Indicate by check mark whether the ~~registrant:~~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~~145,811,829 shares of the Registrant’s ~~common stock, $0.001~~Common Stock, $0.00025 par value per share, outstanding as of ~~November 13, 2017.~~May 3, 2021.

	September 30,			December 31,
	2017			2016			March 31, 2021			December 31, 2020
Assets
Accounted for using the operating method, net of accumulated depreciation	$	1,891,708		$	1,637,700		$	3,395,609		$	3,354,511
Accounted for using the direct financing method		41,612			47,271			28,991			29,066
Accounted for using the sales-type method								567			567
Investment in rental property, net		1,933,320			1,684,971			3,425,167			3,384,144

Cash and cash equivalents		13,698			21,635			10,205			100,486
Restricted cash		925			1,468
Accrued rental income		47,766			36,577			105,674			102,117
Tenant and other receivables, net		1,120			355			1,022			1,604
Tenant and capital reserves		897			767
Prepaid expenses and other assets		699			260			18,862			22,277
Notes receivable		6,527			6,527
Investment in related party		10,000			10,000
Interest rate swap, assets		7,493			9,598			239			—
Goodwill								339,769			339,769
Intangible lease assets, net		205,469			168,121			288,592			290,913
Debt issuance costs – unsecured revolver, net		3,139			446
Debt issuance costs – unsecured revolving credit facility, net								5,842			6,435
Leasing fees, net		13,046			11,329			10,673			10,738
Total assets	$	2,244,099		$	1,952,054		$	4,206,045		$	4,258,483

Liabilities and equity
Unsecured revolver	$	126,500		$	102,000
Mortgages and notes payable, net		57,883			106,686
Unsecured revolving credit facility							$	15,000		$	—
Mortgages, net								106,559			107,382
Unsecured term notes, net		721,907			657,891			1,383,283			1,433,796
Interest rate swap, liabilities		7,119			10,217			43,662			72,103
Earnout liability								6,385			7,509
Accounts payable and other liabilities		18,426			17,396			71,072			74,936
Due to related parties		1,688			364
Tenant improvement allowances		6,627			9,490
Accrued interest payable		4,880			1,602			9,896			4,023
Intangible lease liabilities, net		66,303			47,871			77,491			79,653
Total liabilities		1,011,333			953,517			1,713,348			1,779,402

Commitments and contingencies (See Note 16)
Commitments and contingencies (See Note 17)

Equity
Broadstone Net Lease, Inc. stockholder’s 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
Broadstone Net Lease, Inc. stockholders' equity:
Preferred stock, $0.001 par value; 20,000 shares authorized, 0 shares issued or outstanding								—			—
Common stock, $0.00025 par value; 500,000 shares authorized, 145,813 shares issued and outstanding at March 31, 2021; 440,000 shares authorized, 108,609 shares issued and outstanding at December 31, 2020								36			27
Class A common stock, $0.00025 par value; 0 shares authorized, issued or outstanding at March 31, 2021; 60,000 shares authorized, 37,000 shares issued and outstanding at December 31, 2020								—			9
Additional paid-in capital		1,253,431			1,009,431			2,625,320			2,624,997
Subscriptions receivable		(470	)		(9,790	)
Cumulative distributions in excess of retained earnings		(112,725	)		(89,960	)		(274,140	)		(259,673	)
Accumulated other comprehensive income		(40	)		2,092
Accumulated other comprehensive loss								(38,684	)		(66,255	)
Total Broadstone Net Lease, Inc. stockholders’ equity		1,140,214			911,788			2,312,532			2,299,105
Non-controlling interests		92,552			86,749			180,165			179,976
Total equity		1,232,766			998,537			2,492,697			2,479,081
Total liabilities and equity	$	2,244,099		$	1,952,054		$	4,206,045		$	4,258,483

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

	For the three months ended						For the nine months ended
	September 30,						September 30,						For the Three Months Ended March 31,
	2017			2016			2017			2016			2021			2020
Revenues
Rental income from operating leases	$	43,233		$	34,806		$	123,890		$	96,779
Earned income from direct financing leases		968			1,143			3,175			3,406
Operating expenses reimbursed from tenants		1,995			1,056			4,908			3,059
Other income from real estate transactions		39			5			117			176
Total revenues		46,235			37,010			132,090			103,420
Lease revenues, net													$	82,698		$	78,231

Operating expenses
Depreciation and amortization		15,643			12,114			44,969			33,273			30,713			31,219
Asset management fees		3,844			2,789			10,666			7,770			0			2,461
Property management fees		1,249			1,010			3,635			2,868			0			1,275
Acquisition expenses		-			2,367			-			8,256
Property and operating expense		2,009			1,184			4,710			3,005			4,605			4,115
General and administrative		1,173			598			3,297			1,951			10,633			5,842
State and franchise tax		301			71			511			181
Provision for impairment of investment in rental properties		2,608			-			2,608			-			2,012			2,133
Total operating expenses		26,827			20,133			70,396			57,304			47,963			47,045

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			5			9
Interest expense		(9,380	)		(4,576	)		(25,182	)		(24,166	)		(16,108	)		(20,991	)
Cost of debt extinguishment		(1,404	)		(52	)		(5,019	)		(105	)		(126	)		(22	)
Gain on sale of real estate		4,052			2,983			10,332			4,089			4,733			7,619
Income taxes														(413	)		(549	)
Internalization expenses														0			(1,205	)
Change in fair value of earnout liability														1,124			(4,177	)
Other income (expenses)														10			(22	)
Net income		12,990			15,417			42,729			26,474			23,960			11,848

Net income attributable to non-controlling interests		(1,042	)		(1,459	)		(3,460	)		(2,600	)		(1,737	)		(1,032	)
Net income attributable to Broadstone Net Lease, Inc.	$	11,948		$	13,958		$	39,269		$	23,874		$	22,223		$	10,816

Weighted average number of common shares outstanding
Basic		17,617			13,647			16,607			12,738			145,338			106,108
Diluted		19,147			15,074			18,069			14,154			156,724			116,210
Net Earnings per common share

Net earnings per share attributable to common stockholders
Basic and diluted	$	0.68		$	1.02		$	2.36		$	1.87		$	0.15		$	0.10

Comprehensive income (loss)
Net income	$	12,990		$	15,417		$	42,729		$	26,474		$	23,960		$	11,848
Other comprehensive income (loss)
Change in fair value of interest rate swaps		283			1,280			(1,448	)		(20,551	)		28,680			(58,062	)
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
Realized gain on interest rate swaps														(41	)		(42	)
Comprehensive income (loss)														52,599			(46,256	)
Comprehensive (income) loss attributable to non-controlling interests														(3,813	)		4,020
Comprehensive income (loss) attributable to Broadstone Net Lease, Inc.													$	48,786		$	(42,236	)

~~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.

Condensed Consolidated Statements of Stockholders’ Equity and Mezzanine Equity

	Common Stock		Class A Common Stock			Additional Paid-in Capital			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, 2021	$	27	$	9		$	2,624,997		$	(259,673	)	$	(66,255	)	$	179,976		$	2,479,081		$	—	$	—		$	—
Net income		—		—			—			22,223			—			1,737			23,960			—		—			—
Issuance of 211 shares of common stock		—		—			233			—			—			—			233			—		—			—
Offering costs, discounts and commissions		—		—			(500	)		—			—			—			(500	)		—		—			—
Stock-based compensation		—		—			1,769			—			—			—			1,769			—		—			—
Retirement of 45 shares of restricted common stock		—		—			(832	)		—			—			—			(832	)		—		—			—
Conversion of 37,000 Class A common stock to 37,000 shares of common stock		9		(9	)		—			—			—			—			—			—		—			—
Conversion of 38 OP Units to 38 shares of common stock		—		—			606			—			—			(606	)		—			—		—			—
Distributions declared ($0.25 per share and OP Unit)		—		—			—			(36,690	)		—			(2,963	)		(39,653	)		—		—			—
Change in fair value of interest rate swap agreements		—		—			—			—			26,602			2,078			28,680			—		—			—
Realized gain on interest rate swap agreements		—		—			—			—			(39	)		(2	)		(41	)		—		—			—
Adjustment to non-controlling interests		—		—			(953	)		—			1,008			(55	)		—			—		—			—
Balance, March 31, 2021	$	36	$	—		$	2,625,320		$	(274,140	)	$	(38,684	)	$	180,165		$	2,492,697		$	—	$	—		$	—


	Common Stock		Class A Common Stock			Additional Paid-in Capital			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 293 shares of common stock and 3,124 shares of mezzanine equity common stock		—		—			6,097			—			—			—			6,097			66,376		—			66,376
Issuance of 5,278 mezzanine non-controlling interests		—		—			—			—			—			—			—			—		112,159			112,159
Adjustment to carrying value of mezzanine equity non-controlling interests		—		—			(2,416	)		—			—			—			(2,416	)		—		2,416			2,416
Distributions declared ($0.33 per share and OP Unit)		—		—			—			(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

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			2021			2020
Operating activities
Net income	$	42,729		$	26,474		$	23,960		$	11,848
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			29,985			30,081
Provision for impairment of investment in rental properties		2,608			-			2,012			2,133
Amortization of debt issuance costs charged to interest expense		1,478			1,136			879			853
Straight-line rent and financing lease adjustments		(12,505	)		(9,736	)
Stock-based compensation expense								1,769			—
Straight-line rent, financing and sales-type lease adjustments								(4,632	)		(1,610	)
Cost of debt extinguishment		5,019			105			126			22
(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								(4,733	)		(7,619	)
Change in fair value of earnout liability								(1,124	)		4,177
Leasing fees paid		(2,597	)		(2,827	)		(286	)		—
Adjustment to provision for credit losses								(1	)		(17	)
Other non-cash items		325			306			192			194
Changes in assets and liabilities:
Changes in assets and liabilities, net of acquisition:
Tenant and other receivables		(237	)		286			582			(353	)
Prepaid expenses and other assets		(440	)		(630	)		1,072			291
Accounts payable and other liabilities		897			5,870			(3,894	)		(5,851	)
Accrued interest payable		3,278			134			5,873			6,170
Net cash provided by operating activities		72,365			52,148			51,780			40,319

Investing activities
Acquisition of rental property accounted for using the operating method		(345,789	)		(367,654	)		(88,532	)		—
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	)		(1,334	)		(48	)
Proceeds from disposition of rental property, net		55,296			15,608			22,105			35,383
Increase in tenant and capital reserves		(130	)		(43	)
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 (used in) provided by investing activities								(67,661	)		4,474

Financing activities
Proceeds from issuance of common stock, net		229,698			186,013
Redemptions of common stock		(4,825	)		(6,487	)
Proceeds from issuance of common stock and Class A common stock, net of offering costs, discounts, and commissions								(173	)		131
Cash paid for deferred offering costs								—			(811	)
Borrowings on unsecured term notes		400,000			95,000			—			60,000
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 and unsecured term notes								(50,802	)		(151,781	)
Borrowings on unsecured revolving credit facility								15,000			167,000
Repayments on unsecured revolving credit facility								—			(11,000	)
Cash distributions paid to stockholders		(32,533	)		(26,060	)		(36,402	)		(29,148	)
Cash distributions paid to non-controlling interests		(5,669	)		(5,275	)		(3,174	)		(2,681	)
Debt issuance and extinguishment costs paid		(9,889	)		(622	)		(946	)		(102	)
Net cash provided by financing activities		217,195			313,898
Net cash (used in) provided by financing activities								(76,497	)		31,608
Net (decrease) increase in cash and cash equivalents and restricted cash								(92,378	)		76,401
Cash and cash equivalents and restricted cash at beginning of period								110,728			20,311
Cash and cash equivalents and restricted cash at end of period							$	18,350		$	96,712

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		$	100,486		$	12,455
Restricted cash at beginning of period								10,242			7,856
Cash and cash equivalents and restricted cash at beginning of period							$	110,728		$	20,311

Cash and cash equivalents at end of period	$	13,698		$	33,003		$	10,205		$	93,151
Restricted cash at end of period								8,145			3,561
Cash and cash equivalents and restricted cash at end of period							$	18,350		$	96,712

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, and 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, 2021, the Corporation owned a diversified portfolio of ~~477~~661 individual ~~net leased~~ commercial properties with 660 properties located in 3741 U.S. states ~~throughout the continental United States.~~and 1 property located 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~~were issued OP Units pursuant to the ~~Operating Company~~Internalization (defined below) or in exchange for ~~membership units of~~their interests in properties acquired by the ~~Operating Company.~~OP. 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~~umbrella partnership real estate investment trust (“UPREIT”). The Corporation, the OP, and its consolidated subsidiaries are collectively referred to as the “Company.”

Prior to February 7, 2020, the Corporation was externally managed by Broadstone Real Estate, ~~Investment Trust~~LLC (“~~UPREIT”~~BRE”).

~~The Corporation operates under~~ and Broadstone Asset Management, LLC (the “Asset Manager”) subject to the direction, oversight, and approval of ~~its~~the Company’s board of directors (the “Board of Directors”), which is responsible for the management and control of the Company’s affairs. The Corporation is externally managed 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 of 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 0 fees were paid under them as a result of the Internalization.

On September 18, 2020, the Corporation effected a 4-for-one stock split on its then outstanding 26,944 shares of common stock (“Common Stock”) that previously had a $0.001 par value. Concurrent with the stock split, the OP effected a four-for-one stock split of its outstanding OP Units. No fractional shares or OP Units were issued as a result of the stock split. All historic share and per share amounts in these Condensed Consolidated Financial Statements have been adjusted to give retroactive effect to the stock split.

On September 21, 2020, the Corporation completed its initial public offering (“IPO”) and issued an aggregate of 37,000 shares of a new class of common stock, $0.00025 par value per share (“Class A Common Stock”) at $17.00 per share, which includes shares issued pursuant to the underwriters’ partial exercise of their over-allotment option on October 20, 2020, pursuant to a registration statement on Form S-11 (File No. 333-240381), as amended, under the Securities Act of 1933, as amended. Shares of Class A Common Stock were listed on the New York Stock Exchange (“NYSE”) under the symbol “BNL.” On March 20, 2021, each share of Class A Common Stock automatically converted into one share of Common Stock, and effective March 22, 2021, all shares of Common Stock were listed and freely tradeable on the NYSE under the symbol “BNL.” See Note 13.

The following table summarizes the outstanding equity and economic ownership interest of the Corporation and the OP:

Refer to Note 15 for further discussion regarding the calculation of weighted average shares outstanding.

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,~~2020, included in the Company’s ~~Amendment No. 2 to its Registration Statement~~2020 Annual Report on Form ~~10,~~10-K, filed with the SEC on ~~June 29, 2017 (the “Form 10”).~~February 25, 2021. 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 and certain other conditions are met, it qualifies for the exemption from providing certain disclosure requirements associated with investments in VIEs.

The portion of the ~~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 the earnout liability, the fair value of assumed debt, ~~and notes payables,~~ 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, 2021 was based on the most current information available to the Company. Based upon current market conditions resulting from the COVID-19 pandemic, 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 each of those properties, the Company believes that their carrying amounts are recoverable and therefore, under applicable GAAP guidance, 0 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~~future. During the three months ended March 31, 2021 and 2020, the Company recorded impairment ~~may need~~charges associated with one property in each respective period. Impairment indicators primarily included changes in the Company’s long-term hold strategy with respect to ~~be recognized.~~the individual properties.

