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

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

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

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

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

There were ~~19,805,985.018~~23,173,407.023 shares of the Registrant’s common stock, $0.001 par value per share, outstanding as of May ~~8, 2018.~~7, 2019.

	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Assets
Accounted for using the operating method, net of accumulated depreciation	$	2,251,938		$	2,186,141		$	2,682,996		$	2,641,746
Accounted for using the direct financing method		41,610			41,617			41,975			42,000
Investment in rental property, net		2,293,548			2,227,758			2,724,971			2,683,746
Cash and cash equivalents		13,499			9,355			11,726			18,612
Restricted cash		11,251			744			1,434			377
Accrued rental income		56,465			52,018			73,618			69,247
Tenant and other receivables, net		421			897			1,376			1,026
Tenant and capital reserves		992			943			1,149			1,136
Prepaid expenses and other assets		855			267			4,821			2,803
Notes receivable		6,527			6,527
Investment in related party		10,000			10,000
Interest rate swap, assets		24,040			11,008			8,737			17,633
Intangible lease assets, net		247,249			242,659			287,189			286,258
Debt issuance costs – unsecured revolver, net		2,835			3,026			3,277			2,261
Leasing fees, net		13,987			13,554			13,645			13,698
Total assets	$	2,681,669		$	2,578,756		$	3,131,943		$	3,096,797

Liabilities and equity
Unsecured revolver	$	317,000		$	273,000		$	139,900		$	141,100
Mortgages and notes payable, net		67,097			67,832			72,004			78,952
Unsecured term notes, net		837,159			836,912			1,222,095			1,225,773
Interest rate swap, liabilities		1,096			5,020			5,549			1,820
Accounts payable and other liabilities		22,197			20,345			24,149			22,269
Due to related parties		2,271			722			52			114
Tenant improvement allowances		4,292			5,669			2,697			2,125
Accrued interest payable		4,642			3,311			8,391			9,777
Intangible lease liabilities, net		80,235			81,744			85,080			85,947
Total liabilities		1,335,989			1,294,555			1,559,917			1,567,877

Commitments and contingencies (See Note 16)
Commitments and contingencies (See Note 15)

Equity
Broadstone Net Lease, Inc. stockholders' equity:
Preferred stock, $0.001 par value; 20,000 shares authorized, no shares issued or outstanding		—			—			—			—
Common stock, $0.001 par value; 80,000 shares authorized, 19,572 and 18,909 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively		20			19
Common stock, $0.001 par value; 80,000 shares authorized, 22,876 and 22,014 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively								23			22
Additional paid-in capital		1,355,268			1,301,979			1,630,417			1,557,421
Subscriptions receivable		(144	)		(15	)		(225	)		—
Cumulative distributions in excess of retained earnings		(127,183	)		(120,280	)		(170,847	)		(155,150	)
Accumulated other comprehensive income		20,807			5,122			3,018			14,806
Total Broadstone Net Lease, Inc. stockholders’ equity		1,248,768			1,186,825			1,462,386			1,417,099
Non-controlling interests		96,912			97,376			109,640			111,821
Total equity		1,345,680			1,284,201			1,572,026			1,528,920
Total liabilities and equity	$	2,681,669		$	2,578,756		$	3,131,943		$	3,096,797

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

	For the three months ended March 31,						For the three months ended March 31,
	2018			2017			2019			2018
Revenues
Rental income from operating leases	$	51,832		$	39,401
Earned income from direct financing leases		966			1,133
Operating expenses reimbursed from tenants		2,749			1,617
Other income from real estate transactions		42			34
Total revenues		55,589			42,185
Lease revenues							$	68,430		$	55,589

Operating expenses
Depreciation and amortization		19,202			14,593			24,310			19,202
Asset management fees		4,143			3,193			5,120			4,143
Property management fees		1,517			1,168			1,885			1,517
Property and operating expense		2,619			1,577			4,390			2,619
General and administrative		1,330			963			1,103			1,330
State and franchise tax		243			50			443			243
Provision for impairment of investment in rental properties								1,017			—
Total operating expenses		29,054			21,544			38,268			29,054
Operating income		26,535			20,641

Other income (expenses)
Preferred distribution income		188			181			—			188
Interest income		110			112			1			110
Interest expense		(11,177	)		(7,942	)		(15,828	)		(11,177	)
Cost of debt extinguishment		—			(48	)		(713	)		—
Gain on sale of real estate		3,339			803			1,400			3,339
Net income		18,995			13,747			15,022			18,995
Net income attributable to non-controlling interests		(1,422	)		(1,153	)		(1,084	)		(1,422	)
Net income attributable to Broadstone Net Lease, Inc.	$	17,573		$	12,594		$	13,938		$	17,573

Weighted average number of common shares outstanding
Basic		19,167			15,582			22,335			19,167
Diluted		20,719			17,009			24,072			20,719
Net Earnings per common share
Net earnings per common share
Basic and diluted	$	0.92		$	0.81		$	0.62		$	0.92

Comprehensive income
Net income	$	18,995		$	13,747		$	15,022		$	18,995
Other comprehensive income
Other comprehensive (loss) income
Change in fair value of interest rate swaps		16,955			2,560			(12,624	)		16,955
Realized gain on interest rate swaps								(81	)		—
Comprehensive income		35,950			16,307			2,317			35,950
Comprehensive income attributable to non-controlling interests		(2,692	)		(1,368	)		(167	)		(2,692	)
Comprehensive income attributable to Broadstone Net Lease, Inc.	$	33,258		$	14,939		$	2,150		$	33,258

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

Common
Stock

Additional
Paid-in Capital

Subscriptions
Receivable

Cumulative
Distributions in Excess of Retained Earnings

Accumulated Other
Comprehensive
Income

Non-controlling
Interests

Total

Balance, January 1, 2017

$
15

$
1,009,431

$
(9,790
)

$
(89,960
)

$
2,092

$
86,749

$
998,537

Net income

—

—

—

12,594

—

1,153

13,747

Issuance of 1,167 shares of common stock, net

1

91,055

9,540

—

—

—

100,596

Other offering costs

—

(410
)

—

—

—

—

(410
)
Distributions declared ($0.410 per share January
2017, $0.415 per share February through March 2017)

—

—

—

(19,326
)

—

(1,941
)

(21,267
)
Change in fair value of interest rate swap agreements

—

—

—

—

2,346

214

2,560

Redemption of 18 shares of common stock

—

(1,380
)

—

—

—

—

(1,380
)
Balance, March 31, 2017

$
16

$
1,098,696

$
(250
)

$
(96,692
)

$
4,438

$
86,175

$
1,092,383

	Common Stock		Additional Paid-in Capital			Subscriptions Receivable			Cumulative Distributions in Excess of Retained Earnings			Accumulated Other Comprehensive Income		Non- controlling Interests			Total
Balance, January 1, 2018	$	19	$	1,301,979		$	(15	)	$	(120,280	)	$	5,122	$	97,376		$	1,284,201
Net income		—		—			—			17,573			—		1,422			18,995
Issuance of 710 shares of common stock		1		57,154			(129	)		—			—		—			57,026
Other offering costs		—		(224	)		—			—			—		—			(224	)
Distributions declared ($0.415 per share January 2018, $0.43 per share February through March 2018)		—		—			—			(24,476	)		—		(2,472	)		(26,948	)
Change in fair value of interest rate swap agreements		—		—			—			—			15,685		1,270			16,955
Conversion of eight membership units to eight shares of common stock		—		684			—			—			—		(684	)		—
Redemption of 46 shares of common stock		—		(3,577	)		—			—			—		—			(3,577	)
Cancellation of nine shares of common stock		—		(748	)		—			—			—		—			(748	)
Balance, March 31, 2018	$	20	$	1,355,268		$	(144	)	$	(127,183	)	$	20,807	$	96,912		$	1,345,680

Common
Stock

Additional
Paid-in Capital

Subscriptions
Receivable

Cumulative
Distributions in Excess of Retained Earnings

Accumulated Other
Comprehensive
Income

Non-controlling
Interests

Total

Balance, January 1, 2018

$
19

$
1,301,979

$
(15
)

$
(120,280
)

$
5,122

$
97,376

$
1,284,201

Net income

—

—

—

17,573

—

1,422

18,995

Issuance of 710 shares of common stock, net

1

57,154

(129
)

—

—

—

57,026

Other offering costs

—

(224
)

—

—

—

—

(224
)
Distributions declared ($0.415 per share January 2018, $0.43 per
share February through March 2018)

—

—

—

(24,476
)

—

(2,472
)

(26,948
)
Change in fair value of interest rate swap agreements

—

—

—

15,685

1,270

16,955

Conversion of 8 membership units to 8 shares of common stock

—

684

—

—

—

(684
)

—

Redemption of 46 shares of common stock

—

(3,577
)

—

—

—

—

(3,577
)
Cancellation of 9 shares of common stock

—

(748
)

—

—

—

—

(748
)
Balance, March 31, 2018

$
20

$
1,355,268

$
(144
)

$
(127,183
)

$
20,807

$
96,912

$
1,345,680

	Common Stock		Additional Paid-in Capital			Subscriptions Receivable			Cumulative Distributions in Excess of Retained Earnings			Accumulated Other Comprehensive Income			Non- controlling Interests			Total
Balance, January 1, 2019	$	22	$	1,557,421		$	—		$	(155,150	)	$	14,806		$	111,821		$	1,528,920
Net income		—		—			—			13,938			—			1,084			15,022
Issuance of 883 shares of common stock		1		75,099			(225	)		—			—			—			74,875
Other offering costs		—		(300	)		—			—			—			—			(300	)
Distributions declared ($0.430 per share January 2019, $0.440 per share February through March 2019)		—		—			—			(29,635	)		—			(2,348	)		(31,983	)
Change in fair value of interest rate swap agreements		—		—			—			—			(11,713	)		(911	)		(12,624	)
Realized gain on interest rate swap agreements		—		—			—			—			(75	)		(6	)		(81	)
Redemption of 21 shares of common stock		—		(1,803	)		—			—			—			—			(1,803	)
Balance, March 31, 2019	$	23	$	1,630,417		$	(225	)	$	(170,847	)	$	3,018		$	109,640		$	1,572,026

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

	For the three months ended March 31,						For the three months ended March 31,
	2018			2017			2019			2018
Operating activities
Net income	$	18,995		$	13,747		$	15,022		$	18,995
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
Depreciation and amortization including intangibles associated with investment in rental property		19,380			14,794			23,572			19,380
Provision for impairment on investment in rental properties								1,017			—
Amortization of debt issuance costs charged to interest expense		425			383			517			425
Straight-line rent and financing lease adjustments		(5,141	)		(4,038	)		(5,143	)		(5,141	)
Cost of debt extinguishment		—			48			713			—
Gain on sale of real estate		(3,339	)		(803	)		(1,400	)		(3,339	)
Non-cash interest		—			(101	)
Leasing fees paid								(258	)		(785	)
Other non-cash items		185			134			92			185
Leasing fees paid		(785	)		(897	)
Changes in assets and liabilities:
Tenant and other receivables		(272	)		35			(350	)		(272	)
Prepaid expenses and other assets		(588	)		(396	)		(442	)		(588	)
Accounts payable and other liabilities		2,046			1,226			(315	)		2,046
Accrued interest payable		1,331			(146	)		(1,386	)		1,331
Net cash provided by operating activities		32,237			23,986			31,639			32,237

Investing activities
Acquisition of rental property accounted for using the operating method		(101,835	)		(91,294	)		(75,080	)		(101,835	)
Capital expenditures and improvements		(1,378	)		(2,287	)		(256	)		(1,378	)
Proceeds from disposition of rental property, net		15,738			5,931			10,612			15,738
Increase in tenant and capital reserves		(49	)		(32	)		(13	)		(49	)
Change in deposits on investments in rental property								100			—
Net cash used in investing activities		(87,524	)		(87,682	)		(64,637	)		(87,524	)

Financing activities
Proceeds from issuance of common stock, net		44,957			91,506			59,869			44,957
Redemptions of common stock		(3,577	)		(1,380	)		(1,803	)		(3,577	)
Principal payments on mortgages and notes payable		(722	)		(15,396	)
Borrowings on unsecured term notes								300,000			—
Principal payments on mortgages, notes payable and unsecured term notes								(306,970	)		(722	)
Borrowings on unsecured revolver		79,000			85,000			43,800			79,000
Repayments on unsecured revolver		(35,000	)		(67,000	)		(45,000	)		(35,000	)
Cash distributions paid to stockholders		(12,256	)		(10,213	)		(14,495	)		(12,256	)
Cash distributions paid to non-controlling interests		(2,464	)		(1,936	)		(2,330	)		(2,464	)
Debt issuance costs paid		—			(351	)
Debt issuance and extinguishment costs paid								(5,902	)		—
Net cash provided by financing activities		69,938			80,230			27,169			69,938
Net increase in cash and cash equivalents and restricted cash		14,651			16,534
Net (decrease) increase in cash and cash equivalents and restricted cash								(5,829	)		14,651
Cash and cash equivalents and restricted cash at beginning of period		10,099			23,103			18,989			10,099
Cash and cash equivalents and restricted cash at end of period	$	24,750		$	39,637		$	13,160		$	24,750

Reconciliation of cash and cash equivalents and restricted cash
Cash and cash equivalents at beginning of period	$	9,355		$	21,635		$	18,612		$	9,355
Restricted cash at beginning of period		744			1,468			377			744
Cash and cash equivalents and restricted cash at beginning of period	$	10,099		$	23,103		$	18,989		$	10,099

Cash and cash equivalents at end of period	$	13,499		$	32,804		$	11,726		$	13,499
Restricted cash at end of period		11,251			6,833			1,434			11,251
Cash and cash equivalents and restricted cash at end of period	$	24,750		$	39,637		$	13,160		$	24,750

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

Broadstone Net Lease, Inc. (the “Corporation”) is a Maryland corporation formed on October 18, 2007, that elected to be taxed as a real estate investment trust (“REIT”) commencing with the taxable year ended December 31, 2008. The Corporation focuses on investing in income-producing, net leased commercial properties. The Corporation leases properties to retail, healthcare, industrial, office, and other commercial businesses under long-term lease agreements. Properties are generally leased on a triple-net basis such that tenants pay all operating expenses relating to the property, including, but not limited to, property taxes, insurance, maintenance, repairs, and capital costs, during the lease term. As ofAt March 31, ~~2018,~~2019, the Corporation owned a diversified portfolio of ~~550~~644 individual net leased commercial properties located in 4042 states throughout the continental United States.

Broadstone Net Lease, LLC (the “Operating Company”), is the entity through which the Corporation conducts its business and owns (either directly or through subsidiaries) all of the Corporation’s properties. ~~At March 31, 2018 and December 31, 2017, the Corporation owned economic interests of 92.7%, and 92.4%, respectively, in the Operating Company.~~ The Corporation is ~~also~~ the sole managing member of the Operating Company. The remaining interests in the Operating Company, which are referred to as non-controlling interests, are held by members who acquired their interest by contributing property to the Operating Company in exchange for membership units of the Operating Company. As the Corporation conducts substantially all of its operations through the Operating Company, it is structured as what is referred to as an ~~Umbrella Partnership Real Estate Investment Trust~~umbrella partnership real estate investment trust (“UPREIT”). The following table summarizes the economic ownership interest in the Operating Company:

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

The accompanying ~~unaudited~~ Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information (Accounting Standards Codification (“ASC”) 270, Interim Reporting) and Article 10 of the ~~Security~~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, ~~2017,~~2018, included in the Company’s ~~2017~~2018 Annual Report on Form 10-K, filed with the SEC on March ~~15, 2018.~~14, 2019. Therefore, the readers of this quarterly report should refer to those audited consolidated financial statements, specifically Note 2, Summary of Significant Accounting Policies, for further discussion of significant accounting policies and estimates. The Corporation believes all adjustments necessary for a fair presentation have been included in these interim Condensed Consolidated Financial Statements (which include only normal recurring adjustments).

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

To the extent the Corporation has a variable interest in entities that are not evaluated under the variable interest entity (“VIE”) model, the Corporation evaluates its interests using the voting interest entity model. The Corporation holds a ~~92.7%~~92.9% interest in the Operating Company at March 31, ~~2018,~~2019, and is the sole managing member of the Operating Company, which gives the Corporation exclusive and complete responsibility for the day-to-day management, authority to make decisions, and control of the Operating Company. Based on consolidation guidance, the Corporation has concluded that the Operating Company is a VIE as the members in the Operating Company do not possess kick-out rights or substantive participating rights. Accordingly, the Corporation consolidates its interest in the Operating Company. However, as the Corporation holds the majority voting interest in the Operating Company, it qualifies for the exemption from providing certain disclosure requirements associated with investments in VIEs.

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

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

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

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

Inputs used in establishing fair value for real estate assets generally fall within Level 3 of the fair value hierarchy, which are characterized as requiring significant judgment as little or no current market activity may be available for validation. The main indicator used to establish the classification of the inputs is current market conditions, as derived through the use of published commercial real estate market information. 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 March 31, 2019, the Company ~~maintains pursuant~~recorded an impairment charge of $1,017 on one property. Impairment indicators were identified from concerns over the tenant’s future viability and changes to the ~~terms of certain mortgage and notes payable and lease agreements, and undistributed proceeds from~~overall investment strategy for the ~~sale of properties under Section 1031~~real estate assets. The amount of the ~~Internal Revenue Code.~~impairment charge was based on management’s consideration of the factors detailed above. In determining the fair value of the impaired assets at March 31, 2019, the time of measurement, the Company utilized a capitalization rate of 14.58%, and a weighted average discount rate of 8.00%. There were no impairment charges recorded for the three months ended March 31, 2018.

The Company has reduced the carrying values of the impaired real estate assets to their estimated fair values at the measurement date as detailed below:

The Company commences revenue recognition on its leases based on a number of factors, including the initial determination that the contract is or contains a lease. Generally, all of the Company’s contracts are, or contain leases, and therefore revenue is recognized when the lessee takes possession of or controls the physical use of the leased assets. In most instances this occurs on the lease commencement date. At the inception of a new lease, ~~arrangement,~~ including new leases that arise from amendments, the Company assesses the terms and conditions of the lease to determine the proper lease classification.

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

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

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

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

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

Revenue recognition methods for operating leases, ~~and~~ direct financing leases, and sales-type leases are described below:

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

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

~~Adoption~~Rental property accounted for under sales-type leases – For leases accounted for as sales-type leases, the Company records selling profit arising from the lease at inception, along with the net investment in the lease. The Company leases assets through the assumption of ~~ASU 2014-09, described further~~existing leases or through sale-leaseback transactions, and records such assets at their fair value at the time of acquisition, which in ~~Recently Adopted Accounting Standards~~ ~~elsewhere~~most cases coincides with lease inception. As a result, the Company does not generally recognize selling profit on sales-type leases. The net investment in ~~Note 2, did not have an impact~~the sales-type lease represents receivables for the sum of future lease payments and the estimated unguaranteed residual value of the leased property, each measured at net present value. Interest income is recorded over the lease terms so as to produce a constant periodic rate of return on the ~~nature, amount or timing~~Company’s net investment in the leases.

