Dear Fellow Agree Shareholders,
Our Company experienced another record year in 2015, completing a multi-year effort to transform our
organization and construct the premier retail net lease portfolio in the industry. While it took patience,
consistency, and discipline to accomplish, we believe the value of that execution is only beginning to take
shape.
When we commenced this effort in 2010, the Company’s little-known portfolio consisted of 73 properties in
16 states. Community shopping centers generated 29% of our rents and 70% of our tenant exposure was
concentrated in just three tenants: Walgreens, Borders and Kmart. We were just emerging from the Great
Recession, retailers were undergoing significant disruption and we had to determine how our strategy fit into
the quickly evolving real estate landscape.
We convened our leadership team, devised a strategy and quickly got to work - implementing a plan to
diversify, expand and improve our portfolio, build an industry-leading team and take advantage of the
opportunities that were in front of us. We launched an acquisition program that, combined with our other two
investment platforms, has invested nearly $700 million since its inception. We enacted a targeted disposition
program to reduce our exposure to legacy community shopping centers and non-core assets. We created
our Partner Capital Solutions platform, which draws on our extensive real estate development experience and
compliments our core development and acquisition capabilities. And lastly and most importantly, we retooled
the foundation of the Company, our Team, with an emphasis on hiring first-class people to contribute to an
elite organization.
So, while I am very pleased with our 2015 results and look forward to outlining our major accomplishments
and highlighting the multi-year transformation that we have now completed, I’d like to thank each of you, our
shareholders, for supporting us along the way. With that, please allow me to review the Company’s victories
from 2015.
Record Real Estate Investment Activity
In 2015, the Company once again established a new record for investment activity, deploying or committing
$235 million into high-quality retail net lease properties. These properties are net leased to 41 industry-
leading retailers, operating in 19 e-commerce resistant retail sectors and are located throughout 25 states.
Over the past year, we acquired 73 assets for a new Company record of $220.1 million – breaking a record
that was set just last year. These properties are leased to 40 different tenants operating in 19 diverse retail
sectors. Our acquisition platform continues to drive our growth. Since its inception in April 2010, the Company
has acquired 212 net leased properties for an aggregate purchase price of nearly $600 million. The properties
acquired in 2015 had a weighted-average remaining lease term of 12.2 years, based on the date of
acquisition, and were purchased at a weighted-average cap rate of 8.0%. Our newly acquired properties are
leased to industry-leading retailers such as Walmart, Advance Auto Parts, Wendy’s, AT&T, KeyBank, Aaron’s,
DSW and Taco Bell.
While our acquisition team has been a consistent force of accretive growth for the Company, our Development
and Partner Capital Solutions programs have experienced excellent momentum, undertaking five projects for
industry-leading retailers for total committed capital of nearly $15 million. These projects provide outsized
returns on our investment and represent unique opportunities to create significant value in the net lease
industry. Furthermore, it enables us to leverage our meaningful real estate and development experience to
provide comprehensive solutions to retailers to execute on their growth strategies.
We are focused on expanding and diversifying our portfolio, while simultaneously actively managing our
existing collection of properties. Continuous evaluation and ongoing capital recycling is inherently necessary
to maintain a superior and well-diversified retail net lease portfolio. In 2015, we sold eight properties, including
three community shopping centers, for aggregate proceeds of $29 million. These dispositions, in combination
with our substantial external growth, have reduced our top three tenant exposure to 25.6%; over a 44%
reduction from 2010.
As of December 31, 2015, our real estate portfolio encompassed 5.2 million square feet and is leased to the
highest concentration of investment grade tenants in the industry. We’ve added strong and growing retailers
such as Chick-fil-A, Verizon, Hobby Lobby, Starbucks, Wawa and H-E-B Grocery by fostering new
relationships as well as expanding existing relationships. We now own properties in 41 states leased to
industry-leading retailers in over 25 e-commerce and recession resistant retail sectors.
At year-end, our portfolio was 99.5% occupied and comprised of 52% investment grade tenants. Both
respective metrics are the highest in our sector. With only two lease maturities in 2016 and a weighted average
lease term of over 11 years, our portfolio is both well-occupied and extremely stable.
While we have more than tripled the size of our portfolio since 2010, we have maintained our stringent
investment parameters, a bottom-up analysis of retail real estate fundamentals and a strong preference
towards leading operators in recession and e-commerce resistant sectors.
Demonstrated Consistent Performance
In 2015, the expansion of our real estate portfolio in conjunction with the sound management of our industry-
leading balance sheet, led to another year of high-quality earnings growth. Driven by our third consecutive
year of a 20% or more increase in revenues, the Company increased Funds from Operations (FFO) by 32.2%,
or 10% per share, and Adjusted Funds from Operations (AFFO) by 29.2%, or 7.5% per share. These metrics
compare very favorably to our peer group.
It is our mission to provide a growing and reliable income stream to our shareholders through a secure and
consistent dividend. Once again in 2015, our performance led to a material dividend increase for our
shareholders. The Board of Directors approved a 6% increase in the dividend year-over-year. The $1.86
annualized dividend represents an FFO payout ratio of approximately 77%, implying a very-well covered
dividend with potential for future growth.
With a sector leading 16% total return, our Company was the top performer in the net lease space and among
the best performers in the REIT universe in 2015. We are focused and committed to repeating a similar
performance in 2016 and the years to come.
Improved Access to Capital
We completed a number of capital markets transactions in 2015, both maintaining our balance sheet flexibility
and expanding our access to capital. In May, we put in place a $100 million at-the-market (“ATM”) program
to allow us to quickly and efficiently raise equity capital. This tool was very effective for the Company, enabling
us to match fund real estate transactions while also reducing costs attributed to raising equity.
On the debt capital markets front, we were very pleased to execute the Company’s first bond offering. Our
inaugural private placement of $100 million of senior unsecured notes in May was well received by the market,
and provided the Company with unsecured, long-term debt at a very attractive interest rate. With a weighted
average term of 11 years and a coupon of 4.21%, this debt instrument prudently sought to match duration of
our underlying leases and take advantage of the favorable interest rate environment.
A Growth-Oriented Balance Sheet
Additionally, in order to further position our growth-oriented balance sheet for our continued execution, we
raised $53 million in a follow-on equity offering in December that benefited from strong retail and institutional
investor demand, including a number of new high-quality investors.
At year-end 2015, our total debt to total enterprise value was a moderate 30.9% and we maintained substantial
liquidity heading into 2016 with a nearly undrawn $150 million revolving credit facility and a large part of our
portfolio unencumbered. Our liquidity position and balance sheet will continue to be conservative and growth-
oriented, permitting the Company to execute on our operating strategy in 2016 and beyond.
In Conclusion
Our goal remains the same: to execute on our differentiated operating strategy and build the premier retail
net lease real estate investment trust. We are able to plan for the future through the perspective gained from
the past, and we are very excited about what that future has to offer. I would like to thank our Board of
Directors, our fantastic Team and, of course, our valued Shareholders, for their continued support of Agree
Realty Corporation.
Sincerely,
Joey Agree
President & Chief Executive Officer
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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, 2015
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
Yes
(2) has been subject
file such
No
the past 90 days.
reports), and
requirements
to such
filing
for
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
$526,621,441 as of June 30, 2015, based on the closing price of $29.17 on the New York Stock Exchange on that date.
At March 7, 2016, there were 20,700,378 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 2016 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:
Properties
Legal Proceedings
Item 4:
Mine Safety Disclosures
PART II
Item 5:
Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Item 6:
Selected Financial Data
Item 7:
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Item 7A:
Quantitative and Qualitative Disclosure about Market Risk
Item 8:
Financial Statements and Supplementary Data
Item 9:
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
Consolidated Financial Statements and Notes
SIGNATURES
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F-1
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PART I
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 “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 at acceptable rates 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.
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, including 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
General
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 our common
stock is listed on the New York Stock Exchange (“NYSE”) in 1994.
As of December 31, 2015, our portfolio consisted of 278 properties located in 41 states and totaling approximately
5.2 million square feet of gross leasable area. See “Item 2 – Properties – Geographic Diversification” for more
information on our market. Our portfolio included 275 net lease properties, which contributed approximately 97.6%
of annualized base rent, and three community shopping centers, which generated the remaining 2.4% of annualized
base rent.
As of December 31, 2015, our portfolio was approximately 99.5% leased and had a weighted average remaining
lease term of approximately 11.4 years. A significant majority of our properties are leased to national tenants and
approximately 51.9% 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.
1
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 98.3% interest as of December 31,
2015. 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, 2015, we had 20 full-time employees, including executive, investment, due diligence,
construction, accounting, 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) the 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 2015, we completed approximately $226.4 million of investments in net leased retail real estate, including
the acquisition of 73 properties for an aggregate purchase price of approximately $220.6 million and the completed
development of one property for an aggregate cost of approximately $5.8 million. These 74 properties are leased
to 41 different tenants operating in 19 sectors and are located in 25 states. These assets are 100% leased for a
weighted average lease term of approximately 12.2 years and the weighted average capitalization rate on our
investments was approximately 8.0%.
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.
Dividends
We increased our quarterly dividend per share from $0.45 per share in March 2015 to $0.465 per share in June
2016.
The quarterly dividend per share of $0.465 per share represents an annualized dividend of $1.86 per share and an
annualized dividend yield of approximately 5.5% based on the last reported sales price of our common stock on the
NYSE of $33.99 on December 31, 2015. We have paid a quarterly cash dividend for 87 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 2015, we issued 1,725,000 shares of common stock at a price of $32.10 per share, including 225,000
shares purchased by the underwriters upon the exercise of their option to purchase additional shares. After
underwriting discounts and other offering costs of $2.4 million, net proceeds of approximately $53.0 million were
used to repay borrowings under our $150 million revolving credit facility (the “Credit Facility”), which were used
primarily to fund property acquisitions.
In May 2015, we completed a private placement of $100.0 million principal amount of senior unsecured notes (the
“Senior Unsecured Notes”). The Senior Unsecured Notes were sold in two series, including $50.0 million of 4.16%
notes due May 30, 2025 and $50.0 million of 4.26% notes due May 30, 2027. The weighted average term of the
Senior Unsecured Notes is 11 years and the weighted average interest rate is 4.21%. Proceeds from the issuance
were used to repay borrowings under our Credit Facility and for general corporate purposes.
In May 2015, we implemented a $100.0 million at-the-market equity program (the “ATM program”) by entering into
multiple equity distribution agreements through which we may, from time to time, sell newly issued shares of our
common stock. We use the proceeds generated from our ATM program for general corporate purposes including
2
funding our investment activity, the repayment or refinancing of outstanding indebtedness, working capital and other
general purposes.
