UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20172023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-55435
cvmcriilogoa50.jpgSRT Logo_Full Color.jpg
CARTER VALIDUS MISSION CRITICAL REIT II,SILA REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
Maryland46-1854011
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
Maryland46-1854011
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
4890 West Kennedy Blvd.,1001 Water Street, Suite 650800
Tampa, FL 3360933602
(813) 287-0101
(Address of Principal Executive Offices; Zip Code)(Registrant’s Telephone Number)Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
None
Title of each classTrading SymbolName of each exchange on which registered
NoneN/ANoneN/AN/A
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $0.01 per share
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”filer”, “smaller reporting company,” and “emerging"emerging growth company”company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☒ (Do not check if a smaller reporting company)Smaller reporting company☐
Emerging growth company☒☐
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 7(a)(2)(B)13(a) of the SecuritiesExchange Act. ☒☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ☐    No  ☒
As of November 6, 2017,1, 2023, there were approximately 80,239,000169,054,000 shares of Class A common stock, 5,333,00016,942,000 shares of Class I common stock, 32,947,00041,693,000 shares of Class T common stock and 0 shares of Class T2 common stock of Carter Validus Mission Critical REIT II,Sila Realty Trust, Inc. outstanding.


CARTER VALIDUS MISSION CRITICAL REIT II,


SILA REALTY TRUST, INC.
(A Maryland Corporation)
TABLE OF CONTENTS
Page
PART I.
3
Item 1.
3
3
4
5
67
78
Item 2.
3019
Item 3.
4329
Item 4.
4430
PART II.
4531
Item 1.
4531
Item 1A.
4531
Item 2.
5031
Item 3.
5131
Item 4.
5131
Item 5.
5231
Item 6.
5332
55




Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.
CARTER VALIDUS MISSION CRITICAL REIT II,SILA REALTY TRUST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
September 30, 2017		 December 31, 2016(Unaudited)
September 30, 2023		December 31, 2022
ASSETSASSETSASSETS
Real estate:   Real estate:
Land$208,728
 $154,385
Land$168,283 $163,419 
Buildings and improvements, less accumulated depreciation of $37,553 and $18,521, respectively1,066,856
 722,492
Construction in progress43,692
 20,123
Buildings and improvements, less accumulated depreciation of $246,257 and $209,118, respectivelyBuildings and improvements, less accumulated depreciation of $246,257 and $209,118, respectively1,716,978 1,716,663 
Total real estate, net1,319,276
 897,000
Total real estate, net1,885,261 1,880,082 
Cash and cash equivalents74,488
 50,446
Cash and cash equivalents14,563 12,917 
Acquired intangible assets, less accumulated amortization of $17,620 and $7,995, respectively147,043
 98,053
Other assets, net45,276
 24,539
Intangible assets, less accumulated amortization of $104,869 and $90,239, respectivelyIntangible assets, less accumulated amortization of $104,869 and $90,239, respectively159,178 167,483 
GoodwillGoodwill20,128 21,710 
Right-of-use assetsRight-of-use assets36,649 37,443 
Other assetsOther assets103,346 100,167 
Total assets$1,586,083
 $1,070,038
Total assets$2,219,125 $2,219,802 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:   Liabilities:
Notes payable, net of deferred financing costs of $4,038 and $1,945, respectively$409,797
 $151,045
Credit facility, net of deferred financing costs of $676 and $876, respectively219,324
 219,124
Accounts payable due to affiliates14,552
 7,384
Credit facility, net of deferred financing costs of $1,948 and $2,412, respectivelyCredit facility, net of deferred financing costs of $1,948 and $2,412, respectively$603,052 $580,588 
Accounts payable and other liabilities26,409
 17,184
Accounts payable and other liabilities29,871 30,619 
Intangible lease liabilities, less accumulated amortization of $1,771 and $634, respectively23,006
 6,873
Intangible liabilities, less accumulated amortization of $7,043 and $5,923, respectivelyIntangible liabilities, less accumulated amortization of $7,043 and $5,923, respectively10,826 11,946 
Lease liabilitiesLease liabilities41,260 41,554 
Total liabilities693,088
 401,610
Total liabilities685,009 664,707 
Stockholders’ equity:   Stockholders’ equity:
Preferred stock, $0.01 par value per share, 100,000,000 shares authorized; none issued and outstanding—
 —
Preferred stock, $0.01 par value per share, 100,000,000 shares authorized; none issued and outstanding— — 
Common stock, $0.01 par value per share, 500,000,000 shares authorized; 113,512,765 and 83,109,025 shares issued, respectively; 112,181,418 and 82,744,288 shares outstanding, respectively1,122
 827
Common stock, $0.01 par value per share, 510,000,000 shares authorized; 243,870,433 and 241,425,332 shares issued, respectively; 227,555,999 and 226,255,969 shares outstanding, respectivelyCommon stock, $0.01 par value per share, 510,000,000 shares authorized; 243,870,433 and 241,425,332 shares issued, respectively; 227,555,999 and 226,255,969 shares outstanding, respectively2,276 2,263 
Additional paid-in capital977,633
 723,859
Additional paid-in capital2,037,177 2,024,176 
Accumulated distributions in excess of earnings(86,883) (57,100)
Distributions in excess of accumulated earningsDistributions in excess of accumulated earnings(534,760)(499,334)
Accumulated other comprehensive income1,121
 840
Accumulated other comprehensive income29,423 27,990 
Total stockholders’ equity892,993
 668,426
Total stockholders’ equity1,534,116 1,555,095 
Noncontrolling interests2
 2
Total equity892,995
 668,428
Total liabilities and stockholders’ equity$1,586,083
 $1,070,038
Total liabilities and stockholders’ equity$2,219,125 $2,219,802 
The accompanying notes are an integral part of these condensed consolidated financial statements.

3
CARTER VALIDUS MISSION CRITICAL REIT II,
Table of Contents
SILA REALTY TRUST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except share data and per share amounts)
(Unaudited)
Three Months Ended
September 30,		 Nine Months Ended
September 30,		 Three Months Ended
September 30,		Nine Months Ended
September 30,
2017 2016 2017 20162023202220232022
Revenue:       Revenue:
Rental and parking revenue$30,219
 $12,183
 $73,585
 $33,092
Tenant reimbursement revenue5,986
 1,411
 14,244
 4,129
Total revenue36,205
 13,594
 87,829
 37,221
Rental revenueRental revenue$48,542 $46,881 $143,151 $136,081 
Expenses:       Expenses:
Rental and parking expenses8,368
 1,794
 18,594
 5,055
Rental expensesRental expenses5,005 4,590 14,728 13,219 
General and administrative expenses1,062
 836
 3,199
 2,358
General and administrative expenses4,828 4,760 16,478 16,766 
Acquisition related expenses—
 1,821
 —
 5,432
Asset management fees2,698
 1,227
 7,055
 3,240
Depreciation and amortization11,852
 4,782
 28,487
 12,948
Depreciation and amortization18,097 18,641 55,452 54,443 
Total expenses23,980
 10,460
 57,335
 29,033
Income from operations12,225
 3,134
 30,494
 8,188
Interest expense, net6,786
 626
 15,623
 2,237
Impairment lossesImpairment losses— — 6,708 7,387 
Total operating expensesTotal operating expenses27,930 27,991 93,366 91,815 
Gain on real estate dispositionsGain on real estate dispositions1 — 22 460 
Interest and other expenses, netInterest and other expenses, net5,630 5,498 16,769 17,942 
Net income attributable to common stockholders$5,439
 $2,508
 $14,871
 $5,951
Net income attributable to common stockholders$14,983 $13,392 $33,038 $26,784 
Other comprehensive income:       
Unrealized income (loss) on interest rate swaps, net$219
 $88
 $281
 $(13)
Other comprehensive income (loss) attributable to common stockholders219
 88
 281
 (13)
Other comprehensive income - unrealized gain on interest rate swaps, netOther comprehensive income - unrealized gain on interest rate swaps, net2,315 16,345 1,433 34,457 
Comprehensive income attributable to common stockholders$5,658
 $2,596
 $15,152
 $5,938
Comprehensive income attributable to common stockholders$17,298 $29,737 $34,471 $61,241 
Weighted average number of common shares outstanding:       Weighted average number of common shares outstanding:
Basic105,388,118
 71,852,230
 95,668,433
 63,044,148
Basic227,436,306 225,638,485 226,995,005 225,052,921 
Diluted105,405,297
 71,866,949
 95,687,382
 63,060,086
Diluted229,282,662 226,957,015 228,843,909 226,399,118 
Net income per common share attributable to common stockholders:       Net income per common share attributable to common stockholders:
Basic$0.05
 $0.03
 $0.16
 $0.09
Basic$0.07 $0.06 $0.15 $0.12 
Diluted$0.05
 $0.03
 $0.16
 $0.09
Diluted$0.06 $0.06 $0.14 $0.12 
Distributions declared per common share$0.16
 $0.16
 $0.47
 $0.47
Distributions declared per common share$0.10 $0.10 $0.30 $0.30 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4
CARTER VALIDUS MISSION CRITICAL REIT II,
Table of Contents
SILA REALTY TRUST, INC.
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS’STOCKHOLDERS' EQUITY
(in thousands, except for share data)
(Unaudited)
Common Stock
No. of
Shares		Par
Value		Additional
Paid-in
Capital		Distributions in Excess of Accumulated EarningsAccumulated Other Comprehensive IncomeTotal
Stockholders’
Equity
Balance, June 30, 2023227,143,142 $2,272 $2,033,110 $(526,627)$27,108 $1,535,863 
Issuance of common stock under the distribution reinvestment plan767,734 8 6,217 — — 6,225 
Vesting of restricted stock61,002 — — — — — 
Stock-based compensation— — 1,228 — — 1,228 
Repurchase of common stock(415,879)(4)(3,378)— — (3,382)
Distributions to common stockholders— — — (23,116)— (23,116)
Other comprehensive income— — — — 2,315 2,315 
Net income— — — 14,983 — 14,983 
Balance, September 30, 2023227,555,999 $2,276 $2,037,177 $(534,760)$29,423 $1,534,116 
 Common Stock            
 No. of
Shares		 Par
Value		 Additional
Paid-in
Capital		 Accumulated Distributions in Excess of Earnings Accumulated Other Comprehensive Income Total
Stockholders’
Equity		 Noncontrolling
Interests		 Total
Equity
Balance, December 31, 201682,744,288
 $827
 $723,859
 $(57,100) $840
 $668,426
 $2
 $668,428
Issuance of common stock27,873,206
 279
 268,854
 —
 —
 269,133
 —
 269,133
Issuance of common stock under the distribution reinvestment plan2,523,784
 26
 22,975
 —
 —
 23,001
 —
 23,001
Vesting of restricted common stock6,750
 —
 54
 —
 —
 54
 —
 54
Commissions on sale of common stock and related dealer manager fees—
 —
 (16,323) —
 —
 (16,323) —
 (16,323)
Distribution and servicing fees—
 —
 (7,031) —
 —
 (7,031) —
 (7,031)
Other offering costs—
 —
 (5,998) —
 —
 (5,998) —
 (5,998)
Repurchase of common stock(966,610) (10) (8,757) —
 —
 (8,767) —
 (8,767)
Distributions declared to common stockholders—
 —
 —
 (44,654) —
 (44,654) —
 (44,654)
Other comprehensive income—
 —
 —
 —
 281
 281
 —
 281
Net income—
 —
 —
 14,871
 —
 14,871
 —
 14,871
Balance, September 30, 2017112,181,418
 $1,122
 $977,633
 $(86,883) $1,121
 $892,993
 $2
 $892,995
Common Stock
No. of
Shares		Par
Value		Additional
Paid-in
Capital		Distributions in Excess of Accumulated EarningsAccumulated Other Comprehensive IncomeTotal
Stockholders’
Equity
Balance, December 31, 2022226,255,969 $2,263 $2,024,176 $(499,334)$27,990 $1,555,095 
Issuance of common stock under the distribution reinvestment plan2,284,648 23 18,652 — — 18,675 
Vesting of restricted stock160,453 — — — — — 
Stock-based compensation— 1 3,720 — — 3,721 
Other offering costs— — (6)— — (6)
Repurchase of common stock(1,145,071)(11)(9,365)— — (9,376)
Distributions to common stockholders— — — (68,464)— (68,464)
Other comprehensive income— — — — 1,433 1,433 
Net income— — — 33,038 — 33,038 
Balance, September 30, 2023227,555,999 $2,276 $2,037,177 $(534,760)$29,423 $1,534,116 
The accompanying notes are an integral part of these condensed consolidated financial statements.

5
Table of Contents
CARTER VALIDUS MISSION CRITICAL REIT II,SILA REALTY TRUST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS' EQUITY
(in thousands)thousands, except share data)
(Unaudited)
 Nine Months Ended
September 30,
 2017 2016
Cash flows from operating activities:   
Net income$14,871
 $5,951
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization28,487
 12,948
Amortization of deferred financing costs1,870
 703
Amortization of above-market leases174
 27
Amortization of intangible lease liabilities(1,137) (402)
Straight-line rent(7,686) (4,344)
Stock-based compensation54
 41
Ineffectiveness of interest rate swaps(16) (49)
Changes in operating assets and liabilities:   
Accounts payable and other liabilities8,209
 1,042
Accounts payable due to affiliates1,391
 230
Other assets(5,920) (610)
Net cash provided by operating activities40,297
 15,537
Cash flows from investing activities:   
Investment in real estate(458,023) (239,729)
Acquisition costs capitalized subsequent(44) —
Capital expenditures(25,002) (4,380)
Real estate deposits, net(37) (5,287)
Net cash used in investing activities(483,106) (249,396)
Cash flows from financing activities:   
Proceeds from issuance of common stock269,133
 248,251
Proceeds from notes payable260,845
 —
Proceeds from credit facility175,000
 115,000
Payments on credit facility(175,000) (70,000)
Payments of deferred financing costs(2,963) (767)
Repurchases of common stock(8,767) (2,043)
Offering costs on issuance of common stock(23,196) (23,979)
Distributions to stockholders(20,415) (12,285)
Net cash provided by financing activities474,637
 254,177
Net change in cash, cash equivalents and restricted cash31,828
 20,318
Cash, cash equivalents and restricted cash - Beginning of period56,904
 33,189
Cash, cash equivalents and restricted cash - End of period$88,732
 $53,507
Supplemental cash flow disclosure:   
Interest paid, net of interest capitalized of $1,450 and $293, respectively$14,106
 $1,887
Supplemental disclosure of non-cash transactions:   
Issuance of common stock under the distribution reinvestment plan$23,001
 $16,285
Distribution and servicing fees accrued during the period$5,756
 $4,226
Liability assumed at acquisition$815
 $1,236
Accrued capital expenditures$—
 $1,469
Common Stock
No. of
Shares		Par
Value		Additional
Paid-in
Capital		Distributions in Excess of Accumulated EarningsAccumulated Other Comprehensive IncomeTotal
Stockholders’
Equity
Balance, June 30, 2022225,240,223 $2,252 $2,014,252 $(432,101)$13,265 $1,597,668 
Issuance of common stock under the distribution reinvestment plan767,755 8 6,296 — — 6,304 
Vesting of restricted stock50,689 — — — — — 
Stock-based compensation— — 860 — — 860 
Repurchase of common stock(225,136)(2)(1,844)— — (1,846)
Distributions to common stockholders— — — (22,882)— (22,882)
Other comprehensive income— — — — 16,345 16,345 
Net income— — — 13,392 — 13,392 
Balance, September 30, 2022225,833,531 $2,258 $2,019,564 $(441,591)$29,610 $1,609,841 
Common Stock
No. of
Shares		Par
Value		Additional
Paid-in
Capital		Distributions in Excess of Accumulated EarningsAccumulated Other Comprehensive (Loss) IncomeTotal
Stockholders’
Equity
Balance, December 31, 2021224,179,939 $2,242 $2,004,404 $(400,669)$(4,847)$1,601,130 
Issuance of common stock under the distribution reinvestment plan2,265,628 23 18,571 — — 18,594 
Vesting of restricted stock174,825 — — — — — 
Stock-based compensation— 1 3,033 — — 3,034 
Repurchase of common stock(786,861)(8)(6,444)— — (6,452)
Distributions to common stockholders— — — (67,706)— (67,706)
Other comprehensive income— — — — 34,457 34,457 
Net income— — — 26,784 — 26,784 
Balance, September 30, 2022225,833,531 $2,258 $2,019,564 $(441,591)$29,610 $1,609,841 
The accompanying notes are an integral part of these condensed consolidated financial statements.

6
CARTER VALIDUS MISSION CRITICAL REIT II,
Table of Contents
SILA REALTY TRUST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 Nine Months Ended
September 30,
 20232022
Cash flows from operating activities:
Net income attributable to common stockholders$33,038 $26,784 
Adjustments to reconcile net income attributable to common stockholders to net cash provided by operating activities:
Depreciation and amortization55,452 54,443 
Amortization of deferred financing costs1,240 1,267 
Amortization of above- and below-market leases619 362 
Other amortization expenses598 1,989 
Gain on real estate dispositions(22)(460)
Loss on extinguishment of debt— 3,367 
Impairment losses6,708 7,387 
Straight-line rent adjustments, net of write-offs(2,490)(7,653)
Stock-based compensation3,721 3,034 
Changes in operating assets and liabilities:
Accounts payable and other liabilities(1,063)(2,647)
Other assets40 1,158 
Net cash provided by operating activities97,841 89,031 
Cash flows from investing activities:
Investments in real estate(69,821)(157,194)
Proceeds from real estate dispositions12,388 22,822 
Capital expenditures and other costs(1,590)(7,577)
Net cash used in investing activities(59,023)(141,949)
Cash flows from financing activities:
Proceeds from credit facility50,000 845,000 
Payments on credit facility(28,000)(745,000)
Payments for extinguishment of debt— (4)
Payments of deferred financing costs(12)(6,936)
Repurchase of common stock(9,376)(6,452)
Offering costs on issuance of common stock(10)(193)
Distributions to common stockholders(49,774)(48,920)
Net cash (used in) provided by financing activities(37,172)37,495 
Net change in cash, cash equivalents and restricted cash1,646 (15,423)
Cash, cash equivalents and restricted cash - Beginning of period13,083 32,880 
Cash, cash equivalents and restricted cash - End of period$14,729 $17,457 
Supplemental cash flow disclosure:
Interest paid, net of interest capitalized$15,751 $12,451 
Supplemental disclosure of non-cash transactions:
Common stock issued through distribution reinvestment plan$18,675 $18,594 
Change in accrued distributions to common stockholders$15 $192 
Change in accounts payable and other liabilities related to capital expenditures and investments in real estate$244 $(3,295)
Right-of-use assets obtained in exchange for new lease liabilities$— $15,305 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
Table of Contents
SILA REALTY TRUST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 20172023
Note 1—Organization and Business Operations
Carter Validus Mission Critical REIT II,Sila Realty Trust, Inc., or the Company, is a Maryland corporation, headquartered in Tampa, Florida, that was formed on January 11, 2013. The Companyhas elected, and currently qualifies, to be taxed as a real estate investment trust, or a REIT, under the Internal Revenue Code of 1986, as amended, or the Code, for federal income tax purposes,purposes. The Company invests in high-quality properties leased to tenants. The Company is primarily focused on September 11, 2015. investing in healthcare assets across the continuum of care, with emphasis on lower cost patient settings, which the Company believes typically generate predictable, durable and growing income streams. The Company may also make other real estate-related investments, which may include equity or debt interests in other real estate entities.
Substantially all of the Company’s business is conducted through Carter ValidusSila Realty Operating Partnership, II, LP, a Delaware limited partnership, or the Operating Partnership, formed on January 10, 2013.Partnership. The Company is the sole general partner of the Operating Partnership and Carter Validus Advisors II, LLC, or the Advisor, is the special limited partnerdirectly and indirectly owns 100% of the Operating Partnership.
The Company is offering for sale a maximum of $2,350,000,000 in shares of common stock, or the maximum offering amount, consisting of up to $2,250,000,000 in shares in its primary offering and up to $100,000,000 in shares of common stock to be made available pursuant to the Company’s distribution reinvestment plan, or the DRIP, on a “best efforts” basis, or the Initial Offering, pursuant to a registration statement on Form S-11, or the Registration Statement, filed with the Securities and Exchange Commission, or the SEC, under the Securities Act of 1933, as amended, or the Securities Act, which was declared effective on May 29, 2014. As of September 30, 2017, the Company was offering Class A shares, Class I shares and Class T shares of common stock, in any combination with a dollar value up to the maximum offering amount in the Initial Offering.
On May 1, 2017, the Company filed a registration statement on Form S-11, or Follow-On Registration Statement, under the Securities Act to register a proposed follow-on offering, or the Follow-On Offering. On October 30, 2017, the Company filed a pre-effective amendment to the Follow-On Registration Statement to (i) register a maximum of $1,000,000,000 of shares of Class A, Class I and Class T common stock pursuant to the primary offering of the Follow-On Offering and (ii) remove the DRIP from the Follow-On Registration Statement. Accordingly, pursuant to Rule 415 promulgated under the Securities Act, the Company extended the Initial Offering until the earlier of the SEC effective date of the Follow-On Offering or November 24, 2017. The Company has not issued any shares in connection with the Follow-On Offering as it has not been declared effective by the SEC.
On October 13, 2017, the Company filed a Registration Statement on Form S-3, or the DRIP Registration Statement, under the Securities Act to register up to $100,000,000 of shares of Class A, Class I and Class T common stock to be offered pursuant to the DRIP after the termination of the Initial Offering. The Company intends to continue to offer shares of common stock in the Initial Offering until November 24, 2017; however, it may terminate the Initial Offering prior to November 24, 2017 and commence offering shares of common stock pursuant to the Follow-On Offering and DRIP Registration Statement. The Company's board of directors may revise the termination date of the Initial Offering as necessary in its discretion.
As of September 30, 2017, the Company had issued approximately 113,499,000 shares of Class A, Class I and Class T common stock (including shares of common stock issued pursuant to the DRIP) in the Initial Offering, resulting in receipt of gross proceeds of approximately $1,111,417,000, before selling commissions and dealer manager fees of approximately $85,508,000 and other offering costs of approximately $21,875,000. As of September 30, 2017, the Company had approximately $1,238,583,000 in Class A shares, Class I shares and Class T shares of common stock remaining in the Initial Offering.
Substantially all of the Company’s business is managed by the Advisor. Carter Validus Real Estate Management Services II, LLC, or the Property Manager, an affiliate of the Advisor, serves as the Company’s property manager. The Advisor and the Property Manager have received, and will continue to receive, fees for services related to the acquisition and operational stages. The Advisor will also be eligible to receive fees during the liquidation stage. SC Distributors, LLC, an affiliate of the Advisor, or the Dealer Manager, serves as the dealer manager of the Initial Offering. The Dealer Manager has received, and will continue to receive, fees for services related to the Initial Offering.
The Company was formed to invest primarily in quality income-producing commercial real estate, with a focus on data centers and healthcare properties, preferably with long-term leases to creditworthy tenants, as well as to make real estate-related investments that relate to such property types, which may include equity or debt interests, including securities, in other real estate entities. The Company also may originate or invest in real estate-related notes receivable. The Company expects real estate-related notes receivable originations and investments to be focused on first mortgage loans, but also may include real estate-related bridge loans, mezzanine loans and securitized notes receivable. As of September 30, 2017, the Company owned 49 real estate investments, consisting of 66 properties, located in 36 metropolitan statistical areas, or MSAs, and one micropolitan statistical area, or µSA.

