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~~ 26,855,508.755 shares of the Registrant’s common stock, $0.001 par value per share, outstanding as of ~~November 13, 2017.~~May 7, 2020.

	September 30,			December 31,
	2017			2016			March 31, 2020			December 31, 2019
Assets
Accounted for using the operating method, net of accumulated depreciation	$	1,891,708		$	1,637,700		$	3,367,566		$	3,415,400
Accounted for using the direct financing method		41,612			47,271			39,961			41,890
Investment in rental property, net		1,933,320			1,684,971			3,407,527			3,457,290

Cash and cash equivalents		13,698			21,635			93,151			12,455
Restricted cash		925			1,468
Accrued rental income		47,766			36,577			84,932			84,534
Tenant and other receivables, net		1,120			355			1,287			934
Tenant and capital reserves		897			767
Prepaid expenses and other assets		699			260			12,397			12,613
Notes receivable		6,527			6,527
Investment in related party		10,000			10,000
Interest rate swap, assets		7,493			9,598			—			2,911
Goodwill								339,769			—
Intangible lease assets, net		205,469			168,121			320,418			331,894
Debt issuance costs – unsecured revolver, net		3,139			446
Debt issuance costs – unsecured revolving credit facility, net								2,081			2,380
Leasing fees, net		13,046			11,329			12,492			12,847
Total assets	$	2,244,099		$	1,952,054		$	4,274,054		$	3,917,858

Liabilities and equity
Unsecured revolver	$	126,500		$	102,000
Liabilities, mezzanine equity and equity
Unsecured revolving credit facility							$	353,300		$	197,300
Mortgages and notes payable, net		57,883			106,686			110,464			111,793
Unsecured term notes, net		721,907			657,891			1,672,587			1,672,081
Interest rate swap, liabilities		7,119			10,217			79,622			24,471
Earnout liability								44,296			—
Accounts payable and other liabilities		18,426			17,396			35,835			37,377
Due to related parties		1,688			364
Tenant improvement allowances		6,627			9,490
Accrued interest payable		4,880			1,602			9,764			3,594
Intangible lease liabilities, net		66,303			47,871			89,673			92,222
Total liabilities		1,011,333			953,517			2,395,541			2,138,838

Commitments and contingencies (See Note 16)

Mezzanine equity
Common stock, 781 shares issued and outstanding at March 31, 2020								66,376			—
Non-controlling interests								112,158			—
Total mezzanine equity								178,534			—

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, 26,074 and 26,001 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively								26			26
Additional paid-in capital		1,253,431			1,009,431			1,899,616			1,895,935
Subscriptions receivable		(470	)		(9,790	)
Cumulative distributions in excess of retained earnings		(112,725	)		(89,960	)		(233,067	)		(208,261	)
Accumulated other comprehensive income		(40	)		2,092
Accumulated other comprehensive loss								(73,138	)		(20,086	)
Total Broadstone Net Lease, Inc. stockholders’ equity		1,140,214			911,788			1,593,437			1,667,614
Non-controlling interests		92,552			86,749			106,542			111,406
Total equity		1,232,766			998,537			1,699,979			1,779,020
Total liabilities and equity	$	2,244,099		$	1,952,054
Total liabilities, mezzanine equity and equity							$	4,274,054		$	3,917,858

~~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,

2017

2016

2017

2016

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

Operating expenses

Depreciation and amortization

15,643

12,114

44,969

33,273

Asset management fees

3,844

2,789

10,666

7,770

Property management fees

1,249

1,010

3,635

2,868

Acquisition expenses

-

2,367

-

8,256

Property and operating expense

2,009

1,184

4,710

3,005

General and administrative

1,173

598

3,297

1,951

State and franchise tax

301

71

511

181

Provision for impairment of investment in rental properties

2,608

-

2,608

-

Total operating expenses

26,827

20,133

70,396

57,304

Operating income

19,408

16,877

61,694

46,116

Other income (expenses)

Preferred distribution income

187

181

550

531

Interest income

127

4

354

9

Interest expense

(9,380
)

(4,576
)

(25,182
)

(24,166
)
Cost of debt extinguishment

(1,404
)

(52
)

(5,019
)

(105
)
Gain on sale of real estate

4,052

2,983

10,332

4,089

Net income

12,990

15,417

42,729

26,474

Net income attributable to non-controlling interests

(1,042
)

(1,459
)

(3,460
)

(2,600
)
Net income attributable to Broadstone Net Lease, Inc.

$
11,948

$
13,958

$
39,269

$
23,874

Weighted average number of common shares outstanding

Basic

17,617

13,647

16,607

12,738

Diluted

19,147

15,074

18,069

14,154

Net Earnings per common share

Basic and diluted

$
0.68

$
1.02

$
2.36

$
1.87

Comprehensive income (loss)

Net income

$
12,990

$
15,417

$
42,729

$
26,474

Other comprehensive income (loss)

Change in fair value of interest rate swaps

283

1,280

(1,448
)

(20,551
)
Realized loss on interest rate swaps

-

-

(873
)

-

Comprehensive income

13,273

16,697

40,408

5,923

Comprehensive income attributable to non-controlling interests

(1,046
)

(1,581
)

(3,271
)

(443
)
Comprehensive income attributable to Broadstone Net Lease, Inc.

$
12,227

$
15,116

$
37,137

$
5,480

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

Common
Stock

Additional
Paid-in Capital

Subscriptions
Receivable

Cumulative
Distributions in Excess of Retained Earnings

Accumulated Other
Comprehensive
(Loss)/Income

Non-controlling
Interests

Total

Balance, January 1, 2016

$
11

$
738,909

$
(1,506
)

$
(56,911
)

$
(10,340
)

$
77,782

$
747,945

Net income

-

-

-

23,874

-

2,600

26,474

Issuance of 2,809 shares of common stock, net

3

209,049

(1,977
)

-

-

-

207,075

Other offering costs

-

(976
)

-

-

-

-

(976
)
Issuance of 97 membership units

-

-

-

-

-

7,190

7,190

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

-

-

-

(51,558
)

-

(5,860
)

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

-

-

-

-

(18,394
)

(2,157
)

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

-

(6,487
)

-

-

-
��

-

(6,487
)
Balance, September 30, 2016

$
14

$
940,495

$
(3,483
)

$
(84,595
)

$
(28,734
)

$
79,555

$
903,252

Common
Stock

Additional
Paid-in Capital

Subscriptions
Receivable

Cumulative
Distributions in Excess of Retained Earnings

Accumulated Other
Comprehensive
(Loss)/Income

Non-controlling
Interests

Total

Balance, January 1, 2017

$
15

$
1,009,431

$
(9,790
)

$
(89,960
)

$
2,092

$
86,749

$
998,537

Net income

-

-

-

39,269

-

3,460

42,729

Issuance of 3,163 shares of common stock, net

3

249,942

9,320

-

-

-

259,265

Other offering costs

-

(1,144
)

-

-

-

-

(1,144
)
Issuance of 103 membership units

-

-

-

-

-

8,278

8,278

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

-

-

-

(62,034
)

-

(5,719
)

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

-

-

-

-

(1,328
)

(120
)

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

-

-

-

-

(804
)

(69
)

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

-

27

-

-

-

(27
)

-

Redemption of 62 shares of common stock

-

(4,825
)

-

-

-

-

(4,825
)
Balance, September 30, 2017

$
18

$
1,253,431

$
(470
)

$
(112,725
)

$
(40
)

$
92,552

$
1,232,766

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

	For the three months ended March 31,
	2020			2019
Revenues
Lease revenues, net	$	78,231		$	68,430

Operating expenses
Depreciation and amortization		31,219			24,310
Asset management fees		2,461			5,120
Property management fees		1,275			1,885
Property and operating expense		4,115			4,390
General and administrative		5,842			1,103
Provision for impairment of investment in rental properties		2,133			1,017
Total operating expenses		47,045			37,825

Other income (expenses)
Interest income		9			1
Interest expense		(20,991	)		(15,828	)
Cost of debt extinguishment		(22	)		(713	)
Gain on sale of real estate		7,619			1,400
Income taxes		(549	)		(443	)
Internalization expenses		(1,205	)		—
Change in fair value of earnout liability		(4,177	)		—
Other losses		(22	)		—
Net income		11,848			15,022
Net income attributable to non-controlling interests		(1,032	)		(1,084	)
Net income attributable to Broadstone Net Lease, Inc.	$	10,816		$	13,938

Weighted average number of common shares outstanding
Basic		26,527			22,335
Diluted		29,053			24,072
Net earnings per common share
Basic and diluted	$	0.41		$	0.62
Comprehensive (loss) income
Net income	$	11,848		$	15,022
Other comprehensive income (loss)
Change in fair value of interest rate swaps		(58,062	)		(12,624	)
Realized gain on interest rate swaps		(42	)		(81	)
Comprehensive (loss) income		(46,256	)		2,317
Comprehensive loss (income) attributable to non-controlling interests		4,020			(167	)
Comprehensive (loss) income attributable to Broadstone Net Lease, Inc.	$	(42,236	)	$	2,150

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

Condensed Consolidated Statements of Stockholders’ Equity and Mezzanine Equity

	Common Stock		Additional Paid-in Capital			Subscriptions Receivable			Cumulative Distributions in Excess of Retained Earnings			Accumulated Other Comprehensive Loss			Non- controlling Interests			Total Stockholders' Equity			Mezzanine Equity Common Stock		Mezzanine Equity Non-controlling Interests			Total Mezzanine Equity
Balance, January 1, 2020	$	26	$	1,895,935		$	—		$	(208,261	)	$	(20,086	)	$	111,406		$	1,779,020		$	—	$	—		$	—
Cumulative effect of accounting change (see Note 2)		—		—			—			(323	)		—			—			(323	)		—		—			—
Net income		—		—			—			10,816			—			710			11,526			—		322			322
Issuance of 73 shares of common stock and 781 shares of mezzanine equity common stock		—		6,097			—			—			—			—			6,097			66,376		—			66,376
Issuance of 1,320 mezzanine non-controlling interests		—		—			—			—			—			—			—			—		112,159			112,159
Adjustment to carrying value of mezzanine equity non-controlling interest		—		(2,416	)		—			—			—			—			(2,416	)				2,416			2,416
Distributions declared ($0.44 per share January 2020 through March 2020)		—		—			—			(35,299	)		—			(2,100	)		(37,399	)		—		(1,161	)		(1,161	)
Change in fair value of interest rate swap agreements		—		—			—			—			(53,014	)		(3,472	)		(56,486	)		—		(1,576	)		(1,576	)
Realized gain on interest rate swap agreements		—		—			—			—			(38	)		(2	)		(40	)		—		(2	)		(2	)
Balance, March 31, 2020	$	26	$	1,899,616		$	—		$	(233,067	)	$	(73,138	)	$	106,542		$	1,699,979		$	66,376	$	112,158		$	178,534



	Common Stock		Additional Paid-in Capital			Subscriptions Receivable			Cumulative Distributions in Excess of Retained Earnings			Accumulated Other Comprehensive Income			Non- controlling Interests			Total Stockholders' Equity			Mezzanine Equity Common Stock		Mezzanine Equity Non-controlling Interests			Total Mezzanine Equity
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		$	—	$	—		$	—

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

	For the nine months ended
	September 30,						For the three months ended March 31,
	2017			2016			2020			2019
Operating activities
Net income	$	42,729		$	26,474		$	11,848		$	15,022
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
Adjustments to reconcile net income including non-controlling interests to net cash provided by operating activities:
Depreciation and amortization including intangibles associated with investment in rental property		45,456			32,900			30,081			23,572
Provision for impairment of investment in rental properties		2,608			-			2,133			1,017
Amortization of debt issuance costs charged to interest expense		1,478			1,136			853			517
Straight-line rent and financing lease adjustments		(12,505	)		(9,736	)		(1,610	)		(5,143	)
Cost of debt extinguishment		5,019			105			22			713
(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								(7,619	)		(1,400	)
Change in fair value of earnout liability								4,177			—
Leasing fees paid		(2,597	)		(2,827	)		—			(258	)
Adjustment to provision for credit losses								(17	)		—
Other non-cash items		325			306			194			92
Changes in assets and liabilities:
Changes in assets and liabilities, net of acquisition:
Tenant and other receivables		(237	)		286			(353	)		(350	)
Prepaid expenses and other assets		(440	)		(630	)		291			(442	)
Accounts payable and other liabilities		897			5,870			(5,851	)		(315	)
Accrued interest payable		3,278			134			6,170			(1,386	)
Net cash provided by operating activities		72,365			52,148			40,319			31,639

Investing activities
Acquisition of rental property accounted for using the operating method		(345,789	)		(367,654	)		—			(75,080	)
Acquisition of rental property accounted for using the direct financing method		(3,546	)		(544	)
Cash paid for Internalization								(30,861	)		—
Capital expenditures and improvements		(3,871	)		(7,525	)		(48	)		(256	)
Proceeds from disposition of rental property, net		55,296			15,608			35,383			10,612
Increase in tenant and capital reserves		(130	)		(43	)		—			(13	)
Decrease in restricted cash		543			65
Net cash used in investing activities		(297,497	)		(360,093	)
Change in deposits on investments in rental property								—			100
Net cash provided by (used in) investing activities								4,474			(64,637	)

Financing activities
Proceeds from issuance of common stock, net		229,698			186,013			131			59,869
Redemptions of common stock		(4,825	)		(6,487	)		—			(1,803	)
Cash paid for deferred offering costs								(811	)		—
Borrowings on unsecured term notes		400,000			95,000			60,000			300,000
Principal payments on mortgages and notes payable and unsecured term notes		(384,087	)		(9,171	)
Borrowings on unsecured revolver		220,000			226,500
Repayments on unsecured revolver		(195,500	)		(146,000	)
Principal payments on mortgages, notes payable and unsecured term notes								(151,781	)		(306,970	)
Borrowings on unsecured revolving credit facility								167,000			43,800
Repayments on unsecured revolving credit facility								(11,000	)		(45,000	)
Cash distributions paid to stockholders		(32,533	)		(26,060	)		(29,148	)		(14,495	)
Cash distributions paid to non-controlling interests		(5,669	)		(5,275	)		(2,681	)		(2,330	)
Debt issuance and extinguishment costs paid		(9,889	)		(622	)		(102	)		(5,902	)
Net cash provided by financing activities		217,195			313,898			31,608			27,169
Net increase (decrease) in cash and cash equivalents and restricted cash								76,401			(5,829	)
Cash and cash equivalents and restricted cash at beginning of period								20,311			18,989
Cash and cash equivalents and restricted cash at end of period							$	96,712		$	13,160

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		$	12,455		$	18,612
Restricted cash at beginning of period								7,856			377
Cash and cash equivalents and restricted cash at beginning of period							$	20,311		$	18,989

Cash and cash equivalents at end of period	$	13,698		$	33,003		$	93,151		$	11,726
Restricted cash at end of period								3,561			1,434
Cash and cash equivalents and restricted cash at end of period							$	96,712		$	13,160

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~~industrial, healthcare, restaurant, office, retail, ~~healthcare, industrial,~~ and other commercial ~~businesses~~properties 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 of September 30, 2017,At March 31, 2020, the Corporation owned a diversified portfolio of ~~477~~635 individual ~~net leased~~ commercial properties located in 3741 states throughout the continental United ~~States.~~States and one property in British Columbia, Canada.

Broadstone Net Lease, LLC (the ~~“Operating Company”~~Corporation’s operating company, or the “OP”), is the entity through which the Corporation conducts its business and owns (either directly or through subsidiaries) all of the Corporation’s properties. ~~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.~~OP. The remaining ~~interests~~membership units in the ~~Operating Company~~OP (“OP Units”), which are referred to as non-controlling interests, are held by members who acquired their interest by contributing ~~property~~real estate properties or other assets to the ~~Operating Company~~OP in exchange for ~~membership units of the Operating Company.~~OP Units. As the Corporation conducts substantially all of its operations through the ~~Operating Company,~~OP, it is structured as what is referred to as an ~~Umbrella Partnership Real Estate Investment Trust~~umbrella partnership real estate investment trust (“UPREIT”). The Corporation, the OP, and its consolidated subsidiaries are collectively referred to as the “Company”. The following table summarizes the outstanding equity and economic ownership interest of the Corporation and the OP:

Refer to Note 14 for further discussion regarding the weighted average shares outstanding.

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 affairs. ~~The~~Prior to February 7, 2020, the Corporation iswas externally managed by Broadstone Real Estate, LLC (“BRE”) and ~~its board of directors has retained~~ Broadstone Asset Management, LLC (the “Asset Manager”) to manage the 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 iswas a ~~wholly-owned~~wholly owned subsidiary of ~~the Manager~~BRE and all of the Corporation’s officers ~~are~~were employees of ~~the Manager.~~BRE. Accordingly, both ~~the Manager~~BRE and the Asset Manager ~~are~~were related parties of the ~~Corporation.~~Company. Refer to Note 3 for further discussion ~~over~~concerning related parties and related party transactions.

On February 7, 2020, the Corporation, the OP, BRE, and certain of their respective subsidiaries and affiliates, completed through a series of mergers (the “Mergers”) the internalization of the external management functions previously performed for the Corporation and the OP by BRE and the Asset Manager (such transactions, collectively, the “Internalization”). Upon consummation of the Internalization, the Company’s management team and corporate staff, who were previously employed by BRE, became employees of an indirect subsidiary of the OP and the Company became internally managed. Upon Internalization, the prior Property Management Agreement and Asset Management Agreement were terminated. The Internalization was not considered a “Termination Event” under the terms of the agreements and therefore no fees were paid under them as a result of the Internalization. The Internalization consisted of the acquisition of BRE in accordance with the definitive merger agreement (the “Merger Agreement”). Refer to Note 4 for further discussion regarding the Internalization, including the associated payments related thereto.

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,~~2019, included in the Company’s ~~Amendment No. 2 to its Registration Statement~~2019 Annual Report on Form ~~10,~~10-K, filed with the SEC on ~~June 29, 2017 (the “Form 10”).~~February 27, 2020. 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 by the Operating Company (collectively, the “Company”).~~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 of, authority to make decisions for, and control of the ~~Operating Company.~~OP. Based on consolidation guidance, ~~effective for~~ the Corporation ~~as of January 1, 2016, the Corporation~~has concluded that the ~~Operating Company~~OP is a VIE as the members in the ~~Operating Company~~OP do not possess kick-out rights or substantive participating rights. Accordingly, the Corporation consolidates its interest in the ~~Operating Company.~~OP. However, asbecause the Corporation holds the majority voting interest in the ~~Operating Company,~~OP, it qualifies for the exemption from providing certain disclosure requirements associated with investments in VIEs.

The portion of the ~~Operating Company~~OP 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~~tangible and intangible assets acquired and liabilities assumed, the value of long-lived assets and goodwill, the provision for impairment, the depreciable lives of rental property, the amortizable lives of intangible assets and liabilities, the ~~allowance~~provisions for ~~doubtful accounts,~~uncollectible rent and credit losses, the fair value of earnout liabilities, 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, other than goodwill, to be held and used for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If, and when, such events or changes in circumstances are present, an impairment exists to the extent the carrying value of the 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 strategy, or one or more~~taken. The Company’s assessment of impairment as of March 31, 2020 was based on the most current information available to the Company. Based upon current market conditions resulting from the COVID-19 pandemic (see Note 17), certain of the ~~assumptions~~Company’s properties may have fair values less than their carrying amounts. However, based on the Company’s plans with respect to those properties, the Company believes that their carrying amounts are recoverable and therefore, under applicable GAAP guidance, no impairment charges were recognized other than those described below. If the operating conditions mentioned above ~~were to change~~deteriorate or if the Company’s expected holding period for assets changes, subsequent tests for impairments could result in additional impairment charges in the ~~future, an impairment may need to be recognized.~~future.

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 months ended ~~September 30, 2017 we~~March 31, 2020 and 2019, the Company recorded impairment charges of ~~$2,608~~$2,133 and $1,017, respectively.

Restricted cash includes escrow funds the Company maintains pursuant to the terms of certain mortgages, notes payable, and lease agreements, and undistributed proceeds from the sale of properties under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”), and is reported within Prepaid expenses and other assets in the Condensed Consolidated Balance Sheets.

The Company accounts for leases in accordance with ASC 842, Leases. The Company commences revenue recognition on its leases based on ~~our consideration~~a number of factors, including the initial determination that the contract is or contains a lease. Generally, all of the ~~factors detailed above. In determining~~Company’s property related contracts are or contain leases, and therefore revenue is recognized when the ~~fair value~~lessee takes possession of or controls the physical use of the ~~assets at~~leased assets. In most instances this occurs on the lease commencement date. At the time of ~~measurement, we utilized capitalization rates ranging from 7.25% to 12%, and a weighted average discount rate of 8%.~~

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

Atlease 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 (“CPI”). Lease income associated with such provisions is considered variable lease income and is not included in the initial measurement of the lease receivable, or in the calculation of straight-line rent revenue. Such amounts are recognized as income when the amounts are determinable.

A lease ~~arrangement~~ is classified as an operating lease if none of the following criteria are met: (i) ownership transfers to the lessee ~~prior to or shortly after~~at the end of the lease term, (ii) the lessee has a ~~bargain~~ purchase option ~~during or at the end of the lease term,~~that is reasonably expected to be exercised, (iii) the lease term is ~~greater than or equal to 75%~~for a major part of the ~~underlying property’s estimated useful~~economic life orof the leased property, (iv) the present value of the future ~~minimum~~ lease payments ~~(excluding executory costs)~~and any residual value guaranteed by the lessee that is ~~greater than~~not already reflected in the lease payments equals or ~~equal to 90%~~exceeds substantially all of the fair value of the leased ~~property.~~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, ~~and the minimum lease payments are determined to be reasonably predictable and collectible,~~ the lease ~~arrangement is~~will generally ~~accounted for~~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. Consistent with ASC~~ ~~840, Leases,~~ iflease under certain circumstances.

