UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Mark One
x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2018, or
¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number 1-12928
AGREE REALTY CORPORATION
(Exact name of registrant as specified in its charter)
Maryland | 38-3148187 | |
State or Other Jurisdiction of Incorporation or | (I.R.S. Employer Identification No.) | |
Organization |
70 E. Long Lake Road, Bloomfield Hills, Michigan 48304
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: (248) 737-4190
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 x | No ¨ |
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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x | No ¨ |
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.
Large Accelerated
Filer x |
Accelerated Filer ¨ | Non-accelerated Filer ¨ | Smaller reporting company ¨ | Emerging growth company ¨ |
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. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ | No x |
As of October 19, 2018, the Registrant had 34,481,545 shares of common stock, $0.0001 par value, issued and outstanding.
AGREE REALTY CORPORATION
Index to Form 10-Q
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per-share data)
PART I. | FINANCIAL INFORMATION |
Item 1. | Financial Statements |
September 30, | December 31, | |||||||
2018 | 2017 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Real Estate Investments | ||||||||
Land | $ | 473,446 | $ | 405,457 | ||||
Buildings | 1,041,666 | 868,396 | ||||||
Less accumulated depreciation | (98,051 | ) | (85,239 | ) | ||||
1,417,061 | 1,188,614 | |||||||
Property under development | 7,767 | 25,402 | ||||||
Net Real Estate Investments | 1,424,828 | 1,214,016 | ||||||
Real Estate Held For Sale , net | 1,367 | 2,420 | ||||||
Cash and Cash Equivalents | 16,811 | 50,807 | ||||||
Cash Held in Escrows | 1,436 | 7,975 | ||||||
Accounts Receivable - Tenants , net of allowance of $465 and $296 for possible losses at September 30, 2018 and December 31, 2017, respectively | 19,882 | 15,477 | ||||||
Unamortized Deferred Expenses | ||||||||
Credit facility finance costs, net of accumulated amortization of $744 and $433 at September 30, 2018 and December 31, 2017, respectively | 1,267 | 1,174 | ||||||
Leasing costs, net of accumulated amortization of $823 and $814 at September 30, 2018 and December 31, 2017, respectively | 2,582 | 1,583 | ||||||
Lease intangibles, net of accumulated amortization of $57,121 and $41,390 at September 30, 2018 and December 31, 2017, respectively | 270,606 | 195,158 | ||||||
Interest Rate Swaps | 4,516 | 1,592 | ||||||
Other Assets , net | 5,339 | 4,432 | ||||||
Total Assets | $ | 1,748,634 | $ | 1,494,634 |
See accompanying notes to consolidated financial statements.
1 |
AGREE REALTY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per-share data)
September 30, | December 31, | |||||||
2018 | 2017 | |||||||
(Unaudited) | ||||||||
LIABILITIES | ||||||||
Mortgage Notes Payable, net | $ | 61,537 | $ | 88,270 | ||||
Unsecured Term Loans, net | 157,760 | 158,171 | ||||||
Senior Unsecured Notes, net | 384,073 | 259,122 | ||||||
Unsecured Revolving Credit Facility | 14,000 | 14,000 | ||||||
Dividends and Distributions Payable | 18,808 | 16,303 | ||||||
Deferred Revenue | 1,079 | 1,837 | ||||||
Accrued Interest Payable | 2,706 | 3,412 | ||||||
Accounts Payable and Accrued Expenses | 12,088 | 11,165 | ||||||
Lease intangibles , net of accumulated amortization of $14,116 and $11,357 at September 30, 2018 and December 31, 2017, respectively | 27,628 | 30,350 | ||||||
Interest Rate Swaps | - | 242 | ||||||
Deferred Income Taxes | 475 | 475 | ||||||
Tenant Deposits | 102 | 97 | ||||||
Total Liabilities | 680,256 | 583,444 | ||||||
EQUITY | ||||||||
Common stock, $.0001 par value, 45,000,000 shares authorized, 34,481,545 and 31,004,900 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively | 3 | 3 | ||||||
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 | 1,096,679 | 936,046 | ||||||
Dividends in excess of net income | (35,317 | ) | (28,763 | ) | ||||
Accumulated other comprehensive income (loss) | 4,506 | 1,375 | ||||||
Total Equity - Agree Realty Corporation | 1,065,871 | 908,661 | ||||||
Non-controlling interest | 2,507 | 2,529 | ||||||
Total Equity | 1,068,378 | 911,190 | ||||||
Total Liabilities and Equity | $ | 1,748,634 | $ | 1,494,634 |
See accompanying notes to consolidated financial statements.
2 |
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except share and per-share data)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||||
Revenues | ||||||||||||||||
Minimum rents | $ | 33,622 | $ | 27,325 | $ | 96,494 | $ | 76,500 | ||||||||
Percentage rents | - | - | 216 | 212 | ||||||||||||
Operating cost reimbursement | 3,654 | 2,791 | 10,615 | 8,016 | ||||||||||||
Other | 30 | 271 | 168 | 299 | ||||||||||||
Total Revenues | 37,306 | 30,387 | 107,493 | 85,027 | ||||||||||||
Operating Expenses | ||||||||||||||||
Real estate taxes | 2,824 | 2,149 | 7,825 | 5,988 | ||||||||||||
Property operating expenses | 1,246 | 931 | 3,906 | 2,641 | ||||||||||||
Land lease expense | 172 | 163 | 511 | 490 | ||||||||||||
General and administrative | 2,947 | 2,454 | 8,994 | 7,299 | ||||||||||||
Depreciation and amortization | 11,180 | 8,228 | 31,743 | 22,956 | ||||||||||||
Total Operating Expenses | 18,369 | 13,925 | 52,979 | 39,374 | ||||||||||||
Income from Operations | 18,937 | 16,462 | 54,514 | 45,653 | ||||||||||||
Other (Expense) Income | ||||||||||||||||
Interest expense, net | (6,538 | ) | (4,666 | ) | (17,965 | ) | (13,213 | ) | ||||||||
Gain (loss) on sale of assets, net | 3,917 | 524 | 10,949 | 10,045 | ||||||||||||
Income tax expense | (125 | ) | (37 | ) | (391 | ) | (366 | ) | ||||||||
Other (expense) income | 53 | - | 4 | - | ||||||||||||
Provision for impairment | (488 | ) | - | (1,651 | ) | - | ||||||||||
Net Income | 15,756 | 12,283 | 45,460 | 42,119 | ||||||||||||
Less Net Income Attributable to Non-Controlling Interest | 170 | 118 | 499 | 501 | ||||||||||||
. | . | |||||||||||||||
Net Income Attributable to Agree Realty Corporation | $ | 15,586 | $ | 12,165 | $ | 44,961 | $ | 41,618 | ||||||||
Net Income Per Share Attributable to Agree Realty Corporation | ||||||||||||||||
Basic | $ | 0.49 | $ | 0.42 | $ | 1.43 | $ | 1.53 | ||||||||
Diluted | $ | 0.48 | $ | 0.42 | $ | 1.42 | $ | 1.52 | ||||||||
Other Comprehensive Income | ||||||||||||||||
Net income | $ | 15,756 | $ | 12,283 | $ | 45,460 | $ | 42,119 | ||||||||
Other Comprehensive Income (Loss) - Change in Fair Value of Interest Rate Swaps | 454 | 203 | 3,166 | 533 | ||||||||||||
Total Comprehensive Income | 16,210 | 12,486 | 48,626 | 42,652 | ||||||||||||
Less Comprehensive Income Attributable to Non-Controlling Interest | 174 | 149 | 534 | 509 | ||||||||||||
Comprehensive Income Attributable to Agree Realty Corporation | $ | 16,036 | $ | 12,337 | $ | 48,092 | $ | 42,143 | ||||||||
Weighted Average Number of Common Shares Outstanding - Basic: | 31,758,925 | 28,573,022 | 31,131,530 | 26,988,589 | ||||||||||||
Weighted Average Number of Common Shares Outstanding - Diluted: | 32,287,352 | 28,656,684 | 31,471,251 | 27,069,352 |
See accompanying notes to consolidated financial statements.
3 |
CONSOLIDATED STATEMENT OF EQUITY
(In thousands, except share and per-share data)
(Unaudited)
Accumulated | ||||||||||||||||||||||||||||
Dividends in | Other | |||||||||||||||||||||||||||
Common Stock | Additional | excess of net | Comprehensive | Non-Controlling | Total | |||||||||||||||||||||||
Shares | Amount | Paid-In Capital | income | Income (Loss) | Interest | Equity | ||||||||||||||||||||||
Balance, December 31, 2017 | 31,004,900 | $ | 3 | $ | 936,046 | $ | (28,763 | ) | $ | 1,375 | $ | 2,529 | $ | 911,190 | ||||||||||||||
Issuance of common stock, net of issuance costs | 3,450,000 | - | 159,604 | - | - | - | 159,604 | |||||||||||||||||||||
Repurchase of common shares | (22,348 | ) | - | (1,142 | ) | - | - | - | (1,142 | ) | ||||||||||||||||||
Issuance of restricted stock under the Omnibus Incentive Plan | 50,841 | - | - | - | - | - | - | |||||||||||||||||||||
Forfeiture of restricted stock | (1,848 | ) | - | - | - | - | - | - | ||||||||||||||||||||
Stock-based compensation | - | - | 2,171 | - | - | - | 2,171 | |||||||||||||||||||||
Dividends and distributions declared for the period | - | - | - | (51,515 | ) | - | (556 | ) | (52,071 | ) | ||||||||||||||||||
Other comprehensive income (loss) - change in fair value of interest rate swaps | - | - | - | - | 3,131 | 35 | 3,166 | |||||||||||||||||||||
Net income | - | - | - | 44,961 | - | 499 | 45,460 | |||||||||||||||||||||
Balance, September 30, 2018 | 34,481,545 | $ | 3 | $ | 1,096,679 | $ | (35,317 | ) | $ | 4,506 | $ | 2,507 | $ | 1,068,378 |
See accompanying notes to consolidated financial statements.
4 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended | ||||||||
September 30, 2018 | September 30, 2017 | |||||||
Cash Flows from Operating Activities | ||||||||
Net income | $ | 45,460 | $ | 42,119 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 17,808 | 14,366 | ||||||
Amortization | 13,935 | 8,590 | ||||||
Amortization from financing and credit facility costs | 768 | 730 | ||||||
Stock-based compensation | 2,171 | 1,748 | ||||||
Provision for impairment | 1,651 | - | ||||||
(Gain) loss on sale of assets | (10,949 | ) | (10,045 | ) | ||||
(Increase) decrease in accounts receivable | (5,122 | ) | (4,192 | ) | ||||
(Increase) decrease in other assets | (934 | ) | (148 | ) | ||||
Increase (decrease) in accounts payable and accrued expenses | 923 | 1,837 | ||||||
Increase (decrease) in deferred revenue | (758 | ) | (371 | ) | ||||
Increase (decrease) in accrued interest | (706 | ) | 549 | |||||
Increase (decrease) in tenant deposits | 5 | 2 | ||||||
Net Cash Provided by Operating Activities | 64,252 | 55,185 | ||||||
Cash Flows from Investing Activities | ||||||||
Acquisition of real estate investments and other assets | (352,085 | ) | (241,132 | ) | ||||
Development of real estate investments and other assets (including capitalized interest of $381 in 2018 and $297 in 2017) | (17,390 | ) | (27,240 | ) | ||||
Payment of leasing costs | (1,191 | ) | (544 | ) | ||||
Net proceeds from sale of assets | 60,038 | 29,414 | ||||||
Net Cash Used In Investing Activities | (310,628 | ) | (239,502 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Proceeds from common stock offerings, net | 159,604 | 136,733 | ||||||
Repurchase of common shares | (1,142 | ) | (1,108 | ) | ||||
Unsecured revolving credit facility borrowings | 260,000 | 184,000 | ||||||
Unsecured revolving credit facility repayments | (260,000 | ) | (198,000 | ) | ||||
Payments of mortgage notes payable | (26,915 | ) | (1,794 | ) | ||||
Payments of unsecured term loans | (571 | ) | (549 | ) | ||||
Senior unsecured notes proceeds | 125,000 | 100,000 | ||||||
Dividends paid | (49,018 | ) | (40,392 | ) | ||||
Distributions to Non-Controlling Interest | (549 | ) | (520 | ) | ||||
Payments for financing costs | (568 | ) | (159 | ) | ||||
Net Cash Provided by Financing Activities | 205,841 | 178,211 | ||||||
Net Increase (Decrease) in Cash and Cash Equivalents | (40,535 | ) | (6,106 | ) | ||||
Cash and cash equivalents and restricted deposits, beginning of period | 58,782 | 33,395 | ||||||
Cash and cash equivalents and restricted deposits, end of period | $ | 18,247 | $ | 27,289 | ||||
Supplemental Disclosure of Cash Flow Information | ||||||||
Cash paid for interest (net of amounts capitalized) | $ | 18,944 | $ | 12,658 | ||||
Cash paid (refunded) for income tax | $ | 387 | $ | - | ||||
Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||
Shares issued under equity incentive plans (in dollars) | $ | 2,381 | $ | 3,022 | ||||
Dividends and limited partners' distributions declared and unpaid | $ | 18,808 | $ | 14,930 |
See accompanying notes to consolidated financial statements.
5 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
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 99.0% interest as of September 30, 2018. Under the partnership agreement of the Operating Partnership, the Company, 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
Basis of Accounting and Principles of Consolidation
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for audited financial statements. The unaudited consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim period presented. Operating results for the nine months ended September 30, 2018 may not be indicative of the results that may be expected for the year ending December 31, 2018. Amounts as of December 31, 2017 included in the consolidated financial statements have been derived from the audited consolidated financial statements as of that date. The unaudited consolidated financial statements, included herein, should be read in conjunction with the audited consolidated financial statements and notes thereto, as well as Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Form 10-K for the year ended December 31, 2017.
The unaudited consolidated financial statements include the accounts of the Company, the Operating Partnership and its wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with 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.
Reclassification
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 of the Consolidated Statement of Operations and Comprehensive Income. In reports filed prior to March 2018, income tax expense was included in general and administrative expenses of the Consolidated Statement 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 reporting segments.
6 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
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 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 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 September 30, 2018 and December 31, 2017 (in thousands):
September 30, 2018 | December 31, 2017 | |||||||
Land | $ | 271 | $ | 393 | ||||
Buildings | 1,087 | 1,857 | ||||||
Lease Intangibles (Asset) | 290 | 557 | ||||||
1,648 | 2,807 | |||||||
Accumulated depreciation and amortization | (281 | ) | (387 | ) | ||||
Total Real Estate Held for Sale | $ | 1,367 | $ | 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 in which case the Company amortizes the value attributable to the renewal over the renewal period.
The fair value of identified intangible assets and liabilities acquired is amortized to amortization over the remaining term of the related leases.
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 $17.3 million and $57.5 million in cash and cash held in escrow as of September 30, 2018 and December 31, 2017, respectively, in excess of the FDIC insured limit.
7 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
Accounts Receivable – Tenants
The Company reviews its rent receivables for collectability on a regular basis, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area where the property is located. In the event that the collectability of a receivable with respect to any tenant is in doubt, a provision for uncollectible amounts will be established or a direct write-off of the specific rent receivable will be made. For accrued rental revenues related to the straight-line method of reporting rental revenue, the Company performs a periodic review of receivable balances to assess the risk of uncollectible amounts and establish appropriate provisions.
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 Revenue"). 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 September 30, 2018 and December 31, 2017 was $2.5 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 sheet. The balance of straight-line rent receivables at September 30, 2018 and December 31, 2017 was $15.5 million and $12.9 million, respectively. To the extent any of the tenants under these leases becomes unable to pay its contractual cash rents, the Company may be required to write down the straight-line rent receivable from the 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.
The following schedule summarizes the Company’s amortization of deferred expenses for the three and nine months ended September 30, 2018 and 2017 (in thousands):
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||||
Credit Facility Financing Costs | $ | 133 | $ | 102 | $ | 335 | $ | 304 | ||||||||
Leasing Costs | 82 | 40 | 166 | 120 | ||||||||||||
Lease Intangibles (Asset) | 5,998 | 3,802 | 16,781 | 11,209 | ||||||||||||
Lease Intangibles (Liability) | (1,083 | ) | (1,037 | ) | (3,168 | ) | (3,167 | ) | ||||||||
Total | $ | 5,130 | $ | 2,907 | $ | 14,114 | $ | 8,466 |
8 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
The following schedule represents estimated future amortization of deferred expenses as of September 30, 2018 (in thousands):
Year Ending December 31, | 2018 | |||||||||||||||||||||||||||
(remaining) | 2019 | 2020 | 2021 | 2022 | Thereafter | Total | ||||||||||||||||||||||
Credit Facility Financing Costs | $ | 142 | $ | 556 | $ | 541 | $ | 28 | $ | - | $ | - | $ | 1,267 | ||||||||||||||
Leasing Costs | 76 | 276 | 302 | 293 | 285 | 1,350 | 2,582 | |||||||||||||||||||||
Lease Intangibles (Asset) | 6,822 | 25,643 | 25,493 | 24,815 | 23,737 | 164,096 | 270,606 | |||||||||||||||||||||
Lease Intangibles (Liability) | (1,143 | ) | (4,291 | ) | (4,279 | ) | (3,993 | ) | (3,094 | ) | (10,828 | ) | (27,628 | ) | ||||||||||||||
Total | $ | 5,897 | $ | 22,184 | $ | 22,057 | $ | 21,143 | $ | 20,928 | $ | 154,618 | $ | 246,827 |
Earnings per Share
Earnings per share has been computed by dividing 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.