Except as the context otherwise requires, “we,” “our,” “us,” and the “Company” referrefers to Carter Validus Mission Critical REIT II,Sila Realty Trust, Inc., the Operating Partnership and alltheir wholly-owned subsidiaries.
Note 2—Summary of Significant Accounting Policies
The summary of significant accounting policies presented below is designed to assist in understanding the Company’s condensed consolidated financial statements. Suchaccompanying condensed consolidated financial statements and the accompanying notes thereto are the representation of management. These accounting policies conform to accounting principleshave been prepared in accordance with United States generally accepted in the United States of America,accounting principles, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2022, and related notes thereto set forth in the Company’s Annual Report on Form 10-K, filed with the SEC on March 16, 2023. In the opinion of management, all adjustments, consisting of a normal and recurring nature considered for a fair presentation, have been included. Operating results for the three and nine months ended September 30, 20172023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.
The condensed consolidated balance sheet at December 31, 2016 has been derived from the audited consolidated financial statements at that date but does not include all the information and notes required by GAAP for complete financial statements. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company's audited consolidated financial statements as of and for the year ended December 31, 2016 and related notes thereto set forth in the Company's Annual Report on Form 10-K, filed with the SEC on March 16, 2017.2023.
Principles of Consolidation and Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of the Company, the Operating Partnership, and alltheir wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the condensed consolidated financial statements and accompanying notes in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. These estimates are made and evaluated on an ongoing basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates.
Concentration of Credit Risk and Significant Leases
As of September 30, 2017, the Company had cash on deposit, including restricted cash, in certain financial institutions that had deposits in excess of current federally insured levels; however, the Company has not experienced any losses in such accounts. The Company limits its cash investments to financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk on its cash deposits. To date, the Company has experienced no loss or lack of access to cash in its accounts.
As of September 30, 2017, the Company owned real estate investments in 36 MSAs, two of which accounted for 10.0% or more of contractual rental revenue. Real estate investments located in the Oklahoma City, Oklahoma MSA and the Atlanta-Sandy Springs-Roswell, Georgia MSA accounted for approximately 10.5% and 10.0%, respectively, of contractual rental revenue for the nine months ended September 30, 2017.
As of September 30, 2017, the Company had no exposure to tenant concentration that accounted for 10.0% or more of rental revenue.
Restricted Cash
Restricted cash consists of restricted cash held in an escrow and restricted bank deposits. Restricted cash held in escrow includes cash held in escrow accounts for capital improvements for certain properties as well as cash held by lenders in escrow accounts for tenant and capital improvements, repairs and maintenance and other lender reserves for certain properties,account in accordance with the respective lender’s loana tenant's lease agreement. Restricted cash held in escrow is reported in other assets net in the accompanying condensed consolidated balance sheets. See Note 6—"Other Assets, Net". Restricted bank deposits consist of tenant receipts for certain properties which are required to be deposited into lender-controlled accounts in accordance with the respective lender's loan agreement. Restricted bank deposits are reported in other assets, net in the accompanying condensed consolidated balance sheets.
On April 1, 2017, the Company adopted Accounting Standards Update, or ASU, 2016-18, Restricted Cash, or ASU 2016-18. ASU 2016-18 requires that a statement
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Table of cash flows explain the change during a reporting period in the total of cash, cash equivalents and restricted cash. This ASU states that transfers between cash, cash equivalents and restricted cash are not part of the Company’s operating, investing and financing activities. Therefore, restricted cash should be included with cash andContents

cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. As required, the Company retrospectively applied the guidance in ASU 2016-18 to the prior period presented, which resulted in a decrease of $2,490,000 in net cash used in investing activities on the condensed consolidated statements of cash flows for the nine months ended September 30, 2016.
The following table presents a reconciliation of the beginning of period and end of period cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the totals shown in the condensed consolidated statements of cash flows:flows (amounts in thousands):
Nine Months Ended
September 30,
20232022
Beginning of period:
Cash and cash equivalents$12,917 $32,359 
Restricted cash166 521 
Cash, cash equivalents and restricted cash$13,083 $32,880 
End of period:
Cash and cash equivalents$14,563 $17,291 
Restricted cash166 

166 
Cash, cash equivalents and restricted cash$14,729 $17,457 
  Nine Months Ended
September 30,
Beginning of period: 2017 2016
Cash and cash equivalents $50,446
 $31,262
Restricted cash 6,458
 1,927
Cash, cash equivalents and restricted cash $56,904
 $33,189
     
End of period:    
Cash and cash equivalents $74,488
 $49,090
Restricted cash 14,244
 4,417
Cash, cash equivalents and restricted cash $88,732
 $53,507
Share Repurchase ProgramReclassifications
The Company’s share repurchase program allowsCompany determined that certain expenses, previously presented within general and administrative expenses, are more closely related to the operations of its properties. As a result, these amounts have been reclassified to rental expenses for repurchases of shares of the Company’s common stock when certain criteria are met. The share repurchase program provides that all repurchases during any calendar year, including those redeemable upon death or a Qualifying Disability of a stockholder, are limited to those that can be funded with equivalent proceeds raised from the DRIP Offering during the prior calendar year and other operating funds, if any, as the board of directors, in its sole discretion, may reserve for this purpose.
Repurchases of shares of the Company’s common stock are at the sole discretion of the Company’s board of directors. The Company will limit the number of shares repurchased pursuantperiod to conform to the share repurchase program as follows: during any calendar year, the Company will not repurchase in excess of 5.0% of the number of shares of common stock outstanding on December 31st of the previous calendar year. In addition, the Company’s board of directors, in its sole discretion, may amend, suspend, reduce, terminate or otherwise change the share repurchase program upon 30 days' prior notice to the Company’s stockholders for any reason it deems appropriate.current period presentation.
Note 3—Real Estate Investments
Real Estate Property Acquisitions
During the nine months ended September 30, 2017,2023, the Company received valid repurchase requests related to 966,610 Class A shares and Class T shares of common stock (915,269 Class A shares and 51,341 Class T shares), all ofpurchased two real estate properties in two separate transactions, which were repurchaseddetermined to be asset acquisitions. The Company allocated the purchase price to tangible assets, consisting of land, building and improvements and tenant improvements, and intangible assets, consisting of in-place leases, based on the relative fair value method of allocating all accumulated costs.
The following table summarizes the consideration transferred and the purchase price allocation for acquisitions during the nine months ended September 30, 2023 (amounts in thousands):
Property DescriptionDate AcquiredOwnership PercentageConsideration Transferred
(amount in thousands)
West Palm Beach Healthcare Facility06/15/2023100%$9,920 
Burr Ridge Healthcare Facility09/27/2023100%59,902 
Total$69,822 
Total
Land$6,892 
Building and improvements51,337 
Tenant improvements1,826 
In-place leases9,767 
Total assets acquired$69,822 
The Company capitalized acquisition costs of approximately $158,000, which are included in the allocation of the real estate acquisitions presented above.
Real Estate Property Dispositions
On March 31, 2023, the Company sold one property for a sales price of $12,500,000, consisting of $5,000,000 in cash and $7,500,000 that was structured as a note receivable, which was collected in full on June 30, 2023. Interest income on the note receivable was $105,000 for an aggregate purchasethe nine months ended September 30, 2023, and is recorded in interest and other expenses, net, on the accompanying condensed consolidated statement of comprehensive income.
On September 29, 2023, the Company sold one property for a sales price of approximately $8,767,000 (an average$250,000.
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Table of $9.07 per share)Contents
Investment Risk Concentrations
As of September 30, 2023, the Company had one exposure to geographic concentration that accounted for at least 10.0% of rental revenue for the nine months ended September 30, 2023. Real estate properties located in the Houston-The Woodlands-Sugar Land, Texas metropolitan statistical area accounted for 10.4% of rental revenue for the nine months ended September 30, 2023.
As of September 30, 2023, the Company had one exposure to tenant concentration that accounted for at least 10.0% of rental revenue for the nine months ended September 30, 2023. The leases with tenants at properties under the common control of Post Acute Medical, LLC and its affiliates accounted for 14.3% of rental revenue for the nine months ended September 30, 2023.
Impairment Losses
The Company recorded impairment losses on real estate of $6,708,000 (including goodwill impairments of $1,582,000), for the nine months ended September 30, 2023, as a result of tenant related triggering events that occurred at certain properties. In addition, during the nine months ended September 30, 2023, the Company recorded an impairment of in-place lease and above-market lease intangible assets of $592,000 and $260,000, respectively. The fair values of these properties were determined based on the guidance in ASC 820, Fair Value Measurement. These impairments were allocated to the asset groups, for each respective property, on a pro-rata basis, which included land, buildings and improvements, and their related intangible assets.
During the nine months ended September 30, 2016,2022, the Company received valid repurchase requests related to 214,666 Class A sharesrecorded impairment losses on real estate of common stock, all$7,387,000 (including goodwill impairments of which were repurchased in full for an aggregate purchase price of approximately $2,043,000 (an average of $9.52 per share)$278,000). No shares of Class T common stock were requested to be, or were, repurchasedIn addition, during the nine months ended September 30, 2016. No shares2022, the Company recorded an impairment of Class I common stock were requestedan in-place lease intangible asset of $380,000. The property related to the 2022 impairments was sold on March 31, 2023.
Impairment losses on real estate (including goodwill impairments) are recorded as impairment losses in the accompanying condensed consolidated statements of comprehensive income. Impairments of in-place leases are included in depreciation and amortization in the accompanying condensed consolidated statements of comprehensive income. Impairments of above-market leases are recorded as a reduction to rental revenue in the accompanying condensed consolidated statements of comprehensive income.
Note 4—Intangible Assets, Net
Intangible assets, net, consisted of the following as of September 30, 2023 and December 31, 2022 (amounts in thousands, except weighted average remaining life amounts):
 September 30, 2023December 31, 2022
In-place leases, net of accumulated amortization of $98,193 and $83,788, respectively (with a weighted average remaining life of 8.3 years and 8.9 years, respectively)$148,800 $155,365 
Above-market leases, net of accumulated amortization of $6,676 and $6,451, respectively (with a weighted average remaining life of 7.0 years and 7.9 years, respectively)10,378 12,118 
$159,178 $167,483 
The aggregate weighted average remaining life of the intangible assets was 8.2 years and 8.8 years as of September 30, 2023 and December 31, 2022, respectively.
Amortization of intangible assets was $5,424,000 and $5,839,000 for the three months ended September 30, 2023 and 2022, respectively, and $17,630,000 and $17,557,000 for the nine months ended September 30, 2023 and 2022, respectively. Amortization of in-place leases is included in depreciation and amortization, and amortization of above-market leases is recorded as an adjustment to rental revenue in the accompanying condensed consolidated statements of comprehensive income.
Note 5—Intangible Liabilities, Net
Intangible liabilities, net, consisted of the following as of September 30, 2023 and December 31, 2022 (amounts in thousands, except weighted average remaining life amounts):
September 30, 2023December 31, 2022
Below-market leases, net of accumulated amortization of $7,043 and $5,923, respectively (with a weighted average remaining life of 7.6 years and 8.4 years, respectively)$10,826 $11,946 
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Amortization of below-market leases was $373,000 and $373,000 for the three months ended September 30, 2023 and 2022, respectively, and $1,120,000 and $1,106,000 for the nine months ended September 30, 2023 and 2022, respectively. Amortization of below-market leases is recorded as an adjustment to rental revenue in the accompanying condensed consolidated statements of comprehensive income.
Note 6—Leases
Lessor
Rental Revenue
The Company’s real estate properties are leased to tenants under operating leases with varying terms. Typically, the leases have provisions to extend the terms of the lease agreements. The Company retains substantially all of the risks and benefits of ownership of the real estate properties leased to tenants.
Future rent to be received from the Company's investments in real estate assets under the terms of non-cancellable operating leases in effect as of September 30, 2023, for the period ending December 31, 2023, and for each of the next four years ending December 31, and thereafter, are as follows (amounts in thousands):

September 30, 2023
Period ending December 31, 2023$44,254 
2024178,522 
2025174,706 
2026169,052 
2027165,342 
Thereafter990,386 
Total$1,722,262 
Lessee
The Company is subject to various non-cancellable operating lease agreements on which certain of its properties reside and for its corporate offices.
The Company's operating leases do not provide implicit interest rates. In order to calculate the present value of the remaining operating lease payments, the Company used incremental borrowing rates, or were, repurchasedIBRs, adjusted for a number of factors. The determination of an appropriate IBR involves multiple inputs and judgments. The Company determined its IBRs considering the general economic environment, term of the underlying leases, and various financing and asset specific adjustments to ensure the IBRs are appropriate for the intended use of the underlying operating leases.
The effects of the Company's leases are recorded in right-of-use assets and lease liabilities on the condensed consolidated balance sheets.
The weighted average remaining lease term for the Company's leases was 36.7 years as of September 30, 2023.
The future rent payments, discounted by the Company's IBRs, under non-cancellable operating leases in effect as of September 30, 2023, for the period ending December 31, 2023, and for each of the next four years ending December 31 and thereafter, are as follows (amounts in thousands):
September 30, 2023
Period ending December 31, 2023$671 
20242,746 
20252,768 
20262,715 
20272,681 
Thereafter107,456 
Total undiscounted rental payments119,037 
Less imputed interest(77,777)
Total lease liabilities$41,260 
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The following table provides details of the Company's total lease costs for the three and nine months ended September 30, 2023 and 2022 (amounts in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
Location in Condensed Consolidated Statements of Comprehensive Income2023202220232022
Operating lease costs:
Ground lease costs (1)
Rental expenses$682 $615 $2,045 $1,562 
Corporate operating lease costsGeneral and administrative expenses175 182 551 559 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$166 $135 $564 $354 
(1)The Company receives reimbursements from tenants for certain operating ground leases, which are recorded as rental revenue in the accompanying condensed consolidated statements of comprehensive income.
Note 7—Other Assets
Other assets consisted of the following as of September 30, 2023 and December 31, 2022 (amounts in thousands):
 September 30, 2023December 31, 2022
Deferred financing costs, related to the revolver portion of the credit facility, net of accumulated amortization of $1,654 and $889, respectively$2,470 $3,178 
Leasing commissions, net of accumulated amortization of $174 and $167, respectively610 775 
Restricted cash166 166 
Tenant receivables1,966 1,736 
Straight-line rent receivable64,805 62,457 
Prepaid and other assets3,906 3,865 
Derivative assets29,423 27,990 
$103,346 $100,167 
Note 8—Accounts Payable and Other Liabilities
Accounts payable and other liabilities consisted of the following as of September 30, 2023 and December 31, 2022 (amounts in thousands):
 September 30, 2023December 31, 2022
Accounts payable and accrued expenses$4,236 $5,387 
Accrued interest expense1,903 1,941 
Accrued property taxes4,606 2,421 
Accrued personnel costs2,645 3,940 
Distributions payable to stockholders7,518 7,719 
Performance DSUs distributions payable789 573 
Tenant deposits877 877 
Deferred rental income7,297 7,761 
$29,871 $30,619 
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Note 9—Credit Facility
The Company's outstanding credit facility as of September 30, 2023 and December 31, 2022 consisted of the following (amounts in thousands):
September 30, 2023December 31, 2022
Variable rate revolving line of credit$50,000 $8,000 
Variable rate term loans fixed through interest rate swaps525,000 485,000 
Variable rate term loans30,000 90,000 
Total credit facility, principal amount outstanding605,000 583,000 
Unamortized deferred financing costs related to credit facility term loans(1,948)(2,412)
Total credit facility, net of deferred financing costs$603,052 $580,588 
Significant activities regarding the credit facility during the nine months ended September 30, 20172023 include:
•On February 17, 2023, the Company entered into an interest rate swap agreement to hedge $40,000,000 of its variable rate term loans with an effective date of March 1, 2023.
•On March 8, 2023, the Company repaid $8,000,000 on its revolving line of credit with cash flows from operations.
•On April 13, 2023, the Company repaid $10,000,000 on its 2024 term loan with proceeds from a disposition and 2016.cash flows from operations.
•On July 13, 2023, the Company repaid $10,000,000 on its 2024 term loan with proceeds from the collection of a note receivable related to a disposition and cash flows from operations.
•On September 26, 2023, the Company drew $50,000,000 on its revolving line of credit to fund an acquisition.
The principal payments due on the credit facility as of September 30, 2023, for the period ending December 31, 2023, and for each of the next four years ending December 31 and thereafter, are as follows (amounts in thousands):
September 30, 2023
Period ending December 31, 2023$— 
2024 (1)
280,000 
2025— 
202650,000 
2027— 
Thereafter275,000 
$605,000 
(1)The 2024 term loan has a maturity date of December 31, 2024, and, at the Company's election, may be extended for a period of six-months on no more than two occasions, subject to the satisfaction of certain conditions, including the payment of an extension fee.
Note 10—Fair Value
ASC 820, Fair Value Measurements and Disclosures, or ASC 820, defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosures about fair value measurements. ASC 820 emphasizes that fair value is intended to be a market-based measurement, as opposed to a transaction-specific measurement.
Fair value is defined by ASC 820 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Assets and liabilities are measured using inputs from three levels of the fair value hierarchy, as follows:
Level 1—Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are

observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs).
Level 3—Unobservable inputs, only used to the extent that observable inputs are not available, reflect the Company’s assumptions about the pricing of an asset or liability.
The following describes the methods the Company used to estimate the fair value of the Company’s financial assets and liabilities:
Cash and cash equivalents, restricted cash, tenant receivables, real estate escrow deposits, prepaid and other assets, accounts payable and accruedother liabilities—The Company consideredconsiders the carrying values of these financial instruments, assets and liabilities, to approximate fair value because of the short period of time between origination of the instruments and their expected realization.
Notes payable—Fixed RateCredit facility—The outstanding principal of the credit facility was $605,000,000 and $583,000,000, which approximated its fair value is estimated by discountingdue to the expected cash flows on notes payable at current rates at which management believes similar loans would be made consideringvariable nature of the terms as of September 30, 2023 and conditions of the loan and prevailing market interest rates.December 31, 2022, respectively.
Notes payable—Variable Rate—The carrying value of variable rate notes payable approximates fair value because the interest rate adjusts with current market.
Secured credit facility—Fixed Rate—The fair value is estimated by discounting the expected cash flows on the fixed rate secured credit facility at current rates at which management believes similar borrowings would be made considering the terms and conditions of the borrowings and prevailing market interest rates.
Secured credit facility—Variable Rate—The carrying value of the variable rate secured credit facility approximates fair value as the interest is calculated at the London Interbank Offered Rate, plus an applicable margin. The interest rate resets to market on a monthly basis. The fair value of the Company's variable rate secured credit facility is estimated based on the interest rates currently offered to the Company by its financial institutions.
Derivative instruments—The Company’s derivative instruments consist of interest rate swaps. These swaps are carried at fair value to comply with the provisions of ASC 820. The fair value of these instruments is determined using interest rate market pricing models. The Company incorporated credit valuation adjustments to appropriately reflect the Company’s nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. The Company determined that the majority of the inputs used to value its interest rate swaps fall within Level 2 of the fair value hierarchy. The
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credit valuation adjustments associated with these instruments utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and the respective counterparty. However, as of September 30, 2023, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of its interest rate swaps. As a result, the Company determined that its interest rate swaps valuation in its entirety is classified in Level 2 of the fair value hierarchy.
Considerable judgment is necessary to develop estimated fair values of financial assets and liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize or be liable for on disposition of the financial assets and liabilities.
Earnings Per Share
The Company calculates basic earnings per share by dividing net income attributable to common stockholders for the period by the weighted average shares of its common stock outstanding for that period. Diluted earnings per share are computed based on the weighted average number of shares outstanding and all potentially dilutive securities. Shares of non-vested restricted common stock give rise to potentially dilutive shares of common stock. For the three months ended September 30, 2017 and 2016, diluted earnings per share reflected the effect of approximately 17,000 and 15,000, respectively, of non-vested shares of restricted stock that were outstanding as of such period. For the nine months ended September 30, 2017 and 2016, diluted earnings per share reflected the effect of approximately 19,000 and 16,000, respectively, of non-vested shares of restricted stock that were outstanding as of such period.
Recently Issued Accounting Pronouncements
On May 28, 2014, the Financial Accounting Standards Board, or the FASB, issued ASU 2014-09, Revenue from Contracts with Customers, or ASU 2014-09. The objective of ASU 2014-09 is to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle, which may require more judgment and estimates within the revenue recognition process than are required under existing GAAP. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date, or ASU 2015-14. ASU 2015-14 defers the effective date of ASU 2014-09 by one year to fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted as of the original effective date, which was annual reporting periods beginning after December 15, 2016, and the interim periods within that year. On March 17, 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers Principal versus Agent Considerations (Reporting Revenue Gross versus Net), or ASU 2016-08, which clarifies the implementation guidance on principal versus agent considerations in the new revenue recognition standard. ASU 2016-08 clarifies that an entity is a principal when it controls the specified good or service before that good or service is transferred to the customer, and is an agent when it does not control the

specified good or service before it is transferred to the customer. The effective date and transition of this update is the same as the effective date and transition of ASU 2015-14.
As the majority of the Company's revenue is derived from real estate lease contracts, as discussed in relation to ASU 2016-02, Leases, the Company does not expect that the adoption of ASU 2014-09 or related amendments and modifications will have a material impact on the condensed consolidated financial statements. The Company has preliminarily determined the revenue stream that could be most significantly impacted by this ASU relates to parking revenue. The Company expects that the revenue recognition from parking revenue will be generally consistent with current recognition methods, and therefore does not expect material changes to the condensed consolidated financial statements as a result of adoption. For the three and nine months ended September 30, 2017, parking revenue was less than 10% of consolidated revenue. Recoveries from tenants to be impacted by ASU 2014-09 will not be addressed until the Company's adoption of ASU 2016-02, Leases, considering its revisions to accounting for common area maintenance described below. The Company also continues to evaluate the scope of revenue-related disclosures it expects to provide pursuant to the new requirements. The Company expects to adopt the standard using the modified retrospective approach, which requires cumulative adjustments as of the date of adoption. The Company will adopt the standard on its effective date beginning with the first quarter of 2018.
On February 25, 2016, the FASB issued ASU 2016-02, Leases, or ASU 2016-02. ASU 2016-02 establishes the principles to increase the transparency about the assets and liabilities arising from leases. ASU 2016-02 results in a more faithful representation of the rights and obligations arising from leases by requiring lessees to recognize the lease assets and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions and aligns lessor accounting and sale leaseback transactions guidance more closely to comparable guidance in Topic 606, Revenue from Contractswith Customers, and Topic 610, Other Income. Under ASU 2016-02, a lessee is required to record a right of use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. The Company is a lessee on a limited number of ground leases, which will result in the recognition of a right of use asset and lease liability upon the adoption of ASU 2016-02. Lessor accounting remains largely unchanged, apart from the narrower scope of initial direct costs that can be capitalized. The new standard will result in certain costs, such as legal costs related to lease negotiations, being expensed rather than capitalized. In addition, ASU 2016-02 requires lessors to identify the lease and non-lease components, such as the reimbursement of common area maintenance, contained within each lease. The non-lease components would have to be evaluated under the revenue recognition guidance of ASU 2014-09. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is in process of evaluating the impact ASU 2016-02 will have on the Company's condensed consolidated financial statements.
On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses, or ASU 2016-13. ASU 2016-13 requires more timely recording of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology in current GAAP. ASU 2016-13 is effective for fiscal years, and interim periods within, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within, beginning after December 15, 2018. The Company is in the process of evaluating the impact ASU 2016-13 will have on the Company’s condensed consolidated financial statements. The Company believes that certain financial statements' accounts will be impacted by the adoption of ASU 2016-13, including allowances for doubtful accounts with respect to accounts receivable and straight-line rents receivable. 
On February 23, 2017, the FASB issued ASU 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, or ASU 2017-05. ASU 2017-05 clarifies the scope of asset derecognition guidance and accounting for partial sales of nonfinancial assets. Partial sales of nonfinancial assets are common in the real estate industry and include transactions in which the seller retains an equity interest in the entity that owns the assets or has an equity interest in the buyer. ASU 2017-05 is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within those fiscal years. Early adoption is permitted. The Company is in process of evaluating the impact ASU 2017-05 will have on the Company’s condensed consolidated financial statements. The Company does not expect that the adoption of ASU 2017-05 will have a material impact on the condensed consolidated financial statements.
On August 28, 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, or ASU 2017-12. The objectives of ASU 2017-12 are to (i) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (ii) reduce the complexity of and simplify the application of hedge accounting by preparers. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018,

and interim periods therein. Early adoption is permitted. The Company is in process of evaluating the impact of ASU 2017-12 will have on the Company’s condensed consolidated financial statements.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the Company’s condensed consolidated financial position or results of operations.
Note 3—Real Estate Investments
During the nine months ended September 30, 2017, the Company purchased 15 real estate properties, all of which were determined to be asset acquisitions. Upon the acquisition of the real estate properties determined to be asset acquisitions, the Company allocates the purchase price of such properties to acquired tangible assets, consisting of land and buildings and improvements, and acquired intangible assets, based on a relative fair value method allocating all accumulated costs.
The following table summarizes the consideration transferred for the properties acquired during the nine months ended September 30, 2017:
Property DescriptionDate
Acquired		 Ownership
Percentage		 Purchase Price
(amounts in thousands)
Tempe Data Center01/26/2017 100% $16,224
Norwalk Data Center03/30/2017 100% 58,835
Aurora Healthcare Facility03/30/2017 100% 11,531
Texas Rehab - Austin03/31/2017 100% 36,945
Texas Rehab - Allen03/31/2017 100% 23,691
Texas Rehab - Beaumont03/31/2017 100% 9,649
Charlotte Data Center II05/15/2017 100% 16,646
250 Williams Atlanta Data Center06/15/2017 100% 168,588
Sunnyvale Data Center06/28/2017 100% 38,105
Texas Rehab - San Antonio06/29/2017 100% 14,853
Cincinnati Data Center06/30/2017 100% 10,503
Silverdale Healthcare Facility08/25/2017 100% 9,856
Silverdale Healthcare Facility II09/20/2017 100% 7,144
King of Prussia Data Center09/28/2017 100% 19,885
Tempe Data Center II09/29/2017 100% 15,568
Total    $458,023
The following table summarizes management's allocation of the acquisitions during the nine months ended September 30, 2017, based on a relative fair value method allocating all accumulated costs (amounts in thousands):
 Total
Land$54,267
Buildings and improvements363,970
In-place leases56,423
Above market leases1,448
Total assets acquired476,108
Below market leases(17,270)
Liabilities assumed at acquisitions(815)
Total liabilities acquired(18,085)
Net assets acquired$458,023
Acquisition fees and costs associated with transactions determined to be asset acquisitions are capitalized. The Company capitalized acquisition fees and costs of approximately $1,503,000 and $0 related to properties acquired during the three months ended September 30, 2017 and 2016, respectively, and $11,619,000 and $2,037,000 during the nine months ended September 30, 2017 and 2016, respectively. The Company expensed acquisition fees and expenses of approximately of

approximately $1,684,000 and $5,052,000, respectively, for the three and nine months ended September 30, 2016 in connection with the acquisition of properties determined to be business combinations. The total amount of all acquisition fees and costs is limited to 6.0% of the contract purchase price of a property. The contract purchase price is the amount actually paid or allocated in respect of the purchase, development, construction or improvement of a property exclusive of acquisition fees and costs. For the three and nine months ended September 30, 2017 and 2016, acquisition fees and costs did not exceed 6.0% of the contract purchase price of the Company's acquisitions during such periods.
Note 4—Acquired Intangible Assets, Net
Acquired intangible assets, net consisted of the following as of September 30, 2017 and December 31, 2016 (amounts in thousands, except weighted average life amounts):
 September 30, 2017 December 31, 2016
In-place leases, net of accumulated amortization of $17,369 and $7,918, respectively (with a weighted average remaining life of 10.9 years and 12.8 years, respectively)$144,948
 $97,232
Above-market leases, net of accumulated amortization of $225 and $58, respectively (with a weighted average remaining life of 3.1 years and 7.4 years, respectively)1,477
 196
Ground lease interest, net of accumulated amortization of $26 and $19, respectively (with a weighted average remaining life of 66.0 years and 66.8 years, respectively)618
 625
 $147,043
 $98,053
The aggregate weighted average remaining life of the acquired intangible assets was 11.0 years and 13.1 years as of September 30, 2017 and December 31, 2016, respectively.
Amortization of the acquired intangible assets for the three months ended September 30, 2017 and 2016 was $4,422,000 and $1,496,000, respectively, and for the nine months ended September 30, 2017 and 2016 was $9,625,000 and $3,995,000, respectively. Amortization of the above-market leases is recorded as an adjustment to rental and parking revenue, amortization expense for the in-place leases is included in depreciation and amortization and amortization expense for the ground lease interest is included in rental and parking expenses in the accompanying condensed consolidated statements of comprehensive income.
Note 5—Intangible Lease Liabilities, Net
Intangible lease liabilities, net consisted of the following as of September 30, 2017 and December 31, 2016 (amounts in thousands, except weighted average life amounts):
 September 30, 2017 December 31, 2016
Below-market leases, net of accumulated amortization of $1,771 and $634, respectively (with a weighted average remaining life of 9.1 years and 13.6 years, respectively)$23,006
 $6,873

$23,006
 $6,873
Amortization of below-market leases for the three months ended September 30, 2017 and 2016 was $751,000 and $134,000, respectively, and for the nine months ended September 30, 2017 and 2016 was $1,137,000 and $402,000, respectively. Amortization of below-market leases is recorded as an adjustment to rental and parking revenue in the accompanying condensed consolidated statements of comprehensive income.

