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, 1997
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
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(Exact name of registrant as specified in its charter)
Maryland 38-3148187
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
31850 Northwestern Highway, Farmington Hills, Michigan 48334
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(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| |_|
4,332,280 Shares of Common Stock, $.0001 par value, were outstanding as of
November 7, 1997
<TABLE>
<CAPTION>
Agree Realty Corporation
Form 10-Q
Index
- -----------------------------------------------------------------------------
<S> <C> <C>
Part I: Financial Information Page
Item 1. Interim Consolidated Financial Statements 3
Consolidated Balance Sheets as of September 30, 1997
and December 31, 1996. 4-5
Consolidated Statements of Operations for the nine
months ended September 30, 1997 and 1996. 6
Consolidated Statements of Operations for the three
months ended September 30, 1997 and 1996. 7
Consolidated Statement of Stockholders' Equity for
the nine months ended September 30, 1997. 8
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1997 and 1996. 9
Notes to Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 11-17
Part II: Other Information
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
</TABLE>
2
<PAGE>
Agree Realty Corporation
Part I: Financial Information
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ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
<TABLE>
<CAPTION>
Agree Realty Corporation
Consolidated Balance Sheets (Unaudited)
- -----------------------------------------------------------------------------
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Assets
Real Estate Investments
Land $ 27,758,342 $ 25,183,667
Buildings 107,742,401 107,204,583
Property under development 515,081 85,993
------------- -------------
136,015,824 132,474,243
Less accumulated depreciation (19,364,174) (17,339,353)
------------- -------------
Net Real Estate Investments 116,651,650 115,134,890
Cash and Cash Equivalents 1,306,971 294,389
Accounts Receivable - Tenants 238,411 638,735
Restricted Asset - Cash Held in Escrow 313,523 266,771
Investments In and Advances To Unconsolidated Entities 1,953,483 1,820,605
Unamortized Deferred Expenses
Financing costs 2,112,594 2,398,377
Leasing costs 141,408 141,757
Other Assets 986,058 686,346
------------- -------------
$ 123,704,098 $ 121,381,870
============= =============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Agree Realty Corporation
Consolidated Balance Sheets (Unaudited)
- -----------------------------------------------------------------------------
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Mortgages Payable $ 51,040,578 $ 53,663,999
Construction Loans 1,701,406 10,616,936
Note Payable 6,865,459 23,616,382
Dividends and Distributions Payable 2,286,310 1,479,345
Accrued Interest Payable 242,737 354,988
Accounts Payable
Operating 224,721 691,981
Capital expenditures 183,373 596,794
Tenant Deposits 58,357 50,394
------------- -------------
Total Liabilities 62,602,941 91,070,819
------------- -------------
Minority Interest 5,681,828 5,869,014
------------- -------------
Stockholders' Equity
Common stock, $.0001 par value, 20,000,000
shares authorized, 4,332,280 and 2,649,475
shares issued and outstanding 433 265
Additional paid-in capital 62,577,294 30,060,908
Deficit (7,158,398) (5,619,136)
------------- -------------
Total Stockholders' Equity 55,419,329 24,442,037
------------- -------------
$ 123,704,098 $ 121,381,870
============= =============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Agree Realty Corporation
Consolidated Statements of Operations (Unaudited)
- -----------------------------------------------------------------------------
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
Revenues
Rental income $ 12,057,757 $ 10,575,838
Operating cost reimbursement 1,409,491 1,273,309
Management fees and other 65,710 60,634
------------ ------------
Total Revenues 13,532,958 11,909,781
------------ ------------
Operating Expenses
Real estate taxes 959,230 886,643
Property operating expenses 728,549 698,130
Land lease payments 337,533 224,583
General and administrative 881,098 779,177
Depreciation and amortization 2,082,347 1,954,065
------------ ------------
Total Operating Expenses 4,988,757 4,542,598
------------ ------------
Income From Operations 8,544,201 7,367,183
------------ ------------
Other Income (Expense)
Interest expense, net (4,385,104) (4,510,656)
Gain on land sales 103,270 --
Development fee income 22,369 --
Equity in net income of unconsolidated entities 4,109 62,025
------------ -----------
Total Other Expense (4,255,356) (4,448,631)
------------ ------------
Income Before Minority Interest 4,288,845 2,918,552
Minority Interest (680,439) (566,491)
------------ ------------
Net Income $ 3,608,406 $ 2,352,061
============ ============
Earnings Per Share $ 1.04 $ .89
============ ============
Weighted Average Number of
Common Shares Outstanding 3,481,193 2,649,475
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Agree Realty Corporation
Consolidated Statements of Operations (Unaudited)
- -----------------------------------------------------------------------------
Three Months Ended Three Months Ended
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
Revenues
Rental income $ 4,029,933 $ 3,618,303
Operating cost reimbursement 452,646 377,313
Management fees and other 19,631 21,054
----------- -----------
Total Revenues 4,502,210 4,016,670
----------- -----------
Operating Expenses
Real estate taxes 328,397 300,938
Property operating expenses 199,234 191,099
Land lease payments 114,533 111,500
General and administrative 288,450 237,305
Depreciation and amortization 695,892 667,215
----------- -----------
Total Operating Expenses 1,626,506 1,508,057
----------- -----------
Income From Operations 2,875,704 2,508,613
----------- -----------
Other Income (Expense)
Interest expense, net (1,206,300) (1,575,053)
Equity in net income (loss) of unconsolidated entities 3,325 (89,023)
Development fee expense (906) --
---------- -----------
Total Other Expense (1,203,881) (1,664,076)
---------- -----------
Income Before Minority Interest 1,671,823 844,537
Minority Interest (214,580) (163,925)
---------- -----------
Net Income $ 1,457,243 $ 680,612
---------- -----------
Earnings Per Share $ .34 $ .26
---------- -----------
Weighted Average Number of
Common Shares Outstanding 4,332,280 2,649,475
---------- -----------
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Agree Realty Corporation
Consolidated Statement of Stockholders' Equity (Unaudited)
- -----------------------------------------------------------------------------
Common Stock Additional
--------------------- Paid-In
Shares Amount Capital Deficit
------ ------ ---------- -------
<S> <C> <C> <C> <C>
Balance, January 1, 1997 2,649,475 $ 265 $30,060,908 $(5,619,136)
Issuance of shares under the Stock Incentive Plan 28,955 3 618,910 --
Issuance of common stock 1,653,850 165 31,897,476 --
Dividends declared for the period January 1, 1997
to September 30, 1997 -- -- -- (5,147,668)
Net income for the period January 1, 1997 to
September 30, 1997 -- -- -- 3,608,406
--------- ----------- ----------- -----------
Balance, September 30, 1997 4,332,280 $ 433 $62,577,294 $(7,158,398)
========== ========== =========== ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Agree Realty Corporation
Consolidated Statements of Cash Flows (Unaudited)
- -----------------------------------------------------------------------------
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 3,608,406 $ 2,352,061
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 2,027,901 1,882,695
Amortization 359,784 376,996
Equity in net income of unconsolidated entities (4,109) (62,025)
Minority interests 680,439 566,491
Gain on land sales (103,270) --
Decrease in accounts receivable 400,324 333,751
Increase in other assets (83,535) (33,913)
