instrument are recorded as a component of other comprehensive
income (loss) for the year ended December 31, 2014 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 year ended
December 31, 2014, the Company has determined these derivative instruments to be effective hedges.
The company had the following outstanding interest rate derivatives that were designated as cash flow hedges
of interest rate risk:
Interest Rate Derivatives
Number of Instruments
Notional
December 31,
2014
December 31,
2013
December 31,
2014
December 31,
2013
Interest Rate Swap
4
3
$
146,398,078
$
82,017,758
The table below presents the estimated fair value of the Company’s derivative financial instruments as well as
their classification in the consolidated balance sheets.
F-21
Agree Realty Corporation
Notes to Consolidated Financial Statements
Asset Derivatives
December 31, 2014
December 31, 2013
Balance Sheet
Location
Fair Value
Balance Sheet
Location
Fair Value
Other Assets
$
274,013
Other Assets
$
679,234
Liability Derivatives
December 31, 2014
December 31, 2013
Balance Sheet
Location
Fair Value
Balance Sheet
Location
Fair Value
Other Liabilities
$
2,383,308
Other Liabilities
$
204,696
Derivatives designated as
cash flow hedges:
Interest Rate Swaps
Derivatives designated as
cash flow hedges:
Interest Rate Swaps
The table below presents the effect of the Company’s derivative financial instruments in the consolidated
statements of operations and other comprehensive loss for the years ended December 31, 2014 and 2013.
Deriva ives in
Cash Flow
Hedging
Relationships
Amount of Income/(Loss) Recognized
in OCI on Derivative (Effec ive Portion)
Location of
Income/(Loss)
Reclassifed from
Accumulated OCI
into Income
(Effective Portion)
Amount of Income/(Loss) Reclassified
from Accumulated OCI into Expense
(Effective Por ion)
2014
2013
2014
2013
Loca ion of Loss
Recognized In
Income of
Deriva ive
(Ineffective
Por ion and
Amount Excluded
from
Effec iveness
Testing)
Amount of Loss
Recognized in
Income on
Deriva ive
(Ineffective
Por ion and
Amount
Excluded from
Effectiveness
Tes ing and
2014
2013
Interest rate swaps
$
(2,583,832)
$
1,812,536
Interest Expense
$
(1,875,420)
$
(773,120)
-$
-$
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 December 31, 2014.
Note 9 – Discontinued Operations
We elected to early adopt ASU 2014-08 "Reporting Discontinued Operations and Disclosures of Disposals of
Components of an Entity" in the first quarter of 2014. The adoption of this guidance had an effect on the
presentation of our consolidated financial statements. Beginning in 2014, activities related to individual asset
sales are generally no longer classified as discontinued operations except for the property classified as held for
sale as of December 31, 2013.
In January 2014, the Company sold a Kmart-anchored shopping center in Ironwood, Michigan, which was
classified as held for sale on December 31, 2013, for approximately $5,000,000. The results of operations for
this property are reported in discontinued operations for the twelve months ended 2014, 2013 and 2012,
including revenues of approximately $42,600, $1,281,000 and $1,165,000 respectively, and expenses of
approximately $28,000, $990,000 and $481,000, respectively.
In January 2013, the Company sold a single tenant property located in Ypsilanti, Michigan, which was classified
as held for sale on December 31, 2012, for approximately $5,600,000. The results of operations for this property
are reported in discontinued operations for the twelve months ended 2013 and 2012, including revenues of
approximately $9,300 and $346,000, respectively, and expenses of approximately $2,300 and $75,900,
respectively.
F-22
Agree Realty Corporation
Notes to Consolidated Financial Statements
During 2012, the Company sold six non-core properties, including a Kmart-anchored shopping center in
Charlevoix, Michigan, a Kmart-anchored shopping center in Plymouth, Wisconsin, a Kmart-anchored shopping
center in Shawano, Wisconsin, a vacant single tenant office property and two vacant single tenant retail
properties. In addition, the Company conveyed four mortgaged properties, which were previously leased to
Borders, Inc., to the lender in March 2012 pursuant to a consensual deed-in-lieu-of-foreclosure process that
satisfied the loans. The results of operations for these properties are reported as discontinued operations for the
twelve months ended 2012 including revenues of approximately $2,421,000 and expenses of approximately
$949,000.
Note 10 – Fair Value Measurements
The table below sets forth the Company’s fair value hierarchy for assets and liabilities measured or disclosed at
fair value as of December 31, 2014.
Asset:
Interest rate swaps
Level 1
$
-
Level 2
$
274,013
Level 3
$
-
Carrying Value
$
274,013
Liability:
Interest rate swaps
Mortgage notes payable
Revolving credit facility
Unsecured term loans
Level 1
$
-
$
-
$
-
$
-
Level 2
$
2,383,308
$
-
15,000,000
$
$
-
Level 3
$
-
107,814,314
$
$
-
$
97,918,642
Carrying Value
$
2,383,308
$
106,762,238
$
15,000,000
$
100,000,000
The table below sets forth the Company’s fair value hierarchy for liabilities measured or disclosed at fair value as
of December 31, 2013.
