Good morning ladies and gentlemen and welcome to Agree Realty Corporation’s Third Quarter 2013 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. Good morning everyone and thank you for joining us for Agree Realty Corporation’s Third Quarter Earnings conference call. With me here this morning is Al Maximiuk, our Chief Financial Officer. As everyone is aware, Agree Realty Corporation is a fully integrated, self administered and self managed real estate investment trust focused on the acquisition and development of net lease properties throughout the continental United States. During this call, we will make certain statements that may be considered forward-looking under federal securities laws. The company’s actual results may differ significantly from the matters discussed in any forward-looking statements. Let’s get started with our real estate operations for the third quarter. On the acquisition front, we closed on six properties during the quarter for an aggregate purchase price of approximately $27 million. The properties are leased to six tenants located in six states representing five different retail sectors. The properties acquired during the third quarter were net leased to Tractor Supply in Madisonville, Texas and Forest, Mississippi; Mattress Firm in Baton Rouge, Louisiana; AutoZone in Sun Valley, Nevada; LA Fitness in Rochester, New York, as well as BJ’s Wholesale and Waffle House in Allentown, Pennsylvania. The seven properties acquired during the quarter had an average cap rate of approximately 8.6%. Since the start of our acquisition program in 2010, on our $230 million of acquisitions the average cap rate has been approximately 8.25%. For the nine months, our acquisition activity totaled approximately $70 million. Year-to-date, we have acquired 16 net lease properties located in 13 different states representing nine different retail sectors. Approximately 43% of the annual rental acquired year-to-date is derived from investment-grade retailers. During the quarter, we delivered our third Wawa development located in Casselberry, Florida. The store held its grand opening on July 24. Total project costs…

Thank you, Joey. Good morning everyone. I will be providing a few highlights of the results for the quarter. Please note that we will be discussing non-GAAP financial measures, including funds from operations and adjusted funds from operations. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the company’s earnings press release issued yesterday. This release is available on our website at agreerealty.com. The company is pleased to announce that our revenues for the third quarter 2013 increased 26% year-over-year from $9.2 million to $11.6 million. This strong increase in revenues is due to the execution of our acquisition and development program while continuing to maintain high occupancy levels. Funds from operations, or FFO for the quarter increased by 20% to $7,255,000 from FFO of $6,052,000 for the third quarter of 2012. FFO per share for the third quarter of 2013 was $0.54 per share compared to $0.52 per share a year ago. Excluding the impact of expensing acquisition costs included in general and administrative expense, FFO would have been $0.56 per share for the quarter ended September 30, 2013. Adjusted funds from operations, or AFFO for the third quarter 2013 was $0.55 per share compared with AFFO of $0.54 per share for third quarter 2012. Excluding the impact of expensing acquisition costs included in general and administrative expense, AFFO would have been $0.57 per share for the quarter ended September 30, 2013. The company’s revenues for the nine months of 2013 increased 25% year-over-year from $26.2 million to $32.7 million. For the nine months, FFO increased 18% to $20,442,000 compared to FFO of $17,283,000 for the year prior. This equates to $1.54 per share for the nine months in 2013 compared with FFO of $1.51 per share for the prior year.…

Thank you for the update, Al. At this time, we’d like to open it up for questions.

We will now begin the question and answer session. [Operator instructions] Our first question will come from RJ Milligan of Raymond James and Associates. Please go ahead. RJ Milligan – Raymond James: Hey, good morning guys. Joey, I was wondering if you could talk about the acquisition environment – you guys did a lot in the quarter – sort of where you’re seeing cap rates trend since we’ve seen the volatility in the 10-year over the past couple months, and what you’re seeing in terms of volumes, number of deals you guys are looking at.

We’re seeing significant deal flow, nothing interrupted from the first or the second quarter of the year. In terms of cap rates, we really haven’t seen much cap rate expansion across the board. Obviously there are significant dollars entering the space. The 10-year has pulled back recently, but we haven’t seen that cap rate expansion. We’re focused on truly sourcing opportunities where we can add value, off-market opportunities that frankly aren’t correlated necessarily to market cap rates. RJ Milligan – Raymond James: Okay, and you’re—switching over to occupancy in the quarter, it just ticked up 100 basis points. Just wondering, given some of the weakness we’ve seen in retail sales, is there anybody in the portfolio that you guys are concerned about on your watch list?