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, 2021 and 2020, the Company recorded impairment charges of ~~$2,608 based on our consideration~~$2,012 and $2,133, respectively.

Restricted cash includes escrow funds the Company maintains pursuant to the terms of certain mortgages, and lease agreements, and undistributed proceeds from the sale of properties under Section 1031 of the ~~factors detailed above. In determining the fair value~~Internal Revenue Code of ~~the assets at the time of measurement, we utilized capitalization rates ranging from 7.25% to 12%~~1986, as amended (the “Code”), and ~~a weighted average discount rate of 8%.~~

~~The Company has reduced the carrying value of the impaired real estate~~is reported within Prepaid expenses and other assets ~~to the estimated fair value as detailed below:~~

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

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

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

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

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, Leases, provisions 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 the Condensedaccompanying Consolidated Statements of Income and Comprehensive Income (Loss). If

The following table summarizes the ~~insurance/tenant recovery is less than the amount of accelerated depreciation recognized, the Company will recognize a net loss~~changes in the Condensed Consolidated Statements of Income and Comprehensive Income (Loss). If the insurance/tenant recovery is greater than the amount of accelerated depreciation recognized, the Company will only recognize a recovery up to the amount of the accelerated depreciation, and will accountprovision 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.~~uncollectible rent:

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

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

~~ASC 820 defines fair value as~~Earnout Liability – In connection with the ~~exchange~~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”). Under the terms of the agreement, the milestones related to either (a) the 40-day dollar volume-weighted average price ~~that would be received for~~of a share of the Company’s common stock (“VWAP per REIT Share”), following the completion of an ~~asset~~IPO of the Company’s common stock, or ~~paid~~(b) the Company’s AFFO per share, prior to ~~transfer a liability (an exit price) in~~ the ~~principal or most advantageous market for the asset or liability in~~completion of an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.IPO.

The ~~standard describes three levels of inputs that may be used~~Company utilizes third-party valuation experts to ~~measure fair value:~~

~~Level 1~~ ~~– Quoted prices that are available~~assist 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~~estimating the fair value of the ~~assets or liabilities. Level 3 includes assets~~earnout liability, and ~~liabilities whose values are determined~~develops estimates by considering weighted-average probabilities of likely outcomes, and using ~~pricing models,~~a Monte Carlo simulation and discounted cash flow ~~methodologies, or similar techniques, as well as instruments for~~analysis. These estimates require the Company to make various assumptions about share price volatility and, prior to the IPO, about the timing of an IPO and net asset prices, each of which are unobservable and considered Level 3 inputs in the ~~determination of~~ fair value ~~requires~~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. Specifically, advancements in the estimated IPO date assumption increased the earnout liability’s fair value given the earnout’s fixed time horizon. Peer share price volatilities are used to estimate the Company’s expected share price volatility, and the Company’s corresponding ability to achieve the earnout targets. Increases in the volatility assumption would increase the earnout liability’s fair value. Increases in net asset values would also increase the earnout liability’s fair value.

The table below provides a summary of the significant ~~management judgment or estimation.~~unobservable inputs used to estimate the fair value of the earnout liability as of March 31, 2021:

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

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

The decrease in fair value subsequent to the Internalization was driven by a lower share price. The decrease was partially offset by an increase in peer stock price volatility, which is attributable to changes in economic circumstances impacting global equity markets.

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

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

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

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 and notes payable,~~Mortgages, 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~~revolving credit facility, which reflects the ~~carrying amount~~fair value of ~~such debt of $910,072 and $869,524 on the Condensed Consolidated Balance Sheets at September 30, 2017 and December 31, 2016, respectively.~~interest rate swaps:

~~As disclosed under the Long-lived Asset Impairment Charges section of Note 2, the~~

The Company’s non-recurring fair value measurements ~~for the three months ended September 30, 2017~~at March 31, 2021 and December 31, 2020 consisted of the fair value of impaired real estate assets that were determined using Level 3 inputs.

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

~~Taxes Collected From Tenants~~lessee under non-cancelable operating leases associated with its corporate headquarters and ~~Remitted to Governmental Authorities~~

~~Substantially all~~other office spaces as well as with leases of ~~the Company’s leases are triple-net, which provide that the lessees are responsible for the payment of all property operating expenses, including property taxes, maintenance and insurance.~~land (“ground leases”). The Company records ~~such expenses on a net basis. For the three months ended September 30, 2017~~right-of-use assets and ~~2016, the Company’s tenants, pursuant to their~~ lease ~~obligations, have made direct payment for property taxes~~liabilities associated with these leases. The lease liability is equal to the ~~taxing authorities~~net present value of ~~approximately $2,448 and $1,609, respectively. For~~ the ~~nine months ended September 30, 2017 and 2016,~~future payments to be made under the ~~Company’s tenants, pursuant to their~~ lease, ~~obligations, have made direct payment for property taxes~~discounted using estimates based on observable market factors. The right-of-use asset is generally equal to the ~~taxing authorities~~lease liability plus initial direct costs associated with the leases. The Company includes in the recognition of ~~approximately $13,405~~the right-of-use asset and ~~$11,176, respectively.~~

~~In some situations,~~lease liability those renewal periods that are reasonably certain to be exercised, based on the ~~Company may collect property taxes from its tenants~~facts and ~~remit those taxes to governmental authorities. Taxes collected from tenants~~circumstances that exist at lease inception. Amounts associated with percentage rent provisions are considered variable lease costs and ~~remitted to governmental authorities~~ are ~~presented on a gross basis, where revenue of $608 and $551 is~~not included in ~~Operating expenses reimbursed~~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, not to separate lease from ~~tenants~~nonlease components when allocating contract consideration related to operating leases.

Right-of-use assets and ~~expense of $885 and $718 is~~lease liabilities associated with operating leases were included in ~~Property~~the accompanying Condensed Consolidated Balance Sheets as follows:

The Company has issued restricted stock awards (“RSAs”) and ~~operating~~performance-based restricted stock units (“PRSUs”) under its 2020 Omnibus Equity and Incentive Plan (the “Equity Incentive Plan”). The Company accounts for stock-based incentives in accordance with ASC 718, Compensation – Stock Compensation, which requires that such compensation be recognized in the financial statements based on the award’s estimated grant date fair value. The value of such awards is recognized as compensation expense in General and administrative expenses in the ~~accompanying~~ Condensed Consolidated Statements of Income and Comprehensive Income (Loss) ~~for~~over the ~~three months ended September 30, 2017 and 2016, respectively. Taxes collected from tenants were $1,787 and $1,379, while taxes remitted~~appropriate vesting period on a straight-line basis or at the cumulative amount vested at each balance sheet date, if greater. The Company records forfeitures during the period in which they occur by reversing all previously recorded stock compensation expense associated with the forfeited shares. Dividends declared on RSAs issued under the Equity Incentive Plan are recorded as Cumulative distributions in excess of retained earnings on the Condensed Consolidated Balance Sheets. Accumulated dividends related to ~~governmental authorities were $2,084 and $1,442 for~~forfeited RSAs will be reversed through compensation expense in the ~~nine months ended September 30, 2017 and 2016, respectively.~~period the forfeiture occurs. Dividends accrued on the PRSUs are recorded as Cumulative distributions in excess of retained earnings on the Condensed Consolidated Balance Sheets. Accumulated dividends accrued related to forfeited PRSUs are reversed in the period the forfeiture occurs.

In January ~~2017,~~2021, the Financial Accounting Standards ~~Boards~~Board (“FASB”) issued ~~ASU 2017-01,~~ ~~Business Combinations~~Accounting Standards Update (“ASU”) 2021-01, Reference Rate Reform (Topic ~~805)~~848): ~~Clarifying the Definition of a Business~~ ~~(“ASU 2017-01”)~~Scope, which ~~changes~~refines the ~~definition~~scope of ASC 848, to include all derivative contracts subject to a ~~business~~transition for discounting cash flows, for computing variation margin settlements, and for calculating price alignment interest (PAI) as a result of reference rate reform (the “discounting transition”). ASU 2021-01 gives market participants the ability to ~~exclude acquisitions where substantially all~~apply certain aspects of the ~~fair value~~contract modification and hedge accounting expedients to derivative contracts affected by a discounting transition. ASU 2021-01 permits an entity to elect certain hedging relief if it has designated a derivative as a hedging instrument in a hedging relationship and the terms of the assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets. Under ASU 2017-01, the Company expects that most of its investments in real estate will be considered asset acquisitions. While there are various differences between accounting for an asset acquisition and a business combination, the largest impact is the capitalization of acquisition expenses for asset acquisitions, which are expensed for business combinations. ASU 2017-01 is effective, on a prospective basis, for interim and annual periods beginning after January 1, 2019, with early adoption permitted. The Company adopted the guidance, effective January 1, 2017. Asderivative have changed as a result of the ~~adoption,~~discounting transition. The Company will apply the ~~Company capitalized $6,583 of acquisition costs~~amendments in ~~connection with investments in real estate closed during the nine months ended September 30, 2017 that qualified as asset acquisitions under the adopted guidance.~~ASU 2021-01 related to contract modifications and hedging relationships prospectively.

In ~~November 2016,~~August 2020, the FASB issued ASU ~~2016-18,~~ ~~Statement~~2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The guidance in ASU 2020-06 simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. In addition, the amendments in ASU 2020-06 also simplify the guidance in ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must be satisfied in order to classify a contract as equity, which is expected to decrease the number of ~~Cash Flows—Restricted Cash.~~ ~~ASU 2016-18 requires~~freestanding instruments and embedded derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that ~~the statement of cash flows explain the change during the period~~may be settled in ~~the total of cash, cash equivalents, and amounts generally described as restricted~~ cash or ~~cash equivalents. Therefore, amounts generally described as restricted cash and equivalents should be included with cash and cash equivalents when reconciling~~other assets. The amendments in ASU 2020-06 are effective for the beginning and end of period total amounts on the statement of cash flows. Currently, there is no specific guidance to address how to classify or present these changes. ASU 2016-18 is effective, on a retrospective basis,Company for ~~interim and annual periods~~fiscal years beginning after December 15, ~~2017, with early~~2021. 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~~is permitted, 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 periodsno earlier than fiscal years beginning after December 15, ~~2017, with early adoption permitted.~~2020. The ~~Company has assessed the impact~~guidance must be adopted as 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 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.~~fiscal year of adoption. 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. The Company expects to adopt the guidance using the modified retrospective approach on January 1, 2018. The Company will, however, continue to evaluatecurrently evaluating the impact of this ~~guidance until it becomes effective.~~

~~In February 2017, the FASB issued ASU 2017-05,~~ ~~Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets.~~ ~~This~~ new guidance is required to be adopted concurrently 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. The Company 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. The Company expects to adopt the guidance using the modified retrospective approach on January 1, 2018. The Company will, however, continue to evaluate the impact of this guidance until it becomes effective.guidance.

~~The Corporation and~~Prior to the ~~Operating Company have entered into a property management agreement (the “Property Management Agreement”) with the Manager,~~Internalization on February 7, 2020, BRE, a related party in which certain ~~officers and~~ directors of the Corporation ~~have~~had either a direct or indirect ownership ~~interest. Under~~interest, and the ~~terms of~~Asset Manager were considered to be related parties.

In connection with the ~~Property Management Agreement,~~Internalization, the ~~Manager manages and coordinates~~Company incurred a contingent obligation that would be payable to certain ~~aspects of the leasing~~members of the Company’s ~~rental property.~~

~~In exchange for various services provided under the Property Management Agreement, the Manager is compensated as outlined in the agreement.~~

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 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. The Corporation’s Independent Directors Committee (“IDC”) has approved the renewal of the Property Management Agreement through December 31, 2018. If the Corporation terminates the Property Management Agreement prior to any renewal term or the IDC terminates the agreement within 30 days following a change in control of the Manager (as defined in Property Management Agreement), the Corporation will be required to pay to the Manager a termination fee equal to three times the Management Fees, as defined in the Property Management Agreement, to which the Manager was entitled during the 12 month 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.

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

~~Under the terms~~occurrence of ~~the Asset Management Agreement, the Asset Manager receives an annual asset management fee (“Asset Management Fee”) equal to 1%~~certain events (see Note 4). The earnout consideration at March 31, 2021, consisted of ~~the aggregate value~~$6,385 recorded as Earnout liability, $11,380 recorded as a component of ~~the Corporation’s common stock, based on the Determined Share Value (as defined in Note 13)~~Additional paid-in capital, and $19,430 recorded as ~~determined by the IDC each quarter, on~~ a ~~fully diluted basis as if all~~component of Non-controlling interests in the Operating Company had been converted into shares of the Corporation’s common stock. Through December 31, 2017, compensation to the Asset Manager for any quarter will be deferred in whole or in part at any time during a rolling 12 month period when cumulative distributions are below $3.50 per share. Any deferred compensation under the Asset Management Agreement will accrue interest at the rate of 7% per annum until paid and will be paid from available funds after cumulative 12 month distributions equal $3.50 per share. No compensation to the Asset Manager was deferred during the nine months ended September 30, 2017 and 2016. In addition, the Company pays the Asset Manager, or its designee, a marketing fee equal to 0.5% of all contributions of cash or property to the Corporation or the Operating Company, excluding reinvestments of distributions pursuant to the Distribution Reinvestment Plan (See Note 13), as compensation for its internal and third party offering and marketing costs and expenses. The Asset Manager has the responsibility to cover offering, marketing, and brokerage expenses associated with investor related matters of the Corporation and Operating Company.

~~The Asset Management Agreement includes various other fees paid to the Asset Manager in exchange for services provided under the agreement, as noted in the table below.~~

The initial term of the Asset Management Agreement is effective through December 31, 2017, after which it automatically renews for successive one year periods, unless either party provides 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 as follows:

~~Included in management fees are $1,688 and $364 of unpaid fees recorded in Due to related parties~~ on the Condensed Consolidated Balance ~~Sheets~~Sheets. The earnout consideration at ~~September 30, 2017~~March 31, 2020, consisted of $44,296 recorded as Earnout liability on the Condensed Consolidated Balance Sheets.

On February 7, 2020, the Company completed the Internalization and ~~December~~the Company’s management team and corporate staff, who were previously employed by BRE, became employees of an indirect subsidiary of the OP. The effect of the Internalization has been reflected in the Company’s operating results beginning on February 7, 2020.

The following pro forma information summarizes selected financial information from the Company’s combined results of operations, as if the Internalization had occurred on January 1, 2019. These results contain certain adjustments totaling $5,646 of income for the three months ended March 31, ~~2016, respectively. All~~2020. 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 results, and adjustments to reflect compensation and related costs, incremental general and administrative expenses related to the ~~Property Management Agreement~~Internalization, and incremental interest expense associated with the ~~Asset Management Agreement are paid~~borrowing related to the Internalization. This pro forma information is presented for ~~in cash within~~informational purposes only, and may not be indicative of what actual results of operations would have been had the ~~Company’s normal payment cycle for vendors.~~

~~The Company retains~~Internalization occurred at the ~~legal services of Vaisey Nicholson & Nearpass, PLLC (“VNN”), formerly a related party. One former minority partner of VNN is an immediate family member to a member~~beginning of the ~~management~~period, nor does it purport to represent the results of the Company and an indirect minority owner of the Manager. Beginning January 2017, the family member was no longer an owner or partner of VNN and therefore, prospectively, VNN will no longer be deemed a related party. Legal services obtained from VNN are mainly for acquisition and disposition of real estate related matters,future operations.

