##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K/A
 (Amendment No. 1)
 Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
 For the fiscal year ended December 31, 2006
 Commission File Number 1-12928
 AGREE REALTY CORPORATION
 (Exact name of Registrant as specified in its charter)
 Maryland
    
    38-3148187(State or other jurisdiction of 
Incorporation or organization)
    
    (I.R.S. Employer
identification No.)31850 Northwestern Highway 
Farmington Hills, Michigan 48334
    
    (248) 737-4190(Registrants telephone number,
Including area code)
 Securities Registered Pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredCommon Stock, $.0001 par value
    
    New York Stock Exchange
 Securities Registered Pursuant to Section 12(g) of the Act:
None
(Title of Class)
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
 YES o       NO þ
 Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the act.
 YES o       NO þ
 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 þ       NO o
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. þ
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or
a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule
12b-2 of the Exchange Act. (Check one):
 Large accelerated filer o                      Accelerated filer þ                      Non-accelerated filer o
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
 YES o       NO þ
 The aggregate market value of the Registrants shares of common stock held by non-affiliates was
approximately $261,801,558 as of June 30, 2006, based on the closing price of $33.97 on the NYSE on
that date.
 At February 28, 2007, there were 7,750,496 shares of Common Stock, $.0001 par value per share,
outstanding.
 DOCUMENTS INCORPORATED BY REFERENCE: The information required by Part III, Items 10-13 is to be
incorporated by reference from the definitive proxy statement for our May 2007 Annual Meeting of
Stockholders and which is to be filed with the Commission not later than 120 days after December
31, 2006.




---



##### 



TABLE OF CONTENTS
 Part IItem 1.
    
    Business
    
    
    4Item 1A.
    
    Risk Factors
    
    
    6Item 1B.
    
    Unresolved Staff Comments
    
    
    11Item 2.
    
    Properties
    
    
    11Item 3.
    
    Legal Proceedings
    
    
    17Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    18Part IIItem 5.
    
    Market for Registrants Common Equity and Related Stockholder Matters
    
    
    18Item 6.
    
    Selected Financial Data
    
    
    18Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 7A
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    26Item 8
    
    Financial Statements and Supplementary Data
    
    
    27Item 9
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    27Item 9A
    
    Controls and Procedures
    
    
    27Item 9B.
    
    Other Information
    
    
    30Part IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    30Item 11.
    
    Executive Compensation
    
    
    30Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    
    30Item 13.
    
    Certain Relationships and Related Transactions
    
    
    31Item 14.
    
    Principal Accountant Fees and Services
    
    
    31Part IVItem 15.
    
    Exhibits, Financial Statements and Schedule
    
    
    31Signatures
    
    
    
    
    34Consent of Vichow, Krause & Company, LLPConsent of BDO Seidman, LLPCertification pursuant to Section 302 of Richard Agree, Chief Executive OfficerCertification pursuant to Section 302 of Kenneth R. Howe, Chief Financial OfficerCertification pursuant to Section 906 of Richard Agree, Chief Executive OfficerCertification pursuant to Section 906 of Kenneth R. Howe, Chief Financial Officer
  2




---



##### Table of Contents



EXPLANATORY NOTE
   
 Part I
 FORWARD LOOKING STATEMENTS
   
    
    Our inability to effect the development or acquisition of properties on favorable
terms.
    
    The effect of economic conditions. If an economic downturn occurs, any
corresponding decrease in disposable income could result in consumers being less
willing to purchase goods from our tenants which could adversely affect our financial
condition and results of operations. Our financial condition and results of operations
could also be adversely affected if our tenants are otherwise unable to make lease
payments or fail to renew their leases.
    
    Our inability to obtain long-term financing at interest rates that will allow us to
offer attractive rental rates to our tenants in order to continue the development or
acquisition of retail properties leased to national tenants on a long-term basis.
    
    Actions of our competitors. We seek to remain competitive in the development of
real estate assets in the markets that we currently serve. With regard to our
acquisition of properties, we compete with insurance companies, credit companies,
pension funds, private individuals, investment companies and other REITs, many of which
have greater resources than we do.
    
    Failure to qualify as a REIT. Although we believe that we were organized and have
been operating in conformity with the requirements for qualification as a REIT under
the Internal Revenue Code, we cannot assure you that we will continue to qualify as a
REIT.
    
    Changes in government regulations, tax rates and similar matters, For example,
changes in real estate and zoning laws, environmental uncertainties and natural
disasters could adversely affect our financial condition and results of operations.
    3




---



##### Table of Contents



Item 1. BUSINESS
 General
    Growth Strategy
   Financing Strategy
  4




---



##### Table of Contents



Property Management
   Agree Limited Partnership
  Headquarters
  Major Tenants
  Tax Status
  5




---



##### Table of Contents



Competition
  Potential Environmental Risks
    Employees
  Financial Information About Industry Segments
  
 ITEM 1A. RISK FACTORS
 General
 We rely significantly on three major tenants.
 6




---



##### Table of Contents



We could be adversely affected by a tenants bankruptcy.
 Risks involved in single tenant leases.
 Risks associated with borrowing, including loss of properties in the event of a foreclosure.
 Risks associated with our development and acquisition activities.
 Our portfolio has limited geographic diversification.
 Dependence on key personnel.
 7




---



##### Table of Contents



We are not limited by our organization documents as to the amount of debt we may incur.
 We can change our investment and financing policies without stockholder approval.
 Competition
 Risks Associated With Investment In Real Estate
  
    
    The risk that tenants will not perform under their leases, reducing our income from
the leases or requiring us to assume the cost of performing obligations (such as taxes,
insurance and maintenance) that are the tenants responsibility under the lease.
    
    The risk that changes in economic conditions or real estate markets may adversely
affect the value of our properties.
    
    The risk that local conditions (such as oversupply of similar properties) could
adversely affect the value of our properties.
    
    The risk that we may not always be able to lease properties at favorable rental
rates.
    
    The risk that we may not always be able to sell a property when we desire to do so
at a favorable price.
    
    The risk of changes in tax, zoning or other laws could make properties less
attractive or less profitable.
  8




---



##### Table of Contents



Uncertainties relating to lease renewals and re-letting of space.
 Some potential losses are not covered by insurance.
 Potential liability for environmental contamination could result in substantial costs.
 
    
    As owner we may have to pay for property damage and for investigation and clean-up
costs incurred in connection with the contamination.
    
    The law may impose clean-up responsibility and liability regardless of whether the
owner or operator knew of or caused the contamination.
    
    Even if more than one person is responsible for the contamination, each person who
 shares legal liability under environmental laws may be held responsible for all of the
clean-up costs.
    
    Governmental entities and third parties may sue the owner or operator of a
contaminated site for damages and costs.
    9




---



##### Table of Contents



Tax Risks
   
    
    We would not be allowed a deduction for dividends paid to stockholders in computing
our taxable income and would be subject to federal income tax at regular corporate
rates.
    
    We could be subject to the federal alternative minimum tax and possibly increased
state and local taxes.
    
    Unless we are entitled to relief under statutory provisions, we could not elect to
be treated as a REIT for four taxable years following the year in which we were
disqualified.
  Excessive non-real estate asset values may jeopardize our REIT status.
  We may have to borrow funds or sell assets to meet our distribution requirements.
 We may be subject to other tax liabilities.
 10




---



##### Table of Contents



Changes in tax laws may prevent us from qualifying as a REIT.
 
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
   Development and Acquisition Summary
      11




---



##### Table of Contents



Major Tenants
  Annualized Base
    
    
    Percent of TotalNumber
    
    
    Rent as of
    
    
    Annualized Base Rent asof Leases
    
    
    December 31, 2006
    
    
    of December 31, 2006Borders
    
    
    18
    
    
    $
    9,861,727
    
    
    
    32
    %Walgreen
    
    
    18
    
    
    
    6,648,599
    
    
    
    22Kmart
    
    
    12
    
    
    
    3,847,911
    
    
    
    13Total
    
    
    48
    
    
    $
    20,358,237
    
    
    
    67
    %
     Location of Properties in the Portfolio
 12




---



##### Table of Contents



Number
    
    Total Grossof
    
    Leasable Area
    
    Percent of GLA Leased onState
    
    Properties
    
    (Sq. feet)
    
    December 31, 2006California
    
    
    1
    
    
    
    38,015
    
    
    
    100
    %Florida
    
    
    4
    
    
    
    258,793
    
    
    
    100Indiana
    
    
    1
    
    
    
    15,844
    
    
    
    100Illinois
    
    
    1
    
    
    
    20,000
    
    
    
    100Kansas
    
    
    2
    
    
    
    45,000
    
    
    
    100Kentucky
    
    
    1
    
    
    
    116,212
    
    
    
    100Maryland
    
    
    2
    
    
    
    53,000
    
    
    
    100Michigan
    
    
    34
    
    
    
    2,035,304
    
    
    
    99Nebraska
    
    
    2
    
    
    
    55,000
    
    
    
    100New Jersey
    
    
    1
    
    
    
    10,118
    
    
    
    100New York
    
    
    2
    
    
    
    27,626
    
    
    
    100Ohio
    
    
    1
    
    
    
    21,000
    
    
    
    100Oklahoma
    
    
    4
    
    
    
    99,282
    
    
    
    100Pennsylvania
    
    
    1
    
    
    
    37,004
    
    
    
    100Wisconsin
    
    
    3
    
    
    
    523,036
    
    
    
    99Total/Average
    
    
    60
    
    
    
    3,355,234
    
    
    
    99
    %
 Lease Expirations
  December 31, 2006Gross Leasable Area
    
    
    Annualized Base RentNumberof Leases
    
    
    Square
    
    
    Percent
    
    
    
    
    
    
    PercentExpiration Year
    
    Expiring
    
    
    Footage
    
    
    Of Total
    
    
    Amount
    
    
    Of Total2007
    
    
    5
    
    
    
    24,300
    
    
    
    .7
    %
    
    $
    178,399
    
    
    
    .6
    %2008
    
    
    27
    
    
    
    313,925
    
    
    
    9.4
    %
    
    
    1,396,808
    
    
    
    4.6
    %2009
    
    
    20
    
    
    
    193,326
    
    
    
    5.8
    %
    
    
    973,978
    
    
    
    3.2
    %2010
    
    
    20
    
    
    
    328,035
    
    
    
    9.8
    %
    
    
    2,031,328
    
    
    
    6.7
    %2011
    
    
    25
    
    
    
    231,524
    
    
    
    6.9
    %
    
    
    1,644,262
    
    
    
    5.4
    %2012
    
    
    10
    
    
    
    58,260
    
    
    
    1.7
    %
    
    
    513,016
    
    
    
    1.7
    %2013
    
    
    1
    
    
    
    51,868
    
    
    
    1.6
    %
    
    
    492,746
    
    
    
    1.6
    %2014
    
    
    3
    
    
    
    172,958
    
    
    
    5.2
    %
    
    
    824,206
    
    
    
    2.7
    %2015
    
    
    11
    
    
    
    730,525
    
    
    
    21.8
    %
    
    
    5,075,265
    
    
    
    16.7
    %2016
    
    
    5
    
    
    
    80,945
    
    
    
    2.4
    %
    
    
    1,664,513
    
    
    
    5.5
    %Thereafter
    
    
    41
    
    
    
    1,158,948
    
    
    
    34.7
    %
    
    
    15,628,821
    
    
    
    51.3
    %Total
    
    
    168
    
    
    
    3,344,614
    
    
    
    100.0
    %
    
    $
    30,423,342
    
    
    
    100.0
    %
  13




---



##### Table of Contents



Annualized Base Rent of our Properties
  Percent ofAnnualized
    
    
    AnnualizedType of Tenant
    
    Base Rent
    
    
    Base RentNational(1)
    
    $
    27,125,947
    
    
    
    89
    %Regional(2)
    
    
    2,146,579
    
    
    
    7Local
    
    
    1,150,816
    
    
    
    4Total
    
    $
    30,423,342
    
    
    
    100
    %
 
 (1)
    
    Includes the following national tenants: Borders, Walgreen, Kmart, Wal-Mart, Eckerd
Drugs, Fashion Bug, Rite Aid, JC Penney, Avco Financial, GNC Group, Radio Shack, Sam Goody, Super
Value, Maurices, Payless Shoes, Blockbuster Video, Family Dollar, H&R Block, Sally Beauty, Jo Ann
Fabrics, Staples, Best Buy, Dollar Tree, TGI Fridays, Circuit City and Pier 1 Imports.(2)
    
    Includes the following regional tenants: Roundys Foods, Dunhams Sports, Christopher
Banks, Beals Department Stores and Hollywood Video. Freestanding Properties
   Freestanding Properties
 Year Completed/
    
    
    
    
    
    Lease Expiration(2)Tenant/Location
    
    Expanded
    
    Total GLA
    
    (Option expiration)Borders,(1) Aventura, FL
    
    
    1996
    
    
    
    30,000
    
    
    Jan 31, 2016 (2036)Borders, Columbus, OH
    
    
    1996
    
    
    
    21,000
    
    
    Jan 23, 2016 (2036)Borders, Monroeville, PA
    
    
    1996
    
    
    
    37,004
    
    
    Nov 8, 2016 (2036)Borders, Norman, OK
    
    
    1996
    
    
    
    24,641
    
    
    Sep 20, 2016 (2036)Borders, Omaha, NE
    
    
    1995
    
    
    
    30,000
    
    
    Nov 3, 2015 (2035)Borders, Santa Barbara, CA
    
    
    1995
    
    
    
    38,015
    
    
    Nov 17, 2015 (2035)Borders, Wichita, KS
    
    
    1995
    
    
    
    25,000
    
    
    Nov 10, 2015 (2035)Borders, Lawrence, KS
    
    
    1997
    
    
    
    20,000
    
    
    Oct 16, 2022 (2042)Borders, Tulsa, OK
    
    
    1998
    
    
    
