VEREIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)


	Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities:
Net income (loss)	$	239,085	$	(378,274)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	353,400		379,133
Gain on real estate assets, net	(77,117)		(251,106)

Impairments	36,871		24,240
Equity-based compensation	10,137		9,899
Equity in income of unconsolidated entities	(2,406)		(1,682)
Distributions from unconsolidated entities	1,753		130
Loss on investments	607		492
Loss on derivative instruments	0		58
Non-cash restructuring expense	0		3,999
Loss on extinguishment and forgiveness of debt, net	1,419		497
Surrender of Limited Partner OP Units	0		(26,536)
Changes in assets and liabilities:
Investment in direct financing leases	1,117		1,230
Rent and tenant receivables, operating lease right-of-use and other assets, net	(38,277)		(17,234)


Accounts payable and accrued expenses	(9,645)		786,839
Deferred rent, operating lease and other liabilities	(2,936)		(26,460)


Net cash provided by operating activities	514,008		505,225
Cash flows from investing activities:
Investments in real estate assets	(147,121)		(251,804)
Capital expenditures and leasing costs	(21,102)		(27,309)
Real estate developments	(16,592)		(17,274)
Principal repayments received on mortgage notes receivable	0		106
Investments in unconsolidated entities	(21,348)		(2,767)
Return of investment from unconsolidated entities	1,961		154
Proceeds from disposition of real estate	346,675		846,023


Investment in leasehold improvements and other assets	(612)		(1,417)
Deposits for real estate assets	(1,973)		(5,238)
Investments in mezzanine position	(9,959)		0
Proceeds from sale of investments and other assets	0		9,837
Uses and refunds of deposits for real estate assets	4,036		3,562
Proceeds from the settlement of property-related insurance claims	654		473


Net cash provided by investing activities	134,619		554,346
Cash flows from financing activities:
Proceeds from mortgage notes payable	1,032		0
Payments on mortgage notes payable and other debt, including debt extinguishment costs	(197,382)		(182,648)
Proceeds from credit facility	902,000		1,061,000
Payments on credit facility	(1,052,000)		(564,000)
Proceeds from corporate bonds	594,864		0
Redemptions of corporate bonds, including extinguishment costs	(26)		(750,000)

Repurchases of convertible notes, including extinguishment costs	(69,362)		0
Payments of deferred financing costs	(7,275)		(181)



Repurchases of Common Stock to settle tax obligations	(2,386)		(1,618)

Six Months Ended June 30,
2020 2019
Cash flows from operating activities:
Net income $ 141,102
$ 363,255
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 240,902
260,771
Gain on real estate assets, net (34,303 ) (232,597 )
Impairments 20,474
20,296
Equity-based compensation 6,926
6,755
Equity in income of unconsolidated entities (1,743 ) (1,005 )
Distributions from unconsolidated entities 861
—
Loss on investments 683
464
Loss on derivative instruments —
58
Non-cash restructuring expense —
4,048
Loss on extinguishment and forgiveness of debt, net 1,480
1,472
Surrender of Limited Partner OP Units —
(26,536 )
Changes in assets and liabilities:
Investment in direct financing leases 736
821
Rent and tenant receivables, operating lease right-of-use and other assets, net (30,158 ) (9,596 )
Accounts payable and accrued expenses (13,870 ) (13,104 )
Deferred rent, operating lease and other liabilities (12,138 ) (27,084 )
Net cash provided by operating activities 320,952
348,018
Cash flows from investing activities:
Investments in real estate assets (147,121 ) (191,550 )
Capital expenditures and leasing costs (15,665 ) (19,695 )
Real estate developments (6,469 ) (10,537 )
Principal repayments received on mortgage notes receivable —
88
Investments in unconsolidated entities (10,066 ) (2,767 )
Return of investment from unconsolidated entities 970
—
Proceeds from disposition of real estate 204,114
739,873
Investment in leasehold improvements and other assets (314 ) (798 )
Deposits for real estate assets (1,420 ) (3,072 )
Investments in mezzanine position (9,959 ) —
Proceeds from sale of investments and other assets —
8,199
Uses and refunds of deposits for real estate assets 4,036
2,946
Proceeds from the settlement of property-related insurance claims 48
334
Net cash provided by investing activities 18,154
523,021
Cash flows from financing activities:
Proceeds from mortgage notes payable 1,032
—
Payments on mortgage notes payable and other debt, including debt extinguishment costs (135,036 ) (175,962 )
Proceeds from credit facility 902,000
1,034,000
Payments on credit facility (1,052,000 ) (537,000 )
Proceeds from corporate bonds 594,864
—
Redemptions of corporate bonds, including extinguishment costs (26 ) (750,000 )
Repurchases of convertible notes, including extinguishment costs (50,326 ) —
Payments of deferred financing costs (6,946 ) (182 )
Repurchases of Common Stock to settle tax obligations (2,378 ) (1,604 )
Proceeds from the issuance of Common Stock, net of underwriters’ discount and offering expenses —
42,078
Series F Preferred Stock redemption expenses (52 ) —
Contributions from non-controlling interest holders —
64
Distributions paid (324,032 ) (303,894 )
Net cash used in financing activities (72,900 ) (692,500 )
Net change in cash and cash equivalents and restricted cash $ 266,206
$ 178,539

Table of Contents

VEREIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)

(In thousands) (Unaudited)


	Nine Months Ended September 30,
	2020		2019
Proceeds from the issuance of Common Stock, net of underwriters’ discount and offering expenses	$	89,279	$	929,004
Redemption of Series F Preferred Stock	(300,104)		(100,096)
Redemption of Limited Partners’ Common OP Units	(149)		0
Contributions from non-controlling interest holders	0		64
Distributions paid	(418,722)		(454,702)

Net cash used in financing activities	(460,231)		(63,177)
Net change in cash and cash equivalents and restricted cash	$	188,396	$	996,394



Cash and cash equivalents and restricted cash, beginning of period	$	33,880	$	53,663



Cash and cash equivalents and restricted cash, end of period	$	222,276	$	1,050,057

Reconciliation of Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents at beginning of period	$	12,921	$	30,758
Restricted cash at beginning of period	20,959		22,905
Cash and cash equivalents and restricted cash at beginning of period	33,880		53,663

Cash and cash equivalents at end of period	207,321		1,029,315
Restricted cash at end of period	14,955		20,742
Cash and cash equivalents and restricted cash at end of period	$	222,276	$	1,050,057

Six Months Ended June 30,
2020 2019
Cash and cash equivalents and restricted cash, beginning of period $ 33,880
$ 53,663

Cash and cash equivalents and restricted cash, end of period $ 300,086
$ 232,202

Reconciliation of Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents at beginning of period $ 12,921
$ 30,758
Restricted cash at beginning of period 20,959
22,905
Cash and cash equivalents and restricted cash at beginning of period 33,880
53,663

Cash and cash equivalents at end of period 278,883
211,510
Restricted cash at end of period 21,203
20,692
Cash and cash equivalents and restricted cash at end of period $ 300,086
$ 232,202

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for unit data) (Unaudited)


	September 30, 2020		December 31, 2019
ASSETS
Real estate investments, at cost:
Land	$	2,691,122	$	2,738,679
Buildings, fixtures and improvements	10,046,076		10,200,550
Intangible lease assets	1,872,899		1,904,641
Total real estate investments, at cost	14,610,097		14,843,870
Less: accumulated depreciation and amortization	3,829,368		3,594,247
Total real estate investments, net	10,780,729		11,249,623
Operating lease right-of-use assets	205,346		215,227
Investment in unconsolidated entities	100,339		68,825
Cash and cash equivalents	207,321		12,921
Restricted cash	14,955		20,959
Rent and tenant receivables and other assets, net	391,239		348,395
Goodwill	1,337,773		1,337,773

Real estate assets held for sale, net	1,896		26,957
Total assets	$	13,039,598	$	13,280,680

LIABILITIES AND EQUITY
Mortgage notes payable, net	$	1,330,174	$	1,528,134
Corporate bonds, net	3,406,389		2,813,739
Convertible debt, net	252,077		318,183
Credit facility, net	896,630		1,045,669
Below-market lease liabilities, net	124,009		143,583
Accounts payable and accrued expenses	112,101		126,320
Derivative, deferred rent and other liabilities	162,952		90,349
Distributions payable	85,420		150,364


Operating lease liabilities	214,102		221,061
Total liabilities	6,583,854		6,437,402
Commitments and contingencies (Note 10)
General Partner's preferred equity, 18,871,246 and 30,871,246 General Partner Series F Preferred Units issued and outstanding as of September 30, 2020 and December 31, 2019, respectively	123,794		460,504
General Partner's common equity, 1,091,242,138 and 1,076,845,984 General Partner OP Units issued and outstanding as of September 30, 2020 and December 31, 2019, respectively	6,324,807		6,375,239
Limited Partner's preferred equity, 49,766 Limited Partner Series F Preferred Units issued and outstanding as of each of September 30, 2020 and December 31, 2019, respectively	1,809		1,869
Limited Partner's common equity, 760,169 and 786,719 Limited Partner OP Units issued and outstanding as of September 30, 2020 and December 31, 2019, respectively	4,130		4,433
Total partners’ equity	6,454,540		6,842,045
Non-controlling interests	1,204		1,233
Total equity	6,455,744		6,843,278
Total liabilities and equity	$	13,039,598	$	13,280,680

June 30, 2020 December 31, 2019
ASSETS
Real estate investments, at cost:
Land $ 2,705,149
$ 2,738,679
Buildings, fixtures and improvements 10,117,636
10,200,550
Intangible lease assets 1,891,831
1,904,641
Total real estate investments, at cost 14,714,616

14,843,870
Less: accumulated depreciation and amortization 3,756,132
3,594,247
Total real estate investments, net 10,958,484

11,249,623
Operating lease right-of-use assets 208,037
215,227
Investment in unconsolidated entities 86,300
68,825
Cash and cash equivalents 278,883
12,921
Restricted cash 21,203
20,959
Rent and tenant receivables and other assets, net 382,409
348,395
Goodwill 1,337,773
1,337,773
Real estate assets held for sale, net 48,093
26,957
Total assets $ 13,321,182

$ 13,280,680

LIABILITIES AND EQUITY
Mortgage notes payable, net $ 1,393,652
$ 1,528,134
Corporate bonds, net 3,404,935
2,813,739
Convertible debt, net 270,152
318,183
Credit facility, net 896,314
1,045,669
Below-market lease liabilities, net 130,208
143,583
Accounts payable and accrued expenses 112,551
126,320
Derivative, deferred rent and other liabilities 161,538
90,349
Distributions payable 85,231
150,364
Operating lease liabilities 215,322
221,061
Total liabilities 6,669,903

6,437,402
Commitments and contingencies (Note 10)

General Partner's preferred equity, 30,871,246 General Partner Series F Preferred Units issued and outstanding as of each of June 30, 2020 and December 31, 2019, respectively 434,596
460,504
General Partner's common equity, 1,077,848,554 and 1,076,845,984 General Partner OP Units issued and outstanding as of June 30, 2020 and December 31, 2019, respectively 6,209,368
6,375,239
Limited Partner's preferred equity, 49,766 Limited Partner Series F Preferred Units issued and outstanding as of each of June 30, 2020 and December 31, 2019, respectively 1,830
1,869
Limited Partner's common equity, 782,170 and 786,719 Limited Partner OP Units issued and outstanding as of June 30, 2020 and December 31, 2019, respectively 4,267
4,433
Total partners’ equity 6,650,061

6,842,045
Non-controlling interests 1,218
1,233
Total equity 6,651,279

6,843,278
Total liabilities and equity $ 13,321,182

$ 13,280,680

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per unit data) (Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues:
Rental	$	293,692	$	302,985	$	870,854	$	931,871
Fees from managed partnerships	1,586		316		2,603		498
Total revenues	295,278		303,301		873,457		932,369
Operating expenses:
Acquisition-related	1,050		1,199		3,742		3,169
Litigation and non-routine costs, net	105		832,024		(8,577)		806,763
Property operating	31,400		30,822		90,988		95,703
General and administrative	14,774		14,483		45,950		45,745
Depreciation and amortization	109,191		115,111		343,870		369,688
Impairments	16,397		3,944		36,871		24,240
Restructuring	0		783		0		10,149
Total operating expenses	172,917		998,366		512,844		1,355,457

Other (expenses) income:
Interest expense	(66,935)		(67,889)		(197,244)		(208,946)
Gain (loss) on extinguishment and forgiveness of debt, net	61		975		(1,419)		(497)
Other income, net	73		2,421		1,026		5,012
Equity in income of unconsolidated entities	663		677		2,406		1,682
Gain on disposition of real estate and real estate assets held for sale, net	42,814		18,520		76,858		251,106
Total other (expenses) income, net	(23,324)		(45,296)		(118,373)		48,357
Income (loss) before taxes	99,037		(740,361)		242,240		(374,731)
Provision for income taxes	(1,054)		(1,168)		(3,155)		(3,543)


Net income (loss)	97,983		(741,529)		239,085		(378,274)
Net loss attributable to non-controlling interests (1)	14		25		29		83
Net income (loss) attributable to OP	$	97,997	$	(741,504)	$	239,114	$	(378,191)



Basic and diluted net income (loss) per unit attributable to common unitholders	$	0.08	$	(0.76)	$	0.19	$	(0.43)

(1)Represents net loss attributable to a consolidated joint venture partner.

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Revenues:
Rental $ 278,576
$ 312,043
$ 577,162
$ 628,886
Fees from managed partnerships 421
145
1,017
182
Total revenues 278,997
312,188
578,179
629,068
Operating expenses:
Acquisition-related 1,169
985
2,692
1,970
Litigation and non-routine costs, net (118 ) (3,769 ) (8,682 ) (25,261 )
Property operating 29,098
32,503
59,588
64,881
General and administrative 16,120
16,416
31,176
31,262
Depreciation and amortization 110,599
118,022
234,679
254,577
Impairments 12,094
8,308
20,474
20,296
Restructuring —
290
—
9,366
Total operating expenses 168,962

172,755

339,927

357,091
Other (expenses) income:
Interest expense (65,613 ) (69,803 ) (130,309 ) (141,057 )
Loss on extinguishment and forgiveness of debt, net (200 ) (1,472 ) (1,480 ) (1,472 )
Other income, net 778
3,030
953
2,591
Equity in income of unconsolidated entities 1,497
505
1,743
1,005
Gain on disposition of real estate and real estate assets held for sale, net 8,795
221,755
34,044
232,586
Total other (expenses) income, net (54,743 )
154,015

(95,049 )
93,653
Income before taxes 55,292

293,448

143,203

365,630
Provision for income taxes (1,053 ) (1,164 ) (2,101 ) (2,375 )
Net income 54,239

292,284

141,102

363,255
Net loss attributable to non-controlling interests ⁽¹⁾
8
30
15
58
Net income attributable to the OP $ 54,247

$ 292,314

$ 141,117

$ 363,313

Basic and diluted net income per unit attributable to common unitholders
$ 0.04
$ 0.27
$ 0.11
$ 0.33


~~(1)~~	~~Represents net loss attributable to a consolidated joint venture partner.~~

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands) (Unaudited)

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Net income $ 54,239
$ 292,284
$ 141,102
$ 363,255
Total other comprehensive loss
Unrealized loss on interest rate derivatives (6,497 ) (16,308 ) (85,047 ) (27,594 )
Reclassification of previous unrealized loss on interest rate derivatives into net income 4,604
99
6,552
196
Total other comprehensive loss (1,893 )
(16,209 )
(78,495 )
(27,398 )

Total comprehensive income 52,346
276,075

62,607

335,857
Comprehensive loss attributable to non-controlling interests⁽¹⁾
8
30
15
58
Total comprehensive income attributable to the OP $ 52,354
$ 276,105

$ 62,622

$ 335,915


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net income (loss)	$	97,983	$	(741,529)	$	239,085	$	(378,274)
Total other comprehensive income (loss)
Unrealized gain (loss) on interest rate derivatives	3,666		(20,927)		(81,383)		(48,539)
Reclassification of previous unrealized loss on interest rate derivatives into net income	5,441		656		11,995		870


Total other comprehensive income (loss)	9,107		(20,271)		(69,388)		(47,669)

Total comprehensive income (loss)	107,090		(761,800)		169,697		(425,943)
Comprehensive loss attributable to non-controlling interests (1)	14		25		29		83
Total comprehensive income (loss) attributable to the OP	$	107,104	$	(761,775)	$	169,726	$	(425,860)


~~(1)~~	~~Represents comprehensive loss attributable to a consolidated joint venture partner.~~

(1)Represents comprehensive loss attributable to a consolidated joint venture partner.

