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 every Interactive Data File required to be submitted 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 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 ~~24,783,961.807~~ 26,855,508.755 shares of the Registrant’s common stock, $0.001 par value per share, outstanding as of ~~August~~May 7, ~~2019.~~

	June 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Assets
Accounted for using the operating method, net of accumulated depreciation	$	2,762,161		$	2,641,746		$	3,367,566		$	3,415,400
Accounted for using the direct financing method		41,949			42,000			39,961			41,890
Investment in rental property, net		2,804,110			2,683,746			3,407,527			3,457,290
Cash and cash equivalents		10,288			18,612			93,151			12,455
Accrued rental income		78,254			69,247			84,932			84,534
Tenant and other receivables, net		129			1,026			1,287			934
Prepaid expenses and other assets		7,176			4,316			12,397			12,613
Interest rate swap, assets		2,687			17,633			—			2,911
Goodwill								339,769			—
Intangible lease assets, net		293,228			286,258			320,418			331,894
Debt issuance costs – unsecured revolver, net		2,978			2,261
Debt issuance costs – unsecured revolving credit facility, net								2,081			2,380
Leasing fees, net		13,468			13,698			12,492			12,847
Total assets	$	3,212,318		$	3,096,797		$	4,274,054		$	3,917,858

Liabilities and equity
Unsecured revolver	$	123,600		$	141,100
Liabilities, mezzanine equity and equity
Unsecured revolving credit facility							$	353,300		$	197,300
Mortgages and notes payable, net		121,074			78,952			110,464			111,793
Unsecured term notes, net		1,222,376			1,225,773			1,672,587			1,672,081
Interest rate swap, liabilities		22,676			1,820			79,622			24,471
Earnout liability								44,296			—
Accounts payable and other liabilities		32,370			24,394			35,835			37,377
Due to related parties		111			114
Accrued interest payable		2,578			9,777			9,764			3,594
Intangible lease liabilities, net		81,895			85,947			89,673			92,222
Total liabilities		1,606,680			1,567,877			2,395,541			2,138,838

Commitments and contingencies (See Note 16)

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

Equity
Broadstone Net Lease, Inc. 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, 23,730 and 22,014 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		24			22
Common stock, $0.001 par value; 80,000 shares authorized, 26,074 and 26,001 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively								26			26
Additional paid-in capital		1,702,911			1,557,421			1,899,616			1,895,935
Cumulative distributions in excess of retained earnings		(185,647	)		(155,150	)		(233,067	)		(208,261	)
Accumulated other comprehensive (loss) income		(18,584	)		14,806
Accumulated other comprehensive loss								(73,138	)		(20,086	)
Total Broadstone Net Lease, Inc. stockholders’ equity		1,498,704			1,417,099			1,593,437			1,667,614
Non-controlling interests		106,934			111,821			106,542			111,406
Total equity		1,605,638			1,528,920			1,699,979			1,779,020
Total liabilities and equity	$	3,212,318		$	3,096,797
Total liabilities, mezzanine equity and equity							$	4,274,054		$	3,917,858

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

	For the three months ended June 30,						For the six months ended June 30,						For the three months ended March 31,
	2019			2018			2019			2018			2020			2019
Revenues
Lease revenues	$	69,053		$	57,032		$	137,483		$	112,621
Lease revenues, net													$	78,231		$	68,430

Operating expenses
Depreciation and amortization		25,287			20,232			49,597			39,434			31,219			24,310
Asset management fees		5,318			4,313			10,438			8,456			2,461			5,120
Property management fees		1,935			1,595			3,820			3,112			1,275			1,885
Property and operating expense		3,252			2,530			7,642			5,149			4,115			4,390
General and administrative		1,661			1,456			2,764			2,787			5,842			1,103
State and franchise tax		305			510			748			753
Provision for impairment of investment in rental properties		—			—			1,017			—			2,133			1,017
Total operating expenses		37,758			30,636			76,026			59,691			47,045			37,825

Other income (expenses)
Preferred distribution income		—			187			—			375
Interest income		—			52			1			162			9			1
Interest expense		(16,732	)		(12,454	)		(32,560	)		(23,631	)		(20,991	)		(15,828	)
Cost of debt extinguishment		(8	)		(51	)		(721	)		(51	)		(22	)		(713	)
Gain on sale of real estate		2,787			4,256			4,187			7,595			7,619			1,400
Income taxes														(549	)		(443	)
Internalization expenses														(1,205	)		—
Change in fair value of earnout liability														(4,177	)		—
Other losses														(22	)		—
Net income		17,342			18,386			32,364			37,380			11,848			15,022
Net income attributable to non-controlling interests		(1,208	)		(1,412	)		(2,292	)		(2,834	)		(1,032	)		(1,084	)
Net income attributable to Broadstone Net Lease, Inc.	$	16,134		$	16,974		$	30,072		$	34,546		$	10,816		$	13,938

Weighted average number of common shares outstanding
Basic		23,204			19,829			22,770			19,498			26,527			22,335
Diluted		24,941			21,478			24,507			21,098			29,053			24,072
Net earnings per common share
Basic and diluted	$	0.70		$	0.86		$	1.32		$	1.77		$	0.41		$	0.62

Comprehensive (loss) income
Net income	$	17,342		$	18,386		$	32,364		$	37,380		$	11,848		$	15,022
Other comprehensive (loss) income
Other comprehensive income (loss)
Change in fair value of interest rate swaps		(23,178	)		7,042			(35,802	)		23,997			(58,062	)		(12,624	)
Realized gain on interest rate swaps		(41	)		—			(122	)		—			(42	)		(81	)
Comprehensive (loss) income		(5,877	)		25,428			(3,560	)		61,377			(46,256	)		2,317
Comprehensive loss (income) attributable to non-controlling interests		409			(1,951	)		242			(4,643	)		4,020			(167	)
Comprehensive (loss) income attributable to Broadstone Net Lease, Inc.	$	(5,468	)	$	23,477		$	(3,318	)	$	56,734		$	(42,236	)	$	2,150

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

Condensed Consolidated Statements of Stockholders’ Equity and Mezzanine Equity

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



	Common Stock		Additional Paid-in Capital			Subscriptions Receivable			Cumulative Distributions in Excess of Retained Earnings			Accumulated Other Comprehensive Income			Non- controlling Interests			Total			Common Stock		Additional Paid-in Capital			Subscriptions Receivable			Cumulative Distributions in Excess of Retained Earnings			Accumulated Other Comprehensive Income			Non- controlling Interests			Total Stockholders' Equity			Mezzanine Equity Common Stock		Mezzanine Equity Non-controlling Interests			Total Mezzanine Equity
Balance, January 1, 2019	$	22	$	1,557,421		$	—		$	(155,150	)	$	14,806		$	111,821		$	1,528,920		$	22	$	1,557,421		$	—		$	(155,150	)	$	14,806		$	111,821		$	1,528,920		$	—	$	—		$	—
Net income		—		—			—			13,938			—			1,084			15,022			—		—			—			13,938			—			1,084			15,022			—		—			—
Issuance of 883 shares of common stock		1		75,099			(225	)		—			—			—			74,875			1		75,099			(225	)		—			—			—			74,875			—		—			—
Other offering costs		—		(300	)		—			—			—			—			(300	)		—		(300	)		—			—			—			—			(300	)		—		—			—
Distributions declared ($0.43 per share January 2019, $0.44 per share February through March 2019)		—		—			—			(29,635	)		—			(2,348	)		(31,983	)		—		—			—			(29,635	)		—			(2,348	)		(31,983	)		—		—			—
Change in fair value of interest rate swap agreements		—		—			—			—			(11,713	)		(911	)		(12,624	)		—		—			—			—			(11,713	)		(911	)		(12,624	)		—		—			—
Realized gain on interest rate swap agreements		—		—			—			—			(75	)		(6	)		(81	)		—		—			—			—			(75	)		(6	)		(81	)		—		—			—
Redemption of 21 shares of common stock		—		(1,803	)		—			—			—			—			(1,803	)		—		(1,803	)		—			—			—			—			(1,803	)		—		—			—
Balance, March 31, 2019	$	23	$	1,630,417		$	(225	)	$	(170,847	)	$	3,018		$	109,640		$	1,572,026		$	23	$	1,630,417		$	(225	)	$	(170,847	)	$	3,018		$	109,640		$	1,572,026		$	—	$	—		$	—
Net income		—		—			—			16,134			—			1,208			17,342
Issuance of 892 shares of common stock		1		76,004			225			—			—			—			76,230
Other offering costs		—		(300	)		—			—			—			—			(300	)
Distributions declared ($0.44 per share April through June 2019)		—		—			—			(30,934	)		—			(2,297	)		(33,231	)
Change in fair value of interest rate swap agreements		—		—			—			—			(21,564	)		(1,614	)		(23,178	)
Realized gain on interest rate swap agreements		—		—			—			—			(38	)		(3	)		(41	)
Redemption of 38 shares of common stock		—		(3,210	)		—			—			—			—			(3,210	)
Balance, June 30, 2019	$	24	$	1,702,911		$	—		$	(185,647	)	$	(18,584	)	$	106,934		$	1,605,638

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

Condensed Consolidated Statements of ~~Stockholders’ Equity – (continued)~~Cash Flows

Common
Stock

Additional
Paid-in
Capital

Subscriptions
Receivable

Cumulative
Distributions
in Excess of
Retained
Earnings

Accumulated
Other
Comprehensive
Income

Non-
controlling
Interests

Total

Balance, January 1, 2018

$
19

$
1,301,979

$
(15
)

$
(120,280
)

$
5,122

$
97,376

$
1,284,201

Net income

—

—

—

17,573

—

1,422

18,995

Issuance of 710 shares of common stock

1

57,154

(129
)

—

—

—

57,026

Other offering costs

—

(224
)

—

—

—

—

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

—

—

—

(24,476
)

—

(2,472
)

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

—

—

—

—

15,685

1,270

16,955

Conversion of eight membership units to eight shares of
   common stock

—

684

—

—

—

(684
)

—

Redemption of 46 shares of common stock

—

(3,577
)

—

—

—

—

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

—

(748
)

—

—

—

—

(748
)
Balance, March 31, 2018

$
20

$
1,355,268

$
(144
)

$
(127,183
)

$
20,807

$
96,912

$
1,345,680

Net income

—

—

—

16,974

—

1,412

18,386

Issuance of 695 shares of common stock

—

56,886

(356
)

—

—

—

56,530

Other offering costs

—

(301
)

—

—

—

—

(301
)
Issuance of 194 membership units

—

—

—

—

—

15,797

15,797

Distributions declared ($0.43 per share April through
   June 2018)

—

—

—

(25,620
)

—

(2,383
)

(28,003
)
Change in fair value of interest rate swap agreements

—

—

—

—

6,503

539

7,042

Redemption of 28 shares of common stock

—

(2,312
)

—

—

—

—

(2,312
)
Balance, June 30, 2018

$
20

$
1,409,541

$
(500
)

$
(135,829
)

$
27,310

$
112,277

$
1,412,819

	For the three months ended March 31,
	2020			2019
Operating activities
Net income	$	11,848		$	15,022
Adjustments to reconcile net income including non-controlling interests to net cash provided by operating activities:
Depreciation and amortization including intangibles associated with investment in rental property		30,081			23,572
Provision for impairment of investment in rental properties		2,133			1,017
Amortization of debt issuance costs charged to interest expense		853			517
Straight-line rent and financing lease adjustments		(1,610	)		(5,143	)
Cost of debt extinguishment		22			713
Gain on sale of real estate		(7,619	)		(1,400	)
Change in fair value of earnout liability		4,177			—
Leasing fees paid		—			(258	)
Adjustment to provision for credit losses		(17	)		—
Other non-cash items		194			92
Changes in assets and liabilities, net of acquisition:
Tenant and other receivables		(353	)		(350	)
Prepaid expenses and other assets		291			(442	)
Accounts payable and other liabilities		(5,851	)		(315	)
Accrued interest payable		6,170			(1,386	)
Net cash provided by operating activities		40,319			31,639

Investing activities
Acquisition of rental property accounted for using the operating method		—			(75,080	)
Cash paid for Internalization		(30,861	)		—
Capital expenditures and improvements		(48	)		(256	)
Proceeds from disposition of rental property, net		35,383			10,612
Increase in tenant and capital reserves		—			(13	)
Change in deposits on investments in rental property		—			100
Net cash provided by (used in) investing activities		4,474			(64,637	)

Financing activities
Proceeds from issuance of common stock, net		131			59,869
Redemptions of common stock		—			(1,803	)
Cash paid for deferred offering costs		(811	)		—
Borrowings on unsecured term notes		60,000			300,000
Principal payments on mortgages, notes payable and unsecured term notes		(151,781	)		(306,970	)
Borrowings on unsecured revolving credit facility		167,000			43,800
Repayments on unsecured revolving credit facility		(11,000	)		(45,000	)
Cash distributions paid to stockholders		(29,148	)		(14,495	)
Cash distributions paid to non-controlling interests		(2,681	)		(2,330	)
Debt issuance and extinguishment costs paid		(102	)		(5,902	)
Net cash provided by financing activities		31,608			27,169
Net increase (decrease) in cash and cash equivalents and restricted cash		76,401			(5,829	)
Cash and cash equivalents and restricted cash at beginning of period		20,311			18,989
Cash and cash equivalents and restricted cash at end of period	$	96,712		$	13,160

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

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

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

For the six months
ended June 30,

2019

2018

Operating activities

Net income

$
32,364

$
37,380

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

48,142

39,901

Provision for impairment on investment in rental properties

1,017

—

Amortization of debt issuance costs charged to interest expense

1,079

862

Straight-line rent and financing lease adjustments

(10,383
)

(10,303
)
Cost of debt extinguishment

721

51

Gain on sale of real estate

(4,187
)

(7,595
)
Leasing fees paid

(435
)

(1,177
)
Other non-cash items

185

329

Changes in assets and liabilities:

Tenant and other receivables

897

54

Prepaid expenses and other assets

(16
)

(1,570
)
Accounts payable and other liabilities

2,534

1,046

Accrued interest payable

(7,199
)

(303
)
Net cash provided by operating activities

64,719

58,675

Investing activities

Acquisition of rental property accounted for using the operating method, net of mortgages assumed of
   $49,782 and $20,845 in 2019 and 2018, respectively

(153,858
)

(216,036
)
Acquisition of rental property accounted for using the direct financing method

—

(430
)
Capital expenditures and improvements

(1,543
)

(1,543
)
Proceeds from disposition of rental property, net

33,632

30,289

Change in deposits on investments in rental property

875

—

Net cash used in investing activities

(120,894
)

(187,720
)

Financing activities

Proceeds from issuance of common stock, net

120,190

88,701

Redemptions of common stock

(5,013
)

(5,889
)
Borrowings on mortgages, notes payable and unsecured term notes, net of mortgages assumed of
   $49,782 and $20,845 in 2019 and 2018, respectively

300,000

90,000

Principal payments on mortgages, notes payable and unsecured term notes

(307,672
)

(2,442
)
Borrowings on unsecured revolver

55,800

115,000

Repayments on unsecured revolver

(73,300
)

(115,500
)
Cash distributions paid to stockholders

(29,572
)

(25,245
)
Cash distributions paid to non-controlling interests

(4,627
)

(4,785
)
Debt issuance and extinguishment costs paid

(5,902
)

(72
)
Net cash provided by financing activities

49,904

139,768

Net (decrease) increase in cash and cash equivalents and restricted cash

(6,271
)

10,723

Cash and cash equivalents and restricted cash at beginning of period

18,989

10,099

Cash and cash equivalents and restricted cash at end of period

$
12,718

$
20,822

Reconciliation of cash and cash equivalents and restricted cash

Cash and cash equivalents at beginning of period

$
18,612

$
9,355

Restricted cash at beginning of period

377

744

Cash and cash equivalents and restricted cash at beginning of period

$
18,989

$
10,099

Cash and cash equivalents at end of period

$
10,288

$
13,765

Restricted cash at end of period

2,430

7,057

Cash and cash equivalents and restricted cash at end of period

$
12,718

$
20,822

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

Broadstone Net Lease, Inc. (the “Corporation”) is a Maryland corporation formed on October 18, 2007, that elected to be taxed as a real estate investment trust (“REIT”) commencing with the taxable year ended December 31, 2008. The Corporation focuses on investing in income-producing, net leased commercial ~~properties.~~properties, primarily in the United States. The Corporation leases ~~properties to~~industrial, healthcare, restaurant, office, retail, ~~healthcare, industrial, office,~~ and other commercial ~~businesses~~properties under long-term lease agreements. At ~~June 30, 2019,~~March 31, 2020, the Corporation owned a diversified portfolio of ~~646~~635 individual ~~net leased~~ commercial properties located in 4241 states throughout the continental United ~~States.~~States and one property in British Columbia, Canada.

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

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

The Corporation operates under the direction of its board of directors (the “Board of Directors”), which is responsible for the management and control of the Company’s ~~(as defined below)~~ affairs. ~~The~~Prior to February 7, 2020, the Corporation iswas externally managed ~~and its Board of Directors has retained the Corporation’s sponsor,~~by Broadstone Real Estate, LLC ~~(the “Manager”~~(“BRE”) 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 iswas a wholly owned subsidiary of ~~the Manager~~BRE and all of the Corporation’s officers ~~are~~were employees of ~~the Manager.~~BRE. Accordingly, both ~~the Manager~~BRE and the Asset Manager ~~are~~were related parties of the Company. Refer to Note 3 for further discussion concerning related parties and related party transactions.

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

The accompanying 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 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, ~~2018,~~2019, included in the Company’s ~~2018~~2019 Annual Report on Form 10-K, filed with the SEC on ~~March 14, 2019.~~February 27, 2020. Therefore, the readers of this quarterly report should refer to those audited consolidated financial statements, specifically Note 2, Summary of Significant Accounting Policies, for further discussion of significant accounting policies and estimates. The Corporation believes all adjustments necessary for a fair presentation have been included in these interim Condensed Consolidated Financial Statements (which include only normal recurring adjustments).

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

To the extent the Corporation has a variable interest in entities that are not evaluated under the variable interest entity (“VIE”) model, the Corporation evaluates its interests using the voting interest entity model. The Corporation ~~holds a 93.2% interest in the Operating Company at June 30, 2019, and is the sole managing member of the Operating Company, which gives the Corporation exclusive and~~has complete responsibility for the day-to-day management of, authority to make decisions for, and control of the ~~Operating Company.~~OP. Based on consolidation guidance, the Corporation has concluded that the ~~Operating Company~~OP is a VIE as the members in the ~~Operating Company~~OP do not possess kick-out rights or substantive participating rights. Accordingly, the Corporation consolidates its interest in the ~~Operating Company.~~OP. However, asbecause the Corporation holds the majority voting interest in the ~~Operating Company,~~OP, it qualifies for the exemption from providing certain disclosure requirements associated with investments in VIEs.

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

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

The preparation of Condensed Consolidated Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include, but are not limited to, the allocation of purchase price between ~~investment in rental property~~tangible and intangible assets acquired and liabilities assumed, the value of long-lived assets and goodwill, the provision for impairment, the depreciable lives of rental property, the amortizable lives of intangible assets and liabilities, the ~~allowance~~provisions for ~~doubtful accounts,~~uncollectible rent and credit losses, the fair value of earnout liabilities, the fair value of assumed debt and notes 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.

The Company reviews long-lived assets, other than goodwill, to be held and used for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If, and when, such events or changes in circumstances are present, an impairment exists to the extent the carrying value of the asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use of the asset or asset group and its eventual disposition. Such cash flows include 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. The Company’s assessment of impairment as of March 31, 2020 was based on the most current information available to the Company. Based upon current market conditions resulting from the COVID-19 pandemic (see Note 17), certain of the Company’s properties may have fair values less than their carrying amounts. However, based on the Company’s plans with respect to those properties, the Company believes that their carrying amounts are recoverable and therefore, under applicable GAAP guidance, no impairment charges were recognized other than those described below. If the operating conditions mentioned above deteriorate or if the Company’s ~~strategy, or one or more of the assumptions described above were to change~~expected holding period for assets changes, subsequent tests for impairments could result in additional impairment charges in the ~~future, an impairment may need to be recognized.~~future.

Inputs used in establishing fair value for real estate assets generally fall within Level 3 of the fair value hierarchy, which are characterized as requiring significant judgment as little or no current market activity may be available for validation. The main indicator used to establish the classification of the inputs is current market 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 ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019, the Company recorded an impairment ~~charge~~charges of $~~1,017~~2,133 and $1,017, respectively. ~~on one property. Impairment indicators were identified from concerns over~~

Restricted cash includes escrow funds the ~~tenant’s future viability and changes~~Company maintains pursuant to the ~~overall investment strategy for~~terms of certain mortgages, notes payable, and lease agreements, and undistributed proceeds from the ~~real estate assets. The amount~~sale of properties under Section 1031 of the ~~impairment charge was based on management’s consideration~~Internal Revenue Code of 1986, as amended (the “Code”), and is reported within Prepaid expenses and other assets in the Condensed Consolidated Balance Sheets.

Restricted cash consisted of the factors detailed above. In determining the fair value of the impaired assets at March 31, 2019, the measurement date, 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 and six months ended June 30, 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:~~following:

The Company accounts for leases in accordance with ASC 842, Leases. 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 property related 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 time of lease assumption or at the inception of a new lease, 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.~~Index (“CPI”). Lease income associated with such provisions is considered variable lease income and ~~therefore~~ is not included in the initial measurement of the lease receivable, or in the calculation of straight-line rent revenue. Such amounts are recognized as income when the amounts are determinable.

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

A lease 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.~~circumstances.