Asset:
Interest rate swaps
Level 1
$
-
Level 2
$
679,234
Level 3
$
-
Carrying Value
$
679,234
Liability:
Interest rate swaps
Mortgage notes payable
Revolving credit facility
Unsecured term loan
Level 1
$
-
$
-
$
-
$
-
Level 2
204,696
$
$
-
$
9,500,000
$
-
Level 3
$
-
108,385,281
$
$
-
$
32,728,011
Carrying Value
$
204,696
$
113,897,758
$
9,500,000
$
35,000,000
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
swaps were derived using estimates to settle the interest rate swap agreements, which are 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 mortgages was derived using the present value of
future mortgage payments based on estimated current market interest rates of 4.17% and 5.04% at December
31, 2014 and 2013, respectively. 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.
Note 11 – Equity Incentive Plan
In 2005, the Company’s stockholders approved the 2005 Equity Incentive Plan (the “2005 Plan”), which replaced
a stock incentive plan established in 1994. The 2005 Plan authorized the issuance of a maximum of 1,000,000
shares of common stock.
In 2014, the Company’s stockholders approved the 2014 Omnibus Incentive Plan (the “2014 Plan”), which
replaced the 2005 Plan. The 2014 Plan authorizes the issuance of a maximum of 700,000 shares of common
stock.
No options were granted during 2014, 2013 or 2012.
F-23
Agree Realty Corporation
Notes to Consolidated Financial Statements
Restricted common stock has been granted to certain employees under both the 2005 Plan and the 2014 Plan.
As of December 31, 2014, there was $4,319,000 of total unrecognized compensation costs related to the
outstanding restricted stock, which is expected to be recognized over a weighted average period of 3.0 years.
The Company used 0% for both the discount factor and forfeiture rate for determining the fair value of restricted
stock. The Company has deemed historical forfeitures insignificant and does not consider discount rates to be
material.
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. The Company granted 81,082, 87,950, and 94,850 shares of
restricted stock in 2014, 2013, and 2012, respectively to employees and sub-contractors under the 2005 Plan
and 2,128 shares of restricted stock in 2014 under the 2014 Plan. The restricted shares vest over a five-year
period based on continued service to the Company.
Restricted share activity is summarized as follows:
Shares
Outstanding
W eighted
Average Grant
Date
Fair Value
Unvested restricted stock at December 31, 2011
216,920
$
21.74
Restricted stock granted
Restricted stock vested
Restricted stock forfeited
94,850
(55,870)
(5,720)
$
$
$
24.40
21.87
24.32
Unvested restricted stock at December 31, 2012
250,180
$
22.66
Restricted stock granted
Restricted stock vested
Restricted stock forfeited
87,950
(73,368)
(15,680)
$ 27.70
$ 22.50
$ 25.01
Unvested restricted stock at December 31, 2013
249,082
$ 24.33
Restricted stock granted
Restricted stock vested
Restricted stock forfeited
83,210
(79,588)
(14,078)
$ 28.72
$ 22.64
$ 26.03
Unvested restricted stock at December 31, 2014
238,626
$ 26.24
Note 12 – Profit-Sharing Plan
The Company has a discretionary profit-sharing plan whereby it contributes to the plan such amounts as the
Board of Directors of the Company determines. The participants in the plan cannot make any contributions to
the plan. Contributions to the plan are allocated to the employees based on their percentage of compensation
to the total compensation of all employees for the plan year. Participants in the plan become fully vested after
six years of service. No contributions were made to the plan in 2014, 2013, or 2012.
Note 13 – Quarterly Financial Data (Unaudited)
The following summary represents the unaudited results of operations of the Company, expressed in thousands
except per share amounts, for the periods from January 1, 2013 through December 31, 2014. Certain amounts
have been reclassified to conform to the current presentation of discontinued operations:
F-24
Agree Realty Corporation
Notes to Consolidated Financial Statements
2014
Three Months Ended
March 31
June 30
September
30
December 31
Revenue
Net Income
$
12,575
$
12,904
$
13,757
$
14,323
$
5,509
$
2,716
$
4,966
$
5,723
Earnings per Share - diluted
$
0.37
$
0.18
$
0.33
$
0.36
2013
Three Months Ended
March 31
June 30
September
30
December 31
Revenue
Net Income
$
9,928
$
10,601
$
11,272
$
11,716
$
5,392
$
4,530
$
4,646
$
5,622
Earnings per Share - diluted
$
0.41
$
0.34
$
0.35
$
0.40
Note 14 – Commitments and Contingencies
In the ordinary course of business, we are party to various legal actions which we believe are routine in nature
and incidental to the operation of our business. We believe that the outcome of the proceedings will not have
a material adverse effect upon our consolidated financial position or results of operations
Note 15 – Subsequent Events
In January 2015, the Company repaid a mortgage loan with a balance of $2,406,000 as of December 31,
2014. This loan had an effective interest rate of 6.63% and was fully amortizing with a final monthly payment
due February 2017.
In January 2015, the Company granted a total of 77,801 shares of restricted stock to employees and
associates under the 2014 Plan. The fair value of these grants approximate $2,609,000 and the restricted
shares vest over a five year period based on continued service to the Company.
