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| | In order to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income to our stockholders (computed without regard to the dividends paid deduction and our net capital gain), and to the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income (computed without regard to the dividends paid deduction and including our net capital gain), we will be subject to U.S. federal corporate income tax on the undistributed income, as well as applicable state and local income taxes. If we should fail to distribute, or fail to be treated as having distributed, with respect to each calendar year at least the sum of (i) 85% of our REIT ordinary income for such year, (ii) 95% of our REIT capital gain net income for such year, and (iii) any undistributed taxable income from prior periods, we would be subject to a 4% nondeductible excise tax on the excess of such required distribution over the sum of (a) the amounts actually distributed and (b) the amounts we retained and upon which we paid U.S. federal income tax at the corporate level. If we have (i) net income from the sale or other disposition of “foreclosure property” that is held primarily for sale to customers in the ordinary course of business or(ii) other non-qualifying net income from foreclosure property, we will be subject to tax at the U.S. federal corporate income tax rate on such income. To the extent that income from “foreclosure property” is otherwise qualifying income for purposes of the 75% gross income test, this tax is not applicable. If we have net income from prohibited transactions (which are, in general, certain sales or other dispositions of property held primarily for sale to customers in the ordinary course of business, other than sales of foreclosure property and sales that qualify for certain statutory safe harbors), such income will be subject to a 100% tax. We may be subject to tax on gain recognized in a taxable disposition of assets acquired from anon-REIT C corporation by way of a carryover basis transaction, when such gain is recognized on a disposition of an asset duringa 5-year period beginning on the date on which we acquired the asset. To the extent ofany “built-in gain,” such gain will be subject to U.S. federal income tax at the federal
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| | If we should fail to distribute, or fail to be treated as having distributed, with respect to each calendar year at least the sum of (i) 85% of our REIT ordinary income for such year, (ii) 95% of our REIT capital gain net income for such year, and (iii) any undistributed taxable income from prior periods, we would be subject to a 4% nondeductible excise tax on the excess of such required distribution over the sum of (a) the amounts actually distributed and (b) the amounts we retained and upon which we paid U.S. federal income tax at the corporate level.
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| | If we have (i) net income from the sale or other disposition of “foreclosure property” that is held primarily for sale to customers in the ordinary course of business or (ii) other non-qualifying net income from foreclosure property, we will be subject to tax at the U.S. federal corporate income tax rate on such income. To the extent that income from “foreclosure property” is otherwise qualifying income for purposes of the 75% gross income test, this tax is not applicable.
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| | If we have net income from prohibited transactions (which are, in general, certain sales or other dispositions of property held primarily for sale to customers in the ordinary course of business, other than sales of foreclosure property and sales that qualify for certain statutory safe harbors), such income will be subject to a 100% tax.
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| | We may be subject to tax on gain recognized in a taxable disposition of assets acquired from a non-REIT C corporation by way of a carryover basis transaction, when such gain is recognized on a disposition of an asset during a 5-year period beginning on the date on which we acquired the asset. To the extent of any “built-in gain,” such gain will be subject to U.S. federal income tax at the federal corporate income tax rate. Built-in gainmeans the excess of (i) the fair market value of the asset as of the beginning of the applicable recognition period over (ii) our adjusted basis in such asset as of the beginning of such recognition period.
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| | We may perform additional, non-customary services for tenants of our buildings through a taxable REIT subsidiary (“TRS”), including real estate or non-real estate related services; however, any earnings that exceed allowable limits related to such services are subject to federal and state income taxes. In addition, TRSs will be subject to tax as regular corporations in the jurisdictions in which they operate.
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If we should fail to satisfy the 75% gross income test or the 95% gross income test (which are discussed below), but have nonetheless maintained our qualification as a REIT because certain other requirements have been met, we will be subject to a 100% tax on the greater of the gross income amount by which we fail the 75% or the 95% test multiplied in either case by a fraction generally intended to reflect our profitability without regard to our long-term capital gain. Similarly, if we should fail to satisfy the asset tests or other requirements applicable to REITs, as described below, yet nonetheless qualify as a REIT because there is reasonable cause for the failure and other applicable requirements are met, we may be subject to a penalty. The amount of the penalty will be at least $50,000 per failure, and, in the case of certain asset test failures, will be equal to the amount of net income generated by the assets in question multiplied by the highest corporate tax rate if that amount exceeds $50,000 per failure. We may performadditional, non-customary services for tenants of our buildings through a taxable REIT subsidiary (“TRS”), including real estateor non-real estate related services; however, any earnings related to such services are subject to federal and state income taxes. We will be subject to a 100% tax on transactions with our TRSs if such transactions are not at arm’s length. If the OP fails to qualify as a partnership for U.S. federal income tax purposes, we would cease to qualify as a REIT and suffer other adverse consequences. We believe that the OP will be treated as a partnership for U.S. federal income tax purposes. As a partnership, the OP would generally not be subject to U.S. federal income tax on its income. Instead, for U.S. federal income tax purposes, if the OP is treated as a partnership, each of its partners, including us, would be allocated, and may be required to pay tax with respect to, such partner’s share of its income. The OP may be required to determine and pay an imputed underpayment of tax (plus interest and penalties) resulting from an adjustment of the OP’s items of income, gain, loss, deduction, or credit at the partnership level. We cannot assure you that the IRS will not challenge the status of the OP or any other subsidiary in which we own an interest as a disregarded entity or partnership for U.S. federal income tax purposes, or that a court would not sustain such a challenge. If the IRS were successful in treating the OP or any such other subsidiary as an entity taxable as a corporation for U.S. federal income tax purposes, we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, we would likely cease to qualify as a REIT. Also, the failure of the OP or any subsidiary to qualify as a disregarded entity or partnership could cause it to become subject to U.S. federal and state corporate income tax, which would significantly reduce the amount of cash available for debt service and for distribution to its partners, including us. To satisfy the REIT distribution requirements, we may be forced to take certain actions to raise funds if we have insufficient cash flow which could materially and adversely affect us and the trading price of our Common Stock (including our Class A Common Stock).Stock. To qualify as a REIT, we generally must distribute to our stockholders at least 90% of our REIT taxable income each year, computed without regard to the dividends paid deduction and our net capital gains, and we will be subject to corporate income tax on our undistributed taxable income to the extent that we distribute less than 100% of our REIT taxable income each year, computed without regard to the dividends paid deduction. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. In order to satisfy these distribution requirements to maintain our REIT status and avoid the payment of income and excise taxes, we may need to
take certain actions to raise funds if we have insufficient cash flow, such as borrowing funds, raising additional equity capital, selling a portion of our assets or finding another alternative to make distributions to our stockholders. We may be forced to take those actions even if the then-prevailing market conditions are not favorable for those actions. This situation could arise from, among other things, differences in timing between the actual receipt of cash and recognition of income for U.S. federal income tax purposes, or the effect of non-deductible capital expenditures or other non-deductible expenses, the creation of reserves, or required debt or amortization payments. Such actions could increase our costs and reduce the value of our Common Stock (including our Class A Common Stock).Stock. These sources, however, may not be available on favorable terms or at all. Our access to third-party sources of capital depends on a number of factors, including the market’s perception of our growth potential, our current debt levels, the market price of our Common Stock, (including our Class A Common Stock), and our current and potential future earnings. We cannot assure you that we will have access to such capital on favorable terms at the desired times, or at all, which may cause us to curtail our investment activities and/or to dispose of assets at inopportune times, and could materially and adversely affect us and the trading price of our Common Stock (including our Class A Common Stock).Stock. Further, to qualify as a REIT, we must also satisfy tests on an ongoing basis concerning, among other things, the sources of our income, nature of our assets, and the amounts we distribute to our stockholders. We may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Compliance with the REIT Requirements may hinder our ability to operate solely on the basis of maximizing profits. The IRS may treat sale-leaseback transactions as loans, which could jeopardize our REIT status or require us to make an unexpected distribution. We may purchase properties and lease them back to the sellers of such properties. The IRS may take the position that certain of these sale-leaseback transactions that we treat as leases are not “true leases” but are, instead, financing arrangements or loans for U.S. federal income tax purposes.
If a sale-leaseback transaction were sore-characterized, we might fail to satisfy the REIT asset tests, the income tests, or distribution requirements and consequently lose our REIT status effective with the year ofre-characterization unless we elect to make an additional distribution to maintain our REIT status. The primary risk relates to the disallowance of deductions for depreciation and cost recovery relating to such property, which could affect the calculation of our REIT taxable income and could cause us to fail the REIT distribution requirement that requires a REIT to distribute at least 90% of its REIT taxable income, computed without regard to the dividends paid deduction and any net capital gain. In this circumstance, we may elect to distribute an additional dividend of the increased taxable income so as not to fail the REIT distribution test. This distribution would be paid to all stockholders at the time of declaration rather than the stockholders that held our shares in the taxable year affected by the Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends. The maximum U.S. federal income tax rate applicable to income from “qualified dividends” payable to U.S. stockholders that are individuals, trusts, and estates is 20%. Ordinary dividends payable by REITs, however, generally are not eligible for the 20% rate applicable to “qualified dividends” except to the extent the REIT dividends are attributable to “qualified dividends” received by the REIT itself or generally attributable to income upon which we (or a predecessor) have paid U.S. federal corporate income tax. However, for non-corporate U.S. stockholders, ordinary dividends payable by REITs that are not designated as capital gain dividends or treated as “qualified dividends” generally are eligible for a deduction of 20% of the amount of such ordinary REIT dividends, for taxable years beginning before January 1, 2026. More favorable rates will nevertheless continue to apply for regular corporate “qualified dividends.” Although these rules do not adversely affect the taxation of REITs or dividends payable by REITs, to the extent that the 20% rate continues to apply to regular corporate qualified dividends, investors who are individuals, trusts and estates may regard investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations.
The tax imposed on REITs engaging in “prohibited transactions” may limit our ability to engage in transactions which would be treated as sales for U.S. federal income tax purposes. A REIT’s net income from prohibited transactions is subject to a 100% penalty tax. In general, prohibited transactions are sales or other dispositions of property, other than foreclosure property, held primarily for sale to customers in the ordinary course of business. Although we do not intend to hold any properties that would be characterized as held for sale to customers in the ordinary course of our business, unless a sale or disposition qualifies under certain statutory safe harbors, such characterization is a factual determination and no guarantee can be given that the IRS would agree with our characterization of our properties or that we will always be able to make use of the available safe harbors. Complying with the REIT Requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities. The REIT provisions of the Code substantially limit our ability to hedge our assets and liabilities. Any income from a hedging transaction that we enter into to manage the risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets, or from certain terminations of such hedging positions, does not constitute “gross income” for purposes of the 75% or 95% gross income tests that apply to REITs, provided that certain identification requirements are met. To the extent that we enter into other types of hedging transactions or fail to properly identify such transaction as a hedge, the income is likely to be treated as non-qualifying income for purposes of the 75% and 95% gross income tests. As a result of these rules, we may be required to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities because any TRS in which we own an interest may be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in any TRS in which we own an interest will generally not provide any tax benefit, except that such losses in some cases may be carried back against past taxable income in the TRS and may be carried forward against future taxable income in the TRS (subject to certain limitations). Complying with the REIT Requirements may force us to liquidate or forgo otherwise attractive investments. To qualify as a REIT, we must continually satisfy tests concerning, among other things, the nature and diversification of our assets, the sources of our income, and the amounts we distribute to our stockholders. In connection with the Internalization, we were treated as having acquired substantial amounts of goodwill that may not qualify for the 75% asset test. Compliance with these limitations, particularly given the goodwill that we acquired in the Internalization, may hinder our ability to make, and, in certain cases, maintain ownership of certain attractive investments that might not qualify for the 75% asset test. If we fail to comply with the REIT asset test requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate or forgo otherwise attractive investments in order to satisfy the asset and income tests or to qualify under certain statutory relief provisions. These actions could have the effect of reducing our income, increasing our income tax liability, and reducing amounts available for distribution to our stockholders. In addition, we may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution, and may be unable to pursue investments (or, in some cases, forego the sale of such investments) that would be otherwise advantageous to us in order to satisfy the REIT
Requirements. Accordingly, satisfying the REIT Requirements could materially and adversely affect us. Moreover, if we are compelled to liquidate our investments to meet any of these asset, income, or distribution tests, or to repay obligations to our lenders, we may be unable to comply with one or more of the requirements applicable to REITs or may be subject to a 100% tax on any resulting gain if such sales constitute prohibited transactions. In certain circumstances, we may be liable for certain tax obligations of certain of the members of the OP. In certain circumstances, we may be liable for tax obligations of certain of the members of the OP. In connection with certain UPREIT transactions, we have entered or will enter into tax protection agreements under
which we have agreed to indemnify members of the OP against adverse tax consequences if we were to sell, convey, transfer, or otherwise dispose of our assets in taxable transactions, with specific exceptions and limitations. Pursuant to the tax protection agreements, we have also agreed to ensure that such members of the OP are allocated minimum amounts of the OP’s indebtedness. If we fail to meet our obligations under the tax protection agreements, we may be required to reimburse those members of the OP for the amount of the tax liabilities they incur, subject to certain limitations. We may enter into additional tax protection agreements in the future in connection with other UPREIT transactions. Although it may be in our stockholders’ best interest that we sell a property, it may be economically disadvantageous for us to do so because of these obligations. In order to limit our exposure to a tax obligation, our use of proceeds from any sales or dispositions of certain properties will be limited. With respect to the existing tax protection agreements with property contributors (excluding the Internalization), as of December 31, 2020,2021, our potential indemnification obligation for the taxable sale of those properties is approximately $12.3 million. In connection with the Internalization, we entered into the Founding Owners’ Tax Protection Agreement, pursuant to which we have agreed to indemnify the Founding Owners against the applicable income tax liabilities resulting from: (1) the sale, exchange, transfer, conveyance, or other disposition of the assets of BRE that we acquired in the Internalization (the “Contributed Property”) in a taxable transaction prior to February 7, 2030; and (2) our failure to offer the Founding Owners the opportunity to guarantee specific types of the OP’s indebtedness in order to enable them to continue to defer the applicable income tax liabilities associated with the allocation of that indebtedness. Our maximum liability under the Founding Owners’ Tax Protection Agreement is capped at $10 million. The Blocker Corp Mergers may have adverse tax consequences. As a general matter, notwithstanding that we qualify to be taxed as a REIT for U.S. federal income tax purposes, if we acquire appreciated assets from a non-REIT C corporation in a transaction in which the adjusted tax basis of the assets in its hands is determined by reference to the adjusted tax basis of the assets in the hands of the C corporation, we will be subject to entity-level tax on any gain recognized in connection with a disposition (such as a taxable sale) of any such assets during the 5-year period following such acquisition. In addition, in order to qualify as a REIT, we must not have, at the end of any taxable year, any earnings and profits accumulated in a non-REIT year. Because each of Trident BRE Holdings I, Inc. and Trident BRE Holdings II, Inc. (the “Blocker Corps”) were taxable as a non-REIT C corporation and we acquired their appreciated assets in connection with the Internalization in transactions (the “Blocker Corp Mergers”) in which the adjusted tax basis of the assets in our hands was determined by reference to the adjusted tax basis of the assets in the hands of each of the Blocker Corps prior to the Blocker Corp Mergers, we will be subject to corporate income tax on the “built-in “built-in gain” with respect to the Blocker Corps’ assets at the time of the Blocker Corp Mergers if we dispose of those assets in a taxable transaction within five years following the Blocker Corp Mergers. This built-in gain is measured by the difference between the value of the Blocker Corps’ assets at the time of the Blocker Corp Mergers and the adjusted basis in those assets. We estimate this built-in gain to be approximately $50.7$56.4 million. The assets of the Blocker Corps we acquired in the Blocker Corp Mergers are the Blocker Corps’ interests in BRE. When BRE merged into the OP in a tax-deferred transaction and the Blocker Corps received OP Units, the built-in gain associated with the Blocker Corps’ assets became represented as part of an intangible asset on our balance sheet. The disposition of that intangible asset in a taxable transaction within five years following the Blocker Corp Mergers could trigger a corporate income tax on that built-in gain. The most likely transaction in which that intangible asset is disposed of would be a sale of the OP (or our interest in the OP) in a taxable transaction. Thus, if the OP (or our interest in the OP) is sold in a taxable transaction within five years following the Blocker Corp Mergers, we could incur a corporate income tax on approximately $50.7$56.4 million of built-in gain. Because the Blocker Corps were each taxable as a regular C corporation, we assumed any earnings and profits accumulated by the Blocker Corps for taxable periods prior to and including the Blocker Corp Mergers,
referred to as “C corporation earnings and profits.” To qualify as a REIT, we cannot have any C corporation earnings and profits at the end of any taxable year. We estimated the C corporation earnings and profits of the Blocker Corps to be approximately $2.3 million in total at the time of the Blocker Corp Mergers and we used a nationally recognized accounting firm to prepare a study to assist management in confirming that calculation. During 2020, we made sufficient distributions in excess of our earnings and profits (including the C corporation earnings and profits from the Blocker Corps) so we would not have to pay a special dividend to eliminate such C corporation earnings and profits. In effect, the inclusion of the C corporation earnings and profits from the Blocker Corps increased the portion of our distributions during 2020 that were taxable as dividends. However, if we were determined to succeed to more C corporation earnings and profits as a result of the Blocker Corp Mergers, we may have to pay a special dividend and/or employ applicable deficiency dividend procedures to eliminate such earnings and profits. If we need to make a special dividend or pay a deficiency dividend and do not otherwise have cash on hand
to do so, we may need to (i) sell assets at unfavorable prices, (ii) borrow on unfavorable terms, (iii) distribute amounts that would otherwise be invested in future acquisitions, capital expenditures, or repayment of debt, or (iv) make a taxable distribution of Common Stock (or Class A Common Stock, as applicable) as part of a distribution in which stockholders may elect to receive Common Stock (or Class A Common Stock, as applicable) or cash (subject to a limit measured as a percentage of the total distribution), in order to comply with REIT Requirements. These alternatives could increase our costs or reduce our equity. In addition, if we were to rely upon the remedial deficiency dividend procedures, we would be required to pay interest based on the amount of any such deficiency dividends. In addition to the foregoing, as a result of the Blocker Corp Mergers, we inherited any liability with respect to unpaid taxes of each of the Blocker Corps for any periods prior to the Blocker Corp Mergers. Changes to the U.S. federal income tax laws, including the recent enactment of certain tax reform measures, could have a material and adverse effect on us. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Department of the Treasury, which may result in revisions to regulations and interpretations and changes to the application of existing tax rules by U.S. federal, state, local, and foreign governments, in addition to statutory changes, including those contemplated by the new presidential administration in the United States. No assurance can be given as to whether, or in what form, any proposals affecting REITs or their stockholders will be enacted. In particular, Public Law No. 115-97, commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “TCJA”), for which only limited guidance has been issued to date, significantly reforms the Code with respect to the taxation of both individuals and corporate entities, and there are numerous interpretive issues and ambiguities that are not yet clearly addressed, which require further guidance, including possibly in some cases, technical corrections. It is unclear if and when such guidance will be forthcoming, or in the case of technical corrections, will be enacted. Future regulatory guidance and legislation may significantly affect the impact of the TCJA. Changes to the U.S. federal tax laws and interpretations thereof could adversely affect an investment in our Common Stock (including our Class A Common Stock).
While some of the changes made by the TCJA may adversely affect us, other changes may be beneficial on a going forward basis. The TCJA made numerous other large and small changes to the tax rules that do not affect REITs directly but may affect our stockholders and may indirectly affect us. In addition, federal legislation intended to ameliorate the economic impact of the COVID-19 pandemic has been enacted that makes technical corrections to, or modifies on a temporary basis, certain provisions of the TCJA, including Public Law No. 116-136, known as the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was signed into law on March 27, 2020, and it is possible that additional legislation may be enacted in the future.
There may also be future changes in U.S. federal tax laws, regulations, rules, and judicial and administrative interpretations applicable to us and our business, the effect of which cannot be predicted. Our stockholders and prospective investors are urged to consult with their own tax advisors with respect to the TCJA, the CARES Act and the status of other legislative, regulatory, or administrative developments and proposals and their potential effect on an investment in shares of our Common Stock (including our Class A Common Stock).Stock. Risks Related to Ownership of Our Common Stock (Including Our Class A Common Stock)The market price and trading volume of shares of our Common Stock (including our Class A Common Stock) may be volatile. The market price of shares of our Class A Common Stock and Common Stock following the Class A Conversion may fluctuate. In addition, the trading volume in shares of our Common Stock, and Class A Common Stock, as applicable, may fluctuate and cause significant price variations to occur. Historically, these changes frequently appear to occur without regard to the operating performance of the affected companies. Hence, the price of our Common Stock and our Class A Common Stock, as applicable, could fluctuate based upon factors that have little or nothing to do with us in particular. If the market price of shares of our Common Stock and our Class A Common Stock, as applicable, declines significantly, you may be unable to resell your shares of our Common Stock or Class A Common Stock, as applicable, at or above the public offering price. We cannot assure you that the market price of shares of our Class A Common Stock or Common Stock following the Class A Conversion will not fluctuate or decline significantly, including a decline below the public offering price, in the future. Some of the factors that could negatively affect our share price or result in fluctuations in the market price or trading volume of shares of our Common Stock (includinginclude: actual or anticipated declines in our Class Aquarterly operating results or distributions;
changes in government regulations; changes in laws affecting REITs and related tax matters; the announcement of new contracts by us or our competitors; reductions in our FFO, AFFO, or earnings estimates; publication of research reports about us or the real estate industry; increases in market interest rates that lead purchasers of shares of our Common Stock) include: | •
| | actual or anticipated declines in our quarterly operating results or distributions;
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Stock to demand a higher yield; | •
| | changes in government regulations;
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| | changes in laws affecting REITs and related tax matters;
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| | the announcement of new contracts by us or our competitors;
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| | reductions in our FFO, AFFO, or earnings estimates;
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future equity issuances, or the perception that they may occur, including issuances of Common Stock upon exercise or vesting of equity awards or redemption of OP Units; | •
| | publication of research reports about us or the real estate industry;
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| | increases in market interest rates that lead purchasers of shares of our Common Stock or our Class A Common Stock to demand a higher yield;
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| | the Class A Conversion, pursuant to which our existing Common Stock will become listed on the NYSE and freely tradeable, and the expiration or early release of the lock-up agreements entered into with the underwriters by certain parties described elsewhere under “Shares Eligible for Future Sale—Lock-up Agreements”;
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| | future equity issuances, or the perception that they may occur, including issuances of Common Stock upon exercise or vesting of equity awards or redemption of OP Units;
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| | changes in market valuations of similar companies;
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| | adverse market reaction to any increased indebtedness we incur in the future; |
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| | additions or departures of key management personnel;
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| | actions by institutional stockholders;
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| | differences between our actual financial and operating results and those expected by investors and analysts;
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| | the realization of any of the other risk factors presented herein.
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actions by institutional stockholders; differences between our actual financial and operating results and those expected by investors and analysts; changes in analysts’ recommendations or projections; speculation in the press or investment community; and the realization of any of the other risk factors presented herein. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the price of their common stock. This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on our cash flows, our ability to execute our business strategy, and our ability to make distributions to our stockholder. We may not be able to make distributions to our stockholders at the times or in the amounts we expect, or at all. We intend to make cash distributions to our stockholders in amounts such that all or substantially all of our taxable income in each year, subject to adjustments, is distributed. However, we may not be able to continue to generate sufficient cash flow from our properties to permit us to make the distributions we expect. Our ability to continue to make distributions in the future may be adversely affected by the risk factors described in this Annual Report on Form 10-K. We can provide no assurance that we will be able to make or maintain distributions and certain agreements relating to our indebtedness may, under certain circumstances, limit or eliminate our ability to make distributions to our common stockholders. For instance, our Revolving Credit Facility contains provisions that restrict us from paying distributions if an event of default exists, other than distributions required to maintain our REIT status. We can give no assurance that rents from our properties will increase, or that future acquisitions of real properties or other investments will increase our cash available for distributions to stockholders. In addition, any distributions will be authorized at the sole discretion of our board of directors, and their form, timing, and amount, if any, will depend upon a number of factors, including our actual and projected results of operations, FFO, AFFO, liquidity, cash flows and financial condition, the revenue we actually receive from our properties, our operating expenses, our debt service requirements, our capital expenditures, prohibitions and other limitations under our financing arrangements, our REIT taxable income, the annual REIT distribution requirements, applicable law, and such other factors as our board of directors deems relevant. Distributions are expected to be based upon our FFO, AFFO, financial condition, cash flows and liquidity, debt service requirements, and capital expenditure requirements for our properties. If we do not have sufficient
cash available for distributions, we may need to fund the shortage out of working capital or borrow to provide funds for such distributions, which would reduce the amount of proceeds available for real estate investments and increase our future interest costs. Our inability to make distributions, or to make distributions at expected levels, could result in a decrease in trading price of our Class A Common Stock or Common Stock following the Class A Conversion.Stock.
We may change the dividend policy for our Common Stock (including our Class A Common Stock) in the future.
The decision to declare and pay dividends on our Common Stock, (including our Class A Common Stock), as well as the form, timing, and amount of any such future dividends, will be at the sole discretion of our board of directors and will depend on our earnings, cash flows, liquidity, financial condition, capital requirements, contractual prohibitions or other limitations under our indebtedness, the annual distribution requirements under the REIT provisions of the Code, state law, and such other factors as our board of directors considers relevant. Any change in our dividend policy could have a material adverse effect on the market price of our Common Stock (including our Class A Common Stock).Stock. Increases in market interest rates may result in a decrease in the value of shares of our Common Stock (including our Class A Common Stock).Stock. One of the factors that will influence the price of shares of our Common Stock (including our Class A Common Stock) will be the distribution yield on shares of our Common Stock (including our Class A Common Stock) (as a percentage of the price of shares of our Common Stock (including our Class A Common Stock) ) relative to market interest rates. An increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of shares of our Common Stock (including our Class A Common Stock) to expect a higher distribution yield and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for distribution. Thus, higher market interest rates could cause the per share trading price of our Common Stock (including our Class A Common Stock) to decrease. There may be future dilution to earnings related to shares of our Common Stock (including our Class A Common Stock).Stock. The market price of shares of our Common Stock (including our Class A Common Stock) could decline as a result of issuances or sales of a large number of shares of our Common Stock in the market, or the perception that such issuances or sales could occur. Additionally, future issuances or sales of substantial amounts of shares of our Common Stock (including our Class A Common Stock) may be at prices below the initial public offering price of the shares of our Class A Common Stock and may result in further dilution in our earnings and FFO per share and/or materially and adversely impact the per share trading price of our Common Stock (including our Class A Common Stock).Stock. Future offerings of debt, which would be senior to shares of our Common Stock (including our Class A Common Stock) upon liquidation, and/or preferred equity securities that may be senior to shares of our Common Stock (including our Class A Common Stock) for purposes of distributions or upon liquidation, may materially and adversely affect the market price of shares of our Common Stock (including our Class A Common Stock).Stock. In the future, we may attempt to increase our capital resources by making additional offerings of debt or preferred equity securities (or causing the OP to issue debt securities). Upon liquidation, holders of our debt securities and preferred stock and lenders with respect to other borrowings will receive distributions of our available assets prior to our stockholders. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences, and privileges more favorable than those of our Common Stock (including our Class A Common Stock) and may result in dilution to owners of our Common Stock (including our Class A Common Stock).Stock. Our stockholders are not entitled to preemptive rights or other protections against dilution. Our preferred stock, if issued, could have a preference on liquidating distributions or a preference on distribution payments that could limit our right to make distributions to our stockholders. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of our future offerings. Our stockholders bear the risk of our future offerings reducing the per share trading price of our Common Stock (including our Class A Common Stock).Sales of substantial amounts of our Common Stock (including our Class A Common Stock) in the public markets, or the perception that they might occur, or the pending Class A Conversion could reduce the price of our Common Stock (including our Class A Common Stock).
Prior to the initial public offering, neither our Class A Common Stock nor our Common Stock was listed on any national securities exchange and the ability of stockholders to liquidate their investments was limited. Additionally, our share redemption program was terminated as of January 10, 2020. As a result, there may be increased demand to sell shares of our Common Stock upon the Class A Conversion, at which time shares of our Common Stock owned by the continuing investors will be listed on the NYSE and freely tradable. A large volume of sales of shares (or short sales) of our Common Stock (or our Class A Common Stock prior to the Class A Conversion) could decrease the prevailing market price of our Common Stock or our Class A Common Stock and could impair our ability to raise additional capital through the sale of equity securities in the future. Even if a substantial number of sales of our Common Stock or our Class A Common Stock are not effected, the mere perception of the possibility of these sales could depress the market price of our Common Stock or our Class A Common Stock and have a negative effect on our ability to raise capital in the future.
The shares of our Class A Common Stock that we sold in the initial public offering could be resold immediately in the public market unless they were held by “affiliates,” as that term is defined in Rule 144 of the Securities Act. The Common Stock and OP Units
Stock.
issued as consideration in connection with the Internalization are “restricted securities” within the meaning of Rule 144 under the Securities Act and may not be sold in the absence of registration under the Securities Act unless an exemption from registration is available, including the exemptions contained in Rule 144. The Trident Owners and the Founding Owners (as well as our directors and officers) have agreed, subject to certain exceptions, not to sell or otherwise dispose of any of their Common Stock (including any Class A Common Stock) or OP Units (which may be exchanged for our Common Stock) through March 15, 2021, except with the underwriters’ prior written consent. As a result of the Registration Rights Agreement, however, all of these shares, including Common Stock that may be issued in exchange for OP Units, may be eligible for future sale without restriction, subject to applicable lock-up arrangements. See “Shares Eligible for Future Sale—Registration Rights” and “Certain Relationships and Related Transactions—Registration Rights Agreement.” Sales of a substantial number of such shares upon expiration of the lock-up agreements, the perception that such sales may occur, or early release of these agreements, could cause the market price of our Common Stock or our Class A Common Stock to fall or make it more difficult for you to sell your Class A Common Stock (or your Common Stock, as applicable) at a time and price that you deem appropriate.
Sales of substantial amounts of our capital stock in the public markets may dilute your voting power and your ownership interest in us. Our Charter provides that we may issue up to 500,000,000 shares of Common Stock, of which 60,000,000 shares are designated as Class A Common Stock and 440,000,000 shares are shares of Common Stock without further designation,$0.00025 par value, and 20,000,000 shares of preferred stock, $0.001 par value per share. Moreover, under Maryland law and as
provided in our Charter, a majority of our entire board of directors has the power to amend our Charter to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we are authorized to issue without stockholder approval. Future issuances of shares of our Common Stock or our Class A Common Stock, securities convertible or exchangeable into Common Stock, or shares of our preferred stock may dilute the ownership interest of our common stockholders. Because our decision to issue additional equity or convertible or exchangeable securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future issuances. In addition, we are not required to offer any such securities to existing stockholders on a preemptive basis. Therefore, it may not be possible for existing stockholders to participate in such future issuances, which may dilute the existing stockholders’ interests in us.
| Unresolved Staff Comments. |
There are no unresolved staff comments. Please refer to Item 1. “Business” of this Annual Report on Form 10-K for information concerning our properties. From time to time, we are subject to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. Excluding ordinary, routine litigation incidental to our business, weWe are not currently a party to legal proceedings that we believe would reasonably be expected to have material adverse effect on our business, financial condition, or results of operations. We are not aware of any material legal proceedings to which we or any of our subsidiaries are a party or to which any of our property is subject, nor are we aware of any such legal proceedings contemplated by government agencies. None
| Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Our Class A Common Stock is traded on the NYSENew York Stock Exchange under the ticker symbol “BNL.” Each share of Class A Common Stock will automatically convert to one share of Common Stock on March 20, 2021, the date that is 180 days after the completion of the initial public offering of the Class A Common Stock. The Common Stock will be listed and traded on the NYSE on March 22, 2021.As of February 23, 2021,17, 2022, there were approximately 3,892543 holders of record of our Common Stock and 94 holders of record of our Class A Common Stock. However, because many of our shares of common stock are held by brokers and other institutions on behalf of shareholders, we believe there are considerably more beneficial holders of our Class A Common Stock than record holders. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities Sales of Common Stock and Issuance of OP Units
None.
Awards of Restricted Stock
On August 4, 2020, we entered into restricted stock award agreements for an aggregate of 340,963 shares of Common Stock of the Company (the “2020 Restricted Stock Awards”), which were valued at approximately $7.0 million or $20.50 per common share, with our senior management team and certain other key employees. The awards were issued under the terms of the 2020 Equity Incentive Plan, and the grants were approved by the Compensation Committee. The grants to the senior management team, which were made pursuant to the terms of their respective employment agreements, included (i) restricted stock grants that vest in substantially equal installments on each of the first four anniversaries of February 7, 2020, which represents 40% of the total award value for each participant, and (ii) restricted stock grants that vest in substantially equal installments on each of the first three anniversaries of February 7, 2020, which represents 60% of the total award value for each participant. The grants to other key employees vest 40% on the first anniversary of February 7, 2020, 30% on the second anniversary of February 7, 2020, 20% on the third anniversary of February 7, 2020, and 10% on the fourth anniversary of February 7, 2020. The restricted stock award agreements provide that vesting is subject to the executive’s continued employment with the Company through each applicable vesting date, except in the event of the executive’s death or disability, in which case, any unvested portion of the awards will become fully vested. In addition, the restricted stock award agreements provide the executive with rights as a stockholder in respect of the awards’ vested and unvested shares, including the right to vote and the right to dividends. In the event of a termination of the executive’s employment by the Company without “Cause” or by the executive for “Good Reason” within 12 months following a “Change in Control” of the Company (as such terms are defined in the executive’s employment agreement), any unvested portion of the 2020 Restricted Stock Awards will become fully vested at the time of such termination, provided that if the 2020 Restricted Stock Awards are unvested at the time of a Change in Control of the Company and are not assumed or substituted for equivalent awards as part of the Change in Control transaction, the 2020 Restricted Stock Awards will become fully vested at the time of the Change in Control transaction. Under the terms of the 2020 Restricted Stock Awards, the Company shall be entitled, at its option and in addition to any other available remedies, to terminate the Shares in respect of the 2020 Restricted Stock Awards (including any vested Shares) if the executive materially violates the terms of any restrictive covenant agreement between the Company and the executive or if the executive is convicted of a felony against the Company or its affiliates.
The aforementioned securities were issued in reliance on the exemption set forth in Section 4(a)(2) of the Securities Act.
Use of Proceeds from Initial Public Offering
In September 2020, the Company issued and sold 33,500,000 shares of Class A Common Stock in an IPO, at a public offering price of $17.00 per share and on October 20, 2020 the Company issued and sold an additional 3,500,000 shares of Class A Common Stock pursuant to the partial exercise by the underwriters of their over-allotment option to purchase additional shares at the same public offering price.
The offer and sale of all the shares in the IPO, inclusive of the underwriters' partial exercise of their over-allotment option, were registered under the Securities Act pursuant to a registration statement on Form S-11 (File No. 333-240381), as amended, which was declared effective by the SEC on September 16, 2020. J.P. Morgan Securities LLC, Goldman Sachs & Co. LLC, BMO Capital Markets Corp., Morgan Stanley & Co. LLC, Capital One Securities, Inc. and Truist Securities, Inc. acted as joint book-running managers
Not applicable. for the offering. The IPO commenced on September 16, 2020 and terminated upon the closing of the sale of shares to the underwriters pursuant to their partial exercise of their over-allotment option on October 20, 2020. Upon completion of the IPO, inclusive of the underwriters' partial exercise of their over-allotment option, we received approximately $588.3 million in net proceeds, after deducting underwriting discounts and commissions and other offering expenses payable by us of approximately $3.0 million. No payments for any expenses were made directly or indirectly to (i) any of our officers or directors or their associates, (ii) any persons owning 10% or more of any class of our equity securities or (iii) any of our affiliates.
There has been no material change in the expected use of the net proceeds from our IPO as described in our final prospectus, dated September 16, 2020, filed with the SEC pursuant to Rule 424(b) relating to our registration statement on Form S-11 filed on September 17, 2020. On September 21, 2020, we completed our IPO and issued 37 million shares of stock for net proceeds of $588.3 million, including shares issued subsequently pursuant to the underwriters’ partial exercise of the over-allotment option.
We used $216.5 million of the net proceeds to fully repay the outstanding borrowings and accrued interest under our then existing revolving credit agreement and $240.2 million of the proceeds to fully repay the outstanding principal and accrued interest associated with an unsecured term loan.As we deploy our net proceeds from our successful IPO and continue to invest in accretive real estate properties, we expect to continue to balance our debt and equity capitalization, while maintaining a Net Debt to Annualized Adjusted EBITDAre ratio below 6.0x on a sustained basis, through the anticipated use of follow-on equity offerings and an at-the-market (“ATM”) program.
Prior to the IPO, equity capital for our real estate acquisition activity was provided by proceeds from our private offering, including distributions reinvested through our DRIP. We suspended our private offering on January 10, 2020, and did not raise any equity through our private offering during the year ended December 31, 2020. During the year ended December 31, 2020, we raised approximately $5.9 million in equity capital through our DRIP. For the year ended December 31, 2019, we raised $394.4 million in equity capital, of which $329.8 million was received through new cash investments and $64.6 million was raised through our DRIP. We announced on January 10, 2020 that we were terminating our DRIP effective February 10, 2020.
Distributions
Prior to May 2020, we paid distributions to holders of shares of our Common Stock on a monthlyquarterly basis. In light of the economic uncertainty and rapidly evolving circumstances related to the COVID-19 pandemic and then-current tenant rent relief requests, to preserve cash, strengthen our liquidity position, and manage our leverage profile, in May 2020 our board of directors determined to temporarily suspend our monthly distribution. We did not paypaid a $0.250 quarterly distribution for the monthsfirst quarter of May, June, and July 2020. We reinstated our distribution in August 2020, announcing that we would transition to2021, a $0.255 quarterly distribution payments, and declared a distribution of $0.135 per share on our Common Stock (including our Class A Common Stock) for the second and third quarter with a record date of September 30, 2020,2021, and a payment date of October 15, 2020.
Following completion of our IPO, we paid a $0.25$0.265 quarterly distribution for the fourth quarter of 2020.2021. On February 19, 2021,17, 2022, the Board declared a quarterly dividend for the first quarter of 20212022 of $0.25$0.265 per share, payable to holders of record on March 31, 20212022 and to be paid on or aboutbefore April 15, 2021.
2022. While we intend to continue paying regular quarterly dividends to stockholders, the authorization of future dividend declarations will be at the discretion of our board of directors and will depend on our actual cash flow, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code, and such other factors as our board of directors deems relevant. The actual cash flow available to pay dividends will be affected by a number of factors, including, among others, the risks discussed under “Risk Factors” in Part I, Item 1A and “Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report.
Equity Compensation Plan Information The information concerning our Equity Compensation Plan will be included in the Proxy Statement to be filed relating to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference. The following graph is a comparison of the cumulative total return of shares of our common stock, the Russell 2000, and the MCSI US REIT Index. The graph assumes that $100 was invested on December 31, 2015,2016, in each of shares of our common stock, the Russell 2000 and the MCSI US REIT Index, and that all dividends were reinvested. With respect to shares of our common stock, we have assumed that dividends were reinvested in additional shares of common stock pursuant to our DRIP at a per share price equal to 98% of the Determined Share Value as of the applicable distribution date. There can be no assurance that the performance of our shares will continue in line with the same or similar trends depicted in the graph below. The MCSI US REIT Index is a free float-adjusted market capitalization index that is comprised of equity REITs. The index is based on MSCI USA Investable Market Index (IMI), its parent index, which captures large, mid, and small capitalization securities. While funds used in this benchmark typically target institutional investors and have characteristics that differ from us (including differing fees), we feel that the MCSI US REIT Index is an appropriate and accepted index for the purpose of evaluating returns on investments in direct real estate funds. 
| | December 31, | | | | | 2015 | | | | 2016 | | | | 2017 | | | | 2018 | | | | 2019 | | | | 2020 | | Broadstone Net Lease | | | 100.00 | | | | 111.21 | | | | 124.66 | | | | 140.94 | | | | 148.34 | | | | 142.58 | | Russell 2000 | | | 100.00 | | | | 121.31 | | | | 139.08 | | | | 123.76 | | | | 155.35 | | | | 186.36 | | MSCI US REIT Index | | | 100.00 | | | | 108.60 | | | | 114.11 | | | | 108.89 | | | | 137.03 | | | | 126.65 | |
Following the completion
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 100.00 | | | | 112.10 | | | | 126.74 | | | | 133.39 | | | | 128.21 | | | | 170.09 | | | | | 100.00 | | | | 114.65 | | | | 102.02 | | | | 128.06 | | | | 153.62 | | | | 176.39 | | | | | 100.00 | | | | 105.07 | | | | 100.27 | | | | 126.18 | | | | 116.62 | | | | 166.84 | |
The information in this “Performance Graph” section is not “soliciting material,” is not deemed “filed” with the SEC, and is not to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing, except as shall be expressly set forth by specific reference in such filing. The selected financial data as of and for the years ended December 31, 2020, 2019, 2018, 2017, and 2016 presented below should be read in conjunction with our consolidated financial statements and the related notes thereto contained in Item 8. “Financial Statements and Supplementary Data” and in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K. The selected financial data presented below has been derived from our audited consolidated financial statements.
Our results of operations for the periods presented below are not indicative of those expected in future periods.
| | For the Year Ended December 31, | | (in thousands, except per share data) | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | | Operating Data | | | | | | | | | | | | | | | | | | | | | Revenues | | | | | | | | | | | | | | | | | | | | | Lease revenues | | $ | 321,637 | | | $ | 298,815 | | | $ | 237,479 | | | $ | 181,563 | | | $ | 142,869 | | Operating expenses | | | | | | | | | | | | | | | | | | | | | Depreciation and amortization | | | 132,685 | | | | 108,818 | | | | 83,994 | | | | 62,263 | | | | 46,321 | | Asset management fees | | | 2,461 | | | | 21,863 | | | | 18,173 | | | | 14,754 | | | | 10,955 | | Property management fees | | | 1,275 | | | | 8,256 | | | | 6,529 | | | | 4,988 | | | | 3,939 | | Acquisition expenses | | | — | | | | — | | | | — | | | | — | | | | 10,880 | | Property and operating expense | | | 17,478 | | | | 15,990 | | | | 11,157 | | | | 6,505 | | | | 3,900 | | General and administrative | | | 27,988 | | | | 5,456 | | | | 6,162 | | | | 4,939 | | | | 2,790 | | Provision for impairment of investment in rental properties | | | 19,077 | | | | 3,452 | | | | 2,061 | | | | 2,608 | | | | — | | Total operating expenses | | | 200,964 | | | | 163,835 | | | | 128,076 | | | | 96,057 | | | | 78,785 | | Other income (expenses) | | | | | | | | | | | | | | | | | | | | | Preferred distribution income | | | — | | | | — | | | | 440 | | | | 737 | | | | 713 | | Interest income | | | 24 | | | | 9 | | | | 179 | | | | 467 | | | | 88 | | Interest expense | | | (76,138 | ) | | | (72,534 | ) | | | (52,855 | ) | | | (34,751 | ) | | | (29,963 | ) | Cost of debt extinguishment | | | (417 | ) | | | (1,176 | ) | | | (101 | ) | | | (5,151 | ) | | | (133 | ) | Gain on sale of real estate | | | 14,985 | | | | 29,914 | | | | 10,496 | | | | 12,992 | | | | 5,925 | | Income taxes | | | (939 | ) | | | (2,415 | ) | | | (857 | ) | | | (624 | ) | | | (446 | ) | Gain on sale of investment in related party | | | — | | | | — | | | | 8,500 | | | | — | | | | — | | Internalization expenses | | | (3,705 | ) | | | (3,658 | ) | | | — | | | | — | | | | — | | Change in fair value of earnout liability | | | 1,800 | | | | — | | | | — | | | | — | | | | — | | Other (expenses) income | | | (7 | ) | | | (6 | ) | | | (100 | ) | | | 379 | | | | — | | Net income | | | 56,276 | | | | 85,114 | | | | 75,105 | | | | 59,555 | | | | 40,268 | | Net income attributable to non-controlling interests | | | (5,095 | ) | | | (5,720 | ) | | | (5,730 | ) | | | (4,756 | ) | | | (3,914 | ) | Net income attributable to Broadstone Net Lease, Inc. | | $ | 51,181 | | | $ | 79,394 | | | $ | 69,375 | | | $ | 54,799 | | | $ | 36,354 | | Net Earnings per common share, basic and diluted | | $ | 0.44 | | | $ | 0.83 | | | $ | 0.86 | | | $ | 0.80 | | | $ | 0.69 | |
| | December 31, | | (In thousands) | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | | Balance Sheet Data | | | | | | | | | | | | | | | | | | | | | Investment in rental property, at cost | | $ | 3,734,121 | | | $ | 3,728,334 | | | $ | 2,890,735 | | | $ | 2,376,141 | | | $ | 1,790,674 | | Investment in rental property, net | | | 3,384,144 | | | | 3,457,290 | | | | 2,683,746 | | | | 2,227,758 | | | | 1,684,971 | | Cash and cash equivalents | | | 100,486 | | | | 12,455 | | | | 18,612 | | | | 9,355 | | | | 21,635 | | Total assets | | | 4,258,483 | | | | 3,917,858 | | | | 3,096,797 | | | | 2,578,756 | | | | 1,952,054 | | Unsecured revolving credit facility | | | — | | | | 197,300 | | | | 141,100 | | | | 273,000 | | | | 102,000 | | Mortgage and notes payable, net | | | 107,382 | | | | 111,793 | | | | 78,952 | | | | 67,832 | | | | 106,686 | | Unsecured term notes, net | | | 1,433,796 | | | | 1,672,081 | | | | 1,225,773 | | | | 836,912 | | | | 657,891 | | Total liabilities | | | 1,779,402 | | | | 2,138,838 | | | | 1,567,877 | | | | 1,294,555 | | | | 953,517 | | Total Broadstone Net Lease, Inc. stockholders’ equity | | | 2,299,105 | | | | 1,667,614 | | | | 1,417,099 | | | | 1,186,825 | | | | 911,788 | | Total equity | | | 2,479,081 | | | | 1,779,020 | | | | 1,528,920 | | | | 1,284,201 | | | | 998,537 | |
| | For the Year Ended December 31, | | (In thousands, except per share amounts) | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | | Other Data | | | | | | | | | | | | | | | | | | | | | Dividend declared | | $ | 111,435 | | | $ | 136,280 | | | $ | 112,969 | | | $ | 92,768 | | | $ | 76,955 | | Dividends declared per common share | | $ | 0.83 | | | $ | 1.32 | | | $ | 1.29 | | | $ | 1.24 | | | $ | 1.23 | | FFO(1) | | | 192,981 | | | | 167,470 | | | | 150,664 | | | | 111,434 | | | | 80,664 | | AFFO(1) | | | 181,095 | | | | 149,197 | | | | 124,065 | | | | 99,952 | | | | 78,780 | | | | | | | | | | | | | | | | | | | | | | | | | For the Year Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | | Number of properties | | | 641 | | | | 646 | | | | 621 | | | | 528 | | | | 417 | | Occupancy at period end | | | 99.2 | % | | | 99.7 | % | | | 99.7 | % | | | 99.6 | % | | | 98.0 | % |
(1)
| Refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption Net Income and Non-GAAP Measures (FFO and AFFO) for further discussion of FFO and AFFO, including a reconciliation of net income to FFO and AFFO.
|
Item 7.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes to the Consolidated Financial Statements appearing in Item 8. “Financial Statements and Supplementary Data” in this Annual Report on Form We acquire, own, and manage primarily single-tenant commercial real estate properties that are net leased on a long-term basis to a diversified group of tenants. Since our inception in 2007, we have selectively invested in net leased assets in the industrial, healthcare, restaurant, office,retail, and retailoffice property types. During the year
ended December 31, 2021, we invested $654.7 million, excluding capitalized acquisition costs, in 116 properties at a weighted average initial cash capitalization rate of 6.3%. The acquisitions included properties in industrial (47%, based on ABR), retail (26%), healthcare (23%), and restaurant (4%) asset classes located across 28 states with a weighted average initial lease term and minimum annual rent increases of 15.9 years and 1.5%, respectively. As of December 31, 2020,2021, our portfolio has grown to 640726 properties, with 725 properties located in 4142 U.S. states and one property located in Canada, with an aggregate gross asset value of approximately $4.0 billion.British Columbia, Canada. We focus on investing in real estate that is operated by creditworthy single tenants in industries characterized by positive business drivers and trends. We target properties that are an integral part of the tenants’ businesses and for which there are therefore opportunities to secure long-term net leases. Through long-term net leases, our tenants are able to retain operational control of their strategically important locations, while allocating their debt and equity capital to fund their core business operations rather than real estate ownership. | -
| Diversified Portfolio. As of December 31, 2020, our portfolio comprised approximately 28.2
. As of December 31, 2021, our portfolio comprised approximately 32.2 million rentable square feet of operational space, and was highly diversified based on property type, geography, tenant, and industry, and is cross-diversified within each (e.g., property-type diversification within a geographic concentration): |
| o
| Property Type: We are focused primarily on industrial, healthcare, restaurant, office, and retail property types based on our extensive experience in and conviction around these sectors. Within these sectors, we have meaningful concentrations in manufacturing, distribution and warehouse, clinical, casual dining, quick service restaurant, strategic operations, corporate headquarters, food processing, flex/research and development, and cold storage.
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| o
| Geographic Diversity: Our properties are located in 41 U.S. states and British Columbia, Canada, with no single geographic concentration exceeding 10.2% of our ABR.
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| o
| Tenant and Industry Diversity: Our properties are occupied by approximately 181 different commercial tenants who operate 167 different brands that are diversified across 55 differing industries, with no single tenant accounting for more than 2.5% of our ABR.
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| -
| Strong In-Place Leases with Significant Remaining Lease Term. As of December 31, 2020, our portfolio was approximately 99.2% leased based on rentable square footage with an ABR weighted average remaining lease term of approximately 10.7 years, excluding renewal options.
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| Standard Contractual Base Rent Escalation. Approximately 98.3% of our leases have contractual rent escalations, with an ABR weighted average minimum increase of 2.1%.
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| Extensive Tenant Financial Reporting. Approximately 88.7% of our ABR is received from tenants that are required to provide us with specified financial information on a periodic basis. An additional 6.3% of our ABR is received from tenants who are not required to provide us with specified financial information under the terms of our lease, but whose financial statements are available publicly, either through SEC filings or otherwise.
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COVID-19 Pandemic
The rapidly evolving circumstances related to the COVID-19 pandemic resulted in deep economic uncertainty and far-reaching impacts on almost every business and industry, includingand is cross-diversified within each (
property-type diversification within a geographic concentration):: We are focused primarily on industrial, healthcare, restaurant, retail, and office property types based on our extensive experience in and conviction around these sectors. Within these sectors, we have meaningful concentrations in manufacturing, distribution and warehouse, clinical, quick service restaurant, food processing, casual dining, flex/research and development, and general merchandise. Geographic Diversification Tenant and Industry Diversification industries, in whichwith no single tenant accounting for more than 2.1% of our ABR.StrongIn-Place Leases with Significant Remaining Lease Term Standard Contractual Base Rent Escalation Extensive Tenant Financial Reporting our tenants, operate. In responsebased on ABR provide financial reporting, of which 84.6% are required to the COVID-19 pandemic, many countriesprovide us with specified financial information on a periodic basis and U.S. states, including the areas in which we operate, adopted certain measures to mitigate the ongoing public health crises. Such measures included “shelter in place”an additional 9.4% of our tenants report financial statements publicly, either through SEC filings or “stay at home” rules, restrictions on travel, and restrictions on the types of businesses that may continue to operate in many countries and U.S. states. Although such restrictions have been or were in the process of being lifted in various locations, the recent resurgence of COVID-19 cases has led to a reinstatement or partial reinstatement of restrictions in some locations. We cannot predict whether and to what extent additional states and cities will implement similar restrictions or when restrictions currently in place will expire. Further, the impacts of a potential worsening of economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, and consumer spending, as well as other unanticipated consequences, remain unknown.The sections below summarize the typical factors that impact our results of operations, including the actual and potential impacts of the COVID-19 pandemic on our results of operations, liquidity and capital resources, during the year ended December 31, 2020, as well as management’s view of potential impacts on our future results of operations, liquidity and capital resources. For more discussion on the risks associated with the COVID-19 outbreak, see Item 1A. “Risk Factors”.
otherwise.
Factors That Impact Our Result of Operations Our results of operations and financial condition are affected by numerous factors, many of which are beyond our control. Key factors that typically impact our results of operations and financial condition, which may be exacerbated by the COVID-19 pandemic, include rental rates, and collections, property dispositions, lease renewals and occupancy, acquisition activity, net lease terms, interest expense, general and administrative expenses, tenant bankruptcies, and impairments. Rental Rates and CollectionsOur financial resultsability to grow rental revenue from our existing portfolio will depend on our ability to timely collect contractual rents due underrealize the rental escalations built into our long-term net leases. The COVID-19 pandemic’s impact on us has primarily manifested through tenant requests for rent relief. In total, we granted partial rent relief requests to 15 tenants related to 93 properties.We evaluated each request for rent relief as a unique situation, employing a rigorous credit and business analysis focusing on, among other things, industry circumstances, the tenant’s financial performance, liquidity position, lease structure, and geographic location, and regulatory impacts on the tenant’s operations (e.g., stay-at-home orders, essential v. nonessential business designations). Based on our analyses, we granted relief on a select basis only to those tenants we determined to be most in need. In cases where we granted rent relief, we focused on negotiating the shortest possible repayment period and, when possible, lease enhancements (e.g. extensions of term). There were several tenants who requested rent relief that we believed were well positioned to continue making rent payments during the pandemic. Many of those tenants had strong balance sheets and liquidity positions, had applied for or received Paycheck Protection Program loan funding under the CARES Act, or were designated as essential businesses and could continue to operate despite restrictions on other businesses. We declined to agree to any rent relief in those circumstances, and in all such cases the tenants continued to pay all rents due as of December 31, 2020.
The rent relief requests we granted included partial deferral of payment of rent with 14 tenants, and a partial abatement of rent with one tenant. As of December 31, 2020, all deferral periods have ended, and2021, leases contributing approximately 97.3% of our ABR provided for increases in future annual base rent, generally ranging from 1.5% to 2.5% annually, with an ABR
weighted average minimum increase of 2.0%. Generally, our rent escalators increase rent on specified dates by a fixed percentage. Approximately 13.6% of our rent escalators are based on an increase in the balance of rent deferrals yet to be repaid was less than $1 million. The abatement period ended subsequent to year-end in January 2021.In circumstances where we agreed to a rent deferral that is to be repaidCPI over a specified period and 2.7% of time,our leases are flat leases, meaning they do not provide for rent increases during their terms. During periods of low inflation, small increases in the CPI will result in limited increases in rental revenue from our leases that contain rent escalators based on CPI increases. However, when the CPI decreases or does not change over the relevant period, our rental revenue from such leases is not reduced and wherewill remain the terms of the lease and amounts paid under the lease were substantially the same, we continued to recognize the same amount of GAAP lease revenue each period to the extent the amounts were probable of collection. The amounts we agreed to defer impacted our cash flows from operations.
The following chart summarizes our 2020 rent collections:
same. | | Full Year | | Q4 | | Q3 | | Q2 | | Q1 | Base Rent Received | | 97.7% | | 98.8% | | 97.9% | | 95.5% | | 98.8% | Base Rent Abated | | 0.9% | | 1.0% | | 1.4% | | 1.1% | | 0.0% | Base Rent Deferred | | 0.9% | | 0.0% | | 0.6% | | 3.0% | | 0.0% | Uncollected Rent | | 0.5% | | 0.2% | | 0.1% | | 0.4% | | 1.2% | Total | | 100.0% | | 100.0% | | 100.0% | | 100.0% | | 100.0% |
Despite our continued strong rent collections subsequent to the outbreak of the COVID-19 pandemic, the duration of the pandemic and the potential ongoing impacts of the virus on our tenants’ ability to conduct their business should additional governmental restrictions be implemented, could have a significant negative impact on our ability to continue to collect future rents.
From time to time, we strategically dispose of properties, primarily when we believe the risk profile has changed and become misaligned with our then current risk-adjusted return objectives. The resulting gains or losses on dispositions may materially impact our operating results, and the recognition of a gain or loss on the sale of real estate varies from transaction to transaction based on fluctuations in asset prices and demand in the real estate market at the time a property is listed for sale. As a result of the COVID-19 pandemic, we have seen a slowdown in real estate transactions and weakening market conditions for several property types resulting from an increase in vacant rental space. Although we were able to dispose of properties during the year ended December 31, 2020 at advantageous prices, in the short term, the slowdown in market activity may inhibit our ability to further dispose of properties we have identified for disposition, including those leased by tenants that experience significant credit deterioration as a result of the COVID-19 pandemic, and the price at which we are able to sell the properties may be negatively impacted. We will continue to monitor the pandemic’s impact and continue to selectively dispose of properties when advantageous to do so.Lease Renewals and Occupancy As of December 31, 2020,2021, the ABR weighted average remaining term of our portfolio was approximately 10.710.5 years, excluding renewal options, and approximately 10.2%14.5% of our leases (based on ABR) will expire prior to January 1, 2026.2027. The stability of the rental revenue generated by our properties depends principally on our tenants’ ability to pay rent and our ability to collect rents, renew expiring leases or re-lease space upon the expiration or other termination of leases, lease currently vacant properties, and maintain or increase rental rates at our leased properties. To the extent our properties become vacant and are not subject to a lease, we would forego rental income while remaining responsible for the payment of property taxes and maintaining the property until it is re-leased, which could
negatively impact our operating results. Our occupancy rates have remained strong during the COVID-19 pandemic, standing at 99.2%portfolio was 99.8% occupied as of December 31, 2020 based on rentable square footage. Additionally, when negotiating COVID-19 related rent relief agreements, we have sought to extend lease terms where possible to preserve the continuity of tenants and long-term cash flows derived from our portfolio. While we believe our portfolio’s diversity should allow us to manage the impact the COVID-19 pandemic may have on lease renewals and occupancy, we continue to monitor the pandemic’s effects on several industries in which our tenants operate, such as bankruptcies by large retailers, continued or increased occupancy limits established by local governments on the casual dining industry, as well as the potential long-term effects on the demand for and utilization of office space as more companies consider adopting work from home models. 2021. Our historical growth in revenues and earnings has been achieved through rent escalations associated with existing in-place leases, coupled with rental income generated from accretive property acquisitions. Our ability to grow revenue will depend, to a significant degree, on our ability to identify and complete acquisitions that meet our investment criteria. Changes in capitalization rates, interest rates, or other factors may impact our acquisition opportunities in the future. Market conditions may also impact the total returns we can achieve on our investments. Our acquisition volume also depends on our ability to access third-party debt and equity financing. The COVID-19 pandemic caused a slowdown in acquisition volume, and we did not acquire any new properties during the first ten months of 2020. We returned to growth through acquisitions during the fourth quarter, investing $100.3 million excluding capitalized acquisition expenses in 19 properties at a weighted average initial capitalization rate of 6.9%.We continue to build and evaluate a robust pipeline of potential investment opportunities, predominantly focused on industrial, healthcare, quick-service restaurant, and select retail property sectors.
Substantially all of our leases are net leases pursuant to which our tenant generally is obligated to pay allmost recurring expenses associated with the leased property including real estate taxes, insurance, maintenance, repairs, and capital costs. A limited number ofrepairs. The remaining leases generally require that we pay some or all of the property expenses such as roof and structure repairs, real estate taxes, insurance, the cost of environmental liabilities, if any, or certain non-structural repairs and maintenance. Additionally, we seek to use master lease structures where it fits market practice in the particular property type, pursuant to which we seek to lease multiple properties to a single tenant on an all or none basis. Master leases strengthen our ability to preserve rental revenue and prevent costs associated with vacancies for underperforming properties. We believe the master lease structure is most prevalent and applicable to leases in our restaurant and retail property types, while less relevant to our other property types, such as healthcare and industrial. As of December 31, 2020,2021, master leases contributed approximately 34.4%32.7% of our overall ABR (our largest master lease by ABR related to 2443 properties and contributed 2.5%2.1% of our ABR, and our smallest master lease by ABR related to two properties and contributed 0.1% of our ABR), 74.0%73.7% of our restaurant property ABR (168(156 of our 247235 restaurant properties), and 47.2%37.9% of our retail property ABR (76(84 of our 130191 retail properties). In instances in which we granted rent relief, we generally preserved the rights afforded to us pursuant to our leases. The ongoing COVID-19 pandemic presents certain risks
We anticipate that we will continue to incur debt to fund future acquisition activity, which will increase the amount of interest expense we incur. In addition, although we attempt to limit our total floating-rate debt exposure, changes in the interest rate environment could either increase or decrease our weighted average interest rate in the future. Any changes to our debt structure or debt financing associated with property acquisitions, could materially influence our operating results depending on the terms of any such debt. In January 2021, we received an initial credit rating of BBB‘BBB’ with a stable outlook from S&P, which will have the effect of loweringlowered the applicable margin on our existing $965 million of bank loans by 25 basis points beginning in February 2021, as well as a 20 basis point decrease in the applicable margin on future Revolving Credit Facility borrowings. In September 2021, Moody’s upgraded our credit rating to ‘Baa2’ with a stable outlook, which aligned with S&P’s credit rating and therefore had no impact to our actual interest expense. However, a downgrade in our credit rating could also increase the amount of interest we pay under our debt agreements. Interest rates declined during 2020 as the U.S. federal government attempts to combat the economic impacts of the COVID-19 pandemic. We benefited from this dynamic to the extent our floating rate borrowings were unhedged. Such borrowings bear interest at variable rates equal to LIBOR plus a margin based on our credit rating. The one-month LIBOR rate decreased from 1.76% at December 31, 2019, to 0.14% at December 31, 2020. We repaid $456.3 million of unhedged borrowings with the proceeds of our IPO, and approximately $110.0 million of our outstanding borrowings at December 31, 2020, remained unhedged. Restrictions in credit markets resulted in increased borrowing spreads across the debt capital markets earlier in the year as compared to the end of 2019,
although they have since narrowed. As market conditions evolve and we return to executing against our growth strategy, additional changes in interest rates and our borrowing spreads could influence our operating results.
General and Administrative Expenses Our general and administrative expenses primarily consist of compensation and related costs, third party legal, accounting, and consulting expenses, travel and entertainment, and general office expenses. Since March 16, 2020, Our leases with tenants of our properties are long-term in nature, with a current weighted average remaining lease term of 10.5 years as of December 31, 2021. To mitigate the impact of inflation on our fixed revenue streams, we have been primarily operating under a work from home policy.implemented limited escalation clauses in our leases. As of December 31, 2021, substantially all of our leases had contractual lease escalations, with an annual weighted average of 2.0%. A majority of our leases have fixed annual rent increases or periodic escalations over the dateterm of this filing, the policy remainslease (, a 10% increase every five years), and the remaining portion has annual lease escalations based on increases in effect. Giventhe CPI. These lease escalations mitigate the risk of fixed revenue streams in the case of an inflationary economic environment, and provide increased return in otherwise stable market conditions. As a majority of our limited headcount,portfolio has fixed lease escalations, there is a risk that inflation could be greater than the contractual rent increases. Our focus on single-tenant, net leases also shelters us from fluctuations in the cost of services and maintenance as a result of inflation. For a portion of our portfolio, we have leases that are not incurred a material amount of cash outlays on information technologyfullytriple-net, and, therefore, we bear certain responsibilities for the maintenance and structural component replacements (roof, structure, or infrastructure to facilitate our remote workforce, and do not believe we will incur significant costsparking lot) that may be required in the future. Wefuture, although the tenants are still required to pay all operating expenses associated with the property (, real estate taxes, insurance, and maintenance). Inflation and increased costs may have experiencedan adverse impact to our tenants and their creditworthiness if the increase in costs are greater than their increase in revenue. Where we cannot implement atriple-net lease, we attempt to limit our exposure to inflation through the use of warranties and other remedies that reduce the likelihood of a significant decrease in travel and entertainment expenses, as social distancing guidelines and restrictions have limited corporate travel. These benefits, however, may be outweighed by incremental third party legal, accounting, and consulting costs if the impacts of the COVID-19 pandemic worsen.capital outlay. Adverse economic conditions, particularly those that affect the markets in which our properties are located, or downturns in our tenants’ industries could impair our tenants’ ability to meet their lease obligations to us and our ability to renew expiring leases or re-lease space. In particular, the bankruptcy of one or more of our tenants could adversely affect our ability to collect rents from such tenants and maintain our portfolio’s occupancy. We have historically experienced only a limited number of tenant bankruptcies, which have not been material to our financial results. We have yet to see the long-term effects of the pandemic and the extent to which it may impact our tenants in the future. A prolonged exposure to the negative economic impacts of the pandemic may result in additional tenant bankruptcies.We review long-lived assets to be held and used for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If, and when, such events or changes
in circumstances are present, an impairment exists to the extent the carrying value of the long-lived asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use of the long-lived asset or asset group and its eventual disposition. Such cash flows include expected future operating income, as adjusted for trends and prospects, as well as the effects of demand, competition, and other factors. Significant judgment is made as to if and when impairment should be taken. If our strategy, or one or more of the assumptions described above, changes in the future, we may have to recognize an impairment. Indications of a tenant’s inability to continue as a going concern, changes in our view or strategy relative to a tenant’s business or industry, as a result of the COVID-19 pandemic, or changes in our long-term hold strategies, could each be indicative of an impairment triggering event. For the year ended December 31, 2020,2021, we recognized $19.1$28.2 million of impairment, charges, mainly resulting from changes in our long-term hold strategy with respectof which approximately $25.7 million related to the individual properties, which was duetermination of a long-term master lease in part to unfavorable market trends resulting fromexchange for a termination fee of $35 million. Simultaneously, we sold the COVID-19 pandemic in geographic areas where we haveunderlying vacant properties being marketedto an unrelated third party for re-lease or sale. We facenet proceeds of approximately $15.3 million. Due to the risk of additional impairments depending on the long-term effectsnature of the COVID-19 pandemicseparate transactions, on a gross basis we recorded $33.8 million of revenue, $4.1 million of depreciation and the extentamortization, and $25.7 million of impairment, for a net $4 million impact to which it may impact our tenants in the future.net income. Our historical results of operations for the yearsyear ended December 31, 20202021, discussed below, include a full year of direct compensation expenses and 2019,incremental general and administrative expenses associated with being internally managed. Our historical results of operations for the year ended December 31, 2020, discussed below, include the payment of asset and property management fees that we no longer pay following the Internalization, and do not include the full extent of expected direct compensation expense associated with employees employed by us following the Internalizationexpenses or incremental general and administrative expenses.expenses associated with being internally managed. Discussion of our Results of Operations for the year ended December 31, 20192020 compared to the year ended December 31, 20182019 was previously filed in our Annual Report on Form 10-K for the year ended December 31, 2019.2020. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “ Results of Operations—Year Ended December 31, 20192020 Compared to Year Ended year ended December
As of December 31, 2020,2021, our real estate investment portfolio included 640726 commercial real estate properties, with locations725 properties located in 4142 U.S. states and one real estate property located in British Columbia, Canada, and leased to tenants in various industries. All but eighttwo of our properties were subject to a lease as of December 31, 2020.2021.
