Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were ~~18,491,182.216~~21,367,936.807 shares of the Registrant’s common stock, $0.001 par value per share, outstanding as of November ~~13, 2017.~~5, 2018.

	September 30,			December 31,
	2017			2016			September 30, 2018			December 31, 2017
Assets
Accounted for using the operating method, net of accumulated depreciation	$	1,891,708		$	1,637,700		$	2,449,438		$	2,186,141
Accounted for using the direct financing method		41,612			47,271			42,012			41,617
Investment in rental property, net		1,933,320			1,684,971			2,491,450			2,227,758

Cash and cash equivalents		13,698			21,635			17,301			9,355
Restricted cash		925			1,468			10,727			744
Accrued rental income		47,766			36,577			65,689			52,018
Tenant and other receivables, net		1,120			355			214			897
Tenant and capital reserves		897			767			1,087			943
Prepaid expenses and other assets		699			260			2,932			267
Notes receivable		6,527			6,527			—			6,527
Investment in related party		10,000			10,000			—			10,000
Interest rate swap, assets		7,493			9,598			35,525			11,008
Intangible lease assets, net		205,469			168,121			264,038			242,659
Debt issuance costs – unsecured revolver, net		3,139			446			2,453			3,026
Leasing fees, net		13,046			11,329			13,929			13,554
Total assets	$	2,244,099		$	1,952,054		$	2,905,345		$	2,578,756

Liabilities and equity
Unsecured revolver	$	126,500		$	102,000		$	—		$	273,000
Mortgages and notes payable, net		57,883			106,686			79,762			67,832
Unsecured term notes, net		721,907			657,891			1,225,473			836,912
Interest rate swap, liabilities		7,119			10,217			—			5,020
Accounts payable and other liabilities		18,426			17,396			21,453			20,345
Due to related parties		1,688			364			47			722
Tenant improvement allowances		6,627			9,490			2,920			5,669
Accrued interest payable		4,880			1,602			7,018			3,311
Intangible lease liabilities, net		66,303			47,871			86,301			81,744
Total liabilities		1,011,333			953,517			1,422,974			1,294,555

Commitments and contingencies (See Note 16)

Equity
Broadstone Net Lease, Inc. stockholder’s equity:
Broadstone Net Lease, Inc. stockholders' equity:
Preferred stock, $0.001 par value; 20,000 shares authorized, no shares issued or outstanding		-			-			—			—
Common stock, $0.001 par value; 80,000 shares authorized, 18,260 and 15,158 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		18			15
Common stock, $0.001 par value; 80,000 shares authorized, 21,077 and 18,909 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively								21			19
Additional paid-in capital		1,253,431			1,009,431			1,479,339			1,301,979
Subscriptions receivable		(470	)		(9,790	)		(1,690	)		(15	)
Cumulative distributions in excess of retained earnings		(112,725	)		(89,960	)		(141,117	)		(120,280	)
Accumulated other comprehensive income		(40	)		2,092			33,114			5,122
Total Broadstone Net Lease, Inc. stockholders’ equity		1,140,214			911,788			1,369,667			1,186,825
Non-controlling interests		92,552			86,749			112,704			97,376
Total equity		1,232,766			998,537			1,482,371			1,284,201
Total liabilities and equity	$	2,244,099		$	1,952,054		$	2,905,345		$	2,578,756

The accompanying notes are an integral part of these condensed consolidated financial statements.

	For the three months ended						For the nine months ended
	September 30,						September 30,						For the three months ended September 30,						For the nine months ended September 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Revenues
Rental income from operating leases	$	43,233		$	34,806		$	123,890		$	96,779		$	58,189		$	43,233		$	163,611		$	123,890
Earned income from direct financing leases		968			1,143			3,175			3,406			1,017			968			2,936			3,175
Operating expenses reimbursed from tenants		1,995			1,056			4,908			3,059			2,529			1,995			7,764			4,908
Other income from real estate transactions		39			5			117			176			29			39			74			117
Total revenues		46,235			37,010			132,090			103,420			61,764			46,235			174,385			132,090

Operating expenses
Depreciation and amortization		15,643			12,114			44,969			33,273			21,869			15,643			61,303			44,969
Asset management fees		3,844			2,789			10,666			7,770			4,663			3,844			13,119			10,666
Property management fees		1,249			1,010			3,635			2,868			1,680			1,249			4,792			3,635
Acquisition expenses		-			2,367			-			8,256
Property and operating expense		2,009			1,184			4,710			3,005			2,777			2,009			7,926			4,710
General and administrative		1,173			598			3,297			1,951			1,664			1,173			4,451			3,297
State and franchise tax		301			71			511			181			58			301			811			511
Provision for impairment of investment in rental properties		2,608			-			2,608			-			2,061			2,608			2,061			2,608
Total operating expenses		26,827			20,133			70,396			57,304			34,772			26,827			94,463			70,396

Operating income		19,408			16,877			61,694			46,116			26,992			19,408			79,922			61,694

Other income (expenses)
Preferred distribution income		187			181			550			531			65			187			440			550
Interest income		127			4			354			9			16			127			178			354
Interest expense		(9,380	)		(4,576	)		(25,182	)		(24,166	)		(14,484	)		(9,380	)		(38,115	)		(25,182	)
Cost of debt extinguishment		(1,404	)		(52	)		(5,019	)		(105	)		(50	)		(1,404	)		(101	)		(5,019	)
Gain on sale of real estate		4,052			2,983			10,332			4,089			2,025			4,052			9,620			10,332
Gain on sale of investment in related party														8,500			—			8,500			—
Net income		12,990			15,417			42,729			26,474			23,064			12,990			60,444			42,729

Net income attributable to non-controlling interests		(1,042	)		(1,459	)		(3,460	)		(2,600	)		(1,797	)		(1,042	)		(4,631	)		(3,460	)
Net income attributable to Broadstone Net Lease, Inc.	$	11,948		$	13,958		$	39,269		$	23,874		$	21,267		$	11,948		$	55,813		$	39,269

Weighted average number of common shares outstanding
Basic		17,617			13,647			16,607			12,738			20,554			17,617			19,850			16,607
Diluted		19,147			15,074			18,069			14,154			22,291			19,147			21,496			18,069
Net Earnings per common share
Net earnings per common share
Basic and diluted	$	0.68		$	1.02		$	2.36		$	1.87		$	1.03		$	0.68		$	2.81		$	2.36

Comprehensive income (loss)
Comprehensive income
Net income	$	12,990		$	15,417		$	42,729		$	26,474		$	23,064		$	12,990		$	60,444		$	42,729
Other comprehensive income (loss)
Other comprehensive income
Change in fair value of interest rate swaps		283			1,280			(1,448	)		(20,551	)		6,299			283			30,296			(1,448	)
Realized loss on interest rate swaps		-			-			(873	)		-
Realized (gain) loss on interest rate swaps														(4	)		—			(4	)		(873	)
Comprehensive income		13,273			16,697			40,408			5,923			29,359			13,273			90,736			40,408
Comprehensive income attributable to non-controlling interests		(1,046	)		(1,581	)		(3,271	)		(443	)		(2,288	)		(1,046	)		(6,931	)		(3,271	)
Comprehensive income attributable to Broadstone Net Lease, Inc.	$	12,227		$	15,116		$	37,137		$	5,480		$	27,071		$	12,227		$	83,805		$	37,137

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

Common
Stock

Additional
Paid-in Capital

Subscriptions
Receivable

Cumulative
Distributions in Excess of Retained Earnings

Accumulated Other
Comprehensive
(Loss)/Income

Non-controlling
Interests

Total

Balance, January 1, 2016

$
11

$
738,909

$
(1,506
)

$
(56,911
)

$
(10,340
)

$
77,782

$
747,945

Net income

-

-

-

23,874

-

2,600

26,474

Issuance of 2,809 shares of common stock, net

3

209,049

(1,977
)

-

-

-

207,075

Other offering costs

-

(976
)

-

-

-

-

(976
)
Issuance of 97 membership units

-

-

-

-

-

7,190

7,190

Distributions declared ($0.405 per share January and
February 2016, $0.410 per share March through September 2016)

-

-

-

(51,558
)

-

(5,860
)

(57,418
)
Change in fair value of interest rate swap agreements

-

-

-

-

(18,394
)

(2,157
)

(20,551
)
Redemption of 87 shares of common stock

-

(6,487
)

-

-

-
��

-

(6,487
)
Balance, September 30, 2016

$
14

$
940,495

$
(3,483
)

$
(84,595
)

$
(28,734
)

$
79,555

$
903,252

Common
Stock

Additional
Paid-in Capital

Subscriptions
Receivable

Cumulative
Distributions in Excess of Retained Earnings

Accumulated Other
Comprehensive
(Loss)/Income

Non-controlling
Interests

Total

Balance, January 1, 2017

$
15

$
1,009,431

$
(9,790
)

$
(89,960
)

$
2,092

$
86,749

$
998,537

Net income

-

-

-

39,269

-

3,460

42,729

Issuance of 3,163 shares of common stock, net

3

249,942

9,320

-

-

-

259,265

Other offering costs

-

(1,144
)

-

-

-

-

(1,144
)
Issuance of 103 membership units

-

-

-

-

-

8,278

8,278

Distributions declared ($0.410 per share January
2017, $0.415 per share February through September 2017)

-

-

-

(62,034
)

-

(5,719
)

(67,753
)
Change in fair value of interest rate swap agreements

-

-

-

-

(1,328
)

(120
)

(1,448
)
Realized loss on interest rate swap agreements

-

-

-

-

(804
)

(69
)

(873
)
Conversion of 1 membership unit to 1 share of common stock

-

27

-

-

-

(27
)

-

Redemption of 62 shares of common stock

-

(4,825
)

-

-

-

-

(4,825
)
Balance, September 30, 2017

$
18

$
1,253,431

$
(470
)

$
(112,725
)

$
(40
)

$
92,552

$
1,232,766

The accompanying notes are an integral part of these condensed consolidated financial statements.

	Common Stock		Additional Paid-in Capital			Subscriptions Receivable			Cumulative Distributions in Excess of Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Non- controlling Interests			Total
Balance, January 1, 2017	$	15	$	1,009,431		$	(9,790	)	$	(89,960	)	$	2,092		$	86,749		$	998,537
Net income		—		—			—			39,269			—			3,460			42,729
Issuance of 3,163 shares of common stock, net		3		249,942			9,320			—			—			—			259,265
Other offering costs		—		(1,144	)		—			—			—			—			(1,144	)
Issuance of 103 membership units		—		—			—			—			—			8,278			8,278
Distributions declared ($0.410 per share January 2017, $0.415 per share February through September 2017)		—		—			—			(62,034	)		—			(5,719	)		(67,753	)
Change in fair value of interest rate swap agreements		—		—			—			—			(1,328	)		(120	)		(1,448	)
Realized loss on interest rate swap agreements		—		—			—			—			(804	)		(69	)		(873	)
Conversion of one membership unit to one share of common stock		—		27			—			—			—			(27	)		—
Redemption of 62 shares of common stock		—		(4,825	)		—			—			—			—			(4,825	)
Balance, September 30, 2017	$	18	$	1,253,431		$	(470	)	$	(112,725	)	$	(40	)	$	92,552		$	1,232,766

	Common Stock		Additional Paid-in Capital			Subscriptions Receivable			Cumulative Distributions in Excess of Retained Earnings			Accumulated Other Comprehensive Income			Non- controlling Interests			Total
Balance, January 1, 2018	$	19	$	1,301,979		$	(15	)	$	(120,280	)	$	5,122		$	97,376		$	1,284,201
Net income		—		—			—			55,813			—			4,631			60,444
Issuance of 2,275 shares of common stock, net		2		186,810			(1,675	)		—			—			—			185,137
Other offering costs		—		(822	)		—			—			—			—			(822	)
Issuance of 194 membership units		—		—			—			—			—			15,797			15,797
Distributions declared ($0.415 per share January 2018, $0.43 per share February through September 2018)		—		—			—			(76,650	)		—			(6,716	)		(83,366	)
Change in fair value of interest rate swap agreements		—		—			—			—			27,995			2,301			30,296
Realized gain on interest rate swap agreements		—		—			—			—			(3	)		(1	)		(4	)
Conversion of eight membership units to eight shares of common stock		—		684			—			—			—			(684	)		—
Redemption of 106 shares of common stock		—		(8,564	)		—			—			—			—			(8,564	)
Cancellation of nine shares of common stock		—		(748	)		—			—			—			—			(748	)
Balance, September 30, 2018	$	21	$	1,479,339		$	(1,690	)	$	(141,117	)	$	33,114		$	112,704		$	1,482,371

The accompanying notes are an integral part of these condensed consolidated financial statements.

	For the nine months ended
	September 30,						For the nine months ended September 30,
	2017			2016			2018			2017
Operating activities
Net income	$	42,729		$	26,474		$	60,444		$	42,729
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
Depreciation and amortization including intangibles associated with investment in rental property		45,456			32,900			61,515			45,456
Provision for impairment of investment in rental properties		2,608			-			2,061			2,608
Amortization of debt issuance costs charged to interest expense		1,478			1,136			1,303			1,478
Straight-line rent and financing lease adjustments		(12,505	)		(9,736	)		(15,640	)		(12,505	)
Cost of debt extinguishment		5,019			105			101			5,019
(Gain) on sale of real estate		(10,332	)		(4,089	)
Non-cash interest expense		(1,349	)		2,219
Repayment of interest rate swap, liability		(1,965	)		-
Gain on sale of real estate								(9,620	)		(10,332	)
Settlement of interest rate swap								760			(1,965	)
Gain on sale of investment in related party								(8,500	)		—
Leasing fees paid		(2,597	)		(2,827	)		(1,325	)		(2,597	)
Non-cash interest								(4	)		(1,349	)
Other non-cash items		325			306			472			325
Changes in assets and liabilities:
Tenant and other receivables		(237	)		286			(65	)		(237	)
Prepaid expenses and other assets		(440	)		(630	)		(799	)		(440	)
Accounts payable and other liabilities		897			5,870			(893	)		897
Accrued interest payable		3,278			134			3,707			3,278
Net cash provided by operating activities		72,365			52,148			93,517			72,365

Investing activities
Acquisition of rental property accounted for using the operating method		(345,789	)		(367,654	)
Acquisition of rental property accounted for using the operating method, net of mortgage assumed of $20,845 and $0 in 2018 and 2017, respectively								(329,664	)		(345,789	)
Acquisition of rental property accounted for using the direct financing method		(3,546	)		(544	)		(430	)		(3,546	)
Capital expenditures and improvements		(3,871	)		(7,525	)		(4,182	)		(3,871	)
Proceeds from sale of investment in related party								18,500			—
Proceeds from disposition of rental property, net		55,296			15,608			41,330			55,296
Increase in tenant and capital reserves		(130	)		(43	)		(144	)		(130	)
Decrease in restricted cash		543			65
Net cash used in investing activities		(297,497	)		(360,093	)		(274,590	)		(298,040	)

Financing activities
Proceeds from issuance of common stock, net		229,698			186,013			146,791			229,698
Redemptions of common stock		(4,825	)		(6,487	)		(8,564	)		(4,825	)
Borrowings on unsecured term notes		400,000			95,000
Principal payments on mortgages and notes payable and unsecured term notes		(384,087	)		(9,171	)
Borrowings on mortgages, notes payable and unsecured term notes, net of mortgages assumed of $20,845 and $0 in 2018 and 2017, respectively								415,000			400,000
Principal payments on mortgages and notes payable								(33,930	)		(384,087	)
Borrowings on unsecured revolver		220,000			226,500			189,500			220,000
Repayments on unsecured revolver		(195,500	)		(146,000	)		(462,500	)		(195,500	)
Cash distributions paid to stockholders		(32,533	)		(26,060	)		(38,410	)		(32,533	)
Cash distributions paid to non-controlling interests		(5,669	)		(5,275	)		(6,630	)		(5,669	)
Debt issuance and extinguishment costs paid		(9,889	)		(622	)
Debt issuance costs paid								(2,255	)		(9,889	)
Net cash provided by financing activities		217,195			313,898			199,002			217,195
Net increase (decrease) in cash and cash equivalents and restricted cash								17,929			(8,480	)
Cash and cash equivalents and restricted cash at beginning of period								10,099			23,103
Cash and cash equivalents and restricted cash at end of period							$	28,028		$	14,623

Net (decrease) increase in cash and cash equivalents		(7,937	)		5,953
Reconciliation of cash and cash equivalents and restricted cash
Cash and cash equivalents at beginning of period		21,635			27,050		$	9,355		$	21,635
Restricted cash at beginning of period								744			1,468
Cash and cash equivalents and restricted cash at beginning of period							$	10,099		$	23,103

Cash and cash equivalents at end of period	$	13,698		$	33,003		$	17,301		$	13,698
Restricted cash at end of period								10,727			925
Cash and cash equivalents and restricted cash at end of period							$	28,028		$	14,623

The accompanying notes are an integral part of these condensed consolidated financial statements.

Broadstone Net Lease, Inc. (the “Corporation”) is a Maryland corporation formed on October 18, 2007, that elected to be taxed as a real estate investment trust (“REIT”) commencing with the taxable year ended December 31, 2008. The Corporation focuses on investing in income-producing, net leased commercial properties. The Corporation leases properties to retail, healthcare, industrial, office, and other commercial businesses under long-term net lease agreements. Properties are generally leased on a triple-net basis such that tenants pay all operating expenses relating to the property, including, but not limited to, property taxes, insurance, maintenance, repairs, and capital costs, during the lease term. As of September 30, ~~2017,~~2018, the Corporation owned a diversified portfolio of ~~477~~583 individual net leased commercial properties located in 3742 states throughout the continental United States.

Broadstone Net Lease, LLC (the “Operating Company”), is the entity through which the Corporation conducts its business and owns (either directly or through subsidiaries) all of the Corporation’s properties. ~~At September 30, 2017 and December 31, 2016, the Corporation owned economic interests of 92.3% and 91.4%, respectively, in the Operating Company.~~ The Corporation is ~~also~~ the sole managing member and primary owner of the economic interest of the Operating Company. The remaining interests in the Operating Company, which are referred to as non-controlling interests, are held by members who acquired their interest by contributing property to the Operating Company in exchange for membership units of the Operating Company. As the Corporation conducts substantially all of its operations through the Operating Company, it is structured as what is referred to as an Umbrella Partnership Real Estate Investment Trust (“UPREIT”). The following table summarizes the economic ownership interest in the Operating Company as of September 30, 2018 and December 31, 2017:

The Corporation operates under the direction of its board of directors (the “Board of Directors”), which is responsible for the management and control of the Company’s (as defined below) affairs. The Corporation is externally managed and its board of directors has retained the Corporation’s sponsor, Broadstone Real Estate, LLC (the “Manager”) and Broadstone Asset Management, LLC (the “Asset Manager”) to manage the Corporation’s day-to-day affairs, ~~and~~ to implement the Corporation’s investment strategy, and ~~the Corporation’s sponsor, Broadstone Real Estate, LLC (the “Manager”),~~ to provide certain property management services for the Corporation’s properties, subject to the ~~board~~Board of ~~directors’~~Directors’ direction, oversight, and approval. The Asset Manager is a wholly-owned subsidiary of the Manager and all of the Corporation’s officers are employees of the Manager. Accordingly, both the Manager and the Asset Manager are related parties of the ~~Corporation.~~Company. Refer to Note 3 for further discussion over related parties and related party transactions.

The accompanying ~~unaudited~~ Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information (Accounting Standards Codification (“ASC”) 270, Interim Reporting) and Article 10 of the ~~SEC’s~~Securities and Exchange Commission’s (“SEC”) Regulation S-X. Accordingly, the Corporation has omitted certain footnote disclosures which would substantially duplicate those contained within the audited consolidated financial statements for the year ended December 31, ~~2016,~~2017, included in the Company’s ~~Amendment No. 2 to its Registration Statement~~2017 Annual Report on Form ~~10,~~10-K, filed with the SEC on ~~June 29, 2017 (the “Form 10”).~~March 15, 2018. Therefore, the readers of this quarterly report should refer to those audited consolidated financial statements, specifically Note 2, Summary of Significant Accounting Policies, for further discussion of significant accounting policies and estimates. The Corporation believes all adjustments necessary for a fair presentation have been included in these interim Condensed Consolidated Financial Statements (which include only normal recurring adjustments).

The Condensed Consolidated Financial Statements include the accounts and operations of the Corporation, the Operating Company and its consolidated subsidiaries, all of which are ~~wholly-owned~~wholly owned by the Operating Company (collectively, the “Company”). All intercompany balances and transactions have been eliminated in consolidation.

To the extent the Corporation has a variable interest in entities that are not evaluated under the variable interest entity (“VIE”) model, the Corporation evaluates its interests using the voting interest entity model. The Corporation holds a ~~92.3%~~92.4% interest in the Operating Company at September 30, ~~2017~~2018, and is the sole managing member of the Operating Company, which gives the Corporation exclusive and complete responsibility for the day-to-day management, authority to make decisions, and control of the Operating Company. Based on consolidation guidance, ~~effective for the Corporation as of January 1, 2016,~~ the Corporation concluded that the Operating Company is a VIE as the members in the Operating Company do not possess kick-out rights or substantive participating rights. Accordingly, the Corporation consolidates its interest in the Operating Company. However, as the Corporation holds the majority voting interest in the Operating Company, it qualifies for the exemption from providing certain disclosure requirements associated with investments in VIEs.

The portion of the Operating Company not owned by the Corporation is presented as non-controlling interests as of and during the periods presented.

The Condensed Consolidated Financial Statements have been prepared in accordance with GAAP.

The preparation of ~~consolidated financial statements~~Condensed Consolidated Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include, but are not limited to, the allocation of purchase price between investment in rental property and intangible assets acquired and liabilities assumed, the value of long-lived assets, the provision for impairment, the depreciable lives of rental property, the amortizable lives of intangible assets and liabilities, the allowance for doubtful accounts, the fair value of assumed debt and notes ~~payables,~~payable, the fair value of the Company’s interest rate swap agreements, and the determination of any uncertain tax positions. Accordingly, actual results may differ from those estimates.

Restricted cash includes escrow funds the Company maintains pursuant to the terms of certain mortgage and notes payable and lease agreements, and undistributed proceeds from the sale of properties under Section 1031 of the Internal Revenue Code.

~~We review~~The Company reviews long-lived assets to be held and used for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If and when such events or changes in circumstances are present, an impairment exists to the extent the carrying value of the asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use of the asset or asset group and its eventual disposition. Such cash flows include ~~factors such as~~ expected future operating income, as adjusted for trends and prospects, as well as the effects of demand, competition, and other factors. An impairment loss is measured as the amount by which the carrying amount of the asset or asset group exceeds the fair value of the asset or asset group. A significant ~~judgement~~judgment is made as to if and when impairment should be ~~taken, if~~taken. If our strategy, or one or more of the assumptions described above were to change in the future, an impairment may need to be recognized.

Inputs used in establishing fair value for real estate assets generally fall within Level 3 of the fair value hierarchy, which are characterized as requiring significant judgment as little or no current market activity may be available for validation. The main indicator used to establish the classification of the inputs is current market condition, as derived through our use of published commercial real estate market information. ~~We determine~~The Company determines the valuation of impaired assets using generally accepted valuation techniques including discounted cash flow analysis, income capitalization, analysis of recent comparable sales transactions, actual sales negotiations and bona fide purchase offers received from third parties. Management may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of its real estate.

During the three months ended September 30, 2018 and 2017 we recorded impairment of $2,061 and $2,608, respectively, which resulted from non-payment of rental amounts, concerns over the respective tenant’s future viability, and changes to the overall investment strategy for certain real estate assets. The amount of the impairment charge was based on our consideration of the factors detailed above. In determining the fair value of the impaired assets at September 30, 2018, the time of measurement, we utilized capitalization rates ranging from 7.50% to 10.00% and a weighted average discount rate of 8.00%. In determining the fair value of the impaired assets at September 30, 2017, the time of measurement, we utilized capitalization rates ranging from 7.25% to ~~12%~~12.00%, and a weighted average discount rate of 8%8.00%.

The Company has reduced the carrying value of the impaired real estate assets to the estimated fair value as detailed below:

	September 30, 2017									September 30, 2018									September 30, 2017
(in thousands)	Carrying Amount			Allocation of Impairment			Net Carrying Amount			Carrying Amount			Allocation of Impairment			Net Carrying Amount			Carrying Amount			Allocation of Impairment			Net Carrying Amount
Investments in rental property accounted for using the operating method, net of accumulated depreciation	$	16,159		$	(2,401	)	$	13,758
Investment in rental property accounted for using the operating method, net of accumulated depreciation										$	12,834		$	(1,702	)	$	11,132		$	16,159		$	(2,401	)	$	13,758
Intangible lease assets, net		1,263			(204	)		1,059			2,305			(384	)		1,921			1,263			(204	)		1,059
Leasing fees, net		123			(16	)		107			131			(19	)		112			123			(16	)		107
Intangible lease liabilities, net		(101	)		13			(88	)		(989	)		44			(945	)		(101	)		13			(88	)
	$	17,444		$	(2,608	)	$	14,836		$	14,281		$	(2,061	)	$	12,220		$	17,444		$	(2,608	)	$	14,836

At the inception of a new lease arrangement, including new leases that arise from amendments, the Company assesses the terms and conditions to determine the proper lease classification. A lease arrangement is classified as an operating lease if none of the following criteria are met: (i) ownership transfers to the lessee prior to or shortly after the end of the lease term, (ii) lessee has a bargain purchase option during or at the end of the lease term, (iii) the lease term is greater than or equal to 75% of the underlying property’s estimated useful life, or (iv) the present value of the future minimum lease payments (excluding executory costs) is greater than or equal to 90% of the fair value of the leased property. If one or more of these criteria are met, and the minimum lease payments are determined to be reasonably predictable and collectible, the lease arrangement is generally accounted for as a direct financing lease. Consistent with Financial Accounting Standards Board (“FASB”) ASC 840~~840,~~, Leases, if the fair value of the land component is 25% or more of the total fair value of the leased property, the land is considered separately from the building for purposes of applying the lease term and minimum lease payments criterion in (iii) and (iv) above.

Revenue recognition methods for operating leases and direct financing leases are described below:

Rental property accounted for under operating leases – Revenue is recognized as rents are earned on a straight-line basis over the non-cancelable terms of the related leases. In most cases, revenue recognition under operating leases begins when the lessee takes possession of, or controls, the physical use of the leased asset. Generally, this occurs on the lease commencement date. For leases that have fixed and measurable rent escalations, the difference between such rental income earned and the cash rent due under the provisions of the lease is recorded as Accrued rental income on the Condensed Consolidated Balance Sheets.

Rental property accounted for under direct financing leases – The Company utilizes the direct finance method of accounting to record direct financing lease income. For a lease accounted for as a direct financing lease, the net investment in the direct financing lease represents receivables for the sum of future minimum lease payments and the estimated residual value of the leased property, less the unamortized unearned income. Unearned income is deferred and amortized into income over the lease terms so as to produce a constant periodic rate of return on the Company’s net investment in the leases.

Adoption of ASU 2014-09, described further in Recently Adopted Accounting Standards elsewhere in Note 2, did not have an impact on the nature, amount or timing of revenue recognized for operating leases and direct financing leases as revenue from these sources is derived from lease contracts and therefore falls outside the scope of this guidance.

As described further in Recently Adopted Accounting Standards elsewhere in Note 2, the Company adopted ASU 2017-05, effective January 1, 2018. Under ASU 2017-05, the Company’s sales of real estate are generally considered to be sales to non-customers, requiring the Company to identify each distinct non-financial asset promised to the buyer. The Company determines whether the buyer obtains control of the non-financial assets, achieved through the transfer of the risks and rewards of ownership of the non-financial assets. If control is transferred to the buyer, the Company derecognizes the asset.

If the Company determines that it did not transfer control of the non-financial assets to the buyer, the Company will analyze the contract for separate performance obligations and allocate a portion of the sales price to each performance obligation. As performance obligations are satisfied, the Company will recognize the respective income in the Condensed Consolidated Statements of Income and Comprehensive Income.

The Company accounts for discontinued operations if disposals of properties represent a strategic shift in operations. Those strategic shifts would need to have a major effect on the Company’s operations and financial results in order to meet the definition.

Rent received in advance represents tenant payments received prior to ~~its~~the contractual due date and isare included in Accounts payable and other liabilities on the Condensed Consolidated Balance Sheets. Rents received in advance ~~was $6,845 and $7,566~~ at September 30, ~~2017~~2018 and December 31, ~~2016, respectively.~~2017 are as follows:

Management periodically reviews the sufficiency of the allowance for doubtful accounts, taking into consideration its historical losses and ~~Insurance Recoveries~~existing economic conditions, and adjusts the allowance as it considers necessary. Uncollected tenant receivables are written off against the allowance when all possible means of collection have been exhausted.

