Agree Realty
Annual Report 2018

Plain-text annual report

CORPORATE INFORMATION EXECUTIVE OFFICERS DIRECTORS Richard Agree Executive Chairman Board of Directors Joey Agree President Chief Executive Officer Director Craig Erlich Executive Vice President George P. Johnson Company Merrie S. Frankel President Minerva Realty Consultants, LLC Adjunct Professor Columbia University New York University Farris Kalil Former, Director of Business Development of Commercial Lending Michigan National Bank Clay Thelen Chief Financial Officer Secretary Laith Hermiz Chief Operating Officer Danielle Spehar General Counsel Greg Lehmkuhl President Chief Executive Officer Lineage Logistics John Rakolta, Jr. Chairman Chief Executive Officer Walbridge Jerry Rossi Chief Executive Officer R&R Consulting Chairman Gabe’s Stores William S. Rubenfaer President Rubenfaer Associates, PC Annual Meeting of Stockholders Thursday, April 25, 2019 - 10:00 am Counsel Honigman Embassy Suites 850 Tower Drive Troy, MI 48098 Auditors Grant Thornton LLP 27777 Franklin Road Southfield, MI 48034 39400 Woodward Ave., Ste. 101 Bloomfield Hills, MI 48304 Registrar & Transfer Agent Computershare P.O. Box 30170 College Station, TX 77840 ANNUAL REPORT for the year ended DECEMBER 31, 2018 Agree Realty Corporation (NYSE: ADC) is a fully-integrated, self-administered, and self-managed real estate investment trust (REIT) focused on the acquisition and development of properties net leased to industry-leading retailers throughout the United States. United States. Building upon the foundation of excellence established throughout the past four decades, Agree Realty continues to be a market leader in the net lease space. At December 31, 2018, our growing portfolio consisted of 645 assets in 46 states, portfolio consisted of 645 assets in 46 states, containing approximately 11.2 million square feet of gross leasable space. ANNUAL REPORT for the year ended DECEMBER 31, 2018 Agree Realty Corporation (NYSE: ADC) is a fully-integrated, self-administered, and self-managed real estate investment trust (REIT) focused on the acquisition and development of properties net leased to industry-leading retailers throughout the United States. United States. Building upon the foundation of excellence established throughout the past four decades, Agree Realty continues to be a market leader in the net lease space. At December 31, 2018, our growing portfolio consisted of 645 assets in 46 states, portfolio consisted of 645 assets in 46 states, containing approximately 11.2 million square feet of gross leasable space. United States. United States. United States. United States. square feet of gross leasable space. containing approximately 11.2 million portfolio consisted of 645 assets in 46 states, portfolio consisted of 645 assets in 46 states, space. At December 31, 2018, our growing to be a market leader in the net lease past four decades, Agree Realty continues excellence established throughout the Building upon the foundation of industry-leading retailers throughout the development of properties net leased to (REIT) focused on the acquisition and self-managed real estate investment trust fully-integrated, self-administered, and Agree Realty Corporation (NYSE: ADC) is a DECEMBER 31, 2018 for the year ended REPORT ANNUAL square feet of gross leasable space. containing approximately 11.2 million portfolio consisted of 645 assets in 46 states, portfolio consisted of 645 assets in 46 states, space. At December 31, 2018, our growing to be a market leader in the net lease past four decades, Agree Realty continues excellence established throughout the Building upon the foundation of industry-leading retailers throughout the development of properties net leased to (REIT) focused on the acquisition and self-managed real estate investment trust fully-integrated, self-administered, and Agree Realty Corporation (NYSE: ADC) is a DECEMBER 31, 2018 for the year ended REPORT ANNUAL Dear Fellow Shareholders, Our Company achieved another year of record performance in 2018, strengthening our best-in-class retail net lease portfolio while fortifying our balance sheet to support our exceptional growth trajectory. Since the launch of our acquisition platform in 2010, we have invested over $2 billion into more than 650 high-quality retail net lease properties. Over that period, the Company has transformed its portfolio into the premier retail net lease portfolio in the industry while returning over 300% to our shareholders. While the evolution of our Company has been tremendous, more important is the disciplined manner in which we have grown. Through adherence to our Core Values, we have consistently achieved record performance while strengthening our portfolio and solidifying our conservative balance sheet. With that, please allow me to review our Company’s many accomplishments in 2018 and convey how those achievements uniquely position Agree Realty to continue executing in the years ahead. Record Investment Activity Strengthens Portfolio Our 2018 investment activities, including capital committed to ongoing development and Partner Capital Solutions projects, totaled a record $681 million. While we have consistently achieved year-over-year record investment volumes, more significant to the sustained success of our Company is the quality of that investment activity. The high-quality nature of our investment activity in this past year is demonstrated by the addition of several industry-leading retailers to our top tenant roster. During the past year, we added Sherwin-Williams, O’Reilly Auto Parts, Best Buy and Burlington Coat Factory to our top tenant list. Each of these retailers are leaders in their respective sectors, and employ a cohesive omni-channel strategy, have a strong value proposition or maintain significant barriers to e-commerce penetration. Along those same lines, our focus on quality is evidenced by the 700+ basis point year-over-year increase in our investment grade tenant exposure to a sector-leading 51% of annualized base rent. More than 61% of annualized base rent acquired during 2018 is derived from investment grade retailers including Walmart, Home Depot, TJ Maxx, HomeGoods, Ross Dress for Less, AutoZone, and Bridgestone. We have also made a concerted effort to further enhance the excellence of our portfolio through the acquisition of a number of ground leased assets. During the year we acquired 12 such assets leased to best-in-class retailers including Walmart, Home Depot, AutoZone, and Sheetz. As a result, we increased our ground lease exposure by 100+ basis points year-over-year to a Company record 9% of annualized base rent. Our ground lease portfolio is a prime example of the thoughtful portfolio construction and detailed real estate analysis that we consistently conduct to mitigate risk and maximize quality. Consistent & Reliable Shareholder Results Our record investment activity and strong per share earnings growth led to another substantial dividend increase for our shareholders in 2018. Our Board of Directors approved two dividend increases during the year that resulted in more than 6% growth year-over-year. The $0.555 quarterly dividend declared in the fourth quarter of 2018 represents an annualized dividend of $2.22 and reflects the Company’s 99th consecutive dividend since our initial public offering in 1994. Our annualized dividend represents payout ratios of approximately 77% of FFO per share and 78% of AFFO per share, respectively. Our focus remains on providing our fellow shareholders with a growing, reliable income stream through a secure and well-covered dividend. A growing dividend and solid per share results once again drove leading total shareholder returns in 2018. The Company returned nearly 20% to shareholders during the year, outperforming the net lease sector as well as the S&P 500, Dow Jones Industrial Average and U.S. REIT Index. Conservative & Disciplined Balance Sheet Management Our long-term performance has been enabled by our conservative and disciplined approach to our balance sheet. This approach was further validated in May with the receipt of an investment grade credit rating from Moody’s Investors Service. The rating is a testament to the strength of our balance sheet, as well as the quality of our portfolio, and further solidifies our position as a leader in retail ownership. During 2018, we raised a record $750 million of common equity and debt capital, including several strategic capital markets transactions that fortified our balance sheet, mitigated risk, and provided us with enhanced optionality and flexibility. We prudently raised over $525 million in common equity through the first two forward offerings in the net lease space and opportunistically utilizing our at-the-market equity program. We continue to view forward equity offerings as a thoughtful way to raise equity at attractive pricing and lock in an accretive cost of capital while mitigating market-based volatility. Additionally, we originated $225 million of long-term, unsecured, fixed rate debt during the year including the issuance of $125 million of 12-year senior unsecured notes priced at a fixed interest rate of 4.32%. We also entered into a seven-year $100 million unsecured term loan priced at a fixed interest rate of 4.26%, based on the Company’s current credit rating. As a result of our capital markets activity, we ended the year with net debt to recurring EBITDA of 4.7 times. Proforma for the settlement of approximately $190 million of forward common offering proceeds, our net debt to recurring EBITDA was approximately 3.3 times. Fixed charge coverage ratio remained healthy at 4.0 times and our total debt to enterprise value was approximately 24.9%. We ended the year with approximately $575 million of liquidity including cash on hand, capacity under our revolving credit facility, free cash flow and available proceeds from our forward common offering. Positioned for Continued Growth Our emphasis on people, processes and systems have been at the forefront of our strategy. At year-end, our fantastic team was comprised of 36 team members, more than twice the size of our Company just a few short years ago. We added eight team members during the past year, expanding our acquisitions, accounting, asset management, development and due diligence teams. In 2019, we will continue to emphasize attracting and retaining industry-leading talent. To facilitate our growing Team, we will be adding an HR Strategic Leader; and commenced an expansion of our headquarters. Our efforts on process improvements and system enhancements have resulted in increased automation and improved efficiency throughout the organization. We have streamlined our systems and implemented state of the art technology in asset management, accounting and lease administration. We look forward to reaping the continued benefits of these investments as our Company scales. While investing in our people, processes and systems, we have also realized meaningful efficiencies that will help us to continue reducing our operating leverage. We have reduced our G&A as a percentage of total revenue almost 180 basis points over the past three years and more than 560 basis points since the launch of our acquisition platform in 2010. In Conclusion After another year of record performance, I am pleased to say that our Company is in a fantastic position to continue to execute on its mission---to construct and manage the highest quality retail portfolio in the nation. While I’m proud of our many accomplishments, I am more focused than ever on capitalizing on the myriad of opportunities that lie ahead. I would like to thank our loyal shareholders, our Board of Directors, and our committed team members for their continued support of Agree Realty Corporation. Sincerely, Joey Agree President & Chief Executive Officer UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10 - K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 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 (cid:95) No (cid:133) (cid:3) 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 (cid:133) No (cid:95) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:95) No (cid:133) (cid:3) Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes (cid:95) No (cid:133) (cid:3) 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. (cid:133) (cid:3) Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b - 2 of the Exchange Act. (Check one): Large accelerated filer (cid:95) Emerging growth company (cid:133) Accelerated filer (cid:133) Non-accelerated filer (cid:133) Smaller reporting company (cid:133) If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:133) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b - 2 of the Exchange Act). Yes (cid:133) No (cid:95) (cid:3) The aggregate market value of the Registrant’s shares of common stock held by non-affiliates was $1,637,625,077 as of June 30, 2018, based on the closing price of $52.77 on the New York Stock Exchange on that date. At February 19, 2019, there were 37,537,012 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 2019 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 Page Item 1: Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1A:Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1B: Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 2: Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 3: 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SIGNATURES Consolidated Financial Statements and Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 17 17 22 22 23 23 25 33 35 35 35 36 37 37 37 37 37 38 42 F-1 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 (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Agree Realty Corporation intends 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 includes 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; the potential need to fund improvements or other capital expenditures out of operating cash flow; financing risks, such as the inability to obtain debt or equity financing on favorable terms or at all; the level and volatility of interest rates; our ability to re-lease space as leases expire; loss or bankruptcy of one or more of our major tenants; our ability to maintain our qualification as a real estate investment trust (“REIT”) for federal income tax purposes and the limitations imposed on our business by our status as a REIT; and legislative or regulatory changes, including changes to laws governing REITs. The factors included in this report, including the documents incorporated by reference, and documents the Company subsequently files or furnishes with the SEC are not exhaustive and additional factors could cause actual results to differ materially from that described in the forward-looking statements. For a discussion of additional risk factors, see the factors included under the caption “Risk Factors” within this report. All forward-looking statements are based on information that was available, and speak only, as of the date on which they were made. Except as required by law, the Company disclaims 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 The Company is a fully integrated REIT primarily focused on the ownership, acquisition, development and management of retail properties net leased to industry leading tenants. The Company was founded in 1971 by its current Executive Chairman, Richard Agree, and its common stock was listed on the New York Stock Exchange (“NYSE”) in 1994. The Company’s assets are held by, and all of its operations are conducted through, directly or indirectly, the Operating Partnership of which the Company is the sole general partner and in which it held a 99.1% interest as of December 31, 2018. 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 Agreement. As of December 31, 2018, our portfolio consisted of 645 properties located in 46 states and totaling approximately 11.2 million square feet of gross leasable area (“GLA”). As of December 31, 2018, our portfolio was approximately 99.8% leased and had a weighted average remaining lease term of approximately 10.2 years. A significant majority of our properties are leased to national tenants and approximately 51.4% of our annualized base rent was derived from tenants, or parent entities thereof, with an investment grade credit rating from S&P Global Ratings, Moody’s Investors Service, Fitch Ratings or the National Association of Insurance Commissioners. Substantially all of our tenants are subject to net lease agreements. A net lease typically requires the tenant 1 to be responsible for minimum monthly rent and property operating expenses including property taxes, insurance and maintenance. As of December 31, 2018, we had 36 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 are electronically filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act and 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 2018, we completed approximately $653.9 million of investments in net leased retail real estate, including acquisition and closing costs. Total investment volume includes the acquisition of 225 properties for an aggregate purchase price of approximately $608.3 million and the completed development of eight properties for an aggregate cost of approximately $45.6 million. These 233 properties are net leased to 59 different tenants operating in 22 sectors and are located in 37 states. These assets are 100% leased for a weighted average lease term of approximately 12.4 years, and the weighted average capitalization rate on our investments was approximately 7.0%. Dividends We increased our quarterly dividend per share from $0.520 in March 2018 to $0.540 in June 2018 and further increased our quarterly dividend per share to $0.555 in December 2018. The fourth quarter dividend per share of $0.555 represents an annualized dividend of $2.22 per share and an annualized dividend yield of approximately 3.8% based on the last reported sales price of our common stock listed on the NYSE of $59.12 on December 31, 2018. We have paid a quarterly cash dividend for 99 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 March 2018, the Company completed a follow-on public offering of 3,450,000 shares of common stock, which included the underwriters’ option to purchase an additional 450,000 shares of common stock, in connection with a forward sale agreement. The offering, which included the full exercise of the underwriters’ option to purchase additional shares, was settled in its entirety in September 2018. Upon settlement, the Company issued 3,450,000 shares and received net proceeds of $160.2 million after deducting fees and expenses. In May 2018, the Company entered into a $250.0 million at-the-market equity program (“ATM program”) through which the Company may, from time to time, sell shares of common stock. In addition to selling shares of common stock, the Company may enter into forward sale agreements through its ATM Program. The Company intends to use 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 corporate purposes. During the year ended December 31, 2018, the Company issued 3,057,263 shares of common stock under our ATM program at an average price of $59.28, realizing gross proceeds of $181.2 million. We had approximately $68.8 million remaining capacity under the ATM program as of December 31, 2018. In September 2018, the Company and the Operating Partnership entered into two supplements to uncommitted master note facilities previously entered into with institutional purchasers in August 2017. Pursuant to the supplements, the Operating 2 Partnership completed a private placement of $125.0 million aggregate principal amount of our 4.32% senior unsecured notes due September 2030 (the “2030 Senior Unsecured Notes”). The senior unsecured notes were sold only 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. In September 2018, the Company entered into a follow-on public offering of 3,500,000 shares of common stock in connection with a forward sale agreement. Upon settlement, the offering is anticipated to raise net proceeds of approximately $190.0 million, net of underwriting discounts, fees and commissions and will be subject to certain adjustments as provided in the forward sale agreement. Selling common stock through the forward sale agreement enabled the Company to set the price of such shares upon pricing the offering (subject to certain adjustments) while delaying the issuance of such shares and the receipt of the net proceeds by the Company. As of December 31, 2018, the Company has not settled any shares related to the forward sale agreement which is required to be settled no later than September 3, 2019. In December 2018, the Company and the Operating Partnership entered into a $100.0 million unsecured term loan facility that matures January 2026 (the “2026 Term Loan”). Borrowings under the 2026 Term Loan are priced at LIBOR plus 145 to 240 basis points, depending on the Company’s credit rating. The Company entered into an interest rate swap to fix LIBOR at 266 basis points until maturity. As of December 31, 2018, $100.0 million was outstanding under the 2026 Term Loan, which was subject to an all-in interest rate of 4.26%. Dispositions During 2018, the Company sold real estate properties for net proceeds of $65.8 million and recorded a net gain of $11.2 million. Leasing During 2018, excluding properties that were sold, we executed new leases, extensions or options on more than 331,000 square feet of GLA throughout our portfolio. The annual rent associated with these new leases, extensions or options is approximately $3.8 million. Material new leases, extensions or options included a 30,000 square foot TJ Maxx in Logan, Utah, a 21,177 square foot Harbor Freight Tools in Cedar Park, Texas and a 20,269 square foot Old Navy in Grand Chute, Wisconsin. Business Strategies Our primary business objective is to generate consistent shareholder returns by primarily 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 primarily focused on the long-term, 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 development, Partner Capital Solutions (“PCS”) and acquisitions platforms. Development: We have been developing retail properties since the formation of our predecessor company in 1971 and our development platform seeks to employ our capabilities to direct all aspects of the development process, including site selection, land acquisition, lease negotiation, due diligence, design and construction. Our developments are typically build-to-suit projects that result in fee simple ownership of the property upon completion. Partner Capital Solutions: We launched our PCS program in April 2012. Our PCS program allows us to acquire properties or development opportunities by partnering with private developers or retailers on their in-process developments. We offer construction expertise, relationships, access to capital and forward commitments to purchase to facilitate the successful completion of their projects. We typically take fee simple ownership of PCS projects upon their completion. 3 Acquisitions: Our acquisitions platform was launched in April 2010 in order to expand our investment capabilities by pursuing opportunities that do not fall within our development platform, but that do meet both our real estate and return on investment criteria. 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 we acquire. Each platform leverages the Company’s real estate acumen to pursue investments in net lease retail real estate. Factors that we consider when evaluating an investment include but are not limited to: • • • • • • overall market-specific characteristics, such as demographics, market rents, competition and retail synergy; asset-specific characteristics, such as the age, size, location, zoning, use and environmental history, accessibility, physical condition, signage and visibility of the property; tenant-specific characteristics, including but not limited to the financial profile, operating history, business plan, size, market positioning, geographic footprint, management team, industry and/or sector-specific trends and other characteristics specific to the tenant and parent thereof; unit-level operating characteristics, including store sales performance and profitability, if available; lease-specific terms, including term of the lease, rent to be paid by the tenant and other tenancy considerations, and transaction considerations, such as purchase price, seller profile and other non-financial terms. 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 stock equity offerings, secured mortgage borrowings, unsecured bank borrowings, private placements of senior unsecured notes and the sale of properties to meet our capital requirements. We continually 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, the market value of our properties and other factors. As of December 31, 2018, our ratio of total debt to enterprise value, assuming the conversion of limited partnership interests in the Operating Partnership (“OP Units”) into shares of common stock, was approximately 24.9%, and our ratio of total debt to total gross assets (before accumulated depreciation) was approximately 31.5%. As of December 31, 2018, our total debt outstanding before deferred financing costs was $724.0 million, including $61.5 million of secured mortgage debt that had a weighted average fixed interest rate of 4.13% (including the effects of interest rate swap agreements) and a weighted average maturity of 3.1 years, $643.5 million of unsecured borrowings that had a weighted average fixed interest rate of 3.96% (including the effects of interest rate swap agreements) and a weighted average maturity of 8.2 years, and $19.0 million of floating rate borrowings under our revolving credit facility at a weighted average interest rate of approximately 3.38%. 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 4 renovations or alterations, typically paid for by 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. Competition The U.S. commercial real estate investment market is a highly competitive industry. We actively compete with many entities engaged in the acquisition, development and operation of commercial properties. As such, we compete with other investors for a limited supply of properties and financing for these properties. Investors include traded and non-traded public REITs, private equity firms, institutional investment funds, insurance companies and private individuals, 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, 2018, we leased 105 properties to Sherwin-Williams. As of December 31, 2018, total annualized base rent from Sherwin-Williams was approximately 6.0%, and the weighted average remaining lease term was 11.8 years. As of December 31, 2018, we leased 23 properties to Walgreens. Total annualized base rents from Walgreens were approximately 5.4%, 7.7% and 11.6% for the years ended 2018, 2017 and 2016, respectively. As of December 31, 2018, the weighted average remaining lease term of our Walgreens leases was 8.1 years. No other tenant accounted for more than 5.0% of our annualized base rent as of December 31, 2018. 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. 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, 2018, 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. 5 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 The following factors and other factors discussed in this Annual Report on Form 10 - K could cause our actual results to differ materially from those contained in forward-looking statements made in this report or presented elsewhere in future SEC reports. You should carefully consider each of the risks, assumptions, uncertainties and other factors described below and elsewhere in this report, as well as any reports, 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. Risks Related to Our Business and Operations Economic and financial conditions may have a negative effect on our business and operations. Changes in global or national economic conditions, such as a global economic and financial market downturn or a disruption in the capital markets, may cause, among other things, a significant tightening in the credit markets, lower levels of liquidity, increases in the rate of default and bankruptcy and lower consumer spending and business spending, which could adversely affect our business and operations. Potential consequences of changes in economic and financial conditions include: • • • • • • changes in the performance of our tenants, which may result in lower rent and lower recoverable expenses that the tenant can afford to pay and tenant defaults under the leases; current or potential tenants may delay or postpone entering into long-term net leases with us; 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 shareholders and increase our future interest expense; our ability to access the capital markets may be restricted at a time when we would like, or need, to access those markets, which could have an impact on our flexibility to react to changing economic and business conditions; the recognition of impairment charges on or reduced values of our properties, which may adversely affect our results of operations or limit our ability to dispose of assets at attractive prices and may reduce the availability of buyer financing; and one or more lenders under our revolving 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. Our business is significantly dependent on single tenant properties. We focus our development and investment activities on ownership of real properties that are primarily net leased to a single tenant. Therefore, the financial failure of, or other default in payment by, a single tenant under its lease and the potential resulting vacancy 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 impairment loss. In addition, we would be responsible for all of the operating costs of a property following a vacancy at a single tenant building. 