Year Ended December 31, 20202021 Compared to Year Ended year ended December 31, 20192020 | | Year Ended December 31, | | | Increase/(Decrease) | | (in thousands) | | 2020 | | | 2019 | | | $ | | | % | | Contractual rental amounts billed for operating leases | | $ | 281,998 | | | $ | 257,695 | | | $ | 24,303 | | | | 9.4 | % | Adjustment to recognize contractual operating lease billings on a straight-line basis | | | 20,965 | | | | 22,109 | | | | (1,144 | ) | | | -5.2 | % | Variable rental amount earned | | | 743 | | | | 152 | | | | 591 | | | >100.0 | % | Earned income from direct financing leases | | | 3,355 | | | | 4,018 | | | | (663 | ) | | | -16.5 | % | Earned income from sales-type leases | | | 5 | | | | — | | | | 5 | | | | 100.0 | % | Operating expenses billed to tenants | | | 15,845 | | | | 14,614 | | | | 1,231 | | | | 8.4 | % | Other income from real estate transactions | | | 799 | | | | 668 | | | | 131 | | | | 19.6 | % | Adjustment to revenue recognized for uncollectible rental amounts billed | | | (2,073 | ) | | | (441 | ) | | | (1,632 | ) | | >100.0 | % | Total Lease revenues, net | | $ | 321,637 | | | $ | 298,815 | | | $ | 22,822 | | | | 7.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contractual rental amounts billed for operating leases | | $ | 308,624 | | | $ | 281,998 | | | $ | 26,626 | | | | 9.4 | % | Adjustment to recognize contractual operating lease billings on a straight-line basis | | | 19,847 | | | | 25,200 | | | | (5,353 | ) | | | (21.2 | )% | Write-off of accrued rental income | | | (442 | ) | | | (4,235 | ) | | | 3,793 | | | | (89.6 | )% | Variable rental amount earned | | | 768 | | | | 743 | | | | 25 | | | | 3.4 | % | Earned income from direct financing leases | | | 2,909 | | | | 3,355 | | | | (446 | ) | | | (13.3 | )% | Interest income from sales-type leases | | | 58 | | | | 5 | | | | 53 | | | | >100.0 | % | Operating expenses billed to tenants | | | 17,462 | | | | 15,845 | | | | 1,617 | | | | 10.2 | % | Other income from real estate transactions | | | 33,549 | | | | 799 | | | | 32,750 | | | | >100.0 | % | Adjustment to revenue recognized for uncollectible rental amounts billed, net | | | 101 | | | | (2,073 | ) | | | 2,174 | | | | <(100.0 | )% | | | | | | | | | | | | | | | | | | | Total Lease revenues, net | | $ | 382,876 | | | $ | 321,637 | | | $ | 61,239 | | | | 19.0 | % | | | | | | | | | | | | | | | | | | |
The increase in Lease revenues, net for the year ended December 31, 2020, was primarily attributabledue to growth in our real estate portfolio through accretive property acquisitions during 2019. In 2019, we significantly increased2021, partially offset by the sizereductions of our portfolio, adding 74 new properties at an aggregate purchase price of approximately $1.0 billion, excluding capitalized acquisition costs. Our acquisitions were largely weighted towards the second half of therevenues associated with property dispositions. During year, with the closing of a $735.7 million industrial and office portfolio in August 2019. As of December 31, 2020, our portfolio was 99.2% occupied (based on rentable square footage), with ABR weighted average annual rent increases of 2.1%. During the fourth quarter of 2020, we invested $100.3$654.7 million, excluding capitalized acquisition costs, in 19116 properties at a weighted average initial cash capcapitalization rate of 6.9%6.3%. Most of these acquisitions closed during the month of December, and therefore did not contribute meaningfully to the increase in Lease revenues net foralso increased due to lease termination fee income of $35.0 million (which we classified as other income from real estate transactions in the table above) during the year ended December 31, 2021, compared to $0.4 million in lease termination fee income during the year ended December 31, 2020. In September 2021, we executed the early termination of a long-term, master lease with an investment-grade office tenant in exchange for a termination fee of $35.0 million. Simultaneously, we sold the underlying vacant properties to an unrelated third party. Through the simultaneous transactions, we recorded $33.8 million of revenue, $4.1 million of amortization, and $25.7 million of impairment, for a net $4.0 million increase to net income. This resulted in a $33.8 million increase to generated funds from operations (“FFO”), but no impact to generated adjusted funds from operations (“AFFO”) or net debt to annualized adjusted EBITDAre. Refer to ournon-GAAP reconciliations in thesection of this Management’s Discussion and Analysis of Financial Condition and Results of Operations. | | Year Ended December 31, | | | Increase/(Decrease) | | (in thousands) | | 2020 | | | 2019 | | | $ | | | % | | Operating expenses: | | | | | | | | | | | | | | | | | Depreciation and amortization | | $ | 132,685 | | | $ | 108,818 | | | $ | 23,867 | | | | 21.9 | % | Asset management fees | | | 2,461 | | | | 21,863 | | | | (19,402 | ) | | | (88.7 | )% | Property management fees | | | 1,275 | | | | 8,256 | | | | (6,981 | ) | | | (84.6 | )% | Property and operating expense | | | 17,478 | | | | 15,990 | | | | 1,488 | | | | 9.3 | % | General and administrative | | | 27,988 | | | | 5,456 | | | | 22,532 | | | >100.0 | % | Provision for impairment of investment in rental properties | | | 19,077 | | | | 3,452 | | | | 15,625 | | | >100.0 | % | Total operating expenses | | $ | 200,964 | | | $ | 163,835 | | | $ | 37,129 | | | | 22.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Depreciation and amortization | | $ | 132,096 | | | $ | 132,685 | | | $ | (589 | ) | | | (0.4 | )% | Property and operating expense | | | 18,459 | | | | 17,478 | | | | 981 | | | | 5.6 | % | General and administrative | | | 36,366 | | | | 27,988 | | | | 8,378 | | | | 29.9 | % | Provision for impairment of investment in rental properties | | | 28,208 | | | | 19,077 | | | | 9,131 | | | | 47.9 | % | | | | — | | | | 2,461 | | | | (2,461 | ) | | | (100.0 | )% | | | | — | | | | 1,275 | | | | (1,275 | ) | | | (100.0 | )% | | | | | | | | | | | | | | | | | | | | | $ | 215,129 | | | $ | 200,964 | | | $ | 14,165 | | | | 7.0 | % | | | | | | | | | | | | | | | | | | |
Depreciation and amortization The increasedecrease in depreciation and amortization expense forwas due to $11.1 million of accelerated amortization during the year ended December 31, 2020 is primarily dueas a result of theCOVID-19 pandemic and certain lease terminations compared to only $4.1 million of accelerated amortization during the year ended December 31, 2021, offset by additional depreciation and amortization recognized from growth in our real estate portfolio, as discussed above. The amount of depreciationportfolio.General and amortization expense as a percentage of revenue fluctuates period-over-period based on the composition of our property acquisitions each year. We allocate the purchase price of these acquisitions based on the relative fair value of the underlying assets acquired and liabilities assumed, which have differing useful lives impacting the amount of depreciation and amortization expense recognized thereafter. The assets generally include tangible assets, consisting of land and land improvements, buildings and other improvements, and equipment, and identifiable intangible assets and liabilities, including the value of in-place leases and acquired above-market and below-market leases. Our acquisitions and strategic growth strategies have not resulted in meaningful trends in the composition of underlying assets acquired.Asset management fees and Property management fees
The decline in asset management fees and property management fees was due to the completion of the Internalization. Upon completion ofadministrative
Following the Internalization the agreements with the third-party manager were terminated, resulting in a decrease in these expenses as compared to the prior year period.
Property and operating expense
The increase in property and operating expense was mainly attributable to the number of properties we own for which we are responsible for engaging a third-party manager to manage ongoing property maintenance, along with insurance and real estate taxes associated with those properties. We pay a majority of these expenses and are reimbursed by the tenants under the terms of the respective leases. There was a corresponding increase in operating expenses billed to tenants and included within Lease revenues, net.
General and administrative
The increase in general and administrative expenses mainly reflects the impact of the Internalization associated with our newly acquired employee base. Following the Internalization,February 2020, our asset and property management fees were replaced with compensation and related expenses, which totaled $16.2 million during the year ended December 31, 2020, along with associated general and administrative expenses. In 2020, we achieved costs savings from our internalized structure, as theThe increase in general and administrative expenses is less thanwas a direct result of the combined decrease in asset management, property management, and disposition fees incurred during the year ended December 31, 2020 under our prior externally managed structure.
Internalization. Provision for impairment of investment in rental properties During the year ended December 31, 2020,2021, we recognized $19.1$28.2 million of impairment on our investments in rental properties, primarily attributable to our simultaneous early lease termination transaction and sale of underlying properties as discussed in Lease revenues, net above, compared to $3.5$19.1 million of impairment during the year ended December 31, 2019, respectively.2020. The following table presents the impairment charges for their respective periods: | | Year Ended December 31, | | (in thousands, except number of properties) | | 2020 | | | 2019 | | Number of properties | | | 7 | | | | 4 | | Carrying value prior to impairment charge | | $ | 55,674 | | | $ | 15,901 | | Fair value | | | 36,597 | | | | 12,449 | | Impairment charge | | $ | 19,077 | | | $ | 3,452 | |
| | | | | | | | | | | | | | | (in thousands, except number of properties) | | | | | | | | | | 7 | | | | 7 | | Carrying value prior to impairment charge | | $ | 48,604 | | | $ | 55,674 | | | | | 20,396 | | | | 36,597 | | | | | | | | | | | | | | $ | 28,208 | | | $ | 19,077 | | | | | | | | | | | |
The timing and amount of impairment fluctuates from period to period depending on the specific facts and circumstances. We took a majority Asset management fees and Property management fees The decrease in asset management fees and property management fees was due to the completion of the Internalization in February 2020, impairment duringwhich terminated the third quarter, which primarily related to an increased likelihood that we would sell an asset that was vacated through a tenant’s bankruptcy. We continued to market the asset for lease or sale, and subsequent to year end, we signed a long-term leaseassociated agreements with a new tenant. our third-party manager. | | Year Ended December 31, | | | Increase/(Decrease) | | (in thousands) | | 2020 | | | 2019 | | | $ | | | % | | Other income (expenses) | | | | | | | | | | | | | | | | | Interest income | | $ | 24 | | | $ | 9 | | | $ | 15 | | | >100.0 | % | Interest expense | | | (76,138 | ) | | | (72,534 | ) | | | 3,604 | | | | 5.0 | % | Cost of debt extinguishment | | | (417 | ) | | | (1,176 | ) | | | (759 | ) | | | (64.5 | )% | Gain on sale of real estate | | | 14,985 | | | | 29,914 | | | | (14,929 | ) | | | (49.9 | )% | Income taxes | | | (939 | ) | | | (2,415 | ) | | | (1,476 | ) | | | (61.1 | )% | Internalization expenses | | | (3,705 | ) | | | (3,658 | ) | | | 47 | | | | 1.3 | % | Change in fair value of earnout liability | | | 1,800 | | | | — | | | | 1,800 | | | >100.0 | % | Other expenses | | | (7 | ) | | | (6 | ) | | | 1 | | | | 16.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 17 | | | $ | 24 | | | $ | (7 | ) | | | (29.2 | )% | | | | (64,146 | ) | | | (76,138 | ) | | | (11,992 | ) | | | (15.8 | )% | Cost of debt extinguishment | | | (368 | ) | | | (417 | ) | | | (49 | ) | | | (11.8 | )% | Gain on sale of real estate | | | 13,523 | | | | 14,985 | | | | (1,462 | ) | | | (9.8 | )% | | | | (1,644 | ) | | | (939 | ) | | | 705 | | | | 75.1 | % | | | | — | | | | (3,705 | ) | | | (3,705 | ) | | | (100.0 | )% | Change in fair value of earnout liability | | | (5,539 | ) | | | 1,800 | | | | (7,339 | ) | | | <(100.0 | )% | | | | (62 | ) | | | (7 | ) | | | 55 | | | | >100.0 | % |
Interest expense Increased
The decrease in interest expense during the year ended December 31, 2020, as compared to the year ended December 31, 2019,primarily reflects increaseda decrease in our average outstanding borrowings, combined with a decrease in our weighted average cost of borrowings. In September 2020, we used the comparable period. We incurred incremental revolver and term loanproceeds of our IPO to repay $456.7 million of outstanding borrowings, in August 2019 to fundincluding accrued interest, significantly reducing our leverage profile. In January 2021, we received an initial credit rating of ‘BBB’ with a significant acquisition andstable outlook from S&P Global Ratings (“S&P”), which had the effect of lowering the applicable margin on our then existing $965 million of bank loans by 25 basis points beginning in February 20202021. In September 2021, Moody’s Investors Service (“Moody’s”) upgraded our credit rating to ‘Baa2’ with a stable outlook, which aligned with S&P’s credit rating and therefore had no impact to our actual interest expense. We also repriced and partially repaid our 2026 Unsecured Term Loan in connection withMarch 2021, reducing the Internalization. These borrowings were unhedgedapplicable margin and bore interest atprincipal balance by an additional 60 basis points and $50 million, respectively. Our Net Debt to Annualized Adjusted EBITDAre ratio, used as a variable rate based on LIBOR, whichrelative leverage measure, decreased from 1.76% at7.04x as of January 1, 2020, to 5.13x as of December 31, 2019 to 0.14% at December 31, 2020. As a result, we benefited from declining interest rates during the period of time they were outstanding. The borrowings were fully repaid in September 2020 with proceeds from our IPO.2021.
Gain on sale of real estate
Our recognition of a gain or loss on the sale of real estate varies from transaction to transaction based on fluctuations in asset prices and demand in the real estate market. During the year ended December 31, 2020,2021, we recognized gains of $13.5 million on the sale of 31 properties, compared to gains of $15.0 million on the sale of 24 properties compared to gains of $29.9 million on the sale of 49 properties during the year ended December 31, 2019. There was an increase in2020. During the saleyear ended December 31, 2020, we incurred $3.7 million of propertiesthird-party fees and consulting expenses associated with the Internalization. We did not incur these expenses during 2019 as a result of our deleveraging plans following the significant industrial and office portfolio acquisition in August 2019. The decrease in the sale of properties during 2020 was a result of a shift in our deleveraging to employ proceeds from the IPO, rather than gains on sales of properties, to reduce leverage, as well as a general decrease in market activity resulting from the COVID-19 pandemic in 2020.Income taxes
The decrease in Income taxes during 2020 is mainly attributable to federal and state taxes paid in 2019 by our Taxable REIT Subsidiary as a result of our deleveraging plans subsequent to our significant industrial and office portfolio acquisition in August 2019.
year ended December 31, 2021. Change in fair value of earnout liability As part of the Internalization we may be required to pay additional earnout consideration if certain milestones are achieved during the Earnout Periods. During 2020, we recorded the fair value of this contingent consideration in the Consolidated Balance Sheets, and updated the fair value at the end of each reporting period. To the extent the change in fair value relates to a portion of the earnout consideration that is classified as a liability, we record the change through earnings. We estimate the
The fair value of the earnout liability by considering weighted-average probabilitieswas remeasured each reporting period, with changes recorded as Change in fair value of likely outcomes, and using a Monte Carlo simulation and discounted cash flow analysis to estimate fair value. These estimates require the Company to make various assumptions about future share prices, and other items that are unobservable and are considered Level 3 inputsearnout liability in the fair value hierarchy.Consolidated Statements of Income and Comprehensive Income. The change in the fair value of the earnout liability during the year ended December 31, 2020,2021, reflects changes in share prices and our peer stock price volatility assumption, which are attributableachievement of all four milestones applicable to changes in economic circumstances impacting global equity markets.the earnout during the year ended December 31, 2021. Net Income and Net earnings per diluted share | | Year Ended December 31, | | | Increase/(Decrease) | | (in thousands, except per share data) | | 2020 | | | 2019 | | | $ | | | % | | Net income | | $ | 56,276 | | | $ | 85,114 | | | $ | (28,838 | ) | | | (33.9 | )% | Net earnings per diluted share | | | 0.44 | | | | 0.83 | | | | (0.39 | ) | | | (47.0 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands, except per share data) | | | | | | | | | | | | | | | $ | 109,528 | | | $ | 56,276 | | | $ | 53,252 | | | | 94.6 | % | Net earnings per diluted share | | | 0.67 | | | | 0.44 | | | | 0.23 | | | | 52.3 | % |
The decreaseincrease in net income for the year ended December 31, 2020, as compared to the year ended December 31, 2019, is primarily due to revenue growth of $61.2 million, a $23.9 million increase in depreciation and amortization expense, a $15.6 million increase in impairment charges, a $14.9$12.0 million decrease in gains on sale of real estate,interest expense, a $3.7 million decrease in asset and property management fees, and a $3.6$3.7 million increasedecrease in interest expense.Internalization expenses. These factors were partially offset by revenue growtha $9.1 million increase in impairment of $22.8investment in rental properties, a $8.4 million increase in general and $1.8administrative expenses, a $7.3 million of income from the decreaseincrease in the fair value of our earnout liability, in 2020 with no comparable adjustment in the prior year. In addition, asand a result$1.5 million decrease on gain on sale of the Internalization, increased general and administrative expenses of $22.5 million were offset by $26.4 million lower asset management and property management fees.real estate. GAAP net income includes items such as gain or loss on sale of real estate and provisions for impairment, among others, which can vary from quarter to quarter and impact period-over-period comparisons. These fluctuations, combined with the increase in our weighted average shares outstanding resulting from the common shares and OP Units issued in conjunction with the IPO and Internalization, contributed to the $0.39 decrease in net earnings per diluted share for the year ended December 31, 2020.
Liquidity and Capital Resources We acquire real estate using a combination of debt and equity capital and with cash from operations that is not otherwise distributed to our stockholders. Our focus is on maximizing the risk-adjusted return to our stockholders through an appropriate balance of debt and equity in our capital structure. We are committed to maintaining an investment grade balance sheet through active management of our leverage profile and overall liquidity position. We believe our leverage strategy has allowed us to take advantage of the lower cost of debt while simultaneously strengthening our balance sheet, as evidenced by our current investment grade credit ratingratings of Baa3 from Moody’s Investors Service (“Moody’s”), which was reaffirmed in July 2020, and our initial credit rating of BBB‘BBB’ from S&P in January 2021.and ‘Baa2’ from Moody’s. We manage our leverage profile using a ratio of Net Debt to Annualized Adjusted EBITDAre, a non-GAAP financial measure, which we believe is a useful measure of our ability to repay debt and a relative measure of leverage, and is used in communications with lenders and with rating agencies regarding our credit rating. We seek to maintain on a sustained basis a Net Debt to Annualized Adjusted EBITDAre ratio that is generally less than 6.0x. As of December 31, 2020,2021, we had total debt outstanding of $1.5 billion,and Net Debt of $1.4$1.7 billion, and a Net Debt to Annualized Adjusted EBITDAre ratio of approximately 5.15x.5.13x.
Net Debt and Annualized Adjusted EBITDAre arenon-GAAP financial measures, and Annualized Adjusted EBITDAre is calculated based upon EBITDA, EBITDAre, and Adjusted EBITDAre, each of which is also anon-GAAP financial measure. Refer tobelow for further details concerning our calculation ofnon-GAAP measures and reconciliations to the comparable GAAP measure. Liquidity/REIT Requirements Liquidity is a measure of our ability to meet potential cash requirements, including our ongoing commitments to repay debt, fund our operations, acquire properties, make distributions to our stockholders, and other general business needs. As a REIT, we are required to distribute to our stockholders at least 90% of our REIT taxable income determined without regard to the dividends paid deduction and excluding net capital gain, on an annual basis. As a result, it is unlikely that we will be able to retain substantial cash balances to meet our long-term liquidity needs, including repayment of debt and the acquisition of additional properties, from our annual taxable income. Instead, we expect to meet our long-term liquidity needs primarily by relying upon external sources of capital. Short-term Liquidity Requirements Our short-term liquidity requirements consist primarily of funds necessary to pay for our operating expenses, including our general and administrative expenses as well as interest payments on our outstanding debt, and to pay distributions. We do not currently anticipate making significant capital expenditures or incurring other significant property costs because of the strong occupancy levels across our portfolio and the net lease nature of our leases. We expect to meet our short-term liquidity requirements primarily from cash and cash equivalents balances and net cash provided by operating activities, supplemented by borrowings under our Revolving Credit Facility. As detailed in the contractual obligations table below, we have approximately $124.2 million of expected obligations due throughout 2022, primarily consisting of the $60.0 million 2022 Unsecured Term Loan, $2.9 million of mortgage maturities, and $60.5 million of interest expense due, including the impact of our interest rate swaps. We expect to repay our $60.0 million 2022 Unsecured Term Loan with borrowings under our Revolving Credit Facility. We expect our cash provided by operating activities, as discussed below, will be sufficient to pay for our current obligations including interest expense on our borrowings. We expect to either repay the maturing mortgages with available cash on hand generated from our results of operations or borrowings under our Revolving Credit Facility, or refinance with property-level borrowings.
Long-term Liquidity Requirements Our long-term liquidity requirements consist primarily of funds necessary to repay debt and invest in additional revenue generating properties. Debt capital ishas historically been provided through unsecured term notes,loans from commercial banks, revolving credit facilities, and private placement senior unsecured notes. Further,In September 2021, we anticipate havingcompleted our inaugural public bond offering of $375 million aggregate principal amount of 2.600% senior unsecured notes due 2031 (the “2031 Senior Unsecured Public Notes”), and expect to use additional public bond offerings in the ability to access the public unsecured bond market, which was historically largely unavailable to us.future as a form of growth capital. The source and mix of our debt capital in the future will be impacted by market conditions as well as our continued focus on lengthening our debt maturity profile to better align with our portfolio’s lease terms,long-term leases, staggering debt maturities to reduce the risk that a significant amount of debt will mature in any single year in the future, and managing our exposure to interest rate risk. With outstanding borrowings of $102.0 million at December 31, 2021, we have $798.0 million of available capacity under our Revolving Credit Facility. We expect to meet our long-term liquidity requirements primarily from borrowings under our Revolving Credit Facility, future debt and equity financings, and proceeds from limited sales of our properties. Our ability to access these capital sources may be impacted by unfavorable market conditions, particularly in the debt and equity capital markets, that are outside of our control. In addition, our success will depend on our operating performance, our borrowing restrictions, our degree of leverage, and other factors. Our acquisition growth strategy significantly depends on our ability to obtain acquisition financing on favorable terms. We seek to reduce the risk that long-term debt capital may be unavailable to us by strengthening our balance sheet by investing in real estate with creditworthy tenants and lease guarantors, and by maintaining an appropriate mix of debt and equity capitalization. We also, from time to time, obtain or assume non-recourse mortgage financing from banks and insurance companies secured by mortgages on the corresponding specific property. Mortgages, however, are not currently a strategic focus of the active management of our capital structure. On September 21, 2020, we completed our IPO and issued 37 million shares of stock for net proceeds of $588.3 million, including shares issued subsequently pursuant to the underwriters’ partial exercise of their over-allotment option. We used $216.5 On June 28, 2021, we completed our first publicfollow-on equity offering and issued 11,500,000 shares of common stock, including shares issued pursuant to the underwriters’ full exercise of their over-allotment option, at $23.00 per share. The net proceeds, after deducting underwriting discounts and commissions of $10.6 million and $0.4 million of other expenses, were $253.5 million. On August 23, 2021, we established ancommon equity offering program (“ATM Program”), through which we may, from time to time, publicly offer and sell shares of our common stock having an aggregate gross sales price of up to $400 million. The ATM Program provides for forward sale agreements, enabling us to set the price of shares upon pricing the offering while delaying the issuance of shares and the receipt of the net proceeds to fully repayproceeds. During the outstanding borrowings and accrued interestyear ended December 31, 2021, we issued 1,071,500 shares of common stock under our then existing revolving credit agreementATM Program, at a weighted average sale price of $26.26 per share. The net proceeds, after deducting $0.3 million for commissions and $240.2$0.5 million of the proceeds to fully repay the outstanding principal and accrued interest associatedfor other issuance expenses, were $27.3 million. At December 31, 2021, we could issue additional common stock with an unsecured term loan.aggregate sales price of up to $371.9 million under the ATM Program. Our public offerings have been used to repay debt, fund acquisitions, and for other general corporate purposes.
As we deploy our net proceeds from our successful IPO and continue to invest in accretive real estate properties, we expect to continue to balance our debt and equity capitalization, while maintaining a Net Debt to Annualized Adjusted EBITDAre ratio below 6.0x on a sustained basis, through the anticipated use of follow-on equity offerings and an at-the-market (“ATM”) program.Prior to the IPO, equity capitalATM Program.
Unsecured Indebtedness and Capital Markets Activities as of and for our real estate acquisition activity was provided by proceeds from our private offering, including distributions reinvested through our DRIP. We suspended our private offering on January 10, 2020, and did not raise any equity through our private offering during the year endedYear Ended December 31, 2020. During the year ended December 31, 2020, we raised approximately $5.9 million in equity capital through our DRIP. For the year ended December 31, 2019, we raised $394.4 million in equity capital, of which $329.8 million was received through new cash investments and $64.6 million was raised through our DRIP. We announced on January 10, 2020 that we were terminating our DRIP effective February 10, 2020.2021
Unsecured Indebtedness
The following table sets forth our outstanding Revolving Credit Facility, unsecured term loansUnsecured Term Loans and Senior Unsecured Notes at December 31, 2020.2021. (in thousands, except interest rates) | | Outstanding Balance | | | Interest Rate | | | Maturity Date | Revolving Credit Facility | | $ | — | | | one-month LIBOR + 1.20% | | | Sept. 2023 | 2022 Unsecured Term Loan | | | 60,000 | | | one-month LIBOR + 1.25% | | | Feb. 2022 | 2023 Unsecured Term Loan | | | 265,000 | | | one-month LIBOR + 1.35% | | | Jan. 2023 | 2024 Unsecured Term Loan | | | 190,000 | | | one-month LIBOR + 1.25% | | | Jun. 2024 | 2026 Unsecured Term Loan | | | 450,000 | | | one-month LIBOR + 1.85% | | | Feb. 2026 | Senior Notes | | | | | | | | | | | Series A | | | 150,000 | | | 4.84% | | | Apr. 2027 | Series B | | | 225,000 | | | 5.09% | | | Jul. 2028 | Series C | | | 100,000 | | | 5.19% | | | Jul. 2030 | | | | 475,000 | | | | | | | | Total | | $ | 1,440,000 | | | | | | | |
| | | | | | | | | | | | | (in thousands, except interest rates) | | | | | | | | | | Unsecured revolving credit facility | | $ | 102,000 | | | | one-month LIBOR + 1.00% | | | | Sep. 2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 60,000 | | | | one-month LIBOR + 1.00% | | | | Feb. 2022 | | | | | 190,000 | | | | one-month LIBOR + 1.00% | | | | Jun. 2024 | | | | | 400,000 | | | | one-month LIBOR + 1.00% | | | | Feb. 2026 | | | | | | | | | | | | | | | Total unsecured term loans | | | 650,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2027 Senior Unsecured Notes - Series A | | | 150,000 | | | | 4.84% | | | | Apr. 2027 | | 2028 Senior Unsecured Notes - Series B | | | 225,000 | | | | 5.09% | | | | Jul. 2028 | | 2030 Senior Unsecured Notes - Series C | | | 100,000 | | | | 5.19% | | | | Jul. 2030 | | 2031 Senior Unsecured Public Notes | | | 375,000 | | | | 2.60% | | | | Sep. 2031 | | | | | | | | | | | | | | | Total senior unsecured notes | | | 850,000 | | | | | | | | | | | | | | | | | | | | | | | | | $ | 1,602,000 | | | | | | | | | | | | | | | | | | | | | | |
Revolving Credit Facility In connection with our IPO in September 2020, we replaced our prior $600.0 million revolving credit facility with a $900.0 million
The Revolving Credit Facility thathas a maximum availability of $900.0 million and includes $20.0 million available for issuance of letters of credit. The Revolving Credit Facility has an initial maturity date of September 2023 and provides for two six-month extensions, at our election, subject to certain conditions set forth in the agreement and payment of a 0.0625% fee on the revolving commitments. The Revolving Credit Facility contains an applicable facility fee ranging between 0.125% and 0.30% per annum, based on our credit rating. At December 31, 2020,2021, the facility fee was 0.25%0.20% per annum based on our credit ratingratings of Baa3 on such date.‘BBB’ and ‘Baa2’ from S&P and Moody’s, respectively. Borrowings on the Revolving Credit Facility bear interest at variable rates based on LIBOR plus a margin based on our credit rating ranging between 0.825% and 1.55% per annum. At December 31, 2020,2021, the applicable margin was 1.20% based 1.00%. Subsequent toyear-end, on our credit rating on such date.January 28, 2022 we amended and restated the Revolving Credit Facility, upsizing the capacity to $1 billion, extending its maturity date to March 2026, and reducing the applicable margin to 0.85%. 2022 Unsecured Term Loan We entered into the
The 2022 Unsecured Term Loan to partially repay BRE debt that we assumed as parthas an initial maturity date of the Internalization.February 2022. Borrowings under the 2022 Unsecured Term Loan are subject to interest only payments at variable rates equal to LIBOR plus a margin based on our credit rating, ranging between 0.85% and 1.65% per annum. At December 31, 2020,2021, the applicable margin was 1.25% based on our credit rating on such date.2023 Unsecured Term Loan
The 2023 Unsecured Term loan has an initial maturity date1.00%.
The 2024 Unsecured Term Loan has an initial maturity date of June 2024. Borrowings under the 2024 Unsecured Term Loan are subject to interest at variable rates based on LIBOR plus a margin based on our credit rating ranging between 0.85% and 1.65% per annum. At December 31, 2020,2021, the applicable margin was 1.25% based on our credit rating on such date.1.00%. 2026 Unsecured Term Loan The
On March 12, 2021, we amended the 2026 Unsecured Term Loan includes an accordion feature that provides for an increase inand made a $50.0 million paydown on the facility size uploan. Prior to a total of $550 million of available capacity. Borrowingsthe amendment, the borrowings under the 2026 Unsecured Term Loan are payablewere subject to interest onlyat variable rates based on a monthly basis during the term of the loan, with the principal amount due in February 2026. Borrowings under the 2026 Unsecured Term loan bear
interest equal to LIBOR plus a margin based on our credit rating ranging between 1.45% and 2.40%2.4% per annum. The amendment reduced the margin to a range between 0.85% and 1.65% based on our credit rating. At December 31, 2020,2021, the applicable margin was 1.85% based on our credit rating on such date.
1.00%. 2027 Senior NotesTo mitigate interest rate risk and extend the tenor of a portion of our debt, we have strategically added unsecured, fixed-rate, interest-only senior promissory notes (“Senior Notes”) to our capital structure. The SeniorUnsecured Notes were issued in three series (Series A, B, and C) as described below.
- Series A The 2027 Senior Unsecured Notes The - Series A Notes are payable interest only semiannually during their term, bear interest at a fixed rate of 4.84% per annum, and mature onin April 18, 2027.
2028 Senior Unsecured Notes - Series B and 2030 Senior Unsecured Notes - Series C The 2028 Senior Unsecured Notes The - Series B and 2030 Senior Unsecured Notes - Series C Notes are payable interest only semiannually during their term, and bear interest at fixed rates of 5.09% per annum and 5.19% per annum, respectively. The Series B Notes mature onin July 2, 2028, and the Series C Notes mature onin July 2, 2030.
2031 Senior Unsecured Public Notes On September 15, 2021, we completed our inaugural public bond offering of our 2031 Senior Unsecured Public Notes. We used the proceeds to repay the Revolving Credit Facility and a $265.0 million term loan in full that matured in 2020, to fund acquisitions, and for other general corporate purposes. Borrowings under the 2031 Senior Unsecured Public Notes are subject to interest only, semi-annual payments at a fixed rate of 2.60% per annum and mature in September 2031. The 2031 Senior Unsecured Public Notes were issued by our OP and are fully and unconditionally guaranteed by the Company. The assets, liabilities and results of operations of the OP are not materially different than the corresponding amounts in Company’s consolidated financial statements included herein.
We are subject to various covenants and financial reporting requirements pursuant to our debt facilities, which are summarized below. As of December 31, 2020,2021, we believe we were in compliance with all of our covenants on all outstanding borrowings. In the event of default, either through default on payments or breach of covenants, we may be restricted from paying dividends to our stockholders in excess of dividends required to maintain our REIT qualification. For each of the previous three years, we paid dividends out of our cash flows from operations in excess of the distribution amounts required to maintain our REIT qualification. Covenants
| | Requirement
| | | | | | ≤ 0.60 to 1.00 | Secured Indebtedness Ratio | | ≤ 0.40 to 1.00 | Unencumbered Coverage Ratio | | ≥ 1.75 to 1.00 | Fixed Charge Coverage Ratio | | ≥ 1.50 to 1.00 | Total Unsecured Indebtedness to Total Unencumbered Eligible Property Value | | ≤ 0.60 to 1.00 | Dividends and Other Restricted Payments | | Only applicable in case of default | | | ≤ 0.60 to 1.00 | Consolidated Income Available for Debt to Annual Debt Service Charge | | ≥ 1.50 to 1.00 | Total Unencumbered Assets to Total Unsecured Debt | | ≥ 1.50 to 1.00 | | | ≤ 0.40 to 1.00 |
The following table provides information with respect to our contractual commitments and obligations as of December 31, 2021 (in thousands). Refer to the discussion in the Liquidity and Capital Resources section above for further discussion over our short and long-term obligations. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Revolving Credit Facility (1) | | | | | | | | | | | | Tenant Improvement Allowances (3) | | | | | | | | | | $ | 60,000 | | | $ | — | | | $ | — | | | $ | 2,906 | | | $ | 60,542 | | | $ | 57 | | | $ | 723 | | | $ | 124,228 | | | | | — | | | | 102,000 | | | | — | | | | 7,582 | | | | 59,432 | | | | — | | | | 539 | | | | 169,553 | | | | | 190,000 | | | | — | | | | — | | | | 9,760 | | | | 55,578 | | | | — | | | | 153 | | | | 255,491 | | | | | — | | | | — | | | | — | | | | 20,195 | | | | 52,126 | | | | — | | | | 155 | | | | 72,476 | | | | | 400,000 | | | | — | | | | — | | | | 16,843 | | | | 43,682 | | | | — | | | | 157 | | | | 460,682 | | | | | — | | | | — | | | | 850,000 | | | | 39,874 | | | | 94,113 | | | | — | | | | 3,620 | | | | 987,607 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 650,000 | | | $ | 102,000 | | | $ | 850,000 | | | $ | 97,160 | | | $ | 365,473 | | | $ | 57 | | | $ | 5,347 | | | $ | 2,070,037 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | On January 28, 2022, we amended and restated the Revolving Credit Facility, extending its maturity date to March 2026. The amended agreement contains twosix-month extension options subject to certain conditions, including the payment of an extension fee equal to 0.0625% of the revolving commitments. |
| (2) | Interest expense is projected based on the outstanding borrowings and interest rates in effect as of December 31, 2021. This amount includes the impact of interest rate swap agreements. |
| (3) | We expect to pay tenant improvement allowances out of cash flows from operations or from additional borrowings. |
At December 31, 2021 and 2020, investment in rental property of $161.6 million and $173.5 million, respectively, was pledged as collateral against our mortgages. Additionally, we are a party to three separate tax protection agreements with the contributing members of three distinct UPREIT transactions and we entered into the Founding Owners’ Tax Protection Agreement in connection with the Internalization. The tax protection agreements require us to indemnify the beneficiaries in
the event of a sale, exchange, transfer, or other disposal of the contributed property, and in the case of the Founding Owners’ Tax Protection Agreement, the entire Company, in a taxable transaction that would cause such beneficiaries to recognize a gain that is protected under the agreements, subject to certain exceptions. Based on values as of December 31, 2021, taxable sales of the applicable properties would trigger liability under the four agreements of approximately $22.3 million. Based on information available, we do not believe that the events resulting in damages as detailed above have occurred or are likely to occur in the foreseeable future. Accordingly, we have excluded these commitments from the contractual commitments table above. In the normal course of business, we enter into various types of commitments to purchase real estate properties. These commitments are generally subject to our customary due diligence process and, accordingly, a number of specific conditions must be met before we are obligated to purchase the properties. Derivative Instruments and Hedging Activities We are exposed to interest rate risk arising from changes in interest rates on the floating-rate borrowings under our unsecured credit facilities and a certain mortgage. Borrowings pursuant to our unsecured credit facilities and the mortgage bear interest at floating rates based on LIBOR plus an applicable margin. Accordingly, fluctuations in market interest rates may increase or decrease our interest expense, which will in turn, increase or decrease our net income and cash flow. We attempt to manage our interest rate risk by entering into interest rate swaps. As of December 31, 2020,2021, we had 3324 interest rate swaps outstanding in an aggregate notional amount of $859.8$640.0 million. Under these agreements, we receive monthly payments from the counterparties equal to the related variable interest rates multiplied by the outstanding notional amounts. In turn, we pay the counterparties each month an amount equal to a fixed interest rate multiplied by the related outstanding notional amounts. The intended net impact of these transactions is that we pay a fixed interest rate on our variable-rate borrowings. The interest rate swaps have been designated by us as cash flow hedges for accounting purposes and are reported at fair value. We assess, both at inception and on an ongoing basis, the effectiveness of our qualifying cash flow hedges. We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes.
Cash and cash equivalents and restricted cash totaled $27.8 million, $110.7 million, $20.3 million, and $19.0$20.3 million at December 31, 2021, 2020, 2019, and 2018,2019, respectively. The table below shows information concerning cash flows for the years ended December 31, 2021, 2020, 2019, and 2018:2019: | | For the Year Ended December 31, | | (in thousands) | | 2020 | | | 2019 | | | 2018 | | Net cash provided by operating activities | | $ | 179,028 | | | $ | 147,358 | | | $ | 128,011 | | Net cash used in investing activities | | | (60,236 | ) | | | (831,707 | ) | | | (510,459 | ) | Net cash (used in) provided by financing activities | | | (28,375 | ) | | | 685,671 | | | | 391,338 | | Increase in cash and cash equivalents and restricted cash | | $ | 90,417 | | | $ | 1,322 | | | $ | 8,890 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | Net cash provided by operating activities | | $ | 244,937 | | | $ | 179,028 | | | $ | 147,358 | | Net cash used in investing activities | | | (582,304 | ) | | | (60,236 | ) | | | (831,707 | ) | Net cash provided by (used in) financing activities | | | 254,408 | | | | (28,375 | ) | | | 685,671 | | | | | | | | | | | | | | | (Decrease) increase in cash and cash equivalents and restricted cash | | $ | (82,959 | ) | | $ | 90,417 | | | $ | 1,322 | | | | | | | | | | | | | | |
The increase in net cash provided by operating activities during the years ended December 31, 20202021 and 2019,2020, as compared to the comparable prior periods, was mainly due to growth in our real estate portfolio and cost savings associated with the Internalization, in addition to $35 million lease termination fee we received during the year ended December 31, 2021. The increase in net cash provided by operating activities during the years ended December 31, 2020 as compared to the year ended December 31, 2019, was mainly due to growth in our real estate portfolio and cost savings associated with the Internalization.
The increase in net cash used in investing activities during the year ended December 31, 2021 as compared to the year ended December 31, 2020, was mainly due to increased acquisition volume in 2021 offset by decrease in cash paid in connection with the Internalization. The change in net cash used in investing activities during the year ended December 31, 2020 as compared to the year ended December 31, 2019, was mainly due to decreased acquisition volume, offset by cash paid in connection with the Internalization and decreased proceeds from the disposal of properties in 2020. The increase in net cash used in investingprovided by (used in) financing activities during the year ended December 31, 20192021 as compared to the year ended December 31, 2018, reflected increased outflows for the acquisition of properties, most notably a significant acquisition during August 2019. In addition, during the 2018 period, we received $18.5 million from the sale of our investment2020, mainly reflects an increase in preferred units of BRE, with no such cash inflow in 2019. These factors were somewhat offset by increasednet proceeds from the disposal of properties as we actively manageequity and debt offerings in 2021 to fund growth in our balance sheet following the Industrial Portfolio Acquisition.real estate portfolio. The change in net cash (used in) provided by financing activities during the year ended December 31, 2020 as compared to the year ended December 31, 2019, mainly reflects a net repayment of debt in 2020 with proceeds from our IPO, compared to net borrowings in 2019 that were partially offset by increased proceeds from the sale of common stock. The increase in net cash provided by financing activities during the year ended December 31, 2019 as compared to the year ended December 31, 2018, mainly reflects net incremental borrowings and increased proceeds from the issuance of our common stock, which were used to fund the increased acquisition activity, partially offset by increased distributions resulting from an increase in the number of shares of common stock outstanding. Contractual Obligations
The following table provides information with respect to our contractual commitments and obligations as of December 31, 2020 (in thousands).
Year of Maturity | | Term Loan | | | Revolving Credit Facility(1) | | | Senior Notes | | | Mortgages and Notes Payable | | | Interest Expense(2) | | | Tenant Improvement Allowances(3) | | | Operating Leases | | | Total | | 2021 | | $ | — | | | $ | — | | | $ | — | | | $ | 18,006 | | | $ | 63,323 | | | $ | 1,981 | | | $ | 719 | | | $ | 84,029 | | 2022 | | | 60,000 | | | | — | | | | — | | | | 2,907 | | | | 61,479 | | | | — | | | | 686 | | | | 125,072 | | 2023 | | | 265,000 | | | | — | | | | — | | | | 7,582 | | | | 56,101 | | | | — | | | | 505 | | | | 329,188 | | 2024 | | | 190,000 | | | | — | | | | — | | | | 2,260 | | | | 50,486 | | | | — | | | | 120 | | | | 242,866 | | 2025 | | | — | | | | — | | | | — | | | | 20,195 | | | | 46,715 | | | | — | | | | 121 | | | | 67,031 | | Thereafter | | | 450,000 | | | | — | | | | 475,000 | | | | 56,717 | | | | 82,550 | | | | — | | | | 2,290 | | | | 1,066,557 | | Total | | $ | 965,000 | | | $ | — | | | $ | 475,000 | | | $ | 107,667 | | | $ | 360,654 | | | $ | 1,981 | | | $ | 4,441 | | | $ | 1,914,743 | |
(1)
| We may extend the Revolving Credit Facility twice, each for a six-month period, subject to certain conditions, including the payment of an extension fee equal to 0.0625% of the revolving commitments.
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(2)
| Interest expense is projected based on the outstanding borrowings and interest rates in effect as of December 31, 2020. This amount includes the impact of interest rate swap agreements, and excludes the expected decrease in the applicable margins for our variable-rate term borrowings as a result of receiving a BBB credit rating from S&P in January 2021.
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(3)
| We expect to pay tenant improvement allowances out of cash flows from operations or from additional borrowings.
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At, December 31, 2020 and 2019, investment in rental property of $173.5 million and $178.7 million, respectively, was pledged as collateral against our mortgages and notes payable.
Additionally, we are a party to three separate tax protection agreements with the contributing members of three distinct UPREIT transactions and we entered into the Founding Owners’ Tax Protection Agreement with our Founding Owners in connection with the Internalization. The tax protection agreements require us to indemnify the beneficiaries in the event of a sale, exchange, transfer, or other disposal of the contributed property, or in the case of the Founding Owners’ Tax Protection Agreement, the entire Company, in a taxable transaction that would cause such beneficiaries to recognize a gain that is protected under the agreements, subject to certain exceptions. Based on values as of December 31, 2020, taxable sales of the applicable properties would trigger liability under the four agreements of approximately $22.3 million. Based on information available, we do not believe that the events resulting in damages as
detailed above have occurred or are likely to occur in the foreseeable future. Accordingly, we have excluded these commitments from the contractual commitments table above.
Non-GAAP Measures
We compute FFO in accordance with the standards established by the Board of Governors of Nareit, the worldwide representative voice for REITs and publicly traded real estate companies with an interest in the U.S. real estate and capital markets. Nareit defines FFO as GAAP net income or loss adjusted to exclude net gains (losses) from sales of certain depreciated real estate assets, depreciation and amortization expense from real estate assets, gains and losses from change in control, and impairment charges related to certain previously depreciated real estate assets. To derive AFFO, we modify the Nareit computation of FFO to include other adjustments to GAAP net income related to certain non-cash and non-recurring revenues and expenses, including straight-line rents, write-off of accrued rental income, the change in fair value of our earnout liability, cost of debt extinguishments, amortization of lease intangibles, amortization of debt issuance costs, amortization of net mortgage premiums, (gain) loss on interest rate swaps and other non-cash interest expense, realized gains or losses on foreign currency transactions, internalization expenses, stock-based compensation, severance, extraordinary items, and other specified non-cash items. We believe that such items are not a result of normal operations and thus we believe excluding such items assists management and investors in distinguishing whether changes in our operations are due to growth or decline of operations at our properties or from other factors. Our leases include cash rents that increase over the term of the lease to compensate us for anticipated increases in market rentalsrental rates over time. Our leases do not include significant front-loading or back-loading of payments, or significant rent-free periods. Therefore, we find it useful to evaluate rent on a contractual basis as it allows for comparison of existing rental rates to market rental rates. In situations where we granted short-term rent deferrals as a result of the COVID-19 pandemic, and such deferrals were probable of collection and expected to be repaid within a short term, we continued to recognize the same amount of GAAP lease revenues each period. Consistent with GAAP lease revenues, the short-term deferrals associated with COVID-19, and the corresponding payments, did not impact our AFFO. We further exclude the change in fair value of our earnout liability, lease terminations fees, costs or gains recorded on the extinguishment of debt, non-cash interest expense and gains, the amortization of debt issuance costs, net mortgage premiums, and lease intangibles, realized gains and losses on foreign currency transactions, internalization expenses, stock-based compensation and severance, as these items are not indicative of ongoing operational results. We use AFFO as a measure of our performance when we formulate corporate goals. FFO is used by management, investors, and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers, primarily because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market
conditions. We believe that AFFO is a useful supplemental measure for investors to consider because it will help them to better assess our operating performance without the distortions created by non-cash revenues or expenses. FFO and AFFO may not be comparable to similarly titled measures employed by other REITs, and comparisons of our FFO and AFFO with the same or similar measures disclosed by other REITs may not be meaningful. Neither the SEC nor any other regulatory body has passed judgment on the acceptability of the adjustments to FFO that we use to calculate AFFO. In the future, the SEC, Nareit or another regulatory body may decide to standardize the allowable adjustments across the REIT industry and in response to such standardization we may have to adjust our calculation and characterization of AFFO accordingly.
The following table reconciles net income (which is the most comparable GAAP measure) to FFO and AFFO:
| | For the Year Ended December 31, | | (in thousands, except per share data) | | 2020 | | | 2019 | | | 2018 | | Net income | | $ | 56,276 | | | $ | 85,114 | | | $ | 75,105 | | Real property depreciation and amortization | | | 132,613 | | | | 108,818 | | | | 83,994 | | Gain on sale of real estate | | | (14,985 | ) | | | (29,914 | ) | | | (10,496 | ) | Provision for impairment on investment in rental properties | | | 19,077 | | | | 3,452 | | | | 2,061 | | FFO | | $ | 192,981 | | | $ | 167,470 | | | $ | 150,664 | | Capital improvements / reserves | | | 1,662 | | | | (97 | ) | | | (196 | ) | Straight-line rent adjustment | | | (19,831 | ) | | | (21,943 | ) | | | (19,492 | ) | Adjustment to provision for credit losses | | | (148 | ) | | | — | | | | — | | Cost of debt extinguishment | | | 417 | | | | 1,176 | | | | 101 | | Gain on sale of investment in related party | | | — | | | | — | | | | (8,500 | ) | Amortization of debt issuance costs | | | 3,445 | | | | 2,685 | | | | 1,918 | | Amortization of net mortgage premiums | | | (142 | ) | | | (143 | ) | | | (142 | ) | Gain on interest rate swaps and other non-cash interest expense | | | (166 | ) | | | (205 | ) | | | (84 | ) | Amortization of lease intangibles | | | (1,118 | ) | | | (3,410 | ) | | | (304 | ) | Internalization expenses | | | 3,705 | | | | 3,658 | | | | — | | Stock-based compensation | | | 1,989 | | | | — | | | | — | | Severance | | | 94 | | | | — | | | | — | | Change in fair value of earnout liability | | | (1,800 | ) | | | — | | | | — | | Other expenses | | | 7 | | | | 6 | | | | 100 | | AFFO | | $ | 181,095 | | | $ | 149,197 | | | $ | 124,065 | |
| | | | | | | | | | | | | | | | For the Year Ended December 31, | | (in thousands, except per share data) | | | | | | | | | | | | $ | 109,528 | | | $ | 56,276 | | | $ | 85,114 | | Real property depreciation and amortization | | | 131,999 | | | | 132,613 | | | | 108,818 | | Gain on sale of real estate | | | (13,523 | ) | | | (14,985 | ) | | | (29,914 | ) | Provision for impairment on investment in rental properties | | | 28,208 | | | | 19,077 | | | | 3,452 | | | | | | | | | | | | | | | | | $ | 256,212 | | | $ | 192,981 | | | $ | 167,470 | | | | | | | | | | | | | | | Straight-line rent adjustment | | | (20,304 | ) | | | (24,066 | ) | | | (21,986 | ) | Write-off of accrued rental income | | | 1,938 | | | | 4,235 | | | | 43 | | | | | (35,000 | ) | | | — | | | | — | | Adjustment to provision for credit losses | | | (38 | ) | | | (148 | ) | | | — | | Cost of debt extinguishment | | | 368 | | | | 417 | | | | 1,176 | | Amortization of debt issuance costs | | | 3,854 | | | | 3,445 | | | | 2,685 | | Amortization of net mortgage premiums | | | (132 | ) | | | (142 | ) | | | (143 | ) | Loss (gain) on interest rate swaps and other non-cash interest expense | | | 698 | | | | (166 | ) | | | (205 | ) | Amortization of lease intangibles | | | (3,208 | ) | | | (1,118 | ) | | | (3,410 | ) | | | | 4,669 | | | | 1,989 | | | | — | | | | | 1,304 | | | | 94 | | | | — | | Change in fair value of earnout liability | | | 5,539 | | | | (1,800 | ) | | | — | | | | | — | | | | 3,705 | | | | 3,658 | | Capital improvements/reserves | | | — | | | | 1,662 | | | | (97 | ) | | | | 62 | | | | 7 | | | | 6 | | | | | | | | | | | | | | | | | $ | 215,962 | | | $ | 181,095 | | | $ | 149,197 | | | | | | | | | | | | | | |
EBITDA, EBITDAre, Adjusted EBITDAre and Annualized Adjusted EBITDAre We compute EBITDA as earnings before interest, income taxes and depreciation and amortization. EBITDA is a measure commonly used in our industry. We believe that this ratio provides investors and analysts with a measure of our performance that includes our operating results unaffected by the differences in capital structures, capital investment cycles and useful life of related assets compared to other companies in our industry. We compute EBITDAre in accordance with the definition adopted by Nareit, as EBITDA excluding gains (loss) from the sales of depreciable property and provisions for impairment on investment in real estate. We believe EBITDA and EBITDAre are useful to investors and analysts because they provide important supplemental information about our operating performance exclusive of certain non-cash and other costs. EBITDA and
EBITDAre are not measures of financial performance under GAAP, and our EBITDA and EBITDAre may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA and EBITDAre as alternatives to net income or cash flows from operating activities determined in accordance with GAAP. We are focused on a disciplined and targeted acquisition strategy, together with active asset management that includes selective sales of properties. We manage our leverage profile using a ratio of Net Debt to Annualized Adjusted EBITDAre, each discussed further below, which we believe is a useful measure of our ability to repay debt and a relative measure of leverage, and is used in communications with our lenders and rating agencies regarding our credit rating. As we fund new acquisitions using our unsecured Revolving Credit Facility, our leverage profile and Net Debt will be immediately impacted by current quarter acquisitions. However, the full benefit of EBITDAre from newly acquired properties will not be received in the same quarter in which the properties are acquired. Additionally, EBITDAre for the quarter includes amounts generated by properties that have been sold during the quarter. Accordingly, the variability in EBITDAre caused by the timing of our acquisitions and dispositions can temporarily distort our leverage ratios. We adjust EBITDAre (“Adjusted EBITDAre”) for the most recently completed quarter (i) to recalculate as if all acquisitions and dispositions had occurred at the beginning of the quarter, (ii) to exclude certain GAAP income and expense amounts that are either non-cash, such as cost of debt extinguishments or the change in fair value of our earnout liability, or that we believe are one time, or unusual in nature because they relate to unique circumstances or transactions that had not previously occurred and which we do not anticipate occurring in the future, and (iii) to eliminate the impact of lease termination fees and other items that are not a result of normal operations. We then annualize quarterly Adjusted EBITDAre by multiplying it by four (“Annualized Adjusted EBITDAre”). You should not unduly rely on this measure as it is based on assumptions and estimates that may prove to be inaccurate. Our actual reported EBITDAre for future periods may be significantly different from our Annualized Adjusted EBITDAre. Adjusted EBITDAre and Annualized Adjusted EBITDAre are not measurements of performance under GAAP, and our Adjusted EBITDAre and Annualized Adjusted EBITDAre may not be comparable to similarly titled measures of other companies. You should not consider our Adjusted EBITDAre and Annualized Adjusted EBITDAre as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.
The following table reconciles net income (which is the most comparable GAAP measure) to EBITDA, and EBITDAre: | | For the Year Ended December 31, | | (in thousands) | | 2020 | | | 2019 | | | 2018 | | Net income | | $ | 56,276 | | | $ | 85,114 | | | $ | 75,105 | | Depreciation and amortization | | | 132,685 | | | | 108,818 | | | | 83,994 | | Interest expense | | | 76,138 | | | | 72,534 | | | | 52,855 | | Income taxes | | | 939 | | | | 2,415 | | | | 857 | | EBITDA | | $ | 266,038 | | | $ | 268,881 | | | $ | 212,811 | | Provision for impairment of investment in rental properties | | | 19,077 | | | | 3,452 | | | | 2,061 | | Gain on sale of real estate | | | (14,985 | ) | | | (29,914 | ) | | | (10,496 | ) | EBITDAre | | $ | 270,130 | | | $ | 242,419 | | | $ | 204,376 | |
The following table reconciles EBITDAre, toand Adjusted EBITDAre. Information is also presented with respect to Annualized EBITDAre and Annualized Adjusted EBITDAre:
| | For the Three Months Ended December 31, | | (in thousands) | | 2020 | | | 2019 | | | 2018 | | Net income | | $ | 17,619 | | | $ | 27,712 | | | $ | 14,660 | | Depreciation and amortization | | | 30,182 | | | | 30,829 | | | | 22,691 | | Interest expense | | | 17,123 | | | | 21,509 | | | | 14,740 | | Income taxes | | | (141 | ) | | | 1,262 | | | | 46 | | EBITDA | | $ | 64,783 | | | $ | 81,312 | | | $ | 52,137 | | Provision for impairment of investment in rental properties | | | 1,678 | | | | — | | | | — | | Gain on sale of real estate | | | (5,260 | ) | | | (13,142 | ) | | | (876 | ) | EBITDAre | | $ | 61,201 | | | $ | 68,170 | | | $ | 51,261 | | Adjustment for current quarter acquisition activity (1) | | | 1,703 | | | | 346 | | | | 3,463 | | Adjustment for current quarter disposition activity (2) | | | (318 | ) | | | (1,015 | ) | | | (60 | ) | Adjustment to exclude non-recurring expenses (income) (3) | | | 182 | | | | 2,463 | | | | — | | Adjustment to exclude change in fair value of earnout liability | | | 6,706 | | | | — | | | | — | | Adjustment to exclude write-off of accrued rental income | | | 242 | | | | — | | | | — | | Adjusted EBITDAre | | $ | 69,716 | | | $ | 69,964 | | | $ | 54,664 | | Annualized EBITDAre | | $ | 244,805 | | | $ | 272,680 | | | $ | 205,044 | | Annualized Adjusted EBITDAre | | $ | 278,867 | | | $ | 279,856 | | | $ | 218,656 | |
| | | | | | | | | | | | | | | | For the Three Months Ended December 31, | | | | | | | | | | | | | | $ | 32,226 | | | $ | 17,619 | | | $ | 27,712 | | Depreciation and amortization | | | 33,476 | | | | 30,182 | | | | 30,829 | | | | | 16,997 | | | | 17,123 | | | | 21,509 | | | | | 457 | | | | (141 | ) | | | 1,262 | | | | | | | | | | | | | | | | | $ | 83,156 | | | $ | 64,783 | | | $ | 81,312 | | Provision for impairment of investment in rental properties | | | 207 | | | | 1,678 | | | | — | | Gain on sale of real estate | | | (3,732 | ) | | | (5,260 | ) | | | (13,142 | ) | | | | | | | | | | | | | | | | $ | 79,631 | | | $ | 61,201 | | | $ | 68,170 | | Adjustment for current quarter acquisition activity (1) | | | 2,002 | | | | 1,703 | | | | 346 | | Adjustment for current quarter disposition activity (2) | | | (180 | ) | | | (318 | ) | | | (1,015 | ) | Adjustment to exclude non-recurring expenses (income) (3) | | | — | | | | 182 | | | | 2,463 | | Adjustment to exclude change in fair value of earnout liability | | | — | | | | 6,706 | | | | — | | Adjustment to exclude write-off of accrued rental income | | | — | | | | 242 | | | | — | | | | | | | | | | | | | | | | | $ | 81,453 | | | $ | 69,716 | | | $ | 69,964 | | | | | | | | | | | | | | | | | $ | 318,526 | | | $ | 244,805 | | | $ | 272,680 | | | | | | | | | | | | | | | Annualized Adjusted EBITDAre | | $ | 325,812 | | | $ | 278,867 | | | $ | 279,856 | | | | | | | | | | | | | | |
(1) | Reflects an adjustment to give effect to all acquisitions during the quarter as if they had been acquired as of the beginning of the quarter. |
(2) | Reflects an adjustment to give effect to all dispositions during the quarter as if they had been sold as of the beginning of the quarter.
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(3) | Amounts represent expense directly associated with the Internalization.
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Net Debt, Net Debt to Annualized EBITDAre and Net Debt to Annualized Adjusted EBITDAre We define Net Debt as gross debt (total reported debt plus deferred financingdebt issuance costs) less cash and cash equivalents and restricted cash. We believe that the presentation of Net Debt to Annualized EBITDAre and Net Debt to Annualized Adjusted EBITDAre is useful to investors and analysts because these ratios provide information about gross debt less cash and cash equivalents, which could be used to repay debt, compared to our performance as measured using EBITDAre, and is used in communications with lenders and rating agencies regarding our credit rating. The following table reconciles total debt (which is the most comparable GAAP measure) to Net Debt, and presents the ratio of Net Debt to Annualized EBITDAre and Net Debt to Annualized Adjusted EBITDAre, respectively: | | As of December 31, | | (in thousands) | | 2020 | | | 2019 | | Debt | | | | | | | | | Mortgages and notes payable, net | | $ | 107,382 | | | $ | 111,793 | | Unsecured term notes, net | | | 1,433,796 | | | | 1,672,081 | | Revolving Credit Facility | | | — | | | | 197,300 | | Debt issuance costs | | | 6,489 | | | | 8,277 | | Gross Debt | | | 1,547,667 | | | | 1,989,451 | | Cash and cash equivalents | | | (100,486 | ) | | | (12,455 | ) | Restricted cash | | | (10,242 | ) | | | (7,856 | ) | Net Debt | | $ | 1,436,939 | | | $ | 1,969,140 | | Net Debt to Annualized EBITDAre | | 5.87x | | | 7.22x | | Net Debt to Annualized Adjusted EBITDAre | | 5.15x | | | 7.04x | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unsecured revolving credit facility | | $ | 102,000 | | | $ | — | | Unsecured term loans, net | | | 646,671 | | | | 961,330 | | Senior unsecured notes, net | | | 843,801 | | | | 472,466 | | | | | 96,846 | | | | 107,382 | | | | | 9,842 | | | | 6,489 | | | | | | | | | | | | | | 1,699,160 | | | | 1,547,667 | | Cash and cash equivalents | | | (21,669 | ) | | | (100,486 | ) | | | | (6,100 | ) | | | (10,242 | ) | | | | | | | | | | | | $ | 1,671,391 | | | $ | 1,436,939 | | | | | | | | | | | Net Debt to Annualized EBITDAre | | | 5.25x | | | | 5.87x | | | | | | | | | | | Net Debt to Annualized Adjusted EBITDAre | | | 5.13x | | | | 5.15x | | | | | | | | | | |
Critical Accounting Policies and Estimates The preparation of our consolidated financial statements in conformance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses as well as other disclosures in the financial statements. We base our estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances. These judgments affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. On an ongoing basis, management evaluates its estimates and assumptions; however, actual results may differ from these estimates and assumptions, which in turn could have a material impact on our financial statements. A summary of our significant accounting policies and procedures are included in Note 2, “Summary of Significant Accounting Policies”, contained in Item 8. “Financial Statements and Supplementary Data” included in this Annual Report on Form 10-K. Management believes the following critical accounting policies, among others, affect its more significant estimates and assumptions used in the preparation of our consolidated financial statements. Investment in Rental Property Rental property accounted for under operating leases is recorded at cost. Rental property accounted for under direct financing leases and sales-type are recorded at its net investment, which generally represents the cost of the property at the inception of the lease. We account for acquisitions of real estate as asset acquisitions in accordance with Accounting Standards Codification (“ASC”) 805, as substantially all of the fair value of the assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets.
We allocate the purchase price of investments in rental property accounted for as asset acquisitions based on the relative fair value of the assets acquired and liabilities assumed. These generally include tangible assets, consisting of land and land improvements, buildings and other improvements, and equipment, and identifiable intangible assets and liabilities, including the value of in-place leases and acquired above-market and below-market leases. Acquisition costs incurred in connection with investments in real estate accounted for as asset acquisitions are capitalized and included with the allocated purchase price. The results of operations of acquired properties are included in the Consolidated Statements of Income and Comprehensive Income from the respective date of acquisition.We use multiple sources to estimate fair value, including information obtained about each property as a result of our pre-acquisition due diligence and our marketing and leasing activities. Factors that impact our fair value determination include real estate market conditions, industry conditions that the tenant operates in, and characteristics of the real estate and/or real estate appraisals. Changes in any of these factors could impact the future purchase prices of our investments and the corresponding capitalization rates recognized. We do not believe the assumptions used to fair value the investments upon acquisition have a significant degree of estimation uncertainty.The estimated fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant. The value is then allocated to land and land improvements, buildings, and equipment based on comparable sales and other relevant information with respect to the property, as estimated by management. Specifically, the “if vacant” value of buildings and
equipment is calculated using an income approach. Assumptions used in the income approach to value the buildings include: capitalization and discount rates,lease-up time, market rents, make ready costs, land value, and land improvement value. The estimated fair value of acquired in-place leases are the costs we would have had to incur to lease the properties to the occupancy level of the properties at the date of acquisition. Such costs include the fair value of leasing commissions and other operating costs that would have been incurred to lease the properties, had they been vacant, to their acquired occupancy level. Acquired in-place leases as of the date of acquisition are amortized over the remaining non-cancellable lease terms of the respective leases to amortization expense. Acquired above-market and below-market lease values are recorded based on the present value (using an interest rate that reflects the risks associated with the lease acquired) of the differences between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market value lease rates at the time of acquisition for the corresponding in-place leases. The capitalized above-market and below-market lease values are amortized as adjustments to rental income over the remaining term of the respective leases. Should a tenant terminate its lease, the unamortized portion of the in-place lease value is charged to amortization expense and the unamortized portion of above-market or below-market lease value is charged to rental income.