During the year ended December 31, 2015, we issued 1,318,812 shares of common stock under our ATM program
at an average price of $30.31, realizing gross proceeds of $40.0 million. We had approximately $60.0 million
remaining under the ATM program as of December 31, 2015.
In March 2015, the SEC declared effective a shelf registration statement previously filed by the Company. The
securities covered by this registration statement, which expires March 27, 2018, cannot exceed $500.0 million 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.
Dispositions
During 2015, we sold eight properties for aggregate gross proceeds of $29.0 million, which resulted in a gain of
$12.1 million. Dispositions included three land parcels, two single tenant net leased properties and three community
shopping centers (Marshall Plaza in Marshall, Michigan; Ferris Commons in Big Rapids, Michigan; and Lakeland
Plaza in Lakeland, Florida).
Leasing
During 2015, excluding properties that were sold, we executed new leases, extensions or options on nearly 125,000
square feet of gross leasable area throughout our portfolio. The annual rent associated with these new leases,
extensions or options is approximately $1.2 million. Material new leases, extensions or options included a 51,513
square foot JC Penny and a 15,400 square foot Planet Fitness, both at Central Michigan Commons in Mt. Pleasant,
Michigan.
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 sectors we believe to be more e-commerce and recession resistant. 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 Partner 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
212 properties for an aggregate purchase price of approximately $598.2 million. These properties are net
leased to over 75 different tenants representing more than 25 retail sectors and are located in 41 states.
We pursue acquisition opportunities that meet both our real estate and return on investment criteria and
that will further diversify our existing portfolio.
Development: We have been developing retail properties since the formation of our predecessor in 1971
and have developed 59 of the 278 properties in our portfolio as of December 31, 2015, including 56 of our
net lease properties and all three community shopping centers. We have the capability to direct all aspects
of the development process, including site selection, land acquisition, lease negotiation, due diligence,
design and construction.
Partner Capital Solutions
We launched our Partner Capital Solutions (“PCS”) platform, formerly known as Joint Venture Capital
Solutions, in April 2012. Our PCS program allows us to acquire properties by partnering with private
developers on their in-process developments. We offer development and construction expertise, tenant
3
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 PCS projects upon completion.
We believe that development and PCS 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 previously utilized common equity offerings, secured mortgage borrowings, unsecured bank borrowings,
the private placement of senior unsecured notes 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, access to various capital
markets, relative costs of equity and debt securities, market value of our properties and other factors.
At December 31, 2015, our ratio of total debt to total market capitalization, assuming the conversion of limited
partnership interests in the Operating Partnership (“OP Units”) into shares of common stock, was approximately
30.9%, and our ratio of total debt to total gross assets (before accumulated depreciation) was approximately 37.6%.
As of December 31, 2015, our total debt outstanding was $319.6 million, including $101.6 million of secured
mortgage debt that had a weighted average fixed interest rate of 4.2% (including the effects of interest rate swap
agreements) and a weighted average maturity of 4.2 years, $200 million of unsecured borrowings that had a
weighted average fixed interest rate of 4.0% (including the effects of interest rate swap agreements) and a weighted
average maturity of 7.8 years, and $18.0 million of floating rate borrowings under our Credit Facility at a weighted
average interest rate of approximately 1.7%.
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 three 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 our 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 helps 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", “Item 6 – Selected Financial Data" and “Note 2 – Summary of Significant
Accounting Policies”: to our consolidated financial statements 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
4
private individuals, many 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, 2015, we leased 32 properties to Walgreens. Total annualized base rents were approximately
17.2%, 21.9% and 26.8% for the years ended 2015, 2014 and 2013 respectively. As of December 31, 2015, the
weighted average remaining lease term of our Walgreens leases was 13.4 years.
As of December 31, 2015, we leased 3 properties to Walmart or Walmart affiliates, which represented approximately
5.5% of our total annualized base rent. The weighted average remaining lease term of our Walmart leases was 6.0
years.
No other tenant accounted for more than 5.0% of our annualized base rent as of December 31, 2015. 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 the 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 our properties in violation of any applicable laws;
however, no assurance can be given that such substances are not located on any of our properties. We carry no
insurance coverage for the types of environmental risks described above.
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 our 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. Our 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, 2015, 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.
Available Information
We make available free of charge through our website at www.agreerealty.com all reports we electronically file
with, or furnish to, the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and
current reports on Form 8-K, as well as any amendments to those reports, as soon as reasonably practicable
after those documents are filed with, or furnished to, the SEC. These filings are also accessible on the SEC’s
website at www. sec.gov.
Item 1A:
Risk Factors
You should carefully consider each of the risks, assumptions, uncertainties and other factors described below and
elsewhere in this report, as well as any amendments or updates reflected in subsequent filings or furnishings with
the SEC. We believe these risks, assumptions, uncertainties and other factors, individually or in the aggregate,
could cause our actual results to differ materially from expected and historical results and could materially and
adversely affect our business operations, results of operations, financial condition and liquidity.
5
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 changes in economic and financial
conditions include:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
changes in the performance of our tenants, which may result in lower rent and lower recoverable expenses
that the tenant can afford to pay
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;
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;
(cid:120) 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
(cid:120)
(cid:120) one or more lenders under our 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. Because
our properties have generally been built to suit a particular tenant’s specific needs and desires, 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 respective businesses 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 close proximity 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, 2015, we derived approximately 17.2% and 5.5% of our annualized base rent from Walgreens
and Walmart, respectively. In the event of a default under the leases of either one of these companies, we may
experience delays in enforcing our rights as lessor and may incur substantial costs in seeking to protect our
6
investment. Any bankruptcy, insolvency or failure to make rental payments by either Walgreens or Walmart, or any
adverse changes in their financial condition or in the financial condition of 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 us.
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 pre-petition claim subject to statutory limitations, and therefore any
amounts received in bankruptcy are likely to be substantially less valuable 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.
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 44 properties
or 20.0% of our annualized base rent as of December 31, 2015). 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 fixed rate 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.
Loss of revenues from tenants would reduce the Company’s cash flow.
Our tenants encounter significant macroeconomic, governmental and competitive forces. Adverse changes in
consumer spending or consumer preferences for particular goods, services or store based retailing could serverly
impact their ability to pay rent. Shifts from in-store to online shopping could increase due to changing consumer
7
shopping patterns as well as the increase in consumer adoption and use of mobile electronic devices. This
expansion of e-commerce could have an adverse impact on our tenant’s ongoing viability. The default, financial
distress, bankruptcy or liquidation of one or more of our tenants could cause substantial vacancies in our property
portfolio. Vacancies reduce our revenues, increase property expenses and could decrease the value of each vacant
property. Upon the expiration of a lease, the tenant may choose not to renew the lease and/or we may not be able
to release the vacant property at a comparable lease rate or without incurring additional expenditures in connection
with such renewal or re-leasing.
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:
(cid:120) 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 best interests.
(cid:120) 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.
(cid:120) 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.
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 or otherwise become
unavailable 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 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 cause operational interruption,
damage to our relationships with our tenants, private data exposure (including personally identifiable information,
or proprietary and confidential information, of ours and our employees, as well as third parties) and affect the
efficiency of our business operations. Any such incidents could result in legal claims or proceedings, liability or
regulatory penalties under laws protecting the privacy of personal information and reduce the benefits of our
technologies.
8
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:
(cid:120) Changes in general or local economic conditions;
(cid:120) The attractiveness of our properties to potential tenants;
(cid:120) Changes in supply of or demand for similar or competing properties in an area;
(cid:120) Bankruptcies, financial difficulties or lease defaults by our tenants;
(cid:120) Changes in operating costs and expense and our ability to control rents;
(cid:120) Our ability to lease properties at favorable rental rates;
(cid:120) Our ability to sell a property when we desire to do so at a favorable price;
(cid:120) Unanticipated changes in costs associated with known adverse environmental conditions or retained
liabilities for such conditions;
(cid:120) 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
(cid:120) 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 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 generally 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.
9
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:
(cid:120) As owner, we may have to pay for property damage and for investigation and clean-up costs incurred in
connection with the contamination.
(cid:120) The law may impose clean-up responsibility and liability regardless of whether the owner or operator knew
of or caused the contamination.
(cid:120) 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.
(cid:120) 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 with gas station
facilities. The operation of convenience stores with gas station facilities at our properties will create additional
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, 2015, our ratio of total debt to total market capitalization (assuming conversion of OP Units into
shares of common stock) was approximately 30.9%. 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.
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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 organizational 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 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. Any such failure by 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. Our board of directors, in its sole discretion, may exempt, subject to the satisfaction of certain
conditions, any person from the ownership limit. 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 the Company or make an acquisition more difficult,
even when an acquisition is in the best interest of our stockholders.
11
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 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 our common
stock with the opportunity to realize a premium over the then prevailing market price of such shares, including:
(cid:120)
(cid:120)
“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 Richard Agree,
Edward Rosenberg, any spouses or the foregoing, any brothers or sisters of the foregoing, any ancestors of the
foregoing, any other lineal descendants of any of the foregoing, any estates of any of the foregoing, any trusts
established for the benefit of any of the foregoing and any other entity controlled by any of the foregoing, 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.
12
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:
(cid:120) 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;
(cid:120) 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;
(cid:120)
(cid:120) 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;
(cid:120) Employ and compensate affiliates;
(cid:120) Direct our resources toward investments that do not ultimately appreciate over time;
(cid:120) Change creditworthiness standards with respect to third-party tenants; and
(cid:120) Determine that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT.
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:
(cid:120) Changes in interest rates;
(cid:120) Our financial condition and operating performance and the performance of other similar companies;
(cid:120) Actual or anticipated variations in our quarterly results of operations;
(cid:120) The extent of investor interest in our company, real estate generally or commercial real estate specifically;
(cid:120) 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;
(cid:120) Changes in expectations of future financial performance or changes in estimates of securities analysts;
(cid:120) Fluctuations in stock market prices and volumes; and
(cid:120) 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.
13
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 of 1986, as amended (the “Code”), no assurance can be given that we will remain so
qualified. Qualification as a REIT involves the application of highly technical and complex 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:
(cid:120) 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.
(cid:120) We could be subject to the federal alternative minimum tax and possibly increased state and local taxes.
(cid:120) 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
14
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.
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 20% 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 20% 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
15
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.
Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax
liabilities.
The REIT provisions of the 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, 2015, our portfolio consisted of 278 properties located in 41 states and totaling approximately
5.2 million square feet of gross leasable area. Our portfolio included 275 net lease properties, which contributed
approximately 97.6% of annualized base rent, and three community shopping centers, which generated the
remaining 2.4% of annualized base rent.