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 releasing such property. 6 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. In addition, our tenants compete with alternative forms of retailing, including online shopping, home shopping networks and mail order catalogs. 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 loss of rental income attributable to the affected 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. 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 is concentrated in certain States, which makes us more susceptible to adverse events in these areas. Our properties are located in 46 states throughout the United States and in particular, the state of Michigan (where 51 properties out of 645 properties are located or 9.7% of our annualized base rent was derived as of December 31, 2018), Texas (47 properties or 8.3% of our annualized base rent) and Florida (48 properties or 6.5% of our annualized base rent). An economic downturn or other adverse events or conditions such as natural disasters in any of these areas, or any other area where we may have significant concentration in the future, could result in a material reduction of our cash flows or material losses to our company. There are 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 revolving credit facility or other forms of 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. Furthermore, new project commencement risks also include receipt of zoning, occupancy, 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. 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 a limited number of 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 shareholders 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. 7 The capital markets may limit our sources of funds for financing activities. Our ability to access the capital markets may be restricted at a time when we would like, or need, to access those markets. This could have an impact on our flexibility to react to changing economic and business conditions. A lack of available credit, lack of confidence in the financial sector, increased volatility in the financial markets and reduced business activity could materially and adversely affect our business, financial condition, results of operations and our ability to obtain and manage our liquidity. In addition, the cost of debt financing and the proceeds may be materially adversely impacted by such market conditions. Also, our ability to access equity markets as a source of funds may be affected by our stock price as well as general market conditions. 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 severely impact their ability to pay rent. Shifts from in-store to online shopping could increase due to changing consumer 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. The availability and timing of cash distributions is uncertain We expect to continue to pay quarterly distributions to our shareholders. 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 shareholders. We cannot assure our shareholders that sufficient funds will be available to pay distributions. The decision to declare and pay dividends on our common stock in the future, as well as the timing, amount, and composition of any such future dividends, will be at the sole discretion of our board of directors and will depend on our earnings, funds from operations, liquidity, financial condition, capital requirements, contractual prohibitions, or other limitations under our indebtedness, annual dividend requirements or the REIT provisions of the Internal Revenue Code of 1986, as amended (the “Code”), state law and such other factors as our board of directors deems relevant. Further, we may issue new shares of common stock as compensation to our employees or in connection with public offerings or acquisitions. Any future issuances may substantially increase the cash required to pay dividends at current or higher levels. Our actual dividend payable will be determined by our board of directors based upon the circumstances at the time of declaration. Any preferred shares we may offer may have a fixed dividend rate that would not increase with any increases in the dividend rate of our common stock. Conversely, payment of dividends on our common stock may be subject to payment in full of the dividends on any preferred shares and payment of interest on any debt securities we may offer. If we do not maintain or increase the dividend on our common stock, it could have an adverse effect on the market price of our shares. 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 information technology and cybersecurity attacks, loss of confidential information and other business disruptions. We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information and to manage or support a variety of our business processes and we rely on commercially available systems, software, tools and monitoring to provide infrastructure and security for processing, transmitting and storing information. 8 Any failure, inadequacy or interruption could materially harm our business. Furthermore, our business is subject to risks 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 business relationships, 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. General Real Estate Risk Our performance and value are subject to general economic conditions and risks associated with our real estate assets. There are risks associated with owning and leasing real estate. Although many of our leases contain terms that obligate the tenants to bear substantially all of the costs of operating our properties, investing in real estate involves a number of risks. Income from and the value of our properties may be adversely affected by: • Changes in general or local economic conditions; • The attractiveness of our properties to potential tenants; • Changes in supply of or demand for similar or competing properties in an area; • Bankruptcies, financial difficulties or lease defaults by our tenants; • Changes in operating costs and expense and our ability to control rents; • Our ability to lease properties at favorable rental rates; • Our ability to sell a property when we desire to do so at a favorable price; • Unanticipated changes in costs associated with known adverse environmental conditions or retained liabilities for such conditions; • Changes in or increased costs of compliance with governmental rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws, and our potential liability thereunder; and • Unanticipated expenditures to comply with the Americans with Disabilities Act and other similar regulations. Economic and financial market conditions have and may continue to exacerbate many of the foregoing risks. If a tenant fails to perform on its lease covenants, that would not excuse us from meeting any mortgage debt 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 9 rental rates upon such re-letting were significantly lower than expected rates, our net income and ability to make expected distributions to shareholders 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. 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 shareholders. This potential liability results from the following: • As owner, we may have to pay for property damage and for investigation and clean-up costs incurred in connection with the contamination; • The law may impose clean-up responsibility and liability regardless of whether the owner or operator knew of or caused the contamination; • Even if more than one person is responsible for the contamination, each person who shares legal liability under environmental laws may be held responsible for all of the clean-up costs; and • 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 are certain losses, including losses from environmental liabilities, 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. 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 shareholders 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. 10 Risks Related to Our Debt Financings Our level of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing our operational flexibility, and we may have future capital needs and may not be able to obtain additional financing on acceptable terms. At December 31, 2018, our ratio of total debt to enterprise value (assuming conversion of OP Units into shares of common stock) was approximately 24.9%. Incurring substantial debt may adversely affect our business and operating results by: • requiring us to use a substantial portion of our cash flow to pay interest and principal, which reduces the amount available for distributions, acquisitions and capital expenditures; • making us more vulnerable to economic and industry downturns and reducing our flexibility to respond to • • changing business and economic conditions; requiring us to agree to less favorable terms, including higher interest rates, in order to incur additional debt, and otherwise limiting our ability to borrow for operations, working capital or to finance acquisitions in the future; or limiting our flexibility in conducting our business, including our ability to finance or refinance our assets, contribute assets to joint ventures or sell assets as needed, which may place us at a disadvantage compared to competitors with less debt or debt with less restrictive terms. In addition, 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, (3) there is an increase in interest rates, (4) we default on our financial obligations and (5) debt service requirements increase. 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 consequential loss of income and asset value to us. Under the “cross-default” provisions contained in mortgages encumbering some of our properties, our default under a mortgage with a lender would result in our default under mortgages held on other properties resulting in multiple foreclosures. We generally 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 shareholders, 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 shareholders, 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 financing agreements 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. Our financing agreements contain 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 revolving 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. Our unsecured revolving credit facility and certain term loan agreements contain various restrictive corporate covenants, including a maximum total leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum recourse secured debt ratio, a minimum net worth requirement and a maximum payout ratio. In addition, our unsecured revolving credit facility and certain term loan agreements have unencumbered pool covenants, which include a minimum number of eligible unencumbered assets, a maximum unencumbered leverage ratio and a minimum unencumbered interest coverage ratio. These covenants may restrict our ability to pursue certain business initiatives or certain transactions that might otherwise be advantageous. Furthermore, failure to meet certain of these financial covenants could cause an event of default under and/or accelerate some or all of such indebtedness which could have a material adverse effect on us. 11 Credit market developments may reduce availability under our revolving credit facility. 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 our existing revolving credit facility, including but not limited to: extending credit up to the maximum amount permitted by such 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 revolving credit facility, it could be difficult to replace our revolving credit facility on similar terms. Any such failure by any of the lenders under the revolving credit facility may impact our ability to finance our operating or investing activities. An increase in market interest rates could raise our interest costs on existing and future debt or adversely affect our stock price, and a decrease in interest rates may lead to additional competition for the acquisition of real estate or adversely affect our results of operations. Our interest costs for any new debt and our current debt obligations may rise if interest rates increase. This increased cost could make the financing of any new acquisition more expensive as well as lower our current period earnings. Rising interest rates could limit our ability to refinance existing debt when it matures or cause us to pay higher interest rates upon refinancing. In addition, an increase in interest rates could decrease the access third parties have to credit, thereby decreasing the amount they are willing to pay to lease our assets and limit our ability to reposition our portfolio promptly in response to changes in economic or other conditions. An increase in market interest rates may lead prospective purchasers of our common stock to expect a higher dividend yield, which could adversely affect the market price of our common stock. Decreases in interest rates may lead to additional competition for the acquisition of real estate due to a reduction in desirable alternative income-producing investments. Increased competition for the acquisition of real estate may lead to a decrease in the yields on real estate targeted for acquisition. In such circumstances, if we are not able to offset the decrease in yields by obtaining lower interest costs on our borrowings, our results of operations may be adversely affected. 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, that a court could rule that such agreements are not legally enforceable, and that we may have to post collateral to enter into hedging transactions, which we may lose if we are unable to honor our obligations. 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, bylaws and Maryland law contain provisions that may delay, defer or prevent a change of control transaction. Our charter contains 9.8% ownership limits. 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 contains provisions that limit any person to actual or constructive ownership of no more than 9.8% (in value or in number of shares, whichever is more restrictive) of the outstanding shares of our common stock and no more than 9.8% (in value) of the aggregate of the outstanding shares of all classes and series of our stock. Our board of directors, in its sole discretion, may exempt, subject to the satisfaction of certain conditions, any person from the ownership limits. 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 limits may delay or impede, and we may use the ownership limits 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 shareholders. 12 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 may be viewed to be in the best interest of our shareholders. 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 viewed to be in the best interest of our shareholders. 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: • • “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 shareholders 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 certain 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 viewed to be in the best interest of our shareholders. 13 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 could include classes or series of preferred stock, common stock and senior or subordinated notes. Our ability to raise additional capital may be restricted at a time when we would like or need, including as a result of market conditions. Future market dislocations could cause us to seek sources of potentially less attractive capital and impact our flexibility to react to changing economic and business conditions. All debt securities and other borrowings, as well as all classes or series of preferred stock, will be senior to our common stock in a liquidation of our company. Additional equity offerings could dilute our shareholders’ equity and reduce the market price of shares of our common stock. In addition, depending on the terms and pricing of an additional offering of our common stock and the value of our properties, our shareholders may experience dilution in both the book value and fair value of their shares. The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market after an offering or the perception that such sales could occur, and this could materially and adversely affect our ability to raise capital through future offerings of equity or equity-related securities. In addition, we may issue preferred stock or other securities convertible into equity securities with a distribution preference or a liquidation preference that may limit our ability to make distributions on our common stock. Our ability to estimate the amount, timing or nature of additional offerings is limited as these factors will depend upon market conditions and other factors. The market price of our stock may vary substantially. The market price of our common stock could be volatile, and investors in our common stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. Among the market conditions that may affect the market price of our common stock are the following: • Changes in interest rates; • Our financial condition and operating performance and the performance of other similar companies; • Actual or anticipated variations in our quarterly results of operations; • The extent of investor interest in our company, real estate generally or commercial real estate specifically; • The reputation of REITs generally and the attractiveness of their equity securities in comparison to other equity securities, including securities issued by other real estate companies, and fixed income securities; • Changes in expectations of future financial performance or changes in estimates of securities analysts; • Fluctuations in stock market prices and volumes; and • Announcements by us or our competitors of acquisitions, investments or strategic alliances. An officer and director may have interests that conflict with the interests of shareholders. 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 shareholders with respect to business decisions affecting us and the Operating Partnership, such as interests in the timing and pricing of property sales or refinancing in order to obtain favorable tax treatment. 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 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. Additionally, our charter provides our board of directors with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the approval 14 of our stockholders. A REIT that annually distributes at least 90% of its taxable income to its shareholders generally is not taxed at the corporate level on such distributed income. 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: • We would not be allowed a deduction for dividends paid to shareholders in computing our taxable income and would be subject to federal income tax at regular corporate rates. • We may be subject to increased state and local taxes. • Unless we are entitled to relief under statutory provisions, we could not elect to be treated as a REIT for four taxable years following the year in which we failed to qualify. In addition, if we fail to qualify as a REIT, we will no longer be required to pay dividends (other than any mandatory dividends on any preferred shares we may offer). As a result of these factors, our failure to qualify as a REIT could adversely affect the market price for our common stock. U.S. federal tax reform legislation could affect REITs generally, the geographic markets in which we operate, our stock and our results of operations, both positively and negatively in ways that are difficult to anticipate. Changes to the federal income tax laws are proposed regularly. Additionally, the REIT rules are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Department of the Treasury, which may result in revisions to regulations and interpretations in addition to statutory changes. If enacted, certain such changes could have an adverse impact on our business and financial results. In particular, H.R. 1, which took effect for taxable years that began on or after January 1, 2018 (subject to certain exceptions), made many significant changes to the federal income tax laws that profoundly impacted the taxation of individuals, corporations (both regular C corporations as well as corporations that have elected to be taxed as REITs), and the taxation of taxpayers with overseas assets and operations. A number of changes that affect non-corporate taxpayers will expire at the end of 2025 unless Congress acts to extend them. These changes will impact us and our shareholders in various ways, some of which are adverse or potentially adverse compared to prior law. While the IRS has issued some guidance with respect to certain of the new provisions, there are numerous interpretive issues that will require further guidance. It is highly likely that technical corrections legislation will be needed to clarify certain aspects of the new law and give proper effect to Congressional intent. There can be no assurance, however, that technical clarifications or further changes needed to prevent unintended or unforeseen tax consequences will be enacted by Congress in the near future. In addition, while certain elements of tax reform legislation do not impact us directly as a REIT, they could impact the geographic markets in which we operate, the tenants that populate our properties and the customers who frequent our properties in ways, both positive and negative, that are difficult to anticipate. Other legislative proposals could be enacted in the future that could affect REITs and their shareholders. Prospective investors are urged to consult their tax advisors regarding the effect of H.R. 1 and any other potential tax law changes on an investment in 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 shareholders. 15 Complying with REIT requirements may force us to liquidate or restructure otherwise attractive investments. In order to qualify as a REIT, at least 75% of the value of our assets must consist of cash, cash items, government securities and qualified real estate assets. The remainder of our investments in securities (other than government securities, securities of TRSs and qualified real estate assets) cannot include more than 10% of the voting securities or 10% of the value of all securities, of any one issuer. In addition, in general, no more than 5% of the total value of our assets (other than government securities, securities of TRSs and qualified real estate assets) can consist of securities of any one issuer, and no more than 20% of the total value of our assets can be represented by one or more TRSs. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments. 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 expenses that 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. 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 remain qualified 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 federal income tax on any of our REIT taxable income (including capital gains) that we do not distribute annually to our shareholders. Additionally, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which dividends paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. Moreover, if we have net income from “prohibited transactions,” that income will be subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. The determination as to whether a particular sale is a prohibited transaction depends on the facts and circumstances related to that sale. While we will undertake sales of assets if those assets become inconsistent with our long-term strategic or return objectives, we do not believe that those sales should be considered prohibited transactions, but there can be no assurance that the Internal Revenue Service would not contend otherwise. The need to avoid prohibited transactions could cause us to forego or defer sales of properties that might otherwise be in our best interest to sell. In addition, any net taxable income earned directly by our TRSs, or through entities that are disregarded for federal income tax purposes as entities separate from our TRSs, will be subject to federal and possibly state corporate income tax. To the 16 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 shareholders. Dividends payable by REITs do not qualify for the reduced tax rates on dividend income from regular corporations. The maximum federal income tax rate applicable to “qualified dividend income” payable by non-REIT corporations to certain non-corporate U.S. stockholders is generally 20% and a 3.8% Medicare tax may also apply. Dividends paid by REITs, however, generally are not eligible for the reduced rates applicable to qualified dividend income. Commencing with taxable years that began on or after January 1, 2018 and continuing through 2025, H.R. 1 temporarily reduced the effective tax rate on ordinary REIT dividends (i.e., dividends other than capital gain dividends and dividends attributable to certain qualified dividend income received by us) for U.S. holders of our common stock that are individuals, estates or trusts by permitting such holders to claim a deduction in determining their taxable income equal to 20% of any such dividends they receive. Taking into account H.R. 1’s reduction in the maximum individual federal income tax rate from 39.6% to 37%, this results in a maximum effective rate of regular income tax on ordinary REIT dividends of 29.6% through 2025 (as compared to the 20% maximum federal income tax rate applicable to qualified dividend income received from a non-REIT corporation). The more favorable rates applicable to regular corporate distributions could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay distributions. This could materially and adversely affect the value of the stock of REITs, including our common 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, 2018, our portfolio consisted of 645 properties located in 46 states and totaling approximately 11.2 million square feet of GLA. As of December 31, 2018, our portfolio was approximately 99.8% leased and had a weighted average remaining lease term of approximately 10.2 years. A significant majority of our properties are leased to national tenants and approximately 51.4% 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 certain leases provide for additional rent calculated as a percentage of the tenants’ gross sales above a specified level. 17 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, 2018: ($in thousands) Tenant / Concept Sherwin-Williams Walgreens Walmart LA Fitness TJX Companies Tractor Supply Lowe's CVS Dollar General O'Reilly Auto Parts Mister Car Wash Dave & Buster's Best Buy AutoZone Wawa Hobby Lobby Burlington Coat Factory Dollar Tree AMC Other(2) Total Annualized % of Ann. Base Rent (1) Base Rent 6.0 % $ 5.4 % 3.9 % 3.2 % 2.9 % 2.7 % 2.7 % 2.2 % 2.1 % 2.0 % 2.0 % 1.9 % 1.9 % 1.8 % 1.7 % 1.7 % 1.6 % 1.5 % 1.5 % 51.3 % 100.0 % 9,520 8,445 6,092 5,063 4,541 4,323 4,215 3,397 3,342 3,156 3,141 3,052 2,979 2,832 2,664 2,621 2,572 2,437 2,388 80,857 $ 157,637 (1) Represents annualized straight-line rent as of December 31, 2018. (2) Includes tenants generating less than 1.5% of annualized base rent. 18 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, 2018: ($in thousands) Tenant Sector Home Improvement Pharmacy Tire and Auto Service Grocery Stores Off-Price Retail Health and Fitness Auto Parts Convenience Stores Restaurants - Quick Service General Merchandise Farm and Rural Supply Crafts and Novelties Dollar Stores Home Furnishings Consumer Electronics Specialty Retail Other(2) Total Annualized % of Ann. Base Rent (1) Base Rent 11.1 % $ 8.5 % 7.6 % 6.3 % 5.7 % 5.1 % 4.6 % 4.5 % 4.1 % 3.8 % 3.4 % 3.2 % 2.9 % 2.8 % 2.7 % 2.7 % 21.0 % 100.0 % 17,434 13,428 11,914 9,897 9,002 8,104 7,217 7,127 6,456 5,924 5,425 5,000 4,570 4,360 4,335 4,296 33,148 $ 157,637 (1) Represents annualized straight-line rent as of December 31, 2018. (2) Includes sectors generating less than 2.5% of annualized base rent. 19 Geographic Diversification The following table presents annualized base rents, by state, for our portfolio as of December 31, 2018: ($in thousands) Tenant Sector Michigan Texas Florida Illinois Ohio New Jersey Pennsylvania Georgia Louisiana Missouri North Carolina Virginia Mississippi Kansas Wisconsin New York Kentucky Oregon Indiana California Oklahoma Alabama Colorado South Carolina Arizona Tennessee Iowa Utah New Mexico Minnesota North Dakota Rhode Island Arkansas Delaware Connecticut Maine West Virginia New Hampshire Washington Maryland Nevada Idaho South Dakota Montana Nebraska Massachusetts Total (1) Represents annualized straight-line rent as of December 31, 2018. 20 Annualized % of Ann. Base Rent (1) Base Rent 9.7 % $ 8.3 % 6.5 % 5.8 % 5.4 % 4.4 % 3.9 % 3.9 % 3.5 % 3.3 % 2.9 % 2.7 % 2.6 % 2.5 % 2.4 % 2.4 % 2.4 % 2.1 % 2.1 % 1.7 % 1.7 % 1.7 % 1.6 % 1.7 % 1.6 % 1.5 % 1.4 % 1.4 % 1.4 % 1.2 % 0.8 % 0.7 % 0.7 % 0.6 % 0.6 % 0.5 % 0.4 % 0.4 % 0.3 % 0.3 % 0.3 % 0.3 % 0.2 % 0.1 % 0.1 % 0.0 % 100.0 % 15,339 13,067 10,193 9,163 8,522 7,005 6,215 6,153 5,595 5,260 4,643 4,255 4,139 3,973 3,733 3,683 3,625 3,110 3,105 2,838 2,799 2,771 2,706 2,631 2,594 2,342 2,198 2,032 1,981 1,923 1,200 1,159 1,053 1,010 885 792 662 625 541 539 487 480 326 125 89 71 157,637 $ Lease Expirations The following table presents contractual lease expirations within the Company’s portfolio as of December 31, 2018, assuming that no tenants exercise renewal options: ($and GLA in thousands) Year 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Thereafter Total Number of Leases Dollars Annualized Base Rent (1) Gross Leasable Area % of Total Square Feet Total % of 2,565 11 $ 3,219 19 5,228 26 4,358 23 6,952 38 10,130 36 9,440 40 9,133 54 11,420 50 14,351 48 80,841 367 712 $ 157,637 1.6 % 2.0 % 3.3 % 2.8 % 4.4 % 6.4 % 6.0 % 5.8 % 7.2 % 9.1 % 51.4 % 100 % 1.4 % 156 2.1 % 232 2.8 % 314 3.4 % 383 6.2 % 691 9.0 % 1,006 7.8 % 877 8.3 % 932 6.7 % 748 9.8 % 1,101 42.5 % 4,797 11,237 100.0 % (1) Represents annualized straight-line rent as of December 31, 2018. 