Management estimates the fair value of assumed mortgages and notes payable based upon indications of then-current market pricing for similar types of debt with similar maturities. Assumed mortgages and notes payable are initially recorded at their estimated fair value as of the assumption date, and the difference between such estimated fair value and the notes’ outstanding principal balance is amortized to interest expense over the remaining term of the debt. Expenditures for significant betterments and improvements are capitalized. Maintenance and repairs are charged to expense when incurred. Construction and improvement costs incurred in connection with the development of new properties or the redevelopment of existing properties are capitalized. Real estate taxes, interest costs, and leasing and development costs incurred during construction periods are capitalized. Capitalization is based on qualified expenditures and interest rates. Capitalized real estate taxes, interest costs, and leasing and development costs are amortized over lives which are consistent with the related assets. There were no capitalized interest or real estate taxes during the years ended December 31, 2020, 2019, and 2018.
Long-lived Asset Impairment We review long-lived assets other than goodwill, to be held and used for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If, and when, such events or changes in circumstances are present, an impairment exists to the extent the carrying value of the long-lived asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use of the long-lived asset or asset group and its eventual disposition. Such cash flows include expected future operating income, as adjusted for trends and prospects, as well as the effects of demand, competition, and other factors. An impairment loss is measured as the amount by which the carrying amount of the long-lived asset or asset group exceeds the fair value of the asset or asset group. A significantvalue. Significant judgment is made as to determine if and when impairment should be taken. Management’s assessment of impairment assessment as of December 31, 20202021 was based on the most current information available. Based upon current market conditions resulting from the COVID-19 pandemic, certainavailable to management. Certain of our properties may have fair values less than their carrying amounts. However, based on management’s plans with respect to each of those properties, we believe that their carrying amounts are recoverable and therefore, under applicable GAAP guidance, no impairment charges were recognized other than those described below. If the operating conditions mentioned above deteriorate or if our expected holding period for assets changes, subsequent tests for impairments could result in additional impairment charges in the future. During the year ended December 31, 2020, we recorded impairment charges associated with seven properties. Impairment indicators included changes in our long-term hold strategy with respect to the individual properties, which was due in part to unfavorable market trends resulting from the COVID-19 pandemic in geographic areas where we have vacant properties being marketed for re-lease or sale.
Inputs used in establishing fair value for real estate assets generally fall within Level 3 of the fair value hierarchy, which are characterized as requiring significant judgment as little or no current market activity may be available for validation. The main indicator used to establish the classification of the inputs is current market conditions, as derived through the use of published commercial real estate market information. We determine the valuation of impaired assets using generally accepted valuation techniques including discounted cash flow analysis, income capitalization, analysis of recent comparable sales transactions, actual sales negotiations, and bona fide purchase offers received from third parties. We may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of our real estate. During the years ended December 31, 2020, 2019, and 2018, we recorded
The following table summarizes our impairment charges of $19.1 million, $3.5 million, and $2.1 million, respectively.
resulting primarily from changes in our long-term hold strategy with respect to the individual properties: | | | | | | | | | | | | | | | | | | (in thousands, except number of properties) | | | | | | | | | | | | | 7 | | | | 7 | | | | 4 | | Carrying value prior to impairment charge | | $ | 48,604 | | | $ | 55,674 | | | $ | 15,901 | | | | | 20,396 | | | | 36,597 | | | | 12,449 | | | | | | | | | | | | | | | | | $ | 28,208 | | | $ | 19,077 | | | $ | 3,452 | | | | | | | | | | | | | | |
Goodwill represents the excess of the amount paid over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination and it assigned to one or more reporting units. We evaluate goodwill for impairment when an event occurs or circumstances change that indicate the carrying value may not be recoverable, or at least annually. Our annual testing date is November 30. The goodwill impairment evaluation is completed using either a qualitative or quantitative approach. Under a qualitative approach, the impairment review for goodwill consists of an assessment of whether it is more-likely-than-not that the reporting unit’s fair value is less than its carrying value, including goodwill. If a qualitative approach indicates it is more likely-than-not that the estimated carrying value of a reporting unit (including goodwill) exceeds its fair value, or if we choose to bypass the qualitative approach, we perform the quantitative approach described below. When we perform a quantitative test of goodwill for impairment, we compare the carrying value of a reporting unit with its fair value. If the fair value of the reporting unit exceeds its carrying amount, we do not consider goodwill to be impaired and no further analysis would be required. If the fair value is determined to be less than its carrying value, the amount of goodwill impairment equals the amount by which the reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Management determined that we have one reporting unit, consistent with our segment reporting analysis, which includes the acquisition, leasing, and ownership of net leased properties (i.e., the consolidated entity). When necessary to perform the quantitative test for goodwill impairment, our estimate of fair value is determined using a market approach, leveraging assumptions such as the fair value of our equity, and consideration of a control premium, if necessary, which includes an analysis of similar market transactions. While we believe the assumptions used to estimate the fair value of our reporting unit are reasonable, changes in these assumptions may have a material impact on our financial results. Based on the results of our annual goodwill impairment test on November 30, 2020,2021, our inaugural goodwill impairment test date, we concluded that goodwill was not impaired.
We account for leases in accordance with ASC 842, Leases. We commence revenue recognition on our leases based on a number of factors, including the initial determination that the contract is or contains a lease.
Generally, all of our property related contracts are or contain leases, and therefore revenue is recognized when the lessee takes possession of or controls the physical use of the leased assets. In most instances this occurs on the lease commencement date. At the time of lease assumption or at the inception of a new lease, including new leases that arise from amendments, we assess the terms and conditions of the lease to determine the proper lease classification. Certain of our leases require tenants to pay rent based upon a percentage of the property’s net sales (“percentage rent”) or contain rent escalators indexed to future changes in the CPI. Lease income associated with such provisions is considered variable lease income and therefore is not included in the initial measurement of the lease receivable, or in the calculation of straight-line rent revenue. Such amounts are recognized as income when the amounts are determinable.
A lease is classified as an operating lease if none of the following criteria are met: (i) ownership transfers to the lessee at the end of the lease term, (ii) the lessee has a purchase option that is reasonably expected to be exercised, (iii) the lease term is for a major part of the economic life of the leased property, (iv) the present value of the future lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the leased property, and (v) the leased property is of such a specialized nature that it is expected to have no future alternative use to the Company at the end of the lease term. If one or more of these criteria are met, the lease will generally be classified as a sales-type lease, unless the lease contains a residual value guarantee from a third party other than the lessee, in which case it would be classified as a direct financing lease under certain circumstances. We account for the right to use land as a separate lease component, unless the accounting effect of doing so would be insignificant. Determination of significance requires management judgment. In determining whether the accounting effect of separately reporting the land component from other components for its real estate leases is significant, we assess: (i) whether separating the land component impacts
the classification of any lease component, (ii) the value of the land component in the context of the overall contract, and (iii) whether the right to use the land is coterminous with the rights to use the other assets. Revenue recognition methods for operating leases, direct financing leases, and sales-type leases are described below:
Rental property accounted for under operating leases – Revenue is recognized
Lease Termination Fee Income The Company recognizes lease termination fee income as rents are earned onother income from real estate transactions, a straight-line basis over the non-cancelable termscomponent of Lease revenues, net, when all conditions of the related leases. For leases thattermination agreement have fixedbeen met, and measurable rent escalations, and the collectabilitycollection of the lease paymenttermination fee is probable,probable. If the difference between suchtenant immediately vacates the property upon satisfying the conditions of the termination agreement, the Company recognizes the lease termination fee income net of accrued rental income earned and the cash rent due under the provisions ofassociated with the lease is recordedimmediately, as Accrued rentalother income on the Consolidated Balance Sheets. If we determine that collectabilityfrom real estate transactions, a component of the lease payments is not probable, we record an adjustment to Lease revenues, net to reduce cumulative income recognized since lease commencement to the amount of cash collected from the lessee. Future revenue recognition is limited to amounts paid by the lessee.Rental property accounted for under direct financing leases – We utilize the direct finance method of accounting to record direct financing lease income. The net investment in the direct financing lease represents receivables for the sum of future lease payments to be received and the estimated residual value of the leased property, less unamortized unearned income (which represents the difference between undiscounted cash flows and discounted cash flows). Unearned income is deferred and amortized into income over the lease terms so as to produce a constant periodic rate of return on our net investment in the leases.
Rental property accounted for under sales-type leases – For leases accounted for as sales-type leases, we record selling profit arising from the lease at inception, along with the net investment in the lease. We lease assets through the assumption of existing leases or through sale-leaseback transactions, and records such assets at their fair value at the time of acquisition, which in most cases coincides with lease inception. As a result, we do not generally recognize selling profit on sales-type leases. The net investment in the sales-type lease represents receivables for the sum of future lease payments and the estimated unguaranteed residual value of the leased property, each measured at net present value. Interest income is recorded over the lease terms so as to produce a constant periodic rate of return on our net investment in the leases.
Certain of our lease contracts contain nonlease components (e.g., charges for management fees, common area maintenance, and reimbursement of third-party maintenance expenses) in addition to lease components (i.e., monthly rental charges). Services related to nonlease components are provided over the same period of time as, and billed in the same manner as, monthly rental charges. The Company elected to apply the practical expedient available under ASC 842, for all classes of assets, not to separate the lease components from the nonlease components when accounting for operating leases. Since the lease component is the predominant component under each of these leases, combined revenues from both the lease and nonlease components are reported as Lease revenues, net, in the Consolidated StatementsStatement of Income and Comprehensive Income.
Derivative Instruments and Hedging Management uses interest rate swap agreements to manage risks related to interest rate movements. Management documents its risk management strategy and hedge effectiveness at the inception of, and during the term of, each hedge. Our interest rate risk management strategy is intended to stabilize cash flow requirements by maintaining interest rate swap agreements to convert certain variable-rate debt to a fixed rate. The interest rate swap agreements, designated and qualifying as cash flow hedges, are reported at fair value. In accordance with ASC 815, Derivatives Interest rate swaps are measured at fair value using inputs that are directly observable in active markets and Hedging, we present the earnings effectare classified within Level 2 of the hedging instrumentvaluation hierarchy, using an income approach. Specifically, the fair value of the interest rate swaps is determined using a discounted cash flow analysis on the expected future cash flows of each instrument. This analysis utilizes observable market data including yield curves and implied volatilities to determine the market’s expectation of the future cash flows of the variable component. The fixed and variable components of the interest rate swaps are then discounted using calculated discount factors developed based on the overnight indexed swap (“OIS”) curve and are aggregated to arrive at a single valuation for the period. The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the same income statement line item in whichfair value measurements. Although the earnings effectCompany has determined that the majority of the hedged item is reported. The gain or lossinputs used to value its interest rate swaps fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its interest rate swaps utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its
counterparties. At December 31, 2021 and 2020, the Company has assessed the significance of the impact of the credit valuation adjustments on the qualifying hedges is initially included asoverall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation. As a componentresult, the Company has determined that its interest rate swap valuations in their entirety are appropriately classified within Level 2 of other comprehensive income or loss and is subsequently reclassified into earnings when interest payments (the forecasted transactions) on the related debt are incurred and as the swap net settlements occur.fair value hierarchy. When an existing cash flow hedge is terminated, we determine the accounting treatment for the accumulated gain or loss recognized in Accumulated other comprehensive loss, based on the probability of the hedged forecasted transaction occurring within the period the cash flow hedge was anticipated to affect earnings. If management determines that the hedged forecasted transaction is probable of occurring during the original period, the accumulated gain or loss is reclassified into earnings over the remaining life of the cash flow hedge using a straight-line method, which approximates an effective interest method. If management determines that the hedged forecasted transaction is not probable of occurring during the original period, the entire amount of accumulated gain or loss is reclassified into earnings in the period the cash flow hedge is terminated.Management documents its risk management strategy and hedge effectiveness at the inception of and during the term of each hedge. Our interest rate risk management strategy is intended to stabilize cash flow requirements by maintaining interest rate swap agreements to convert certain variable-rate debt to a fixed rate.
such time. Impact of Recent Accounting Pronouncements For information on the impact of recent accounting pronouncements on our business, see the captions Recently Adopted Accounting Standards Other Recently Issued Accounting Standards 10-K.
| Quantitative and Qualitative Disclosures About Market Risk |
We are exposed to certain market risks, one of the most predominant of which is a change in interest rates. Increases in interest rates can result in increased interest expense under our Revolving Credit Facility and other variable-rate debt. Increases in interest rates can also result in increased interest expense when our fixed rate debt matures and needs to be refinanced. We attempt to manage interest rate risk by entering into long-term fixed rate debt or by entering into interest rate swaps to convert certain variable-rate debt to a fixed rate. The interest rate swaps have been designated by us as cash flow hedges for accounting purposes and are reported at fair value. We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes. Further information concerning our interest rate swaps can be found in Note 1211 in our Consolidated Financial Statements contained elsewhere in this Annual Report on Form Our fixed-rate debt includes our Senior Unsecured Notes, mortgages, and variable-rate debt converted to a fixed rate with the use of interest rate swaps. Our fixed-rate debt and outstanding interest rate swaps had carrying values and fair values of approximately $1.4$1.6 billion and $1.6$1.7 billion, respectively, as of December 31, 2020.2021. Changes in market interest rates impact the fair value of our fixed-rate debt and interest rate swaps, but they have no impact on interest incurred or on cash flows. For instance, if interest rates were to increase 1%, and the fixed-rate debt balance were to remain constant, we would expect the fair value of our debt to decrease, similar to how the price of a bond decreases as interest rates rise. A 1% increase in market interest rates would have resulted in a decrease in the fair value of our fixed-rate debt and interest rate swaps of approximately $79.8$95.5 million as of December 31, 2020.2021. Borrowings pursuant to our Revolving Credit Facility and other variable-rate debt bear interest at rates based on LIBOR plus an applicable margin, and totaled $969.8$759.5 million as of December 31, 2020,2021, of which $859.8$640.0 million was swapped to a fixed rate by our use of interest rate swaps. Taking into account the effect of our interest rate swaps, a 1% increase orin interest would have a corresponding $1.2 million increase in interest expense annually, while a 1% decrease in interest would have a corresponding $1.1 million increase or decrease in interest expense annually.annually due to certain interest rate floors on our variable-rate debt. With the exception of our interest rate swap transactions, we have not engaged in transactions in derivative financial instruments or derivative commodity instruments. As of December 31, 2020,2021, our financial instruments were not exposed to significant market risk due to foreign currency exchange risk.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Broadstone Net Lease, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Broadstone Net Lease, Inc. and Subsidiaries (the "Company"“Company”) as of December 31, 20202021 and 2019,2020, the related consolidated statements of income and comprehensive income, stockholders’ equity and mezzanine equity, and cash flows for each of the three years in the period ended December 31, 2020,2021, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20202021 and 2019,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020,2021, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established inInternal Control — Integrated Framework (2013) These financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Investment in rental property — Refer to Notes 2 and 5 to the financial statements Critical Audit Matter Description During the year ended December 31, 2021, the Company acquired $659.2 million of real estate, excluding capitalized acquisition costs. The Company accounts for acquisitions of real estate as asset acquisitions. For acquired properties accounted for using the operating method, the Company allocates the purchase price to the tangible and intangible assets acquired and liabilities assumed of based on their relative fair value. Acquisition costs are capitalized and included with the allocated purchase price. The Company uses multiple sources to estimate fair value. Factors that impact estimates of fair value include real estate market conditions, industry conditions that the tenant operates in, and characteristics of the real estate and/or real estate appraisals. We identified the allocation of purchase price as a critical audit matter because of management’s significant estimates utilized to estimate the relative fair value of tangible and intangible assets acquired and liabilities assumed. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the allocation of purchase price for investments in rental property accounted for using the operating method included the following, among others: We obtained an understanding and tested the design and operating effectiveness over the Company’s controls to allocate the purchase price of investments in real estate, including controls over management’s evaluation of inputs and assumptions used in the valuation estimates. For each acquisition, we obtained and evaluated the third-party purchase price allocation report, along with relevant supporting documentation, such as the executed purchase and sale agreement. For each real estate acquisition, we compared the purchase price allocated to identifiable tangible and intangible assets and liabilities as to the Company’s historical allocation percentages for similar types of properties, identifying outliers for further investigation. With the assistance of our fair value specialists, on a sample basis, we evaluated the reasonableness of the valuation methodology and significant assumptions used in the third-party purchase price allocation report, including comparing the key inputs used in the purchase price allocation to external market sources. Evaluation of long-lived asset impairment —Refer to Note 2 to the consolidated financial statements Critical Audit Matter Description The Company’s evaluation of long-lived assets to be held and used for possible impairment involves an initial assessment to determine whether events or changes in circumstances indicate that their carrying amounts may not be recoverable. If, and when, such events or changes in circumstances area present, an impairment exists to the extent the carrying value of the long-lived asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use of the long-lived asset and its eventual disposition. An impairment loss is measured as the amount by which the carrying amount of the long-lived asset or asset group exceeds its estimated fair value. We identified the evaluation of long-lived asset impairment as a critical audit matter because of the significant estimates and assumptions management utilizes to identify whether events or changes in circumstances have occurred indicating that the carrying value of the long-lived asset may not be recoverable, and, when applicable, the significant estimates and assumptions utilized to evaluate the long-lived asset for recoverability, including probabilities of outcomes, estimates of the hold or sell strategy, projected rental rates, and estimated disposition proceeds. Auditing these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort. 83
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the significant estimates and assumptions utilized by management to identify whether events or changes in circumstances have occurred indicating that the carrying value of the long-lived asset may not be recoverable and, when applicable, the significant estimates and assumptions utilized to evaluate the long-lived asset for recoverability included the following, among others: We obtained an understanding and tested the design and operating effectiveness of the Company’s controls to monitor long-lived assets for events or changes in circumstances that indicate that their carrying amounts may not be recoverable, and, when applicable, the Company’s controls over the undiscounted cash flow recoverability estimates, including the estimated hold or sell strategy, projected rental rates, and estimated disposition proceeds. We evaluated the completeness and reasonableness of the Company’s criteria to identify long-lived assets with indicators of impairment, including assessing the methodologies applied and testing the completeness and accuracy of the underlying data utilized. We compared the Company’s undiscounted cash flow recoverability estimates and assumptions, including estimated hold or sell strategy, projected rental rates and estimated disposition proceeds to historical results and external market sources to evaluate the reasonableness. In addition, we performed procedures to evaluate the completeness and accuracy of the data utilized in management’s recoverability estimates. February 25, 202123, 2022 We have served as the Company'sCompany’s auditor since 2016.
84
Broadstone Net Lease, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands, except per share amounts) | | December 31, | | | | 2020 | | | 2019 | | Assets | | | | | | | | | Accounted for using the operating method, net of accumulated depreciation | | $ | 3,354,511 | | | $ | 3,415,400 | | Accounted for using the direct financing method | | | 29,066 | | | | 41,890 | | Accounted for using the sales-type method | | | 567 | | | | — | | Investment in rental property, net | | | 3,384,144 | | | | 3,457,290 | | Cash and cash equivalents | | | 100,486 | | | | 12,455 | | Accrued rental income | | | 102,117 | | | | 84,534 | | Tenant and other receivables, net | | | 1,604 | | | | 934 | | Prepaid expenses and other assets | | | 22,277 | | | | 12,613 | | Interest rate swap, assets | | | — | | | | 2,911 | | Goodwill | | | 339,769 | | | | — | | Intangible lease assets, net | | | 290,913 | | | | 331,894 | | Debt issuance costs – unsecured revolving credit facility, net | | | 6,435 | | | | 2,380 | | Leasing fees, net | | | 10,738 | | | | 12,847 | | Total assets | | $ | 4,258,483 | | | $ | 3,917,858 | | | | | | | | | | | Liabilities and equity | | | | | | | | | Unsecured revolving credit facility | | $ | — | | | $ | 197,300 | | Mortgages and notes payable, net | | | 107,382 | | | | 111,793 | | Unsecured term notes, net | | | 1,433,796 | | | | 1,672,081 | | Interest rate swap, liabilities | | | 72,103 | | | | 24,471 | | Earnout liability | | | 7,509 | | | | — | | Accounts payable and other liabilities | | | 74,936 | | | | 37,377 | | Accrued interest payable | | | 4,023 | | | | 3,594 | | Intangible lease liabilities, net | | | 79,653 | | | | 92,222 | | Total liabilities | | | 1,779,402 | | | | 2,138,838 | | | | | | | | | | | Commitments and contingencies (See Note 20) | | | | | | | | | | | | | | | | | | Equity | | | | | | | | | Broadstone Net Lease, Inc. stockholders’ equity: | | | | | | | | | Preferred stock, $0.001 par value; 20,000 shares authorized, 0 shares issued or outstanding | | | — | | | | — | | Common stock, $0.00025 par value; 440,000 shares authorized, 108,609 shares issued and outstanding at December 31, 2020; 320,000 shares authorized, 104,006 shares issued and outstanding at December 31, 2019 | | | 27 | | | | 26 | | Class A common stock, $0.00025 par value; 60,000 shares authorized, 37,000 shares issued and outstanding at December 31, 2020; 0 shares authorized, issued or outstanding at December 31, 2019 | | | 9 | | | | — | | Additional paid-in capital | | | 2,624,997 | | | | 1,895,935 | | Cumulative distributions in excess of retained earnings | | | (259,673 | ) | | | (208,261 | ) | Accumulated other comprehensive loss | | | (66,255 | ) | | | (20,086 | ) | Total Broadstone Net Lease, Inc. stockholders’ equity | | | 2,299,105 | | | | 1,667,614 | | Non-controlling interests | | | 179,976 | | | | 111,406 | | Total equity | | | 2,479,081 | | | | 1,779,020 | | Total liabilities and equity | | $ | 4,258,483 | | | $ | 3,917,858 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accounted for using the operating method: | | | | | | | | | | Land | | $ | 655,374 | | | $ | 555,748 | | | Land improvements | | | 295,329 | | | | 279,360 | | | Buildings and improvements | | | 3,242,618 | | | | 2,857,510 | | | Equipment | | | 11,870 | | | | 11,870 | | | | | | | | | | | | | Total accounted for using the operating method | | | 4,205,191 | | | | 3,704,488 | | | Less accumulated depreciation | | | (430,141 | ) | | | (349,977 | ) | | | | | | | | | | | | Accounted for using the operating method, net | | | 3,775,050 | | | | 3,354,511 | | | Accounted for using the direct financing method | | | 28,782 | | | | 29,066 | | | Accounted for using the sales-type method | | | 571 | | | | 567 | | | | | | | | | | | | | Investment in rental property, net | | | 3,804,403 | | | | 3,384,144 | | | Cash and cash equivalents | | | 21,669 | | | | 100,486 | | | Accrued rental income | | | 116,874 | | | | 102,117 | | | Tenant and other receivables, net | | | 1,310 | | | | 1,604 | | | Prepaid expenses and other assets | | | 17,275 | | | | 22,277 | | | Goodwill | | | 339,769 | | | | 339,769 | | | Intangible lease assets, net | | | 303,642 | | | | 290,913 | | | Debt issuance costs—unsecured revolving credit facility, net | | | 4,065 | | | | 6,435 | | | Leasing fees, net | | | 9,641 | | | | 10,738 | | | | | | | | | | | | | | $ | 4,618,648 | | | $ | 4,258,483 | | | | | | | | | | | | | | | | | | | | | | Unsecured revolving credit facility | | $ | 102,000 | | | $ | 0 — | | | Mortgages, net | | | 96,846 | | | | 107,382 | | | Unsecured term loans, net | | | 646,671 | | | | 961,330 | | | Senior unsecured notes, net | | | 843,801 | | | | 472,466 | | | Interest rate swap, liabilities | | | 27,171 | | | | 72,103 | | | Earnout liability | | | — | | | | 7,509 | | | Accounts payable and other liabilities | | | 38,038 | | | | 35,684 | | | Dividends payable | | | 45,914 | | | | 39,252 | | | Accrued interest payable | | | 6,473 | | | | 4,023 | | | Intangible lease liabilities, net | | | 70,596 | | | | 79,653 | | | | | | | | | | | | | | | 1,877,510 | | | | 1,779,402 | | | | | | | | | | | | Commitments and contingencies (See Note 19) | | | 0 | | | | 0 | | | | | | | | | | | | | | | | Broadstone Net Lease, Inc. stockholders’ equity: | | | | | | | | | | Preferred stock, $0.001 par value; 20,000 shares authorized,0 shares issued or outstanding | | | 0— | | | | 0— | | | Common stock, $0.00025 par value; 500,000 shares authorized, 162,383 shares issued and outstanding at December 31, 2021; 440,000 shares authorized, 108,609 shares issued and outstanding at December 31, 2020 | | | 41 | | | | 27 | | | Class A common stock, $0.00025 par value; 0 shares authorized, issued or outstanding at December 31, 2021; 60,000 shares authorized, 37,000 shares issued and outstanding at December 31, 2020 | | | 0— | | | | 9 | | | Additional paid-in capital | | | 2,924,168 | | | | 2,624,997 | | | Cumulative distributions in excess of retained earnings | | | (318,476 | ) | | | (259,673 | ) | | Accumulated other comprehensive loss | | | (28,441 | ) | | | (66,255 | ) | | | | | | | | | | | | Total Broadstone Net Lease, Inc. stockholders’ equity | | | 2,577,292 | | | | 2,299,105 | | | | | 163,846 | | | | 179,976 | | | | | | | | | | | | | | | 2,741,138 | | | | 2,479,081 | | | | | | | | | | | | Total liabilities and equity | | $ | 4,618,648 | | | $ | 4,258,483 | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
85 Broadstone Net Lease, Inc. and Subsidiaries Consolidated Statements of Income and Comprehensive Income (in thousands, except per share amounts)
| | | | | | | | | | | | | | | | | For the Year Ended December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | Lease revenues, net | | $ | 382,876 | | | $ | 321,637 | | | $ | 298,815 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Depreciation and amortization | | | 132,096 | | | | 132,685 | | | | 108,818 | | | Property and operating expense | | | 18,459 | | | | 17,478 | | | | 15,990 | | | General and administrative | | | 36,366 | | | | 27,988 | | | | 5,456 | | | Provision for impairment of investment in rental properties | | | 28,208 | | | | 19,077 | | | | 3,452 | | | Asset management fees | | | 0— | | | | 2,461 | | | | 21,863 | | | Property management fees | | | 0— | | | | 1,275 | | | | 8,256 | | | | | | | | | | | | | | | | | | | 215,129 | | | | 200,964 | | | | 163,835 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest income | | | 17 | | | | 24 | | | | 9 | | | Interest expense | | | (64,146 | ) | | | (76,138 | ) | | | (72,534 | ) | | Cost of debt extinguishment | | | (368 | ) | | | (417 | ) | | | (1,176 | ) | | Gain on sale of real estate | | | 13,523 | | | | 14,985 | | | | 29,914 | | | Income taxes | | | (1,644 | ) | | | (939 | ) | | | (2,415 | ) | | Internalization expenses | | | 0— | | | | (3,705 | ) | | | (3,658 | ) | | Change in fair value of earnout liability | | | (5,539 | ) | | | 1,800 | | | | 0— | | | Other expenses | | | (62 | ) | | | (7 | ) | | | (6 | ) | | | | | | | | | | | | | | | | | | 109,528 | | | | 56,276 | | | | 85,114 | | Net income attributable to non-controlling interests | | | (7,102 | ) | | | (5,095 | ) | | | (5,720 | ) | | | | | | | | | | | | | | | Net income attributable to Broadstone Net Lease, Inc. | | $ | 102,426 | | | $ | 51,181 | | | $ | 79,394 | | | | | | | | | | | | | | | | | | | | | Weighted average number of common shares outstanding | | | | | | | | | | | | | | Basic | | | 153,057 | | | | 117,150 | | | | 95,917 | | | | | | | | | | | | | | | | | Diluted | | | 163,970 | | | | 128,799 | | | | 102,865 | | | | | | | | | | | | | | | | | | | | | Net earnings per share attributable to common stockholders | | | | | | | | | | | | | | Basic and diluted | | $ | 0.67 | | | $ | 0.44 | | | $ | 0.83 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | $ | 109,528 | | | $ | 56,276 | | | $ | 85,114 | | | Other comprehensive income | | | | | | | | | | | | | | Change in fair value of interest rate swaps | | | 39,353 | | | | (50,544 | ) | | | (37,372 | ) | | Realized loss (gain) on interest rate swaps | | | 698 | | | | (166 | ) | | | (205 | ) | | | | | | | | | | | | | | | | Comprehensive income | | | 149,579 | | | | 5,566 | | | | 47,537 | | Comprehensive income attributable to non-controlling interests | | | (9,831 | ) | | | (554 | ) | | | (3,036 | ) | | | | | | | | | | | | | | | | Comprehensive income attributable to Broadstone Net Lease, Inc. | | $ | 139,748 | | | $ | 5,012 | | | $ | 44,501 | | | | | | | | | | | | | | | |
| | For the Year Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | Revenues | | | | | | | | | | | | | Lease revenues, net | | $ | 321,637 | | | $ | 298,815 | | | $ | 237,479 | | | | | | | | | | | | | | | Operating expenses | | | | | | | | | | | | | Depreciation and amortization | | | 132,685 | | | | 108,818 | | | | 83,994 | | Asset management fees | | | 2,461 | | | | 21,863 | | | | 18,173 | | Property management fees | | | 1,275 | | | | 8,256 | | | | 6,529 | | Property and operating expense | | | 17,478 | | | | 15,990 | | | | 11,157 | | General and administrative | | | 27,988 | | | | 5,456 | | | | 6,162 | | Provision for impairment of investment in rental properties | | | 19,077 | | | | 3,452 | | | | 2,061 | | Total operating expenses | | | 200,964 | | | | 163,835 | | | | 128,076 | | | | | | | | | | | | | | | Other income (expenses) | | | | | | | | | | | | | Preferred distribution income | | | — | | | | — | | | | 440 | | Interest income | | | 24 | | | | 9 | | | | 179 | | Interest expense | | | (76,138 | ) | | | (72,534 | ) | | | (52,855 | ) | Cost of debt extinguishment | | | (417 | ) | | | (1,176 | ) | | | (101 | ) | Gain on sale of real estate | | | 14,985 | | | | 29,914 | | | | 10,496 | | Income taxes | | | (939 | ) | | | (2,415 | ) | | | (857 | ) | Gain on sale of investment in related party | | | — | | | | — | | | | 8,500 | | Internalization expenses | | | (3,705 | ) | | | (3,658 | ) | | | — | | Change in fair value of earnout liability | | | 1,800 | | | | — | | | | — | | Other expenses | | | (7 | ) | | | (6 | ) | | | (100 | ) | Net income | | | 56,276 | | | | 85,114 | | | | 75,105 | | Net income attributable to non-controlling interests | | | (5,095 | ) | | | (5,720 | ) | | | (5,730 | ) | Net income attributable to Broadstone Net Lease, Inc. | | $ | 51,181 | | | $ | 79,394 | | | $ | 69,375 | | | | | | | | | | | | | | | Weighted average number of common shares outstanding | | | | | | | | | | | | | Basic | | | 117,150 | | | | 95,917 | | | | 80,967 | | Diluted | | | 128,799 | | | | 102,865 | | | | 87,641 | | Net earnings per share attributable to common stockholders | | | | | | | | | | | | | Basic and diluted | | $ | 0.44 | | | $ | 0.83 | | | $ | 0.86 | | | | | | | | | | | | | | | Comprehensive income | | | | | | | | | | | | | Net income | | $ | 56,276 | | | $ | 85,114 | | | $ | 75,105 | | Other comprehensive income | | | | | | | | | | | | | Change in fair value of interest rate swaps | | | (50,544 | ) | | | (37,372 | ) | | | 10,584 | | Realized gain on interest rate swaps | | | (166 | ) | | | (205 | ) | | | (84 | ) | Comprehensive income | | | 5,566 | | | | 47,537 | | | | 85,605 | | Comprehensive income attributable to non-controlling interests | | | (554 | ) | | | (3,036 | ) | | | (6,546 | ) | Comprehensive income attributable to Broadstone Net Lease, Inc. | | $ | 5,012 | | | $ | 44,501 | | | $ | 79,059 | |
The accompanying notes are an integral part of these consolidated financial statements.
86
Broadstone Net Lease, Inc. and Subsidiaries Consolidated Statements of Stockholders’ Equity and Mezzanine Equity(in thousands, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Additional Paid-in Capital | | | Cumulative
Distributions
in Excess
of Retained
Earnings | | | Accumulated
Other
Comprehensive
Income (Loss) | | | | | | | | | Balance, January 1, 2021 | | $ | 27 | | | $ | 9 | | | $ | 2,624,997 | | | $ | (259,673 | ) | | $ | (66,255 | ) | | $ | 179,976 | | | $ | 2,479,081 | | | Net income | | | — | | | | — | | | | — | | | | 102,426 | | | | — | | | | 7,102 | | | | 109,528 | | | Issuance of 13,910 shares of common stock | | | 4 | | | | — | | | | 293,728 | | | | — | | | | — | | | | — | | | | 293,732 | | | Issuance of 1,859 OP Units | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | Offering costs, discounts, and commissions | | | — | | | | — | | | | (12,290 | ) | | | — | | | | — | | | | — | | | | (12,290 | ) | | Stock-based compensation | | | — | | | | — | | | | 4,701 | | | | — | | | | — | | | | — | | | | 4,701 | | | Retirement of 64 shares of common stock | | | — | | | | — | | | | (1,215 | ) | | | — | | | | — | | | | — | | | | (1,215 | ) | | Forfeiture of seven shares of common stock | | | — | | | | — | | | | (33 | ) | | | — | | | | — | | | | — | | | | (33 | ) | | Conversion of 37,000 Class A common stock to 37,000 shares of common stock | | | 9 | | | | (9 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | Conversion of 886 OP Units to 886 shares of common stock | | | — | | | | — | | | | 14,206 | | | | — | | | | — | | | | (14,206 | ) | | | — | | | Conversion of 2,049 OP Units to 2,049 shares of common stock with a related party | | | 1 | | | | — | | | | 32,761 | | | | — | | | | — | | | | (32,762 | ) | | | — | | | Distributions declared ($1.025 per share and OP Unit) | | | — | | | | — | | | | — | | | | (161,229 | ) | | | — | | | | (11,188 | ) | | | (172,417 | ) | | Change in fair value of interest rate swap agreements | | | — | | | | — | | | | — | | | | — | | | | 36,664 | | | | 2,689 | | | | 39,353 | | | Realized loss on interest rate swap agreements | | | — | | | | — | | | | — | | | | — | | | | 658 | | | | 40 | | | | 698 | | Adjustment to non-controlling interests | | | — | | | | — | | | | (32,687 | ) | | | — | | | | 492 | | | | 32,195 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, December 31, 2021 | | $ | 41 | | | $ | — | | | $ | 2,924,168 | | | $ | (318,476 | ) | | $ | (28,441 | ) | | $ | 163,846 | | | $ | 2,741,138 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | | Class A Common Stock | | | Additional Paid-in Capital | | | Subscriptions Receivable | | | Cumulative Distributions in Excess of Retained Earnings | | | Accumulated Other Comprehensive (Loss)/Income | | | Non- controlling Interests | | | Total Shareholders' Equity | | | | Mezzanine Equity Common Stock | | | Mezzanine Equity Non- controlling Interests | | | Total Mezzanine Equity | | Balance, January 1, 2018 | | $ | 19 | | | $ | — | | | $ | 1,301,979 | | | $ | (15 | ) | | $ | (120,280 | ) | | $ | 5,122 | | | $ | 97,376 | | | $ | 1,284,201 | | | | $ | — | | | $ | — | | | $ | — | | Net income | | | — | | | | — | | | | — | | | | — | | | | 69,375 | | | | — | | | | 5,730 | | | | 75,105 | | | | | — | | | | — | | | | — | | Issuance of 12,930 shares of common stock | | | 3 | | | | — | | | | 268,478 | | | | 15 | | | | — | | | | — | | | | — | | | | 268,496 | | | | | — | | | | — | | | | — | | Other offering costs | | | — | | | | — | | | | (1,158 | ) | | | — | | | | — | | | | — | | | | — | | | | (1,158 | ) | | | | — | | | | — | | | | — | | Issuance of 776 OP Units | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 15,797 | | | | 15,797 | | | | | — | | | | — | | | | — | | Distributions declared ($1.292 per share and OP Unit) | | | — | | | | — | | | | — | | | | — | | | | (104,245 | ) | | | — | | | | (8,724 | ) | | | (112,969 | ) | | | | — | | | | — | | | | — | | Change in fair value of interest rate swap agreements | | | — | | | | — | | | | — | | | | — | | | | — | | | | 9,762 | | | | 822 | | | | 10,584 | | | | | — | | | | — | | | | — | | Realized gain on interest rate swap agreements | | | — | | | | — | | | | — | | | | — | | | | — | | | | (78 | ) | | | (6 | ) | | | (84 | ) | | | | — | | | | — | | | | — | | Conversion of 34 OP Units to 34 shares of common stock | | | — | | | | — | | | | 684 | | | | — | | | | — | | | | — | | | | (684 | ) | | | — | | | | | — | | | | — | | | | — | | Redemption of 509 shares of common stock | | | — | | | | — | | | | (10,304 | ) | | | — | | | | — | | | | — | | | | — | | | | (10,304 | ) | | | | — | | | | — | | | | — | | Cancellation of 37 shares of common stock | | | — | | | | — | | | | (748 | ) | | | — | | | | — | | | | — | | | | — | | | | (748 | ) | | | | — | | | | — | | | | — | | Adjustment of non-controlling interests | | | — | | | | — | | | | (1,510 | ) | | | — | | | | — | | | | — | | | | 1,510 | | | | — | | | | | — | | | | — | | | | — | | Balance, December 31, 2018 | | | 22 | | | | — | | | | 1,557,421 | | | | — | | | | (155,150 | ) | | | 14,806 | | | | 111,821 | | | | 1,528,920 | | | | | — | | | | — | | | | — | | Net income | | | — | | | | — | | | | — | | | | — | | | | 79,394 | | | | — | | | | 5,720 | | | | 85,114 | | | | | — | | | | — | | | | — | | Issuance of 18,560 shares of common stock | | | 5 | | | | — | | | | 395,086 | | | | — | | | | — | | | | — | | | | — | | | | 395,091 | | | | | — | | | | — | | | | — | | Other offering costs | | | — | | | | — | | | | (1,649 | ) | | | — | | | | — | | | | — | | | | — | | | | (1,649 | ) | | | | — | | | | — | | | | — | | Distributions declared ($1.318 per share and OP Unit) | | | — | | | | — | | | | — | | | | — | | | | (127,014 | ) | | | — | | | | (9,266 | ) | | | (136,280 | ) | | | | — | | | | — | | | | — | | Change in fair value of interest rate swap agreements | | | — | | | | — | | | | — | | | | — | | | | — | | | | (34,701 | ) | | | (2,671 | ) | | | (37,372 | ) | | | | — | | | | — | | | | — | | Realized gain on interest rate swap agreements | | | — | | | | — | | | | — | | | | — | | | | — | | | | (191 | ) | | | (14 | ) | | | (205 | ) | | | | — | | | | — | | | | — | | Redemption of 1,668 shares of common stock | | | (1 | ) | | | — | | | | (32,005 | ) | | | — | | | | (2,593 | ) | | | — | | | | — | | | | (34,599 | ) | | | | — | | | | — | | | | — | | Redemption of 941 shares of common stock with a related party | | | — | | | | — | | | | (17,102 | ) | | | — | | | | (2,898 | ) | | | — | | | | — | | | | (20,000 | ) | | | | — | | | | — | | | | — | | Adjustment of non-controlling interests | | | — | | | | — | | | | (5,816 | ) | | | — | | | | — | | | | — | | | | 5,816 | | | | — | | | | | — | | | | — | | | | — | | Balance, December 31, 2019 | | | 26 | | | | — | | | | 1,895,935 | | �� | | — | | | | (208,261 | ) | | | (20,086 | ) | | | 111,406 | | | | 1,779,020 | | | | | — | | | | — | | | | — | | Cumulative effect of accounting change (see Note 2) | | | — | | | | — | | | | — | | | | — | | | | (323 | ) | | | — | | | | — | | | | (323 | ) | | | | — | | | | — | | | | — | | Net income | | | — | | | | — | | | | — | | | | — | | | | 51,181 | | | | — | | | | 3,647 | | | | 54,828 | | | | | — | | | | 1,448 | | | | 1,448 | | Issuance of 659 shares of common stock and 3,124 shares of mezzanine equity common stock | | | — | | | | — | | | | 6,795 | | | | — | | | | — | | | | — | | | | — | | | | 6,795 | | | | | 66,376 | | | | — | | | | 66,376 | | Stock-based compensation | | | — | | | | — | | | | 1,989 | | | | — | | | | — | | | | — | | | | — | | | | 1,989 | | | | | — | | | | — | | | | — | | Issuance of 37,000 shares of Class A common stock | | | — | | | | 9 | | | | 628,991 | | | | — | | | | — | | | | — | | | | — | | | | 629,000 | | | | | — | | | | — | | | | — | | Issuance of 5,278 mezzanine equity non-controlling interests | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | — | | | | 112,159 | | | | 112,159 | | Offering costs, discounts, and commissions | | | — | | | | — | | | | (40,750 | ) | | | — | | | | — | | | | — | | | | — | | | | (40,750 | ) | | | | — | | | | — | | | | — | | Adjustments to carrying value of mezzanine equity non- controlling interests | | | — | | | | — | | | | (2,513 | ) | | | — | | | | — | | | | — | | | | — | | | | (2,513 | ) | | | | — | | | | 2,513 | | | | 2,513 | | Reclassification of portion of earnout liability | | | — | | | | — | | | | 11,380 | | | | — | | | | — | | | | — | | | | 19,430 | | | | 30,810 | | | | | — | | | | — | | | | — | | Repurchase of 2 fractional shares of common stock | | | — | | | | — | | | | (35 | ) | | | — | | | | — | | | | — | | | | — | | | | (35 | ) | | | | — | | | | — | | | | — | | Repurchase of 5 OP Units | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (91 | ) | | | (91 | ) | | | | — | | | | — | | | | — | | Conversion of 822 OP Units to 822 shares of common stock with a related party | | | — | | | | — | | | | 15,631 | | | | — | | | | — | | | | — | | | | (15,631 | ) | | | — | | | | | — | | | | — | | | | — | | Distributions declared ($0.825 per share and OP Unit) | | | — | | | | — | | | | — | | | | — | | | | (102,270 | ) | | | — | | | | (7,423 | ) | | | (109,693 | ) | | | | — | | | | (1,742 | ) | | | (1,742 | ) | Change in fair value of interest rate swap agreements | | | — | | | | — | | | | — | | | | — | | | | — | | | | (46,018 | ) | | | (2,850 | ) | | | (48,868 | ) | | | | — | | | | (1,676 | ) | | | (1,676 | ) | Realized gain on interest rate swap agreements | | | — | | | | — | | | | — | | | | — | | | | — | | | | (151 | ) | | | (11 | ) | | | (162 | ) | | | | — | | | | (4 | ) | | | (4 | ) | Reclassification of 3,124 shares of mezzanine equity common stock to 3,124 shares of common stock | | | 1 | | | | — | | | | 66,375 | | | | — | | | | — | | | | — | | | | — | | | | 66,376 | | | | | (66,376 | ) | | | — | | | | (66,376 | ) | Reclassification of 5,278 mezzanine equity non-controlling interests to 5,278 non-controlling interests | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 112,698 | | | | 112,698 | | | | | — | | | | (112,698 | ) | | | (112,698 | ) | Adjustment to non-controlling interests | | | — | | | | — | | | | 41,199 | | | | — | | | | — | | | | — | | | | (41,199 | ) | | | — | | | | | — | | | | — | | | | — | | Balance, December 31, 2020 | | $ | 27 | | | $ | 9 | | | $ | 2,624,997 | | | $ | — | | | $ | (259,673 | ) | | $ | (66,255 | ) | | $ | 179,976 | | | $ | 2,479,081 | | | | $ | — | | | $ | — | | | $ | — | |
The accompanying notes are an integral part of these consolidated financial statements.
87
Broadstone Net Lease, Inc. and Subsidiaries Consolidated Statements of Cash FlowsStockholders’ Equity and Mezzanine Equity (in thousands)thousands, except per share amounts) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Additional Paid-in Capital | | | Cumulative
Distributions
in Excess
of Retained
Earnings | | | Accumulated
Other
Comprehensive
Income (Loss) | | | | | | | | | | | | Mezzanine
Equity
Common
Stock | | | Mezzanine
Equity
Non-
controlling
Interests | | | | | | Balance, January 1, 2019 | | $ | 22 | | | $ | — | | | $ | 1,557,421 | | | $ | (155,150 | ) | | $ | 14,806 | | | $ | 111,821 | | | $ | 1,528,920 | | | | | | | $ | — | | | $ | — | | | $ | — | | | Net income | | | — | | | | — | | | | — | | | | 79,394 | | | | — | | | | 5,720 | | | | 85,114 | | | | | | | | — | | | | — | | | | — | | Issuance of 18,560 shares of common
stock | | | 5 | | | | — | | | | 395,086 | | | | — | | | | — | | | | — | | | | 395,091 | | | | | | | | — | | | | — | | | | — | | | Other offering costs | | | — | | | | — | | | | (1,649 | ) | | | — | | | | — | | | | — | | | | (1,649 | ) | | | | | | | — | | | | — | | | | — | | Distributions declared ($1.318 per share
and OP Unit) | | | — | | | | — | | | | — | | | | (127,014 | ) | | | — | | | | (9,266 | ) | | | (136,280 | ) | | | | | | | — | | | | — | | | | — | | Change in fair value of interest rate swap
agreements | | | — | | | | — | | | | — | | | | — | | | | (34,701 | ) | | | (2,671 | ) | | | (37,372 | ) | | | | | | | — | | | | — | | | | — | | | Realized gain on interest rate swap agreements | | | — | | | | — | | | | — | | | | — | | | | (191 | ) | | | (14 | ) | | | (205 | ) | | | | | | | — | | | | — | | | | — | | | Redemption of 1,668 shares of common stock | | | (1 | ) | | | — | | | | (32,005 | ) | | | (2,593 | ) | | | — | | | | — | | | | (34,599 | ) | | | | | | | — | | | | — | | | | — | | | Redemption of 941 shares of common stock with a related party | | | — | | | | — | | | | (17,102 | ) | | | (2,898 | ) | | | — | | | | — | | | | (20,000 | ) | | | | | | | — | | | | — | | | | — | | Adjustment of non-controlling interests | | | — | | | | — | | | | (5,816 | ) | | | — | | | | — | | | | 5,816 | | | | — | | | | | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, December 31, 2019 | | | 26 | | | | — | | | | 1,895,935 | | | | (208,261 | ) | | | (20,086 | ) | | | 111,406 | | | | 1,779,020 | | | | | | | | — | | | | — | | | | — | | | Cumulative effect of accounting change | | | — | | | | — | | | | — | | | | (323 | ) | | | — | | | | — | | | | (323 | ) | | | | | | | — | | | | — | | | | — | | | Net income | | | — | | | | — | | | | — | | | | 51,181 | | | | 0 | | | | 3,647 | | | | 54,828 | | | | | | | | — | | | | 1,448 | | | | 1,448 | | | Issuance of 659 shares of common stock and 3,124 shares of mezzanine equity common stock | | | — | | | | — | | | | 6,795 | | | | — | | | | — | | | | — | | | | 6,795 | | | | | | | | 66,376 | | | | — | | | | 66,376 | | | Stock-based compensation | | | — | | | | — | | | | 1,989 | | | | — | | | | — | | | | — | | | | 1,989 | | | | | | | | — | | | | — | | | | — | | | Issuance of 37,000 shares of Class A common stock | | | — | | | | 9 | | | | 628,991 | | | | — | | | | — | | | | — | | | | 629,000 | | | | | | | | — | | | | — | | | | — | | Issuance of 5,278 mezzanine equity non-controlling interests | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | — | | | | 112,159 | | | | 112,159 | | | Offering costs, discounts, and commissions | | | — | | | | — | | | | (40,750 | ) | | | — | | | | — | | | | — | | | | (40,750 | ) | | | | | | | — | | | | — | | | | — | | | Adjustments to carrying value of mezzanine equity non- controlling interests | | | — | | | | — | | | | (2,513 | ) | | | — | | | | — | | | | — | | | | (2,513 | ) | | | | | | | — | | | | 2,513 | | | | 2,513 | | | Reclassification of portion of earnout liability | | | — | | | | — | | | | 11,380 | | | | — | | | | — | | | | 19,430 | | | | 30,810 | | | | | | | | — | | | | — | | | | — | | | Repurchase of two fractional shares of common stock | | | — | | | | — | | | | (35 | ) | | | — | | | | — | | | | — | | | | (35 | ) | | | | | | | — | | | | — | | | | — | | | Repurchase of five OP Units | | | — | | | | — | | | | — | | | | — | | | | — | | | | (91 | ) | | | (91 | ) | | | | | | | — | | | | — | | | | — | | Conversion of 822 OP Units to 822 shares
of common stock with a related party | | | — | | | | — | | | | 15,631 | | | | — | | | | — | | | | (15,631 | ) | | | — | | | | | | | | — | | | | — | | | | — | | | Distributions declared ($0.825 per share and OP Unit) | | | — | | | | — | | | | — | | | | (102,270 | ) | | | — | | | | (7,423 | ) | | | (109,693 | ) | | | | | | | — | | | | (1,742 | ) | | | (1,742 | ) | | Change in fair value of interest rate swap agreements | | | — | | | | — | | | | — | | | | — | | | | (46,018 | ) | | | (2,850 | ) | | | (48,868 | ) | | | | | | | — | | | | (1,676 | ) | | | (1,676 | ) | | Realized gain on interest rate swap agreements | | | — | | | | — | | | | — | | | | — | | | | (151 | ) | | | (11 | ) | | | (162 | ) | | | | | | | — | | | | (4 | ) | | | (4 | ) | | Reclassification of 3,124 shares of mezzanine equity common stock to 3,124 shares of common stock | | | 1 | | | | — | | | | 66,375 | | | | — | | | | — | | | | — | | | | 66,376 | | | | | | | | (66,376 | ) | | | — | | | | (66,376 | ) | Reclassification of 5,278 mezzanine equity non-controlling interests to 5,278 non-controlling interests | | | — | | | | — | | | | — | | | | — | | | | — | | | | 112,698 | | | | 112,698 | | | | | | | | — | | | | (112,698 | ) | | | (112,698 | ) | Adjustment to non-controlling interests | | | — | | | | — | | | | 41,199 | | | | — | | | | — | | | | (41,199 | ) | | | — | | | | | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, December 31, 2020 | | $ | 27 | | | $ | 9 | | | $ | 2,624,997 | | | $ | (259,673 | ) | | $ | (66,255 | ) | | $ | 179,976 | | | $ | 2,479,081 | | | | | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Year Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | Operating activities | | | | | | | | | | | | | Net income | | $ | 56,276 | | | $ | 85,114 | | | $ | 75,105 | | Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities: | | | | | | | | | | | | | Depreciation and amortization including intangibles associated with investment in rental property | | | 131,568 | | | | 105,408 | | | | 83,690 | | Provision for impairment of investment in rental properties | | | 19,077 | | | | 3,452 | | | | 2,061 | | Amortization of debt issuance costs charged to interest expense | | | 3,303 | | | | 2,542 | | | | 1,776 | | Stock-based compensation expense | | | 1,989 | | | | — | | | | — | | Straight-line rent, financing and sales-type lease adjustments | | | (19,817 | ) | | | (21,943 | ) | | | (19,492 | ) | Cost of debt extinguishment | | | 417 | | | | 1,176 | | | | 101 | | Gain on sale of real estate | | | (14,985 | ) | | | (29,914 | ) | | | (10,496 | ) | Change in fair value of earnout liability | | | (1,800 | ) | | | — | | | | — | | Settlement of interest rate swap | | | — | | | | — | | | | 760 | | Gain on sale of investment in related party | | | — | | | | — | | | | (8,500 | ) | Leasing fees paid | | | — | | | | (1,002 | ) | | | (1,399 | ) | Adjustment to provision for credit losses | | | (148 | ) | | | — | | | | — | | Other non-cash items | | | 605 | | | | 466 | | | | 528 | | Changes in assets and liabilities, net of acquisition: | | | | | | | | | | | | | Tenant and other receivables | | | (670 | ) | | | 92 | | | | (876 | ) | Prepaid expenses and other assets | | | (3,868 | ) | | | (136 | ) | | | (936 | ) | Accounts payable and other liabilities | | | 6,652 | | | | 8,286 | | | | (777 | ) | Accrued interest payable | | | 429 | | | | (6,183 | ) | | | 6,466 | | Net cash provided by operating activities | | | 179,028 | | | | 147,358 | | | | 128,011 | | Investing activities | | | | | | | | | | | | | Acquisition of rental property accounted for using the operating method, net of mortgages assumed of $0, $49,782 and $20,845 in 2020, 2019 and 2018, respectively | | | (94,808 | ) | | | (997,015 | ) | | | (575,764 | ) | Acquisition of rental property accounted for using the direct financing method | | | — | | | | — | | | | (430 | ) | Acquisition of rental property accounted for using the sales-type method | | | (574 | ) | | | — | | | | — | | Cash paid for Internalization | | | (30,861 | ) | | | — | | | | — | | Capital expenditures and improvements | | | (10,806 | ) | | | (5,051 | ) | | | (5,153 | ) | Proceeds from sale of investment in related party | | | — | | | | — | | | | 18,500 | | Proceeds from disposition of rental property, net | | | 77,513 | | | | 168,759 | | | | 53,988 | | Change in deposits on investments in rental property | | | (700 | ) | | | 1,600 | | | | (1,600 | ) | Net cash used in investing activities | | | (60,236 | ) | | | (831,707 | ) | | | (510,459 | ) | Financing activities | | | | | | | | | | | | | Proceeds from issuance of common stock and Class A common stock, net of $40,674 offering costs, discounts, and commissions | | | 588,457 | | | | 329,750 | | | | 215,902 | | Redemptions of common stock | | | — | | | | (34,599 | ) | | | (10,204 | ) | Redemptions of common stock with a related party | | | — | | | | (20,000 | ) | | | — | | Repurchase of fractional shares of common stock and OP Units | | | (126 | ) | | | — | | | | — | | Borrowings on mortgages, notes payable and unsecured term notes, net of mortgages assumed of $0, $49,782 and $20,845 in 2020, 2019 and 2018, respectively | | | 60,000 | | | | 750,000 | | | | 415,000 | | Principal payments on mortgages, notes payable and unsecured term notes | | | (394,666 | ) | | | (316,940 | ) | | | (34,722 | ) | Borrowings on unsecured revolving credit facility | | | 192,000 | | | | 434,100 | | | | 343,600 | | Repayments on unsecured revolving credit facility | | | (389,300 | ) | | | (377,900 | ) | | | (475,500 | ) | Cash distributions paid to stockholders | | | (71,532 | ) | | | (61,961 | ) | | | (51,845 | ) | Cash distributions paid to non-controlling interests | | | (7,079 | ) | | | (9,248 | ) | | | (8,638 | ) | Debt issuance and extinguishment costs paid | | | (6,129 | ) | | | (7,531 | ) | | | (2,255 | ) | Net cash (used in) provided by financing activities | | | (28,375 | ) | | | 685,671 | | | | 391,338 | | Net increase in cash and cash equivalents and restricted cash | | | 90,417 | | | | 1,322 | | | | 8,890 | | Cash and cash equivalents and restricted cash at beginning of period | | | 20,311 | | | | 18,989 | | | | 10,099 | | Cash and cash equivalents and restricted cash at end of period | | $ | 110,728 | | | $ | 20,311 | | | $ | 18,989 | | Reconciliation of cash and cash equivalents and restricted cash | | | | | | | | | | | | | Cash and cash equivalents at beginning of period | | $ | 12,455 | | | $ | 18,612 | | | $ | 9,355 | | Restricted cash at beginning of period | | | 7,856 | | | | 377 | | | | 744 | | Cash and cash equivalents and restricted cash at beginning of period | | $ | 20,311 | | | $ | 18,989 | | | $ | 10,099 | | | | | | | | | | | | | | | Cash and cash equivalents at end of period | | $ | 100,486 | | | $ | 12,455 | | | $ | 18,612 | | Restricted cash at end of period | | | 10,242 | | | | 7,856 | | | | 377 | | Cash and cash equivalents and restricted cash at end of period | | $ | 110,728 | | | $ | 20,311 | | | $ | 18,989 | |
The accompanying notes are an integral part of these consolidated financial statements.
88 Broadstone Net Lease, Inc. and Subsidiaries Consolidated Statements of Cash Flows | | | | | | | | | | | | | | | | | For the Year Ended December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | $ | 109,528 | | | $ | 56,276 | | �� | $ | 85,114 | | Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities: | | | | | | | | | | | | | | Depreciation and amortization including intangibles associated with investment in rental property | | | 128,888 | | | | 131,568 | | | | 105,408 | | | Provision for impairment of investment in rental properties | | | 28,208 | | | | 19,077 | | | | 3,452 | | | Amortization of debt issuance costs and original issuance discounts charged to interest expense | | | 3,721 | | | | 3,303 | | | | 2,542 | | | Stock-based compensation expense | | | 4,669 | | | | 1,989 | | | | — | | | Straight-line rent, direct financing and sales-type lease adjustments | | | (18,362 | ) | | | (19,817 | ) | | | (21,943 | ) | | Cost of debt extinguishment | | | 368 | | | | 417 | | | | 1,176 | | | Gain on sale of real estate | | | (13,523 | ) | | | (14,985 | ) | | | (29,914 | ) | | Change in fair value of earnout liability | | | 5,539 | | | | (1,800 | ) | | | — | | | Cash paid for earnout liability | | | (6,440 | ) | | | — | | | | — | | | Settlement of interest rate swaps | | | (5,580 | ) | | | — | | | | — | | | Leasing fees paid | | | (319 | ) | | | — | | | | (1,002 | ) | | Adjustment to provision for credit losses | | | (38 | ) | | | (148 | ) | | | — | | | | | 1,811 | | | | 605 | | | | 466 | | | Changes in assets and liabilities, net of acquisition: | | | | | | | | | | | | | | Tenant and other receivables | | | 776 | | | | (670 | ) | | | 92 | | | Prepaid expenses and other assets | | | 350 | | | | (3,868 | ) | | | (136 | ) | | Accounts payable and other liabilities | | | 2,891 | | | | 6,652 | | | | 8,286 | | | Accrued interest payable | | | 2,450 | | | | 429 | | | | (6,183 | ) | | | | | | | | | | | | | | | | Net cash provided by operating activities | | | 244,937 | | | | 179,028 | | | | 147,358 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Acquisition of rental property accounted for using the operating method, net of mortgages assumed of $0, $0 and $49,782 in 2021, 2020 and 2019, respectively | | | (665,030 | ) | | | (94,808 | ) | | | (997,015 | ) | | Acquisition of rental property accounted for using the sales-type method | | | — | | | | (574 | ) | | | — | | | Cash paid for Internalization | | | — | | | | (30,861 | ) | | | — | | | Capital expenditures and improvements | | | (1,598 | ) | | | (10,806 | ) | | | (5,051 | ) | | Proceeds from disposition of rental property, net | | | 83,812 | | | | 77,513 | | | | 168,759 | | | Change in deposits on investments in rental property | | | 512 | | | | (700 | ) | | | 1,600 | | | | | | | | | | | | | | | | | Net cash used in investing activities | | | (582,304 | ) | | | (60,236 | ) | | | (831,707 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Proceeds from issuance of common stock and Class A common stock, net of $12,270, $40,674 and $0 of offering costs, discounts, and commissions in 2021, 2020 and 2019, respectively | | | 280,356 | | | | 588,457 | | | | 329,750 | | | Redemptions of common stock | | | — | | | | — | | | | (34,599 | ) | | Redemptions of common stock with a related party | | | — | | | | — | | | | (20,000 | ) | | Repurchase of fractional shares of common stock and OP Units | | | — | | | | (126 | ) | | | — | | | Borrowings on mortgages, senior unsecured notes and unsecured term loans, net of mortgages assumed of $0, $0 and $49,782 in 2021, 2020 and 2019, respectively | | | 381,810 | | | | 60,000 | | | | 750,000 | | | Principal payments on mortgages and unsecured term loans | | | (332,874 | ) | | | (394,666 | ) | | | (316,940 | ) | | Borrowings on unsecured revolving credit facility | | | 356,600 | | | | 192,000 | | | | 434,100 | | | Repayments on unsecured revolving credit facility | | | (254,600 | ) | | | (389,300 | ) | | | (377,900 | ) | | Cash distributions paid to stockholders | | | (154,459 | ) | | | (71,532 | ) | | | (61,961 | ) | Cash distributions paid to non-controlling interests | | | (11,302 | ) | | | (7,079 | ) | | | (9,248 | ) | | Cash paid for earnout liability | | | (6,608 | ) | | | — | | | | — | | | Debt issuance and extinguishment costs paid | | | (4,515 | ) | | | (6,129 | ) | | | (7,531 | ) | | | | | | | | | | | | | | | | Net cash provided by (used in) financing activities | | | 254,408 | | | | (28,375 | ) | | | 685,671 | | | | | | | | | | | | | | | | | Net (decrease) increase in cash and cash equivalents and restricted cash | | | (82,959 | ) | | | 90,417 | | | | 1,322 | | | Cash and cash equivalents and restricted cash at beginning of period | | | 110,728 | | | | 20,311 | | | | 18,989 | | | | | | | | | | | | | | | | | Cash and cash equivalents and restricted cash at end of period | | $ | 27,769 | | | $ | 110,728 | | | $ | 20,311 | | | | | | | | | | | | | | | | Reconciliation of cash and cash equivalents and restricted cash | | | | | | | | | | | | | | Cash and cash equivalents at beginning of period | | $ | 100,486 | | | $ | 12,455 | | | $ | 18,612 | | | Restricted cash at beginning of period | | | 10,242 | | | | 7,856 | | | | 377 | | | | | | | | | | | | | | | | | Cash and cash equivalents and restricted cash at beginning of period | | $ | 110,728 | | | $ | 20,311 | | | $ | 18,989 | | | | | | | | | | | | | | | | | Cash and cash equivalents at end of period | | $ | 21,669 | | | $ | 100,486 | | | $ | 12,455 | | | Restricted cash at end of period | | | 6,100 | | | | 10,242 | | | | 7,856 | | | | | | | | | | | | | | | | | Cash and cash equivalents and restricted cash at end of period | | $ | 27,769 | | | $ | 110,728 | | | $ | 20,311 | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. 89
Broadstone Net Lease, Inc. and Subsidiaries Notes to Consolidated Financial Statements (in thousands)December 31, 2021, 2020, 2019, and 20182019 Broadstone Net Lease, Inc. (the “Corporation”) is a Maryland corporation formed on October 18, 2007 , that elected to be taxed as a real estate investment trust (“REIT”) commencing with the taxable year ended December 31, 2008. The Corporation focuses on investing in income-producing, net leased commercial properties, primarily in the United States. The Corporation leases industrial, healthcare, restaurant, office, retail, and otheroffice commercial properties under long-term lease agreements. At December 31, 2020,2021, the Corporation owned a diversified portfolio of 640 726 individual commercial properties with725 properties located in 4142 U.S. states throughout the continental United States and 1 property located in British Columbia, Canada. Broadstone Net Lease, LLC (the Corporation’s operating company, or the “OP”), is the entity through which the Corporation conducts its business and owns (either directly or through subsidiaries) all of the Corporation’s properties. The Corporation is the sole managing member of the OP. The remaining membership units in the OP (“OP Units”), which are referred to as non-controlling interests, are held by members who were issued OP Units pursuant to the Internalization (defined below) or in exchange for their interests in properties acquired by the OP. As the Corporation conducts substantially all of its operations through the OP, it is structured as what is referred to as an umbrella partnership real estate investment trust (“UPREIT”). The Corporation, the OP, and its consolidated subsidiaries are collectively referred to as the “Company.” Prior to February 7, 2020, the Corporation was externally managed by Broadstone Real Estate, LLC (“BRE”) and Broadstone Asset Management, LLC (the “Asset Manager”) subject to the direction, oversight, and approval of the Company’s board of directors (the “Board of Directors”). The Asset Manager was a wholly owned subsidiary of BRE and all of the Corporation’s officers were employees of BRE. Accordingly, both BRE and the Asset Manager were related parties of the Company. Refer to Note 3 for further discussion concerning related parties and related party transactions. On February 7, 2020, the Corporation, the OP, BRE, and certain of their respective subsidiaries and affiliates, completed through a series of mergers (the “Mergers”) the internalization of the external management functions previously performed for the Corporation and the OP by BRE and the Asset Manager (such transactions, collectively, the “Internalization”). Upon consummation of the Internalization, the Company’s management team and corporate staff, who were previously employed by BRE, became employees of an indirect subsidiary of the OP and the Company became internally managed. Upon Internalization, the prior Property Management Agreement and Asset Management Agreement were terminated. The Internalization was not considered a “Termination Event” under the terms of the agreementseither agreement and therefore 0 fees were paid under them as a result of the Internalization. The Internalization consisted of the acquisition of BRE in accordance with the definitive merger agreement (the “Merger Agreement”). Refer to Note 4 for further discussion regarding the Internalization, including the associated payments related thereto.On September 18, 2020, the Corporation effected a 4-for-one stock split on its then outstanding 26,94426,943,587 shares of common stock (“Common Stock”) that previously had a $0.001 $0.001 par value. Concurrent with the stock split, the OP effected a four-for-one stock split of its outstanding OP Units. No NaN fractional shares or OP Units were issued as a result of the stock split. All historic share and per share amounts in these Consolidated Financial Statements have been adjusted to give retroactive effect to the stock split. On September 21, 2020, the Corporation closedcompleted its initial public offering (“IPO”) at $17.00 per share,and issued an aggregate of 33,500 37,000,000 shares of a new class of common stock, $0.00025 $0.00025 par value per share (“Class A Common Stock”) at $17.00 per share, which includes shares issued pursuant to the underwriters’ partial exercise of their over-allotment option on October 20, 2020, pursuant to a registration statement on Form S-11 (File (FileNo. 333-240381), as amended, under the Securities Act of 1933, as amended.1933. Shares of the Class A Common Stock arewere listed on the New York 90
Stock Exchange (“NYSE”) under the symbol “BNL.” On OctoberMarch 20, 2020, the Company issued an additional 3,500 shares2021, each share of Class A Common Stock pursuant to the underwriters’ partial exerciseautomatically converted into one share of their option to acquire up to 5,025Common Stock, and effective March 22, 2021, all shares of Class A Common Stock at $17.00 per share.were listed and freely tradeable on the NYSE under the symbol “BNL.” See Note 15. 14.