Decrease in accounts payable (467,260) (399,379)
Increase (decrease) in accrued interest (112,251) 155,342
Increase in tenant deposits 7,963 7,543
------------ ------------
Net Cash Provided By Operating Activities 6,314,392 5,179,562
------------ ------------
Cash Flows From Investing Activities
Acquisition of real estate investments (including
capitalized interest of $46,221 in 1997 and $64,109
in 1996) (3,461,445) (11,416,031)
Proceeds from sale of land 148,270 --
Investments in and advances to unconsolidated entities 121,447 (1,969,733)
------------ ------------
Cash Flows Used In Investing Activities (3,191,728) (13,385,764)
------------ ------------
Cash Flows From Financing Activities
Proceeds from issuance of common stock 31,897,641 --
Payment on line-of-credit (31,250,375) --
Line-of-credit proceeds 14,499,452 21,237,489
Payment of construction loans (8,915,530) (7,765,033)
Dividends and limited partners' distributions paid (5,208,328) (4,432,954)
Payments of mortgages payable (2,623,421) (227,327)
Net repayment of capital expenditure payables (413,421) (1,472,009)
Increase in escrow deposits (46,752) (46,387)
Payments of leasing costs (29,793) (52,224)
Payments for financing costs (19,555) (287,538)
------------ ------------
Net Cash Provided By (Used In) Financing Activities (2,110,082) 6,954,017
------------ ------------
Net Increase (Decrease) In Cash and Cash Equivalents 1,012,582 (1,252,185)
Cash and Cash Equivalents, beginning of period 294,389 1,283,672
------------ ------------
Cash and Cash Equivalents, end of period $ 1,306,971 $ 31,487
============ ============
Supplemental Disclosure of Cash Flow Information
Cash paid for interest (net of amounts capitalized) $ 4,235,205 $ 4,065,327
============ ============
Supplemental Disclosure of Non-Cash Transactions
Dividends and limited partners' distributions declared
and unpaid $ 2,286,310 $ 1,479,345
Shares issued under Stock Incentive Plan $ 618,913 $ 170,616
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
9
<PAGE>
Agree Realty Corporation
Notes to Consolidated Financial Statements
(Unaudited)
- -----------------------------------------------------------------------------
1. Basis of
Presentation The accompanying unaudited 1997 consolidated 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, 1996 has been derived from the audited
consolidated financial statements at that date.
Operating results for the nine months ended September
30, 1997 are not necessarily indicative of the results
that may be expected for the year ending December 31,
1997, 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, 1996.
2. Issuance of
Common Stock During May and June 1997, the Company sold 1,653,850
shares of common stock. The cash proceeds (net of
underwriting fees and related issuance costs) to the
Company from the stock issuance sales were
approximately $31.9 million, which was used to reduce
outstanding indebtedness.
3. Earnings Per
Share Earnings per share has been computed by dividing the
income by the weighted average number of common shares
outstanding.
10
<PAGE>
Agree Realty Corporation
Part I
- -----------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
-----------------------------------------------------------
Overview
The Company was established to continue to operate and expand the retail
property business of the Agree Predecessors. The Company commenced its
operations on April 22, 1994 with the sale of 2,500,000 shares of common
stock. The net cash proceeds to the Company from the completion of the
initial public 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, the Operating Partnership, in which the Company held an 87.16%
interest as of September 30, 1997 as the sole general partner. The Company is
operating so as to qualify as a real estate investment trust for federal
income tax purposes.
The following should be read in conjunction with the Unaudited Consolidated
Financial Statements of Agree Realty Corporation including the respective
notes thereto, all of which are included in this Form 10-Q.
Comparison of Nine Months Ended September 30, 1997 to Nine Months Ended
September 30, 1996
Rental income increased $1,482,000, or 14%, to $12,058,000 in 1997, compared
to $10,576,000 in 1996. The increase is primarily the result of the
development and acquisition of five properties in 1996.
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 $136,000, or 11%, to
$1,409,000 in 1997, compared to $1,273,000 in 1996. Operating cost
reimbursements increased due to the increase in real estate taxes and
property operating expenses from 1997 to 1996 as explained below.
11
<PAGE>
Agree Realty Corporation
Part I
- -----------------------------------------------------------------------------
Management fees and other income remained relatively constant at $66,000 in
1997 versus $61,000 in 1996.
Real estate taxes increased $72,000, or 8%, to $959,000 in 1997 versus
$887,000 in 1996. The increase is the result of the addition of new
properties.
Property operating expenses (shopping center maintenance, insurance and
utilities) increased $31,000, or 4%, to $729,000 in 1997 versus $698,000 in
1996. The increase was the result of increased snow removal costs of $8,000;
an increase in shopping center maintenance costs of $30,000; a decrease in
utility costs of $4,000 and a decrease in insurance costs of $3,000 in 1997
versus 1996.
Land lease payments increased $113,000 to $338,000 in 1997 versus $225,000 in
1996 as a result of the acquisition of a ground lease of a single tenant
property in Aventura, Florida.
General and administrative expenses increased by $102,000, or 13%, to
$881,000 in 1997 versus $779,000 in 1996. The increase was primarily the
result of increases in compensation-related expenses of $71,000; increases in
state franchise and income taxes of $10,000 and increased expenses in
connection with the management of the Company's properties of $21,000.
General and administrative expenses as a percentage of rental income
decreased from 7.4% for 1996 to 7.3% for 1997.
Depreciation and amortization increased $128,000, or 7%, to $2,082,000 in
1997 versus $1,954,000 in 1996. This increase was the result of the
completion of five new properties in 1996.
Interest expense decreased $126,000, or 3%, to $4,385,000 in 1997, from
$4,511,000 in 1996. The decrease in interest expense was the result of the
Company using the proceeds of the 1997 Offering to reduced the Company's
indebtedness, during the quarter ended June 30, 1997.
Equity in net income of unconsolidated entities decreased $58,000 to $4,000
in 1997 versus $62,000 in 1996 as a result of additional expenses in 1997
related to certain of the seven properties held in joint ventures, in which
the Company holds interests ranging from 8% to 20%.
The Company received $22,000 of development fee income in 1997 in connection
with the completion of four Joint Venture Properties. There was no
development fee income in 1996.
12
<PAGE>
Agree Realty Corporation
Part I
- -----------------------------------------------------------------------------
The Company recognized income of $103,000 on the sale of a parcel of land in
1997. There were no land sale gains in 1996.
The Company's income before minority interest increased $1,370,000 as a
result of the foregoing factors.
Comparison of Three Months Ended September 30, 1997 to Three Months Ended
September 30, 1996
Rental income increased $411,000, or 11%, to $4,030,000 in 1997, compared to
$3,619,000 in 1996. The increase is primarily the result of the development
and acquisition of three properties in 1996.
Operating cost reimbursements increased $75,000, or 20%, to $452,000 in 1997,
compared to $377,000 in 1996. Operating cost reimbursements increased due to
the increase in real estate taxes and property operating expenses from 1997
to 1996 as explained below.
Management fees and other income remained constant at $20,000 in 1997 versus
$21,000 in 1996.
Real estate taxes increased $27,000, or 9%, to $328,000 in 1997 versus
$301,000 in 1996. The increase is the result of the addition of new
properties.