~~ASC 842 requires the~~The Company ~~to account~~accounts 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 had a bargain purchase option during or at the end of the lease term, (iii) the lease term was 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) was greater than or equal to 90% of the fair value of the leased property. If one or more of these criteria were met, and the minimum lease payments were determined to be reasonably predictable and collectible, the lease arrangement was generally accounted for as a direct financing lease. Consistent with ASC 840~~, Leases,~~ if the fair value of the land component was 25% or more of the total fair value of the leased property, the land was 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, 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. 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. The net investment in the direct financing lease represents receivables for the sum of future lease payments to be received and the estimated residual value of the leased property, less unamortized unearned income (which represents the difference between undiscounted cash flows and discounted cash flows). Unearned income is deferred and amortized into income over the lease terms so as to produce a constant periodic rate of return on the Company’s net investment in the leases.

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

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

Rent received in advance represents tenant payments received prior to the contractual due date, and is included in Accounts payable and other liabilities on the Condensed Consolidated Balance Sheets. Rent received in advance is as follows:

(in thousands)

June 30,

2019

December 31,

2018

March 31,

2020

December 31,

2019

Rent received in advance

8,182

7,832

9,918

13,368

~~Prior to the adoption of~~In accordance with ASC 842, ~~provisions~~provision for ~~doubtful accounts were~~uncollectible rent are recorded as ~~bad debt expense and included in General and administrative expenses~~an offset to Lease revenues, net on the accompanying Condensed Consolidated Statements of Income and Comprehensive (Loss) Income. ~~Subsequent~~The following table summarizes the changes in the provision for uncollectible rent:

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

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

The Company has incurred certain costs in connection with its anticipated initial public offering (“IPO”). The Company capitalizes such deferred IPO costs, which primarily consist of ~~ASC 842, provisions for doubtful accounts are recorded prospectively~~direct, incremental legal, professional, accounting and other third-party fees. The deferred IPO costs will be offset against IPO proceeds upon the consummation of an offering. Should the planned IPO be abandoned, the deferred IPO costs will be expensed immediately as ~~an offset~~a charge to ~~Lease revenues on~~operating expenses in the ~~accompanying~~ Condensed Consolidated ~~Statements~~Statement of Income and Comprehensive (Loss) Income. At March 31, 2020 and December 31, 2019, deferred IPO costs were $1,282 and $668, respectively, and were included within Prepaid expenses and other assets on the Condensed Consolidated Balance Sheets.

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 are as follows (see Note 10):~~

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

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

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

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

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

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

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

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

Long-term Debt – The fair value of the Company’s debt was estimated using Level 2 and Level 3 inputs based on recent financing transactions, estimates of the fair value of the property that serves as collateral for such debt, historical risk premiums for loans of comparable quality, current London Interbank Offered Rate (“LIBOR”), U.S. ~~treasury~~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 Mortgages and notes payable, net, Unsecured term notes, net, and Unsecured ~~revolver:~~revolving credit facility:

(in thousands)

June 30,

2019

December 31,

2018

March 31,

2020

December 31,

2019

Carrying amount

1,475,090

1,450,551

2,144,118

1,989,451

Fair value

1,529,558

1,439,264

2,233,159

2,047,860

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

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

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

		June 30,			March 31,		December 31,
(in thousands)	Financial Statement Presentation	2019		Financial Statement Presentation	2020		2019
Right-of-use assets	Prepaid expenses and other assets	$	1,665	Prepaid expenses and other assets	$	3,457	$	1,614
Lease liabilities	Accounts payable and other liabilities		1,251	Accounts payable and other liabilities		3,059		1,209

The Company’s earnout liability is payable in a combination of cash, common shares, and ~~Remitted~~OP Units, in the same proportion as the initial consideration paid in the Internalization (see Note 4). The common shares and OP Units payable under the arrangement will be subject to ~~Governmental Authorities~~

~~A majority~~a redemption rights agreement, whereby holders of the ~~Company’s properties are leased on a triple-net basis, which provides that~~common shares and OP Units will have the ~~tenants are responsible for the payment of all property operating expenses, including, but not limited~~right to ~~property taxes, maintenance, insurance, repairs, and capital costs, during the lease term. The Company records such expenses on a net basis. In other situations,~~require the Company ~~may collect property taxes from its tenants~~to repurchase any or all of the common shares or OP Units if an IPO has not occurred (see discussion of the redemption rights agreement in Note 4). The common shares and ~~remit those taxes~~OP Units are deemed to ~~governmental authorities. Taxes collected from tenants~~be freestanding financial instruments that, at inception, embody an obligation to repurchase the Company’s common shares and ~~remitted to governmental authorities are presented~~OP Units, and therefore have been classified as liabilities together with the cash portion of the earnout. The fair value of the earnout liability at the time of the Internalization was recorded in Earnout liability on ~~a gross basis, where amounts billed to tenants are included in Lease revenues, and~~ the ~~corresponding expense is included in Property and operating expense, in the accompanying~~ Condensed Consolidated ~~Statements of Income and Comprehensive (Loss) Income.~~

Rental expense associated with ground leases is recorded on a straight-line basis over the term of each lease, for leases that have fixed and measurable rent escalations. Under the 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 recordedBalance Sheets as part of the ~~right-of-use asset in~~purchase price allocation. The fair value of the ~~accompanying June 30, 2019 Condensed Consolidated Balance Sheet. Prior to the adoption of ASC 842, at December 31, 2018, this difference was~~earnout liability is remeasured each reporting period, with changes recorded as ~~a deferred liability and was included as a component of Accounts payable and other liabilities~~Change in the accompanying Condensed Consolidated Balance Sheets. Amounts associated with percentage rent provisions based on the achievement of sales targets are recognized as variable rental expense when achievement of the sales targets is considered probable. Rental expense is included in Property and operating expenses on the accompanying Condensed Consolidated Statements of Income and Comprehensive (Loss) Income.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic ASC 842)~~, which superseded the existing guidance for lease accounting, 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 presentfair value of lease payments, for both operating and financing leases. Under the new pronouncement, lessor accounting is largely unchanged from prior GAAP, however disclosures were expanded. The Company adopted ASC 842 on January 1, 2019 on a modified retrospective basis and elected the following practical expedients:

ASC 842 requires all income from leases to be presented as a single line item, rather than the prior presentation where rental income from leases was shown separately from amounts billed and collected as reimbursements from tenants on the Condensed Consolidated Statements of Income and Comprehensive (Loss) 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 (Loss) Income.

The Company ~~is primarily~~issued common shares and OP Units as base consideration for the Internalization, each of which were subject to a ~~lessor~~redemption rights agreement, where the common shares (“mezzanine equity common stock”) and ~~therefore~~OP Units (“mezzanine equity non-controlling interests”) are economically equivalent to the permanent equity classified common shares and OP Units with the exception of certain contingent redemption rights that are not yet exercisable as of March 31, 2020 (see discussion of redemption rights agreement in Note 4). The Company presents the mezzanine equity common stock and mezzanine equity non-controlling interests as mezzanine equity in the Condensed Consolidated Balance Sheets as they are redeemable outside the Company’s control.

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

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

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses which changed how entities measure credit losses for most financial assets. Financial assets that are measured at amortized cost are required to be presented at the net amount expected to be collected with a provision for credit losses deducted from the amortized cost basis. The guidance requires an entity to utilize broader information in estimating the expected credit loss, including forecasted information. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses which clarified that operating lease receivables recorded by lessors are explicitly excluded from the scope of this guidance. ASU 2016-13 and ASU 2018-09 (collectively, “ASC 326”) were effective January 1, 2020, under a modified retrospective application. The new guidance applies to the Company’s investments in direct financing leases. Due to the nature of its activities, the Company’s lease portfolio has historically not included a significant number of direct financing leases, and as a result the adoption of ASC ~~842~~326 did not have a material impact on its ~~Condensed Consolidated Financial Statements. Upon~~financial statements. In connection with the adoption of ASC ~~842, it was not necessary for~~326, the Company ~~to record~~recorded a provision for credit losses of $323 with an offsetting cumulative-effect adjustment to the opening balance of retained earnings ~~however the Company recognized a right-of-use asset and corresponding lease liability~~ as of January 1, 2019, of $1,687 and $1,261, respectively, related to operating leases where it is the lessee (see Note 16). The right-of-use asset was recorded net of a previously recorded straight-line rent liability of $7 and ground lease intangible asset, net of $432 as of the date of adoption.2020.

In ~~October~~August 2018, the FASB issued ASU ~~2018-16,~~2018-13, Fair Value Measurement (Topic 820) Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ~~Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes~~. Previously under Topic 815, the eligible benchmark interest rates in the United States were the interest rates on direct Treasury obligations of the U.S. government (UST), the LIBOR swap rate, the OIS Rate based on the Fed Funds Effective Rate, and the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate, which was introduced in ASU 2017-12, ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~ ~~(“ASU 2017-12”).~~ The amendments under ASU 2018-13 remove, add, and modify certain disclosure requirements on fair value measurements in ~~ASU 2018-16 permit the use of the OIS rate based on SOFR as a benchmark interest rate for hedge accounting purposes under Topic 815~~. ASC 820. 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).~~beginning after December 15, 2019, with early adoption permitted. The Company adopted ~~ASU 2018-16 as of January 1, 2019~~the new standard on a prospective basis on January 1, 2020. The modifications and new disclosures required by the new standard primarily relate to disclosures around recurring Level 3 fair value measurements.

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

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting affected by reference rate reform if certain criteria are met. ASU 2020-04 contains practical expedients for ~~qualifying new or redesignated hedging relationships entered into on or after~~reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the ~~date~~first quarter of ~~adoption. Adoption~~2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of ~~this guidance had no impact~~effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the ~~Condensed Consolidated Financial Statements.~~corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

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

reached with the tenant (in which case the modification would be ~~presented at~~accounted for within the ~~net amount expected~~lease modification accounting framework of ASC 842) or if it was covered under the enforceable rights and obligations within the existing lease agreement (in which case the modification would be precluded from applying the lease modification accounting framework). In April 2020, the FASB staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to ~~be collected~~lease concessions provided as a result of the COVID-19 pandemic. The Lease Modification Q&A allows the Company, if certain criteria have been met, to elect whether or not it will apply the lease modification accounting framework, with such election applied consistently to leases with similar characteristics and similar circumstances, rather than performing an ~~allowance for credit losses deducted from~~analysis of the ~~amortized cost~~concessions granted on a lease by lease basis. The ~~guidance requires an entity to utilize broader information in estimating the expected credit loss, including forecasted information. In November 2018, the FASB issued ASU 2018-19,~~ ~~Codification Improvements to Topic 326, Financial Instruments – Credit Losses~~ ~~which clarified that operating lease receivables recorded by lessors are explicitly excluded from the scope of this guidance. In May 2019, the FASB issued ASU 2019-05,~~ ~~Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief~~, which provides entities with an option to irrevocably elect the fair value option for eligible instruments upon adoption of Topic 326. ASU 2016-13 is effective January 1, 2020, with early adoption permitted beginning on January 1, 2019, under a modified retrospective application. The Company continues to evaluate the impact this new standard will have on its Condensed Consolidated Financial Statements, including the transition relief provisions, but does not expect such impact will be material based upon the composition of its current lease portfolio.

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

~~In April 2019, the FASB issued ASU 2019-04,~~ ~~Codification Improvements~~elect to ~~Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives~~apply such relief and ~~Hedging, and Topic 825, Financial Instruments~~ ~~which served to clarify a variety of Topics in the Codification and applies to all reporting entities within the scope~~will avail itself of the ~~affected accounting guidance.~~election to avoid performing a lease by lease analysis. The Company will assess the impact of the changes to Topic 326 in connection with its adoption of ASU 2018-13 discussed above. The provisions of ASU 2019-04 relating to Topics 815 and 825 are effective on January 1, 2020. The Company is currently evaluating the impact of adopting ASU 2019-04, but does not anticipate that it will have aLease Modification Q&A has no material impact on the Company’s consolidated financial statements as of and for the three months ended March 31, 2020. However, its ~~financial statements.~~future impact to the Company is dependent upon the extent of lease concessions granted to tenants as a result of the COVID-19 pandemic in future periods and the elections made by the Company at the time of entering into such concessions.

~~Certain prior-period amounts have been~~The Company reclassified ~~to conform with the current period’s presentation, including certain items described below which resulted~~$443 of Income taxes from ~~the adoption~~a component of ~~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~~to a component of Other income ~~from real estate transactions,~~(expenses), on the Condensed Consolidated Statements of Income and Comprehensive (Loss) Income ~~have been combined and reported as Lease revenues on the Condensed Consolidated Statements of Income and Comprehensive (Loss) Income as follows:~~

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

~~The Company reclassified Restricted cash of $377 and Tenant and capital reserves of $1,136 to Prepaid expenses and other assets on the Condensed Consolidated Balance Sheets at December 31, 2018~~ to conform with the current period presentation. Additionally, Tenant improvement allowances of $2,125 were reclassified to Accounts payable and other liabilities on the Condensed Consolidated Balance Sheets at December 31, 2018 to conform with the current presentation. The ~~reclassifications are changes~~reclassification is a change from one acceptable presentation to another acceptable presentation.

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

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

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

~~The Property Management Agreement automatically renewed on January 1, 2019 for three years ending December 31, 2021, subject to earlier termination pursuant to the terms~~Upon completion of the ~~Property Management Agreement. The Property Management Agreement provides for termination: (i) immediately by the Corporation’s Independent Directors Committee (“IDC”) for Cause, as defined in~~Internalization, the Property Management Agreement ~~(ii) by the IDC, upon 30 days’ written notice~~was terminated and there will be no future property management fees payable to ~~the Manager, in connection with~~BRE. The Internalization was not considered a ~~change in control of the Manager, as defined in~~“termination event” under the Property Management Agreement, ~~(iii) by~~so no fees were payable to BRE as a result of the ~~IDC, by providing~~Internalization. See Note 4 for further discussion regarding the ~~Manager with written notice of termination not less than one year prior to~~Internalization, including the last calendar day of any renewal term, (iv) by the Manager upon written notice to the Company not less than one year prior to the last calendar day of any renewal period, (v) automatically in the event of a Termination Event, as defined in the Property Management Agreement, and (vi) by the IDC upon a Key Person Event, as defined in the Property Management Agreement.

If the Corporation terminates the agreement prior to any renewal term or in any manner described above, other than termination by the Corporation for Cause, the Corporation will be 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 at June 30, 2019, if the Property Management Agreement had been terminated at June 30, 2019, subject to the conditions noted above, the termination fee would have been $21,711.associated payments related thereto.

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

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

~~The Asset Management Agreement automatically renewed on January 1, 2019 for three years ending December 31, 2021, subject to earlier termination pursuant to the terms~~Upon completion of the ~~Asset Management Agreement. The Asset Management Agreement provides for termination: (i) immediately by the IDC for Cause, as defined in~~Internalization, the Asset Management Agreement ~~(ii) by~~was terminated and there will be no future asset management fees payable to the ~~IDC, upon 30 days’ written notice~~Asset Manager. The Internalization was not considered a “termination event” under the Asset Management Agreement, so no fees were payable to the Asset Manager ~~in connection with~~as a ~~change in control~~result of the ~~Asset Manager, as defined in~~Internalization. See Note 4 for further discussion regarding the ~~Asset Management Agreement, (iii) by~~Internalization, including 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, 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 at June 30, 2019, if the Asset Management Agreement had been terminated at June 30, 2019, subject to the conditions noted above, the termination fee would have been $60,465.associated payments related thereto.

Total fees incurred under the Property Management Agreement and Asset Management Agreement ~~are~~were as follows:

(in thousands)		For the three months ended June 30,				For the six months ended June 30,					For the three months ended March 31,
Type of Fee	Financial Statement Presentation	2019		2018		2019		2018		Financial Statement Presentation	2020^(a)		2019
Asset management fee	Asset management fees	$	5,318	$	4,313	$	10,438	$	8,456	Asset management fees	$	2,461	$	5,120
Property management fee	Property management fees		1,935		1,595		3,820		3,112	Property management fees		1,275		1,885
Total management fee expense			7,253		5,908		14,258		11,568			3,736		7,005

Marketing fee (offering costs)	Additional paid-in capital		300		301		600		525	Additional paid-in capital		—		300
Acquisition fee	Capitalized as a component of assets acquired		1,275		1,380		2,005		2,386	Capitalized as a component of assets acquired		—		730
Leasing fee	Leasing fees, net		177		392		435		1,177
Leasing fee and re-leasing fees										Leasing fees, net		—		258
Disposition fee	Gain on sale of real estate		238		155		351		323	Gain on sale of real estate		109		113
Total management fees		$	9,243	$	8,136	$	17,649	$	15,979		$	3,845	$	8,406

~~Included in Due to related parties on the Condensed Consolidated Balance Sheets~~There were no unpaid management fees at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018, are $95 and $114 of unpaid management fees, respectively.~~2019. All fees related to the Property Management Agreement and the Asset Management Agreement ~~are~~were paid for in cash within the Company’s normal payment cycle for vendors.

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

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

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

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

The consideration paid at closing of the Internalization is summarized in the following table:

The Company ~~closed~~may be required to pay additional earnout consideration of up to $75,000 payable in four tranches of $10,000, $15,000, $25,000, and $25,000 if certain milestones related to either (a) the 40-day VWAP per REIT Share, following the completion of an IPO, or (b) the Company’s AFFO per share, prior to the completion of an IPO, (each, an “Earnout Trigger”) are achieved during the Earnout Periods. The consideration will consist of a combination of cash, shares of the Company’s common stock, and OP Units, based on the ~~following acquisitions during~~same proportions paid in the ~~six months ended June 30, 2019:~~base consideration.

The earnout tranches, applicable 40-day VWAP of a REIT Share and AFFO per share, and the applicable Earnout Periods are as follows:

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

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

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

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

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

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

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

In connection with the Internalization, the Company assumed $90,484 of debt which was subsequently repaid through a combination of borrowings under its Revolving Credit Facility (as defined below) and entering into a new $60,000 term loan agreement (see Note 9).

The Company incurred $1,205 in non-recurring costs associated with the Internalization during the three months ended March 31, 2020, which were classified as Internalization expenses in the Condensed Consolidated Statements of Income and Comprehensive (Loss) Income.

The effect of the Internalization has been reflected in the Company’s operating results beginning on February 7, 2020. No incremental revenues were recorded as a result of the Internalization. From February 7, 2020 to March 31, 2020, the Company incurred $3,662 in expenses as a result of being internalized, which include general and administrative expenses associated with the Company’s performance of functions previously performed by BRE and the Asset Manager (primarily employee related costs), as well as interest expense associated with the borrowings related to the Internalization. These expenses do not include the $1,205 non-recurring costs discussed above.

The following pro forma information summarizes selected financial information from the Company’s combined results of operations, as if the Internalization had occurred on January 1, 2019. These results contain certain adjustments totaling $5,646 and $6,377 of income, respectively, for the three months ended March 31, 2020 and 2019. These pro forma adjustments reflect the elimination of Internalization expenses and asset management, property management, and disposition fees between the Company and BRE and the Asset Manager in historic financial results, and adjustments to reflect incremental interest expense associated with the borrowing related to the Internalization. This pro forma information is presented for informational purposes only, and may not be indicative of what actual results of operations would have been had the Internalization occurred at the beginning of the period, nor does it purport to represent the results of future operations.

The condensed pro forma financial information is as follows for the three months ended March 31, 2020 and 2019:

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

~~The Company closed on the following acquisitions during the six months ended June 30, 2018:~~

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

The above acquisitions were funded using a combination of available cash on hand, ~~proceeds from~~borrowings under the Company’s ~~unsecured revolving line of credit,~~Revolving Credit Facility, and proceeds from equity issuances. All real estate acquisitions closed during the ~~six~~three months ended ~~June 30,~~March 31, 2019, ~~and 2018,~~ qualified as asset acquisitions and, as such, acquisition costs ~~were~~have been capitalized.

