10-Q

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

		Page
PART I	Financial Information
Item 1:	Interim Consolidated Financial Statements
	Consolidated Balance Sheets as of September 30, 2018 (Unaudited) and December 31, 2017	1
	Consolidated Statements of Income and Comprehensive Income (Unaudited) for the three and nine months ended September 30, 2018 and 2017	3
	Consolidated Statement of Equity (Unaudited) for the nine months ended September 30, 2018	4
	Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2018 and 2017	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3:	Quantitative and Qualitative Disclosures about Market Risk	34
Item 4:	Controls and Procedures	35
PART II
Item 1:	Legal Proceedings	35
Item 1A:	Risk Factors	35
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3:	Defaults Upon Senior Securities	35
Item 4:	Mine Safety Disclosures	35
Item 5:	Other Information	35
Item 6:	Exhibits	36
SIGNATURES		36

AGREE REALTY CORPORATION

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

AGREE REALTY CORPORATION

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

AGREE REALTY CORPORATION

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

AGREE REALTY CORPORATION

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

AGREE REALTY CORPORATION

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.

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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.

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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. 

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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:

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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%.

	September 30, 2018			December 31, 2017
(not presented in thousands)	(in thousands)
Note payable in monthly installments of interest only at LIBOR plus 160 basis points, swapped to a fixed rate of 2.49%. A balloon payment in the amount of $25,000,000 was repaid on March 29, 2018	$	-		$	25,000
Note payable in monthly installments of interest only at 3.32% per annum, with a balloon payment due October 2019		21,500			21,500
Note payable in monthly installments of $153,838, including interest at 6.90% per annum, with the final monthly payment due January 2020		2,345			3,573
Note payable in monthly installments of $23,004, including interest at 6.24% per annum, with a balloon payment of $2,781,819 due February 2020		2,896			2,963
Note payable in monthly installments of interest only at 3.60% per annum, with a balloon payment due January 1, 2023		23,640			23,640
Note payable in monthly installments of $35,673, including interest at 5.01% per annum, with a balloon payment of $4,034,627 due September 2023		5,003			5,131
Note payable in monthly installments of $91,675 including interest at 6.27% per annum, with a final monthly payment due July 2026		6,795			7,288
Total principal		62,179			89,095
Unamortized debt issuance costs		(642	)		(825	)
Total	$	61,537		$	88,270

The mortgage loans encumbering our properties are generally non-recourse, subject to certain exceptions for which we would be liable for any resulting losses incurred by the lender. These exceptions vary from loan to loan, but generally include fraud or material misrepresentations, misstatements or omissions by the borrower, intentional or grossly negligent conduct by the borrower that harms the property or results in a loss to the lender, filing of a bankruptcy petition by the borrower, either directly or indirectly, and certain environmental liabilities. At September 30, 2018, there were no mortgage loans with partial recourse to us.

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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.

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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.

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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.

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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 Offset in the Statement of Financial Position		Net Amounts of Assets presented in the statement of Financial 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 Offset in the Statement of Financial Position

Net Amounts of Liabilities 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 Offset in the Statement of Financial 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 Offset in the Statement of Financial Position		Net Amounts of Liabilities presented in the statement of Financial 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.

PART II Other Information

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

*4.1	Form of 4.32% Senior Guaranteed Note, Series 2018-A, due September 26, 2030
*4.2	Form of 4.32% Senior Guaranteed Note, Series 2018-B, due September 26, 2030
10.1	Increase Agreement, dated July 18, 2018 among Agree Limited Partnership, as the Borrower, the Company, as the parent, PNC Bank, National Association and the other lender parties thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 23, 2018)
10.2	Form of Revolving Note (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 23, 2018)
*10.3	First Supplement to Uncommitted Master Note Facility, dated as of September 26, 2018, among Agree Limited Partnership, Agree Realty Corporation and Teachers Insurance and Annuity Association of America (“TIAA”)
*10.4	First Supplement to Uncommitted Master Note Facility, dated as of September 26, 2018, among Agree Limited Partnership, Agree Realty Corporation, AIG Asset Management (U.S.), LLC and the institutional investors named therein
*31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Joel N. Agree, Chief Executive Officer
*31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Clayton R. Thelen, Chief Financial Officer
*32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Joel N. Agree, Chief Executive Officer
*32.2	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Clayton R. Thelen, Chief Financial Officer
*101	The following materials from Agree Realty Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income and Comprehensive Income, (iii) the Consolidated Statement of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) related notes to these consolidated financial statements.

* Filed herewith.