Property operating expense (shopping center maintenance, insurance and
utilities) increased $8,000, or 4% to $199,000 in 1997 versus $191,000 in
1996. The increase was the result of an increase in shopping center
maintenance costs of $9,000 and a decrease in insurance costs of $1,000 in
1997 versus 1996.
Land lease payments increased $3,000 to $114,000 in 1997 versus $111,000 in
1996 as a result of an amendment to the terms of a ground lease for a
property located in Perrysburg, Ohio.
General and administrative expenses increased by $51,000, or 22%, to $288,000
in 1997 versus $237,000 in 1996. This increase was primarily the result of
increases in compensation-related expenses of $42,000 and increased expenses
in connection with the management of the Company's properties of $9,000.
General and administrative expenses as a percentage of rental income
increased from 6.6% for 1996 to 7.2% for 1997.
Depreciation and amortization increased $29,000, or 4%, to $696,000 in 1997
versus $667,000 in 1996. This increase was the result of the completion of
three new properties in 1996.
13
<PAGE>
Agree Realty Corporation
Part I
- -----------------------------------------------------------------------------
Interest expense decreased $369,000, or 23%, to $1,206,000 in 1997, from
$1,575,000 in 1996. The decrease in interest expense was the result of the
Company's completion of the 1997 Offering during the quarter ended June 30,
1997.
Equity in net income of unconsolidated entities increased $92,000, to $3,000
in 1997 versus a loss of ($89,000) in 1996 as a result of additional expenses
in 1996 related to certain of the seven properties held in joint ventures, in
which the Company holds interests ranging from 8% to 20%.
The Company's income before minority interest increased $827,000 as a result
of the foregoing factors.
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 (loss) before minority interest, computed in accordance with
generally accepted accounting principles ("GAAP"), excluding gains (losses)
from debt restructuring and sales of property, plus real estate related
depreciation and amortization (excluding amortization of financing costs),
and after adjustments for unconsolidated partnerships and joint ventures. 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
<PAGE>
Agree Realty Corporation
Part I
- -----------------------------------------------------------------------------
The following tables illustrate the calculation of FFO for the nine months
and three months ended September 30, 1997 and 1996:
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1997 1996
- ------------------------------- ---- ----
<S> <C> <C>
Net income before minority interest $ 4,288,845 $ 2,918,552
Depreciation of real estate assets 2,008,722 1,874,126
Amortization of leasing costs 62,881 71,370
Amortization of stock awards 97,425 62,154
Depreciation of real estate assets held in unconsolidated entities 515,765 199,683
Gain on sale of assets (103,270) -
Development fee income (22,369) -
----------- -----------
Funds from Operations $ 6,847,999 $ 5,125,885
=========== ===========
Funds from Operations Per Share $ 1.66 $ 1.56
=========== ===========
Weighted Average Shares and OP Units Outstanding 4,119,152 3,287,434
=========== ===========
</TABLE>
FFO increased $1,722,000, or 34%, to $6,848,000. The increase in FFO is
primarily the result of the development and acquisition of five properties in
1996 and the completion of the 1997 Offering.
<TABLE>
<CAPTION>
Three Months Ended September 30, 1997 1996
- -------------------------------- ---- ----
<S> <C> <C>
Net income before minority interest $ 1,671,823 $ 844,537
Depreciation of real estate assets 670,273 639,568
Amortization of leasing costs 21,656 24,576
Amortization of stock awards 32,475 20,718
Depreciation of real estate assets held in unconsolidated entities 171,922 199,683
Development fee expense 906 -
----------- -----------
Funds from Operations $ 2,569,055 $ 1,729,082
=========== ===========
Funds from Operations Per Share $ .52 $ .53
=========== ===========
Weighted Average Shares and OP Units Outstanding 4,970,239 3,287,434
=========== ===========
</TABLE>
FFO increased $840,000, or 49%, to $2,569,000. The increase in FFO is
primarily the result of the development and acquisition of three properties
in 1996 and the completion of the 1997 Offering.
15
<PAGE>
Agree Realty Corporation
Part I
- -----------------------------------------------------------------------------
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, 1997 the Company declared a quarterly
dividend of $.46 per share. The dividend was paid on October 16, 1997 to
holders of record on September 30, 1997.
As of September 30, 1997, the Company had total mortgage indebtedness of
$51,040,578 with a weighted average interest rate of 7.55%. Future scheduled
annual maturities of mortgages payable for the years ended September 30, are
as follows: 1998 - $345,229; 1999 - $8,258,653; 2000 - $951,659; 2001 -
$1,027,078; 2002 - $1,108,655. This mortgage debt is all fixed rate debt.
In addition, the Operating Partnership has in place a $50 million Credit
Facility with a bank group headed by Michigan National Bank which is
guaranteed by the Company. The loan is for a three-year period ending on
August 7, 2000 and can be extended by the Company for an additional three
years. Advances under the Credit Facility bear interest within a range of
LIBOR plus 187.5 basis points to 250 basis points or the Bank's prime rate
less 12.5 basis points to plus 50 basis points, 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 all of the Company's existing
properties which are not otherwise encumbered and properties to be acquired
or developed. As of September 30, 1997, $6,865,459 was outstanding under the
Credit Facility.
The Company also has in place a $5 million line of credit which matures
September 21, 1998. The line bears interest at the bank's prime rate or 200
basis points in excess of the one-month LIBOR rate at the option of the
Company. The purpose of the loan is to provide working capital to the Company
and fund land options and start-up costs associated with new projects. As of
September 30, 1997, there were no amounts outstanding under the line of
credit.
The Company has received funding from an unaffiliated entity to fund
construction of certain of its properties. Advances under this agreement bear
no interest and are required to be repaid within sixty (60) days after the
date construction has been completed. The advances are secured by the
specific land and buildings being developed. As of September 30, 1997,
$1,701,406 was outstanding under this arrangement.
16
<PAGE>
Agree Realty Corporation
Part I
- -----------------------------------------------------------------------------
The Company has two development projects under way which will add an
additional 30,000 square feet of retail space to the Company's portfolio. The
projects are expected to be completed during the fourth quarter of 1997 and
the second quarter of 1998. Management expects the development of these
retail projects to have a positive effect on cash generated by operating
activities and funds from operations. Additional Company funding required for
these projects is estimated to be $3,400,000 and will come from the Credit
Facility.
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 intends to maintain a ratio of total indebtedness
(including construction and acquisition financing) to Total Market
Capitalization of 65% or less. The Company plans to begin construction of
additional pre-leased developments and may acquire additional properties
which will initially be financed by the line of credit and the Credit
Facility. Management intends to periodically refinance short term
construction and acquisition financing with long-term debt and equity. Upon
the completion of such refinancing, the Company intends to lower its ratio of
total indebtedness to Total Market Capitalization to 50% or less.
Nevertheless, the Company may operate with debt levels 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.
17
<PAGE>
Agree Realty Corporation
Part II
- -----------------------------------------------------------------------------
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 First amendment to $50 million line-of-credit agreement
dated August 7, 1997 among Agree Realty Corporation and
Michigan National Bank, as agent.