    25,000
    
    
    Sep 30, 2018 (2038)Borders, Oklahoma City, OK
    
    
    2002
    
    
    
    24,641
    
    
    Nov 17, 2017 (2037)
 14




---



##### Table of Contents



Year Completed/
    
    
    
    
    
    Lease Expiration(2)Tenant/Location
    
    Expanded
    
    Total GLA
    
    (Option expiration)Borders, Omaha, NE
    
    
    2002
    
    
    
    25,000
    
    
    Nov 17, 2017 (2037)Borders, Indianapolis, IN
    
    
    2002
    
    
    
    15,844
    
    
    Nov 17, 2017 (2037)Borders, Columbia, MD
    
    
    1999
    
    
    
    28,000
    
    
    Oct 16, 2022 (2042)Borders, Germantown, MD
    
    
    2000
    
    
    
    25,000
    
    
    Oct 16, 2022 (2042)Borders Headquarters, Ann Arbor, MI
    
    
    1996/1998
    
    
    
    458,729
    
    
    Jan 29, 2023 (2043)Borders, Tulsa, OK
    
    
    1996
    
    
    
    25,000
    
    
    Sep 30, 2018 (2038)Borders, Boynton Beach, FL
    
    
    1996
    
    
    
    25,000
    
    
    July 20, 2024 (2044)Borders, Ann Arbor, MI
    
    
    1996
    
    
    
    110,000
    
    
    July 20, 2024 (2044)Circuit City, Boynton Beach, FL
    
    
    1996
    
    
    
    32,459
    
    
    Dec 15, 2016 (2036)Citizens Bank, Flint, MI
    
    
    2003
    
    
    
    4,426
    
    
    Apr 15, 2023Eckerd Drugs, Webster, NY
    
    
    2004
    
    
    
    13,813
    
    
    Feb 24, 2024 (2044)Eckerd Drugs, Albion, NY
    
    
    2004
    
    
    
    13,813
    
    
    Oct 12, 2024 (2044)Fajita Factory, Lansing, MI
    
    
    2004
    
    
    Note (3)
    
    Aug 31,2014 (2032)Kmart, Grayling, MI
    
    
    1984
    
    
    
    52,320
    
    
    Sep 30, 2009 (2059)Kmart, Oscoda, MI
    
    
    1984/1990
    
    
    
    90,470
    
    
    Sep 30, 2009 (2059)Rite Aid, Canton Twp, MI
    
    
    2003
    
    
    
    11,180
    
    
    Oct 31, 2019 (2049)Rite Aid, Roseville, MI
    
    
    2005
    
    
    
    11,060
    
    
    June 30, 2025 (2050)Rite Aid, Mt Pleasant, MI
    
    
    2005
    
    
    
    11,095
    
    
    Nov 30, 2025 (2065)Rite Aid, N Cape May, NJ
    
    
    2005
    
    
    
    10,118
    
    
    Nov 30, 2025 (2065)Rite Aid, Summit Twp, MI
    
    
    2006
    
    
    
    11,060
    
    
    Oct 31, 2019 (2039)Sams Club, Roseville, MI
    
    
    2002
    
    
    Note (4)
    
    Aug 4, 2022 (2082)Walgreen, Waterford, MI
    
    
    1997
    
    
    
    13,905
    
    
    Feb 28, 2018 (2058)Walgreen, Chesterfield, MI
    
    
    1998
    
    
    
    13,686
    
    
    July 31, 2018 (2058)Walgreen, Pontiac, MI
    
    
    1998
    
    
    
    13,905
    
    
    Oct 31, 2018 (2058)Walgreen, Grand Blanc, MI
    
    
    1998
    
    
    
    13,905
    
    
    Feb 28, 2019 (2059)Walgreen, Rochester, MI
    
    
    1998
    
    
    
    13,905
    
    
    June 30, 2019 (2059)Walgreen, Ypsilanti, MI
    
    
    1999
    
    
    
    15,120
    
    
    Dec 31, 2019 (2059)Walgreen,(1) Petoskey, MI
    
    
    2000
    
    
    
    13,905
    
    
    Apr 30, 2020 (2060)Walgreen, Flint, MI
    
    
    2000
    
    
    
    14,490
    
    
    Dec 31, 2020 (2060)Walgreen, Flint, MI
    
    
    2001
    
    
    
    15,120
    
    
    Feb 28, 2021 (2061)Walgreen, N Baltimore, MI
    
    
    2001
    
    
    
    14,490
    
    
    Aug 31, 2021 (2061)Walgreen, Flint, MI
    
    
    2002
    
    
    
    14,490
    
    
    Apr 30, 2027 (2077)Walgreen, Big Rapids, MI
    
    
    2003
    
    
    
    13,560
    
    
    Apr 30, 2028 (2078)Walgreen, Flint, MI
    
    
    2004
    
    
    
    14,560
    
    
    Feb 28, 2029 (2079)Walgreen, Flint, MI
    
    
    2004
    
    
    
    13,650
    
    
    Oct 31, 2029 (2079)Walgreen, Midland, MI
    
    
    2005
    
    
    
    14,820
    
    
    July 31, 2030 (2080)Walgreen, Grand Rapids, MI
    
    
    2005
    
    
    
    14,820
    
    
    Aug 30, 2030 (2080)Walgreen, Delta Township,, MI
    
    
    2005
    
    
    
    14,559
    
    
    Nov 30, 2030 (2080)Total
    
    
    
    
    
    
    1,492,578
 15




---



##### Table of Contents



(1)
    
    These properties are subject to long-term ground leases where a third party owns the
underlying land and has leased the land to us to construct or operate freestanding properties.
We pay rent for the use of the land and we are generally responsible for all costs and
expenses associated with the building and improvements. At the end of the lease terms, as
extended (Aventura, FL 2036, and Petoskey, MI 2049), the land together with all improvements
revert to the land owner. We have an option to purchase the Petoskey property after August 7,
2019.(2)
    
    At the expiration of tenants initial lease term, each tenant has an option, subject to
certain requirements, to extend its lease for an additional period of time.(3)
    
    This 2.03 acre property is leased from us by Fajita Factory, LLC pursuant to a ground lease.(4)
    
    This 12.68 acre property is leased from us by Wal-Mart pursuant to a ground lease. Community Shopping Centers
   Gross
    
    
    
    
    
    
    Average
    
    
    Percent
    
    
    PercentYear
    
    
    Leasable
    
    
    
    
    
    
    Base
    
    
    Occupied at
    
    
    Leased at
    
    
    Anchor Tenants (LeaseCompleted/
    
    
    Area
    
    
    Annualized
    
    
    Rent per
    
    
    December 31,
    
    
    December 31,
    
    
    expiration/Option periodProperty Location
    
    Expanded
    
    
    Sq. Ft.
    
    
    Base Rent (2)
    
    
    Sq. Ft.(3)
    
    
    2006
    
    
    2006 (4)
    
    
    expiration) (5)Capital Plaza,(1)
    
    
    1978/2006
    
    
    
    116,212
    
    
    $
    561,917
    
    
    $
    4.84
    
    
    
    100
    %
    
    
    100
    %
    
    Kmart(2008/2053)Frankfort, KY
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Walgreen (2031/2052)Fashion Bug (2008/2025)Charlevoix Commons
    
    
    1991
    
    
    
    137,375
    
    
    
    683,162
    
    
    
    4.97
    
    
    
    74
    %
    
    
    100
    %
    
    Kmart (2015/2065)Charlevoix, MI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Roundys (2011-2031)Chippewa Commons
    
    
    1991
    
    
    
    168,311
    
    
    
    961,783
    
    
    
    5.71
    
    
    
    100
    %
    
    
    100
    %
    
    Kmart (2014/2064)Chippewa Falls, WI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Roundys (2011/2031)Fashion Bug (2011/2021)Ironwood Commons
    
    
    1991
    
    
    
    185,535
    
    
    
    956,910
    
    
    
    5.16
    
    
    
    100
    %
    
    
    100
    %
    
    Kmart (2015/2065)Ironwood, MI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Super Value (2011/2036)Fashion Bug (2007/2022)Marshall Plaza
    
    
    1990
    
    
    
    119,279
    
    
    
    687,484
    
    
    
    5.76
    
    
    
    100
    %
    
    
    100
    %
    
    Kmart (2015/2065)Marshall, MIMt. Pleasant Shopping
CenterMt. Pleasant, MI
    
    
    1973/1997
    
    
    
    241,458
    
    
    
    1,085,782
    
    
    
    4.63
    
    
    
    97
    %
    
    
    97
    %
    
    Kmart (2008/2048)J.C. Penney Co. (2005/2020)Staples, Inc. (2010/2025)Fashion Bug (2006/2026)
 16




---



##### Table of Contents



Gross
    
    
    
    
    
    
    Average
    
    
    Percent
    
    
    PercentYear
    
    
    Leasable
    
    
    
    
    
    
    Base
    
    
    Occupied at
    
    
    Leased at
    
    
    Anchor Tenants (LeaseCompleted/
    
    
    Area
    
    
    Annualized
    
    
    Rent per
    
    
    December 31,
    
    
    December 31,
    
    
    expiration/Option periodProperty Location
    
    Expanded
    
    
    Sq. Ft.
    
    
    Base Rent (2)
    
    
    Sq. Ft.(3)
    
    
    2006
    
    
    2006 (4)
    
    
    expiration) (5)North Lakeland Plaza
    
    
    1987
    
    
    
    171,334
    
    
    
    1,285,585
    
    
    
    7.50
    
    
    
    100
    %
    
    
    100
    %
    
    Best Buy (2013/2028)Lakeland, FL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Bealls (2015/2025)Petoskey Town Center
    
    
    1990
    
    
    
    174,870
    
    
    
    1,093,873
    
    
    
    6.26
    
    
    
    100
    %
    
    
    100
    %
    
    Kmart (2015/2065)Petoskey, MI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Roundys (2010/2030)Fashion Bug (2007/2022)Plymouth Commons
    
    
    1990
    
    
    
    162,031
    
    
    
    889,934
    
    
    
    5.65
    
    
    
    97
    %
    
    
    97
    %
    
    Kmart (2015/2065)Plymouth, WI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Roundys (2010/2030)Fashion Bug (2008/2021)Rapids Associates
    
    
    1990
    
    
    
    173,557
    
    
    
    955,457
    
    
    
    5.51
    
    
    
    74
    %
    
    
    100
    %
    
    Kmart (2015/2065)Big Rapids, MI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Roundys (2010/2030)Fashion Bug (2006/2021)Shawano Plaza
    
    
    1990
    
    
    
    192,694
    
    
    
    1,030,388
    
    
    
    5.35
    
    
    
    100
    %
    
    
    100
    %
    
    Kmart (2014/2064)Shawano, WI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Roundys (2010/2030)J.C. Penney Co. (2005/2025)Fashion Bug (2006/2021)West Frankfort Plaza
    
    
    1982
    
    
    
    20,000
    
    
    
    145,333
    
    
    
    7.27
    
    
    
    100
    %
    
    
    100
    %
    
    Fashion Bug (2007)West Frankfort, ILTotal/Average
    
    
    
    
    
    
    1,862,656
    
    
    $
    10,337,608
    
    
    $
    5.53
    
    
    
    95
    %
    
    
    99
    %
 
 (1)
    
    All community shopping centers except Capital Plaza (which is subject to a long-term ground
lease expiring in 2053 from a third party) are wholly-owned by us.(2)
    
    Total annualized base rents of the Company as of December 31, 2006.(3)
    
    Calculated as total annualized base rents, divided by gross leaseable area actually leased as
of December 31, 2006.(4)
    
    Roundys leases but does not currently occupy, the 35,896 square feet it leases at Charlevoix
Commons at a rate of $5.97 per square foot and the 44,478 square feet it leases at Rapids
Associates at a rate of $6.00 per square foot. The Charlevoix lease expires in 2011 and the
Rapids Associates lease expires in 2010 (assuming they are not extended by Roundys).(5)
    
    The option to extend the lease beyond its initial term is only at the option of the tenant. 
 ITEM 3.
    
    LEGAL PROCEEDINGS
  17




---



##### Table of Contents



ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 Part II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
  Market Information
 Dividends PerHigh
    
    Low
    
    Common ShareQuarter EndedMarch 31, 2006
    
    $
    32.10
    
    
    $
    29.69
    
    
    $
    0.49June 30, 2006
    
    $
    35.07
    
    
    $
    29.88
    
    
    $
    0.49September 30, 2006
    
    $
    34.05
    
    
    $
    31.24
    
    
    $
    0.49December 31, 2006
    
    $
    36.26
    
    
    $
    32.10
    
    
    $
    0.49March 31, 2005
    
    $
    31.31
    
    
    $
    26.63
    
    
    $
    0.49June 30, 2005
    
    $
    30.37
    
    
    $
    26.54
    
    
    $
    0.49September 30, 2005
    
    $
    31.00
    
    
    $
    27.72
    
    
    $
    0.49December 31, 2005
    
    $
    29.67
    
    
    $
    26.16
    
    
    $
    0.49
     
 ITEM 6.
    
