Welcome to the Agree Realty Fourth Quarter and Year-End 2014 Conference Call. [Operator Instructions]. Now I would like to turn the conference over to Joey Agree. Mr. Agree, please go ahead.

Thank you, Keith. Good morning, everyone and thank your for joining us for Agree Realty's fourth quarter and year-end 2014 conference call. Joining me today is Brian Dickman, our Chief Financial Officer. Overall, I'm pleased with our 2014 results and the success we've had executing on our operating strategy. The company's persistent but disciplined approach to capital deployment has enabled us to expand and diversify our portfolio, generate strong returns for our shareholders and maintain a best-in-class balance sheet. For the year, we invested a record $165.3 million in high quality properties net leased to industry-leading retailers. We acquired 77 properties for $147.5 million and developed five additional properties for an aggregate cost of $17.8 million. These 82 properties are located in 24 states and leased to 34 different tenants, representing 15 diverse retail sectors. The weighted average cap rate on our 2014 investments was 8.2% and the weighted average lease term was 14.1 years. The impact of this investment activity on our portfolio has been significant. Net of dispositions, we increased annualized rental income by over 25%, reduced the rents generated by our top 10 tenants from 65% to 52% and reduced our concentration in Michigan from 36% to 28%. Meanwhile, rental income generated from investment grade tenants remained a sector-leading 56% [ph] and our weighted average remaining lease term also remained on the highest in this sector at 11.9 years. On the disposition front, we sold four properties in 2014, including three non-core Kmart-anchored shopping centers. These dispositions reduced the rental income derived from our shopping center portfolio to approximately 8%, as well as Kmart rental income to less than 3%. While the sale of six Kmart-anchored shopping centers over the last three years has generally been dilutive to earnings, the net result of these dispositions combined with…

Thanks, Joey. Good morning, everyone. As a reminder, please note that during this call, the company will make certain statements that may be considered forward-looking under federal securities law. Our actual results may differ significantly from the matters discussed in any forward-looking statements. In addition, we discuss 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. As announced yesterday for the fourth quarter of 2014, the company reported rental revenue of $13.5 million, an increase of 21.4% over Q4 2013. FFO for the quarter was $9 million, an increase of 13.8% over 2013 and AFFO was $9.1 million, an increase of 12.7% over 2013. On a per share basis, FFO was $0.57 and AFFO of $0.58, each increased by approximately 1.8% over Q4 2013. For the full year-ended December 31, 2014, rental revenue of $49.6 million was an increase of 21.1% over the full year 2013. FFO of $33.3 million and AFFO of $33.9 million increased by 17.4% and 17.2%, respectively and on a per-share basis, 2014 FFO of $2.18 and AFFO of $2.22 both increased by approximately 3.8% over 2013. As we continue to scale the platform, we're seeing increased efficiencies with regards to overhead costs. G&A expenses were approximately 12.4% of revenue in 2014, a decrease of 130 basis points compared to 2013. We've reduced this ratio by 350 basis points in just two years and expect this trajectory to continue. On the disposition front, the company sold two properties in the fourth quarter for gross proceeds of approximately $6.2 million. Both were Kmart-anchored shopping centers, Petoskey Town Center in Petoskey, Michigan which we discussed on the last call and…

Thank you for the update, Brian. Again, we're pleased with our performance and we remain committed to the execution of our operating strategy. We continue to deploy capital in a disciplined manner, improving and diversifying our industry leading portfolio, delivering positive returns to our shareholders while maintaining a strong balance sheet. Since the launch of our acquisition platform in 2010, we have grown our asset base by an average of 25% per year while adhering to our real estate-centric, bottoms-up underwriting approach. We've built a fantastic team with the capability to continue to execute at a similar pace and we're excited about the pipeline we developed thus far in 2015. At this time, we would like to open it up for questions.

[Operator Instructions]. The first question comes from Daniel Donlan with Ladenburg Thalmann.

I was looking at the press release and noticed that the -- your portfolio towards the end is 217 properties it looks like, versus 208 at year-end. Have you guys acquired stuff between now and the end of the quarter?

[Technical Difficulty] deploy capital regularly, periodically whether it's a making an acquisition, or just as we get some [Technical Difficulty] in the portfolio, we will release that. But yes, that's just the difference about what we've [Technical Difficulty] 2015 to-date.

Okay. And then as far as the threefold increase in due diligence that you guys have done since two years ago. Has that just been the number of people? Has it been, just simply there is more opportunities, what is really driven that? Is it you just have more capacity, given that you have got more people on board? What's driving that?

[Technical Difficulty]. Obviously, we've seen the platform continue to scale and gain traction in the marketplace and really gain -- and at the same time with the -- been material with the addition of [Technical Difficulty]. I would tell you that the growth -- thus far [Technical Difficulty].

The next question comes from Collin Mings with Raymond James.

A few questions, one, I think, Joey, you guys have made great progress diversifying away from Michigan. I think last quarter you highlighted that geographic diversity was important to you, but not necessarily at the top of your priority list, as far as looking at acquisitions. Can you maybe share with us your goals on what you would like to bring that Michigan exposure down to and maybe over what time frame?

