Good morning ladies and gentlemen, and welcome to the Agree Reality Corporation's Second Quarter 2015 Earnings Conference Call. During today's presentation all parties will be in a listen-only mode. Following the formal presentation the conference will be open for questions. As a reminder, this conference is being recorded. It is now my pleasure to introduce Joey Agree, President and Chief Executive Officer of Agree Realty Corporation. Mr. Agree, you may begin.

Thank you, operator. Good morning everyone, and thank you for joining us for Agree Realty's Second Quarter 2015 Conference Call. Joining me today is Brian Dickman, our Chief Financial Officer; as well as Ken Howe, who will step in as the Interim Chief Financial Officer on August 4th. For those of you that aren't familiar with Ken, he has been with the company since our IPO in 1994, and served as Chief Financial Officer for over 16 years, until late 2010. Since that time, he's remained onboard as our Director of Tax. Ken has a very long history and deep understanding of the company. I am very pleased to report our second quarter results, and believe that our performance further establishes the unique capabilities of our retail net lease platform. During the quarter, we continued to scale the company by sourcing attractive real estate investment opportunities, but also remain focused on actively managing the existing portfolio, and maintaining a strong credit profile. The result was record year-over-year per share FFO, as well as AFFO growth, 35% of revenue growth, and the third dividend increase in the past six quarters. At the end of the quarter, our real estate portfolio consisted of 250 properties located in 41 states, and encompassing over 4.9 million square feet of gross leasable area. As of June 30th, the total portfolio had a weighted average remaining lease term of 11.8 years, and investment grade retailers generated 53.4% of annualized rent. Excluding the five remaining community shopping centers, the net lease portfolio had a weighted average remaining lease term of 12.2 years, and investment grade retailers generated 56.2% of annualized rent. At quarter end, the portfolio was 99.4% occupied. These metrics reflect the high-quality nature of our portfolio that continues to be among the strongest of its…

Thanks, Joey. Good morning, everyone. As a reminder, please note that during this call we will make certain statements that may be considered forward-looking under federal securities law. Our actual results may differ significantly from the matters discussed in any forward-looking statements. In addition, we discuss non-GAAP financial measures including funds from operations, or FFO, and adjusted funds from operations, or AFFO. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in our earnings release. As announced yesterday, for the second quarter of 2015, we reported total rental revenue of $16.1 million, an increase of 35% over Q2 2014. FFO for the quarter was $11.1 million, an increase of 37%; and AFFO was $11 million, an increase of 33%, both over second quarter of 2014. On a per share basis, FFO of $0.62 and was an increase of 14.8% over Q2 2014, and AFFO of $0.62 was an increase of 12.7%. It's prudent to note that our results there enhanced by carrying a larger-than-normal balance on our revolving credit facility throughout the quarter. This was due to having committed financing in place related to our private placement of unsecured notes, and added approximately $0.02 to $0.025 per share to FFO and AFFO, as compared to having a more normalized capital structure with permanent debt in place and reduced usage of our revolver. Adjusting for a more normalized capital structure would have still yielded FFO and AFFO per share growth of over 10%, and over 8% respectively, which we are very pleased with. G&A expenses were approximately 10.1% of total revenue for the quarter, as compared to 12.5% in Q2 2014. For the full year 2015, we expect G&A as a percentage of total revenue to be less than 10.5%. In 2016, we anticipate…

Thank you, Brian. Again, I am extremely pleased with our performance for the quarter. We delivered record earnings growth while continuing to execute on unique real estate investment opportunities that complement our best-in-class net lease portfolio. We remain focused on creating long-term value for our shareholders, to look forward to building on our success during the second half of the year. At this time, we would like to open it up for questions.

We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Collin Mings from Raymond James. Please go ahead.

Hey, good morning guys.

Good morning.

Couple of questions, I think as far as first question for me is just on the guidance, really it sounds like it's unchanged in that 175-200 million range. Should we interpret that, Joey, as you are seeing a slowdown in the back half of the year, or is it just you not having a lot of visibility, call it, beyond the next quarter or so?

Good morning, Collin. That's a good question. I think it would be the latter. We really don't have visibility truly into the fourth quarter of this year. Most importantly, we are going to continue to stress quality over quality, continue to underwrite from a bottoms-up approach. It's easy to acquire assets at the net lease space; it's more difficult to acquire assets that fit within the context of our portfolio. So we are going to continue to stress quality. We've acquired $126 million as released in the press release, and we are going to continue to maintain our investment parameters.

Okay. And then I guess just along those lines, call it, the average cap rate for the quarter of 7.9%, just as [ph] we think about the back half for the year, should we think about that staying fairly consistent based on what you are seeing in the pipeline?

Yes, I think the consistency is really a paramount for us. We have been consistent since we launched the platform, the acquisition platform in 2010, and we will maintain that consistency through the back half of the year.

Okay. And switching gears, Joey, just comment a little bit on the CFO search is going, and just what maybe you are looking for, as you look through -- still kind of [indiscernible] for Brian?

Sure. Look, we will undertake really an exhaustive and methodical search to find a successor to Brian, whose last day will be Tuesday of next week. So Brian has done a fantastic job over the course of the last 18 months, and our goal is to find a successor that can continue to build upon everything that Brian and the team here has accomplished, and that continue to work with us to grow and evolve this company as we move forward.

Okay. And then I guess another one, Joey, just as you think about -- just curious to hear your thoughts as it relates to kind of dart [ph] and expecting, call it a 5.5 cap on some of the properties that's looking to sell. What do you think that type of pricing or at least that type of expectation for pricing says about the acquisition market right now? Is that really just kind of being driven by demand from 1031 buyers or just trying to connect the dots between the cap rates that they're highlighting versus what you're transacting at?

