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AMERICAN FINANCE TRUST : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

05/06/2021 | 08:59am EDT
The following discussion and analysis should be read in conjunction with the
accompanying consolidated financial statements of American Finance Trust, Inc.
and the notes thereto. As used herein, the terms "Company," "we," "our" and "us"
refer to American Finance Trust, Inc., a Maryland corporation, including, as
required by context, American Finance Operating Partnership, L.P., a Delaware
limited partnership, which we refer to as the "OP," and its subsidiaries. We are
externally managed by American Finance Advisors, LLC (our "Advisor"), a Delaware
limited liability company.
                           Forward-Looking Statements
Certain statements included in this Quarterly Report on Form 10-Q are
forward-looking statements, including statements regarding the intent, belief or
current expectations of us, our Advisor and members of our management team, as
well as the assumptions on which such statements are based, and generally are
identified by the use of words such as "may," "will," "seeks," "anticipates,"
"believes," "estimates," "expects," "plans," "intends," "should" or similar
expressions. Actual results may differ materially from those contemplated by
such forward-looking statements. Further, forward-looking statements speak only
as of the date they are made, and we undertake no obligation to update or revise
forward-looking statements to reflect changed assumptions, the occurrence of
unanticipated events or changes to future operating results over time, unless
required by law.
These forward-looking statements are subject to risks, uncertainties and other
factors, many of which are outside of our control, which could cause actual
results to differ materially from the results contemplated by the
forward-looking statements. Some of the risks and uncertainties, although not
all risks and uncertainties, that could cause our actual results to differ
materially from those presented in our forward-looking statements are set forth
under "Risk Factors" and "Quantitative and Qualitative Disclosures About Market
Risk" in our Annual Report on Form 10-K for the year ended December 31, 2020.
Overview
We are an externally managed real estate investment trust for U.S. federal
income tax purposes ("REIT") focusing on acquiring and managing a diversified
portfolio of primarily service-oriented and traditional retail and
distribution-related commercial real estate properties located primarily in the
United States. Our assets consist primarily of freestanding single-tenant
properties that are net leased to "investment grade" and other creditworthy
tenants and a portfolio of multi-tenant retail properties consisting primarily
of power centers and lifestyle centers. We intend to focus our future
acquisitions primarily on net leased, single-tenant service retail properties,
defined as properties leased to tenants in the retail banking, restaurant,
grocery, pharmacy, gas, convenience, fitness, and auto services sectors. As of
March 31, 2021, we owned 925 properties, comprised of 19.7 million rentable
square feet, which were 94.9% leased, including 892 single-tenant net leased
commercial properties (850 of which are retail properties) and 33 multi-tenant
retail properties. Based on annualized rental income on a straight-line basis as
of March 31, 2021, the total single-tenant properties comprised 70% of our total
portfolio and were 59% leased to service retail tenants, and the total
multi-tenant properties comprised 30% of our portfolio, and were 50% leased to
experiential retail tenants, defined as tenants in the restaurant, discount
retail, entertainment, salon/beauty and grocery store sectors, among others.
Substantially all of our business is conducted through the OP and its wholly
owned subsidiaries. The Advisor manages our day-to-day business with the
assistance of our property manager, American Finance Properties, LLC (the
"Property Manager"). The Advisor and the Property Manager are under common
control with AR Global Investments, LLC ("AR Global") and these related parties
receive compensation and fees for providing services to us. We also reimburse
these entities for certain expenses they incur in providing these services to
us.
For our purposes, "investment grade" includes both tenants (or lease guarantors)
with actual investment grade ratings or tenants with "implied" investment grade
ratings. Implied investment grade may include the actual rating of a tenant's
parent or the guarantor of the parent (regardless of whether the parent has
guaranteed the tenant's obligation under the lease) or tenants that are
identified as investment grade by using a proprietary Moody's analytical tool
which generates an implied rating by measuring an entity's probability of
default. Based on annualized rental income on a straight-line basis as of
March 31, 2021, approximately 60.6% of the tenants in our single-tenant
portfolio were considered "investment grade" consisting of 49.6% with actual
investment grade ratings and 11.0% with implied investment grade ratings, and
approximately 30.7% of the anchor tenants in our multi-tenant portfolio were
considered "investment grade" consisting of 21.4% with actual investment grade
ratings and 9.3% with implied investment grade ratings.
Management Update on the Impacts of the COVID-19 Pandemic
The COVID-19 global pandemic has created several risks and uncertainties that
may impact our business, including our future results of operations and our
liquidity. The ultimate impact on our results of operations, our liquidity and
the ability of our tenants to continue to pay us rent will depend on numerous
factors including the overall length and severity of the COVID-19 pandemic. For
a further discussion of the risks and uncertainties associated with the impact
of the COVID-19 on us, see Item 1A. Risk Factors in our Annual Report on Form
10-K for the year ended December 31, 2020.
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We have taken several steps to mitigate the impact of the pandemic on our
business. We have been in direct contact with our tenants since the crisis
began, cultivating open dialogue and deepening the fundamental relationships
that we have carefully developed through prior transactions and historic
operations. Based on this approach and the overall financial strength and
creditworthiness of our tenants, we believe that we have had positive results in
our cash rent collections during this pandemic. We have collected nearly 100% of
the original cash rent due for the first quarter 2021 across our entire
portfolio, including nearly 100% from our top 20 tenants (based on the total of
first quarter original cash rent). This was an improvement from the fourth
quarter of 2020 and reflects the expiration of rent deferral agreements where
tenants have resumed paying full rent as well as collections of deferred rent
paid during the period.
"Original cash rent" refers to contractual rents on a cash basis due from
tenants as stipulated in their originally executed lease agreement at inception
or as amended, prior to any rent deferral agreement. We calculate "original cash
rent collections" by comparing the total amount of rent collected during the
period to the original cash rent due. Total rent collected during the period
includes both original cash rent due and payments made by tenants pursuant to
rent deferral agreements. Eliminating the impact of deferred rent paid, we
collected 98% of original cash rent collections for the first quarter of 2021.
The deferral amounts received in the third and fourth quarters of 2020 were less
than 1% of total rent collected in those quarters.
A deferral agreement is an executed or approved amendment to an existing lease
to defer a certain portion of cash rent due to a future period. During the year
ended December 31, 2020, we granted rent deferrals for an aggregate of
$7.0 million or approximately 3% of original cash rent due for the year. During
the three months ended March 31, 2021 we deferred an insignificant amount of
rent. Those deferral amounts are or were scheduled for repayment during 2020 or
2021. During the first quarter of 2021, we collected approximately 15% of the
total $7.0 million rents we deferred. During the first quarter of 2021, we
granted rent deferrals with respect to less than 1% of original cash rent due
during the period, and we granted rent abatements with respect to less than 1%
of original cash rent due during the period. The most common arrangements
granted during the first quarter of 2021 provide deferral of some or all of the
rent due for the first quarter of 2021 with such amounts to be paid in the
latter part of 2021 and early 2022. The terms of these lease amendments
providing for rent deferrals and abatements differ by tenant in terms of length
and amount of the deferral or abatement, although the deferrals and abatements
are generally coupled with an extension of the lease.
The cash rent collections for the first quarter of 2021 uses cash receipts as of
April 30, 2021 and therefore is inclusive of cash received in April for rent due
in the first quarter of 2021. Such cash receipts are not included in cash and
cash equivalents on our March 31, 2021 consolidated balance sheet. The below
cash rent status may not be indicative of any future period and remains subject
to changes based ongoing collection efforts and negotiation of additional
agreements. Moreover, there is no assurance that we will be able to collect the
cash rent that is due in future months including the deferred 2020 rent amounts
due during 2021 under deferral agreements we have entered into with our tenants.
The impact of the COVID-19 pandemic on our tenants and thus our ability to
collect rents in future periods cannot be determined at present.
The table below shows the percentage of original cash rent for our single-tenant
portfolio, our multi-tenant portfolio, and our total portfolio we collected in
each fiscal quarter of 2020 and 2021.
       Period             Single-Tenant (1)      Multi-Tenant (2)      Total Portfolio (3)
First Quarter 2020                     98  %                100  %                    99  %
Second Quarter 2020                    96  %                 72  %                    88  %
Third Quarter 2020                     98  %                 85  %                    94  %
Fourth Quarter 2020                   100  %                 91  %                    97  %
First Quarter 2021                    100  %                 99  %                   100  %