Yes, Collin, it's a good question. We've been consistent in saying that geographic diversity is really the third leg of the stool for us. We've been most focused on tenant and sector and then geography continues to be the third. The majority of our Michigan portfolio is Walgreens that we've developed within the state of Michigan. So I doubt you will continue to see that number come down naturally, as we increase the size of the portfolio and as well as we make some selected dispositions. In terms of a target, I think in the medium-term, getting that down to approximately 15% is probably a good number. I tell you that could swing up or down, dependent upon opportunities both on the acquisition and disposition front.

And then, just how are you -- at what point or how are you thinking about disposition activity this year? Are there any other shopping centers, or even Kmart assets in particular that you are marketing? I think in the prepared remarks, you were alluding to a lot of what's left is well-suited towards kind of re-tenanting opportunities. Can you just put a little bit more color around that as it relates to the prepared remarks?

Sure. I think we will look in 2015 to potentially dispose of additional shopping centers, if the opportunity presents itself. At the same time, we will look at the net lease portfolio and see if there are any opportunities, either based upon cap rates, four wall performance, credit concerns, concentration. As the portfolio expands and grows, we obviously have more opportunities to divest of that. And we consider ourselves to be active asset managers. Every day that we hold an asset, frankly, is another day we choose not to sell it. So as we progress through 2015, we will consistently be looking at the shopping center portfolio. As we mentioned in the press release, we now have essentially two outlots that we have been able to create, both for industry leading operators within their respective sectors in the shopping center portfolio. One is at a signed LOI, one is at a signed lease. So, we're constantly looking at that portfolio which today, frankly is quite small for opportunities. So I think we will have some news as 2015 progresses. We're looking forward to wrapping up these two opportunities that we've been able to harvest internally and then, potentially look to source some additional divestments.

Okay. I know it's early and it could vary as the year progresses, but any sort of sense on what type of cap rates may be on the assets that you are looking to divest within the shopping center portfolio? What type of cap rates those might go for?

I think it is fair to say, we've been consistent that our goal as we have really cut the shopping center portfolio down now to six assets, is over the course of the last four years, as we have been seeing particularly from the bottom. Assets where we didn't see opportunities either to create value or either through re-tenanting development or outlot creation or even extension of leases which we have undertaken which we undertook three in 2014 on Kmart-anchored assets. So I think the cap rates that we've divesting of that Brian spoke to in the mid-teens and then redeploying at round numbers at an 8% cap, we're not going to see that negative -- really that negative dilutive effect on the redeployment. We think these shopping centers are of much higher quality than the shopping centers that we've divested of Again, some of these assets are near-term priorities to dispose of. Other ones, we think there is a business motivation, or a rationale to continue to hold them and potentially improve NOI.

And then, as far as your tenant credit mix now, as far -- stands at like 56% investment grade rated. Just as it relates to the acquisition environment, you guys have addressed just kind of the robustness as far as your deal pipeline. Can you just talk a little more about the competition for acquisitions, for properties with investment grade rated tenants? Any sort of cap rate differential you are seeing between that and maybe properties with lower quality tenants?

Sure. I think competition remains robust, really across the board in the net lease space. And the majority of the competition we see isn't from our publicly traded peers, that analysts such as yourself on this call are covering. There are $1031, there is the nebulous foreign capital that is chasing these assets. There is private investors and private funds -- so competition remains pretty fierce in this space. I think most importantly, it's a massive space. We're working on opportunities that we either source off market through relationships or through different avenues and the amount of volume that we do in context to the aggregate volume that gets transacted on an annual basis, is just a fraction. So our job and our MO, is really to maintain our entrepreneurial spirit here and to source and uncover opportunities that aren't widely marketed through brokerage networks, or are widely marketed throughout REIT-dom, net lease REIT-dom. Net lease assets in general, we see a bifurcation. Investment grade assets are trading in the 5%s to low 6%s, obviously, that is dependent upon a number of factors, most importantly term. And then -- sub investment grade or unrated assets are trading in the 7%s, up to maybe a low 8%. And again, our job is to find opportunities within that -- both realms there, investment grade as well as unrated or sub investment grade and we were highly successful in doing so in 2014 and our pipeline continues to grow for 2015.

Okay. And then just looking for a little bit further clarity as it relates to one of the deals in 2014, just as far as the Burger King transaction with Meridian restaurants. Can one, I think if I'm not mistaken, I think the deal was for 11 of like 55 Burger King's that Meridian had. Is there potential to take down more properties from them? And then, or could that lead to additional deal flow? And then also, is it -- as far as the lease, is it just backed by Meridian, the franchisee or is there some sort of kind of corporate or parent guarantee there on the leases?

So that is a lease with the franchisee, right? That is not a Burger King lease, I would tell you that which is obviously common in the franchise restaurant space. I would tell you that, we're working with all of the tenants that we have transacted within 2014 or previously, always looking to grow those relationships and create new opportunities, both on the acquisition front as well as the development front. You want to give any more specifics on the lease front?

