Good morning and welcome to the Agree Realty Third 2016 Earnings Conference Call. All participants will be on listen only mode. Should you need assistance please signal a conference specialist by pressing the Star key followed by zero. After today's presentation there will be an opportunity to ask questions. To ask a question you may press Star then 1 on your touch tone phone. To withdraw your question please press Star then 2. Please note this event is being recorded. I would now like to turn the conference ever to Mr. Joey Agree. Please go ahead.

Thank you, operator. Good morning everybody. And thank you for joining us for Agree Realty’s Third Quarter 2016 Earnings Call. Joining me this morning is Matt Partridge our chief financial officer. We are very pleased to report that we had another excellent quarter as we continue to execute in all aspects of our operations. Strong activity across our three external growth platforms, opportunistic dispositions, and a number of strategic capital markets transactions drove robust year-over-year per share earnings on growth Let's start off with our investment activities. Total investment volume for the quarter was approximately $54 million as we invested in 17 high quality retail net lease properties. Of those 17 real estate investments 14 properties were originated through our acquisition platform resulting in total quarterly acquisition volume of approximately $49.5 million. The acquired properties are located in 11 states in our lease of 13 national and super-regional tenants. These tenants operate in 11 diverse e-commerce and recession resistant retail sectors including the crafts and novelties, farm in rural supply, grocery, specialty retail, discount, and auto parts sectors. The properties were acquired in a weighted average calf-rate of 8% with the weighted average remaining lease term of approximately 10.6 years. On the development and partner Capital Solutions front we completed and brought online three projects during the quarter with aggregate costs of approximately four point six million dollars. The projects have a weighted average remaining lease term of twenty years. Our activity throughout the first nine months of the year has been robust. We've invested a record $246 million dollars into 66 high quality retail net lease properties in 20 diverse retail sectors. Of our 66th investment through September 30th, 60 properties were sourced through our acquisition platform representing total acquisition volume of $234 million. We've acquired these properties to…

Thanks, Joey. Good morning everyone. Before I began, let me quickly run through the cautionary language. As a reminder please note that during this call. We 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 statement. In addition, we discussed non-gap financial measures including funds from operations or FFO and adjusted funds from operations or AFFO reconciliation of these non-gap financial measures to the most directly comparable gap measures can be found in our earnings release. As we announced in yesterday's press release, total rental revenue including percentage rents for the third quarter of 2016 was $22.3 million. That increase is 32.9% over the third quarter of 2015. Total rental revenue was positively impacted by the acceleration of a $193,000.00 of prepaid rent as a result of an early termination agreement with Off Broadway Shoes to vacate the premises in Boynton Beach, Florida. I’ll note this prepaid rent acceleration is one time in nature. Here today, total rental revenue has increased 28.3% over the comparable period in 2015 to $60.9. Corporate operating leverage continued to come down in the first quarter as our corporate GNA. expenses were approximately 8.4% of total revenue, which was a 155 basis point decrease year over year as compared to 9.9% percent of total revenue in the third quarter of 2015. Year- to-date corporate GNA’s percentage of total revenue has decreased nearly 100 basis points as compared to the first three quarters of 2015. [Indiscernible] operations for the third quarter with $16.2 million representing an increase of 44.1% over the third quarter 2015. Year-to-date FFO has increased 31.9% over the comparable period in 2015 to $42.6. Adjusted funds from operations in the third quarter was $15.8 million which…

Thank you, Matt. Lastly, I'd like to welcome Merrie Frankel to our board of directors. Merrie joined just there an extensive and impressive career in the real estate industry was through most recently serving as vice president and senior credit officer at Moody's Investors Service. We are really very pleased to have Merrie join our already fantastic board of directors and look forward to working with her for years to come. I appreciate everyone’s patience. That completes our prepared remarks. At this time, we’ll open it up for questions.