The Company accounts for the ~~fair~~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 ~~is 25% or more~~in the context of the ~~total fair value of~~overall contract, and (iii) whether the ~~leased property,~~right to use the land is ~~considered separately from~~coterminous with the ~~building for purposes of applying~~rights to use the ~~lease term and minimum lease payments criterion in (iii) and (iv) above.~~other assets.

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 lease contracts contain nonlease components (e.g., charges for management fees, common area maintenance, and reimbursement of third-party maintenance expenses) in addition to lease components (i.e., monthly rental charges). Services related to nonlease components are provided over the same period of time as, and billed in the same manner as, monthly rental charges. The Company elected to apply the practical expedient available under ASC 842, for all classes of assets, not to separate the lease components from the nonlease components when accounting for operating leases. Since the lease component is the predominant component under each of these leases, combined revenues from both the lease and nonlease components are reported as Lease revenues, net in the accompanying Condensed Consolidated Statements of Income and Comprehensive (Loss) 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,~~In accordance with ASC 842, provision for uncollectible rent are ~~accounted for using a combination of impairment, insurance, and revenue recognition guidance prescribed by GAAP. Upon incurring a loss event, the Company evaluates for asset impairment under ASC 350,~~ ~~Intangibles – Goodwill and Other,~~ ~~and ASC 360,~~ ~~Property, Plant, and Equipment.~~ Under the terms of the Company’s lease agreements with tenants, a significant majority of which are triple-net whereby the tenants are responsible for insurance, taxes, and maintenance, amongst other property costs, the tenants are responsible for repairs and maintenance to the properties. The terms of the leases also require the tenants to continue making their monthly rental payments despite the property loss. To the extent that the assets are recoverable, determined utilizing undiscounted cash flows expected to result from the use of the asset or asset group and its eventual disposition, the Company accounts for a full or partial property lossrecorded as an ~~acceleration of depreciation and evaluates whether all or a portion of the property loss can be~~ offset ~~by the recognition of insurance recoveries.~~

~~Under the terms of the lease agreements with tenants, 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 policiesLease revenues, net 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. The following table summarizes the ~~insurance/tenant recovery is less than~~changes in the provision for uncollectible rent:

The following table summarizes the changes in the provision for uncollectible rent:

Goodwill represents the excess of the amount paid over the fair value of ~~accelerated depreciation recognized,~~ the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination and is assigned to one or more reporting units. The Company’s reporting unit is the same as its reportable segment. Goodwill has an indefinite life and is therefore not amortized. The Company evaluates goodwill for impairment when an event occurs or circumstances change that indicate the carrying value may not be recoverable, or at least annually. The Company will ~~recognize~~adopt an annual goodwill testing date during the fourth quarter.

The Company has incurred certain costs in connection with its anticipated initial public offering (“IPO”). The Company capitalizes such deferred IPO costs, which primarily consist of direct, incremental legal, professional, accounting and other third-party fees. The deferred IPO costs will be offset against IPO proceeds upon the consummation of an offering. Should the planned IPO be abandoned, the deferred IPO costs will be expensed immediately as a ~~net loss~~charge to operating expenses in the Condensed Consolidated ~~Statements~~Statement 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~~ Income. At March 31, 2020 and December 31, ~~2016,~~2019, deferred IPO costs were $1,282 and $668, respectively, ~~by third parties which are accounted for as a separate component of equity.~~

~~The Company periodically adjusts~~and were included within Prepaid expenses and other assets on 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.~~Balance Sheets.

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):~~

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.

Earnout Liability – In connection with the Internalization, the Company recognized an earnout liability that will be due and payable to the former owners of BRE if certain milestones are achieved during specified periods of time following the closing of the Internalization (the “Earnout Periods”) related to either (a) the 40-day dollar volume-weighted average price of a share of the Company’s common stock (“VWAP per REIT Share”), following the completion of an IPO of the Company’s common stock, or (b) the Company’s adjusted funds from operations (“AFFO”) per share, prior to the completion of an IPO (see Note 4).

The Company utilizes third-party valuation experts to assist in estimating the fair value of the earnout liability, and develops estimates by considering weighted-average probabilities of likely outcomes, and using a Monte Carlo simulation and discounted cash flow analysis. These estimates require the Company to make various assumptions about future share prices, timing of an IPO, and other items that are unobservable and are considered Level 3 inputs in the fair value hierarchy. A change in these inputs to a different amount might result in a significantly higher or lower fair value measurement at the reporting date. As shown in the tables below, the Company’s weighted average expected IPO date upon close of the Internalization was April 15, 2020. Due to the market dislocation and uncertainty presented by the COVID-19 pandemic, management revised its weighted average expected IPO date as of quarter end to March 15, 2021. The Company anticipates commencing its IPO when market conditions allow, which may be before March 15, 2021. To the extent the expected IPO date advances, there would be a corresponding increase in the earnout liability’s fair value given the earnout’s fixed time horizon. Peer share price volatilities are used to estimate the Company’s expected share price volatility, and the Company’s corresponding ability to achieve the earnout targets. An increase in peer share price volatility would result in an increase in the earnout liability’s fair value.

The table below provides a summary of the significant unobservable inputs used to estimate the fair value of the earnout liability as of February 7, 2020, the transaction date.

The table below provides a summary of the significant unobservable inputs used to estimate the fair value of the earnout liability as of March 31, 2020.

The following table presents a reconciliation of the change in the earnout liability:

The increase in the earnout liability fair value between February 7, 2020 and March 31, 2020 is primarily a result of an increase in the peer stock price volatility assumption used, as detailed above, a direct result of changes in economic circumstances impacting global equity markets.

Interest Rate Swaps – The balances of interest rate swap assets and liabilities (see Note 11) and earnout liability measured at fair value on a recurring basis are as follows:

Long-term Debt – The fair value of the Company’s debt was estimated using Level 2 and Level 3 inputs based on recent financing transactions, estimates of the fair value of the property that serves as collateral for such debt, historical risk premiums for loans of comparable quality, current ~~LIBOR, US treasury~~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.revolving credit facility:

As disclosed under the Long-lived Asset Impairment ~~Charges~~ section ofelsewhere in Note 2, the Company’s non-recurring fair value measurements ~~for the three months ended September 30, 2017~~at March 31, 2020 and December 31, 2019, consisted of the fair value of impaired real estate assets that were determined using Level 3 inputs.

The Company ~~did~~is a lessee under non-cancelable operating leases associated with its corporate headquarters and other office spaces as well as with leases of land (“ground leases”). The Company records right-of-use assets and lease liabilities associated with these 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 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 included in the initial measurement of the right-of-use asset or lease liability. 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 operating leases.

Right-of-use assets and lease liabilities associated with operating leases were included in the accompanying Condensed Consolidated Balance Sheets as follows:

The Company’s earnout liability is payable in a combination of cash, common shares, and OP Units, in the same proportion as the initial consideration paid in the Internalization (see Note 4). The common shares and OP Units payable under the arrangement will be subject to a redemption rights agreement, whereby holders of the common shares and OP Units will have the right to require the Company to repurchase any ~~assets measured at fair value on a nonrecurring basis at December 31, 2016.~~

~~Substantially~~or all of the ~~Company’s leases~~common shares or OP Units if an IPO has not occurred (see discussion of the redemption rights agreement in Note 4). The common shares and OP Units are ~~triple-net, which provide~~deemed to be freestanding financial instruments that, the lessees are responsible for the payment of all property operating expenses, including property taxes, maintenance and insurance. The Company records such expenses on a net basis. For the three months ended September 30, 2017 and 2016,at inception, embody an obligation to repurchase the Company’s ~~tenants, pursuant to their lease obligations,~~common shares and OP Units, and therefore have ~~made direct payment for property taxes to~~been classified as liabilities together with the ~~taxing authorities~~cash portion of ~~approximately $2,448 and $1,609, respectively. For~~ the ~~nine months ended September 30, 2017 and 2016,~~earnout. The fair value of the ~~Company’s tenants, pursuant to their lease obligations, have made direct payment for property taxes to~~earnout liability at the ~~taxing authorities~~time of ~~approximately $13,405 and $11,176, respectively.~~

~~In some 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~~Internalization was recorded in Earnout liability on ~~a gross basis, where revenue~~the Condensed Consolidated Balance Sheets as part of ~~$608 and $551~~the purchase price allocation. The fair value of the earnout liability is ~~included~~remeasured each reporting period, with changes recorded as Change in ~~Operating expenses reimbursed from tenants and expense~~fair value of ~~$885 and $718 is included in Property and operating expenses~~earnout liability in the ~~accompanying~~ Condensed Consolidated Statements of Income and Comprehensive ~~Income~~ (Loss) Income.

The Company issued common shares and OP Units as base consideration for the ~~three months ended September 30, 2017~~Internalization, each of which were subject to a redemption rights agreement, where the common shares (“mezzanine equity common stock”) and ~~2016, respectively. Taxes collected from tenants were $1,787~~OP Units (“mezzanine equity non-controlling interests”) are economically equivalent to the permanent equity classified common shares and ~~$1,379, while taxes remitted to governmental authorities were $2,084~~OP Units with the exception of certain contingent redemption rights that are not yet exercisable as of March 31, 2020 (see discussion of redemption rights agreement in Note 4). The Company presents the mezzanine equity common stock and ~~$1,442~~mezzanine equity non-controlling interests as mezzanine equity in the Condensed Consolidated Balance Sheets as they are redeemable outside the Company’s control.

The Company subsequently records mezzanine equity common stock at redemption value each reporting period, with changes in carrying value recorded as a component of Additional paid-in capital on the Condensed Consolidated Balance Sheets.

The Company subsequently records mezzanine equity non-controlling interests at the greater of (i) carrying amount, increased or decreased for the ~~nine months ended September 30, 2017~~non-controlling interest’s share of net income or loss, dividends and ~~2016, respectively.~~comprehensive income or loss or (ii) redemption value. Changes in carrying value of mezzanine equity non-controlling interests are recorded as a component of Additional paid-in capital on the Condensed Consolidated Balance Sheets.

In ~~January 2017,~~June 2016, the ~~Financial Accounting Standards Boards (“FASB”)~~FASB issued ASU ~~2017-01,~~2016-13, ~~Business Combinations~~Financial Instruments – Credit Losses which changed how entities measure credit losses for most financial assets. Financial assets that are measured at amortized cost are required to be presented at the net amount expected to be collected with a provision for credit losses deducted from the amortized cost basis. The guidance requires an entity to utilize broader information in estimating the expected credit 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. ASU 2016-13 and ASU 2018-09 (collectively, “ASC 326”) were effective January 1, 2020, under a modified retrospective application. The new guidance applies to the Company’s investments in direct financing leases. Due to the nature of its activities, the Company’s lease portfolio has historically not included a significant number of direct financing leases, and as a result the adoption of ASC 326 did not have a material impact on its financial statements. In connection with the adoption of ASC 326, the Company recorded a provision for credit losses of $323 with an offsetting cumulative-effect adjustment to the opening balance of retained earnings as of January 1, 2020.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic ~~805): Clarifying~~820) Disclosure Framework – Changes to the ~~Definition of a Business~~Disclosure Requirements for Fair Value Measurement. (“The amendments under ASU ~~2017-01”), which changes the definition of a business to exclude acquisitions where substantially all of the~~2018-13 remove, add, and modify certain disclosure requirements on fair value ~~of the assets acquired are concentrated~~measurements 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 accountingASC 820. The amendments were effective for ~~an asset acquisition~~fiscal years, 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 within those fiscal years, beginning after ~~January 1,~~December 15, 2019, with early adoption permitted. The Company adopted the ~~guidance, effective~~new standard on a prospective basis on January 1, ~~2017. As a result~~2020. The modifications and new disclosures required by the new standard primarily relate to disclosures around recurring Level 3 fair value measurements.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments which clarified and improved guidance within the recently issued standards on credit losses, hedging, and recognition and measurement of financial instruments. The Company assessed the impact of the ~~adoption, the Company capitalized $6,583 of acquisition costs~~changes to Topic 326 in connection with ~~investments~~its adoption of ASU 2016-13 discussed above. The provisions of ASU 2019-04 relating to Topics 815 and 825 relate to clarifying the provisions of existing guidance that were not applicable to the Company.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting affected by reference rate reform if certain criteria are met. ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ~~real estate closed during~~ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the ~~nine months ended September 30, 2017~~first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that ~~qualified~~the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as ~~asset acquisitions under~~applicable as additional changes in the ~~adopted guidance.~~market occur.

As more fully described in Note 17, during 2020 there have been business disruptions and challenges severely affecting the global economy caused by the COVID-19 pandemic. In ~~November 2016,~~response, lessors may be required to provide rent deferrals and other lease concessions to lessees. While the lease modification guidance in ASC 842, Leases addresses routine changes to lease terms resulting from negotiations between the lessee and the lessor, this guidance did not contemplate concessions being so rapidly executed to address the sudden liquidity constraints of some lessees arising from situations such as the COVID-19 pandemic. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement

reached with the tenant (in which case the modification would be accounted for within the lease modification accounting framework of ASC 842) or if it was covered under the enforceable rights and obligations within the existing lease agreement (in which case the modification would be precluded from applying the lease modification accounting framework). In April 2020, the FASB staff 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,~~a question 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 amountsanswer document (the “Lease Modification Q&A”) focused on the ~~statement~~application of ~~cash flows. Currently, there is no specific~~lease accounting guidance to ~~address how~~lease concessions provided as a result of the COVID-19 pandemic. The Lease Modification Q&A allows the Company, if certain criteria have been met, to ~~classify~~elect whether or ~~present these changes. ASU 2016-18 is effective,~~not it will apply the lease modification accounting framework, with such election applied consistently to leases with similar characteristics and similar circumstances, rather than performing an analysis of the concessions granted 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 842), which supersedes the existing guidance for~~ lease ~~accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize a right-of-use asset and a corresponding~~by lease liability, initially measured at the present value of lease payments, for both operating and financing leases. For leases with a term of 12 months or less, lessees will be permitted to make an accounting policy election by class of underlying asset to not recognize lease liabilities and lease assets. The Company does not have any material leases where the Company is the lessee. Under the new pronouncement, lessor accounting 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 at the beginning of the earliest period presented using a modified retrospective approach. The amendments are effective January 1, 2019, with early adoption permitted. The Company is continuing to evaluate the impact that adoption of this guidance will have on its Condensed Consolidated Financial Statements and footnote disclosures until the guidance becomes effective.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~. ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB issued ASU 2015-14, ~~Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,~~ ~~which defers the effective date of 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, it does not expect the adoption of this pronouncement to have a material effect on the amount or timing of revenue recognized in its Condensed Consolidated Financial Statements as it believes its revenue, excluding revenue streams recognized in Other income from real estate transactions and Gain on sale of real estate, falls outside the scope of this guidance.basis. The Company expects to ~~adopt~~elect to apply such relief and will avail itself of the ~~guidance using~~election to avoid performing a lease by lease analysis. The Lease Modification Q&A has no material impact on the ~~modified retrospective approach on January 1, 2018. The~~Company’s consolidated financial statements as of and for the three months ended March 31, 2020. However, its future impact to the Company ~~will, however, continue~~is dependent upon the extent of lease concessions granted to ~~evaluate~~tenants as a result of the ~~impact of this guidance until it becomes effective.~~

~~In February 2017,~~COVID-19 pandemic in future periods and the ~~FASB issued ASU 2017-05,~~ ~~Other Income-Gains and Losses from~~elections made by the ~~Derecognition of Nonfinancial Assets.~~ This new guidance is required to be adopted concurrently with the amendments in ASU 2014-09. The new pronouncement, which adds guidance for partial sales of nonfinancial assets, including real estate. In adopting ASU 2017-05, companies may use either a full retrospective or a modified retrospective approach. The Company ~~currently recognizes 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, 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. entering into such concessions.

The Company ~~does not expect the adoption~~reclassified $443 of ~~this pronouncement~~Income taxes from a component of Operating expenses to ~~have~~ a ~~material effect~~component of Other income (expenses), on the ~~amount or timing of revenue recognized in its~~ Condensed Consolidated ~~Financial Statements.~~Statements of Income and Comprehensive (Loss) Income for the three months ended March 31, 2019, to conform with the current period presentation. The ~~Company expects~~reclassification is a change 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.

Prior to the Internalization on February 7, 2020, BRE, a related party in which certain directors of the Corporation had either a direct or indirect ownership interest, and the Asset Manager were considered to be related parties.

The Corporation and the ~~Operating Company have entered into~~OP were parties 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.~~BRE. Under the terms of the Property Management Agreement, ~~the Manager manages~~BRE managed and ~~coordinates~~coordinated certain aspects of the leasing of the ~~Company’s~~Corporation’s rental property.

In exchange for ~~various~~ services provided under the Property Management Agreement, BRE received certain fees and other compensation as follows:

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

~~The initial term of~~Internalization, 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 the Property Management Agreement.was terminated and there will be no future property management fees payable to BRE. The ~~Corporation’s Independent Directors Committee (“IDC”) has approved the renewal of~~Internalization was not considered a “termination event” under the Property Management Agreement, ~~through December 31, 2018. If the Corporation terminates the Property Management Agreement prior~~so no fees were payable to ~~any renewal term or the IDC terminates the agreement within 30 days following~~BRE as a ~~change in control~~result of the ~~Manager (as defined in Property Management Agreement),~~Internalization. See Note 4 for further discussion regarding the ~~Corporation will be required to pay to~~Internalization, including 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 period immediately preceding the date of such termination. Although not terminable as of September 30, 2017, if the Property Management Agreement had been terminated at September 30, 2017 subject to the conditions noted above, the termination fee would have been $14,121.associated payments related thereto.

The Corporation and the ~~Operating Company have entered into~~OP were parties to an asset management agreement ~~(the~~(as amended, the “Asset Management Agreement”) with the Asset Manager, a ~~wholly-owned subsidiary~~single member limited liability company of which BRE was the ~~Manager,~~sole member, and therefore a related party in which certain ~~officers and~~ directors of the ~~Company have~~Corporation had an indirect ownership interest. Under the terms of the Asset Management Agreement, the Asset Manager iswas responsible for, among other things, the Corporation’s acquisition, initial leasing, and disposition strategies, financing activities, and providing support to the ~~IDC~~Corporation’s Independent Directors Committee (“IDC”) for its valuation functions and other duties. The Asset Manager also ~~designates~~nominated 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~~was compensated as follows:

Upon completion of the Internalization, the Asset Management Agreement was terminated and there will be no future 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) 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, compensationfees payable to the Asset ~~Manager for any quarter will be deferred in whole or in part at any time during~~Manager. The Internalization was not considered a ~~rolling 12 month period when cumulative distributions are below $3.50 per share. Any deferred compensation~~“termination event” 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~~so no fees were payable 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,~~as 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 mattersresult of the ~~Corporation and Operating Company.~~

~~The Asset Management Agreement includes various other fees paid to~~Internalization. See Note 4 for further discussion regarding the ~~Asset Manager in exchange for services provided under~~Internalization, including the ~~agreement, as noted in the table below.~~associated payments related thereto.

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 written notice of termination in accordance with the Asset Management Agreement. The IDC has approved the renewal of the agreement through December 31, 2018. If the Corporation terminates the agreement prior to any renewal term or the IDC terminates the agreement within thirty days following a change in control of the Asset Manager (as defined in the Asset Management Agreement), 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 period immediately preceding the date of such termination. Although not terminable as of September 30, 2017, if the Asset Management Agreement had been terminated at September 30, 2017 subject to the conditions noted above, the termination fee would have been $41,552. 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~~were as follows:

		For the three months ended				For the nine months ended
(in thousands)		September 30,				September 30,					For the three months ended March 31,
Type of Fee	Financial Statement Presentation	2017		2016		2017		2016		Financial Statement Presentation	2020^(a)		2019
Asset management fee	Asset management fees	$	3,844	$	2,789	$	10,666	$	7,770	Asset management fees	$	2,461	$	5,120
Property management fee	Property management fees		1,249		1,010		3,635		2,868	Property management fees		1,275		1,885
Total management fee expense			5,093		3,799		14,301		10,638			3,736		7,005

Marketing fee	Additional paid-in capital		342		318		1,144		976
Marketing fee (offering costs)										Additional paid-in capital		—		300
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		—		730
Leasing fee	Leasing fees, net		801		797		2,597		2,827
Leasing fee and re-leasing fees										Leasing fees, net		—		258
Disposition fee	Gain on sale of real estate		219		23		522		61	Gain on sale of real estate		109		113
Total management fees		$	8,046	$	6,291	$	22,084	$	18,312		$	3,845	$	8,406

There were no unpaid 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~~March 31, 2020 and December 31, ~~2016, respectively.~~2019. All fees related to the Property Management Agreement and the Asset Management Agreement ~~are~~were paid for in cash within the Company’s normal payment cycle for vendors.

~~The~~Upon closing of the Internalization, the Company ~~retains~~entered into an agreement with Amy L. Tait, the ~~legal services~~Company’s founder, and certain members of ~~Vaisey Nicholson & Nearpass, PLLC~~her family (“~~VNN”~~Founding Owners”), ~~formerly~~pursuant to which the OP agreed to indemnify the Founding Owners against the applicable income tax liabilities resulting from the sale, exchange, transfer or other disposal of the assets of BRE that the Company acquired in the Internalization, through February 7, 2030, or the Company’s failure to allocate specific types of the OP’s indebtedness to the Founding Owners (the “Founding Owners’ Tax Protection Agreement”). The maximum amount the Company may be liable for under the Founding Owners’ Tax Protection Agreement is $10,000.

In connection with the Internalization, the Company incurred a ~~related party. One former minority partner~~contingent liability that would be payable to certain members of ~~VNN~~the Company’s Board of Directors and employees who had previously been owners and/or employees of BRE, upon the occurrence of certain events (see Note 4). The fair value of the earnout liability was $44,296 as of March 31, 2020.