No new entrants on our watch list. We’ve continued to watch Rite Aid same store sales improve. At the same time, we closely monitor any tenants in the portfolio, including the shopping center portfolio, including same store sale trends or balance sheet issues that might arise. But we’re pretty comfortable with the portfolio to date. RJ Milligan – Raymond James: Okay. I guess along those lines, do you have any update on—I know you were looking to strategically dispose of some of your assets that had Kmart exposure, and I was wondering—and you guys certainly got rid of, I guess, some of the lower tier properties. Any more updates there? Are you in discussions with people, or is it something that you’ve sort of put on hold right now?

Yes, by no means are we on hold. We continue to enter into discussions and we hope to have an announcement by year-end there, both potentially on the disposition front as well as strategic transactions, which I talked about in prior quarters. RJ Milligan – Raymond James: Okay, thank you guys.

Our next question will come from Craig Kucera of Wunderlich Securities. Please go ahead. Craig Kucera – Wunderlich Securities: Yes, hi. Good morning. I had a question – just as you look at your underwriting this quarter and into the fourth quarter, as the overall retail environment sort of decelerated, were there any sectors that you took a look at and you thought really were looking as if they were going in the wrong direction and that you might want to steer away, whereas a quarter or two ago they might have looked more appealing?

Yes, that’s a good question, Craig. I don’t think that we steered away from any sectors due to any macroeconomic conditions or any trends within any sectors. We’re more focused on strategically adding to the portfolio assets that we feel have an imbalance in terms of sectors or we are underweight, and we continue to execute. I think you’ve seen us complement our portfolio of auto parts retailers as well as wholesale clothes with the BJ’s acquisition. We feel that we have a significant number of retail sectors where we still remain underweight and we have an opportunity to increase exposure, frankly. Craig Kucera – Wunderlich Securities: Okay, great. And RJ kind of hit on this, but I’d like to go back to the Kmart issue. You’ve got a number coming due—of leases kind of coming due for renewal in the next couple of years, particularly at some of your shopping centers. Are they giving you any feedback, or is that something that you’re just going to address later as you approach your strategic plan and dispositions?

We’re in constant and consistent dialogue with Sears Holdings. In 2014, I believe we have three Kmarts maturing. Two of those are actually the freestanding stores, which are well performing stores, so near term we’re focused on continuing to strategically divest or reposition assets, or even possibly monetize out lots as well. But at the same time, we’re constantly in dialogue with Sears Holdings on store performance and opportunities to create value in the portfolio. Craig Kucera – Wunderlich Securities: Okay. Finally, you’ve done a lot of build-to-suit in the past and I think it’s—I don’t know, makes 40, 50% of the portfolio – quite a bit. Now you’ve transitioned into the joint venture capital solutions program. What does that give you relative to what you used to do more in the build-to-suit plan?

We really view our joint venture capital solutions program as an inorganic development pipeline. It’s an opportunity for us to leverage our balance sheet and our development expertise and partner with private developers who have relationships as well as projects that they’re looking to partner with a stronger balance sheet to bring to fruition. So we had two projects thus far that we’ve announced this year – the Hobby Lobby in Grand Forks, which is open and paying rent, and then our recently announced project subsequent to quarter end in New Lenox, Illinois where we will be constructing a TJ Maxx, Petco, as well as Ross Dress for Less. So the joint venture capital solutions platform for us is really the third leg to the stool. We have our acquisition platform, which obviously originated in April of 2010, our 40 years of development history, and now the joint venture platform which seems to be firing on all cylinders. Craig Kucera – Wunderlich Securities: And how do the—if you were just to compare sort of on an apples-to-apples basis the development yields versus doing it on balance sheet yourself versus doing the joint venture, how do they really stack up?

I think you’ve really got to look at individual transactions to look at yields and comparable yields to our quote-unquote organic development pipeline. That said, the yields are very strong. We won’t give specific yields on the call today, but they are substantially above market cap rates where we could acquire, but I think it’s fair to say that they typically do not reach our hurdle for an organic development where we’re going through a two or two and a half year development process. Craig Kucera – Wunderlich Securities: Okay, thanks.

Our next question will come from Michael Gorman of Janney Capital Markets. Please go ahead. Michael Gorman – Janney Capital Markets: Thanks, good morning guys. Just wanted to go back to the acquisition environment for a minute. I was wondering if you could talk about maybe the competition that you’re seeing in the marketplace, or if there has been any reduction in buyers because of some of the volatility in the financing markets, or just any drop-off overall because of interest rate sensitivity.