On March 5, 2015, the Company declared a dividend of $0.45 per share for the quarter ending March 31, 2015
for holders of record on March 31, 2015. The holders of OP Units are also entitled to an equal distribution per
OP Unit held as of March 31, 2015. The amounts are to be paid on April 14, 2015.
There were no other reportable subsequent events or transactions.
F-25
Agree Realty Corporation
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2014
COLUMN A
COLUMN B
COLUMN C
COLUMN D
COLUMN E
COLUMN F COLUMN G
Description
Real Estate Held for Investment
Encumbrance
Land
Initial Cost
Building and
Improvements
Costs
Capitalized
Subsequent to
Acquisition
Gross Amount at Which Carried at Close of Period
Building and
Improvements
Land
Total
Accumulated
Depreciation
Date of
Acquisition
Borman Center, MI
Capital Plaza, KY
Grayling Plaza, MI
Marshall Plaza Two, MI
North Lakeland Plaza, FL
Oscoda Plaza, MI
Rapids Associates, MI
West Frankfort Plaza, IL
Omaha Store, NE
Wichita Store, KS
Monroeville, PA
Boynton Beach, FL
Lawrence, KS
Waterford, MI
Chesterfield Township, MI
Grand Blanc, MI
Pontiac, MI
Mt Pleasant Shopping Ctr, MI
Rochester, MI
Ypsilanti, MI
Petoskey, MI
Flint, MI
Flint, MI
New Baltimore, MI
Flint, MI
Indianapolis, IN
Big Rapids, MI
Flint, MI
Canton Twp, MI
Flint, MI
Webster, NY
A bion, NY
Flint, MI
Lansing, MI
Boynton Beach, FL
Midland, MI
Grand Rapids, MI
-
$
-
-
-
-
-
-
-
-
1,669,449
-
-
-
579,359
636,140
607,750
582,728
-
1,582,374
1,429,190
994,116
1,499,465
1,290,219
1,100,713
2,969,578
3,441,685
2,631,221
-
-
-
2,959,784
$
550,000
7,379
200,000
-
1,641,879
183,295
705,000
8,002
150,000
1,039,195
6,332,158
1,534,942
981,331
971,009
1,350,590
1,104,285
1,144,190
907,600
2,438,740
2,050,000
-
2,026,625
1,477,680
1,250,000
1,729,851
180,000
1,201,675
-
1,550,000
1,537,400
1,600,000
1,900,000
1,029,000
785,000
1,569,000
2,350,000
1,450,000
$
562,404
2,240,607
1,778,657
4,662,230
6,364,379
1,872,854
6,854,790
784,077
$
1,087,596
3,510,133
-
159,688
2,052,496
-
2,157,041
202,463
-
-
1,690,644
2,249,724
2,043,122
3,000,000
1,562,869
1,757,830
1,998,919
1,808,955
8,081,968
2,188,050
2,222,097
2,332,473
1,879,700
2,241,293
2,285,781
1,798,091
1,117,617
2,014,107
471,272
2,132,096
1,961,674
2,438,781
3,037,864
2,165,463
348,501
2,363,524
2,313,413
2,646,591
(48,910)
(2,586,265)
3,754,994
(1,510,873)
135,390
(46,164)
43,929
(113,506)
1,024,052
1,949
32,641
1,179
(1,201)
-
(16,502)
660
-
(2,000)
(201,810)
23,020
-
-
-
(6,666)
3,045
-
(79,235)
-
$
550,000
7,379
200,000
-
1,641,879
183,295
705,000
8,002
150,000
1,139,677
3,153,890
1,534,942
419,791
971,009
1,350,590
1,104,285
1,144,190
907,600
2,438,740
2,050,000
-
2,026,625
1,477,680
1,250,000
1,729,851
180,000
1,201,675
-
1,550,000
1,537,400
1,600,000
1,900,000
1,029,000
785,000
1,569,000
2,268,695
1,450,000
F-26
$
1,650,000
5,750,740
1,778,657
4,821,918
8,416,875
1,872,854
9,011,831
986,540
-
1,541,252
2,841,727
5,798,116
2,050,667
1,698,259
1,711,666
2,042,848
1,695,449
9,106,020
2,189,999
2,254,738
2,333,652
1,878,499
2,241,293
2,269,279
1,798,751
1,117,617
2,012,107
269,462
2,155,116
1,961,674
2,438,781
3,037,864
2,158,797
351,546
2,363,524
2,315,483
2,646,591
$
2,200,000
5,758,119
1,978,657
4,821,918
10,058,754
2,056,149
9,716,831
994,542
150,000
2,680,929
5,995,617
7,333,058
2,470,458
2,669,268
3,062,256
3,147,133
2,839,639
10,013,620
4,628,739
4,304,738
2,333,652
3,905,124
3,718,973
3,519,279
3,528,602
1,297,617
3,213,782
269,462
3,705,116
3,499,074
4,038,781
4,937,864
3,187,797
1,136,546
3,932,524
4,584,178
4,096,591
$
1,618,022
2,887,183
1,363,755
2,822,969
5,126,106
1,433,536
4,600,697
700,383
-
775,757
968,975
1,343,608
1,221,625
720,723
706,644
812,241
690,483
4,808,049
848,601
844,665
855,585
657,481
777,445
758,965
571,441
362,158
591,097
125,748
597,098
531,371
657,967
768,962
546,405
92,245
633,826
547,439
617,539
1977
1978
1984
1990
1987
1984
1990
1982
1995
1995
1996
1996
1997
1997
1998
1998
1998
1973