No, I would just say in general, Collin, it varies when you see the number of stores that the guys operate. It may be that they don't own those stores. They may already have tenant landlord relationships with other landlords there. So as Joey said, whether it's an existing properties that they are operating, that they may or may not own or new properties, as they acquire different operations, we continue to further those relationships. On the lease itself, is fairly standard in this space from what we've seen, master leasing, rent bumps 20 years. We will always get the best credit on the lease that we can from an entity perspective and guarantees and wraps around it, if we can. This one is with the franchisee as Joey mentioned.

And the next question comes from Craig Kucera with Wunderlich Securities.

I may have missed this, early in your commentary, so I apologize if you have already addressed this. But you had a nice drop in your real estate taxes this quarter. Was that the result of winning some appeals, or were there any timing issues with that? Or was that sort of a run rate going forward?

Yes, it's really timing, Craig, on a lot of these. Don't forget we get reimbursed from our tenants for real estate taxes 100% and it varies in terms of some [inaudible] of how these tenants pay. Some tenants will pay us back upon receipt. We pay the bill and they reimburse us immediately. Other guys pay estimates throughout the year and then we reconcile at the end of the year. And then you also have some nuances when we acquire properties depending on when taxes are due, in terms of how those get paid upon close and subsequently reimbursed. So I think the annual numbers on real estate taxes are really where you want to look and wouldn't extract too much on a run rate basis from any single quarter

And going back to your six remaining shopping centers, can you give us a quick overview? I note you have some Kmart tenant, that's a pretty significant tenant, but how many of those are Kmart anchored and who are the other anchors?

Yes, sure. Let's take a couple of minutes to run through them. So Lakeland Plaza on Lakeland, Florida where Best Buy just extended, is a Best Buy, [inaudible] and JoAnn anchored center. We really see that as an institutional quality B market asset. No Kmart anchor at that center. Two Kmart anchored centers, where Kmart is really paying just north of a couple of dollars a square foot in Capital Plaza in Frankfort, Kentucky, where we have executed the ground lease with an industry-leading fast food operator as well as Mount Pleasant, Michigan which is directly across from university in the primary retail trade area. Marshal Plaza, here in Michigan, where it is a very high-performing Kmart store where Kmart just recently in 2014 extended that lease, that store is doing well north of $10 million on an annual basis in sales. Ferris Commons in Big Rapids, that is the last store that we previously announced that Kmart would be vacating, again, that is an university town, primary retail corridor. Kmart's lease expires towards the middle of this year, this summer. And we see the potential opportunity, either to redevelop that space or dispose of the asset and we have LOIs from a couple of national retailers to take a portion of the Kmart box. That is really the rundown on the remaining six shopping centers in the portfolio there. So like I said, our strategy was to divest from the bottom over the course of the last few years. And what we have left, we're very comfortable with either the store performance, the underlying real estate, or the residual values to those boxes.

Looking at development, you completed some projects last year, within the majority joint venture capital solution program and there is a mention of a project in Kentucky. Can you give us a little color on the dollar amount of that and is that the only development that you currently have underway today?

So the project in Kentucky that you are referencing, is the outlot that we recently carved out which I just mentioned, out in front of the Kmart at Capital Plaza in Frankfort. And I think that is probably the most important testament to the underlying real estate, both there at Capital Plaza in Frankfort, as well as Lakeland Plaza in Lakeland, Florida. Creating those outlots, adding the fast food retailer that we're adding in Capital Plaza and then adding the coffee retailer that we have executed an LOI and Lakeland, is really a testament to the underlying real estate, the retail synergy as well as the traffic counts. So the project you’re referencing, is that fast food operator. It's about a $500,000 total cost. It is an as-is ground lease, 20 year term, and as I mentioned previously, that ground lease is paying nearly 50% of the NOI that Kmart is paying on the 85,000 square foot box in the rear.

Thank you and the next question comes from Wilkes Graham with Compass Point.

Really just one quick question and hopefully you didn't mention it before. I think I ask this every now and then. But just curious, with $150 million almost of acquisitions that you bought last year, how you see your scale going forward? What is your appetite is for acquisitions and developments on an annual basis going forward? Again based on your current staff, as well as what you're seeing in the market?

Right. That is a great question, Wilkes. Obviously, we talked earlier about the scale and the growth of our acquisition platform. And given our pipeline and given really the improvements in terms of processes and systems that we have undertaken, the people that we have added, we feel like we're operating at a very high level right now. Given our pipeline, the traction that we're seeing in the marketplace, we're looking to build upon last year. And I'm pretty comfortable, absent any unforeseen circumstances that we're going to be able to close on close to $1 million this year [Technical Difficulty].

[Operator Instructions]. All right, as there is nothing more at the present time, I would like to turn the call back over to management for any closing comments.

Great, thank you, that about wraps it up, everyone. Again I would like to thank everyone for joining us and we look forward to speaking to you, when we report first quarter results. Thank you.

Thank you. This concludes today's teleconference. You may now disconnect your lines. Thank you and have a nice day.