SIGNATURES

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

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EX-4.1

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:

EX-4.2

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:

EX-10.3

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;

Now, 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 63rd 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

EX-10.4

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;

Now, 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 63rd 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

EX-31.1

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

EX-31.2

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

EX-32.1

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

EX-32.2

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

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Oct. 19, 2018
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Entity Registrant Name	AGREE REALTY CORP
Entity Central Index Key	0000917251
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Trading Symbol	ADC
Entity Common Stock, Shares Outstanding		34,481,545
Entity Emerging Growth Company	false
Entity Small Business	false

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Real Estate Investments
Land	$ 473,446	$ 405,457
Buildings	1,041,666	868,396
Less accumulated depreciation	(98,051)	(85,239)
Property, Plant and Equipment, Net	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
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	0	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	0	0
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

XML

CONSOLIDATED BALANCE SHEETS [Parenthetical] - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Allowance for doubtful accounts receivable (in dollars)	$ 465	$ 296
Accumulated Amortization, Deferred Finance Costs	744	433
Deferred leasing costs, accumulated amortization (in dollars)	823	814
Finite-lived intangible assets, accumulated amortization (in dollars)	57,121	41,390
Below Market Lease, Accumulated Amortization	$ 14,116	$ 11,357
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	45,000,000	45,000,000
Common stock, shares, issued	34,481,545	31,004,900
Common stock, shares, outstanding	34,481,545	31,004,900
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	4,000,000	4,000,000
Series A Junior Participating Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	200,000	200,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

XML

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Revenues
Minimum rents	$ 33,622	$ 27,325	$ 96,494	$ 76,500
Percentage rents	0	0	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	0	4	0
Provision for impairment	(488)	0	(1,651)	0
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

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CONSOLIDATED STATEMENT OF EQUITY - 9 months ended Sep. 30, 2018 - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Dividends in excess of net income [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Non-Controlling Interest [Member]
Balance at Dec. 31, 2017	$ 911,190	$ 3	$ 936,046	$ (28,763)	$ 1,375	$ 2,529
Balance (in shares) at Dec. 31, 2017		31,004,900
Issuance of common stock, net of issuance costs	159,604	$ 0	159,604	0	0	0
Issuance of common stock, net of issuance costs (in shares)		3,450,000
Repurchase of common shares	(1,142)	$ 0	(1,142)	0	0	0
Repurchase of common shares (in shares)		(22,348)
Issuance of restricted stock under the Omnibus Incentive Plan	0	$ 0	0	0	0	0
Issuance of restricted stock under the Omnibus Incentive Plan (in shares)		50,841
Forfeiture of restricted stock	0	$ 0	0	0	0	0
Forfeiture of restricted stock (in shares)		(1,848)
Stock-based compensation	2,171	$ 0	2,171	0	0	0
Dividends and distributions declared for the period	(52,071)	0	0	(51,515)	0	(556)
Other comprehensive income (loss) - change in fair value of interest rate swaps	3,166	0	0	0	3,131	35
Net income	45,460	0	0	44,961	0	499
Balance at Sep. 30, 2018	$ 1,068,378	$ 3	$ 1,096,679	$ (35,317)	$ 4,506	$ 2,507
Balance (in shares) at Sep. 30, 2018		34,481,545

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Cash Flows from Operating Activities
Net income	$ 15,756	$ 12,283	$ 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	488	0	1,651	0
(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	$ 33,395
Cash and cash equivalents and restricted deposits, end of period	$ 18,247	$ 27,289	18,247	27,289	$ 58,782
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	0
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

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CONSOLIDATED STATEMENTS OF CASH FLOWS [Parenthetical] - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Real Estate Inventory, Capitalized Interest Costs	$ 381	$ 297

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Organization

9 Months Ended

Sep. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

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.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

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.

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.

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

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.

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.

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.

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Real Estate Investments

9 Months Ended

Sep. 30, 2018

Real Estate [Abstract]

Real Estate Disclosure [Text Block]

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:

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.

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Debt

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

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.

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%.

	September 30, 2018			December 31, 2017
(not presented in thousands)	(in thousands)
Note payable in monthly installments of interest only at LIBOR plus 160 basis points, swapped to a fixed rate of 2.49%. A balloon payment in the amount of $25,000,000 was repaid on March 29, 2018	$	-		$	25,000
Note payable in monthly installments of interest only at 3.32% per annum, with a balloon payment due October 2019		21,500			21,500
Note payable in monthly installments of $153,838, including interest at 6.90% per annum, with the final monthly payment due January 2020		2,345			3,573
Note payable in monthly installments of $23,004, including interest at 6.24% per annum, with a balloon payment of $2,781,819 due February 2020		2,896			2,963
Note payable in monthly installments of interest only at 3.60% per annum, with a balloon payment due January 1, 2023		23,640			23,640
Note payable in monthly installments of $35,673, including interest at 5.01% per annum, with a balloon payment of $4,034,627 due September 2023		5,003			5,131
Note payable in monthly installments of $91,675 including interest at 6.27% per annum, with a final monthly payment due July 2026		6,795			7,288
Total principal		62,179			89,095
Unamortized debt issuance costs		(642	)		(825	)
Total	$	61,537		$	88,270

The mortgage loans encumbering our properties are generally non-recourse, subject to certain exceptions for which we would be liable for any resulting losses incurred by the lender. These exceptions vary from loan to loan, but generally include fraud or material misrepresentations, misstatements or omissions by the borrower, intentional or grossly negligent conduct by the borrower that harms the property or results in a loss to the lender, filing of a bankruptcy petition by the borrower, either directly or indirectly, and certain environmental liabilities. At September 30, 2018, there were no mortgage loans with partial recourse to us.

We have entered into mortgage loans which are secured by multiple properties and contain cross-default and cross-collateralization provisions. Cross-collateralization provisions allow a lender to foreclose on multiple properties in the event that we default under the loan. Cross-default provisions allow a lender to foreclose on the related property in the event a default is declared under another loan.