21 Developments During the fourth quarter of 2018, construction continued or commenced on eight development and Partner Capital Solutions (“PCS”) projects with anticipated total project costs of approximately $28.8 million. The projects consist of the Company’s first development with Gerber Collision in Round Lake, Illinois; the Company’s redevelopment of the former Kmart space in Frankfort, Kentucky for ALDI, Big Lots and Harbor Freight Tools; the Company’s first three developments with Sunbelt Rentals in Batavia and Maumee, Ohio and Georgetown, Kentucky; the Company’s third and fourth developments with Mister Car Wash in Orlando and Tavares, Florida; and the Company’s redevelopment of the former Kmart space in Mount Pleasant, Michigan for Hobby Lobby. During the twelve months ended December 31, 2018, the Company had 16 development or PCS projects completed or under construction. Anticipated total costs for those projects are approximately $74.4 million and include the following completed or commenced projects: Tenant Mister Car Wash Mister Car Wash Burger King(1) Art Van Furniture Camping World ALDI Burger King(1) Burlington Coat Factory Mister Car Wash Mister Car Wash Sunbelt Rentals Sunbelt Rentals Sunbelt Rentals Gerber Collision Hobby Lobby Big Lots Harbor Freight Tools ALDI Lease Structure Location Build-to-Suit Urbandale, IA Bernalillo, NM Build-to-Suit North Ridgeville, OH Build-to-Suit Build-to-Suit Canton, MI Build-to-Suit Grand Rapids, MI Build-to-Suit Chickasha, OK Build-to-Suit Aurora, IL Build-to-Suit Nampa, ID Build-to-Suit Orlando, FL Build-to-Suit Tavares, FL Build-to-Suit Batavia, OH Build-to-Suit Maumee, OH Build-to-Suit Georgetown, KY Build-to-Suit Round Lake, IL Build-to-Suit Mt. Pleasant, MI Build-to-Suit Frankfort, KY Build-to-Suit Frankfort, KY Build-to-Suit Frankfort, KY Lease Term 20 years 20 years 20 years 20 years 20 years 10 years 20 years 15 years 20 years 20 years 10 years 10 years 15 years 15 years 15 years 10 years 10 years 10 years Notes: (1) Franchise restaurant operated by TOMS King, LLC. Item 3: Legal Proceedings Actual or Anticipated Rent Commencement Q1 2018 Q1 2018 Q1 2018 Q1 2018 Q2 2018 Q3 2018 Q3 2018 Q3 2018 Q1 2019 Q1 2019 Q1 2019 Q1 2019 Q3 2019 Q3 2019 Q4 2019 Q1 2020 Q1 2020 Q2 2020 Status Completed Completed Completed Completed Completed Completed Completed Completed Under Construction Under Construction Under Construction Under Construction Under Construction Under Construction Under Construction Under Construction Under Construction Under Construction 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. 22 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.” At February 19, 2019, there were 37,537,012 shares of our common stock issued and outstanding which were held by approximately 129 shareholders of record. The number of shareholders of record does not reflect persons or entities that held their shares in nominee or “street” name. In addition, at February 19, 2019 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. Common stock repurchases during the three months ended December 31, 2018 were: Period October 1, 2018 - October 31, 2018 November 1, 2018 - November 30, 2018 December 1, 2018 - December 31, 2018 Maximum Number Total Number of Shares Purchased of Shares that May Yet Be Purchased as Part of Publicly Under the Plans Average Price Paid Per Announced Plans Per Share or Programs or Programs — 56.81 61.91 57.00 — — — — — — — — Total Number of Shares Purchased — 5,815 221 6,036 $ $ During the three months ended December 31, 2018, the Company withheld 6,036 shares from employees to satisfy estimated statutory income tax obligations related to vesting of restricted stock awards. The value of the common stock withheld was based on the closing price of our common stock on the applicable vesting date. There were no unregistered sales of equity secruities during the three months ended December 31, 2018. We intend to continue to declare quarterly dividends. 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 shareholders, 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 shareholders 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 shareholders 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 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. 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. The balance sheet for 23 the periods ending December 31, 2014 through 2018 and operating data for each of the periods presented were derived from our audited financial statements. (in thousands, except per share information and number of properties) Operating Data Total revenues Expenses Property costs (1) General and administrative Interest Depreciation and amortization Impairments Total Expenses Income From Operations Gain (loss) on extinguishment of debt Gain (loss) on sale of assets Other income Income tax expense 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 2018 2017 2016 2015 2014 Year Ended December 31, $ 148,195 $ 116,555 $ 91,527 $ 69,966 $ 53,559 17,011 12,165 24,872 43,698 2,319 100,065 48,130 — 11,180 4 (516) 58,798 12,467 9,722 18,137 31,752 — 72,078 44,477 — 14,193 347 (227) 58,790 8,596 7,862 15,343 23,407 — 55,208 36,319 (333) 9,964 — (153) 45,797 6,379 6,836 12,305 16,486 — 42,006 27,960 (181) 12,135 — (152) 39,762 4,916 6,629 8,477 11,103 3,020 34,145 19,414 — (528) — (110) 18,776 — — — — 123 — 58,798 — 58,790 — 45,797 — 39,762 14 18,913 626 678 679 744 425 $ 58,172 $ 58,112 $ 45,118 $ 39,018 $ 18,488 32,401 1.78 2.16 $ $ 27,700 2.08 2.03 $ $ 22,960 1.97 1.92 18,065 2.15 1.85 $ $ 14,967 1.22 1.74 $ $ $ $ $ 1,761,647 $ 2,028,189 $ 728,841 $ 1,299,255 $ 1,494,634 $ 525,811 $ 1,019,956 $ 1,141,972 $ 406,261 $ 755,849 $ 807,042 $ 320,547 $ 589,147 $ 606,415 $ 222,483 645 11,237 436 8,663 366 7,033 278 5,207 209 4,315 100 % 100 % 100 % 99 % 99 % (1) Property costs include real estate taxes, insurance, maintenance and land lease expense. 24 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 our common stock was 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 99.1% interest as of December 31, 2018. As of December 31, 2018, our portfolio consisted of 645 properties located in 46 states and totaling approximately 11.2 million square feet of GLA. As of December 31, 2018, our portfolio was approximately 99.8% leased and had a weighted average remaining lease term of approximately 10.2 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 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 Refer to “Note 2 – Summary of Significant Accounting Policies” in the Consolidated Financial Statements for a summary and anticipated impact of each accounting pronouncement on the Company’s financial statements. Critical Accounting Policies Our accounting policies are determined in accordance with generally accepted accounting principles (“GAAP”). The preparation of our financial statements requires us to make estimates and assumptions that are subjective in nature and, as a result, our actual results could differ materially from our estimates. Set forth below are the more critical accounting policies that require management judgment and estimates in the preparation of our consolidated financial statements. This summary should be read in conjunction with the more complete discussion of our accounting policies and procedures included in Note 2 to our Consolidated Financial Statements. 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 incurred. 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 25 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 of our due diligence, including expected future cash flows of the property and various characteristics of the markets where the property is located. Depreciation Our real estate portfolio is depreciated using the straight-line method over the estimated remaining useful life of the properties, which are generally 40 years for buildings and 10 to 20 years for improvements. Properties classified as “held for sale” and properties under development 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. Results of Operations Comparison of Year Ended December 31, 2018 to Year Ended December 31, 2017 Minimum rental income increased $27.7 million, or 26%, to $132.8 million in 2018, compared to $105.1 million in 2017. Approximately $29.5 million of the increase was due to the acquisition of 225 properties in 2018 and the full year impact of 79 properties acquired in 2017. Approximately $2.8 million of the increase was attributable to eight development projects completed in 2018 and the full year impact of four development projects completed in 2017. The increases were partially offset by a $4.8 million reduction in minimum rental income from properties sold during 2018 that were owned for all or part of 2017. Operating cost reimbursements increased $4.1 million, or 38%, to $14.9 million in 2018, compared to $10.8 million in 2017. Operating cost reimbursements increased primarily due to increased property count. The portfolio recovery rate remained consistent at 91% in 2018 and 2017. Real estate taxes increased $2.5 million, or 31%, to $10.7 million in 2018, compared to $8.2 million in 2017. The increase was due to the ownership of additional properties in 2018 compared to 2017 for which we remit real estate taxes and are reimbursed by tenants. Property operating expenses increased $2.0 million, or 56%, to $5.6 million in 2018, compared to $3.6 million in 2017. The increase was due to the ownership of additional properties in 2018 compared to 2017. Land lease payments decreased $0.1 million in 2018 to $0.6 million compared to $0.7 million in 2017. The decrease was due to exercising the option to purchase the fee simple interest in a property for which we were previously the lessee. General and administrative expenses increased $2.5 million, or 25%, to $12.2 million in 2018, compared to $9.7 million in 2017. The increase was primarily the result of increased employee headcount and professional costs. General and administrative expenses as a percentage of total revenue decreased to 8.2% in 2018 from 8.3% in 2017. Depreciation and amortization increased $11.9 million, or 38%, to $43.7 million in 2018, compared to $31.8 million in 2017. The increase was primarily due to the ownership of additional properties in 2018 compared to 2017. Provision for impairment increased $2.3 million in 2018, compared to $0.0 million in 2017. Provisions for impairment reflect the amount by which current book value exceeds estimated fair value. 26 Interest expense increased $6.8 million, or 37%, to $24.9 million in 2018, compared to $18.1 million in 2017. The increase in interest expense was primarily a result of higher levels of borrowings in 2018 to finance the acquisition and development of additional properties in comparison to the full year impact of 2017 financings. Gain on sale of assets decreased $3.0 million, or 21%, to $11.2 million in 2018, compared to $14.2 million in 2017. The decrease in gain on sale of assets was primarily a result of a decrease in asset sales price relative to net asset basis after depreciation and amortization, partially offset by an increase in the number of properties sold in 2018 compared to 2017. Net income remained consistent with the prior year. The years ended December 31, 2018 and 2017 totaled $58.8 million. Comparison of Year Ended December 31, 2017 to Year Ended December 31, 2016 Minimum rental income increased $21.1 million, or 25%, to $105.1 million in 2017, compared to $84.0 million in 2016. Approximately $22.4 million of the increase was due to the acquisition of 79 properties in 2017 and the full year impact of 82 properties acquired in 2016. Approximately $2.2 million of the increase was attributable to four development projects completed in 2017 and the full year impact of nine development projects completed in 2016. These increases were partially offset by approximately a $2.1 million reduction in minimum rental income from properties sold during 2017 that were owned for all or part of 2016. Operating cost reimbursements increased $3.5 million, or 48%, to $10.8 million in 2017, compared to $7.3 million in 2016. Operating cost reimbursements increased primarily due to higher levels of recoverable property operating expenses, including real estate taxes, and increased property count. The portfolio recovery rate remained consistent at 91% in 2017 and 2016 due to the factors discussed above. Real estate taxes increased $2.7 million, or 50%, to $8.2 million in 2017, compared to $5.5 million in 2016. The increase was due to the ownership of additional properties in 2017 compared to 2016 for which we remit real estate taxes and are subsequently reimbursed by tenants. Property operating expenses increased $1.1 million, or 45%, to $3.6 million in 2017, compared to $2.5 million in 2016. The increase was primarily due to the ownership of additional properties in 2017 compared to 2016 which contributed to higher property maintenance, utilities and insurance expenses. Our tenants subsequently reimbursed us for the majority of these expenses. Land lease payments remained consistent with prior periods. The years ended December 31, 2017 and 2016 totaled approximately $0.7 million. General and administrative expenses increased $1.8 million, or 23%, to $9.7 million in 2017, compared to $7.9 million in 2016. The increase was primarily the result of increased employee headcount and associated professional costs and was partially offset by a one-time credit of $0.2 million to reflect a reduction in the company’s deferred tax liability due to new tax legislation. General and administrative expenses as a percentage of total revenue decreased to 8.3% for 2017 from 8.6% in 2016. Depreciation and amortization increased $8.4 million, or 35%, to $31.8 million in 2017, compared to $23.4 million in 2016. The increase was due to the ownership of additional properties in 2017 compared to 2016. Interest expense increased $2.8 million, or 18%, to $18.1 million in 2017, from $15.3 million in 2016. The increase in interest expense was primarily a result of higher levels of borrowings to finance the acquisition and development of additional properties and the issuance of $100.0 million senior unsecured notes in September 2017 compared to the full year interest impact of debt issuances in 2016. During 2017, the Company sold real estate properties for net proceeds of $44.3 million and recorded a net gain of $14.2 million (net of any expected losses on real estate held for sale). 27 Net income increased $13.0 million, or 29%, to $58.8 million in 2017, from $45.8 million in 2016. The change was the results of items discussed above, including non-cash amounts such as gain on sale of assets and depreciation and amortization. Liquidity and Capital Resources Our principal demands for funds include payment of operating expenses, payment of principal and interest on our outstanding indebtedness, distributions to our shareholders and future property acquisitions and development. We expect to meet our short-term liquidity requirements through cash provided from operations and borrowings under our revolving credit facility. As of December 31, 2018, available cash and cash equivalents was $54.0 million. As of December 31, 2018 we had $19.0 million outstanding on our revolving credit facility and $306.0 million was available for future borrowings, subject to our compliance with covenants. In July 2018, the Company elected to pursue commitments under the accordion option outlined in its senior unsecured revolving credit facility to increase the borrowing capacity under its line of credit from $250.0 million to $325.0 million. We anticipate funding our long-term capital needs through cash provided from operations, borrowings under our revolving credit facility, the issuance of debt and common or preferred equity or other instruments convertible into or exchangeable for common or preferred equity. In August 2017, the Company entered into an uncommitted and unsecured $100.0 million private placement shelf agreement (the “TIAA Shelf Agreement”) with Teachers Insurance and Annuity Association of America (“TIAA”) and each TIAA Affiliate named therein. The TIAA Shelf Agreement allows us to issue senior unsecured notes to TIAA at terms to be agreed upon at the time of any issuance during a three year issuance period ending in August 2020. In September 2018, the Company issued $25.0 million in senior unsecured notes under the TIAA Shelf Agreement. As of December 31, 2018, $75.0 million remained outstanding under the TIAA Shelf Agreement. 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, 2018, our total market capitalization was approximately $2.9 billion. Market capitalization consisted of $2.2 billion of common stock (based on the December 31, 2018 closing price of our common stock on the NYSE of $59.12 per share and assuming the conversion of OP Units) and $724.0 million of total debt including (i) $19.0 million of borrowings under our revolving credit facility; (ii) $258.5 million of unsecured term loans; (iii) $385.0 million of senior unsecured notes; and (iv) $61.5 million of mortgage notes payable. Our ratio of total debt to total market capitalization was 23.0% at December 31, 2018. At December 31, 2018, the non-controlling interest in our Operating Partnership consisted of a 0.9% 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. The Company 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 37,893,409 shares of common stock outstanding at December 31, 2018. 28 Debt The below table summarizes the Company’s outstanding debt for the periods ended December 31, 2018 and December 31, 2017 (in thousands): Senior Unsecured Revolving Credit Facility Credit Facility (1) Total Credit Facility Interest Rate 3.52 % January 2021 Maturity Principal Amount Outstanding December 31, 2018 December 31, 2017 14,000 $ 14,000 $ 19,000 $ 19,000 $ Unsecured Term Loans (2) 2019 Term Loan 2023 Term Loan 2024 Term Loan Facility 2024 Term Loan Facility 2026 Term Loan Total Unsecured Term Loans Senior Unsecured Notes (2) 2025 Senior Unsecured Notes 2027 Senior Unsecured Notes 2028 Senior Unsecured Notes 2029 Senior Unsecured Notes 2030 Senior Unsecured Notes Total Senior Unsecured Notes Mortgage Notes Payable (2) Secured Term Loan Single Asset Mortgage Loan Portfolio Mortgage Loan Single Asset Mortgage Loan CMBS Portfolio Loan Single Asset Mortgage Loan Portfolio Credit Tenant Lease Total Mortgage Notes Payable Total Principal Amount Outstanding 3.62 % May 2019 2.40 % July 2023 3.09 % January 2024 3.20 % January 2024 4.26 % January 2026 $ $ 18,543 $ 40,000 65,000 35,000 100,000 258,543 $ $ 4.16 % May 2025 4.26 % May 2027 4.42 % July 2028 4.19 % September 2029 4.32 % September 2030 $ 50,000 $ 50,000 60,000 100,000 125,000 385,000 $ $ 2.49 % March 2018 3.32 % October 2019 6.90 % January 2020 6.24 % February 2020 3.60 % January 2023 5.01 % September 2023 6.27 % July 2026 $ $ — $ 21,500 1,922 2,872 23,640 4,959 6,626 61,519 $ 19,304 40,000 65,000 35,000 — 159,304 50,000 50,000 60,000 100,000 — 260,000 25,000 21,500 3,573 2,963 23,640 5,131 7,288 89,095 724,062 $ 522,399 (1) The annual interest rate of the Credit Facility assumes one month LIBOR as of December 31, 2018 of 2.52%. (2) Interest rate includes the effects of variable interest rates that have been swapped to fixed interest rates. Senior Unsecured Revolving Credit Facility In December 2016, the Company amended and restated the credit agreement (the “Credit Agreement”) that governs the Company’s senior unsecured revolving credit facility and the Company’s unsecured term loan facility to increase the aggregate borrowing capacity to $350.0 million. In July 2018, the Company elected to pursue commitments under the accordion option outlined in its senior unsecured revolving credit facility to increase the revolving commitments by $75.0 million, raising the total revolving commitments under the amended and restated credit agreement from $250.0 million to $325.0 million. Including the increased commitments, the amended and restated credit agreement provides for a $325.0 million unsecured revolving credit facility, a $65.0 million unsecured term loan facility and a $35.0 million unsecured term loan facility (referenced above as 2024 Term Loan Facilities). The unsecured revolving credit facility matures January 2021 with options to extend the maturity date to January 2022. The 2024 Term Loan Facilities mature January 2024. The Company has the ability to increase the aggregate borrowing capacity under the credit agreement up to $500.0 million, subject to lender approval. 29 Borrowings under the revolving credit facility bear interest at LIBOR plus 85 to 155 basis points, depending on the Company’s credit rating. Additionally, the Company is required to pay a facility fee at an annual rate of 0 to 55 basis points of the total amount of the revolving credit facility, depending on the Company’s credit rating. The Credit Agreement contains certain financial covenants, including a maximum leverage ratio, a minimum fixed charge coverage ratio, and a maximum percentage of secured debt to total asset value. As of December 31, 2018, and December 31, 2017, the Company had $19.0 million and $14.0 million of outstanding borrowings under the revolving credit facility, respectively, bearing weighted average interest rates of approximately 3.38% and 2.63%, respectively. As of December 31, 2018, $306.0 million was available for borrowing under the revolving credit facility and the Company was in compliance with the credit agreement covenants The Company and Richard Agree, the Executive Chairman of the Company, are parties to a Reimbursement Agreement dated November 18, 2014. Pursuant to the Reimbursement Agreement, Mr. Agree has agreed to reimburse the Company for any loss incurred under the unsecured revolving credit facility in an amount not to exceed $14 million to the extent that the value of the Operating Partnership’s assets available to satisfy the Operating Partnership’s obligations under the revolving credit facility is less than $14 million. Unsecured Term Loan Facilities The amended and restated credit agreement extended the maturity dates of the $65.0 million unsecured term loan facility and $35.0 million unsecured term loan facility (together, the “2024 Term Loan Facilities”) to January 2024. In connection with entering into the amended and restated credit agreement, the prior notes evidencing the existing $65.0 million unsecured term loan facility and $35.0 million unsecured term loan facility were canceled and new notes evidencing the 2024 Term Loan Facilities were executed. Borrowings under the unsecured 2024 Term Loan Facilities bear interest at a variable LIBOR plus 85 to 165 basis points, depending on the Company’s credit rating. The Company utilized existing interest rate swaps to effectively fix the LIBOR rate at 213 basis points until maturity. As of December 31, 2018, $100.0 million was outstanding under the 2024 Term Loan Facilities bearing an all-in interest rate of 3.13%, including the swaps. In July 2016, the Company completed a $40.0 million unsecured term loan facility that matures July 2023 (the “2023 Term Loan”). Borrowings under the 2023 Term Loan are priced at LIBOR plus 85 to 165 basis points, depending on the Company’s credit rating. The Company entered into an interest rate swap to fix LIBOR at 140 basis points until maturity. As of December 31, 2018, $40.0 million was outstanding under the 2023 Term Loan, which was subject to an all-in interest rate of 2.40%, including the swap. In August 2016, the Company entered into a $20.3 million unsecured amortizing term loan that matures May 2019 (the “2019 Term Loan”). Borrowings under the 2019 Term Loan are priced at LIBOR plus 170 basis points. In order to fix LIBOR on the 2019 Term Loan at 1.92% until maturity, the Company had an interest rate swap agreement in place, which was assigned by the lender under the Mortgage Note to the 2019 Term Loan lender. As of December 31, 2018, $18.5 million was outstanding under the 2019 Term Loan bearing an all-in interest rate of 3.62%, including the swap. In December 2018, the Company entered into a $100.0 million unsecured term loan facility that matures January 2026 (the “2026 Term Loan”). Borrowings under the 2026 Term Loan are priced at LIBOR plus 145 to 240 basis points, depending on the Company’s credit rating. The Company entered into an interest rate swap to fix LIBOR at 266 basis points until maturity. As of December 31, 2018, $100.0 million was outstanding under the 2026 Term Loan, which was subject to an all-in interest rate of 4.26%, including the swaps. Senior Unsecured Notes In May 2015, the Company and the Operating Partnership completed a private placement of $100.0 million principal amount of senior unsecured notes. The senior unsecured notes were sold in two series; $50.0 million of 4.16% notes due May 2025 (the “2025 Senior Unsecured Notes”) and $50.0 million of 4.26% notes due May 2027 (the “2027 Senior Unsecured Notes”). The senior unsecured notes were sold only to institutional investors and did not involve a public offering in reliance of the exemption from registration in Section 4(a)(2) of the Securities Act. In July 2016, the Company and the Operating Partnership entered into a note purchase agreement with institutional purchasers. Pursuant to the note purchase agreement, the Operating Partnership completed a private placement of 30 $60.0 million aggregate principal amount of 4.42% senior unsecured notes due July 2028 (the “2028 Senior Unsecured Notes”). The senior unsecured notes were sold only 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. In August 2017, the Company and the Operating Partnership entered into a note purchase agreement with institutional purchasers. Pursuant to the note purchase agreement, the Operating Partnership completed a private placement of $100.0 million aggregate principal amount of 4.19% senior unsecured notes due September 2029 (the “2029 Senior Unsecured Notes”). Closing of the private placement was consummated in September 2017; and, on that date, the Operating Partnership issued the senior unsecured notes. The senior unsecured notes were sold only 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. In September 2018, the Company and the Operating Partnership entered into two supplements to uncommitted master note facilities with institutional purchasers. Pursuant to the supplements, the Operating Partnership completed a private placement of $125.0 million aggregate principal amount of 4.32% senior unsecured notes due September 2030 (the “2030 Senior Unsecured Notes”). The senior unsecured notes were sold only 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. Mortgage Notes Payable As of December 31, 2018, the Company had total gross mortgage indebtedness of $61.5 million which was collateralized by related real estate and tenants’ leases with an aggregate net book value of $108.0 million. Including mortgages that have been swapped to a fixed interest rate, the weighted average interest rate on the Company’s mortgage notes payable was 4.13% as of December 31, 2018 and 3.74% as of December 31, 2017. In December 2017, the Company assumed an interest only mortgage note for $21.5 million with PNC Bank, National Association in connection with an acquisition. The mortgage note is due October 2019, secured by a multi-tenant property and has a fixed interest rate of 3.32%. We have entered into mortgage loans which are secured by multiple properties and contain cross-default and cross- collateralization provisions. Cross-collateralization provisions allow a lender to foreclose on multiple properties in the event that we default under the loan. Cross-default provisions allow a lender to foreclose on the related property in the event a default is declared under another loan. Contractual Obligations The following table summarizes our contractual obligations by due date as of December 31, 2018: Mortgage Notes Payable Revolving Credit Facility Unsecured Term Loans Senior Unsecured Notes Land Lease Obligations Estimated Interest Payments on Outstanding Debt (1) Total Total 2019 $ 61,519 $ 24,251 $ 3,867 $ 2020 19,000 258,543 385,000 8,996 — 18,543 — 566 — — — 564 2021 2022 2023 998 $ 1,060 $ 28,726 $ — — — 437 — 40,000 — 437 19,000 — — 521 Thereafter 2,617 — 200,000 385,000 6,471 224,019 91,972 $ 957,078 $ 71,383 $ 31,359 $ 46,739 $ 27,629 $ 93,909 $ 686,060 26,132 28,022 24,746 26,928 26,220 (1) 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. 