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~~ 25,550,886.642 shares of the Registrant’s common stock, $0.001 par value per share, outstanding as of November ~~13, 2017.~~12, 2019.

	September 30,			December 31,
	2017			2016			September 30, 2019			December 31, 2018
Assets
Accounted for using the operating method, net of accumulated depreciation	$	1,891,708		$	1,637,700		$	3,459,626		$	2,641,746
Accounted for using the direct financing method		41,612			47,271			41,920			42,000
Investment in rental property, net		1,933,320			1,684,971			3,501,546			2,683,746

Cash and cash equivalents		13,698			21,635			14,008			18,612
Restricted cash		925			1,468
Accrued rental income		47,766			36,577			81,251			69,247
Tenant and other receivables, net		1,120			355			861			1,026
Tenant and capital reserves		897			767
Prepaid expenses and other assets		699			260			34,594			4,316
Notes receivable		6,527			6,527
Investment in related party		10,000			10,000
Interest rate swap, assets		7,493			9,598			1,120			17,633
Intangible lease assets, net		205,469			168,121			342,478			286,258
Debt issuance costs – unsecured revolver, net		3,139			446			2,679			2,261
Leasing fees, net		13,046			11,329			13,251			13,698
Total assets	$	2,244,099		$	1,952,054		$	3,991,788		$	3,096,797

Liabilities and equity
Unsecured revolver	$	126,500		$	102,000		$	303,300		$	141,100
Mortgages and notes payable, net		57,883			106,686			112,562			78,952
Unsecured term notes, net		721,907			657,891			1,671,511			1,225,773
Interest rate swap, liabilities		7,119			10,217			37,489			1,820
Accounts payable and other liabilities		18,426			17,396			34,008			24,394
Due to related parties		1,688			364			433			114
Tenant improvement allowances		6,627			9,490
Accrued interest payable		4,880			1,602			9,482			9,777
Intangible lease liabilities, net		66,303			47,871			94,503			85,947
Total liabilities		1,011,333			953,517			2,263,288			1,567,877

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, 25,482 and 22,014 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively								25			22
Additional paid-in capital		1,253,431			1,009,431			1,852,038			1,557,421
Subscriptions receivable		(470	)		(9,790	)
Cumulative distributions in excess of retained earnings		(112,725	)		(89,960	)		(194,790	)		(155,150	)
Accumulated other comprehensive income		(40	)		2,092
Accumulated other comprehensive (loss) income								(33,911	)		14,806
Total Broadstone Net Lease, Inc. stockholders’ equity		1,140,214			911,788			1,623,362			1,417,099
Non-controlling interests		92,552			86,749			105,138			111,821
Total equity		1,232,766			998,537			1,728,500			1,528,920
Total liabilities and equity	$	2,244,099		$	1,952,054		$	3,991,788		$	3,096,797

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			2019			2018			2019			2018
Revenues
Rental income from operating leases	$	43,233		$	34,806		$	123,890		$	96,779
Earned income from direct financing leases		968			1,143			3,175			3,406
Operating expenses reimbursed from tenants		1,995			1,056			4,908			3,059
Other income from real estate transactions		39			5			117			176
Total revenues		46,235			37,010			132,090			103,420
Lease revenues													$	76,401		$	61,764		$	213,884		$	174,385

Operating expenses
Depreciation and amortization		15,643			12,114			44,969			33,273			28,392			21,869			77,989			61,303
Asset management fees		3,844			2,789			10,666			7,770			5,610			4,663			16,048			13,119
Property management fees		1,249			1,010			3,635			2,868			2,098			1,680			5,918			4,792
Acquisition expenses		-			2,367			-			8,256
Property and operating expense		2,009			1,184			4,710			3,005			3,855			2,777			11,497			7,926
General and administrative		1,173			598			3,297			1,951			1,315			1,664			3,807			4,451
State and franchise tax		301			71			511			181
State, franchise and foreign tax														405			58			1,153			811
Provision for impairment of investment in rental properties		2,608			-			2,608			-			2,435			2,061			3,452			2,061
Total operating expenses		26,827			20,133			70,396			57,304			44,110			34,772			119,864			94,463

Operating income		19,408			16,877			61,694			46,116

Other income (expenses)
Preferred distribution income		187			181			550			531			—			65			—			440
Interest income		127			4			354			9			5			16			6			178
Interest expense		(9,380	)		(4,576	)		(25,182	)		(24,166	)		(18,465	)		(14,484	)		(51,025	)		(38,115	)
Cost of debt extinguishment		(1,404	)		(52	)		(5,019	)		(105	)		(455	)		(50	)		(1,176	)		(101	)
Gain on sale of real estate		4,052			2,983			10,332			4,089			12,585			2,025			16,772			9,620
Gain on sale of investment in related party														—			8,500			—			8,500
Internalization expenses														(923	)		—			(1,195	)		—
Net income		12,990			15,417			42,729			26,474			25,038			23,064			57,402			60,444

Net income attributable to non-controlling interests		(1,042	)		(1,459	)		(3,460	)		(2,600	)		(1,650	)		(1,797	)		(3,942	)		(4,631	)
Net income attributable to Broadstone Net Lease, Inc.	$	11,948		$	13,958		$	39,269		$	23,874		$	23,388		$	21,267		$	53,460		$	55,813

Weighted average number of common shares outstanding
Basic		17,617			13,647			16,607			12,738			24,642			20,554			23,394			19,850
Diluted		19,147			15,074			18,069			14,154			26,379			22,291			25,131			21,496
Net Earnings per common share
Net earnings per common share
Basic and diluted	$	0.68		$	1.02		$	2.36		$	1.87		$	0.95		$	1.03		$	2.28		$	2.81

Comprehensive income (loss)
Comprehensive income
Net income	$	12,990		$	15,417		$	42,729		$	26,474		$	25,038		$	23,064		$	57,402		$	60,444
Other comprehensive income (loss)
Other comprehensive income
Change in fair value of interest rate swaps		283			1,280			(1,448	)		(20,551	)		(16,380	)		6,299			(52,182	)		30,296
Realized loss on interest rate swaps		-			-			(873	)		-
Realized gain on interest rate swaps														(41	)		(4	)		(163	)		(4	)
Comprehensive income		13,273			16,697			40,408			5,923			8,617			29,359			5,057			90,736
Comprehensive income attributable to non-controlling interests		(1,046	)		(1,581	)		(3,271	)		(443	)		(557	)		(2,288	)		(315	)		(6,931	)
Comprehensive income attributable to Broadstone Net Lease, Inc.	$	12,227		$	15,116		$	37,137		$	5,480		$	8,060		$	27,071		$	4,742		$	83,805

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

	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, 2019	$	22	$	1,557,421		$	—		$	(155,150	)	$	14,806		$	111,821		$	1,528,920
Net income		—		—			—			13,938			—			1,084			15,022
Issuance of 883 shares of common stock		1		75,099			(225	)		—			—			—			74,875
Other offering costs		—		(300	)		—			—			—			—			(300	)
Distributions declared ($0.43 per share January 2019, $0.44 per share February through March 2019)		—		—			—			(29,635	)		—			(2,348	)		(31,983	)
Change in fair value of interest rate swap agreements		—		—			—			—			(11,713	)		(911	)		(12,624	)
Realized gain on interest rate swap agreements		—		—			—			—			(75	)		(6	)		(81	)
Redemption of 21 shares of common stock		—		(1,803	)		—			—			—			—			(1,803	)
Balance, March 31, 2019	$	23	$	1,630,417		$	(225	)	$	(170,847	)	$	3,018		$	109,640		$	1,572,026
Net income		—		—			—			16,134			—			1,208			17,342
Issuance of 892 shares of common stock		1		76,004			225			—			—			—			76,230
Other offering costs		—		(300	)		—			—			—			—			(300	)
Distributions declared ($0.44 per share April through June 2019)		—		—			—			(30,934	)		—			(2,297	)		(33,231	)
Change in fair value of interest rate swap agreements		—		—			—			—			(21,564	)		(1,614	)		(23,178	)
Realized gain on interest rate swap agreements		—		—			—			—			(38	)		(3	)		(41	)
Redemption of 38 shares of common stock		—		(3,210	)		—			—			—			—			(3,210	)
Balance, June 30, 2019	$	24	$	1,702,911		$	—		$	(185,647	)	$	(18,584	)	$	106,934		$	1,605,638
Net income		—		—			—			23,388			—			1,650			25,038
Issuance of 1,840 shares of common stock		1		157,191			—			—			—			—			157,192
Other offering costs		—		(703	)		—			—			—			—			(703	)
Distributions declared ($0.44 per share July through September 2019)		—		—			—			(32,531	)		—			(2,352	)		(34,883	)
Change in fair value of interest rate swap agreements		—		—			—			—			(15,288	)		(1,092	)		(16,380	)
Realized gain on interest rate swap agreements		—		—			—			—			(39	)		(2	)		(41	)
Redemption of 88 shares of common stock		—		(7,361	)		—			—			—			—			(7,361	)
Balance, September 30, 2019	$	25	$	1,852,038		$	—		$	(194,790	)	$	(33,911	)	$	105,138		$	1,728,500

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			Non- controlling Interests			Total
Balance, January 1, 2018	$	19	$	1,301,979		$	(15	)	$	(120,280	)	$	5,122		$	97,376		$	1,284,201
Net income		—		—			—			17,573			—			1,422			18,995
Issuance of 710 shares of common stock		1		57,154			(129	)		—			—			—			57,026
Other offering costs		—		(224	)		—			—			—			—			(224	)
Distributions declared ($0.415 per share January 2018, $0.43 per share February through March 2018)		—		—			—			(24,476	)		—			(2,472	)		(26,948	)
Change in fair value of interest rate swap agreements		—		—			—			—			15,685			1,270			16,955
Conversion of eight membership units to eight shares of common stock		—		684			—			—			—			(684	)		—
Redemption of 46 shares of common stock		—		(3,577	)		—			—			—			—			(3,577	)
Cancellation of nine shares of common stock		—		(748	)		—			—			—			—			(748	)
Balance, March 31, 2018	$	20	$	1,355,268		$	(144	)	$	(127,183	)	$	20,807		$	96,912		$	1,345,680
Net income		—		—			—			16,974			—			1,412			18,386
Issuance of 695 shares of common stock		—		56,886			(356	)		—			—			—			56,530
Other offering costs		—		(301	)		—			—			—			—			(301	)
Issuance of 194 membership units		—		—			—			—			—			15,797			15,797
Distributions declared ($0.43 per share April through June 2018)		—		—			—			(25,620	)		—			(2,383	)		(28,003	)
Change in fair value of interest rate swap agreements		—		—			—			—			6,503			539			7,042
Redemption of 28 shares of common stock		—		(2,312	)		—			—			—			—			(2,312	)
Balance, June 30, 2018	$	20	$	1,409,541		$	(500	)	$	(135,829	)	$	27,310		$	112,277		$	1,412,819
Net income		—		—			—			21,267			—			1,797			23,064
Issuance of 870 shares of common stock		1		72,770			(1,190	)		—			—			—			71,581
Other offering costs		—		(297	)		—			—			—			—			(297	)
Distributions declared ($0.43 per share July through September 2018)		—		—			—			(26,555	)		—			(1,861	)		(28,416	)
Change in fair value of interest rate swap agreements		—		—			—			—			5,807			492			6,299
Realized gain on interest rate swap agreements		—		—			—			—			(3	)		(1	)		(4	)
Redemption of 32 shares of common stock		—		(2,675	)		—			—			—			—			(2,675	)
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			2019			2018
Operating activities
Net income	$	42,729		$	26,474		$	57,402		$	60,444
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			75,661			61,515
Provision for impairment of investment in rental properties		2,608			-
Provision for impairment on investment in rental properties								3,452			2,061
Amortization of debt issuance costs charged to interest expense		1,478			1,136			1,655			1,303
Straight-line rent and financing lease adjustments		(12,505	)		(9,736	)		(15,882	)		(15,640	)
Cost of debt extinguishment		5,019			105			1,176			101
(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								(16,772	)		(9,620	)
Settlement of interest rate swap								—			760
Gain on sale of investment in related party								—			(8,500	)
Leasing fees paid		(2,597	)		(2,827	)		(747	)		(1,325	)
Other non-cash items		325			306			277			468
Changes in assets and liabilities:
Tenant and other receivables		(237	)		286			165			(65	)
Prepaid expenses and other assets		(440	)		(630	)		(393	)		(799	)
Accounts payable and other liabilities		897			5,870			5,234			(893	)
Accrued interest payable		3,278			134			(295	)		3,707
Net cash provided by operating activities		72,365			52,148			110,933			93,517

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 mortgages assumed of $49,782 and $20,845 in 2019 and 2018, respectively								(957,820	)		(329,664	)
Acquisition of rental property accounted for using the direct financing method		(3,546	)		(544	)		—			(430	)
Capital expenditures and improvements		(3,871	)		(7,525	)		(4,044	)		(4,326	)
Proceeds from sale of investment in related party								—			18,500
Proceeds from disposition of rental property, net		55,296			15,608			90,137			41,330
Increase in tenant and capital reserves		(130	)		(43	)
Decrease in restricted cash		543			65
Change in deposits on investments in rental property								1,500			—
Net cash used in investing activities		(297,497	)		(360,093	)		(870,227	)		(274,590	)

Financing activities
Proceeds from issuance of common stock, net		229,698			186,013			260,475			146,791
Redemptions of common stock		(4,825	)		(6,487	)		(12,374	)		(8,564	)
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 $49,782 and $20,845 in 2019 and 2018, respectively								750,000			415,000
Principal payments on mortgages, notes payable and unsecured term notes								(316,191	)		(33,930	)
Borrowings on unsecured revolver		220,000			226,500			389,100			189,500
Repayments on unsecured revolver		(195,500	)		(146,000	)		(226,900	)		(462,500	)
Cash distributions paid to stockholders		(32,533	)		(26,060	)		(45,219	)		(38,410	)
Cash distributions paid to non-controlling interests		(5,669	)		(5,275	)		(6,980	)		(6,630	)
Debt issuance and extinguishment costs paid		(9,889	)		(622	)		(7,491	)		(2,255	)
Net cash provided by financing activities		217,195			313,898			784,420			199,002
Net increase in cash and cash equivalents and restricted cash								25,126			17,929
Cash and cash equivalents and restricted cash at beginning of period								18,989			10,099
Cash and cash equivalents and restricted cash at end of period							$	44,115		$	28,028

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		$	18,612		$	9,355
Restricted cash at beginning of period								377			744
Cash and cash equivalents and restricted cash at beginning of period							$	18,989		$	10,099

Cash and cash equivalents at end of period	$	13,698		$	33,003		$	14,008		$	17,301
Restricted cash at end of period								30,107			10,727
Cash and cash equivalents and restricted cash at end of period							$	44,115		$	28,028

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.~~properties, primarily in the United States. The Corporation leases properties to retail, healthcare, industrial, office, and other commercial businesses under long-term 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 ofAt September 30, ~~2017,~~2019, the Corporation owned a diversified portfolio of ~~477~~662 individual net leased commercial properties located in 3742 states throughout the continental United ~~States.~~States and in British Columbia, Canada.

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 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~~umbrella partnership real estate investment trust (“UPREIT”). The following table summarizes the economic ownership interest in the Operating Company:

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 currently externally managed and its ~~board~~Board of ~~directors~~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~~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~~concerning 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,~~2018, included in the Company’s ~~Amendment No. 2 to its Registration Statement~~2018 Annual Report on Form ~~10,~~10-K, filed with the SEC on ~~June 29, 2017 (the “Form 10”).~~March 14, 2019. 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% interest in the Operating Company at September 30, 2017 and is the sole managing member of the Operating Company, which gives the Corporation exclusive and~~has 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~~has 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.

~~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 our~~taken. If the Company’s 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,~~conditions, as derived through ~~our~~the 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 and nine months ended September 30, ~~2017 we~~2019, the Company recorded impairment charges of ~~$2,608~~$2,435 and $3,452, respectively. During the three and nine months ended September 30, 2018, the Company recorded impairment charges of $2,061. Impairment indicators were identified due to concerns over the tenant’s future viability, property vacancies, and changes to the overall investment strategy for the real estate assets. The amount of the impairment charges were based on ~~our~~management’s consideration of the factors detailed above. In determining the fair value of the impaired assets at September 30, 2019 and March 31, 2019, the ~~time~~measurement dates, the Company utilized a capitalization rate of 14.58%, a weighted average discount rate of 8.00%, and a weighted average price per square foot of $226. In determining the fair value of the impaired assets at September 30, 2018, the measurement wedate, the Company utilized capitalization rates ranging from ~~7.25%~~7.50% to ~~12%~~10.00%, and a weighted average discount rate of 8%8.00%.

The Company ~~has reduced~~commences revenue recognition on its leases based on a number of factors, including the ~~carrying value~~initial determination that the contract is or contains a lease. Generally, all of the ~~impaired real estate assets to~~Company’s property related contracts are or contain leases, and therefore revenue is recognized when the ~~estimated fair value as detailed below:~~

lessee takes possession of or controls the physical use of the leased assets. In most instances this occurs on the lease commencement date. At the time of lease assumption or at the inception of a new lease, ~~arrangement,~~ including new leases that arise from amendments, the Company assesses the terms and conditions of the lease to determine the proper lease classification.

Certain of the Company’s leases require tenants to pay rent based upon a percentage of the property’s net sales (“percentage rent”) or contain rent escalators indexed to future changes in the Consumer Price Index. Lease income associated with such provisions is considered variable lease income and therefore is not included in the initial measurement of the lease receivable, or in the calculation of straight-line rent revenue. Such amounts are recognized as income when the amounts are determinable.

As described in Recently Adopted Accounting Standards elsewhere in Note 2, the Company adopted the provisions of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) and related ASUs subsequently issued (collectively, “ASC 842”) as of January 1, 2019.

A lease ~~arrangement~~ is classified as an operating lease if none of the following criteria are met: (i) ownership transfers to the lessee at the end of the lease term, (ii) the lessee has a purchase option that is reasonably expected to be exercised, (iii) the lease term is for a major part of the economic life of the leased property, (iv) the present value of the future lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the leased property, and (v) the leased property is of such a specialized nature that it is expected to have no future alternative use to the Company at the end of the lease term. If one or more of these criteria are met, the lease will generally be classified as a sales-type lease, unless the lease contains a residual value guarantee from a third party other than the lessee, in which case it would be classified as a direct financing lease under certain circumstances in accordance with ASC 842.

ASC 842 requires the Company to account for the right to use land as a separate lease component, unless the accounting effect of doing so would be insignificant. Determination of significance requires management judgment. In determining whether the accounting effect of separately reporting the land component from other components for its real estate leases is significant, the Company assesses: (i) whether separating the land component impacts the classification of any lease component, (ii) the value of the land component in the context of the overall contract, and (iii) whether the right to use the land is coterminous with the rights to use the other assets.