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except for unit data) (Unaudited)


	Preferred Units						Common Units
	General Partner			Limited Partner			General Partner			Limited Partner
	Number of Units	Capital		Number of Units	Capital		Number of Units	Capital		Number of Units	Capital		Total Partners' Capital		Non-Controlling Interests		Total Capital
Balance, January 1, 2020	30,871,246	$	460,504	49,766	$	1,869	1,076,845,984	$	6,375,239	786,719	$	4,433	$	6,842,045	$	1,233	$	6,843,278

Conversion of Limited Partners' Common OP Units to General Partner's Common OP Units	—	—		—	—		4,549	45		(4,549)	(45)		—		—		0

Redemption of Series F Preferred Stock	—	(27)		—	—		—	—		—	—		(27)		—		(27)

Repurchases of common OP Units to settle tax obligation	—	—		—	—		(241,092)	(2,378)		—	—		(2,378)		—		(2,378)
Equity-based compensation, net	—	—		—	—		1,172,038	2,855		—	—		2,855		—		2,855

Distributions to Common OP Units and non-controlling interests —$0.1375 per common unit	—	—		—	—		—	(148,194)		—	(105)		(148,299)		—		(148,299)
Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—	(1,628)		—	—		(1,628)		—		(1,628)
Distributions to Series F Preferred Units	—	(12,928)		—	(19)		—	—		—	—		(12,947)		—		(12,947)

Net income (loss)	—	—		—	—		—	86,808		—	62		86,870		(7)		86,863
Other comprehensive loss	—	—		—	—		—	(76,547)		—	(55)		(76,602)		—		(76,602)
Balance, March 31, 2020	30,871,246	447,549		49,766	1,850		1,077,781,479	6,236,200		782,170	4,290		6,689,889		1,226		6,691,115



Redemption of Series F Preferred Stock	—	(25)		—	—		—	—		—	—		(25)		—		(25)


Equity-based compensation, net	—	—		—	—		67,075	4,071		—	—		4,071		—		4,071

Distributions to Common OP Units and non-controlling interests — $0.077 per common unit	—	—		—	—		—	(82,997)		—	(61)		(83,058)		—		(83,058)
Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—	(18)		—	—		(18)		—		(18)
Distributions to Series F Preferred Units	—	(12,928)		—	(20)		—	—		—	—		(12,948)		—		(12,948)
Repurchase of convertible notes	—	—		—	—		—	(204)		—	—		(204)		—		(204)
Net income (loss)	—	—		—	—		—	54,208		—	39		54,247		(8)		54,239
Other comprehensive loss	—	—		—	—		—	(1,892)		—	(1)		(1,893)		—		(1,893)
Balance, June 30, 2020	30,871,246	434,596		49,766	1,830		1,077,848,554	6,209,368		782,170	4,267		6,650,061		1,218		6,651,279
Issuance of common OP Units, net	—	—		—	—		13,296,662	89,279		—	—		89,279		—		89,279

Redemption of Limited Partners' Common OP Units	—	—		—	—		—	—		(22,001)	(149)		(149)		—		(149)

Redemption of Series F Preferred Stock	(12,000,000)	(300,052)		—	—		—	—		—	—		(300,052)		—		(300,052)

Repurchases of common OP Units to settle tax obligation	—	—		—	—		(1,248)	(8)		—	—		(8)		—		(8)
Equity-based compensation, net	—	—		—	—		98,170	3,211		—	—		3,211		—		3,211

Distributions to Common OP Units and non-controlling interests — $0.077 per common unit	—	—		—	—		—	(84,026)		—	(59)		(84,085)		—		(84,085)
Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—	(24)		—	—		(24)		—		(24)
Distributions to Series F Preferred Units	—	(10,750)		—	(21)		—	—		—	—		(10,771)		—		(10,771)
Repurchase of convertible notes	—	—		—	—		—	(26)		—	—		(26)		—		(26)
Net income (loss)	—	—		—	—		—	97,932		—	65		97,997		(14)		97,983

Preferred Units Common Units
General Partner Limited Partner General Partner Limited Partner
Number of Units Capital Number of Units Capital Number of Units Capital Number of Units Capital Total Partners' Capital Non-Controlling Interests Total Capital
Balance, January 1, 2020 30,871,246
$ 460,504
49,766
$ 1,869
1,076,845,984
$ 6,375,239
786,719
$ 4,433
$ 6,842,045
$ 1,233
$ 6,843,278
Conversion of Limited Partners' Common OP Units to General Partner's Common OP Units —
—
—
—
4,549
45
(4,549 ) (45 ) —
—
—
Redemption of Series F Preferred Stock —
(27 ) —
—
—
—
—
—
(27 ) —
(27 )
Repurchases of common OP Units to settle tax obligation —
—
—
—
(241,092 ) (2,378 ) —
—
(2,378 ) —
(2,378 )
Equity-based compensation, net —
—
—
—
1,172,038
2,855
—
—
2,855
—
2,855
Distributions to Common OP Units and non-controlling interests —$0.1375 per common unit —
—
—
—
—
(148,194 ) —
(105 ) (148,299 ) —
(148,299 )
Dividend equivalents on awards granted under the Equity Plan —
—
—
—
—
(1,628 ) —
—
(1,628 ) —
(1,628 )
Distributions to Series F Preferred Units —
(12,928 ) —
(19 ) —
—
—
—
(12,947 ) —
(12,947 )
Net income (loss) —
—
—
—
—
86,808
—
62
86,870
(7 ) 86,863
Other comprehensive loss —
—
—
—
—
(76,547 ) —
(55 ) (76,602 ) —
(76,602 )
Balance, March 31, 2020 30,871,246
$ 447,549
49,766
$ 1,850
1,077,781,479
$ 6,236,200
782,170
$ 4,290
$ 6,689,889
$ 1,226
$ 6,691,115
Redemption of Series F Preferred Stock —
(25 ) —
—
—
—
—
—
(25 ) —
(25 )
Equity-based compensation, net —
—
—
—
67,075
4,071
—
—
4,071
—
4,071
Distributions to Common OP Units and non-controlling interests —$0.077 per common unit —
—
—
—
—
(82,997 ) —
(61 ) (83,058 ) —
(83,058 )
Dividend equivalents on awards granted under the Equity Plan —
—
—
—
—
(18 ) —
—
(18 ) —
(18 )
Distributions to Series F Preferred Units —
(12,928 ) —
(20 ) —
—
—
—
(12,948 ) —
(12,948 )
Repurchase of convertible notes —
—
—
—
—
(204 ) —
—
(204 ) —
(204 )
Net income (loss) —
—
—
—
—
54,208
—
39
54,247
(8 ) 54,239
Other comprehensive loss —
—
—
—
—
(1,892 ) —
(1 ) (1,893 ) —
(1,893 )
Balance, June 30, 2020 30,871,246
$ 434,596
49,766
$ 1,830
1,077,848,554
$ 6,209,368
782,170
$ 4,267
$ 6,650,061
$ 1,218
$ 6,651,279

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except for unit data) (Unaudited)


	Preferred Units						Common Units
	General Partner			Limited Partner			General Partner			Limited Partner
	Number of Units	Capital		Number of Units	Capital		Number of Units	Capital		Number of Units	Capital		Total Partners' Capital		Non-Controlling Interests		Total Capital
Other comprehensive loss	—	—		—	—		—	9,101		—	6		9,107		—		9,107
Balance, September 30, 2020	18,871,246	$	123,794	49,766	$	1,809	1,091,242,138	$	6,324,807	760,169	$	4,130	$	6,454,540	$	1,204	$	6,455,744

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except for unit data) (Unaudited)


	Preferred Units									Common Units																				Preferred Units						Common Units
	General Partner				Limited Partner					General Partner					Limited Partner															General Partner			Limited Partner			General Partner			Limited Partner
	Number of Units	Capital			Number of Units		Capital			Number of Units		Capital			Number of Units		Capital			Total Partners' Capital			Non-Controlling Interests			Total Capital				Number of Units	Capital		Number of Units	Capital		Number of Units	Capital		Number of Units	Capital		Total Partners' Capital		Non-Controlling Interests		Total Capital
Balance, January 1, 2019	42,834,138	$	710,325		86,874		$	2,883		967,515,165		$	6,446,734		23,715,908		$	138,931		$	7,298,873		$	1,271		$	7,300,144		Balance, January 1, 2019	42,834,138	$	710,325	86,874	$	2,883	967,515,165	$	6,446,734	23,715,908	$	138,931	$	7,298,873	$	1,271	$	7,300,144
Issuance of common OP Units, net	—	—			—		—			3,309,808		27,544			—		—			27,544			—			27,544			Issuance of common OP Units, net	—	—		—	—		3,309,808	27,544		—	—		27,544		—		27,544
Conversion of Limited Partners' Common OP Units to General Partner's Common OP Units	—	—			—		—			—		(26		)	—		26			—			—			—			Conversion of Limited Partners' Common OP Units to General Partner's Common OP Units	—	—		—	—		—	(26)		—	26		—		—		0
Conversion of Limited Partner Series F Preferred Units to Series F Preferred Stock	37,108	923			(37,108	)	(923		)	—		—			—		—			—			—			—			Conversion of Limited Partner Series F Preferred Units to Series F Preferred Stock	37,108	923		(37,108)	(923)		—	—		—	—		—		—		0

Repurchases of common OP Units to settle tax obligation	—	—			—		—			(199,083	)	(1,595		)	—		—			(1,595		)	—			(1,595		)	Repurchases of common OP Units to settle tax obligation	—	—		—	—		(199,083)	(1,595)		—	—		(1,595)		—		(1,595)
Equity-based compensation, net	—	—			—		—			950,487		2,872			—		—			2,872			—			2,872			Equity-based compensation, net	—	—		—	—		950,487	2,872		—	—		2,872		—		2,872
Contributions from non-controlling interest holders	—	—			—		—			—		—			—		—			—			64			64			Contributions from non-controlling interest holders	—	—		—	—		—	—		—	—		—		64		64
Distributions to Common OP Units and non-controlling interests —$0.1375 per common unit	—	—			—		—			—		(133,480		)	—		(3,262		)	(136,742		)	—			(136,742		)
Distributions to Common OP Units and non-controlling interests — $0.1375 per common unit																													Distributions to Common OP Units and non-controlling interests — $0.1375 per common unit	—	—		—	—		—	(133,480)		—	(3,262)		(136,742)		—		(136,742)
Dividend equivalents on awards granted under the Equity Plan	—	—			—		—			—		(1,222		)	—		—			(1,222		)	—			(1,222		)	Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—	(1,222)		—	—		(1,222)		—		(1,222)
Distributions to Series F Preferred Units	—	(17,940		)	—		(33		)	—		—			—		—			(17,973		)	—			(17,973		)	Distributions to Series F Preferred Units	—	(17,940)		—	(33)		—	—		—	—		(17,973)		—		(17,973)

Net income (loss)	—	—			—		—			—		69,304			—		1,695			70,999			(28		)	70,971			Net income (loss)	—	—		—	—		—	69,304		—	1,695		70,999		(28)		70,971
Other comprehensive loss	—	—			—		—			—		(10,922		)	—		(267		)	(11,189		)	—			(11,189		)	Other comprehensive loss	—	—		—	—		—	(10,922)		—	(267)		(11,189)		—		(11189)
Balance, March 31, 2019	42,871,246	$	693,308		49,766		$	1,927		971,576,377		$	6,399,209		23,715,908		$	137,123		$	7,231,567		$	1,307		$	7,232,874		Balance, March 31, 2019	42,871,246	693,308		49,766	1,927		971,576,377	6,399,209		23,715,908	137,123		7,231,567		1,307		7,232,874
Issuance of common OP Units, net	—	—			—		—			1,773,456		14,534			—		—			14,534			—			14,534			Issuance of common OP Units, net	—	—		—	—		1,773,456	14,534		—	—		14,534		—		14,534

Repurchases of common OP Units to settle tax obligation	—	—			—		—			—		(9		)	—		—			(9		)	—			(9		)	Repurchases of common OP Units to settle tax obligation	—	—		—	—		—	(9)		—	—		(9)		—		(9)
Equity-based compensation, net	—	—			—		—			36,066		3,883			—		—			3,883			—			3,883			Equity-based compensation, net	—	—		—	—		36,066	3,883		—	—		3,883		—		3,883
Distributions to Common OP Units and non-controlling interests —$0.1375 per common unit	—	—			—		—			—		(133,841		)	—		(3,264		)	(137,105		)	—			(137,105		)

Distributions to Common OP Units and non-controlling interests — $0.1375 per common unit																													Distributions to Common OP Units and non-controlling interests — $0.1375 per common unit	—	—		—	—		—	(133,841)		—	(3,264)		(137,105)		—		(137,105)
Dividend equivalents on awards granted under the Equity Plan	—	—			—		—			—		(44		)	—		—			(44		)	—			(44		)	Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—	(44)		—	—		(44)		—		(44)
Distributions to Series F Preferred Units	—	(17,958		)	—		(15		)	—		—			—		—			(17,973		)	—			(17,973		)	Distributions to Series F Preferred Units	—	(17,958)		—	(15)		—	—		—	—		(17,973)		—		(17,973)
Distributions payable relinquished	—	—			—		—			—		—			—		6,429			6,429			—			6,429			Distributions payable relinquished	—	—		—	—		—	—		—	6,429		6,429		—		6,429
Surrender of Limited Partner OP Units	—	—			—		—			—		(8,520		)	(2,922,445	)	(18,017		)	(26,537		)	—			(26,537		)	Surrender of Limited Partner OP Units	—	—		—	—		—	(8,520)		(2,922,445)	(18,017)		(26,537)		—		(26,537)

Net income (loss)	—	—			—		—			—		285,658			—		6,656			292,314			(30		)	292,284			Net income (loss)	—	—		—	—		—	285,658		—	6,656		292,314		(30)		292,284
Other comprehensive loss	—	—			—		—			—		(15,824		)	—		(385		)	(16,209		)	—			(16,209		)	Other comprehensive loss	—	—		—	—		—	(15,824)		—	(385)		(16,209)		—		(16,209)
Balance, June 30, 2019	42,871,246	$	675,350		49,766		$	1,912		973,385,899		$	6,545,046		20,793,463		$	128,542		$	7,350,850		$	1,277		$	7,352,127		Balance, June 30, 2019	42,871,246	675,350		49,766	1,912		973,385,899	6,545,046		20,793,463	128,542		7,350,850		1,277		7,352,127
Issuance of common OP Units, net																													Issuance of common OP Units, net	—	—		—	—		94,300,000	886,926		—	—		886,926		—		886,926

Redemption of Series F Preferred Stock																													Redemption of Series F Preferred Stock	(4,000,000)	(63,012)		—	—		—	(37,084)		—	—		(100,096)		—		(100,096)

Repurchases of common OP Units to settle tax obligation																													Repurchases of common OP Units to settle tax obligation	—	—		—	—		(1,248)	(14)		—	—		(14)		—		(14)
Equity-based compensation, net																													Equity-based compensation, net	—	—		—	—		4,236	3,144		—	—		3,144		—		3,144

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except for unit data) (Unaudited)


	Preferred Units						Common Units
	General Partner			Limited Partner			General Partner			Limited Partner
	Number of Units	Capital		Number of Units	Capital		Number of Units	Capital		Number of Units	Capital		Total Partners' Capital		Non-Controlling Interests		Total Capital
Distributions to Common OP Units and non-controlling interests — $0.1375 per common unit	—	$	—	—	$	—	—	$	(146,808)	—	$	(2,859)	$	(149,667)	$	—	$	(149,667)
Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—	(26)		—	—		(26)		—		(26)
Distributions to Series F Preferred Units	—	(16,557)		—	(21)		—	—		—	—		(16,578)		—		(16,578)

Surrender of Limited Partner OP Units	—	—		—	—		—	(83,400)		—	(108,574)		(191,974)		—		(191,974)

Net income (loss)	—	—		—	—		—	(726,440)		—	(15,064)		(741,504)		(25)		(741,529)
Other comprehensive loss	—	—		—	—		—	(19,860)		—	(411)		(20,271)		—		(20,271)
Balance, September 20, 2019	38,871,246	$	595,781	49,766	$	1,891	1,067,688,887	$	6,421,484	20,793,463	$	1,634	$	7,020,790	$	1,252	$	7,022,042

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)


	Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities:
Net income (loss)	$	239,085	$	(378,274)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	353,400		379,133
Gain on real estate assets, net	(77,117)		(251,106)

Impairments	36,871		24,240
Equity-based compensation	10,137		9,899
Equity in income of unconsolidated entities	(2,406)		(1,682)
Distributions from unconsolidated entities	1,753		130
Loss on investments	607		492
Loss on derivative instruments	0		58
Non-cash restructuring expense	0		3,999
Loss on extinguishment and forgiveness of debt, net	1,419		497
Surrender of Limited Partner OP Units	0		(26,536)
Changes in assets and liabilities:
Investment in direct financing leases	1,117		1,230
Rent and tenant receivables, operating lease right-of-use and other assets, net	(38,277)		(17,234)


Accounts payable and accrued expenses	(9,645)		786,839
Deferred rent, operating lease and other liabilities	(2,936)		(26,460)


Net cash provided by operating activities	514,008		505,225
Cash flows from investing activities:
Investments in real estate assets	(147,121)		(251,804)
Capital expenditures and leasing costs	(21,102)		(27,309)
Real estate developments	(16,592)		(17,274)
Principal repayments received on mortgage notes receivable	0		106
Investments in unconsolidated entities	(21,348)		(2,767)
Return of investment from unconsolidated entities	1,961		154
Proceeds from disposition of real estate	346,675		846,023


Investment in leasehold improvements and other assets	(612)		(1,417)
Deposits for real estate assets	(1,973)		(5,238)
Investments in mezzanine position	(9,959)		0
Proceeds from sale of investments and other assets	0		9,837
Uses and refunds of deposits for real estate assets	4,036		3,562
Proceeds from the settlement of property-related insurance claims	654		473


Net cash provided by investing activities	134,619		554,346
Cash flows from financing activities:
Proceeds from mortgage notes payable	1,032		0
Payments on mortgage notes payable and other debt, including debt extinguishment costs	(197,382)		(182,648)
Proceeds from credit facility	902,000		1,061,000
Payments on credit facility	(1,052,000)		(564,000)
Proceeds from corporate bonds	594,864		0
Redemptions of corporate bonds, including extinguishment costs	(26)		(750,000)

Repurchases of convertible notes, including extinguishment costs	(69,362)		0
Payments of deferred financing costs	(7,275)		(181)



Repurchases of Common Stock to settle tax obligations	(2,386)		(1,618)

Six Months Ended June 30,
2020 2019
Cash flows from operating activities:
Net income $ 141,102
$ 363,255
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 240,902
260,771
Gain on real estate assets, net (34,303 ) (232,597 )
Impairments 20,474
20,296
Equity based compensation 6,926
6,755
Equity in income of unconsolidated entities (1,743 ) (1,005 )
Distributions from unconsolidated entities 861
—
Loss on investments 683
464
Loss on derivative instruments —
58
Non-cash restructuring expense —
4,048
Loss on extinguishment and forgiveness of debt, net 1,480
1,472
Surrender of Limited Partner OP Units —
(26,536 )
Changes in assets and liabilities:
Investment in direct financing leases 736
821
Rent and tenant receivables, operating lease right-of-use and other assets, net (30,158 ) (9,596 )
Accounts payable and accrued expenses (13,870 ) (13,104 )
Deferred rent, operating lease and other liabilities (12,138 ) (27,084 )
Net cash provided by operating activities 320,952

348,018
Cash flows from investing activities:
Investments in real estate assets (147,121 ) (191,550 )
Capital expenditures and leasing costs (15,665 ) (19,695 )
Real estate developments (6,469 ) (10,537 )
Principal repayments received on mortgage notes receivable —
88
Investments in unconsolidated entities (10,066 ) (2,767 )
Return of investment from unconsolidated entities 970
—
Proceeds from disposition of real estate 204,114
739,873
Investment in leasehold improvements and other assets (314 ) (798 )
Deposits for real estate assets (1,420 ) (3,072 )
Investments in mezzanine position (9,959 ) —
Proceeds from sale of investments and other assets —
8,199
Uses and refunds of deposits for real estate assets 4,036
2,946
Proceeds from the settlement of property-related insurance claims 48
334
Net cash provided by investing activities 18,154
523,021
Cash flows from financing activities:
Proceeds from mortgage notes payable 1,032
—
Payments on mortgage notes payable and other debt, including debt extinguishment costs (135,036 ) (175,962 )
Proceeds from credit facility 902,000
1,034,000
Payments on credit facility (1,052,000 ) (537,000 )
Proceeds from corporate bonds 594,864
—
Redemptions of corporate bonds, including extinguishment costs (26 ) (750,000 )
Repurchases of convertible notes, including extinguishment costs (50,326 ) —
Payments of deferred financing costs (6,946 ) (182 )
Repurchases of Common Stock to settle tax obligations (2,378 ) (1,604 )
Proceeds from the issuance of Common Stock, net of underwriters’ discount and offering expenses —
42,078
Series F Preferred Stock redemption expenses (52 ) —
Contributions from non-controlling interest holders —
64
Distributions paid (324,032 ) (303,894 )
Net cash used in financing activities (72,900 )
(692,500 )
Net change in cash and cash equivalents and restricted cash $ 266,206
$ 178,539

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)

(In thousands) (Unaudited)


	Nine Months Ended September 30,
	2020		2019
Proceeds from the issuance of Common Stock, net of underwriters’ discount and offering expenses	$	89,279	$	929,004
Redemption of Series F Preferred Stock	(300,104)		(100,096)
Redemption of Limited Partners’ Common OP Units	(149)		0
Contributions from non-controlling interest holders	0		64
Distributions paid	(418,722)		(454,702)

Net cash used in financing activities	(460,231)		(63,177)
Net change in cash and cash equivalents and restricted cash	$	188,396	$	996,394

Cash and cash equivalents and restricted cash, beginning of period	$	33,880	$	53,663





Cash and cash equivalents and restricted cash, end of period	$	222,276	$	1,050,057

Reconciliation of Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents at beginning of period	$	12,921	$	30,758
Restricted cash at beginning of period	20,959		22,905
Cash and cash equivalents and restricted cash at beginning of period	33,880		53,663

Cash and cash equivalents at end of period	207,321		1,029,315
Restricted cash at end of period	14,955		20,742
Cash and cash equivalents and restricted cash at end of period	$	222,276	$	1,050,057

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2020 (Unaudited)

Note 1 – Organization

VEREIT is a Maryland corporation, incorporated on December 2, 2010, that qualified as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning in the taxable year ended December 31, 2011. The OP is a Delaware limited partnership of which the General Partner is the sole general partner. VEREIT’s common stock, par value $0.01 per share (“Common Stock”), and its 6.70% Series F Cumulative Redeemable Preferred Stock, par value $0.01 per share (“Series F Preferred Stock”) trade on the New York Stock Exchange (“NYSE”) under the trading symbols, “VER” and “~~VER~~“VER PRF,,” respectively. As used herein, the terms the “Company,” “we,” “our” and “us” refer to VEREIT, together with its consolidated subsidiaries, including the OP.