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

The Company has not completed the allocation of the acquisition date fair values for the properties acquired subsequent to June 30, 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:

	For the three months ended June 30,						For the six months ended June 30,						For the three months ended March 31,
(in thousands, except number of properties)	2019			2018			2019			2018			2020			2019
Number of properties disposed		5			6			9			11			10			4
Aggregate sale price	$	23,809		$	15,529		$	35,100		$	32,342		$	37,185		$	11,291
Aggregate carrying value		(20,233	)		(10,295	)		(29,445	)		(22,694	)		(27,764	)		(9,212	)
Additional sales expenses		(789	)		(978	)		(1,468	)		(2,053	)		(1,802	)		(679	)
Gain on sale of real estate	$	2,787		$	4,256		$	4,187		$	7,595		$	7,619		$	1,400

The Company generally leases its investment rental property to established tenants in the ~~retail,~~industrial, healthcare, ~~manufacturing,~~restaurant, office, retail, and other industries. At ~~June 30, 2019,~~March 31, 2020, the Company had ~~627~~616 real estate properties which were leased under leases that have been classified as operating leases and 1615 that have been classified as direct financing leases. Of the 1615 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. The Company’s leases generally provide for limited increases in rent as a result of fixed increases, increases in the ~~Consumer Price Index,~~CPI, or increases in the tenant’s sales volume. Generally, tenants are also required to pay all property taxes and assessments, substantially maintain the interior and exterior of the building, and maintain property and liability insurance coverage. The leases also typically provide for one or more multiple year renewal options, at the election of the tenant, and are subject to generally the same terms and conditions as the initial lease. ~~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~~was as follows:

(in thousands)	June 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Land	$	418,671		$	411,043		$	545,846		$	548,911
Land improvements		254,340			239,701			274,135			275,470
Buildings and improvements		2,319,054			2,186,499			2,827,111			2,850,571
Equipment		11,492			11,492			11,492			11,492
		3,003,557			2,848,735			3,658,584			3,686,444
Less accumulated depreciation		(241,396	)		(206,989	)		(291,018	)		(271,044	)
	$	2,762,161		$	2,641,746		$	3,367,566		$	3,415,400

For the three months ended

June 30,

For the six months ended

June 30,

For the three months ended

March 31,

(in thousands)

2019

2018

2019

2018

2020

2019

Depreciation

19,532

15,985

38,285

31,149

23,515

18,753

Estimated lease payments to be received under non-cancelable operating leases with tenants at ~~June 30, 2019~~March 31, 2020 are as follows:

(in thousands)
Remainder of 2019	$	121,921
2020		246,965
Remainder of 2020			$	210,383
2021		250,129		284,505
2022		252,425		287,511
2023		254,220		290,357
2024				285,396
Thereafter		2,167,629		2,130,183
	$	3,293,289	$	3,488,335

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

The Company’s net investment in direct financing leases iswas comprised of the following:

(in thousands)	June 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Undiscounted estimated lease payments to be received	$	74,795		$	76,829		$	68,898		$	72,753
Estimated unguaranteed residual values		20,358			20,358			19,827			20,358
Unearned income		(53,204	)		(55,187	)		(48,459	)		(51,221	)
Reserve for credit losses								(305	)		—
Net investment in direct financing leases	$	41,949		$	42,000		$	39,961		$	41,890

Undiscounted estimated lease payments to be received under non-cancelable direct financing leases with tenants at ~~June 30, 2019~~March 31, 2020 are as follows:

(in thousands)
Remainder of 2019	$	2,042
2020		4,194
Remainder of 2020			$	3,047
2021		4,283		4,138
2022		4,369		4,220
2023		4,456		4,305
2024				4,385
Thereafter		55,451		48,803
	$	74,795	$	68,898

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

The following table summarizes amounts reported as Lease revenues, net on the Condensed Consolidated Statements of Income and Comprehensive (Loss) Income:

	For the three months ended		For the six months ended			For the three months ended March 31,
(in thousands)	June 30, 2019		June 30, 2019			2020			2019
Contractual rental amounts billed for operating leases	$	60,294	$	118,713		$	72,828		$	58,419
Straight-line rent adjustments		5,269		10,440
Adjustment to recognize contractual operating lease billings on a straight-line basis							1,665			5,171
Percentage rent income							3			—
Adjustment to revenue recognized for uncollectible rental amounts billed		—		(440	)		(1,033	)		(440	)
Total operating lease rental revenues		65,563		128,713			73,463			63,150
Earned income from direct financing leases		1,004		2,009			987			1,005
Operating expenses billed to tenants		2,486		6,761			3,732			4,275
Total lease revenues	$	69,053	$	137,483
Other income from real estate transactions							49			—
Total Lease revenues, net						$	78,231		$	68,430

The following is a summary of intangible assets and liabilities and related accumulated amortization:

(in thousands)	June 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Lease intangibles:
Acquired above-market leases	$	65,047		$	64,164		$	60,394		$	62,136
Less accumulated amortization		(16,438	)		(14,740	)		(17,989	)		(17,433	)
Acquired above-market leases, net		48,609			49,424			42,405			44,703
Acquired in-place leases		295,786			277,659			346,165			349,645
Less accumulated amortization		(51,167	)		(40,825	)		(68,152	)		(62,454	)
Acquired in-place leases, net		244,619			236,834			278,013			287,191
Total intangible lease assets, net	$	293,228		$	286,258		$	320,418		$	331,894
Acquired below-market leases	$	100,247		$	101,602		$	113,091		$	113,862
Less accumulated amortization		(18,352	)		(15,655	)		(23,418	)		(21,640	)
Intangible lease liabilities, net	$	81,895		$	85,947		$	89,673		$	92,222
Leasing fees	$	17,449		$	17,274		$	16,841		$	17,013
Less accumulated amortization		(3,981	)		(3,576	)		(4,349	)		(4,166	)
Leasing fees, net	$	13,468		$	13,698		$	12,492		$	12,847

(in thousands)		For the three months ended June 30,					For the six months ended June 30,						For the three months ended March 31,
Intangible	Financial Statement Presentation	2019		2018			2019		2018			Financial Statement Presentation	2020		2019
Acquired in-place leases and leasing fees	Depreciation and amortization	$	5,755	$	4,247		$	11,312	$	8,285		Depreciation and amortization	$	7,695	$	5,557
Above-market and below-market leases	Increase (decrease) to lease revenues		720		(289	)		1,460		(467	)	Lease revenues, net		1,140		740

Estimated future amortization of intangible assets and liabilities at ~~June 30, 2019~~March 31, 2020 is as follows:

(in thousands)
Remainder of 2019	$	10,268
2020		20,307
Remainder of 2020			$	17,706
2021		19,896		23,286
2022		19,281		22,738
2023		18,901		22,411
2024				21,644
Thereafter		136,148		135,452
	$	224,801	$	243,237

	Outstanding Balance								Outstanding Balance
(in thousands, except interest rates)	June 30, 2019			December 31, 2018			Interest Rate^(d)	Maturity Date	March 31, 2020			December 31, 2019			Interest Rate^(c)	Maturity Date
2019 Unsecured Term Loan ^(a)	$	—		$	300,000		one-month LIBOR + 1.40%	Feb. 2020 ^(f)
2020 Unsecured Term Loan^(a)									$	240,000		$	300,000		one-month LIBOR + 1.25%	Aug. 2020^(d)
Unsecured Revolving Credit and Term Loan Agreement^(a)
Revolver ^(b)		123,600			141,100		one-month LIBOR + 1.20%^(e)	Jan. 2022
Revolving Credit Facility										353,300			197,300		one-month LIBOR + 1.20%	Jan. 2022
2023 Unsecured Term Loan		265,000			265,000		one-month LIBOR + 1.35%	Jan. 2023		265,000			265,000		one-month LIBOR + 1.35%	Jan. 2023
2024 Unsecured Term Loan		190,000			190,000		one-month LIBOR + 1.90%	Jun. 2024		190,000			190,000		one-month LIBOR + 1.25%	Jun. 2024
		578,600			596,100					808,300			652,300
2022 Unsecured Term Loan^(a)										60,000			—		one-month LIBOR + 1.25%	Feb. 2022
2026 Unsecured Term Loan ^(a)		300,000			—		one-month LIBOR + 1.85%	Feb. 2026		450,000			450,000		one-month LIBOR + 1.85%	Feb. 2026
Senior Notes^(a)
Series A		150,000			150,000		4.84%	Apr. 2027		150,000			150,000		4.84%	Apr. 2027
Series B		225,000			225,000		5.09%	Jul. 2028		225,000			225,000		5.09%	Jul. 2028
Series C		100,000			100,000		5.19%	Jul. 2030		100,000			100,000		5.19%	Jul. 2030
		475,000			475,000					475,000			475,000
Total		1,353,600			1,371,100					2,033,300			1,877,300
Debt issuance costs, net^(c)		(7,624	)		(4,227	)
Debt issuance costs, net^(b)										(7,413	)		(7,919	)
	$	1,345,976		$	1,366,873				$	2,025,887		$	1,869,381

On February ~~27, 2019,~~7, 2020, the Company entered into a ~~$450,000 seven-year unsecured~~$60,000 term loan agreement maturing on February 28, 2022 (the ~~“2026~~“2022 Unsecured Term Loan”) with ~~Capital One, National Association~~JP Morgan Chase, N.A. as administrative agent. The ~~2026~~2022 Unsecured Term Loan ~~provides an accordion feature for up~~was fully funded at closing and used to repay a ~~total~~portion of ~~$550,000 borrowing capacity. The 2026 Unsecured Term Loan has an initial maturity date~~the debt assumed by the Company as part of ~~February 27, 2026.~~the Internalization. Borrowings under the ~~2026~~2022 Unsecured Term Loan are subject to interest only payments at variable rates equal to LIBOR plus a margin based upon the Company’s credit rating, ranging between ~~1.45%~~0.85% and ~~2.40%~~1.65% per ~~annum based on the Operating Company’s investment grade credit rating.~~annum. Based on the ~~Operating~~ Company’s current credit rating ~~of Baa3,~~ the applicable margin ~~under the 2026 Unsecured Term Loan is 1.85%. The 2026 Unsecured Term Loan is subject to a fee~~was 1.25% as of 0.25% per annum on the amount of the commitment, reduced by the amount of term loans outstanding. At closing, $300,000 of the commitment was funded and used to repay the 2019 Unsecured Term Loan in full. The remaining $150,000 commitment can be drawn in up to three requests through August 27, 2019.

On February 28, 2019, the Company amended the Unsecured Revolving Credit and Term Loan Agreement to increase the amount available under the Revolver from $425,000 to $600,000. This increased the total available borrowings under the Unsecured Revolving Credit and Term Loan Agreement to $1,055,000. All other terms and conditions of the Unsecured Revolving Credit and Term Loan Agreement remain the same as those in effect prior to this amendment.March 31, 2020.

At ~~June 30, 2019,~~March 31, 2020, the weighted average interest rate on all outstanding borrowings was ~~4.39%~~3.03%. In addition, the ~~Revolver~~Revolving Credit Facility is subject to a facility fee of 0.25% per annum.

For the ~~six~~three months ended ~~June 30,~~March 31, 2019, the Company paid $5,229 in debt issuance costs associated with the 2026 Unsecured Term Loan and the ~~amended~~ 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 the associated debt or expensed as incurred. Based on this assessment, $5,229 of the debt issuance costs incurred in the three months ended March 31, 2019, were deemed to be related to the issuance of new debt, or the modification of existing debt, and therefore have been deferred and are being amortized over the term of the associated debt.

Additionally, $215 of unamortized debt issuance costs were expensed in the three months ended March 31, 2019, and included in Cost of debt extinguishment in the accompanying Condensed Consolidated Statements of Income and Comprehensive (Loss) ~~Income for the six months ended June 30, 2019.~~Income.

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

For the three months ended

June 30,

For the six months ended

June 30,

For the three months ended

March 31,

(in thousands)

2019

2018

2019

2018

2020

2019

Debt issuance costs amortization

597

472

1,150

934

888

553

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

		Origination	Maturity										Origination	Maturity
(in thousands, except interest rates)	(in thousands, except interest rates)	Date	Date	Interest	June 30,			December 31,				(in thousands, except interest rates)	Date	Date	Interest	March 31,			December 31,
Lender	Lender	(Month/Year)	(Month/Year)	Rate	2019			2018				Lender	(Month/Year)	(Month/Year)	Rate	2020			2019
(1)	Wilmington Trust National Association	Apr-19	Feb-28	4.92%	$	49,605		$	—		(a) (b) (c) (n)	Wilmington Trust National Association	Apr-19	Feb-28	4.92%	$	48,787		$	49,065		^{(a) (b) (c) (k)}
(2)	Wilmington Trust National Association	Jun-18	Aug-25	4.36%		20,496			20,674		(a) (b) (c) (m)	Wilmington Trust National Association	Jun-18	Aug-25	4.36%		20,225			20,318		^{(a) (b) (c) (j)}
(3)	PNC Bank	Oct-16	Nov-26	3.62%		18,073			18,260		(b) (c)	PNC Bank	Oct-16	Nov-26	3.62%		17,789			17,885		^{(b) (c)}
(4)	Sun Life	Mar-12	Oct-21	5.13%		11,090			11,288		(b) (g)	Sun Life	Mar-12	Oct-21	5.13%		10,785			10,888		^{(b) (f)}
(5)	Aegon	Apr-12	Oct-23	6.38%		8,147			8,496		(b) (h)	Aegon	Apr-12	Oct-23	6.38%		7,604			7,788		^{(b) (g)}
(6)	Symetra Financial	Nov-17	Oct-26	3.65%		6,355			6,467		(a) (b) (k) (l)	M&T Bank	Oct-17	Aug-21	one - month LIBOR+3%		4,878			4,913		^{(b) (d) (h) (i)}
(7)	M&T Bank	Oct-17	Aug-21	one - month LIBOR+3%		4,983			5,051		(b) (d) (i) (j)	Note holders	Dec-08	Dec-23	6.25%		750			750		^(d)
(8)	Columbian Mutual Life Insurance Company	Aug-10	Sep-25	7.00%		1,437			1,459		(b) (c) (d) (o)	Standard Insurance Co.	Jul-10	Aug-30	6.75%		—			544		^{(b) (c) (d) (e)}
~~(9)~~	Note holders	Dec-08	Dec-23	6.25%		750			750		(d)						110,818			112,151
(10)	Standard Insurance Co.	Jul-10	Aug-30	6.75%		554			563		(b) (c) (d) (f)
(11)	Legg Mason Mortgage Capital Corporation	Aug-10	Aug-22	7.06%		—			4,692		(b) (e)
(12)	Standard Insurance Co.	Apr-09	May-34	6.88%		—			1,751		(b) (c)
						121,490			79,451			Debt issuance costs, net					(354	)		(358	)
	Debt issuance costs, net					(416	)		(499	)						$	110,464		$	111,793
					$	121,074		$	78,952

At ~~June 30, 2019,~~March 31, 2020, investment in rental property of ~~$195,523 is~~$176,805 was pledged as collateral against the Company’s mortgages and notes payable.

(in thousands, except number of mortgages)

For the six months ended

June 30, 2019

For the year ended

December 31, 2018

For the three months ended

March 31, 2020

For the year ended

December 31, 2019

Number of mortgages

Outstanding balance of mortgages

6,173

6,666

541

13,905

For the three months ended

June 30,

For the six months ended

June 30,

For the three months ended

March 31,

(in thousands)

2019

2018

2019

2018

2020

2019

Cost of mortgage extinguishment

506

498

Estimated future principal payments to be made under the above mortgage and note payable agreements, and the Company’s unsecured credit agreements (see Note 8)9) at ~~June 30, 2019~~March 31, 2020 are as follows:

(in thousands)
Remainder of 2019	$	1,685
2020		3,492
Remainder of 2020			$	2,401
2021		18,322		258,006
2022		126,837		416,207
2023		273,677		273,332
2024				192,260
Thereafter		1,051,077		1,001,912
	$	1,475,090	$	2,144,118

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. 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:

(in thousands, except interest rates)	(in thousands, except interest rates)								Fair Value							(in thousands, except interest rates)								Fair Value
Counterparty		Maturity Date	Fixed Rate			Variable Rate Index	Notional Amount		June 30, 2019			December 31, 2018					Maturity Date	Fixed Rate			Variable Rate Index	Notional Amount		March 31, 2020			December 31, 2019
Bank of America, N.A.		November 2023		2.80	%	one-month LIBOR	$	25,000	$	(1,214	)	$	(411	)			November 2023		2.80	%	one-month LIBOR	$	25,000	$	(2,178	)	$	(1,136	)
Bank of Montreal		July 2024		1.16	%	one-month LIBOR		40,000		948			2,702				July 2024		1.16	%	one-month LIBOR		40,000		(1,324	)		740
Bank of Montreal		January 2025		1.91	%	one-month LIBOR		25,000		(345	)		769				January 2025		1.91	%	one-month LIBOR		25,000		(1,806	)		(402	)
Bank of Montreal		July 2025		2.32	%	one-month LIBOR		25,000		(946	)		222				July 2025		2.32	%	one-month LIBOR		25,000		(2,500	)		(970	)
Bank of Montreal		January 2026		1.92	%	one-month LIBOR		25,000		(364	)		915				January 2026		1.92	%	one-month LIBOR		25,000		(2,118	)		(448	)
Bank of Montreal		January 2026		2.05	%	one-month LIBOR		40,000		(903	)		1,130				January 2026		2.05	%	one-month LIBOR		40,000		(3,685	)		(1,014	)
Bank of Montreal		May 2026		1.99	%	one-month LIBOR		25,000		(467	)		—				December 2026		2.33	%	one-month LIBOR		10,000		(1,231	)		(460	)
Bank of Montreal		December 2026		2.33	%	one-month LIBOR		10,000		(431	)	132					December 2026		1.99	%	one-month LIBOR		25,000		(2,500	)		(577	)
Bank of Montreal		December 2027		2.37	%	one-month LIBOR		25,000		(1,200	)		355				December 2027		2.37	%	one-month LIBOR		25,000		(3,497	)		(1,306	)
Bank of Montreal		May 2029		2.09	%	one-month LIBOR		25,000		(601	)		—				May 2029		2.09	%	one-month LIBOR		25,000		(3,342	)		(799	)
Capital One, National Association		December 2021		1.05	%	one-month LIBOR		15,000		212			605				December 2021		1.05	%	one-month LIBOR		15,000		(213	)		143
Capital One, National Association		December 2024		1.58	%	one-month LIBOR		15,000		58			727				December 2024		1.58	%	one-month LIBOR		15,000		(836	)		10
Capital One, National Association		January 2026		2.08	%	one-month LIBOR		35,000		(836	)		930				January 2026		2.08	%	one-month LIBOR		35,000		(3,291	)		(911	)
Capital One, National Association		April 2026		2.68	%	one-month LIBOR		15,000		(947	)		(189	)			April 2026		2.68	%	one-month LIBOR		15,000		(2,007	)		(944	)
Capital One, National Association		July 2026		1.32	%	one-month LIBOR		35,000		933			2,877				July 2026		1.32	%	one-month LIBOR		35,000		(1,844	)		720
Capital One, National Association		December 2027		2.37	%	one-month LIBOR		25,000		(1,191	)		345				December 2027		2.37	%	one-month LIBOR		25,000		(3,533	)		(1,278	)
M&T Bank		August 2021		1.02	%	one-month LIBOR		4,982		64			177		^{(a), (b)}		August 2021		1.02	%	one-month LIBOR		4,877		(45	)		41		^{(a), (b)}
M&T Bank		September 2022		2.83	%	one-month LIBOR		25,000		(964	)		(362	)			September 2022		2.83	%	one-month LIBOR		25,000		(1,553	)		(862	)
M&T Bank		November 2023		2.65	%	one-month LIBOR		25,000		(1,108	)		(254	)			November 2023		2.65	%	one-month LIBOR		25,000		(2,097	)		(1,038	)
Regions Bank		May 2020		2.12	%	one-month LIBOR		50,000		(92	)		271				May 2020		2.12	%	one-month LIBOR		50,000		(92	)		(104	)
Regions Bank		December 2023		1.18	%	one-month LIBOR		25,000		472			1,484				December 2023		1.18	%	one-month LIBOR		25,000		(793	)		376
Regions Bank		May 2029		2.11	%	one-month LIBOR		25,000		(659	)		—				May 2029		2.11	%	one-month LIBOR		25,000		(3,438	)		(827	)
Regions Bank		June 2029		2.03	%	one-month LIBOR		25,000		(485	)		—		^(c)		June 2029		2.03	%	one-month LIBOR		25,000		(3,260	)		(651	)
SunTrust Bank		April 2024		1.99	%	one-month LIBOR		25,000		(387	)		554
SunTrust Bank		April 2025		2.20	%	one-month LIBOR		25,000		(708	)		382
SunTrust Bank		July 2025		1.99	%	one-month LIBOR		25,000		(419	)		728
SunTrust Bank		December 2025		2.30	%	one-month LIBOR		25,000		(902	)		299
SunTrust Bank		January 2026		1.93	%	one-month LIBOR		25,000		(326	)		903
Truist Financial Corporation																	April 2024		1.99	%	one-month LIBOR		25,000		(1,655	)		(451	)
Truist Financial Corporation																	April 2025		2.20	%	one-month LIBOR		25,000		(2,260	)		(781	)
Truist Financial Corporation																	July 2025		1.99	%	one-month LIBOR		25,000		(2,075	)		(524	)
Truist Financial Corporation																	December 2025		2.30	%	one-month LIBOR		25,000		(2,676	)		(993	)
Truist Financial Corporation																	January 2026		1.93	%	one-month LIBOR		25,000		(2,146	)		(458	)
U.S. Bank National Association																	June 2029		2.03	%	one-month LIBOR		25,000		(3,263	)		(681	)
U.S. Bank National Association		June 2029		2.03	%	one-month LIBOR		25,000		(489	)		—		^(c)		August 2029		1.35	%	one-month LIBOR		25,000		(1,699	)		881
Wells Fargo Bank, N.A.		February 2021		2.39	%	one-month LIBOR		35,000		(377	)		59				February 2021		2.39	%	one-month LIBOR		35,000		(599	)		(302	)
Wells Fargo Bank, N.A.		October 2024		2.72	%	one-month LIBOR		15,000		(829	)		(222	)			October 2024		2.72	%	one-month LIBOR		15,000		(1,591	)		(795	)
Wells Fargo Bank, N.A.		April 2027		2.72	%	one-month LIBOR		25,000		(1,827	)		(382	)			April 2027		2.72	%	one-month LIBOR		25,000		(3,878	)		(1,845	)
Wells Fargo Bank, N.A.		January 2028		2.37	%	one-month LIBOR		75,000		(3,659	)		1,067				January 2028		2.37	%	one-month LIBOR		75,000		(10,597	)		(3,914	)
									$	(19,989	)	$	15,813											$	(79,622	)	$	(21,560	)

The total amounts recognized, and the location in the accompanying Condensed Consolidated Statements of Income and Comprehensive (Loss) Income, from converting from variable rates to fixed rates under these agreements ~~are~~were as follows:

													Reclassification from				Total Interest Expense
								Total Interest Expense		Amount of Loss			Accumulated Other				Presented in the
	Amount of (Loss) Gain			Reclassification from Accumulated Other				Presented in the		Recognized in			Comprehensive Loss				Consolidated Statements of
(in thousands)	Recognized in			Comprehensive (Loss) Income				Consolidated Statements of		Accumulated Other				Amount of			Income and Comprehensive
	Accumulated Other				Amount of			Income and Comprehensive
For the three months ended June 30,	Comprehensive (Loss) Income			Location	Gain (Loss)			(Loss) Income
For the three months ended March 31,										Comprehensive Loss			Location	(Loss) Gain			(Loss) Income
2020										$	(58,062	)	Interest expense	$	(885	)	$	20,991
2019	$	(23,178	)	Interest expense	$	778		$	16,738		(12,624	)	Interest expense		836			15,828
2018		7,042		Interest expense		(354	)		12,454

Amounts related to the interest rate swaps expected to be reclassified out of Accumulated other comprehensive ~~(loss) income~~loss to Interest expense during the next twelve months are estimated to be a loss of ~~$2,010.~~$14,802. The Company is exposed to credit risk in the event of non-performance by the counterparties of the swaps. The Company minimizes 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. Properties contributed as part of UPREIT transactions were valued at $15,797 during the three and six months ended June 30, 2018, which represents the estimated fair value of the properties contributed, less any assumed debt. There were no UPREIT transactions during the three and six months ended June 30, 2019.