Certain of ~~revenue recognized~~the Company’s contracts contain nonlease components (e.g., charges for management fees, common area maintenance, and reimbursement of third-party maintenance expenses) in addition to lease components (i.e., monthly rental charges). Services related to nonlease components are provided over the same period of time as, and billed in the same manner as, monthly rental charges. The Company elected to apply the practical expedient available under ASC 842, for all classes of assets, not to segregate the lease components from the nonlease components when accounting for operating leases. Since the lease component is the predominant component under each of these leases, combined revenues from both the lease and ~~direct financing leases~~nonlease components are accounted for in accordance with ASC 842 and reported as ~~revenue from these sources is derived from lease contracts and therefore falls outside the scope of this guidance.~~

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

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

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

Rent received in advance represents tenant payments received prior to the contractual due date and are included in Accounts payable and other liabilities on the Condensed Consolidated Balance Sheets. Rents received in advance ~~were $9,164 and $8,585 at March 31, 2018 and December 31, 2017, respectively.~~are as follows:

~~Management periodically reviews~~Prior to the ~~sufficiency~~adoption of ~~the allowance~~ASC 842, provisions for doubtful accounts ~~taking into consideration its historical losses~~were recorded as bad debt expense and ~~existing economic conditions,~~included in General and makes adjustments to the allowance as it considers necessary. Uncollected tenant receivables are written off against the allowance when all possible means of collection have been exhausted. The following table summarizes the changes in the allowance for doubtful accounts:

The Company uses interest rate swap agreements to manage risks related to interest rate movements. The interest rate swap agreements, designated and qualifying as cash flow hedges, are reported at fair value. The gain or lossadministrative expenses on the qualifying hedges is initially included as a component of other comprehensive income or loss and is subsequently reclassified into earnings when interest payments on the related debt are incurred and as the swap net settlements occur. The Company documents its risk management strategy and hedge effectiveness at the inception of and during the term of each hedge. The Company’s interest rate risk management strategy is intended to stabilize cash flow requirements by maintaining interest rate swap agreements to convert certain variable-rate debt to a fixed rate.

Non-controlling interests represents the membership interests held in the Operating Company of 7.3% and 7.6% at March 31, 2018 and December 31, 2017, 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 their share of the book value of the Operating Company. Such adjustments are recorded to Additional paid-in capital as a reallocation of Non-controlling interests in theaccompanying Condensed Consolidated Statements of ~~Stockholders’ Equity.~~Income and Comprehensive Income. Subsequent to the adoption of ASC 842, provisions for doubtful accounts are recorded as an offset to Lease revenues on the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

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

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

	March 31, 2018										March 31, 2019
(in thousands)	Total			Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3
Interest rate swaps, assets	$	24,040		$	—	$	24,040		$	—
Interest rate swap, assets											$	8,737		$	—	$	8,737		$	—
Interest rate swap, liabilities		(1,096	)		—		(1,096	)		—		(5,549	)		—		(5,549	)		—
	$	22,944		$	—	$	22,944		$	—	$	3,188		$	—	$	3,188		$	—

	December 31, 2017										December 31, 2018
	Total			Level 1		Level 2			Level 3
Interest rate swaps, assets	$	11,008		$	—	$	11,008		$	—
(in thousands)											Total			Level 1		Level 2			Level 3
Interest rate swap, assets											$	17,633		$	—	$	17,633		$	—
Interest rate swap, liabilities		(5,020	)		—		(5,020	)		—		(1,820	)		—		(1,820	)		—
	$	5,988		$	—	$	5,988		$	—	$	15,813		$	—	$	15,813		$	—

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

The fair value of the Company’s debt was estimated using Level 2 and Level 3 inputs based on recent financing transactions, estimates of the fair value of the property that serves as collateral for such debt, historical risk premiums for loans of comparable quality, current ~~LIBOR, US~~London Interbank Offered Rate (“LIBOR”), U.S. treasury obligation interest rates, and on the discounted estimated future cash payments to be made on such debt. The discount rates estimated reflect the Company’s judgment as to the approximate current lending rates for loans or groups of loans with similar maturities and assumes that the debt is outstanding through maturity. Market information, as available, or present value techniques were utilized to estimate the amounts required to be disclosed. Since such amounts are estimates that are based on limited available market information for similar transactions and do not acknowledge transfer or other repayment restrictions that may exist on specific loans, it is unlikely that the estimated fair value of any such debt could be realized by immediate settlement of the obligation.

The following table summarizes the carrying amount reported on the Condensed Consolidated Balance Sheets and the Company’s estimate of the fair value of the ~~Company’s~~ Mortgage and notes payable, net, Unsecured term notes, net, and Unsecured ~~revolver are estimated to be $1,198,630 and $1,177,197~~revolver:

As disclosed under the Long-lived Asset Impairment section elsewhere in Note 2, the Company’s non-recurring fair value measurements at March 31, ~~2018~~2019 consisted of the fair value of impaired real estate assets that were determined using Level 3 inputs.

Right-of-Use Assets and ~~December 31, 2017, respectively, as compared~~Lease Liabilities

In accordance with ASC 842, the Company records right-of-use assets and lease liabilities associated with leases of land where it is the lessee under non-cancelable operating leases (“ground leases”). The lease liability is equal to the ~~carrying amount~~net present value of ~~such debt~~the future payments to be made under the lease, discounted using the rate implicit in the lease. The right-of-use asset is generally equal to the lease liability plus initial direct costs associated with the leases. The Company includes in the recognition of ~~$1,224,713~~the right-of-use asset and ~~$1,181,470~~lease liability those renewal periods that are reasonably certain to be exercised, based on the facts and circumstances that exist at lease inception. Amounts associated with percentage rent provisions are considered variable lease costs and are not included in the initial measurement of the right-of-use asset or lease liability. As allowed under ASC 842, the Company has made an accounting policy election, applicable to all asset types, to not segregate lease from nonlease components when allocating contract consideration related to ground leases.

Right-of-use assets and lease liabilities associated with ground leases were included in the accompanying Condensed Consolidated Balance Sheets ~~at March 31, 2018 and December 31, 2017, respectively.~~as follows:

~~The Company did not have any assets measured at fair value on a nonrecurring basis at March 31, 2018.~~

~~The~~A majority of the Company’s properties are ~~generally~~ leased on a triple-net basis, which provides that the tenants are responsible for the payment of all property operating expenses, including, but not limited to, property taxes, maintenance, insurance, repairs, and capital costs, during the lease term. The Company records such expenses on a net basis. For the three months ended March 31, 2018 and 2017, the Company’s tenants, pursuant to their lease obligations, have made direct payment for property taxes to the taxing authorities of approximately $9,182 and $7,412, respectively.

In ~~some~~other situations, the Company may collect property taxes from its tenants and remit those taxes to governmental authorities. Taxes collected from tenants and remitted to governmental authorities are presented on a gross basis, where ~~revenue of $1,195 and $635 is~~amounts billed to tenants are included in ~~Operating expenses reimbursed from tenants~~Lease revenues, and the corresponding expense ~~of $1,157 and $639~~ is included in Property and operating expense, in the accompanying Condensed Consolidated Statements of Income and Comprehensive ~~Income~~Income.

Rental expense associated with land that the Company leases under non-cancellable operating leases, is recorded on a straight-line basis over the term of each lease, for leases that have fixed and measurable rent escalations. Under the ~~three months ended~~provisions of ASC 842, the difference between rental expense incurred on a straight-line basis and the cash rental payments due under the provisions of the lease is recorded as part of the right-of-use asset in the accompanying March 31, 2019 Condensed Consolidated Balance Sheet. Prior to the adoption of ASC 842, at December 31, 2018, this difference was recorded as a deferred liability and ~~2017, respectively.~~was included as a component of Accounts payable and other liabilities in the accompanying Condensed Consolidated Balance Sheets. Amounts associated with percentage rent provisions based on the achievement sales targets are recognized as variable rental expense when achievement of the sales targets are considered probable. Rental expense is included in Property and operating expenses on the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

~~In August 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~. ASU 2017-12 amends the designation and measurement guidance for qualifying hedging transactions and the presentation of hedge results in an entity’s financial statements. The new guidance removes the concept of separately measuring and reporting hedge ineffectiveness and requires a company to present the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported. Disclosure requirements have been modified to include a tabular disclosure related to the effect of hedging instruments on the income statement and eliminate the requirement to disclose the ineffective portion of the change in fair value of such instruments. The new guidance is effective January 1, 2019, with early adoption permitted, and provides companies with a modified retrospective transition method for each cash flow and net investment hedge relationship existing on the date of adoption. This adoption method will require a company to recognize the cumulative effect of initially applying the ASU as an adjustment to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that an entity adopts the update. The Company adopted the guidance effective January 1, 2018. The Company did not recognize a cumulative effect adjustment upon adoption as the Company had not recognized ineffectiveness on any of the hedging instruments existing as of the date of adoption.

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows—Restricted Cash.~~ ASU 2016-18 requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or cash equivalents. Therefore, amounts generally described as restricted cash and equivalents should be included with cash and cash equivalents when reconciling the beginning and end of period total amounts on the statement of cash flows. Previously, there had been no specific guidance to address how to classify or present these changes. ASU 2016-18 is effective, on a retrospective basis, for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company adopted ASU 2016-18 as of January 1, 2018. In line with the retrospective adoption of this standard, the Company removed the change in restricted cash from cash flows used in investing activities of $(5,365) for the three months ended March 31, 2017. See ~~Reclassifications~~ ~~elsewhere in Note 2.~~

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Classification of Certain Cash Receipts and Cash Payments.~~ ASU 2016-15 provides classification guidance for eight specific topics, including but not limited to, debt extinguishment costs, contingent consideration payments made after a business combination, and distributions received from equity method investees. ASU 2016-15 is effective, on a retrospective basis, for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company adopted ASU 2016-15 as of January 1, 2018. The classification of debt extinguishment costs in the Condensed Consolidated Statements of Cash Flows addressed by ASU 2016-15 is applicable to the Company. However, adoption of this guidance did not have an impact on the Company’s Condensed Consolidated Statements of Cash Flows, as the Company historically classified these cash flows as required by the guidance.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~. ASU 2014-09, including all updates, is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted ASU 2014-09 as of January 1, 2018 on a modified retrospective basis. The adoption had no effect on the Company’s Condensed Consolidated Financial Statements as the Company’s revenues are lease related, which are not subject to the provisions of ASU 2014-09.

~~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 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 previously recognized revenue on sales of real estate at the time the asset was transferred (i.e., at the time of closing). Upon adoption of ASU 2014-09, as discussed above, and therefore ASU 2017-05, the Company now evaluates any separate contract or performance obligation to determine proper timing of revenue recognition, as well as sales price allocation when a performance obligation is identified. Adoption of this pronouncement had no effect on the Company’s Condensed Consolidated Financial Statements during the three months ended March 31, 2018 or in any periods.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic ASC 842), which ~~supersedes~~superseded the existing guidance for lease accounting, ~~Leases (Topic 840). ASU 2016-02~~ASC 840. ASC 842 is effective January 1, 2019, with early adoption permitted. The guidance requires lessees to recognize a right-of-use asset and a corresponding lease liability, initially measured at the present value of lease payments, for both operating and financing leases. ~~For~~Under the new pronouncement, lessor accounting is largely unchanged from prior GAAP, however disclosures were expanded. The Company adopted ASC 842 on January 1, 2019 on a modified retrospective basis and elected the following practical expedients:

ASC 842 requires all income from leases to be presented as a single line item, rather than the prior presentation where ~~the Company is the lessee. Under the new pronouncement, lessor accounting will be largely unchanged~~rental income from ~~existing GAAP. However, there are certain changes, including 1) accounting for non-lease components of~~ leases was shown separately from amounts billed 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. Upon adoption, the Company will record certain expenses paid directly bycollected as reimbursements from tenants ~~that protect the Company’s interest in the properties, such as real estate taxes,~~ on ~~a gross basis, where revenue and the corresponding expense will be recorded and presented in~~ the Condensed Consolidated Statements of Income and Comprehensive Income. In addition, bad debt expense is required to be presented as an adjustment to Lease revenues, rather than the prior presentation within Operating expenses on the Condensed Consolidated Statements of Income and Comprehensive Income.

The Company ~~currently records~~is primarily a lessor and ~~presents these amounts~~therefore adoption of ASC 842 did not have a material impact on its Condensed Consolidated Financial Statements. Upon adoption of ASC 842, it was not necessary for the Company to record a cumulative-effect adjustment to the opening balance of retained earnings, however the Company recognized a right-of-use asset and corresponding lease liability as of January 1, 2019, of $1,687 and $1,261, respectively, related to operating leases where it is the lessee (see Note 15). The right-of-use asset was recorded net ~~basis (see~~of a previously recorded straight-line rent liability of $7 and ground lease intangible asset, net of $432 as of the date of adoption.

In October 2018, the FASB issued ASU 2018-16, ~~Taxes Collected From Tenants~~Derivatives and ~~Remitted~~Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. Previously under Topic 815, the eligible benchmark interest rates in the United States were the interest rates on direct Treasury obligations of the U.S. government (UST), the LIBOR swap rate, the OIS Rate based on the Fed Funds Effective Rate, and the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate, which was introduced in ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to ~~Governmental Authorities~~Accounting for Hedging Activities ~~elsewhere~~(“ASU 2017-12”). The amendments in ~~Note 2)~~ASU 2018-16 permit the use of the OIS rate based on SOFR as a benchmark interest rate for hedge accounting purposes under Topic 815. The amendments in this update were effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years for public business entities that already adopted the amendments in ASU 2017-12 (which the Company adopted effective January 1, 2018). The Company adopted ASU 2018-16 as of January 1, 2019 on a prospective basis for qualifying new or redesignated hedging relationships entered into on or after the date of adoption. Adoption of this guidance had no impact on the Condensed Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses which changes how entities measure credit losses for most financial assets. Financial assets that are measured at amortized cost will be required to be presented at the net amount expected to be collected with an allowance for credit losses deducted from the amortized cost basis. The guidance requires an entity to utilize broader information in estimating the expected credit loss, including forecasted information. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses which clarified that operating lease receivables recorded by lessors are explicitly excluded from the scope of this guidance. ASU 2016-13 is ~~continuing~~effective January 1, 2020, with early adoption permitted beginning on January 1, 2019, under a modified retrospective application. The Company continues to evaluate the impact ~~that~~this new standard will have on its Condensed Consolidated Financial Statements, but does not expect such impact will be material based upon the composition of its current lease portfolio.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The amendments under ASU 2018-13 remove, add, and modify certain disclosure requirements on fair value measurements in ASC 820. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption ~~of this guidance~~permitted. The Company is currently evaluating the impact the new standard will have on its Condensed Consolidated Financial Statements and ~~footnote~~expects to adopt the new disclosures ~~until the guidance becomes effective.~~on a prospective basis on January 1, 2020.

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

~~In connection with~~presentation, including items described below which resulted from the adoption of ~~ASU 2016-18, discussed in~~ ~~Recently Adopted Accounting Standards~~ ~~elsewhere in Note 2, certain reclassifications have been made to prior period balances to conform to current presentation in~~ASC 842.

Components of revenue that were previously reported as Rental income from operating leases, Earned income from direct financing leases, Operating expenses reimbursed from tenants, and Other income from real estate transactions, on the Condensed Consolidated Statements of ~~Cash Flows. Under ASU 2016-18, changes in restricted cash which were previously shown in cash flows used in investing activities in~~Income and Comprehensive Income, have been combined and reported as Lease revenues on the Condensed Consolidated Statements of ~~Cash Flows are now reflected~~Income and Comprehensive Income as ~~part of~~follows:

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

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

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

Effective January 1, 2018, the Property Management Agreement was amended to, among other things, extend the recurring term of the agreement from one year to three years, clarify termination provisions, include a Termination Event concept and a Key Person Event concept, each as defined in the Property Management Agreement, and remove fee provisions relating to short-term financing or guarantees provided by the Manager to the Operating Company.

The Property Management Agreement ~~will~~ automatically ~~renew~~renewed on January 1, 2019 for three years ending December 31, 2021, subject to earlier termination pursuant to the terms of the Property Management Agreement. The Property Management Agreement provides

for ~~termination~~termination: (i) immediately by the Corporation’s Independent Directors Committee (“IDC”) for Cause, as defined in the Property Management Agreement, (ii) by the IDC, upon 30 days’ written notice to the Manager, in connection with a change ofin control of the Manager, as defined in the Property Management Agreement, (iii) by the IDC, by providing the Manager with written notice of termination not less than one year prior to the last calendar day of any renewal term, (iv) by the Manager upon written notice to the Company not less than one year prior to the last calendar day of any renewal period, (v) automatically in the event of a Termination Event, as defined in the Property Management Agreement, and (vi) by the IDC upon a Key Person ~~Event.~~Event, as defined in the Property Management Agreement.

If the Corporation terminates the agreement prior to any renewal term or in any manner described above, other than termination by the Corporation for Cause, the Corporation will be subject to 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~~at March 31, ~~2018,~~2019, if the Property Management Agreement had been terminated at March 31, ~~2018,~~2019, subject to the conditions noted above, the termination fee would have been ~~$16,013.~~$20,691.

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

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

Under the terms of the Asset Management Agreement, the Asset Manager is compensated as follows:

The Asset Management Agreement ~~will~~ automatically ~~renew~~renewed on January 1, 2019 for three years ending December 31, 2021, subject to earlier termination pursuant to the terms of the Asset Management Agreement. The Asset Management Agreement provides for ~~termination~~termination: (i) immediately by the IDC for Cause, as defined in the Asset Management Agreement, (ii) by the IDC, upon 30 days’ written notice to the Asset Manager, in connection with a change in control of the Asset Manager, as defined in the Asset Management Agreement, (iii) by the IDC, by providing the Asset Manager with written notice of termination not less than one year prior to the last calendar day of any renewal term, (iv) by the Asset Manager upon written notice to the Company not less than one year prior to the last calendar day of any renewal period, (v) automatically in the event of a Disposition Event, as defined in the Asset Management Agreement and (vi) by the IDC upon a Key Person ~~Event.~~Event, as defined in the Asset Management Agreement.

If the Corporation terminates the agreement prior to any renewal term or in any manner described above, other than termination by the Corporation for Cause, the Corporation will be required to pay to the Asset Manager a termination fee equal to three times the Asset Management Fee to which the Asset Manager was entitled during the 12-month period immediately preceding the date of such termination. Although not terminable ~~as of~~at March 31, ~~2018,~~2019, if the Asset Management Agreement had been terminated at March 31, ~~2018,~~2019, subject to the conditions noted above, the termination fee would have been ~~$47,115.~~$57,449.