The condensed pro forma financial information is as well as general counsel regarding property management and financing. The IDC has reviewed the billings and other aspects of the relationship between VNN and the Company. The Company utilizes the services of other outside legal counsel as well. These fees are paid for in cash within the Company’s normal payment cycle for vendor payments. Included in these expenses are $527 of unpaid fees recorded in Accounts payable and other liabilities at September 30, 2016. The following table details the type of legal fees incurred from VNN for the three and nine months ended September 30, 2016:follows:

The Company closed on the following acquisitions during the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2021:

(in thousands, except number of properties)

Date

Tenant Type

Number of
Properties

Real Estate
Acquisition
Price

January 18, 2017

Retail

1

$
2,520

March 1, 2017

Retail

9

87,196

April 28, 2017

Retail

25

48,898

June 2, 2017

Retail

2

13,300

June 15, 2017

Retail

2

2,700

June 30, 2017

Industrial

2

12,250

June 30, 2017

Office

7

25,989

July 7, 2017

Office

1

32,210

August 4, 2017

Healthcare

3

11,732

August 31, 2017

Healthcare

3

16,700

August 31, 2017

Industrial

2

6,148

September 13, 2017

Retail

5

4,994

September 29, 2017

Industrial/Retail

7

30,012

September 29, 2017

Industrial

1

57,372

70

$
352,021

^(a)

(in thousands, except number of properties)		Number of		Real Estate
Date	Property Type	Properties		Acquisition Price
February 5, 2021	Healthcare		1	$	4,843
February 26, 2021	Restaurant	^(a)		$	181
March 11, 2021	Retail		13	$	26,834
March 30, 2021	Retail		11		41,324
March 31, 2021	Healthcare		3		14,140
			28	$	87,322	^(b)

The Company ~~closed on the following~~did 0t complete any acquisitions of rental property during the ~~nine~~three months ended ~~September 30, 2016:~~March 31, 2020.

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

The above acquisitions were funded using a combination of available cash on hand and ~~proceeds from the Company’s unsecured~~ revolving ~~line of credit.~~credit facility borrowings. All ~~of the~~real estate acquisitions closed during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021, qualified as asset acquisitions and, as such, acquisition costs were capitalized in accordance with ASU 2017-01. In conjunction with the acquisitions closed during the nine months ended September 30, 2016, expenses of $2,233 and $7,614 for the three and nine months ended September 30, 2016 were incurred and included in Acquisition expenses in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income (Loss). From the date of acquisition through September 30, 2016, the Company recorded revenues of $5,173 and $8,515 for the three and nine months ended September 30, 2016, respectively, related to the properties acquired and accounted for as business combinations, and recognized net income of $2,655 and $5,204 for the three and nine months ended September 30, 2016, excluding the impact of one-time acquisition expenses from the date of acquisition through September 30, 2016.

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

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

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

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

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, 2021, the Company had ~~462~~644 real estate properties which were leased under leases that have been classified as operating leases, ~~and 15~~10 that have been classified as direct financing ~~leases.~~leases, and 1 that has been classified as a sales-type lease. Of the 1510 leases classified as direct financing leases, ~~five~~3 include land portions which are accounted for as operating ~~leases (see~~ ~~Revenue Recognition~~ ~~within Note 2).~~leases. The sales-type lease includes a land portion which is accounted for as an operating lease. 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:

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, 2021 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:

~~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, 2021 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 Income (Loss):

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

Amortization expense for ~~acquired in-place leases and fees was $3,043 and $2,318~~the three months ended March 31, 2020, includes $577 of accelerated amortization resulting from early lease terminations, compared to NaN 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. March 31, 2021.

Estimated future amortization of intangible assets and liabilities at ~~September 30, 2017~~March 31, 2021 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, 2021			December 31, 2020			Interest Rate^{(c) (d)}	Maturity Date
Unsecured revolving credit facility^(a)	$	15,000		$	—		daily LIBOR + 1.00% ^(e)	Sep. 2023
2022 Unsecured Term Loan^(a)		60,000			60,000		one-month LIBOR + 1.00% ^(f)	Feb. 2022
2023 Unsecured Term Loan^(a)		265,000			265,000		one-month LIBOR + 1.10% ^(g)	Jan. 2023
2024 Unsecured Term Loan^(a)		190,000			190,000		one-month LIBOR + 1.00% ^(f)	Jun. 2024
2026 Unsecured Term Loan^(a)		400,000			450,000		one-month LIBOR + 1.00% ^(h)	Feb. 2026
Senior Notes^(a)
Series A		150,000			150,000		4.84%	Apr. 2027
Series B		225,000			225,000		5.09%	Jul. 2028
Series C		100,000			100,000		5.19%	Jul. 2030
		475,000			475,000
Total		1,405,000			1,440,000
Debt issuance costs, net^(b)		(6,717	)		(6,204	)
	$	1,398,283		$	1,433,796

At ~~September 30, 2017 and December~~March 31, ~~2016,~~2021, the weighted average interest rate on all outstanding borrowings was ~~2.96%~~2.45%, exclusive of interest rate swap agreements.

On March 12, 2021, the Company amended the 2026 Unsecured Term Loan and ~~2.14%, respectively.~~made a $50,000 paydown on the loan. Prior to the amendment, the borrowings under the 2026 Unsecured Term Loan were subject to interest at variable rates based on LIBOR plus a margin based on the OP’s current credit rating ranging between 1.45% and 2.40% per annum with the applicable margin being 1.60% immediately prior to the amendment. The amendment reduced the margin to a range between 0.85% and 1.65% per annum and based on the OP’s credit rating of BBB, the applicable margin was 1.0% beginning March 12, 2021. All other terms and conditions of the 2026 Unsecured Term Loan remained materially the same as those in effect prior to this amendment.

~~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, 2021, the Company paid ~~$8,344~~$951 in debt issuance costs associated with the ~~Senior Notes, the Credit Agreement with M&T as Administrative Agent, and the Amended and Restated~~amended 2026 Unsecured Term ~~Loan Agreement with SunTrust Bank.~~Loan. 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~~the assessment, ~~$5,443~~$946 of ~~the~~ debt issuance costs incurred in the three months ended March 31, 2021, were deemed to be related to ~~new~~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, $126 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, 2021, 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~~.

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.~~. 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, 2021, the Company believes it was in compliance with all of its loan covenants. Failure to comply with the covenants would result in a default which, if the Company were unable to cure or obtain a waiver from the lenders, could accelerate the repayment of the obligations. Further, in the event of default, the Company may be restricted from paying dividends to its stockholders in excess of dividends required to maintain its REIT qualification. Accordingly, an event of default could have a material and adverse impact on the Company.

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

(in thousands, except interest rates)

Origination
Date

Maturity Date

September 30,

December 31,

Lender

(Month/Year)

(Month/Year)

Interest Rate

2017

2016

(1)
M&T Bank

Dec-10

Apr-20

1 month
LIBOR+1.90%

$
-

$
21,335

(b) (f) (g)
(2)
Sun Life

Mar-12

Oct-21

5.13%

11,763

12,036

(b) (i)
(3)
Aegon

Apr-12

Oct-23

6.38%

9,330

9,804

(b) (j)
(4)
Legg Mason Mortgage Capital Corporation

Aug-10

Aug-22

7.06%

5,900

6,538

(b) (e)
(5)
Columbian Mutual Life Insurance Company

Aug-10

Sep-25

7.00%

1,510

1,538

(b) (c) (d)
(6)
Symetra Financial

Mar-11

Apr-31

6.34%

1,015

1,036

(a) (b)
(7)
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)
(9)
Siemens Financial Services, Inc.

Sep-10

Sep- 20

5.47%

5,869

6,010

(a) (b)
(10)
Standard Insurance Co.

Apr-09

May-34

6.88%

1,827

1,870

(b) (c) (h)
(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

(689
)

(838
)

$
57,883

$
106,686

	Origination	Maturity
(in thousands, except interest rates)	Date	Date	Interest	March 31,			December 31,
Lender	(Month/Year)	(Month/Year)	Rate	2021			2020
Wilmington Trust National Association	Apr-19	Feb-28	4.92%	$	47,646		$	47,945		^{(a) (b) (c) (j)}
Wilmington Trust National Association	Jun-18	Aug-25	4.36%		19,848			19,947		^{(a) (b) (c) (i)}
PNC Bank	Oct-16	Nov-26	3.62%		17,396			17,498		^{(b) (c)}
Sun Life	Mar-12	Oct-21	5.13%		10,361			10,469		^{(b) (e)}
Aegon	Apr-12	Oct-23	6.38%		6,846			7,039		^{(b) (f)}
M&T Bank	Oct-17	Aug-21	one - month LIBOR+3%		4,733			4,769		^{(b) (d) (g) (h)}
					106,830			107,667
Debt issuance costs, net					(271	)		(285	)
				$	106,559		$	107,382

At ~~September 30, 2017,~~March 31, 2021, investment in rental property of ~~$91,326 is~~$172,440 was pledged as collateral against the Company’s ~~mortgages and notes payable.~~mortgages.

The Company extinguished six and four mortgages totaling $46,804 and $8,199, during 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, 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.

Estimated future principal payments to be made under the above ~~mortgage and note payable agreements,~~mortgages and the Company’s unsecured credit agreements (see Note 8)9) at ~~September 30, 2017~~March 31, 2021 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, 2021			December 31, 2020
Bank of America, N.A.	November 2023		2.80%	LIBOR 1 month	$	25,000	$	(1,177	)		November 2023		2.80	%	one-month LIBOR	$	25,000	$	(1,622	)	$	(1,848	)
Bank of Montreal	July 2024		1.16%	LIBOR 1 month		40,000		2,147			July 2024		1.16	%	one-month LIBOR		40,000		(896	)		(1,380	)
Bank of Montreal	January 2025		1.91%	LIBOR 1 month		25,000		193			January 2025		1.91	%	one-month LIBOR		25,000		(1,236	)		(1,725	)
Bank of Montreal	July 2025		2.32%	LIBOR 1 month		25,000		(490	)		July 2025		2.32	%	one-month LIBOR		25,000		(1,696	)		(2,351	)
Bank of Montreal	January 2026		1.92%	LIBOR 1 month		25,000		297			January 2026		1.92	%	one-month LIBOR		25,000		(1,271	)		(2,039	)
Bank of Montreal	January 2026		2.05%	LIBOR 1 month		40,000		84			January 2026		2.05	%	one-month LIBOR		40,000		(2,277	)		(3,523	)
Bank of Montreal	December 2026		2.33%	LIBOR 1 month		10,000		(175	)		December 2026		2.33	%	one-month LIBOR		10,000		(720	)		(1,156	)
Capital One, N.A.	December 2021		1.05%	LIBOR 1 month		15,000		487
Capital One, N.A.	December 2024		1.58%	LIBOR 1 month		15,000		459
Capital One, N.A.	January 2026		2.08%	LIBOR 1 month		35,000		39
Capital One, N.A.	July 2026		1.32%	LIBOR 1 month		35,000		2,289
Bank of Montreal											December 2026		1.99	%	one-month LIBOR		25,000		(1,314	)		(2,372	)
Bank of Montreal											December 2027		2.37	%	one-month LIBOR		25,000		(1,858	)		(3,234	)
Bank of Montreal											May 2029		2.09	%	one-month LIBOR		25,000		(1,286	)		(2,994	)
Capital One, National Association											December 2021		1.05	%	one-month LIBOR		15,000		(105	)		(141	)
Capital One, National Association											December 2024		1.58	%	one-month LIBOR		15,000		(553	)		(799	)
Capital One, National Association											January 2026		2.08	%	one-month LIBOR		35,000		(2,035	)		(3,078	)
Capital One, National Association											April 2026		2.68	%	one-month LIBOR		15,000		(1,325	)		(1,843	)
Capital One, National Association											July 2026		1.32	%	one-month LIBOR		35,000		(639	)		(1,806	)
Capital One, National Association											December 2027		2.37	%	one-month LIBOR		25,000		(1,860	)		(3,199	)
M&T Bank											August 2021		1.02	%	one-month LIBOR		4,731		(14	)		(25	)	^{(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		(960	)		(1,139	)
M&T Bank	November 2023		2.65%	LIBOR 1 month		25,000		(1,023	)		November 2023		2.65	%	one-month LIBOR		25,000		(1,524	)		(1,785	)
Regions Bank	March 2018		1.77%	LIBOR 1 month		25,000		(46	)		December 2023		1.18	%	one-month LIBOR		25,000		(576	)		(763	)
Regions Bank	March 2019		1.91%	LIBOR 3 month		25,000		(106	)		May 2029		2.11	%	one-month LIBOR		25,000		(1,324	)		(3,004	)
Regions Bank	May 2020		2.12%	LIBOR 1 month		50,000		(562	)		June 2029		2.03	%	one-month LIBOR		25,000		(1,167	)		(2,843	)
Regions Bank	March 2022		2.43%	LIBOR 3 month		25,000		(550	)
Regions Bank	December 2023		1.18%	LIBOR 1 month		25,000		1,178
SunTrust Bank	April 2024		1.99%	LIBOR 1 month		25,000		(63	)
SunTrust Bank	April 2025		2.20%	LIBOR 1 month		25,000		(332	)
SunTrust Bank	July 2025		1.99%	LIBOR 1 month		25,000		72
SunTrust Bank	January 2026		1.93%	LIBOR 1 month		25,000		248
Truist Financial Corporation											April 2024		1.99	%	one-month LIBOR		25,000		(1,200	)		(1,487	)
Truist Financial Corporation											April 2025		2.20	%	one-month LIBOR		25,000		(1,543	)		(2,084	)
Truist Financial Corporation											July 2025		1.99	%	one-month LIBOR		25,000		(1,345	)		(1,941	)
Truist Financial Corporation											December 2025		2.30	%	one-month LIBOR		25,000		(1,719	)		(2,481	)
Truist Financial Corporation											January 2026		1.93	%	one-month LIBOR		25,000		(1,280	)		(2,019	)
U.S. Bank National Association											June 2029		2.03	%	one-month LIBOR		25,000		(1,174	)		(2,902	)
U.S. Bank National Association											August 2029		1.35	%	one-month LIBOR		25,000		239			(1,445	)
Wells Fargo Bank, N.A.											February 2021		2.39	%	one-month LIBOR		35,000		—			(70	)
Wells Fargo Bank, N.A.											October 2024		2.72	%	one-month LIBOR		15,000		(1,154	)		(1,422	)
Wells Fargo Bank, N.A.	February 2021		2.39%	LIBOR 1 month		35,000		(739	)		April 2027		2.72	%	one-month LIBOR		25,000		(2,388	)		(3,555	)
Wells Fargo Bank, N.A.	October 2024		2.72%	LIBOR 1 month		15,000		(706	)		January 2028		2.37	%	one-month LIBOR		75,000		(5,601	)		(9,650	)
					$	640,000	$	374										$	(43,423	)	$	(72,103	)

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

The total ~~loss~~amounts recognized, and the location ~~of the loss~~ in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income (Loss), from converting from variable rates to fixed rates under these agreements 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 $15,776. 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, 2021. The Company has not experienced losses relating to these deposits and management does not believe that the Company is exposed to any significant credit risk with respect to these amounts.