In connection with the Internalization, the Company assumed the lease agreement relating to the Company’s principal executive office with Clinton Asset Holdings Associates, L.P., an affiliated third party, approximately 1.6% of which is ~~an immediate family member to a~~indirectly owned by the Company’s Chairman and member of the Board of Directors. The lease of 24,072 square feet of office space is scheduled to expire on August 31, 2023, with two five-year renewal options. The annual rent for 2020 is approximately $547, with 2% annual increases thereafter. See further discussion in Note 16.

On February 7, 2020, the Company completed the Internalization and the Company’s management team and corporate staff, who were previously employed by BRE, became employees of an indirect subsidiary of the ~~Company and an indirect minority owner~~OP.

The consideration paid at closing of the ~~Manager. Beginning January 2017,~~Internalization is summarized in the ~~family member was no longer~~following table:

The Company may be required to pay additional earnout consideration of up to $75,000 payable in four tranches of $10,000, $15,000, $25,000, and $25,000 if certain milestones related to either (a) the 40-day VWAP per REIT Share, following the completion of an ~~owner~~IPO, or ~~partner~~(b) the Company’s AFFO per share, prior to the completion of ~~VNN and therefore, prospectively, VNN~~an IPO, (each, an “Earnout Trigger”) are achieved during the Earnout Periods. The consideration will ~~no longer be deemed~~consist of a ~~related party. Legal services obtained from VNN are mainly for acquisition and disposition~~combination of ~~real estate related matters, as well as general counsel regarding property management and financing. The IDC has reviewed the billings and other aspects~~cash, shares of the ~~relationship between VNN~~Company’s common stock, and OP Units, based on the same proportions paid in the base consideration.

The earnout tranches, applicable 40-day VWAP of a REIT Share and AFFO per share, and the ~~Company. The Company utilizes the services of other outside legal counsel~~applicable Earnout Periods are 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:follows:

~~4. Acquisitions~~Should all earnout milestones be met, an additional 272 shares of common stock and an additional 465 OP Units would be issued, in addition to amounts payable in cash. As of the Internalization date, the Company estimated that the earnout liability had a fair value of $40,119, of which approximately $33,511 relates to the potential issuance of common shares and OP Units and approximately $6,608 relates to the potential payment of cash. The Company will estimate the fair value of the earnout liability at each reporting date during the contingency period and record any changes in estimated fair value in its Condensed Consolidated Statement of Income and Comprehensive (Loss) Income.

The mezzanine equity common shares and OP Units are economically equivalent to permanent equity common shares and OP Units with the exception of certain contingent redemption rights that are not yet exercisable as of March 31, 2020. If an IPO does not occur on or before December 31, 2020, then each holder of mezzanine equity common shares and OP Units shall have the right to require the Company ~~closed on~~to repurchase any or all of such holder’s shares and OP Units at a price equal to the ~~following acquisitions~~greater of (i) the initial fair value of $85 of the common shares or OP Units at the date of the Internalization or (ii) the current fair value of such common shares or OP Units, as adjusted for interest and distributions. Such repurchases can occur during the ~~nine~~period from January 1, 2021 until the earlier of 12 months ~~ended September 30, 2017:~~thereafter or the date of an IPO; provided that the period shall not begin on January 1, 2021 if the Company, in connection with an IPO, shall have filed a registration statement with the SEC that has not been withdrawn as of January 1, 2021 (but the period shall begin immediately upon any such withdrawal and then continue until the earlier of 12 months thereafter or until the occurrence of an IPO); provided, further, that the period shall begin no later than July 1, 2021 (even if such registration statement shall not have been withdrawn as of July 1, 2021) and in such event shall continue until the earlier of twelve (12) months thereafter or the occurrence of an IPO. The Merger Agreement did not provide that the completion of an IPO is a condition to the closing of the Internalization.

~~The~~ Company ~~closed on~~to repurchase any or all of such holder’s shares or OP Units at a price equal to the ~~following acquisitions~~greater of (i) the initial fair value of $85 of the common shares at the date of the Internalization or (ii) the current fair value of such common shares, as adjusted for interest and distributions. Such repurchases can occur during the ~~nine~~period from the date of issuance of such earnout shares until the earlier of 12 months ~~ended September 30, 2016:~~thereafter or the occurrence of an IPO; provided, further, that such period shall not begin on such date of issuance if the Company, in connection with an IPO, shall have filed a registration statement with the SEC that has not been withdrawn as of such date of issuance (but such period shall begin immediately upon any such withdrawal and then continue until the earlier of 12 months thereafter or the occurrence of an IPO; provided, further, that such period shall begin no later than six months after such date of issuance (even if such registration statement shall not have been withdrawn as of such date) and in such event shall continue until the earlier of 12 months thereafter or the occurrence of an IPO.

The Internalization was accounted for as a business combination and accordingly, the Company allocated the purchase price ~~of these properties~~utilizing the acquisition method to ~~the relative fair value of the real estate~~record assets acquired and liabilities ~~assumed.~~ assumed at their estimated fair values.

The allocation of the purchase price has not been finalized and is based upon preliminary estimates of these fair values, which is the best available information at the current time. The final determination of the fair values of the assets and liabilities will be based on the actual valuations of the tangible and intangible assets and liabilities that existed as of the date of completion of the acquisition, including the valuation of the earnout liability. The Company expects to finalize the valuations during the measurement period, not to exceed one year from the date of the Internalization. Consequently, amounts preliminarily allocated to identifiable tangible and intangible assets and liabilities could change.

The following table summarizes the Company’s preliminary allocation of the purchase price ~~allocation~~associated with the Internalization:

In connection with the Internalization, the Company recorded goodwill of $339,769 as a result of the consideration exceeding the fair value of the net liabilities acquired. Goodwill represents the synergies and costs savings expected from the acquired management functions and the Company’s ability to generate additional portfolio growth on a lower cost structure than when it was externally managed. The Company does not expect that the goodwill will be deductible for ~~acquisitions completed during~~tax purposes.

In connection with the ~~nine months ended September 30, 2017~~Internalization, the Company assumed $90,484 of debt which was subsequently repaid through a combination of borrowings under its Revolving Credit Facility (as defined below) and ~~2016, discussed above, excluding non-real estate liabilities assumed of $1,000~~entering into a new $60,000 term loan agreement (see Note 9).

The Company incurred $1,205 in non-recurring costs associated with the Internalization during the three ~~and nine~~ months ended ~~September 30, 2017:~~

~~The above acquisitions~~March 31, 2020, which were funded using a combination of available cash on hand and proceeds from the Company’s unsecured revolving line of credit. All of the acquisitions closed during the nine months ended September 30, 2017 qualifiedclassified 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 AcquisitionInternalization expenses in the ~~accompanying~~ Condensed Consolidated Statements of Income and Comprehensive ~~Income~~ (Loss). Income.

The effect of the Internalization has been reflected in the Company’s operating results beginning on February 7, 2020. No incremental revenues were recorded as a result of the Internalization. From ~~the date of acquisition through September 30, 2016,~~February 7, 2020 to March 31, 2020, the Company ~~recorded revenues~~incurred $3,662 in expenses as a result of ~~$5,173~~being internalized, which include general and ~~$8,515 for~~administrative expenses associated with the ~~three~~Company’s performance of functions previously performed by BRE and ~~nine months ended September 30, 2016, respectively,~~the Asset Manager (primarily employee related costs), as well as interest expense associated with the borrowings related to the ~~properties acquired and accounted for as business combinations, and recognized net income of $2,655 and $5,204 for~~Internalization. These expenses do not include the ~~three and nine months ended September 30, 2016, excluding the impact of one-time acquisition expenses from the date of acquisition through September 30, 2016.~~

~~Subsequent to September 30, 2017, the Company closed on the following acquisitions (see Note 17):~~$1,205 non-recurring costs discussed above.

The Company has not completed the allocation of the acquisition date relative fair values for the properties acquired subsequent to September 30, 2017; 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 following pro forma information summarizes selected financial information from the Company’s combined results of operations, ~~excluding~~as if the ~~impact~~Internalization had occurred on January 1, 2019. These results contain certain adjustments totaling $5,646 and $6,377 of ~~one-time acquisition costs, of~~income, respectively, for the ~~acquisitions accounted for as business combinations, for which financial information was available, are included in the following condensed~~three months ended March 31, 2020 and 2019. These pro forma adjustments reflect the elimination of Internalization expenses and asset management, property management, and disposition fees between the Company and BRE and the Asset Manager in historic financial ~~information as if these acquisitions had been completed as of~~results, and adjustments to reflect incremental interest expense associated with the ~~beginning of the comparable prior annual period prior~~borrowing related to the ~~acquisition date. The following condensed~~Internalization. This 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~~informational purposes only, and ~~are~~may not ~~necessarily~~be indicative of what ~~the Company’s~~ actual results of operations would have been had the ~~acquisitions~~Internalization occurred at the beginning of the ~~periods presented,~~period, nor ~~are they necessarily indicative~~does it purport to represent the results of future ~~operating results.~~operations.

The condensed pro forma financial information ~~are~~is as follows for the three ~~and nine~~ months ended ~~September 30, 2016:~~March 31, 2020 and 2019:

The Company did not complete any acquisitions of rental property during the three months ended March 31, 2020. The Company closed on the following acquisitions of rental property during the three months ended March 31, 2019:

The Company allocated the purchase price of these properties to the fair value of the assets acquired and liabilities assumed. The following table summarizes the purchase price allocation for completed real estate acquisitions:

5.The above acquisitions were funded using a combination of available cash on hand, borrowings under the Company’s Revolving Credit Facility, and proceeds from equity issuances. All real estate acquisitions closed during the three months ended March 31, 2019, qualified as asset acquisitions and, as such, acquisition costs have been capitalized.

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 March 31,
(in thousands, except number of properties)	2017		2016		2017		2016		2020			2019
Number of properties disposed		4		2		10		4		10			4
Aggregate sale price	$	27,725	$	12,345	$	58,170	$	16,095	$	37,185		$	11,291
Aggregate carrying value		22,335		9,163		44,984		11,519		(27,764	)		(9,212	)
Additional sales expenses		1,338		199		2,854		487		(1,802	)		(679	)
Gain on sale of real estate		4,052		2,983		10,332		4,089	$	7,619		$	1,400

The Company generally leases its investment rental property to established ~~tenants.~~tenants in the industrial, healthcare, restaurant, office, retail, and other industries. At ~~September 30, 2017,~~March 31, 2020, the Company had ~~462~~616 real estate properties which were leased under leases that have been classified as operating leases and 15 that have been classified as direct financing leases. Of the 15 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/~~CPI, 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, at the election of the tenant, and are subject to generally the same terms and conditions as the initial lease.

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

	September 30,			December 31,
(in thousands)	2017			2016			March 31, 2020			December 31, 2019
Land	$	300,633		$	288,276		$	545,846		$	548,911
Land improvements		185,776			162,341			274,135			275,470
Buildings		1,530,429			1,283,322
Tenant improvements		9,656			8,665
Buildings and improvements								2,827,111			2,850,571
Equipment		519			799			11,492			11,492
		2,027,013			1,743,403			3,658,584			3,686,444
Less accumulated depreciation		(135,305	)		(105,703	)		(291,018	)		(271,044	)
	$	1,891,708		$	1,637,700		$	3,367,566		$	3,415,400

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~~March 31, 2020 are as follows:

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~~CPI 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:~~was comprised of the following:

	September 30,			December 31,
(in thousands)	2017			2016			March 31, 2020			December 31, 2019
Minimum lease payments to be received	$	78,837		$	90,447
Undiscounted estimated lease payments to be received							$	68,898		$	72,753
Estimated unguaranteed residual values		19,758			22,335			19,827			20,358
Less unearned revenue		(56,983	)		(65,511	)
Unearned income								(48,459	)		(51,221	)
Reserve for credit losses								(305	)		—
Net investment in direct financing leases	$	41,612		$	47,271		$	39,961		$	41,890

~~Minimum future rental receipts required~~Undiscounted estimated lease payments to be received under non-cancelable direct financing leases with tenants at ~~September 30, 2017~~March 31, 2020 are as follows:

The above rental receipts do not include future ~~minimum~~ lease payments for renewal periods, potential variable ~~consumer price index~~CPI 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, net on the Condensed Consolidated Statements of Income and Comprehensive (Loss) 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			March 31, 2020			December 31, 2019
Lease intangibles:
Acquired above-market leases	$	57,922		$	45,490		$	60,394		$	62,136
Less accumulated amortization		(8,047	)		(4,940	)		(17,989	)		(17,433	)
Acquired above-market leases, net		49,875			40,550			42,405			44,703
Acquired in-place leases		177,044			141,676			346,165			349,645
Less accumulated amortization		(21,450	)		(14,105	)		(68,152	)		(62,454	)
Acquired in-place leases, net		155,594			127,571			278,013			287,191
Total intangible lease assets, net	$	205,469		$	168,121		$	320,418		$	331,894

Acquired below-market leases	$	75,038		$	54,062		$	113,091		$	113,862
Less accumulated amortization		(8,735	)		(6,191	)		(23,418	)		(21,640	)
Intangible lease liabilities, net	$	66,303		$	47,871		$	89,673		$	92,222

Leasing fees	$	15,543		$	13,279		$	16,841		$	17,013
Less accumulated amortization		(2,497	)		(1,950	)		(4,349	)		(4,166	)
Leasing fees, net	$	13,046		$	11,329		$	12,492		$	12,847

Amortization ~~expense~~ for ~~acquired in-place leases~~intangible lease assets and ~~fees~~liabilities 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.as follows:

Estimated future amortization of intangible assets and liabilities at ~~September 30, 2017~~March 31, 2020 is as follows:

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)	March 31, 2020			December 31, 2019			Interest Rate^(c)	Maturity Date
2020 Unsecured Term Loan^(a)	$	240,000		$	300,000		one-month LIBOR + 1.25%	Aug. 2020^(d)
Unsecured Revolving Credit and Term Loan Agreement^(a)
Revolving Credit Facility		353,300			197,300		one-month LIBOR + 1.20%	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%	Jun. 2024
		808,300			652,300
2022 Unsecured Term Loan^(a)		60,000			—		one-month LIBOR + 1.25%	Feb. 2022
2026 Unsecured Term Loan^(a)		450,000			450,000		one-month LIBOR + 1.85%	Feb. 2026
Senior Notes^(a)
Series A		150,000			150,000		4.84%	Apr. 2027
Series B		225,000			225,000		5.09%	Jul. 2028
Series C		100,000			100,000		5.19%	Jul. 2030
		475,000			475,000
Total		2,033,300			1,877,300
Debt issuance costs, net^(b)		(7,413	)		(7,919	)
	$	2,025,887		$	1,869,381

On February 7, 2020, the Company entered into a $60,000 term loan agreement maturing on February 28, 2022 (the “2022 Unsecured Term Loan”) with JP Morgan Chase, N.A. as administrative agent. The 2022 Unsecured Term Loan was fully funded at closing and used to repay a portion of the debt assumed by the Company as part of the Internalization. Borrowings under the 2022 Unsecured Term Loan are subject to interest only payments at variable rates equal to LIBOR plus a margin based upon the Company’s credit rating, ranging between 0.85% and 1.65% per annum. Based on the Company’s current credit rating the applicable margin was 1.25% as of March 31, 2020.

At ~~September 30, 2017 and December~~March 31, ~~2016,~~2020, the weighted average interest rate on all outstanding borrowings was ~~2.96% and 2.14%, respectively.~~3.03%. In addition, the Revolving Credit Facility 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,~~March 31, 2019, the Company paid ~~$8,344~~$5,229 in debt issuance costs associated with the ~~Senior Notes, the Credit Agreement with M&T as Administrative Agent,~~2026 Unsecured Term Loan and the ~~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~~$5,229 of the debt issuance costs incurred in the three months ended March 31, 2019, were deemed to be related to the issuance of new debt, or the modification of existing debt, and therefore have been deferred and are being amortized over the term of the associated debt. ~~The remaining $2,901~~

Additionally, $215 of ~~debt issuance costs was associated with lenders whose commitments under the new agreements have been determined to be an extinguishment and such~~unamortized debt issuance costs were expensed ~~as a component of~~in the ~~cost~~three months ended March 31, 2019, 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. Additionally, $654 of unamortized debt~~Income.

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

The Company is subject to various financial and operational covenants and financial reporting requirements pursuant to its unsecured credit agreements. These covenants require the Company, to maintain certain financial ratios, including leverage, fixed charge coverage, and debt service coverage, among others. As of March 31, 2020, the Company believes it was in compliance with all of its loan covenants. The Company’s continued compliance with these covenants depends on many factors and could be impacted by current or future economic conditions associated with the COVID-19 pandemic (see Note 17), and thus there are no assurances that the Company will continue to be in compliance with its covenants. Failure to comply with the covenants would result in a default which, if the Company were unable to cure or obtain a waiver from the lenders, could accelerate the repayment of the obligations. Further, in the event of default, the Company may be restricted from paying dividends to its stockholders in excess of dividends required to maintain its REIT qualification. Accordingly, an event of default could have a material and adverse impact on the Company.

The 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	March 31,			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	2020			2019
(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%	$	48,787		$	49,065		^{(a) (b) (c) (k)}
(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%		20,225			20,318		^{(a) (b) (c) (j)}
(3)	Aegon	Apr-12	Oct-23		6.38%		9,330			9,804		(b) (j)	PNC Bank	Oct-16	Nov-26	3.62%		17,789			17,885		^{(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%		10,785			10,888		^{(b) (f)}
(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%		7,604			7,788		^{(b) (g)}
(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%		4,878			4,913		^{(b) (d) (h) (i)}
(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%		—			544		^{(b) (c) (d) (e)}
~~(9)~~	Siemens Financial Services, Inc.	Sep-10	Sep- 20		5.47%		5,869			6,010		(a) (b)						110,818			112,151
(10)	Standard Insurance Co.	Apr-09	May-34		6.88%		1,827			1,870		(b) (c) (h)
(11)	Wells Fargo Bank, N.A.	May-07	Jun-17		6.69%		-			1,694		(a) (b)
(12)	Standard Insurance Co.	May-09	Jun-34		6.88%		1,312			1,342		(b) (c) (h) (l)
(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			Debt issuance costs, net					(354	)		(358	)
	Debt issuance costs, net						(689	)		(838	)						$	110,464		$	111,793
						$	57,883		$	106,686

At ~~September 30, 2017,~~March 31, 2020, investment in rental property of ~~$91,326 is~~$176,805 was 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)9) at ~~September 30, 2017~~March 31, 2020 are as follows:

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		March 31, 2020			December 31, 2019
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	$	(2,178	)	$	(1,136	)
Bank of Montreal	July 2024		1.16%	LIBOR 1 month		40,000		2,147			July 2024		1.16	%	one-month LIBOR		40,000		(1,324	)		740
Bank of Montreal	January 2025		1.91%	LIBOR 1 month		25,000		193			January 2025		1.91	%	one-month LIBOR		25,000		(1,806	)		(402	)
Bank of Montreal	July 2025		2.32%	LIBOR 1 month		25,000		(490	)		July 2025		2.32	%	one-month LIBOR		25,000		(2,500	)		(970	)
Bank of Montreal	January 2026		1.92%	LIBOR 1 month		25,000		297			January 2026		1.92	%	one-month LIBOR		25,000		(2,118	)		(448	)
Bank of Montreal	January 2026		2.05%	LIBOR 1 month		40,000		84			January 2026		2.05	%	one-month LIBOR		40,000		(3,685	)		(1,014	)
Bank of Montreal	December 2026		2.33%	LIBOR 1 month		10,000		(175	)		December 2026		2.33	%	one-month LIBOR		10,000		(1,231	)		(460	)
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		(2,500	)		(577	)
Bank of Montreal											December 2027		2.37	%	one-month LIBOR		25,000		(3,497	)		(1,306	)
Bank of Montreal											May 2029		2.09	%	one-month LIBOR		25,000		(3,342	)		(799	)
Capital One, National Association											December 2021		1.05	%	one-month LIBOR		15,000		(213	)		143
Capital One, National Association											December 2024		1.58	%	one-month LIBOR		15,000		(836	)		10
Capital One, National Association											January 2026		2.08	%	one-month LIBOR		35,000		(3,291	)		(911	)
Capital One, National Association											April 2026		2.68	%	one-month LIBOR		15,000		(2,007	)		(944	)
Capital One, National Association											July 2026		1.32	%	one-month LIBOR		35,000		(1,844	)		720
Capital One, National Association											December 2027		2.37	%	one-month LIBOR		25,000		(3,533	)		(1,278	)
M&T Bank											August 2021		1.02	%	one-month LIBOR		4,877		(45	)		41		^{(a), (b)}
M&T Bank	September 2022		2.83%	LIBOR 1 month		25,000		(1,150	)		September 2022		2.83	%	one-month LIBOR		25,000		(1,553	)		(862	)
M&T Bank	November 2023		2.65%	LIBOR 1 month		25,000		(1,023	)		November 2023		2.65	%	one-month LIBOR		25,000		(2,097	)		(1,038	)
Regions Bank	March 2018		1.77%	LIBOR 1 month		25,000		(46	)		May 2020		2.12	%	one-month LIBOR		50,000		(92	)		(104	)
Regions Bank	March 2019		1.91%	LIBOR 3 month		25,000		(106	)		December 2023		1.18	%	one-month LIBOR		25,000		(793	)		376
Regions Bank	May 2020		2.12%	LIBOR 1 month		50,000		(562	)		May 2029		2.11	%	one-month LIBOR		25,000		(3,438	)		(827	)
Regions Bank	March 2022		2.43%	LIBOR 3 month		25,000		(550	)		June 2029		2.03	%	one-month LIBOR		25,000		(3,260	)		(651	)
Regions Bank	December 2023		1.18%	LIBOR 1 month		25,000		1,178
SunTrust Bank	April 2024		1.99%	LIBOR 1 month		25,000		(63	)
SunTrust Bank	April 2025		2.20%	LIBOR 1 month		25,000		(332	)
SunTrust Bank	July 2025		1.99%	LIBOR 1 month		25,000		72
SunTrust Bank	January 2026		1.93%	LIBOR 1 month		25,000		248
Truist Financial Corporation											April 2024		1.99	%	one-month LIBOR		25,000		(1,655	)		(451	)
Truist Financial Corporation											April 2025		2.20	%	one-month LIBOR		25,000		(2,260	)		(781	)
Truist Financial Corporation											July 2025		1.99	%	one-month LIBOR		25,000		(2,075	)		(524	)
Truist Financial Corporation											December 2025		2.30	%	one-month LIBOR		25,000		(2,676	)		(993	)
Truist Financial Corporation											January 2026		1.93	%	one-month LIBOR		25,000		(2,146	)		(458	)
U.S. Bank National Association											June 2029		2.03	%	one-month LIBOR		25,000		(3,263	)		(681	)
U.S. Bank National Association											August 2029		1.35	%	one-month LIBOR		25,000		(1,699	)		881
Wells Fargo Bank, N.A.											February 2021		2.39	%	one-month LIBOR		35,000		(599	)		(302	)
Wells Fargo Bank, N.A.											October 2024		2.72	%	one-month LIBOR		15,000		(1,591	)		(795	)
Wells Fargo Bank, N.A.	February 2021		2.39%	LIBOR 1 month		35,000		(739	)		April 2027		2.72	%	one-month LIBOR		25,000		(3,878	)		(1,845	)
Wells Fargo Bank, N.A.	October 2024		2.72%	LIBOR 1 month		15,000		(706	)		January 2028		2.37	%	one-month LIBOR		75,000		(10,597	)		(3,914	)
					$	640,000	$	374										$	(79,622	)	$	(21,560	)

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 (Loss) Income, ~~(Loss),~~ from converting from variable rates to fixed rates under these agreements iswere 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 ~~income~~loss to Interest expense during the next twelve months are estimated to be ~~$3,460.~~a loss of $14,802. 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 during the nine months ended September 30, 2017 and 2016 were valued at $8,278 and $7,190, respectively, which represents the estimated fair value of the properties contributed, less any assumed debt.