The following table summarizes the outstanding equity and economic ownership interest of the Corporation and the OP: | | December 31, 2020 | | | December 31, 2019 | | | December 31, 2018 | | (in thousands) | | Shares of Common Stock | | | OP Units | | | Total Diluted Shares | | | Shares of Common Stock | | | OP Units | | | Total Diluted Shares | | | Shares of Common Stock | | | OP Units | | | Total Diluted Shares | | Ownership interest | | | 145,609 | | | | 11,399 | | | | 157,008 | | | | 104,006 | | | | 6,948 | | | | 110,954 | | | | 88,055 | | | | 6,948 | | | | 95,003 | | Percent Ownership of OP | | | 92.7 | % | | | 7.3 | % | | | 100.0 | % | | | 93.7 | % | | | 6.3 | % | | | 100.0 | % | | | 92.7 | % | | | 7.3 | % | | | 100.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ownership interest | | | 162,383 | | | | 10,323 | | | | 172,706 | | | | 145,609 | | | | 11,399 | | | | 157,008 | | | | 104,006 | | | | 6,948 | | | | 110,954 | | | Percent Ownership of OP | | | 94.0 | % | | | 6.0 | % | | | 100.0 | % | | | 92.7 | % | | | 7.3 | % | | | 100.0 | % | | | 93.7 | % | | | 6.3 | % | | | 100.0 | % |
Refer to Note 1716 for further discussion regarding the calculation of weighted average shares outstanding. 2. Summary of Significant Accounting Policies Principles of Consolidation The Consolidated Financial Statements include the accounts and operations of the Company. All intercompany balances and transactions have been eliminated in consolidation. To the extent the Corporation has a variable interest in entities that are not evaluated under the variable interest entity (“VIE”) model, the Corporation evaluates its interests using the voting interest entity model. The Corporation has complete responsibility for the management of, authority to make decisions for, and control of the OP. Based on consolidation guidance, the Corporation has concluded that the OP is a VIE as the members in the OP do not possess kick-out rights or substantive participating rights. Accordingly, the Corporation consolidates its interest in the OP. However, because the Corporation holds the majority voting interest in the OP and certain other conditions are met, it qualifies for the exemption from providing certain disclosure requirements associated with investments in VIEs. The portion of the OP not owned by the Corporation is presented as non-controlling interests as of and during the periods presented. The Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include, but are not limited to, the allocation of purchase price between tangible and intangible assets acquired and liabilities assumed, the value of long-lived assets and goodwill, the provision for impairment, the depreciable lives of rental property, the amortizable lives of intangible assets and liabilities, the provisions for uncollectible rent and credit losses, the fair value of the earnout liability, the fair value of assumed debt, and notes payable, the fair value of the Company’s interest rate swap agreements, and the determination of any uncertain tax positions. Accordingly, actual results may differ from those estimates. 91
Investment in Rental Property Rental property accounted for under operating leases is recorded at cost. Rental property accounted for under direct financing leases and sales-type leases are recorded at its net investment, which generally represents the cost of the property at the inception of the lease. The Company accounts for its acquisitions of real estate as asset acquisitions in accordance with Accounting Standards Codification (“ASC”) 805, , as substantially all of the fair value of the assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets.
The Company allocates the purchase price of investments in rental property accounted for as asset acquisitions based on the relative fair value of the assets acquired and liabilities assumed. These generally include tangible assets, consisting of land and land improvements, buildings and other improvements, and equipment, and identifiable intangible assets and liabilities, including the value ofin-place leases and acquired above-market and below-market leases. Acquisition costs incurred in connection with investments in real estate accounted for as asset acquisitions are capitalized and included with the allocated purchase price. The results of operations of acquired properties are included in the Consolidated Statements of Income and Comprehensive Income from the respective date of acquisition. Estimated fair value determinations are based on management’s judgment, which considers various factors including real estate market conditions, industry conditions that the tenant operates in, and characteristics of the real estate and/or real estate appraisals. The estimated fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant. The value is then allocated to land and land improvements, buildings, and equipment based on comparable sales and other relevant information with respect to the property as estimated by management. Specifically, the “if vacant” value of buildings and equipment is calculated using an income approach. Assumptions used in the income approach to value the buildings include: capitalization and discount rates, lease-up time, market rents, make ready costs, land value, and land improvement value. The estimated fair value of acquired in-place leases are the costs that the Company would have had to incur to lease the properties to the occupancy level of the properties at the date of acquisition. Such costs include the fair value of leasing commissions and other operating costs that would have been incurred to lease the properties, had they been vacant, to their acquired occupancy level. Acquired in-place leases as of the date of acquisition are amortized over the remaining non-cancellable lease terms of the respective leases to amortization expense. Acquired above-market and below-market lease values are recorded based on the present value (using an interest rate that reflects the risks associated with the lease acquired) of the differences between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market value lease rates at the time of acquisition for the corresponding in-place leases. The capitalized above-market and below-market lease values are amortized as adjustments to lease revenue over the remaining term of the respective leases. Should a tenant terminate its lease, the unamortized portion of the in-place lease value is charged to amortization expense and the unamortized portion of above-market or below-market lease value is charged to lease revenue. Management estimates the fair value of assumed mortgages and notes payable based upon indications of then-current market pricing for similar types of debt with similar maturities. Assumed mortgages and notes payable are initially recorded at their estimated fair value as of the assumption date, and the difference between such estimated fair value and the notes’ outstanding principal balance is amortized to interest expense over the remaining term of the debt. Expenditures for significant betterments and improvements are capitalized. Maintenance and repairs are charged to expense when incurred. Construction and improvement costs incurred in connection with the development of 92
new properties or the redevelopment of existing properties are capitalized. Real estate taxes, interest costs, and leasing and development costs incurred during construction periods are capitalized. Capitalization is based on qualified expenditures and interest rates. Capitalized real estate taxes, interest costs, and leasing and development costs are amortized over lives which are consistent with the related assets. There were no capitalized interest or real estate taxes during the years ended December 31, 2021, 2020, 2019, and 2018.2019. Long-lived Asset Impairment The Company reviews long-lived assets other than goodwill, to be held and used for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If, and when, such events or changes in circumstances are present, an impairment exists to the extent the carrying value of the long-lived asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use of the long-lived asset or asset group and its eventual disposition. Such cash flows include expected future operating income, as adjusted for trends and prospects, as well as the effects of demand, competition, and other factors. An impairment loss is measured as the amount by which the carrying amount of the long-lived asset or asset group exceeds theits fair value of the asset or asset group. A significantvalue. Significant judgment is made as to determine if and when impairment should be taken. The Company’s assessment of impairment as of December 31, 2021, 2020, and 2019, was based on the most current information available to the Company. Based upon current market conditions resulting from the COVID-19 pandemic (see Note 23), certainCertain of the Company’s properties may have fair
values less than their carrying amounts. However, based on the Company’s plans with respect to each of those properties, the Company believes that their carrying amounts are recoverable and therefore, under applicable GAAP guidance, 0no impairment charges were recognized other than those described below. If the operating conditions mentioned above deteriorate or if the Company’s expected holding period for assets changes, subsequent tests for impairments could result in additional impairment charges in the future.During the year ended December 31, 2020, the Company recorded impairment charges associated with seven properties. Impairment indicators primarily included changes in the Company’s long-term hold strategy with respect to the individual properties, which was due in part to unfavorable market trends resulting from the COVID-19 pandemic in geographic areas where the Company has vacant properties being marketed for re-lease or sale. Inputs used in establishing fair value for real estate assets generally fall within Level 3 of the fair value hierarchy, which are characterized as requiring significant judgment as little or no current market activity may be available for validation. The main indicator used to establish the classification of the inputs is current market conditions, as derived through the use of published commercial real estate market information. The Company determines the valuation of impaired assets using generally accepted valuation techniques including discounted cash flow analysis, income capitalization, analysis of recent comparable sales transactions, actual sales negotiations, and bona fide purchase offers received from third parties. Management may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of its real estate. The following table summarizes the Company’s impairment charges, resulting primarily from changes in the Company’s long-term hold strategy with respect to the individual properties: | | | For the Year Ended
December 31, | | (in thousands, except number of properties) | | | | | | | | | | | Number of properties | | | 7 | | | | 7 | | | | 4 | | | Impairment charge | | $ | 28,208 | | | $ | 19,077 | | | $ | 3,452 | |
During the yearsyear ended December 31, 2021, an office tenant of the Company executed an early lease termination at two properties in exchange for a fee of $35.0 million, and simultaneously sold the underlying properties to an unrelated third party for aggregate gross proceeds of $16.0 million. As the sale of the underlying properties was to an unrelated third party, the Company accounted for the lease termination income and sale of properties as separate transactions in accordance with GAAP. The Company recognized the termination fee income, net of $1.5 millionwrite-off of accrued rental income associated with the lease as other income from real estate transactions, a component of Lease revenues, net, in the Consolidated Statements of Income and Comprehensive Income. Refer to theLease Termination Fee Income 93 result of the early lease termination, the Company accelerated the amortization of the remaining lease intangibles, recognizing $0.3 million in Lease revenues, net and $4.0 million in Depreciation and amortization in the Consolidated Statements of Income and Comprehensive Income. The Company sold the underlying vacant properties for an aggregate sales price of $16.0 million, and incurred sales expenses of $0.7 million. The properties’ carrying value, net of the fully amortized lease intangibles, was $41.1 million, resulting in a $25.7 million loss on sale of the properties. As the lease termination income was recognized separate from the sale of the underlying properties, the $35.0 million cash receipt was not able to be factored into the properties’ future undiscounted cash flows, and the properties were immediately deemed impaired. As such, the Company recognized the loss as an impairment charge in the Consolidated Statements of Income and Comprehensive Income. The following summarizes the impact of the above transactions, together with the corresponding financial statement line item: | | | | | | | | | | | Lease revenues, net | | | | | | Lease termination fee | | $ | 35,000 | | Write-off of accrued rental income | | | (1,496 | ) | | Accelerated amortization of above-market and below-market lease intangibles | | | 289 | | | | | | | | | | | | 33,793 | | | Depreciation and amortization | | | | | Accelerated amortization of in-place lease intangible | | | (4,046 | ) | | Provision for impairment of investment in rental properties | | | | | | Loss on sale | | | (25,746 | ) | | | | | | | | Total impact to net income | | $ | 4,001 | | | | | | | |
The remaining impairments recognized during the year ended December 31, 2021 were immaterial. During the year ended December 31, 2020, 2019, and 2018,impairment indicators primarily included changes in the Company’s long-term hold strategy with respect to the individual properties, which was due in part to unfavorable market trends resulting from theCOVID-19 pandemic in geographic areas where the Company recorded impairment chargeshad vacant properties marketed forre-lease or sale. Impairments recognized during the year ended December 31, 2019 were immaterial. Lease Termination Fee Income The Company recognizes lease termination fee income as other income from real estate transactions, a component of $19,077, $3,452,Lease revenues, net, when all conditions of the termination agreement have been met, and $2,061, respectively.collection of the lease termination fee is probable. If the tenant immediately vacates the property upon satisfying the conditions of the termination agreement, the Company recognizes the lease termination fee income net of accrued rental income associated with the lease immediately, as other income from real estate transactions, a component of Lease revenues, net, in the Consolidated Statement of Income and Comprehensive Income. Investments in Rental Property Held for Sale The Company classifies investments in rental property as held for sale when all of the following criteria are met: (i) management commits to a plan to sell the property, (ii) the property is available for immediate sale in its present condition, subject only to terms that are usual and customary for sales of investment properties, (iii) an active program to locate a buyer and conduct other actions required to complete the sale has been initiated, (iv) the sale of the property is probable in occurrence and is expected to qualify as a completed sale, (v) the property is actively marketed for sale at a sale price that is reasonable in relation to its fair value, and (vi) actions 94
required to complete the sale indicate that it is unlikely that any significant changes will be made or that the plan to sell will be withdrawn. For properties classified as held for sale, the Company suspends depreciation and amortization of the related assets, including the acquired in-place lease and above- or below-market lease intangibles, as well as straight-line revenue recognition of the associated lease, and records the investment in rental property at the lower of cost or net realizable value. The assets and liabilities associated with the properties classified as held for sale are presented separately on the Consolidated Balance Sheets for the most recent reporting period. At December 31, 20202021 and 2019,2020, the Company did not have any properties that met the held for sale criteria. Sales of Real Estate The Company adopted
Under ASU 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets, effective January 1, 2018 on a prospective basis. Under ASU 2017-05, the Company’s sales of real estate are generally considered to be sales to non-customers, requiring the Company to identify each distinct non-financial asset promised to the buyer. The Company determines whether the buyer obtains control of the non-financial assets, achieved through the transfer of the risks and rewards of ownership of the non-financial assets. If control is transferred to the buyer, the Company derecognizes the asset. If the Company determines that it did not transfer control of the non-financial assets to the buyer, the Company analyzes the contract for separate performance obligations and allocates a portion of the sales price to each performance obligation. As performance obligations are satisfied, the Company recognizes the respective income in the Consolidated Statements of Income and Comprehensive Income. The Company presents discontinued operations if disposals of properties represent a strategic shift in operations. Those strategic shifts would need to have a major effect on the Company’s operations and financial results in order to meet the definition. For the years ended December 31, 2021, 2020, 2019, and 2018,2019, the Company did not have property dispositions that qualified as discontinued operations. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which are as follows:
Land improvements
| | 15 years
| | | Land improvements | | | 15 years | | | Buildings and improvements | | | 15 to 39 years | | Equipment | | | 7 years | |
Leasing fees represent costs incurred to lease properties to tenants and are capitalized as they are incremental costs of a lease that would not have been incurred if the lease had not been obtained. Leasing fees are amortized using the straight-line method over the term of the lease to which they relate, which range from 4 to 25 years. Cash equivalents consist of highly liquid investments with an original maturity at date of acquisition of three months or less, including money market funds. The Company estimates that the fair value of cash equivalents approximates the carrying value due to the relatively short maturity of these instruments. Restricted cash includes escrow funds the Company maintains pursuant to the terms of certain mortgages, notes payable, and lease agreements, and undistributed proceeds from the sale of properties under Section 1031 of the Internal Revenue 95
Code of 1986, as amended (the “Code”), and is reported within Prepaid expenses and other assets on the Consolidated Balance Sheets. Restricted cash consisted of the following: | | | | | | | | | | | | | | | | | | | | | | | Escrow funds and other | | $ | 6,100 | | | $ | 7,852 | | | Undistributed 1031 proceeds | | | 0 | | | | 2,390 | | | | | | | | | | | | | | | $ | 6,100 | | | $ | 10,242 | | | | | | | | | | | |
| | December 31, | | (in thousands) | | 2020 | | | 2019 | | Escrow funds and other | | $ | 7,852 | | | $ | 2,311 | | Undistributed 1031 proceeds | | | 2,390 | | | | 5,545 | | | | $ | 10,242 | | | $ | 7,856 | |
The Company accounts for leases in accordance with ASC 842, . The Company commences revenue recognition on its leases based on a number of factors, including the initial determination that the contract is or contains a lease. Generally, all of the Company’s property related contracts are or contain leases, and therefore revenue is recognized when the lessee takes possession of or controls the physical use of the leased assets. In most instances this occurs on the lease commencement date. At the time of lease assumption or at the inception of a new lease, including new leases that arise from amendments, the Company assesses the terms and conditions of the lease to determine the proper lease classification.Certain of the Company’s leases require tenants to pay rent based upon a percentage of the property’s net sales (“percentage rent”) or contain rent escalators indexed to future changes in the Consumer Price Index (“CPI”). Lease income associated with such provisions, isabsent the existence of a floor, are considered variable lease income and isare not included in the initial measurement of the lease receivable, or in the calculation of straight-line rent revenue. Such amounts are recognized as income when the amounts are determinable. A lease is classified as an operating lease if none of the following criteria are met: (i) ownership transfers to the lessee at the end of the lease term, (ii) the lessee has a purchase option that is reasonably expected to be exercised, (iii) the lease term is for a major part of the economic life of the leased property, (iv) the present value of the future lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the leased property, and (v) the leased property is of such a specialized nature that it is expected to have no future alternative use to the Company at the end of the lease term. Prospectively, upon adoption of ASC 842 on January 1, 2019, if one or more of these criteria are met, the lease will generally be classified as a sales-type lease, unless the lease contains a residual value guarantee from a third party other than the lessee, in which case it would be classified as a direct financing lease under certain circumstances. Prior to the adoption of ASC 842, a lease that was not an operating lease would be accounted for as a direct financing lease.
The Company accounts for the right to use land as a separate lease component, unless the accounting effect of doing so would be insignificant. Determination of significance requires management judgment. In determining whether the accounting effect of separately reporting the land component from other components for its real estate leases is significant, the Company assesses: (i) whether separating the land component impacts the classification of any lease component, (ii) the value of the land component in the context of the overall contract, and (iii) whether the right to use the land is coterminous with the rights to use the other assets. Revenue recognition methods for operating leases, direct financing leases, and sales-type leases are described below: Rental property accounted for under operating leases – Revenue is recognized as rents are earned on a straight-line basis over the non-cancelable terms of the related leases. For leases that have fixed and measurable rent escalations and collectability of the lease payments is probable, the difference between such 96
rental income earned and the cash rent due under the provisions of the lease is recorded as Accrued rental income on the Consolidated Balance Sheets. If the Company determines that collectability of the lease payments is not probable, the Company records an adjustment to Lease revenues, net to reduce cumulative income recognized since lease commencement to the amount of cash collected from the lessee. Future revenue recognition is limited to amounts paid by the lessee. Rental property accounted for under direct financing leases – The Company utilizes the direct finance method of accounting to record direct financing lease income. The net investment in the direct financing lease represents receivables for the sum of future lease payments to be received and the estimated residual value of the leased property, less unamortized unearned income (which represents the difference between undiscounted cash flows and discounted cash flows). Unearned income is deferred and amortized into income over the lease terms so as to produce a constant periodic rate of return on the Company’s net investment in the leases. Rental property accounted for under sales-type leases – For leases accounted for as sales-type leases, the Company records selling profit arising from the lease at inception, along with the net investment in the lease. The Company leases assets through the assumption of existing leases or through sale-leaseback transactions, and records such assets at their fair value at the time of acquisition, which in most cases coincides with lease inception. As a result, the Company does not generally recognize selling profit on sales-type leases. The net investment in the sales-type lease represents receivables for the sum of future lease payments and the estimated unguaranteed residual value of the leased property, each measured at net present value. Interest income is recorded over the lease terms so as to produce a constant periodic rate of return on the Company’s net investment in the leases. Certain of the Company’s lease contracts contain nonlease components ( , charges for management fees, common area maintenance, and reimbursement of third-party maintenance expenses) in addition to lease components (, monthly rental charges). Services related to nonlease components are provided over the same period of time as, and billed in the same manner as, monthly rental charges. The Company elected to apply the practical expedient available under ASC 842, for all classes of assets, not to separate the lease components from the nonlease components when accounting for operating leases. Since the lease component is the predominant component under each of these leases, combined revenues from both the lease and nonlease components are reported as Lease revenues, net in the accompanying Consolidated Statements of Income and Comprehensive Income.Refer below to
In April 2020, the Recently Adopted Accounting Standards section of this Note regardingFASB staff issued a question and answer document released by the Financial Accounting Standards Board (“FASB”(the “Lease Modification Q&A”) with guidancethat focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Under ASC 842, economic relief that was agreed to or negotiated outside of the original lease agreement is typically considered a lease modification, in which case both the lessee and lessor would be required to apply the respective modification frameworks. However, if the lessee was entitled to the economic relief because of either contractual or legal rights, the relief would be accounted for outside of the modification framework. Although the original lease modification guidance in ASC 842 remains appropriate to address routine lease modifications, the Lease Modification Q&A established a different framework to account for certain lease concessions granted in response to the COVID-19 pandemic, if certain criteria have been met. The Lease Modification Q&A allows the Company to make an accounting policy election to account forCOVID-19 related lease concessions as either a lease modification or a negative variable adjustment to rental revenue. Such election is required to be applied consistently to leases with similar characteristics and similar circumstances. In accordance with elections made pursuant to the Lease Modification Q&A, straight-line revenue recognized in the financial statements was not impacted for partial rent deferrals that were expected to be repaid within a short period of time, and where there was not a substantial change to the total consideration in the original lease agreement. Deferred rents due under these agreements was recorded as Tenant and other receivables, net in the Consolidated Balance Sheets. 97
Rent received in advance represents tenant payments received prior to the contractual due date, and is included in Accounts payable and other liabilities on the Consolidated Balance Sheets. Rent received in advance is as follows: | | December 31, | | (in thousands) | | 2020 | | | 2019 | | Rent received in advance | | $ | 13,651 | | | $ | 13,368 | |
| | | | | | | | | | Rent received in advance | | $15,162 | | $13,651 |
Goodwill represents the excess of the amount paid over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination and it assigned to one or more reporting units. The Company evaluates goodwill for impairment when an event occurs or circumstances change that indicate the carrying value may not be recoverable, or at least annually. The Company’s annual testing date is November 30. The goodwill impairment evaluation is completed using either a qualitative or quantitative approach. Under a qualitative approach, the impairment review for goodwill consists of an assessment of whether it is more-likely-than-not that the reporting unit’s fair value is less than its carrying value, including goodwill. If a qualitative approach indicates it is more likely-than-not that the estimated carrying value of a reporting unit (including goodwill) exceeds its fair value, or if we choose to bypass the qualitative approach, we perform the quantitative approach described below. When the Company performs a quantitative test of goodwill for impairment, it compares the carrying value of aits reporting unit with its fair value. If the fair value of the reporting unit exceeds its carrying amount, the Company does not consider goodwill to be impaired and no further analysis would be required. If the fair value is determined to be less than its carrying value, the amount of goodwill impairment equals the amount by which the reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The Company determined that it has 1 reporting unit, consistent with its segment reporting analysis, which includes the acquisition, leasing, and ownership of net leased properties (i.e., the consolidated entity). When necessary to perform the quantitative test for goodwill impairment, the Company’s estimate of fair value is determined using a market approach, leveraging assumptions such as the fair value of our equity, and consideration of a control premium, if necessary, which includes an analysis of similar market transactions. While the Company believes the assumptions used to estimate the fair value of its reporting unit are reasonable, changes in these assumptions may have a material impact on the Company’s financial results. Based on the results of its annual goodwill impairment test on November 30, 2021 and 2020, the Company’s inaugural goodwill impairment test date, the Company concluded that goodwill was not impaired. Provision for Uncollectible Rent Prior to the adoption of ASC 842, provisions for uncollectible rent were recorded as bad debt expense and included in General and administrative expenses on the accompanying Consolidated Statements of Income and Comprehensive Income. Prospectively, in
In accordance with ASC 842, (adopted January 1, 2019), provisions for uncollectible rent are recorded as an offset to Lease revenues, net on the accompanying Consolidated Statements of Income and Comprehensive Income. The following table summarizes the changes in the provision for uncollectible rent:
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Beginning balance | | $ | 201 | | | $ | 0 | | | $ | 2,086 | | | Provision for uncollectible rent, net | | | (101 | ) | | | 2,073 | | | | 441 | | | Write-offs | | | 0 | | | | (1,872 | ) | | | (2,527 | ) | | | | | | | | | | | | | | | | Ending balance | | $ | 100 | | | $ | 201 | | | $ | 0 | | | | | | | | | | | | | | | |
| | For the Year Ended December 31, | | (in thousands) | | 2020 | | | 2019 | | | 2018 | | Balance as of January 1 | | $ | 0 | | | $ | 2,086 | | | $ | 742 | | Provision for uncollectible rent | | | 2,073 | | | | 441 | | | | 1,521 | | Write-offs / Recoveries | | | (1,872 | ) | | | (2,527 | ) | | | (177 | ) | Balance as of December 31 | | $ | 201 | | | $ | 0 | | | $ | 2,086 | |
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Tenant and Capital Reserves The terms of certain of the Company’s operating leases require the establishment of tenant and capital reserves. Under the tenant reserve requirements, tenant-funded amounts are deposited into an escrow account, to be used to fund certain costs to maintain the rental properties. Under the capital reserve lease requirements, the tenants are required to
pay additional amounts into an escrow account to fund capital improvements, replacements, and repairs made to the properties. The Company has 0 obligation to fund capital improvements beyond these reserve balances. The balances of the tenant and capital reserves are included in Accounts payable and other liabilities on the Consolidated Balance Sheets and are as follows: | | | | | | | | | | | | | | | | | | | | | | | Tenant reserve | | $ | 1,217 | | | $ | 1,070 | | | Capital reserve | | | 1,020 | | | | 1,001 | | | | | | | | | | | | | | | $ | 2,237 | | | $ | 2,071 | | | | | | | | | | | |
| | December 31, | | (in thousands) | | 2020 | | | 2019 | | Tenant reserve | | $ | 1,070 | | | $ | 922 | | Capital reserve | | | 1,001 | | | | 872 | | | | $ | 2,071 | | | $ | 1,794 | |
The corresponding cash balances are recorded in Prepaid expenses and other assets on the Consolidated Balance Sheets. In accordance with ASC 835, debt issuance costs related to mortgages, and notes payable, unsecured term notesloans and senior unsecured notes are reported as a direct deduction from the carrying amount of the related liability, consistent with debt discounts, in the Consolidated Balance Sheets. Debt issuance costs associated with the unsecured revolving credit facility are reported as an asset on the Consolidated Balance Sheets.Debt issuance costs incurred in connection with the Company’s unsecured revolving credit facility, mortgages, and notes payable, and unsecured term notesloans and senior unsecured notes have been deferred and are being amortized over the term of the respective loan commitment using the straight-line method, which approximates the effective interest method. The following table summarizes debt issuance costs:
| | December 31, | | (in thousands) | | 2020 | | | 2019 | | Unsecured revolving credit facility: | | | | | | | | | Debt issuance costs | | $ | 9,708 | | | $ | 4,692 | | Less accumulated amortization | | | (3,273 | ) | | | (2,312 | ) | | | $ | 6,435 | | | $ | 2,380 | | Mortgages and notes payable: | | | | | | | | | Debt issuance costs | | $ | 636 | | | $ | 667 | | Less accumulated amortization | | | (351 | ) | | | (309 | ) | | | $ | 285 | | | $ | 358 | | Unsecured term notes: | | | | | | | | | Debt issuance costs | | $ | 9,076 | | | $ | 9,898 | | Less accumulated amortization | | | (2,872 | ) | | | (1,979 | ) | | | $ | 6,204 | | | $ | 7,919 | |
Initial Public
Offering Costs Prior to the close of the IPO on September 21, 2020,
In connection with equity offerings, the Company incurredincurs and capitalizedcapitalizes certain direct, incremental legal, professional, accounting and other third-party fees in connection with the IPO. The deferred IPOcosts. Such costs wereare offset against IPOthe gross proceeds of each equity offering, and reclassifiedrecorded as a component of Additional paid-in capital on the Consolidated Balance Sheets upon the consummation of the offering. At December 31, 2019, deferred IPO costs totaled $668 and were included within Prepaid expenses and other assets on the Consolidated Balance Sheets. See Note 1514 for further discussion of net proceeds associated with the IPO. equity offerings.
The Company’s earnout liability iswas payable in four tranches, in a combination of cash, common shares, and OP Units, in the same proportion as the initial consideration paid in the Internalization (see Note 4). The common shares and OP Units payable under the arrangement were originally subject to a redemption rights agreement, whereby holders of the common shares and OP Units had the right to require the Company to repurchase any or all of the common shares or OP Units if an IPO had not occurred on or before December 31, 2020 (see discussion of the redemption rights agreement in Note 4). The common shares and OP Units were deemed to be freestanding financial instruments that, at inception, embodied an obligation to repurchase the Company’s common shares and OP Units, and therefore were initially classified as liabilities together with the cash portion of the earnout, and recorded in Earnout liability on the Consolidated Balance Sheets as part of the purchase price allocation. The fair value of the earnout liability iswas remeasured each reporting period, with changes recorded as Change in fair value of earnout liability in the Consolidated Statements of Income and Comprehensive Income. 99
Upon completion of the IPO in September 2020, the redemption rights with respect to the common shares and OP Units terminated, and the $18,436$18.4 million fair value of the 726725,988 shares of common stock and 1,2401,239,506 OP Units associated with the third and fourth earnout tranches as of the date of the IPO, was reclassified to equity as a component of Additional paid-in capital and Non-controlling interests on the Consolidated Balance Sheets. At December 31, 2020, the $12,374$12.4 million fair value of 363362,989 shares of common stock and 619619,751 OP Units associated with the first and second earnout tranches was reclassified to equity as a component of Additional paid-in capital and Non-controlling interests on the Consolidated Balance Sheets, as the achievement of 2020 adjusted funds from operations (“AFFO”) targets were not met and arewere no longer applicable. AtThe Company achieved all four milestones applicable to the earnout thereby triggering the payout of all earnout tranches during the year ended December 31, 2020, the2021, and therefore no remaining balance in the earnout liability represents the fair value of the amounts potentially payable in the form of cash associated with all 4 tranches.was recorded at December 31, 2021. The Company issued common shares and OP Units as base consideration for the Internalization, each of which were subject to a redemption rights agreement, where the common shares (“mezzanine equity common stock”) and OP Units (“mezzanine equity non-controlling interests”) were economically equivalent to the permanent equity classified common shares and OP Units. The Company presented the mezzanine equity common stock and mezzanine equity non-controlling interests as mezzanine equity in the Consolidated Balance Sheets as they were redeemable outside the Company’s control. The Company subsequently recorded mezzanine equity common stock at redemption value each reporting period, with changes in carrying value recorded as a component of Additional paid-in capital on the Consolidated Balance Sheets. The Company subsequently recorded mezzanine equity non-controlling interests at the greater of (i) carrying amount, increased or decreased for the non-controlling interests’ share of net income or loss, dividends and comprehensive income or loss or (ii) redemption value. Changes in carrying value of mezzanine equity non-controlling interests were recorded as a component of Additional paid-in capital on the Consolidated Balance Sheets. The rights under the redemption rights agreement terminated effective with the IPO and the applicable common shares and OP Units were reclassified to permanent equity on September 21,in 2020 (see discussion of redemption rights agreement in Note 4). Leasing Fees
Leasing fees represent costs incurred to lease properties to tenants and are capitalized as they are incremental costs of a lease that would not have been incurred if the lease had not been obtained. Leasing fees are amortized using the straight-line method over the term of the lease to which they relate, which range from 9 to 29 years.
The Company uses interest rate swap agreements to manage risks related to interest rate movements. The interest rate swap agreements, designated and qualifying as cash flow hedges, are reported at fair value. The Company early adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting and Hedging Activities, , effective January 1, 2018 on a modified retrospective basis. ASU 2017-12 amended the designation and
measurement guidance for qualifying hedging transactions and the presentation of hedge results in an entity’s financial statements.
ASU 2017-12 removed the concept of separately measuring and reporting hedge ineffectiveness and
requires a company to present the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported. In accordance with ASU 2017-12, the gain or loss on the qualifying hedges is initially included as a component of other comprehensive income or loss and is subsequently reclassified into earnings when interest payments (the forecasted transactions) on the related debt are incurred and as the swap net settlements occur. When an existing cash flow hedge is terminated, the Company determines the accounting treatment for the accumulated gain or loss recognized in Accumulated other comprehensive loss based on the probability of the hedged forecasted transaction occurring within the period the cash flow hedge was anticipated to affect earnings. If the Company determines that the hedged forecasted transaction is probable of occurring during the original period, the accumulated gain or loss is reclassified into earnings over the remaining life of the cash flow hedge 100
using a straight-line method, which approximates an effective interest method. If the Company determines that the hedged forecasted transaction is not probable of occurring during the original period, the entire amount of accumulated gain or loss is reclassified into earnings in the period the cash flow hedge is terminated.at such time. The Company documents its risk management strategy and hedge effectiveness at the inception of, and during the term of, each hedge. The Company’s interest rate risk management strategy is intended to stabilize cash flow requirements by maintaining interest rate swap agreements to convert certain variable-rate debt to a fixed rate. Property Loss and Insurance Recoveries Property losses, whether full or partial, are accounted for using a combination of impairment, insurance, and revenue recognition guidance prescribed by GAAP. Upon incurring a loss event, the Company evaluates for asset impairment under ASC 350, Intangibles – Intangibles—Goodwill and Other, Property, Plant, and Equipment. Under the terms of the lease agreements with tenants, in the case of full or partial loss to a property, the tenant has an obligation to restore/rebuild the premises as nearly as possible to its value, condition and character immediately prior to such event. To mitigate the risk of loss, the Company requires tenants to maintain general liability insurance policies on the replacement value of the properties. Based on these considerations, the Company follows the guidance in ASC 610-30, Other Income – Gains—Gains and Losses on Involuntary Conversions, for the conversion of nonmonetary assets ( , the properties) to monetary assets (, insurance recoveries or tenant recoveries). Under ASC610-30, once probable of receipt, the Company recognizes an insurance/tenant recovery receivable in Tenant and other receivables, net, in the Consolidated Balance Sheets, with a corresponding offset to the accelerated depreciation recognized in the Consolidated Statements of Income and Comprehensive Income. If the insurance/tenant recovery is less than the amount of accelerated depreciation recognized, the Company will recognize a net loss in the Consolidated Statements of Income and Comprehensive Income. If the insurance/tenant recovery is greater than the amount of accelerated depreciation recognized, the Company will only recognize a recovery up to the amount of the accelerated depreciation, and will account for the excess as a gain contingency in accordance with ASC450-30, Gain contingencies are recognized when earned and realized, which typically will occur at the time of final settlement or whennon-refundable cash advances are received.Non-controlling InterestsNon-controlling
interests represents the membership interests held in the OP of 7.3%6.0%, 6.3%7.3%, and 7.3%6.3% at December 31, 2021, 2020, 2019, and 2018,2019, respectively, by third parties which are accounted for as a separate component of equity. The Company periodically adjusts the carrying value of non-controlling interests to reflect their share of the book value of the OP. Such adjustments are recorded to Additional paid-in capital as a reallocation of Non-controlling interests in the Consolidated Statements of Stockholders’ Equity and Mezzanine Equity. Subscriptions Receivable
Subscriptions receivable is related to shares issued to the Corporation’s stockholders for which the proceeds have not yet been received solely due to the fact
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The Company currently operates in a single reportable segment, which includes the acquisition, leasing, and ownership of net leased properties. The Company’s chief operating decision maker assesses, measures, and reviews the operating and financial results at the consolidated level for the entire portfolio, and therefore, each property or property type is not considered an individual operating segment. The Company does not evaluate the results of operations based on geography, size, or property type. ASC 820, Fair Value Measurements and Disclosures, The standard describes three levels of inputs that may be used to measure fair value: —Quoted prices that are available in active markets for identical assets or liabilities. The types of financial instruments included in Level 1 are marketable, equity securities that are traded in an active exchange market. —Pricing inputs other than quoted prices in active markets, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Instruments included in this category are derivative contracts whose value is determined using a pricing model with inputs (such as yield curves and credit spreads) that are observable in the market or can be derived principally from or corroborated by observable market data. —Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 includes assets and liabilities whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. The Company has estimated that the carrying amount reported on the Consolidated Balance Sheets for Cash and cash equivalents, Prepaid expenses and other assets, Tenant and other receivables, net, Accrued interest payable, and Accounts payable and other liabilities, and Dividends payable approximates their fair values due to their short-term nature. Recurring Fair Value Measurements Interest Rate Swap Assets and Liabilities - Liabilities— The Company measures and records its interest rate swap instruments (see Note 12)11) and earnout liability at fair value, and discloses the fair value of its long-term debt, on a recurring basis.
Interest rate swaps are derivative instruments that have no quoted readily available Level 1 inputs, and therefore are measured at fair value using inputs that are directly observable in active markets and are classified within Level 2 of the valuation hierarchy, using an income approach. Specifically, the fair value of the interest rate swaps is determined using a discounted cash flow analysis on the expected future cash flows of each instrument. This analysis utilizes observable market data including yield curves and implied volatilities to determine the market’s expectation of the future cash flows of the variable component. The fixed and variable components of the interest rate swaps are then discounted using calculated discount factors developed based on the overnight indexed swap (“OIS”) curve and are aggregated to arrive at a single valuation for the period. The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. Although the Company has 102
determined that the majority of the inputs used to value its interest rate swaps fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its interest rate swaps utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. At December 31, 20202021 and 2019,2020, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation. As a result, the Company has determined that its interest rate swap valuations in their entirety are appropriately classified within Level 2 of the fair value hierarchy. —In connection with the Internalization, the Company recognized an earnout liability that will bewas due and payable to the former owners of BRE if certain milestones arewere achieved during specified periods of time following the closing of the Internalization (the “Earnout Periods”). Under the terms of the agreement, the milestones related to either (a) the 40-day dollar volume-weighted average price of a share of the Company’s common stock (“VWAP per REIT Share”), following the completion of an IPO of the Company’s common stock, or (b) the Company’s AFFO per share, prior to the completion of an IPO (see Note 4).IPO. The Company utilizesutilized third-party valuation experts to assist in estimating the fair value of the earnout liability, and developsdeveloped estimates by considering weighted-average probabilities of likely outcomes, and using a Monte Carlo simulation and discounted cash flow analysis. These estimates requirerequired the Company to make various assumptions about share price volatility and, prior to the IPO, about the timing of an IPO and net asset prices, each of which are unobservable and considered Level 3 inputs in the fair value hierarchy. A change in these inputs to a different amount might resultcould have resulted in a significantly higher or lower fair value measurement at the reporting date. Specifically, advancements in the estimated IPO date assumption increased the earnout liability’s fair value given the earnout’s fixed time horizon. Peer share price volatilities arewere used to estimate the Company’s expected share price volatility, and the Company’s corresponding ability to achieve the earnout targets. Increases in the volatility assumption would increase the earnout liability’s fair value. Increases in net asset values would also increase the earnout liability’s fair value. The Company achieved all four VWAP milestones applicable to the earnout thereby triggering the payout of all earnout tranches during the year ended December 31, 2021, and therefore no remaining earnout liability was recorded at December 31, 2021. The table below provides a summary of the significant unobservable inputs used to estimate the fair value of the earnout liability as of December 31, 2020: Significant Unobservable Inputs | | Weighted Average
Assumption Used
| | | | | Peer stock price volatility | | 40.0%
| 40.0 | % |
| | 25.92% - 55.90% | |
The table below provides a summary of the significant unobservable inputs used to estimate the fair value of the earnout liability as of February 7, 2020, which was the transaction date: Significant Unobservable Inputs | | Weighted Average Assumption Used | | | Range | Expected IPO date | | April 15, 2020 | | | March 2020 through May 2020 | Peer stock price volatility | | 20.0% | | | 16.22% to 23.09% | Company's net asset value per diluted share | | $ | 21.30 | | | (a) |
(a)
|
| | | | Significant Unobservable Inputs | | Weighted Average
Assumption Used | | | | Expected IPO date | | April 15, 2020 | | March 2020 through May 2020 | | Peer stock price volatility | | 20.0% | | 16.22% to 23.09% | | Company’s net asset value per diluted share | | $21.30 | | (a) |
| (a) | The Company’s net asset value per diluted share was primarily based on the fair value of its real estate investment portfolio, together with the fair value of its other assets and liabilities. The fair value of the Company’s real estate investment portfolio as of the measurement date was determined using market capitalization rates that ranged between 6.05% and 7.09%. |
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The following table presents a reconciliation of the change in the earnout liability:
| | | | | | | | | | | | | For the Year Ended December 31, | | | | | | | | | | Beginning balance | | $ | 7,509 | | | $ | 0 | | | Allocation of Internalization purchase price at February 7, 2020 | | | 0 | | | | 40,119 | | | Change in fair value subsequent to Internalization | | | 5,539 | | | | (1,800 | ) | Reclassification as a component of additional paid-in capital and non-controlling interests | | | 0 | | | | (30,810 | ) | | Payout of tranches earned | | | (13,048 | ) | | | 0 | | | | | | | | | | | | | Ending balance | | $ | 0 | | | $ | 7,509 | | | | | | | | | | | |
(in thousands) | | For the Year Ended December 31, 2020 | | Beginning balance | | $ | 0 | | Allocation of Internalization purchase price at February 7, 2020 | | | 40,119 | | Change in fair value subsequent to Internalization | | | (1,800 | ) | Reclassification as a component of additional paid-in capital and non-controlling interests | | | (30,810 | ) | Ending balance | | $ | 7,509 | |
As a result of the Company’s IPO in September 2020 and expiration of the AFFO target achievement in December 2020, the portions of the liability payable in common shares and OP units was reclassified to equity at fair value as a component of Additional paid-in capital and Non-controlling interests, respectively. See further discussion in Earnout Liability in this Note 2.
The decrease in fair value subsequent to the Internalization was driven by a lower share price. This was partially offset by an increase in peer stock price volatility, which is attributable to changes in economic circumstances impacting global equity markets.
The balances of financial instruments measured at fair value on a recurring basis are as follows (see Note 12)11): | | December 31, 2020 | | (in thousands) | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | Interest rate swap, liabilities | | $ | (72,103 | ) | | $ | — | | | $ | (72,103 | ) | | $ | — | | Earnout liability | | | (7,509 | ) | | | — | | | | — | | | | (7,509 | ) |
| | | | | | | | | | | | | | | | | | | Interest rate swap, liabilities | | $ | (27,171 | ) | | $ | 0 | | | $ | (27,171 | ) | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate swap, liabilities | | $ | (72,103 | ) | | $ | — | | | $ | (72,103 | ) | | $ | — | | | Earnout liability | | | (7,509 | ) | | | — | | | | — | | | | (7,509 | ) |
| | December 31, 2019 | | | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | Interest rate swap, assets | | $ | 2,911 | | | $ | — | | | $ | 2,911 | | | $ | — | | Interest rate swap, liabilities | | | (24,471 | ) | | | — | | | | (24,471 | ) | | | — | |
The fair value of the Company’s debt was estimated using Level 1, Level 2, and Level 3 inputs based on recent secondary market trades of the Company’s 2031 Senior Unsecured Public Notes (defined below), recent financing transactions, estimates of the fair value of the property that serves as collateral for such debt, historical risk premiums for loans of comparable quality, current London Interbank Offered Rate (“LIBOR”), U.S. Treasury obligation interest rates, and on the discounted estimated future cash payments to be made on such debt. The discount rates estimated reflect the Company’s judgment as to the approximate current lending rates for loans or groups of loans with similar maturities and assumes that the debt is outstanding through maturity. Market information, as available, or present value techniques were utilized to estimate the amounts required to be disclosed. Since such amounts are estimates that are based on limited available market information for similar transactions and do not acknowledge transfer or other repayment restrictions that may exist on specific loans, it is unlikely that the estimated fair value of any such debt could be realized by immediate settlement of the obligation.
The following table summarizes the carrying amount reported on the Consolidated Balance Sheets and the Company’s estimate of the fair value of the Mortgages and notes payable, net, Unsecured term notes, net, and Unsecuredunsecured revolving credit facility, mortgages, unsecured term loans, and senior unsecured notes which reflects the fair value of interest rate swaps: | | December 31, | | (in thousands) | | 2020 | | | 2019 | | Carrying amount | | $ | 1,547,667 | | | $ | 1,989,451 | | Fair value | | | 1,679,188 | | | | 2,047,860 | |
| | | | | | | | | | | | | Carrying amount | | $ | 1,699,160 | | | $ | 1,547,667 | | | Fair value | | | 1,785,701 | | | | 1,679,188 | |
Non-recurring Fair Value Measurements The Company’s non-recurring fair value measurements at December 31, 20202021 and 2019,2020, consisted of the fair value of impaired real estate assets that were determined using Level 3 inputs. 104
The Company has made an election to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with its taxable year ended December 31, 2008. The Company believes it is organized and operates in such a manner as to qualify for treatment as a REIT, and intends to operate in the foreseeable future in such a manner so that it will remain qualified as a REIT for U.S. federal income tax purposes. Accordingly, the Company is not subject to U.S. federal corporate income tax to the extent its dividends paid deduction exceeds its taxable income, as defined in the Code. Accordingly, no provision has been made for U.S. federal income taxes in the accompanying Consolidated Financial Statements. The Company has a wholly-owned subsidiary that elected to be treated as a TRStaxable REIT subsidiary (“TRS”) and is subject to U.S. federal, state and local income taxes at regular corporate tax rates when due. The Company is subject to state and local income or franchise taxes and foreign taxes in certain jurisdictions in which some of its properties are located and records these within Income taxes in the accompanying Consolidated Statements of Income and Comprehensive Income when due. The Company is required to file income tax returns with federal, state, and Canadian taxing authorities. At December 31, 2020,2021, the Company’s U.S. federal and state income tax returns remain subject to examination by the respective taxing authorities for the 20172018 through 20192020 tax years. The Company recognizes and measures uncertain tax positions using a two-step approach. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more-likely-than-not that the position will be sustained upon examination, including resolution of related appeals or litigation processes, if any. In making this assessment, the Company must assume that the taxing authority will examine the income tax position and have full knowledge of all relevant information. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating tax positions and tax benefits, which may require periodic adjustments and which may or may not accurately forecast actual outcomes. The Company has determined that it has 0no uncertain tax positions at December 31, 20202021 and 2019,2020, or for the years ended December 31, 2021, 2020, 2019, and 2018,2019, which include the tax status of the Company. Interest and penalties related to income taxes are charged to tax expense during the year in which they are incurred. Taxes Collected From Tenants and Remitted to Governmental Authorities A majority of the Company’s properties are leased on a net basis, which provides that the tenants are responsible for the payment of property operating expenses, including, but not limited to, property taxes, maintenance, insurance, repairs, and capital costs, during the lease term. The Company records such expenses on a net basis. In other situations, the Company may collect property taxes from its tenants and remit those taxes to governmental authorities. Taxes collected from tenants and remitted to governmental authorities are presented on a gross basis,
where amounts billed to tenants are included in Lease revenues, net and the corresponding expense is included in Property and operating expense in the accompanying Consolidated Statements of Income and Comprehensive Income. Assets and Lease Liabilities The Company is a lessee under non-cancelable operating leases associated with its corporate headquarters and other office spaces as well as with leases of land (“ground leases”). The Company records assets and lease liabilities associated with these leases. The lease liability is equal to the net present value of the future 105
payments to be made under the lease, discounted using estimates based on observable market factors. The asset is generally equal to the lease liability plus initial direct costs associated with the leases. The Company includes in the recognition of the asset and lease liability those renewal periods that are reasonably certain to be exercised, based on the facts and circumstances that exist at lease inception. Amounts associated with percentage rent provisions are considered variable lease costs and are not included in the initial measurement of the asset or lease liability. The Company has made an accounting policy election, applicable to all asset types, not to separate lease from nonlease components when allocating contract consideration related to operating leases. assets and lease liabilities associated with operating leases were included in the accompanying Consolidated Balance Sheets as follows: | | | | December 31, | | (in thousands) | | Financial Statement Presentation | | 2020 | | | 2019 | | Right-of-use assets | | Prepaid expenses and other assets | | $ | 3,075 | | | $ | 1,614 | | Lease liabilities | | Accounts payable and other liabilities | | | 2,659 | | | | 1,209 | |
| | | | | | | | | | | | | | | | | | | | Financial Statement Presentation | | | | | | | | | Prepaid expenses and other assets | | $ | 3,099 | | | $ | 3,075 | | Lease liabilities | | Accounts payable and other liabilities | | | 2,570 | | | | 2,659 | |
Rental expense associated with operating leases is recorded on a straight-line basis over the term of each lease, for leases that have fixed and measurable rent escalations. The difference between rental expense incurred on a straight-line basis and the cash rental payments due under the provisions of the lease is recorded as part of the asset in the accompanying December 31, 20202021 and 20192020 Consolidated Balance Sheets. Amounts associated with percentage rent provisions based on the achievement of sales targets are recognized as variable rental expense when achievement of the sales targets are considered probable. Rental expense is included in Property and operating expense on the accompanying Consolidated Statements of Income and Comprehensive Income. Stock-Based Compensation On August 4, 2020, the Board of Directors adopted the Broadstone Net Lease, Inc.
The Company has issued restricted stock awards (“RSAs”) and performance-based restricted stock units (“PRSUs”) under its 2020 Omnibus Equity and Incentive Plan (the “Equity Incentive Plan”) to provide long-term stock-based incentives to employees and non-employee directors of the Company. Subject to any adjustment as provided in the Equity Incentive Plan, up to 9,000 shares may be issued pursuant to awards granted under the Equity Incentive Plan in the form of stock options, restricted stock, restricted stock units, stock appreciation rights, dividend equivalent rights, share awards and performance-based awards (including performance share units and performance-based restricted stock) and LTIP Units (as defined in the Equity Incentive Plan). On August 4, 2020, the Company awarded 341 shares of restricted common stock under the Equity Incentive Plan to certain officers and employees. The Company accounts for stock-based incentives in accordance with ASC 718, Compensation – Compensation—Stock Compensation shares of restricted common stockRSAs issued under the Equity Incentive Plan are recorded as Cumulative distributions in excess of retained earnings on the Consolidated Balance Sheets. Accumulated dividends related to forfeited awards will beRSAs are reversed through compensation expense in the period the forfeiture occurs. Dividends accrued on the PRSUs are recorded as Cumulative distributions in excess of retained earnings on the Consolidated Balance Sheets. Accumulated dividends accrued related to forfeited PRSUs are reversed in the period the forfeiture occurs.
Earnings per common share has been computed pursuant to the guidance in ASC Topic 260, which requires the classification of the Company’s unvested shares of restricted common stock, which contain rights to receivenon-forfeitable dividends, as participating securities requiring thetwo-class method of computing earnings per share. Thetwo-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating securities according to dividends declared (or106
accumulated) and participation rights in undistributed earnings. In accordance with the two-class method, the Company’s calculation of earnings per share excludes the income attributable to the unvested shares of restricted common stock from the numerator of the calculation and the weighted average number of such unvested shares from the denominator. See Note 17.16. Recently Adopted Accounting Standards In June 2016,January 2021, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments – Credit Losses which changed how entities measure credit losses for most financial assets. Financial assets that are measured at amortized cost are required to be presented at the net amount expected to be collected with a provision for credit losses deducted from the amortized cost basis. The guidance requires an entity to utilize broader information in estimating the expected credit losses, including forecasted information. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses which clarified that operating lease receivables recorded by lessors are explicitly excluded from the scope of this guidance. ASU 2016-13 and ASU 2018-09 (collectively, “ASC 326”Accounting Standards Update (“ASU”) were effective January 1, 2020, under a modified retrospective application. The new guidance applies to the Company’s investments in direct financing and sales-type leases. Due to the nature of its activities, the Company’s lease portfolio has historically not included a significant number of direct financing or sales-type leases, and as a result the adoption of ASC 326 did not have a material impact on its financial statements. In connection with the adoption of ASC 326, the Company recorded a provision for credit losses of $323 with an offsetting cumulative-effect adjustment to the opening balance of retained earnings as of January 1, 2020.In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The amendments under ASU 2018-13 remove, add, and modify certain disclosure requirements on fair value measurements in ASC 820. The amendments were effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company adopted the new standard on a prospective basis on January 1, 2020. The modifications and new disclosures required by the new standard primarily relate to disclosures concerning recurring Level 3 fair value measurements.
In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments which clarified and improved guidance within the recently issued standards on credit losses, hedging, and recognition and measurement of financial instruments. The Company assessed the impact of the changes to Topic 326 in connection with its adoption of ASU 2016-13 discussed above. The provisions of ASU 2019-04 relating to Topics 815 and 825 relate to clarifying the provisions of existing guidance that are not applicable to the Company.
In March 2020, the FASB issued ASU 2020-04, 2021-01, Reference Rate Reform (Topic 848): FacilitationScope 2021-01 gives market participants the ability to apply certain aspects of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to the U.S. GAAP guidance on contract modificationsmodification and hedge accounting expedients to derivative contracts affected by reference rate reforma discounting transition. ASU
2021-01 permits an entity to elect certain hedging relief if certain criteria are met. ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidanceit has designated a derivative as a hedging instrument in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probabilitya hedging relationship and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impactterms of the guidance and may apply other elections as applicable as additional changes in the market occur.In April 2020, the FASB staff issued a question and answer document (the “Lease Modification Q&A”) that focused on the application of lease accounting guidance to lease concessions providedderivative have changed as a result of the COVID-19 pandemic. Under ASC 842, economic relief that was agreed to or negotiated outside of the original lease agreement is typically considered a lease modification, in which case both the lessee and lessor would be required todiscounting transition. The Company will apply the respective
amendments in ASU
2021-01
modification frameworks. However, if the lessee was entitledrelated to the economic relief because of either contractual or legal rights, the relief would be accounted for outside of the modification framework. Although the original lease modification guidance in ASC 842 remains appropriate to address routine leasecontract modifications the Lease Modification Q&A established a different framework to account for certain lease concessions granted in response to the COVID-19 pandemic, if certain criteria have been met. The Lease Modification Q&A allows the Company to make an accounting policy election to account for COVID-19 related lease concessions as either a lease modification or a negative variable adjustment to rental revenue. Such election is required to be applied consistently to leases with similar characteristics and similar circumstances. Refer to Note 23, COVID-19 Pandemic regarding information on COVID-19 related concessions and the associated impact on the Company’s results of operations.
hedging relationships prospectively. Other Recently Issued Accounting Standards In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity . The guidance in ASU 2020-06 simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. In addition, the amendments in ASU 2020-06 also simplify the guidance in ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity , by removing certain criteria that must be satisfied in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets.instruments. The amendments in ASU 2020-06 are effective for the Company for fiscal years beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.January 1, 2022. The guidance must be adopted asCompany uses thetwo-class method of computing basic and diluted earnings per share. Based on the nature of the beginningCompany’s potentially dilutive instruments, the treasury stock method is not used in computing dilutive earnings per share. Accordingly, the adoption of ASU2020-06 will not have a material impact on the Company.The Company reclassified $961.3 million of Unsecured term notes, net at December 31, 2020 to Unsecured term loans, net at December 31, 2021 and $472.5 million of Unsecured term notes, net at December 31, 2020 to Senior unsecured notes, net at December 31, 2021 on the Consolidated Balance Sheets, to conform with the current period presentation. The reclassifications are changes from one acceptable presentation to another acceptable presentation. The Company disaggregated $39.3 million of Accounts payable and other liabilities to a separate financial statement line item Dividends payable on the Consolidated Balance Sheets at December 31, 2020, to conform with the current period presentation. The reclassification is a change from one acceptable presentation to another acceptable presentation. The components of investment in rental property accounted for using the operating method were previously combined and reported as assets accounted for using the operating method, net of accumulated depreciation on the Consolidated Balance Sheets with separate footnote disclosure of the fiscal yeardisaggregated balances. The components of adoption. The Companyinvestment in rental property accounted for using the operating method were disaggregated to 107
conform with the current period presentation, which is currently evaluating the impact of this new guidance.a change from one acceptable presentation to another acceptable presentation, as follows: | | | | | | | | | | | | | | | | | | | Accounted for using the operating method, net of accumulated depreciation | | $ | 3,354,511 | |
| | | | | | | | | | | | | | | | | | | Accounted for using the operating method: | | | | | | Land | | $ | 555,748 | | | Land improvements | | | 279,360 | | | Buildings and improvements | | | 2,857,510 | | | Equipment | | | 11,870 | | | | | | | | | Total accounted for using the operating method | | | 3,704,488 | | | Less accumulated depreciation | | | (349,977 | ) | | | | | | | | Accounted for using the operating method, net | | $ | 3,354,511 | | | | | | | |
3. Related-Party Transactions Prior to the Internalization on February 7, 2020, BRE, a related party in which certain directors of the Corporation had either a direct or indirect ownership interest, and the Asset Manager were considered to be related parties. Property Management Agreement The Corporation and the OP were parties to a property management agreement (as amended, the “Property Management Agreement”) with BRE. Under the terms of the Property Management Agreement, BRE managed and coordinated certain aspects of the leasing of the Corporation’s rental property. In exchange for services provided under the Property Management Agreement, BRE received certain fees and other compensation as follows: | (i) | 3% of gross rentals collected each month from the rental property for property management services (other than 1 one property, which called for 5% of gross rentals under the Property Management Agreement); and
|
| (ii) | Re-leasing fees for existing rental property equal to one month’s rent for a new lease with an existing tenant and two months’months’ rent for a new lease with a new tenant. |
Upon completion of the Internalization, the Property Management Agreement was terminated and, there will be 0 futureprospectively, property management fees were 0 longer payable to BRE. The Internalization was not considered a “Termination Event” under the Property Management Agreement, therefore 0 fees were payable to BRE as a result of the Internalization. See Note 4 for further discussion regarding the Internalization, including the associated payments related thereto. Asset Management Agreement The Corporation and the OP were parties to an asset management agreement (as amended, the “Asset Management Agreement”) with the Asset Manager, a single member limited liability company of which BRE 108
was the sole member,
and therefore a related party in which certain directors of the Corporation had an indirect ownership interest. Under the terms of the Asset Management Agreement, the Asset Manager was responsible for, among other things, the Corporation’s acquisition, initial leasing, and disposition strategies, financing activities, and providing support to the Corporation’s Independent Directors Committee (“IDC”) for its valuation functions and other duties. The Asset Manager also nominated two individuals to serve on the Board of Directors of the Corporation. Under the terms of the Asset Management Agreement, the Asset Manager was compensated as follows: | (i) | a quarterly asset management fee equal to 0.25% of the aggregate value of common stock, based on the per share value as determined by the IDC each quarter, on a fully diluted basis as if all interests in the OP had been converted into shares of the Corporation’s common stock; |
| (ii) | 0.5% of the proceeds from future equity closings as reimbursement for offering, marketing, and brokerage expenses; |
| (iii) | 1% of the gross purchase price paid for each rental property acquired (other than acquisitions described in (iv) below), including any property contributed in exchange for membership interests in the OP; |
| (iv) | 2% of the gross purchase price paid for each rental property acquired in the event that the acquisition of a rental property required a new lease (as opposed to the assumption of an existing lease), such as a sale-leaseback transaction; |
| (v) | 1% of the gross sale price received for each rental property disposition; and |
| (vi) | 1% of the Aggregate Consideration, as defined in the Asset Management Agreement, received in connection with a disposition event, as defined in the Asset Management Agreement. |
Upon completion of the Internalization, the Asset Management Agreement was terminated and, there will be 0 futureprospectively, asset management fees were 0 longer payable to the Asset Manager. The Internalization was not considered a “Termination Event” under the Asset Management Agreement, therefore 0 fees were payable to the Asset Manager as a result of the Internalization. See Note 4 for further discussion regarding the Internalization, including the associated payments related thereto. Total fees incurred under the Property Management Agreement and Asset Management Agreement arewere as follows: (in thousands) | | Financial Statement | | For the Year Ended December 31, | | Type of Fee | | Presentation | | 2020(a) | | | 2019 | | | 2018 | | Asset management fee | | Asset management fees | | $ | 2,461 | | | $ | 21,863 | | | $ | 18,173 | | Property management fee | | Property management fees | | | 1,275 | | | | 8,256 | | | | 6,529 | | Total management fee expense | | | | | 3,736 | | | | 30,119 | | | | 24,702 | | | | | | | | | | | | | | | | | Marketing fee (offering costs) | | Additional paid-in capital | | | — | | | | 1,649 | | | | 1,158 | | Acquisition fee | | Capitalized as a component of assets acquired | | | — | | | | 10,319 | | | | 5,907 | | Leasing fee and re-leasing fees | | Leasing fees, net | | | — | | | | 843 | | | | 1,399 | | Disposition fee | | Gain on sale of real estate | | | 109 | | | | 1,765 | | | | 573 | | Total management fees | | | | $ | 3,845 | | | $ | 44,695 | | | $ | 33,739 | |
| | | | | | | | | | | | | | | | | | | For the Year Ended December 31, | | | | Financial Statement Presentation | | | | | | | | | | | Asset management fee | | Asset management fees | | | $0 | | | | $2,461 | | | | $21,863 | | | Property management fee | | Property management fees | | | 0 | | | | 1,275 | | | | 8,256 | | | | | | | | | | | | | | | | | | | Total management fee expense | | | | | 0 | | | | 3,736 | | | | 30,119 | | | Marketing fee (offering costs) | | Additional paid-in capital | | | 0 | | | | — | | | | 1,649 | | | Acquisition fee | | Capitalized as a component of assets acquired | | | 0 | | | | — | | | | 10,319 | | Leasing fee and re-leasing fees | | Leasing fees, net | | | 0 | | | | — | | | | 843 | | | Disposition fee | | Gain on sale of real estate | | | 0 | | | | 109 | | | | 1,765 | | | | | | | | | | | | | | | | | | | Total management fees | | | | | $0 | | | | $3,845 | | | | $44,695 | | | | | | | | | | | | | | | | | |
(a) | Fees were payable under the Property Management Agreement and Asset Management Agreement from January 1, 2020 through February 6, 2020. The Internalization was effective February 7, 2020. |
There were 0 unpaid management fees at December 31, 20202021 and 2019.2020. All fees related to the Property Management Agreement and the Asset Management Agreement were paid for in cash within the Company’s normal payment cycle for vendors. Tax Protection Agreement
Upon closing
109
Company’s failure to allocate specific types of the OP’s indebtedness to the Founding Owners (the “Founding Owners’ Tax Protection Agreement”). The maximum amount the Company may be liable for under the Founding Owners’ Tax Protection Agreement is $10,000.
In connection with the Internalization, the Company incurred a contingent obligation that would be payable to certain members of the Company’s Board of Directors and employees who had previously been owners and/or employees of BRE, upon the occurrence of certain events (see Note 4). As of December 31, 2021, the Company achieved all four VWAP milestones applicable to the earnout. As a result, the Company issued 1,088,977 shares of common stock, 1,859,257 OP Units and made cash payments of $13.0 million to these related parties (see Note 4). The earnout consideration at December 31, 2020, consisted of $7,509$7.5 million recorded as Earnout liability, $11,380$11.4 million recorded as a component of Additional paid-in capital, and $19,430$19.4 million recorded as a component of Non-controlling interests on the Consolidated Balance Sheets (see Note 2). Related Party Lease
In connection with the Internalization, the Company assumed the lease agreement relating to its principal executive office with Clinton Asset Holdings Associates, L.P., an affiliated third party, approximately 1.6% of which is indirectly owned by the Company’s Chairman and member of the Board of Directors. The lease of 24,072 square feet of office space expires on August 31, 2023, and contains 2 five-year renewal options. The annual rent for 2021 is approximately $558, with 2% annual increases thereafter. See further discussion in Note 20.
Investment in Related Party
On June 30, 2015, the Company issued 556 shares with a value of $10,000 to BRE in exchange for 100 non-voting convertible preferred units of BRE, which represented a 6.4% ownership interest in BRE at the time of the transaction on a fully-diluted basis. The Company had the right to convert the preferred units to non-voting common units of BRE between January 1, 2018 and December 31, 2019. Subsequent to the conversion period, BRE had the option to redeem the convertible preferred units at their original value of $10,000, plus any accrued and unpaid preferred return. On July 31, 2018, the Company sold its investment to an existing owner of BRE. The preferred units were sold for an aggregate sales price of $18,500 and had a carrying value of $10,000 at the time of sale. The transaction was approved by the Board of Directors and IDC. The preferred units provided a stated preferred return at inception of 7.0% with 0.25% increases every June 30th. Preferred distributions related to the investment in BRE for the year ended December 31, 2018 amounted to $440.