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 31 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 our 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 (“FFO”) The Company considers the non-GAAP measures of FFO and FFO per share/unit to be key supplemental measures of the Company's performance and should be considered along with, but not as alternatives to, net income or loss as a measure of the Company's operating performance. Historical cost accounting for real estate assets 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, most real estate industry investors consider FFO to be helpful in evaluating a real estate company's operations. The White Paper on FFO approved by the National Association of Real Estate Investment Trusts, Inc. (“Nareit”) in April 2002, as revised in 2011 and 2018, defines FFO as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of properties and items classified by GAAP as extraordinary, plus real estate-related depreciation and amortization and impairment writedowns, and after comparable adjustments for the Company's portion of these items related to unconsolidated entities and joint ventures. The Company’s calculation of FFO may not be comparable to FFO reported by other REITs that interpret the Nareit definition differently from the Company. To align the Company's computation of FFO with the standards established by Nareit's white paper entitled “Nareit Funds From Operations White Paper – 2018 Restatement” published in December 2018, the Company intends to modify its computation of FFO beginning in the first quarter of 2019 to calculate Nareit FFO without adding back the amortization of above and below market lease intangibles (“Nareit FFO”). In addition, the Company will introduce a new operating measure, called Core Funds From Operations ("Core FFO"), in the first quarter of 2019 which it will include in its financial reports in 2019 along with Nareit FFO and Adjusted Funds From Operations (“AFFO”). The Company believes that Core FFO, which will include the addback for above and below market lease intangibles, will more accurately compare its performance to its peers. For more information, please reference the Company's Form 8 - K filed with the SEC on December 10, 2018. The Company believes that excluding the effect of extraordinary items, real estate-related depreciation and amortization and impairments, which are based on historical cost accounting and which may be of limited significance in evaluating current performance, can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common shareholders. However, FFO may not be helpful when comparing the Company to non-REITs. FFO does not represent cash generated from operating activities as determined by GAAP and should not be considered an alternative to net income or loss, cash flows from operations or any other operating performance measure prescribed by GAAP. FFO is not a measurement of the Company's liquidity, nor is FFO indicative of funds available to fund the Company's cash needs, including its ability to make cash distributions. These measurements do not reflect cash expenditures for long-term assets and other items that have been and will be incurred. FFO may include funds that may not be available for management's discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties. To compensate for this, management considers the impact of these excluded items to the extent they are material to operating decisions or the evaluation of the Company's operating performance. Adjusted Funds from Operations (“AFFO”) The Company presents AFFO (including AFFO per share/unit), which adjusts FFO for certain additional items including straight-line accrued rent, deferred revenue recognition, stock based compensation expense, non-real estate depreciation and debt extinguishment costs and certain other items. The Company excludes these items as it believes it allows for meaningful comparisons with other REITs and between periods and is more indicative of the ongoing performance of its 32 assets. As with FFO, the Company’s calculation of AFFO may be different from similar adjusted measures calculated by other REITs. The following table provides a reconciliation of net income to FFO for the years ended December 31, 2018, 2017 and 2016: Reconciliation from Net Income to Funds from Operations Net income Depreciation of rental real estate assets Amortization of leasing costs Amortization of lease intangibles Provision for impairment Gain on sale of assets Funds from Operations Funds from Operations Per Share - Diluted December 31, 2018 December 31, 2017 December 31, 2016 Year Ended $ $ $ 58,798 $ 24,553 191 18,748 2,319 (11,180) 93,429 $ 58,790 $ 19,507 163 12,004 - (14,193) 76,271 $ 45,797 15,200 125 8,010 - (9,964) 59,168 2.85 $ 2.72 $ 2.54 Weighted average shares and OP units outstanding Basic Diluted 32,417,874 32,748,741 27,972,721 28,047,966 23,216,355 23,307,418 The following table provides a reconciliation of net income to AFFO for the years ended December 31, 2018, 2017 and 2016: Reconciliation from Net Income to Adjusted Funds from Operations Net income Cumulative adjustments to calculate FFO Funds from Operations Straight-line accrued rent Deferred revenue recognition Deferred tax expense (benefit) Stock based compensation expense Amortization of financing costs Non-real estate depreciation Loss on debt extinguishment Adjusted Funds from Operations Adjusted Funds from Operations Per Share - Diluted Additional supplemental disclosure Scheduled principal repayments Capitalized interest Capitalized building improvements December 31, 2018 December 31, 2017 December 31, 2016 Year Ended $ $ $ $ $ $ $ 58,798 $ 34,631 93,429 $ (4,648) — — 3,227 578 146 — 92,732 $ 58,790 $ 17,481 76,271 $ (3,548) — (230) 2,589 574 78 — 75,734 $ 45,797 13,371 59,168 (3,582) (541) — 2,441 516 72 333 58,407 2.83 $ 2.70 $ 2.51 3,337 $ 448 $ 1,635 $ 3,151 $ 570 $ 1,230 $ 2,954 210 541 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. 33 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. 2019 2020 2021 2022 2023 Thereafter Total Mortgage Notes Payable Average Interest Rate $ 24,251 $ 3,867 $ 6.21 % 3.69 % 998 $ 1,060 $ 28,726 $ 3.89 % 6.02 % 6.02 % 2,617 6.27 % $ 61,519 Unsecured Revolving Credit Facility (1) $ — $ — Average Interest Rate $ 19,000 $ 3.52 % — $ — $ — $ 19,000 Unsecured Term Loans $ 18,543 Average Interest Rate $ 3.62 % — $ — $ — $ 40,000 $ 200,000 $ 258,543 2.40 % 3.69 % Senior Unsecured Notes $ — $ — $ — $ — $ — $ 385,000 $ 385,000 Average Interest Rate 4.27 % (1) The balloon payment balance includes the balance outstanding under the Credit Facility as of December 31, 2018. The Credit Facility matures in January 2021, with options to extend the maturity for one year at the Company’s election, subject to certain conditions. The fair value is estimated at $61.6 million and $640.4 million for mortgage notes payable and unsecured term loans and notes, respectively, as of December 31, 2018. The table above incorporates those exposures that exist as of December 31, 2018; 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. The Company 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, the Company entered into an amortizing 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, the Company receives from the counterparty interest on the notional amount based on 1 month LIBOR and pays to the counterparty a fixed rate of 1.92%. The notional amount as of December 31, 2018 was $18.5 million. 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, 2018, this interest rate swap was valued as an asset of approximately $0.0 million. In September 2013, the Company 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, the Company receives from the counterparty interest on the notional amount based on 1 month LIBOR and pays to the counterparty a fixed rate of 2.20%. This swap effectively converted $35.0 million of variable-rate 34 borrowings to fixed-rate borrowings from October 3, 2013 to September 29, 2020. As of December 31, 2018, this interest rate swap was valued as asset of approximately $0.2 million. In July 2014, the Company 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, the Company receives from the counterparty interest on the notional amount based on 1 month LIBOR and pays 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, 2018, this interest rate swap was valued as an asset of approximately $0.6 million. In September 2016, the Company entered into an interest rate swap agreement to hedge against changes in future cash flows resulting from changes in interest rates on $40.0 million in variable-rate borrowings. Under the terms of the interest rate swap agreement, the Company receives from the counterparty interest on the notional amount based on 1 month LIBOR and pays to the counterparty a fixed rate of 1.40%. This swap effectively converted $40.0 million of variable-rate borrowings to fixed-rate borrowings from August 1, 2016 to July 1, 2023. As of December 31, 2018, this interest rate swap was valued as an asset of approximately $1.8 million. In December 2018, the Company entered into interest rate swap agreements to hedge against changes in future cash flows resulting from changes in interest rates on $100.0 million in variable-rate borrowings. Under the terms of the interest rate swap agreements, the Company receives from the counterparty interest on the notional amount based on 1 month LIBOR and pays to the counterparty a fixed rate of 2.66%. This swap effectively converted $100.0 million of variable-rate borrowings to fixed-rate borrowings from December 27, 2018 to January 15, 2026. As of December 31, 2018, this interest rate swap was valued as a liability of approximately $1.1 million. 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, 2018. As of December 31, 2018, 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 $0.2 million. Item 8: Financial Statements and Supplementary Data The financial statements and supplementary data are listed in the Index to the 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 35 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, 2018. Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Attestation Report of Independent Registered Public Accounting Firm The attestation report required under this item is contained on page F - 2 of this Annual Report on Form 10 - K. Item 9B: Other Information None. 36 PART III Item 10: Directors, Executive Officers and Corporate Governance The information required by this item is set forth under the following captions in our proxy statement to be filed with respect to our 2019 Annual Meeting of Shareholders (the “Proxy Statement”), all of which is incorporated by reference: “Proposal I – Election of Directors”, “Board Matters –The Board of Directors”; “Board Matters –Committees of the Board”; “Board Matters –Corporate Governance”; “Executive Officers”; “Additional Information – Section 16(a) Beneficial Ownership Reporting Compliance” and “Additional Information – Proposals for 2019 Annual Meeting.” Item 11: Executive Compensation The information required by this item is set forth under the following captions in our Proxy Statement, all of which is incorporated herein by reference: “Compensation Discussion and Analysis”, “Executive Officer Compensation Tables”, “Board Matters – Director Compensation”, “Board Matters –Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report.” 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, 2018. Plan Category Equity Compensation Plans Approved by Security Holders Equity Compensation Plans Not Approved by Security Holders Total Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Outstanding Options, Warrant and Rights Weighted Average Exercise Price of Rights (a) (b) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) — — — — — — 422,650 (1) — 422,650 (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. Additonal information required by this item is set forth under the following caption in our Proxy Statement, all of which is incorporated herein by reference: “Security Ownership of Certain Beneficial Owners and Management.” Item 13: Certain Relationships, Related Transactions and Director Independence The information required by this item is set forth under the following captions in our Proxy Statement, all of which is incorporated herein by reference: “Related Person Transactions” and “Board Matters –The Board of Directors.” Item 14: Principal Accounting Fees and Services The information required by this item is set forth under the following caption in our Proxy Statement, all of which is incorporated herein by reference: “Audit Committee Matters.” 37 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: • Reports of Independent Registered Public Accounting Firms • Consolidated Balance Sheets as of December 31, 2018 and 2017 • Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2018, 2017 and 2016 • Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2018, 2017 and 2016 • Consolidated Statements of Cash Flow for the Years Ended December 31, 2018, 2017 and 2016 • 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. 3.1 Description Articles of Incorporation of the Company, including all amendments and articles supplementary thereto (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10 - Q (for the quarter ended June 30, 2013). 3.2 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8 - K filed on May 9, 2013). 3.3 Amendment to the Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8 - K filed on May 6, 2015). 3.4 Amendment to Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8 - K filed on May 3, 2016). 4.1 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 for the year ended December 31, 1994). 4.2 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 filed on August 24, 2009). 4.3 4.4 10.1 10.2 Form of 4.32% Senior Guaranteed Note, Series 2018 - A, due September 26, 2030 (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10 - Q for the quarter ended September 30, 2018). Form of 4.32% Senior Guaranteed Note, Series 2018 - B, due September 26, 2030 (incorporated by reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10 - Q for the quarter ended September 30, 2018). Term Loan Agreement, dated July 1, 2016, among Agree Limited Partnership, Capital One, National Association, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10 - Q for the quarter ended June 30, 2016). Amended and Restated Revolving Credit and Term Loan Agreement, dated as of December 15, 2016, among Agree Limited Partnership, as the Borrower, the Company, as the parent, certain subsidiaries of the Borrower, 38 10.3 10.4 10.5 10.6 10.7 10.8 as guarantors, PNC Bank, National Association and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10 - K for the year ended December 31, 2016). First Amendment and Joinder to Term Loan Agreement, dated December 15, 2016, by and among Agree Limited Partnership, the Company, the other guarantors party thereto, the lenders party thereto and Capital One, National Association (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10 - K for the year ended December 31, 2016). Note Purchase Agreement, dated as of August 3, 2017, among Agree Limited Partnership, the Company and the purchasers named therein (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10 - Q for the quarter ended September 30, 2017). Uncommitted Master Note Facility, dated as of August 3, 2017, among Agree Limited Partnership, the Company and Teachers Insurance and Annuity Associate of America (“TIAA”) and each TIAA Affiliate (as defined therein) (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10 - Q for the quarter ended September 30, 2017). Uncommitted Master Note Facility, dated as of August 3, 2017, among Agree Limited Partnership, the Company and Teachers Insurance and AIG Asset Management (U.S.), LLC (“AIG”) and each AIG Affiliate (as defined therein) (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10 - Q for the quarter ended September 30, 2017). First Amended and Restated Agreement of Limited Partnership of Agree Limited Partnership, dated as of April 22, 1994, 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 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, by and among the Company, Agree Limited Partnership and Richard Agree (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10 - Q for the quarter ended March 31, 2013). 10.9+ Agree Realty Corporation Profit Sharing Plan (incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10 - K for the year ended December 31, 1996). 10.10+ 10.11+ 10.12+ 10.13+ 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 for the quarter ended September 30, 2014). 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 for the quarter ended September 30, 2014). 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 filed on April 6, 2010). Employment Agreement, dated October 20, 2017, between Agree Realty Corporation and Clayton R. Thelen (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8 - K filed on November 1, 2017). 10.14* Summary of Director Compensation. 39 10.15+ Agree Realty Corporation 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10 - K for the year ended December 31, 2014). 10.16+ 10.17+ 10.18+ 10.19 10.20 10.21 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 for the quarter ended September 30, 2014). Form of Performance Share Award Agreement pursuant to the Agree Realty Corporation 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10 - K for the year ended December 31, 2017). Agree Realty Corporation 2017 Executive Incentive Plan, dated February 16, 2017 (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10 - K for the year ended December 31, 2016). Note Purchase Agreement dated as of May 28, 2015 by and among Agree Limited Partnership, the Company and the purchasers thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8 - K filed on June 1, 2015). Note Purchase Agreement, dated as of July 28, 2016, by and among Agree Limited Partnership, the Company and the purchasers thereto (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10 - Q for the quarter ended September 30, 2016). Increase Agreement, dated July 18, 2018 among Agree Limited Partnership, as the Borrower, the Company, as the parent, PNC Bank, National Association and the other lender parties thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8 - K filed on July 23, 2018). 10.22 Form of Revolving Note (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8 - K filed on July 23, 2018). 10.23 10.24 First Supplement to Uncommitted Master Note Facility, dated as of September 26, 2018, among Agree Limited Partnership, Agree Realty Corporation and Teachers Insurance and Annuity Association of America (“TIAA”) (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10 - Q for the quarter ended September 30, 2018). First Supplement to Uncommitted Master Note Facility, dated as of September 26, 2018, among Agree Limited Partnership, Agree Realty Corporation, AIG Asset Management (U.S.), LLC and the institutional investors named therein (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10 - Q for the quarter ended September 30, 2018). 10.25* Second Amendment to Term Loan Agreement dated November 2, 2018, among Agree Limited Partnership, Capital One, National Association, and Raymond James Bank, N.A. 10.26* First Amendment to Amended and Restated Revolving Credit and Term Loan Agreement, dated as of December 17, 2018, among the Company, PNC Bank, National Association and the other lenders party thereto. 10.27* Term Loan Agreement, dated December 27, 2018, by and among Agree Limited Partnership, the Company, PNC Bank, National Association and the other lenders party thereto. 10.28* Guaranty, dated as of December 27, 2018, by and among the Company and each of the subsidiaries of Agree Limited Partnership party thereto. 40 10.29* Reimbursement Agreement, dated as of November 18, 2014, by and between the Company and Richard Agree. 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, Clayton Thelen, 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, Clayton Thelen, 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, 2018 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 Shareholders’ 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. 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. 41 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: February 21, 2019 KNOW ALL PERSONS BY THESE PRESENTS, that we, the undersigned officers and directors of Agree Realty Corporation, hereby severally constitute Richard Agree, Joel N. Agree and Clayton Thelen, 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 21st day of February 2019. By: /s/ Richard Agree Richard Agree Executive Chairman of the Board of Directors By: /s/ Joel N. Agree Joel N. Agree President, Chief Executive Officer and Director (Principal Executive Officer) By: /s/ Clayton Thelen Clayton Thelen Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) By: /s/ Craig Erlich Craig Erlich Director By: /s/ Merrie S. Frankel Merrie S. Frankel Director By: /s/ Farris G. Kalil Farris G. Kalil Director By: /s/ Greg Lehmkuhl Greg Lehmkuhl Director 42 Date: February 21, 2019 Date: February 21, 2019 Date: February 21, 2019 Date: February 21, 2019 Date: February 21, 2019 Date: February 21, 2019 Date: February 21, 2019 By: /s/ John Rakolta John Rakolta Jr. Director By: /s/ Jerome Rossi Jerome Rossi Director By: /s/ William S. Rubenfaer William S. Rubenfaer Director Date: February 21, 2019 Date: February 21, 2019 Date: February 21, 2019 43 (This page intentionally left blank)(cid:3) Reports of Independent Registered Public Accounting Firm Financial Statements Consolidated Balance Sheets Consolidated Statements of Operations and Comprehensive Income Consolidated Statements of Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Schedule III - Real Estate and Accumulated Depreciation Page F-2 F-4 F-6 F-7 F-8 F-9 F-30 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders Agree Realty Corporation Opinion on internal control over financial reporting We have audited the internal control over financial reporting of Agree Realty Corporation (a Maryland corporation) and subsidiaries (the “Company”) as of December 31, 2018, based on criteria established in the 2013 Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, 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) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2018, and our report dated February 21, 2019 expressed an unqualified opinion on those financial statements. Basis for opinion 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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. 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. Definition and limitations of internal control over financial reporting 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. /s/ Grant Thornton LLP Southfield, Michigan February 21, 2019 F-2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders Agree Realty Corporation Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Agree Realty Corporation (a Maryland corporation) and subsidiaries (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and schedules (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2018, 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 February 21, 2019 expressed an unqualified opinion. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Grant Thornton LLP We have served as the Company’s auditor since 2013. Southfield, Michigan February 21, 2019 F-3 AGREE REALTY CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share and per-share data) December 31, December 31, 2018 2017 ASSETS Real Estate Investments Land Buildings Less accumulated depreciation Property under development Net Real Estate Investments Real Estate Held for Sale, net Cash and Cash Equivalents Cash Held in Escrows Accounts Receivable - Tenants, net of allowance of $289 and $296 for possible losses at December 31, 2018 and December 31, 2017, respectively Unamortized Deferred Expenses Credit facility finance costs, net of accumulated amortization of $886 and $433 at December 31, 2018 and December 31, 2017, respectively $ 553,704 $ 1,194,985 (100,312) 1,648,377 12,957 1,661,334 405,457 868,396 (85,239) 1,188,614 25,402 1,214,016 — 2,420 53,955 50,807 20 7,975 21,547 15,477 1,126 1,174 Leasing costs, net of accumulated amortization of $901 and $814 at December 31, 2018 and December 31, 2017, respectively 2,652 1,583 Lease intangibles, net of accumulated amortization of $62,543 and $41,390 at December 31, 2018 and December 31, 2017, respectively Interest Rate Swaps Other Assets, net Total Assets See accompanying notes to consolidated financial statements. 280,153 195,158 2,539 1,592 4,863 4,432 $ 2,028,189 $ 1,494,634 F-4 AGREE REALTY CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share and per-share data) LIABILITIES Mortgage Notes Payable, net Unsecured Term Loans, net Senior Unsecured Notes, net Unsecured Revolving Credit Facility Dividends and Distributions Payable Deferred Revenue Accrued Interest Payable Accounts Payable and Accrued Expenses Lease intangibles, net of accumulated amortization of $15,177 and $11,357 at December 31, 2018 and December 31, 2017, respectively Interest Rate Swaps Deferred Income Taxes Tenant Deposits Total Liabilities December 31, December 31, 2018 2017 $ 60,926 $ 88,270 256,419 158,171 384,064 259,122 19,000 14,000 21,031 16,303 4,627 1,837 4,779 3,412 9,897 11,165 27,218 30,350 1,135 475 132 242 475 97 789,703 583,444 EQUITY Common stock, $.0001 par value, 45,000,000 shares authorized, 37,545,790 and 31,004,900 shares issued and outstanding at December 31, 2018 and December 31, 2017, 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 income Total Equity - Agree Realty Corporation Non-controlling interest Total Equity 4 3 — 1,277,592 (42,945) 1,424 1,236,075 2,411 1,238,486 — 936,046 (28,763) 1,375 908,661 2,529 911,190 Total Liabilities and Equity $ 2,028,189 $ 1,494,634 See accompanying notes to consolidated financial statements. F-5 AGREE REALTY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (In thousands, except share and per-share data) For the Year Ended December 31, 2017 2018 2016 Revenues Minimum rents Percentage rents Operating cost reimbursement Other Total Revenues Operating Expenses Real estate taxes Property operating expenses Land lease expense General and administrative Depreciation and amortization Provision for impairment Total Operating Expenses Income from Operations Other (Expense) Income Interest expense, net Gain (loss) on sale of assets, net Income tax expense Loss on debt extinguishment Other (expense) income Net Income $ 132,814 $ 261 14,887 233 148,195 105,074 $ 244 10,752 485 116,555 10,721 5,645 645 12,165 43,698 2,319 75,193 8,204 3,610 653 9,722 31,752 — 53,941 84,031 197 7,267 32 91,527 5,459 2,484 653 7,862 23,407 — 39,865 73,002 62,614 51,662 (24,872) 11,180 (516) — 4 58,798 (18,137) 14,193 (227) — 347 58,790 (15,343) 9,964 (153) (333) — 45,797 Less Net Income Attributable to Non-Controlling Interest 626 678 679 Net Income Attributable to Agree Realty Corporation $ 58,172 $ 58,112 $ 45,118 Net Income Per Share Attributable to Agree Realty Corporation Basic Diluted Other Comprehensive Income Net income Other Comprehensive Income (Loss) - Change in Fair Value of Interest Rate Swaps Total Comprehensive Income Less Comprehensive Income Attributable to Non-Controlling Interest $ $ $ 1.80 $ 1.78 $ 2.09 $ 2.08 $ 1.97 1.97 58,798 $ 54 58,852 631 58,790 $ 1,935 60,725 702 45,797 2,618 48,415 703 Comprehensive Income Attributable to Agree Realty Corporation $ 58,221 $ 60,023 $ 47,712 Weighted Average Number of Common Shares Outstanding - Basic: 32,070,255 27,625,102 22,868,736 Weighted Average Number of Common Shares Outstanding - Diluted: 32,401,122 27,700,347 22,959,799 See accompanying notes to consolidated financial statements. F-6 AGREE REALTY CORPORATION CONSOLIDATED STATEMENT OF EQUITY (In thousands, except share and per-share data) Common Stock Additional Shares Amount Paid-In Capital Accumulated Other Dividends in excess of net Comprehensive Non-Controlling Income (Loss) Interest income Total Equity 20,637,301 $ 2 $ 482,514 $ (28,262) $ (3,130) $ 2,496 $ 453,620 228,010 (712) — — 2,257 — — — — — (45,414) — — — — — — — — — 228,011 (712) — — 2,257 (667) (46,081) — — 712,069 $ — 45,118 (28,558) $ 2,594 — (536) $ 24 679 2,618 45,797 2,532 $ 685,510 222,695 (1,111) — — 2,393 — — — — — — (58,317) — — — — — — — — — — — 222,695 (1,111) — — 2,393 (705) (59,022) — — 936,046 $ — 58,112 (28,763) $ 1,911 — 1,375 $ 24 678 1,935 58,790 2,529 $ 911,190 339,743 (1,145) — — 2,948 — — — — — — (72,354) — — — — — — — — — — — 339,744 (1,145) — — 2,948 (749) (73,103) 37,545,790 $ 4 $ 1,277,592 $ — — — 58,172 (42,945) $ 49 — 1,424 $ 5 626 54 58,798 2,411 $ 1,238,486 Balance, December 31, 2015 Issuance of common stock, net of issuance costs Repurchase of common shares Issuance of restricted stock under the Omnibus Incentive Plan Forfeiture of restricted stock Stock-based compensation Dividends and distributions declared for the period Other comprehensive income (loss) - change in fair value of interest rate swaps Net income Balance, December 31, 2016 Issuance of common stock, net of issuance costs Repurchase of common shares Issuance of restricted stock under the Omnibus Incentive Plan Forfeiture of restricted stock Stock-based compensation Dividends and distributions declared for the period Other comprehensive income (loss) - change in fair value of interest rate swaps Net income Balance, December 31, 2017 Issuance of common stock, net of issuance costs Repurchase of common shares Issuance of restricted stock under the Omnibus Incentive Plan Forfeiture of restricted stock Stock-based compensation Dividends and distributions declared for the period Other comprehensive income (loss) - change in fair value of interest rate swaps Net income Balance, December 31, 2018 5,461,459 (20,569) 93,363 (6,577) — — — — 1 — — — — — — — 26,164,977 $ 3 $ 4,786,604 (23,925) 88,466 (11,222) — — — — — — — — — — — — 31,004,900 $ 3 $ 6,507,263 (23,407) 57,882 (848) — — — — 1 — — — — — — — See accompanying notes to consolidated financial statements. F-7 AGREE REALTY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) For the Year Ended December 31, 2017 2018 2016 Cash Flows from Operating Activities Net income Adjustments to reconcile net income to net cash provided by operating activities: $ 58,798 $ 58,790 $ 45,797 Depreciation Amortization Amortization from financing and credit facility costs Stock-based compensation Provision for impairment Write-off of deferred costs (Gain) loss on sale of assets (Increase) decrease in accounts receivable (Increase) decrease in other assets Increase (decrease) in accounts payable and accrued expenses Increase (decrease) in deferred revenue Increase (decrease) in accrued interest Increase (decrease) in deferred income taxes Increase (decrease) in tenant deposits Net Cash Provided by Operating Activities Cash Flows from Investing Activities Acquisition of real estate investments and other assets Development of real estate investments and other assets (including capitalized interest of $448 in 2018, $570 in 2017, and $210 in 2016) 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 offerings, net Repurchase of common shares Unsecured revolving credit facility borrowings Unsecured revolving credit facility repayments Payments of mortgage notes payable Unsecured term loan proceeds Payments of unsecured term loans Senior unsecured notes proceeds Dividends paid Distributions to Non-Controlling Interest Payments for financing costs Net Cash Provided by Financing Activities 24,699 18,999 1,055 2,948 2,319 — (11,180) (6,855) (463) (1,265) 2,790 1,367 — 35 93,247 19,586 12,166 979 2,393 — — (14,193) (4,216) 444 5,265 14 1,202 (230) 3 82,203 15,274 8,133 720 2,257 — 333 (9,964) (4,117) (109) 1,984 115 1,247 — 65 61,735 (611,129) (319,572) (297,868) (21,481) (1,337) 65,830 (568,117) 339,744 (1,145) 363,000 (358,000) (27,576) 100,000 (761) 125,000 (67,638) (737) (1,824) 470,063 (43,302) (568) 44,343 (319,099) 222,695 (1,111) 203,000 (203,000) (2,412) — (739) 100,000 (55,146) (695) (309) 262,283 (27,919) (686) 28,919 (297,554) 228,011 (712) 252,000 (256,000) (31,578) 60,283 (239) 60,000 (42,058) (657) (2,548) 266,502 Net Increase (Decrease) in Cash and Cash Equivalents Cash and cash equivalents and cash held in escrow, beginning of period Cash and cash equivalents and cash held in escrow, end of period 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 (in dollars) Dividends and limited partners’ distributions declared and unpaid Real Estate acquisitions financed with debt assumption See accompanying notes to consolidated financial statements. (4,807) 58,782 53,975 $ 25,387 33,395 58,782 $ 30,683 2,712 33,395 23,015 $ 452 $ 17,331 $ 257 $ 13,822 153 2,781 $ 21,031 $ — $ 4,298 $ 16,303 $ 21,500 $ 3,517 13,124 — $ $ $ $ $ $ F-8 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 Note 1 – Organization Agree Realty Corporation (the “Company”), 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. The Company was founded in 1971 by its current Executive Chairman, Richard Agree, and our common stock was 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 Agree Realty Corporation is the sole general partner and in which it held a 99.1% interest as of December 31, 2018. Under the partnership agreement of the Operating Partnership, Agree Realty Corporation, as the sole general partner, has exclusive responsibility and discretion in the management and control of the Operating Partnership. The terms “Agree Realty,” the "Company," “Management,” "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, as the sole general partner, held 99.1% and 98.8% of the Operating Partnership as of December 31, 2018 and 2017, respectively. All material intercompany accounts and transactions are eliminated. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“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 Certain reclassifications of prior period amounts have been made in the consolidated financial statements and footnotes in order to conform to the current presentation. Income tax expense is presented in Other (Expense) Income on the Consolidated Statements of Operations and Comprehensive Income. In financial statements filed prior to March 2018, income tax expense was included in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income. Segment Reporting The Company is primarily in the business of acquiring, developing and managing retail real estate which is considered to be one reporting segment. The Company has no other reportable segments. Real Estate Investments The Company records the acquisition of real estate at cost, including acquisition and closing costs. For properties developed by the Company, 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. Assets are classified as Held for Sale based on specific criteria as outlined in Accounting Standards Codification (“ASC”) 360, Property, Plant & Equipment. Properties classified as Held for sale are recorded at the lower of their carrying value or their fair value, less anticipated selling costs. Assets are generally classified as Held for Sale once management has actively F-9 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 engaged in marketing the asset and has received a firm purchase commitment that is expected to close within one year. Real estate held for sale consisted of the following as of December 31, 2018 and December 31, 2017 (in thousands): Land Buildings Lease Intangibles (Asset) Accumulated depreciation and amortization Total Real Estate Held for Sale, net December 31, 2018 December 31, 2017 $ $ — $ — — — — — $ 393 1,857 557 2,807 (387) 2,420 Accounting for Acquisitions of Real Estate The acquisition of property for investment purposes is typically accounted for as an asset acquisition. The Company allocates the purchase price to land, buildings 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, the Company may use a number of sources, including data provided by independent third parties, as well as information obtained by the Company as a result of its due diligence, including expected future cash flows of the property and various characteristics of the markets where the property is located. 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 and the Company’s estimate of current market lease rates for the property. The capitalized above- and below-market lease intangibles are amortized over the non-cancelable term of the lease unless the Company believes it is reasonably certain that the tenant will renew the lease for an option term whereby the Company amortizes the value attributable to the renewal over the renewal period. In the case of sale-leaseback transactions, it is typically assumed that the lease is not in-place prior to the close of the transaction. 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 The Company’s real estate portfolio is depreciated using the straight-line method over the estimated remaining useful life of the properties, which are generally 40 years for buildings and 10 to 20 years for improvements. Properties classified as held for sale and properties under development are not depreciated. Impairments The Company reviews long-lived assets, including intangible assets, for possible impairment when certain events or changes in circumstances indicates that the carrying amount of the asset may not be recoverable though operations. Events or changes in circumstances that may occur include, but are not limited to, significant changes in real estate market conditions and an expectation to sell assets before the end of the previously estimated life. Impairments are measured to the extent the current book value exceeds the estimated fair value of the asset less disposition costs for any assets classified as held for sale. The valuation of impaired assets is determined using valuation techniques including discounted cash flow analysis, analysis of recent comparable sales transactions, and purchase offers received from third parties, which are Level 3 inputs. F-10 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 The Company may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of its real estate. 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. We had $52.7 million and $57.5 million in cash and cash held in escrow as of December 31, 2018 and December 31, 2017, respectively, 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 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. The Company’s leases provide for reimbursement from tenants for common area maintenance (“CAM”), insurance, real estate taxes and other operating expenses ("Operating Cost Reimbursement"). A portion of our Operating Cost Reimbursement Revenue is estimated each period and is recognized as revenue in the period the recoverable costs are incurred and accrued. Receivables from Operating Cost Reimbursement Revenue are included in our Accounts Receivable - Tenants line item in our Consolidated Balance Sheets. The balance of unbilled Operating Cost Reimbursement Receivable at December 31, 2018 and December 31, 2017 was $3.3 million and $1.4 million, respectively. In addition, many of the Company’s leases contain rent escalations for which we recognize revenue on a straight-line basis over the non-cancelable lease term. This method results in rental revenue in the early years of a lease being higher than actual cash received, creating a straight-line rent receivable asset which is included in the Accounts Receivable - Tenants line item in our Consolidated Balance Sheets. The balance of straight-line rent receivables at December 31, 2018 and December 31, 2017 was $16.7 million and $12.9 million, respectively. To the extent any of the tenants under these leases become unable to pay their contractual cash rents, the Company may be required to write down the straight- line rent receivable from those tenants, which would reduce operating income. Sales Tax The Company collects various taxes from tenants and remits these amounts, on a net basis, to the applicable taxing authorities. Unamortized Deferred Expenses Deferred expenses include debt financing costs related to the Company’s revolving credit facility, leasing costs and lease intangibles, and are amortized as follows: (i) debt financing costs related to the line of credit on a straight-line basis to interest expense over the term of the related loan, which approximates the effective interest method; (ii) leasing costs on a straight-line basis to amortization over the term of the related lease entered into; and (iii) lease intangibles on a straight- line basis to amortization over the remaining term of the related lease acquired. F-11 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 The following schedule summarizes the Company’s amortization of deferred expenses for the years ended December 31, 2018, 2017 and 2016, respectively (in thousands): For the Year Ended December 31, 2016 2017 2018 Credit Facility Financing Costs Leasing Costs Lease Intangibles (Asset) Lease Intangibles (Liability) Total $ 477 $ 243 22,650 (4,228) 228 124 11,093 (3,083) $ 19,142 $ 12,351 $ 8,362 405 $ 161 16,060 (4,275) The following schedule represents estimated future amortization of deferred expenses as of December 31, 2018 (in thousands): Year Ending December 31, 2019 2020 2021 2022 2023 Thereafter Total Credit Facility Financing Costs Leasing Costs Lease Intangibles (Asset) Lease Intangibles (Liability) Total $ 556 $ 290 542 $ 315 — $ 312 25,690 25,202 24,517 23,439 22,080 (2,567) 1,126 2,652 159,225 280,153 (27,218) (3,129) $ 22,123 $ 21,746 $ 20,823 $ 20,608 $ 19,825 $ 151,588 $ 256,713 — $ 1,131 — $ 298 28 $ 306 (4,413) (4,313) (4,028) (8,768) Revenue Recognition The Company leases real estate to its 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 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 incurred. Earnings per Share Earnings per share have been computed by dividing the net income less net income attributable to unvested restricted shares by the weighted average number of common shares outstanding less unvested restricted shares. Diluted earnings per share is computed by dividing net income by the weighted average common shares and potentially dilutive common shares outstanding in accordance with the treasury stock method. F-12 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 The following is a reconciliation of 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: Net income attributable to Agree Realty Corporation Less: Income attributable to unvested restricted shares Net income used in basic and diluted earnings per share $ $ 58,172 $ (370) $ 57,802 58,112 $ (454) 57,658 $ Year Ended December 31, 2018 2017 2016 45,118 (424) 44,694 Weighted average number of common shares outstanding Less: Unvested restricted stock Weighted average number of common shares outstanding used in basic earnings per share 32,281,273 (211,018) 27,852,231 (227,129) 23,096,267 (227,531) 32,070,255 27,625,102 22,868,736 Weighted average number of common shares outstanding used in basic earnings per share Effect of dilutive securities: Restricted stock Effect of dilutive securities: March 2018 forward equity offering Effect of dilutive securities: September 2018 forward equity offering Weighted average number of common shares outstanding used in diluted earnings per share 32,070,255 69,136 27,625,102 75,245 22,868,736 91,063 198,786 62,945 — — — — 32,401,122 27,700,347 22,959,799 Operating Partnership Units ("OP Units") Weighted average number of common shares and OP Units outstanding used in diluted earnings per share 347,619 347,619 347,619 32,748,741 28,047,966 23,307,418 Forward Equity Sales In March 2018, the Company completed a forward sale agreement to sell an aggregate of 3,450,000 shares of our common stock, which included the underwriters option to purchase an additional 450,000 shares of common stock, at a public offering price of $48.00 per share, before underwriting discounts. In September 2018, the Company settled, in its entirety, the forward sale agreement and received proceeds of $160.2 million, net of underwriting discounts, fees and expenses. In September 2018, the Company entered into a forward sale agreement to sell an aggregate of 3,500,000 shares of our common stock at a public offering price of $55.20 per share, before underwriting discounts. The Company is obligated to settle the forward sale agreement no later than September 3, 2019. To account for the forward sale agreements, the Company considered the accounting guidance governing financial instruments and derivatives and concluded that our forward sale agreement was not a liability as it did not embody obligations to repurchase our shares nor did it embody obligations to issue a variable number of shares for which the monetary value was predominantly fixed, varying with something other than the fair value of the shares, or varying inversely in relation to our shares. We then evaluated whether the agreement met the derivatives and hedging guidance scope exception to be accounted for as an equity instrument, and concluded that the agreement can be classified as an equity contract based on the following assessment: (i) none of the agreement’s exercise contingencies was based on observable markets or indices besides those related to the market for our own stock price and operations; and (ii) none of the settlement provisions precluded the agreement from being indexed to our own stock. The Company also considered the potential dilution resulting from the forward sale agreement on the earnings per share calculations. The Company used the treasury stock method to determine the dilution resulting from the forward sale agreement during the period of time prior to settlement. The impact to our weighted-average number of common shares – diluted for the year ended December 31, 2018, was 261,731 weighted-average incremental shares. F-13 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 Income Taxes The Company has made an election to be taxed as a REIT under Sections 856 through 860 of the 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, 2018, 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. The Company and its taxable REIT subsidiaries (“TRS”) have made a timely TRS election pursuant to the provisions of the REIT Modernization Act. A TRS is able to engage in activities resulting in income that previously would have been disqualified from being eligible REIT income under the federal income tax regulations. As a result, certain activities of the Company which occur within its TRS entity are subject to federal and state income taxes (See Note 7). All provisions for federal income taxes in the accompanying consolidated financial statements are attributable to the Company’s TRS. Fair Values of Financial Instruments The Company’s estimates of fair value of financial and non-financial assets and liabilities are based on the framework established in the fair value accounting guidance. The framework specifies a hierarchy of valuation inputs which was established to increase consistency, clarity and comparability in fair value measurements and related disclosures. The guidance describes a fair value hierarchy based upon three levels of inputs that may be used to measure fair value, two of which are considered observable and one that is considered unobservable. The following describes the three levels: Level 1 – Valuation is based upon quoted prices in active markets for identical assets or liabilities. Level 2 – Valuation is based upon inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include option pricing models, discounted cash flow models and similar techniques. Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. ASU 2018 - 13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018 - 13”). These amendments modify the disclosure requirements in Topic 820 on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty. ASU 2018 - 13 will be effective for all entities for fiscal years beginning after December 15, 2019, including interim periods in the year of adoption. Early adoption is permitted for any interim or annual period. The Company is in the process of determining the impact that the implementation of ASU 2018 - 13 and does not believe it will have a material effect on the Company’s financial statements. In June 2018, the FASB issued ASU No. 2018 - 07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018 - 07”). These amendments expand the scope of Topic 718, Compensation—Stock Compensation, which currently only includes share-based payments to employees, to include share- based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned, and the ASU supersedes Subtopic 505 - 50, Equity—Equity- Based Payments to Non-Employees. ASU 2018 - 07 will be effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods in the year of adoption. Early adoption is permitted for any interim or annual period. The Company does not expect these amendments to have a material effect on its financial statements. F-14 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 In August 2017, the FASB issued ASU No. 2017 - 12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017 - 12”). The objective of ASU 2017 - 12 is to expand hedge accounting for both financial (interest rate) and commodity risks, and create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. ASU 2017 - 12 will be effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods in the year of adoption. Early adoption is permitted for any interim or annual period. The Company has evaluated the impact of the implementation of ASU 2017 - 12 and does not believe it will have a material effect on the Company’s financial statements. In February 2016, the FASB issued ASU No. 2016 - 02 “Leases” (“ASU 2016 - 02”). The new standard creates Topic 842, Leases, in FASB Accounting Standards Codification (“FASB ASC”) and supersedes FASB ASC 840, Leases. ASU 2016 - 02 requires a lessee to recognize the assets and liabilities that arise from leases (operating and finance). ASU 2016 - 02 is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2018. The main difference between the existing guidance on accounting for leases and the new standard is that operating leases for lessees will now be recorded in the statement of financial position as right of use assets and lease liabilities on the lessee’s balance sheet. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases and operating leases. As part of ASU 2018 - 01, the FASB provided an optional transition method, allowing entities to not evaluate under ASC 842 land easements that existed or expired before the adoption of ASC 842 and that were not previously accounted for as leases under ASC 840. The Company will apply this practical expedient upon adoption of Topic 842. In July 2018, the FASB issued ASU 2018 - 11, which provides a practical expedient for lessors by class of underlying assets to not separate non-lease components from the lease component. The Company will apply the practical expedient to not separate lease and nonlease components in a contract if the timing and pattern of transfer for the lease components and nonlease components are the same and if the lease component is classified as an operating lease. As part of ASU 2018 - 11, the FASB provided an additional (and optional) transition method that allows entities to initially apply Topic 842 at the adoption date (January 1, 2019) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company will apply this practical expedient upon adoption of Topic 842. Based on its anticipated election of practical expedients, the Company anticipates that its retail leases, where it is the lessor, will continue to be accounted for as operating leases under the new standard. As part of ASU 2018 - 20, the FASB provided guidance requiring lessors to exclude from variable payments, lessor costs paid by lessees directly to third parties. The ASU also requires lessors to account for costs excluded from the consideration of a contract that are paid by the lessor and reimbursed by the lessee as variable payments. The Company evaluated the recognition of reimbursed costs received from the lessee and have concluded that there will be no change in current presentation based on this ASU. The Company is also the lessee under various land lease arrangements. The Company will not reassess the classification of existing land leases where it is the lessee and therefore these leases will continue to be accounted for as operating leases. Therefore, as of January 1, 2019, the Company does not currently anticipate significant changes in the accounting for its lease revenues as lessor, but does anticipate the recognition of right of use assets and related lease liabilities on its consolidated balance sheets related to land leases as lessee of less than 1.0% of total assets. In addition the Company will include the required disclosures related to the adoption of this standard. In the event the Company modifies existing land leases or enters into new land leases after adoption of the new standard, such leases may be classified as finance leases. The Company will continue to evaluate the impact of adopting the new leases standard on its consolidated statements of income and comprehensive income, consolidated balance sheets and related internal controls over financial reporting. Note 3 – Real Estate Investments Real Estate Portfolio As of December 31, 2018, the Company owned 645 properties, with a total gross leasable area (“GLA”) of approximately 11.2 million square feet. Net Real Estate Investments totaled $1.7 billion as of December 31, 2018. As of December 31, 2017, the Company owned 436 properties, with a total gross leasable area of approximately 8.7 million square feet. Net Real Estate Investments totaled $1.2 billion as of December 31, 2017. F-15 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 Tenant Leases The properties that the Company owns are typically leased to tenants under long term operating leases. The leases are generally net leases which typically require the tenant to be responsible for minimum monthly rent and property operating expenses including property taxes, insurance and maintenance. Certain of our properties are subject to leases under which we retain responsibility for specific costs and expenses of the property. The leases typically provide the tenant with one or more multi-year renewal options subject to generally the same terms and conditions, including rent increases, consistent with the initial lease term. As of December 31, 2018, our portfolio had a weighted average remaining lease term of approximately 10.2 years. As of December 31, 2018, the future minimum lease payments to be received under the terms of all non-cancellable tenant leases is as follows (in thousands): For the Year Ending December 31, 2019 2020 2021 2022 2023 Thereafter Total $ 151,914 150,504 147,506 143,988 139,573 902,448 $ 1,635,933 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 Consumer Price Index (“CPI”) or future contingent rents which may be received on the leases based on a percentage of the tenant’s gross sales. Deferred Revenue As of December 31, 2018, and December 31, 2017, there was $3.7 million and $1.8 million, respectively, in deferred revenues resulting from rents paid in advance. Land Lease Obligations The Company is subject to land lease agreements for certain of its properties. Land lease expense was $0.6 million, $0.7 million, and $0.7 million for the years ending December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, future annual lease commitments under these agreements are as follows (in thousands): For the Year Ending December 31, 2019 2020 2021 2022 2023 Thereafter Total $ $ 566 564 521 437 437 6,472 8,997 Acquisitions During 2018, the Company purchased 225 retail net lease assets for approximately $608.3 million, which includes acquisition and closing costs. These properties are located in 37 states and had a weighted average lease term of approximately 12.4 years. None of the Company’s investments during 2018 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, 2018. F-16 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 The aggregate 2018 acquisitions were allocated approximately $164.7 million to land, $325.0 million to buildings and improvements, and $118.6 million to lease intangibles. The acquisitions were substantially all cash purchases and there was no contingent consideration associated with these acquisitions. During 2017, the Company purchased 79 retail net lease assets for approximately $338.0 million, including acquisition and closing costs. These properties are located in 27 states and are leased for a weighted average lease term of approximately 11.1 years. None of the Company’s investments during 2017 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, 2017. The aggregate 2017 acquisitions were allocated approximately $94.1 million to land, $172.0 million to buildings and improvements, and $71.9 million to lease intangibles and other assets. The acquisitions were substantially all cash purchases and there was no contingent consideration associated with these acquisitions. In one acquisition, the Company assumed debt of $21.5 million. Developments During 2018, the Company had 16 development or Partner Capital Solutions projects completed or under construction. Dispositions During 2018, the Company sold real estate properties for net proceeds of $65.8 million and a recorded net gain of $11.2 million. During 2017, the Company sold real estate properties for net proceeds of $44.3 million and a recorded net gain of $14.2 million (net of any expected losses on real estate held for sale). During 2016, the Company sold real estate properties for net proceeds of $27.9 million and a recorded net gain of $10.0 million (net of any expected losses on real estate held for sale). Provisions for Impairment As a result of our review of Real Estate Investments we recognized real estate impairment charges of $2.3 million, $0.0 million and $0.0 million for the years ended December 31, 2018, 2017 and 2016, respectively. Note 4 – Debt As of December 31, 2018, we had total indebtedness of $720.4 million, including (i) $60.9 million of mortgage notes payable; (ii) $256.4 million of unsecured term loans; (iii) $384.1 million of senior unsecured notes; and (iv) $19.0 million of borrowings under our Credit Facility. The Company was in compliance with covenant terms for all debt at December 31, 2018. Mortgage Notes Payable As of December 31, 2018, the Company had total gross mortgage indebtedness of $61.5 million which was collateralized by related real estate and tenants’ leases with an aggregate net book value of $108.0 million. Including mortgages that have been swapped to a fixed interest rate, the weighted average interest rate on the Company’s mortgage notes payable was 4.13% as of December 31, 2018 and 3.74% as of December 31, 2017. F-17 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 In December 2017, the Company assumed an interest only mortgage note for $21.5 million with PNC Bank, National Association in connection with an acquisition. The mortgage note is due October 2019, secured by a multi-tenant property and has a fixed interest rate of 3.32%. Mortgages payable consisted of the following: (not presented in thousands) Note payable in monthly installments of interest only at LIBOR plus 160 basis points, swapped to a fixed rate of 2.49%. A balloon payment in the amount of $25,000,000 was repaid on March 29, 2018 December 31, 2018 December 31, 2017 (in thousands) $ — $ 25,000 Note payable in monthly installments of interest only at 3.32% per annum, with a balloon payment due October 2019 21,500 21,500 Note payable in monthly installments of $153,838, including interest at 6.90% per annum, with the final monthly payment due January 2020 1,922 3,573 Note payable in monthly installments of $23,004, including interest at 6.24% per annum, with a balloon payment of $2,781,819 due February 2020 2,872 2,963 Note payable in monthly installments of interest only at 3.60% per annum, with a balloon payment due January 2023 23,640 23,640 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 4,959 5,131 Note payable in monthly installments of $91,675 including interest at 6.27% per annum, with a final monthly payment due July 2026 Total principal Unamortized debt issuance costs Total 6,626 7,288 61,519 (593) 60,926 $ 89,095 (825) 88,270 $ 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 material misrepresentations, misstatements or omissions 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, 2018, there were no mortgage loans with partial recourse to us. 