1999
1999
2000
2000
2001
2001
2002
2002
2003
2003
2003
2004
2004
2004
2004
2004
2004
2005
2005
COLUMN H
Life on Which
Depreciation in
Latest Income
Statement is
Computed
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
20 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
Agree Realty Corporation
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2014
COLUMN A
COLUMN B
COLUMN C
COLUMN D
COLUMN E
COLUMN F COLUMN G
Description
Encumbrance
Land
Initial Cost
Building and
Improvements
Costs
Capitalized
Subsequent to
Acquisition
Gross Amount at Which Carried at Close of Period
Building and
Improvements
Land
Total
Accumulated
Depreciation
Date of
Acquisition
Delta Township, MI
Roseville, MI
Mt Pleasant, MI
N Cape May, NJ
Summit Twp, MI
Livonia, MI
Barnesville, GA
East Lansing, MI
Plainfield, IN
Macomb Township, MI
She by Township, MI
Silver Springs Shores, FL
Brighton, MI
Port St John, FL
Lowell, MI
Southfield, MI
Atchison, KS
Johnstown, OH
Lake in the Hills, IL
Concord, NC
Antioch, IL
St Augustine Shores, FL
Atlantic Beach, FL
Mansfield, CT
Spring Grove, IL
Ann Arbor, MI
Tallahassee, FL
Wilmington, NC
Marietta, GA
Baltimore, MD
Dallas, TX
Chandler, AZ
New Lenox, IL
Roseville, CA
Fort Walton Beach, FL
Leawood, KS
Salt Lake City, UT
3,090,351
2,336,328
1,252,087
-
1,431,882
4,240,564
-
-
-
3,955,574
3,383,595
3,637,014
-
-
-
-
-
2,384,927
-
-
1,669,449
-
3,452,182
2,170,284
2,313,000
-
1,628,000
2,186,000
900,000
2,534,000
1,844,000
1,550,203
1,192,464
4,752,000
1,768,000
3,204,294
4,948,724
2,075,000
1,771,000
1,075,000
1,075,000
998,460
1,200,000
932,500
240,000
4,549,758
2,621,500
2,055,174
1,975,000
1,365,000
2,320,860
890,000
1,200,000
943,750
485,000
2,135,000
7,676,305
1,087,884
1,700,000
1,650,000
700,000
1,191,199
-
-
1,500,000
575,000
2,610,430
701,320
332,868
1,422,488
2,800,000
542,200
989,622
-
2,535,971
2,327,052
1,432,390
1,430,092
1,336,357
3,441,694
2,091,514
54,531
-
3,484,212
2,533,876
2,504,112
2,802,036
2,402,641
1,930,182
125,616
3,021,672
2,799,502
3,328,560
-
-
1,973,929
1,904,357
1,902,191
-
3,061,507
1,482,462
1,348,591
696,297
-
778,905
793,898
-
3,695,455
1,958,790
3,003,541
6,810,104
7,004
-
4,787
495
12,686
817,589
5,490
-
114,383
(83,479)
47,775
(5,400)
5,615
880
10,190
2,064
-
-
-
-
-
(4,754)
1,262
508
968
2,634,651
-
-
6,359
(3,447)
1,042,730
360
-
(96,364)
303
16,198
(44,417)
2,075,000
1,771,000
1,075,000
1,075,000
998,460
1,200,000
932,500
240,000
4,664,141
2,537,222
2,058,474
1,975,000
1,365,000
2,320,860
890,000
1,200,000
823,170
485,000
1,690,000
7,676,305
1,087,884
1,700,000
1,650,000
700,000
1,192,167
2,660,582
-
1,500,000
575,000
2,606,983
701,320
332,868
1,422,488
2,695,636
542,200
989,622
-
F-27
2,542,975
2,327,052
1,437,177
1,430,587
1,349,043
4,259,283
2,097,004
54,531
-
3,485,011
2,578,351
2,498,712
2,807,651
2,403,521
1,940,372
127,690
3,142,252
2,799,502
3,773,560
-
-
1,969,175
1,905,619
1,902,699
-
3,035,576
1,482,462
1,348,591
702,656
-
1,821,635
794,258
-
3,703,455
1,959,093
3,019,739
6,765,687
4,617,975
4,098,052
2,512,177
2,505,587
2,347,503
5,459,283
3,029,504
294,531
4,664,141
6,022,233
4,636,825
4,473,712
4,172,651
4,724,381
2,830,372
1,327,690
3,965,422
3,284,502
5,463,560
7,676,305
1,087,884
3,669,175
3,555,619
2,602,699
1,192,167
5,696,158
1,482,462
2,848,591
1,277,656
2,606,983
2,522,955
1,127,126
1,422,488
6,399,091
2,501,293
4,009,361
6,765,687
582,824
530,857
326,346
324,859
277,204
778,062
377,868
9,519
-
595,339
412,803
374,942
409,370
340,484
254,610
16,617
351,996
314,945
418,963
-
-
202,933
198,398
196,213
-
321,871
149,791
129,240
61,402
-
144,737
64,571
-
308,554
151,009
226,480
542,896
2005
2005
2005
2005
2006
2007
2007
2007
2007
2008
2008
2009
2009
2009
2009
2009
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2011
2011
2011
2011
2011
2011
2011
2011
2011
2011
COLUMN H
Life on Which
Depreciation in
Latest Income
Statement is
Computed
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