Redemption of Shares from Related Party In accordance with the definitive Merger Agreement entered into as part of Internalization, during December 2019, the Company redeemed 941941,196 shares of its common stock from BRE, representing BRE’s entire ownership interest in the Company. The shares were redeemed at $21.25 per share, the then current determined share value established by the Board of Directors (“Determined Share Value,Value”), for total consideration of $20,000.$20.0 million. Conversion of OP Units to Common Stock During the yearyears ended December 31, 2021 and 2020, in a non-cash transaction transactions (see Note19)Note 18), the Company converted 8222,049,439 and 822,745 OP Units, respectively, held by an affiliated third party to 8222,049,439 and 822,745 shares of common stock, respectively, at a total conversion value of $15,631. The affiliated third party is approximately 7.5% directly,$32.8 million and 30.0% indirectly owned by the Company’s Chairman and member of the Board of Directors.$15.6 million, respectively. See further discussion in Note 1312 and 15.14. On February 7, 2020, the Company completed the Internalization and the Company’s management team and corporate staff, who were previously employed by BRE, became employees of an indirect subsidiary of the OP. The Company paid base consideration of $209,516$209.5 million at closing and may be required to pay additional earnout consideration of up to $75,000 in the future,$75.0 million, as described below. In addition, the Company assumed $90,484$90.5 million of debt in addition to other assets acquired and liabilities assumed, as detailed in the Allocation of Purchase Price
The consideration paid at closing of the Internalization is summarized in the following table: | | | | | | | | | | | Issuance of 3,124 shares of common stock | | $ | 66,376 | | | Issuance of 5,278 OP Units | | | 112,159 | | | Cash | | | 30,981 | | | | | | | | | Base consideration | | | 209,516 | | | Initial estimate of fair value of earnout liability | | | 40,119 | | | | | | | | | Total consideration | | $ | 249,635 | | | | | | | |
(in thousands) | | | | | Issuance of 3,124 shares of common stock | | $ | 66,376 | | Issuance of 5,278 OP Units | | | 112,159 | | Cash | | | 30,981 | | Base consideration | | | 209,516 | | Initial estimate of fair value of earnout liability | | | 40,119 | | Total consideration | | $ | 249,635 | |
According toIn accordance with the terms of the Merger Agreement,Internalization, the Company may bewas required to pay additional earnout consideration of up to $75,000$75.0 million payable in 4 tranches of $10,000, $15,000, $25,000,$10.0 million, $15.0 million, $25.0 million, and $25,000$25.0 million if certain milestones related to either (a) the
40-day VWAP per REIT Share following the completion of an IPO, or (b) the Company’s AFFO per share, prior to the completion of an IPO, (each, an “Earnout Trigger”) are achieved during the Earnout Periods.were achieved. The consideration will consistconsisted of a combination of cash, shares of the Company’s common stock, and OP Units, based on the same proportions paid in the base consideration. The110
As of December 31, 2021, the Company completed its IPO on September 21, 2020.The earnout tranches, applicable 40-dayachieved all four VWAP of a REIT Share andmilestones, thereby triggering the applicable Earnout Periods are as follows:
| | | | Number of | | | | | | | | | | | | | | | | Shares and | | | | | | | 40-Day | | | | (in thousands, except per share amounts) | | OP Units | | | Approximate | | | VWAP of a | | | | Tranche | | Earnout Target(a) | | Payable(b) | | | Amount of Cash | | | REIT Share | | | Applicable Earnout Period | 1 | | $10,000 | | | 393 | | | $ | 1,646 | | | $ | 22.50 | | | September 2020 - September 2022 | 2 | | $15,000 | | | 589 | | | $ | 2,470 | | | $ | 23.75 | | | September 2020 - September 2022 | 3 | | $25,000 | | | 983 | | | $ | 4,117 | | | $ | 24.375 | | | September 2021 - September 2025 | 4 | | $25,000 | | | 983 | | | $ | 4,117 | | | $ | 25.00 | | | September 2021 - September 2025 |
(a)
| Initial contractual valuepayout of applicable earnout tranche based on a $21.25 price per share/unit of common stock and OP Units. Does not take into account the actual per share price of common stock and OP Units at the time an applicable earnout tranche may be earned and paid.
|
(b)
| Calculated based on $21.25 price per share/unit of common stock and OP Units.
|
Should all earnout milestones be met, an additional 1,089tranches. Below is a summary of the shares of common stock and an additional 1,859 OP Units would be issued, in addition to the payment of $12,350 in cash. As of the Internalization date, the Company estimated that theand cash paid for each earnout liability had a fair value of $40,119, of which approximately $33,511 related to the potential issuance of common shares and OP Units and approximately $6,608 related to the potential payment of cash. The Company will estimate the fair value of the earnout liability at each reporting date during the contingency period and record any changes in estimated fair value in its Consolidated Statements of Income and Comprehensive Income. See Note 2 for further discussion of changes in the fair value of the earnout liability subsequent to the Internalization.
tranche: (in thousands, except per share amounts) | | | | | | | | | | | | | | | | | | | | | 1 | | 145 | | 248 | | $1,926 (a) | | $ 22.50 | | | June 16, 2021 | | | 2 | | 218 | | 371 | | 2,888 (a) | | 23.75 | | | July 14, 2021 | | | 3 | | 363 | | 620 | | 4,117 | | 24.375 | | | September 21, 2021 | | | 4 | | 363 | | 620 | | 4,117 | | 25.00 | | | September 21, 2021 | |
| (a) | Cash payments include amounts earned for dividends. |
Redemption Rights Agreement If an IPO did not occur on or before the satisfaction of any Earnout Trigger,certain milestones related to the40-day VWAP per REIT Share, then each holder of common shares or OP Units issued in connection with the Internalization had the right to require the Company to repurchase any or all of such holder’s shares or OP Units. Such rights terminated effective with the IPO. Upon occurrence of the IPO in September 2020, the common stock and non-controlling interests issued as base consideration in connection with the Internalization and originally classified as mezzanine equity, were reclassified as a component of Common stock, Additional paid-in capital, and Non-controlling interests on the Consolidated Balance Sheets.
Allocation of Purchase Price
The Internalization was accounted for as a business combination and accordingly, the Company allocated the purchase price utilizing the acquisition method to record assets acquired and liabilities assumed at their estimated fair values. The allocation of the purchase price has been finalized and is based on the actual valuations of the tangible and intangible assets and liabilities that existed as of the date of completion of the acquisition, including the valuation of the earnout liability. The following table summarizes the Company’s allocation of the purchase price associated with the Internalization: (in thousands) | | | | | Prepaid expenses and other assets | | $ | 1,336 | | Right-of-use assets | | | 1,898 | | Goodwill | | | 339,769 | | Accounts payable and other liabilities | | | (986 | ) | Operating lease liabilities | | | (1,898 | ) | Debt | | | (90,484 | ) | | | $ | 249,635 | |
| | | | | | | | | | Prepaid expenses and other assets | | $ | 1,336 | | | | | 1,898 | | | Goodwill | | | 339,769 | | | Accounts payable and other liabilities | | | (986 | ) | | Operating lease liabilities | | | (1,898 | ) | | Debt | | | (90,484 | ) | | | | | | | | | | $ | 249,635 | | | | | | | |
In connection with the Internalization, the Company recorded goodwill of $339,769$339.8 million as a result of the consideration exceeding the fair value of the net liabilities acquired. Goodwill represents the synergies and costs savings expected from the acquired management functions and the Company’s ability to generate additional portfolio growth on a lower cost structure than when it was externally managed. The goodwill is not deductible for tax purposes. 111
In connection with the Internalization, the Company assumed $90,484$90.5 million of debt which was subsequently repaid through a combination of revolving credit facility borrowings and entering into a new $60,000$60.0 million term loan agreement (see Note 10)9). The Company incurred $3,705$3.7 million in non-recurring costs associated with the Internalization during each of the yearyears ended December 31, 2020 and $3,658 of such costs during the year ended December 31, 2019, which were classified as Internalization expenses in the Consolidated Statements of Income and Comprehensive Income. The effect of the Internalization has been reflected in the Company’s operating results beginning on February 7, 2020. NaN incremental revenues were recorded as a result of the Internalization. Subsequent to the Internalization, during the year ended December 31, 2020, the Company incurred $20,463$20.5 million in expenses as a result of being internalized. Such amounts include general and administrative expenses associated with the Company’s performance of functions previously performed by BRE and the Asset Manager (primarily employee related costs), as well as interest expense associated with the borrowings related to the Internalization. These expenses do not include the Internalization expenses discussed above, or amounts recorded to reflect changes in the fair value of the earnout liability. Condensed Pro Forma Financial Information (Unaudited) The following pro forma information summarizes selected financial information from the Company’s combined results of operations, as if the Internalization had occurred on January 1, 2019. These results contain certain adjustments totaling $4,507$4.5 million and $14,522$14.5 million of income for the yearsyear ended December 31, 2020 and 2019, respectively. These pro forma adjustments reflect the elimination of Internalization expenses and asset management, property management, and disposition fees between the Company and BRE and the Asset Manager in historichistorical financial results, and adjustments to reflect compensation and related costs, incremental general and administrative expenses related to the Internalization, and incremental interest expense associated with the borrowing related to the Internalization. This pro forma information is presented for informational purposes only, and may not be indicative of what actual results of operations would have been had the Internalization occurred at the beginning of the period, nor does it purport to represent the results of future operations. The condensed pro forma financial information is as follows: | | For the Year Ended December 31, | | (in thousands) | | 2020 | | | 2019 | | Revenues | | $ | 321,637 | | | $ | 298,815 | | Net income | | | 60,783 | | | | 99,636 | |
| | | For the Year Ended December 31, | | | | | | | | | | Revenues | | $ | 321,637 | | | $ | 298,815 | | | Net income | | | 60,783 | | | | 99,636 | |
112
5. Acquisitions of Rental Property The Company closed on the following acquisitions during the year ended December 31, 2021:
| | | | | | | | | | | | | | (in thousands, except number of properties) | | | | | | | | | | | | | | | | | | | | | February 5, 2021 | | | Healthcare | | | | 1 | | | $ | 4,843 | | | February 26, 2021 | | | Restaurant | | | | (a | ) | | | 181 | | | March 11, 2021 | | | Retail | | | | 13 | | | | 26,834 | | | March 30, 2021 | | | Retail | | | | 11 | | | | 41,324 | | | March 31, 2021 | | | Healthcare | | | | 3 | | | | 14,140 | | | June 4, 2021 | | | Retail | | | | 2 | | | | 19,420 | | | June 9, 2021 | | | Industrial | | | | 1 | | | | 8,500 | | | June 9, 2021 | | | Industrial | | | | 11 | | | | 106,578 | | | June 25, 2021 | | | Retail | | | | 8 | | | | 12,131 | | | June 28, 2021 | | | Healthcare | | | | 4 | | | | 15,300 | | | June 30, 2021 | | | Retail | | | | 1 | | | | 1,279 | | | June 30, 2021 | | | Healthcare | | | | 7 | | | | 30,750 | | | July 2, 2021 | | | Industrial | | | | (b | ) | | | 4,500 | | | July 21, 2021 | | | Retail | | | | 1 | | | | 5,565 | | | July 29, 2021 | | | Retail | | | | 3 | | | | 4,586 | | | July 29, 2021 | | | Industrial | | | | 1 | | | | 13,041 | | | July 30, 2021 | | | Industrial | | | | 2 | | | | 11,011 | | | August 23, 2021 | | | Healthcare | | | | 1 | | | | 60,000 | | | September 8, 2021 | | | Retail | | | | 2 | | | | 8,901 | | | September 17, 2021 | | | Retail | | | | 1 | | | | 1,722 | | | September 24, 2021 | | | Retail | | | | 1 | | | | 2,456 | | | September 24, 2021 | | | Industrial | | | | 2 | | | | 48,699 | | | September 29, 2021 | | | Industrial | | | | 1 | | | | 10,600 | | | September 30, 2021 | | | Industrial | | | | 3 | | | | 59,343 | | | October 1, 2021 | | | Healthcare | | | | 1 | | | | 3,306 | | | October 22, 2021 | | | Industrial | | | | 1 | | | | 5,386 | | | October 27, 2021 | | | Retail | | | | 3 | | | | 4,278 | | | December 10, 2021 | | | Retail | | | | 16 | | | | 33,500 | | | December 15, 2021 | | | Industrial | | | | 1 | | | | 16,000 | | | December 15, 2021 | | | Healthcare | | | | 1 | | | | 6,000 | | | December 16, 2021 | | | Restaurant/Office | | | | 6 | | | | 28,546 | | | December 17, 2021 | | | Retail | | | | 3 | | | | 4,260 | | | December 17, 2021 | | | Industrial | | | | 1 | | | | 16,000 | | | December 22, 2021 | | | Industrial | | | | 2 | | | | 22,651 | | | December 22, 2021 | | | Healthcare | | | | 1 | | | | 7,600 | | | | | | | | | | | | | | | | | | | | | | | | 116 | | | $ | 659,231 | (c) | | | | | | | | | | | | | | |
| (a) | Acquisition of additional land adjacent to an existing property. |
| (b) | Acquisition of land related to an existing property. |
| (c) | Acquisition price does not include capitalized acquisition costs of $5.8 million. |
113 The Company closed on the following acquisitions during the year ended December 31, 2020: (in thousands, except number of properties) | | | | Number of | | | Real Estate | | | Date | | Property Type | | Properties | | | Acquisition Price | | | November 13, 2020 | | Healthcare | | | 1 | | | $ | 4,950 | | | December 7, 2020 | | Industrial | | | 8 | | | | 28,000 | | | December 23, 2020 | | Industrial | | | 1 | | | | 36,473 | | (a) | December 28, 2020 | | Retail | | | 1 | | | | 5,150 | | | December 29, 2020 | | Restaurant | | | 7 | | | | 13,189 | | | December 30, 2020 | | Industrial | | | 1 | | | | 8,050 | | | | | | | | 19 | | | $ | 95,812 | | (b) |
| | | | | | | | | | | | | | (in thousands, except number of properties) | | | | | | | | | | | | | | | | | | | | | November 13, 2020 | | | Healthcare | | | | 1 | | | $ | 4,950 | | | December 7, 2020 | | | Industrial | | | | 8 | | | | 28,000 | | | December 23, 2020 | | | Industrial | | | | 1 | | | | 36,473 | (d) | | December 28, 2020 | | | Retail | | | | 1 | | | | 5,150 | | | December 29, 2020 | | | Restaurant | | | | 7 | | | | 13,189 | | | December 30, 2020 | | | Industrial | | | | 1 | | | | 8,050 | | | | | | | | | | | | | | | | | | | | | | | | 19 | | | $ | 95,812 | (e) | | | | | | | | | | | | | | |
(a)
(d) | Acquisition price excludes $4,500$4.5 million deposited in an escrow for the future purchase of the related land. The land. | purchase closed on July 2, 2021, and is included in the 2021 acquisitions. |
(b)
(e) | Acquisition price does not include capitalized acquisition costs of $1,272. | $1.3 million. |
The Company closed on the following acquisitions during the year ended December 31, 2019:
| | | | | | | | | | | | (in thousands, except number of properties) | | | | | | | | | | | | | | | | | | | January 31, 2019 | | Healthcare | | | 1 | | | $ | 4,747 | | | March 12, 2019 | | Industrial | | | 1 | | | | 10,217 | | | March 15, 2019 | | Retail | | | 10 | | | | 13,185 | | | March 19, 2019 | | Retail | | | 14 | | | | 19,128 | | | March 26, 2019 | | Industrial | | | 1 | | | | 25,801 | | | April 30, 2019 | | Industrial | | | 1 | | | | 76,000 | (f) | | May 21, 2019 | | Retail | | | 2 | | | | 6,500 | | | May 31, 2019 | | Retail | | | 1 | | | | 3,192 | | | June 7, 2019 | | Office | | | 1 | | | | 30,589 | | | June 26, 2019 | | Industrial | | | 2 | | | | 11,180 | | | July 15, 2019 | | Restaurant | | | 1 | | | | 3,214 | | | July 15, 2019 | | Industrial | | | 1 | | | | 11,330 | | | July 31, 2019 | | Healthcare | | | 5 | | | | 27,277 | | | August 27, 2019 | | Industrial | | | 1 | | | | 4,404 | | | August 29, 2019 | | Industrial/Office | | | 23 | | | | 735,740 | | | September 17, 2019 | | Industrial | | | 1 | | | | 11,185 | | | October 31, 2019 | | Retail/Healthcare | | | 3 | | | | 12,922 | | | November 7, 2019 | | Restaurant | �� | | 1 | | | | 3,142 | | | November 20, 2019 | | Retail | | | 1 | | | | 7,385 | | | November 22, 2019 | | Industrial | | | 1 | | | | 6,500 | | | November 27, 2019 | | Retail | | | 2 | | | | 8,243 | | | | | | | | | | | | | | | | | | | | 74 | | | $ | 1,031,881 | (g) | | | | | | | | | | | | |
(in thousands, except number of properties) | | | | Number of | | | Real Estate | | | Date | | Property Type | | Properties | | | Acquisition Price | | | January 31, 2019 | | Healthcare | | | 1 | | | $ | 4,747 | | | March 12, 2019 | | Industrial | | | 1 | | | | 10,217 | | | March 15, 2019 | | Retail | | | 10 | | | | 13,185 | | | March 19, 2019 | | Retail | | | 14 | | | | 19,128 | | | March 26, 2019 | | Industrial | | | 1 | | | | 25,801 | | | April 30, 2019 | | Industrial | | | 1 | | | | 76,000 | | (c) | May 21, 2019 | | Retail | | | 2 | | | | 6,500 | | | May 31, 2019 | | Retail | | | 1 | | | | 3,192 | | | June 7, 2019 | | Office | | | 1 | | | | 30,589 | | | June 26, 2019 | | Industrial | | | 2 | | | | 11,180 | | | July 15, 2019 | | Restaurant | | | 1 | | | | 3,214 | | | July 15, 2019 | | Industrial | | | 1 | | | | 11,330 | | | July 31, 2019 | | Healthcare | | | 5 | | | | 27,277 | | | August 27, 2019 | | Industrial | | | 1 | | | | 4,404 | | | August 29, 2019 | | Industrial/Office | | | 23 | | | | 735,740 | | | September 17, 2019 | | Industrial | | | 1 | | | | 11,185 | | | October 31, 2019 | | Retail/Healthcare | | | 3 | | | | 12,922 | | | November 7, 2019 | | Restaurant | | | 1 | | | | 3,142 | | | November 20, 2019 | | Retail | | | 1 | | | | 7,385 | | | November 22, 2019 | | Industrial | | | 1 | | | | 6,500 | | | November 27, 2019 | | Retail | | | 2 | | | | 8,243 | | | | | | | | 74 | | | $ | 1,031,881 | | (d) |
(c)
(f) | In conjunction with this acquisition, the Company assumed a mortgage with a principal balance of $49,782$49.8 million with an interest rate of 4.92% and a maturity date of February 2028 (see Note 11)10).
| |
(d)
(g) | Acquisition price does not include capitalized acquisition costs of $17,631. | $17.6 million. |
The Company closed on the following acquisitions during the year ended December 31, 2018:
(in thousands, except number of properties) | | | | Number of | | | Real Estate | | | Date | | Property Type | | Properties | | | Acquisition Price | | | March 27, 2018 | | Industrial | | | 1 | | | $ | 22,000 | | | March 30, 2018 | | Industrial/Retail | | | 26 | | | | 78,530 | | | April 30, 2018 | | Other | | | 1 | | | | 16,170 | | (e) | June 6, 2018 | | Industrial | | | 1 | | | | 8,500 | | | June 14, 2018 | | Industrial | | | 1 | | | | 39,700 | | | June 14, 2018 | | Retail | | | 6 | | | | 14,479 | | | June 21, 2018 | | Retail | | | 1 | | | | 20,231 | | | June 21, 2018 | | Industrial | | | 1 | | | | 38,340 | | (f) | June 29, 2018 | | Industrial | | | 1 | | | | 10,400 | | | June 29, 2018 | | Retail | | | 2 | | | | 6,433 | | (g) | July 12, 2018 | | Industrial | | | 1 | | | | 11,212 | | | July 17, 2018 | | Retail | | | 5 | | | | 14,845 | | | July 17, 2018 | | Office | | | 1 | | | | 34,670 | | | August 6, 2018 | | Industrial | | | 2 | | | | 4,802 | | | August 10, 2018 | | Retail | | | 20 | | | | 44,977 | | | October 11, 2018 | | Healthcare | | | 4 | | | | 17,448 | | | October 26, 2018 | | Industrial | | | 1 | | | | 8,816 | | | October 31, 2018 | | Retail | | | 1 | | | | 2,016 | | | November 30, 2018 | | Retail | | | 3 | | | | 5,357 | | | December 4, 2018 | | Retail | | | 2 | | | | 6,036 | | | December 6, 2018 | | Healthcare | | | 6 | | | | 46,100 | | | December 12, 2018 | | Healthcare | | | 1 | | | | 20,312 | | | December 20, 2018 | | Industrial | | | 1 | | | | 18,250 | | | December 20, 2018 | | Healthcare | | | 18 | | | | 93,129 | | | December 28, 2018 | | Industrial | | | 1 | | | | 10,035 | | | December 28, 2018 | | Healthcare | | | 5 | | | | 14,037 | | | | | | | | 113 | | | $ | 606,825 | | (h) |
(e)
| In conjunction with this acquisition, the Company settled a note receivable with the seller in the amount of $3,700, in exchange for a reduction in the cash paid for the transaction (see Note 9).
|
114(f)
| In conjunction with this acquisition, the Company assumed a mortgage with a principal balance of $20,845 with an interest rate at 4.36% and a maturity date of August 2025 (see Note 11).
|
(g)
| In conjunction with this acquisition, the Company settled a note receivable with the seller in the amount of $2,827, in exchange for a reduction in the cash paid for the transaction (see Note 9).
|
(h)
| Acquisition price does not include capitalized acquisition costs of $12,643.
|
The Company allocated the purchase price of these properties to the fair value of the assets acquired and liabilities assumed. The following table summarizes the purchase price allocation for completed real estate acquisitions:
| | | | | | | | | | | | | | | | | For the Year Ended December 31, | | | | | | | | | | | | | Land | | $ | 114,296 | | | $ | 17,403 | | | $ | 161,182 | | | Land improvements | | | 29,298 | | | | 5,356 | | | | 47,391 | | | Buildings and improvements | | | 469,113 | | | | 64,116 | | | | 772,998 | | Acquired in-place leases (h) | | | 51,956 | | | | 8,346 | | | | 80,952 | | Acquired above-market leases (i) | | | 211 | | | | 1,717 | | | | 2,800 | | Acquired below-market leases (j) | | | 0 | | | | (428 | ) | | | (15,811 | ) | | | | 663 | | | | — | | | | — | | | Lease liability | | | (481 | ) | | | — | | | | — | | | Sales-type investments | | | 0 | | | | 574 | | | | 0 | | | Mortgage payable | | | 0 | | | | 0 | | | | (49,782 | ) | | | | | | | | | | | | | | | | | | $ | 665,056 | | | $ | 97,084 | | | $ | 999,730 | | | | | | | | | | | | | | | |
| | For the Year Ended December 31, | | (in thousands) | | 2020 | | | 2019 | | | 2018 | | Land | | $ | 17,403 | | | $ | 161,182 | | | $ | 72,559 | | Land improvements | | | 5,356 | | | | 47,391 | | | | 32,498 | | Buildings and improvements | | | 64,116 | | | | 772,998 | | | | 454,391 | | Equipment | | | — | | | | — | | | | 2,892 | | Acquired in-place leases (i) | | | 8,346 | | | | 80,952 | | | | 62,631 | | Acquired above-market leases (j) | | | 1,717 | | | | 2,800 | | | | 5,538 | | Acquired below-market leases (k) | | | (428 | ) | | | (15,811 | ) | | | (11,471 | ) | Direct financing investments | | | — | | | | — | | | | 430 | | Sales-type investments | | | 574 | | | | — | | | | — | | Mortgages payable | | | — | | | | (49,782 | ) | | | (20,845 | ) | Non-real estate liabilities | | | — | | | | — | | | | (56 | ) | | | $ | 97,084 | | | $ | 999,730 | | | $ | 598,567 | |
(i)
(h) |
The weighted average amortization period for acquired in-place leases is 1516 years, 1315 years, and 13 years for acquisitions completed during the years ended December 31, 2021, 2020, and 2019, and 2018, respectively. |
(j)
(i) | The weighted average amortization period for acquired above-market leases is 10 years, 1 year, 18 years, and 1618 years for acquisitions completed during the years ended December 31, 2021, 2020, and 2019, and 2018, respectively. |
(k)
(j) |
The weighted average amortization period for acquired below-market leases is 10 years 10 years, and 13 years for acquisitions completed during each of the years ended December 31, 2020, 2019, and 2018, respectively.2019. There were no below-market leases acquired during the year ended December 31, 2021. |
The above acquisitions were funded using a combination of available cash on hand, revolving credit facility borrowings, and the issuance ofproceeds from unsecured term loans, equity issuances, and proceeds from equity issuances.the 2031 Senior Unsecured Public Notes (see Note 9). All real estate acquisitions closed during the years ended December 31, 2021, 2020, 2019, and 2018,2019, qualified as asset acquisitions and, as such, acquisition costs have been capitalized. Subsequent to December 31, 2020,2021, the Company closed on the following acquisitionacquisitions (see Note 21)20): (in thousands, except number of properties) | | | | | | | | | | | Date | | Property Type | | Number of Properties | | | Acquisition Price | | February 5, 2021 | | Healthcare | | | 1 | | | $ | 4,843 | |
| | | | | | | | | | | | | (in thousands, except number of properties) | | | | | | | | | | | | | | | | | | | | | | | Retail | | | | 2 | | | $ | 2,573 | | | | | Industrial | | | | 1 | | | | 21,733 | | | | | Retail | | | | 1 | | | | 1,341 | | | | | | | | | | | | | | | | | | | | | | | | 4 | | | $ | 25,647 | | | | | | | | | | | | | | |
The Company closed on the following sales of real estate, none of which qualified as discontinued operations:
| | | | | | | | | | | | | | | | | For the Year Ended December 31, | | (in thousands, except number of properties) | | | | | | | | | | | Number of properties disposed | | | 31 | | | | 24 | | | | 49 | | | Aggregate sale price | | $ | 87,730 | | | $ | 81,039 | | | $ | 176,486 | | | Aggregate carrying value | | | (70,289 | ) | | | (62,528 | ) | | | (138,845 | ) | | Additional sales expenses | | | (3,918 | ) | | | (3,526 | ) | | | (7,727 | ) | | | | | | | | | | | | | | | | Gain on sale of real estate | | $ | 13,523 | | | $ | 14,985 | | | $ | 29,914 | | | | | | | | | | | | | | | |
| | For the Year Ended December 31, | | (in thousands, except number of properties) | | 2020 | | | 2019 | | | 2018 | | Number of properties disposed | | | 24 | | | | 49 | | | | 20 | | Aggregate sale price | | $ | 81,039 | | | $ | 176,486 | | | $ | 57,402 | | Aggregate carrying value | | | (62,528 | ) | | | (138,845 | ) | | | (43,492 | ) | Additional sales expenses | | | (3,526 | ) | | | (7,727 | ) | | | (3,414 | ) | Gain on sale of real estate | | $ | 14,985 | | | $ | 29,914 | | | $ | 10,496 | |
7. Investment in Rental Property and Lease Arrangements The Company generally leases its investment rental property to established tenants in the industrial, healthcare, restaurant, office, retail, and other industries.office property types. At December 31, 2020,2021, the Company had 622726 real estate properties, of which were leased under leases that have been classified as operating leases, 10 that have been classified as direct financing leases, and 1 that has been classified as a sales-type lease.lease, and two that were vacant. Of the 10 leases classified as direct financing leases, 3 include land portions which are accounted for as operating leases. The sales-type lease includes a land portion which is accounted for as an operating lease (see within Note 2) . Substantially all leases have initial terms of 10 to 20 years. The Company’s leases generally provide for limited increases in rent as a result of fixed increases, increases in the CPI, or increases in the tenant’s sales volume. Generally, tenants are also required to pay all property taxes and assessments, substantially maintain the interior and exterior of the building, and maintain property and liability insurance coverage. The leases also typically provide for one or more multiple year renewal options, at the election of the tenant, and are subject to generally the same terms and conditions as the initial lease. Investment in Rental Property – Property—Accounted for Using the Operating Method Rental property subject to non-cancelable operating leases with tenants was as follows:
| | December 31, | | (in thousands) | | 2020 | | | 2019 | | Land | | $ | 555,748 | | | $ | 548,911 | | Land improvements | | | 279,360 | | | | 275,470 | | Buildings and improvements | | | 2,857,510 | | | | 2,850,571 | | Equipment | | | 11,870 | | | | 11,492 | | | | | 3,704,488 | | | | 3,686,444 | | Less accumulated depreciation | | | (349,977 | ) | | | (271,044 | ) | | | $ | 3,354,511 | | | $ | 3,415,400 | |
Depreciation expense on investment in rental property was as follows: | | For the Year Ended December 31, | | (in thousands) | | 2020 | | | 2019 | | | 2018 | | Depreciation | | $ | 93,679 | | | $ | 83,797 | | | $ | 66,055 | |
| | | For the Year Ended December 31, | | | | | | | | | | | | | Depreciation | | $ | 99,143 | | | $ | 93,679 | | | $ | 83,797 | |
Estimated lease payments to be received under non-cancelable operating leases with tenants at December 31, 20202021 are as follows: (in thousands) | | | | | 2021 | | $ | 294,411 | | 2022 | | | 297,715 | | 2023 | | | 301,282 | | 2024 | | | 297,325 | | 2025 | | | 290,075 | | Thereafter | | | 2,041,715 | | | | $ | 3,522,523 | |
| | | | | | | | | | 2022 | | $ | 334,163 | | | 2023 | | | 338,889 | | | 2024 | | | 335,624 | | | 2025 | | | 328,914 | | | 2026 | | | 319,124 | | | Thereafter | | | 2,281,067 | | | | | | | | | | | $ | 3,937,781 | | | | | | | |
Since lease renewal periods are exercisable at the option of the tenant, the above amounts only include future lease payments due during the initial lease terms. In addition, suchSuch amounts exclude any potential variable rent increases that are based on changes in the CPI or future variable rents which may be received under the leases based on a percentage of the tenant’s gross sales. Additionally, certain of our leases provide tenants with the option to terminate their leases in exchange for termination penalties, or that are contingent upon the occurrence of a future event. Future lease payments within the table above have not been adjusted for these termination rights.
Investment in Rental Property – Property—Direct Financing Leases
The Company’s net investment in direct financing leases was comprised of the following:
| | | | | | | | | | | | | | | | | | | | | | | Undiscounted estimated lease payments to be received | | $ | 42,602 | | | $ | 45,782 | | | Estimated unguaranteed residual values | | | 15,203 | | | | 15,203 | | | Unearned revenue | | | (28,893 | ) | | | (31,753 | ) | | Reserve for credit losses | | | (130 | ) | | | (166 | ) | | | | | | | | | | | | Net investment in direct financing leases | | $ | 28,782 | | | $ | 29,066 | | | | | | | | | | | |
| | December 31, | | (in thousands) | | 2020 | | | 2019 | | Undiscounted estimated lease payments to be received | | $ | 45,782 | | | $ | 72,753 | | Estimated unguaranteed residual values | | | 15,203 | | | | 20,358 | | Unearned revenue | | | (31,753 | ) | | | (51,221 | ) | Reserve for credit losses | | | (166 | ) | | | — | | Net investment in direct financing leases | | $ | 29,066 | | | $ | 41,890 | |
116
Undiscounted estimated lease payments to be received under non-cancelable direct financing leases with tenants at December 31, 20202021 are as follows: (in thousands) | | | | | 2021 | | $ | 3,180 | | 2022 | | | 3,241 | | 2023 | | | 3,304 | | 2024 | | | 3,361 | | 2025 | | | 3,475 | | Thereafter | | | 29,221 | | | | $ | 45,782 | |
| | | | | | | | | | 2022 | | $ | 3,241 | | | 2023 | | | 3,304 | | | 2024 | | | 3,361 | | | 2025 | | | 3,475 | | | 2026 | | | 3,547 | | | Thereafter | | | 25,674 | | | | | | | | | | | $ | 42,602 | | | | | | | |
The above rental receipts do not include future lease payments for renewal periods, potential variable CPI rent increases, or variable percentage rent payments that may become due in future periods. The following table summarizes amounts reported as Lease revenues, net on the Consolidated Statements of Income and Comprehensive Income:
| | | | | | | | | | | | | | | | | For the Year Ended December 31, | | | | | | | | | | | | | Contractual rental amounts billed for operating leases | | $ | 308,624 | | | $ | 281,998 | | | $ | 257,695 | | | Adjustment to recognize contractual operating lease billings on a straight-line basis | | | 19,847 | | | | 25,200 | | | | 22,109 | | Write-off of accrued rental income | | | (442 | ) | | | (4,235 | ) | | | — | | | Variable rental amounts earned | | | 768 | | | | 743 | | | | 152 | | | Earned income from direct financing leases | | | 2,909 | | | | 3,355 | | | | 4,018 | | | Interest income from sales-type leases | | | 58 | | | | 5 | | | | — | | | Operating expenses billed to tenants | | | 17,462 | | | | 15,845 | | | | 14,614 | | Other income from real estate transactions (a) | | | 33,549 | | | | 799 | | | | 668 | | | Adjustment to revenue recognized for uncollectible rental amounts billed, net | | | 101 | | | | (2,073 | ) | | | (441 | ) | | | | | | | | | | | | | | | | Total Lease revenues, net | | $ | 382,876 | | | $ | 321,637 | | | $ | 298,815 | | | | | | | | | | | | | | | |
| | For the Year Ended December 31, | | (in thousands) | | 2020 | | | 2019 | | Contractual rental amounts billed for operating leases | | $ | 281,998 | | | $ | 257,695 | | Adjustment to recognize contractual operating lease billings on a straight-line basis | | | 20,965 | | | | 22,109 | | Variable rental amounts earned | | | 743 | | | | 152 | | Earned income from direct financing leases | | | 3,355 | | | | 4,018 | | Earned income from sales-type leases | | | 5 | | | | — | | Operating expenses billed to tenants | | | 15,845 | | | | 14,614 | | Other income from real estate transactions | | | 799 | | | | 668 | | Adjustment to revenue recognized for uncollectible rental amounts billed | | | (2,073 | ) | | | (441 | ) | Total Lease revenues, net | | $ | 321,637 | | | $ | 298,815 | |
| (a) | The December 31, 2021 amount includes thewrite-off of $1.5 million of accrued rental income associated with a lease termination transaction. Refer to the Company’s policy footnote onLong-lived Asset Impairment |
117 8. Intangible Assets and Liabilities The following is a summary of intangible assets and liabilities and related accumulated amortization:
| | | | | | | | | | | | | | | | | | | | | | | Lease intangibles: | | | | | | | | | | Acquired above-market leases | | $ | 47,147 | | | $ | 54,616 | | | Less accumulated amortization | | | (16,807 | ) | | | (18,928 | ) | | | | | | | | | | | | Acquired above-market leases, net | | | 30,340 | | | | 35,688 | | | | | | | | | | | | | | | 380,766 | | | | 340,958 | | | Less accumulated amortization | | | (107,464 | ) | | | (85,733 | ) | | | | | | | | | | | Acquired in-place leases, net | | | 273,302 | | | | 255,225 | | | | | | | | | | | | | Total Intangible lease assets, net | | $ | 303,642 | | | $ | 290,913 | | | | | | | | | | | | | Acquired below-market leases | | $ | 105,310 | | | $ | 107,788 | | | Less accumulated amortization | | | (34,714 | ) | | | (28,135 | ) | | | | | | | | | | | | Intangible lease liabilities, net | | $ | 70,596 | | | $ | 79,653 | | | | | | | | | | | | | Leasing fees | | $ | 14,786 | | | $ | 15,462 | | | Less accumulated amortization | | | (5,145 | ) | | | (4,724 | ) | | | | | | | | | | | | Leasing fees, net | | $ | 9,641 | | | $ | 10,738 | | | | | | | | | | | |
| | December 31, | | (in thousands) | | 2020 | | | 2019 | | Lease intangibles: | | | | | | | | | Acquired above-market leases | | $ | 54,616 | | | $ | 62,136 | | Less accumulated amortization | | | (18,928 | ) | | | (17,433 | ) | Acquired above-market leases, net | | | 35,688 | | | | 44,703 | | Acquired in-place leases | | | 340,958 | | | | 349,645 | | Less accumulated amortization | | | (85,733 | ) | | | (62,454 | ) | Acquired in-place leases, net | | | 255,225 | | | | 287,191 | | Total Intangible lease assets, net | | $ | 290,913 | | | $ | 331,894 | | Acquired below-market leases | | $ | 107,788 | | | $ | 113,862 | | Less accumulated amortization | | | (28,135 | ) | | | (21,640 | ) | Intangible lease liabilities, net | | $ | 79,653 | | | $ | 92,222 | | Leasing fees | | $ | 15,462 | | | $ | 17,013 | | Less accumulated amortization | | | (4,724 | ) | | | (4,166 | ) | Leasing fees, net | | $ | 10,738 | | | $ | 12,847 | |
Amortization of intangible lease assets and liabilities was as follows:
| | | | | | | | | | | | | | | | | | | | For the Year Ended December 31, | | | | Financial Statement Presentation | | | | | | | | | | Acquired in-place leases and leasing fees | | Depreciation and amortization | | $ | 32,857 | | | $ | 38,934 | | | $ | 25,021 | | | Above-market and below-market leases | | Lease revenues, net | | | 3,264 | | | | 1,127 | | | | 3,419 | |
(in thousands) | | | | For the Year Ended December 31, | | Intangible | | Financial Statement Presentation | | 2020 | | | 2019 | | | 2018 | | Acquired in-place leases and leasing fees | | Depreciation and amortization | | $ | 38,934 | | | $ | 25,021 | | | $ | 17,939 | | Above-market and below-market leases | | Lease revenues, net | | | 1,127 | | | | 3,419 | | | | 304 | |
Amortization expense forFor the yearyears ended December 31, 2021 and 2020, amortization of all intangible assets and liabilities includes $14,517$3.8 million and $14.5 million, respectively, of accelerated amortization resulting from early lease terminations. There was 0 accelerated amortization for the yearsyear ended December 31, 2019 and 2018.
2019. Estimated future amortization of all intangible assets and liabilities at December 31, 20202021 is as follows: (in thousands) | | | | | 2021 | | $ | 24,621 | | 2022 | | | 22,447 | | 2023 | | | 22,135 | | 2024 | | | 21,376 | | 2025 | | | 20,080 | | Thereafter | | | 111,339 | | | | $ | 221,998 | |
| | | | | | | | | | 2022 | | $ | 25,289 | | | 2023 | | | 24,982 | | | 2024 | | | 24,222 | | | 2025 | | | 22,925 | | | 2026 | | | 21,576 | | | Thereafter | | | 123,693 | | | | | | | | | | | $ | 242,687 | | | | | | | |
9. Notes ReceivableThe Company, as the lender, entered into two loan agreements in the amount of $3,700 and $2,827. The agreements called for interest-only payments at 7.00% and 6.35% per annum through maturity in February and November 2019, respectively. Each of the loans was collateralized by the real estate assets held by the obligors and represented first mortgage liens on net leased commercial propertiesin Florida and Michigan, respectively. There were no prior liens on the properties at the time the notes were issued. In connection with real estate transactions conducted during the year ended December 31, 2018, the Company settled the notes in full, in exchange for a reduction to the cash paid for the associated real estate assets (see Note 5). Interest income earned on the notes receivable amounted to $174 for the year ended December 31, 2018.
10. Unsecured Credit Agreements
Unsecured Revolving Credit and Term Loan AgreementOn June 23, 2017, the Corporation and the OP entered into an $800,000 unsecured revolving credit and term loan agreement (“Agreements
Unsecured Revolving Credit and Term Loan Agreement”) with Manufacturers & Traders Trust Company (“M&T Bank”), as Administrative Agent, 4 participating banks as Joint Lead Arrangers and Joint Bookrunners, 4 participating banks as Co-Syndication Agents, and 4 participating banks, as Co-Documentation Agents. The Unsecured Revolving Credit and Term Loan Agreement consisted of a $400,000 senior unsecured revolving credit facility, a $250,000 senior unsecured delayed draw term loan (“2023 Unsecured Term Loan”), and a $150,000 senior unsecured delayed draw term loan (“2024 Unsecured Term Loan”). The Unsecured Revolving Credit and Term Loan Agreement provides an accordion feature for up to a total of $1,000,000 of borrowing capacity. The senior unsecured revolving credit facility includes a $35,000 sublimit for swingline loans and $20,000 available for issuance of letters of credit. On November 20, 2017, pursuant to the terms of a Consent and Agreement Regarding Commitment Increases and Additional Term Loans (the “Commitment Increase”) among the Company, the OP, as the borrower, M&T Bank, as Administrative Agent, and the original parties to the Unsecured Revolving Credit and Term Loan Agreement, plus U.S. Bank National Association and Raymond James, N.A. as new lenders added pursuant to the Commitment Increase, the OP obtained an additional $80,000 in credit commitments from the lenders, raising the total available borrowings under the Unsecured Revolving Credit and Term Loan Agreement to $880,000. Except as amended by the Commitment Increase, all terms and conditions of the Unsecured Revolving Credit and Term Loan Agreement remained the same as those in effect prior to the Commitment Increase. As amended by the Commitment Increase, the Unsecured Revolving Credit and Term Loan Agreement consisted of the $425,000 senior unsecured revolving credit facility, the $265,000 2023 Unsecured Term Loan, and the $190,000 2024 Unsecured Term Loan.
On February 28, 2019, the Company amended the Unsecured Revolving Credit and Term Loan Agreement to increase the amount available under the senior unsecured revolving credit facility from $425,000 to $600,000. This increased the total available borrowings under the Unsecured Revolving Credit and Term Loan Agreement to $1,055,000. All other terms and conditions of the Unsecured Revolving Credit and Term Loan Agreement remained the same as those in effect prior to this amendment.
On July 1, 2019, the Company amended the Unsecured Revolving Credit and Term Loan Agreement. Prior to the amendment, the borrowings under the 2024 Unsecured Term Loan were subject to interest at variable rates based on LIBOR plus a margin based on the OP’s credit rating ranging between 1.50% and 2.45% per annum with the applicable margin being 1.90% at December 31, 2018. The amendment reduced the margin to a range between 0.85% and 1.65% per annum, and beginning on July 1, 2019 was 1.25% based on the OP’s credit rating of Baa3 then in effect. All other terms and conditions of the Unsecured Revolving Credit and Term Loan Agreement remained materially the same as those in effect prior to this amendment.
Borrowings under the 2023 Unsecured Term Loan bear interest at variable rates based on LIBOR plus a margin based on the OP’s credit rating ranging between 0.90% and 1.75% per annum through the maturity date of January 2023. At December 31, 2020, the applicable margin was 1.35% based on the OP’s credit rating on such date.
The Company is subject to various financial and nonfinancial covenants under the Unsecured Revolving Credit and Term Loan Agreement.
Facility
On September 4, 2020, the Company entered into an agreement (the “Revolving Credit Agreement”) for a $900,000$900.0 million unsecured revolving credit facility (the “Revolving Credit Facility”), with JPMorgan Chase Bank, 118
N.A., as Administrative Agent. Closing ofThe Company closed the Revolving Credit Agreement was subject to certain customary conditions, as well as the closing of the IPO, with a minimum condition on size, and listing of the Company’s common stock, as set forth in the agreement. Closing occurred on September 21, 2020, at which time the Revolving Credit Facility replaced the Company’s then existing $600,000$600.0 million senior unsecured revolving credit facility.facility (described below). The Revolving Credit Agreement includes an accordion feature to increase the aggregate facility size from $900,000$900.0 million to $2,000,000,$2.0 billion, subject to the willingness of existing or new lenders to fund such increase and other customary conditions. The Revolving Credit Agreement matures on September 21, 2023. The Company has the option to extend the term of the Revolving Credit Agreement twice for six months per extension, subject to certain conditions, including payment of an extension fee equal to 0.0625% of the revolving commitments. Borrowings under the Revolving Credit Agreement are subject to interest only payments at variable rates equal to LIBOR plus a margin based on the Company’s credit rating, ranging from 0.825% to 1.55% per annum. At December 31, 2020, the applicable margin was 1.20% based on the OP’s credit rating on such date. In addition, the Revolving Credit Facility is subject to a facility fee based on the Company’s credit rating, ranging between 0.125% and 0.30% per annum. At December 31, 2020, the facility fee was 0.25% per annum based on the OP’s credit rating on such date. The interest rate spreads and facility fee under the Unsecured Revolving Credit Facility are identical to thoseand Term Loan Agreement On June 23, 2017, the Company entered into an $800.0 million unsecured revolving credit and term loan agreement (“Unsecured Revolving Credit and Term Loan Agreement”) with a group of thelenders. The Unsecured Revolving Credit and Term Loan Agreement consisted of a $400.0 million senior unsecured revolving credit facility, that was replaced.2026 Unsecured Term Loan
On February 27, 2019, the Company entered into a $450,000 seven-year$250.0 million senior unsecured delayed draw term loan agreement (the “2026(“2023 Unsecured Term Loan”) with Capital One, National Association as administrative agent. The 2026, and a $150.0 million senior unsecured delayed draw term loan (“2024 Unsecured Term Loan”). The Unsecured Revolving Credit and Term Loan Agreement provides an accordion feature for up to a total of $550,000$1.0 billion of borrowing capacity. The 2026senior unsecured revolving credit facility included a $35.0 million sublimit for swingline loans and $20.0 million available for issuance of letters of credit.
On November 20, 2017, pursuant to the terms of a Consent and Agreement Regarding Commitment Increases and Additional Term Loans (the “Commitment Increase”) the OP obtained an additional $80.0 million in credit commitments from existing and certain new lenders, raising the total available borrowings under the Unsecured Revolving Credit and Term Loan Agreement to $880.0 million. Except as amended by the Commitment Increase, all terms and conditions of the Unsecured Revolving Credit and Term Loan Agreement remained the same as those in effect prior to the Commitment Increase. As amended by the Commitment Increase, the Unsecured Revolving Credit and Term Loan Agreement consisted of the $425.0 million senior unsecured revolving credit facility, the $265.0 million 2023 million Unsecured Term Loan, has an initial maturity date ofand the $190.0 million 2024 Unsecured Term Loan. On February 27, 2026. Borrowings28, 2019, the Company amended the Unsecured Revolving Credit and Term Loan Agreement to increase the amount available under the 2026 senior unsecured revolving credit facility from $425.0 million to $600.0 million. This increased the total available borrowings under the Unsecured Revolving Credit and Term Loan Agreement to $1.1 billion. All other terms and conditions of the Unsecured Revolving Credit and Term Loan Agreement remained the same as those in effect prior to this amendment. On September 4, 2020, the senior unsecured revolving credit facility under the Unsecured Revolving Credit and Term Loan Agreement was replaced by the $900.0 million Revolving Credit Facility described above. Unsecured Term Loan are subject to interest only payments at variable rates equal to LIBOR plus a margin between 1.45% and 2.40% per annum based on the OP’s credit rating. At December 31, 2020, the applicable margin was 1.85% based on the OP’s credit rating on such date. The 2026 Unsecured Term Loan is subject to a fee of 0.25% per annum on the amount of the commitment, reduced by the amount of term loans outstanding. At closing, $300,000 of the commitment was funded and used to repay the 2019 Unsecured Term Loan in full. The remaining $150,000 commitment was drawn on August 27, 2019 and used to partially fund acquisitions.2020 Unsecured Term Loan
On August 2, 2019, the Company entered into a $300,000 term loan agreement (the “2020 Unsecured Term Loan”), maturing on August 2, 2020, with JP Morgan Chase Bank, N.A. as administrative agent. The 2020 Unsecured Term Loan was subject to a fee of 0.25% per annum on the amount of the commitment, reduced by the amount of term loans outstanding. The entire amount of $300,000 was funded on August 28, 2019 and used to partially fund acquisitions. Borrowings under the 2020 Unsecured Term Loan are subject to interest-only payments at variable rates equal to LIBOR plus a margin based on the OP’s credit rating between 0.85% and 1.65% per annum. Based on the OP’s credit rating of Baa3, the applicable margin was 1.25%. On September 21, 2020, the term loan was repaid in full using proceeds from the Company’s IPO.
Agreements
On February 7, 2020, the Company entered into a $60,000$60.0 million term loan agreement maturing on February 28, 2022 (the “2022 Unsecured Term Loan”) with JP Morgan Chase, N.A. as administrative agent. The 2022 Unsecured Term Loan was fully funded at closing and used to repay a portion of the debt assumed by the Company as part of the Internalization. Borrowings under the 2022 Unsecured Term Loan are subject to interest only payments at variable rates equal to LIBOR plus a margin based upon the Company’s credit rating, ranging between 0.85% and 1.65% per annum. At December 31, 2020, 119
2023 and 2024 Unsecured Term Loans The terms of the applicable2023 Unsecured Term Loan and 2024 Unsecured Term Loan are pursuant to the Unsecured Revolving Credit and Term Loan Agreement described above. Borrowings under the 2024 Unsecured Term Loan bear interest at variable rates based on LIBOR plus a margin was 1.25% based on the OP’s credit rating ranging between 0.85% and 1.65% per annum. Borrowings under the 2023 Unsecured Term Loan bore interest at variable rates based on such date.LIBOR plus a margin based on the OP’s credit rating ranging between 0.90% and 1.75% per annum. The borrowings under the 2023 Unsecured Term Loan were repaid in full with proceeds from the 2031 Senior Unsecured Public Notes In January 2017, in September 2021 described below.
On February 27, 2019, the Company commencedentered into a private offering$450.0 million seven-year unsecured term loan agreement (the “2026 Unsecured Term Loan”) with Capital One, National Association as administrative agent. The 2026 Unsecured Term Loan provides an accordion feature for up to a total of unsecured, fixed-rate, interest-only senior promissory notes (the “Series$550.0 million borrowing capacity. The 2026 Unsecured Term Loan has an initial maturity date of February 27, 2026. Borrowings under the 2026 Unsecured Term Loan were subject to interest only payments at variable rates equal to LIBOR plus a margin between 1.45% and 2.40% per annum based on the OP’s credit rating through March 12, 2021. On March 12, 2021, the Company amended the 2026 Unsecured Term Loan and made a $50.0 million paydown on the loan. The amendment reduced the margin on variable interest rate borrowings to a range between 0.85% and 1.65% per annum based on the OP’s credit rating. All other terms and conditions of the 2026 Unsecured Term Loan remained materially the same as those in effect prior to this amendment. The 2026 Unsecured Term Loan is subject to a fee of 0.25% per annum on the amount of the commitment, reduced by the amount of term loans outstanding. 2027 Senior Unsecured Notes—Series A Notes”). On April 18, 2017, the Company closed the offering and issued the $150.0 million of unsecured, fixed-rate, interest-only guaranteed senior promissory notes (the “2027 Senior Unsecured Notes—Series A Notes for an aggregate principal amount of $150,000. The Series A Notes were issued by the OP and guaranteed by the Corporation.A”). The Series A Notes were issued at par, bear interest at a rate of 4.84% per annum (priced at 240 basis points above the 10-year U.S. Treasury yield at the time of pricing),. 2028 Senior Unsecured Notes—Series B and have a 10-year maturity, maturing on April 18, 2027.2030 Senior Unsecured Notes—Series C On July 2, 2018, the Company entered into a Note and Guaranty Agreement (the “NGA Agreement”) with each of the purchasers of unsecured, fixed-rate, interest-only, guaranteed senior promissory notes. Under the NGA Agreement, the OP issued and sold senior promissory notes in two series, Series B Guaranteed Senior Notes (the “Series B Notes”“2028 Senior Unsecured Notes—Series B”) and Series C Guaranteed Senior Notes (the “Series C Notes”“2030 Unsecured Notes—Series C”), for an aggregate principal amount of $325,000.$325.0 million. The 2028 Senior Unsecured Notes—Series B Notes provide for an aggregate principal amount of $225,000$225.0 million with a fixed-rate of 5.09% through the maturity date of July 2, 2028.. The 2030 Senior Unsecured Notes—Series C Notes provide for an aggregate principal amount of $100,000$100.0 million with a fixed-rate of 5.19%. 2031 Senior Unsecured Public Notes On September 15, 2021, the Company completed a public offering of $375.0 million in aggregate principal amount of 2.60% senior unsecured notes due 2031 (“2031 Senior Unsecured Public Notes”), issued at 99.816% of the principal amount. The 2031 Senior Unsecured Public Notes require semi-annual interest payments through the maturity date of July 2, 2030. On July 2, 2018,September 15, 2031, unless earlier redeemed. The 2031 Senior Unsecured Public Notes were issued by the OP issued $100,000 ofand are fully and unconditionally guaranteed by the Series B Notes and $50,000 of the Series C Notes.Company. The remaining $125,000 principal of the Series B Notes and $50,000 principal of the Series C Notes were funded on September 13, 2018. The proceeds of both issuances were used to pay offrepay in full borrowings on the Revolving Credit Facility and other outstanding term loan debt.The following table summarizes the Company’s unsecured credit agreements:
| | Outstanding Balance | | | | | | | | | | December 31, | | | Interest | | | Maturity | (in thousands, except interest rates) | | 2020 | | | 2019 | | | Rate(c) | | | Date | Revolving credit facilities(a) | | $ | — | | | $ | 197,300 | | | one-month LIBOR + 1.20% | | | (d) | 2020 Unsecured Term Loan(a) | | | — | | | | 300,000 | | | one-month LIBOR + 1.25% | | | Feb. 2021 | 2022 Unsecured Term Loan(a) | | | 60,000 | | | | — | | | one-month LIBOR + 1.25% | | | Feb. 2022 | 2023 Unsecured Term Loan(a) | | | 265,000 | | | | 265,000 | | | one-month LIBOR + 1.35% | | | Jan. 2023 | 2024 Unsecured Term Loan(a) | | | 190,000 | | | | 190,000 | | | one-month LIBOR + 1.25% | | | Jun. 2024 | 2026 Unsecured Term Loan(a) | | | 450,000 | | | | 450,000 | | | one-month LIBOR + 1.85% | | | Feb. 2026 | Senior Notes(a) | | | | | | | | | | | | | | | Series A | | | 150,000 | | | | 150,000 | | | 4.84% | | | Apr. 2027 | Series B | | | 225,000 | | | | 225,000 | | | 5.09% | | | Jul. 2028 | Series C | | | 100,000 | | | | 100,000 | | | 5.19% | | | Jul. 2030 | | | | 475,000 | | | | 475,000 | | | | | | | | Total | | | 1,440,000 | | | | 1,877,300 | | | | | | | | Debt issuance costs, net(b) | | | (6,204 | ) | | | (7,919 | ) | | | | | | | | | $ | 1,433,796 | | | $ | 1,869,381 | | | | | | | |
(a)
| The Company believes it was in compliance with all financial covenants for all periods presented.
|
(b)
| Amounts presented include debt issuance costs, net, related to the unsecured term notes and senior notes only.
|
(c)
| At December 31, 2020 and 2019, one-month LIBOR was 0.14% and 1.76%, respectively.
|
(d)
| On September 4, 2020, the Company replaced its prior $600,000 revolving credit facility with a maturity date of January 2022, with a new $900,000 facility with a maturity date of September 2023.
|
At December 31, 2020, the weighted average interest rate on all outstanding borrowings was 2.80%, exclusive of interest rate swap agreements.
For the year ended December 31, 2020, the Company paid $5,918 in debt issuance costs associated with the Revolving Credit Facility. For the year ended December 31, 2019, the Company paid $6,549 in debt issuance costs associated with the 2020 Unsecured Term Loan, the 20262023 Unsecured Term Loan, and its prior unsecured revolving credit agreement. For the year ended December 31, 2018, the Company paid $2,209 in debt issuance costs associated with the Series B Notes and Series C Notes.
For each separate debt instrument,to fund acquisitions.
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Covenants on a lender by lender basis, in accordance with ASC 470-50, Debt Modifications and Extinguishment, the Company performed an assessment of whether the transaction was deemed to be new debt, a modification of existing debt, or an extinguishment of existing debt. Debt issuance costs are either deferred and amortized over the term of the associated debt or expensed as incurred.Unsecured Credit Agreements
Based on this assessment, $5,918 and $6,543 of the debt issuance costs incurred during the years ended December 31, 2020 and 2019, were deemed to be related to the issuance of new debt, or the modification of existing debt, and therefore have been deferred and are being amortized over the term of the associated debt. The remaining $6 of the debt issuance costs incurred during the year ended December 31, 2019, were deemed to be related to the extinguishment of debt and were expensed and included in Cost of debt extinguishment in the accompanying Consolidated Statements of Income and Comprehensive Income. Additionally, during the year ended December 31, 2020, $392 of unamortized debt issuance costs were expensed and included in Cost of debt extinguishment in the accompanying Consolidated Statements of Income and Comprehensive Income. Such amounts totaled $328 during the year ended December 31, 2019.
All debt issuance costs incurred during the year ended December 31, 2018, related to the issuance of new debt and therefore have been deferred and are being amortized over the term of the associated debt.
Debt issuance costs are amortized as a component of interest expense in the accompanying Consolidated Statements of Income and Comprehensive Income. The following table summarizes debt issuance cost amortization:
| | For the Year Ended December 31, | | (in thousands) | | 2020 | | | 2019 | | | 2018 | | Debt issuance costs amortization | | $ | 3,445 | | | $ | 2,685 | | | $ | 1,918 | |
The Company is subject to various financial and operational covenants and financial reporting requirements pursuant to its unsecured credit agreements. These covenants require the Company to maintain certain financial ratios, including leverage, fixed charge coverage, and debt service coverage, aggregate debt ratio, consolidated income available for debt to annual debt service charge, total unencumbered assets to total unsecured debt, and secured debt ratio, among others. As of December 31, 2020,2021, and for all periods presented the Company believes it was in compliance with all of its loan covenants. Failure to comply with the covenants would result in a default which, if the Company were unable to cure or obtain a waiver from the lenders, could accelerate the repayment of the obligations. Further, in the event of default, the Company may be restricted from paying dividends to its stockholders in excess of dividends required to maintain its REIT qualification. Accordingly, an event of default could have a material and adverse impact on the Company.The following table summarizes the Company’s unsecured credit agreements:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands, except interest rates) | | | | | | | |
| | | | | | Unsecured revolving credit facility | | $ | 102,000 | | | $ | — | | | | one-month LIBOR
+ 1.00%(c) |
| | | Sep. 2023 | | | | | | | | | | | | | | | | | | | | | Unsecured term loans: | | | | | | | | | | | | | | | | | | 2022 Unsecured Term Loan | | | 60,000 | | | | 60,000 | | | | one-month LIBOR
+ 1.00%(d) |
| | | Feb. 2022 | | | 2023 Unsecured Term Loan | | | — | | | | 265,000 | | | | one-month LIBOR
+ 1.10%(e) |
| | | Jan. 2023 | (f) | | 2024 Unsecured Term Loan | | | 190,000 | | | | 190,000 | | | | one-month LIBOR
+ 1.00%(d) |
| | | Jun. 2024 | | | 2026 Unsecured Term Loan | | | 400,000 | | | | 450,000 | | | | one-month LIBOR
+ 1.00%(g) |
| | | Feb. 2026 | | | | | | | | | | | | | | | | | | | | | Total unsecured term loans | | | 650,000 | | | | 965,000 | | | | | | | | | | | Unamortized debt issuance costs, net | | | (3,329 | ) | | | (3,670 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total unsecured term loans, net | | | 646,671 | | | | 961,330 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Senior unsecured notes: | | | | | | | | | | | | | | | | | | 2027 Senior Unsecured Notes - Series A | | | 150,000 | | | | 150,000 | | | | 4.84% | | | | Apr. 2027 | | | 2028 Senior Unsecured Notes - Series B | | | 225,000 | | | | 225,000 | | | | 5.09% | | | | Jul. 2028 | | | 2030 Senior Unsecured Notes - Series C | | | 100,000 | | | | 100,000 | | | | 5.19% | | | | Jul. 2030 | | | 2031 Senior Unsecured Public Notes | | | 375,000 | | | | — | | | | 2.60% | | | | Sep. 2031 | | | | | | | | | | | | | | | | | | | | | Total senior unsecured notes | | | 850,000 | | | | 475,000 | | | | | | | | | | | Unamortized debt issuance costs and original issuance discount, net | | | (6,199 | ) | | | (2,534 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total senior unsecured notes, net | | | 843,801 | | | | 472,466 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total unsecured debt, net | | $ | 1,592,472 | | | $ | 1,433,796 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | At December 31, 2021 and 2020,one-month LIBOR was 0.10% and 0.14%, respectively. |
| (b) | In January 2021, the Company received a cre dit rating of ‘BBB’ from S&P, changing the applicable margin on variable rate unsecured debt effective February 1, 2021. In September 2021, Moody’s upgraded our credit rating to ‘Baa2’. |
| (c) | At December 31, 2020, interest rate wasone-month LIBOR plus 1.20%. |
| (d) | At December 31, 2020, interest rate wasone-month LIBOR plus 1.25%. |
| (e) | At December 31, 2020, interest rate wasone-month LIBOR plus 1.35%. |
| The 2023 Unsecured Term Loan was paid in full with proceeds from the 2031 Senior Unsecured Public Notes in September 2021. |
| At December 31, 2020, interest rate wasone-month LIBOR plus 1.85%. |
31, 2021, the weighted average interest rate on all outstanding borrowings was 2.62%, exclusive of interest rate swap agreements. For the year ended December 31, 2021, the Company incurred $5.0 million in debt issuance costs and original issuance discount associated with the 2031 Senior Unsecured Public Notes and the amended 2026 Unsecured Term Loan. For the year ended December 31, 2020, the Company incurred $5.9 million in debt issuance costs associated with the Revolving Credit Facility. For the year ended December 31, 2019, the Company incurred $6.5 million in debt issuance costs associated with the 2020 Unsecured Term Loan, the 2026 Unsecured Term Loan and its prior unsecured revolving credit agreement. For each separate debt instrument, on a lender by lender basis, in accordance with ASC470-50, Debt Modifications and Extinguishment Based on the Company.
11. Mortgagesassessments, $5.0 million, $5.9 million and Notes Payable
$6.5 million of debt issuance costs and original issuance discounts incurred during the years ended December 31, 2021, 2020, and 2019, respectively, were deemed to be related to new debt, and the modification of existing debt, and therefore have been deferred and are being amortized over the term of the associated debt. Additionally, during the years ended December 31, 2021, 2020, and 2019, $0.3 million, $0.4 million and $0.3 million, respectively, of unamortized debt issuance costs were expensed, and included in Cost of debt extinguishment in the accompanying Consolidated Statements of Income and Comprehensive Income. Debt issuance costs and original issuance discounts are amortized as a component of Interest expense in the accompanying Consolidated Statements of Income and Comprehensive Income. The following table summarizes debt issuance cost and original issuance discount amortization:
| | | | | | | | | | | | | | | | | For the Year Ended December 31, | | | | | | | | | | | | | Debt issuance costs and original issuance discount amortization | | $ | 3,854 | | | $ | 3,445 | | | $ | 2,685 | |
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The Company’s mortgages and notes payable consist of the following:
| | | | | | | | | | | | | | | | | | | | | | (in thousands, except interest rates) | |
| | |
| | |
| | | | | | | | | | | | | | | | Wilmington Trust National Association | | | | | | | Feb-28 | | | 4.92% | | $ | 46,760 | | | $ | 47,945 | | | (a) (b) (c) (j) | | Wilmington Trust National Association | | | | | | | Aug-25 | | | 4.36% | | | 19,557 | | | | 19,947 | | | (a) (b) (c) (i) | | PNC Bank | | | | | | | Nov-26 | | | 3.62% | | | 17,094 | | | | 17,498 | | | (b) (c) | | T2 Durham I, LLC | | | Jul-21 | | | | Jul-24 | | | Greater of Prime +
1.25% or 5.00% | | | 7,500 | | | | 0 | | | (b) (k) | | Aegon | | | Apr-12 | | | | Oct-23 | | | 6.38% | | | 6,249 | | | | 7,039 | | | (b) (f) | | Sun Life | | | Mar-12 | | | | Oct-21 | | | 5.13% | | | 0 | | | | 10,469 | | | (b) (e) | | M&T Bank | | | Oct-17 | | | | Aug-21 | | | one-month
LIBOR+3% | | | 0 | | | | 4,769 | | | (b) (d) (g)
(h) | | | | | | | | | | | | | | | | | | | | | | | | Total mortgages | | | | | | | | | | | | | 97,160 | | | | 107,667 | | | | | Debt issuance costs, net | | | | | | | | | | | | | (314 | ) | | | (285 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Mortgages, net | | | | | | | | | | | | $ | 96,846 | | | $ | 107,382 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Origination | | Maturity | | | | | | | | | | | | | | | (in thousands, except interest rates) | | Date | | Date | | Interest | | | December 31, | | | | Lender | | (Month/Year) | | (Month/Year) | | Rate | | | 2020 | | | 2019 | | | | Wilmington Trust National Association | | Apr-19 | | Feb-28 | | 4.92% | | | $ | 47,945 | | | $ | 49,065 | | | (a) (b) (c) (k) | Wilmington Trust National Association | | Jun-18 | | Aug-25 | | 4.36% | | | | 19,947 | | | | 20,318 | | | (a) (b) (c) (j) | PNC Bank | | Oct-16 | | Nov-26 | | 3.62% | | | | 17,498 | | | | 17,885 | | | (b) (c) | Sun Life | | Mar-12 | | Oct-21 | | 5.13% | | | | 10,469 | | | | 10,888 | | | (b) (f) | Aegon | | Apr-12 | | Oct-23 | | 6.38% | | | | 7,039 | | | | 7,788 | | | (b) (g) | M&T Bank | | Oct-17 | | Aug-21 | | one - month LIBOR+3% | | | | 4,769 | | | | 4,913 | | | (b) (d) (h) (i) | Note holders | | Dec-08 | | Dec-23 | | 6.25% | | | | — | | | | 750 | | | (d) | Standard Insurance Co. | | Jul-10 | | Aug-30 | | 6.75% | | | | — | | | | 544 | | | (b) (c) (d) (e) | | | | | | | | | | | | 107,667 | | | | 112,151 | | | | Debt issuance costs, net | | | | | | | | | | | (285 | ) | | | (358 | ) | | | | | | | | | | | | | $ | 107,382 | | | $ | 111,793 | | | |
(a) | Non-recourse debt includes the indemnification/guaranty of the Corporation and/or OP pertaining to fraud, environmental claims, insolvency, and other matters.
|
(b) | Debt secured by related rental property and lease rents. |
(c) | Debt secured by guaranty of the OP. |
(d) | Debt secured by guaranty of the Corporation. |
(e) | The interest rate represents the initial interest rate. The interest rate could have been adjusted at Standard Insurance’s discretion (based on prevailing rates) at 119 months from the first payment date
|
(f)
| Mortgage was assumed in March 2012 as part of an UPREIT transaction. The debt was recorded at fair value at the time of the assumption. |
(g)
(f) | Mortgage was assumed in April 2012 as part of the acquisition of the related property. The debt was recorded at fair value at the time of the assumption. |
(h)
(g) | The Company entered into an interest rate swap agreement in connection with the mortgage, note, as further described in Note 12. 11. |
(i)
(h) | Mortgage was assumed in October 2017 as part of an UPREIT transaction. The debt was recorded at fair value at the time of the assumption. |
(j)
(i) | Mortgage was assumed in June 2018 as part of the acquisition of the related property. The debt was recorded at fair value at the time of assumption. |
(k)
(j) | Mortgage was assumed in April 2019 as part of the acquisition of the related property. The debt was recorded at fair value at the time of assumption. |
| (k) | Mortgage is subject to interest at a daily floating annual rate equal to the Prime Rate plus 1.25%, but no less than 5.00% per annum. At December 31, 2021, the interest rate was 5.00% |
At December 31, 2020,2021, investment in rental property of $173,532$161.6 million was pledged as collateral against the Company’s mortgages and notes payable.The following table summarizes the mortgages extinguished by the Company:
mortgages. | | For the Year Ended December 31, | | (in thousands, except number of mortgages) | | 2020 | | | 2019 | | | 2018 | | Number of mortgages | | | 2 | | | | 4 | | | | 2 | | Outstanding balance of mortgages | | $ | 1,132 | | | $ | 13,905 | | | $ | 6,666 | |
The following table summarizes the cost
123 | | For the Year Ended December 31, | | (in thousands) | | 2020 | | | 2019 | | | 2018 | | Cost of mortgage extinguishment | | $ | 25 | | | $ | 842 | | | $ | 101 | |
Estimated future principal payments to be made under the above mortgage and note payable agreements, and the Company’s unsecured credit agreements (see Note 10)9) at December 31, 2020,2021, are as follows: (in thousands) | | | | | 2021 | | $ | 18,006 | | 2022 | | | 62,907 | | 2023 | | | 272,582 | | 2024 | | | 192,260 | | 2025 | | | 20,195 | | Thereafter | | | 981,717 | | | | $ | 1,547,667 | |
| | | | | | | | | | 2022 | | $ | 62,906 | | | 2023 | | | 109,582 | | | 2024 | | | 199,760 | | | 2025 | | | 20,195 | | | 2026 | | | 416,843 | | | Thereafter | | | 889,874 | | | | | | | | | | | $ | 1,699,160 | | | | | | | |
Certain of the Company’s mortgage and note payable agreementsmortgages provide for prepayment fees and can be terminated under certain events of default as defined under the related agreements. These prepayment fees are not reflected as part of the table above.