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.

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.

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.

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Common Stock

9 Months Ended

Sep. 30, 2018

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

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.

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

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Dividends and Distribution Payable

9 Months Ended

Sep. 30, 2018

Stockholders' Equity Note [Abstract]

Dividends And Distributions Payable [Text Block]

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.

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Derivative Instruments and Hedging Activity

9 Months Ended

Sep. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

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.

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

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 Offset in the Statement of Financial Position		Net Amounts of Assets presented in the statement of Financial Position		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	4,516	$	-	$	4,516	$	-	$	-	$	4,516

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 Offset in the Statement of Financial Position

Net Amounts of Liabilities 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 Offset in the Statement of Financial 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 Offset in the Statement of Financial Position		Net Amounts of Liabilities presented in the statement of Financial Position		Financial Instruments			Cash Collateral Received		Net Amount
Derivatives	$	242	$	-	$	242	$	(42	)	$	-	$	200

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Discontinued Operations

9 Months Ended

Sep. 30, 2018

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Note 8 – Discontinued Operations

There were no properties classified as discontinued operations for the three and nine months ended September 30, 2018.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

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).

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.

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.

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Equity Incentive Plan

9 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

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.

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.

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Subsequent Events

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

Subsequent Events [Text Block]

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.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

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, Policy [Policy Text Block]

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, Policy [Policy Text Block]

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, Policy [Policy Text Block]

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.

Real Estate, Policy [Policy Text Block]

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

Purchase Accounting For Acquisitions Of Real Estate [Policy Text Block]

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, Policy [Policy Text Block]

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.

Trade and Other Accounts Receivable, Policy [Policy Text Block]

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 [Policy Text Block]

Sales Tax

The Company collects various taxes from tenants and remits these amounts, on a net basis, to the applicable taxing authorities.

Deferred Charges, Policy [Policy Text Block]

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

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, Policy [Policy Text Block]

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.

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 Tax, Policy [Policy Text Block]

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 Value of Financial Instruments, Policy [Policy Text Block]

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.

New Accounting Pronouncements, Policy [Policy Text Block]

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.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Schedule of Real Estate Properties [Table Text Block]

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

Schedule of Amortization of Deferred Expenses [Table Text Block]

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

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

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

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

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

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Real Estate Investments (Tables)

9 Months Ended

Sep. 30, 2018

Real Estate [Abstract]

Schedule of Completed Or Commenced Projects [Table Text Block]

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:

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.

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Debt (Tables)

9 Months Ended

Sep. 30, 2018

Schedule of Long-term Debt Instruments [Table Text Block]

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%.

	September 30, 2018			December 31, 2017
(not presented in thousands)	(in thousands)
Note payable in monthly installments of interest only at LIBOR plus 160 basis points, swapped to a fixed rate of 2.49%. A balloon payment in the amount of $25,000,000 was repaid on March 29, 2018	$	-		$	25,000
Note payable in monthly installments of interest only at 3.32% per annum, with a balloon payment due October 2019		21,500			21,500
Note payable in monthly installments of $153,838, including interest at 6.90% per annum, with the final monthly payment due January 2020		2,345			3,573
Note payable in monthly installments of $23,004, including interest at 6.24% per annum, with a balloon payment of $2,781,819 due February 2020		2,896			2,963
Note payable in monthly installments of interest only at 3.60% per annum, with a balloon payment due January 1, 2023		23,640			23,640
Note payable in monthly installments of $35,673, including interest at 5.01% per annum, with a balloon payment of $4,034,627 due September 2023		5,003			5,131
Note payable in monthly installments of $91,675 including interest at 6.27% per annum, with a final monthly payment due July 2026		6,795			7,288
Total principal		62,179			89,095
Unamortized debt issuance costs		(642	)		(825	)
Total	$	61,537		$	88,270

Schedule of Maturities of Long-term Debt [Table Text Block]

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.

Senior Unsecured Notes [Member]

Schedule of Maturities of Long-term Debt [Table Text Block]

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

Unsecured Debt [Member]

Schedule of Maturities of Long-term Debt [Table Text Block]

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

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Derivative Instruments and Hedging Activity (Tables)

9 Months Ended

Sep. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Notional Amounts of Outstanding Derivative Positions [Table Text Block]

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

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]

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

Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) [Table Text Block]

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	)

Offsetting Assets And Liabilities [Table Text Block]

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 Offset in the Statement of Financial Position		Net Amounts of Assets presented in the statement of Financial Position		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	4,516	$	-	$	4,516	$	-	$	-	$	4,516

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 Offset in the Statement of Financial Position

Net Amounts of Liabilities 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 Offset in the Statement of Financial 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 Offset in the Statement of Financial Position		Net Amounts of Liabilities presented in the statement of Financial Position		Financial Instruments			Cash Collateral Received		Net Amount
Derivatives	$	242	$	-	$	242	$	(42	)	$	-	$	200

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Schedule of Derivative Liabilities at Fair Value [Table Text Block]

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

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Equity Incentive Plan (Tables)

9 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

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

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Organization (Details Textual)	Sep. 30, 2018
Nature of Operations [Line Items]
Ownership Percentage On Controlling Interest By Parent	99.00%