Note 6—Other Assets, Net
Other assets, net consisted of the following as of September 30, 2017 and December 31, 2016 (amounts in thousands):
 September 30, 2017 December 31, 2016
Deferred financing costs, related to the revolver portion of the secured credit facility, net of accumulated amortization of $2,984 and $1,789, respectively$2,269
 $3,071
Real estate escrow deposits327
 290
Restricted cash14,244
 6,458
Tenant receivable4,719
 3,126
Straight-line rent receivable16,411
 8,725
Prepaid and other assets5,412
 1,087
Derivative assets1,894
 1,782
 $45,276
 $24,539
Note 7—Accounts Payable and Other Liabilities
Accounts payable and other liabilities as of September 30, 2017 and December 31, 2016, were comprised of the following (amounts in thousands):
 September 30, 2017 December 31, 2016
Accounts payable and accrued expenses$10,387
 $7,657
Accrued interest expense2,193
 945
Accrued property taxes4,152
 1,164
Distributions payable to stockholders5,574
 4,336
Tenant deposits822
 1,551
Deferred rental income2,668
 733
Derivative liabilities613
 798
 $26,409
 $17,184
Note 8—Notes Payable and Secured Credit Facility
The Company's debt outstanding as of September 30, 2017 and December 31, 2016 consisted of the following (amounts in thousands):
 September 30, 2017 December 31, 2016
Notes payable:   
Fixed rate notes payable$214,700
 $51,000
Variable rate notes payable fixed through interest rate swaps186,590
 71,540
Variable rate notes payable12,545
 30,450
Total notes payable, principal amount outstanding413,835
 152,990
Unamortized deferred financing costs related to notes payable(4,038) (1,945)
Total notes payable, net of deferred financing costs409,797
 151,045
Secured credit facility:   
Revolving line of credit120,000
 120,000
Term loan100,000
 100,000
Total secured credit facility, principal amount outstanding220,000
 220,000
Unamortized deferred financing costs related to the term loan of the secured credit facility(676) (876)
Total secured credit facility, net of deferred financing costs219,324
 219,124
Total debt outstanding$629,121
 $370,169

Significant debt activity since December 31, 2016, excluding scheduled principal payments, includes:
During the nine months ended September 30, 2017, the Company drew $175,000,000 and repaid $175,000,000 on its secured credit facility.
During the nine months ended September 30, 2017, the Company increased the borrowing base availability under the secured credit facility by $106,531,000 by adding 11 properties to the aggregate pool availability and removed a property from the collateralized pool, which decreased the aggregate pool availability by $18,645,000. This resulted in the net increase of the borrowing base availability of $87,886,000.
As of September 30, 2017, the Company had an aggregate pool availability under the secured credit facility of $384,419,000 and an aggregate outstanding principal balance of $220,000,000. As of September 30, 2017, $164,419,000 remained to be drawn on the secured credit facility.
During the nine months ended September 30, 2017, the Company entered into six notes payable collateralized by real estate assets in the principal amount of $260,845,000 at initiation of the respective loans.
During the nine months ended September 30, 2017, the Company entered into four interest rate swap agreements to effectively fix the London Interbank Offered Rate, or LIBOR, on $75,000,000 of the term loan of the secured credit facility and two interest rate swap agreements of variable rate notes payable in the aggregate amount of $84,600,000.
The principal payments due on the notes payable and secured credit facility for the three months ending December 31, 2017 and for each of the next four years ending December 31 and thereafter, are as follows (amounts in thousands):
Year Total Amount
Three months ending December 31, 2017 $65
2018 120,314
2019 101,880
2020 4,542
2021 154,971
Thereafter 252,063
  $633,835

Note 9—Related-Party Transactions and Arrangements
The Company reimburses the Advisor and its affiliates for organization and offering expenses it incurs on the Company’s behalf, but only to the extent the reimbursement would not cause the selling commissions, dealer manager fees, distribution and servicing fees and other organization and offering expenses to exceed 15% of the gross proceeds of the Initial Offering. The Company expects that organization and offering expenses associated with the Initial Offering (other than selling commissions, dealer manager fees and distribution and servicing fees) will be approximately 1.90% of the gross proceeds. As of September 30, 2017, since inception, the Advisor and its affiliates incurred approximately $16,896,000 on the Company’s behalf in offering costs, the majority of which was incurred by the Dealer Manager. Of this amount, approximately $566,000 of other organization and offering costs remained accrued as of September 30, 2017. As of September 30, 2017, since inception, the Advisor paid approximately $188,000 to an affiliate of the Dealer Manager in other offering costs on the Company's behalf. Other organization expenses are expensed as incurred and offering costs are charged to stockholders’ equity as incurred.
The Company pays to the Advisor 2.0% of the contract purchase price of each property or asset acquired. For the three months ended September 30, 2017 and 2016, the Company incurred approximately $1,019,000 and $1,590,000, respectively, and for the nine months ended September 30, 2017 and 2016, the Company incurred $8,975,000 and $5,760,000, respectively, in acquisition fees to the Advisor or its affiliates. In addition, the Company reimburses the Advisor for acquisition expenses incurred in connection with the selection and acquisition of properties or real estate-related investments (including expenses relating to potential investments that the Company does not close), such as legal fees and expenses, costs of real estate due diligence, appraisals, non-refundable option payments on properties not acquired, travel and communications expenses, accounting fees and expenses and title insurance premiums, whether or not the property was acquired. The Company expects these expenses will be approximately 0.75% of the purchase price of each property or real estate-related investment.
The Company pays to the Advisor an asset management fee calculated on a monthly basis in an amount equal to 1/12th of 0.75% of gross assets (including amounts borrowed), which is payable monthly in arrears. For the three months ended September 30, 2017 and 2016, the Company incurred approximately $2,698,000 and $1,227,000, respectively, and for the nine months ended September 30, 2017 and 2016, the Company incurred approximately $7,055,000 and $3,240,000, respectively, in asset management fees.
In connection with the rental, leasing, operation and management of the Company’s properties, the Company pays the Property Manager and its affiliates aggregate fees equal to 3.0% of gross revenues from the properties managed, or property management fees. The Company will reimburse the Property Manager and its affiliates for property-level expenses that any of them pay or incur on the Company’s behalf, including salaries, bonuses and benefits of persons employed by the Property Manager and its affiliates except for the salaries, bonuses and benefits of persons who also serve as one of its executive officers. The Property Manager and its affiliates may subcontract the performance of their duties to third parties and pay all or a portion of the property management fee to the third parties with whom they contract for these services. If the Company contracts directly with third parties for such services, it will pay them customary market fees and may pay the Property Manager an oversight fee equal to 1.0% of the gross revenues of the properties managed. In no event will the Company pay the Property Manager or any affiliate both a property management fee and an oversight fee with respect to any particular property. The Company also will pay the Property Manager a separate fee for the one-time initial rent-up, leasing-up of newly constructed properties or re-leasing to existing tenants. For the three months ended September 30, 2017 and 2016, the Company incurred approximately $913,000 and $353,000, respectively, and for the nine months ended September 30, 2017 and 2016, the Company incurred approximately $2,322,000 and $964,000, respectively, in property management fees to the Property Manager, which are recorded in rental and parking expenses in the accompanying condensed consolidated statements of comprehensive income. For the three and nine months ended September 30, 2017, the Company incurred $884,000 and $907,000, respectively, in leasing commissions to the Property Manager. As of September 30, 2016, the Company had not incurred any leasing commissions to the Property Manager. Leasing commission fees are capitalized in other assets, net in the accompanying condensed consolidated balance sheets.
For acting as general contractor and/or construction manager to supervise or coordinate projects or to provide major repairs or rehabilitation on our properties, the Company may pay the Property Manager up to 5.0% of the cost of the projects, repairs and/or rehabilitation, as applicable, or construction management fees. For the three months ended September 30, 2017 and 2016, the Company incurred approximately $172,000 and $265,000, respectively, and for the nine months ended September 30, 2017 and 2016, the Company incurred approximately $575,000 and $265,000, respectively, in construction management fees to the Property Manager. Construction management fees are capitalized in real estate, net in the accompanying condensed consolidated balance sheets.
The Company reimburses the Advisor for all expenses it paid or incurred in connection with the services provided to the Company, subject to certain limitations. Expenses in excess of the operating expenses in the four immediately preceding quarters that exceeds the greater of (a) 2.0% of average invested assets or (b) 25% of net income, subject to certain adjustments, will not be reimbursed unless the independent directors determine such excess expenses are justified. The Company will not reimburse the Advisor for personnel costs in connection with services for which the Advisor receives an

acquisition fee or a disposition fee. For the three months ended September 30, 2017 and 2016, the Advisor allocated approximately $381,000 and $337,000, respectively, and for the nine months ended September 30, 2017 and 2016, the Advisor allocated $1,228,000 and $935,000 respectively, in operating expenses to the Company, which are recorded in general and administrative expenses in the accompanying condensed consolidated statements of comprehensive income.
On May 15, 2017 the Advisor employed Gael Ragone, who is the daughter of John E. Carter, our chief executive officer and chairman of our board of directors, as Vice President of Product Management of Carter Validus Advisors II, LLC. The Company directly reimburses the Advisor any amounts of Gael's salary that are allocated to the Company. For the three and nine months ended September 30, 2017, the Advisor allocated approximately $41,000 and $58,000, respectively, which are included in general and administrative expenses in the Company's condensed consolidated statements of comprehensive income.
The Company will pay its Advisor or its affiliates, if it provides a substantial amount of services (as determined by a majority of the Company’s independent directors) in connection with the sale of properties, a disposition fee equal to up to the lesser of 1.0% of the contract sales price and one-half of the total brokerage commission paid if a third party broker is also involved, without exceeding the lesser of 6.0% of the contract sales price or a reasonable, customary and competitive real estate commission. As of September 30, 2017, the Company has not incurred any disposition fees to the Advisor or its affiliates.
Upon the sale of the Company, the Advisor will receive 15% of the remaining net sale proceeds after return of capital contributions plus payment to investors of a 6.0% annual cumulative, non-compounded return on the capital contributed by investors, or the subordinated participation in net sale proceeds. As of September 30, 2017, the Company has not incurred any subordinated participation in net sale proceeds to the Advisor or its affiliates.
Upon the listing of the Company’s shares on a national securities exchange, the Advisor will receive 15.0% of the amount by which the sum of the Company’s adjusted market value plus distributions exceeds the sum of the aggregate capital contributed by investors plus an amount equal to a 6.0% annual cumulative, non-compounded return to investors, or the subordinated incentive listing fee. As of September 30, 2017, the Company has not incurred any subordinated incentive listing fees to the Advisor or its affiliates.
Upon termination or non-renewal of the advisory agreement, with or without cause, the Advisor will be entitled to receive subordinated termination fees from the Operating Partnership equal to 15% of the amount by which the sum of the Company’s adjusted market value plus distributions exceeds the sum of the aggregate capital contributed by investors plus an amount equal to an annual 6.0% cumulative, non-compounded return to investors. In addition, the Advisor may elect to defer its right to receive a subordinated termination fee upon termination until either shares of the Company’s common stock are listed and traded on a national securities exchange or another liquidity event occurs. As of September 30, 2017, the Company has not incurred any subordinated termination fees to the Advisor or its affiliates.
The Company pays the Dealer Manager selling commissions of up to 7.0% of the gross offering proceeds per Class A share and up to 3.0% of gross offering proceeds per Class T share. All selling commissions are expected to be re-allowed to participating broker-dealers. The Company does not pay selling commissions with respect to Class I shares and shares of any class sold pursuant to the DRIP. In addition, the Company pays the Dealer Manager a dealer manager fee of up to 3.0% of gross offering proceeds from the sale of Class A and Class T shares. The Dealer Manager may receive up to 2.0% of the gross offering proceeds from the sale of Class I shares as a dealer manager fee, of which 1.0% will be funded by our Advisor without reimbursement from us. The 1.0% of the dealer manager fee paid from offering proceeds will be waived in the event an investor purchases Class I shares through a registered investment advisor that is not affiliated with a broker dealer. The dealer manager fee may be partially re-allowed to participating broker-dealers. No dealer manager fees will be paid in connection with purchases of shares of any class made pursuant to the DRIP. For the three months ended September 30, 2017 and 2016, the Company incurred approximately $6,065,000 and $4,994,000, respectively, and for the nine months ended September 30, 2017 and 2016, the Company incurred approximately $16,323,000 and $19,938,000, respectively, for selling commissions and dealer manager fees in connection with the Initial Offering to the Dealer Manager.
The Company pays the Dealer Manager a distribution and servicing fee with respect to its Class T shares that are sold in the primary offering of the Initial Offering that accrues daily in an amount equal to 1/365th of 1.0% of the most recent offering price per Class T share sold in the primary offering on a continuous basis from year to year; provided, however, that upon the termination of the primary offering of the Initial Offering, the distribution and servicing fee will accrue daily in an amount equal to 1/365th of 1.0% of the most recent estimated NAV per Class T share on a continuous basis from year to year. The Dealer Manager will reallow all of the distribution and servicing fees with respect to Class T shares sold in the primary offering of the Initial Offering to participating broker-dealers; provided, however, effective June 1, 2017, a participating broker-dealer may give written notice to the Dealer Manager that it waives all or a portion of the reallowance of the distribution and servicing fee, which waiver shall be irrevocable and will not retroactively apply to Class T shares that were previously sold through such participating broker-dealer. Termination of such payment will commence on the earliest to occur of the following: (i) a listing of the Class T shares on a national securities exchange; (ii) following the completion of the Initial Offering, the date on which

total underwriting compensation in the Initial Offering equals (a) 10% of the gross proceeds from our primary offering of the Initial Offering less (b) the total amount of distribution and servicing fees waived by participating broker-dealers; (iii) the date on which there are no longer any Class T shares outstanding; (iv) the fourth anniversary of the last day of the fiscal quarter in which the Company's primary offering of the Initial Offering terminates; (v) with respect to a Class T share sold in the primary offering of the Initial Offering, the date on which a participating broker-dealer receives (a) total underwriting compensation equal to 10% of the gross offering proceeds of such Class T share less (b) the amount of any waived distribution and servicing fees by such participating broker-dealer; or (vi) the date on which the holder of such Class T share or its agent notifies the Company or its agent that he or she is represented by a new participating broker-dealer; provided that the Company will continue paying the distribution and servicing fee, which shall be re-allowed to the new participating broker-dealer, if the new participating broker-dealer enters into a participating broker-dealer agreement with the Dealer Manager or otherwise agrees to provide the services set forth in the dealer manager agreement.
The distribution and servicing fee is paid monthly in arrears. The distribution and servicing fee will not be payable with respect to Class T shares issued under the DRIP or in connection with Class A shares and Class I shares. For the three months ended September 30, 2017 and 2016, the Company incurred approximately $2,572,000 and $1,420,000, respectively, and for the nine months ended September 30, 2017 and 2016, the Company incurred approximately $7,031,000 and $1,420,000, respectively, in distribution and servicing fees to the Dealer Manager in connection with the Initial Offering.
Accounts Payable Due to Affiliates
The following amounts were due to affiliates as of September 30, 2017 and December 31, 2016 (amounts in thousands):
Entity Fee September 30, 2017 December 31, 2016
Carter Validus Advisors II, LLC and its affiliates Asset management fees $928
 $627
Carter Validus Real Estate Management Services II, LLC Property management fees 439
 252
Carter Validus Real Estate Management Services II, LLC Construction management fees 67
 323
Carter Validus Advisors II, LLC and its affiliates General and administrative costs 156
 138
Carter Validus Advisors II, LLC and its affiliates Offering costs 566
 289
SC Distributors, LLC Distribution and servicing fees 11,506
 5,750
Carter Validus Advisors II, LLC and its affiliates Acquisition expenses and fees 7
 5
Carter Validus Real Estate Management Services II, LLC Leasing commissions 883
 —

   $14,552
 $7,384
Note 10—Segment Reporting
Management reviews the performance of individual properties and aggregates individual properties based on operating criteria into two reportable segments—commercial real estate investments in data centers and healthcare, and makes operating decisions based on these two reportable segments. The Company’s commercial real estate investments in data centers and healthcare are based on certain underwriting assumptions and operating criteria, which are different for data centers and healthcare. There were no intersegment sales or transfers during the nine months ended September 30, 2017 and 2016.
The Company evaluates performance based on net operating income of the individual properties in each segment. Net operating income, a non-GAAP financial measure, is defined as total revenues, less rental and parking expenses, which excludes depreciation and amortization, general and administrative expenses, acquisition related expenses, asset management fees and interest expense, net. The Company believes that segment net operating income serves as a useful supplement to net income because it allows investors and management to measure unlevered property-level operating results and to compare operating results to the operating results of other real estate companies between periods on a consistent basis. Segment net operating income should not be considered as an alternative to net income determined in accordance with GAAP as an indicator of financial performance, and accordingly, the Company believes that in order to facilitate a clear understanding of the consolidated historical operating results, segment net operating income should be examined in conjunction with net income as presented in the accompanying condensed consolidated financial statements and data included elsewhere in this Quarterly Report on Form 10-Q.
General and administrative expenses, acquisition related expenses, asset management fees, depreciation and amortization and interest expense, net are not allocated to individual segments for purposes of assessing segment performance.

Non-segment assets primarily consist of corporate assets, including cash and cash equivalents, real estate and escrow deposits, deferred financing costs attributable to the revolving line of credit portion of the Company's secured credit facility and other assets not attributable to individual properties.

Summary information for the reportable segments during the three and nine months ended September 30, 2017 and 2016, is as follows (amounts in thousands):
 Data Center Healthcare Three Months Ended
September 30, 2017
Revenue:     
Rental, parking and tenant reimbursement revenue$19,882
 $16,323
 $36,205
Expenses:     
Rental and parking expenses(6,092) (2,276) (8,368)
Segment net operating income$13,790
 $14,047
 27,837
      
Expenses:     
General and administrative expenses    (1,062)
Asset management fees    (2,698)
Depreciation and amortization    (11,852)
Income from operations    12,225
Interest expense, net    (6,786)
Net income attributable to common stockholders    $5,439
 Data Center Healthcare Three Months Ended
September 30, 2016
Revenue:     
Rental, parking and tenant reimbursement revenue$2,497
 $11,097
 $13,594
Expenses:     
Rental and parking expenses(440) (1,354) (1,794)
Segment net operating income$2,057
 $9,743
 11,800
      
Expenses:     
General and administrative expenses    (836)
Acquisition related expenses    (1,821)
Asset management fees    (1,227)
Depreciation and amortization    (4,782)
Income from operations    3,134
Interest expense, net    (626)
Net income attributable to common stockholders    $2,508

 Data Centers Healthcare Nine Months Ended
September 30, 2017
Revenue:     
Rental, parking and tenant reimbursement revenue$41,347
 $46,482
 $87,829
Expenses:     
Rental and parking expenses(11,779) (6,815) (18,594)
Segment net operating income$29,568
 $39,667
 69,235
      
Expenses:     
General and administrative expenses    (3,199)
Asset management fees    (7,055)
Depreciation and amortization    (28,487)
Income from operations    30,494
Interest expense, net    (15,623)
Net income attributable to common stockholders    $14,871
 Data Centers Healthcare Nine Months Ended
September 30, 2016
Revenue:     
Rental, parking and tenant reimbursement revenue$6,211
 $31,010
 $37,221
Expenses:     
Rental and parking expenses(1,011) (4,044) (5,055)
Segment net operating income$5,200
 $26,966
 32,166

     
Expenses:     
General and administrative expenses    (2,358)
Acquisition related expenses    (5,432)
Asset management fees    (3,240)
Depreciation and amortization    (12,948)
Income from operations    8,188
Interest expense, net    (2,237)
Net income attributable to common stockholders    $5,951

Assets by each reportable segment as of September 30, 2017 and December 31, 2016 are as follows (amounts in thousands):
 September 30, 2017 December 31, 2016
Assets by segment:   
Data centers$739,055
 $362,969
Healthcare786,952
 653,416
All other60,076
 53,653
Total assets$1,586,083
 $1,070,038
Capital additions and acquisitions by reportable segments for the nine months ended September 30, 2017 and 2016 are as follows (amounts in thousands):
 Nine Months Ended
September 30,
 2017 2016
Capital additions and acquisitions by segment:   
Data centers$344,458
 $134,831
Healthcare138,611
 109,278
Total capital additions and acquisitions$483,069
 $244,109
Note 11—Future Minimum Rent
Rental Income
The Company’s real estate assets are leased to tenants under operating leases with varying terms. The leases frequently have provisions to extend the terms of the lease agreements. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants.
The future minimum rent to be received from the Company’s investment in real estate assets under non-cancelable operating leases for the three months ending December 31, 2017 and for each of the next four years ending December 31 and thereafter, are as follows (amounts in thousands):
Year Amount
Three months ending December 31, 2017 $26,926
2018 108,666
2019 109,635
2020 109,043
2021 110,560
Thereafter 866,506
  $1,331,336

Rental Expense
The Company has ground lease obligations that generally require fixed annual rental payments and may also include escalation clauses and renewal options.
The future minimum rent obligations under non-cancelable ground leases for the three months ending December 31, 2017 and for each of the next four years ending December 31 and thereafter, are as follows (amounts in thousands):
Year Amount
Three months ending December 31, 2017 $9
2018 38
2019 38
2020 38
2021 38
Thereafter 2,481
  $2,642
Note 12—Fair Value
Notes payable—Fixed Rate—The estimated fair value of notes payable—fixed rate measured using quoted prices and observable inputs from similar liabilities (Level 2) was approximately $206,102,000 and $49,930,000 as of September 30, 2017 and December 31, 2016, respectively, as compared to the outstanding principal of $214,700,000 and $51,000,000 as of September 30, 2017 and December 31, 2016, respectively. The estimated fair value of notes payable—variable rate fixed through interest rate swap agreements (Level 2) was approximately $181,890,000 and $69,247,000 as of September 30, 2017 and December 31, 2016, respectively, as compared to the outstanding principal of $186,590,000 and $71,540,000 as of September 30, 2017 and December 31, 2016, respectively.
Notes payable—Variable—The outstanding principal of the notes payable—variable was $12,545,000 and $30,450,000 as of September 30, 2017 and December 31, 2016, respectively, which approximated its fair value. The fair value of the Company's variable rate notes payable is estimated based on the interest rates currently offered to the Company by financial institutions.
Secured credit facility—The outstanding principal of the secured credit facility—variable was $120,000,000 and $195,000,000, which approximated its fair value as of September 30, 2017 and December 31, 2016, respectively. The fair value of the Company's variable rate secured credit facility is estimated based on the interest rates currently offered to the Company by financial institutions. The estimated fair value of the secured credit facility—variable rate fixed through interest rate swap agreements (Level 2) was approximately $96,208,000 and $24,195,000 as of September 30, 2017 and December 31, 2016, respectively, as compared to the outstanding principal of $100,000,000 and $25,000,000 as of September 30, 2017 and December 31, 2016, respectively.
Derivative instruments—Considerable judgment is necessary to develop estimated fair values of financial instruments. Accordingly, the estimates presented herein are not necessarily indicative of the amount the Company could realize, or be liable for, on disposition of the financial instruments. The Company has determined that the majority of the inputs used to value its interest rate swaps fall within Level 2 of the fair value hierarchy. The credit valuation adjustments associated with these instruments utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and the respective counterparty. However, as of September 30, 2017, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions, and has determined that the credit valuation adjustments are not significant to the overall valuation of its interest rate swaps. As a result, the Company determined that its interest rate swaps valuation is classified in Level 2 of the fair value hierarchy.

