Debt

3 Months Ended

Mar. 31, 2024

Debt

Debt

Note 5 – Debt

As of March 31, 2024, the Company had total gross indebtedness of $2.53 billion, including (i) $44.6 million of mortgage notes payable; (ii) $350.0 million unsecured term loan; (iii) $1.81 billion of senior unsecured notes; and (iv) $330.0 million outstanding under the Revolving Credit Facility (defined below).

Mortgage Notes Payable

As of March 31, 2024, the Company had total gross mortgage indebtedness of $44.6 million, which was collateralized by related real estate and tenants’ leases with an aggregate net book value of $78.5 million. The weighted average interest rate on the Company’s mortgage notes payable was 3.77% as of March 31, 2024 and 3.78% as of December 31, 2023.

Mortgage notes payable consisted of the following (presented in thousands):

	March 31, 2024		December 31, 2023
Note payable in monthly installments of $92 including interest at 6.27% per annum, with a final monthly payment due July 2026		2,382		2,618
Note payable in monthly installments of interest only at 3.63% per annum, with a balloon payment due December 2029		42,250		42,250
Total principal		44,632		44,868
Unamortized debt issuance costs and assumed debt discount, net		(1,966)		(2,057)
Total	$	42,666	$	42,811

The mortgage loans encumbering the Company’s properties are generally non-recourse, subject to certain exceptions for which the Company would be liable for any resulting losses incurred by the lender. These exceptions vary from loan to loan, but generally include fraud or material misrepresentations, misstatements or omissions by the borrower, intentional or grossly negligent conduct by the borrower that harms the property or results in a loss to the lender, filing of a bankruptcy petition by the borrower, either directly or indirectly, and certain environmental liabilities. At March 31, 2024, there were no mortgage loans with partial recourse to the Company.

The Company has entered into mortgage loans that are secured by multiple properties and contain cross-default and cross-collateralization provisions. Cross-collateralization provisions allow a lender to foreclose on multiple properties in the event that the Company defaults under the loan. Cross-default provisions allow a lender to foreclose on the related property in the event a default is declared under another loan.

Unsecured Term Loan

The following table presents the unsecured term loan principal balances net of unamortized debt issuance costs as of March 31, 2024 and December 31, 2023 (presented in thousands):

	All-in
	Interest Rate (1)		Maturity	March 31, 2024		December 31, 2023
2029 Unsecured Term Loan	4.52	%	January 2029	$	350,000	$	350,000
Total Principal					350,000		350,000
Unamortized debt issuance costs, net					(3,053)		(3,202)
Total				$	346,947	$	346,798

(1) Interest rate as of March 31, 2024 reflects the credit spread of 85 basis points, plus a 10 basis point SOFR adjustment and the impact of interest rate swaps which converted $350.0 million of SOFR-based interest to a fixed weighted average interest rate of 3.57%.

The 2029 Unsecured Term Loan includes an accordion option that allows the Company to request additional lender commitments up to a total of $500.0 million. Borrowings under the 2029 Unsecured Term Loan are priced at SOFR plus a spread of 80 to 160 basis points over SOFR, depending on the Company’s credit ratings, plus a SOFR adjustment of 10 basis points. Based on the Company’s credit ratings at the time of closing, pricing on the 2029 Unsecured Term Loan was 95 basis points over SOFR. The Company used the existing $350.0 million of forward starting interest rate swaps to hedge the variable SOFR priced interest to a weighted average fixed rate of 3.57% until January 2029.

Senior Unsecured Notes

The following table presents the senior unsecured notes principal balances net of unamortized debt issuance costs and original issue discounts for the Company’s private placement and public offerings as of March 31, 2024 and December 31, 2023 (presented in thousands):

	All-in		Coupon
	Interest Rate (1)		Rate		Maturity	March 31, 2024		December 31, 2023
2025 Senior Unsecured Notes	4.16	%	4.16	%	May 2025	$	50,000	$	50,000
2027 Senior Unsecured Notes	4.26	%	4.26	%	May 2027		50,000		50,000
2028 Senior Unsecured Public Notes	2.11	%	2.00	%	June 2028		350,000		350,000
2028 Senior Unsecured Notes	4.42	%	4.42	%	July 2028		60,000		60,000
2029 Senior Unsecured Notes	4.19	%	4.19	%	September 2029		100,000		100,000
2030 Senior Unsecured Notes	4.32	%	4.32	%	September 2030		125,000		125,000
2030 Senior Unsecured Public Notes	3.49	%	2.90	%	October 2030		350,000		350,000
2031 Senior Unsecured Notes	4.42	%	4.47	%	October 2031		125,000		125,000
2032 Senior Unsecured Public Notes	3.96	%	4.80	%	October 2032		300,000		300,000
2033 Senior Unsecured Public Notes	2.13	%	2.60	%	June 2033		300,000		300,000
Total Principal							1,810,000		1,810,000
Unamortized debt issuance costs and original issue discounts, net							(15,126)		(15,688)
Total						$	1,794,874	$	1,794,312

(1) The all-in interest rate reflects the straight-line amortization of the terminated swap agreements, as applicable.