As of December 31, 2015, our portfolio was approximately 99.5% leased and had a weighted average remaining
lease term of approximately 11.4 years. A significant majority of our properties are leased to national tenants and
approximately 51.9% 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, 2015:
($ in thousands)
Number of
Annualized
% of Ann.
Property Type
Retail Net Lease
Retail Net Lease (ground leases)
Total Retail Net Lease
Community Shopping Centers
Total Portfolio
Properties Base Rent (1) Base Rent
88.8%
8.8%
97.6%
2.4%
100.0%
$63,658
6,287
$69,945
1,747
$71,692
249
26
275
3
278
% Investment
Grade
Rated (2)
49.0%
88.2%
52.5%
28.2%
51.9%
Remaining
Wtd. Avg.
Lease
Term
11.3 yrs
13.6 yrs
11.5 yrs
6.1 yrs
11.4 yrs
(1) Represents annualized straight-line rent as of December 31, 2015.
(2) Reflects tenants, or parent entities thereof, with investment grade credit ratings from S&P, Moody's, Fitch and/or NAIC.
16
Tenant Diversification
The following table presents annualized base rents for all tenants that generated 1.5% or greater of our total
annualized base rent as of December 31, 2015:
($ in thousands)
Tenant / Concept
Walgreens
Wal-Mart
Wawa
CVS
Academy Sports
Rite Aid
Lowe's
Dollar General
24 Hour Fitness
BJ's Wholesale
LA Fitness
Charter Foods North
Dollar Tree
Meridian Restaurants
Kohl's
AutoZone
Dick's Sporting Goods
Total
Annualized
Base Rent (1)
$12,310
3,924
2,465
2,463
1,982
1,886
1,846
1,795
1,759
1,709
1,694
1,537
1,427
1,241
1,180
1,163
1,089
$41,470
% of Ann.
Base Rent
17.2%
5.5%
3.4%
3.4%
2.8%
2.6%
2.6%
2.5%
2.5%
2.4%
2.4%
2.1%
2.0%
1.7%
1.6%
1.6%
1.5%
57.8%
(1) Represents annualized straight-line rent as of December 31, 2015.
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, 2015, Walgreens had total assets of approximately $68.8 billion, annual net sales of $103.4 billion,
annual net income of $4.2 billion and shareholders’ equity of $31.3 billion. As of August 31, 2015, Walgreens
operated 8,173 locations in 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.
On October 27, 2015, Walgreens Boot Alliance, Inc. entered into an Agreement and Plan of Merger with Rite Aid
Corporation ("Rite Aid'') and Victoria Merger Sub, Inc., a wholly-owned subsidiary of the Walgreens Boot Alliance,
Inc., pursuant to which the Walgreens Boot Alliance, Inc. agreed, subject to the terms and conditions thereof, to
acquire Rite Aid, a drugstore chain in the United States with 4,561 stores in 31 states and the District of Columbia
as of August 29, 2015. The transaction is expected to close in the second half of calendar 2016, subject to Rite Aid
stockholder approval, regulatory approvals and other customary closing conditions.
The information set forth above was derived from the annual report on Form 10-K filed by Walgreens with respect
to their 2015 fiscal year. Additional information regarding Walgreens and Walgreens Boots Alliance, Inc. can be
found in their public filings. These filings can be accessed at www.sec.gov. We are unable to confirm, and make
no representations with respect to the accuracy of these reports and therefore you should not place undue reliance
on such information as it pertains to our operations.
17
Tenant Sector Diversification
The following table presents annualized base rents for all sectors that generated 2.5% or greater of our total
annualized base rents as of December 31, 2015:
($ in thousands)
Tenant Sector
Pharmacy
Restaurants - Quick Service
General Merchandise
Apparel
Grocery Stores
Warehouse Clubs
Health & Fitness
Sporting Goods
Specialty Retail
Convenience Stores
Restaurants - Casual Dining
Dollar Stores
Auto Parts
Home Improvement
Other (2)
Total
Annualized
Base Rent (1)
$16,659
5,643
3,956
3,903
3,843
3,749
3,562
3,149
3,147
2,599
2,388
2,280
2,267
1,847
12,700
$71,692
% of Ann.
Base Rent
23.2%
7.9%
5.5%
5.4%
5.4%
5.2%
5.0%
4.4%
4.4%
3.6%
3.3%
3.2%
3.2%
2.6%
17.7%
100.0%
(1) Represents annualized straight-line rent as of December 31, 2015.
(2)
Includes sectors generating less than 2.5% of annualized base rent.
18
Geographic Diversification
The following table presents annualized base rents, by state, for our portfolio as of December 31, 2015:
($ in thousands)
Tenant Sector
Michigan
Florida
Ohio
Texas
Pennsylvania
Illinois
Kentucky
Kansas
Georgia
Wisconsin
Missouri
North Carolina
South Carolina
North Dakota
Oregon
New York
Indiana
Colorado
California
Tennessee
Virginia
Alabama
Iowa
Maine
Utah
Minnesota
New Jersey
Louisiana
West Virginia
Connecticut
Washington
Delaware
South Dakota
Maryland
Nevada
Oklahoma
Montana
Arizona
Mississippi
New Hampshire
Nebraska
Total
Annualized
Base Rent (1)
$14,333
6,046
4,618
4,560
4,095
3,874
2,630
2,540
1,980
1,935
1,800
1,747
1,678
1,648
1,605
1,551
1,443
1,341
1,238
1,125
1,118
1,096
955
792
756
706
590
562
537
400
339
326
326
277
224
204
184
175
151
107
80
$71,692
% of Ann.
Base Rent
20.0%
8.4%
6.4%
6.4%
5.7%
5.4%
3.7%
3.5%
2.8%
2.7%
2.5%
2.4%
2.3%
2.3%
2.2%
2.2%
2.0%
1.9%
1.7%
1.6%
1.6%
1.5%
1.3%
1.1%
1.1%
1.0%
0.8%
0.8%
0.7%
0.6%
0.5%
0.5%
0.5%
0.4%
0.3%
0.3%
0.3%
0.2%
0.2%
0.1%
0.1%
100.0%
(1) Represents annualized straight-line rent as of December 31, 2015.
19
Lease Expirations
The following table presents contractual lease expirations within the Company’s portfolio as of December 31, 2015,
assuming that no tenants exercise renewal options:
Gross Leasable Area
% of
Total
(in
thousands)
Year
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Thereafter
Total
Annualized Base Rent (1)
Leases
2
10
11
11
17
17
13
21
27
26
161
316
Dollars
277
1,700
1,431
3,607
2,608
4,198
2,672
3,270
6,342
5,231
40,356
$71,692
% of
Total
0.4%
2.4%
2.0%
5.0%
3.6%
5.9%
3.7%
4.6%
8.8%
7.3%
56.3%
100.0%
(1) Represents annualized straight-line rent as of December 31, 2015.
Square Feet
30
114
245
332
239
236
262
272
539
396
2,542
5,207
0.6%
2.2%
4.7%
6.4%
4.6%
4.5%
5.0%
5.2%
10.3%
7.6%
48.9%
100.0%
Community Shopping Centers
Our three community shopping centers range in size from 20,000 to 241,458 square feet of GLA.
The location and primary occupancy information with respect to the community shopping centers as of December
31, 2015 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, 2015
100%
Central Michigan Commons Mt. Pleasant, MI
1973 / 1997
241,458
$1,023,150
$4.66
91%
Anchor Tenants
(Lease Expiration /
Option Expiration) (3)
Kmart (2018 / 2053)
Walgreens (2032 / 2052)
Kmart (2018 / 2048)
JC Penney (2020 / 2035)
Staples (2020 / 2030)
West Frankfort Plaza
West Frankfort, IL
1982 / N/A
20,000
$90,386
$6.46
Totals
377,670
$1,747,536
$4.63
(1) Represents annualized straight-line rent as of December 31, 2015.
(2) Calculated as total annualized base rent divided by leased GLA.
(3) The tenant has the option to extend a lease beyond the initial term.
70%
93%
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, 2015
June 30, 2015
September 30, 2015
December 31, 2015
March 31, 2014
June 30, 2014
September 30, 2014
December 31, 2014
High
$35.45
$33.36
$31.12
$34.47
$31.67
$31.22
$30.82
$31.63
Low
$31.46
$29.17
$27.80
$29.80
$28.17
$29.22
$27.38
$27.09
Dividends per
share declared
$0.450
$0.465
$0.465
$0.465
$0.430
$0.430
$0.430
$0.450
On March 7, 2016, the reported closing sale price per share of common stock on the NYSE was $36.63
At March 7, 2016, there were 20,700,378 shares of our common stock issued and outstanding which were held by
approximately 140 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 March 7, 2016 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 2015, we paid $1.845 per share of common stock in dividends. Of the $1.845, 82.3% represented ordinary
income, and 17.7% represented return of capital, for tax purposes. For 2014, we paid $1.74 per share of common
stock in dividends. Of the $1.74, 80.4% represented ordinary income, and 19.6% 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 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 before the first regular dividend payment after such
21
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, 2015, we sold $100.0 million of senior unsecured notes. On May 28, 2015,
we entered into a Note Purchase Agreement with Teachers Insurance and Annuity Association of America and The
Guardian Life Insurance Company of America, as institutional purchasers. Pursuant to the Note Purchase
Agreement, the Operating Partnership completed a private placement of $50.0 million aggregate principal amount
of our 4.16% Series A senior unsecured notes due May 30, 2025 and $50.0 million aggregate principal amount of
our 4.26% senior unsecured notes due May 30, 2027 (together, the “Notes”). The Notes were only sold to
institutional investors and did not involve a public offering in reliance on the exemption from registration in Section
4(a)(2) of the Securities Act.
During the fourth quarter of 2015, we did not repurchase any of our equity securities.
For information about our equity compensation plan, please see “Item 12 – Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters” 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, 2011 through 2015 and operating data for each of the periods
presented were derived from our audited financial statements.
(in thousands, except per share information and other data)
2015
Year Ended December 31,
2013
2012
2014
2011
Operating Data
Total revenues
Expenses
Property costs (1)
General and administrative
Interest
Depreciation and amortization
Impairments
Total Expenses
Income From Operations
(Loss) gain on extinguishment of debt
Gain (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 Properties
Gross Leasable Area (Sq. Ft.)