We will now begin the question and answer session. To ask a question, you may press Star then 1 on your touch tone phone. If you're using a speakerphone top your handset before pressing the keys. To withdraw your question please press Star then 2. At this time, we will pause for a moment to assemble our roster. And our first question will come from Collin Mings of Raymond James. Please go ahead.

Hey. Good morning, Joey. Good morning, Matt.

Morning, Collin

To start, Joey, maybe just touch on how you're approaching movie theaters right now, and specifically the deal that moved Carmike into the tenant list

Sure. So, we have two movie theaters in our portfolio today. Both are Carmike. Obviously those are pending the AMC acquisition, which I believe is scheduled to be approved in November. We believe movie theaters are an aspect of a net-lease portfolio. Movie theaters will continue to be a small minority, low single digits in our portfolio in the aggregate. But in terms of experiential retail and e-commerce resistance and recession resistant the movie theater industry has demonstrated pretty strongly that it's here to stay. So we've acquired two new movie theaters both Carmikes. And we're happy with both acquisitions.

Okay. And then just switching - just much more broadly as far the acquisition pipeline and then more specifically within that, you've talked a lot about multi-potential net-piece propertied before. It looks like there's a report that you guys have acquired an asset here in Port Arthur, Texas last week. Just maybe update us on the acquisition pipeline and then more specifically multi-tenant opportunities.

Sure. Our acquisition pipeline remains strong. We continue to execute across all three platforms this year. During the quarter we acquired a number of prototypical assets for us really. Tractor Supply, PPG Paints, AutoZone, Oreilly, the one multi-tenant, or multi-tenant net lease asset that we acquired was at Hobby Lobby, Party City, and Pet Smart in Port Arthur, Texas. All brand new leases, three boxes lined up on the hard corner. [Indiscernible] fantastic piece of real estate, and we’re excited to add t all three of those tenants to our portfolio.

Can you touch on, Joey, just is there like a cap rate opportunity whatever you can get for a little bit better, given the multi-tenant aspect of some of these net lease properties as you look at some of these acquisitions. And what's really the attraction there.

So we really look at net lease retail a few different ways. Traditional single-tenant net lease retail freestanding boxes comprises the vast majority of our portfolio. If we're able to acquire industry leading retailers such as Hobby Lobby, Party City, and Pet Smart, and Port Arthur and they share our roof, parking lot, and walls frankly that does that doesn't change our mentality. So, at times were able to improve you, at time we're able to work with existing relationships and potentially modify leases. You know, we also use our partner Capital Solutions program as well in this arena. And so we've had some great opportunities to take advantage of what we traditionally call multi-tenant net lease assets two or three junior boxes lined up. And frankly really like the real estate. So these are dominant retail [Indiscernible] again. This is the hard corner here in Port Arthur, Texas, and it's a fantastic piece of underlying real estate with retailers that you have difficulty acquiring in a freestanding basis.

Okay. Very helpful, Joey. Thanks. And then one last one. I'll turn it over. Just you touched on the prepared remarks but just as real relates to the leases you have expiring next year. Can you provide a little bit more of an update on how those discussions are going? Are there extension options on some of the properties or are there some that you expect to retain?

Sure. So, we've taken care of a significant piece of our week maturities in 2017. Two thousand and sixteen we have none remaining. So 2017 and beyond are really our focus. The early termination of the Off Broadway Shoes and the concurrent and really expiration of the Off Broadway Shoes allowed us to expand that former box for Orchard Supply Hardware. This will be our second Orchard Supply Hardware in the portfolio the first in Sunnyvale as I mentioned in the prepared remarks. Both with Lowe’s corporate guarantee, so fantastic credit. An exciting opportunity for us to really put one of the first Orchard Supplies in the ground in Southeast Florida in Boynton Beach. So, that takes care of approximately half of our lease expirations in 2017. We really have five remaining lease expirations and ‘17 all of those and then have extension options. And we're currently in communication with all of them but nothing overly material. So, our 2017 lease expiration schedule’s in fantastic shape right now.

