-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G5lEYh5LTZ0/pLnf1uUzigzxH6OPlhJPgtLCYRAFelbQbxqVQv1/BDB0WEp6M/YL N8HIyhaZTJna1s8SSIgG6Q== /in/edgar/work/20001102/0000950124-00-006389/0000950124-00-006389.txt : 20001106 0000950124-00-006389.hdr.sgml : 20001106 ACCESSION NUMBER: 0000950124-00-006389 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AGREE REALTY CORP CENTRAL INDEX KEY: 0000917251 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 383148187 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12928 FILM NUMBER: 751441 BUSINESS ADDRESS: STREET 1: 31850 NORTHWESTERN HGWY CITY: FARMINGTON HILLS STATE: MI ZIP: 48334 BUSINESS PHONE: 8107374190 MAIL ADDRESS: STREET 1: 31850 NORTHWESTERN HIGHWAY CITY: FARMINGTON HILLS STATE: MI ZIP: 48334 10-Q 1 k58112e10-q.txt FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q |X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2000 OR | | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ---------- ----------- Commission File Number 1-12928 AGREE REALTY CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) MARYLAND 38-3148187 - -------------------------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 31850 NORTHWESTERN HIGHWAY, FARMINGTON HILLS, MICHIGAN 48334 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, included 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 No |X| |_| 4,394,669 Shares of Common Stock, $.0001 par value, were outstanding as of November 2, 2000 2 AGREE REALTY CORPORATION FORM 10-Q INDEX
PART I: FINANCIAL INFORMATION PAGE Item 1. Interim Consolidated Financial Statements 3 Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999 4-5 Consolidated Statements of Operations for the nine months ended September 30, 2000 and 1999 6 Consolidated Statements of Operations for the three months ended September 30, 2000 and 1999 7 Consolidated Statement of Stockholders' Equity for the nine months ended September 30, 2000 8 Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 and 1999 9 Notes to Consolidated Financial Statements 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-19 PART II: OTHER INFORMATION Item 1. Legal Proceedings 20 Item 2. Changes in Securities 20 Item 3. Defaults Upon Senior Securities 20 Item 4. Submission of Matters to a Vote of Security Holders 20 Item 5 Other Information 20 Item 6. Exhibits and Reports on Form 8-K 20 SIGNATURES 21
2 3 AGREE REALTY CORPORATION PART I: FINANCIAL INFORMATION ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS 3 4 AGREE REALTY CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, December 31, 2000 1999 - --------------------------------------------------------------------------------------------------------------------- ASSETS REAL ESTATE INVESTMENTS Land $ 43,778,679 $ 40,270,367 Buildings 141,085,973 135,709,128 Property under development 1,930,301 3,878,611 - --------------------------------------------------------------------------------------------------------------------- 186,794,953 179,858,106 Less accumulated depreciation (29,010,652) (26,342,296) - --------------------------------------------------------------------------------------------------------------------- NET REAL ESTATE INVESTMENTS 157,784,301 153,515,810 CASH AND CASH EQUIVALENTS 205,154 1,064,241 ACCOUNTS RECEIVABLE - TENANTS 229,514 565,133 INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED ENTITIES 269,373 449,676 UNAMORTIZED DEFERRED EXPENSES Financing 1,565,509 1,587,397 Leasing costs 287,141 282,629 OTHER ASSETS 894,659 730,651 - --------------------------------------------------------------------------------------------------------------------- $ 161,235,651 $ 158,195,537 =====================================================================================================================
See accompanying notes to consolidated financial statements. 4 5 AGREE REALTY CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, December 31, 2000 1999 - --------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY MORTGAGES PAYABLE $ 51,957,498 $ 52,936,571 CONSTRUCTION LOANS 16,316,355 15,322,071 NOTES PAYABLE 32,158,232 27,158,232 DIVIDENDS AND DISTRIBUTIONS PAYABLE 2,331,379 2,317,670 ACCRUED INTEREST PAYABLE 341,446 344,875 ACCOUNTS PAYABLE Operating 298,748 855,886 Capital expenditures 510,230 1,315,597 TENANT DEPOSITS 53,526 52,073 - --------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 103,967,414 100,302,975 - --------------------------------------------------------------------------------------------------------------------- MINORITY INTEREST 5,733,219 5,859,012 - --------------------------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY Common stock, $.0001 par value; 20,000,000 shares authorized; 4,394,669 and 4,364,867 shares issued and outstanding 440 436 Additional paid-in capital 63,632,433 63,217,235 Deficit (11,496,388) (10,673,302) - --------------------------------------------------------------------------------------------------------------------- 52,136,485 52,544,369 Less: unearned compensation - restricted stock (601,467) (510,819) - --------------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 51,535,018 52,033,550 - --------------------------------------------------------------------------------------------------------------------- $ 161,235,651 $ 158,195,537 =====================================================================================================================
See accompanying notes to consolidated financial statements. 5 6 AGREE REALTY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Nine Months Ended Nine Months Ended September 30, 2000 September 30, 1999 - ---------------------------------------------------------------------------------------------------------------------- REVENUES Minimum rents $ 15,595,738 $ 14,296,648 Percentage rents 187,970 129,298 Operating cost reimbursements 1,798,722 1,787,645 Management fees and other 32,770 32,430 - ---------------------------------------------------------------------------------------------------------------------- TOTAL REVENUES 17,615,200 16,246,021 - ---------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Real estate taxes 1,309,120 1,268,606 Property operating expenses 889,013 891,491 Land lease payments 500,353 408,578 General and administrative 1,207,356 1,044,816 Depreciation and amortization 2,760,492 2,566,930 - ---------------------------------------------------------------------------------------------------------------------- TOTAL OPERATING EXPENSES 6,666,334 6,180,421 - ---------------------------------------------------------------------------------------------------------------------- INCOME FROM OPERATIONS 10,948,866 10,065,600 - ---------------------------------------------------------------------------------------------------------------------- OTHER INCOME (EXPENSE) Interest expense, net (5,250,526) (4,237,986) Equity in net income of unconsolidated entities 348,759 20,804 Development fee income - 40,873 - ---------------------------------------------------------------------------------------------------------------------- TOTAL OTHER EXPENSE (4,901,767) (4,176,309) - ---------------------------------------------------------------------------------------------------------------------- INCOME BEFORE MINORITY INTEREST 6,047,099 5,889,291 MINORITY INTEREST (803,702) (787,309) - ---------------------------------------------------------------------------------------------------------------------- NET INCOME $ 5,243,397 $ 5,101,982 ====================================================================================================================== EARNINGS PER SHARE $ 1.19 $ 1.17 ====================================================================================================================== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 4,396,187 4,364,867 ======================================================================================================================