The Company maintained bank balances that, at times, exceeded the federally insured limit during the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. The Company has not experienced losses relating to these deposits and management does not believe that the Company is exposed to any significant credit risk with respect to these amounts.

~~The~~Prior to the Internalization on February 7, 2020, the Company’s rental property iswas managed by ~~the Manager~~BRE and the Asset Manager as described in Note 3. Management fees paid to ~~the Manager~~BRE and Asset Manager ~~represent~~represented 8% and 19% of total operating expenses for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018.~~respectively. These amounts do not include acquisition fees paid to the Asset Manager that were capitalized (see Note 3). The Company has mortgages and notes payable with ~~two~~three institutions that ~~comprise 57.7%~~comprised 62%, 16%, and ~~14.9%~~10% of total mortgages and notes payable at ~~June 30, 2019. The Company has mortgages~~March 31, 2020 and ~~notes payable with four institutions that comprise 26%, 23%, 14%, and 11% of total mortgages and notes payable at~~ December 31, ~~2018.~~2019. For the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ the Company had no individual tenants or common franchises that accounted for more than 10% of total revenues.

The Share Redemption Program was terminated effective February 10, 2020, and as a result there were no redemptions during the three months ended March 31, 2020. The following table summarizes redemptions under the Company’s Share Redemption ~~Program:~~Program during the three months ended March 31, 2019:

	For the three months ended June 30,				For the six months ended June 30,
(in thousands, except number of redemptions)	2019		2018		2019		2018
Number of redemptions requested	16		14		29		22		13
Number of shares	38		28		59		74		21
Aggregate redemption price	$	3,210	$	2,312	$	5,013	$	5,889	$	1,803

The Corporation ~~has~~had adopted a Distribution Reinvestment Plan (“DRIP”), pursuant to which the Corporation’s stockholders and holders of ~~membership units in the Operating Company~~OP Units (other than the Corporation), ~~may~~could elect to have cash distributions reinvested in additional shares of the Corporation’s common stock. ~~Cash distributions will be reinvested in additional shares of common stock pursuant to the~~The DRIP ~~at a per share price equal to 98% of the Determined Share Value as of the applicable distribution date. The Corporation may amend the DRIP at any time upon written notice to each participant at least~~was terminated effective February 10, ~~days prior to the effective date of the amendment. The Corporation may terminate the DRIP upon written notice to each participant at least 30 days prior to the effective date of the termination.~~2020. At ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, a total of ~~2,600~~3,075 and ~~2,233~~3,005 shares of common stock, respectively, have been issued under the DRIP.

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

	For the three months ended June 30,				For the six months ended June 30,				For the three months ended March 31,
(in thousands, except per share)	2019		2018		2019		2018		2020		2019
Basic earnings:
Net earnings attributable to Broadstone Net Lease, Inc.	$	16,134	$	16,974	$	30,072	$	34,546	$	10,816	$	13,938
Diluted earnings:
Net earnings attributable to Broadstone Net Lease, Inc.	$	16,134	$	16,974	$	30,072	$	34,546	$	10,816	$	13,938
Net earnings attributable to non-controlling interests		1,208		1,412		2,292		2,834		1,032		1,084
	$	17,342	$	18,386	$	32,364	$	37,380	$	11,848	$	15,022

Basic and diluted weighted average shares outstanding:
Weighted average number of common shares outstanding used in basic earnings per share		23,204		19,829		22,770		19,498		26,527		22,335
Effects of convertible membership units		1,737		1,649		1,737		1,600		2,526		1,737
Weighted average number of common shares outstanding used in diluted earnings per share		24,941		21,478		24,507		21,098		29,053		24,072
Basic and diluted net earnings per common share	$	0.70	$	0.86	$	1.32	$	1.77	$	0.41	$	0.62

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

Cash paid for interest was ~~$38,808~~$14,010 and ~~$23,071~~$16,777 for the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. Cash paid for ~~state~~ income ~~and franchise~~ taxes was ~~$422~~$195 and ~~$745~~$395 for the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively.

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

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

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

~~As part of an acquisition closed during the six months ended June 30, 2019, the company assumed a lease agreement that provided for a total of $1,727 in tenant improvement allowances.~~

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

(in thousands)

June 30,

2019

December 31,

2018

March 31,

2020

December 31,

2019

Tenant improvement allowances

3,635

2,125

2,219

2,706

The Company is a party to three separate tax protection agreements with the contributing members of three distinct UPREIT transactions and to the Founding Owners’ Tax Protection Agreement in connection with the Internalization (see Note 3). The tax protection agreements require the Company to indemnify the beneficiaries in the event of a sale, exchange, transfer, or other disposal of the contributed property, or in the case of the Founding Owners’ Tax Protection Agreement, the entire Company, in a taxable transaction that would cause such beneficiaries to recognize a gain that is protected under the agreements, subject to certain exceptions. Based on values as of March 31, 2020, taxable sales of the applicable properties would trigger liability under the Agreements of approximately $22,300. Based on information available, the Company does not believe that the events resulting in damages as detailed above have occurred or are likely to occur in the foreseeable future.

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

The Company also leases land at certain properties under non-cancellable operating leases (“ground leases”) with initial lease terms ranging from ~~2025~~2034 to 2066. These leases contain provisions for fixed monthly payments, subject to rent escalations. One lease requires the Company to make annual rent payments calculated based upon sales generated at the property (“percentage rent”). None of the leases are subject to any sublease agreement.

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

	For the three months ended June 30,				For the six months ended June 30,					For the three months ended March 31,
(in thousands)	2019		2018		2019		2018		Financial Statement Presentation	2020		2019
Operating lease costs	$	35	$	3	$	70	$	3
Office leases									General and administrative	$	52	$	—
Ground leases									Property and operating expense		33		35
Variable lease costs		11		2		23		2
Ground leases									Property and operating expense		18		12
Total lease costs	$	46	$	5	$	93	$	5		$	103	$	47

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

For the three months ended

June 30,

For the six months ended

June 30,

For the three months ended

March 31,

(in thousands)

2019

2018

2019

2018

2020

2019

Operating lease payments

100

128

Estimated future lease payments required under non-cancelable operating leases at ~~June 30, 2019,~~March 31, 2020, and a reconciliation to the lease liabilities, is as follows:

(in thousands)
Remainder of 2019	$	59
2020		120
Remainder of 2020				$	534
2021		122			711
2022		124			686
2023		125			505
2024					120
Thereafter		2,540			2,411
Total undiscounted cash flows		3,090			4,967
Less imputed interest		(1,839	)		(1,908	)
Lease liabilities	$	1,251		$	3,059

The above rental payments include future minimum lease payments due during the initial lease terms. Such amounts exclude any ~~variable lease payments~~contingent amounts associated with percentage rent ~~or changes in the Consumer Price Index~~ that may become due in future periods.

~~Through August 7, 2019,~~Subsequent to March 31, 2020, the OP drew additional borrowings on the Revolving Credit Facility in the aggregate amount of $25,000.

On May 5, 2020, the Company ~~has raised $90,562 through~~gave notice that it was exercising the ~~sale~~first of ~~1,054 shares~~two six-month extension options available under the terms of the 2020 Unsecured Term Loan Agreement (see Note 9), effective as of August 2, 2020, and extending the maturity date of the loan to February 2, 2021, subject to certain customary conditions and in exchange for the payment of a 0.05% fee payable on August 2, 2020.

Subsequent to March 31, 2020, the Company paid $13,160 in distributions. At its May 7, 2020 meeting, the Board of Directors undertook a full review of the Company’s rent collection results for April, preliminary collection results for May, the outlook for collections in future months, and the Company’s overall liquidity position. Given the economic uncertainty and rapidly evolving circumstances related to the COVID-19 pandemic (discussed below) and current tenant rent relief requests, to preserve cash and strengthen the Company’s liquidity position, the Board of Directors determined that it would temporarily suspend the Company’s monthly distribution. The previously announced distribution of $0.44 per common share and OP Unit for the month of April 2020 will be paid on May 15, 2020. The Board of Directors will re-evaluate whether or not to reinstate a distribution at its August 2020 meeting.

On May 7, 2020, the Board of Directors determined the share value for the Corporation’s common stock ~~from monthly equity closings, including dividend reinvestments. Through August 7, 2019,~~to be $82.00 per share for the period May 1, 2020 through July 31, 2020. However, as previously disclosed, on January 10, 2020, the Company ~~has paid $11,119 in distributions, including dividend reinvestments.~~suspended its private offering of shares of its common stock until further notice.

Subsequent to June 30, 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 $41,821 of rental property and associated intangible assets and liabilities. Through ~~August~~May 7, ~~2019,~~2020, the Company sold ~~seven~~three properties with an aggregate carrying value of ~~$24,474~~approximately $8,994 for total proceeds of ~~$29,483.~~$10,538. The Company incurred additional expenses related to the sales of approximately ~~$1,468,~~$489, resulting in a gain on sale of real estate of approximately ~~$3,541.~~$1,055.

Since its discovery in December 2019, a novel strain of coronavirus, which causes the viral disease known as COVID-19, has spread throughout most countries of the world, including the United States. The outbreak has been declared a pandemic by the World Health Organization, and the United States Secretary of Health and Human Services has declared a public health emergency in the United States. In response to the COVID-19 pandemic, many local, state and federal governments have instituted “stay at home” or “shelter in place” rules and restrictions on the types of businesses that may continue to operate, which resulted in closure of many businesses deemed to be non-essential. Many of the Company’s tenants, in particular those who operate in the retail and restaurant industries, depend on in-person interactions with customers to generate unit-level profitability, and have been negatively impacted by the pandemic, as have businesses who supply products and services to these industries. As a result, in March and subsequent to the end of the quarter, the Company ~~entered into~~received rent relief requests from 68 tenants representing approximately 36.3% of annualized contractual revenues. The Company is in various stages of discussion with these tenants and currently expects to grant relief to some of its tenants to defer rent payments as a result of their estimated lost revenues from the current COVID-19 pandemic; however, there can be no assurance the Company will reach an agreement with any tenant or if an agreement is reached, that any such tenant will be able to ~~acquire a portfolio~~repay any such deferred rent in the future. The full extent of ~~commercial net leased properties for a purchase price~~the impact of ~~$735,740. In connection with this potential future acquisition,~~ the ~~Company made a non-refundable deposit of $20,000.~~

~~On August 5, 2019, the Board of Directors declared a distribution of $0.44 per share~~COVID-19 pandemic on the ~~Corporation’s common stock~~Company’s financial condition, results of operations, income, expenses, and ~~approved a distribution of $0.44 per membership unit~~ability to pay distributions cannot be determined at this time and will depend on certain developments, including the duration and spread of the ~~Operating Company for monthly distributions through October 2019. The distributions~~outbreak and its impact on the Company’s tenants, all of which are ~~payable on or prior to the 15th day~~uncertain and cannot be predicted. For further discussion of the ~~following month~~COVID-19 outbreak, refer to ~~stockholders and unit holders~~Part II, Item 1A. of ~~record~~this Quarterly Report on the 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 to be $85 per share for the period from August 1, 2019 through October 31, 2019.Form 10-Q.

Subsequent to June 30, 2019, the Operating Company paid off borrowings on the Revolver in the aggregate amount of $30,000, borrowed and repaid $5,000 on the swingline loan feature of the Revolver, and prepaid a mortgage in full in the amount of $1,433 (see Note 9).

On July 1, 2019, the Company amended the Unsecured Revolving Credit and Term Loan Agreement (see Note 8). Prior to the amendment, the borrowings under the 2024 Unsecured Term Loan were subject to interest at variable rates based on LIBOR plus a margin based on the Operating Company’s credit rating ranging between 1.50% and 2.45% per annum with the applicable margin being 1.90% at June 30, 2019 and December 31, 2018. The amendment restated the margin to a range between 0.85% and 1.65% per annum and based on the Operating Company’s current credit rating of Baa3, the applicable margin is 1.25% beginning on July 1, 2019. All other terms and conditions of the Unsecured Revolving Credit and Term Loan Agreement remained materially the same as those in effect prior to this amendment.

On August 2, 2019, the Company entered into a $300,000 term loan agreement (the “2020 Unsecured Term Loan”) with JP Morgan Chase Bank, N.A. as administrative agent. Under the agreement, the Company may request funding in up to three separate borrowings between August 2, 2019 and November 2, 2019, at the latest, in $25,000 minimums. The 2020 Unsecured Term Loan has an initial maturity date of August 2, 2020 with two six-month extension options, at the election of the Company, subject to certain conditions set forth in the agreement and payment of a 0.05% fee on the outstanding principal balance. Borrowings under the 2020 Unsecured Term Loan are subject to interest only payments at variable rates equal to LIBOR plus a margin based on the Operating Company’s investment grade credit rating between 0.85% and 1.65% per annum. Based on the Operating Company’s current credit rating of Baa3, the applicable margin is 1.25%. The 2020 Unsecured Term Loan is subject to a fee of 0.25% per annum on the amount of the commitment, reduced by the amount of term loans outstanding. At closing and through August 7, 2019, the Company has not funded any of the available commitment.

Except where the context suggests otherwise, as used in this Quarterly Report on Form 10-Q, the terms “BNL,” “we,” “us,” “our,” and “our company” refer to Broadstone Net Lease, Inc., a Maryland corporation incorporated on October 18, 2007, and, as required by context, Broadstone Net Lease, LLC, a New York limited liability company (the “OP”), which we refer to as the or our ~~“Operating Company,~~“OP,” and to their respective subsidiaries.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our 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~~contains forward-looking statements, ~~within~~which reflect our current views regarding our business, financial performance, growth prospects and strategies, market opportunities, and market trends, that are intended to be made pursuant to the ~~meaning~~safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)~~, regarding, among other things, our plans, strategies, and prospects, both business and financial.~~. Forward-looking statements include ~~but~~all statements that are not ~~limited to,~~historical facts. In some cases, you can identify these forward-looking statements ~~that represent our beliefs concerning future operations, strategies, financial results, or other developments. Forward-looking statements can be identified~~ by the use of ~~forward-looking terminology~~words such as ~~but not limited to,~~“outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” ~~“expect,~~“could,” ~~“intend,~~“seeks,” ~~“anticipate,~~“approximately,” ~~“estimate,~~“projects,” ~~“would be,~~“predicts,” ~~“believe,~~“intends,” ~~or “continue”~~“plans,” “estimates,” “anticipates,” or the negative version of these words or other ~~variations~~comparable words. All of ~~comparable terminology. Because these~~the forward-looking statements ~~are based~~included in this Quarterly Report on ~~estimates and assumptions that~~Form 10-Q are subject to ~~significant~~various risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, and future business ~~economic,~~decisions, all of which are difficult or impossible to predict accurately and ~~competitive uncertainties,~~ many of which are beyond our ~~control or are subject to change, actual results could be materially different.~~control. Although we believe that ~~our plans, intentions, and~~the expectations reflected in ~~or suggested by these~~such forward-looking statements are based on reasonable ~~we cannot assure you that we will achieve~~assumptions, our actual results, performance, and achievements could differ materially from those expressed in or ~~realize these plans, intentions, or expectations. Forward-looking statements are inherently subject to known and unknown risks, uncertainties, and assumptions, including risks related to~~by the pending large portfolio acquisition, financing of the portfolio, and associated post-closing deleveraging activity as well as 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~~and may be affected by a variety of ~~the date this Form 10-Q is filed with the Securities~~risks and ~~Exchange Commission (the “SEC”). Except as required by law, we do not undertake any obligation~~other factors. Accordingly, there are or will be important factors that could cause actual outcomes or results to ~~update or revise any~~differ materially from such forward-looking ~~statements contained in this Form 10-Q. Important factors~~statements.

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

You are cautioned not to place undue reliance on any forward-looking statements included in this Quarterly Report on Form 10-Q. All forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q and the risk that actual results, performance, and achievements will differ materially from the expectations expressed in or referenced by this Quarterly Report on Form 10-Q will increase with the passage of time. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by law. Important factors that could cause results to differ materially from the forward-looking statements are ~~disclosed~~described in Item 1. “Business,” Item 1A. “Risk ~~Factors”~~Factors,” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2019 Annual Report on Form 10-K, ~~for the year ended December 31, 2018,~~as filed with the SEC on ~~March 14, 2019 (the “Form 10-K”).~~February 27, 2020 and in Part II, Item 1A. “Risk Factors” of this Form 10-Q.

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

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

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

As of June 30, 2019, we owned a diversified portfolio of 646 individual net leased commercial properties located in 42 states, and comprising approximately 20.3 million rentable square feet of operational space. As of June 30, 2019, all but three of our properties were subject to leases and were 99.6% occupied by 166 different commercial tenants, with no single tenant accounting for moreoperations rather than ~~3.3% of our contractual rental revenue over the next 12 months (“NTM Rent”).~~

We operate under the direction of our board of directors, which is responsible for the management and control of our affairs. Our board of directors has retained Broadstone Real Estate, LLC (the “Manager”) to provide certain property management services for our properties, and Broadstone Asset Management, LLC, 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 directors’ direction, oversight, and approval.

~~As we conduct substantially all of our operations through the Operating Company, we are structured as what is referred to as an umbrella partnership~~ real estate investment trust (“UPREIT”). The UPREIT structure allows a property owner to contribute 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 condensed consolidated financial statements as “non-controlling interests,” “non-controlling membership units,” or “membership units,” and are convertible into shares of our common stock on a one-for-one basis, subject to certain restrictions. We allocate consolidated earnings to holders of our common stock and non-controlling membership units based on the weighted average number of shares of our common stock and non-controlling membership units outstanding during the year.

We currently close sales of additional shares of our common stock on a monthly basis, subject to an equity cap and queue program for new and additional investments. The cap does not apply to investments made pursuant to our Distribution Reinvestment Plan (“DRIP”) or equity capital received in connection with UPREIT transactions. For the months of February 2019 through June 2019, new and additional investments were capped at $20 million per month. On July 3, 2019, we announced that we were removing the equity cap for the month of July 2019 based on our current leverage profile and pipeline of potential acquisitions. We anticipate reinstating the equity cap once we are comfortably within the leverage range of the Company’s investment grade credit rating.

Shares of our common stock are currently being offered in our ongoing private offering at a price equal to a Determined Share Value (as defined below) of $85 per share. For the six months ended June 30, 2019, ~~we sold 1,771,161~~ shares of our common stock in our private offering, including 367,604 shares of common stock issued pursuant to our DRIP. Cash received for newly issued shares totaled $120.0 million and shares with a value of $30.8 million were issued pursuant to DRIP transactions. We intend to use substantially all of the net proceeds from our ongoing private offering, supplemented with additional borrowings, to continue to invest in additional net leased properties and for general corporate purposes. See Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this Form 10-Q for further information.

~~As of June 30, 2019, there were 23.7 million shares of our common stock issued and outstanding, and 1.7 million non-controlling membership units 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.~~

~~Collected 99.9+%~~ability to timely collect contractual rents due under our long-term net leases. We collected approximately 98% of rents due as of March 31, 2020; however, the COVID-19 pandemic’s impact on us has primarily manifested through tenant requests for rent relief, which we started to receive in late March 2020. Based on industry and property type and ABR as of March 31, 2020, the following represents the scope of rent relief requests we have received through April 30, 2020:

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

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

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

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

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

Property Dispositions

From time to time, we will strategically dispose of properties, primarily where we believe the risk profile has changed and become misaligned with our then current risk-adjusted return objectives. The resulting gains or losses on dispositions may materially impact our operating results, and the recognition of a 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 at the time a property is listed for sale. As a result of the COVID-19 pandemic, we have seen a significant slowdown in real estate transactions. We were able to dispose of certain properties at the end of the first quarter and early in the second quarter that were already under contract and substantially along in the disposition process, and used the proceeds to bolster our liquidity position. In the short term, however, the slowdown in market activity may inhibit our ability to dispose of properties we have identified for disposition, including those that experience significant credit deterioration as a result of the COVID-19 pandemic, and the price at which we are able to sell the properties may be impacted. Management believes the market slowdowns are temporary, and will dispose of properties as opportunities become available.

Lease Renewals and Occupancy

As of March 31, 2020, the ABR weighted average remaining term of our leases was approximately 11.3 years, excluding renewal options. As of March 31, 2020, approximately 8.5% of our leases (based on ABR) will expire prior to January 1, 2025. The stability of the rental revenue generated by our properties depends principally on our tenants’ ability to pay rent and our ability to collect rents, renew expiring leases or re-lease space upon the expiration or other termination of leases, lease currently vacant properties, and maintain or increase rental rates at our leased properties. To the extent our properties become vacant, we would forego rental income while remaining responsible for the payment of property taxes and maintaining the property until it is re-leased, which could negatively impact our operating results. Our occupancy rates have remained strong subsequent to quarter-end, standing at 99.5% based on rentable square footage ~~maintained~~as of April 30, 2020, and we continue to monitor the impact the COVID-19 pandemic has on our tenants.

Acquisition Volume

Our historical growth in revenues and earnings has been achieved through rent escalations associated with existing in-place leases, coupled with rental income generated from accretive property acquisitions. Our ability to grow revenue will depend, to a ~~99.8%~~significant degree, on our ability to identify and complete acquisitions that meet our investment criteria. Changes in capitalization rates, interest rates, or other factors may impact our acquisition opportunities in the future. Market conditions may also impact the total returns we can achieve on our investments. Our acquisition volume also depends on our ability to access third-party debt and equity financing to fund our capital needs. The COVID-19 pandemic has caused a slowdown in acquisition volume, and we have strategically redeployed our acquisitions team to assist with the influx of requests for rent relief, including performing credit analysis and negotiating deferments with tenants. During these uncertain times we are focused on preserving shareholder value. We will continue to monitor the pandemic’s impact to capitalization rates, interest rates, and access and cost of equity and debt capital, and return to our focus on growth through acquisitions and execution on our de-leveraging initiatives when it is prudent to do so.