____________
(1) Eliminating the impact of deferred rent paid, single-tenant collections were
99% of original cash rent due for the first quarter of 2021. Deferred rent
received was either not present or less than 1% of rent collected before the
first quarter of 2021.
(2) Eliminating the impact of deferred rent paid, multi-tenant collections were
95% of original cash rent due for the first quarter of 2021. Deferred rent
received was either not present or less than 1% of rent collected before the
first quarter of 2021.
(3) Eliminating the impact of deferred rent paid, total portfolio collections
were 98% of original cash rent due for the first quarter of 2021. Deferred rent
received was either not present or less than 1% of rent collected before the
first quarter of 2021.
The total amounts of abated rent, for abatement agreements entered into through
March 31, 2021, was $0.2 million for the three months ended March 31, 2021.
In addition to the proactive measures taken on rent collections, we have taken
additional steps to maximize our flexibility related to our liquidity and
minimize the related risk during this uncertain time. In July 2020, we entered
into an amendment to our revolving unsecured corporate credit facility (the
"Credit Facility") designed to provide us with additional flexibility during
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the period from April 1, 2020 through March 31, 2021 (the "Adjustment Period")
to continue addressing the adverse impacts of the COVID-19 pandemic, including
certain relief from financial covenants. See   Note 5   - Credit Facility for
further details. Additionally, on March 30, 2020, we announced a reduction in
our dividend, beginning in the second quarter of 2020, reducing the cash needed
to fund dividend payments by approximately $27.2 million per year based on
shares outstanding at that time. For additional information on our financing
activity during the first quarter of 2021 and subsequent to March 31, 2021, see
the "Liquidity and Capital Resources" section of this Management's Discussion
and Analysis of Financial Condition and Results of Operations.
Significant Accounting Estimates and Critical Accounting Policies
For a discussion about our significant accounting estimates and critical
accounting policies, see the "Significant Accounting Estimates and Critical
Accounting Policies" section of our 2020 Annual Report on Form 10-K. Except for
those required by new accounting pronouncements discussed below, there have been
no material changes from these significant accounting estimates and critical
accounting policies.
Recently Issued Accounting Pronouncements
Please see   Note 2   - Summary of Significant Accounting Policies - Recently
Issued Accounting Pronouncements to our consolidated financial statements in
this Quarterly Report on Form 10-Q for further discussion.
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Properties
The following table represents certain additional information about the
properties we own at March 31, 2021:
                                                                       Number of            Rentable Square Feet
Portfolio                                 Acquisition Date            Properties               (In thousands)             Remaining Lease Term (1)          Percentage Leased
Dollar General I                         Apr 2013; May 2013                2                         18                             7.1                           100.0%
Walgreens I                                   Jul 2013                     1                         11                             16.5                          100.0%
Dollar General II                             Jul 2013                     2                         18                             7.2                           100.0%
AutoZone I                                    Jul 2013                     1                          8                             6.3                           100.0%
Dollar General III                            Jul 2013                     5                         46                             7.1                           100.0%
BSFS I                                        Jul 2013                     1                          9                             2.8                           100.0%
Dollar General IV                             Jul 2013                     2                         18                             4.9                           100.0%
Tractor Supply I                              Aug 2013                     1                         19                             6.7                           100.0%
Dollar General V                              Aug 2013                     1                         12                             6.8                           100.0%
                                         Aug 2013; Nov 2013;
Mattress Firm I                          Feb 2014; Mar 2014;               5                         24                             5.7                           100.0%
                                              Apr 2014
Family Dollar I                               Aug 2013                     1                          8                             0.2                           100.0%
Lowe's I                                      Aug 2013                     5                         671                            8.2                           100.0%
O'Reilly Auto Parts I                         Aug 2013                     1                         11                             9.3                           100.0%
Food Lion I                                   Aug 2013                     1                         45                             8.6                           100.0%
Family Dollar II                              Aug 2013                     1                          8                             2.2                           100.0%
Walgreens II                                  Aug 2013                     1                         14                             12.0                          100.0%
Dollar General VI                             Aug 2013                     1                          9                             4.9                           100.0%
Dollar General VII                            Aug 2013                     1                          9                             7.0                           100.0%
Family Dollar III                             Aug 2013                     1                          8                             1.5                           100.0%
Chili's I                                     Aug 2013                     2                         13                             4.7                           100.0%
CVS I                                         Aug 2013                     1                         10                             4.8                           100.0%
Joe's Crab Shack I                            Aug 2013                     1                          8                             6.0                           100.0%
Dollar General VIII                           Sep 2013                     1                          9                             7.3                           100.0%
Tire Kingdom I                                Sep 2013                     1                          7                             4.0                           100.0%
AutoZone II                                   Sep 2013                     1                          7                             2.2                           100.0%
Family Dollar IV                              Sep 2013                     1                          8                             2.2                           100.0%
Fresenius I                                   Sep 2013                     1                          6                             4.3                           100.0%
Dollar General IX                             Sep 2013                     1                          9                             4.1                           100.0%
Advance Auto I                                Sep 2013                     1                         11                             2.2                           100.0%
Walgreens III                                 Sep 2013                     1                         15                             5.0                           100.0%
Walgreens IV                                  Sep 2013                     1                         14                             3.5                           100.0%
CVS II                                        Sep 2013                     1                         16                             15.8                          100.0%
Arby's I                                      Sep 2013                     1                          3                             7.3                           100.0%
Dollar General X                              Sep 2013                     1                          9                             7.0                           100.0%
AmeriCold I                                   Sep 2013                     9                        1,407                           6.5                           100.0%
Home Depot I                                  Sep 2013                     2                        1,315                           5.8                           100.0%
New Breed Logistics I                         Sep 2013                     1                         390                            5.1                           100.0%
Truist Bank I                                 Sep 2013                    19                         96                             7.1                           100.0%
National Tire & Battery I                     Sep 2013                     1                         11                             2.7                           100.0%
Circle K I                                    Sep 2013                    19                         55                             7.6                           100.0%
Walgreens V                                   Sep 2013                     1                         14                             6.4                           100.0%
Walgreens VI                                  Sep 2013                     1                         15                             8.1                           100.0%
FedEx Ground I                                Sep 2013                     1                         22                             2.2                           100.0%
Walgreens VII                                 Sep 2013                     8                         113                            8.3                           100.0%
O'Charley's I                                 Sep 2013                    20                         135                            10.6                          100.0%
Krystal I                                     Sep 2013                     6                         13                             8.5                           83.6%
1st Constitution Bancorp I                    Sep 2013                     1                          3                             2.8                           100.0%
American Tire Distributors I                  Sep 2013                     1                         125                            2.8                           100.0%


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                                                                      Number of            Rentable Square Feet
Portfolio                              Acquisition Date              Properties               (In thousands)             Remaining Lease Term (1)          Percentage Leased
Tractor Supply II                          Oct 2013                       1                         23                             2.5                           100.0%
United Healthcare I                        Oct 2013                       1                         400                            0.2                           100.0%
National Tire & Battery II                 Oct 2013                       1                          7                             11.2                          100.0%
Tractor Supply III                         Oct 2013                       1                         19                             7.1                           100.0%
Verizon Wireless                           Oct 2013                       1                          4                             8.5                           100.0%
Dollar General XI                          Oct 2013                       1                          9                             6.1                           100.0%
Talecris Plasma Resources I                Oct 2013                       1                         22                             2.0                           100.0%
Amazon I                                   Oct 2013                       1                         79                             2.3                           100.0%
Fresenius II                               Oct 2013                       2                         16                             6.4                           100.0%
Dollar General XII                    Nov 2013; Jan 2014                  2                         18                             7.7                           100.0%
Dollar General XIII                        Nov 2013                       1                          9                             5.0                           100.0%
Advance Auto II                            Nov 2013                       2                         14                             2.1                           100.0%
FedEx Ground II                            Nov 2013                       1                         49                             2.3                           100.0%
Burger King I                              Nov 2013                      41                         169                            16.5                          100.0%
Dollar General XIV                         Nov 2013                       3                         27                             7.2                           100.0%
Dollar General XV                          Nov 2013                       1                          9                             7.6                           100.0%
FedEx Ground III                           Nov 2013                       1                         24                             2.4                           100.0%
Dollar General XVI                         Nov 2013                       1                          9                             4.7                           100.0%
Family Dollar V                            Nov 2013                       1                          8                             2.0                           100.0%
CVS III                                    Dec 2013                       1                         11                             2.8                           100.0%
Mattress Firm III                          Dec 2013                       1                          5                             7.3                           100.0%
Arby's II                                  Dec 2013                       1                          4                             7.1                           100.0%
Family Dollar VI                           Dec 2013                       2                         17                             2.8                           100.0%
SAAB Sensis I                              Dec 2013                       1                         91                             4.0                           100.0%
Citizens Bank I                            Dec 2013                       9                         31                             2.8                           100.0%
Truist Bank II                             Jan 2014                      15                         79                             7.8                           100.0%
Mattress Firm IV                           Jan 2014                       1                          5                             3.4                           100.0%
FedEx Ground IV                            Jan 2014                       1                         59                             2.2                           100.0%
Mattress Firm V                            Jan 2014                       1                          6                             2.6                           100.0%
Family Dollar VII                          Feb 2014                       1                          8                             3.3                           100.0%
Aaron's I                                  Feb 2014                       1                          8                             2.4                           100.0%
AutoZone III                               Feb 2014                       1                          7                             2.0                           100.0%
C&S Wholesale Grocer I                     Feb 2014                       1                         360                            1.2                           100.0%
Advance Auto III                           Feb 2014                       1                          6                             3.4                           100.0%
Family Dollar VIII                         Mar 2014                       3                         25                             2.3                           100.0%
Dollar General XVII                   Mar 2014; May 2014                  3                         27                             7.0                           100.0%
Truist Bank III [2]                        Mar 2014                      70                         347                            8.7                           98.7%
Truist Bank IV                             Mar 2014                       6                         33                             8.8                           100.0%
First Horizon Bank                         Mar 2014                       8                         40                             8.0                           100.0%
Draper Aden Associates                     Mar 2014                       1                         78                             9.7                           100.0%
Church of Jesus Christ                     Mar 2014                       1                          3                             2.5                           100.0%
Dollar General XVIII                       Mar 2014                       1                          9                             7.0                           100.0%
Sanofi US I                                Mar 2014                       1                         737                            11.8                          100.0%
Family Dollar IX                           Apr 2014                       1                          8                             3.0                           100.0%
Stop & Shop I                              May 2014                       7                         492                            5.8                           100.0%
Bi-Lo I                                    May 2014                       1                         56                             4.8                           100.0%
Dollar General XIX                         May 2014                       1                         12                             7.4                           100.0%
Dollar General XX                          May 2014                       5                         49                             6.1                           100.0%
Dollar General XXI                         May 2014                       1                          9                             7.4                           100.0%
Dollar General XXII                        May 2014                       1                         11                             6.1                           100.0%
FedEx Ground V                             Feb 2016                       1                         46                             4.3                           100.0%
FedEx Ground VI                            Feb 2016                       1                         121                            4.4                           100.0%