See accompanying notes to consolidated financial statements. 6 7 AGREE REALTY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Three Months Ended September 30, 2000 September 30, 1999 - ------------------------------------------------------------------------------------------------------------------------ REVENUES Minimum rents $ 5,311,418 $ 4,840,062 Percentage rents 84,939 71,143 Operating cost reimbursements 591,513 564,898 Management fees and other 10,278 13,470 - ------------------------------------------------------------------------------------------------------------------------ TOTAL REVENUES 5,998,148 5,489,573 - ------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Real estate taxes 435,790 424,824 Property operating expenses 243,235 229,098 Land lease payments 184,740 134,748 General and administrative 395,765 374,003 Depreciation and amortization 923,508 856,101 - ------------------------------------------------------------------------------------------------------------------------ TOTAL OPERATING EXPENSES 2,183,038 2,018,774 - ------------------------------------------------------------------------------------------------------------------------ INCOME FROM OPERATIONS 3,815,110 3,470,799 - ------------------------------------------------------------------------------------------------------------------------ OTHER INCOME (EXPENSE) Interest expense, net (1,833,747) (1,457,799) Equity in net income of unconsolidated entities 173,580 6,935 - ------------------------------------------------------------------------------------------------------------------------ TOTAL OTHER EXPENSE (1,660,167) (1,450,864) - ------------------------------------------------------------------------------------------------------------------------ INCOME BEFORE MINORITY INTEREST 2,154,943 2,019,935 MINORITY INTEREST (286,809) (270,035) - ------------------------------------------------------------------------------------------------------------------------ NET INCOME $ 1,868,134 $ 1,749,900 ======================================================================================================================== EARNINGS PER SHARE $ .43 $ .40 ======================================================================================================================== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 4,394,669 4,364,867 ========================================================================================================================
See accompanying notes to consolidated financial statements. 7 8 AGREE REALTY CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
Unearned Common Stock Additional Compensation - ------------------------------ Paid-In Restricted Shares Amount Capital Deficit Stock - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE, January 1, 2000 4,364,867 $ 436 $ 63,217,235 $ (10,673,302) $ (510,819) Issuance of shares under Stock Incentive Plan 33,802 4 471,198 - (267,648) Shares redeemed under Stock Incentive Plan (4,000) - (56,000) - - Vesting of restricted stock - - - - 177,000 Dividends declared for the period January 1, 2000 to September 30, 2000 - - - (6,066,483) - Net income for the period January 1, 2000 to September 30, 2000 - - - 5,243,397 - - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE, September 30, 2000 4,394,669 $ 440 $ 63,632,433 $ (11,496,388) $ (601,467) ==================================================================================================================================
See accompanying notes to consolidated financial statements. 8 9 AGREE REALTY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended Nine Months Ended September 30, 2000 September 30, 1999 - --------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 5,243,397 $ 5,101,982 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 2,696,336 2,503,007 Amortization 338,156 336,923 Stock-based compensation 177,000 145,500 Equity in net income of unconsolidated entities (348,759) (20,804) Minority interests 803,702 787,309 Decrease in accounts receivable 335,619 353,546 Decrease (increase) in other assets (193,398) 124,096 Decrease in accounts payable (557,138) (420,400) Decrease in accrued interest (3,429) (55,101) Increase in tenant deposits 1,453 3,467 - --------------------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 8,492,939 8,859,525 - --------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of real estate investments (including capitalized interest of $232,400 in 2000 and $343,000 in 1999) (6,426,617) (8,019,191) Distributions from unconsolidated entities 520,629 528,345 - --------------------------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (5,905,988) (7,490,846) - --------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Dividends and limited partners' distributions paid (6,982,268) (6,944,478) Line-of-credit net borrowings (payments) 5,000,000 (11,050,000) Repayments of capital expenditure payables (1,112,044) (723,493) Construction loan proceeds 994,284 4,851,776 Payments of mortgages payable (979,073) (437,550) Payments for financing costs (252,112) (417,146) Payment of leasing costs (58,825) (18,000) Redemption of restricted stock (56,000) - Mortgage proceeds - 12,390,135 - --------------------------------------------------------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (3,446,038) (2,348,756) - --------------------------------------------------------------------------------------------------------------------------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (859,087) (980,077) CASH AND CASH EQUIVALENTS, beginning of period 1,064,241 994,159 - --------------------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, end of period $ 205,154 $ 14,082 ================================================================================================================================= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest (net of amounts capitalized) $ 4,988,239 $ 4,029,030 ================================================================================================================================= SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS Dividends and limited partners' distributions declared and unpaid $ 2,331,379 $ 2,317,670 Real estate investments financed with accounts payable $ 510,230 $ 705,225 Shares issued under Stock Incentive Plan $ 471,202 $ 343,249 =================================================================================================================================
See accompanying notes to consolidated financial statements. 9 10 AGREE REALTY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF The accompanying unaudited 2000 consolidated PRESENTATION financial statements have been prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The consolidated balance sheet at December 31, 1999 has been derived from the audited consolidated financial statements at that date. Operating results for the nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000, or for any other interim period. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report for the year ended December 31, 1999. 2. EARNINGS PER Earnings per share has been computed by dividing the SHARE income by the weighted average number of common shares outstanding. The per share amounts reflected in the consolidated statements of income are presented in accordance with Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings per Share"; the amounts of the Company's "basic" and "diluted" earnings per share (as defined in SFAS No. 128) are the same. 3. RECLASSIFICATIONS Certain amounts in the 1999 financial statements have been reclassified to conform with the 2000 presentation. 10 11 AGREE REALTY CORPORATION PART I ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OEPRATIONS OVERVIEW The Company was established to continue to operate and expand the retail property business of its Predecessors. The Company commenced its operations on April 22, 1994 with the sale of 2,500,000 shares of common stock in an initial public offering. The net cash proceeds to the Company from the completion of this offering were approximately $45.4 million, which were used primarily to reduce outstanding indebtedness, pay stock issuance costs and establish a working capital reserve. On May 21, 1997, the Company completed an offering of 1,625,000 shares of common stock at $20.625 per share; on June 18, 1997 the underwriters exercised their overallotment option for an additional 28,850 shares at the same per share price (collectively, "the 1997 Offering"). The net proceeds from the 1997 Offering of approximately $31.9 million were used to repay amounts outstanding under the Company's Credit Facility. The assets of the Company are held by, and all operations are conducted through, Agree Limited Partnership (the "Operating Partnership"), of which the Company is the sole general partner and held an 86.71% interest as of September 30, 2000. The Company is operating so as to qualify as a real estate investment trust ("REIT") for federal income tax purposes. The following should be read in conjunction with the Consolidated Financial Statements of Agree Realty Corporation, including the respective notes thereto, which are included in this Form 10-Q. COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2000 TO NINE MONTHS ENDED SEPTEMBER 30, 1999 Minimum rental income increased $1,299,000, or 9%, to $15,596,000 in 2000, compared to $14,297,000 in 1999. The increase is primarily the result of the development of three properties in 1999 and two properties in 2000. Percentage rental income increased $59,000, or 45%, to $188,000 in 2000, compared to $129,000 in 1999. The increase was the result of increased tenant sales. Operating cost reimbursements, which represent additional rent required by substantially all of the Company's leases to cover the tenants' proportionate share of the property's operating expenses, increased $11,000, or 1%, to $1,799,000 in 2000, compared to $1,788,000 in 1999. Operating cost reimbursements increased due to the increase in real estate taxes from 1999 to 2000 as explained below. Management fees and other income remained relatively constant at $33,000 in 2000, compared to $32,000 in 1999. 