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. F-18 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 Senior Unsecured Notes The following table presents the Senior Unsecured Notes balance net of unamortized debt issuance costs as of December 31, 2018, and 2017 (in thousands): 2025 Senior Unsecured Notes 2027 Senior Unsecured Notes 2028 Senior Unsecured Notes 2029 Senior Unsecured Notes 2030 Senior Unsecured Notes Total Principal Unamortized debt issuance costs Total December 31, 2018 December 31, 2017 50,000 $ 50,000 60,000 100,000 — 260,000 (878) 259,122 50,000 $ 50,000 60,000 100,000 125,000 385,000 (936) 384,064 $ $ In May 2015, the Company and the Operating Partnership completed a private placement of $100.0 million principal amount of senior unsecured notes. The senior unsecured notes were sold in two series; $50.0 million of 4.16% notes due May 2025 (the “2025 Senior Unsecured Noted”) and $50.0 million of 4.26% notes due May 2027 (the “2027 Senior Unsecured Notes”). The senior unsecured notes were sold only to institutional investors and did not involve a public offering in reliance of the exemption from registration in Section 4(a)(2) of the Securities Act. In July 2016, the Company and the Operating Partnership entered into a note purchase agreement with institutional purchasers. Pursuant to the note purchase agreement, the Operating Partnership completed a private placement of $60.0 million aggregate principal amount of 4.42% senior unsecured notes due July 2028 (the “2028 Senior Unsecured Notes”). The senior unsecured notes were sold only 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. In August 2017, the Company and the Operating Partnership entered into a note purchase agreement with institutional purchasers. Pursuant to the note purchase agreement, the Operating Partnership completed a private placement of $100.0 million aggregate principal amount of 4.19% senior unsecured notes due September 2029 (the “2029 Senior Unsecured Notes”). Closing of the private placement was consummated in September 2017; and, on that date, the Operating Partnership issued the senior unsecured notes. The senior unsecured notes were sold only 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. In September 2018, the Company and the Operating Partnership entered into two supplements to uncommitted master note facilities with institutional purchasers. Pursuant to the supplements, the Operating Partnership completed a private placement of $125.0 million aggregate principal amount of 4.32% senior unsecured notes due September 2030 (the “2030 Senior Unsecured Notes”). The senior unsecured notes were sold only 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. Unsecured Term Loan Facilities The following table presents the Unsecured Term Loans balance net of unamortized debt issuance costs as of December 31, 2018 and 2017 (in thousands): 2019 Term Loan 2023 Term Loan 2024 Term Loan Facilities 2026 Term Loan Total Principal Unamortized debt issuance costs Total F-19 December 31, 2018 December 31, 2017 19,304 $ 40,000 100,000 — 159,304 (1,133) 158,171 18,543 $ 40,000 100,000 100,000 258,543 (2,124) 256,419 $ $ Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 The amended and restated credit agreement, described below, extended the maturity dates of the $65.0 million unsecured term loan facility and $35.0 million unsecured term loan facility (together, the “2024 Term Loan Facilities”) to January 2024. In connection with entering into the amended and restated credit agreement, the prior notes evidencing the existing $65.0 million unsecured term loan facility and $35.0 million unsecured term loan facility were canceled and new notes evidencing the 2024 Term Loan Facilities were executed. Borrowings under the unsecured 2024 Term Loan Facilities bear interest at a variable LIBOR plus 85 to 165 basis points, depending on the Company’s credit rating. The Company utilized existing interest rate swaps to effectively fix the LIBOR rate at 213 basis points until maturity (refer to Note 8 – Derivative Instruments and Hedging Activity). As of December 31, 2018, $100.0 million was outstanding under the 2024 Term Loan Facilities bearing an all-in interest rate of 3.13%, including the swaps. In July 2016, the Company completed a $40.0 million unsecured term loan facility that matures July 2023 (the “2023 Term Loan”). Borrowings under the 2023 Term Loan are priced at LIBOR plus 85 to 165 basis points, depending on the Company’s credit rating. The Company entered into an interest rate swap to fix LIBOR at 140 basis points until maturity. As of December 31, 2018, $40.0 million was outstanding under the 2023 Term Loan, which was subject to an all-in interest rate of 2.40%, including the swap. In August 2016, the Company entered into a $20.3 million unsecured amortizing term loan that matures May 2019 (the “2019 Term Loan”). Borrowings under the 2019 Term Loan are priced at LIBOR plus 170 basis points. In order to fix LIBOR on the 2019 Term Loan at 1.92% until maturity, the Company had an interest rate swap agreement in place, which was assigned by the lender under the Mortgage Note to the 2019 Term Loan lender. As of December 31, 2018, $18.5 million was outstanding under the 2019 Term Loan bearing an all-in interest rate of 3.62%, including the swap. In December 2018, the Company entered into a $100.0 million unsecured term loan facility that matures January 2026 (the “2026 Term Loan”). Borrowings under the 2026 Term Loan are priced at LIBOR plus 145 to 240 basis points, depending on the Company’s credit rating. The Company entered into an interest rate swap to fix LIBOR at 266 basis points until maturity. As of December 31, 2018, $100.0 million was outstanding under the 2026 Term Loan, which was subject to an all-in interest rate of 4.26%, including the swaps. Senior Unsecured Revolving Credit Facility In December 2016, the Company amended and restated the credit agreement (the “Credit Agreement”) that governs the Company’s senior unsecured revolving credit facility and the Company’s unsecured term loan facility to increase the aggregate borrowing capacity to $350.0 million. In July 2018, the Company elected to pursue commitments under the accordion option outlined in its senior unsecured revolving credit facility to increase the revolving commitments by $75.0 million, raising the total revolving commitments under the amended and restated credit agreement from $250.0 million to $325.0 million. Including the increased commitments, the amended and restated credit agreement provides for a $325.0 million unsecured revolving credit facility, a $65.0 million unsecured term loan facility and a $35.0 million unsecured term loan facility (referenced above as 2024 Term Loan Facilities). The unsecured revolving credit facility matures January 2021 with options to extend the maturity date to January 2022. The 2024 Term Loan Facilities mature January 2024. The Company has the ability to increase the aggregate borrowing capacity under the credit agreement up to $500.0 million, subject to lender approval. Borrowings under the revolving credit facility bear interest at LIBOR plus 85 to 155 basis points, depending on the Company’s credit rating. Additionally, the Company is required to pay a facility fee at an annual rate of 0 to 55 basis points of the total amount of the revolving credit facility, depending on the Company’s credit rating. The Credit Agreement contains certain financial covenants, including a maximum leverage ratio, a minimum fixed charge coverage ratio, and a maximum percentage of secured debt to total asset value. As of December 31, 2018, and December 31, 2017, the Company had $19.0 million and $14.0 million of outstanding borrowings under the revolving credit facility, respectively, bearing weighted average interest rates of approximately 3.38% and 2.6%, respectively. As of December 31, 2018, $306.0 million was available for borrowing under the revolving credit facility and the Company was in compliance with the credit agreement covenants. Concurrent with the amendment and restatement of the Company’s senior unsecured revolving credit facility, conforming changes were made to the 2023 Term Loan and 2019 Term Loan. F-20 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 The Company and Richard Agree, the Executive Chairman of the Company, are parties to a Reimbursement Agreement dated November 18, 2014. Pursuant to the Reimbursement Agreement, Mr. Agree has agreed to reimburse the Company for any loss incurred under the unsecured revolving credit facility in an amount not to exceed $14 million to the extent that the value of the Operating Partnership’s assets available to satisfy the Operating Partnership’s obligations under the revolving credit facility is less than $14 million. Debt Maturities The following table presents scheduled principal payments related to our debt as of December 31, 2018 (in thousands): 2019 2020 2021 (1) 2022 2023 Thereafter Total Total Scheduled Balloon Principal Payment $ 2,751 $ 40,044 $ 42,795 3,867 2,767 19,998 19,000 1,060 — 68,725 67,656 587,617 585,000 $ 9,595 $ 714,467 $ 724,062 1,100 998 1,060 1,069 2,617 (1) The balloon payment balance includes the balance outstanding under the Credit Facility as of December 31, 2018. The Credit Facility matures in January 2021, with options to extend the maturity for one year at the Company’s election, subject to certain conditions. Note 5 – Common Stock In June 2017, the Company filed an automatic shelf registration statement on Form S - 3, registering an unspecified amount of common stock, preferred stock, depositary shares and warrants at an indeterminant aggregate initial offering price. The Company 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. In June 2017, the Company completed a follow-on underwritten offering of 2,415,000 shares of common stock. The offering, which included the full exercise of the overallotment option by the underwriters, raised net proceeds of approximately $108.0 million, after deducting the underwriting discount. The proceeds from the offering were used to repay borrowings under our revolving credit facility to fund property acquisitions and for general corporate purposes. In May 2018, the Company entered into a $250.0 million at-the-market equity program (“ATM program”) through which the Company may, from time to time, sell shares of common stock. In addition to selling shares of common stock, the Company may enter into forward sale agreements through its ATM Program. During the year ended December 31, 2018, the Company issued 3,057,263 shares of common stock under its ATM program at an average price of $59.28, realizing gross proceeds of approximately $181.2 million. The Company had approximately $68.8 million remaining under the ATM program as of December 31, 2018. In March 2018, the Company completed a follow-on public offering of 3,450,000 shares of common stock, which included the underwriters’ option to purchase an additional 450,000 shares of common stock, in connection with a forward sale agreement. The offering, which included the full exercise of the underwriters’ option to purchase additional shares, was settled in its entirety in September 2018. Upon settlement the Company issued 3,450,000 shares and received net proceeds of $160.2 million after deducting fees and expenses. In September 2018, the Company entered into a follow-on public offering of 3,500,000 shares of common stock in connection with a forward sale agreement. As of December 31, 2018, the Company has not received proceeds from the sale of shares of its common stock by the forward purchaser. Selling common stock through the forward sale agreement F-21 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 enabled the Company to set the price of such shares upon pricing the offering (subject to certain adjustments) while delaying the issuance of such shares and the receipt of the net proceeds by the Company. The forward sale agreement is required to be settled no later than September 3, 2019. Note 6 – Dividends and Distribution Payable The Company declared dividends of $2.155, $2.025 and $1.920 per share during the years ended December 31, 2018, 2017 and 2016; the dividends have been reflected for federal income tax purposes as follows: For the Year Ended December 31, Ordinary Income Return of Capital Total 2016 2018 2017 $ 1.638 $ 1.695 $ 1.557 0.363 $ 2.155 $ 2.025 $ 1.920 0.517 0.330 On December 4, 2018, the Company declared a dividend of $0.555 per share for the quarter ended December 31, 2018. The holders of Operating Partnership Units were entitled to an equal distribution per Operating Partnership Unit held as of December 21, 2018. The dividends and distributions payable are recorded as liabilities in the Company’s consolidated balance sheet at December 31, 2018. 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 4, 2019. Note 7 – Income Taxes (not presented in thousands) 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, 2015. The Company has elected to record related interest and penalties, if any, as income tax expense on the Consolidated Statements of Operations and Comprehensive Income. As of December 31, 2018 and 2017, the Company had accrued a deferred income tax liability in the amount of $475,000. 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 Code. This transaction was accrued within the TRS entities described above. During the years ended December 31, 2018, 2017 and 2016, the Company recognized net federal and state tax expense of approximately $516,000, $227,0000 and $153,000, respectively, which are included in other expense and income in the Consolidated Statements of Operations and Comprehensive Income. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code that affected 2018, including but not limited to reducing the U.S. federal corporate rate from 35 percent to 21 percent. In connection with our initial analysis of the impact of the Tax Act, we have recorded a discrete net tax benefit related to one of the Company’s TRS entities reducing the deferred income tax liability by $230,000 in the period ending December 31, 2017. This is included in other expense and income on the Consolidated Statements of Operations and Comprehensive Income. 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, (refer to Note 10 – Fair Value Measurements.) F-22 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 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, the Company entered into an amortizing 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, the Company receives from the counterparty interest on the notional amount based on 1 month LIBOR and pays to the counterparty a fixed rate of 1.92%. The notional amount as of December 31, 2018 is $18.5 million. This swap effectively converts $22.3 million of variable-rate borrowings to fixed-rate borrowings from July 1, 2013 to May 1, 2019. As of December 31, 2018, this interest rate swap was valued as an asset of approximately $0.0 million. In September 2013, the Company 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, the Company receives from the counterparty interest on the notional amount based on 1 month LIBOR and pays to the counterparty a fixed rate of 2.20%. This swap effectively converts $35.0 million of variable-rate borrowings to fixed-rate borrowings from October 3, 2013 to September 29, 2020. As of December 31, 2018, this interest rate swap was valued as an asset of approximately $0.2 million. In July 2014, the Company 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, the Company receives from the counterparty interest on the notional amount based on 1 month LIBOR and pays to the counterparty a fixed rate of 2.09%. This swap effectively converts $65.0 million of variable-rate borrowings to fixed-rate borrowings from July 21, 2014 to July 21, 2021. As of December 31, 2018, this interest rate swap was valued as an asset of approximately $0.6 million. In September 2016, the Company entered into an interest rate swap agreement to hedge against changes in future cash flows resulting from changes in interest rates on $40.0 million in variable-rate borrowings. Under the terms of the interest rate swap agreement, the Company receives from the counterparty interest on the notional amount based on 1 month LIBOR and pays to the counterparty a fixed rate of 1.40%. This swap effectively converts $40.0 million of variable-rate borrowings to fixed-rate borrowings from August 1, 2016 to July 1, 2023. As of December 31, 2018, this interest rate swap was valued as an asset of approximately $1.8 million. In December 2018, the Company entered into interest rate swap agreements to hedge against changes in future cash flows resulting from changes in interest rates on $100.0 million in variable-rate borrowings. Under the terms of the interest rate swap agreements, the Company receives from the counterparty interest on the notional amount based on 1 month LIBOR and pays to the counterparty a fixed rate of 2.66%. This swap effectively converts $100.0 million of variable-rate borrowings to fixed-rate borrowings from December 27, 2018 to January 15, 2026. As of December 31, 2018, this interest rate swap was valued as a liability of approximately $1.1 million. 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, the effective portion of changes in the fair value of the derivatives designated, and that qualify as cash flow hedges, is recorded as a component of Other Comprehensive Income (Loss). The ineffective portion of the change in fair value of the derivative instrument is recognized directly in interest expense. For the years ended December 31, 2018 and 2017, the Company has not recorded any hedge ineffectiveness in earnings. Amounts in Accumulated Other Comprehensive Income (Loss) related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $0.8 million will be reclassified as a reduction to interest expense. F-23 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 The Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (in thousands, except number of instruments): Interest Rate Derivatives Interest Rate Swap Number of Instruments Notional December 31, December 31, December 31, December 31, 2018 2017 2018 2017 10 11 $ 258,543 $ 184,304 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 (in thousands). Derivatives designated as cash flow hedges: Interest Rate Swaps Derivatives designated as cash flow hedges: Interest Rate Swaps Asset Derivatives December 31, 2018 December 31, 2017 Fair Value Fair Value $ 2,539 $ 1,592 Liability Derivatives December 31, 2018 December 31, 2017 Fair Value Fair Value $ 1,135 $ 242 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, 2018 and 2017 (in thousands). Derivatives in Cash Flow Hedging Relationships Amount of Income/(Loss) Recognized in OCI on Derivative (Effective Portion) Location of Income/(Loss) Reclassified from Accumulated OCI Amount of Income/(Loss) Reclassified from Accumulated OCI into Expense (Effective Portion) into Income (Effective Portion) Twelve months ended December 31, 2018 2017 2018 2017 Interest rate swaps $ 193 $ 622 Interest Expense $ (139) $ 1,313 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, 2018. Credit-risk-related Contingent Features The Company has agreements with its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness. As of December 31, 2018, the fair value of derivatives in a net liability position related to these agreements, excluding any adjustment for nonperformance risk, was $0.6 million. As of December 31, 2018, the Company has not posted any collateral related to these net liability positions. If the Company had breached any of these provisions as of December 31, 2018, it could have been required to settle its obligations under the agreements at their termination value of $0.6 million. Although the derivative contracts are subject to master netting arrangements, which serve as credit mitigants to both us and our counterparties under certain situations, we do not net our derivative fair values or any existing rights or obligations to cash collateral on the Consolidated Balance Sheets. F-24 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 The table below presents a gross presentation of the effects of offsetting and a net presentation of the Company’s derivatives as of December 31, 2018 and December 31, 2017. The gross amounts of derivative assets or liabilities can be reconciled to the Tabular Disclosure of Fair Values of Derivative Instruments above, which also provides the location that derivative assets and liabilities are presented on the Consolidated Balance Sheets (in thousands): Offsetting of Derivative Assets As of December 31, 2018 Gross Amounts Statement of Gross Amounts Net Amounts of Offset in the Assets presented in the statement of Financial Position Financial Position Gross Amounts Not Offset in the Statement of Financial Position Financial Cash Collateral Instruments Received of Recognized Assets Net Amount 1,964 — $ Derivatives $ 2,539 $ — $ 2,539 $ (575) $ Offsetting of Derivative Liabilities As of December 31, 2018 Net Amounts of Gross Amounts Offset in the presented in the Liabilities Statement of Financial Position statement of Financial Position Gross Amounts Not Offset in the Statement of Financial Position Financial Cash Collateral Instruments Received Net Amount 560 — $ — $ 1,135 $ (575) $ Gross Amounts of Recognized Liabilities $ 1,135 $ Derivatives Offsetting of Derivative Assets As of December 31, 2017 Gross Amounts of Recognized Assets Gross Amounts Net Amounts of Offset in the Assets presented in the statement of Financial Position Statement of Financial Position Gross Amounts Not Offset in the Statement of Financial Position Financial Cash Collateral Instruments Received (42) $ Net Amount 1,550 — $ 1,592 $ Derivatives $ 1,592 $ — $ Offsetting of Derivative Liabilities As of December 31, 2017 Derivatives Net Amounts of Gross Amounts Offset in the presented in the Liabilities Statement of Financial Position statement of Financial Position Gross Amounts of Recognized Liabilities $ 242 $ Gross Amounts Not Offset in the Statement of Financial Position Financial Cash Collateral Instruments Received (42) $ Net Amount 200 — $ 242 $ — $ F-25 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 Note 9 – Discontinued Operations There were no properties classified as discontinued operations for the years ended December 31, 2018, 2017 and 2016. Note 10 – Fair Value Measurements Assets and Liabilities Measured at Fair Value The Company accounts for fair values in accordance with FASB Accounting Standards Codification Topic 820 Fair Value Measurements and Disclosure (ASC 820). ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances. ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls, is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Derivative Financial Instruments Currently, the Company uses interest rate swap agreements to manage its interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. To comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of December 31, 2018, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. F-26 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 and December 31, 2017 (in thousands): December 31, 2018 Derivative assets - interest rate swaps Derivative liabilities - interest rate swaps December 31, 2017 Derivative assets - interest rate swaps Derivative liabilities - interest rate swaps Total Fair Value Level 2 $ $ $ $ 2,539 $ 1,135 $ 2,539 1,135 1,592 $ 242 $ 1,592 242 The carrying values of cash and cash equivalents, receivables and accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short maturity of these financial instruments. The Company estimated the fair value of our debt based on our incremental borrowing rates for similar types of borrowing arrangements with the same remaining maturity and on the discounted estimated future cash payments to be made for other debt. The discount rate used to calculate the fair value of debt approximates current lending rates for loans and assumes the debt is outstanding through maturity. Since such amounts are estimates that are based on limited available market information for similar transactions, which is a Level 2 non-recurring measurement, there can be no assurance that the disclosed value of any financial instrument could be realized by immediate settlement of the instrument. Fixed rate debt (including variable rate debt swapped to fixed, excluding the value of the derivatives) with carrying values of $701.4 million and $505.6 million as of December 31, 2018 and December 31, 2017, respectively, had fair values of approximately $702.0 million and $516.5 million, respectively. Variable rate debt’s fair value is estimated to be equal to the carrying values of $19.0 million and $14.0 million as of December 31, 2018 and December 31, 2017, respectively. Note 11 – Equity Incentive Plan 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 2018, 2017 or 2016. Restricted common stock has been granted to certain employees under the 2014 Plan. As of December 31, 2018, there was $6.8 million of unrecognized compensation costs related to the outstanding restricted stock, which is expected to be recognized over a weighted average period of 3.3 years. The Company used 0% for the forfeiture rate for determining the fair value of restricted stock. 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 57,247; 88,466; and 93,363 shares of restricted stock in 2018, 2017 and 2016, respectively to employees and Directors. The restricted shares vest over a five-year period based on continued service to the Company. F-27 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 Restricted share activity is summarized as follows (in thousands, except per share data): Unvested restricted stock at December 31, 2015 Restricted stock granted Restricted stock vested Restricted stock forfeited Shares Weighted Average Outstanding (in thousands) Grant Date Fair Value 213 $ 29.07 93 $ (72) $ (6) $ 37.67 27.07 35.58 Unvested restricted stock at December 31, 2016 228 $ 33.02 Restricted stock granted Restricted stock vested Restricted stock forfeited 88 $ (78) $ (11) $ 48.59 30.95 39.68 Unvested restricted stock at December 31, 2017 227 $ 39.47 Restricted stock granted Restricted stock vested Restricted stock forfeited 57 $ (72) $ (1) $ 48.85 36.06 48.28 Unvested restricted stock at December 31, 2018 211 $ 43.15 The intrinsic value of restricted shares redeemed was $1.1 million, $1.1 million and $0.7 million for the years ended December 31, 2018, 2017 and 2016, respectively. Performance Shares Equity compensation awarded February 23, 2018 for certain executive officers consisted of both performance shares and restricted stock. Performance shares are subject to a three-year performance period, at the conclusion of which, shares awarded are to be determined by the Company’s total shareholder return compared to the MSCI US REIT Index and a defined peer group. Vesting of the performance shares following their issuance will occur ratably over a three-year period, with the initial vesting occurring immediately following the conclusion of the performance period such that all shares vest within five years of the original award date of February 23, 2018. The grant date fair value of these awards is determined using a Monte Carlo simulation pricing model using the following assumptions: (i) expected term of 2.9 years (equal to the remaining performance measurement period at the grant date), (ii) volatility of 19.1% (based on historical volatility), (iii) dividend yield of 4.36% (based on most recently paid dividend at grant date), and (iv) risk-free rate of 2.37% (interpolated based on 2 - and 3- year rates). Compensation expense is amortized on a straight-line basis over a five-year period which approximates the accelerated attribution method. Compensation expense related to performance shares is determined at the grant date and is not adjusted throughout the measurement or vesting periods. As of December 31, 2018, there was $1.4 million of total unrecognized compensation costs related to the outstanding performance shares, which is expected to be recognized over a weighted average period of 4.2 years. The Company used 0% for the forfeiture rate for determining the fair value of performance shares. 