10.2 First amendment to $5 million business loan agreement
dated September 21, 1997 between Agree Limited
Partnership and Michigan National Bank.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
18
<PAGE>
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 7, 1997
19
FIRST 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
NBD BANK
and
LASALLE NATIONAL BANK
AS LENDERS
Dated as of August 7, 1997
<PAGE>
FIRST AMENDMENT TO
LINE OF CREDIT AGREEMENT
THIS FIRST AMENDMENT TO LINE OF CREDIT AGREEMENT ("First
Amendment"), dated as of August 7, 1997, 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 NBD BANK, a Michigan banking corporation ("NBD"),
and LASALLE NATIONAL BANK, a national banking association ("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 ("Original Agreement") whereby
Lenders made available to Borrower a line of credit loan facility in the
maximum amount of $50,000,000.
Borrower and Lenders now wish to amend certain terms and provisions
of the Original 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 ORIGINAL AGREEMENT.
--------------------------------
1. Defined Terms.
--------------
(a) The following defined terms and the meanings thereof
set forth in Section 1.1 of the Original Agreement are hereby deleted in
their entirety and replaced with the following:
"Adjusted Funds from Operation" means, for the period for
which it is to be determined, the operating income of Borrower and
the Company for such period, less operating expenses of Borrower and
the Company for such period, determined in accordance with GAAP,
calculated on a basis consistent with the definitions of Net
Operating Income and Operating Expenses herein; but including in
operating expenses all general and administrative expenses, and
excluding operating income and expenses resulting from (i)
cumulative changes in accounting practices, (ii) discontinued
operations, (iii) extraordinary items, (iv) net income of a
Subsidiary that is unavailable to Borrower or the Company, (iv) net
income not readily convertible into Dollars or remittable to the
United States, and (v) net income from corporations, partnerships,
associations, joint ventures or other entities in which Borrower or
the Company or a Subsidiary has a minority interest or in which
Borrower or the Company does not have control, except to the extent
actually received. For the purpose of this definition, "control"
means the possession directly or indirectly of the power to direct
or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities or by contract or
otherwise.
<PAGE>
"Available Loan Amount" means, as of the First Amendment
Closing Date, $41,538,250 less the Holdback Amount, as the same may
be subsequently reduced or increased, as the case may be, pursuant
to Sections 2.9, 2.11 or 5.13, or otherwise pursuant to the terms of
this Agreement or any other Loan Document, or increased pursuant to
Section 2.18, but in no event to exceed the Available Borrowing
Base.
"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:
<TABLE>
<CAPTION>
Circuit City Cap
Borders Cap Rate Kmart Cap Rate Rate TBD Cap Rate
---------------- -------------- ----------------- ------------
<S> <C> <C> <C> <C>
YE (yield requirement on 8.0% 8.50% 8.50% 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)
</TABLE>
"Borrowing Base" means (i) the Existing Properties, (ii)
the Acquisition Properties as to which the requirements of Section
2.18(e) have been met, and (iii) the Development Properties as to
which the requirements of Section 2.18(c) have been and continue to
be met and/or as to which the requirements of Section 2.18(d) have
been met.
"Borrowing Base Value" means the aggregate (a) Appraised
Value of the (i) Existing Properties, (ii) Acquisition Properties
and (iii) Development Properties as to which the requirements of
Section 2.18(d) have been met, which are included in the Borrowing
Base, and (b) 30% of the aggregate Appraised Value of the
Development Properties included in the Borrowing Base as to which
the requirements of Section 2.18(c) (but not the requirements of
2.18(d)) have been and continue to be met, (c) excluding, however,
from the calculation of Borrowing Base Value, the Appraised Value of
any Holdback Properties; provided, however, that the Borrowing Base
Value of a Property shall at no time exceed 20% of the aggregate
Borrowing Base Value of all Properties.
"Capital Value" means, as of any date, the sum of (i) Net
Operating Income of Borrower derived from Existing Properties for
the most recently ended twelve (12) month period divided by the
Kmart Cap Rate, and (ii) the aggregate of the following in respect
of each Acquisition Property that has satisfied the conditions set
forth in Section 2.18(e): (a) during the first eight fiscal quarters
of ownership by Borrower, the Appraised Value of the Acquisition
Property, and (b) thereafter, Net Operating Income of Borrower
derived from the Acquisition Property for the most recently ended
twelve (12) month period divided by the Borders Cap Rate (if the
-2-
<PAGE>
Property is a Borders Stand Alone or Anchored Property), the Kmart
Cap Rate (if the Property is a Kmart Stand Alone or Anchored
Property), the Circuit City Cap Rate (if the Property is a Circuit
City Stand Alone or Anchored Property), or the TBD Cap Rate (if the
Property is not a Borders, Kmart or Circuit City Stand Alone or
Anchored Property); and (iii) the aggregate of the following in
respect of each Development Property: (a) upon satisfaction of the
conditions set forth in Section 2.18(c), 30% of the Appraised Value
of such Property; provided, however, that such 30% of Appraised
Value shall be taken into account in determining Capital Value only
for the first fifteen (15) months following the date of acquisition
of the Property by Borrower; (b) for the first eight fiscal quarters
of Borrower following satisfaction of the conditions set forth in
Section 2.18(d), the Appraised Value of such Property and (c)
thereafter, Net Operating Income of Borrower derived from such
Property divided by the Borders Cap Rate (if the Property is a
Borders Stand Alone or Anchored Property), the Kmart Cap Rate (if
the Property is a Kmart Stand Alone or Anchored Property, the
Circuit City Cap Rate (if the Property is a Circuit City Stand Alone
or Anchored Property), or the TBD Cap Rate if the Property is not a
Borders, Kmart or Circuit City Stand Alone or Anchored Property);
(iv) excluding, however, from the calculation of Capital Value the
Capital Value of any Holdback Properties. The TBD Cap Rate will be
determined by the Required Lenders in their sole discretion and will
be utilized to determine the Capital Value of any Property which is
not an Existing Property nor a Borders, Kmart or Circuit City Stand
Alone or Anchored Property.
"Draw Period" shall mean the period commencing on November
14, 1995 expiring on the date which is thirty-six (36) months from
the First Amendment Closing Date.
"Kmart Cap Rate" is defined at "Borders Cap Rate", "Kmart
Cap Rate", "Circuit City Cap Rate" and "TBD Cap Rate" above.
"ProForma Loan Debt Service" means total annual debt
service payable on the Loan, assuming an outstanding principal
amount equal to the Available Loan Amount, a principal amortization
term of twenty (20) years, and an interest rate equal to the average
of the interest rates set forth in the chart below, to be weighted
according to the relative size of the Loan Portions (determined as
of the end of the last completed fiscal quarter of Borrower) to
which such rates are applicable. The determination of such average
interest rate by the Required Lenders shall be conclusive evidence
absent manifest error.
<TABLE>
<CAPTION>
Loan Portion Allocable to
Loan Portion Allocable to K-Mart Stand Alone or Loan Portion Allocable to
Borders Stand Alone or Anchored Properties and Circuit City Stand Alone
Anchored Properties Existing Properties or Anchored Properties All Other Properties
------------------------- ----------------------- ---------------------- --------------------
<S> <C> <C> <C>
10-Year Treasury Rate + 1.50% 10-Year Treasury Rate + 10-Year Treasury Rate + 10-Year Treasury Rate +
2.25% 2.00% margin to be determined
by the Required Lenders
in their sole discretion
</TABLE>
-3-
<PAGE>
"Subsidiary" means, with respect to any Person, any
corporation, partnership, association or other business entity of
which more than 50% of the total voting power of shares of stock (or
equivalent ownership or controlling interest) entitled (without
regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustee thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof.