    SELECTED FINANCIAL DATA
  18




---



##### Table of Contents



Selected Financial Data
 (in thousands, except per share, number of properties, and percentage leased information)
 Year Ended
    
    
    Year Ended
    
    
    Year Ended
    
    
    Year Ended
    
    
    Year EndedDec 31,
    
    
    Dec 31,
    
    
    Dec 31,
    
    
    Dec 31,
    
    
    Dec 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Operating DataTotal Revenue
    
    $
    32,908
    
    
    $
    31,579
    
    
    $
    28,940
    
    
    $
    26,224
    
    
    $
    23,061ExpensesProperty expense (1)
    
    
    4,219
    
    
    
    4,545
    
    
    
    4,220
    
    
    
    4,161
    
    
    
    3,806General and administrative
    
    
    4,019
    
    
    
    4,191
    
    
    
    2,849
    
    
    
    2,275
    
    
    
    2,012Interest
    
    
    4,625
    
    
    
    4,159
    
    
    
    4,507
    
    
    
    5,684
    
    
    
    6,196Early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    961
    
    
    
    Depreciation and amortization
    
    
    4,851
    
    
    
    4,637
    
    
    
    4,249
    
    
    
    3,836
    
    
    
    3,466Total Expenses
    
    
    17,714
    
    
    
    17,532
    
    
    
    15,825
    
    
    
    16,917
    
    
    
    15,480Other Income (2)
    
    
    
    
    
    
    6
    
    
    
    217
    
    
    
    438
    
    
    
    674Income before Minority Interest and
Discontinued Operations
    
    
    15,194
    
    
    
    14,053
    
    
    
    13,332
    
    
    
    9,745
    
    
    
    8,255Minority Interest
    
    
    1,220
    
    
    
    1,145
    
    
    
    1,257
    
    
    
    1,103
    
    
    
    1,085Income before Discontinued Operations
    
    
    13,974
    
    
    
    12,908
    
    
    
    12,075
    
    
    
    8,642
    
    
    
    7,170Gain on Sale of Asset From Discontinued
Operations
    
    
    
    
    
    
    2,654
    
    
    
    523
    
    
    
    740
    
    
    
    Income From Discontinued Operations
    
    
    
    
    
    
    486
    
    
    
    525
    
    
    
    1,090
    
    
    
    1,602Net Income
    
    $
    13,974
    
    
    $
    16,048
    
    
    $
    13,123
    
    
    $
    10,472
    
    
    $
    8,772Number of Properties
    
    
    60
    
    
    
    59
    
    
    
    54
    
    
    
    50
    
    
    
    48Number of Square Feet
    
    
    3,355
    
    
    
    3,363
    
    
    
    3,463
    
    
    
    3,495
    
    
    
    3,699Percentage Leased
    
    
    99
    %
    
    
    99
    %
    
    
    99
    %
    
    
    97
    %
    
    
    99
    %Per Share Data  DilutiveIncome before discontinued operations
    
    $
    1.83
    
    
    $
    1.72
    
    
    $
    1.87
    
    
    $
    1.64
    
    
    $
    1.61Discontinued operations
    
    
    
    
    
    
    .42
    
    
    
    .16
    
    
    
    .35
    
    
    
    .36Net income
    
    $
    1.83
    
    
    $
    2.14
    
    
    $
    2.03
    
    
    $
    1.99
    
    
    $
    1.97Weighted average of common shares
outstanding  Dilutive
    
    
    7,651
    
    
    
    7,491
    
    
    
    6,475
    
    
    
    5,276
    
    
    
    4,447Cash dividends
    
    $
    1.96
    
    
    $
    1.96
    
    
    $
    1.95
    
    
    $
    1.94
    
    
    $
    1.84Balance Sheet DataReal Estate (before accumulated depreciation)
    
    $
    268,248
    
    
    $
    258,332
    
    
    $
    252,427
    
    
    $
    220,334
    
    
    $
    210,986Total Assets
    
    $
    223,515
    
    
    $
    223,460
    
    
    $
    214,837
    
    
    $
    190,795
    
    
    $
    178,162Total debt, including accrued interest
    
    $
    69,031
    
    
    $
    68,504
    
    
    $
    92,441
    
    
    $
    83,313
    
    
    $
    115,534
 
 (1)
    
    Property expense includes real estate taxes, property maintenance, insurance, utilities
and land lease expense.(2)
    
    Other income is composed of development fee income, gain on land sales, and equity in net
income of unconsolidated entities.(3)
    
    Net income per share has been computed by dividing the net income by the weighted average
number of shares of Common Stock outstanding and the effect of dilutive securities
outstanding. The per share amounts are presented in accordance with SFAS No. 128 Earnings per
share. 19




---



##### Table of Contents



ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
   Recent Accounting Pronouncements
     20




---



##### Table of Contents



Critical Accounting Policies
    21




---



##### Table of Contents



Comparison of Year Ended December 31, 2006 to Year Ended December 31, 2005
          22




---



##### Table of Contents



Comparison of Year Ended December 31, 2005 to Year Ended December 31, 2004
           23




---



##### Table of Contents



Discontinued Operations
   Liquidity and Capital Resources
      24




---



##### Table of Contents



Total
    
    Yr 1
    
    2-3 Yrs
    
    4-5 Yrs
    
    Over 5 YrsMortgages Payable
    
    $
    48,291
    
    
    $
    2,531
    
    
    $
    5,687
    
    
    $
    6,489
    
    
    $
    33,584Notes Payable
    
    
    20,500
    
    
    
    
    
    
    
    20,500
    
    
    
    
    
    
    
    Land Lease Obligations
    
    
    11,610
    
    
    
    674
    
    
    
    1,305
    
    
    
    1,387
    
    
    
    8,244Other Long-Term Liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest Payments on
Mortgages and Notes
Payable
    
    
    27,239
    
    
    
    4,368
    
    
    
    7,028
    
    
    
    6,009
    
    
    
    9,834Total
    
    $
    107,640
    
    
    $
    7,573
    
    
    
    34,520
    
    
    $
    13,885
    
    
    $
    51,662
    Inflation
  Funds from Operations
  25




---



##### Table of Contents



Year ended December 31,2006
    
    
    2005
    
    
    2004Net income
    
    $
    13,974,168
    
    
    $
    16,047,576
    
    
    $
    13,123,020Depreciation of real estate assets
    
    
    4,745,319
    
    
    
    4,683,807
    
    
    
    4,379,912Amortization of leasing costs
    
    
    44,423
    
    
    
    48,357
    
    
    
    45,178Minority interest
    
    
    1,220,113
    
    
    
    1,423,932
    
    
    
    1,366,347Gain on sale of assets
    
    
    
    
    
    
    (2,895,532
    )
    
    
    (577,168
    )Funds from Operations
    
    $
    19,984,023
    
    
    $
    19,308,140
    
    
    $
    18,337,289Weighted average shares and
OP Units outstandingBasic
    
    
    8,254,391
    
    
    
    8,134,051
    
    
    
    7,141,898Dilutive
    
    
    8,324,973
    
    
    
    8,164,288
    
    
    
    7,148,664
 
 ITEM 7A
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    TotalFixed rate debt
    
    $
    2,531
    
    
    $
    2,750
    
    
    $
    2,937
    
    
    $
    3,138
    
    
    $
    3,351
    
    
    $
    33,584
    
    
    $
    48,291Average interest rate
    
    
    6.64
    %
    
    
    6.64
    %
    
    
    6.64
    %
    
    
    6.64
    %
    
    
    6.64
    %
    
    
    6.64
    %
    
    
    Variable rate debt
    
    
    
    
    
    
    
    
    
    $
    20,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    20,500Average interest rate
    
    
    
    
    
    
    
    
    
    
    6.35
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   26




---



##### Table of Contents



ITEM 8
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
   
 ITEM 9A
    
    CONTROLS AND PROCEDURES
     27




---



##### Table of Contents



Report of Management on Agree Realty Corporations Internal Control Over Financial Reporting
    
    
    We lack segregation of duties in the period-end financial reporting process.
Our Chief Financial Officer (CFO) is the only employee with any significant
knowledge of generally accepted accounting principles. The CFO is also the sole
employee in charge of the general ledger (including the preparation of routine and
non-routine journal entries and journal entries involving accounting estimates),
the preparation of accounting reconciliations, the selection of accounting
principles, and the preparation of interim and annual financial statements
(including report combinations, consolidation entries and footnote disclosures) in
accordance with generally accepted accounting principles.
   Report of Independent Registered Public Accounting Firm
   28




---



##### Table of Contents




    
    The Company lacks segregation of duties in the period-end financial reporting process.
The Chief Financial Officer (CFO) is the only employee with any significant knowledge of
generally accepted accounting principles. The CFO is also the sole employee in charge of
the general ledger (including the preparation of routine and non-routine journal entries
and journal entries involving accounting estimates), the preparation of accounting
reconciliations, the selection of accounting principles, and the preparation of interim and
annual financial statements (including report combinations, consolidation entries and
footnote disclosures) in accordance with generally accepted accounting principles.
   
 29




---



##### Table of Contents



Changes in Internal Control over Financial Reporting
  
 ITEM 9B
    
    OTHER INFORMATION
  
 PART III
 
 ITEM 10.
    
    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  
 ITEM 11.
    
    EXECUTIVE COMPENSATION
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  Number ofsecurities to beissued upon
    
    Weighted averageexercise of
    
    exercise price of
    
    Number ofoutstanding
    
    outstanding
    
    securitiesoptions, warrants
    
    options, warrants
    
    remaining availablePlan category
    
    and rights
    
    and rights
    
    for future issuanceEquity compensation
plans approved by
security holders
    
    
    
    
    
    
    
    
    
    
    918,850Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    918,850
  30




---



##### Table of Contents



ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
 PART IV
 
 ITEM 15.
    
    EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES
 (a)
    
    The following documents are filed as part of this Report
  (b)
    
    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)3.2
    
    
    
    Bylaws of the Company (Incorporated by reference to Exhibit 3.2 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2006 (the 2006 Form 10-K))4.1
    
    
    
    Rights Agreement by and between Agree Realty Corporation and BankBoston, N.A. as Rights Agent
dated as of December 7, 1998 (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form
8-K filed  December 7, 1998)10.1
    
    
    
    First Amended and Restated Agreement of Limited Partnership of Agree Limited Partnership,
dated as of April 22, 1994, by and among the Company, Richard Agree, Edward Rosenberg and Joel
Weiner (incorporated by reference to Exhibit 10.6 to the Companys Annual Report on
Form 10-K for the year ended December 31, 1996 (the 1996 Form 10-K))10.2
    
    
    
    Amended and Restated Registration Rights Agreement, dated July 8, 1994 by and among the
Company, Richard Agree, Edward Rosenberg and Joel Weiner (incorporated by reference to Exhibit
10.2 to the Companys Annual Report on Form 10-K for the year ended December 31, 1994)10.3
    
    
    
    Contribution Agreement, dated as of April 21, 1994, by and among the Company, Richard Agree,
Edward Rosenberg and the co-partnerships named therein (incorporated by reference to Exhibit
10.10 to the 1996 Form 10-K)10.4
    
    +
    
    Agree Realty Corporation Profit Sharing Plan (incorporated by reference to Exhibit 10.13 to
the 1996 Form 10-K)10.5
    
    
    
    Line of Credit Agreement by and among Agree Limited Partnership, the Company, the lenders
parties thereto, and Michigan National Bank as Agent (incorporated by reference to Exhibit
10.10 to the Companys Annual Report on Form 10-K for the year ended December 31, 1995)
 31




---



##### Table of Contents



10.6
    
    
    
    First amendment to $5 million business loan agreement dated September 21, 1997 between Agree
Limited Partnership and Michigan National Bank (incorporated by reference to Exhibit 10.2 to
the Companys Quarterly Report on Form 10-Q for the period ended September 30, 1997)10.7
    
    
    
    Second amendment to amended and restated $5 million business Loan agreement dated October 19,
1998 between Agree Limited Partnership and Michigan National Bank (incorporated by reference
to Exhibit 10.17 to the Companys Annual Report on Form 10-K for the year ended December 31,
1998)10.8
    
    +
    
    Employment Agreement, dated July 1, 2004, by and between the
Company and Richard Agree (incorporated by reference to
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q
for the period ended June 30, 2004 (the June 2004 Form 10-Q))10.9
    
    +
    
    Employment Agreement, dated July 1, 2004, by and between the
Company, and Kenneth R. Howe (incorporated by reference to
Exhibit 10.2 to the June 2004 Form 10-Q)10.10
    
    
    
    Third amendment to amended and restated $5 million business Loan agreement dated December
19, 1999 between Agree Limited Partnership and Michigan National Bank (incorporated by
reference to Exhibit 10.17 to the Companys Annual Report on Form 10-K for the year ended December 31, 1999)10.11
    
    
    
    Trust Mortgage dated as of June 27, 1999 from Agree Facility No. 1, L.L.C. as Grantor to
Manufacturers and Traders Trust Company (incorporated by reference to Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q for the period ended June 30, 1999)10.12
    
    +
    
    Employment Agreement, dated January 10, 2000, by and between the Company, and David J.
Prueter (incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form
10-Q for the period ended March 31, 2000)10.13
    
    
    
    Fourth amendment to amended and restated $5 million business Loan agreement dated February
19, 2001 between Agree Limited Partnership and Michigan National Bank (incorporated by
reference to Exhibit 10.23 to the Companys Annual Report on Form 10-K for the year ended
December 31, 2000)10.14
    
    
    
    Mortgage dated as of December 20, 2001, by Agree Limited Partnership to and in favor of
Nationwide Life Insurance Company (incorporated by reference to Exhibit 10.25 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2001)10.15
    
    
    
    Fifth amendment to amended and restated $5 million business Loan agreement dated April 30,
2002 between Agree Limited Partnership and Standard Federal Bank (incorporated by reference to
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2002
(the June 2002 Form 10-Q))10.16
    
    
    
    Project Loan Agreement dated as of April 30, 2002 between Royal Identify Company (together
with its successors and assigns) and Lawrence Store No. 203 L.L.C. (together with its
permitted successors and assigns) (incorporated by reference to Exhibit 10.2 to the June 2002
Form 10-Q)10.17
    
    
    
    Project Loan Agreement dated as of November 25, 2002 between Wilmington Trust Company, not
in its individual capacity, but solely as Owner Trustee, and Indianapolis Store No. 16 L.L.C.
(incorporated by reference to Exhibit 10.28 to the Companys Annual Report on Form
10-K for the year ended December 31, 2002)10.18
    
