Property Type

 Number of

Properties

Annualized
Base Rent⁽¹⁾

 Percent of
Annualized
Base Rent

Percent
Investment
Grade⁽²⁾

 Weighted
Average
Lease Term

Retail Net Lease

392

$108,066

90.6%

40.6%

10.2 yrs

Retail Net Lease Ground Leases

41

9,403

7.9%

84.8%

11.9 yrs

Total Retail Net Lease

433

$117,469

98.5%

44.2%

10.3 yrs

Total Portfolio

436

$119,209

100.0%

43.9%

10.2 yrs

Annualized base rent is in thousands; any differences are the result of rounding.

(1)

Represents annualized straight-line rent as of December 31, 2017.

(2)

Reflects tenants, or parent entities thereof, with investment grade credit ratings from S&P Global Ratings, Moody's Investor Service, Fitch Ratings or the National Association of Insurance Commissioners.

Tenant

Location

Lease Structure

Lease Term

Actual or
Anticipated Rent
Commencement

Status

Camping World

Tyler, TX

Build-to-Suit

20 Years

Q1 2017

Completed

Burger King⁽¹⁾

Heber, UT

Build-to-Suit

20 Years

Q1 2017

Completed

Camping World

Georgetown, KY

Build-to-Suit

20 Years

Q2 2017

Completed

Orchard Supply

Boynton Beach, FL

Build-to-Suit

15 Years

Q3 2017

Completed

Mister Car Wash

Urbandale, IA

Build-to-Suit

20 years

Q1 2018

Under Construction

Mister Car Wash

Bernalillo, NM

Build-to-Suit

20 years

Q1 2018

Under Construction

Art Van Furniture

Canton, MI

Build-to-Suit

20 years

Q1 2018

Under Construction

Burger King⁽²⁾

North Ridgeville, OH

Build-to-Suit

20 years

Q1 2018

Under Construction

Camping World

Grand Rapids, MI

Build-to-Suit

20 years

Q2 2018

Under Construction

Mister Car Wash

Orlando, FL

Build-to-Suit

20 years

Q3 2018

Under Construction

Mister Car Wash

Tavares, FL

Build-to-Suit

20 years

Q3 2018

Under Construction

(1)

Franchise restaurant operated by Meridian Restaurants Unlimited, LC.

(2)

Franchise restaurant operated by TOMS King, LLC.

Year

 Leases

Annualized
Base Rent⁽¹⁾

 Percent of
Annualized
Base Rent

Gross
Leasable Area

 Percent of Gross
Leasable Area

2018

9

1,130

0.9%

255

2.9%

2019

12

2,681

2.2%

138

1.6%

2020

18

3,206

2.7%

237

2.7%

2021

29

5,905

5.0%

375

4.3%

2022

24

4,284

3.6%

394

4.6%

2023

39

6,804

5.7%

659

7.6%

2024

38

11,037

9.3%

1,069

12.3%

2025

38

8,915

7.5%

626

7.2%

2026

47

7,155

6.0%

682

7.9%

2027

38

9,716

8.2%

814

9.4%

Thereafter

206

58,376

48.9%

3,414

39.5%

Total Portfolio

498

$119,209

100.0%

8,663

100.0%

Annualized base rent and gross leasable area (square feet) are in thousands; any differences are the result of rounding.

(1)

Represents annualized straight-line rent as of December 31, 2017.

Tenant

Annualized
Base Rent⁽¹⁾

 Percent of Annualized
Base Rent

Walgreens

$9,215

7.7%

Walmart

4,224

3.5%

LA Fitness

4,224

3.5%

Lowe's

4,215

3.5%

TJX Companies

3,652

3.1%

CVS

3,004

2.5%

Wawa

2,664

2.2%

Mister Car Wash

2,580

2.2%

Smart & Final

2,475

2.1%

Dollar General

2,415

2.0%

PetSmart

2,234

1.9%

Tractor Supply

2,179

1.8%

Hobby Lobby

2,176

1.8%

Michaels

2,072

1.7%

Dave & Buster's

2,058

1.7%

Academy Sports

1,982

1.7%

Dollar Tree

1,939

1.6%

AutoZone

1,909

1.6%

Rite Aid

1,886

1.6%

Other⁽²⁾

62,106

52.3%

Total Portfolio

$119,209

100.0%

Annualized base rent is in thousands; any differences are the result of rounding.