Total fees incurred under the Property Management Agreement and Asset Management Agreement ~~for the three months ended March 31, 2018 and 2017,~~ are as follows:

(in thousands)		For the three months ended March 31,					For the three months ended March 31,
Type of Fee	Financial Statement Presentation	2018		2017		Financial Statement Presentation	2019		2018
Asset management fee	Asset management fees	$	4,143	$	3,193	Asset management fees	$	5,120	$	4,143
Property management fee	Property management fees		1,517		1,168	Property management fees		1,885		1,517
Total management fee expense			5,660		4,361			7,005		5,660

Marketing fee (offering costs)	Additional paid-in capital		224		410	Additional paid-in capital		300		224
Acquisition fee	Capitalized as a component of assets acquired		1,006		897	Capitalized as a component of assets acquired		730		1,006
Leasing fee	Leasing fees, net		785		897	Leasing fees, net		258		785
Disposition fee	Gain on sale of real estate		168		63	Gain on sale of real estate		113		168
Total management fees		$	7,843	$	6,628		$	8,406	$	7,843

Included ~~in management fees are $2,271 and $722 of unpaid fees recorded~~ in Due to related parties on the Condensed Consolidated Balance Sheets at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, are $26 and $114 of unpaid management fees, respectively. All fees related to the Property Management Agreement and the Asset Management Agreement are paid for in cash within the Company’s normal payment cycle for vendors.

The Company closed on the following acquisitions during the three months ended March 31, ~~2018:~~2019:

(in thousands, except number of properties)	(in thousands, except number of properties)							(in thousands, except number of properties)		Number of		Real Estate
Date		Property Type	Number of Properties		Real Estate Acquisition Price				Property Type	Properties		Acquisition Price
March 27, 2018		Industrial		1	$	22,000
March 30, 2018		Retail/Industrial		26		78,530
January 31, 2019									Healthcare		1	$	4,747
March 12, 2019									Industrial		1		10,217
March 15, 2019									Retail		10		13,185
March 19, 2019									Retail		14		19,128
March 26, 2019									Industrial		1		25,801
				27	$	100,530	^(a)				27	$	73,078	^(a)

The Company closed on the following acquisitions during the three months ended March 31, ~~2017:~~2018:

(in thousands, except number of properties)	(in thousands, except number of properties)							(in thousands, except number of properties)		Number of		Real Estate
Date		Property Type	Number of Properties		Real Estate Acquisition Price				Property Type	Properties		Acquisition Price
January 18, 2017		Retail		1	$	2,520
March 1, 2017		Retail		9		87,196
March 27, 2018									Industrial		1	$	22,000
March 30, 2018									Industrial/Retail		26		78,530
				10	$	89,716	^(b)				27	$	100,530	^(b)

The Company allocated the purchase price of these properties to the fair value of the assets acquired and liabilities assumed. The following table summarizes the purchase price allocation for ~~acquisitions~~ completed ~~during the three months ended March 31, 2018 and 2017, discussed above:~~acquisitions:

	For the three months ended March 31,						For the three months ended March 31,
(in thousands)	2018			2017			2019			2018
Land	$	15,381		$	2,286		$	7,149		$	15,381
Land improvements		5,591			4,209			10,506			5,591
Buildings and other improvements		71,825			71,528			49,677			71,825
Acquired in-place leases^(c)		9,088			8,998			6,618			9,088
Acquired above-market leases^(d)		1,523			6,380			2,169			1,523
Acquired below-market leases^(e)		(740	)		(2,107	)		(836	)		(740	)
	$	102,668		$	91,294		$	75,283		$	102,668

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, and proceeds from equity issuances. All ~~of the~~ acquisitions closed during the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, qualified as asset acquisitions and, as such, acquisition costs were ~~capitalized in accordance with ASU 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~.capitalized.

Subsequent to March 31, ~~2018,~~2019, the Company closed on the following ~~acquisitions~~acquisition (see Note ~~17)~~16):

(in thousands, except number of properties)

Number of

Real Estate

Date

Property Type

Number of

Properties

Acquisition Price

Property Type

Properties

Acquisition Price

April 30, 2018

Other

16,170

April 30, 2019

Industrial

76,000

^(f)

The Company has not completed the allocation of the acquisition date fair values for the ~~properties~~property acquired subsequent to March 31, ~~2018;~~2019; however, it expects the acquisitions to qualify as asset acquisitions and that the purchase price of these properties will primarily be allocated to land, land improvements, building and acquired lease intangibles.

The Company closed on the following sales of real estate, none of which qualified as discontinued ~~operations, during the three months ended March 31, 2018 and 2017:~~operations:

	For the three months ended March 31,				For the three months ended March 31,
(in thousands, except number of properties)	2018		2017		2019			2018
Number of properties disposed		5		1		4			5
Aggregate sale price	$	16,813	$	6,320	$	11,291		$	16,813
Aggregate carrying value		12,399		5,127		(9,212	)		(12,399	)
Additional sales expenses		1,075		390		(679	)		(1,075	)
Gain on sale of real estate	$	3,339	$	803	$	1,400		$	3,339

The Company generally leases its investment rental property to established ~~tenants.~~tenants in the retail, healthcare, manufacturing, office and other industries. At March 31, ~~2018,~~2019, the Company had ~~535~~625 real estate properties which were leased under leases that have been classified as operating leases and 1516 that have been classified as direct financing leases. Of the 1516 leases classified as direct financing leases, four include land portions which are accounted for as operating leases (see Revenue Recognition within Note 2). Substantially all leases have initial terms of 10 to 20 ~~years and provide for minimum rentals as defined in ASC 840,~~ ~~Leases. In addition, the~~years. The Company’s leases generally provide for limited increases in rent as a result of fixed increases, increases in the Consumer Price Index, or increases in the tenant’s sales volume. Generally, ~~the tenant is~~tenants are also required to pay all property taxes and assessments, substantially maintain the interior and exterior of the building, and maintain property and liability insurance coverage. The leases also typically provide for one or more multiple year renewal options subject to generally the same terms and conditions as the initial lease. None of the Company’s leases contain purchase options.

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

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

(in thousands)	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Land	$	361,344		$	348,940		$	416,643		$	411,043
Land improvements		216,115			211,674			249,493			239,701
Buildings		1,817,128			1,754,796
Tenant improvements		11,426			11,425
Buildings and improvements								2,229,912			2,186,499
Equipment		7,689			7,689			11,492			11,492
		2,413,702			2,334,524			2,907,540			2,848,735
Less accumulated depreciation		(161,764	)		(148,383	)		(224,544	)		(206,989	)
	$	2,251,938		$	2,186,141		$	2,682,996		$	2,641,746

Depreciation expense on investment in rental property was ~~$15,164 and $11,931 for the three months ended March 31, 2018 and 2017, respectively.~~as follows:

Estimated ~~minimum future rental receipts required~~lease payments to be received under non-cancelable operating leases with tenants at March 31, ~~2018~~2019 are as follows:

(in thousands)
Remainder of 2018	$	145,610
2019		197,600
Remainder of 2019			$	176,619
2020		200,684		238,968
2021		203,623		241,922
2022		206,021		243,994
2023				245,606
Thereafter		1,941,315		2,059,151
	$	2,894,853	$	3,206,260

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 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 March 31, 2018 and December 31, 2017:~~comprised of the following:

(in thousands)	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Minimum lease payments to be received	$	76,929		$	77,889
Undiscounted estimated lease payments to be received							$	75,813		$	76,829
Estimated unguaranteed residual values		19,758			19,758			20,358			20,358
Less unearned revenue		(55,077	)		(56,030	)
Unearned income								(54,196	)		(55,187	)
Net investment in direct financing leases	$	41,610		$	41,617		$	41,975		$	42,000

~~Minimum future rental receipts required~~Undiscounted estimated lease payments to be received under non-cancelable direct financing leases with tenants at March 31, ~~2018~~2019 are as follows:

(in thousands)
Remainder of 2018	$	2,897
2019		3,931
Remainder of 2019			$	3,060
2020		4,037		4,194
2021		4,126		4,283
2022		4,211		4,369
2023				4,456
Thereafter		57,727		55,451
	$	76,929	$	75,813

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

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

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

(in thousands)	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Lease intangibles:
Acquired above-market leases	$	60,650		$	59,502		$	64,936		$	64,164
Less accumulated amortization		(10,615	)		(9,183	)		(15,471	)		(14,740	)
Acquired above-market leases, net		50,035			50,319			49,465			49,424
Acquired in-place leases		225,389			216,858			283,691			277,659
Less accumulated amortization		(28,175	)		(24,518	)		(45,967	)		(40,825	)
Acquired in-place leases, net		197,214			192,340			237,724			236,834
Total intangible lease assets, net	$	247,249		$	242,659		$	287,189		$	286,258
Acquired below-market leases	$	91,326		$	91,667		$	102,412		$	101,602
Less accumulated amortization		(11,091	)		(9,923	)		(17,332	)		(15,655	)
Intangible lease liabilities, net	$	80,235		$	81,744		$	85,080		$	85,947
Leasing fees	$	16,857		$	16,286		$	17,454		$	17,274
Less accumulated amortization		(2,870	)		(2,732	)		(3,809	)		(3,576	)
Leasing fees, net	$	13,987		$	13,554		$	13,645		$	13,698

Amortization ~~expense was $4,038~~for intangible lease assets and $2,663 for acquired in-place leases and leasing fees for the three months ended March 31, 2018 and 2017, respectively. Amortization of acquired above-market and below-market leases, net, was a decrease in rental income of $178 and $200 for the three months ended March 31, 2018 and 2017, respectively.liabilities is as follows:

Estimated future amortization of intangible assets and liabilities at March 31, ~~2018~~2019 is as follows:

(in thousands)
Remainder of 2018	$	12,334
2019		14,144
Remainder of 2019			$	14,678
2020		14,012		19,314
2021		13,974		18,903
2022		13,827		18,288
2023				17,909
Thereafter		112,710		126,662
	$	181,001	$	215,754

The following table summarizes the Company’s unsecured credit ~~agreements at March 31, 2018 and December 31, 2017:~~agreements:

	Outstanding Balance								Outstanding Balance
(in thousands, except interest rates)	March 31, 2018			December 31, 2017			Interest Rate^(d)	Maturity Date	March 31, 2019			December 31, 2018			Interest Rate^(d)	Maturity Date
2015 Unsecured Term Loan Agreement^(a)	$	325,000		$	325,000		1- month LIBOR + 1.40%	Feb. 2019 ^(f)
2015 Unsecured Term Loan ^(a)									$	—		$	300,000		one-month LIBOR + 1.40%	Feb. 2020 ^(f)
2017 Unsecured Revolving Credit and Term Loan Agreement^(a)
Revolver^(b)		317,000			273,000		1- and 3- month LIBOR + 1.20% ^(e)	Jan. 2022		139,900			141,100		one-month LIBOR + 1.20%^(e)	Jan. 2022
5.5-Year term loan		265,000			265,000		1- month LIBOR + 1.35%	Jan. 2023		265,000			265,000		one-month LIBOR + 1.35%	Jan. 2023
7-Year term loan		100,000			100,000		1- month LIBOR + 1.90%	Jun. 2024		190,000			190,000		one-month LIBOR + 1.90%	Jun. 2024
		682,000			638,000					594,900			596,100
2017 Senior Notes^(a)		150,000			150,000		4.84%	Apr. 2027
2019 Unsecured Term Loan ^(a)										300,000			—		one-month LIBOR + 1.85%	Feb. 2026
Senior Notes^(a)
Series A										150,000			150,000		4.84%	Apr. 2027
Series B										225,000			225,000		5.09%	Jul. 2028
Series C										100,000			100,000		5.19%	Jul. 2030
										475,000			475,000
Total		1,157,000			1,113,000					1,369,900			1,371,100
Debt issuance costs, net^(c)		(2,841	)		(3,088	)				(7,905	)		(4,227	)
	$	1,154,159		$	1,109,912				$	1,361,995		$	1,366,873

~~At March 31, 2018 and December 31, 2017,~~On February 27, 2019, the ~~weighted average interest rate on all outstanding borrowings was 3.29% and 3.03%, respectively.~~Company entered into a $450,000 seven-year unsecured term loan agreement (the “2019 Unsecured Term Loan”) with Capital One, N.A. as administrative agent. The ~~Revolver is~~2019 Unsecured Term Loan provides an accordion feature for up to a total of $550,000 borrowing capacity. The 2019 Unsecured Term Loan has an initial maturity date of February 27, 2026. Borrowings under the 2019 Unsecured Term Loan are subject to interest only payments at variable rates equal to LIBOR plus a ~~facility fee~~margin between 1.45% and 2.40% per annum based on the Operating Company’s investment grade credit rating. Based on the Operating Company’s current credit rating of ~~0.25% per annum. In addition,~~Baa3, the ~~5.5-Year~~applicable margin under the 2019 Unsecured Term Loan ~~and 7-Year~~is 1.85%. The 2019 Unsecured Term Loan ~~are~~is subject to a fee of 0.25% per annum on the amount of the ~~commitments,~~commitment, reduced by the amount of term loans ~~outstanding~~outstanding. At closing, $300,000 of the commitment was funded and used to repay the 2015 Unsecured Term Loan in full. The remaining $150,000 commitment can be drawn in up to three requests through August 27, 2019.

On February 28, 2019, the Company amended the 2017 Unsecured Revolving Credit and Term Loan Agreement to increase the amount available under the ~~applicable loan.~~ Revolver from $425,000 to $600,000. This increased the total available borrowings under the 2017 Unsecured Revolving Credit and Term Loan Agreement to $1,055,000. All other terms and conditions of the 2017 Unsecured Revolving Credit and Term Loan Agreement remain the same as those in effect prior to this amendment.

At March 31, 2019, the weighted average interest rate on all outstanding borrowings was 4.42%. In addition, the Revolver is subject to a facility fee of 0.25% per annum.

For the three months ended March 31, 2019, the Company paid $5,229 in debt issuance costs associated with the 2019 Unsecured Term Loan and the amended 2017 Unsecured Revolving Credit and Term Loan Agreement. For each separate debt instrument, on a lender by lender basis, in accordance with ASC 470-50, Debt Modifications and Extinguishment, the Company performed an assessment of whether the transaction was 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 ~~$461~~the associated debt or expensed as incurred. Based on this assessment, $5,229 of the debt issuance costs were deemed to be related to the issuance of new debt, or the modification of existing debt, and ~~$424~~therefore have been deferred and are being amortized over the term of the associated debt. Additionally, $215 of unamortized debt issuance costs were ~~amortized as a component~~expensed and included in Cost of ~~interest expense~~debt extinguishment in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, ~~2018~~2019.

Debt issuance costs are amortized as a component of interest expense in the accompanying Condensed Consolidated Statements of Income and ~~2017, respectively.~~Comprehensive Income. The following table summarizes debt issuance cost amortization:

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

													Origination	Maturity
(in thousands, except interest rates)	(in thousands, except interest rates)											(in thousands, except interest rates)	Date	Date	Interest	March 31,			December 31,
Lender	Lender	Original Date (Month/Year)	Maturity Date (Month/Year)	Interest Rate	March 31, 2018			December 31, 2017				Lender	(Month/Year)	(Month/Year)	Rate	2019			2018
(1)	PNC Bank	Oct-16	Nov-26	3.62%	$	18,530		$	18,622		(b) (c)
~~(2)~~(1)	Sun Life	Mar-12	Oct-21	5.13%		11,577			11,670		(b) (g)	Wilmington Trust National Association	Jun-18	Aug-25	4.36%	$	20,583		$	20,674		(a) (b) (c) (m)
~~(3)~~(2)	Aegon	Apr-12	Oct-23	6.38%		9,003			9,168		(b) (h)	PNC Bank	Oct-16	Nov-26	3.62%		18,165			18,260		(b) (c)
~~(4)~~(3)	Symetra Financial	Nov-17	Oct-26	3.65%		6,631			6,685		(a) (b) (k) (l)	Sun Life	Mar-12	Oct-21	5.13%		11,190			11,288		(b) (g)
~~(5)~~(4)	Siemens Financial Services, Inc.	Sep-10	Sep-20	5.47%		5,771			5,820		(a) (b)	Aegon	Apr-12	Oct-23	6.38%		8,323			8,496		(b) (h)
~~(6)~~(5)	Legg Mason Mortgage Capital Corporation	Aug-10	Aug-22	7.06%		5,436			5,670		(b) (e)	Symetra Financial	Nov-17	Oct-26	3.65%		6,411			6,467		(a) (b) (k) (l)
~~(7)~~(6)	M&T Bank	Oct-17	Aug-21	1- month LIBOR+3%		5,151			5,183		(b) (d) (i) (j)	M&T Bank	Oct-17	Aug-21	one - month LIBOR+3%		5,017			5,051		(b) (d) (i) (j)
~~(8)~~(7)	Standard Insurance Co.	Apr-09	May-34	6.88%		1,797			1,813		(b) (c) (f)	Columbian Mutual Life Insurance Company	Aug-10	Sep-25	7.00%		1,448			1,459		(b) (c) (d)
~~(9)~~(8)	Columbian Mutual Life Insurance Company	Aug-10	Sep-25	7.00%		1,490			1,500		(b) (c) (d)	Note holders	Dec-08	Dec-23	6.25%		750			750		(d)
(9)												Standard Insurance Co.	Jul-10	Aug-30	6.75%		559			563		(b) (c) (d) (f)
(10)	Symetra Financial	Mar-11	Apr-31	6.34%		1,000			1,008		(a) (b)	Legg Mason Mortgage Capital Corporation	Aug-10	Aug-22	7.06%		—			4,692		(b) (e)
(11)	Note holders	Dec-08	Dec-23	6.25%		750			750		(d)	Standard Insurance Co.	Apr-09	May-34	6.88%		—			1,751		(b) (c)
(12)	Standard Insurance Co.	Jul-10	Aug-30	6.75%		577			581		(b) (c) (d) (f)
						67,713			68,470								72,446			79,451
	Debt issuance costs, net					(616	)		(638	)		Debt issuance costs, net					(442	)		(499	)
					$	67,097		$	67,832							$	72,004		$	78,952

At March 31, ~~2018,~~2019, investment in rental property of ~~$109,265~~$127,916 is pledged as collateral against the Company’s mortgages and notes payable.