The following table showstables show the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis as of September 30, 20172023 and December 31, 20162022 (amounts in thousands):
 September 30, 2023
 Fair Value Hierarchy 
 Quoted Prices in Active
Markets for Identical
Assets (Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs (Level 3)		Total Fair
Value
Assets:
Derivative assets$— $29,423 $— $29,423 
Total assets at fair value$— $29,423 $— $29,423 
 December 31, 2022
 Fair Value Hierarchy 
 Quoted Prices in Active
Markets for Identical
Assets (Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs (Level 3)		Total Fair
Value
Assets:
Derivative assets$— $27,990 $— $27,990 
Total assets at fair value$— $27,990 $— $27,990 
Derivative assets are reported in the condensed consolidated balance sheets as other assets.
Real Estate Assets—Certain real estate assets (which include land, buildings and improvements and intangible assets) were adjusted to fair value as a result of impairments which occurred during the nine months ended September 30, 2023. The fair values of real estate assets were determined by using either third-party purchase offers or comparable sales information. The fair values of real estate assets based on third-party purchase offers are reflected in the Level 2 fair value hierarchy. The comparable sales technique uses estimates of properties similar to the subject property by comparing prices per square foot considering recent transaction activity. The estimates of comparable sales and prices per square foot have been adjusted, and are considered significant inputs and thus are classified within Level 3 of the fair value hierarchy.
The following table shows the fair value of the Company's real estate assets, including intangible assets, measured at fair value on a non-recurring basis as of the date on which the event took place, which was June 30, 2023 (amounts in thousands):
June 30, 2023
Fair Value Hierarchy
Quoted Prices in Active
Markets for Identical
Assets (Level 1)		Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs (Level 3) (1)
Total Fair
Value
Total Losses (2)
Real estate assets$— $20,726 $1,552 $22,278 $5,978 
(1)The fair value of real estate assets was derived using the comparable sales technique. The comparable sales price per square foot of $98.04 used in determining the fair value is considered a significant unobservable input.
(2)Amount includes impairment of in-place lease and above-market lease intangible assets of $592,000 and $260,000, respectively.
14
 September 30, 2017
 Fair Value Hierarchy  
 Quoted Prices in Active
Markets for Identical
Assets (Level 1)		 Significant Other
Observable Inputs
(Level 2)		 Significant
Unobservable
Inputs (Level 3)		 Total Fair
Value
Assets:       
Derivative assets$—
 $1,894
 $—
 $1,894
Total assets at fair value$—
 $1,894
 $—
 $1,894
Liabilities:       
Derivative liabilities$—
 $613
 $—
 $613
Total liabilities at fair value$—
 $613
 $—
 $613
Table of Contents
 December 31, 2016
 Fair Value Hierarchy  
 Quoted Prices in Active
Markets for Identical
Assets (Level 1)		 Significant Other
Observable Inputs
(Level 2)		 Significant
Unobservable
Inputs (Level 3)		 Total Fair
Value
Assets:       
Derivative assets$—
 $1,782
 $—
 $1,782
Total assets at fair value$—
 $1,782
 $—
 $1,782
Liabilities:       
Derivative liabilities$—
 $798
 $—
 $798
Total liabilities at fair value$—
 $798
 $—
 $798
Note 13—11—Derivative Instruments and Hedging Activities
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps
For derivatives designated and qualifying as cash flow hedges involveof interest rate risk, the receipt of variable rate amounts from a counterparty in exchange forgain or loss on the Company making fixed rate payments over the life of the agreements without exchange of the underlying notional amount.
The effective portion of changes in the fair value of derivatives designated, and that qualify, as cash flow hedgesderivative is recorded in accumulated other comprehensive income in the accompanying condensed consolidated statement of stockholders' equity and is subsequently reclassified into earningsinterest expense in the period thatsame period(s) during which the hedged forecasted transaction affects earnings.
During the nine months ended September 30, 2017, the Company's derivative instruments were used to hedge the variable cash flows associated with variable rate debt. The ineffective portion of changes in fair value of the derivatives are recognized directly in earnings. During the three months ended September 30, 2017 and 2016, the Company recognized a gain of $14,000 and $71,000, respectively, and during the nine months ended September 30, 2017 and 2016, the Company recognized a gain of $16,000 and $49,000, respectively, due to ineffectiveness of its hedges of interest rate risk, which were recorded in interest expense, net in the accompanying condensed consolidated statements of comprehensive income.
Amounts reported in accumulated other comprehensive income related to the derivativederivatives will be reclassified to interest expense,and other expenses, net, as interest payments are madeis incurred on the Company’s variable rate debt. During the next twelve months, the Company estimates that an additional $614,000$17,453,000 will be reclassified from accumulated other comprehensive income as an increasea reduction to interest expense, net.
See Note 12—"Fair Value" for a further discussion of the fair value of the Company’s derivative instruments.

expense.
The following table summarizes the notional amount and fair value of the Company’s derivative instruments (amounts in thousands):
Derivatives
Designated as
Hedging
Instruments		Balance
Sheet
Location		Effective
Dates		Maturity
Dates		September 30, 2023December 31, 2022
Outstanding
Notional
Amount		Fair Value ofOutstanding
Notional
Amount		Fair Value of
AssetsAssets
Interest rate swaps(1)05/01/2022 to
05/01/2023		12/31/2024 to
01/31/2028		$525,000 $29,423 $485,000 $27,990 
Derivatives
Designated as
Hedging
Instruments		 Balance
Sheet
Location		 Effective
Dates		 Maturity
Dates		 September 30, 2017 December 31, 2016
Outstanding
Notional
Amount		 Fair Value of Outstanding
Notional
Amount		 Fair Value of
Asset (Liability) Asset (Liability)
 
Interest rate swaps Other assets, net/Accounts
payable and other
liabilities		 07/01/2016 to
07/01/2017		 12/22/2020 to
04/20/2022		 $286,590
 $1,894
 $(613) $96,540
 $1,782
 $(798)
(1)     Derivative assets are reported in the condensed consolidated balance sheets as other assets.
The notional amount under the agreements is an indication of the extent of the Company’s involvement in the instrumentseach instrument at the time, but does not represent exposure to credit, interest rate or market risks.
Accounting for changes in the fair value of a derivative instrument depends on the intended use and designation of the derivative instrument. The Company designated the interest rate swaps as cash flow hedges to hedge the variability of the anticipated cash flows on its variable rate secured credit facility and notes payable. The change in fair value of the effective portion of the derivative instruments that are designated as hedges is recorded in other comprehensive income, or OCI, in the accompanying condensed consolidated statements of comprehensive income.
The table below summarizes the amount of income and loss recognized on the interest rate derivatives designated as cash flow hedging relationshipshedges for the three and nine months ended September 30, 20172023 and 20162022 (amounts in thousands):
Derivatives in Cash Flow Hedging Relationships Amount of Income (Loss) Recognized
in OCI on Derivative
(Effective Portion)		 Location of Income (Loss)
Reclassified From
Accumulated Other
Comprehensive Income to
Net Income
(Effective Portion)		 Amount of Loss
Reclassified From
Accumulated Other
Comprehensive Income to
Net Income
(Effective Portion)
Three Months Ended September 30, 2017      
Interest rate swaps $(108) Interest expense, net $(327)
Total $(108)   $(327)
Three Months Ended September 30, 2016      
Interest rate swaps $62
 Interest expense, net $(26)
Total $62
   $(26)
Nine Months Ended September 30, 2017      
Interest rate swaps $(743) Interest expense, net $(1,024)
Total $(743)   $(1,024)
Nine Months Ended September 30, 2016      
Interest rate swaps $(39) Interest expense, net $(26)
Total $(39)   $(26)
Derivatives in Cash Flow
Hedging Relationships		Amount of Income Recognized
in Other Comprehensive Income on Derivatives		Location of Income
Reclassified From
Accumulated Other
Comprehensive Income to
Net Income		Amount of Income (Loss)
Reclassified From
Accumulated Other
Comprehensive Income to
Net Income		Total Amount of Line Item in Condensed Consolidated Statements of Comprehensive Income
Three Months Ended September 30, 2023
Interest rate swaps$6,780 Interest and other expenses, net$4,465 $5,630 
Three Months Ended September 30, 2022
Interest rate swaps$16,724 Interest and other expenses, net$379 $5,498 
Nine Months Ended September 30, 2023
Interest rate swaps$13,550 Interest and other expenses, net$12,117 $16,769 
Nine Months Ended September 30, 2022
Interest rate swaps$31,545 Interest and other expenses, net$(2,912)$17,942 
Credit Risk-Related Contingent Features
The Company has agreements with each of its derivative counterparties that contain cross-default provisions, whereby if the Company defaults on certain of its indebtedness, then the Company could also be declared in default on its derivative obligation, resulting in an acceleration of payment thereunder.
In addition, the Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations. The Company records credit risk valuation adjustments on its interest rate swaps based on the respective credit quality of the Company and the counterparty. The Company believes it mitigates its credit risk by entering into agreements with creditworthy counterparties. As of September 30, 2017,2023, the Company had no derivatives with fair value of derivatives in a net liability position, includinginclusive of accrued interest but excluding any adjustment for nonperformance risk related to the agreement, was $740,000.agreement. As of September 30, 2017,2023, there were no termination events or events of default related to the interest rate swaps.

15
Table of Contents
Tabular Disclosure Offsetting Derivatives
The Company has elected not to offset derivative positions in its condensed consolidated financial statements. The following tables present the effect on the Company’s financial position had the Company made the election to offset its derivative positions as of September 30, 20172023 and December 31, 20162022 (amounts in thousands):
Offsetting of Derivative Assets    
    Gross Amounts Not Offset in the Balance Sheet 
 Gross
Amounts of
Recognized
Assets		Gross Amounts
Offset in the
Balance Sheet		Net Amounts of
Assets Presented in
the Balance Sheet		Financial Instruments
Collateral		Cash CollateralNet
Amount
September 30, 2023$29,423 $— $29,423 $— $— $29,423 
December 31, 2022$27,990 $— $27,990 $— $— $27,990 
Note 12—Stockholders' Equity
Offsetting of Derivative Assets        
        Gross Amounts Not Offset in the Balance Sheet  
  Gross
Amounts of
Recognized
Assets		 Gross Amounts
Offset in the
Balance Sheet		 Net Amounts of
Assets Presented in
the Balance Sheet		 Financial Instruments
Collateral		 Cash Collateral Net
Amount
September 30, 2017 $1,894
 $—
 $1,894
 $—
 $—
 $1,894
December 31, 2016 $1,782
 $—
 $1,782
 $—
 $—
 $1,782
Distributions Payable
As of September 30, 2023, the Company had distributions payable of approximately $7,518,000. Of these distributions payable, approximately $5,502,000 was paid in cash on October 6, 2023, and approximately $2,016,000 was reinvested in shares of common stock pursuant to our distribution reinvestment plan, or the DRIP, effective October 1, 2023.
Offsetting of Derivative Liabilities        
        Gross Amounts Not Offset in the Balance Sheet  
  Gross
Amounts of
Recognized
Liabilities		 Gross Amounts
Offset in the
Balance Sheet		 Net Amounts of
Liabilities
Presented in the
Balance Sheet		 Financial Instruments
Collateral		 Cash Collateral Net
Amount
September 30, 2017 $613
 $—
 $613
 $—
 $—
 $613
December 31, 2016 $798
 $—
 $798
 $—
 $—
 $798
Share Repurchase Program
The Company’s Amended and Restated Share Repurchase Program allows for repurchases of shares of the Company’s common stock upon meeting certain criteria. During the nine months ended September 30, 2023, the Company reports derivatives inrepurchased 1,145,071 Class A shares, Class I shares and Class T shares of common stock (879,861 Class A shares, 102,570 Class I shares and 162,640 Class T shares), for an aggregate purchase price of approximately $9,376,000 (an average of $8.19 per share). During the accompanying condensed consolidated balance sheets as other assets, netnine months ended September 30, 2022, the Company repurchased 786,861 Class A shares, Class I shares and accounts payableClass T shares of common stock (690,494 Class A shares, 20,905 Class I shares and other liabilities.75,462 Class T shares), for an aggregate purchase price of approximately $6,452,000 (an average of $8.20 per share).
Note 14—Accumulated Other Comprehensive Income
The following table presents a rollforward of amounts recognized in accumulated other comprehensive income by component for the nine months ended September 30, 20172023 and 20162022 (amounts in thousands):
Unrealized Income
on Derivative
Instruments
Balance as of December 31, 2022$27,990 
Other comprehensive income before reclassification13,550 
Amount of income reclassified from accumulated other comprehensive income to net income(12,117)
Other comprehensive income1,433 
Balance as of September 30, 2023$29,423 

Unrealized Income
on Derivative
Instruments
Balance as of December 31, 2021$(4,847)
Other comprehensive income before reclassification31,545 
Amount of loss reclassified from accumulated other comprehensive loss to net income2,912 
Other comprehensive income34,457 
Balance as of September 30, 2022$29,610 
16
  Unrealized Income on Derivative
Instruments		 Accumulated Other
Comprehensive Income
Balance as of December 31, 2016 $840
 $840
Other comprehensive loss before reclassification (743) (743)
Amount of loss reclassified from accumulated other comprehensive income to net income (effective portion) 1,024
 1,024
Other comprehensive income 281
 281
Balance as of September 30, 2017 $1,121
 $1,121

Table of Contents
  Unrealized Loss on Derivative
Instruments		 Accumulated Other
Comprehensive Loss
Balance as of December 31, 2015 $—
 $—
Other comprehensive loss before reclassification (39) (39)
Amount of loss reclassified from accumulated other comprehensive loss to net income (effective portion) 26
 26
Other comprehensive loss (13) (13)
Balance as of September 30, 2016 $(13) $(13)
The following table presents reclassifications out of accumulated other comprehensive income for the nine months ended September 30, 20172023 and 20162022 (amounts in thousands):
Details about Accumulated Other
Comprehensive Income Components		(Income) Loss Amounts Reclassified from
Accumulated Other Comprehensive Income to Net Income		Affected Line Items in the Condensed Consolidated Statements of Comprehensive Income
Nine Months Ended
September 30,
20232022
Interest rate swap contracts$(12,117)$2,912 Interest and other expense, net
Note 13—Earnings Per Share
Details about Accumulated Other
Comprehensive Income Components		 Amounts Reclassified from
Accumulated Other Comprehensive Income to Net
Income		 Affected Line Items in the Consolidated Statements of Comprehensive Income
  Nine Months Ended
September 30,		  
  2017 2016  
Interest rate swap contracts $1,024
 $26
 Interest expense, net
The Company calculates basic earnings per share by dividing net income attributable to common stockholders for the period by the weighted average shares of its common stock outstanding for that period. Diluted earnings per share is computed based on the weighted average number of shares outstanding and all potentially dilutive securities. Shares of non-vested restricted common stock and performance-based deferred stock unit awards, or Performance DSUs, give rise to potentially dilutive shares of common stock. For the three and nine months ended September 30, 2023, diluted earnings per share reflected the effect of approximately 1,846,000 and 1,849,000, respectively, of non-vested shares of restricted common stock and Performance DSUs that were outstanding. For the three and nine months ended September 30, 2022, diluted earnings per share reflected the effect of approximately 1,319,000 and 1,346,000, respectively, of non-vested shares of restricted common stock and Performance DSUs that were outstanding.
Note 14—Stock-based Compensation
On March 6, 2020, the Board approved the Amended and Restated 2014 Restricted Share Plan, or the A&R Incentive Plan, pursuant to which the Company has the authority and power to grant awards of restricted shares of its Class A common stock to its directors, executive officers and employees.
During the nine months ended September 30, 2023, the Company granted time-based awards to its executive officers and certain employees, consisting of 284,063 restricted shares of Class A common stock, or the Time-Based 2023 Awards. The Time-Based 2023 Awards will vest ratably over four years following the grant date, subject to each executive's and employee's employment through the applicable vesting dates, with certain exceptions.
In addition, during the nine months ended September 30, 2023, the Company's compensation committee approved Performance DSUs to be granted to its executive officers for performance-based awards, or the Performance-Based 2023 Awards. The Performance-Based 2023 Awards will be measured based on Company performance over a three-year performance period ending on December 31, 2025. Subject to each executive's continuous employment through the applicable vesting dates, with certain exceptions, the Performance-Based DSUs, if any, will be issued following the performance period end date. The actual value realized by each executive will depend on the market value of shares of stock or units on the date that the awards vest and the actual number of shares of stock or units that vest.
The Company recognized total stock-based compensation expense of $1,228,000 and $860,000, respectively, for the three months ended September 30, 2023 and 2022, and $3,721,000 and $3,034,000, respectively, for the nine months ended September 30, 2023, and 2022. Stock-based compensation expense is reported in general and administrative expenses in the accompanying condensed consolidated statements of comprehensive income, and forfeitures are recorded as they occur.
Note 15—Commitments and Contingencies
LitigationLegal Proceedings
In the ordinary course of business, the Company may become subject to litigation or claims. As of September 30, 2017,2023, there were, and currently there are, no material pending legal proceedings to which the Company is a party. While the resolution of a lawsuit or proceeding may have an impact to the Company's financial results for the period in which it is resolved, the Company believes that the final resolution of the lawsuits or proceedings in which it is currently involved, either individually or in the aggregate, will not have a material adverse effect on its financial position, results of operations or liquidity.
17
Table of Contents
Note 16—Economic DependencySubsequent Events
Distributions Paid to Stockholders
The Company is dependentfollowing table summarizes the Company's distributions paid to stockholders on the Advisor and its affiliatesOctober 6, 2023, for certain services that are essential to the Company, including the sale of the Company’s shares of common and preferred stock available for issuance; the identification, evaluation, negotiation, purchase and disposition of real estate investments and other investments; the management of the daily operations of the Company’s real estate portfolio; and other general and administrative responsibilities. In the event that the Advisor and its affiliates are unable to provide the respective services, the Company will be required to obtain such services from other sources.
Note 17—Subsequent Events
Distributions to Stockholders Paid
On October 2, 2017, the Company paid aggregate distributions of approximately $4,164,000 to Class A stockholders ($2,081,000 in cash and $2,083,000 in shares of the Company’s Class A common stock pursuant to the DRIP), which related to distributions declared for each day in the period from September 1, 20172023 through September 30, 2017. On2023 (amounts in thousands):
Payment DateCommon StockCashDRIPTotal Distribution
October 6, 2023Class A$4,419 $1,176 $5,595 
October 6, 2023Class I333 222 555 
October 6, 2023Class T750 618 1,368 
$5,502 $2,016 $7,518 
The following table summarizes the Company's distributions paid to stockholders on November 1, 2017, the Company paid aggregate distributions of approximately $4,406,000 to Class A stockholders ($2,201,000 in cash and $2,205,000 in shares of the Company’s Class A common stock pursuant to the DRIP), which related to distributions declared7, 2023, for each day in the period from October 1, 20172023 through October 31, 2017.
On October 2, 2017, the Company paid aggregate distributions of approximately $183,000 to Class I stockholders ($99,0002023 (amounts in cash and $84,000 in shares of the Company's Class I common stock pursuant to the DRIP), which related to distributions declared for each day in the period from September 1, 2017 through September 30, 2017. On November 1, 2017, the Company paid aggregate distributions of approximately $259,000 to Class I stockholders ($137,000 in cash and $122,000 in shares of the Company's Class I common stock pursuant to the DRIP), which related to distributions declared for each day in the period from October 1, 2017 through October 31, 2017.
On October 2, 2017, the Company paid aggregate distributions of approximately $1,227,000 to Class T stockholders ($506,000 in cash and $721,000 in shares of the Company's Class T common stock pursuant to the DRIP), which related to distributions declared for each day in the period from September 1, 2017 through September 30, 2017. On November 1, 2017, the Company paid aggregate distributions of approximately $1,431,000 to Class T stockholders ($589,000 in cash and

$842,000 in shares of the Company's Class T common stock pursuant to the DRIP), which related to distributions declared for each day in the period from October 1, 2017 through October 31, 2017.thousands):
Payment DateCommon StockCashDRIPTotal Distribution
November 7, 2023Class A$4,581 $1,205 $5,786 
November 7, 2023Class I346 229 575 
November 7, 2023Class T779 637 1,416 
$5,706 $2,071 $7,777 
Distributions Declared
Class A SharesAuthorized
The Company's board of directorsfollowing tables summarize the daily distributions approved and authorized an additional daily distributionby the Board subsequent to our Class ASeptember 30, 2023:
Authorization Date (1)
Common Stock
Daily Distribution Rate (1)
Annualized Distribution Per Share
October 17, 2023Class A$0.00109589 $0.40 
October 17, 2023Class I$0.00109589 $0.40 
October 17, 2023Class T$0.00109589 $0.40 
Authorization Date (2)
Common Stock
Daily Distribution Rate (2)
Annualized Distribution Per Share
November 7, 2023Class A$0.00109589 $0.40 
November 7, 2023Class I$0.00109589 $0.40 
November 7, 2023Class T$0.00109589 $0.40 
(1)Distributions approved and authorized to stockholders of record as of the close of business on each day of the period commencing on OctoberNovember 1, 20172023 and ending on November 30, 20172023. The distributions are calculated based on 365 days in the amount of $0.000021392 per share. This additional distribution amount and the daily distribution of $0.001767101 previously authorized and declared by the board of directors will equal an annualized rate of 6.40%, based on the revised primary offering purchase price of $10.200 per Class A share.calendar year. The distributions declared for each record date in October 2017 and November 20172023 will be paid in November 2017 and December 2017, respectively.2023. The distributions will beare payable to stockholders from legally available funds therefor.
On November 2, 2017, the board of directors of the Company(2)Distributions approved and declared a distributionauthorized to the Company’s Class A stockholders of record as of the close of business on each day of the period commencing on December 1, 20172023 and ending on February 28, 2018.December 31, 2023. The distributions will be calculated based on 365 days in the calendar year and will be equal to $0.001788493 per share of Class A common stock, which will be equal to an annualized distribution rate of 6.40%, assuming a purchase price of $10.200 per share of Class A common stock.year. The distributions declared for each record date in December 2017, January 2018 and February 20182023 will be paid in January 2018, February 2018 and March 2018, respectively.2024. The distributions will be payable to stockholders from legally available funds therefor.
Class I Shares
The Company's board of directors approved and authorized an additional daily distribution to our Class I stockholders of record as of the close of businessRepayment on each day of the period commencing on October 1, 2017 and ending November 30, 2017 in the amount of $0.000021392 per share. This additional distribution amount and the daily distribution of $0.001767101 previously authorized and declared by the board of directors will equal an annualized rate of 7.04%, based on the revised primary offering purchase price of $9.273 per Class I share. The distributions for each record date in October 2017 and November 2017 will be paid in November 2017 and December 2017, respectively. The distributions will be payable to stockholders from legally available funds therefor.Credit Facility
On November 2, 2017, the board of directors of1, 2023, the Company approvedrepaid $8,000,000 on its revolving line of credit with cash flows from operations and declaredproceeds from a daily distribution to the Company’s Class I stockholdersdisposition.
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Table of record as of the close of business on each day of the period commencing on December 1, 2017 and ending on February 28, 2018. The distribution will be calculated based on 365 days in the calendar year and will be equal to $0.001788493 per share of Class I common stock, which will be equal to an annualized distribution rate of 7.04%, assuming a purchase price of $9.273 per share. The distributions declared for each record date in December 2017, January 2018 and February 2018 will be paid in January 2018, February 2018 and March 2018, respectively. The distributions will be payable to stockholders from legally available funds therefor.Contents
Class T Shares
The Company's board of directors approved and authorized an additional daily distribution to our Class T stockholders of record as of the close of business on each day of the period commencing on October 1, 2017 and ending November 30, 2017 in the amount of $0.000018207 per share. This additional distribution amount and the daily distribution of $0.001501543 previously authorized and declared by the board of directors will equal an annualized rate of 5.68%, based on the revised primary offering purchase price of $9.766 per Class T share. The distributions for each record date in October 2017 and November 2017 will be paid in November 2017 and December 2017, respectively. The distributions will be payable to stockholders from legally available funds therefor.
On November 2, 2017, the board of directors of the Company approved and declared a daily distribution to the Company’s Class T stockholders of record as of the close of business on each day of the period commencing on December 1, 2017 and ending on February 28, 2017. The distribution will be calculated based on 365 days in the calendar year and will be equal to $0.001519750 per share of Class T common stock, which will be equal to an annualized distribution rate of 5.68%, assuming a purchase price of $9.766 per share. The distributions declared for each record date in December 2017, January 2018 and February 2018 will be paid in January 2018, February 2018 and March 2018, respectively. The distributions will be payable to stockholders from legally available funds therefor.
Status of the Initial Offering
As of November 6, 2017, the Company had accepted investors’ subscriptions for and issued approximately 81,920,000 shares of Class A common stock, 5,333,000 shares of Class I common stock and 33,011,000 shares of Class T common stock in the Initial Offering, resulting in receipt of gross proceeds of approximately $811,273,000, $48,613,000 and $316,971,000, respectively, including shares of its common stock issued pursuant to its DRIP, for total gross proceeds raised of