The following is a reconciliation of the denominator of the basic net earnings per common share computation to the denominator of the diluted net earnings per common share computation for each of the periods presented:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||||
Weighted average number of common shares outstanding | 31,969,749 | 28,792,158 | 31,342,354 | 27,207,725 | ||||||||||||
Less: Unvested restricted stock | (210,824 | ) | (219,136 | ) | (210,824 | ) | (219,136 | ) | ||||||||
Weighted average number of common shares outstanding used in basic earnings per share | 31,758,925 | 28,573,022 | 31,131,530 | 26,988,589 | ||||||||||||
Weighted average number of common shares outstanding used in basic earnings per share | 31,758,925 | 28,573,022 | 31,131,530 | 26,988,589 | ||||||||||||
Effect of dilutive securities: restricted stock | 80,211 | 83,662 | 71,855 | 80,763 | ||||||||||||
Effect of dilutive securities: March 2018 forward equity offering | 439,761 | - | 265,048 | - | ||||||||||||
Effect of dilutive securities: September 2018 forward equity offering | 8,455 | - | 2,818 | - | ||||||||||||
Weighted average number of common shares outstanding used in diluted earnings per share | 32,287,352 | 28,656,684 | 31,471,251 | 27,069,352 | ||||||||||||
Operating Partnership Units ("OP Units") | 347,619 | 347,619 | 347,619 | 347,619 | ||||||||||||
Weighted average number of common shares and OP Units outstanding used in diluted earnings per share | 32,634,971 | 29,004,303 | 31,818,870 | 27,416,971 |
Forward Equity Sales
In March 2018, the Company entered into a forward sale agreement to sell an aggregate of 3,450,000 shares of our common stock, which includes the underwriters’ option to purchase an additional 450,000 shares, at a public offering price of $48.00 per share, before underwriting discounts. In September 2018, the Company settled 3,450,000 shares from our 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, less issuance costs, underwriters’ discount, and further adjustments as provided for in the forward sale agreement. We are obligated to settle the forward sale agreement no later than September 3, 2019.
To account for the forward sale agreements, we 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.
9 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
We also considered the potential dilution resulting from the forward sale agreement on the earnings per share calculations. We use 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 three and nine months ended September 30, 2018, was 448,217 and 267,867 weighted-average incremental shares, respectively.
Income Taxes (not presented in thousands)
The Company has made an election to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) and related regulations. The Company generally will not be subject to federal income taxes on amounts distributed to stockholders, providing it distributes 100% of its REIT taxable income and meets certain other requirements for qualifying as a REIT. For the periods ending September 30, 2018 and December 31, 2017, 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. All provisions for federal income taxes in the accompanying consolidated financial statements are attributable to the Company’s TRS.
As of September 30, 2018, and December 31, 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 Internal Revenue Code. This transaction was accrued within the TRS entities described above. The Company recognized total federal and state tax expense of approximately $125,000 and $37,000 for the three months ended September 30, 2018 and 2017, respectively and approximately $391,000 and $366,000 for the nine months ended September 30, 2018 and 2017, respectively.
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. |
10 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
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 will have 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.
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 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). 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 for lessee’s using an approach that is substantially equivalent to existing guidance for sales-type leases and operating leases. 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 intends to 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. ASU 2016-02 is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2018. Early adoption is permitted. 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 intends to apply this practical expedient upon adoption of Topic 842. 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 intends to apply this practical expedient upon adoption of Topic 842. The Company has engaged a professional services firm to assist in the implementation of ASU 2016-02. 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. The Company is also the lessee under various land lease arrangements. The Company would not be required to reassess the classification of existing land leases where it is the lessee and therefore these leases would 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. 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 and consolidated balance sheets.
11 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
Note 3 – Real Estate Investments
Real Estate Portfolio
As of September 30, 2018, the Company owned 520 properties, with a total gross leasable area of approximately 10.0 million square feet. Net Real Estate Investments totaled $1.4 billion as of September 30, 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.
Acquisitions
During the three months ended September 30, 2018, the Company purchased 43 retail net lease assets for approximately $150.0 million, which includes acquisition and closing costs. These properties are located in 20 states and are leased for a weighted average lease term of approximately 11.5 years.
During the nine months ended September 30, 2018, the Company purchased 96 retail net lease assets for approximately $349.9 million, which includes acquisition and closing costs. These properties are located in 29 states and are leased for a weighted average lease term of approximately 12.3 years.
The aggregate acquisitions for the nine months ended September 30, 2018 were allocated $81.6 million to land, $174.4 million to buildings and improvements, and $93.9 million to lease intangibles. The acquisitions were all cash purchases and there were no contingent considerations associated with these acquisitions.
None of the Company’s acquisitions during the first nine months of 2018 caused any new or existing tenant to comprise 10% or more of our total assets or generate 10% or more of our total annualized base rent at September 30, 2018.
Developments
During the third quarter of 2018, construction continued or commenced on five development and Partner Capital Solutions (“PCS”) projects with anticipated total project costs of approximately $14.0 million. The projects consist of the Company’s third and fourth development projects with Mister Car Wash; the Company’s first two development projects with Sunbelt Rentals; and the Company’s redevelopment with Hobby Lobby in Mount Pleasant, Michigan.
During the nine months ended September 30, 2018, the Company had 13 development or PCS projects completed or under construction. Anticipated total costs for those projects are approximately $59.6 million and include the following completed or commenced projects:
12 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
Tenant | Location | Lease Structure |
Lease
Term |
Actual
or
Anticipated Rent Commencement |
Status | |||||
Mister Car Wash | Urbandale, IA | Build-to-Suit | 20 years | Q1 2018 | Completed | |||||
Mister Car Wash | Bernalillo, NM | Build-to-Suit | 20 years | Q1 2018 | Completed | |||||
Burger King(1) | North Ridgeville, OH | Build-to-Suit | 20 years | Q1 2018 | Completed | |||||
Art Van Furniture | Canton, MI | Build-to-Suit | 20 years | Q1 2018 | Completed | |||||
Camping World | Grand Rapids, MI | Build-to-Suit | 20 years | Q2 2018 | Completed | |||||
ALDI | Chickasha, OK | Build-to-Suit | 10 years | Q3 2018 | Completed | |||||
Burger King(1) | Aurora, IL | Build-to-Suit | 20 years | Q3 2018 | Completed | |||||
Burlington Coat Factory | Nampa, ID | Build-to-Suit | 15 years | Q3 2018 | Completed | |||||
Mister Car Wash | Orlando, FL | Build-to-Suit | 20 years | Q4 2018 | Under Construction | |||||
Mister Car Wash | Tavares, FL | Build-to-Suit | 20 years | Q4 2018 | Under Construction | |||||
Sunbelt Rentals | Batavia, OH | Build-to-Suit | 10 years | Q1 2019 | Under Construction | |||||
Sunbelt Rentals | Maumee, OH | Build-to-Suit | 10 years | Q1 2019 | Under Construction | |||||
Hobby Lobby | Mt. Pleasant, MI | Build-to-Suit | 15 years | Q4 2019 | Under Construction |
Notes:
(1) Franchise restaurant operated by TOMS King, LLC.
Dispositions
During the three months ended September 30, 2018, the Company sold six properties for net proceeds of $29.6 million and the Company recorded a net gain of $3.9 million.
During the nine months ended September 30, 2018, the Company sold 16 properties for net proceeds of $56.4 million and the Company recorded a net gain of $9.9 million (net of any expected losses on real estate held for sale). In addition, a tenant exercised its option to purchase a store which had previously been ground leased from the Company. The option to purchase was exercised for net proceeds of $3.9 million and the Company recorded a net gain of $1.0 million.
Provision for Impairment
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 through operations. Events or changes in circumstances may include 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. During the three and nine months ended September 30, 2018, the Company recognized provisions for impairment of $0.5 million and $1.7 million, respectively. There were no provisions for impairment for the three and nine months ended September 30, 2017.
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. The Company may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of its real estate.
Note 4 – Debt
As of September 30, 2018, the Company had total indebtedness of $619.9 million, including (i) $62.2 million of mortgage notes payable; (ii) $158.7 million of unsecured term loans; (iii) $385.0 million of senior unsecured notes; and (iv) $14.0 million of borrowings under our Credit Facility.
Mortgage Notes Payable
As of September 30, 2018, the Company had total gross mortgage indebtedness of $62.2 million which was collateralized by related real estate and tenants’ leases with an aggregate net book value of $107.9 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 4.16% as of September 30, 2018 and 3.74% as of December 31, 2017.
13 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
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%.
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 September 30, 2018, there were no mortgage loans with partial recourse to us.
14 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
We have entered into mortgage loans which are secured by multiple properties and contain cross-default and cross-collateralization provisions. Cross-collateralization provisions allow a lender to foreclose on multiple properties in the event that we default under the loan. Cross-default provisions allow a lender to foreclose on the related property in the event a default is declared under another loan.
The Company was in compliance with covenant terms for all mortgages payable at September 30, 2018.
Senior Unsecured Notes
The following table presents the Senior Unsecured Notes balance net of unamortized debt issuance costs as of September 30, 2018, and December 31, 2017 (in thousands):
September 30, 2018 | December 31, 2017 | |||||||
2025 Senior Unsecured Notes | $ | 50,000 | $ | 50,000 | ||||
2027 Senior Unsecured Notes | 50,000 | 50,000 | ||||||
2028 Senior Unsecured Notes | 60,000 | 60,000 | ||||||
2029 Senior Unsecured Notes | 100,000 | 100,000 | ||||||
2030 Senior Unsecured Notes | 125,000 | - | ||||||
Total Principal | 385,000 | 260,000 | ||||||
Unamortized debt issuance costs | (927 | ) | (878 | ) | ||||
Total | $ | 384,073 | $ | 259,122 |
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 weighted average term of the senior unsecured notes is 11 years and the weighted average interest rate is 4.21%. 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 July 2016, the Company 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 our 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 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 our 4.19% senior unsecured notes due September 2029 (the “2029 Senior Unsecured Notes”). The 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 entered into two supplements to uncommitted master note facilities previously entered into with institutional purchasers in August 2017. Pursuant to the supplements, the Operating 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.
15 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
Unsecured Term Loan Facilities
The following table presents the Unsecured Term Loans balance net of unamortized debt issuance costs as of September 30, 2018 and December 31, 2017 (in thousands):
September 30, 2018 | December 31, 2017 | |||||||
2019 Term Loan | $ | 18,734 | $ | 19,304 | ||||
2023 Term Loan | 40,000 | 40,000 | ||||||
2024 Term Loans | 100,000 | 100,000 | ||||||
Total Principal | 158,734 | 159,304 | ||||||
Unamortized debt issuance costs | (974 | ) | (1,133 | ) | ||||
Total | $ | 157,760 | $ | 158,171 |
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 150 to 245 basis points, depending on the Company's credit rating. The Company utilized existing interest rate swaps to effectively fix the LIBOR at 213 basis points until maturity. As of September 30, 2018, $100.0 million was outstanding under the 2024 Term Loan Facilities bearing an all-in interest rate of 3.78%.
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 150 to 245 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 September 30, 2018, $40.0 million was outstanding under the 2023 Term Loan, which was subject to an all-in interest rate of 3.05%.
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 September 30, 2018, $18.7 million was outstanding under the 2019 Term Loan bearing an all-in interest rate of 3.62%.
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 to a maximum amount of $500.0 million, subject to lender approval.
16 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
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 September 30, 2018, and December 31, 2017, the Company had $14.0 million, of outstanding borrowings under the revolving credit facility, respectively, bearing weighted average interest rates of approximately 3.2% and 2.6%, respectively. As of September 30, 2018, $311.0 million was available for borrowing under the revolving credit facility and the Company was in compliance with the credit agreement covenants.
Debt Maturities
The following table presents scheduled principal payments related to our debt as of September 30, 2018 (in thousands):
Scheduled | Balloon | |||||||||||
Principal | Payment | Total | ||||||||||
Remainder of 2018 | $ | 850 | $ | - | $ | 850 | ||||||
2019 | 3,005 | 39,790 | 42,795 | |||||||||
2020 | 1,100 | 2,767 | 3,867 | |||||||||
2021 (1) | 998 | 14,000 | 14,998 | |||||||||
2022 | 1,060 | - | 1,060 | |||||||||
Thereafter | 3,687 | 552,656 | 556,343 | |||||||||
Total | $ | 10,700 | $ | 609,213 | $ | 619,913 |
(1) | The balloon payment balance includes the balance outstanding under the Credit Facility as of September 30, 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 at an indeterminant aggregate initial offering price of common stock, preferred stock, depositary shares and warrants. 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 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 completed 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. 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 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.
17 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
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 and working capital.
During the three and nine months ended September 30, 2018, the Company did not issue any shares of common stock under its ATM program. The Company had $250.0 million remaining under the ATM program as of September 30, 2018
Note 6 – Dividends and Distribution Payable
On September 4, 2018, the Company declared a dividend of $0.540 per share for the quarter ended September 30, 2018. The holders of limited partnership interests in the Operating Partnership (“OP Units”) were entitled to an equal distribution per OP Unit held as of September 28, 2018. The dividends and distributions payable were recorded as liabilities on the Company's consolidated balance sheet at September 30, 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 October 12, 2018.
Note 7 – 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 9 – Fair Value Measurements).
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 September 30, 2018 is $18.7 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 September 30, 2018, this interest rate swap was valued as an asset of approximately $0.1 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 borrowings to fixed-rate borrowings from October 3, 2013 to September 29, 2020. As of September 30, 2018, this interest rate swap was valued as an asset of approximately $0.4 million.
18 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
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 September 30, 2018, this interest rate swap was valued as an asset of approximately $1.3 million.
In September 2017, 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 September 30, 2018, this interest rate swap was valued as an asset of approximately $2.7 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 three and nine months ended September 30, 2018, 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 $1.0 million will be reclassified as a reduction to interest expense.
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):
Number of Instruments | Notional | |||||||||||
September 30, | December 31, | September 30, | December 31, | |||||||||
Interest Rate Derivatives | 2018 | 2017 | 2018 | 2017 | ||||||||
Interest Rate Swap | 4 | 5 | $ | 158,734 | $ | 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).
Asset Derivatives | ||||||||
September 30, 2018 | December 31, 2017 | |||||||
Fair Value | Fair Value | |||||||
Derivatives designated as cash flow hedges: | ||||||||
Interest Rate Swaps | $ | 4,516 | $ | 1,592 |
Liability Derivatives | ||||||||
September 30, 2018 | December 31, 2017 | |||||||
Fair Value | Fair Value | |||||||
Derivatives designated as cash flow hedges: | ||||||||
Interest Rate Swaps | $ | - | $ | 242 |
19 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
The table below displays the effect of the Company’s derivative financial instruments in the consolidated statements of operations and other comprehensive loss for the three and nine months ended September 30, 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) Reclassifed from Accumulated OCI into Income (Effective Portion) |
Amount
of Income/(Loss) Reclassified
from Accumulated OCI into Expense (Effective Portion) |
|||||||||||||||||
Three months ended September 30 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||
Interest rate swaps | $ | 454 | $ | 203 | Interest Expense | $ | 67 | $ | (258 | ) | ||||||||||
Nine months ended September 30 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||
Interest rate swaps | $ | 3,166 | $ | 330 | Interest Expense | $ | (24 | ) | $ | (1,085 | ) |
Credit-risk-related Contingent Features
The Company has agreements with two of 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 September 30, 2018, the fair value of derivatives in a net liability position related to these agreements, which includes accrued interest but excludes any adjustment for nonperformance risk, was $0.0 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.