~~Property losses, whether full~~The following table summarizes the changes in the allowance for doubtful accounts for the nine months ended September 30, 2018 and the year ended December 31, 2017:

The Company uses interest rate swap agreements to manage risks related to interest rate movements. The interest rate swap agreements, designated and qualifying as cash flow hedges, are reported at fair value. The gain or ~~partial,~~loss on the qualifying hedges is initially included as a component of other comprehensive income or loss and is subsequently reclassified into earnings when interest payments (the forecasted transactions) on the related debt are ~~accounted~~incurred and as the swap net settlements occur. When an existing cash flow hedge is terminated, the Company determines the accounting treatment for the accumulated gain or loss recognized in Accumulated other comprehensive income based on the probability of the hedged forecasted transaction occurring within the period the cash flow hedge was anticipated to affect earnings. If the Company determines that the hedged forecasted transaction is probable of occurring during the original period, the accumulated gain or loss is reclassified into earnings over the remaining life of the cash flow hedge using a ~~combination of impairment, insurance, and revenue recognition guidance prescribed by GAAP. Upon incurring a loss event,~~straight-line method, which approximates an effective interest method. If the Company ~~evaluates for asset impairment under ASC 350,~~ ~~Intangibles – Goodwill and Other,~~ ~~and ASC 360,~~ ~~Property, Plant, and Equipment.~~ Under the terms of the Company’s lease agreements with tenants, a significant majority of which are triple-net whereby the tenants are responsible for insurance, taxes, and maintenance, amongst other property costs, the tenants are responsible for repairs and maintenance to the properties. The terms of the leases also require the tenants to continue making their monthly rental payments despite the property loss. To the extentdetermines that the ~~assets are recoverable, determined utilizing undiscounted cash flows expected to result from~~hedged forecasted transaction is not probable of occurring during the ~~use~~original period, the entire amount of ~~the asset~~accumulated gain or ~~asset group and its eventual disposition, the Company accounts for a full or partial property~~ loss ~~as an acceleration of depreciation and evaluates whether all or a portion of the property loss can be offset by the recognition of insurance recoveries.~~

~~Under the terms of the lease agreements with tenants,~~is reclassified into earnings in the ~~case~~period the cash flow hedge is terminated. The Company documents its risk management strategy and hedge effectiveness at the inception of ~~full or partial loss~~and during the term of each hedge. The Company’s interest rate risk management strategy is intended to stabilize cash flow requirements by maintaining interest rate swap agreements to convert certain variable-rate debt to a property the tenant has an obligation to restore/rebuild the premises as nearly as possible to its value, condition and character immediately prior to such event. To mitigate the risk of loss, the Company requires tenants to maintain general liability insurance policies on the replacement value of the properties. Based on these considerations, the Company follows the guidance in ASC 605-40, ~~Classification of Insurance Recoveries,~~ for the conversion of nonmonetary assets (i.e., the properties) to monetary assets (i.e., insurance recoveries or tenant recoveries). Under ASC 605-40, once probable of receipt, the Company recognizes an insurance/tenant recovery receivable in Tenant and other receivables, net, in the Condensed Consolidated Balance Sheet, with a corresponding offset to the accelerated depreciation recognized in the Condensed Consolidated Statements of Income and Comprehensive Income (Loss). If the insurance/tenant recovery is less than the amount of accelerated depreciation recognized, the Company will recognize a net loss in the Condensed Consolidated Statements of Income and Comprehensive Income (Loss). If the insurance/tenant recovery is greater than the amount of accelerated depreciation recognized, the Company will only recognize a recovery up to the amount of the accelerated depreciation, and will account for the excess as a gain contingency in accordance with ASC 450-30, ~~Gain Contingencies.~~ ~~Gain contingencies are recognized when earned and realized, which typically will occur at the time of final settlement or when non-refundable cash advances are received.~~fixed rate.

Non-controlling interests represents the membership interests held in the Operating Company of ~~7.7% and 8.6%~~7.6% at September 30, ~~2017~~2018 and December 31, ~~2016, respectively,~~2017, by third parties which are accounted for as a separate component of equity.

The Company periodically adjusts the carrying value of non-controlling interests to reflect ~~its~~their share of the book value of the Operating Company. Such adjustments are recorded to Additional paid-in capital as a reallocation of Non-controlling interests in the ~~accompanying~~ Condensed Consolidated Statements of Stockholders’ Equity.

ASC 820, Fair Value Measurements and Disclosures, defines fair value as the ~~exchange~~ price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a three-tier fair value hierarchy, which ~~requires an entity to maximize~~prioritizes the ~~use of observable~~ inputs ~~and minimize the use of unobservable inputs when~~used in measuring fair value.

~~The standard describes three levels of inputs that may be used to measure fair value:~~

~~Level 1~~ – Quoted prices that are available in active markets for identical assets or liabilities. The types of financial instruments included in Level 1 are marketable, available-for-sale equity securities that are traded in an active exchange market.

~~Level 2~~ – Pricing inputs other than quoted prices in active markets, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Instruments included in this category are derivative contracts whose value is determined using a pricing model with inputs (such as yield curves and credit spreads) that are observable in the market or can be derived principally from or corroborated by observable market data.

~~Level 3~~ – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 includes assets and liabilities whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The balances of financial instruments measured at fair value on a recurring basis at September 30, ~~2017~~2018 and December 31, ~~2016~~2017 are as follows (see Note 10):

	September 30, 2017										September 30, 2018
(in thousands)	Total			Level 1		Level 2			Level 3		Total		Level 1		Level 2		Level 3
Interest rate swaps, assets	$	7,493		$	-	$	7,493		$	-
Interest rate swap, assets											$	35,525	$	—	$	35,525	$	—
Interest rate swap, liabilities		(7,119	)		-		(7,119	)		-		—		—		—		—
	$	374		$	-	$	374		$	-	$	35,525	$	—	$	35,525	$	—

Interest rate swaps are derivative instruments that have no quoted readily available Level 1 inputs, and therefore are measured at fair value using inputs that are directly observable in active markets and are classified within Level 2 of the valuation hierarchy, using an income approach. Specifically, the fair value of the interest rate swaps are determined using a discounted cash flow analysis on the expected future cash flows of each instrument. This analysis utilizes observable market data including yield curves and implied volatilities to determine the market’s expectation of the future cash flows of the variable component. The fixed and variable components of the interest rate swaps are then discounted using calculated discount factors developed based on the London Interbank Offered Rate (“LIBOR”) swap rate and are aggregated to arrive at a single valuation for the period. The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. Although the Company has determined that the majority of the inputs used to value its interest rate swaps fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its interest rate swaps utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. At September 30, 2017 and December 31, 2016, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation. As a result, the Company has determined that its interest rate swap valuations in their entirety are appropriately classified within Level 2 of the fair value hierarchy.

The Company has estimated that the carrying amount reported on the Condensed Consolidated Balance Sheets for Cash and cash equivalents, Restricted cash, Tenant and other receivables, net, Notes receivable, and Accounts payable and other liabilities approximates their fair values due to their ~~short~~short-term nature.

The following table summarizes the carrying amount reported on the Condensed Consolidated Balance Sheets and the Company’s estimate of the fair value of the Mortgage and notes payable, net, Unsecured term ~~nature.~~notes, net, and Unsecured revolver at September 30, 2018 and December 31, 2017:

The fair value of the Company’s debt was estimated using Level 2 and Level 3 inputs based on recent financing transactions, estimates of the fair value of the property that serves as collateral for such debt, historical risk premiums for loans of comparable quality, current LIBOR, US treasury obligation interest rates, and on the discounted estimated future cash payments to be made on such debt. The discount rates estimated reflect the Company’s judgment as to the approximate current lending rates for loans or groups of loans with similar maturities and assumes that the debt is outstanding through maturity. Market information, as available, or present value techniques were utilized to estimate the amounts required to be disclosed. Since such amounts are estimates that are based on limited available market information for similar transactions and do not acknowledge transfer or other repayment restrictions that may exist on specific loans, it is unlikely that the estimated fair value of any such debt could be realized by immediate settlement of the obligation. The fair value of the Company’s Mortgage and notes payable, Unsecured term notes, net, and Unsecured revolver are estimated to be $914,270 and $873,026 at September 30, 2017 and December 31, 2016, respectively, as compared to the carrying amount of such debt of $910,072 and $869,524 on the Condensed Consolidated Balance Sheets at September 30, 2017 and December 31, 2016, respectively.

As disclosed under the Long-lived Asset Impairment ~~Charges~~ section ofelsewhere in Note 2, the Company’s non-recurring fair value measurements ~~for the three months ended~~at September 30, ~~2017~~2018 consisted of the fair value of impaired real estate assets that were determined using Level 3 inputs.

~~The Company did not have any assets measured at fair value on a nonrecurring basis at December 31, 2016.~~

~~Substantially all of~~In most situations, the Company’s ~~leases~~properties are leased on a triple-net basis, which ~~provide~~provides that the ~~lessees~~tenants are responsible for the payment of all property operating expenses, including, but not limited to, property taxes, maintenance, insurance, repairs, and ~~insurance.~~capital costs, during the lease term. The Company records such expenses on a net basis. ~~For~~

The following table summarizes the ~~three months ended September 30, 2017 and 2016,~~approximate property tax payments made directly to the taxing authorities by the Company’s tenants, pursuant to their lease obligations, ~~have made direct payment~~ for ~~property taxes to~~ the ~~taxing authorities of approximately $2,448~~three and ~~$1,609, respectively. For the~~ nine months ended September 30, ~~2017~~2018 and ~~2016, the Company’s tenants, pursuant to their lease obligations, have made direct payment for property taxes to the taxing authorities of approximately $13,405 and $11,176, respectively.~~2017:

In ~~some~~other situations, the Company may collect property taxes from its tenants and remit those taxes to governmental authorities. Taxes collected from tenants and remitted to governmental authorities are presented on a gross basis, where revenue ~~of $608 and $551~~ is included in Operating expenses reimbursed from tenants and expense ~~of $885 and $718~~ is included in Property and operating ~~expenses~~expense in the accompanying Condensed Consolidated Statements of Income and Comprehensive ~~Income (Loss) for the three months ended September 30, 2017 and 2016, respectively. Taxes~~Income.

The following table summarizes taxes collected from tenants ~~were $1,787~~ and ~~$1,379, while taxes~~ remitted to governmental authorities ~~were $2,084 and $1,442~~ for the three and nine months ended September 30, ~~2017~~2018 and ~~2016, respectively.~~2017:

In ~~January~~August 2017, the ~~Financial~~FASB issued Accounting Standards ~~Boards~~Update (“~~FASB”~~ASU”) ~~issued~~2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU ~~2017-01,~~ ~~Business Combinations (Topic 805): Clarifying~~2017-12 amends the ~~Definition~~designation and measurement guidance for qualifying hedging transactions and the presentation of hedge results in an entity’s financial statements. The new guidance removes the concept of separately measuring and reporting hedge ineffectiveness and requires a ~~Business~~ ~~(“ASU 2017-01”), which changes~~company to present the ~~definition of a business to exclude acquisitions where substantially all~~earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported. Disclosure requirements have been modified to include a tabular disclosure related to the effect of hedging instruments on the income statement and eliminate the requirement to disclose the ineffective portion of the change in fair value of the assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets. Under ASU 2017-01, the Company expects that most of its investments in real estate will be considered asset acquisitions. While there are various differences between accounting for an asset acquisition and a business combination, the largest impactsuch instruments. The new guidance is ~~the capitalization of acquisition expenses for asset acquisitions, which are expensed for business combinations. ASU 2017-01 is~~ effective ~~on a prospective basis, for interim and annual periods beginning after~~ January 1, 2019, with early adoption ~~permitted.~~permitted, and provides companies with a modified retrospective transition method for each cash flow and net investment hedge relationship existing on the date of adoption. This adoption method requires a company to recognize the cumulative effect of initially applying the ASU as an adjustment to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that an entity adopts the update. The Company adopted the guidance effective January 1, ~~2017. As~~2018. The Company did not recognize a ~~result~~cumulative effect adjustment upon adoption as the Company had not recognized ineffectiveness on any of the ~~adoption,~~hedging instruments existing as of the ~~Company capitalized $6,583~~date of ~~acquisition costs in connection with investments in real estate closed during the nine months ended September 30, 2017 that qualified as asset acquisitions under the adopted guidance.~~

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows—Restricted Cash. ASU 2016-18 requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or cash equivalents. Therefore, amounts generally described as restricted cash and equivalents should be included with cash and cash equivalents when reconciling the beginning and end of period total amounts on the statement of cash flows. ~~Currently,~~Previously, there ishad been no specific guidance to address how to classify or present these changes. ASU 2016-18 isbecame effective, on a retrospective basis, for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company ~~currently reflects~~adopted ASU 2016-18 as of January 1, 2018. In line with the retrospective adoption of this standard, the Company removed the change in restricted cash ~~in its~~from cash flows ~~from~~used in investing ~~activities. Upon adoption, these amounts will be included in the cash and cash equivalents balance when reconciling the beginning and end~~activities of ~~period total amounts. For~~$543 for the nine months ended September 30, ~~2017 the decrease~~2017. See Reclassifications elsewhere in ~~restricted cash included in cash flows from investing activities was $543.~~Note 2.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides classification guidance for eight specific topics, including but not limited to, debt extinguishment costs, contingent consideration payments made after a business combination, and distributions received from equity method investees. ASU ~~2016-18 is~~2016-15 became effective, on a retrospective basis, for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company ~~has assessed the impact of adopting~~adopted ASU 2016-15 ~~noting the~~as of January 1, 2018. The classification of debt extinguishment costs in the Condensed Consolidated ~~Statement~~Statements of Cash Flows addressed by ASU 2016-15 is applicable to the ~~Company, however, will have no impact as the Company currently classifies these as cash flows used in financing activities.~~

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09, including all updates, is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. ~~In August 2015, the FASB issued ASU 2015-14,~~ ~~Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,~~ ~~which defers the effective date of~~The Company adopted ASU 2014-09 ~~Revenue from Contracts with Customers,~~ ~~for all entities by one year. With the deferral, ASU 2014-09 is effective~~as of January 1, 2018 ~~with early~~on a modified retrospective basis. The adoption ~~permitted beginning January 1, 2017. While the Company anticipates additional disclosure, it does not expect the adoption of this pronouncement to have a material~~had no effect on the ~~amount or timing of revenue recognized in its~~Company’s Condensed Consolidated Financial Statements as ~~it believes its revenue, excluding revenue streams recognized in Other income from real estate transactions and Gain on sale~~the Company’s revenues are lease related, which are not subject to the provisions of real estate, falls outside the scope of this guidance. The Company expects to adopt the guidance using the modified retrospective approach on January 1, 2018. The Company will, however, continue to evaluate the impact of this guidance until it becomes effective.ASU 2014-09.

In February 2017, the FASB issued ASU 2017-05, Other ~~Income-Gains~~Income – Gains and Losses from the Derecognition of Nonfinancial Assets. This new guidance iswas required to be adopted concurrently with the amendments in ASU 2014-09. The new pronouncement ~~which~~ adds guidance for partial sales of nonfinancial assets, including real estate. In adopting ASU 2017-05, companies may use either a full retrospective or a modified retrospective approach. The Company ~~currently recognizes~~previously recognized revenue on sales of real estate at the time the asset iswas transferred (i.e., at the time of closing). Upon adoption of ASU 2014-09, as discussed above, and therefore ASU 2017-05, the Company ~~will need to evaluate~~now evaluates any separate ~~contracts~~contract or performance ~~obligations~~obligation to determine proper timing of revenue recognition, as well as ~~transaction~~sales price ~~allocation.~~allocation when a performance obligation is identified. Adoption of this pronouncement had no effect on the Company’s Condensed Consolidated Financial Statements during the three or nine months ended September 30, 2018 or in any periods.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize a right-of-use asset and a corresponding lease liability, initially measured at the present value of lease payments, for both operating and financing leases. For leases with a term of 12 months or less, lessees will be permitted to make an accounting policy election by class of underlying asset to not recognize lease liabilities and lease assets. Under the new pronouncement, lessor accounting will be largely unchanged from existing GAAP, however disclosures will be expanded. The ~~Company does~~standard also eliminates current real estate-specific provisions and changes the guidance on sale-leaseback transactions, initial direct costs and lease executory costs for all entities. The provisions of ASU 2016-02 that are relevant to the Company’s accounting as lessor include those relating to 1) identification of non-lease components of leases, 2) lease classification tests and 3) requirements to expense, on an as-incurred basis, certain initial direct costs that are not ~~expect the~~incremental in negotiating a lease. Under existing standards, certain of these costs are capitalizable and, therefore, adoption of this ~~pronouncement~~new standard may result in these costs being expensed as incurred. The Company is primarily a lessor and does not have any material leases where it is the lessee. Adoption of ASU 2016-02 is therefore not expected to have a material ~~effect~~impact on the ~~amount~~Company’s Condensed Financial Statements as it relates to leases where the Company is the lessee. Upon adoption of ASC 842, the Company may be required to record certain expenses paid directly by tenants that protect the Company’s interest as lessor in those properties, such as real estate taxes, on a gross basis, where revenue and the corresponding expense will be recorded and presented in the Consolidated Statements of Income and Comprehensive Income. The Company currently records and presents certain of these items on a net basis (see Taxes Collected From Tenants and Remitted to Governmental Authorities elsewhere in Note 2). Although there is not expected to be any impact to net income or ~~timing~~cash flows as a result of a gross presentation of these payments, such presentation would have the impact of increasing both reported revenues and property expenses. The FASB recently decided to add additional guidance to ASC 842 to address the accounting treatment for these types of payments, and on October 31, 2018, tentatively concluded that lessors should exclude costs paid directly by the lessees from their financial statements; the Company will evaluate final guidance as it becomes available and continue to assess the impact of this potential change in presentation. The new standard provides a number of practical expedients that both lessors and lessees may elect as part of transitional reporting. These include 1) an election not to reassess upon transition whether any expired or existing contracts are leases or contain leases, the lease classification for any expired or existing leases, and initial direct costs for existing leases, and 2) an election to use hindsight when evaluating the lease term of existing contracts, and impairment of right of use assets. The Company currently anticipates it will only elect the first of these practical expedients.

As originally published, when adopting ASC 842, companies were required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements. ASU 2018-11 provides entities an additional (and optional) transition method to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with current GAAP (Topic 840, Leases). An entity that elects this additional transition method must provide the required ASC 840 disclosures for all periods that continue to be in accordance with ASC 840. The amendments do not change the existing disclosure requirements in ASC 840. The Company plans to adopt this optional transition method. ASU 2018-11 also provides lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue ~~recognized~~guidance (ASC 606) and certain conditions are met. If the nonlease component or components associated with the lease component are the predominant component of the combined component, an entity would account for the combined component in accordance with ASC 606. Otherwise, the entity would account for the combined component in accordance with ASC 842. The Company plans to elect this additional practical expedient, and based on its assessment of the current leases in its portfolio, anticipates that the combined components will be accounted for in accordance with ASC 842.

The amendments are effective January 1, 2019, with early adoption permitted. The Company has completed its initial inventory of leases and has identified changes needed to its processes and systems impacted by the new standard. The Company is continuing to evaluate the impact that adoption of this guidance will have on its Condensed Consolidated Financial ~~Statements.~~Statements and footnote disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments under ASU 2018-13 remove, add and modify certain disclosure requirements on fair value measurements in ASC 820. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company ~~expects to adopt the guidance using the modified retrospective approach on January 1, 2018. The Company will, however, continue to evaluate~~is currently evaluating the impact the new standard will have on its Condensed Consolidated Financial Statements.

As described below, certain prior period amounts have been reclassified to conform with the current period’s presentation.

In connection with the adoption of ~~this guidance until it becomes effective.~~ASU 2016-18, discussed in Recently Adopted Accounting Standards elsewhere in Note 2, certain reclassifications have been made to prior period balances to conform to current presentation in the Condensed Consolidated Statements of Cash Flows. Under ASU 2016-18, changes in restricted cash which were previously shown in cash flows used in investing activities in the Condensed Consolidated Statements of Cash Flows are now reflected as part of the total change in cash, cash equivalents and restricted cash in the Condensed Consolidated Statements of Cash Flows.

The Corporation and the Operating Company ~~have entered into~~are a party to a property management agreement ~~(the~~(as amended, the “Property Management Agreement”) with the Manager, a related party in which certain ~~officers and~~ directors of the Corporation have either a direct or indirect ownership interest. Under the terms of the Property Management Agreement, the Manager manages and coordinates certain aspects of the leasing of the ~~Company’s~~Corporation’s rental property.

In exchange for ~~various~~ services provided under the Property Management Agreement, the Manager ~~is compensated~~receives certain fees and other compensation as ~~outlined~~follows:

Effective January 1, 2018, the Property Management Agreement was amended to, among other things, extend the recurring term of the agreement from one year to three years, clarify termination provisions, include a Termination Event concept and a Key Person Event concept, each as defined in the ~~agreement.~~

~~In addition,~~Property Management Agreement, and remove fee provisions relating to short-term financing or guarantees provided by the Manager may also provide, but is not obligated to provide, short-term financing to, or guarantees for, the Operating Company. In exchange for these services, the Manager is entitled to receive an interest rate of up to the prime rate plus 1.00% in exchange for any advances to the Operating Company, and 0.05% for guaranteeing recourse carve-outs on financing arrangements. No such advances or guarantees were outstanding or made during the nine months ended September 30, 2017 and 2016, respectively.Company.

The ~~initial term~~Property Management Agreement will automatically renew on January 1, 2019 for three years ending December 31, 2021, subject to earlier termination pursuant to the terms of the Property Management Agreement is effective through December 31, 2017, after which it automatically renews for successive one year periods, unless either party provides written notice of termination in accordance with theAgreement. The Property Management ~~Agreement. The~~Agreement provides for termination (i) immediately by the Corporation’s Independent Directors Committee (“IDC”) ~~has approved the renewal of~~for Cause, as defined in the Property Management Agreement, ~~through December 31, 2018.~~ (ii) by the IDC, upon 30 days’ written notice to the Manager, in connection with a change of control of the Manager, as defined in the Property Management Agreement, (iii) by the IDC, by providing the Manager with written notice of termination not less than one year prior to the last calendar day of any renewal term, (iv) by the Manager upon written notice to the Company not less than one year prior to the last calendar day of any renewal period, (v) automatically in the event of a Termination Event, and (vi) by the IDC upon a Key Person Event.

If the Corporation terminates the ~~Property Management Agreement~~agreement prior to any renewal term or in any manner described above, other than termination by the ~~IDC terminates the agreement within 30 days following a change in control of the Manager (as defined in Property Management Agreement),~~Corporation for Cause, the Corporation will be ~~required~~subject to ~~pay to the Manager~~ a termination fee equal to three times the Management Fees, as defined in the Property Management Agreement, to which the Manager was entitled during the ~~12 month~~12-month period immediately preceding the date of such termination. Although not terminable as of September 30, ~~2017,~~2018, if the Property Management Agreement had been terminated at September 30, ~~2017~~2018, subject to the conditions noted above, the termination fee would have been ~~$14,121.~~$18,435.

The Corporation and the Operating Company ~~have entered into~~are party to an asset management agreement ~~(the~~(as amended, the “Asset Management Agreement”) with the Asset Manager, a ~~wholly-owned subsidiary of~~single member limited liability company with the Manager as the single member, and therefore a related party in which certain ~~officers and~~ directors of the ~~Company~~Corporation have an indirect ownership interest. Under the terms of the Asset Management Agreement, the Asset Manager is responsible for, among other things, the Corporation’s acquisition, initial leasing, and disposition strategies, financing activities, and providing support to the Corporation’s IDC for its valuation functions and other duties. The Asset Manager also designates two individuals to serve on the Board of Directors of the Corporation.

Effective January 1, 2018, the Asset Management Agreement was amended to, among other things, extend the recurring term of the agreement from one year to three years, provide for additional disposition fee provisions, and include a Disposition Event concept and Key Person Event concept, each as defined in the amended Asset Management Agreement. The Asset Management Agreement defines a Disposition Event in the same manner as a Termination Event is defined in the Property Management Agreement discussed above.

Under the terms of the Asset Management Agreement, the Asset Manager ~~receives an annual asset management fee (“~~is compensated as follows:

The Asset Management ~~Fee”) equal~~Agreement will automatically renew on January 1, 2019 for three years ending December 31, 2021, subject to 1%earlier termination pursuant to the terms of the ~~aggregate value of the Corporation’s common stock, based on the Determined Share Value (as defined in Note 13) as determined~~Asset Management Agreement. The Asset Management Agreement provides for termination (i) immediately by the IDC ~~each quarter, on a fully diluted basis~~for Cause, as ~~if all interests~~defined in the Operating Company had been converted into shares of the Corporation’s common stock. Through December 31, 2017, compensation to the Asset Manager for any quarter will be deferred in whole or in part at any time during a rolling 12 month period when cumulative distributions are below $3.50 per share. Any deferred compensation under the Asset Management Agreement, ~~will accrue interest at~~(ii) by the rate of 7% per annum until paid and will be paid from available funds after cumulative 12 month distributions equal $3.50 per share. No compensation to the Asset Manager was deferred during the nine months ended SeptemberIDC, upon 30 2017 and 2016. In addition, the Company pays the Asset Manager, or its designee, a marketing fee equal to 0.5% of all contributions of cash or property to the Corporation or the Operating Company, excluding reinvestments of distributions pursuant to the Distribution Reinvestment Plan (See Note 13), as compensation for its internal and third party offering and marketing costs and expenses. The Asset Manager has the responsibility to cover offering, marketing, and brokerage expenses associated with investor related matters of the Corporation and Operating Company.

~~The Asset Management Agreement includes various other fees paid~~days’ written notice to the Asset Manager, in ~~exchange for services provided under~~connection with a change in control of the ~~agreement,~~Asset Manager, as ~~noted~~defined in ~~the table below.~~

~~The initial term of~~ the Asset Management Agreement, ~~is effective through December 31, 2017, after which it automatically renews for successive one year periods, unless either party provides~~(iii) by the IDC, by providing the Asset Manager with written notice of termination ~~in accordance with~~not less than one year prior to the last calendar of any renewal term, (iv) by the Asset ~~Management Agreement. The~~Manager upon written notice to the Company not less than one year prior to the last calendar day of any renewal period, (v) automatically in the event of a Disposition Event, and (vi) by the IDC ~~has approved the renewal of the agreement through December 31, 2018.~~ upon a Key Person Event.

If the Corporation terminates the agreement prior to any renewal term or in any manner described above, other than termination by the ~~IDC terminates the agreement within thirty days following a change in control of the Asset Manager (as defined in the Asset Management Agreement),~~Corporation for Cause, the Corporation will be required to pay to the Asset Manager a termination fee equal to three times the Asset Management Fee to which the Asset Manager was entitled during the ~~12 month~~12-month period immediately preceding the date of such termination. Although not terminable as of September 30, ~~2017,~~2018, if the Asset Management Agreement had been terminated at September 30, ~~2017~~2018, subject to the conditions noted above, the termination fee would have been ~~$41,552.~~ $51,621.

Total fees incurred under the Property Management Agreement and Asset Management Agreement for the three and nine months ended September 30, ~~2017~~2018 and ~~2016~~2017, are as follows:

		For the three months ended				For the nine months ended
(in thousands)		September 30,				September 30,					For the three months ended September 30,				For the nine months ended September 30,
Type of Fee	Financial Statement Presentation	2017		2016		2017		2016		Financial Statement Presentation	2018		2017		2018		2017
Asset management fee	Asset management fees	$	3,844	$	2,789	$	10,666	$	7,770	Asset management fees	$	4,663	$	3,844	$	13,119	$	10,666
Property management fee	Property management fees		1,249		1,010		3,635		2,868	Property management fees		1,680		1,249		4,792		3,635
Total management fee expense			5,093		3,799		14,301		10,638			6,343		5,093		17,911		14,301

Marketing fee	Additional paid-in capital		342		318		1,144		976
Marketing fee (offering costs)										Additional paid-in capital		297		342		822		1,144
Acquisition fee	Capitalized as a component of assets acquired in 2017 (See Note 4) and included as acquisition expenses in 2016		1,591		1,354		3,520		3,810	Capitalized as a component of assets acquired		1,105		1,591		3,491		3,520
Leasing fee	Leasing fees, net		801		797		2,597		2,827	Leasing fees, net		148		801		1,325		2,597
Disposition fee	Gain on sale of real estate		219		23		522		61	Gain on sale of real estate		116		219		439		522
Total management fees		$	8,046	$	6,291	$	22,084	$	18,312		$	8,009	$	8,046	$	23,988	$	22,084

Included in management fees are ~~$1,688~~$47 and ~~$364~~$722 of unpaid fees recorded in Due to related parties on the Condensed Consolidated Balance Sheets at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. All fees related to the Property Management Agreement and the Asset Management Agreement are paid for in cash within the Company’s normal payment cycle for vendors.

On June 30, 2015, the Company issued 139 shares with a value of $10,000 to the Manager in exchange for 100 non-voting convertible preferred units of the Manager, which represented a 6.4% ownership interest in the Manager at the time of the transaction on a fully-diluted basis. The Company ~~retains~~had the ~~legal services of Vaisey Nicholson & Nearpass, PLLC (“VNN”), formerly a related party. One former minority partner of VNN is an immediate family member~~right to ~~a member~~convert the preferred units to non-voting common units of the ~~management~~Manager between January 1, 2018 and December 31, 2019. Subsequent to the conversion period, the Manager had the option to redeem the convertible preferred units at their original value of $10,000, plus any accrued and unpaid preferred return. On July 31, 2018, the Company ~~and~~sold their investment to an ~~indirect minority~~existing owner of the Manager. ~~Beginning January~~The preferred units were sold for an aggregate sales price of $18,500 and had a carrying value of $10,000 at the time of sale. The transaction was approved by the Board of Directors and IDC. At December 31, 2017, the family member was no longer an owner or partner of VNN and therefore, prospectively, VNN will no longer be deemed a related party. Legal services obtained from VNN are mainly for acquisition and disposition of real estate related matters, as well as general counsel regarding property management and financing. The IDC has reviewed the billings and other aspectscarrying amount of the ~~relationship between VNN and~~investment was $10,000. The preferred units provided a stated preferred return at inception of 7.0% with 0.25% increases every June 30^th. Preferred distributions related to the ~~Company. The Company utilizes~~investment in the services of other outside legal counsel as well. These fees are paid for in cash within the Company’s normal payment cycle for vendor payments. Included in these expenses are $527 of unpaid fees recorded in Accounts payable and other liabilities at September 30, 2016. The following table details the type of legal fees incurred from VNNManager for the three months ended September 30, 2018 and 2017 amounted to $65 and $187, respectively. Preferred distributions related to the investment in the Manager for the nine months ended September 30, ~~2016:~~2018 and 2017 amounted to $440 and $550, respectively.