12.
Interest rate swaps were entered into with certain financial institutions in order to mitigate the impact of interest rate variability over the term of the related debt agreements. The interest rate swaps are considered cash flow hedges. In order to reduce counterparty concentration risk, the Company has a diversification policy for institutions that serve as swap counterparties. Under these agreements, the Company receives monthly payments from the counterparties on these interest rate swaps equal to the related variable interest rates multiplied by the outstanding notional amounts. Certain interest rate swaps amortize on a monthly basis. In turn, the Company pays the counterparties each month an amount equal to a fixed rate multiplied by the related outstanding notional amounts. The intended net impact of these transactions is that the Company pays a fixed interest rate on its variable-rate borrowings. In connection with the issuance of the 2031 Senior Unsecured Public Notes in September 2021 and repayment of outstanding borrowings of variable rate debt indexed to theone-month LIBOR rate (see Note 9), the Company terminated interest rate swap agreements with an aggregate termination value of $5.6 million. The Company determined that it is not probable the hedge forecasted transactions will not occur during the original periods, and therefore, the $5.6 million of accumulated losses held in Other comprehensive income will be reclassified to interest expense on a straight-line basis over the original lives of the terminated swaps. For the year ended December 31, 2021, amounts reclassified out of Other comprehensive income to Interest expense were $0.1 million. 124
The following is a summary of the Company’s outstanding interest rate swap agreements: | | | | | | | | | | | | | | | | | | | | | | | | (in thousands, except interest rates) | | | | | | | | | | | | | | | | | | | | | | | | | | | Wells Fargo Bank, N.A. | | February 2021 | | | 2.39 | % | | $ | — | | | $ | — | | | $ | 35,000 | | | $ | (70 | ) | | M&T Bank | | August 2021 | | | 1.02 | % | | | — | | | | — | | | | 4,768 | | | | (25 | ) (a) | | Capital One, National Association | | December 2021 | | | 1.05 | % | | | — | | | | — | (b) | | | 15,000 | | | | (141 | ) | | M&T Bank | | September 2022 | | | 2.83 | % | | | — | | | | — | (b) | | | 25,000 | | | | (1,139 | ) | | Bank of America, N.A. | | November 2023 | | | 2.80 | % | | | — | | | | — | (b) | | | 25,000 | | | | (1,848 | ) | | M&T Bank | | November 2023 | | | 2.65 | % | | | — | | | | — | (b) | | | 25,000 | | | | (1,785 | ) | | Regions Bank | | December 2023 | | | 1.18 | % | | | — | | | | — | (b) | | | 25,000 | | | | (763 | ) | | Truist Financial Corporation | | April 2024 | | | 1.99 | % | | | — | | | | — | (b) | | | 25,000 | | | | (1,487 | ) | | Bank of Montreal | | July 2024 | | | 1.16 | % | | | — | | | | — | (b) | | | 40,000 | | | | (1,380 | ) | | Wells Fargo Bank, N.A. | | October 2024 | | | 2.72 | % | | | 15,000 | | | | (702 | ) | | | 15,000 | | | | (1,422 | ) | | Capital One, National Association | | December 2024 | | | 1.58 | % | | | 15,000 | | | | (241 | ) | | | 15,000 | | | | (799 | ) | | Bank of Montreal | | January 2025 | | | 1.91 | % | | | 25,000 | | | | (649 | ) | | | 25,000 | | | | (1,725 | ) | | Truist Financial Corporation | | April 2025 | | | 2.20 | % | | | 25,000 | | | | (905 | ) | | | 25,000 | | | | (2,084 | ) | | Bank of Montreal | | July 2025 | | | 2.32 | % | | | 25,000 | | | | (1,049 | ) | | | 25,000 | | | | (2,351 | ) | | Truist Financial Corporation | | July 2025 | | | 1.99 | % | | | 25,000 | | | | (767 | ) | | | 25,000 | | | | (1,941 | ) | | Truist Financial Corporation | | December 2025 | | | 2.30 | % | | | 25,000 | | | | (1,125 | ) | | | 25,000 | | | | (2,481 | ) | | Bank of Montreal | | January 2026 | | | 1.92 | % | | | 25,000 | | | | (760 | ) | | | 25,000 | | | | (2,039 | ) | | Bank of Montreal | | January 2026 | | | 2.05 | % | | | 40,000 | | | | (1,415 | ) | | | 40,000 | | | | (3,523 | ) | | Capital One, National Association | | January 2026 | | | 2.08 | % | | | 35,000 | | | | (1,274 | ) | | | 35,000 | | | | (3,078 | ) | | Truist Financial Corporation | | January 2026 | | | 1.93 | % | | | 25,000 | | | | (768 | ) | | | 25,000 | | | | (2,019 | ) | | Capital One, National Association | | April 2026 | | | 2.68 | % | | | 15,000 | | | | (941 | ) | | | 15,000 | | | | (1,843 | ) | | Capital One, National Association | | July 2026 | | | 1.32 | % | | | 35,000 | | | | (205 | ) | | | 35,000 | | | | (1,806 | ) | | Bank of Montreal | | December 2026 | | | 2.33 | % | | | 10,000 | | | | (538 | ) | | | 10,000 | | | | (1,156 | ) | | Bank of Montreal | | December 2026 | | | 1.99 | % | | | 25,000 | | | | (936 | ) | | | 25,000 | | | | (2,372 | ) | | Wells Fargo Bank, N.A. | | April 2027 | | | 2.72 | % | | | 25,000 | | | | (1,887 | ) | | | 25,000 | | | | (3,555 | ) | | Bank of Montreal | | December 2027 | | | 2.37 | % | | | 25,000 | | | | (1,570 | ) | | | 25,000 | | | | (3,234 | ) | | Capital One, National Association | | December 2027 | | | 2.37 | % | | | 25,000 | | | | (1,575 | ) | | | 25,000 | | | | (3,199 | ) | | Wells Fargo Bank, N.A. | | January 2028 | | | 2.37 | % | | | 75,000 | | | | (4,741 | ) | | | 75,000 | | | | (9,650 | ) | | Bank of Montreal | | May 2029 | | | 2.09 | % | | | 25,000 | | | | (1,316 | ) | | | 25,000 | | | | (2,994 | ) | | Regions Bank | | May 2029 | | | 2.11 | % | | | 25,000 | | | | (1,356 | ) | | | 25,000 | | | | (3,004 | ) | | Regions Bank | | June 2029 | | | 2.03 | % | | | 25,000 | | | | (1,222 | ) | | | 25,000 | | | | (2,843 | ) | | U.S. Bank National Association | | June 2029 | | | 2.03 | % | | | 25,000 | | | | (1,220 | ) | | | 25,000 | | | | (2,902 | ) | | U.S. Bank National Association | | August 2029 | | | 1.35 | % | | | 25,000 | | | | (9 | ) | | | 25,000 | | | | (1,445 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 640,000 | | | $ | (27,171 | ) | | $ | 859,768 | | | $ | (72,103 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Fair Value | | | (in thousands, except interest rates) | | Fixed | | | | | Notional | | | December 31, | | | Counterparty | | Maturity Date | | Rate | | | Variable Rate Index | | Amount | | | 2020 | | | 2019 | | | Bank of America, N.A. | | November 2023 | | | 2.80 | % | | one-month LIBOR | | $ | 25,000 | | | $ | (1,848 | ) | | $ | (1,136 | ) | | Bank of Montreal | | July 2024 | | | 1.16 | % | | one-month LIBOR | | | 40,000 | | | | (1,380 | ) | | | 740 | | | Bank of Montreal | | January 2025 | | | 1.91 | % | | one-month LIBOR | | | 25,000 | | | | (1,725 | ) | | | (402 | ) | | Bank of Montreal | | July 2025 | | | 2.32 | % | | one-month LIBOR | | | 25,000 | | | | (2,351 | ) | | | (970 | ) | | Bank of Montreal | | January 2026 | | | 1.92 | % | | one-month LIBOR | | | 25,000 | | | | (2,039 | ) | | | (448 | ) | | Bank of Montreal | | January 2026 | | | 2.05 | % | | one-month LIBOR | | | 40,000 | | | | (3,523 | ) | | | (1,014 | ) | | Bank of Montreal | | December 2026 | | | 2.33 | % | | one-month LIBOR | | | 10,000 | | | | (1,156 | ) | | | (460 | ) | | Bank of Montreal | | December 2026 | | | 1.99 | % | | one-month LIBOR | | | 25,000 | | | | (2,372 | ) | | | (577 | ) | | Bank of Montreal | | December 2027 | | | 2.37 | % | | one-month LIBOR | | | 25,000 | | | | (3,234 | ) | | | (1,306 | ) | | Bank of Montreal | | May 2029 | | | 2.09 | % | | one-month LIBOR | | | 25,000 | | | | (2,994 | ) | | | (799 | ) | | Capital One, National Association | | December 2021 | | | 1.05 | % | | one-month LIBOR | | | 15,000 | | | | (141 | ) | | | 143 | | | Capital One, National Association | | December 2024 | | | 1.58 | % | | one-month LIBOR | | | 15,000 | | | | (799 | ) | | | 10 | | | Capital One, National Association | | January 2026 | | | 2.08 | % | | one-month LIBOR | | | 35,000 | | | | (3,078 | ) | | | (911 | ) | | Capital One, National Association | | April 2026 | | | 2.68 | % | | one-month LIBOR | | | 15,000 | | | | (1,843 | ) | | | (944 | ) | | Capital One, National Association | | July 2026 | | | 1.32 | % | | one-month LIBOR | | | 35,000 | | | | (1,806 | ) | | | 720 | | | Capital One, National Association | | December 2027 | | | 2.37 | % | | one-month LIBOR | | | 25,000 | | | | (3,199 | ) | | | (1,278 | ) | | M&T Bank | | August 2021 | | | 1.02 | % | | one-month LIBOR | | | 4,768 | | | | (25 | ) | | | 41 | | (a), (b) | M&T Bank | | September 2022 | | | 2.83 | % | | one-month LIBOR | | | 25,000 | | | | (1,139 | ) | | | (862 | ) | | M&T Bank | | November 2023 | | | 2.65 | % | | one-month LIBOR | | | 25,000 | | | | (1,785 | ) | | | (1,038 | ) | | Regions Bank | | May 2020 | | | 2.12 | % | | one-month LIBOR | | | 50,000 | | | | — | | | | (104 | ) | | Regions Bank | | December 2023 | | | 1.18 | % | | one-month LIBOR | | | 25,000 | | | | (763 | ) | | | 376 | | | Regions Bank | | May 2029 | | | 2.11 | % | | one-month LIBOR | | | 25,000 | | | | (3,004 | ) | | | (827 | ) | | Regions Bank | | June 2029 | | | 2.03 | % | | one-month LIBOR | | | 25,000 | �� | | | (2,843 | ) | | | (651 | ) | | Truist Financial Corporation | | April 2024 | | | 1.99 | % | | one-month LIBOR | | | 25,000 | | | | (1,487 | ) | | | (451 | ) | | Truist Financial Corporation | | April 2025 | | | 2.20 | % | | one-month LIBOR | | | 25,000 | | | | (2,084 | ) | | | (781 | ) | | Truist Financial Corporation | | July 2025 | | | 1.99 | % | | one-month LIBOR | | | 25,000 | | | | (1,941 | ) | | | (524 | ) | | Truist Financial Corporation | | December 2025 | | | 2.30 | % | | one-month LIBOR | | | 25,000 | | | | (2,481 | ) | | | (993 | ) | | Truist Financial Corporation | | January 2026 | | | 1.93 | % | | one-month LIBOR | | | 25,000 | | | | (2,019 | ) | | | (458 | ) | | U.S. Bank National Association | | June 2029 | | | 2.03 | % | | one-month LIBOR | | | 25,000 | | | | (2,902 | ) | | | (681 | ) | | U.S. Bank National Association | | August 2029 | | | 1.35 | % | | one-month LIBOR | | | 25,000 | | | | (1,445 | ) | | | 881 | | | Wells Fargo Bank, N.A. | | February 2021 | | | 2.39 | % | | one-month LIBOR | | | 35,000 | | | | (70 | ) | | | (302 | ) | | Wells Fargo Bank, N.A. | | October 2024 | | | 2.72 | % | | one-month LIBOR | | | 15,000 | | | | (1,422 | ) | | | (795 | ) | | Wells Fargo Bank, N.A. | | April 2027 | | | 2.72 | % | | one-month LIBOR | | | 25,000 | | | | (3,555 | ) | | | (1,845 | ) | | Wells Fargo Bank, N.A. | | January 2028 | | | 2.37 | % | | one-month LIBOR | | | 75,000 | | | | (9,650 | ) | | | (3,914 | ) | | | | | | | | | | | | | | | | $ | (72,103 | ) | | $ | (21,560 | ) | |
(a) | Notional amount at December 31, 2019 was $4,912.
|
(b)
| Interest rate swap was assumed in October 2017 as part of an UPREIT transaction. transaction. |
| (b) | Interest rate swap was terminated in September 2021. |
At December 31, 2021, the weighted average fixed rate on all outstanding interest rate swaps was 2.11%.
125
The total amounts recognized, and the location in the accompanying Consolidated Statements of Income and Comprehensive Income, from converting from variable rates to fixed rates under these agreements were as follows: | | | | | | | | | | | | Total Interest Expense | | | | Amount of (Loss) | | | | | | | | | Presented in the | | | | Gain Recognized in | | | Reclassification from Accumulated | | | Consolidated Statements | | | | Accumulated Other | | | Other Comprehensive Loss | | | of Income and | | (in thousands) | | Comprehensive | | | | | Amount of (Loss) | | | Comprehensive | | For the years ended December 31, | | Loss | | | Location | | Gain | | | Income | | 2020 | | $ | (50,544 | ) | | Interest expense | | $ | (12,656 | ) | | $ | 76,138 | | 2019 | | | (37,372 | ) | | Interest expense | | | 1,492 | | | | 72,534 | | 2018 | | | 10,584 | | | Interest expense | | | (910 | ) | | | 52,855 | |
| | | | | | | | | | | | | | | | | | | | |
| | | Reclassification from Accumulated
| | |
| | | | | | |
| | | | | | | 2021 | | $ | 39,353 | | | | Interest expense | | | $ | (16,136 | ) | | $ | 64,146 | | | 2020 | | | (50,544 | ) | | | Interest expense | | | | (12,656 | ) | | | 76,138 | | | 2019 | | | (37,372 | ) | | | Interest expense | | | | 1,492 | | | | 72,534 | |
Amounts related to the interest rate swaps expected to be reclassified out of Accumulated other comprehensive loss to Interest expense during the next twelve months are estimated to be a loss of $15,972.$13.1 million. The Company is exposed to credit risk in the event of non-performance by the counterparties of the swaps. The Company minimizes the risk exposure by limiting counterparties to major banks who meet established credit and capital guidelines. 13.
12.Non-Controlling Interests Under the Company’s UPREIT structure, entities and individuals can contribute their properties in exchange for OP Units. Properties contributed as part of UPREIT transactions were valued at $15,797 during the year ended December 31, 2018, which represents the estimated fair value of the properties contributed, less any assumed debt. There were 0 UPREIT transactions during the years ended December 31, 2021, 2020, and 2019. The cumulative amount of UPREIT properties contributed, less assumed debt, amounted to $128,746$128.7 million as of December 31, 20202021 and 2019.2020. In exchange for the properties contributed and as part of the Internalization, 6,9436,058,080 and 4,455 4,265,126non-controlling OP Units were issued and outstanding, respectively, as of December 31, 2021, representing a 6.0% interest in the OP at December 31, 2021. In exchange for the properties contributed and as part of the Internalization, 6,943,130 and 4,455,308non-controlling OP Units were issued and outstanding, respectively, as of December 31, 2020, representing a 7.3% interest in the OP at December 31, 2020. In exchange for the properties contributed, 6,948 6,948,185non-controlling OP Units were issued and outstanding as of December 31, 2019, representing a 6.3% interest in the OP at December 31, 2019. The OP Units are economically equivalent to the Corporation’s common stock and, subject to certain restrictions, are convertible into the Company’s common stock at the option of the respective unit holders on a basis. The OP Units are redeemable for cash at the option of the holder, however, the Company may issue shares in lieu of cash. Therefore the OP Units are considered to be permanent equity. Exchanges of OP Units held by non-controlling interest holders are recorded by reducing non-controlling interest on a historical cost basis with a corresponding increase in common stock and additional paid-in capital. The following table summarizes OP Units exchanged for shares of common stock: | | For the Year Ended December 31, | | (in thousands) | | 2020 | | | 2019 | | | 2018 | | OP Units exchanged | | | 822 | | | | — | | | | 34 | | Shares of common stock received | | | 822 | | | | — | | | | 34 | | Value of shares/units exchanged | | $ | 15,631 | | | $ | — | | | $ | 684 | |
| | | For the Year Ended December 31, | | | | | | | | | | | | | OP Units exchanged for shares of common stock | | | 2,935 | | | | 822 | | | | 0 | | | Value of units exchanged | | $ | 46,968 | | | $ | 15,631 | | | $ | 0 | |
As of December 31, 2021, the Company achieved all four VWAP milestones applicable to the earnout. As a result, the Company issued 1,859,257 OP Units during the year ended December 31, 2021 (see Note 4). Holders of the OP Units do not have voting rights at the Corporation level. 14.
126
13. Credit Risk Concentrations The Company maintained bank balances that, at times, exceeded the federally insured limit during the years ended December 31, 2021, 2020, 2019, and 2018.2019. The Company has not experienced losses relating to these deposits and management does not believe that the Company is exposed to any significant credit risk with respect to these amounts.
Prior to the Internalization on February 7, 2020, the Company’s rental property was managed by BRE and the Asset Manager as described in Note 3. Management fees paid to BRE and the Asset Manager represented 2%, 18%, and 19%18% of total operating expenses for the years ended December 31, 2020 2019, and 2018,2019, respectively. These amounts do not include acquisition fees paid to the Asset Manager that were capitalized (see Notes 2 andNote 3). The Company had mortgages and notes payable with three institutions that comprise 63%, 16%, and 10% of total mortgages and notes payable atThere were no management fees paid to BRE or the Asset Manager during the year ended December 31, 2020. The Company had mortgages and notes payable with three institutions that comprised 62%, 16%, and 10% of total mortgages and notes payable at December 31, 2019. The Company had mortgages and notes payable with four institutions that comprised 26%, 23%, 14%, and 11% of total mortgages and notes payable at December 31, 2018.2021. For the years ended December 31, 2021, 2020, 2019, and 2018,2019, the Company had 0 individual tenants or common franchises that accounted for more than 10%10 % of total revenues. 15.revenues, excluding lease termination fees.
On September 21, 2020, the Corporation completed its IPO and issued 33,50037,000,000 shares of Class A Common Stock at an initial public offering price of $17.00 per share (the “IPO Price”). The net proceeds from the IPO, after deducting underwriting discounts and commissions of $34,170 and $3,010 of other expenses, were $532,320. The Company used the net proceeds to repay the remaining $216,488 principal and accrued interest due under the Company’s then existing revolving credit facility and the remaining $240,225 principal and accrued interest due under its 2020 Unsecured Term Loan. The remaining net proceeds will be used for general business purposes, including acquisitions. As partinclusive of the IPO, the underwriters of the IPO were granted an option, exercisable within 30 days from September 21, 2020, to purchase up to an additional 5,025 shares of Class A Common Stock at the IPO Price, less underwriting discounts and commissions. On October 20, 2020, the underwriters partially exercised their option by purchasing an additional 3,500 shares of Class A Common stock. The Company received $55,930 of additional IPO proceeds as a result of the underwriter’sunderwriters’ partial exercise of their over-allotment option net of $3,570 underwriting discounts and commissions. The net proceeds will be used for general business purposes, including acquisitions.Pursuant toon October 20, 2020.
Aside from the Corporation’s Articles of Incorporation (the “Charter”),conversion discussed below, the Corporation is authorized to issue an aggregate of 500,000 shares of common stock, of which 60,000 shares are designated as Class A Common Stock with a par value of $0.00025 per share (unrounded), and 440,000 shares are designated as Common Stock with a par value of $0.00025 per share (unrounded), and 20,000 shares are designated as preferred stock with a par value of $0.001 per share (unrounded). The Board of Directors, without any action by the Corporation’s stockholders, may amend the Charter from time to time to increase or decrease the aggregate number of shares of capital stock or the number of shares of capital stock of any class or series that the Corporation has authority to issue.The terms of the Class A Common Stock arewere identical to the terms of the Common Stock, except that eachStock. Each share of Class A Common Stock will automatically convertconverted into one share of Common Stock on March 20, 2021. The2021, and effective March 22, 2021, all shares of Common Stock will subsequently bewere listed and freely tradeable on the NYSE on March 22, 2021, which representsunder the first trading day following the 180-day period following the closing of the IPO.ticker “BNL.” The Common Stock and Class A Common Stock are collectively referred to as the Corporation’s “common stock”.
stock.” On June 28, 2021, the Corporation completed its first publicfollow-on equity offering and issued 11,500,000 shares of Common Stock, inclusive of the underwriters’ full exercise of their over-allotment option, at $23.00 per share. The net proceeds, after deducting underwriting discounts and commissions of $10.6 million and $0.4 million of other expenses, were $253.5 million. The Company used the net proceeds to repay the remaining $160.6 million principal due under the Company’s revolving credit facility. The remaining net proceeds were used for general business purposes, including acquisitions. On August 23, 2021, the Company established ancommon equity offering program (“ATM Program”), through which it may, from time to time, publicly offer and sell shares of common stock having an aggregate gross sales price of up to $400.0 million. The ATM Program provides for forward sale agreements, enabling the Company to set the price of shares upon pricing the offering, while delaying the issuance of shares and the receipt of the net proceeds. During the year ended December 31, 2020,2021, the BoardCompany issued 1,071,500 shares of Directors declaredcommon stock at a monthly dividendweighted average sale price of $0.110$26.26 per share under the ATM Program. The net proceeds, after deducting $0.3 million for commission and OP Unit$0.5 million for January through April 2020, and a quarterly dividend of $0.135 and $0.250 per share and OP Unit for the quarters ended September 30, 2020 andother issuance expenses, were $27.3 million. At December 31, 2020, respectively.During2021, the years endedCompany could issue additional common stock with an aggregate sales price of up to $371.9 million under the ATM Program.
As of December 31, 2019 and 2018,2021, the BoardCompany achieved all four VWAP milestones applicable to the earnout. As a result, the Company issued 1,088,977 shares of Directors declared a monthly dividendcommon stock during the year ended2021 127
The shares of the Corporation’s common stock entitle the holders to one vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Board of Directors in accordance with the Maryland General Corporation Law, and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive conversion or exchange rights.
Pursuant to the limited liability company agreement between the Corporation and the OP, each outstanding OP Unit is convertible into one share of the Corporation’s common stock, subject to the terms and conditions set forth in the OP’s operating agreement. The Charter also provides the Board of Directors with the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the Board of Directors shall have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. At December 31, 20202021 and 2019,2020, 0 shares of the Corporation’s preferred stock were issued and outstanding. The Board of Directors approved a share redemption program (“Share Redemption Program”) under which the Corporation could repurchase shares of its outstanding common stock after December 31, 2009. The Board of Directors approved and adopted an amended and restated Share Redemption Program effective as of June 28, 2017. Under the Share Redemption Program, stockholders could request that the Corporation redeem shares after one year from the original investment date, subject to certain exceptions as set forth in the Share Redemption Program. Under the Share Redemption Program, the Corporation was not obligated to repurchase shares and, notwithstanding any other term of the Share Redemption Program, the Board of Directors or IDC could reject any share redemption request made by any stockholder at any time. Shares held for more than 12 months, but less than five years, were redeemed at a purchase price equal to 95% of the current share value established from time to time by the IDC (the “DeterminedDetermined Share Value”),Value, and shares held for five years or more were redeemed at a purchase price equal to 100% of the current Determined Share Value, subject to certain exemptions as set forth in the Share Redemption Program. Total shares redeemed pursuant to the Share Redemption Program in any quarter could not exceed 1% of the total number of shares outstanding at the beginning of the calendar year plus 50% of the total number of any additional shares issued during the prior calendar quarter under the DRIP (as defined below), provided that the total number of shares redeemed during any calendar year could not exceed 5% of the number of shares outstanding as of the first day of such calendar year. The Board of Directors or the IDC could amend, suspend, or terminate the Share Redemption Program at any time upon 30 days’ notice to the Corporation’s stockholders. On January 10, 2020, the Corporation announced that it would be terminating the Share Redemption Program, effective February 10, 2020. The following table summarizes redemptions under the Company’s Share Redemption Program: | | For the years ended December 31, | | (in thousands, except number of redemptions) | | 2020 | | | 2019 | | | 2018 | | Number of redemptions requested | | | — | | | | 96 | | | | 50 | | Number of shares | | | — | | | | 2,610 | | | | 509 | | Aggregate redemption price | | $ | — | | | $ | 54,599 | | | $ | 10,304 | |
| | | | | | | | | | | | For the Year Ended December 31, | | (in thousands, except number of redemptions) | | | | | | | | Number of redemptions requested | | | 0 | | | | 96 | | | Number of shares | | | 0 | | | | 2,610 | | | Aggregate redemption price | | $ | 0 | | | $ | 54,599 | |
128
The 2019 redemption amounts include the redemption of shares from BRE, as discussed in Note 3. Distribution Reinvestment Plan The Corporation had adopted a Distribution Reinvestment Plan (“DRIP”), pursuant to which the Corporation’s stockholders and holders of OP Units (other than the Corporation), could elect to have cash distributions reinvested in additional shares of the Corporation’s common stock. The DRIP was terminated effective February 10, 2020. At December 31, 2020 and 2019 a total of 12,30112,300,812 and 12,01912,019,170 shares of common stock, respectively, have beenwere issued under the DRIP. 16.
15. Stock-Based Compensation On August 4, 2020, the
The Company awarded 341199,430 and 340,976 shares of restricted common stockRSAs, during the years ended December 31, 2021 and 2020, respectively, to certain officers and employees under the Equity Incentive Plan to certain officers and employees.Plan. The holder of a restricted stock awardRSAs is generally entitled at all times on and after the date of issuance of the restricted common shares to exercise the rights of a stockholder of the Company, including the
right to vote the shares and the right to receive dividends on the shares. The restricted stock awardsRSAs vest over a one, three, or four year period from the date of the Internalization,grant and are subject to the employee’s continued service through the applicable vesting dates and in accordance with the terms of the individual award agreements. NaNneThe weighted average value of the shares of restricted stock were vested at December 31, 2020. The following table presents information about the Company’s restricted stock awards:
| | For the Year Ended December 31, | | (in thousands, except recognition period) | | 2020 | | Compensation cost | | $ | 1,989 | | Dividends declared on unvested restricted stock | | 131 | | | | | | | | | December 31, 2020 | | Unamortized value of restricted stock awards | | $ | 5,001 | | Weighted average amortization period (in years) | | | 2.8 | |
The following table presents information about the Company’s restricted stock activityawards granted during the year ended December 31, 2020:
(in thousands, except per share amounts) | | Number of Shares | | | Weighted Average Grant Date Fair Value per Share | | Unvested at beginning of period | | | — | | | $ | — | | Granted | | | 341 | | | | 20.50 | | Vested | | | — | | | | — | | Forfeited | | | — | | | | — | | Unvested at end of period | | | 341 | | | $ | 20.50 | |
2021 was $18.66, which was based on the market price per share of the Company’s common stock on the grant date. The August 4, 2020 grant date fairweighted average value per share of awards granted during the year ended December 31, 2020 was $20.50, which was based on the determined share value established by the Board of Directors (“Determined Share Value”).Value. Prior to the IPO, the Company sold shares of common stock in a private offering at a price equal to the Determined Share Value, which was established at least quarterly by the Board of Directors based on the net asset value (“NAV”) of the Company’s portfolio, input from management and third-party consultants, and such other factors as the Board of Directors determined. The Company’s NAV was calculated using its established valuation process, starting with an estimate of the fair value of the properties in the portfolio as of thatthe date based upon, among other factors, the implied market price for each asset based upon a review of market capitalization rates. There were no RSAs during the year ended December 31, 2019.
The following table presents information about the Company’s RSAs:
17.| | | | | | | | | | | | | For the year ended December 31, | | | | | | | | | | Compensation cost | | $ | 3,926 | | | $ | 1,989 | | | Dividends declared on unvested RSAs | | | 394 | | | | 131 | | | Grant date fair value of shares vested during the period | | | 3,296 | | | | 0 | |
| | | | | | | | | | (in thousands, except recognition period) | | | | | | | | Unamortized value of RSAs | | $ | 4,715 | | | $ | 5,001 | | | Weighted average amortization period (in years) | | | 2.4 | | | | 2.8 | |
129 The following table presents information about the Company’s restricted stock activity:
| | | | | | | | | | | | | | | | | | | | | For the year ended December 31, | | | | | | | | | | (in thousands, except per share amounts) | | | | | Weighted
Average Grant
Date Fair Value
per Share | | | | | | Weighted
Average Grant
Date Fair Value
per Share | | | Unvested at beginning of period | | | 341 | | | $ | 20.50 | | | | 0 | | | $ | 0 | | | Granted | | | 202 | | | | 18.70 | | | | 341 | | | | 20.50 | | | Vested | | | (164 | ) | | | 20.15 | | | | 0 | | | | 0 | | | Forfeited | | | (7 | ) | | | 19.40 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | | | | | Unvested at end of period | | | 372 | | | | 19.62 | | | | 341 | | | | 20.50 | | | | | | | | | | | | | | | | | | | |
Performance-based Restricted Stock Units On March 1, 2021, the Company granted 132,189 target PRSUs under the Equity Incentive Plan to the officers of the Company. The awards arenon-vested restricted stock units where the vesting percentages and the ultimate number of units vesting will be measured 50% based on the relative total shareholder return (“rTSR”) of the Company’s common stock as compared to the rTSR of peer companies, as identified in the grant agreements, over a three-year period, and 50% based on the rTSR of the Company’s common stock as compared to the rTSR of the MSCI US REIT Index over a three year measurement period. Vesting percentages range from 0% to 200%, with a target of 100%. rTSR means the percentage appreciation in the fair market value of one share over the three year measurement period beginning on the date of grant, assuming the reinvestment of dividends on theex-dividend date. The target number of units is based on achieving a rTSR equal to the 55th percentile of the peer companies and MSCI US REIT Index. Dividends accrue during the measurement period and will be paid on the PRSUs ultimately earned at the end of the measurement period in either cash or common stock, at the direction of the Board’s Compensation Committee. The grant date fair value of the PRSUs was measured using a Monte Carlo simulation model based on assumptions including share price volatility. The following table presents information about the Company’s PRSUs: | | | | | | | | | | (in thousands, except recognition period) | | | | | Compensation cost | | $ | 743 | |
| | | | | | | | | | | Unamortized value of PRSUs | | $ | 1,931 | | | Weighted average amortization period (in years) | | | 2.2 | |
The were 0 PRSUs at December 31, 2020 and 2019. The following table presents information about the Company’s PRSU activity:
| | | | | | | | | | | | | | | | | | | | (in thousands, except per share amounts) | |
| | | Weighted Average
Grant Date Fair
Value per Share | | | Unvested at beginning of period | | | 0 | | | $ | 0 | | | Granted | | | 132 | | | | 24.40 | | | Vested | | | 0 | | | | 0 | | | Forfeited | | | (22 | ) | | | 24.40 | | | | | | | | | | | | | Unvested at end of period | | | 110 | | | | 24.40 | | | | | | | | | | | |
130
The following table summarizes the components used in the calculation of basic and diluted earnings per share (“EPS”):
| | | | | | | | | | | | | | | | | For the Year Ended December 31, | | (in thousands, except per share amounts) | | | | | | | | | | | Basic earnings: | | | | | | | | | | | | | | Net earnings attributable to Broadstone Net Lease, Inc. common shareholders | | $ | 102,426 | | | $ | 51,181 | | | $ | 79,394 | | | Less: earnings allocated to unvested restricted shares | | | (394 | ) | | | (131 | ) | | | 0 | | | | | | | | | | | | | | | | | Net earnings used to compute basic earnings per common share | | $ | 102,032 | | | $ | 51,050 | | | $ | 79,394 | | | | | | | | | | | | | | | | | Diluted earnings: | | | | | | | | | | | | | | Net earnings used to compute basic earnings per share | | $ | 102,032 | | | $ | 51,050 | | | $ | 79,394 | | Net earnings attributable to non-controlling interests | | | 7,102 | | | | 5,095 | | | | 5,720 | | | | | | | | | | | | | | | | | Net earnings used to compute diluted earnings per common share | | $ | 109,134 | | | $ | 56,145 | | | $ | 85,114 | | | | | | | | | | | | | | | | | Weighted average number of common shares outstanding | | | 153,425 | | | | 117,289 | | | | 95,917 | | Less: weighted average unvested restricted shares (a) | | | (368 | ) | | | (139 | ) | | | 0 | | | | | | | | | | | | | | | | | Weighted average number of common shares outstanding used in basic earnings per common share | | | 153,057 | | | | 117,150 | | | | 95,917 | | Effects of restricted stock units (b) | | | 172 | | | | 0 | | | | 0 | | Effects of convertible membership units (c) | | | 10,741 | | | | 11,649 | | | | 6,948 | | | | | | | | | | | | | | | | | Weighted average number of common shares outstanding used in diluted earnings per common share | | | 163,970 | | | | 128,799 | | | | 102,865 | | | | | | | | | | | | | | | | | Basic earnings per share | | $ | 0.67 | | | $ | 0.44 | | | $ | 0.83 | | | | | | | | | | | | | | | | | Diluted earnings per share | | $ | 0.67 | | | $ | 0.44 | | | $ | 0.83 | | | | | | | | | | | | | | | |
| | For the Year Ended December 31, | | (in thousands, except per share amounts) | | 2020 | | | 2019 | | | 2018 | | Basic earnings: | | | | | | | | | | | | | Net earnings attributable to Broadstone Net Lease, Inc. common shareholders | | $ | 51,181 | | | $ | 79,394 | | | $ | 69,375 | | Less: earnings allocated to unvested restricted shares | | | (131 | ) | | | — | | | | — | | Net earnings used to compute basic earnings per common share | | $ | 51,050 | | | $ | 79,394 | | | $ | 69,375 | | | | | | | | | | | | | | | Diluted earnings: | | | | | | | | | | | | | Net earnings used to compute basic earnings per share | | $ | 51,050 | | | $ | 79,394 | | | $ | 69,375 | | Net earnings attributable to non-controlling interests | | | 5,095 | | | | 5,720 | | | | 5,730 | | Net earnings used to compute diluted earnings per common share | | $ | 56,145 | | | $ | 85,114 | | | $ | 75,105 | | | | | | | | | | | | | | | Weighted average number of common shares outstanding: | | | 117,289 | | | | 95,917 | | | | 80,967 | | Less: weighted average unvested restricted shares (a) | | | (139 | ) | | | — | | | | — | | Weighted average number of common shares outstanding used in basic earnings per common share | | | 117,150 | | | | 95,917 | | | | 80,967 | | Effects of convertible membership units (b) | | | 11,649 | | | | 6,948 | | | | 6,674 | | Weighted average number of common shares outstanding used in diluted earnings per common share | | | 128,799 | | | | 102,865 | | | | 87,641 | | | | | | | | | | | | | | | Basic earnings per share | | $ | 0.44 | | | $ | 0.83 | | | $ | 0.86 | | Diluted earnings per share | | $ | 0.44 | | | $ | 0.83 | | | $ | 0.86 | |
(a) | Represents the weighted average effects of 341372,150 and 340,963 unvested restricted shares of common stock as of December 31, 2021 and 2020, respectively, which will be excluded from the computation of earnings per share until they vest. The shares of restricted common stock were not included in the calculation of diluted earnings per share, as the effect of doing so would have been anti-dilutive. anti-dilutive. |
(b) | Represents the weighted average effects of 11,399, 6,948,shares of common stock to be issued as though the end of the period were the end of the performance period (see Note 15). |
| (c) | Represents the weighted average effects of 10,323,206, 11,398,438, and 6,9486,948,185 OP Units outstanding at December 31, 2021, 2020, 2019, and 2018,2019, respectively. OP Units are included in the diluted earnings per share calculation. However, because such OP Units would also require that the share of the OPnet income attributable to such OP units also be added back to net income, there is no effect to EPS. |
18.
For federal income tax purposes, distributions to stockholders are characterized as ordinary dividends, capital gain distributions, or return of capital distributions. Return of capital distributions will reduce stockholders’ basis in their 131
shares, but not below zero. The portion of the distribution that exceeds the adjusted basis of the stock will be treated as gain from the sale or exchange of property. The following table shows the character of the distributions the Company paid on a percentage basis:
| | | | | | | | | | | | | | | | | For the Year Ended December 31, | | Character of Distributions | | | | | | | | | | | Ordinary dividends | | | 61 | % | | | 89 | % | | | 43 | % | | Capital gain distributions | | | 0 | % | | | 7 | % | | | 8 | % | | Return of capital distributions | | | 39 | % | | | 4 | % | | | 49 | % | | | | | | | | | | | | | | | | | | | 100 | % | | | 100 | % | | | 100 | % | | | | | | | | | | | | | | |
| | For the Year Ended December 31, | | Character of Distributions | | 2020 | | | 2019 | | | 2018 | | Ordinary dividends | | | 89 | % | | | 43 | % | | | 55 | % | Capital gain distributions | | | 7 | % | | | 8 | % | | | 8 | % | Return of capital distributions | | | 4 | % | | | 49 | % | | | 37 | % | | | | 100 | % | | | 100 | % | | | 100 | % |
19.18. Supplemental Cash Flow Disclosures
Cash paid for interest was $72,566, $76,379,$57.3 million, $72.6 million, and $44,697$76.4 million for the years ended December 31, 2021, 2020, 2019, and 2018,2019, respectively. Cash paid for state income franchise, and foreign taxes was $1,500, $2,131,$0.6 million, $1.5 million, and $947$2.1 million for the years ended December 31, 2021, 2020, and 2019, and 2018, respectively. The following are non-cash transactions and have been excluded from the accompanying Consolidated Statements of Cash Flows: | •
| During the years ended December 31, 2020, 2019, and 2018, the Corporation issued 275, 3,012, and 2,489 shares, respectively, of common stock with a value of approximately $5,733, $63,020, and $50,826, respectively, under the terms of the DRIP (see Note 15).
|
| •
| During the year ended December 31, 2020, the Company issued shares of Common Stock and OP Units, with a total value of approximately $178,535, and earnout consideration with a fair value of $40,119 as consideration for the Internalization and assumed $90,484 of debt (see Note 4).
|
| •
| During the year ended December 31, 2020, the Company adjusted the carrying value of mezzanine equity non-controlling interests by $2,513, with an offset to Additional paid-in capital, in accordance with our accounting policy (see Note 2)During the year ended December 31, 2021, the Company converted 2,934,489 OP Units valued at $47.0 million to 2,934,489 shares of common stock. During the year ended December 31, 2020, the Company converted 822,745 OP Units valued at $15.6 million to 822,745 shares of common stock. (See Note 12).
|
| •
| During the year ended December 31, 2020, the Company reclassified $112,698 of mezzanine equity non-controlling interests to Non-controlling interests as a result of the IPO triggering permanent equity classification (see Note 2 and 4).
|
| •
| During the year ended December 31, 2020, the Company reclassified $66,376 of mezzanine equity common stock, with an offset of $66,375 to Additional paid-in capital and $1 to Common stock as a result of the IPO triggering permanent equity classification (see Note 2 and 4).
|
At December 31, 2021, 2020, and 2019, dividend amounts declared and accrued but not yet paid amounted to $45.9 million, $39.3 million, and $12.2 million, respectively. | •
| During the year ended December 31, 2020, the Company reclassified $30,810 of the carrying value of the earnout liability, with an offset of $19,430 as a component of Non-controlling interests and $11,380 as a component of Additional paid-in capital (see Note 2).
|
| •
| During the year ended December 31, 2020, the Company converted 822 OP Units valued at $15,631 to 822 shares of common stock. (See Note 13).
|
At December 31, 2021, 2020, and 2019, the Company adjusted the carrying value ofNon-controlling interests to reflect their share of the book value of the OP by $32.2 million, $(41.2) million, and $5.8 million, respectively, with the reallocation recorded as an offset to Additionalpaid-in capital (see Note 2). | •
| During the year ended December 31, 2018, the Company issued 776 OP Units in exchange for property contributed in UPREIT transactions valued at $15,797. There were 0 UPREIT transactions during the years ended December 31, 2020 and 2019 (see Note 13).
|
| •
| During the year ended December 31, 2018, the Corporation cancelled 37 shares of common stock with a value of $748 that were pledged as collateral by a tenant. The cancellation of the shares was used to settle $748 in outstanding receivables associated with the tenant.
|
During the years ended December 31, 2020, and 2019, the Corporation issued 275,271, and 3,012,052 shares, respectively, of common stock with a value of approximately $5.7 million, and $63.0 million, respectively, under the terms of the DRIP (see Note 14). | •
| At December 31, 2020, 2019, and 2018, dividend amounts declared and accrued but not yet paid amounted to $39,252, $12,162, and $10,111, respectively.
|
| •
| At December 31, 2020, 2019, and 2018, the Company adjusted the carrying value of Non-controlling interests to reflect their share of the book value of the OP by $(41,199), $5,816, and $1,510, respectively, with the reallocation recorded as an offset to Additional paid-in capital (see Note 2)During the year ended December 31, 2020, the Company issued shares of Common Stock and OP Units, with a total value of approximately $178.5 million, and earnout consideration with a fair value of $40.1 million as consideration for the Internalization and assumed $90.5 million of debt (see Note 4).
|
| •
| During the year ended December 31, 2020, the Company executed lease modifications that resulted in the lease classification changing from direct financing lease to operating lease for 5 properties. At the modification date, the net investment in the original lease, and therefore the carrying value of the assets recognized, amounted to $10,838.
|
| •
| Upon adoption of ASC 326 on January 1, 2020, described in Note 2, the Company recorded a transition adjustment to record a provision for credit losses associated with its net investment in direct financing leases of $323, with an equal amount recorded as a reduction in retained earnings. The provision for credit losses is included as a component of Investment in rental property, net accounted for using the direct financing method on the Consolidated Balance Sheets.
|
During the year ended December 31, 2020, the Company adjusted the carrying value of mezzanine equitynon-controlling interests by $2.5 million, with an offset to Additionalpaid-in capital, in accordance with our accounting policy (see Note 2).
| •
| Upon adoption of ASC 842 on January 1, 2019, the Company recorded right-of-use assets of $1,687 and lease liabilities of $1,261 associated with ground leases where it is the lessee. The right-of-use asset was recorded net of straight-line rent liability of $7 and ground lease intangible asset, net of $432 as of the date of adoption.
|
During the year ended December 31, 2020, the Company reclassified $112.7 million of mezzanine equitynon-controlling interests toNon-controlling interests as a result of the IPO triggering permanent equity classification (see Note 2 and 4). | •
| In connection with real estate transactions conducted during the year ended December 31, 2020, the Company accepted credits for rent in advance of $1,701 in exchange for a reduction to the cash paid to acquire the associated real estate assets. In connection with real estate transactions conducted during the year ended December 31, 2019, the Company assumed tenant improvement allowances of $2,517 in exchange for a reduction to the cash paid to acquire the associated real estate assets. The Company did 0t accept any tenant improvement allowances or credits for rent in advance during the year ended December 31, 2018.
|
| •
| In connection with real estate transactions conducted during the year ended December 31, 2018, the Company settled notes receivable in the amount of $6,527 in exchange for a reduction to the cash paid for the associated real estate assets (see Notes 5 and 9).
|
During the year ended December 31, 2020, the Company reclassified $66.4 million of mezzanine equity common stock, with an offset of $66.4 million to Additionalpaid-in 20.capital as a result of the IPO triggering permanent equity classification (see Note 2 and 4).
During the year ended December 31, 2020, the Company reclassified $30.8 million of the carrying value of the earnout liability, with an offset of $19.4 million as a component ofNon-controlling interests and $11.4 million as a component of Additionalpaid-in capital (see Note 2). 132
During the year ended December 31, 2020, the Company executed lease modifications that resulted in the lease classification changing from direct financing lease to operating lease for 5 properties. At the modification date, the net investment in the original lease, and therefore the carrying value of the assets recognized, amounted to $10.8 million. Upon adoption of ASC 326 on January 1, 2020, the Company recorded a transition adjustment to record a provision for credit losses associated with its net investment in direct financing leases of $0.3 million, with an equal amount recorded as a reduction in retained earnings. The provision for credit losses is included as a component of Accounted for using the direct financing method on the Consolidated Balance Sheets. Upon adoption of ASC 842 on January 1, 2019, the Company recordedassets of $1.7 million and lease liabilities of $1.3 million associated with ground leases where it is the lessee. In connection with real estate transactions conducted during the year ended December 31, 2020, the Company accepted credits for rent in advance of $1.7 million in exchange for a reduction to the cash paid to acquire the associated real estate assets. In connection with real estate transactions conducted during the year ended December 31, 2019, the Company assumed tenant improvement allowances of $2.5 million in exchange for a reduction to the cash paid to acquire the associated real estate assets. 19. Commitments and Contingencies From time to time, the Company is a party to various litigation matters incidental to the conduct of the Company’s business. While the resolution of such matters cannot be predicted with certainty, based on currently available information, the Company does not believe that the final outcome of any of these matters will have a material effect on its consolidated financial position, results of operations, or liquidity. Property and Acquisition Related In connection with ownership and operation of real estate, the Company may potentially be liable for cost and damages related to environmental matters. The Company is not aware of any non-compliance, liability, claim, or other environmental condition that would have a material effect on its consolidated financial position, results of operations, or liquidity. Balances associated with tenant improvement allowances are included
The Company has a commitment to fund a building expansion expected to be completed in Accounts payable and other liabilities on the Consolidated Balance Sheets2022, totaling $17.4 million as follows:of December 31, 2021, in exchange for an increase in rent contractually scheduled to commence in August 2022. | | December 31, | | (in thousands) | | 2020 | | | 2019 | | Tenant improvement allowances | | $ | 1,981 | | | $ | 2,706 | |
The Company is a party to three separate tax protection agreements with the contributing members of three distinct UPREIT transactions and to the Founding Owners’ Tax Protection Agreement in connection with the Internalization (see Note 3).Internalization. The tax protection agreements require the Company to indemnify the beneficiaries in the event of a sale, exchange, transfer, or other disposal of the contributed property, orand in the case of the Founding Owners’ Tax Protection Agreement, the entire Company, in a taxable transaction that would cause such beneficiaries to recognize a gain that is protected under the agreements, subject to certain exceptions. The Company is required to allocate an amount of nonrecourse liabilities to each beneficiary that is at least equal to the Minimum Liability Amount,minimum liability amount, as contained in the agreements. The minimum liability amount and the associated allocation of nonrecourse liabilities are calculated in accordance with applicable tax regulations, are completed at the OP level, and do not represent GAAP accounting. Therefore, there is no impact to the Consolidated Financial Statements. Based on values as of December 31, 2020,2021, taxable sales of the applicable properties would trigger liability under the Agreementsagreements of approximately $22,300.$22.3 million. Based on information available, the Company does not believe that the events resulting in damages as detailed above have occurred or are likely to occur in the foreseeable future. 133
In the normal course of business, the Company enters into various types of commitments to purchase real estate properties. These commitments are generally subject to the Company’s customary due diligence process and, accordingly, a number of specific conditions must be met before the Company is obligated to purchase the properties. Obligations Under Operating Leases Subsequent to the Internalization, (see Note 4), the Company leases office space for its corporate headquarters and other locations under non-cancellable operating leases with expiration dates ranging from 20212022 to 2023. These leases
contain provisions for fixed monthly payments, subject to rent escalations. None of the leases are subject to any sublease agreement. The lease for the corporate headquarters is with a related party (see Note 3). The Company also leases land at certain properties under non-cancellable operating leases (“ground leases”) with initial lease terms ranging from 2034 to 2066.2069. These leases contain provisions for fixed monthly payments, subject to rent escalations. One lease requires the Company to make annual rent payments calculated based upon sales generated at the property (“percentage rent”). None of the leases are subject to any sublease agreement. The following table summarizes the total lease costs associated with operating leases:
| | | | | | | | | | | | | | | | | | | | | For the Year Ended December 31, | | | | Financial Statement Presentation | | | | | | | | | | | Operating lease costs | | | | | | | | | | | | | | | | Office leases | | General and administrative | | $ | 623 | | | $ | 517 | | | $ | 0 | | | Ground leases | | Property and operating expense | | | 149 | | | | 133 | | | | 139 | | | Variable lease costs | | | | | | | | | | | | | | | | Ground leases | | Property and operating expense | | | 62 | | | | 61 | | | | 46 | | | | | | | | | | | | | | | | | | | Total lease costs | | | | $ | 834 | | | $ | 711 | | | $ | 185 | | | | | | | | | | | | | | | | | |
| | | | For the Year Ended December 31, | | (in thousands) | | Financial Statement Presentation | | 2020 | | | 2019 | | | 2018 | | Operating lease costs | | | | | | | | | | | | | | | Office leases | | General and administrative | | $ | 517 | | | $ | — | | | $ | — | | Ground leases | | Property and operating expense | | | 133 | | | | 139 | | | | 59 | | Variable lease costs | | | | | | | | | | | | | | | Ground leases | | Property and operating expense | | | 61 | | | | 46 | | | | 23 | | Total lease costs | | | | $ | 711 | | | $ | 185 | | | $ | 82 | |
The following table summarizes payments associated with obligations under operating leases, reported as Cash flows fromNet cash provided by operating activities on the accompanying Consolidated Statements of Cash Flows: | | For the Year Ended December 31, | | (in thousands) | | 2020 | | | 2019 | | | 2018 | | Operating lease payments | | $ | 666 | | | $ | 158 | | | $ | 52 | |
| | | For the Year Ended December 31, | | | | | | | | | | | | | Operating lease payments | | $ | 804 | | | $ | 666 | | | $ | 158 | |
Estimated future lease payments required under non-cancelable operating leases at December 31, 2020,2021, and a reconciliation to the lease liabilities, is as follows: (in thousands) | | | | | 2021 | | $ | 719 | | 2022 | | | 686 | | 2023 | | | 505 | | 2024 | | | 120 | | 2025 | | | 121 | | Thereafter | | | 2,290 | | Total undiscounted cash flows | | | 4,441 | | Less imputed interest | | | (1,782 | ) | Lease liabilities | | $ | 2,659 | |
| | | | | | | | | | 2022 | | $ | 723 | | | 2023 | | | 539 | | | 2024 | | | 153 | | | 2025 | | | 155 | | | 2026 | | | 157 | | | Thereafter | | | 3,620 | | | | | | | | | Total undiscounted cash flows | | | 5,347 | | | Less imputed interest | | | (2,777 | ) | | | | | | | | Lease liabilities | | $ | 2,570 | | | | | | | |
The above rental payments include future minimum lease payments due during the initial lease terms. Such amounts exclude any contingent amounts associated with percentage rent that may become due in future periods. 21.
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On January 15, 2021,14, 2022, the Company paid distributions totaling $39,252.$45.8 million. On February 19, 2021,17, 2022, the Board of Directors declared a quarterly distribution of $0.25$0.265 per share on the Company’s common stock and OP Units for the first quarter of 2021,2022, which will be payable on or before April 15, 20212022 to stockholders and unit holders of record as of March 31, 2021.2022. Subsequent to December 31, 2020,2021, the Company continued to expand its operations through the acquisition of additional rental property and associated intangible assets and liabilities. The Company acquired approximately $4,843$25.6 million of rental property and associated intangible assets and liabilities.liabilities (see Note 5). On January 28, 2022, the Through February 25,Company amended and restated the Revolving Credit Agreement to increase the available borrowings to $1.0 billion and extend the maturity date to March 31, 2026. In addition to United States Dollars, borrowings under the Revolving Credit Agreement can be made in Pound Sterling, Euros or Canadian Dollars up to an aggregate amount of $500.0 million. Borrowings under the agreement are subject to interest only payments at variable rates equal to the applicable reference rate plus a margin based on the Company’s credit rating, ranging between 0.725% and 1.400%. The applicable margin is 0.850% per annum. In addition, the Revolving Credit Facility is subject to a facility fee on the amount of the revolving commitments, based on the Company’s credit rating. The applicable facility fee is 0.200% per annum.
Subsequent to December 31, 2021, the Company sold 3 properties with an aggregate carrying value of approximately $4,529 for totalpaid down $17.0 million, and borrowed $37.0 million on the Revolving Credit Facility, the proceeds of $6,710. The Company incurred additional expenses relatedwhich were used to the sales of approximately $312, resulting in a gain on sale of real estate of approximately $1,869.22. Selected Quarterly Results (unaudited)
Presented below is a summary of the Company’s unaudited quarterly financial informationfund acquisitions and for the years ended December 31, 2020 and 2019. Amounts have been updated to reflect the Company’s four-for-one stock split on September 18, 2020.
| | For the Quarter Ended | | (in thousands, except per share) | | March 31, 2020 | | | June 30, 2020 | | | September 30, 2020 | | | December 31, 2020 | | Lease revenues | | $ | 78,231 | | | $ | 80,371 | | | $ | 80,744 | | | $ | 82,291 | | Net income | | $ | 11,848 | | | $ | 17,098 | | | $ | 9,711 | | | $ | 17,619 | | Net income attributable to non-controlling interests | | | (1,032 | ) | | | (1,745 | ) | | | (961 | ) | | | (1,357 | ) | Net income attributable to Broadstone Net Lease, Inc. | | $ | 10,816 | | | $ | 15,353 | | | $ | 8,750 | | | $ | 16,262 | | Net earnings per share attributable to common stockholders basic and diluted | | $ | 0.10 | | | $ | 0.14 | | | $ | 0.08 | | | $ | 0.11 | | Weighted average number of common shares outstanding | | | | | | | | | | | | | | | | | Basic | | | 106,108 | | | | 107,422 | | | | 111,155 | | | | 143,916 | | Diluted | | | 116,210 | | | | 119,648 | | | | 123,381 | | | | 155,956 | |
| | For the Quarter Ended | | (in thousands, except per share) | | March 31, 2019 | | | June 30, 2019 | | | September 30, 2019 | | | December 31, 2019 | | Lease revenues | | $ | 68,430 | | | $ | 69,053 | | | $ | 76,401 | | | $ | 84,931 | | Net income | | $ | 15,022 | | | $ | 17,342 | | | $ | 25,038 | | | $ | 27,712 | | Net income attributable to non-controlling interests | | | (1,084 | ) | | | (1,208 | ) | | | (1,650 | ) | | | (1,778 | ) | Net income attributable to Broadstone Net Lease, Inc. | | $ | 13,938 | | | $ | 16,134 | | | $ | 23,388 | | | $ | 25,934 | | Net earnings per share attributable to common stockholders basic and diluted | | $ | 0.16 | | | $ | 0.17 | | | $ | 0.24 | | | $ | 0.25 | | Weighted average number of common shares outstanding | | | | | | | | | | | | | | | | | Basic | | | 89,340 | | | | 92,818 | | | | 98,568 | | | | 102,941 | | Diluted | | | 96,288 | | | | 99,766 | | | | 105,516 | | | | 109,889 | |
23. COVID-19 Pandemic
Since its discovery in December 2019, a novel strain of coronavirus, which causes the viral disease known as COVID-19, has spread throughout most countries of the world, including the United States. The outbreak has been declared a pandemic by the World Health Organization, and the United States Secretary of Health and Human Services has declared a public health emergency in the United States. In response to the COVID-19 pandemic, many local, state and federal governments instituted “stay at home” or “shelter in place” restrictions, for various periods of time throughout the year on the types of businesses that may continue to operate, which resulted in closure of many businesses deemed to be non-essential. Many of the Company’s tenants, in particular those who operate in the retail and restaurant industries, depend on in-person interactions with customers to generate unit-level profitability, and have been negatively impacted by the pandemic, as have businesses who supply products and services to these industries. As a result, during the second quarter of 2020,Through February 22, 2022, the Company receivedissued 1,051,000 shares of common stock at a numberweighted average sale price of requests for rent relief and ultimately granted relief to 15 tenants.
For all but 1 of the 15 tenants granted relief, the Company granted relief in the form of a partial rent deferral. At December 31, 2020, all deferral periods have ended, and the balance of rent deferrals was less than $1,000. For the remaining tenant, the Company agreed to a partial abatement of rent, which ended subsequent to year-end in January 2021.
For partial rent deferrals expected to be repaid within a short period of time where the deferral of payments made no substantive changes to the total consideration in the original lease agreement, the amount of straight-line lease revenue recognized in the financial statements was not impacted. Deferred rents due$24.10 per share under the agreements are recorded as TenantATM Program. The net proceeds, after deducting $0.4 million of commissions and other receivables, net in the Consolidated Balance Sheets. In certain circumstances, as partoffering costs, were $25.0 million.
135
Table of the deferral agreements, the Company negotiated lease extensions or the early exercise of tenant renewal options, resulting in cash flows under the agreements being substantially in excess of the original lease terms. The Company evaluated these agreements on a lease by lease basis, and accounted for the relief under the modification framework of ASC 842, resulting in adjustments to the amount of straight-line lease revenue that will be recorded prospectively. The Company also accounted for the partial abatement under the lease modification framework of ASC 842.As of and for the year ended December 31, 2020, the impact of the COVID-19 pandemic on the Company’s financial condition, and results of operations has been limited to effects of the grants of rent relief discussed above. The full extent of the pandemic on the Company’s future financial conditions, results of operations, liquidity, and ability to pay distributions will ultimately depend on certain developments, including the duration and spread of the outbreak and its impact on the Company’s tenants, all of which are uncertain and cannot be predicted.