A lease arrangement was classified as an operating lease if none of the following criteria were met: (i) ownership transferred to the lessee prior to or shortly after the end of the lease term, (ii) the lessee ~~has~~had a bargain purchase option during or at the end of the lease term, (iii) the lease term iswas 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) iswas greater than or equal to 90% of the fair value of the leased property. If one or more of these criteria ~~are~~were met, and the minimum lease payments ~~are~~were determined to be reasonably predictable and collectible, the lease arrangement iswas generally accounted for as a direct financing lease. Consistent with ASC 840~~840,~~, Leases, if the fair value of the land component iswas 25% or more of the total fair value of the leased property, the land iswas 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, and sales-type leases are described below:

Rental property accounted for under operating leases – Revenue is recognized as rents are earned on a straight-line basis over the non-cancelable terms of the related leases. 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~~The net investment in the direct financing lease represents receivables for the sum of future ~~minimum~~ lease payments to be received and the estimated residual value of the leased property, less ~~the~~ unamortized unearned ~~income.~~income (which represents the difference between undiscounted cash flows and discounted cash flows). Unearned income is deferred and amortized into income over the lease terms so as to produce a constant periodic rate of return on the Company’s net investment in the leases.

Rental property accounted for under sales-type leases – For leases accounted for as sales-type leases, the Company records selling profit arising from the lease at inception, along with the net investment in the lease. The Company leases assets through the assumption of existing leases or through sale-leaseback transactions, and records such assets at their fair value at the time of acquisition, which in most cases coincides with lease inception. As a result, the Company does not generally recognize selling profit on sales-type leases. The net investment in the sales-type lease represents receivables for the sum of future lease payments and the estimated unguaranteed residual value of the leased property, each measured at net present value. Interest income is recorded over the lease terms so as to produce a constant periodic rate of return on the Company’s net investment in the leases.

Certain of the Company’s contracts contain nonlease components (e.g., charges for management fees, common area maintenance, and reimbursement of third-party maintenance expenses) in addition to lease components (i.e., monthly rental charges). Services related to nonlease components are provided over the same period of time as, and billed in the same manner as, monthly rental charges. The Company elected to apply the practical expedient available under ASC 842, for all classes of assets, not to separate the lease components from the nonlease components when accounting for operating leases. Since the lease component is the predominant component under each of these leases, combined revenues from both the lease and nonlease components are reported as Lease revenues in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

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

~~Property losses, whether full or partial, are accounted~~Allowance for ~~using a combination of impairment, insurance, and revenue recognition guidance prescribed by GAAP. Upon incurring a loss event, the Company evaluates for asset impairment under ASC 350,~~ ~~Intangibles – 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 maintenanceDoubtful Accounts

Prior to the ~~properties. The terms~~adoption of the leases also require the tenants to continue making their monthly rental payments despite the property loss. To the extent that the assets are recoverable, determined utilizing undiscounted cash flows expected to result from the use of the asset or asset groupASC 842, provisions for doubtful accounts were recorded as bad debt expense and ~~its eventual disposition, the Company accounts for a full or partial property loss as an acceleration of depreciation~~included in General 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, in the case of full or partial loss to a property the tenant has an obligation to restore/rebuild the premises as nearly as possible to its value, condition and character immediately prior to such event. To mitigate the risk of loss, the Company requires tenants to maintain general liability insurance policiesadministrative expenses 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 theaccompanying Condensed Consolidated Statements of Income and Comprehensive ~~Income (Loss). If~~Income. Subsequent to the ~~insurance/tenant recovery is less than~~adoption of ASC 842, provisions for doubtful accounts are recorded prospectively as an offset to Lease revenues on the ~~amount of accelerated depreciation recognized, the Company will recognize a net loss in the~~accompanying 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.~~

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

The Company periodically adjusts the carrying value of non-controlling interests to reflect its 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.Income.

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 and December 31, 2016~~ are as follows (see Note 10):

	September 30, 2017										September 30, 2019
(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											$	1,120		$	—	$	1,120		$	—
Interest rate swap, liabilities		(7,119	)		-		(7,119	)		-		(37,489	)		—		(37,489	)		—
	$	374		$	-	$	374		$	-	$	(36,369	)	$	—	$	(36,369	)	$	—

	December 31, 2016										December 31, 2018
	Total			Level 1		Level 2			Level 3
Interest rate swaps, assets	$	9,598		$	-	$	9,598		$	-
(in thousands)											Total			Level 1		Level 2			Level 3
Interest rate swap, assets											$	17,633		$	—	$	17,633		$	—
Interest rate swap, liabilities		(10,217	)		-		(10,217	)		-		(1,820	)		—		(1,820	)		—
	$	(619	)	$	-	$	(619	)	$	-	$	15,813		$	—	$	15,813		$	—

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,~~Prepaid expenses and other assets, Tenant and other receivables, ~~Notes receivable,~~net, and Accounts payable and other liabilities, approximates their fair values due to their ~~short term~~short-term nature.

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~~London Interbank Offered Rate (“LIBOR”), U.S. treasury obligation interest rates, and on the discounted estimated future cash payments to be made on such debt. The discount rates estimated reflect the Company’s judgment as to the approximate current lending rates for loans or groups of loans with similar maturities and assumes that the debt is outstanding through maturity. Market information, as available, or present value techniques were utilized to estimate the amounts required to be disclosed. Since such amounts are estimates that are based on limited available market information for similar transactions and do not acknowledge transfer or other repayment restrictions that may exist on specific loans, it is unlikely that the estimated fair value of any such debt could be realized by immediate settlement of the obligation.

The following table summarizes the carrying amount reported on the Condensed Consolidated Balance Sheets and the Company’s estimate of the fair value of the ~~Company’s Mortgage~~Mortgages and notes payable, net, 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.revolver:

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

In accordance with ASC 842, the Company records right-of-use assets and lease liabilities associated with leases of land where it is the lessee under non-cancelable operating leases (“ground leases”). The lease liability is equal to the net present value of the future payments to be made under the lease, discounted using estimates based on observable market factors. The right-of-use asset is generally equal to the lease liability plus initial direct costs associated with the leases. The Company ~~did~~includes in the recognition of the right-of-use asset and lease liability those renewal periods that are reasonably certain to be exercised, based on the facts and circumstances that exist at lease inception. Amounts associated with percentage rent provisions are considered variable lease costs and are not ~~have any~~included in the initial measurement of the right-of-use asset or lease liability. As allowed under ASC 842, the Company has made an accounting policy election, applicable to all asset types, to not separate lease from nonlease components when allocating contract consideration related to ground leases.

Right-of-use assets ~~measured at fair value on a nonrecurring basis at December 31, 2016.~~and lease liabilities associated with ground leases were included in the accompanying Condensed Consolidated Balance Sheets as follows:

~~Substantially all~~A majority of 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 three months ended September 30, 2017 and 2016, the Company’s tenants, pursuant to their lease obligations, have made direct payment for property taxes to the taxing authorities of approximately $2,448 and $1,609, respectively. For the nine months ended September 30, 2017 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.

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~~amounts billed to tenants are included in ~~Operating expenses reimbursed from tenants~~Lease revenues, and the corresponding 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)~~Income.

Rental expense associated with ground leases is recorded on a straight-line basis over the term of each lease, for leases that have fixed and measurable rent escalations. Under the ~~three months ended~~provisions of ASC 842, the difference between rental expense incurred on a straight-line basis and the cash rental payments due under the provisions of the lease is recorded as part of the right-of-use asset in the accompanying September 30, ~~2017~~2019 Condensed Consolidated Balance Sheet. Prior to the adoption of ASC 842, at December 31, 2018, this difference was recorded as a deferred liability and ~~2016, respectively. Taxes collected from tenants were $1,787~~was included as a component of Accounts payable and ~~$1,379, while taxes remitted to governmental authorities were $2,084~~other liabilities in the accompanying Condensed Consolidated Balance Sheets. Amounts associated with percentage rent provisions based on the achievement of sales targets are recognized as variable rental expense when achievement of the sales targets is considered probable. Rental expense is included in Property and ~~$1,442 for~~operating expenses on the ~~nine months ended September 30, 2017~~accompanying Condensed Consolidated Statements of Income and ~~2016, respectively.~~Comprehensive Income.

~~In January 2017, the Financial Accounting Standards Boards (“FASB”) issued ASU 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~ (“ASU 2017-01”), which changes the definition of a business to exclude acquisitions where substantially all of the 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 impact 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. The Company adopted the guidance, effective January 1, 2017. As a result of the adoption, the Company capitalized $6,583 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, there is no specific guidance to address how to classify or present these changes. ASU 2016-18 is effective, on a retrospective basis, for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company currently reflects the change in restricted cash in its cash flows from investing activities. Upon adoption, these amounts will be included in the cash and cash equivalents balance when reconciling the beginning and end of period total amounts. For the nine months ended September 30, 2017 the decrease in restricted cash included in cash flows from investing activities was $543.

~~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 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 ASU 2016-15, noting the classification of debt extinguishment costs in the Condensed Consolidated Statement of Cash Flows is applicable to the Company, however, will have no impact as the Company currently classifies these as cash flows used in financing activities.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic ASC 842), which ~~supersedes~~superseded the existing guidance for lease accounting, ~~Leases (Topic 840). ASU 2016-02~~ASC 840. ASC 842 is effective January 1, 2019, with early adoption permitted. The guidance 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~~Under the new pronouncement, lessor accounting is largely unchanged from prior GAAP, however disclosures were expanded. The Company adopted ASC 842 on January 1, 2019 on a modified retrospective basis and elected the following practical expedients:

ASC 842 requires all income from leases to be presented as a single line item, rather than the prior presentation where rental income from leases was shown separately from amounts billed and collected as reimbursements from tenants on the Condensed Consolidated Statements of Income and Comprehensive Income. In addition, bad debt expense is required to be recorded as an adjustment to Lease revenues, rather than recorded within Operating expenses on the Condensed Consolidated Statements of Income and Comprehensive Income, as had previously been the case.

The Company ~~does~~is primarily a lessor and therefore adoption of ASC 842 did not have ~~any~~a material impact on its Condensed Consolidated Financial Statements. Upon adoption of ASC 842, it was not necessary for the Company to record a cumulative-effect adjustment to the opening balance of retained earnings, however the Company recognized a right-of-use asset and corresponding lease liability as of January 1, 2019, of $1,687 and $1,261, respectively, related to operating leases where it is the lessee (see Note 16). The right-of-use asset was recorded net of a previously recorded straight-line rent liability of $7 and ground lease intangible asset, net of $432 as of the date of adoption.

In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. Previously under Topic 815, the eligible benchmark interest rates in the United States were the interest rates on direct Treasury obligations of the U.S. government (UST), the LIBOR swap rate, the OIS Rate based on the Fed Funds Effective Rate, and the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate, which was introduced in ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). The amendments in ASU 2018-16 permit the use of the OIS rate based on SOFR as a benchmark interest rate for hedge accounting purposes under Topic 815. The amendments in this update were effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years for public business entities that already adopted the amendments in ASU 2017-12 (which the Company isadopted effective January 1, 2018). The Company adopted ASU 2018-16 as of January 1, 2019 on a prospective basis for qualifying new or redesignated hedging relationships entered into on or after the ~~lessee. Under~~date of adoption. Adoption of this guidance had no impact on the ~~new pronouncement, lessor accounting~~Condensed Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses which changes how entities measure credit losses for most financial assets. Financial assets that are measured at amortized cost will be largely unchanged from existing GAAP. However, there are certain changes, including 1) accounting for non-lease components of leases and 2) lease classification tests. In adopting the new guidance, companies are required to ~~recognize and measure leases~~be presented at the net amount expected to be collected with an allowance for credit losses deducted from the amortized cost basis. The guidance requires an entity to utilize broader information in estimating the expected credit loss, including forecasted information. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses which clarified that operating lease receivables recorded by lessors are explicitly excluded from the scope of this guidance. In May 2019, the FASB issued ASU 2019-05, Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief, which provides entities with an option to irrevocably elect the fair value option for eligible instruments upon adoption of Topic 326. ASU 2016-13 is effective January 1, 2020, with early adoption permitted beginning ~~of the earliest period presented using~~on January 1, 2019, under a modified retrospective ~~approach.~~application. The Company continues to evaluate the impact this new standard will have on its Condensed Consolidated Financial Statements, including the transition relief provisions, but does not expect such impact will be material based upon the composition of its current lease portfolio.

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 ~~January 1,~~for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company is ~~continuing to evaluate~~currently evaluating the impact ~~that adoption of this guidance~~the new standard will have on its Condensed Consolidated Financial Statements and ~~footnote~~expects to adopt the new disclosures ~~until the guidance becomes effective.~~on a prospective basis on January 1, 2020.

In ~~May 2014,~~April 2019, the FASB issued ASU ~~2014-09,~~2019-04, ~~Revenue from Contracts~~Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments which clarifies and improves guidance within the recently issued standards on credit losses, hedging, and recognition and measurement of financial instruments. The Company will assess the impact of the changes to Topic 326 in connection with ~~Customers (Topic 606)~~.its adoption of ASU ~~2014-09~~2018-13 discussed above. The provisions of ASU 2019-04 relating

to Topics 815 and 825 are effective on January 1, 2020. The Company is ~~a comprehensive new revenue recognition model requiring a company to recognize revenue to depict~~currently evaluating the ~~transfer~~impact 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 ASU 2014-09,~~ ~~Revenue from Contracts with Customers,~~ for all entities by one year. With the deferral, ASU 2014-09 is effective January 1, 2018, with early adoption permitted beginning January 1, 2017. While the Company anticipates additional disclosure, it2019-04, but does not ~~expect~~anticipate that it will have a material impact on its financial statements.

Certain prior-period amounts have been reclassified to conform with the current period’s presentation, including certain items described below which resulted from the adoption of ~~this pronouncement to have a material effect on the amount or timing~~ASC 842.

Components of revenue ~~recognized in its Condensed Consolidated Financial Statements~~that were previously reported as ~~it believes its revenue, excluding revenue streams recognized in~~Rental income from operating leases, Earned income from direct financing leases, Operating expenses reimbursed from tenants, and Other income from real estate transactions, on the Condensed Consolidated Statements of Income and ~~Gain~~Comprehensive Income, have been combined and reported as Lease revenues on ~~sale~~the Condensed Consolidated Statements of ~~real estate, falls outside~~Income and Comprehensive Income as follows:

In addition, as discussed above, in connection with recording the ~~scope~~transition adjustment for the right-of-use asset related to operating leases where the Company is the lessee, amounts reported as ground lease intangible assets, net and ground lease straight-line rent liabilities on the Condensed Consolidated Balance Sheet at December 31, 2018, were reclassified as of ~~this guidance.~~ January 1, 2019, and are now included as components of the right-of-use asset.

The Company ~~expects~~reclassified Restricted cash of $377 and Tenant and capital reserves of $1,136 to ~~adopt~~Prepaid expenses and other assets on the ~~guidance using the modified retrospective approach on January 1, 2018. The Company will, however, continue~~Condensed Consolidated Balance Sheets at December 31, 2018, to ~~evaluate the impact of this guidance until it becomes effective.~~

~~In February 2017, the FASB issued ASU 2017-05,~~ ~~Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets.~~ ~~This new guidance is required to be adopted concurrently~~conform with the ~~amendments in ASU 2014-09. The new pronouncement, which adds guidance for partial sales~~current period presentation. Additionally, Tenant improvement allowances 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 revenue on sales of real estate at the time the asset is transferred (i.e., at the time of closing). Upon adoption of ASU 2014-09,$2,125 were reclassified to Accounts payable and therefore ASU 2017-05, the Company will need to evaluate any separate contracts or performance obligations to determine proper timing of revenue recognition, as well as transaction price allocation. The Company does not expect the adoption of this pronouncement to have a material effectother liabilities on the ~~amount or timing of revenue recognized in its~~ Condensed Consolidated ~~Financial Statements.~~Balance Sheets at December 31, 2018, to conform with the current presentation. The ~~Company expects~~reclassifications are changes from one acceptable presentation 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.~~another acceptable presentation.

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 in the agreement.~~follows:

~~In addition, the Manager may also provide, but is not obligated~~The Property Management Agreement automatically renewed on January 1, 2019 for three years ending December 31, 2021, subject 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~~earlier termination pursuant 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.

~~The initial term~~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. If the Corporation terminates the Property Management Agreement prior to any renewal term or~~(ii) by the IDC, ~~terminates~~upon 30 days’ written notice to the ~~agreement within 30 days following~~Manager, in connection with a change in control of the Manager, ~~(as~~as defined in the Property Management ~~Agreement),~~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, as defined in the Property Management Agreement, and (vi) by the IDC upon a Key Person Event, as defined in the Property Management Agreement.

If the Corporation terminates the agreement prior to any renewal term or in any manner described above, other than termination by the 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~~at September 30, ~~2017,~~2019, if the Property Management Agreement had been terminated at September 30, ~~2017~~2019, subject to the conditions noted above, the termination fee would have been ~~$14,121.~~$22,965.

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~~nominates two individuals to serve on the Board of Directors of the Corporation.

Under the terms of the Asset Management Agreement, the Asset Manager ~~receives an annual asset management fee (“Asset Management Fee”) equal to 1% of the aggregate value of the Corporation’s common stock, based on the Determined Share Value (as defined in Note 13)~~is compensated as determined by the IDC each quarter, on a fully diluted basis as if all interests 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 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 September 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.follows:

The Asset Management Agreement ~~includes various other fees paid~~automatically renewed on January 1, 2019 for three years ending December 31, 2021, subject to earlier termination pursuant to the terms of the Asset Management Agreement. The Asset Management Agreement provides for termination: (i) immediately by the IDC for Cause, as defined in the Asset Management Agreement, (ii) by the IDC, upon 30 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 not less than one year prior to the last calendar day of any renewal term, (iv) by the Asset 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 ~~accordance with~~the event of a Disposition Event, as defined in the Asset Management ~~Agreement. The~~Agreement, and (vi) by the IDC ~~has approved~~upon a Key Person Event, as defined in the ~~renewal of the agreement through December 31, 2018.~~ Asset Management Agreement.

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~~at September 30, ~~2017,~~2019, if the Asset Management Agreement had been terminated at September 30, ~~2017~~2019, subject to the conditions noted above, the termination fee would have been ~~$41,552.~~ $63,306.