$1,176,857,000. As of November 6, 2017, the Company had approximately $1,173,143,000 in Class A shares, Class I shares and Class T shares of common stock remaining in the Initial Offering.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the notes thereto and the other unaudited financial information appearing elsewhere in this Quarterly Report on Form 10-Q.
The following discussion should also be read in conjunction with our audited consolidated financial statements, and the notes thereto, and Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2016,2022, as filed with the U.S. Securities and Exchange Commission, or the SEC, on March 16, 2017,2023, or the 20162022 Annual Report on Form 10-K.
The terms “we,” “our,” "us," and the “Company” refer to Carter Validus Mission Critical REIT II,Sila Realty Trust, Inc., Carter ValidusSila Realty Operating Partnership, II, LP, or our Operating Partnership, and all wholly-owned subsidiaries.
Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q, other than historical facts, include forward-looking statements that reflect our expectations and projections about our future results, performance, prospects and opportunities. Such statements include, in particular, statements about our liquidity and capital resources, capital expenditures, material cash requirements, debt service requirements, term loan requirements, plans, leases, dividends, distributions, strategies, and prospects and are subject to certain risks and uncertainties, as well asincluding known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Forward-looking statements are subject to various risks and uncertainties, and factors that could cause actual results to differ materially from our expectations, and investors should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect our results of operations, financial condition, cash flows, performance or future achievements or events.
Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our management’s view only as of the date this Quarterly Report on Form 10-Q is filed with the SEC. We make no representation or warranty (express or implied) about the accuracy of any such forward-looking statements contained in this Quarterly Report on Form 10-Q, and we do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. See Part I, Item 1A. “Risk Factors” of our 20162022 Annual Report on Form 10-K, for a discussion of some, although not all, of the risks and uncertainties that could cause actual results to differ materially from those presented in our forward-looking statements.
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 United States generally accepted accounting principles, in the United States, or GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Onexpenses. We evaluate these estimates on a regular basis, we evaluate these estimates.basis. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
Overview
We were formedinvest in high-quality properties leased to tenants capitalizing on January 11, 2013 undercritical and structural economic growth drivers. We are primarily focused on investing in healthcare assets across the lawscontinuum of Maryland to acquirecare, with emphasis on lower cost patient settings, which we believe typically generate predictable, durable and operate a diversified portfolio of income-producing commercial real estate with a focus on data centers and healthcare properties, preferably with long-term net leases to creditworthy tenants, as well as togrowing income streams. We may also make other real estate-related investments, that relate to such property types. We are offering for sale a maximum of $2,350,000,000which may include equity or debt interests in shares of common stock, or the maximum offering amount, consisting of up to $2,250,000,000 in shares of common stock in our primary offering and up to $100,000,000 in shares of common stock pursuant to our distribution reinvestment plan, or the DRIP, on a “best efforts” basis pursuant to a registration statement on Form S-11, or the Registration Statement, filed with the SEC under the Securities Act, or the Initial Offering. As of September 30, 2017, we were offering Class A shares, Class I shares and Class T shares of common stock, in any combination with a dollar value up to the maximum offering amount in the Initial Offering. The offering price for the common shares in the primary offering was $10.078 per Class A share, $9.162 per Class I share, and $9.649 per Class T share and the offering price for shares in the DRIP was $9.07 per Class A share, $9.07 per Class I share and $9.07 per Class T share, which is equal to the most recent estimated per share net asset value, or NAV, of each of our Class A common stock, Class I common stock and Class T common stock, as determined by our board of directors on September 29, 2016.
On May 1, 2017, we filed a registration statement on Form S-11 under the Securities Act to register a proposed follow-on offering, or the Follow-On Offering. On October 30, 2017, we registered a maximum of $1,000,000,000 of shares of Class A, Class I and Class T common stock pursuant to the primary offering of the Follow-On Offering and removed the DRIP from the Follow-On Offering. Accordingly, pursuant to Rule 415 promulgated under the Securities Act, we extended the Initial Offering until the earlier of the SEC effective date of the Follow-On Offering Registration Statement or November 24, 2017. We have not issued any shares in connection with the Follow-On Offering as it has not been declared effective by the SEC.
On October 13, 2017, we filed a Registration Statement on Form S-3, or the DRIP Registration Statement, under the Securities Act to register up to $100,000,000 of shares of Class A, Class I and Class T common stock to be offered pursuant to

our DRIP after the termination of the Initial Offering. We intend to continue to offer shares of common stock in the Initial Offering until November 24, 2017; however, we may terminate this Offering prior to November 24, 2017 and commence offering shares of common stock pursuant to the Follow-On Offering and DRIP Registration Statement. Our board of directors may revise the offering termination date as necessary in its discretion.
On June 2, 2017, we filed Articles Supplementary to the Second Articles of Amendment and Restatement with the State Department of Assessments and Taxation of Maryland reclassifying a portion of our Class A shares, Class I shares and Class T shares as Class T2 shares. We currently are not offering Class T2 shares.
On September 28, 2017, our board of directors, at the recommendation of the audit committee, which is comprised solely of independent directors, unanimously approved and established an estimated per share net asset value, or NAV, of $9.18 of each of our Class A common stock, Class I common stock and Class T common stock, or the Estimated Per Share NAV, as of June 30, 2017, for purposes of assisting broker-dealers in meeting their customer account statement reporting obligations under National Association of Securities Dealers Conduct Rule 2340, as required by the Financial Industry Regulatory Authority, or FINRA. In connection with the Estimated Per Share NAV, our board of directors unanimously approved the increased primary offering price of $10.200 per Class A share, which reflects the $9.18 Estimated Per Share NAV, a 7.0% selling commission and a 3.0% dealer manager fee, and the increased primary offering price of $9.766 per Class T share, which reflects the $9.18 Estimated Per Share NAV, a 3.0% selling commission and a 3.0% dealer manager fee, commencing on October 1, 2017. With respect to Class I shares, the dealer manager may receive up to 2.0% of the gross offering proceeds from the sale of Class I shares as a dealer manager fee, of which 1.0% will be funded by Carter Validus Advisors II, LLC, or our Advisor, without reimbursement from us, in which case, commencing on October 1, 2017, the primary offering price per Class I share will be $9.273, with reflects the $9.18 Estimated Per Share NAV and a 1.0% dealer manager fee. However, the 1.0% of the dealer manager fee paid from offering proceeds will be waived in the event an investor purchases Class I shares through a registered investment advisor that is not affiliated with a broker dealer, and in such instances, commencing on October 1, 2017, the price per Class I share would be $9.18. Further, the Board approved $9.18 as the per share purchase price of Class A shares pursuant to the DRIP, $9.18 as the per share purchase price of Class I shares pursuant to the DRIP and $9.18 as the per share purchase price of Class T shares pursuant to the DRIP, effective October 1, 2017. The Estimated Per Share NAV is not subject to audit by our independent registered public accounting firm. We intend to publish an updated estimated NAV per share on at least an annual basis.other real estate entities.
As of September 30, 2017,2023, we had accepted investors’ subscriptions for and issued approximately 113,499,000 shares of Class A, Class I and Class T common stock (including shares of common stock issued pursuant to the DRIP) in our Offering, resulting in receipt of gross proceeds of approximately $1,111,417,000, before selling commissions and dealer manager fees of approximately $85,508,000 and other offering costs of approximately $21,875,000. As of September 30, 2017, we had approximately $1,238,583,000 in Class A shares, Class I shares and Class T shares of common stock remaining in our Offering.
Substantially all of our operations are conducted through Carter Validus Operating Partnership II, LP, or our Operating Partnership. We are externally advised by our Advisor which is our affiliate, pursuant to an advisory agreement between us and our Advisor. Our Advisor supervises and manages our day-to-day operations and selects theowned 132 real estate properties and real estate-related investments we acquire, subject to the oversight and approvaltwo undeveloped land parcels.

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Table of our board of directors. Our Advisor also provides marketing, sales and client services related to real estate on our behalf. Our Advisor engages affiliated entities to provide various services to us. Our Advisor is managed by, and is a subsidiary of, our sponsor, Carter Validus REIT Management Company II, LLC, or our Sponsor. We have no paid employees and we rely on our Advisor to provide substantially all of our services.Contents
Carter Validus Real Estate Management Services II, LLC, or our Property Manager, a wholly-owned subsidiary of our Sponsor, serves as our property manager. Our Advisor and our Property Manager received, and will continue to receive, fees during the acquisition and operational stages and our Advisor may be eligible to receive fees during the liquidation stage of the Company. SC Distributors, LLC, an affiliate of the Advisor, or the Dealer Manager, serves as the dealer manager of the Initial Offering. The Dealer Manager has received, and will continue to receive, fees for services related to our Initial Offering. The Dealer Manager will serve as the dealer manager of the Follow-On Offering, when effective.
We currently operate through two reportable segments – commercial real estate investments in data centers and healthcare. As of September 30, 2017, we had purchased 49 real estate investments, consisting of 66 properties and comprising approximately 4,784,000 of gross rental square feet, for an aggregate purchase price of approximately $1,458,970,000.
Critical Accounting PoliciesEstimates
Our critical accounting policiesestimates were disclosed in our 20162022 Annual Report on Form 10-K. There have been no material changes to our critical accounting policiesestimates as disclosed therein.
Interim Unaudited Financial Data

Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, our accompanying condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. Our accompanying condensed consolidated financial statements reflect all adjustments, which are, in our view, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim period. Interim results of operations are not necessarily indicative of the results to be expected for the full year; such full year results may be less favorable. Our accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our 20162022 Annual Report on Form 10-K.
Qualification as a REIT
We qualifiedelected, and electedqualify, to be taxed as a REIT for federal income tax purposes, and we intend to continue to be taxed as a REIT. To maintain our qualification as a REIT, we must continue to meet certain organizational and operational requirements, including a requirement to currently distribute at least 90.0% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gain, to our stockholders. As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders.
If we fail to maintain our qualification as a REIT in any taxable year, we would then be subject to federal income taxes on our taxable income at regular corporate rates and would not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could have a material adverse effect on our net income and net cash available for distribution to our stockholders.
Recently Issued Accounting Pronouncements
For a discussion of recently issued accounting pronouncements, see Note 2—“Summary of Significant Accounting Policies—Recently Issued Accounting Pronouncements” to our condensed consolidated financial statements that are a part of this Quarterly Report on Form 10-Q.
Segment Reporting
We report our financial performance based on two reporting segments—commercial real estate investments in data centers and healthcare. See Note 10—"Segment Reporting" to our condensed consolidated financial statements that are part of this Quarterly Report on Form 10-Q for additional information on our two reporting segments.
Factors thatThat May Influence Results of Operations
We are not aware at this time of any material trends andor uncertainties, other than national economic conditions and those discussed below, affecting our real estate generally,properties, that may reasonably be reasonably expected to have a material impact, favorable or unfavorable, on revenues or incomes from the acquisition,income, management and operation of our properties other than those set forth in our 2022 Annual Report on Form 10-K10-K.
Rental Revenue
The amount of rental revenue generated by our properties depends principally on our ability to maintain the occupancy rates of leased space and to lease available space at existing rental rates. Negative trends in one or more of these factors could adversely affect our rental revenue in future periods. We continually monitor our tenants' ability to meet their lease obligations to pay us rent to determine if any adjustments should be reflected currently. During the nine months ended September 30, 2023, GenesisCare (as defined below) filed for bankruptcy, and we determined the yearcollectability of amounts owed under the contractual terms of GenesisCare's lease were no longer reasonably assured. As a result, we ceased recognizing rent on a straight-line basis and have only recorded rent for GenesisCare to the extent we have received cash. In addition, during the nine months ended December 31, 2016 andSeptember 30, 2023, we wrote off $1,630,000 of straight-line rent receivable related to GenesisCare, as a reduction in Part II, Item 1A. "Risk Factors"rental revenue, because the amounts were determined to be uncollectible. As of this QuarterlySeptember 30, 2023, our real estate properties were 99.4% leased.
GenesisCare Bankruptcy Filing
As disclosed in the Current Report on Form 10-Q.8-K that the Company filed with the SEC on June 5, 2023, GenesisCare USA, Inc. and its affiliates, or GenesisCare, sponsor and owner of the tenant in 17 of our real estate properties, announced that it filed for Chapter 11 bankruptcy protection under the United States Bankruptcy Code. GenesisCare is seeking U.S. bankruptcy court approval to reject certain unexpired real property leases. GenesisCare's lease obligations with us have not been included in any motions to date. GenesisCare continues to make its lease payments due to us in accordance with their contractual terms. Bankruptcy proceedings are subject to uncertainty and there can be no assurance how the bankruptcy court's or other parties' actions or decisions may impact GenesisCare.
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Results of Operations
Our results of operations are influenced by the timing of acquisitions and the operating performance of our real estate properties. The following table shows the property statistics of our real estate properties as of September 30, 20172023 and 2016:2022:
 September 30,
 20232022
Number of real estate properties (1)
132 132 
Leased square feet5,456,000 5,508,000 
Weighted average percentage of rentable square feet leased99.4 %99.5 %
 September 30,
 2017 2016
Number of commercial operating real estate properties (1)
64

41
Leased rentable square feet4,655,000
 2,298,000
Weighted average percentage of rentable square feet leased97.3% 99.9%
(1)As of September 30, 2017, we owned 66 real estate properties, two of which were under construction. As of September 30, 2016, we owned 43 real estate properties, two of which were under construction.

(1)As of September 30, 2023, we owned 132 real estate properties and two undeveloped land parcels. As of September 30, 2022, we owned 132 real estate properties and two undeveloped land parcels.
The following table summarizes our real estate acquisition activity for the three and nine months ended September 30, 20172023 and 2016:2022:
 Three Months Ended
September 30,		Nine Months Ended
September 30,
 2023202220232022
Real estate properties acquired1 2 2 7 
Real estate properties disposed1 — 2 — (1)
Aggregate purchase price of real estate properties acquired (2)
$59,902,000 $114,744,000 $69,822,000 $157,194,000 
Net book value of real estate properties disposed$245,000 $— $12,362,000 $— (1)
Leased square feet of real estate property additions105,000 144,000 130,000 284,000 
Leased square feet of real estate property dispositions38,000 — 177,000 — 
 Three Months Ended September 30, Nine Months Ended September 30, 
 2017 2016 2017 2016 
Commercial operating real estate properties acquired4
 1
 15
 13
(1) 
Approximate aggregate purchase price of acquired real estate properties$52,454,000
 $79,500,000
 $458,838,000
 $227,364,000
(1) 
Leased rentable square feet154,000
 288,000
 1,683,000
 769,000
 
(1)
(1)During the nine months ended September 30, 2016, we acquired 15 real estate properties, two of which were under construction. The properties under construction were purchased for $13,601,000.
The following discussion is based on our condensed consolidated financial statements for the three and nine months ended September 30, 2017 and 2016.2022, we disposed of one land parcel that formerly contained a property.
(2)Includes capitalized acquisition costs associated with transactions determined to be asset acquisitions.
This section describes and compares our results of operations for the three and nine months ended September 30, 20172023 and 2016.2022. We generate almostsubstantially all of our net operating incomerevenue from property operations. In order to evaluate our overall portfolio, management analyzes the net operating incomeresults of our same store properties. We define "same store properties" as operating properties that were owned and operated for the entirety of both calendar periods being compared and exclude properties under development.development, re-development, or classified as held for sale.
By evaluating the property net operating incomeresults of our same store properties, management is able to monitor the operations of our existing properties for comparable periods to measure the performance of our current portfolio and determinereadily observe the expected effects of our new acquisitions and dispositions on net income.


Three Months Ended September 30, 20172023 Compared to the Three Months Ended September 30, 20162022
ChangesThe following table allocates total rental revenue for the three months ended September 30, 2023 compared to the comparable period in our revenues are summarized2022 (amounts in thousands).
Three Months Ended
September 30,
20232022$ Change% Change
Same store rental revenue$41,522 $41,898 $(376)(0.9)%
Same store tenant reimbursements3,020 2,738 282 10.3 %
Non-same store rental revenue3,744 2,116 1,628 76.9 %
Non-same store tenant reimbursements255 129 126 97.7 %
Other operating income1 — 1 100.0 %
Total rental revenue$48,542 $46,881 $1,661 3.5 %
•Same store rental revenue decreased primarily due to a $652,000 decrease related to tenants who ceased paying all or a portion of their rent, partially offset by a $239,000 increase in annual base rent escalations for leases indexed to CPI and a $37,000 increase from new and renewal leases.
•Same store tenant reimbursements increased $282,000 primarily due to higher operating costs in the following table (amounts in thousands):current year.
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 Three Months Ended September 30,  
 2017 2016 Change
Same store rental and parking revenue$12,113
 $12,119
 $(6)
Non-same store rental and parking revenue18,103
 63
 18,040
Same store tenant reimbursement revenue1,484
 1,404
 80
Non-same store tenant reimbursement revenue4,502
 7
 4,495
Other operating income3
 1
 2
Total revenue$36,205
 $13,594
 $22,611
There was an increase in contractual rental revenue resulting from average annual rent escalations of 1.90% at our same store properties, which was offset entirely by straight-line rental revenue.
•Non-same store rental and parking revenue increased primarily due to the acquisitionlease termination income of 24 operating$1,504,000 and a $616,000 increase attributable to properties acquired since July 1, 2016.2022, partially offset by a $492,000 decrease due to property dispositions.
•Non-same store tenant reimbursement revenuereimbursements increased $126,000 primarily due to the acquisition of 24 operating properties acquired since July 1, 2016.2022.
•There were no significant changes in other operating income.
Changes in our expenses are summarized in the following table (amounts in thousands):
Three Months Ended
September 30,
20232022$ Change% Change
Same store rental expenses$4,577 $4,260 $317 7.4 %
Non-same store rental expenses428 330 98 29.7 %
General and administrative expenses4,828 4,760 68 1.4 %
Depreciation and amortization18,097 18,641 (544)(2.9)%
Total operating expenses$27,930 $27,991 $(61)(0.2)%
Gain on real estate dispositions$1 $— $1 100.0 %
 Three Months Ended September 30,  
 2017 2016 Change
Same store rental and parking expenses$1,789
 $1,787
 $2
Non-same store rental and parking expenses6,579
 7
 6,572
General and administrative expenses1,062
 836
 226
Acquisition related expenses—
 1,821
 (1,821)
Asset management fees2,698
 1,227
 1,471
Depreciation and amortization11,852
 4,782
 7,070
Total expenses$23,980
 $10,460
 $13,520
•Same store rental expenses, certain of which are subject to reimbursement by our tenants, increased $317,000 primarily due to higher operating costs in the current year.

•Non-same store rental and parking expenses, certain of which are subject to reimbursement by our tenants, increased primarily due to the acquisition of 24 operatinga $131,000 increase attributable to properties acquired since July 1, 2016.2022, partially offset by a $33,000 decrease due to property dispositions.
•General and administrative expenses increased due to an increase in professional and legal fees, personnel costs and other administrative costs, in connection with our Company's growth.
Acquisition related expenses decreasedprimarily due to a $368,000 increase in stock-based compensation due to equity awards granted in 2023, partially offset by a decrease of $207,000 in real estate properties determinedproxy reporting costs related to be business combinationsour annual meeting of stockholders and a decrease of $60,000 due to the adoptiontiming of ASU 2017-01, Business Combinations. Acquisition fees and expenses associated with transactions determined to be business combinations are expensed as incurred. During the three months ended September 30, 2017, we did not acquire any real estate properties determined to be business combinations as compared to one real estate property determined to be a business combination during the three months ended September 30, 2016.
third-party valuation services for our estimated per share net asset value.
Asset management fees increased due to an increase in the weighted average operating assets held to $1,226.5 million for the three months ended September 30, 2017, as compared to $631.3 million for the three months ended September 30, 2016.
•Depreciation and amortization increaseddecreased primarily due to ana $272,000 decrease from property dispositions, a $341,000 decrease attributable to fully amortized in-place leases and a $284,000 decrease related to properties impaired, partially offset by a $320,000 increase attributable to properties acquired since July 1, 2022 and a $33,000 increase due to capital expenditures placed in the weighted average depreciable basis of operating real estate investments.service.
Changes in interest expense,and other expenses, net, are summarized in the following table (amounts in thousands):
Three Months Ended
September 30,
20232022$ Change% Change
Interest and other expenses, net:
Interest on credit facility$5,653 $5,579 $74 1.3 %
Other income(23)(81)58 (71.6)%
Total interest and other expenses, net$5,630 $5,498 $132 2.4 %
 Three Months Ended September 30,  
 2017 2016 Change
Interest expense, net:     
Interest on notes payable$(4,492) $—
 $(4,492)
Interest on secured credit facility(2,275) (590) (1,685)
Amortization of deferred financing costs(685) (256) (429)
Cash deposits interest51
 28
 23
Capitalized interest615
 192
 423
Total interest expense, net(6,786) (626) (6,160)
•Interest on notes payablecredit facility increased primarily due to an increase inof $687,000 related to the outstanding principal balanceweighted average interest rate on notes payable to $413.8 million as of September 30, 2017, as compared to $0 as of September 30, 2016.
Interest on securedour credit facility increasedthat is subject to variable rates, partially offset by a $293,000 decrease due to an increasea reduction in the weighted average outstanding principal balance on the secured credit facility. The weighted average outstanding principal balance of the securedour credit facility was $241.1 million for the three months ended September 30, 2017, as compared to $84.5 million for the three months ended September 30, 2016.
Capitalizedof $19,457,000. In addition, interest increased due to an increase in the average accumulated expenditures on development properties to $44.5 million for the three months ended September 30, 2017, as compared to $15.2 millioncredit facility includes $291,000 of interest rate swap amortization during the three months ended September 30, 2016.2022.

•Other income decreased primarily due to $75,000 in settlement income from disposed properties recognized during the three months ended September 30, 2022, partially offset by an increase of $18,000 in cash deposits interest income during the three months ended September 30, 2023.
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Nine Months Ended September 30, 20172023 Compared to the Nine Months Ended September 30, 20162022
Changes in our revenues are summarized in theThe following table allocates total rental revenue for the nine months ended September 30, 2023 compared to the comparable period in 2022 (amounts in thousands):.
Nine Months Ended
September 30,
20232022$ Change% Change
Same store rental revenue$119,084 $122,424 $(3,340)(2.7)%
Same store tenant reimbursements8,016 7,599 417 5.5 %
Non-same store rental revenue14,857 5,621 9,236 164.3 %
Non-same store tenant reimbursements1,189 435 754 173.3 %
Other operating income5 2 3 150.0 %
Total rental revenue$143,151 $136,081 $7,070 5.2 %
 Nine Months Ended September 30,  
 2017 2016 Change
      
Same store rental and parking revenue$28,113
 $28,083
 $30
Non-same store rental and parking revenue45,458
 5,007
 40,451
Same store tenant reimbursement revenue4,420
 3,790
 630
Non-same store tenant reimbursement revenue9,824
 339
 9,485
Other operating income14
 2
 12
Total revenue$87,829
 $37,221
 $50,608
There was•Same store rental revenue decreased primarily due to a $2,371,000 decrease related to tenants who ceased paying all or a portion of their rent, a $1,770,000 write-off of straight-line rent due to tenant uncertainty and an impairment of above-market lease intangible assets of $260,000, partially offset by a $868,000 increase in contractual rental revenue resulting from average annual base rent escalations of 2.21% at our same store properties, which was offset entirely by straight-line rental revenue.for leases indexed to CPI and a $193,000 increase from new and renewal leases.
Non-same store rental and parking revenue increased due to the acquisition of 36 operating properties since January 1, 2016.
•Same store tenant reimbursementreimbursements increased $417,000 primarily due to higher operating costs in the current year.
•Non-same store rental revenue increased primarily due to anlease termination income of $5,185,000 and a $5,135,000 increase attributable to properties acquired and properties placed in real estate tax reimbursements at certain same store properties.service since January 1, 2022, partially offset by a $985,000 decrease due to property dispositions and a $99,000 decrease due to deferment of rent on a property under renovation.
•Non-same store tenant reimbursement revenuereimbursements increased $754,000 primarily increased due to the acquisition of 36 operating properties acquired since January 1, 2016.2022.
•There were no significant changes in other operating income.
Changes in our expenses are summarized in the following table (amounts in thousands):
Nine Months Ended
September 30,
20232022$ Change% Change
Same store rental expenses$12,950 $12,338 $612 5.0 %
Non-same store rental expenses1,778 881 897 101.8 %
General and administrative expenses16,478 16,766 (288)(1.7)%
Depreciation and amortization55,452 54,443 1,009 1.9 %
Impairment losses6,708 7,387 (679)(9.2)%
Total operating expenses$93,366 $91,815 $1,551 1.7 %
Gain on real estate dispositions$22 $460 $(438)(95.2)%
 Nine Months Ended September 30,  
 2017 2016 Change
      
Same store rental and parking expenses$5,293
 $4,550
 $743
Non-same store rental and parking expenses13,301
 505
 12,796
General and administrative expenses3,199
 2,358
 841
Acquisition related expenses—
 5,432
 (5,432)
Asset management fees7,055
 3,240
 3,815
Depreciation and amortization28,487
 12,948
 15,539
Total expenses$57,335
 $29,033
 $28,302
•Same store rental and parkingexpenses, certain of which are subject to reimbursement by our tenants, increased $612,000 primarily due to higher operating costs in the current year.
•Non-same store rental expenses, certain of which are subject to reimbursement by our tenants, increased primarily due to a $1,031,000 increase from properties acquired and properties placed in service since January 1, 2022, partially offset by a $134,000 decrease due to property dispositions.
•General and administrative expenses decreased primarily due to a $806,000 decrease in separation pay primarily related to our former chief accounting officer and a $247,000 decrease in proxy reporting costs related to our annual meeting of stockholders, partially offset by an increase of $687,000 in real estate taxes at certain same store properties.stock-based compensation due to equity awards granted in 2023.
Non-same store rental•Depreciation and parking expenses, certain of which are subject to reimbursement by our tenants,amortization increased primarily due to the acquisition of 36 operatinga $2,601,000 increase attributable to properties acquired and properties placed in service since January 1, 2016.
General and administrative expenses increased2022, a $193,000 increase due to an increasecapital expenditures placed in professionalservice and legal fees, personnel costsa $592,000 impairment of in-place lease intangible assets, partially offset by a $792,000 decrease from property dispositions, a $451,000 decrease attributable to fully amortized in-place leases and other administrative costs, in connection with our Company's growth.
Acquisitiona $754,000 decrease related expenses decreased due to a decrease in real estate properties determined to be business combinations due to the adoption of ASU 2017-01, Business Combinations. Acquisition fees and expenses associated with transactions determined to be business combinations are expensed as incurred. Duringimpaired. In addition, the nine months ended September 30, 2017, we did not acquire any real estate properties determined to be business combinations as compared to 12 real estate properties determined to be business combinations2022, included an impairment of an in-place lease intangible asset of $380,000.
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•Impairment losses were recorded in the aggregate amount of $6,708,000 and $7,387,000 during the nine months ended September 30, 2016.
Asset management fees increased due2023 and 2022, respectively. The property related to an increase in the weighted average operating assets held to $1,226.0 million for the nine months ended September 30, 2017, as compared to $563.6 million for the nine months ended September 30, 2016.