The Company’s rental property is managed by the Manager and the Asset Manager as described in Note 3. Management fees and expense reimbursements paid to the Manager and Asset Manager represent 21% and 26% of the Company’s total operating expenses for the three months ended September 30, 2017 and 2016, and 21% and 25% of the Company’s total operating expenses for the nine months ended September 30, 2017 and 2016, respectively. The Company has mortgages ~~and notes payable~~ with ~~five~~three institutions that ~~comprise 32%, 20%~~comprised 63%, 16%~~, 10%~~, and 10% of total mortgages ~~and notes payable~~ at ~~September 30, 2017. The Company has mortgages~~March 31, 2021 and ~~notes payable with four institutions that comprise 20%, 18%, 12%, and 11% of total mortgages and notes payable at~~ December 31, ~~2016.~~2020. For the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, the Company had no0 individual tenants or common franchises that accounted for more than 10% of total revenues.

~~Pursuant~~On September 21, 2020, the Corporation completed its IPO and issued 37,000 shares of Class A Common Stock inclusive of the underwriters’ partial exercise of their over-allotment option on October 20, 2020.

Aside from the conversion discussed below, the terms of the Class A Common Stock were identical to the ~~Corporation’s Articles~~terms of ~~Incorporation (the “Charter”),~~ the ~~Corporation is authorized to issue an aggregate~~Common Stock. Each share of ~~100,000~~Class A Common Stock automatically converted into one share of Common Stock on March 20, 2021, and effective March 22, 2021, all shares of ~~capital stock, consisting of 80,000 shares designated~~Common Stock were listed and freely tradeable on the NYSE under the ticker “BNL.” The Common Stock and Class A Common Stock are collectively referred to 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~~“common stock.”

On March 1, 2021 and August 4, 2020, the ~~Charter from time to time to increase or decrease the aggregate number of~~Company awarded 199 and 341 shares of ~~capital stock or~~RSAs, respectively, under the ~~number~~Equity Incentive Plan to certain officers and employees. The holder of ~~shares~~RSAs is generally entitled at all times on and after the date of ~~capital stock of any class or series that the Corporation has authority to issue.~~

~~The shares~~issuance of the ~~Corporation’s~~restricted common ~~stock entitle~~shares to exercise the ~~holders~~rights of a stockholder of the Company, including the right to ~~one~~ vote ~~per share on all matters upon which stockholders are entitled to vote,~~the shares and the right to receive dividends on the shares. The March 1, 2021 RSAs vest over a one, three or four year period from the date of grant. The August 4, 2020 RSAs vest over a three or four year period from the anniversaries of February 7, 2020. The vesting for the RSAs is subject to the employee’s continued service through the applicable vesting dates and ~~other distributions as authorized~~in accordance with the terms of the individual award agreements. The August 4, 2020 grant date fair value per share of $20.50 was based on the determined share value established by the Board of Directors ~~in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant~~(“Determined Share Value”). Prior to the ~~Maryland General Corporation Law. The~~IPO, the Company sold shares of 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, subjectin a private offering at a price equal to the ~~terms and conditions set forth in the Operating Company’s operating agreement.~~

~~The Charter also provides~~Determined Share Value, which was established at least quarterly by the Board of Directors ~~with~~based on the ~~authority to issue one or more classes or series~~net asset value (“NAV”) of ~~preferred stock,~~the Company’s portfolio, input from management and ~~prior to the issuance of~~third-party consultants, and such ~~shares of preferred stock,~~other factors as 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 sharesdetermined. The Company’s NAV was calculated using its established valuation process, starting with an estimate of the ~~Corporation’s preferred stock were issued and outstanding.~~

~~In 2009,~~fair value of the ~~Board~~properties in the portfolio as of ~~Directors approved~~that date based upon, among other factors, the implied market price for each asset based upon a review of market capitalization rates. The March 1, 2021 grant date fair value per share ~~redemption program (“Share Redemption Program”) under which~~of $18.66 was based on the ~~Corporation may repurchase shares~~market price of ~~its outstanding~~the Company’s common stock ~~after December 31, 2009. The Board of Directors approved and adopted an amended and restated Share Redemption Program effective as of June 28, 2017.~~

~~Under~~on 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.grant date.

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

The following table ~~summarizes redemptions~~presents information about the Company’s RSAs:

On March 1, 2021, the Company issued target grants of 132 PRSUs under the ~~Share Redemption Program for~~Equity Incentive Plan to the officers of the Company. The awards are non-vested restricted stock units where the vesting percentages and the ultimate number of units vesting will be measured 50% based on the relative total shareholder return (“rTSR”) of the Company’s common stock as compared to the rTSR of peer companies over a three-year period, as identified in the grant agreements, and 50% based on the rTSR of the Company’s common stock as compared to the rTSR of the MSCI US REIT Index over a three year measurement period. The payout schedules can produce vesting percentages ranging from 0% to 200% with a target of 100%. rTSR means the percentage appreciation in the fair market value of one share over the three-year measurement period beginning on the date of grant, assuming the reinvestment of dividends on the ex-dividend date. The target number of units is based on achieving a rTSR equal to the 55^th percentile of the peer companies and ~~nine months ended September 30, 2017~~MSCI US REIT Index. Dividends accrue during the measurement period and ~~2016:~~will be paid on the PRSUs ultimately earned at the end of the measurement period in either cash or common stock, at the direction of the Board’s Compensation Committee. The grant date fair value of the PRSUs was measured using a Monte Carlo simulation model based on assumptions including share price volatility.

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

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,

(in thousands, except per share)

2017

2016

2017

2016

Basic earnings:

Net earnings attributable to Broadstone Net Lease, Inc.

$
11,948

$
13,958

$
39,269

$
23,874

Diluted earnings:

Net earnings attributable to Broadstone Net Lease, Inc.

$
11,948

$
13,958

$
39,269

$
23,874

Net earnings attributable to non-controlling interests

1,042

1,459

3,460

2,600

$
12,990

$
15,417

$
42,729

$
26,474

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

Effects of convertible membership units

1,530

1,427

1,462

1,416

Weighted average number of common shares outstanding used in
diluted earnings per share

19,147

15,074

18,069

14,154

Basic and diluted net earnings per common share

$
0.68

$
1.02

$
2.36

$
1.87

	For the Three Months Ended March 31,
(in thousands, except per share amounts)	2021			2020
Basic earnings:
Net earnings attributable to Broadstone Net Lease, Inc. common shareholders	$	22,223		$	10,816
Less earnings allocated to unvested restricted shares		(104	)		—
Net earnings used to compute basic earnings per common share	$	22,119		$	10,816


Diluted earnings:
Net earnings used to compute basic earnings per share	$	22,119		$	10,816
Net earnings attributable to non-controlling interests		1,737			1,032
Net earnings used to compute diluted earnings per common share	$	23,856		$	11,848

Weighted average number of common shares outstanding		145,672			106,108
Less weighted average unvested restricted shares ^(a)		(334	)		—
Weighted average number of common shares outstanding used in basic earnings per common share		145,338			106,108
Effects of convertible membership units ^(b)		11,386			10,102
Weighted average number of common shares outstanding used in diluted earnings per common share		156,724			116,210

Basic earnings per share	$	0.15		$	0.10
Diluted earnings per share	$	0.15		$	0.10

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

Cash paid for interest was ~~$20,364~~$9,397 and ~~$16,430~~$14,010 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively. Cash paid for ~~state~~ income ~~and franchise~~ taxes was ~~$751~~$237 and ~~$323~~$195 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, 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~~costs 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. 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, and in the case of the Founding Owners’ Tax Protection Agreement, the entire Company, in a taxable transaction that would cause such beneficiaries to recognize a gain that is protected under the agreements, subject to certain exceptions. The Company is required to allocate an amount of nonrecourse liabilities to each beneficiary that ~~provided for a total of $11,464~~is at least equal to the minimum liability amount, as contained in ~~tenant improvement allowances. During~~ the ~~nine months ended September 30,2017~~agreements. The minimum liability amount and the ~~year ended December~~associated allocation of nonrecourse liabilities are calculated in accordance with applicable tax regulations, are completed at the OP level, and do not represent GAAP accounting. Therefore, there is no impact to the Condensed Consolidated Financial Statements. Based on values as of March 31, ~~2016, payments~~2021, taxable sales of ~~$3,863 and $974, respectively, have been made for work completed~~the applicable properties would trigger liability under ~~these allowances,~~the agreements of approximately $22,300. Based on information available, the Company does not believe that the 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 to fire damage. Management anticipates that the proceeds received from insurance will exceed the book value of the property destroyed, and accordingly a gain on insurance settlement may be recorded in a future period upon receipt of funds.foreseeable future.

Subsequent to ~~September 30, 2017,~~the Internalization, the Company ~~has raised $18,443~~leases office space for ~~a total of 231 shares~~its corporate headquarters and other locations under non-cancellable operating leases with expiration dates ranging from 2021 to 2023. These leases contain provisions for fixed monthly payments, subject to rent escalations. None of the ~~Corporation’s common stock through~~leases are subject to any sublease agreement. The lease for the corporate headquarters is with an affiliated third party.

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 ~~equity closings, including dividend reinvestments, and $4,635 for a total of 58 units~~payments, subject to rent escalations. One lease requires the Company to make annual rent payments calculated based upon sales generated at the property (“percentage rent”). None of the ~~Operating Company’s membership interest through an UPREIT transaction. Through November 13, 2017,~~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 Net cash provided by operating activities on the accompanying Condensed Consolidated Statements of Cash Flows:

Estimated future lease payments required under non-cancelable operating leases at March 31, 2021, and a 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 become due in future periods.

On April 15, 2021, the Company ~~has~~ paid ~~$8,099 in~~ distributions ~~including dividend reinvestments.~~

Subsequent to September 30, 2017, the Company continued to expand its operations through the acquisition of additional rental property and associated intangible assets and liabilities. The Company acquired approximately $25,693 of rental property and associated intangible assets and liabilities (see Note 4), and assumed $11,933 of liabilities.totaling $39,293.

On ~~November 7, 2017,~~April 30, 2021, the Board of Directors declared a quarterly distribution of ~~$0.415~~$0.255 per share on the ~~Corporation’s~~Company’s common stock and ~~approved a distribution~~OP Units for the second quarter of ~~$0.415 per membership unit of the Operating Company for monthly distributions through January 2018. The distributions are~~2021, which will be payable on or ~~prior~~before July 15, 2021 to ~~the 15th of the following month to the Corporation’s common~~ stockholders and ~~the Operating Company’s~~ unit holders of record as of June 30, 2021.

Subsequent to March 31, 2021, the Company drew additional borrowings on the ~~last day~~Revolving Credit Facility in the aggregate amount of the month. In addition, the IDC determined the Determined Share Value for the Corporation’s common stock to be $81.00 per share for subscription agreements received from November 1, 2017 through January 31, 2018.

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 Quarterly Report on 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.~~ statements.

Important factors that could cause ~~actual~~ 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~~2020 Annual Report on Form ~~10,~~10-K, as filed with the SEC on ~~June 29, 2017 (the “Form 10”).~~February 25, 2021. The “Risk Factors” of our 2020 Annual Report should not be construed as exhaustive and should be read in conjunction with other cautionary statements included elsewhere in this Quarterly Report on Form 10-Q.

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.

Unless the context otherwise requires, the following terms and phrases are used throughout this MD&A 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. As of March 31, 2021, our portfolio has grown to 661 properties, with 660 properties located in 41 U.S. states and one property located in British Columbia, Canada.

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. We target properties that 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 lookfor which there are therefore 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.~~

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 moreoperations rather than ~~5% of our annual rental stream.~~real estate ownership.

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

We operate under the direction of our board of directors, which is responsible for the management and control of our affairs. Our board of directors has retained 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 directly or indirectly by, Broadstone Net Lease, LLC (the “Operating Company”). We are the sole managing member of the Operating Company and as of September 30, 2017, we owned approximately 92.3% of its issued and outstanding membership units, with the remaining 7.7% of its membership units held by persons who were issued membership units in exchange for their interests in properties acquired by the Operating Company.

~~As we conduct substantially all of our operations through the Operating Company, we are structured as what is referred to as an Umbrella Partnership~~

Real Estate Investment Trust (“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.Portfolio Information

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.~~

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

We target acquisitions of fee simple interests in individual properties priced between $5 million and $75 million. Portfolios 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 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 property type, tenant, brand, industry and geographic location as of ~~September 30, 2017.~~March 31, 2021. The percentages below are calculated based on our ~~contractual rental revenue over the next twelve months (“NTM Rent”), on a per property type basis divided~~ABR of $302.3 million as of March 31, 2021.