Agree Realty Corporation
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2014
COLUMN A
COLUMN B
COLUMN C
COLUMN D
COLUMN E
COLUMN F COLUMN G
Description
Encumbrance
Land
Initial Cost
Building and
Improvements
Costs
Capitalized
Subsequent to
Acquisition
Gross Amount at Which Carried at Close of Period
Building and
Improvements
Land
Total
Accumulated
Depreciation
Date of
Acquisition
Burton, MI
Macomb Township, MI
Madison, AL
Wa ker, MI
Portland, OR
Cochran, GA
Baton Rouge, LA
Southfield, MI
Clifton Heights, PA
Newark, DE
Vineland, NJ
Fort Mill, SC
Spartanburg, SC
Springfield, IL
Jacksonville, NC
Morrow, GA
Charlotte, NC
Lyons, GA
Fuquay-Varina, NC
Minneapolis, MN
Lake Zurich, IL
Lebanon, VA
Harlingen, TX
Wichita, TX
Pensacola, FL
Pensacola, FL
Venice, FL
St. Joseph, MO
Statham, GA
North Las Vegas, NV
Memphis, TN
Rancho Cordova, CA
Kissimmee, FL
Pinellas Park, FL
Manchester, CT
Rapid City, SD
Chicago, IL
-
1,793,000
1,552,000
887,000
-
-
1,073,217
1,483,000
3,898,994
2,492,444
2,188,562
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
80,000
1,605,134
675,000
219,200
7,969,403
365,714
-
1,178,215
2,543,941
2,117,547
4,102,710
750,000
250,000
302,520
676,930
525,000
1,822,900
121,627
2,042,225
1,088,015
780,974
300,000
430,000
340,000
650,000
400,000
1,300,196
377,620
191,919
214,552
322,520
3,889,612
1,453,500
2,625,000
397,800
1,017,800
272,222
-
-
1,317,927
1,024,738
-
2,053,726
1,188,322
-
3,038,561
4,777,516
1,501,854
1,187,380
765,714
653,654
1,482,748
1,383,489
3,531,275
2,155,635
1,763,768
345,958
7,909,277
612,582
1,614,378
1,530,971
1,165,415
1,507,583
-
7,639,521
3,851,073
717,435
748,890
3,232,662
971,683
874,542
325,705
2,348,032
649,063
-
-
-
-
161
-
-
-
-
-
-
-
-
-
-
(99,850)
(572,344)
(126,199)
(255,778)
(54,430)
28,174
16,363
12,854
12,854
12,854
12,854
4,891
-
-
-
-
282,130
-
3,965
-
-
-
80,000
1,605,134
675,000
219,200
7,969,564
365,714
-
1,178,215
2,543,941
2,117,547
4,102,710
750,000
250,000
302,520
676,930
525,000
1,822,900
121,627
2,042,225
826,635
780,974
300,000
430,000
340,000
650,000
400,000
1,305,087
377,620
191,919
214,552
322,520
3,889,612
1,453,500
2,625,000
397,800
1,017,800
272,222
F-28
-
-
1,317,927
1,024,738
-
2,053,726
1,188,322
-
3,038,561
4,777,516
1,501,854
1,187,380
765,714
653,654
1,482,748
1,283,639
2,958,931
2,029,436
1,507,990
552,908
7,937,451
628,945
1,627,232
1,543,825
1,178,269
1,520,437
-
7,639,521
3,851,073
717,435
748,890
3,514,792
971,683
878,507
325,705
2,348,032
649,063
80,000
1,605,134
1,992,927
1,243,938
7,969,564
2,419,440
1,188,322
1,178,215
5,582,502
6,895,063
5,604,564
1,937,380
1,015,714
956,174
2,159,678
1,808,639
4,781,831
2,151,063
3,550,215
1,379,543
8,718,425
928,945
2,057,232
1,883,825
1,828,269
1,920,437
1,305,087
8,017,141
4,042,992
931,987
1,071,410
7,404,404
2,425,183
3,503,507
723,505
3,365,832
921,285
-
-
98,844
70,448
-
128,358
76,746
-
186,554
293,318
92,792
71,738
45,464
38,130
86,494
72,829
162,660
105,963
79,074
28,366
405,111
31,447
81,362
77,191
58,913
76,022
-
366,060
184,531
33,630
34,324
148,482
42,511
34,716
13,571
95,389
25,692
2011
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
COLUMN H
Life on Which
Depreciation in
Latest Income
Statement is
Computed
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
Agree Realty Corporation
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2014
COLUMN A
COLUMN B
COLUMN C
COLUMN D
COLUMN E
COLUMN F COLUMN G
Description
Encumbrance
Land
Initial Cost
Building and
Improvements
Costs
Capitalized
Subsequent to
Acquisition
Gross Amount at Which Carried at Close of Period
Building and
Improvements
Land
Total
Accumulated
Depreciation
Date of
Acquisition
Brooklyn, OH
Madisonville, TX
Baton Rouge, LA
Forest, MS
Sun Valley, NV
Rochester, NY
Allentown, PA
Casselberry, FL
Berwyn, IL
Grand Forks, ND
Ann Arbor, MI
Joplin, MO
Red Bay, AL
Birmingham, AL
Birmingham, AL
Birmingham, AL
Birmingham, AL
Montgomery, AL
Littleton, CO
St Petersburg, FL