VEREIT is a full-service real estate operating company which owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S. VEREIT’s business model provides equity capital to creditworthy corporations in return for long-term leases on their properties. The Company actively manages its portfolio considering a number of metrics including property type, concentration and key economic factors for appropriate balance and diversity.

Substantially all of the Company’s operations are conducted through the OP. VEREIT is the sole general partner and holder of 99.9% of the common equity interests in the OP as of ~~June~~September 30, 2020. Under the limited partnership agreement of the OP, as amended (the “LPA”), after holding common units of limited partner interests in the OP (“OP Units”) or Series F Preferred Units of limited partnership interests in the OP (“Series F Preferred Units”), for a period of one year and meeting the other requirements in the LPA, unless we otherwise consent to an earlier redemption, holders have the right to redeem the units for the cash value of a corresponding number of shares of Common Stock or Series F Preferred Stock, as applicable, or, at our option, a corresponding number of shares of Common Stock or Series F Preferred Stock, as applicable, subject to adjustment pursuant to the terms of the LPA. The remaining rights of the holders of OP Units are limited, however, and do not include the ability to replace the General Partner or to approve the sale, purchase or refinancing of the OP’s assets.

The actions of the OP and its relationship with the General Partner are governed by the LPA. The General Partner does not have any significant assets other than its investment in the OP. Therefore, the assets and liabilities of the General Partner and the OP are the same. Additionally, pursuant to the LPA, all administrative expenses and expenses associated with the formation, continuity, existence and operation of the General Partner incurred by the General Partner on the OP’s behalf shall be treated as expenses of the OP. Further, when the General Partner issues any equity instrument that has been approved by the General Partner’s Board of Directors, the LPA requires the OP to issue to the General Partner equity instruments with substantially similar terms, to protect the integrity of the Company’s umbrella partnership REIT structure, pursuant to which each holder of interests in the OP has a proportionate economic interest in the OP reflecting its capital contributions thereto. OP Units and Series F Preferred Units issued to the General Partner are referred to as “General Partner OP Units” and “General Partner Series F Preferred Units,” respectively. OP Units and Series F Preferred Units issued to parties other than the General Partner are referred to as “Limited Partner OP Units” and “Limited Partner Series F Preferred Units,” respectively. The LPA also provides that the OP issue debt with terms and provisions consistent with debt issued by the General Partner. The LPA will be amended to provide for the issuance of any additional class of equivalent equity instruments to the extent the General Partner’s Board of Directors authorizes the issuance of any new class of equity securities.

Note 2 –Summary of Significant Accounting Policies

Basis of Accounting

The consolidated financial statements of the Company presented herein include the accounts of the General Partner and its consolidated subsidiaries, including the OP. All intercompany transactions have been eliminated upon consolidation. The financial statements are prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. The results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2020 are not necessarily indicative of the results for the entire year or any subsequent interim period.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2019 of the Company, which are included in the Company’s Annual Report on Form 10-K filed on February 26, 2020. Information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and U.S. GAAP.

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2020 (Unaudited) – (Continued)

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company and its consolidated subsidiaries and a consolidated joint venture. The portion of the consolidated joint venture not owned by the Company is presented as non-controlling interest in VEREIT’s and the OP’s consolidated balance sheets, statements of operations, statements of comprehensive income and statements of changes in equity. In addition, certain third parties have been issued OP Units and Series F Preferred Units. Holders of OP Units are considered to be non-controlling interest holders in the OP and their ownership interest in the limited partner’s share is presented as non-controlling interests in VEREIT’s consolidated balance sheets, statements of operations, statements of comprehensive income and statements of changes in equity. Further, a portion of the earnings and losses of the OP are allocated to non-controlling interest holders based on their respective ownership percentages. Equity is reallocated between controlling and noncontrolling interests in the OP upon a change in ownership. At the end of each annual reporting period, noncontrolling interests in the OP are adjusted to reflect their ownership percentage in the OP through a reallocation between controlling and noncontrolling interests in the OP, as applicable. As of each of ~~June~~September 30, 2020 and December 31, 2019, there were approximately 0.8 million Limited Partner OP Units issued and outstanding, and 49,766 Limited Partner Series F Preferred Units issued and outstanding.

For legal entities being evaluated for consolidation, the Company must first determine whether the interests that it holds and fees it receives qualify as variable interests in the entity. A variable interest is an investment or other interest that will absorb portions of an entity’s expected losses or receive portions of the entity’s expected residual returns. The Company’s evaluation includes consideration of fees paid to the Company where the Company acts as a decision maker or service provider to the entity being evaluated. If the Company determines that it holds a variable interest in an entity, it evaluates whether that entity is a variable interest entity (“VIE”). VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or where equity investors, as a group, lack one of the following characteristics: (a) the power to direct the activities that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of the entity, or (c) the right to receive the expected returns of the entity. The Company consolidates entities that are not VIEs if it has a majority voting interest or other rights that result in effectively controlling the entity.

The Company then qualitatively assesses whether it is (or is not) the primary beneficiary of a VIE, which is generally defined as the party who has a controlling financial interest in the VIE. Consideration of various factors include, but are not limited to, the Company’s ability to direct the activities that most significantly impact the entity’s economic performance and its obligation to absorb losses from or right to receive benefits of the VIE that could potentially be significant to the VIE. The Company consolidates any VIEs when the Company is determined to be the primary beneficiary of the VIE and the difference between consolidating the VIE and accounting for it using the equity method could be material to the Company’s consolidated financial statements. The Company continually evaluates the need to consolidate these VIEs based on standards set forth in U.S. GAAP.

Reclassification

The fees from managed partnerships, which are fees earned from the Company’s unconsolidated joint venture entities, previously included in other income, ~~(loss),~~ net have been presented in its own line item for prior periods presented to be consistent with the current year presentation.

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2020 (Unaudited) – (Continued)

Revenue Recognition

Rental Revenue

The Company continually reviews receivables related to rent, straight-line rent and property operating expense reimbursements and determines collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. The review includes a binary assessment of whether or not substantially all of the amounts due under a tenant’s lease agreement are probable of collection. For leases that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term and the Company recognizes a general allowance on a portfolio-wide basis. For leases that are deemed not probable of collection, revenue is recorded as cash is received and the Company reduces rental revenue for any straight-line rent receivables. The Company recognizes all changes in the collectability assessment for an operating lease as an adjustment to rental revenue. During the three and ~~six~~nine months ended ~~June~~September 30, 2020, rental revenue was reduced by ~~$13.2~~$9.6 million and ~~$18.5~~$28.2 million, respectively, which included (i) ~~$2.1~~$5.1 million and ~~$1.5~~$6.6 million, respectively, of an increase to the general allowance, (ii) ~~$7.4~~$4.8 million and ~~$9.4~~$14.3 million, respectively, for amounts not probable of collection, and (iii) ~~$3.7~~an offset of $0.3 million ~~and $7.6 million, respectively,~~ for straight-line rent ~~receivables.~~receivables deemed collectible and $7.3 million for straight-line rent receivables, respectively. Of the ~~$13.2~~$9.6 million and $28.2 million reduction to rental revenue for the three and nine months ended ~~June~~September 30, 2020,~~, $8.4~~ respectively, $10.2 million and $18.6 million, respectively was related to the impact of the novel coronavirus (“COVID-19”) pandemic, of which ~~$0.9~~$5.1 million and $6.0 million, respectively, represented an increase to the general allowance, ~~$3.8~~$4.1 million and $7.9 million, respectively, represented amounts not probable of collection, and ~~$3.7~~$1.0 million and $4.7 million, respectively, was for straight-line rent receivables.

Rental revenue also includes lease termination income collected from tenants to allow for the tenant to vacate their space prior to their scheduled termination dates, as well as amortization of above and below-market leases.

Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic

The FASB issued a question-and-answer document, Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic for concessions related to the effects of COVID-19 that provide a deferral of payments with no substantive changes to the consideration of the original contract allows an entity to elect to not analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and to elect to apply or not apply the lease modification guidance in Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”), to those contracts (the “COVID-19 Lease Concessions Relief”). For eligible concessions, the Company has elected not to apply the lease modification guidance in ASC 842. As such, the Company accounts for eligible deferral concessions as if there were no changes made to the lease agreement and, accordingly, continues to recognize income and increases the lease receivable. Ineligible concessions are accounted for as a lease modification under ASC 842, which requires the Company to reevaluate the lease classification and remeasure and reallocate the consideration over the remaining lease term, and include any prepaid rent liabilities and accrued rent assets relating to the original lease as part of the lease payments for the modified lease.

During the three and nine months ended ~~June~~September 30, 2020, the Company had ~~$3.6~~$3.9 million and $16.7 million, respectively, of rental revenue related to deferral agreements executed through ~~June 30, 2020 and $5.3 million related to deferral agreements executed from July 1, 2020 through July 27,~~October 23, 2020, which qualify for the COVID-19 Lease Concessions Relief. ~~The~~During the three and nine months ended September 30, 2020 the Company ~~did not record~~abated $6.5 million of rental revenue, ~~for $11.2~~$5.9 million of ~~second~~which related to third quarter rental revenue ~~abated~~ pursuant to lease amendments executed through ~~June~~September 30, 2020 and $0.6 million of which is second quarter rental revenue pursuant to lease amendments executed from July 1, 2020 through September 30, 2020, and $17.7 million of rental revenue, respectively, pursuant to lease amendments executed through September 30, 2020, which increased the weighted average lease term for the related properties. In accordance with ASC 842, the Company recorded $5.7 million as straight-line rent in each of the three and nine months ended September 30, 2020 and reduced rental income by $0.8 million and $12.0 million, respectively, related to the lease amendments.

Fees from Managed Partnerships

The Company provides various services to our unconsolidated joint venture entities in exchange for fees. Total asset and property management and acquisition fees earned in connection with these entities was ~~$0.4~~$1.6 million and ~~$0.1~~$0.3 million for the three months ended ~~June~~September 30, 2020 and 2019, respectively, and ~~$1.0~~$2.6 million and ~~$0.2~~$0.5 million for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2020 (Unaudited) – (Continued)

Litigation and non-routine costs, net

The Company has incurred legal fees and other costs associated with litigations and investigations resulting from the Audit Committee Investigation (defined below), which are considered non-routine. The Company’s insurance carriers have paid certain defense costs subject to standard reservation of rights under the respective policies.

Litigation and non-routine costs, net include the following costs and recoveries (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019


Litigation and non-routine costs, net:
Audit Committee Investigation and related matters (1) (2)	$	105	$	32,051	$	(6,106)	$	69,509
Legal fees and expenses	0		0		0		2
Litigation settlements	0		799,973		0		812,208


Total costs	105		832,024		(6,106)		881,719
Insurance recoveries	0		0		(2,471)		(48,420)
Other recoveries (3)	0		0		0		(26,536)
Total	$	105	$	832,024	$	(8,577)	$	806,763

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Litigation and non-routine costs, net:
Audit Committee Investigation and related matters ^{(1) (2)}
$ (118 ) $ 22,767
$ (6,211 ) $ 37,458
Legal fees and expenses —
—
—
2
Litigation settlements —
—
—
12,235
Total costs (118 )
22,767

(6,211 )
49,695
Insurance recoveries —
—
(2,471 ) (48,420 )
Other recoveries ⁽³⁾
—
(26,536 ) —
(26,536 )
Total $ (118 ) $ (3,769 ) $ (8,682 ) $ (25,261 )

~~___________________________________~~(1)Includes all fees and costs associated with various litigations and investigations prompted by the results of the 2014 investigation conducted by the audit committee (the “Audit Committee”) of the Company’s Board of Directors (the “Audit Committee Investigation”), including fees and costs incurred pursuant to the Company’s advancement obligations, litigation related thereto and in connection with related insurance recovery matters, net of accrual reversals.

~~(1)~~

Includes all fees and costs associated with various litigations and investigations prompted by the results of the 2014 investigation conducted by the audit committee (the “Audit Committee”) of the Company’s Board of Directors (the “Audit Committee Investigation”), including fees and costs incurred pursuant to the Company’s advancement obligations, litigation related thereto and in connection with related insurance recovery matters, net of accrual reversals.


~~(2)~~	~~The negative balance for the three and six months ended June 30, 2020 is a result of estimated costs accrued in prior periods that exceeded actual expenses incurred.~~

~~(3)~~

~~Represents the surrender of 2.9 million Limited Partner OP Units in connection with an SEC settlement entered into by principals of the Company’s~~ ~~former external manager~~.

(2)The negative balance for the nine months ended September 30, 2020 is a result of estimated costs accrued in prior periods that exceeded actual expenses incurred.

(3)Represents the surrender of 2.9 million Limited Partner OP Units in connection with an SEC settlement entered into by principals of the Company’s former external manager.

Equity-based Compensation

The Company has an equity-based incentive award plan (the “Equity Plan”) for non-executive directors, officers, other employees and advisors or consultants who provide services to the Company, as applicable, and a non-executive director restricted share plan, which are accounted for under U.S. GAAP for share-based payments. The expense for such awards is recognized over the vesting period or when the requirements for exercise of the award have been met. As of ~~June~~September 30, 2020, the General Partner had cumulatively awarded under its Equity Plan approximately 18.0 million shares of Common Stock, which was comprised of 4.0 million restricted share awards (“Restricted Shares”), net of the forfeiture of 3.7 million Restricted Shares through that date, 7.9 million restricted stock units (“Restricted Stock Units”), net of the forfeiture/cancellation of 2.0 million Restricted Stock Units through that date, 0.8 million deferred stock units (“Deferred Stock Units”), and 5.3 million stock options (“Stock Options”), net of forfeiture/cancellation of 0.3 million Stock Options through that date. Accordingly, as of such date, approximately ~~95.1~~96.4 million additional shares were available for future issuance, excluding the effect of the 5.3 million Stock Options. At ~~June~~September 30, 2020, a total of 45,000 shares were awarded under the non-executive director restricted share plan out of the 99,000 shares reserved for issuance.

The following is a summary of equity-based compensation expense for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019


Restricted Shares	$	0	$	0	$	0	$	77
Time-Based Restricted Stock Units (1)	1,412		1,272		4,195		3,748
Long-Term Incentive-Based Restricted Stock Units	1,416		1,455		3,916		4,074
Deferred Stock Units	53		82		1,071		1,101
Stock Options	330		335		955		899
Total	$	3,211	$	3,144	$	10,137	$	9,899

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Restricted Shares $ —
$ —
$ —
$ 77
Time-Based Restricted Stock Units ⁽¹⁾
1,397
1,234
2,782
2,484
Long-Term Incentive-Based Restricted Stock Units 1,401
1,383
2,500
2,612
Deferred Stock Units 947
947
1,019
1,018
Stock Options 326
319
625
564
Total $ 4,071
$ 3,883
$ 6,926
$ 6,755

~~___________________________________~~(1)


~~(1)~~	Includes stock ~~compensation expense attributable to awards for which the requisite service period begins prior to the assumed future grant date.~~

~~As of June 30, 2020, total unrecognized~~ compensation expense ~~related~~attributable to ~~these~~ awards ~~was approximately $21.9 million, with an aggregate weighted-average remaining term of 2.5 years.~~

for which the requisite service period begins prior to the assumed future grant date.

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2020 (Unaudited) – (Continued)

As of September 30, 2020, total unrecognized compensation expense related to these awards was approximately $18.8 million, with an aggregate weighted-average remaining term of 2.3 years.

Restructuring

During the ~~six~~nine months ended ~~June~~September 30, 2020, there were 0 restructuring expenses recorded. During the ~~six~~nine months ended ~~June~~September 30, 2019, the Company’s obligation to provide certain transition services for CCA Acquisition, LLC (the “Cole Purchaser”) terminated in accordance with the terms of a services agreement (the “Services Agreement”) with the Cole Purchaser and the Company recorded ~~$9.4~~$10.1 million of restructuring expenses related to the reorganization of its business.

Recent Accounting Pronouncements

Financial Instruments - Credit Losses

The Company adopted ASU 2016-13, Financial Instruments – Credit Losses and subsequent amendments (collectively Topic 326), effective January 1, 2020. Topic 326 was intended to improve financial reporting by requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income and required that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that was deducted from the amortized cost basis. The amendments in Topic 326 required the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminated the “incurred loss” methodology under current U.S. GAAP.

Upon adoption, the Company determined the following to be within the scope of Topic 326: (i) investments in direct financing leases and (ii) other immaterial miscellaneous short term receivables. Due to the short term nature and collection history of the direct financing leases and management fee receivables and the creditworthiness of the direct financing lease tenants, the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Reference Rate Reform

During the first quarter of 2020, the Financial Accounting Standards Board (the “FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance 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 probability and the assessments of effectiveness for future London Inter-Bank Offer Rate (“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 impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Debt and Equity Accounting

During the third quarter of 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 is intended to (i) reduce the number of accounting models for convertible debt instruments and convertible preferred stock, (ii) amend the guidance for the derivatives scope exception for contracts in an entity’s own equity and (iii) amend the related earnings per share guidance by requiring the application of the if-converted method for calculating diluted earnings per share and eliminating the treasury stock method. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

Note 3 –Real Estate Investments and Related Intangibles

Property Acquisitions

During the ~~six~~nine months ended ~~June~~September 30, 2020, the Company acquired controlling financial interests in 25 commercial properties for an aggregate purchase price of $147.1 million (the “2020 Acquisitions”), which includes 1 land parcel for build-to-suit development, further discussed below and $0.9 million of external acquisition-related expenses that were capitalized.

During the ~~six~~nine months ended ~~June~~September 30, 2019, the Company acquired controlling financial interests in 3340 commercial properties for an aggregate purchase price of ~~$200.5~~$260.7 million (the “2019 Acquisitions”), which includes ~~$1.0~~$1.4 million of external acquisition-related expenses that were capitalized.