The ~~Company did not extinguish any~~following table summarizes the mortgages ~~during~~extinguished by the ~~three months ended March 31, 2018.~~ Company:

The Company extinguished seven mortgages totaling $48,108 during the year ended December 31, 2017, and three mortgages totaling $14,536 during the three months ended March 31, 2017. For the three months ended March 31, 2017,following table summarizes the cost of ~~extinguishment for the mortgages was $48.~~mortgage extinguishment:

Estimated future principal payments to be made under the above mortgage and note payable agreements, and the Company’s unsecured credit agreements (see Note 8) at March 31, ~~2018~~2019 are as follows:

(in thousands)
Remainder of 2018	$	16,357
2019		328,351
Remainder of 2019			$	1,706
2020		8,777		2,372
2021		18,268		17,137
2022		311,828		141,892
2023				272,368
Thereafter		541,132		1,006,871
	$	1,224,713	$	1,442,346

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 borrowings.

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

(in thousands, except interest rates)								Fair Value							(in thousands, except interest rates)								Fair Value
Counterparty	Maturity Date	Fixed Rate			Variable Rate Index	Notional Amount		March 31, 2018			December 31, 2017					Maturity Date	Fixed Rate			Variable Rate Index	Notional Amount		March 31, 2019			December 31, 2018
Bank of America, N.A.	November 2023		2.80	%	LIBOR 1 month	$	25,000	$	(310	)	$	(863	)			November 2023		2.80	%	one-month LIBOR	$	25,000	$	(699	)	$	(411	)
Bank of Montreal	July 2024		1.16	%	LIBOR 1 month		40,000		3,299			2,503				July 2024		1.16	%	one-month LIBOR		40,000		2,048			2,702
Bank of Montreal	January 2025		1.91	%	LIBOR 1 month		25,000		1,052			464				January 2025		1.91	%	one-month LIBOR		25,000		361			769
Bank of Montreal	July 2025		2.32	%	LIBOR 1 month		25,000		457			(194	)			July 2025		2.32	%	one-month LIBOR		25,000		(207	)		222
Bank of Montreal	January 2026		1.92	%	LIBOR 1 month		25,000		1,207			561				January 2026		1.92	%	one-month LIBOR		25,000		433			915
Bank of Montreal	January 2026		2.05	%	LIBOR 1 month		40,000		1,570			520				January 2026		2.05	%	one-month LIBOR		40,000		366			1,130
Bank of Montreal	December 2026		2.33	%	LIBOR 1 month		10,000		230			(63	)			December 2026		2.33	%	one-month LIBOR		10,000		(83	)		132
Bank of Montreal	December 2027		2.37	%	LIBOR 1 month		25,000		599			(192	)			December 2027		2.37	%	one-month LIBOR		25,000		(247	)		355
Capital One, N.A.	December 2021		1.05	%	LIBOR 1 month		15,000		786			607				December 2021		1.05	%	one-month LIBOR		15,000		455			605
Capital One, N.A.	December 2024		1.58	%	LIBOR 1 month		15,000		942			603				December 2024		1.58	%	one-month LIBOR		15,000		472			727
Capital One, N.A.	January 2026		2.08	%	LIBOR 1 month		35,000		1,324			399				January 2026		2.08	%	one-month LIBOR		35,000		243			930
Capital One, N.A.	July 2026		1.32	%	LIBOR 1 month		35,000		3,450			2,565				July 2026		1.32	%	one-month LIBOR		35,000		2,099			2,877
Capital One, N.A.	December 2027		2.37	%	LIBOR 1 month		25,000		626			(189	)			December 2027		2.37	%	one-month LIBOR		25,000		(265	)		345
Capital One, N.A.																April 2026		2.68	%	one-month LIBOR		15,000		(481	)		(189	)
M&T Bank	August 2021		1.02	%	LIBOR 1 month		5,151		233			182		^{(a), (b)}		August 2021		1.02	%	one-month LIBOR		5,016		134			177		^{(a), (b)}
M&T Bank	September 2022		2.83	%	LIBOR 1 month		25,000		(328	)		(810	)			September 2022		2.83	%	one-month LIBOR		25,000		(564	)		(362	)
M&T Bank	November 2023		2.65	%	LIBOR 1 month		25,000		(125	)		(686	)			November 2023		2.65	%	one-month LIBOR		25,000		(551	)		(254	)
Regions Bank	March 2018		1.77	%	LIBOR 1 month		—		—			(9	)	^(c)
Regions Bank	March 2019		1.91	%	LIBOR 3 month		25,000		114			2
Regions Bank	May 2020		2.12	%	LIBOR 1 month		50,000		247			(153	)
Regions Bank	March 2022		2.43	%	LIBOR 3 month		25,000		(205	)		(254	)			May 2020		2.12	%	one-month LIBOR		50,000		137			271
Regions Bank	December 2023		1.18	%	LIBOR 1 month		25,000		1,874			1,402				December 2023		1.18	%	one-month LIBOR		25,000		1,108			1,484
SunTrust Bank	April 2024		1.99	%	LIBOR 1 month		25,000		807			261				April 2024		1.99	%	one-month LIBOR		25,000		192			554
SunTrust Bank	April 2025		2.20	%	LIBOR 1 month		25,000		626			—				April 2025		2.20	%	one-month LIBOR		25,000		(44	)		382
SunTrust Bank	July 2025		1.99	%	LIBOR 1 month		25,000		1,010			386				July 2025		1.99	%	one-month LIBOR		25,000		276			728
SunTrust Bank	December 2025		2.30	%	LIBOR 1 month		25,000		538			(138	)			December 2025		2.30	%	one-month LIBOR		25,000		(176	)		299
SunTrust Bank	January 2026		1.93	%	LIBOR 1 month		25,000		1,202			553				January 2026		1.93	%	one-month LIBOR		25,000		413			903
Wells Fargo Bank, N.A.	February 2021		2.39	%	LIBOR 1 month		35,000		49			(369	)			February 2021		2.39	%	one-month LIBOR		35,000		(85	)		59
Wells Fargo Bank, N.A.	October 2024		2.72	%	LIBOR 1 month		15,000		(128	)		(510	)			October 2024		2.72	%	one-month LIBOR		15,000		(436	)		(222	)
Wells Fargo Bank, N.A.	January 2028		2.37	%	LIBOR 1 month		75,000		1,798			(590	)			January 2028		2.37	%	one-month LIBOR		75,000		(777	)		1,067
Wells Fargo Bank, N.A.																April 2027		2.72	%	one-month LIBOR		25,000		(934	)		(382	)
								$	22,944		$	5,988											$	3,188		$	15,813

The total amounts recognized, and the location in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income, from converting from variable rates to fixed rates under these agreements isare as ~~follows for the three months ended March 31, 2018 and 2017:~~follows:

															Total Interest Expense
								Amount of (Loss) Gain			Reclassification from Accumulated Other				Presented in the
(in thousands)	Amount of Gain Recognized in Accumulated Other Comprehensive Income		Reclassification from Accumulated Other Comprehensive Income			Total Interest Expense Presented in the Consolidated Statements of Income and Comprehensive Income		Recognized in			Comprehensive Income				Consolidated Statements of
Interest rate swaps			Location	Amount of Loss
								Accumulated Other				Amount of			Income and Comprehensive
For the three months ended March 31,								Comprehensive Income			Location	Gain (Loss)			Income
2019								$	(12,624	)	Interest expense	$	836		$	15,828
2018	$	16,955	Interest expense	$	913	$	11,177		16,955		Interest expense		(913	)		11,177
2017		2,560	Interest expense		1,902		7,942

Amounts related to the interest rate swaps expected to be reclassified out of Accumulated other comprehensive income to Interest expense during the next twelve months are estimated to be a gain of ~~$500.~~$2,240. 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 in exchange for membership interests in the Operating Company. There were no properties contributed as part of UPREIT transactions during the three months ended March 31, 2018 and 2017.

The Company recognized rental income related to properties contributed as part of UPREIT transactions in the amount of $3,710 and $3,004 for the three months ended March 31, 2018 and 2017, respectively.

The Company maintained bank balances that, at times, exceeded the federally insured limit during the three months ended March 31, ~~2018.~~2019. The Company has not experienced losses relating to these deposits and management does not believe that the Company is exposed to any significant credit risk with respect to these amounts.

The Company’s rental property is managed by the Manager and the Asset Manager as described in Note 3. Management fees paid to the Manager and Asset Manager represent 19% ~~and 20%~~ of ~~the Company’s~~ total operating expenses for the three months ended March 31, ~~2018~~2019 and ~~2017, respectively.~~2018. These amounts do not include acquisition fees paid to the Asset Manager that were capitalized (see Note 3). The Company has mortgages and notes payable with four institutions that comprise ~~27%~~28%, ~~17%~~25%, ~~13%~~15%, and 12% of total mortgages and notes payable at March 31, 2019. The Company has mortgages and notes payable with four institutions that comprise 26%, 23%, 14%, and 11% of total mortgages and notes payable at ~~March 31, 2018 and~~ December 31, ~~2017.~~2018. For the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, the Company had no individual tenants or common franchises that accounted for more than 10% of total revenues.

The following table summarizes redemptions under the Share Redemption ~~Program for the three months ended March 31, 2018 and 2017:~~Program:

	For the three months ended March 31,				For the three months ended March 31,
(in thousands, except stockholders)	2018		2017
Number of stockholders	8		8
(in thousands, except number of redemptions)					2019		2018
Number of redemptions requested					13		8
Number of shares	46		18		21		46
Aggregate redemption price	$	3,577	$	1,380	$	1,803	$	3,577

The Corporation has adopted the Distribution Reinvestment Plan (“DRIP”), pursuant to which the Corporation’s stockholders and holders of membership units in the Operating Company (other than the Corporation), may elect to have cash distributions reinvested in additional shares of the Corporation’s common stock. Cash distributions will be reinvested in additional shares of common stock pursuant to the DRIP at a per share price equal to 98% of the Determined Share Value as of the applicable distribution date. The Corporation may amend ~~suspend, or terminate~~ the DRIP at any time upon ~~30 days’ prior~~ written notice to each ~~stockholder.~~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 March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, a total of ~~1,743~~2,411 and ~~1,592~~2,233 shares of common stock, respectively, have been issued under the DRIP.

The following table summarizes the components used in the calculation of basic and diluted earnings per share (“EPS”) ~~for the three months ended March 31, 2018 and 2017:~~:

	For the three months ended March 31,				For the three months ended March 31,
(in thousands, except per share)	2018		2017		2019		2018
Basic earnings:
Net earnings attributable to Broadstone Net Lease, Inc.	$	17,573	$	12,594	$	13,938	$	17,573
Diluted earnings:
Net earnings attributable to Broadstone Net Lease, Inc.	$	17,573	$	12,594	$	13,938	$	17,573
Net earnings attributable to non-controlling interests		1,422		1,153		1,084		1,422
	$	18,995	$	13,747	$	15,022	$	18,995

Basic and diluted weighted average shares outstanding:
Weighted average number of common shares outstanding used in basic earnings per share		19,167		15,582		22,335		19,167
Effects of convertible membership units		1,552		1,427		1,737		1,552
Weighted average number of common shares outstanding used in diluted earnings per share		20,719		17,009		24,072		20,719
Basic and diluted net earnings per common share	$	0.92	$	0.81	$	0.62	$	0.92

In the table above, outstanding membership units 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 ~~$9,420~~$16,777 and ~~$7,806~~$9,420 for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively. Cash paid for state income and franchise taxes was ~~$419~~$395 and ~~$488~~$419 for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively.

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

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

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

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

For the three months ended March 31, 2019, total lease costs associated with ground leases, reported as a component of Property and operating expenses in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income, amounted to $47. The total lease costs are comprised of $35 of operating lease cost and $12 of variable lease cost related to percentage rent. For the three months ended March 31, 2018, there were no lease costs associated with ground leases.

For the three months ended March 31, 2019, payments associated with operating leases totaled $72 and were reported as Cash flows from operating activities on the ~~year~~accompanying Condensed Consolidated Statements of Cash Flows. For the three months ended ~~December~~March 31, ~~2017,~~2018, there were no lease payments.

Estimated future lease payments ~~of $1,802 and $6,598, respectively, have been made for work completed~~required under ~~tenant improvement allowances, resulting in a total tenant improvement allowance of $4,292 and $5,669~~non-cancelable operating leases at March 31, ~~2018~~2019, and ~~December 31, 2017, respectively.~~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 variable lease payments associated with percentage rent or changes in the Consumer Price Index that may become due in future periods.

Through May ~~8, 2018,~~7, 2019, the Company has raised ~~$19,109 for a total~~$25,224 through the sale of ~~237~~298 shares of the Corporation’s common stock ~~through~~from monthly equity closings, including dividend ~~reinvestments, and $12,470 for a total of 154 units of membership interest in the Operating Company through an UPREIT transaction.~~reinvestments. Through May ~~8, 2018,~~7, 2019, the Company has paid ~~$9,018~~$10,734 in distributions, including dividend reinvestments.

Subsequent to March 31, ~~2018,~~2019, the Company continued to expand its operations through the acquisition of additional rental property and associated intangible assets and liabilities. The Company acquired approximately ~~$16,170~~$76,000 of rental property and associated intangible assets and liabilities and assumed $49,782 of liabilities (see Note 4).

Subsequent to March 31, 2018, the Operating Company paid off borrowings on the Revolver in the amount of $10,000 and transferred the $14,000 outstanding swingline loan at March 31, 2018 to the Revolver.

On May ~~8, 2018,~~7, 2019, the Board of Directors declared a distribution of ~~$0.43~~$0.44 per share on the Corporation’s common stock and approved a distribution of ~~$0.43~~$0.44 per membership unit of the Operating Company for monthly distributions through July ~~2018.~~2019. The distributions are payable on or prior to the 15th day of the following month to stockholders and unit holders of record on the ~~last~~record date, which is generally the next-to-the-last business day of the prior month. In addition, the IDC determined the share value for the Corporation’s common stock ~~and the Operating Company’s membership units~~ to be ~~$83.00~~$86.00 per share ~~or unit~~ for ~~subscription agreements received~~the period from May 1, ~~2018~~2019 through July 31, ~~2018.~~2019.

Subsequent to March 31, 2019, the Operating Company paid off borrowings on the Revolver in the aggregate amount of $13,000 and drew additional borrowings on the Revolver in the aggregate amount of $12,000.

Except where the context suggests otherwise, as used in this Form 10-Q, the terms “we,” “us,” “our,” and “our company” refer to Broadstone Net Lease, Inc., a Maryland corporation, and, as required by context, Broadstone Net Lease, LLC, a New York limited liability company, which we refer to as the or our “Operating Company,” and to their respective subsidiaries.

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

This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), regarding, among other things, our plans, strategies, and prospects, both business and financial. Forward-looking statements include, but are not limited to, statements that represent our beliefs concerning future operations, strategies, financial results, or other developments. Forward-looking statements can be identified by the use of forward-looking terminology such as, but not limited to, “may,” “will,” “should,” “expect,” “intend,” “anticipate,” “estimate,” “would be,” “believe,” or “continue” or the negative or other variations of comparable terminology. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic, and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different. Although we believe that our plans, intentions, and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions, or expectations. Forward-looking statements are inherently subject to known and unknown risks, uncertainties, and assumptions, including risks related to general economic conditions, local real estate conditions, tenant financial health, property acquisitions and the timing of these acquisitions, and the availability of capital to finance planned growth, among others. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Form 10-Q is filed with the Securities and Exchange Commission (the “SEC”). Except as required by law, we do not undertake any obligation to update or revise any forward-looking statements contained in this Form 10-Q. Important factors that could cause actual results to differ materially from the forward-looking statements are disclosed in Item 1A. “Risk Factors” in our Form 10-K for the year ended December 31, ~~2017,~~2018, filed with the SEC on March ~~15, 2018~~14, 2019 (the “Form 10-K”).

We are an externally managed real estate investment trust (“REIT”), formed as a Maryland corporation in 2007 to acquire and hold ~~single-tenant,~~ commercial real estate properties throughout the United States, ~~that~~substantially all of which are leased to the properties’ operators under long-term net leases. Under a “net lease,” the tenant occupying the leased property (usually as a single tenant) does so in much the same manner as if the tenant were the owner of the property. There are various forms of net leases, most typically classified as triple-net or double-net. Triple-net leases typically require that the tenant pay all expenses associated with the property (e.g., real estate taxes, insurance, maintenance, repairs, and capital costs). Double-net leases typically require that the tenant pay all operating expenses associated with the property (e.g., real estate taxes, insurance, and maintenance), but exclude some or all major repairs (e.g., roof, structure, and parking lot). Accordingly, the owner receives the rent “net” of these expenses, rendering the cash flow associated with the lease predictable for the term of the lease. Under a net lease, the tenant generally agrees to lease the property for a significant term and agrees that it will either have no ability, or only limited ability to terminate the lease or abate rent prior to the expiration of the term of the lease as a result of real estate driven events such as casualty, condemnation or failure by the landlord to fulfill its obligations under the lease.

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

As of March 31, ~~2018,~~2019, we owned a diversified portfolio of ~~550~~644 individual net leased commercial properties located in 4042 states, and comprising approximately ~~16.3~~19.7 million rentable square feet of operational space. As of March 31, ~~2018,~~2019, all but three of our properties that were ~~100%~~previously leased to ~~137~~a single tenant, were subject to leases and were 99.7% occupied by 161 different commercial tenants, with no single tenant accounting for more than 4%3.4% of our ~~annual~~contractual rental ~~stream.~~revenue over the next 12 months (“NTM Rent”).

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 ended December 31, 2008. As a REIT, we are not subject to federal income tax to the extent that we meet certain requirements, including that we distribute at least 90% of our annual taxable income to our stockholders and satisfy other requirements based on the composition of our asset portfolio and sources of income.

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

We conduct substantially all of our activities through, and all of our properties are held directly or indirectly by the Operating Company. We are the sole managing member of the Operating Company and as of March 31, 2018, we owned approximately 92.7% of its issued and outstanding membership units, with the remaining 7.3% of its membership units held by persons who were issued membership units in exchange for their interests in properties acquired by the Operating Company.

As we conduct substantially all of our operations through the Operating Company, we are structured as what is referred to as an ~~Umbrella Partnership Real Estate Investment Trust~~umbrella partnership real estate investment trust (“UPREIT”). The UPREIT structure allows a property owner to contribute ~~their~~ property to the Operating Company in exchange for membership units in the Operating Company and generally defer taxation of a resulting gain until the contributor later disposes of the membership units or the property is sold in a taxable transaction. The membership units of the Operating Company held by members of the Operating Company other than us are referred to herein and in our consolidated financial statements as “non-controlling interests,” “non-controlling membership units,” or “membership units,” and are convertible into shares of our common stock on a one-for-one basis, subject to certain restrictions. We allocate consolidated earnings to holders of our common stock and ~~holders of~~ non-controlling membership ~~units~~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 March 31, 2018.~~ For the three months ended March 31, ~~2018,~~2019, the weighted average number of ~~non-controlling membership~~ units outstanding was ~~1.6~~1.74 million.

