Joey Agree - President and CEO Brian Dickman - Chief Financial Officer.

R.J. Milligan - Raymond James & Associates Paul Adornato - BMO Capital Markets Wilkes Graham - Compass Point.

Good morning, ladies and gentlemen. And welcome to Agree Realty Corporation’s First Quarter 2014 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the formal presentation, the conference will be open for questions. As a reminder, this conference is being recorded.

It is now my pleasure to introduce Joey Agree, President and Chief Executive Officer of Agree Realty Corporation. Mr. Agree, you may begin..

Thank you, Maggie. Good morning, everyone. And thank you for joining us for Agree Realty’s first quarter 2014 conference call. Joining me for today’s call is Brian Dickman, our Chief Financial Officer. The first quarter represented a strong start to the New Year for the company.

Our operating results including approximately 10% year-over-year AFFO growth are reflective of the unique and creative opportunities that our acquisition and development teams continue to execute.

These results were achieved while maintaining our best-in-class balance sheet, as well as the portfolio of high quality real estate that is over 60% lease to investing grade retailers. I am also very pleased that our Board of Directors voted to raise our dividend by nearly 5% while maintaining conservative FFO and AFFO payout ratio.

For the quarter, we acquired nine properties for $22 million at an average cap rate of approximately 8.4%. These assets are leased to 12 different tenants in eight e-commerce resistant retail sectors and are located in eight different states.

During the quarter, we welcome Sherwin Williams, O'Reilly Auto Parts, [Yvette’s Bridal] (ph) Michael Kraft to our portfolio. Additionally, we acquired our first freestanding Buffalo Wild Wings in Indianapolis, Indiana.

On the development front, we announced the commencement of another McDonald's in East Palatka, Florida, delivered our previously announced Wawa project in St. Petersburg, Florida and despite the [forward road tax] (ph) continue to make progress on our join venture in New Lenox, Illinois. The Wawa in St.

Petersburg held its grand opening on April 24, 2014 and our New Lenox project, which is a three-tenant net lease asset to TJ Maxx, Ross Dress for Less and Petco is schedule to be deliver in the fourth quarter of this year.

At the end of the quarter, our portfolio consisted of 139 properties spread across 34 states and encompassing approximately 3.8 million square feet of gross leasable area. The portfolio consists of 131 net lease assets, which generated over 86% of our annualized rent with remainder being derived from our eight remaining community shopping centers.

At quarter end, the portfolio was at 97% occupancy. As of March 31st, the company’s portfolio had a weighted average remaining lease term of approximately 11.4 years, which increases to 12.7 years specifically to our net lease portfolio.

Investment grade retailers generated 61% of annualized rent across the portfolio and 59% when looking only at the net lease properties. We believe these metrics continue to be the strongest among our peer group.

On leasing and asset management front, we are very pleased to have announced the addition of Hobby Lobby to Petoskey Town Center during the first quarter. Hobby Lobby assigned a 10-year lease to replace the former Glen’s market. We anticipate rent to commence by early third quarter of this year.

Additionally, Kmart exercised a five-year extension option to September of 2019 at our freestanding store in Oscoda, Michigan. With that, I’ll turn it over to Brian to discuss our financial results.

Brian?.

Thanks, Joey. Good morning everyone. Inclusive of the requisite disclaimers, please note that during this call the company will make certain statements that maybe considered forward looking under federal securities laws. Our actual results may differ significantly from the matters discussed in any forward-looking statements.

In addition, we will be discussing non-GAAP financial measures, including funds from operations or FFO and adjusted funds from operations or AFFO.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the company’s earnings release which was issued yesterday and is available on our website at agreereality.com. As announced yesterday, total rental revenue for the first quarter increased by 23% over the comparable period in 2013.

Our robust revenue growth continues to be driven by quality investment sourced by both our acquisition and development team. For the first quarter, we reported FFO per share of $0.52 which represents an increase of 6.1% over Q1 2013 and AFFO per share of $0.64 which represents an increase of 10.2% over Q1 2013.

The company paid a dividend of $0.43 per share for the first quarter or $1.72 on an annualized basis. This was an increase of 4.9% over the previous year and represents the company’s 80th consecutive cash dividend. Our payout ratios for the quarter were 83% of FFO and 80% of AFFO. The company’s balance sheet continues to be in a very strong position.