St Augustine, FL
East Palatka, FL
Pensacola, FL
Jacksonville, FL
Jacksonville, FL
Fort Oglethorpe, GA
New Lenox, IL
Rockford, IL
Indianapolis, IN
Terre Haute, IN
Junction City, KS
Baton Rouge, LA
Lincoln Park, MI
Novi, MI
Bloomfield Hills, MI
Moreahead, MN
Fergus Falls, MN
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,595,327
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,643,700
96,680
271,400
-
308,495
2,500,000
2,525,051
1,804,000
186,791
1,502,609
3,000,000
1,208,225
38,981
230,106
245,234
98,271
235,641
325,389
819,000
1,225,000
200,000
730,000
136,365
297,066
299,312
1,842,240
2,010,000
303,395
575,000
103,147
78,271
226,919
543,303
1,803,857
1,340,000
511,645
405,617
15,079,714
1,087,642
1,086,434
1,298,176
1,373,336
7,398,639
7,896,613
793,101
933,959
2,301,337
4,595,757
1,160,843
2,528,437
231,313
251,339
179,824
127,477
217,850
8,756,266
1,025,247
1,523,230
575,236
398,773
312,818
348,862
2,844,126
6,206,252
2,436,873
1,871,110
2,477,263
2,504,294
347,691
1,408,544
1,488,505
2,003,406
870,732
561,332
-
-
-
-
2,819
-
-
-
5,400
1,801,028
276,163
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,643,700
96,680
271,400
-
308,495
2,500,000
2,525,051
1,804,000
186,791
1,502,609
3,000,000
1,208,225
38,981
230,106
245,234
98,271
235,641
325,389
819,000
1,225,000
200,000
730,000
136,365
297,066
299,312
1,842,240
2,010,000
303,395
575,000
103,147
78,271
226,919
543,303
1,803,857
1,340,000
511,645
405,617
15,079,714
1,087,642
1,086,434
1,298,176
1,376,155
7,398,639
7,896,613
793,101
939,359
4,102,365
4,871,920
1,160,843
2,528,437
231,313
251,339
179,824
127,477
217,850
8,756,266
1,025,247
1,523,230
575,236
398,773
312,818
348,862
2,844,126
6,206,252
2,436,873
1,871,110
2,477,263
2,504,294
347,691
1,408,544
1,488,505
2,003,406
870,732
561,332
18,723,414
1,184,322
1,357,834
1,298,176
1,684,650
9,898,639
10,421,664
2,597,101
1,126,150
5,604,974
7,871,920
2,369,068
2,567,418
461,419
496,573
278,095
363,118
543,239
9,575,266
2,250,247
1,723,230
1,305,236
535,138
609,884
648,174
4,686,366
8,216,252
2,740,268
2,446,110
2,580,410
2,582,565
574,610
1,951,847
3,292,362
3,343,406
1,382,377
966,949
565,489
40,787
38,478
45,977
45,848
238,914
254,995
28,089
25,430
112,148
131,372
33,858
10,535
482
524
375
266
454
54,727
19,223
9,520
3,595
831
-
-
65,178
34,234
15,230
35,083
-
-
724
26,410
-
6,966
3,628
2,339
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
F-29
COLUMN H
Life on Which
Depreciation in
Latest Income
Statement is
Computed
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
Agree Realty Corporation
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2014
COLUMN A
COLUMN B
COLUMN C
COLUMN D
COLUMN E
COLUMN F COLUMN G
Description
Encumbrance
Land
Initial Cost
Building and
Improvements
Costs
Capitalized
Subsequent to
Acquisition
Gross Amount at Which Carried at Close of Period
Building and
Improvements
Land
Total
Accumulated
Depreciation
Date of
Acquisition
Fergus Falls, MN
Park Rapids, MN
Jackson, MS
Belton, MO
Great Falls, MT
Irvington, NJ
East Grand Forks, ND
Fargo, ND
Fargo, ND
Jamestown, ND
Grand Forks, ND
Grand Forks, ND
Grand Forks, ND
Toledo, OH
Toledo, OH
Toledo, OH
Toledo, OH
Port Clinton, OH
Mansfield, OH
Orville, OH
Akron, OH
Akron, OH
Hubbard, OH
Youngstown, OH
Calcutta, OH
Columbus, OH
Tulsa, OK
Ligonier, PA
Clarion, PA
Mercer, PA
Limerick, PA
Harrisbuarg, PA
Andreson, SC
Easley, SC
Spartanburg, SC
Spartanburg, SC
Columbia, SC
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
327,247
413,151
256,789
714,775
945,765
315,000
313,454
513,505
629,484
234,545
540,658
762,471
529,087
500,000
155,250
213,750
168,750
75,000
306,000
344,250
427,750
696,000
204,000
285,000
208,050
-
459,148
330,000
121,200
121,200
369,000
124,757
781,200
332,275
141,307
94,770
303,932
655,973
706,884
172,184
7,173,999
753,222
1,313,025
914,676
1,201,532
707,799
1,158,486
813,776
554,595
676,026
1,372,363
762,500
754,675
785,000
721,100
725,600
716,600