The Company closed on the following acquisitions during the nine months ended September 30, 2018:

The Company closed on the following acquisitions during the nine months ended September 30, 2017:

(in thousands, except number of properties)	(in thousands, except number of properties)							(in thousands, except number of properties)
Date		Tenant Type	Number of Properties		Real Estate Acquisition Price				Property Type	Number of Properties		Real Estate Acquisition Price
January 18, 2017		Retail		1	$	2,520			Retail		1	$	2,520
March 1, 2017		Retail		9		87,196			Retail		9		87,196
April 28, 2017		Retail		25		48,898			Retail		25		48,898
June 2, 2017		Retail		2		13,300			Healthcare		2		13,300
June 15, 2017		Retail		2		2,700			Retail		2		2,700
June 30, 2017		Industrial		2		12,250			Industrial		2		12,250
June 30, 2017		Office		7		25,989			Healthcare		7		25,989
July 7, 2017		Office		1		32,210			Office		1		32,210
August 4, 2017		Healthcare		3		11,732			Healthcare		3		11,732
August 31, 2017		Healthcare		3		16,700			Healthcare		3		16,700
August 31, 2017		Industrial		2		6,148			Industrial		2		6,148
September 13, 2017		Retail		5		4,994			Retail		5		4,994
September 29, 2017		Industrial/Retail		7		30,012			Industrial/Retail		7		30,012
September 29, 2017		Industrial		1		57,372			Industrial		1		57,372
				70	$	352,021	^(a)				70	$	352,021	^(c)

~~The Company closed on the following acquisitions during the nine months ended September 30, 2016:~~

The Company allocated the purchase price of these properties to the ~~relative~~ fair value of the ~~real estate~~ assets acquired and liabilities assumed. The following table summarizes the purchase price allocation for acquisitions completed during the nine months ended September 30, 2018 and 2017, ~~and 2016,~~ discussed ~~above, excluding non-real estate liabilities assumed of $1,000 during the three and nine months ended September 30, 2017:~~above:

	September 30,			September 30,			For the nine months ended September 30,
(in thousands)	2017			2016			2018			2017
Land	$	18,499		$	63,918		$	47,930		$	18,499
Land improvements		28,463			28,250			20,815			28,463
Buildings and other improvements		279,110			251,861			271,696			279,110
Equipment		508			-			2,891			508
Acquired in-place leases^(c)(d)		37,110			38,456			36,342			37,110
Acquired above-market leases^(d)(e)		13,229			16,090			3,347			13,229
Acquired below-market leases^(e)(f)		(21,861	)		(18,107	)		(10,143	)		(21,861	)
Direct financing		3,546			544
Direct financing investments								430			3,546
Mortgage payable								(20,845	)		—
	$	358,604		$	381,012		$	352,463		$	358,604

The above acquisitions were funded using a combination of available cash on hand and proceeds from the Company’s unsecured revolving line of credit. All of the acquisitions closed during the nine months ended September 30, 2018 and 2017, qualified as asset acquisitions and, as such, acquisition costs were capitalized in accordance with ASU ~~2017-01. In conjunction with~~2017-01, Business Combinations (Topic 805): Clarifying the ~~acquisitions closed during the nine months ended September 30, 2016, expenses~~Definition of $2,233 and $7,614 for the three and nine months ended September 30, 2016 were incurred and included in Acquisition expenses in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income (Loss)a Business. From the date of acquisition through September 30, 2016, the Company recorded revenues of $5,173 and $8,515 for the three and nine months ended September 30, 2016, respectively, related to the properties acquired and accounted for as business combinations, and recognized net income of $2,655 and $5,204 for the three and nine months ended September 30, 2016, excluding the impact of one-time acquisition expenses from the date of acquisition through September 30, 2016.

Subsequent to September 30, ~~2017,~~2018, the Company closed on the following acquisitions (see Note 17):

(in thousands, except number of properties)
Date	Property Type	Number of Properties	Acquisition Price			Property Type	Number of Properties	Acquisition Price
October 13, 2017	Healthcare	1	$	10,000
November 1, 2017	Other	4		15,693	^(f)
October 11, 2018						Healthcare	4	$	17,448
October 26, 2018						Industrial	1		8,817
October 31, 2018						Retail	1		2,016
		5	$	25,693			6	$	28,281

The Company has not completed the allocation of the acquisition date ~~relative~~ fair values for the properties acquired subsequent to September 30, ~~2017;~~2018; however, it expects the acquisitions to qualify as asset acquisitions and that the purchase price of these properties will primarily be allocated to land, land improvements, building and acquired lease intangibles.

The results of operations, excluding the impact of one-time acquisition costs, of the acquisitions accounted for as business combinations, for which financial information was available, are included in the following condensed pro forma financial information as if these acquisitions had been completed as of the beginning of the comparable prior annual period prior to the acquisition date. The following condensed pro forma financial information is presented as if the 2016 acquisitions were completed as of January 1, 2015. Pro forma financial information is not presented for the 2017 acquisitions based on their qualification as asset acquisitions in accordance with ASU 2017-01. These pro forma results are for comparative purposes only and are not necessarily indicative of what the Company’s actual results of operations would have been had the acquisitions occurred at the beginning of the periods presented, nor are they necessarily indicative of future operating results.

~~The condensed pro forma financial information are as follows for the three and nine months ended September 30, 2016:~~

The Company closed on the following sales of real estate, none of which qualified as discontinued operations, during the three and nine months ended September 30, ~~2017~~2018 and ~~2016:~~2017:

	For the three months ended				For the nine months ended
	September 30,				September 30,				For the three months ended September 30,						For the nine months ended September 30,
(in thousands, except number of properties)	2017		2016		2017		2016		2018			2017			2018			2017
Number of properties disposed		4		2		10		4		4			4			15			10
Aggregate sale price	$	27,725	$	12,345	$	58,170	$	16,095	$	11,609		$	27,725		$	43,951		$	58,170
Aggregate carrying value		22,335		9,163		44,984		11,519		(9,016	)		(22,335	)		(31,710	)		(44,984	)
Additional sales expenses		1,338		199		2,854		487		(568	)		(1,338	)		(2,621	)		(2,854	)
Gain on sale of real estate		4,052		2,983		10,332		4,089	$	2,025		$	4,052		$	9,620		$	10,332

The Company generally leases its investment rental property to established tenants. At September 30, ~~2017,~~2018, the Company had ~~462~~567 real estate properties which were leased under leases that have been classified as operating leases and 1516 that have been classified as direct financing leases. Of the 1516 leases classified as direct financing leases, ~~five~~four include land portions which are accounted for as operating leases (see Revenue Recognition within Note 2). Substantially all leases have initial terms of 10 to 20 years and provide for minimum rentals as defined in ASC 840, Leases. In addition, the leases generally provide for limited increases in rent as a result of fixed increases, increases in the ~~consumer price index, and/~~Consumer Price Index, or increases in the tenant’s sales volume. Generally, the tenant is also required to pay all property taxes and assessments, substantially maintain the interior and exterior of the building, and maintain property and liability insurance coverage. The leases also typically provide one or more multiple year renewal options subject to generally the same terms and conditions as the initial lease.

Rental property subject to non-cancelable operating leases with tenants are as follows at September 30, ~~2017~~2018 and December 31, ~~2016:~~2017:

	September 30,			December 31,
(in thousands)	2017			2016			September 30, 2018			December 31, 2017
Land	$	300,633		$	288,276		$	389,127		$	348,940
Land improvements		185,776			162,341			228,806			211,674
Buildings		1,530,429			1,283,322			2,009,417			1,754,796
Tenant improvements		9,656			8,665			1,729			11,425
Equipment		519			799			11,492			7,689
		2,027,013			1,743,403			2,640,571			2,334,524
Less accumulated depreciation		(135,305	)		(105,703	)		(191,133	)		(148,383	)
	$	1,891,708		$	1,637,700		$	2,449,438		$	2,186,141

Depreciation expense on investment in rental property was ~~$12,600 and $9,796~~as follows for the three ~~months ended September 30, 2017~~ and ~~2016, respectively, and $36,455 and $27,323 for the~~ nine months ended September 30, ~~2017~~2018 and ~~2016, respectively.~~2017:

Estimated minimum future rental receipts required under non-cancelable operating leases with tenants at September 30, ~~2017~~2018 are as follows:

(in thousands)
Remainder of 2017	$	40,732
2018		165,923
Remainder of 2018			$	53,323
2019		169,255		216,102
2020		171,908		219,327
2021		174,168		222,074
2022				224,399
Thereafter		1,778,342		2,120,958
	$	2,500,328	$	3,056,183

Since lease renewal periods are exercisable at the option of the tenant, the above amounts only include future minimum lease payments due during the initial lease terms. In addition, such amounts exclude any potential variable rent increases that are based on the ~~consumer price index~~Consumer Price Index, or future contingent rents which may be received under the leases based on a percentage of the tenant’s gross sales.

Investment in Rental Property – Accounted for Using the Direct Financing Method

The Company’s net investment in direct financing leases is as follows at September 30, ~~2017~~2018 and December 31, ~~2016:~~2017:

	September 30,			December 31,
(in thousands)	2017			2016			September 30, 2018			December 31, 2017
Minimum lease payments to be received	$	78,837		$	90,447		$	77,833		$	77,889
Estimated unguaranteed residual values		19,758			22,335			20,358			19,758
Less unearned revenue		(56,983	)		(65,511	)		(56,179	)		(56,030	)
Net investment in direct financing leases	$	41,612		$	47,271		$	42,012		$	41,617

Minimum future rental receipts required under non-cancelable direct financing leases with tenants at September 30, ~~2017~~2018 are as follows:

(in thousands)
Remainder of 2017	$	947
2018		3,857
Remainder of 2018			$	1,003
2019		3,931		4,076
2020		4,037		4,194
2021		4,126		4,283
2022				4,369
Thereafter		61,939		59,908
	$	78,837	$	77,833

The above rental receipts do not include future minimum lease payments for renewal periods, potential variable ~~consumer price index~~Consumer Price Index rent increases, or contingent rental payments that may become due in future periods.

The following is a summary of intangible assets and liabilities and related accumulated amortization at September 30, ~~2017~~2018 and December 31, ~~2016:~~2017:

	September 30,			December 31,
(in thousands)	2017			2016			September 30, 2018			December 31, 2017
Lease intangibles:
Acquired above-market leases	$	57,922		$	45,490		$	62,149		$	59,502
Less accumulated amortization		(8,047	)		(4,940	)		(13,668	)		(9,183	)
Acquired above-market leases, net		49,875			40,550			48,481			50,319
Acquired in-place leases		177,044			141,676			251,926			216,858
Less accumulated amortization		(21,450	)		(14,105	)		(36,369	)		(24,518	)
Acquired in-place leases, net		155,594			127,571			215,557			192,340
Total intangible lease assets, net	$	205,469		$	168,121		$	264,038		$	242,659

Acquired below-market leases	$	75,038		$	54,062		$	100,308		$	91,667
Less accumulated amortization		(8,735	)		(6,191	)		(14,007	)		(9,923	)
Intangible lease liabilities, net	$	66,303		$	47,871		$	86,301		$	81,744

Leasing fees	$	15,543		$	13,279		$	17,269		$	16,286
Less accumulated amortization		(2,497	)		(1,950	)		(3,340	)		(2,732	)
Leasing fees, net	$	13,046		$	11,329		$	13,929		$	13,554

Amortization ~~expense~~ for ~~acquired in-place leases~~intangible lease assets and ~~fees was $3,043 and $2,318~~liabilities for the three ~~months ended September 30, 2017~~ and ~~2016, respectively and $8,514 and $5,950 for the~~ nine months ended September 30, 2018 and 2017 and 2016, respectively. Amortization of acquired above-market and below-market leases, net, was a (decrease) increase in rental income of $(99) and $100 for the three months ended September 30, 2017 and 2016, respectively, and $(487) and $373 for the nine months ended September 30, 2017 and 2016, respectively. is as follows:

Estimated future amortization of intangible assets and liabilities at September 30, ~~2017~~2018 is as follows:

(in thousands)
Remainder of 2017	$	3,273
2018		12,224
Remainder of 2018			$	4,275
2019		11,439		16,041
2020		11,330		15,764
2021		11,278		15,575
2022				15,360
Thereafter		102,667		124,651
	$	152,211	$	191,666

~~2017 Unsecured Revolving Credit~~The following table summarizes the Company’s unsecured credit agreements at September 30, 2018 and ~~Term Loan Agreement~~December 31, 2017:

On ~~June 23, 2017,~~July 2, 2018, the ~~Corporation~~Company entered into a Note and Guaranty Agreement (the “NGA Agreement”) with each of the purchasers of unsecured, fixed-rate, interest-only, guaranteed senior promissory notes. Under the NGA Agreement, the Operating Company ~~entered into~~issued and sold senior promissory notes in two series, Series B Guaranteed Senior Notes (the “Series B Notes”) and Series C Guaranteed Senior Notes (the “Series C Notes”), for an ~~$800,000 unsecured Revolving Credit and Term Loan Agreement (“Credit Agreement”)~~aggregate principal amount of $325,000. The Series B Notes provide for an aggregate principal amount of $225,000 with Manufacturers & Traders Trust Company (“M&T Bank”), as Administrative Agent, four participating banks as Joint Lead Arrangers and Joint Bookrunners, four participating banks as Co-Syndication Agents, and four participating banks, as Co-Documentation Agents. The Credit Agreement consistsa fixed-rate of a $400,000 senior unsecured revolving credit facility (“Revolver”), a $250,000 senior unsecured delayed draw term loan (“5.5-Year Term Loan”), and a $150,000 senior unsecured delayed draw term loan (“7-Year Term Loan”). The Credit Agreement provides an accordion feature for up to a total of $1,000,000. The Revolver includes a $35,000 sublimit for swingline loans and $20,000 available for issuance of letters of credit. Proceeds from the Company’s borrowings under the Credit Agreement were used to repay the Company’s existing unsecured revolving credit facility and term notes with M&T and Regions Bank for $5,000 and $100,000, respectively, the Company’s existing unsecured term note with Regions Bank for $185,000, and $50,000 of the Company’s unsecured term note with SunTrust Bank. The Revolver has an initial maturity date of January 2022 and provides for one five month extension, at the election of the Company, subject to certain conditions set forth in the agreement and payment of a 0.0625% fee on the revolving commitments. Borrowings on the Revolver bear interest at variable rates based on LIBOR plus a margin based on the Operating Company’s investment grade credit rating ranging between 0.825% and 1.55% per annum. The initial applicable facility fee on the Revolver is 0.25% per annum. The 5.5-Year Term Loan provides for up to three delayed draws from inception through June 2018 at the request of the Company. Borrowings under the 5.5-Year Term Loan bear interest at variable rates based on LIBOR plus a margin based on the Operating Company’s credit rating ranging between 0.90% and 1.75% per annum5.09% through the maturity date of ~~January 2023.~~July 2, 2028. The ~~7-Year Term Loan provides~~Series C Notes provide for ~~up to three delayed draws from inception through June 2018 at the request~~an aggregate principal amount of ~~the Company. Borrowings under the 7-Year Term Loan bear interest at variable rates based on LIBOR plus~~$100,000 with a ~~margin based on the Operating Company’s credit rating ranging between 1.50% and 2.45%~~fixed-rate of 5.19% through the maturity date of ~~June 2024. Based~~July 2, 2030. On July 2, 2018, the Operating Company issued $100,000 of the Series B Notes and $50,000 of the Series C Notes. The remaining $125,000 principal of the Series B Notes and $50,000 principal of the Series C Notes were funded on September 13, 2018. The proceeds of both issuances were used to pay off borrowings on the ~~Operating Company’s current credit rating~~Revolver, along with $25,000 of ~~Baa3,~~ the ~~applicable margin under~~outstanding principal on the 2015 Unsecured Term Loan.

At September 30, 2018 and December 31, 2017, the weighted average interest rate on all outstanding borrowings was 4.17% and 3.03%, respectively. The Revolver is subject to a facility fee of 0.25% per annum. In addition, the 5.5-Year Term Loan and 7-Year Term Loan are ~~1.20%, 1.35% and 1.90%, respectively. The 5.5-Year Term Loan and 7-Year Term Loan are both~~ subject to a fee of 0.25% per annum on the amount of the commitments, reduced by the amount of term loans outstanding under the applicable loan. The ~~Company is subject to various financial~~5.5-Year and ~~nonfinancial covenants under the Credit Agreement.~~

~~On June 23, 2017, the Company amended and restated the Term Loan Agreement by and among the Company, the Operating Company,~~7-Year term loans were fully drawn as the borrower, SunTrust Bank, as Administrative Agent, and the lenders party thereto (as amended and restated, the “Restated Term Loan Agreement”). The Restated Term Loan Agreement amended certain terms, conditions, covenants, and other provisions to align them with those included in the Credit Agreement described above. The Restated Term Loan Agreement has an initial maturity date of February 2019 and provides for two one year extension options, at the election of the Company, subject to compliance with all covenants and the payment of a 0.01% fee. Borrowings under the Restated Term Loan Agreement bear interest at variable rates based on the one month LIBOR plus a margin based on the Operating Company’s investment grade credit rating ranging between 0.90% and 1.75%. Based on the Operating Company’s current credit rating of Baa3, the applicable margin under the Restated Term Loan Agreement is 1.40%.

In January 2017, the Company commenced a private offering of unsecured, fixed rate, guaranteed senior promissory notes (“Senior Notes”). On March 16, 2017, the Company entered into a Note and Guaranty Agreement with each of the purchasers of the Senior Notes. On April 18, 2017, the Company closed the offering and issued the Senior Notes for an aggregate principal amount of $150,000. The Senior Notes were issued by the Operating Company and guaranteed by the Corporation. The Senior Notes were issued at par, bear interest at a rate of 4.84% per annum (priced at 240 basis points above the 10 year U.S. Treasury yield at the time of pricing), and have a 10 year maturity, maturing on April 18, 2027. J.P. Morgan Securities, LLC and Wells Fargo Securities, LLC served as the joint placement agents.

Outstanding Balance

September 30,

December 31,

Interest

Maturity
(in thousands, except interest rates)

2017

2016

Rate^(d)

Date
2015 Unsecured Term Loan Agreement^(a)

$
325,000

$
375,000

1 month LIBOR + 1.40%

Feb. 2019

2017 Unsecured Revolving Credit and Term Loan Agreement^(a)

Revolver ^(f)

126,500

-

1 month LIBOR + 1.20%

Jan. 2022
5.5-Year term loan

250,000

-

1 month LIBOR + 1.35%

Jan. 2023
7-Year term loan

-

-

1 month LIBOR + 1.90%

June 2024

376,500

-

2017 Senior Notes^(a)

150,000

-

4.84%

Apr. 2027

2012 Unsecured Credit Agreement^(a)

Term note

-

50,000

3 month LIBOR + 1.45%

June 2017
Term note

-

50,000

1 month LIBOR + 1.45%

June 2017
Revolver^(b)

-

102,000

1 month LIBOR + 1.45%

June 2017

-

202,000

2013 Unsecured Credit Agreement^(a)

-

185,000

1 month LIBOR + 1.75%
to 2.50%^(e)

Oct. 2018

Total

851,500

762,000

Debt issuance costs, net^(c)

(3,093
)

(2,109
)

$
848,407

$
759,891

At September 30, ~~2017 and December 31, 2016, the weighted average interest rate on all outstanding borrowings was 2.96% and 2.14%, respectively.~~2018.

Debt issuance costs ~~were~~are amortized ~~and recorded~~ as a component of interest expense in the accompanying Condensed Consolidated Statements of Income and Comprehensive ~~Income (Loss) of $486 and $403~~Income. The following table summarizes debt issuance cost amortization for the three ~~months ended September 30, 2017~~ and ~~2016, respectively, and $1,343 and $1,279 for the~~ nine months ended September 30, ~~2017~~2018 and ~~2016, respectively.~~2017:

For the three and nine months ended September 30, 2018, the Company paid $2,209 in debt issuance costs related to the Series B Notes and Series C Notes.

For the nine months ended September 30, 2017, the Company paid $8,344 in debt issuance costs associated with the ~~Senior~~Series A Notes, the Credit Agreement, ~~with M&T as Administrative Agent,~~ and the ~~Amended and Restated~~2015 Unsecured Term Loan ~~Agreement with SunTrust Bank.~~Agreement. For each separate debt instrument, on a lender by lender basis, in accordance with ASC 470-50, Debt Modifications and Extinguishment, the Company performed an assessment of whether the transaction iswas deemed to be new debt, a modification of existing debt, or an extinguishment of existing debt. Debt issuance costs are either deferred and amortized over the term of the associated debt or expensed as incurred. Based on this assessment, $5,443 of the debt issuance costs ~~were~~ related to the issuance of new debt and therefore have been deferred and are being amortized over the term of the associated debt. The remaining $2,901 of debt issuance costs ~~was~~were associated with lenders whose commitments under the new agreements have been determined to be an extinguishment and such debt issuance costs were expensed as a component of the ~~cost~~Cost of debt extinguishment in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income ~~(Loss)~~ for the nine months ended September 30, 2017. Additionally, $654 of unamortized debt issuance costs were expensed and included in ~~cost~~Cost of debt extinguishment in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income ~~(Loss)~~ for the nine months ended September 30, 2017.

The Company’s mortgages and notes payable consist of the following at September 30, ~~2017~~2018 and December 31, ~~2016:~~2017:

(in thousands, except interest rates)	(in thousands, except interest rates)												(in thousands, except interest rates)
		Origination Date	Maturity Date			September 30,			December 31,
Lender	Lender	(Month/Year)	(Month/Year)	Interest Rate		2017			2016				Lender	Original/ Assumption Date (Month/Year)	Maturity Date (Month/Year)	Interest Rate	September 30, 2018			December 31, 2017
(1)													Wilmington Trust National Association	Jun-18	Aug-25	4.36%	$	20,761		$	—		(a) (b) (c) (m)
~~(1)~~(2)	M&T Bank	Dec-10	Apr-20	1 month LIBOR+1.90%		$	-		$	21,335		(b) (f) (g)	PNC Bank	Oct-16	Nov-26	3.62%		18,352			18,622		(b) (c)
~~(2)~~(3)	Sun Life	Mar-12	Oct-21		5.13%		11,763			12,036		(b) (i)	Sun Life	Mar-12	Oct-21	5.13%		11,385			11,670		(b) (g)
~~(3)~~(4)	Aegon	Apr-12	Oct-23		6.38%		9,330			9,804		(b) (j)	Aegon	Apr-12	Oct-23	6.38%		8,668			9,168		(b) (h)
~~(4)~~(5)	Legg Mason Mortgage Capital Corporation	Aug-10	Aug-22		7.06%		5,900			6,538		(b) (e)	Symetra Financial	Nov-17	Oct-26	3.65%		6,522			6,685		(a) (b) (k) (l)
~~(5)~~(6)	Columbian Mutual Life Insurance Company	Aug-10	Sep-25		7.00%		1,510			1,538		(b) (c) (d)	M&T Bank	Oct-17	Aug-21	one - month LIBOR+3%		5,085			5,183		(b) (d) (i) (j)
~~(6)~~(7)	Symetra Financial	Mar-11	Apr-31		6.34%		1,015			1,036		(a) (b)	Legg Mason Mortgage Capital Corporation	Aug-10	Aug-22	7.06%		4,950			5,670		(b) (e)
~~(7)~~(8)	Note holders	Dec-08	Dec-23		6.25%		750			750		(d)	Standard Insurance Co.	Apr-09	May-34	6.88%		1,767			1,813		(b) (c) (f)
~~(8)~~(9)	Standard Insurance Co.	Jul-10	Aug-30		6.75%		585			597		(b) (c) (d) (h)	Columbian Mutual Life Insurance Company	Aug-10	Sep-25	7.00%		1,470			1,500		(b) (c) (d)
(9)	Siemens Financial Services, Inc.	Sep-10	Sep- 20		5.47%		5,869			6,010		(a) (b)
(10)	Standard Insurance Co.	Apr-09	May-34		6.88%		1,827			1,870		(b) (c) (h)	Note holders	Dec-08	Dec-23	6.25%		750			750		(d)
(11)	Wells Fargo Bank, N.A.	May-07	Jun-17		6.69%		-			1,694		(a) (b)	Standard Insurance Co.	Jul-10	Aug-30	6.75%		568			581		(b) (c) (d) (f)
(12)	Standard Insurance Co.	May-09	Jun-34		6.88%		1,312			1,342		(b) (c) (h) (l)	Siemens Financial Services, Inc.	Sep-10	Sep-20	5.47%		—			5,820		(a) (b)
(13)	Standard Insurance Co.	Mar-10	Apr-31		7.00%		-			1,058		(b) (c) (d) (h)	Symetra Financial	Mar-11	Apr-31	6.34%		—			1,008		(a) (b)
(14)	Standard Insurance Co.	Mar-10	Apr-31		7.00%		-			844		(b) (c) (d) (h)
(15)	Columbus Life Insurance	Feb-13	Jan-26		4.65%		-			9,400		(b) (k)
(16)	Athene Annuity & Life Co.	Feb-12	Feb-17		3.76%		-			12,701		(b)
(17)	PNC Bank	Oct-16	Nov-26		3.62%		18,711			18,971		(b) (c)
							58,572			107,524								80,278			68,470
	Debt issuance costs, net						(689	)		(838	)		Debt issuance costs, net					(516	)		(638	)
						$	57,883		$	106,686							$	79,762		$	67,832

At September 30, ~~2017,~~2018, investment in rental property of ~~$91,326~~$140,639 is pledged as collateral against the Company’s mortgages and notes payable.

The ~~Company~~following table summarizes the mortgages extinguished ~~six and four mortgages totaling $46,804 and $8,199,~~by the Company during the nine months ended September 30, ~~2017~~2018 and the year ended December 31, ~~2016, respectively. For the three months ended September 30, 2017 and 2016,~~2017:

The following table summarizes the cost of mortgage extinguishment for the ~~mortgages was $1,404~~three and ~~$52, respectively. For the~~ nine months ended September 30, ~~2017~~2018 and ~~2016, the cost of extinguishment for the mortgages was $1,464 and $105, respectively.~~2017:

Estimated future principal payments to be made under the above mortgage and note payable agreements and the Company’s unsecured credit agreements (see Note 8) at September 30, ~~2017~~2018 are as follows:

(in thousands)
Remainder of 2017	$	28,677
2018		2,829
Remainder of 2018			$	827
2019		328,034		303,433
2020		8,449		3,672
2021		13,305		18,584
2022				3,066
Thereafter		528,778		980,696
	$	910,072	$	1,310,278

Certain of the Company’s mortgage and note payable agreements provide for prepayment fees and can be terminated under certain events of default as defined under the related agreements which are not reflected as part of the table above.

Interest rate swaps were entered into with certain financial institutions in order to mitigate the impact of interest rate variability over the term of the related debt agreements. The interest rate swaps are considered cash flow hedges. In order to reduce counterparty concentration risk, the Company has a diversification policy for institutions that serve as swap counterparties. Under these agreements, the Company receives monthly payments from the counterparties on these interest rate swaps equal to the related variable interest rates multiplied by the outstanding notional amounts. Certain interest rate swaps amortize on a monthly basis. In turn, the Company pays the counterparties each month an amount equal to a fixed rate multiplied by the related outstanding notional amounts. The intended net impact of these transactions is that the Company pays a fixed interest rate on its ~~variable rate~~variable-rate borrowings.

The following is a summary of the Company’s outstanding interest rate swap agreements at September 30, 2018 and December 31, 2017:

(in thousands, except interest rates)

Counterparty

Maturity Date

Fixed Rate

Variable Rate Index

Notional Amount

Fair Value

Bank of America, N.A.

November 2023

2.80%

LIBOR 1 month

$
25,000

$
(1,177
)
Bank of Montreal

July 2024

1.16%

LIBOR 1 month

40,000

2,147

Bank of Montreal

January 2025

1.91%

LIBOR 1 month

25,000

193

Bank of Montreal

July 2025

2.32%

LIBOR 1 month

25,000

(490
)
Bank of Montreal

January 2026

1.92%

LIBOR 1 month

25,000

297

Bank of Montreal

January 2026

2.05%

LIBOR 1 month

40,000

84

Bank of Montreal

December 2026

2.33%

LIBOR 1 month

10,000

(175
)
Capital One, N.A.

December 2021

1.05%

LIBOR 1 month

15,000

487

Capital One, N.A.

December 2024

1.58%

LIBOR 1 month

15,000

459

Capital One, N.A.

January 2026

2.08%

LIBOR 1 month

35,000

39

Capital One, N.A.

July 2026

1.32%

LIBOR 1 month

35,000

2,289

M&T Bank

September 2022

2.83%

LIBOR 1 month

25,000

(1,150
)
M&T Bank

November 2023

2.65%

LIBOR 1 month

25,000

(1,023
)
Regions Bank

March 2018

1.77%

LIBOR 1 month

25,000

(46
)
Regions Bank

March 2019

1.91%

LIBOR 3 month

25,000

(106
)
Regions Bank

May 2020

2.12%

LIBOR 1 month

50,000

(562
)
Regions Bank

March 2022

2.43%

LIBOR 3 month

25,000

(550
)
Regions Bank

December 2023

1.18%

LIBOR 1 month

25,000

1,178

SunTrust Bank

April 2024

1.99%

LIBOR 1 month

25,000

(63
)
SunTrust Bank

April 2025

2.20%

LIBOR 1 month

25,000

(332
)
SunTrust Bank

July 2025

1.99%

LIBOR 1 month

25,000

72

SunTrust Bank

January 2026

1.93%

LIBOR 1 month

25,000

248

Wells Fargo Bank, N.A.

February 2021

2.39%

LIBOR 1 month

35,000

(739
)
Wells Fargo Bank, N.A.