11 12 AGREE REALTY CORPORATION PART I Real estate taxes increased $40,000, or 3%, to $1,309,000 in 2000 versus $1,269,000 in 1999. The increase is the result of general assessment increases on the Company's Properties. Property operating expenses (snow removal, shopping center maintenance, insurance and utilities) decreased $2,000, to $889,000 in 2000 versus $891,000 in 1999. The decrease was the result of decreased snow removal costs of $41,000; an increase in shopping center maintenance costs of $31,000; an increase in utility costs of $7,000 and an increase in insurance costs of $1,000 in 2000 versus 1999. Land lease payments increased $91,000, or 22%, to $500,000 in 2000 compared to $409,000 in 1999. The increase is the result of the Company leasing land for its completed Petoskey, Michigan development. General and administrative expenses increased by $163,000, or 16%, to $1,207,000 in 2000 versus $1,045,000 in 1999. The increase was primarily the result of an increase in compensation-related expenses related to the addition of an employee and wage increases. General and administrative expenses as a percentage of total rental income increased from 7.2% for 1999 to 7.7% in 2000. Depreciation and amortization increased $193,000, or 8%, to $2,760,000 in 2000 versus $2,567,000 in 1999. This increase was the result of the completion of three new properties in 1999 and two properties in 2000. Interest expense increased $1,013,000, or 24%, to $5,251,000 in 2000, from $4,238,000 in 1999. The increase in interest expense was the result of the Company's additional borrowing to finance its development of properties and increased rates on variable rate notes payable. The Company received development fee income of $41,000 in 1999; there was no development fee income in 2000. Equity in net income of unconsolidated entities increased $328,000 to $349,000 in 2000 compared to $21,000 in 1999 as a result of depreciation expense no longer being allocated to the Company pursuant to the Joint Venture Agreements in which the Company holds interests in properties ranging from 8% to 20%. The Company's income before minority interest increased $158,000 as a result of the foregoing factors. COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2000 TO THREE MONTHS ENDED SEPTEMBER 30, 1999 Rental income increased $471,000, or 10%, to $5,311,000 in 2000, compared to $4,840,000 in 1999. The increase is primarily the result of the development and acquisition of two properties in 1999 and two properties in 1999. Percentage rental income increased $14,000, or 19%, to $85,000 in 2000, compared to $71,000 in 1999. The increase was the result of increased tenant sales. 12 13 AGREE REALTY CORPORATION PART I Operating cost reimbursements increased $27,000, or 5%, to $592,000 in 2000, compared to $565,000 in 1999. Operating cost reimbursements increased due to the increase in real estate taxes and property operating expenses from 1999 to 2000 as explained below. Management fees and other income remained relatively constant at $10,000 in 2000 compared to $13,000 in 1999. Real estate taxes increased $11,000, or 3%, to $436,000 in 2000 versus $425,000 in 1999. The increase is the result of general assessment increases on the Company's Properties. Property operating expense (snow removal, shopping center maintenance, insurance and utilities) increased $14,000, or 6% to $243,000 in 2000 versus $229,000 in 1999. The increase was the result of increased snow removal costs of $7,000; an increase in shopping center maintenance costs of $2,000; a decrease in insurance costs of $1,000 and an increase in utilities of $6,000 in 2000 versus 1999. Land lease payments increased $50,000, or 37%, to $185,000 in 2000 compared to $135,000 in 1999. The increase is the result of the Company leasing land for its completed Petoskey, Michigan development. General and administrative expenses increased $22,000, or 6%, to $396,000 in 2000 compared to $374,000 in 1999. The increase was primarily the result of an increase in compensation-related expenses. General and administrative expenses as a percentage of total rental income decreased from 7.6% for 1999 to 7.3% in 2000. Depreciation and amortization increased $68,000, or 8%, to $924,000 in 2000 versus $856,000 in 1999. The increase was the result of the development of two properties in 1999 and two properties in 2000. Interest expense increased $376,000, or 26%, to $1,834,000 in 2000, from $1,458,000 in 1999. The increase in interest expense was the result of the Company's additional borrowing to finance its development of properties and increased rates on variable rate notes payable. Equity in net income of unconsolidated entities increased $167,000 to $174,000 in 2000 compared to $7,000 in 1999 as a result of depreciation expense no longer being allocated to the Company pursuant to the Joint venture Agreements in which the Company holds interests in properties ranging from 8% to 20%. The Company's income before minority interest increased $135,000 as a result of the foregoing factors. 13 14 AGREE REALTY CORPORATION PART I FUNDS FROM OPERATIONS Management considers Funds from Operations ("FFO") to be a supplemental measure of the Company's operating performance. FFO is defined by the National Association of Real Estate Investments Trusts, Inc. ("NAREIT") to mean net income computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or losses) from sales of depreciable operating property, plus real estate related depreciation and amortization, and after adjustments for unconsolidated entities in which the REIT holds an interest. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs. FFO should not be considered as 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. 14 15 AGREE REALTY CORPORATION PART I The following tables illustrate the calculation of FFO for the nine months and three months ended September 30, 2000 and 1999:
Nine Months Ended September 30, 2000 1999 - -------------------------------------------------------------------------------------------------------------------------- Net income before minority interest $ 6,047,099 $ 5,889,291 Depreciation of real estate assets 2,686,632 2,502,747 Amortization of leasing costs 54,313 50,057 Amortization of stock awards 177,000 145,500 Depreciation of real estate assets held in unconsolidated entities 171,980 499,935 Development fee income - (40,873) - -------------------------------------------------------------------------------------------------------------------------- FUNDS FROM OPERATIONS $ 9,137,024 $ 9,046,657 ========================================================================================================================== WEIGHTED AVERAGE SHARES AND OP UNITS OUTSTANDING 5,069,734 5,038,414 ========================================================================================================================== Three Months Ended September 30, 2000 1999 - -------------------------------------------------------------------------------------------------------------------------- Net income before minority interest $ 2,154,943 $ 2,019,935 Depreciation of real estate assets 897,708 834,659 Amortization of leasing costs 19,228 16,686 Amortization of stock awards 59,000 48,500 Depreciation of real estate assets held in unconsolidated entities - 166,645 - -------------------------------------------------------------------------------------------------------------------------- FUNDS FROM OPERATIONS $ 3,130,879 $ 3,086,425 ========================================================================================================================== WEIGHTED AVERAGE SHARES AND OP UNITS OUTSTANDING 5,068,216 5,038,414 ==========================================================================================================================