Percentage Leased
$
69,966
$
53,559
$
43,518
$
34,624
$
30,263
6,379
6,988
12,306
16,486
-
42,159
27,807
(180)
12,135
39,762
-
-
39,762
745
$ 39,018
18,065
$ 2.16
$ 1.85
$ 755,849
$ 792,550
$ 320,547
278
5,207,000
99%
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
$ 593,581
$ 222,484
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%
(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 98.3% interest as of December 31, 2015.
As of December 31, 2015, our portfolio consisted of 278 properties located in 41 states and totaling approximately
5.2 million square feet of gross leasable area. As of December 31, 2015, our portfolio was approximately 99.5%
leased and had a weighted average remaining lease term of approximately 11.4 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 May 2014, the Financial Accounting Standards Board issued ASU No. 2014-09 “Revenue from Contracts with
Customers.” ASU No. 2014-09 was developed to enable financial statement users to better understand the
nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The
update’s core principle is that an entity 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. Companies are to use a five-step contract review model to ensure revenue
gets recognized, measured and disclosed in accordance with this principle. ASU 2014-09 was to be effective for
fiscal years and interim periods beginning after December 15, 2016. In August 2015, the Financial Accounting
Standards Board (the “FASB”) issued ASU No. 2015-14 to defer the effective date of ASU No. 2014-09 for one
year. As a result, ASU No. 2014-09 is now effective for fiscal years and interim periods beginning after December
15, 2017. The amendments in this update will be applied retrospectively either to each prior reporting period
presented or to disclose the cumulative effect recognized at the date of initial application. The Company is still in
the process of determining the impact that the implementation of ASU 2014-09 will have on the financial
statements.
In April 2015, the FASB issued ASU No. 2015-03 “Interest – Imputation of Interest (Subtopic 835-30): Simplifying
the Presentation of Debt Issuance Costs.” The objective of ASU 2015-03 is to identify, evaluate, and improve
areas of generally accepted accounting principles (“GAAP”) for which cost and complexity can be reduced while
maintaining or improving the usefulness of the information provided to users of financial statements. To simplify
presentation of debt issuance costs, the amendments in ASU No. 2015-03 require that debt issuance costs
related to a recognized debt liability be presented in the balance sheet as a direct deduc tion from the carrying
amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt
issuance costs are not affected by the amendments in ASU No. 2015-03. This ASU is effective for annual
reporting periods (including interim periods within those periods) beginning after December 15, 2015. Early
adoption is permitted. The Company has evaluated the new guidance and determined the resulting impact on
the statements will be a reclassification of certain deferred financing costs from other assets to notes payable.
See Note 2 of the consolidated financial statements for more information on recent accounting pronouncements.
Critical Accounting Policies
Our accounting policies are determined in accordance with 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 the Company
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.
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, 2015 to Year Ended December 31, 2014
Minimum rental income increased $14,875,000, or 30%, to $64,278,000 in 2015, compared to $49,403,000 in 2014.
Approximately $16,688,000 of the increase is due to the acquisition of 73 properties in 2015 and the full year impact
of 77 properties acquired in 2014. Approximately $1,062,000 of the increase is attributable to one development
project completed in 2015 and the full year impact of five development projects completed in 2014. These increases
were partially offset by approximately a $3,017,000 reduction in minimum rental income from properties sold during
2015 that were owned for all of 2014, and approximately a $142,000 increase due to other minimum rental income
adjustments.
Percentage rents increased $20,000, or 13%, to $180,000 in 2015 compared to $160,000 in 2014. The primary
drivers of the increase are better tenant performance, resulting in the tenant being required to pay more percentage
rent in 2015, and properties acquired in 2014 and 2015 for which we received percentage rent in 2015.
Operating cost reimbursements increased $1,452,000, or 38%, to $5,277,000 in 2015, compared to $3,825,000 in
2014. Operating cost reimbursements increased due to higher levels of recoverable property operating expenses
24
as a result of our 2015 and 2014 acquisition and development activity. Our portfolio recovery rate increased to 91%
in 2015 compared to 86% in 2014.
Other income increased to $230,000 in 2015 from $171,000 in 2014. The primary driver of the increase is non-
recurring fee income earned in 2015.
Real estate taxes increased $1,239,000, or 45%, to $4,005,000 in 2015, compared to $2,766,000 in 2014. The
increase is due to the ownership of additional properties in 2015 compared to 2014 for which we remit real estate
taxes and are subsequently reimbursed by tenants.
Property operating expenses increased $89,000, or 5%, to $1,768,000 in 2015, compared to $1,679,000 in 2014.
The increase is primarily due to the ownership of additional properties in 2015 compared to 2014 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 $134,000, or 28%, to $606,000 in 2015, compared to $472,000 for 2014. The
increase is the result of additional properties acquired in 2015 compared to 2014 that are subject to a land leases.
General and administrative expenses increased $359,000, to $6,988,000 in 2015, compared to $6,629,000 in 2014.
The increase is primarily due to an increase in the number of employees resulting in an increased employee cost
of $214,000 and a net increase in other expenses of $145,000. General and administrative expenses as a
percentage of total revenue decreased to 10.0% for 2015 from 12.4% in 2014.
Depreciation and amortization increased $5,383,000, or 48%, to $16,486,000 in 2015, compared to $11,103,000 in
2013. The increase was primarily the result of the acquisition of 73 properties in 2015 and 77 properties in 2014.
We had no impairment charges in 2015. 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 December 31, 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.
Interest expense increased $3,718,000, or 43%, to $12,305,000 in 2015, from $8,587,000 in 2014. The increase
in interest expense is a result of higher levels of borrowings to finance the acquisition and development of additional
properties in 2015 and 2014, including the private placement of $100,000,000 of senior unsecured notes entered
into in May of 2015.
We recognized a net gain on sales of assets of $12,135,000 in 2015 which was attributable primarily to a $8,071,000
gain on the sale of North Lakeland Plaza in September 2015 and a $3,313,000 gain on the sale of Marshall Plaza
in April 2015. We also recognized a net gain of $614,000 on the sale of the Ferris Commons in August 2015 and
a net gain of $137,000 on five other transaction in 2015. In 2014, we recognized a net loss on sales of assets of
$528,000, 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.
We had no income from discontinued operations in 2015, compared to $15,000 in 2014. 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.
Our net income increased $20,849,000, or 102%, to $39,762,000 in 2015, from $18,913,000 in 2014 as a result of
the foregoing factors.
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
25
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.
Other income increased to $171,000 in 2014 from $19,000 in 2013. The primary driver of the increase was 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 was 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 was 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 was 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 was primarily due to an increase in the number of employees resulting in an increased employee cost
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 $2,614,000, 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 create a 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 was 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 was 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 was reflected in discontinued operations in 2013.
26
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.
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 stockholders and future property acquisitions and development.
We expect to meet our short term liquidity requirements through cash provided from operations and borrowings
under our Credit Facility. As of December 31, 2015, $18.0 million was outstanding on our Credit Facility and $132.0
million was available for future borrowings, subject to our compliance with covenants. We anticipate funding our
long term capital needs through cash provided from operations, borrowings under our Credit Facility, the issuance
of debt and 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, 2015, our total market capitalization was approximately $1.0 billion. Market capitalization
consisted of $713.3 million of common equity (based on the December 31, 2015 closing price of our common stock
on the NYSE of $33.99 per share and assuming the conversion of OP Units) and $319.6 million of total debt
including (i) $101.6 million of mortgage notes payable; (ii) $100.0 million of unsecured term loans; (Iii) $100.0 million
of senior unsecured notes; and (iv) $18.0 million of borrowings under our Credit Facility. Our ratio of total debt to
total market capitalization was 30.9% at December 31, 2015.
At December 31, 2015, the non-controlling interest in our Operating Partnership consisted of a 1.7% ownership
interest in the Operating Partnership held by third parties. 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 20,984,920 shares of common
stock outstanding at December 31, 2015.
Debt
Revolving Credit and Term Loan Facility
The Company has in place a $250.0 million senior unsecured revolving credit and term loan facility (the “Revolving
Credit and Term Loan Facility”) consisting of (i) a $150.0 million revolving credit facility; (ii) a $65.0 million unsecured
term loan facility due 2021 (the “2021 Term Loan”); and (iii) a $35.0 million unsecured term loan facility due 2020
(the “2020 Term Loan”).
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, 2015, $18.0 million was outstanding under the Credit
Facility bearing a weighted average interest rate of approximately 1.7% and $132.0 million 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, and the Company entered into interest rate swap
agreements to fix LIBOR at 2.09% until maturity. As of December 31, 2015, $65.0 million was outstanding under
the 2021 Term Loan bearing an effective interest rate of 3.74%.
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, and the Company entered into interest rate
27
swap agreements to fix LIBOR at 2.20% until maturity. As of December 31, 2015, $35.0 million was outstanding
under the 2020 Term Loan bearing an effective interest rate of 3.85%.
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, 2015.
Senior Unsecured Notes
On May 28, 2015, the Company completed a private placement of $100.0 million principal amount of senior
unsecured notes (the “Senior Unsecured Notes”). The Senior Unsecured Notes were sold in two series, including
$50.0 million of 4.16% notes due May 30, 2025 and $50.0 million of 4.26% notes due May 30, 2027. The weighted
average term of the Senior Unsecured Notes is 11 years and the weighted average interest rate is 4.21%. Proceeds
from the issuance were used to repay borrowings under the Company's Credit Facility and for general corporate
purposes.
Mortgage Notes Payable
As of December 31, 2015, we had total mortgage indebtedness of $101.6 million, with a weighted average term to
maturity of 4.2 years. Including our mortgages that have been swapped to a fixed interest rate, our weighted
average interest rate on mortgage debt was 4.17%.
($ 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
Total
Interest
Rate (1)
6.56%
6.63%
3.62%
2.49%
6.90%
6.24%
3.60%
5.01%
6.27%
Maturity
June 2016
May 2017 (2)
April 2018
January 2020
January 2020
January 2023
September 2023
July 2026
$
Principal Amount Outstanding
December 31, 2015 December 31, 2014
8,580
$
2,406
21,398
25,000
7,896
3,204
23,640
5,595
9,043
106,762
8,580
-
20,741
25,000
6,553
3,129
23,640
5,447
8,494
101,584
$
$
(1) Fixed rates, including the effect of interest rate swap agreements.
(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, 2015, the mortgage loan of $20.7 million was partially recourse to us and secured by a limited guaranty of
payment and performance for approximately 50% of the loan amount.
We have entered into mortgage loans which are secured by multiple properties and contain cross-default and cross-
collateralization provisions. Cross-collateralization provisions allow a lender to foreclose on multiple properties in
the event that we default under the loan. Cross-default provisions allow a lender to foreclose on the related property
in the event a default is declared under another loan.