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                                                                         Number of            Rentable Square Feet
Portfolio                                   Acquisition Date            Properties               (In thousands)             Remaining Lease Term (1)          Percentage Leased
FedEx Ground VII                                Feb 2016                     1                         42                             4.5                           100.0%
FedEx Ground VIII                               Feb 2016                     1                         79                             4.6                           100.0%
Liberty Crossing (3)                            Feb 2017                     1                         106                            3.7                           82.7%
San Pedro Crossing (3)                          Feb 2017                     1                         207                            4.2                           87.8%
Tiffany Springs MarketCenter (3)                Feb 2017                     1                         265                            4.7                           85.9%
The Streets of West Chester (3)                 Feb 2017                     1                         237                            9.5                           85.3%
Prairie Towne Center (3)                        Feb 2017                     1                         264                            9.0                           80.4%
Southway Shopping Center(3)                     Feb 2017                     1                         182                            4.3                           88.6%
Stirling Slidell Centre (3)                     Feb 2017                     1                         140                            2.1                           45.8%
Northwoods Marketplace (3)                      Feb 2017                     1                         236                            4.0                           96.8%
Centennial Plaza (3)                            Feb 2017                     1                         234                            2.5                           96.6%
Northlake Commons (3)                           Feb 2017                     1                         109                            3.7                           86.8%
Shops at Shelby Crossing (3)                    Feb 2017                     1                         236                            3.0                           90.9%
Shoppes of West Melbourne (3)                   Feb 2017                     1                         144                            3.3                           82.1%
The Centrum (3)                                 Feb 2017                     1                         271                            4.4                           77.7%
Shoppes at Wyomissing (3)                       Feb 2017                     1                         103                            3.2                           64.0%
Southroads Shopping Center (3)                  Feb 2017                     1                         409                            4.3                           78.5%
Parkside Shopping Center (3)                    Feb 2017                     1                         183                            4.0                           80.5%
Colonial Landing (3)                            Feb 2017                     1                         264                            5.2                           93.6%
The Shops at West End (3)                       Feb 2017                     1                         382                            6.9                           71.2%
Township Marketplace (3)                        Feb 2017                     1                         299                            3.3                           85.5%
Cross Pointe Centre (3)                         Feb 2017                     1                         226                            8.6                           100.0%
Towne Centre Plaza (3)                          Feb 2017                     1                         94                             2.1                           100.0%
Village at Quail Springs (3)                    Feb 2017                     1                         100                            6.2                           100.0%
Pine Ridge Plaza (3)                            Feb 2017                     1                         239                            3.0                           95.8%
Bison Hollow (3)                                Feb 2017                     1                         135                            3.7                           100.0%
Jefferson Commons (3)                           Feb 2017                     1                         206                            6.0                           97.9%
Northpark Center (3)                            Feb 2017                     1                         318                            5.0                           95.0%
Anderson Station (3)                            Feb 2017                     1                         244                            3.5                           95.9%
Patton Creek (3)                                Feb 2017                     1                         491                            3.6                           82.1%
North Lakeland Plaza (3)                        Feb 2017                     1                         171                            4.3                           98.0%
Riverbend Marketplace (3)                       Feb 2017                     1                         143                            3.6                           85.0%
Montecito Crossing (3)                          Feb 2017                     1                         180                            3.9                           86.2%
Best on the Boulevard (3)                       Feb 2017                     1                         205                            2.6                           86.1%
Shops at RiverGate South (3)                    Feb 2017                     1                         141                            5.2                           96.1%
Dollar General XXIII                      Mar 2017; May 2017;                8                         71                             8.4                           100.0%
                                                Jun 2017
Jo-Ann Fabrics I                                Apr 2017                     1                         18                             3.8                           100.0%
Bob Evans I                                     Apr 2017                    23                         117                            16.1                          95.2%
FedEx Ground IX                                 May 2017                     1                         54                             5.2                           100.0%
Chili's II                                      May 2017                     1                          6                             6.6                           100.0%
Sonic Drive In I                                Jun 2017                     2                          3                             11.3                          100.0%
Bridgestone HOSEPower I                         Jun 2017                     2                         41                             8.4                           100.0%
Bridgestone HOSEPower II                        Jul 2017                     1                         25                             8.6                           100.0%
FedEx Ground X                                  Jul 2017                     1                         142                            6.3                           100.0%
Chili's III                                     Aug 2017                     1                          6                             6.6                           100.0%
FedEx Ground XI                                 Sep 2017                     1                         29                             6.3                           100.0%
Hardee's I                                      Sep 2017                     4                         13                              -                              -%
Tractor Supply IV                               Oct 2017                     2                         51                             5.6                           100.0%
Circle K II                                     Nov 2017                     6                         20                             16.3                          100.0%
Sonic Drive In II                               Nov 2017                    20                         31                             16.7                          100.0%
Bridgestone HOSEPower III                       Dec 2017                     1                         21                             9.3                           100.0%


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                                                                         Number of            Rentable Square Feet
Portfolio                                   Acquisition Date            Properties               (In thousands)             Remaining Lease Term (1)          Percentage Leased
Sonny's BBQ I                                   Jan 2018                     3                         19                             12.8                          100.0%
Mountain Express I                              Jan 2018                     9                         30                             16.8                          100.0%
Kum & Go I                                      Feb 2018                     1                          5                             7.2                           100.0%
DaVita I                                        Feb 2018                     2                         13                             4.9                           100.0%
Imperial I                                      Mar 2018                     9                         22                             19.6                          100.0%
Mountain Express II                             Jun 2018                    15                         59                             17.1                          100.0%
Dialysis I                                      Jul 2018                     7                         65                             7.1                           100.0%
Children of America I                           Aug 2018                     2                         33                             12.4                          79.7%
Burger King II                                  Aug 2018                     1                          3                             12.4                          100.0%
Imperial II                                     Aug 2018                     9                         18                             19.6                          100.0%
Bob Evans II                                    Aug 2018                    22                         112                            16.1                          100.0%
Mountain Express III                            Sep 2018                    14                         47                             17.3                          100.0%
Taco John's                                     Sep 2018                     7                         15                             12.6                          100.0%
HIFZA Trading                                   Oct 2018                     1                          4                             19.8                          100.0%
DaVita II                                       Oct 2018                     1                         10                             6.5                           100.0%
Pizza Hut I                                     Oct 2018                     9                         23                             12.6                          100.0%
Little Caesars I                                Dec 2018                    11                         19                             17.8                          100.0%
Caliber Collision I                             Dec 2018                     3                         48                             11.0                          100.0%
Tractor Supply V                           Dec 2018; Mar 2019                5                         97                             10.4                          100.0%
Fresenius III                                   Jan 2019                     6                         44                             6.2                           100.0%
Pizza Hut II                                    Jan 2019                    31                         90                             17.8                          100.0%
Mountain Express IV                             Feb 2019                     8                         28                             17.8                          100.0%
                                          Feb 2019; Mar 2019;
Mountain Express V                              Apr 2019                    18                         96                             17.9                          100.0%
Fresenius IV                                    Mar 2019                     1                          9                             10.7                          100.0%
Mountain Express VI                             Jun 2019                     1                          3                             17.8                          100.0%
IMTAA                                      May 2019; Jan 2020               12                         40                             18.3                          100.0%
Pizza Hut III                              May 2019; Jun 2019               13                         47                             18.2                          100.0%
Fresenius V                                     Jun 2019                     2                         19                             11.1                          100.0%
Fresenius VI                                    Jun 2019                     1                         10                             5.8                           100.0%
Fresenius VII                                   Jun 2019                     3                         59                             9.5                           50.1%
Caliber Collision II                            Aug 2019                     1                         19                             8.0                           100.0%
Dollar General XXV                              Sep 2019                     5                         44                             9.7                           100.0%
Dollar General XXIV                        Sep 2019; Oct 2019                9                         82                             13.4                          100.0%
Mister Carwash I                                Sep 2019                     3                         13                             18.5                          100.0%
Checkers I                                      Sep 2019                     1                          1                             18.4                          100.0%
DaVita III                                 Sep 2019; Mar 2020                2                         20                             8.4                           100.0%
Dialysis II                                     Sep 2019                    50                         426                            7.6                           100.0%
Mister Carwash II                               Nov 2019                     2                          8                             18.7                          100.0%
Advance Auto IV                            Dec 2019; Jan 2020               14                         96                             8.3                           100.0%
Advance Auto V                                  Dec 2019                    11                         73                             7.8                           100.0%
Dollar General XXVI                             Dec 2019                    12                         114                            11.1                          100.0%
Pizza Hut IV                               Dec 2019; Mar 2020               16                         50                             18.8                          100.0%
American Car Center I                           Mar 2020                    16                         178                            19.0                          100.0%
BJ's Wholesale Club                             Mar 2020                     1                         110                            9.6                           100.0%
Mammoth Car Wash                                Mar 2020                     9                         56                             19.0                          100.0%
Mammoth Car Wash                                Apr 2020                     1                         18                             19.0                          100.0%
Mammoth Car Wash                                Apr 2020                     1                          4                             19.1                          100.0%
DaVita IV                                       Apr 2020                     1                         10                             10.3                          100.0%
GPM                                            Jul. 2020                    30                         112                            15.2                          100.0%
IMTAA II                                   Aug 2020; Dec 2020               10                         54                             14.4                          100.0%
Fresenius IX                                    Nov 2020                     6                         46                             9.9                           100.0%


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                                                                            Number of            Rentable Square Feet
Portfolio                                    Acquisition Date              Properties               (In thousands)             Remaining Lease Term (1)          Percentage Leased
Kalma Kaur                                       Dec 2020                      10                         37                             19.8                          100.0%
Dialysis III                                     Dec 2020                      15                         128                            4.5                           100.0%
National Convenience Distributors                Mar. 2021                      5                         385                            20.0                          100.0%
Advance Auto VI                                  Mar. 2021                      2                         14                             6.2                           100.0%
                                                                               925                      19,657                           8.7                           94.9%


________
(1)Remaining lease term in years as of March 31, 2021. If the portfolio has
multiple properties with varying lease expirations, remaining lease term is
calculated on a weighted-average basis.
(2)Includes one property leased to Truist Bank which was unoccupied as of
March 31, 2021 and was being marketed for sale. Please see   Note 3   - Real
Estate Investments to our consolidated financial statements in this Quarterly
Report on Form 10-Q for further details.
(3)Multi-tenant properties. All other properties are single-tenant.
Results of Operations
In addition to the comparative quarter-over-quarter discussion below, please see
the "Overview - Management Update on the Impacts of the COVID-19 Pandemic"
section above for additional information on the risks and uncertainties
associated with the COVID-19 pandemic and management's actions taken to mitigate
those risks and uncertainties.
Comparison of the Three Months Ended March 31, 2021 and 2020
We owned 813 properties for the entirety of both the three months ended
March 31, 2021 and 2020 (our "Three Month Same Store") that were 93.8% leased as
of March 31, 2021. From January 1, 2020 through March 31, 2021, we acquired 112
properties (our "Acquisitions Since January 1, 2020'') that were 100.0% leased
as of March 31, 2021. From January 1, 2020 through March 31, 2021, we sold eight
properties (our "Disposals Since January 1, 2020'').
The following table summarizes our leasing activity during the three months
ended March 31, 2021:
                                                                                                                       Three Months Ended March 31, 2021
                                                                                                                                            (In thousands)
                                                                                                                                                                                                        Costs to execute
                                                        Number of                                        Annualized SLR (1) prior to Lease         Annualized SLR (1) after          Costs to           lease per square
                                                         Leases           Rentable Square Feet             Execution/Renewal/Termination            Lease Execution/Renewal        execute lease              foot
New leases (2)                                              11                  191,952                $                                -          $                2,120          $    1,391          $          7.25
Lease renewals/amendments (2)                               53                  490,867                $                            6,825          $                6,399          $      249          $          0.51