October 2024

2.72%

LIBOR 1 month

15,000

(706
)

$
640,000

$
374

~~The fair value of the interest rate swaps are reported on the Condensed Consolidated Balance Sheets at September 30, 2017 and December 31, 2016 as follows:~~

September 30,

December 31,

(in thousands)

2017

2016

Interest rate swaps, asset

$
7,493

$
9,598

Interest rate swaps, liability

(7,119
)

(10,217
)
Interest rate swap

$
374

$
(619
)

(in thousands, except interest rates)								Fair Value
Counterparty	Maturity Date	Fixed Rate			Variable Rate Index	Notional Amount		September 30, 2018		December 31, 2017
Bank of America, N.A.	November 2023		2.80	%	one-month LIBOR	$	25,000	$	129	$	(863	)
Bank of Montreal	July 2024		1.16	%	one-month LIBOR		40,000		3,775		2,503
Bank of Montreal	January 2025		1.91	%	one-month LIBOR		25,000		1,451		464
Bank of Montreal	July 2025		2.32	%	one-month LIBOR		25,000		921		(194	)
Bank of Montreal	January 2026		1.92	%	one-month LIBOR		25,000		1,655		561
Bank of Montreal	January 2026		2.05	%	one-month LIBOR		40,000		2,309		520
Bank of Montreal	December 2026		2.33	%	one-month LIBOR		10,000		445		(63	)
Bank of Montreal	December 2027		2.37	%	one-month LIBOR		25,000		1,180		(192	)
Capital One, N.A.	December 2021		1.05	%	one-month LIBOR		15,000		867		607
Capital One, N.A.	December 2024		1.58	%	one-month LIBOR		15,000		1,157		603
Capital One, N.A.	January 2026		2.08	%	one-month LIBOR		35,000		1,996		399
Capital One, N.A.	July 2026		1.32	%	one-month LIBOR		35,000		4,007		2,565
Capital One, N.A.	December 2027		2.37	%	one-month LIBOR		25,000		1,215		(189	)
Capital One, N.A.	April 2026		2.68	%	one-month LIBOR		15,000		267		—		^(a)
M&T Bank	August 2021		1.02	%	one-month LIBOR		5,085		306		182		^{(b), (c)}
M&T Bank	September 2022		2.83	%	one-month LIBOR		25,000		59		(810	)
M&T Bank	November 2023		2.65	%	one-month LIBOR		25,000		250		(686	)
Regions Bank	March 2018		1.77	%	one-month LIBOR		—		—		(9	)	^(a)
Regions Bank	March 2019		1.91	%	three-month LIBOR		—		—		2		^(a)
Regions Bank	May 2020		2.12	%	one-month LIBOR		50,000		501		(153	)
Regions Bank	March 2022		2.43	%	three-month LIBOR		—		—		(254	)	^(a)
Regions Bank	December 2023		1.18	%	one-month LIBOR		25,000		2,130		1,402
SunTrust Bank	April 2024		1.99	%	one-month LIBOR		25,000		1,181		261
SunTrust Bank	April 2025		2.20	%	one-month LIBOR		25,000		1,074		—
SunTrust Bank	July 2025		1.99	%	one-month LIBOR		25,000		1,444		386
SunTrust Bank	December 2025		2.30	%	one-month LIBOR		25,000		1,035		(138	)
SunTrust Bank	January 2026		1.93	%	one-month LIBOR		25,000		1,651		553
Wells Fargo Bank, N.A.	February 2021		2.39	%	one-month LIBOR		35,000		363		(369	)
Wells Fargo Bank, N.A.	October 2024		2.72	%	one-month LIBOR		15,000		162		(510	)
Wells Fargo Bank, N.A.	January 2028		2.37	%	one-month LIBOR		75,000		3,580		(590	)
Wells Fargo Bank, N.A.	April 2027		2.72	%	one-month LIBOR		25,000		415		—
								$	35,525	$	5,988

The total ~~loss~~amounts recognized and the location ~~of the loss~~ in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income, ~~(Loss),~~ from converting from variable rates to fixed rates under these agreements is as follows for the three ~~months ended September 30, 2017~~ and ~~2016:~~

The total loss recognized, and the location of the loss in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income (Loss), from converting from variable rates to fixed rates under these agreements is as follows for the nine months ended September 30, ~~2017~~2018 and ~~2016:~~2017:

													Total Interest Expense
							Amount of Gain						Presented in the
	Effective Portion			Ineffective Portion			Recognized in			Reclassification from Accumulated Other			Consolidated Statements of
(in thousands)	Location of Loss Reclassified from Accumulated Other Comprehensive Income into Income	Amount of Loss Reclassified from Accumulated Other Comprehensive Income into Income		Location of Loss Recognized in Income on Derivatives	Amount of Loss Recognized in Income on Derivatives		Accumulated Other			Comprehensive Income			Income and Comprehensive
Interest rate swaps
Three Months Ended September 30,							Comprehensive Income			Location	Amount of Loss		Income
2018							$	6,299		Interest expense	$	20	$	14,484
2017	Interest expense	$	3,152	Interest expense	$	332		283		Interest expense		448		9,380
2016	Interest expense		7,030	Interest expense		2,219


													Total Interest Expense
							Amount of Gain (Loss)						Presented in the
							Recognized in			Reclassification from Accumulated Other			Consolidated Statements of
(in thousands)							Accumulated Other			Comprehensive Income			Income and Comprehensive
Nine Months Ended September 30,							Comprehensive Income			Location	Amount of Loss		Income
2018							$	30,296		Interest expense	$	1,287	$	38,115
2017								(1,448	)	Interest expense		3,152		25,182

Ineffectiveness of $2,219 for the nine months ended September 30, 2017 was attributable to inconsistencies in certain terms between the interest rate swaps and the credit agreements. The interest rate swaps continued to qualify for hedge accounting, with the effective portion of mark-to-market adjustments included in Accumulated other comprehensive income. During the fourth quarter of 2016, the Company amended the terms of the credit agreements, thereby reversing the impact of the ineffectiveness and rendering a $0 full year 2016 impact to the Condensed Consolidated Statement of Income and Comprehensive Income (Loss).

Amounts related to the interest rate swaps expected to be reclassified out of Accumulated other comprehensive income to Interest expense during the next twelve months are estimated to be ~~$3,460. The Company is exposed to credit risk in the event~~a gain of ~~non-performance by the counterparties of the swaps. The Company minimizes this risk exposure by limiting counterparties to major banks who meet established credit and capital guidelines.~~$4,054.

Under the Company’s UPREIT structure, entities and individuals can contribute their properties ~~to the Operating Company~~ in exchange for membership interests in the Operating Company. Properties contributed as part of UPREIT transactions during the nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 were valued at ~~$8,278~~$15,797 and ~~$7,190,~~$8,278, respectively, which represents the estimated fair value of the properties contributed, less any assumed debt.

The Company recognized rental income related to UPREIT transactions ~~in the amount of $3,539 and $3,025~~ for the three ~~months ended September 30, 2017~~ and ~~2016, respectively. The Company recognized rental income related to UPREIT transactions in the amount of $9,503 and $8,754 for the~~ nine months ended September 30, 2018 and 2017 ~~and 2016, respectively.~~as follows:

The Company maintained bank balances that, at times, exceeded the federally insured limit during the nine months ended September 30, ~~2017.~~2018. The Company has not experienced losses relating to these deposits and management does not believe that the Company is exposed to any significant credit risk with respect to these amounts.

The Company’s rental property is managed by the Manager and the Asset Manager as described in Note 3. Management fees ~~and expense reimbursements~~ paid to the Manager and Asset Manager represent ~~21%~~20% and ~~26%~~21% of the Company’s total operating expenses for the three months ended September 30, 2018 and 2017, respectively, and ~~2016,~~19% and 21% ~~and 25%~~ of the Company’s total operating expenses for the nine months ended September 30, 2018 and 2017, ~~and 2016,~~ respectively. ~~The Company has mortgages and notes payable with five institutions that comprise 32%, 20%, 16%, 10%, and 10% of total mortgages and notes payable at September 30, 2017.~~ The Company has mortgages and notes payable with four institutions that comprise ~~20%~~26%, ~~18%~~23%, ~~12%~~14% and 11% of total mortgages and notes payable at September 30, 2018. The Company has mortgages and notes payable with four institutions that comprise 27%, 17%, 13% and 11% of total mortgages and notes payable at December 31, ~~2016.~~2017. For the three and nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, the Company had no individual tenants or common franchises that accounted for more than 10% of total revenues.

Pursuant to the Corporation’s Articles of Incorporation (the “Charter”), the Corporation is authorized to issue an aggregate of 100,000 shares of capital stock, consisting of 80,000 shares designated as common stock with a par value of $0.001 per share, and 20,000 shares designated as preferred stock with a par value of $0.001 per share (unrounded). The Board of Directors, without any action by the Corporation’s stockholders, may amend the Charter from time to time to increase or decrease the aggregate number of shares of capital stock or the number of shares of capital stock of any class or series that the Corporation has authority to issue.

The shares of the Corporation’s common stock entitle the holders to one vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Board of Directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive, conversion or exchange rights.

Pursuant to limited liability company agreement of the Operating Company, each outstanding membership unit of the Operating Company is convertible into one share of the Corporation’s common stock, subject to the terms and conditions set forth in the Operating Company’s operating agreement.

The Charter also provides the Board of Directors with the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the Board of Directors shall have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. As of September 30, 2017 and December 31, 2016, no shares of the Corporation’s preferred stock were issued and outstanding.

In 2009, the Board of Directors approved a share redemption program (“Share Redemption Program”) under which the Corporation may repurchase shares of its outstanding common stock after December 31, 2009. The Board of Directors approved and adopted an amended and restated Share Redemption Program effective as of June 28, 2017.

Under the Share Redemption Program, stockholders may request that the Corporation redeem shares after one year from the original investment date, subject to certain exceptions as set forth in the Share Redemption Program. Under the Share Redemption Program, the Corporation is not obligated to repurchase shares and, notwithstanding any other term of the Share Redemption Program, the Board of Directors or IDC may reject any share redemption request made by any stockholder at any time. Shares held for more than 12 months, but less than five years, will be redeemed at a purchase price equal to 95% of the current share value established from time-to-time by the IDC (the “Determined Share Value”), and shares held for five years or more will be redeemed at a purchase price equal to 100% of the current Determined Share Value, subject to certain exemptions as set forth in the Share Redemption Program.

Total shares redeemed pursuant to the Share Redemption Program in any quarter may not exceed 1% of the total number of shares outstanding at the beginning of the calendar year plus 50% of the total number of any additional shares issued during the prior calendar quarter under the Corporation’s Distribution Reinvestment Plan (“DRIP”), provided that the total number of shares redeemed during any calendar year may not exceed 5% of the number of shares outstanding as of the first day of such calendar year. The Board of Directors or the IDC may amend, suspend, or terminate the Share Redemption Program at any time upon 30 days’ notice to the Corporation’s stockholders.

The following table summarizes redemptions under the Share Redemption Program for the three and nine months ended September 30, ~~2017~~2018 and ~~2016:~~2017:

	For the three months ended				For the nine months ended				For the three months ended September 30,				For the nine months ended September 30,
	September 30,				September 30,
(in thousands, except stockholders and shares)	2017		2016		2017		2016
(in thousands, except number of stockholders)									2018		2017		2018		2017
Number of stockholders	6		7		20		20		11		6		33		20
Number of shares	23		45		62		87		32		23		106		62
Aggregate redemption price	$	1,808	$	3,427	$	4,825	$	6,487	$	2,675	$	1,808	$	8,564	$	4,825

The Corporation has adopted the ~~DRIP,~~Distribution Reinvestment Plan (“DRIP”), pursuant to which the Corporation’s stockholders and holders of membership units in the Operating Company (other than the Corporation), may elect to have cash distributions reinvested in additional shares of the Corporation’s common stock. Cash distributions will be reinvested in additional shares of common stock pursuant to the DRIP at a per share price equal to 98% of the Determined Share Value as of the applicable distribution date. The Corporation may amend, suspend, or terminate the DRIP at any time upon 30 days’ prior written notice to each participant at least 10 days prior to the effective date of the amendment. The Corporation may terminate the DRIP upon written notice to each participant at least 30 days prior to the effective date of the termination.stockholder. At September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, a total of ~~1,451~~2,064 and ~~1,076,~~1,592 shares of common stock, respectively, have been issued under the DRIP.

The following table summarizes the components used in the calculation of basic and diluted earnings per share (“EPS”):

	For the three months ended				For the nine months ended
	September 30,				September 30,				For the three months ended September 30,				For the nine months ended September 30,
(in thousands, except per share)	2017		2016		2017		2016		2018		2017		2018		2017
Basic earnings:
Net earnings attributable to Broadstone Net Lease, Inc.	$	11,948	$	13,958	$	39,269	$	23,874	$	21,267	$	11,948	$	55,813	$	39,269
Diluted earnings:
Net earnings attributable to Broadstone Net Lease, Inc.	$	11,948	$	13,958	$	39,269	$	23,874	$	21,267	$	11,948	$	55,813	$	39,269
Net earnings attributable to non-controlling interests		1,042		1,459		3,460		2,600		1,797		1,042		4,631		3,460
	$	12,990	$	15,417	$	42,729	$	26,474	$	23,064	$	12,990	$	60,444	$	42,729

Basic and diluted weighted average shares outstanding:
Weighted average number of common shares outstanding used in basic earnings per share		17,617		13,647		16,607		12,738		20,554		17,617		19,850		16,607
Effects of convertible membership units		1,530		1,427		1,462		1,416		1,737		1,530		1,646		1,462
Weighted average number of common shares outstanding used in diluted earnings per share		19,147		15,074		18,069		14,154		22,291		19,147		21,496		18,069
Basic and diluted net earnings per common share	$	0.68	$	1.02	$	2.36	$	1.87	$	1.03	$	0.68	$	2.81	$	2.36

In the table above, outstanding membership units ~~in the Operating Company~~ are included in the diluted earnings per share calculation. However, because such membership units would also require that the share of the Operating Company income attributable to such membership units also be added back to net income, there is no effect on EPS.

Cash paid for interest was ~~$20,364~~$33,108 and ~~$16,430~~$20,364 for the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively. Cash paid for state income and franchise ~~taxes~~tax was ~~$751~~$307 and ~~$323~~$751 for the nine months ended September 30, 2018 and 2017, ~~and 2016,~~ respectively.

The following are non-cash transactions and have been excluded from the accompanying Condensed Consolidated Statements of Cash Flows:

From time to time, the Company is a party to various litigation matters incidental to the conduct of the Company’s business. While the resolution of such matters cannot be predicted with certainty, based on currently available information, the Company does not believe that the final outcome of any of these matters will have a material effect on its consolidated financial position, results of operations or liquidity.

In connection with ownership and operation of real estate, the Company may potentially be liable for cost and damages related to environmental matters. The Company is not aware of any non-compliance, liability, claim, or other environmental condition that would have a material effect on its consolidated financial position, results of operations, or liquidity.

~~As part of acquisitions closed during 2016~~Tenant improvement allowances at September 30, 2018 and one acquisition closed in 2017, the Company assumed four separate lease agreements that provided for a total of $11,464 in tenant improvement allowances. During the nine months ended September 30,2017 and the year ended December 31, ~~2016, payments of $3,863 and $974, respectively, have been~~2017 were as follows:

Payments made for work completed under ~~these allowances, resulting in a total~~the tenant improvement ~~allowance of $6,627 and $9,490 at September 30, 2017 and December 31, 2016, respectively.~~allowances were as follows:

During the nine months ended September 30, 2017, three properties held in the Company’s real estate portfolio incurred losses due to fire damage. Management anticipates that the proceeds received from insurance will exceed the book value of the property destroyed, and accordingly a gain on insurance settlement may be recorded in a future period upon receipt of funds.

~~Subsequent to September 30, 2017,~~Through November 5, 2018, the Company has raised ~~$18,443 for a total~~$24,671 through the sale of ~~231~~291 shares of the Corporation’s common stock ~~through~~from monthly equity closings, including dividend ~~reinvestments, and $4,635 for a total of 58 units of the Operating Company’s membership interest through an UPREIT transaction.~~reinvestments. Through November ~~13, 2017,~~5, 2018, the Company has paid ~~$8,099~~$9,722 in distributions, including dividend reinvestments.

Subsequent to September 30, ~~2017,~~2018, the Company continued to expand its operations through the acquisition of additional rental property and associated intangible assets and liabilities. The Company acquired approximately ~~$25,693~~$28,281 of rental property and associated intangible assets and liabilities (see Note 4)~~, and assumed $11,933~~. Through November 5, 2018, the Company sold four properties for total proceeds of ~~liabilities.~~$10,995 with an aggregate carrying value of approximately $9,100. The Company incurred additional expenses related to the sales of approximately $640 resulting in a gain on sale of real estate of approximately $1,255.

On November ~~7, 2017,~~2, 2018, the Board of Directors declared a distribution of ~~$0.415~~$0.43 per share on the Corporation’s common stock and approved a distribution of ~~$0.415~~$0.43 per membership unit of the Operating Company for monthly distributions through January ~~2018.~~2019. The distributions are payable on or prior to the 15th of the following month to ~~the Corporation’s common~~ stockholders and ~~the Operating Company’s~~ unit holders of record on the last day of the month. In addition, the IDC determined the ~~Determined Share Value~~share value for the Corporation’s common stock and the Operating Company’s membership units to be ~~$81.00~~$86.00 per share or unit for subscription agreements received from November 1, ~~2017~~2018 through January 31, ~~2018.~~2019.

Subsequent to September 30, 2018, the Operating Company paid off borrowings on the Revolver in the aggregate amount of $13,000 and drew additional borrowings on the Revolver in the aggregate amount of $13,000.

Except where the context suggests otherwise, the terms “we,” “us,” “our,” and “our company” refer to Broadstone Net Lease, Inc., a Maryland corporation, and, as required by context, Broadstone Net Lease, LLC, a New York limited liability company, which we refer to as the or our “Operating Company,” and to their respective subsidiaries.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our ~~consolidated financial statements~~Condensed Consolidated Financial Statements and the accompanying ~~notes~~Notes to the ~~consolidated financial statements~~Condensed Consolidated Financial Statements appearing elsewhere in this Form 10-Q.

This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), regarding, among other things, our plans, strategies, and prospects, both business and financial. Forward-looking statements include, but are not limited to, statements that represent our beliefs concerning future operations, strategies, financial results or other developments. Forward-looking statements can be identified by the use of forward-looking terminology such as, but not limited to, “may,” “will,” “should,” “expect,” “intend,” “anticipate,” “estimate,” “would be,” “believe,” or “continue” or the negative or other variations of comparable terminology. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic, and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different. Although we believe that our plans, intentions, and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to known and unknown risks, uncertainties, and ~~assumptions.~~assumptions, including risks related to general economic conditions, local real estate conditions, tenant financial health, property acquisitions and the timing of these acquisitions, and the availability of capital to finance planned growth, among others. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Form 10-Q is filed with the Securities and Exchange Commission (the “SEC”). Except as required by law, we do not undertake any obligation to update or revise any forward-looking statements contained in this Form 10-Q. Important factors that could cause actual results to differ materially from the forward-looking statements are disclosed in Item 1A. “Risk Factors” in ~~Amendment No. 2 to~~ our ~~Registration Statement on~~ Form ~~10,~~10-K for the year ended December 31, 2017, filed with the SEC on ~~June 29, 2017~~March 15, 2018 (the “Form ~~10”~~10-K”).

We are an externally managed real estate investment trust (“REIT”), formed as a Maryland corporation in 2007 to acquire and hold single-tenant, commercial real estate properties throughout the United States, ~~that~~substantially all of which are leased to the properties’ operators under long-term net leases. 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, repairs and capital costs). 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 exclude 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. Substantially all of the properties in our portfolio are subject to net leases.

We focus on real estate that is operated by a single tenant ~~which~~where the real estate is an integral part of the tenant’s business. Our diversified portfolio of real estate includes retail properties ~~such~~(such as quick service and casual dining ~~restaurants,~~restaurants), healthcare facilities, industrial manufacturing facilities, warehouse and distribution centers, and corporate offices, ~~amongst~~among others. We target properties with credit-worthy tenants that look to engage in a long-term lease relationship. Through long-term leases, our tenants are able to retain operational control of their critical locations, while conserving their debt and equity capital to fund their fundamental business operations.

As of September 30, ~~2017,~~2018, we owned a diversified portfolio of ~~477~~583 individual ~~net~~ leased commercial properties located in 3742 states, comprising approximately ~~14.1~~18.0 million rentable square feet of operational space. As of September 30, ~~2017,~~2018, our properties were 100% leased, ~~to 119~~and 99.4% occupied by 142 different commercial tenants, with no single tenant accounting for more than 5%4% of our annual rental stream.

We elected to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), beginning with our taxable year ending December 31, 2008. As a REIT, we are not subject to federal income tax to the extent that we meet certain requirements, including that we distribute at least 90% of our annual taxable income to our stockholders and satisfy other requirements based on the composition of our asset portfolio and sources of income.

We operate under the direction of our board of directors, which is responsible for the management and control of our affairs. Our board of directors has retained our sponsor, Broadstone Real Estate, LLC (the “Manager”), to provide certain property management services for our properties, and Broadstone Asset Management, LLC, ~~the wholly-owned~~a wholly owned subsidiary of the Manager (the “Asset Manager”), to manage our day-to-day affairs and implement our investment strategy, subject to our board of director’s direction, oversight, and approval.

We conduct substantially all of our activities through, and all of our properties are held directly or indirectly by, ~~Broadstone Net Lease, LLC (the “Operating Company”).~~the Operating Company. We are the sole managing member of the Operating Company and as of September 30, ~~2017,~~2018, we owned approximately ~~92.3%~~92.4% of its issued and outstanding membership units, with the remaining ~~7.7% of its membership units~~7.6% held by persons who were issued membership units in exchange for their interests in properties acquired by the Operating Company.

As we conduct substantially all of our operations through the Operating Company, we are structured as what is referred to as an Umbrella Partnership Real Estate Investment Trust (“UPREIT”). The UPREIT structure allows a property owner to contribute their property to the Operating Company in exchange for membership units ~~in the Operating Company~~ and generally defer taxation of a resulting gain until the contributor later disposes of the membership ~~units.~~units or the property is sold in a taxable transaction. The membership units of the Operating Company held by members of the Operating Company other than us are referred to herein and in our consolidated financial statements as “non-controlling interests,” “non-controlling membership units,” or “membership units,” and are convertible into shares of our common stock on a one-for-one basis, subject to certain restrictions. We allocate consolidated earnings to holders of our common stock and holders of non-controlling membership ~~unit holders of the Operating Company~~units based on the weighted average number of shares of our common stock and non-controlling membership units outstanding during the year. ~~Approximately 1.5 million~~For the nine months ended September 30, 2018, the weighted average number of non-controlling membership units ~~were~~ outstanding ~~as of September 30, 2017, with a year-to-date weighted average of 1.5~~was 1.45 million.

We commenced our ongoing private offering of shares of our common stock (our “private offering”) in 2007. The first closing of our private offering occurred on December 31, 2007, and we have conducted additional closings at least once every calendar quarter since then. Currently, we close sales of additional shares of our common stock monthly. In November 2017, we instituted a monthly equity cap and queue program for new and additional investments in our common stock. The cap does not apply to investments made pursuant to our Distribution Reinvestment Plan (“DRIP”) or equity capital received in connection with UPREIT transactions. For the months of February 2018 through June 2018, new and additional investments were capped at $15.0 million per month. Based on anticipated acquisition activity, we increased the cap to $20.0 million for the months of July, August, September, and October 2018, and to $30.0 million for the months of November 2018 through January 2019.

Shares of our common stock are currently being offered in our private offering at ~~$81.00 per share, provided that the per share offering price may be adjusted quarterly by the committee of our board of directors comprised of our independent directors (“IDC”) based on~~ the Determined Share Value (as defined below)~~, which is based on input from management, and such other factors as our IDC may consider.~~ of $86.00 per share. For the nine months ended September 30, ~~2017,~~ 2018, we sold ~~3.2 million~~2.27 million shares of our common stock in our private offering, including ~~0.4~~0.47 million shares of common stock issued pursuant to our ~~Distribution Reinvestment Plan (“DRIP”),~~DRIP, for gross offering proceeds of approximately ~~$249.6~~$186.3 million. In addition, we issued 194,035 membership units valued at $15.8 million during the nine months ended September 30, 2018. We intend to use substantially all of the net proceeds from our private offering, supplemented with additional borrowings, to continue to invest in additional net leased ~~properties. We conduct our private offering in reliance upon the exemption from registration under the~~properties and for general corporate purposes. See Part II, Item 2. “Unregistered Sales of Equity Securities ~~Act~~and Use of ~~1933, as amended (the “Securities Act”), provided by Rule 506(c)~~Proceeds” of ~~Regulation D promulgated under the Securities Act.~~this Form 10-Q for further information.

As of September 30, ~~2017,~~2018, there were ~~18.3~~21.08 million shares of our common stock issued and outstanding, and ~~1.5~~1.74 million non-controlling membership units ~~in the Operating Company~~ issued and outstanding. ~~Each outstanding membership unit in the Operating Company is convertible on a one-for-one basis into shares of our common stock, subject to certain limitations.~~

Our principal executive offices are located at 800 Clinton Square, Rochester, New York, 14604, and our telephone number is (585) 287-6500.

FFO and AFFO are performance measures that are not calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We present these non-GAAP measures as we believe certain investors and other users of our financial information use them as part of ~~their evaluation of~~evaluating our historical operating performance. Please see our discussion below under the heading ~~“Net~~Net Income and Non-GAAP Measures (FFO and AFFO),” which includes discussion of the definition, purpose, and use of these non-GAAP measures as well as a reconciliation of each to the most comparable GAAP measure.

We target acquisitions of fee simple interests in individual properties priced between $5 million and $75 million. ~~Portfolios~~Property portfolios that we acquire may be significantly larger, depending on our balance sheet capacity and whether the portfolio is diversified or concentrated by tenant, geography, or brand. Our investment policy (“Investment Policy”) has three primary ~~objectives that drive the investments we make: (1)~~ objectives:

We primarily acquire freestanding, single-tenant commercial properties located in the United States either directly from our credit-worthy tenants in sale-leaseback transactions, where they sell us their properties and simultaneously lease them back through long-term, ~~triple-net~~net leases, or through the purchase of properties already under a ~~triple-net~~net lease (~~i.e.~~(i.e., a lease assumption). Under either scenario, our properties are generally under lease and fully occupied at the time of acquisition. ~~Our real estate portfolio as of September 30, 2017, is reflective of our Investment Policy, with a~~We focus on properties in growth markets with at least ten years of lease term remaining that ~~will~~are expected to achieve financial returns on equity of greater than ~~10%~~9.5%, net of fees, calculated based on the average return recognized across all acquisitions during a calendar year, provided that all acquisitions must have a minimum remaining lease term of seven years and a minimum return on equity of 9.5%, unless approved by our IDC. Subsequent to quarter end, we updated our Investment Policy to require a 9.5% minimum return on equity, net of fees, calculated based on the average return recognized across all acquisitions during a calendar year, with a minimum required return of 8.5%, net of fees, ~~for any particular transaction. The IDC~~unless otherwise approved ~~this update following~~by the regular annual review of our Investment Policy at the November 2017 meeting of our board of directors. We believe the changes will allow us greater flexibility in deploying capital in investment opportunities that maximize the risk-adjusted return to our shareholders.Independent Directors Committee. Our criteria for selecting properties ~~(“Property Selection Criteria”) is~~are based on ~~three pillars of~~the following underwriting ~~evaluation:~~principles:

We believe we can achieve an appropriate risk-adjusted return through these ~~pillars~~underwriting principles and conservatively project a property’s potential to generate targeted returns from current and future cash flows. We believe targeted returns are achieved through a combination of in-place income at the time of acquisition, rent growth, and a property’s potential for appreciation.

To achieve an appropriate risk-adjusted return, we maintain a diversified portfolio of real estate spread across multiple tenants, industries, and geographic locations. The following charts summarize our portfolio diversification by ~~industry~~property type and geographic location as of September 30, ~~2017.~~2018. The percentages below are calculated based on our contractual rental revenue over the next twelve months (“NTM Rent”), as of September 30, 2018, on a per property type basis divided by total NTM Rent. Late payments, non-payments or other unscheduled payments are not considered in the calculation. NTM Rent includes the impact of contractual rent ~~escalations, excluding any potential variable rent increases that are based on consumer price index (“CPI”) and/or the tenants’ sales volume.~~escalations.

Substantially all of our leases are triple-net, meaning that our tenants are responsible for the maintenance, insurance, and property taxes associated with the properties they lease from us. Since inception and at

At September 30, ~~2017,~~2018, all of our properties are subject to leases, substantially all of which are net leases. We do not currently engage in the development of real estate, which could cause a delay in timing between the funds used to invest in properties and the corresponding cash inflows from rental receipts. Our cash flows from operations are primarily generated through our real estate investment portfolio and the monthly lease payments under our long-term leases with our tenants.To increase value to our stockholders, we strive to implement periodic rent escalations within our leases.

Due to the fact that all of our properties are leased to single tenants under long-term leases, we are not currently required to perform significant ongoing leasing activities on our properties. The leases for only ~~two~~eight of our properties, representing less than 1% of our annual rental streams (calculated based on NTM Rent), will expire before ~~2020.~~2021. As of September 30, ~~2017,~~2018, the weighted average remaining term of our leases (calculated based on NTM Rent) was approximately ~~13.2~~12.8 years, excluding renewal options which are exercisable at the option of our tenants upon expiration of their base lease term. Less than 5% of the properties in our portfolio are subject to leases without at least one renewal option. Furthermore, the weighted average lease term on the ~~$159.2~~$365.3 million in properties acquired during the ~~three~~nine months ended September 30, ~~2017,~~2018, was ~~13.0 years. Over 50%~~14.0 years at the time of acquisition. More than 56% of our rental revenue is from leases that expire during 2030 and thereafter. As of September 30, ~~2017,~~2018, not more than ~~10%~~9% of our rental revenue is derived from leases that expire in any single year in the decade between 2020 and 2030. The following chart sets forth our lease expirations based upon the terms of our leases in place as of September 30, ~~2017.~~2018.

The following table presents the lease expirations by year, including the number of tenants and properties with leases expiring, the square footage covered by the leases expiring, the NTM Rent, and the percentage of NTM Rent for the leases expiring. Late payments, non-payments, or other unscheduled payments are not considered in the NTM Rent amounts. NTM Rent includes the impact of contractual rent ~~escalations, excluding any potential variable rent increases that are based on CPI and/or the tenants’ sales volume.~~escalations. Amounts are in thousands, except the number of tenants and properties.

Year

Number of
Tenants

Number of
Properties

Square
Footage

NTM Rent

Percentage of
NTM Rent

2017

—

—

—

$
—

—
%
2018

1

1

2

131

<0.1
%
2019

1

1

2

117

<0.1
%
2020

3

4

116

1,376

0.8
%
2021

2

4

9

576

0.3
%
2022

3

3

87

2,393

1.4
%
2023

9

13

724

6,786

4.0
%
2024

12

15

1,741

13,933

8.2
%
2025

2

8

28

1,034

0.6
%
2026

17

27

620

9,964

5.9
%
2027

16

30

1,210

14,785

8.8
%
2028

12

22

1,025

11,184

6.6
%
2029

12

54

2,483

15,623

9.2
%
2030 and thereafter

61

295

6,015

91,023

53.9
%

Our top tenants and brands at September 30, ~~2017,~~2018, are listed in the tables below. The percentages are calculated based on our NTM Rent on a per property type basis divided by total NTM Rent. Late payments, non-payments, or other unscheduled payments are not considered in the calculation. NTM Rent includes the impact of contractual rent ~~escalations, excluding any potential variable rent increases that are based on CPI and/or the tenants’ sales volume.~~escalations.