    
    
    Project Loan Agreement dated as of January 30, 2003 between Modern Woodman of America and
Phoenix Drive L.L.C. (incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form
10-Q for the period ended March 31, 2003)
 32




---



##### Table of Contents



10.19
    
    
    
    Sixth amendment to amended and restated $5 million business loan agreement dated April 30,
2003, between Agree Limited Partnership and Standard Federal Bank (incorporated by reference
to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2003)10.20
    
    
    
    Amended and Restated $50 million Line of Credit agreement dated November 5, 2003, among
Agree Realty Corporation, Standard Federal Bank and Bank One. (incorporated by reference to
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the period ended September 30, 2003)10.21
    
    
    
    Indemnity Deed of Trust and Security Agreement dated October 31, 2003, by Agree  Columbia
Crossing Project, L.L.C., and Nationwide Life Insurance Company (incorporated by reference to
Exhibit 10.33 to the Companys Annual Report on Form 10-K for the year ended December 31, 2003 (the 2003 Form 10-K))10.22
    
    
    
    Indemnity Deed of Trust and Security Agreement dated October 31, 2003, by Agree-Milestone
Center Project, L.L.C., and Nationwide Life Insurance Company (incorporated by reference to
Exhibit 10.34 to the 2003 Form 10-K)10.23
    
    
    
    Mortgage and Security Agreement dated October 31, 2003, by Oklahoma Store No. 151, L.L.C.
and Nationwide Life Insurance Company (incorporated by reference to Exhibit 10.35 to the
2003 From 10-K)10.24
    
    
    
    Deed of Trust and Security Agreement dated October 31, 2003, by Omaha Store No. 166, L.L.C.
and Nationwide Life Insurance Company (incorporated by reference to Exhibit 10.36 to the
2003 Form 10-K)10.25
    
    +
    
    The Companys 2005 Equity Incentive Plan
(incorporated by reference to Appendix A of the Companys Proxy
Statement for its 2005 Annual Meeting of Stockholders)10.26
    
    +
    
    Employment Agreement, dated August 1, 2005, by and between the Company, and Charles
Carter (incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q
for the period ended September 30, 2005 (the September 2005 Form 10-Q))10.27
    
    +
    
    Employment Agreement, dated September 1, 2005, by and between the Company, and Vicky
Umphryes (incorporated by reference to Exhibit 10.2 to the September 2005 Form 10-Q)10.28
    
    
    
    Third Amended and Restated Line of Credit Agreement by and between the Company, and
LaSalle Bank Midwest National Association Individually and as Agent for the Lenders and
together with Fifth Third Bank (incorporated by reference to Exhibit 10.28 to the 2006 Form 10-K)10.29
    
    
    
    Amendment No. 10 to Business Loan Agreement. Amendment No. 2 to Ninth Amended and
Restated Promissory Note ($5 million Line of Credit) (incorporated by reference to Exhibit 10.29 to the 2006 Form 10-K)21.1
    
    
    
    Subsidiaries of Agree Realty Corporation (incorporated by reference to Exhibit 21 to the 2006 Form 10-K)23.1
    
    *
    
    Consent of Virchow, Krause & Company, LLP23.2
    
    *
    
    Consent of BDO Seidman, LLP31.1
    
    *
    
    Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, Richard Agree, Chief
Executive Officer31.2
    
    *
    
    Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, Kenneth R. Howe, Chief
Financial Officer
 32.1
    
    *
    
    Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, Richard Agree, Chief
Executive Officer32.2
    
    *
    
    Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, Kenneth R. Howe, Chief
Financial Officer
 
 *
    
    Filed herewith+
    
    Management contract or compensatory plan or arrangement 33




---



##### Table of Contents



SIGNATURES
  AGREE REALTY CORPORATIONBy:
    /s/ Richard AgreeName:
    Richard AgreePresident and Chairman of the
Board of Directors
Date: December 7, 2007 th
 By:
    
    /s/ Richard Agree

Richard Agree
President and Chairman of the
Board of Directors
(Principal Executive Officer)
    
    
    
    By:
    
    /s/ Farris G. Kalil

Farris G. Kalil
DirectorBy:
    
    /s/ Michael RotchfordMichael Rotchford
DirectorBy:
    
    /s/ Kenneth R. Howe

Kenneth R. Howe
Vice President, Finance and
Secretary
(Principal Financial and
Accounting Officer)
    
    
    
    By:
    
    /s/ Ellis G. Wachs

Ellis G. Wachs
DirectorBy:
    
    /s/ Gene Silverman

Gene Silverman
DirectorBy:
    
    /s/ Leon M. SchurginLeon M. Schurgin
Director
 34




---



##### Table of Contents



Agree Realty Corporation
 Index
 PageReports of Independent Registered Public Accounting Firms
    
    
    F-2Financial StatementsConsolidated Balance Sheets
    
    
    F-4Consolidated Statements of Income
    
    
    F-6Consolidated Statements of Stockholders Equity
    
    
    F-7Consolidated Statements of Cash Flows
    
    
    F-8Notes to Consolidated Financial Statements
    
    
    F-10Schedule III  Real Estate and Accumulated Depreciation
    
    
    F-29
 F-1




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
       
 F-2




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
      
 F-3




---



##### Table of Contents



Agree Realty Corporation
 
 Consolidated Balance Sheets
 December 31,
    
    2006
    
    
    2005AssetsReal Estate Investments(Notes 3 and 4)Land
    
    $
    77,536,458
    
    
    $
    73,035,167Buildings
    
    
    189,117,421
    
    
    
    185,032,185Property under development
    
    
    1,593,828
    
    
    
    264,913268,247,707
    
    
    
    258,332,265Less accumulated depreciation
    
    
    (48,352,753
    )
    
    
    (43,771,581
    )Net Real Estate Investments
    
    
    219,894,954
    
    
    
    214,560,684Cash and Cash Equivalents
    
    
    463,730
    
    
    
    5,714,540Accounts Receivable  Tenants,net of allowance of $20,000
for possible losses at both December 31, 2006 and 2005
    
    
    732,141
    
    
    
    730,606Unamortized Deferred ExpensesFinancing costs, net of accumulated amortization of $4,482,272
and $4,344,244 at December 31, 2006 and 2005, respectively
    
    
    1,019,905
    
    
    
    852,036Leasing costs, net of accumulated amortization of $665,811
and $621,388 at December 31, 2006 and 2005, respectively
    
    
    421,229
    
    
    
    389,354Other Assets
    
    
    982,640
    
    
    
    1,212,387$
    223,514,599
    
    
    $
    223,459,607
 See accompanying notes to consolidated financial statements.
 F-4




---



##### Table of Contents



Agree Realty Corporation
 Consolidated Balance Sheets
 December 31,
    
    2006
    
    
    2005Liabilities and Stockholders EquityMortgages Payable(Note 3)
    
    $
    48,291,247
    
    
    $
    50,721,920Notes Payable(Note 4)
    
    
    20,500,000
    
    
    
    17,500,000Dividends and Distributions Payable(Note 5)
    
    
    4,111,807
    
    
    
    4,089,243Deferred Revenue(Note 13)
    
    
    12,103,954
    
    
    
    12,793,504Accrued Interest Payable
    
    
    239,318
    
    
    
    282,080Accounts PayableCapital expenditures
    
    
    766,378
    
    
    
    112,687Operating
    
    
    1,140,617
    
    
    
    1,300,416Tenant Deposits
    
    
    64,085
    
    
    
    54,062Total Liabilities
    
    
    87,217,406
    
    
    
    86,853,912Minority Interest(Note 6)
    
    
    5,878,593
    
    
    
    5,978,635Stockholders Equity(Note 5)Common stock, $.0001 par value; 20,000,000
shares authorized; 7,750,496 and 7,706,846
shares issued and outstanding
    
    
    775
    
    
    
    772Additional paid-in capital
    
    
    141,276,763
    
    
    
    143,138,497Deficit
    
    
    (10,858,938
    )
    
    
    (9,717,471
    )130,418,600
    
    
    
    133,421,798Less: unearned compensation  restricted stock (Note 8)
    
    
    
    
    
    
    (2,794,738
    )Total Stockholders Equity
    
    
    130,418,600
    
    
    
    130,627,060$
    223,514,599
    
    
    $
    223,459,607
 See accompanying notes to consolidated financial statements.
 F-5




---



##### Table of Contents



Agree Realty Corporation
 
 Consolidated Statements of Income
 Year Ended December 31,
    
    2006
    
    
    2005
    
    
    2004RevenuesMinimum rents
    
    $
    29,963,363
    
    
    $
    28,386,580
    
    
    $
    25,966,256Percentage rents
    
    
    53,550
    
    
    
    68,071
    
    
    
    55,995Operating cost reimbursement
    
    
    2,846,775
    
    
    
    3,082,831
    
    
    
    2,885,132Other income
    
    
    43,938
    
    
    
    41,415
    
    
    
    32,716Total Revenues
    
    
    32,907,626
    
    
    
    31,578,897
    
    
    
    28,940,099Operating ExpensesReal estate taxes
    
    
    1,821,372
    
    
    
    1,749,005
    
    
    
    1,692,176Property operating expenses
    
    
    1,637,192
    
    
    
    2,011,688
    
    
    
    1,790,773Land lease payments
    
    
    759,831
    
    
    
    784,027
    
    
    
    737,460General and administrative
    
    
    4,018,836
    
    
    
    4,191,279
    
    
    
    2,848,414Depreciation and amortization
    
    
    4,851,343
    
    
    
    4,637,325
    
    
    
    4,249,361Total Operating Expenses
    
    
    13,088,574
    
    
    
    13,373,324
    
    
    
    11,318,184Income From Continuing Operations
    
    
    19,819,052
    
    
    
    18,205,573
    
    
    
    17,621,915Other Income (Expense)Interest expense, net
    
    
    (4,624,771
    )
    
    
    (4,158,887
    )
    
    
    (4,506,712
    )Gain on sale of asset
    
    
    
    
    
    
    6,397
    
    
    
    Equity in net income of unconsolidated entities
    
    
    
    
    
    
    
    
    
    
    216,837Total Other Expense
    
    
    (4,624,771
    )
    
    
    (4,152,490
    )
    
    
    (4,289,875
    )Income Before Minority Interest and Discontinued Operations
    
    
    15,194,281
    
    
    
    14,053,083
    
    
    
    13,332,040Minority Interest
    
    
    1,220,113
    
    
    
    1,145,330
    
    
    
    1,257,212Income Before Discontinued Operations
    
    
    13,974,168
    
    
    
    12,907,753
    
    
    
    12,074,828Gain on Sale of Asset From Discontinued Operations,net of minority interest of $235,465 and $54,427
    
    
    
    
    
    
    2,653,670
    
    
    
    522,741Income From Discontinued Operations,net of minorityinterest of $43,137 and $54,708
    
    
    
    
    
    
    486,153
    
    
    
    525,451Net Income
    
    $
    13,974,168
    
    
    $
    16,047,576
    
    
    $
    13,123,020Basic Earnings Per Share(Note 2)Income before discontinued operations
    
    $
    1.84
    
    
    $
    1.73
    
    
    $
    1.87Discontinued operations
    
    
    
    
    
    
    .42
    
    
    
    .16Basic Earnings Per Share
    
    $
    1.84
    
    
    $
    2.15
    
    
    $
    2.03Dilutive Earnings Per Share (Note 2)Income before discontinued operations
    
    $
    1.83
    
    
    $
    1.72
    
    
    $
    1.87Discontinued operations
    
    
    
    
    
    
    .42
    
    
    
    .16Dilutive Earnings Per Share
    
    $
    1.83
    
    
    $
    2.14
    
    
    $
    2.03Dividend Declared Per Common Share
    
    $
    1.96
    
    
    $
    1.96
    
    
    $
    1.95
 See accompanying notes to consolidated financial statements.
 F-6




---



##### Table of Contents



Agree Realty Corporation
 
 Consolidated Statements of Stockholders Equity
 Additional
    
    
    
    
    
    
    UnearnedCommon Stock
    
    
    Paid-In
    
    
    
    
    
    
    Compensation -Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Restricted StockBalance,January 1, 2004
    
    
    6,434,345
    
    
    $
    643
    
    
    $
    108,251,813
    
    
    $
    (11,227,636
    )
    
    $
    (837,384
    )Issuance of shares under the Equity
Incentive Plan
    
    
    59,501
    
    
    
    6
    
    
    
    1,517,832
    
    
    
    
    
    
    
    (950,925
    )Shares redeemed under the Equity
Incentive Plan
    
    
    (6,000
    )
    
    
    
    
    
    
    (169,680
    )
    
    
    
    
    
    
    Vesting of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    546,345Dividends declared, $1.95 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,622,047
    )
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,123,020
    
    
    
    Balance,December 31, 2004
    
    
    6,487,846
    
    
    
    649
    
    
    
    109,599,965
    
    
    
    (10,726,663
    )
    
    
    (1,241,964
    )Issuance of common stock, net of
issuance costs
    
    
    1,150,000
    
    
    
    115
    
    
    
    31,456,414
    
    
    
    
    
    
    
    Issuance of shares under the Equity
Incentive Plan
    
    
    73,000
    
    
    
    8
    
    
    
    2,208,878
    
    
    
    
    
    
    
    (2,208,886
    )Shares redeemed under the Equity
Incentive Plan
    
    
    (4,000
    )
    
    
    
    
    
    
    (126,760
    )
    
    
    
    
    
    
    Vesting of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    656,112Dividends declared, $1.96 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,038,384
    )
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,047,576
    
    
    
    Balance,December 31, 2005
    
    
    7,706,846
    
    
    
    772
    
    
    
    143,138,497
    
    
    
    (9,717,471
    )
    
    
    (2,794,738
    )Reclassify unearned compensation
    
    
    
    
    
    
    
    
    
    
    (2,794,738
    )
    