"TBD Cap Rate" is defined at "Borders Cap Rate", "Kmart Cap
Rate", "Circuit City Cap Rate" and "TBD Cap Rate" above.
(b) The following terms are hereby added to subsection 1.1 of the
Original Agreement in their proper alphabetical order and shall have the
following meanings:
"Circuit City" means Circuit City, Inc., a Virginia
corporation.
"Circuit City Cap Rate" is defined at "Borders Cap Rate",
"Kmart Cap Rate", "Circuit City Cap Rate" and "TBD Cap Rate" above.
"First Amendment" means the First Amendment to Line of
Credit Agreement dated August 7, 1997 among Borrower, the Company
and Lenders.
"First Amendment Agreements" means the First Amendment and
all other agreements and documents executed by Borrower and/or the
Company in connection therewith.
"First Amendment Closing Date" means the date of the First
Amendment.
"Guaranty" means the Guaranty from the Company to Lenders
dated the Closing Date, and any amendment or supplement thereto or
any restatement thereof.
"Walgreens" means Walgreens Co., an Illinois corporation.
2. Amendment to Sections 2.1 (b). Sections 2.1(b) of the Original
Agreement is hereby deleted in its entirety and replaced with the following:
(b) Subject to the other provisions of this
Agreement, including, without limitation, Section 2.10,
2.11, 2.16 and 2.19, amounts borrowed under this Section
2.1 may be repaid and reborrowed prior to the Termination
Date. All outstanding Advances shall mature on the Maturity
Date, without further action on the part of Lenders.
3. Amendment to Section 2.2. Section 2.2 of the Original Agreement
is hereby deleted in its entirety and replaced with the following:
Section 2.2 Use of Proceeds. Borrower shall use
the proceeds of the Loan for general business purposes of
Borrower
-4-
<PAGE>
consistent with the "Business Objectives and Strategies"
set forth in the Prospectus of Agree Realty Corporation
dated April 15, 1994; provided, however, that Borrower
shall not use any loan proceeds to invest in any joint
venture, partnership, corporation or other entity unless
Borrower (i) acquires at least 50% of the ownership
interest in such entity, and (ii) Borrower has control of
such entity. For the purpose of this definition, "control"
means the possession directly or indirectly of the power to
direct or cause the direction of the management and
policies of a Person, whether through the ownership of
voting securities or by contract or otherwise.
4. Amendment to Section 2.6. The chart included in Section 2.6(a) of
the Original Agreement is hereby deleted in its entirety and replaced with
the following:
<TABLE>
<CAPTION>
Base Rate Margins and LIBOR Margins
Debt to Capital Value Ratio
Debt Service Coverage Greater than or equal to Greater than or equal to
Ratio 67.5% 60% but less than 67.5% Less than 60%
- -------------------- ------------------------ ----------------------- -------------
<S> <C> <C> <C>
Greater than or equal to LIBOR Margin = 1.75% LIBOR Margin = 1.625% LIBOR Margin = 1.5%
1.55 Base Rate Margin = (.25%) Base Rate Margin = (.375%) Base Rate Margin = (.5%)
Greater than or equal to LIBOR Margin = 1.875% LIBOR Margin = 1.75% LIBOR Margin = 1.625%
1.35 but less than 1.55 Base Rate Margin = (.125%) Base Rate Margin = (.25%) Base Rate Margin = (.375%)
Greater than or equal to LIBOR Margin = 2.125% LIBOR Margin = 1.875% LIBOR Margin = 1.75%
1.25 but less than 1.35 Base Rate Margin = .125% Base Rate Margin = (.125%) Base Rate Margin = (.25%)
</TABLE>
5. Amendment to Section 2.10(a). Section 2.10(a) of the Original
Agreement is hereby deleted in its entirety and replaced with the following:
Section 2.10 Repayments; Termination. (a) Borrower shall
have the right to repay amounts borrowed pursuant to Section 2.1
from time to time on the following terms and conditions: (a)
Borrower shall give Agent written notice in the form attached hereto
as Exhibit "A-3" (or telephonic notice promptly confirmed in
writing), which notice shall be irrevocable, of its intent to repay
amounts outstanding under the Loan, at least one (1) Business Day
prior to a repayment of LIBOR Portions and Base Rate Portions, which
notice shall specify the amount of such payment and what Loan
Portions are to be paid and, in the case of LIBOR Portions, the
specific Advance pursuant to which made, (b) payments of LIBOR
Portions made pursuant to this Section on a date other than the last
day of the Interest Period applicable thereto shall be accompanied
by payment of any Funding Costs resulting from such early payment.
If any such notice is given, the amount specified in such notice
shall be due and payable on the date specified therein.
6. Amendment to Section 2.18.
(a) Amendment to Section 2.18(a). Section 2.18(a) of the
Original Agreement is hereby deleted in its entirety and replaced with the
following:
Section 2.18 Addition of Collateral; Increasing Available Loan
Amount. Provided that no Default or Event of Default has occurred
and is
-5-
<PAGE>
continuing and that no Property shall constitute more than 20% of
the Borrowing Base Value, prior to the Termination Date, Borrower
may, subject to the limitations set forth herein and the
satisfaction of the terms of this Section 2.18, add additional
commercial real estate properties, which are approved by all of the
Lenders in their sole discretion, and which are acquired and owned
in fee simple by Borrower or leased by Borrower pursuant to a ground
lease acceptable in all respects to all of the Lenders in their sole
discretion (each an "Approved Property"), to the Borrowing Base and
thereby increase the Available Loan Amount, by subjecting the
Additional Property to the Lien of a new mortgage, deed of trust,
deed to secure debt or similar security instruments, in the same
form and substance as the Mortgage, to the Lien of the Loan
Documents, as a first lien thereon. Any Approved Property shall be
designated by Agent as an Approved Acquisition Property or an
Approved Development Property, and shall be added to the Borrowing
Base and, subject to the continued satisfaction of the Available
Borrowing Base Covenant (after giving effect to the Additional
Properties added thereto), the Available Loan Amount shall be
increased as follows:
(i) At such time as all of the conditions set forth in
Section 2.18(c) are met as to an Approved Development Property, the
Available Loan Amount shall be increased by an amount equal to 30%
of the Appraised Value of such Approved Development Property, but
only until the earlier of (i) the date fifteen months from the date
Borrower acquires such Property, or (ii) the date upon which the
conditions of set forth in Section 2.18(a)(ii) are satisfied;
(ii) At such time as all of the conditions set forth in
Section 2.18(d) are met as to an Approved Development Property, the
Available Loan Amount shall be increased by an amount equal to 65%
of the Appraised Value of such Approved Development Property; and
(iii) At such time as all of the conditions set forth in
Section 2.18(e) are met as to an Approved Acquisition Property, the
Available Loan Amount shall be increased by an amount equal to 65%
of the Appraised Value of such Approved Acquisition Property.