Our total debt to total market capitalization at March 31st was approximately 26% and debt to EBITDA was approximately 4.2 times. These metrics compared to our targeted leverage levels of 35% to 40% and 4.5 times to 5.5 times respectively and applied balance sheet that continues to be geared for additional growth.

Our $85 million unsecured revolving credit facility had only $16 million outstanding at March 31 leaving $69 million of additional borrowing capacity.

Interest coverage was a robust four times and our debt maturities continue to be well staggered with only $17.8 million maturing in the next three years including $9.2 million in June of this year and $8.6 million in 2015. In general, we’re pleased with results for the first quarter and remain well positioned to continue expanding our portfolio.

With that, I turn the call back to Joey..

Thank you for the update, Brian. In conclusion, it was another quarter of significant progress from the company’s operating strategy. We expanded and diversified our portfolio, delivered significant year-over-year earnings growth and maintained our strong balance sheet.

We look forward to continuing to execute on additional opportunities as the year progresses. At this time, we’d like to open it up for questions..

Thank you. (Operator Instructions) The first question comes from R.J. Milligan with Raymond James & Associates. Please go ahead..

Hey. Good morning, guys..

Good morning, RJ..

Joe, I just wondered if, could you give a little bit of color on the Hobby Lobby lease signed? In your discussions with them, was there any concern about their being -- it being a Kmart anchored center and maybe any information or colors to where the rents were relative to the previous tenant?.

And I assume you are talking about the Hobby Lobby in Petoskey obviously? Hobby Lobby, which is currently under construction is, again, that’s a 10-year lease that joined the center was actually in the form of Glen’s market there. Hobby Lobby really didn’t express any concern about co-tenancy with Kmart specifically.

Petoskey is a pretty good retail market. You get synergy with a number of major big box as well as unit box users there. They were eager to get that store moving and open and they are on a schedule to get that opened as soon as possible. So we are excited to have it into the center is obviously a great backfill for the former Glen’s phase.

So just put some color between a Walmart Supercenter as well as a Mayo and Petoskey. The grocery market was just oversaturated and Glen’s couldn’t make it in competition to those two larger former retailers just couldn’t compete on price. So, Hobby Lobby will be joining the center in terms of their rent versus Glen’s.

They are paying nominally more than on a Glen per square foot basis, same lease structure as Glen’s with minimal more investment..

Great. My next question is on the freestanding Kmart.

Is it something as simplest as they just send you a letter and say, we are renewing? Is it a discussion? Is it a negotiation? Did they look already rent concessions just curios how that process works?.

That’s just a notification of them exercising their option there. We had discussions with them as always, but that was just a 5-year contractual option that they exercise..

Okay. I guess my last question and I will yield the floor. It hasn’t been that long since the last quarter conference call.

Just curious what you’re seeing in terms of the acquisition markets, whether or not you’re seeing more or less product come into market?.

Yes. It’s a great question. We’re seeing a material change really in supply. We still think that overall it’s generally supply constrained market. Pricing has reached pre-recession levels as I think everybody really has noticed now and taken notice of.

Again, our job is to continue to find value in that marketplace and to continue to create value on the development side as well as joint venture side.

And then to find opportunities to fit within the context of our portfolio and accretive opportunities for shareholder, and I think both at the investment levels that we are targeting, we are well suited to do so in this market..

Great. Thanks..

Thank you. The next question comes from Paul Adornato with BMO Capital Markets. Please go ahead..

Hi, good morning..

Good morning, Paul..

Hey, Joey. I think you mentioned that 69% of the NOI from the net leased portfolio comes from investment grade tenants. And so the question is to follow on to the discussion about the competition for the acquisitions.

I was wondering what the cap rate differential is between investment grade and non-investment grade tenants and how you think about that mix, is 69 the right number, would you go higher, should you go little bit lower, given where cap rates are, maybe you could give us a little color there?.

I think it’s a great question, Paul. I think on an overall basis at approximately 61% our portfolio and that’s overall not inclusive to the net leased portfolio we believe has the highest concentration than exposure to investment grade retailers in the sector. I think in terms of pricing differential, that’s a wide answer.

We can go on for pretty long period of time.