28
Contractual Obligations
The following table summarizes our contractual obligations by due date as of December 31, 2015:
($ in thousands)
Mortgage Notes Payable
Revolving Credit Facility
Unsecured Term Loans
Senior Unsecured Notes
Land Lease Obligations
$
Total
101,584
18,000
100,000
100,000
11,613
Less than 1
year
1-3 years
3-5 years
More than 5
years
$
$
11,534
-
-
-
640
$
50,031
18,000
-
-
1,281
$
6,618
-
35,000
-
1,266
33,401
-
65,000
100,000
8,426
Estimated Interest Payments on Mortgage
Notes Payable and Unsecured Term Loans
Total
85,185
416,382
$
$
12,211
24,385
$
21,878
91,190
$
18,889
61,773
$
32,207
239,034
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, 2015, we declared a quarterly dividend of $0.465 per share. The cash
dividend was paid on January 5, 2016 to holders of record on December 22, 2015.
During the quarter ending March 31, 2016, we declared a quarterly dividend of $0.465 per share. The cash dividend
will be paid on April 15, 2016 to holders of record on March 31, 2016.
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
29
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, 2015, 2014
and 2013:
Reconciliation of Funds from Operations to Net Income
Net income
Depreciation of real estate assets
Amortization of leasing costs
Amortization of lease intangibles
Impairment charge
(Gain) loss on sale of assets
Funds from Operations
December 31, 2015
$
39,762,455
11,465,896
97,140
4,859,103
-
(12,135,036)
44,049,558
$
Year Ended
December 31, 2014
$
18,913,009
December 31, 2013
$
20,189,611
8,361,698
125,946
2,490,585
3,020,000
404,996
33,316,234
$
6,930,145
113,101
1,633,691
450,000
(946,347)
28,370,201
$
Funds from Operations Per Share - Diluted
$
2.39
$
2.18
$
2.10
Weighted average shares and OP units outstanding
Basic
Diluted
18,350,741
18,413,034
15,230,205
15,314,514
13,413,526
13,505,124
The following table provides a reconciliation of AFFO and net income for the years ended December 31, 2015, 2014
and 2013:
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
Debt Extinguishment Costs
Adjusted Funds from Operations
Additional supplemental disclosure
Scheduled principal repayments
Capitalized interest
Capitalized building improvements
Year Ended
Year Ended
December 31, 2015
$
39,762,455
December 31, 2014
$
18,913,009
December 31, 2013
$
20,189,611
4,287,103
44,049,558
(2,449,614)
(463,380)
1,992,241
494,449
62,112
179,867
43,865,233
$
14,403,225
33,316,234
(1,415,739)
(463,380)
1,986,835
398,248
122,861
-
$
8,180,590
28,370,201
(1,148,462)
(463,380)
1,812,532
326,238
66,596
-
$
33,945,059
$
28,963,725
$
$
$
$
$
2,771,894
39,325
309,701
$
$
$
3,599,130
263,472
145,274
$
$
$
3,478,384
566,753
87,018
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.
30
Mortgage Notes Payable
Average Interest Rate
$
11,534 $
6.32%
22,455 $
3.90%
27,576 $
2.84%
2,751 $
6.26%
3,867 $
5.97%
33,401 $ 101,584
3.52%
2016
2017
2018
2019
2020
Thereafter
Total
Unsecured Revolving Credit Facility $
Average Interest Rate
- $
- $
18,000 $
1.70%
- $
- $
- $
18,000
Unsecured Term Loans
Average Interest Rate
Senior Unsecured Notes
Average Interest Rate
$
$
- $
- $
- $
- $
35,000 $
3.85%
65,000 $ 100,000
3.74% -
- $
- $
- $
- $
- $ 100,000 $ 100,000
4.21%
The fair value is estimated at $105.0 million and $197.4 million for mortgage notes payable and unsecured term
loans and notes, respectively, as of December 31, 2015.
The table above incorporates those exposures that exist as of December 31, 2015; 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 $22.3 million 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 $22.3 million of
variable-rate borrowings to fixed-rate borrowings from July 1, 2013 to May 1, 2019. As of December 31, 2015, this
interest rate swap was valued as a liability of $448,000.
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 $25.0 million 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 $25.0 million of variable-rate
borrowings to fixed-rate borrowings from December 6, 2012 to April 4, 2018. As of December 31, 2015, this interest
rate swap was valued as an asset of $99,000.
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 $35.0 million 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 $35.0 million of variable-rate
borrowings to fixed-rate borrowings from October 3, 2013 to September 29, 2020. As of December 31, 2015, this
interest rate swap was valued as a liability of $1,135,000.
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 $65.0 million 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 $65.0 million of variable-rate
borrowings to fixed-rate borrowings from July 21, 2014 to July 21, 2021. As of December 31, 2015, this interest
rate swap was valued as a liability of $1,719,000.
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, 2015.
31
As of December 31, 2015, a 100 basis point increase in interest rates on the portion of our debt bearing interest at
variable rates would have resulted in an increase in interest expense of approximately $180,000.
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 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
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 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, 2015.
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.
32
Item 9B:
Other Information
None.
PART III
Item 10:
Directors, Executive Officers and Corporate Governance
Incorporated herein by reference to our definitive proxy statement with respect to our 2016 Annual Meeting of
Stockholders.
Item 11:
Executive Compensation
Incorporated herein by reference to our definitive proxy statement with respect to our 2016 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, 2015.
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
(a)
Weighted Average Exercise
Price of Outstanding Options,
Warrant and Rights
(b)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column (a))
(c)
-
-
-
-
-
-
644,329 (1)
-
644,329
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, including our Security Ownership of Certain Beneficial Owners and Management table, is
incorporated herein by reference to our definitive proxy statement with respect to our 2016 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 2016 Annual Meeting of
Stockholders.
Item 14:
Principal Accounting Fees and Services
Incorporated herein by reference to our definitive proxy statement with respect to our 2016 Annual Meeting of
Stockholders.
33
PART IV
ITEM 15:
Exhibits and Financial Statement Schedules
15(a)(1).
The following documents are filed as a part of this Annual Report on Form 10-K:
(cid:131) Reports of Independent Registered Public Accounting Firms
(cid:131) Consolidated Balance Sheets as of December 31, 2015 and 2014
(cid:131) Consolidated Statements of Operations and Comprehensive Income for the Years Ended
December 31, 2015, 2014, and 2013
(cid:131) Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2015,
2014, and 2013
(cid:131) Consolidated Statements of Cash Flow for the Years Ended December 31, 2015, 2014,
and 2013
(cid:131) Notes to the Consolidated Financial Statements
15(a)(2).
The following is a list of the financial statement schedules required by Item 8:
Schedule III – Real Estate and Accumulated Depreciation
15(a)(3).
Exhibits
Exhibit No.
Description
3.1
3.2
3.3
4.1
Articles of Incorporation of the Company, (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)
Articles of Amendment of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K (No.
001-12928) filed on May 6, 2015)
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, 2009)
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)
34
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)
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 November 4, 2015 between Agree Limited Partnership and Matthew M.
Partridge (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (No. 001-12928)
filed on November 24, 2015)
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 (incorporated by reference to Exhibit 10.10 to the
Company’s Annual Report on 10-K (No. 001-12928) for the year ended December 31, 2014)
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 (No. 001-12928) for
the quarter ended September 30, 2014)
10.12 Note Purchase Agreement, by Agree Limited Partnership dated May 28, 2015 (incorporated by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K (No. 001-12928) filed on June 1, 2015)
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
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, Matthew M. Partridge, 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, Matthew M. Partridge, Chief Financial
Officer
99.1* Material Federal Income Tax Considerations
101*
The following materials from Agree Realty Corporation’s Annual Report on Form 10-K for the year ended December
31, 2015 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
*
+
Filed herewith.
Management contract or compensatory plan or arrangement.
Pursuant to Item 601(b)(4)(iii)(A)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, 2015. 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 11, 2016
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 Matthew M. Partridge, 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 11th day of March 2016.
By:
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/ Matthew M. Partridge
Matthew M. Partridge
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
/s/ Gene Silverman
Gene Silverman
Director
36
Date: March 11, 2016
Date: March 11, 2016
Date: March 11, 2016
Date: March 11, 2016
Date: March 11, 2016
Date: March 11, 2016
Date: March 11, 2016
Date: March 11, 2016
Date: March 11, 2016
Reports of Independent Registered Public Accounting Firm
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-4
F-5
F-6
F-7
F-9
F-26
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
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, 2015, 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, 2015, 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, 2015, and our report
dated March 11, 2016 expressed an unqualified opinion on those financial statements.
/s/ GRANT THORNTON LLP
Southfield, Michigan
March 11, 2016
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
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, 2015 and 2014, and the related consolidated statements of operations
and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December
31, 2015. 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, 2015 and 2014, and the results of their operations
and their cash flows for each of the three years in the period ended December 31, 2015 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, 2015, 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 11, 2016 expressed an unqualified opinion.
/s/ GRANT THORNTON LLP
Southfield, Michigan
March 11, 2016
F-3
AGREE REALTY CORPORATION
CONSOLIDATED BALANCE SHEETS
As of December 31,
ASSETS
Real Estate Investments
Land
Buildings
Less accumulated depreciation
Property under development
Net Real Estate Investments
2015
2014
$
225,273,640
526,911,997
(56,401,423)
695,784,214
3,663,301
699,447,515
$
195,091,303
393,826,467
(59,089,851)
529,827,919
229,242
530,057,161
Cash and Cash Equivalents
2,711,588
5,399,458
Accounts Receivable - Tenants, net of allowance of
$35,000 for possible losses at December 31, 2015 and
December 31, 2014
Unamortized Deferred Expenses
Financing costs, net of accumulated amortization of
$3,409,110 and $2,690,005 at December 31, 2015 and
December 31, 2014, respectively
Leasing costs, net of accumulated amortization of $553,502
and $543,957 at December 31, 2015 and December 31,
2014, respectively
Lease intangibles, net of accumulated amortization of
$10,577,794 and $5,719,085 at December 31, 2015 and
December 31, 2014, respectively
Other Assets
Total Assets
7,418,327
4,507,735
3,185,567
3,008,280
664,565
783,335
76,552,316
47,479,602
2,569,659
2,345,290
$
792,549,537
$
593,580,861
See accompanying notes to consolidated financial statements.