Total fees incurred under the Property Management Agreement and Asset Management Agreement ~~for the three and nine months ended September 30, 2017 and 2016~~ 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	2019		2018		2019		2018
Asset management fee	Asset management fees	$	3,844	$	2,789	$	10,666	$	7,770	Asset management fees	$	5,610	$	4,663	$	16,048	$	13,119
Property management fee	Property management fees		1,249		1,010		3,635		2,868	Property management fees		2,098		1,680		5,918		4,792
Total management fee expense			5,093		3,799		14,301		10,638			7,708		6,343		21,966		17,911

Marketing fee	Additional paid-in capital		342		318		1,144		976
Marketing fee (offering costs)										Additional paid-in capital		703		297		1,303		822
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		7,932		1,105		9,937		3,491
Leasing fee	Leasing fees, net		801		797		2,597		2,827	Leasing fees, net		312		148		747		1,325
Disposition fee	Gain on sale of real estate		219		23		522		61	Gain on sale of real estate		596		116		947		439
Total management fees		$	8,046	$	6,291	$	22,084	$	18,312		$	17,251	$	8,009	$	34,900	$	23,988

Included ~~in management fees are $1,688 and $364 of unpaid fees recorded~~ in Due to related parties on the Condensed Consolidated Balance Sheets at September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, are $433 and $114 of unpaid management fees, 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.

The Company retains the legal services of Vaisey Nicholson & Nearpass, PLLC (“VNN”), formerly a related party. One former minority partner of VNN is an immediate family member to a member of the management of the Company and an indirect minority owner of the Manager. Beginning January 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 aspects of the relationship between VNN and the Company. The Company utilizes 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 VNN for the three and nine months ended September 30, 2016:

The Company closed on the following acquisitions during the nine months ended September 30, ~~2017:~~2019:

(in thousands, except number of properties)

Date

Tenant Type

Number of
Properties

Real Estate
Acquisition
Price

January 18, 2017

Retail

1

$
2,520

March 1, 2017

Retail

9

87,196

April 28, 2017

Retail

25

48,898

June 2, 2017

Retail

2

13,300

June 15, 2017

Retail

2

2,700

June 30, 2017

Industrial

2

12,250

June 30, 2017

Office

7

25,989

July 7, 2017

Office

1

32,210

August 4, 2017

Healthcare

3

11,732

August 31, 2017

Healthcare

3

16,700

August 31, 2017

Industrial

2

6,148

September 13, 2017

Retail

5

4,994

September 29, 2017

Industrial/Retail

7

30,012

September 29, 2017

Industrial

1

57,372

70

$
352,021

^(a)

(in thousands, except number of properties)		Number of		Real Estate
Date	Property Type	Properties		Acquisition Price
January 31, 2019	Healthcare		1	$	4,747
March 12, 2019	Industrial		1		10,217
March 15, 2019	Retail		10		13,185
March 19, 2019	Retail		14		19,128
March 26, 2019	Industrial		1		25,801
April 30, 2019	Other		1		76,000	^(a)
May 21, 2019	Retail		2		6,500
May 31, 2019	Retail		1		3,192
June 7, 2019	Other		1		30,589
June 26, 2019	Industrial		2		11,180
July 15, 2019	Retail		1		3,214
July 15, 2019	Industrial		1		11,330
July 31, 2019	Healthcare		5		27,277
August 27, 2019	Industrial		1		4,404
August 29, 2019	Industrial/Office/Other		23		735,740
September 17, 2019	Industrial		1		11,185
			66	$	993,689	^(b)

The Company closed on the following acquisitions during the nine months ended September 30, ~~2016:~~2018:

(in thousands, except number of properties)

Date

Tenant Type

Number of
Properties

Real Estate
Acquisition
Price

January 25, 2016

Retail

3

$
13,376

February 1, 2016

Retail

1

27,000

March 24, 2016

Industrial

1

15,650

April 7, 2016

Office

2

17,115

April 25, 2016

Office

2

54,600

May 9, 2016

Retail

5

42,390

May 12, 2016

Office

1

4,500

May 20, 2016

Retail

19

36,843

May 25, 2016

Healthcare

^(b)

5,624

June 30, 2016

Retail

7

28,477

July 15, 2016

Healthcare

2

26,700

August 12, 2016

Other

3

12,399

September 14, 2016

Office

1

14,000

September 29, 2016

Retail

24

82,338

71

$
381,012

(in thousands, except number of properties)		Number of		Real Estate
Date	Property Type	Properties		Acquisition Price
March 27, 2018	Industrial		1	$	22,000
March 30, 2018	Industrial/Retail		26		78,530
April 30, 2018	Other		1		16,170
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	^(c)
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		20		44,977
			70	$	365,289	^(d)

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, 2017 and 2016, discussed above, excluding non-real estate liabilities assumed of $1,000 during the three and nine months ended September 30, 2017:~~acquisitions:

	September 30,			September 30,			For the nine months ended September 30,
(in thousands)	2017			2016			2019			2018
Land	$	18,499		$	63,918		$	155,434		$	47,930
Land improvements		28,463			28,250			44,929			20,815
Buildings and other improvements		279,110			251,861			745,116			271,696
Equipment		508			-			—			2,891
Acquired in-place leases^(c)(e)		37,110			38,456			77,868			36,342
Acquired above-market leases^(d)(f)		13,229			16,090			2,800			3,347
Acquired below-market leases^(e)(g)		(21,861	)		(18,107	)		(15,811	)		(10,143	)
Direct financing		3,546			544
Direct financing investments								—			430
Mortgages payable								(49,782	)		(20,845	)
	$	358,604		$	381,012		$	960,554		$	352,463

The above acquisitions were funded using a combination of available cash on hand, ~~and proceeds from~~borrowings under the Company’s unsecured revolving line of ~~credit.~~credit and unsecured term loan agreements, and proceeds from equity issuances. All ~~of the~~ acquisitions closed during the nine months ended September 30, ~~2017~~2019 and 2018, qualified as asset acquisitions and, as such, acquisition costs were capitalized in accordance with ASU 2017-01. In conjunction with the acquisitions closed during the nine months ended September 30, 2016, expenses 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). 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.capitalized.

Subsequent to September 30, ~~2017,~~2019, the Company closed on the following acquisitions (see Note 17):

(in thousands, except number of properties)						(in thousands, except number of properties)		Number of		Real Estate
Date	Property Type	Number of Properties	Acquisition Price				Property Type	Properties		Acquisition Price
October 13, 2017	Healthcare	1	$	10,000
November 1, 2017	Other	4		15,693	^(f)
October 31, 2019							Retail/Healthcare		3	$	12,922
November 7, 2019							Retail		1		3,142
		5	$	25,693					4	$	16,064

The Company has not completed the allocation of the acquisition date ~~relative~~ fair values for the properties acquired subsequent to September 30, ~~2017;~~2019; 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 and 2016:~~operations:

	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		2019			2018			2019			2018
Number of properties disposed		4		2		10		4		16			4			25			15
Aggregate sale price	$	27,725	$	12,345	$	58,170	$	16,095	$	59,691		$	11,609		$	94,791		$	43,951
Aggregate carrying value		22,335		9,163		44,984		11,519		(43,920	)		(9,016	)		(73,365	)		(31,710	)
Additional sales expenses		1,338		199		2,854		487		(3,186	)		(568	)		(4,654	)		(2,621	)
Gain on sale of real estate		4,052		2,983		10,332		4,089	$	12,585		$	2,025		$	16,772		$	9,620

The Company generally leases its investment rental property to established ~~tenants.~~tenants in the retail, healthcare, manufacturing, office and other industries. At September 30, ~~2017,~~2019, the Company had ~~462~~642 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~~years. The Company’s 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~~tenants are also required to pay all property taxes and assessments, substantially maintain the interior and exterior of the building, and maintain property and liability insurance coverage. The leases also typically provide for one or more multiple year renewal options subject to generally the same terms and conditions as the initial lease. None of the Company’s leases contain purchase options.

The Company’s leases do not include residual value guarantees. To protect the residual value of its assets under lease, the Company requires tenants to maintain certain levels of property insurance, and in some cases will purchase supplemental policies directly. Management physically inspects each property on a regular basis, to ensure the tenant is maintaining the property so that it will be in a condition at the end of the lease term that is suitable for the Company to lease to a new tenant without the need for significant additional investment. For assets other than land, at lease inception the Company estimates the residual value taking into consideration the original fair value of the asset, less anticipated depreciation over the lease term. In general, at lease inception the Company assumes the value ascribed to land will be fully recoverable at the end of the lease term.

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

	September 30,			December 31,
(in thousands)	2017			2016			September 30, 2019			December 31, 2018
Land	$	300,633		$	288,276		$	551,903		$	411,043
Land improvements		185,776			162,341			279,629			239,701
Buildings		1,530,429			1,283,322
Tenant improvements		9,656			8,665
Buildings and improvements								2,871,761			2,186,499
Equipment		519			799			11,492			11,492
		2,027,013			1,743,403			3,714,785			2,848,735
Less accumulated depreciation		(135,305	)		(105,703	)		(255,159	)		(206,989	)
	$	1,891,708		$	1,637,700		$	3,459,626		$	2,641,746

Depreciation expense on investment in rental property was ~~$12,600 and $9,796 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 and 2016, respectively.~~as follows:

Estimated ~~minimum future rental receipts required~~lease payments to be received under non-cancelable operating leases with tenants at September 30, ~~2017~~2019 are as follows:

(in thousands)
Remainder of 2017	$	40,732
2018		165,923
2019		169,255
Remainder of 2019			$	72,718
2020		171,908		294,220
2021		174,168		298,899
2022				301,996
2023				304,828
Thereafter		1,778,342		2,562,223
	$	2,500,328	$	3,834,884

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 changes in the ~~consumer price index~~Consumer Price Index or future ~~contingent~~variable 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~~Leases

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

	September 30,			December 31,
(in thousands)	2017			2016			September 30, 2019			December 31, 2018
Minimum lease payments to be received	$	78,837		$	90,447
Undiscounted estimated lease payments to be received							$	73,775		$	76,829
Estimated unguaranteed residual values		19,758			22,335			20,358			20,358
Less unearned revenue		(56,983	)		(65,511	)
Unearned income								(52,213	)		(55,187	)
Net investment in direct financing leases	$	41,612		$	47,271		$	41,920		$	42,000

~~Minimum future rental receipts required~~Undiscounted estimated lease payments to be received under non-cancelable direct financing leases with tenants at September 30, ~~2017~~2019 are as follows:

(in thousands)
Remainder of 2017	$	947
2018		3,857
2019		3,931
Remainder of 2019			$	1,022
2020		4,037		4,194
2021		4,126		4,283
2022				4,369
2023				4,456
Thereafter		61,939		55,451
	$	78,837	$	73,775

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~~variable percentage rent payments that may become due in future periods.

The following table summarizes amounts reported as Lease revenues on the Condensed Consolidated Statements of Income and Comprehensive Income:

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

	September 30,			December 31,
(in thousands)	2017			2016			September 30, 2019			December 31, 2018
Lease intangibles:
Acquired above-market leases	$	57,922		$	45,490		$	64,931		$	64,164
Less accumulated amortization		(8,047	)		(4,940	)		(17,275	)		(14,740	)
Acquired above-market leases, net		49,875			40,550			47,656			49,424
Acquired in-place leases		177,044			141,676			351,720			277,659
Less accumulated amortization		(21,450	)		(14,105	)		(56,898	)		(40,825	)
Acquired in-place leases, net		155,594			127,571			294,822			236,834
Total intangible lease assets, net	$	205,469		$	168,121		$	342,478		$	286,258

Acquired below-market leases	$	75,038		$	54,062		$	114,316		$	101,602
Less accumulated amortization		(8,735	)		(6,191	)		(19,813	)		(15,655	)
Intangible lease liabilities, net	$	66,303		$	47,871		$	94,503		$	85,947

Leasing fees	$	15,543		$	13,279		$	17,316		$	17,274
Less accumulated amortization		(2,497	)		(1,950	)		(4,065	)		(3,576	)
Leasing fees, net	$	13,046		$	11,329		$	13,251		$	13,698

Amortization ~~expense~~ for ~~acquired in-place leases~~intangible lease assets and fees was $3,043 and $2,318 for the three months ended September 30, 2017 and 2016, respectively and $8,514 and $5,950 for the nine months ended September 30, 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.liabilities is as follows:

Estimated future amortization of intangible assets and liabilities at September 30, ~~2017~~2019 is as follows:

(in thousands)
Remainder of 2017	$	3,273
2018		12,224
2019		11,439
Remainder of 2019			$	6,113
2020		11,330		24,267
2021		11,278		23,856
2022				23,241
2023				22,862
Thereafter		102,667		160,887
	$	152,211	$	261,226

On June 23, 2017, the Corporation and the Operating Company entered into an $800,000 unsecured Revolving Credit and Term Loan Agreement (“Credit Agreement”) 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 consists 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 annum through the maturity date of January 2023. The 7-Year Term Loan provides for up to three delayed draws from inception through June 2018 at the request of the Company. Borrowings under the 7-Year Term Loan bear interest at variable rates based on LIBOR plus a margin based on the Operating Company’s credit rating ranging between 1.50% and 2.45% through the maturity date of June 2024. Based on the Operating Company’s current credit rating of Baa3, the applicable margin under the Revolver, 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 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, 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

	Outstanding Balance
(in thousands, except interest rates)	September 30, 2019			December 31, 2018			Interest Rate^(d)	Maturity Date
2019 Unsecured Term Loan^(a)	$	—		$	300,000		one-month LIBOR + 1.40%	Feb. 2020^(g)
2020 Unsecured Term Loan^(a)		300,000			—		one-month LIBOR + 1.25%	Aug. 2020^(h)
Unsecured Revolving Credit and Term Loan Agreement^(a)
Revolver^(b)		303,300			141,100		one-month LIBOR + 1.20%^(e)	Jan. 2022
2023 Unsecured Term Loan		265,000			265,000		one-month LIBOR + 1.35%	Jan. 2023
2024 Unsecured Term Loan		190,000			190,000		one-month LIBOR + 1.25%^(f)	Jun. 2024
		758,300			596,100
2026 Unsecured Term Loan^(a)		450,000			—		one-month LIBOR + 1.85%	Feb. 2026
Senior Notes^(a)
Series A		150,000			150,000		4.84%	Apr. 2027
Series B		225,000			225,000		5.09%	Jul. 2028
Series C		100,000			100,000		5.19%	Jul. 2030
		475,000			475,000
Total		1,983,300			1,371,100
Debt issuance costs, net^(c)		(8,489	)		(4,227	)
	$	1,974,811		$	1,366,873

On February 27, 2019, the Company entered into a $450,000 seven-year unsecured term loan agreement (the “2026 Unsecured Term Loan”) with Capital One, National Association as administrative agent. The 2026 Unsecured Term Loan provides an accordion feature for up to a total of $550,000 borrowing capacity. The 2026 Unsecured Term Loan has an initial maturity date of February 27, 2026. Borrowings under the 2026 Unsecured Term Loan are subject to interest only payments at variable rates equal to LIBOR plus a margin between 1.45% and 2.40% per annum based on the Operating Company’s credit rating. Based on the Operating Company’s current credit rating of Baa3, the applicable margin under the 2026 Unsecured Term Loan is 1.85%. The 2026 Unsecured Term Loan is subject to a fee of 0.25% per annum on the amount of the commitment, reduced by the amount of term loans outstanding. At closing, $300,000 of the commitment was funded and used to repay the 2019 Unsecured Term Loan in full. The remaining $150,000 commitment was drawn on August 27, 2019 and used to fund acquisitions.

On February 28, 2019, the Company amended the Unsecured Revolving Credit and Term Loan Agreement to increase the amount available under the Revolver from $425,000 to $600,000. This increased the total available borrowings under the Unsecured Revolving Credit and Term Loan Agreement to $1,055,000. All other terms and conditions of the Unsecured Revolving Credit and Term Loan Agreement remain the same as those in effect prior to this amendment.

On July 1, 2019, the Company amended the Unsecured Revolving Credit and Term Loan Agreement. Prior to the amendment, the borrowings under the 2024 Unsecured Term Loan were subject to interest at variable rates based on LIBOR plus a margin based on the Operating Company’s credit rating ranging between 1.50% and 2.45% per annum with the applicable margin being 1.90% at December 31, 2018. The amendment reduced the margin to a range between 0.85% and 1.65% per annum and based on the Operating Company’s current credit rating of Baa3, the applicable margin is 1.25% beginning on July 1, 2019. All other terms and conditions of the Unsecured Revolving Credit and Term Loan Agreement remained materially the same as those in effect prior to this amendment.

On August 2, 2019, the Company entered into a $300,000 term loan agreement (the “2020 Unsecured Term Loan”) with JP Morgan Chase Bank, N.A. as administrative agent. The 2020 Unsecured Term Loan was subject to a fee of 0.25% per annum on the amount of the commitment, reduced by the amount of term loans outstanding. The entire amount of $300,000 was funded on August 28, 2019 and used to fund acquisitions. Borrowings under the 2020 Unsecured Term Loan are subject to interest only payments at variable rates equal to LIBOR plus a margin based on the Operating Company’s credit rating between 0.85% and 1.65% per annum. Based on the Operating Company’s current credit rating of Baa3, the applicable margin is 1.25%.

At September 30, ~~2017 and December 31, 2016,~~2019, the weighted average interest rate on all outstanding borrowings was ~~2.96% and 2.14%, respectively.~~3.89%. In addition, the Revolver is subject to a facility fee of 0.25% per annum.