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~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2020 (Unaudited)~~ – ~~(Continued)~~

The following table presents the allocation of the fair values of the assets acquired and liabilities assumed during the periods presented (in thousands):

Six Months Ended June 30,
2020 2019
Real estate investments, at cost:
Land $ 19,953
$ 40,460
Buildings, fixtures and improvements 95,728
135,182
Total tangible assets 115,681
175,642
Acquired intangible assets:
In-place leases and other intangibles ⁽¹⁾
15,739
24,817
Above-market leases⁽²⁾
15,701
—
Total purchase price of assets acquired $ 147,121
$ 200,459


	Nine Months Ended September 30,
	2020		2019
Real estate investments, at cost:
Land	$	19,953	$	47,749
Buildings, fixtures and improvements	95,728		181,904
Total tangible assets	115,681		229,653
Acquired intangible assets:
In-place leases and other intangibles (1)	15,739		31,062
Above-market leases (2)	15,701		0


Total purchase price of assets acquired	$	147,121	$	260,715


~~(1)~~	~~The weighted average amortization period for acquired in-place leases and other intangibles is 18.1 years and 15.8 years for 2020 Acquisitions and 2019 Acquisitions, respectively.~~


~~(2)~~	~~The weighted average amortization period for acquired above-market leases is 20.1 years for 2020 Acquisitions.~~

(1)The weighted average amortization period for acquired in-place leases and other intangibles is 18.1 years and 15.2 years for 2020 Acquisitions and 2019 Acquisitions, respectively.

(2)The weighted average amortization period for acquired above-market leases is 20.1 years for 2020 Acquisitions.

As of ~~June~~September 30, 2020, the Company invested ~~$23.4~~$26.4 million, including $0.3 million of external acquisition-related expenses and interest that were capitalized, in 1 build-to-suit development project. The Company’s estimated remaining committed investment is ~~$21.4~~$18.4 million, and the project is expected to be completed within the next 12 months.

Property Dispositions and Real Estate Assets Held for Sale

During the ~~six~~nine months ended ~~June~~September 30, 2020, the Company disposed of 4763 properties, including the sale of 23 consolidated properties to the office partnership, for an aggregate gross sales price of ~~$219.2~~$376.2 million, of which our share was ~~$216.7~~$373.4 million after the profit participation payments related to the disposition of 34 Red Lobster properties. The dispositions resulted in proceeds of ~~$204.1~~$346.7 million after closing costs, including proceeds from the contribution of properties to the office partnership. The Company recorded a gain of ~~$34.2~~$77.2 million related to the dispositions, which is included in gain on disposition of real estate and real estate assets held for sale, net in the accompanying consolidated statements of operations.

During the ~~six~~nine months ended ~~June~~September 30, 2019, the Company disposed of 75107 properties, including the sale of 6 consolidated properties to the industrial partnership, and 1 property sold through a foreclosure by the lender, for an aggregate gross sales price of ~~$809.2~~$926.0 million, of which our share was ~~$796.4~~$905.9 million after the profit participation payment related to the disposition of 2333 Red Lobster properties. The dispositions resulted in proceeds of ~~$739.9~~$846.0 million after closing costs and contributions to the industrial partnership. The Company recorded a gain of ~~$233.4~~$251.9 million related to the sales which is included in gain on disposition of real estate and real estate assets held for sale, net in the accompanying consolidated statements of operations.

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

As of ~~June~~September 30, 2020, there were 82 properties classified as held for sale with a carrying value of ~~$48.1~~$1.9 million, included in real estate assets held for sale, net, primarily comprised of land of ~~$2.5~~$0.5 million and building, fixtures and improvements, net of ~~$41.7~~$1.5 million, in the accompanying consolidated balance sheets, and are expected to be sold in the next 12 months as part of the Company’s portfolio management strategy. As of December 31, 2019, there were 5 properties classified as held for sale. During the ~~six~~nine months ended ~~June~~September 30, 2020, the Company recorded a loss of ~~$0.2~~$0.3 million related to held for sale properties. During the ~~six~~nine months ended ~~June~~September 30, 2019 the Company recorded a loss of $0.8 million related to held for sale properties.

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~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2020 (Unaudited)~~ – ~~(Continued)~~

Intangible Lease Assets and Liabilities

Intangible lease assets and liabilities of the Company consisted of the following as of ~~June~~September 30, 2020 and December 31, 2019 (amounts in thousands, except weighted-average useful life):

Weighted-Average Useful Life June 30, 2020 December 31, 2019
Intangible lease assets:
In-place leases and other intangibles, net of accumulated amortization of $787,231 and $748,689, respectively 16.1 $ 788,686
$ 854,196
Leasing commissions, net of accumulated amortization of $6,409 and $6,027, respectively 7.5 18,790
17,808
Above-market lease assets and deferred lease incentives, net of accumulated amortization of $120,510 and $112,438, respectively 16.8 170,205
165,483
Total intangible lease assets, net $ 977,681
$ 1,037,487

Intangible lease liabilities:
Below-market leases, net of accumulated amortization of $106,116 and $99,315, respectively 19.2 $ 130,208
$ 143,583


	Weighted-Average Useful Life	September 30, 2020		December 31, 2019
Intangible lease assets:
In-place leases and other intangibles, net of accumulated amortization of $802,778 and $748,689, respectively	16.3	$	755,914	$	854,196
Leasing commissions, net of accumulated amortization of $7,011 and $6,027, respectively	9.3	17,221		17,808
Above-market lease assets and deferred lease incentives, net of accumulated amortization of $124,953 and $112,438, respectively	16.9	165,022		165,483
Total intangible lease assets, net		$	938,157	$	1,037,487

Intangible lease liabilities:
Below-market leases, net of accumulated amortization of $103,156 and $99,315, respectively	19.6	$	124,009	$	143,583

The aggregate amount of amortization of ~~above‑~~above-market and below-market leases and deferred lease incentives included as a net decrease to rental revenue was ~~$1.5~~$1.9 million and ~~$1.3~~$2.0 million for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively. The aggregate amount of in-place leases, leasing commissions and other lease intangibles amortized and included in depreciation and amortization expense was ~~$73.3~~$103.5 million and ~~$65.8~~$96.9 million for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

The following table provides the projected amortization expense and adjustments to rental revenue related to the intangible lease assets and liabilities for the next five years as of ~~June~~September 30, 2020 (in thousands):


	Remainder of 2020		2021		2022		2023		2024		2025
In-place leases and other intangibles:
Total projected to be included in amortization expense	$	28,521	$	105,740	$	93,571	$	83,429	$	73,162	$	61,187
Leasing commissions:
Total projected to be included in amortization expense	705		2,776		2,632		2,357		2,140		1,871
Above-market lease assets and deferred lease incentives:
Total projected to be deducted from rental revenue	4,978		19,492		18,683		17,740		16,369		14,902
Below-market lease liabilities:
Total projected to be included in rental revenue	4,004		13,964		13,135		12,413		10,566		9,347

Remainder of 2020 2021 2022 2023 2024 2025
In-place leases and other intangibles:
Total projected to be included in amortization expense $ 57,571
$ 107,490
$ 93,814
$ 83,671
$ 73,403
$ 61,429
Leasing commissions:
Total projected to be included in amortization expense 1,317
2,461
2,360
2,085
1,867
1,599
Above-market lease assets and deferred lease incentives:
Total projected to be deducted from rental revenue 9,962
19,519
18,708
17,764
16,393
14,921
Below-market lease liabilities:
Total projected to be included in rental revenue 8,320
14,947
13,255
12,533
10,686
9,467

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

Consolidated Joint Venture

The Company had an interest in 1 consolidated joint venture that owned 1 property as of ~~June~~September 30, 2020 and December 31, 2019. As of ~~June~~September 30, 2020 and December 31, 2019, the consolidated joint venture had total assets of ~~$33.6~~$33.2 million and $32.5 million, respectively, of which ~~$30.0~~$29.7 million and $29.6 million, respectively, were real estate investments, net of accumulated depreciation and amortization at each of the respective dates. The property is secured by a mortgage note payable, which is non-recourse to the Company and had a balance of ~~$15.2~~$14.8 million and $14.3 million as of ~~June~~September 30, 2020 and December 31, 2019, respectively. The Company has the ability to control operating and financing policies of the consolidated joint venture. There are restrictions on the use of these assets as the Company is generally required to obtain the approval of the joint venture partner in accordance with the joint venture agreement for any major transactions. The Company and the joint venture partner are subject to the provisions of the joint venture agreement, which includes provisions for when additional contributions may be required to fund certain cash shortfalls.

~~Table of Contents~~

~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2020 (Unaudited)~~ – ~~(Continued)~~

Unconsolidated Joint Ventures

The following is a summary of the Company’s investments in unconsolidated joint ventures as of ~~June~~September 30, 2020 and December 31, 2019 and for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 (dollar amounts in thousands):


			Carrying Amount of Investment					Equity in Income											Carrying Amount of Investment							Equity in Income
							Six Months Ended																		Nine Months Ended
Investment	Ownership % ⁽¹⁾	Number of Properties		June 30, 2020		December 31, 2019			June 30, 2020		June 30, 2019			Investment		Ownership % (1)		Number of Properties			September 30, 2020			December 31, 2019				September 30, 2020			September 30, 2019
Faison JV Bethlehem GA ⁽²⁾	90%	1	$	41,076	$	40,416		$	1,197	$	1,035		Faison JV Bethlehem GA (2)		90%		1			$	40,533		$	40,416			$	1,442		$	1,583
Industrial Partnership⁽³⁾	20%	6	35,257		28,409			347		(30		)	Industrial Partnership (3)		20%		7		46,024			28,409				584			99
Office Partnership ⁽⁴⁾	20%	3	9,967		—			199		—			Office Partnership (4)		20%		4		13,782			0				380			0

~~(1)~~

The Company’s ownership interest reflects its legal ownership interest. Legal ownership may, at times, not equal the Company’s economic interest in the listed properties because of various provisions in certain joint venture agreements regarding capital contributions, distributions of cash flow based on capital account balances, allocations of profits and losses and payments of preferred returns. As a result, the Company’s actual economic interest (as distinct from its legal ownership interest) in certain of the properties could fluctuate from time to time and may not wholly align with its legal ownership interests.

~~(2)~~

The total carrying amount of the investment was greater than the underlying equity in net assets by $4.6 million and $4.7 million as of June 30, 2020 and December 31, 2019, respectively. This difference relates to a purchase price allocation of goodwill and a step up in fair value of the investment asset acquired in connection with mergers. The step up in fair value was allocated to the individual investment asset and is being amortized in accordance with the Company’s depreciation policy.


~~(3)~~	~~During the six months ended June 30, 2020, the Company made a capital contribution to the industrial partnership, in anticipation of the acquisition of a property.~~


~~(4)~~	~~During the six months ended June 30, 2020, the office partnership acquired 1 property from a third party for a purchase price of $33.1 million.~~

(1)The Company’s ownership interest reflects its legal ownership interest. Legal ownership may, at times, not equal the Company’s economic interest in the listed properties because of various provisions in certain joint venture agreements regarding capital contributions, distributions of cash flow based on capital account balances, allocations of profits and losses and payments of preferred returns. As a result, the Company’s actual economic interest (as distinct from its legal ownership interest) in certain of the properties could fluctuate from time to time and may not wholly align with its legal ownership interests.

(2)The total carrying amount of the investment was greater than the underlying equity in net assets by $4.3 million and $4.7 million as of September 30, 2020 and December 31, 2019, respectively. This difference relates to a purchase price allocation of goodwill and a step up in fair value of the investment asset acquired in connection with mergers. The step up in fair value was allocated to the individual investment asset and is being amortized in accordance with the Company’s depreciation policy. On September 18, 2020, the Faison JV Bethlehem GA joint venture partner exercised its put option to require the Company to purchase its 10% ownership interest in the joint venture on or before November 4, 2020.

(3)During the nine months ended September 30, 2020, the industrial partnership acquired 1 property from a third party for a purchase price of $246.8 million.

(4)During the nine months ended September 30, 2020, the office partnership acquired 1 property from a third party for a purchase price of $33.1 million.

The unconsolidated joint ventures had total aggregate debt outstanding of ~~$341.8~~$534.3 million as of ~~June~~September 30, 2020, which is non-recourse to the Company, as discussed in Note 6 –~~Debt~~. Debt. There was $269.3 million of debt outstanding related to the unconsolidated joint ventures as of December 31, 2019.

The Company and the respective unconsolidated joint venture partners are subject to the provisions of the applicable joint venture agreements, which include provisions for when additional contributions may be required to fund certain cash shortfalls, including the Company’s share of expansion project capital expenditures.

Table of Contents

VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

Note 4 – Rent and Tenant Receivables and Other Assets, Net

Rent and tenant receivables and other assets, net consisted of the following as of ~~June~~September 30, 2020 and December 31, 2019 (in thousands):


	September 30, 2020		December 31, 2019
Straight-line rent receivable	$	271,283	$	266,195
Accounts receivable	64,733		41,556
Mezzanine position	9,959		0
Deferred costs, net (1)	5,924		7,208
Investment in direct financing leases, net	8,198		9,341
Investment in Cole REITs (2)	6,943		7,552
Prepaid expenses	6,467		3,453
Leasehold improvements, property and equipment, net (3)	4,230		4,809
Other assets, net	13,502		8,281
Total	$	391,239	$	348,395

June 30, 2020 December 31, 2019
Straight-line rent receivable $ 266,823
$ 266,195
Accounts receivable 64,791
41,556
Mezzanine position 9,959
—
Deferred costs, net ⁽¹⁾
6,927
7,208
Investment in direct financing leases, net 8,579
9,341
Investment in Cole REITs ⁽²⁾
6,867
7,552
Prepaid expenses 6,538
3,453
Leasehold improvements, property and equipment, net ⁽³⁾
4,317
4,809
Other assets, net 7,608
8,281
Total $ 382,409

$ 348,395

~~___________________________________~~(1)

~~(1)~~

Amortization expense for deferred costs related to the revolving credit facilities totaled $0.8 million and $0.9 million for the three months ended June 30, 2020 and 2019, respectively, and $1.5 million and $2.0 million for the six months ended June 30, 2020 and 2019, respectively. Accumulated amortization for deferred costs related to the revolving credit facilities was $51.2 million and $49.8 million as of June 30, 2020 and December 31, 2019, respectively.

~~(2)~~

The Company has interests in Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”), Cole Office & Industrial REIT (CCIT III), Inc. (“CCIT III”) and Cole Credit Property Trust V, Inc. (“CCPT V”), (collectively, the “Cole REITs”) and carries these investments at fair value. During the six months ended June 30, 2020, the Company recognized a loss of $0.7 million related to the change in fair value, which is included in other income, net in the accompanying consolidated statements of operations.

~~Table of Contents~~

~~VEREIT, INC.~~ and ~~VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June~~$0.9 million for the three months ended September 30, 2020 ~~(Unaudited)~~ and 2019, respectively, and $2.3 million and $2.9 million for the nine months ended September 30, 2020 and 2019, respectively. Accumulated amortization for deferred costs related to the revolving credit facilities was $52.1 million and $49.8 million as of September 30, 2020 and December 31, 2019, respectively.

(2)–The Company has interests in Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”), Cole Office & Industrial REIT (CCIT III), Inc. (“CCIT III”) and Cole Credit Property Trust V, Inc. (“CCPT V”), (collectively, the “Cole REITs”) and carries these investments at fair value. During the nine months ended September 30, 2020, the Company recognized a loss of $0.6 million related to the change in fair value, which is included in other income, net in the accompanying consolidated statements of operations.

(3) ~~(Continued)~~Amortization expense for leasehold improvements totaled $0.1 million for each of the three months ended September 30, 2020 and 2019, and $0.4 million and $0.6 million for the nine months ended September 30, 2020 and 2019, respectively, with 0 related write-offs. Accumulated amortization was $3.2 million and $2.8 million as of September 30, 2020 and December 31, 2019, respectively. Depreciation expense for property and equipment totaled $0.3 million for each of the three months ended September 30, 2020 and 2019, with 0 related write-offs. Depreciation expense for property and equipment totaled $0.8 million and $1.0 million for the nine months ended September 30, 2020 and 2019, respectively, inclusive of write-offs of less than $0.1 million for the nine months ended September 30, 2019. Accumulated depreciation was $6.3 million and $5.4 million as of September 30, 2020 and December 31, 2019, respectively.

~~(3)~~

Amortization expense for leasehold improvements totaled $0.1 million for each of the three months ended June 30, 2020 and 2019, and $0.3 million and $0.4 million for the six months ended June 30, 2020 and 2019, respectively, with 0 related write-offs. Accumulated amortization was $3.1 million and $2.8 million as of June 30, 2020 and December 31, 2019, respectively. Depreciation expense for property and equipment totaled $0.3 million for each of the three months ended June 30, 2020 and 2019, with no related write-offs. Depreciation expense for property and equipment totaled $0.6 million and $0.7 million for the six months ended June 30, 2020 and 2019, respectively, inclusive of write-offs of less than $0.1 million for six months ended June 30, 2019. Accumulated depreciation was $6.0 million and $5.4 million as of June 30, 2020 and December 31, 2019, respectively.

Note 5 – Fair Value Measures

The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. U.S. GAAP guidance defines three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3 – Unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. Changes in the type of inputs may result in a reclassification for certain assets. The Company does not expect that changes in classifications between levels will be frequent.

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

Items Measured at Fair Value on a Recurring Basis

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis as of ~~June~~September 30, 2020 and December 31, 2019, aggregated by the level in the fair value hierarchy within which those instruments fall (in thousands):

Level 1
Level 2
Level 3
Balance as of June 30, 2020
Assets:

Investment in Cole REITs $ —
$ —
$ 6,867
$ 6,867
Liabilities:
Derivative liabilities
$ —
$ (106,520 ) $ —

$ (106,520 )

Level 1
Level 2
Level 3
Balance as of December 31, 2019
Assets:
Derivative assets $ —
$ 250
$ —
$ 250
Investment in Cole REITs —
—
7,552
7,552
Total assets $ —
$ 250
$ 7,552
$ 7,802
Liabilities:
Derivative liabilities $ —
$ (28,081 ) $ —
$ (28,081 )


	Level 1		Level 2		Level 3		Balance as of September 30, 2020
Assets:


Investment in Cole REITs	$	0	$	0	$	6,943	$	6,943

Liabilities:
Derivative liabilities	$	0	$	(97,511)	$	0	$	(97,511)

	Level 1		Level 2		Level 3		Balance as of December 31, 2019
Assets:
Derivative assets	$	0	$	250	$	0	$	250
Investment in Cole REITs	0		0		7,552		7,552
Total assets	$	0	$	250	$	7,552	$	7,802
Liabilities:
Derivative liabilities	$	0	$	(28,081)	$	0	$	(28,081)

Derivative Assets and Liabilities – The Company’s derivative financial instruments relate to interest rate swaps. The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the counterparties.

~~Table of Contents~~

~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2020 (Unaudited)~~ – ~~(Continued)~~

Although the Company determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of ~~June~~September 30, 2020 and December 31, 2019, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Investment in Cole REITs – The fair values of CCIT II, CCIT III and CCPT V were estimated using the net asset value per share, as most recently disclosed by each applicable REIT. Each of the Cole REIT’s share redemption programs includes restrictions that limit the number of shares redeemed by the respective Cole REIT.

The following are reconciliations of the changes in assets and liabilities with Level 3 inputs in the fair value hierarchy for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 (in thousands):

Investment in Cole REITs
Beginning balance, January 1, 2020 $ 7,552
Unrealized loss included in other income, net (685 )
Ending Balance, June 30, 2020 $ 6,867

Beginning balance, January 1, 2019 $ 7,844
Unrealized loss included in other income, net (292 )
Ending Balance, June 30, 2019 $ 7,552


	Investment in Cole REITs
Beginning balance, January 1, 2020	$	7,552
Unrealized loss included in other income, net	(609)
Ending Balance, September 30, 2020	$	6,943

Beginning balance, January 1, 2019	$	7,844

Unrealized loss included in other income, net	(292)








Ending Balance, September 30, 2019	$	7,552

Items Measured at Fair Value on a Non-Recurring Basis

Certain financial and nonfinancial assets and liabilities are measured at fair value on a non-recurring basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.

Table of Contents

VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

Real Estate Investments – The Company performs quarterly impairment review procedures for real estate investments and investments in unconsolidated entities, primarily through continuous monitoring of events and changes in circumstances that could indicate the carrying value of its real estate assets may not be recoverable.

As part of the Company’s quarterly impairment review procedures, net real estate assets representing 3847 properties were deemed to be impaired resulting in impairment charges of ~~$20.5~~$36.9 million during the ~~six~~nine months ended ~~June~~September 30, 2020. The impairment charges relate to certain office, retail and restaurant properties whose tenants filed for Chapter 11 bankruptcy during the ~~six~~nine months ended ~~June~~September 30, 2020, were identified by management for potential sale or were determined would not be re-leased by the tenant.

As a result of the COVID-19 pandemic, the Company considered whether there was any indication of impairment for properties that did not otherwise have potential impairment indicators and ~~did not identify additional~~identified 5 properties to include on the Company’s impairment watch list as of ~~June~~September 30, ~~2020.~~ 2020, however there were 0 additional impairment charges as a result of this assessment.

Based on the Company’s expected holding period for the properties and the economic conditions as of ~~June~~September 30, 2020, the Company believes that their carrying values are recoverable. However, the COVID-19 pandemic has negatively impacted the businesses of certain of our tenants so the Company continues to monitor for circumstances and events in future periods, which may result in impairment charges.

During the ~~six~~nine months ended ~~June~~September 30, 2019, net real estate assets related to 4253 properties, were deemed to be impaired resulting in impairment charges of ~~$20.3~~$24.2 million. The impairment charges related to certain office, retail and restaurant properties that, during the ~~six~~nine months ended ~~June~~September 30, 2019, management identified for potential sale or determined, based on discussions with the current tenants, would not be re-leased by the tenant and the Company believed the property would not be leased to another tenant at a rental rate that supports the current book value.

~~Table of Contents~~

~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2020 (Unaudited)~~ – ~~(Continued)~~

The Company estimates fair values using Level 3 inputs and uses a combined income and market approach, specifically using discounted cash flow analysis and recent comparable sales transactions. The evaluation of real estate assets for potential impairment requires the Company’s management to exercise significant judgment and make certain key assumptions, including, but not limited to, the following: (1) capitalization rate; (2) discount rates; (3) number of years property will be held; (4) property operating expenses; and (5) re-leasing assumptions including number of months to re-lease, market rental revenue and required tenant improvements. There are inherent uncertainties in making these estimates such as market conditions and performance and sustainability of the Company’s tenants. For the Company’s impairment tests for the real estate assets during the ~~six~~nine months ended ~~June~~September 30, 2020, the Company used a range of discount rates from 7.9% to ~~8.4%~~8.6% with a weighted-average rate of ~~8.2%~~8.3% and capitalization rates from 7.4% to ~~7.9%~~8.1% with a weighted-average rate of ~~7.7%~~7.8%.

Goodwill – The Company evaluates goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable.

As a result of a decrease in the Company’s stock price during the ~~six~~nine months ended ~~June~~September 30, 2020, the Company assessed its goodwill for impairment as of ~~June~~September 30, 2020, which resulted in 0 impairments. The Company continues to monitor factors that may impact the fair value of goodwill including, but not limited to, market comparable company multiples, interest rates, and global economic conditions.

Fair Value of Financial Instruments

The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash and accounts payable approximate their carrying value in the accompanying consolidated balance sheets due to their short-term nature and are classified as Level 1 under the fair value hierarchy. The fair values of the Company’s financial instruments are reported below (dollar amounts in thousands):

Level Carrying Amount at June 30, 2020 Fair Value at June 30, 2020 Carrying Amount at December 31, 2019 Fair Value at December 31, 2019
Liabilities⁽¹⁾:

Mortgage notes payable and other debt, net 2 $ 1,400,317
$ 1,446,194
$ 1,535,918
$ 1,590,915
Corporate bonds, net 2 3,435,016
3,575,898
2,839,581
3,022,087
Convertible debt, net 2 270,872
269,512
319,947
327,237
Credit facility 2 900,000
900,000
1,050,000
1,050,000
Total liabilities $ 6,006,205
$ 6,191,604
$ 5,745,446
$ 5,990,239

~~_______________________________________________~~Table of Contents


~~(1)~~	~~Current and prior period liabilities’ carrying and fair values exclude net deferred financing costs.~~

VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)


	Level	Carrying Amount at September 30, 2020		Fair Value at September 30, 2020		Carrying Amount at December 31, 2019		Fair Value at December 31, 2019



Liabilities (1):
Mortgage notes payable and other debt, net	2	$	1,336,629	$	1,385,727	$	1,535,918	$	1,590,915
Corporate bonds, net	2	3,435,457		3,689,038		2,839,581		3,022,087
Convertible debt, net	2	252,388		256,098		319,947		327,237
Credit facility	2	900,000		900,000		1,050,000		1,050,000
Total liabilities		$	5,924,474	$	6,230,863	$	5,745,446	$	5,990,239

(1)Current and prior period liabilities’ carrying and fair values exclude net deferred financing costs.

Debt – The fair value is estimated by an independent third party using a discounted cash flow analysis, based on management’s estimates of observable market interest rates. Corporate bonds and convertible debt are valued using quoted market prices in active markets with limited trading volume when available.

~~Table of Contents~~

~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2020 (Unaudited)~~ – ~~(Continued)~~

Note 6 –Debt

As of ~~June~~September 30, 2020, the Company had ~~$6.0~~$5.9 billion of debt outstanding, including net premiums and net deferred financing costs, with a weighted-average years to maturity of ~~4.8~~4.6 years and a weighted-average interest rate of ~~4.20%~~4.19%. The following table summarizes the carrying value of debt as of ~~June~~September 30, 2020 and December 31, 2019, and the debt activity for the ~~six~~nine months ended ~~June~~September 30, 2020 (in thousands):


																				Nine Months Ended September 30, 2020
					Six Months Ended June 30, 2020													Balance as of December 31, 2019		Debt Issuances		Repayments, Extinguishment and Assumptions		Accretion and Amortization		Balance as of September 30, 2020
		Balance as of December 31, 2019			Debt Issuances			Repayments, Extinguishment and Assumptions			Accretion and Amortization			Balance as of June 30, 2020
Mortgage notes payable:
	Outstanding balance	$	1,529,057		$	1,032		$	(133,657	)	$	—		$	1,396,432
	Net premiums ⁽¹⁾	6,861			—			(216		)	(2,760		)	3,885
	Deferred costs	(7,784		)	—			65			1,054			(6,665		)
Mortgages notes payable, net		1,528,134			1,032			(133,808		)	(1,706		)	1,393,652
Mortgage note payable:																	Mortgage note payable:
Outstanding balance																	Outstanding balance	$	1,529,057	$	1,032	$	(195,991)	$	—	$	1,334,098
Net premiums (1)																	Net premiums (1)	6,861		—		(415)		(3,915)		2,531
Deferred costs																	Deferred costs	(7,784)		(326)		65		1,590		(6,455)
Mortgage notes payable, net																	Mortgage notes payable, net	1,528,134		706		(196,341)		(2,325)		1,330,174

Corporate bonds:	Corporate bonds:																Corporate bonds:
	Outstanding balance	2,850,000			600,000			—			—			3,450,000
	Discount ⁽²⁾	(10,419		)	(5,136		)	—			571			(14,984		)
	Deferred costs	(25,842		)	(5,908		)	—			1,669			(30,081		)
Outstanding balance																	Outstanding balance	2,850,000		600,000		—		—		3,450,000
Discount (2)																	Discount (2)	(10,419)		(5,136)		—		1,012		(14,543)
Deferred costs																	Deferred costs	(25,842)		(5,908)		—		2,682		(29,068)
Corporate bonds, net	Corporate bonds, net	2,813,739			588,956			—			2,240			3,404,935			Corporate bonds, net	2,813,739		588,956		—		3,694		3,406,389

Convertible debt:	Convertible debt:																Convertible debt:
	Outstanding balance	321,802			—			(50,169		)	—			271,633
	Discount ⁽²⁾	(1,855		)	—			140			954			(761		)
	Deferred costs	(1,764		)	—			133			911			(720		)
Outstanding balance																	Outstanding balance	321,802		—		(69,083)		—		252,719
Discount (2)																	Discount (2)	(1,855)		—		156		1,368		(331)
Deferred costs																	Deferred costs	(1,764)		—		148		1,305		(311)
Convertible debt, net	Convertible debt, net	318,183			—			(49,896		)	1,865			270,152			Convertible debt, net	318,183		—		(68,779)		2,673		252,077

Credit facility:	Credit facility:																Credit facility:
	Outstanding balance	1,050,000			902,000			(1,052,000		)	—			900,000
	Deferred costs ⁽³⁾	(4,331		)	—			—			645			(3,686		)
Outstanding balance																	Outstanding balance	1,050,000		902,000		(1,052,000)		—		900,000
Deferred costs (3)																	Deferred costs (3)	(4,331)		(5)		—		966		(3,370)
Credit facility, net	Credit facility, net	1,045,669			902,000			(1,052,000		)	645			896,314			Credit facility, net	1,045,669		901,995		(1,052,000)		966		896,630

Total debt	Total debt	$	5,705,725		$	1,491,988		$	(1,235,704	)	$	3,044		$	5,965,053		Total debt	$	5,705,725	$	1,491,657	$	(1,317,120)	$	5,008	$	5,885,270


~~(1)~~	Net premiums on mortgage notes payable were recorded upon the assumption of the respective mortgage notes in relation to the various mergers and acquisitions. Amortization of these net premiums is recorded as a reduction to interest expense over the remaining term of the respective mortgage notes using the effective-interest method.


~~(2)~~	Discounts on the corporate bonds and convertible debt were recorded based upon the fair value of the respective debt instruments as of the respective issuance dates. Amortization of these discounts is recorded as an increase to interest expense over the remaining term of the respective debt instruments using the effective-interest method.


~~(3)~~	~~Deferred costs relate to the Credit Facility Term Loan, as defined in the “Credit Facility” section below.~~

(1)Net premiums on mortgage notes payable were recorded upon the assumption of the respective mortgage notes in relation to the various mergers and acquisitions. Amortization of these net premiums is recorded as a reduction to interest expense over the remaining term of the respective mortgage notes using the effective-interest method.

(2)Discounts on the corporate bonds and convertible debt were recorded based upon the fair value of the respective debt instruments as of the respective

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2020 (Unaudited) – (Continued)

issuance dates. Amortization of these discounts is recorded as an increase to interest expense over the remaining term of the respective debt instruments using the effective-interest method.

(3)Deferred costs relate to the Credit Facility Term Loan, as defined in the “Credit Facility” section below.

Mortgage Notes Payable

The Company’s mortgage notes payable consisted of the following as of ~~June~~September 30, 2020 (dollar amounts in thousands):

Encumbered Properties
Net Carrying Value of Collateralized Properties ⁽¹⁾
Outstanding Balance
Weighted-Average
Interest Rate ⁽²⁾

Weighted-Average Years to Maturity ⁽³⁾
Fixed-rate debt 313
$ 1,877,744
$ 1,381,184
5.02 % 2.5
Variable-rate debt 1
30,018
15,248
3.50 %
⁽⁴⁾
0.1
Total ⁽⁵⁾
314
$ 1,907,762
$ 1,396,432
5.00 % 2.5


	Encumbered Properties	Net Carrying Value of Collateralized Properties (1)		Outstanding Balance		Weighted-Average Interest Rate (2)			Weighted-Average Years to Maturity (3)
Fixed-rate debt	278	$	1,745,907	$	1,318,937	5.01	%		2.3
Variable-rate debt	1	29,678		15,161		3.75	%	(4)	0.9
Total (5)	279	$	1,775,585	$	1,334,098	4.99	%		2.3


~~(1)~~	~~Net carrying value is real estate assets, including investment in direct financing leases, net of real estate liabilities.~~


~~(2)~~	Weighted average interest rate is computed using the interest rate in effect until the anticipated repayment date. Should the loan not be repaid at the anticipated repayment date, the applicable interest rate will increase as specified in the respective loan agreement until the extended maturity date.


~~(3)~~	~~Weighted average years remaining to maturity is computed using the anticipated repayment date as specified in each loan agreement, where applicable.~~


~~(4)~~	~~Weighted-average interest rate for variable-rate debt represents the interest rate in effect as of June 30, 2020.~~


~~(5)~~	~~The table above does not include mortgage notes associated with unconsolidated joint ventures of $341.8 million, which are non-recourse to the Company.~~

(1)Net carrying value is real estate assets, including investment in direct financing leases, net of real estate liabilities.

(2)Weighted average interest rate is computed using the interest rate in effect until the anticipated repayment date. Should the loan not be repaid at the anticipated repayment date, the applicable interest rate will increase as specified in the respective loan agreement until the extended maturity date.

(3)Weighted average years remaining to maturity is computed using the anticipated repayment date as specified in each loan agreement, where applicable.

(4)Weighted-average interest rate for variable-rate debt represents the interest rate in effect as of September 30, 2020.

(5)The table above does not include mortgage notes associated with unconsolidated joint ventures of $534.3 million, which are non-recourse to the Company.

The Company’s mortgage loan agreements generally restrict corporate guarantees and require the maintenance of financial covenants, including maintenance of certain financial ratios (such as debt service coverage ratios and minimum net operating income). The mortgage loan agreements contain no dividend restrictions except in the event of default or when a distribution would drive liquidity below the applicable thresholds. At ~~June~~September 30, 2020, the Company believes that it was in compliance with the financial covenants under the mortgage loan agreements and had no restrictions on the payment of dividends.

The following table summarizes the scheduled aggregate principal repayments due on mortgage notes subsequent to ~~June~~September 30, 2020 (in thousands):

Total
July 1, 2020 - December 31, 2020 $ 78,261
2021 299,015
2022 266,951
2023 124,217
2024 621,021
2025 1,078
Thereafter 5,889
Total $ 1,396,432


	Total
October 1, 2020 - December 31, 2020	$	859
2021	314,084
2022	266,951
2023	124,217
2024	621,021
2025	1,078
Thereafter	5,888
Total	$	1,334,098

Corporate Bonds

As of ~~June~~September 30, 2020, the OP had $3.45 billion aggregate principal amount of senior unsecured notes (the “Senior Notes”) outstanding comprised of the following (dollar amounts in thousands):


	Outstanding Balance September 30, 2020		Interest Rate		Maturity Date




2024 Senior Notes	$	500,000	4.600	%	February 6, 2024
2025 Senior Notes	550,000		4.625	%	November 1, 2025
2026 Senior Notes	600,000		4.875	%	June 1, 2026
2027 Senior Notes	600,000		3.950	%	August 15, 2027
2028 Senior Notes	600,000		3.400	%	January 15, 2028
2029 Senior Notes	600,000		3.100	%	December 15, 2029

Total balance and weighted-average interest rate	$	3,450,000	4.069	%

Outstanding Balance June 30, 2020 Interest Rate Maturity Date
2024 Senior Notes $ 500,000
4.600 % February 6, 2024
2025 Senior Notes 550,000
4.625 % November 1, 2025
2026 Senior Notes 600,000
4.875 % June 1, 2026
2027 Senior Notes 600,000
3.950 % August 15, 2027
2028 Senior Notes 600,000
3.400 % January 15, 2028
2029 Senior Notes 600,000
3.100 % December 15, 2029
Total balance and weighted-average interest rate $ 3,450,000
4.069 %

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

On June 29, 2020, the Company closed a senior note offering, consisting of $600.0 million aggregate principal amount of the Operating Partnership’s 3.40% Senior Notes due 2028 (the “2028 Senior Notes”).

~~Table of Contents~~

~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2020 (Unaudited)~~ – ~~(Continued)~~

The Senior Notes are guaranteed by the General Partner. The OP may redeem all or a part of any series of the Senior Notes at any time, at its option, for the redemption prices set forth in the indenture governing the Senior Notes. If the redemption date is 60 or fewer days prior to the maturity date with respect to the 2025 Senior Notes, 90 or fewer days prior to the maturity date with respect to the 2024 Senior Notes, the 2026 Senior Notes, the 2027 Senior Notes and the 2029 Senior Notes, or on or after November 15, 2027, with respect to the 2028 Senior Notes, the redemption price will equal 100% of the principal amount of the Senior Notes of the applicable series to be redeemed, plus accrued and unpaid interest on the amount being redeemed to, but excluding, the applicable redemption date. The Senior Notes are registered under the Securities Act of 1933, as amended (the “Securities Act”) and are freely transferable.

The indenture governing our Senior Notes requires us to maintain financial ratios which include maintaining (i) a maximum limitation on incurrence of total debt less than or equal to 65% of Total Assets (as defined in the indenture), (ii) maximum limitation on incurrence of secured debt less than or equal to 40% of Total Assets (as defined in the indenture), (iii) a minimum debt service coverage ratio of at least 1.5x and (iv) a minimum unencumbered asset value of at least 150% of the aggregate principal amount of all of the outstanding Unsecured Debt (as defined in the indenture). As of ~~June~~September 30, 2020, the Company believes that it was in compliance with the financial covenants of our Senior Notes based on the covenant limits and calculations in place at that time.

Convertible Debt

~~On June 25,~~During the nine months ended September 30, 2020, the Company repurchased ~~$50.2~~$69.1 million of its 3.75% Convertible Senior Notes due 2020. As of ~~June~~September 30, 2020, the Company’s 2020 Convertible Notes had a balance of ~~$271.6~~$252.7 million outstanding, which excludes the carrying value of the conversion options recorded within additional paid-in capital of $12.1 million and the unamortized discount of ~~$0.8~~$0.3 million. The discount will be amortized over the remaining term of ~~0.5~~0.2 years. The 2020 Convertible Notes bear interest at an annual rate of 3.75%.

The 2020 Convertible Notes may be converted into cash, shares of the Company’s Common Stock or a combination thereof, in limited circumstances prior to June 15, 2020, and may be converted into such consideration at any time on or after June 15, 2020. As of ~~June~~September 30, 2020, the conversion rate was 66.7249 shares of the Company’s Common Stock per $1,000 principal amount of 2020 Convertible Notes, which reflects adjustments to the initial conversion rate pursuant to the terms of the applicable indenture as a result of cash dividend payments. There were no changes to the terms of the 2020 Convertible Notes during the ~~six~~nine months ended ~~June~~September 30, 2020 and the Company believes that it was in compliance with the financial covenants pursuant to the indenture governing the 2020 Convertible Notes as of ~~June~~September 30, 2020.