Contents
Broadstone Net Lease, Inc. and Subsidiaries Schedule III – Real Estate Assets and Accumulated Depreciation As of December 31, 20202021 (in thousands) | | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Industrial Properties: | | | | | | | | | | | | | | | | | | | | | | | Tacoma | | WA | | $ — | | $1,634 | | $4,902 | | $ — | | $ — | | $1,634 | | $4,902 | | $6,536 | | $1,581 | | 1977 | | 2011 | | 15-39 | New Haven | | IN | | — | | 445 | | 2,521 | | — | | — | | 445 | | 2,521 | | 2,966 | | 951 | | 1960 | | 2011 | | 15-39 | Raleigh | | NC | | — | | 2,034 | | 8,137 | | — | | — | | 2,034 | | 8,137 | | 10,171 | | 2,264 | | 1999 | | 2012 | | 15-39 | Eureka | | MO | | — | | 2,328 | | 9,311 | | — | | — | | 2,328 | | 9,311 | | 11,639 | | 3,538 | | 1990 | | 2012 | | 15-39 | Durham | | NC | | 10,469 | | 3,000 | | 17,531 | | — | | — | | 3,000 | | 17,531 | | 20,531 | | 5,192 | | 2009 | | 2012 | | 15-39 | Kilgore | | TX | | — | | 160 | | 908 | | — | | — | | 160 | | 908 | | 1,068 | | 334 | | 2008 | | 2012 | | 15-39 | American Canyon | | CA | | 7,039 | | 2,378 | | 26,142 | | — | | — | | 2,378 | | 26,142 | | 28,520 | | 6,870 | | 2002 | | 2012 | | 15-39 | Huber Heights | | OH | | — | | 583 | | 1,748 | | — | | — | | 583 | | 1,748 | | 2,331 | | 644 | | 1985 | | 2012 | | 15-39 | Eastlake | | OH | | — | | 854 | | 2,562 | | — | | — | | 854 | | 2,562 | | 3,416 | | 807 | | 1981 | | 2012 | | 15-39 | Union Grove | | WI | | — | | 239 | | 957 | | — | | — | | 239 | | 957 | | 1,196 | | 222 | | 1993 | | 2012 | | 15-39 | Union Grove | | WI | | — | | 347 | | 1,386 | | — | | — | | 347 | | 1,386 | | 1,733 | | 309 | | 1979 | | 2012 | | 15-39 | Rock Hill | | SC | | — | | 796 | | 3,185 | | — | | 72 | | 796 | | 3,257 | | 4,053 | | 1,021 | | 1999 | | 2012 | | 15-39 | Union Grove | | WI | | — | | 427 | | 3,413 | | — | | — | | 427 | | 3,413 | | 3,840 | | 663 | | 2014 | | 2015 | | 15-39 | Oshkosh | | WI | | — | | 456 | | 869 | | — | | — | | 456 | | 869 | | 1,325 | | 191 | | 2007 | | 2015 | | 15-39 | Hoffman Estates | | IL | | — | | 12,253 | | 23,456 | | — | | — | | 12,253 | | 23,456 | | 35,709 | | 6,186 | | 1988 | | 2013 | | 15-39 | White Marsh | | MD | | — | | 3,223 | | 200 | | — | | — | | 3,223 | | 200 | | 3,423 | | 65 | | 1986 | | 2013 | | 15-39 | Manassas | | VA | | — | | 1,187 | | 197 | | — | | — | | 1,187 | | 197 | | 1,384 | | 54 | | 1986 | | 2013 | | 15-39 | Morrisville | | NC | | — | | 235 | | 46 | | — | | — | | 235 | | 46 | | 281 | | 16 | | 1960 | | 2013 | | 15-39 | Aston | | PA | | — | | 2,554 | | 126 | | — | | — | | 2,554 | | 126 | | 2,680 | | 39 | | 1984 | | 2013 | | 15-39 | Cincinnati | | OH | | — | | 1,001 | | 173 | | — | | — | | 1,001 | | 173 | | 1,174 | | 65 | | 1976 | | 2013 | | 15-39 | Columbus | | OH | | — | | 757 | | 77 | | — | | — | | 757 | | 77 | | 834 | | 24 | | 1981 | | 2013 | | 15-39 | Windsor | | CT | | — | | 1,887 | | 204 | | — | | — | | 1,887 | | 204 | | 2,091 | | 77 | | 1986 | | 2013 | | 15-39 | Pittsburgh | | PA | | — | | 1,691 | | 244 | | — | | — | | 1,691 | | 244 | | 1,935 | | 78 | | 1989 | | 2013 | | 15-39 | Norton Shores | | MI | | — | | 198 | | 2,932 | | — | | 393 | | 198 | | 3,325 | | 3,523 | | 582 | | 2002 | | 2014 | | 15-39 | Muskegon | | MI | | — | | 168 | | 2,751 | | — | | 13 | | 168 | | 2,764 | | 2,932 | | 651 | | 1985 | | 2013 | | 15-39 | Muskegon | | MI | | — | | 454 | | 6,889 | | — | | 706 | | 454 | | 7,595 | | 8,049 | | 1,664 | | 2012 | | 2013 | | 15-39 | Muskegon | | MI | | — | | 463 | | 2,512 | | — | | 23 | | 463 | | 2,535 | | 2,998 | | 644 | | 1978 | | 2013 | | 15-39 | Muskegon | | MI | | — | | 257 | | 655 | | — | | 383 | | 257 | | 1,038 | | 1,295 | | 181 | | 2005 | | 2013 | | 15-39 |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Greenwich | | CT | | — | | 16,898 | | 959 | | — | | — | | 16,898 | | 959 | | 17,857 | | 240 | | 1967 | | 2014 | | 15-39 | Elgin | | IL | | — | | 4,339 | | 17,458 | | — | | — | | 4,339 | | 17,458 | | 21,797 | | 3,441 | | 2009 | | 2014 | | 15-39 | Shakopee | | MN | | — | | 3,962 | | 21,296 | | — | | — | | 3,962 | | 21,296 | | 25,258 | | 4,399 | | 2014 | | 2014 | | 15-39 | Houston | | TX | | — | | 1,242 | | 2,698 | | — | | — | | 1,242 | | 2,698 | | 3,940 | | 687 | | 1972 | | 2014 | | 15-39 | Winona | | MN | | — | | 1,653 | | 7,694 | | — | | — | | 1,653 | | 7,694 | | 9,347 | | 1,366 | | 2008 | | 2014 | | 15-39 | Winona | | MN | | — | | 804 | | 4,412 | | — | | — | | 804 | | 4,412 | | 5,216 | | 764 | | 2008 | | 2014 | | 15-39 | Mt. Pleasant | | TX | | — | | 1,785 | | 5,540 | | — | | — | | 1,785 | | 5,540 | | 7,325 | | 1,094 | | 1994 | | 2014 | | 15-39 | Madill | | OK | | — | | 1,395 | | 5,796 | | — | | — | | 1,395 | | 5,796 | | 7,191 | | 1,094 | | 1999 | | 2014 | | 15-39 | Madill | | OK | | — | | 2,657 | | 1,566 | | — | | 1,001 | | 2,657 | | 2,567 | | 5,224 | | 393 | | 1972 | | 2014 | | 15-39 | Madill | | OK | | — | | 621 | | 1,759 | | — | | — | | 621 | | 1,759 | | 2,380 | | 333 | | 1977 | | 2014 | | 15-39 | Willis Point | | TX | | — | | 3,102 | | 2,420 | | — | | — | | 3,102 | | 2,420 | | 5,522 | | 564 | | 2003 / 2008 | | 2014 | | 15-39 | Fitzgerald | | GA | | — | | 1,939 | | 3,316 | | — | | — | | 1,939 | | 3,316 | | 5,255 | | 709 | | 1997 | | 2014 | | 15-39 | Cordele | | GA | | — | | 2,705 | | 3,786 | | — | | — | | 2,705 | | 3,786 | | 6,491 | | 702 | | 2000 | | 2014 | | 15-39 | Kingston | | OK | | — | | 1,857 | | 1,692 | | — | | — | | 1,857 | | 1,692 | | 3,549 | | 375 | | 2013 | | 2014 | | 15-39 | Odessa | | TX | | — | | 529 | | 3,327 | | — | | — | | 529 | | 3,327 | | 3,856 | | 635 | | 2012 | | 2015 | | 15-39 | Columbia | | MD | | — | | 667 | | 9,220 | | — | | — | | 667 | | 9,220 | | 9,887 | | 1,578 | | 1984 | | 2015 | | 15-39 | Menomonee Falls | | WI | | — | | 1,378 | | 18,557 | | — | | — | | 1,378 | | 18,557 | | 19,935 | | 3,043 | | 2001 | | 2015 | | 15-39 | Elk River | | MN | | — | | 763 | | 4,937 | | — | | — | | 763 | | 4,937 | | 5,700 | | 959 | | 2008 | | 2015 | | 15-39 | Sanford | | FL | | — | | 2,075 | | 7,600 | | — | | — | | 2,075 | | 7,600 | | 9,675 | | 1,321 | | 2002 | | 2015 | | 15-39 | Columbus | | GA | | — | | 615 | | 9,942 | | — | | — | | 615 | | 9,942 | | 10,557 | | 1,516 | | 1907 | | 2015 | | 15-39 | Ephrata | | PA | | — | | 531 | | 6,995 | | — | | — | | 531 | | 6,995 | | 7,526 | | 1,584 | | 2000 | | 2015 | | 15-39 | Greer | | SC | | — | | 607 | | 2,502 | | — | | — | | 607 | | 2,502 | | 3,109 | | 472 | | 1978 | | 2015 | | 15-39 | Joplin | | MO | | — | | 831 | | 9,600 | | — | | — | | 831 | | 9,600 | | 10,431 | | 1,593 | | 1993 | | 2015 | | 15-39 | Katy | | TX | | — | | 1,493 | | 3,883 | | — | | — | | 1,493 | | 3,883 | | 5,376 | | 718 | | 1996 | | 2015 | | 15-39 | Kinston | | NC | | — | | 1,017 | | 10,418 | | — | | 43 | | 1,017 | | 10,461 | | 11,478 | | 1,757 | | 1979 | | 2015 | | 15-39 | Euless | | TX | | — | | 1,487 | | 3,051 | | — | | — | | 1,487 | | 3,051 | | 4,538 | | 537 | | 1991 | | 2015 | | 15-39 | Jacksonville | | TX | | — | | 1,221 | | 3,316 | | — | | — | | 1,221 | | 3,316 | | 4,537 | | 531 | | 1974 | | 2015 | | 15-39 | Lima | | OH | | — | | 656 | | 21,645 | | — | | — | | 656 | | 21,645 | | 22,301 | | 3,185 | | 2009 | | 2015 | | 15-39 | Portage | | IN | | — | | 1,181 | | 13,130 | | — | | 13 | | 1,181 | | 13,143 | | 14,324 | | 2,333 | | 2001 | | 2016 | | 15-39 | Milpitas | | CA | | — | | 1,478 | | 8,164 | | — | | — | | 1,478 | | 8,164 | | 9,642 | | 973 | | 1982 | | 2016 | | 15-39 | St. Cloud | | MN | | — | | 565 | | 20,420 | | — | | — | | 565 | | 20,420 | | 20,985 | | 2,699 | | 1999 | | 2016 | | 15-39 | New Kensington | | PA | | — | | 907 | | 13,058 | | — | | — | | 907 | | 13,058 | | 13,965 | | 1,510 | | 2015 | | 2016 | | 15-39 | Denver | | CO | | — | | 1,105 | | 8,077 | | — | | 2,000 | | 1,105 | | 10,077 | | 11,182 | | 1,071 | | 1975 | | 2017 | | 15-39 | Denver | | CO | | — | | 252 | | 1,658 | | — | | — | | 252 | | 1,658 | | 1,910 | | 167 | | 1977 | | 2017 | | 15-39 | Germantown | | WI | | — | | 612 | | 2,062 | | — | | — | | 612 | | 2,062 | | 2,674 | | 208 | | 1989 | | 2017 | | 15-39 | Germantown | | WI | | — | | 575 | | 2,086 | | — | | — | | 575 | | 2,086 | | 2,661 | | 207 | | 2000 | | 2017 | | 15-39 |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Cary | | NC | | — | | 877 | | 3,295 | | — | | — | | 877 | | 3,295 | | 4,172 | | 130 | | 1982 | | 2019 | | 15-39 | Green Bay | | WI | | — | | 406 | | 7,032 | | — | | — | | 406 | | 7,032 | | 7,438 | | 705 | | 1989 | | 2017 | | 15-39 | Two Rivers | | WI | | — | | 445 | | 1,885 | | — | | 1,750 | | 445 | | 3,635 | | 4,080 | | 331 | | 1994 | | 2017 | | 15-39 | Little Chute | | WI | | — | | 342 | | 52,744 | | — | | 68 | | 342 | | 52,812 | | 53,154 | | 5,204 | | 2017 | | 2017 | | 7-39 | Las Vegas | | NV | | — | | 3,034 | | 11,857 | | — | | — | | 3,034 | | 11,857 | | 14,891 | | 1,042 | | 2015 | | 2017 | | 15-39 | Walker | | LA | | — | | 4,646 | | 30,310 | | — | | — | | 4,646 | | 30,310 | | 34,956 | | 2,891 | | 2017 | | 2017 | | 15-39 | Saxonburg | | PA | | — | | 1,048 | | 7,545 | | — | | 1 | | 1,048 | | 7,546 | | 8,594 | | 761 | | 2008 | | 2017 | | 15-39 | Butler | | PA | | — | | 1,885 | | 6,294 | | — | | — | | 1,885 | | 6,294 | | 8,179 | | 679 | | 1990 | | 2017 | | 15-39 | Story City | | IA | | — | | 5,700 | | 13,916 | | — | | 28 | | 5,700 | | 13,944 | | 19,644 | | 1,386 | | 1997 | | 2017 | | 15-39 | San Jose | | CA | | — | | 9,489 | | 18,617 | | — | | 1,358 | | 9,489 | | 19,975 | | 29,464 | | 1,937 | | 1983 | | 2017 | | 15-39 | Taunton | | MA | | — | | 3,157 | | 16,851 | | — | | — | | 3,157 | | 16,851 | | 20,008 | | 1,527 | | 1987 | | 2018 | | 15-39 | Knoxville | | TN | | — | | 447 | | 4,276 | | — | | — | | 447 | | 4,276 | | 4,723 | | 316 | | 1977 | | 2018 | | 15-39 | Elk Grove Village | | IL | | — | | 2,014 | | 3,686 | | — | | — | | 2,014 | | 3,686 | | 5,700 | | 301 | | 2014 | | 2018 | | 15-39 | Elgin | | IL | | — | | 3,265 | | 4,947 | | — | | — | | 3,265 | | 4,947 | | 8,212 | | 451 | | 1981 | | 2018 | | 15-39 | Lordstown | | OH | | — | | 1,028 | | 36,068 | | — | | — | | 1,028 | | 36,068 | | 37,096 | | 2,534 | | 2012 | | 2018 | | 15-39 | Perth Amboy | | NJ | | 19,947 | | 5,622 | | 35,420 | | — | | — | | 5,622 | | 35,420 | | 41,042 | | 2,353 | | 1933 | | 2018 | | 15-39 | Indianapolis | | IN | | — | | 840 | | 8,395 | | — | | — | | 840 | | 8,395 | | 9,235 | | 622 | | 1972 | | 2018 | | 15-39 | Hazelwood | | MO | | — | | 2,936 | | 7,565 | | — | | — | | 2,936 | | 7,565 | | 10,501 | | 563 | | 1966 | | 2018 | | 15-39 | Fridley | | MN | | — | | 273 | | 1,986 | | — | | — | | 273 | | 1,986 | | 2,259 | | 148 | | 1973 | | 2018 | | 15-39 | Burnsville | | MN | | — | | 207 | | 2,209 | | — | | — | | 207 | | 2,209 | | 2,416 | | 162 | | 1973 | | 2018 | | 15-39 | North Canton | | OH | | — | | 338 | | 8,263 | | — | | — | | 338 | | 8,263 | | 8,601 | | 543 | | 1988 | | 2018 | | 15-39 | Madison | | MS | | — | | 3,348 | | 11,997 | | — | | — | | 3,348 | | 11,997 | | 15,345 | | 750 | | 2003 | | 2018 | | 15-39 | Novi | | MI | | — | | 872 | | 8,274 | | — | | 4 | | 872 | | 8,278 | | 9,150 | | 485 | | 2018 | | 2018 | | 15-39 | Evansville | | IN | | — | | 253 | | 9,601 | | — | | — | | 253 | | 9,601 | | 9,854 | | 474 | | 1932 | | 2019 | | 15-39 | Greenfield | | IN | | — | | 2,828 | | 19,367 | | — | | 3,680 | | 2,828 | | 23,047 | | 25,875 | | 1,781 | | 2018 | | 2019 | | 15-39 | Beverly | | MA | | 47,945 | | 3,241 | | 65,532 | | — | | — | | 3,241 | | 65,532 | | 68,773 | | 3,110 | | 1984 | | 2019 | | 15-39 | Liverpool | | NY | | — | | 374 | | 6,032 | | — | | — | | 374 | | 6,032 | | 6,406 | | 279 | | 1985 | | 2019 | | 15-39 | Liverpool | | NY | | — | | 381 | | 3,527 | | — | | — | | 381 | | 3,527 | | 3,908 | | 168 | | 2001 | | 2019 | | 15-39 | Green Bay | | WI | | — | | 528 | | 9,785 | | — | | — | | 528 | | 9,785 | | 10,313 | | 381 | | 2000 | | 2019 | | 15-39 | Dallas | | TX | | — | | 3,854 | | 34,818 | | — | | — | | 3,854 | | 34,818 | | 38,672 | | 1,334 | | 2003 / 2017 | | 2019 | | 15-39 | Plano | | TX | | — | | 6,456 | | 37,093 | | — | | — | | 6,456 | | 37,093 | | 43,549 | | 1,351 | | 1983 / 1986 / 2016 | | 2019 | | 15-39 | Lecompton | | KS | | — | | 413 | | 33,211 | | — | | — | | 413 | | 33,211 | | 33,624 | | 1,273 | | 2012 | | 2019 | | 15-39 | Abbotsford | | BC | | — | | 25,372 | | 33,408 | | — | | — | | 25,372 | | 33,408 | | 58,780 | | 1,224 | | 2000 | | 2019 | | 15-39 | Streamwood | | IL | | — | | 4,705 | | 49,348 | | — | | — | | 4,705 | | 49,348 | | 54,053 | | 1,823 | | 1974 / 1985 / 1994 / 2012 | | 2019 | | 15-39 | Hoffman Estates | | IL | | — | | 10,107 | | 23,781 | | — | | — | | 10,107 | | 23,781 | | 33,888 | | 881 | | 1976 / 1998 | | 2019 | | 15-39 | Savage | | MD | | — | | 4,226 | | 20,582 | | — | | 700 | | 4,226 | | 21,282 | | 25,508 | | 816 | | 1985 | | 2019 | | 15-39 |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Irving | | TX | | — | | 11,411 | | 10,788 | | — | | — | | 11,411 | | 10,788 | | 22,199 | | 433 | | 1970 / 1980 | | 2019 | | 15-39 | Sherman | | TX | | — | | 1,023 | | 19,151 | | — | | — | | 1,023 | | 19,151 | | 20,174 | | 787 | | 1979 / 1992 | | 2019 | | 15-39 | Phoenix | | AZ | | — | | 5,687 | | 49,618 | | — | | — | | 5,687 | | 49,618 | | 55,305 | | 1,869 | | 1988 | | 2019 | | 15-39 | Chandler | | AZ | | — | | 5,858 | | 27,312 | | — | | — | | 5,858 | | 27,312 | | 33,170 | | 1,006 | | 2008 | | 2019 | | 15-39 | Prescott | | AZ | | — | | 663 | | 1,988 | | — | | — | | 663 | | 1,988 | | 2,651 | | 77 | | 2003 | | 2019 | | 15-39 | Forest Park | | OH | | — | | 1,874 | | 26,145 | | — | | — | | 1,874 | | 26,145 | | 28,019 | | 953 | | 2001 | | 2019 | | 15-39 | Omaha | | NE | | — | | 1,279 | | 16,158 | | — | | — | | 1,279 | | 16,158 | | 17,437 | | 592 | | 1965 | | 2019 | | 15-39 | Villa Rica | | GA | | — | | 1,525 | | 9,924 | | — | | — | | 1,525 | | 9,924 | | 11,449 | | 361 | | 1998 | | 2019 | | 15-39 | Ogden | | UT | | — | | 1,944 | | 11,882 | | — | | — | | 1,944 | | 11,882 | | 13,826 | | 465 | | 1989 / 2009 | | 2019 | | 15-39 | Woodland Hills | | CA | | — | | 30,453 | | 19,080 | | — | | — | | 30,453 | | 19,080 | | 49,533 | | 710 | | 1973 / 1983 / 2003 | | 2019 | | 15-39 | Visalia | | CA | | — | | 1,630 | | 23,196 | | — | | — | | 1,630 | | 23,196 | | 24,826 | | 856 | | 1985 / 1993 / 1997 | | 2019 | | 15-39 | Plymouth | | IN | | — | | 270 | | 10,792 | | — | | — | | 270 | | 10,792 | | 11,062 | | 413 | | 1985 / 1997 | | 2019 | | 15-39 | Edison | | NJ | | — | | 5,664 | | 13,793 | | — | | — | | 5,664 | | 13,793 | | 19,457 | | 529 | | 1982 | | 2019 | | 15-39 | Enid | | OK | | — | | 1,145 | | 32,075 | | — | | — | | 1,145 | | 32,075 | | 33,220 | | 1,170 | | 1997 / 2002 / 2006 | | 2019 | | 15-39 | Fresno | | CA | | — | | 2,971 | | 37,364 | | — | | — | | 2,971 | | 37,364 | | 40,335 | | 1,562 | | 1972 / 1993 | | 2019 | | 15-39 | Cedar Falls | | IA | | — | | 1,239 | | 10,403 | | — | | — | | 1,239 | | 10,403 | | 11,642 | | 419 | | 2019 | | 2019 | | 15-39 | Gainesville | | GA | | — | | 750 | | 5,373 | | — | | 5,137 | | 750 | | 10,510 | | 11,260 | | 168 | | 1998/2020 | | 2019 | | 15-39 | Lexington | | NC | | — | | 2,155 | | 3,002 | | — | | — | | 2,155 | | 3,002 | | 5,157 | | 4 | | 2017 | | 2020 | | 15-39 | Clayton | | NC | | — | | 733 | | 2,850 | | — | | — | | 733 | | 2,850 | | 3,583 | | 4 | | 2006 | | 2020 | | 15-39 | Grimesland | | NC | | — | | 538 | | 978 | | — | | — | | 538 | | 978 | | 1,516 | | 1 | | 1997 / 2001 | | 2020 | | 15-39 | Columbia | | SC | | — | | 380 | | 1,339 | | — | | — | | 380 | | 1,339 | | 1,719 | | 2 | | 2006 | | 2020 | | 15-39 | Summerville | | SC | | — | | 1,570 | | — | | — | | — | | 1,570 | | — | | 1,570 | | — | | 2001 | | 2020 | | 15-39 | Apopka | | FL | | — | | 944 | | 985 | | — | | — | | 944 | | 985 | | 1,929 | | 2 | | 1995 | | 2020 | | 15-39 | Fort Pierce | | FL | | — | | 305 | | 1,602 | | — | | — | | 305 | | 1,602 | | 1,907 | | 2 | | 1968 | | 2020 | | 15-39 | Houston | | TX | | — | | 3,300 | | 4,397 | | — | | — | | 3,300 | | 4,397 | | 7,697 | | 5 | | 1967 / 1995 / 2017 / 2020 | | 2020 | | 15-39 | Cold Spring | | MN | | — | | — | | 32,247 | | — | | — | | — | | 32,247 | | 32,247 | | 36 | | 2020 | | 2020 | | 15-39 | Langhorne | | PA | | — | | 2,204 | | 5,323 | | — | | — | | 2,204 | | 5,323 | | 7,527 | | 6 | | 1980 / 1997 / 2016 | | 2020 | | 15-39 | Healthcare Properties: | | | | | | | | | | | | | | | | | | | | | | | Houston | | TX | | — | | 598 | | 3,388 | | — | | — | | 598 | | 3,388 | | 3,986 | | 1,147 | | 1980 | | 2008 | | 15-39 | Machesney Park | | IL | | — | | 218 | | 1,237 | | — | | — | | 218 | | 1,237 | | 1,455 | | 483 | | 1996 | | 2008 | | 15-39 | Memphis | | TN | | — | | 530 | | 2,722 | | — | | — | | 530 | | 2,722 | | 3,252 | | 975 | | 1993 | | 2009 | | 15-39 | Greece | | NY | | — | | 1,391 | | 30,442 | | — | | 2,823 | | 1,391 | | 33,265 | | 34,656 | | 9,226 | | 2011 | | 2010 | | 7-39 | Tampa | | FL | | — | | 580 | | 3,304 | | — | | — | | 580 | | 3,304 | | 3,884 | | 960 | | 2002 | | 2011 | | 15-39 | Tampa | | FL | | — | | 790 | | 4,021 | | — | | — | | 790 | | 4,021 | | 4,811 | | 1,133 | | 1985 | | 2011 | | 15-39 | Wesley Chapel | | FL | | — | | 340 | | 2,862 | | — | | — | | 340 | | 2,862 | | 3,202 | | 815 | | 2008 | | 2011 | | 15-39 | Brandon | | FL | | — | | 292 | | 1,961 | | — | | — | | 292 | | 1,961 | | 2,253 | | 552 | | 1998 | | 2011 | | 15-39 |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Knoxville | | TN | | — | | 744 | | 2,246 | | — | | — | | 744 | | 2,246 | | 2,990 | | 727 | | 1975 | | 2011 | | 15-39 | McAlester | | OK | | — | | 413 | | 1,669 | | — | | — | | 413 | | 1,669 | | 2,082 | | 399 | | 2012 | | 2012 | | 15-39 | Melbourne | | FL | | — | | 3,320 | | 13,281 | | — | | — | | 3,320 | | 13,281 | | 16,601 | | 3,303 | | 1993 | | 2012 | | 15-39 | Melbourne | | FL | | — | | 809 | | 3,235 | | — | | — | | 809 | | 3,235 | | 4,044 | | 899 | | 1998 | | 2012 | | 15-39 | Sarasota | | FL | | — | | 752 | | 3,969 | | — | | 335 | | 752 | | 4,304 | | 5,056 | | 934 | | 2002 | | 2013 | | 15-39 | Englewood | | FL | | — | | 207 | | 679 | | — | | — | | 207 | | 679 | | 886 | | 156 | | 1985 | | 2013 | | 15-39 | Brookfield | | WI | | — | | 338 | | 4,603 | | — | | — | | 338 | | 4,603 | | 4,941 | | 1,040 | | 2005 | | 2013 | | 15-39 | Waukesha | | WI | | — | | 302 | | 11,218 | | — | | — | | 302 | | 11,218 | | 11,520 | | 2,337 | | 2005 | | 2013 | | 15-39 | Plainfield | | IL | | — | | 128 | | 7,843 | | 702 | | 1,489 | | 830 | | 9,332 | | 10,162 | | 1,799 | | 2012 | | 2013 | | 15-39 | Greenfield | | WI | | — | | 212 | | 7,163 | | — | | — | | 212 | | 7,163 | | 7,375 | | 1,487 | | 2011 | | 2013 | | 15-39 | Brookfield | | WI | | — | | 331 | | 7,542 | | — | | — | | 331 | | 7,542 | | 7,873 | | 1,618 | | 2008 | | 2013 | | 15-39 | Goodyear | | AZ | | — | | 558 | | 3,529 | | — | | — | | 558 | | 3,529 | | 4,087 | | 743 | | 2013 | | 2013 | | 15-39 | Richmond | | VA | | — | | 348 | | 2,986 | | — | | — | | 348 | | 2,986 | | 3,334 | | 584 | | 2011 | | 2013 | | 15-39 | Montgomery | | AL | | — | | 94 | | 1,303 | | — | | — | | 94 | | 1,303 | | 1,397 | | 297 | | 2013 | | 2013 | | 15-39 | Kingwood | | TX | | — | | 253 | | 5,236 | | — | | — | | 253 | | 5,236 | | 5,489 | | 919 | | 2009 | | 2014 | | 15-39 | Lubbock | | TX | | — | | 1,616 | | 6,195 | | — | | 135 | | 1,616 | | 6,330 | | 7,946 | | 1,117 | | 2001 | | 2014 | | 15-39 | Russellville | | AR | | — | | 1,232 | | 4,752 | | — | | — | | 1,232 | | 4,752 | | 5,984 | | 969 | | 2010 | | 2014 | | 15-39 | Little Rock | | AR | | — | | 1,866 | | 5,294 | | — | | — | | 1,866 | | 5,294 | | 7,160 | | 1,109 | | 2012 | | 2014 | | 15-39 | Conway | | AR | | — | | 1,522 | | 3,579 | | — | | 5,624 | | 1,522 | | 9,203 | | 10,725 | | 1,328 | | 2007 | | 2014 | | 15-39 | Hudsonville | | MI | | — | | 199 | | 3,631 | | — | | — | | 199 | | 3,631 | | 3,830 | | 584 | | 2007 | | 2015 | | 15-39 | Franklin | | TN | | — | | 766 | | 3,728 | | — | | — | | 766 | | 3,728 | | 4,494 | | 684 | | 2005 | | 2015 | | 15-39 | Elk Grove Village | | IL | | — | | 252 | | 2,933 | | — | | — | | 252 | | 2,933 | | 3,185 | | 475 | | 1985 | | 2015 | | 15-39 | Virginia Beach | | VA | | — | | 827 | | 3,310 | | — | | — | | 827 | | 3,310 | | 4,137 | | 461 | | 2008 | | 2016 | | 15-39 | Tampa | | FL | | — | | 42 | | 6,945 | | — | | — | | 42 | | 6,945 | | 6,987 | | 735 | | 1999 | | 2016 | | 39 | Tampa | | FL | | — | | 8 | | 732 | | — | | — | | 8 | | 732 | | 740 | | 77 | | 1999 | | 2016 | | 39 | Tampa | | FL | | — | | 33 | | 2,094 | | — | | — | | 33 | | 2,094 | | 2,127 | | 221 | | 2013 | | 2016 | | 39 | Houston | | TX | | — | | 405 | | 2,586 | | — | | — | | 405 | | 2,586 | | 2,991 | | 294 | | 2002 | | 2016 | | 15-39 | Mt. Dora | | FL | | — | | 1,338 | | 4,788 | | — | | — | | 1,338 | | 4,788 | | 6,126 | | 747 | | 1988 | | 2015 | | 15-39 | Mt. Dora | | FL | | — | | 477 | | 691 | | — | | — | | 477 | | 691 | | 1,168 | | 142 | | 1987 | | 2015 | | 15-39 | Summerfield | | FL | | — | | 295 | | 2,146 | | — | | — | | 295 | | 2,146 | | 2,441 | | 336 | | 2000 | | 2015 | | 15-39 | Summerfield | | FL | | — | | 362 | | 2,632 | | — | | — | | 362 | | 2,632 | | 2,994 | | 412 | | 2008 | | 2015 | | 15-39 | Leesburg | | FL | | — | | 402 | | 1,869 | | — | | — | | 402 | | 1,869 | | 2,271 | | 312 | | 1994 | | 2015 | | 15-39 | Tempe | | AZ | | — | | 1,181 | | 14,580 | | — | | — | | 1,181 | | 14,580 | | 15,761 | | 2,372 | | 2006 | | 2015 | | 15-39 | Lincoln | | NE | | — | | 1,300 | | 13,163 | | — | | — | | 1,300 | | 13,163 | | 14,463 | | 2,046 | | 1973 | | 2015 | | 15-39 | North Little Rock | | AR | | — | | 532 | | 51,843 | | — | | — | | 532 | | 51,843 | | 52,375 | | 7,202 | | 2005 | | 2015 | | 15-39 | Worthington | | OH | | — | | 264 | | 12,053 | | — | | — | | 264 | | 12,053 | | 12,317 | | 1,546 | | 1979 | | 2016 | | 15-39 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Initial Costs to
Company(A) | | | Costs Capitalized
Subsequent to
Acquisition | | | Gross Amount at Which Carried at
Close of Period | | | | | | | | | | | | | | | | | | | | | | Buildings and
Improvements | | | | | | | | | | | | Buildings and
Improvements | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | — | | | $ | 111,511 | | | $ | 487,861 | | | $ | — | | | $ | 9,087 | | | $ | 111,511 | | | $ | 496,948 | | | $ | 608,459 | | | $ | 59,597 | | | | 1932-2021 | | | | 2011-2021 | | | | | | | | | 7,500 | | | | 95,356 | | | | 565,182 | | | | 4,511 | | | | 1,834 | | | | 99,867 | | | | 567,016 | | | | 666,883 | | | | 50,798 | | | | 1929-2021 | | | | 2012-2021 | | | | | | | | | 6,249 | | | | 24,668 | | | | 264,695 | | | | — | | | | 2,700 | | | | 24,668 | | | | 267,395 | | | | 292,063 | | | | 27,827 | | | | 1907-2020 | | | | 2012-2021 | | | | | | | | | 46,760 | | | | 57,118 | | | | 155,150 | | | | — | | | | 4 | | | | 57,118 | | | | 155,154 | | | | 212,272 | | | | 18,130 | | | | 1982-2018 | | | | 2013-2019 | | | | | | | | | 19,557 | | | | 11,638 | | | | 154,542 | | | | — | | | | 68 | | | | 11,638 | | | | 154,610 | | | | 166,248 | | | | 17,375 | | | | 1933-2017 | | | | 2017-2018 | | | | | | | | | — | | | | 51,531 | | | | 40,327 | | | | — | | | | 3,680 | | | | 51,531 | | | | 44,007 | | | | 95,538 | | | | 4,156 | | | | 1960-2020 | | | | 2013-2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 31,837 | | | | 273,566 | | | | 557 | | | | 10,182 | | | | 32,394 | | | | 283,748 | | | | 316,142 | | | | 47,300 | | | | 1970-2018 | | | | 2010-2021 | | | | | | | | | — | | | | 21,160 | | | | 137,863 | | | | (145 | ) | | | 508 | | | | 21,015 | | | | 138,371 | | | | 159,386 | | | | 9,900 | | | | 1982-2020 | | | | 2009-2021 | | | | | | | | | — | | | | 15,943 | | | | 111,107 | | | | — | | | | (635 | ) | | | 15,943 | | | | 110,472 | | | | 126,415 | | | | 11,404 | | | | 1954-2017 | | | | 2015-2021 | | | | | | | | | — | | | | 9,942 | | | | 117,006 | | | | 290 | | | | 135 | | | | 10,232 | | | | 117,141 | | | | 127,373 | | | | 16,401 | | | | 1984-2011 | | | | 2014-2021 | | | | | | | | | — | | | | 10,306 | | | | 78,056 | | | | — | | | | 1,212 | | | | 10,306 | | | | 79,268 | | | | 89,574 | | | | 12,550 | | | | 1965-2016 | | | | 2011-2018 | | | | | | | | | — | | | | 251 | | | | 3,821 | | | | — | | | | 1 | | | | 251 | | | | 3,822 | | | | 4,073 | | | | 343 | | | | 2006 | | | | 2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Quick Service Restaurants | | | — | | | | 49,683 | | | | 239,382 | | | | 197 | | | | 3,650 | | | | 49,880 | | | | 243,032 | | | | 292,912 | | | | 42,108 | | | | 1965-2020 | | | | 2009-2020 | | | | | | | | | — | | | | 36,120 | | | | 222,836 | | | | — | | | | 12 | | | | 36,120 | | | | 222,848 | | | | 258,968 | | | | 34,062 | | | | 1972-2014 | | | | 2011-2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | �� | | | | | | | | | | | | | | | | | | | | 17,094 | | | | 61,833 | | | | 198,862 | | | | — | | | | 17 | | | | 61,833 | | | | 198,879 | | | | 260,712 | | | | 11,839 | | | | 2003-2019 | | | | 2016-2021 | | | | | | | | | — | | | | 32,460 | | | | 121,643 | | | | — | | | | 18 | | | | 32,460 | | | | 121,661 | | | | 154,121 | | | | 17,629 | | | | 1909-2019 | | | | 2014-2021 | | | | | | | | | — | | | | 3,625 | | | | 90,644 | | | | — | | | | 5 | | | | 3,625 | | | | 90,649 | | | | 94,274 | | | | 11,548 | | | | 1974-2014 | | | | 2017-2018 | | | | | | | | | — | | | | 63 | | | | 2,152 | | | | — | | | | — | | | | 63 | | | | 2,152 | | | | 2,215 | | | | 83 | | | | 1991 | | | | 2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 13,027 | | | | 95,721 | | | | — | | | | 1,810 | | | | 13,027 | | | | 97,531 | | | | 110,558 | | | | 10,836 | | | | 1965-2008 | | | | 2012-2021 | | | | | | | | | — | | | | 7,723 | | | | 90,130 | | | | — | | | | 8,858 | | | | 7,723 | | | | 98,988 | | | | 106,711 | | | | 14,577 | | | | 1984-2012 | | | | 2016-2017 | | | | | | | | | — | | | | 4,169 | | | | 45,814 | | | | — | | | | 10,228 | | | | 4,169 | | | | 56,042 | | | | 60,211 | | | | 11,678 | | | | 1979-2001 | | | | 2010-2019 | | | | | | Acquisitions in Process (C) | | | — | | | | — | | | | 83 | | | | — | | | | — | | | | — | | | | 83 | | | | 83 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 97,160 | | | | 649,964 | | | | 3,496,443 | | | | 5,410 | | | | 53,374 | | | | 655,374 | | | | 3,549,817 | | | | 4,205,191 | | | | 430,141 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Carmel | | IN | | — | | 243 | | 3,519 | | — | | — | | 243 | | 3,519 | | 3,762 | | 604 | | 2006 | | 2016 | | 15-39 | Copley | | OH | | — | | 104 | | 6,359 | | — | | — | | 104 | | 6,359 | | 6,463 | | 602 | | 1996 | | 2017 | | 15-39 | Cleveland | | OH | | — | | 323 | | 2,744 | | — | | — | | 323 | | 2,744 | | 3,067 | | 285 | | 2007 | | 2017 | | 15-39 | Girard | | OH | | — | | 75 | | 1,107 | | — | | — | | 75 | | 1,107 | | 1,182 | | 137 | | 2003 | | 2017 | | 15-39 | Moraine (Dayton) | | OH | | — | | 336 | | 3,654 | | — | | 2 | | 336 | | 3,656 | | 3,992 | | 354 | | 2017 | | 2017 | | 15-39 | Commerce Township | | MI | | — | | 412 | | 1,935 | | — | | 2 | | 412 | | 1,937 | | 2,349 | | 209 | | 2007 | | 2017 | | 15-39 | Modesto | | CA | | — | | 689 | | 19,200 | | — | | — | | 689 | | 19,200 | | 19,889 | | 2,258 | | 1984 | | 2016 | | 15-39 | Modesto | | CA | | — | | 300 | | 4,273 | | — | | — | | 300 | | 4,273 | | 4,573 | | 525 | | 1984 | | 2016 | | 15-39 | Clinton Township | | MI | | — | | 396 | | 6,694 | | — | | 35 | | 396 | | 6,729 | | 7,125 | | 733 | | 2016 | | 2017 | | 15-39 | Westland | | MI | | — | | 394 | | 6,106 | | — | | 29 | | 394 | | 6,135 | | 6,529 | | 640 | | 1994 | | 2017 | | 15-39 | Lenoir | | NC | | — | | 150 | | 3,622 | | — | | — | | 150 | | 3,622 | | 3,772 | | 372 | | 2010 | | 2017 | | 15-39 | Morganton | | NC | | — | | 164 | | 3,010 | | — | | — | | 164 | | 3,010 | | 3,174 | | 313 | | 2000 | | 2017 | | 15-39 | Rutherford College | | NC | | — | | 130 | | 2,692 | | — | | — | | 130 | | 2,692 | | 2,822 | | 280 | | 2007 | | 2017 | | 15-39 | Hickory | | NC | | — | | 473 | | 4,991 | | — | | — | | 473 | | 4,991 | | 5,464 | | 545 | | 2000 | | 2017 | | 15-39 | Newton | | NC | | — | | 195 | | 1,085 | | — | | — | | 195 | | 1,085 | | 1,280 | | 125 | | 1994 | | 2017 | | 15-39 | Newton | | NC | | — | | 101 | | 458 | | — | | — | | 101 | | 458 | | 559 | | 50 | | 1998 | | 2017 | | 15-39 | Wilson | | NC | | — | | 547 | | 6,214 | | — | | 51 | | 547 | | 6,265 | | 6,812 | | 656 | | 1993 | | 2017 | | 15-39 | Overland Park | | KS | | — | | 456 | | 3,789 | | — | | — | | 456 | | 3,789 | | 4,245 | | 360 | | 2006 | | 2017 | | 15-39 | Overland Park | | KS | | — | | 205 | | 8,045 | | — | | — | | 205 | | 8,045 | | 8,250 | | 705 | | 2016 | | 2017 | | 15-39 | Overland Park | | KS | | — | | 571 | | 3,715 | | — | | — | | 571 | | 3,715 | | 4,286 | | 425 | | 1965 | | 2017 | | 15-39 | Crestview Hills | | KY | | 4,769 | | 192 | | 8,342 | | — | | — | | 192 | | 8,342 | | 8,534 | | 739 | | 2005 | | 2017 | | 15-39 | Mesa | | AZ | | — | | 785 | | 5,034 | | — | | — | | 785 | | 5,034 | | 5,819 | | 450 | | 1998 | | 2017 | | 15-39 | Albuquerque | | NM | | — | | 987 | | 11,357 | | — | | 34 | | 987 | | 11,391 | | 12,378 | | 961 | | 1996 | | 2017 | | 15-39 | Indianapolis | | IN | | — | | 1,086 | | 18,551 | | — | | 1,212 | | 1,086 | | 19,763 | | 20,849 | | 1,848 | | 1995 | | 2017 | | 15-39 | Pittsburg | | KS | | — | | 103 | | 2,264 | | — | | — | | 103 | | 2,264 | | 2,367 | | 195 | | 2016 | | 2017 | | 15-39 | Prairieville | | LA | | — | | 369 | | 3,275 | | — | | — | | 369 | | 3,275 | | 3,644 | | 285 | | 2016 | | 2017 | | 15-39 | Charlotte | | NC | | — | | 825 | | 4,969 | | — | | 14 | | 825 | | 4,983 | | 5,808 | | 420 | | 1989 | | 2017 | | 15-39 | Tulsa | | OK | | — | | 734 | | 3,143 | | — | | — | | 734 | | 3,143 | | 3,877 | | 270 | | 2016 | | 2017 | | 15-39 | Rhinelander | | WI | | — | | 55 | | 1,689 | | — | | — | | 55 | | 1,689 | | 1,744 | | 154 | | 2013 | | 2017 | | 15-39 | Charlotte | | NC | | — | | 534 | | 1,101 | | — | | — | | 534 | | 1,101 | | 1,635 | | 119 | | 1999 | | 2017 | | 15-39 | Tampa | | FL | | — | | 3,954 | | 10,732 | | — | | — | | 3,954 | | 10,732 | | 14,686 | | 824 | | 1984 | | 2018 | | 15-39 | Zionsville | | IN | | — | | 591 | | 4,243 | | — | | — | | 591 | | 4,243 | | 4,834 | | 270 | | 2016 | | 2018 | | 15-39 | Noblesville | | IN | | — | | — | | 6,216 | | — | | — | | — | | 6,216 | | 6,216 | | 352 | | 2017 | | 2018 | | 15-39 | Spencer | | IN | | — | | 268 | | 4,048 | | — | | — | | 268 | | 4,048 | | 4,316 | | 244 | | 2018 | | 2019 | | 15-39 | Indianapolis | | IN | | — | | 578 | | 3,966 | | — | | — | | 578 | | 3,966 | | 4,544 | | 14 | | 2003 | | 2020 | | 15-39 | Warren | | MI | | — | | 110 | | 1,604 | | — | | 1 | | 110 | | 1,605 | | 1,715 | | 98 | | 1998 | | 2018 | | 15-39 |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Tullahoma | | TN | | — | | 114 | | 3,674 | | — | | — | | 114 | | 3,674 | | 3,788 | | 232 | | 2003 | | 2018 | | 15-39 | Brandon | | FL | | — | | 475 | | 2,438 | | — | | (1) | | 475 | | 2,437 | | 2,912 | | 142 | | 2008 | | 2018 | | 15-39 | Atlanta | | GA | | — | | 2,397 | | 12,271 | | — | | — | | 2,397 | | 12,271 | | 14,668 | | 685 | | 1999 | | 2018 | | 15-39 | Northfield | | IL | | — | | 548 | | 4,184 | | — | | (1) | | 548 | | 4,183 | | 4,731 | | 222 | | 1964 | | 2018 | | 15-39 | Ann Arbor | | MI | | — | | 209 | | 562 | | — | | (1) | | 209 | | 561 | | 770 | | 38 | | 1954 | | 2018 | | 15-39 | Southfield | | MI | | — | | 1,013 | | 14,967 | | — | | — | | 1,013 | | 14,967 | | 15,980 | | 809 | | 2004 | | 2018 | | 15-39 | Clearwater | | FL | | — | | 819 | | 961 | | — | | (1) | | 819 | | 960 | | 1,779 | | 57 | | 1977 | | 2018 | | 15-39 | Arlington | | TX | | — | | 1,931 | | 15,873 | | — | | 3 | | 1,931 | | 15,876 | | 17,807 | | 890 | | 2015 | | 2018 | | 15-39 | Naperville | | IL | | — | | 711 | | 5,349 | | — | | — | | 711 | | 5,349 | | 6,060 | | 307 | | 2005 | | 2018 | | 15-39 | Yorkville | | IL | | — | | 234 | | 4,003 | | — | | 1 | | 234 | | 4,004 | | 4,238 | | 221 | | 2000 | | 2018 | | 15-39 | Yorkville | | IL | | — | | 260 | | 1,944 | | — | | — | | 260 | | 1,944 | | 2,204 | | 116 | | 2006 | | 2018 | | 15-39 | Sycamore | | IL | | — | | 152 | | 3,621 | | — | | — | | 152 | | 3,621 | | 3,773 | | 216 | | 1999 | | 2018 | | 15-39 | Sycamore | | IL | | — | | 13 | | 282 | | — | | — | | 13 | | 282 | | 295 | | 15 | | 1999 | | 2018 | | 15-39 | Sandwich | | IL | | — | | 315 | | 4,876 | | — | | — | | 315 | | 4,876 | | 5,191 | | 298 | | 1995 | | 2018 | | 15-39 | Olympia Fields | | IL | | — | | 565 | | 5,698 | | — | | 1 | | 565 | | 5,699 | | 6,264 | | 334 | | 2007 | | 2018 | | 15-39 | Shelby | | NC | | — | | 124 | | 2,217 | | — | | 16 | | 124 | | 2,233 | | 2,357 | | 122 | | 2006 | | 2018 | | 15-39 | Lacey | | WA | | — | | 2,441 | | 15,769 | | — | | (25) | | 2,441 | | 15,744 | | 18,185 | | 876 | | 2004 | | 2018 | | 15-39 | Aberdeen | | WA | | — | | 899 | | 4,482 | | — | | — | | 899 | | 4,482 | | 5,381 | | 256 | | 2007 | | 2018 | | 15-39 | Bremerton | | WA | | — | | 140 | | 3,154 | | — | | 1 | | 140 | | 3,155 | | 3,295 | | 174 | | 1999 | | 2018 | | 15-39 | Spartanburg | | SC | | — | | 251 | | 3,821 | | — | | 1 | | 251 | | 3,822 | | 4,073 | | 230 | | 2006 | | 2018 | | 15-39 | Newport News | | VA | | — | | 831 | | 3,977 | | — | | 13 | | 831 | | 3,990 | | 4,821 | | 236 | | 2004 | | 2018 | | 15-39 | Newport News | | VA | | — | | 587 | | 3,466 | | — | | — | | 587 | | 3,466 | | 4,053 | | 199 | | 2006 | | 2018 | | 15-39 | Hanover | | PA | | — | | 80 | | 3,752 | | — | | — | | 80 | | 3,752 | | 3,832 | | 210 | | 2003 | | 2018 | | 15-39 | Roanoke | | VA | | — | | 267 | | 3,027 | | — | | 1 | | 267 | | 3,028 | | 3,295 | | 169 | | 1990 | | 2018 | | 15-39 | Wayland | | MI | | — | | 373 | | 2,592 | | — | | — | | 373 | | 2,592 | | 2,965 | | 153 | | 1999 | | 2018 | | 15-39 | Johnson City | | NY | | — | | 357 | | 4,934 | | — | | 1 | | 357 | | 4,935 | | 5,292 | | 268 | | 1970 | | 2018 | | 15-39 | Bradenton | | FL | | — | | 547 | | 5,055 | | — | | 2 | | 547 | | 5,057 | | 5,604 | | 293 | | 1984 | | 2018 | | 15-39 | Bradenton | | FL | | — | | 292 | | 2,085 | | — | | — | | 292 | | 2,085 | | 2,377 | | 121 | | 1982 | | 2018 | | 15-39 | Bradenton | | FL | | — | | 112 | | 1,167 | | — | | — | | 112 | | 1,167 | | 1,279 | | 66 | | 1982 | | 2018 | | 15-39 | Bradenton | | FL | | — | | 274 | | 1,589 | | — | | — | | 274 | | 1,589 | | 1,863 | | 93 | | 1995 | | 2018 | | 15-39 | Ruskin | | FL | | — | | 203 | | 1,526 | | — | | — | | 203 | | 1,526 | | 1,729 | | 85 | | 2004 | | 2018 | | 15-39 | Hibbing | | MN | | — | | 799 | | 3,176 | | — | | — | | 799 | | 3,176 | | 3,975 | | 135 | | 1999 | | 2019 | | 15-39 | Duluth | | MN | | — | | 241 | | 2,195 | | — | | 17 | | 241 | | 2,212 | | 2,453 | | 84 | | 2003 | | 2019 | | 15-39 | Minot | | ND | | — | | 1,152 | | 8,796 | | — | | — | | 1,152 | | 8,796 | | 9,948 | | 343 | | 2011 | | 2019 | | 15-39 | Billings | | MT | | — | | 702 | | 4,368 | | — | | — | | 702 | | 4,368 | | 5,070 | | 173 | | 2001 | | 2019 | | 15-39 | Missoula | | MT | | — | | 1,395 | | 3,870 | | — | | — | | 1,395 | | 3,870 | | 5,265 | | 152 | | 2001 | | 2019 | | 15-39 |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | New Orleans | | LA | | — | | 1,804 | | 3,461 | | — | | — | | 1,804 | | 3,461 | | 5,265 | | 115 | | 2013 | | 2019 | | 15-39 | Restaurant Properties: | | | | | | | | | | | | | | | | | | | | | | | Jacksonville | | FL | | — | | 223 | | 1,262 | | — | | — | | 223 | | 1,262 | | 1,485 | | 580 | | 1987 | | 2007 | | 15-39 | Katy | | TX | | — | | 500 | | 648 | | — | | — | | 500 | | 648 | | 1,148 | | 244 | | 1995 | | 2009 | | 15-39 | La Porte | | TX | | — | | 250 | | 1,151 | | — | | — | | 250 | | 1,151 | | 1,401 | | 415 | | 1996 | | 2009 | | 15-39 | Rowlett | | TX | | — | | 350 | | 776 | | — | | — | | 350 | | 776 | | 1,126 | | 299 | | 1997 | | 2009 | | 15-39 | Norman | | OK | | — | | 280 | | 1,049 | | — | | — | | 280 | | 1,049 | | 1,329 | | 348 | | 1991 | | 2009 | | 15-39 | Oklahoma City | | OK | | — | | 540 | | 517 | | — | | — | | 540 | | 517 | | 1,057 | | 225 | | 2001 | | 2009 | | 15-39 | Ashland City | | TN | | — | | 59 | | 973 | | — | | — | | 59 | | 973 | | 1,032 | | 119 | | 1992 | | 2016 | | 15-39 | Cadiz | | KY | | — | | 77 | | 1,048 | | — | | — | | 77 | | 1,048 | | 1,125 | | 132 | | 1992 | | 2016 | | 15-39 | Centerville | | TN | | — | | 68 | | 965 | | — | | — | | 68 | | 965 | | 1,033 | | 127 | | 2006 | | 2016 | | 15-39 | Kingston Springs | | TN | | — | | 92 | | 978 | | — | | — | | 92 | | 978 | | 1,070 | | 133 | | 1998 | | 2016 | | 15-39 | Mount Juliet | | TN | | — | | 76 | | 995 | | — | | — | | 76 | | 995 | | 1,071 | | 128 | | 1994 | | 2016 | | 15-39 | White House | | TN | | — | | 105 | | 927 | | — | | — | | 105 | | 927 | | 1,032 | | 128 | | 2003 | | 2016 | | 15-39 | Mountain Home | | AR | | — | | 338 | | 1,016 | | — | | — | | 338 | | 1,016 | | 1,354 | | 335 | | 1988 | | 2010 | | 15-39 | Batesville | | AR | | — | | 214 | | 1,055 | | — | | — | | 214 | | 1,055 | | 1,269 | | 364 | | 1988 | | 2010 | | 15-39 | Paragould | | AR | | — | | 187 | | 1,444 | | — | | — | | 187 | | 1,444 | | 1,631 | | 435 | | 1990 | | 2010 | | 15-39 | Forrest City | | AR | | — | | 84 | | 941 | | — | | — | | 84 | | 941 | | 1,025 | | 326 | | 1989 | | 2010 | | 15-39 | Dyersburg | | TN | | — | | 276 | | 1,250 | | — | | — | | 276 | | 1,250 | | 1,526 | | 393 | | 1989 | | 2010 | | 15-39 | Martin | | TN | | — | | 152 | | 858 | | — | | — | | 152 | | 858 | | 1,010 | | 301 | | 1999 | | 2010 | | 15-39 | Union City | | TN | | — | | 72 | | 806 | | — | | — | | 72 | | 806 | | 878 | | 270 | | 1988 | | 2010 | | 15-39 | Mankato | | MN | | — | | 712 | | 2,136 | | — | | — | | 712 | | 2,136 | | 2,848 | | 625 | | 1994 | | 2011 | | 15-39 | Saint Paul | | MN | | — | | 606 | | 1,817 | | — | | — | | 606 | | 1,817 | | 2,423 | | 562 | | 1994 | | 2011 | | 15-39 | Jackson | | TN | | — | | 204 | | 1,154 | | — | | — | | 204 | | 1,154 | | 1,358 | | 324 | | 1999 | | 2011 | | 15-39 | Henderson | | TN | | — | | 141 | | 800 | | — | | — | | 141 | | 800 | | 941 | | 216 | | 1986 | | 2012 | | 15-39 | Lexington | | TN | | — | | 150 | | 848 | | — | | — | | 150 | | 848 | | 998 | | 231 | | 1995 | | 2012 | | 15-39 | Humboldt | | TN | | — | | 118 | | 669 | | — | | — | | 118 | | 669 | | 787 | | 202 | | 1993 | | 2012 | | 15-39 | Cocoa Beach | | FL | | — | | 283 | | 848 | | — | | — | | 283 | | 848 | | 1,131 | | 224 | | 1992 | | 2012 | | 15-39 | Lake Mary | | FL | | — | | 422 | | 1,265 | | — | | — | | 422 | | 1,265 | | 1,687 | | 313 | | 1989 | | 2012 | | 15-39 | New Smyrna Beach | | FL | | — | | 382 | | 1,146 | | — | | — | | 382 | | 1,146 | | 1,528 | | 353 | | 2008 | | 2012 | | 15-39 | Orlando | | FL | | — | | 351 | | 1,052 | | — | | — | | 351 | | 1,052 | | 1,403 | | 275 | | 1990 | | 2012 | | 15-39 | Orlando | | FL | | — | | 219 | | 656 | | — | | — | | 219 | | 656 | | 875 | | 198 | | 1996 | | 2012 | | 15-39 | Savannah | | GA | | — | | 390 | | 1,170 | | — | | — | | 390 | | 1,170 | | 1,560 | | 311 | | 2009 | | 2012 | | 15-39 | Savannah | | GA | | — | | 376 | | 1,129 | | — | | — | | 376 | | 1,129 | | 1,505 | | 292 | | 2009 | | 2012 | | 15-39 | Hinesville | | GA | | — | | 402 | | 1,207 | | — | | — | | 402 | | 1,207 | | 1,609 | | 338 | | 2008 | | 2012 | | 15-39 | Princeton | | WV | | — | | 269 | | 1,524 | | — | | — | | 269 | | 1,524 | | 1,793 | | 375 | | 1976 | | 2012 | | 15-39 |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Princeton | | WV | | — | | 301 | | 1,703 | | — | | — | | 301 | | 1,703 | | 2,004 | | 416 | | 1991 | | 2012 | | 15-39 | Marietta | | OH | | — | | 246 | | 1,395 | | — | | — | | 246 | | 1,395 | | 1,641 | | 333 | | 2007 | | 2012 | | 15-39 | Pomeroy | | OH | | — | | 208 | | 1,178 | | — | | — | | 208 | | 1,178 | | 1,386 | | 305 | | 1997 | | 2012 | | 15-39 | Elkins | | WV | | — | | 452 | | 1,355 | | — | | — | | 452 | | 1,355 | | 1,807 | | 332 | | 1980 | | 2012 | | 15-39 | State College | | PA | | — | | 365 | | 1,461 | | — | | — | | 365 | | 1,461 | | 1,826 | | 345 | | 1976 | | 2012 | | 15-39 | Summerville | | WV | | — | | 109 | | 2,366 | | — | | — | | 109 | | 2,366 | | 2,475 | | 259 | | 1993 | | 2017 | | 15-39 | Oxford | | AL | | — | | 240 | | 958 | | — | | — | | 240 | | 958 | | 1,198 | | 246 | | 1999 | | 2012 | | 15-39 | Oxford | | AL | | — | | 320 | | 158 | | — | | 1,100 | | 320 | | 1,258 | | 1,578 | | 174 | | 2009 | | 2012 | | 15-39 | Pell City | | AL | | — | | 237 | | 1,340 | | — | | — | | 237 | | 1,340 | | 1,577 | | 316 | | 2002 | | 2012 | | 15-39 | Tuscaloosa | | AL | | — | | 449 | | 1,796 | | — | | — | | 449 | | 1,796 | | 2,245 | | 425 | | 2010 | | 2012 | | 15-39 | Jacksonville | | AL | | — | | 190 | | 1,077 | | — | | — | | 190 | | 1,077 | | 1,267 | | 267 | | 2000 | | 2012 | | 15-39 | Tuscaloosa | | AL | | — | | 422 | | 1,686 | | — | | — | | 422 | | 1,686 | | 2,108 | | 416 | | 2001 | | 2012 | | 15-39 | Tampa | | FL | | — | | 208 | | 1,179 | | — | | — | | 208 | | 1,179 | | 1,387 | | 275 | | 1980 | | 2012 | | 15-39 | Tampa | | FL | | — | | 288 | | 1,634 | | — | | — | | 288 | | 1,634 | | 1,922 | | 395 | | 1987 | | 2012 | | 15-39 | Richmond | | VA | | — | | 202 | | 1,147 | | — | | — | | 202 | | 1,147 | | 1,349 | | 282 | | 1984 | | 2012 | | 15-39 | Exton | | PA | | — | | 470 | | 1,882 | | — | | — | | 470 | | 1,882 | | 2,352 | | 474 | | 1982 | | 2012 | | 15-39 | Richmond | | VA | | — | | 133 | | 755 | | — | | — | | 133 | | 755 | | 888 | | 204 | | 1981 | | 2012 | | 15-39 | Paoli | | PA | | — | | 360 | | 1,440 | | — | | — | | 360 | | 1,440 | | 1,800 | | 340 | | 1982 | | 2012 | | 15-39 | Alamogordo | | NM | | — | | 22 | | 2,117 | | — | | — | | 22 | | 2,117 | | 2,139 | | 411 | | 1983 | | 2014 | | 15-39 | Roswell | | NM | | — | | 64 | | 2,059 | | — | | — | | 64 | | 2,059 | | 2,123 | | 388 | | 1990 | | 2014 | | 15-39 | Moore | | OK | | — | | 64 | | 1,249 | | — | | — | | 64 | | 1,249 | | 1,313 | | 253 | | 1975 | | 2014 | | 15-39 | Del City | | OK | | — | | 40 | | 1,370 | | — | | — | | 40 | | 1,370 | | 1,410 | | 266 | | 1980 | | 2014 | | 15-39 | Oklahoma City | | OK | | — | | 105 | | 1,150 | | — | | — | | 105 | | 1,150 | | 1,255 | | 221 | | 1977 | | 2014 | | 15-39 | Oklahoma City | | OK | | — | | 721 | | 1,049 | | — | | — | | 721 | | 1,049 | | 1,770 | | 229 | | 2003 | | 2014 | | 15-39 | Fort Worth | | TX | | — | | 487 | | 934 | | — | | — | | 487 | | 934 | | 1,421 | | 188 | | 2003 | | 2014 | | 15-39 | Kearney | | NE | | — | | 113 | | 1,242 | | — | | — | | 113 | | 1,242 | | 1,355 | | 249 | | 1982 | | 2014 | | 15-39 | Kearney | | NE | | — | | 176 | | 1,238 | | — | | — | | 176 | | 1,238 | | 1,414 | | 256 | | 1991 | | 2014 | | 15-39 | Grand Island | | NE | | — | | 425 | | — | | — | | — | | 425 | | — | | 425 | | — | | 1992 | | 2014 | | - | Ogallala | | NE | | — | | 291 | | 1,243 | | — | | — | | 291 | | 1,243 | | 1,534 | | 274 | | 1986 | | 2014 | | 15-39 | McAlester | | OK | | — | | 52 | | 1,521 | | — | | — | | 52 | | 1,521 | | 1,573 | | 306 | | 2006 | | 2014 | | 15-39 | Oklahoma City | | OK | | — | | 466 | | 928 | | — | | — | | 466 | | 928 | | 1,394 | | 164 | | 1970 | | 2015 | | 15-39 | Renton | | WA | | — | | 539 | | 1,141 | | — | | — | | 539 | | 1,141 | | 1,680 | | 199 | | 1986 | | 2015 | | 15-39 | Tacoma | | WA | | — | | 807 | | 643 | | — | | — | | 807 | | 643 | | 1,450 | | 141 | | 1991 | | 2015 | | 15-39 | Tacoma | | WA | | — | | 562 | | 897 | | — | | — | | 562 | | 897 | | 1,459 | | 163 | | 1993 | | 2015 | | 15-39 | Tukwila | | WA | | — | | 1,170 | | 419 | | — | | — | | 1,170 | | 419 | | 1,589 | | 143 | | 1993 | | 2015 | | 15-39 | Federal Way | | WA | | — | | 334 | | 1,088 | | — | | — | | 334 | | 1,088 | | 1,422 | | 173 | | 1995 | | 2015 | | 15-39 |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Lakewood | | WA | | — | | 1,372 | | 878 | | — | | — | | 1,372 | | 878 | | 2,250 | | 186 | | 1995 | | 2015 | | 15-39 | Burlington | | WA | | — | | 178 | | 1,982 | | — | | — | | 178 | | 1,982 | | 2,160 | | 317 | | 2000 | | 2015 | | 15-39 | Everett | | WA | | — | | 175 | | 1,473 | | — | | — | | 175 | | 1,473 | | 1,648 | | 254 | | 1986 | | 2015 | | 15-39 | Puyallup | | WA | | — | | 622 | | — | | — | | — | | 622 | | — | | 622 | | — | | 1994 | | 2015 | | - | Aberdeen | | WA | | — | | 218 | | 1,446 | | — | | — | | 218 | | 1,446 | | 1,664 | | 233 | | 2006 | | 2015 | | 15-39 | Florence | | AL | | — | | 337 | | 2,609 | | — | | — | | 337 | | 2,609 | | 2,946 | | 426 | | 2011 | | 2015 | | 15-39 | Decatur | | AL | | — | | 364 | | 3,708 | | — | | — | | 364 | | 3,708 | | 4,072 | | 597 | | 2014 | | 2015 | | 15-39 | Tupelo | | MS | | — | | 297 | | 3,030 | | — | | — | | 297 | | 3,030 | | 3,327 | | 477 | | 2012 | | 2015 | | 15-39 | Adamsville | | TN | | — | | 59 | | 1,675 | | — | | — | | 59 | | 1,675 | | 1,734 | | 260 | | 2005 | | 2015 | | 15-39 | Adamsville | | AL | | — | | 123 | | 1,924 | | — | | — | | 123 | | 1,924 | | 2,047 | | 313 | | 1989 | | 2015 | | 15-39 | Alexandria | | AL | | — | | 79 | | 2,318 | | — | | — | | 79 | | 2,318 | | 2,397 | | 351 | | 2004 | | 2015 | | 15-39 | Ashville | | AL | | — | | 124 | | 1,696 | | — | | — | | 124 | | 1,696 | | 1,820 | | 257 | | 1999 | | 2015 | | 15-39 | Athens | | AL | | — | | 143 | | 1,996 | | — | | — | | 143 | | 1,996 | | 2,139 | | 302 | | 2007 | | 2015 | | 15-39 | Carbon Hill | | AL | | — | | 54 | | 1,634 | | — | | — | | 54 | | 1,634 | | 1,688 | | 253 | | 1998 | | 2015 | | 15-39 | Carrollton | | GA | | — | | 77 | | 2,030 | | — | | — | | 77 | | 2,030 | | 2,107 | | 307 | | 2008 | | 2015 | | 15-39 | Centreville | | AL | | — | | 140 | | 2,251 | | — | | — | | 140 | | 2,251 | | 2,391 | | 328 | | 2013 | | 2015 | | 15-39 | Gadsden | | AL | | — | | 42 | | 2,571 | | — | | — | | 42 | | 2,571 | | 2,613 | | 378 | | 1991 | | 2015 | | 15-39 | Cullman | | AL | | — | | 71 | | 1,799 | | — | | — | | 71 | | 1,799 | | 1,870 | | 268 | | 1997 | | 2015 | | 15-39 | Cullman | | AL | | — | | 79 | | 1,949 | | — | | — | | 79 | | 1,949 | | 2,028 | | 303 | | 2006 | | 2015 | | 15-39 | Dora | | AL | | — | | 18 | | — | | — | | 2,095 | | 18 | | 2,095 | | 2,113 | | 97 | | 1968 | | 2015 | | 15-39 | Double Springs | | AL | | — | | 306 | | 1,752 | | — | | — | | 306 | | 1,752 | | 2,058 | | 275 | | 1995 | | 2015 | | 15-39 | Moulton | | AL | | — | | 117 | | 1,752 | | — | | — | | 117 | | 1,752 | | 1,869 | | 277 | | 2003 | | 2015 | | 15-39 | Guntersville | | AL | | — | | 382 | | 2,020 | | — | | — | | 382 | | 2,020 | | 2,402 | | 324 | | 2015 | | 2015 | | 15-39 | Harpersville | | AL | | — | | 48 | | 2,645 | | — | | — | | 48 | | 2,645 | | 2,693 | | 377 | | 1995 | | 2015 | | 15-39 | Harvest | | AL | | — | | 163 | | 2,060 | | — | | — | | 163 | | 2,060 | | 2,223 | | 318 | | 2014 | | 2015 | | 15-39 | Henderson | | TN | | — | | 111 | | 1,608 | | — | | — | | 111 | | 1,608 | | 1,719 | | 283 | | 1987 | | 2015 | | 15-39 | Madison | | AL | | — | | 209 | | 1,958 | | — | | — | | 209 | | 1,958 | | 2,167 | | 311 | | 2011 | | 2015 | | 15-39 | Lawrenceburg | | TN | | — | | 117 | | 1,832 | | — | | — | | 117 | | 1,832 | | 1,949 | | 352 | | 2014 | | 2015 | | 15-39 | Montevallo | | AL | | — | | 60 | | 2,203 | | — | | — | | 60 | | 2,203 | | 2,263 | | 332 | | 2009 | | 2015 | | 15-39 | Muscle Shoals | | AL | | — | | 44 | | — | | — | | 1,867 | | 44 | | 1,867 | | 1,911 | | 100 | | 1984 | | 2015 | | 15-39 | Odenville | | AL | | — | | 100 | | 1,652 | | — | | — | | 100 | | 1,652 | | 1,752 | | 278 | | 2000 | | 2015 | | 15-39 | Opelika | | AL | | — | | 125 | | 1,657 | | — | | — | | 125 | | 1,657 | | 1,782 | | 3 | | 2011 | | 2015 | | 15-39 | Piedmont | | AL | | — | | 33 | | 1,934 | | — | | — | | 33 | | 1,934 | | 1,967 | | 279 | | 1981 | | 2015 | | 15-39 | Reform | | AL | | — | | 201 | | 1,979 | | — | | — | | 201 | | 1,979 | | 2,180 | | 336 | | 1992 | | 2015 | | 15-39 | Roanoke | | AL | | — | | 83 | | 1,625 | | — | | — | | 83 | | 1,625 | | 1,708 | | 245 | | 2006 | | 2015 | | 15-39 | Savannah | | TN | | — | | 62 | | 1,693 | | — | | — | | 62 | | 1,693 | | 1,755 | | 271 | | 2012 | | 2015 | | 15-39 |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Sheffield | | AL | | — | | 43 | | 1,730 | | — | | — | | 43 | | 1,730 | | 1,773 | | 246 | | 1967 | | 2015 | | 15-39 | Somerville | | AL | | — | | 28 | | 1,758 | | — | | — | | 28 | | 1,758 | | 1,786 | | 299 | | 2001 | | 2015 | | 15-39 | Springville | | AL | | — | | 31 | | 1,994 | | — | | — | | 31 | | 1,994 | | 2,025 | | 288 | | 1993 | | 2015 | | 15-39 | Stevenson | | AL | | — | | 306 | | 1,862 | | — | | — | | 306 | | 1,862 | | 2,168 | | 278 | | 1985 | | 2015 | | 15-39 | Trussville | | AL | | — | | 34 | | 2,039 | | — | | — | | 34 | | 2,039 | | 2,073 | | 291 | | 1992 | | 2015 | | 15-39 | Tuscumbia | | AL | | — | | 117 | | 1,831 | | — | | — | | 117 | | 1,831 | | 1,948 | | 294 | | 2004 | | 2015 | | 15-39 | Wedowee | | AL | | — | | 92 | | 1,454 | | — | | — | | 92 | | 1,454 | | 1,546 | | 212 | | 2002 | | 2015 | | 15-39 | Huntsville | | AL | | — | | 133 | | 2,029 | | — | | — | | 133 | | 2,029 | | 2,162 | | 301 | | 2010 | | 2015 | | 15-39 | Linden | | AL | | — | | 382 | | 1,252 | | — | | — | | 382 | | 1,252 | | 1,634 | | 2 | | 2019 | | 2020 | | 15-39 | Pleasant Grove | | AL | | — | | 256 | | 1,721 | | — | | — | | 256 | | 1,721 | | 1,977 | | 2 | | 2020 | | 2020 | | 15-39 | Slocomb | | AL | | — | | 409 | | 1,567 | | — | | — | | 409 | | 1,567 | | 1,976 | | 2 | | 2020 | | 2020 | | 15-39 | Amory | | MS | | — | | 296 | | 1,346 | | — | | — | | 296 | | 1,346 | | 1,642 | | 2 | | 2020 | | 2020 | | 15-39 | Meridian | | MS | | — | | 381 | | 1,434 | | — | | — | | 381 | | 1,434 | | 1,815 | | 2 | | 2020 | | 2020 | | 15-39 | West Point | | MS | | — | | 469 | | 1,322 | | — | | — | | 469 | | 1,322 | | 1,791 | | 2 | | 2020 | | 2020 | | 15-39 | Brownsville | | TN | | — | | 365 | | 1,058 | | — | | — | | 365 | | 1,058 | | 1,423 | | 1 | | 2019 | | 2020 | | 15-39 | Ashwaubenon | | WI | | — | | 86 | | 2,008 | | — | | — | | 86 | | 2,008 | | 2,094 | | 305 | | 1994 | | 2015 | | 15-39 | Oshkosh | | WI | | — | | 145 | | 1,795 | | — | | — | | 145 | | 1,795 | | 1,940 | | 287 | | 1996 | | 2015 | | 15-39 | Green Bay | | WI | | — | | 106 | | 1,713 | | — | | — | | 106 | | 1,713 | | 1,819 | | 270 | | 1996 | | 2015 | | 15-39 | West Bend | | WI | | — | | 113 | | 1,704 | | — | | — | | 113 | | 1,704 | | 1,817 | | 267 | | 1996 | | 2015 | | 15-39 | Appleton | | WI | | — | | 95 | | 2,478 | | — | | — | | 95 | | 2,478 | | 2,573 | | 369 | | 1976 | | 2015 | | 15-39 | Manitowoc | | WI | | — | | 106 | | 1,714 | | — | | — | | 106 | | 1,714 | | 1,820 | | 273 | | 1996 | | 2015 | | 15-39 | Eau Claire | | WI | | — | | 137 | | 2,245 | | — | | — | | 137 | | 2,245 | | 2,382 | | 358 | | 1994 | | 2015 | | 15-39 | Dover | | DE | | — | | 211 | | 3,455 | | — | | — | | 211 | | 3,455 | | 3,666 | | 503 | | 1991 | | 2015 | | 15-39 | Norman | | OK | | — | | 232 | | 3,733 | | — | | — | | 232 | | 3,733 | | 3,965 | | 548 | | 1982 | | 2015 | | 15-39 | Knoxville | | TN | | — | | 151 | | 2,775 | | — | | — | | 151 | | 2,775 | | 2,926 | | 438 | | 1978 | | 2015 | | 15-39 | Wichita | | KS | | — | | 468 | | 3,475 | | — | | — | | 468 | | 3,475 | | 3,943 | | 510 | | 1982 | | 2015 | | 15-39 | Las Cruces | | NM | | — | | 108 | | 4,069 | | — | | — | | 108 | | 4,069 | | 4,177 | | 604 | | 1991 | | 2015 | | 15-39 | Lee's Summit | | MO | | — | | 132 | | 3,447 | | — | | — | | 132 | | 3,447 | | 3,579 | | 532 | | 2010 | | 2015 | | 15-39 | Indianapolis | | IN | | — | | 354 | | 2,813 | | — | | — | | 354 | | 2,813 | | 3,167 | | 61 | | 1973 | | 2015 | | 15-39 | Gadsden | | AL | | — | | 219 | | 2,915 | | — | | — | | 219 | | 2,915 | | 3,134 | | 436 | | 1981 | | 2015 | | 15-39 | Murfreesboro | | TN | | — | | 247 | | 2,747 | | — | | — | | 247 | | 2,747 | | 2,994 | | 437 | | 1987 | | 2015 | | 15-39 | Macon | | GA | | — | | 258 | | 3,235 | | — | | — | | 258 | | 3,235 | | 3,493 | | 471 | | 1972 | | 2015 | | 15-39 | Lexington | | KY | | — | | 1,258 | | 2,344 | | — | | — | | 1,258 | | 2,344 | | 3,602 | | 55 | | 1976 | | 2015 | | 15-39 | Joliet | | IL | | — | | 686 | | 3,072 | | — | | — | | 686 | | 3,072 | | 3,758 | | 488 | | 1991 | | 2015 | | 15-39 | Wheat Ridge | | CO | | — | | 451 | | 3,614 | | — | | — | | 451 | | 3,614 | | 4,065 | | 520 | | 1974 | | 2015 | | 15-39 | Tulsa | | OK | | — | | 125 | | 3,846 | | — | | — | | 125 | | 3,846 | | 3,971 | | 554 | | 1987 | | 2015 | | 15-39 |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Oakdale | | MN | | — | | 197 | | 3,455 | | — | | — | | 197 | | 3,455 | | 3,652 | | 497 | | 2006 | | 2015 | | 15-39 | Pineville | | NC | | — | | 74 | | 3,587 | | — | | — | | 74 | | 3,587 | | 3,661 | | 533 | | 1991 | | 2015 | | 15-39 | Albuquerque | | NM | | — | | 196 | | 3,389 | | — | | — | | 196 | | 3,389 | | 3,585 | | 509 | | 2002 | | 2015 | | 15-39 | Madison | | TN | | — | | 97 | | 4,617 | | — | | — | | 97 | | 4,617 | | 4,714 | | 600 | | 1972 | | 2016 | | 15-39 | Florence | | KY | | — | | 61 | | 4,687 | | — | | — | | 61 | | 4,687 | | 4,748 | | 616 | | 1977 | | 2016 | | 15-39 | Maplewood | | MN | | — | | 315 | | 1,551 | | — | | — | | 315 | | 1,551 | | 1,866 | | 272 | | 1983 | | 2016 | | 15-39 | Santa Fe | | NM | | — | | 121 | | 2,979 | | — | | — | | 121 | | 2,979 | | 3,100 | | 386 | | 1990 | | 2016 | | 15-39 | Memphis | | TN | | — | | 103 | | 3,327 | | — | | — | | 103 | | 3,327 | | 3,430 | | 458 | | 2008 | | 2016 | | 15-39 | Jonesboro | | AR | | — | | 324 | | 3,383 | | — | | — | | 324 | | 3,383 | | 3,707 | | 457 | | 2011 | | 2016 | | 15-39 | Lafayette | | IN | | — | | 285 | | 3,436 | | — | | — | | 285 | | 3,436 | | 3,721 | | 463 | | 2012 | | 2016 | | 15-39 | Bridgeport | | WV | | — | | 88 | | 4,074 | | — | | — | | 88 | | 4,074 | | 4,162 | | 566 | | 2007 | | 2016 | | 15-39 | Round Rock | | TX | | — | | 769 | | 4,176 | | — | | — | | 769 | | 4,176 | | 4,945 | | 535 | | 1984 | | 2016 | | 15-39 | Austin | | TX | | — | | 1,184 | | 5,678 | | — | | — | | 1,184 | | 5,678 | | 6,862 | | 736 | | 1998 | | 2016 | | 15-39 | Austin | | TX | | — | | 2,104 | | 7,566 | | — | | — | | 2,104 | | 7,566 | | 9,670 | | 1,030 | | 2006 | | 2016 | | 15-39 | Austin | | TX | | — | | 4,190 | | 7,829 | | — | | — | | 4,190 | | 7,829 | | 12,019 | | 1,019 | | 1994 | | 2016 | | 15-39 | Dothan | | AL | | — | | 539 | | 2,551 | | — | | — | | 539 | | 2,551 | | 3,090 | | 326 | | 1997 | | 2016 | | 15-39 | Tallahassee | | FL | | — | | 864 | | 2,184 | | — | | — | | 864 | | 2,184 | | 3,048 | | 296 | | 1995 | | 2016 | | 15-39 | Peachtree City | | GA | | — | | 476 | | 2,590 | | — | | — | | 476 | | 2,590 | | 3,066 | | 342 | | 1997 | | 2016 | | 15-39 | Valdosta | | GA | | — | | 524 | | 2,504 | | — | | — | | 524 | | 2,504 | | 3,028 | | 331 | | 1997 | | 2016 | | 15-39 | Orland Park | | IL | | — | | 686 | | 2,358 | | — | | — | | 686 | | 2,358 | | 3,044 | | 323 | | 1994 | | 2016 | | 15-39 | Rockford | | IL | | — | | 450 | | 2,701 | | — | | — | | 450 | | 2,701 | | 3,151 | | 347 | | 1996 | | 2016 | | 15-39 | Bloomington | | IN | | — | | 240 | | 2,761 | | — | | — | | 240 | | 2,761 | | 3,001 | | 327 | | 1994 | | 2016 | | 15-39 | Kokomo | | IN | | — | | 106 | | 3,065 | | — | | — | | 106 | | 3,065 | | 3,171 | | 348 | | 1995 | | 2016 | | 15-39 | Clarkston | | MI | | — | | 284 | | 2,788 | | — | | — | | 284 | | 2,788 | | 3,072 | | 391 | | 1997 | | 2016 | | 15-39 | Madison Heights | | MI | | — | | 58 | | 3,094 | | — | | — | | 58 | | 3,094 | | 3,152 | | 351 | | 1995 | | 2016 | | 15-39 | Brighton | | MI | | — | | 102 | | 2,920 | | — | | — | | 102 | | 2,920 | | 3,022 | | 385 | | 1998 | | 2016 | | 15-39 | Jackson | | MI | | — | | 177 | | 2,846 | | — | | — | | 177 | | 2,846 | | 3,023 | | 367 | | 1996 | | 2016 | | 15-39 | Hendersonville | | NC | | — | | 165 | | 2,928 | | — | | — | | 165 | | 2,928 | | 3,093 | | 396 | | 2000 | | 2016 | | 15-39 | New Bern | | NC | | — | | 284 | | 2,525 | | — | | — | | 284 | | 2,525 | | 2,809 | | 326 | | 2000 | | 2016 | | 15-39 | Las Vegas | | NV | | — | | 962 | | 2,086 | | — | | — | | 962 | | 2,086 | | 3,048 | | 304 | | 2002 | | 2016 | | 15-39 | Cherry Hill | | NJ | | — | | 791 | | 2,340 | | — | | — | | 791 | | 2,340 | | 3,131 | | 321 | | 1992 | | 2016 | | 15-39 | Pittsburgh | | PA | | — | | 363 | | 3,488 | | — | | — | | 363 | | 3,488 | | 3,851 | | 443 | | 1996 | | 2016 | | 15-39 | Beaumont | | TX | | — | | 206 | | 3,241 | | — | | — | | 206 | | 3,241 | | 3,447 | | 409 | | 1996 | | 2016 | | 15-39 | Desoto | | TX | | — | | 535 | | 2,542 | | — | | — | | 535 | | 2,542 | | 3,077 | | 342 | | 1999 | | 2016 | | 15-39 | Lewisville | | TX | | — | | 299 | | 2,786 | | — | | — | | 299 | | 2,786 | | 3,085 | | 335 | | 1994 | | 2016 | | 15-39 | Webster | | TX | | — | | 591 | | 2,622 | | — | | — | | 591 | | 2,622 | | 3,213 | | 346 | | 1995 | | 2016 | | 15-39 |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Harrisonburg | | VA | | — | | 444 | | 2,645 | | — | | — | | 444 | | 2,645 | | 3,089 | | 360 | | 1998 | | 2016 | | 15-39 | Beckley | | WV | | — | | 194 | | 3,049 | | — | | — | | 194 | | 3,049 | | 3,243 | | 379 | | 1997 | | 2016 | | 15-39 | Portage | | MI | | — | | 38 | | 2,041 | | — | | — | | 38 | | 2,041 | | 2,079 | | 241 | | 1981 | | 2017 | | 15-39 | Brook Park | | OH | | — | | 180 | | 1,875 | | — | | — | | 180 | | 1,875 | | 2,055 | | 214 | | 2000 | | 2017 | | 15-39 | Terre Haute | | IN | | — | | 207 | | 1,860 | | — | | — | | 207 | | 1,860 | | 2,067 | | 208 | | 1984 | | 2017 | | 15-39 | Harmarville | | PA | | — | | 157 | | 1,761 | | — | | — | | 157 | | 1,761 | | 1,918 | | 219 | | 1984 | | 2017 | | 15-39 | Youngstown | | OH | | — | | 72 | | 1,945 | | — | | — | | 72 | | 1,945 | | 2,017 | | 218 | | 1983 | | 2017 | | 15-39 | Mars | | PA | | — | | 381 | | 1,572 | | — | | — | | 381 | | 1,572 | | 1,953 | | 202 | | 2004 | | 2017 | | 15-39 | Lafayette | | IN | | — | | 125 | | 1,793 | | — | | — | | 125 | | 1,793 | | 1,918 | | 195 | | 1976 | | 2017 | | 15-39 | Joliet | | IL | | — | | 142 | | 583 | | — | | — | | 142 | | 583 | | 725 | | 12 | | 1983 | | 2017 | | 15-39 | Cincinnati | | OH | | — | | 638 | | 1,515 | | — | | — | | 638 | | 1,515 | | 2,153 | | 194 | | 1988 | | 2017 | | 15-39 | Delaware | | OH | | — | | 54 | | 1,788 | | — | | — | | 54 | | 1,788 | | 1,842 | | 201 | | 1987 | | 2017 | | 15-39 | Wadsworth | | OH | | — | | 310 | | 1,612 | | — | | — | | 310 | | 1,612 | | 1,922 | | 204 | | 1989 | | 2017 | | 15-39 | Fort Wright | | KY | | — | | 68 | | 2,374 | | — | | 9 | | 68 | | 2,383 | | 2,451 | | 270 | | 1997 | | 2017 | | 15-39 | Akron | | OH | | — | | 134 | | 1,605 | | — | | — | | 134 | | 1,605 | | 1,739 | | 236 | | 1998 | | 2017 | | 15-39 | Mt. Vernon | | IL | | — | | 29 | | 796 | | — | | — | | 29 | | 796 | | 825 | | 16 | | 2001 | | 2017 | | 15-39 | California | | MD | | — | | 308 | | 1,275 | | — | | — | | 308 | | 1,275 | | 1,583 | | 26 | | 2000 | | 2017 | | 15-39 | Maysville | | KY | | — | | 37 | | 1,889 | | — | | — | | 37 | | 1,889 | | 1,926 | | 218 | | 2003 | | 2017 | | 15-39 | Cranberry | | PA | | — | | 157 | | 1,804 | | — | | — | | 157 | | 1,804 | | 1,961 | | 38 | | 2004 | | 2017 | | 15-39 | Parkersburg | | WV | | — | | 280 | | 1,631 | | — | | — | | 280 | | 1,631 | | 1,911 | | 195 | | 2004 | | 2017 | | 15-39 | Chesterton | | IN | | — | | 343 | | 1,613 | | — | | — | | 343 | | 1,613 | | 1,956 | | 197 | | 2004 | | 2017 | | 15-39 | Huntington | | WV | | — | | 344 | | 1,575 | | — | | — | | 344 | | 1,575 | | 1,919 | | 188 | | 2005 | | 2017 | | 15-39 | Amelia | | OH | | — | | 315 | | 1,719 | | — | | — | | 315 | | 1,719 | | 2,034 | | 193 | | 2006 | | 2017 | | 15-39 | Bellefontaine | | OH | | — | | 100 | | 1,833 | | — | | — | | 100 | | 1,833 | | 1,933 | | 220 | | 1994 | | 2017 | | 15-39 | Logan | | OH | | — | | 153 | | 1,880 | | — | | — | | 153 | | 1,880 | | 2,033 | | 246 | | 2008 | | 2017 | | 15-39 | Harrison | | OH | | — | | 204 | | 1,514 | | — | | — | | 204 | | 1,514 | | 1,718 | | 183 | | 2014 | | 2017 | | 15-39 | Upper Sandusky | | OH | | — | | 171 | | 1,198 | | — | | — | | 171 | | 1,198 | | 1,369 | | 142 | | 1994 | | 2017 | | 15-39 | Charlotte | | NC | | — | | 1,148 | | 1,789 | | — | | 6 | | 1,148 | | 1,795 | | 2,943 | | 166 | | 2013 | | 2017 | | 15-39 | Oak Ridge | | TN | | — | | 1,167 | | 1,684 | | — | | — | | 1,167 | | 1,684 | | 2,851 | | 170 | | 2013 | | 2017 | | 15-39 | Alcoa | | TN | | — | | 1,022 | | 1,760 | | — | | — | | 1,022 | | 1,760 | | 2,782 | | 176 | | 2015 | | 2017 | | 15-39 | Salisbury | | NC | | — | | 131 | | 1,243 | | — | | — | | 131 | | 1,243 | | 1,374 | | 93 | | 1974 | | 2018 | | 15-39 | High Point | | NC | | — | | 202 | | 1,765 | | — | | — | | 202 | | 1,765 | | 1,967 | | 136 | | 1975 | | 2018 | | 15-39 | Fayetteville | | NC | | — | | 251 | | 3,324 | | — | | — | | 251 | | 3,324 | | 3,575 | | 245 | | 1970 | | 2018 | | 15-39 | Raleigh | | NC | | — | | 619 | | 3,327 | | — | | — | | 619 | | 3,327 | | 3,946 | | 249 | | 1971 | | 2018 | | 15-39 | Gastonia | | NC | | — | | 236 | | 1,311 | | — | | — | | 236 | | 1,311 | | 1,547 | | 104 | | 1991 | | 2018 | | 15-39 | Virginia Beach | | VA | | — | | 665 | | 4,104 | | — | | — | | 665 | | 4,104 | | 4,769 | | 305 | | 1966 | | 2018 | | 15-39 |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Hampton | | VA | | — | | 642 | | 1,108 | | — | | — | | 642 | | 1,108 | | 1,750 | | 100 | | 2016 | | 2018 | | 15-39 | Greenville | | SC | | — | | 946 | | 3,068 | | — | | — | | 946 | | 3,068 | | 4,014 | | 226 | | 1973 | | 2018 | | 15-39 | Riverdale | | GA | | — | | 311 | | 2,518 | | — | | — | | 311 | | 2,518 | | 2,829 | | 195 | | 2003 | | 2018 | | 15-39 | Marietta | | GA | | — | | 152 | | 1,732 | | — | | — | | 152 | | 1,732 | | 1,884 | | 129 | | 1986 | | 2018 | | 15-39 | Memphis | | TN | | — | | 632 | | 2,376 | | — | | — | | 632 | | 2,376 | | 3,008 | | 192 | | 1978 | | 2018 | | 15-39 | Chattanooga | | TN | | — | | 470 | | 3,391 | | — | | — | | 470 | | 3,391 | | 3,861 | | 253 | | 1970 | | 2018 | | 15-39 | Florence | | AL | | — | | 234 | | 1,534 | | — | | — | | 234 | | 1,534 | | 1,768 | | 125 | | 2004 | | 2018 | | 15-39 | Madison | | TN | | — | | 325 | | 1,026 | | — | | — | | 325 | | 1,026 | | 1,351 | | 81 | | 2014 | | 2018 | | 15-39 | Louisville | | KY | | — | | 387 | | 4,698 | | — | | — | | 387 | | 4,698 | | 5,085 | | 348 | | 1965 | | 2018 | | 15-39 | Louisville | | KY | | — | | 297 | | 2,867 | | — | | — | | 297 | | 2,867 | | 3,164 | | 211 | | 1966 | | 2018 | | 15-39 | Huntsville | | AL | | — | | 251 | | 3,819 | | — | | — | | 251 | | 3,819 | | 4,070 | | 280 | | 1968 | | 2018 | | 15-39 | Matthews | | NC | | — | | 432 | | 941 | | — | | — | | 432 | | 941 | | 1,373 | | 82 | | 2013 | | 2018 | | 15-39 | Brentwood | | TN | | — | | 924 | | 803 | | — | | — | | 924 | | 803 | | 1,727 | | 77 | | 2004 | | 2018 | | 15-39 | Pensacola | | FL | | — | | 328 | | 2,600 | | — | | — | | 328 | | 2,600 | | 2,928 | | 196 | | 2007 | | 2018 | | 15-39 | Augusta | | GA | | — | | 253 | | 772 | | — | | — | | 253 | | 772 | | 1,025 | | 61 | | 2012 | | 2018 | | 15-39 | Columbus | | OH | | — | | 587 | | 503 | | — | | — | | 587 | | 503 | | 1,090 | | 49 | | 1995 | | 2018 | | 15-39 | Evansville | | IN | | — | | 158 | | 1,403 | | — | | — | | 158 | | 1,403 | | 1,561 | | 114 | | 2003 | | 2018 | | 15-39 | Mishawaka | | IN | | — | | 330 | | 2,074 | | — | | — | | 330 | | 2,074 | | 2,404 | | 164 | | 2003 | | 2018 | | 15-39 | Nashville | | TN | | — | | 416 | | 1,511 | | — | | — | | 416 | | 1,511 | | 1,927 | | 91 | | 2000 | | 2018 | | 15-39 | Miles City | | MT | | — | | 547 | | 1,616 | | — | | — | | 547 | | 1,616 | | 2,163 | | 138 | | 1995 | | 2018 | | 15-39 | Dickinson | | ND | | — | | 294 | | 2,447 | | — | | — | | 294 | | 2,447 | | 2,741 | | 173 | | 1983 | | 2018 | | 15-39 | Billings | | MT | | — | | 516 | | 2,128 | | — | | — | | 516 | | 2,128 | | 2,644 | | 171 | | 1977 | | 2018 | | 15-39 | Billings | | MT | | — | | 356 | | 1,728 | | — | | — | | 356 | | 1,728 | | 2,084 | | 134 | | 1976 | | 2018 | | 15-39 | Billings | | MT | | — | | 753 | | 1,448 | | — | | — | | 753 | | 1,448 | | 2,201 | | 120 | | 2003 | | 2018 | | 15-39 | Louisville | | KY | | — | | 162 | | 948 | | — | | — | | 162 | | 948 | | 1,110 | | 61 | | 2002 | | 2018 | | 15-39 | Cincinnati | | OH | | — | | 184 | | 1,396 | | — | | — | | 184 | | 1,396 | | 1,580 | | 87 | | 1987 | | 2018 | | 15-39 | Madison | | IN | | — | | 126 | | 2,230 | | — | | 3 | | 126 | | 2,233 | | 2,359 | | 135 | | 1996 | | 2018 | | 15-39 | Cincinnati | | OH | | — | | 164 | | 2,787 | | — | | — | | 164 | | 2,787 | | 2,951 | | 110 | | 1987 | | 2019 | | 15-39 | Hamilton | | OH | | — | | 640 | | 2,310 | | — | | — | | 640 | | 2,310 | | 2,950 | | 76 | | 2004 | | 2019 | | 15-39 | Office Properties: | | | | | | | | | | | | | | | | | | | | | | | Rochester | | NY | | — | | 589 | | 9,872 | | — | | — | | 589 | | 9,872 | | 10,461 | | 2,998 | | 2001 | | 2010 | | 15-39 | Union Grove | | WI | | — | | 85 | | 340 | | — | | — | | 85 | | 340 | | 425 | | 78 | | 1993 | | 2012 | | 15-39 | Groveport | | OH | | — | | 710 | | 5,087 | | — | | — | | 710 | | 5,087 | | 5,797 | | 1,191 | | 1979 | | 2014 | | 15-39 | West Valley City | | UT | | — | | 1,336 | | 5,822 | | — | | 10,000 | | 1,336 | | 15,822 | | 17,158 | | 4,354 | | 1998 | | 2014 | | 15-39 | Milwaukee | | WI | | — | | 668 | | 5,650 | | — | | — | | 668 | | 5,650 | | 6,318 | | 960 | | 1989 | | 2014 | | 15-39 | Mt. Pleasant | | TX | | — | | 2,214 | | 3,717 | | — | | — | | 2,214 | | 3,717 | | 5,931 | | 851 | | 2008 | | 2014 | | 15-39 |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Harleysville | | PA | | — | | 3,513 | | 24,767 | | — | | — | | 3,513 | | 24,767 | | 28,280 | | 3,818 | | 1950 | | 2016 | | 15-39 | Harrisburg | | PA | | — | | 958 | | 19,060 | | — | | — | | 958 | | 19,060 | | 20,018 | | 2,536 | | 1976 | | 2016 | | 15-39 | Wood Dale | | IL | | — | | 2,806 | | 8,726 | | — | | 93 | | 2,806 | | 8,819 | | 11,625 | | 1,221 | | 1986 | | 2016 | | 15-39 | Austin | | TX | | — | | 300 | | 29,681 | | — | | 8,649 | | 300 | | 38,330 | | 38,630 | | 5,349 | | 1984 | | 2016 | | 7-39 | Melbourne | | FL | | — | | 1,701 | | 12,141 | | — | | — | | 1,701 | | 12,141 | | 13,842 | | 1,404 | | 2012 | | 2016 | | 15-39 | Pittsford | | NY | | — | | 40 | | 29,530 | | — | | 1,000 | | 40 | | 30,530 | | 30,570 | | 3,102 | | 1975 | | 2017 | | 15-39 | Jacksonville | | FL | | — | | 1,251 | | 19,784 | | — | | — | | 1,251 | | 19,784 | | 21,035 | | 1,662 | | 1984 | | 2017 | | 15-39 | Troy | | MI | | — | | 1,665 | | 19,798 | | — | | 1 | | 1,665 | | 19,799 | | 21,464 | | 1,718 | | 1984 | | 2017 | | 15-39 | Carrollton | | TX | | — | | 3,743 | | 28,025 | | — | | — | | 3,743 | | 28,025 | | 31,768 | | 1,913 | | 1999 | | 2018 | | 15-39 | Murfreesboro | | TN | | — | | 1,534 | | 25,033 | | — | | 1,665 | | 1,534 | | 26,698 | | 28,232 | | 1,082 | | 1980 | | 2019 | | 15-39 | Westborough | | MA | | — | | 5,861 | | 27,646 | | — | | — | | 5,861 | | 27,646 | | 33,507 | | 1,057 | | 1965 | | 2019 | | 15-39 | Retail Properties: | | | | | | | | | | | | | | | | | | | | | | | Palmdale | | CA | | — | | 995 | | 2,811 | | — | | — | | 995 | | 2,811 | | 3,806 | | 795 | | 1991 | | 2013 | | 15-39 | Palmdale | | CA | | — | | 670 | | 1,610 | | — | | — | | 670 | | 1,610 | | 2,280 | | 486 | | 2006 | | 2013 | | 15-39 | Palmdale | | CA | | — | | 987 | | 3,817 | | — | | — | | 987 | | 3,817 | | 4,804 | | 967 | | 1991 | | 2013 | | 15-39 | Mt. Pleasant | | TX | | — | | 1,141 | | 997 | | — | | — | | 1,141 | | 997 | | 2,138 | | 309 | | 1972 | | 2014 | | 15-39 | Madill | | OK | | — | | 739 | | 714 | | — | | — | | 739 | | 714 | | 1,453 | | 132 | | 1993 | | 2014 | | 15-39 | Fort Worth | | TX | | — | | 1,142 | | 554 | | — | | — | | 1,142 | | 554 | | 1,696 | | 131 | | 1980 | | 2014 | | 15-39 | Dallas | | TX | | — | | 454 | | 449 | | — | | — | | 454 | | 449 | | 903 | | 121 | | 1984 | | 2014 | | 15-39 | Wichita Falls | | TX | | — | | 674 | | 186 | | — | | — | | 674 | | 186 | | 860 | | 49 | | 1995 | | 2014 | | 15-39 | Lytle | | TX | | — | | 97 | | 815 | | — | | — | | 97 | | 815 | | 912 | | 155 | | 2008 | | 2015 | | 15-39 | New Caney | | TX | | — | | 37 | | 875 | | — | | — | | 37 | | 875 | | 912 | | 149 | | 1972 | | 2015 | | 15-39 | Sterling | | VA | | 17,498 | | 24,395 | | — | | — | | — | | 24,395 | | — | | 24,395 | | — | | 2004 | | 2016 | | - | Central City | | KY | | — | | 315 | | 580 | | — | | — | | 315 | | 580 | | 895 | | 89 | | 1978 | | 2016 | | 15-39 | Owensboro | | KY | | — | | 177 | | 615 | | — | | — | | 177 | | 615 | | 792 | | 81 | | 1972 | | 2016 | | 15-39 | Newburgh | | IN | | — | | 330 | | — | | — | | — | | 330 | | — | | 330 | | — | | 1994 | | 2016 | | - | Sikeston | | MO | | — | | 205 | | 2,235 | | — | | — | | 205 | | 2,235 | | 2,440 | | 301 | | 1940 | | 2016 | | 15-39 | Evansville | | IN | | — | | 636 | | 3,655 | | — | | — | | 636 | | 3,655 | | 4,291 | | 466 | | 1949 | | 2016 | | 15-39 | Evansville | | IN | | — | | 244 | | 2,375 | | — | | — | | 244 | | 2,375 | | 2,619 | | 295 | | 1909 | | 2016 | | 15-39 | Marion | | IL | | — | | 314 | | 2,089 | | — | | — | | 314 | | 2,089 | | 2,403 | | 269 | | 1970 | | 2016 | | 15-39 | Kennett | | MO | | — | | 191 | | 1,198 | | — | | — | | 191 | | 1,198 | | 1,389 | | 156 | | 1970 | | 2016 | | 15-39 | Poplar Bluff | | MO | | — | | 149 | | 1,794 | | — | | — | | 149 | | 1,794 | | 1,943 | | 243 | | 1970 | | 2016 | | 15-39 | Cape Girardeau | | MO | | — | | 76 | | 542 | | — | | — | | 76 | | 542 | | 618 | | 81 | | 1988 | | 2016 | | 15-39 | Scott City | | MO | | — | | 260 | | 3,052 | | — | | — | | 260 | | 3,052 | | 3,312 | | 396 | | 1978 | | 2016 | | 15-39 | Henderson | | KY | | — | | 290 | | 729 | | — | | — | | 290 | | 729 | | 1,019 | | 107 | | 1973 | | 2016 | | 15-39 | Blytheville | | AR | | — | | 413 | | 3,405 | | — | | — | | 413 | | 3,405 | | 3,818 | | 471 | | 1966 | | 2016 | | 15-39 |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Harrisburg | | IL | | — | | 131 | | 839 | | — | | — | | 131 | | 839 | | 970 | | 104 | | 1970 | | 2016 | | 15-39 | Clarksville | | IN | | — | | 1,091 | | 3,890 | | — | | — | | 1,091 | | 3,890 | | 4,981 | | 545 | | 1961 | | 2016 | | 15-39 | Owensboro | | KY | | — | | 499 | | 734 | | — | | — | | 499 | | 734 | | 1,233 | | 104 | | 1976 | | 2016 | | 15-39 | Evansville | | IN | | — | | 203 | | 369 | | — | | — | | 203 | | 369 | | 572 | | 73 | | 2001 | | 2016 | | 15-39 | Haubstadt | | IN | | — | | 379 | | 1,349 | | — | | — | | 379 | | 1,349 | | 1,728 | | 207 | | 2005 | | 2016 | | 15-39 | Otterbein | | IN | | — | | 177 | | 1,385 | | — | | — | | 177 | | 1,385 | | 1,562 | | 224 | | 1978 | | 2016 | | 15-39 | Ithaca | | MI | | — | | 739 | | 2,669 | | — | | — | | 739 | | 2,669 | | 3,408 | | 389 | | 2015 | | 2016 | | 15-39 | Gillette | | WY | | — | | 366 | | 3,447 | | — | | — | | 366 | | 3,447 | | 3,813 | | 475 | | 2014 | | 2016 | | 15-39 | Novi | | MI | | — | | 201 | | 12,681 | | — | | — | | 201 | | 12,681 | | 12,882 | | 1,399 | | 1985 | | 2017 | | 15-39 | Lansing | | MI | | — | | 88 | | 13,919 | | — | | 3 | | 88 | | 13,922 | | 14,010 | | 1,478 | | 1999 | | 2017 | | 15-39 | Flint | | MI | | — | | 83 | | 7,987 | | — | | — | | 83 | | 7,987 | | 8,070 | | 852 | | 1977 | | 2017 | | 15-39 | Clinton Township | | MI | | — | | 358 | | 9,551 | | — | | — | | 358 | | 9,551 | | 9,909 | | 1,023 | | 1987 | | 2017 | | 15-39 | Chesterfield | | MI | | — | | 753 | | 9,716 | | — | | — | | 753 | | 9,716 | | 10,469 | | 1,073 | | 2003 | | 2017 | | 15-39 | Traverse City | | MI | | — | | 106 | | 8,468 | | — | | — | | 106 | | 8,468 | | 8,574 | | 905 | | 1998 | | 2017 | | 15-39 | Warren | | MI | | — | | 63 | | 2,152 | | — | | — | | 63 | | 2,152 | | 2,215 | | 17 | | 1991 | | 2017 | | 15-39 | Grandville | | MI | | — | | 184 | | 2,372 | | — | | — | | 184 | | 2,372 | | 2,556 | | - | | 2002 | | 2017 | | 15-39 | Grand Rapids | | MI | | — | | 68 | | 1,038 | | — | | — | | 68 | | 1,038 | | 1,106 | | 118 | | 2014 | | 2017 | | 15-39 | San Antonio | | TX | | — | | 300 | | 1,277 | | — | | 1 | | 300 | | 1,278 | | 1,578 | | 140 | | 1998 | | 2017 | | 15-39 | Selma | | TX | | — | | 269 | | 805 | | — | | — | | 269 | | 805 | | 1,074 | | 119 | | 2013 | | 2017 | | 15-39 | Linwood | | NC | | — | | 206 | | 475 | | — | | — | | 206 | | 475 | | 681 | | 97 | | 1997 | | 2017 | | 15-39 | Vinton | | TX | | — | | 469 | | 384 | | — | | — | | 469 | | 384 | | 853 | | 74 | | 2016 | | 2017 | | 15-39 | Columbus | | MN | | — | | 406 | | 945 | | — | | 2 | | 406 | | 947 | | 1,353 | | 118 | | 1983 | | 2017 | | 15-39 | Louisville | | KY | | — | | 370 | | 240 | | — | | — | | 370 | | 240 | | 610 | | 42 | | 2002 | | 2017 | | 15-39 | Dunn | | NC | | — | | 199 | | 659 | | — | | — | | 199 | | 659 | | 858 | | 87 | | 2017 | | 2017 | | 15-39 | San Marcos | | TX | | — | | 486 | | 776 | | — | | — | | 486 | | 776 | | 1,262 | | 122 | | 2017 | | 2017 | | 15-39 | Oshkosh | | WI | | — | | 134 | | 5,372 | | — | | — | | 134 | | 5,372 | | 5,506 | | 515 | | 1995 | | 2017 | | 15-39 | Sheboygan | | WI | | — | | 266 | | 2,787 | | — | | — | | 266 | | 2,787 | | 3,053 | | 311 | | 2002 | | 2017 | | 15-39 | Fond du Lac | | WI | | — | | 120 | | 658 | | — | | — | | 120 | | 658 | | 778 | | 80 | | 2006 | | 2017 | | 15-39 | Green Bay | | WI | | — | | 398 | | 9,087 | | — | | 2 | | 398 | | 9,089 | | 9,487 | | 862 | | 1992 | | 2017 | | 15-39 | Manitowoc | | WI | | — | | 293 | | 2,926 | | — | | — | | 293 | | 2,926 | | 3,219 | | 312 | | 1993 | | 2017 | | 15-39 | Boynton Beach | | FL | | — | | 960 | | 2,803 | | — | | 10 | | 960 | | 2,813 | | 3,773 | | 547 | | 2007 | | 2017 | | 7-39 | Jacksonville | | FL | | — | | 444 | | 2,179 | | — | | — | | 444 | | 2,179 | | 2,623 | | 507 | | 2008 | | 2017 | | 7-39 | Jacksonville | | FL | | — | | 319 | | 2,191 | | — | | — | | 319 | | 2,191 | | 2,510 | | 361 | | 1999 | | 2017 | | 7-39 | Miami Gardens | | FL | | — | | 803 | | 2,181 | | — | | — | | 803 | | 2,181 | | 2,984 | | 497 | | 2009 | | 2017 | | 7-39 | Orange Park | | FL | | — | | 365 | | 2,471 | | — | | — | | 365 | | 2,471 | | 2,836 | | 670 | | 2006 | | 2017 | | 7-39 | Milton | | FL | | — | | 505 | | 1,994 | | — | | — | | 505 | | 1,994 | | 2,499 | | 478 | | 2005 | | 2017 | | 7-39 |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Wichita | | KS | | — | | 488 | | 2,135 | | — | | — | | 488 | | 2,135 | | 2,623 | | 473 | | 2008 | | 2017 | | 7-39 | Tulsa | | OK | | — | | 113 | | 1,890 | | — | | — | | 113 | | 1,890 | | 2,003 | | 457 | | 2008 | | 2017 | | 7-39 | Alcoa | | TN | | — | | 751 | | 1,829 | | — | | — | | 751 | | 1,829 | | 2,580 | | 470 | | 1993 | | 2017 | | 7-39 | Wichita | | KS | | — | | 233 | | 2,443 | | — | | — | | 233 | | 2,443 | | 2,676 | | 311 | | 2006 | | 2018 | | 7-39 | Wichita | | KS | | — | | 206 | | 2,262 | | — | | — | | 206 | | 2,262 | | 2,468 | | 312 | | 2006 | | 2018 | | 7-39 | Wichita | | KS | | — | | 234 | | 1,761 | | — | | — | | 234 | | 1,761 | | 1,995 | | 279 | | 2008 | | 2018 | | 7-39 | Texarkana | | TX | | — | | 139 | | 3,211 | | — | | (1) | | 139 | | 3,210 | | 3,349 | | 378 | | 2016 | | 2018 | | 7-39 | Pace | | FL | | — | | 215 | | 2,955 | | — | | — | | 215 | | 2,955 | | 3,170 | | 395 | | 2015 | | 2018 | | 7-39 | Hoosick Falls | | NY | | — | | 78 | | 1,612 | | — | | — | | 78 | | 1,612 | | 1,690 | | 176 | | 2012 | | 2017 | | 15-39 | Hadley | | NY | | — | | 100 | | 1,586 | | — | | — | | 100 | | 1,586 | | 1,686 | | 180 | | 2014 | | 2017 | | 15-39 | Cairo | | NY | | — | | 106 | | 1,609 | | — | | — | | 106 | | 1,609 | | 1,715 | | 161 | | 2014 | | 2017 | | 15-39 | Bridgewater | | NY | | — | | 241 | | 1,482 | | — | | — | | 241 | | 1,482 | | 1,723 | | 164 | | 2014 | | 2017 | | 15-39 | Valatie | | NY | | — | | 102 | | 1,720 | | — | | — | | 102 | | 1,720 | | 1,822 | | 173 | | 2014 | | 2017 | | 15-39 | Wurtsboro | | NY | | — | | 83 | | 1,640 | | — | | — | | 83 | | 1,640 | | 1,723 | | 177 | | 2014 | | 2017 | | 15-39 | Ellenburg Center | | NY | | — | | 133 | | 1,595 | | — | | — | | 133 | | 1,595 | | 1,728 | | 165 | | 2014 | | 2017 | | 15-39 | Marion | | NY | | — | | 149 | | 1,457 | | — | | — | | 149 | | 1,457 | | 1,606 | | 140 | | 2013 | | 2017 | | 15-39 | Oswego | | NY | | — | | 124 | | 1,636 | | — | | — | | 124 | | 1,636 | | 1,760 | | 165 | | 2015 | | 2017 | | 15-39 | Cincinnati | | OH | | — | | 367 | | 1,168 | | — | | — | | 367 | | 1,168 | | 1,535 | | 111 | | 2014 | | 2017 | | 15-39 | Dayton | | OH | | — | | 249 | | 1,240 | | — | | — | | 249 | | 1,240 | | 1,489 | | 125 | | 2013 | | 2017 | | 15-39 | West Alexandria | | OH | | — | | 371 | | 1,108 | | — | | — | | 371 | | 1,108 | | 1,479 | | 107 | | 2011 | | 2017 | | 15-39 | Sheffield | | MA | | — | | 109 | | 1,687 | | — | | 6 | | 109 | | 1,693 | | 1,802 | | 153 | | 2015 | | 2017 | | 15-39 | Cedar Hill | | TX | | — | | 501 | | 1,842 | | — | | — | | 501 | | 1,842 | | 2,343 | | 165 | | 2015 | | 2017 | | 15-39 | Bear | | DE | | — | | 398 | | 2,164 | | — | | 6 | | 398 | | 2,170 | | 2,568 | | 200 | | 2017 | | 2017 | | 15-39 | Smyrna | | DE | | — | | 1,366 | | 2,708 | | — | | — | | 1,366 | | 2,708 | | 4,074 | | 314 | | 2016 | | 2017 | | 15-39 | North Fort Myers | | FL | | — | | 1,011 | | 3,353 | | — | | 6 | | 1,011 | | 3,359 | | 4,370 | | 386 | | 2015 | | 2017 | | 15-39 | Downers Grove | | IL | | — | | 757 | | 6,454 | | — | | — | | 757 | | 6,454 | | 7,211 | | 48 | | 1974 | | 2018 | | 15-39 | Benzonia | | MI | | — | | 89 | | 3,009 | | — | | — | | 89 | | 3,009 | | 3,098 | | 230 | | 2014 | | 2018 | | 15-39 | Flushing | | MI | | — | | 201 | | 2,863 | | — | | — | | 201 | | 2,863 | | 3,064 | | 225 | | 2014 | | 2018 | | 15-39 | Anderson | | SC | | — | | 312 | | 4,113 | | — | | 3 | | 312 | | 4,116 | | 4,428 | | 271 | | 2008 | | 2018 | | 15-39 | Elizabethton | | TN | | — | | 270 | | 4,077 | | — | | — | | 270 | | 4,077 | | 4,347 | | 258 | | 2005 | | 2018 | | 15-39 | Greeneville | | TN | | — | | 117 | | 4,122 | | — | | — | | 117 | | 4,122 | | 4,239 | | 263 | | 2003 | | 2018 | | 15-39 | Lexington | | SC | | — | | 219 | | 898 | | — | | — | | 219 | | 898 | | 1,117 | | 70 | | 2015 | | 2018 | | 15-39 | Lexington | | SC | | — | | 348 | | 714 | | — | | — | | 348 | | 714 | | 1,062 | | 55 | | 2015 | | 2018 | | 15-39 | Orangeburg | | SC | | — | | 238 | | 3,323 | | — | | — | | 238 | | 3,323 | | 3,561 | | 242 | | 2006 | | 2018 | | 15-39 | West Columbia | | SC | | — | | 296 | | 1,140 | | — | | — | | 296 | | 1,140 | | 1,436 | | 80 | | 2016 | | 2018 | | 15-39 | Big Spring | | TX | | — | | 465 | | 2,363 | | — | | 1 | | 465 | | 2,364 | | 2,829 | | 142 | | 2008 | | 2018 | | 15-39 |
| | | | | | | | | | Costs Capitalized | | | | | | | | | | | | | | Life on | | | | | | | Initial Costs to | | Subsequent | | Gross Amount at Which Carried at | | | | | | | | Which | | | | | | | Company(A) | | to Acquisition | | Close of Period | | | | | | | | Depreciation | | | | | | | | | Buildings and | | | | | | | | Buildings and | | | | Accumulated | | Date of | | Date | | is Computed | City | | State | | Encumbrance | | Land | | Improvements | | Land | | Improvements | | Land | | Improvements | | Total(B) | | Depreciation | | Construction | | Acquired | | (Years) | Cuero | | TX | | — | | 472 | | 2,285 | | — | | 1 | | 472 | | 2,286 | | 2,758 | | 148 | | 2010 | | 2018 | | 15-39 | Berry | | AL | | — | | 120 | | 864 | | — | | — | | 120 | | 864 | | 984 | | 44 | | 2014 | | 2019 | | 15-39 | Jacksonville | | FL | | — | | 116 | | 1,132 | | — | | — | | 116 | | 1,132 | | 1,248 | | 58 | | 2014 | | 2019 | | 15-39 | Albany | | GA | | — | | 168 | | 1,067 | | — | | — | | 168 | | 1,067 | | 1,235 | | 55 | | 2014 | | 2019 | | 15-39 | Rex | | GA | | — | | 330 | | 1,328 | | — | | — | | 330 | | 1,328 | | 1,658 | | 71 | | 2014 | | 2019 | | 15-39 | North Charleston | | SC | | — | | 215 | | 1,259 | | — | | — | | 215 | | 1,259 | | 1,474 | | 63 | | 2014 | | 2019 | | 15-39 | Apple Springs | | TX | | — | | 99 | | 838 | | — | | — | | 99 | | 838 | | 937 | | 44 | | 2014 | | 2019 | | 15-39 | Dawson | | TX | | — | | 81 | | 824 | | — | | — | | 81 | | 824 | | 905 | | 43 | | 2014 | | 2019 | | 15-39 | San Antonio | | TX | | — | | 215 | | 1,178 | | — | | — | | 215 | | 1,178 | | 1,393 | | 61 | | 2014 | | 2019 | | 15-39 | Monroe | | UT | | — | | 141 | | 1,132 | | — | | — | | 141 | | 1,132 | | 1,273 | | 60 | | 2014 | | 2019 | | 15-39 | Broadway | | VA | | — | | 212 | | 1,203 | | — | | — | | 212 | | 1,203 | | 1,415 | | 62 | | 2014 | | 2019 | | 15-39 | Tyler | | MN | | — | | 81 | | 905 | | — | | — | | 81 | �� | 905 | | 986 | | 46 | | 2014 | | 2019 | | 15-39 | Preston | | MN | | — | | 182 | | 1,239 | | — | | — | | 182 | | 1,239 | | 1,421 | | 64 | | 2014 | | 2019 | | 15-39 | Rushford | | MN | | — | | 137 | | 850 | | — | | — | | 137 | | 850 | | 987 | | 47 | | 2014 | | 2019 | | 15-39 | Lorain | | OH | | — | | 120 | | 1,311 | | — | | — | | 120 | | 1,311 | | 1,431 | | 68 | | 2014 | | 2019 | | 15-39 | Bagley | | MN | | — | | 123 | | 1,135 | | — | | — | | 123 | | 1,135 | | 1,258 | | 61 | | 2014 | | 2019 | | 15-39 | Greenwood | | WI | | — | | 116 | | 1,048 | | — | | — | | 116 | | 1,048 | | 1,164 | | 52 | | 2013 | | 2019 | | 15-39 | Cass Lake | | MN | | — | | 175 | | 1,218 | | — | | — | | 175 | | 1,218 | | 1,393 | | 65 | | 2013 | | 2019 | | 15-39 | Wild Rose | | WI | | — | | 126 | | 852 | | — | | — | | 126 | | 852 | | 978 | | 45 | | 2013 | | 2019 | | 15-39 | Comanche | | TX | | — | | 189 | | 1,207 | | — | | — | | 189 | | 1,207 | | 1,396 | | 64 | | 2014 | | 2019 | | 15-39 | Levelland | | TX | | — | | 147 | | 1,111 | | — | | — | | 147 | | 1,111 | | 1,258 | | 60 | | 2014 | | 2019 | | 15-39 | Saginaw | | MI | | — | | 137 | | 1,211 | | — | | — | | 137 | | 1,211 | | 1,348 | | 65 | | 2014 | | 2019 | | 15-39 | Des Moines | | IA | | — | | 186 | | 1,321 | | — | | — | | 186 | | 1,321 | | 1,507 | | 69 | | 2014 | | 2019 | | 15-39 | Georgetown | | KY | | — | | 279 | | 1,382 | | — | | — | | 279 | | 1,382 | | 1,661 | | 73 | | 2014 | | 2019 | | 15-39 | Davenport | | IA | | — | | 104 | | 1,074 | | — | | — | | 104 | | 1,074 | | 1,178 | | 55 | | 2014 | | 2019 | | 15-39 | Grand Ledge | | MI | | — | | 307 | | 2,794 | | — | | — | | 307 | | 2,794 | | 3,101 | | 126 | | 2002 | | 2019 | | 15-39 | Lansing | | MI | | — | | 140 | | 2,836 | | — | | — | | 140 | | 2,836 | | 2,976 | | 127 | | 2011 | | 2019 | | 15-39 | Williamsburg | | KY | | — | | 214 | | 2,880 | | — | | — | | 214 | | 2,880 | | 3,094 | | 136 | | 2011 | | 2019 | | 15-39 | Buckeye | | AZ | | — | | 444 | | 3,478 | | — | | — | | 444 | | 3,478 | | 3,922 | | 125 | | 2014 | | 2019 | | 15-39 | Tucson | | AZ | | — | | 802 | | 3,496 | | — | | — | | 802 | | 3,496 | | 4,298 | | 111 | | 2014 | | 2019 | | 15-39 | Laurel | | MS | | — | | 272 | | 2,938 | | — | | — | | 272 | | 2,938 | | 3,210 | | 107 | | 2012 | | 2019 | | 15-39 | Tyler | | TX | | — | | 462 | | 6,242 | | — | | — | | 462 | | 6,242 | | 6,704 | | 216 | | 2006 / 2016 | | 2019 | | 15-39 | Edgewood | | NM | | — | | 575 | | 3,021 | | — | | — | | 575 | | 3,021 | | 3,596 | | 100 | | 2012 | | 2019 | | 15-39 | Southaven | | MS | | — | | 2,138 | | 3,053 | | — | | — | | 2,138 | | 3,053 | | 5,191 | | 4 | | 2005 / 2011 | | 2020 | | 15-39 | Acquisitions in Progress(C) | | — | | — | | 26 | | — | | — | | — | | 26 | | 26 | | | | | | | | | Total(D) | | | | $107,667 | | $555,046 | | $3,093,025 | | $702 | | $55,715 | | $555,748 | | $3,148,740 | | $3,704,488 | | $349,977 | | | | | | |
Notes:
| (A) | (A)
| The initial cost to the Company represents the original purchase price of the property (see Note 5). |
| (B) | (B)
| The aggregate cost of real estate owned as of December 31, 20202021 for U.S. federal income tax purposes was approximately $3,900,000. $4.4 billion. |
| (C) | (C)
| Acquisition costs in progress represents costs incurred during the year ended December 31, 20202021 related to asset acquisitions expected to close during the year ended December 31, 2021. 2022. |
| (D) | (D)
| This schedule excludes properties subject to leases that are classified as direct financing leases, sales-type leases, as well as the value of right-of-use assets recorded on certain of the properties where the Company is lessee under a ground lease. |
Change in Total Real Estate Assets
| | For the Year Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | Balance, beginning of period | | $ | 3,686,444 | | | $ | 2,848,735 | | | $ | 2,334,524 | | Acquisitions and building improvements | | | 108,868 | | | | 984,760 | | | | 568,036 | | Dispositions | | | (69,941 | ) | | | (143,688 | ) | | | (51,950 | ) | Impairment | | | (20,883 | ) | | | (3,363 | ) | | | (1,875 | ) | Balance, end of period | | $ | 3,704,488 | | | $ | 3,686,444 | | | $ | 2,848,735 | |
| | | For the Year Ended December 31, | | | | | | | | | | | | | | Balance, beginning of period | | $ | 3,704,488 | | | $ | 3,686,444 | | | $ | 2,848,735 | | | Acquisitions and building improvements | | | 613,646 | | | | 108,868 | | | | 984,760 | | | Dispositions | | | (109,761 | ) | | | (69,941 | ) | | | (143,688 | ) | | Impairment | | | (3,182 | ) | | | (20,883 | ) | | | (3,363 | ) | | | | | | | | | | | | | | | | Balance, end of period | | $ | 4,205,191 | | | $ | 3,704,488 | | | $ | 3,686,444 | | | | | | | | | | | | | | | |
Change in Accumulated Depreciation | | For the Year Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | Balance, beginning of period | | $ | 271,044 | | | $ | 206,989 | | | $ | 148,383 | | Acquisitions and building improvements | | | 93,741 | | | | 83,797 | | | | 66,156 | | Dispositions | | | (12,369 | ) | | | (19,317 | ) | | | (7,376 | ) | Impairment | | | (2,439 | ) | | | (425 | ) | | | (174 | ) | Balance, end of period | | $ | 349,977 | | | $ | 271,044 | | | $ | 206,989 | |
| | | For the Year Ended December 31, | | | | | | | | | | | | | | Balance, beginning of period | | $ | 349,977 | | | $ | 271,044 | | | $ | 206,989 | | | Acquisitions and building improvements | | | 100,878 | | | | 93,741 | | | | 83,797 | | | Dispositions | | | (19,543 | ) | | | (12,369 | ) | | | (19,317 | ) | | Impairment | | | (1,171 | ) | | | (2,439 | ) | | | (425 | ) | | | | | | | | | | | | | | | | Balance, end of period | | $ | 430,141 | | | $ | 349,977 | | | $ | 271,044 | | | | | | | | | | | | | | | |
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of and for the year ended December 31, 2020,2021, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and were operating at a reasonable assurance level. Management's
Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Control—Integrated Framework (2013) 2020.2021. The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report in this Annual Report on Form 10-K. Changes in Internal Control Over Financial Reporting There have been no changes in our internal control over financial reporting during the quarter ended December 31, 20202021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Broadstone Net Lease, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Broadstone Net Lease, Inc. and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established inInternal Control—Integrated Framework (2013) Internal Control—Integrated Framework (2013) We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated February 23, 2022, expressed an unqualified opinion on those financial statements. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP
| Disclosure Regarding Foreign Jurisdictions That Prevent Inspections. |
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Directors, Executive Officers, and Corporate Governance. |
The information required by this Item will be included in the definitive proxy statement and is incorporated herein by reference. The Company will file such definitive proxy statement with the SEC pursuant to Regulation 14A no later than 120 days after the end of the Company’s 20202021 fiscal year covered by this Annual Report on Form 10-K. The information required by this Item will be included in the definitive proxy statement and is incorporated herein by reference. The Company will file such definitive proxy statement with the SEC pursuant to Regulation 14A no later than 120 days after the end of the Company’s 20202021 fiscal year covered by this Annual Report on Form 10-K.
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Security Ownership of Certain Beneficial Owners and Management. |
The information required by this Item will be included in the definitive proxy statement and is incorporated herein by reference. The Company will file such definitive proxy statement with the SEC pursuant to Regulation 14A no later than 120 days after the end of the Company’s 20202021 fiscal year covered by this Annual Report on Form 10-K.
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Certain Relationships and Related Transactions and Director Independence. |
The information required by this Item will be included in the definitive proxy statement and is incorporated herein by reference. The Company will file such definitive proxy statement with the SEC pursuant to Regulation 14A no later than 120 days after the end of the Company’s 20202021 fiscal year covered by this Annual Report on Form 10-K.
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Principal Accountant Fees and Services. |
The information required by this Item will be included in the definitive proxy statement and is incorporated herein by reference. The Company will file such definitive proxy statement with the SEC pursuant to Regulation 14A no later than 120 days after the end of the Company’s 20202021 fiscal year covered by this Annual Report on Form 10-K.
| Exhibits and Financial Statement Schedules. |
See Item 8. “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Financial Statement Schedules See Item 8. “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. All other schedules are omitted because they are not applicable or because the required information is shown in the financial statements or the notes thereto.
Exhibit No.
| | Description
| | | | 3.1
| | | 3.1 | | | | | | 3.2 | | | | | | 3.3 | | | | | | 3.4 | | | | | | 3.5 | | | | | | 4.1* | | | | | | 10.1
4.2 | | | | | | 4.3 | | | | | | 10.1 | | | | | | 10.2* | | | | | | 10.3 | | | | | | 10.4 | | Note and Guaranty Agreement, dated March 16, 2017, for 4.84% Guaranteed Senior Notes due April 18, 2027, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, and the purchasers party thereto (filed as Exhibit 10.23 to the Company’s Registration Statement on Form 10 filed April 24, 2017 and incorporated herein by reference) | | | | 10.5 | | Revolving Credit and Term Loan Agreement, dated as of June 23, 2017, by and among Broadstone Net Lease, LLC, Broadstone Net Lease, Inc., Manufacturers and Traders Trust Company, as administrative agent, and the lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 29, 2017, and incorporated herein by reference) | | | | 10.6 | | Consent and Agreement Regarding Commitment Increases and Additional Term Loans, dated as of November 20, 2017, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Manufacturers and Traders Trust Company, as administrative agent, and the lenders party thereto (filed as Exhibit 10.1 onto the Company’s Current Report on Form 8-K filed November 27, 2017, and incorporated herein by reference) |
| | | | 10.7 | | | 10.7
| | | | | | 10.8 | | Second Amendment to Revolving Credit and Term Loan Agreement, dated as of July 1, 2019, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Manufacturers and Traders Trust Company, and other parties thereto (filed as Exhibit 10.1 onto the Company’s Current Report on Form 8-K filed July 3, 2019, and incorporated herein by reference) | | | | 10.9 | | Third Amendment to Revolving Credit and Term Loan Agreement, dated as of September 21, 2020, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Manufacturers and Traders Trust Company, and other parties thereto (filed as Exhibit 10.4 onto the Company’s Current Report on Form 8-K filed September 21, 2020, and incorporated herein by reference) |
Exhibit No.
| | Description
| | | | | 10.10 | | | 10.10
| | Note and Guaranty Agreement, dated July 2, 2018, for 5.09% Series B Guaranteed Senior Notes due July 2, 2028 and 5.19% Series C Guaranteed Senior Notes due July 2, 2030, by and amountamong Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, and the purchasers party thereto (filed as Exhibit 10.1 onto the Company’s Current Report on Form 8-K filed July 6, 2018, and incorporated herein by reference) | | | | 10.11 | | Term Loan Agreement, dated February 27, 2019, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Capital One, National Association, and the other parties thereto (“Capital One Term Loan Agreement”) (filed as Exhibit 10.1 onto the Company’s Current Report on Form 8-K filed March 5, 2019, and incorporated herein by reference) | | | | 10.12 | | | | | | 10.13 | | First Amendment to Capital One Term Loan Agreement, dated July 1, 2019, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, Capital One, National Association, and the other parties thereto (filed as Exhibit 10.1 onto the Company’s Quarterly Report on Form 10-Q filed November 12, 2019, and incorporated herein by reference) | | | | 10.14 | | Second Amendment to Capital One Term Loan Agreement, dated September 21, 2020, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, Capital One, National Association, and the other parties thereto (filed as Exhibit 10.3 onto the Company’s Current Report on Form 8-K filed September 21, 2020, and incorporated herein by reference) | | | | 10.15 | | Third Amendment to Capital One Term Loan Agreement, dated March 12, 2021, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, Capital One, National Association, and the other parties thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 18, 2021, and incorporated by reference) | | | | 10.16 | | Term Loan Agreement, dated February 7, 2020, by and among Broadstone Net Lease, LLC, Broadstone Net Lease, Inc., JPMorgan Chase Bank, N.A., and the other lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 7, 2020 and incorporated herein by reference) | | | | 10.16
10.17 | | Guaranty, dated February 7, 2020, by Broadstone Net Lease, Inc. in favor of JPMorgan Chase Bank, N.A (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed February 7, 2020 and incorporated by reference) | | | | 10.17
10.18 | | Amendment No.1 to Term Loan Agreement, dated September 21, 2020, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, JP Morgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed September 21, 2020 and incorporated herein by reference) |
| | | | 10.19 | | | 10.18
| | Revolving Credit Agreement, dated as of September 4, 2020, by and among Broadstone Net Lease, LLC, Broadstone Net Lease, Inc., JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 11, 2020 and incorporated by reference) | | | | 10.19
10.20 | | Guaranty, dated September 4, 2020, by Broadstone Net Lease, Inc. in favor of JPMorgan Chase Bank, N.A (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed September 11, 2020 and incorporated by reference) | | | | 10.20
10.21 | | Amended and Restated Revolving Credit Agreement, dated as of January 28, 2022, by and among, Broadstone Net Lease, LLC, Broadstone Net Lease, Inc., JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 3, 2022 and incorporated by reference) | | | | 10.22 | | Guaranty, dated January 28, 2022, by Broadstone Net Lease, Inc. in favor of JPMorgan Chase Bank, N.A (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed February 3, 2022 and incorporated by reference) | | | | 10.23 | | | | | | 10.21
10.24 | | | | | | 10.22+
10.25+ | | Amended and Restated Employment Agreement, effective February 7, 2020, by and betweenamong Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Broadstone Employee Sub, LLC, and Christopher J. Czarnecki (filed as Exhibit 10.7 to the Company’s Current Report on Form 8-K filed February 7, 2020 and incorporated herein by reference) |
Exhibit No.
| | Description
| | | | 10.23+
10.26+ | | Amended and Restated Employment Agreement, effective February 7, 2020, by and betweenamong Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Broadstone Employee Sub, LLC, and Ryan M. Albano (filed as Exhibit 10.8 to the Company’s Current Report on Form 8-K filed February 7, 2020 and incorporated herein by reference) | | | | 10.24+
10.27+ | | Amended and Restated Employment Agreement, effective February 7, 2020, by and betweenamong Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Broadstone Employee Sub, LLC, and Sean T. Cutt (filed as Exhibit 10.9 to the Company’s Current Report on Form 8-K filed February 7, 2020 and incorporated herein by reference) | | | | 10.25+
10.28+ | | Amended and Restated Employment Agreement, effective February 7, 2020, by and betweenamong Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Broadstone Employee Sub, LLC, and John D. Moragne (filed as Exhibit 10.10 to the Company’s Current Report on Form 8-K filed February 7, 2020 and incorporated herein by reference) | | | | 10.26+
10.29+ | | | | | | 10.27+
10.30+ | | | | | | 21.1* | | | | | | 23.1* | | |
+ | Management contract or compensatory plan or arrangement. |
† | In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference. |
Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. | | | | | | | | | | | | | BROADSTONE NET LEASE, INC. | | | | | Date: February 25, 2021 23, 2022 | | | | | | /s/ Christopher J. Czarnecki | | | | | | | Christopher J. Czarnecki | | | | | | | Chief Executive Officer and President |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. | | | | | | | Date: February 25, 202123, 2022 | | | | | | /s/ Amy L. TaitLaurie A. Hawkes | | | Amy L. Tait
| | | | Laurie A. Hawkes | | | | | | | Chairman of the Board of Directors | | | | | Date: February 25, 2021 23, 2022 | | | | | | /s/ Christopher J. Czarnecki | | | | | | | Christopher J. Czarnecki | | | | | | | Director, Chief Executive Officer and President (Principal (Principal Executive Officer)
| | | | | Date: February 25, 2021 23, 2022 | | | | | | /s/Laurie A. Hawkes Denise Brooks-Williams | | | Laurie A. Hawkes
| | | | Denise Brooks-Williams | | | | | | | Director | | | | | Date: February 25, 2021 23, 2022 | | | | | | /s/ Michael A. Coke | | | | | | | Michael A. Coke | | | | | | | Director | | | | | | Date: February 23, 2022 | | | | | | /s/ David M. Jacobstein | | | | | | | David M. Jacobstein | | | | | | | Director | | | | | Date: February 25, 2021 23, 2022 | | | | | | /s/ Agha S. Khan | | | | | | | Agha S. Khan | | | | | | | Director | | | | | Date: February 25, 2021 23, 2022 | | | | | | /s/ Shekar Narasimhan | | | | | | | Shekar Narasimhan | | | | | | | Director | | | | | Date: February 25, 2021 23, 2022 | | | | | | /s/ Geoffrey H. Rosenberger | | | | | | | Geoffrey H. Rosenberger | | | | | | | Director | | | | | Date: February 25, 2021 23, 2022 | | | | | | /s/ James H. Watters | | | | | | | James H. Watters | | | | | | | Director |
| | | | | | | | | | Date: February 25, 2021 23, 2022 | | | | | | /s/ Ryan M. Albano | | | | | | | Ryan M. Albano | | | | | | | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | | | | | Date: February 25, 2021 23, 2022 | | | | | | /s/ Timothy D. Dieffenbacher | | | | | | | Timothy D. Dieffenbacher | | | | | | | Senior Vice President, Chief Accounting Officer and Treasurer (Principal Accounting Officer) |
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