Good morning Michael. We really haven’t seen a drop-off in terms of competition. As everyone is aware, there is non-traded capital in the space, obviously traded capital in the space. We see 1031 dollars participating in the acquisition market, private capital, foreign capital. It’s really across the board. In our typical wheelhouse where we play in the acquisition realm, it’s a price point of approximately a few million dollars, and in that wheelhouse you see a significant amount of competition along with a significant amount of capital chasing yield. I don’t think—obviously spreads have contracted in terms of the 10-year on an overall basis ticking upward, and as I mentioned, obviously we’ve seen that pull back a little bit in recent weeks. We haven’t seen a significant drop-off in competition, nothing material. That said, we’re acquiring $27 million in the third quarter, a little bit over $70 million year-to-date. We really are surgical and strategic in the assets that we chase and the assets that we put paper out on, and we’re not entering into a bidding war or an auction-like environment. We’re aware of our cost of capital and we’re aware of the spreads that we need to create to be accretive to our shareholders. Michael Gorman – Janney Capital Markets: Sure, okay. Good. And keeping in the lines of being surgical, I’m kind of interested if you could talk a little bit more about the second joint venture development that you’re working on, or the one that you just announced in Illinois, kind of how you approached, how it came about. It seems like a little bit more of a hybrid between a traditional triple-net and a shopping center, and just maybe some of the economics of the leases in terms of bumps or just kind of how that came about.

Sure, and it’s a great question because it kind of dovetails with how we work on a repeat basis with partners. Our partner in the New Lenox project is actually a former seller of two assets that we acquired, an LA Fitness as well as (indiscernible). They had developed the power center where this project is located, which is anchored by WalMart and Minard’s, as well as a number of (indiscernible). They were looking for a partner to come in and complete the project, wrap up the leases, complete entitlements, and then pull permits and start construction, which we did to last week. So that project is three essentially triple-net leases, so it’s Ross, TJ Maxx, as well as Petco – all three brand-new entrants into the portfolio. So I think that project is really symbolic of the types of opportunities that we’re capitalizing on. We love the real estate, we are extremely fond of those three tenants. They are all 10-year leases with traditional bumps at the five-year point. Michael Gorman – Janney Capital Markets: Okay great, and then maybe just one last one. Al mentioned the payout ratio at about 76%. That’s trending towards the low end for the sector. I’m just kind of curious how you guys are thinking about the dividend here versus some free cash flow to continue the development pipeline and the expansion pipeline, just how you’re approaching that decision with the board.

Yes, we are obviously trending toward the low end of that bracket. Typically on an FFO basis, we’re around 75 to 85%. Our AFFO and FFO are pretty tight currently. The board is consistently and constantly looking at our payout ratio, looking at the free cash flow on an absolute basis, and what the best use of that capital is. The board reviews it quarterly, and they are obviously aware of the downward trend in our payout ratio and the possibility or the potential to increase the dividend in the future. Michael Gorman – Janney Capital Markets: Sure, great. Thanks guys.

And once again, if you would like to ask a question, you may press star then one on your touchtone phone. The next question will come from Wilkes Graham of Compass Point Research & Trading. Please go ahead. Wilkes Graham – Compass Point Research & Trading: Hey, good morning guys. A couple quick questions – one, can you talk at all about the spread or targeted spread you might have between acquisitions and dispositions?

I don’t think there’s necessarily a targeted spread, a correlating targeted spread between acquisitions and dispositions, only because when we dispose of an asset, typically we’ve deemed it non-core for a reason. It could be on credit watch, as RJ asked earlier in the call. It could be that we’re looking to rebalance a geographic sector or tenant concentration. So while we’re obviously trying to minimize that spread, at the same time we’re looking at the underlying real estate and we’re taking a bottom-up approach as well as a top-down approach from a credit perspective, and we’re determining if it would fit within our portfolio for the long term. We’re obviously long term holders and that’s the nature of this business, so there’s a number of different motivations on the disposition front that necessarily don’t tie directly to the acquisition front. Wilkes Graham – Compass Point Research & Trading: That’s fair. Maybe along the longer term front, I’m curious if as you get larger and you continue to face competition, not only from some of the public guys but certainly from the private capital that’s out there, and given that you do place a big emphasis on the underlying real estate in these acquisitions, as you grow into the future, would you consider other property types like industrial or single-tenant office or something like that, or do you think you’ll stick just to retail?