F-4
AGREE REALTY CORPORATION
CONSOLIDATED BALANCE SHEETS
As of December 31,
LIABILITIES
Mortgage Notes Payable
2015
2014
$
101,584,368
$
106,762,238
Unsecured Term Loans
100,000,000
100,000,000
Senior Unsecured Notes
100,000,000
-
Unsecured Revolving Credit Facility
18,000,000
15,000,000
Dividends and Distributions Payable
9,757,988
8,048,404
Deferred Revenue
540,643
1,004,023
Accrued Interest Payable
962,825
721,459
Accounts Payable and Accrued Expense
Capital expenditures
Operating
Interest Rate Swaps
Deferred Income Taxes
Tenant Deposits
Total Liabilities
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value, 28,000,000 shares
authorized, 20,637,301 and 17,539,946 shares issued
and outstanding, respectively
Preferred Stock, $.0001 par value per share, 4,000,000
shares authorized
Series A junior participating preferred stock, $.0001
par value, 200,000 authorized, no shares issued
and outstanding
Additional paid-in-capital
Dividends in excess of net income
Accumulated other comprehensive loss
Total Stockholders' Equity - Agree Realty Corporation
Non-controlling interest
Total Stockholders' Equity
122,496
3,926,962
200,300
2,684,599
3,301,108
2,383,308
705,000
28,608
705,000
36,156
338,929,998
237,545,487
2,064
1,754
-
482,514,380
(28,262,441)
(3,130,376)
451,123,627
2,495,912
453,619,539
-
388,262,847
(32,584,612)
(2,059,998)
353,619,991
2,415,383
356,035,374
Total Liabilities and Stockholders' Equity
$
792,549,537
$
593,580,861
See accompanying notes to consolidated financial statements.
F-5
AGREE REALTY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Year Ended December 31,
Revenues
Minimum rents
Percentage 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
Gain (loss) on sale of assets
Loss on debt extinguishment
2015
2014
2013
$
64,277,924
180,067
5,277,404
230,471
69,965,866
$
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
4,004,754
1,768,346
606,134
6,988,075
16,485,874
-
29,853,183
10.0%
40,112,683
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
27,890,412
25,419,649
(12,305,397)
12,135,036
(179,867)
(8,586,980)
(527,743)
-
(6,474,727)
-
-
Income From Continuing Operations
39,762,455
18,775,689
18,944,922
Discontinued Operations
Gain on sale of assets from discontinued operations
Income from discontinued operations
-
-
122,747
14,573
946,347
298,342
Net Income
39,762,455
18,913,009
20,189,611
Less Net Income Attributable to Non-Controlling
Interest
744,600
425,017
515,036
Net Income Attributable to Agree Realty Corporation
$
39,017,855
$
18,487,992
$
19,674,575
Basic Earnings Per Share
Continuing operations
Discontinued operations
Diluted Earnings Per Share
Continuing operations
Discontinued operations
$
$
$
$
$
$
$
$
$
$
$
$
2.17
-
2.17
2.16
-
2.16
1.23
0.01
1.24
1.23
0.01
1.24
1.41
0.10
1.51
1.40
0.10
1.50
Other Comprehensive Income
Net income
Other Comprehensive Income (Loss)
Total Comprehensive Income
Comprehensive Income Attributable to Non-Controlling
Interest
Comprehensive Income Attributable to
Agree Realty Corporation
Weighted Average Number of Common Shares
Outstanding - Basic:
Weighted Average Number of Common Shares
Outstanding - Diluted:
$
39,762,455
(1,093,251)
38,669,204
$
18,913,009
(2,583,832)
16,329,177
$
20,189,611
1,812,535
22,002,146
(724,127)
(373,221)
(561,587)
$
37,945,077
$
15,955,956
$
21,440,559
18,003,122
14,882,586
13,065,907
18,065,415
14,966,895
13,157,505
See accompanying notes to consolidated financial statements.
F-6
AGREE REALTY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
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 distributions declared for the 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 Plan
Forfeiture of restricted stock
Vesting of restricted stock
Dividends and distributions declared for the period
Other comprehensive income (loss) -
change in fair value of interest rate swap
Net income
Balance, December 31, 2014
Issuance of common stock, net of issuance costs
Issuance of restricted stock under the Omnibus Incentive Plan
Forfeiture of restricted stock
Vesting of restricted stock
Dividends and distributions declared for the period
Other comprehensive income (loss) - change in fair value
of interest rate swaps
Net income
Balance, December 31, 2015
Common Stock
Shares
11,436,044
3,375,000
87,950
(15,680)
Amount
$
1,144
337
9
(2)
Additional
Paid-In Capital
$
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
Dividends in
excess of net
income
(21,166,509)
$
Accumulated
Other
Comprehensive
Income (Loss)
$
(1,294,267)
Non-Controlling
Interest
$
2,655,848
(22,387,217)
(570,094)
19,674,575
(23,879,151)
$
$
471,717
1,765,984
46,551
515,036
2,647,341
$
(27,193,453)
(604,857)
$
$
Total
Equity
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)
$
1,754
304
9
(3)
-
-
$
388,262,847
92,259,293
-
-
1,992,240
-
$
18,487,992
(32,584,612)
-
-
-
-
(34,695,684)
(2,531,715)
$
(2,059,998)
-
-
-
-
-
$
(52,118)
425,017
2,415,383
-
-
-
-
(641,198)
$
(2,583,833)
18,913,009
356,035,374
92,259,597
9
(3)
1,992,240
(35,336,882)
-
-
2,064
$
-
-
482,514,380
$
-
39,017,855
(28,262,441)
$
(1,070,378)
-
(3,130,376)
$
(22,873)
744,600
2,495,912
$
(1,093,251)
39,762,455
453,619,539
$
17,539,946
3,043,812
85,597
(32,054)
-
-
-
-
20,637,301
See accompanying notes to consolidated financial statements.
F-7
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
Amortization from financing and credit facility costs
Stock-based compensation
Impairment charge
Loss on extinguishment of debt
(Gain) loss on sale of assets
Increase in accounts receivable
Decrease (increase) in other assets
(Decrease) increase in accounts payable
Decrease in deferred revenue
Increase 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 $39,325 in 2015, $263,472 in
2014, and $566,793 in 2013)
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
Payments of mortgage notes payable
Term loan payable proceeds
Senior unsecured notes proceeds
Dividends paid
Limited partners' distributions paid
Debt extinguishment costs
Payments for financing costs
Net Cash Provided by Financing Activities
2015
2014
2013
$
39,762,455
$
18,913,009
$
20,189,611
11,529,629
4,956,245
689,321
1,992,241
-
179,867
(12,135,036)
(2,910,592)
(197,380)
1,043,064
(463,380)
241,366
(7,548)
44,680,252
8,486,178
2,616,533
950,876
1,986,835
3,020,000
-
404,996
(1,244,967)
346,131
(311,337)
(463,380)
250,597
(4,491)
34,950,980
6,996,741
1,746,792
736,425
1,812,532
450,000
-
(946,347)
(1,102,713)
(780,069)
716,435
(463,380)
135,446
(23,814)
29,467,659
(223,870,660)
(143,272,607)
(75,920,083)
(6,970,271)
(66,410)
28,132,261
(202,775,080)
(16,526,566)
(354,336)
12,455,673
(147,697,836)
(14,619,386)
(183,310)
5,462,280
(85,260,499)
92,259,603
161,000,000
(158,000,000)
(5,177,870)
-
100,000,000
(32,992,155)
(636,143)
(150,085)
(896,392)
155,406,958
73,302,116
148,622,976
(143,122,976)
(12,766,704)
65,000,000
-
(25,402,637)
(590,951)
-
(1,432,391)
103,609,433
93,393,056
106,189,924
(140,219,929)
(3,478,383)
35,000,000
-
(20,859,476)
(566,619)
-
(398,879)
69,059,694
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents, beginning of period
Cash and Cash Equivalents, end of period
(2,687,870)
5,399,458
2,711,588
$
(9,137,423)
14,536,881
5,399,458
$
13,266,854
1,270,027
14,536,881
$
Supplemental Disclosure of Cash Flow Information
Cash paid for interest (net of amounts capitalized)
Cash paid (refunded) for income tax
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
Real estate investment financed with accounts payable
$
11,548,099
$
7,824,594
$
6,149,649
$
924
$
(355)
$
(21,543)
$
2,863,766
9,757,988
$
$
-
$
122,495
$
2,390,245
$
8,048,404
5,631,183
$
$
-
$
2,401,688
6,243,933
$
$
-
$
-
See accompanying notes to consolidated financial statements.
F-8
Agree Realty Corporation
Notes to Consolidated Financial Statements
December 31, 2015
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 98.3%
interest as of December 31, 2015. 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,
98.3% and 98.1% of the Operating Partnership as of December 31, 2015 and 2014. 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. In addition, certain reclassifications of prior period amounts within the Statement of Cash Flows
have been made in order to conform to the 2015 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 the
Company 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-9
Agree Realty Corporation
Notes to Consolidated Financial Statements
December 31, 2015
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. As of December 31, 2015 we had $1.7 million in excess of the FDIC insured limit.
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.
Sales Tax
The Company collects various taxes from tenants and remit these amounts, on a net basis, to the applicable
taxing authorities.
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, 2015, 2014 and 2013, respectively:
F-10
Agree Realty Corporation
Notes to Consolidated Financial Statements
December 31, 2015
Year Ended December 31,
2015
2014
2013
Financing Costs
Leasing Costs
Lease Intangibles
Total
$
689,322
97,140
4,859,103
5,645,566
$
$
950,878
125,946
2,490,585
3,567,409
$
$
736,425
113,101
1,633,691
2,483,217
$
The following schedule represents estimated future amortization of deferred expenses as of December 31, 2015:
Year Ending December 31,
2016
2017
2018
2019
2020
Thereafter
Total
Financing Costs
Leasing Costs
Lease Intangibles
Total
$
679,955
87,784
6,660,774
7,428,514
$
$
645,554
87,123
6,611,983
7,344,660
$
$
469,055
84,789
6,532,504
7,086,348
$
$
316,573
82,662
6,140,221
6,539,456
$
$
290,056
64,552
5,878,479
6,233,087
$
$
784,374
257,655
44,728,353
45,770,383
$
$
3,185,567
664,565
76,552,316
80,402,447
$
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:
2015
Year Ended December 31,
2014
2013
Weighted average number of common shares outstanding
Less: Unvested restricted stock
18,215,628
(212,506)
15,121,212
(238,626)
13,314,989
(249,082)
Weighted average number of common shares
outstanding used in basic earnings per share
18,003,122
14,882,586
13,065,907
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
18,003,122
62,293
14,882,586
84,309
13,065,907
91,598
18,065,415
14,966,895
13,157,505
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, 2015, 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-11
Agree Realty Corporation
Notes to Consolidated Financial Statements
December 31, 2015
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 ac tivities 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 May 2014, the Financial Accounting Standards Board issued ASU No. 2014-09 “Revenue from Contracts with
Customers.” ASU No. 2014-09 was developed to enable financial statement users to better understand the
nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The
update’s core principle is that an entity 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. Companies are to use a five-step contract review model to ensure
revenue gets recognized, measured and disclosed in accordance with this principle. ASU 2014 -09 was to be
effective for fiscal years and interim periods beginning after December 15, 2016. In August 2015, the Financial
Accounting Standards Board issued ASU No. 2015-14 to defer the effective date of ASU No. 2014-09 for one
year. As a result, ASU No. 2014-09 is now effective for fiscal years and interim periods beginning after December
15, 2017. The amendments in this update will be applied retrospectively either to each prior reporting period
presented or to disclose the cumulative effect recognized at the date of initial application. The Company is still
in the process of determining the impact that the implementation of ASU 2014-09 will have on the financial
statements.