Depreciation and amortization increased due to an increase in the weighted average depreciable basis of operating real estate investments.2022 impairments was sold on March 31, 2023.
Changes in interest expense,and other expenses, net, are summarized in the following table (amounts in thousands):
Nine Months Ended
September 30,
20232022$ Change% Change
Interest and other expenses, net:
Interest on credit facility$16,939 $18,244 $(1,305)(7.2)%
Other income(170)(302)132 (43.7)%
Total interest and other expenses, net$16,769 $17,942 $(1,173)(6.5)%
 Nine Months Ended September 30,  
 2017 2016 Change
Interest expense, net:     
Interest on notes payable$(9,183) $—
 $(9,183)
Interest on secured credit facility(6,162) (1,907) (4,255)
Amortization of deferred financing costs(1,870) (703) (1,167)
Cash deposits interest142
 80
 62
Capitalized interest1,450
 293
 1,157
Total interest expense, net(15,623) (2,237) (13,386)
•Interest on notes payable increasedcredit facility decreased primarily due to $3,367,000 in loss on extinguishment of debt and $1,286,000 in interest rate swap amortization recognized during the nine months ended September 30, 2022, partially offset by an increase of $2,538,000 related to changes in the outstanding principal balanceweighted average interest rate on notes payable to $413.8 million as of September 30, 2017, as compared to $0 as of September 30, 2016.
Interest on securedour credit facility increasedthat is subject to variable rates and an increase of $895,000 due to an increase in the weighted average outstanding principal balance on the secured credit facility. The weighted average outstanding principal balance of the securedour credit facility was $232.6 million for the nine months ended September 30, 2017, as compared to $88.7 million for the nine months ended September 30, 2016.of $45,938,000.
Capitalized interest increased•Other income decreased primarily due to an increase$105,000 in the average accumulated expendituresinterest income on development properties to $35.6 million for the nine months ended September 30, 2017, as compared to $8.0 milliona note receivable recognized during the nine months ended September 30, 2016.
Organization and Offering Costs
We reimburse our Advisor or its affiliates for organization and offering costs it incurs on our behalf, but only2023, compared to $283,000 in settlement income from disposed properties recognized during the extent the reimbursement would not cause the selling commissions, dealer manager fees, distribution and servicing fees and other organization and offering costs incurred by us to exceed 15% of gross offering proceeds from the Initial Offering as of the date of the reimbursement. We expect that other offering costs associated with the Initial Offering (other than selling commissions, dealer manager fees and distribution and servicing fees) will be approximately 1.90% of the gross offering proceeds. Since inception, our Advisor and its affiliates incurred other organization and offering costs on our behalf of approximately $16,896,000 as ofnine months ended September 30, 2017. As2022, partially offset by an increase of $47,000 in cash deposits interest income during the nine months ended September 30, 2017, we reimbursed our Advisor or its affiliates approximately $15,926,000 in other offering costs. In addition, we paid our Advisor or its affiliates $404,000 in other offering costs related to subscription agreements. As of September 30, 2017, we accrued approximately $566,000 of other offering costs to our Advisor and its affiliates. As of September 30, 2017, we incurred approximately $85,508,000 in selling commissions and dealer manager fees and $13,244,000 in distribution and servicing fees to our Dealer Manager. As of September 30, 2017, we incurred other offering costs (other than selling commissions, dealer manager fees and distribution and servicing fees) of approximately $21,875,000.2023.
When incurred, organization costs are expensed and offering costs, including selling commissions, dealer manager fees, distribution and servicing fees and other offering costs are charged to stockholders’ equity. For a further discussion of other organization and offering costs, see Note 9—"Related-Party Transactions and Arrangements" to the condensed consolidated financial statements that are a part of this Quarterly Report on Form 10-Q.
Inflation
We are exposed to inflation risk as income from long-term leases is the primary source of our cash flows from operations. There are provisions in certain of our leases with tenants that are intended to protect us from, and mitigate the risk of, the impact of inflation. These provisions include scheduled increases in contractual base rent receipts, reimbursement billings for operating expenses, pass-through charges and real estate tax and insurance reimbursements. However, due to the long-term nature of our leases, among other factors, the leases may not reset frequently enough to adequately offset the effects of inflation.
Liquidity and Capital Resources
Our principal demands foruses of funds are for acquisitions of real estate and real estate-related investments, to paycapital expenditures, operating expenses, distributions to, and share repurchases from, stockholders, and principal and interest payments on current and future indebtedness. While interest rates on variable rate debt have increased and may continue to increase, we believe our exposure is limited at this time due to our hedging strategy, which has effectively fixed 87% of our outstanding debt as of September 30, 2023, allowing us to reasonably project our liquidity needs. Generally, cash for these items is generated from operations of our current and future indebtedness and to pay distributions to our stockholders.investments. Our sources of funds

are primarily the net proceeds of our Offering,operating cash flows, funds equal to amounts reinvested in the DRIP, operating cash flows, the securedour credit facility and other borrowings. In addition, we require resources to make certain payments to our Advisor and our Dealer Manager, which, during our Offering, include payments to our Advisor and its affiliates for reimbursement of other organization and offering expenses and other costs incurred on our behalf, and payments to our Dealer Manager and its affiliates for selling commissions, dealer manager fees, distribution and servicing fees, and offering expenses.
Generally, cash needs for items other than acquisitions of real estate and real estate-related investments are met from operations, borrowings, and the net proceeds of our Offering. However, there may be a delay between the sale of shares of our common stock and our investments in real estate, which could result in a delay in the benefits to our stockholders, if any, of returns generated from our investment operations.
Our Advisor evaluates potential additional investments and engages in negotiations with real estate sellers, developers, brokers, investment managers, lenders and others on our behalf. Until we invest all of the proceeds of our Offering in properties and real estate-related investments, we may invest in short-term, highly liquid or other authorized investments. Such short-term investments will not earn significant returns, and we cannot predict how long it will take to fully invest the proceeds in properties and real estate-related investments. The number of properties we acquire and other investments we make will depend upon the number of shares sold in our Offering and the resulting amount of net proceeds available for investment.borrowings.
When we acquire a property, our Advisor prepareswe prepare a capital plan that contemplates the estimated capital needs of that investment. In addition to operating expenses, capital needs may also include, for example, costs of refurbishment, tenant improvements or other major capital expenditures. The capital plan also sets forth the anticipated sources of the necessary capital, which may include a line of credit, or other loans established with respect to the investment, operating cash generated by the investment, additional equity investments from us, or joint venture partners or,and when necessary, capital reserves. Any capital reserves would be established from the net proceeds of our Offering, proceeds from sales of other investments, operating cash generated by other investments or other cash on hand. In some cases, a lender may require us to establish capital reserves for a particular investment. The capital plan for each investment will be adjusted through ongoing, regular reviews of our portfolio or, as necessary, to respond to unanticipated additional capital needs.
Short-term Liquidity and Capital Resources
On a short-term basis,For at least the next twelve months, we expect our principal demands for funds will be for operating expenses, including our general and administrative expenses, as well as the acquisition of real estate and real estate-related notes and investments and paymentsfunding of capital improvements and tenant improvements, acquisition related costs, operating expenses, distributions to and stock repurchases from stockholders, and interest and principal payments on current and future debt financings.our credit facility. We expect to meet our short-term liquidity requirements through net cash flows provided by operations, net proceeds from our Offering,funds equal to amounts reinvested in the DRIP and borrowings on the securedour credit facility as well as secured and unsecured borrowings from bankspotential other borrowings.
We believe we will have sufficient liquidity available to meet our obligations in a timely manner, under both normal and other lenders to finance our expected future acquisitions.stressed conditions, for the next twelve months.
Long-term Liquidity and Capital Resources
On a long-term basis,Beyond the next twelve months, we expect our principal demands for funds will be for the acquisition ofcosts to acquire additional real estate and real estate-related notes and investments and payments of tenant improvements, acquisition related costs, operating expenses, distributions to and repurchases from stockholders, andproperties, interest and principal payments on currentour credit facility, long-term capital investment demands for our real estate properties and future indebtedness. our distributions necessary to maintain our REIT status.
We currently expect to meet our long-term liquidity requirements through proceeds from cash flow from operations, borrowings on the secured credit facility, proceeds from secured or unsecured borrowings from banks or other lenders, proceeds from our Offering and funds equal to amounts reinvested in the DRIP.
We expect that substantially all cash flows from operations will be usedand borrowings on our credit facility and potential other borrowings.
We expect to pay distributions to our stockholders after certain capital expenditures;from cash flows from operations; however, we have used, and may continue to use, other sources to fund distributions, as necessary, such as proceeds from our Offering, borrowings onfunds equal to amounts reinvested in the secured credit facility and/or future borrowings on unencumbered assets.DRIP. To the
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extent cash flows from operations are lower due to fewer properties being acquired or lower-than-expected returns on the properties held or the disposition of properties, distributions paid to stockholders may be lower. We currently expect that substantially all net cash flows from our Offering or debt financingsoperations will be used to fund acquisitions, certain capital expenditures identified at acquisition, repayments ofongoing capital expenditures, interest and principal payments on outstanding debt orand distributions to our stockholders in excess ofstockholders.
Material Cash Requirements
In addition to the cash flows from operations.
Capital Expenditures
We willwe need to conduct our normal business operations, we expect to require approximately $21.3 million$25,265,000 in expenditures for capital improvementscash over the next 12 months.twelve months, of which $22,536,000 will be required for the payment of estimated interest on our outstanding debt (calculated based on our effective interest rates as of September 30, 2023) and $2,729,000 related to our various obligations as lessee. We cannot provide assurances, however, that actual expenditures will not exceed these estimated expenditure levels. estimates.
As of September 30, 2017, we had $8.2 million of restricted cash in escrow reserve accounts for such capital expenditures. In addition, as of September 30, 2017,2023, we had approximately $74.5 million$14,563,000 in cash and cash equivalents. For the nine months ended September 30, 2017,2023, we hadpaid capital expenditures of $25.0 million that primarily$1,590,000 related to two healthcare real estate investments.tenant improvements.

As of September 30, 2023, we had material obligations beyond 12 months in the amount of approximately $766,274,000, inclusive of $649,966,000 related to principal and estimated interest payments on our outstanding debt (calculated based on our effective interest rates as of September 30, 2023) and $116,308,000 related to our various obligations as lessee.
One of our principal liquidity needs is the payment of principal and interest on outstanding indebtedness. As of September 30, 2023, we had $605,000,000 of principal outstanding under our Unsecured Credit Facility (as defined below). We are required by the terms of certain loan documents to meet certain covenants, such as financial ratios and reporting requirements. As of September 30, 2023, we were in compliance with all such covenants and requirements on our Unsecured Credit Facility.
As of September 30, 2023, the aggregate notional amount under our derivative instruments was $525,000,000. We have agreements with each derivative counterparty that contain cross-default provisions; if we default on our indebtedness, then we could also be declared in default on our derivative obligations, resulting in an acceleration of payment of any net amounts due under our derivative contracts. As of September 30, 2023, we were in compliance with all such cross-default provisions.
Debt Service Requirements
Credit Facility
As of September 30, 2017,2023, the maximum commitments available under the secured credit facility were $425,000,000, consisting of a $325,000,000our senior unsecured revolving line of credit with Truist Bank, as Administrative Agent for the lenders, or the Revolving Credit Agreement, were $500,000,000, which may be increased, subject to lender approval, through incremental term loans and/or revolving loan commitments in an aggregate amount not to exceed $1,000,000,000. The maturity date for the Revolving Credit Agreement is February 15, 2026, which, at our election, may be extended for a period of six-months on no more than two occasions, subject to certain conditions, including the payment of an extension fee. As of September 30, 2023, the Revolving Credit Agreement had an aggregate outstanding principal balance of $50,000,000.
As of September 30, 2023, the maximum commitments available under our senior unsecured term loan with Truist Bank, as Administrative Agent for the lenders, or the 2024 Term Loan Agreement, were $280,000,000, which may be increased, subject to lender approval, to an aggregate amount not to exceed $580,000,000. The 2024 Term Loan Agreement has a maturity date of December 22, 2018,31, 2024, and, at our election, may be extended for a period of six-months on no more than two occasions, subject to the satisfaction of certain conditions, including the payment of an extension fee. As of September 30, 2023, the 2024 Term Loan Agreement had an aggregate outstanding principal balance of $280,000,000.
As of September 30, 2023, the maximum commitments available under our Operating Partnership's right to two, 12-month extension periods, and a $100,000,000senior unsecured term loan with Truist Bank, as Administrative Agent for the lenders, or the 2028 Term Loan Agreement, were $275,000,000, which may be increased, subject to lender approval, to an aggregate amount not to exceed $500,000,000 and has a maturity date of December 22, 2019, subject toJanuary 31, 2028. The 2028 Term Loan Agreement is pari passu with our Operating Partnership's right to one, 12-month extension.Revolving Credit Agreement and 2024 Term Loan Agreement. As of September 30, 2023, the 2028 Term Loan Agreement had an aggregate outstanding principal balance of $275,000,000.
On October 6, 2017, the secured credit facility agreement was modified by accelerating the effectiveness date of one of the covenants from December 31, 2017 to October 6, 2017, whereby our Operating Partnership will not pay distributionsWe refer to the partners, members or other ownersRevolving Credit Agreement, the 2024 Term Loan Agreement and the 2028 Term Loan Agreement, collectively, as the “Unsecured Credit Facility,” which has aggregate commitments available of our Operating Partnership, and we will not pay distributions to our partners, members or other owners, if such distributions by our Operating Partnership, when added to$1,055,000,000, as of September 30, 2023. Generally, the amount of all other distributions paid in any period of four consecutive calendar quarters, are in excess of 95% of funds from operations, as defined in the credit facility agreement, for such period.
The proceeds of loans made under the secured credit facilityour Unsecured Credit Facility may be used to finance thefor acquisition of real estate investments, forfunding of tenant improvements and leasing commissions with respect to real estate, for repayment of indebtedness, forfunding of capital expenditures with respect to real estate, and for general corporate and working capital purposes. The secured credit facility can be increased to $550,000,000, subject to certain conditions. See Note 8—"Notes Payable and Secured Credit Facility" to the condensed consolidated financial statements that are part of this Quarterly Report on Form 10-Q.
As of September 30, 2017,2023, we had a total pool availability under the secured credit facilityour Unsecured Credit Facility of $384,419,000$1,055,000,000 and an aggregate outstanding principal balance of $220,000,000. As of September 30, 2017, $164,419,000 remained$605,000,000; therefore, $450,000,000 was available to be drawn under our Unsecured Credit Facility. We were in compliance with all the financial covenant requirements as of September 30, 2023.
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On November 1, 2023, we repaid $8,000,000 on the secured credit facility.Revolving Credit Agreement with cash flows from operations and proceeds from a disposition. As of November 1, 2023, as a result of the repayment, we had a total pool availability under our Unsecured Credit Facility of $1,055,000,000 and an aggregate outstanding principal balance of $597,000,000; therefore, $458,000,000 was available to be drawn under our Unsecured Credit Facility.
Cash Flows
Nine Months Ended September 30, 20172023 Compared to the Nine Months Ended September 30, 20162022
Nine Months Ended
September 30,		  Nine Months Ended
September 30,
(in thousands)2017 2016 Change(in thousands)20232022Change
Net cash provided by operating activities$40,297
 $15,537
 $24,760
Net cash provided by operating activities$97,841 $89,031 $8,810 
Net cash used in investing activities$(483,106) $(249,396) $(233,710)Net cash used in investing activities$(59,023)$(141,949)$82,926 
Net cash provided by financing activities$474,637
 $254,177
 $220,460
Net cash (used in) provided by financing activitiesNet cash (used in) provided by financing activities$(37,172)$37,495 $(74,667)
Operating Activities
•Net cash provided by operating activities increased primarily due to an increase in cash collected for rent resulting from acquiring and placing properties in service, annual rent increases, new leasing and renewal activity and the acquisitionreceipt of our new operating properties, partially offset by increased operating expenses.lease termination income.
Investing Activities
Net cash used inSignificant investing activities increased primarily dueincluded:
•Investment of $69,821,000 to purchase two properties during the nine months ended September 30, 2023, compared to an increase in investments in real estateinvestment of $218.4 million and an increase in$157,194,000 to purchase seven properties during the nine months ended September 30, 2022.
•Sale of two properties for net proceeds of $12,388,000 during the nine months ended September 30, 2023, compared to receiving $22,822,000 from the sale of a land parcel that formerly contained a property during the nine months ended September 30, 2022.
•Incurred capital expenditures, primarily for tenant improvements, of $20.6 million, offset by a decrease in real estate deposits, net$1,590,000 during the nine months ended September 30, 2023, compared to incurring $7,577,000 during the nine months ended September 30, 2022.
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Table of $5.3 million.Contents
Financing Activities
Net cash provided bySignificant financing activities increased primarily dueincluded:
•Payment of $49,774,000 in distributions to an increase in proceeds from notes payablecommon stockholders during the nine months ended September 30, 2023, compared to $48,920,000 during the nine months ended September 30, 2022.
•Repurchase of $260.8 million, an increase in proceeds from the issuance$9,376,000 of common stock under our share repurchase program during the nine months ended September 30, 2023, compared to $6,452,000 during the nine months ended September 30, 2022.
•The following Unsecured Credit Facility related activity during the nine months ended September 30, 2023:
◦Repayment of $20.9 million and$8,000,000 on the Revolving Credit Agreement with cash flows from operations;
◦Repayment of $20,000,000 on the 2024 Term Loan Agreement with proceeds from a decrease in offering costsdisposition, the collection of a note receivable related to a disposition and cash flows from operations; and
◦Draw of $50,000,000 on the issuanceRevolving Credit Agreement to fund an acquisition.
•The following Unsecured Credit Facility related activity during the nine months ended September 30, 2022:
◦Draw of common stock$70,000,000 on the Revolving Credit Agreement to fund acquisitions;
◦Draw of $0.8 million, offset by a net decrease in$70,000,000 on the 2028 Term Loan Agreement to fund acquisitions;
◦Repayment of $40,000,000 on the Revolving Credit Agreement with proceeds from the secureddispositions and cash flows from operations;
◦Replacement of $500,000,000 from our prior unsecured credit facility with borrowings from our new Revolving Credit Agreement and 2024 Term Loan Agreement;
◦Draw of $45.0 million, an increase in distributions$205,000,000 on the 2028 Term Loan Agreement at closing to our stockholderspay down the $205,000,000 outstanding balance on the Revolving Credit Agreement; and
◦Payment of $8.1 million, an increase in repurchases of our common stock of $6.7 million and an increase$6,936,000 in deferred financing costs as a result of $2.2 million.
entering into the Revolving Credit Agreement, 2024 Term Loan Agreement and 2028 Term Loan Agreement during the nine months ended September 30, 2022.
Distributions to Stockholders
The amount of distributions payable to our stockholders is determined by our board of directorsthe Board and is dependent on a number of factors, including our funds available for distribution, financial condition, lenders' restrictions and limitations, capital expenditure requirements, corporate law restrictions and the annual distribution requirements needed to maintain our status as a REIT under the Code. Our boardInternal Revenue Code of directors1986, as amended. The Board must authorize each distribution and may, in the future, authorize lower amounts of distributions or not authorize additional distributions and, therefore, distribution payments are not guaranteed. Our Advisor may also defer, suspend and/or waive fees and expense reimbursements if we have not generated sufficient cash flow from our operations and other sources to fund distributions. Additionally, our organizational documents permit us to pay distributions from unlimited amounts of any source, and we may use sources other than operating cash flows to fund distributions, including proceeds from our Offering,funds equal to amounts reinvested in the DRIP, which may reduce the amount of capital we ultimately invest in properties or other permitted investments.

We have funded distributions with operating cash flows from our properties proceeds raisedand funds equal to amounts reinvested in our Offering and reinvestments pursuant to the DRIP. To the extent that we do not have taxable income, distributions paid will be considered a return of capital to stockholders.
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The following table shows the sources of distributions paid during the nine months ended September 30, 20172023 and 20162022 (amounts in thousands):
Nine Months Ended September 30,
20232022
Distributions paid in cash - common stockholders$49,774 $48,920 

Distributions reinvested (shares issued)18,675 18,594 
Total distributions$68,449 $67,514 
Source of distributions:
Cash flows provided by operations$49,774 73 %(1)$48,920 72 %(1)
Offering proceeds from issuance of common stock pursuant to the DRIP18,675 27 %(1)18,594 28 %(1)
Total sources$68,449 100 %$67,514 100 %
 Nine Months Ended September 30,
 2017 2016
Distributions paid in cash - common stockholders$20,415
   $12,285
  
Distributions reinvested23,001
   16,285
  
Total distributions$43,416
   $28,570
  
Source of distributions:       
Cash flows provided by operations (1)
$20,415
 47% $12,285
 43%
Offering proceeds from issuance of common stock pursuant to the DRIP (1)
23,001
 53% 16,285
 57%
Total sources$43,416
 100% $28,570
 100%
(1)Percentages were calculated by dividing the respective source amount by the total sources of distributions.
(1)Percentages were calculated by dividing the respective source amount by the total sources of distributions.
Total distributions declared but not paid on Class A shares, Class I shares and Class T shares as of September 30, 20172023, were approximately $5.6 million$7,518,000 for common stockholders. These distributions were paid on October 2, 2017.6, 2023.
For
Non-GAAP Financial Measures
In the nine months ended September 30, 2017, we declared and paid distributions of approximately $43.4 million to Class A stockholders, Class I stockholders and Class T stockholders, including shares issued pursuant to the DRIP, as compared to FFO (as defined below) for the nine months ended September 30, 2017 of approximately $43.4 million, which covered 100% of our distributions paid during such period. The payment of distributions from sources other than FFO may reduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds.
For a discussion of distributions paid subsequent to September 30, 2017, see Note 17—"Subsequent Events" to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Contractual Obligations
As of September 30, 2017, we had approximately $633.8 million of principal debt outstanding, of which $413.8 million related to notes payable and $220.0 million related to the secured credit facility. See Note 8—"Notes Payable and Secured Credit Facility" to the condensed consolidated financial statements that are a part of this Quarterly Report on Form 10-Q for certain terms of the debt outstanding.
Our contractual obligations as of September 30, 2017 were as follows (amounts in thousands):
 Less than
1 Year		 1-3 Years 3-5 Years More than
5 Years		 Total
Principal payments—fixed rate debt$—
 $1,453
 $76,748
 $136,499
 $214,700
Interest payments—fixed rate debt9,273
 18,529
 15,963
 23,417
 67,182
Principal payments—variable rate debt fixed through interest rate swap (1)
—
 103,302
 183,288
 —
 286,590
Interest payments—variable rate debt fixed through interest rate swap (2)
11,894
 20,068
 11,527
 —
 43,489
Principal payments—variable rate debt261
 120,562
 11,722
 —
 132,545
Interest payments—variable rate debt (3)
4,993
 2,299
 1,172
 —
 8,464
Capital expenditures21,299
 —
 —
 —
 21,299
Ground lease payments521
 1,089
 1,089
 5,343
 8,042
Total$48,241
 $267,302
 $301,509
 $165,259
 $782,311
(1)As of September 30, 2017, we had $286.6 million outstanding principal on notes payable and borrowings under the secured credit facility that were fixed through the use of interest rate swap agreements.
(2)We used the fixed rates under our interest rate swap agreements as of September 30, 2017 to calculate the debt payment obligations in future periods.

(3)We used LIBOR plus the applicable margin under our variable rate debt agreement as of September 30, 2017 to calculate the debt payment obligations in future periods.
Off-Balance Sheet Arrangements
As of September 30, 2017, we had no off-balance sheet arrangements.
Related-Party Transactions and Arrangements
We have entered into agreements with our Advisor and its affiliates whereby we agree to pay certain fees to, or reimburse certain expenses of, our Advisor or its affiliates for acquisition fees and expenses, organization and offering expenses, asset and property management fees and reimbursement of operating costs. Refer to Note 9—"Related-Party Transactions and Arrangements" to our condensed consolidated financial statements that are a part of this Quarterly Report on Form 10-Q for a detailed discussion of the various related-party transactions and agreements.
Funds from Operations and Modified Funds from Operations
One of our objectives is to provide cash distributions to our stockholders from cash generated by our operations. The purchase of real estate assetsindustry, analysts and real estate-related investments,investors employ certain non-GAAP supplemental financial measures in order to facilitate meaningful comparisons between periods and among peer companies. We believe that these measures are useful to investors to consider because they may assist them to better understand and measure the corresponding expenses associated with that process, is a key operational featureperformance of our business plan in orderover time and against similar companies. We use the following non-GAAP financial measures: Funds From Operations, or FFO, Core Funds From Operations, or Core FFO, and Adjusted Funds From Operations, or AFFO.
Net Income and FFO, Core FFO and AFFO
A description of FFO, Core FFO, and AFFO and reconciliations of these non-GAAP measures to generate cash from operations. Due to certain unique operating characteristics of real estate companies,net income, the most directly comparable GAAP measure, are provided below.
The National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated athe FFO measure, known as funds from operations, or FFO, which we believe is an appropriate supplementaladditional measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income as determined under GAAP.
We define FFO, consistent with NAREIT’s definition, as net income (computed(calculated in accordance with GAAP), excluding gains (or losses) from sales of propertyreal estate assets and asset impairment write-downs,impairments of real estate assets, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnershippartnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis. To date, we do not have any investments in unconsolidated partnerships or joint ventures.
We, along with othersmany of our peers in the real estate industry, consider FFO to be an appropriate supplemental measure of a REIT’s operating performance, because it is based on a net income analysis of propertyreal estate portfolio performance that excludes non-cash items such as real estate depreciation and amortization and asset impairment write-downs, which wereal estate impairments. We believe FFO provides a more completeuseful understanding of our performance to the investors and to our management, and when compared to year over year, FFO reflects the impact on our operations from trends in occupancy.
Historical accounting convention (in accordance with GAAP) for real estate assets requires companiesWe calculate Core FFO by adjusting FFO to report their investment in real estate at its carrying value, which consistsremove the effect of capitalizing the cost of acquisitions, development, construction, improvements and significant replacements, less depreciation and amortization and asset impairment write-downs, if any, which is not necessarily equivalent to the fair market value of their investment in real estate assets.
The historical accounting convention requires straight-line depreciation of buildings and improvements, which impliesitems that the value of real estate assets diminishes predictably over time, which could be the case if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in orderexpected to maintain the value disclosed. We believe that, since the fair value of real estate assets historically rises and falls with market conditions including, but not limited to, inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation could be less informative.
In addition, we believe it is appropriate to disregard asset impairment write-downs as they are a non-cash adjustment to recognize losses on prospective sales of real estate assets. Since losses from sales of real estate assets are excluded from FFO, we believe it is appropriate that asset impairment write-downs in advancement of realization of losses should be excluded. Impairment write-downs are based on negative market fluctuations and underlying assessments of general market conditions, which are independent ofimpact our operating performance including, but not limited to, a significant adverse change in the financial condition of our tenants, changes in supplyon an ongoing basis and demand for similar or competing properties, changes in tax, real estate, environmental and zoning law, which can change over time. When indicators of potential impairment suggest that the carrying value of real estate and related assets may not be recoverable, we assess the recoverability by estimating whether we will recover the carrying value of the asset through undiscounted future cash flows and eventual disposition (including, but not limited to, net rental and lease revenues, net proceeds on the sale of property and any other ancillary cash flows at a property or group level under GAAP). If based on this analysis, we do not believe that we will be able to recover the carrying value of the real estate asset, we will record an impairment write-down to the extent that the carrying value exceeds the estimated fair value of the real estate asset. Testing for indicators of impairment is a continuous process and is analyzed on a quarterly basis.

Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and that we intend to have a relatively limited term of our operations,consider it could be difficult to recover any impairment charges through the eventual sale of the property. No impairment losses have been recorded to date.
In developing estimates of expected future cash flow, we make certain assumptions regarding future market rental income amounts subsequent to the expiration of current lease arrangements, property operating expenses, terminal capitalization and discount rates, the expected number of months it takes to re-lease the property, required tenant improvements and the number of years the property will be held for investment. The use of alternative assumptions in the future cash flow analysis could result in a different determination of the property’s future cash flows and a different conclusion regarding the existence of an asset impairment, the extent of such loss, if any, as well as the carrying value of the real estate asset.
Publicly registered, non-listed REITs, such as us, typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operations. While other start up entities may also experience significant acquisition activity during their initial years, we believe that publicly registered, non-listed REITs are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after the acquisition activity ceases. We will use the proceeds raised in our offering to acquire real estate assets and real estate-related investments, and we intend to begin the process of achieving a liquidity event (i.e., listing of our shares of common stock on a national securities exchange, a merger or sale, the sale of all or substantially all of our assets, or another similar transaction) within five to seven years after the completion of our offering stage, which is generally comparable to other publicly registered, non-listed REITs. Thus, we do not intend to continuously purchase real estate assets and intend to have a limited life. Due to these factors and other unique features of publicly registered, non-listed REITS, the Investment Program Association, or the IPA, an industry trade group, has standardized a measure known as modified funds from operations, or MFFO, which we believe to be another appropriatea useful supplemental measure because it provides investors with additional information to reflect the operating performanceunderstand our sustainable performance. These include severance payments, write-off of a publicly registered, non-listed REIT. MFFO is a metric used by managementstraight-line rent receivables related to evaluate sustainable performanceprior periods, amortization of above- and dividend policy. MFFO is not equivalent to our net income as determined under GAAP.below-market leases (including ground leases) and loss on extinguishment of debt.
We define MFFO, a non-GAAP measure, consistent with the IPA’s definition:calculate AFFO by further adjusting Core FFO further adjusted for the following items included in the determination of GAAP net income; acquisition fees and expenses; amounts related toitems: deferred rent, current period straight-line rental income andrent adjustments, amortization of abovedeferred financing costs and below intangible lease assets and liabilities; accretionstock-based compensation.
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Table of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, adjustments related to contingent purchase price obligations where such adjustments have been included in the derivation of GAAP net income, and after adjustments for a consolidated and unconsolidated partnership and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. Our MFFO calculation complies with the IPA’s Practice Guideline, described above. In calculating MFFO, we exclude paid and accrued acquisition fees and expenses that are reported in our condensed consolidated statements of comprehensive income, amortization of above and below-market leases, amounts related to straight-line rents (which are adjusted in order to reflect such payments from a GAAP accrual basis to closer to an expected to be received cash basis of disclosing the rent and lease payments) and ineffectiveness of interest rate swaps. The other adjustments included in the IPA’s guidelines are not applicable to us.Contents
Since MFFO excludes acquisition fees and expenses, it should not be construed as a historic performance measure. Acquisition fees and expenses are paid in cash by us, and we have not set aside or put into escrow any specific amount of proceeds from our offerings to be used to fund acquisition fees and expenses. Acquisition fees and expenses include payments to our Advisor or its affiliates and third parties. Such fees and expenses will not be reimbursed by our Advisor or its affiliates and third parties, and therefore if there are no further proceeds from the sale of shares of our common stock to fund future acquisition fees and expenses, such fees and expenses will need to be paid from either additional debt, operational earnings or cash flows, net proceeds from the sale of properties, or from ancillary cash flows. As a result, the amount of proceeds available for investment and operations would be reduced, or we may incur additional interest expense as a result of borrowed funds. Nevertheless, our Advisor or its affiliates will not accrue any claim on our assets if acquisition fees and expenses are not paid from the proceeds of our offerings. Under GAAP, acquisition fees and expenses related to the acquisition of properties determined to be business combinations are expensed as incurred, including investment transactions that are no longer under consideration, and are included in acquisition related expenses in the accompanying condensed consolidated statements of comprehensive income and acquisition fees and expenses associated with transactions determined to be an asset purchase are capitalized.

All paid and accrued acquisition fees and expenses have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the real estate asset, these fees and expenses and other costs related to such property. In addition, MFFO may not be an indicator of our operating performance, especially during periods in which properties are being acquired.
In addition, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flows from operations in accordance with GAAP.
We use MFFO and the adjustments used to calculate it in order to evaluate our performance against other publicly registered, non-listed REITs, which intend to have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate it allow us to present our performance in a manner that reflects certain characteristics that are unique to publicly registered, non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence the use of such measures may be useful to investors. For example, acquisition fees and expenses are intended to be funded from the proceeds of our offering and other financing sources and not from operations. By excluding acquisition fees and expenses, the use of MFFO provides information consistent with management’s analysis of the operating performance of its real estate assets. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such charges that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.
Presentation of this information is intended to assist management and investors in comparing the operating performance of different REITs, although it should be noted that not all REITs calculate FFO, Core FFO and MFFOAFFO the same way, so comparisons with other REITs may not be meaningful. Furthermore, FFO, Core FFO and MFFOAFFO are not necessarily indicative of cash flowflows available to fund cash needs and should not be considered as an alternative to net income as an indication of our performance, as an indication of our liquidity, or indicative of funds available for our cash needs, including our ability to make distributions to our stockholders. FFO, Core FFO and MFFO should be reviewed in conjunction with other measurements as an indication of our performance. MFFO has limitations as a performance measure. However, itAFFO may be useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, andperiods. All of our non-GAAP financial measures should be reviewed in particular, after the offering and acquisition stages are complete and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value since impairment write-downs are taken into account in determining net asset value but not in determining MFFO.
FFO and MFFO,conjunction with other measurements as described above, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluatingan indication of our operational performance. The method used to evaluate the value and performance of real estate under GAAP should be construedconsidered as a more relevant measure of operating performance and considered more prominentlyprominent than the non-GAAP financial measures presented here.
Reconciliation of Net Income to FFO, Core FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO. MFFO has not been scrutinized to the level of other similar non-GAAP performance measures by the SEC or any other regulatory body.

AFFO
The following istable presents a reconciliation of net income attributable to common stockholders, which is the most directly comparable GAAP financial measure, to FFO, Core FFO and MFFOAFFO for the three and nine months ended September 30, 20172023 and 20162022 (amounts in thousands, except share data and per share amounts)thousands):
 Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Net income attributable to common stockholders$14,983 $13,392 $33,038 $26,784 
Adjustments:
Depreciation and amortization18,073 18,615 55,384 54,369 
Gain on real estate dispositions(1)— (22)(460)
Impairment losses— — 6,708 7,387 
FFO$33,055 $32,007 $95,108 $88,080 
Adjustments:
Severance payments43 23 83 889 
Write-off of straight-line rent receivables related to prior periods— — 1,618 — 
Amortization of above (below) market lease intangibles, including ground leases279 271 1,110 762 
Loss on extinguishment of debt— — — 3,367 
Core FFO$33,377 $32,301 $97,919 $93,098 
Adjustments:
Deferred rent325 299 1,188 797 
Straight-line rent adjustments(1,217)(2,630)(4,108)(7,653)
Amortization of deferred financing costs415 413 1,240 1,267 
Stock-based compensation1,228 860 3,721 3,034 
AFFO$34,128 $31,243 $99,960 $90,543 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Net income attributable to common stockholders$5,439
 $2,508
 $14,871
 $5,951
Adjustments:
 
    
Depreciation and amortization11,852
 4,782
 28,487
 12,948
FFO attributable to common stockholders$17,291
 $7,290
 $43,358
 $18,899
Adjustments:
 
    
Acquisition related expenses (1)
$—
 $1,821
 $—
 $5,432
Amortization of intangible assets and liabilities (2)
(616) (126) (963) (375)
Straight-line rent (3)
(2,844) (1,645) (7,686) (4,344)
Ineffectiveness of interest rate swaps(14) (71) (16) (49)
MFFO attributable to common stockholders$13,817
 $7,269
 $34,693
 $19,563
Weighted average common shares outstanding - basic105,388,118
 71,852,230
 95,668,433
 63,044,148
Weighted average common shares outstanding - diluted105,405,297
 71,866,949
 95,687,382
 63,060,086
Net income per common share - basic$0.05
 $0.03
 $0.16
 $0.09
Net income per common share - diluted$0.05
 $0.03
 $0.16
 $0.09
FFO per common share - basic$0.16
 $0.10
 $0.45
 $0.30
FFO per common share - diluted$0.16
 $0.10
 $0.45
 $0.30
(1)In evaluating investments in real estate assets, management differentiates the costs to acquire the investment from the operations derived from the investment. Such information would be comparable only for publicly registered, non-listed REITs that have completed their acquisitions activities and have other similar operating characteristics. By excluding expensed acquisition related expenses, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments in cash to our Advisor and third parties. Acquisition fees and expenses incurred in a business combination, under GAAP, are considered operating expenses and as expenses are included in the determination of net income, which is a performance measure under GAAP. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property.
(2)Under GAAP, certain intangibles are accounted for at cost and reviewed at least annually for impairment, and certain intangibles are assumed to diminish predictably in value over time and are amortized, similar to depreciation and amortization of real estate-related assets that are excluded from FFO. However, because real estate values and market lease rates historically rise or fall with market conditions, management believes that by excluding charges related to amortization of these intangibles, MFFO provides useful supplemental information on the performance of the real estate.
(3)Under GAAP, rental revenue is recognized on a straight-line basis over the terms of the related lease (including rent holidays if applicable). This may result in income recognition that is significantly different than the underlying contract terms. By adjusting for the change in deferred rent receivables, MFFO may provide useful supplemental information on the realized economic impact of lease terms, providing insight on the expected contractual cash flows of such lease terms, and aligns with our analysis of operating performance.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business plan, the primary market risk to which we are exposed is interest rate risk.

We have obtained variable rate debt financing to fund certain property acquisitions, and we are exposed to such changes in the one-month LIBOR.Term SOFR. Loans under the Unsecured Credit Facility may be made as Base Rate Loans or SOFR Loans, at our election, and all of our interest rate swap agreements are indexed to SOFR. Our objectives in managing interest rate risk seekare to limit the impact of interest rate changesfluctuations on operations and cash flows, and to lower overall borrowing costs. To achieve these objectives, we will borrow primarily at interest rates with the lowest margins available and, in some cases, with the ability to convert variable interest rates to fixed rates.
As of September 30, 2023, we had 11 interest rate swap agreements outstanding, which mature on various dates from December 2024 to January 2028, with an aggregate notional amount under the swap agreements of $525,000,000. As of September 30, 2023, the aggregate settlement asset value was $31,116,000. The settlement value of these interest rate swap agreements is dependent upon existing market interest rates and swap spreads. As of September 30, 2023, an increase of 50
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basis points in the market rates of interest would have resulted in an increase to the settlement asset value of these interest rate swaps to a value of $37,372,000. These interest rate swap agreements were designated as cash flow hedging instruments.
As of September 30, 2023, of the $605,000,000 total principal debt outstanding, $80,000,000 was subject to variable interest rates, indexed to Term SOFR, with an interest rate of 6.7% per annum. As of September 30, 2023, an increase of 50 basis points in the market rates of interest would have resulted in an increase in interest expense of approximately $400,000 per year.
The following table summarizes our principal debt outstanding related to our credit facility as of September 30, 2023 (amounts in thousands):
September 30, 2023
Variable rate revolving line of credit$50,000 
Variable rate term loans fixed through interest rate swaps525,000 
Variable rate term loans30,000 
Total principal debt outstanding (1)
$605,000 
(1)As of September 30, 2023, the weighted average interest rate on our total debt outstanding was 3.7%.
We have entered, and may continue to enter, into additional derivative financial instruments, such as interest rate swaps, in order to mitigate our interest rate risk on a given variable rate financial instrument. To the extent we do, we are exposed to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, it does not possess credit risk. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. We manage the market risk associated with interest rate contracts by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. We have not entered, and do not intend to enter, into derivative or interest rate swap transactions for speculative purposes. We may also enter into rate-lock arrangements to lock interest rates on future borrowings.
In addition to changes in interest rates, the value of our future investments will be subject to fluctuations based on changes in local and regional economic conditions and changes in the creditworthiness of tenants, which may affect our ability to refinance our debt, if necessary.
The following table summarizes our principal debt outstanding as of September 30, 2017 (amounts in thousands):
 September 30, 2017
Notes payable: 
Fixed rate notes payable$214,700
Variable rate notes payable fixed through interest rate swaps186,590
Variable rate notes payable12,545
Total notes payable413,835
Secured credit facility:
Variable rate secured credit facility fixed through interest rate swaps100,000
Variable rate secured credit facility120,000
Total secured credit facility220,000
Total principal debt outstanding (1)
$633,835
(1)As of September 30, 2017, the weighted average interest rate on our total debt outstanding was 3.91%.
As of September 30, 2017, $132.5 million of the $633.8 million total principal debt outstanding was subject to variable interest rates with a weighted average interest rate of 3.72% per annum. As of September 30, 2017, an increase of 50 basis points in the market rates of interest would have resulted in a change in interest expense of approximately $0.7 million per year.
As of September 30, 2017, we had 11 interest rate swap agreements outstanding, which mature on various dates from December 2020 to April 2022. As of September 30, 2017, the aggregate settlement asset value was $1.1 million. The settlement value of these interest rate swap agreements are dependent upon existing market interest rates and swap spreads. As of September 30, 2017, an increase of 50 basis points in the market rates of interest would have resulted in a settlement asset value of the interest rate swaps of $6.3 million.
We do not have any foreign operations and thus we are not exposed to foreign currency fluctuations.fluctuation risks.
Item 4. Controls and Procedures.
(a) Evaluation of disclosure controls and procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports pursuant to the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily were required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, we conducted an evaluation as of September 30, 20172023, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures, as of September 30, 2017,2023, were effective at a reasonable assurance level.
(b) Changes in internal control over financial reporting. There have been no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the three months ended September 30, 2017,2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
We are not aware of any material pending legal proceedings to which we are a party or to which our properties are the subject.
Item 1A. Risk Factors
There have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2016,2022, as filed with the SEC on March 16, 2017, except as noted below.2023.
Distributions paid from sources other than our cash flows from operations, including from the proceeds of this Offering, will result in us having fewer funds available for the acquisition of properties and real estate-related investments, which may adversely affect our ability to fund future distributions with cash flows from operations and may adversely affect your overall return.
We have paid, and may continue to pay, distributions from sources other than from our cash flows from operations. For the nine months ended September 30, 2017, our cash flows provided by operations of approximately $40.3 million was a shortfall of approximately $3.1 million, or 7.1%, of our distributions (total distributions were approximately $43.4 million, of which $20.4 million was cash and $23.0 million was reinvested in shares of our common stock pursuant to our DRIP) during such period and such shortfall was paid from proceeds from our DRIP Offering. For the year ended December 31, 2016, our cash flows provided by operations of approximately $25.0 million was a shortfall of approximately $15.6 million, or 38.4%, of our distributions (total distributions were approximately $40.6 million, of which $17.7 million was cash and $22.9 million was reinvested in shares of our common stock pursuant to our DRIP) during such period and such shortfall was paid from proceeds from our DRIP Offering. Until we acquire additional properties or real estate-related investments, we may not generate sufficient cash flows from operations to pay distributions. Our inability to acquire additional properties or real estate-related investments may result in a lower return on your investment than you expect.
We may pay, and have no limits on the amounts we may pay, distributions from any source, such as from borrowings, the sale of assets, the sale of additional securities, advances from our Advisor, our Advisor’s deferral, suspension and/or waiver of its fees and expense reimbursements and Offering proceeds. Funding distributions from borrowings could restrict the amount we can borrow for investments, which may affect our profitability. Funding distributions with the sale of assets may affect our ability to generate cash flows. Funding distributions from the sale of additional securities could dilute your interest in us if we sell shares of our common stock to third party investors. Funding distributions from the proceeds of our Offering will result in us having less funds available for acquiring properties or real estate-related investments. Our inability to acquire additional properties or real estate-related investments may have a negative effect on our ability to generate sufficient cash flow from operations from which to pay distributions. As a result, the return investors may realize on their investment may be reduced and investors who invest in us before we generate significant cash flow may realize a lower rate of return than later investors. Payment of distributions from any of the aforementioned sources could restrict our ability to generate sufficient cash flow from operations, affect our profitability and/or affect the distributions payable upon a liquidity event, any or all of which may have an adverse effect on an investment in us.

A high concentration of our properties in a particular geographic area, or of tenants in a similar industry, would magnify the effects of downturns in that geographic area or industry.
As of September 30, 2017, we owned 49 real estate investments, located in 36 metropolitan statistical areas, or MSAs, and one micropolitan statistical area, two of which accounted for 10.0% or more of our contractual rental revenue. Real estate investments located in the Oklahoma City, Oklahoma MSA and the Atlanta-Sandy Springs-Roswell, Georgia MSA accounted for approximately 10.5% and 10.0%, respectively, of our contractual rental revenue for the nine months ended September 30, 2017. In the event that we have a concentration of properties in any particular geographic area, any adverse situation that disproportionately effects that geographic area would have a magnified adverse effect on our portfolio. Similarly, if tenants of our properties become concentrated in a certain industry or industries, any adverse effect to that industry generally would have a disproportionately adverse effect on our portfolio.
Our investments in properties where the underlying tenant has a below investment grade credit rating, as determined by major credit rating agencies, or unrated tenants, may have a greater risk of default and therefore may have an adverse impact on our returns on that asset and our operating results.
As of September 30, 2017, approximately 11.9% of our tenants had an investment grade credit rating from a major ratings agency, 19.3% of our tenants were rated but did not have an investment grade credit rating from a major ratings agency and 68.8% of our tenants are not rated.  Approximately 17.3% of our non-rated tenants were affiliates of companies having an investment grade credit rating. Our investments with tenants that do not have an investment grade credit rating from a major ratings agency or were not rated and are not affiliated with companies having an investment grade credit rating may have a greater risk of default and bankruptcy than investments in properties leased exclusively to investment grade tenants. When we invest in properties where the tenant does not have a publicly available credit rating, we use certain credit assessment tools as well as rely on our own estimates of the tenant’s credit rating which includes reviewing the tenant’s financial information (i.e., financial ratios, net worth, revenue, cash flows, leverage and liquidity). If our lender or a credit rating agency disagrees with our ratings estimates, or our ratings estimates are otherwise inaccurate, we may not be able to obtain our desired level of leverage or our financing costs may exceed those that we projected. This outcome could have an adverse impact on our returns on that asset and hence our operating results.
Reductions in reimbursement from third party payors, including Medicare and Medicaid, could adversely affect the profitability of our tenants and hinder their ability to make rental payments to us.
Sources of revenue for our tenants may include the federal Medicare program, state Medicaid programs, private insurance carriers and health maintenance organizations, among others. Efforts by such payors to reduce healthcare costs will likely continue, which may result in reductions or slower growth in reimbursement for certain services provided by some of our tenants. In addition, the healthcare billing rules and regulations are complex, and the failure of any of our tenants to comply with various laws and regulations could jeopardize their ability to continue participating in Medicare, Medicaid and other government sponsored payment programs. Moreover, the state and federal governmental healthcare programs are subject to reductions by state and federal legislative actions. The American Taxpayer Relief Act of 2012 prevented the reduction in physician reimbursement of Medicare from being implemented in 2013. The Protecting Access to Medicare Act of 2014 prevented the reduction of 24.4% in the physician fee schedule by replacing the scheduled reduction with a 0.5% increase to the physician fee schedule through December 31, 2014, and a 0% increase for January 1, 2015 through March 31, 2015. The potential 21.0% cut in reimbursement that was to be effective April 1, 2015 was removed by the Medicare Access & CHIP Reauthorization Act of 2015 (MACRA) and replaced with two new methodologies that will focus upon payment based upon quality outcomes. The first model is the Merit-Based Incentive Payment System, or MIPS, which combines the Physician Quality Reporting System, or PQRS, and Meaningful Use program with the Value Based Modifier program to provide for one payment model based upon (i) quality, (ii) resource use, (iii) clinical practice improvement and (iv) advancing care information through the use of certified Electronic Health Record, or EHR, technology. The second model is the Advanced Alternative Payment Models, or APM, which requires the physician to participate in a risk share arrangement for reimbursement related to his or her patients while utilizing a certified health record and reporting on specific quality metrics. There are a number of physicians that will not qualify for the APM payment method. Therefore, this change in reimbursement models may impact our tenants’ payments and create uncertainty in the tenants’ financial condition.
The healthcare industry continues to face various challenges, including increased government and private payor pressure on healthcare providers to control or reduce costs. It is possible that our tenants will continue to experience a shift in payor mix away from fee-for-service payors, resulting in an increase in the percentage of revenues attributable to reimbursement based upon value based principles and quality driven managed care programs, and general industry trends that include pressures to control healthcare costs. The federal government's goal is to move approximately ninety percent (90%) of its reimbursement for providers to be based upon quality outcome models. Pressures to control healthcare costs and a shift away from traditional health insurance reimbursement to payment based upon quality outcomes have increased the uncertainty of payments.

In 2014, state insurance exchanges were implemented, which provide a new mechanism for individuals to obtain insurance. At this time, the number of payers that are participating in the state insurance exchanges varies, and in some regions there are very limited insurance plans available for individuals to choose from when purchasing insurance. In addition, not all healthcare providers will maintain participation agreements with the payers that are participating in the state health insurance exchange. Therefore, it is possible that our tenants may incur a change in their reimbursement if the tenant does not have a participation agreement with the state insurance exchange payers and a large number of individuals elect to purchase insurance from the state insurance exchange. Further, the rates of reimbursement from the state insurance exchange payers to healthcare providers will vary greatly. The rates of reimbursement will be subject to negotiation between the healthcare provider and the payer, which may vary based upon the market, the healthcare provider’s quality metrics, the number of providers participating in the area and the patient population, among other factors. Therefore, it is uncertain whether healthcare providers will incur a decrease in reimbursement from the state insurance exchange, which may impact a tenant’s ability to pay rent.
The insurance plans that participated on the health insurance exchanges created by the Patient Protection and Affordable Care Act of 2010 (“Healthcare Reform Act”) were expecting to receive risk corridor payments to address the high risk claims that it paid through the exchange product. However, the federal government currently owes the insurance companies approximately $8.3 billion under the risk corridor payment program that is currently disputed by the federal government. The federal government is currently defending several lawsuits from the insurance plans that participate on the health insurance exchange. If the insurance companies do not receive the payments, the insurance companies may cease to participate on the insurance exchange which limits insurance options for patients. If patients do not have access to insurance coverage it may adversely impact the tenant’s revenues and the tenant’s ability to pay rent.
In addition, the healthcare legislation passed in 2010 included new payment models with new shared savings programs and demonstration programs that include bundled payment models and payments contingent upon reporting on satisfaction of quality benchmarks. The new payment models will likely change how physicians are paid for services. These changes could have a material adverse effect on the financial condition of some or all of our tenants. The financial impact on our tenants could restrict their ability to make rent payments to us, which would have a material adverse effect on our business, financial condition and results of operations and our ability to pay distributions to stockholders.
Furthermore, beginning in 2016, the Centers for Medicare and Medicaid Services has applied a negative payment adjustment to individual eligible professionals, Comprehensive Primary Care practice sites, and group practices participating in the Physician Quality Reporting System, or PQRS, group practice reporting option (including Accountable Care Organizations) that do not satisfactorily report PQRS in 2014. Program participation during a calendar year will affect payments after two years, such that individuals and groups that receive the 2016 negative payment adjustment will not receive a 2014 PQRS incentive payment. Providers can appeal the determination, but if the provider is not successful, the provider’s reimbursement may be adversely impacted, which could adversely impact a tenant’s ability to make rent payments to us.
Moreover, President Trump signed an Executive Order on January 20, 2017 to “ease the burden of Obamacare”.
On May 4, 2017, members of the House of Representatives approved legislation to repeal portions of the Healthcare Reform Act, which legislation was submitted to the Senate for approval. On July 25, 2017, the Senate rejected a complete repeal and, further, on July 27, 2017, the Senate rejected a repeal on the Healthcare Reform Act’s individual and employer mandates and a temporary repeal on the medical device tax. Furthermore, on October 12, 2017, President Trump signed an Executive Order the purpose of which was to, among other things, (i) cut healthcare cost-sharing reduction subsidies, (ii) allow more small businesses to join together to purchase insurance coverage, (iii) extend short-term coverage policies, and (iv) expand employers’ ability to provide workers cash to buy coverage elsewhere. The Executive Order required the government agencies to draft regulations for consideration related to Associated Health Plans ("AHP"), short term limited duration insurance ("STLDI") and health reimbursement arrangements ("HRA"). At this time the proposed legislation has not been drafted. The Trump Administration also ceased to provide the cost-share subsidies to the insurance companies that offered the silver plan benefits on the Health Information Exchange. The termination of the cost-share subsidies would impact the subsidy payments due in 2017 and will likely adversely impact the insurance companies, causing an increase in the premium payments for the individual beneficiaries in 2018. Nineteen State Attorney Generals filed suit to force the Trump Administration to reinstate the cost shares subsidy payments. On October 25, 2017, a California Judge ruled in favor of the Trump Administration and found that the federal government was not required to immediately reinstate payment for the cost shares subsidy. The injunction sought by the Attorney Generals’ lawsuit was denied. Therefore, our tenants will likely see an increase in individuals who are self-pay or have a lower health benefit plan due to the increase in the premium payments. Our tenants’ collections and revenues may be adversely impacted by the change in the payor mix of their patients and it may adversely impact the tenants’ ability to make rent payments.
On October 17, 2017, Senate health committee leaders proposed a bill to address funding for the cost-sharing subsidies and the Healthcare Reform Act’s outreach funding. At this time, it is uncertain whether any healthcare reform legislation will ultimately become law. If our tenants’ patients do not have insurance, it could adversely impact the tenants’ ability to pay rent and operate a practice.