We commenced our ongoing private offering of shares of our common stock (our “private offering”) in 2007. The first closing of our private offering occurred on December 31, 2007, and we have conducted additional closings at least once every calendar quarter since then. Currently, we close sales of additional shares of our common stock monthly. In November 2017, we instituted a monthly equity cap and queue program for new and additional investments in our common stock. The cap does not apply to investments made pursuant to our Distribution Reinvestment Plan (“DRIP”) or equity capital received in connection with UPREIT transactions. For the months of February ~~2018~~2019 through April ~~2018,~~2019, new and additional investments were capped at ~~$15.0~~$20 million per month. This cap will remain in ~~place~~effect for the months of May ~~2018~~2019 through July ~~2018.~~2019.

Shares of our common stock are currently being offered in our private offering at ~~$83.00 per share, provided that the per share offering~~a price ~~may be adjusted quarterly by the committee of our board of directors comprised of our independent directors (“Independent Directors Committee”) based on the~~equal to a Determined Share Value (as defined below)~~, which is based on input from management and third-party consultants, and such other factors as our Independent Directors Committee may consider.~~ of $86.00 per share. For the three months ended March 31, ~~2018,~~ 2019, we sold ~~0.7 million~~880,983 shares of our common stock in our private offering, including ~~0.1 million~~177,837 shares of common stock issued pursuant to our DRIP. Cash received for newly issued shares totaled $60.0 million and shares with a value of $14.9 million were issued pursuant to DRIP ~~for gross offering proceeds of approximately $57.0 million.~~transactions. We intend to use substantially all of the net proceeds from our private offering, supplemented with additional borrowings, to continue to invest in additional net leased properties and for general corporate purposes. ~~We conduct our private offering in reliance upon the exemption from registration under the Securities Act, provided by Rule 506(c) of Regulation D promulgated under the Securities Act.~~ See Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this Form 10-Q for further ~~information, including information regarding our current equity cap and queue program.~~information.

As of March 31, ~~2018,~~2019, there were ~~19.6~~22.9 million shares of our common stock issued and outstanding, and ~~1.5~~1.7 million non-controlling membership units in the Operating Company issued and outstanding.

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

FFO and AFFO are performance measures that are not calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We present these non-GAAP measures as we believe certain investors and other users of our financial information use them as part of their evaluation of our historical operating performance. ~~Please see our~~See discussion below under the heading Net 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. ~~Property portfolios that we acquire~~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:~~objectives:

We primarily acquire freestanding, single-tenant commercial properties located in the United States either directly from our ~~credit-worthy~~creditworthy tenants in sale-leaseback transactions, where they sell us their properties and simultaneously lease them back through long-term, net leases, or through the purchase of properties already under a net lease ~~(i.e.~~(i.e., a lease assumption). Under either scenario, our properties are generally under lease and fully occupied at the time of acquisition. We focus on properties in growth markets with at least ten years of lease term remaining that ~~will~~are expected to achieve financial returns on equity of greater than 9.5%, net of fees, calculated based on the average return recognized across all acquisitions during a calendar year, provided that, with certain exceptions provided for in our Investment Policy, all acquisitions must have a minimum remaining lease term of seven years and a minimum return on equity of 8.5%, net of fees, unless otherwise approved by the Independent Directors Committee. Our criteria for selecting properties ~~(“Property Selection Criteria”) is~~are based on the following underwriting principles:

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

To achieve an appropriate risk-adjusted return, we maintain a diversified portfolio of real estate spread across multiple tenants, industries, and geographic locations. The following charts summarize our portfolio diversification by property type, tenant industry, and geographic location as of March 31, ~~2018.~~2019. The percentages below are calculated based on our ~~contractual rental revenue over the next twelve months (“~~NTM ~~Rent”)~~Rent as of March 31, ~~2018, on a per property type basis~~2019, divided by total NTM Rent. Late payments, non-payments, or other unscheduled payments are not considered in the calculation. NTM Rent includes the impact of contractual rent escalations.

~~Substantially all of our leases are triple-net.~~ At March 31, ~~2018,~~2019, 99.8% of our portfolio’s rentable square footage, representing all but three of our properties ~~are~~that were previously leased to a single tenant, is subject to leases, substantially all of which were net leases. We do not currently engage in the development of real estate, which could cause a delay in timing between the funds used to invest in properties and the corresponding cash inflows from rental receipts. Our cash flows from operations are primarily generated through our real estate investment portfolio ~~and~~and the monthly lease payments under our long-term leases with our tenants.~~To increase value to our stockholders, we strive to implement periodic rent escalations within our leases.~~

Due to the fact that substantially all of our properties are leased ~~to single tenants~~ under long-term leases, we are not currently required to perform significant ongoing leasing activities on our properties. The leases for ~~only three~~six of our properties, representing less than 1% of our annual rental streams (calculated based on NTM Rent), will expire before ~~2020.~~2021. As of March 31, ~~2018,~~2019, the weighted average remaining term of our leases (calculated based on NTM Rent) was approximately ~~13.0~~12.0 years, excluding renewal options, which are exercisable at the option of our tenants upon expiration of their base lease term. ~~Less than~~Approximately 5% of the properties in our portfolio are subject to leases without at least one renewal option. Furthermore, the weighted average remaining lease term on the ~~$100.5~~$73.1 million in properties acquired during the three months ended March 31, ~~2018,~~2019, was ~~17.6 years.~~14.8 years at the time of acquisition. More than ~~50%~~56% of our rental revenue is derived from leases that expire during 2030 and thereafter. As of March 31, ~~2018, not~~2019, no more than ~~10%~~9% of our rental revenue is derived from leases that expire in any single year in the ~~decade between 2020 and 2030.~~next ten years. The following chart sets forth our lease expirations based upon the terms of our leases in place as of March 31, ~~2018.~~2019.

The following table presents the lease expirations by year, including the number of tenants and properties with leases expiring, the square footage covered by the leases expiring, the NTM Rent, and the percentage of NTM Rent for the leases expiring. Late payments, non-payments, or other unscheduled payments are not considered in the NTM Rent amounts. NTM Rent includes the impact of contractual rent escalations. Amounts are in thousands, except the number of tenants and properties. We did not have any material leasing activity during the three months ended March 31, 2019.

Year	Number of Tenants		Number of Properties		Square Footage		NTM Rent		Percentage of NTM Rent			Number of Tenants		Number of Properties		Square Footage		NTM Rent		Percentage of NTM Rent
2018		1		1		2		73		<0.1	%
2019		2		2		8		281		0.1	%		1		1		11	$	49		<0.1	%
2020		3		3		95		1,106		0.6	%		5		5		112		1,373		0.6	%
2021		2		4		9		580		0.3	%		7		11		99		1,921		0.8	%
2022		4		3		87		2,459		1.2	%		5		4		124		3,253		1.4	%
2023		8		11		694		6,259		3.2	%		12		13		703		6,900		2.9	%
2024		12		15		1,741		14,114		7.1	%		14		17		1,795		14,734		6.1	%
2025		2		8		28		1,042		0.5	%		10		18		271		4,372		1.8	%
2026		18		28		801		12,050		6.1	%		18		29		826		12,520		5.2	%
2027		23		35		1,726		18,690		9.4	%		22		33		1,965		19,955		8.3	%
2028		17		30		1,469		15,159		7.6	%		22		35		1,871		21,125		8.8	%
2029		17		62		2,664		17,982		9.1	%		16		62		2,486		18,500		7.7	%
2030 and thereafter		93		348		7,014		108,822		54.8	%		91		413		9,374		135,526		56.4	%
Untenanted properties													—		3		47		—		—
Total													223		644		19,684	$	240,228		100.0	%

Our top tenants and brands at March 31, ~~2018,~~2019, are listed in the tables below. The percentages are calculated based on ~~our~~the NTM Rent ~~on a per property type basis~~associated with the tenant or brand divided by total NTM Rent. Late payments, non-payments, or other unscheduled payments are not considered in the calculation. NTM Rent includes the impact of contractual rent escalations.

Tenant	Property Type	% NTM Rent			Properties		Property Type	% NTM Rent			Properties
Art Van Furniture, LLC							Retail		3.4	%		10
Red Lobster Hospitality LLC & Red Lobster Restaurants LLC	Retail		3.7	%		25	Retail		3.1	%		25
Art Van Furniture, LLC	Retail		3.3	%		9
Jack's Family Restaurants LP	Retail		3.0	%		36	Retail		2.5	%		36
Outback Steakhouse of Florida, LLC ⁽¹⁾	Retail		2.7	%		24
Outback Steakhouse of Florida LLC ^(a)							Retail		2.3	%		24
Krispy Kreme Doughnut Corporation	Industrial/Retail		2.5	%		26	Industrial/Retail		2.1	%		27
BluePearl Holdings, LLC							Healthcare		2.0	%		12
Big Tex Trailer Manufacturing, Inc.	Industrial/Retail/Office		2.3	%		17	Industrial/Retail/Office		2.0	%		17
Siemens Medical Solutions USA, Inc. & Siemens Corporation	Industrial		2.3	%		2	Industrial		1.9	%		2
Nestle' Dreyer's Ice Cream Company	Industrial		2.1	%		1	Industrial		1.8	%		1
Nationwide Mutual Insurance Company	Office		2.0	%		2
Arkansas Surgical Hospital, LLC	Healthcare		2.0	%		1
WendPartners & Subsidiaries							Retail		1.7	%		28
Total Top Ten									22.8	%		182
All Other									77.2	%		462
Total			25.9	%		143			100.0	%		644
All Other			74.1	%		407

Brand	Property Type	% NTM Rent			Properties		Property Type	% NTM Rent			Properties
Bob Evans Farms⁽¹⁾	Industrial/Retail		3.7	%		27
Art Van Furniture							Retail		3.4	%		10
Bob Evans Farms^(a)							Industrial/Retail		3.1	%		27
Red Lobster	Retail		3.7	%		25	Retail		3.1	%		25
Art Van Furniture	Retail		3.3	%		9
Wendy's							Retail		2.5	%		41
Jack's Family Restaurants	Retail		3.0	%		36	Retail		2.5	%		36
Taco Bell	Retail		2.6	%		41	Retail		2.2	%		41
Wendy's	Retail		2.5	%		35
Krispy Kreme	Industrial/Retail		2.5	%		26	Industrial/Retail		2.1	%		27
BluePearl Veterinary Partners							Healthcare		2.0	%		12
Outback Steakhouse	Retail		2.4	%		22	Retail		2.0	%		22
Big Tex Trailers	Industrial/Retail/Office		2.3	%		17	Industrial/Retail/Office		2.0	%		17
Siemens	Industrial		2.3	%		2
Total Top Ten									24.9	%		258
All Other									75.1	%		386
Total			28.3	%		240			100.0	%		644
All Other			71.7	%		310

Moody’s ~~Investor Services~~Investors Service (“Moody’s”) has assigned the Operating Company an investment grade credit rating of Baa3 with a stable outlook, which allows us to take advantage of preferential borrowing margins and provides more attractive access to the debt markets, including the debt private placement ~~markets.~~market. The Operating Company’s credit rating is based on a number of factors, including an assessment of our financial strength, portfolio size and diversification, credit and operating metrics, corporate governance policies, and sustainability of cash flow and earnings. ~~We are strongly committed to maintaining modest leverage, commensurate with our investment grade rating.~~ While Moody’s utilizes other factors outside of our leverage ratio in assigning ratings, we are strongly committed to maintaining a modest leverage profile commensurate with our investment grade rating. Our leverage policy (“Leverage Policy”) is to maintain a leverage ratio in the 35% to 45% range based on the approximate market value of our assets, recognizing that the actual leverage ratio ~~will~~may vary over time and there may be opportunistic reasons to exceed a 45% leverage ratio; provided, however, that we cannot exceed a 50% leverage ratio without the approval of the Independent Directors Committee. The Independent Directors Committee reviews our Leverage Policy at least annually; however, depending on market conditions and other factors, they may change our Leverage Policy from time to time.

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

At March 31, 2018, we had $150.0 million of unsecured Senior Notes (as defined below) outstanding, which bear interest at a fixed rate of 4.84% per annum, and mature in April 2027. We began strategically using this channel of long-term, fixed-rate debt capital in 2017 to help mitigate interest rate risk, lengthen our maturity profile, and diversify our sources of debt capital. We intend to access the debt private placement market in 2018 in order to partially fund future acquisition activity and for general corporate purposes.

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

As of March 31, ~~2018,~~2019, our total outstanding indebtedness was ~~$1,224.7~~$1,442.3 million, and the ratio of our total indebtedness to the approximate market value of our assets was ~~41.7%~~40.8%.

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 at least quarterly by the Independent Directors Committee based on the net asset value (“NAV”) of our portfolio, input from management and third-party consultants, and such other factors as the Independent Directors Committee may determine. Shares of our common stock are also sold pursuant to our DRIP, and repurchased by us pursuant to our share redemption program, at a price based upon the Determined Share Value. For additional information regarding our valuation policy and procedures, please see the section titled Determined Share Value in Part II, Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of our Form 10-K. The following table presents our Determined Share Value for each period indicated below, together with the corresponding NAV per diluted share ~~of our outstanding common stock (including non-controlling membership units)~~ as of the preceding quarter end:

The adjustments to NAV per diluted share in arriving at the Determined Share Value for the periods presented above account for the inherent imprecision in the valuation estimates. In August ~~2018,~~2019, the Independent Directors Committee will review the NAV per diluted share calculations as of June 30, ~~2018,~~2019, and will assess whether adjustments to the current Determined Share Value of ~~$83.00~~$86.00 are appropriate.

The following table provides a breakdown of the major components of our estimated NAV and NAV per diluted share amounts ~~as of March 31, 2018, and December 31, 2017~~ (in thousands, except per share amounts):

NAV as of:	March 31, 2018			December 31, 2017
NAV component:							March 31, 2019			December 31, 2018
Investment in rental property	$	2,937,769		$	2,840,941		$	3,568,282		$	3,462,675
Debt		(1,195,023	)		(1,173,219	)		(1,445,814	)		(1,434,403	)
Other assets and liabilities, net		12,634			(2,256	)		(16,352	)		(11,467	)
NAV	$	1,755,380		$	1,665,466		$	2,106,116		$	2,016,805
Number of outstanding shares, including noncontrolling interests		21,115			20,461			24,612			23,751
NAV per diluted share	$	83.14		$	81.40		$	85.57		$	84.92

The following table details the implied market capitalization rates (shown on a weighted average basis) used to value the investment in rental property, by property type, as of March 31, ~~2018,~~2019, and December 31, ~~2017,~~2018, supporting the Determined Share Value in effect for the periods of May 1, ~~2018,~~2019, through July 31, ~~2018,~~2019, and February 1, ~~2018,~~2019, through April 30, ~~2018,~~2019, respectively:

While we believe our assumptions are reasonable, a change in these assumptions would impact the calculation of the value of our real estate investments. For example, assuming all other factors remain unchanged, an increase in the weighted average implied market capitalization rate used as of March 31, ~~2018,~~2019, of 0.25%, would result in a decrease in the fair value of our investment in rental property of 3.6%, and our NAV per diluted share would have been ~~$78.16.~~$80.39. Conversely, a decrease in the weighted average implied market capitalization rate used as of March 31, ~~2018,~~2019, of 0.25% would result in an increase in the fair value of our investment in rental property of ~~3.8 %,~~3.9%, and our NAV per diluted share would have been ~~$88.49.~~$91.16.

At its May ~~8, 2018,~~7, 2019 meeting, our board of directors declared monthly distributions of ~~$0.43~~$0.44 per share of our common stock and unit of membership interest in the Operating Company to be paid by us to our stockholders and members of the Operating Company (other than us) of record ~~prior to the end of May 2018, June 2018, and July 2018:~~as follows:

Dividend Per Share/Unit

Record Date

Payment Date

(on or before)

Dividend Per Share/Unit

Record Date

Payment Date

(on or before)

0.43

May 30, 2018

June 15, 2018

0.44

May 30, 2019

June 14, 2019

0.43

June 28, 2018

July 13, 2018

0.44

June 27, 2019

July 15, 2019

0.43

July 30, 2018

August 15, 2018

0.44

July 30, 2019

August 15, 2019

Investors may purchase additional shares of our common stock by electing to reinvest their distributions through our DRIP. Cash distributions will be reinvested in additional shares of common stock pursuant to our DRIP at a per share price equal to 98% of the Determined Share Value as of the applicable distribution date. ~~Please refer~~Refer to the section titled Distribution and Distribution Reinvestment in Part II, Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of our Form 10-K, for additional discussion of our DRIP.

The following table summarizes distributions paid in cash and pursuant to our DRIP for the three months ended March 31, ~~2018~~2019 (in thousands).

Month	Year	Cash Distribution - Common Stockholders		Cash Distribution - Membership Units		Distribution Paid Pursuant to DRIP on Common Stock ⁽¹⁾		Distribution Paid Pursuant to DRIP on Membership Units ⁽¹⁾		Total Amount of Distribution		Year	Cash Distribution - Common Stockholders		Cash Distribution - Membership Units		Distribution Paid Pursuant to DRIP on Common Stock ^(a)		Distribution Paid Pursuant to DRIP on Membership Units ^(a)		Total Amount of Distribution
January	2018	$	4,021	$	536	$	3,769	$	123	$	8,449	2019	$	4,634	$	617	$	4,730	$	130	$	10,111
February	2018		4,029		521		3,839		123	$	8,512	2019		4,691		617		4,800		130		10,238
March	2018		4,201		539		4,052		128	$	8,920	2019		4,836		632		5,003		132		10,603
TOTAL		$	12,251	$	1,596	$	11,660	$	374	$	25,881		$	14,161	$	1,866	$	14,533	$	392	$	30,952

The following table summarizes our distributions paid, ~~during the three months ended March 31, 2018,~~ including the source of distributions and a comparison against FFO (in thousands).

	For the three months ended				For the three months ended
	March 31,				March 31,
	2018		2017		2019		2018
Distributions:
Paid in cash	$	14,221	$	11,999	$	16,419	$	14,221
Reinvested in shares		11,660		8,546		14,533		11,660
Total Distributions	$	25,881	$	20,545	$	30,952	$	25,881
Source of Distributions:
Cash flow from operating activities	$	25,881	$	20,545	$	30,952	$	25,881
FFO	$	34,858	$	27,537	$	38,949	$	34,858

For the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, we paid distributions from our cash flow from operating activities. Refer to Net Income and Non-GAAP Measures (FFO and AFFO) below for further discussion of our FFO.