(b) Amendment to Section 2.18(c). Section 2.18(c) is hereby
amended by adding the following Section 2.18 (c) (iii) to Section 2.18(c):
(iii) Notwithstanding any other provision of this
Agreement, the Available Loan Amount shall not be increased pursuant
to Section 2.18(a)(i) unless the undisbursed portion of the
Available Loan Amount is sufficient to fund the remaining unpaid
cost of the acquisition, development and construction of the
Additional Approved Property in respect of which the increase in the
Available Loan Amount has been requested pursuant to Section
2.18(a)(i), and Borrower shall provide Agent with such evidence of
such costs as Agent shall require, including, but not limited to,
updating the construction budget and construction schedule for such
Additional Approved Property.
-6-
<PAGE>
(c) Deletion of Sections 2.18 (h) and (i). Sections 2.18(h)
and (i) of the Agreement are hereby deleted in their entirety from Section
2.18.
7. Amendment of Schedules and Exhibits. Schedules 1, 2, 3, 5 and 8
and Exhibit A-3 to the Original Agreement are hereby deleted in their
entirety and replaced with Revised Schedules 1, 2, 3, 5 and 8 and Exhibit A-3
attached hereto.
C. REPRESENTATIONS AND WARRANTIES.
Borrower represents, warrants, covenants and agrees that as of the
First Amendment Closing Date, after giving effect to the consummation of the
transactions contemplated by this First Amendment:
1. Authority. Each of Borrower and the Company has full power,
authority and legal right to enter into the applicable First Amendment
Documents. The execution, delivery and performance by Borrower and the
Company of the applicable First 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 First 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 First 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 First Amendment
pursuant to Section B(7).
-7-
<PAGE>
4. Schedules. The Schedules to the Agreement remain true, correct
and complete on and as of the First Amendment Closing Date except to the
extent that Revised Schedules are attached to this First Amendment, in which
case such revised Schedules are true, correct and complete on and as of the
First Amendment Closing Date.
5. Default. Upon closing of the First 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 First Amendment are
conditioned upon (a) the fulfillment, in a manner satisfactory to Lenders on
or before the First Amendment Closing Date, of each of the following terms
and conditions or (b) the delivery on or before the First 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. First Amendment Documents.
(a) First Amendment. Borrower and the Company shall have
executed and delivered this First 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 First Amendment Closing Date, from counsel to Borrower, in form and
substance satisfactory to Agent and its counsel, that, among other things,
this First Amendment and any other First 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 First 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 First
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
First 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 First Amendment Closing Date, certifying (i) the names and true
signatures of the incumbent officers of the Company authorized to sign the
-8-
<PAGE>
applicable First Amendment Agreements, (ii) the by-laws of the Company as in
effect on the First Amendment Closing Date, (iii) the resolutions of the
Company's board of directors approving and authorizing the execution,
delivery and performance of all First 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.
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. Fees and Expenses. Agent shall have received, for its account,
the fees and expenses accrued through the First Amendment Closing Date of
counsel retained by Agent, and each Lender shall have received, for its
account, the following First Amendment fees: to MNB, $62,500; to NBD, $37,500
and to LaSalle, $25,000.
7. 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 First
Amendment Closing Date, the financial covenants set forth in Section 5.13,
5.14, 5.15 and 5.16 of the Agreement are satisfied and that, as of the First
Amendment Closing Date, there is no Default or Event of Default under the
Agreement.
8. Additional Matters. Agent shall have received such other
certificates, opinions, documents and instruments relating to the First
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 First Amendment transaction shall be satisfactory in
form and substance to Agent.
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, and the reference in
the eighth paragraph of each of the Notes to Section 2.6(c) of the Loan
Agreement is changed to Section 2.6(b) of the Loan Agreement.
2. Affirmation of Loan Documents. Borrower and the Company
acknowledge and affirm that (i) the Loan Documents, as amended by the First
Amendment Agreements and Section E(1) of this First 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 First Amendment Agreements and
Section E(1) of this First 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.
-9-
<PAGE>
G. MISCELLANEOUS.
1. Section Titles. The section titles contained in this First
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 First 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 this First Amendment shall be deemed to
include this First Amendment unless the context shall otherwise require.
4. Continued Effectiveness. Notwithstanding anything contained
herein, the terms of this First 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 First Amendment.
5. Counterparts. This First 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 First 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 First 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 First 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 First Amendment
and each acknowledge and agree that Agent and each Lender is relying upon
this release in entering into this First 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 First Amendment, the exhibits and
schedules attached hereto, and the other First Amendment Agreements represent
the entire agreement between the parties hereto relating to the First
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.
-10-
<PAGE>
IN WITNESS WHEREOF, this First 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/ Shelia E. Maples
-----------------------------
Name: Sheila E. Maples
Title: Vice President
NBD BANK,
a Michigan banking corporation, as Lender
By:/s/ Gary D. Boyer
------------------------------
Name: Garry D. Boyer
Title: Vice President
LASALLE NATIONAL BANK,
a national banking association, as Lender
By:/s/ Thomas Jeffrey
------------------------------
Name: Thomas Jeffrey
Title: Vice President
-11-
<PAGE>
<TABLE>
<CAPTION>
REVISED SCHEDULE 1
ALLOCATED LOAN AMOUNTS
Allocated
Property Location Loan Amount
-------- -------- -----------
<S> <C> <C>
Borman Center Roseville, MI *$2,470,000
Grayling Plaza Grayling, MI $1,534,000
Iron Mountain Plaza Iron Mountain, MI $4,173,000
Ironwood Commons Ironwood, MI $4,995,250
Oscoda Plaza Oscoda, MI $1,709,500
Capital Plaza Frankfort, KY $2,195,050
West Frankfort Plaza West Frankfort, IL $ 453,700
Borders #122
1715 N. Rock Rd. Wichita, KS $2,060,500
Borders #123
13105 Birch Dr. Omaha, NE $2,551,250
Borders #129
900 State Street Santa Barbara, CA $4,238,000
Borders #2 $2,063,750
4545 Kenny Road Columbus, OH
Borders #83
19225 Biscayne Blvd. Aventura, FL $2,112,500
Circuit City
Boynton Festive Center
Congress Ave. & Old Boynton Road Boynton Beach, FL $3,003,000
Borders # 108
300 Norman Center Court Norman, OK $1,803,750
Borders #143
Mall Blvd. at Oxford Blvd. Monroeville, PA $5,265,000
TGI Friday
Mall Blvd. at Oxford Blvd. Monroeville, PA $ 975,000
<FN>
*Less Holdback Amount
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
REVISED SCHEDULE 2
EXISTING PROPERTIES
Property Location
-------- --------
<S> <C>
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVISED SCHEDULE 3
ADDITIONAL APPROVED PROPERTIES
Approved Acquisition Properties
Location Tenant
-------- ------
<S> <C>
19225 Biscayne Blvd. Borders #83
Aventura, Fl
4545 Kenny Borders #2
Columbus, Ohio 43220
Mall Blvd. at Oxford Blvd. TGI Friday
Monroeville, Pennsylvania 15146
</TABLE>
<TABLE>
<CAPTION>
Approved Development Properties
Location Tenant
-------- ------
<S> <C>
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
</TABLE>
-14--
<PAGE>
REVISED SCHEDULE 5
LITIGATION
None
-15-
<PAGE>
<TABLE>
<CAPTION>
REVISED SCHEDULE 8
INDEBTEDNESS
Outstanding Principal
Property Lender Secured Balance
- -------- ------ ------- ---------------------
<S> <C> <C> <C>
Charlevoix Commons Nationwide Life Insurance Yes $3,981,600
Company
Chippewa Commons Nationwide Life Insurance Yes $5,130,840
Company
Marshall Plaza II Nationwide Life Insurance Yes $3,407,040
Company
Petoskey Town Center Nationwide Life Insurance Yes $5,577,600
Company
Plymouth Commons Nationwide Life Insurance Yes $4,811,520
Company
Rapids Associates Nationwide Life Insurance Yes $5,120,640
Company
Shawano Plaza Nationwide Life Insurance Yes $5,597,760
Company
North Lakeland Plaza Travelers Indemnity Yes $7,910,469
Winter Gardens Plaza American United Life Yes $9,570,328
Perrysburg Plaza Michigan National Bank Yes $2,360,377
Borders Borders Group, Inc. No $1,701,406 (1)
<FN>
(1)Non-interest bearing
</TABLE>
-16-
<PAGE>
REVISED EXHIBIT A-3
PAYMENT NOTICE
AGREE LIMITED PARTNERSHIP
Michigan National Bank
27777 Inkster Road
Farmington Hills, Michigan 48333-9065
Attention: Sheila E. Maples (10-02)
Ladies and Gentlemen:
We refer to that certain Line of Credit Agreement dated as of
November __, 1995, between us, Lenders, and you, as amended (the "Loan
Agreement"). This certificate is delivered to you pursuant to Section 2.10 of
the Loan Agreement. All capitalized terms used herein shall have the same
meanings herein as they have in the Loan Agreement.