Yes, Collin, it's a great question. As I've commented previously before, we're probably -- and we take pride in that the worst indicator of the net lease market in the space. That said there is obviously a lot of capital in this space, a lot of capital that has return requirements that are obviously well below ours. I would tell you that you really have to look at the price points of those assets to really determine who the buyer pool is. I would anticipate Darden's expectation of midsize in terms of cap rates. It is driven by private 1031 purchasers, inclusive of 1031 purchasers, and private capital. I can't imagine any REIT [indiscernible] or institutional capital acquiring [indiscernible] assets at those cap rates.

Okay, now that's helpful. And just got one last one from me, as far as just with the ATM in place now, how much equity you think you can raise in any given quarter, just in context of the liquidity of your stock?

That's a great question. I think obviously the ATM is still new for us. I think we're going to use the ATM selectively. We're going to use it obviously to reduce our overall cost of capital, our cost of equity capital and also to improve the timing and efficiency of raising capital. We are really, by definition, an aggregator of assets. And to be able to raise capital more contemporaneously with the deployment of that capital, obviously, provides some efficiency. I think it will remain to be seen how effective the ATM is. We're going to be selective. We're going to keep it in line with our -- when we do deploy the ATM we will keep it in line with trading volume on any given day.

Okay. Well, I guess maybe thinking about that, so in context I think it was 14 million or so or just shy of 14 million in the second quarter, should we be thinking about calling that 10 to maybe 20 million in any sort of quarter?

Yes. Look, I think the lower end of that is reasonable. Again, I think we're going to continue to learn how effective that platform and that tool can be. Most importantly, we put it in our tool belt during the quarter. As you mentioned, we're able to raise a little over $14 million. I think the effectiveness of it we'd have to look forward in to the crystal ball. We don't really control that. We don't really control both sides of that equation. But I think the lower end; the $10 million range at the ATM probably makes sense.

Okay, thanks Joey, and good luck, Brian, in your position.

Thanks, Collin.

Thanks, Collin.

Our next question comes from Wilkes Graham from Compass Point. Please go ahead.

Hi, good morning, Joey and Brian, and Brian, good luck at [indiscernible].

Thanks, Wilkes.

Good morning, Wilkes.

Good morning. I think Collin asked most of my questions, but I think the only real question I have is, do you think that, at least in the near term, you can find your acquisition strategy with the asset sales and with the ATM, as opposed to outright common equity raises, given, as you said, you don't have control over the stock price; just curious how far you can take your acquisition strategy in the future with those tools or perhaps with other tools such as other private raises.

That's a great question. There's multiple -- obviously, multiple inputs to that equation. The amount of proceeds that we raise from dispositions, we'd given guidance for the 25 million this year. We've already transacted or disposed of over $9 million. So I think that will be a significant factor. And then on the flipside, and I'll put the ETM aside, is with the pipeline materializes like really put Q4 of this year. We have some visibility into the remainder of the Q3 pipeline. But Q4 is off in the distance still. So I think it is feasible for us to raise those proceeds, both via the ATM as well as the disposition activity. It would also - it will be highly depended upon also acquisition activity on the other side.

Great, thank you.

Thanks, Wilkes.

[Operator instructions] Our next question comes from Rob Stevenson from Janney. Please go ahead.

Hi, good morning guys. Joey, when you think about all of the sort of developments and the potential developments that you talked about earlier, what's the overall capital commitment at the sort of high end that you think about over the next six to nine months on the development side, both between the joint venture and the straight ADC development?

Right. Good morning, Robert. We talked previously and we discussed in this call about the $15 million near-term development pipeline. We've obviously recently released the Hobby Lobby as the Cash & Carry, given a little bit more color on to outlot developments at North Lakeland and Capital Plaza. I'd tell you that number looking out six to nine months has obviously included that $15 million, and then it will be outside from there. I tell you that in our shadow pipeline are some exciting opportunities with existing retailers, as well as new potential entrance to our portfolio. And we will see -- we don't control the entitlement pace. We don't control the pace in which tenants approve projects. But there's exciting opportunities that we hope to get announced in 2015, if not early in 2016.

And I mean does that bring you more into the sort of $45 million-$50 million range, or is it significantly smaller than that if some of those things were to hit? But I'm trying to think about what the upward sort of, and are the development -– of development pipeline an aggregate could wind up being for you guys if everything starts to hit?

Well, I think that would be a high number in terms of the short-term. If we look out medium and long-term, our goal is to continue to grow in the scale of three of our external growth platform. So acquisitions, development as well as joint venture capital solutions, we think we have the ability over the medium-term to materially scale the latter two there. So we've grown the acquisition platform to the guidance of a $175 million to $200 million this year. Our goal is also is to continue to scale organic development as well as joint venture capital solutions. And the team here, the development team is working diligently to do so. They are in conversations with some new and exciting tenants as well as the existing tenants, how quickly we're able to scale that will be frankly project and relationship specific.

Okay. And then just lastly, I mean when you think about the balance sheet today, is it pristine shape, I mean what's the sort of level without corresponding equity of additional debt issuance that you guys would feel comfortable with in the near-term?

Yes. From a debt to recurring EBITDA perspective, we've always said that our target really is five to six times or right in the middle of 5.4 times at quarter end. Excuse me. So we're right in the middle of that targeted range. We feel good about where we are. We don't have any preferred in the capitals tax or coverage is very strong across the board. So we're right in the middle of that target range. Right now obviously we will have some acquisition activity and the capital deployed via the joint venture as well as development platform, and then hopefully some dispositions as well as the funding source.

Okay, thanks guys.

Thank you.

Having no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Mr. Agree for any closing remarks.

Well, thank you, that about wraps it up again. I would like to thank everybody for joining us, and we look forward to speaking with you upon our third quarter results. Thanks, everybody.

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