    
    
    
    
    
    2,794,738Issuance of shares under the Equity
Incentive Plan
    
    
    43,650
    
    
    
    3
    
    
    
    95,547
    
    
    
    
    
    
    
    Vesting of restricted stock
    
    
    
    
    
    
    
    
    
    
    837,457
    
    
    
    
    
    
    
    Dividends declared, $1.96 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,115,635
    )
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,974,168
    
    
    
    Balance,December 31, 2006
    
    
    7,750,496
    
    
    $
    775
    
    
    $
    141,276,763
    
    
    $
    (10,858,938
    )
    
    $
    
  F-7




---



##### Table of Contents



Agree Realty Corporation
 
 Consolidated Statements of Cash Flows
 Year Ended December 31,
    
    2006
    
    
    2005
    
    
    2004Cash Flows From Operating ActivitiesNet income
    
    $
    13,974,168
    
    
    $
    16,047,576
    
    
    $
    13,123,020Adjustments to reconcile net income to net
cash provided by operating activitiesDepreciation
    
    
    4,799,370
    
    
    
    4,738,405
    
    
    
    4,418,177Amortization
    
    
    190,001
    
    
    
    207,040
    
    
    
    204,986Stock-based compensation
    
    
    837,457
    
    
    
    656,112
    
    
    
    546,345Gain on sale of assets
    
    
    
    
    
    
    (2,895,532
    )
    
    
    (577,168
    )Equity in net income of unconsolidated entities
    
    
    
    
    
    
    
    
    
    
    (216,837
    )Minority interests
    
    
    1,220,113
    
    
    
    1,423,932
    
    
    
    1,366,347Decrease (increase) in accounts receivable
    
    
    (1,535
    )
    
    
    (103,308
    )
    
    
    (4,961
    )Decrease (increase) in other assets
    
    
    160,596
    
    
    
    420,581
    
    
    
    (431,446
    )Increase (decrease) in accounts payable
    
    
    (159,799
    )
    
    
    (141,459
    )
    
    
    33,605Decrease in deferred revenue
    
    
    (689,550
    )
    
    
    (689,550
    )
    
    
    (307,936
    )Increase (decrease) in accrued interest
    
    
    (42,762
    )
    
    
    (16,035
    )
    
    
    131,016Increase (decrease) in tenant deposits
    
    
    10,023
    
    
    
    (6,927
    )
    
    
    13,890Net Cash Provided By Operating Activities
    
    
    20,298,082
    
    
    
    19,640,835
    
    
    
    18,299,038Cash Flows From Investing ActivitiesAcquisition of real estate investments (including
capitalized interest of $198,000 in 2006, $437,000
in 2005 and $305,000 in 2004)
    
    
    (9,305,661
    )
    
    
    (15,121,825
    )
    
    
    (21,711,356
    )Distributions from unconsolidated entities
    
    
    
    
    
    
    
    
    
    
    216,837Decrease in restricted cash
    
    
    
    
    
    
    
    
    
    
    4,309,914Net proceeds from sale of assets, less
amounts held in escrow
    
    
    
    
    
    
    9,576,974
    
    
    
    2,046,493Net Cash Used In Investing Activities
    
    
    (9,305,661
    )
    
    
    (5,544,851
    )
    
    
    (15,138,112
    )
 See accompanying notes to consolidated financial statements.
 F-8




---



##### Table of Contents



Agree Realty Corporation
 Consolidated Statements of Cash Flows
 Year Ended December 31,
    
    2006
    
    
    2005
    
    
    2004Cash Flows From Financing ActivitiesLine-of-credit net borrowings (payments)
    
    
    3,000,000
    
    
    
    (21,700,000
    )
    
    
    12,700,000Dividends and limited partners distributions paid
    
    
    (16,413,226
    )
    
    
    (15,778,376
    )
    
    
    (13,873,516
    )Payments of mortgages payable
    
    
    (2,430,673
    )
    
    
    (2,247,255
    )
    
    
    (2,158,689
    )Payments of payables for capital expenditures
    
    
    (112,687
    )
    
    
    (393,711
    )
    
    
    (361,769
    )Redemption of restricted stock
    
    
    
    
    
    
    (126,760
    )
    
    
    (169,680
    )Payments for financing costs
    
    
    (305,897
    )
    
    
    
    
    
    
    Payments of leasing costs
    
    
    (76,298
    )
    
    
    (179,395
    )
    
    
    (72,150
    )Exercise of stock options
    
    
    95,550
    
    
    
    
    
    
    
    358,312Net proceeds from the issuance of common stock
    
    
    
    
    
    
    31,456,529
    
    
    
    Net Cash Used In Financing Activities
    
    
    (16,243,231
    )
    
    
    (8,968,968
    )
    
    
    (3,577,492
    )Net Increase (Decrease) In Cash and Cash Equivalents
    
    
    (5,250,810
    )
    
    
    5,127,016
    
    
    
    (416,566
    )Cash and Cash Equivalents,beginning of year
    
    
    5,714,540
    
    
    
    587,524
    
    
    
    1,004,090nbsp;Cash and Cash Equivalents,end of year
    
    $
    463,730
    
    
    $
    5,714,540
    
    
    $
    587,524Supplemental Disclosure of Cash Flow InformationCash paid for interest (net of amounts capitalized)
    
    $
    4,530,740
    
    
    $
    3,984,010
    
    
    $
    4,243,983Supplemental Disclosure of Non-Cash TransactionsDividends and limited partners distributions
Declared and unpaid
    
    $
    4,111,807
    
    
    $
    4,089,243
    
    
    $
    3,509,083Shares issued under Stock Incentive Plan
    
    $
    1,310,766
    
    
    $
    2,208,886
    
    
    $
    1,159,518Real estate investments financed with accounts
payable
    
    $
    766,378
    
    
    $
    112,687
    
    
    $
    393,711Real estate investments acquired from joint ventures
    
    $
    
    
    
    $
    
    
    
    $
    13,790,990
 See accompanying notes to consolidated financial statements.
 F-9




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 1. The Company
    
    Agree Realty Corporation (the Company) is a
self-administered, self-managed real estate
investment trust (REIT), which develops,
acquires, owns and operates properties,
which are primarily leased to national and
regional retail companies under net leases.
At December 31, 2006 the Companys
properties are comprised of forty-eight
single tenant retail facilities and twelve
shopping centers located in fifteen states.
At December 31, 2006, approximately 96% of
the Companys annual base rental revenues
will be received from national and regional
tenants under long-term leases, including
approximately 32% from Borders, Inc., 22%
from Walgreen Co., and 13% from Kmart
Corporation, a wholly-owned subsidiary of
Sears Holdings Corporation2. Summary of Significant
    Accounting Policies
    
    Principles of Consolidation
The consolidated financial statements of
Agree Realty Corporation include the
accounts of the Company, its majority-owned
partnership, Agree Limited Partnership (the
Operating Partnership), and its wholly-owned
subsidiaries. The Company controlled, as the
sole general partner, 92.00% and 91.96% of
the Operating Partnership as of December 31,
2006 and 2005, respectively. All material
intercompany accounts and transactions are
eliminated.Use of EstimatesThe preparation of financial statements in
conformity with accounting principles
generally accepted in the United States of
America, requires management to make
estimates and assumptions that affect the
reported amounts of (1) assets and
liabilities and the disclosure of contingent
assets and liabilities as of the date of the
financial statements, and (2) revenues and
expenses during the reporting period. Actual
results could differ from those estimates.Fair Values of Financial InstrumentsThe carrying amounts of the Companys
financial instruments, which consist of
cash, cash equivalents, receivables, and
accounts payable approximate their fair
values. The fair value of notes and
mortgages payable approximates their
carrying amount because the terms are
equivalent to borrowing notes currently
available to the Company with similar terms
and maturities
 F-10




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 Investments in Real Estate  Carrying Value of AssetsReal estate assets are stated at cost less accumulated
depreciation. All costs related to planning, development and
construction of buildings prior to the date they become
operational, including interest and real estate taxes during the
construction period, are capitalized for financial reporting
purposes and recorded as Property under development until
construction has been completed.The Company allocates the cost of an acquisition based upon the
estimated fair value of the net assets acquired. The Company also
estimates the fair value of intangibles related to its
acquisitions. The valuation of the fair value of the intangibles
primarily involves estimates related to market conditions,
probability of lease renewals and the current market value of
leases.Subsequent to completion of construction, expenditures for
property maintenance are charged to operations as incurred, while
significant renovations are capitalized. Depreciation of the
buildings is recorded on the straight-line method using an
estimated useful life of forty years.Depreciation and AmortizationDepreciation expense is computed using a straight-line method and
estimated useful lives for buildings and improvements of 40 years
and equipment and fixtures of five to ten years.Investment in Real Estate  Impairment evaluationReal estate investments are evaluated for impairment when events
or changes in circumstances indicate that the carrying amount of
the assets may not be recoverable through the estimated
undiscounted future cash flows from the use of these assets. When
any such impairment exists, the related assets will be written
down to fair value. No impairment loss recognition has been
required through December 31, 2006.
 F-11




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 Cash and Cash EquivalentsThe Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents. The Company maintains its cash and cash equivalents
at a financial institution. The account balances periodically
exceed the Federal Deposit Insurance Corporation (FDIC)
insurance coverage, and as a result, there is a concentration of
credit risk related to amounts on deposit in excess of FDIC
insurance coverage. The Company believes the risk is not
significant, as the Company does not anticipate the financial
institutions nonperformance.Accounts Receivable  TenantsAccounts receivable from tenants are unsecured and reflect primarily
reimbursement of specified common area expenses. The Company determines its
allowance for uncollectible accounts based on historical trends, existing
economic conditions, and known financial position of its tenants. Tenant
accounts receivable are written-off by the Company in the year when receipt is
determined to be remote.Unamortized Deferred ExpensesDeferred expenses are stated net of total accumulated amortization. The nature
and treatment of these capitalized costs are as follows: (1) financing costs,
consisting of expenditures incurred to obtain long-term financing, are being
amortized using the interest method over the term of the related loan, and (2)
leasing costs, which are amortized on a straight-line basis over the term of
the related lease. The Company incurred expenses of $182,451, $199,490 and
$197,436 for the years ended December 31, 2006, 2005 and 2004, respectively.Other AssetsThe Company records prepaid expenses, deposits, vehicles, furniture and
fixtures, leasehold improvements, acquisition advances and miscellaneous
receivables as other assets in the accompanying balance sheets.Accounts Payable  Capital ExpendituresIncluded in accounts payable are amounts related to the construction of
buildings. Due to the nature of these expenditures, they are reflected in the
statements of cash flows as a financing activity.
 F-12




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 Minority InterestThis amount represents the limited partners interest (OP Units)
of 8.00% and 8.04% (convertible into 637,547 shares) in the
Operating Partnership as of December 31, 2006 and 2005,
respectively.Revenue RecognitionMinimum rental income attributable to leases is recorded when due
from tenants. Certain leases provide for additional percentage
rents based on tenants sales volume. These percentage rents are
recognized when determinable by the Company. In addition, leases
for certain tenants contain rent escalations and/or free rent
during the first several months of the lease term; however, such
amounts are not material.Taxes Collected and Remitted to Governmental AuthoritiesThe Company reports taxes, collected from tenants that are to be
remitted to governmental authorities, on a net basis and therefore
does not include the taxes in revenue.Operating Cost ReimbursementSubstantially all of the Companys leases contain provisions
requiring tenants to pay as additional rent a proportionate share
of operating expenses such as real estate taxes, repairs and
maintenance, insurance, etc. The related revenue from tenant
billings is recognized as operating cost reimbursement in the same
period the expense is recorded.Income TaxesThe Company elected to be taxed as a REIT under the Internal
Revenue Code of 1986, as amended (the Code), and began operating
as such on April 22, 1994. As a result, the Company is not subject
to federal income taxes to the extent that it distributes annually
at least 90% of its taxable income to its stockholders and
satisfies certain other requirements defined in the Code.
Accordingly, no provision was made for federal income taxes in the
accompanying consolidated financial statements.
 F-13




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 Stock OptionsThe Company has elected to adopt the recognition provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation (SFAS 123) using the prospective method beginning January 1,
2003. SFAS 123 establishes a fair value based method of accounting for
stock-based compensation plans under which employees receive shares of stock
or other equity instruments of the Company or the Company incurs liabilities
to employees in amounts based on the price of its stock. No stock options
were granted during 2006, 2005 or 2004 and there was no expense for stock
options that would be required.DividendsThe Company declared dividends of $1.96, $1.96 and $1.95 per share during
the years ended December 31, 2006, 2005, and 2004; the dividends have been
reflected for federal income tax purposes as follows:
 December 31,
    
    2006
    
    2005
    
    2004Ordinary income
    
    $
    1.80
    
    
    $
    1.76
    
    
    $
    1.95Return of capital
    
    
    .16
    
    
    
    .20
    
    
    
    Total
    
    $
    1.96
    
    
    $
    1.96
    
    
    $
    1.95
 The aggregate federal income tax basis of Real Estate Investments is
approximately $22.3 million less than the financial statement basis.
 F-14




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 Discontinued OperationsIn August 2004, the Company completed the sale of a single tenant
property for approximately $2.2 million and recognized a gain of
approximately $523,000, net of minority interest. The property
was leased to Kmart Corporation and was located in Perrysburg,
Ohio. In November 2005 the Company completed the sale of a
shopping center for approximately $8.8 million and recognized a
gain of approximately $2,654,000, net of minority interest. The
shopping center was anchored by Kmart Corporation and Roundys
Foods and was located in Iron Mountain, Michigan. The gain on sale
and results of operations for these properties are presented as
discontinued operations in the Companys consolidated statements
of income.The revenues from the properties were $864,113, and $1,125,842 for
the years ended December 31, 2005 and 2004, respectively. The
expenses for the properties were $377,960 and $600,391, including
minority interest charges of $43,137 and $54,708, for the years
ended December 31, 2005 and 2004, respectively.
 F-15