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

The Company maintained bank balances that, at times, exceeded the federally insured limit during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2020. 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~~Prior to the Internalization on February 7, 2020, the Company’s rental property iswas managed by ~~the Manager~~BRE and the Asset Manager as described in Note 3. Management fees ~~and expense reimbursements~~ paid to ~~the Manager~~BRE and Asset Manager ~~represent 21%~~represented 8% and ~~26%~~19% of ~~the Company’s~~ total operating expenses for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, and 21% and 25% of~~2019, respectively. These amounts do not include acquisition fees paid to the ~~Company’s total operating expenses for the nine months ended September 30, 2017 and 2016, respectively.~~Asset Manager that were capitalized (see Note 3). The Company has mortgages and notes payable with ~~five~~three institutions that ~~comprise 32%, 20%~~comprised 62%, 16%~~, 10%~~, and 10% of total mortgages and notes payable at ~~September 30, 2017. The Company has mortgages~~March 31, 2020 and ~~notes payable with four institutions that comprise 20%, 18%, 12%, and 11% of total mortgages and notes payable at~~ December 31, ~~2016.~~2019. For the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, 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 was terminated effective February 10, 2020, and 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 issuedresult there were no redemptions 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.

three months ended March 31, 2020. The following table summarizes redemptions under the Company’s Share Redemption Program ~~for~~during the three ~~and nine~~ months ended ~~September 30, 2017 and 2016:~~March 31, 2019:

	For the three months ended				For the nine months ended
	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)
Number of redemptions requested									13
Number of shares	23		45		62		87		21
Aggregate redemption price	$	1,808	$	3,427	$	4,825	$	6,487	$	1,803

The Corporation ~~has~~had adopted ~~the DRIP,~~a Distribution Reinvestment Plan (“DRIP”), pursuant to which the Corporation’s stockholders and holders of ~~membership units in the Operating Company~~OP Units (other than the Corporation), ~~may~~could 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~~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~~was terminated effective February 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.~~2020. At ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, a total of ~~1,451~~3,075 and ~~1,076,~~3,005 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 March 31,
(in thousands, except per share)	2017		2016		2017		2016		2020		2019
Basic earnings:
Net earnings attributable to Broadstone Net Lease, Inc.	$	11,948	$	13,958	$	39,269	$	23,874	$	10,816	$	13,938
Diluted earnings:
Net earnings attributable to Broadstone Net Lease, Inc.	$	11,948	$	13,958	$	39,269	$	23,874	$	10,816	$	13,938
Net earnings attributable to non-controlling interests		1,042		1,459		3,460		2,600		1,032		1,084
	$	12,990	$	15,417	$	42,729	$	26,474	$	11,848	$	15,022

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		26,527		22,335
Effects of convertible membership units		1,530		1,427		1,462		1,416		2,526		1,737
Weighted average number of common shares outstanding used in diluted earnings per share		19,147		15,074		18,069		14,154		29,053		24,072
Basic and diluted net earnings per common share	$	0.68	$	1.02	$	2.36	$	1.87	$	0.41	$	0.62

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

Cash paid for interest was ~~$20,364~~$14,010 and ~~$16,430~~$16,777 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, respectively. Cash paid for ~~state~~ income ~~and franchise~~ taxes was ~~$751~~$195 and ~~$323~~$395 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, 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~~Balances associated with tenant improvement allowances are included in Accounts payable and other liabilities on the Condensed Consolidated Balance Sheets as follows:

The Company is a party to three separate tax protection agreements with the contributing members of ~~acquisitions closed during 2016~~three distinct UPREIT transactions and ~~one acquisition closed~~to the Founding Owners’ Tax Protection Agreement in ~~2017,~~connection with the Internalization (see Note 3). The tax protection agreements require the Company ~~assumed four separate lease~~to indemnify the beneficiaries in the event of a sale, exchange, transfer, or other disposal of the contributed property, or in the case of the Founding Owners’ Tax Protection Agreement, the entire Company, in a taxable transaction that would cause such beneficiaries to recognize a gain that is protected under the agreements, subject to certain exceptions. Based on values as of March 31, 2020, taxable sales of the applicable properties would trigger liability under the Agreements of approximately $22,300. Based on information available, the Company does not believe that ~~provided for a total of $11,464 in tenant improvement allowances. During~~ the ~~nine months ended September 30,2017 and the year ended December 31, 2016, payments of $3,863 and $974, respectively, have been made for work completed under these allowances,~~events resulting in ~~a total tenant improvement allowance of $6,627 and $9,490 at September 30, 2017 and December 31, 2016, respectively.~~

~~During the nine months ended September 30, 2017, three properties held~~damages as detailed above have occurred or are likely to occur in the ~~Company’s real estate portfolio incurred losses due~~foreseeable future.

Subsequent to ~~fire damage. Management anticipates that~~ the ~~proceeds received~~Internalization (see Note 4), the Company leases office space for its corporate headquarters and other locations under non-cancellable operating leases with remaining lease terms ranging from ~~insurance will exceed the book value~~2020 to 2023. These leases contain provisions for fixed monthly payments, subject to rent escalations. None of the leases are subject to any sublease agreement. The lease for the corporate headquarters is with a related party (see Note 3).

The Company also leases land at certain properties under non-cancellable operating leases (“ground leases”) with initial lease terms ranging from 2034 to 2066. 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 ~~destroyed,~~(“percentage rent”). None of the leases are subject to any sublease agreement.

The following table summarizes the total lease costs associated with operating leases:

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 March 31, 2020, and ~~accordingly~~ a ~~gain on insurance settlement~~reconciliation to the lease liabilities, is as follows:

The above rental payments include future minimum lease payments due during the initial lease terms. Such amounts exclude any contingent amounts associated with percentage rent that may ~~be recorded~~become due in a future ~~period upon receipt of funds.~~periods.

Subsequent to ~~September 30, 2017,~~March 31, 2020, the OP drew additional borrowings on the Revolving Credit Facility in the aggregate amount of $25,000.

On May 5, 2020, the Company ~~has raised $18,443 for a total~~gave notice that it was exercising the first of ~~231 shares~~two six-month extension options available under the terms of the ~~Corporation’s common stock through monthly equity closings, including dividend reinvestments,~~2020 Unsecured Term Loan Agreement (see Note 9), effective as of August 2, 2020, and ~~$4,635 for a total of 58 units~~extending the maturity date of the ~~Operating Company’s membership interest through an UPREIT transaction. Through November 13, 2017,~~loan to February 2, 2021, subject to certain customary conditions and in exchange for the payment of a 0.05% fee payable on August 2, 2020.

Subsequent to March 31, 2020, the Company ~~has~~ paid ~~$8,099~~$13,160 in ~~distributions, including dividend reinvestments.~~

~~Subsequent to September 30, 2017, the Company continued to expand~~distributions. At its operations through the acquisition of additional rental property and associated intangible assets and liabilities. The Company acquired approximately $25,693 of rental property and associated intangible assets and liabilities (see Note 4), and assumed $11,933 of liabilities.

~~On November~~May 7, ~~2017,~~2020 meeting, the Board of Directors ~~declared~~undertook a full review of the Company’s rent collection results for April, preliminary collection results for May, the outlook for collections in future months, and the Company’s overall liquidity position. Given the economic uncertainty and rapidly evolving circumstances related to the COVID-19 pandemic (discussed below) and current tenant rent relief requests, to preserve cash and strengthen the Company’s liquidity position, the Board of Directors determined that it would temporarily suspend the Company’s monthly distribution. The previously announced distribution of $0.44 per common share and OP Unit for the month of April 2020 will be paid on May 15, 2020. The Board of Directors will re-evaluate whether or not to reinstate a distribution at its August 2020 meeting.

On May 7, 2020, the Board of $0.415 per share on the Corporation’s common stock and approved a distribution of $0.415 per membership unit of the Operating Company for monthly distributions through January 2018. The distributions are payable on or prior to the 15th of the following month to the Corporation’s common stockholders and the Operating Company’s unit holders of record on the last day of the month. In addition, the IDCDirectors determined the ~~Determined Share Value~~share value for the Corporation’s common stock to be ~~$81.00~~$82.00 per share for ~~subscription agreements~~the period May 1, 2020 through July 31, 2020. However, as previously disclosed, on January 10, 2020, the Company suspended its private offering of shares of its common stock until further notice.

Through May 7, 2020, the Company sold three properties with an aggregate carrying value of approximately $8,994 for total proceeds of $10,538. The Company incurred additional expenses related to the sales of approximately $489, resulting in a gain on sale of real estate of approximately $1,055.

Since its discovery in December 2019, a novel strain of coronavirus, which causes the viral disease known as COVID-19, has spread throughout most countries of the world, including the United States. The outbreak has been declared a pandemic by the World Health Organization, and the United States Secretary of Health and Human Services has declared a public health emergency in the United States. In response to the COVID-19 pandemic, many local, state and federal governments have instituted “stay at home” or “shelter in place” rules and restrictions on the types of businesses that may continue to operate, which resulted in closure of many businesses deemed to be non-essential. Many of the Company’s tenants, in particular those who operate in the retail and restaurant industries, depend on in-person interactions with customers to generate unit-level profitability, and have been negatively impacted by the pandemic, as have businesses who supply products and services to these industries. As a result, in March and subsequent to the end of the quarter, the Company received rent relief requests from ~~November 1, 2017 through January 31, 2018.~~68 tenants representing approximately 36.3% of annualized contractual revenues. The Company is in various stages of discussion with these tenants and currently expects to grant relief to some of its tenants to defer rent payments as a result of their estimated lost revenues from the current COVID-19 pandemic; however, there can be no assurance the Company will reach an agreement with any tenant or if an agreement is reached, that any such tenant will be able to repay any such deferred rent in the future. The full extent of the impact of the COVID-19 pandemic on the Company’s financial condition, results of operations, income, expenses, and ability to pay distributions cannot be determined at this time and will depend on certain developments, including the duration and spread of the outbreak and its impact on the Company’s tenants, all of which are uncertain and cannot be predicted. For further discussion of the COVID-19 outbreak, refer to Part II, Item 1A. of this Quarterly Report on Form 10-Q.

Except where the context suggests otherwise, as used in this Quarterly Report on Form 10-Q, the terms “BNL,” “we,” “us,” “our,” and “our company” refer to Broadstone Net Lease, Inc., a Maryland corporation incorporated on October 18, 2007, and, as required by context, Broadstone Net Lease, LLC, a New York limited liability company (the “OP”), which we refer to as the or our ~~“Operating Company,~~“OP,” 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~~contains forward-looking statements, ~~within~~which reflect our current views regarding our business, financial performance, growth prospects and strategies, market opportunities, and market trends, that are intended to be made pursuant to the ~~meaning~~safe harbor provisions 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~~all statements that are not ~~limited to,~~historical facts. In some cases, you can identify these forward-looking statements ~~that represent our beliefs concerning future operations, strategies, financial results or other developments. Forward-looking statements can be identified~~ by the use of ~~forward-looking terminology~~words such as ~~but not limited to,~~“outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” ~~“expect,~~“could,” ~~“anticipate,~~“seeks,” ~~“estimate,~~“approximately,” ~~“would be,~~“projects,” ~~“believe,~~“predicts,” ~~or “continue”~~“intends,” “plans,” “estimates,” “anticipates,” or the negative version of these words or other ~~variations~~comparable words. All of ~~comparable terminology. Because these~~the forward-looking statements ~~are based~~included in this Quarterly Report on ~~estimates and assumptions that~~Form 10-Q are subject to ~~significant~~various risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, and future business ~~economic,~~decisions, all of which are difficult or impossible to predict accurately and ~~competitive uncertainties,~~ many of which are beyond our ~~control or are subject to change, actual results could be materially different.~~control. Although we believe that ~~our plans, intentions, and~~the expectations reflected in ~~or suggested by these~~such forward-looking statements are based on reasonable ~~we cannot assure you that we will achieve~~assumptions, our actual results, performance, and achievements could differ materially from those expressed in or ~~realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions. Readers are cautioned not to place undue reliance on these~~by the forward-looking statements ~~which speak only as~~and may be affected by a variety of ~~the date this Form 10-Q is filed with the Securities~~risks and ~~Exchange Commission (the “SEC”). Except as required by law, we do not undertake any obligation~~other factors. Accordingly, there are or will be important factors that could cause actual outcomes or results to ~~update or revise any~~differ materially from such forward-looking ~~statements contained in this Form 10-Q. Important factors~~statements.

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

You are cautioned not to place undue reliance on any forward-looking statements included in this Quarterly Report on Form 10-Q. All forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q and the risk that actual results, performance, and achievements will differ materially from the expectations expressed in or referenced by this Quarterly Report on Form 10-Q will increase with the passage of time. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by law. Important factors that could cause results to differ materially from the forward-looking statements are ~~disclosed~~described in Item 1. “Business,” Item 1A. “Risk ~~Factors”~~Factors,” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in ~~Amendment No. 2 to~~ our ~~Registration Statement~~2019 Annual Report on Form ~~10,~~10-K, as filed with the SEC on February 27, 2020 and in Part II, Item 1A. “Risk Factors” of this Form 10-Q.

Unless the context otherwise requires, the following terms and phrases are used throughout this Quarterly Report on Form 10-Q as described below:

We ~~are an externally managed real estate investment trust (“REIT”), formed as a Maryland corporation in 2007 to~~ acquire, own, and ~~hold~~manage primarily single-tenant commercial real estate properties ~~throughout the United States~~ that are net leased on a long-term basis to a diversified group of tenants. Since our inception in 2007, we have selectively invested in net leased assets in the ~~properties’ operators under long-term leases.~~ industrial, healthcare, restaurant, office, and retail property types, and as of March 31, 2020, our portfolio has grown to 635 properties in 41 U.S. states and one property in Canada, with an aggregate gross asset value of $4.0 billion.

We focus on investing in real estate that is operated by acreditworthy single ~~tenant which is~~tenants in industries characterized by positive business drivers and trends, where the properties are an integral part of the ~~tenant’s business. Our diversified portfolio of real estate includes retail properties, such as quick service~~tenants’ businesses and casual dining restaurants, healthcare facilities, industrial manufacturing facilities, warehouse and distribution centers, and corporate offices, amongst others. We target properties with credit-worthy tenants that lookthere are opportunities to ~~engage in a~~secure long-term ~~lease relationship.~~net leases. Through long-term net leases, our tenants are able to retain operational control of their ~~critical~~strategically important locations, while ~~conserving~~allocating their debt and equity capital to fund their ~~fundamental~~core business ~~operations.~~operations rather than real estate ownership.

As of September 30, 2017, we owned a diversified portfolio of 477 individual net leased commercial properties located in 37 states comprising approximately 14.1 million rentable square feet of operational space. As of September 30, 2017, our properties were 100% leased to 119 different commercial tenants, with no single tenant accounting for more than 5% of our annual rental stream.

We elected to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), beginning with our taxable year ending December 31, 2008. As a REIT, we are not subject to federal income taxThe rapidly evolving circumstances related to the ~~extent that~~COVID-19 pandemic have resulted in deep economic uncertainty and far-reaching impacts on almost every business and industry in the country. In response to the COVID-19 pandemic, many countries and U.S. states, including the areas in which we ~~meet~~operate, have adopted certain ~~requirements, including that we distribute~~measures to mitigate the ongoing public health crises. Such measures include “shelter in place” or “stay at ~~least 90% of our annual taxable income to our stockholders~~home” rules, restrictions on travel, and ~~satisfy other requirements based~~restrictions on the ~~composition~~types of ~~our asset portfolio~~businesses that may continue to operate in many countries 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~~U.S. states. The COVID-19 pandemic has retained Broadstone Real Estate, LLC (the “Manager”), to provide certain property management services for our properties, and Broadstone Asset Management, LLC, the wholly-owned subsidiary of the Manager (the “Asset Manager”), to manage our day-to-day affairs and implement our investment strategy, subject to our board of director’s direction, oversight, and approval.

~~We conduct substantially all of our activities through, and all of our properties are held~~negatively impacted nearly every industry directly or ~~indirectly by, Broadstone Net Lease, LLC (the “Operating Company”). We are the sole managing member~~indirectly.

The COVID-19 pandemic did not have a material impact on our results of ~~the Operating Company~~operations and liquidity and capital resources 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 (“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. The membership units of the Operating Company held by members of the Operating Company other than us are referred to herein and in our consolidated financial statements as “non-controlling interests,” “non-controlling membership units,” or “membership units,” and are convertible into shares of our common stock on a one-for-one basis, subject to certain restrictions. We allocate consolidated earnings to holders of our common stock and non-controlling membership unit holders of the Operating Company 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 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 we have conducted additional closings at least once every calendar quarter since then. Currently, we close sales of additional shares of our common stock monthly. Shares of our common stock are currently being offered in our private offering at $81.00 per share, provided that the per share offering price may be adjusted quarterly by the committee of our board of directors comprised of our independent directors (“IDC”) based on the Determined Share Value (as defined below), which is based on input from management, and such other factors as our IDC may consider. For the nine months ended September 30, 2017, we sold 3.2 million shares of our common stock in our private offering, including 0.4 million shares of common stock issued pursuant to our Distribution Reinvestment Plan (“DRIP”), for gross offering proceeds of approximately $249.6 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. We conduct our private offering in reliance upon the exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), provided by Rule 506(c) of Regulation D promulgated under the Securities Act.

As of September 30, 2017, there were 18.3 million shares of our common stock issued and outstanding, and 1.5 million 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.~~

~~Closed seven real estate acquisitions during~~ the three months ended ~~September~~March 31, 2020. While we are still in the early stages of navigating the actual and potential impacts the pandemic will have on our tenants and our business, the sections below summarize developments subsequent to quarter-end and management’s view of the potential impacts the COVID-19 pandemic may have on our future results of operations, liquidity and capital resources, and other various company-specific matters. For more discussion on the COVID-19 outbreak, see Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q.

Impact to Results of Operations

Our results of operations and financial condition are affected by numerous factors, many of which are beyond our control. Key factors that typically impact our results of operations and financial condition, which may be exacerbated by the COVID-19 pandemic, include rental rates, property dispositions, lease renewals and occupancy, acquisition volume, net lease terms, interest expense, general and administrative expenses, tenant bankruptcies, and impairments.