Okay. I'll turn it over. Thanks, Joey.

Thank you, Collin.

Our next question will come from Rob Stevenson of Janney. Please go ahead.

Good morning. Joey, just to expand on the last question, when you look at the sort of 2.5% of the portfolio rolling in ‘18, you know, I don't know how much time you're spending on those with ‘17 still sort of front and center. But is there any sort of a known move out at this point for either the ‘17 or ‘18 expirations.

No, we really don't have any known move-out today in ‘17 or ‘18, and we're spending our asset management team led by Laith Hermiz our CO spending a lot of time on both near and medium term lease expirations. We're top we're constantly in communication with all of our tenants understanding how their stores are performing what they're seeing in the market. And so, you know, our active asset management is really is really focused on being in front and aware of tenant store level performance and how they're performing in context of their districts and their markets. So nothing going today. Most of the tenants all have options. We expect most of the tenants to exercise their option, in some instances frankly we'd prefer if they don't. So we've got some fantastic pieces of real estate that are encumbered by leases including the K-mart these in Frankfort, Kentucky, which is a fantastic piece of property maturing in 2018. So we've got some opportunities in there and we look forward to addressing them.

When you're looking at the end at your current acquisition pipeline, how do you characterize that relative to the fourth quarters of years past being about a third of the way through this one? I mean similar size, similar amount of products, similar amount of yields, is there anything that sort of changing as you see it from previous years when you're looking at what's coming across your desk today?

I tell you, fourth quarters are always interesting. At times you have flurry of activity typically really driven by tax motivated sellers and at times fourth quarters can be calm and people can actually enjoy the holiday season. So, I tell you this year our fourth quarter is shaping up to be to be similar to our previous quarters this year to be a strong quarter for us. Frankly, a lot of the out of our pipeline we're not sure at this point whether it be fourth quarter first quarter closing. It's just simply too early to tell, but we have a number of opportunities across all three platforms that we're that we're actively working on.

Okay. And just lastly the two Walgreens. Did you target those specifically for sale or were those just unsolicited offers that came in and you decided to hit the bid? Can you talk a little bit about that?

No we specifically targeted those assets. And all three assets we've sold to date. Walgreens assets that we sold to date for sale and market them with brokers. These are all sold to 1031 purchasers. We really look at our Walgreens’ portfolio and all assets. We look at store level performance, demographic trends, the residuals on the real estate. Obviously, the store sales and their meaning term. And from then prior to coming into 2016 we targeted specific assets of disposition candidate.

Okay. You can expect broadly any more dispositions for the remainder of the year to close in in the fourth quarter here?

I would expect. Yes. I would expect one or two similar dispositions to close during the fourth quarter.

Okay. Thanks guys. Thank you.

Our next question will come from R.J. Milligan of Baird. Please go ahead.

Hey. Good morning guys. Just more broadly on the acquisition side we've seen cap rate pause if not push back a little bit some other sectors. Just curious if you're seeing any changes in the acquisition cap rate environment or any changes in the pool of potential buyers over the past couple months.

Good morning, R.J. We really haven't seen any material cap rate compression or expansion in the last twelve eighteen months. We’ve rarely seen cap rates maintain a pretty steady level. There's aggressive bid out there driven by 1031 all cash purchasers as well as an institutional bid for higher priced point assets. I've always said we are not the best indicator or prognosticator of the market. We have larger peers who have much larger data sets, you know, because we are really exploiting asymmetrical opportunities out there, leveraging our relationships, the information that we have, and looking for above market opportunities. That said, we haven't seen any major disruption or vacillation of any cap rates.

Okay thanks. Yes, obviously using the A.T.M. this past quarter, how can we think about what a maximum amount of equity you'd be willing to raise through the A.T.M. per quarter I mean given the fact that the stock price is as close to the all-time high? Just curious how you think about you know is that essentially the full amount that you would want to be comfortable issuing per quarter.