The table below presents a gross presentation of the effects of offsetting and a net presentation of the Company’s derivatives as of September 30, 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 September 30, 2018 | ||||||||||||||||||||||||
Gross Amounts Not Offset in the
Statement of Financial Position |
||||||||||||||||||||||||
Gross Amounts
of Recognized Assets |
Gross Amounts
Position |
Net Amounts of
Position |
Financial
Instruments |
Cash Collateral
Received |
Net Amount | |||||||||||||||||||
Derivatives | $ | 4,516 | $ | - | $ | 4,516 | $ | - | $ | - | $ | 4,516 |
20 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
Offsetting of Derivative Liabilities | ||||||||||||||||||||||||
As of September 30, 2018 | ||||||||||||||||||||||||
Gross Amounts Not Offset in the
Statement of Financial Position |
||||||||||||||||||||||||
Gross Amounts
of Recognized Liabilities |
Gross Amounts
Statement of
Position |
Net Amounts of
presented in the
statement of
Financial Position |
Financial
Instruments |
Cash Collateral
Received |
Net Amount | |||||||||||||||||||
Derivatives | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - |
Offsetting of Derivative Assets | ||||||||||||||||||||||||
As of December 31, 2017 | ||||||||||||||||||||||||
Gross Amounts Not Offset in the
Statement of Financial Position |
||||||||||||||||||||||||
Gross Amounts
of Recognized Assets |
Gross Amounts
Position |
Net Amounts of
Assets presented
in the statement
of Financial
Position |
Financial
Instruments |
Cash Collateral
Received |
Net Amount | |||||||||||||||||||
Derivatives | $ | 1,592 | $ | - | $ | 1,592 | $ | (42 | ) | $ | - | $ | 1,550 |
Offsetting of Derivative Liabilities | ||||||||||||||||||||||||
As of December 31, 2017 | ||||||||||||||||||||||||
Gross Amounts Not Offset in the
Statement of Financial Position |
||||||||||||||||||||||||
Gross Amounts
of Recognized Liabilities |
Gross Amounts
Position |
Net Amounts of
Position |
Financial
Instruments |
Cash Collateral
Received |
Net Amount | |||||||||||||||||||
Derivatives | $ | 242 | $ | - | $ | 242 | $ | (42 | ) | $ | - | $ | 200 |
Note 8 – Discontinued Operations
There were no properties classified as discontinued operations for the three and nine months ended September 30, 2018.
Note 9 – 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).
21 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
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 September 30, 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.
The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2018 and December 31, 2017 (in thousands):
Total Fair Value | Level 2 | |||||||
September 30, 2018 | ||||||||
Derivative assets - interest rate swaps | $ | 4,516 | $ | 4,516 | ||||
Derivative liabilities - interest rate swaps | $ | - | $ | - | ||||
December 31, 2017 | ||||||||
Derivative assets - interest rate swaps | $ | 1,592 | $ | 1,592 | ||||
Derivative liabilities - interest rate swaps | $ | 242 | $ | 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.
22 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
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 $603.4 million and $505.6 million as of September 30, 2018 and December 31, 2017, respectively, had fair values of approximately $594.8 million and $516.5 million, respectively. Variable rate debt’s fair value is estimated to be equal to the carrying values of $14.0 million as of September 30, 2018 and December 31, 2017.
Note 10 – Equity Incentive Plan
The Company estimates the fair value of restricted stock grants at the date of grant and amortizes those amounts into expense on a straight line basis or amount vested, if greater, over the appropriate vesting period.
As of September 30, 2018, there was $7.1 million of total 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 stock 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.
Restricted stock activity is summarized as follows:
Shares
Outstanding (in thousands) |
Weighted Average
Grant Date Fair Value |
|||||||
Unvested restricted stock at December 31, 2017 | 227 | $ | 39.47 | |||||
Restricted stock granted | 50 | $ | 47.73 | |||||
Restricted stock vested | (65 | ) | $ | 35.40 | ||||
Restricted stock forfeited | (1 | ) | $ | 48.28 | ||||
Unvested restricted stock at September 30, 2018 | 211 | $ | 42.66 |
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 and compensation expense is amortized on a straight-line basis over a five-year period. Compensation expense related to performance shares is determined at the grant date and is not adjusted throughout the measurement or vesting periods. The Monte Carlo simulation pricing model utilizes assumptions including grant date, performance period, risk-free rate, grant date share price, dividend yield and annualized volatility.
23 |
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(Unaudited)
As of September 30, 2018, there was $1.5 million of total unrecognized compensation costs related to the outstanding performance shares, which is expected to be recognized over a weighted average period of 4.4 years. The Company used 0% for the forfeiture rate for determining the fair value of performance shares.
Note 11 – Subsequent Events
In connection with the preparation of its financial statements, the Company has evaluated events that occurred subsequent to September 30, 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.
24 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following should be read in conjunction with the Interim Consolidated Financial Statements of Agree Realty Corporation (the “Company”), including the respective notes thereto, which are included in this Quarterly Report on Form 10-Q.
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”). The Company 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” in our Annual Report on Form 10-K for the year ended December 31, 2017. 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.
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 New York Stock Exchange (“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 99.0% interest as of September 30, 2018.
As of September 30, 2018, our portfolio consisted of 520 properties located in 45 states and totaling approximately 10.0 million square feet of gross leasable area (“GLA”). As of September 30, 2018, our portfolio was approximately 99.7% leased and had a weighted average remaining lease term of approximately 10.1 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.
Third Quarter 2018 Highlights
During the three months ended September 30, 2018, the Company acquired 43 retail net lease assets for approximately $150.0 million, which includes acquisition and closing costs. These properties are located in 20 states and are leased to 19 different tenants operating in 14 diverse retail sectors for a weighted average lease term of approximately 11.5 years. The underwritten weighted average capitalization rate on the Company’s third quarter 2018 acquisitions was approximately 7.2%.
25 |
During the three months ended September 30, 2018, the Company sold six properties for net proceeds of $29.6 million and recorded a net gain of $3.9 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 borrowing available under its line of credit from $250.0 million to $325.0 million.
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. The proceeds from the offering were used to repay borrowings under the Company’s revolving credit facility, to fund property acquisitions, and for general corporate purposes.
In September 2018, the Company completed 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. 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 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.
In September 2018, the Company completed a private placement of $125.0 million of senior unsecured notes (the “Senior Notes”) to a group of institutional investors. The Senior Notes have a 12-year term, maturing on September 26, 2030, priced at a fixed interest rate of 4.32%.
Recent Accounting Pronouncements
Refer to Note 2 to the September 30, 2018 Interim Consolidated Financial Statements.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires the Company’s management to use judgment in the application of accounting policies, including making estimates and assumptions. Management bases estimates on the best information available at the time, its experience, and on various other assumptions believed to be reasonable under the circumstances. These estimates affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. If management’s judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting principles would have been applied, resulting in a different presentation of the interim consolidated financial statements. From time to time, the Company may re-evaluate its estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. A summary of the Company’s critical accounting policies is included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. The Company has not made any material changes to these policies during the periods covered by this quarterly report.
Results of Operations
Comparison of Three Months Ended September 30, 2018 to Three Months Ended September 30, 2017
Minimum rental income increased $6.3 million, or 23%, to $33.6 million for the three months ended September 30, 2018, compared to $27.3 million for the three months ended September 30, 2017. Minimum rental income increased approximately $6.7 million due to increased property count from acquisitions activity, $0.7 million due to increased property count from development activity, and was partially offset by a $1.1 million reduction due to disposition activity.
26 |
Operating cost reimbursements increased $0.9 million, or 31%, to $3.7 million for the three months ended September 30, 2018, compared to $2.8 million for the three months ended September 30, 2017. Operating cost reimbursements increased primarily due to increased property count. The portfolio recovery rate decreased to 90% for the three months ended September 30, 2018 compared to 91% for the three months September 30, 2017.
Real estate taxes increased $0.7 million, or 31%, to $2.8 million for the three months ended September 30, 2018, compared to $2.1 million for the three months ended September 30, 2017. The increase was due to the ownership of additional properties in the third quarter of 2018 compared to the third quarter of 2017 for which we remit real estate taxes and are reimbursed by tenants.
Property operating expenses increased $0.3 million, or 34%, to $1.2 million for the three months ended September 30, 2018, compared to $0.9 million for the three months ended September 30, 2017. The increase was due to the ownership of additional properties in the third quarter of 2018 compared to the third quarter of 2017.
General and administrative expenses increased $0.4 million, or 20%, to $2.9 million for the three months ended September 30, 2018, compared to $2.5 million for the three months ended September 30, 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 7.9% in the third quarter of 2018 from 8.1% in the third quarter of 2017.
Depreciation and amortization increased $3.0 million, or 36%, to $11.2 million for the three months ended September 30, 2018, compared to $8.2 million for the three months ended September 30, 2017. The increase was primarily due to the ownership of additional properties in the third quarter of 2018 compared to the third quarter of 2017.
Interest expense increased $1.8 million, or 40%, to $6.5 million for the three months ended September 30, 2018, compared to $4.7 million for the three months ended September 30, 2017. The increase in interest expense was primarily a result of higher levels of borrowings to finance the acquisition and development of additional properties.
Income tax expense increased to $0.1 million for the three months ended September 30, 2018, compared to $0.0 million for the three months ended September 30, 2017. The change is due to ownership of an increased number of properties in the third quarter of 2018 compared to the third quarter of 2017 which are located in states that assess state and local income tax.
Provision for impairment increased $0.5 million for the three months ended September 30, 2018, compared to $0.0 million for the three months ended September 30, 2017. Provisions for impairment reflect the amount by which current book value exceeds estimated fair value.
Gain on sale of assets increased $3.4 million to $3.9 million for the three months ended September 30, 2018, compared to $0.5 million for the three months ended September 30, 2017. The increase in gain on sale of assets was primarily a result of increased disposition activity during the third quarter of 2018 compared to the third quarter of 2017.
27 |
Net Income increased $3.5 million, or 28%, to $15.8 million for the three months ended September 30, 2018, compared to $12.3 million for the three months ended September 30, 2017. The change was the result of items discussed above, including changes in non-cash amounts such as gain on the sale of assets, provision for impairments and depreciation and amortization expense.
Comparison of Nine Months Ended September 30, 2018 to Nine Months Ended September 30, 2017
Minimum rental income increased $20.0 million, or 26%, to $96.5 million for the nine months ended September 30, 2018, compared to $76.5 million for the nine months ended September 30, 2017. Minimum rental income increased approximately $20.8 million due to increased property count from acquisitions activity, $2.1 million due to increased property count from development activity, and was partially offset by a $3.3 million reduction due to disposition activity.
Operating cost reimbursements increased $2.6 million, or 32%, to $10.6 million for the nine months ended September 30, 2018, compared to $8.0 million for the nine months ended September 30, 2017. Operating cost reimbursements increased primarily due to increased property count. The portfolio recovery rate decreased to 90% for the nine months ended September 30, 2018 compared to 93% for the nine months ended September 30, 2017.
Real estate taxes increased $1.8 million, or 31%, to $7.8 million for the nine months ended September 30, 2018, compared to $6.0 million for the nine months ended September 30, 2017. The increase was due to the ownership of additional properties in the first nine months of 2018 compared to the first nine months of 2017 for which we remit real estate taxes and are reimbursed by tenants.
Property operating expenses increased $1.3 million, or 48%, to $3.9 million for the nine months ended September 30, 2018, compared to $2.6 million for the nine months ended September 30, 2017. The increase was due to the ownership of additional properties in the first nine months of 2018 compared to the first nine months of 2017.
General and administrative expenses increased $1.7 million, or 23%, to $9.0 million for the nine months ended September 30, 2018, compared to $7.3 million for the nine months ended September 30, 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 8.4% in the first nine months of 2018 from 8.6% in the first nine months of 2017.
Depreciation and amortization increased $8.7 million, or 38%, to $31.7 for the nine months ended September 30, 2018, compared to $23.0 million for the nine months ended September 30, 2017. The increase was primarily due to the ownership of additional properties in the first nine months of 2018 compared to the first nine months of 2017.
Interest expense increased $4.8 million, or 36%, to $18.0 million for the nine months ended September 30, 2018, compared to $13.2 million for the nine months ended September 30, 2017. The increase in interest expense was primarily a result of higher levels of borrowings to finance the acquisition and development of additional properties.
28 |
Provision for impairment increased $1.7 million for the nine months ended September 30, 2018, compared to $0.0 million for the nine months ended September 30, 2017. Provisions for impairment reflect the amount by which current book value exceeds estimated fair value.
Gain on sale of assets increased $0.9 million, or 8.3%, to $10.9 million for the nine months ended September 30, 2018, compared to $10.0 million for the nine months ended September 30, 2017. The increase in gain on sale of assets was primarily a result of increased disposition activity during the first nine months of 2018, compared to the first nine months 2017.
Net Income increased $3.4 million, or 8.0%, to $45.5 million for the nine months ended September 30, 2018, compared to $42.1 million for the nine months ended September 30, 2017. The change was the result of items discussed above, including changes in non-cash amounts such as gain on the sale of assets, provision for impairments and depreciation and amortization expense.
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 September 30, 2018, available cash and cash equivalents was $16.8 million. As of September 30, 2018, we had $14.0 million outstanding on our revolving credit facility and $311.0 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 available under its the 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.
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.
Equity
In March 2018, the Company completed a follow-on public offering of 3,450,000 shares of common stock, which includes 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. The proceeds from the offering were used to repay borrowings under the Company’s revolving credit facility, to fund property acquisitions, and for general corporate purposes.
In September 2018, the Company completed 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. 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 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.
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 purposes. The Company has not issued any shares of common stock under its ATM Program.
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Capitalization
As of September 30, 2018, the Company’s total market capitalization was approximately $2.5 billion. Market capitalization consisted of $1.9 billion of common equity (based on the September 28, 2018 closing price on the NYSE of $53.12 per common share and assuming the conversion of operating partnership units in the Operating Partnership (“OP units”) and $619.9 million of total gross debt, including (i) $62.2 million of mortgage notes payable; (ii) $158.7 million of unsecured term loans; (iii) $385.0 million of senior unsecured notes; and (iv) $14.0 million of borrowings under our revolving credit facility. Our ratio of total debt to total market capitalization was 25.1% at September 30, 2018.
At September 30, 2018, the non-controlling interest in the Operating Partnership represented ownership of 1.1% of the Operating Partnership. The OP Units may, under certain circumstances, be exchanged for shares of common stock on a one-for-one basis. The Company, as sole general partner of the Operating Partnership, has the option to settle exchanged OP Units held by others for cash based on the current trading price of its shares. Assuming the exchange of all OP Units, there would have been 34,829,164 shares of common stock outstanding at September 30, 2018.
Debt
The below table summarizes the Company’s outstanding debt for the periods ended September 30, 2018 and December 31, 2017 (in thousands):
Interest | Principal Amount Outstanding | |||||||||||||
Senior Unsecured Revolving Credit Facility | Rate | Maturity | September 30, 2018 | December 31, 2017 | ||||||||||
Credit Facility (1) | 3.26 | % | January 2021 | $ | 14,000 | $ | 14,000 | |||||||
Total Credit Facility | $ | 14,000 | $ | 14,000 | ||||||||||
Unsecured Term Loans (2) | ||||||||||||||
2019 Term Loan | 3.62 | % | May 2019 | $ | 18,734 | $ | 19,304 | |||||||
2023 Term Loan | 3.05 | % | July 2023 | 40,000 | 40,000 | |||||||||
2024 Term Loan Facility | 3.74 | % | January 2024 | 65,000 | 65,000 | |||||||||
2024 Term Loan Facility | 3.85 | % | January 2024 | 35,000 | 35,000 | |||||||||
Total Unsecured Term Loans | $ | 158,734 | $ | 159,304 | ||||||||||
Senior Unsecured Notes (2) | ||||||||||||||
2025 Senior Unsecured Notes | 4.16 | % | May 2025 | $ | 50,000 | $ | 50,000 | |||||||
2027 Senior Unsecured Notes | 4.26 | % | May 2027 | 50,000 | 50,000 | |||||||||
2028 Senior Unsecured Notes | 4.42 | % | July 2028 | 60,000 | 60,000 | |||||||||
2029 Senior Unsecured Notes | 4.19 | % | September 2029 | 100,000 | 100,000 | |||||||||
2030 Senior Unsecured Notes | 4.32 | % | September 2030 | 125,000 | - | |||||||||
Total Senior Unsecured Notes | $ | 385,000 | $ | 260,000 | ||||||||||
Mortgage Notes Payable (2) | ||||||||||||||
Secured Term Loan | 2.49 | % | March 2018 | $ | - | $ | 25,000 | |||||||
Single Asset Mortgage Loan | 3.32 | % | October 2019 | 21,500 | 21,500 | |||||||||
Portfolio Mortgage Loan | 6.90 | % | January 2020 | 2,345 | 3,573 | |||||||||
Single Asset Mortgage Loan | 6.24 | % | February 2020 | 2,896 | 2,963 | |||||||||
CMBS Portfolio Loan | 3.60 | % | January 2023 | 23,640 | 23,640 | |||||||||
Single Asset Mortgage Loan | 5.01 | % | September 2023 | 5,003 | 5,131 | |||||||||
Portfolio Credit Tenant Lease | 6.27 | % | July 2026 | 6,795 | 7,288 | |||||||||
Total Mortgage Notes Payable | $ | 62,179 | $ | 89,095 | ||||||||||
Total Principal Amount Outstanding | $ | 619,913 | $ | 522,399 |
(1) The annual interest rate of the Credit Facility assumes one month LIBOR as of September 30, 2018 of 2.26%.