______
(1)Annualized rental income on a straight-line basis as of March 31, 2021.
Represents the GAAP basis annualized straight-line rent that is recognized over
the term on the respective leases, which includes free rent, periodic rent
increases, and excludes recoveries.
(2)New leases reflect leases in which a new tenant took possession of the space
during the three months ended March 31, 2021, excluding new property
acquisitions. Lease renewals/amendments reflect leases in which an existing
tenant executed terms to extend the term or change the rental terms of the lease
during the three months ended March 31, 2021. This excludes leases modifications
for deferrals/abatements in response to COVID-19 negotiations which qualify for
FASB relief. For more information - see Management update on Impacts of the
COVID-19 Pandemic - Management's Actions.
(3)Represents leases that were terminated prior to their contractual lease
expiration dates.
Net Loss Attributable to Common Stockholders
Net loss attributable to common stockholders was $9.4 million for the three
months ended March 31, 2021, as compared to $9.2 million for the three months
ended March 31, 2020. The change in net loss attributable to common stockholders
is discussed in detail for each line item of the consolidated statements of
operations and comprehensive loss in the sections that follow.
Property Results of Operations
                                                Same Store                                              Acquisitions                                             Disposals                                                 Total
                                                                   Increase            Three Months Ended March            Increase           Three Months Ended March           Increase                                                   Increase
                            Three Months Ended March 31,          (Decrease)                      31,                     (Decrease)                     31,                    (Decrease)           Three Months Ended March 31,          (Decrease)
                               2021              2020                  $                  2021             2020                $                 2021            2020                $                  2021              2020                  $
Revenue from tenants       $  74,123          $ 74,060          $         63          $   4,807          $ 356          $      4,451          $   257          $ 148          $        109          $  79,187          $ 74,564          $      4,623
Less: Property operating      13,384            12,282                 1,102                 55              -                    55                -              -                     -             13,439            12,282                 1,157
NOI                        $  60,739          $ 61,778          $     (1,039)         $   4,752          $ 356          $      4,396          $   257          $ 148          $        109          $  65,748          $ 62,282          $      3,466