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 Earnings Per ShareEarnings per share have been computed by dividing the net income by the weighted average
number of common shares outstanding. The per-share amounts reflected in the consolidated
statements of income are presented in accordance with SFAS No. 128 Earnings per Share.
Diluted earnings per share is computed by dividing net income by the weighted average common
and potential dilutive common shares outstanding in accordance with the treasury stock method.The following is a reconciliation of the denominator of the basic net earnings per common
share computation to the denominator of the diluted net earnings per common share computation
for each of the periods presented:
 Year Ended December 31,
    
    2006
    
    
    2005
    
    
    2004Weighted Average number of common
shares outstanding
    
    
    7,711,964
    
    
    
    7,460,504
    
    
    
    6,468,351Unvested restricted stock
    
    
    131,120
    
    
    
    
    
    
    
    Weighted average number of common
shares outstanding used in basic earnings
per share
    
    
    7,580,844
    
    
    
    7,460,504
    
    
    
    6,468,351Weighted average number of common shares
outstanding used in basic earnings per
share
    
    
    7,580,844
    
    
    
    7,460,504
    
    
    
    6,468,351Effect of dilutive securitiesRestricted stock
    
    
    70,582
    
    
    
    29,842
    
    
    
    Common stock options
    
    
    
    
    
    
    395
    
    
    
    6,766Weighted average number of common shares
outstanding used in diluted earnings per
share
    
    
    7,651,426
    
    
    
    7,490,741
    
    
    
    6,475,117
 F-16




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 Stock Based CompensationOn January 1, 2006, we adopted the provisions of SFAS No. 123R,
Shares-Based Payments (SFAS 123R), under the modified prospective
method. Under the modified prospective method, compensation cost
is recognized for all awards, granted after the adoption of this
standard and for the unvested portion of previously granted awards
that are outstanding as of that date. In accordance with SFAS
123R, we will estimate fair vale of restricted stock and stock
option grants at the date of grant and amortize those amounts into
expense on a straight-line basis or amount vested, if greater,
over the appropriate vesting period. No stock options were issued
or vested during 2006, so SFAS 123R did not have any impact on net
income.Recent Accounting PronouncementsIn June 2006, the Financial Accounting Standards Board (FASB)
issued an Emerging Issues Task force (EITF) Consensus in Issue
06-03, How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income
Statement (That Is, Gross versus Net Presentation). The
consensus includes any tax assessed by a governmental authority
that is directly imposed on a revenue-producing transaction
between a seller and a customer and may include, but is not
limited to, sales, use, value added and some exercise taxes. The
consensus states that the presentation of taxes within the scope
on either a gross (included in revenues and costs) or a net
(excluded from revenues) basis is an accounting policy decision
that should be disclosed pursuant to Accounting Principles Board
(APB) Opinion No. 22 Disclosure of Accounting Policies. In
addition, for any such taxes that are reported on a gross basis, a
company should disclose the amounts of those taxes in interim and
annual financial statements for each period for which an income
statement is presented if those amounts are significant. The
disclosure of those taxes can be done on an aggregate basis. The
consensus should be applied to financial reports for interim and
annual reporting periods beginning after December 15, 2006. The
Company reports taxes collected from customers on a net basis.
The adoption of this consensus will not have a material impact on
our financial position or results of operations.In June 2006, the FASB issued FASB
Interpretation No. 48 (FIN 48), Accounting
for Uncertainty in Income Taxes  an
interpretation of
 F-17




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 FASB Statement No. 109.
FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in
accordance with SFAS No. 109, Accounting
for Income Taxes. This interpretation
prescribes a recognition threshold and
measurement attribute for the financial
statement recognition and measurement of a
tax position taken or expected to be taken
in a tax return. It also provides guidance
on de-recognition, classification, interest
and penalties, accounting in interim
periods, disclosure and transition. The
Company will be required to adopt FIN 48 as
of January 1, 2007, with any cumulative
effect of the change in accounting
principles recorded as an adjustment to
opening retained earnings. The Company is
currently evaluating the impact of its
adoption of FIN 48 and has not yet
determined the effect on its earnings or
financial position.In September 2006, the Securities and
Exchange Commission (SEC) staff issued Staff
Accounting Bulletin (SAB) Topic 1N
Financial Statements  Considering the
Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year
Financial Statements (SAB 108). SAB 108
provides guidance on how prior year
misstatements should be taken into
consideration when quantifying misstatements
in current year financial statements for
purposes of determining whether the current
years financial statements are materially
misstated. SAB 108 references both the
iron curtain and rollover approaches to
quantifying a current year misstatement for
purposes of determining the materiality.
The iron curtain approach focuses on how the
current years balance sheet would be
affected in correcting a misstatement
without considering the year(s) in which the
misstatement originated. The rollover
approach focuses on the amount of the
misstatement that originated in the current
years income statement. SAB 108 states
that registrants must quantify the impact of
correcting all misstatements, including both
the carryover and reversing affects of prior
year misstatements, on the current year
financial statements. Both the iron curtain
approach and rollover approach should be
used in assessing the materiality of a
current year misstatement. SAB 108 provides
that once a current year misstatement has
been quantified, the guidance in SAB Topic
1N, Financial Statements  Materiality,
(SAB 99) should be applied to determine
whether the misstatement is material and
should result in an adjustment to the
financial statements. SAB 108 is effective
for fiscal years ending after November 15,
2006. The adoption of SAB 108 did not have
a significant impact on our
 F-18




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 financial
position or results of operations.In September 2006, FASB issued SFAS No. 157,
Fair Value Measurements. This statement
defines fair value, establishes a framework
for measuring fair value in generally
accepted accounting principles (GAAP) and
expands the disclosures about fair value
measurements. SFAS No. 157 applies to other
accounting pronouncements that require or
permit fair value measurements. The changes
to current practice resulting from the
application of SFAS No 157 relate to the
definition of fair value, the methods used
to measure fair value and the expanded
disclosures about fair value measurements.
The definition focuses on the price that
would be received to sell the asset or paid
to transfer the liability at the measurement
date (an exit price) and not the price that
would be paid to acquire the asset or
received to assume the liability at the
measurement date (an entry price). This
statement also emphasizes that fair value is
a market-based measurement, not an entity
specific measurement and subsequently a fair
value measurement should be determined based
on the assumptions that market participants
would use in pricing the asset or liability.
The statement also clarifies that the
market participant assumptions about risk
and assumptions about the effect of a
restriction on the sale or use of an asset.
This statement is effective for financial
statements issued for fiscal years beginning
after November 15, 2007, and interim periods
within those fiscal years. This statement
should be applied prospectively as of the
beginning of the year in which this
statement is initially applied. A limited
form of retrospective application of SFAS
No. 157 is allowed for certain financial
instruments. We are currently evaluating
the provisions of SFAS No. 157 to determine
the potential impact, if any, the adoption
of SFAS No. 157 will have on our financial
position or results of operations.In February 2007, the FASB issued SFAS
Statement No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities.
This statement permits companies and
not-for-profit organizations to make a
one-time election to carry eligible types of
financial assets and liabilities at fair
value, even if fair value measurement is not
required under GAAP. SFAS 159 is effective
for fiscal years beginning after November
15, 2007. The Company is currently
evaluating the effect of the adoption of
SFAS No. 159.
 F-19




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 3. Mortgages Payable
    
    Mortgages payable consisted of the following:
 December 31,
    
    2006
    
    
    2005Note payable in
monthly
installments of
$153,838 including
interest at 6.90%
per annum, with the
final monthly
payment due January
2020;
collateralized by
related real estate
and tenants leases
    
    $
    15,878,633
    
    
    $
    16,601,748Note payable in
monthly
installments of
$128,205 including
interest at 6.20%
per annum, with a
final monthly
payment due
November 2018;
collateralized by
related real estate
and tenants leases
    
    
    12,877,086
    
    
    
    13,592,901Note payable in
monthly
installments of
$99,598 including
interest at 6.63%
per annum, with the
final monthly
payment due
February 2017;
collateralized by
related real estate
and tenants leases
    
    
    8,822,558
    
    
    
    9,411,438Note payable in
monthly
installments of
$57,403 including
interest at 6.50%
per annum, with the
final monthly
payment due
February 2023;
collateralized by
related real estate
and tenant lease
    
    
    6,881,562
    
    
    
    7,114,801
 F-20




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 December 31,
    
    2006
    
    
    2005Note payable in
monthly
installments of
$25,631 including
interest at 7.50%
per annum, with the
final monthly
payment due May
2022;
collateralized by
related real estate
and tenant lease
    
    
    2,805,919
    
    
    
    2,899,217Note payable in
monthly
installments of
$12,453 including
interest at 6.95%
per annum, with the
final monthly
payment due
December 2017;
collateralized by
related real estate
and tenant lease
    
    
    1,025,489
    
    
    
    1,101,815Total
    
    $
    48,291,247
    
    
    $
    50,721,920
 Future scheduled annual maturities of mortgages payable for years ending
December 31 are as follows: 2007  $2,531,080; 2008  $2,749,772; 2009 -
$2,937,232; 2010  $3,137,505; 2011  $3,351,470 and $33,584,188
thereafter.
 F-21




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 4. Notes Payable
    
    The Operating Partnership has in
place a $50 million line-of-credit
agreement, which is guaranteed by
the Company up to the maximum amount
and for the full term. The agreement
expires in November 2009 and can be
extended, solely at the option of
the Operating Partnership, for two
additional one year periods.
Advances under the Credit Facility
bear interest within a range of
one-month to twelve-month LIBOR plus
100 basis points to 150 basis points
or the banks prime rate, at the
option of the Company, based on
certain factors such as the ratio of
our indebtedness to the capital
value of our properties.. In
addition, we must maintain certain
leverage and debt service coverage
ratios, maintain our adjusted net
worth at a minimum level, maintain
our tax status as a REIT, and
distribute no more than 95% of our
adjusted funds from operations. The
facility also requires that we pay a
non-use fee of .125% of the unfunded
balance if our outstanding balance
is greater than $25 million or .20%
of the unfunded balance if our
outstanding balance is less than $25
million. The Credit Facility is
used to fund property acquisitions
and development activities. At
December 31, 2006 and 2005,
$20,500,000 and $17,000,000,
respectively, was outstanding under
this facility with a weighted
average interest rate of 6.35% and
6.35%, respectively. The Credit
Facilitys covenants were all
complied with through December 31,
2006.In addition, the Company maintains a
$5,000,000 line-of-credit agreement.
Monthly interest payments are
required, either at the banks prime
rate less 75 basis points, or 150
basis points in excess of the
one-month to twelve month LIBOR
rate, at the option of the Company.
At December 31, 2006 and 2005, $-0-
and $500,000, respectively, was
outstanding under this agreement
with a weighted average interest
rate of 6.75%.5. Dividends and
    Distributions Payable
    
    On December 4, 2006 the Company
declared a dividend of $.49 per
share for the quarter ended December
31, 2006. The holders of OP Units
were entitled to an equal
distribution per OP Unit held as of
December 31, 2006. The dividends and
distributions payable are recorded
as liabilities in the Companys
consolidated balance sheet at
December 31, 2006. The dividend has
been reflected as a reduction of
stockholders equity and the
distribution has been reflected as a
reduction of the limited partners
minority interest. These amounts
were paid on January 4, 2007.
 F-22




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 6. Minority
Interest
    
    The following summarizes the changes in minority interest since
January 1, 2004:
 Minority Interest at January 1, 2004
    
    $
    5,821,739Minority interests share of income for the year
    
    
    1,366,347Distributions for the year
    
    
    (1,313,231
    )Minority Interest at December 31, 2004
    
    
    5,874,855Minority interests share of income for the year
    
    
    1,423,932Distributions for the year
    
    
    (1,320,152
    )Minority Interest at December 31, 2005
    
    
    5,978,635Minority interests share of income for the year
    
    
    1,220,113Distributions for the year
    
    
    (1,320,155
    )Minority Interest at December 31, 2006
    
    $
    5,878,593
 7. Stock Incentive Plan
    
    The Company established a stock incentive plan in 1994 (the 1994 Plan)
under which options were granted. The options, had an exercise price
equal to the initial public offering price ($19.50/share), can be
exercised in increments of 25% on each anniversary of the date of the
grant, and expire upon employment termination. There were -0-, 4,900
and 4,900, options outstanding and exercisable at December 31, 2006,
2005 and 2004, respectively. There were 18,375 options exercised in
2004 and 4,900 options exercised in 2006. No options were granted
during 2006, 2005 or 2004. In 2005, our stockholders approved the
2005 Equity Incentive Plan (the 2005 Plan) which replaced the 1994
Plan. The 2005 Plan authorizes the issuance of a maximum of one
million shares of common stock.
 F-23




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 8. Stock Based
    Compensation
    
    As part of the Companys 2005 Equity Incentive Plan, restricted common shares are granted
to certain employees. As of December 31, 2006, there was $3,268,045 of total unrecognized
compensation costs related to the outstanding restricted shares, which is expected to be
recognized over a weighted average period of 3.80 years. We used a 0% discount factor and
forfeiture rate for determining the fair value of restricted stock. The forfeiture rate
was based on historical results and trends and we do not consider discount rates to be
material. Pursuant to SFAS 123R, the Company reversed the previously recorded deferred
compensation of $2,794,738 at December 31, 2005 during the year ended December 31, 2006.
The impact did not change stockholders equity or reported net
income.
The holder of a restricted share award is generally entitled at all times on and after the
date of issuance of the restricted shares to exercise the rights of a shareholder of the
Company, including the right to vote the shares and the right to receive dividends on the
shares. We granted 38,750 shares of restricted stock to employees and associates under the
2005 Equity Incentive Plan. The restricted shares vest over a 3 to 5 year period based on
continued service to the Company. Restricted share activity is summarized as follows:
 WeightedAverageShares
    