Rental Rates

Our financial results depend on our ability to timely collect contractual rents due under our long-term net leases. We collected approximately 98% of rents due as of March 31, 2020; however, the COVID-19 pandemic’s impact on us has primarily manifested through tenant requests for rent relief, which we started to receive in late March 2020. Based on industry and property type and ABR as of March 31, 2020, the following represents the scope of rent relief requests we have received through April 30, ~~2017, totaling $159.2 million, excluding capitalized acquisition expenses, adding 22 new~~2020:

	Rent Relief Request as of April 30, 2020										Portfolio Diversification as of March 31, 2020
Tenant Industry	# Properties		ABR ($000s)		% of Portfolio ABR			% of Property Type ABR			# Properties		ABR ($000s)		% of Portfolio ABR
Restaurants		186	$	34,357		11.8	%		74.1	%		246	$	46,337		15.9	%
Auto Parts & Equipment		25		9,555		3.3	%		94.6	%		31		10,103		3.5	%
Specialized Consumer Services		36		9,077		3.1	%		97.4	%		37		9,318		3.2	%
Healthcare Facilities		29		8,072		2.8	%		17.9	%		96		45,203		15.6	%
Home Furnishings		2		5,185		1.8	%		100.0	%		2		5,185		1.8	%
Home Furnishings Retail		9		3,910		1.3	%		32.1	%		19		12,195		4.2	%
Movies & Entertainment		1		3,125		1.1	%		100.0	%		1		3,125		1.1	%
Personal Products		2		2,899		1.0	%		100.0	%		2		2,899		1.0	%
Air Freight & Logistics		1		2,744		0.9	%		42.9	%		3		6,400		2.2	%
Industrial Machinery		6		2,675		0.9	%		49.1	%		15		5,454		1.9	%
Specialty Stores		1		2,557		0.9	%		41.8	%		15		6,114		2.1	%
Distillers & Vintners		1		2,344		0.8	%		100.0	%		1		2,344		0.8	%
Internet & Direct Marketing Retail		1		2,280		0.8	%		49.9	%		2		4,564		1.6	%
Construction Machinery & Heavy Truck		1		1,972		0.7	%		100.0	%		1		1,972		0.7	%
Food Retail		1		1,860		0.6	%		100.0	%		1		1,860		0.6	%
Footwear		1		1,761		0.6	%		100.0	%		1		1,761		0.6	%
Automotive Retail		6		1,717		0.6	%		87.4	%		8		1,964		0.7	%
Data Processing & Outsourced Services		1		1,580		0.5	%		100.0	%		1		1,580		0.5	%
Marine		1		1,571		0.5	%		100.0	%		1		1,571		0.5	%
Life Sciences Tools & Services		3		1,449		0.5	%		36.5	%		5		3,973		1.4	%
Automobile Manufacturers		1		1,104		0.4	%		100.0	%		1		1,104		0.4	%
Healthcare Services		1		1,058		0.4	%		13.0	%		16		8,143		2.8	%
Food Distributors		1		1,031		0.4	%		8.1	%		7		12,670		4.4	%
Paper Packaging		1		793		0.3	%		20.1	%		3		3,948		1.4	%
Commodity Chemicals		3		783		0.3	%		56.3	%		4		1,392		0.5	%
Miscellaneous		—		—		—			—			117		89,367		30.6	%
Total		321	$	105,459		36.3	%	N/A				636	$	290,546		100.0	%

	Rent Relief Request as of April 30, 2020										Portfolio Diversification as of March 31. 2020
Property Type	# Properties		ABR ($000s)		% of Portfolio ABR			% of Property Type ABR			# Properties		ABR ($000s)		% of Portfolio ABR
Industrial		45	$	43,587		15.0	%		34.5	%		113	$	126,477		43.5	%
Healthcare		33		10,579		3.7	%		18.5	%		122		57,115		19.7	%
Restaurant		186		34,357		11.8	%		75.2	%		245		45,673		15.7	%
Office		3		4,705		1.6	%		16.5	%		17		28,491		9.8	%
Retail		53		10,371		3.6	%		37.2	%		128		27,855		9.6	%
Other		1		1,860		0.6	%		37.7	%		11		4,935		1.7	%
Total		321	$	105,459		36.3	%	N/A				636	$	290,546		100.0	%

Although the requests range in scope, the most common request is for a full or partial rent deferment for three months, with repayment over a six- to 12-month period following the reinstatement of regular rent payments. In certain cases, we are also negotiating for lease extensions or the early exercise of a tenant renewal option in addition to the repayment of the deferred rent. We have not agreed to any rent forgiveness or permanent abatement and are only negotiating rent deferrals. There are several tenants that have requested rent relief that we believe are well positioned to continue making rent payments during this period. Many of those tenants have strong balance sheets and liquidity positions, have applied for or received Paycheck Protection Program loan funding under the CARES Act, or are designated as essential and can continue to operate despite restrictions on other businesses. At this point, we have declined to agree to any rent relief in those circumstances and are seeking to collect the full amount of rent that is due but cannot provide any assurances regarding the ultimate outcome of our ongoing discussions.

Despite the extent of requests, we have collected 87.8% of rents due for April 2020, and through May 6, 2020, have collected 77.5% of rents due for May 2020. The duration of the COVID-19 pandemic and our tenants’ ability to return to business after governmental restrictions are lifted will have a significant impact on our ability to continue to collect rents.

In circumstances where we agree to a rent deferral that is repaid over a period of time, and where the terms of the lease and amounts paid under the lease are substantially the same, we will continue to recognize the same amount of GAAP lease revenue each period to the extent the amounts are probable of collection. The amounts we agree to defer will impact our cash flows from operations, and may impact the amount of AFFO we recognize each period. Refer to Impact to Liquidity and Capital Resources below for further discussion.

Property Dispositions

From time to time, we will strategically dispose of properties, atprimarily where we believe the risk profile has changed and become misaligned with our then current risk-adjusted return objectives. The resulting gains or losses on dispositions may materially impact our operating results, and the recognition of a ~~weighted average initial cash capitalization rate~~gain or loss on the sale of ~~7.7%. The properties acquired had a weighted average lease term of 13.0 years~~real estate varies from transaction to transaction based on fluctuations in asset prices and demand in the real estate market at the time a property is listed for sale. As a result of ~~acquisition and weighted average annual rent increases~~the COVID-19 pandemic, we have seen a significant slowdown in real estate transactions. We were able to dispose of ~~1.8%.~~

Our historical growth in revenues and ~~AFFO are performance measures~~earnings has been achieved through rent escalations associated with existing in-place leases, coupled with rental income generated from accretive property acquisitions. Our ability to grow revenue will depend, to a significant degree, on our ability to identify and complete acquisitions that ~~are not calculated~~meet our investment criteria. Changes in ~~accordance with accounting principles generally accepted~~capitalization rates, interest rates, or other factors may impact our acquisition opportunities in the ~~United States~~future. Market conditions may also impact the total returns we can achieve on our investments. Our acquisition volume also depends on our ability to access third-party debt and equity financing to fund our capital needs. The COVID-19 pandemic has caused a slowdown in acquisition volume, and we have strategically redeployed our acquisitions team to assist with the influx of ~~America (“GAAP”).~~requests for rent relief, including performing credit analysis and negotiating deferments with tenants. During these uncertain times we are focused on preserving shareholder value. We ~~present these non-GAAP measures as we believe certain investors~~will continue to monitor the pandemic’s impact to capitalization rates, interest rates, and ~~other users~~access and cost of ~~our financial information use them as part of their evaluation of our historical operating performance. Please see our discussion below under the heading “Net Income~~equity and ~~Non-GAAP Measures (FFO~~debt capital, and ~~AFFO),” which includes discussion of the definition, purpose, and use of these non-GAAP measures as well as a reconciliation of each to the most comparable GAAP measure.~~

We target acquisitions of fee simple interests in individual properties priced between $5 million and $75 million. Portfolios 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) preserve, protect, and return capital to investors; (2) realize increased cash available for distributions and long-term capital appreciation from growth in the rental income and value of our properties; and (3) maximize the level of sustainable cash distributions to our investors. We primarily acquire freestanding, single-tenant commercial properties located in the United States either directly from our credit-worthy tenants in sale-leaseback transactions, where they sell us their properties and simultaneously lease them back through long-term, triple-net leases, or through the purchase of properties already under a triple-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 focus on properties in growth markets with at least ten years of lease term remaining that will achieve financial returns on equity of greater than 10%, net of fees, provided that all acquisitions must have a minimum remaining lease term of seven years and a minimum return on equity of 9.5%, unless approved by our IDC. Subsequent to quarter end, we updated our Investment Policy to require a 9.5% minimum return on equity, net of fees, calculated based on the average return recognized across all acquisitions during a calendar year, with a minimum required return of 8.5%, net of fees, for any particular transaction. The IDC approved this update following 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. Our criteria for selecting properties (“Property Selection Criteria”) is based~~focus on ~~three pillars of underwriting evaluation:~~

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

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

~~Industry Diversification, by % of NTM Rent~~de-leveraging initiatives when it is prudent to do so.

Substantially all of our leases are ~~triple-net, meaning that~~net leases pursuant to which our ~~tenants~~tenant generally is obligated to pay all expenses associated with the leased property including real estate taxes, insurance, maintenance, repairs, and capital costs. A limited number of leases require us to pay some or all of the property expenses such as the cost of environmental liabilities, roof and structure repairs, real estate taxes, insurance, or certain non-structural repairs and maintenance. An increase in the number of leases in which we are responsible for some or all of these expenses could negatively influence our operating results. Additionally, we seek to use master lease structures where it fits market practice in the ~~maintenance, insurance,~~particular property type, pursuant to which we seek to lease multiple properties to a single tenant on an all or none basis. Master leases strengthen our ability to preserve rental revenue and ~~property taxes~~prevent costs associated with vacancies for underperforming properties. We believe the ~~properties they~~master lease ~~from us. Since inception~~structure is most prevalent and ~~at September 30, 2017, all~~applicable to leases in our restaurant and retail property types, while less relevant to our other property types, such as healthcare and industrial. As of March 31, 2020, master leases contributed approximately 36.3% of our overall ABR (our largest master lease by ABR related to 24 properties and contributed 2.5% of our ABR, and our smallest master lease by ABR related to two properties and contributed 0.1% of our ABR), 74.1% of our restaurant property ABR (164 of our 245 restaurant properties), and 68.0% of our retail property ABR (85 of our 128 retail properties).

As we review requests for rent relief and consider granting limited deferments, we are ~~subject~~focused on ensuring our contractual rights under the leases are preserved, and are evaluating opportunities to ~~leases.~~ create value by negotiating enhanced financial reporting under the leases and the possibility for lease extensions or early lease renewals. The COVID-19 pandemic, however, presents certain risks of modifications to our lease terms, including certain rights we have under master leases and the risk of tenants’ failure to meet their lease obligations, including the risk that the prolonged exposure forces tenants into bankruptcy.

We ~~do not currently engage~~anticipate that we will continue to incur debt in the ~~development~~future in order to fund future acquisition activity, which will increase the amount of ~~real estate, which~~interest expense we incur. In addition, although we attempt to limit our total floating-rate debt exposure, changes in the interest rate environment 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~~either increase or decrease our ~~real estate investment portfolio and the monthly lease payments under our long-term leases with our tenants.~~

Due to the fact that all of our properties are leased to single tenants under long-term leases, we are not currently required to perform significant ongoing leasing activities on our properties. The leases for only two of our properties, representing less than 1% of our annual rental streams (calculated based on NTM Rent), will expire before 2020. As of September 30, 2017, the weighted average remaining term of our leases (calculated based on NTM Rent) was approximately 13.2 years, excluding renewal options, which are exercisable at the option of our tenants upon expiration of their base lease term. Less than 5% of the properties in our portfolio are subject to leases without at least one renewal option. Furthermore, the weighted average lease term on the $159.2 million in properties acquired during the three months ended September 30, 2017, was 13.0 years. Over 50% of our rental revenue is from leases that expire during 2030 and thereafter. As of September 30, 2017, not more than 10% of our rental revenue is from leases that expire in any single yearinterest rate in the ~~decade between 2020 and 2030. The following chart sets forth~~future. Any changes to our ~~lease expirations based upon~~debt structure or debt financing associated with property acquisitions, could materially influence our operating results depending on the terms of ~~our leases~~any such debt.

We have seen a decrease in ~~place~~interest rates as ~~of September 30, 2017.~~

~~The following table presents~~ the ~~lease expirations by year, including~~U.S. federal government attempts to combat 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. Amounts are in thousands, except the number of tenants and properties.

Year

Number of
Tenants

Number of
Properties

Square
Footage

NTM Rent

Percentage of
NTM Rent

2017

—

—

—

$
—

—
%
2018

1

1

2

131

<0.1
%
2019

1

1

2

117

<0.1
%
2020

3

4

116

1,376

0.8
%
2021

2

4

9

576

0.3
%
2022

3

3

87

2,393

1.4
%
2023

9

13

724

6,786

4.0
%
2024

12

15

1,741

13,933

8.2
%
2025

2

8

28

1,034

0.6
%
2026

17

27

620

9,964

5.9
%
2027

16

30

1,210

14,785

8.8
%
2028

12

22

1,025

11,184

6.6
%
2029

12

54

2,483

15,623

9.2
%
2030 and thereafter

61

295

6,015

91,023

53.9
%

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

~~As previously mentioned, the IDC approved certain updates to our Investment Policy following the regular annual review~~economic impacts 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”) 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 usCOVID-19 pandemic, which we have been able to take advantage of ~~preferential borrowing margins~~ on ~~our outstanding debt, including the $800~~approximately $653.3 million ~~credit facility we entered into on June 23, 2017. The investment grade credit ratings will also allow us more attractive access to the debt private placement markets. The rating is based on a number~~ of factors, including an assessment of our financial strength, portfolio size and diversification, credit and operating metrics, corporate governance policies, and sustainability of cash flow and earnings. We are strongly committed to maintaining modest leverage, commensurate with our investment grade rating. While Moody’s utilizes other factors outside of our leverage ratio, our leverage policy (“Leverage Policy”) is to maintain a leverage ratio in the 35% to 45% range based on the market value of assets, recognizing that the actual leverage ratio will vary over time and there may be opportunistic reasons to exceed a 45% leverage ratio; provided, however, that we cannot exceed a 50% leverage ratio without the approval of the IDC.

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

~~During the nine months ended September 30, 2017, we added $150 million of unsecured Senior Notes (as defined below) to our capital structure. The Senior Notes~~March 31, 2020. Our floating rate borrowings 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, our total outstanding indebtedness was $910.1 million, and the ratio of our total indebtedness to the market value of our assets was approximately 36.5%.~~

~~Our shares of common stock are sold by us in our ongoing private offering at a price~~variable rates equal to LIBOR plus a ~~determined share value (the “Determined Share Value”), which is established quarterly by the IDC~~margin based on ~~the net asset value (“NAV”) of~~ our ~~portfolio, input~~credit rating. The one-month LIBOR rate decreased from ~~management, and such other factors as the IDC may determine. Shares of our common stock are also sold pursuant~~1.76% at December 31, 2019, to ~~our DRIP, and repurchased by us pursuant to our share redemption program,~~0.99% 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 Item 1 of our Form 10. The following table presents our Determined Share Value for each period indicated below, together with the corresponding NAV~~March 31, 2020. Additionally, as of April 30, 2020, the ~~preceding quarter-end:~~

~~The adjustments to NAV per share~~one-month LIBOR rate was 0.33%. Simultaneously, restrictions in ~~arriving at the Determined Share Value for the periods presented above account for the inherent imprecision~~credit markets have resulted 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 share amounts as of September 30, 2017 and June 30, 2017 (in thousands, except per share amounts):~~

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 and June 30, 2017, supporting the Determined Share Value in effect for the periods of November 1, 2017 through January 31, 2018, and August 1, 2017 through October 31, 2017, 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 borrowing spreads across the ~~weighted average implied market capitalization rate~~debt capital markets. Approximately $240 million of our borrowings under our 2020 Unsecured Term Loan have a maturity within one year. On May 5, 2020, we gave notice that we were exercising the first of two available extension options effective upon the original maturity date of the debt in August 2020, subject to our being in compliance with the debt covenants and customary representations and warranties, and payment of a fee equal to 0.05% of the outstanding principal balance at that time. Accordingly, we do not expect the increase in borrowing spreads to have a material impact to us at this time.

In response to the COVID-19 pandemic, and discussed further below in Impact to Liquidity and Capital Resources, we have bolstered our liquidity profile and cash on hand position, with approximately $95.2 million in cash and cash equivalents and restricted 1031 funds at March 31, 2020. We have typically used asa portion of ~~September 30, 2017, of 0.25%, would~~these funds, in addition to cash generated by operating activities, to pay down our Revolving Credit Facility balances. Accordingly, the increased cash position and corresponding leverage balances will result in increased interest expense. We are committed to an investment grade balance sheet, and plan to deleverage once the capital markets have improved.

Our general and administrative expenses primarily consist of compensation and related costs, third party legal, accounting, and consulting costs, travel and entertainment, and general office expenses. We transitioned to a work from home policy effective on March 16, 2020, successfully migrating approximately 71 employees out of the office. Given our limited headcount, we have not incurred a material amount of cash outlays on information technology or infrastructure to facilitate our newly remote workforce, and do not believe we will incur significant costs in the future. We expect a significant decrease in travel and entertainment expenses, as social distancing guidelines and restrictions have limited corporate travel. These benefits, however, may be outweighed by incremental third party legal, accounting, and consulting costs as we navigate the ~~fair~~impacts of the COVID-19 pandemic.

Adverse economic conditions, particularly those that affect the markets in which our properties are located, or downturns in our tenants’ industries could impair our tenants’ ability to meet their lease obligations to us and our ability to renew expiring leases or re-lease space. In particular, the bankruptcy of one or more of our tenants could adversely affect our ability to collect rents from such tenant and maintain our portfolio’s occupancy.

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. Such cash flows include expected future operating income, as adjusted for trends and prospects, as well as the effects of demand, competition, and other factors. Significant judgment is made as to if and when impairment should be taken. If our ~~investment~~strategy, or one or more of the assumptions described above were to change in ~~rental property~~the future, an impairment may need to be recognized. As of ~~3.6%,~~March 31, 2020, we have not identified any impairment triggering events as a result of the COVID-19 pandemic, including tenant requests for rent relief, but we have yet to see the long-term effects of the pandemic and the extent to which it may impact our ~~NAV per share~~tenants in the future. Indications of a tenant’s inability to continue as a going concern, changes in our view or strategy relative to a tenant’s business or industry as a result of the COVID-19 pandemic, or changes in our long-term hold strategies, could be indicative of an impairment triggering event.

We have taken proactive measures to bolster our liquidity profile, including borrowing an additional $75 million on our Revolving Credit Facility at quarter end, $25 million of which was funded subsequent to quarter end, strategically reverting approximately $35 million of 1031 proceeds originally planned to be reinvested in replacement properties, and holding onto cash generated from rentals that otherwise would have been ~~$76.03.~~

~~Distributions~~used to pay down our Revolving Credit Facility. As of March 31, 2020, we had approximately $95.2 million in cash and ~~Distribution Reinvestment~~

Atcash equivalents and restricted 1031 cash not yet reverted to our operating account, excluding the additional $25 million Revolving Credit Facility borrowing funded on April 2, 2020. Given the economic uncertainty and rapidly evolving circumstances related to the COVID-19 pandemic and current tenant requests for rent relief, we intend to evaluate all options for preserving cash and strengthening our liquidity position. As discussed below, at its ~~November~~May 7, ~~2017,~~2020 meeting, our board of directors ~~declared~~determined that we would temporarily suspend our monthly ~~distributions~~distribution. The board of ~~$0.415 per share of our common stock and unit of membership interest in~~directors will re-evaluate whether to reinstate 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:~~

Investors may purchase additional shares of our common stock by electing to reinvest their distributions through our DRIP. The purchase price for shares of our common stock acquired through our DRIP will be 98% of the then-current Determined Share Value. Please refer to Item 11. “~~Description of Registrant’s Securities to Be Registered” of our Form 10 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 (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

January

2017

$
3,319

$
488

$
2,738

$
98

$
6,643

February

2017

3,394

488

2,836

98

6,816

March

2017

3,522

493

2,972

99

7,086

April

2017

3,555

493

3,068

99

7,215

May

2017

3,618

493

3,167

99

7,377

June

2017

3,680

493

3,220

99

7,492

July

2017

3,742

493

3,296

99

7,630

August

2017

3,815

512

3,378

122

7,827

September

2017

3,883

512

3,420

123

7,938

TOTAL

$
32,528

$
4,465

$
28,095

$
936

$
66,024

~~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 September 30, 2017 and 2016, 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.~~

dividend at its August 2020 meeting. 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~~maintain REIT status, and 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~~make 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 through an appropriate balance of debt and equityspecial distribution in our capital structure. Therefore, we attempt to maintain a conservative debt level on our balance sheet with appropriate interest and fixed charge coverage ratios. We target a leverage ratio with total debt equal to 35% to 45% of the approximate market value of our assets. We believe our current leverage model has allowed us to take advantage of the lower cost of debt while simultaneously strengthening our balance sheet, as evidenced by the investment grade credit rating the Operating Company received in March of 2016 and re-affirmed in March 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 of our assets. From a management perspective and in communications with the credit rating agencies, we also consider our leverage position as a multiple of Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”), a non-GAAP financial measure. EBITDA is a tool we use to measure leverage in the context of our cash flow expectations and projections. Furthermore, given the significance of our growth over the past two years, adding $352.0 million in investments during the nine months ended September 30, 2017, $518.8 million in investments during 2016, and $550.1 million in investments during 2015, coupled with our continued strategic growth initiatives, historical EBITDA may not provide investors with an adequate picture of the contractual cash in-flows associated with these investments. Our investments are typically made throughout the year, and therefore the full year, or “normalized” cash flows, will not be realized until subsequent years. Accordingly, we look at contractual, “normalized,” cash flows and EBITDA as an appropriate tool to manage our leverage profile. We utilize this analysis inclusive of our focus on debt-to-market value metrics.

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

To reduce our exposure to variable rate debt, the Operating Company enters into interest rate swap agreements to fix the rate of interest as a hedge against interest rate fluctuations. These interest rate hedges have staggered maturities up to ten years in duration2020 in order to ~~reduce the exposure~~maintain REIT status if it becomes necessary 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.do so.

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

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

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

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,Under the terms of ~~the lease require us~~our credit agreements, we must maintain ratios of total indebtedness 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~~total market value, and total unsecured indebtedness to total unencumbered eligible property ~~costs during the term~~value (together, “leverage covenant ratios”), 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)~~60%, ~~expiring before 2020.~~

We intend to continue to grow through additional real estate investments. To accomplish this objective, we must continue to identify real estate acquisitions that are consistent with our underwriting guidelines and raise additional future debt and equity capital. We have financed our acquisition of properties using both equity investments as well as a combination of 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 millionmeasured 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).

quarter end. 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 portfolio, and earnings stability based on the credit-worthiness of our tenants, which we intend to maintain concurrent with our growth objectives. Factors that could negatively impact our credit rating include, but are not limited to: a significant increase in our leverage on a sustained basis; a significant increase in secured debt levels; a significant decline in our unencumbered asset base; weakening of our corporate governance structure; and a significant decline in our portfolio diversification. We have aligned our strategic growth priorities with these factors, asMarch 31, 2020, we believe the favorable debt pricing and access to additional 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.