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 2018, 2017, or 2016. F-28 Agree Realty Corporation 8 Notes to Consolidated Financial Statements December 31, 2018 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, 2017 through December 31, 2018: 2018 Three Months Ended Revenue Net income Net income attributable to Agree Realty Corporation Net earnings per share (1) Basic Diluted Revenue Net income Net income attributable to Agree Realty Corporation Net earnings per share (1) Basic Diluted March 31, June 30, $ 34,569 $ 35,711 $ 16,636 16,451 13,068 12,923 September 30, December 31, 40,609 13,338 13,212 37,306 $ 15,756 15,586 $ 0.53 $ 0.53 0.42 $ 0.41 0.49 $ 0.48 0.38 0.37 2017 Three Months Ended March 31, $ 26,560 $ 14,768 14,575 June 30, 28,080 $ 15,067 14,876 September 30, December 31, 31,528 16,672 16,496 30,387 $ 12,283 12,165 $ 0.56 $ 0.56 0.56 $ 0.56 0.42 $ 0.42 0.55 0.55 (1) Calculated independently for each period and consequently, the sum of the quarters may differ from the annual amount Note 14 – Commitments and Contingencies In the ordinary course of business, we are party to various legal actions which we believe are routine in nature and incidental to the operation of our business. We believe that the outcome of the proceedings will not have a material adverse effect upon our consolidated financial position or results of operations Note 15 – Subsequent Events In connection with the preparation of its financial statements, the Company has evaluated events that occurred subsequent to December 31, 2018 through the date on which these financial statements were available to be issued to determine whether any of these events required disclosure in the financial statements. There were no reportable subsequent events or transactions. F-29 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Latest Income Statement is Computed (in years) 40 40 40 — 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 — Description Real Estate Held for Investment Encumbrance Land Initial Cost Capitalized Building and Subsequent to Improvements Acquisition Close of Period Building and Improvements Land Accumulated Depreciation Acquisition Date of Total Costs Gross Amount at Which Carried at Borman Center, MI Capital Plaza, KY Grayling Plaza, MI Omaha Store, NE Wichita Store, KS Monroeville, PA Boynton Beach, FL Chesterfield Township, MI Grand Blanc, MI Pontiac, MI Mt Pleasant Shopping Ctr, MI Rochester, MI Ypsilanti, MI Petoskey, MI Flint, MI Flint, MI New Baltimore, MI Flint, MI Indianapolis, IN Big Rapids, MI Flint, MI Canton Twp, MI Flint, MI Webster, NY Albion, NY Flint, MI Lansing, MI Boynton Beach, FL Midland, MI Roseville, MI Mt Pleasant, MI N Cape May, NJ Summit Twp, MI Livonia, MI Barnesville, GA East Lansing, MI Macomb Township, MI — — — — — — — — — — — 385,100 347,820 241,936 364,922 313,998 267,879 2,175,945 — — — — 2,521,880 — — 1,928,016 — — — — — — — — — — — 550,000 7,379 200,000 150,000 1,039,195 6,332,158 1,534,942 1,350,590 1,104,285 1,144,190 907,600 2,438,740 2,050,000 — 2,026,625 1,477,680 1,250,000 1,729,851 180,000 1,201,675 — 1,550,000 1,537,400 1,600,000 1,900,000 1,029,000 785,000 1,569,000 2,350,000 1,771,000 1,075,000 1,075,000 998,460 1,200,000 932,500 240,000 424,222 562,404 2,240,607 1,778,657 — 1,690,644 2,249,724 2,043,122 1,757,830 1,998,919 1,808,955 8,081,968 2,188,050 2,222,097 2,332,473 1,879,700 2,241,293 2,285,781 1,798,091 1,117,617 2,014,107 471,272 2,132,096 1,961,674 2,438,781 3,037,864 2,165,463 348,501 2,363,524 2,313,413 2,327,052 1,432,390 1,430,092 1,336,357 3,441,694 2,091,514 54,531 — 1,087,596 (455,034) (37,082) — (48,910) (2,541,849) 3,743,613 550,000 7,379 200,000 150,000 1,139,677 3,153,890 1,534,942 1,650,000 1,785,573 1,741,575 — 1,541,252 2,886,143 5,786,735 2,200,000 1,792,952 1,941,575 150,000 2,680,929 6,040,033 7,321,677 1,650,000 1,068,905 1,490,177 — 908,570 1,215,639 1,771,262 (46,164) 43,929 (113,506) 1,350,590 1,104,285 1,144,190 1,711,666 2,042,848 1,695,449 3,062,256 3,147,133 2,839,639 877,811 1,019,526 860,030 (1,495,521) 1,950 32,641 1,179 (1,200) — (16,503) 660 119,931 (2,000) (201,809) 23,021 — — — (6,666) 3,045 3,937,044 (79,235) 395 4,787 495 12,686 817,589 5,490 (52,752) — 907,600 2,438,740 2,050,000 — 2,026,625 1,477,680 1,250,000 1,729,851 180,000 1,201,675 — 1,550,000 1,537,400 1,600,000 1,900,000 1,029,000 785,000 1,569,000 2,268,695 1,771,000 1,075,000 1,075,000 998,460 1,200,000 932,500 240,000 424,222 6,586,447 2,190,000 2,254,738 2,333,652 1,878,500 2,241,293 2,269,278 1,798,751 1,237,548 2,012,107 269,463 2,155,117 1,961,674 2,438,781 3,037,864 2,158,797 351,546 6,300,568 2,315,483 2,327,447 1,437,177 1,430,587 1,349,043 4,259,283 2,097,004 1,779 — 7,494,047 4,628,740 4,304,738 2,333,652 3,905,125 3,718,973 3,519,278 3,528,602 1,417,548 3,213,782 269,463 3,705,117 3,499,074 4,038,781 4,937,864 3,187,797 1,136,546 7,869,568 4,584,178 4,098,447 2,512,177 2,505,587 2,347,503 5,459,283 3,029,504 241,779 424,222 4,143,160 1,067,603 1,070,139 1,088,948 845,333 1,001,573 985,893 751,315 493,063 792,310 166,120 812,606 727,535 901,842 1,072,751 762,281 127,398 1,158,794 778,990 763,590 470,061 467,917 413,376 1,203,994 587,567 12,433 — 1977 1978 1984 1995 1995 1996 1996 1998 1998 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2003 2004 2004 2004 2004 2004 2004 2005 2005 2005 2005 2006 2007 2007 2007 2008 F-30 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Costs Gross Amount at Which Carried at Close of Period Building and Improvements Accumulated Depreciation Acquisition Date of Total Description Brighton, MI Southfield, MI Atchison, KS Johnstown, OH Lake in the Hills, IL Concord, NC Antioch, IL St Augustine Shores, FL Mansfield, CT Spring Grove, IL Tallahassee, FL Wilmington, NC Marietta, GA Baltimore, MD Dallas, TX Chandler, AZ New Lenox, IL Roseville, CA Fort Walton Beach, FL Leawood, KS Salt Lake City, UT Burton, MI Macomb Township, MI Madison, AL Walker, MI Portland, OR Cochran, GA Baton Rouge, LA Southfield, MI Clifton Heights, PA Newark, DE Vineland, NJ Fort Mill, SC Spartanburg, SC Springfield, IL Jacksonville, NC Morrow, GA Encumbrance — 1,483,000 — — — — — — — 2,313,000 1,628,000 2,186,000 900,000 2,534,000 1,844,000 — — 4,752,000 1,768,000 2,872,167 — — 1,793,000 1,552,000 887,000 — — — — — — — — — — — — Initial Cost Capitalized Building and Subsequent to Improvements Acquisition Land 1,365,000 1,200,000 943,750 485,000 2,135,000 7,676,305 1,087,884 1,700,000 700,000 1,191,199 — 1,500,000 575,000 2,610,430 701,320 332,868 1,422,488 2,800,000 542,200 989,622 — 80,000 1,605,134 675,000 219,200 7,969,403 365,714 — 1,178,215 2,543,941 2,117,547 4,102,710 750,000 250,000 302,520 676,930 525,000 2,802,036 125,616 3,021,672 2,799,502 3,328,560 — — 1,973,929 1,902,191 — 1,482,462 1,348,591 696,297 — 778,905 793,898 — 3,695,455 1,958,790 3,003,541 6,810,104 — — 1,317,927 1,024,738 — 2,053,726 1,188,322 — 3,038,561 4,777,516 1,501,854 1,187,380 765,714 653,654 1,482,748 1,383,489 5,615 2,063 — — — — — (4,754) 508 968 — — 6,359 (3,447) 1,042,730 360 — (96,364) 88,778 16,197 (44,416) — — — — 161 — — — (3,105) (4,881) 7,986 — 4,387 10,255 — (99,849) Land 1,365,000 1,200,000 823,170 485,000 1,690,000 7,676,305 1,087,884 1,700,000 700,000 1,192,167 — 1,500,000 575,000 2,606,983 701,320 332,868 1,422,488 2,695,636 542,200 989,622 — 80,000 1,605,134 675,000 219,200 7,969,564 365,714 — 1,178,215 2,543,941 2,117,547 4,102,710 750,000 250,000 302,520 676,930 525,000 2,807,651 127,679 3,142,252 2,799,502 3,773,560 — — 1,969,175 1,902,699 — 1,482,462 1,348,591 702,656 — 1,821,635 794,258 — 3,703,455 2,047,568 3,019,738 6,765,688 — — 1,317,927 1,024,738 — 2,053,726 1,188,322 — 3,035,456 4,772,635 1,509,840 1,187,380 770,101 663,909 1,482,748 1,283,640 4,172,651 1,327,679 3,965,422 3,284,502 5,463,560 7,676,305 1,087,884 3,669,175 2,602,699 1,192,167 1,482,462 2,848,591 1,277,656 2,606,983 2,522,955 1,127,126 1,422,488 6,399,091 2,589,768 4,009,360 6,765,688 80,000 1,605,134 1,992,927 1,243,938 7,969,564 2,419,440 1,188,322 1,178,215 5,579,397 6,890,182 5,612,550 1,937,380 1,020,101 966,429 2,159,678 1,808,640 690,136 29,385 666,220 594,895 796,321 — — 399,848 386,484 — 298,034 264,100 131,671 — 326,898 143,997 — 678,903 355,279 528,452 1,219,467 — — 230,637 172,924 — 333,732 195,578 — 490,102 770,645 243,780 190,475 122,696 105,247 234,768 201,194 2009 2009 2010 2010 2010 2010 2010 2010 2010 2010 2010 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 Latest Income Statement is Computed (in years) 40 40 40 40 40 — — 40 40 — 40 40 40 — 40 40 40 40 40 40 40 — — 40 40 — 40 40 — 40 40 40 40 40 40 40 40 F-31 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Costs Gross Amount at Which Carried at Initial Cost Capitalized Building and Subsequent to Improvements Acquisition Land Close of Period Building and Improvements Accumulated Depreciation Acquisition Date of Total Description Charlotte, NC Lyons, GA Fuquay-Varina, NC Minneapolis, MN Lake Zurich, IL Lebanon, VA Harlingen, TX Pensacola, FL Pensacola, FL Venice, FL St. Joseph, MO Statham, GA North Las Vegas, NV Memphis, TN Rancho Cordova, CA Kissimmee, FL Pinellas Park, FL Manchester, CT Rapid City, SD Chicago, IL Brooklyn, OH Madisonville, TX Forest, MS Sun Valley, NV Rochester, NY Allentown, PA Casselberry, FL Berwyn, IL Grand Forks, ND Ann Arbor, MI Joplin, MO Red Bay, AL Birmingham, AL Birmingham, AL Birmingham, AL Birmingham, AL Montgomery, AL Encumbrance — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 1,822,900 121,627 2,042,225 1,088,015 780,974 300,000 430,000 650,000 400,000 1,300,196 377,620 191,919 214,552 322,520 1,339,612 1,453,500 2,625,000 397,800 1,017,800 272,222 3,643,700 96,680 — 308,495 2,500,000 2,525,051 1,804,000 186,791 1,502,609 3,000,000 1,208,225 38,981 230,106 245,234 98,271 235,641 325,389 Latest Income Statement is Computed (in years) 40 40 40 40 40 40 40 40 40 — 40 40 40 40 — 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 3,531,275 2,155,635 1,763,768 345,958 7,909,277 612,582 1,614,378 1,165,415 1,507,583 — 7,639,521 3,851,073 717,435 748,890 — 971,683 874,542 325,705 2,348,032 649,063 15,079,714 1,087,642 1,298,176 1,373,336 7,398,639 7,896,613 793,101 933,959 2,301,337 4,595,757 1,160,843 2,528,437 231,313 251,339 179,824 127,477 217,850 (570,844) (103,392) (255,778) (54,430) 28,174 20,380 12,854 12,854 12,854 4,892 — — — — — — 4,163 — — 2,451 14,207 11,850 21,925 (51,008) 2,017 — — 3,925 1,801,028 277,040 — 3,856 (297) (324) — (313) — 1,822,900 121,627 2,042,225 826,635 780,974 300,000 430,000 650,000 400,000 1,305,088 377,620 191,919 214,552 322,520 1,339,612 1,453,500 2,625,000 397,800 1,017,800 272,222 3,643,700 96,680 — 253,495 2,500,000 2,525,051 1,804,000 186,791 1,502,609 3,000,000 1,208,225 38,981 230,106 245,234 98,271 235,641 325,389 2,960,431 2,052,243 1,507,990 552,908 7,937,451 632,962 1,627,232 1,178,269 1,520,437 — 7,639,521 3,851,073 717,435 748,890 — 971,683 878,705 325,705 2,348,032 651,514 15,093,921 1,099,492 1,320,101 1,377,328 7,400,656 7,896,613 793,101 937,884 4,102,365 4,872,797 1,160,843 2,532,293 231,016 251,015 179,824 127,164 217,850 4,783,331 2,173,870 3,550,215 1,379,543 8,718,425 932,962 2,057,232 1,828,269 1,920,437 1,305,088 8,017,141 4,042,992 931,987 1,071,410 1,339,612 2,425,183 3,503,705 723,505 3,365,832 923,736 18,737,621 1,196,172 1,320,101 1,630,823 9,900,656 10,421,664 2,597,101 1,124,675 5,604,974 7,872,797 2,369,068 2,571,274 461,122 496,249 278,095 362,805 543,239 458,551 313,088 229,873 83,659 1,198,856 100,853 244,083 176,739 228,067 — 1,130,012 569,636 105,373 109,216 — 139,680 122,579 46,143 330,191 90,845 2,074,053 150,230 178,719 183,574 978,930 1,044,656 107,399 119,344 522,385 618,627 149,941 263,766 23,584 25,626 18,358 12,983 22,239 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 2014 F-32 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Costs Gross Amount at Which Carried at Initial Cost Capitalized Building and Subsequent to Improvements Acquisition Close of Period Building and Improvements Accumulated Depreciation Acquisition Date of Total Description Littleton, CO St Petersburg, FL St Augustine, FL East Palatka, FL Pensacola, FL Jacksonville, FL Fort Oglethorpe, GA New Lenox, IL Rockford, IL Indianapolis, IN Terre Haute, IN Junction City, KS Baton Rouge, LA Lincoln Park, MI Novi, MI Bloomfield Hills, MI Jackson, MS Belton, MO Irvington, NJ Fargo, ND Jamestown, ND Toledo, OH Toledo, OH Toledo, OH Toledo, OH Port Clinton, OH Mansfield, OH Orville, OH Akron, OH Akron, OH Hubbard, OH Calcutta, OH Columbus, OH Tulsa, OK Ligonier, PA Clarion, PA Mercer, PA Encumbrance 4,959,561 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 819,000 1,225,000 200,000 730,000 136,365 299,312 1,842,240 2,010,000 303,395 575,000 103,147 78,271 226,919 543,303 1,803,857 1,340,000 256,789 714,775 315,000 629,484 234,545 500,000 155,250 213,750 168,750 75,000 306,000 344,250 427,750 696,000 204,000 208,050 — 459,148 330,000 121,200 121,200 8,756,266 1,025,247 1,523,230 575,236 398,773 348,862 2,844,126 6,206,252 2,436,873 1,871,110 2,477,263 2,504,294 347,691 1,408,544 1,488,505 2,003,406 172,184 7,173,999 1,313,025 707,799 1,158,486 1,372,363 762,500 754,675 785,000 721,100 725,600 716,600 715,700 845,000 726,500 758,750 1,136,250 640,550 5,021,849 771,500 770,000 399 6,592 — 6,911 — 12,497 20,762 107,873 (15,000) — 32,376 (47,565) — 42,868 22,490 364,266 — — — 505,065 8,499 (12) 72 — 16,477 — — — — — — 1,462 1,584,190 (13,336) (9,500) — — Land 819,000 1,225,000 200,000 730,000 136,365 299,312 1,842,240 2,010,000 303,395 575,000 103,147 78,271 226,919 543,303 1,803,857 1,341,900 256,789 714,775 315,000 629,484 234,545 500,000 155,250 213,750 168,750 75,000 306,000 344,250 427,750 696,000 204,000 208,050 1,581,395 459,148 330,000 121,200 121,200 8,756,665 1,031,839 1,523,230 582,147 398,773 361,359 2,864,888 6,314,125 2,421,873 1,871,110 2,509,639 2,456,729 347,691 1,451,412 1,510,995 2,365,772 172,184 7,173,999 1,313,025 1,212,864 1,166,985 1,372,351 762,572 754,675 801,477 721,100 725,600 716,600 715,700 845,000 726,500 760,212 1,139,045 627,214 5,012,349 771,500 770,000 9,575,665 2,256,839 1,723,230 1,312,147 535,138 660,671 4,707,128 8,324,125 2,725,268 2,446,110 2,612,786 2,535,000 574,610 1,994,715 3,314,852 3,707,672 428,973 7,888,774 1,628,025 1,842,348 1,401,530 1,872,351 917,822 968,425 970,227 796,100 1,031,600 1,060,850 1,143,450 1,541,000 930,500 968,262 2,720,440 1,086,362 5,342,349 892,700 891,200 930,391 122,253 161,843 61,812 40,708 36,107 350,693 660,363 258,824 222,194 249,544 251,148 35,493 168,499 151,065 256,955 17,577 717,399 155,920 126,274 121,512 162,966 84,196 83,329 88,325 79,622 80,118 79,124 79,026 93,302 80,218 83,860 123,164 75,787 553,992 85,187 85,022 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 Latest Income Statement is Computed (in years) 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 F-33 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Costs Gross Amount at Which Carried at Initial Cost Capitalized Building and Subsequent to Improvements Acquisition Close of Period Building and Improvements Accumulated Depreciation Acquisition Date of Description Limerick, PA Harrisburg, PA Anderson, SC Easley, SC Spartanburg, SC Spartanburg, SC Columbia, SC Alcoa, TN Knoxville, TN Red Bank, TN New Tazewell, TN Maryville, TN Morristown, TN Clinton, TN Knoxville, TN Sweetwater, TN McKinney, TX Forest, VA Colonial Heights, VA Chester, VA Ashland, VA Mecanicsville, VA Glen Allen, VA Burlington, WA Wausau, WI Foley, AL Sulligent, AL Eutaw, AL Tallassee, AL Orange Park, AL Aurora, CO Pace, FL Pensacola, FL Jacksonville Beach, FL Freeport, FL Glenwood, GA Albany, GA Encumbrance — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 369,000 124,757 781,200 332,275 141,307 94,770 303,932 329,074 214,077 229,100 91,006 94,682 46,404 69,625 160,057 79,100 2,671,020 282,600 547,692 300,583 426,396 219,496 590,101 610,000 909,092 305,332 58,803 103,746 154,437 649,652 976,865 37,860 309,607 623,031 312,615 29,489 47,955 — 1,446,773 4,441,535 268,612 446,706 261,640 1,221,964 270,719 286,037 302,146 328,561 1,529,621 801,506 1,177,927 2,265,025 1,009,290 6,785,815 956,027 1,059,557 794,417 965,925 906,590 1,129,495 3,647,279 1,405,899 506,203 1,085,906 1,212,006 850,448 1,775,000 1,999,651 524,400 775,084 370,612 1,277,386 1,027,370 641,123 — 11,175 259,712 — — — (13,830) — — — 5,074 27,243 4,990 11,564 12,927 6,740 100,331 — (5,963) (3,777) (5,050) (4,225) (6,867) (4,602) 44,222 — — 2,935 11,125 — 1,743 — (25) — — — — Land 369,000 124,757 781,200 332,275 141,307 94,770 303,932 329,074 214,077 229,100 91,006 94,682 46,404 69,625 160,057 79,100 2,671,020 282,600 547,692 300,583 426,396 219,496 590,101 610,000 909,092 305,332 58,803 103,746 154,437 649,652 976,865 37,860 309,607 623,031 312,615 29,489 47,955 — 1,457,948 4,701,247 268,612 446,706 261,640 1,208,134 270,719 286,037 302,146 333,635 1,556,864 806,496 1,189,491 2,277,952 1,016,030 6,886,146 956,027 1,053,594 790,640 960,875 902,365 1,122,628 3,642,677 1,450,121 506,203 1,085,906 1,214,941 861,573 1,775,000 2,001,394 524,400 775,059 370,612 1,277,386 1,027,370 641,123 Total 369,000 1,582,705 5,482,447 600,887 588,013 356,410 1,512,066 599,793 500,114 531,246 424,641 1,651,546 852,900 1,259,116 2,438,009 1,095,130 9,557,166 1,238,627 1,601,286 1,091,223 1,387,271 1,121,861 1,712,729 4,252,677 2,359,213 811,535 1,144,709 1,318,687 1,016,010 2,424,652 2,978,259 562,260 1,084,666 993,643 1,590,001 1,056,859 689,078 — 145,713 547,382 27,421 45,602 26,709 123,928 27,636 29,200 30,843 33,356 155,321 80,641 118,938 227,772 101,591 765,079 107,552 107,557 80,713 98,092 92,119 114,605 373,245 158,654 51,548 104,000 116,355 78,761 147,917 154,271 51,247 75,702 34,702 111,771 96,271 60,025 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 Latest Income Statement is Computed (in years) — 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 F-34 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Costs Gross Amount at Which Carried at Initial Cost Capitalized Building and Subsequent to Improvements Acquisition Land Close of Period Building and Improvements Accumulated Depreciation Acquisition Date of Description Belvidere, IL Peru, IL Davenport, IA Buffalo Center, IA Sheffield, IA Topeka, KS Lenexa, KS Tompkinsville , KY Hazard, KY Portland, MA Flint, MI Hutchinson, MN Lowry City, MO Branson, MO Branson, MO Enfield, NH Marietta, OH Lorain, OH Franklin, OH Elyria, OH Elyria, OH Bedford Heights, OH Newburgh Heights, OH Warrensville Heights, OH Heath, OH Lima, OH Elk City, OK Salem, OR Westfield, PA Altoona, PA Grindstone, PA Blythewood, SC Columbia, SC Liberty, SC Blacksburg, SC Easley, SC Fountain Inn, SC Encumbrance — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 184,136 380,254 776,366 159,353 131,794 1,853,601 303,175 70,252 8,392,841 — 120,078 67,914 103,202 564,066 721,135 93,628 319,157 293,831 264,153 82,023 126,641 226,920 224,040 186,209 325,381 335,386 45,212 1,450,000 47,346 555,903 288,246 475,393 249,900 27,929 27,547 51,325 107,633 Total 828,628 2,505,752 7,399,908 859,813 861,337 14,096,155 2,490,039 1,202,285 22,107,632 3,835,032 2,701,583 788,713 717,267 1,504,826 1,439,156 1,437,937 1,544,183 1,338,787 1,455,930 992,427 821,713 1,186,448 1,183,139 1,111,605 1,083,510 927,540 1,287,432 5,747,807 1,165,069 10,046,711 788,625 1,353,979 1,059,835 1,250,875 1,495,648 1,238,831 1,184,266 60,308 172,697 579,560 59,831 62,315 1,189,302 164,015 108,417 1,029,899 335,526 193,613 61,568 53,731 74,476 56,835 128,063 114,788 95,788 106,764 79,660 60,819 81,960 81,923 79,647 60,018 44,412 111,282 322,334 109,343 771,113 37,528 83,210 75,832 114,563 134,576 106,381 96,448 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 Latest Income Statement is Computed (in years) 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 644,492 2,125,498 6,623,542 700,460 729,543 12,427,839 2,186,864 1,132,033 13,731,648 3,831,860 2,561,015 720,799 614,065 940,585 717,081 1,295,320 1,225,026 1,044,956 1,191,777 910,404 695,072 959,528 959,099 920,496 757,994 592,154 1,242,220 2,951,167 1,117,723 9,489,791 500,379 878,586 809,935 1,222,856 1,468,101 1,187,506 1,076,633 — — — — — (185,285) — — (16,857) 3,172 20,490 — — 175 940 48,989 — — — — — — — 4,900 135 — — 1,346,640 — 1,017 — — — 90 — — — 184,136 380,254 776,366 159,353 131,794 1,853,601 303,175 70,252 8,375,591 — 120,078 67,914 103,202 564,066 721,135 93,628 319,157 293,831 264,153 82,023 126,641 226,920 224,040 186,209 325,381 335,386 45,212 1,450,000 47,346 555,903 288,246 475,393 249,900 27,929 27,547 51,325 107,633 644,492 2,125,498 6,623,542 700,460 729,543 12,242,554 2,186,864 1,132,033 13,732,041 3,835,032 2,581,505 720,799 614,065 940,760 718,021 1,344,309 1,225,026 1,044,956 1,191,777 910,404 695,072 959,528 959,099 925,396 758,129 592,154 1,242,220 4,297,807 1,117,723 9,490,808 500,379 878,586 809,935 1,222,946 1,468,101 1,187,506 1,076,633 F-35 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Costs Gross Amount at Which Carried at Initial Cost Capitalized Building and Subsequent to Improvements Acquisition Land Close of Period Building and Improvements Accumulated Depreciation Acquisition Date of Total Description Walterboro, SC Jackson, TN Arlington, TX Sweetwater, TX Fort Worth, TX Brenham, TX Corpus Christi, TX Harlingen, TX Midland, TX Rockwall, TX Bluefield, VA Princeton, WV Beckley, WV Martinsburg, WV Grand Chute, WI New Richmond, WI Ashland, WI Baraboo, WI Decatur, AL Greenville, AL Bullhead City, AZ Page, AZ Safford, AZ Tuscon, AZ Bentonville, AR Sunnyvale, CA Whittier, CA Aurora, CO Aurora, CO Evergreen, CO Lakeland, FL Mt Dora, FL North Miami Beach, FL Orlando, FL Port Orange, FL Royal Palm Beach, FL Sarasota, FL Encumbrance — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 21,414 277,000 494,755 626,578 2,999,944 355,486 316,916 126,102 194,174 578,225 88,431 111,653 162,024 620,892 2,766,417 71,969 142,287 142,563 337,738 203,722 177,500 256,982 349,269 3,208,580 610,926 7,351,903 4,237,918 847,349 1,132,676 1,998,860 61,000 1,678,671 1,622,742 903,411 1,493,863 2,052,463 1,769,175 Latest Income Statement is Computed (in years) 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 1,156,820 495,103 710,416 652,127 6,198,198 17,280,895 2,140,056 869,779 5,005,720 1,768,930 1,161,840 1,029,090 991,653 943,163 7,084,942 648,850 684,545 653,176 510,706 905,780 1,364,406 1,299,283 1,196,307 4,410,679 897,562 4,638,432 7,343,869 834,301 5,716,367 3,827,245 1,227,037 3,691,615 512,717 1,627,159 3,114,697 956,768 3,587,992 — — — — — 581 — — 2,000 210 — — — — 4,700 — (153,000) — — 9,911 — — — — 170 194 — — 44,693 — — — 11,240 (24,843) — 11,151 — 21,414 277,000 494,755 626,578 2,999,944 355,486 316,916 126,102 194,174 578,225 88,431 111,653 162,024 620,892 2,766,417 71,969 142,287 142,563 337,738 203,722 177,500 256,982 349,269 3,208,580 610,926 7,351,903 4,237,918 847,349 1,132,676 1,998,860 61,000 1,678,671 1,622,742 903,411 1,493,863 2,052,463 1,769,175 1,156,820 495,103 710,416 652,127 6,198,198 17,281,476 2,140,056 869,779 5,007,720 1,769,140 1,161,840 1,029,090 991,653 943,163 7,089,642 648,850 531,545 653,176 510,706 915,691 1,364,406 1,299,283 1,196,307 4,410,679 897,732 4,638,626 7,343,869 834,301 5,761,060 3,827,245 1,227,037 3,691,615 523,957 1,602,316 3,114,697 967,919 3,587,992 1,178,234 772,103 1,205,171 1,278,705 9,198,142 17,636,962 2,456,972 995,881 5,201,894 2,347,365 1,250,271 1,140,743 1,153,677 1,564,055 9,856,059 720,819 673,832 795,739 848,444 1,119,413 1,541,906 1,556,265 1,545,576 7,619,259 1,508,658 11,990,529 11,581,787 1,681,650 6,893,736 5,826,105 1,288,037 5,370,286 2,146,699 2,505,727 4,608,560 3,020,382 5,357,167 103,631 37,133 69,269 63,854 568,168 1,584,096 178,338 72,482 406,852 132,681 108,878 96,415 92,917 70,737 664,198 56,774 56,559 55,792 27,663 45,741 93,789 89,326 72,150 275,667 61,747 299,412 474,292 41,715 287,480 247,176 66,465 238,417 26,115 93,379 201,158 57,805 231,724 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 F-36 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Costs Gross Amount at Which Carried at Initial Cost Capitalized Building and Subsequent to Improvements Acquisition Close of Period Building and Improvements Accumulated Depreciation Acquisition Date of Total Description Venice, FL Vero Beach, FL Dalton, GA Crystal Lake, IL Glenwood, IL Morris, IL Wheaton, IL Bicknell, IN Fort Wayne, IN Indianapolis, IN Des Moines, IA Frankfort, KY DeRidder, LA Lake Charles, LA Shreveport, LA Marshall, MI Mt Pleasant, MI Norton Shores, MI Portage, MI Stephenson, MI Sterling, MI Cambridge, MN Eagle Bend, MN Brandon, MS Clinton, MS Columbus, MS Flowood, MS Holly Springs, MS Jackson, MS Jackson, MS Meridian, MS Pearl, MS Ridgeland, MS Bowling Green, MO St Robert, MO Hamilton, MT Beatty, NV Encumbrance — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 281,936 4,469,033 211,362 2,446,521 815,483 1,206,749 447,291 215,037 711,430 734,434 322,797 — 814,891 1,308,418 891,872 339,813 — 495,605 262,181 223,152 127,844 536,812 96,558 428,464 370,264 1,103,458 360,267 413,316 242,796 732,944 396,329 299,839 407,041 360,201 394,859 558,047 198,928 1,291,748 — 220,927 7,012,819 970,108 2,062,495 751,458 2,381,471 1,258,357 970,175 1,374,153 514,277 2,156,542 4,235,719 2,058,257 — 511,282 667,982 1,102,990 1,044,947 905,607 1,334,601 1,165,437 969,346 1,057,143 2,128,089 1,044,807 952,574 963,188 2,862,813 1,152,729 616,351 864,498 2,809,170 1,305,366 1,083,570 1,265,084 — — — 120 — — — — — (2,700) — — 480 5,761 — — (254) 7,274 — 270 25,464 — — — — — — — — 13,767 — 7,355 — — 24,333 442 8,051 Land 281,936 4,469,033 211,362 2,446,521 815,483 1,206,749 447,291 215,037 711,430 734,434 322,797 — 814,891 1,308,418 891,872 339,813 — 495,605 262,181 223,152 127,844 536,812 96,558 428,464 370,264 1,103,458 360,267 413,316 242,796 732,944 396,329 299,839 407,041 360,201 394,859 558,047 198,928 1,291,748 — 220,927 7,012,939 970,108 2,062,495 751,458 2,381,471 1,258,357 967,475 1,374,153 514,277 2,157,022 4,241,480 2,058,257 — 511,028 675,256 1,102,990 1,045,217 931,071 1,334,601 1,165,437 969,346 1,057,143 2,128,089 1,044,807 952,574 963,188 2,876,580 1,152,729 623,706 864,498 2,809,170 1,329,699 1,084,012 1,273,135 1,573,684 4,469,033 432,289 9,459,460 1,785,591 3,269,244 1,198,749 2,596,508 1,969,787 1,701,909 1,696,950 514,277 2,971,913 5,549,898 2,950,129 339,813 511,028 1,170,861 1,365,171 1,268,369 1,058,915 1,871,413 1,261,995 1,397,810 1,427,407 3,231,547 1,405,074 1,365,890 1,205,984 3,609,524 1,549,058 923,545 1,271,539 3,169,371 1,724,558 1,642,059 1,472,063 75,263 — 13,787 365,256 52,548 133,203 50,097 138,819 91,755 66,678 88,747 30,569 134,830 220,790 128,651 — 25,552 35,124 66,639 52,258 50,231 86,193 65,499 64,623 70,476 150,740 69,654 59,417 64,213 161,416 76,828 31,132 57,633 157,973 65,781 56,456 71,500 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 Latest Income Statement is Computed (in years) 40 — 40 40 40 40 40 40 40 40 40 40 40 40 40 — 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 F-37 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Costs Gross Amount at Which Carried at Initial Cost Capitalized Building and Subsequent to Improvements Acquisition Land Close of Period Building and Improvements Accumulated Depreciation Acquisition Date of Total Description Alamogordo, NM Alamogordo, NM Alcalde, NM Cimarron, NM La Luz, NM Fayetteville, NC Gastonia, NC Devils Lake, ND Cambridge, OH Columbus, OH Grove City, OH Lorain, OH Reynoldsburg, OH Springfield, OH Ardmore, OK Dillon, SC Jasper, TN Austin, TX Carthage, TX Cedar Park, TX Granbury, TX Hemphill, TX Lampasas, TX Lubbock, TX Odessa, TX Port Arthur, TX Tyler, TX Farr West, UT Provo, UT St George, UT Tappahannock, VA Kirkland, WA Manitowoc, WI Oak Creek, WI Oxford, AL Oxford, AL Oxford, AL Encumbrance — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 654,965 524,763 435,486 345,693 487,401 1,267,529 401,119 323,508 168,717 1,109,044 334,032 808,162 843,336 982,451 571,993 85,896 190,582 4,986,082 597,995 1,386,802 944,223 250,503 245,312 1,501,556 921,043 1,889,732 4,446,648 679,206 1,692,785 313,107 1,076,745 816,072 879,237 487,277 148,407 255,786 24,875 Latest Income Statement is Computed (in years) 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 — 40 40 40 40 40 2,716,166 941,615 836,499 1,236,437 835,455 2,527,462 979,803 1,133,773 1,113,232 1,291,313 176,274 1,390,481 1,197,966 3,957,512 1,590,151 1,697,160 966,125 5,179,446 1,965,290 4,656,229 2,362,540 1,955,918 1,063,701 2,341,031 2,434,384 8,121,417 3,178,302 1,040,737 5,874,584 1,009,161 14,904 — 4,467,960 3,082,180 641,820 7,273,871 600,936 4,436 7,522 — 7,613 — 16,292 1,631 955 — — — 10,000 — (3,500) — — 6,888 9,988 — 341,226 — 11,886 — — 5,615 4,655 3,007 3,062 43,650 10,080 — — — 41,775 — — — 654,965 524,763 435,486 345,693 487,401 1,267,529 401,119 323,508 168,717 1,109,044 334,032 808,162 843,336 982,451 571,993 85,896 190,582 4,986,082 597,995 1,386,802 944,223 250,503 245,312 1,501,556 921,043 1,889,732 4,446,648 679,206 1,692,785 313,107 1,076,745 816,072 879,237 487,277 148,407 255,786 24,875 2,720,602 949,137 836,499 1,244,050 835,455 2,543,754 981,434 1,134,728 1,113,232 1,291,313 176,274 1,400,481 1,197,966 3,954,012 1,590,151 1,697,160 973,013 5,189,434 1,965,290 4,997,455 2,362,540 1,967,804 1,063,701 2,341,031 2,439,999 8,126,072 3,181,309 1,043,799 5,918,234 1,019,241 14,904 — 4,467,960 3,123,955 641,820 7,273,871 600,936 3,375,567 1,473,900 1,271,985 1,589,743 1,322,856 3,811,283 1,382,553 1,458,236 1,281,949 2,400,357 510,306 2,208,643 2,041,302 4,936,463 2,162,144 1,783,056 1,163,595 10,175,516 2,563,285 6,384,257 3,306,763 2,218,307 1,309,013 3,842,587 3,361,042 10,015,804 7,627,957 1,723,005 7,611,019 1,332,348 1,091,649 816,072 5,347,197 3,611,232 790,227 7,529,657 625,811 152,823 49,390 41,825 64,750 43,513 132,390 51,116 65,741 78,854 80,630 11,000 96,262 74,812 280,010 102,699 123,751 48,624 378,334 122,837 306,341 147,667 110,304 66,476 146,324 152,310 473,704 184,065 63,993 357,759 70,304 900 — 260,467 221,306 26,712 303,078 25,039 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2017 2017 2017 F-38 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Costs Gross Amount at Which Carried at Initial Cost Capitalized Building and Subsequent to Improvements Acquisition Land Close of Period Building and Improvements Accumulated Depreciation Acquisition Date of Total Description Jonesboro, AR Lowell, AR Southington, CT Millsboro, DE Jacksonville,FL Orange Park, FL Port Richey, FL Americus, GA Brunswick, GA Brunswick, GA Buford, GA Carrollton, GA Decatur, GA Metter, GA Villa Rica, GA Chicago, IL Chicago, IL Galesburg, IL Mundelein, IL Mundelein, IL Mundelein, IL Springfield, IL Woodstock, IL Frankfort, IN Kokomo, IN Nashville, IN Roeland Park, KS Georgetown, KY Hopkinsville, KY Salyersville, KY Amite, LA Bossier City, LA Kenner, LA Mandeville, LA New Orleans, LA Baltimore, MD Canton, MI Encumbrance — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 3,656,554 949,519 1,088,181 3,501,109 2,298,885 214,858 1,140,182 1,318,463 1,279,688 126,335 341,860 597,465 558,859 256,743 410,936 2,899,155 2,081,151 214,280 1,238,743 1,743,222 1,803,068 574,805 683,419 50,458 95,196 484,117 7,829,806 1,996,456 413,269 289,663 601,238 797,899 323,188 834,891 — 782,819 3,655,296 Latest Income Statement is Computed (in years) 40 40 40 — 40 40 40 — 40 40 40 40 40 40 40 40 40 40 — — — 40 40 40 40 40 — 40 40 40 40 40 40 40 40 40 40 3,219,456 1,435,056 1,287,837 — 2,894,565 2,304,095 1,649,773 — 2,158,863 1,626,530 1,023,813 886,644 1,429,106 766,818 1,311,444 9,822,986 5,197,315 979,108 — — — 1,554,786 1,002,207 2,008,275 1,484,778 2,458,215 — 6,315,768 996,619 906,455 1,695,242 2,925,864 859,298 1,294,812 6,846,313 745,092 — — 10,229 13,057 665 12,286 — — — 205 — — — — — — — — — — — — 1,722 284 — — — (1,247,898) 928 — — — 146 — (795) — — 13,912,109 3,656,554 949,519 1,088,181 3,501,774 2,298,885 214,858 1,140,182 1,318,463 1,279,688 126,335 341,860 597,465 558,859 256,743 410,936 2,899,155 2,081,151 214,280 1,238,743 1,743,222 1,803,068 574,805 683,419 50,458 95,196 484,117 6,581,908 1,996,456 413,269 289,663 601,238 797,899 323,188 834,891 — 782,819 