In April 2015, the Financial Accounting Standards Board issued ASU No. 2015-03 “Interest – Imputation of
Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” The objective of ASU 2015-
03 is to identify, evaluate, and improve areas of GAAP for which cost and complexity can be reduced while
maintaining or improving the usefulness of the information provided to users of financial statements. To simplify
presentation of debt issuance costs, the amendments require that debt issuance costs related to a recognized
debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt
liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are
not affected by the amendments. ASU No. 2015-03 is effective for annual reporting periods (including interim
periods within those periods) beginning after December 15, 2015. Early adopti on is permitted. The Company
has evaluated the new guidance and determined the resulting impact on the statements will be a reclassification
of certain deferred financing costs from other assets to notes payable.
F-12
Agree Realty Corporation
Note 3 – Real Estate Investments
Notes to Consolidated Financial Statements
December 31, 2015
Real Estate Portfolio
At December 31, 2015 and 2014, the Company’s gross investment in real estate assets, including properties under
development and properties held for sale, totaled $755,848,938 and $589,147,012, respectively. Real estate
investments consisted of the following as of December 31, 2015 and December 31, 2014:
Number of Properties
Gross Leasable Area
278
5,207,000
209
4,315,000
2015
2014
Land
Buildings
Property under Development
Gross Real Estate Investments
$
$
225,273,640
526,911,997
3,663,301
755,848,938
195,091,303
393,826,467
229,242
589,147,012
$
$
Less Accumulated Depreciation
Net Real Estate Investments
$
$
(56,401,423)
699,447,515
$
$
(59,089,851)
530,057,161
Lease Intangibles
The following table details lease intangibles, net of accumulated amortization, as of December 31, 2015 and
December 31, 2014:
December 31,
2015
December 31,
2014
$
$
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
47,051,639
(7,239,191)
61,241,046
(7,367,216)
(21,162,576)
4,028,614
76,552,316
36,680,631
(3,897,008)
31,642,267
(4,111,435)
(15,124,210)
2,289,358
47,479,602
$
$
As of December 31, 2015, our portfolio was approximately 99.5% leased and had a weighted average remaining
lease term of approximately 11.4 years.
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.
F-13
Agree Realty Corporation
Notes to Consolidated Financial Statements
December 31, 2015
As of December 31, 2015, 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,
2016
2017
2018
2019
2020
Thereafter
Total
$
68,765,041
68,732,996
67,872,318
65,552,286
63,184,391
505,204,411
839,311,443
$
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 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 17.2% and 5.5% of the total is attributable to Walgreens and
Walmart (and Walmart affiliates), respectively, as of December 31, 2015. The loss of these tenants or the inability
of them 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, 2015.
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 $541,000 will be recognized as minimum rents over
approximately 1.2 years
Land Lease Obligations
The Company is subject to land lease agreements for certain of its properties. Land lease expense was $606,134,
$471,840, and $427,900 for the years ending December 31, 2015, 2014 and 2013, respectively. As of December
31, 2015, future annual lease commitments under these agreements are as follows:
For the Year Ending December 31,
2016
2017
2018
2019
2020
Thereafter
Total
$
639,903
639,903
640,819
633,778
632,178
8,426,118
11,612,699
$
The Company leased its executive offices during 2014 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. As of December 31, 2015 are no outstanding commitments or
liabilities related to this lease.
F-14
Agree Realty Corporation
Notes to Consolidated Financial Statements
December 31, 2015
2015 and 2014 Acquisitions
During 2015, the Company purchased 73 retail net lease assets for approximately $220,557,000, including
acquisition and closing costs. These properties are located in 24 states and 100% leased to 40 different tenants
operating in 19 unique retail sectors for a weighted average lease term of approximately 12.2 years. The
underwritten weighted average capitalization rate on our 2015 investments was approximately 8.0%. None of the
Company’s investments during 2015 caused any new or existing tenant to comprise 10% or more of the
Company’s total assets or generate 10% or more of the Company’s total annualized base rent at December 31,
2015.
The aggregate 2015 acquisitions were allocated approximately $33,801,000 to land, $152,742,000 to buildings
and improvements, and $34,014,000 to lease intangible costs. The acquisitions were substantially all cash
purchases and there was no contingent consideration associated with these 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 the
Company’s investments during 2014 caused any new or existing tenant to comprise 10% or more of the
Company’stotal assets or generate 10% or more of the Company’s total annualized base rent at December 31,
2015.
The aggregate 2014 acquisitions were allocated approximately $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.
The Company calculates 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 2015 and 2014,
assumes all of our 2015 acquisitions had taken place on January 1, 2015 for the 2015 pro forma information, and
on January 1, 2014 for the 2014 pro forma information:
Supplemental pro forma for the year ended December 31, 2015 (1)
Total Revenue
Income before discontinued operations
$
79,056,000
$
36,149,000
Supplemental pro forma for the year ended December 31, 2014 (1)
Total Revenue
Income before discontinued operations
$
57,840,000
$
19,369,000
(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, 2015 or January 1, 2014 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.
Dispositions
During 2015, we sold eight properties for aggregate gross proceeds of $29.0 million, which resulted in a gain of
$12.1 million. Dispositions included three land parcels, two single tenant buildings and three non-core community
shopping centers (Marshall Plaza in Marshall, Michigan, Ferris Commons in Big Rapids, Michigan and Lakeland
Plaza in Lakeland, Florida).
F-15
Agree Realty Corporation
Notes to Consolidated Financial Statements
December 31, 2015
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
2015
2014
2013
$
$
- $ 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 of 2014.
In the second quarter of 2014, an anchor tenant at Chippewa Commons declined to exercise 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, 2014.
Note 4 – Debt
As of December 31, 2015, we had total indebtedness of $319,584,368, including (i) $101,584,368 of mortgage
notes payable; (ii) $100,000,000 of unsecured term loans; (iii) $100,000,000 of senior unsecured notes; and (iv)
$18,000,000 of borrowings under our Credit Facility.
Mortgage Notes Payable
As of December 31, 2015, we had total mortgage indebtedness of $101,584,368 with a weighted average maturity
of 4.2 years. These mortgages are collateralized by related real estate with an aggregate net book value of
$135,974,635.
Including mortgages that have been swapped to a fixed interest rate, our weighted average interest rate on
mortgage debt was 4.17% as of December 31, 2015 and 4.27% as of December 31, 2014.
Mortgages payable consisted of the following:
F-16
Agree Realty Corporation
Note payable in monthly installments of interest only 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 prepayment paid in
January 2015; collateralized by related real estate and
tenants’ leases
Note payable in monthly principal installments of $56,380
plus interest at 170 basis points over LIBOR, swapped to a
fixed rate of 3.62% as of December 31, 2015. 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 a 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 a 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 a 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
Notes to Consolidated Financial Statements
December 31, 2015
Decem ber 31, 2015
Decem ber 31, 2014
$
8,580,000
$
8,580,000
-
2,405,976
20,740,838
21,398,078
25,000,000
25,000,000
6,552,907
7,896,078
3,128,803
3,204,294
23,640,000
23,640,000
5,448,058
5,595,327
8,493,762
9,042,485
Total
$
101,584,368
$
106,762,238
F-17
Agree Realty Corporation
Notes to Consolidated Financial Statements
December 31, 2015
The following table presents scheduled principal payments related to our debt as of December 31, 2015:
Scheduled
Principal
Balloon
Payment
Total
For the Year Ending December 31,
2016
2017 (1)
2018 (2)
2019
2020
Thereafter
Total
$
2,954,035
2,710,697
2,575,654
2,750,823
1,100,218
5,744,873
17,836,300
$
$
8,580,000
19,744,758
43,000,000
-
37,766,951
192,656,359
301,748,068
$
$
11,534,035
22,455,455
45,575,654
2,750,823
38,867,169
198,401,232
319,584,368
$
(1) The balloon payment is related to a mortgage note that matures on 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) The balloon payment balance includes the balance outstanding under the Credit Facility as of December 31, 2015. 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, 2015, the mortgage loan of approximately $20,741,000 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, 2015.
Senior Unsecured Notes
On May 28, 2015, the Company completed a private placement of $100,000,000 principal amount of senior
unsecured notes (the “Senior Unsecure Notes”). The Senior Unsecured Notes were sold in two series, including
$50,000,000 of 4.16% notes due May 30, 2025 and $50,000,000 of 4.26% notes due May 30, 2027. The weighted
average term of the Senior Unsecured Notes is 11 years and the weighted average interest rate is 4.21%.
Proceeds from the issuance were used to repay borrowings under the Company’s Credit Facility and for general
corporate purposes.
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, 2015, $18,000,000 was outstanding under the Credit Facility bearing a weighted average
interest rate of approximately 1.7% and $132,000,000 was available for borrowing.
F-18
Agree Realty Corporation
Notes to Consolidated Financial Statements
December 31, 2015
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, 2015, $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, 2015, $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, 2015.
Note 5 – Common Stock
On May 6, 2015, the Company implemented a $100,000,000 at-the-market equity program (“ATM program”) by
entering into multiple equity distribution agreements through which the Company may, from time to time, sell
shares of common stock. The Company uses the proceeds generated from its ATM program for general corporate
purposes including funding our investment activity, the repayment or refinancing of outstanding indebtedness,
working capital and other general purposes.
During the year ended December 31, 2015, the Company issued 1,318,812 shares of common stock under its
ATM program at an average price of $30.31, realizing gross proceeds of approximately $40,000,000. The
Company has approximately $60,000,000 remaining under the ATM program as of December 31, 2015.
In March 2015, we filed, and the SEC deemed effective, a shelf registration statement that expires in March 2018.