    Grant DateOutstanding
    
    Fair ValueNon-vested restricted shares at December
31, 2004
    
    
    81,770
    
    
    $
    15.19Restricted shares granted
    
    
    73,000
    
    
    $
    30.26Restricted shares vested
    
    
    (25,330
    )
    
    $
    25.90Restricted shares forfeited
    
    
    
    
    
    
    Non-vested restricted shares at December
31, 2005
    
    
    129,440
    
    
    $
    21.59Restricted shares granted
    
    
    38,750
    
    
    $
    33.83Restricted shares vested
    
    
    (37,070
    )
    
    $
    22.59Restricted shares forfeited
    
    
    
    
    
    
    Non-vested restricted shares at December
31, 2006
    
    
    131,120
    
    
    $
    24.92
 F-24




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 9. Profit-Sharing
Plan
    
    The Company has a discretionary profit-sharing
plan whereby it contributes to the plan such
amounts as the Board of Directors of the
Company determines. The participants in the
plan cannot make any contributions to the plan.
Contributions to the plan are allocated to the
employees based on their percentage of
compensation to the total compensation of all
employees for the plan year. Participants in
the plan become fully vested after six years of
service. No contributions were made to the plan
in 2006, 2005 or 2004.10. Rental
Income
    
    The Company leases premises in its properties to tenants
pursuant to lease agreements, which provide for terms
ranging generally from 5 to 25 years. The majority of
leases provide for additional rents based on tenants
sales volume. The weighted average lease term is 11.5
years.As of December 31, 2006, the
future minimum rentals for the
next five years from rental
property under the terms of all
noncancellable tenant leases,
assuming no new or renegotiated
leases are executed for such
premises, are as follows (in
thousands):
 2007
    
    $
    30,4152008
    
    
    29,5502009
    
    
    28,6062010
    
    
    27,5932011
    
    
    25,294Thereafter
    
    
    196,809Total
    
    $
    338,267
 Of these future minimum rentals,
approximately 35% of the total is
attributable to Borders, Inc.,
approximately 34% of the total is
attributable to Walgreen and
approximately 9% is attributable
to Kmart Corporation a
wholly-owned subsidiary of Sears
Holdings Corporation. Borders is
a major operator of book
superstores in the United States,
Walgreen operates in the national
drugstore chain industry and
Kmarts principal business is
general merchandise retailing
through a chain of discount
department stores. The loss of
any of these anchor tenants or
the inability of any of them to
pay rent could have an adverse
effect on the Companys business.
 F-25




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 11. Lease
Commitments
    
    The Company has entered into certain land lease
agreements for four of its properties. As of December
31, 2006, future annual lease commitments under these
agreements are as follows:
 For the Year ending December 31,2007
    
    $
    674,2002008
    
    
    658,8672009
    
    
    648,2002010
    
    
    691,3752011
    
    
    695,300Thereafter
    
    
    8,243,822Total
    
    $
    11,609,764
 F-26




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 12. Interim
Results (Unaudited)
    
    The following summary represents the unaudited results of operations of the Company, expressed in thousands except per
share amounts, for the periods from January 1, 2005 through December 31, 2006. Certain amounts have been reclassified to
conform to the current presentation of discontinued operations:
 Three Months Ended2006
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,Revenues
    
    $
    8,272
    
    
    $
    7,994
    
    
    $
    8,114
    
    
    $
    8,528Income before discontinued operations
    
    $
    3,387
    
    
    $
    3,519
    
    
    $
    3,406
    
    
    $
    3,662Discontinued operations,
net of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income
    
    $
    3,387
    
    
    $
    3,519
    
    
    $
    3,406
    
    
    $
    3,662Earnings Per Share  Diluted
    
    $
    .44
    
    
    $
    .46
    
    
    $
    .44
    
    
    $
    .49
 Three Months Ended2005
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,Revenues
    
    $
    7,824
    
    
    $
    7,737
    
    
    $
    7,690
    
    
    $
    8,328Income before discontinued operations
    
    $
    3,164
    
    
    $
    3,379
    
    
    $
    3,316
    
    
    $
    3,449Write-off of acquisition advances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400Discontinued operations,
net of minority interest
    
    
    138
    
    
    
    140
    
    
    
    138
    
    
    
    2,724Net Income
    
    $
    3,302
    
    
    $
    3,519
    
    
    $
    3,454
    
    
    $
    5,773Earnings Per Share  Diluted
    
    $
    .45
    
    
    $
    .46
    
    
    $
    .45
    
    
    $
    .78
 F-27




---



##### Table of Contents



Agree Realty Corporation
 Notes to Consolidated Financial Statements
 13. Deferred
Revenue
    
    In July 2004, our tenant in two joint
venture properties located in Ann Arbor,
MI and Boynton Beach, FL repaid $13.8
million that had been contributed by our
joint venture partner. As a result of this
repayment the Company became the sole
member of the limited liability companies
holding the properties. Total assets of
the two properties were approximately
$13.8 million. We have treated the $13.8
million repayment of the capital
contribution as deferred revenue and
accordingly, will recognize rental income
over the term of the related leases.
 F-28




---



##### Table of Contents



Agree Realty Corporation
 
 Schedule III  Real Estate and Accumulated Depreciation
December 31, 2006
 Column A
    
    Column B
    
    Column C
    
    Column D
    
    Column E
    
    Column F
    
    Column G
    
    Column HLife on WhichCosts
    
    
    Gross Amount at Which Carried
    
    
    
    
    
    
    
    
    
    Depreciation inInitial Cost
    
    Capitalized
    
    
    At Close of Period
    
    
    
    
    
    
    
    
    
    Latest IncomeBuildings and
    
    
    Subsequent to
    
    
    
    
    
    
    Buildings and
    
    
    
    
    
    
    Accumulated
    
    
    Date of
    
    StatementDescription
    
    Encumbrance
    
    
    Land
    
    Improvements
    
    
    Acquisition
    
    
    Land
    
    Improvements
    
    
    Total
    
    
    Depreciation
    
    
    Construction
    
    is ComputedCompleted Retail FacilitiesSams Club, MI
    
    $
    622,941
    
    
    $
    550,000
    
    
    $
    562,404
    
    
    $
    1,087,596
    
    
    $
    550,000
    
    
    $
    1,650,000
    
    
    $
    2,200,000
    
    
    $
    1,288,027
    
    
    
    
    1977
    
    40 YearsCapital Plaza, KY
    
    
    
    
    
    
    7,379
    
    
    
    2,240,607
    
    
    
    3,223,736
    
    
    
    7,379
    
    
    
    5,464,343
    
    
    
    5,471,722
    
    
    
    1,761,206
    
    
    
    
    1978
    
    40 YearsCharlevoix Common, MI
    
    
    
    
    
    
    305,000
    
    
    
    5,152,992
    
    
    
    106,718
    
    
    
    305,000
    
    
    
    5,259,710
    
    
    
    5,564,710
    
    
    
    2,109,775
    
    
    
    
    1991
    
    40 YearsChippewa Commons, WI
    
    
    
    
    
    
    1,197,150
    
    
    
    6,367,560
    
    
    
    439,818
    
    
    
    1,197,150
    
    
    
    6,807,378
    
    
    
    8,004,528
    
    
    
    2,715,048
    
    
    
    
    1990
    
    40 YearsGrayling Plaza, MI
    
    
    
    
    
    
    200,000
    
    
    
    1,778,657
    
    
    
    
    
    
    
    200,000
    
    
    
    1,778,657
    
    
    
    1,978,657
    
    
    
    1,017,395
    
    
    
    
    1984
    
    40 YearsIronwood Commons, MI
    
    
    
    
    
    
    167,500
    
    
    
    8,181,306
    
    
    
    261,074
    
    
    
    167,500
    
    
    
    8,442,380
    
    
    
    8,609,880
    
    
    
    3,263,230
    
    
    
    
    1991
    
    40 YearsMarshall Plaza Two, MI
    
    
    
    
    
    
    
    
    
    
    4,662,230
    
    
    
    115,294
    
    
    
    
    
    
    
    4,777,524
    
    
    
    4,777,524
    
    
    
    1,864,068
    
    
    
    
    1990
    
    40 YearsNorth Lakeland Plaza, FL
    
    
    2,698,890
    
    
    
    1,641,879
    
    
    
    6,364,379
    
    
    
    1,525,238
    
    
    
    1,641,879
    
    
    
    7,889,617
    
    
    
    9,531,496
    
    
    
    3,438,950
    
    
    
    
    1987
    
    40 YearsOscoda Plaza, MI
    
    
    
    
    
    
    183,295
    
    
    
    1,872,854
    
    
    
    
    
    
    
    183,295
    
    
    
    1,872,854
    
    
    
    2,056,149
    
    
    
    1,066,792
    
    
    
    
    1984
    
    40 YearsPetoskey Town Center, MI
    
    
    
    
    
    
    875,000
    
    
    
    8,895,289
    
    
    
    223,581
    
    
    
    875,000
    
    
    
    9,118,870
    
    
    
    9,993,870
    
    
    
    3,583,749
    
    
    
    
    1990
    
    40 YearsPlymouth Commons, WI
    
    
    
    
    
    
    535,460
    
    
    
    5,667,504
    
    
    
    282,915
    
    
    
    535,460
    
    
    
    5,950,419
    
    
    
    6,485,879
    
    
    
    2,377,104
    
    
    
    
    1990
    
    40 YearsRapids Associates, MI
    
    
    
    
    
    
    705,000
    
    
    
    6,854,790
    
    
    
    27,767
    
    
    
    705,000
    
    
    
    6,882,557
    
    
    
    7,587,557
    
    
    
    2,787,776
    
    
    
    
    1990
    
    40 YearsShawano Plaza, WI
    
    
    
    
    
    
    190,000
    
    
    
    9,133,934
    
    
    
    176,471
    
    
    
    190,000
    
    
    
    9,310,405
    
    
    
    9,500,405
    
    
    
    3,818,357
    
    
    
    
    1990
    
    40 YearsWest Frankfort Plaza, IL
    
    
    
    
    
    
    8,002
    
    
    
    784,077
    
    
    
    143,258
    
    
    
    8,002
    
    
    
    927,335
    
    
    
    935,337
    
    
    
    511,482
    
    
    
    
    1982
    
    40 YearsOmaha, NE
    
    
    1,065,055
    
    
    
    1,705,619
    
    
    
    2,053,615
    
    
    
    2,152
    
    
    
    1,705,619
    
    
    
    2,055,767
    
    
    
    3,761,386
    
    
    
    571,752
    
    
    
    
    1995
    
    40 YearsWichita, KS
    
    
    779,952
    
    
    
    1,039,195
    
    
    
    1,690,644
    
    
    
    24,666
    
    
    
    1,039,195
    
    
    
    1,715,310
    
    
    
    2,754,505
    
    
    
    476,996
    
    
    
    
    1995
    
    40 YearsSanta Barbara, CA
    
    
    1,585,279
    
    
    
    2,355,423
    
    
    
    3,240,557
    
    
    
    2,650
    
    
    
    2,355,423
    
    
    
    3,243,207
    
    
    
    5,598,630
    
    
    
    902,007
    
    
    
    
    1995
    
    40 YearsMonroeville, PA
    
    
    
    
    
    
    6,332,158
    
    
    
    2,249,724
    
    
    
    
    
    
    
    6,332,158
    
    
    
    2,249,724
    
    
    
    8,581,882
    
    
    
    569,208
    
    
    
    
    1996
    
    40 YearsNorman, OK
    
    
    
    
    
    
    879,562
    
    
    
    1,626,501
    
    
    
    
    
    
    
    879,562
    
    
    
    1,626,501
    
    
    
    2,506,063
    
    
    
    416,601
    
    
    
    
    1996
    
    40 YearsColumbus, OH
    
    
    
    
    
    
    826,000
    
    
    
    2,336,791
    
    
    
    
    
    
    
    826,000
    
    
    
    2,336,791
    
    
    
    3,162,791
    
    
    
    637,747
    
    
    
    
    1996
    
    40 YearsAventura, FL
    
    
    
    
    
    
    
    
    
    
    3,173,121
    
    
    
    
    
    
    
    
    
    
    
    3,173,121
    
    
    
    3,173,121
    
    
    
    849,471
    
    
    
    
    1996
    
    40 YearsBoyton Beach, FL
    
    
    1,013,146
    
    
    
    1,534,942
    
    
    
    2,043,122
    
    
    
    
    
    
    
    1,534,942
    
    
    
    2,043,122
    
    
    
    3,578,064
    
    
    
    514,849
    
    
    
    
    1996
    
    40 YearsLawrence, KS
    
    
    2,805,919
    
    
    
    981,331
    
    
    
    3,000,000
    
    
    
    349,127
    
    
    
    981,331
    
    
    
    3,349,127
    
    
    
    4,330,458
    
    
    
    736,488
    
    
    
    
    1997
    
    40 YearsWaterford, MI
    
    
    2,124,472
    
    
    
    971,009
    
    
    
    1,562,869
    
    
    
    135,390
    
    
    
    971,009
    
    
    
    1,698,259
    
    
    
    2,669,268
    
    
    
    381,074
    
    
    
    
    1997
    
    40 YearsChesterfield Township, MI
    
    
    2,332,684
    
    
    
    1,350,590
    
    
    
    1,757,830
    
    
    
    (46,164
    )
    
    
    1,350,590
    
    
    
    1,711,666
    
    
    
    3,062,256
    
    
    
    364,309
    
    
    
    
    1998
    
    40 YearsGrand Blanc, MI
    
    
    2,228,578
    
    
    
    1,104,285
    
    
    
    1,998,919
    
    
    
    13,968
    
    
    