In addition, the current Administration has commented on the possibility that it may seek to cease the additional subsidies to the qualified health plans that provide coverage for beneficiaries on the health insurance exchange.  There are also multiple lawsuits in several judicial districts brought by qualified health plans to recover the prior risk corridor payments that were anticipated to be paid as part of the health insurance exchange program.  The multiple lawsuits are moving through the judicial process.  Further, there is a current lawsuit, United States House of Representatives vs. Price, which alleges that the Executive Branch of the United States of America exceeded its authority in implementing the risk corridor payments under the HealthCare Reform and therefore the payments should not be made. At this time, the case is pending. If the Administration or the court system determines that risk corridor or risk share payments are not required to be paid to the qualified health plans offering insurance coverage on the health insurance exchange program, the insurance companies may cease offering the Health Insurance Exchange product to the current beneficiaries. Therefore, our tenants may have an increase of self-pay patients and collections may decline, adversely impacting the tenants’ ability to pay rent.
The Estimated Per Share NAV of each of our Class A common stock, Class I common stock and Class T common stock are estimates as of a given point in time and likely will not represent the amount of net proceeds that would result if we were liquidated or dissolved or completed a merger or other sale of the company.
The offering prices per Class A share, Class I share and Class T share are based on our Estimated Per Share NAV of each of our Class A common stock, Class I common stock and Class T common stock as of June 30, 2017, as determined by our board of directors on September 28, 2017, which we refer to collectively as our Estimated Per Share NAV, and any applicable per share upfront selling commissions and dealer manager fees.
The price at which stockholders purchase shares and any subsequent values are likely to differ from the price at which a stockholder could resell such shares because: (1) there is no public trading market for our shares at this time; (2) the price does not reflect, and will not reflect, the fair value of our assets as we acquire them, nor does it represent the amount of net proceeds that would result from an immediate liquidation of our assets or sale of the company, because the amount of proceeds available for investment from our Offering is net of selling commissions, dealer manager fees, other organization and offering expense reimbursements and acquisition fees and expenses; (3) the estimated value does not take into account how market fluctuations affect the value of our investments, including how the current conditions in the financial and real estate markets may affect the value of our investments; (4) the estimated value does not take into account how developments related to individual assets may increase or decrease the value of our portfolio; and (5) the estimated value does not take into account any portfolio premium or premiums to value that may be achieved in a liquidation of our assets or sale of our portfolio. Further, the value of our shares will fluctuate over time as a result of, among other things, developments related to individual assets and responses to the real estate and capital markets. The Estimated Per Share NAV does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The Estimated Per Share NAV also does not take into account estimated disposition costs and fees for real estate properties that are not held for sale. There are currently no SEC, federal and state rules that establish requirements specifying the methodology to employ in determining an estimated value per share; provided, however, that pursuant to FINRA rules, the determination of the estimated value per share must be conducted by, or with the material assistance or confirmation of, a third-party valuation expert and must be derived from a methodology that conforms to standard industry practice. Subsequent estimates of our Estimated Per Share NAV will be done at least annually. Our Estimated Per Share NAV is an estimate as of a given point in time and likely does not represent the amount of net proceeds that would result from an immediate sale of our assets.
The purchase prices you pay for shares of our Class A common stock, Class I common stock and Class T common stock are based on the Estimated Per Share NAV of each of our Class A common stock, Class I common stock and Class T common stock at a given point in time, and any applicable per share upfront selling commissions and dealer manager fees. Our Estimated Per Share NAV is based upon a number of estimates, assumptions, judgments and opinions that may not be, or may later prove not to be, accurate or complete, which could make the estimated valuations incorrect. As a result, our Estimated Per Share NAV may not reflect the amount that you might receive for your shares in a market transaction, and the purchase price you pay may be higher than the value of our assets per share of common stock at the time of your purchase.
The per share price for Class A shares, Class I shares and Class T shares in our primary offering and pursuant to our DRIP are based on our most recent Estimated Per Share NAV of each of our Class A common stock, Class I common stock and Class T common stock and applicable upfront commissions and fees. Currently, there are no SEC, federal or state rules that establish requirements specifying the methodology to employ in determining an Estimated Per Share NAV. The audit committee of our board of directors, pursuant to authority delegated by our board of directors, was responsible for the oversight of the valuation process, including the review and approval of the valuation process and methodology used to determine our Estimated Per Share NAV, the consistency of the valuation and appraisal methodologies with real estate industry standards and practices and the reasonableness of the assumptions used in the valuations and appraisals. Pursuant to the prior approval of the audit committee of our board of directors, which is solely comprised of our independent directors, in accordance with the valuation policies previously adopted by our board of directors, we engaged Robert A. Stanger & Co., Inc., or Stanger, an independent

third-party valuation firm, to assist with determining the Estimated Per Share NAV. Our Estimated Per Share NAV was determined after consultation with our advisor and Stanger. Stanger prepared an appraisal report summarizing key information and assumptions and providing a value on 49 of our 62 properties in our portfolio as of June 30, 2017. In addition, Stanger relied upon the appraisal reports prepared by third parties other than Stanger on 11 properties acquired in the six months preceding June 30, 2017 and the book value of two properties, which were under development as of June 30, 2017. Stanger also prepared a net asset value report, which estimates the per share NAV of each of our Class A, Class I and Class T common stock as of June 30, 2017. The valuation was based upon the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding on an adjusted fully diluted basis, calculated as of June 30, 2017, and was performed in accordance with the valuation guidelines established by the Investment Program Association Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs. The Estimated Per Share NAV was determined by our board of directors. Subsequent estimates of our per share NAV for each of our Class A common stock, Class I common stock and Class T common stock will be prepared at least annually. Our Estimated Per Share NAV is an estimate as of a given point in time and likely does not represent the amount of net proceeds that would result from an immediate sale of our assets. The Estimated Per Share NAV is not intended to be related to any values at which individual assets may be carried on financial statements under applicable accounting standards. While the determination of our most recent Estimated Per Share NAV was conducted with the material assistance of a third-party valuation expert, with respect to asset valuations, we are not required to obtain asset-by-asset appraisals prepared by certified independent appraisers, nor must any appraisals conform to formats or standards promulgated by any trade organization. Other than the information included in our Current Report on Form 8-K filed on September 28, 2017 regarding the Estimated Per Share NAV, we do not intend to release individual property value estimates or any of the data supporting the Estimated Per Share NAV.
The U.S. Department of Labor has issued a final regulation revising the definition of “fiduciary” and the scope of “investment advice” under ERISA, which may have a negative impact on our ability to raise capital.
On April 8, 2016, the U.S. Department of Labor issued a final regulation that substantially expands the range of activities that would be considered to be fiduciary investment advice under ERISA and the Internal Revenue Code, which may make it more difficult to qualify for a prohibited transaction exemption. This new regulation could have negative implications on our ability to raise capital from potential investors, including those investing through IRAs or other arrangements. Prior to the issuance of the new regulation, ERISA and the Internal Revenue Code broadly defined fiduciaries to include persons who give investment advice for a fee, regardless of whether that fee is paid directly by the customer or by a third party. However, prior law required that advice must be given on a “regular basis” before a fiduciary standard would apply, and that a mutual agreement or understanding between the customer and the adviser that the advice would serve as a primary basis for the investment decision would also be required. Under the new regulation, a person is a fiduciary if the person receives compensation for providing advice (a “recommendation” or “communication that would reasonably be viewed as a suggestion that the recipient engage in or refrain from taking a particular course of action”) with the understanding it is based on the particular needs of the person being advised or that it is directed to a specific plan sponsor, plan participant, or IRA owner. Such decisions can include, but are not limited to, what assets to purchase or sell and (unlike under prior law) whether to rollover from an employment-based plan to an IRA. The fiduciary can be a broker, registered investment adviser or other type of adviser, some of which are subject to federal securities laws and some of which are not. The final regulation and the related exemptions were expected to become applicable for investment transactions on and after April 10, 2017. However, on February 3, 2017, the President asked for additional review of this regulation, the results of such review are unknown. In response, on March 2, 2017, the U.S. Department of Labor published a notice seeking public comments on, among other things, a proposal to adopt a 60-day delay of the April 10 applicability date of the final regulation. On April 7, 2017, the U.S. Department of Labor published a final rule extending for 60 days the applicability date of the final regulation, to June 9, 2017. However, certain requirements and exemptions under the regulation are implemented through a phased-in approach. Therefore, certain requirements and exemptions will not take effect until January 1, 2018 and other key requirements and exemptions will not take effect until July 1, 2019.
The final regulation and the accompanying exemptions are complex, and plan fiduciaries and the beneficial owners of IRAs are urged to consult with their own advisors regarding this development. The final regulation could have negative implications on our ability to raise capital from potential investors, including those investing through IRAs.
If our leases are not respected as true leases for U.S. federal income tax purposes, we would fail to qualify as a REIT.
To qualify as a REIT, we must satisfy two gross income tests, under which specified percentages of our gross income must be derived from certain sources, such as “rents from real property.” In order for rent paid to us to qualify as “rents from real property” for purposes of the REIT gross income tests, the leases must be respected as true leases for U.S. federal income tax purposes and not be treated as service contracts, joint ventures, or some other type of arrangement. If our leases are not respected as true leases for U.S. federal income tax purposes, we would fail to qualify as a REIT, which would materially adversely impact the value of an investment in our securities and in our ability to pay dividends to our stockholders.
The lease of our properties to a TRS is subject to special requirements.

Under the provisions of the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”), we may lease certain “qualified health care properties” to a TRS (or a limited liability company of which a TRS is a member). The TRS in turn would contract with a third party operator to manage the health care operations at these properties. The rents paid by a TRS in this structure would be treated as qualifying rents from real property for purposes of the REIT requirements only if (i) they are paid pursuant to an arm’s-length lease of a qualified health care property and (ii) the operator qualifies as an “eligible independent contractor” with respect to the property. An operator will qualify as an eligible independent contractor if it meets certain ownership tests with respect to us, and if, at the time the operator enters into the property management agreement, the operator is actively engaged in the trade or business of operating qualified health care properties for any person who is not a related person to us or the TRS. If any of the above conditions were not satisfied, then the rents would not be considered income from a qualifying source for purposes of the REIT rules, which could cause us to incur penalty taxes or to fail to qualify as a REIT.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
On August 18, 2017,July 1, 2023, we granted an aggregate of 9,00055,350.55 shares of restricted Class A common stock under our 2014 Restricted Share Plan to our threefive independent directors in connection with such independent directors’ re-election to our board of directors. Each independent director received 3,00011,070.11 shares of restricted Class A common stock.stock that will vest on July 1, 2024. The sharesawards were not registeredgranted under and subject to the Securities Act and were issued in reliance on Section 4(a)(2) of the Securities Act. There were no other sales of unregistered securities during the three months ended September 30, 2017.
Use of Public Offering Proceeds
On May 29, 2014, our Registration Statement on Form S-11 (File No. 333-191706), covering a public offering of up to $2,350,000,000 in sharesterms of our common stock, was declared effective under the Securities Act. We are offering for sale a maximum of $2,250,000,000 in shares of common stock (exclusive of $100,000,000 in shares of common stock to be made available pursuant to our DRIP) in our primary offering on a “best efforts” basis. As of September 30, 2017, we were offering shares of Class A common stock, shares of Class I common stockAmended and shares of Class T common stock, in any combination with a dollar value up to the maximum offering amount. The offering price for the shares in the primary offering was $10.078 per Class A share, $9.162 per Class I share,Restated 2014 Restricted Share Plan and $9.649 per Class T share and the offering price for shares in the DRIP was $9.07 per Class A share, $9.07 per Class I share and $9.07 per Class T share, which is equal to the most recent Estimated Per Share NAV of each of our Class A common stock, Class I common stock and Class T common stock as determined by our board of directors on September 29, 2016.an award agreement.
As of September 30, 2017, we had issued approximately 113.5 million shares of common stock in our Offering for gross proceeds of approximately $1,111.4 million, out of which we paid approximately $85.5 million in selling commissions and dealer manager fees, approximately $21.9 million in organization and offering costs and approximately $29.8 million in acquisition fees to our Advisor or its affiliates. We have excluded the distribution and servicing fee from the above information, as we pay the distribution and servicing fee from cash flows from operations or, if our cash flows from operations are not sufficient to pay the distribution and servicing fee, from borrowings in anticipation of future cash flow.
With the net offering proceeds and associated borrowings, we acquired $1.5 billion in total real estate investments as of September 30, 2017. In addition, we invested $34.5 million in expenditures for capital improvements related to certain real estate investments.
As of September 30, 2017, approximately $0.6 million remained payable to our Dealer Manager and our Advisor or its affiliates for costs related to our Offering, excluding distribution and servicing fees.
Share Repurchase Program
Our share repurchase program permits stockholders to sell their shares back to us after they have held them for at least one year, subject to certain conditions and limitations. We will limit the number of shares repurchased during any calendar year to 5.0% of the number of shares of our common stock outstanding on December 31st of the previous calendar year. In addition, the share repurchase program provides that all repurchases during any calendar year, including those upon death or a qualifying disability of a stockholder, are limited to those that can be funded with proceeds raised from the DRIP Offering during the prior calendar year and other operating funds, if any, as the board of directors, in its sole discretion, may reserve for this purpose. Our board of directors has the right, in its sole discretion, to waive the one-year holding period requirement in the event of the death or qualifying disability of a stockholder, or other involuntary exigent circumstances, such as bankruptcy, or a mandatory distribution requirement under a stockholder's IRA.
Pursuant to our share repurchase program, the purchase price for shares repurchased under our share repurchase program is 100.0% of the most recent estimated value of the Class A common stock, Class I common stock, or Class T common stock, as applicable (in each case, as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect

to our common stock). Our board of directors reserves the right, in its sole discretion, at any time and from time to time, to waive the one-year holding period requirement in the event of the death or Qualifying Disability of a stockholder, other involuntary exigent circumstances such as bankruptcy, or a mandatory distribution requirement under a stockholder’s IRA.
During the three months ended September 30, 2017,2023, we fulfilled the following repurchase requests pursuant to our share repurchase program:
Period Total Number of
Shares Repurchased		 Average
Price Paid per
Share		 Total Numbers of Shares
Purchased as Part of Publicly
Announced Plans and Programs		 Approximate Dollar Value
of Shares Available that may yet
be Repurchased under the
Program
07/01/2017 - 07/31/2017 196,259
 $9.07
 196,259
 $—
08/01/2017 - 08/31/2017 101,509
 $9.07
 101,509
 $—
09/01/2017 - 09/30/2017 136,243
 $9.07
 136,243
 $—
Total 434,011
   434,011
  
Share Repurchase Program:
PeriodTotal Number of
Shares Repurchased		Average
Price Paid per
Share		Total Number
of Shares Purchased
as Part of Publicly
Announced Plans
and Programs		Approximate Dollar Value
of Shares Available
 that may yet
be Repurchased under the
Program
July 1, 2023 - July 31, 2023394,788 $8.13 — $— 
August 1, 2023 - August 31, 202321,091 $8.13 — $— 
September 1, 2023 - September 30, 2023— $— — $— 
Total415,879 — 
During the three months ended September 30, 2017,2023, we repurchased approximately $3,594,000$3,382,000 of Class A shares, of common stockClass I shares and $343,000 of Class T shares of common stock, which represented all repurchase requests received in good order and eligible for repurchase through the September 30, 2017 repurchase date. During the three months ended September 30, 2016, we repurchased approximately $908,000 of Class A shares of common stock, which represented all repurchase requests received in good order and eligible for repurchase through the September 30, 2016 repurchase date. No shares of Class T common stock were requested to be, or were, repurchased during the three months ended September 30, 2016. No shares of Class I common stock were requested to be, or were, repurchased during the three months ended September 30, 2017 and 2016.stock.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.

Item 5. Other Information.

Seventh Amendment to Dealer Manager Agreement
On November 8, 2017,(c) Insider trading arrangements and policies. During the Company entered into the Seventh Amendment to the Dealer Manager Agreement with the Advisor and Dealer Manager, dated June 10, 2014 (as amended, the “Dealer Manager Agreement”). The purposethree months ended September 30, 2023, none of the Seventh Amendment, which is filed as Exhibit 10.8, is (1) to engage the Dealer Manager with respect to the Company’s Follow-on Offering and DRIP Offering and (2) to clarify certain terms of the distribution and servicing fee payable in connection with shares of Class T common stock ("Class T Shares") sold in the primary portion (the “Primary Offering”) of the Initial Offering and the Follow-On Offering.
The Dealer Manager serves as the exclusive dealer managerofficers or directors adopted or terminated any contract, instruction or written plan for the Initial Offering and will servepurchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as the exclusive dealer manager for the Follow-On Offering and DRIP Registration Statement.defined in Item 408(c) of Regulation S-K.
Further, pursuant to the terms
31
Table of the Seventh Amendment, with respect to Class T Shares sold in the Primary Offering of the Initial Offering and in the Follow-on Offering only, the Company will pay the Dealer Manager a distribution and servicing fee that accrues daily in an amount equal to 1/365th of up to 1.0% of the most recent offering price per Class T Share on a continuous basis from year to year, payable, on a monthly basis in arrears, out of amounts that otherwise would be distributed to holders of Class T Shares; provided, however, that upon the termination of the Primary Offering of the Initial Offering, the distribution and servicing fee shall be an amount that accrues daily equal to 1/365th of up to 1.0% of the most recent Estimated Per Share NAV per Class T Share on a continuous basis from year to year. The Dealer Manager will reallow all of the distribution and servicing fees with respect to Class T Shares sold in the Primary Offering of the Initial Offering or in the Follow-on Offering to participating broker-dealers; provided, however, effective June 1, 2017, a participating broker-dealer may give written notice to the Dealer Manager that it waives all or a portion of the reallowance of the distribution and servicing fee, which waiver shall be irrevocable and will not retroactively apply to Class T Shares that were previously sold through such participating broker-dealer.Contents
The Company will cease paying the distribution and servicing fee to the Dealer Manager on the earliest to occur of the following: (i) a listing of the Class T Shares on a national securities exchange; (ii) following the completion of the Initial Offering or the Follow-on Offering, as applicable, on the date on which total underwriting compensation in such offering equals (a) 10% of the gross proceeds from the Initial Offering or Follow-on Offering, as applicable, less (b) the total amount of distribution and servicing fees waived by participating broker-dealers; (iii) the date on which there are no longer any Class T Shares outstanding; (iv) December 31, 2021, which is the fourth anniversary of the last day of the fiscal quarter in which the Primary Offering of the Initial Offering terminates; (v) with respect to a Class T Share sold in the Primary Offering of the Initial Offering or the Follow-on Offering, the date on which a participating broker-dealer receives (a) total underwriting compensation equal to 10% of the gross offering proceeds of such Class T Share less (b) the amount of any waived distribution and servicing fees by such participating broker-dealer; or (vi) the date on which the holder of such Class T Share or its agent notifies the Company or its agent that he or she is represented by a new participating broker-dealer; provided that the Company will continue paying the distribution and servicing fee, which shall be reallowed to the new participating broker-dealer, if the new participating broker-dealer enters into a participating broker-dealer agreement with the Dealer Manager or otherwise agrees to provide the services set forth in the dealer manager agreement.
The foregoing description of the Seventh Amendment does not purport to be complete and is qualified in its entirety by reference to the full Seventh Amendment, a copy of which is filed as Exhibit 10.8.


Item 6. Exhibits.
Exhibit

No:
3.1
3.1
3.2
Amended and Restated Bylaws of Carter Validus Mission Critical REIT II, Inc. (included as Exhibit 3.2 to Pre-Effective Amendment No. 3 to the Registrant’s Registration Statement on Form S-11 (File No. 333-191706) filed May 9, 2014, and incorporated herein by reference).
3.3
Articles Supplementary of Carter Validus Mission Critical REIT II, Inc., filed on January 13, 2017 (included as Exhibit 3.1 to the Registrant's Current Report on Form 8-K (File No. 000-55435) filed on January 18, 2017,August 15, 2022, and incorporated herein by reference).
3.4
3.2
3.5
Articles of Amendment of Carter Validus Mission Critical REIT II, Inc., filed on August 22, 2017 (included as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 000-55435) filed on August 22, 2017, and incorporated herein by reference).
4.1
Subscription Agreement and Subscription Agreement Signature Page (included as Appendix B to the prospectus, incorporated by reference to the Registrant's final prospectus filed pursuant to Rule 424(b)(3), filed on February 10, 2017 (File No. 333-191706)).
4.2
Additional Subscription Agreement and Subscription Agreement Signature Page (included as Appendix C to the prospectus included as Appendix B to the prospectus, incorporated by reference to the Registrant's final prospectus filed pursuant to Rule 424(b)(3), filed on February 10, 2017 (File No. 333-191706)).
4.3
Automatic Purchase Program Enrollment Form (included as Appendix D to the prospectus attached to Post-Effective Amendment No. 6 to the Registrant’s Registration Statement on Form S-11 (File No. 333-191706) filed October 13, 2015, and incorporated herein by reference).
4.4
Third Amended and Restated Distribution Reinvestment Plan (included as Appendix E to the prospectus attached to Post-Effective Amendment No. 11 to the Registrant’s Registration Statement on Form S-11 (File No. 333-191706) filed on January 20, 2017, and incorporated herein by reference).
4.6
Form of Multi-Product Subscription Agreement (included as Appendix F to the prospectus, incorporated by reference to the Registrant's final prospectus filed pursuant to Rule 424(b)(3), filed on February 10, 2017 (File No. 333-191706)).
10.1
Joinder Agreement, dated August 25, 2017, by DCII-8700 GOVERNORS HILL DRIVE, LLC and HCII-9800 LEVIN ROAD NW, LLC, to KeyBank National Association, as Agent (included as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 000-55435) filed on August 29, 2017, and incorporated herein by reference).
10.2
Amendment to Collateral Assignment of Interests, dated August 25, 2017, by and between Carter Validus Operating Partnership II, LP, as Assignor, and KeyBank National Association, as Agent for itself and the other lenders from time to time a party to the KeyBank Credit Facility Agreement (included as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 000-55435) filed on August 29, 2017, and incorporated herein by reference).
10.3
Joinder Agreement, dated September 20, 2017, by HCII-4409 NW ANDERSON HILL ROAD, LLC to KeyBank National Association, as Agent (included as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 000-55435) filed on September 22, 2017, and incorporated herein by reference).
10.4
Amendment to Collateral Assignment of Interests, dated September 20, 2017, by and between Carter Validus Operating Partnership II, LP, as Assignor, and KeyBank National Association, as Agent for itself and the other lenders from time to time a party to the KeyBank Credit Facility Agreement (included as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 000-55435) filed on September 22, 2017, and incorporated herein by reference).
10.5
Joinder Agreement, dated September 29, 2017, by DCII-2005 EAST TECHNOLOGY CIRCLE, LLC to KeyBank National Association, as Agent (included as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 000-55435) filed on October 3, 2017, and incorporated herein by reference).
10.6
Amendment to Collateral Assignment of Interests, dated September 29, 2017, by and between Carter Validus Operating Partnership II, LP, as Assignor, and KeyBank National Association, as Agent for itself and the other lenders from time to time a party to the KeyBank Credit Facility Agreement (included as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 000-55435) filed on October 3, 2017, and incorporated herein by reference).

10.731.1*
10.8*
Seventh Amendment to Amended and Restated Dealer Manager Agreement, by and among Carter Validus Mission Critical REIT II, Inc., Carter Validus Advisors II, LLC and SC Distributors, LLC, dated November 8, 2017.
31.1*
Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
31.2*
32.1**
32.2**
99.1
Consent of Robert A. Stanger & Co., Inc. (included as Exhibit 99.1 to the Registrant's Annual Report on Form 10-K (File No. 000-55435) filed on March 16, 2017 and incorporated by reference herein).
101.INS*XBRL Instance Document
101.SCH*
101.SCH*Inline XBRL Taxonomy Extension Schema Document
101.CAL*
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).
*Filed herewith.
**Furnished herewith in accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act, except to the extent that the registrant specifically incorporates it by reference.
* Filed herewith.

** Furnished herewith in accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act, except to the extent that the registrant specifically incorporates it by reference.


SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SILA REALTY TRUST, INC.
CARTER VALIDUS MISSION CRITICAL REIT II, INC.(Registrant)
(Registrant)
Date: November 8, 2023By:/s/    MICHAEL A. SETON
Date: November 9, 2017By:
/s/    JOHN E. CARTER
Michael A. Seton
John E. Carter
Chief Executive Officer
(Principal Executive Officer)
Date: November 9, 20178, 2023By:
/s/    TODD M. SAKOW
KAY C. NEELY
Todd M. SakowKay C. Neely
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)