~~Debt issuance costs were amortized and recorded as interest expense in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income (Loss) of $486 and $403 for~~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 and 2016, respectively.~~

~~For the nine months ended September 30, 2017,~~2019, the Company paid ~~$8,344~~$1,281 and $6,510, respectively, in debt issuance costs associated with the ~~Senior Notes,~~2020 Unsecured Term Loan, the ~~Credit Agreement with M&T as Administrative Agent,~~2026 Unsecured Term Loan and the ~~Amended~~amended Unsecured Revolving Credit and ~~Restated~~ 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~~$1,275 and $6,504 of the debt issuance costs incurred in the three and nine months ended September 30, 2019, respectively, were deemed to be related to the issuance of new debt, or the modification of existing debt, and therefore have been deferred and are being amortized over the term of the associated debt. The remaining ~~$2,901~~$6 of the debt issuance costs ~~was associated with lenders whose commitments under~~incurred in the ~~new agreements have been determined~~three and nine months ended September 30, 2019, were deemed to be anrelated to the extinguishment ~~and such~~of debt ~~issuance costs~~and were expensed ~~as a component of the cost~~and included in Cost of debt extinguishment in the accompanying Condensed Consolidated Statements of Income and Comprehensive ~~Income (Loss) for the nine months ended September 30, 2017.~~Income. Additionally, ~~$654~~$113 and $328 of unamortized debt issuance costs were expensed in the three and nine months ended September 30, 2019, respectively, and included in ~~cost~~Cost of debt extinguishment in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

Debt issuance costs are amortized as a component of interest expense in the accompanying Condensed Consolidated Statements of Income ~~(Loss) for the nine months ended September 30, 2017.~~and Comprehensive Income. The following table summarizes debt issuance cost amortization:

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

														Origination	Maturity
(in thousands, except interest rates)	(in thousands, except interest rates)												(in thousands, except interest rates)	Date	Date	Interest	September 30,			December 31,
		Origination Date	Maturity Date			September 30,			December 31,
Lender	Lender	(Month/Year)	(Month/Year)	Interest Rate		2017			2016				Lender	(Month/Year)	(Month/Year)	Rate	2019			2018
(1)	M&T Bank	Dec-10	Apr-20	1 month LIBOR+1.90%		$	-		$	21,335		(b) (f) (g)	Wilmington Trust National Association	Apr-19	Feb-28	4.92%	$	49,340		$	—		(a) (b) (c) (n)
(2)	Sun Life	Mar-12	Oct-21		5.13%		11,763			12,036		(b) (i)	Wilmington Trust National Association	Jun-18	Aug-25	4.36%		20,409			20,674		(a) (b) (c) (m)
(3)	Aegon	Apr-12	Oct-23		6.38%		9,330			9,804		(b) (j)	PNC Bank	Oct-16	Nov-26	3.62%		17,980			18,260		(b) (c)
(4)	Legg Mason Mortgage Capital Corporation	Aug-10	Aug-22		7.06%		5,900			6,538		(b) (e)	Sun Life	Mar-12	Oct-21	5.13%		10,990			11,288		(b) (g)
(5)	Columbian Mutual Life Insurance Company	Aug-10	Sep-25		7.00%		1,510			1,538		(b) (c) (d)	Aegon	Apr-12	Oct-23	6.38%		7,968			8,496		(b) (h)
(6)	Symetra Financial	Mar-11	Apr-31		6.34%		1,015			1,036		(a) (b)	M&T Bank	Oct-17	Aug-21	one - month LIBOR+3%		4,949			5,051		(b) (d) (i) (j)
(7)	Note holders	Dec-08	Dec-23		6.25%		750			750		(d)	Note holders	Dec-08	Dec-23	6.25%		750			750		(d)
(8)	Standard Insurance Co.	Jul-10	Aug-30		6.75%		585			597		(b) (c) (d) (h)	Standard Insurance Co.	Jul-10	Aug-30	6.75%		549			563		(b) (c) (d) (f)
(9)	Siemens Financial Services, Inc.	Sep-10	Sep- 20		5.47%		5,869			6,010		(a) (b)	Symetra Financial	Nov-17	Oct-26	3.65%		—			6,467		(a) (b) (k) (l)
(10)	Standard Insurance Co.	Apr-09	May-34		6.88%		1,827			1,870		(b) (c) (h)	Columbian Mutual Life Insurance Company	Aug-10	Sep-25	7.00%		—			1,459		(b) (c) (d)
(11)	Wells Fargo Bank, N.A.	May-07	Jun-17		6.69%		-			1,694		(a) (b)	Legg Mason Mortgage Capital Corporation	Aug-10	Aug-22	7.06%		—			4,692		(b) (e)
(12)	Standard Insurance Co.	May-09	Jun-34		6.88%		1,312			1,342		(b) (c) (h) (l)	Standard Insurance Co.	Apr-09	May-34	6.88%		—			1,751		(b) (c)
(13)	Standard Insurance Co.	Mar-10	Apr-31		7.00%		-			1,058		(b) (c) (d) (h)
(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								112,935			79,451
	Debt issuance costs, net						(689	)		(838	)		Debt issuance costs, net					(373	)		(499	)
						$	57,883		$	106,686							$	112,562		$	78,952

At September 30, ~~2017,~~2019, investment in rental property of ~~$91,326~~$179,769 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, during~~by the ~~nine months ended September 30, 2017 and the year ended December 31, 2016, respectively. For the three months ended September 30, 2017 and 2016,~~Company:

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

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~~2019 are as follows:

(in thousands)
Remainder of 2017	$	28,677
2018		2,829
2019		328,034
Remainder of 2019			$	784
2020		8,449		303,210
2021		13,305		18,028
2022				306,230
2023				273,356
Thereafter		528,778		1,194,627
	$	910,072	$	2,096,235

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~~agreements. These prepayment fees 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, 2017:~~agreements:

(in thousands, except interest rates)										(in thousands, except interest rates)								Fair Value
Counterparty	Maturity Date	Fixed Rate		Variable Rate Index	Notional Amount		Fair Value				Maturity Date	Fixed Rate			Variable Rate Index	Notional Amount		September 30, 2019			December 31, 2018
Bank of America, N.A.	November 2023		2.80%	LIBOR 1 month	$	25,000	$	(1,177	)		November 2023		2.80	%	one-month LIBOR	$	25,000	$	(1,389	)	$	(411	)
Bank of Montreal	July 2024		1.16%	LIBOR 1 month		40,000		2,147			July 2024		1.16	%	one-month LIBOR		40,000		421			2,702
Bank of Montreal	January 2025		1.91%	LIBOR 1 month		25,000		193			January 2025		1.91	%	one-month LIBOR		25,000		(694	)		769
Bank of Montreal	July 2025		2.32%	LIBOR 1 month		25,000		(490	)		July 2025		2.32	%	one-month LIBOR		25,000		(1,333	)		222
Bank of Montreal	January 2026		1.92%	LIBOR 1 month		25,000		297			January 2026		1.92	%	one-month LIBOR		25,000		(833	)		915
Bank of Montreal	January 2026		2.05%	LIBOR 1 month		40,000		84			January 2026		2.05	%	one-month LIBOR		40,000		(1,643	)		1,130
Bank of Montreal	December 2026		2.33%	LIBOR 1 month		10,000		(175	)		December 2026		2.33	%	one-month LIBOR		10,000		(662	)		132
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
Bank of Montreal											December 2026		1.99	%	one-month LIBOR		25,000		(1,058	)		—
Bank of Montreal											December 2027		2.37	%	one-month LIBOR		25,000		(1,905	)		355
Bank of Montreal											May 2029		2.09	%	one-month LIBOR		25,000		(1,502	)		—
Capital One, National Association											December 2021		1.05	%	one-month LIBOR		15,000		133			605
Capital One, National Association											December 2024		1.58	%	one-month LIBOR		15,000		(165	)		727
Capital One, National Association											January 2026		2.08	%	one-month LIBOR		35,000		(1,515	)		930
Capital One, National Association											April 2026		2.68	%	one-month LIBOR		15,000		(1,243	)		(189	)
Capital One, National Association											July 2026		1.32	%	one-month LIBOR		35,000		118			2,877
Capital One, National Association											December 2027		2.37	%	one-month LIBOR		25,000		(1,932	)		345
M&T Bank	September 2022		2.83%	LIBOR 1 month		25,000		(1,150	)		August 2021		1.02	%	one-month LIBOR		4,948		42			177		^{(a), (b)}
M&T Bank	November 2023		2.65%	LIBOR 1 month		25,000		(1,023	)		September 2022		2.83	%	one-month LIBOR		25,000		(1,031	)		(362	)
Regions Bank	March 2018		1.77%	LIBOR 1 month		25,000		(46	)
M&T Bank											November 2023		2.65	%	one-month LIBOR		25,000		(1,284	)		(254	)
Regions Bank	March 2019		1.91%	LIBOR 3 month		25,000		(106	)		May 2020		2.12	%	one-month LIBOR		50,000		(104	)		271
Regions Bank	May 2020		2.12%	LIBOR 1 month		50,000		(562	)		December 2023		1.18	%	one-month LIBOR		25,000		199			1,484
Regions Bank	March 2022		2.43%	LIBOR 3 month		25,000		(550	)		May 2029		2.11	%	one-month LIBOR		25,000		(1,562	)		—
Regions Bank	December 2023		1.18%	LIBOR 1 month		25,000		1,178			June 2029		2.03	%	one-month LIBOR		25,000		(1,383	)		—
SunTrust Bank	April 2024		1.99%	LIBOR 1 month		25,000		(63	)		April 2024		1.99	%	one-month LIBOR		25,000		(745	)		554
SunTrust Bank	April 2025		2.20%	LIBOR 1 month		25,000		(332	)		April 2025		2.20	%	one-month LIBOR		25,000		(1,181	)		382
SunTrust Bank	July 2025		1.99%	LIBOR 1 month		25,000		72			July 2025		1.99	%	one-month LIBOR		25,000		(934	)		728
SunTrust Bank	January 2026		1.93%	LIBOR 1 month		25,000		248			December 2025		2.30	%	one-month LIBOR		25,000		(1,474	)		299
SunTrust Bank											January 2026		1.93	%	one-month LIBOR		25,000		(915	)		903
U.S. Bank National Association											June 2029		2.03	%	one-month LIBOR		25,000		(1,395	)		—
U.S. Bank National Association											August 2029		1.35	%	one-month LIBOR		25,000		207			—
Wells Fargo Bank, N.A.											February 2021		2.39	%	one-month LIBOR		35,000		(385	)		59
Wells Fargo Bank, N.A.											October 2024		2.72	%	one-month LIBOR		15,000		(994	)		(222	)
Wells Fargo Bank, N.A.	February 2021		2.39%	LIBOR 1 month		35,000		(739	)		April 2027		2.72	%	one-month LIBOR		25,000		(2,427	)		(382	)
Wells Fargo Bank, N.A.	October 2024		2.72%	LIBOR 1 month		15,000		(706	)		January 2028		2.37	%	one-month LIBOR		75,000		(5,801	)		1,067
					$	640,000	$	374										$	(36,369	)	$	15,813

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:~~

~~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 isare as ~~follows for the three months ended September 30, 2017 and 2016:~~follows:

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 and 2016:

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 (loss) income to Interest expense during the next twelve months are estimated to be ~~$3,460.~~a loss of $3,688. The Company is exposed to credit risk in the event of non-performance by the counterparties of the swaps. The Company minimizes ~~this~~the risk exposure by limiting counterparties to major banks who meet established credit and capital guidelines.

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 were valued at $15,797 during the nine months ended September 30, ~~2017 and 2016 were valued at $8,278 and $7,190, respectively,~~2018, which represents the estimated fair value of the properties contributed, less any assumed debt.

~~The Company recognized rental income related to~~ There were no UPREIT transactions ~~in the amount of $3,539 and $3,025 for~~during 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, ~~2017 and 2016, respectively.~~2019.

The Company maintained bank balances that, at times, exceeded the federally insured limit during the nine months ended September 30, ~~2017.~~2019. The Company has not experienced losses relating to these deposits and management does not believe that the Company is exposed to any significant credit risk with respect to these amounts.

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%~~17% and ~~26%~~20% of ~~the Company’s~~ total operating expenses for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, and ~~21%~~18% and ~~25%~~19% of ~~the Company’s~~ total operating expenses for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. These amounts do not include acquisition fees paid to the Asset Manager that were capitalized (see Note 3). The Company has mortgages and notes payable with ~~five~~three institutions that comprise ~~32%, 20%~~62%, 16%~~, 10%~~, and 10% of total mortgages and notes payable at September 30, ~~2017.~~2019. 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 December 31, ~~2016.~~2018. For the three and nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, 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 and 2016:~~Program:

	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
Number of stockholders	6		7		20		20
(in thousands, except number of redemptions)									2019		2018		2019		2018
Number of redemptions requested									20		11		49		33
Number of shares	23		45		62		87		88		32		147		106
Aggregate redemption price	$	1,808	$	3,427	$	4,825	$	6,487	$	7,361	$	2,675	$	12,374	$	8,564

The Corporation has adopted ~~the DRIP,~~a 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 the DRIP at any time upon 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. At September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, a total of ~~1,451~~2,797 and ~~1,076,~~2,233 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		2019		2018		2019		2018
Basic earnings:
Net earnings attributable to Broadstone Net Lease, Inc.	$	11,948	$	13,958	$	39,269	$	23,874	$	23,388	$	21,267	$	53,460	$	55,813
Diluted earnings:
Net earnings attributable to Broadstone Net Lease, Inc.	$	11,948	$	13,958	$	39,269	$	23,874	$	23,388	$	21,267	$	53,460	$	55,813
Net earnings attributable to non-controlling interests		1,042		1,459		3,460		2,600		1,650		1,797		3,942		4,631
	$	12,990	$	15,417	$	42,729	$	26,474	$	25,038	$	23,064	$	57,402	$	60,444

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		24,642		20,554		23,394		19,850
Effects of convertible membership units		1,530		1,427		1,462		1,416		1,737		1,737		1,737		1,646
Weighted average number of common shares outstanding used in diluted earnings per share		19,147		15,074		18,069		14,154		26,379		22,291		25,131		21,496
Basic and diluted net earnings per common share	$	0.68	$	1.02	$	2.36	$	1.87	$	0.95	$	1.03	$	2.28	$	2.81

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 (which are currently presented as non-controlling interest) also be added back to net income, there is no effect on EPS.

Cash paid for interest was ~~$20,364~~$49,828 and ~~$16,430~~$33,108 for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. Cash paid for state income, franchise and ~~franchise~~foreign taxes was ~~$751~~$809 and ~~$323~~$307 for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, 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 and one acquisition closed in 2017,~~ the ~~Company~~nine months ended September 30, 2019, the company assumed ~~four separate~~three lease agreements that provided for a total of ~~$11,464~~$2,517 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 made for work completed under these allowances, resulting in a total

Balances associated with tenant improvement ~~allowance~~allowances are included in Accounts payable and other liabilities on the Condensed Consolidated Balance Sheets as follows:

The Company leases land at certain properties under non-cancellable operating leases with initial lease terms ranging from 2025 to 2066. These leases contain provisions for fixed monthly payments, subject to rent escalations. One lease requires the Company to make annual rent payments calculated based upon sales generated at the property (“percentage rent”). None of ~~$6,627~~the leases are subject to any sublease agreement.

The following table summarizes the total lease costs associated with these leases, reported as a component of Property and ~~$9,490~~operating expense in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income:

The following table summarizes payments associated with obligations under operating leases, reported as Cash flows from operating activities on the accompanying Condensed Consolidated Statements of Cash Flows:

Estimated future lease payments required under non-cancelable operating leases at September 30, ~~2017~~2019, and ~~December 31, 2016, respectively.~~a reconciliation to the lease liabilities, is as follows:

The above rental payments include future minimum lease payments due during the ~~nine months ended September 30, 2017, three properties held~~initial lease terms. Such amounts exclude any variable lease payments associated with percentage rent or changes in the ~~Company’s real estate portfolio incurred losses~~Consumer Price Index that may become 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.~~periods.

~~Subsequent to September 30, 2017,~~Through November 12, 2019, the Company has raised ~~$18,443 for a total of 231~~$5,789 equivalent to 69 shares of the Corporation’s common stock through ~~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.~~DRIP. Through November ~~13, 2017,~~12, 2019, the Company has paid ~~$8,099~~$11,932 in distributions, including dividend reinvestments.

Subsequent to September 30, ~~2017,~~2019, 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~~$16,064 of rental property and associated intangible assets and ~~liabilities (see Note 4), and assumed $11,933~~liabilities. Through November 12, 2019, the Company sold five properties with an aggregate carrying value of ~~liabilities.~~$10,922 for total proceeds of $13,731. The Company incurred additional expenses related to the sales of approximately $745, resulting in a gain on sale of real estate of approximately $2,064.

On ~~November 7, 2017,~~October 31, 2019, the Board of Directors declared a distribution of ~~$0.415~~$0.44 per share on the Corporation’s common stock and approved a distribution of ~~$0.415~~$0.44 per membership unit of the Operating Company for monthly distributions through January ~~2018.~~2020. The distributions are payable on or prior to the 15th day of the following month to ~~the Corporation’s common~~ stockholders and ~~the Operating Company’s~~ unit holders of record on the ~~last~~record date, which is generally the next-to-the-last business day of the prior month. In addition, the IDC determined the ~~Determined Share Value~~share value for the Corporation’s common stock to be ~~$81.00~~$85.00 per share for ~~subscription agreements received~~the period from November 1, ~~2017~~2019 through January 31, ~~2018.~~2020.

Subsequent to September 30, 2019, the Operating Company paid off borrowings on the Revolver in the aggregate amount of $6,000.

On November 11, 2019, the Company entered into a definitive merger agreement (the “Merger Agreement”) with the Manager and other parties providing for the internalization of the external management functions currently performed for the Company by the Manager (the “Internalization”). Upon consummation of the Internalization, the Company’s current management team and corporate staff, who are currently employed by the Manager, will become employed by an indirect subsidiary of the Company, and the Company will become internally managed. Subject to the satisfaction of specified closing conditions, the Internalization is scheduled to close during the first quarter of 2020. The Internalization is not considered a termination event under the Property Management Agreement and the Asset Management Agreement (see Note 3). The Property Management Agreement and Asset Management Agreement, however, will be terminated upon closing of the Internalization, but no fees will be payable under them as a result of that termination. The Internalization will consist of the acquisition of the Manager through a series of mergers pursuant to the Merger Agreement.

The consideration paid pursuant to the Merger Agreement will consist of (i) base consideration of approximately $206 million plus assumption of debt of approximately $94 million, payable upon closing and (ii) additional consideration of up to $75 million payable in four tranches of $10 million, $15 million, $25 million, and $25 million if certain milestones related to either (a) the dollar volume-weighted average price of a share of the Company’s common stock (“VWAP per REIT Share”), following the completion of an initial public offering of the Company’s common stock (“IPO”), or (b) the Company’s adjusted funds from operations (“AFFO”) per share, prior to the completion of an IPO, are achieved during specified periods of time following the closing of the Internalization (the

“Earnout Periods”). The consideration will consist of a combination of cash, shares of the Company’s common stock, and Operating Company membership units, at the election of the owners of the Manager.

The earnout tranches, applicable VWAP of a REIT Share and AFFO per share, and the applicable Earnout Periods are as follows:

Upon closing of the Internalization, the Company’s existing management team, who are currently employees of the Manager, including the Company’s current executive officers, will become employees of the Company, providing a seamless transition and clarity as to future senior leadership. Each of Christopher J. Czarnecki, Ryan M. Albano, John D. Moragne, and Sean T. Cutt are expected to terminate their employment with the Manager and enter into employment agreements with the Company or its subsidiary to serve as the Company’s Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, and Chief Investment Officer, respectively.

The Merger Agreement contains customary representations, warranties and covenants. Each party’s obligation to consummate the transactions contemplated by the Merger Agreement is subject to customary closing conditions.

The Merger Agreement does not provide that the completion of an IPO is a condition to the closing of the Internalization. Under the terms of the Merger Agreement, however, if the Company does not complete an IPO by December 31, 2020, then the former owners of the Manager who receive shares of the Company’s common stock and/or membership units of the Operating Company will be granted certain redemption rights as a means to provide additional liquidity in the absence of an IPO.

Prior to closing the Internalization, the Company has agreed to repurchase all of the outstanding shares of Company common stock held by the Manager in exchange for cash at a per share price equal to $85.00, the current Determined Share Value.

Except where the context suggests otherwise, as used in this Form 10-Q, the terms “BNL,” “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. We caution that forward-looking statements are not guarantees. 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.~~different from those expressed or implied in any forward-looking statements. 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~~

Factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include, but are ~~inherently subject~~not limited to:

Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and readers are cautioned not to place undue reliance on ~~these~~any forward-looking statements ~~which speak only~~included herein. All forward-looking statements are made as of the date this Form 10-Q is filed with the Securities and Exchange Commission (the “SEC”)., and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. 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.~~10-Q for any reason. 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, 2018, as filed with the SEC on ~~June 29, 2017~~March 14, 2019 (the “Form ~~10”~~10-K”).