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Net operating income ("NOI") is a non-GAAP financial measure used by us to
evaluate the operating performance of our real estate portfolio. NOI is equal to
revenue from tenants less property operating expense. NOI excludes all other
financial statement amounts included in net loss attributable to common
stockholders. We believe NOI provides useful and relevant information because it
reflects only those income and expense items that are incurred at the property
level and presents such items on an unlevered basis. See "Non-GAAP Financial
Measures" included elsewhere in this Quarterly Report on Form 10-Q for
additional disclosure and a reconciliation to our net loss attributable to
common stockholders.
Revenue from Tenants
Revenue from tenants increased $4.6 million to $79.2 million for the three
months ended March 31, 2021, compared to $74.6 million for the three months
ended March 31, 2020. This increase in revenue from tenants was due to
incremental revenue from our Acquisitions Since January 1, 2020 of approximately
$4.5 million, and by an increase in our Three Month Same Store revenue of
approximately $0.1 million, partially offset by a decrease in revenue as a
result of our Disposals Since January 1, 2020 of approximately $0.1 million,
when compared to the same quarter last year.
The slight increase in the Three Month Same Store revenue includes higher
reimbursement revenue of $0.6 million partially offset by higher bad debt
expense of $0.4 million as compared to first quarter of 2020, which is recorded
as a reduction of revenue from tenants. For additional information on our
revenue recognition policy and details on the factors included in our
assessment, see   Note 2   - Summary of Significant Accounting Policies to the
consolidated financial statements included in this Form 10-Q.
Property Operating Expenses
Property operating expenses primarily consist of the costs associated with
maintaining our properties including real estate taxes, utilities, and repairs
and maintenance. Property operating expenses increased $1.2 million to $13.4
million for the three months ended March 31, 2021 compared to $12.3 million for
the three months ended March 31, 2020. This increase was driven by an increase
of $0.1 million from our Acquisitions Since January 1, 2020 and an increase of
approximately $1.1 million in Three Month Same Store properties
The increase in the Three Month Same Store property operating expenses is
attributable to higher reimbursement expenses of $0.6 million with the remainder
primarily attributable to real estate tax reassessments which were paid in 2019
and credited in 2020, which lowered expenses during the three months ended March
31, 2020 and did not recur in the three months ended March 31, 2021.
Other Results of Operations
Asset Management Fees to Related Party
We pay asset management fees to the Advisor for managing our day-to-day
operations. These fees include a base management fee, which has a fixed and
variable portion and an incentive variable management fee. Asset management fees
paid to the Advisor increased $0.4 million to $7.3 million for the three months
ended March 31, 2021, compared to $6.9 million for the three months ended
March 31, 2020, primarily due to an increase in the variable portion of the base
management fee due to our equity issuances.
The variable portion of the base management fee is calculated on a monthly basis
and is equal to one-twelfth of 1.25% of the cumulative net proceeds of any
equity raised by us (including, among other things, common stock, preferred
stock and certain convertible debt but excluding among other things, equity
based compensation) from and after February 16, 2017. The variable portion of
the base management fee will increase in connection with future issuances of
equity securities. We incurred an incentive variable management fee of
$0.1 million during the three months ended March 31, 2021. No incentive variable
management fee was incurred during the three months ended March 31, 2020.
In light of the unprecedented market disruption resulting from the COVID-19
pandemic, in March 2020, we agreed with the Advisor to amend the advisory
agreement to temporarily lower the quarterly thresholds we must reach on a
quarterly basis for the Advisor to receive the variable incentive management fee
through the end of 2020, and in January 2021, we agreed with the Advisor to
further amend the advisory agreement to extend the expiration of these
thresholds through the end of 2021. Please see   Note 10   - Related Party
Transactions and Arrangements to our consolidated financial statements included
in this Quarterly Report on Form 10-Q for additional information regarding fees
incurred from the Advisor.
Acquisition, Transaction and Other Costs
Acquisition, transaction and other costs decreased $0.4 million to $42,000 for
the three months ended March 31, 2021, compared to $0.5 million for the three
months ended March 31, 2020. The decrease was primarily due to less acquisition
activity during the three months ended March 31, 2021, as compared to the prior
year quarter. The prepayment penalties related to mortgages during the three
months ended March 31, 2020 were approximately $80,000. We did not incur any
prepayment penalties during the three months ended March 31, 2021.
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Equity-Based Compensation
During the three months ended March 31, 2021 and 2020, we recorded non-cash
equity-based compensation expense of $4.3 million and $3.2 million,
respectively, relating to restricted shares of Class A common stock ("restricted
shares") granted to our board of directors and employees of the Advisor or its
affiliates who are involved in providing services to us and the units of limited
partnership designated as "LTIP Units" ("LTIP Units") that were granted to our
Advisor in 2018 pursuant to a multi-year outperformance agreement (the "2018
OPP").
The higher expense recorded in the first quarter of 2021 was due to an amendment
to the original award agreement on February 26, 2021 for restricted shares
previously issued to our former chief financial officer which accelerated the
vesting of those restricted shares on April 9, 2021 upon the effectiveness of
her resignation. These restricted shares were scheduled to vest in 25%
increments on each of the first four anniversaries of the grant date (September
15, 2020). Also, we recorded additional expense for the excess of the new value
of those awards on the date of modification over the fair value of the awards
immediately prior to the amendment. In addition, we granted our former chief
financial officer an additional award of restricted shares that also fully
vested upon the effectiveness of her resignation April 9, 2021, contributing to
the increase to equity-based compensation expense recorded during the three
months ended March 31, 2021. For additional details, including the February 2021
restricted share activity and the 2018 OPP and the LTIP Units, see   Note 12   -
Equity-Based Compensation to our consolidated financial statements included in
this Quarterly Report on Form 10-Q.
General and Administrative Expense
General and administrative expense increased $1.2 million to $6.4 million for
the three months ended March 31, 2021, compared to $5.3 million for the three
months ended March 31, 2020. This increase was due to $0.8 million of increased
legal fees, $0.2 million of increased audit fees, and $0.2 million of increased
miscellaneous general and administrative expenses incurred during the three
months ended March 31, 2021 as compared to March 31, 2020.
Depreciation and Amortization Expense
Depreciation and amortization expense decreased $2.0 million to $32.3 million
for the three months ended March 31, 2021, compared to $34.3 million for the
three months ended March 31, 2020. Depreciation and amortization expense was
impacted by a decrease of $3.8 million from our Three Month Same Store
properties partially offset by an increase of $1.7 million related to our
Acquisitions Since January 1, 2020, and an increase of $0.1 million from our
Disposals Since January 1, 2020. The decrease in our Same Store properties'
depreciation and amortization expense is mainly attributable to lower
amortization expense from in-place leases of $3.3 million as compared to the
three months ended March 31, 2020 due to the write-off of $2.1 million within
the single-tenant portfolio and $1.2 million within the multi-tenant portfolio
which represents the expiration of in-place lease assets which had their
amortization accelerated during the period ended March 31, 2020 as a result of
tenant lease terminations.
Gain on Sale/Exchange of Real Estate Investments
During the three months ended March 31, 2021 we sold two properties. These
properties sold for an aggregate contract price of $0.6 million, resulting in
aggregate gains on sale of $0.3 million. During the three months ended March 31,
2020, we sold two properties which resulted in gains on sale. These properties
sold for an aggregate contract price of $3.8 million, resulting in aggregate
gains on sale of $1.4 million.
Interest Expense
Interest expense increased $0.2 million to $19.3 million for the three months
ended March 31, 2021, compared to $19.1 million for the three months ended
March 31, 2020. This increase was due to higher average mortgage notes payable
during the three months ended March 31, 2021 when compared to the average
balance for the three months ended March 31, 2020, partially offset by lower
interest rates.
During the three months ended March 31, 2021 and 2020, the average outstanding
balances on our mortgage notes payable were $1.5 billion and $1.3 billion,
respectively, and our average outstanding balance under our Credit Facility was
$280.9 million and $350.1 million, respectively. For the three months ended
March 31, 2021 and 2020, the weighted-average interest rates on our mortgage
notes payable were 4.02% and 4.55% and the weighted-average interest rates on
our Credit Facility were 2.79% and 3.75%, respectively.
Other Income
Other income was $24,000 and $72,000 for the three months ended March 31, 2021
and 2020.
Loss on Non-Designated Derivative
The loss on non-designated derivative instruments was immaterial for the three
months ended March 31, 2021 and relates to an interest rate cap on a mortgage
note payable entered into in the fourth quarter of 2020 that is designed to
protect us from
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adverse interest rate changes. For additional information , see   Note 7   -
Derivatives and Hedging Activities to our consolidated financial statements
included in this Quarterly Report on Form 10-Q.
Cash Flows from Operating Activities
Our cash flows provided by or used in operating activities is affected by the
rental income generated from leasing activity, including leasing activity due to
acquisitions and dispositions, restricted cash we are required to maintain, the
timing of interest payments, the receipt of scheduled rent payments and the
level of property operating expenses. Our cash flows from operating activities
was $34.4 million during the three months ended March 31, 2021 and consisted of
net loss of $3.8 million, adjusted for non-cash items of $37.6 million,
including depreciation and amortization of tangible and intangible real estate
assets, amortization of deferred financing costs, amortization of mortgage
premiums on borrowings, share-based compensation, gain on sale of real estate
investments and impairment charges. In addition, cash flows from operating
activities were impacted by an increase in the straight-line rent receivable of
$1.7 million, a decrease in deferred rent of $1.4 million, an increase in
accounts payable and accrued expenses of $3.3 million and an increase in prepaid
expenses and other assets of $2.4 million.
Our cash flows from operating activities was $24.1 million during the three
months ended March 31, 2020 and consisted of net loss of $5.5 million, adjusted
for non-cash items of $36.1 million, including depreciation and amortization of
tangible and intangible real estate assets, amortization of deferred financing
costs, amortization of mortgage premiums on borrowings, share-based
compensation, gain on sale of real estate investments and impairment charges. In
addition, cash flows from operating activities were impacted by an increase in
the straight-line rent receivable of $2.3 million, a decrease in deferred rent
of $1.7 million, a decrease in accounts payable and accrued expenses of $0.2
million and an increase in prepaid expenses and other assets of $2.4 million.
Cash Flows from Investing Activities
The net cash used in investing activities during the three months ended
March 31, 2021 of $37.5 million consisted primarily of cash paid for investments
in real estate and other assets of $37.2 million, capital expenditures of $0.9
million and deposits for real estate acquisitions of $0.1 million, partially
offset by cash received from the sale of real estate investments of $0.6
million.
The net cash used in investing activities during the three months ended March
31, 2020 of $65.5 million consisted primarily of cash paid for investments in
real estate and other assets of $63.4 million, capital expenditures of $3.3
million and deposits for real estate acquisitions of $1.1 million, partially
offset by cash received from the sale of real estate investments, (net of
mortgage loans repaid) of $2.3 million.
Cash Flows from Financing Activities
The net cash used in financing activities of $11.8 million during the three
months ended March 31, 2021 consisted primarily of cash dividends paid to
holders of Class A common stock of $23.1 million and cash dividends paid to
holders of our Series A Preferred Stock of $3.7 million, partially offset by net
proceeds from the issuance of Series A Preferred Stock of $2.3 million and net
proceeds from the issuance of Series C Preferred Stock of $13.9 million.
The net cash provided by financing activities of $135.5 million during the three
months ended March 31, 2020 consisted primarily of net borrowings on our Credit
Facility of $150.0 million and net proceeds received from the issuance of Series
A Preferred Stock of $19.9 million, partially offset by cash dividends paid to
holders of Class A common stock of $29.8 million and cash dividends paid to
holders of our Series A Preferred Stock of $3.3 million.
Liquidity and Capital Resources
The negative impacts of the COVID-19 pandemic has caused and may continue to
cause certain of our tenants to be unable to make rent payments to us timely, or
at all, which has had, and could continue to have, an adverse effect on the
amount of cash we receive from our operations. We have taken proactive steps
with regard to rent collections to mitigate the impact on our business and
liquidity. The ultimate impact on our results of operations, our liquidity and
the ability of our tenants to continue to pay us rent will depend on numerous
factors including the overall length and severity of the COVID-19 pandemic.
Management is unable to predict the nature and scope of any of these factors.
Because substantially all of our income is derived from rentals of commercial
real property, our business, income, cash flow, results of operations, financial
condition, liquidity, prospects and ability to service our debt obligations, our
ability to consummate future property acquisitions and our ability to pay
dividends and other distributions to our stockholders would be adversely
affected if a significant number of tenants are unable to meet their obligations
to us. In addition to the discussion below, please see the "Overview -
Management Update on the Impacts of the COVID-19 Pandemic" section above for
additional information on the risks and uncertainties associated with the
COVID-19 pandemic and management's actions taken in response.
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We expect to fund our future short-term operating liquidity requirements through
a combination of cash on hand, net cash provided by our property operations and
proceeds from our Credit Facility; provided that, following the amendment to our
Credit Facility in July 2020, we are restricted from using proceeds from
borrowings under the Credit Facility to accumulate or maintain cash or cash
equivalents in excess of amounts necessary to meet current working capital
requirements, which may limit our ability to use proceeds from the Credit
Facility for these purposes. We may also generate additional liquidity through
property dispositions and, to the extent available, secured or unsecured
borrowings, our "at the market" equity offering program for Class A common stock
(the "Class A Common Stock ATM Program"), our "at the market" equity offering
program for Series A Preferred Stock (the "Series A Preferred Stock ATM
Program"), our "at the market" equity offering program for Series C Preferred
Stock (the "Series C Preferred Stock ATM Program"), or other offerings of debt
or equity securities. The volatility in the global financial market could
negatively impact our ability to raise capital through equity offerings, which
as a result, could impact our decisions as to when and if we will seek
additional equity funding.
As of March 31, 2021 and December 31, 2020, we had cash and cash equivalents of
$84.2 million and $102.9 million, respectively, and availability for future
borrowings under our Credit Facility was $134.3 million and $126.0 million,
respectively.
During the Adjustment Period, our Credit Facility required us to maintain a
combination of cash, cash equivalents and amounts available for future
borrowings under our Credit Facility of not less than $100.0 million, which
limited our ability to incur additional indebtedness and use cash that would
otherwise be available to us. We were also restricted during the Adjustment
Period from using proceeds from borrowings under the Credit Facility to
accumulate or maintain cash or cash equivalents in excess of amounts necessary
to meet current working capital requirements, as determined in good faith by us.
Our principal demands for funds are for payment of our operating and
administrative expenses, property acquisitions, capital expenditures, debt
service obligations and cash dividends to our common and preferred stockholders.
Mortgage Notes Payable and Credit Facility
As of March 31, 2021, we had $1.5 billion of gross mortgage notes payable
outstanding and $280.9 million outstanding under our Credit Facility. Of our
total gross debt, 82.6% is fixed-rate (including by swap agreement), and 17.4%
is variable-rate. As of March 31, 2021, our net debt to gross asset value ratio
was 40.4%. We define net debt as the principal amount of our outstanding debt
(excluding the effect of deferred financing costs, net and mortgage premiums and
discounts, net) less cash and cash equivalents. Gross asset value is defined as
total assets plus accumulated depreciation and amortization. As of March 31,
2021, the weighted-average interest rates on the mortgage notes payable and
Credit Facility were 4.02% and 2.79% respectively. Based on debt outstanding as
of March 31, 2021, future anticipated principal payments on our mortgage notes
payable for the remainder of 2021 and the year ended December 31, 2022 are
$109.9 million and $2.3 million, respectively.
As of March 31, 2021, we had $4.0 billion in gross real estate assets, at cost,
and we had pledged approximately $2.8 billion in gross real estate assets, at
cost, as collateral for our mortgage notes payable. In addition, approximately
$1.1 billion of these gross real estate investments, at cost, were included in
the unencumbered asset pool comprising the borrowing base under the Credit
Facility. Therefore, this real estate is only available to serve as collateral
or satisfy other debts and obligations if it is first removed from the borrowing
base under the Credit Facility, which would reduce the amount available to us on
the Credit Facility.
Credit Facility - Terms and Capacity
As of March 31, 2021 and December 31, 2020, we had $280.9 million outstanding
under our Credit Facility. Our Credit Facility provides for commitments for
aggregate revolving loan borrowings and includes an uncommitted "accordion
feature" whereby, upon the request of the OP, but at the sole discretion of the
participating lenders, the commitments under the Credit Facility may be
increased by up to an additional $500.0 million, subject to obtaining
commitments from new lenders or additional commitments from participating
lenders and certain customary conditions. As of March 31, 2021, we had increased
our commitments through this accordion feature by $125.0 million, bringing total
aggregate commitments to $540.0 million, and leaving $375.0 million of potential
available commitments remaining.
The amount available for future borrowings under the Credit Facility is based on
the lesser of (1) a percentage of the value of the pool of eligible unencumbered
real estate assets comprising the borrowing base, and (2) a maximum amount
permitted to maintain a minimum debt service coverage ratio with respect to the
borrowing base, in each case, as of the determination date. During the
Adjustment Period, (a) the value of all eligible unencumbered real estate assets
comprising the borrowing base purchased through June 30, 2020 was generally
decreased by 10%, and (b) the minimum unsecured interest coverage ratio required
to be maintained by the eligible unencumbered real estate assets comprising the
borrowing base was decreased during the fiscal quarter ended June 30, 2020 and
was increased during the other fiscal quarters of the Adjustment Period. As of
March 31, 2021, we had a total borrowing capacity under the Credit Facility of
$415.1 million based on the value of the borrowing base under the Credit
Facility. Of this amount, $280.9 million was outstanding under the Credit
Facility as of March 31, 2021 and $134.3 million remained available for future
borrowings.
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Our Credit Facility requires payments of interest only and matures on April 26,
2022. We also have a one-time right, subject to customary conditions, to extend
the maturity date for an additional term of one year to April 26, 2023.
Borrowings under our Credit Facility bear interest at either (i) the Base Rate
(as defined in the Credit Facility) plus an applicable spread ranging from 0.60%
to 1.20% depending on our consolidated leverage ratio or (ii) LIBOR plus an
applicable margin ranging from 1.60% to 2.20%, depending on our consolidated
leverage ratio. From July 24, 2020 until delivery of the compliance certificate
for the fiscal quarter ending June 30, 2021, the margin will be 1.50% with
respect to the Base Rate and 2.50% with respect to LIBOR regardless of our
consolidated leverage ratio. The "floor" on LIBOR is 0.25%. As of March 31, 2021
we have elected to use the LIBOR rate for all our borrowings under the Credit
Facility.
LIBOR Exposure
In July 2017, the Financial Conduct Authority (which regulates LIBOR) announced
it intends to stop compelling banks to submit rates for the calculation of LIBOR
after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank
of New York organized the Alternative Reference Rates Committee, which
identified the Secured Overnight Financing Rate ("SOFR") as its preferred
alternative to LIBOR in derivatives and other financial contracts. On November
30, 2020, the Financial Conduct Authority announced a partial extension of this
deadline, indicating its intention to cease the publication of the one-week and
two-month USD LIBOR settings immediately following December 31, 2021, and the
remaining USD LIBOR settings immediately following the LIBOR publication on June
30, 2023.
While we expect LIBOR to be available in substantially its current form until at
least the end of 2023, it is possible that LIBOR will become unavailable prior
to that time. To transition from LIBOR under the Credit Facility, we will either
utilize the Base Rate (as defined in the Credit Facility) or an alternative
benchmark established by the agent in accordance with the terms of the Credit
Facility, which will be SOFR if available or an alternate benchmark that is
being widely used in the market at that time as selected by the agent.
Acquisitions and Dispositions - Three Months Ended March 31, 2021
One of our primary uses of cash during the three months ended March 31, 2021 was
for acquisitions of properties.
During the three months ended March 31, 2021, we acquired seven properties for
an aggregate purchase price of $37.2 million, including capitalized acquisition
costs. The acquisitions during the three months ended March 31, 2021 were funded
through a combination of proceeds from cash on hand, the issuance and sale of
Series A Preferred Stock and Series C Preferred Stock (discussed below) and
proceeds from dispositions of properties (discussed below).
During the three months ended March 31, 2021, we sold two properties, for an
aggregate contract price of $0.6 million, excluding disposition related costs.
There was no mortgage debt on these properties.
Acquisitions and Dispositions - Subsequent to March 31, 2021
We have entered into definitive purchase and sale agreements ("PSAs") to acquire
an additional 21 properties for an aggregate contract purchase price of
approximately $21.4 million. The PSAs are subject to conditions, and there can
be no assurance we will complete any of these acquisitions on their contemplated
terms, or at all. We have also entered into a letter of intent ("LOI") to
acquire one property for a contract purchase price of $10.2 million. We
anticipate using cash on hand, which we expect will include cash from prior
borrowings under our Credit Facility, proceeds from our ATM Programs, proceeds
from future dispositions of properties and proceeds from borrowings (including
mortgage borrowings and additional borrowings under our Credit Facility), to
fund the consideration required to complete these acquisitions. During the
Adjustment Period, (i) all properties acquired with proceeds from the borrowings
under the Credit Facility were required to be added to the borrowing base, and
(ii) we were prohibited from acquiring any multi-tenant properties and from
making certain other investments.
With respect to our pending acquisitions, in light of the disruptions caused by
the COVID-19 pandemic, we are taking a prudent stance with our acquisition
pipeline and are carefully determining appropriate risk adjusted capitalization
rate targets for potential new acquisitions going forward.
ATM Programs
We did not sell any shares under the Class A Common Stock ATM Program during the
three months ended March 31, 2021.
During the three months ended March 31, 2021, we sold 91,703 shares under the
Series A Preferred Stock ATM Program for gross proceeds of $2.3 million and net
proceeds of $2.3 million, after commissions paid of approximately $35,000.
During the three months ended March 31, 2021, we sold 564,101 shares under the
Series C Preferred Stock ATM Program for gross proceeds of $14.1 million and net
proceeds of $13.9 million, after commissions paid of approximately $0.2 million.