The Company has entered into forward-starting interest rate swap agreements to hedge against changes in future cash flows on forecasted issuances of debt. Refer to Note 8 – Derivative Instruments and Hedging Activity. In connection with pricing certain Senior Unsecured Notes and Senior Unsecured Public Notes, the Company terminated forward-starting interest rate swap agreements to fix the interest rate on all or a portion of the respective notes.  

Senior Unsecured Notes – Private Placements

The Senior Unsecured Notes (collectively the “Private Placements”) were issued in private placements to individual investors. The Private Placements did not involve a public offering in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act.

Senior Unsecured Notes – Public Offerings

The Senior Unsecured Public Notes (collectively the “Public Notes”) are fully and unconditionally guaranteed by Agree Realty Corporation and certain wholly owned subsidiaries of the Operating Partnership. These guarantees are senior unsecured obligations of the guarantors, rank equally in right of payment with all other existing and future senior unsecured indebtedness and are effectively subordinated to all secured indebtedness of the Operating Partnership and each guarantor (to the extent of the value of the collateral securing such indebtedness).

The Public Notes are governed by an indenture, dated August 17, 2020, among the Operating Partnership, the Company and trustee (as supplemented by an officer’s certificate dated at the issuance of each of the Public Notes, the “Indenture”). The Indenture contains various restrictive covenants, including limitations on the ability of the guarantors and the issuer to incur additional indebtedness and requirements to maintain a pool of unencumbered assets.

Senior Unsecured Revolving Credit Facility

In November 2022, the Company entered into a First Amendment to the Third Amended and Restated Revolving Credit Agreement which converted the interest rate on its existing $1.00 billion revolving credit facility (the “Revolving Credit Facility”) from a spread over LIBOR to a spread over SOFR plus a SOFR adjustment of 10 basis points.

The Revolving Credit Facility's interest rate is based on a pricing grid with a range of 72.5 to 140 basis points over SOFR, determined by the Company's credit ratings and leverage ratio, plus a SOFR adjustment of 10 basis points. The margins for the Revolving Credit Facility are subject to improvement based on the Company's leverage ratio, provided its credit ratings meet a certain threshold. In addition, in connection with the Company's ongoing environmental, social and governance ("ESG") initiatives, pricing on the Revolving Credit Facility may be reduced if specific ESG rating improvements are achieved. As of March 31, 2024 the Revolving Credit Facility bore interest of 6.19%, which is comprised of SOFR of 5.32% plus the pricing grid spread of 76.5 basis points and 10 basis point SOFR adjustment.

The Revolving Credit Facility had a $330.0 million outstanding balance as of March 31, 2024 and $227.0 million outstanding balance as of December 31, 2023. The Revolving Credit Facility includes an accordion option that allows the Company to request additional lender commitments up to a total of $1.75 billion. The Revolving Credit Facility will mature in January 2026 with Company options to extend the maturity date to January 2027.

The Company and Richard Agree, the Executive Chairman of the Company, were parties to a Reimbursement Agreement dated November 18, 2014 (the “Reimbursement Agreement”). Pursuant to the Reimbursement Agreement, Mr. Agree had agreed to reimburse the Company for any loss incurred under the Revolving Credit Facility in an amount not to exceed $14.0 million to the extent that the value of the Operating Partnership’s assets available to satisfy the Operating Partnership’s obligations under the Revolving Credit Facility is less than $14.0 million. The parties terminated the Reimbursement Agreement and entered into a new reimbursement agreement dated October 3, 2023 (the “New Reimbursement Agreement”).  Pursuant to the New Reimbursement Agreement, Mr. Agree has agreed to reimburse the Company for his proportionate share of loss incurred under the Revolving Credit Facility in an amount to be determined by facts and circumstances at the time of loss.

Debt Maturities

The following table presents scheduled principal payments related to the Company’s debt as of March 31, 2024 (presented in thousands):

	Scheduled		Balloon
	Principal		Payment		Total
Remainder of 2024	$	727	$	—	$	727
2025		1,026		50,000		51,026
2026 (1)		629		330,000		330,629
2027		—		50,000		50,000
2028		—		410,000		410,000
Thereafter		—		1,692,250		1,692,250
Total scheduled principal payments	$	2,382	$	2,532,250	$	2,534,632

(1) The Revolving Credit Facility matures in January 2026, with options to extend the maturity to January 2027 and had a $330.0 million outstanding balance as of March 31, 2024.

Loan Covenants

Certain loan agreements contain various restrictive covenants, including the following financial covenants: maximum total leverage ratio, maximum secured leverage ratios, consolidated net worth requirements, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio, a minimum unsecured interest expense ratio, a minimum interest coverage

ratio, a minimum unsecured debt yield and a minimum unencumbered interest expense ratio. As of March 31, 2024, the most restrictive covenant was the minimum unencumbered interest expense ratio. The Company was in compliance with all of its loan covenants and obligations as of March 31, 2024.