We are currently 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~~located primarily in 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.

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~~creditworthy 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 mission critical locations, while conserving their debt and equity capital to fund their fundamental business operations.

As of September 30, ~~2017,~~2019, we owned a diversified portfolio of ~~477~~661 individual net leased commercial properties located in 3742 U.S. states and one commercial property located in British Columbia, Canada, and comprising approximately ~~14.1~~27.5 million rentable square feet of operational space. As of September 30, ~~2017,~~2019, all but four of our properties were ~~100% leased~~subject to ~~119~~leases and our properties were 99.7% occupied by 187 different commercial tenants, with no single tenant accounting for more than 5%2.8% of our ~~annual~~contractual rental ~~stream.~~

~~We elected to qualify as a REIT under~~revenue over the ~~Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”~~next 12 months (“NTM Rent”), 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~~currently retains 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~~directors’ 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”). We are the sole managing member of the Operating Company and as of September 30, 2017, we owned approximately 92.3% of its issued and outstanding membership units, with the remaining 7.7% of its membership units 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~~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 condensed 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 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 non-controlling membership units were outstanding as~~

During each of ~~September 30, 2017, with a year-to-date weighted average of 1.5 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~~the periods covered by this Form 10-Q, we ~~have conducted additional closings at least once every calendar quarter since then. Currently, we close~~closed sales of additional shares of our common stock ~~monthly.~~ on a monthly basis, subject to an equity cap and queue program for new and additional investments. The cap does not apply to investments made pursuant to our Distribution Reinvestment Plan (“DRIP”) or equity capital received in connection with UPREIT transactions. There is currently no established equity cap. We anticipate reinstating an equity cap once we are comfortably within the leverage range of the Company’s investment grade credit rating. As a result of a pending transaction, we determined that we would not hold an equity closing as of October 31, 2019. The next equity closing will occur on November 29, 2019.

Shares of our common stock are currently being offered in our ongoing private offering at ~~$81.00 per share, provided that the per share offering~~a price ~~may be adjusted quarterly by the committee of our board of directors comprised of our independent directors (“IDC”) based on the~~equal to a Determined Share Value (as defined below)~~, which is based on input from management, and such other factors as our IDC may consider.~~ of $85.00 per share. For the nine months ended September 30, ~~2017,~~ 2019, we sold ~~3.2 million~~3,609,696 shares of our common stock in our private offering, including ~~0.4 million~~563,864 shares of common stock issued pursuant to our ~~Distribution Reinvestment Plan (“DRIP”),~~DRIP, for ~~gross offering~~total proceeds of approximately ~~$249.6~~$307.9 million. We intend to use substantially all of the net proceeds from our ongoing 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,~~2019, there were ~~18.3~~25.5 million shares of our common stock issued and outstanding, and ~~1.5~~1.7 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 our historical operating performance. ~~Please see our~~See 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.

On November 12, 2019, we issued a press release announcing that we had entered into a definitive agreement (the “Merger Agreement”) to internalize the external management functions (the “Internalization”) currently performed by the Manager. Upon consummation of the Internalization, our current management team and corporate staff, who are currently employed by the Manager, will become employed by an indirect subsidiary of ours, and we will become internally managed. Subject to the satisfaction of specified closing conditions, the Internalization is scheduled to close during the first quarter of 2020. The Merger Agreement does not provide that the completion of an initial public offering (“IPO”) is a condition to the closing of the Internalization. Under the terms of the Merger Agreement, however, if we do not complete an IPO by December 31, 2020, then the former owners of the Manager who receive shares of our common stock and/or membership units of the Operating Company will be granted certain redemption rights as a means to provide additional liquidity in the absence of an IPO.

The consideration paid pursuant to the Merger Agreement will consist of (i) base consideration of approximately $206 million plus assumption of debt of approximately $94 million, payable upon closing and (ii) additional consideration of up to $75 million payable in four tranches of $10 million, $15 million, $25 million, and $25 million if certain milestones related to either (a) the dollar volume-weighted average price of a share of the Company’s common stock (“VWAP per REIT Share”), following the completion of an IPO of the Company’s common stock, or (b) the Company’s AFFO per share, prior to the completion of an IPO, are achieved during specified periods of time following the closing of the Internalization (“Earnout Periods”). The consideration will consist of a combination of cash, shares of the Company’s common stock, and Operating Company membership units, at the election of the owners of the Manager.

The earnout tranches, applicable VWAP of a REIT Share and AFFO per share, and the applicable Earnout Periods are as follows:

Additional information is available in the Current Report on Form 8-K that we filed on November 12, 2019, with the U.S. Securities and Exchange Commission, including a detailed description of the merger agreement and the proposed transaction’s terms, conditions, covenants, and agreements.

We target acquisitions of fee simple interests in individual properties priced between $5 million and $75 million. Portfolios may be significantly larger, depending on 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 primarily located in the United States either directly from our ~~credit-worthy~~creditworthy 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., 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, with certain exceptions provided for in our Investment Policy, 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 property type, tenant industry, and geographic location as of September 30, ~~2017.~~2019. The percentages below are calculated based on our ~~contractual rental revenue over the next twelve months (“~~NTM ~~Rent”), on a per property type basis~~Rent as of September 30, 2019, 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.

At September 30, 2019, 99.8% 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 September 30, 2017,portfolio’s rentable square footage, representing all but four of our properties, ~~are~~is subject to a lease, 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.

Due to the fact that substantially 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~~three 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,~~2019, the weighted average remaining term of our leases (calculated based on NTM Rent) was approximately ~~13.2~~11.7 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 remaining lease term on the ~~$159.2~~$993.7 million in properties acquired during the ~~three~~nine months ended September 30, ~~2017,~~2019, was ~~13.0 years. Over 50%~~12.3 years at the time of acquisition. More than 59% of our rental revenue is derived from leases that expire during 2030 and thereafter. As of September 30, ~~2017, not~~2019, no more than ~~10%~~8.9% of our rental revenue is derived from leases that expire in any single year in the ~~decade between 2020 and 2030.~~next ten years. The following chart sets forth our lease expirations based upon the terms of our leases in place as of September 30, ~~2017.~~2019.

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. We did not have any significant lease renewals during the nine months ended September 30, 2019.

Year	Number of Tenants		Number of Properties		Square Footage		NTM Rent		Percentage of NTM Rent			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	%		4		3		87	$	629		0.2	%
2021		2		4		9		576		0.3	%		7		11		99		1,931		0.6	%
2022		3		3		87		2,393		1.4	%		5		4		124		3,285		1.1	%
2023		9		13		724		6,786		4.0	%		12		13		703		6,975		2.3	%
2024		12		15		1,741		13,933		8.2	%		13		14		1,672		13,737		4.6	%
2025		2		8		28		1,034		0.6	%		12		21		693		7,713		2.6	%
2026		17		27		620		9,964		5.9	%		22		34		1,521		18,551		6.2	%
2027		16		30		1,210		14,785		8.8	%		22		32		2,006		23,043		7.8	%
2028		12		22		1,025		11,184		6.6	%		24		36		2,715		26,555		8.9	%
2029		12		54		2,483		15,623		9.2	%		16		61		2,481		18,527		6.2	%
2030 and thereafter		61		295		6,015		91,023		53.9	%		110		429		15,322		176,196		59.3	%
Untenanted properties													—		4		51		—		—
Total													247		662		27,474	$	297,142		100.0	%

Our top tenants and brands by percentage of NTM Rent at September 30, ~~2017,~~2019, are listed in the tables below. The percentages of NTM Rent shown are calculated based on ~~our~~the NTM Rent ~~on a per property type basis~~associated with the tenant or brand 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.

Tenant

Property Type

% NTM Rent

Properties

Red Lobster Hospitality LLC & Red Lobster Restaurants LLC

Retail

4.3
%

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

Siemens Medical Solutions USA, Inc. & Siemens Corporation

Industrial

2.6
%

2

Nestle' Dreyer's Ice Cream Company

Industrial

2.5
%

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

Total

29.3
%

142

All Other

70.7
%

335

Tenant	Property Type	% NTM Rent			Properties
Art Van Furniture, LLC	Retail		2.8	%		10
Red Lobster Hospitality & Red Lobster Restaurants LLC	Retail		2.5	%		25
Jack's Family Restaurants LP	Retail		2.0	%		36
Axcelis Technologies, Inc.	Other		1.9	%		1
Hensley & Company	Industrial		1.9	%		3
Outback Steakhouse of Florida LLC ^(a)	Retail		1.9	%		24
Krispy Kreme Doughnut Corporation	Industrial/Retail		1.7	%		27
BluePearl Holdings, LLC	Healthcare		1.7	%		12
Big Tex Trailer Manufacturing, Inc.	Industrial/Retail/Office		1.6	%		17
Siemens Medical Solutions USA, Inc. & Siemens Corporation	Industrial		1.6	%		2
Total Top Ten			19.6	%		157
All Other			80.4	%		505
Total			100.0	%		662

Brand	Property Type	% NTM Rent			Properties		Property Type	% NTM Rent			Properties
Bob Evans Farms⁽¹⁾	Industrial/Retail		4.3	%		27
Art Van Furniture							Retail		2.8	%		10
Bob Evans Farms ^(a)							Industrial/Retail		2.6	%		27
Red Lobster	Retail		4.3	%		25	Retail		2.5	%		25
Art Van Furniture	Retail		3.9	%		9
Wendy's							Retail		2.1	%		41
Jack's Family Restaurants	Retail		3.4	%		36	Retail		2.0	%		36
Taco Bell	Retail		3.1	%		41
Wendy's	Retail		2.9	%		35
Axcelis							Other		1.9	%		1
Hensley							Industrial		1.9	%		3
Krispy Kreme							Industrial/Retail		1.7	%		27
BluePearl Veterinary Partners							Healthcare		1.7	%		12
Outback Steakhouse	Retail		2.8	%		22	Retail		1.6	%		22
Big Tex Trailers	Industrial/Retail		2.7	%		17
Siemens	Industrial		2.6	%		2
Nestle'	Retail		2.5	%		1
Total Top Ten									20.8	%		204
All Other									79.2	%		458
Total			32.5	%		215			100.0	%		662
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 (“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 markets, including the debt private placement ~~markets.~~market. The Operating Company’s credit 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 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 in assigning ratings, we are strongly committed to maintaining a modest leverage profile commensurate with our investment grade rating. Our leverage policy (“Leverage Policy”) is to maintain a leverage ratio in the 35% to 45% range based on the approximate market value of our assets, recognizing that the actual leverage ratio ~~will~~may 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~~our exposure to ~~variable rate~~variable-rate debt, ~~the Operating Company enters~~we enter into interest rate swap agreements to fix the rate of interest as a hedge against interest rate ~~fluctuations.~~fluctuations on floating-rate debt. 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 variable-rate 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~~our 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 debt capital 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.~~

As of September 30, ~~2017,~~2019, our total outstanding indebtedness was ~~$910.1~~$2,096.2 million, and the ratio of our total indebtedness to the approximate market value of our assets was ~~approximately 36.5%~~47.5%.

~~Our~~We sell shares of our 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 at least 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. At its October 31, 2019 meeting, the Independent Directors Committee determined that the Determined Share Value would remain at $85.00 per share through January 31, 2020. 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~~the 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 made 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, the IDC will review the NAV calculations as of December 31, 2017, and will assess whether adjustments to the current Determined Share Value of $81.00 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 and June 30, 2017~~ (in thousands, except per share amounts):

NAV as of:	September 30, 2017			June 30, 2017
NAV component:							September 30, 2019			June 30, 2019
Investment in rental property	$	2,502,140		$	2,351,989		$	4,465,457		$	3,704,911
Debt		(909,416	)		(883,112	)		(2,180,100	)		(1,529,385	)
Other assets and liabilities, net		1,348			34,790			4,373			(19,078	)
NAV	$	1,594,072		$	1,503,667		$	2,289,730		$	2,156,448
Number of outstanding shares, including noncontrolling interests	$	19,790		$	18,820			27,219			25,467
NAV per share	$	80.55		$	79.90
NAV per diluted share							$	84.12		$	84.68

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~~2019, and June 30, ~~2017,~~2019, supporting the Determined Share Value in effect for the ~~periods of~~period from November 1, ~~2017~~2019 through January 31, ~~2018,~~2020, and August 1, ~~2017~~2019 through October 31, ~~2017,~~2019, 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,~~2019, 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.~~$78.18. Conversely, a decrease in the weighted average implied market capitalization rate used as of September 30, 2019, of 0.25% would result in an increase in the fair value of our investment in rental property of 3.9%, and our NAV per diluted share would have been $90.53.

At its ~~November 7, 2017,~~October 31, 2019 meeting, our board of directors declared monthly distributions of ~~$0.415~~$0.44 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:

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 our DRIP will be~~at a per share price equal to 98% of the ~~then-current~~ Determined Share ~~Value. Please refer~~Value as of the applicable distribution date. Refer to the section titled Distribution and Distribution Reinvestment in Part II, 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~~2019 (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 ^(a)		Distribution Paid Pursuant to DRIP on Membership Units ^(a)		Total Amount of Distribution
January	2017	$	3,319	$	488	$	2,738	$	98	$	6,643	2019	$	4,634	$	617	$	4,730	$	130	$	10,111
February	2017		3,394		488		2,836		98		6,816	2019		4,691		617		4,800		130		10,238
March	2017		3,522		493		2,972		99		7,086	2019		4,836		632		5,003		132		10,603
April	2017		3,555		493		3,068		99		7,215	2019		4,879		631		5,092		132		10,734
May	2017		3,618		493		3,167		99		7,377	2019		4,917		632		5,176		133		10,858
June	2017		3,680		493		3,220		99		7,492	2019		5,017		632		5,207		133		10,989
July	2017		3,742		493		3,296		99		7,630	2019		5,108		632		5,247		133		11,120
August	2017		3,815		512		3,378		122		7,827	2019		5,178		632		5,291		133		11,234
September	2017		3,883		512		3,420		123		7,938	2019		5,401		631		5,532		132		11,696
TOTAL		$	32,528	$	4,465	$	28,095	$	936	$	66,024
Total													$	44,661	$	5,656	$	46,078	$	1,188	$	97,583

The following table summarizes our distributions paid, ~~during the nine months ended September 30, 2017 and 2016,~~ 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		2019		2018
Distributions:
Paid in cash	$	37,929	$	31,229	$	51,505	$	44,650
Reinvested in shares		28,095		19,781		46,078		37,055
Total Distributions	$	66,024	$	51,010	$	97,583	$	81,705
Source of Distributions:
Cash flow from operating activities	$	66,024	$	51,010	$	97,583	$	81,705
Cash flow from investing activities		—		—
Cash flow from financing activities		—		—
Total Sources of Distributions	$	66,024	$	51,010
FFO	$	79,974	$	55,658	$	122,071	$	114,188

For the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, 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~~using a combination of debt and equity capital and with cash from operations that is not otherwise distributed to our stockholders. Our focus is on maximizing the risk-adjusted return to our ~~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~~profile, 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 our investment grade credit rating. As of September 30, 2019, the leverage ratio was 47.5% of the approximate market value of our assets, compared to 40.2% as of June 30, 2019. The increase was due to incremental borrowings associated with funding the industrial and office portfolio acquisition during the third quarter. We intend to reduce our leverage profile in the near term, to a range within the leverage profile consistent with our investment grade credit rating, ~~the Operating Company received in March~~using a combination of ~~2016 and re-affirmed in March~~proceeds from our ongoing private offering of ~~2017. The actual leverage ratio will vary over time but may not exceed 50% without the approval of the IDC. As of September 30, 2017, the leverage ratio was approximately 36.5% of the market value~~shares of our ~~assets. From~~common stock and increasing disposition activity. As a ~~management perspective~~result of our announcing the industrial and ~~in communications with the~~office portfolio acquisition, Moody’s affirmed our investment grade credit rating and stable outlook.

Management and our 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~~metric we use to measure leverage in the context of our cash flow expectations and projections. ~~Furthermore, given~~Given the significance of our recent growth, ~~over the past two years,~~however, adding ~~$352.0~~$993.7 million in investments during the nine months ended September 30, ~~2017, $518.8~~2019, $606.8 million in investments during ~~2016,~~2018, and ~~$550.1~~$683.6 million in investments during ~~2015,~~2017, coupled with our continued strategic growth initiatives, historical EBITDA may not provide investors with an adequate picture of the contractual cash ~~in-flows~~inflows associated with these investments. Our investments are typically made throughout the year (historically, a significant portion has occurred later in the year), and therefore the ~~full year,~~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~~metric to manage our leverage profile. We utilize this analysis inclusive of our focus on debt-to-market value metrics.

Our ~~equity capital for~~primary cash expenditures include the monthly interest payments we make on the debt we use to finance our real estate investment portfolio, asset management and property management fees for servicing our portfolio, acquisition ~~activity is provided from~~costs related to the ~~proceeds~~growth of our ~~ongoing private offering, including distributions reinvested through~~portfolio, and the general and administrative expenses of operating our ~~DRIP. During~~business. Since substantially all of our leases are net leases, our tenants are generally responsible for the ~~three~~maintenance, insurance, and property taxes associated with the properties they lease from us. In certain circumstances, the terms of the lease require us to pay these expenses, although, 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 on an aggregate basis during the term of the property leases in our current portfolio. 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.

As shown in the table below, net cash provided by operating activities increased by $17.4 million, to $110.9 million for the nine months ended September 30, ~~2017, we raised $79.2~~2019, from $93.5 million for the nine months ended September 30, 2018. We funded real estate investment activity with a combination of cash from operations, proceeds from our unsecured revolving credit agreements, borrowing under the 2020 and 2026 Unsecured Term Loans, and proceeds from the issuance of common stock. We paid cash dividends to our stockholders and holders of non-controlling membership units of $52.2 million and ~~$249.6~~$45.0 million ~~respectively,~~for the nine months ended September 30, 2019 and 2018, respectively. The increased dividends between periods were primarily funded by cash provided by our operations. Cash and cash equivalents and restricted cash totaled $44.1 million and $28.0 million at September 30, 2019 and 2018, respectively.

Substantially all of our cash from operations is generated by our real estate portfolio. As of September 30, 2019, the historical cost basis of our real estate investment portfolio totaled $3,501.5 million, consisting of investments in 662 properties. During the first nine months of 2019, our portfolio generated average monthly straight-line rent revenues of approximately $22.3 million, and average monthly contractual cash revenues of approximately $20.6 million. During the nine months ended September 30, 2019, we closed 16 real estate acquisitions totaling $993.7 million, excluding capitalized acquisition costs, adding 66 new properties to our portfolio. We currently expect the new properties will generate approximately $6.0 million in monthly straight-line rent revenues and approximately $5.5 million in monthly contractual cash revenues over the next twelve months.