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Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Land	$ 271	$ 393
Buildings	1,087	1,857
Lease Intangibles (Asset)	290	557
Real Estate Held-for-sale, Gross	1,648	2,807
Accumulated depreciation and amortization	(281)	(387)
Total Real Estate Held for Sale	$ 1,367	$ 2,420

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Summary of Significant Accounting Policies (Details 1) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Amortization of Deferred Charges	$ 5,130	$ 2,907	$ 14,114	$ 8,466
Credit Facility Financing Costs [Member]
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Amortization of Deferred Charges	133	102	335	304
Leasing Costs [Member]
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Amortization of Deferred Charges	82	40	166	120
Lease Intangibles (Assets) [Member]
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Amortization of Deferred Charges	5,998	3,802	16,781	11,209
Lease Intangibles (Liability) [Member]
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Amortization of Below Market Lease	$ (1,083)	$ (1,037)	$ (3,168)	$ (3,167)

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Summary of Significant Accounting Policies (Details 2) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Year Ending December 31,
2018 (remaining)	$ 5,897
2019	22,184
2020	22,057
2021	21,143
2022	20,928
Thereafter	154,618
Total	246,827
Total	(27,628)	$ (30,350)
Credit Facility Financing Costs [Member]
Year Ending December 31,
2018 (remaining)	142
2019	556
2020	541
2021	28
2022	0
Thereafter	0
Total	1,267
Leasing Costs [Member]
Year Ending December 31,
2018 (remaining)	76
2019	276
2020	302
2021	293
2022	285
Thereafter	1,350
Total	2,582
Lease Intangibles (Assets) [Member]
Year Ending December 31,
2018 (remaining)	6,822
2019	25,643
2020	25,493
2021	24,815
2022	23,737
Thereafter	164,096
Total	270,606
Lease Intangibles (Liability) [Member]
Year Ending December 31,
2018 (remaining)	(1,143)
2019	(4,291)
2020	(4,279)
2021	(3,993)
2022	(3,094)
Thereafter	(10,828)
Total	$ (27,628)

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Summary of Significant Accounting Policies (Details 3) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Earnings Per Share Basic And Diluted [Line Items]
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
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 Contracts One [Member]
Earnings Per Share Basic And Diluted [Line Items]
Effect of dilutive securities: forward equity offering	439,761	0	265,048	0
Forward Contracts Two [Member]
Earnings Per Share Basic And Diluted [Line Items]
Effect of dilutive securities: forward equity offering	8,455	0	2,818	0

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Summary of Significant Accounting Policies (Details Textual) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended		3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018	Jun. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Mar. 31, 2018
Accounting Policies [Line Items]
Deferred Tax Liabilities, Gross	$ 475		$ 475		$ 475		$ 475
Income Tax Expense (Benefit)			125	$ 37	391	$ 366
Deferred Rent Receivables, Net	15,500		15,500		15,500		12,900
Cash in Excess of FDIC Insured Amounts	$ 17,300		$ 17,300		$ 17,300		$ 57,500
Weighted Average Number Diluted Shares Outstanding Adjustment			448,217		267,867
Common Stock, Shares Authorized	45,000,000		45,000,000		45,000,000		45,000,000
Reimbursements Revenue					$ 2,500		$ 1,400
Proceeds from Issuance of Common Stock		$ 108,000			$ 159,604	$ 136,733
Forward Contracts Two [Member]
Accounting Policies [Line Items]
Share Price	$ 55.20		$ 55.20		$ 55.20
Common Stock, Shares Authorized	3,500,000		3,500,000		3,500,000
Common Stock [Member]
Accounting Policies [Line Items]
Share Price								$ 48.00
Stock Issued During Period, Shares, New Issues		2,415,000			3,450,000
Proceeds from Issuance of Common Stock	$ 160,200				$ 190,000
Common Stock [Member] | Forward Contracts [Member]
Accounting Policies [Line Items]
Common Stock, Shares Authorized								3,450,000
Stock Issued During Period, Shares, New Issues					3,450,000
Over-Allotment Option [Member] | Common Stock [Member] | Forward Contracts [Member]
Accounting Policies [Line Items]
Common Stock, Shares Authorized								450,000