The securities covered by this registration statement cannot exceed $500,000,000 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 1,725,000 shares of common stock in December of 2015. The offering,
which included the full exercise of the overallotment option by the underwriters, raised net proceeds of
approximately $52,950,000 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 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.
F-19
Agree Realty Corporation
Notes to Consolidated Financial Statements
December 31, 2015
Note 6 – Dividends and Distribution Payable
The Company declared dividends of $1.845, $1.74 and $1.64 per share during the years ended December 31,
2015, 2014 and 2013; the dividends have been reflected for federal income tax purposes as follows:
For the Year Ended December 31,
Ordinary Income
Return of Capital
$
2015
1.519
0.326
$
2014
1.398
0.342
$
2013
1.372
0.268
Total
$
1.845
$
1.740
$
1.640
On December 1, 2015, the Company declared a dividend of $0.465 per share for the quarter ended December
31, 2015. The holders OP Units were entitled to an equal distribution per OP Unit held as of December 22,
2015. The dividends and distributions payable are recorded as liabilities in the Company's consolidated balance
sheet at December 31, 2015. 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 5, 2016.
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, 2011. 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, 2015, the Company has estimated a current income tax liability of $2,000 and a deferred
income tax liability in the amount of $705,000. As of December 31, 2014, 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, 2015, and 2014, we recognized total federal and state tax expense (benefit)
of $3,317, and ($14,000), 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. For additional information regarding the leveling of our derivatives see Note 10.
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, 2015,
this interest rate swap was valued as a liability of approximately $448,000.
F-20
Agree Realty Corporation
Notes to Consolidated Financial Statements
December 31, 2015
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, 2015, this
interest rate swap was valued as an asset of approximately $99,000.
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, 2015, this interest rate swap was valued as a liability of approximately $1,135,000.
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, 2015, this
interest rate swap was valued as a liability of approximately $1,719,000.
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, 2015 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, 2015, 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,
2015
December 31,
2014
December 31,
2015
December 31,
2014
Interest Rate Swap
4
4
$
145,740,838
$
146,398,078
F-21
Agree Realty Corporation
Notes to Consolidated Financial Statements
December 31, 2015
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.
Asset Derivatives
December 31, 2015
December 31, 2014
Balance Sheet
Location
Fair Value
Balance Sheet
Location
Fair Value
Other Assets
$
98,562
Other Assets
$
274,013
Liability Derivatives
December 31, 2015
December 31, 2014
Balance Sheet
Location
Fair Value
Balance Sheet
Location
Fair Value
Other Liabilities
$
3,301,108
Other Liabilities
$
2,383,308
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, 2015 and 2014.
Derivatives in
Cash Flow
Hedging
Relationships
Amount of Income/(Loss) Recognized
in OCI on Derivative (Effective Portion)
Location of
Income/(Loss)
Reclassifed from
Accumulated OCI
into Income
(Effective Portion)
Amount of Income/(Loss) Reclassified
from Accumulated OCI into Expense
(Effective Portion)
2015
2014
2015
2014
Location of Loss
Recognized In
Income of
Derivative
(Ineffective Portion
and Amount
Excluded from
Effectiveness
Testing)
Amount of Loss
Recognized in
Income on
Derivative
(Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing and
2015
2014
Interest rate swaps
$
(1,093,251)
$
(2,583,832)
Interest Expense
$
(2,796,000)
$
(1,875,420)
-$
-$
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, 2015.
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, 2014.
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 years ending December 2014 and 2013, including
revenues of approximately $42,600 and $1,281,000 respectively, and expenses of approximately $28,000 and
$990,000, 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 year ended December 2013, including revenues of approximately
$9,300, and expenses of approximately $2,300.
F-22
Agree Realty Corporation
Notes to Consolidated Financial Statements
December 31, 2015
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, 2015.
Asset:
Interest rate swaps
Level 1
$
-
Level 2
$
98,562
Level 3
$
-
Carrying Value
$
98,562
Liability:
Interest rate swaps
Mortgage notes payable
Unsecured term loans
Senior unsecured notes
Revolving credit facility
Level 1
$
-
-
$
$
-
$
-
$
-
Level 2
$
3,301,108
-
$
$
-
$
-
$
18,000,000
Level 3
$
-
$
105,033,267
$
97,741,973
99,645,428
$
$
-
Carrying Value
$
3,301,108
$
101,584,368
$
100,000,000
$
100,000,000
$
18,000,000
The table below sets forth the Company’s fair value hierarchy for liabilities measured or disclosed at fair value as
of December 31, 2014.
Asset:
Interest rate swaps
Level 1
$
-
Level 2
$
274,013
Level 3
$
-
Carrying Value
$
274,013
Liability:
Interest rate swaps
Mortgage notes payable
Unsecured term loans
Revolving credit facility
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
$
100,000,000
$
15,000,000
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 4.27% and 4.17% at December 31, 2015 and 2014,
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 Equity Incentive Plan. The 2014 Plan authorizes the issuance of a maximum of 700,000 shares
of common stock.
No options were granted during 2015, 2014 or 2013.
Restricted common stock has been granted to certain employees under both the 2005 Plan and the 2014 Plan.
As of December 31, 2015, there was $4,244,000 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 85,597, 83,210, and 87,950 shares of
restricted stock in 2015, 2014, and 2013 respectively to employees and sub-contractors. The restricted shares
vest over a five-year period based on continued service to the Company.
F-23
Agree Realty Corporation
Notes to Consolidated Financial Statements
December 31, 2015
Restricted share activity is summarized as follows:
Shares
Outstanding
Weighted Average
Grant Date
Fair Value
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
Restricted stock granted
Restricted stock vested
Restricted stock forfeited
85,597
(79,663)
(32,054)
$
$
$
33.46
25.13
29.54
Unvested restricted stock at December 31, 2015
212,506
$
29.07
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 201 5, 2014, or 2013.
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, 2014 through December 31, 2015. Certain amounts
have been reclassified to conform to the current presentation of discontinued operations:
F-24
Agree Realty Corporation
Notes to Consolidated Financial Statements
December 31, 2015
2015
Three Months Ended
March 31
June 30
September
30
December 31
Revenue
Net Income
$
15,743
$
17,219
$
17,850
$
19,154
$
6,494
$
10,465
$
14,876
$
7,927
Earnings per Share - diluted
$
0.36
$
0.58
$
0.81
$
0.41
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
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 oper ations
Note 15 – Subsequent Events
In January 2016, the Company granted a total of 5,599 shares of stock to the Board of Directors. The fair value
of these grants is approximately $184,000.
In February 2016, the Company granted a total of 70,315 shares of restricted stock to employees and associates
under the 2014 Plan. The fair value of these grants is approximately $2,625,000 and the restricted shares vest
over a five year period based on continued service to the Company.
On March 1, 2016, the Company declared a dividend of $0.465 per share for the quarter ending March 31, 2016
for holders of record on March 31, 2016. The holders of OP Units are also entitled to an equal distribution per OP
Unit held as of March 31, 2016. The amounts are to be paid on April 15, 2016.
There were no other reportable subsequent events or transactions.
F-25
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Agree Realty Corporation
Notes to Schedule III
December 31, 2015
1. Reconciliation of Real Estate Properties
The following table reconciles the Real Estate Properties from January 1, 2013 to December 31, 2015
2015
2014
2013
Balance at January 1
Construction and acquisition cost
Impairment charge
Disposition of real estate
$
589,147,012
196,672,924
-
(29,970,998)
$
476,168,824
143,365,974
(3,020,000)
(27,367,786)
$
398,811,830
82,692,554
(450,000)
(4,885,560)
Balance at December 31
$
755,848,938
$
589,147,012
$
476,168,824
2. Reconciliation of Accumulated Depreciation
The following table reconciles the Real Estate Properties from January 1, 2013 to December 31, 2015
2015
2014
2013
Balance at January 1
Current year depreciation expense
Disposition of real estate
$
59,089,851
11,464,695
(14,153,123)
$
65,436,739
8,361,698
(14,708,586)
$
58,856,688
6,930,145
(350,094)
Balance at December 31
$
56,401,423
$
59,089,851
$
65,436,739
3. Tax Basis of Building and Improvements
The aggregate cost of Building and Improvements for federal income tax purposes is approximately
$23,420,000 less than the cost basis used for financial statement purposes.
F-34
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AGREE REALTY CORPORATION
Financial Highlights
NYSE: ADC
Financial - For Year Ended December 31,
2015
2014
2013
Total revenues ($000's)(cid:3)
Operating income ($000's)(cid:3)
Funds from operations ($000's)(cid:3)
Funds from operations per share(cid:3)
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)
$
$
$
$
$
$
$
$
69,966
27,627
44,051
2.39
1.845
2015
755,849
792,550
319,584
$
$
$
$
$
$
$
$
53,559
19,318
33,316
2.18
1.74
2014
589,147
593,581
222,483
$
$
$
$
$
$
$
$
43,518
19,244
28,370
2.10
1.64
2013
471,366
462,742
158,869
278
209
130
5,207,000
4,315,000
3,662,000
TOTAL RETURN PERFORMANCE
250
200
150
100
e
u
l
a
V
x
e
d
n
I
50
12.31.10
12.31.11
12.31.12
12.31.13
12.31.14
12.31.15
Agree Realty Corporation
Russell 2000
SNL REIT Retail Shopping Ctr
Index
12.31.10
12.31.11
12.31.12
12.31.13
12.31.14
12.31.15
Agree Realty Corporation
Russell 2000
SNL REIT Retail Shopping Ctr
100.00
100.00
100.00
99.84
95.82
97.14
117.30
111.49
122.65
134.42
154.78
131.04
152.64
162.35
169.80
177.04
155.18
178.88
Period Ending
AGREE REALTY CORPORATION
Financial Highlights
NYSE: ADC
FUNDS FROM OPERATIONS
(in thousands)
2011
2012
2013
2014
2015
REAL ESTATE ASSETS
(in thousands)
$35,000
$30,000
$25,000
$20,000
$15,000
$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
2011
2012
2013
2014
2015
CORPORATE INFORMATION
EXECUTIVE OFFICERS
Richard Agree
Executive Chairman
Board of Directors
Joey Agree
President, Chief Executive Officer
Director
Matthew Partridge
Chief Financial Officer
Secretary
Laith Hermiz
Chief Operating Officer
DIRECTORS
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 2, 2016 at 10:00 am
Embassy Suites
850 Tower Drive
Troy, MI 48098
Auditors
Grant Thornton LLP
27777 Franklin Road
Southfield, MI 48034
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
70 E. Long Lake Road | Bloomfield Hills, MI 48304
www.agreerealty.com