Net Lease Terms

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

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

Interest Expense

We anticipate that we will continue to incur debt in the future in order to fund future acquisition activity, which will increase the amount of interest expense we incur. In addition, although we attempt to limit our total floating-rate debt exposure, changes in the interest rate environment could either increase or decrease our weighted average interest rate in the future. Any changes to our debt structure or debt financing associated with property acquisitions, could materially influence our operating results depending on the terms of any such debt.

We have seen a decrease in interest rates as the U.S. federal government attempts to combat the economic impacts of the COVID-19 pandemic, which we have been able to take advantage of on approximately $653.3 million of floating rate borrowings as of March 31, 2020. Our floating rate borrowings bear interest at variable rates equal to LIBOR plus a margin based on our credit rating. The one-month LIBOR rate decreased from 1.76% at December 31, 2019, to 0.99% at March 31, 2020. Additionally, as of April 30, 2020, the one-month LIBOR rate was 0.33%. Simultaneously, restrictions in credit markets have resulted in an increase in borrowing spreads across the debt capital markets. Approximately $240 million of our borrowings under our 2020 Unsecured Term Loan have a maturity within one year. On ~~July 1, 2019,~~May 5, 2020, we gave notice that we were exercising the first of two available extension options effective upon the original maturity date of the debt in August 2020, subject to our being in compliance with the debt covenants and customary representations and warranties, and payment of a fee equal to 0.05% of the outstanding principal balance at that time. Accordingly, we do not expect the increase in borrowing spreads to have a material impact to us at this time.

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

General and Administrative Expenses

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

Tenant Bankruptcies

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

Impairments

We review long-lived assets to be held and used for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If, and when, such events or changes in circumstances are present, an impairment exists to the extent the carrying value of the asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use of the asset or asset group and its eventual disposition. Such cash flows include expected future operating income, as adjusted for trends and prospects, as well as the effects of demand, competition, and other factors. Significant judgment is made as to if and when impairment should be taken. If our strategy, or one or more of the assumptions described above were to change in the future, an impairment may need to be recognized. As of March 31, 2020, we have not identified any impairment triggering events as a result of the COVID-19 pandemic, including tenant requests for rent relief, but we have yet to see the long-term effects of the pandemic and the extent to which it may impact our tenants in the future. Indications of a tenant’s inability to continue as a going concern, changes in our view or strategy relative to a tenant’s business or industry as a result of the COVID-19 pandemic, or changes in our long-term hold strategies, could be indicative of an impairment triggering event.

Impact to Liquidity and Capital Resources

We have taken proactive measures to bolster our liquidity profile, including borrowing an additional $75 million on our Revolving Credit Facility at quarter end, $25 million of which was funded subsequent to quarter end, strategically reverting approximately $35 million of 1031 proceeds originally planned to be reinvested in replacement properties, and holding onto cash generated from rentals that otherwise would have been used to pay down our Revolving Credit Facility. As of March 31, 2020, we ~~amended~~had approximately $95.2 million in cash and cash equivalents and restricted 1031 cash not yet reverted to our operating account, excluding the additional $25 million Revolving Credit Facility borrowing funded on April 2, 2020. Given the economic uncertainty and rapidly evolving circumstances related to the COVID-19 pandemic and current tenant requests for rent relief, we intend to evaluate all options for preserving cash and strengthening our liquidity position. As discussed below, at its May 7, 2020 meeting, our board of directors determined that we would temporarily suspend our monthly distribution. The board of directors will re-evaluate whether to reinstate the dividend at its August 2020 meeting. We intend to maintain REIT status, and to make a special distribution in 2020 in order to maintain REIT status if it becomes necessary to do so.

Under the terms of our credit agreements, we must maintain ratios of total indebtedness to total market value, and ~~term loan agreement~~total unsecured indebtedness to ~~reduce~~total unencumbered eligible property value (together, “leverage covenant ratios”), of less than 60%, measured as of each quarter end. At March 31, 2020, we believe we were in compliance with all required covenants. In addition to our cash on hand, we also have $246.7 million of available capacity under our Revolving Credit Facility, and $100 million of available capacity in the ~~margin above LIBOR paid~~form of an accordion feature on ~~the 2024~~our 2026 Unsecured Term ~~Loan (as defined below)~~Loan. Taking into consideration our leverage covenant ratios, however, as of March 31, 2020 we had $50.7 million of available borrowing capacity under our covenants, excluding the $25 million revolver draw subsequent to quarter end. We believe the cash on-hand, available capacity on our credit facilities, including the restrictions imposed by our covenant ratios, and our ability to manage distributions provide us with the ability to meet all current obligations, including maintaining our REIT status, for at least the next four quarters prior to collecting another dollar of rent.

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

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

Other Considerations

Internal Controls over Financial Reporting and Disclosure Controls

We have taken proactive steps to maintain an appropriate internal control environment while migrating our workforce to a work from ~~1.90%~~home dynamic. Our access to ~~1.25%~~technology and online communications has required minimal changes to controls, none of which we deem material. We believe our existing disclosure controls are appropriate to address the reporting complexities presented by the COVID-19 pandemic.

Recent Developments — Internalization

In order to benefit from increasing economies of scale as we continue to grow, our board of directors made the decision to internalize our management structure, which was completed on February 7, 2020. In connection with the Internalization, we terminated our management agreements with BRE, entered into employment agreements with each of our named executive officers, and began directly employing 71 former employees of BRE. Our historical results of operations through February 7, 2020, include the payment of management fees that we will no longer pay following the Internalization and do not include the direct compensation expense associated with our 71 employees, or certain professional fees, consulting, portfolio servicing costs, and other general and administrative expenses not previously incurred based upon our externally managed structure. Additional details of the Internalization include the following:

As consideration in the Internalization, we issued 780,893 shares of our common stock, and the OP issued 1,319,513 OP Units and we and the OP paid $31.0 million in cash, for aggregate consideration of approximately $209.5 million, and the OP assumed approximately $90.5 million of debt. Concurrent with the closing, we refinanced $60 million of the assumed debt with a new loan that is guaranteed by Amy L. Tait, our founder and Chairman, and certain members of her family (“Founding Owners”), and repaid the remaining $30.5 million using borrowings from our Revolving Credit Facility.

~~On August 2, 2019, subsequent~~In addition to ~~quarter end, we~~the consideration paid immediately following the Mergers, the Merger Agreement provides that additional “earnout” consideration of up to an aggregate of up to $75 million (payable in four tranches of $10 million, $15 million, $25 million, and $25 million) will be due and payable to the former owners of BRE if certain milestones related to either (a) the 40-day dollar volume-weighted average price of our common stock on the principal exchange or securities market (or over-the-counter market) on which our common stock are then traded, following the completion of an IPO, or (b) our adjusted funds from operations per share, prior to the completion of an IPO, are achieved during specified periods of time following the completion of the Internalization. Should all earnout milestones be met, an additional 272,250 shares of common stock and 464,820 OP Units would be issued. The earnout liability has an estimated fair value of $40.1 million at the time of the Internalization.

We entered into a ~~one-year $300 million unsecured delayed-draw term loan~~registration rights agreement ~~(the “2020 Unsecured Term Loan”)~~ with ~~a syndicate of banks~~our founding owners and ~~financial institutions. We anticipate drawing on this facility to partially fund~~Trident BRE, LLC and its affiliates, and the Anticipated Transaction (as defined below). Borrowings under the 2020 Unsecured Term Loan bear interest at LIBOR plus a spread ranging between 0.85% and 1.65%. Based on our current investment grade credit rating, the spread for initial borrowings under the 2020 Unsecured Term Loan will be 1.25%.Founding Owners’ Tax Protection Agreement.

~~Year-to-Date 2019 Highlights~~Results of Operations

~~For~~Overview

As of March 31, 2020, our real estate investment portfolio had a gross asset value of approximately $4.0 billion, consisting of investments in 635 commercial real estate properties with locations in 41 states and one real estate property located in British Columbia, Canada, and leased to tenants in various industries. All but five of our properties were subject to a lease as of March 31, 2020.

Our historical results of operations for the ~~six~~three months ended ~~June 30,~~March 31, 2020 and March 31, 2019, ~~we:~~discussed below, include the payment of asset and property management fees that we will no longer pay following the Internalization, and do not include the expected full impact of direct compensation expense associated with 71 employees employed by us following the Internalization or incremental general and administrative expenses.

Lease Revenues, net

	For the three months ended
	March 31,						Increase/(Decrease)
(in thousands)	2020			2019			$			%
Contractual rental amounts billed for operating leases and straight-line rent adjustments	$	74,493		$	63,590		$	10,903			17.1	%
Percentage rent income		3			—			3		>100		%
Adjustment to revenue recognized for uncollectible rental amounts billed		(1,033	)		(440	)		(593	)	(>100		)%
Operating expenses billed to/reimbursed from tenants		3,732			4,275			(543	)		(12.7	)%
Other income from real estate transactions		49			—			49		>100		%
Total lease revenues from operating leases		77,244			67,425			9,819			14.6	%
Earned income from direct financing leases		987			1,005			(18	)		(1.8	)%
Total Lease revenues, net	$	78,231		$	68,430		$	9,801			14.3	%

~~Increased~~The increase in Lease revenues, ~~to $137.5 million, representing growth of 22.1% compared~~net for the three months ended March 31, 2020, was primarily attributable to the ~~six months ended June 30, 2018.~~

Subsequent to quarter end, on July 23, 2019, we entered into an agreement to acquire a portfolio of 23 fully leased industrial (warehouse, distribution, manufacturing and cold storage) and office/flex assets, for $735.7 million, excluding capitalized acquisition costs (the “Anticipated Transaction”). The portfolio comprises 6.9 million rentable square feet of operational space and is well diversified with 19 different tenants, and properties located in 14 states and British Columbia, Canada. The acquisition is expected to be funded through a combination of proceeds from our ongoing private offering of sharesdebt, inclusive of our ~~common stock, drawing~~interest rate swaps. We were able to take advantage of the ~~remaining $150 million commitment available under~~decreasing interest rates since March 31, 2019, as our ~~2026~~percentage of floating-rate debt increased concurrently with our funding of the aforementioned acquisition. We also amended our 2024 Unsecured Term Loan ~~(as described below), $300~~in July 2019 to reduce the applicable margin from 1.90% to 1.25%.

Our recognition of a gain or loss on the sale of real estate varies from transaction to transaction based on fluctuations in asset prices and demand in the real estate market. During the three months ended March 31, 2020, we recognized gains of $7.6 million ~~from~~on the sale of 10 properties, compared to gains of $1.4 million on the sale of four properties during the three months ended March 31, 2019.

During the three months ended March 31, 2020, ~~Unsecured Term Loan,~~we incurred $1.2 million of third-party fees and consulting expenses associated with the ~~balance funded from proceeds from our senior unsecured revolving credit facility. The Anticipated Transaction is expected~~Internalization that closed on February 7, 2020. We expect incremental internalization expenses in the future to ~~close~~be limited to third party legal and accounting fees related to residual work in ~~August 2019, subject~~connection with the transaction.

As part of the Internalization we may be required to pay additional earnout consideration if certain milestones are achieved during the ~~completion~~Earnout Periods. We record the fair value of ~~due diligence~~this contingent consideration as an Earnout liability in the Condensed Consolidated Balance Sheets, and update the fair value at the end of each reporting period. We estimate the fair value of the earnout liability by considering weighted-average probabilities of likely outcomes, and using a Monte Carlo simulation and discounted cash flow analysis to estimate fair value. These estimates require the Company to make various assumptions about future share prices, timing of an IPO, and other ~~customary~~items that are unobservable and ~~transaction-specific~~are considered Level 3 inputs in the fair value hierarchy.

Upon closing ~~conditions. For additional discussion~~ of the ~~Anticipated Transaction, see~~Internalization, we recorded an earnout liability of $40.1 million through our preliminary purchase price allocation, which increased to $44.3 million as of March 31, 2020. The increase in fair value between February 7, 2020 and March 31, 2020 is primarily a result of an increase in the peer stock price volatility assumption used, as detailed in Note ~~17, “Subsequent Events” within the Notes~~2 to the Condensed Consolidated Financial Statements ~~within Item 1. “Financial Statements”~~above, a direct result of ~~this Form 10-Q.~~changes in economic circumstances impacting global equity markets.

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. 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.~~

net earnings per diluted share are presented in accordance with GAAP. We ~~target acquisitions of fee simple interests in individual properties priced between $5 million~~also disclose FFO and $75 million. Portfolios may be significantly larger, depending on balance sheet capacity and whether the portfolio is diversified or concentrated by tenant, geography, or brand. Our investment policy (“Investment Policy”) has three primary objectives:

We primarily acquire freestanding, single-tenant commercial properties located in the United States either directly from our 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.~~, 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 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 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 June 30, 2019. The percentages below are calculated based on our NTM Rent as of June 30, 2019, divided by total NTM Rent. Late payments, non-payments, or other unscheduled payments are not considered in the calculation. NTM Rent includes the impact of contractual rent escalations.

~~At June 30, 2019, 99.8% of our portfolio’s rentable square footage, representing all but three of our properties, is subject to a lease, substantially all~~AFFO, each of which are non-GAAP measures. We believe the 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 ~~leases. We do not currently engage in the development of real estate, which could cause~~income as a ~~delay in timing between the funds used~~performance measure or to ~~invest in properties and the corresponding cash inflows from rental receipts. Our~~ cash flows from operations, ~~are primarily generated through~~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 Board of Governors of Nareit, the worldwide representative voice for REITs and publicly traded real estate ~~investment portfolio~~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 ~~monthly~~Nareit computation of FFO to include other adjustments to GAAP net income related to certain non-cash and non-recurring revenues and expenses, including straight-line rents, cost of debt extinguishments, amortization of lease ~~payments~~ ~~under~~intangibles, amortization of debt issuance costs, amortization of net mortgage premiums, (gain) loss on interest rate swaps and other non-cash interest expense, realized gains or losses on foreign currency transactions, internalization expenses, extraordinary items, and other specified non-cash items. We believe that such items are not a result of normal operations and thus we believe excluding such items assists management and investors in distinguishing whether changes in our ~~long-term~~operations are due to growth or decline of operations at our properties or from other factors.

~~Due~~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 ~~fact that substantially all~~extinguishment of debt, non-cash interest expense and gains, the amortization of debt issuance costs, net mortgage premiums, and lease intangibles, realized gains and losses on foreign currency transactions, and internalization expenses, as these items are not indicative of ongoing operational results. We use AFFO as a measure of our ~~properties~~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 ~~leased under long-term leases, we 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 ~~currently required~~be comparable to ~~perform significant ongoing leasing activities on our properties. The leases for six~~similarly titled measures employed by other REITs, and comparisons of our ~~properties, representing less than 1% of our annual rental streams (calculated based~~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 ~~NTM Rent), will expire before 2021. As of June 30, 2019,~~ the weighted average remaining term of our leases (calculated based on NTM Rent) was approximately 11.9 years, excluding renewal options, which are exercisable at the option of our tenants upon expiration of their base lease term. Approximately 4%acceptability of the ~~properties~~adjustments to FFO that we use to calculate AFFO. In the future, the SEC, 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 portfolio are subject to leases without at least one renewal option. Furthermore, the weighted average remaining lease term on the $200.5 million in properties acquired during the six months ended June 30, 2019, was 15.1 years at the timecalculation and characterization of acquisition. More than 57% of our rental revenue is derived from leases that expire during 2030 and thereafter. As of June 30, 2019, no more than 9.4% of our rental revenue is derived from leases that expire in any single year in the next ten years. The following chart sets forth our lease expirations based upon the terms of our leases in place as of June 30, 2019.

The following table presents our net income and our non-GAAP FFO and AFFO. Our measures of FFO and AFFO are computed on the ~~lease expirations by year, including~~basis of amounts attributable to both us and non-controlling interests. As the ~~number of tenants~~non-controlling interests share in our net income on a one-for-one basis, the basic and ~~properties with leases expiring,~~diluted per share amounts are 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 significant lease renewals during the six months ended June 30, 2019.same.

Year

Number of
Tenants

Number of
Properties

Square
Footage

NTM Rent

Percentage
of
NTM Rent

2019

1

1

11

$
25

<0.1
%
2020

5

5

112

1,273

0.5
%
2021

7

11

99

1,926

0.8
%
2022

5

4

124

3,273

1.3
%
2023

12

13

703

6,938

2.8
%
2024

13

15

1,668

13,692

5.5
%
2025

10

18

271

4,393

1.8
%
2026

18

29

825

12,581

5.0
%
2027

23

34

1,984

20,329

8.2
%
2028

23

36

2,030

23,507

9.4
%
2029

16

62

2,485

18,597

7.5
%
2030 and thereafter

95

415

9,917

142,623

57.2
%
Untenanted properties

—

3

47

—

—

Total

228

646

20,276

$
249,157

100.0
%

~~Our top tenants and brands at June 30, 2019, are listed in the tables below. The percentages are calculated based on the NTM Rent associated with the tenant or brand divided by total NTM Rent.~~

~~Moody’s Investors Service (“Moody’s”) has assigned~~For 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~~three months ended March 31, 2020, compared to the debt markets, including the debt private placement 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. 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 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 our exposure to variable-rate debt, we enter into interest rate swap agreements to fix the rate of interest as a hedge against interest rate 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 no more than 5% of the approximate market value of our assets, measured at quarter end.

~~As of June 30, 2019, our total outstanding indebtedness was $1,475.1 million, and the ratio of our total indebtedness to the approximate market value of our assets was 40.2%.~~

We sell shares of our common stock 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 the Determined Share Value for each period indicated below, together with the corresponding NAV per diluted share 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 November 2019, the Independent Directors Committee will review the NAV per diluted share calculations as of September 30, 2019, and will assess whether adjustments to the Determined Share Value are appropriate.

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

~~The following table details the implied market capitalization rates (shown on a weighted average basis) used to value the investment in rental property, by property type, as of June 30, 2019, and~~three months ended March 31, 2019, ~~supporting the Determined Share Value~~net income decreased primarily due to a $6.9 million increase in ~~effect for the periods of August 1, 2019 through October 31, 2019,~~depreciation and ~~May 1, 2019 through July 31, 2019, respectively:~~

~~While we believe our assumptions are reasonable,~~amortization expense associated with a ~~change~~larger real estate portfolio, a $5.2 million increase in ~~these assumptions would impact the calculation of the value of~~interest expense associated with incremental borrowings used to partially fund our real estate ~~investments. For example, assuming all other factors remain unchanged, an increase in~~acquisitions and the ~~weighted average implied market capitalization rate used as of June 30, 2019, of 0.25% would result in~~Internalization, a decrease in the fair value of our investment in rental property of 3.6%, and our NAV per diluted share would have been $79.47. Conversely, a decrease in the weighted average implied market capitalization rate used as of June 30, 2019, of 0.25% would result in an$4.2 million increase in the fair value of our ~~investment~~earnout liability, $1.2 million in ~~rental property~~internalization expenses incurred in 2020, and a $1.1 million increase in provisions for impairment. These factors were partially offset by revenue growth of ~~3.9%,~~$9.8 million, combined with a $6.2 million increase in gains on sale of real estate.

GAAP net income includes items such as gain or loss on sale of real estate and provisions for impairment, among others, which can vary from quarter to quarter and impact period-over-period comparisons. These fluctuations, combined with increased general and administrative expenses and the increase in our ~~NAV~~weighted average shares outstanding, contributed to the $0.21 decrease in net earnings per diluted share ~~would have been $90.29.~~for the three months ended March 31, 2020.

The increase in AFFO during the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, was primarily driven by revenue growth, which resulted from rent escalations associated with our same property portfolio, accretive acquisitions and ~~Distribution Reinvestment~~strong portfolio operating performance, as well as a $3.3 million decrease in asset and property management fees as a result of terminating the associated agreements in connection with the Internalization. These factors were partially offset by a $4.7 million increase in general and administrative expense related to incremental compensation and related costs associated with an internalized management structure, and a $5.2 million increase in interest expense associated with incremental borrowings.

AtThe $0.01 decrease in AFFO per diluted share was primarily due to the short-term dilution caused by the immediate increase in BNL’s weighted average shares outstanding resulting from the consideration paid in conjunction with the Internalization. Upon consummation of the transaction in February, BNL began recognizing cash flow and AFFO benefits due to the immediate cost savings achieved by operating the REIT with an internalized management structure, as compared to the recurring management fees and transaction-based fees incurred under its ~~August 5, 2019 meeting, our board~~previous externally-managed structure. Although the full dilutive effect of ~~directors declared monthly distributions~~shares outstanding was recognized at the time of ~~$0.44 per share of our common stock and unit of membership interest~~the transaction, we expect the continued cost savings to be ~~paid~~substantial and to ~~our stockholders and members of the Operating Company (other than us) of record as follows:~~

~~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 at~~translate into accretive results on a per share ~~price equal~~basis over time as the cash flow and AFFO benefits are recognized. Further, we expect this accretion will continue to ~~98%~~increase as we grow our portfolio and recognize economies of ~~the Determined Share Value as of the applicable distribution date. 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.~~scale.

~~The following table summarizes distributions paid in cash and pursuant to our DRIP for the six months ended June 30, 2019 (in thousands).~~

^(a)~~Distributions are paid in shares~~Reconciliation of ~~common stock.~~Non-GAAP Measures

The following ~~table summarizes our distributions paid, including~~is a reconciliation of net income to FFO and AFFO, which are non-GAAP financial measures. Also presented are the ~~source of distributions~~diluted WASO and ~~a comparison against FFO (in thousands).~~

~~For the six months ended June 30, 2019 and 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 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~~We are committed to ~~maintain a conservative~~maintaining an investment grade balance sheet through active management of our leverage profile ~~with total debt equal to 35% to 45% of the approximate market value of our assets.~~and overall liquidity position. We believe our leverage model has allowed us to take advantage of the lower cost of debt while simultaneously strengthening our balance sheet, as evidenced by our investment grade credit ~~rating.~~rating of Baa3 from Moody’s Investors Service (“Moody’s”). As of ~~June 30, 2019, the~~March 31, 2020, our leverage ratio was ~~40.2%~~45.7% of the approximate market value of our ~~assets. Management and our credit rating agencies also consider our leverage position~~assets, compared to 45.8% as ~~a multiple~~ of ~~Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”), a non-GAAP financial measure. EBITDA~~December 31, 2019.