Tenant	Property Type	% NTM Rent			Properties		Property Type	% NTM Rent			Properties
Art Van Furniture, LLC							Retail		3.7	%		10
Red Lobster Hospitality LLC & Red Lobster Restaurants LLC	Retail		4.3	%		25	Retail		3.4	%		25
Art Van Furniture, LLC	Retail		3.9	%		9
Jack’s Family Restaurants LP	Retail		3.4	%		36
Outback Steakhouse of Florida, LLC⁽¹⁾	Retail		3.1	%		24
Big Tex Trailer Manufacturing Inc.	Industrial/Retail		2.7	%		17
Jack's Family Restaurants LP							Retail		2.7	%		36
Outback Steakhouse of Florida LLC ⁽¹⁾							Retail		2.5	%		24
Krispy Kreme Doughnut Corporation							Industrial/Retail		2.2	%		26
Big Tex Trailer Manufacturing, Inc.							Industrial/Retail/Office		2.1	%		17
Siemens Medical Solutions USA, Inc. & Siemens Corporation	Industrial		2.6	%		2	Industrial		2.1	%		2
Nestle' Dreyer's Ice Cream Company	Industrial		2.5	%		1	Industrial		2.0	%		1
Nationwide Mutual Insurance Company	Other		2.3	%		2
Arkansas Surgical Hospital LLC	Healthcare		2.3	%		1
Bob Evans Restaurants, LLC	Retail		2.2	%		25
WendPartners & Subsidiaries							Retail		1.9	%		28
Arkansas Surgical Hospital, LLC							Healthcare		1.8	%		1
Total Top Ten									24.4	%		170
All Other									75.6	%		413
Total			29.3	%		142			100.0	%		583
All Other			70.7	%		335

Brand	Property Type	% NTM Rent			Properties		Property Type	% NTM Rent			Properties
Art Van Furniture							Retail		3.7	%		10
Bob Evans Farms⁽¹⁾	Industrial/Retail		4.3	%		27	Industrial/Retail		3.4	%		27
Red Lobster	Retail		4.3	%		25	Retail		3.4	%		25
Art Van Furniture	Retail		3.9	%		9
Wendy's							Retail		2.7	%		41
Jack's Family Restaurants	Retail		3.4	%		36	Retail		2.7	%		36
Taco Bell	Retail		3.1	%		41	Retail		2.4	%		41
Wendy's	Retail		2.9	%		35
Krispy Kreme							Industrial/Retail		2.2	%		26
Outback Steakhouse	Retail		2.8	%		22	Retail		2.2	%		22
Big Tex Trailers	Industrial/Retail		2.7	%		17	Industrial/Retail/Office		2.1	%		17
Siemens	Industrial		2.6	%		2	Industrial		2.1	%		2
Nestle'	Retail		2.5	%		1
Total Top Ten									26.9	%		247
All Other									73.1	%		336
Total			32.5	%		215			100.0	%		583
All Other			67.5	%		262

As previously mentioned, the IDC approved certain updates to our Investment Policy following the regular annual review of the policy at the November 2017 meeting of our board of directors. As updated, our Investment Policy generally requires us to seek diversification of our investments. Based on the aggregate NTM rent of the properties in the portfolio, determined as of the date of the prior quarter end, new investments may not cause us to exceed:

We may exceed these diversification targets from time to time with the approval of the IDC. To avoid undue risk concentrations in any single asset class or category, long-term asset allocation will be set with the following target percentages and within the following ranges, although these ranges may be temporarily waived by the IDC:

Our Investment Policy provides the Asset Manager with the authority to make any acquisition or sale of any property or group of related properties involving up to $50 million for any single or portfolio transaction, $75 million per cumulative tenant concentration, or $100 million per cumulative brand concentration on our behalf, without approval of the IDC, provided that any properties so acquired otherwise meet our Investment Policy and Property Selection Criteria, and any financing related to any such acquisitions does not violate our Leverage Policy (as defined below), as such are established by the IDC from time to time. Our Investment Policy permits investments in properties that do not otherwise meet our Investment Policy or Property Selection Criteria with the approval of the IDC.

~~In March of 2016,~~ Moody’s ~~Investors Service~~Investor Services (“Moody’s”) has assigned the Operating Company an investment grade credit rating of Baa3 with a stable ~~outlook. Moody’s re-affirmed the investment grade credit rating in March 2017. The investment grade credit rating allowed~~outlook, which allows us to take advantage of preferential borrowing margins ~~on our outstanding debt, including the $800 million credit facility we entered into on June 23, 2017. The investment grade credit ratings will also allow us~~and provides more attractive access to the debt ~~private placement~~ markets. The rating is based on a number of factors, including an assessment of our financial strength, portfolio size and diversification, credit and operating metrics, corporate governance policies, and sustainability of cash ~~flow~~flows and earnings. We are strongly committed to maintaining modest leverage, commensurate with our investment grade rating. While Moody’s utilizes other factors outside of our leverage ratio, our leverage policy (“Leverage Policy”) is to maintain a leverage ratio in the 35% to 45% range based on the approximate market value of assets, recognizing that the actual leverage ratio will vary over time and there may be opportunistic reasons to exceed a 45% leverage ratio; provided, however, that we cannot exceed a 50% leverage ratio without the approval of the ~~IDC.~~Independent Directors Committee.

The Independent Directors Committee reviews our Leverage Policy at least annually; however, depending on market conditions and other factors, they may change our Leverage Policy from time to time.

To reduce its exposure to ~~variable rate~~variable-rate debt, the Operating Company enters into interest rate swap agreements to fix the rate of interest as a hedge against interest rate fluctuations. These interest rate hedges have staggered maturities to reduce the exposure to interest rate fluctuations in any one year, and generally extend up to 10 years. The interest rate swaps are applied against a pool of debt, which offers flexibility in maintaining our hedge designation concurrent with our ongoing capital ~~market~~markets activity. We attempt to limit our total exposure to ~~floating rate~~floating-rate debt to no more than 5% of the approximate market value of total assets, measured at quarter end.

During the nine months ended September 30, 2017, we added $150 million of unsecured Senior Notes (as defined below) to our capital structure. The Senior Notes bear interest at a fixed of 4.84% per annum, with a 10 year maturity. We strategically ~~used this channel of long-term, fixed rate~~use the fixed-rate, debt ~~capital~~private placement market to help mitigate interest rate risk, lengthen our maturity profile, and diversify our sources of debt capital.

~~The IDC reviews our Leverage Policy at least annually, however, depending on market conditions and other factors, they may change our Leverage Policy from time to time.~~At September 30, 2018, we had $475.0 million of unsecured senior notes outstanding.

As of September 30, ~~2017,~~2018, our total outstanding indebtedness was ~~$910.1~~$1,310.3 million, and the ratio of our total indebtedness to the approximate market value of our assets was ~~approximately 36.5%~~40.3%.

Our shares of common stock are sold by us in our ongoing private offering at a price equal to a determined share value (the “Determined Share Value”), which is established quarterly by the ~~IDC~~Independent Directors Committee based on the net asset value (“NAV”) of our portfolio, input from management and third-party consultants, and such other factors as the ~~IDC~~Independent Directors Committee may determine. Shares of our common stock are also sold pursuant to our DRIP, and repurchased by us pursuant to our share redemption program, at a price based upon the Determined Share Value. For additional information regarding our valuation policy and procedures, please see the section titled “Determined Share Value” in Part II, Item 15. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of our Form ~~10.~~10-K. The following table presents our Determined Share Value for each period indicated below, together with the corresponding NAV per diluted share as of the preceding ~~quarter-end:~~quarter end:

The adjustments to NAV per diluted share in arriving at the Determined Share Value for the periods presented above account for the inherent imprecision in the valuation estimates. In February ~~2018,~~2019, the ~~IDC~~Independent Directors Committee will review the NAV per diluted share calculations as of December 31, ~~2017,~~2018, and will assess whether adjustments to the current Determined Share Value of ~~$81.00~~$86.00 are appropriate.

The following table provides a breakdown of the major components of our estimated NAV and NAV per diluted share amounts as of September 30, ~~2017~~2018, and June 30, ~~2017~~2018 (in thousands, except per share amounts):

NAV as of:	September 30, 2017			June 30, 2017
NAV component:							September 30, 2018			June 30, 2018
Investment in rental property	$	2,502,140		$	2,351,989		$	3,214,063		$	3,100,313
Debt		(909,416	)		(883,112	)		(1,259,645	)		(1,251,104	)
Other assets and liabilities, net		1,348			34,790			(263	)		10,548
NAV	$	1,594,072		$	1,503,667		$	1,954,155		$	1,859,757
Number of outstanding shares, including noncontrolling interests	$	19,790		$	18,820			22,814			21,976
NAV per share	$	80.55		$	79.90
NAV per diluted share							$	85.66		$	84.63

The following table details the implied market capitalization rates (shown on a weighted average basis) used to value the investment in rental property, by property type, as of September 30, ~~2017~~2018, and June 30, ~~2017,~~2018, supporting the Determined Share Value in effect for the periods of November 1, ~~2017~~2018, through January 31, ~~2018,~~2019, and August 1, ~~2017~~2018, through October 31, ~~2017,~~2018, respectively:

While we believe our assumptions are reasonable, a change in these assumptions would impact the calculation of the value of our real estate investments. For example, assuming all other factors remain unchanged, an increase in the weighted average implied market capitalization rate used as of September 30, ~~2017,~~2018, of 0.25%, would result in a decrease in the fair value of our investment in rental property of 3.6%, and our NAV per diluted share would have been ~~$76.03.~~$80.64. Conversely, a decrease in the weighted average implied market capitalization rate used as of September 30, 2018, of 0.25% would result in an increase in the fair value of our investment in rental property of 3.8%, and our NAV per diluted share would have been $91.06.

At its November ~~7, 2017,~~2, 2018, meeting, our board of directors declared monthly distributions of ~~$0.415~~$0.43 per share of our common stock and unit of membership interest in the Operating Company to be paid by us to our stockholders and members of the Operating Company (other than us) of record ~~prior to the end of November 2017, December 2017, and January 2018:~~as follows:

Dividend Per Share/Unit

Record Date

Payment Date

(on or before)

Dividend Per Share/Unit

Record Date

Payment Date

(on or before)

0.415

November 29, 2017

December 15, 2017

0.43

November 29, 2018

December 14, 2018

0.415

December 28, 2017

January 15, 2018

0.43

December 28, 2018

January 15, 2019

0.415

January 30, 2018

February 15, 2018

0.43

January 30, 2019

February 15, 2019

Investors may purchase additional shares of our common stock by electing to reinvest their distributions through our DRIP. ~~The purchase price for~~Cash distributions will be reinvested in additional shares of ~~our~~ common stock ~~acquired through~~pursuant to our DRIP ~~will be~~at a per share price equal to 98% of the ~~then-current~~ Determined Share ~~Value.~~Value as of the applicable distribution date. Please refer to the section titled Distribution and Distribution Reinvestment in Item ~~11. “Description~~5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of ~~Registrant’s Securities to Be Registered~~”Equity Securities” of our Form 1010-K, for additional discussion of our DRIP.

The following table summarizes distributions paid in cash and pursuant to our DRIP for the nine months ended September 30, ~~2017~~2018 (in thousands).

Month	Year	Cash Distribution - Common Stockholders		Cash Distribution - Membership Units		Distribution Paid Pursuant to DRIP on Common Stock ⁽¹⁾		Distribution Paid Pursuant to DRIP on Membership Units ⁽¹⁾		Total Amount of Distribution		Year	Cash Distribution - Common Stockholders		Cash Distribution - Membership Units		Distribution Paid Pursuant to DRIP on Common Stock ⁽¹⁾		Distribution Paid Pursuant to DRIP on Membership Units ⁽¹⁾		Total Amount of Distribution
January	2017	$	3,319	$	488	$	2,738	$	98	$	6,643	2018	$	4,021	$	536	$	3,769	$	123	$	8,449
February	2017		3,394		488		2,836		98		6,816	2018		4,029		521		3,839		123		8,512
March	2017		3,522		493		2,972		99		7,086	2018		4,201		539		4,052		128		8,920
April	2017		3,555		493		3,068		99		7,215	2018		4,267		540		4,084		127		9,018
May	2017		3,618		493		3,167		99		7,377	2018		4,331		536		4,106		127		9,100
June	2017		3,680		493		3,220		99		7,492	2018		4,386		602		4,154		128		9,270
July	2017		3,742		493		3,296		99		7,630	2018		4,382		602		4,255		127		9,366
August	2017		3,815		512		3,378		122		7,827	2018		4,393		617		4,333		130		9,473
September	2017		3,883		512		3,420		123		7,938	2018		4,386		618		4,463		130		9,597
TOTAL		$	32,528	$	4,465	$	28,095	$	936	$	66,024		$	38,396	$	5,111	$	37,055	$	1,143	$	81,705

The following table summarizes our distributions paid during the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, including the source of distributions and a comparison against FFO (in thousands).

	For the nine months ended				For the nine months ended
	September 30,				September 30,
	2017		2016		2018		2017
Distributions:
Paid in cash	$	37,929	$	31,229	$	44,650	$	37,929
Reinvested in shares		28,095		19,781		37,055		28,095
Total Distributions	$	66,024	$	51,010	$	81,705	$	66,024
Source of Distributions:
Cash flow from operating activities	$	66,024	$	51,010	$	81,705	$	66,024
Cash flow from investing activities		—		—
Cash flow from financing activities		—		—
Total Sources of Distributions	$	66,024	$	51,010
FFO	$	79,974	$	55,658	$	114,188	$	79,974

For the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, we paid distributions from our cash flow from operating activities. Refer to “Net Income and Non-GAAP Measures (FFO and AFFO)” below for further discussion of our FFO.

We intend to fund future distributions from cash generated by operations; however, we may fund distributions from the sale of assets, borrowings, or proceeds from the sale of our securities.

The following table sets forth the redemption requests honored pursuant to our share redemption program during the three and nine months ended September 30, 2017. We did not defer or reject any redemption requests during this period. Please refer to Item 11. “~~Description of Registrant’s Securities to Be Registered” of our Form 10 for additional discussion of our share redemption program.~~

We acquire real estate with a combination of debt and equity capital and with cash from operations that is not otherwise distributed to our stockholders. Our focus is on maximizing the risk-adjusted return to our ~~shareholders~~stockholders through an appropriate balance of debt and equity in our capital structure. Therefore, we attempt to maintain a conservative debt level on our balance sheet with appropriate interest and fixed charge coverage ratios. We target a leverage ratio with total debt equal to 35% to 45% of the approximate market value of our assets. We believe our current leverage model has allowed us to take advantage of the lower cost of debt while simultaneously strengthening our balance sheet, as evidenced by the Operating Company’s investment grade credit ~~rating the Operating Company received in March of 2016 and re-affirmed in March of 2017. The~~rating. Our actual leverage ratio will vary over time but may not exceed 50% without the approval of the ~~IDC.~~Independent Directors Committee. As of September 30, ~~2017,~~2018, the leverage ratio was ~~approximately 36.5%~~40.3% of the approximate market value of our assets. From a management perspective and in communications with the credit rating agencies, we also consider our leverage position as a multiple of Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”), a non-GAAP financial measure. EBITDA is a tool we use to measure leverage in the context of our cash flow expectations and projections. ~~Furthermore,~~However, given the significance of our recent growth, ~~over the past two years,~~ adding ~~$352.0~~$365.3 million in investments during the nine months ended September 30, 2018, $683.6 million in investments during 2017, and $518.8 million in investments during 2016, ~~and $550.1 million in investments during 2015,~~ coupled with our continued strategic growth initiatives, historical EBITDA may not provide investors with an adequate picture of the contractual cash in-flows associated with these investments. Our investments are typically made throughout the year (with a significant portion typically occurring in the second half of the year), and therefore the full year, or ~~“normalized”~~“normalized,” cash flows will not be realized until subsequent years. Accordingly, we look at contractual, “normalized,” cash flows and EBITDA as an appropriate tool to manage our leverage profile. We utilize this analysis inclusive of our focus on debt-to-market value metrics.

Our equity capital for our real estate acquisition activity is provided from the proceeds of our ongoing private offering, including distributions reinvested through our DRIP. During the three and nine months ended September 30, 2017, we raised $79.2 million and $249.6 million, respectively, in equity capital to be used in our acquisition activities, including distributions reinvested through our DRIP and properties exchanged for membership units in the Operating Company through UPREIT transactions. We seek to maintain an appropriate balance of debt and equity capital in our overall leverage policy, while maintaining a focus on increasing core value for existing stockholders (achieved via share appreciation and earnings growth). Our debt capital is provided through unsecured term notes, revolving debt facilities, and senior unsecured notes. We also, from time to time, obtain non-recourse mortgage financing from banks and insurance companies secured by mortgages on the corresponding specific property. Mortgages, however, are not a strategic focus of the active management of our leverage profile. Rather, we enter into mortgages and notes payable as ancillary business transactions on an as-needed basis.

To reduce our exposure to variable rate debt, the Operating Company enters into interest rate swap agreements to fix the rate of interest as a hedge against interest rate fluctuations. These interest rate hedges have staggered maturities up to ten years in duration in order to reduce the exposure to interest rate fluctuations in any one year. The interest rate swaps are applied against a pool of debt, which offers flexibility in maintaining our hedge designation concurrent with our ongoing capital market activity. We attempt to limit our total floating rate debt exposure to no more than 5% of total assets, measured at quarter end. To reduce counterparty concentration risk with respect to the interest rate hedges, we diversify the institutions that serve as swap counterparties. No more than 30% of the nominal value of our total hedged debt may be with any one institution, to be measured at the time we enter into an interest rate swap transaction and at quarter end. We may deviate from these policies from time-to-time subject to the approval of the IDC. The interest rate swaps are considered cash flow hedges. Under these agreements, we receive monthly payments from the counterparties equal to the variable interest rates multiplied by the outstanding notional amounts. In turn, we pay the counterparties each month an amount equal to a fixed rate multiplied by the outstanding notional amounts. The intended net impact of these transactions is that we pay a fixed interest rate on our variable rate borrowings.

We also mitigate interest rate risk by strategically adding long-term, fixed rate debt to our capital structure. During the nine months ended September 30, 2017, we added $150 million of unsecured Senior Notes (as defined below) to our capital structure. The Senior Notes bear interest at a fixed rate of 4.84% per annum, with a 10 year maturity.

The availability of debt to finance commercial real estate can be impacted by economic and other factors that are beyond our control. We seek to reduce the risk that long-term debt capital may be unavailable to us by strengthening our balance sheet through our investments in real estate with credit-worthy tenants and lease guarantors, and maintaining an appropriate mix of debt and equity capitalization. Specifically, we recognized a 100% collection rate on rentals during 2016, and over a 99% collection rate on rentals during the nine months ended September 30, 2017. Additionally, Moody’s issued an investment grade credit rating of Baa3 to the Operating Company in March 2016, further evidencing our active management of a conservative capital structure. Moody’s re-affirmed the investment grade credit rating in March 2017. We have arranged our debt facilities to have multiple year terms in order to reduce the risk that short-term real estate financing would not be available to us in any given year. As we grow our real estate portfolio, we also intend to manage our debt maturities to reduce the risk that a significant amount of our debt will mature in any single year in the future. Refer to “Contractual Obligations” below for further details of the maturities on our contractual obligations, including long-term debt.

As of September 30, 2017, the historical cost basis of our real estate investment portfolio totaled $1.9 billion, consisting of investments in 477 properties with rent and interest due from our tenants aggregating $14.7 million per month on a straight-line basis. During the nine months ended September 30, 2017, we closed 14 real estate acquisitions totaling $352.0 million, adding 70 new properties to our portfolio. The 70 new properties will provide approximately $2.6 million in monthly rent on a straight-line basis. Substantially all of our cash from operations is generated by our real estate portfolio.Liquidity

Our primary cash expenditures are the monthly interest payments we make on the debt we use to finance our real estate investment portfolio, asset management and property management fees offor servicing the portfolio, acquisition expenses related to the growth of our portfolio, and the general and administrative expenses of operating our business. Since substantially all of our leases are ~~triple-net,~~net leases, our tenants are generally responsible for the maintenance, insurance, ~~and~~ property taxes and capital costs associated with the properties they lease from us. In certain circumstances, the terms of the lease require us to pay these expenses, however, in most cases we are reimbursed by the tenants. Accordingly, we do not currently anticipate making significant capital expenditures or incurring other significant property costs during the term of a property lease, unless we incur substantial vacancies. To the extent that we have vacant properties, we will incur certain costs to operate and maintain the properties, however, we do not currently expect these costs to be material. ~~For~~

As shown in the table below, net cash provided by operating activities increased by approximately $21.1 million, to $93.5 million for the nine months ended September 30, ~~2017, we maintained a 100% leased portfolio, with~~2018, from $72.4 million for the ~~leases for only two~~nine months ended September 30, 2017. The increase in cash provided by operating activities is primarily due to the increase in the size of our ~~properties, representing less than 1%~~real estate investment portfolio. Our real estate investing activities have grown in volume as we continue to identify favorable investment opportunities. We funded real estate investment activity with a combination of proceeds from the issuance of unsecured debt obligations and from the issuance of common stock. We paid cash dividends to our stockholders and holders of non-controlling membership units, net of reinvestments through our DRIP, totaling $45.0 million and $38.2 million for the nine months ended September 30, 2018 and 2017, respectively. Cash used to fund the increase in dividends between periods related primarily to the increase in cash provided by our operations. Cash and cash equivalents and restricted cash totaled $28.0 million and $14.6 million at September 30, 2018, and 2017, respectively.

As of September 30, 2018, the historical cost basis of our ~~annual rental streams (calculated based~~real estate investment portfolio totaled $2.49 billion, consisting of investments in 583 properties with rent and interest due from our tenants aggregating $18.5 million per month on ~~NTM Rent), expiring before 2020.~~a straight-line basis and $16.4 million per month in monthly cash inflows for the first nine months of the year. During the nine months ended September 30, 2018, we closed 15 real estate acquisitions totaling $365.3 million, excluding capitalized acquisition expenses, adding 70 new properties to our portfolio. The new properties will provide approximately $2.4 million in monthly rent on a straight-line basis and $2.1 million in monthly cash rents. Substantially all of our cash from operations is generated by our real estate portfolio.

We intend to continue to grow through additional real estate investments. To accomplish this objective, we must continue to identify ~~real estate~~ acquisitions that are consistent with our underwriting guidelines and raise additional ~~future~~ debt and equity capital. We have financed our acquisition of properties using ~~both equity investments as well as~~ a combination of equity investments, unsecured term loans, revolving debt, senior unsecured notes, and mortgage loans. We seek to maintain an appropriate balance of debt and equity capital in our overall leverage policy, while maintaining a focus on increasing core value for existing stockholders (achieved via earnings growth and share price appreciation).

The mix of financing sources may change over time based on market conditions and our liquidity needs. The availability of debt to finance commercial real estate can be impacted by economic and other factors that are beyond our control. We ~~have three outstanding unsecured term loans~~seek to reduce the risk that long-term debt capital may be unavailable to us by strengthening our balance sheet through our investments in real estate with credit-worthy tenants and lease guarantors and maintaining an ~~outstanding principal balance~~appropriate mix of ~~approximately $725.0 million as of~~debt and equity capitalization. Specifically, we recognized a 99+% collection rate on rentals during 2017 and for the nine months ended September 30, ~~2017,~~2018. Moody’s assignment and ~~a $400.0 million line~~reaffirmations of ~~credit with $126.5 million of outstanding borrowings as of September 30, 2017.~~

~~On April 18, 2017, the Operating Company closed the issuance of unsecured, fixed rate, guaranteed senior promissory notes (“Senior Notes”) with~~ an aggregate principal amount of $150 million. The Senior Notes were issued by the Operating Company and upon issuance, were guaranteed by us and each of the Operating Company’s subsidiaries that guarantee our other unsecured credit facilities. The Senior Notes were issued at par, bear interest at a rate of 4.84% per annum (priced at 240 basis points above the 10 year U.S. Treasury yield at the time of pricing), and mature on April 18, 2027. We used the proceeds from the sale of the Senior Notes to pay down $115 million of the outstanding balance on our existing line of credit (the “Revolver”) at the time of closing and to fund other general corporate purposes, including acquisitions. The financial covenants associated with the Senior Notes are materially consistent with the covenant tables set forth below.

On June 23, 2017, together with the Operating Company, we closed on an $800 million unsecured credit facility (the “Credit Facility”). The Credit Facility contains an accordion feature that can increase the facility size up to a total of $1.0 billion, and includes (i) a $400 million senior unsecured revolving credit facility (the “New Revolver”), (ii) a five and a half year, $250 million senior unsecured delayed draw term loan (the “5.5-Year Term Loan”), and (iii) a seven year, $150 million senior unsecured delayed draw term loan (the “7-Year Term Loan”). The following table summarizes the amounts drawn and available to be drawn on the Credit Facility upon closing (in thousands).

At closing, we borrowed $250 million under the 5.5-Year Term Loan and drew down $90 million on the New Revolver. We used the proceeds from these borrowings to pay off our $100 million term note (“Term Note 1”), our $185 million term note (“Term Note 2”), the outstanding balance of $5 million on our Revolver, and to pay down $50 million of the outstanding borrowings on our $375 term note (“Term Note 3”). The $50 million payment on Term Note 3 was made via a one-time, non-pro rata payment provision included in our amended and restated Term Note 3 agreement, which was amended and restated simultaneously with the closing of the Credit Facility to align its terms with the Credit Facility. We did not draw down funds from the 7-Year Term Loan at closing. The remaining capacity on the Credit Facility will also be used to partially fund future acquisition activity in our real estate portfolio, and for general corporate purposes. Prior to extension options, Term Note 1 and the Revolver were set to mature on June 27, 2017, and Term Note 2 was set to mature on October 11, 2018.

~~Included in the terms of the Credit Facility and through our amendment and restatement of Term Note 3, we removed the subsidiary guarantees supporting our term notes and Senior Notes.~~

Our $400 million New Revolver matures on January 21, 2022, with one extension option for an additional five month period through June 21, 2022, subject to certain conditions set forth in the Credit Facility, including payment of an extension fee equal to 0.0625% of the revolving commitments. The rate of interest payable on the New Revolver, at our option, is equal to LIBOR plus a margin. The margin for New Revolver borrowings is adjustable based upon the Operating Company’s credit rating and is between 0.825% and 1.55% per annum. Based on the Operating Company’s current investment grade credit rating of Baa3 the applicable margin for the New Revolver equals 1.2% per annum. Borrowings under the New Revolver are payable interest only during the term, with the principal amount due in full at maturity. As of September 30, 2017, and at closing on June 23, 2017, there were $126.5 million and $90 million, respectively, in outstanding LIBOR borrowings under the New Revolver. As of September 30, 2017, $28 million of the total $126.5 million outstanding New Revolver borrowings were in the form of swingline borrowings, which allow us to draw down funds on the New Revolver immediately upon request. The swingline borrowings are short-term in nature, with a maturity date equal to five business days after draw. As of September 30, 2017, we expect to replace the $28 million in swingline borrowings with New Revolver borrowings. Should the Operating Company lose its investment grade credit rating, the margin would be 1.55% until such time as the Operating Company regains its investment grade credit rating. The current margin on the New Revolver of 1.2% represents a 25 basis point reduction from the margin of 1.45% on the previous Revolver, prior to consideration of the applicable facility fee discussed below. The following table presents the margins on the New Revolver based on credit ratings from S&P or Moody’s.

An applicable facility fee is payable on the amount of the revolving commitments, as defined in the Credit Facility, based on the Operating Company’s credit rating. The initial applicable facility fee equals 0.25% per annum. The previous Revolver contained an unused commitment fee. The following table presents the applicable facility fee on the New Revolver based on credit ratings from S&P or Moody’s.

Our $250 million 5.5-Year Term Loan matures on January 23, 2023, and was fully drawn as of June 30, 2017. Borrowings under the 5.5-Year Term Loan bear interest at variable rates based on LIBOR plus a margin ranging from 0.90% to 1.75% based on the Operating Company’s credit rating. Based on the Operating Company’s current investment grade credit rating of Baa3, the applicable margin under the 5.5-Year Term Loan equals 1.35% per annum. As compared to the applicable margin for Term Note 1 and Term Note 2 of 1.45% and 1.75%, respectively, the applicable margin of 1.35% on the 5.5-Year Term Loan represents a 10 basis point and 40 basis point reduction, respectively. Borrowings under the 5.5-Year Term Loan are payable interest only during the term, with the principal amount due in full at maturity. The following table presents the margins on the 5.5-Year Term Loan.

Our $150 million 7-Year Term Loan matures on June 21, 2024. We are permitted to request up to three borrowings under the delayed draw feature of the 7-Year Term Loan, which may be drawn from June 23, 2017, to but excluding June 22, 2018. As of September 30, 2017, we have not drawn upon the 7-Year Term Loan. The rate of interest payable on the 7-Year Term Loan is equal to LIBOR plus a margin. The margin for 7-Year Term Loan borrowings is adjustable based upon the Operating Company’s credit rating and is between 1.5% and 2.45% per annum. Based on the Operating Company’s current investment grade credit rating of Baa3, the initial margin under the 7-Year Term Loan equals 1.9% per annum. A ticking fee is payable on the amount of the commitments for the 7-Year Term Loan, as reduced by the amount of any term loans outstanding under the 7-Year Term Loan, equal to 0.25% per annum. Borrowings under the 7-Year Term Loan are payable interest only during the term, with the principal amount due in full at maturity. The following table presents the margins on the 7-Year Term Loan based on credit ratings from S&P or Moody’s.