You know that that's a good question, R.J.. We look at the A.T.M. as another tool in our tool belt. It’s an effective and cost-efficient way for us to raise equity capital. It gives us the ability to match-fund purchases and capital deployment. So it's a good tool in that regard. In terms of overall A.T.M usage you we're very cognizant of the market we're targeting of the float of our stock. And so, the last thing we want to do with be A.T.M. to impact share prices. So the A.T.M.’s been an effective tool for us. We'll continue to look to use the A.T.M. in quarters and in the future potentially. But it t doesn't replace on a traditional overnight basis, but it really supplements our existing tool belt about.

Okay, thanks. And, Joey you guys started providing some acquisition guidance for the past couple years and I'm curious, Matt, now that you've done with the company for a while, any consideration or how do you think about the pros and cons of issuing FFO or AFFO per share guidance going forward.

Sure. I mean we talk about it but being a small cap [indiscernible] that is materially impacted by the timing of capital makes it difficult to provide FFO or AFFO guidance right now. You know, as we grow in things smooth out a bit, we’ll take it under consideration. but at this time, you know, it's just too lumpy and too volatile for us to provide.

Okay. Great thanks, guys.

Thanks R.J.

Our next question will come from George Hoglund of Jeffries. Please go ahead.

Hey, good morning guys.

Good morning, George

Hey just one of the questions for me just in terms of the acquisitions and the developments that came online during the quarter, like can get some details on what kind of red bumps are on those two different pools?

Sure. So, red bumps vary obviously asset by asset. I tell you in the development pipeline specifically traditional bumps are somewhere between 5% and 10% every 5 years. Typically, those are 10-year leases in the development pipeline. On the acquisition side, frankly is all over the board. We have we have assets that we’ve acquired that have annual bombs. We have assets that 10% bumps every five that we've acquired. It really depends on the very nature of the underlying lease of the tenant, and then frankly what we're doing potentially in conjunction with the retailer [indiscernible].

Okay, thanks.

Sure. Thanks, George.

Our next question will come from David Corack of FBR Capital Markets. Please go ahead with your question.

Hey guys. Just sticking with development here, I think you’ve talked about a target development exposure in the $50 million to $100million dollar range. Does that change at all as the company grows just looking at it on a relative basis to the size of the company? And then how scalable is that business? You know, what's the governor there? Is it, you know, the number of projects or the dollar size of the pipeline?

First, good morning, David. And thanks for joining us. I enjoyed reading your initiation on the company. So, what we've talked about historically over the past couple quarters is the medium term goal of the deploying $50 million $100 million dollars in the ground on an annual basis through our development and partner of Capital Solutions programs. The real governor on that is of course relationships. This is this is the relationship business. Every site has its own entitlement, as it has its own cellar, has its own lease. And so our focus is expanding it as I think everyone has seen that we've been able to accomplish this quarter existing relationships as well as creating new programmatic relationships where we can be the developer, or partner of choice and bring the full value proposition that this company brings to the table. You know, Being the only publicly traded net lease retail developer, we bring a balance sheet afforded to us by the public capital markets. But we also bring the expertise of a private developer. And so retailers and our development partners understand that. And our goal is to continue to grow and scale both our partner Capital Solutions as well as the development platform.

Okay. That makes sense. So can you just touch on what you're seeing in in terms of the market deal flow out there for development deal? I mean can we expect another Meridian-type partnership or are these mainly going to be one off but relationship driven deals?

We hope so. We've been actively working with Burger King Corporate, a number of Burger King franchisees. I think the Meridian program has really been a model for Burger King franchisees to really show how we can really parlay our expertise in our capital into helping facilitate their store expansion. So, the Meridian program has been a very fruitful program. At the same time outside of the franchisee world we're working with retailers such as Camping World on the new Georgetown, Kentucky ground-up project and the Orchard Supply Hardware and Boynton Beach, Florida. So we're working with a number of retailers across retail sectors focusing on being able to create value for them and put shovels in the ground.