Liquidity is a ~~metric we use to~~ measure ~~leverage in the context~~ of our ability to meet potential cash ~~flow expectations~~requirements, including our ongoing commitments to repay debt, fund our operations, acquire properties, make distributions to our stockholders, and ~~projections. Given the significance~~other general business needs. As a REIT, we are required to distribute to our stockholders at least 90% of our ~~recent growth, however, adding $200.5 million in investments during~~REIT taxable income determined without regard to the ~~six months ended June 30, 2019, $606.8 million in investments during 2018,~~dividends paid deduction and ~~$683.6 million in investments during 2017, coupled with our continued strategic growth initiatives, historical EBITDA may not provide investors with~~excluding net capital gain, on an adequate picture of the contractual cash inflows associated with these investments. Our investments are typically made throughout the year (with a significant portion typically occurring in the fourth quarter of the year), and therefore the full-year, or “normalized,” cash flows will not be realized until subsequent years. Accordingly, we look at contractual, “normalized,” cash flows and EBITDA as an appropriate metric to manage our leverage profile. We utilize this analysis inclusive of our focus on debt-to-market value metrics. We anticipate that our leverage ratio will increase as a result of the incremental borrowings associated with funding the Anticipated Transaction discussed above. We intend to begin working to reduce our leverage profile in the near term, to a range within the leverage profile consistent with our investment grade credit rating, using a combination of proceeds from our ongoing private offering of shares of our common stock and increasing disposition activity.annual basis. As a result, it is unlikely that we will be able to retain substantial cash balances to meet our long-term liquidity needs, including repayment of debt and the acquisition of additional properties, from our ~~announcement~~annual taxable income. Instead, we expect to meet our long-term liquidity needs primarily by relying upon external sources of ~~the Anticipated Transaction, Moody’s affirmed our investment grade credit rating and stable outlook.~~capital.

Our ~~primary cash expenditures include the monthly interest payments we make on the debt we use~~short-term liquidity requirements consist primarily of funds necessary to ~~finance~~pay for our ~~real estate investment portfolio, asset management and property management fees of servicing the portfolio, acquisition costs related to the growth of~~operating expenses, including our ~~portfolio, and the~~ general and administrative expenses ~~of operating~~as well as interest payments on our ~~business.~~outstanding debt and to pay distributions. Since our portfolio has a strong occupancy level and substantially all of our leases are net leases, our tenants are generally responsible for the maintenance, insurance, and property taxes associated with the properties they lease from us. In certain circumstances, the terms of the lease require us to pay these expenses, although, in most cases we are reimbursed by the tenants. Accordingly, we do not currently anticipate making significant capital expenditures or incurring other significant property ~~costs on an aggregate basis during the term of the property leases in~~costs. We expect to meet our ~~current portfolio. To the extent that we have vacant properties, we will incur certain costs to operate~~short-term liquidity requirements primarily from cash and ~~maintain the properties, however, we do not currently expect these costs to be material.~~

~~As shown in the table below,~~cash equivalents balances, net cash provided by operating activities, ~~increased by $6.0~~and borrowing under our Revolving Credit Facility. Additionally, our $240 million 2020 Unsecured Term Loan matures in August 2020, at which time we have the option to ~~$64.7 million~~extend the loan twice, each for ~~the~~a period of six months, ended June 30, 2019, from $58.7 million for the six months ended June 30, 2018. We funded real estate investment activity with a combination of cash from operations, proceeds from our unsecured revolving credit agreements, and proceeds from the issuance of common stock. We paid cash dividendssubject to our ~~stockholders~~being in compliance with the debt covenants and ~~holders~~customary representations and warranties, and payment of ~~non-controlling membership units~~a fee equal to 0.05% of ~~$34.2 million and $30.0 million for~~ the ~~six months ended June 30, 2019 and 2018, respectively. The increased dividends between periods~~outstanding principal balance at the time of extension. On May 5, 2020, we gave notice that we were ~~primarily funded by cash provided by our operations. Cash and cash equivalents and restricted cash totaled $12.7 million and $20.8 million at June 30, 2019 and 2018, respectively.~~

Substantially all of our cash from operations is generated by our real estate portfolio. As of June 30, 2019, the historical cost basis of our real estate investment portfolio totaled $2,804.1 million, consisting of investments in 646 properties. Duringexercising the first ~~six months of 2019, our portfolio generated monthly straight-line rent revenues of approximately $21.4 million, and monthly contractual cash revenues of approximately $19.7 million. During~~six-month option, effective August 2, 2020. Refer to Recent Developments – COVID-19 Pandemic for additional discussion regarding the ~~six months ended June 30, 2019, we closed 10 real estate acquisitions totaling $200.5 million, excluding capitalized acquisition costs, adding 34 new properties~~pandemic’s impact to our portfolio. We currently expect the new properties will generate approximately $1.4 million in monthly straight-line rent revenues and approximately $1.3 million in monthly contractual cash revenues over the next twelve months.

Our long-term liquidity requirements consist primarily of funds necessary to ~~continue to grow through additional real estate investments. To accomplish this objective, we must continue to identify acquisitions that are consistent with our investment policy and raise additional~~repay debt and ~~equity capital. We have financed our acquisition of properties using a combination of debt and equity capital. We seek to maintain an appropriate balance of debt and equity capital~~invest in our overall leverage policy, while maintaining a focus on increasing core value for existing stockholders, which we seek to achieve through earnings growth and share price appreciation. The mix of our financing sources may change over time based on market conditions and our liquidity needs.

Equity capital for our real estate acquisition activity is provided by the proceeds of our ongoing private offering, including distributions reinvested through our DRIP. During the six months ended June 30, 2019, we raised $150.8 million in equity capital to be used in our acquisition activities, of which $120.0 million was received through new cash investments and $30.8 million was raised through our DRIP.

additional revenue generating properties. Debt capital is provided through unsecured term notes, revolving debt facilities, and senior unsecured notes.

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

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

~~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~~Equity Capital Resources

Equity capital may be unavailable to us by strengthening our balance sheet by investing in real estate with creditworthy tenants and lease guarantors, and by maintaining an appropriate mix of debt and equity capitalization. Specifically, we recognized a rent collection rate of greater than 99% during the six months ended June 30, 2019 and 2018. As we growfor our real estate ~~portfolio,~~acquisition activity has historically been provided from the proceeds of our private offering, including distributions reinvested through our DRIP. We suspended our private offering on January 10, 2020, in connection with our confidential submission of a draft registration statement on Form S-11 with the SEC relating to a proposed IPO. Accordingly, we ~~intend to manage~~did not raise any equity through our ~~debt maturities to reduce the risk that a significant amount of debt will mature in any single year in the future. For example,~~private offering during the first ~~quarter~~quarter. During the three months ended March 31, 2020, we raised approximately $5.9 million in equity capital through our DRIP. See Part II, Item 2. “Unregistered Sales of 2019, we used proceeds from the longer-term 2026 Unsecured Term Loan (as defined below) to repay a shorter-term unsecured term loan that had been due in 2019 (the “2019 Unsecured Term Loan”). Refer to ~~Contractual Obligations~~ ~~below~~Equity Securities and Use of Proceeds” of this Form 10-Q for further ~~details of the maturities~~information. We announced on ~~our contractual obligations, including long-term debt maturities.~~January 10, 2020 that we were terminating DRIP, effective February 10, 2020.

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

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

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

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

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

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

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

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

On February 27, 2019, we entered into a $450 million seven-year unsecured term loan agreement (the “2026 Unsecured Term Loan”). At closing, we borrowed $300 million and used the proceeds to fully repay our 2019 Unsecured Term Loan. The 2026 Unsecured Term Loan includes an accordion feature that ~~can~~provides for an increase in the facility size up to a total of $550 million of available capacity. Borrowings under the 2026 Unsecured Term Loan are payable interest only on a monthly basis during the term of the loan, with the principal amount due onin February ~~27,~~ 2026. ~~The rate of interest payable on borrowings~~Borrowings under the 2026 Unsecured Term ~~Loan, at our option, is~~loan bear interest equal to LIBOR plus a ~~margin.~~margin based on our credit rating ranging between 1.45% and 2.40% per annum. Based on our ~~investment grade~~current credit rating, the applicable margin is ~~currently~~ 1.85%.

As of June 30, 2019, we have a $1.055 billion unsecured credit facility and term loan agreement (the “Credit Facility”), which is comprised of (i) a $600 million senior unsecured revolving credit facility (the “Revolver”), (ii) a $265 million senior unsecured delayed draw term loan due in 2023 (the “2023 Unsecured Term Loan”), and (iii) a $190 million senior unsecured delayed draw term loan due in 2024 (the “2024 Unsecured Term Loan”). Borrowings under the Credit Facility are payable interest only during the term of the appropriate loan tranche, with the principal amount due in full on the applicable maturity date.

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

~~On July 1, 2019, subsequent to quarter end, we amended the Credit Facility to reduce the margin above LIBOR paid on the 2024 Unsecured Term Loan from 1.90% to 1.25%.~~March 31, 2020.

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

~~On April 18, 2017, we issued $150 million~~The following is a reconciliation of ~~Senior Notes (the “Series A Notes”). The Series A Notes~~net income to FFO and AFFO, which are ~~payable interest only during their term, bear interest at~~non-GAAP financial measures. Also presented are the diluted WASO and per diluted share amounts:

We acquire real estate using a ~~fixed rate~~combination of ~~4.84% per annum,~~debt and ~~mature~~equity capital and with cash from operations that is not otherwise distributed to our stockholders. Our focus is on ~~April 18, 2027.~~

~~Series B~~maximizing the risk-adjusted return to our stockholders through an appropriate balance of debt and ~~Series C Notes~~

~~On July 2, 2018, we issued $325 million~~equity in our capital structure. We are committed to maintaining an investment grade balance sheet through active management of ~~Senior Notes in two series: (i) $225 million of 10-year Senior Notes (“Series B Notes”) maturing on July 2, 2028,~~our leverage profile and (ii) $100 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 fixed rates of 5.09% per annum and 5.19% per annum, respectively.

~~In addition~~overall liquidity position. We believe our leverage model has allowed us to ~~funding acquisitions, a portion~~take advantage of the ~~net proceeds~~lower cost of debt while simultaneously strengthening our balance sheet, as evidenced by our investment grade credit rating of Baa3 from Moody’s Investors Service (“Moody’s”). As of March 31, 2020, our leverage ratio was 45.7% of the ~~Series B Notes and Series C Notes was used~~approximate market value of our assets, compared to 45.8% as of December 31, 2019.

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

Our short-term liquidity requirements consist primarily of funds necessary to pay for our operating expenses, including our general and administrative expenses as well as ~~$25~~interest payments on our outstanding debt and to pay distributions. Since our portfolio has a strong occupancy level and substantially all of our leases are net leases, we do not currently anticipate making significant capital expenditures or incurring other significant property costs. We expect to meet our short-term liquidity requirements primarily from cash and cash equivalents balances, net cash provided by operating activities, and borrowing under our Revolving Credit Facility. Additionally, our $240 million 2020 Unsecured Term Loan matures in August 2020, at which time we have the option to extend the loan twice, each for a period of six months, subject to our being in compliance with the debt covenants and customary representations and warranties, and payment of a fee equal to 0.05% of the outstanding principal balance at the time of extension. On May 5, 2020, we gave notice that we were exercising the first six-month option, effective August 2, 2020. Refer to Recent Developments – COVID-19 Pandemic for additional discussion regarding the pandemic’s impact to our liquidity profile.

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

The source and mix of our ~~2019 Unsecured Term Loan.~~debt capital in the future will be impacted by market conditions as well as our continued focus on lengthening our debt maturity profile to better align with our portfolio’s lease terms, staggering debt maturities to reduce the risk that a significant amount of debt will mature in any single year in the future, and managing our exposure to interest rate risk.

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

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

~~We are subject to various covenants~~The following table sets forth our outstanding Revolving Credit Facility, unsecured term loans and ~~financial reporting requirements pursuant to our loan agreements. The table below summarizes the applicable financial covenants, which are substantially the same across each~~Senior Notes as of the agreements. As of June 30, 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 restricted from paying dividends to our stockholders above the annual 90% REIT taxable income distribution requirement. For each of the previous three years, our cash flows from operations exceeded the required cash dividend distribution amounts.March 31, 2020.

On August 2, 2019 we entered into a one-year $300 million unsecured delayed-draw term loan agreement (the “2020 Unsecured Term Loan”) with a syndicate of banks and financial institutions. Under the 2020 Unsecured Term Loan ~~we may borrow up to $300 million between August 2, 2019 and November 2, 2019. We anticipate drawing on the facility to partially fund the Anticipated Transaction. Borrowings under the~~

The 2020 Unsecured Term ~~Loan are payable interest only over the term of the~~ loan ~~with the principal balance due in full on August 2, 2020, provided that we have two options to extend the~~has an initial maturity date of ~~the loan for a six-month period for each extension (for a total possible extension of up to one year), subject to payment of an extension fee.~~August 2020. Borrowings under the 2020 Unsecured Term Loan bear interest at variable rates based on LIBOR plus a ~~spread~~margin based on our credit rating ranging between 0.85% and 1.65%. per annum. Based on our current ~~investment grade~~ credit rating, the ~~spread for initial borrowings under the~~applicable margin is 1.25% as of March 31, 2020. The 2020 Unsecured Term Loan ~~is 1.25%.~~

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

~~We intend to exercise~~credit rating. Based on our current credit rating of Baa3, the ~~extension provisions~~facility fee is 0.25% per annum as of March 31, 2020.

Borrowings on the Revolving Credit Facility bear interest at variable rates based on LIBOR plus a margin based on our ~~debt instruments, refinance, or replace~~credit rating ranging between 0.825% and 1.55% per annum. Based on our current credit rating, the ~~existing borrowings~~applicable margin is 1.20% as ~~they become due, including through additional private debt placements, all with~~of March 31, 2020.

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

The 2024 Unsecured Term Loan has an initial maturity date of June 2024. Borrowings under the 2024 Unsecured Term Loan are subject to interest ~~payments only. As~~at variable rates based on LIBOR plus a ~~result, we do not intend to make principal payments~~margin based on ~~these debt obligations in~~our credit rating ranging between 0.85% and 1.65% per annum. Based on our current credit rating, the foreseeable future. Additionally, we may be required to increase our borrowing capacity to partially fund future acquisitions, including the Anticipated Transaction. We assess market conditions and the availability and pricingapplicable margin is 1.25% as 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 cashMarch 31, 2020.

On February 7, 2020, we entered into a $60 million term loan agreement maturing in February 2022 with JP Morgan Chase Bank, N.A., as administrative agent. The 2022 Unsecured Term Loan was used to ~~pay~~partially repay BRE debt that had been assumed by the ~~principal amount~~Company as part of ~~debt,~~the Internalization. Borrowings under the 2022 Unsecured Term Loan are subject to interest only payments at variable rates equal to LIBOR plus a margin based on our credit rating, ranging between 0.85% and ~~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 June 30, 2019,~~1.65% per annum. Based on our current ~~borrowing capacity under our Credit Facility and~~credit rating, the applicable margin is 1.25% as of March 31, 2020.

The 2026 Unsecured Term Loan includes an accordion feature that provides for an increase in the facility size up to a total of $550 million of available capacity. Borrowings under the 2026 Unsecured Term Loan and our access to long-term debt capital, including through the debt private placement market, will be sufficient to fund our operations for the foreseeable future and allow us to acquire the real estate to meet our strategic objectives.

~~The leases in our portfolio~~ are ~~long-term in nature, with~~payable interest only on a current weighted average remaining lease term of 11.9 years as of June 30, 2019. To mitigate the impact of inflation on our fixed revenue streams, we have implemented limited rent escalation clauses in our leases. As of June 30, 2019, substantially all of our leases had contractual lease escalations, with an annual weighted average of 2.0%. A majority of our leases have fixed annual rent increases or periodic escalations overmonthly basis during the term of the ~~lease (e.g.~~, a 10% increase every five years), and the remaining portion has annual lease escalations based on increases in the CPI. These lease escalations mitigate the risk of fixed revenue streams in the case of an inflationary economic environment, and provide increased return in otherwise stable market conditions. As a majority of our portfolio has fixed lease escalations, there is a risk that inflation could be greater than the contractual rent increases.

Our focus on single-tenant, net leases also shelters us from inflationary fluctuations in the cost of services and maintenance. For 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~~loan, with the ~~property (e.g., real estate taxes, insurance, and maintenance). Inflation and increased costs may have an adverse impact on our tenants and their creditworthiness if the increase~~principal amount due in costs is greater than their increase in revenue. 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 June 30, 2019, or December 31, 2018.~~

~~The following table provides information with respect to our contractual commitments and obligations as of June 30, 2019 (in thousands).~~

~~At June 30, 2019, investment in rental property of $195.5 million is pledged as collateral against our mortgages and notes payable.~~

Additionally, as of June 30, 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. 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. Based on values as of June 30, 2019, taxable sales of the applicable properties would trigger liabilityFebruary 2026. Borrowings under the Agreements of 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. For a more detailed discussion of the Agreements, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations”, in our Form 10-K.

As of June 30, 2019, our real estate investment portfolio had grown to a net book value of $2,804.1 million, consisting of investments in 646 commercial real estate properties with locations in 42 states and leased to tenants in various industries. All but three of our properties were subject to a lease as of June 30, 2019, and substantially all of our leasing activity related to our real estate acquisitions.

Total lease revenues increased to $69.1 million for the three months ended June 30, 2019, compared to $57.0 million for the three months ended June 30, 2018. The increase in revenue period-over-period is primarily attributable to the growth in our real estate portfolio, which was achieved through rent escalations associated with our same property portfolio, coupled with rental revenue generated during the first six months of 2019 from accreti ve property acquisitions completed since the second quarter of 2018, and continued strong portfolio operating performance. We acquired $606.8 million in real estate in 2018, excluding capitalized acquisition costs. These properties provide annual straight-line rental revenue of approximately $47.4 million, or $11.8 million per quarter. In addition, during the first quarter of 2019, we acquired $73.1 million of real estate, excluding capitalized acquisition costs, which provided $1.5 million of straight-line rental revenue in the second quarter. These incremental revenues were offset mainly by the effect of revenues associated with properties we have disposed of subsequent to the second quarter of 2018. The acquisitions closed during the three months ended June 30, 2019, did not materially impact reported rental income, due to their timing. However, they are expected to provide approximately $2.7 million of straight-line rental revenue in the third quarter. The rental rates we receive 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 cash capitalization rate on acquisitions closed during the three months ended June 30, 2019, was 7.4%.

Depreciation and amortization increased to $25.3 million for the three months ended June 30, 2019, compared to $20.2 million for the three months ended June 30, 2018. The increase is primarily due to the growth in our real estate portfolio, as discussed above.

~~Asset management fees increased to $5.3 million for the three months ended June 30, 2019, compared to $4.3 million for the three months ended June 30, 2018. We pay the Asset Manager a quarterly fee~~2026 Unsecured Term loan bear interest equal to ~~0.25% of the aggregate value of our equity on~~LIBOR plus a fully diluted basis, based on the Determined Share Value. The increase in asset management fees during the three months ended June 30, 2019, compared to the comparable period in 2018, is the result of an increase in our total outstanding equity on a fully diluted basis, combined with an increase in the Determined Share Value.

The $86.00 Determined Share Value in effect as of June 30, 2019, reflected an increase of 3.6% from the $83.00 Determined Share Value in effect as of June 30, 2018. Additionally, the number of shares of our common stock and non-controlling membership units outstanding increased as the result of continued equity capital investments. As of June 30, 2019, there were 25.5 million shares of our common stock and non-controlling membership units outstanding, compared to 22.0 million as of June 30, 2018. The increase in equity capital was used to partially fund the continued growth in our real estate portfolio.

Property and operating expense increased to $3.3 million for the three months ended June 30, 2019, compared to $2.5 million for the three months ended June 30, 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. 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 operating expenses billed to tenants and included within Lease revenues.

Interest expense increased to $16.7 million for the three months ended June 30, 2019, compared to $12.5 million for the three months ended June 30, 2018. The increased interest expense resulted from a $185.8 million increase in overall borrowings used to partially fund new acquisitions, as well as an increase in our weighted average interest rate. We continue to strengthen our balance sheet by more closely aligning debt maturities and lease terms, accomplished through the refinancing of shorter-term borrowings with longer duration fixed-rate debt. Immediately following the second quarter of 2018, we refinanced our outstanding Revolver borrowings with our fixed rate Series B and Series C Notes, providing for an additional six and eight years of duration, respectively, beyond the Revolver maturity. Extending our debt maturity profile increased our weighted average interest rate on outstanding borrowings from 3.84% at June 30, 2018 to 4.26% at June 30, 2019, inclusive of our interest rate swaps.

During the three months ended June 30, 2019, we recognized gains of $2.8 million on the sale of five properties, compared to gains of $4.3 million on the sale of six properties during the three months ended June 30, 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.

Total lease revenues increased to $137.5 million for the six months ended June 30, 2019, compared to $112.6 million for the six months ended June 30, 2018. The increase in revenue period-over-period is primarily attributable to the growth in our real estate portfolio during 2018 as described in the discussion related to the three months ended June 30, 2019 above. The initial cash capitalization rate on acquisitions made during the six months ended June 30, 2019, was 7.4%.

Depreciation and amortization increased to $49.6 million for the six months ended June 30, 2019, compared to $39.4 million for the six months ended June 30, 2018. The increase is primarily due to the growth in our real estate portfolio, as described in the discussion related to the three months ended June 30, 2019, above.