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Distribution Reinvestment Plan
Our distribution reinvestment plan ("DRIP") allows stockholders who have elected
to participate in the DRIP to have dividends payable with respect to all or a
portion of their shares of Class A common stock reinvested in additional shares
of Class A common stock. Shares issued pursuant to the DRIP are, at our
election, either (i) acquired directly from us, by issuing new shares, at a
price based on the average of the high and low sales prices of Class A common
stock on Nasdaq on the date of reinvestment, or (ii) acquired through open
market purchases by the plan administrator at a price based on the
weighted-average of the actual prices paid for all of the shares of Class A
common stock purchased by the plan administrator with all participants'
reinvested dividends for the related quarter, less a per share processing fee.
During the three months ended March 31, 2021 and the year ended December 31,
2020, all shares acquired by participants pursuant to the DRIP were acquired
through open market purchases by the plan administrator and not issued directly
to stockholders by us.
Capital Expenditures and Construction in Progress
We invest in capital expenditures to enhance and maintain the value of our
properties. The recent economic uncertainty created by the COVID-19 global
pandemic could impact our decisions on the amount and timing of future capital
expenditures. We define revenue enhancing capital expenditures as improvements
to our properties that we believe will result in higher income generation over
time. Capital expenditures for maintenance are generally necessary, non-revenue
generating improvements that extend the useful life of the property and are less
frequent in nature. By providing this metric, we believe we are presenting
useful information for investors that can help them assess the components of our
capital expenditures that are expected to either grow or maintain our current
revenue. Detail related to our capital expenditures during the three months
ended March 31, 2021 is as follows:
(In thousands)                    Three Months Ended March 31, 2021
Capital Expenditures
  Revenue enhancing              $                            2,342

  Maintenance                                                    77
Total Capital Expenditures                                    2,419
  Leasing commissions                                         2,149
Total                            $                            4,568


Also, as of March 31, 2021 and December 31, 2020, we had $0.4 million and
$31,000, respectively, of construction in progress which is included in the
prepaid expenses and other assets on the consolidated balance sheets.
2021 LTIP Award
On May 4, 2021, our independent directors, acting as a group, authorized the
issuance of a new award of LTIP Units to the Advisor after the performance
period under the 2018 OPP expires on July 19, 2021. The number of LTIP Units to
be issued to the Advisor pursuant to this award will be equal to the quotient of
$72.0 million divided by the ten­trading day trailing average closing stock
price of Class A common stock for the ten trading days up to and including the
day before the new three-year performance period commences on July 20, 2021. See
  Item 5   - Other Information for additional information.
Non-GAAP Financial Measures
This section discusses the non-GAAP financial measures we use to evaluate our
performance, including Funds from Operations ("FFO"), Adjusted Funds from
Operations ("AFFO") and NOI. While NOI is a property-level measure, AFFO is
based on our total performance and therefore reflects the impact of other items
not specifically associated with NOI such as interest expense, general and
administrative expenses and operating fees to related parties. Additionally, NOI
as defined herein, does not reflect an adjustment for straight-line rent but
AFFO does. A description of these non-GAAP measures and reconciliations to the
most directly comparable GAAP measure, which is net income (loss), is provided
below. Adjustments for unconsolidated partnerships and joint ventures are
calculated to exclude the proportionate share of the non-controlling interest to
arrive at FFO, AFFO and NOI attributable to stockholders.
Funds from Operations and Adjusted Funds from Operations
Funds from Operations
Due to certain unique operating characteristics of real estate companies, as
discussed below, the National Association of Real Estate Investment Trusts
("NAREIT"), an industry trade group, has promulgated a performance measure known
as FFO, which we believe to be an appropriate supplemental measure to reflect
the operating performance of a REIT. FFO is not equivalent to net income or loss
as determined under GAAP.
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We calculate FFO, a non-GAAP measure, consistent with the standards established
over time by the Board of Governors of NAREIT, as restated in a White Paper and
approved by the Board of Governors of NAREIT effective in December 2018 (the
"White Paper"). The White Paper defines FFO as net income or loss computed in
accordance with GAAP, excluding depreciation and amortization related to real
estate, gains and losses from sales of certain real estate assets, gain and
losses from change in control and impairment write-downs of certain real estate
assets and investments in entities when the impairment is directly attributable
to decreases in the value of depreciable real estate held by the entity.
Adjustments for consolidated partially-owned entities (including our OP) and
equity in earnings of unconsolidated affiliates are made to arrive at our
proportionate share of FFO attributable to our stockholders. Our FFO calculation
complies with NAREIT's definition.
The historical accounting convention used for real estate assets requires
straight-line depreciation of buildings and improvements, and straight-line
amortization of intangibles, which implies that the value of a real estate asset
diminishes predictably over time. We believe that, because real estate values
historically rise and fall with market conditions, including inflation, interest
rates, unemployment and consumer spending, presentations of operating results
for a REIT using historical accounting for depreciation and certain other items
may be less informative. Historical accounting for real estate involves the use
of GAAP. Any other method of accounting for real estate such as the fair value
method cannot be construed to be any more accurate or relevant than the
comparable methodologies of real estate valuation found in GAAP. Nevertheless,
we believe that the use of FFO, which excludes the impact of real estate related
depreciation and amortization, among other things, provides a more complete
understanding of our performance to investors and to management, and when
compared year over year, reflects the impact on our operations from trends in
occupancy rates, rental rates, operating costs, general and administrative
expenses, and interest costs, which may not be immediately apparent from net
income.
Adjusted Funds from Operations
In calculating AFFO, we start with FFO, then we exclude certain income or
expense items from AFFO that we consider to be more reflective of investing
activities, such as non-cash income and expense items and the income and expense
effects of other activities that are not a fundamental attribute of our day to
day operating business plan, such as amounts related to litigation arising out
of the merger with American Realty Capital-Retail Centers of America, Inc. in
February 2017 (the "Merger"). These amounts include legal costs incurred as a
result of the litigation, portions of which have been and may in the future be
reimbursed under insurance policies maintained by us. Insurance reimbursements
are deducted from AFFO in the period of reimbursement. We believe that excluding
the litigation costs and subsequent insurance reimbursements related to
litigation arising out of the Merger helps to provide a better understanding of
the operating performance of our business. Other income and expense items also
include early extinguishment of debt and unrealized gains and losses, which may
not ultimately be realized, such as gains or losses on derivative instruments
and gains and losses on investments. In addition, by excluding non-cash income
and expense items such as amortization of above-market and below-market leases
intangibles, amortization of deferred financing costs, straight-line rent, and
share-based compensation related to restricted shares and the 2018 OPP from
AFFO, we believe we provide useful information regarding those income and
expense items which have a direct impact on our ongoing operating performance.
In calculating AFFO, we exclude certain expenses which under GAAP are
characterized as operating expenses in determining operating net income (loss).
All paid and accrued merger, acquisition and transaction related fees and
certain other expenses negatively impact our operating performance during the
period in which expenses are incurred or properties are acquired will also have
negative effects on returns to investors, but are not reflective of our on-going
performance. In addition, legal fees and expense associated with
COVID-19-related lease disputes involving certain tenants negatively impact our
operating performance but are not reflective of our on-going performance.
Further, under GAAP, certain contemplated non-cash fair value and other non-cash
adjustments are considered operating non-cash adjustments to net income (loss).
In addition, as discussed above, we view gains and losses from fair value
adjustments as items which are unrealized and may not ultimately be realized and
not reflective of ongoing operations and are therefore typically adjusted for
when assessing operating performance. Excluding income and expense items
detailed above from our calculation of AFFO provides information consistent with
management's analysis of our operating performance. 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
changes that may reflect anticipated and unrealized gains or losses, we believe
AFFO provides useful supplemental information. By providing AFFO, we believe we
are presenting useful information that can be used to better assess the
sustainability of our ongoing operating performance without the impact of
transactions or other items that are not related to the ongoing performance of
our portfolio of properties. AFFO presented by us may not be comparable to AFFO
reported by other REITs that define AFFO differently. Furthermore, we believe
that in order to facilitate a clear understanding of our operating results, AFFO
should be examined in conjunction with net income (loss) as presented in our
consolidated financial statements. AFFO should not be considered as an
alternative to net income (loss) as an indication of our performance or to cash
flows as a measure of our liquidity or ability to pay dividends.
Accounting Treatment of Rent Deferrals/Abatements
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The majority of the concessions granted to our tenants as a result of the
COVID-19 pandemic are rent deferrals or temporary rent abatements with the
original lease term unchanged and collection of deferred rent deemed probable
(see the "Overview - Management Update on the Impacts of the COVID-19 Pandemic"
section of this Management's Discussion and Analysis of Financial Condition and
Results of Operations for additional information). As a result of relief granted
by the FASB and SEC related to lease modification accounting, rental revenue
used to calculate Net Income and NAREIT FFO has not been, and we do not expect
it to be, significantly impacted by these types of deferrals. In addition, since
we currently believe that these deferral amounts are collectable, we have
excluded from the increase in straight-line rent for AFFO purposes the amounts
recognized under GAAP relating to these types of rent deferrals. Conversely, for
abatements where contractual rent has been reduced, the reduction in revenue is
reflected over the remaining lease term for accounting purposes but represents a
permanent reduction in revenue and we have, accordingly, reduced our AFFO. For a
detailed discussion of our revenue recognition policy, including details related
to the relief granted by the FASB and SEC, see   Note 2   - Significant
Accounting Polices to our consolidated financial statements included in the
Quarterly Report on Form 10-Q.
The table below reflects the items deducted from or added to net loss in our
calculation of FFO and AFFO for the periods presented:
                                                                            Three Months Ended March 31,
(In thousands)                                                                2021                  2020