Credit Facility

On May 23, 2018, the General Partner, as guarantor, and the OP, as borrower, entered into a credit agreement with Wells Fargo Bank, National Association as administrative agent and other lenders party thereto (the “Credit Agreement”). The Credit Agreement provided for maximum borrowings of $2.9 billion, originally consisting of a $2.0 billion unsecured revolving credit facility (the “Revolving Credit Facility”) and a $900.0 million unsecured term loan facility (the “Credit Facility Term Loan,” together with the Revolving Credit Facility, the “Credit Facility”). Effective December 27, 2019, the Company reduced the amount available under its Revolving Credit Facility from $2.0 billion to $1.5 billion. On May 27, 2020, the Operating Partnership and the Company, entered into Amendment No. 1 to the Credit Agreement (the “Amendment”) which, among other things, modifies the measurement period for certain financial covenants (and relevant associated definitions) from either the prior quarterly period annualized or the prior six month period to the four consecutive fiscal quarter period most recently ending.

As of ~~June~~September 30, 2020, 0 amounts were outstanding under the Revolving Credit Facility and the full $900.0 million was drawn on the Credit Facility Term Loan. The maximum aggregate dollar amount of letters of credit that may be outstanding at any one time under the Credit Facility is $50.0 million. As of ~~June~~September 30, 2020, there were 0$4.0 million of letters of credit outstanding.

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

The Revolving Credit Facility generally bears interest at an annual rate of LIBOR plus 0.775% to 1.55% or Base Rate plus 0.00% to 0.55% (based upon the General Partner’s then current credit rating). “Base Rate” is defined as the highest of the prime rate, the federal funds rate plus 0.50% or a floating rate based on one month LIBOR plus 1.0%, determined on a daily basis. The Credit Facility Term Loan generally bears interest at an annual rate of LIBOR plus 0.85% to 1.75%, or Base Rate plus 0.00% to 0.75% (based upon the General Partner’s then current credit rating). In addition, the Credit Agreement provides the flexibility for interest rate auctions, pursuant to which, at the Company’s election, the Company may request that lenders make competitive bids to provide revolving loans, which competitive bids may be at pricing levels that differ from the foregoing interest rates. The Credit Facility Term Loan interest rate was 3.59% as of ~~June~~September 30, 2020, pursuant to the terms of the related swap agreements discussed in Note 7 –Derivatives and Hedging ~~Activities~~.

~~Table of Contents~~

~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Activities.

~~June 30, 2020 (Unaudited)~~ – ~~(Continued)~~

In the event of default, at the election of a majority of the lenders (or automatically upon a bankruptcy event of default with respect to the OP or the General Partner), the commitments of the lenders under the Credit Facility will terminate, and payment of any unpaid amounts in respect of the Credit Facility will be accelerated. The Revolving Credit Facility terminates on May 23, 2022, unless extended in accordance with the terms of the Credit Agreement. The Credit Agreement provides for 2 ~~six-month~~six-month extension options with respect to the Revolving Credit Facility, exercisable at the OP’s election and subject to certain customary conditions, as well as certain customary “amend and extend” provisions. The outstanding Credit Facility Term Loan matures on May 23, 2023. At any time, upon timely notice by the OP and subject to any breakage fees, the OP may prepay borrowings under the Credit Facility (subject to certain limitations applicable to the prepayment of any loans obtained through an interest rate auction, as described above). The OP incurs a facility fee equal to 0.10% to 0.30% per annum (based upon the General Partner’s then current credit rating) multiplied by the commitments (whether or not utilized) in respect of the Revolving Credit Facility. The OP also incurs customary administrative agent, letter of credit issuance, letter of credit fronting, extension and other fees.

The Credit Facility requires restrictions on corporate guarantees, as well as the maintenance of financial covenants, including the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios). The key financial covenants in the Credit Facility, as defined and calculated per the terms of the Credit Agreement, include maintaining (i) a maximum leverage ratio less than or equal to 60%, (ii) a minimum fixed charge coverage ratio of at least 1.5x, (iii) a secured leverage ratio less than or equal to 45%, (iv) a total unencumbered asset value ratio less than or equal to 60% and (v) a minimum unencumbered interest coverage ratio of at least 1.75x. The Company believes that it was in compliance with the financial covenants pursuant to the Credit Agreement and is not restricted from accessing any borrowing availability under the Credit Facility as of ~~June~~September 30, 2020.

Note 7 –Derivatives and Hedging Activities

Cash Flow Hedges of Interest Rate Risk

The Company has interest rate swap agreements with an aggregate $900.0 million notional amount, which were designated as cash flow hedges. The Company also has forward starting interest rate swaps with a total notional amount of $400.0 million, which were designated as cash flow hedges to hedge the risk of changes in the interest-related cash outflows associated with the anticipated issuance of long-term debt.

The table below presents the fair value of the Company’s derivative financial instruments designated as cash flow hedges as well as their classification in the consolidated balance sheets as of ~~June~~September 30, 2020 and December 31, 2019 (in thousands):

Derivatives Designated as Hedging Instruments Balance Sheet Location June 30, 2020 December 31, 2019
Interest rate swaps Rent and tenant receivables and other assets, net $ —
$ 250
Interest rate swaps Derivative, deferred rent and other liabilities $ (106,520 ) $ (28,081 )


Derivatives Designated as Hedging Instruments	Balance Sheet Location	September 30, 2020		December 31, 2019
Interest rate swaps	Rent and tenant receivables and other assets, net	$	0	$	250
Interest rate swaps	Derivative, deferred rent and other liabilities	$	(97,511)	$	(28,081)

During the three and ~~six~~nine months ended ~~June~~September 30, 2020, the Company recorded unrealized gains of $3.7 million and losses of ~~$6.5 million and $85.0~~$81.4 million, respectively, and losses of ~~$16.3~~$20.9 million and ~~$27.6~~$48.5 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2019 for changes in the fair value of the cash flow hedges in accumulated other comprehensive income.

The Company reclassified previous losses of ~~$4.6~~$5.4 million and ~~$6.6~~$12.0 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively, and losses of ~~$0.1~~$0.7 million and ~~$0.2~~$0.9 million for the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively, from accumulated other comprehensive income into interest expense as a result of the hedged transactions impacting earnings.

~~During the next twelve months, the Company estimates that an additional $24.4 million will be reclassified from other comprehensive income as an increase to interest expense.~~

3236

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2020 (Unaudited) – (Continued)

During the next twelve months, the Company estimates that an additional $21.7 million will be reclassified from other comprehensive income as an increase to interest expense.

Tabular Disclosure of Offsetting Derivatives

The table below details a gross presentation, the effects of offsetting and a net presentation of the Company’s derivatives as of ~~June~~September 30, 2020 and December 31, 2019 (in thousands). The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value.

Offsetting of Derivative Assets and Liabilities
Gross Amounts of Recognized Assets Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts of Assets Presented in the Consolidated Balance Sheets Net Amounts of Liabilities Presented in the Consolidated Balance Sheets Financial Instruments Cash Collateral Received Net Amount
June 30, 2020 $ —
$ (106,520 ) $ —
$ —
$ (106,520 ) $ —
$ —
$ (106,520 )
December 31, 2019 $ 250
$ (28,081 ) $ —
$ 250
$ (28,081 ) $ —
$ —
$ (27,831 )


	Offsetting of Derivative Assets and Liabilities
	Gross Amounts of Recognized Assets		Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Assets Presented in the Consolidated Balance Sheets		Net Amounts of Liabilities Presented in the Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
September 30, 2020	$	0	$	(97,511)	$	0	$	0	$	(97,511)	$	0	$	0	$	(97,511)
December 31, 2019	$	250	$	(28,081)	$	0	$	250	$	(28,081)	$	0	$	0	$	(27,831)

Credit Risk Related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision specifying that if the Company either defaults or is capable of being declared in default on any of its indebtedness, the Company could also be declared in default on its derivative obligations.

As of ~~June~~September 30, 2020, the Company has not posted any collateral related to these agreements and was not in breach of any provisions in these agreements. If the Company had breached any of these agreements, it could have been required to settle its obligations under the agreements at their aggregate termination value of ~~$107.3~~$99.0 million at ~~June~~September 30, 2020.

Note 8 – Supplemental Cash Flow Disclosures

Supplemental cash flow information was as follows for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 (in thousands):


	Nine Months Ended September 30,
	2020		2019
Supplemental disclosures:
Cash paid for interest	$	176,694	$	203,438
Cash paid for income taxes	$	5,601	$	4,474

Non-cash investing and financing activities:


Accrued capital expenditures, tenant improvements and real estate developments	$	8,831	$	13,670

Real estate contributions to industrial partnership and office partnership	$	17,240	$	29,577
Distributions declared and unpaid	$	85,421	$	150,970
Distributions payable relinquished	$	0	$	7,799
Surrender of Limited Partner OP Units	$	0	$	191,974
Mortgage note payable relieved by foreclosure or a deed-in-lieu of foreclosure	$	0	$	19,525

Real estate investments received from lease related transactions	$	259	$	0


Nonmonetary exchanges:
Exchange of real estate investments	$	0	$	8,900

Six Months Ended June 30,
2020 2019
Supplemental disclosures:
Cash paid for interest $ 126,173
$ 147,317
Cash paid for income taxes $ 3,885
$ 3,962
Non-cash investing and financing activities:
Accrued capital expenditures, tenant improvements and real estate developments $ 13,513
$ 8,551
Real estate contributions to industrial partnership and office partnership $ 7,494
$ 29,577
Distributions declared and unpaid $ 85,231
$ 143,306
Distributions payable relinquished $ —
$ 6,429
Real estate investments received from lease related transactions $ 259
$ —
Exchange of real estate investments $ —
$ 8,900

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

Note 9 – Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following as of ~~June~~September 30, 2020 and December 31, 2019 (in thousands):

June 30, 2020 December 31, 2019
Accrued interest $ 31,695
$ 31,925
Accrued real estate and other taxes 28,174
25,320
Accrued legal fees and litigation settlements 8,586
25,571
Accounts payable 5,697
1,779
Accrued other 38,399
41,725
Total $ 112,551

$ 126,320


	September 30, 2020		December 31, 2019
Accrued interest	$	45,196	$	31,925
Accrued real estate and other taxes	34,671		25,320
Accounts payable	1,684		1,779
Accrued legal fees and litigation settlements	523		25,571
Accrued other	30,027		41,725
Total	$	112,101	$	126,320

~~Table of Contents~~

~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2020 (Unaudited)~~ – ~~(Continued)~~

Note 10 – Commitments and Contingencies

Litigation

The Company is involved in various routine legal proceedings and claims incidental to the ordinary course of its business. There are no material legal proceedings pending against the Company, except as follows:

Government Investigations and Litigation Relating to the Audit Committee Investigation

As previously reported, on October 29, 2014, the Company filed a Current Report on Form 8-K (the “October 29 8-K”) reporting the Audit Committee’s conclusion, based on the preliminary findings of its investigation, that certain previously issued consolidated financial statements of the Company, including those included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014, and related financial information should no longer be relied upon. The Company also reported that the Audit Committee had based its conclusion on the preliminary findings of its investigation into concerns regarding accounting practices and other matters that were first reported to the Audit Committee in early September 2014 and that the Audit Committee believed that an error in the calculation of adjusted funds from operations for the first quarter of 2014 had been identified but intentionally not corrected when the Company reported its financial results for the three and six months ended June 30, 2014. Prior to the filing of the October 29 8-K, the Audit Committee previewed for the SEC the information contained in the filing. Subsequent to that filing, the SEC provided notice that it had commenced a formal investigation and issued subpoenas calling for the production of various documents. In addition, the United States Attorney’s Office for the Southern District of New York contacted counsel for the Audit Committee and counsel for the Company with respect to this matter, and the Secretary of the Commonwealth of Massachusetts issued a subpoena calling for the production of various documents. The Company cooperated with these regulators throughout their investigations. The U.S. Attorney’s Office concluded that it did not intend to bring any criminal charges against the Company arising from its investigation and the Company believes that the investigation by the Secretary of the Commonwealth of Massachusetts is no longer pending.

On November 18, 2019, the Company announced it had reached agreement with the staff of the Enforcement Division of the SEC on the material terms of a negotiated resolution relating to the SEC's investigation of the matters disclosed in the Company's October 29 8-K. The agreement with the SEC staff, which was approved by the SEC's Commissioners on June 23, 2020, required payment of $8.0 million as a civil penalty, which payment was made by the Company ~~subsequent to~~during the third quarter ~~end.~~of 2020.

Purchase Commitments

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.

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

Joint Ventures

As discussed in Note 3 – Real Estate Investments and Related Intangibles, on September 18, 2020, the Faison JV Bethlehem GA joint venture partner exercised its put option to require the Company to purchase its 10% ownership interest in the joint venture on or before November 4, 2020.

Environmental Matters

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. The Company has not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition, in each case, that it believes will have a material adverse effect on the results of operations.

~~Table of Contents~~

~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2020 (Unaudited)~~ – ~~(Continued)~~

Note 11 – Leases

Lessor

The Company is the lessor for its ~~3,836~~3,820 retail, restaurant, office and industrial properties. The Company’s operating and direct financing leases have non-cancelable lease terms of ~~0.03~~0.08 years to ~~24.6~~24.4 years. Certain leases with tenants include options to extend or terminate the lease agreements or to purchase the underlying asset. Lease agreements may also contain rent increases that are based on an index or rate (e.g., the consumer price index (“CPI”) or LIBOR). The Company believes the residual value risk is not a primary risk because of the long-lived nature of the assets.

The components of rental revenue from the Company’s operating and direct financing leases were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Fixed:
Cash rent (1)	$	255,996	$	272,032	$	778,697	$	831,931
Straight-line rent (2)	12,595		5,470		18,053		20,925
Lease intangible amortization	(393)		(692)		(1,929)		(2,034)
Property operating cost reimbursements	1,581		1,418		4,372		4,304
Sub-lease (3)	5,175		5,328		15,718		16,099
Total fixed	274,954		283,556		814,911		871,225

Variable (4)	18,585		19,219		55,438		60,008
Income from direct financing leases	153		210		505		638
Total rental revenue	$	293,692	$	302,985	$	870,854	$	931,871

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Fixed:
Cash rent⁽¹⁾
$ 253,117
$ 277,324
$ 522,702
$ 559,899
Straight-line rent⁽²⁾
3,404
8,043
5,458
15,455
Lease intangible amortization (788 ) (611 ) (1,536 ) (1,342 )
Property operating cost reimbursements 1,363
1,422
2,791
2,886
Sub-lease ⁽³⁾
5,279
5,282
10,543
10,771
Total fixed 262,375

291,460

539,958
587,669

Variable ⁽⁴⁾
16,039
20,372
36,852
40,789
Income from direct financing leases 162
211
352
428
Total rental revenue $ 278,576

$ 312,043

$ 577,162

$ 628,886

~~____________________________________~~(1)For the three and nine months ended September 30, 2020, the Company had $3.9 million and $16.7 million, respectively, of rental revenue related to deferral agreements executed through October 23, 2020, which qualify for the COVID-19 Lease Concessions Relief. For the three and nine months ended September 30, 2020, cash rent was negatively impacted by (i) $6.5 million and $17.7 million, respectively, of abated rental revenue pursuant to lease amendments executed through September 30, 2020, which increased the weighted average lease term for the related properties and (ii) a reduction to rental revenue of $9.2 million and $13.9 million, respectively, that was related to the impact of the COVID-19 pandemic, of which $5.1 million and $6.0 million, respectively, represented an increase to the general allowance for rental revenue that the Company believes it may abate as a result of lease amendments and $4.1 million and $7.9 million, respectively, represented amounts not probable of collection at September 30, 2020 and rental revenue will be recognized as cash is received.

Period

Record Date

Payment Date

~~September~~December 15, 2020 - ~~October~~January 14, ~~2020~~2021

~~October~~January 1, ~~2020~~2021

~~October~~January 15, ~~2020~~2021

~~October~~January 15, ~~2020~~2021 - ~~November~~February 14, ~~2020~~2021

~~November~~February 1, ~~2020~~2021

~~November~~February 16, ~~2020~~2021

~~November~~February 15, ~~2020~~2021 - ~~December~~March 14, ~~2020~~2021

~~December~~March 1, ~~2020~~2021

~~December~~March 15, ~~2020~~2021

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. We make statements in this section that are forward-looking statements. Certain risks may cause our actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a complete discussion of such risk factors, see "Risk Factors" in Part I, Item 1A. of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as supplemented in Part II, Item 1A. of this Quarterly Report on Form 10-Q. Capitalized terms used herein, but not otherwise defined, shall have the meaning ascribed to those terms in the “Part I – Financial Information,” including the notes to the consolidated financial statements contained therein.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements” which reflect our expectations and projections regarding future events and plans, future financial condition, results of operations, liquidity and business, including leasing, acquisitions, dispositions, rent receipts, rent relief requests and rent relief granted, debt levels, maturities and refinancings, ~~liquidity,~~the expected reverse stock split, the payment of future dividends and the impact of the coronavirus (COVID-19) on our business. Generally, the words “anticipates,” “assumes,” “believes,” “continues,” “could,” “estimates,” “expects,” “goals,” “intends,” “may,” “plans,” “projects,” “seeks,” “should,” “targets,” “will,” variations of such words and similar expressions identify forward-looking statements. These forward-looking statements are based on information currently available and involve a number of known and unknown assumptions and risks, uncertainties and other factors, which may be difficult to predict and beyond the Company’s control, that could cause actual events and plans or could cause our business, financial condition, liquidity and results of operations to differ materially from those expressed or implied in the forward-looking statements. Further, information regarding historical rent collections should not serve as an indication of future rent collection. These factors include, among other things, those discussed below. We disclaim any obligation to publicly update or revise any forward-looking statements, whether as a result of changes in underlying assumptions or factors, new information, future events or otherwise, except as may be required by law.

The following are some, but not all, of the assumptions, risks, uncertainties and other factors that could cause our actual results to differ materially from those presented in our forward-looking statements:

•The uncertain duration and extent of the impact of COVID-19 on our business and the businesses of our tenants (including their ability to timely make rental payments) and the economy generally.

•Federal, state or local legislation or regulation that could impact the timely payment of rent by tenants in light of COVID-19.

•We may be unable to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all.

•We are subject to risks associated with tenant, geographic and industry concentrations with respect to our properties.

•We may be subject to risks accompanying the management of our industrial and office partnerships.

•Our properties may be subject to impairment charges.

•We could be subject to unexpected costs or liabilities that may arise from potential dispositions, including related to limited partnership, tenant-in-common and Delaware statutory trust real estate programs (“1031 real estate programs”) and our management of such programs.

•We are subject to competition in the acquisition and disposition of properties and in the leasing of our properties including that we may be unable to acquire, dispose of, or lease properties on advantageous terms or at all.

•We are subject to risks associated with bankruptcies or insolvencies of tenants, from tenant defaults generally or from the unpredictability of the business plans and financial condition of our tenants, which are heightened as a result of the COVID-19 pandemic.