(2) Interest rate includes the effects of variable interest rates that have been swapped to fixed interest rates.
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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 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 to a maximum amount of $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 September 30, 2018, and December 31, 2017, the Company had $14.0 million, of outstanding borrowings under the revolving credit facility, respectively, bearing weighted average interest rates of approximately 3.2% and 2.6%, respectively. As of September 30, 2018, $311.0 million was available for borrowing under the revolving credit facility and the Company was in compliance with the credit agreement covenants.
Unsecured Term Loan Facilities
The amended and restated credit agreement (Referenced above in Senior Unsecured Revolving Credit Facility) 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 150 to 245 basis points, depending on the Company's credit rating. The Company utilized existing interest rate swaps to effectively fix the LIBOR at 213 basis points until maturity. As of September 30, 2018, $100.0 million was outstanding under the 2024 Term Loan Facilities bearing an all-in interest rate of 3.78%.
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 150 to 245 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 September 30, 2018, $40.0 million was outstanding under the 2023 Term Loan, which was subject to an all-in interest rate of 3.05%.
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 September 30, 2018, $18.7 million was outstanding under the 2019 Term Loan bearing an all-in interest rate of 3.62%.
Senior Unsecured Notes
In May 2015, the Company and 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 weighted average term of the senior unsecured notes is 11 years and the weighted average interest rate is 4.21%. 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 July 2016, the Company 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 our 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.
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In August 2017, the Company 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 our 4.19% senior unsecured notes due September 2029 (the “2029 Senior Unsecured Notes”). The 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 entered into two supplements to uncommitted master note facilities previously entered into with institutional purchasers in August 2017. Pursuant to the supplements, the Operating 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.
Mortgage Notes Payable
As of September 30, 2018, the Company had total gross mortgage indebtedness of $62.2 million, with a weighted average term to maturity of 3.3 years. Including our mortgages that have been swapped to a fixed interest rate, our weighted average interest rate on mortgage debt was 4.16%.
We have entered into mortgage loans which are secured by multiple properties and contain cross-default and cross-collateralization provisions. Cross-collateralization provisions allow a lender to foreclose on multiple properties in the event that we default under the loan. Cross-default provisions allow a lender to foreclose on the related property in the event a default is declared under another loan.
Contractual Obligations
The following table summarizes our contractual obligations as of September 30, 2018 (in thousands):
Remainder of | ||||||||||||||||||||||||||||
2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | Total | ||||||||||||||||||||||
Mortgage Notes Payable | $ | 660 | $ | 24,251 | $ | 3,867 | $ | 998 | $ | 1,060 | $ | 31,343 | $ | 62,179 | ||||||||||||||
Revolving Credit Facility | - | - | - | 14,000 | - | - | 14,000 | |||||||||||||||||||||
Unsecured Term Loans | 190 | 18,544 | - | - | - | 140,000 | 158,734 | |||||||||||||||||||||
Senior Unsecured Notes | - | - | - | - | - | 385,000 | 385,000 | |||||||||||||||||||||
Land Lease Obligations | 142 | 566 | 564 | 521 | 437 | 6,908 | 9,138 | |||||||||||||||||||||
Estimated Interest Payments on Outstanding Debt | 6,294 | 24,470 | 23,376 | 22,861 | 22,781 | 104,558 | 204,340 | |||||||||||||||||||||
Total | $ | 7,286 | $ | 67,831 | $ | 27,807 | $ | 38,380 | $ | 24,278 | $ | 667,809 | $ | 833,391 |
Includes estimated interest payments based on (i) the stated rates for mortgage notes payable, including the effect of interest rate swaps; (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; and (iii) the stated rates for senior unsecured notes.
Dividends
During the quarter ended September 30, 2018, the Company declared a quarterly dividend of $0.540 per share. The cash dividend was paid on October 12, 2018 to holders of record on September 28, 2018.
Non-GAAP Financial Measures
Funds from Operations
Funds from Operations (“FFO”) is defined by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) to mean net income computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus real estate related depreciation and amortization and any impairment charges on a depreciable real estate asset, and after adjustments for unconsolidated partnerships and joint ventures. Management uses FFO as a supplemental measure to conduct and evaluate the Company business because there are certain limitations associated with using GAAP net income by itself as the primary measure of the Company’s operating performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, management believes that the presentation of operating results for real estate companies that use historical cost accounting is insufficient by itself.
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FFO should not be considered an alternative to net income as the primary indicator of the Company’s operating performance, or as an alternative to cash flow as a measure of liquidity. Further, while the Company adheres to the NAREIT definition of FFO, its presentation of FFO is not necessarily comparable to similarly titled measures of other REITs due to the fact that all REITs may not use the same definition.
Adjusted Funds from Operations
Adjusted Funds from Operations (“AFFO”) is a non-GAAP financial measure of operating performance used by many companies in the REIT industry. AFFO further adjusts FFO for certain non-cash items that reduce or increase net income in accordance with GAAP. Management considers AFFO a useful supplemental measure of the Company’s performance, however, AFFO should not be considered an alternative to net income as an indication of the Company’s performance, or to cash flow as a measure of liquidity or ability to make distributions. The Company’s computation of AFFO may differ from the methodology for calculating AFFO used by other equity REITs, and therefore may not be comparable to such other REITs.
The following table provides a reconciliation from net income to FFO for the three and nine months ended September 30, 2018 and 2017 (in thousands):
Three Months Ended | Nine Months Ended | |||||||||||||||
Reconciliation from Net Income to Funds from Operations | September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | ||||||||||||
Net income | $ | 15,756 | $ | 12,283 | $ | 45,460 | $ | 42,119 | ||||||||
Depreciation of real estate assets | 6,156 | 5,101 | 17,745 | 14,286 | ||||||||||||
Amortization of leasing costs | 90 | 40 | 174 | 120 | ||||||||||||
Amortization of lease intangibles | 4,914 | 3,059 | 13,761 | 8,470 | ||||||||||||
Provision for impairment | 488 | - | 1,651 | - | ||||||||||||
Gain on sale of assets | (3,917 | ) | (524 | ) | (10,949 | ) | (10,045 | ) | ||||||||
Funds from Operations | $ | 23,487 | $ | 19,959 | $ | 67,842 | $ | 54,950 | ||||||||
Funds from Operations Per Share - Diluted | $ | 0.72 | $ | 0.69 | $ | 2.13 | $ | 2.00 | ||||||||
Weighted average shares and OP units outstanding | ||||||||||||||||
Basic | 32,106,544 | 28,920,641 | 31,479,149 | 27,336,208 | ||||||||||||
Diluted | 32,634,971 | 29,004,303 | 31,818,870 | 27,416,971 |
The following table provides a reconciliation from net income to AFFO for the three and nine months ended September 30, 2018 and 2017 (in thousands):
Three Months Ended | Nine Months Ended | |||||||||||||||
Reconciliation from Net Income to Adjusted Funds from Operations | September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | ||||||||||||
Net income | $ | 15,756 | $ | 12,283 | $ | 45,460 | $ | 42,119 | ||||||||
Cumulative adjustments to calculate FFO | 7,731 | 7,676 | 22,382 | 12,831 | ||||||||||||
Funds from Operations | $ | 23,487 | $ | 19,959 | $ | 67,842 | $ | 54,950 | ||||||||
Straight-line accrued rent | (1,138 | ) | (860 | ) | (3,344 | ) | (2,545 | ) | ||||||||
Stock based compensation expense | 850 | 622 | 2,375 | 1,898 | ||||||||||||
Amortization of financing costs | 135 | 142 | 433 | 426 | ||||||||||||
Non-real estate depreciation | 20 | 28 | 63 | 80 | ||||||||||||
Adjusted Funds from Operations | $ | 23,354 | $ | 19,891 | $ | 67,369 | $ | 54,809 | ||||||||
Adjusted Funds from Operations Per Share - Diluted | $ | 0.72 | $ | 0.69 | $ | 2.12 | $ | 2.00 | ||||||||
Additional supplemental disclosure | ||||||||||||||||
Scheduled principal repayments | $ | 838 | $ | 797 | $ | 2,486 | $ | 2,343 | ||||||||
Capitalized interest | $ | 88 | $ | 143 | $ | 381 | $ | 297 | ||||||||
Capitalized building improvements | $ | 966 | $ | 34 | $ | 1,042 | $ | 76 |
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ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk |
We are exposed to interest rate risk primarily through borrowing activities. There is inherent roll-over risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and our future financing requirements.
Our interest rate risk is monitored using a variety of techniques. The table below presents the principal payments 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.
($ in thousands) | ||||||||||||||||||||||||||||
2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | Total | ||||||||||||||||||||||
Mortgage Notes Payable | $ | 660 | $ | 24,251 | $ | 3,867 | $ | 998 | $ | 1,060 | $ | 31,343 | $ | 62,179 | ||||||||||||||
Average Interest Rate | 6.59 | % | 3.69 | % | 6.21 | % | 6.02 | % | 6.02 | % | 3.86 | % | ||||||||||||||||
Unsecured Revolving Credit Facility | $ | - | $ | - | $ | - | $ | 14,000 | $ | - | $ | - | $ | 14,000 | ||||||||||||||
Average Interest Rate | 3.26 | % | ||||||||||||||||||||||||||
Unsecured Term Loans | $ | 190 | $ | 18,544 | $ | - | $ | - | $ | - | $ | 140,000 | $ | 158,734 | ||||||||||||||
Average Interest Rate | 3.62 | % | 3.62 | % | 3.57 | % | ||||||||||||||||||||||
Senior Unsecured Notes | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 385,000 | $ | 385,000 | ||||||||||||||
Average Interest Rate | 4.27 | % |
The fair value is estimated to be $61.8 million, $153.2 million and $379.8 million for mortgage notes payable, unsecured term loans and senior unsecured notes, respectively, as of September 30, 2018.
The table above incorporates those exposures that exist as of September 30, 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. We could incur significant costs associated with the settlement of the agreements, the agreements will be unenforceable and the underlying transactions will fail to qualify as highly-effective cash flow hedges under GAAP guidance.
In April 2012, 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 September 30, 2018 is $18.7 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 September 30, 2018, this interest rate swap was valued as an asset of approximately $0.1 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 borrowings to fixed-rate borrowings from October 3, 2013 to September 29, 2020. As of September 30, 2018, this interest rate swap was valued as an asset of approximately $0.4 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 September 30, 2018, this interest rate swap was valued as an asset of approximately $1.3 million.
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In September 2017, 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 September 30, 2018, this interest rate swap was valued as an asset of approximately $2.7 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 September 30, 2018.
ITEM 4. | Controls and Procedures |
Disclosure Controls and Procedures
At 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, our 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.
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.
Item 1. | Legal Proceedings |
We are not presently involved in any material litigation nor, to our knowledge, is any other material litigation threatened against us, except for routine litigation arising in the ordinary course of business which is expected to be covered by our liability insurance.
Item 1A. | Risk Factors |
There have been no material changes from our risk factors set forth under Item 1A of Part 1 of our most recently filed Form 10-K.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
Item 3. | Defaults upon Senior Securities |
None.
Item 4. | Mine Safety Disclosures |
Not applicable .
Item 5. | Other Information |
None.
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Item 6. | Exhibits |
* | Filed herewith. |
Pursuant to the requirements 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.
Agree Realty Corporation
/s/ JOEL N. AGREE | |
Joel N. Agree | |
President and Chief Executive Officer |
/s/ CLAYTON R. THELEN | |
Clayton R. Thelen | |
Chief Financial Officer and Secretary | |
(Principal Financial and Accounting Officer) |
Date: October 22, 2018 |
36 |
Exhibit 4.1
[Form of Series 2018-A Note]
Agree Limited Partnership
4.32% Senior Guaranteed Note, Series 2018-A, due September 26, 2030
No. RA__-__ | [Date] |
$[____________] | PPN 00855@ AE4 |
For Value Received , the undersigned, Agree Limited Partnership (herein called the “Company” ), a limited partnership organized and existing under the laws of Delaware, hereby promises to pay to [_____________________], or registered assigns, the principal sum of [_____________________] Dollars (or so much thereof as shall not have been prepaid) on September 26, 2030 (the “Maturity Date” ) with interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid balance hereof at the rate of 4.32% per annum from the date hereof, payable semiannually, on the 31st day of March and 30th day of September in each year, commencing with March 31, 2019 or the first March 31 or September 30 following the date hereof, and on the Maturity Date, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, (x) on any overdue payment of interest and (y) during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum from time to time equal to the Default Rate (as defined in the hereinafter defined Master Note Facility).
Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of JPMorgan Chase Bank, N.A. in New York, New York or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Master Note Facility referred to below.
This Note is one of the Senior Guaranteed Notes, Series 2018-A (herein called the “Notes” ) issued pursuant to the First Supplement dated as of September 26, 2018 to the Uncommitted Master Note Facility dated as of August 3, 2017 (as from time to time amended, the “Master Note Facility” ), between Agree Realty Corporation (the “Parent Guarantor” ), the Company, AIG Asset Management (U.S.), LLC and the Purchasers from time to time referred to therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, to have (i) agreed to the confidentiality provisions set forth in Section 20 of the Master Note Facility and (ii) made the representations set forth in Section 6.2 of the Master Note Facility. Unless otherwise indicated, capitalized terms used in this Note shall have the respective meanings ascribed to such terms in the Master Note Facility.
This Note is a registered Note and, as provided in the Master Note Facility, upon surrender of this Note for registration of transfer accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.
Pursuant to a Guaranty dated as of September 26, 2018, the Parent Guarantor, operating as a real estate investment trust and certain subsidiaries, have each absolutely and unconditionally guaranteed payment in full of the principal of, Make-Whole Amount, if any, and interest on this Note and performance by the Company of all of its obligations contained in the Master Note Facility all on the terms set forth in such Guaranty.
This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Master Note Facility, but not otherwise.
If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Master Note Facility.
This Note shall be construed and enforced in accordance with, and the rights of the Company and the holder of this Note shall be governed by, the law of the State of New York, excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.
Agree Limited Partnership | ||
By: | Agree Realty Corporation , | |
Its sole general partner |
By | |||
Name: | |||
Title: |
Exhibit 4.2
[Form of Series 2018-B Note]
Agree Limited Partnership
4.32% Senior Guaranteed Note, Series 2018-B, due September 26, 2030
No. RB__-__ | [Date] |
$[____________] | PPN 00855@ AF1 |
For Value Received , the undersigned, Agree Limited Partnership (herein called the “Company” ), a limited partnership organized and existing under the laws of Delaware, hereby promises to pay to [_____________________], or registered assigns, the principal sum of [_____________________] Dollars (or so much thereof as shall not have been prepaid) on September 26, 2030 (the “Maturity Date” ) with interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid balance hereof at the rate of 4.32% per annum from the date hereof, payable semiannually, on the the 31st day of March and 30th day of September in each year, commencing with March 31, 2019 or the first March 31 or September 30 following the date hereof, and on the Maturity Date, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, (x) on any overdue payment of interest and (y) during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum from time to time equal to the Default Rate (as defined in the hereinafter defined Master Note Facility).
Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of JPMorgan Chase Bank, N.A. in New York, New York or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Master Note Facility referred to below.
This Note is one of the Senior Guaranteed Notes, Series 2018-B (herein called the “Notes” ) issued pursuant to the First Supplement dated as of September 26, 2018 to the Uncommitted Master Note Facility dated as of August 3, 2017 (as from time to time amended, the “Master Note Facility” ), between Agree Realty Corporation (the “Parent Guarantor” ), the Company, Teachers Insurance and Annuity Association of America and the Purchasers from time to time referred to therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, to have (i) agreed to the confidentiality provisions set forth in Section 20 of the Master Note Facility and (ii) made the representations set forth in Section 6.2 of the Master Note Facility. Unless otherwise indicated, capitalized terms used in this Note shall have the respective meanings ascribed to such terms in the Master Note Facility.
This Note is a registered Note and, as provided in the Master Note Facility, upon surrender of this Note for registration of transfer accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.
Pursuant to a Guaranty dated as of September 26, 2018, the Parent Guarantor, operating as a real estate investment trust and certain subsidiaries, have each absolutely and unconditionally guaranteed payment in full of the principal of, Make-Whole Amount, if any, and interest on this Note and performance by the Company of all of its obligations contained in the Master Note Facility all on the terms set forth in such Guaranty.
This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Master Note Facility, but not otherwise.
If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Master Note Facility.
This Note shall be construed and enforced in accordance with, and the rights of the Company and the holder of this Note shall be governed by, the law of the State of New York, excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.