The undersigned hereby notifies you that it has elected to repay
$__________ representing the [Base Rate Portion of $____________] [LIBOR
Portion of _________ with an Interest Rate of _____________ and an Interest
Period ending on _____________]. We hereby acknowledge that we will pay
Funding Costs, as applicable.
AGREE LIMITED PARTNERSHIP
By: Agree Realty Corporation
By:_____________________
Name:
Title:
-17-
FIRST AMENDMENT TO
AMENDED AND RESTATED BUSINESS LOAN AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED BUSINESS LOAN AGREEMENT
("First Amendment"), made October 1, 1997, but effective September 21, 1997
("Effective Date"), by and between AGREE LIMITED PARTNERSHIP, a Delaware
limited partnership, whose address is 31850 Northwestern Highway, Farmington
Hills, Michigan 48334 (the "Borrower") and MICHIGAN NATIONAL BANK, a national
banking association, whose address is 27777 Inkster Road (10-02), Farmington
Hills, Michigan 48333-9065 (the "Bank"). Capitalized terms used but not
defined in this First Amendment shall have the meaning assigned to such terms
in the Restated Agreement (as defined below).
RECITALS
WHEREAS, Borrower and Bank entered into an Amended and Restated
Business Loan Agreement dated September 30, 1996, but effective September 21,
1996 ("Restated Agreement"), whereby Bank agreed to make a $5,000,000 Line of
Credit Loan ("Loan") available to Borrower;
WHEREAS, the Loan has matured; and
WHEREAS, Borrower has requested Bank to extend the maturity date of
the Loan and modify and amend certain terms of the Restated Loan Agreement to
evidence the extension of the Loan and Bank has agreed to do so upon the
terms and condition of this First Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of and in reliance upon the
foregoing recitals of fact and the agreements among the parties set forth in
this Agreement, the Restated Agreement is hereby amended as follows:
A. AMENDMENT OF RESTATED AGREEMENT.
1. Amendment of Section I. The INTEREST RATE, MATURITY DATE AND LOAN
DATE set forth in Section I of the Restated Agreement are changed to read
"MNB Prime or 200 b.p. (2.00%) in excess of 1-month LIBOR", "September 21,
1998" and "September 21, 1997", respectively.
2. Amendment of Section III.P. Section III.P. is restated in its
entirety to read as follows:
"P. Borrower's Operations. Operations of Borrower shall be
limited to the acquisition, ownership and management of retail
shopping centers and related business activities."
<PAGE>
3. Amendment of Section IX. Section IX of the Restated Agreement is
amended by adding the following definition to Section IX:
"Adjusted Net Worth" should mean the sum of (i) total
stockholder's equity of Borrower and Guarantor on a consolidated
basis determined in accordance with GAAP as of the end of each
fiscal quarter of Borrower and Guarantor, and (ii) the percentage of
the cumulative amount of quarterly depreciation and amortization
expenses of Borrower and Guarantor equal to the ownership percentage
of Guarantor in Borrower, beginning with the quarter ended September
30, 1995.
4. Amendment of Section VII.A.(2) of Addendum. Section VII.A.(2) of
the Addendum to the Restated Agreement is restated in its entirety to read as
follows:
"For a LIBOR Advance at a rate equal to the LIBOR Interest
Rate plus Two (2.00%) Percent.
5. Amendment of Section VII.C.(2) of Addendum. Section VII.C.(2) of
the Addendum to the Restated Agreement is restated in its entirety to read as
follows:
"For each LIBOR Advance at a rate equal to the LIBOR
Interest Rate plus Four (4.00%) Percent from the time of default in
payment of principal until the end of the then current Interest
Period therefore, and thereafter at a rate equal to the Prime Rate
plus Two (2.00%) Percent.
6. Amendment of Section III.A.2. Section III.A.2. is restated in its
entirety to read as follows:
"Maintain an Adjusted Net Worth of not less than
$23,092,200.00 plus 90% of the cash proceeds of any equity offering
of Agree Realty Corporation, net of underwriting discounts and
commissions and other reasonable costs associated therewith."
7. Revised Exhibit B. Exhibit B to the Restated Agreement is
restated in its entirety to read as set forth in Revised Exhibit B attached
hereto.
B. REPRESENTATIONS AND WARRANTIES.
Borrower represents, warrants, covenants and agrees that as of the
Effective Date and the date hereof, after giving effect to the consummation
of the transactions contemplated by this First Amendment:
1. Authority. Each of Borrower and Guarantor, as applicable, has
full power, authority and legal right to enter into the First Amendment and
the Note (as defined
2
<PAGE>
below). The execution, delivery and performance by Borrower and Guarantor of
the applicable First Amendment documents:
(a) have been duly authorized by all necessary
partnership or corporate action, as applicable, of Borrower and
Guarantor;
(b) do not and will not, by lapse of time, the
giving of notice or otherwise, contravene the terms of Borrower's or
Guarantor's respective partnership agreement or certificate,
articles of incorporation or bylaws or of any indenture, agreement
or undertaking to which Borrower or Guarantor 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 Guarantor, 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 Guarantor
under any existing indenture, mortgage, deed of trust, loan or
credit agreement or other material agreement or instrument to which
Borrower or Guarantor is a party or by which Borrower or Guarantor
or any of their respective property may be bound or affected.
2. Binding Effect. Each of the First Amendment documents is the
legal, valid and binding obligation of Borrower and Guarantor, as
appropriate, and is enforceable against Borrower and Guarantor, 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 Restated Agreement and the
Related Documents are true, correct and complete on and as of the Effective
Date and the date hereof, to the same extent as though made on and as of that
date, and taking into account any revised Exhibits attached to this First
Amendment.