Diversification 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.Property Type

~~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~~	%

Property Type	# Properties		ABR ($'000s)		ABR as a % of Total Portfolio			Square Feet ('000s)		SF as a % of Total Portfolio
Industrial
Manufacturing		56	$	42,455		14.0	%		7,732		27.3	%
Distribution & Warehouse		31		40,250		13.3	%		7,414		26.1	%
Food Processing		14		18,386		6.1	%		2,132		7.5	%
Flex and R&D		7		16,934		5.6	%		1,457		5.1	%
Cold Storage		4		12,578		4.2	%		933		3.3	%
Services		18		7,168		2.4	%		429		1.5	%
Industrial Total		130		137,771		45.6	%		20,097		70.8	%
Healthcare
Clinical		50		24,958		8.3	%		1,062		3.7	%
Surgical		11		9,166		3.0	%		306		1.1	%
Animal Health Services		20		8,209		2.7	%		314		1.1	%
Life Science		9		7,994		2.6	%		550		1.9	%
Healthcare Services		26		7,520		2.5	%		302		1.1	%
Healthcare Total		116		57,847		19.1	%		2,534		8.9	%
Restaurant
Quick Service Restaurants		156		25,495		8.4	%		530		1.9	%
Casual Dining		88		19,858		6.6	%		563		2.0	%
Restaurant Total		244		45,353		15.0	%		1,093		3.9	%
Retail
Automotive		68		12,767		4.2	%		844		3.0	%
General Merchandise		71		12,215		4.1	%		855		3.0	%
Home Furnishings		15		6,932		2.3	%		860		3.0	%
Retail Total		154		31,914		10.6	%		2,559		9.0	%
Office
Strategic Operations		7		13,639		4.5	%		1,021		3.6	%
Corporate Headquarters		6		10,016		3.3	%		671		2.4	%
Call Center		4		5,716		1.9	%		392		1.4	%
Office Total		17		29,371		9.7	%		2,084		7.4	%
Total		661	$	302,256		100.0	%		28,367		100.0	%

Tenant	Property Type	# Properties		ABR ($'000s)		ABR as a % of Total Portfolio			Square Feet ('000s)		SF as a % of Total Portfolio
Red Lobster Hospitality & Red Lobster Restaurants LLC^*	Casual Dining		24	$	7,306		2.4	%		196		0.7	%
Jack's Family Restaurants LP^*	Quick Service Restaurants		43		7,026		2.3	%		147		0.5	%
Axcelis Technologies, Inc.	Flex and R&D		1		5,859		1.9	%		417		1.5	%
Hensley & Company^*	Distribution & Warehouse		3		5,756		1.9	%		577		2.0	%
Outback Steakhouse of Florida LLC^*1	Casual Dining		22		5,192		1.7	%		140		0.5	%
BluePearl Holdings, LLC^*	Animal Health Services		12		5,137		1.7	%		154		0.5	%
Krispy Kreme Doughnut Corporation	Quick Service Restaurants/ Food Processing		27		5,034		1.7	%		156		0.6	%
Big Tex Trailer Manufacturing, Inc.^*	Automotive/Distribution & Warehouse/Manufacturing/ Corporate Headquarters		17		4,860		1.6	%		1,302		4.6	%
Siemens Medical Solutions USA, Inc. & Siemens Corporation	Manufacturing/Flex and R&D		2		4,718		1.6	%		545		1.9	%
Nestle' Dreyer's Ice Cream Company	Cold Storage		1		4,409		1.5	%		310		1.1	%
Total Top 10 Tenants			152		55,297		18.3	%		3,944		13.9	%

Arkansas Surgical Hospital	Surgical		1		4,260		1.4	%		129		0.4	%
Nationwide Mutual Insurance Company^*	Strategic Operations		2		4,165		1.4	%		407		1.4	%
American Signature, Inc.	Home Furnishings		6		4,142		1.4	%		474		1.7	%
Cascade Aerospace Inc.	Manufacturing		1		4,122		1.4	%		231		0.8	%
Tractor Supply Company	General Merchandise		15		3,872		1.3	%		300		1.1	%
Aventiv Technologies, LLC	Corporate Headquarters		1		3,819		1.2	%		154		0.5	%
Fresh Express Incorporated	Food Processing		1		3,819		1.2	%		335		1.2	%
Bob Evans Restaurants, LLC^*	Casual Dining		22		3,566		1.2	%		116		0.4	%
Zips Car Wash, LLC^*	Automotive		14		3,292		1.1	%		57		0.2	%
Centene Management Company, LLC	Strategic Operations		1		3,267		1.1	%		220		0.8	%
Total Top 20 Tenants			216	$	93,621		31.0	%		6,367		22.4	%

Brand	Property Type	# Properties		ABR ($'000s)		ABR as a % of Total Portfolio			Square Feet ('000s)		SF as a % of Total Portfolio
Red Lobster^*	Casual Dining		24	$	7,306		2.4	%		196		0.7	%
Jack's Family Restaurants^*	Quick Service Restaurants		43		7,026		2.3	%		147		0.5	%
Axcelis	Flex and R&D		1		5,859		1.9	%		417		1.5	%
Hensley^*	Distribution & Warehouse		3		5,756		1.9	%		577		2.0	%
Bob Evans Farms^*1	Casual Dining/Food Processing		23		5,449		1.8	%		292		1.0	%
Wendy's^#	Quick Service Restaurants		38		5,433		1.8	%		113		0.4	%
BluePearl Veterinary Partners^*	Animal Health Services		12		5,137		1.7	%		154		0.5	%
Krispy Kreme	Quick Service Restaurants/ Food Processing		27		5,034		1.7	%		156		0.6	%
Big Tex Trailers^*	Automotive/Distribution & Warehouse/Manufacturing/ Corporate Headquarters		17		4,860		1.6	%		1,302		4.6	%
Siemens	Manufacturing/Flex and R&D		2		4,718		1.6	%		545		1.9	%
Total Top 10 Brands			190		56,578		18.7	%		3,899		13.7	%

Outback Steakhouse^*	Casual Dining		20		4,492		1.5	%		126		0.5	%
Nestle'	Cold Storage		1		4,409		1.5	%		310		1.1	%
Arkansas Surgical Hospital	Surgical		1		4,260		1.4	%		129		0.4	%
Taco Bell^#	Quick Service Restaurants		32		4,226		1.4	%		82		0.3	%
Nationwide Mutual Insurance Co.^*	Strategic Operations		2		4,165		1.4	%		407		1.4	%
Value City Furniture	Home Furnishings		6		4,142		1.4	%		474		1.7	%
Cascade Aerospace	Manufacturing		1		4,122		1.4	%		231		0.8	%
Tractor Supply Co.	General Merchandise		15		3,872		1.3	%		300		1.1	%
Securus Technologies	Corporate Headquarters		1		3,819		1.2	%		154		0.5	%
Chiquita	Food Processing		1		3,819		1.2	%		335		1.2	%
Total Top 20 Brands			270	$	97,904		32.4	%		6,447		22.7	%

Industry	# Properties		ABR ($'000s)		ABR as a % of Total Portfolio			Square Feet ('000s)		ABR as a % of Total Portfolio
Restaurants		244	$	46,018		15.2	%		1,118		4.0	%
Healthcare Facilities		88		44,345		14.7	%		1,738		6.1	%
Food Distributors		7		12,907		4.3	%		1,556		5.5	%
Auto Parts & Equipment		39		12,369		4.1	%		2,387		8.4	%
Specialized Consumer Services		47		11,790		3.9	%		720		2.5	%
Packaged Foods & Meats		6		11,371		3.7	%		1,130		4.0	%
Metal & Glass Containers		8		9,686		3.2	%		2,206		7.8	%
Healthcare Services		19		9,152		3.0	%		522		1.8	%
Home Furnishing Retail		16		8,711		2.9	%		1,149		4.1	%
Aerospace & Defense		6		7,760		2.6	%		921		3.3	%
Distributors		12		6,909		2.3	%		966		3.4	%
Specialty Stores		17		6,913		2.3	%		888		3.1	%
Electronic Components		2		6,658		2.2	%		466		1.7	%
Air Freight & Logistics		3		6,494		2.1	%		436		1.5	%
Industrial Machinery		16		6,021		2.0	%		1,174		4.1	%
Other (40 industries)		125		95,152		31.5	%		10,894		38.4	%
Untenanted properties		6		—		—			96		0.3	%
Total		661	$	302,256		100.0	%		28,367		100.0	%

Substantially all of our leases are triple-net, meaning that our tenants are responsible for the maintenance, insurance, and property taxes associated with the properties they lease from us. Since inception and at September 30, 2017, all of our properties are subject to leases. We do not currently engage in the development of real estate, which could cause a delay in timing between the funds used to invest in properties and the corresponding cash inflows from rental receipts. Our cash flows from operations are primarily generated through our real estate investment portfolio and the monthly lease payments under our long-term leases with our tenants.

State	# Properties		ABR ($'000s)		ABR as a % of Total Portfolio			Square Feet ('000s)		SF as a % of Total Portfolio			State	# Properties		ABR ($'000s)		ABR as a % of Total Portfolio			Square Feet ('000s)		SF as a % of Total Portfolio
TX		54	$	30,771		10.2	%		3,207		11.3	%	VA		13	$	4,368		1.4	%		110		0.4	%
IL		25		19,339		6.4	%		1,976		7.0	%	WA		15		4,155		1.4	%		150		0.5	%
CA		11		15,735		5.2	%		1,554		5.5	%	MO		9		3,882		1.3	%		733		2.6	%
FL		46		15,663		5.2	%		801		2.8	%	KY		17		3,473		1.2	%		167		0.6	%
WI		32		15,655		5.2	%		1,611		5.7	%	LA		3		3,128		1.0	%		175		0.6	%
MI		35		14,760		4.9	%		1,439		5.1	%	NE		6		2,959		1.0	%		509		1.8	%
OH		35		14,125		4.7	%		1,369		4.8	%	MD		4		2,882		1.0	%		293		1.0	%
IN		30		12,830		4.2	%		1,765		6.2	%	MS		8		2,736		0.9	%		334		1.2	%
NC		34		12,134		4.0	%		1,245		4.4	%	NM		8		2,731		0.9	%		97		0.3	%
MN		20		11,501		3.8	%		1,757		6.2	%	IA		4		2,704		0.9	%		622		2.2	%
NY		26		10,323		3.4	%		680		2.4	%	SC		13		2,466		0.8	%		308		1.1	%
TN		42		10,225		3.4	%		390		1.4	%	UT		3		2,328		0.8	%		280		1.0	%
MA		4		9,994		3.3	%		1,009		3.5	%	CT		2		1,653		0.6	%		55		0.2	%
PA		16		9,785		3.2	%		1,146		4.0	%	WV		8		1,642		0.5	%		36		0.1	%
AL		50		8,761		2.9	%		206		0.7	%	MT		7		1,544		0.5	%		43		0.2	%
AZ		8		8,553		2.8	%		761		2.7	%	CO		3		1,434		0.5	%		94		0.3	%
AR		11		7,380		2.4	%		282		1.0	%	NV		2		1,311		0.4	%		81		0.3	%
GA		19		6,554		2.2	%		976		3.4	%	ND		2		933		0.3	%		28		0.1	%
OK		18		6,440		2.1	%		786		2.8	%	DE		3		663		0.2	%		35		0.1	%
KS		10		5,407		1.8	%		639		2.3	%	WY		1		307		0.1	%		21		0.1	%
NJ		3		4,900		1.6	%		366		1.3	%	Total US		660	$	298,134		98.6	%		28,136		99.2	%
													Total Canada		1		4,122		1.4	%		231		0.8	%
													Grand Total		661	$	302,256		100.0	%		28,367		100.0	%

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,~~March 31, 2021, the ABR 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.~~10.6 years. 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%~~Approximately 44.9% of our rental revenue iswas derived from leases that will expire ~~during~~after 2030, and ~~thereafter. As of September 30, 2017, not~~no more than ~~10%~~9.0% of our rental revenue iswas derived from leases that expire in any single year ~~in the decade between 2020 and~~prior to 2030. The following chart sets forth our lease expirations based upon the terms of ~~our~~the leases in place as of ~~September 30, 2017.~~March 31, 2021.

The following table presents certain information based on lease expirations by year. Amounts are in thousands, except for number of properties.

Expiration Year	# Properties		ABR ($'000s)		ABR as a % of Total Portfolio			Square Feet ('000s)		SF as a % of Total Portfolio
2021		4	$	964		0.3	%		46		0.2	%
2022		3		2,409		0.8	%		86		0.3	%
2023		6		4,841		1.6	%		515		1.8	%
2024		11		13,662		4.5	%		1,689		6.0	%
2025		19		7,833		2.6	%		682		2.4	%
2026		34		18,586		6.1	%		1,404		4.9	%
2027		27		22,917		7.6	%		2,010		7.1	%
2028		35		27,171		9.0	%		2,736		9.6	%
2029		61		19,357		6.4	%		2,538		8.9	%
2030		86		49,088		16.2	%		4,927		17.4	%
2031		21		7,145		2.4	%		725		2.6	%
2032		44		26,225		8.7	%		3,014		10.6	%
2033		41		16,385		5.4	%		1,693		6.0	%
2034		31		5,479		1.8	%		361		1.3	%
2035		14		10,498		3.5	%		1,471		5.2	%
2036		71		16,914		5.6	%		969		3.4	%
2037		24		17,256		5.7	%		1,367		4.8	%
2038		33		6,805		2.3	%		306		1.1	%
2039		12		8,988		3.0	%		933		3.3	%
2040		41		6,887		2.3	%		347		1.2	%
Thereafter		37		12,846		4.2	%		452		1.6	%
Untenanted properties		6		—		—			96		0.3	%
Total		661	$	302,256		100.0	%		28,367		100.0	%

The following discussion includes the results of our operations for the periods presented. We have included an analysis of the three months ended March 31, 2021, as compared to the three months ended December 31, 2020 and March 31, 2020. We have included the comparison of the immediately preceding quarter given our Internalization and initial public offering’s (“IPO”) significant impact to our results of operations and financial condition, and therefore comparability, of the prior year periods. We believe the quarter-over-quarter analysis is beneficial to investors as it compares the results of operations on a more comparable basis, and aligns with our strategic growth priorities under a different leverage and liquidity profile going forward.

Three Months Ended March 31, 2021 Compared to Three Months Ended December 31, 2020

The increase in Lease revenues, net was primarily attributable to growth in our real estate portfolio through accretive property acquisitions during the fourth quarter of 2020. During the fourth quarter of 2020, we invested $100.3 million, excluding capitalized acquisition costs, in 19 properties at a weighted average initial cash cap rate of 6.9%. Most of these acquisitions closed during the month of December, and therefore did not materially contribute to Lease revenues, net for the three months ended December 31, 2020.

The increase in general and administrative expenses mainly reflects increased severance associated with the departure of an executive officer during the three months ended March 31, 2021.

During the three months ended March 31, 2021, we recognized $2.0 million of impairment on our investments in rental properties, compared to $1.7 million during the three months ended December 31, 2020. The following table presents the ~~lease expirations by year, including~~impairment charges for their respective period:

The timing and amount of impairment fluctuates from period to period depending on the ~~number~~specific facts and circumstances.

The decrease in interest expense reflects a decrease in our weighted average cost of ~~tenants and properties~~borrowings combined 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 considereddecreased average outstanding borrowings 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 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.

comparable period. In ~~March of 2016, Moody’s Investors Service (“Moody’s”) assigned the Operating Company~~January 2021, we received an ~~investment grade~~initial credit rating of ~~Baa3~~BBB with a stable ~~outlook. Moody’s re-affirmed~~outlook from S&P Global Ratings (“S&P”), which had the ~~investment grade credit rating~~effect of lowering the applicable margin on our then existing $965 million of bank loans by 25 basis points beginning in February 2021, as well as a 20 basis point decrease in the applicable margin on Revolving Credit Facility borrowings. We also repriced our 2026 Unsecured Term Loan in March ~~2017. The investment grade credit rating allowed~~2021, reducing the applicable margin by an additional 60 basis points, and simultaneously repaid $50 million.

As part of the Internalization, we may be required to pay additional earnout consideration if certain milestones are achieved during the Earnout Periods. We record the fair value of this contingent consideration in the Condensed Consolidated Balance Sheets, and update the fair value at the end of each reporting period. To the extent the change in fair value relates to a portion of the earnout consideration that is classified as a liability, we record the change through earnings. We estimate the fair value of the 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 us to take advantage of preferential borrowing margins on our outstanding debt, including the $800 million credit facility we entered into on June 23, 2017. The investment grade credit ratings will also allow us 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 sizemake various assumptions about future share prices, and ~~diversification, credit~~other items that are unobservable 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 ratioconsidered Level 3 inputs in the ~~35% to 45% range based on the market~~fair 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.hierarchy. 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% 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 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 equal to a determined share value (the “Determined Share Value”), which is established quarterly by the IDC based on the net asset value (“NAV”) of our portfolio, input from management, and such other factors as the IDC may determine. Shares of our common stock are also sold pursuant to our DRIP, and repurchased by us pursuant to our share redemption program, at a price based upon the Determined Share Value. For additional information regarding our valuation policy and procedures, please see the section titled “~~Determined Share Value” in Item 1 of our Form 10. The following table presents our Determined Share Value for each period indicated below, together with the corresponding NAV as of the preceding quarter-end:~~

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

~~The following table provides a breakdown of the major components of our estimated NAV and NAV per 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 the weighted average implied market capitalization rate used as of September 30, 2017, of 0.25%, would result in a decrease in the fair value of the earnout liability during the three months ended March 31, 2021, reflects a decrease in our share price as compared to December 31, 2020.