Agree Limited Partnership | ||
By: | Agree Realty Corporation , | |
Its sole general partner |
By | |||
Name: | |||
Title: |
Exhibit 10.3
Execution Version
Agree Limited Partnership
First Supplement to Uncommitted Master Note Facility
Dated as of September 26, 2018
Re: $25,000,000 4.32%, Series 2018-B, Senior Guaranteed Notes
due September 26, 2030
Agree Limited Partnership
70 E. Long Lake Road
Bloomfield Hills, MI 48304
First Supplement to Uncommitted Master Note Facility
Dated as of
September 26, 2018
To the Purchaser named in
Schedule A hereto
Ladies and Gentlemen:
This First Supplement to Uncommitted Master Note Facility (the “First Supplement” ) is among Agree Limited Partnership, a Delaware limited partnership (the “ Company ”), and Agree Realty Corporation, a Maryland corporation operating as a real estate investment trust (the “ Parent Guarantor ”) and Teachers Insurance and Annuity Association of America, as listed in Schedule A hereto (“ TIAA ” or the “Purchaser” ).
Recitals
A. The Company and the Parent Guarantor have entered into the Uncommitted Master Note Facility dated as of August 3, 2017 with TIAA (as heretofore amended and supplemented, the “Master Note Facility” ); and
B. The Company desires to issue and sell, and the Purchaser desires to purchase, an initial Series of Notes (as defined in the Master Note Facility) pursuant to the Master Note Facility and in accordance with the terms set forth below;
N ow, Therefore , the Company and the Purchaser agrees as follows:
1. Authorization of the New Series of Notes . The Company has authorized the issue and sale of $25,000,000 aggregate principal amount of its 4.32%, Series 2018-B, Senior Guaranteed Notes due September 26, 2030 (the “Series 2018-B Notes” ). The Series 2018-B Notes, and each Series of Notes which may from time to time hereafter be issued pursuant to the provisions of the Master Note Facility, are collectively referred to as the “Notes” (such term shall also include any such notes issued in substitution therefor pursuant to Section 13 of the Master Note Facility). The Series 2018-B Notes shall be substantially in the form set out in Exhibit 1 hereto with such changes therefrom, if any, as may be approved by the Purchaser and the Company.
2. Sale and Purchase of Series 2018-B Notes. Subject to the terms and conditions of this First Supplement and the Master Note Facility and on the basis of the representations and warranties hereinafter set forth, the Company will issue and sell to the Purchaser and the Purchaser will purchase from the Company, at the Closing provided for in Section 3, Series 2018-B Notes in the principal amount specified opposite its name in the attached Schedule A hereto at the purchase price of 100% of the principal amount thereof.
3. Closing . The sale and purchase of the Series 2018-B Notes to be purchased by the Purchaser shall occur at the offices of Chapman and Cutler LLP, 111 West Monroe Street, Chicago, IL 60603 at 10:00 a.m. Chicago time, at a closing (the “Closing” ) on September 26, 2018 or on such other Business Day thereafter on or prior to October 2, 2018 as may be agreed upon by the Company and the Purchaser (the “Closing Date” ). At the Closing, the Company will deliver to the Purchaser the Series 2018-B Notes to be purchased by the Purchaser in the form of a single Series 2018-B Note (or such greater number of Series 2018-B Notes in denominations of at least $100,000 as the Purchaser may request) dated the date of the Closing and registered in the Purchaser’s name (or in the name of the Purchaser’s nominee), against delivery by the Purchaser to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company in accordance with wire transfer instructions provided by the Company to the Purchaser pursuant to Section 4 of this First Supplement, as it relates to Section 4.11 of the Master Note Facility. If, at the Closing, the Company shall fail to tender such Series 2018-B Notes to the Purchaser as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to the Purchaser’s satisfaction, the Purchaser shall, at the Purchaser’s election, be relieved of all further obligations under this Agreement, without thereby waiving any rights the Purchaser may have by reason of such failure or such nonfulfillment.
4. Conditions to Closing . The obligation of the Purchaser to purchase and pay for the Series 2018-B Notes to be sold to the Purchaser at the Closing is subject to the fulfillment to the Purchaser’s satisfaction, prior to the Closing, of the conditions set forth in Section 4 of the Master Note Facility (it being understood that all references to “Purchaser” therein shall be deemed to refer to the Purchaser hereunder, all references to “this Agreement” shall be deemed to refer to the Master Note Facility as supplemented by this First Supplement, and all references to “Notes” therein shall be deemed to refer to the Series 2018-B Notes, and as hereafter modified), and as provided in Section 5 of this First Supplement, except as supplemented, amended or superseded by the representations and warranties set forth in Exhibit 2 hereto (which changes are subject to the approval of the Purchaser), each of the representations and warranties of the Company and the Parent Guarantor set forth in Section 5 of the Master Note Facility shall be correct as of the date of Closing and the Company and the Parent Guarantor each shall have delivered to the Purchaser an Officer’s Certificate, dated the date of the Closing certifying that such condition has been fulfilled.
- 2 - |
5. Representations and Warranties of the Company and the Parent Guarantor . With respect to each of the representations and warranties contained in Section 5 of the Master Note Facility, each of the Company and the Parent Guarantor represents and warrants to the Purchaser that, as of the date hereof, such representations and warranties are true and correct (A) except that all references to “Purchaser” therein shall be deemed to refer to the Purchaser hereunder, all references to “this Agreement” shall be deemed to refer to the Master Note Facility as supplemented by this First Supplement, and all references to “Notes” therein shall be deemed to refer to the Series 2018-B Notes, and (B) except for changes to such representations and warranties or the Schedules referred to therein, which changes are set forth in the attached Exhibit 2 and which are in all respects satisfactory to the Purchaser as a condition to the Closing .
6. Representations of the Purchasers. The Purchaser confirms to the Company that the representations set forth in Section 6 of the Master Note Facility are true and correct on the date hereof with respect to the purchase of the Series 2018-B Notes by such Purchaser, except that all references to “Purchaser” therein shall be deemed to refer to the Purchaser hereunder, all references to “this Agreement” therein shall be deemed to refer to the Master Note Facility as supplemented by this First Supplement, and all references to “Notes” therein shall be deemed to refer to the Series 2018-B Notes.
7. Maturity; Interest. The Series 2018-B Notes will have the maturity date and bear interest at the rate set forth therein.
8. Prepayments of the Series 2018-B Notes . All prepayment provisions in Section 8 of the Master Note Facility shall apply to the Series 2018-B Notes equally as “Notes” thereunder, subject to the definitions applicable to the Series 2018-B Notes contained herein.
9. Applicability of Master Note Facility . Except as otherwise expressly provided herein (and expressly permitted by the Master Note Facility), all of the provisions of the Master Note Facility are incorporated by reference herein, shall apply to the Series 2018-B Notes as if expressly set forth in this First Supplement and all references to “Notes” shall include the Series 2018-B Notes. Without limiting the foregoing, the Company and the Parent Guarantor agree to pay all costs and expenses incurred in connection with the initial filing of this First Supplement and all related documents and financial information with the SVO; provided that such costs and expenses with respect to the Series 2018-B Notes shall not exceed $5,000 per Series or tranche of such Notes. Capitalized terms used herein without definition have the respective meanings ascribed to them in the Master Note Facility (as amended from time to time).
10. Governing Law. This First Supplement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York , excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.
- 3 - |
11. Agreement to be Bound . The Company, the Parent Guarantor and the Purchaser agree to be bound by and comply with the terms and provisions of the Master Note Facility as fully and completely as if the Purchaser were an original signatory to the Master Note Facility.
- 4 - |
The execution hereof shall constitute a contract between the Company, the Parent Guarantor and the Purchaser for the uses and purposes hereinabove set forth, and this First Supplement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement.
Agree Limited Partnership, | |
a Delaware limited partnership |
By | ||
Name: | ||
Title: |
Agree Realty Corporation, | |
a Maryland corporation |
By | ||
Name: | ||
Title: |
Accepted as of the date first written above.
Teachers Insurance and Annuity | |
Association of America |
By: | Nuveen Alternatives Advisors LLC, | |
its investment manager |
By | ||
Name: | ||
Title: |
- 5 - |
Information Relating to Purchaser
Name and Address of Purchaser |
Principal Amount of
Series 2018-B Notes to Be Purchased |
|||
Teachers Insurance and Annuity Association of America 8500 Andrew Carnegie Boulevard Charlotte, North Carolina 28262 |
$ | 25,000,000 |
Payments
All payments on or in respect of the Series 2018-B Notes shall be made in immediately available funds on the due date by electronic funds transfer, through the Automated Clearing House System, to:
JPMorgan Chase Bank, N.A.
ABA # 021-000-021
Account Number: 900-9-000200
Account Name: TIAA
For Further Credit to the Account Number: G07040
Reference: PPN: 00855@ AF1/Agree Limited Partnership
Maturity Date: September 26, 2030/Interest Rate: 4.32%/P&I Breakdown
Payment Notices
All notices with respect to payments and prepayments of the Series 2018-B Notes shall be sent to:
Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, New York 10017
Attention: Securities Accounting Division
Phone: (212) 916-5504
Email: jpiperato@tiaa.org or mwolfe@tiaa.org
With a copy to:
JPMorgan Chase Bank, N.A.
P.O. Box 35308
Newark, New Jersey 07101
And to:
Schedule A
(to First Supplement)
Teachers Insurance and Annuity Association of America
c/o Nuveen Alternatives Advisors LLC
8500 Andrew Carnegie Boulevard
Charlotte, North Carolina 28262
Attention: Global Private Markets
Telephone: | (704) 988-4349 (Ho Young Lee) |
(704) 988-1000 (General Number)
Facsimile: | (704) 988-4916 |
Email: | hoyoung.lee@nuveen.com and to |
Nuveen PrivatePlacements@nuveen.com
Contemporaneous written confirmation of any electronic funds transfer shall be sent to the above addresses setting forth (1) the full name, private placement number, interest rate and maturity date of the Series 2018-B Notes, (2) allocation of payment between principal, interest, Make-Whole Amount, other premium or any special payment and (3) the name and address of the bank from which such electronic funds transfer was sent.
Other Notices and Communications
All other notices and communications shall be delivered or mailed to:
Teachers Insurance and Annuity Association of America
c/o Nuveen Alternatives Advisors LLC
8500 Andrew Carnegie Boulevard
Charlotte, North Carolina 28262
Attention: Global Private Markets
Telephone: | (704) 988-4349 (Ho Young Lee) |
(704) 988-1000 (General Number)
Facsimile: | (704) 988-4916 |
Email: | hoyoung.lee@nuveen.com and to |
NuveenPrivatePlacements@nuveen.com
Taxpayer Identification Number : 13-1624203
Physical Delivery of the Series 2018-B Notes:
JPMorgan Chase Bank, N.A.
4 Chase Metrotech Center
3 rd Floor
Brooklyn, New York 11245-0001
Attention: Physical Receive Department
For TIAA A/C #G07040
A- 2 |
[Form of Series 2018-B Note]
Agree Limited Partnership
4.32% Senior Guaranteed Note, Series 2018-B, due September 26, 2030
No. RB__-__ | [Date] |
$[____________] | PPN 00855@ AF1 |
For Value Received , the undersigned, Agree Limited Partnership (herein called the “Company” ), a limited partnership organized and existing under the laws of Delaware, hereby promises to pay to [_____________________], or registered assigns, the principal sum of [_____________________] Dollars (or so much thereof as shall not have been prepaid) on September 26, 2030 (the “Maturity Date” ) with interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid balance hereof at the rate of 4.32% per annum from the date hereof, payable semiannually, on the the 31st day of March and 30th day of September in each year, commencing with March 31, 2019 or the first March 31 or September 30 following the date hereof, and on the Maturity Date, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, (x) on any overdue payment of interest and (y) during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum from time to time equal to the Default Rate (as defined in the hereinafter defined Master Note Facility).
Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of JPMorgan Chase Bank, N.A. in New York, New York or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Master Note Facility referred to below.
This Note is one of the Senior Guaranteed Notes, Series 2018-B (herein called the “Notes” ) issued pursuant to the First Supplement dated as of September 26, 2018 to the Uncommitted Master Note Facility dated as of August 3, 2017 (as from time to time amended, the “Master Note Facility” ), between Agree Realty Corporation (the “Parent Guarantor” ), the Company, Teachers Insurance and Annuity Association of America and the Purchasers from time to time referred to therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, to have (i) agreed to the confidentiality provisions set forth in Section 20 of the Master Note Facility and (ii) made the representations set forth in Section 6.2 of the Master Note Facility. Unless otherwise indicated, capitalized terms used in this Note shall have the respective meanings ascribed to such terms in the Master Note Facility.
This Note is a registered Note and, as provided in the Master Note Facility, upon surrender of this Note for registration of transfer accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.
Exhibit 1
(to First Supplement)
Pursuant to a Guaranty dated as of September 26, 2018, the Parent Guarantor, operating as a real estate investment trust and certain subsidiaries, have each absolutely and unconditionally guaranteed payment in full of the principal of, Make-Whole Amount, if any, and interest on this Note and performance by the Company of all of its obligations contained in the Master Note Facility all on the terms set forth in such Guaranty.
This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Master Note Facility, but not otherwise.
If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Master Note Facility.
This Note shall be construed and enforced in accordance with, and the rights of the Company and the holder of this Note shall be governed by, the law of the State of New York, excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.