4. Default. Upon closing of the First Amendment transaction, no
Event of Default or Default has occurred and is continuing.
<PAGE>
C. CONDITIONS TO CLOSING.
In addition to those conditions set forth elsewhere in the
Agreement, the obligations of Bank under this First Amendment are conditioned
upon (a) the fulfillment, in a manner satisfactory to Bank on or before the
date hereof, of each of the following terms and conditions or (b) the
delivery on or before the date hereof, duly executed, in form and substance
satisfactory to Bank (and their counsel) of the following documents, as the
case may be:
1. First Amendment Documents.
(a) First Amendment. Borrower and Guarantor shall have executed and
delivery this First Amendment to Bank.
(b) Third Amended and Restated Note. Borrower shall have executed and
delivered the Third Amended and Restated Note ("Note").
(c) Other Agreements. Borrower shall have executed and delivered
to Bank such other agreements and documents in connection with the Loan as
Bank may request in form and substance satisfactory to Bank and its counsel.
2. Organizational Documents. Bank shall have received (i) with
respect to Guarantor, the certificate of incorporation of Guarantor, as
amended, modified or supplemented to the date hereof, 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 date hereof, 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 date hereof, certified to be true, correct and complete
by the appropriate Secretary of State.
3. Certified Resolutions. Bank shall have received a certificate of
the secretary or assistant secretary of Guarantor and dated the date hereof,
certifying (i) the names and true signatures of the incumbent officers of
Guarantor authorized to sign the applicable First Amendment documents and
(ii) the resolutions of Guarantor's board of directors approving and
authorizing the execution, delivery and performance of all First Amendment
documents executed by Guarantor.
4. Additional Matters. Bank shall have received such other
certificates, opinions, documents and instruments relating to the First
Amendment transaction as may have been reasonably requested by Bank, and all
corporate and other proceedings and all other documents and all legal matters
in connection with the First Amendment transaction shall be satisfactory in
form and substance to Bank.
4
<PAGE>
D. AMENDMENT AND AFFIRMATION OF LOAN DOCUMENTS.
1. Affirmation of Loan Documents. Borrower and Guarantor acknowledge
and affirm that (i) the Restated Agreement, as amended by the First
Amendment, the Mortgages, the Assignments and the Guaranty are enforceable
against the Borrower and Guarantor, as applicable, and remain in full force
and effect and shall be unamended, unchanged and unmodified, except as
specifically set forth in the First Amendment; and (ii) the Collateral and
the Guaranty shall continue to secure and/or guaranty the repayment of the
Obligations, whether or not the Obligations were contemplated by Borrower,
Guarantor or Bank at the time of the execution of the Restated Agreement and
the Related Documents, as amended hereby.
E. MISCELLANEOUS.
1. Section Titles. The section titles contained in this First
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 First 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, Guarantor and Bank.
3. References. Any reference to the Restated Agreement contained in
any notice, request, certificate, or other document executed concurrently
with or after the execution and delivery of this First Amendment shall be
deemed to include this First Amendment unless the context shall otherwise
require.
4. Continued Effectiveness. Notwithstanding anything contained
herein, the terms of this First Amendment are not intended to and do not
serve to effect a novation as to the Restated Agreement. The parties hereto
expressly do not intend to extinguish the Restated Agreement; instead, it is
the express intention of the parties hereto to reaffirm Borrower's
Obligations created under the Restated Agreement, as amended by this First
Amendment.
5. Counterparts. This First 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. Release of Claims; Limitation of LiabilityIn consideration of
Bank entering into this First Amendment, Borrower and Guarantor do each
hereby release and discharge Bank 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 Guarantor have against Bank through the date of
this First
5
<PAGE>
Amendment. Borrower and Guarantor confirm to Bank 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 First Amendment and each acknowledge and agree that Bank is relying upon
this release in entering into this First Amendment. No claim may be made by
Borrower, Guarantor, or any other Person against Bank or the affiliates,
directors, officers, employees, attorneys or Bank 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 Guarantor 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.
7. Entire Agreement. This First Amendment, the exhibits attached
hereto, and the other First Amendment documents represent the entire
agreement between the parties hereto relating to the First 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.
IN WITNESS WHEREOF, this First 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 Bank and as Lender
By:
--------------------------------
Name: Sheila E. Maples
Title: Vice President
6
<PAGE>
AGREEMENT OF GUARANTOR
By executing this First Amendment the undersigned "Guarantor" agrees that the
Indebtedness of Borrower is and, notwithstanding this First Amendment, will
continue to be guaranteed to Bank in accordance with the terms of the Amended
and Restated Guaranty made September 30, 1996 ("Guaranty") and executed and
delivered by Guarantor to Bank, without limit. In addition, Guarantor: (1)
acknowledges and agrees that the Guarantor has completely read and
understands this First Amendment; (2) consents to all of the provisions of
this First Amendment relating to Borrower; (3) acknowledges and agrees that
the Guaranty continues in full force and effect; (4) acknowledges receipt of
good and lawful consideration for execution of the Guaranty and this First
Amendment; (5) agrees promptly to furnish such Financial Statements to Bank
concerning the Guarantor as Bank shall reasonably request; (6) agrees to all
of those portions of this First Amendment which apply to Guarantor; (7)
acknowledges and agrees that this First Amendment has been freely executed
without duress and after an opportunity was provided to Guarantor for review
of this First Amendment by competent legal counsel of Guarantor's choice; and
(8) acknowledges that the Bank has provided Guarantor with a copy of this
First Amendment and such other Related Documents as Guarantor has requested.
GUARANTOR:
AGREE REALTY CORPORATION,
a Maryland corporation
By:/s/ Richard A. Agree
-----------------------
Richard A. Agree
Its: President
<PAGE>
REVISED EXHIBIT B
Permitted Encumbrances
First mortgage liens and related security interests have been granted to the
following lenders on the projects described below:
A. Nationwide Insurance Company
1. Charlevoix Commons
2. Chippewa Commons
3. Marshall Plaza II
4. Petoskey Town Center
5. Plymouth Commons
6. Rapids Associates
7. Shawano Plaza
B. Travelers Indemnity
1. North Lakeland Plaza
C. American United Life
1. Winter Garden Plaza
D. Michigan National Bank
1. Perrysburg Plaza
E. Michigan National Bank, NBD Bank and LaSalle National Bank
1. The properties listed on Exhibit A to this Agreement.
2. Norman, Oklahoma Borders
3. Monroeville, Pennsylvania Borders
4. Monroeville, Pennsylvania TGI Fridays
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> $ 1,306,971
<SECURITIES> 0
<RECEIVABLES> 238,411
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 136,015,824
<DEPRECIATION> 19,364,174
<TOTAL-ASSETS> 123,704,098
<CURRENT-LIABILITIES> 0
<BONDS> 59,607,443
<COMMON> 433
0
0
<OTHER-SE> 55,419,329
<TOTAL-LIABILITY-AND-EQUITY> 123,704,098
<SALES> 13,532,958
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 4,988,757
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,385,104
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,608,406
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 0.00
</TABLE>