Net loss attributable to common stockholders (in accordance with GAAP)

                                                                  $        (9,411)         $   (9,153)
Impairment of real estate investments                                                -                   -
Depreciation and amortization                                                   32,319              34,335
Gain on sale/exchange of real estate investments                                  (286)             (1,440)

Proportionate share of adjustments for non-controlling interests to arrive at FFO

                                                                   (51)                (52)
FFO (as defined by NAREIT) attributable to common stockholders                  22,571              23,690
Acquisition, transaction and other costs (1)                                        42                 452
Litigation cost reimbursements related to the Merger (2)                             -                  (9)
Legal fees and expenses - COVID-19 lease disputes (3)                               69                   -
Accretion of market lease and other intangibles, net                              (935)               (992)
Straight-line rent                                                              (1,727)             (2,265)
Straight-line rent (rent deferral agreements) (4)                                 (975)                  -
Amortization of mortgage discounts (premiums) on borrowings, net                  (321)               (560)
Loss on non-designated derivatives                                                   -                   -
Equity-based compensation                                                        4,347               3,211

Amortization of deferred financing costs, net and change in accrued interest

                                                                 2,469               1,712

Proportionate share of adjustments for non-controlling interests to arrive at AFFO

                                                                   (5)                 (2)
AFFO attributable to common stockholders                               $    

25,535 $ 25,237

___________

(1)Includes primarily prepayment costs incurred in connection with early debt
extinguishment as well as litigation costs related to the Merger.
(2)Included in "Other income" in our consolidated statement of operations and
comprehensive loss.
(3)Reflects legal costs incurred during the year ended December 31, 2020 related
to disputes with tenants due to store closures or other challenges resulting
from COVID-19. The tenants involved in these disputes had not recently defaulted
on their rent and, prior to the second and third quarters of 2020, had recently
exhibited a pattern of regular payment. Based on the tenants involved in these
matters, their history of rent payments, and the impact of the pandemic on
current economic conditions, we view these costs as COVID-19-related and
separable from our ordinary general and administrative expenses related to
tenant defaults. We engaged counsel in connection with these issues separate and
distinct from counsel we typically engage for tenant defaults. The amount
reflects what the we believe to be only those incremental legal costs above what
we typically incur for tenant-related dispute issues. We may continue to incur
these COVID-19 related legal costs in the future.
(4)Represents the amount of deferred rent pursuant to lease negotiations which
qualify for FASB relief for which rent was deferred but not reduced. These
amounts are included in the straight-line rent receivable on our consolidated
balance sheet but are considered to be earned revenue attributed to the current
period for purposes of AFFO as they are expected to be collected. For rent
abatements (including those qualified for FASB relief), where contractual rent
has been reduced, the reduction in revenue is reflected over the remaining lease
term for accounting purposes but represents a permanent reduction in revenue and
we have, accordingly reduced our AFFO.
Net Operating Income
NOI is a non-GAAP financial measure used by us to evaluate the operating
performance of our real estate. NOI is equal to total revenues, excluding
contingent purchase price consideration, less property operating and maintenance
expense. NOI excludes all other items of expense and income included in the
financial statements in calculating net income (loss). We believe
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NOI provides useful and relevant information because it reflects only those
income and expense items that are incurred at the property level and presents
such items on an unleveraged basis. We use NOI to assess and compare property
level performance and to make decisions concerning the operation of the
properties. Further, we believe NOI is useful to investors as a performance
measure because, when compared across periods, NOI reflects the impact on
operations from trends in occupancy rates, rental rates, operating expenses and
acquisition activity on an unleveraged basis, providing perspective not
immediately apparent from net income (loss).
NOI excludes certain items included in calculating net income (loss) in order to
provide results that are more closely related to a property's results of
operations. For example, interest expense is not necessarily linked to the
operating performance of a real estate asset. In addition, depreciation and
amortization, because of historical cost accounting and useful life estimates,
may distort operating performance at the property level. NOI presented by us may
not be comparable to NOI reported by other REITs that define NOI differently. We
believe that in order to facilitate a clear understanding of our operating
results, NOI should be examined in conjunction with net income (loss) as
presented in our consolidated financial statements. NOI should not be considered
as an alternative to net income (loss) as an indication of our performance or to
cash flows as a measure of our liquidity or ability to pay dividends.
The following table reflects the items deducted from or added to net loss
attributable to common stockholders in our calculation of NOI for the three
months ended March 31, 2021:
                                                                                                                Non-Property
(In thousands)                                  Same Store           Acquisitions           Disposals             Specific               Total
Net income (loss) attributable to
common stockholders (in accordance with
GAAP)                                         $    13,212          $       

2,875 $ 437 $ (25,935) $ (9,411) Asset management fees to related party

                  -                      -                   -                   7,321             7,321

Acquisition, transaction and other
costs                                                   -                      -                   -                      42                42
Equity-based compensation                               -                      -                   -                   4,347             4,347
General and administrative                            312                      -                   -                   6,137             6,449
Depreciation and amortization                      30,336                  1,877                 106                       -            32,319
Interest expense                                   16,897                      -                   -                   2,437            19,334
Gain on sale of real estate investments                 -                      -                (286)                      -              (286)
Other income                                          (18)                     -                   -                      (6)              (24)
Loss on non-designated derivatives                      -                      -                   -                       -                 -
Allocation for preferred stock                          -                      -                   -                   5,663             5,663
Net loss attributable to
non-controlling interests                               -                      -                   -                      (6)               (6)
NOI                                           $    60,739          $       4,752          $      257          $            -          $ 65,748



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The following table reflects the items deducted from or added to net loss
attributable to stockholders in our calculation of NOI for the three months
ended March 31, 2020:
                                                                                                                Non-Property
(In thousands)                                  Same Store           Acquisitions           Disposals             Specific               Total
Net income (loss) attributable to
common stockholders (in accordance with
GAAP)                                         $    11,658          $        

227 $ 1,566 $ (22,604) $ (9,153) Asset management fees to related party

                  -                      -                   -                   6,905             6,905

Acquisition, transaction and other
costs                                                  97                      -                   -                     355               452
Equity-based compensation                               -                      -                   -                   3,211             3,211
General and administrative                            441                      -                   -                   4,887             5,328
Depreciation and amortization                      34,184                    129                  22                       -            34,335
Interest expense                                   15,449                                          -                   3,657            19,106
Gain on sale of real estate investments                 -                      -              (1,440)                      -            (1,440)
Other income                                          (51)                     -                   -                     (21)              (72)
Allocation for preferred stock                          -                      -                   -                   3,619             3,619
Net loss attributable to
non-controlling interests                               -                      -                   -                      (9)               (9)
NOI                                           $    61,778          $         356          $      148          $            -          $ 62,282