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

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 stockholders through an appropriate balance of debt and equity in our capital structure. Therefore, we attempt to maintain a conservative ~~debt level on our balance sheet with appropriate interest and fixed charge coverage ratios. We target a~~ leverage ~~ratio~~profile, with total debt equal to 35% to 45% of the approximate market value of our assets. We believe our current leverage model has allowed us to take advantage of the lower cost of debt while simultaneously strengthening our balance sheet, as evidenced by ~~the~~our investment grade credit ~~rating the Operating Company received in March 2016, which rating was re-affirmed in March 2017 and April 2018.~~rating. Our actual leverage ratio will vary over time but may not exceed 50% without the approval of the Independent Directors Committee. As of March 31, ~~2018,~~2019, the leverage ratio was ~~41.7%~~40.8% of the approximate market value of our assets. From a management perspective and in communications with the credit rating agencies, we also consider our leverage position as a multiple of Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”), a non-GAAP financial measure. EBITDA is a ~~tool~~metric we use to measure leverage in the context of our cash flow expectations and projections. ~~However, given~~Given the significance of our recent growth, however, adding ~~$100.5~~$73.1 million in investments during the three months ended March 31, 2019, $606.8 million in investments during 2018, and $683.6 million in investments during 2017, ~~and $518.8 million in investments during 2016,~~ coupled with our continued strategic growth initiatives, historical EBITDA may not provide investors with an adequate picture of the contractual cash ~~in-flows~~inflows associated with these investments. Our investments are typically made throughout the year (with a significant portion typically occurring in the ~~second half~~fourth quarter of the year), and therefore the ~~full year,~~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~~metric to manage our leverage profile. We utilize this analysis inclusive of our focus on debt-to-market value metrics.

Our primary cash expenditures ~~are~~include the monthly interest payments we make on the debt we use to finance our real estate investment portfolio, asset management and property management fees ~~for~~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,~~net leases, our tenants are generally responsible for the maintenance, insurance, and property taxes ~~and capital costs~~ associated with the properties they lease from us. In certain circumstances, the terms of the lease require us to pay these expenses, ~~however,~~although, in most cases we are reimbursed by the tenants. Accordingly, we do not currently anticipate making significant capital expenditures or incurring other significant property costs on an aggregate basis during the term of athe property ~~lease, unless we incur substantial vacancies.~~leases in our current portfolio. To the extent that we have vacant properties, we will incur certain costs to operate and maintain the properties, however, we do not currently expect these costs to be material.

As shown in the table below, net cash provided by operating activities ~~increased~~decreased by ~~$8.2~~$0.6 million, to $31.6 million for the three months ended March 31, 2019, from $32.2 million for the three months ended March 31, 2018, from $24.0 million for the three months ended March 31, 2017. 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 as a result of increased access to debt and equity capital and favorable investment opportunities.2018. We funded real estate investment activity with a combination of cash from operations, proceeds from ~~the issuance of~~our unsecured ~~debt obligations,~~revolving credit agreement, and proceeds from the issuance of common stock. We paid cash dividends to our stockholders and holders of non-controlling membership units of ~~the Operating Company, net of reinvestments through our DRIP, totaling $14.7~~$16.8 million and ~~$12.1~~$14.7 million for the three months ended March 31, 2019 and 2018, ~~and 2017,~~ respectively. ~~Cash used to fund the increase in~~The increased dividends between periods ~~related~~were primarily ~~to the increase in~~funded by cash provided by our operations. Cash and cash equivalents and restricted cash totaled ~~$24.8~~$13.2 million and ~~$39.6~~$24.8 million at March 31, ~~2018,~~2019 and ~~March 31, 2017,~~2018, respectively.

	For the three months ended						For the three months ended
	March 31,						March 31,
(In thousands)	2018			2017			2019			2018
Net cash provided by operating activities	$	32,237		$	23,986		$	31,639		$	32,237
Net cash used in investing activities		(87,524	)		(87,682	)		(64,637	)		(87,524	)
Net cash provided by financing activities		69,938			80,230			27,169			69,938
Increase in cash and cash equivalents and restricted cash	$	14,651		$	16,534		$	(5,829	)	$	14,651

As of March 31, 2018, the historical cost basis of our real estate investment portfolio totaled $2.3 billion, consisting of investments in 550 properties with rent and interest due from our tenants aggregating $17.6 million per month on a straight-line basis and $16.6 million per month in monthly cash inflows. During the three months ended March 31, 2018, we closed two real estate acquisitions totaling $100.5 million, adding 27 new properties to our portfolio. The new properties will provide approximately $0.6 million in monthly rent on a straight-line basis and $0.5 million in monthly cash rents.

Substantially all of our cash from operations is generated by our real estate portfolio. As of March 31, 2019, the historical cost basis of our real estate investment portfolio totaled $2,725.0 million, consisting of investments in 644 properties. During the first three months of 2019, these properties generated monthly straight-line rent revenues of approximately $21.3 million, and monthly contractual cash revenues of approximately $19.6 million. During the three months ended March 31, 2019, we closed five real estate acquisitions totaling $73.1 million, excluding capitalized acquisition expenses, adding 27 new properties to our portfolio. The new properties will generate approximately $0.5 million in monthly straight-line rent revenues and approximately $0.5 million in monthly contractual cash revenues over the next twelve months.

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

The mix of our financing sources may change over time based on market conditions and our liquidity needs. The availability of debt to finance commercial real estate can be impacted by economic and other factors that are beyond our control. We 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~~creditworthy tenants and lease guarantors, and maintaining an appropriate mix of debt and equity capitalization. Specifically, we recognized a collection rate of greater than 99% ~~collection rate on rentals~~ during ~~2017 and for~~ the three months ended March 31, 2019 and 2018. ~~Moody’s assignment of an~~An investment grade credit rating of Baa3 ~~to the Operating Company~~on our debt is further evidence of our active management of a conservative capital structure. As we grow our real estate portfolio, we also intend to manage our debt maturities to reduce the risk that a significant amount of our debt will mature in any single year in the future. ~~Please refer~~For example, during the third quarter of 2018, we used proceeds from the longer-term Series B and Series C Notes (as defined below) to repay a portion of our shorter-term Revolver and 2015 Unsecured Term Loan (each as defined below). Refer to Contractual Obligations below for further details ~~regarding~~of the maturities on our contractual obligations, including long-term ~~debt.~~debt maturities.

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

Our equity capital for our real estate acquisition activity is provided from the proceeds of our ongoing private offering, including distributions reinvested through our DRIP. During the three months ended March 31, ~~2018,~~2019, we raised ~~$57.0~~$74.9 million in equity capital to be used in our acquisition activities, ~~including distributions reinvested~~of which $60.0 million was received through new cash investments and $14.9 million was raised through our DRIP.

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

~~In 2017, together~~On February 27, 2019, we entered into a $450.0 million seven-year unsecured term loan agreement (the “2019 Unsecured Term Loan”). At closing, we borrowed $300.0 million and used the proceeds to fully repay the 2015 Unsecured Term Loan (described below). The remaining $150.0 million can be drawn through August 27, 2019. The 2019 Unsecured Term Loan includes an accordion feature that can increase the facility size up to a total of $550.0 million of available capacity. Borrowings under the 2019 Unsecured Term Loan are payable interest only during the term, with the ~~Operating Company,~~principal amount due at the maturity date of February 27, 2026. The rate of interest payable on borrowings under the 2019 Unsecured Term Loan, at our option, is equal to LIBOR plus a margin. Based on our investment grade credit rating, the applicable margin is currently 1.85%.

As of March 31, 2019, we ~~closed on an $880.0 million~~have a $1.055 billion unsecured credit facility and term loan agreement (the “Credit Facility”), which is comprised of (i) a ~~$425.0~~$600.0 million senior unsecured revolving credit facility (the “Revolver”), (ii) a five-and-a-half-year, $265.0 million senior unsecured delayed draw term loan (the “5.5-Year Term Loan”), and (iii) a seven-year, $190.0 million senior unsecured delayed draw term loan (the “7-Year Term Loan”). On February 28, 2019, we amended the Credit Facility to increase the amount available under the Revolver, from $425.0 million to $600.0 million. This ~~both~~ increased the ~~amount of capital~~ available ~~for borrowing and reduced~~capacity under the ~~interest rate we pay on borrowings, as compared to the debt that was paid down or replaced as a result of negotiating the new facility. The~~ Credit ~~facility contains an accordion feature that can increase the facility size up to a total of~~Facility from $1.0 billion ~~of available capacity.~~to $1.055 billion, including its accordion feature. Borrowings under the Credit Facility are payable interest only during the term of the appropriate loan tranche, with the principal amount due in full at maturity. All other terms and conditions of the Credit Facility remain the same as those in effect prior to this amendment.

The following table summarizes the amounts drawn and available to be drawn on the Credit Facility and 2019 Unsecured Term Loan as of March 31, ~~2018~~2019 (in thousands, excluding Loan Tranche and Maturity Date).

Loan Tranche	Amount Drawn		Amount Available		Total Capacity		Maturity Date	Amount Drawn		Amount Available		Total Capacity		Maturity Date
Credit Facility:
Revolver	$	317,000		108,000	$	425,000	January 21, 2022	$	139,900	$	460,100	$	600,000	January 21, 2022^(a)
5.5-Year Term Loan		265,000		—		265,000	January 23, 2023		265,000		—		265,000	January 23, 2023
7-Year Term Loan		100,000		90,000		190,000	June 21, 2024		190,000		—		190,000	June 21, 2024
2019 Unsecured Term Loan									300,000	150,000^(b)			450,000	February 27, 2026

The 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 Revolver, at our option, is equal to LIBOR plus a margin which is adjustable based on the Operating Company’s credit rating. Based on the Operating Company’s current investment grade credit rating of Baa3, the applicable margin equals 1.2% per annum. 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 current applicable facility fee equals 0.25% per annum.

The 5.5-Year Term Loan matures on January 23, 2023, and was fully drawn as of March 31, 2018. Borrowings under the 5.5-Year Term Loan bear interest at variable rates based on LIBOR plus a margin, which is adjustable based on the Operating Company’s credit rating. Based on the Operating Company’s current credit rating, the applicable margin under the 5.5-Year Term Loan equals 1.35% per annum.

The 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 June 21, 2018. As of March 31, 2018, we have made one draw of $100.0 million. The rate of interest payable on the 7-Year Term Loan is equal to LIBOR plus a margin, which is adjustable based upon the Operating Company’s credit rating. Based on the Operating Company’s current credit rating, the applicable 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.

~~In addition to the Credit Facility, at March~~At December 31, 2018, we ~~also~~ had outstanding a ~~$325.0~~$300.0 million unsecured term ~~note~~loan (“2015 Unsecured Term ~~Loan Agreement”~~Loan”). The 2015 Unsecured Term Loan ~~Agreement matures~~was set to mature on February 6, 2019, ~~was fully drawn as of March 31, 2018,~~ and ~~provides~~provided for two one-year extension options, at our option, subject to compliance with all covenants and the payment of a 0.10% fee. ~~The 2015 Unsecured Term Loan Agreement contains an accordion feature that can increase~~We exercised the ~~note size up~~first of these options on January 9, 2019, extending the maturity to ~~a total of $600 million. Based on the Operating Company’s current investment grade credit rating of Baa3, the applicable margin under~~February 6, 2020, and subsequently repaid the 2015 Unsecured Term Loan ~~Agreement equals 1.40% per annum.~~in full on February 27, 2019, using proceeds from the 2019 Unsecured Term Loan.

To mitigate interest rate risk, we have strategically added ~~long-term,~~unsecured, fixed-rate, ~~debt~~interest-only senior promissory notes (“Senior Notes”) to our capital structure. At March 31, 2019 and December 31, 2018, we had ~~$150.0~~$475.0 million of ~~unsecured, fixed-rate, interest-only senior promissory notes (the “Senior Notes”)~~Senior Notes outstanding. The Senior Notes were issued in three series (Series A, B, and C) as described below.

On April 18, 2017, we issued $150.0 million of Senior Notes (the “Series A Notes”). The Series A Notes are payable interest only during their term, bear interest at a fixed rate of 4.84% per annum, and mature inon April 18, 2027.

~~Interest Rate Risk~~On July 2, 2018, we issued $325.0 million of Senior Notes in two series: (i) $225.0 million of 10-year Senior Notes (“Series B Notes”) maturing on July 2, 2028, and (ii) $100.0 million of 12-year Senior Notes (“Series C Notes”) maturing on July 2, 2030. The Series B and Series C Notes are payable interest only during their term, and bear interest at a fixed rate of 5.09% per annum and 5.19% per annum, respectively.

In addition to ~~issuing fixed-rate debt to reduce our exposure to variable-rate interest rates, the Operating Company enters into interest rate swap agreements to fix the rate of interest as~~funding acquisitions, a hedge against interest rate fluctuations. These interest rate hedges have staggered maturities up to 10 years in duration in order to reduce the exposure to interest rate fluctuations in any one year. The interest rate swaps are applied against a pool of debt, which offers flexibility in maintaining our hedge designation concurrent with our ongoing capital markets activity. We attempt to limit our total floating-rate debt exposure to no more than 5%portion of the ~~approximate market value of assets, measured at quarter end. To reduce counterparty concentration risk with respect~~net proceeds from the Series B Notes and Series C Notes was used to repay outstanding borrowings under the ~~interest rate hedges, we diversify the institutions that serve~~Revolver as ~~swap counterparties. No more than 30%~~well as $25.0 million of the ~~nominal value~~outstanding principal balance 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 Independent Directors Committee. The interest rate swaps are considered cash flow hedges. Under these agreements, we receive monthly payments from the counterparties equal to the variable interest rates multiplied by the outstanding notional amounts. In turn, we pay the counterparties each month an amount equal to a fixed rate multiplied by the outstanding notional amounts. The intended net impact of these transactions is that we pay a fixed interest rate on our variable-rate borrowings.

We 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 March 31, ~~2018,~~2019, 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~~restricted from paying dividends onto our ~~common stock~~stockholders above the annual 90% REIT taxable income distribution requirement. For each of the previous three years, we paid dividends out of our cash flows from operations in excess of the required distribution amounts.

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

We ~~intend to draw on the 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 Revolver and the 2015 Unsecured Term Loan Agreement,~~our debt instruments, refinance, or replace the existing borrowings as they become due, including ~~accessing the~~through additional private debt ~~market in 2018. The extensions would extend~~placements, all with the ~~Revolver’s maturity until June 2022, and the 2015 Unsecured Term Loan Agreement’s maturity until February 2021. We~~goal of limiting future debt service to interest payments only. As a result, we do not intend to make principal payments on these debt obligations in the foreseeable ~~future, and plan to replace our existing credit facilities with new debt prior to maturity.~~future. Additionally, we may be required to increase our borrowing capacity to partially fund future acquisitions. We assess market conditions and the availability and pricing of debt on an ongoing basis, which are critical inputs in our strategic planning and decision-making 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 our investors. To the extent that we are unable to recast our debt facilities, our cash flows from operations will not be adequate to pay the principal amount of debt, and we may be forced to liquidate properties to satisfy our obligations.

We believe that the cash generated by our operations and our ongoing private offering, our cash and cash equivalents at March 31, ~~2018,~~2019, our current borrowing capacity under our unsecured credit facility, and our access to long-term debt capital, including through the debt private placement market, will be sufficient to fund our operations for the foreseeable future and allow us to acquire the real estate ~~necessary~~ to ~~achieve~~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 ~~13.0~~12.0 years as of March 31, ~~2018.~~2019. To mitigate the impact of inflation on our fixed revenue streams, we have implemented limited escalation clauses in our leases. As of March 31, ~~2018, nearly~~2019, substantially all of our leases had contractual lease escalations, with aan annual weighted average of ~~2.1%~~2.0%. A ~~substantial~~ majority of our leases have fixed annual rent increases ~~and the remainder have annual lease escalations based on increases in the consumer price index (“CPI”),~~ or periodic escalations over the term of the lease (e.g., a 10% increase every five years)., and the remaining portion has annual lease escalations based on increases in the CPI. These lease escalations mitigate the risk of ~~earnings erosion on our~~fixed revenue streams in the case of an inflationary economic environment, and provide increased return in otherwise stable market conditions. As a majority of our portfolio has fixed lease escalations, there is a risk that inflation could be greater than the contractual rent increases.

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

We had no off-balance sheet arrangements as of March 31, ~~2018,~~2019, or December 31, ~~2017.~~2018.

The following table provides information with respect to our contractual commitments and obligations as of March 31, ~~2018~~2019 (in thousands).

Year of
Maturity

2015 Unsecured Term Loan Agreement⁽¹⁾

5.5-Year Term Loan

7-Year Term Loan⁽²⁾

Revolver⁽³⁾

Senior Notes

Mortgages and Notes Payable

Interest
Expense⁽⁴⁾

Tenant
Improvement
Allowances

Total

2018

$
—

$
—

$
—

$
14,000

$
—

$
2,357

$
34,236

$
4,292

$
54,885

2019

325,000

—

—

—

—

3,351

36,281

—

364,632

2020

—

—

—

—

—

8,777

34,868

—

43,645

2021

—

—

—

—

—

18,268

34,121

—

52,389

2022

—

—

—

303,000

—

8,828

23,319

—

335,147

Thereafter

—

265,000

100,000

—

150,000

26,132

48,743

—

589,875

Total

$
325,000

$
265,000

$
100,000

$
317,000

$
150,000

$
67,713

$
211,568

$
4,292

$
1,440,573

⁽¹⁾	~~We may extend the 2015 Unsecured Term Loan Agreement twice, for a one-year period each time, subject to compliance with all covenants and the payment of 0.10% fee.~~

Year of Maturity	Term Loans		Revolver^(a)		Senior Notes		Mortgages and Notes Payable		Interest Expense^(b)		Tenant Improvement Allowances^(c)		Operating Leases		Total
Remainder of 2019	$	—	$	—	$	—	$	1,706	$	47,234	$	2,697	$	89	$	51,726
2020		—		—		—		2,372		62,530		—		120		65,022
2021		—		—		—		17,137		62,385		—		122		79,644
2022		—		139,900		—		1,992		55,613		—		124		197,629
2023		265,000		—		—		7,368		45,471		—		125		317,964
Thereafter		490,000		—		475,000		41,871		141,518		—		2,540		1,150,929
Total	$	755,000	$	139,900	$	475,000	$	72,446	$	414,751	$	2,697	$	3,120	$	1,862,914

As part of acquiring rental properties, we may enter into tenant improvement allowances. As of March 31, 2018, and December 31, 2017, tenant improvement allowances totaled $4.3 million and $5.7 million, respectively. We expect to pay the tenant improvement allowances out of cash flows from operations or from additional borrowings.

At March 31, ~~2018,~~2019, investment in rental property of ~~$109.3~~$127.9 million is pledged as collateral against our mortgages and notes payable.

