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.
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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:
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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
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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.
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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:
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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.
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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.
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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.
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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
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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.
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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:
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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
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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.
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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
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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