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Real Estate Investments (Details)	9 Months Ended
	Sep. 30, 2018
Urbandale, IA [Member]
Lease Structure	Build-to-Suit
Lease Term	20 years
Actual or Anticipated Rent Commencement	Q1 2018
Status	Completed
Bernalillo, NM [Member]
Lease Structure	Build-to-Suit
Lease Term	20 years
Actual or Anticipated Rent Commencement	Q1 2018
Status	Completed
North Ridgeville, OH [Member]
Lease Structure	Build-to-Suit	[1]
Lease Term	20 years	[1]
Actual or Anticipated Rent Commencement	Q1 2018	[1]
Status	Completed	[1]
Canton, MI [Member]
Lease Structure	Build-to-Suit
Lease Term	20 years
Actual or Anticipated Rent Commencement	Q1 2018
Status	Completed
Grand Rapids, MI [Member]
Lease Structure	Build-to-Suit
Lease Term	20 years
Actual or Anticipated Rent Commencement	Q2 2018
Status	Completed
Chickasha, OK [Member]
Lease Structure	Build-to-Suit
Lease Term	10 years
Actual or Anticipated Rent Commencement	Q3 2018
Status	Completed
Aurora, IL [Member]
Lease Structure	Build-to-Suit	[1]
Lease Term	20 years	[1]
Actual or Anticipated Rent Commencement	Q3 2018	[1]
Status	Completed	[1]
Nampa, ID [Member]
Lease Structure	Build-to-Suit
Lease Term	15 years
Actual or Anticipated Rent Commencement	Q3 2018
Status	Completed
Orlando, FL [Member]
Lease Structure	Build-to-Suit
Lease Term	20 years
Actual or Anticipated Rent Commencement	Q4 2018
Status	Under Construction
Tavares, FL [Member]
Lease Structure	Build-to-Suit
Lease Term	20 years
Actual or Anticipated Rent Commencement	Q4 2018
Status	Under Construction
Batavia, OH [Member]
Lease Structure	Build-to-Suit
Lease Term	10 years
Actual or Anticipated Rent Commencement	Q1 2019
Status	Under Construction
Maumee, OH [Member]
Lease Structure	Build-to-Suit
Lease Term	10 years
Actual or Anticipated Rent Commencement	Q1 2019
Status	Under Construction
Mt. Pleasant, MI [Member]
Lease Structure	Build-to-Suit
Lease Term	15 years
Actual or Anticipated Rent Commencement	Q4 2019
Status	Under Construction

[1] Franchise restaurant operated by TOMS King, LLC.

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Real Estate Investments (Details Textual) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2018 USD ($) ft²	Sep. 30, 2018 USD ($) ft²	Dec. 31, 2017 USD ($) ft²
Real Estate Properties [Line Items]
Property Subject to or Available for Operating Lease, Gross	$ 59,600	$ 59,600
Number of Real Estate Properties	520	520	436
Land Subject to Ground Leases | ft²	10.0	10.0	8.7
Real Estate Investment Property, Net	$ 1,424,828	$ 1,424,828	$ 1,214,016
Impairment of Long-Lived Assets Held-for-use	500	1,700
Gains (Losses) on Sales of Investment Real Estate	3,900	9,900
Options Exercised [Member]
Real Estate Properties [Line Items]
Proceeds from Sale of Real Estate		3,900
Gains (Losses) on Sales of Investment Real Estate		1,000
Five Development And PCS Projects [Member]
Real Estate Properties [Line Items]
Property Subject to or Available for Operating Lease, Gross	14,000	14,000
Five Real Estate Properties [Member]
Real Estate Properties [Line Items]
Proceeds from Sale of Real Estate	$ 29,600	$ 56,400
Seventy Nine Retail Net Lease Assets [Member]
Real Estate Properties [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life (in year)	11 years 6 months	12 years 3 months 18 days
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Land	$ 81,600	$ 81,600
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Buildings	174,400	174,400
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill	93,900	93,900
Seventy Nine Retail Net Lease Assets [Member] | Five Development And PCS Projects [Member]
Real Estate Properties [Line Items]
Payments to Acquire Property, Plant, and Equipment	$ 150,000	$ 349,900

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Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Total principal	$ 61,537	$ 88,270
Mortgage Notes Payable [Member]
Debt Instrument [Line Items]
Total principal	62,179	89,095
Unamortized debt issuance costs	(642)	(825)
Total	61,537	88,270
March 29, 2018 [Member]
Debt Instrument [Line Items]
Total principal	0	25,000
October 2019 [Member]
Debt Instrument [Line Items]
Total principal	21,500	21,500
January 2020 [Member]
Debt Instrument [Line Items]
Total principal	2,345	3,573
February 2020 [Member]
Debt Instrument [Line Items]
Total principal	2,896	2,963
January 1, 2023 [Member]
Debt Instrument [Line Items]
Total principal	23,640	23,640
September 2023 [Member]
Debt Instrument [Line Items]
Total principal	5,003	5,131
July 2026 [Member]
Debt Instrument [Line Items]
Total principal	$ 6,795	$ 7,288

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Debt (Details 1) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	May 31, 2015
Debt Instrument, Face Amount			$ 50,000
Total	$ 384,073	$ 259,122
Senior Notes [Member]
Total Principal	385,000	260,000
Unamortized debt issuance costs	(927)	(878)
Total	384,073	259,122
Senior Notes [Member] | 2025 Senior Unsecured Notes [Member]
Debt Instrument, Face Amount	50,000	50,000
Senior Notes [Member] | 2027 Senior Unsecured Notes [Member]
Debt Instrument, Face Amount	50,000	50,000
Senior Notes [Member] | 2028 Senior Unsecured Notes [Member]
Debt Instrument, Face Amount	60,000	60,000
Senior Notes [Member] | 2029 Senior Unsecured Notes [Member]
Debt Instrument, Face Amount	100,000	100,000
Senior Notes [Member] | 2030 Senior Unsecured Notes [Member]
Debt Instrument, Face Amount	$ 125,000	$ 0