715,700
845,000
726,500
745,700
758,750
1,136,250
640,550
5,021,849
771,500
770,000
-
1,446,773
4,441,535
268,612
446,706
261,640
1,221,964
327,247
413,151
256,789
714,775
945,765
315,000
313,454
513,505
629,484
234,545
540,658
762,471
529,087
500,000
155,250
213,750
168,750
75,000
306,000
344,250
427,750
696,000
204,000
285,000
208,050
-
459,148
330,000
121,200
121,200
369,000
124,757
781,200
332,275
141,307
94,770
303,932
655,973
706,884
172,184
7,173,999
753,222
1,313,025
914,676
1,201,532
707,799
1,158,486
813,776
554,595
676,026
1,372,363
762,500
754,675
785,000
721,100
725,600
716,600
715,700
845,000
726,500
745,700
758,750
1,136,250
640,550
5,021,849
771,500
770,000
-
1,446,773
4,441,535
268,612
446,706
261,640
1,221,964
983,220
1,120,035
428,973
7,888,774
1,698,987
1,628,025
1,228,130
1,715,037
1,337,283
1,393,031
1,354,434
1,317,066
1,205,113
1,872,363
917,750
968,425
953,750
796,100
1,031,600
1,060,850
1,143,450
1,541,000
930,500
1,030,700
966,800
1,136,250
1,099,698
5,351,849
892,700
891,200
369,000
1,571,530
5,222,735
600,887
588,013
356,410
1,525,896
2,733
2,945
359
-
-
24,619
3,811
5,006
2,949
4,827
3,391
2,311
2,817
25,732
7,943
7,861
8,177
7,511
7,558
7,465
7,455
8,802
7,568
7,768
7,904
9,469
13,345
52,311
8,036
8,021
-
-
101,785
560
931
545
2,546
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
F-30
COLUMN H
Life on Which
Depreciation in
Latest Income
Statement is
Computed
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
Agree Realty Corporation
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2014
COLUMN A
COLUMN B
COLUMN C
COLUMN D
COLUMN E
COLUMN F COLUMN G
Description
Encumbrance
Land
Initial Cost
Building and
Improvements
Costs
Capitalized
Subsequent to
Acquisition
Gross Amount at Which Carried at Close of Period
Building and
Improvements
Land
Total
Accumulated
Depreciation
Date of
Acquisition
Alcoa, TN
Knoxville, TN
Red Bank, TN
New Tazewell, TN
Maryville, TN
Morristown, TN
Clinton, TN
Knoxville, TN
Sweetwater, TN
McKinney, TX
Forest Va
Waynesboro, VA
Colonial Heights, VA
Chester, VA
Midlothian, VA
Ashland, VA
Mecanicsville, VA
Glen Allen, VA
Burlington, WA
Wausau, WI
Subtotal
Property Under Development
Various
Sub Total
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
106,762,238
329,074
214,077
229,100
91,006
94,682
46,404
69,625
160,057
79,100
2,671,020
282,600
292,086
547,692
300,583
232,337
426,396
219,496
590,101
610,000
909,092
197,046,698
270,719
286,037
302,146
328,561
1,529,621
801,506
1,177,927
2,265,025
1,009,290
6,785,815
956,027
514,209
1,059,557
794,417
802,602
965,925
906,590
1,129,495
3,647,279
1,405,899
376,435,573
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,435,489
329,074
214,077
229,100
91,006
94,682
46,404
69,625
160,057
79,100
2,671,020
282,600
292,086
547,692
300,583
232,337
426,396
219,496
590,101
610,000
909,092
195,091,303
270,719
286,037
302,146
328,561
1,529,621
801,506
1,177,927
2,265,025
1,009,290
6,785,815
956,027
514,209
1,059,557
794,417
802,602
965,925
906,590
1,129,495
3,647,279
1,405,899
393,826,467
599,793
500,114
531,246
419,567
1,624,303
847,910
1,247,552
2,425,082
1,088,390
9,456,835
1,238,627
806,295
1,607,249
1,095,000
1,034,939
1,392,321
1,126,086
1,719,596
4,257,279
2,314,991
588,917,770
564
596
629
-
-
-
-
-
-
84,823
17,926
1,071
2,207
1,655
1,672
2,012
1,889
2,353
8,869
17,588
59,089,851
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
-
-
-
-
229,242
229,242
-
-
-
-
229,242
229,242
229,242
229,242
-
-
N/A
N/A
$
106,762,238
$
197,046,698
$
376,664,815
$
15,435,489
$
195,091,303
$
394,055,709
$
589,147,012
$
59,089,851
F-31
COLUMN H
Life on Which
Depreciation in
Latest Income
Statement is
Computed
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
40 Years
Agree Realty Corporation
Notes to Schedule III
December 31, 2014
1. Reconciliation of Real Estate Properties
The following table reconciles the Real Estate Properties from January 1, 2012 to December 31, 2014.