15 16 AGREE REALTY CORPORATION PART I FORWARD-LOOKING STATEMENTS Management has included herein certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. When used, statements which are not historical in nature including the words "anticipate," "estimate," "should," "expect," "believe," "intend" and similar expressions are intended to identify forward-looking statements. Such statements are, by their nature, subject to certain risks and uncertainties. Risks and other factors that might cause such a difference include, but are not limited to, the effect of economic and market conditions; risks that the Company's acquisition and development projects will fail to perform as expected; financing risks, such as the inability to obtain debt or equity financing on favorable terms; the level and volatility of interest rates; loss or bankruptcy of one or more of the Company's major retail tenants; and failure of the Company's properties to generate additional income to offset increases in operating expenses. LIQUIDITY AND CAPITAL RESOURCES The Company's principal demands for liquidity are distributions to its stockholders, debt repayment, development of new properties and future property acquisitions. During the quarter ended September 30, 2000, the Company declared a quarterly dividend of $.46 per share. The dividend was paid on October 12, 2000 to holders of record on September 29, 2000. As of September 30, 2000, the Company had total mortgage indebtedness of $51,957,498 with a weighted average interest rate of 6.92%. Future scheduled annual maturities of mortgages payable for the years ending September 30 are as follows: 2001 - $1,366,258; 2002 - $1,483,546; 2003 - $1,589,041; 2004 - $1,702,042; and 2005 - $1,823,086. This mortgage debt is all fixed rate debt. In addition, the Operating Partnership has in place a $50 million line of Credit Facility (the "Credit Facility") which is guaranteed by the Company. The loan matures in August 2003 and can be extended by the Company for an additional three years. Advances under the Credit Facility bear interest within a range of one-month to six-month LIBOR plus 150 basis points to 213 basis points or the bank's prime rate, at the option of the Company, based on certain factors such as debt to property value and debt service coverage. The Credit Facility is used to fund property acquisitions and development activities and is secured by most of the Company's Properties which are not otherwise encumbered and properties to be acquired or developed. As of September 30, 2000, $30,158,232 was outstanding under the Credit Facility. 16 17 AGREE REALTY CORPORATION PART I The Company also has in place a $5 million line of credit (the "Line of Credit"), which matures on December 19, 2000, and which the Company expects to renew for an additional 12-month period. The Line of Credit bears interest at the bank's prime rate less 50 basis points or 175 basis points in excess of the one-month LIBOR rate, at the option of the Company. The purpose of the Line of Credit is to provide working capital to the Company and fund land options and start-up costs associated with new projects. As of September 30, 2000, $2,0000,000 was outstanding under the Line of Credit. The Company's wholly-owned subsidiaries have obtained construction financing of approximately $16,100,000 to fund the development of four retail properties. The notes require quarterly interest payments, based on a weighted average interest rate based on LIBOR, computed by the lender. The notes mature on October 16, 2002 and are secured by the underlying land and buildings. As of September 30, 2000, $14,585,865 was outstanding. The Company has received funding from an unaffiliated third party for the construction of certain of its Properties. Advances under this agreement bear no interest and are secured by the specific land and buildings being developed. As of September 30, 2000, $1,730,490 was outstanding. The Company has two development projects under construction that will add an additional 29,610 square feet of retail space to the Company's portfolio. The projects are expected to be completed during the fourth quarter of 2000. Additional Company funding required for this project is estimated to be $2,800,000 and will come from the Credit Facility. Management expects the development of this project to have a positive effect on cash generated by operating activities and Funds from Operations. The Company intends to meet its short-term liquidity requirements, including capital expenditures related to the leasing and improvement of the Properties, through its cash flow provided by operations and the Line of Credit. Management believes that adequate cash flow will be available to fund the Company's operations and pay dividends in accordance with REIT requirements. The Company may obtain additional funds for future development or acquisitions through other borrowings or the issuance of additional shares of capital stock. The Company intends to incur additional debt in a manner consistent with its policy of maintaining a ratio of total debt (including construction and acquisition financing) to total market capitalization of 65% or less. 17 18 AGREE REALTY CORPORATION PART I The Company plans to begin construction of additional pre-leased developments and may acquire additional properties, which will initially be financed by the Credit Facility and Line of Credit. Management intends to periodically refinance short-term construction and acquisition financing with long-term debt and/or equity. Upon completion of refinancing, the Company intends to lower the ratio of total debt to market capitalization to 50% or less. Nevertheless, the Company may operate with debt levels or ratios which are in excess of 50% for extended periods of time prior to such refinancing. INFLATION The Company's leases generally contain provisions designed to mitigate the adverse impact of inflation on net income. These provisions include clauses enabling the Company to pass through to tenants certain operating costs, including real estate taxes, common area maintenance, utilities and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. Certain of the Company's leases contain clauses enabling the Company to receive percentage rents based on tenants' gross sales, which generally increase as prices rise, and, in certain cases, escalation clauses, which generally increase rental rates during the terms of the leases. In addition, expiring tenant leases permit the Company to seek increased rents upon re-lease at market rates if rents are below the then existing market rates. 18 19 AGREE REALTY CORPORATION PART I ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to interest rate risk primarily through its borrowing activities. There is inherent rollover 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 the Company's future financing requirements. Mortgages payable - As of September 30, 2000 the Company had three mortgages outstanding. The first mortgage in the amount of $32,641,617 bears interest at 7.00%. The mortgage matures on November 15, 2005. The second mortgage in the amount of $7,377,751 bears interest at 7.00%. The mortgage matures on April 1, 2013 and is subject to a rate review after the 7th year (April 1, 2006). The third mortgage in the amount of $11,938,130 bears interest at 6.63%. The mortgage matures on February 5, 2017. Construction loans - As of September 30, 2000 the Company had Construction loans outstanding of $16,316,355. Under the terms of the construction loans the Company bears no interest rate risk. Notes Payable - As of September 30, 2000 the Company had $32,158,232 outstanding on its Lines-of Credit which were subject to interest at a variable interest rate based on LIBOR. The Company does not enter into financial instrument transactions for trading or other speculative purposes or to manage interest rate exposure. A 10% adverse change in interest rates on the portion of the Company's debt bearing interest at variable rates would result in an annual increase in interest expense of approximately $260,000. 19 20 AGREE REALTY CORPORATION PART I OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3.1 Articles of Incorporation and Articles of Amendment of the Company (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-11 (Registration Statement No. 33-73858, as amended ("Agree S-11")) 3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.3 to Agree S-11) 10.1 Third amendment to $50 million line-of-credit agreement dated August 7, 2000 among Agree Realty Corporation and Michigan National Bank, as agent 27.1 Financial Data Schedule (b) Reports on Form 8-K None 20 21 AGREE REALTY CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has fully caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AGREE REALTY CORPORATION /s/ RICHARD AGREE - ------------------------------------------------ Richard Agree President and Chief Executive Officer /s/ KENNETH R. HOWE - ------------------------------------------------- Kenneth R. Howe Vice-President - Finance and Secretary (Principal Financial Officer) Date: November 2, 2000 - ------------------------------------------------- 21 22 Exhibit Index -------------