The increase in net income is primarily due to a $7.8 million increase in income from the change in fair value of our earnout liability and a $1.0 million decrease in interest expense. These factors were partially offset by a $1.4 million increase in general and administrative expenses.

GAAP net income includes items such as gain or loss on sale of real estate and provisions for impairment, among others, which can vary from quarter to quarter and impact period-over-period comparisons.

The increase in Lease revenues, net, was primarily attributable to growth in our real estate portfolio through accretive property acquisitions during 2020. During the fourth quarter of 2020, we invested $100.3 million, excluding capitalized acquisition costs, in 19 properties at a weighted average initial cash cap rate of 6.9%. Most of these acquisitions closed during the month of December, and therefore did not contribute to Lease revenues, net for the three months ended March 31, 2020.

The decrease in asset management fees and property management fees was due to the completion of the Internalization in February 2020, which terminated the associated agreements with our third-party manager.

The increase in general and administrative expenses mainly reflects the impact of the Internalization associated with our newly acquired employee base. Following the Internalization, our asset and property management fees were replaced with compensation and related expenses, along with associated general and administrative expenses for the three months ended March 31, 2020.

During the three months ended March 31, 2021, we recognized $2.0 million of ~~3.6%, and~~impairment on our ~~NAV per share would have been $76.03.~~

~~At its November 7, 2017, meeting, our board of directors declared monthly distributions of $0.415 per share of our common stock and unit of membership interest~~investments in rental properties, compared to $2.1 million during 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.~~

three months ended March 31, 2020. The following table ~~summarizes distributions paid in cash~~presents the impairment charges for their respective periods:

The timing and ~~pursuant~~amount of impairment fluctuates from period to ~~our DRIP for~~period depending on the ~~nine months ended September 30, 2017 (in thousands).~~specific facts and circumstances.

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

	For the Three Months Ended
	March 31,						Increase/(Decrease)
(in thousands)	2021			2020			$			%
Other income (expenses)
Interest income	$	5		$	9		$	(4	)		(44.4	)%
Interest expense		(16,108	)		(20,991	)		(4,883	)		(23.3	)%
Cost of debt extinguishment		(126	)		(22	)		104		>100%
Gain on sale of real estate		4,733			7,619			(2,886	)		(37.9	)%
Income taxes		(413	)		(549	)		(136	)		(24.8	)%
Internalization expenses		—			(1,205	)		(1,205	)		(100.0	)%
Change in fair value of earnout liability		1,124			(4,177	)		5,301		>100%
Other income (expenses)		10			(22	)		32		>100%

The ~~following table summarizes~~decrease in interest expense primarily reflects a decrease in our ~~distributions paid during~~average outstanding borrowings, combined with a decrease in our weighted average cost of borrowings. In September 2020, we used 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~~proceeds of our ~~FFO.~~IPO to repay $456.7 million of outstanding borrowings, including accrued interest, significantly reducing our leverage profile. In January 2021, we received an initial credit rating of BBB with a stable outlook from S&P, which had the effect of lowering the applicable margin on our then existing $965 million of bank loans by 25 basis points beginning in February 2021. We also repriced and partially repaid our 2026 Unsecured Term Loan in March 2021, reducing the applicable margin and principal balance by an additional 60 basis points and $50 million, respectively.

~~We intend to fund future distributions from cash generated by operations; however, we may fund distributions from~~Gain on sale of real estate

Our recognition of a gain or loss on the sale of ~~assets, borrowings, or proceeds~~real estate varies from transaction to transaction based on fluctuations in asset prices and demand in the real estate market.During the three months ended March 31, 2021, we recognized gains of $4.7 million on the sale of ~~our securities.~~

~~The following table sets forth~~eight properties, compared to gains of $7.6 million on the ~~redemption requests honored pursuant to our share redemption program~~sale of 10 properties during the three ~~and nine~~ months ended ~~September 30, 2017.~~March 31, 2020.

During the three months ended March 31, 2020, we incurred $1.2 million of third-party fees and consulting expenses associated with the Internalization that closed on February 7, 2020. We did not ~~defer or reject any redemption requests~~incur these expenses during ~~this period. Please refer~~the three months ended March 31, 2021.

The change in the fair value of the earnout liability during the three months ended March 31, 2021, reflects a decrease in our period end share price.

The increase in net income, is primarily due to ~~Item 11. “Description of Registrant’s Securities to Be Registered~~”a $5.3 million increase in income from the change in fair value of our ~~Form 10~~earnout liability, a $4.9 million decrease in interest expense, revenue growth of $4.5 million, and a $1.2 million decrease in internalization expenses. These factors were partially offset by a $2.9 million decrease in the gain on sale of real estate.

GAAP net income includes items such as gain or loss on sale of real estate and provisions for ~~additional discussion of our share redemption program.~~impairment, among others, which can vary from quarter to quarter and impact period-over-period comparisons.

We acquire real estate ~~with~~using a combination of debt and equity capital and with cash from operations that is not otherwise distributed to our stockholders. Our focus is on maximizing the risk-adjusted return to our ~~shareholders~~stockholders through an appropriate balance of debt and equity in our capital structure. ~~Therefore, we attempt~~We are committed to ~~maintain a conservative debt level on our~~maintaining an investment grade 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~~through active management of our ~~assets.~~leverage profile and overall liquidity position. We believe our ~~current~~ leverage ~~model~~strategy has allowed us to take advantage of the lower cost of debt while simultaneously strengthening our balance sheet, as evidenced by ~~the~~our investment grade credit ~~rating the Operating Company received in March~~ratings of ~~2016~~BBB from S&P and ~~re-affirmed in March~~Baa3 from Moody’s Investors Service (“Moody’s”). We manage our leverage profile using a ratio 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~~Net Debt to Annualized Adjusted EBITDAre, a non-GAAP financial measure, which we believe is a useful measure of our ~~assets. From~~ability to repay debt and a ~~management perspective~~relative measure of leverage, and is used in communications with ~~the credit~~lenders and with rating agencies regarding our credit rating. We seek to maintain on a sustained basis a Net Debt to Annualized Adjusted EBITDAre ratio that is generally less than 6.0x. As of March 31, 2021, we ~~also consider our leverage position as~~had total debt outstanding of $1.5 billion, Net Debt of $1.5 billion, and a ~~multiple~~Net Debt to Annualized Adjusted EBITDAre ratio of ~~Earnings Before Interest Taxes Depreciation~~approximately 5.25x.

Net Debt and ~~Amortization (“EBITDA”),~~Annualized Adjusted EBITDAre are non-GAAP financial measures, and Annualized Adjusted EBITDAre is calculated based upon EBITDA, EBITDAre, and Adjusted EBITDAre, each of which is also a non-GAAP financial measure. ~~EBITDA~~Refer to Non-GAAP Measures below for further details concerning our calculation of non-GAAP measures and reconciliations to the comparable GAAP measure.

Liquidity is a ~~tool we use to~~ measure ~~leverage in the context~~ of our ability to meet potential cash ~~flow expectations~~requirements, including our ongoing commitments to repay debt, fund our operations, acquire properties, make distributions to our stockholders, and ~~projections. Furthermore, given the significance~~other general business needs. As a REIT, we are required to distribute to our stockholders at least 90% of our ~~growth over~~REIT taxable income determined without regard to 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,~~dividends paid deduction and ~~$550.1 million in investments during 2015, coupled with~~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 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,~~long-term liquidity needs, 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 balancerepayment of debt and ~~equity~~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. We do not currently anticipate making significant capital expenditures or incurring other significant property costs because of the strong occupancy levels across our portfolio and the nature of our leases. We expect to meet our short-term liquidity requirements primarily from cash and cash equivalents balances and net cash provided by operating activities, supplemented by borrowings under our Revolving Credit Facility.

As detailed in the contractual obligations table below, we have approximately $61.7 million of expected obligations due to be paid throughout the remainder of 2021, primarily consisting of $17.2 million of mortgage maturities, and $43.1 million of interest expense due, including the impact of our ~~overall leverage policy, while maintaining a focus~~interest rate swaps. We expect our cash provided by operating activities, as discussed below, will be sufficient to pay for our current obligations including interest expense on ~~increasing core value for existing stockholders (achieved via share appreciation~~our borrowings. We expect to either repay the maturing mortgages with available cash on hand generated from our results of operations or borrowings under our Revolving Credit Facility, or refinance with property-level borrowings.

Our long-term liquidity requirements consist primarily of funds necessary to repay debt and ~~earnings growth). Our debt~~invest in additional revenue generating properties. Debt capital is provided through unsecured term notes, revolving ~~debt~~credit facilities, and senior unsecured notes. Further, we anticipate having the ability to access the public unsecured bond market, which was historically largely unavailable to us prior to our IPO.

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. Our $60 million 2022 Unsecured Term Loan has a short-term maturity date of February 2022. We expect to either repay the 2022 Unsecured Term Loan with available cash on hand, or with borrowings under our Revolving Credit Facility. With outstanding borrowings of $15 million at March 31, 2021, we have $885 million of available capacity under our Revolving Credit Facility.

We expect to meet our long-term liquidity requirements primarily from borrowings under our Revolving Credit Facility, future debt and equity financings, and proceeds from limited sales of our properties. Our ability to access these capital sources may be impacted by unfavorable market conditions, particularly in the debt and equity capital markets, that are outside of our control. In addition, our success will depend on our operating performance, our borrowing restrictions, our degree of leverage, and other factors. Our acquisition growth strategy significantly depends on our ability to obtain acquisition financing on favorable terms. We seek to reduce the risk that long-term debt capital may be unavailable to us by strengthening our balance sheet by investing in real estate with creditworthy tenants and lease guarantors, and by maintaining an appropriate mix of debt and equity capitalization. We also, from time to time, obtain or assume non-recourse mortgage financing from banks and insurance companies secured by mortgages on the corresponding specific property. Mortgages, however, are not currently a strategic focus of the active management of our ~~leverage profile. Rather,~~capital structure.

On September 21, 2020, we ~~enter into mortgages~~completed our IPO and ~~notes payable~~issued 37 million shares of stock for net proceeds of $588.3 million, including shares issued subsequently pursuant to the underwriters’ partial exercise of their over-allotment option. We used $216.5 million of the net proceeds to fully repay the outstanding borrowings and accrued interest under our then existing revolving credit agreement and $240.2 million of the proceeds to fully repay the outstanding principal and accrued interest associated with an unsecured term loan.

As we continue to invest in accretive real estate properties, we expect to balance our debt and equity capitalization, while maintaining a Net Debt to Annualized Adjusted EBITDAre ratio below 6.0x on a sustained basis, through the anticipated use of follow-on equity offerings and an at-the-market (“ATM”) program. As of March 31, 2021, we have successfully deployed the remaining proceeds from our IPO.

Unsecured Indebtedness and Capital Markets Activities as ~~ancillary business transactions~~of and for the Three Months Ended March 31, 2021

The following table sets forth our outstanding Revolving Credit Facility, unsecured term loans and Senior Notes at March 31, 2021.

As announced on January 21, 2021, S&P assigned the Company an ~~as-needed basis.~~initial credit rating of 'BBB' with a stable outlook. As a result of this credit rating, the margin of our existing bank loans was reduced by 25 basis points beginning in February 2021, the applicable margin on borrowings under our Revolving Credit Facility was reduced by 20 basis points, and our access to a diverse set of advantageous funding sources should expand. During the quarter, Moody’s reaffirmed our ‘Baa3’ credit rating and updated their outlook from ‘stable’ to ‘positive.

On March 12, 2021, we amended our $450 million 2026 Unsecured Term Loan, reducing the applicable margin an additional 60 basis points based on our current credit rating. In connection with the amendment, we repaid in full the outstanding commitments for two lenders and elected to repay an additional $10 million in outstanding principal, bringing the outstanding balance to $400 million as of March 31, 2021.

~~To reduce~~On March 31, 2021, we drew $15 million on our ~~exposure~~Revolving Credit Facility to ~~variable~~fund an acquisition. We have $885 million of remaining capacity on our Revolving Credit Facility as of March 31, 2021.

We are subject to various covenants and financial reporting requirements pursuant to our debt facilities, which are summarized below. As of March 31, 2021, we believe we were in compliance with all of our covenants on all outstanding borrowings. In the event of default, either through default on payments or breach of covenants, we may be restricted from paying dividends to our stockholders in excess of dividends required to maintain our REIT qualification. For each of the previous three years, we paid dividends out of our cash flows from operations in excess of the distribution amounts required to maintain our REIT qualification.

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

We attempt to manage our interest rate risk by entering into interest rate ~~swap agreements to fix the rate~~swaps. As of interest as a hedge against interest rate fluctuations. These interest rate hedges have staggered maturities up to ten years in duration in order to reduce the exposure to interest rate fluctuations in any one year. TheMarch 31, 2021, we had 32 interest rate swaps ~~are applied against a pool~~outstanding in an aggregate notional amount 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.$824.7 million. Under these agreements, we receive monthly payments from the counterparties equal to the related variable interest rates multiplied by the outstanding notional amounts. In turn, we pay the counterparties each month an amount equal to a fixed interest rate multiplied by the related outstanding notional amounts. The intended net impact of these transactions is that we pay a fixed interest rate on our ~~variable rate~~variable-rate borrowings.

~~We also mitigate~~ The interest rate ~~risk~~swaps have been designated by ~~strategically adding long-term, fixed~~us as cash flow hedges for accounting purposes and are reported at fair value. We assess, both at inception and on an ongoing basis, the effectiveness of our qualifying cash flow hedges. We have not entered, and do not intend to enter, into derivative or interest rate ~~debt to our capital structure. During~~transactions for speculative purposes.

Cash and cash equivalents and restricted cash totaled $18.4 million, $110.7 million, and $96.7 million at March 31, 2021, December 31, 2020 and March 31, 2020, respectively. The table below shows information concerning cash flows for the ~~nine~~three 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~~March 31, 2021, December 31, 2020, 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, the terms of the lease require us to pay these expenses, however, in most cases we are reimbursed by the tenants. Accordingly, we do not currently anticipate making significant capital expenditures or incurring other significant property costs during the term of a property lease, unless we incur substantial vacancies. To the extent that we have vacant properties, we will incur certain costs to operate and maintain the properties, however, we do not currently expect these costs to be material. For the nine months ended September 30, 2017, we maintained a 100% leased portfolio, with the leases for only two of our properties, representing less than 1% of our annual rental streams (calculated based on NTM Rent), expiring before 2020.

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 million as of September 30, 2017, and a $400.0 million line of credit with $126.5 million of outstanding borrowings as of September 30, 2017.