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Debt (Details 2) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	May 31, 2015
Debt Instrument, Face Amount			$ 50,000
Total	$ 157,760	$ 158,171
Unsecured Debt [Member]
Total Principal	158,734	159,304
Unamortized debt issuance costs	(974)	(1,133)
Total	157,760	158,171
Unsecured Debt [Member] | 2019 Term Loan [Member]
Debt Instrument, Face Amount	18,734	19,304
Unsecured Debt [Member] | 2023 Term Loan [Member]
Debt Instrument, Face Amount	40,000	40,000
Unsecured Debt [Member] | 2024 Term Loans [Member]
Debt Instrument, Face Amount	$ 100,000	$ 100,000

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Debt (Details 3) $ in Thousands	Sep. 30, 2018 USD ($)
Long-term Debt, Maturities, Repayments of Principal [Line Items]
Remainder of 2018	$ 850
2019	42,795
2020	3,867
2021	14,998	[1]
2022	1,060
Thereafter	556,343
Total	619,913
Scheduled Principal [Member]
Long-term Debt, Maturities, Repayments of Principal [Line Items]
Remainder of 2018	850
2019	3,005
2020	1,100
2021	998	[1]
2022	1,060
Thereafter	3,687
Total	10,700
Balloon Payment [Member]
Long-term Debt, Maturities, Repayments of Principal [Line Items]
Remainder of 2018	0
2019	39,790
2020	2,767
2021	14,000	[1]
2022	0
Thereafter	552,656
Total	$ 609,213

[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.

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Debt (Details Textual) - USD ($)	1 Months Ended				9 Months Ended		12 Months Ended
	Jul. 31, 2018	Mar. 29, 2018	Jul. 31, 2016	May 31, 2015	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Aug. 31, 2017	Dec. 31, 2016	Aug. 31, 2016
Debt Instrument [Line Items]
Long-term Line of Credit					$ 14,000,000		$ 14,000,000
Debt Instrument, Face Amount				$ 50,000,000
Real Estate Investments, Net					$ 107,900,000
Debt Instrument, Description of Variable Rate Basis			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.		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.
Long-term Debt					$ 619,913,000
Secured Debt					61,537,000		88,270,000
Unsecured Debt					157,760,000		$ 158,171,000
Repayments of Secured Debt					26,915,000	$ 1,794,000
Proceeds from Issuance of Private Placement			$ 60,000,000	$ 100,000,000
Private Placement [Member]
Debt Instrument [Line Items]
Unsecured Debt								$ 100,000,000
Debt [Member]
Debt Instrument [Line Items]
Long-term Debt					619,900,000
Secured Debt					$ 62,200,000
Revolving Credit and Term Loan Facility [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity									$ 350,000,000
Mortgage Note Payable [Member]
Debt Instrument [Line Items]
Long-term Debt, Weighted Average Interest Rate, at Point in Time					4.16%		3.74%
Debt Instrument, Interest Rate, Stated Percentage							3.32%
Repayments of Secured Debt							$ 21,500,000
Unsecured Debt [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity									65,000,000
Long-term Debt, Weighted Average Interest Rate, at Point in Time				4.21%
Debt Instrument, Maturity Date			Jul. 31, 2028
Debt Instrument, Interest Rate, Stated Percentage			4.42%
Unsecured Debt					$ 157,760,000		158,171,000
Unsecured Debt [Member] | Weighted Average [Member]
Debt Instrument [Line Items]
Debt Instrument, Term				11 years
Unsecured Debt [Member] | 2024 Term Loan Facility One [Member)
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity					65,000,000				35,000,000
Debt Instrument, Face Amount					65,000,000
Unsecured Debt [Member] | 2024 Term Loan Facility Two [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity					35,000,000
Debt Instrument, Face Amount					$ 35,000,000
Unsecured Debt [Member] | 2024 Term Loan Facilitilies [Member]
Debt Instrument [Line Items]
Debt Instrument, Maturity Date					Jan. 31, 2024
Unsecured Debt One [Member]
Debt Instrument [Line Items]
Debt Instrument, Maturity Date				May 31, 2025
Debt Instrument, Interest Rate, Stated Percentage				4.16%				4.19%
Unsecured Debt Two [Member]
Debt Instrument [Line Items]
Debt Instrument, Face Amount				$ 50,000,000
Debt Instrument, Maturity Date				May 31, 2027
Debt Instrument, Interest Rate, Stated Percentage				4.26%
Unsecured Debt Three [Member]
Debt Instrument [Line Items]
Debt Instrument, Face Amount					$ 125,000,000
Debt Instrument, Maturity Date					Sep. 30, 2030
Debt Instrument, Interest Rate, Stated Percentage					4.32%
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 250,000,000		$ 325,000,000		$ 311,000,000				500,000,000
Long-term Line of Credit					$ 14,000,000		$ 14,000,000
Long-term Debt, Weighted Average Interest Rate, at Point in Time					3.20%		2.60%
Debt Instrument, Interest Rate, Stated Percentage					3.05%
Debt Instrument, Description of Variable Rate Basis					The Company entered into an interest rate swap to fix LIBOR at 140 basis points until maturity.
Unsecured Debt			$ 40,000,000		$ 40,000,000
Line of Credit Facility, Increase (Decrease), Net	$ 75,000,000
Revolving Credit Facility [Member] | Debt [Member]
Debt Instrument [Line Items]
Long-term Line of Credit					$ 14,000,000
Revolving Credit Facility [Member] | 2019 Term Loan [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage					3.62%
Debt Instrument, Description of Variable Rate Basis					LIBOR plus 170 basis points. In order to fix LIBOR on the 2019 Term Loan at 1.92% until maturity
Unsecured Debt					$ 18,700,000					$ 20,300,000
Revolving Credit Facility [Member] | 2024 Term Loan Facilitilies [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage					3.78%
Unsecured Debt					$ 100,000,000
Unsecured Term Loan [Member]
Debt Instrument [Line Items]
Unsecured Debt					158,700,000
Senior Unsecured Notes [Member]
Debt Instrument [Line Items]
Long-term Line of Credit					385,000,000
Senior Unsecured Notes [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity									$ 325,000,000
March 29 2018 [Member]
Debt Instrument [Line Items]
Secured Debt					$ 0		$ 25,000,000
March 29 2018 [Member] | Mortgages [Member]
Debt Instrument [Line Items]
Debt Instrument, Description of Variable Rate Basis					interest only at LIBOR plus 160 basis points, swapped to a fixed rate of 2.49%
Repayment Of Debt Instrument, Balloon Payment		$ 25,000,000
January 2020 [Member]
Debt Instrument [Line Items]
Secured Debt					$ 2,345,000		3,573,000
January 2020 [Member] | Mortgages [Member]
Debt Instrument [Line Items]
Debt Instrument, Periodic Payment, Principal					$ 153,838
Debt Instrument, Interest Rate, Stated Percentage					6.90%
February 2020 [Member]
Debt Instrument [Line Items]
Secured Debt					$ 2,896,000		2,963,000
February 2020 [Member] | Mortgages [Member]
Debt Instrument [Line Items]
Debt Instrument, Periodic Payment, Principal					23,004
Debt Instrument, Periodic Payment Terms, Balloon Payment to be Paid					$ 2,781,819
Debt Instrument, Interest Rate, Stated Percentage					6.24%
January 1 2023 [Member]
Debt Instrument [Line Items]
Secured Debt					$ 23,640,000		23,640,000
January 1 2023 [Member] | Mortgages [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage					3.60%
September 2023 [Member]
Debt Instrument [Line Items]
Secured Debt					$ 5,003,000		5,131,000
September 2023 [Member] | Mortgages [Member]
Debt Instrument [Line Items]
Debt Instrument, Periodic Payment, Principal					35,673
Debt Instrument, Periodic Payment Terms, Balloon Payment to be Paid					$ 4,034,627
Debt Instrument, Interest Rate, Stated Percentage					5.01%
July 2026 [Member]
Debt Instrument [Line Items]
Secured Debt					$ 6,795,000		$ 7,288,000
July 2026 [Member] | Mortgages [Member]
Debt Instrument [Line Items]
Debt Instrument, Periodic Payment, Principal					$ 91,675
Debt Instrument, Interest Rate, Stated Percentage					6.27%
October 29 [Member] | Mortgages [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage					3.32%