Our $325 million Term Note 3 matures on February 6, 2019, was fully drawn as of September 30, 2017, and provides for two one year extension options, at our option, subject to compliance with all covenants and the payment of a 0.10% fee. The Term Note 3 agreement contains an accordion feature that can increase the note size up to a total of $600 million. Borrowings under Term Note 3 originally bore interest at variable rates based on the one month LIBOR plus a margin. Moody’s assignment of an investment grade credit rating to the Operating Company ~~led~~is further evidence of our active management of a conservative capital structure. As we grow our real estate portfolio, we also intend to manage our debt maturities to reduce the risk that a ~~margin~~significant amount of ~~1.40% on~~our debt will come due in any single year. For example, during the third quarter of 2018, we repaid a portion of our Revolver and 2015 Unsecured Term ~~Note 3, effective April 1, 2016. Should the Operating Company lose its investment grade credit rating, the margin would be 1.75% until such time~~Loan Agreement (each as ~~the Operating Company regains its investment grade credit rating. The following tables present the margins on Term Note 3 based on credit ratings from S&P or Moody’s.~~defined below), replacing those borrowings with a portion of our longer maturity Series B Notes and Series C Notes (as defined below). Refer to Contractual Obligations below for further details regarding our long-term debt maturities.

The Operating Company achieved its investment grade credit rating based on our conservative leverage profile, diversified portfolio, and earnings stability based on the credit-worthiness of our tenants, which we intend to maintain concurrent with our growth objectives. Factors that could negatively impact our credit rating include, but are not limited to: a significant increase in our leverage on a sustained ~~basis;~~basis, a significant increase in secured debt ~~levels;~~levels, a significant decline in our unencumbered asset ~~base;~~base, weakening of our corporate governance ~~structure;~~structure, and a significant decline in our portfolio diversification. We have aligned our strategic growth priorities with these factors, as we believe the favorable debt pricing and access to additional sources of debt capital resulting from the investment grade credit rating, ~~provides~~provide us with an advantageous cost of capital and risk-adjusted return on investment for our stockholders.

Our debt capital is provided through unsecured term notes, revolving debt facilities, and senior unsecured notes. We ~~intend~~also, from time to ~~draw down~~time, obtain non-recourse mortgage financing from banks and insurance companies secured by mortgages on the ~~$150~~corresponding specific property. Mortgages, however, are not a strategic focus of the active management of our leverage profile. Rather, we enter into mortgages and notes payable as ancillary business transactions on an as-needed basis, most often as the result of lease assumption transactions.

On July 2, 2018, we entered into a Note and Guaranty Agreement (the “NGA”) by and among us, as parent guarantor, the Operating Company, as issuer, and the purchasers party thereto (the “Purchasers”). Pursuant to the terms of the NGA, the Operating Company issued and sold to the Purchasers $325.0 million ~~7-Year~~aggregate principal amount of unsecured, fixed-rate, interest-only senior notes in two series: (i) $225.0 million aggregate principal amount of 5.09% Series B Guaranteed Senior Notes (the “Series B Notes”), and (ii) $100.0 million aggregate principal amount of 5.19% Series C Guaranteed Senior Notes (the “Series C Notes”).

Pursuant to the NGA, $100.0 million aggregate principal amount of the Series B Notes were issued on July 2, 2018, and $125.0 million aggregate principal amount were issued on September 13, 2018. The Series B Notes have a 10-year term and mature on July 2, 2028, unless earlier redeemed or prepaid pursuant to the terms of the NGA. The Series B Notes were issued at par and the unpaid balance of the Series B Notes bear interest at a rate of 5.09% per annum (priced at 210 basis points above the 10-year U.S. Treasury yield at the time of pricing). Also pursuant to the NGA, $50.0 million aggregate principal amount of the Series C Notes were issued on July 2, 2018, and $50.0 million aggregate principal amount were issued on September 13, 2018. The Series C Notes have a 12-year term and mature on July 2, 2030, unless earlier redeemed or prepaid pursuant to the terms of the NGA. The Series C Notes were issued at par and the unpaid balance of the Series C Notes bear interest at a rate of 5.19% per annum (priced at 220 basis points above the 10-year U.S. Treasury yield at the time of pricing).

In addition to funding acquisitions during the third quarter, a portion of the net proceeds from the Series B Notes and Series C Notes were used to repay outstanding borrowings under the Revolver (as defined below) as well as $25.0 million of the outstanding principal balance of our 2015 Unsecured Term Loan Agreement (as defined below).

In 2017, together with the Operating Company, we closed on an $880.0 million unsecured credit facility (the “Credit Facility”), comprised of (i) a $425.0 million senior unsecured revolving credit facility (the “Revolver”), (ii) a five-and-a-half-year, $265.0 million senior unsecured delayed draw term loan (the “5.5-Year Term Loan”), and (iii) a seven-year, $190.0 million senior unsecured delayed draw term loan (the “7-Year Term Loan”). The Credit facility contains an accordion feature that can increase the facility size up to a total of $1.0 billion of available capacity. Borrowings under the Credit Facility are payable interest only during the term of the appropriate loan tranche, with the principal amount due in full at maturity. The following table summarizes the amounts drawn and available to be drawn on the Credit Facility as of September 30, 2018 (in thousands, excluding Loan Tranche and Maturity Date).

At September 30, 2018, we ~~acquire additional~~had $225.0 million of unsecured, fixed-rate, interest-only Series B Notes and $100.0 million of unsecured, fixed-rated, interest only Series C Notes outstanding. In addition, we had $150.0 million of unsecured, fixed-rate, interest-only senior promissory notes issued in April 2017 (the “Series A Notes”) outstanding. The Series A Notes bear interest at a fixed rate of 4.84% per annum, and mature in April 2027.

At September 30, 2018 we had outstanding a $300.0 million unsecured term note (“2015 Unsecured Term Loan Agreement”). The 2015 Unsecured Term Loan Agreement matures on February 6, 2019, and provides for two one-year extension options, at our option, subject to compliance with all covenants and the payment of a 0.10% fee. The 2015 Unsecured Term Loan Agreement contains an accordion feature that can increase the note size by up to $275 million.

We are subject to various covenants and financial reporting requirements pursuant to the loan agreements we have entered into. The table below summarizes the applicable financial covenants, which are substantially the same across each of our loan agreements. As of September 30, 2018, we were in compliance with all of our covenants. In the event of default, either through default on payments or breach of covenants, we may be prohibited from paying dividends on our common stock above the annual 90% REIT taxable income distribution requirement. For each of the previous three years, we paid dividends out of our cash flows from operations in excess of the required distribution amounts.

We believe our leverage policy and capital structure provides us with several advantages, including the ability to:

We intend to exercise the extension provisions of ~~the New Revolver and Term Note 3,~~our debt instruments, refinance, or replace the existing borrowings as they become ~~due. The extensions would delay~~due, including via additional private debt placements, all with the ~~New Revolver’s maturities until June 2022, and Term Note 3’s maturity until February 2021. We~~goal of limiting future debt service to interest payments only. As a result, we do not intend to make principal payments on ~~these~~our debt obligations infor the foreseeable ~~future, and plan to replace our existing credit facilities with new debt prior to maturity.~~future. Additionally, we may be required to increase our borrowing capacity to partially fund future acquisitions. We assess market conditions and the availability and pricing of debt on an ongoing basis, which are critical inputs in our strategic planning and ~~decision making~~decision-making process. While we believe the current market conditions provide our stockholders with an advantageous capitalization structure and risk-adjusted return, we believe our conservative capital structure is appropriate to absorb temporary market fluctuations. Significant adverse market conditions could impact the availability of debt to fund future acquisitions, our ability to recognize growth in earnings and return on investment for stockholders, and our ability to recast the debt facilities at cost-advantageous pricing points. In the event of such conditions, we would plan to revise our capitalization structure and strategic initiatives to maximize return on investment for ~~stockholders.~~our investors. To the extent that we are unable to recast our debt facilities, our cash flows from operations will not be adequate to pay the principal amount of debt, and we may be forced to liquidate properties to satisfy our obligations.

We are subject to various covenants and financial reporting requirements pursuant to the loan agreements we have entered into. The table below summarizes the applicable financial covenants, which are substantially the same across each of our loan agreements. As of September 30, 2017, we were in compliance with all of our covenants. In the event of default, either through default on payments or breach of covenants, we may be prohibited from paying dividends on our common stock above the annual 90% REIT taxable income distribution requirement. For each of the previous three years, we paid dividends out of our cash flows from operations in excess of the required distribution amounts.

In connection with our closing of the Credit Facility and amending and restating Term Note 3, we removed the maximum recourse secured indebtedness ratio, minimum tangible net worth requirement, minimum eligible properties, and maximum permitted investments covenants from our term loan and revolving credit agreements. The new debt covenants are characteristic of investment grade credit facilities within the REIT industry.

We believe ~~our leverage policy and capital structure provides us with several advantages, including the ability to:~~

We do not anticipate utilizing mortgage loans as a strategic priority in our capital structure to fund growth. When utilized, mortgage loans typically correspond to a single property or a group of related properties acquired from a single seller. The loans may be further secured by guarantees from us or the Operating Company, provided that we attempt to limit the use of guarantees to the extent possible. The Operating Company may assume debt when conducting a transaction or it may mortgage existing properties. The maturities on our mortgages are staggered from 2017 to 2031. As of September 30, 2017, the aggregate GAAP principal balance of outstanding mortgage loans approximated $57.9 million, net of unamortized debt issuance costs.

As part of acquisitions closed during 2016, we entered into tenant improvement allowances with a balance of $9.5 million at December 31, 2016, included in Accounts payable and other liabilities in the Condensed Consolidated Balance Sheets within this Form 10-Q. During the nine months ended September 30, 2017, we entered into $1.0 million of additional tenant improvement allowances and paid $3.9 million towards the allowances. We expect to pay the $6.6 million balance of tenant improvement allowances within the next twelve months out of cash flows from operations.

As shown in the table below, net cash provided by operating activities increased by $20.2 million during the nine months ended September 30, 2017, from $52.1 million for the nine months ended September 30, 2016. The increase in cash provided by operating activities is primarily due to the increase in the size of our real estate investment portfolio. Our real estate investing activities have grown in volume as we continue to identify and acquire income-producing, net leased commercial real estate, primarily through sale-leaseback transactions, as a result of increased access to debt and equity capital and favorable investment opportunities. We funded real estate investment activity with a combination of cash from operations, proceeds from the issuance of unsecured debt obligations, and proceeds from the issuance of common stock. We paid cash dividends to our stockholders and non-controlling members of the Operating Company, net of reinvestments through our DRIP, totaling $38.2 million and $31.3 million for the nine months ended September 30, 2017 and 2016, respectively. Cash used to fund the increase in dividends between periods related primarily to the increase in cash provided by our operations. Cash and cash equivalents totaled $13.7 million and $33.0 million at September 30, 2017 and September 30, 2016, respectively.

~~Management believes~~ that the cash generated by our operations and our ongoing private offering, our cash and cash equivalents at September 30, ~~2017,~~2018, our current borrowing capacity onunder our ~~New Revolver and three~~ unsecured credit ~~facilities,~~facility, and our access to long-term debt capital, including through the debt private placement market, will be sufficient to fund our operations for the foreseeable future and allow us to acquire the real estate necessary to ~~meet~~achieve our strategic objectives.

Our leases with tenants of our properties are long-term in nature, with a current weighted average remaining lease term of ~~13.2~~12.8 years as of September 30, ~~2017.~~2018. To mitigate the impact of inflation on our fixed revenue streams, we have implemented limited escalation clauses in our leases. As of September 30, ~~2017,~~2018, nearly all of our leases had contractual lease escalations, with a weighted average of ~~2.1%~~2.0%. A substantial majority of our leases have fixed annual rent increases, and the ~~remaining portion has~~remainder have annual lease escalations based on increases in the ~~CPI,~~consumer price index (“CPI”), or periodic escalations over the term of the lease (e.g., a 10% increase every five years). These lease escalations mitigate the risk of ~~fixed~~earnings erosion on our revenue streams in the case of an inflationary economic environment, and provide increased return in otherwise stable market conditions. As a majority of our portfolio has fixed lease escalations, there is a risk that inflation could be greater than the contractual rent increases.

Our focus on single-tenant, triple-net leases also shelters us from fluctuations in the cost of services and maintenance as a result of inflation. For ~~an insignificant~~a portion of our portfolio, we have leases that are not fully triple-net, and, therefore, we bear certain responsibilities for the maintenance and structural component ~~replacement~~replacements (e.g., roof, structure, or parking lot) that may be required in the ~~future.~~future, although the tenants are still required to pay all operating expenses associated with the property (e.g., real estate taxes, insurance, and maintenance). Inflation and increased costs may have an adverse impact to our tenants and their credit-worthiness if the increase in costs are greater than their increase in revenue. In the limited circumstances where we cannot implement a triple-net lease, we attempt to limit our exposure to inflation through the use of warranties and other remedies that reduce the likelihood of a significant capital outlay.

We ~~have~~had no off-balance sheet arrangements as of September 30, 2018, or December 31, 2017.

The following table provides information with respect to our contractual commitments and obligations as of September 30, ~~2017~~2018 (in thousands).

Year of Maturity	Term Note 3⁽¹⁾		5.5-Year Term Loan		New Revolver⁽²⁾		Senior Notes		Mortgages		Interest Expense⁽³⁾		Tenant Improvement Allowances⁽⁴⁾		Total		2015 Unsecured Term Loan Agreement⁽¹⁾		5.5-Year Term Loan		7-Year Term Loan		Senior Notes		Mortgages and Notes Payable		Interest Expense⁽²⁾		Tenant Improvement Allowances		Total
2017	$	—	$	—	$	28,000	$	—	$	677	$	8,842	$	6,627	$	44,146
2018		—		—		—		—		2,829		34,915		—		37,744	$	—	$	—	$	—	$	—	$	827	$	14,109	$	—	$	14,936
2019		325,000		—		—		—		3,036		26,907		—		354,943		300,000		—		—		—		3,433		46,423		2,920		352,776
2020		—		—		—		—		8,450		25,459		—		33,909		—		—		—		—		3,672		45,165		—		48,837
2021		—		—		—		—		13,306		24,537		—		37,843		—		—		—		—		18,584		44,758		—		63,342
2022																		—		—		—		—		3,066		43,121		—		46,187
Thereafter		—		250,000		98,500		150,000		30,274		70,467		—		599,241		—		265,000		190,000		475,000		50,696		152,312		—		1,133,008
Total	$	325,000	$	250,000	$	126,500	$	150,000	$	58,572	$	191,127	$	6,627	$	1,107,826	$	300,000	$	265,000	$	190,000	$	475,000	$	80,278	$	345,888	$	2,920	$	1,659,086

As part of acquiring rental properties, we may enter into tenant improvement allowances. As of September 30, 2018, tenant improvement allowances totaled $2.9 million. We expect to pay the tenant improvement allowances out of cash flows from operations or from additional borrowings.

At September 30, ~~2017, investment~~2018, inve stment in rental property of ~~$91.3~~$140.6 million is pledged as collateral against our mortgages and notes payable.

Additionally, as of September 30, ~~2017,~~2018, we ~~have two~~are a party to three separate Tax Protection Agreements (the “Agreements”) with the contributing members (the “Protected Members”) of ~~two~~three distinct UPREIT transactions conducted in November 2015, ~~and~~ February ~~2016. Subsequent to September 30, 2017, we entered into a third Tax Protection Agreement with additional Protected Members through one UPREIT transaction conducted in~~2016, and October 2017. The Agreements require us to pay monetary damages in the event of a sale, exchange, transfer, or other disposal of the contributed property in a taxable transaction that would cause a Protected Member to recognize a Protected Gain, as defined in the Agreements, ~~and~~ subject to certain exceptions. ~~In such an event, we will pay monetary damages to~~As of September 30, 2018, the Protected Members in the amount of the aggregate federal, state, and local income taxes incurred as a result of the income or gain allocated or recognized by the Protected Member as an outcome of the transaction, subject to certain caps and limitations contained in the Agreements. We are required to allocate to the Protected Members, an amount of nonrecourse liabilities that is at least equal to the Minimum Liability Amount for each Protected Member, as defined in the Agreements. The Minimum Liability Amount and the associated allocation of nonrecourse liabilities are calculated in accordance with applicable tax regulations, are completed at the Operating Company level, and do not represent GAAP accounting. Therefore, there is no impact to the consolidated financial statements included in this Form 10-Q. If the nonrecourse liabilities allocated do not meet the requirement, we will pay monetary damages to the Protected Members in the amount of the aggregate federal, state, and local income taxes incurred as a result of the income or gain allocated or recognized by the Protected Member as an outcome to the default. The maximum aggregate amount we may be liable for under the Agreements is approximately $12.3 million. Based on information available, we do not believe that the events resulting in damages as detailed above have occurred or are likely to occur in the foreseeable future. Accordingly, we have excluded ~~this commitment~~these commitments from the contractual commitments table above. See a more detailed discussion of the Tax Protection Agreements in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations”, in our Form 10-K.

As of September 30, ~~2017,~~2018, our real estate investment portfolio had a net book value of ~~$1.9~~$2.49 billion, consisting of investments in ~~477~~583 property locations in 3742 states and various industries. All of our real estate investment portfolio represents commercial real estate properties subject to long-term leases, ~~and~~ all of our owned properties were subject to a lease as of September 30, ~~2017. During the three months ended September 30, 2017 and 2016, none of our leases with tenants expired,~~2018, and all of our leasing activity related to our real estate acquisitions. During the three and nine months ended September 30, 2018, a tenant renewed one lease that had been set to expire in 2018. The lease renewal was immaterial to our portfolio of real estate and results of operations.

	For the three months ended							For the three months ended
	September 30,				Increase/			September 30,				Increase/(Decrease)
(in thousands)	2017		2016		(Decrease)			2018		2017		$			%
Revenues:
Rental income from operating leases	$	43,233	$	34,806	$	8,427		$	58,189	$	43,233	$	14,956			34.6	%
Earned income from direct financing leases		968		1,143		(175	)		1,017		968		49			5.1	%
Operating expenses reimbursed from tenants		1,995		1,056		939			2,529		1,995		534			26.8	%
Other income from real estate transactions		39		5		34			29		39		(10	)		(25.6	)%
Total revenues	$	46,235	$	37,010	$	9,225		$	61,764	$	46,235	$	15,529			33.6	%

Total revenues increased ~~by $9.2~~to $61.8 million ~~or 24.9%,~~for the three months ended September 30, 2018, compared to $46.2 million for the three months ended September 30, ~~2017, compared to $37.0 million for the three months ended September 30, 2016.~~2017. The ~~growth~~increase in revenue ~~period-over-period~~period-over-period is primarily attributable to the growth in our real estate portfolio. ~~During~~We acquired $683.6 million in real estate throughout 2017, excluding capitalized acquisition expenses. These properties provide annual straight-line rental income of $56.1 million, or $14.0 million per quarter. In addition, during the first and second quarters of 2018, we acquired $254.8 million of real estate, excluding capitalized acquisition expenses, which provided $4.8 million of straight-line rental income in the third quarter. The acquisitions occurring during the three months ended September 30, 2017, we closed seven real estate acquisitions and acquired $159.2 million in real estate, excluding capitalized acquisition costs, comprised of 22 new properties. We capitalized approximately $2.4 million in acquisition expenses and $0.8 million in leasing fees as part of the acquisitions. Additionally, subsequent to September 30, 2016 and for the twelve month period ended September 30, 2017, we closed 22 real estate acquisitions and acquired approximately $489.8 million in real estate comprised of 88 new properties, contributing2018 did not materially impact reported rental income, due to the ~~growth in current quarter revenue.~~timing of acquisitions. These incremental revenues were somewhat offset by the elimination of revenues associated with properties that we have recently sold. The rental rates we receive on sale-leaseback transactions and lease assumptions on the various types of properties we target across the United States vary from transaction to transaction based on many factors, such as the terms of the lease, each property’s real estate fundamentals, and the market rents in the area. The initial ~~contractual~~ cash ~~lease payments~~capitalization rate on acquisitions made during the three months ended September 30, ~~2017, excluding capitalized acquisition expenses, represented a weighted average capitalization rate of 7.5%~~2018, was 7.48%.

	For the three months ended							For the three months ended
	September 30,				Increase/			September 30,				Increase/(Decrease)
(in thousands)	2017		2016		(Decrease)			2018		2017		$			%
Operating expenses
Depreciation and amortization	$	15,643	$	12,114	$	3,529		$	21,869	$	15,643	$	6,226			39.8	%
Asset management fees		3,844		2,789		1,055			4,663		3,844		819			21.3	%
Property management fees		1,249		1,010		239			1,680		1,249		431			34.5	%
Acquisition expenses		—		2,367		(2,367	)
Property and operating expense		2,009		1,184		825			2,777		2,009		768			38.2	%
General and administrative		1,173		598		575			1,664		1,173		491			41.9	%
State and franchise tax		301		71		230			58		301		(243	)		(80.7	)%
Provision for impairment of investment in rental properties		2,608		—		2,608			2,061		2,608		(547	)		(21.0	)%
Total operating expenses	$	26,827	$	20,133	$	6,694		$	34,772	$	26,827	$	7,945			29.6	%

Depreciation and amortization increased ~~by $3.5~~to $21.9 million ~~or 29.1%,~~for the three months ended September 30, 2018, compared to $15.6 million for the three months ended September 30, ~~2017,~~2017. The increase is primarily ~~as a result of~~due to the growth in our real estate portfolio. During the three months ended September 30, 2017, we closed seven real estate acquisitions and acquired $159.2 million in real estate, excluding capitalized acquisition costs, comprised of 22 new properties. Additionally, subsequent to September 30, 2016 and for the twelve month period ended September 30, 2017, we closed 22 real estate acquisitions and acquired approximately $489.8 million in real estate comprised of 88 new properties. In addition to the $159.2 million purchase price for acquisitions during the three months ended September 30, 2017, we capitalized $2.4 million in acquisition expensesportfolio, as ~~the result of adopting ASU 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~ (“ASU 2017-01”). The capitalized acquisition expenses are capitalized as part of the cost basis of the underlying tangible and intangible assets acquired, and are depreciated over the respective useful lives. For acquisitions made during 2016, we expensed acquisition costs as incurred. We adopted ASU 2017-01 and the respective accounting for acquisition expenses as of January 1, 2017, on a prospective basis, and therefore, this new accounting standard does not impact acquisition costs previously expensed in 2016.discussed above.

Asset management fees increased ~~by $1.1~~to $4.7 million ~~or 37.8%,~~for the three months ended September 30, 2018, compared to $3.8 million for the three months ended September 30, 2017. ~~The~~We pay the Asset Manager ~~receives an annual asset management~~a quarterly fee equal to 1%0.25% of the aggregate value of our equity on a fully diluted basis, based on the Determined Share Value. The increase in asset management fees during the three months ended September 30, ~~2017~~2018, compared to the comparable period in ~~2016~~2017, is athe result of an increase in our outstanding equity on a fully diluted basis, ~~and the~~combined with an increase in the Determined Share Value.

The ~~$80.00 per share~~$85.00 Determined Share Value in effect as of September 30, ~~2017,~~2018, reflected an increase of ~~3.9%~~6.3% from the ~~$77.00 per share~~$80.00 Determined Share Value in effect as ofSeptember 30, ~~2016.~~2017. Additionally, the ~~weighted average~~ number of shares of our common stock and non-controlling membership units ~~of the Operating Company~~ outstanding increased as the result of continued equity capital investments. ~~For the three months ended~~As of September 30, ~~2017, the weighted average number of~~2018, there were 22.81 million shares of our common stock and non-controlling membership units ~~of the Operating Company~~ outstanding, ~~was 19.1 million,~~ compared to ~~15.1~~20.46 million ~~for the three months ended~~as of December 31, 2017 and 19.79 million as of September 30, ~~2016.~~2017. The increase in equity capital was used to partially fund the continued growth in our real estate portfolio.

~~Acquisition expenses decreased by $2.4~~Property and operating expense increased to $2.8 million for the three months ended September 30, 2018, compared to $2.0 million for the three months ended September 30, 2017. ~~Under~~The increase is mainly attributable to the number of properties we own for which we are responsible for engaging a third-party property manager to manage ongoing property maintenance, along with insurance and real estate taxes associated with those properties. These expenses are paid by us and reimbursed by the tenant under the terms of the Asset Management Agreement, we pay the Asset Manager an acquisition fee equal to 1% of the gross purchase price paid for each property we acquire (including properties contributed in exchange for membership unitsrespective leases. There was a corresponding increase in the ~~Operating Company).~~

~~We adopted ASU 2017-01 effective January 1, 2017, and under this new accounting standard, we capitalize acquisition~~operating expenses as part of the cost basis of the underlying tangible and intangible assets acquired, as opposed to expensing them as incurred. We adopted ASU 2017-01 on a prospective basis. For the three months ended September 30, 2017, we capitalized $2.4 millionreimbursed by tenants balance included in ~~acquisition expenses relating to $159.2 million in acquisitions, which approximated the acquisition expenses recognized during the three months ended September 30, 2016.~~total revenues.

During the three months ended September 30, ~~2017,~~2018, we recognized ~~$2.6~~$2.1 million of impairment on our investments in rental properties. We review long-lived assets to be held and used for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If and when such events or changes in circumstances are present, an impairment exists to the extent the carrying value of the asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use of the asset or asset group and its eventual disposition. WeThe impairment recognized during the three months ended September 30, 2018, related to five properties whose carrying amounts we determined were not recoverable. In determining the fair value of the assets at the time of measurement, we utilized capitalization rates ranging from 7.50% to 10%, and a weighted average discount rate of 8%. During the three months ended September 30, 2017, we recognized $2.6 million of impairment on four properties whose carrying amounts we determined were not recoverable. In determining the fair value of the assets at the time of measurement, we utilized capitalization rates ranging from 7.25% to 12%, and a weighted average discount rate of 8%.

	For the three months ended									For the three months ended
	September 30,						Increase/			September 30,						Increase/(Decrease)
(in thousands)	2017			2016			(Decrease)			2018			2017			$			%
Other income (expenses)
Preferred distribution income	$	187		$	181		$	6		$	65		$	187		$	(122	)		(65.2	)%
Interest income		127			4			123			16			127			(111	)		(87.4	)%
Interest expense		(9,380	)		(4,576	)		(4,804	)		(14,484	)		(9,380	)		5,104			54.4	%
Cost of debt extinguishment		(1,404	)		(52	)		(1,352	)		(50	)		(1,404	)		(1,354	)		(96.4	)%
Gain on sale of real estate		4,052			2,983			1,069			2,025			4,052			(2,027	)		(50.0	)%
Gain on sale of investment in related party											8,500			—			8,500		>100.0		%

Interest expense increased ~~$4.8~~to $14.5 million ~~or 105%,~~for the three months ended September 30, 2018, compared to $9.4 million for the three months ended September 30, 2017, due primarily to an increase in unsecured long-term borrowings in each of the periods. Total outstanding debt on our unsecured credit facilities and unsecured Senior Notes, excluding capitalized debt issuance costs, increased from ~~$4.6~~$851.5 million at September 30, 2017, to $1,230.0 million at September 30, 2018, reflecting net increased borrowings under our Credit Facility, as well as to the issuance of the Series B Notes and Series C Notes.

Cost of debt extinguishment decreased to $0.1 million for the three months ended September 30, 2016, due primarily to an increase in long-term borrowings used to partially fund the acquisition of properties for our growing real estate investment portfolio. Our total outstanding debt, excluding capitalized debt issuance costs, increased from $831.3 million at September 30, 2016, to $910.1 million at September 30, 2017. Additionally, during the three months ended September 30, 2016, we recognized approximately $3.0 million of interest rate swap ineffectiveness, which resulted in a reduction of interest expense. Ineffectiveness during the three months ended September 30, 2016 was attributable to inconsistencies in certain terms between the interest rate swaps and the loan agreements for the Term Notes and Revolver. The interest rate swaps continued to qualify for hedge accounting, with the effective portion of mark-to-market adjustments included in accumulated other comprehensive income. During the fourth quarter of 2016, we amended the terms of the credit agreements, thereby reversing the impact of the ineffectiveness and rendering a $0 full year 2016 impact to the consolidated income statement. We did not recognize any ineffectiveness on our interest rate swaps during the three months ended September 30, 2017.

~~The cost of debt extinguishment represents the difference between the price paid to extinguish the debt~~2018, compared to the carrying value of the debt, plus any unamortized debt issuance costs at the time of extinguishment. To the extent that the price paid to extinguish the debt is greater than the carrying value of debt, we would recognize a loss (cost) on extinguishment. The loss would be increased by the amount of previously capitalized debt issuance costs that remain unamortized at the time of extinguishment. These amounts fluctuate period-over-period based on the variability in the interest rate environment, changes in financial institutions’ credit standards, and our activity in capital markets to manage our leverage position. Cost of debt extinguishment increased by $1.4 million, to $1.4 million for the three months ended September 30, 2017, from $0.1 million for the three months ended September 30, 2016. The fluctuation is a direct result of a $1.4 million prepayment penalty recognized on the extinguishment of a mortgage, with no similar activity during the three months ended September 30, 2016.

During the three months ended September 30, 2017, we recognized a $4.1 million gain on the sale of real estate, compared to a gain of $3.0 million for the three months ended September 30, 2016. During the three months ended September 30, 2017 and 2016, we sold four properties and two properties, respectively. Our recognition of a gain or loss on the sale of real estate varies from transaction to transaction based on fluctuations in asset prices and demand in the real estate market.