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

On June 23, 2017, together with the Operating Company, we closed on an $800 million unsecured credit facility (the “Credit Facility”). The Credit Facility contains an accordion feature that can increase the facility size up to a total of $1.0 billion, and includes (i) a $400 million senior unsecured revolving credit facility (the “New Revolver”), (ii) a five and a half year, $250 million senior unsecured delayed draw term loan (the “5.5-Year Term Loan”), and (iii) a seven year, $150 million senior unsecured delayed draw term loan (the “7-Year Term Loan”). The following table summarizes the amounts drawn and available to be drawn on the Credit Facility upon closing (in thousands).31, 2020:

The increase in net cash provided by operating activities during the ~~5.5-Year Term Loan~~three months ended March 31, 2021 as compared to the three months ended December 31, 2020 and ~~drew down $90 million on the New Revolver. We used the proceeds from these borrowings~~March 31, 2020, was mainly due 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 activitygrowth in our real estate portfolio and ~~for general corporate purposes. Prior to extension options, Term Note 1 and~~cost savings associated with the ~~Revolver were set to mature on June 27, 2017, and Term Note 2 was set to mature on October 11, 2018.~~Internalization.

~~Included~~The change 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 onlynet cash (used in) provided by investing activities 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 timethree months ended March 31, 2021 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~~three months ended December 31, 2020, was mainly due to decreased acquisition volume quarter-over-quarter. The change in net cash (used in) provided by investing activities during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020, was mainly due to increased acquisition volume and ~~Term Note 2~~decreased proceeds from disposal of ~~1.45% and 1.75%, respectively,~~properties in 2021 offset by decrease in cash paid in connection with the ~~applicable margin~~Internalization.

The change in net cash (used in) provided by financing activities during the three months ended March 31, 2021 as compared to the three months ended December 31, 2020 mainly reflects a net repayment of ~~1.35%~~debt in 2021 as compared to net proceeds from our IPO in 2020. During the three months ended March 31, 2021, we made a $50 million paydown on ~~the 5.5-Year~~our 2026 Unsecured Term Loan ~~represents a 10 basis point~~using cash on hand 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, as 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 covenants. In the event of default, either through default on payments or breach of covenants, we may be prohibited from paying dividends on our common stock above the annual 90% REIT taxable income distribution requirement. For each of the previous three years, we paid dividends out of our cash flows from operations in excess of the required distribution amounts.

In connection with our closing of the Credit Facility and amending and restating Term Note 3, we removed the maximum recourse secured indebtedness ratio, minimum tangible net worth requirement, minimum eligible properties, and maximum permitted investments covenantsremaining proceeds from our ~~term loan and revolving credit agreements. The new debt covenants are characteristic of investment grade credit facilities within~~IPO in 2020. During the ~~REIT industry.~~

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

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

~~As part of acquisitions closed during 2016, we entered into tenant improvement allowances with a balance of $9.5 million at~~three months ended December 31, ~~2016, included~~2020 our underwriters partially exercised their overallotment option, resulting in Accounts payable and other liabilities in the Condensed Consolidated Balance Sheets within this Form 10-Q. During the nine months ended September 30, 2017, we entered into $1.0 million of additional tenant improvement allowances and paid $3.9 million towards the allowances. We expect to pay the $6.6 million balance of tenant improvement allowances within the next twelve months out of cash flows from operations.

As shown in the table below, net cash provided by operating activities increased by $20.2 million during the nine months ended September 30, 2017, from $52.1 million for the nine months ended September 30, 2016. The increase in cash provided by operating activities is primarily due to the increase in the size of our real estate investment portfolio. Our real estate investing activities have grown in volume as we continue to identify and acquire income-producing, net leased commercial real estate, primarily through sale-leaseback transactions, as a result of increased access to debt and equity capital and favorable investment opportunities. We funded real estate investment activity with a combination of cash from operations, proceeds from the issuance of ~~unsecured debt obligations, and~~an additional 3.5 million shares for net proceeds ~~from~~of approximately $55.9 million. The change in net cash (used in) provided by financing activities during the issuance of common stock. We paid cash dividends to our stockholders and non-controlling members of the Operating Company, net of reinvestments through our DRIP, totaling $38.2 million and $31.3 million for the ninethree months ended ~~September 30, 2017 and 2016, respectively. Cash used to fund the increase in dividends between periods related primarily~~March 31, 2021 as compared to the ~~increase~~three months ended March 31, 2020, mainly reflects a net repayment of debt in ~~cash provided by our operations. Cash and cash equivalents totaled $13.7 million and $33.0 million at September 30, 2017 and September 30, 2016, respectively.~~2021, compared to net borrowings during the three months ended March 31, 2020.

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~~March 31, 2021 (in thousands). Refer to the discussion in the Liquidity and Capital Resources section above for further discussion over our short and long-term obligations.

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

Year of Maturity	Term Loans		Revolving Credit Facility^(a)		Senior Notes		Mortgages and Notes Payable		Interest Expense^(b)		Tenant Improvement Allowances^(c)		Operating Leases		Total
Remainder of 2021	$	—	$	—	$	—	$	17,169	$	43,052	$	903	$	548	$	61,672
2022		60,000		—		—		2,907		55,574		—		690		119,171
2023		265,000		15,000		—		7,582		51,007		—		505		339,094
2024		190,000		—		—		2,260		45,921		—		120		238,301
2025		—		—		—		20,195		42,362		—		121		62,678
Thereafter		400,000		—		475,000		56,717		82,083		—		2,290		1,016,090
Total	$	915,000	$	15,000	$	475,000	$	106,830	$	319,999	$	903	$	4,274	$	1,837,006

At ~~September 30, 2017,~~March 31, 2021 and December 31, 2020, investment in rental property of ~~$91.3~~$172.4 million isand $173.5 million, respectively, was pledged as collateral against our ~~mortgages and notes payable.~~mortgages.

Additionally, ~~as of September 30, 2017,~~ we ~~have two~~are a party to three separate ~~Tax Protection Agreements (the “Agreements”)~~tax protection agreements with the contributing members ~~(the “Protected Members”)~~ of ~~two~~three distinct UPREIT transactions ~~conducted in November 2015~~ and ~~February 2016. Subsequent to September 30, 2017,~~ we entered into ~~a third~~the Founding Owners’ Tax Protection Agreement in connection with ~~additional Protected Members through one UPREIT transaction conducted in October 2017.~~the Internalization. The ~~Agreements~~tax protection agreements require us to ~~pay monetary damages~~indemnify the beneficiaries in the event of a sale, exchange, transfer, or other disposal of the contributed property, and in the case of the Founding Owners’ Tax Protection Agreement, the entire Company, in a taxable transaction that would cause ~~a Protected Member~~such beneficiaries to recognize a ~~Protected Gain, as defined in~~gain that is protected under the ~~Agreements and~~agreements, subject to certain exceptions. ~~In such an event, we will pay monetary damages to the Protected Members in the amount~~Based on values as of March 31, 2021, taxable sales of the aggregate federal, state, and local income taxes incurred as a result of the income or gain allocated or recognized by the Protected Member as an outcome of the transaction, subject to certain caps and limitations contained in the Agreements. We are required to allocate to the Protected Members, an amount of nonrecourse liabilities that is at least equal to the Minimum Liability Amount for each Protected Member, as defined in the Agreements. The Minimum Liability Amount and the associated allocation of nonrecourse liabilities are calculated in accordance with applicable tax regulations, are completed at the Operating Company level, and do not represent GAAP accounting. Therefore, there is no impact to the consolidated financial statements included in this Form 10-Q. If the nonrecourse liabilities allocated do not meet the requirement, we will pay monetary damages to the Protected Members in the amount of the aggregate federal, state, and local income taxes incurred as a result of the income or gain allocated or recognized by the Protected Member as an outcome to the default. The maximum aggregate amount we may be liable forproperties would trigger liability under the ~~Agreements is~~four agreements of approximately ~~$12.3~~$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 ~~this commitment~~these commitments from the contractual commitments table above.

As of September 30, 2017, our real estate investment portfolio had a net book value of $1.9 billion, consisting of investments in 477 property locations in 37 states and various industries. All of our real estate investment portfolio represents commercial real estate properties subject to long-term leases, and all of our owned properties were subject to a lease as of September 30, 2017. During the three months ended September 30, 2017 and 2016, none 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 for the three months ended September 30, 2017, compared to $37.0 million for the three months ended September 30, 2016. The growth in revenue period-over-period is primarily attributable 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. We capitalized approximately $2.4 million in acquisition expenses and $0.8 million in leasing fees as part of the acquisitions. Additionally, subsequent to September 30, 2016 and for the twelve month period ended September 30, 2017, we closed 22 real estate acquisitions and acquired approximately $489.8 million in real estate comprised of 88 new properties, contributing to the growth in current quarter revenue. The rental rates we receive on sale-leaseback transactions and lease assumptions on the various types of properties we target across the United States vary from transaction to transaction based on many factors, such as the terms of the lease, each property’s real estate fundamentals, and the market rents in the area. The initial contractual cash lease payments on acquisitions during the three months ended September 30, 2017, excluding capitalized acquisition expenses, represented a weighted average capitalization rate of 7.5%.

Depreciation and amortization increased by $3.5 million, or 29.1%, to $15.6 million for the three months ended September 30, 2017, primarily as a result of 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%, to $3.8 million for the three months ended September 30, 2017. The Asset Manager receives an annual asset management fee equal to 1% of the aggregate value of our equity on a fully diluted basis, based on the Determined Share Value. The increase in asset management fees during 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 and the increase in the Determined Share Value.

The $80.00 per share Determined Share Value in effect as of September 30, 2017, reflected an increase of 3.9% from the $77.00 per share Determined Share Value in effect as of September 30, 2016. Additionally, the weighted average number of shares of our common stock and non-controlling membership units of the Operating Company outstanding increased as the result of continued equity capital investments. For the three months ended September 30, 2017, the weighted average number of shares of our common stock and non-controlling membership units of the Operating Company outstanding was 19.1 million, compared to 15.1 million for the three months ended September 30, 2016. 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 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 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.

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

Interest expense increased $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 resulted in a reduction of interest expense. Ineffectiveness during the three months ended September 30, 2016 was attributable to inconsistencies in certain terms between the interest rate swaps and the loan agreements for the Term Notes and Revolver. The interest rate swaps continued to qualify for hedge accounting, with the effective portion of mark-to-market adjustments included in accumulated other comprehensive income. During the fourth quarter of 2016, we amended the terms of the credit agreements, thereby reversing the impact of the ineffectiveness and rendering a $0 full year 2016 impact to the consolidated income statement. We did not recognize any ineffectiveness on our interest rate swaps during the three months ended September 30, 2017.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

During the nine 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 share are presented in accordance with GAAP. We also disclose~~ FFO and AFFO each of which are non-GAAP measures. We believe the use 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,~~Adjusted Funds From Operations (“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, the change in fair value of our earnout liability, 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, stock-based compensation, severance, extraordinary items, and other specified non-cash items. We believe that ~~such items are not a result of normal operations and thus we believe~~ excluding such items assists

management and investors in distinguishing whether changes in our operations are due to growth or decline of operations at our properties or from other factors.

Our leases include cash rents that increase over the term of the lease to compensate us for anticipated increases in market 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,~~In situations where we ~~exclude transaction costs~~granted short-term rent deferrals as a result of the COVID-19 pandemic, and such deferrals were probable of collection and expected to be repaid within a short term, we continued to recognize the same amount of GAAP lease revenues each period. Consistent with GAAP lease revenues, the short-term deferrals associated with ~~acquiring real estate subject to existing leases, including~~COVID-19 did not impact our AFFO.

We further exclude the change in fair value of our earnout liability, costs or gains recorded on the extinguishment of debt, non-cash interest expense and gains, the amortization of debt issuance costs, net mortgage premiums, and lease intangibles, realized gains and losses on foreign currency transactions, internalization expenses, stock-based compensation and severance, as ~~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~~reconciles net income ~~and our non-GAAP~~(which is the most comparable GAAP measure) to FFO and AFFO for the three 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.AFFO:

	For the three months ended
	September 30,				Increase/			For the Three Months Ended
(in thousands, except per share data)	2017		2016		Decrease			March 31, 2021			December 31, 2020			March 31, 2020
Net income	$	12,990	$	15,417	$	(2,427	)	$	23,960		$	17,619		$	11,848
Net earnings per diluted share		0.68		1.02		(0.34	)
Real property depreciation and amortization									30,690			30,161			31,210
Gain on sale of real estate									(4,733	)		(5,260	)		(7,619	)
Provision for impairment on investment in rental properties									2,012			1,678			2,133
FFO		27,189		24,548		2,641		$	51,929		$	44,198		$	37,572
FFO per diluted share		1.42		1.63		(0.21	)
Straight-line rent adjustment									(4,632	)		(5,125	)		(1,612	)
Adjustment to provision for credit losses									(1	)		(6	)		(17	)
Cost of debt extinguishment									126			3			22
Amortization of debt issuance costs									914			917			888
Amortization of net mortgage premiums									(35	)		(36	)		(35	)
Gain on interest rate swaps and other non-cash interest expense									(41	)		(41	)		(42	)
Amortization of lease intangibles									(728	)		(1,150	)		(1,138	)
Internalization expenses									—			182			1,205
Stock-based compensation									1,769			1,193			—
Severance									1,243			68			26
Change in fair value of earnout liability									(1,124	)		6,706			4,177
Other expenses									(10	)		(15	)		22
AFFO		24,813		20,476		4,337		$	49,410		$	46,894		$	41,068
AFFO per diluted share		1.30		1.36		(0.06	)
Diluted WASO⁽¹⁾		19,147		15,074

We compute EBITDA as earnings before interest, income taxes and depreciation and amortization. EBITDA is a measure commonly used in our industry. We believe that this ratio provides investors and analysts with a measure of our performance that includes our operating results unaffected by the differences in capital structures, capital investment cycles and useful life of related assets compared to other companies in our industry. We compute EBITDAre in accordance with the definition adopted by Nareit, as EBITDA excluding gains (loss) from the sales of depreciable property and provisions for impairment on investment in real estate. We believe EBITDA and EBITDAre are useful to investors and analysts because they provide important supplemental information about our operating performance exclusive of certain non-cash and other costs. EBITDA and EBITDAre are not measures of financial

performance under GAAP, and our EBITDA and EBITDAre may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA and EBITDAre as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.

We are focused on a disciplined and targeted acquisition strategy, together with active asset management that includes selective sales of properties. We manage our leverage profile using a ratio of Net ~~income~~

Debt to Annualized Adjusted EBITDAre, each discussed further below, which we believe is a useful measure of our ability to repay debt and a relative measure of leverage, and is used in communications with our lenders and rating agencies regarding our credit rating. As we fund new acquisitions using our unsecured Revolving Credit Facility, our leverage profile and Net ~~income decreased~~Debt will be immediately impacted by ~~$2.4 million, or 15.7%, to $13.0 million~~current quarter acquisitions. However, the full benefit of EBITDAre from newly acquired properties will not be received in the same quarter in which the properties are acquired. Additionally, EBITDAre for the ~~three months ended September 30, 2017, compared to $15.4 million~~quarter includes amounts generated by properties that have been sold during the quarter. Accordingly, the variability in EBITDAre caused by the timing of our acquisitions and dispositions can temporarily distort our leverage ratios. We adjust EBITDAre (“Adjusted EBITDAre”) for the ~~three months ended September 30, 2016. Net earnings per diluted share decreased by $0.34 during the same period, down~~most recently completed quarter (i) to $0.68 per share. The decrease in net income is primarily attributable to $2.6 million of asset impairment charges recognized during the three months ended September 30, 2017, with no impairment recognized during the three months ended September 30, 2016. The decrease in net income was partially offset by our investments in real estate properties. During the three months ended September 30, 2017, we closed seven real estaterecalculate as if all 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~~dispositions had occurred at 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 partbeginning of the quarter, (ii) to exclude certain GAAP income and expense amounts that are either non-cash, such as cost ~~basis~~ of debt extinguishments or the ~~underlying assets acquired, as opposed~~change in fair value of our earnout liability, or that we believe are one time, or unusual in nature because they relate to ~~expensing them as incurred. We adopted ASU 2017-01 on a prospective basis. For~~unique circumstances or transactions that had not previously occurred and which we do not anticipate occurring in the ~~three months ended September 30, 2017, we capitalized $2.4 million in acquisition expenses relating~~future, and (iii) to ~~$159.2 million in acquisitions. As such, net income for~~eliminate 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 as compared to the three months ended September 30, 2016.