7,345,761 3,219,456 1,445,285 1,300,894 — 2,906,851 2,304,095 1,649,773 — 2,159,068 1,626,530 1,023,813 886,644 1,429,106 766,818 1,311,444 9,822,986 5,197,315 979,108 — — — 1,556,508 1,002,491 2,008,275 1,484,778 2,458,215 — 6,316,696 996,619 906,455 1,695,242 2,926,010 859,298 1,294,017 6,846,313 745,092 10,221,644 6,876,010 2,394,804 2,389,075 3,501,774 5,205,736 2,518,953 2,789,955 1,318,463 3,438,756 1,752,865 1,365,673 1,484,109 1,987,965 1,023,561 1,722,380 12,722,141 7,278,466 1,193,388 1,238,743 1,743,222 1,803,068 2,131,313 1,685,910 2,058,733 1,579,974 2,942,332 6,581,908 8,313,152 1,409,888 1,196,118 2,296,480 3,723,909 1,182,486 2,128,908 6,846,313 1,527,911 17,567,405 98,475 36,068 32,441 — 78,531 86,373 61,853 — 94,280 44,052 38,358 31,318 38,705 27,114 51,882 429,668 227,014 36,694 — — — 38,881 27,148 83,678 40,213 91,945 — 243,812 37,344 35,845 67,052 79,243 26,787 40,388 256,689 21,632 220,173 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 F-39 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Accumulated Depreciation Acquisition Date of Description Grand Rapids, MI Bloomington, MN Maplewood, MN Monticello, MN Mountain Iron, MN Gulfport, MS Jackson, MS McComb, MS Kansas City, MO Springfield, MO St. Charles, MO St. Peters, MO Boulder City, NV Egg Harbor, NJ Secaucus, NJ Sewell, NJ Santa Fe, NM Statesville, NC Jacksonville, NC Minot, ND Grandview Heights, OH Hillard, OH Edmond, OK Oklahoma City, OK Erie, PA Pittsburgh, PA Gaffney, SC Sumter, SC Chattanooga, TN Etowah, TN Memphis, TN Alamo, TX Andrews, TX Arlington, TX Canyon Lake, TX Corpus Christi, TX Fort Stockton, TX Initial Cost Land Encumbrance — — — — — — — — — — — — — — 7,015,035 1,491,302 2,050,168 449,025 177,918 671,824 802,230 67,026 1,390,880 616,344 736,242 1,364,670 566,639 520,510 21,500,000 19,915,781 1,809,771 1,072,340 287,467 308,321 928,796 1,276,870 1,001,228 1,063,243 868,648 425,267 692,454 200,845 132,204 2,089,237 74,057 1,661,764 104,878 172,373 497,852 382,522 185,375 185,474 — — — — — — — — — — — — — — — — — — — — — — Costs Capitalized Building and Subsequent to Improvements Acquisition 2,635,983 — — — (3,600) 3,517,854 9,368 979,816 — 1,139,849 — 1,176,505 — 1,434,997 — 685,426 — 1,588,573 13,285 2,448,360 36,650 2,122,426 — — — 993,399 — 1,087,374 55,649 17,306,541 — 6,892,134 — 4,013,237 — 867,849 24,019 875,652 — 1,619,726 650 8,557,690 — — — 3,816,155 7,835 1,820,174 — 1,284,883 — 2,509,358 — 878,455 — 1,095,478 195 3,595,808 2,732 862,436 (250) 3,874,356 13,274 821,355 (292) 817,252 1,783 1,601,007 (281) 1,026,179 — 1,413,298 — 1,186,339 Land Total Gross Amount at Which Carried at Close of Period Building and Improvements 7,901,018 — 3,514,254 989,184 1,139,849 1,176,505 1,434,997 685,426 1,588,573 2,461,645 2,159,076 — 993,399 1,087,374 17,362,190 6,892,134 4,013,237 867,849 899,671 1,619,726 8,558,340 — 3,816,155 1,828,009 1,284,883 2,509,358 878,455 1,095,478 3,596,003 865,168 3,874,106 834,629 816,960 1,602,790 1,025,898 1,413,298 1,186,339 1,750,000 1,491,302 2,050,168 449,025 177,918 671,824 802,230 67,026 1,390,880 616,344 736,242 1,364,670 566,639 520,510 19,915,781 1,809,771 1,072,340 287,467 308,321 928,796 1,276,870 1,001,228 1,063,243 868,648 425,267 692,454 200,845 132,204 2,089,237 74,057 1,661,764 104,878 172,373 497,852 382,522 185,375 185,474 9,651,018 1,491,302 5,564,422 1,438,209 1,317,767 1,848,329 2,237,227 752,452 2,979,453 3,077,989 2,895,318 1,364,670 1,560,038 1,607,884 37,277,971 8,701,905 5,085,577 1,155,316 1,207,992 2,548,522 9,835,210 1,001,228 4,879,398 2,696,657 1,710,150 3,201,812 1,079,300 1,227,682 5,685,240 939,225 5,535,870 939,507 989,333 2,100,642 1,408,420 1,598,673 1,371,813 98,763 — 102,582 46,973 42,724 46,550 56,777 25,655 69,003 61,458 93,246 — 37,176 47,547 433,688 258,448 200,655 39,772 32,946 64,047 338,594 — 111,305 60,599 42,696 93,924 32,914 43,333 97,389 37,745 177,513 20,783 35,747 63,366 25,649 55,792 46,926 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 Latest Income Statement is Computed (in years) 40 — 40 40 40 40 40 40 40 40 40 — 40 40 40 40 40 40 40 40 40 — 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 F-40 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Costs Gross Amount at Which Carried at Initial Cost Capitalized Building and Subsequent to Improvements Acquisition Land Close of Period Building and Improvements Accumulated Depreciation Acquisition Date of Total Description Fort Worth, TX Lufkin, TX Heber, UT Newport News, VA Appleton, WI Onalaska, WI Athens, AL Birmingham, AL Boaz, AL Roanoke, AL Selma, AL Maricopa, AZ Parker, AZ St. Michaels, AZ Little Rock, AR Grand Junction, CO Brookfield, CT Manchester, CT Waterbury, CT Apopka, FL Cape Coral, FL Crystal River, FL DeFuniak Springs, FL Eustis, FL Hollywood, FL Homestead, FL Jacksonville, FL Marianna, FL Melbourne, FL Merritt Island,FL St. Petersburg, FL Tampa, FL Tampa, FL Titusville, FL Winter Haven, FL Albany, GA Austell, GA Encumbrance — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 1,016,587 1,497,171 367,013 2,458,053 417,249 821,084 253,858 1,635,912 379,197 110,924 206,831 2,166,955 322,510 127,874 390,921 835,792 343,489 316,847 663,667 587,585 554,721 369,723 226,898 649,394 895,783 650,821 827,799 257,760 497,607 598,790 958,547 488,002 703,273 137,421 832,247 448,253 1,162,782 Latest Income Statement is Computed (in years) 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 4,622,507 4,948,906 1,204,635 5,390,475 1,525,582 2,651,772 1,204,570 2,739,834 898,689 938,451 1,790,939 9,505,724 1,159,624 1,043,962 856,987 1,915,976 835,106 558,659 607,457 2,363,721 1,009,404 1,015,324 835,016 1,580,694 947,204 948,265 1,554,516 886,801 1,549,974 988,114 902,502 1,209,902 1,283,951 1,017,394 1,433,449 1,462,641 7,462,351 — 3,078 — 576,298 275 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 1,016,587 1,497,171 367,013 2,458,053 417,249 821,084 253,858 1,635,912 379,197 110,924 206,831 2,166,955 322,510 127,874 390,921 835,792 343,489 316,847 663,667 587,585 554,721 369,723 226,898 649,394 895,783 650,821 827,799 257,760 497,607 598,790 958,547 488,002 703,273 137,421 832,247 448,253 1,162,782 4,622,507 4,951,984 1,204,635 5,966,773 1,525,857 2,651,772 1,204,570 2,739,834 898,689 938,451 1,790,939 9,505,724 1,159,624 1,043,962 856,987 1,915,976 835,106 558,659 607,457 2,363,721 1,009,404 1,015,324 835,016 1,580,694 947,204 948,265 1,554,516 886,801 1,549,974 988,114 902,502 1,209,902 1,283,951 1,017,394 1,433,449 1,462,641 7,462,351 5,639,094 6,449,155 1,571,648 8,424,826 1,943,106 3,472,856 1,458,428 4,375,746 1,277,886 1,049,375 1,997,770 11,672,679 1,482,134 1,171,836 1,247,908 2,751,768 1,178,595 875,506 1,271,124 2,951,306 1,564,125 1,385,047 1,061,914 2,230,088 1,842,987 1,599,086 2,382,315 1,144,561 2,047,581 1,586,904 1,861,049 1,697,904 1,987,224 1,154,815 2,265,696 1,910,894 8,625,133 144,383 216,554 54,326 218,674 57,080 104,905 — 51,345 16,766 5,865 — 19,804 16,911 6,525 — — — — — — — 23,257 3,479 — — — — — — 6,176 9,345 12,603 — — — — 124,373 2017 2017 2017 2017 2017 2017 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 F-41 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Costs Gross Amount at Which Carried at Initial Cost Capitalized Building and Subsequent to Improvements Acquisition Close of Period Building and Improvements Accumulated Depreciation Acquisition Date of Total Description Conyers, GA Covington, GA Doraville, GA Douglasville, GA Lilburn, GA Marietta, GA Marietta, GA Pooler, GA Riverdale, GA Savannah, GA Statesboro, GA Union City, GA Nampa, ID Aurora, IL Aurora, IL Bloomington, IL Carlinville, IL Centralia, IL Chicago, IL Flora, IL Gurnee, IL Lake Zurich, IL Macomb, IL Morris, IL Newton, IL Northlake, IL Rockford, IL Greenwood, IN Hammond, IN Indianapolis, IN Mishawaka, IN South Bend, IN Warsaw, IN Ackley, IA Ottumwa, IA Riceville, IA Riverside, IA Encumbrance — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 330,549 744,321 1,991,031 519,420 304,597 1,257,433 447,582 989,819 474,072 944,815 681,381 97,528 496,676 174,456 623,568 1,408,067 208,519 277,527 1,569,578 232,155 1,341,679 290,272 85,753 331,622 510,192 353,337 270,180 1,586,786 230,142 132,291 1,263,680 420,571 583,174 202,968 227,562 154,294 579,935 941,133 1,235,171 291,663 1,492,529 1,206,785 1,563,755 832,782 1,220,271 879,835 2,997,426 1,592,291 1,036,165 5,163,257 862,599 1,437,665 986,931 1,113,537 351,547 632,848 1,121,688 951,320 857,467 661,375 1,842,994 1,069,075 564,677 708,041 1,232,818 — 311,647 4,106,900 2,772,376 1,118,270 896,444 5,794,123 742,421 1,594,085 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 330,549 744,321 1,991,031 519,420 304,597 1,257,433 447,582 989,819 474,072 944,815 681,381 97,528 496,676 174,456 623,568 1,408,067 208,519 277,527 1,569,578 232,155 1,341,679 290,272 85,753 331,622 510,192 353,337 270,180 1,586,786 230,142 132,291 1,263,680 420,571 583,174 202,968 227,562 154,294 579,935 941,133 1,235,171 291,663 1,492,529 1,206,785 1,563,755 832,782 1,220,271 879,835 2,997,426 1,592,291 1,036,165 5,163,257 862,599 1,437,665 986,931 1,113,537 351,547 632,848 1,121,688 951,320 857,467 661,375 1,842,994 1,069,075 564,677 708,041 1,232,818 — 311,647 4,106,900 2,772,376 1,118,270 896,444 5,794,123 742,421 1,594,085 1,271,682 1,979,492 2,282,694 2,011,949 1,511,382 2,821,188 1,280,364 2,210,090 1,353,907 3,942,241 2,273,672 1,133,693 5,659,933 1,037,055 2,061,233 2,394,998 1,322,056 629,074 2,202,426 1,353,843 2,292,999 1,147,739 747,128 2,174,616 1,579,267 918,014 978,221 2,819,604 230,142 443,938 5,370,580 3,192,947 1,701,444 1,099,412 6,021,685 896,715 2,174,020 — 2,573 5,407 — — 32,513 — 15,249 — — 9,952 — 53,784 — 14,976 16,449 16,239 — 14,475 2,337 17,821 1,786 — 11,519 8,909 — 16,218 17,979 — — 25,668 63,487 25,608 18,593 132,760 15,362 19,926 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 Latest Income Statement is Computed (in years) 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 — 40 40 40 40 40 40 40 40 F-42 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Costs Gross Amount at Which Carried at Initial Cost Capitalized Building and Subsequent to Improvements Acquisition Close of Period Building and Improvements Accumulated Depreciation Acquisition Date of Total Description Urbandale, IA Overland Park, KS Ekron, KY Florence, KY Chalmette, LA Donaldsonville, LA Franklinton, LA Franklinton, LA Franklinton, LA Franklinton, LA Harvey, LA Jena, LA Jennings, LA New Orleans, LA Pine Grove, LA Rayville, LA Roseland, LA Talisheek, LA Baltimore, MD Salisbury, MD Springfield, MA Ann Arbor, MI Belleville, MI Grand Blanc, MI Jackson, MI Kentwood, MI Lake Orion, MI Onaway, MI Champlin, MN North Branch, MN Richfield, MN Bay St. Louis, MS Corinth, MS Forest, MS Southaven, MS Waynesboro, MS Blue Springs, MO Encumbrance — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 68,172 1,053,287 95,655 601,820 290,396 542,118 193,192 242,651 396,560 163,258 728,822 772,878 128,158 293,726 238,223 310,034 307,331 150,802 699,157 305,215 153,428 735,859 598,203 1,589,886 1,451,971 939,481 1,172,982 17,557 307,271 533,175 2,141,431 547,498 504,885 189,817 150,931 243,835 431,698 2,938,611 6,141,649 802,880 1,054,572 1,297,684 2,418,183 925,598 2,462,533 1,122,737 747,944 1,468,688 2,392,129 2,329,137 — 758,573 2,365,203 872,252 1,031,214 651,927 1,193,870 826,741 2,489,707 3,970,176 3,738,477 2,548,436 3,438,259 2,349,762 935,308 1,602,196 — 613,552 2,080,989 4,540,022 1,340,848 826,123 1,205,383 1,704,870 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 68,172 1,053,287 95,655 601,820 290,396 542,118 193,192 242,651 396,560 163,258 728,822 772,878 128,158 293,726 238,223 310,034 307,331 150,802 699,157 305,215 153,428 735,859 598,203 1,589,886 1,451,971 939,481 1,172,982 17,557 307,271 533,175 2,141,431 547,498 504,885 189,817 150,931 243,835 431,698 2,938,611 6,141,649 802,880 1,054,572 1,297,684 2,418,183 925,598 2,462,533 1,122,737 747,944 1,468,688 2,392,129 2,329,137 — 758,573 2,365,203 872,252 1,031,214 651,927 1,193,870 826,741 2,489,707 3,970,176 3,738,477 2,548,436 3,438,259 2,349,762 935,308 1,602,196 — 613,552 2,080,989 4,540,022 1,340,848 826,123 1,205,383 1,704,870 3,006,783 7,194,936 898,535 1,656,392 1,588,080 2,960,301 1,118,790 2,705,184 1,519,297 911,202 2,197,510 3,165,007 2,457,295 293,726 996,796 2,675,237 1,179,583 1,182,016 1,351,084 1,499,085 980,169 3,225,566 4,568,379 5,328,363 4,000,407 4,377,740 3,522,744 952,865 1,909,467 533,175 2,754,983 2,628,487 5,044,907 1,530,665 977,054 1,449,218 2,136,568 68,313 38,385 10,036 — — 25,189 5,785 25,651 7,017 4,675 27,466 24,918 24,262 — 4,741 24,638 5,452 6,445 — — — 57,009 90,891 85,596 58,343 78,729 53,797 13,640 — — — 21,677 104,037 13,967 — 12,556 21,308 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 Latest Income Statement is Computed (in years) 40 40 40 40 40 40 40 40 40 40 40 40 40 — 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 — 40 40 40 40 40 40 40 F-43 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Costs Gross Amount at Which Carried at Initial Cost Capitalized Building and Subsequent to Improvements Acquisition Land Close of Period Building and Improvements Accumulated Depreciation Acquisition Date of Total Description Florissant, MO Joplin, MO Liberty, MO Neosho, MO Springfield, MO St. Peters, MO Webb City, MO Nashua, NH Forked River, NJ Forked River, NJ Forked River, NJ Forked River, NJ Forked River, NJ Woodland Park, NJ Bernalillo, NM Farmington, NM Canandaigue, NY Catskill, NY Clifton Park, NY Elmira, NY Geneseo, NY Greece, NY Hamburg, NY Latham, NY N. Syracuse, NY Niagara Falls, NY Rochester, NY Rochester, NY Rochester, NY Schenectady, NY Schenectady, NY Syracuse, NY Syracuse, NY Tonawanda, NY Tonawanda, NY W. Seneca, NY Williamsville, NY Encumbrance — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 733,592 789,880 308,470 687,812 1,311,497 1,205,257 1,324,146 3,635,953 4,227,966 3,505,805 1,128,858 1,682,284 682,822 7,761,801 899,770 4,428,998 154,996 80,524 925,613 43,388 264,795 182,916 520,599 373,318 165,417 392,301 100,136 575,463 375,721 74,387 453,006 339,207 607,053 94,443 131,021 98,194 705,842 Latest Income Statement is Computed (in years) 40 40 40 40 40 40 40 40 40 40 40 40 — 40 40 — 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 1,961,094 384,638 2,750,231 1,115,054 5,462,972 1,760,658 1,501,744 2,720,644 3,991,690 (2,766,838) 1,396,960 3,527,964 — 3,958,902 2,037,465 — 1,352,174 1,097,609 1,858,613 947,627 1,328,115 1,254,678 2,039,602 764,382 452,510 1,022,745 895,792 772,555 881,257 1,279,967 726,404 918,302 259,331 727,373 576,915 737,592 488,800 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 733,592 789,880 308,470 687,812 1,311,497 1,205,257 1,324,146 3,635,953 4,227,966 3,505,805 1,128,858 1,682,284 682,822 7,761,801 899,770 4,428,998 154,996 80,524 925,613 43,388 264,795 182,916 520,599 373,318 165,417 392,301 100,136 575,463 375,721 74,387 453,006 339,207 607,053 94,443 131,021 98,194 705,842 1,961,094 384,638 2,750,231 1,115,054 5,462,972 1,760,658 1,501,744 2,720,644 3,991,690 (2,766,838) 1,396,960 3,527,964 — 3,958,902 2,037,465 — 1,352,174 1,097,609 1,858,613 947,627 1,328,115 1,254,678 2,039,602 764,382 452,510 1,022,745 895,792 772,555 881,257 1,279,967 726,404 918,302 259,331 727,373 576,915 737,592 488,800 2,694,686 1,174,518 3,058,701 1,802,866 6,774,469 2,965,915 2,825,890 6,356,597 8,219,656 738,967 2,525,818 5,210,248 682,822 11,720,703 2,937,235 4,428,998 1,507,170 1,178,133 2,784,226 991,015 1,592,910 1,437,594 2,560,201 1,137,700 617,927 1,415,046 995,928 1,348,018 1,256,978 1,354,354 1,179,410 1,257,509 866,384 821,816 707,936 835,786 1,194,642 — 8,804 51,458 13,938 136,548 — 34,404 62,214 16,632 1,774 5,821 1,398 — 41,226 47,973 — 11,249 9,127 — — 11,068 10,436 — — — — 7,465 — — 10,647 — — — 6,042 — — — 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 F-44 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Costs Gross Amount at Which Carried at Initial Cost Capitalized Building and Subsequent to Improvements Acquisition Land Close of Period Building and Improvements Accumulated Depreciation Acquisition Date of Description Charlotte, NC Concord, NC Durham, NC Fayetteville, NC Greensboro, NC Greenville, NC High Point, NC Kernersville, NC Pineville, NC Rockingham, NC Salisbury, NC Zebulon, NC Akron, OH Bellevue, OH Canton, OH Columbus, OH Fairview Park, OH Franklin, OH Middletown, OH Niles, OH North Olmsted, OH North Ridgeville, OH Warren, OH Warrensville Heights, OH Youngstown, OH Broken Arrow, OK Chickasha, OK Coweta, OK Midwest City, OK Oklahoma City, OK Shawnee, OK Wright City, OK Hillsboro, OR Carlisle, PA Erie, PA Johnstown, PA King of Prussia, PA Encumbrance — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 287,732 526,102 1,787,380 108,898 402,957 541,233 252,336 270,581 1,390,592 245,976 572,085 160,107 445,299 272,308 981,941 542,161 338,732 5,405,718 311,389 334,783 544,903 521,909 208,710 735,534 323,983 919,176 230,000 282,468 755,192 1,104,085 409,190 38,302 4,632,369 340,349 58,279 1,030,667 5,097,320 Total 805,737 2,482,091 2,636,366 1,878,172 1,753,972 1,944,674 1,277,032 1,237,388 7,780,793 1,201,555 1,272,373 161,184 445,299 1,399,673 2,058,054 1,630,477 738,745 5,405,718 1,762,858 1,132,919 1,355,743 1,997,214 809,802 735,534 1,313,413 2,195,930 3,111,525 1,086,230 6,442,472 2,978,444 1,366,747 1,048,947 12,288,548 983,847 892,212 1,030,667 5,097,320 — 4,075 — — — — — — 53,229 11,945 — 11 — 16,441 — — — — 21,151 — 15,165 27,554 — — — 15,959 24,013 10,047 35,546 3,905 — 6,317 127,603 — — — — 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 Latest Income Statement is Computed (in years) 40 40 40 40 40 40 40 40 40 40 40 40 — 40 40 40 40 — 40 40 40 40 40 — 40 40 40 40 40 40 40 40 40 40 40 — — 518,005 1,955,989 848,986 1,769,274 1,351,015 1,403,441 1,024,696 966,807 6,390,201 955,579 700,288 1,077 — 1,127,365 1,076,113 1,088,316 400,013 — 1,451,469 798,136 810,840 1,475,305 601,092 — 989,430 1,276,754 2,881,525 803,762 5,687,280 1,874,359 957,557 1,010,645 7,656,179 643,498 833,933 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 287,732 526,102 1,787,380 108,898 402,957 541,233 252,336 270,581 1,390,592 245,976 572,085 160,107 445,299 272,308 981,941 542,161 338,732 5,405,718 311,389 334,783 544,903 521,909 208,710 735,534 323,983 919,176 230,000 282,468 755,192 1,104,085 409,190 38,302 4,632,369 340,349 58,279 1,030,667 5,097,320 518,005 1,955,989 848,986 1,769,274 1,351,015 1,403,441 1,024,696 966,807 6,390,201 955,579 700,288 1,077 — 1,127,365 1,076,113 1,088,316 400,013 — 1,451,469 798,136 810,840 1,475,305 601,092 — 989,430 1,276,754 2,881,525 803,762 5,687,280 1,874,359 957,557 1,010,645 7,656,179 643,498 833,933 — — F-45 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Life on Which Depreciation in Costs Gross Amount at Which Carried at Initial Cost Capitalized Building and Subsequent to Improvements Acquisition Close of Period Building and Improvements Accumulated Depreciation Acquisition Date of Description Philadelphia, PA Philadelphia, PA Pittsburgh, PA Pittsburgh, PA Upper Darby, PA Wysox, PA Richmond, RI Warwick, RI Greenville, SC Lake City, SC Manning, SC Mt. Pleasant, SC Myrtle Beach, SC Spartanburg, SC Sumter, SC Walterboro, SC Chattanooga, TN Johnson City, TN Beaumont, TX Donna, TX Fairfield, TX Groves, TX Humble, TX Jacksboro, TX Kemah, TX Lamesa, TX Live Oak, TX Lufkin, TX Plano, TX Port Arthur, TX Porter, TX Tomball, TX Universal City, TX Waxahachie, TX Willis, TX Logan, UT Christiansburg, VA Encumbrance — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 155,212 127,690 927,083 1,397,965 861,339 1,668,272 1,293,932 687,454 628,081 57,911 245,546 555,387 254,334 709,338 521,299 207,130 1,179,566 181,117 936,389 962,302 125,098 596,586 173,885 119,147 2,324,774 66,019 371,174 382,643 452,721 512,094 524,532 1,336,029 380,788 388,138 406,466 914,515 520,538 218,083 122,516 5,126,243 — 85,966 1,699,343 7,477,281 2,108,256 1,451,481 932,874 989,236 1,042,804 149,107 1,618,382 809,466 827,775 1,236,591 1,232,151 2,725,502 1,620,925 970,816 2,250,794 867,347 1,036,482 2,835,597 1,493,146 1,880,746 1,054,911 822,683 721,936 1,683,767 1,849,554 1,496,318 792,125 925,047 2,774,985 661,780 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Land 155,212 127,690 927,083 1,397,965 861,339 1,668,272 1,293,932 687,454 628,081 57,911 245,546 555,387 254,334 709,338 521,299 207,130 1,179,566 181,117 936,389 962,302 125,098 596,586 173,885 119,147 2,324,774 66,019 371,174 382,643 452,721 512,094 524,532 1,336,029 380,788 388,138 406,466 914,515 520,538 218,083 122,516 5,126,243 — 85,966 1,699,343 7,477,281 2,108,256 1,451,481 932,874 989,236 1,042,804 149,107 1,618,382 809,466 827,775 1,236,591 1,232,151 2,725,502 1,620,925 970,816 2,250,794 867,347 1,036,482 2,835,597 1,493,146 1,880,746 1,054,911 822,683 721,936 1,683,767 1,849,554 1,496,318 792,125 925,047 2,774,985 661,780 Total 373,295 250,206 6,053,326 1,397,965 947,305 3,367,615 8,771,213 2,795,710 2,079,562 990,785 1,234,782 1,598,191 403,441 2,327,720 1,330,765 1,034,905 2,416,157 1,413,268 3,661,891 2,583,227 1,095,914 2,847,380 1,041,232 1,155,629 5,160,371 1,559,165 2,251,920 1,437,554 1,275,404 1,234,030 2,208,299 3,185,583 1,877,106 1,180,263 1,331,513 3,689,500 1,182,318 — — 21,359 — — 10,621 124,621 — — 1,944 8,227 — — — — 10,345 — — — 13,474 4,045 — — 4,319 17,722 24,880 23,507 — — — 10,523 23,115 — — 5,781 23,124 — 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 Latest Income Statement is Computed (in years) 40 40 40 — 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 F-46 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H Description Encumbrance Land Initial Cost Costs Capitalized Building and Subsequent to Improvements Acquisition Gross Amount at Which Carried at Close of Period Building and Improvements Land Total Life on Which Depreciation in Latest Income Statement is Computed (in years) Accumulated Depreciation Acquisition Date of — — — — — 452,911 1,112,948 353,242 538,246 1,454,278 1,076,589 837,542 514,898 2,179,541 — — — — — — 452,911 1,112,948 353,242 538,246 1,454,278 1,076,589 837,542 514,898 2,179,541 — 1,529,500 1,950,490 868,140 2,717,787 1,454,278 — 15,607 — 13,613 — 2018 2018 2018 2018 2018 — 2,142,002 1,154,585 — 2,142,002 1,154,585 3,296,587 — 2018 — — — — — — — — — 271,176 414,899 287,740 817,143 175,551 2,475,815 208,806 533,503 331,692 3,308,434 811,710 947,287 1,383,440 1,145,438 4,249,537 1,173,275 1,071,930 929,092 — — — — — — — — — 271,176 414,899 287,740 817,143 175,551 2,475,815 208,806 533,503 331,692 3,308,434 811,710 947,287 1,383,440 1,145,438 4,249,537 1,173,275 1,071,930 929,092 3,579,610 1,226,609 1,235,027 2,200,583 1,320,989 6,725,352 1,382,081 1,605,433 1,260,784 — — 21,708 — — 26,559 — — — 2018 2018 2018 2018 2018 2018 2018 2018 2018 40 40 40 40 — 40 40 40 40 40 40 40 40 40 40 61,519,224 559,102,639 1,161,790,217 27,796,429 553,704,040 1,194,985,245 1,748,689,285 100,311,974 Fredericksburg, VA Glen Allen, VA Hampton, VA Louisa, VA Manassas, VA Virginia Beach, VA Virginia Beach, VA Everett, WA Bluefield, WV Green Bay, WI La Crosse, WI Madison, WI Mt. Pleasant, WI Schofield, WI Sheboygan, WI Subtotal Property Under Development Various Sub Total Total — — $ 61,519,224 $ 559,102,639 $ 1,174,747,627 $ 27,796,429 $ 553,704,040 $ 1,207,942,655 $ 1,761,646,695 $ 100,311,974 12,957,410 12,957,410 12,957,410 12,957,410 12,957,410 12,957,410 — — — — — — — — F-47 Agree Realty Corporation Schedule III – Real Estate and Accumulated Depreciation December 31, 2018 1. Reconciliation of Real Estate Properties The following table reconciles the Real Estate Properties from January 1, 2016 to December 31, 2018. 2018 2017 2016 Balance at January 1 Construction and acquisition cost Impairment charge Disposition of real estate Reclassified as assets held for sale Balance at December 31 $ 1,299,254,832 $ 1,019,956,329 $ 755,848,938 284,968,286 — (20,860,895) — $ 1,761,646,695 $ 1,299,254,832 $ 1,019,956,329 519,369,366 (1,163,000) (55,814,503) — 312,695,116 — (31,146,055) (2,250,558) 2. Reconciliation of Accumulated Depreciation The following table reconciles the Real Estate Properties from January 1, 2016 to December 31, 2018. Balance at January 1 Current year depreciation expense Disposition of real estate Reclassified as assets held for sale Balance at December 31 2018 2017 $ 85,238,614 $ 20,441,780 (5,368,420) — $ 100,311,974 $ 69,696,727 $ 19,507,398 (3,737,114) (228,397) 85,238,614 $ 2016 56,401,423 15,201,469 (1,906,165) — 69,696,727 3. Tax Basis of Building and Improvements The aggregate cost of Building and Improvements for federal income tax purposes is approximately $35,785,000 less than the cost basis used for financial statement purposes. F-48 (This page intentionally left blank)(cid:3) (This page intentionally left blank)(cid:3) AGREE REALTY CORPORATION Financial Highlights NYSE: ADC Financial - For Year Ended December 31, Total revenues ($000's) Operating income ($000's) Funds from operations ($000's) Funds from operations per share 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) 2018 2017 2016 $ 148,195 $ 116,555 $ 91,527 $ 49,937 $ 44,597 $ 35,833 $ 93,429 $ 76,271 $ 59,168 $ 2.85 $ 2.72 $ 2.54 $ 2.155 $ 2.025 $ 1.920 2018 2017 2016 $ 1,761,647 $ 1,299,255 $ 1,019,956 $ 2,028,189 $ 1,494,634 $ 1,141,972 $ 728,841 $ 525,811 $ 406,261 645 436 366 11,237,000 8,663,000 7,033,000 TOTAL RETURN PERFORMANCE 260 220 180 140 e u l a V x e d n I 100 12.31.13 12.31.14 12.31.15 12.31.16 12.31.17 12.31.18 Agree Realty Corporation Russell 2000 SNL REIT Retail Shopping Ctr Index 12.31.13 12.31.14 12.31.15 12.31.16 12.31.17 12.31.18 Agree Realty Corporation Russell 2000 SNL REIT Retail Shopping Ctr 100.00 100.00 100.00 113.55 104.89 129.58 131.70 100.26 136.51 186.18 121.63 141.27 216.71 139.44 125.62 259.45 124.09 105.42 Period Ending AGREE REALTY CORPORATION Financial Highlights NYSE: ADC FUNDS FROM OPERATIONS (in thousands) 2014 2015 2016 2017 2018 REAL ESTATE ASSETS (in thousands) $100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 2014 2015 2016 2017 2018 CORPORATE INFORMATION EXECUTIVE OFFICERS Richard Agree Executive Chairman Board of Directors Joey Agree President Chief Executive Officer Director DIRECTORS Craig Erlich Executive Vice President George P. Johnson Company Merrie S. Frankel President Minerva Realty Consultants, LLC Adjunct Professor Columbia University New York University Farris Kalil Former, Director of Business Development of Commercial Lending Michigan National Bank Clay Thelen Chief Financial Officer Secretary Laith Hermiz Chief Operating Officer Danielle Spehar General Counsel Greg Lehmkuhl President Chief Executive Officer Lineage Logistics John Rakolta, Jr. Chairman Chief Executive Officer Walbridge Jerry Rossi Chief Executive Officer R&R Consulting Chairman Gabe’s Stores William S. Rubenfaer President Rubenfaer Associates, PC Annual Meeting of Stockholders Thursday, April 25, 2019 - 10:00 am Embassy Suites 850 Tower Drive Troy, MI 48098 Auditors Grant Thornton LLP 27777 Franklin Road Southfield, MI 48034 Counsel Honigman 39400 Woodward Ave., Ste. 101 Bloomfield Hills, MI 48304 Registrar & Transfer Agent Computershare P.O. Box 30170 College Station, TX 77842 ANNUAL REPORT for the year ended DECEMBER 31, 2018 Agree Realty Corporation (NYSE: ADC) is a fully-integrated, self-administered, and self-managed real estate investment trust (REIT) focused on the acquisition and development of properties net leased to industry-leading retailers throughout the Building upon the foundation of excellence established throughout the past four decades, Agree Realty continues to be a market leader in the net lease space. At December 31, 2018, our growing portfolio consisted of 645 assets in 46 states, portfolio consisted of 645 assets in 46 states, containing approximately 11.2 million square feet of gross leasable space. ANNUAL REPORT for the year ended DECEMBER 31, 2018 Agree Realty Corporation (NYSE: ADC) is a fully-integrated, self-administered, and self-managed real estate investment trust (REIT) focused on the acquisition and development of properties net leased to industry-leading retailers throughout the Building upon the foundation of excellence established throughout the past four decades, Agree Realty continues to be a market leader in the net lease space. At December 31, 2018, our growing portfolio consisted of 645 assets in 46 states, portfolio consisted of 645 assets in 46 states, containing approximately 11.2 million square feet of gross leasable space. United States. United States. United States. United States. United States. United States. United States. United States. square feet of gross leasable space. containing approximately 11.2 million portfolio consisted of 645 assets in 46 states, portfolio consisted of 645 assets in 46 states, space. At December 31, 2018, our growing to be a market leader in the net lease past four decades, Agree Realty continues excellence established throughout the Building upon the foundation of industry-leading retailers throughout the development of properties net leased to (REIT) focused on the acquisition and self-managed real estate investment trust fully-integrated, self-administered, and Agree Realty Corporation (NYSE: ADC) is a DECEMBER 31, 2018 for the year ended REPORT ANNUAL square feet of gross leasable space. containing approximately 11.2 million portfolio consisted of 645 assets in 46 states, portfolio consisted of 645 assets in 46 states, space. At December 31, 2018, our growing to be a market leader in the net lease past four decades, Agree Realty continues excellence established throughout the Building upon the foundation of industry-leading retailers throughout the development of properties net leased to (REIT) focused on the acquisition and self-managed real estate investment trust fully-integrated, self-administered, and Agree Realty Corporation (NYSE: ADC) is a DECEMBER 31, 2018 for the year ended REPORT ANNUAL 

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