Additionally, as of March 31, ~~2018,~~2019, we are a party to three separate Tax Protection Agreements (the “Agreements”) with the contributing members (the “Protected Members”) of three distinct UPREIT ~~transactions conducted in November 2015, February 2016, and October 2017.~~transactions. The Agreements require us to pay monetary damages in the event of a sale, exchange, transfer, or other disposal of the contributed property in a taxable transaction that would cause a Protected Member to recognize a Protected Gain, as defined in the Agreements, subject to certain exceptions. ~~In such an event, we will pay monetary damages to~~As of March 31, 2019, the Protected Members in the amount of the aggregate federal, state, and local income taxes incurred as a result of the income or gain allocated or recognized by the Protected Member as an outcome of the transaction, subject to certain caps and limitations contained in the Agreements. We are required to allocate to the Protected Members an amount of nonrecourse liabilities that is at least equal to the Minimum Liability Amount for each Protected Member, as defined in the Agreements. The Minimum Liability Amount and the associated allocation of nonrecourse liabilities are calculated in accordance with applicable tax regulations, are completed at the Operating Company level, and do not represent GAAP accounting. Therefore, there is no impact to the consolidated financial statements included in Item 1. “Financial Statements” within this Form 10-Q. If the nonrecourse liabilities allocated do not meet the requirement, we will pay monetary damages to the Protected Members in the amount of the aggregate federal, state, and local income taxes incurred as a result of the income or gain allocated or recognized by the Protected Member as an outcome to the default. The maximum aggregate amount we may be liable for under the Agreements is approximately $12.3 million. Based on information available, we do not believe that the events resulting in damages as detailed above have occurred or are likely to occur in the foreseeable future. Accordingly, we have excluded these commitments from the contractual commitments table above. See a more detailed discussion of the Tax Protection Agreements in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations”, in our Form 10-K.

As of March 31, ~~2018,~~2019, our real estate investment portfolio had grown to a net book value of ~~$2.3 billion,~~$2,725.0 million, consisting of investments in ~~550 property~~644 properties with locations in 4042 states and leased to tenants in various industries. All of our real estate investment portfolio represents commercial real estate properties, ~~subject to long-term leases, and~~ all but three of our ~~owned~~ properties (that were previously leased to a single tenant) were subject to a lease as of March 31, ~~2018. During the three months ended March 31, 2018, none of our leases with tenants expired,~~2019, and substantially all of our leasing activity related to our real estate acquisitions.

Total lease revenues increased ~~by $13.4~~to $68.4 million ~~or 31.8%,~~for the three months ended March 31, 2019, compared to $55.6 million for the three months ended March 31, ~~2018, compared to $42.2 million for the three months ended March 31, 2017.~~2018. The ~~growth~~increase in revenue period-over-period is primarily attributable to the growth in our real estate portfolio, which was achieved through annual rent escalations associated with our same property portfolio, coupled with rental revenue generated during ~~2017.~~the first quarter of 2019 from a ccretive property acquisitions completed since the first quarter of 2018, and continued strong portfolio operating performance. We acquired ~~$683.6~~$606.8 million in real estate throughout 2018, excluding capitalized acquisition ~~costs, throughout 2017, mainly during the second half of the year. The acquired~~expenses. These properties ~~represented~~provide annual straight-line ~~rent income~~rental revenue of ~~$56.1~~$47.4 million, or ~~$14.0~~$11.8 million per quarter. ~~These incremental revenues were somewhat offset by~~The acquisitions closed during the ~~elimination of revenues in the current period associated with properties that we have recently sold.~~three months ended March 31, 2019 did not materially impact reported rental income, due to their timing. The rental rates we receive ~~on sale-leaseback transactions and lease assumptions~~ on the various types of properties we target across the United States vary from transaction to transaction based on many factors, such as the terms of the lease, each property’s real estate fundamentals, and the market rents in the area. The initial ~~contractual~~ cash ~~lease payments~~capitalization rate on acquisitions closed during the three months ended March 31, ~~2018, excluding capitalized acquisition expenses, represented a weighted average capitalization rate of 6.4%~~2019, was 7.4%.

	For the three months ended						For the three months ended
	March 31,				Increase/		March 31,				Increase/(Decrease)
(in thousands)	2018		2017		(Decrease)		2019		2018		$			%
Operating expenses
Depreciation and amortization	$	19,202	$	14,593	$	4,609	$	24,310	$	19,202	$	5,108			26.6	%
Asset management fees		4,143		3,193		950		5,120		4,143		977			23.6	%
Property management fees		1,517		1,168		349		1,885		1,517		368			24.3	%
Property and operating expense		2,619		1,577		1,042		4,390		2,619		1,771			67.6	%
General and administrative		1,330		963		367		1,103		1,330		(227	)		(17.1	)%
State and franchise tax		243		50		193		443		243		200			82.3	%
Provision for impairment of investment in rental properties								1,017		—		1,017			>100.0	%
Total operating expenses	$	29,054	$	21,544	$	7,510	$	38,268	$	29,054	$	9,214			31.7	%

Depreciation and amortization increased ~~by $4.6~~to $24.3 million ~~or 31.6%,~~for the three months ended March 31, 2019, compared to $19.2 million for the three months ended March 31, ~~2018, compared to $14.6 million for the three months ended March 31, 2017.~~2018. The increase is primarily due to the growth in our real estate portfolio, as discussed in ~~Revenues~~above.

Asset management fees increased ~~approximately $0.9~~to $5.1 million ~~or 29.8%,~~for the three months ended March 31, 2019, compared to $4.1 million for the three months ended March 31, ~~2018, compared to $3.2 million in~~2018. We pay the ~~three months ended March 31, 2017. The~~ Asset Manager ~~receives~~ a quarterly ~~asset management~~ fee equal to 0.25% of the aggregate value of our equity on a fully diluted basis, based on the Determined Share Value. The increase in asset management fees during the three months ended March 31, ~~2018,~~2019, compared to the comparable period in ~~2017,~~2018, is athe result of an increase in our total outstanding equity on a fully diluted basis, combined with ~~the~~an increase in the Determined Share Value.

The ~~$81.00 per share~~$85.00 Determined Share Value in effect as of March 31, ~~2018,~~2019, reflected an increase of ~~2.5%~~4.9% from the ~~$79.00 per share~~$81.00 Determined Share Value in effect as ofMarch 31, ~~2017.~~2018. Additionally, the ~~weighted average~~ number of shares of our common stock and non-controlling membership units ~~of the Operating Company~~ outstanding increased as the result of continued equity capital investments. ~~For the three months ended~~As of March 31, ~~2018, the weighted average number of~~2019, there were 24.6 million shares of our common stock and non-controlling membership units ~~of the Operating Company~~ outstanding, ~~increased 21.8%, to 20.7 million,~~ compared to ~~17.0~~21.1 million ~~for the three months ended~~as of March 31, ~~2017.~~2018. The increase in equity capital was used to partially fund the continued growth in our real estate portfolio.

Property and operating expense increased ~~by $1.0~~to $4.4 million ~~or 66.1%,~~for the three months ended March 31, 2019, compared to $2.6 million for the three months ended March 31, ~~2018, compared to $1.6 million for the three months ended March 31, 2017.~~2018. The increase is mainly attributable to the number of properties we own for which we are responsible for engaging a third-party property manager to manage ongoing property maintenance, along with insurance and real estate taxes associated with those properties. ~~These~~A majority of 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~~billed to tenants ~~balance~~and included within Lease revenues.

During the three months ended March 31, 2019, we recognized $1.0 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. The impairment recognized during the three months ended March 31, 2019, related to one property whose carrying amount we determined was not recoverable. In determining the fair value of the assets at the time of measurement, we utilized a capitalization rate of 14.6%, and a weighted average discount rate of 8%. We did not recognize any impairment during the three months ended March 31, 2018.

Interest expense increased ~~$3.2~~to $15.8 million ~~or 40.7%,~~for the three months ended March 31, 2019, compared to $11.2 million for the three months ended March 31, 2018, due to increases in both our average outstanding borrowings as well as the weighted average interest rate we pay on those borrowings as compared to ~~approximately $8.0~~a year ago. Both of these factors were mainly the result of our issuing $325 million of Series B and Series C Notes during the third quarter of 2018. These borrowings bear interest at fixed rates in excess of the rates paid on our variable-rate debt. In addition, the spread above one-month LIBOR on the 2019 Unsecured Term Loan of 1.85%, is greater than the spread of 1.40% paid on the 2015 Unsecured Term Loan that it replaced. At March 31, 2019, the weighted average interest rate on our outstanding borrowings was 4.42%, compared to 3.29% at March 31, 2018.

Cost of debt extinguishment was $0.7 million for the three months ended March 31, ~~2017, due~~2019, and related primarily to ~~an increase~~the early extinguishment of two mortgages, and the debt refinancing that occurred in ~~long-term borrowings used~~the first quarter of 2019. We did not extinguish any debt during the first quarter of 2018. To the extent that the price paid to ~~partially fund~~extinguish the ~~acquisition~~debt is greater than the carrying value of ~~properties for our growing real estate investment portfolio. Total outstanding~~that debt, we recognize a loss (cost) on ~~our unsecured credit facilities, excluding~~extinguishment. The loss is increased by the amount of previously capitalized debt ~~issuance~~acquisition costs ~~increased from $780.0 million~~that remain unamortized at ~~March 31, 2017,~~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 ~~$1,157.0 million at March 31, 2018. This primarily reflected increased borrowings due to the issuance of the Senior Notes in April 2017, along with the negotiation of~~manage our ~~credit facility in June 2017.~~leverage position.

During the three months ended March 31, ~~2018,~~2019, we recognized gains of ~~$3.3~~$1.4 million on the sale of real estate, compared to gains of ~~$0.8~~$3.3 million during the three months ended March 31, ~~2017. During~~2018. We sold four properties during the three months ended March 31, ~~2018, we sold~~2019, and five properties ~~compared to one property~~ during the ~~comparable period in 2017.~~three months ended March 31, 2018. 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 diluted share are presented in accordance with GAAP. We also disclose FFO and AFFO, each of which are non-GAAP measures. We believe the ~~use~~presentation of FFO and AFFO are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs. FFO and AFFO should not be considered alternatives to net income as a performance measure or to cash flows from operations, as reported on our statement of cash flows, or as a liquidity measure, and should be considered in addition to, and not in lieu of, GAAP financial measures.

We compute FFO in accordance with the standards established by the ~~2002 White Paper on FFO approved by the~~ Board of Governors of Nareit, the ~~National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT~~worldwide representative voice for REITs and publicly traded real estate companies with an interest in the U.S. real estate and capital markets. Nareit defines FFO as GAAP net income or loss adjusted to exclude net gains (losses) from sales of certain depreciated real estate assets, depreciation and amortization expense from real estate assets, gains and losses from change in control, and impairment charges related to certain previously depreciated real estate assets. To derive AFFO, we modify the ~~NAREIT~~Nareit computation of FFO to include other adjustments to GAAP net income related to certain non-cash revenues and expenses, including straight-line rents, cost of debt extinguishments, ~~acquisition expenses,~~ amortization of lease intangibles, amortization of debt issuance costs, amortization of net mortgage premiums, (gain) loss on interest rate swaps and other non-cash interest expense, 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. We further exclude costs or gains recorded on the extinguishment of debt, non-cash interest expense and gains, ~~and~~ the amortization of debt issuance costs, net mortgage premiums, and lease intangibles, as these items are not indicative of ongoing operational 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 nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO and AFFO. In the future, the SEC, ~~NAREIT~~Nareit or another regulatory body may decide to standardize the allowable adjustments across the REIT industry and in response to such standardization we may have to adjust our calculation and characterization of FFO and AFFO accordingly.

The following table presents our net income and our non-GAAP FFO and AFFO for the three months ended March 31, ~~2018~~2019 and ~~2017.~~2018. Our measures of FFO and AFFO are computed on the basis of amounts attributable to both us and non-controlling interests. As the non-controlling interests share in our net income on a one-for-one basis, the basic and diluted per share amounts are the same.

	For the three months ended						For the three months ended
	March 31,				Increase/		March 31,				Increase/(Decrease)
(in thousands, except per share data)	2018		2017		Decrease		2019		2018		$			%
Net income	$	18,995	$	13,747	$	5,248	$	15,022	$	18,995	$	(3,973	)		(20.9	)%
Net earnings per diluted share		0.92		0.81		0.11		0.62		0.92		(0.30	)		(32.6	)%
FFO		34,858		27,537		7,321		38,949		34,858		4,091			11.7	%
FFO per diluted share		1.68		1.62		0.06		1.62		1.68		(0.06	)		(3.6	)%
AFFO		30,271		24,082		6,189		34,169		30,271		3,898			12.9	%
AFFO per diluted share		1.46		1.42		0.04		1.42		1.46		(0.04	)		(2.7	)%
Diluted WASO^(1)(a)		20,719		17,009				24,072		20,719		3,353			16.2	%

Net income ~~increased by $5.2~~decreased to $15.0 million ~~or 38.2%,~~for the three months ended March 31, 2019, compared to $19.0 million for the three months ended March 31, ~~2018,~~2018. Revenue growth associated with the increase in the number of properties in our portfolio, was more than offset by an associated increase in depreciation and amortization, asset management and property management expenses, combined with increased interest expense and decreased gains on sale of real estate in 2019, as compared to ~~approximately $13.8~~2018.

During the first quarter of 2019, certain deals, that had been anticipated to close when setting the first quarter’s equity cap, were delayed and are expected to close during the second quarter. This delay resulted in a leverage ratio of 40.8% as of March 31, 2019, compared to 41.7% as of March 31, 2018, and a decrease of $0.30 in net earnings per diluted share for the three months ended March 31, 2019 as compared to the three months ended March 31, 2018.

FFO increased by 11.7% to $38.9 million for the three months ended March 31, 2017. Net earnings per diluted share increased $0.11 during the same period, to $0.92 per share. The increase is mainly attributable to increased operating income, which was primarily due to the net growth in the number of investments in real estate properties in our portfolio, as discussed in ~~Revenues~~ ~~above. This portfolio growth resulted in increased revenues which were partially offset by increased depreciation and amortization expenses.~~

Partially offsetting these factors were increased interest expense, which reflected the increase in outstanding borrowings on our long-term credit facilities, as well as increased gains on sale of real estate during the three months ended March 31, 2018, as2019, compared ~~to the prior-year period, discussed above.~~

The increase in net income in the earnings per share computation was partially offset by a 3.7 million increase in the diluted weighted average number of shares of our common stock outstanding as a result of ongoing equity raises We use proceeds from the sale of stock to partially fund acquisitions of real estate, which contributes to the increased revenues discussed above.

~~FFO increased $7.3 million, or 26.6%,~~ to $34.9 million for the three months ended March 31, ~~2018, compared~~2018. AFFO increased by 12.9% to ~~$27.5~~$34.2 million for the three months ended March 31, 2017. FFO per diluted share increased by $0.06 during the same period, to $1.68 per share. The increase in FFO is primarily driven by the increased revenues year over year as a result of growth in our real estate investment portfolio, as discussed in ~~Revenues~~ above, which also drove an increase in addbacks related to real estate depreciation and amortization. These factors were partially offset by a larger deduction from net income in the three months ended March 31, 2018, related to gains on the sale of real estate. The increase in FFO in the FFO per share computation was partially offset by the increase in the weighted average number of shares outstanding.

~~AFFO increased $6.2 million, or 25.7%,~~2019, compared to $30.3 million for the three months ended March 31, 2018. The increase in both FFO and AFFO was primarily driven by growth in our real estate investment portfolio. As discussed above, this resulted from rent escalations associated with our same property portfolio, accretive acquisitions made since the first quarter of 2018, and strong portfolio operating performance. During the first quarter of 2019, certain deals, that had been anticipated to close when setting the first quarter’s equity cap, were delayed and are expected to close during the second quarter. This delay resulted in a leverage ratio of 40.8% as of March 31, 2019, compared to ~~$24.1 million~~41.7% as of March 31, 2018, and decreases of $0.06 and $0.04 in FFO per diluted share and AFFO per diluted share, respectively, for the three months ended March 31, ~~2017. AFFO per diluted share increased $0.04 during the same period, to $1.46 per diluted share. As~~2019 as compared to the increase in net income and FFO, the year-over-year growth in AFFO was impacted by a $1.1 million increase in the deduction for straight-line rent adjustments, which reflects the growth in our real estate investment portfolio.three months ended March 31, 2018.

The following is a reconciliation of net income to FFO and AFFO, ~~for the three months ended March 31, 2018 and 2017.~~which are non-GAAP financial measures. Also presented is information regarding ~~distributions paid to our common stockholders~~diluted WASO and holders of non-controlling membership units in the Operating Company and the weighted average number of shares of our common stock and non-controlling membership units of the Operating Company used for the basic andper diluted ~~computation per share:~~share amounts:

	For the three months ended						For the three months ended
(in thousands, except per share data)	March 31,						March 31,
	2018			2017			2019			2018
Net income	$	18,995		$	13,747		$	15,022		$	18,995
Real property depreciation and amortization		19,202			14,593			24,310			19,202
Gain on sale of real estate		(3,339	)		(803	)		(1,400	)		(3,339	)
Provision for impairment on investment in rental properties								1,017			—
FFO	$	34,858		$	27,537		$	38,949		$	34,858
Capital improvements / reserves		(49	)		(48	)		(49	)		(49	)
Straight line rent adjustment		(5,141	)		(4,038	)
Straight-line rent adjustment								(5,143	)		(5,141	)
Cost of debt extinguishment		—			48			713			—
Amortization of debt issuance costs		461			424			553			461
Amortization of net mortgage premiums		(36	)		(41	)		(35	)		(36	)
Gain on interest rate swaps and other non-cash interest expense								(81	)		—
Amortization of lease intangibles		178			200			(738	)		178
AFFO	$	30,271		$	24,082		$	34,169		$	30,271

Diluted WASO⁽¹⁾		20,719			17,009
Diluted WASO								24,072			20,719

Net earnings per share, basic and diluted	$	0.92		$	0.81		$	0.62		$	0.92
FFO per diluted share		1.68			1.62			1.62			1.68
AFFO per diluted share	$	1.46		$	1.42		$	1.42		$	1.46

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. ~~We believe there have been no significant changes~~

As discussed in Note 2 in the Notes to Condensed Consolidated Financial Statements included elsewhere in this filing, during the three months ended March 31, ~~2018~~2019, we adopted the provisions of ASC 842, which resulted in a change to the ~~items that we disclosed as our~~ critical accounting ~~policies and estimates under~~policy with respect to revenue recognition that had been disclosed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2018 Form 10-K. We believe there have been no other significant changes during the three months ended March 31, 2019, to the items that we disclosed as our critical accounting policies in our 2018 Form 10-K.