Dividends and Distributions
From the listing of our Class A common stock on Nasdaq in July 2018 through
March 31, 2020, we paid dividends on our Class A common stock at an annualized
rate equal to $1.10 per share, or $0.0916667 per share on a monthly basis. In
March 2020, our board of directors approved a reduction in our annualized
dividend to $0.85 per share, or $0.0708333 per share on a monthly basis, due to
the uncertain and rapidly changing environment caused by the COVID-19 pandemic.
The new dividend rate became effective beginning with our April 1 dividend
declaration. Historically, and through September 30, 2020, we declared dividends
based on monthly record dates and generally paid dividends, once declared, on or
around the 15th day of each month (or, if not a business day, the next
succeeding business day) to Class A common stock holders of record on the
applicable record date. On August 27, 2020, our board of directors approved a
change in our Class A common stock dividend policy. Subsequent dividends
authorized by our board of directors on shares of our Class A common stock have
been, and we anticipate will continue to be, paid on a quarterly basis in
arrears on the 15th day of the first month following the end of each fiscal
quarter (unless otherwise specified) to Class A common stockholders of record on
the record date for such payment. This change affected the frequency of dividend
payments only, and did not impact the annualized dividend rate on Class A common
stock of $0.85. The amount of dividends payable on our Class A common stock to
our common stock holders is determined by our board of directors and is
dependent on a number of factors, including funds available for dividends, our
financial condition, provisions in our Credit Facility or other agreements that
may restrict our ability to pay dividends, capital expenditure requirements, as
applicable, requirements of Maryland law and annual distribution requirements
needed to maintain our status as a REIT.
Dividends on our Series A Preferred Stock accrue in an amount equal to $1.875
per share each year, which is equivalent to the rate of 7.50% of the $25.00
liquidation preference per share per annum. Dividends on the Series A Preferred
Stock are payable quarterly in arrears on the 15th day of each of January,
April, July and October of each year (or, if not a business day, the next
succeeding business day) to holders of record on the applicable record date.
Dividends on our Series C Preferred Stock accrue in an amount equal to $1.844
per share each year, which is equivalent to the rate of 7.375% of the $25.00
liquidation preference per share per annum. Dividends on the Series C Preferred
Stock are payable quarterly in arrears on the 15th day of each of January,
April, July and October of each year (or, if not a business day, the next
succeeding business day) to holders of record on the applicable record date. The
first dividend for the Series C Preferred Stock was paid on April 15, 2021 and
represented an accrual for more than a full quarter, covering the period from
December 18, 2020 to March 31, 2021.
Our Credit Facility contains provisions restricting our ability to pay
distributions, including paying cash dividends on equity securities (including
the Series A Preferred Stock and Series C Preferred Stock). On November 4, 2019,
we entered into an amendment to the Credit Facility easing these restrictions
and the amendment to the Credit Facility we entered into in July 2020 also eased
these restrictions during the Adjustment Period, which lasted from April 1, 2020
through March 31, 2021. During the Adjustment Period, (i) we were permitted to
continue to pay dividends on the Series A Preferred Stock and Class A
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common stock at the current annualized per-share rates without satisfying any
further tests for the fiscal quarters ended June 30, 2020 and September 30,
2020, respectively, and (ii) we were generally permitted to pay dividends on the
Series C Preferred Stock, the Series A Preferred Stock and Class A common stock
and other distributions in an aggregate amount of up to 105% of annualized MFFO
(as defined in the Credit Facility) for a look-back period of two consecutive
fiscal quarters for the fiscal quarter ended December 31, 2020 and a look-back
period of three consecutive fiscal quarters for the fiscal quarter ending March
31, 2021 if, as of the last day of the period, after giving effect to the
payment of those dividends and distributions, we had a combination of cash, cash
equivalents and amounts available for future borrowings under the Credit
Facility of not less than $125.0 million. If we did not satisfy this
requirement, the applicable threshold percentage of MFFO is 95% instead of 105%.
After March 31, 2021, we are generally permitted to pay dividends on the Series
C Preferred Stock, Series A Preferred Stock, and Class A common stock and other
distributions for any fiscal quarter in an aggregate amount of up to 105% of
annualized MFFO for a look-back period of four consecutive fiscal quarters but
only if, as of the last day of the period, after giving effect to the payment of
those dividends and distributions, we are able to satisfy a maximum leverage
ratio and maintain a combination of cash, cash equivalents and amounts available
for future borrowings under the Credit Facility of not less than $60 million. If
these conditions are not satisfied, the applicable threshold percentage of MFFO
will be 95% instead of 105%. If applicable, during the continuance of an event
of default under the Credit Facility, we may not pay dividends or other
distributions in excess of the amount necessary for us to maintain our status as
a REIT.
During the Adjustment Period, we were not permitted to repurchase shares by
tender offer or otherwise. After March 31, 2021 we may repurchase shares if we
satisfy a maximum leverage ratio after giving effect to the repurchase and also
have a combination of cash, cash equivalents and amounts available for future
borrowings under the Credit Facility of not less than $40.0 million.
Notwithstanding the previous amendments, there is no assurance that the lenders
will consent to any additional amendments to the Credit Facility that may become
necessary to maintain compliance with the Credit Facility.
During the quarter ended March 31, 2021, cash used to pay dividends on our Class
A common stock, dividends on our Series A Preferred Stock, distributions on our
LTIP Units and distributions for our limited partnership units designated as
"Class A Units" ("Class A Units") was generated from cash flows provided by
operations and cash on hand, which consisted of proceeds from financings and
sales of real estate investments. We paid our first dividend on the Series C
Preferred Stock in April 2021, which is therefore not included in the table
below. If we need to continue to identify financing sources other than operating
cash flows to fund dividends at their current level, there can be no assurance
that other sources will be available on favorable terms, or at all.
Complying with the restriction on the payment of dividends and other
distributions in our Credit Facility may limit our ability to incur additional
indebtedness and use cash that would otherwise be available to us. Funding
dividends from borrowings restricts the amount we can borrow for property
acquisitions and investments. Using proceeds from the sale of assets or the
issuance of our Class A common stock, Series A Preferred Stock, Series C
Preferred Stock or other equity securities to fund dividends rather than invest
in assets will likewise reduce the amount available to invest. Funding dividends
from the sale of additional securities could also dilute our stockholders.
The following table shows the sources for the payment of dividends to common
stockholders, including dividends on unvested restricted shares and other
dividends and distributions for the periods indicated:

                                                                           

Three Months Ended March 31, 2021

                                                                                                                                                                 Percentage of
(In thousands)                                                                                                                                Amount               Dividends
Dividends and other cash distributions:
Cash dividends paid to common stockholders                                                                                                 $  23,128                       85.9  %
Cash dividends paid to Series A preferred stockholders                                                                                         3,691                       13.7  %
Cash distributions on LTIP Units                                                                                                                  94                        0.3  %
Cash distributions on Class A Units                                                                                                               37                        0.1  %
Total dividends and other cash distributions paid                                                                                          $  26,950                      100.0  %

Source of dividend and other cash distributions coverage: Cash flows provided by operations

                                                               $  26,950                      100.0  %
Available cash on hand                                                                                                                             -                          -  %

Total sources of dividend and other cash distributions coverage

                                                                                                                                   $  26,950                      100.0  %

Cash flows provided by operations (GAAP basis)                                                                                             $  34,422
Net loss attributable to common stockholders (in accordance
with GAAP)                                                                                                                                 $  (9,411)


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Loan Obligations
The payment terms of certain of our mortgage loan obligations require principal
and interest payments monthly, with all unpaid principal and interest due at
maturity. Our loan agreements stipulate that we comply with specific reporting
covenants. As of March 31, 2021, we were in compliance with the debt covenants
under our loan agreements, including our Credit Facility.
Contractual Obligations
Except as disclosed in this Quarterly Report on Form 10-Q, there were no
material changes in our contractual obligations at March 31, 2021, as compared
to those reported in our Annual Report on Form 10-K for the year
ended December 31, 2020.
Election as a REIT
We elected to be taxed as a REIT under Sections 856 through 860 of the Code,
effective for our taxable year ended December 31, 2013. We believe that,
commencing with such taxable year, we have been organized and have operated in a
manner so that we qualify for taxation as a REIT under the Code. We intend to
continue to operate in such a manner, but can provide no assurances that we will
operate in a manner so as to remain qualified as a REIT. To continue to qualify
for taxation as a REIT, we must distribute annually at least 90% of our REIT
taxable income (which does not equal net income as calculated in accordance with
GAAP), determined without regard for the deduction for dividends paid and
excluding net capital gains, and must comply with a number of other
organizational and operational requirements. If we continue to qualify for
taxation as a REIT, we generally will not be subject to federal corporate income
tax on the portion of our REIT taxable income that we distribute to our
stockholders. Even if we qualify for taxation as a REIT, we may be subject to
certain state and local taxes on our income and properties, as well as federal
income and excise taxes on our undistributed income.
Inflation
Some of our leases with our tenants contain provisions designed to mitigate the
adverse impact of inflation. These provisions generally increase rental rates
during the terms of the leases either at fixed rates or indexed escalations
(based on the Consumer Price Index or other measures). We may be adversely
impacted by inflation on the leases that do not contain indexed escalation
provisions. However, our net leases require the tenant to pay its allocable
share of operating expenses, which may include common area maintenance costs,
real estate taxes and insurance. This may reduce our exposure to increases in
costs and operating expenses resulting from inflation.
Related-Party Transactions and Agreements
Please see   Note 10   - Related Party Transactions and Arrangements to our
consolidated financial statements in this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There has been no material change in our exposure to market risk during
the three months ended March 31, 2021. For a discussion of our exposure to
market risk, refer to Item 7A, "Quantitative and Qualitative Disclosures about
Market Risk," contained in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2020.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), we, under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer,
carried out an evaluation of the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act)
as of the end of the period covered by this Quarterly Report on Form 10-Q and
determined that our disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
No change occurred in our internal control over financial reporting (as defined
in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months
ended March 31, 2021 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
                                       59

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