As of September 30, 2017, our real estate investment portfolio had grown to a net book value of $1.9 billion, consisting of investments in 477 property locations in 37 states and various industries. All of our real estate investment portfolio represents commercial real estate properties subject to long-term leases, and all of our owned properties were subject to a lease as of September 30, 2017. ~~During the nine months ended September 30, 2017 and 2016, none of our leases expired, and all of our leasing activity related to our real estate acquisitions.~~

Total revenues increased by $28.7 million, or 27.7%, to $132.1 million for the nine months ended September 30, 2017, compared to $103.4 million for the nine months ended September 30, 2016. The growth in revenue year over year is primarily attributable to the growth in our real estate portfolio. During the nine months ended September 30, 2017, we closed 14 real estate acquisitions and acquired $352.0 million in real estate comprised of 70 new properties. We capitalized approximately $6.6 million in acquisition expenses and $2.6 million in leasing fees as part of the acquisitions. Additionally, subsequent to September 30, 2016 and for the three month period ended December 31, 2016, we closed eight real estate acquisitions and acquired approximately $137.8 million in real estate comprised of 17 new properties. The rental rates we receive on sale-leaseback transactions and lease assumptions on the various types of properties we target across the United States vary from transaction to transaction based on many factors, such as the terms of the lease, each property’s real estate fundamentals, and the market rents in the area. The initial contractual cash lease payments on acquisitions during the nine months ended September 30, 2017, excluding capitalized acquisition expenses, represented a weighted average capitalization rate of 7.4%.

Depreciation and amortization increased by $11.7 million, or 35.2%, to $45.0 million for the nine months ended September 30, 2017, primarily as a result of the growth in our real estate portfolio. During the nine months ended September 30, 2017, we acquired $352.0 million in real estate comprised of 70 new properties. In addition to the $352.0 million purchase price for acquisitions during the nine months ended September 31, 2017, we capitalized $6.6 million in acquisition expenses as the result of adopting ASU 2017-01. The capitalized acquisition expenses are capitalized as part of the cost basis of the underlying tangible and intangible assets acquired, and are depreciated over their respective useful lives. For acquisitions made during 2016, we expensed acquisition costs as incurred. We adopted ASU 2017-01 and the respective accounting for acquisition expenses as of January 1, 2017, on a prospective basis, and therefore, this new accounting standard does not impact acquisition costs previously expensed in 2016.

Asset management fees increased by $2.9 million, or 37.3%, to $10.7 million for the nine months ended September 30, 2017. The Asset Manager receives an annual asset management fee equal to 1% of the aggregate value of our equity on a fully diluted basis based on the Determined Share Value. The increase in asset management fees during 2016 is a result of an increase in the equity on a fully diluted basis and the increase in the Determined Share Value.

The $80.00 per share Determined Share Value in effect as of September 30, 2017, reflected an increase of 3.9% from the $77.00 per share Determined Share Value in effect as of September 30, 2016. Additionally, the weighted average number of shares of our common stock and non-controlling membership units of the Operating Company outstanding increased as the result of continued equity capital investments. For the nine months ended September 30, 2017, the weighted average number of shares of our common stock and non-controlling membership units of the Operating Company outstanding was 18.1 million compared to 14.2 million for the nine months ended September 30, 2016. The increase in equity capital was used to partially fund the continued growth in our real estate portfolio.

Acquisition expenses decreased by $8.3 million for the nine months ended September 30, 2017. Under the terms of the Asset Management Agreement, we pay the Asset Manager an acquisition fee equal to 1% of the gross purchase price paid for each property we acquire (including properties contributed in exchange for membership units in the Operating Company).

We adopted ASU 2017-01 effective January 1, 2017, and under this new accounting standard, we capitalize acquisition expenses as part of the cost basis of the underlying tangible and intangible assets acquired, as opposed to expensing them as incurred. We adopted ASU 2017-01 on a prospective basis. For the nine months ended September 30, 2017, we capitalized $6.6 million in acquisition expenses relating to $352.0 million in acquisitions. The $1.7 million decrease in acquisition expenses incurred during the comparable periods relates to a decrease in acquisition activity. During the nine months ended September 30, 2016, we acquired $381.0 million in real estate.

Property and operating expense increased by $1.7 million, or 56.7%, to $4.7 million for the nine months ended September 30, 2017. The increase is attributable to an increase in the number of properties we own, whereby we are responsible for engaging a third party property manager to manage the respective ongoing property maintenance. These expenses are paid by us and reimbursed by the tenant under the terms of the respective leases. There was a corresponding increase in the operating expenses reimbursed by tenants revenue balance.

General and administrative expenses increased by $1.3 million, or 69.0% to $3.3 million for the nine months ended September 30, 2017. The increase is primarily attributable to increased fees for costs and services associated with becoming a public reporting entity in accordance with Section 12(g) of the Exchange Act.

During the nine months ended September 30, 2017, we recognized $2.6 million of impairment on our investments in rental properties. We review long-lived assets to be held and used for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If and when such events or changes in circumstances are present, an impairment exists to the extent the carrying value of the asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use of the asset or asset group and its eventual disposition. We recognized impairment on four properties whose carrying amounts we determined were not recoverable. In determining the fair value of the assets at the time of measurement, we utilized capitalization rates ranging from 7.25% to 12%, and a weighted average discount rate of 8%.

Interest expense increased $1.0 million, or 4.2%, to $25.2 million for the nine months ended September 30, 2017, from $24.2 million for the nine months ended September 30, 2016, due primarily to an increase in long-term borrowings used to partially fund the acquisition of properties for our growing real estate investment portfolio. Our total outstanding debt, excluding capitalized debt issuance costs, increased from $831.3 million at September 30, 2016, to $910.1 million at September 30, 2017.

The increase in outstanding debt was slightly offset by $2.2 million in ineffectiveness recognized on interest rate swaps during the nine months ended September 30, 2016 that was not recognized during the nine months ended September 30, 2017. Ineffectiveness during the nine months ended September 30, 2016 was attributable to inconsistencies in certain terms between the interest rate swaps and the loan agreements for the Term Notes and Revolver. The interest rate swaps continued to qualify for hedge accounting, with the effective portion of mark-to-market adjustments included in accumulated other comprehensive income. During the fourth quarter of 2016, we amended the terms of the credit agreements, thereby reversing the impact of the ineffectiveness and rendering a $0 full year 2016 impact to the consolidated income statement. The increase in interest expense was also offset by a $1.2 million decrease in interest expense during the nine months ended September 30, 2017 related to the termination of an interest rate swap that occurred concurrent with the paydown of a mortgage.

The cost of debt extinguishment represents the difference between the price paid to extinguish the debt compared to the carrying value of the debt, plus any unamortized debt acquisition costs at the time of extinguishment. To the extent that the price paid to extinguish the debt is greater than the carrying value of debt, we would recognize a loss (cost) on extinguishment. The loss would be increased by the amount of previously capitalized debt acquisition costs that remain unamortized at the time of extinguishment. These amounts fluctuate period-over-period based on the variability in the interest rate environment, changes in financial institutions’ credit standards, and our activity in capital markets to manage our leverage position. Cost of debt extinguishment increased by $4.9 million, to $5.0 million for the nine months ended September 30, 2017, from $0.1 million for the nine months ended September 30, 2016. The fluctuation is a direct result of the $800 million Credit Facility we closed on June 23, 2017, prior to quarter end, together with the corresponding extinguishment of the Revolver, Term Note 1, and Term Note 2, with no similar activity during the nine months ended September 30, 2016.

During the ~~nine~~three months ended September 30, ~~2017,~~2018, we recognized ~~a $10.3~~gains of $2.0 million ~~gain~~ on the sale of real estate, compared to ~~a gain~~gains of $4.1 million ~~for~~during the ~~nine~~three months ended September 30, ~~2016. During the nine months ended September 30, 2017 and 2016 we~~2017. We sold ~~ten properties and~~ four properties ~~respectively.~~in both periods. Our recognition of a gain or loss on the sale of real estate varies from transaction to transaction based on fluctuations in asset prices and demand in the real estate market.

During the three months ended September 30, 2018, we sold our investment of 100 non-voting convertible preferred units of our Manager, a related party. The preferred units were sold to another related party of the Manager. The preferred units were sold for an aggregate sales price of $18.5 million and had a carrying value of $10.0 million at the time of sale, resulting in a gain of $8.5 million. Prior to the sale, we received preferred distribution income on the preferred units.

Total revenues increased to $174.4 million for the nine months ended September 30, 2018, compared to $132.1 million for the nine months ended September 30, 2017. The increase in revenue period-over-period is primarily attributable to the growth in our real estate portfolio as discussed in Results of Operations — For the three months ended September 30, 2018 and 2017 — Revenues above. The initial cash capitalization rate on acquisitions made during the nine months ended September 30, 2018, was 6.93%.

Depreciation and amortization increased to $61.3 million for the nine months ended September 30, 2018, compared to $45.0 million for the nine months ended September 30, 2017. The increase is primarily due to the growth in our real estate portfolio, as discussed in Results of Operations — For the three months ended September 30, 2018 and 2017 — Revenues above.

Asset management fees increased to $13.1 million for the nine months ended September 30, 2018, compared to $10.7 million in the nine months ended September 30, 2017. The increase in asset management fees during the nine months ended September 30, 2018, compared to the comparable period in 2017, is a result of an increase in our outstanding equity on a fully diluted basis, combined with the increase in the Determined Share Value.

The $85.00 per share Determined Share Value in effect as of September 30, 2018, reflected an increase of 6.3% from the $80.00 per share Determined Share Value in effect as of September 30, 2017. Additionally, the number of shares of our common stock and non-controlling membership units outstanding increased as the result of continued equity capital investments. As of September 30, 2018, there were 22.81 million shares of our common stock and non-controlling membership units outstanding, compared to 20.46 million as of December 31, 2017 and 19.79 million as of September 30, 2017. The increase in equity capital was used to partially fund the continued growth in our real estate portfolio.

Property and operating expense increased to $7.9 million for the nine months ended September 30, 2018, compared to $4.7 million for the nine months ended September 30, 2017. The increase is attributable to the number of properties we own for which we are responsible for engaging a third-party property manager to manage ongoing property maintenance, along with insurance and real estate taxes associated with those properties. These expenses are paid by us and reimbursed by the tenant under the terms of the respective leases. There was a corresponding increase in the operating expenses reimbursed by tenants balance included in total revenues.

Interest expense increased to $38.1 million for the nine months ended September 30, 2018, compared to $25.2 million for the nine months ended September 30, 2017, due primarily to an increase in long-term borrowings used to partially fund the acquisition of properties for our growing real estate investment portfolio. This primarily reflected the issuance of the Series A Notes in April 2017 and the Series B Notes and Series C Notes in 2018, along with increased borrowings under our Credit Facility, which was renegotiated on June 23, 2017. In addition, interest expense reported for the nine months ended September 30, 2017 was reduced by a $1.2 million gain related to the termination of an interest rate swap that occurred concurrent with the paydown of a mortgage.

Cost of debt extinguishment decreased to $0.1 million for the nine months ended September 30, 2018, compared to $5.0 million for the nine months ended September 30, 2017. The fluctuation is a direct result of our closing the $880 million Credit Facility on June 23, 2017, concurrent with the extinguishment of prior existing debt. There was no similar transaction during the nine months ended September 30, 2018.

See discussion at Results of Operations — For the three months ended September 30, 2018 and 2017 — Gain on sale of investment in related party, above.

Our reported results and net earnings per ~~dilutive~~diluted share are presented in accordance with GAAP. We also disclose FFO and AFFO, each of which are non-GAAP measures. We believe the ~~use~~presentation of FFO and AFFO are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs. FFO and AFFO should not be considered alternatives to net income as a performance measure or to cash flows from operations, as reported on our statement of cash flows, or as a liquidity measure, and should be considered in addition to, and not in lieu of, GAAP financial measures.

We compute FFO in accordance with the standards established by the 2002 White Paper on FFO approved by the Board of Governors of Nareit, the ~~National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT~~worldwide representative voice for REITs and publicly traded real estate companies with an interest in the U.S. real estate and capital markets.. Nareit defines FFO as GAAP net income or loss adjusted to exclude net gains (losses) from sales of depreciated real estate assets, depreciation and amortization expense from real estate assets, and impairment charges related to previously depreciated real estate assets. To derive AFFO, we modify the ~~NAREIT~~Nareit computation of FFO to include other adjustments to GAAP net income related to certain non-cash revenues and expenses, including straight-line rents, cost of debt extinguishments, acquisition expenses, amortization of lease intangibles, amortization of debt issuance costs, amortization of net mortgage premiums, (gain) loss on interest rate swaps and other non-cash interest expense, extraordinary items and other specified non-cash items. We believe that such items are not a result of normal operations and thus we believe excluding such items assists management and investors in distinguishing whether changes in our operations are due to growth or decline of operations at our properties or from other factors.

Our leases include cash rents that increase over the term of the lease to compensate us for anticipated increases in market rentals over time. Our leases do not include significant front-loading or back-loading of payments, or significant rent-free periods. Therefore, we find it useful to ~~evaluate~~evaluate rent on a contractual basis as it allows for comparison of existing rental rates to market rental rates. ~~Additionally, we~~ We further exclude ~~transaction~~ costs ~~associated with acquiring real estate subject to existing leases, including~~or gains recorded on the extinguishment of debt, non-cash interest expense and gains, and the amortization of debt issuance costs, net mortgage premiums, and lease intangibles, as ~~well as acquisition expenses paid to our Asset Manager that are based on a percentage of the gross acquisition purchase price. We exclude~~ these ~~costs from AFFO because they are upfront expenses that are recognized in conjunction with an acquisition, and therefore,~~items are not indicative of ongoing operational results of the portfolio. We believe excluding acquisition expenses provides investors a view of the performance of our portfolio over time. In connection with our adoption of ASU 2017-01, effective January 1, 2017 and on a prospective basis, we capitalize all acquisition expenses as part of the cost-basis of the tangible and intangible assets acquired. Therefore, effective January 1, 2017, we will no longer adjust for acquisition expenses in our AFFO computation. We also exclude the amortization of debt issuance costs and net mortgage premiums as they are not indicative of ongoing operational results of the portfolio.results. We use AFFO as a measure of our performance when we formulate corporate goals.

FFO is used by management, investors, and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers, primarily because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. We believe that AFFO is a useful supplemental measure for investors to consider because it will help them to better assess our operating performance without the distortions created by non-cash revenues or expenses. FFO and AFFO may not be comparable to similarly titled measures employed by other REITs, and comparisons of our FFO and AFFO with the same or similar measures disclosed by other REITs may not be meaningful.

Neither the SEC ornor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO and AFFO. In the future, the SEC, ~~NAREIT~~Nareit or another regulatory body may decide to standardize the allowable adjustments across the REIT industry and in response to such standardization we may have to adjust our calculation and characterization of FFO and AFFO accordingly.

Net Income, FFO, and AFFO for the three months ended September 30, ~~2017~~2018 and ~~2016~~2017

The following table presents our net income and our non-GAAP FFO and AFFO for the three months ended September 30, ~~2017~~2018 and ~~2016.~~2017. Our measures of FFO and AFFO are computed on the basis of amounts attributable to both us and non-controlling interests. As the non-controlling interests share in our net income on a one-for-one basis, the basic and diluted per share amounts are the same.

	For the three months ended							For the three months ended
	September 30,				Increase/			September 30,				Increase/(Decrease)
(in thousands, except per share data)	2017		2016		Decrease			2018		2017		$		%
Net income	$	12,990	$	15,417	$	(2,427	)	$	23,064	$	12,990	$	10,074		77.6	%
Net earnings per diluted share		0.68		1.02		(0.34	)		1.03		0.68		0.35		51.5	%
FFO		27,189		24,548		2,641			44,969		27,189		17,780		65.4	%
FFO per diluted share		1.42		1.63		(0.21	)		2.02		1.42		0.60		42.3	%
AFFO		24,813		20,476		4,337			31,315		24,813		6,502		26.2	%
AFFO per diluted share		1.30		1.36		(0.06	)		1.40		1.30		0.10		7.7	%
Diluted WASO⁽¹⁾		19,147		15,074					22,291		19,147		3,144		16.4	%

Net income ~~decreased by $2.4~~increased to $23.1 million ~~or 15.7%,~~for the three months ended September 30, 2018, compared to $13.0 million for the three months ended September 30, ~~2017, compared to $15.4 million for the three months ended September 30, 2016.~~2017. Net earnings per diluted share ~~decreased by $0.34~~increased $0.35 per share during the same period, ~~down~~ to ~~$0.68~~$1.03 per share. The ~~decrease~~increase in net income is ~~primarily~~mainly attributable to ~~$2.6 million~~increased operating income, reflecting the net growth in the number of asset impairment charges recognized during the three months ended September 30, 2017, with no impairment recognized during the three months ended September 30, 2016. The decrease in net income was partially offset by our investments in real estate ~~properties. During the three months ended September 30, 2017, we closed seven real estate acquisitions and acquired $159.2 million~~properties in ~~real estate, excluding capitalized acquisition costs, comprised~~our portfolio, as discussed in Results of 22 new properties. Additionally, subsequent to September 30, 2016 and for the twelve month period ended September 30, 2017, we closed 22 real estate acquisitions and acquired approximately $489.8 million in real estate comprised of 88 new properties.

The fluctuation in net income was also impacted by acquisition expenses. During the three months ended September 30, 2016 we recognized $2.4 million in acquisition expenses. We adopted ASU 2017-01 effective January 1, 2017, and under this new accounting standard, we capitalize acquisition expenses as part of the cost basis of the underlying assets acquired, as opposed to expensing them as incurred. We adopted ASU 2017-01 on a prospective basis. Operations — For the three months ended September 30, 2018 and 2017 ~~we capitalized $2.4 million in acquisition expenses relating~~— Revenues above. This portfolio growth generated increased revenues which were partially offset by increased depreciation and amortization, asset management and property management expenses. Additional contributing factors to ~~$159.2 million in acquisitions. As such,~~ net income growth were an $8.5 million gain on sale of an investment in a related party in 2018, for which there was no comparable transaction in 2017, and decreased impairment charges as compared to the prior-year period. These factors were partially offset by increased interest expense and decreased gains on sale of real estate in 2018, as compared to 2017. See further discussion in Results of Operations — For the three months ended September 30, ~~2016 was impacted by acquisition expenses, however,~~2018 and 2017— Other income (expenses), above.

The per-share impact of increased net income ~~for~~used in the ~~three months ended September 30, 2017~~numerator of the earnings per share calculation was ~~not. The impact of capitalizing acquisition expenses during the three months ended September 30, 2017 was partially~~somewhat offset by ~~increased depreciation expense relating to~~ the ~~capitalized costs.~~

~~The fluctuation in net income for the three months ended September 30, 2017 was also impacted by a $4.1 million gain on the sale~~effect of ~~real estate, representing a $1.1 million increase as compared to the three months ended September 30, 2016.~~

~~Earnings per share were further impacted by a 4.1 million~~an increase in the diluted weighted average number of shares outstanding used in the denominator. The increase in the diluted weighted average number of shares reflected shares issued as part of our ~~common stock outstanding as a result of~~ ongoing equity raises. We use proceeds from the sale of stock to partially fund acquisitions of real estate, which contributed to the increased revenues discussed above.

FFO increased ~~by $2.6~~to $45.0 million ~~or 10.8%,~~for the three months ended September 30, 2018, compared to $27.2 million for the three months ended September 30, ~~2017,~~2017. FFO per diluted share increased to $2.02 per diluted share, compared to ~~$24.5~~$1.42 per diluted share for the three months ended September 30, 2017. The increase in FFO is primarily due to the factors associated with growth in our real estate portfolio, discussed above, which were factors accounting for an increase in net income. Growth in FFO was greater than growth in net income, as there was a smaller deduction from net income in the three months ended September 30, 2018, related to gains on the sale of real estate as compared to the three months ended September 30, 2017. These factors were partially offset by a decrease in asset impairment charges in the three months ended September 30, 2018 as compared to the three months ended September 30, 2017, which are added back when computing FFO. The impact of the increase in FFO in the numerator of the FFO per share computation was partially mitigated by the increase in the weighted average number of shares outstanding used in the denominator.

AFFO increased to $31.3 million for the three months ended September 30, 2016. FFO per diluted share decreased by $0.21 during the same period to $1.42 per share. The increase in FFO is primarily driven by increased revenue year over year as a result of growth in our real estate investment portfolio, as discussed for net income above. Additionally, we added back $2.6 million of asset impairment charges recognized during the three months ended September 30, 2017, which were not recognized during the three months ended September 30, 2016.

Consistent with the decrease in net earnings per diluted share, the increase in FFO was more than offset by a 4.1 million increase in the diluted weighted average number of shares of our common stock outstanding as a result of ongoing equity raises.

~~AFFO increased by $4.3 million, or 21.2%,~~2018, compared to $24.8 million for the three months ended September 30, ~~2017, compared~~2017. AFFO per diluted share increased to ~~$20.5 million for~~$1.40 per diluted share in the three months ended September 30, ~~2016. AFFO per diluted share decreased by $0.06 during the same period~~2018, compared to $1.30 per diluted ~~share.~~

~~The period-over-period growth~~share in AFFO was $1.7 million greater than the comparable growth in FFO, primarily as a result of a $3.0 million gain on interest rate swaps and other non-cash interest expense recognized during the three months ended September 30, 2016, which is subtracted from FFO in the AFFO calculation. We did not recognize a gain or loss on interest rate swaps and other non-cash interest expense during the three months ended September 30, 2017. ~~Additionally,~~As compared to the increase in FFO, the lower year-over-year growth in AFFO ~~during~~and AFFO per diluted share was mainly due to a $8.5 million gain on sale of our investment in a related party in the ~~three months ended September 30, 2017 was reduced by~~2018 period, which is subtracted from FFO to compute AFFO; combined with a $1.4 million decrease in the addback adjustment for cost of debt extinguishment ~~costs,~~as compared to ~~$0.1 million of debt extinguishment costs recognized during~~ the three months ended September 30, 2016. These increases were partially offset by a reduction in the addback for acquisition expenses. During the three months ended September 30, 2016, we added back $2.4 million in acquisition expenses in our AFFO calculation. For the three months ended September 30, 2017 we capitalized all acquisition expenses to the cost basis of the real estate acquired. The capitalized acquisition expenses, beginning in 2017, result in increased depreciation expenses, which is an add-back in the FFO computation. Accordingly, our capitalization of acquisition expenses has no net impact to AFFO. period.

Consistent with the decrease in net earnings per diluted share, the increase in AFFO was more than offset by a 4.1 million increase in the diluted weighted average number of shares of our common stock outstanding as a result of ongoing equity raises.

Net Income, FFO, and AFFO for the nine months ended September 30, ~~2017~~2018 and ~~2016~~2017

The following table presents our net income and our non-GAAP FFO and AFFO for the nine months ended September 30, ~~2017~~2018 and ~~2016.~~2017. Our measures of FFO and AFFO are computed on the basis of amounts attributable to both us and non-controlling interests. As the non-controlling interests share in our net income on a one-for-one basis, the basic and diluted per share amounts are the same.

	For the nine months ended						For the nine months ended
	September 30,				Increase/		September 30,				Increase/(Decrease)
(in thousands, except per share data)	2017		2016		Decrease		2018		2017		$		%
Net income	$	42,729	$	26,474	$	16,255	$	60,444	$	42,729	$	17,715		41.5	%
Net earnings per diluted share		2.36		1.87		0.49		2.81		2.36		0.45		19.1	%
FFO		79,974		55,658		24,316		114,188		79,974		34,214		42.8	%
FFO per diluted share		4.43		3.93		0.50		5.31		4.43		0.88		19.9	%
AFFO		72,946		57,093		15,853		91,513		72,946		18,567		25.5	%
AFFO per diluted share		4.04		4.03		0.01		4.26		4.04		0.22		5.4	%
Diluted WASO(1)		18,069		14,154				21,496		18,069		3,427		19.0	%

Net income increased ~~by $16.3~~to $60.4 million ~~or 61.4%,~~for the nine months ended September 30, 2018, compared to $42.7 million for the nine months ended September 30, ~~2017, compared~~2017. Net earnings per diluted share increased to ~~$26.5 million~~$2.81 per diluted share for the nine months ended September 30, ~~2016. Net earnings~~2018, compared to $2.36 per diluted share ~~increased by $0.49 during~~for the ~~same period, up to $2.36 per share.~~nine months ended September 30, 2017. The increase ~~in net income and earnings per share~~ is mainly attributable to ~~accretive~~increased operating income, which was primarily due to the net growth in the number of investments in real estate properties ~~made during~~in our portfolio, as discussed in Results of Operations — For the three months ended September 30, 2018 and 2017 ~~coupled~~— Revenues above. This portfolio growth generated increased revenues which were partially offset by increased depreciation and amortization, asset management, and property management expenses. Additional contributing factors to net income growth were an $8.5 million gain on sale of an investment in a related party in 2018, for which there was no comparable transaction in 2017, and decreased impairment charges as compared to the prior-year period. In addition, we recorded decreased expense associated with the ~~annualized revenue streams from the real estate investments made~~extinguishment of debt during the nine months ended September 30, ~~2016. We added $352.0 million and $381.0 million~~2018, as compared to the prior-year period, discussed in ~~real estate investments during the nine months ended September 30, 2017 and 2016, respectively.~~

In increase in net income was also impacted by acquisition expenses. During the nine months ended September 30, 2016 we recognized $8.3 million in acquisition expenses. We adopted ASU 2017-01 effective January 1, 2017, and under this new accounting standard, we capitalize acquisition expenses as partResults of ~~the cost basis of the underlying assets acquired, as opposed to expensing them as incurred. We adopted ASU 2017-01 on a prospective basis.~~ Operations — For the nine months ended September 30, ~~2017, we capitalized $6.6 million~~2018 and 2017— Other income (expenses), above. These factors were partially offset by increased interest expense.

The per-share impact of increased in ~~acquisition expenses relating to $352.0 million in acquisitions. As such,~~ net income ~~for~~used in the ~~nine months ended September 30, 2016 was impacted by acquisition expenses, however, net income for~~numerator of the ~~nine months ended September 30, 2017 was not. The impact of capitalizing acquisition expenses during the nine months ended September 30, 2017~~earnings per share calculation was partially offset by ~~increased depreciation expense relating to~~ the ~~capitalized costs.~~

~~The increase in net income for the nine months ended September 30, 2016 was also impacted by a $10.3 million gain on the sale~~impact of ~~real estate, representing a $6.2 million increase as compared to the nine months ended September 30, 2016.~~

~~The increase in net income in the earnings per share computation was partially offset by a 3.9 million increase in the~~increased diluted weighted average number of shares of our common stock outstanding used in the denominator, as ~~a result~~compared to the nine months ended September 30, 2017. The increase in the diluted weighted average number of shares reflected shares issued as part of our ongoing equity raises. We use proceeds from the sale of stock to partially fund acquisitions of real estate, which contributes to the increased revenues discussed above.

FFO increased ~~by $24.3~~to $114.2 million ~~or 43.7%,~~for the nine months ended September 30, 2018, compared to $80.0 million for the nine months ended September 30, ~~2017,~~2017. FFO per diluted share increased to $5.31 per diluted share for the nine months ended September 30, 2018, compared to ~~$55.7~~$4.43 per diluted share for the nine months ended September 30, 2017. The increase in FFO is primarily due to the factors associated with growth in our real estate portfolio, discussed above, which were factors accounting for an increase in net income. The impact of the increase in FFO in the numerator of the FFO per share calculation was partially mitigated by the increase in the weighted average number of shares outstanding used in the denominator.

AFFO increased to $91.5 million for the nine months ended September 30, 2016. FFO per diluted share increased by $0.50 during the same period to $4.43 per share. The increase in FFO is primarily driven by increased revenue period-over-period as the result of growth in our real estate investment portfolio. We added $352.0 million in real estate investments during the nine months ended September 30, 2017. Growth in FFO per diluted share was less than growth in net earnings per diluted share primarily as a result of a $10.3 million gain on sale of real estate recognized in net income during the nine months ended September 30, 2017, which was adjusted and excluded in the FFO computation.

~~AFFO increased by $15.9 million, or 27.8%,~~2018, compared to $72.9 million for the nine months ended September 30, ~~2017, compared~~2017. AFFO per diluted share increased to ~~$57.1 million~~$4.26 per diluted share for the nine months ended September 30, ~~2016. AFFO per diluted share increased by $0.01 during the same period~~2018, compared to $4.04 ~~per diluted share.~~

AFFO per diluted share growth of $0.01 as compared to FFO per diluted share growth of $0.50 was primarily impacted by acquisition expenses. During the nine months ended September 30, 2016, we recognized $8.3 million in acquisition expenses that were added back to FFO in computing AFFO. For the nine months ended September 30, 2017, we capitalized all acquisition expenses to the cost basis of the real estate acquired. The capitalized acquisition expenses, beginning in 2017, result in increased depreciation expenses, which is an add-back in the FFO computation. AFFO per diluted share growth as compared to FFO per diluted share growth was also impacted by the (gain) loss on interest rate swaps and other non-cash interest expense. During the nine months ended September 30, 2016, we recognized an add-back of $2.2 million, compared to a deduction of $1.3 million for the nine months ended September 30, 2017. As compared to the increase in FFO, the lower year-over-year growth in AFFO and AFFO per diluted share was mainly due to a $8.5 million gain on sale of our investment in a related party in the 2018 period, which is subtracted from FFO to compute AFFO; combined with a $4.9 million decrease in the addback adjustment for cost of debt extinguishment as compared to the 2017 period, which reflected the renegotiation of our Credit Facility in June 2017. In addition, the deduction for straight-line rent adjustments used to compute AFFO increased by $3.1 million, reflecting the growth in our real estate investment portfolio. These ~~impacts~~factors were somewhat offset by a ~~$4.9~~$1.3 million ~~increase~~decrease in the ~~add-back for~~deduction related to gains on interest rate swaps, mainly reflecting the ~~cost~~termination of ~~debt extinguishment. During~~an interest rate swap that occurred concurrent with the ~~nine months ended September 30, 2017 we recognized $5.0 million~~paydown of a mortgage in ~~debt extinguishment costs, compared to $0.1 million for~~ the ~~nine months ended September 30, 2016.~~ prior year.