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

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

We manage a portion of our interest rate risk by entering into interest rate swap agreements. Our interest rate risk management strategy is intended to stabilize cash flow requirements by maintaining interest rate swap agreements to convert certain variable-rate debt to ~~fixed-rate debt.~~a fixed rate. As of March 31, ~~2018,~~2019, we had 28 interest rate swap agreements outstanding, ~~with~~in an aggregate notional amount of ~~$770.2~~$760.0 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 cash flow hedges for accounting purposes and are reported at fair value. We assess, both at inception and on an ongoing basis, the effectiveness of our qualifying cash flow hedges. We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes.

The table below summarizes the terms of ~~the current swap agreements relating to~~ our ~~unsecured credit facilities. Several of the~~ interest rate swap agreements set forth in the table below were entered into in conjunction with previous secured and unsecured borrowings that were retired and the swaps have since been reapplied in support of the current unsecured credit facilities.at March 31, 2019.

(in thousands, except interest rates)

Counterparty	Maturity Date	Fixed Rate			Variable Rate Index	Notional Amount		Fair Value			Maturity Date	Fixed Rate			Variable Rate Index	Notional Amount		Fair Value
Bank of America, N.A.	November 2023		2.80	%	LIBOR 1 month	$	25,000	$	(310	)	November 2023		2.80	%	one-month LIBOR	$	25,000	$	(699	)
Bank of Montreal	July 2024		1.16	%	LIBOR 1 month		40,000		3,299		July 2024		1.16	%	one-month LIBOR		40,000		2,048
Bank of Montreal	January 2025		1.91	%	LIBOR 1 month		25,000		1,052		January 2025		1.91	%	one-month LIBOR		25,000		361
Bank of Montreal	July 2025		2.32	%	LIBOR 1 month		25,000		457		July 2025		2.32	%	one-month LIBOR		25,000		(207	)
Bank of Montreal	January 2026		1.92	%	LIBOR 1 month		25,000		1,207		January 2026		1.92	%	one-month LIBOR		25,000		433
Bank of Montreal	January 2026		2.05	%	LIBOR 1 month		40,000		1,570		January 2026		2.05	%	one-month LIBOR		40,000		366
Bank of Montreal	December 2026		2.33	%	LIBOR 1 month		10,000		230		December 2026		2.33	%	one-month LIBOR		10,000		(83	)
Bank of Montreal	December 2027		2.37	%	LIBOR 1 month		25,000		599		December 2027		2.37	%	one-month LIBOR		25,000		(247	)
Capital One, N.A.	December 2021		1.05	%	LIBOR 1 month		15,000		786		December 2021		1.05	%	one-month LIBOR		15,000		455
Capital One, N.A.	December 2024		1.58	%	LIBOR 1 month		15,000		942		December 2024		1.58	%	one-month LIBOR		15,000		472
Capital One, N.A.	January 2026		2.08	%	LIBOR 1 month		35,000		1,324		January 2026		2.08	%	one-month LIBOR		35,000		243
Capital One, N.A.	July 2026		1.32	%	LIBOR 1 month		35,000		3,450		July 2026		1.32	%	one-month LIBOR		35,000		2,099
Capital One, N.A.	December 2027		2.37	%	LIBOR 1 month		25,000		626		December 2027		2.37	%	one-month LIBOR		25,000		(265	)
Capital One, N.A.											April 2026		2.68	%	one-month LIBOR		15,000		(481	)
M&T Bank	August 2021		1.02	%	LIBOR 1 month		5,151		233		August 2021		1.02	%	one-month LIBOR		5,016		134
M&T Bank	September 2022		2.83	%	LIBOR 1 month		25,000		(328	)	September 2022		2.83	%	one-month LIBOR		25,000		(564	)
M&T Bank	November 2023		2.65	%	LIBOR 1 month		25,000		(125	)	November 2023		2.65	%	one-month LIBOR		25,000		(551	)
Regions Bank	March 2019		1.91	%	LIBOR 3 month		25,000		114
Regions Bank	May 2020		2.12	%	LIBOR 1 month		50,000		247
Regions Bank	March 2022		2.43	%	LIBOR 3 month		25,000		(205	)	May 2020		2.12	%	one-month LIBOR		50,000		137
Regions Bank	December 2023		1.18	%	LIBOR 1 month		25,000		1,874		December 2023		1.18	%	one-month LIBOR		25,000		1,108
SunTrust Bank	April 2024		1.99	%	LIBOR 1 month		25,000		807		April 2024		1.99	%	one-month LIBOR		25,000		192
SunTrust Bank	April 2025		2.20	%	LIBOR 1 month		25,000		626		April 2025		2.20	%	one-month LIBOR		25,000		(44	)
SunTrust Bank	July 2025		1.99	%	LIBOR 1 month		25,000		1,010		July 2025		1.99	%	one-month LIBOR		25,000		276
SunTrust Bank	December 2025		2.30	%	LIBOR 1 month		25,000		538		December 2025		2.30	%	one-month LIBOR		25,000		(176	)
SunTrust Bank	January 2026		1.93	%	LIBOR 1 month		25,000		1,202		January 2026		1.93	%	one-month LIBOR		25,000		413
Wells Fargo Bank, N.A.	February 2021		2.39	%	LIBOR 1 month		35,000		49		February 2021		2.39	%	one-month LIBOR		35,000		(85	)
Wells Fargo Bank, N.A.	October 2024		2.72	%	LIBOR 1 month		15,000		(128	)	October 2024		2.72	%	one-month LIBOR		15,000		(436	)
Wells Fargo Bank, N.A.	January 2028		2.37	%	LIBOR 1 month		75,000		1,798		January 2028		2.37	%	one-month LIBOR		75,000		(777	)
Wells Fargo Bank, N.A.											April 2027		2.72	%	one-month LIBOR		25,000		(934	)
						$	770,151	$	22,944							$	760,016	$	3,188

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 March 31, ~~2018,~~2019, our financial instruments were not exposed to significant market risk due to foreign currency exchange risk.

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of and for the ~~three months~~quarter ended March 31, ~~2018,~~2019, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and were operating at a reasonable assurance level.

There were no changes to our internal control over financial reporting that occurred during the ~~three months~~quarter ended March 31, ~~2018,~~2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

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

We commenced our ongoing private offering of shares of our common stock in 2007. The first closing of our private offering occurred on December 31, 2007, and we have conducted additional closings at least once every calendar quarter since then. Currently, we close sales of additional shares of our common stock monthly. In November 2017, we instituted a monthly equity cap and queue program for new and additional investments in our common stock. The cap does not apply to investments made pursuant to our DRIP, or to equity capital received in connection with UPREIT transactions. ~~For~~On February 8, 2019, we announced that the equity cap had been set at $20.0 million for investments made in the months of February ~~2018~~2019 through April ~~2018, new and additional investments were capped at $15.0 million per month. This same~~2019, which cap will beremain in ~~place~~effect for investments made in the months of May ~~2018~~2019 through July ~~2018.~~2019.

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

For the three months ended March 31, ~~2018,~~2019, we sold ~~0.7~~0.9 million shares of our common stock in our private offering, including ~~0.1~~0.2 million shares of common stock issued pursuant to our DRIP, for gross offering proceeds of approximately ~~$57.0~~$74.9 million. We intend to use substantially all of the net proceeds from our private offering, supplemented with additional borrowings, to continue to invest in additional net leased properties and for general corporate purposes.

The following table provides information regarding the sale of shares of our common stock pursuant to our ongoing private offering during the three months ended March 31, ~~2018~~2019 (in thousands, except year and Determined Share Value amounts).

Month	Year	Common Shares Sold		Determined Share Value - Common Shares⁽¹⁾		Total Proceeds - Common Shares Sold		Common Shares DRIP		Determined Share Value - DRIP⁽²⁾		Total Proceeds - Common Share DRIP⁽³⁾		Total Proceeds		Year	Common Shares Sold		Weighted Average Determined Share Value — Common Shares^(a)		Total Proceeds — Common Shares Sold		Common Shares DRIP		Weighted Average Determined Share Value — DRIP^(b)		Total Proceeds — Common Share DRIP^(c)		Total Proceeds
January	2018		185	$	81	$	15,000		49	$	79	$	3,892	$	18,892	2019		233	$	86.00	$	20,000		58	$	84.28	$	4,862	$	24,862
February	2018		184		81		14,941		50		79		3,962		18,903	2019		235	$	85.00		20,000		58	$	84.28		4,930		24,930
March	2018		185		81		15,000		53		79		4,179		19,179	2019		235	$	85.00		20,000		62	$	83.30		5,136		25,136
Total			554			$	44,941		152			$	12,033	$	56,974			703			$	60,000		178			$	14,928	$	74,928

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

During the three months ended March 31, ~~2018,~~2019, we fulfilled repurchase requests and repurchased shares of our common stock pursuant to our share redemption program as follows.

~~Not applicable.~~The other information presented below is being filed as a result of the Company’s adoption of the new accounting guidance for lease accounting (“ASC 842”) on January 1, 2019. As part of that adoption, the Company elected the available practical expedient, for all classes of assets, not to separate lease components in contracts from the nonlease components in those contracts, when recording revenues associated with operating leases where it is the lessor. Since the lease component is the predominant component under the Company’s leases, combined revenues from both the lease and nonlease components are accounted for in accordance with ASC 842 and will be reported in all periods subsequent to the adoption of the new accounting guidance in a single caption, “Lease revenues,” on the Company’s Consolidated Statements of Income and Comprehensive Income. The presentation and disclosure of Lease revenues have been adjusted to reflect these changes for the quarter ended March 31, 2019. Refer to Note 2 of Part I, Item 1. “Financial Statements,” for further details on these updates to significant accounting policies.

This information is intended to assist investors in making comparisons of the Company’s historical financial information with future financial information. The reported financial information below has been revised to conform to the current presentation.

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

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

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

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

		Page
Part I - FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)	2
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2325
	Cautionary Note Regarding Forward-Looking Statements	2325
	Overview	2325
	Liquidity and Capital Resources	3235
	Impact of Inflation	3639
	Off-Balance Sheet Arrangements	3639
	Contractual Obligations	3639
	Results of Operations	3740
	Net Income and Non-GAAP Measures (FFO and AFFO)	3942
	Critical Accounting Policies	4144
	Impact of Recent Accounting Pronouncements	4144
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4145
Item 4.	Controls and Procedures	4346
Part II - OTHER INFORMATION		4447
Item 1.	Legal Proceedings	4447
Item 1A.	Risk Factors	4447
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4447
Item 3.	Defaults upon Senior Securities	4548
Item 4.	Mine Safety Disclosures	4548
Item 5.	Other Information	4548
Item 6.	Exhibits	4650

	For the three months ended
(in thousands)	March 31, 2019
Contractual rental amounts billed for operating leases	$	58,419
Straight-line rent adjustments		5,171
Adjustment to revenue recognized for uncollectible rental amounts billed		(440	)
Operating lease rental revenues		63,150
Earned income from direct financing leases		1,005
Operating expenses billed to tenants		4,275
Total lease revenues	$	68,430

Property Type	% NTM Rent
Retail – other		13.0	%
Retail – casual dining		~~12.6~~10.2	%
Retail – quick service restaurants ~~(QSR)~~("QSR")		~~11.4~~	%
~~Retail – other~~		~~11.1~~10.0	%
Total Retail		~~35.1~~33.2	%
Industrial – warehouse/distribution		~~11.2~~13.4	%
Industrial – manufacturing		~~10.2~~9.7	%
Industrial – flex		~~6.3~~5.9	%
Industrial – other		~~3.7~~3.2	%
Total Industrial		~~31.4~~32.2	%
Healthcare – clinical		~~11.2~~14.2	%
Healthcare – surgical		~~4.9~~3.8	%
Healthcare – other		~~4.2~~3.5	%
Total Healthcare		~~20.3~~21.5	%
Office		9.5	%
Other		~~3.7~~3.6	%
Total		100.0	%

	Common Stock		Additional Paid-in Capital			Subscriptions Receivable			Cumulative Distributions in Excess of Retained Earnings			Accumulated Other Comprehensive Income		Non-controlling Interests			Total
Balance, January 1, 2017	$	15	$	1,009,431		$	(9,790	)	$	(89,960	)	$	2,092	$	86,749		$	998,537
Net income		—		—			—			12,594			—		1,153			13,747
Issuance of 1,167 shares of common stock, net		1		91,055			9,540			—			—		—			100,596
Other offering costs		—		(410	)		—			—			—		—			(410	)
Distributions declared ($0.410 per share January 2017, $0.415 per share February through March 2017)		—		—			—			(19,326	)		—		(1,941	)		(21,267	)
Change in fair value of interest rate swap agreements		—		—			—			—			2,346		214			2,560
Redemption of 18 shares of common stock		—		(1,380	)		—			—			—		—			(1,380	)
Balance, March 31, 2017	$	16	$	1,098,696		$	(250	)	$	(96,692	)	$	4,438	$	86,175		$	1,092,383

Percentage of shares owned by	March 31, 2019			December 31, 2018
Corporation		92.9	%		92.7	%
Non-controlling interests		7.1	%		7.3	%
		100.0	%		100.0	%

	March 31, 2019
(in thousands)	Carrying Amount		Allocation of Impairment			Net Carrying Amount
Investment in rental property accounted for using the operating method, net of accumulated depreciation	$	2,536	$	(748	)	$	1,788
Accrued rental income		180		(180	)		—
Intangible lease assets, net		275		(81	)		194
Leasing fees, net		26		(8	)		18
	$	3,017	$	(1,017	)	$	2,000

As originally reported	For the three months ended
(in thousands)	March 31, 2018
Revenues
Rental income from operating leases	$	51,832
Earned income from direct financing leases		966
Operating expenses reimbursed from tenants		2,749
Other income from real estate transactions		42
Total revenues	$	55,589

As revised	For the three months ended
(in thousands)	March 31, 2018
Revenues
Lease revenues	$	55,589

(in thousands)		For the three months ended March 31,
Intangible	Financial Statement Presentation	2019		2018
Acquired in-place leases and leasing fees	Depreciation and amortization	$	5,557	$	4,038
Above-market and below-market leases	Increase (decrease) to lease revenues		740		(178	)

~~Top Tenant Industries~~
Industry	% NTM Rent
Restaurants		~~24.3~~20.5	%
Healthcare Facilities		~~17.6~~19.1	%
Home Furnishing Retail		~~4.8~~5.0	%
Specialized Consumer Services		~~4.8~~	%
~~Packaged Foods & Meats~~		4.4	%
Auto Parts & Equipment		~~4.4~~4.3	%
Packaged Foods & Meats		3.8	%
Air Freight & Logistics		3.1	%
Healthcare Services		~~2.7~~2.8	%
Industrial ~~Conglomerates~~Machinery		2.3	%
~~Multi-line Insurance~~		~~2.0~~	%
~~Life Sciences Tools & Services~~		~~2.0~~	%
Distributors		2.0	%
~~Air Freight~~Industrial Conglomerates		1.9	%
Internet & ~~Logistics~~Direct Marketing Retail		1.8	%
~~Industrial Machinery~~		~~1.8~~	%
~~Aerospace & Defense~~Multi-line Insurance		1.7	%
~~Metal~~Life Sciences Tools & ~~Glass Containers~~Services		1.7	%
General Merchandise Stores		1.6	%
Top 15 Tenant Industries		~~78.2~~76.0	%
Other ~~(28~~(31 industries)		~~21.8~~24.0	%
Total		100.0	%

Period	NAV as of	Determined Share Value		NAV per share
May 1, 2018 - July 31, 2018	March 31, 2018	$	83.00	$	83.14
February 1, 2018 - April 30, 2018	December 31, 2017	$	81.00	$	81.40
November 1, 2017 - January 31, 2018	September 30, 2017	$	81.00	$	80.55

Period	NAV as of	NAV per diluted share		Determined Share Value
May 1, 2019 - July 31, 2019	March 31, 2019	$	85.57	$	86.00
February 1, 2019 - April 30, 2019	December 31, 2018	$	84.92	$	85.00
November 1, 2018 - January 31, 2019	September 30, 2018	$	85.66	$	86.00

Covenants	Required	Actual (as of March 31, ~~2018)~~2019)
Leverage Ratio^(1)(a)	≤ 0.60 to 1.00		~~0.43~~0.46
Secured Indebtedness Ratio^(2)(b)	≤ 0.40 to 1.00	��	0.02
Unencumbered Coverage Ratio^(3)(c)	≥ 1.75 to 1.00		~~4.05~~3.47
Fixed Charge Coverage Ratio^(4)(d)	≥ 1.50 to 1.00		~~3.46~~2.95
Total Unsecured Indebtedness to Total Unencumbered Eligible Property Value^(5)(e)	≤ 0.60 to 1.00		~~0.48~~0.47
Dividends and Other Restricted Payments	Only applicable in case of default	Not Applicable

Year of Maturity	2015 Unsecured Term Loan Agreement⁽¹⁾		5.5-Year Term Loan		7-Year Term Loan⁽²⁾		Revolver⁽³⁾		Senior Notes		Mortgages and Notes Payable		Interest Expense⁽⁴⁾		Tenant Improvement Allowances		Total
2018	$	—	$	—	$	—	$	14,000	$	—	$	2,357	$	34,236	$	4,292	$	54,885
2019		325,000		—		—		—		—		3,351		36,281		—		364,632
2020		—		—		—		—		—		8,777		34,868		—		43,645
2021		—		—		—		—		—		18,268		34,121		—		52,389
2022		—		—		—		303,000		—		8,828		23,319		—		335,147
Thereafter		—		265,000		100,000		—		150,000		26,132		48,743		—		589,875
Total	$	325,000	$	265,000	$	100,000	$	317,000	$	150,000	$	67,713	$	211,568	$	4,292	$	1,440,573

Period	Total Number of Shares Requested to be Redeemed ⁽¹⁾		Total Number of Shares Redeemed		Average Price Paid Per Share ⁽²⁾		Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
January 2018		—		—		—	⁽³⁾
February 2018		—		—		—	⁽³⁾
March 2018		45,503		45,503	$	78.60	⁽³⁾

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

No.		Description

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

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

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

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

10.1		Term Loan Agreement, dated February 27, 2019, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, Capital One, National Association, and the other parties thereto (Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on March 5, 2019)

10.2		First Amendment Regarding Commitment Increases, dated February 28, 2019, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Manufacturers and Traders Trust Company and the other parties thereto (Incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on March 5, 2019)

10.3		Guaranty, dated February 27, 2019, by Broadstone Net Lease, Inc. in favor of Capital One, National Association (Incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on March 5, 2019)

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

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

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

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

101.1		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended ~~September 30, 2017,~~March 31, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income and Comprehensive Income, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements

		BROADSTONE NET LEASE, INC.

Date: May ~~8, 2018~~7, 2019		/s/ Christopher J. Czarnecki
		Christopher J. Czarnecki
		Chief Executive Officer and President

Date: May ~~8, 2018~~7, 2019		/s/ Ryan M. Albano
		Ryan M. Albano
		Executive Vice President and Chief Financial Officer