(1)

Represents annualized straight-line rent as of December 31, 2017.

(2)

Includes tenants generating less than 1.5% of annualized base rent.

Sector

Annualized
Base Rent⁽¹⁾

 Percent of Annualized
Base Rent

Pharmacy

$14,694

12.3%

Grocery Stores

9,136

7.7%

Health & Fitness

6,938

5.8%

Tire & Auto Service

6,534

5.5%

Off-Price Retail

6,405

5.4%

Restaurants - Quick Service

6,120

5.1%

Home Improvement

5,551

4.7%

Convenience Stores

5,298

4.4%

General Merchandise

4,643

3.9%

Crafts and Novelties

4,539

3.8%

Auto Parts

4,370

3.7%

Specialty Retail

4,261

3.6%

Warehouse Clubs

3,749

3.1%

Farm and Rural Supply

3,361

2.8%

Sporting Goods

3,171

2.7%

Dollar Stores

3,145

2.6%

Home Furnishings

3,120

2.6%

Health Services

3,066

2.6%

Other⁽²⁾

21,108

17.7%

Total Portfolio

$119,209

100.0%

Annualized base rent is in thousands; any differences are the result of rounding.

(1)

Represents annualized straight-line rent as of December 31, 2017.

(2)

Includes sectors generating less than 2.5% of annualized base rent.

State

Annualized
Base Rent⁽¹⁾

 Percent of Annualized
Base Rent

Michigan

$14,394

12.1%

Texas

10,112

8.5%

Florida

8,839

7.4%

Illinois

8,190

6.9%

Ohio

6,816

5.7%

Pennsylvania

4,646

3.9%

New Jersey

4,352

3.7%

Louisiana

3,853

3.2%

California

3,697

3.1%

Kentucky

3,640

3.1%

Missouri

3,387

2.8%

Mississippi

3,283

2.8%

Wisconsin

3,258

2.7%

Other⁽²⁾

40,742

34.1%

Total Portfolio

$119,209

100.0%

Annualized base rent is in thousands; any differences are the result of rounding.

(1)

Represents annualized straight-line rent as of December 31, 2017.

(2)

Includes states generating less than 2.5% of annualized base rent.

Agree Realty Corporation

Consolidated Balance Sheet

($ in thousands, except share and per-share data)

December 31, 2017

December 31, 2016

Assets:

Real Estate Investments:

     Land  

$                405,457

$                309,687

     Buildings

868,396

703,506

     Accumulated depreciation

(85,239)

(69,696)

     Property under development 

25,402

6,764

Net real estate investments

1,214,016

950,261

Real estate held for sale, net

2,420

-

Cash and cash equivalents

50,807

33,395

Cash held in escrows

7,975

-

Accounts receivable - tenants, net of allowance of $296 and $50 for possible losses at December 31, 2017 and December 31, 2016, respectively

15,477

11,535

Credit facility finance costs, net of accumulated amortization of $433 and $1,262 at December 31, 2017 and December 31, 2016, respectively

1,174

1,552

Leasing costs, net of accumulated amortization of $814 and $677 at December 31, 2017 and December 31, 2016, respectively

1,583

1,227

Lease intangibles, net of accumulated amortization of $41,390 and $25,666 at December 31, 2017 and December 31, 2016, respectively

195,158

139,871

Interest rate swaps

1,592

1,409

Other assets

4,432

2,722

     Total Assets

$             1,494,634

$             1,141,972

Liabilities:

Mortgage notes payable, net

$                  88,270

$                  69,067

Unsecured term loans, net

158,171

158,679

Senior unsecured notes, net

259,122

159,176

Unsecured revolving credit facility

14,000

14,000

Dividends and distributions payable

16,303

13,124

Deferred revenue

1,837

1,823

Accrued interest payable

3,412

2,210

Accounts payable and accrued expenses:

     Capital expenditures

354

677

     Operating

10,811

4,866

Lease intangibles, net of accumulated amortization of $11,357 and $7,079 at December 31, 2017 and December 31, 2016, respectively

30,350

30,047

Interest rate swaps

242

1,994

Deferred income taxes

475

705

Tenant deposits

97

94

     Total Liabilities

$                583,444

$                456,462

Equity:

Common stock, $.0001 par value, 45,000,000 shares authorized, 31,004,9000 and 26,164,977 shares issued and outstanding at December 31, 2017 and December 31, 2016, 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