We intend to continue to grow through additional real estate investments. To accomplish this objective, we must continue to identify acquisitions that are consistent with our investment policy and raise additional debt and equity ~~capital to be used in~~capital. We have financed our acquisition ~~activities, including distributions reinvested through our DRIP~~of properties using a combination of debt and ~~properties exchanged for membership units in the Operating Company through UPREIT transactions.~~equity capital. 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~~which we seek to achieve through earnings growth and share ~~appreciation~~price appreciation. The mix of our financing sources may change over time based on market conditions and ~~earnings growth). Our debt~~our liquidity needs.

Equity capital for our real estate acquisition activity is provided by the proceeds of our ongoing private offering, including distributions reinvested through our DRIP. During the nine months ended September 30, 2019, we raised approximately $307.9 million in equity capital to be used in our acquisition activities. See Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this Form 10-Q for further information.

Debt capital is provided through unsecured term notes, revolving debt facilities, and senior unsecured notes. We also, from time to time, obtain or assume non-recourse mortgage financing from banks and insurance companies secured by mortgages on the corresponding specific property. Mortgages, however, are not currently a strategic focus of the active management of our 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,~~basis, most often as the ~~Operating Company enters into interest rate swap agreements to fix the rate~~result 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.lease assumption transactions.

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~~by investing in real estate with ~~credit-worthy~~creditworthy tenants and lease guarantors, and by 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. For example, during the first quarter of 2019, we used proceeds from the longer-term 2026 Unsecured Term Loan (as defined below) to repay a shorter-term unsecured term loan that had been due in 2019 (the “2019 Unsecured Term Loan”). Refer to ~~“Contractual Obligations”~~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.

~~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 of 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, our tenants are generally responsible for the maintenance, insurance, and property taxes 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 the nine months ended September 30, 2017, we maintained a 100% leased portfolio, with the leases for only two of our properties, representing less than 1% of our annual rental streams (calculated based on NTM Rent), expiring before 2020.maturities.

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~~achieved 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 unsecured term, revolving debt, senior unsecured notes, and mortgage loans. The mix of financing sources may change over time based on market conditions and our liquidity needs. We have three outstanding unsecured term loans with an outstanding principal balance of approximately $725.0 million as of September 30, 2017, and a $400.0 million line 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 to a margin of 1.40% on 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 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.

~~The Operating Company achieved its investment grade credit rating~~ based on our conservative leverage profile, diversified real estate investment portfolio, and earnings stability ~~based on~~provided by the ~~credit-worthiness~~creditworthiness 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 the proportion of 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 real estate portfolio diversification. We have aligned our strategic growth priorities with these factors, as we believe the favorable debt pricing and access to ~~additional~~multiple sources of debt capital resulting from the investment grade credit rating, provides us with an advantageous cost of capital and risk-adjusted return on investment for our stockholders.

On August 2, 2019 we entered into the 2020 Unsecured Term Loan, under which we could borrow up to $300 million between August 2, 2019 and November 2, 2019. We ~~intend~~drew the entire amount available under the 2020 Unsecured Term Loan on August 28, 2019, to partially fund the industrial and office portfolio acquisition. Borrowings under the 2020 Unsecured Term Loan are payable interest only over the term of the loan, with the principal balance due in full on August 2, 2020, provided that we have two options to extend the maturity date for a six-month period for each extension (for a total possible extension of up to one year), subject to payment of an extension fee. The rate of interest payable on borrowings under the 2020 Unsecured Term Loan, at our option, is equal to LIBOR plus a margin. Based on our investment grade credit rating, the applicable margin is currently 1.25%.

On February 27, 2019, we entered into a $450 million seven-year unsecured term loan agreement (the “2026 Unsecured Term Loan”). At closing, we borrowed $300 million under the 2026 Term Loan and used the proceeds to fully repay our 2019 Unsecured Term Loan. On August 27, 2019, we borrowed the remaining $150 million to partially fund the industrial and office portfolio acquisition. The 2026 Unsecured Term Loan includes an accordion feature that can increase the facility size up to a total of $550 million of available capacity. Borrowings under the 2026 Unsecured Term Loan are payable interest only during the term, with the principal

amount due on February 27, 2026. The rate of interest payable on borrowings under the 2026 Unsecured Term Loan, at our option, is equal to LIBOR plus a margin. Based on our investment grade credit rating, the applicable margin is currently 1.85%.

As of September 30, 2019, we have a $1.055 billion unsecured credit facility and term loan agreement (the “Credit Facility”), which is comprised of (i) a $600 million senior unsecured revolving credit facility (the “Revolver”), (ii) a $265 million senior unsecured delayed draw ~~down~~term loan due in 2023 (the “2023 Unsecured Term Loan”), and (iii) a $190 million senior unsecured delayed draw term loan due in 2024 (the “2024 Unsecured Term Loan”). Borrowings under the Credit Facility are payable interest only during the term of the appropriate loan tranche, with the principal amount due in full on the applicable maturity date. On July 1, 2019, we amended the Credit Facility to reduce the margin above LIBOR paid on the 2024 Unsecured Term Loan from 1.90% to 1.25%.

The following table summarizes the amounts drawn and available to be drawn on the Credit Facility and the 2020 and 2026 Unsecured Term Loans as of September 30, 2019 (in thousands, excluding Loan Tranche and Maturity Date).

To mitigate interest rate risk, we have strategically added unsecured, fixed-rate, interest-only senior promissory notes (“Senior Notes”) to our capital structure. At September 30, 2019 and December 31, 2018, we had $475 million of Senior Notes outstanding. The Senior Notes were issued in three series (Series A, B, and C) as described below.

On April 18, 2017, we issued $150 million ~~7-Year~~of Senior Notes (the “Series A Notes”). The Series A Notes bear interest at a fixed rate of 4.84% per annum, and mature on April 18, 2027.

On July 2, 2018, we issued $325 million of Senior Notes in two series: (i) $225 million of 10-year Senior Notes (“Series B Notes”) maturing on July 2, 2028, and (ii) $100 million of 12-year Senior Notes (“Series C Notes”) maturing on July 2, 2030. The Series B and Series C Notes bear interest at fixed rates of 5.09% per annum and 5.19% per annum, respectively.

In addition to funding acquisitions, a portion of the net proceeds from the Series B Notes and Series C Notes was used to repay outstanding borrowings under the Revolver as well as $25 million of the outstanding principal balance of our 2019 Unsecured Term ~~Loan as~~Loan.

We are subject to various covenants and financial reporting requirements pursuant to our loan agreements. The table below summarizes the applicable financial covenants, which are substantially the same across each of the agreements. As of September 30, 2019, we ~~acquire additional~~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 restricted from paying dividends to our stockholders above the annual 90% REIT taxable income distribution requirement. For each of the previous three years, our cash flows from operations exceeded the required cash dividend distribution amounts.

We believe our leverage policy and capital structure provide 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 through 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 debt obligations in 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,~~2019, our current borrowing capacity onunder our ~~New Revolver~~Credit Facility and ~~three unsecured credit facilities,~~accordion feature of the 2026 Unsecured Term Loan, 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 to meet our strategic objectives.

~~Our~~The leases ~~with tenants of~~in our ~~properties~~portfolio are long-term in nature, with a current weighted average remaining lease term of ~~13.2~~11.7 years as of September 30, ~~2017.~~2019. To mitigate the impact of inflation on our fixed revenue streams, we have implemented limited rent escalation clauses in our leases. As of September 30, ~~2017,~~2019, substantially all of our leases had contractual lease escalations, with aan annual weighted average of ~~2.1%~~2.0%. A ~~substantial~~ majority of our leases have fixed annual rent increases ~~and the remaining portion has annual lease escalations based on increases in the CPI,~~ or periodic escalations over the term of the lease (e.g., a 10% increase every five years)., and the remaining portion has annual lease escalations based on increases in the CPI. These lease escalations mitigate the risk of fixed revenue streams in the case of an inflationary economic environment, and provide increased return in otherwise stable market conditions. As a majority of our 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~~net leases also shelters us from inflationary fluctuations in the cost of services and ~~maintenance as~~maintenance. For a ~~result of inflation. For an insignificant~~ 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 toon our tenants and their ~~credit-worthiness~~creditworthiness if the increase in costs ~~are~~is greater than their increase in revenue. ~~In the limited circumstances where~~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, ~~2017.~~2019, or December 31, 2018.

The following table provides information with respect to our contractual commitments and obligations as of September 30, ~~2017 (in~~2019 (dollar amounts 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		Term Loans^(a)		Revolver^(b)		Senior Notes		Mortgages and Notes Payable		Interest Expense^(c)		Tenant Improvement Allowances^(d)		Operating Leases		Total
2017	$	—	$	—	$	28,000	$	—	$	677	$	8,842	$	6,627	$	44,146
2018		—		—		—		—		2,829		34,915		—		37,744
2019		325,000		—		—		—		3,036		26,907		—		354,943
Remainder of 2019																	$	—	$	—	$	—	$	784	$	21,126	$	—	$	29	$	21,939
2020		—		—		—		—		8,450		25,459		—		33,909		300,000		—		—		3,210		79,642		3,664		120		386,636
2021		—		—		—		—		13,306		24,537		—		37,843		—		—		—		18,028		73,363		—		122		91,513
2022																		—		303,300		—		2,930		61,903		—		124		368,257
2023																		265,000		—		—		8,356		52,332		—		125		325,813
Thereafter		—		250,000		98,500		150,000		30,274		70,467		—		599,241		640,000		—		475,000		79,627		162,190		—		2,540		1,359,357
Total	$	325,000	$	250,000	$	126,500	$	150,000	$	58,572	$	191,127	$	6,627	$	1,107,826	$	1,205,000	$	303,300	$	475,000	$	112,935	$	450,556	$	3,664	$	3,060	$	2,553,515

At September 30, ~~2017,~~2019, investment in rental property of ~~$91.3~~$179.8 million is pledged as collateral against our mortgages and notes payable.

Additionally, as of September 30, ~~2017,~~2019, 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 October 2017.transactions. 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 the Protected Members in the amount~~Based on values as of September 30, 2019, taxable sales 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 forproperties would trigger liability under the Agreements isof 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. For a more detailed discussion of the Agreements, see 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,~~2019, our real estate investment portfolio had grown to a net book value of ~~$1.9 billion,~~$3,501.5 million, consisting of investments in ~~477 property locations in 37 states and various industries. All of our real estate investment portfolio represents~~661 commercial real estate properties ~~subject~~with locations in 42 U.S. states and one commercial property located in British Columbia, Canada, and leased to ~~long-term leases, and all~~tenants in various industries. All but four of our ~~owned~~ properties were subject to a lease as of September 30, ~~2017. During the three months ended September 30, 2017~~2019, and ~~2016, none of our leases with tenants expired, and~~substantially all of our leasing activity related to our real estate acquisitions.

The increase in revenues ~~increased by $9.2 million, or 24.9%, to $46.2 million~~ for the three and nine months ended September 30, ~~2017, compared to $37.0 million for the three months ended September 30, 2016. The growth in revenue period-over-period~~2019, is primarily attributable to the growth in our real estate ~~portfolio. During~~portfolio, which was achieved through rent escalations associated with our same property portfolio, coupled with ren tal revenue generated from accretive property acquisitions completed since the ~~three months ended September 30, 2017,~~third quarter of 2018, and continued strong portfolio operating performance. Since the third quarter of 2018, we ~~closed seven real estate acquisitions and~~have acquired ~~$159.2 million in real estate,~~109 new properties for $1.2 billion, excluding capitalized acquisition costs, ~~comprised~~including 66 new properties acquired for $993.7 million during the first nine months of ~~22 new properties. We capitalized approximately $2.4 million in acquisition expenses~~2019. During the year, we experienced greater than 99% rent collection and ~~$0.8 million in leasing fees~~occupancy (based on rentable square footage), and as ~~part~~ of ~~the acquisitions. Additionally, subsequent to~~ September 30, ~~2016 and for~~2019, 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, contributing to the growth in current quarter revenue. 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 three months ended September 30, 2017, excluding capitalized acquisition expenses, represented a weighted average ~~capitalization rate of 7.5%~~annual rent increases on our properties was 2.0%.

	For the three months ended							For the three months ended										For the nine months ended
	September 30,				Increase/			September 30,				Increase/(Decrease)						September 30,				Increase/(Decrease)
(in thousands)	2017		2016		(Decrease)			2019		2018		$			%			2019		2018		$			%
Operating expenses
Depreciation and amortization	$	15,643	$	12,114	$	3,529		$	28,392	$	21,869	$	6,523			29.8	%	$	77,989	$	61,303	$	16,686			27.2	%
Asset management fees		3,844		2,789		1,055			5,610		4,663		947			20.3	%		16,048		13,119		2,929			22.3	%
Property management fees		1,249		1,010		239			2,098		1,680		418			24.9	%		5,918		4,792		1,126			23.5	%
Acquisition expenses		—		2,367		(2,367	)
Property and operating expense		2,009		1,184		825			3,855		2,777		1,078			38.8	%		11,497		7,926		3,571			45.1	%
General and administrative		1,173		598		575			1,315		1,664		(349	)		(21.0	)%		3,807		4,451		(644	)		(14.5	)%
State and franchise tax		301		71		230
State, franchise and foreign tax									405		58		347		>100.0		%		1,153		811		342			42.2	%
Provision for impairment of investment in rental properties		2,608		—		2,608			2,435		2,061		374			18.1	%		3,452		2,061		1,391			67.5	%
Total operating expenses	$	26,827	$	20,133	$	6,694		$	44,110	$	34,772	$	9,338			26.9	%	$	119,864	$	94,463	$	25,401			26.9	%

The increase in Depreciation and amortization ~~increased by $3.5 million, or 29.1%, to $15.6 million~~expense for the three and nine months ended September 30, ~~2017,~~2019, 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 million, or 37.8%, to $3.8 million for~~We pay the ~~three months ended September 30, 2017. 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 and nine months ended September 30, ~~2017 compared to~~2019, is primarily the ~~comparable period in 2016 is a~~ result of an increase in our total outstanding 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~~which resulted from continued equity capital investments. 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~~2019, there were 27.2 million shares of our common stock and non-controlling membership units ~~of the Operating Company~~ outstanding, ~~increased~~compared to 22.8 million as ~~the result~~ of ~~continued equity capital investments. For the three 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 19.1 million, compared to 15.1 million for the three months ended September 30, 2016.2018. The increase in equity capital was used to partially fund the continued growth in our real estate portfolio. In addition to the increase in total outstanding equity, the increase in asset management fees reflects higher average Determined Share Values in effect.

~~Acquisition expenses decreased by $2.4 million for~~The increase in property and operating expense in the three and nine months ended September 30, ~~2017. Under~~2019, 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. We pay a majority of these expenses and are reimbursed by the tenant under the terms of the ~~Asset Management Agreement, we pay the Asset Manager an acquisition fee equal~~respective leases. There was a corresponding increase in operating expenses billed 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,~~tenants 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 three months ended September 30, 2017, we capitalized $2.4 million in acquisition expenses relating to $159.2 million in acquisitions, which approximated the acquisition expenses recognized during the three months ended September 30, 2016.included within Lease revenues.

During the three and nine months ended September 30, ~~2017,~~2019, we recognized ~~$2.6~~$2.4 million and $3.5 million, respectively, 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 impairments recognized during the nine months ended September 30, 2019, related to 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 a capitalization rate of 14.6%, a weighted average discount rate of 8%, and a weighted average price per square foot of $226. During the three and nine months ended September 30, 2018, we recognized $2.1 million of impairment on ~~four~~our investments in rental properties. The impairment 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 ~~7.25%~~7.5% to ~~12%~~10%, and a weighted average discount rate of 8%.

	For the three months ended									For the three months ended												For the nine months ended
	September 30,						Increase/			September 30,						Increase/(Decrease)						September 30,						Increase/(Decrease)
(in thousands)	2017			2016			(Decrease)			2019			2018			$			%			2019			2018			$			%
Other income (expenses)
Preferred distribution income	$	187		$	181		$	6		$	—		$	65		$	(65	)		(100.0	)%	$	—		$	440		$	(440	)		(100.0	)%
Interest income		127			4			123			5			16			(11	)		(68.8	)%		6			178			(172	)		(96.6	)%
Interest expense		(9,380	)		(4,576	)		(4,804	)		(18,465	)		(14,484	)		3,981			27.5	%		(51,025	)		(38,115	)		12,910			33.9	%
Cost of debt extinguishment		(1,404	)		(52	)		(1,352	)		(455	)		(50	)		405		>100.0		%		(1,176	)		(101	)		1,075		>100.0		%
Gain on sale of real estate		4,052			2,983			1,069			12,585			2,025			10,560		>100.0		%		16,772			9,620			7,152			74.3	%
Gain on sale of investment in related party											—			8,500			(8,500	)		(100.0	)%		—			8,500			(8,500	)		(100.0	)%
Internalization expenses											(923	)		—			(923	)		>100.0	%		(1,195	)		—			(1,195	)		>100.0	%

~~Interest~~The increased interest expense ~~increased $4.8 million, or 105%, to $9.4 million for~~during the three and nine months ended September 30, ~~2017,~~2019, resulted primarily from ~~$4.6~~a $785.9 million ~~for the three months ended~~increase in outstanding borrowings from September 30, ~~2016, due primarily~~2018, used partially to ~~an increase in long-term~~fund additional real estate investments. We continue to focus on strengthening our investment grade balance sheet by more closely aligning debt maturities and lease terms, accomplished through the refinancing of shorter-term borrowings with longer duration fixed-rate debt. While the benefits of our debt capital markets strategy are partially mitigated by higher-costing instruments, we were able to take advantage of the decreasing interest rates during the third quarter of 2019, as our percentage of floating-rate debt increased concurrently with our funding of the $735.7 million industrial and office portfolio. Our weighted average cost of borrowings, inclusive of interest rate swaps, was 3.94% at September 30, 2019, compared to 4.21% at September 30, 2018. We attempt to limit our total floating-rate debt exposure to no more than 5% of the approximate market value of assets, and expect to reduce our current exposure as we look to refinance or replace the short-term borrowings used to ~~partially fund~~finance the acquisition of ~~properties for our growing real estate investment~~the industrial and office 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 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.

As2019, we recognized gains of $12.6 million on the sale of 16 properties, compared to gains of $2.0 million on the sale of four properties during the three months ended 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, 2017.2018. During the nine months ended September 30, ~~2017 and 2016, none~~2019, we recognized gains of ~~our leases expired, and all~~$16.8 million on the sale 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,~~25 properties, compared to ~~$103.4~~gains of $9.6 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~~sale of 15 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, 2016.2018.

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, to another related party of the Manager, for an aggregate sales price of $18.5 million. The preferred units had a carrying value of $10 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.

During the three and nine months ended September 30, ~~2017,~~2019, we ~~recognized a $10.3~~incurred $0.9 million ~~gain on~~and $1.2 million, respectively, of third-party fees and consulting expenses associated with the sale of real estate, compared to a gain of $4.1 million for the nine months ended September 30, 2016. During the nine months ended September 30, 2017 and 2016 we sold ten properties and four 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.pending Internalization.