We’ve seen cap rates compressed truly across the board and cap rates range for an investment grade credit really range from we will call it 4.5 for the lower price point ground leased assets typically 20-year terms with [Kohl's] (ph), McDonalds and Walgreens, all the way up to probably, lets call it six in three quarters and they are not approaching seven anymore.

So there is approximately 300 basis point band where you see investing grade exposure, investment grade cap rates depending on multiple different factors, price point, lease structure, obviously real estate and regionality plays a piece into that. Square footage of the back to the fungibility of those boxes.

So there is a number of factors that play in to that. We have exposure across -- in the existing portfolio across all of those peers within that 300 basis point -- 200 really basis point band.

I think in terms of pricing differential, we have seen that compressed between the investment grade and non-investment grade retailers but we think there is minimally round number of 100 basis points and upwards, really depending on credit used and factor as well as lease term. So our focus is maintaining a first-in-class portfolio.

We believe we have room and I think you’ve seen that in our acquisition to data add, not investment grade exposure.

It’s really sourcing opportunities that we believe our e-commerce resistant as well as reception resistant retailers, strong underlying real estate in stores that are well performing that we understand not only the residuals but also the four-wall performance to that store. And I know that's a long and circular answer, but I think it’s a big topic.

It’s obviously the hot bun within that lease and it really gears toward our strategy on a go-forward basis..

Okay. Great.

And I was wondering if you could just spend a minute talking about the existing vacancies and if there are any known additional move outs over the next couple of quarters?.

This is Brian. In terms of existing vacancy other than the Hobby Lobby that's factoring the growth that Joey spoke about 42,000 square feet, vacant as of this quarter but spoken for it. It’s really just some various small shops at the shopping centre, so nothing material there.

And in terms of go-forward, we have the handful of leases coming due later this year that we are in discussions and those situations are fluent..

Okay.

And just one more for the new guys, Brian, I was wondering if you could, may be just tell us what attracted you to the company and what’s your mandate over the next couple of quarters?.

Yeah. Good question. I appreciate that. I look forward to catching up with you more going forward.

Spoken a little bit about on the last call but in simple terms I think, what you have here is the really interesting combination of a small cap company with lot of attributes of almost, a startup type company with the leadership that’s here and the potential that we have to grow and you combined that though with 20 years of public company, actually 20th anniversary was just about 10 days ago.

Our legacy and the history and the track record in the public markets in 40 years in real estate, so that combination was very attractive to me and I happened to have a lot of exposure, too many experiences and that would factor in my banking careers. So it just feels like a good stuff.

As far as mandate, it’s really just to continue what Joey and the rest of the team here accomplished over the last 12-18 months and really, three and a half, four years since the acquisition platform and that’s just to diversifying grow really kicked in full strength. So we look forward to continuing that progress as we go forward..

Okay. Great. Thank you..

Thanks..

Thank you. The next question comes from Wilkes Graham with Compass Point. Please go ahead..

Hey, good morning guys..

Good morning, Wilkes..

Hi, Joey. As R.J. said, there hasn’t been that long since the last earnings call, so I don’t think much has changed. But maybe just even though it’s a little early, can you address any opportunities or challenges you see in the 400,000 square feet that rolls next year.

It looks like a number of them are Kmarts and the shopping centers and I know you just resigned a Kmart early.

So, is that something you’re going to look to do as well with those and are there any other interesting details from that role in ’15?.

It is all of it. We are obviously working through a number of those expirations or maturities. Currently, what will be in the future? A primetime to do so is at RECon at the Annual Real Estate Convention in Las Vegas to gain further clarity and insight.

I’d tell you that a number of those, this is vast majority or frankly be at even potentially all of those expirations are within the shopping center portfolio, which we are -- as stated and we’ve executed. Historically, we will continue to look for opportunities either to divest or repositioning on those assets.

And we hope to have some news on that hopefully by Q3..

Okay. Thank you..

Yeah..

Thank you. (Operator Instructions) As we’re showing no further questions, I would like to turn the conference back over to Mr. Agree for any closing remarks..

All right. I think that about wraps it up. Thank you everybody for joining us. And we look forward to speaking with you again next quarter..

That does conclude our conference. Thank you for attending today’s presentation. You may now disconnect your lines..