936,046

712,069

Dividends in excess of net income

(28,763)

(28,558)

Accumulated other comprehensive income (loss)

1,375

(536)

Equity - Agree Realty Corporation

$                908,661

$                682,978

     Non-controlling interest

2,529

2,532

     Total Equity

$                911,190

$                685,510

     Total Liabilities and Equity

$             1,494,634

$             1,141,972

Agree Realty Corporation

Consolidated Statements of Operations and Comprehensive Income

($ in thousands, except share and per share-data)

Three months ended
December 31,

Twelve months ended
December 31,

2017

2016

2017

2016

Revenues

(Unaudited)

(Unaudited)

Minimum rents

$      28,574

$      23,349

$    105,074

$      84,031

Percentage rents

32

-

244

197

Operating cost reimbursement

2,736

1,899

10,752

7,267

Other

186

50

485

32

     Total Revenues

$      31,528

$      25,298

$    116,555

$      91,527

Operating Expenses

Real estate taxes

$        2,216

$        1,424

$        8,204

$        5,459

Property operating expenses

969

815

3,610

2,484

Land lease payments

163

163

653

653

General and administrative

2,284

1,908

9,949

8,015

Depreciation and amortization

8,796

6,506

31,752

23,407

     Total Operating Expenses

$      14,428

$      10,816

$      54,168

$      40,018

     Income from Operations

$      17,100

$      14,482

$      62,387

$      51,509

Other (Expense) Income

Interest expense, net

$      (4,924)

$      (4,107)

$    (18,137)

$    (15,343)

Gain on sale of assets, net

4,148

2,831

14,193

9,964

Loss on debt extinguishment

-

(300)

-

(333)

Other income

347

-

347

-

     Net Income

$      16,671

$      12,906

$      58,790

$      45,797

Less Net Income Attributable to Non-Controlling Interest

177

173

678

679

     Net Income Attributable to Agree Realty Corporation

$      16,494

$      12,733

$      58,112

$      45,118

Net Income Per Share Attributable to Agree Realty Corporation

     Basic

$          0.55

$          0.50

$          2.09

$          1.97

     Diluted

$          0.55

$          0.50

$          2.08

$          1.97

Other Comprehensive Income

Net Income

$      16,671

$      12,906

$      58,790

$      45,797

Other Comprehensive Income (Loss) - Gain (Loss) on Interest Rate Swaps

1,402

5,853

1,935

2,618

Total Comprehensive Income

18,073

18,759

60,725

48,415

Comprehensive Income Attributable to Non-Controlling Interest

(209)

(251)

(702)

(703)

     Comprehensive Income Attributable to Agree Realty Corporation

$      17,864

$      18,508

$      60,023

$      47,712

Weighted Average Number of Common Shares Outstanding - Basic

29,537,603

25,375,922

27,625,102

22,868,736

Weighted Average Number of Common Shares Outstanding - Diluted

29,616,353

25,473,270

27,700,347

22,959,799

Agree Realty Corporation

Reconciliation of Net Income to FFO and Adjusted FFO

($ in thousands, except share and per-share data)

(Unaudited)

Three months ended
December 31,

Twelve months ended
December 31,

2017

2016

2017

2016

Net Income

$      16,671

$      12,906

$      58,790

$      45,797

Depreciation of real estate assets

5,221

4,296

19,507

15,200

Amortization of leasing costs

43

40

163

125

Amortization of lease intangibles

3,534

2,150

12,004

8,010

(Gain) loss on sale of assets, net

(4,148)

(2,831)

(14,193)

(9,964)

     Funds from Operations

$      21,321

$      16,561

$      76,271

$      59,168

Straight-line accrued rent

(1,003)

(1,420)

(3,548)

(3,582)

Deferred revenue recognition

-

-

-

(541)

Deferred tax expense (benefit)

(230)

-

(230)

-

Stock based compensation expense

691

577

2,589

2,441

Amortization of financing costs

148

155

574

516

Non-real estate depreciation

(2)