The following is a reconciliation of net income to FFO and AFFO for the three and nine months ended September 30, ~~2017~~2018 and ~~2016.~~2017. Also presented is information regarding ~~distributions paid to common stockholders and non-controlling interests and~~ the weighted average number of shares of our common stock and non-controlling membership units ~~of the Operating Company~~ used for the basic and diluted ~~computation~~ per ~~share:~~share computation:

	For the three months ended						For the nine months ended						For the three months ended						For the nine months ended
(in thousands, except per share data)	September 30,						September 30,						September 30,						September 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Net income	$	12,990		$	15,417		$	42,729		$	26,474		$	23,064		$	12,990		$	60,444		$	42,729
Real property depreciation and amortization		15,643			12,114			44,969			33,273			21,869			15,643			61,303			44,969
Gain on sale of real estate		(4,052	)		(2,983	)		(10,332	)		(4,089	)		(2,025	)		(4,052	)		(9,620	)		(10,332	)
Asset impairment		2,608			—			2,608			—			2,061			2,608			2,061			2,608
FFO	$	27,189		$	24,548		$	79,974		$	55,658		$	44,969		$	27,189		$	114,188		$	79,974
Capital improvements / reserves		(49	)		(49	)		(147	)		(147	)		(49	)		(49	)		(147	)		(147	)
Straight line rent adjustment		(4,520	)		(3,759	)		(12,585	)		(9,761	)		(5,337	)		(4,521	)		(15,640	)		(12,585	)
Cost of debt extinguishment		1,404			52			5,019			105			50			1,404			101			5,019
Gain on sale of investment in related party														(8,500	)		—			(8,500	)		—
Amortization of debt issuance costs		486			456			1,343			1,279			477			486			1,410			1,343
Amortization of net mortgage premiums		205			(48	)		135			(143	)		(36	)		205			(107	)		135
(Gain) Loss on interest rate swaps and other non-cash interest expense		—			(2,991	)		(1,280	)		2,219
Gain on interest rate swaps and other non-cash interest expense														(4	)		—			(4	)		(1,280	)
Amortization of lease intangibles		99			(100	)		487			(373	)		(255	)		99			212			487
Acquisition expenses		—			2,367			—			8,256
AFFO	$	24,813		$	20,476		$	72,946		$	57,093		$	31,315		$	24,813		$	91,513		$	72,946

Diluted WASO(1)		19,147			15,074			18,069			14,154			22,291			19,147			21,496			18,069

Net earnings per share, basic and diluted	$	0.68		$	1.02		$	2.36		$	1.87		$	1.03		$	0.68		$	2.81		$	2.36
FFO per diluted share		1.42			1.63			4.43			3.93			2.02			1.42			5.31			4.43
AFFO per diluted share	$	1.30		$	1.36		$	4.04		$	4.03		$	1.40		$	1.30		$	4.26		$	4.04

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our ~~consolidated financial statements,~~Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these ~~consolidated financial statements~~Condensed Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe there have been no significant changes during the nine months ended September 30, ~~2017~~2018 to the items that we disclosed as our critical accounting policies and estimates under Item 2. ~~“Financial Information - Management’s~~7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Form ~~10.~~10-K.

For information on the impact of recent accounting pronouncements on our business, see Note 2 of the notes to the condensed consolidated financial statements included in this Form 10-Q.

We are exposed to interest rate risk arising from changes in interest rates on the ~~floating rate~~floating-rate indebtedness under our unsecured credit facilities and certain mortgages. Borrowings pursuant to our unsecured credit facilities and floating-rate mortgages bear interest at floating rates based on LIBOR plus ~~the~~an applicable margin. Accordingly, fluctuations in market interest rates may increase or decrease our interest expense, which will in turn increase or decrease our net income and cash flow.

We manage a portion of our interest rate risk by entering into interest rate swap agreements. Our interest rate risk management strategy is intended to stabilize cash flow requirements by maintaining interest rate swap agreements to convert certain ~~variable rate~~variable-rate debt to ~~a fixed rate.~~fixed-rate debt. As of September 30, ~~2017,~~2018, we had 2428 interest rate swap agreements outstanding, with an aggregate notional amount of ~~$640~~$760.1 million. Under these agreements, we receive monthly payments from the counterparties equal to the related variable interest rates multiplied by the outstanding notional amounts. In turn, we pay the counterparties each month an amount equal to a fixed interest rate multiplied by the related outstanding notional amounts. The intended net impact of these transactions is that we pay a fixed interest rate on our ~~variable rate~~variable-rate borrowings. The interest rate swaps have been designated by us as ~~effective~~ cash flow hedges for accounting purposes and are reported at fair value. We assess, both at inception and on an ongoing basis, the effectiveness of our qualifying cash flow hedges. We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes.

The table below summarizes the terms of the current swap agreements relating to our unsecured credit facilities. Several of the interest rate ~~swaps~~swap agreements set forth in the table below were entered into in conjunction with previous secured and unsecured borrowings that were retired, and the swaps have since been reapplied in support of the current unsecured credit facilities.

(in thousands, except interest rates)
Counterparty	Maturity Date	Fixed Rate		Variable Rate Index	Notional Amount		Fair Value			Maturity Date	Fixed Rate			Variable Rate Index	Notional Amount		Fair Value
Bank of America, N.A.	November-23		2.80%	1 month LIBOR	$	25,000,000		(1,177,353	)	November 2023		2.80	%	one-month LIBOR	$	25,000	$	129
Bank of Montreal										July 2024		1.16	%	one-month LIBOR		40,000		3,775
Bank of Montreal	July-24		1.16%	1 month LIBOR		40,000,000		2,146,861		January 2025		1.91	%	one-month LIBOR		25,000		1,451
Bank of Montreal	January-25		1.91%	1 month LIBOR		25,000,000		192,803		July 2025		2.32	%	one-month LIBOR		25,000		921
Bank of Montreal	July-25		2.32%	1 month LIBOR		25,000,000		(489,600	)	January 2026		1.92	%	one-month LIBOR		25,000		1,655
Bank of Montreal	January-26		1.92%	1 month LIBOR		25,000,000		297,340		January 2026		2.05	%	one-month LIBOR		40,000		2,309
Bank of Montreal	January-26		2.05%	1 month LIBOR		40,000,000		84,117		December 2026		2.33	%	one-month LIBOR		10,000		445
Bank of Montreal	December-26		2.33%	1 month LIBOR		10,000,000		(175,375	)	December 2027		2.37	%	one-month LIBOR		25,000		1,180
Capital One, N.A.	December-21		1.05%	1 month LIBOR		15,000,000		486,922		December 2021		1.05	%	one-month LIBOR		15,000		867
Capital One, N.A.	December-24		1.58%	1 month LIBOR		15,000,000		459,406		December 2024		1.58	%	one-month LIBOR		15,000		1,157
Capital One, N.A.	January-26		2.08%	1 month LIBOR		35,000,000		38,960		January 2026		2.08	%	one-month LIBOR		35,000		1,996
Capital One, N.A.	July-26		1.32%	1 month LIBOR		35,000,000		2,289,026		July 2026		1.32	%	one-month LIBOR		35,000		4,007
Manufacturers & Traders Trust Co.	September-22		2.83%	1 month LIBOR		25,000,000		(1,149,860	)
Manufacturers & Traders Trust Co.	November-23		2.65%	1 month LIBOR		25,000,000		(1,023,132	)
Regions Bank	March-18		1.77%	1 month LIBOR		25,000,000		(46,329	)
Regions Bank	March-19		1.91%	3 month LIBOR		25,000,000		(105,943	)
Regions Bank	May-20		2.12%	1 month LIBOR		50,000,000		(561,657	)
Capital One, N.A.										December 2027		2.37	%	one-month LIBOR		25,000		1,215
Capital One, N.A.										April 2026		2.68	%	one-month LIBOR		15,000		267
M&T Bank										August 2021		1.02	%	one-month LIBOR		5,085		306
M&T Bank										September 2022		2.83	%	one-month LIBOR		25,000		59
M&T Bank										November 2023		2.65	%	one-month LIBOR		25,000		250
Regions Bank	March-22		2.43%	3 month LIBOR		25,000,000		(550,191	)	May 2020		2.12	%	one-month LIBOR		50,000		501
Regions Bank	December-23		1.18%	1 month LIBOR		25,000,000		1,177,710		December 2023		1.18	%	one-month LIBOR		25,000		2,130
SunTrust Bank	April-24		1.99%	1 month LIBOR		25,000,000		(63,116	)	April 2024		1.99	%	one-month LIBOR		25,000		1,181
SunTrust Bank	April-25		2.20%	1 month LIBOR		25,000,000		(331,624	)	April 2025		2.20	%	one-month LIBOR		25,000		1,074
SunTrust Bank	July-25		1.99%	1 month LIBOR		25,000,000		71,593		July 2025		1.99	%	one-month LIBOR		25,000		1,444
SunTrust Bank	January-26		1.93%	1 month LIBOR		25,000,000		248,334		December 2025		2.30	%	one-month LIBOR		25,000		1,035
SunTrust Bank										January 2026		1.93	%	one-month LIBOR		25,000		1,651
Wells Fargo Bank, N.A.	February-21		2.39%	1 month LIBOR		35,000,000		(738,635	)	February 2021		2.39	%	one-month LIBOR		35,000		363
Wells Fargo Bank, N.A.	October-24		2.72%	1 month LIBOR		15,000,000		(706,367	)	October 2024		2.72	%	one-month LIBOR		15,000		162
Wells Fargo Bank, N.A.										January 2028		2.37	%	one-month LIBOR		75,000		3,580
Wells Fargo Bank, N.A.										April 2027		2.72	%	one-month LIBOR		25,000		415
															$	760,085	$	35,525

With the exception of our interest rate swap transactions, we have not engaged in transactions in derivative financial instruments or derivative commodity instruments.

As of September 30, ~~2017,~~2018, our financial instruments were not exposed to significant market risk due to foreign currency exchange risk.

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of and for the quarter ended September 30, ~~2017,~~2018, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and were operating at a reasonable assurance level.

There were no changes to our internal control over financial reporting that occurred during the quarter ended September 30, ~~2017,~~2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we are subject to legal proceedings and claims that arise in the ordinary course of our business. These matters are generally covered by insurance or are subject to our right to be indemnified by our tenants that we include in our leases. Management is not aware of any material pending legal proceedings to which we or any of our subsidiaries are a party or to which any of our property is subject, nor are we aware of any such legal proceedings contemplated by government agencies.

There have been no material changes from the risk factors set forth in ~~the~~our Form ~~10.~~

~~In December 2007, we~~We commenced our ongoing private offering of shares of our common stock in 2007. The first closing of our private offering occurred on December 31, 2007, and we have conducted additional closings at least once every calendar quarter since then. Currently, we close sales of additional shares of our common stock monthly. In November 2017, we instituted a monthly equity cap and queue program for new and additional investments in our common stock. The cap does not apply to investments made pursuant to our DRIP or equity capital received in connection with UPREIT transactions. For the months of February 2018 through June 2018, new and additional investments were capped at $15.0 million per month. Based on anticipated acquisition activity, we increased the cap to $20.0 million for the months of July through October 2018, and to $30.0 million for the months of November 2018 through January 2019.

If the total subscriptions for shares of our common stock exceed the cap for a month, subscriptions will generally be accepted at that month’s closing in the order in which they were submitted. In our or the Asset Manager’s discretion, however, certain subscriptions may be given priority over other subscriptions based on factors other than the order of submission, including the size of the subscription, the size of a stockholder’s existing investment, whether the subscription was sourced through an existing or new intermediary relationship, and such other factors we or the Asset Manager may consider. Any subscription for shares that we do not accept at any closing may be held for two subsequent closings and, if so held, shall be treated as a continuing subscription to purchase any remaining shares at the two subsequent closings (and, if applicable, any additional subsequent closings resulting from the subscriber’s exercise of the renewal option discussed below) at the offering price established at the initially subscribed for closing. If we do not accept and request payment for all of the shares subscribed for at one of the first three closings after receipt of a subscription, the subscriber will have the option to renew its subscription for three additional closings and maintain its position in any equity subscription queue by providing written notice of the subscriber’s election to exercise such option. The same option will be available to the subscriber for each subsequent three-closing period.

For the nine months ended September 30, 2018, we sold 2.3 million shares of our common stock in our private offering, including 0.5 million shares of common stock issued pursuant to our DRIP, for gross offering proceeds of approximately $186.3 million. We intend to use substantially all of the net proceeds from our private offering, supplemented with additional borrowings, to continue to invest in additional net leased properties and for general corporate purposes.

The following table provides information regarding the sale of shares of our common stock pursuant to our ongoing private offering during the nine months ended September 30, ~~2017~~2018 (in thousands, except year and Determined Share Value amounts).

Month	Year	Common Shares Sold		Determined Share Value – Common Shares ⁽¹⁾		Total Proceeds – Common Shares Sold		Common Shares DRIP		Determined Share Value – DRIP⁽²⁾		Total Proceeds – Common Share DRIP⁽³⁾		Total Proceeds		Year	Common Shares Sold		Weighted Average Determined Share Value — Common Shares¹		Total Proceeds — Common Shares Sold		Common Shares DRIP		Weighted Average Determined Share Value — DRIP²		Total Proceeds — Common Share DRIP³		Total Proceeds
January	2017		413	$	77	$	31,827		38	$	75	$	2,836	$	34,663	2018		185	$	81	$	15,000		49	$	79	$	3,892	$	18,892
February	2017		270		79		21,314		39		75		2,934		24,248	2018		185		81		14,941		50		79		3,962		18,903
March	2017		368		79		28,946		39		77		3,071		32,017	2018		185		81		15,000		53		79		4,175		19,175
April	2017		234		79		18,462		41		77		3,166		21,628	2018		184		81		14,897		50		79		4,008		18,905
May	2017		291		80		23,242		42		78		3,266		26,508	2018		173		83		14,325		53		79		4,234		18,559
June	2017		352		80		28,064		42		79		3,319		31,383	2018		181		83		15,000		53		81		4,281		19,281
July	2017		220		80		17,601		44		78		3,394		20,995	2018		231		83		19,193		54		81		4,380		23,573
August	2017		343		80		27,455		45		78		3,501		30,956	2018		238		84		20,000		55		81		4,463		24,463
September	2017		297		80		23,676		45		78		3,544		27,220	2018		235		85		20,000		55		83		4,593		24,593
TOTAL			2,788			$	220,587		375			$	29,031	$	249,618
Total																		1,797			$	148,356		472			$	37,988	$	186,344

None of the shares of our common stock set forth in the table above were registered under the Securities Act in reliance upon the exemption from registration under the Securities Act provided by Rule 506(c) under Regulation D promulgated under the Securities Act. All of the shares of our common stock set forth in the table above were sold to persons who represented to us in writing that they qualified as an “Accredited Investor” as such term is defined by Regulation D promulgated under the Securities Act, and provided us with additional documentation to assist us in verifying such person’s status as accredited investors.

In connection with property acquisitions that are structured as UPREIT transactions, the owner of a property will transfer its interest in the property to the Operating Company in exchange for membership units in the Operating Company. During June 2017 we issued 103,478 membership units in the Operating Company in exchange for property in the amount of $8.3 million. There were no other membership unit issuances during the nine months ended September 30, 2017.

None of the membership units in the Operating Company discussed above were registered under the Securities Act in reliance upon the exemption from registration under the Securities Act provided by Rule 506(c) under Regulation D promulgated under the Securities Act. All of the membership units in the Operating Company discussed above were sold to persons who represented to us in writing that they qualified as an Accredited Investor, as such term is defined by Regulation D promulgated under the Securities Act, and provided us with additional documentation to assist us in verifying such person’s status as accredited investors.

During the three months ended September 30, ~~2017,~~2018, we fulfilled repurchase requests and repurchased shares of our common stock pursuant to our share redemption program as follows.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Maryland	26-1516177
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐
Emerging growth company	☒


		Page
Part I - FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Income and Comprehensive Income ~~(Loss)~~ (Unaudited)	2
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2628
	Cautionary Note Regarding Forward-Looking Statements	2628
	Overview	2628
	Liquidity and Capital Resources	3538
	Impact of Inflation	4042
	Off-Balance Sheet Arrangements	4142
	Contractual Obligations	4143
	Results of Operations	4143
	Net Income and Non-GAAP Measures (FFO and AFFO)	4748
	Critical Accounting Policies	5152
	Impact of Recent Accounting Pronouncements	5152
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5153
Item 4.	Controls and Procedures	5254
Part II - OTHER INFORMATION		5355
Item 1.	Legal Proceedings	5355
Item 1A.	Risk Factors	5355
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5355
Item 3.	Defaults upon Senior Securities	5557
Item 4.	Mine Safety Disclosures	5557
Item 5.	Other Information	5557
Item 6.	Exhibits	5558

(in thousands)	September 30, 2018			December 31, 2017
Beginning balance	$	742		$	323
Provision for doubtful accounts		1,053			419
Write-offs		(177	)		—
Ending balance	$	1,618		$	742

(in thousands, except number of properties)
Date	Property Type	Number of Properties		Real Estate Acquisition Price
March 27, 2018	Industrial		1	$	22,000
March 30, 2018	Industrial/Retail		26		78,530
April 30, 2018	Other		1		16,170
June 6, 2018	Industrial		1		8,500
June 14, 2018	Industrial		1		39,700
June 14, 2018	Retail		6		14,479
June 21, 2018	Retail		1		20,231
June 21, 2018	Industrial		1		38,340	^(a)
June 29, 2018	Industrial		1		10,400
June 29, 2018	Retail		2		6,433
July 12, 2018	Industrial		1		11,212
July 17, 2018	Retail		5		14,845
July 17, 2018	Office		1		34,670
August 6, 2018	Industrial		2		4,802
August 10, 2018	Retail		6		26,545
August 10, 2018	Retail		2		2,192
August 10, 2018	Retail		1		3,650
August 10, 2018	Retail		1		1,539
August 10, 2018	Retail		10		11,051
			70	$	365,289	^(b)

	Common Stock		Additional Paid-in Capital			Subscriptions Receivable			Cumulative Distributions in Excess of Retained Earnings			Accumulated Other Comprehensive (Loss)/Income			Non-controlling Interests			Total
Balance, January 1, 2016	$	11	$	738,909		$	(1,506	)	$	(56,911	)	$	(10,340	)	$	77,782		$	747,945
Net income		-		-			-			23,874			-			2,600			26,474
Issuance of 2,809 shares of common stock, net		3		209,049			(1,977	)		-			-			-			207,075
Other offering costs		-		(976	)		-			-			-			-			(976	)
Issuance of 97 membership units		-		-			-			-			-			7,190			7,190
Distributions declared ($0.405 per share January and February 2016, $0.410 per share March through September 2016)		-		-			-			(51,558	)		-			(5,860	)		(57,418	)
Change in fair value of interest rate swap agreements		-		-			-			-			(18,394	)		(2,157	)		(20,551	)
Redemption of 87 shares of common stock		-		(6,487	)		-			-			-	��		-			(6,487	)
Balance, September 30, 2016	$	14	$	940,495		$	(3,483	)	$	(84,595	)	$	(28,734	)	$	79,555		$	903,252

Percentage of shares owned by	September 30, 2018			December 31, 2017
Corporation		92.4	%		92.4	%
Non-controlling interests		7.6	%		7.6	%
		100.0	%		100.0	%

	December 31, 2016
	Total			Level 1		Level 2			Level 3
Interest rate swaps, assets	$	9,598		$	-	$	9,598		$	-
Interest rate swap, liabilities		(10,217	)		-		(10,217	)		-
	$	(619	)	$	-	$	(619	)	$	-

	December 31, 2017
(in thousands)	Total			Level 1		Level 2			Level 3
Interest rate swap, assets	$	11,008		$	—	$	11,008		$	—
Interest rate swap, liabilities		(5,020	)		—		(5,020	)		—
	$	5,988		$	—	$	5,988		$	—

(in thousands)	Financial Statement	For the three months ended		For the nine months ended
Type of Fee	Presentation	September 30, 2016		September 30, 2016
Legal services – general	General and administrative	$	107	$	276
Organization costs	General and administrative		4		18
			111		294

Finance related	Debt issuance costs^(a)		47		94
Acquisition related fees	Acquisition expenses		89		1,756
Property disposition related	Gain on sale of real estate		34		34
Legal services - tenant related	Property and operating expenses		28		40
Total related party legal expenses		$	309	$	2,218

	Outstanding Balance
(in thousands)	September 30, 2018			December 31, 2017			Interest Rate^(d)	Maturity Date
2015 Unsecured Term Loan Agreement^{(a), (b)}	$	300,000		$	325,000		one-month LIBOR + 1.40%	Feb. 2019 ^(f)
2017 Unsecured Revolving Credit and Term Loan Agreement^(a)
Revolver		—			273,000		one- and three- month LIBOR + 1.20% ^(e)	Jan. 2022
5.5-Year term loan		265,000			265,000		one- month LIBOR + 1.35%	Jan. 2023
7-Year term loan		190,000			100,000		one- month LIBOR + 1.90%	Jun. 2024
		455,000			638,000
Senior Notes^(a)
Series A		150,000			150,000		4.84%	Apr. 2027
Series B		225,000			—		5.09%	Jul. 2028
Series C		100,000			—		5.19%	Jul. 2030
		475,000			150,000
Total		1,230,000			1,113,000
Debt issuance costs, net^(c)		(4,527	)		(3,088	)
	$	1,225,473		$	1,109,912

Property Type	% NTM Rent
Retail – other		13.0	%
Retail – casual dining		~~13.4~~11.3	%
Retail – quick service restaurants ~~(QSR)~~("QSR")		~~11.9~~	%
~~Retail – other~~		~~10.7~~10.8	%
Total Retail		~~36.0~~	%
~~Industrial – manufacturing~~		~~11.1~~35.1	%
Industrial – warehouse/distribution		~~10.0~~13.1	%
Industrial – manufacturing		9.8	%
Industrial – flex		~~5.3~~6.1	%
Industrial – other		~~3.8~~3.4	%
Total Industrial		~~30.2~~32.4	%
Healthcare – clinical		~~11.4~~10.2	%
Healthcare – surgical		~~5.7~~4.5	%
Healthcare – other		~~4.3~~3.6	%
Total Healthcare		~~21.4~~18.3	%
~~Other – corporate office~~Office		~~8.3~~10.3	%
~~Other – other~~		~~4.1~~	%
~~Total~~ Other		~~12.4~~3.9	%
Total		100.0	%

~~Top Tenant Industries~~
Industry	% NTM Rent
Restaurants		~~25.3~~22.4	%
Healthcare Facilities		~~20.8~~15.7	%
Home Furnishing Retail		~~5.6~~5.4	%
Specialized Consumer Services		4.8	%
Packaged Foods & Meats		~~5.3~~4.1	%
Auto Parts & Equipment		~~5.0~~4.0	%
~~Specialized Consumer~~Air Freight & Logistics		3.4	%
Healthcare Services		~~3.7~~3.0	%
Distributors		2.2	%
Industrial Conglomerates		~~2.6~~2.1	%
Multi-line Insurance		~~2.3~~1.8	%
Life Sciences Tools & Services		~~2.3~~	%
~~Distributors~~		~~2.3~~1.8	%
Industrial Machinery		~~2.0~~	%
~~Food Retail~~		~~1.9~~	%
~~Metal & Glass Containers~~		1.8	%
~~Managed Healthcare~~		~~1.8~~	%
~~Soft Drinks~~Application Software		1.7	%
Aerospace & Defense		1.6	%
Top 15 Tenant Industries		~~84.4~~75.8	%
Other ~~(22~~(31 industries)		~~15.6~~24.2	%
Total		100.0	%

Year	Number of Tenants		Number of Properties		Square Footage		NTM Rent		Percentage of NTM Rent
2017		—		—		—	$	—		—	%
2018		1		1		2		131		<0.1	%
2019		1		1		2		117		<0.1	%
2020		3		4		116		1,376		0.8	%
2021		2		4		9		576		0.3	%
2022		3		3		87		2,393		1.4	%
2023		9		13		724		6,786		4.0	%
2024		12		15		1,741		13,933		8.2	%
2025		2		8		28		1,034		0.6	%
2026		17		27		620		9,964		5.9	%
2027		16		30		1,210		14,785		8.8	%
2028		12		22		1,025		11,184		6.6	%
2029		12		54		2,483		15,623		9.2	%
2030 and thereafter		61		295		6,015		91,023		53.9	%

~~Asset Category~~	~~Target~~			~~Range~~
~~Retail~~		30	%	~~15-45%~~
~~Healthcare~~		20	%	~~15-40%~~
~~Industrial~~		25	%	~~15-40%~~
~~Office~~		15	%	~~10-20%~~
~~Other~~		10	%	~~5-15%~~properties.

Period	NAV as of	Determined Share Value		NAV per diluted share
November 1, 2018 - January 31, 2019	September 30, 2018	$	86.00	$	85.66
August 1, 2018 - October 31, 2018	June 30, 2018	$	85.00	$	84.63
May 1, 2018 - July 31, 2018	March 31, 2018	$	83.00	$	83.14

Period	Shares Redeemed		Average Determined Share Value⁽¹⁾		Average Redemption Price		Redemption Amount		Discount on Redemption⁽²⁾
Q1 2017		17,861	$	79.00	$	77.24	$	1,379,570		2.2	%
Q2 2017		20,641	$	80.00	$	79.29	$	1,636,650		0.9	%
Q3 2017		23,374	$	80.00	$	77.36	$	1,808,288		3.3	%
YTD 2017		61,876	$	79.67	$	77.97	$	4,824,508		2.1	%

Loan Tranche	Amount Drawn		Amount Available		Total Capacity		Maturity Date
New Revolver		90,000		310,000		400,000	January 21, 2022
5.5-Year Term Loan		250,000		—		250,000	January 23, 2023
7-Year Term Loan		—		150,000		150,000	June 21, 2024

~~Level~~	~~Credit Rating~~ ~~(S&P/Moody’s)~~	~~Applicable Margin~~ ~~for LIBOR Loans~~
I	~~A-/A3 or better~~		~~0.83%~~
II	~~BBB+/Baa1~~		~~0.88%~~
~~III~~	~~BBB/Baa2~~		~~1.00%~~
IV	~~BBB-/Baa3~~		~~1.20%~~
V	~~Lower than BBB-/Baa3~~		~~1.55%~~

~~Level~~	~~Credit Rating~~ ~~(S&P/Moody’s)~~	~~Applicable~~ ~~Facility Fee~~
I	~~A-/A3 or better~~		~~0.13%~~
II	~~BBB+/Baa1~~		~~0.15%~~
~~III~~	~~BBB/Baa2~~		~~0.20%~~
IV	~~BBB-/Baa3~~		~~0.25%~~
V	~~Lower than BBB-/Baa3~~		~~0.30%~~

~~Level~~	~~Credit Rating~~ ~~(S&P/Moody’s)~~	~~Applicable Margin for~~ ~~LIBOR Loans~~
I	~~A-/A3 or better~~		~~0.90%~~
II	~~BBB+/Baa1~~		~~0.95%~~
~~III~~	~~BBB/Baa2~~		~~1.10%~~
IV	~~BBB-/Baa3~~		~~1.35%~~
V	~~Lower than BBB-/Baa3~~		~~1.75%~~

Covenants	Required	Actual (as of September 30, 2018)
Leverage Ratio⁽¹⁾	≤ 0.60 to 1.00		0.41
Secured Indebtedness Ratio⁽²⁾	≤ 0.40 to 1.00		0.02
Unencumbered Coverage Ratio⁽³⁾	≥ 1.75 to 1.00		3.26
Fixed Charge Coverage Ratio⁽⁴⁾	≥ 1.50 to 1.00		2.83
Total Unsecured Indebtedness to Total Unencumbered Eligible Property Value⁽⁵⁾	≤ 0.60 to 1.00		0.47
Dividends and Other Restricted Payments	Only applicable in case of default	Not Applicable

~~Covenants~~	~~Required~~	~~Actual~~ ~~(as of~~ ~~September 30, 2017)~~
~~Leverage Ratio~~⁽¹⁾	≤ ~~0.60 to 1.00~~		~~0.37~~
~~Secured Indebtedness Ratio~~⁽²⁾	≤ ~~0.40 to 1.00~~	~~0.02~~
~~Unencumbered Coverage Ratio~~⁽³⁾	≥ ~~1.75 to 1.00~~	~~5.49~~
~~Fixed Charge Coverage Ratio~~⁽⁴⁾	~~≥ 1.50 to 1.00~~	~~3.11~~
~~Total Unsecured Indebtedness to Total~~ ~~Unencumbered Eligible Property Value~~⁽⁵⁾	~~≤ 0.60 to 1.00~~		~~0.43~~
~~Dividends and Other Restricted Payments~~	~~Only applicable in case of default~~	~~Not Applicable~~

Period	Total Number of Shares Requested to be Redeemed ⁽¹⁾		Total Number of Shares Redeemed		Average Price Paid Per Share ⁽²⁾		Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
July 2017		—		—	$	—	(3)
August 2017		—		—	$	—	(3)
September 2017		23,374		23,374	$	77.36	(3)


No.		Description

3.1^(a)		Articles of Incorporation of Broadstone Net Lease, Inc. (Incorporated herein by reference to Exhibit 3.1 to the Company’s General Form for Registration of Securities on Form 10, filed on April 24, 2017)

3.2^(a)		Amended and Restated Bylaws of Broadstone Net Lease, Inc. (Incorporated herein by reference to Exhibit 3.2 to the Company’s General Form for Registration of Securities on Form 10, filed on April 24, 2017)

4.1^(a)		Broadstone Net Lease, Inc. Distribution Reinvestment Plan (Incorporated herein by reference to Exhibit 4.1 to the Company’s General Form for Registration of Securities on Form 10, filed on April 24, 2017)

4.2^(b)		Broadstone Net Lease, Inc. Share Redemption Program (Incorporated herein by reference to Exhibit 4.2 to the Company’s Amendment No. 2 to the General Form for Registration of Securities on Form 10, filed on June 29, 2017)

~~31.1~~10.1		Note and Guaranty Agreement, dated July 2, 2018, for 5.09% Series B Guaranteed Senior Notes due July 2, 2028 and 5.19% Series C Guaranteed Senior Notes due July 2, 2030, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, and the purchasers party thereto (Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on July 6, 2018)

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

~~31.2~~ 31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

~~32.1~~32.1*†		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

~~32.2~~32.2*†		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

101.1		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, ~~2017,~~2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income and Comprehensive Income, ~~(Loss),~~ (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements

		BROADSTONE NET LEASE, INC.

Date: November ~~13, 2017~~5, 2018		/s/ Christopher J. Czarnecki
		Christopher J. Czarnecki
		Chief Executive Officer and President

Date: November ~~13, 2017~~5, 2018		/s/ Ryan M. Albano
		Ryan M. Albano
		Executive Vice President and Chief Financial Officer