2014
2013
2012
Balance at January 1
Construction and acquisition cost
Impairment charge
Disposition of real estate
$
476,168,824
143,365,974
(3,020,000)
(27,367,786)
$
398,811,830
82,692,554
(450,000)
(4,885,560)
$
340,073,911
97,418,031
-
(38,680,112)
Balance at December 31
$
589,147,012
$
476,168,824
$
398,811,830
2. Reconciliation of Accumulated Depreciation
The following table reconciles the Real Estate Properties from January 1, 2012 to December 31, 2014.
2014
2013
2012
Balance at January 1
Current year depreciation expense
Disposition of real estate
$
65,436,739
8,361,698
(14,708,586)
$
58,856,688
6,930,145
(350,094)
$
68,589,778
5,726,319
(15,459,409)
Balance at December 31
$
59,089,851
$
65,436,739
$
58,856,688
3. Tax Basis of Building and Improvements
The aggregate cost of Building and Improvements for federal income tax purposes is approximately
$14,723,000 less than the cost basis used for financial statement purposes.
F-32
AGREE REALTY CORPORATION
Financial Highlights
NYSE: ADC
FUNDS FROM OPERATIONS
(in thousands)
2010
2011
2012
2013
2014
REAL ESTATE ASSETS
(in thousands)
$35,000
$30,000
$25,000
$20,000
$15,000
$600,000
$550,000
$500,000
$450,000
$400,000
$350,000
$300,000
$250,000
$200,000
2010
2011
2012
2013
2014
AGREE REALTY CORPORATION
Financial Highlights
NYSE: ADC
FUNDS FROM OPERATIONS
(in thousands)
2010
2011
2012
2013
2014
REAL ESTATE ASSETS
(in thousands)
$35,000
$30,000
$25,000
$20,000
$15,000
$600,000
$550,000
$500,000
$450,000
$400,000
$350,000
$300,000
$250,000
$200,000
2010
2011
2012
2013
2014
AGREE REALTY CORPORATION
Financial Highlights
NYSE: ADC
Financial - For Year Ended December 31,
2014
2013
2012
Total revenues ($000's)
Operating income ($000's)
Funds from operations1 ($000's)
Funds from operations per share1
Dividends per share
Property Portfolio
Real estate assets, at cost ($000's)
Total assets ($000's)
Total debt and accrued interest ($000's)
Number of properties
Gross leasable area (sq. ft)
$
53,559
$
43,518
$
34,624
$
19,318
$
19,244
$
16,507
$
33,316
$
28,370
$
23,364
$
2.18
$
2.10
$
2.03
$
1.74
$
1.64
$
1.60
2014
2013
2012
$
589,147
$
471,366
$
398,812
$
593,580
$
462,742
$
370,093
$
222,483
$
158,869
$
161,242
209
130
109
4,315,000
3,662,000
3,259,000
TOTAL RETURN PERFORMANCE
250
200
150
100
e
u
l
a
V
x
e
d
n
I
50
12.31.09
12.31.10
12.31.11
12.31.12
12.31.13
12.31.14
Agree Realty Corporation
Russell 2000
SNL REIT Retail Shopping Ctr
Index
12.31.09
12.31.10
12.31.11
12.31.12
12.31.13
12.31.14
Agree Realty Corporation
Russell 2000
SNL REIT Retail Shopping Ctr
100.00
100.00
100.00
122.03
126.86
129.81
121.84
121.56
126.10
143.13
141.43
159.21
164.03
196.34
170.11
186.26
205.95
220.42
Period Ending
CORPORATE INFORMATION
EXECUTIVE OFFICERS
DIRECTORS
Richard Agree
Executive Chairman
Board of Directors
Joey Agree
President
Chief Executive Officer
Director
John Rakolta, Jr.
Chairman & Chief Executive
Officer
Walbridge
William S. Rubenfaer
President
Rubenfaer Associates, PC
Leon Schurgin
Of Counsel
Dawda Mann
Annual Meeting of Stockholders
Monday, May 4, 2015 at 10:00 am
Embassy Suites
850 Tower Drive
Troy, MI 48098
Auditors
Grant Thornton LLP
27777 Franklin Road
Southfield, MI 48034
Brian R. Dickman
Chief Financial Officer
Secretary
Laith Hermiz
Executive Vice President
Gene Silverman
Retired, President & Chief
Executive Officer
Polygram Video
Farris Kalil
Retired, Director of Business
Development of
Commercial Lending
Michigan National Bank
Jerry Rossi
Retired, Group President
The TJX Companies
CEO, R&R Consulting
Counsel
Honigman
39400 Woodward Ave., Ste. 101
Bloomfield Hills, MI 48304
Registrar & Transfer Agent
Computershare
P.O. Box 30170
College Station, TX 77842-3170
www.agreerealty.com
Corporate Headquarters
70 E. Long Lake Road | Bloomfield Hills, MI 48304
P 248.737.4190 | F 248.737.9110