Asset management fees increased to $10.4 million for the six months ended June 30, 2019, compared to $8.5 million for the six months ended June 30, 2018. As described in the discussion above related to the three months ended June 30, 2019, the increase in asset management fees during the six months ended June 30, 2019, compared to the comparable period in 2018, is a result of an increase in our outstanding equity on a fully diluted basis, combined with the increase in the Determined Share Value.

Property and operating expense increased to $7.6 million for the six months ended June 30, 2019, compared to $5.1 million for the six months ended June 30, 2018. The increase is attributable to the number of properties we own for which we are responsible for engaging a third-party property manager to manage ongoing property maintenance, along with insurance and real estate taxes associated with those properties. 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 billed to tenants included within Lease revenues.

During the six months ended June 30, 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 six months ended June 30, 2019, related to a single 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 six months ended June 30, 2018.

Interest expense increased to $32.6 million for the six months ended June 30, 2019, compared to $23.6 million for the six months ended June 30, 2018, due to higher overall borrowings as well as an increase in the weighted average interest rate we pay on those borrowings as compared to a year ago, as described in the discussion above related to the three months ended June 30, 2019.

During the six months ended June 30, 2019, we recognized gains of $4.2 million on the sale of nine properties, compared to gains of $7.6 million on the sale of 11 properties during the six months ended June 30, 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 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 Board of Governors of Nareit, the 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 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, 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, 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 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 June 30, 2019 and 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.

As compared to the same period in 2018, revenue growth during the three months ended June 30, 2019, was partially offset by an increase in depreciation and amortization, asset management and property management expenses, and property and operating expenses, all of which are associated with a larger real estate portfolio, as well as increased interest expense and decreased gains on the sale of real estate.

The increased interest expense resulted from a $185.8 million increase in overall borrowings used to partially fund new acquisitions, as well as an increase in our weighted average interest rate. We continue to strengthen our balance sheet by more closely aligning debt maturities and lease terms, accomplished through the refinancing of shorter-term borrowings with longer duration fixed-rate debt. Immediately following the second quarter of 2018, we refinanced our outstanding Revolver borrowings with our fixed rate Series B and Series C Notes, providing for an additional six and eight years of duration, respectively, beyond the Revolver maturity. Extending our debt maturity profile increased our weighted average interest rate on outstanding borrowings from 3.84% at June 30, 2018, to 4.26% at June 30, 2019, inclusive of our interest rate swaps.

GAAP net income includes items such as gain or loss on sale of real estate and provisions for impairment, among others, which can vary from quarter to quarter and impact period-to-period comparisons. The gain on sale of real estate decreased $1.5 million during the three months ended June 30, 2019, as compared to the same period in 2018.

Our per share results were negatively impacted by funding a larger portion of our acquisitions with equity and recycling proceeds from property dispositions. We actively manage our leverage profile and overall liquidity position, and use a monthly equity cap to balance the mix of equity and debt capital used to fund acquisitions. We maintained a $20 million cap on new equity investments during the six months ended June 30, 2019, and removed the cap for new investments beginning in the month of July 2019,margin based on our ~~pipeline of potential acquisitions, including the Anticipated Transaction for $735.7 million.~~credit rating ranging between 1.45% and 2.40% per annum. Based on our current credit rating, the ~~timing difference between equity inflows managed through the cap and expected deployment into accretive acquisitions, our leverage ratio decreased to 40.2%~~applicable margin is 1.85% as of ~~June 30, 2019, compared to 41.4% as of June 30, 2018. Upon closing the Anticipated Transaction,~~March 31, 2020.

To mitigate interest rate risk, we ~~expect a short-term increase in leverage, and a corresponding positive impact~~have strategically added unsecured, fixed-rate, interest-only senior promissory notes (“Senior Notes”) to our results of operations based on the accretive nature of the investment and the relative cost of debt to equity. Consistent with our growth priorities and commitment to maintaining an investment grade balance sheet, we are committed to continuing to actively manage our leverage profile and overall liquidity position.

capital structure. The ~~15.9% increase~~Senior Notes were issued in ~~FFO and the 14.8% increase in AFFO during the~~ three months ended June 30, 2019, as compared to the same period in 2018, was primarily driven by revenue 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 second quarter of 2018, and strong portfolio operating performance. The increase in revenues was partially offset by increased interest expense, as discussed above, a result of extending our debt maturity profile. Consistent with the decrease in earnings per share, FFO per share remained constant with, and AFFO per share decreased from, the comparable period in 2018 as a result of our change in funding mix.

The following table presents our net income and our non-GAAP FFO and AFFO for the six months ended June 30, 2019 and 2018. Our measures of FFO and AFFO are computed on the basis of amounts attributable to both us and non-controlling interests.

As compared to the same period in 2018, revenue growth during the six months ended June 30, 2019, was partially offset by an increase in depreciation and amortization, asset management and property management expenses, and property and operating expenses, all of which are associated with a larger real estate portfolio, as well as increased interest expense and decreased gains on the sale of real estate.

The increased interest expense resulted from a $185.8 million increase in overall borrowings used to partially fund new acquisitions, as well as an increase in our weighted average interest rate. We continue to strengthen our balance sheet by more closely aligning debt maturities and lease terms, accomplished through the refinancing of shorter-term borrowings with longer duration fixed-rate debt. Immediately following the second quarter of 2018, we refinanced our outstanding Revolver borrowings with our fixed rate Seriesseries (Series A, B, and Series C Notes, providing for an additional six and eight years of duration, respectively, beyond the Revolver maturity. Extending our debt maturity profile increased our weighted average interest rate on outstanding borrowings from 3.84% at June 30, 2018, to 4.26% at June 30, 2019, inclusive of our interest rate swaps.

~~GAAP net income includes items such~~C) as gain or loss on sale of real estate and provisions for impairment, among others, which can vary from quarter to quarter and impact period-to-period comparisons. The gain on sale of real estate decreased $3.4 million during the six months ended June 30, 2019, as compared to the same period in 2018. Additionally, we recognized a $1.0 million provision for impairment on investment in rental properties during the six months ended June 30, 2019, with no comparable charges during the same period in 2018.described below.

Our per share results were negatively impacted by funding a larger portion of our acquisitions with equity and recycling proceeds from property dispositions. We actively manage our leverage profile and overall liquidity position, and use a monthly equity cap to balance the mix of equity and debt capital used to fund acquisitions. We maintained a $20 million cap on new equity investments during the six months ended June 30, 2019, and removed the cap for new investments beginning in the month of July 2019, based on our pipeline of potential acquisitions, including the Anticipated Transaction (as defined below) for $735.7 million. Based on the timing difference between equity inflows managed through the cap and expected deployment into accretive acquisitions, our leverage ratio decreased to 40.2% as of June 30, 2019, compared to 41.4% as of June 30, 2018. Upon closing the Anticipated Transaction, we expect a short-term increase in leverage, and a corresponding positive impact to our results of operations based on the accretive nature of the investment and the relative cost of debt to equity. Consistent with our growth priorities and commitment to maintaining an investment grade balance sheet, we are committed to continuing to actively manage our leverage profile and overall liquidity position.

The 13.8% increase in both FFO and AFFO during the six months ended June 30, 2019, as compared to the same period in 2018, was primarily driven by revenue 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 second quarter of 2018, and strong portfolio operating performance. The increase in revenues was partially offset by increased interest expense, as discussed above, a result of extending our debt maturity profile. Consistent with the decrease in earnings per share, FFO per share and AFFO per share decreased from the comparable period in 2018 as a result of our change in funding mix.

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

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

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

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

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

For the three months ended

For the six months ended

(in thousands, except per share data)

June 30,

June 30,

2019

2018

2019

2018

Net income

$
17,342

$
18,386

$
32,364

$
37,380

Real property depreciation and amortization

25,287

20,232

49,597

39,434

Gain on sale of real estate

(2,787
)

(4,256
)

(4,187
)

(7,595
)
Provision for impairment on investment in rental properties

—

—

1,017

—

FFO

$
39,842

$
34,362

$
78,791

$
69,219

Capital improvements / reserves

(48
)

(49
)

(97
)

(98
)
Straight-line rent adjustment

(5,240
)

(5,162
)

(10,383
)

(10,303
)
Cost of debt extinguishment

8

51

721

51

Amortization of debt issuance costs

597

472

1,150

933

Amortization of net mortgage premiums

(36
)

(35
)

(71
)

(71
)
Gain on interest rate swaps and other non-cash interest expense

(41
)

—

(122
)

—

Amortization of lease intangibles

(717
)

289

(1,455
)

467

AFFO

$
34,365

$
29,928

$
68,534

$
60,198

Diluted WASO

24,941

21,478

24,507

21,098

Net earnings per share, basic and diluted

$
0.70

$
0.86

$
1.32

$
1.77

FFO per diluted share

1.60

1.60

3.22

3.28

AFFO per diluted share

$
1.38

$
1.39

$
2.80

$
2.85

(in thousands, except interest rates)	Outstanding Balance			Interest Rate	Maturity Date
2020 Unsecured Term Loan	$	240,000		one-month LIBOR + 1.25%	Aug. 2020
Unsecured Revolving Credit and Term Loan Agreement
Revolving Credit Facility		353,300		one-month LIBOR + 1.20%	Jan. 2022
2023 Unsecured Term Loan		265,000		one-month LIBOR + 1.35%	Jan. 2023
2024 Unsecured Term Loan		190,000		one-month LIBOR + 1.25%	Jun. 2024
		808,300
2022 Unsecured Term Loan		60,000		one-month LIBOR + 1.25%	Feb. 2022
2026 Unsecured Term Loan		450,000		one-month LIBOR + 1.85%	Feb. 2026
Senior Notes
Series A		150,000		4.84%	Apr. 2027
Series B		225,000		5.09%	Jul. 2028
Series C		100,000		5.19%	Jul. 2030
		475,000
Total		2,033,300
Debt issuance costs, net		(7,413	)
	$	2,025,887

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

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

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

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

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

Cash and cash equivalents and restricted cash totaled $96.7 million and $13.2 million at March 31, 2020 and 2019, respectively. The table below shows information concerning cash flows for the three months ended March 31, 2020 and 2019:

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

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

The increase in net cash provided by financing activities during the three months ended March 31, 2020 as compared to the three months ended March 31, 2019, mainly reflects a net increase in borrowings (as discussed in Liquidity above), partially offset by a decrease in proceeds from the issuance of our common stock and increased distributions resulting from an increase in the number of shares of common stock outstanding.

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

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

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

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

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

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of ~~our~~these Condensed Consolidated Financial Statements requires management to make estimates and ~~judgments~~assumptions that affect the reported amounts of assets, liabilities, revenues, and ~~expenses. Management bases~~expenses as well as other disclosures in the financial statements. On an ongoing basis, management evaluates its estimates ~~on historical experience~~ and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent from other sources. Actualassumptions; however, actual results may differ from these estimates ~~under different~~and assumptions, ~~or conditions.~~

~~As discussed~~which in turn could have a material impact on our financial statements. A summary of our significant accounting policies and procedures are included in Note 2, “Summary of Significant Accounting Policies,” in the Notes to the Condensed Consolidated Financial Statements included ~~elsewhere~~ in this

Quarterly Report on Form 10-Q, during the first quarter of 2019, we adopted the provisions of ASC 842, which resulted in a change to the critical accounting policy with respect to revenue recognition that had been disclosed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2018 Form 10-K.10-Q. We believe there have been no ~~other~~ significant changes during the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, to the items that we disclosed as our critical accounting policies in our ~~2018~~2019 Annual report on Form 10-K.

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

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

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

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

The adjustments made to NAV per diluted share in arriving at the Determined Share Value for the periods presented above account for the inherent imprecision in the valuation estimates.

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

The following table details the implied market capitalization rates (shown on a weighted average basis) used to value the investment in rental property, by property type, as of March 31, 2020, and December 31, 2019, supporting the Determined Share Value in effect for the periods of May 1, 2020 through July 31, 2020, and February 1, 2020, through April 30, 2020, respectively:

While we believe our assumptions are reasonable, a change in these assumptions would impact the calculation of the value of our real estate investments. For example, assuming all other factors remain unchanged, an increase in the weighted average implied market capitalization rate used as of March 31, 2020, of 0.25% would result in a decrease in the fair value of our investment in rental property of 3.6%, and our NAV per diluted share would have been $77.27. Conversely, a decrease in the weighted average implied capitalization rate used as of March 31, 2020, of 0.25% would result in an increase in the fair value of our investment in rental property of 3.8%, and our NAV per diluted share would have been $88.05.

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

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

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

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

The following table summarizes our distributions paid, including the source of distributions and a comparison against FFO (in thousands). Refer to Net Income and Non-GAAP Measures (FFO and AFFO) below for further discussion of our FFO.

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

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

needs to be refinanced. We attempt to manage ~~a portion of our~~ interest rate risk by entering into ~~interest~~long-term fixed rate ~~swaps. Our interest rate risk management strategy is intended to stabilize cash flow requirements~~debt or by ~~maintaining~~entering into interest rate swaps to convert certain variable-rate debt to a fixed rate. As of June 30, 2019, we had 33 interest rate swaps outstanding, in an aggregate notional amount of $885.0 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. Further information concerning our interest rate swaps can be found in Note 11 in our Condensed Consolidated Financial Statements contained elsewhere in this Quarterly Report on Form 10-Q.

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

Borrowings pursuant to our Revolving Credit Facility and other variable-rate debt bear interest at rates based on LIBOR plus an applicable margin, and totaled $1.6 billion as of March 31, 2020, of which $909.9 million was swapped to a fixed rate by our use of interest rate swaps. Taking into account the effect of our interest rate swaps, ~~at June 30, 2019.~~

(in thousands, except interest rates)

Counterparty

Maturity Date

Fixed Rate

Variable Rate Index

Notional
Amount

Fair Value

Bank of America, N.A.

November 2023

2.80
%

one-month LIBOR

$
25,000

$
(1,214
)
Bank of Montreal

July 2024

1.16
%

one-month LIBOR

40,000

948

Bank of Montreal

January 2025

1.91
%

one-month LIBOR

25,000

(345
)
Bank of Montreal

July 2025

2.32
%

one-month LIBOR

25,000

(946
)
Bank of Montreal

January 2026

1.92
%

one-month LIBOR

25,000

(364
)
Bank of Montreal

January 2026

2.05
%

one-month LIBOR

40,000

(903
)
Bank of Montreal

May 2026

1.99
%

one-month LIBOR

25,000

(467
)
Bank of Montreal

December 2026

2.33
%

one-month LIBOR

10,000

(431
)
Bank of Montreal

December 2027

2.37
%

one-month LIBOR

25,000

(1,200
)
Bank of Montreal

May 2029

2.09
%

one-month LIBOR

25,000

(601
)
Capital One, National Association

December 2021

1.05
%

one-month LIBOR

15,000

212

Capital One, National Association

December 2024

1.58
%

one-month LIBOR

15,000

58

Capital One, National Association

January 2026

2.08
%

one-month LIBOR

35,000

(836
)
Capital One, National Association

April 2026

2.68
%

one-month LIBOR

15,000

(947
)
Capital One, National Association

July 2026

1.32
%

one-month LIBOR

35,000

933

Capital One, National Association

December 2027

2.37
%

one-month LIBOR

25,000

(1,191
)
M&T Bank

August 2021

1.02
%

one-month LIBOR

4,982

64

M&T Bank

September 2022

2.83
%

one-month LIBOR

25,000

(964
)
M&T Bank

November 2023

2.65
%

one-month LIBOR

25,000

(1,108
)
Regions Bank

May 2020

2.12
%

one-month LIBOR

50,000

(92
)
Regions Bank

December 2023

1.18
%

one-month LIBOR

25,000

472

Regions Bank

May 2029

2.11
%

one-month LIBOR

25,000

(659
)
Regions Bank

June 2029

2.03
%

one-month LIBOR

25,000

(485
)
SunTrust Bank

April 2024

1.99
%

one-month LIBOR

25,000

(387
)
SunTrust Bank

April 2025

2.20
%

one-month LIBOR

25,000

(708
)
SunTrust Bank

July 2025

1.99
%

one-month LIBOR

25,000

(419
)
SunTrust Bank

December 2025

2.30
%

one-month LIBOR

25,000

(902
)
SunTrust Bank

January 2026

1.93
%

one-month LIBOR

25,000

(326
)
U.S. Bank National Association

June 2029

2.03
%

one-month LIBOR

25,000

(489
)
Wells Fargo Bank, N.A.

February 2021

2.39
%

one-month LIBOR

35,000

(377
)
Wells Fargo Bank, N.A.

October 2024

2.72
%

one-month LIBOR

15,000

(829
)
Wells Fargo Bank, N.A.

April 2027

2.72
%

one-month LIBOR

25,000

(1,827
)
Wells Fargo Bank, N.A.

January 2028

2.37
%

one-month LIBOR

75,000

(3,659
)

$
884,982

$
(19,989
)

interest expense would have increased by approximately $1.4 million in the three months ended March 31, 2020, if the applicable LIBOR rate had been 1% higher.

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 ~~June 30, 2019,~~March 31, 2020, our financial instruments were not exposed to significant market risk due to foreign currency exchange risk.

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the ~~Securities~~ Exchange Act, ~~of 1934, as amended (the “Exchange Act”)),~~ that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the ~~Securities and Exchange Commission’s~~SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of and for the quarter ended ~~June 30, 2019,~~March 31, 2020, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and were operating at a reasonable assurance level.

~~There were no changes~~As a result of our Internalization on February 7, 2020, we implemented internal controls over financial reporting to consider the management functions previously performed by our third-party manager. The Internalization represents a material change in internal control over financial reporting subsequent to management’s last assessment of our internal control over financial reporting, ~~that occurred~~which was completed on December 31, 2019.

There have been no other changes in our internal control over financial reporting during the ~~quarter~~three months ended ~~June 30, 2019,~~March 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Historically, shares of our common stock have been sold by us in a private offering at a price per share equal to what we refer to as the current Determined Share Value, which is established at least quarterly by our Board of Directors based on the net asset value of the portfolio, input from management and third-party consultants, and such other factors ~~set forth~~as the Board of Directors may, in its sole discretion, determine. Our net assets are primarily comprised of our ~~Form 10-K.~~investment in real property and debt, as well as other assets and liabilities such as cash, interest rate swaps, and accounts payable. The values ascribed to our mortgages and unsecured notes are marked to market each quarter.

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,~~through December 31, 2019. On January 10, 2020, we ~~close sales~~announced that we suspended until further notice our private offering of ~~additional~~ shares of our common ~~stock monthly. In November 2017, we instituted an equity cap and queue program for new and additional investments in our common~~ stock. ~~The cap does not apply to investments made pursuant to our DRIP, or to equity capital received in connection with UPREIT transactions. For the months~~

As of ~~February 2019 through June 2019, new and additional investments~~March 31, 2020, there were capped at $20 million per month. On July 3, 2019, we announced that we were removing the equity cap for the month of July 2019 based on our current leverage profile and pipeline of potential acquisitions. We anticipate reinstating the equity cap once we are comfortably within the leverage range of our investment grade credit rating.

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

~~For the six months ended June 30, 2019, we sold 1.8~~26.9 million shares of our common stock ~~in our private offering,~~issued and outstanding, including ~~0.4~~0.8 million mezzanine equity common shares, ~~of common stock~~and 3.1 million OP Units issued pursuant to our DRIP, for gross offering proceeds of approximately $150.8 million. We intend to use substantially all of the net proceeds from our private offering, supplemented with additional borrowings, to continue to invest in additional net leased properties, to reduce ourand outstanding, ~~indebtedness, and for general corporate purposes.~~including 1.3 million mezzanine equity non-controlling interests.

The following table provides information regarding the sale of shares of our common stock pursuant to our ongoing private offering during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 (in thousands, except year and Determined Share Value amounts).

Month

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

2019

233

$
86.00

$
20,000

58

$
84.28

$
4,862

$
24,862

February

2019

235

$
85.00

20,000

58

$
84.28

4,930

24,930

March

2019

235

$
85.00

20,000

62

$
83.30

5,136

25,136

April

2019

235

$
85.00

20,000

63

$
83.30

5,224

25,224

May

2019

233

$
86.00

20,000

64

$
83.30

5,306

25,306

June

2019

233

$
86.00

20,000

63

$
84.28

5,339

25,339

Total

1,404

120,000

368

30,797

150,797

Month

Year

Common

Sold

Weighted

Average

Determined

Value —

Common

Total

Proceeds —

Common

Sold

Common

DRIP

Weighted

Average

Determined

Value —

DRIP^(a)

Total

Proceeds —

Common

DRIP^(b)

Total

Proceeds

January

2020

—

83.30

5,865

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

In connection with property acquisitions that are structured as UPREIT transactions, the owner of a property will transfer its interest in the property to the OP in exchange for OP Units. There were no such OP Unit issuances during the quarter ended March 31, 2020.

None of the OP Units have been registered under the Securities Act in reliance upon the exemptions from registration under the Securities Act provided by Rule 506(c) under Regulation D promulgated under the Securities Act and Section 4(a)(2) of the Securities Act. All of the OP Units were issued to persons who represented to us in writing that they qualified as an Accredited Investor, and provided us with additional documentation to assist us in verifying such person’s status as an Accredited Investor, including third-party verification as permitted under Regulation D.

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

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

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

~~During the three months ended June 30, 2019, we fulfilled repurchase requests and repurchased~~We had adopted a share redemption program to provide an opportunity for our stockholders to have shares of our common stock ~~pursuant~~repurchased, at the end of each quarter, subject to certain restrictions and limitations, at a price equal to or at a discount from the current Determined Share Value in effect as of the date the shares were tendered for redemption. Cash used to fund share redemptions had historically been provided through a combination of cash generated by operations, the sale of assets, and borrowings. On January 10, 2020, we announced that we terminated our share redemption program, effective as ~~follows.~~ of February 10, 2020. Consequently, there were no redemptions of shares of our common stock during the three months ended March 31, 2020.