We intend to draw down on the $150 million 7-Year Term Loan as we acquire additional real estate as part of our strategic growth initiatives. Additionally, we intend to exercise the extension provisions of the New Revolver and Term Note 3, refinance, or replace the existing borrowings as they become due. The extensions would delay the New Revolver’s maturities until June 2022, and Term Note 3’s maturity until February 2021. We do not intend to make principal payments on these obligations in the foreseeable future, and plan to replace our existing credit facilities with new debt prior to maturity. 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 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. 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~~required 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 ofaddition to our cash ~~flows from operations in excess~~on hand, we also have $246.7 million of ~~the required distribution amounts.~~

~~In connection with~~available capacity under our ~~closing of the~~Revolving Credit Facility, and ~~amending and restating~~$100 million of available capacity in the form of an accordion feature on our 2026 Unsecured Term ~~Note 3,~~Loan. Taking into consideration our leverage covenant ratios, however, as of March 31, 2020 we ~~removed~~had $50.7 million of available borrowing capacity under our covenants, excluding the ~~maximum recourse secured indebtedness ratio, minimum tangible net worth requirement, minimum eligible properties, and maximum permitted investments covenants from~~$25 million revolver draw subsequent to quarter end. We believe the cash on-hand, available capacity on our ~~term loan and revolving credit agreements. The new debt covenants are characteristic of investment grade~~ credit facilities, ~~within~~including the restrictions imposed by our covenant ratios, and our ability to manage distributions provide us with the ability to meet all current obligations, including maintaining our REIT ~~industry.~~status, for at least the next four quarters prior to collecting another dollar of rent.

In addition to these factors, the total market value and total unencumbered eligible property value included in our leverage covenant ratios are computed in part based on a computation of portfolio net operating income, which takes into consideration contractual rents with exclusions for certain aged delinquencies and tenant defaults, divided by a stated market capitalization rate. Management believes we were in compliance with our covenants as of March 31, 2020, and we believe it is probable we will continue to be in compliance. However, the COVID-19 pandemic’s impact to tenants is not yet known, and could result in significantly aged delinquencies and tenant defaults, which have a direct impact to our leverage covenant ratios. Accordingly, there are no assurances

that we will continue to comply with our covenants. See further discussion concerning our liquidity in Liquidity and Capital Resources below.

We have taken proactive steps to maintain an appropriate internal control environment while migrating our workforce to a work from home dynamic. Our access to technology and online communications has required minimal changes to controls, none of which we deem material. We believe our ~~leverage policy and capital structure provides us with several advantages, including~~existing disclosure controls are appropriate to address the ~~ability to:~~reporting complexities presented by the COVID-19 pandemic.

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 volumescale as we continue to ~~identify~~grow, our board of directors made the decision to internalize our management structure, which was completed on February 7, 2020. In connection with the Internalization, we terminated our management agreements with BRE, entered into employment agreements with each of our named executive officers, and ~~acquire income-producing, net leased commercial real estate, primarily~~began directly employing 71 former employees of BRE. Our historical results of operations through ~~sale-leaseback transactions, as a result~~February 7, 2020, include the payment of ~~increased access to~~management fees that we will no longer pay following the Internalization and do not include the direct compensation expense associated with our 71 employees, or certain professional fees, consulting, portfolio servicing costs, and other general and administrative expenses not previously incurred based upon our externally managed structure. Additional details of the Internalization include the following:

Management believes that the cash generated by our operations and our ongoing private offering, our cash and cash equivalents at September 30, 2017, our current borrowing capacity on our New Revolver and three unsecured credit facilities, 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 leases with tenants of our properties are long-term in nature, with a current weighted average remaining lease term of 13.2 years as of September 30, 2017. To mitigate the impact of inflation on our fixed revenue streams, we have implemented limited escalation clauses in our leases. As of September 30, 2017, all of our leases had contractual lease escalations, with a weighted average of 2.1%. 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). 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 leases also shelters us from fluctuations in the cost of services and maintenance as a result of inflation. For an insignificant portion of our portfolio, we have leases that are not triple-net, and therefore we bear certain responsibilities for the maintenance and structural component replacement that may be required in the future. Inflation and increased costs may have an adverse impact to our tenants and their credit-worthiness if the increase in costs are greater than their increase in revenue. In the limited circumstances where we cannot implement a triple-net lease, we attempt to limit our exposure to inflation through the use of warranties and other remedies that reduce the likelihood of a significant capital outlay.

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

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

2020

—

—

—

—

8,450

25,459

—

33,909

2021

—

—

—

—

13,306

24,537

—

37,843

Thereafter

—

250,000

98,500

150,000

30,274

70,467

—

599,241

Total

$
325,000

$
250,000

$
126,500

$
150,000

$
58,572

$
191,127

$
6,627

$
1,107,826

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

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

As of ~~September 30, 2017,~~March 31, 2020, our real estate investment portfolio had a ~~net book~~gross asset value of ~~$1.9~~approximately $4.0 billion, consisting of investments in ~~477 property locations in 37 states and various industries. All of our real estate investment portfolio represents~~635 commercial real estate properties ~~subject~~with locations in 41 states and one real estate property located in British Columbia, Canada, and leased to ~~long-term leases, and all~~tenants in various industries. All but five of our ~~owned~~ properties were subject to a lease as of ~~September 30, 2017. During the three months ended September 30, 2017 and 2016, none~~March 31, 2020.

Our historical results of ~~our leases with tenants expired, and all of our leasing activity related to our real estate acquisitions.~~

~~Total revenues increased by $9.2 million, or 24.9%, to $46.2 million~~operations for the three months ended ~~September 30, 2017, compared to $37.0 million~~March 31, 2020 and March 31, 2019, discussed below, include the payment of asset and property management fees that we will no longer pay following the Internalization, and do not include the expected full impact of direct compensation expense associated with 71 employees employed by us following the Internalization or incremental general and administrative expenses.

The increase in Lease revenues, net for the three months ended ~~September 30, 2016. The growth in revenue period-over-period is~~March 31, 2020, was primarily attributable to the growth in our real estate ~~portfolio.~~portfolio, which was achieved through accretive property acquisitions during 2019, weighted towards the second half of the year, and continued strong portfolio operating performance. In 2019, we significantly increased the size of our portfolio, adding 74 new properties at a price of approximately $1.0 billion, excluding capitalized acquisition costs. During the three months ended ~~September 30, 2017,~~March 31, 2020, we ~~closed seven real estate acquisitions~~experienced approximately 98% rent collection and ~~acquired $159.2 million in real estate, excluding capitalized acquisition costs, comprised~~99.5% occupancy (based on rentable square footage). As of ~~22 new properties. We capitalized approximately $2.4 million in acquisition expenses and $0.8 million in leasing fees as part of~~March 31, 2020, the acquisitions. Additionally, subsequent to September 30, 2016 and for the twelve month period ended September 30, 2017, we closed 22 real estate acquisitions and acquired approximately $489.8 million in real estate comprised of 88 new properties, 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 aABR weighted average ~~capitalization rate of 7.5%~~annual rent increases on our properties was 2.1%.

	For the three months ended							For the three months ended
	September 30,				Increase/			March 31,				Increase/(Decrease)
(in thousands)	2017		2016		(Decrease)			2020		2019		$			%
Operating expenses
Depreciation and amortization	$	15,643	$	12,114	$	3,529		$	31,219	$	24,310	$	6,909			28.4	%
Asset management fees		3,844		2,789		1,055			2,461		5,120		(2,659	)		(51.9	)%
Property management fees		1,249		1,010		239			1,275		1,885		(610	)		(32.4	)%
Acquisition expenses		—		2,367		(2,367	)
Property and operating expense		2,009		1,184		825			4,115		4,390		(275	)		(6.3	)%
General and administrative		1,173		598		575			5,842		1,103		4,739		>100		%
State and franchise tax		301		71		230
Provision for impairment of investment in rental properties		2,608		—		2,608			2,133		1,017		1,116		>100		%
Total operating expenses	$	26,827	$	20,133	$	6,694		$	47,045	$	37,825	$	9,220			24.4	%

~~Depreciation~~The increase in depreciation and amortization ~~increased by $3.5 million, or 29.1%, to $15.6 million~~expense for the three months ended ~~September 30, 2017,~~March 31, 2020, 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 expenses 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.

Asset management fees ~~increased by $1.1 million, or 37.8%,~~and Property management fees

Prior to ~~$3.8 million for~~ the ~~three months ended September 30, 2017. The Asset Manager receives an annual asset management~~Internalization on February 7, 2020, we paid our third-party manager 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 established by our board of directors (“Determined Share ~~Value.~~ Value”). Additionally, we paid our third-party manager a monthly fee equal to 3% of gross rentals collected from our real estate portfolio as compensation for its property management services. Upon completion of the Internalization, the agreements with the third-party manager were terminated, resulting in a decrease in these expenses as compared to the prior year period. Our management fees were replaced by compensation and related costs associated with an internalized management structure, and corresponding general and administrative expenses.

The increase in general and administrative expenses mainly reflects the impact of the Internalization, and our employment of approximately 71 employees. At such time, our asset and property management fees were replaced with compensation and related expenses, which totaled $2.8 million during the three months ended ~~September 30, 2017 compared to the comparable period in 2016 is a result of an increase in our outstanding equity on a fully diluted basis~~March 31, 2020, along with associated general 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. Foradministrative expenses. During 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~~March 31, 2020, we also incurred $0.9 million ~~compared to 15.1 million for the three 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 $2.4 million for the three 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 unitsincremental legal fees associated with general corporate matters that were not incurred 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 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.comparable prior period.

During the three months ended ~~September 30, 2017,~~March 31, 2020, we recognized ~~$2.6~~$2.1 million of impairment on our investments in rental properties. We review long-lived assets to be held and used for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If and when such events or changes in circumstances are present, an impairment exists to the extent the carrying value of the asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use of the asset or asset group and its eventual disposition. ~~We recognized~~The timing and amount of impairment fluctuates from period to period depending 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%,~~specific facts and ~~a weighted average discount rate of 8%.~~circumstances.

	For the three months ended									For the three months ended
	September 30,						Increase/			March 31,						Increase/(Decrease)
(in thousands)	2017			2016			(Decrease)			2020			2019			$			%
Other income (expenses)
Preferred distribution income	$	187		$	181		$	6
Interest income		127			4			123		$	9		$	1		$	8		>100		%
Interest expense		(9,380	)		(4,576	)		(4,804	)		(20,991	)		(15,828	)		5,163			32.6	%
Cost of debt extinguishment		(1,404	)		(52	)		(1,352	)		(22	)		(713	)		(691	)		(96.9	)%
Gain on sale of real estate		4,052			2,983			1,069			7,619			1,400			6,219		>100		%
Income taxes											(549	)		(443	)		106			23.9	%
Internalization expenses											(1,205	)		—			1,205		>100		%
Change in fair value of earnout liability											(4,177	)		—			4,177		>100		%
Other losses											(22	)		—			22		>100		%

~~Interest~~The increased interest expense increased $4.8 million, or 105%, to $9.4 million for the three months ended September 30, 2017, from $4.6 million for the three months ended September 30, 2016, due primarily to an increase in long-term borrowings used to partially fund the acquisition of properties for our growing real estate investment portfolio. Our total outstanding debt, excluding capitalized debt issuance costs, increased from $831.3 million at September 30, 2016, to $910.1 million at September 30, 2017. Additionally, during the three months ended ~~September 30, 2016, we recognized approximately $3.0 million of interest rate swap ineffectiveness, which~~March 31, 2020, resulted primarily from an increase in ~~a reduction of interest expense. Ineffectiveness during~~average outstanding borrowings as compared to the three months ended ~~September 30, 2016 was attributable~~March 31, 2019, due mainly to ~~inconsistencies~~the incurrence of indebtedness associated with a significant acquisition in ~~certain terms between~~ the ~~interest rate swaps~~third quarter of 2019, and ~~the loan agreements for the Term Notes and Revolver. The interest rate swaps continued to qualify for hedge accounting,~~incremental borrowings associated with the ~~effective portion~~Internalization, partially offset by a 61 basis point decrease in our weighted average cost of ~~mark-to-market adjustments included in accumulated other comprehensive income. During the fourth quarter~~debt, inclusive 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~~swaps. We were able to ~~extinguish the debt compared to the carrying value~~take advantage of the decreasing interest rates since March 31, 2019, as our percentage of floating-rate debt ~~plus any unamortized debt issuance costs at~~increased concurrently with our funding of the ~~time of extinguishment. To~~aforementioned acquisition. We also amended our 2024 Unsecured Term Loan in July 2019 to reduce the ~~extent that the price paid~~applicable margin from 1.90% 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, 2016.1.25%.

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.

~~For~~ During the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020, we recognized gains of $7.6 million on the sale of 10 properties, compared to gains of $1.4 million on the sale of four properties during the three months ended March 31, 2019.

During the three months ended March 31, 2020, we incurred $1.2 million of third-party fees and ~~2016~~

~~As of September 30, 2017, our real estate investment portfolio had grown~~consulting expenses associated with the Internalization that closed on February 7, 2020. We expect incremental internalization expenses in the future to ~~a net book~~be limited to third party legal and accounting fees related to residual work in connection with the transaction.

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

Total revenues increased by $28.7 million, or 27.7%, to $132.1 million for the nine months ended September 30, 2017, compared to $103.4 million for the nine months ended September 30, 2016. The growth in revenue year over year is primarily attributable to the growth in our real estate portfolio. During the nine months ended September 30, 2017, we closed 14 real estate acquisitions and acquired $352.0 million in real estate comprised of 70 new properties. We capitalized approximately $6.6 million in acquisition expenses and $2.6 million in leasing fees asAs part of the ~~acquisitions. Additionally, subsequent~~Internalization we may be required to ~~September 30, 2016~~pay additional earnout consideration if certain milestones are achieved during the Earnout Periods. We record the fair value of this contingent consideration as an Earnout liability in the Condensed Consolidated Balance Sheets, and ~~for~~update the ~~three month period ended December 31, 2016, we closed eight real estate acquisitions and acquired approximately $137.8 million in real estate comprised~~fair value at the end of ~~17 new properties. The rental rates we receive on sale-leaseback transactions and lease assumptions on~~each reporting period. We estimate the ~~various types of properties we target across the United States vary from transaction to transaction based on many factors, such as the terms~~fair value of the ~~lease, each property’s real estate fundamentals,~~earnout liability by considering weighted-average probabilities of likely outcomes, and using a Monte Carlo simulation and discounted cash flow analysis to estimate fair value. These estimates require the ~~market rents~~Company to make various assumptions about future share prices, timing of an IPO, and other items that are unobservable and are considered Level 3 inputs 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~~Upon closing of the ~~growth in~~Internalization, we recorded an earnout liability of $40.1 million through 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~~preliminary purchase price ~~for acquisitions during the nine months ended September 31, 2017, we capitalized $6.6~~allocation, which increased to $44.3 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.March 31, 2020. The increase in ~~asset management fees during 2016~~fair value between February 7, 2020 and March 31, 2020 is primarily a result of an increase in the ~~equity on a fully diluted basis and the increase~~peer stock price volatility assumption used, as detailed 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 existsNote 2 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 isCondensed Consolidated Financial Statements above, 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.

~~Gain on sale of real estate~~changes in economic circumstances impacting global equity markets.

During the nine months ended September 30, 2017, we recognized a $10.3 million gain on 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.

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

	For the three months ended							For the three months ended
	September 30,				Increase/			March 31,				Increase/(Decrease)
(in thousands, except per share data)	2017		2016		Decrease			2020		2019		$			%
Net income	$	12,990	$	15,417	$	(2,427	)	$	11,848	$	15,022	$	(3,174	)		(21.1	)%
Net earnings per diluted share		0.68		1.02		(0.34	)		0.41		0.62		(0.21	)		(33.9	)%
FFO		27,189		24,548		2,641			37,572		38,949		(1,377	)		(3.5	)%
FFO per diluted share		1.42		1.63		(0.21	)		1.29		1.62		(0.33	)		(20.4	)%
AFFO		24,813		20,476		4,337			41,068		34,169		6,899			20.2	%
AFFO per diluted share		1.30		1.36		(0.06	)		1.41		1.42		(0.01	)		(0.7	)%
Diluted WASO^(1)(a)		19,147		15,074					29,053		24,072		4,981			20.7	%

~~Net~~For the three months ended March 31, 2020, compared to the three months ended March 31, 2019, net income decreased primarily due to a $6.9 million increase in depreciation and amortization expense associated with a larger real estate portfolio, a $5.2 million increase in interest expense associated with incremental borrowings used to partially fund our real estate acquisitions and the Internalization, a $4.2 million increase in the fair value of our earnout liability, $1.2 million in internalization expenses incurred in 2020, and a $1.1 million increase in provisions for impairment. These factors were partially offset by ~~$2.4~~revenue growth of $9.8 million, combined with a $6.2 million increase in gains on sale of real estate.

GAAP net income includes items such as gain or ~~15.7%,~~loss on sale of real estate and provisions for impairment, among others, which can vary from quarter to ~~$13.0 million~~quarter and impact period-over-period comparisons. These fluctuations, combined with increased general and administrative expenses and the increase in our weighted average shares outstanding, contributed to the $0.21 decrease in net earnings per diluted share 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.~~ March 31, 2020.

The ~~decrease~~increase in ~~net income is primarily attributable to $2.6 million of asset impairment charges recognized~~AFFO 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 million in acquisition expenses relating to $159.2 million in acquisitions. As such, net income for the three months ended September 30, 2016 was impacted by acquisition expenses, however, net income for 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~~March 31, 2020, as compared to the three months ended ~~September 30, 2016.~~

~~Earnings per share were further impacted~~March 31, 2019, was primarily driven by revenue growth, which resulted from rent escalations associated with our same property portfolio, accretive acquisitions and strong portfolio operating performance, as well as a ~~4.1~~$3.3 million ~~increase~~decrease in ~~the diluted weighted average number of shares of our common stock outstanding~~asset and property management fees as a result of ~~ongoing equity raises.~~

~~FFO increased by $2.6 million, or 10.8%, to $27.2 million for~~terminating 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 increaseassociated agreements 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~~connection 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.Internalization. These ~~increases~~factors were partially offset by a ~~reduction~~$4.7 million increase in ~~the addback for acquisition expenses. During the three months ended September 30, 2016, we added back $2.4~~general and administrative expense related to incremental compensation and related costs associated with an internalized management structure, and a $5.2 million increase 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.~~ interest expense associated with incremental borrowings.

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~~$0.01 decrease in ~~net earnings~~AFFO per diluted share was primarily due to the short-term dilution caused by the immediate increase in ~~AFFO was more than offset by a 4.1 million increase in the diluted~~BNL’s weighted average ~~number~~shares outstanding resulting from the consideration paid in conjunction with the Internalization. Upon consummation of ~~shares of our common stock outstanding as a result of ongoing equity raises.~~

~~Net Income, FFO,~~the transaction in February, BNL began recognizing cash flow 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 relatingbenefits due to the ~~capitalized costs.~~

~~The increase in net income for~~immediate cost savings achieved by operating the ~~nine months ended September 30, 2016 was also impacted by a $10.3 million gain on the sale of real estate, representing a $6.2 million increase~~REIT with an internalized management structure, as compared to the ~~nine months ended September 30, 2016.~~

~~The increase in net income in~~recurring management fees and transaction-based fees incurred under its previous externally-managed structure. Although the ~~earnings~~full dilutive effect of shares outstanding was recognized at the time of the transaction, we expect the continued cost savings to be substantial and to translate into accretive results on a per share ~~computation was partially offset by a 3.9 million~~basis over time as the cash flow and AFFO benefits are recognized. Further, we expect this accretion will continue to increase ~~in the diluted weighted average number~~as we grow our portfolio and recognize economies of ~~shares of our common stock outstanding as a result of ongoing equity raises.~~scale.

FFO increased by $24.3 million, or 43.7%, to $80.0 million for the nine months ended September 30, 2017, 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 in FFO is primarily driven by increased revenue period-over-period as the result of growth in our real estate investment portfolio. We added $352.0 million in real estate investments during the nine months ended September 30, 2017. Growth in FFO per diluted share was less than growth in net earnings per diluted share primarily as a result of a $10.3 million gain on sale of real estate recognized in net income during the nine months ended September 30, 2017, which was adjusted and excluded in the FFO computation.

AFFO increased by $15.9 million, or 27.8%, 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. 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 of $0.50 was primarily impacted by acquisition expenses. During the nine months ended September 30, 2016, we recognized $8.3 million in acquisition expenses that were added back to FFO in computing AFFO. For the nine months ended September 30, 2017, we capitalized all acquisition expenses to the cost basis of the real estate acquired. The capitalized acquisition expenses, beginning in 2017, result in increased depreciation expenses, which is an add-back in the FFO computation. AFFO per diluted share growth as compared to FFO per diluted share growth was also impacted by the (gain) loss on interest rate swaps and other non-cash interest expense. During the nine months ended September 30, 2016, we recognized an add-back of $2.2 million, compared to a deduction of $1.3 million for the nine months ended September 30, 2017. 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.

The following is a reconciliation of net income to FFO and AFFO, which are non-GAAP financial measures. Also presented are the diluted WASO and per diluted share amounts:

We acquire real estate using a combination of debt and equity capital and with cash from operations that is not otherwise distributed to our stockholders. Our focus is on maximizing the risk-adjusted return to our stockholders through an appropriate balance of debt and equity in our capital structure. We are committed to maintaining an investment grade balance sheet through active management of our leverage profile and overall liquidity position. We believe our leverage 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 of Baa3 from Moody’s Investors Service (“Moody’s”). As of March 31, 2020, our leverage ratio was 45.7% of the approximate market value of our assets, compared to 45.8% as of December 31, 2019.