•We have substantial indebtedness, which may affect our ability to pay dividends, and expose us to interest rate fluctuation risk and the risk of default under our debt obligations.

•We may be subject to increases in our borrowing costs as a result of changes in interest rates and other factors, including the potential phasing out of London Inter-Bank Offer Rate (“LIBOR”) after 2021.

•Our overall borrowing and operating flexibility may be adversely affected by the terms and restrictions within the indenture governing the senior unsecured notes (the “Senior Notes”), and the Credit Agreement governing the terms of the Credit Facility (as both terms are defined in Liquidity and Capital Resources), and compliance with such covenants and/or our ability to access capital markets (including on attractive terms) may be more difficult as a result of the impact of COVID-19.

•Our access to capital and terms of future financings may be affected by adverse changes to our credit rating.

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•We may be affected by the incurrence of additional secured or unsecured debt.

•We may not be able to achieve and maintain profitability.

•We may not generate cash flows sufficient to pay our dividends to stockholders or meet our debt service obligations.

•We may be affected by risks resulting from losses in excess of insured limits.

•We may fail to remain qualified as a real estate investment trust (“REIT”) for U.S. federal income tax purposes.

•Compliance with the REIT annual distribution requirements may limit our operating flexibility.

•We may be unable to retain or hire key personnel.

•We may be impacted by the continuation or deterioration of current market conditions.

All forward-looking statements should be read in light of the risks identified in Part I, Item 1A. Risk Factors within our Annual Report on Form 10-K for the year ended December 31, 2019, as supplemented in Part II, Item 1A. of this Quarterly Report on Form 10-Q.

We use certain defined terms throughout this Quarterly Report on Form 10-Q that have the following meanings:

When we refer to “annualized rental income,” we mean the rental revenue under our leases on operating properties on a straight-line basis, which includes the effect of rent escalations and any tenant concessions, such as free rent, and our pro rata share of such revenues from properties owned by unconsolidated joint ventures. Annualized rental income excludes any adjustments to rental income due to changes in the collectability assessment, contingent rent, such as percentage rent, and operating expense reimbursements. Management uses annualized rental income as a basis for tenant, industry and geographic concentrations and other metrics within the portfolio. Annualized rental income is not indicative of future performance.

When we refer to a “creditworthy tenant,” we mean a tenant that has entered into a lease that we determine is creditworthy and may include tenants with an investment grade or below investment grade credit rating, as determined by major credit rating agencies, or unrated tenants. To the extent we determine that a tenant is a “creditworthy tenant” even though it does not have an investment grade credit rating, we do so based on our management’s determination that a tenant should have the financial wherewithal to honor its obligations under its lease with us. As explained further below, this determination is based on our management’s substantial experience performing credit analysis and is made after evaluating a tenant’s due diligence materials that are made available to us, including financial statements and operating data.

When we refer to a “direct financing lease,” we mean a lease that requires specific treatment due to the significance of the lease payments from the inception of the lease compared to the fair value of the property, term of the lease, a transfer of ownership, or a bargain purchase option. These leases are recorded as a net asset on the balance sheet. The amount recorded is calculated as the fair value of the remaining lease payments on the leases and the estimated fair value of any expected residual property value at the end of the lease term.

When we refer to properties that are net leased on a “long term basis,” we mean properties with remaining primary lease terms of generally seven to 10 years or longer on average, depending on property type.

Under a “net lease,” the tenant occupying the leased property (usually as a single tenant) does so in much the same manner as if the tenant were the owner of the property. There are various forms of net leases, most typically classified as triple net or double net. Triple net leases typically require that the tenant pay all expenses associated with the property (e.g., real estate taxes, insurance, maintenance and repairs). Double net leases typically require that the tenant pay all operating expenses associated with the property (e.g., real estate taxes, insurance and maintenance), but excludes some or all major repairs (e.g., roof, structure and parking lot). Accordingly, the owner receives the rent “net” of these expenses, rendering the cash flow associated with the lease predictable for the term of the lease. Under a net lease, the tenant generally agrees to lease the property for a significant term and agrees that it will either have no ability or only limited ability to terminate the lease or abate rent prior to the expiration of the term of the lease as a result of real estate driven events such as casualty, condemnation or failure by the landlord to fulfill its obligations under the lease.

When we refer to “operating properties” we mean properties owned and consolidated by the Company, omitting properties (the “Excluded Properties”) for which (i) the related mortgage loan is in default, and (ii) management decides to transfer the properties to the lender in connection with settling the mortgage note obligation. At and during the three and ~~six~~nine months ended ~~June~~September 30, 2020, there were no Excluded Properties. At and during the three months ended ~~June~~September 30, 2019, there were no Excluded Properties. During the nine months ended September 30, 2019, there was one Excluded Property which was an office property comprising 145,186 square feet, of which 6,926 square feet was ~~vacant, with an outstanding principal balance~~vacant.

Table of ~~$19.5 million.~~Contents

~~Effective April 1, 2019, the Company determined that the~~The real estate portfolio and economic metrics of operating properties ~~should include~~includes the Company's pro rata share of square feet and annualized rental income from the Company's unconsolidated joint ventures, based upon the Company's legal ownership percentage, which may, at times, not equal the Company's economic interest because of various provisions in certain joint venture agreements regarding distributions of cash flow based on capital account balances, allocations of profits and losses and payments of preferred returns. ~~The Company did not update data presented for prior periods as the impact on prior period metrics was immaterial.~~

As of ~~June~~September 30, 2020, our portfolio was comprised of ~~3,836~~3,820 retail, restaurant, office and industrial real estate properties with an aggregate ~~89.2~~89.1 million square feet, of which ~~98.7%~~98.3% was leased, with a weighted-average remaining lease term of ~~8.5~~8.3 years. Omitting the square feet of one redevelopment property and including the pro rata share of square feet and annualized rental income from the Company’s unconsolidated joint ventures, we owned an aggregate of 88.9 million square feet, of which ~~98.8%~~98.5% was leased, with a weighted-average remaining lease term of ~~8.5~~8.4 years as of ~~June~~September 30, 2020.

On November 5, 2020, VEREIT announced a one-for-five reverse stock split of its Common Stock which is expected to be effective on December 17, 2020 whereby every five shares of VEREIT's issued and outstanding shares of Common Stock, $0.01 par value per share, will be converted into one share of Common Stock, $0.01 par value per share. The reverse stock split will affect all record holders of VEREIT’s Common Stock. For additional information about the reverse stock split, see Note 14 – Subsequent Events.

Overview

VEREIT is a full-service real estate operating company which owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S. The Company has ~~3,836~~3,820 retail, restaurant, office and industrial operating properties with an aggregate 88.9 million rentable square feet, of which ~~98.8%~~98.5% was leased as of ~~June~~September 30, 2020, with a weighted-average remaining lease term of ~~8.5~~8.4 years.

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Operating Highlights and Key Performance Indicators

Activity through ~~June~~September 30, 2020

Operations

•Acquired controlling financial interests in 25 commercial properties for an aggregate purchase price of $147.1 million, which includes one land parcel for build-to-suit development and $0.9 million of external acquisition-related expenses that were capitalized. During the ~~three~~nine months ended ~~June~~September 30, 2020, the Company acquired a mezzanine position in two last-mile distribution facilities for $10.0 million.

•Acquired $246.8 million for the industrial partnership and $33.1 million for the office partnership.

•Disposed of 4763 properties, including the sale of ~~two~~three consolidated properties to the office partnership, for an aggregate gross sales price of ~~$219.2~~$376.2 million, of which our share was ~~$216.7~~$373.4 million, resulting in proceeds of ~~$204.1~~$346.7 million after closing costs and contributions to the office partnership. The Company recorded a gain of ~~$34.2~~$77.2 million related to the sales.

Debt

•Closed a senior note offering, consisting of $600.0 million aggregate principal amount of the Operating Partnership’s 3.40% Senior Notes due 2028 (the “2028 Senior Notes”).

•Repurchased ~~$50.2~~$69.1 million of the Company’s 3.75% Convertible Senior Notes due 2020.

~~Repaid $871.3 million on our Revolving Credit Facility.~~ •As of ~~June~~September 30, 2020, no amounts were outstanding under the Revolving Credit Facility.


•	~~Total secured debt decreased by$132.6 million, from $1.5 billion to $1.4 billion.~~ •Total secured debt decreased by$195.0 million, from $1.5 billion to $1.3 billion, which includes prepayment of $61.5 million of mortgage notes during the third quarter of 2020.

Equity

•Issued ~~notice that we would redeem $150.0~~an aggregate of 13.3 million shares under the ATM Program, at a weighted average price per share of $6.81, for gross proceeds of $90.6 million. The weighted average price per share, net of commissions, was $6.73, for net proceeds of $89.4 million. The Company incurred $0.1 million of other offering expenses.

•Redeemed a total of 12.0 million shares of Series F Preferred Stock, ~~on July 22, 2020,~~representing approximately 38.87% of the issued and outstanding preferred shares as of the beginning of the year. The shares of Series F Preferred Stock were redeemed at a redemption price of $25.00 per share plus all accrued and unpaid ~~dividends thereon.~~dividends.

•Declared a quarterly dividend of $0.077 per share of Common Stock for the ~~second~~third quarter of 2020.

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Real Estate Portfolio Metrics

In managing our portfolio, we are committed to diversification by property type, tenant, geography and industry. Below is a summary of our operating property type diversification and our top ten concentrations as of ~~June~~September 30, 2020, based on annualized rental income of $1.1 billion.


~~(1)~~	~~Includes redevelopment property, billboards, construction in progress, land and parking lots.~~

(1)Includes redevelopment property, billboards, construction in progress, land and parking lots.

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Our financial performance is influenced by the timing of acquisitions and dispositions and the operating performance of our operating properties. The following table shows the property statistics of our operating properties as of ~~June~~September 30, 2020 and 2019:

June 30, 2020 June 30, 2019
Portfolio Metrics
Operating properties 3,836 3,950
Rentable square feet (in millions)⁽¹⁾
88.9 90.6
Economic occupancy rate ⁽¹⁾⁽²⁾
98.8% 99.0%
Investment-grade tenants⁽¹⁾⁽³⁾
37.0% 39.6%


	September 30, 2020	September 30, 2019
Portfolio Metrics
Operating properties	3,820	3,926
Rentable square feet (in millions)	88.9	90.7
Economic occupancy rate (1)	98.5%	99.0%
Investment-grade tenants (2)	37.7%	39.5%


~~(1)~~	As of June 30, 2020, rentable square feet, economic occupancy rate and annualized rental income include the Company’s pro rata share of square feet and annualized rental income from the Company’s unconsolidated joint ventures. As of June 30, 2019, rentable square feet and economic occupancy rate exclude one redevelopment property.


~~(2)~~	~~Economic occupancy rate equals the sum of square feet leased (including space subject to month-to-month agreements) divided by rentable square feet.~~

~~(3)~~

Based on annualized rental income of our real estate portfolio as of June 30, 2020 and 2019, respectively. Investment-grade tenants are those with a credit rating of BBB- or higher by Standard & Poor’s Financial Services LLC or a credit rating of Baa3 or higher by Moody’s Investor Service, Inc. The ratings may reflect those assigned by Standard & Poor’s Financial Services LLC or Moody’s Investor Service, Inc. to the lease guarantor or the parent company, as applicable.

(1)Economic occupancy rate equals the sum of square feet leased (including space subject to month-to-month agreements) divided by rentable square feet.

(2)Based on annualized rental income of our real estate portfolio as of September 30, 2020 and 2019, respectively. Investment-grade tenants are those with a credit rating of BBB- or higher by Standard & Poor’s Financial Services LLC or a credit rating of Baa3 or higher by Moody’s Investor Service, Inc. The ratings may reflect those assigned by Standard & Poor’s Financial Services LLC or Moody’s Investor Service, Inc. to the lease guarantor or the parent company, as applicable.

The following table shows the economic metrics of our operating properties as of ~~June~~September 30, 2020 and 2019:


	June 30, 2020	June 30, 2019		September 30, 2020	September 30, 2019
Economic Metrics			Economic Metrics
Weighted-average lease term (in years)	8.5	8.6	Weighted-average lease term (in years)	8.4	8.4
Lease rollover: ⁽¹⁾			Lease rollover: (1)
Annual average	6.0%	5.8%	Annual average	5.9%	6.3%
Maximum for a single year	10.9%	7.7%	Maximum for a single year	11.1%	8.7%


~~(1)~~	~~Through the end of the next five years as of the respective reporting date.~~

(1)Through the end of the next five years as of the respective reporting date.

Operating Performance

In addition, management uses the following financial metrics to assess our operating performance (dollar amounts in thousands, except per share amounts).


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Financial Metrics


Total revenues	$	295,278	$	303,301	$	873,457	$	932,369





Net income (loss)	$	97,983	$	(741,529)	$	239,085	$	(378,274)



Basic and diluted net income (loss) per share attributable to common stockholders	$	0.08	$	(0.76)	$	0.19	$	(0.43)



FFO attributable to common stockholders and limited partners (1)	$	171,233	$	(657,147)	$	508,998	$	(287,805)



AFFO attributable to common stockholders and limited partners (1)	$	166,547	$	177,580	$	508,604	$	533,082



AFFO attributable to common stockholders and limited partners per diluted share (1)	$	0.15	$	0.18	$	0.47	$	0.53

(1)See the Non-GAAP Measures section below for descriptions of our non-GAAP measures and reconciliations to the most comparable measure in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Financial Metrics
Total revenues $ 278,997
$ 312,188
$ 578,179
$ 629,068

Net income $ 54,239
$ 292,284
$ 141,102
$ 363,255
Basic and diluted net income per share attributable to common stockholders $ 0.04
$ 0.27
$ 0.11
$ 0.33

FFO attributable to common stockholders and limited partners ⁽¹⁾

$ 155,943
$ 179,038
$ 337,765
$ 369,342
AFFO attributable to common stockholders and limited partners ⁽¹⁾

$ 161,083
$ 177,099
$ 342,057
$ 355,502
AFFO attributable to common stockholders and limited partners per diluted share ⁽¹⁾
$ 0.15
$ 0.18
$ 0.32
$ 0.36


~~(1)~~	~~See the~~ ~~Non-GAAP Measures~~ Table of Contents section below for descriptions of our non-GAAP measures and reconciliations to the most comparable measure in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).

Results of Operations

COVID-19 has impacted all states where our tenants operate their businesses or where our properties are located, and measures taken to prevent or remediate COVID-19, including “shelter-in-place” or “stay-at-home” orders, other quarantine mandates and ~~restriction~~restrictions on the operations of certain types of businesses issued by local, state or federal authorities, have had an adverse effect on our business and the businesses of our tenants. While our business was not materially impacted during the ~~six~~nine months ended ~~June~~September 30, 2020 from the COVID-19 pandemic, our rent collection was impacted and for the ~~second~~third quarter was ~~85%~~94% of rental ~~revenue on an annualized basis.~~revenue. The full extent of the future impact of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations is uncertain.

Our dedicated property type asset management teams have been in discussion with tenants to understand the impact of COVID-19 on their businesses. ~~As of July 27, 2020, we~~We have received rent relief requests ~~most often in the form of rent deferral requests, from tenants representing approximately 33% of rental revenue on an annualized basis, including some tenants~~ that ~~paid April, May, June and/ or July rent. These rent relief requests~~ vary in timeframes, but are generally concentrated within the two to four month range. We evaluate each tenant request on a case-by-case basis, including by analyzing metrics such as industry segment, corporate financial health, rent coverage, and the tenant's liquidity. As of ~~July 27,~~October 30, 2020, we collected the following percent of rent, which included contractual rent and recoveries paid by tenants to cover estimated tax, insurance and common area maintenance expenses, including our pro rata share of such amounts related to properties owned by unconsolidated joint ventures:

April May June
July ⁽¹⁾
Rent collection 86% 85% 86% 91%


	Q2	July	August	September	Q3	October (1)
Rent collection	87%	92%	94%	95%	94%	97%


~~(1)~~	~~Includes approximately 2% to be paid in arrears by a Government agency tenant.~~

(1)Includes approximately 2% to be paid in arrears by a Government agency tenant.

During the three and nine months ended ~~June~~September 30, 2020, we had ~~$3.6~~$3.9 million and $16.7 million, respectively, of rental revenue related to deferral agreements executed through ~~June 30, 2020 and $5.3 million related to deferral agreements executed from July 1, 2020 through July 27,~~October 23, 2020, which qualify for the COVID-19 Lease Concessions Relief. WeFor the three and nine months ended September 30, 2020, we abated ~~$11.2~~$6.5 million of ~~second~~rental revenue, $5.9 million of which is third quarter rental revenue abated pursuant to lease amendments executed through ~~June~~September 30, 2020 and $0.6 million of which is second quarter rental revenue abated pursuant to lease amendments executed from July 1, 2020 through September 30, 2020, and $17.7 million of rental revenue, respectively, pursuant to lease amendments executed through September 30, 2020, which increased the weighted average lease term for the related ~~properties, pursuant to the terms of the amendments.~~properties. During the three and nine months ended ~~June~~September 30, 2020, rental revenue was reduced by ~~$13.2~~$9.6 million ~~(4.5%~~and $28.2 million, respectively (3.17% and 3.14%, respectively, of gross rental revenue), which included (i) ~~$2.1~~$5.1 million and $6.6 million, respectively, of an increase to the general allowance, (ii) ~~$7.4~~$4.8 million and $14.3 million, respectively, for amounts not probable of collection, and (iii) ~~$3.7~~an offset of $0.3 million for straight-line rent ~~receivables.~~receivables deemed collectible and $7.3 million for straight-line rent receivables, respectively. Of the ~~$13.2~~$9.6 million and $28.2 million reduction to rental revenue for the three and nine months ended ~~June~~September 30, 2020, respectively, $10.2 million and $18.6 million, respectively (3.36% and 2.09%, ~~$8.4 million (2.9%~~respectively, of gross rental revenue), was related to the impact of the COVID-19 pandemic, of which ~~$0.9~~$5.1 million and $6.0 million, respectively, represented an increase to the general allowance, ~~$3.8~~$4.1 million and $7.9 million, respectively, represented amounts not probable of collection, and ~~$3.7~~$1.0 million and $4.7 million, respectively, was for straight-line rent receivables.