Agree Limited Partnership |
By: | Agree Realty Corporation , | |
Its sole general partner |
By | ||
Name: | ||
Title: |
EX 1- 2 |
Supplemental Representations
The Company represents and warrants to the Purchaser that except as hereinafter set forth in this Exhibit 2, each of the representations and warranties set forth in Section 5 of the Master Note Facility is true and correct in all material respects as of the date hereof with respect to the Series 2018-B Notes with the same force and effect as if each reference to “Notes” set forth therein was modified to refer the “Series 2018-B Notes” and each reference to “this Agreement” therein was modified to refer to the Master Note Facility as supplemented by the First Supplement. The Section references hereinafter set forth correspond to the similar sections of the Master Note Facility which are supplemented hereby:
Section 5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates. Schedule 5.4 of the Master Note Facility is hereby replaced by the below Schedule 5.4:
Schedule 5.4
Organization and Ownership of Shares of Subsidiaries; Affiliates
(as of August 30, 2018)
Subsidiary |
Jurisdiction
of Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
2355 Jackson Avenue, LLC | Michigan | 100 | % | |||
Agree 1031, LLC | Delaware | 100 | % | |||
Agree 103-Middleburg Jacksonville, LLC | Delaware | 100 | % | |||
Agree 117 Mission, LLC | Michigan | 100 | % | |||
Agree 17-92, LLC | Florida | 100 | % | |||
Agree 2016, LLC | Delaware | 100 | % | |||
Agree 6 LA & MS, LLC | Delaware | 100 | % | |||
Agree Alcoa TN LLC | Tennessee | 100 | % | |||
Agree Allentown PA LLC | Pennsylvania | 100 | % | |||
Agree Altoona, PA, LLC | Delaware | 100 | % | |||
Agree Americus GA, LLC | Delaware | 100 | % | |||
Agree Anderson SC LLC | Delaware | 100 | % |
Exhibit 2
( to Supplement)
Subsidiary |
Jurisdiction
of Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree Ann Arbor Jackson, LLC | Delaware | 100 | % | |||
Agree Ann Arbor MI, LLC | Delaware | 100 | % | |||
Agree Ann Arbor State Street, LLC | Michigan | 100 | % | |||
Agree Antioch, LLC | Illinois | 100 | % | |||
Agree Apopka FL, LLC | Delaware | 100 | % | |||
Agree Appleton WI, LLC | Delaware | 100 | % | |||
Agree Archer Chicago IL, LLC | Delaware | 100 | % | |||
Agree Arlington TX LLC | Texas | 100 | % | |||
Agree Atchison, LLC | Kansas | 100 | % | |||
Agree Atlantic Beach, LLC | Delaware | 100 | % | |||
Agree Baltimore MD, LLC | Delaware | 100 | % | |||
Agree Baton Rouge LA LLC | Louisiana | 100 | % | |||
Agree Beecher LLC | Michigan | 100 | % | |||
Agree Belton MO LLC | Delaware | 100 | % | |||
Agree Belvidere IL, LLC | Illinois | 100 | % | |||
Agree Berwyn IL LLC | Illinois | 100 | % | |||
Agree Bloomington MN, LLC | Delaware | 100 | % | |||
Agree Boynton, LLC | Florida | 100 | % | |||
Agree Brenham TX, LLC | Delaware | 100 | % | |||
Agree Brighton, LLC | Delaware | 100 | % | |||
Agree Bristol & Fenton Project, LLC | Michigan | 100 | % | |||
Agree Brooklyn OH LLC | Ohio | 100 | % |
EX 2- 2 |
Subsidiary |
Jurisdiction
of Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree BT, LLC | Delaware | 100 | % | |||
Agree Buffalo Center IA, LLC | Delaware | 100 | % | |||
Agree Burlington, LLC | Delaware | 100 | % | |||
Agree Cannon Station LLC | Delaware | 100 | % | |||
Agree Carlinville IL, LLC | Delaware | 100 | % | |||
Agree Cedar Park TX, LLC | Delaware | 100 | % | |||
Agree Center Point Birmingham AL LLC | Alabama | 100 | % | |||
Agree Chandler, LLC | Arizona | 100 | % | |||
Agree Charlotte County, LLC | Delaware | 100 | % | |||
Agree Charlotte Poplar, LLC | North Carolina | 100 | % | |||
Agree Chicago Kedzie, LLC | Illinois | 100 | % | |||
Agree Cochran GA, LLC | Georgia | 100 | % | |||
Agree Columbia SC, LLC | Delaware | 100 | % | |||
Agree Columbus OH, LLC | Delaware | 100 | % | |||
Agree Concord, LLC | North Carolina | 100 | % | |||
Agree Construction Management LLC | Delaware | 100 | % | |||
Agree Corunna LLC | Michigan | 100 | % | |||
Agree Crystal River FL, LLC | Delaware | 100 | % | |||
Agree CW, LLC | Delaware | 100 | % | |||
Agree Dallas Forest Drive, LLC | Texas | 100 | % | |||
Agree Daniel Morgan Avenue Spartanburg SC LLC | South Carolina | 100 | % | |||
Agree Davenport IA, LLC | Delaware | 100 | % |
EX 2- 3 |
Subsidiary |
Jurisdiction
of Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree Des Moines IA, LLC | Delaware | 100 | % | |||
Agree Development, LLC | Delaware | 100 | % | |||
Agree Doraville GA, LLC | Delaware | 100 | % | |||
Agree DT Jacksonville NC, LLC | Delaware | 100 | % | |||
Agree East Palatka, LLC | Florida | 100 | % | |||
Agree Edmond OK, LLC | Delaware | 100 | % | |||
Agree Egg Harbor NJ, LLC | Delaware | 100 | % | |||
Agree Elkhart, LLC | Michigan | 100 | % | |||
Agree Evergreen CO, LLC | Delaware | 100 | % | |||
Agree Facility No. I, L.L.C. | Delaware | 100 | % | |||
Agree Farmington NM, LLC | Delaware | 100 | % | |||
Agree Forest MS LLC | Mississippi | 100 | % | |||
Agree Forest VA LLC | Virginia | 100 | % | |||
Agree Fort Mill SC, LLC | South Carolina | 100 | % | |||
Agree Fort Walton Beach, LLC | Florida | 100 | % | |||
Agree Fort Worth TX, LLC | Delaware | 100 | % | |||
Agree Fuquay-Varina, LLC | North Carolina | 100 | % | |||
Agree GCG, LLC | Delaware | 100 | % | |||
Agree Grand Chute WI LLC | Delaware | 100 | % | |||
Agree Grand Forks, LLC | North Dakota | 100 | % | |||
Agree Grandview Heights OH, LLC | Delaware | 100 | % | |||
Agree Greenville SC, LLC | South Carolina | 100 | % |
EX 2- 4 |
Subsidiary |
Jurisdiction
of Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree Harlingen LLC | Texas | 100 | % | |||
Agree Hazard KY, LLC | Delaware | 100 | % | |||
Agree Holdings I, LLC | Delaware | 100 | % | |||
Agree Holly Springs MS, LLC | Delaware | 100 | % | |||
Agree Hopkinsville KY, LLC | Delaware | 100 | % | |||
Agree IL & VA, LLC | Delaware | 100 | % | |||
Agree Indianapolis Glendale LLC | Delaware | 100 | % | |||
Agree Indianapolis IN II, LLC | Delaware | 100 | % | |||
Agree Indianapolis, LLC | Indiana | 100 | % | |||
Agree Jackson MS, LLC | Delaware | 100 | % | |||
Agree Jacksonville NC, LLC | North Carolina | 100 | % | |||
Agree Johnstown, LLC | Ohio | 100 | % | |||
Agree Joplin MO LLC | Missouri | 100 | % | |||
Agree Junction City KS LLC | Delaware | 100 | % | |||
Agree K&G Joplin MO, LLC | Delaware | 100 | % | |||
Agree K&G OK, LLC | Delaware | 100 | % | |||
Agree Kirkland WA, LLC | Delaware | 100 | % | |||
Agree Lake in the Hills, LLC | Illinois | 100 | % | |||
Agree Lake Zurich IL, LLC | Illinois | 100 | % | |||
Agree Leawood, LLC | Delaware | 100 | % | |||
Agree Lebanon VA, LLC | Virginia | 100 | % | |||
Agree Lejune Springfield IL, LLC | Illinois | 100 | % |
EX 2- 5 |
Subsidiary |
Jurisdiction
of Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree Ligonier PA LLC | Pennsylvania | 100 | % | |||
Agree Littleton CO LLC | Delaware | 100 | % | |||
Agree Lowell AR, LLC | Delaware | 100 | % | |||
Agree Lowell, LLC | Delaware | 100 | % | |||
Agree Lyons GA, LLC. | Georgia | 100 | % | |||
Agree M-59, LLC | Michigan | 100 | % | |||
Agree Madison AL LLC | Michigan | 100 | % | |||
Agree Madisonville TX LLC | Texas | 100 | % | |||
Agree Magnolia Knoxville TN LLC | Tennessee | 100 | % | |||
Agree Mall of Louisiana, LLC | Louisiana | 100 | % | |||
Agree Manchester LLC | Connecticut | 100 | % | |||
Agree Mansfield, LLC | Connecticut | 100 | % | |||
Agree Marietta, LLC | Georgia | 100 | % | |||
Agree Marshall MI Outlot, LLC | Delaware | 100 | % | |||
Agree Maumee OH, LLC | Delaware | 100 | % | |||
Agree McKinney TX LLC | Texas | 100 | % | |||
Agree MCW, LLC | Delaware | 100 | % | |||
Agree Memphis Getwell, LLC | Tennessee | 100 | % | |||
Agree Middletown OH, LLC | Delaware | 100 | % | |||
Agree Millsboro DE, LLC | Delaware | 100 | % | |||
Agree Minneapolis Clinton Ave L.L.C. | Minnesota | 100 | % | |||
Agree Minot ND, LLC | Delaware | 100 | % |
EX 2- 6 |
Subsidiary |
Jurisdiction
of Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree Montgomery AL LLC | Alabama | 100 | % | |||
Agree Montgomeryville PA LLC | Pennsylvania | 100 | % | |||
Agree Morrow GA, LLC | Georgia | 100 | % | |||
Agree Mt. Dora FL, LLC | Delaware | 100 | % | |||
Agree Nampa ID, LLC | Delaware | 100 | % | |||
Agree Nashua NH, LLC | Delaware | 100 | % | |||
Agree Neosho MO, LLC | Delaware | 100 | % | |||
Agree New Lenox 2, LLC | Illinois | 100 | % | |||
Agree New Lenox, LLC | Illinois | 100 | % | |||
Agree North Las Vegas, LLC | Nevada | 100 | % | |||
Agree North Miami Beach FL, LLC | Delaware | 100 | % | |||
Agree Novi MI LLC | Michigan | 100 | % | |||
Agree Onaway MI, LLC | Delaware | 100 | % | |||
Agree Orange & McCoy, LLC | Florida | 100 | % | |||
Agree Oxford Commons AL, LLC | Delaware | 100 | % | |||
Agree Palafox Pensacola FL, LLC | Delaware | 100 | % | |||
Agree Pensacola LLC | Florida | 100 | % | |||
Agree Pensacola Nine Mile LLC | Florida | 100 | % | |||
Agree Pinellas Park, LLC | Florida | 100 | % | |||
Agree Plainfield LLC | Michigan | 100 | % | |||
Agree Poinciana, LLC | Florida | 100 | % | |||
Agree Pooler GA, LLC | Delaware | 100 | % |
EX 2- 7 |
Subsidiary |
Jurisdiction
of Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree Port Orange FL, LLC | Delaware | 100 | % | |||
Agree Port St. John, LLC | Delaware | 100 | % | |||
Agree Portland ME, LLC | Delaware | 100 | % | |||
Agree Portland OR LLC | Delaware | 100 | % | |||
Agree Provo UT, LLC | Delaware | 100 | % | |||
Agree Rancho Cordova I, LLC | California | 100 | % | |||
Agree Rancho Cordova II, LLC | California | 100 | % | |||
Agree Rapid City SD, LLC | South Dakota | 100 | % | |||
Agree Realty Services, LLC | Delaware | 100 | % | |||
Agree Realty South-East, LLC | Michigan | 100 | % | |||
Agree Richmond RI, LLC | Delaware | 100 | % | |||
Agree Richmond VA, LLC | Delaware | 100 | % | |||
Agree Riverside IA, LLC | Delaware | 100 | % | |||
Agree Rochester NY LLC | New York | 100 | % | |||
Agree Rockford IL, LLC | Delaware | 100 | % | |||
Agree Roseville CA, LLC | California | 100 | % | |||
Agree RT Amite LA, LLC | Delaware | 100 | % | |||
Agree RT Arlington TX, LLC | Delaware | 100 | % | |||
Agree RT Gulfport MS, LLC | Delaware | 100 | % | |||
Agree RT Jackson MS, LLC | Delaware | 100 | % | |||
Agree RT Port Richey FL, LLC | Delaware | 100 | % | |||
Agree RT Villa Rica GA, LLC | Delaware | 100 | % |
EX 2- 8 |
Subsidiary |
Jurisdiction
of Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree Salem OR LLC | Delaware | 100 | % | |||
Agree Sarasota FL, LLC | Delaware | 100 | % | |||
Agree SB, LLC | Delaware | 100 | % | |||
Agree Secaucus NJ, LLC | Delaware | 100 | % | |||
Agree Shelby, LLC | Michigan | 100 | % | |||
Agree Silver Springs Shores, LLC | Delaware | 100 | % | |||
Agree Southfield & Webster, LLC | Delaware | 100 | % | |||
Agree Southfield LLC | Michigan | 100 | % | |||
Agree Spartanburg SC, LLC | South Carolina | 100 | % | |||
Agree Spring Grove, LLC | Illinois | 100 | % | |||
Agree Springfield IL, LLC | Illinois | 100 | % | |||
Agree Springfield MO, LLC | Delaware | 100 | % | |||
Agree Springfield OH LLC | Delaware | 100 | % | |||
Agree St Petersburg, LLC | Florida | 100 | % | |||
Agree St. Augustine Shores, LLC | Delaware | 100 | % | |||
Agree St. Joseph MO, LLC | Missouri | 100 | % | |||
Agree Statesville NC, LLC | Delaware | 100 | % | |||
Agree Statham GA, LLC | Georgia | 100 | % | |||
Agree Stores, LLC | Delaware | 100 | % | |||
Agree Sun Valley NV LLC | Nevada | 100 | % | |||
Agree Sunnyvale CA, LLC | Delaware | 100 | % | |||
Agree Tallahassee, LLC | Florida | 100 | % |
EX 2- 9 |
Subsidiary |
Jurisdiction
of Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree Terre Haute IN LLC | Delaware | 100 | % | |||
Agree TK, LLC | Delaware | 100 | % | |||
Agree Topeka KS LLC | Delaware | 100 | % | |||
Agree Tri-State Lease, LLC | Delaware | 100 | % | |||
Agree Upland CA, LLC | Delaware | 100 | % | |||
Agree Venice, LLC | Florida | 100 | % | |||
Agree Vero Beach FL, LLC | Delaware | 100 | % | |||
Agree W 63 rd Chicago IL, LLC | Delaware | 100 | % | |||
Agree Walker, LLC | Michigan | 100 | % | |||
Agree Wawa Baltimore, LLC | Maryland | 100 | % | |||
Agree Wheaton IL, LLC | Delaware | 100 | % | |||
Agree Whittier CA, LLC | Delaware | 100 | % | |||
Agree Wichita Falls TX LLC | Texas | 100 | % | |||
Agree Wichita, LLC | Kansas | 100 | % | |||
Agree Wilmington, LLC | North Carolina | 100 | % | |||
Agree Woodland Park NJ, LLC | Delaware | 100 | % | |||
Agree Woodstock IL, LLC | Delaware | 100 | % | |||
Indianapolis Store No. 16 LLC | Delaware | 100 | % | |||
Lawrence Store No. 203, L.L.C. | Delaware | 100 | % | |||
Lunacorp, LLC | Delaware | 100 | % | |||
Mt. Pleasant Outlot I, LLC | Michigan | 100 | % | |||
Mt. Pleasant Shopping Center, L.L.C. | Michigan | 100 | % | |||
Pharm Nashville IN, LLC | Delaware | 100 | % |
Note: The above list excludes dormant Subsidiaries that do not own any property.
EX 2- 10 |
Affiliates (other than Subsidiaries)
None
Directors and Executive Officers of the Parent Guarantor |
Position(s) | |
Richard Agree | Executive Chairman of the Board of Directors | |
Joel N. Agree | President, Chief Executive Officer and Director | |
Clayton R. Thelen | Chief Financial Officer and Secretary | |
Laith M. Hermiz | Chief Operating Officer and Executive Vice President | |
Craig Erlich | Independent Director | |
Farris G. Kalil | Independent Director | |
W. Gregory Lehmkuhl | Independent Director | |
John Rakolta, Jr. | Independent Director | |
Jerome Rossi | Independent Director | |
William S. Rubenfaer | Independent Director | |
Leon M. Schurgin | Independent Director | |
Merrie S. Frankel | Independent Director |
Directors and Executive Officers of the Company
The sole general partner of the Company is the Parent Guarantor. Please see the directors and senior officers of the Parent Guarantor listed above.
Section 5.14. Use of Proceeds. The Company will apply the proceeds of the sale of the Series 2018-B Notes issued hereunder to finance, among other things, acquisitions, tenant improvements, new construction, development and redevelopment, capital expenditures, debt repayment, leasing commissions and for general working capital.
EX 2- 11 |
Exhibit 10.4
Execution Version
Agree Limited Partnership
First Supplement to Uncommitted Master Note Facility
Dated as of September 26, 2018
Re: $100,000,000 4.32%, Series 2018-A, Senior Guaranteed Notes
due September 26, 2030
Agree Limited Partnership
70 E. Long Lake Road
Bloomfield Hills, MI 48304
First Supplement to Uncommitted Master Note Facility
Dated as of
September 26, 2018
To the Purchaser(s) named in
Schedule A hereto
Ladies and Gentlemen:
This First Supplement to Uncommitted Master Note Facility (the “First Supplement” ) is among Agree Limited Partnership, a Delaware limited partnership (the “ Company ”), and Agree Realty Corporation, a Maryland corporation operating as a real estate investment trust (the “ Parent Guarantor ”), AIG Asset Management (U.S.), LLC (“ AIG ”) and the institutional investors named on Schedule A attached hereto (the “Purchasers” ).
Recitals
A. The Company and the Parent Guarantor have entered into the Uncommitted Master Note Facility dated as of August 3, 2017 with AIG (as heretofore amended and supplemented, the “Master Note Facility” ); and
B. The Company desires to issue and sell, and the Purchasers desire to purchase, an initial Series of Notes (as defined in the Master Note Facility) pursuant to the Master Note Facility and in accordance with the terms set forth below;
N ow, Therefore , the Company and the Purchasers agree as follows:
1. Authorization of the New Series of Notes . The Company has authorized the issue and sale of $100,000,000 aggregate principal amount of its 4.32%, Series 2018-A, Senior Guaranteed Notes due September 26, 2030 (the “Series 2018-A Notes” ). The Series 2018-A Notes, and each Series of Notes which may from time to time hereafter be issued pursuant to the provisions of the Master Note Facility, are collectively referred to as the “Notes” (such term shall also include any such notes issued in substitution therefor pursuant to Section 13 of the Master Note Facility). The Series 2018-A Notes shall be substantially in the form set out in Exhibit 1 hereto with such changes therefrom, if any, as may be approved by the Purchaser(s) and the Company.
2. Sale and Purchase of Series 2018-A Notes. Subject to the terms and conditions of this First Supplement and the Master Note Facility and on the basis of the representations and warranties hereinafter set forth, the Company will issue and sell to each of the Purchasers, and the Purchasers will purchase from the Company, at the Closing provided for in Section 3, Series 2018-A Notes in the principal amount specified opposite their respective names in the attached Schedule A hereto at the purchase price of 100% of the principal amount thereof. The obligations of the Purchasers hereunder are several and not joint obligations and no Purchaser shall have any liability to any Person for the performance or non-performance by any other Purchaser hereunder.