Liquidity is a measure of our ability to meet potential cash requirements, including our ongoing commitments to repay debt, fund our operations, acquire properties, make distributions to our stockholders, and other general business needs. As a REIT, we are required to distribute to our stockholders at least 90% of our REIT taxable income determined without regard to the dividends paid deduction and excluding net capital gain, on an annual basis. As a result, it is unlikely that we will be able to retain substantial cash balances to meet our long-term liquidity needs, including repayment of debt and the acquisition of additional properties, from our annual taxable income. Instead, we expect to meet our long-term liquidity needs primarily by relying upon external sources of capital.

Our short-term liquidity requirements consist primarily of funds necessary to pay for our operating expenses, including our general and administrative expenses as well as interest payments on our outstanding debt and to pay distributions. Since our portfolio has a strong occupancy level and substantially all of our leases are net leases, we do not currently anticipate making significant capital expenditures or incurring other significant property costs. We expect to meet our short-term liquidity requirements primarily from cash and cash equivalents balances, net cash provided by operating activities, and borrowing under our Revolving Credit Facility. Additionally, our $240 million 2020 Unsecured Term Loan matures in August 2020, at which time we have the option to extend the loan twice, each for a period of six months, subject to our being in compliance with the debt covenants and customary representations and warranties, and payment of a fee equal to 0.05% of the outstanding principal balance at the time of extension. On May 5, 2020, we gave notice that we were exercising the first six-month option, effective August 2, 2020. Refer to Recent Developments – COVID-19 Pandemic for additional discussion regarding the pandemic’s impact to our liquidity profile.

Our long-term liquidity requirements consist primarily of funds necessary to repay debt and invest in additional revenue generating properties. Debt capital is provided through unsecured term notes, revolving debt facilities, and senior unsecured notes.

The source and mix of our debt capital in the future will be impacted by market conditions as well as our continued focus on lengthening our debt maturity profile to better align with our portfolio’s lease terms, staggering debt maturities to reduce the risk that a significant amount of debt will mature in any single year in the future, and managing our exposure to interest rate risk.

We expect to meet our long-term liquidity requirements primarily from borrowings under our Revolving Credit Facility, future debt and equity financings, and proceeds from limited sales of our properties. Our ability to access these capital sources may be impacted by unfavorable market conditions, particularly in the debt and equity capital markets, that are outside of our control. In addition, our success will depend on our operating performance, our borrowing restrictions, our degree of leverage, and other factors. Our acquisition growth strategy significantly depends on our ability to obtain acquisition financing on favorable terms. We seek to reduce the risk that long-term debt capital may be unavailable to us by strengthening our balance sheet by investing in real estate with creditworthy tenants and lease guarantors, and by maintaining an appropriate mix of debt and equity capitalization. We also, from time to time, obtain or assume non-recourse mortgage financing from banks and insurance companies secured by mortgages on the corresponding specific property. Mortgages, however, are not currently a strategic focus of the active management of our leverage profile. Rather, we enter into mortgages and notes payable as ancillary business transactions on an as-needed basis, most often as the result of lease assumption transactions. Our fiscal strength has enabled us to build a portfolio that is approximately 95% unencumbered on a gross assets basis, with 629 unencumbered properties and approximately $110.8 million of mortgage debt on the remaining properties. Refer to Recent Developments – COVID-19 Pandemic for additional discussion regarding the pandemic’s impact to our liquidity profile.

Equity capital for our real estate acquisition activity has historically been provided from the proceeds of our private offering, including distributions reinvested through our DRIP. We suspended our private offering on January 10, 2020, in connection with our confidential submission of a draft registration statement on Form S-11 with the SEC relating to a proposed IPO. Accordingly, we did not raise any equity through our private offering during the first quarter. During the three months ended March 31, 2020, we raised approximately $5.9 million in equity capital through our DRIP. See Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this Form 10-Q for further information. We announced on January 10, 2020 that we were terminating DRIP, effective February 10, 2020.

We achieved our current investment grade credit rating of Baa3 based on our conservative leverage profile, diversified real estate investment portfolio, access to capital, and earnings stability provided by the creditworthiness of our tenants. Factors that could negatively impact our credit rating include, but are not limited to: a significant increase in our leverage on a sustained basis, a significant increase in the proportion of secured debt levels, a significant decline in our unencumbered asset base, weakening of our corporate governance structure, and a significant decline in our real estate portfolio diversification or the creditworthiness of our tenants. Factors that could positively impact our credit rating include, but are not limited to, continued growth in the portfolio, improvement in our leverage profile, lengthening of our debt maturity profile, and our Internalization. We have aligned our strategic growth priorities with these factors, as we believe the favorable debt pricing and access to multiple sources of debt capital resulting from our investment grade credit rating, provides us with an advantageous cost of capital and risk-adjusted return on investment for our stockholders.

The following table sets forth our outstanding Revolving Credit Facility, unsecured term loans and Senior Notes as of March 31, 2020.

The 2020 Unsecured Term loan has an initial maturity date of August 2020. Borrowings under the 2020 Unsecured Term Loan bear interest at variable rates based on LIBOR plus a margin based on our credit rating ranging between 0.85% and 1.65% per annum. Based on our current credit rating, the applicable margin is 1.25% as of March 31, 2020. The 2020 Unsecured Term Loan allows for two six-month extensions, at our option, subject to our being in compliance with the debt covenants and customary representations and warranties, and payment of a fee equal to 0.05% of the outstanding principal balance at the time of extension. On May 5, 2020, we gave notice that we were exercising the first of these options, effective as of August 2, 2020.

The Revolving Credit Facility has a maximum availability of $600 million, and includes a $35 million sublimit for swingline loans and $20 million available for issuance of letters of credit. The Revolving Credit Facility has an initial maturity date of January 2022 and provides for one five-month extension, at our election, subject to certain conditions set forth in the agreement and payment of a 0.0625% fee on the revolving commitments. The Revolving Credit Facility contains an applicable facility fee ranging between 0.125% and 0.30% per annum, based on our credit rating. Based on our current credit rating of Baa3, the facility fee is 0.25% per annum as of March 31, 2020.

Borrowings on the Revolving Credit Facility bear interest at variable rates based on LIBOR plus a margin based on our credit rating ranging between 0.825% and 1.55% per annum. Based on our current credit rating, the applicable margin is 1.20% as of March 31, 2020.

The 2023 Unsecured Term loan has an initial maturity date of January 2023. Borrowings under the 2023 Unsecured Term Loan bear interest at variable rates based on LIBOR plus a margin based on our credit rating ranging between 0.90% and 1.75% per annum. Based on our current credit rating, the applicable margin is 1.35% as of March 31, 2020.

The 2024 Unsecured Term Loan has an initial maturity date of June 2024. Borrowings under the 2024 Unsecured Term Loan are subject to interest at variable rates based on LIBOR plus a margin based on our credit rating ranging between 0.85% and 1.65% per annum. Based on our current credit rating, the applicable margin is 1.25% as of March 31, 2020.

On February 7, 2020, we entered into a $60 million term loan agreement maturing in February 2022 with JP Morgan Chase Bank, N.A., as administrative agent. The 2022 Unsecured Term Loan was used to partially repay BRE debt that had been assumed by the Company as part of the Internalization. Borrowings under the 2022 Unsecured Term Loan are subject to interest only payments at variable rates equal to LIBOR plus a margin based on our credit rating, ranging between 0.85% and 1.65% per annum. Based on our current credit rating, the applicable margin is 1.25% as of March 31, 2020.

The 2026 Unsecured Term Loan includes an accordion feature that provides for an increase in the facility size up to a total of $550 million of available capacity. Borrowings under the 2026 Unsecured Term Loan are payable interest only on a monthly basis during the term of the loan, with the principal amount due in February 2026. Borrowings under the 2026 Unsecured Term loan bear interest equal to LIBOR plus a margin based on our credit rating ranging between 1.45% and 2.40% per annum. Based on our current credit rating, the applicable margin is 1.85% as of March 31, 2020.

To mitigate interest rate risk, we have strategically added unsecured, fixed-rate, interest-only senior promissory notes (“Senior Notes”) to our capital structure. The Senior Notes were issued in three series (Series A, B, and C) as described below.

The Series A Notes are payable interest only semiannually during their term, bear interest at a fixed rate of 4.84% per annum, and mature on April 18, 2027.

The Series B and Series C Notes are payable interest only semiannually during their term, and bear interest at fixed rates of 5.09% per annum and 5.19% per annum, respectively. The Series B Notes mature on July 2, 2028, and the Series C Notes mature on July 2, 2030.

We are subject to various covenants and financial reporting requirements pursuant to our debt facilities. The table below summarizes the applicable financial covenants, which are substantially the same across each of our debt facilities. As of March 31, 2020, we believe that 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 restricted from paying dividends to our stockholders in excess of dividends required to maintain our REIT qualification. For each of the previous three years, we paid dividends out of our cash flows from operations in excess of the distribution amounts required to maintain our REIT qualification. Refer to Recent Developments – COVID-19 Pandemic for additional discussion over the pandemic’s impact on our ability to satisfy our financial covenants.

Cash and cash equivalents and restricted cash totaled $96.7 million and $13.2 million at March 31, 2020 and 2019, respectively. The table below shows information concerning cash flows for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016. Also presented is information regarding distributions~~2019:

The increase in net cash provided by operating activities during the three months ended March 31, 2020 as compared to the three months ended March 31, 2019, was mainly due to growth in our real estate portfolio.

The change in net cash provided by investing activities during the three months ended March 31, 2020 as compared to the three months ended March 31, 2019, was mainly due to decreased acquisition volume and increased proceeds from the disposal of properties, offset by cash paid in connection with the Internalization.

The increase in net cash provided by financing activities during the three months ended March 31, 2020 as compared to ~~common stockholders and non-controlling interests and~~ the ~~weighted average number of shares~~three months ended March 31, 2019, mainly reflects a net increase in borrowings (as discussed in Liquidity above), partially offset by a decrease in proceeds from the issuance of our common stock and ~~non-controlling membership units~~increased distributions resulting from an increase in the number of ~~the Operating Company used for the basic and diluted computation per share:~~

For the three months ended

For the nine months ended

(in thousands, except per share data)

September 30,

September 30,

2017

2016

2017

2016

Net income

$
12,990

$
15,417

$
42,729

$
26,474

Real property depreciation and amortization

15,643

12,114

44,969

33,273

Gain on sale of real estate

(4,052
)

(2,983
)

(10,332
)

(4,089
)
Asset impairment

2,608

—

2,608

—

FFO

$
27,189

$
24,548

$
79,974

$
55,658

Capital improvements / reserves

(49
)

(49
)

(147
)

(147
)
Straight line rent adjustment

(4,520
)

(3,759
)

(12,585
)

(9,761
)
Cost of debt extinguishment

1,404

52

5,019

105

Amortization of debt issuance costs

486

456

1,343

1,279

Amortization of net mortgage premiums

205

(48
)

135

(143
)
(Gain) Loss on interest rate swaps and other non-cash interest expense

—

(2,991
)

(1,280
)

2,219

Amortization of lease intangibles

99

(100
)

487

(373
)
Acquisition expenses

—

2,367

—

8,256

AFFO

$
24,813

$
20,476

$
72,946

$
57,093

Diluted WASO

19,147

15,074

18,069

14,154

Net earnings per share, basic and diluted

$
0.68

$
1.02

$
2.36

$
1.87

FFO per diluted share

1.42

1.63

4.43

3.93

AFFO per diluted share

$
1.30

$
1.36

$
4.04

$
4.03

The leases in our portfolio are long-term in nature, with a current ABR weighted average remaining lease term of 11.3 years as of March 31, 2020. Our rental revenues may be impacted by inflation. Substantially all of our leases have contractual lease escalations, with an ABR weighted average of 2.1% as of March 31, 2020. Many of our leases contain rent escalators that increase rent at a fixed amount and may not be sufficient during periods of high inflation. Leases that contributed approximately 16.0% of our ABR as of March 31, 2020, contained rent escalators based on increases in CPI and the associated increases in rental revenue may be limited during periods of low inflation. The impact of inflation on our property and operating expenses is limited since substantially all of our leases are net leases, and property-level expenses are generally paid by our tenants. To the extent we bear the cost of such expense, 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. Inflation and increased costs may also have an adverse impact to our tenants and their creditworthiness if the increase in property-level expenses is greater than their increase in revenues.

We had no off-balance sheet arrangements as of March 31, 2020, or December 31, 2019.

The following table provides information with respect to our contractual commitments and obligations as of March 31, 2020 (in thousands).

Year of Maturity	Term Loans^(a)		Revolving Credit Facility^(b)		Senior Notes		Mortgages and Notes Payable		Interest Expense^(c)		Tenant Improvement Allowances^(d)		Operating Leases		Total
Remainder of 2020	$	—	$	—	$	—	$	2,401	$	58,412	$	2,219	$	534	$	63,566
2021		240,000		—		—		18,006		72,049		—		711		330,766
2022		60,000		353,300		—		2,907		60,773		—		686		477,666
2023		265,000		—		—		8,332		53,562		—		505		327,399
2024		190,000		—		—		2,260		49,454		—		120		241,834
Thereafter		450,000		—		475,000		76,912		122,555		—		2,411		1,126,878
Total	$	1,205,000	$	353,300	$	475,000	$	110,818	$	416,805	$	2,219	$	4,967	$	2,568,109

At March 31, 2020 and December 31, 2019, investment in rental property of $176.8 million and $178.7 million, respectively, was pl edged as collateral against our mortgages and notes payable.

Additionally, we are a party to three separate tax protection agreements with the contributing members of three distinct UPREIT transactions and we entered into the Founding Owners’ Tax Protection Agreement with our founding owners in connection with the Internalization. The tax protection agreements require us to indemnify the beneficiaries in the event of a sale, exchange, transfer, or other disposal of the contributed property, or in the case of the Founding Owners’ Tax Protection Agreement, the entire Company, in a taxable transaction that would cause such beneficiaries to recognize a gain that is protected under the agreements, subject to certain exceptions. Based on values as of March 31, 2020, taxable sales of the applicable properties would trigger liability under the four agreements of approximately $22.3 million. Based on information available, we do not believe that the events resulting in damages as detailed above have occurred or are likely to occur in the foreseeable future. Accordingly, we have excluded these commitments from the contractual commitments table above.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our ~~consolidated financial statements,~~Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these ~~consolidated financial statements~~Condensed Consolidated Financial Statements requires management to make estimates and ~~judgments~~assumptions that affect the reported amounts of assets, liabilities, revenues, and ~~expenses. Management bases~~expenses as well as other disclosures in the financial statements. On an ongoing basis, management evaluates its estimates ~~on historical experience~~ and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent from other sources. Actualassumptions; however, actual results may differ from these estimates ~~under different~~and assumptions, ~~or conditions.~~which in turn could have a material impact on our financial statements. A summary of our significant accounting policies and procedures are included in Note 2, “Summary of Significant Accounting Policies,” in the Notes to the Condensed Consolidated Financial Statements included in this

Quarterly Report on Form 10-Q. We believe there have been no significant changes during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020, 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 2019 Annual report on 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.

Historically, we have sold shares of common stock in a private offering at a price equal to the Determined Share Value (“DSV”), which was established at least quarterly by the board of directors based on the net asset value (“NAV”) of our portfolio, input from management and third-party consultants, and such other factors as the board of directors may determine. The DSV was historically used for purchases, distribution reinvestment, and redemptions. On January 10, 2020, we suspended our private offering of our common stock until further notice and terminated our dividend reinvestment plan (“DRIP”) and share redemption program as of February 10, 2020.

At its May 7, 2020, meeting, our board of directors voted to set the DSV at $82.00 per share until July 31, 2020, compared to the prior DSV of $85 per share. The Company’s NAV calculation as of March 31, 2020 was consistently calculated using the Company’s established valuation process, starting with an estimate of the fair value of the properties in the portfolio as of that date based upon, among other factors, the implied market price for each asset based upon our review of market capitalization rates. The Company did not adjust the values of its real estate assets to estimate any potential impact from the COVID-19 pandemic on its portfolio as of March 31, 2020.

The decline in the Company’s NAV during the first quarter was due to a decrease in the estimated value of the Company’s real estate investments (driven mainly by downward adjustments to fair value associated with properties leased to our largest tenant, who declared bankruptcy in March, and current quarter disposition activity), combined with a decline in market interest rates during the first quarter, which led to an increase in our estimated fair value of debt (and a corresponding decline in NAV). Additional information regarding our valuation policy and procedures, including significant assumptions used to value our real estate portfolio and corresponding sensitivity disclosures, and the determination of the DSV by the board of directors, is available in Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities,” in our 2019 Annual Report on Form 10-K filed with the SEC on February 27, 2020, under the heading Determined Share Value.

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.

The following table provides a breakdown of the major components of our estimated NAV and NAV per diluted share amounts (in thousands, except per share amounts):

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 March 31, 2020, and December 31, 2019, supporting the Determined Share Value in effect for the periods of May 1, 2020 through July 31, 2020, and February 1, 2020, through April 30, 2020, 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 March 31, 2020, 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 $77.27. Conversely, a decrease in the weighted average implied capitalization rate used as of March 31, 2020, of 0.25% would result in an increase in the fair value of our investment in rental property of 3.8%, and our NAV per diluted share would have been $88.05.

Additionally, the ongoing COVID-19 pandemic, together with the restrictions on travel and other measures enacted in response to the pandemic, has had and will continue to have a significant adverse impact on our tenants’ operations and the value of our properties for an unknown period of time. Given the reliance on historical information when valuing a property and the number of unknown variables with respect to the COVID-19 pandemic at this time, the impact of the pandemic on a particular property will likely not be reflected in a property-level valuation for several calendar quarters. Additionally, when conducting property-level valuations, management and our third-party consultants and appraisers utilize available sales data, such as purchase price, from transactions involving comparable assets. Given the current economic downturn and significant reduction in real estate transactions, it is likely that we will be unable to obtain or utilize comparable sales data as part of our valuation process for several calendar quarters, which further impedes our ability to conduct accurate valuations. Accordingly, the current Determined Share Value does not accurately reflect the impact of the COVID-19 pandemic on the value of our shares as of the date of this filing. The board of directors will continue to utilize all available valuation information when setting the DSV in future periods as the impacts of the COVID-19 pandemic on real estate asset values continues to unfold.

At its May 7, 2020 meeting, our board of directors undertook a full review of our rent collection results for April, preliminary collection results for May, our outlook for collections in future months, and our overall liquidity position. Given the economic uncertainty and rapidly evolving circumstances related to the COVID-19 pandemic and current tenant rent relief requests, to preserve cash and strengthen our liquidity position, the board determined that it would temporarily suspend our monthly distribution. The previously announced distribution of $0.44 per common share and OP Unit for the month of April will remain payable on May 15, 2020. The board of directors will re-evaluate whether or not to reinstate a distribution at its August 2020 meeting. In connection with that re-evaluation, the board will consider the impact the COVID-19 pandemic has had on the Company’s results of operations through that time and, based upon the Company’s determination of its progress against its growth initiatives, will also evaluate the appropriate payout ratio and payment frequency for any future distributions. We intend to maintain BNL’s REIT status, and intend to make a special distribution in 2020 if it becomes necessary to do so based on the ultimate decisions with respect to future distributions.

We terminated our DRIP and share redemption program, effective February 10, 2020. Prior to its termination, pursuant to the terms of our DRIP, stockholders and OP Unit holders (other than us), could elect to have cash distributions reinvested in additional shares of our common stock. Shares of our common stock acquired through our DRIP have the same rights and are subject to the same restrictions on transferability as all other shares of our common stock.

The following table summarizes distributions paid in cash and pursuant to our DRIP for the three months ended March 31, 2020 (in thousands).

The following table summarizes our distributions paid, including the source of distributions and a comparison against FFO (in thousands). 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.

We are exposed to certain market risks, one of the most predominant of which is a change in interest ~~rate risk arising from changes~~rates. Increases in interest rates ~~on the floating rate indebtedness~~can result in increased interest expense under our ~~unsecured credit facilities~~Revolving Credit Facility and certain mortgages. Borrowings pursuant to our unsecured credit facilities and floating-rate mortgages bear interest at floating rates based on LIBOR plus the applicable margin. Accordingly, fluctuationsother variable-rate debt. Increases in ~~market~~ interest rates ~~may increase or decrease our~~can also result in increased interest expense ~~which will in turn, increase or decrease~~when our ~~net income~~fixed rate debt matures and ~~cash flow.~~

needs to be refinanced. We attempt to manage ~~a portion of our~~ interest rate risk by entering into long-term fixed rate debt or by entering into interest rate ~~swap agreements. Our interest rate risk management strategy is intended to stabilize cash flow requirements by maintaining interest rate swap agreements~~swaps to convert certain ~~variable rate~~variable-rate debt to a fixed rate. As of September 30, 2017, we had 24 interest rate swap agreements outstanding, with an aggregate notional amount of $640 million. Under these agreements, we receive monthly payments from the counterparties equal to the related variable interest rates multiplied by the outstanding notional amounts. In turn, we pay the counterparties each month an amount equal to a fixed interest rate multiplied by the related outstanding notional amounts. The intended net impact of these transactions is that we pay a fixed interest rate on our variable rate borrowings. The interest rate swaps have been designated by us as ~~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~~ Further information concerning our ~~unsecured credit facilities. Several of the~~ interest rate swaps ~~agreements set forth~~can be found in Note 11 in our Condensed Consolidated Financial Statements contained elsewhere in this Quarterly Report on Form 10-Q.

Our fixed-rate debt includes our Senior Notes, mortgages, and variable-rate debt converted to a fixed rate with the use of interest rate swaps. Our fixed-rate debt and outstanding interest rate swaps had carrying values and fair values of approximately $1.6 billion, as of March 31, 2020. Changes in market interest rates impact the fair value of our fixed-rate debt and interest rate swaps, but they have no impact on interest incurred or on cash flows. For instance, if interest rates were to increase 1%, and the fixed-rate debt balance were to remain constant, we would expect the fair value of our debt to decrease, similar to how the price of a bond decreases as interest rates rise. A 1% increase in market interest rates would have resulted in a decrease in the ~~table below were entered~~fair value of our fixed-rate debt and interest rate swaps of approximately $85.4 million as of March 31, 2020.