I don’t have a crystal ball, but I’ll tell you that we have no plans anywhere in the near term to venture into other property types. The net lease retail sector is a wide and disparate sector. I don’t have a crystal ball going out years or a decade in the future, but I’ll tell you that I personally am not a fan of the industrial or office net lease sector. That said, if we found the right opportunity which happened to have one or two or a couple of assets or a minimal amount of NOI tied to it and it fit in a portfolio, I think we would have to deal with it. But we are highly and keenly focused on continuing to execute in the context of the continental United States on the net lease retail sector. Wilkes Graham – Compass Point Research & Trading: Great, thanks Joey.

And once again, to ask a question it is star, then one. The next question will come from Daniel Donlan of Ladenburg Thalmann. Please go ahead. Daniel Donlan – Ladenburg Thalmann: Thanks and good morning. Joey, there’s been a lot of talk in the triple-net space about scale. Was just curious how big you think you could grow this company before you’d have to really start looking at an increase in G&A? Do you think if you double the size of the asset base that the G&A could stay roughly the same or just slightly pick up? What’s your thoughts there?

I think as demonstrated previously by participants in the sector, by our peers, this business is highly scalable. That said, as the portfolio grows, there’s accounting, administrative assets that we think we’ll need to bring on board, but we’re comfortable today at 130 assets with our G&A. The very nature of the leases, the very nature of the portfolio today is well suited to run with the G&A that we have currently. In addition to that, as we’ve divested of shopping center assets over the course of the last couple years, we continue to eliminate CAM and administrative burden that comes with that in terms of accounting as well as property management. So I think we’re increasing our efficiencies, we’re looking at our systems, we’re looking at our processes, we’re constantly improving those processes to create efficiencies to continue to scale this portfolio. Daniel Donlan – Ladenburg Thalmann: Okay. I guess obviously being located in Detroit probably helps out a lot from that side as well, relative to, say, New York or San Francisco, I would imagine.

We are all frequent flyers on Delta here in Detroit, so yes. Daniel Donlan – Ladenburg Thalmann: And just on the term loan – I’m sorry if I missed it – did you guys give the length of the term loan?

Yes, that’s a seven-year unsecured term loan, so we’re very pleased to enter the seven-year unsecured space. As Al mentioned, that’s a $35 million term loan with a $35 million accordion, fully swaps out for those seven years at 3.85 today. We’re very pleased to have our banking partners allow that deal to come to fruition. Daniel Donlan – Ladenburg Thalmann: Okay, and then on the Hobby Lobby, what was the total cost of that project?

Total cost of Hobby Lobby was approximately $5.7 million, $5.8 million. Daniel Donlan – Ladenburg Thalmann: Okay. And then lastly going back to Michael’s question, the dividend policy, is there going to be something where you’re going to look to raise it every first quarter, or could it be that you have one raise one year and then maybe another year you have two raises, depending on acquisition growth? Is there going to be any type of—you know, some of your peers may raise it every fourth quarter or they raise it every first quarter. How should we be looking at that modeling going forward?

It’s a good question and obviously a very pertinent question. The board doesn’t have a policy in terms of when dividends—you know, obviously first and foremost, they’re reviewing our payout ratios on a consistent basis, but the board doesn’t have a policy on when any dividend raise is appropriate or applicable. I think—and I’ve stressed this to the board and the board fully appreciates that a level of consistency and predictability is important in this space. Obviously it’s a yield-oriented space, and so that’s significant. So I think what you’ll see—what I anticipate you’ll see is a level of predictability, stability and consistency that gives a level of awareness to our shareholders. That said, there are transactions, there are always things moving in and out of the portfolio as well as a pipeline of opportunities that board considers. Daniel Donlan – Ladenburg Thalmann: Okay, that’s it for me. Thank you.

Showing no additional questions in the queue, this will conclude our question and answer session. I would like to turn the conference back over to Mr. Joey Agree for his closing remarks.

That about wraps it up. I would like to thank everybody for joining us this morning, and we look forward to hearing from everybody next quarter.

Thank you. Ladies and gentlemen, the conference has now concluded. We thank you for attending today’s presentation. You may now disconnect your lines.