Exhibit No. Description - ----------- ----------- 3.1 Articles of Incorporation and Articles of Amendment of the Company (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-11 (Registration Statement No. 33-73858, as amended ("Agree S-11")) 3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.3 to Agree S-11) 10.1 Third amendment to $50 million line-of-credit agreement dated August 7, 2000 among Agree Realty Corporation and Michigan National Bank, as agent 27.1 Financial Data Schedule
EX-10.1 2 k58112ex10-1.txt THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT 1 EXHIBIT 10.1 ================================================================================ THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT AND AMENDMENT AND AFFIRMATION OF LOAN DOCUMENTS BETWEEN AGREE LIMITED PARTNERSHIP AND AGREE REALTY CORPORATION AND MICHIGAN NATIONAL BANK INDIVIDUALLY AND AS AGENT FOR THE LENDERS AND BANK ONE, MICHIGAN AND LASALLE BANK NATIONAL ASSOCIATION AS LENDERS DATED AS OF AUGUST 7, 2000 ================================================================================ 2 THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT THIS THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT ("Third Amendment"), dated as of August 7, 2000 ("Third Amendment Closing Date"), is made among AGREE LIMITED PARTNERSHIP, a Delaware limited partnership ("Borrower"), AGREE REALTY CORPORATION, a Maryland corporation (the "Company"), and MICHIGAN NATIONAL BANK, a national banking association ("MNB"), individually and as Agent for the Lenders ("Agent"), and BANK ONE, MICHIGAN, a Michigan banking corporation, formerly NBD Bank ("NBD"), and LASALLE BANK NATIONAL ASSOCIATION, a national banking association, formerly LaSalle National Bank ("LaSalle"), as Lenders (such term and other capitalized terms used but not defined in this First Amendment are defined in Section 1 of the Agreement (as defined below)). RECITALS Borrower, the Company and Lenders entered into a Line of Credit Agreement dated as of November 14, 1995 ("Agreement") whereby Lenders made available to Borrower a line of credit loan facility in the maximum amount of $50,000,000. The Agreement has been amended by a First Amendment to Line of Credit Agreement dated August 7, 1997, and a Second Amendment to Line of Credit Agreement dated November 17, 1997. The Line of Credit Agreement and the aforementioned amendments are collectively, the "Agreement." Borrower and Lenders now wish to again amend certain terms and provisions of the Agreement. AGREEMENT In consideration of the terms and conditions contained herein, and of any loans, advances, or extensions of credit previously, now or hereafter made to Borrower by the Lenders, the parties hereto hereby agree as follows: A. AMENDMENT OF AGREEMENT. 1. DEFINED TERMS. (a) The following defined terms and the meanings thereof set forth in Section 1.1 of the Agreement are hereby deleted in their entirety and replaced with the following: "BASE RATE" means, at any particular date, the higher of (i) the Prime Rate, or (ii) two percent (2%) per annum above the Federal Funds Effective Rate, rounded to the nearest 1/4 of 1% (.25%). The determination of the Base Rate by Agent shall be conclusive absent manifest error. "BORDERS CAP RATE", "KMART CAP RATE", "CIRCUIT CITY CAP RATE" and "TBD CAP RATE" means the capitalization rates calculated as (YE x WE) + (YD x WD), taking the applicable YE, WT, YD and WD from the chart below: 3
==================== ==================== ======================= ===================== Borders Cap Rate Kmart Cap Rate Circuit City Cap Rate TBD Cap Rate ============================== ==================== ==================== ======================= ===================== YE (yield requirement on 8.5% 9.0% 9.0% To be determined equity component of total by Required Lenders cap rate) ============================== -------------------- -------------------- ----------------------- --------------------- WE (equity weight factor 25% 25% 25% 25% expressed as a percent) ============================== -------------------- -------------------- ----------------------- --------------------- YD (mortgage constant 10 year Treasury 10 year Treasury 10 year Treasury 10 year Treasury assuming 20 year Rate + 1.50% Rate + 2.25% Rate + 2.00% Rate + margin to amortization and following be determined by interest rate) Required Lenders ============================== -------------------- -------------------- ----------------------- --------------------- WD (debt weight factor 75% 75% 75% 75% expressed as a percent) ============================== ==================== ==================== ======================= =====================
"DRAW PERIOD" shall mean the period commencing on November 14, 1995 expiring on the date which is thirty-six (36) months from the Third Amendment Closing Date. "EXISTING PROPERTIES" has the meaning given such term in the Agreement, but Schedule 2 is replaced by the Schedule 2 attached to this Third Amendment. 2. AMENDMENT TO SECTION 2.6 (a). Section 2.6(a) of the Agreement is hereby amended by deleting the grid on page 21 thereof and substituting the following grid in its place:
BASE RATE MARGINS AND LIBOR MARGINS ========================================================================================= DEBT TO CAPITAL VALUE RATIO ==================================================================================================================== DEBT SERVICE COVERAGE GREATER THAN OR EQUAL TO GREATER THAN OR EQUAL TO LESS THAN 60% RATIO 67.5% 60% BUT LESS THAN 67.5% ========================== ----------------------------- ---------------------------- ------------------------------ GREATER THAN OR EQUAL TO LIBOR Margin = 1.75% LIBOR Margin = 1.625% LIBOR Margin = 1.50% 1.55 ========================== ----------------------------- ---------------------------- ------------------------------ GREATER THAN OR EQUAL TO LIBOR Margin = 1.875% LIBOR Margin = 1.75% LIBOR Margin = 1.625% 1.35 BUT LESS THAN 1.55 ========================== ----------------------------- ---------------------------- ------------------------------ LESS THAN 1.35 LIBOR Margin = 2.125% LIBOR Margin = 1.875% LIBOR Margin = 1.75% ========================== ============================= ============================ ==============================
3. AMENDMENT TO SECTION 2.6(C)(II). Section 2.6(c)(ii)(A) of the Agreement is amended by deleting the same and inserting the following language: ". . . (ii) in respect to each LIBOR Portion, (A) at the end of each Interest Period, but if the Interest Period is longer than three (3) months, then at the end of each quarter, . . ." 4. AMENDMENT TO SECTION 2.14(A). Section 2.14(a) is amended by deleting the parenthetical in the second and third line thereof and substituting as a parenthetical the following language: ". . . (based on a year of 360 days)" and by deleting the grid on page 26 and substituting the following grid: -2- 4
NON-USE FEE RATE ======================================================================================= DEBT TO CAPITAL VALUE RATIO ==================================================================================================================== DEBT SERVICE COVERAGE RATIO GREATER THAN OR GREATER THAN OR EQUAL TO LESS THAN 60% EQUAL TO 67.5% 60% BUT LESS THAN 67.5% ============================ ---------------------------- --------------------------- ------------------------------ GREATER THAN OR EQUAL TO .375% .25% .25% 1.55 ============================ ---------------------------- --------------------------- ------------------------------ GREATER THAN OR EQUAL TO .50% .375% .25% 1.35 BUT LESS THAN 1.55 ============================ ---------------------------- --------------------------- ------------------------------ LESS THAN 1.35 .50% .50% .375% ============================ ============================ =========================== ==============================