Borrowings pursuant to our Revolving Credit Facility and other variable-rate debt bear interest at rates based on LIBOR plus an applicable margin, and totaled $1.6 billion as of March 31, 2020, of which $909.9 million was swapped to a fixed rate by our use of interest rate swaps. Taking into account the effect of our interest rate swaps, interest expense would have increased by approximately $1.4 million in ~~conjunction with previous secured and unsecured borrowings that were retired and~~ the ~~swaps have since~~three months ended March 31, 2020, if the applicable LIBOR rate had been ~~reapplied in support of the current unsecured credit facilities.~~1% higher.

Counterparty

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
)
Bank of Montreal

July-24

1.16%

1 month LIBOR

40,000,000

2,146,861

Bank of Montreal

January-25

1.91%

1 month LIBOR

25,000,000

192,803

Bank of Montreal

July-25

2.32%

1 month LIBOR

25,000,000

(489,600
)
Bank of Montreal

January-26

1.92%

1 month LIBOR

25,000,000

297,340

Bank of Montreal

January-26

2.05%

1 month LIBOR

40,000,000

84,117

Bank of Montreal

December-26

2.33%

1 month LIBOR

10,000,000

(175,375
)
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
)
Regions Bank

March-19

1.91%

3 month LIBOR

25,000,000

(105,943
)
Regions Bank

May-20

2.12%

1 month LIBOR

50,000,000

(561,657
)
Regions Bank

March-22

2.43%

3 month LIBOR

25,000,000

(550,191
)
Regions Bank

December-23

1.18%

1 month LIBOR

25,000,000

1,177,710

SunTrust Bank

April-24

1.99%

1 month LIBOR

25,000,000

(63,116
)
SunTrust Bank

April-25

2.20%

1 month LIBOR

25,000,000

(331,624
)
SunTrust Bank

July-25

1.99%

1 month LIBOR

25,000,000

71,593

SunTrust Bank

January-26

1.93%

1 month LIBOR

25,000,000

248,334

Wells Fargo Bank, N.A.

February-21

2.39%

1 month LIBOR

35,000,000

(738,635
)
Wells Fargo Bank, N.A.

October-24

2.72%

1 month LIBOR

15,000,000

(706,367
)

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,~~March 31, 2020, 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~~SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of and for the quarter ended ~~September 30, 2017,~~March 31, 2020, 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~~As a result of our Internalization on February 7, 2020, we implemented internal controls over financial reporting to consider the management functions previously performed by our third-party manager. The Internalization represents a material change in internal control over financial reporting subsequent to management’s last assessment of our internal control over financial reporting, ~~that occurred~~which was completed on December 31, 2019.

There have been no other changes in our internal control over financial reporting during the ~~quarter~~three months ended ~~September 30, 2017,~~March 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~From time to time, we~~We are subject to various 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~~Other than the addition of the text below, there have been no material changes from risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K. See the discussion of the Company’s risk factors under Part I, Item 1A. in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Actual or perceived threats associated with epidemics, pandemics or public health crises, including the COVID-19 pandemic, could have a material adverse effect on our results of operations and the businesses of our tenants.

Since its discovery in December 2019, a novel strain of coronavirus, which causes the viral disease known as COVID-19, has spread throughout most countries in the world, including the United States. This outbreak, which has since been declared a pandemic by the World Health Organization, has negatively impacted regional and global economic activity and contributed to volatility in financial markets throughout the world. Additionally, in response to the COVID-19 pandemic, many countries and U.S. states, including the areas in which we operate, have adopted certain measures to mitigate the ongoing public health crises. Such measures include “shelter in place” or “stay at home” rules, restrictions on travel, and restrictions on the types of businesses that may continue to operate in many countries and U.S. states. The COVID-19 pandemic has negatively impacted nearly every industry directly or indirectly.

The COVID-19 pandemic, and future epidemics, pandemics, and other public health crises could materially and adversely affect our and our tenants’ results of operations, liquidity, and ability to access capital markets or pay distributions due to, among other factors:

The extent to which the COVID-19 pandemic impacts our investments and operations will depend on future developments, including, among others, the duration of the outbreak, new information that may emerge concerning the severity of COVID-19, and the actions taken to contain the COVID-19 pandemic or treat the disease. These developments and the full impact of the COVID-19 pandemic on our business are highly uncertain and cannot be predicted with confidence. Nevertheless, the COVID-19 pandemic and any future epidemics, pandemics or public health crises could materially and adversely affect our business, financial condition, liquidity and results of operations, as well as our ability to pay distributions to our stockholders, for the reasons discussed above. In particular, the following risk factors previously disclosed in our Annual Report on Form 10-K are updated as follows:

The failure of one or more of our tenants to pay rent due to the market disruption caused by the COVID-19 outbreak or any other reason could materially and adversely affect us, including our results of operations.

Our performance depends on the financial condition of our tenants and their ability to fulfill their lease obligations by paying rent in a timely manner. The outbreak has adversely affected our tenants’ businesses generally. As of April 30, 2020, we have received requests for rent relief from 36.3% of our tenants based on ABR. Although the requests range in scope, the most common request is for a full or partial rent deferment for three months, with repayment over a six to 12-month period following the reinstatement of regular rent payments. In certain cases, we are also negotiating for lease extensions or the early exercise of a tenant renewal option in addition to the repayment of the deferred rent. We have not agreed to any rent forgiveness or permanent abatement and are only negotiating rent deferrals. However, we cannot predict the ultimate resolution of these discussions with our tenants or whether any such negotiations could break down in the future and result in any such tenants refusing to pay all or a substantial portion of the rent due under their leases. The duration of the COVID-19 pandemic and our tenants’ ability to return to business after governmental restrictions are lifted will have a significant impact on our ability to continue to collect rents, and any material disruption in our ability to collect rents could have a material adverse impact on our business and results of operations.

General economic disruption resulting from the COVID-19 pandemic could result in a reduction in the willingness or ability of consumers to use their discretionary income in the businesses of our tenants and potential tenants, which could reduce the demand for our properties and in turn could materially and adversely affect us.

A significant portion of our portfolio is leased to tenants operating businesses at our properties that rely on discretionary consumer spending. Restaurants (including quick service and casual and family dining) represent a material portion of our portfolio and the highest proportion of tenants seeking rent relief at this time are in the restaurant sector. Red Lobster Hospitality, Jack’s Family Restaurants, Outback Steakhouse, and Krispy Kreme are among the most significant tenants in our portfolio. The success of most of these businesses depends on the willingness of consumers to use discretionary income to purchase their products or services. A downturn in the economy resulting from the COVID-19 pandemic could cause consumers to reduce their discretionary spending, which could result in tenant bankruptcies or otherwise have an adverse impact on our tenants’ ability to successfully manage their businesses and pay us amounts due under our lease agreements, thereby materially and adversely affecting us.

More generally, if the pandemic results in a period of economic slowdown, rising interest rates and declining demand for real estate, then it may cause a general decline in rents or an increased incidence of defaults under existing leases. A lack of demand for rental space could adversely affect our ability to maintain our current tenants and gain new tenants, which may affect our growth and results of operations. Accordingly, a general decline in economic conditions resulting from the COVID-19 pandemic could materially and adversely affect us.

Legal restrictions intended to mitigate the impact of COVID-19 could have a particularly adverse impact on the restaurant and retail industries, which may materially and adversely affect us.

The legal restrictions adopted by many U.S. states to mitigate the ongoing public health crises related to COVID-19, including “shelter in place” and “stay at home” rules, restrictions on travel, and restrictions on the types of businesses that may continue to operate, have had a particularly acute negative economic impact on restaurant and retail businesses throughout the areas in which we operate. As of March 31, 2020, leases representing approximately 15.7% of our ABR were with tenants in the restaurant industry and 9.6% of our ABR were with tenants in the retail industry. Accordingly, decreases in the demand for restaurant and/or retail spaces may have a greater adverse effect on us than if we had fewer investments in these industries. For example, if there is an increase in the number of companies in the restaurant industry that declare bankruptcy, go out of business, or significantly reduce the number of their locations as a result of the pandemic, then we are likely to experience challenges with our restaurant tenants, and may record asset impairments on certain assets as a result of increased credit losses. To the extent that economic conditions continue to deteriorate in the retail and restaurant industries, they are likely to negatively affect market rents for such properties and could materially and adversely affect us.

Decreases in real estate transaction activity resulting from the COVID-19 pandemic may materially inhibit our ability to achieve growth through acquisitions at a rate that is comparable to our historical results, which could materially and adversely affect us.

Although the long-term impact of the COVID-19 pandemic on investment sales markets is currently difficult to predict, the disruption from the pandemic thus far has resulted in a significant decrease in real estate investment sales. Our growth strategy depends significantly on acquiring new properties. Since 2015, our team has acquired more than $500 million of net leased real estate each year, with approximately $1 billion during 2019. The Company did not complete any acquisitions during the three months ended March 31, 2020, which increases the risk ~~factors set forth~~of lower overall acquisition activity for the full year given the ongoing impact of the COVID-19 pandemic. Our ability to grow requires us to identify and complete acquisitions that meet our investment criteria. Changes in the ~~Form 10.~~volume of real estate investment sales, or our ability to access acquisition financing, resulting from the COVID-19 pandemic may negatively impact our acquisition opportunities, and if we are unable to achieve growth through acquisitions at a rate that is comparable to our historical results, it could materially and adversely affect us.

The Determined Share Value is not directly derived from any independent valuation or from the value of the existing property portfolio. Investors should use caution in using the Determined Share Value as the current value of shares of our common stock.

Historically, shares of our common stock have been sold by us in a private offering at a price per share equal to what we refer to as the current Determined Share Value, which is established at least quarterly by our Board of Directors based on the net asset value of the portfolio, input from management and third-party consultants, and such other factors as the Board of Directors may, in its sole discretion, determine. Our net assets are primarily comprised of our investment in real property and debt, as well as other assets and liabilities such as cash, interest rate swaps, and accounts payable. The values ascribed to our mortgages and unsecured notes are marked to market each quarter.

~~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 conducted additional closings at least once every calendar quarter through December 31, 2019. On January 10, 2020, we announced that we suspended until further notice our private offering of shares of our common stock.

As of March 31, 2020, there were 26.9 million shares of our common stock issued and outstanding, including 0.8 million mezzanine equity common shares, and 3.1 million OP Units issued and outstanding, including 1.3 million mezzanine equity non-controlling interests.

The following table provides information regarding the sale of shares of our common stock pursuant to our ongoing private offering during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 (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

January

2017

413

$
77

$
31,827

38

$
75

$
2,836

$
34,663

February

2017

270

79

21,314

39

75

2,934

24,248

March

2017

368

79

28,946

39

77

3,071

32,017

April

2017

234

79

18,462

41

77

3,166

21,628

May

2017

291

80

23,242

42

78

3,266

26,508

June

2017

352

80

28,064

42

79

3,319

31,383

July

2017

220

80

17,601

44

78

3,394

20,995

August

2017

343

80

27,455

45

78

3,501

30,956

September

2017

297

80

23,676

45

78

3,544

27,220

TOTAL

2,788

$
220,587

375

$
29,031

$
249,618

None of the shares of our common stock set forth in the table above were registered under the Securities Act in reliance upon the exemption from registration under the Securities Act provided by Rule 506(c) under Regulation D promulgated under the Securities Act. All of the shares of our common stock set forth in the table above were sold to persons ~~who~~each of whom represented to us in writing that ~~they~~such person 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~~OP 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.~~OP Units. There were no ~~other membership unit~~such OP Unit issuances during the ~~nine months~~quarter ended ~~September 30, 2017.~~March 31, 2020.

None of the ~~membership units in the Operating Company discussed above were~~OP Units have been registered under the Securities Act in reliance upon the ~~exemption~~exemptions from registration under the Securities Act provided by Rule 506(c) under Regulation D promulgated under the Securities Act and Section 4(a)(2) of the Securities Act. All of the ~~membership units in the Operating Company discussed above~~OP Units were ~~sold~~issued 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.~~an Accredited Investor, including third-party verification as permitted under Regulation D.

In connection with the closing of the Internalization, on February 7, 2020, we issued 780,893 shares of our common stock to certain owners of BRE as merger consideration for an aggregate value of $66.4 million.

In connection with the Internalization, on February 7, 2020, the OP issued 1,319,513 OP Units to certain owners of BRE as merger consideration for an aggregate value of $112.2 million.

In each case, the aforementioned securities were issued in reliance on the exemption set forth in Section 4(a)(2) of the Securities Act.

~~During the three months ended September 30, 2017, we fulfilled repurchase requests and repurchased~~We had adopted a share redemption program to provide an opportunity for our stockholders to have shares of our common stock ~~pursuant~~repurchased, at the end of each quarter, subject to certain restrictions and limitations, at a price equal to or at a discount from the current Determined Share Value in effect as of the date the shares were tendered for redemption. Cash used to fund share redemptions had historically been provided through a combination of cash generated by operations, the sale of assets, and borrowings. On January 10, 2020, we announced that we terminated our share redemption program, effective as ~~follows.~~ of February 10, 2020. Consequently, there were no redemptions of shares of our common stock during the three months ended March 31, 2020.

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 (Loss) Income ~~(Loss)~~ (Unaudited)	2
	Condensed Consolidated Statements of Stockholders’ Equity and Mezzanine Equity (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2628
	Cautionary Note Regarding Forward-Looking Statements	2628
	Explanatory Note and Certain Defined Terms	29
	Overview	2629
	Recent Developments – COVID-19 Pandemic	30
	Recent Developments – Internalization	35
	Results of Operations	35
	Liquidity and Capital Resources	3540
	Cash Flows	44
	Impact of Inflation	4045
	Off-Balance Sheet Arrangements	4145
	Contractual Obligations	41
	~~Results of Operations~~	41
	~~Net Income and Non-GAAP Measures (FFO and AFFO)~~	4745
	Critical Accounting Policies	5145
	Impact of Recent Accounting Pronouncements	5146
	Determined Share Value	46
	Distributions and Distribution Reinvestment	47
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5148
Item 4.	Controls and Procedures	5249
Part II - OTHER INFORMATION		5350
Item 1.	Legal Proceedings	5350
Item 1A.	Risk Factors	5350
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5352
Item 3.	Defaults upon Senior Securities	5553
Item 4.	Mine Safety Disclosures	5553
Item 5.	Other Information	5553
Item 6.	Exhibits	5554

	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 March 31,
(in thousands)	2020		2019
Beginning balance	$	—	$	2,086
Provision for uncollectible rent		1,033		441
Write-offs		—		(2,527	)
Ending balance	$	1,033	$	—

	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

	March 31, 2020									December 31, 2019
(in thousands)	Shares of Common Stock			OP Units			Total Diluted Shares			Shares of Common Stock			OP Units			Total Diluted Shares
Permanent equity		26,074			1,737			27,811			26,001			1,737			27,738
Mezzanine equity		781			1,320			2,101			—			—			—
Total		26,855			3,057			29,912			26,001			1,737			27,738
Percent Ownership of OP		89.9	%		10.1	%		100.0	%		93.7	%		6.3	%		100.0	%

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

Significant Unobservable Inputs	Weighted Average Assumption Used	Range
Expected IPO date	March 15, 2021	November 2020 through May 2021
Peer stock price volatility	30.0%	22.96% to 43.91%

(in thousands)
Issuance of 781 shares of common stock	$	66,376
Issuance of 1,320 OP Units		112,159
Cash		30,981
Base consideration		209,516
Initial estimate of fair value of earnout liability		40,119
Total consideration	$	249,635

(in thousands)	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 per share amounts)	If the Company has completed an IPO		If the Company has not completed an IPO
Earnout Tranche^(a)	40-Day VWAP of a REIT Share	Applicable Earnout Period	AFFO per Share	Applicable Earnout Period
$10,000	$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.
$15,000	$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.
$25,000	$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.
$25,000	$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.

(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)
Prepaid expenses and other assets	$	1,336
Right-of-use assets		1,898
Goodwill		339,769
Accounts payable and other liabilities		(986	)
Operating lease liabilities		(1,898	)
Debt		(90,484	)
	$	249,635

(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
			27	$	73,078	^(a)

(in thousands)	For the three months ended March 31, 2019
Land	$	7,149
Land improvements		10,506
Buildings and improvements		49,677
Acquired in-place leases^(b)		6,618
Acquired above-market leases^(c)		2,169
Acquired below-market leases^(d)		(836	)
	$	75,283

(in thousands)
Remainder of 2017	$	40,732
2018		165,923
2019		169,255
2020		171,908
2021		174,168
Thereafter		1,778,342
	$	2,500,328

(in thousands)
Remainder of 2020	$	210,383
2021		284,505
2022		287,511
2023		290,357
2024		285,396
Thereafter		2,130,183
	$	3,488,335

(in thousands)
Remainder of 2020	$	3,047
2021		4,138
2022		4,220
2023		4,305
2024		4,385
Thereafter		48,803
	$	68,898

(in thousands)		For the three months ended March 31,
Intangible	Financial Statement Presentation	2020		2019
Acquired in-place leases and leasing fees	Depreciation and amortization	$	7,695	$	5,557
Above-market and below-market leases	Lease revenues, net		1,140		740

(in thousands)
Remainder of 2017	$	3,273
2018		12,224
2019		11,439
2020		11,330
2021		11,278
Thereafter		102,667
	$	152,211

(in thousands)
Remainder of 2020	$	17,706
2021		23,286
2022		22,738
2023		22,411
2024		21,644
Thereafter		135,452
	$	243,237

(in thousands)
Remainder of 2017	$	28,677
2018		2,829
2019		328,034
2020		8,449
2021		13,305
Thereafter		528,778
	$	910,072

	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			Accumulated Other				Presented in the
	Recognized in			Comprehensive Loss				Consolidated Statements of
(in thousands)	Accumulated Other				Amount of			Income and Comprehensive
For the three months ended March 31,	Comprehensive Loss			Location	(Loss) Gain			(Loss) Income
2020	$	(58,062	)	Interest expense	$	(885	)	$	20,991
2019		(12,624	)	Interest expense		836			15,828

~~Property Type~~	~~% NTM Rent~~
~~Retail – casual dining~~		~~13.4~~	%
~~Retail – quick service restaurants (QSR)~~		~~11.9~~	%
~~Retail – other~~		~~10.7~~	%
~~Total Retail~~		~~36.0~~	%
~~Industrial – manufacturing~~		~~11.1~~	%
~~Industrial – warehouse/distribution~~		~~10.0~~	%
~~Industrial – flex~~		~~5.3~~	%
~~Industrial – other~~		~~3.8~~	%
~~Total Industrial~~		~~30.2~~	%
~~Healthcare – clinical~~		~~11.4~~	%
~~Healthcare – surgical~~		~~5.7~~	%
~~Healthcare – other~~		~~4.3~~	%
~~Total Healthcare~~		~~21.4~~	%
~~Other – corporate office~~		~~8.3~~	%
~~Other – other~~		~~4.1~~	%
~~Total Other~~		~~12.4~~	%

~~Top Tenant Industries~~
~~Industry~~	~~% NTM Rent~~
~~Restaurants~~		~~25.3~~	%
~~Healthcare Facilities~~		~~20.8~~	%
~~Home Furnishing Retail~~		~~5.6~~	%
~~Packaged Foods & Meats~~		~~5.3~~	%
~~Auto Parts & Equipment~~		~~5.0~~	%
~~Specialized Consumer Services~~		~~3.7~~	%
~~Industrial Conglomerates~~		~~2.6~~	%
~~Multi-line Insurance~~		~~2.3~~	%
~~Life Sciences Tools & Services~~		~~2.3~~	%
~~Distributors~~		~~2.3~~	%
~~Industrial Machinery~~		~~2.0~~	%
~~Food Retail~~		~~1.9~~	%
~~Metal & Glass Containers~~		~~1.8~~	%
~~Managed Healthcare~~		~~1.8~~	%
~~Soft Drinks~~		~~1.7~~	%
~~Top 15 Tenant Industries~~		~~84.4~~	%
~~Other (22 industries)~~		~~15.6~~	%
~~Total~~		~~100.0~~	%

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

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

Brand	Property Type	% NTM Rent			Properties
Bob Evans Farms⁽¹⁾	Industrial/Retail		4.3	%		27
Red Lobster	Retail		4.3	%		25
Art Van Furniture	Retail		3.9	%		9
Jack's Family Restaurants	Retail		3.4	%		36
Taco Bell	Retail		3.1	%		41
Wendy's	Retail		2.9	%		35
Outback Steakhouse	Retail		2.8	%		22
Big Tex Trailers	Industrial/Retail		2.7	%		17
Siemens	Industrial		2.6	%		2
Nestle'	Retail		2.5	%		1
Total			32.5	%		215
All Other			67.5	%		262

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

NAV as of:	September 30, 2017			June 30, 2017
Investment in rental property	$	2,502,140		$	2,351,989
Debt		(909,416	)		(883,112	)
Other assets and liabilities, net		1,348			34,790
NAV	$	1,594,072		$	1,503,667
Number of outstanding shares, including noncontrolling interests	$	19,790		$	18,820
NAV per share	$	80.55		$	79.90

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

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
January	2017	$	3,319	$	488	$	2,738	$	98	$	6,643
February	2017		3,394		488		2,836		98		6,816
March	2017		3,522		493		2,972		99		7,086
April	2017		3,555		493		3,068		99		7,215
May	2017		3,618		493		3,167		99		7,377
June	2017		3,680		493		3,220		99		7,492
July	2017		3,742		493		3,296		99		7,630
August	2017		3,815		512		3,378		122		7,827
September	2017		3,883		512		3,420		123		7,938
TOTAL		$	32,528	$	4,465	$	28,095	$	936	$	66,024

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	%