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 certain depreciated real estate assets, depreciation and amortization expense from real estate assets, gains and losses from change in control, and impairment charges related to certain previously depreciated real estate assets. To derive AFFO, we modify the ~~NAREIT~~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, realized gains or losses on foreign currency transactions, internalization expenses, 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 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, the amortization of debt issuance costs, net mortgage premiums, and lease intangibles, realized gains and losses on foreign currency transactions, and internalization expenses, 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 to FFO 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 and 2016~~

The following table presents our net income and our non-GAAP FFO and AFFO for the three and nine months ended September 30, ~~2017~~2019 and ~~2016.~~2018. 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										For the nine months ended
	September 30,				Increase/			September 30,				Increase/(Decrease)						September 30,				Increase/(Decrease)
(in thousands, except per share data)	2017		2016		Decrease			2019		2018		$			%			2019		2018		$			%
Net income	$	12,990	$	15,417	$	(2,427	)	$	25,038	$	23,064	$	1,974			8.6	%	$	57,402	$	60,444	$	(3,042	)		(5.0	)%
Net earnings per diluted share		0.68		1.02		(0.34	)		0.95		1.03		(0.08	)		(7.8	)%		2.28		2.81		(0.53	)		(18.9	)%
FFO		27,189		24,548		2,641			43,280		44,969		(1,689	)		(3.8	)%		122,071		114,188		7,883			6.9	%
FFO per diluted share		1.42		1.63		(0.21	)		1.64		2.02		(0.38	)		(18.8	)%		4.86		5.31		(0.45	)		(8.5	)%
AFFO		24,813		20,476		4,337			38,819		31,315		7,504			24.0	%		107,625		91,513		16,112			17.6	%
AFFO per diluted share		1.30		1.36		(0.06	)		1.47		1.40		0.07			5.0	%		4.28		4.26		0.02			0.5	%
Diluted WASO⁽¹⁾		19,147		15,074
Diluted WASO⁽^a)									26,379		22,291		4,088			18.3	%		25,131		21,496		3,635			16.9	%

Net income decreased by $2.4 million, or 15.7%, 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. Net earnings per diluted share decreased by $0.34 during the same period, down to $0.68 per share. The decrease in net income is primarily attributable to $2.6 million 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 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.

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. For the three months ended September 30, ~~2017, we capitalized $2.4~~2019, growth in net income was primarily attributable to revenue growth as discussed above, combined with a $10.6 million increase in our gain on sale of real estate. These factors were partially offset by a $6.5 million increase in depreciation and amortization expense associated with a larger real estate portfolio, a $4.0 million increase in interest expense associated with incremental borrowings used to fund our real estate acquisitions, and $0.9 million in ~~acquisition~~internalization expenses ~~relating~~incurred in 2019. We also recognized an $8.5 million gain on the sale of an investment in a related party during 2018, with no such activity in 2019. In addition to ~~$159.2 million in acquisitions. As such,~~the factors driving net income for the three months ended September 30, ~~2016 was impacted by acquisition expenses, however, net income for~~2019, the three months ended September 30, 2017 was not. The impact of capitalizing acquisition expenses during the three months ended September 30, 2017 was partially 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 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 increase in the diluted weighted average number of shares of our common stock outstanding as a result of ongoing equity raises.~~

FFO increased by $2.6 million, or 10.8%, to $27.2 million for the three months ended September 30, 2017, compared to $24.5 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%, to $24.8 million for the three months ended September 30, 2017, compared to $20.5 million for the three months ended September 30, 2016. AFFO per diluted share decreased by $0.06 during the same period to $1.30 per diluted share.

The period-over-period growth 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, AFFO during the three months ended September 30, 2017 was reduced by $1.4 million of debt extinguishment costs, 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.

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 and 2016~~

The following table presents our net income and our non-GAAP FFO and AFFO for the nine months ended September 30, 2017 and 2016. 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.

Net income increased by $16.3 million, or 61.4%, to $42.7 million for the nine months ended September 30, 2017, compared to $26.5 million for the nine months ended September 30, 2016. Net earnings per diluted share increased by $0.49 during the same period, up to $2.36 per share. The increase in net income and earnings per share is attributable to accretive investments in real estate properties made during 2017, coupled with the annualized revenue streams from the real estate investments made during the nine months ended September 30, 2016. We added $352.0 million and $381.0 million 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 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. For the nine months ended September 30, 2017, we capitalized $6.6 million in acquisition expenses relating to $352.0 million in acquisitions. As such, net income for the nine months ended September 30, 2016 was impacted by acquisition expenses, however, net income for the nine months ended September 30, 2017 was not. The impact of capitalizing acquisition expenses during the nine months ended September 30, 2017 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~~2019, is attributable to a ~~$10.3~~$1.1 million increase in cost of debt extinguishment primarily associated with our debt refinancing in the first quarter of 2019.

GAAP net income includes items such as gain or loss on ~~the~~ sale of real estate ~~representing~~and provisions for impairment, among others, which can vary from quarter to quarter and impact period-to-period comparisons. The fluctuations, coupled with our ongoing equity offering, resulted in a ~~$6.2 million increase as compared to~~$0.08 and $0.53 decrease in net earnings per diluted share for the three and nine months ended September 30, ~~2016.~~ 2019, respectively.

The increase in ~~net income in~~AFFO during the ~~earnings per share computation was partially offset by a 3.9 million increase in the diluted weighted average number of shares of our common stock outstanding as a result of ongoing equity raises.~~

~~FFO increased by $24.3 million, or 43.7%, to $80.0 million for the~~three and nine months ended September 30, ~~2017,~~2019, as compared to ~~$55.7 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~~periods in ~~FFO is~~2018, was primarily driven by ~~increased~~ revenue ~~period-over-period as the result of~~ growth in our real estate investment portfolio. As discussed above, this resulted from rent escalations associated with our same property portfolio, accretive acquisitions made since the third quarter of 2018, and strong portfolio operating performance.

During the first six months of 2019, our per share results were negatively impacted by funding a larger portion of our acquisitions with equity and proceeds recycled from property dispositions. We ~~added $352.0~~re-balanced our funding mix for the year with the closing of our $735.7 million ~~in real estate investments~~industrial and office portfolio acquisition on August 29, 2019, and increased our leverage ratio to 47.5% as of September 30, 2019. The accretive nature of our acquisitions during the ~~nine months ended September 30, 2017. Growth~~year and increase 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 excludedleverage in the ~~FFO computation.~~

~~AFFO increased by $15.9 million, or 27.8%, to $72.9 million for the nine months ended September 30, 2017, compared to $57.1 million for the nine months ended September 30, 2016.~~third quarter resulted in a $0.07 increase in AFFO per diluted share ~~increased by $0.01 during the same period to $4.04 per diluted share.~~

~~AFFO per diluted share growth of $0.01~~ as compared to ~~FFO per diluted share growth~~the third quarter 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~~2018. We expect these factors to ~~FFO in computing AFFO. For the nine months ended September 30, 2017, we capitalized all acquisition expenses~~contribute to ~~the cost basis~~positive fourth quarter results, and are committed to maintaining an investment grade balance sheet through active management 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 swapsour leverage profile 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. These impacts were offset by a $4.9 million increase in the add-back for the cost of debt extinguishment. During the nine months ended September 30, 2017 we recognized $5.0 million in debt extinguishment costs, compared to $0.1 million for the nine months ended September 30, 2016. overall liquidity position

The following is a reconciliation of net income to FFO and AFFO, ~~for the three and nine months ended September 30, 2017 and 2016.~~which are non-GAAP financial measures. Also presented is information regarding ~~distributions paid to common stockholders~~diluted WASO 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~~per diluted ~~computation per share:~~share amounts:

	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			2019			2018			2019			2018
Net income	$	12,990		$	15,417		$	42,729		$	26,474		$	25,038		$	23,064		$	57,402		$	60,444
Real property depreciation and amortization		15,643			12,114			44,969			33,273			28,392			21,869			77,989			61,303
Gain on sale of real estate		(4,052	)		(2,983	)		(10,332	)		(4,089	)		(12,585	)		(2,025	)		(16,772	)		(9,620	)
Asset impairment		2,608			—			2,608			—
Provision for impairment on investment in rental properties														2,435			2,061			3,452			2,061
FFO	$	27,189		$	24,548		$	79,974		$	55,658		$	43,280		$	44,969		$	122,071		$	114,188
Capital improvements / reserves		(49	)		(49	)		(147	)		(147	)		—			(49	)		(97	)		(147	)
Straight line rent adjustment		(4,520	)		(3,759	)		(12,585	)		(9,761	)
Straight-line rent adjustment														(5,499	)		(5,337	)		(15,882	)		(15,640	)
Cost of debt extinguishment		1,404			52			5,019			105			455			50			1,176			101
Gain on sale of investment in related party														—			(8,500	)		—			(8,500	)
Amortization of debt issuance costs		486			456			1,343			1,279			611			477			1,761			1,410
Amortization of net mortgage premiums		205			(48	)		135			(143	)		(37	)		(36	)		(108	)		(107	)
(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														(41	)		(4	)		(163	)		(4	)
Amortization of lease intangibles		99			(100	)		487			(373	)		(873	)		(255	)		(2,328	)		212
Acquisition expenses		—			2,367			—			8,256
Internalization expenses														923			—			1,195			—
AFFO	$	24,813		$	20,476		$	72,946		$	57,093		$	38,819		$	31,315		$	107,625		$	91,513

Diluted WASO		19,147			15,074			18,069			14,154			26,379			22,291			25,131			21,496

Net earnings per share, basic and diluted	$	0.68		$	1.02		$	2.36		$	1.87		$	0.95		$	1.03		$	2.28		$	2.81
FFO per diluted share		1.42			1.63			4.43			3.93			1.64			2.02			4.86			5.31
AFFO per diluted share	$	1.30		$	1.36		$	4.04		$	4.03			1.47			1.40			4.28			4.26

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~~our 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~~we believe 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.

As discussed in Note 2 in the Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q, during the first quarter of 2019, we adopted the provisions of ASC 842, which resulted in a change to the critical accounting policy with respect to revenue recognition that had been disclosed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2018 Form 10-K. We believe there have been no other significant changes during the nine months ended September 30, ~~2017~~2019, to the items that we disclosed as our critical accounting policies ~~and estimates under Item 2.~~ ~~“Financial Information - Management’s Discussion and Analysis of Financial Condition and Results of Operations,”~~in our 2018 Form ~~10.~~10-K.

For information on the impact of recent accounting pronouncements on our business, see Note 2 of the ~~notes~~Notes to the ~~condensed consolidated financial statements~~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 indebtedness~~floating-rate borrowings under our unsecured credit facilities and a certain ~~mortgages.~~mortgage. Borrowings pursuant to our unsecured credit facilities and the floating-rate ~~mortgages~~mortgage 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.~~swaps. Our interest rate risk management strategy is intended to stabilize cash flow requirements by maintaining interest rate ~~swap agreements~~swaps to convert certain ~~variable rate~~variable-rate debt to a fixed rate. As of September 30, ~~2017,~~2019, we had 2434 interest rate ~~swap agreements~~swaps outstanding, ~~with~~in an aggregate notional amount of ~~$640~~$909.9 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 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.at September 30, 2019.

(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	$	(1,389	)
Bank of Montreal	July-24		1.16%	1 month LIBOR		40,000,000		2,146,861		July 2024		1.16	%	one-month LIBOR		40,000		421
Bank of Montreal	January-25		1.91%	1 month LIBOR		25,000,000		192,803		January 2025		1.91	%	one-month LIBOR		25,000		(694	)
Bank of Montreal	July-25		2.32%	1 month LIBOR		25,000,000		(489,600	)	July 2025		2.32	%	one-month LIBOR		25,000		(1,333	)
Bank of Montreal	January-26		1.92%	1 month LIBOR		25,000,000		297,340		January 2026		1.92	%	one-month LIBOR		25,000		(833	)
Bank of Montreal	January-26		2.05%	1 month LIBOR		40,000,000		84,117		January 2026		2.05	%	one-month LIBOR		40,000		(1,643	)
Bank of Montreal	December-26		2.33%	1 month LIBOR		10,000,000		(175,375	)	December 2026		2.33	%	one-month LIBOR		10,000		(662	)
Capital One, N.A.	December-21		1.05%	1 month LIBOR		15,000,000		486,922
Capital One, N.A.	December-24		1.58%	1 month LIBOR		15,000,000		459,406
Capital One, N.A.	January-26		2.08%	1 month LIBOR		35,000,000		38,960
Capital One, N.A.	July-26		1.32%	1 month LIBOR		35,000,000		2,289,026
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	)
Bank of Montreal										December 2026		1.99	%	one-month LIBOR		25,000		(1,058	)
Bank of Montreal										December 2027		2.37	%	one-month LIBOR		25,000		(1,905	)
Bank of Montreal										May 2029		2.09	%	one-month LIBOR		25,000		(1,502	)
Capital One, National Association										December 2021		1.05	%	one-month LIBOR		15,000		133
Capital One, National Association										December 2024		1.58	%	one-month LIBOR		15,000		(165	)
Capital One, National Association										January 2026		2.08	%	one-month LIBOR		35,000		(1,515	)
Capital One, National Association										April 2026		2.68	%	one-month LIBOR		15,000		(1,243	)
Capital One, National Association										July 2026		1.32	%	one-month LIBOR		35,000		118
Capital One, National Association										December 2027		2.37	%	one-month LIBOR		25,000		(1,932	)
M&T Bank										August 2021		1.02	%	one-month LIBOR		4,948		42
M&T Bank										September 2022		2.83	%	one-month LIBOR		25,000		(1,031	)
M&T Bank										November 2023		2.65	%	one-month LIBOR		25,000		(1,284	)
Regions Bank	March-19		1.91%	3 month LIBOR		25,000,000		(105,943	)	May 2020		2.12	%	one-month LIBOR		50,000		(104	)
Regions Bank	May-20		2.12%	1 month LIBOR		50,000,000		(561,657	)	December 2023		1.18	%	one-month LIBOR		25,000		199
Regions Bank	March-22		2.43%	3 month LIBOR		25,000,000		(550,191	)	May 2029		2.11	%	one-month LIBOR		25,000		(1,562	)
Regions Bank	December-23		1.18%	1 month LIBOR		25,000,000		1,177,710		June 2029		2.03	%	one-month LIBOR		25,000		(1,383	)
SunTrust Bank	April-24		1.99%	1 month LIBOR		25,000,000		(63,116	)	April 2024		1.99	%	one-month LIBOR		25,000		(745	)
SunTrust Bank	April-25		2.20%	1 month LIBOR		25,000,000		(331,624	)	April 2025		2.20	%	one-month LIBOR		25,000		(1,181	)
SunTrust Bank	July-25		1.99%	1 month LIBOR		25,000,000		71,593		July 2025		1.99	%	one-month LIBOR		25,000		(934	)
SunTrust Bank	January-26		1.93%	1 month LIBOR		25,000,000		248,334		December 2025		2.30	%	one-month LIBOR		25,000		(1,474	)
SunTrust Bank										January 2026		1.93	%	one-month LIBOR		25,000		(915	)
U.S. Bank National Association										June 2029		2.03	%	one-month LIBOR		25,000		(1,395	)
U.S. Bank National Association										August 2029		1.35	%	one-month LIBOR		25,000		207
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		(385	)
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		(994	)
Wells Fargo Bank, N.A.										April 2027		2.72	%	one-month LIBOR		25,000		(2,427	)
Wells Fargo Bank, N.A.										January 2028		2.37	%	one-month LIBOR		75,000		(5,801	)
															$	909,948	$	(36,369	)

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,~~2019, 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,~~2019, 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,~~2019, 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 our Form 10-K, other than the ~~Form 10.~~following which we have identified as a result of the pending Internalization.

The pendency of the Internalization could adversely affect our business and operations.

Between the date that the Merger Agreement and other documents related to the Internalization were executed and the date that the Internalization is consummated, the attention of our management may be diverted from our day-to-day operations, regardless of whether or not the Internalization is ultimately consummated. The pendency of the Internalization could have an adverse impact on our relationships with other parties, which parties may delay or decline entering into agreements with us as a result of the announcement of our entry into the Merger Agreement. In addition, due to covenants in the Merger Agreement, we may be unable during the pendency of the Internalization to pursue certain transactions or pursue certain other actions that are not in the ordinary course of business, even if such actions would prove beneficial.

There can be no certainty that the Internalization will be consummated and our inability to consummate the Internalization may materially adversely affect our business, financial condition and results of operations.

Consummation of the Internalization is subject to the satisfaction or waiver of a number of conditions. There can be no guarantee that all of these closing conditions will be satisfied or waived and the Internalization consummated. If the Internalization is not consummated, we may be subject to a number of material risks that could materially adversely affect our business, financial condition, and results of operations, including:

There may be unexpected delays in the consummation of the pending Internalization.

The consummation of the Internalization may be delayed by a variety of events, including those that are not within our control. Events that could delay the consummation of the Internalization include delays and difficulties in satisfying any closing conditions to which the Internalization is subject. The Merger Agreement provides that either we or the Manager may terminate the Merger Agreement if the Internalization has not occurred by March 31, 2020.

We may not manage the Internalization efficiently and effectively or realize its anticipated benefits.

We may not be able to successfully internalize our management in a manner that permits us to realize the anticipated benefits of the Internalization. We may not be able to retain all of the current employees of our Manager that we expect will become our employees as a result of the Internalization. The failure to manage the Internalization efficiently and effectively, including the failure to smoothly transition services or retain employees, could result in the anticipated benefits of the Internalization not being realized in the timeframe currently anticipated or at all.

The Merger Agreement and other agreements entered into in connection with the Internalization were negotiated between a special committee of our Board of Directors composed entirely of independent, disinterested directors (the “Special Committee”) and certain of our officers and directors that are affiliated with our Manager, which may give rise to conflicts of interests.

Certain of our officers and directors are affiliated with the Manager, including Ms. Amy L. Tait and Mr. Christopher J. Czarnecki, each of whom serve as a member of the Manager’s four-person board of managers. Accordingly, those officers and directors may receive economic benefits as a result of the Internalization that may differ from, and conflict with, our interests and the interests of our stockholders. The terms and conditions of the agreements entered into in connection with the Internalization, which were negotiated between the Special Committee and our Manager, may not be as favorable to us as if they had been negotiated with unaffiliated third parties. Moreover, the representations, warranties, covenants, and indemnities in the Merger Agreement and the other agreements related to the Internalization are subject to limitations and qualifiers, which may limit our ability to enforce any remedy under such agreements.

The Internalization may not be financially beneficial to us and our stockholders and our net income, funds from operations (“FFO”), and adjusted funds from operations (“AFFO”) may decrease as a result of the Internalization.