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Common Stock (Details Textual) - USD ($) $ in Thousands	1 Months Ended			9 Months Ended
	Sep. 30, 2018	May 31, 2018	Jun. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Mar. 31, 2018	Dec. 31, 2017
Class of Stock [Line Items]
Proceeds from Issuance of Common Stock			$ 108,000	$ 159,604	$ 136,733
Common Stock, Shares Authorized	45,000,000			45,000,000			45,000,000
Forward Contracts Two [Member]
Class of Stock [Line Items]
Common Stock, Shares Authorized	3,500,000			3,500,000
Common Stock [Member]
Class of Stock [Line Items]
Proceeds from Issuance of Common Stock	$ 160,200			$ 190,000
Stock Issued During Period, Shares, New Issues			2,415,000	3,450,000
Common Stock [Member] | Forward Contracts [Member]
Class of Stock [Line Items]
Stock Issued During Period, Shares, New Issues				3,450,000
Common Stock, Shares Authorized						3,450,000
ATM Program [Member]
Class of Stock [Line Items]
Gross Amount Remaining To Be Issued				$ 250,000
ATM Program [Member] | Common Stock [Member]
Class of Stock [Line Items]
Value Of Equity Instruments To Be Issued		$ 250,000
Over-Allotment Option [Member] | Common Stock [Member] | Forward Contracts [Member]
Class of Stock [Line Items]
Common Stock, Shares Authorized						450,000

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Dividends and Distribution Payable (Details Textual)	Sep. 04, 2018 $ / shares
Agree Limited Partnership [Member]
Dividends Payable [Line Items]
Dividends Payable, Amount Per Share (in dollars per share)	$ 0.540

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Derivative Instruments and Hedging Activity (Details) - Interest Rate Swap [Member] pure in Thousands, $ in Thousands	Sep. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Interest Rate Derivatives, Number of Instruments	4	5
Interest Rate Derivatives, Notional Amount	$ 158,734	$ 184,304

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Derivative Instruments and Hedging Activity (Details 1) - Interest Rate Swap [Member] - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Derivatives designated as cash flow hedges
Interest Rate Cash Flow Hedge Asset at Fair Value	$ 4,516	$ 1,592
Interest Rate Cash Flow Hedge Liability at Fair Value	$ 0	$ 242

