Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
the
Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): February 16,
2011
_________________________________
AGREE
REALTY CORPORATION
(Exact
name of registrant as specified in its charter)
__________________________________
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Maryland
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1-12928
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38-3148187
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer Identification
No.)
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31850
Northwestern Highway
Farmington
Hills, Michigan 48334
(Address
of principal executive offices)
Registrant's
telephone number, including area code: (248) 737-4190
Not
Applicable
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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q
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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q
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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q
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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q
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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ITEM
7.01. REGULATION FD DISCLOSURE.
On
February 16, 2011, Agree Realty Corporation (the “Company”) issued a press
release announcing the filing of a bankruptcy petition by one of its tenants,
Borders, Inc., and the tenant’s parent and lease guarantor, Borders Group,
Inc. A copy of the press release is furnished as Exhibit 99.1 to this
report.
ITEM
8.01. OTHER EVENTS.
Borders
Group, Inc. (NYSE: BGP) and certain of its subsidiaries, including Borders,
Inc., filed a bankruptcy petition under Chapter 11. The Company currently has 14
properties leased to Borders, Inc. under triple net leases, including 13 retail
properties and the Borders Group, Inc. corporate headquarters in Ann Arbor,
Michigan. The Company records annualized rental revenues of
approximately $7.4 million from Borders, Inc., amounting to approximately 20% of
the Company’s annualized base rental revenues. Borders Group, Inc.
also filed an anticipated store closing list with the bankruptcy court that
included five of the Company’s properties, which five stores generate
approximately $2.6 million of the Company’s annualized base rental
revenues. The various leases are with Borders, Inc. and are
guaranteed by Borders Group, Inc. (together, “Borders”).
Seven of
the properties leased to Borders are unencumbered, while the remaining seven are
encumbered by various non-recourse loan agreements.
The seven
unencumbered properties have annual base rental revenues amounting to
approximately $4.0 million, including approximately $1.0 million of non-cash
rental revenues annually attributable to the reduction in the deferred revenue
balance.
The
locations of the unencumbered properties are as follows:
Ann Arbor, Michigan (retail
store)
Boynton Beach,
Florida
Columbus, Ohio
Monroeville,
Pennsylvania
Norman, Oklahoma
Omaha, Nebraska
Wichita, Kansas
The seven
encumbered properties serve as collateral for seven non-recourse loans,
including four mortgages that are cross-defaulted and
cross-collateralized. The balances on the non-recourse loans amount
to approximately $18.5 million as of December 31, 2010, including $9.6 million
under the cross-collateralized loans. The debt service for these self-amortizing
loans amounts to approximately $222,000 on a monthly basis, including $128,000
monthly under the cross-collateralized loans. The
non-cross-collateralized mortgages historically have been paid directly by
Borders. The Company expects to be in contact with the loan servicer of the
cross-collateralized loans in the near future.
The
locations of the seven encumbered properties, which have annual base rental
revenues amounting to approximately $3.4 million, are:
Columbia, Maryland
Germantown,
Maryland
Oklahoma City,
Oklahoma
Omaha, Nebraska
Ann Arbor, Michigan (Borders
corporate headquarters)
Indianapolis,
Indiana
Lawrence, Kansas
The
locations of the five stores on the Borders store closing list, which have
annual base rental revenues of $2.6 million, are:
Columbus, Ohio
Monroeville, Pennsylvania
Wichita, Kansas
Oklahoma City, Oklahoma
Lawrence, Kansas
Two of
the 14 properties, Boynton Beach, Florida, and Indianapolis, Indiana, are not
currently occupied by Borders, but are occupied by subtenants under sublease
agreements between Borders and such subtenants.
Because
Borders is a significant tenant, negative information about its performance,
financial condition and business prospects (including its bankruptcy filing) may
adversely affect the market and price of the Company’s common
stock.
The
Chapter 11 bankruptcy will allow Borders to assume or reject any of its leases
with the Company (including the leases for the five properties on the store
closing list recently published by Borders). The rejection of any of
the leases would have a negative effect on the Company’s rental revenues and
cash flows. Borders may also propose rent reductions under any of the
leases, which if accepted by the Company would have a negative effect on the
Company’s rental revenues and cash flows. It is also possible that
Borders may assume leases for some locations, which would require Borders to
abide by the existing lease terms. Until Borders determines its plan
under Chapter 11, the Company cannot determine the impact on its rental revenues
and cash flows.
The
Company has provided substitute borrowing base properties to replace Borders
stores under its $55 million credit facility, and the credit facility banks have
acknowledged that the financial condition of Borders and any default under any
of the non-recourse loans secured by a property leased to Borders shall not be
deemed a default under the credit facility.
The
Company considers portions of the information contained in this report to be
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, each as
amended. These forward-looking statements represent the Company’s expectations,
plans and beliefs concerning future events. Although these forward-looking
statements are based on good faith beliefs, reasonable assumptions and the
Company’s best judgment reflecting current information, certain factors could
cause actual results to differ materially from such forward–looking statements.
Such factors are detailed from time to time in reports filed or furnished by the
Company with the Securities and Exchange Commission, including the Company’s
Form 10-K for the year ended December 31, 2009. Except as required by law, the
Company assumes no obligation to update these forward–looking statements, even
if new information becomes available in the future.
ITEM
9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d)
Exhibits.
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Exhibit No.
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Description
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99.1
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Press
release dated February 16,
2011
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The
information contained in the press release attached as Exhibit 99.1 to this
report shall not be deemed “filed” for the purposes of Section 18 of the
Securities Exchange Act of 1934 or otherwise subject to the liabilities of that
section. Furthermore, the information contained in the press release attached as
Exhibit 99.1 to this report shall not be deemed to be incorporated by reference
in the filings of the registrant under the Securities Act of
1933.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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AGREE
REALTY CORPORATION |
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Dated: February
16, 2011
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By:
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/s/ Alan
D. Maximiuk |
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Alan
D. Maximiuk |
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Chief
Financial Officer and Secretary |
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EXHIBIT
INDEX
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Exhibit Number
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Description
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99.1
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Press
release dated February 16,
2011
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