There is no assurance that the Internalization will be financially beneficial to us and our stockholders. If the expenses we assume as a result of the Internalization are higher than the fees that we have historically paid to the Manager or otherwise higher than we anticipate, we may not realize the anticipated cost savings and other benefits from the Internalization and our net income, FFO per share and AFFO per share could decrease, which could have a material adverse effect on our business, financial condition, and results of operations.

The Internalization will be a time-consuming and costly process and the expenses arising from the Internalization could exceed our current estimates. Further, transactions involving the internalization by a REIT of an external manager affiliated with the REIT’s sponsor have, in some cases, been the subject of litigation. If such litigation arose in connection with the Internalization, we could be forced to spend significant amounts of money and management resources defending the claims (even if such claims were without merit), which would reduce the amount of funds available for us to invest in properties or other investments or to pay distributions. Additionally, while we will no longer effectively bear the costs of the various fees and currently paid to the Manager following the Internalization, our expenses following the Internalization will include the compensation and benefits of our executive officers and employees, as well as overhead currently paid by the Manager or its affiliates in managing our business and operations. Furthermore, the individuals who we expect will be our employees following the Internalization will be providing us with services historically provided by the Manager. There are no assurances that, following the Internalization, these employees will be able or incentivized to provide services at the same level or for the same costs as are currently provided to us by the Manager. There may also be other unforeseen costs, expenses and difficulties associated with operating as an internally managed company.

The issuance of shares of our common stock and units of membership interest in the Operating Company in connection with the Internalization would have a dilutive effect on the voting power and relative ownership interest of our current stockholders.

The issuance of shares of our common stock and units of membership interest in the Operating Company in the Internalization will have a dilutive effect on the voting power and relative ownership interest of our current stockholders. In addition, each unit of membership interest in the Operating Company issued in connection with the consummation of the Internalization will be convertible into shares of our common stock, subject to the terms and conditions for such conversions set forth in the limited liability company agreement of the Operating Company. The conversion of such units into shares of our common stock in the future would further dilute the voting power and relative ownership of our current stockholders.

Following the consummation of the Internalization, we may be exposed to risks to which we have not historically been exposed.

The consummation of the Internalization will expose us to risks to which we have not historically been exposed. Pursuant to the Merger Agreement, we will assume certain potential liabilities relating to the assets of the Manager. These liabilities could have a material adverse effect on our business to the extent we have not identified such liabilities or have not accurately estimated the amount of such liabilities. Our overhead will increase as a result of our becoming internally managed following the Internalization. In addition, following the consummation of the Internalization, we will be subject to the potential liabilities commonly faced by employers, including workers disability and compensation claims, potential labor disputes, and other employee-related liabilities and grievances, and we will bear the costs of the establishment and maintenance of health, retirement, and similar benefit plans for our employees. Finally, there may be other unforeseen costs and expenses associated with operating as an internally managed company.

There is no guarantee that our key employees will remain employed by us for any specified period of time and will not engage in competitive activities if they cease to be employed with or engaged by us.

The execution of employment agreements between us and certain key persons currently employed by the Manager or its affiliate, including Christopher J. Czarnecki, Chief Executive Officer and President; Ryan M. Albano, Chief Financial Officer; John D. Moragne, Chief Operating Officer; and Sean T. Cutt, Chief Investment Officer (the “Senior Employees”), is a condition to the consummation of the Internalization. The employment agreements with each Senior Employee will be structured to incentivize the Senior Employees to remain employed by us, will become effective upon the consummation of the Internalization, and will have a four-year term. However, the departure or the loss of the services of any Senior Employee, or other senior personnel, following the Internalization could have a material adverse effect on our business, financial condition, results of operations and ability to effectively operate our business.

Further, the employment agreements with the Senior Employees will contain restrictions on the activities of such Senior Employees, including restrictions on engaging in activities that are deemed competitive to our business. Although we believe these restrictions to be enforceable under current law, there can be no guarantee that if a Senior Employee were to breach the restrictions and engage in competitive activities, we would be successful in fully enforcing the restrictions. If a Senior Employee were to terminate his or her employment with us and engage in competitive activities, such activities could have a material adverse effect on our business, financial condition and results of operations.

~~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. During each of the periods covered by this Form 10-Q, we closed sales of additional shares of our common stock on a monthly basis. In November 2017, we instituted an 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 to equity capital received in connection with UPREIT transactions. For the months of February 2019 through June 2019, new and additional investments were capped at $20 million per month. On July 3, 2019, we announced that we were removing the equity cap for the month of July 2019 based on our current leverage profile and pipeline of potential acquisitions. There is currently no established equity cap. We anticipate reinstating the equity cap once we are comfortably within the leverage range of our investment grade credit rating. As a result of a pending transaction, we determined that we would not hold an equity closing as of October 31, 2019. The next equity closing will occur on November 29, 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 then in effect. 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, 2019, we sold 3.6 million shares of our common stock in our private offering, including 0.6 million shares of common stock issued pursuant to our DRIP, for gross offering proceeds of approximately $307.9 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, to reduce our outstanding indebtedness, 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~~2019 (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 Shares^(a)		Total Proceeds — Common Shares Sold		Common Shares DRIP		Weighted Average Determined Share Value — DRIP^(b)		Total Proceeds — Common Share DRIP^(c)		Total Proceeds
January	2017		413	$	77	$	31,827		38	$	75	$	2,836	$	34,663	2019		233	$	86.00	$	20,000		58	$	84.28	$	4,862	$	24,862
February	2017		270		79		21,314		39		75		2,934		24,248	2019		235	$	85.00		20,000		58	$	84.28		4,930		24,930
March	2017		368		79		28,946		39		77		3,071		32,017	2019		235	$	85.00		20,000		62	$	83.30		5,136		25,136
April	2017		234		79		18,462		41		77		3,166		21,628	2019		235	$	85.00		20,000		63	$	83.30		5,224		25,224
May	2017		291		80		23,242		42		78		3,266		26,508	2019		233	$	86.00		20,000		64	$	83.30		5,306		25,306
June	2017		352		80		28,064		42		79		3,319		31,383	2019		233	$	86.00		20,000		63	$	84.28		5,339		25,339
July	2017		220		80		17,601		44		78		3,394		20,995	2019		990	$	86.00		85,182		64	$	84.28		5,379		90,561
August	2017		343		80		27,455		45		78		3,501		30,956	2019		466	$	85.00		39,573		64	$	84.28		5,430		45,003
September	2017		297		80		23,676		45		78		3,544		27,220	2019		186	$	85.00		15,828		68	$	83.30		5,666		21,494
TOTAL			2,788			$	220,587		375			$	29,031	$	249,618
Total																		3,046			$	260,583		564			$	47,272	$	307,855

None of the shares of our common stock set forth in the table above were registered under the Securities Act, and all of the shares were issued 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.Investor.

During the three months ended September 30, ~~2017,~~2019, we fulfilled repurchase requests and repurchased shares of our common stock pursuant to our share redemption program as follows.

The other information presented below is being filed as a result of the Company’s adoption of the new accounting guidance for lease accounting (“ASC 842”) on January 1, 2019. As part of that adoption, the Company elected the available practical expedient, for all classes of assets, not to separate lease components in contracts from the nonlease components in those contracts, when recording revenues associated with operating leases where it is the lessor. Since the lease component is the predominant component under the Company’s leases, combined revenues from both the lease and nonlease components are accounted for in accordance with ASC 842 and will be reported in all periods subsequent to the adoption of the new accounting guidance in a single caption, “Lease revenues,” on the Company’s Consolidated Statements of Income and Comprehensive Income. The presentation and disclosure of Lease revenues have been adjusted to reflect these changes for the three and nine months ended September 30, 2019. Refer to Reclassifications in Note 2 of Part I, Item 1. “Financial Statements,” for further details on these updates to significant accounting policies.

~~Not applicable.~~This information is intended to assist investors in making comparisons of the Company’s historical financial information with future financial information. The reported financial information below has been revised to conform to the current presentation.

This table below summarizes total revenues as originally reported in the Consolidated Statements of Income and Comprehensive Income included in the Company’s 2018 Annual Report on Form 10-K, as follows (in thousands):

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)	45
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	56
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2630
	Cautionary Note Regarding Forward-Looking Statements	2630
	Overview	2631
	Liquidity and Capital Resources	3543
	Impact of Inflation	4047
	Off-Balance Sheet Arrangements	4147
	Contractual Obligations	4147
	Results of Operations	4148
	Net Income and Non-GAAP Measures (FFO and AFFO)	4750
	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	5357
Item 3.	Defaults upon Senior Securities	5559
Item 4.	Mine Safety Disclosures	5559
Item 5.	Other Information	5559
Item 6.	Exhibits	5560

	September 30, 2017
(in thousands)	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
Intangible lease assets, net		1,263			(204	)		1,059
Leasing fees, net		123			(16	)		107
Intangible lease liabilities, net		(101	)		13			(88	)
	$	17,444		$	(2,608	)	$	14,836

	For the three months ended		For the nine months ended
(in thousands)	September 30, 2019		September 30, 2019
Contractual rental amounts billed for operating leases	$	65,579	$	184,292
Adjustment to recognize contractual operating lease billings on a straight-line basis		5,575		16,015
Adjustment to revenue recognized for uncollectible rental amounts billed		—		(440	)
Total operating lease rental revenues		71,154		199,867
Earned income from direct financing leases		1,005		3,014
Operating expenses billed to tenants		3,811		10,572
Other income from real estate transactions		431		431
Total lease revenues	$	76,401	$	213,884

	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, 2019			December 31, 2018
Corporation		93.6	%		92.7	%
Non-controlling interests		6.4	%		7.3	%
		100.0	%		100.0	%

As originally reported	For the three months ended		For the nine months ended
(in thousands)	September 30, 2018		September 30, 2018
Revenues
Rental income from operating leases	$	58,189	$	163,611
Earned income from direct financing leases		1,017		2,936
Operating expenses reimbursed from tenants		2,529		7,764
Other income from real estate transactions		29		74
Total revenues	$	61,764	$	174,385

As revised	For the three months ended		For the nine months ended
(in thousands)	September 30, 2018		September 30, 2018
Revenues
Lease revenues	$	61,764	$	174,385

(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

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

	Effective Portion			Ineffective Portion
(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 Gain Recognized in Income on Derivatives
Interest rate swaps
2017	Interest expense	$	448	Interest expense	$	-
2016	Interest expense		2,426	Interest expense		(2,991	)

				Reclassification from				Total Interest Expense
	Amount of (Loss) Gain			Accumulated Other				Presented in the
	Recognized in			Comprehensive (Loss) Income				Consolidated Statements of
(in thousands)	Accumulated Other				Amount of			Income and Comprehensive
For the three months ended September 30,	Comprehensive (Loss) Income			Location	Gain (Loss)			Income
2019	$	(16,380	)	Interest expense	$	387		$	18,465
2018		6,299		Interest expense		(20	)		14,484

	If the Company has completed an IPO		If the Company has not completed an IPO
Earnout Tranche	VWAP of a REIT Share	Applicable Earnout Period	AFFO per Share	Applicable Earnout Period
$10 million	$90.00	The two-year period beginning on the earlier of (i) the IPO closing date or (ii) December 31, 2020.	$5.85	The two-year period consisting of the calendar years ended December 31, 2020 and December 31, 2021.
$15 million	$95.00	The two-year period beginning on the earlier of (i) the IPO closing date or (ii) December 31, 2020.	$5.95	The two-year period consisting of the calendar years ended December 31, 2020 and December 31, 2021.
$25 million	$97.50	The four-year period beginning on the date that is exactly one year after the earnout period begins for the first and second tranches above.	$6.30	The four-year period consisting of the calendar years ended December 31, 2021, December 31, 2022, December 31, 2023 and December 31, 2024.
$25 million	$100.00	The four-year period beginning on the date that is exactly one year after the earnout period begins for the first and second tranches above.	$6.70	The four-year period consisting of the calendar years ended December 31, 2021, December 31, 2022, December 31, 2023 and December 31, 2024.


Earnout Tranche	If BNL has completed an IPO		If BNL has not completed an IPO
Earnout Tranche	VWAP of a REIT Share	Applicable Earnout Period	AFFO per Share	Applicable Earnout Period
$10 million	$90.00	The two-year period beginning on the earlier of (i) the IPO closing date or (ii) December 31, 2020.	$5.85	The two-year period consisting of the calendar years ended December 31, 2020 and December 31, 2021.
$15 million	$95.00	The two-year period beginning on the earlier of (i) the IPO closing date or (ii) December 31, 2020.	$5.95	The two-year period consisting of the calendar years ended December 31, 2020 and December 31, 2021.
$25 million	$97.50	The four-year period beginning on the date that is exactly one year after the earnout period begins for the first and second tranches above.	$6.30	The four-year period consisting of the calendar years ended December 31, 2021, December 31, 2022, December 31, 2023 and December 31, 2024.
$25 million	$100.00	The four-year period beginning on the date that is exactly one year after the earnout period begins for the first and second tranches above.	$6.70	The four-year period consisting of the calendar years ended December 31, 2021, December 31, 2022, December 31, 2023 and December 31, 2024.

Property Type	% NTM Rent
Retail – ~~casual dining~~other		~~13.4~~10.5	%
Retail – quick service restaurants ~~(QSR)~~("QSR")		~~11.9~~8.0	%
Retail – ~~other~~casual dining		~~10.7~~7.9	%
Total Retail		~~36.0~~	%
~~Industrial – manufacturing~~		~~11.1~~26.4	%
Industrial – warehouse/distribution		~~10.0~~20.6	%
Industrial – manufacturing		11.2	%
Industrial – flex		~~5.3~~5.5	%
Industrial – other		3.8	%
Total Industrial		~~30.2~~41.1	%
Healthcare – clinical		~~11.4~~11.7	%
Healthcare – surgical		~~5.7~~3.2	%
Healthcare – other		~~4.3~~3.0	%
Total Healthcare		~~21.4~~17.9	%
~~Other – corporate office~~Office		~~8.3~~8.5	%
~~Other – other~~		~~4.1~~	%
~~Total~~ Other		~~12.4~~6.1	%
Total		100.0	%

~~Top Tenant Industries~~
Industry	% NTM Rent
Restaurants		~~25.3~~16.1	%
Healthcare Facilities		~~20.8~~	%
~~Home Furnishing Retail~~		~~5.6~~15.7	%
Packaged Foods & Meats		~~5.3~~4.4	%
~~Auto Parts & Equipment~~Food Distributors		~~5.0~~4.3	%
Home Furnishing Retail		4.1	%
Specialized Consumer Services		3.7	%
~~Industrial Conglomerates~~Auto Parts & Equipment		3.4	%
Metal & Glass Containers		3.2	%
Healthcare Services		2.6	%
~~Multi-line Insurance~~Air Freight & Logistics		~~2.3~~2.6	%
~~Life Sciences Tools~~Aerospace & ~~Services~~Defense		~~2.3~~2.5	%
Distributors		2.3	%
~~Industrial Machinery~~Electronic Components		~~2.0~~2.2	%
~~Food Retail~~		~~1.9~~	%
~~Metal & Glass Containers~~Industrial Machinery		1.8	%
~~Managed Healthcare~~		~~1.8~~	%
~~Soft Drinks~~Home Furnishings		1.7	%
Top 15 Tenant Industries		~~84.4~~70.6	%
Other ~~(22~~(38 industries)		~~15.6~~29.4	%
Total		100.0	%

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

Period	NAV as of	NAV per diluted share		Determined Share Value
November 1, 2019 - January 31, 2020	September 30, 2019	$	84.12	$	85.00
August 1, 2019 - October 31, 2019	June 30, 2019	$	84.68	$	85.00
May 1, 2019 - July 31, 2019	March 31, 2019	$	85.57	$	86.00

Dividend Per Share/Unit		Record Date	Payment Date (on or before)
$	0.415	November 29, 2017	December 15, 2017
$	0.415	December 28, 2017	January 15, 2018
$	0.415	January 30, 2018	February 15, 2018

Record Date		Payment Date (on or before)
November 27, 2019		December 13, 2019
December 30, 2019		January 15, 2020
January 30, 2020		February 14, 2020

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%~~

Loan Tranche	Amount Drawn		Amount Available		Total Capacity		Maturity Date
Credit Facility:
Revolver	$	303,300	$	296,700	$	600,000	January 21, 2022^(a)
2023 Unsecured Term Loan		265,000		—		265,000	January 23, 2023
2024 Unsecured Term Loan		190,000		—		190,000	June 21, 2024
2020 Unsecured Term Loan		300,000		—		300,000	August 2, 2020^(b)
2026 Unsecured Term Loan		450,000		—		450,000	February 27, 2026

Covenants	Required	Actual (as of September 30, 2019)
Leverage Ratio^(a)	≤ 0.60 to 1.00		0.52
Secured Indebtedness Ratio^(b)	≤ 0.40 to 1.00		0.03
Unencumbered Coverage Ratio^(c)	≥ 1.75 to 1.00		3.52
Fixed Charge Coverage Ratio^(d)	≥ 1.50 to 1.00		2.84
Total Unsecured Indebtedness to Total Unencumbered Eligible Property Value^(e)	≤ 0.60 to 1.00		0.54
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)

	For the years ended December 31,
	2018		2017		2016
Revenues
Rental income from operating leases	$	222,208	$	170,493	$	133,943
Earned income from direct financing leases		3,941		4,141		4,544
Operating expenses reimbursed from tenants		11,221		6,721		4,173
Other income from real estate transactions		109		208		209
Total revenues	$	237,479	$	181,563	$	142,869


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*		First Amendment to Term Loan Agreement, dated February 27, 2019, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, Capital One, National Association, and the other parties thereto

10.2*		Partial Assignment and Assumption of Purchase Agreement, dated July 23, 2019, by and among Broadstone Net Lease, LLC, Broadstone Net Lease, Inc., CF Alpha & Golf Propco LLC, CF Alpha & Golf KS Propco LLC, CF Alpha & Golf MA Propco LLC, and CF Alpha & Golf Property BC ULC

10.3		Second Amendment to Revolving Credit and Term Loan Agreement, dated as of July 1, 2019, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Manufacturers and Traders Trust Company, and the other parties thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 3, 2019, and incorporated herein by reference)

10.4		Term Loan Agreement, dated August 2, 2019, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, JP Morgan Chase Bank, N.A., BMO Capital Markets Corp., Capital One, National Association, Regions Bank, Regions Capital Markets and the other lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed August 7, 2019, and incorporated herein by reference)

10.5		Guaranty, dated August 2, 2019, by Broadstone Net Lease, Inc. in favor of JP Morgan Chase Bank, N.A. (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed August 7, 2019, and incorporated herein by reference)

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,~~2019, 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~~12, 2019		/s/ Christopher J. Czarnecki
		Christopher J. Czarnecki
		Chief Executive Officer and President

Date: November ~~13, 2017~~12, 2019		/s/ Ryan M. Albano
		Ryan M. Albano
		Executive Vice President and Chief Financial Officer