That makes sense. So, turning to just industry concentrated [indiscernible] we’ve talked a lot about grocery and a few other of the heavier sectors, but in terms of acquisitions can you just touch on the sectors where you want to increase exposure today?

Yes. There's a number of sectors that we are consistently focused on increasing exposure. And it all starts for us with that omni-channel/e-commerce lens that we approach retail with. Recession resistance is pretty natural for us where I said before we're not acquiring Neiman Marcus or Tiffany's. So, our focus is on is on discounters, is on auto parts, auto service health and fitness, specialty retail, quick service restaurant convenience stores. And so those experiences in those brick and mortar destinations that frankly necessitate that brick and mortar presence and that aren’t going to be translated over to e-commerce, those sales won't be translated over to e-commerce anytime soon.

Great. Thanks guys. That’s all for me.

Thank you David.

Again, if you have a question please press Star then 1. I will next question will come from [indiscernible]. Please go ahead.

Hey. Good morning guys. You’re getting a pretty significant [indiscernible].

Good morning Craig

…between your Walgreens. Are you selling your Walgreens in the mid-fives and then you're able to sort of sell the fund buy, you know, a CAP acquisitions which are, you know, deals that you like? When you think about your Walgreen exposure, do you have a targeted amount that you trying to maybe work that down to whether it's just growing the overall portfolio and also maybe selling some of those assets? Maybe it's below ten percent or are you just selectively harvesting value?

Well first, good morning, Craig. Our Walgreens exposure has been a focus for us that's come down. Obviously significantly this year and over the past two years our focus in the medium term bring any kind of inclusive of Walgreens below that gray line of 5%. Near term we would anticipate Walgreens below 10% as we continue to grow the portfolio and selectively dispose of assets. As you mentioned, those are those are great spreads. You're talking about 250 basis point spreads be a disposition in redeployment to our acquisition platform. I tell you the same time the spread between the development 9% and 10% percent year one on levered returns and 4 and 5.5 cap dispositions. We're talking about 400 basis points on average and you can see those numbers falling through our net income. So we're creating value on the development side. We're able to recycle those assets and redeploy them and on a creative basis into our acquisition development and partner of Capital Solutions platform. So we're focused on continuing to create the highest quality, most diversified portfolio retail portfolio in the net lease space. In order to do that we’ll have to bring down any outside’s concentrations over the course of time here.

Got it. And I know a lot of things go into a cap rate, but if you had to, you know, all things being equal. what would you say the current spread is between investment grade and non-investment grade properties?

Oh, it's, you know. Craig, it's really so tough because of really the bifurcation driven by price points in our space. When you get under $2 million, $3 million dollars, you all cash purchasers acquiring fast food operations on a ground lease, or a turnkey, typically franchise operators in the low six cats today. And so it's really difficult just to look at one set of criteria investment grade or know on a binary basis and drive and drive to a cap rate. What we're seeing generally speaking if you remove price point if you move real estate and real estate attribute, and then you fix a lease term we're basically seeing called 150 to 200 basis point spread there today.

Got it. And one more for me I know you guys did a, you know, a portfolio acquisition back in, you know, second quarter. Are you seeing any portfolios out there that are as attractive as what you saw in the second quarter or are they just, you know, the price point’s just not attractive enough at this point?

I wish we did. I'll tell you that the most attractive portfolio we've seen since the launch of our acquisition platform in 2010, we've never seen a diversified portfolio with the credit quality, the lease term, and the geographic concentration specifically in California as that portfolio. We wait impatiently for the next one. But frankly that was a very unique opportunity and one that we seized upon very quickly. Okay, thanks guys.

Thank you, Craig.

Ladies and gentlemen, this will conclude our question and answer session. I would like to turn the conference back over to Mr. Agree for any closing remarks.

And with that I would like to think everybody for joining us here today, and we will cord speaking with you again next year when we report our year-end and fourth quarter results. Thank you everybody.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.