~~Earnings per share were further impacted by a 4.1 million increase in the diluted weighted average number of shares of our common stock outstanding as~~lease termination fees and other items that are not a result of ~~ongoing equity raises.~~

~~FFO increased~~normal operations. We then annualize quarterly Adjusted EBITDAre by ~~$2.6 million, or 10.8%,~~multiplying it by four (“Annualized Adjusted EBITDAre”). You should not unduly rely on this measure as it is based on assumptions and estimates that may prove to ~~$27.2 million~~be inaccurate. Our actual reported EBITDAre for ~~the three months ended September 30, 2017, compared~~future periods may be significantly different from our Annualized Adjusted EBITDAre. Adjusted EBITDAre and Annualized Adjusted EBITDAre are not measurements of performance under GAAP, and our Adjusted EBITDAre and Annualized Adjusted EBITDAre may not be comparable to ~~$24.5 million for the three months ended September 30, 2016. FFO per diluted share decreased by $0.21 during the same period~~similarly titled measures of other companies. You should not consider our Adjusted EBITDAre and Annualized Adjusted EBITDAre as alternatives to ~~$1.42 per share. The increase in FFO is primarily driven by increased revenue year over year as a result of growth in our real estate investment portfolio, as discussed for~~ net income above. Additionally, we added back $2.6 million of asset impairment charges recognized during the three months ended September 30, 2017, which were not recognized during the three months ended September 30, 2016.

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

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

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

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

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

The following table ~~presents our~~reconciles net income (which is the most comparable GAAP measure) to EBITDA 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.EBITDAre:

The following table reconciles EBITDAre to Adjusted EBITDAre. Information is also presented with respect to Annualized EBITDAre and Annualized Adjusted EBITDAre:

Net ~~income~~Debt, Net Debt to Annualized EBITDAre and Net Debt to Annualized Adjusted EBITDAre

We define Net ~~income increased by $16.3 million, or 61.4%,~~Debt as gross debt (total reported debt plus deferred financing costs) less cash and cash equivalents and restricted cash. We believe that the presentation of Net Debt to ~~$42.7 million for the nine months ended September 30, 2017,~~Annualized EBITDAre and Net Debt to Annualized Adjusted EBITDAre is useful to investors and analysts because these ratios provide information about gross debt less cash and cash equivalents, which could be used to repay debt, compared to ~~$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~~our performance as measured using EBITDAre, and is used in ~~net income~~communications with lenders and earnings per share is attributable to accretive investments in real estate properties made during 2017, coupled with the annualized revenue streams from the real estate investments made during the nine months ended September 30, 2016. We added $352.0 million and $381.0 million in real estate investments during the nine months ended September 30, 2017 and 2016, respectively.

In increase in net income was also impacted by acquisition expenses. During the nine months ended September 30, 2016 we recognized $8.3 million in acquisition expenses. We adopted ASU 2017-01 effective January 1, 2017, and under this new accounting standard, we capitalize acquisition expenses as part of the cost basis of the underlying assets acquired, as opposed to expensing them as incurred. We adopted ASU 2017-01 on a prospective basis. For the nine months ended September 30, 2017, we capitalized $6.6 million in acquisition expenses relating to $352.0 million in acquisitions. As such, net income for the nine months ended September 30, 2016 was impacted by acquisition expenses, however, net income for the nine months ended September 30, 2017 was not. The impact of capitalizing acquisition expenses during the nine months ended September 30, 2017 was partially offset by increased depreciation expense relating to the capitalized costs.

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

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

FFO increased by $24.3 million, or 43.7%, to $80.0 million for the 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.

credit rating. The following table reconciles total debt (which is ~~a reconciliation~~the most comparable GAAP measure) to Net Debt, and presents the ratio of ~~net income~~Net Debt to ~~FFO~~Annualized EBITDAre and ~~AFFO for the three and nine months ended September 30, 2017 and 2016. Also presented is information regarding distributions paid~~Net Debt to common stockholders and non-controlling interests and the weighted average number of shares of our common stock and non-controlling membership units of the Operating Company used for the basic and diluted computation per share:Annualized Adjusted EBITDAre, respectively:

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

(in thousands)	March 31, 2021			December 31, 2020			March 31, 2020
Debt
Revolving Credit Facility	$	15,000		$	—		$	353,300
Unsecured term notes, net		1,383,283			1,433,796			1,672,587
Mortgages and notes payable, net		106,559			107,382			110,464
Debt issuance costs		6,988			6,489			7,767
Gross Debt		1,511,830			1,547,667			2,144,118
Cash and cash equivalents		(10,205	)		(100,486	)		(93,151	)
Restricted cash		(8,145	)		(10,242	)		(3,561	)
Net Debt	$	1,493,480		$	1,436,939		$	2,047,406
Net Debt to Annualized EBITDAre	5.45x			5.87x			8.66x
Net Debt to Annualized Adjusted EBITDAre	5.25x			5.15x			7.50x

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, 2021, 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 2020 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 Quarterly Report on Form 10-Q.

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 $1.4 billion and $1.5 billion, respectively, as of March 31, 2021. Changes in market interest rates impact the fair value of our fixed-rate debt and interest rate swaps, but they have no impact on interest incurred or on cash flows. For instance, if interest rates were to increase 1%, and the fixed-rate debt balance were to remain constant, we would expect the fair value of our debt to decrease, similar to how the price of a bond decreases as interest rates rise. A 1% increase in market interest rates would have resulted in a decrease in the ~~table below were entered~~fair value of our fixed-rate debt and interest rate swaps of approximately $74.5 million as of March 31, 2021.

Borrowings pursuant to our Revolving Credit Facility and other variable-rate debt bear interest at rates based on LIBOR plus an applicable margin, and totaled $934.7 million as of March 31, 2021, of which $824.7 million was swapped to a fixed rate by our use of interest rate swaps. Taking into account the effect of our interest rate swaps, a 1% increase or decrease in ~~conjunction with previous secured and unsecured borrowings that were retired and the swaps~~interest would have ~~since been reapplied~~a corresponding $1.1 million increase or decrease in ~~support of the current unsecured credit facilities.~~interest expense annually.

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, 2021, 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”))~~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, 2021, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and were operating at a reasonable assurance level.

There ~~were~~have been no changes toin our internal control over financial reporting ~~that occurred~~ during the quarter ended ~~September 30, 2017,~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we are subject to various lawsuits, claims and other legal proceedings ~~and claims~~ that arise in the ordinary course of our business. ~~These matters are generally covered by insurance or are subject~~Excluding ordinary, routine litigation incidental to our ~~right~~business, we are not currently a party to ~~be indemnified by our tenants~~legal proceedings that we ~~include in~~believe would reasonably be expected to have material adverse effect on our ~~leases. Management is~~business, financial condition or results of operations. We are not aware of any material ~~pending~~ legal proceedings to which we or any of our subsidiaries are a party or to which any of our property is subject, nor are we aware of any such legal proceedings contemplated by government agencies.

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

~~In December 2007, we commenced our ongoing private offering~~Equity Securities and Use of shares of our common stock. The following table provides information regarding the sale of shares of our common stock pursuant to our ongoing private offering during the nine months ended September 30, 2017 (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~~Proceeds from registration under the Securities Act provided by Rule 506(c) under Regulation D promulgated under the Securities Act. All of the shares of our common stock set forth in the table above were sold to persons who represented to us in writing that they qualified as an “Accredited Investor” as such term is defined by Regulation D promulgated under the Securities Act, and provided us with additional documentation to assist us in verifying such person’s status as accredited investors.

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

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

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

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

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

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


		Page
Part I - FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Income and Comprehensive Income (Loss) (Unaudited)	2
	Condensed Consolidated Statements of Stockholders’ Equity 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	2622
	Cautionary Note Regarding Forward-Looking Statements	2622
	~~Overview~~Explanatory Note and Certain Defined Terms	2622
	~~Liquidity and Capital Resources~~Overview	3523
	~~Impact~~Real Estate Portfolio Information	24
	Results of ~~Inflation~~Operations	30
	Liquidity and Capital Resources	34
	Derivative Instruments and Hedging Activities	36
	Cash Flows	36
	Contractual Obligations	37
	Non-GAAP Measures	37
	Critical Accounting Policies	40
	~~Off-Balance Sheet Arrangements~~	41
	~~Contractual Obligations~~	41
	~~Results of Operations~~	41
	~~Net Income and Non-GAAP Measures (FFO and AFFO)~~	47
	~~Critical Accounting Policies~~	51
	Impact of Recent Accounting Pronouncements	5140
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5140
Item 4.	Controls and Procedures	5241
Part II - OTHER INFORMATION		5342
Item 1.	Legal Proceedings	5342
Item 1A.	Risk Factors	5342
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5342
Item 3.	Defaults upon Senior Securities	5542
Item 4.	Mine Safety Disclosures	5542
Item 5.	Other Information	5542
Item 6.	Exhibits	5543

	March 31, 2021									December 31, 2020
(in thousands)	Shares of Common Stock			OP Units			Total Diluted Shares			Shares of Common Stock			OP Units			Total Diluted Shares
Ownership interest		145,813			11,361			157,174			145,609			11,399			157,008
Percent ownership of OP		92.8	%		7.2	%		100.0	%		92.7	%		7.3	%		100.0	%

	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

	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

Significant Unobservable Inputs	Weighted Average Assumption Used		Range
Expected IPO date	April 15, 2020		March 2020 through May 2020
Peer stock price volatility	20.0%		16.22% to 23.09%
Company's net asset value per diluted share	$	21.30	^(a)

	December 31, 2016										December 31, 2020
	Total			Level 1		Level 2			Level 3
Interest rate swaps, assets	$	9,598		$	-	$	9,598		$	-
(in thousands)											Total			Level 1		Level 2			Level 3
Interest rate swap, liabilities		(10,217	)		-		(10,217	)		-	$	(72,103	)	$	—	$	(72,103	)	$	—
	$	(619	)	$	-	$	(619	)	$	-
Earnout liability												(7,509	)		—		—			(7,509	)

(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

	For the Three Months Ended
(in thousands)	March 31, 2020
Revenues	$	78,231
Net income		13,751

(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)
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 2021	$	224,633
2022		302,580
2023		306,227
2024		302,556
2025		295,351
Thereafter		2,106,544
	$	3,537,891

(in thousands)		For the Three Months Ended March 31,
Intangible	Financial Statement Presentation	2021		2020
Acquired in-place leases and leasing fees	Depreciation and amortization	$	6,947	$	7,695
Above-market and below-market leases	Lease revenues, net		753		1,140

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

	September 30,			September 30,
(in thousands)	2017			2016
Land	$	18,499		$	63,918
Land improvements		28,463			28,250
Buildings and other improvements		279,110			251,861
Equipment		508			-
Acquired in-place leases^(c)		37,110			38,456
Acquired above-market leases^(d)		13,229			16,090
Acquired below-market leases^(e)		(21,861	)		(18,107	)
Direct financing		3,546			544
	$	358,604		$	381,012

(in thousands)
Remainder of 2021	$	18,746
2022		22,844
2023		22,531
2024		21,773
2025		20,477
Thereafter		115,403
	$	221,774

(in thousands, except interest rates)
		Origination Date	Maturity Date			September 30,			December 31,
Lender		(Month/Year)	(Month/Year)	Interest Rate		2017			2016
(1)	M&T Bank	Dec-10	Apr-20	1 month LIBOR+1.90%		$	-		$	21,335		(b) (f) (g)
(2)	Sun Life	Mar-12	Oct-21		5.13%		11,763			12,036		(b) (i)
(3)	Aegon	Apr-12	Oct-23		6.38%		9,330			9,804		(b) (j)
(4)	Legg Mason Mortgage Capital Corporation	Aug-10	Aug-22		7.06%		5,900			6,538		(b) (e)
(5)	Columbian Mutual Life Insurance Company	Aug-10	Sep-25		7.00%		1,510			1,538		(b) (c) (d)
(6)	Symetra Financial	Mar-11	Apr-31		6.34%		1,015			1,036		(a) (b)
(7)	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)
(9)	Siemens Financial Services, Inc.	Sep-10	Sep- 20		5.47%		5,869			6,010		(a) (b)
(10)	Standard Insurance Co.	Apr-09	May-34		6.88%		1,827			1,870		(b) (c) (h)
(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						(689	)		(838	)
						$	57,883		$	106,686

(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	)

(in thousands, except recognition period)	March 31, 2021		December 31, 2020
Unamortized value of RSAs	$	6,999	$	5,001
Weighted average amortization period (in years)		3.0		2.8

	For the Three Months Ended March 31, 2021
(in thousands, except per share amounts)	Number of Shares		Weighted Average Grant Date Fair Value per Share
Unvested at beginning of period		341	$	20.50
Granted		199		18.66
Vested		124		20.26
Forfeited		—		—
Unvested at end of period		416	$	19.62

~~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~~	%Subject to a master lease.

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

~~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	%

(in thousands, except interest rates)	Outstanding Balance		Interest Rate	Maturity Date
Revolving Credit Facility	$	15,000	daily LIBOR + 1.00%	Sept. 2023
2022 Unsecured Term Loan		60,000	one-month LIBOR + 1.00%	Feb. 2022
2023 Unsecured Term Loan		265,000	one-month LIBOR + 1.10%	Jan. 2023
2024 Unsecured Term Loan		190,000	one-month LIBOR + 1.00%	Jun. 2024
2026 Unsecured Term Loan		400,000	one-month LIBOR + 1.00%	Feb. 2026
Senior Notes
Series A		150,000	4.84%	Apr. 2027
Series B		225,000	5.09%	Jul. 2028
Series C		100,000	5.19%	Jul. 2030
		475,000
Total		1,405,000

Covenants		Requirement
Leverage Ratio		≤ 0.60 to 1.00
Secured Indebtedness Ratio		≤ 0.40 to 1.00
Unencumbered Coverage Ratio		≥ 1.75 to 1.00
Fixed Charge Coverage Ratio		≥ 1.50 to 1.00
Total Unsecured Indebtedness to Total Unencumbered Eligible Property Value		≤ 0.60 to 1.00
Dividends and Other Restricted Payments		Only applicable in case of default

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

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

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

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