19

78

72

Debt extinguishment costs

-

300

-

333

     Adjusted Funds from Operations

$      20,925

$      16,192

$      75,734

$      58,407

Funds from Operations per common share - Basic

$          0.71

$          0.64

$          2.73

$          2.55

Funds from Operations per common share - Diluted

$          0.71

$          0.64

$          2.72

$          2.54

Adjusted Funds from Operations per common share - Basic

$          0.70

$          0.63

$          2.71

$          2.52

Adjusted Funds from Operations per common share - Diluted

$          0.70

$          0.63

$          2.70

$          2.51

Weighted Average Number of Common Shares and Units Outstanding - Basic

29,885,222

25,723,541

27,972,721

23,216,355

Weighted Average Number of Common Shares and Units Outstanding - Diluted

29,963,973

25,820,889

28,047,966

23,307,418

Supplemental Information:

Scheduled principal repayments

$           808

$           758

$        3,151

$        2,954

Capitalized interest

273

183

570

210

Capitalized building improvements

1,154

136

1,230

541

Non-GAAP Financial Measures

Funds from Operations ("FFO")
The Company considers the non-GAAP measures of FFO and FFO per share/unit to be key supplemental measures of the Company's performance and should be considered along with, but not as alternatives to, net income or loss as a measure of the Company's operating performance. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO to be helpful in evaluating a real estate company's operations.

The White Paper on FFO approved by NAREIT in April 2002, as revised in 2011, defines FFO as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of properties and items classified by GAAP as extraordinary, plus real estate-related depreciation and amortization and impairment writedowns, and after comparable adjustments for the Company's portion of these items related to unconsolidated entities and joint ventures. The Company computes FFO consistent with standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than the Company.

The Company believes that excluding the effect of extraordinary items, real estate-related depreciation and amortization and impairments, which are based on historical cost accounting and which may be of limited significance in evaluating current performance, can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common shareholders. However, FFO may not be helpful when comparing the Company to non-REITs.

FFO does not represent cash generated from operating activities as determined by GAAP and should not be considered an alternative to net income or loss, cash flows from operations or any other operating performance measure prescribed by GAAP. FFO is not a measurement of the Company's liquidity, nor is FFO indicative of funds available to fund the Company's cash needs, including its ability to make cash distributions. These measurements do not reflect cash expenditures for long-term assets and other items that have been and will be incurred. FFO may include funds that may not be available for management's discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties. To compensate for this, management considers the impact of these excluded items to the extent they are material to operating decisions or the evaluation of the Company's operating performance.

Adjusted Funds from Operations
The Company presents adjusted FFO (including adjusted FFO per share/unit), which adjusts for certain additional items including straight-line accrued rent, deferred revenue recognition, stock based compensation expense, non-real estate depreciation and debt extinguishment costs and certain other items. The Company excludes these items as it believes it allows for meaningful comparisons with other REITs and between periods and is more indicative of the ongoing performance of its assets. As with FFO, the Company's calculation of adjusted FFO may be different from similar adjusted measures calculated by other REITs.

Agree Realty Corporation

Reconciliation of Net Debt to Recurring EBITDA

($ in thousands, except share and per-share data)

(Unaudited)

Three months ended
December 31,

2017

Net Income

$                     16,671

Interest expense, net

4,924

Depreciation of real estate assets

5,221

Amortization of leasing costs

43

Amortization of lease intangibles

3,534

Deferred tax expense (benefit)

(230)

Non-real estate depreciation

(2)

EBITDA

$                     30,161

Run-Rate Impact of Investment and Disposition Activity

$                       1,203

(Gain) loss on sale of assets, net

(4,148)

Other income

(347)

Recurring EBITDA

$                     26,869

Annualized Recurring EBITDA

$                   107,476

Total Debt

$                   522,399

Cash, cash equivalents and cash held in escrows

(58,782)

Net Debt

$                   463,617

Net Debt to Recurring EBITDA

Non-GAAP Financial Measures

Recurring EBITDA
The Company considers the non-GAAP measure of recurring EBITDA to be a key supplemental measure of the Company's performance and should be considered along with, but not as an alternative to, net income or loss as a measure of the Company's operating performance. The Company considers recurring EBITDA a key supplemental measure of the Company's operating performance because it represents the Company's earnings run rate for the period presented and because it is widely followed by industry analysts, lenders and investors. Our recurring EBITDA may not be comparable to recurring EBITDA reported by other companies that have a different interpretation of the definition of recurring EBITDA. Our ratio of net debt to recurring EBITDA, which is used by the Company as a measure of leverage, is calculated by taking recurring EBITDA and dividing it by our net debt per the consolidated balance sheet. 

Any differences are a result of rounding.