5. FURTHER AMENDMENTS TO SECTION 2. New sections are added to Section 2 as follows: 2.20 Letter of Credit Commitment. Subject to the terms and conditions hereof, until the Maturity Date, Agent agrees to issue or confirm Letters of Credit for the account of Borrower in such form as may from time to time be approved by Agent in favor of such beneficiaries as Borrower shall specify (the "Letters of Credit"); provided that the aggregate face amount of the Letters of Credit outstanding or requested, together with Letters of Credit paid but not reimbursed by Borrower to the extent not an outstanding Advance, shall at no time exceed Five Million and 00/100 Dollars ($5,000,000.00); provided, further, that the aggregate face amount of the Letters of Credit outstanding or requested, when added to the aggregate face amount of all other Letters of Credit outstanding and all amounts from time to time outstanding under the Line of Credit Loan together with Letters of Credit paid but not reimbursed by Borrower to the extent not an Advance, shall not exceed the Borrowing Base. Each Letter of Credit renewed or issued hereunder shall: (i) be denominated in United States Dollars; and (ii) expire on a date which is not more than twelve (12) months from its issuance and at least thirty (30) days' prior to the Line of Credit Loan Maturity Date. 2.21 Requests for Letters of Credit. Borrower may request issuance of a Letter of Credit from Bank by delivery to Bank of a Request for Letter of Credit executed by an authorized officer of Borrower, subject to the following and to the remaining provisions hereof: (a) Each such request for a Letter of Credit shall set forth the information required on the Request for Letter of Credit form provided by the Agent which form shall include: (i) The proposed date of issuance of the Letter of Credit, which must be a Business Day; (ii) The amount of the Letter of Credit; (iii) The beneficiary of the Letter of Credit; -3- 5 (iv) The conditions of the Letter of Credit; (v) The Expiration Date of the Letter of Credit. (b) Each such Request for Letter of Credit shall be delivered to Agent three (3) Business Days prior to the proposed date of issuance of the Letter of Credit; (c) The face amount of the Letter of Credit requested plus the principal amount of all Advances then outstanding, plus the principal amount of all Advances requested but not yet funded, plus the aggregate undrawn portion of any previously issued Letters of Credit which shall still be outstanding as of the date of the Request for Letter of Credit and the aggregate face amount of Letters of Credit requested but not yet issued and the amount of all Letters of Credit paid but not yet reimbursed by Borrower to the extent not an outstanding Advance shall not exceed the Borrowing Base; 2.22 Reimbursement Obligations of the Banks. Upon issuance of a Letter of Credit by Agent, each Bank shall automatically acquire a risk participation interest in such Letter of Credit based upon its Pro Rata Share. If Agent shall honor a draft or other demand for payment presented or made under any Letter of Credit, Agent shall provide notice thereof to each Bank on the date such draft or demand is honored unless Borrower shall have satisfied its Reimbursement Obligation by payment to Agent on such date. Upon receipt of such notice, each Bank shall forthwith (but in any event, no later than 1:00 p.m. Detroit time on the Business Day of receipt of such notice if such Bank receives such notice by 10:00 a.m. Detroit time on such day; receipt of such notice after 10:00 a.m. Detroit time on any day shall be deemed to be received by 10:00 a.m. Detroit time on the following Business Day), make available to Agent at its principal office, immediately available funds in an amount equal to such Bank's Pro Rata Share of any amount paid or disbursed, or to be paid or disbursed, by Agent to settle its obligations under any draft or other order, instrument or demand drawn or presented under any Letter of Credit. The obligation of each Bank to provide Agent with such Bank's Pro Rata Share of the amount of any payment or disbursement made or to be made by Agent to settle its obligations under any item drawn or presented under any Letter of Credit in accordance with the provisions of the preceding paragraph shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which such Bank may have or have had against Agent, including without limitation, any defense based on the failure of the demand for payment under such Letter of Credit to conform to the terms of such Letter of Credit, or the legality, validity, regularity or enforceability of such Letter of Credit or any defense based on the identity of the transferee of such Letter of Credit or the sufficiency of the transfer if such Letter of Credit is transferable; provided, however, that no Bank shall be obligated to reimburse Agent pursuant to the preceding provisions of this section for any wrongful payment or disbursement made or to be made by Agent under any -4- 6 Letter of Credit as a result of acts or omissions constituting gross negligence or willful misconduct on the part of Agent or any of its officers, employees or agents. 2.23 Procedure for Issuance of Letters of Credit. Borrower may from time to time request Agent to issue a Letter of Credit by delivering to Agent's office a properly completed Application. Promptly upon receipt of such documents, Agent shall advise each other Bank thereof. Upon the issuance of each Letter of Credit, Agent shall give the other Banks prompt written notice of such issuance. Agent will process such Application in accordance with its customary procedures, and shall issue such Letter of Credit according to the terms of such Application and this Agreement. 2.24 Reimbursement Obligations of Borrower. (a) Borrower agrees to reimburse Agent for the total amount of any sums paid by Agent in connection with Letters of Credit, including any drawing or demand under Letters of Credit or any Advance made by Agent in respect of Letters of Credit, and the amount of any taxes, fees, charges or other costs or expenses whatsoever incurred by Agent in connection with any payment made by Agent under, or with respect to, such Letter of Credit (the "Reimbursement Obligation") as set forth in the Application. (b) Payment by Agent of a draw under any Letter of Credit shall be deemed an Advance under the Line of Credit Loan in an amount sufficient to discharge Borrower's Reimbursement Obligation with interest thereon as set forth in this Agreement as of the date of payment. To the extent that Borrower is not eligible for an Advance under the Line of Credit Loan, Borrower shall immediately pay and discharge the Reimbursement Obligation pursuant to the terms of the Application and this Agreement. (c) Borrower's Reimbursement Obligations with respect to Letters of Credit shall be absolute, unconditional and irrevocable and shall remain in full force and effect until all Obligations of Borrower to the Banks hereunder shall have been satisfied, and such Obligations shall not be affected, modified or impaired upon the happening of any event, including without limitation, any of the following, whether or not with notice to, or the consent of, the Borrower: (i) Any lack of validity or enforceability of any Letter of Credit, Application or any documentation relating to any Letter of Credit or to any transaction related in any way to such Letter of Credit (the "Letter of Credit Documents"); (ii) Any amendment, modification, waiver, consent, or any substitution, exchange or release of or failure to perfect any interest in collateral or security, if any, with respect to any of the Letter of Credit Documents; (iii) The existence of any claim, setoff, defense or other -5- 7 right which the Borrower may have at any time against any beneficiary or any transferee of any Letter of Credit (or any persons or entities for whom any such beneficiary or any such transferee may be acting), the Agent or any Bank or any other person or entity, whether in connection with any of the Letter of Credit Documents, the transactions contemplated herein