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Derivative Instruments and Hedging Activity (Details 2) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative Instruments, Amount of Income/(Loss) Recognized in OCI on Derivative (Effective Portion)	$ 454	$ 203	$ 3,166	$ 330
Derivative Instruments, Amount of Income/(Loss) Reclassified from Accumulated OCI into Expense (Effective Portion)	$ 67	$ (258)	$ (24)	$ (1,085)

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Derivative Instruments and Hedging Activity (Details 3) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Derivative [Line Items]
Gross Amounts of Recognized Assets	$ 4,516	$ 1,592
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Assets presented in the statement of Financial Position	4,516	1,592
Gross Amounts Not Offset in the Statement of Financial Position, Financial Instruments	0	(42)
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Received	0	0
Gross Amounts Not Offset in the Statement of Financial Position, Net Amount	4,516	1,550
Gross Amounts of Recognized Liabilities	0	242
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Liabilities presented in the statement of Financial Position	0	242
Gross Amounts Not Offset in the Statement of Financial Position, Financial Instruments	0	(42)
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Received	0	0
Gross Amounts Not Offset in the Statement of Financial Position, Net Amount	$ 0	$ 200

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Derivative Instruments and Hedging Activity (Details Textual) - USD ($) $ in Millions	1 Months Ended				9 Months Ended
	Sep. 30, 2017	Jul. 31, 2014	Sep. 30, 2013	Apr. 30, 2012	Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Description of Interest Rate Cash Flow Hedge Activities			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%.
Derivative, Net Liability Position, Aggregate Fair Value					$ 0.0
Interest and Debt Expense					1.0
Interest Rate Swap Agreement One [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative, Notional Amount				$ 22.3	18.7
Derivative, Inception Date			Oct. 03, 2013	Jul. 01, 2013
Derivative, Maturity Date			Sep. 29, 2020	May 01, 2019
Description of Interest Rate Cash Flow Hedge Activities				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%.
Derivative, Amount of Hedged Item				$ 22.3
Fair Value, Net Asset (Liability)					0.1
Interest Rate Swap Agreement Two [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative, Notional Amount			$ 35.0
Derivative, Inception Date	Aug. 01, 2016
Derivative, Maturity Date	Jul. 01, 2023
Derivative, Amount of Hedged Item			$ 35.0
Fair Value, Net Asset (Liability)					0.4
Interest Rate Swap Agreement Three [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative, Notional Amount		$ 65.0
Derivative, Inception Date		Jul. 21, 2014
Derivative, Maturity Date		Jul. 21, 2021
Description of Interest Rate Cash Flow Hedge Activities		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%.
Derivative, Amount of Hedged Item		$ 65.0
Fair Value, Net Asset (Liability)					1.3
Interest Rate Swap Agreement Four [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Description of Interest Rate Cash Flow Hedge Activities	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%.
Interest Rate Swap Agreement Five [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative, Notional Amount	$ 40.0
Derivative, Amount of Hedged Item	$ 40.0
Fair Value, Net Asset (Liability)					$ 2.7

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Fair Value Measurements (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Derivatives, Fair Value [Line Items]
Derivative assets - interest rate swaps	$ 4,516	$ 1,592
Derivative liabilities - interest rate swaps	0	242
Interest rate swaps [Member] | Fair Value, Inputs, Level 2 [Member]
Derivatives, Fair Value [Line Items]
Derivative assets - interest rate swaps	4,516	1,592
Derivative liabilities - interest rate swaps	$ 0	$ 242

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Fair Value Measurements (Details Textual) - USD ($) $ in Millions	Sep. 30, 2018	Dec. 31, 2017
Derivative [Line Items]
Derivative Liability, Fixed Rate Debt, Carrying Value	$ 603.4	$ 505.6
Derivative Liability, Fixed Rate Debt, Fair Value	594.8	516.5
Derivative Liability, Variable Rate Debt, Fair Value	$ 14.0	$ 14.0

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Equity Incentive Plan (Details) - Restricted Stock [Member] shares in Thousands	9 Months Ended
	Sep. 30, 2018 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares Outstanding, Unvested restricted stock at beginning of the period | shares	227
Shares Outstanding, Restricted stock granted | shares	50
Shares Outstanding, Restricted stock vested | shares	(65)
Shares Outstanding, Restricted stock forfeited | shares	(1)
Shares Outstanding, Unvested restricted stock at end of the period | shares	211
Weighted Average Grant Date Fair Value, Unvested restricted stock at beginning of the period (in dollars per share) | $ / shares	$ 39.47
Weighted Average Grant Date Fair Value, Restricted stock granted (in dollars per share) | $ / shares	47.73
Weighted Average Grant Date Fair Value, Restricted stock vested (in dollars per share) | $ / shares	35.40
Weighted Average Grant Date Fair Value, Restricted stock forfeited (in dollars per share) | $ / shares	48.28
Weighted Average Grant Date Fair Value, Unvested restricted stock at end of the period (in dollars per share) | $ / shares	$ 42.66

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Equity Incentive Plan (Details Textual) $ in Millions	9 Months Ended
	Sep. 30, 2018 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair Value Inputs Forfeiture Rate	0.00%
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 7.1
Share-based Compensation Arrangement by Share-based Payment Award, Description	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.
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	3 years 3 months 18 days
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	4 years 4 months 24 days
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options	$ 1.5
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate	0.00%