3. Closing . The sale and purchase of the Series 2018-A Notes to be purchased by each Purchaser shall occur at the offices of Chapman and Cutler LLP, 111 West Monroe Street, Chicago, IL 60603 at 10:00 a.m. Chicago time, at a closing (the “Closing” ) on September 26, 2018 or on such other Business Day thereafter on or prior to October 2, 2018 as may be agreed upon by the Company and the Purchasers (the “Closing Date” ). At the Closing, the Company will deliver to each Purchaser the Series 2018-A Notes to be purchased by such Purchaser in the form of a single Series 2018-A Note (or such greater number of Series 2018-A Notes in denominations of at least $100,000 as such Purchaser may request) dated the date of the Closing and registered in such Purchaser’s name (or in the name of such Purchaser’s nominee), against delivery by such Purchaser to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company in accordance with wire transfer instructions provided by the Company to such Purchaser pursuant to Section 4 of this First Supplement, as it relates to Section 4.11 of the Master Note Facility. If, at the Closing, the Company shall fail to tender such Series 2018-A Notes to any Purchaser as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to any Purchaser’s satisfaction, such Purchaser shall, at such Purchaser’s election, be relieved of all further obligations under this Agreement, without thereby waiving any rights such Purchaser may have by reason of such failure or such nonfulfillment.
4. Conditions to Closing . The obligation of each Purchaser to purchase and pay for the Series 2018-A Notes to be sold to such Purchaser at the Closing is subject to the fulfillment to such Purchaser’s satisfaction, prior to the Closing, of the conditions set forth in Section 4 of the Master Note Facility (it being understood that all references to “Purchaser” therein shall be deemed to refer to the Purchasers hereunder, all references to “this Agreement” shall be deemed to refer to the Master Note Facility as supplemented by this First Supplement, and all references to “Notes” therein shall be deemed to refer to the Series 2018-A Notes, and as hereafter modified), and to the following additional conditions:
(a) as provided in Section 5 of this First Supplement, except as supplemented, amended or superseded by the representations and warranties set forth in Exhibit 2 hereto (which changes are subject to the approval of each Purchaser), each of the representations and warranties of the Company and the Parent Guarantor set forth in Section 5 of the Master Note Facility shall be correct as of the date of Closing and the Company and the Parent Guarantor each shall have delivered to each Purchaser an Officer’s Certificate, dated the date of the Closing certifying that such condition has been fulfilled; and
- 2 - |
(b) contemporaneously with the Closing, the Company shall sell to each Purchaser, and each Purchaser shall purchase, the Series 2018-A Notes to be purchased by such Purchaser at the Closing as specified in Schedule A.
5. Representations and Warranties of the Company and the Parent Guarantor . With respect to each of the representations and warranties contained in Section 5 of the Master Note Facility, each of the Company and the Parent Guarantor represents and warrants to the Purchasers that, as of the date hereof, such representations and warranties are true and correct (A) except that all references to “Purchaser” therein shall be deemed to refer to the Purchasers hereunder, all references to “this Agreement” shall be deemed to refer to the Master Note Facility as supplemented by this First Supplement, and all references to “Notes” therein shall be deemed to refer to the Series 2018-A Notes, and (B) except for changes to such representations and warranties or the Schedules referred to therein, which changes are set forth in the attached Exhibit 2 and which are in all respects satisfactory to such Purchaser as a condition to the Closing .
6. Representations of the Purchasers. Each Purchaser confirms to the Company that the representations set forth in Section 6 of the Master Note Facility are true and correct on the date hereof with respect to the purchase of the Series 2018-A Notes by such Purchaser, except that all references to “Purchaser” therein shall be deemed to refer to the Purchasers hereunder, all references to “this Agreement” therein shall be deemed to refer to the Master Note Facility as supplemented by this First Supplement, and all references to “Notes” therein shall be deemed to refer to the Series 2018-A Notes.
7. Maturity; Interest. The Series 2018-A Notes will have the maturity date and bear interest at the rate set forth therein.
8. Prepayments of the Series 2018-A Notes . All prepayment provisions in Section 8 of the Master Note Facility shall apply to the Series 2018-A Notes equally as “Notes” thereunder, subject to the definitions applicable to the Series 2018-A Notes contained herein.
9. Applicability of Master Note Facility . Except as otherwise expressly provided herein (and expressly permitted by the Master Note Facility), all of the provisions of the Master Note Facility are incorporated by reference herein, shall apply to the Series 2018-A Notes as if expressly set forth in this First Supplement and all references to “Notes” shall include the Series 2018-A Notes. Without limiting the foregoing, the Company and the Parent Guarantor agree to pay all costs and expenses incurred in connection with the initial filing of this First Supplement and all related documents and financial information with the SVO; provided that such costs and expenses with respect to the Series 2018-A Notes shall not exceed $5,000 per Series or tranche of such Notes. Capitalized terms used herein without definition have the respective meanings ascribed to them in the Master Note Facility (as amended from time to time).
- 3 - |
10. Governing Law. This First Supplement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York , excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.
11. Agreement to be Bound . The Company, the Parent Guarantor and each Purchaser agree to be bound by and comply with the terms and provisions of the Master Note Facility as fully and completely as if such Purchaser were an original signatory to the Master Note Facility.
[Remainder of page intentionally left blank]
- 4 - |
The execution hereof shall constitute a contract between the Company, the Parent Guarantor and the Purchaser(s) for the uses and purposes hereinabove set forth, and this First Supplement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement.
Agree Limited Partnership, | |
a Delaware limited partnership |
By | ||
Name: | ||
Title: |
Agree Realty Corporation, | |
a Maryland corporation |
By | ||
Name: | ||
Title: |
- 5 - |
Accepted as of the date first written above.
AIG Asset Management (U.S.), LLC |
By | ||
Name: | ||
Title: |
American General Life Insurance
Company |
|
The United States Life Insurance Company
in the City of New York |
|
The Variable Annuity Life Insurance
Company |
By: | AIG Asset Management (U.S.), LLC, as | |
Investment Adviser |
By: | ||
Name: | ||
Title: |
- 6 - |
Information Relating to Purchasers
Name and Address of Purchaser |
Principal
Amount of Series 2018-A Notes to Be Purchased |
Name and Address of Purchaser |
Principal Amount of
Series 2018-A Notes to Be Purchased |
|||
American General Life Insurance Company | $ | 55,000,000 |
(1) | All payments to be by wire transfer of immediately available funds, with sufficient information (including PPN #, interest rate, maturity date, interest amount, principal amount and premium amount, if applicable) to identify the source and application of such funds, to : |
The Bank of New York Mellon
ABA # 021-000-018
Account Name: BNYM Income
Account Number: GLA111566
For Further Credit to: AMERICAN GENERAL LIFE INS. CO. Physical; Account No. 886623
Reference: PPN and Prin.: $ ; Int.: $______
(2) | Payment notices, audit confirmations and related note correspondence to : |
American General Life Insurance Company (886623)
c/o AIG Asset Management
2929 Allen Parkway, A36-04
Houston, Texas 77019-2155
Attn: PCG Investment Portfolio Support
Email: PPGIPS@aig.com
(3) | Duplicate payment notices (only) to : |
American General Life Insurance Company (886623)
c/o The Bank of New York Mellon
Attn: P & I Department
Fax: (718) 315-3076
Schedule A
(to First Supplement)
(4) | * Compliance reporting information (financial docs, officer’s certificates, etc.) to : |
AIG Asset Management
2929 Allen Parkway, A36-04
Houston, Texas 77019-2155
Attn: Private Placements Compliance
Email: complianceprivateplacements@aig.com
* Note: Only two (2) complete sets of compliance information are required for all companies for which AIG Asset Management Group serves as investment adviser.
(5) | Note to be issued in the nominee name of: HARE & CO., LLC (Tax ID #: 13-6062916) |
(6) | Tax I.D. Number for American General Life Insurance Company: 25-0598210 |
(7) | Physical Delivery Instructions : |
DTCC
570 Washington Blvd.
Jersey City, NJ 07310
Attn: BNY Mellon / Branch Deposit Department – 5 th Floor
Contact: Andre Granville; Phone: (315) 414-3068
Account Name: AMERICAN GENERAL LIFE INSURANCE COMPANY
Account Number: 886623
cc: Jennifer.Cuellar@aig.com and Jon.Heiny@aig.com
with a copy of the custodian receipt to Rachel.lewis@aig.com
A- 2 |
Name and Address of Purchaser |
Principal Amount of
Series 2018-A Notes to Be Purchased |
|||
The United States Life Insurance Company in the City of New York | $ | 15,000,000 |
(1) | All payments to be by wire transfer of immediately available funds, with sufficient information (including PPN #, interest rate, maturity date, interest amount, principal amount and premium amount, if applicable) to identify the source and application of such funds, to : |
JPMorgan Chase Bank, N.A.
ABA # 021-000-021
Account Name: AIG PHYSICAL WIRE ACCOUNT
Account Number: 780153941
For Further Credit to: P68423
Reference: PPN and Prin.: $ ; Int.: $______
(2) | Payment notices, audit confirmations and related note correspondence to : |
The United States Life Insurance Company in the City of New York (P68423)
c/o AIG Asset Management
2929 Allen Parkway, A36-04
Houston, Texas 77019-2155
Attn: PCG Investment Portfolio Support
Email: PPGIPS@aig.com
(3) | Duplicate payment notices (only) to : |
The United States Life Insurance Co. in the City of New York (P68423)
c/o JPMorgan Client Services
Email: physical.abs.income@jpmorgan.com
(4) | * Compliance reporting information (financial docs, officer’s certificates, etc.) to : |
AIG Asset Management
2929 Allen Parkway, A36-04
Houston, Texas 77019-2155
Attn: Private Placements Compliance
Email: complianceprivateplacements@aig.com
* Note: Only two (2) complete sets of compliance information are required for all companies for which AIG Asset Management Group serves as investment adviser.
A- 3 |
(5) | Note to be issued in the nominee name of: CUDD & CO. LLC (Tax ID #: 13-6022143) |
(6) | Tax ID Number for The United States Life Insurance Company in the City of New York: 13-5459480 |
(7) | Physical Delivery Instructions : |
JPMorgan Chase Bank, N.A.
4 Chase Metrotech Center
Brooklyn, New York 11245-0001
Attn: Physical Receive Department – 3 rd Floor ( for overnight mail ) OR
Physical Receive Dept. – 1 st Floor, Window 5 ( for messenger, use Willoughby Entrance )
Contact: Aubrey M. Reuben; Phone: (718) 242-0269
Account Name: THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF N. Y.
Account Number: P68423
cc: Jennifer.Cuellar@aig.com and Jon.Heiny@aig.com
with a copy of the custodian receipt to Rachel.lewis@aig.com
A- 4 |
Name and Address of Purchaser |
Principal Amount of
Series 2018-A Notes to Be Purchased |
|||
The Variable Annuity Life Insurance Company | $ | 30,000,000 |
(1) | All payments to be by wire transfer of immediately available funds, with sufficient information (including PPN #, interest rate, maturity date, interest amount, principal amount and premium amount, if applicable) to identify the source and application of such funds, to : |
The Bank of New York Mellon
ABA # 021-000-018
Account Name: BNYM Income
Account Number: GLA111566
For Further Credit to: VARIABLE ANNUITY LIFE INSURANCE CO.; Account No. 260735
Reference: PPN and Prin.: $ ; Int.: $______
(2) | Payment notices, audit confirmations and related note correspondence to : |
The Variable Annuity Life Insurance Company (260735)
c/o AIG Asset Management
2929 Allen Parkway, A36-04
Houston, Texas 77019-2155
Attn: PPG Investment Portfolio Support
Email: PPGIPS@aig.com
(3) | Duplicate payment notices (only) to : |
The Variable Annuity Life Insurance Company (260735)
c/o The Bank of New York Mellon
Attn: P & I Department
Fax: (718) 315-3076
A- 5 |
(4) | * Compliance reporting information (financial docs, officer’s certificates, etc.) to : |
AIG Asset Management
2929 Allen Parkway, A36-04
Houston, Texas 77019-2155
Attn: Private Placements Compliance
Email: complianceprivateplacements@aig.com
* Note : Only two (2) complete sets of compliance information are required for all companies for which AIG Asset Management Group serves as investment adviser.
(5) | Note to be issued in the nominee name of: HARE & CO., LLC (Tax ID #: 13-6062916) |
(6) | Tax ID Number for The Variable Annuity Life Insurance Company: 74-1625348 |
(7) | Physical Delivery Instructions : |
DTCC
570 Washington Blvd.
Jersey City, NJ 07310
Attn: BNY Mellon / Branch Deposit Department – 5 th Floor
Contact: Andre Granville; Phone: (315) 414-3068
BNYM Account Name: THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
BNYM Account Number: 260735
cc: Jennifer.Cuellar@aig.com and Jon.Heiny@aig.com
with a copy of the custodian receipt to Rachel.lewis@aig.com
A- 6 |
[Form of Series 2018-A Note]
Agree Limited Partnership
4.32% Senior Guaranteed Note, Series 2018-A, due September 26, 2030
No. RA__-__ | [Date] |
$[____________] | PPN 00855@ AE4 |
For Value Received , the undersigned, Agree Limited Partnership (herein called the “Company” ), a limited partnership organized and existing under the laws of Delaware, hereby promises to pay to [_____________________], or registered assigns, the principal sum of [_____________________] Dollars (or so much thereof as shall not have been prepaid) on September 26, 2030 (the “Maturity Date” ) with interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid balance hereof at the rate of 4.32% per annum from the date hereof, payable semiannually, on the 31st day of March and 30th day of September in each year, commencing with March 31, 2019 or the first March 31 or September 30 following the date hereof, and on the Maturity Date, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, (x) on any overdue payment of interest and (y) during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum from time to time equal to the Default Rate (as defined in the hereinafter defined Master Note Facility).
Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of JPMorgan Chase Bank, N.A. in New York, New York or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Master Note Facility referred to below.
This Note is one of the Senior Guaranteed Notes, Series 2018-A (herein called the “Notes” ) issued pursuant to the First Supplement dated as of September 26, 2018 to the Uncommitted Master Note Facility dated as of August 3, 2017 (as from time to time amended, the “Master Note Facility” ), between Agree Realty Corporation (the “Parent Guarantor” ), the Company, AIG Asset Management (U.S.), LLC and the Purchasers from time to time referred to therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, to have (i) agreed to the confidentiality provisions set forth in Section 20 of the Master Note Facility and (ii) made the representations set forth in Section 6.2 of the Master Note Facility. Unless otherwise indicated, capitalized terms used in this Note shall have the respective meanings ascribed to such terms in the Master Note Facility.
This Note is a registered Note and, as provided in the Master Note Facility, upon surrender of this Note for registration of transfer accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.
Exhibit 1
(to First Supplement)
Pursuant to a Guaranty dated as of September 26, 2018, the Parent Guarantor, operating as a real estate investment trust and certain subsidiaries, have each absolutely and unconditionally guaranteed payment in full of the principal of, Make-Whole Amount, if any, and interest on this Note and performance by the Company of all of its obligations contained in the Master Note Facility all on the terms set forth in such Guaranty.
This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Master Note Facility, but not otherwise.
If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Master Note Facility.
This Note shall be construed and enforced in accordance with, and the rights of the Company and the holder of this Note shall be governed by, the law of the State of New York, excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.