or therein or any unrelated transactions; and (iv) Any draft or other statement or document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; provided, however, that Borrower shall have no Reimbursement Obligation for any wrongful payment or disbursement made or to be made under any Letter of Credit as a result of acts or omissions constituting gross negligence or willful misconduct on the part of Agent or any of its officers, employees or agents. No setoff, counterclaim, reduction or diminution of any obligation or any defense of any kind or nature which the Borrower has or may have against the beneficiary of any Letter of Credit shall be available hereunder to Borrower against the Agent or any Bank. 2.25 Fees. (a) Letter of Credit Fees. Borrower agrees to pay or reimburse Agent upon demand, for the account of each Bank, a letter of credit fee for the issuance of such Letter of Credit to be divided by the Banks in accordance with their Pro-Rata Shares equal to 1/4 of 1 percent multiplied by the face amount of each Letter of Credit for the period from and including the date of issuance of such Letter of Credit to and including the date upon which such Letter of Credit expires or is terminated, including all periods during which such Letter of Credit is renewed, and such other normal and customary fees, costs and expenses as are incurred or charged by Agent from time to time in issuing and effecting payment under or administering any Letter of Credit (including, without limitation, amendment fees and transfer fees, if any) and including a fee for Agent for each Letter of Credit or renewal of 12.5 basis points. 5. AMENDMENT TO SECTION 5.16. Section 5.16 is amended by deleting the numerals $23,092,200" and substituting the numerals "$49,674,070". 6. AMENDMENTS TO SCHEDULES 3, 4 AND 8. In connection with the Third Amendment, all properties listed on Schedule 3 are deleted therefrom. Such properties having been moved to Schedule 2 and are now Existing Properties. Schedules 4 and 8 are revised as attached. -6- 8 C. REPRESENTATIONS AND WARRANTIES. Borrower represents, warrants, covenants and agrees that as of the Third Amendment Closing Date, after giving effect to the consummation of the transactions contemplated by this Third Amendment: 1. AUTHORITY. Each of Borrower and the Company has full power, authority and legal right to enter into the applicable Third Amendment Documents. The execution, delivery and performance by Borrower and the Company of the applicable Third Amendment Documents: (a) have been duly authorized by all necessary partnership or corporate action, as applicable, of Borrower and the Company; (b) do not and will not, by lapse of time, the giving of notice or otherwise, contravene the terms of Borrower's or the Company's respective partnership agreement or certificate, articles of incorporation or bylaws or of any indenture, agreement or undertaking to which Borrower or the Company is a party or by which Borrower or Guarantor is or any of their respective property are bound; (c) do not and will not require any governmental consent, registration or approval; (d) do not and will not, by lapse of time, the giving of notice or otherwise, contravene any material contractual or governmental restriction to which Borrower or the Company, or any of their respective property may be subject; and (e) do not and will not, except as contemplated herein, result in the imposition of any lien, charge, security interest or encumbrance upon any property of Borrower or the Company under any existing indenture, mortgage, deed of trust, loan or credit agreement or other material agreement or instrument to which Borrower or the Company is a party or by which Borrower or the Company or any of their respective property may be bound or affected. 2. BINDING EFFECT. Each of the Third Amendment Documents is the legal, valid and binding obligation of Borrower and the Company, as appropriate, and is enforceable against Borrower and the Company, as appropriate, in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by equitable principles (whether or not any action to enforce such document is brought at law or in equity). 3. AGREEMENT REPRESENTATIONS AND WARRANTIES. The warranties and representations of Borrower contained in the Agreement and the other Loan Documents are true, correct and complete on and as of the Third Amendment Closing Date, to the same extent as though made on and as of that date, and taking into account any revised Exhibits attached to this Third Amendment. 4. SCHEDULES. The Schedules to the Agreement remain true, correct and complete on and as of the Third Amendment Closing Date except to the extent that Revised Schedules are attached to this Third Amendment, in which case such revised Schedules are true, correct and complete on and as of the Third Amendment Closing Date. -7- 9 5. DEFAULT. Upon closing of the Third Amendment transaction, no Event of Default or Default has occurred and is continuing. D. CONDITIONS TO CLOSING. In addition to those conditions set forth elsewhere in the Agreement, the obligations of Lenders under this Third Amendment are conditioned upon (a) the fulfillment, in a manner satisfactory to Lenders on or before the Third Amendment Closing Date, of each of the following terms and conditions or (b) the delivery on or before the Third Amendment Closing Date, duly executed, in form and substance satisfactory to Lenders (and their counsel) of the following documents, as the case may be: 1. THIRD AMENDMENT DOCUMENTS. (a) Third Amendment. Borrower and the Company shall have executed and delivered this Third Amendment to Agent. (b) Borrower's Certificate. Borrower shall have executed and delivered the Borrower's Certificate in the form attached hereto as Exhibit D. (c) Revised Schedules. Borrower shall have delivered the revised Schedules to Agent. (d) Other Agreements. Borrower shall have executed and delivered to Agent such other agreements and documents in connection with the Loan as Agent may request in form and substance satisfactory to Agent and its counsel. 2. OPINION OF COUNSEL. Agent shall have received a legal opinion, dated the Third Amendment Closing Date, from counsel to Borrower, in form and substance satisfactory to Agent and its counsel, that, among other things, this Third Amendment and any other Third Amendment Agreements have been duly authorized, executed and delivered by Borrower and the Company and are valid and enforceable in accordance with their terms, subject to bankruptcy and equitable principles. 3. ORGANIZATIONAL DOCUMENTS. Agent shall have received (i) with respect to the Company, the certificate of incorporation of the Company, as amended, modified or supplemented to the Third Amendment Closing Date, certified to be true, correct and complete by the appropriate Secretary of State, together with a good standing certificate from such Secretary of State, and (ii) with respect to Borrower, the agreement of limited partnership of Borrower, as amended, modified or supplemented to the Third Amendment Closing Date, certified to be true, correct and complete by a general partner of Borrower, together with a copy of the certificate of limited partnership of Borrower, as amended, modified or supplemented to the Third Amendment Closing Date, certified to be true, correct and complete by the appropriate Secretary of State. 4. CERTIFIED RESOLUTIONS, ETC. Agent shall have received a certificate of the secretary or assistant secretary of the Company and dated the Third Amendment Closing Date, certifying (i) the names and true signatures of the incumbent officers of the Company authorized to sign the applicable Third Amendment Agreements, (ii) the by-laws of the Company as in effect on the Third Amendment Closing Date, (iii) the resolutions of the Company's board of directors approving and authorizing the execution, delivery and performance of all Third Amendment Agreements executed by the Company, and (iv) that there have been no changes in the certificate of incorporation of such Person since the date of the most recent certification thereof by the appropriate Secretary of State. -8- 10 5. LIEN SEARCH REPORTS. Agent shall have received satisfactory (i.e., showing no Liens other than Permitted Liens) UCC searches, together with tax lien, judgment and litigation searches conducted in the appropriate jurisdictions by a search firm acceptable to Agent with respect to the Properties, Borrower, and the Company as Agent shall require (collectively, the "UCC Searches"). 