Revenues

The table below sets forth, for the periods presented, revenue information and the dollar amount change year over year (in thousands):


	Three Months Ended June 30,							Six Months Ended June 30,								Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		2020 vs 2019 Increase/(Decrease)			2020		2019		2020 vs 2019 Increase/(Decrease)				2020		2019		2020 vs 2019 Increase/(Decrease)		2020		2019		2020 vs 2019 Increase/(Decrease)
Revenues:															Revenues:
Rental	$	278,576	$	312,043	$	(33,467	)	$	577,162	$	628,886	$	(51,724	)	Rental	$	293,692	$	302,985	$	(9,293)	$	870,854	$	931,871	$	(61,017)
Fees from managed partnerships	421		145		276			1,017		182		835			Fees from managed partnerships	1,586		316		1,270		2,603		498		2,105
Total revenues	$	278,997	$	312,188	$	(33,191	)	$	578,179	$	629,068	$	(50,889	)	Total revenues	$	295,278	$	303,301	$	(8,023)	$	873,457	$	932,369	$	(58,912)


		OR
☐		OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from _________ to __________



		Page
PART I
~~PART I~~
Item 1. Unaudited Financial Statements	4
Consolidated Balance Sheets of VEREIT, Inc. as of ~~June~~Se ptember 30, 2020 and December 31, 2019		4
Consolidated Statements of Operations of VEREIT, Inc. for the Three and ~~Six~~Nine Months Ended ~~June~~Septem ber 30, 2020 and 2019		5
Consolidated Statements of Comprehensive Income (Loss) of VEREIT, Inc. for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019		6
Consolidated Statements of Changes in Equity of VEREIT, Inc. for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019		7
Consolidated Statements of Cash Flows of VEREIT, Inc. for the ~~Six~~Nine Months Ended ~~June~~Se ptember 30, 2020 and 2019		911
Consolidated Balance Sheets of VEREIT Operating Partnership, L.P. as of ~~June~~Sept ember 30, 2020 and December 31, 2019		1113
Consolidated Statements of Operations of VEREIT Operating Partnership, L.P. for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019		1214
Consolidated Statements of Comprehensive Income (Loss) of VEREIT Operating Partnership, L.P. for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019		1315
Consolidated Statements of Changes in Equity of VEREIT Operating Partnership, L.P. for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019		1416
Consolidated Statements of Cash Flows of VEREIT Operating Partnership, L.P. for the ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019		1620
Notes to Consolidated Financial Statements		1822
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		4045
Item 3. Quantitative and Qualitative Disclosures About Market Risk		5563
Item 4. Controls and Procedures		5765
PART II
Item 1. Legal Proceedings		5866
Item 1A. Risk Factors		5866
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		5967
Item 3. Defaults Upon Senior Securities		5967
Item 4. Mine Safety Disclosures		5967
Item 5. Other Information		5967
Item 6. Exhibits		6068
Signatures		6371



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



VEREIT, Inc.
VEREIT Operating Partnership, L.P.
(Exact name of registrant as specified in its charter)


(800)			606-3610
(Registrant’s telephone number, including area code)



~~(800)~~	~~606-3610~~
~~(Registrant’s telephone number, including area code)~~


~~(1)~~	~~Represents net income attributable to limited partners and a consolidated joint venture partner.~~


~~(1)~~	(1)Represents comprehensive (income) loss attributable to limited partners and a consolidated joint venture partner. ~~income~~ ~~attributable to limited partners and a consolidated joint venture partner.~~


	Preferred Stock			Common Stock
	Number of Shares	Par Value		Number of Shares	Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stock-holders’ Equity		Non-Controlling Interests		Total Equity
Balance, January 1, 2020	30,871,246	$	309	1,076,845,984	$	10,768	$	13,251,962	$	(27,670)	$	(6,399,626)	$	6,835,743	$	7,535	$	6,843,278

Conversion of OP Units to Common Stock	—	—		4,549	1		44		—		—		45		(45)		0

Redemption of Series F Preferred Stock	—	—		—	—		(27)		—		—		(27)		—		(27)

Repurchases of Common Stock to settle tax obligation	—	—		(241,092)	(2)		(2,376)		—		—		(2,378)		—		(2,378)
Equity-based compensation, net	—	—		1,172,038	11		2,844		—		—		2,855		—		2,855

Distributions declared on Common Stock —$0.1375 per common share	—	—		—	—		—		—		(148,194)		(148,194)		—		(148,194)
Distributions to non-controlling interest holders	—	—		—	—		—		—		—		—		(105)		(105)
Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—		—		(1,628)		(1,628)		—		(1,628)
Distributions to preferred shareholders and unitholders	—	—		—	—		—		—		(12,928)		(12,928)		(19)		(12,947)

Net income	—	—		—	—		—		—		86,808		86,808		55		86,863
Other comprehensive loss	—	—		—	—		—		(76,547)		—		(76,547)		(55)		(76,602)
Balance, March 31, 2020	30,871,246	309		1,077,781,479	10,778		13,252,447		(104,217)		(6,475,568)		6,683,749		7,366		6,691,115



Redemption of Series F Preferred Stock	—	—		—	—		(25)		—		—		(25)		—		(25)


Equity-based compensation, net	—	—		67,075	1		4,070		—		—		4,071		—		4,071

Distributions declared on Common Stock — $0.077 per common share	—	—		—	—		—		—		(82,997)		(82,997)		—		(82,997)
Distributions to non-controlling interest holders	—	—		—	—		—		—		—		—		(61)		(61)
Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—		—		(18)		(18)		—		(18)
Distributions to preferred shareholders and unitholders	—	—		—	—		—		—		(12,928)		(12,928)		(20)		(12,948)
Repurchase of convertible notes		—		—	—		(204)		—		—		(204)		—		(204)
Net income	—	—		—	—		—		—		54,208		54,208		31		54,239
Other comprehensive loss	—	—		—	—		—		(1,892)		—		(1,892)		(1)		(1,893)
Balance, June 30, 2020	30,871,246	309		1,077,848,554	10,779		13,256,288		(106,109)		(6,517,303)		6,643,964		7,315		6,651,279
Issuance of Common Stock, net	—	—		13,296,662	133		89,146		—		—		89,279		—		89,279

Redemption of Limited Partners' Common OP Units	—	—		—	—		—		—		—		—		(149)		(149)

Redemption of Series F Preferred Stock	(12,000,000)	(120)		—	—		(299,932)		—		—		(300,052)		—		(300,052)

Repurchases of Common Stock to settle tax obligation	—	—		(1,248)	—		(8)		—		—		(8)		—		(8)
Equity-based compensation, net	—	—		98,170	1		3,210		—		—		3,211		—		3,211

Distributions declared on Common Stock — $0.077 per common share	—	—		—	—		—		—		(84,026)		(84,026)		—		(84,026)
Distributions to non-controlling interest holders	—	—		—	—		—		—		—		—		(59)		(59)
Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—		—		(24)		(24)		—		(24)



	Level	Carrying Amount at June 30, 2020		Fair Value at June 30, 2020		Carrying Amount at December 31, 2019		Fair Value at December 31, 2019
Liabilities⁽¹⁾:
Mortgage notes payable and other debt, net	2	$	1,400,317	$	1,446,194	$	1,535,918	$	1,590,915
Corporate bonds, net	2	3,435,016		3,575,898		2,839,581		3,022,087
Convertible debt, net	2	270,872		269,512		319,947		327,237
Credit facility	2	900,000		900,000		1,050,000		1,050,000
Total liabilities		$	6,006,205	$	6,191,604	$	5,745,446	$	5,990,239



	Total
July 1, 2020 - December 31, 2020	$	78,261
2021	299,015
2022	266,951
2023	124,217
2024	621,021
2025	1,078
Thereafter	5,889
Total	$	1,396,432



	Outstanding Balance June 30, 2020		Interest Rate		Maturity Date
2024 Senior Notes	$	500,000	4.600	%	February 6, 2024
2025 Senior Notes	550,000		4.625	%	November 1, 2025
2026 Senior Notes	600,000		4.875	%	June 1, 2026
2027 Senior Notes	600,000		3.950	%	August 15, 2027
2028 Senior Notes	600,000		3.400	%	January 15, 2028
2029 Senior Notes	600,000		3.100	%	December 15, 2029
Total balance and weighted-average interest rate	$	3,450,000	4.069	%


~~(2)~~	For the three months ended June 30, 2020, was negatively impacted by a reduction to rental revenue that was related to the impact of the COVID-19 pandemic of $3.7 million of straight-line rent receivables.


~~(3)~~	~~The Company’s tenants are generally sub-tenants under certain ground leases and are responsible for paying the rent under these leases.~~


~~(4)~~	~~Includes costs reimbursed related to property operating expenses, common area maintenance and percentage rent, including these costs reimbursed by ground lease sub-tenants.~~


						Future Minimum Operating Lease Payments		Future Minimum Direct Financing Lease Payments (1)
	Future Minimum Operating Lease Payments		Future Minimum Direct Financing Lease Payments ⁽¹⁾
July 1, 2020 - December 31, 2020	$	509,142	$	1,068
October 1, 2020 - December 31, 2020					October 1, 2020 - December 31, 2020	$	257,995	$	534
2021	1,046,102		2,014		2021	1,029,882		2,014
2022	984,711		1,925		2022	975,313		1,925
2023	920,421		1,565		2023	911,354		1,565
2024	848,833		510		2024	839,902		510
2025	743,217		169		2025	735,684		169
Thereafter	4,556,368		655		Thereafter	4,515,176		655
Total	$	9,608,794	$	7,906	Total	$	9,265,306	$	7,372


~~(1)~~	(1)Related to 19 properties which are subject to direct financing leases and, therefore, revenue is recognized as rental income on the discounted cash flows of the lease payments. Amounts reflect undiscounted cash flows to be received by the Company under the lease agreements on these respective properties.


~~(1)~~	~~No cash paid for operating lease liabilities was capitalized.~~



	Future Minimum Lease Payments
July 1, 2020 - December 31, 2020	$	10,751
2021	22,092
2022	21,936
2023	21,590
2024	21,048
2025	20,569
Thereafter	206,547
Total	324,533
Less: imputed interest	109,211
Total	$	215,322


	Future Minimum Lease Payments
October 1, 2020 - December 31, 2020	$	5,459
2021	22,173
2022	22,055
2023	21,620
2024	21,015
2025	20,594
Thereafter	208,598
Total	321,514
Less: imputed interest	107,412
Total	$	214,102


~~(2)~~	Dilutive securities include unvested restricted share awards (“Restricted Shares”), unvested restricted stock units (“Restricted Stock Units”) and stock options (“Stock Options”). During the first quarter of 2019, all Restricted Shares vested.


~~(3)~~	Weighted-average shares for all periods presented exclude the effect of the convertible debt as the Company would expect to settle the debt with cash and any shares underlying Restricted Stock Units that are not issuable based on the Company’s level of achievement of certain performance targets through the respective reporting period.


			Payments due by period
	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Principal payments - mortgage notes	$	1,334,098	$	859	$	581,035	$	745,238	$	6,966
Interest payments - mortgage notes (1)	152,179		16,995		100,903		33,154		1,127
Principal payments - Credit Facility	900,000		—		—		900,000		—
Interest payments - Credit Facility (1) (2)	80,005		8,252		65,478		6,275		—
Principal payments - corporate bonds	3,450,000		—		—		500,000		2,950,000
Interest payments - corporate bonds	855,070		35,097		280,776		260,012		279,185
Principal payments - convertible debt	252,719		252,719		—		—		—
Interest payments - convertible debt	1,948		1,948		—		—		—
Operating and ground lease commitments	321,514		5,459		44,228		42,635		229,192
Other commitments (3)	22,361		22,361		—		—		—
Total	$	7,369,894	$	343,690	$	1,072,420	$	2,487,314	$	3,466,470


~~(1)~~	~~Interest payments due in future periods on the $15.2 million of variable rate debt were calculated using a forward LIBOR curve.~~


~~(2)~~	As of June 30, 2020, we had $900.0 million of variable rate debt on the Credit Facility Term Loan effectively fixed through the use of interest rate swap agreements. We used the interest rates effectively fixed under our swap agreements to calculate the debt payment obligations in future periods.


Period	Total Number of Shares/ Units Redeemed (1)	Redemption Price Per Share/Unit
July 1, 2020 - July 31, 2020	6,000,000	$	25.00
August 1, 2020 - August 31, 2020	—	—
September 1, 2020 - September 30, 2020	6,000,000	$	25.00
Total	12,000,000	$	25.00


Exhibit No.						Description


~~Exhibit No.~~						~~Description~~
~~3.1~~







3.1						Articles of Amendment and Restatement of VEREIT, Inc. (Incorporated by reference to the Company’s Pre-Effective Amendment No. 5 to Form S-11 (Registration No. 333-172205), filed with the SEC on July 5, 2011).
3.2						Articles Supplementary Relating to the Series A Convertible Preferred Stock of VEREIT, Inc., dated May 10, 2012 (Incorporated by reference to the Company’s Form 8-K (File No. 001-35263), filed with the SEC on May 15, 2012).
3.3						Articles Supplementary Relating to the Series B Convertible Preferred Stock of VEREIT, Inc., dated July 24, 2012 (Incorporated by reference to the Company’s Form 8-K (File No. 001-35263), filed with the SEC on July 30, 2012).
3.4						Articles Supplementary for the Series C Convertible Preferred Stock of VEREIT, Inc., dated June 6, 2013 (Incorporated by reference to the Company’s Form 8-K (File No. 001-35263), filed with the SEC on June 12, 2013).
3.5						Articles of Amendment to Articles of Amendment and Restatement of VEREIT, Inc., effective July 2, 2013 (Incorporated by reference to the Company’s Form 8-K (File No. 001-35263), filed with the SEC on July 9, 2013).
3.6						Articles Supplementary for the Series D Cumulative Convertible Preferred Stock of VEREIT, Inc., filed November 8, 2013 (Incorporated by reference to the Company’s Form 8-K (File No. 001-35263), filed with the SEC on November 15, 2013).
3.7						Articles of Amendment to Articles of Amendment and Restatement of VEREIT, Inc., effective December 9, 2013 (Incorporated by reference to the Company’s Amended Current Report on Form 8-K/A (File No. 001-35263), filed with the SEC on December 20, 2013).
3.8						Articles Supplementary Relating to the 6.70% Series F Cumulative Redeemable Preferred Stock of VEREIT, Inc., dated January 2, 2014 (Incorporated by reference to the Company’s Registration Statement on Form 8-A (File No. 333-190056), filed with the SEC on January 3, 2014).
3.9						Articles of Amendment to Articles of Amendment and Restatement of VEREIT, Inc., dated July 28, 2015 (Incorporated by reference to the Company’s Form 8-K (File No. 001-35263), filed with the SEC on July 28, 2015).
3.10						Articles Supplementary to Articles of Amendment and Restatement of VEREIT, Inc., dated August 5, 2015 (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (File No. 001-35263), for the quarter ended June 30, 2015 filed with the SEC on August 6, 2015).
~~3.11~~




3.11						Amended and Restated Bylaws of VEREIT, Inc., effective as of January 1, 2016 (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (File No. 001-35263), for the quarter ended September 30, 2015 filed with the SEC on November 5, 2015).
3.12						Certificate of Limited Partnership of VEREIT Operating Partnership, L.P. (Incorporated by reference to the Company’s Registration Statement on Form S-4 (Registration No. 333-197780-01), filed with the SEC on August 1, 2014).
3.13						Amendment to Certificate of Limited Partnership of VEREIT Operating Partnership, L.P., effective July 28, 2015 (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (File No. 001-35263), for the quarter ended June 30, 2015 filed with the SEC on August 6, 2015).
4.1						Third Amended and Restated Agreement of Limited Partnership of VEREIT Operating Partnership, L.P., effective January 3, 2014 (Incorporated by reference to the Company’s Amendment No. 2 to its Annual Report on Form 10-K/A (File No. 001-35263), for the year ended December 31, 2013 filed with the SEC on March 2, 2015).
4.2						First Amendment to Third Amended and Restated Agreement of Limited Partnership of VEREIT Operating Partnership, L.P., dated January 26, 2015 (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (File No. 001-35263), for the quarter ended June 30, 2015 filed with the SEC on August 6, 2015).
4.3						Second Amendment to Third Amended and Restated Agreement of Limited Partnership of VEREIT Operating Partnership, L.P., dated July 28, 2015 (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (File No. 001-35263), for the quarter ended June 30, 2015 filed with the SEC on August 6, 2015).
4.4						Indenture, dated as of July 29, 2013, between American Realty Capital Properties, Inc. and U.S. Bank National Association, as trustee (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on July 29, 2013).
4.5						First Supplemental Indenture, dated as of July 29, 2013, between American Realty Capital Properties, Inc. and U.S. Bank National Association, as trustee (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on July 29, 2013).
4.6						Second Supplemental Indenture, dated as of December 10, 2013, between American Realty Capital Properties, Inc. and U.S. Bank National Association, as trustee (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on December 11, 2013).
4.7						Form of 3.75% Convertible Senior Notes due 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on December 11, 2013).
4.8						Indenture, dated as of February 6, 2014, among ARC Properties Operating Partnership, L.P., Clark Acquisition, LLC, the guarantors named therein and U.S. Bank National Association, as trustee (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on February 7, 2014).



Exhibit No.						Description
4.9						Officers’ Certificate, dated as of February 6, 2014 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on February 7, 2014).
~~4.10~~
4.10						First Supplemental Indenture, dated as of February 9, 2015, by and among ARC Properties Operating Partnership, L.P., American Realty Capital Properties, Inc. and U.S. Bank National Association (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on February 13, 2015).
4.11						Officer’s Certificate, dated as of June 2, 2016 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on June 3, 2016).
4.12						Form of 4.125% Senior Notes due 2021 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on June 3, 2016).
4.13						Form of 4.875% Senior Notes due 2026 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on June 3, 2016).
4.14						Officers’ Certificate, dated as of August 11, 2017 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on August 11, 2017).
4.15						Form of 3.950% Senior Notes due 2027 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on August 11, 2017).
4.16						Officer’s Certificate, dated as of October 16, 2018 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on October 16, 2018).
4.17						Form of 4.625% Senior Notes due 2025 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on October 16, 2018).
4.18						Officer’s Certificate, dated as of December 4, 2019 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on December 4, 2019).
4.19						Form of 3.10% Senior Notes due 2029 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on December 4, 2019).
4.20						Officer’s Certificate, dated as of June 29, 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on June 29, 2020).
4.21						Form of 3.400% Senior Notes due 2028 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on June 29, 2020).
~~10.1~~						Amendment No. 1 to Credit Agreement dated as of May 27, 2020 by and among VEREIT Operating Partnership, L.P., VEREIT, Inc., the lenders parties thereto and Wells Fargo Bank, National Association, as the administrative agent (Incorporated by reference to the Company’s Current Report of Form 8-K (File No. 001-35263), filed with the SEC on May 28, 2020).
31.1*






31.1*						Certification of the Chief Executive Officer of VEREIT, Inc. pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of the Chief Financial Officer of VEREIT, Inc. pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3*						Certification of the Chief Executive Officer of VEREIT, Inc., the sole general partner of VEREIT Operating Partnership, L.P., pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.4*						Certification of the Chief Financial Officer of VEREIT, Inc., the sole general partner of VEREIT Operating Partnership, L.P., pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**						Written statements of the Chief Executive Officer of VEREIT, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**						Written statements of the Chief Financial Officer of VEREIT, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.3**						Written statements of the Chief Executive Officer of VEREIT, Inc., the sole general partner of VEREIT Operating Partnership, L.P., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.4**						Written statements of the Chief Financial Officer of VEREIT, Inc., the sole general partner of VEREIT Operating Partnership, L.P., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.SCH*
101.SCH*						Inline XBRL Taxonomy Extension Schema Document.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*						Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*).



			VEREIT, INC.
			By:			/s/ Michael J. Bartolotta
			Michael J. Bartolotta
			Executive Vice President and Chief Financial Officer (Principal Financial Officer)



			VEREIT OPERATING PARTNERSHIP, L.P.
			By: VEREIT, Inc., its sole general partner
			By:			/s/ Michael J. Bartolotta
			Michael J. Bartolotta
			Executive Vice President and Chief Financial Officer (Principal Financial Officer)