    1,104,285
    
    
    
    2,012,887
    
    
    
    3,117,172
    
    
    
    402,923
    
    
    
    
    1998
    
    40 YearsPontiac, MI
    
    
    2,136,824
    
    
    
    1,144,190
    
    
    
    1,808,955
    
    
    
    (113,506
    )
    
    
    1,144,190
    
    
    
    1,695,449
    
    
    
    2,839,639
    
    
    
    351,394
    
    
    
    
    1998
    
    40 YearsMt. Pleasant Shopping
Center, MI
    
    
    
    
    
    
    907,600
    
    
    
    8,081,968
    
    
    
    410,600
    
    
    
    907,600
    
    
    
    8,492,568
    
    
    
    9,400,168
    
    
    
    2,307,181
    
    
    
    
    1973
    
    40 YearsTulsa, OK
    
    
    
    
    
    
    1,100,000
    
    
    
    2,394,512
    
    
    
    
    
    
    
    1,100,000
    
    
    
    2,394,512
    
    
    
    3,494,512
    
    
    
    514,219
    
    
    
    
    1998
    
    40 YearsColumbia, MD
    
    
    3,022,252
    
    
    
    1,545,509
    
    
    
    2,093,700
    
    
    
    286,589
    
    
    
    1,545,509
    
    
    
    2,380,289
    
    
    
    3,925,798
    
    
    
    439,950
    
    
    
    
    1999
    
    40 YearsRochester, MI
    
    
    3,182,078
    
    
    
    2,438,740
    
    
    
    2,188,050
    
    
    
    1,949
    
    
    
    2,438,740
    
    
    
    2,189,999
    
    
    
    4,628,739
    
    
    
    410,601
    
    
    
    
    1999
    
    40 Years
 F-29




---



##### Table of Contents



Agree Realty Corporation
 Schedule III  Real Estate and Accumulated Depreciation
December 31, 2006
 Column A
    
    Column B
    
    Column C
    
    Column D
    
    Column E
    
    Column F
    
    Column G
    
    Column HLife on WhichCosts
    
    
    Gross Amount at Which Carried
    
    
    
    
    
    
    
    
    
    Depreciation inInitial Cost
    
    Capitalized
    
    
    At Close of Period
    
    
    
    
    
    
    
    
    
    Latest IncomeBuildings and
    
    Subsequent to
    
    
    
    
    
    
    Buildings and
    
    
    
    
    
    Accumulated
    
    
    Date of
    
    StatementDescription
    
    Encumbrance
    
    
    Land
    
    Improvements
    
    Acquisition
    
    
    Land
    
    Improvements
    
    Total
    
    Depreciation
    
    
    Construction
    
    is ComputedYpsilanti, MI
    
    
    2,874,033
    
    
    
    2,050,000
    
    
    
    2,222,097
    
    
    
    29,624
    
    
    
    2,050,000
    
    
    
    2,251,721
    
    
    
    4,301,721
    
    
    
    394,095
    
    
    
    
    1999
    
    40 YearsGermantown, MD
    
    
    2,841,973
    
    
    
    1,400,000
    
    
    
    2,288,890
    
    
    
    45,000
    
    
    
    1,400,000
    
    
    
    2,333,890
    
    
    
    3,733,890
    
    
    
    411,488
    
    
    
    
    2000
    
    40 YearsPetoskey, MI
    
    
    1,999,120
    
    
    
    
    
    
    
    2,332,473
    
    
    
    (1,721
    )
    
    
    
    
    
    
    2,330,752
    
    
    
    2,330,752
    
    
    
    389,258
    
    
    
    
    2000
    
    40 YearsFlint, MI
    
    
    3,015,352
    
    
    
    2,026,625
    
    
    
    1,879,700
    
    
    
    (1,201
    )
    
    
    2,026,625
    
    
    
    1,878,499
    
    
    
    3,905,124
    
    
    
    281,778
    
    
    
    
    2000
    
    40 YearsFlint, MI
    
    
    2,594,569
    
    
    
    1,477,680
    
    
    
    2,241,293
    
    
    
    
    
    
    
    1,477,680
    
    
    
    2,241,293
    
    
    
    3,718,973
    
    
    
    329,188
    
    
    
    
    2001
    
    40 YearsNew Baltimore, MI
    
    
    2,213,481
    
    
    
    1,250,000
    
    
    
    2,285,781
    
    
    
    (16,502
    )
    
    
    1,250,000
    
    
    
    2,269,279
    
    
    
    3,519,279
    
    
    
    305,109
    
    
    
    
    2001
    
    40 YearsFlint, MI
    
    
    999,141
    
    
    
    1,729,851
    
    
    
    1,798,091
    
    
    
    660
    
    
    
    1,729,851
    
    
    
    1,798,751
    
    
    
    3,528,602
    
    
    
    211,690
    
    
    
    
    2002
    
    40 YearsOklahoma City, OK
    
    
    3,657,092
    
    
    
    1,914,859
    
    
    
    2,057,034
    
    
    
    
    
    
    
    1,914,859
    
    
    
    2,057,034
    
    
    
    3,971,893
    
    
    
    218,171
    
    
    
    
    2002
    
    40 YearsOmaha, NE
    
    
    3,355,769
    
    
    
    1,530,000
    
    
    
    2,237,702
    
    
    
    
    
    
    
    1,530,000
    
    
    
    2,237,702
    
    
    
    3,767,702
    
    
    
    237,311
    
    
    
    
    2002
    
    40 YearsIndianapolis, IN
    
    
    1,025,489
    
    
    
    180,000
    
    
    
    1,117,617
    
    
    
    
    
    
    
    180,000
    
    
    
    1,117,617
    
    
    
    1,297,617
    
    
    
    118,582
    
    
    
    
    2002
    
    40 YearsBig Rapids, MI
    
    
    909,998
    
    
    
    1,201,675
    
    
    
    2,014,107
    
    
    
    (2,000
    )
    
    
    1,201,675
    
    
    
    2,012,107
    
    
    
    3,213,782
    
    
    
    188,674
    
    
    
    
    2003
    
    40 YearsFlint, MI
    
    
    
    
    
    
    
    
    
    
    471,272
    
    
    
    (201,809
    )
    
    
    
    
    
    
    269,463
    
    
    
    269,463
    
    
    
    17,964
    
    
    
    
    2003
    
    20 YearsAnn Arbor, MI
    
    
    6,881,562
    
    
    
    1,727,590
    
    
    
    6,009,488
    
    
    
    
    
    
    
    1,727,590
    
    
    
    6,009,488
    
    
    
    7,737,078
    
    
    
    610,142
    
    
    
    
    2003
    
    40 YearsTulsa, OK
    
    
    
    
    
    
    2,000,000
    
    
    
    2,740,507
    
    
    
    
    
    
    
    2,000,000
    
    
    
    2,740,507
    
    
    
    4,740,507
    
    
    
    231,327
    
    
    
    
    2003
    
    40 YearsCanton Twp., MI
    
    
    1,049,122
    
    
    
    1,550,000
    
    
    
    2,132,096
    
    
    
    23,020
    
    
    
    1,550,000
    
    
    
    2,155,116
    
    
    
    3,705,116
    
    
    
    166,074
    
    
    
    
    2003
    
    40 YearsFlint, MI
    
    
    990,780
    
    
    
    1,537,400
    
    
    
    1,961,674
    
    
    
    
    
    
    
    1,537,400
    
    
    
    1,961,674
    
    
    
    3,499,074
    
    
    
    139,035
    
    
    
    
    2004
    
    40 YearsWebster, NY
    
    
    1,143,601
    
    
    
    1,600,000
    
    
    
    2,438,781
    
    
    
    
    
    
    
    1,600,000
    
    
    
    2,438,781
    
    
    
    4,038,781
    
    
    
    170,208
    
    
    
    
    2004
    
    40 YearsAlbion, NY
    
    
    1,398,180
    
    
    
    1,900,000
    
    
    
    3,037,864
    
    
    
    
    
    
    
    1,900,000
    
    
    
    3,037,864
    
    
    
    4,937,864
    
    
    
    161,387
    
    
    
    
    2004
    
    40 YearsFlint, MI
    
    
    902,640
    
    
    
    1,029,000
    
    
    
    2,165,463
    
    
    
    (6,666
    )
    
    
    1,029,000
    
    
    
    2,158,797
    
    
    
    3,187,797
    
    
    
    114,645
    
    
    
    
    2004
    
    40 YearsLansing, MI
    
    
    
    
    
    
    785,000
    
    
    
    348,501
    
    
    
    3,045
    
    
    
    785,000
    
    
    
    351,546
    
    
    
    1,136,546
    
    
    
    21,934
    
    
    
    
    2004
    
    40 YearsBoynton Beach, FL
    
    
    1,144,278
    
    
    
    1,569,000
    
    
    
    2,363,524
    
    
    
    108,651
    
    
    
    1,569,000
    
    
    
    2,472,175
    
    
    
    4,041,175
    
    
    
    149,021
    
    
    
    
    2004
    
    40 YearsAnn Arbor, MI
    
    
    2,876,529
    
    
    
    1,700,000
    
    
    
    8,308,854
    
    
    
    150,000
    
    
    
    1,700,000
    
    
    
    8,458,854
    
    
    
    10,158,854
    
    
    
    636,333
    
    
    
    
    2004
    
    40 YearsMidland, MI
    
    
    1,320,468
    
    
    
    2,350,000
    
    
    
    2,313,413
    
    
    
    
    
    
    
    2,350,000
    
    
    
    2,313,413
    
    
    
    4,663,413
    
    
    
    84,343
    
    
    
    
    2005
    
    40 YearsGrand Rapids, MI
    
    
    
    
    
    
    1,450,000
    
    
    
    2,646,591
    
    
    
    
    
    
    
    1,450,000
    
    
    
    2,646,591
    
    
    
    4,096,591
    
    
    
    88,220
    
    
    
    
    2005
    
    40 YearsDelta Twp., MI
    
    
    
    
    
    
    2,075,000
    
    
    
    2,535,971
    
    
    
    7,015
    
    
    
    2,075,000
    
    
    
    2,542,986
    
    
    
    4,617,986
    
    
    
    74,225
    
    
    
    
    2005
    
    40 YearsRoseville., MI
    
    
    
    
    
    
    1,771,000
    
    
    
    2,327,052
    
    
    
    
    
    
    
    1,771,000
    
    
    
    2,327,052
    
    
    
    4,098,052
    
    
    
    65,448
    
    
    
    
    2005
    
    40 YearsMt Pleasant., MI
    
    
    
    
    
    
    1,075,000
    
    
    
    1,432,390
    
    
    
    4,787
    
    
    
    1,075,000
    
    
    
    1,437,177
    
    
    
    2,512,177
    
    
    
    38,913
    
    
    
    
    2005
    
    40 YearsN Cape May, NJ.,
    
    
    
    
    
    
    1,075,000
    
    
    
    1,430,092
    
    
    
    495
    
    
    
    1,075,000
    
    
    
    1,430,587
    
    
    
    2,505,587
    
    
    
    38,740
    
    
    
    
    2005
    
    40 YearsSummit Twp, MI
    
    
    
    
    
    
    998,460
    
    
    
    1,336,357
    
    
    
    
    
    
    
    998,460
    
    
    
    1,336,357
    
    
    
    2,334,817
    
    
    
    9,721
    
    
    
    
    2006
    
    40 YearsSubTotal
    
    
    68,791,247
    
    
    
    73,734,958
    
    
    
    180,294,136
    
    
    
    8,823,285
    
    
    
    73,734,958
    
    
    
    189,117,421
    
    
    
    262,852,379
    
    
    
    48,352,753Retail Facilities
Under DevelopmentLivonia, MI
    
    
    
    
    
    
    1,200,000
    
    
    
    1,144,378
    
    
    
    
    
    
    
    1,200,000
    
    
    
    1,144,378
    
    
    
    2,344,378
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/AOther
    
    
    
    
    
    
    2,601,500
    
    
    
    449,450
    
    
    
    
    
    
    
    2,601,500
    
    
    
    449,450
    
    
    
    3,050,950
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    3,801,500
    
    
    
    1,593,828
    
    
    
    
    
    
    
    3,801,500
    
    
    
    1,593,828
    
    
    
    5,395,328
    
    
    
    Total
    
    $
    68,791,247
    
    
    $
    77,536,458
    
    
    $
    181,887,964
    
    
    $
    8,823,285
    
    
    $
    77,536,458
    
    
    $
    190,711,249
    
    
    $
    268,247,707
    
    
    $
    48,352,753
 F-30




---



##### Table of Contents



Agree Realty Corporation
 Notes to Schedule III
December 31, 2006
 1)
    
    Reconciliation of Real Estate Properties
  2006
    
    
    2005
    
    
    2004Balance at January 1
    
    $
    258,332,265
    
    
    $
    252,426,862
    
    
    $
    220,358,955Construction and acquisition costs
    
    
    9,915,442
    
    
    
    15,260,671
    
    
    
    34,736,096Sale of real estate asset
    
    
    
    
    
    
    (9,355,268
    )
    
    
    (2,668,189
    )Balance at December 31
    
    $
    268,247,707
    
    
    $
    258,332,265
    
    
    $
    252,426,862
 2)
    
    Reconciliation of Accumulated Depreciation
  2006
    
    
    2005
    
    
    2004Balance at January 1
    
    $
    43,771,581
    
    
    $
    41,727,987
    
    
    $
    38,475,767Current year depreciation expense
    
    
    4,581,172
    
    
    
    4,676,257
    
    
    
    4,372,362Sale of real estate asset
    
    
    
    
    
    
    (2,632,663
    )
    
    
    (1,120,142
    )Balance at December 31
    
    $
    48,352,753
    
    
    $
    43,771,581
    
    
    $
    41,727,987
 3)
    
    Tax Basis of Buildings and Improvements
  F-31