Agree Limited Partnership |
By: | Agree Realty Corporation , | |
Its sole general partner |
By | ||
Name: | ||
Title: |
EX 1- 2 |
Supplemental Representations
The Company represents and warrants to each Purchaser that except as hereinafter set forth in this Exhibit 2, each of the representations and warranties set forth in Section 5 of the Master Note Facility is true and correct in all material respects as of the date hereof with respect to the Series 2018-A Notes with the same force and effect as if each reference to “Notes” set forth therein was modified to refer the “Series 2018-A Notes” and each reference to “this Agreement” therein was modified to refer to the Master Note Facility as supplemented by the First Supplement. The Section references hereinafter set forth correspond to the similar sections of the Master Note Facility which are supplemented hereby:
Section 5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates. Schedule 5.4 of the Master Note Facility is hereby replaced by the below Schedule 5.4:
Schedule 5.4
Organization and Ownership of Shares of Subsidiaries; Affiliates
(as of August 30, 2018)
Subsidiary |
Jurisdiction of
Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
2355 Jackson Avenue, LLC | Michigan | 100 | % | |||
Agree 1031, LLC | Delaware | 100 | % | |||
Agree 103-Middleburg Jacksonville, LLC | Delaware | 100 | % | |||
Agree 117 Mission, LLC | Michigan | 100 | % | |||
Agree 17-92, LLC | Florida | 100 | % | |||
Agree 2016, LLC | Delaware | 100 | % | |||
Agree 6 LA & MS, LLC | Delaware | 100 | % | |||
Agree Alcoa TN LLC | Tennessee | 100 | % | |||
Agree Allentown PA LLC | Pennsylvania | 100 | % | |||
Agree Altoona, PA, LLC | Delaware | 100 | % | |||
Agree Americus GA, LLC | Delaware | 100 | % |
Exhibit 2
(to First Supplement)
Subsidiary |
Jurisdiction of
Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree Anderson SC LLC | Delaware | 100 | % | |||
Agree Ann Arbor Jackson, LLC | Delaware | 100 | % | |||
Agree Ann Arbor MI, LLC | Delaware | 100 | % | |||
Agree Ann Arbor State Street, LLC | Michigan | 100 | % | |||
Agree Antioch, LLC | Illinois | 100 | % | |||
Agree Apopka FL, LLC | Delaware | 100 | % | |||
Agree Appleton WI, LLC | Delaware | 100 | % | |||
Agree Archer Chicago IL, LLC | Delaware | 100 | % | |||
Agree Arlington TX LLC | Texas | 100 | % | |||
Agree Atchison, LLC | Kansas | 100 | % | |||
Agree Atlantic Beach, LLC | Delaware | 100 | % | |||
Agree Baltimore MD, LLC | Delaware | 100 | % | |||
Agree Baton Rouge LA LLC | Louisiana | 100 | % | |||
Agree Beecher LLC | Michigan | 100 | % | |||
Agree Belton MO LLC | Delaware | 100 | % | |||
Agree Belvidere IL, LLC | Illinois | 100 | % | |||
Agree Berwyn IL LLC | Illinois | 100 | % | |||
Agree Bloomington MN, LLC | Delaware | 100 | % | |||
Agree Boynton, LLC | Florida | 100 | % | |||
Agree Brenham TX, LLC | Delaware | 100 | % | |||
Agree Brighton, LLC | Delaware | 100 | % | |||
Agree Bristol & Fenton Project, LLC | Michigan | 100 | % |
EX 2- 2 |
Subsidiary |
Jurisdiction of
Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree Brooklyn OH LLC | Ohio | 100 | % | |||
Agree BT, LLC | Delaware | 100 | % | |||
Agree Buffalo Center IA, LLC | Delaware | 100 | % | |||
Agree Burlington, LLC | Delaware | 100 | % | |||
Agree Cannon Station LLC | Delaware | 100 | % | |||
Agree Carlinville IL, LLC | Delaware | 100 | % | |||
Agree Cedar Park TX, LLC | Delaware | 100 | % | |||
Agree Center Point Birmingham AL LLC | Alabama | 100 | % | |||
Agree Chandler, LLC | Arizona | 100 | % | |||
Agree Charlotte County, LLC | Delaware | 100 | % | |||
Agree Charlotte Poplar, LLC | North Carolina | 100 | % | |||
Agree Chicago Kedzie, LLC | Illinois | 100 | % | |||
Agree Cochran GA, LLC | Georgia | 100 | % | |||
Agree Columbia SC, LLC | Delaware | 100 | % | |||
Agree Columbus OH, LLC | Delaware | 100 | % | |||
Agree Concord, LLC | North Carolina | 100 | % | |||
Agree Construction Management LLC | Delaware | 100 | % | |||
Agree Corunna LLC | Michigan | 100 | % | |||
Agree Crystal River FL, LLC | Delaware | 100 | % | |||
Agree CW, LLC | Delaware | 100 | % | |||
Agree Dallas Forest Drive, LLC | Texas | 100 | % | |||
Agree Daniel Morgan Avenue Spartanburg SC LLC | South Carolina | 100 | % |
EX 2- 3 |
Subsidiary |
Jurisdiction of
Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree Davenport IA, LLC | Delaware | 100 | % | |||
Agree Des Moines IA, LLC | Delaware | 100 | % | |||
Agree Development, LLC | Delaware | 100 | % | |||
Agree Doraville GA, LLC | Delaware | 100 | % | |||
Agree DT Jacksonville NC, LLC | Delaware | 100 | % | |||
Agree East Palatka, LLC | Florida | 100 | % | |||
Agree Edmond OK, LLC | Delaware | 100 | % | |||
Agree Egg Harbor NJ, LLC | Delaware | 100 | % | |||
Agree Elkhart, LLC | Michigan | 100 | % | |||
Agree Evergreen CO, LLC | Delaware | 100 | % | |||
Agree Facility No. I, L.L.C. | Delaware | 100 | % | |||
Agree Farmington NM, LLC | Delaware | 100 | % | |||
Agree Forest MS LLC | Mississippi | 100 | % | |||
Agree Forest VA LLC | Virginia | 100 | % | |||
Agree Fort Mill SC, LLC | South Carolina | 100 | % | |||
Agree Fort Walton Beach, LLC | Florida | 100 | % | |||
Agree Fort Worth TX, LLC | Delaware | 100 | % | |||
Agree Fuquay - Varina, LLC | North Carolina | 100 | % | |||
Agree GCG, LLC | Delaware | 100 | % | |||
Agree Grand Chute WI LLC | Delaware | 100 | % | |||
Agree Grand Forks, LLC | North Dakota | 100 | % |
EX 2- 4 |
Subsidiary |
Jurisdiction of
Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree Grandview Heights OH, LLC | Delaware | 100 | % | |||
Agree Greenville SC, LLC | South Carolina | 100 | % | |||
Agree Harlingen LLC | Texas | 100 | % | |||
Agree Hazard KY, LLC | Delaware | 100 | % | |||
Agree Holdings I, LLC | Delaware | 100 | % | |||
Agree Holly Springs MS, LLC | Delaware | 100 | % | |||
Agree Hopkinsville KY, LLC | Delaware | 100 | % | |||
Agree IL & VA, LLC | Delaware | 100 | % | |||
Agree Indianapolis Glendale LLC | Delaware | 100 | % | |||
Agree Indianapolis IN II, LLC | Delaware | 100 | % | |||
Agree Indianapolis, LLC | Indiana | 100 | % | |||
Agree Jackson MS, LLC | Delaware | 100 | % | |||
Agree Jacksonville NC, LLC | North Carolina | 100 | % | |||
Agree Johnstown, LLC | Ohio | 100 | % | |||
Agree Joplin MO LLC | Missouri | 100 | % | |||
Agree Junction City KS LLC | Delaware | 100 | % | |||
Agree K&G Joplin MO, LLC | Delaware | 100 | % | |||
Agree K&G OK, LLC | Delaware | 100 | % | |||
Agree Kirkland WA, LLC | Delaware | 100 | % | |||
Agree Lake in the Hills, LLC | Illinois | 100 | % | |||
Agree Lake Zurich IL, LLC | Illinois | 100 | % | |||
Agree Leawood, LLC | Delaware | 100 | % |
EX 2- 5 |
Subsidiary |
Jurisdiction of
Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree Lebanon VA, LLC | Virginia | 100 | % | |||
Agree Lejune Springfield IL, LLC | Illinois | 100 | % | |||
Agree Ligonier PA LLC | Pennsylvania | 100 | % | |||
Agree Littleton CO LLC | Delaware | 100 | % | |||
Agree Lowell AR, LLC | Delaware | 100 | % | |||
Agree Lowell, LLC | Delaware | 100 | % | |||
Agree Lyons GA, LLC. | Georgia | 100 | % | |||
Agree M-59, LLC | Michigan | 100 | % | |||
Agree Madison AL LLC | Michigan | 100 | % | |||
Agree Madisonville TX LLC | Texas | 100 | % | |||
Agree Magnolia Knoxville TN LLC | Tennessee | 100 | % | |||
Agree Mall of Louisiana, LLC | Louisiana | 100 | % | |||
Agree Manchester LLC | Connecticut | 100 | % | |||
Agree Mansfield, LLC | Connecticut | 100 | % | |||
Agree Marietta, LLC | Georgia | 100 | % | |||
Agree Marshall MI Outlot, LLC | Delaware | 100 | % | |||
Agree Maumee OH, LLC | Delaware | 100 | % | |||
Agree McKinney TX LLC | Texas | 100 | % | |||
Agree MCW, LLC | Delaware | 100 | % | |||
Agree Memphis Getwell, LLC | Tennessee | 100 | % | |||
Agree Middletown OH, LLC | Delaware | 100 | % | |||
Agree Millsboro DE, LLC | Delaware | 100 | % |
EX 2- 6 |
Subsidiary |
Jurisdiction of
Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree Minneapolis Clinton Ave L.L.C. | Minnesota | 100 | % | |||
Agree Minot ND, LLC | Delaware | 100 | % | |||
Agree Montgomery AL LLC | Alabama | 100 | % | |||
Agree Montgomeryville PA LLC | Pennsylvania | 100 | % | |||
Agree Morrow GA, LLC | Georgia | 100 | % | |||
Agree Mt. Dora FL, LLC | Delaware | 100 | % | |||
Agree Nampa ID, LLC | Delaware | 100 | % | |||
Agree Nashua NH, LLC | Delaware | 100 | % | |||
Agree Neosho MO, LLC | Delaware | 100 | % | |||
Agree New Lenox 2, LLC | Illinois | 100 | % | |||
Agree New Lenox, LLC | Illinois | 100 | % | |||
Agree North Las Vegas, LLC | Nevada | 100 | % | |||
Agree North Miami Beach FL, LLC | Delaware | 100 | % | |||
Agree Novi MI LLC | Michigan | 100 | % | |||
Agree Onaway MI, LLC | Delaware | 100 | % | |||
Agree Orange & McCoy, LLC | Florida | 100 | % | |||
Agree Oxford Commons AL, LLC | Delaware | 100 | % | |||
Agree Palafox Pensacola FL, LLC | Delaware | 100 | % | |||
Agree Pensacola LLC | Florida | 100 | % | |||
Agree Pensacola Nine Mile LLC | Florida | 100 | % | |||
Agree Pinellas Park, LLC | Florida | 100 | % | |||
Agree Plainfield LLC | Michigan | 100 | % |
EX 2- 7 |
Subsidiary |
Jurisdiction of
Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree Poinciana, LLC | Florida | 100 | % | |||
Agree Pooler GA, LLC | Delaware | 100 | % | |||
Agree Port Orange FL, LLC | Delaware | 100 | % | |||
Agree Port St. John, LLC | Delaware | 100 | % | |||
Agree Portland ME, LLC | Delaware | 100 | % | |||
Agree Portland OR, LLC | Delaware | 100 | % | |||
Agree Provo UT, LLC | Delaware | 100 | % | |||
Agree Rancho Cordova I, LLC | California | 100 | % | |||
Agree Rancho Cordova II, LLC | California | 100 | % | |||
Agree Rapid City SD, LLC | South Dakota | 100 | % | |||
Agree Realty Services, LLC | Delaware | 100 | % | |||
Agree Realty South-East, LLC | Michigan | 100 | % | |||
Agree Richmond RI, LLC | Delaware | 100 | % | |||
Agree Richmond VA, LLC | Delaware | 100 | % | |||
Agree Riverside IA, LLC | Delaware | 100 | % | |||
Agree Rochester NY LLC | New York | 100 | % | |||
Agree Rockford IL, LLC | Delaware | 100 | % | |||
Agree Roseville CA, LLC | California | 100 | % | |||
Agree RT Amite LA, LLC | Delaware | 100 | % | |||
Agree RT Arlington TX, LLC | Delaware | 100 | % | |||
Agree RT Gulfport MS, LLC | Delaware | 100 | % | |||
Agree RT Jackson MS, LLC | Delaware | 100 | % |
EX 2- 8 |
Subsidiary |
Jurisdiction of
Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree RT Port Richey FL, LLC | Delaware | 100 | % | |||
Agree RT Villa Rica GA, LLC | Delaware | 100 | % | |||
Agree Salem OR LLC | Delaware | 100 | % | |||
Agree Sarasota FL, LLC | Delaware | 100 | % | |||
Agree SB, LLC | Delaware | 100 | % | |||
Agree Secaucus NJ, LLC | Delaware | 100 | % | |||
Agree Shelby, LLC | Michigan | 100 | % | |||
Agree Silver Springs Shores, LLC | Delaware | 100 | % | |||
Agree Southfield & Webster, LLC | Delaware | 100 | % | |||
Agree Southfield, LLC | Michigan | 100 | % | |||
Agree Spartanburg SC, LLC | South Carolina | 100 | % | |||
Agree Spring Grove, LLC | Illinois | 100 | % | |||
Agree Springfield IL, LLC | Illinois | 100 | % | |||
Agree Springfield MO, LLC | Delaware | 100 | % | |||
Agree Springfield OH LLC | Delaware | 100 | % | |||
Agree St Petersburg, LLC | Florida | 100 | % | |||
Agree St. Augustine Shores, LLC | Delaware | 100 | % | |||
Agree St. Joseph MO, LLC | Missouri | 100 | % | |||
Agree Statesville NC, LLC | Delaware | 100 | % | |||
Agree Statham GA, LLC | Georgia | 100 | % | |||
Agree Stores, LLC | Delaware | 100 | % | |||
Agree Sun Valley NV LLC | Nevada | 100 | % |
EX 2- 9 |
Subsidiary |
Jurisdiction of
Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Agree Sunnyvale CA, LLC | Delaware | 100 | % | |||
Agree Tallahassee, LLC | Florida | 100 | % | |||
Agree Terre Haute IN LLC | Delaware | 100 | % | |||
Agree TK, LLC | Delaware | 100 | % | |||
Agree Topeka KS LLC | Delaware | 100 | % | |||
Agree Tri-State Lease, LLC | Delaware | 100 | % | |||
Agree Upland CA, LLC | Delaware | 100 | % | |||
Agree Venice, LLC | Florida | 100 | % | |||
Agree Vero Beach FL, LLC | Delaware | 100 | % | |||
Agree W 63 rd Chicago IL, LLC | Delaware | 100 | % | |||
Agree Walker, LLC | Michigan | 100 | % | |||
Agree Wawa Baltimore, LLC | Maryland | 100 | % | |||
Agree Wheaton IL, LLC | Delaware | 100 | % | |||
Agree Whittier CA, LLC | Delaware | 100 | % | |||
Agree Wichita Falls TX LLC | Texas | 100 | % | |||
Agree Wichita, LLC | Kansas | 100 | % | |||
Agree Wilmington, LLC | North Carolina | 100 | % | |||
Agree Woodland Park NJ, LLC | Delaware | 100 | % | |||
Agree Woodstock IL, LLC | Delaware | 100 | % | |||
Indianapolis Store No. 16 LLC | Delaware | 100 | % | |||
Lawrence Store No. 203, L.L.C. | Delaware | 100 | % | |||
Lunacorp, LLC | Delaware | 100 | % |
EX 2- 10 |
Subsidiary |
Jurisdiction of
Organization |
Percentage of Equity Interests
Owned by Parent Guarantor, Company and other Subsidiaries (in the aggregate) |
||||
Mt. Pleasant Outlot I, LLC | Michigan | 100 | % | |||
Mt. Pleasant Shopping Center, L.L.C. | Michigan | 100 | % | |||
Pharm Nashville IN, LLC | Delaware | 100 | % |
Note: The above list excludes dormant Subsidiaries that do not own any property.
Affiliates (other than Subsidiaries)
None
Directors and Executive Officers of the Parent Guarantor |
Position(s) | |
Richard Agree | Executive Chairman of the Board of Directors | |
Joel N. Agree | President, Chief Executive Officer and Director | |
Clayton R. Thelen | Chief Financial Officer and Secretary | |
Laith M. Hermiz | Chief Operating Officer and Executive Vice President | |
Craig Erlich | Independent Director | |
Farris G. Kalil | Independent Director | |
W. Gregory Lehmkuhl | Independent Director | |
John Rakolta, Jr. | Independent Director | |
Jerome Rossi | Independent Director | |
William S. Rubenfaer | Independent Director | |
Leon M. Schurgin | Independent Director | |
Merrie S. Frankel | Independent Director |
Directors and Executive Officers of the Company
The sole general partner of the Company is the Parent Guarantor. Please see the directors and senior officers of the Parent Guarantor listed above.
Section 5.14. Use of Proceeds. The Company will apply the proceeds of the sale of the Series 2018-A Notes issued hereunder to finance, among other things, acquisitions, tenant improvements, new construction, development and redevelopment, capital expenditures, debt repayment, leasing commissions and for general working capital.
EX 2- 11 |
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joel N. Agree, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ending September 30, 2018 of Agree Realty Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: October 22, 2018 | /s/ | Joel N. Agree |
Name: | Joel N. Agree | |
Title: | President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Clayton Thelen, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ending September 30, 2018 of Agree Realty Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: October 22, 2018 | /s/ | Clayton Thelen |
Name: | Clayton Thelen | |
Title: | Chief Financial Officer and Secretary |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Based on a review of the Quarterly Report on Form 10-Q for the period ending September 30, 2018 of Agree Realty Corporation (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joel N. Agree, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report, containing the financial statements, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Joel N. Agree | |
Joel N. Agree | |
President and Chief Executive Officer | |
October 22, 2018 |
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Based on a review of the Quarterly Report on Form 10-Q for the period ending September 30, 2018 of Agree Realty Corporation (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Clayton Thelen, Chief Financial Officer and Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report, containing the financial statements, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Clayton Thelen | |
Clayton Thelen | |
Chief Financial Officer and Secretary | |
October 22, 2018 |