6. CERTIFICATION AS TO COVENANTS. Agent shall have received a certification by the Company, individually and as general partner of Borrower together, with other evidence satisfactory to Agent that, as of the Third Amendment Closing Date, the financial covenants set forth in the Agreement are satisfied and that, as of the Third Amendment Closing Date, there is no Default or Event of Default under the Agreement. 7. ADDITIONAL MATTERS. Agent shall have received such other certificates, opinions, documents and instruments relating to the Third Amendment transaction as may have been reasonably requested by Agent, and all corporate and other proceedings and all other documents and all legal matters in connection with the Third Amendment transaction shall be satisfactory in form and substance to Agent. 8. FEES. Borrower shall have paid to Agent for distribution to the Banks in accordance with their Pro Rata Shares a fee of $250,000 for this Third Amendment plus the attorney fees and costs of Agent in connection with this Third Amendment. E. AMENDMENT AND AFFIRMATION OF LOAN DOCUMENTS. 1. AMENDMENT OF CERTAIN LOAN DOCUMENTS. Any references to, or definitions of, the Agreement or Loan Agreement in any of the Loan Documents are amended hereby to mean the Agreement or Loan Agreement as heretofore, hereby and hereafter amended, modified or supplemented. 2. AFFIRMATION OF LOAN DOCUMENTS. Borrower and the Company acknowledge and affirm that (i) the Loan Documents, as amended by the Third Amendment Agreements and Section E(1) of this Third Amendment, are enforceable against the Borrower and the Company, as applicable, and remain in full force and effect and shall be unamended, unchanged and unmodified, except as specifically set forth in the Third Amendment Agreements and Section E(1) of this Third Amendment; (ii) the Guaranty and the Collateral shall continue to secure and/or guaranty the repayment of Borrower's Obligations, whether or not Borrower's Obligations were contemplated by Borrower, the Company or Lenders at the time of the execution of the Loan Documents; and (iii) the security interests and liens granted to Lenders by Borrower under the Loan Documents remain valid first perfected security interests and liens. G. MISCELLANEOUS. 1. SECTION TITLES. The section titles contained in this Third Amendment shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties. 2. PARTIES. Whenever in this Third Amendment reference is made to any of the parties hereto, such reference shall be deemed to include, wherever applicable, a reference to the successors and assigns of the Borrower, the Company, Agent and Lenders. 3. REFERENCES. Any reference to the Agreement contained in any notice, request, certificate, or other document executed concurrently with or after the execution and delivery of -9- 11 this Third Amendment shall be deemed to include this Third Amendment unless the context shall otherwise require. 4. CONTINUED EFFECTIVENESS. Notwithstanding anything contained herein, the terms of this Third Amendment are not intended to and do not serve to effect a novation as to the Agreement. The parties hereto expressly do not intend to extinguish the Agreement; instead, it is the express intention of the parties hereto to reaffirm Borrower's Obligations created under the Agreement, as amended by this Third Amendment. 5. COUNTERPARTS. This Third Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. 6. EFFECTIVENESS. This Third Amendment shall become effective on the date on which all of the parties hereto shall have signed a counterpart hereof and shall have delivered the same to Agent. 7. RELEASE OF CLAIMS; LIMITATION OF LIABILITY. In consideration of the Lenders entering into this Third Amendment, Borrower and the Company do each hereby release and discharge Agent and each Lender of and from any and all claims, harm, injury, and damage of any and every kind, known or unknown, legal or equitable, which Borrower or the Company have against the Agent and each Lender through the date of this Third Amendment. Borrower and the Company confirm to Agent and the Lenders that they have reviewed the effect of this release with competent legal counsel of their choice, or have been afforded the opportunity to do so, prior to execution of this Third Amendment and each acknowledge and agree that Agent and each Lender is relying upon this release in entering into this Third Amendment. No claim may be made by Borrower, the Company, or any other Person against Agent or any Lender or the Affiliates, directors, officers, employees, attorneys or agent of any of such Persons for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by the Agreement or any other Transactions, or any act, omission or event occurring in connection therewith; and Borrower and the Company hereby waive, release and agree not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. 8. ENTIRE AGREEMENT. This Third Amendment, the exhibits and schedules attached hereto, and the other Third Amendment Agreements represent the entire agreement between the parties hereto relating to the Third Amendment and may not be altered or modified in any respect, except upon the execution by the parties hereto of a written document or instrument so providing. (Signatures contained on following page) -10- 12 IN WITNESS WHEREOF, this Third Amendment has been duly executed as of the day and year first above written. AGREE LIMITED PARTNERSHIP, a Delaware limited partnership By: AGREE REALTY CORPORATION, its sole general partner, a Maryland corporation By: /s/ RICHARD AGREE ----------------- Name: Richard Agree Title: President AGREE REALTY CORPORATION, a Maryland corporation By: /s/ RICHARD AGREE ----------------- Name: Richard Agree Title: President MICHIGAN NATIONAL BANK, a national banking association, as Agent and as Lender By: /s/ SHEILA E. MAPLES -------------------- Name: Sheila E. Maples Title: Vice President BANK ONE, MICHIGAN, a Michigan banking corporation, as Lender By: /s/ STEVEN J. MAHR ------------------ Name: Steven J. Mahr Title: First Vice President LASALLE BANK NATIONAL ASSOCIATION, a national banking association, as Lender By: /s/ JOHN C. HEIN ---------------- Name: John C. Hein Title: Senior Vice President -11- 13 REVISED SCHEDULE 2 EXISTING PROPERTIES THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT
=============================== =========================== PROPERTY LOCATION - ------------------------------- --------------------------- Borman Center Roseville, MI - ------------------------------- --------------------------- Grayling Plaza Grayling, MI - ------------------------------- --------------------------- Iron Mountain Plaza Iron Mountain, MI - ------------------------------- --------------------------- Ironwood Commons Ironwood, MI - ------------------------------- --------------------------- Oscoda Plaza Oscoda, MI - ------------------------------- --------------------------- Capital Plaza Frankfort, KY - ------------------------------- --------------------------- West Frankfort Plaza West Frankfort, IL - ------------------------------- --------------------------- 19225 Biscayne Blvd. Borders #83 Aventura, Fl - ------------------------------- --------------------------- 4545 Kenny Borders #2 Columbus, Ohio 43220 - ------------------------------- --------------------------- Mall Blvd. at Oxford Blvd. TGI Friday Monroeville, Pennsylvania 15146 - ------------------------------- --------------------------- 132nd and Maple Borders #133 Omaha, Nebraska 68114 - ------------------------------- --------------------------- Mall Blvd. at Oxford Blvd. Borders #143 Monroeville, Pennsylvania 15146 - ------------------------------- --------------------------- 900 State Street Borders #129 Santa Barbara, California 93107 - ------------------------------- --------------------------- 1715 N. Rock Road Borders #122 Wichita, Kansas 67213 - ------------------------------- --------------------------- I-35 and Main Street Borders #108 Norman, OK - ------------------------------- --------------------------- Boynton Festive Center Circuit City Boynton Beach, FL - ------------------------------- ---------------------------
-12- EX-27 3 k58112ex27.txt FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ARTICLE 5 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-2000 SEP-30-2000 205,154 0 229,514 0 0 0 186,794,953 29,010,652 161,235,651 0 100,432,085 0 0 440 51,534,578 161,235,651 0 17,615,200 0 6,666,334 0 0 5,250,526 0 0 0 0 0 0 5,243,397 1.19 1.19
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