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 (Loss) Income. The presentation and disclosure of Lease revenues have been adjusted to reflect these changes for the three and six months ended June 30, 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 (Loss) 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.)

		Page
Part I - FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Income and Comprehensive (Loss) Income (Unaudited)	2
	Condensed Consolidated Statements of Stockholders’ Equity and Mezzanine Equity (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	54
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	65
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2928
	Cautionary Note Regarding Forward-Looking Statements	28
	Explanatory Note and Certain Defined Terms	29
	Overview	29
	Recent Developments – COVID-19 Pandemic	30
	Recent Developments – Internalization	35
	Results of Operations	35
	Liquidity and Capital Resources	40
	Cash Flows	44
	Impact of Inflation	4445
	Off-Balance Sheet Arrangements	4445
	Contractual Obligations	44
	~~Results of Operations~~	45
	~~Net Income and Non-GAAP Measures (FFO and AFFO)~~	48
	Critical Accounting Policies	5145
	Impact of Recent Accounting Pronouncements	5146
	Determined Share Value	46
	Distributions and Distribution Reinvestment	47
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5248
Item 4.	Controls and Procedures	5349
Part II - OTHER INFORMATION		5450
Item 1.	Legal Proceedings	5450
Item 1A.	Risk Factors	5450
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5452
Item 3.	Defaults upon Senior Securities	5653
Item 4.	Mine Safety Disclosures	5653
Item 5.	Other Information	5653
Item 6.	Exhibits	5754

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

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

(in thousands, except number of properties)		Number of		Real Estate
Date	Property Type	Properties		Acquisition Price
January 31, 2019	Healthcare		1	$	4,747
March 12, 2019	Industrial		1		10,217
March 15, 2019	Retail		10		13,185
March 19, 2019	Retail		14		19,128
March 26, 2019	Industrial		1		25,801
April 30, 2019	Other		1		76,000	^(a)
May 21, 2019	Retail		2		6,500
May 31, 2019	Retail		1		3,192
June 7, 2019	Other		1		30,589
June 26, 2019	Industrial		2		11,180
			34	$	200,539	^(b)

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

	For the six months ended June 30,
	2019			2018
Operating activities
Net income	$	32,364		$	37,380
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		48,142			39,901
Provision for impairment on investment in rental properties		1,017			—
Amortization of debt issuance costs charged to interest expense		1,079			862
Straight-line rent and financing lease adjustments		(10,383	)		(10,303	)
Cost of debt extinguishment		721			51
Gain on sale of real estate		(4,187	)		(7,595	)
Leasing fees paid		(435	)		(1,177	)
Other non-cash items		185			329
Changes in assets and liabilities:
Tenant and other receivables		897			54
Prepaid expenses and other assets		(16	)		(1,570	)
Accounts payable and other liabilities		2,534			1,046
Accrued interest payable		(7,199	)		(303	)
Net cash provided by operating activities		64,719			58,675

Investing activities
Acquisition of rental property accounted for using the operating method, net of mortgages assumed of $49,782 and $20,845 in 2019 and 2018, respectively		(153,858	)		(216,036	)
Acquisition of rental property accounted for using the direct financing method		—			(430	)
Capital expenditures and improvements		(1,543	)		(1,543	)
Proceeds from disposition of rental property, net		33,632			30,289
Change in deposits on investments in rental property		875			—
Net cash used in investing activities		(120,894	)		(187,720	)

Financing activities
Proceeds from issuance of common stock, net		120,190			88,701
Redemptions of common stock		(5,013	)		(5,889	)
Borrowings on mortgages, notes payable and unsecured term notes, net of mortgages assumed of $49,782 and $20,845 in 2019 and 2018, respectively		300,000			90,000
Principal payments on mortgages, notes payable and unsecured term notes		(307,672	)		(2,442	)
Borrowings on unsecured revolver		55,800			115,000
Repayments on unsecured revolver		(73,300	)		(115,500	)
Cash distributions paid to stockholders		(29,572	)		(25,245	)
Cash distributions paid to non-controlling interests		(4,627	)		(4,785	)
Debt issuance and extinguishment costs paid		(5,902	)		(72	)
Net cash provided by financing activities		49,904			139,768
Net (decrease) increase in cash and cash equivalents and restricted cash		(6,271	)		10,723
Cash and cash equivalents and restricted cash at beginning of period		18,989			10,099
Cash and cash equivalents and restricted cash at end of period	$	12,718		$	20,822

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

Cash and cash equivalents at end of period	$	10,288		$	13,765
Restricted cash at end of period		2,430			7,057
Cash and cash equivalents and restricted cash at end of period	$	12,718		$	20,822

Percentage of shares owned by	June 30, 2019			December 31, 2018
Corporation		93.2	%		92.7	%
Non-controlling interests		6.8	%		7.3	%
		100.0	%		100.0	%

	March 31, 2019
(in thousands)	Previous Carrying Amount		Allocation of Impairment			Carrying Amount After Impairment
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		For the six months ended
(in thousands)	June 30, 2018		June 30, 2018
Revenues
Rental income from operating leases	$	53,590	$	105,422
Earned income from direct financing leases		953		1,919
Operating expenses reimbursed from tenants		2,486		5,235
Other income from real estate transactions		3		45
Total revenues	$	57,032	$	112,621

As revised	For the three months ended		For the six months ended
(in thousands)	June 30, 2018		June 30, 2018
Revenues
Lease revenues	$	57,032	$	112,621

(in thousands, except per share amounts)	If the Company has completed an IPO		If the Company has not completed an IPO
Earnout Tranche^(a)	40-Day VWAP of a REIT Share	Applicable Earnout Period	AFFO per Share	Applicable Earnout Period
$10,000	$90.00	The two-year period beginning on the earlier of (i) the IPO closing date or (ii) December 31, 2020.	$5.85	The two-year period consisting of the calendar years ended December 31, 2020 and December 31, 2021.
$15,000	$95.00	The two-year period beginning on the earlier of (i) the IPO closing date or (ii) December 31, 2020.	$5.95	The two-year period consisting of the calendar years ended December 31, 2020 and December 31, 2021.
$25,000	$97.50	The four-year period beginning on the date that is exactly one year after the earnout period begins for the first and second tranches above.	$6.30	The four-year period consisting of the calendar years ended December 31, 2021, December 31, 2022, December 31, 2023 and December 31, 2024.
$25,000	$100.00	The four-year period beginning on the date that is exactly one year after the earnout period begins for the first and second tranches above.	$6.70	The four-year period consisting of the calendar years ended December 31, 2021, December 31, 2022, December 31, 2023 and December 31, 2024.

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

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

~~Property Type~~	~~% NTM Rent~~
~~Retail – other~~		~~12.7~~	%
~~Retail – casual dining~~		~~9.8~~	%
~~Retail – quick service restaurants ("QSR")~~		~~9.7~~	%
~~Total Retail~~		~~32.2~~	%
~~Industrial – warehouse/distribution~~		~~13.2~~	%
~~Industrial – manufacturing~~		~~9.6~~	%
~~Industrial – flex~~		~~5.3~~	%
~~Industrial – other~~		~~3.0~~	%
~~Total Industrial~~		~~31.1~~	%
~~Healthcare – clinical~~		~~13.8~~	%
~~Healthcare – surgical~~		~~3.7~~	%
~~Healthcare – other~~		~~3.3~~	%
~~Total Healthcare~~		~~20.8~~	%
~~Office~~		~~9.2~~	%
~~Other~~		~~6.7~~	%
~~Total~~		~~100.0~~	%

~~Industry~~	~~% NTM Rent~~
~~Restaurants~~		~~19.7~~	%
~~Healthcare Facilities~~		~~18.5~~	%
~~Home Furnishing Retail~~		~~4.9~~	%
~~Specialized Consumer Services~~		~~4.5~~	%
~~Auto Parts & Equipment~~		~~4.1~~	%
~~Packaged Foods & Meats~~		~~3.7~~	%
~~Air Freight & Logistics~~		~~3.0~~	%
~~Healthcare Services~~		~~2.7~~	%
~~Electronic Components~~		~~2.6~~	%
~~Industrial Machinery~~		~~2.2~~	%
~~Distributors~~		~~1.9~~	%
~~Industrial Conglomerates~~		~~1.9~~	%
~~Internet & Direct Marketing Retail~~		~~1.8~~	%
~~Multi-line Insurance~~		~~1.6~~	%
~~Life Sciences Tools & Services~~		~~1.6~~	%
~~Top 15 Tenant Industries~~		~~74.7~~	%
~~Other (32 industries)~~		~~25.3~~	%
~~Total~~		~~100.0~~	%

Year	Number of Tenants		Number of Properties		Square Footage		NTM Rent		Percentage of NTM Rent
2019		1		1		11	$	25	<0.1		%
2020		5		5		112		1,273		0.5	%
2021		7		11		99		1,926		0.8	%
2022		5		4		124		3,273		1.3	%
2023		12		13		703		6,938		2.8	%
2024		13		15		1,668		13,692		5.5	%
2025		10		18		271		4,393		1.8	%
2026		18		29		825		12,581		5.0	%
2027		23		34		1,984		20,329		8.2	%
2028		23		36		2,030		23,507		9.4	%
2029		16		62		2,485		18,597		7.5	%
2030 and thereafter		95		415		9,917		142,623		57.2	%
Untenanted properties		—		3		47		—		—
Total		228		646		20,276	$	249,157		100.0	%

Tenant	Property Type	% NTM Rent			Properties
Art Van Furniture, LLC	Retail		3.3	%		10
Red Lobster Hospitality & Red Lobster Restaurants LLC	Retail		3.0	%		25
Jack's Family Restaurants LP	Retail		2.4	%		36
Axcelis Technologies, Inc.	Other		2.3	%		1
Outback Steakhouse of Florida LLC ^(a)	Retail		2.2	%		24
Krispy Kreme Doughnut Corporation	Industrial/Retail		2.0	%		27
BluePearl Holdings, LLC	Healthcare		2.0	%		12
Big Tex Trailer Manufacturing, Inc.	Industrial/Retail/Office		1.9	%		17
Siemens Medical Solutions USA, Inc. & Siemens Corporation	Industrial		1.9	%		2
Nestle' Dreyer's Ice Cream Company	Industrial		1.7	%		1
Total Top Ten			22.7	%		155
All Other			77.3	%		491
Total			100.0	%		646

Brand	Property Type	% NTM Rent			Properties
Art Van Furniture	Retail		3.3	%		10
Bob Evans Farms ^(a)	Industrial/Retail		3.0	%		27
Red Lobster	Retail		3.0	%		25
Wendy's	Retail		2.5	%		41
Jack's Family Restaurants	Retail		2.4	%		36
Axcelis	Other		2.3	%		1
Taco Bell	Retail		2.1	%		41
Krispy Kreme	Industrial/Retail		2.0	%		27
BluePearl Veterinary Partners	Healthcare		2.0	%		12
Outback Steakhouse	Retail		1.9	%		22
Total Top Ten			24.5	%		242
All Other			75.5	%		404
Total			100.0	%		646

Period	NAV as of	NAV per diluted share		Determined Share Value
August 1, 2019 - October 31, 2019	June 30, 2019	$	84.68	$	85.00
May 1, 2019 - July 31, 2019	March 31, 2019	$	85.57	$	86.00
February 1, 2019 - April 30, 2019	December 31, 2018	$	84.92	$	85.00

NAV component:	June 30, 2019			March 31, 2019
Investment in rental property	$	3,704,911		$	3,568,282
Debt		(1,529,385	)		(1,445,814	)
Other assets and liabilities, net		(19,078	)		(16,352	)
NAV	$	2,156,448		$	2,106,116
Number of outstanding shares, including noncontrolling interests		25,467			24,612
NAV per diluted share	$	84.68		$	85.57

Dividend Per Share/Unit		Record Date	Payment Date (on or before)
$	0.44	August 29, 2019	September 13, 2019
$	0.44	September 27, 2019	October 15, 2019
$	0.44	October 30, 2019	November 15, 2019

Month	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	2019	$	4,634	$	617	$	4,730	$	130	$	10,111
February	2019		4,691		617		4,800		130		10,238
March	2019		4,836		632		5,003		132		10,603
April	2019		4,879		631		5,092		132		10,734
May	2019		4,917		632		5,176		133		10,858
June	2019		5,017		632		5,207		133		10,989
Total		$	28,974	$	3,761	$	30,008	$	790	$	63,533

	For the three months ended
(in thousands, except per share data)	March 31,
	2020			2019
Net income	$	11,848		$	15,022
Real property depreciation and amortization		31,210			24,310
Gain on sale of real estate		(7,619	)		(1,400	)
Provision for impairment on investment in rental properties		2,133			1,017
FFO	$	37,572		$	38,949
Capital improvements / reserves		—			(49	)
Straight-line rent adjustment		(1,612	)		(5,143	)
Adjustment to provision for credit losses		(17	)		—
Cost of debt extinguishment		22			713
Amortization of debt issuance costs		888			553
Amortization of net mortgage premiums		(35	)		(35	)
Gain on interest rate swaps and other non-cash interest expense		(42	)		(81	)
Amortization of lease intangibles		(1,138	)		(738	)
Internalization expenses		1,205			—
Severance		26			—
Change in fair value of earnout liability		4,177			—
Other losses		22			—
AFFO	$	41,068		$	34,169

Diluted WASO		29,053			24,072

Net earnings per share, basic and diluted	$	0.41		$	0.62
FFO per diluted share		1.29			1.62
AFFO per diluted share		1.41			1.42

Loan Tranche	Amount Drawn		Amount Available		Total Capacity		Maturity Date
Credit Facility:
Revolver	$	123,600	$	476,400	$	600,000	January 21, 2022^(a)
2023 Unsecured Term Loan		265,000		—		265,000	January 23, 2023
2024 Unsecured Term Loan		190,000		—		190,000	June 21, 2024
2026 Unsecured Term Loan		300,000	150,000^(b)			450,000	February 27, 2026

~~Covenants~~	~~Required~~	~~Actual~~ ~~(as of~~ ~~June 30, 2019)~~
~~Leverage Ratio~~^(a)	≤ ~~0.60 to 1.00~~		~~0.45~~
~~Secured Indebtedness Ratio~~^(b)	≤ ~~0.40 to 1.00~~		~~0.04~~
~~Unencumbered Coverage Ratio~~^(c)	≥ ~~1.75 to 1.00~~		~~3.49~~
~~Fixed Charge Coverage Ratio~~^(d)	~~≥ 1.50 to 1.00~~		~~2.92~~
~~Total Unsecured Indebtedness to Total~~ ~~Unencumbered Eligible Property Value~~^(e)	~~≤ 0.60 to 1.00~~		~~0.46~~
~~Dividends and Other Restricted Payments~~	~~Only applicable in case of default~~	~~Not Applicable~~

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	$	—	$	—	$	—	$	1,685	$	31,581	$	3,635	$	59	$	36,960
2020		—		—		—		3,492		62,555		—		120		66,167
2021		—		—		—		18,322		62,317		—		122		80,761
2022		—		123,600		—		3,237		56,105		—		124		183,066
2023		265,000		—		—		8,677		46,072		—		125		319,874
Thereafter		490,000		—		475,000		86,077		147,414		—		2,540		1,201,031
Total	$	755,000	$	123,600	$	475,000	$	121,490	$	406,044	$	3,635	$	3,090	$	1,887,859

Covenants	Required	Actual (as of March 31, 2020)
Leverage Ratio^(a)	≤ 0.60 to 1.00		0.54
Secured Indebtedness Ratio^(b)	≤ 0.40 to 1.00		0.03
Unencumbered Coverage Ratio^(c)	≥ 1.75 to 1.00		3.54
Fixed Charge Coverage Ratio^(d)	≥ 1.50 to 1.00		2.81
Total Unsecured Indebtedness to Total Unencumbered Eligible Property Value^(e)	≤ 0.60 to 1.00		0.59
Dividends and Other Restricted Payments	Only applicable in case of default	Not Applicable

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

Period	NAV as of	NAV per diluted share		Determined Share Value
May 1, 2020 - July 31, 2020	March 31, 2020	$	82.46	$	82.00
February 1, 2020 - April 30, 2020	December 31, 2019	$	85.21	$	85.00
November 1, 2019 - January 31, 2020	September 30, 2019	$	84.12	$	85.00

Month	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	2019		233	$	86.00	$	20,000		58	$	84.28	$	4,862	$	24,862
February	2019		235	$	85.00		20,000		58	$	84.28		4,930		24,930
March	2019		235	$	85.00		20,000		62	$	83.30		5,136		25,136
April	2019		235	$	85.00		20,000		63	$	83.30		5,224		25,224
May	2019		233	$	86.00		20,000		64	$	83.30		5,306		25,306
June	2019		233	$	86.00		20,000		63	$	84.28		5,339		25,339
Total			1,404				120,000		368				30,797		150,797

Period	Total Number of Shares Requested to be Redeemed ^(a)		Total Number of Shares Redeemed		Average Price Paid Per Share ^(b)		Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
April 2019		—		—		—	^(c)
May 2019		—		—		—	^(c)
June 2019		37,501		37,501	$	85.59	^(c)

	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

2.1		Agreement and Plan of Merger, dated as of November 11, 2019, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Broadstone Net Lease Sub 1, Inc., Broadstone Net Lease Sub 2, Inc., Broadstone Real Estate, LLC, Trident BRE Holdings I, Inc., Trident BRE Holdings II, Inc. and, solely for purposes of Sections 6.18, 6.19 and 6.20, Trident BRE Holdings I, L.P. and Trident BRE Holdings II, L.P. (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 12, 2019 and incorporated herein by reference)

2.2		Amendment No. 1, dated February 7, 2020, to Agreement and Plan of Merger, dated as of November 11, 2019, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Broadstone Net Lease Sub 1, Inc., Broadstone Net Lease Sub 2, Inc., Broadstone Real Estate, LLC, Trident BRE Holdings I, Inc., Trident BRE Holdings II, Inc. and, solely for purposes of Sections 6.18, 6.19, and 6.20 of the Merger Agreement, Trident BRE Holdings I, L.P. and Trident BRE Holdings II, L.P. (filed as Exhibit 2.1 to the Corporation’s Current Report on Form 8-K filed February 7, 2020 and incorporated herein by reference)

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

3.2		Second Amended and Restated Bylaws of Broadstone Net Lease, Inc. ~~(Incorporated~~, adopted March 23, 2020 (filed as Exhibit 3.1 to the Corporation’s Current Report on Form 8-K filed March 25, 2020 and 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)~~reference)

4.1		~~Broadstone Net Lease, Inc. Distribution Reinvestment Plan (Incorporated herein by reference to~~Description of the Corporation’s Securities (filed as Exhibit 4.1 to the ~~Company’s General Form for Registration of Securities~~Corporation’s Annual Report on Form ~~10,~~10-K filed ~~on April 24, 2017)~~February 27, 2020 and incorporated herein by reference)

~~4.2~~10.1		Term Loan Agreement, dated February 7, 2020, by and among Broadstone Net Lease, LLC, Broadstone Net Lease, Inc., JPMorgan Chase Bank, N.A., and the other lenders party thereto (filed as Exhibit 10.1 to the Corporation’s Current Report on Form 8-K filed February 7, 2020 and incorporated herein by reference)

10.2		Guaranty, dated February 7, 2020, by Broadstone Net Lease, Inc. ~~Share Redemption Program (Incorporated~~in favor of JPMorgan Chase Bank, N.A. (filed as Exhibit 10.2 to the Corporation’s Current Report on Form 8-K filed February 7, 2020 and incorporated herein by ~~reference to~~reference)

10.3		Tax Protection Agreement, dated February 7, 2020, between Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, and the persons named therein (filed as Exhibit ~~4.2~~10.3 to the ~~Company’s~~ Corporation’s Current Report on Form 8-K filed February 7, 2020 and incorporated herein by reference)

10.4		Registration Rights Agreement, dated February 7, 2020, between Broadstone Net Lease, Inc. and the persons named therein (filed as Exhibit 10.4 to the Corporation’s Current Report on Form 8-K filed February 7, 2020 and incorporated herein by reference)

10.5		Amendment No. 21, dated February 7, 2020 to the ~~General Form for Registration~~Amended and Restated Operating Agreement of ~~Securities~~Broadstone Net Lease, LLC (filed as Exhibit 10.5 to the Corporation’s Current Report on Form ~~10,~~8-K filed February 7, 2020 and incorporated herein by reference)

10.6		Amended and Restated Operating Agreement of Broadstone Net Lease, LLC, dated December 31, 2007 (filed as Exhibit 10.6 to the Corporation’s Current Report on ~~June 29, 2017)~~Form 8-K filed February 7, 2020 and incorporated herein by reference)

10.7+		Amended and Restated Employment Agreement, effective February 7, 2020, by and between Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Broadstone Employee Sub, LLC, and Christopher J. Czarnecki (filed as Exhibit 10.7 to the Corporation’s Current Report on Form 8-K filed February 7, 2020 and incorporated herein by reference)

10.8+		Amended and Restated Employment Agreement, effective February 7, 2020, by and between Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Broadstone Employee Sub, LLC, and Ryan M. Albano (filed as Exhibit 10.8 to the Corporation’s Current Report on Form 8-K filed February 7, 2020 and incorporated herein by reference)

10.9+		Amended and Restated Employment Agreement, effective February 7, 2020, by and between Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Broadstone Employee Sub, LLC, and Sean T. Cutt (filed as Exhibit 10.9 to the Corporation’s Current Report on Form 8-K filed February 7, 2020 and incorporated herein by reference)

No.		Description
10.10+		Amended and Restated Employment Agreement, effective February 7, 2020, by and between Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Broadstone Employee Sub, LLC, and John D. Moragne (filed as Exhibit 10.10 to the Corporation’s Current Report on Form 8-K filed February 7, 2020 and incorporated herein by reference)

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

31.2*		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~~Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended ~~June 30, 2019,~~March 31, 2020, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income and Comprehensive (Loss) Income, (iii) Condensed Consolidated Statements of Stockholders’ Equity and Mezzanine Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements