What changed in this filing

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Item 1. Financial Statements

2020-11-05 compared with 2020-08-04 · 387 added, 255 removed, 831 unchanged (44% of the section changed)

4 unchanged sentences

(in thousands, except per share amounts)

September 30,

Accounted for using the operating method, net of accumulated depreciation

9 unchanged sentences

Leasing fees, net

Liabilities, mezzanine equity and equity

Liabilities and equity

Unsecured revolving credit facility

8 unchanged sentences

Commitments and contingencies (See Note 17)

Mezzanine equity

Common stock, 781 shares issued and outstanding at June 30, 2020

Non-controlling interests

Total mezzanine equity

Broadstone Net Lease, Inc.

3 unchanged sentences

Common stock, $ 0.00025 par value;

80,000 shares authorized, 26,077 and 26,001 shares

issued and outstanding at June 30, 2020 and December 31, 2019, respectively

440,000 shares authorized, 107,773 shares issued and

outstanding at September 30, 2020;

320,000 shares authorized, 104,006 shares issued and

outstanding at December 31, 2019

Class A common stock, $ 0.00025 par value;

60,000 shares authorized, 33,500 shares issued and

outstanding at September 30, 2020;

no shares authorized, issued or outstanding at

December 31, 2019

Additional paid-in capital

4 unchanged sentences

Non-controlling interests

Total liabilities, mezzanine equity and equity

Total liabilities and equity

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

4 unchanged sentences

For the three months ended

For the six months ended

September 30,

For the nine months ended

September 30,

Lease revenues, net

14 unchanged sentences

Change in fair value of earnout liability

Other gains (losses)

Net income attributable to non-controlling interests

1 unchanged sentence

Weighted average number of common shares outstanding

Net earnings per common share

Net earnings per share attributable to common stockholders

Basic and diluted

Comprehensive income (loss)

Other comprehensive loss

Other comprehensive income (loss)

Change in fair value of interest rate swaps

10 unchanged sentences

Comprehensive

Total Stockholders' Equity

Mezzanine Equity Common Stock

Mezzanine Equity Non-controlling Interests

Total Mezzanine Equity

Stockholders'

Balance, January 1, 2020

11 unchanged sentences

Balance, March 31, 2020

Issuance of three shares of common stock

Issuance of 11 shares of common stock

Adjustment to carrying value of mezzanine equity

5 unchanged sentences

Balance, June 30, 2020

Issuance of 341 shares of common stock

Stock-based compensation

Issuance of 33,500 shares of Class A common stock

Offering costs, discounts, and commissions

Reclassification of portion of contingent earnout liability

Reclassification of 3,124 shares of mezzanine equity

common stock to 3,124 shares of common stock

Reclassification of 5,278 mezzanine equity

non-controlling interests to 5,278 non-

controlling interests

Repurchase of 2 fractional shares of common stock

Repurchase of fractional OP Units

Distributions declared ($ 0.135 per share for

three months ended September 30, 2020)

Change in fair value of interest rate

swap agreements

Realized gain on interest rate swap agreements

Balance, September 30, 2020

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

6 unchanged sentences

Comprehensive

Total Stockholders' Equity

Mezzanine Equity Common Stock

Mezzanine Equity Non-controlling Interests

Total Mezzanine Equity

Income (Loss)

Stockholders'

Balance, January 1, 2019

6 unchanged sentences

swap agreements

Realized gain on interest rate swap agreements

Realized gain on interest rate swap

Redemption of 85 shares of common stock

6 unchanged sentences

swap agreements

Realized gain on interest rate swap agreements

Realized gain on interest rate swap

Redemption of 150 shares of common stock

Balance, June 30, 2019

Issuance of 7,360 shares of common stock

Other offering costs

Distributions declared ($ 0.11 per share July

through September 2019)

Change in fair value of interest rate

swap agreements

Realized gain on interest rate swap

Redemption of 353 shares of common stock

Balance, September 30, 2019

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

3 unchanged sentences

(in thousands)

For the six months ended

For the nine months ended

September 30,

Operating activities

4 unchanged sentences

Amortization of debt issuance costs charged to interest expense

Stock-based compensation expense

Straight-line rent and financing lease adjustments

20 unchanged sentences

Financing activities

Proceeds from issuance of common stock, net

Proceeds from issuance of common stock and Class A common stock, net of $ 35,514 offering costs,

discounts, and commissions

Redemptions of common stock

Cash paid for deferred offering costs

Repurchase of fractional shares of common stock

Borrowings on mortgages, notes payable and unsecured term notes, net of mortgages assumed of

7 unchanged sentences

Net cash (used in) provided by financing activities

Net decrease in cash and cash equivalents and restricted cash

Net increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of period

11 unchanged sentences

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(in thousands)

(in thousands, except per share amounts)

Business Description

3 unchanged sentences

The Corporation leases industrial, healthcare, restaurant, office, retail, and other commercial properties under long-term lease agreements.

At June 30, 2020, the Corporation owned a diversified portfolio of 632 individual commercial properties located in 41 states throughout the continental United States and one property in British Columbia, Canada.

At September 30, 2020, the Corporation owned a diversified portfolio of 627 individual commercial properties located in 41 states throughout the continental United States and one property in British Columbia, Canada.

Broadstone Net Lease, LLC (the Corporation’s operating company, or the “OP”), is the entity through which the Corporation conducts its business and owns (either directly or through subsidiaries) all of the Corporation’s properties.

3 unchanged sentences

The Corporation, the OP, and its consolidated subsidiaries are collectively referred to as the “Company”.

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

June 30, 2020

December 31, 2019

(in thousands)

Shares of Common Stock

Total Diluted Shares

Shares of Common Stock

Total Diluted Shares

Permanent equity

Mezzanine equity

Percent Ownership of OP

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

The Corporation operates under the direction of its board of directors (the “Board of Directors”), which is responsible for the management and control of the Company’s affairs.

Prior to February 7, 2020, the Corporation was externally managed by Broadstone Real Estate, LLC (“BRE”) and Broadstone Asset Management, LLC (the “Asset Manager”) subject to the Board of Directors’ direction, oversight, and approval.

Prior to February 7, 2020, the Corporation was externally managed by Broadstone Real Estate, LLC (“BRE”) and Broadstone Asset Management, LLC (the “Asset Manager”) subject to the direction, oversight, and approval of the Company’s board of directors (the “Board of Directors”).

The Asset Manager was a wholly owned subsidiary of BRE and all of the Corporation’s officers were employees of BRE.

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Refer to Note 4 for further discussion regarding the Internalization, including the associated payments related thereto.

On September 18, 2020, the Corporation effected a four -for-one split on its then outstanding 26,944 shares of common stock (“Common Stock”) that previously had a $ 0.001 par value.

Concurrent with the stock split, the OP effected a four-for-one stock split of its outstanding OP Units.

No fractional shares or OP Units were issued as a result of the stock split.

All historic share and per share amounts in these Condensed Consolidated Financial Statements have been adjusted to give retroactive effect to the stock split.

On September 21, 2020, the Corporation closed its initial public offering (“IPO”) at $ 17.00 per share, of 33,500 shares of a new class of common stock, $ 0.00025 par value per share (“Class A Common Stock”) pursuant to a registration statement on Form S-11 (File No.

333-240381), as amended, under the Securities Act of 1933, as amended.

Shares of the Class A Common Stock are listed on the New York Stock Exchange under the symbol “BNL”.

The terms of the Class A Common Stock are identical to the terms of the Common Stock, except that each share of Class A Common Stock will automatically convert into one share of Common Stock on March 20, 2021.

The Common Stock will subsequently be listed on the New York Stock Exchange on March 22, 2021, which represents the first trading day following the 180-day period following the closing of the IPO.

The Common Stock and Class A Common Stock are collectively referred to as the Corporation’s “common stock”.

See further discussion of the Company’s IPO and stock split in Note 13.

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

September 30, 2020

December 31, 2019

(in thousands)

Shares of Common

Total Diluted

Shares of Common

Total Diluted

Ownership interest

Percent Ownership of OP

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

On October 20, 2020, the Company issued an additional 3,500 shares of Class A Common Stock, pursuant to the underwriters’ partial exercise of their option to acquire up to 5,025 shares of Class A Common Stock at $ 17.00 per share.

Summary of Significant Accounting Policies

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The Corporation believes all adjustments necessary for a fair presentation have been included in these interim Condensed Consolidated Financial Statements (which include only normal recurring adjustments).

Principles of Con solidation

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts and operations of the Company.

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A significant judgment is made as to if and when impairment should be taken.

The Company’s assessment of impairment as of June 30, 2020 was based on the most current information available to the Company.

The Company’s assessment of impairment as of September 30, 2020 was based on the most current information available to the Company.

Based upon current market conditions resulting from the COVID-19 pandemic (see Note 19), certain of the Company’s properties may have fair values less than their carrying amounts.

However, based on the Company’s plans with respect to those properties, the Company believes that their carrying amounts are recoverable and therefore, under applicable GAAP guidance, no impairment charges were recognized other than those described below.

However, based on the Company’s plans with respect to each of those properties, the Company believes that their carrying amounts are recoverable and therefore, under applicable GAAP guidance, no impairment charges were recognized other than those described below.

If the operating conditions mentioned above deteriorate or if the Company’s expected holding period for assets changes, subsequent tests for impairments could result in additional impairment charges in the future.

During the three and nine months ended September 30, 2020, the Company recorded impairment charges associated with three and six properties, respectively.

Impairment indicators included changes in the Company’s long-term hold strategy with respect to the individual properties, which was due in part to unfavorable market trends resulting from the COVID-19 pandemic in geographic areas where the Company has vacant properties being marketed for re-lease or sale.

Inputs used in establishing fair value for real estate assets generally fall within Level 3 of the fair value hierarchy, which are characterized as requiring significant judgment as little or no current market activity may be available for validation.

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Management may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of its real estate.

During the three and six months ended June 30, 2020 and 2019, the Company recorded impairment charges of $534 and $0, and $ 2,667 and $1,017, respectively.

During the three and nine months ended September 30, 2020 and 2019, the Company recorded impairment charges of $ 14,732 and $ 2,435 , and $ 17,399 and $ 3,452 , respectively.

Restricted Cash

Restricted cash includes escrow funds the Company maintains pursuant to the terms of certain mortgages, notes payable, and lease agreements, and undistributed proceeds from the sale of properties under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”), and is reported within Prepaid expenses and other assets in the Condensed Consolidated Balance Sheets.

Restricted cash consisted of the following:

September 30,

(in thousands)

17 unchanged sentences

(i) whether separating the land component impacts the classification of any lease component, (ii) the value of the land component in the context of the overall contract, and (iii) whether the right to use the land is coterminous with the rights to use the other assets.

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

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

Rental property accounted for under operating leases – Revenue is recognized as rents are earned on a straight-line basis over the non-cancelable terms of the related leases.

For leases that have fixed and measurable rent escalations and collectability of the lease payments is probable, the difference between such rental income earned and the cash rent due under the provisions of the lease is recorded as Accrued rental income on the Condensed Consolidated Balance Sheets.

If the Company determines that collectability of the lease payments is not probable, the Company records an adjustment to Lease revenues to reduce cumulative income recognized since lease commencement to the amount of cash collected from the lessee.

If the Company determines that collectability of the lease payments is not probable, the Company records an adjustment to Lease revenues, net to reduce cumulative income recognized since lease commencement to the amount of cash collected from the lessee.

Future revenue recognition is limited to amounts paid by the lessee.

Rental property accounted for under direct financing leases – The Company utilizes the direct finance method of accounting to record direct financing lease income.

The net investment in the di rect financing lease represents receivables for the sum of future lease payments to be received and the estimated residual value of the leased property, less unamortized unearned income (which represents the difference between undiscounted cash flows and discounted cash flows).

The net investment in the direct financing lease represents receivables for the sum of future lease payments to be received and the estimated residual value of the leased property, less unamortized unearned income (which represents the difference between undiscounted cash flows and discounted cash flows).

Unearned income is deferred and amortized into income over the lease terms so as to produce a constant periodic rate of return on the Company’s net investment in the leases.

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Services related to nonlease components are provided over the same period of time as, and billed in the same manner as, monthly rental charges.

The Company elected to apply the practical exp edient available under ASC 842, for all classes of assets, not to separate the lease components from the nonlease components when accounting for operating leases.

Since the lease component is the predominant component under each of these leases, combined r evenues from both the lease and nonlease components are reported as Lease revenues, net in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income (Loss).

The Company elected to apply the practical expedient available under ASC 842, for all classes of assets, not to separate the lease components from the nonlease components when accounting for operating leases.

Since the lease component is the predominant component under each of these leases, combined revenues from both the lease and nonlease components are reported as Lease revenues, net in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income (Loss).

Refer below to the Recently Adopted Accounting Standards section of this Note regarding a question and answer document released by the Financial Accounting Standards Board (“FASB”) with guidance on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic.

3 unchanged sentences

(in thousands)

September 30,

Rent received in advance

Provision for Uncollectible Rent

In accordance with ASC 842, provisions for uncollectible rent are recorded as an offset to Lease revenues, net on the accompanying Condensed Consolidated Statements of Income and Comprehensive Income (Loss).

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

For the three months ended

For the six months ended

(in thousands)

Beginning balance

Provision for uncollectible rent

Ending balance

Goodwill represents the excess of the amount paid over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination and is assigned to one or more reporting units.

2 unchanged sentences

The Company evaluates goodwill for impairment when an event occurs or circumstances change that indicate the carrying value may not be recoverable, or at least annually.

The Company will adopt an annual goodwill testing date during the fourth quarter of 2020.

Deferred Initial Public Offering Costs

The Company has incurred certain costs in connection with its anticipated initial public offering (“IPO”).

The Company capitalizes such deferred IPO costs, which primarily consist of direct, incremental legal, professional, accounting and other third-party fees.

The deferred IPO costs will be offset against IPO proceeds upon the consummation of an offering.

Should the planned IPO be abandoned, the deferred IPO costs will be expensed immediately as a charge to operating expenses in the Condensed Consolidated Statement of Income and Comprehensive Income (Loss).

At June 30, 2020 and December 31, 2019, deferred IPO costs were $ 1,282 and $668, respectively, and were included within Prepaid expenses and other assets on the Condensed Consolidated Balance Sheets.

The Company will perform its first annual goodwill testing during the fourth quarter of 2020.

Initial Public Offering Costs

Prior to the close of the IPO on September 21, 2020, the Company incurred and capitalized certain direct, incremental legal, professional, accounting and other third-party fees in connection with the IPO.

The deferred IPO costs were offset against IPO proceeds, and reclassified as a component of Additional paid-in capital on the Condensed Consolidated Balance Sheets upon the consummation of the offering.

At December 31, 2019, deferred IPO costs totaled $ 668 and were included within Prepaid expenses and other assets on the Condensed Consolidated Balance Sheets.

See Note 13 for further discussion of net proceeds associated with the IPO.

Earnout Liability

The Company’s earnout liability is payable in four tranches, in a combination of cash, common shares, and OP Units, in the same proportion as the initial consideration paid in the Internalization (see Note 4).

The common shares and OP Units payable under the arrangement were originally subject to a redemption rights agreement, whereby holders of the common shares and OP Units had the right to require the Company to repurchase any or all of the common shares or OP Units if an IPO had not occurred on or before December 31, 2020 (see discussion of the redemption rights agreement in Note 4).

The common shares and OP Units were deemed to be freestanding financial instruments that, at inception, embody an obligation to repurchase the Company’s common shares and OP Units, and therefore were initially classified as liabilities together with the cash portion of the earnout, and recorded in Earnout liability on the Condensed Consolidated Balance Sheets as part of the purchase price allocation.

The fair value of the earnout liability is remeasured each reporting period, with changes recorded as Change in fair value of earnout liability in the Condensed Consolidated Statements of Income and Comprehensive Income (Loss).

Upon completion of the IPO, the redemption rights with respect to the common shares and OP Units terminated, and the $ 18,436 fair value of the 726 shares of common stock and 1,240 OP Units associated with the third and fourth earnout tranches as of the date of the IPO, was reclassified to equity as a component of Additional paid-in capital and Non-controlling interests on the Condensed Consolidated Balance Sheets.

At September 30, 2020, the remaining balance in the earnout liability represents $ 5,207 that is potentially payable in the form of cash associated with all four tranches, and $ 7,970 , representing the estimated fair value of 363 shares of common stock and 619 OP Units associated with the first and second earnout tranches, that remain potentially payable based upon the achievement of 2020 adjusted funds from operations (“AFFO”) targets.

Fair Value Measurements

1 unchanged sentence

ASC 820 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

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

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

Recurring Fair Value Measurements

The Company measures and records its interest rate swap assets and liabilities (see Note 11) and earnout liability at fair value, and discloses the fair value of its long-term debt, on a recurring basis.

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

The Company measures and records its interest rate swap instruments (see Note 11) and earnout liability at fair value, and discloses the fair value of its long-term debt, on a recurring basis.

Under the terms of the agreement, the milestones related to either (a) the 40-day dollar volume-weighted average price of a share of the Company’s common stock (“VWAP per REIT Share”), following the completion of an IPO of the Company’s common stock, or (b) the Company’s AFFO per share, prior to the completion of an IPO (see Note 4).

The Company utilizes third-party valuation experts to assist in estimating the fair value of the earnout liability, and develops estimates by considering weighted-average probabilities of likely outcomes, and using a Monte Carlo simulation and discounted cash flow analysis.

These estimates require the Company to make various assumptions about the timing of an IPO, share price volatility, and net asset prices, each of which are unobservable and are considered Level 3 inputs in the fair value hierarchy.

These estimates require the Company to make various assumptions about share price volatility and, prior to the IPO, about the timing of an IPO and net asset prices, each of which are unobservable and considered Level 3 inputs in the fair value hierarchy.

A change in these inputs to a different amount might result in a significantly higher or lower fair value measurement at the reporting date.

As shown in the tables below, the Company’s weighted average expected IPO date upon close of the Internalization was April 15, 2020, with a range from March 2020 to May 2020.

Due to the subsequent market dislocation and uncertainty presented by the COVID-19 pandemic late in the first quarter of 2020, management determined that it was not prudent to pursue an IPO at that time.

As a result of recent improvement in market conditions, as of June 30, 2020, management revised its weighted average expected IPO date to October 21, 2020, with a range of September 2020 to February 2021.

The Company anticipates commencing its IPO when market conditions allow, which may be before October 21, 2020.

To the extent the expected IPO date advances, there would be a corresponding increase in the earnout liability’s fair value given the earnout’s fixed time horizon.

Specifically, advancements in the estimated IPO date assumption increase the earnout liability’s fair value given the earnout’s fixed time horizon.

Peer share price volatilities are used to estimate the Company’s expected share price volatility, and the Company’s corresponding ability to achieve the earnout targets.

An increase in peer share price volatility would result in an increase in the earnout liability’s fair value.

An increase in the Company’s estimated net asset value per diluted share would result in an increase in the earnout liability’s fair value.

Increases in the volatility assumption would increase the earnout liability’s fair value.

Increases in net asset values would also increase the earnout liability’s fair value.

The table below provides a summary of the significant unobservable inputs used to estimate the fair value of the earnout liability as of September 30, 2020:

Significant Unobservable Inputs

Weighted Average

Assumption Used

Peer stock price volatility

26.11% - 56.85%

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

Significant Unobservable Inputs

Weighted Average Assumption Used

Weighted Average

Assumption Used

Expected IPO date

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The fair value of the Company’s real estate investment portfolio as of the measurement date was determined using market capitalization rates that ranged between 6.05 % and 7.09 %.

The table below provides a summary of the significant unobservable inputs used to estimate the fair value of the earnout liability as of Jun e 30, 2020.

Significant Unobservable Inputs

Weighted Average Assumption Used

Expected IPO date

October 21, 2020

September 2020 through February 2021

Peer stock price volatility

25.67% to 58.92%

Company's net asset value per diluted share

The Company’s net asset value per diluted share is primarily based on the fair value of its real estate investment portfolio, together with the fair value of its other assets and liabilities.

The fair value of the Company’s real estate investment portfolio as of the measurement date was determined using market capitalization rates that ranged between 6.11% and 7.17%.

The following table presents a reconciliation of the change in the earnout liability during the three and six months ended June 30, 2020:

The following table presents a reconciliation of the change in the earnout liability during the three and nine months ended September 30, 2020:

For the three months ended

For the six months ended

For the nine months ended

(in thousands)

June 30, 2020

September 30, 2020

Beginning balance

1 unchanged sentence

Change in fair value subsequent to Internalization

Reclassification as a component of additional paid-in capital and

non-controlling interests

Ending balance

The decrease in the earnout liability fair value between March 31, 2020 and June 30, 2020 is primarily a result of a decrease in the estimated net asset value per share assumption used, partially offset by an increase in peer stock price volatility, both of which are attributable to changes in economic circumstances impacting global equity markets.

The Company closed its IPO on September 21, 2020, at which time a portion of the liability payable in common shares and OP units was reclassified to equity at fair value as a component of Additional paid-in capital and Non-controlling interests, respectively.

See further discussion in Earnout Liability in this Note 2.

The decrease in fair value between the Internalization and the IPO closing was driven by a lower IPO price, correlating to the net asset value assumption, and the delayed closing of the IPO due to market disruption and uncertainty presented by the COVID-19 pandemic late in the first quarter of 2020.

These factors were partially offset by an increase in peer stock price volatility, which is attributable to changes in economic circumstances impacting global equity markets.

The balances of assets and liabilities measured at fair value on a recurring basis are as follows:

June 30, 2020

September 30, 2020

(in thousands)

5 unchanged sentences

Interest rate swap, liabilities

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

Long-term Debt – The fair value of the Company’s debt was estimated using Level 2 and Level 3 inputs based on recent financing transactions, estimates of the fair value of the property that serves as collateral for such debt, historical risk premiums for loans of comparab le quality, current London Interbank Offered Rate (“LIBOR”), U.S.

Treasury obligation interest rates, and on the discounted estimated future cash payments to be made on such debt.

The discount rates estimated reflect the Company’s judgment as to the approximate current lending rates for loans or groups of loans with similar maturities and assumes that the debt is outstanding through maturity.

Market information, as available, or present value techniques were utilized to estimate the amounts required to be disclosed.

Since such amounts are estimates that are based on limited available market information for similar transactions and do not acknowledge transfer or other repayment restrictions that may exist on specific loans, it is unlikely that the estimated fair value of any such debt could be realized by immediate settlement of the obligation.

The following table summarizes the carrying amount reported on the Condensed Consolidated Balance Sheets and the Company’s estimate of the fair value of the Mortgages and notes payable, net, Unsecured term notes, net, and Unsecured revolving credit facility:

The discount rates estimated reflect the Company’s judgment as to the approx imate current lending rates for loans or groups of loans with similar maturities and assumes that the debt is outstanding through maturity.

Market information, as available, or present value techniques were utilized to estimate the amounts required to be d isclosed.

Since such amounts are estimates that are based on limited available market information for similar transactions and do not acknowledge transfer or other repayment restrictions that may exist on specific loans, it is unlikely that the estimated f air value of any such debt could be realized by immediate settlement of the obligation.

(in thousands)

September 30,

Carrying amount

Non-recurring Fair Value Measurements

The Company’s non-recurring fair value measurements at June 30, 2020 and December 31, 2019 consisted of the fair value of impaired real estate assets that were determined using Level 3 inputs.

The Company’s non-recurring fair value measurements at September 30, 2020 and December 31, 2019 consisted of the fair value of impaired real estate assets that were determined using Level 3 inputs.

Right-of-Use Assets and Lease Liabilities

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Amounts associated with percentage rent provisions are considered variable lease costs and are not included in the initial measurement of the right-of-use asset or lease liability.

The Company has made an accounting policy election, applicable to all asset types, to not separate lease from nonlease components when allocating contract consideration related to operating leases.

The Company has made an accounting policy election, applicable to all asset types, not to separate lease from nonlease components when allocating contract consideration related to operating leases.

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

September 30,

(in thousands)

4 unchanged sentences

Accounts payable and other liabilities

Earnout Liability

The Company’s earnout liability is payable in a combination of cash, common shares, and OP Units, in the same proportion as the initial consideration paid in the Internalization (see Note 4).

The common shares and OP Units payable under the arrangement will be subject to a redemption rights agreement, whereby holders of the common shares and OP Units will have the right to require the Company to repurchase any or all of the common shares or OP Units if an IPO has not occurred on or before December 31, 2020 (see discussion of the redemption rights agreement in Note 4).

The common shares and OP Units are deemed to be freestanding financial instruments that, at inception, embody an obligation to repurchase the Company’s common shares and OP Units, and therefore have been classified as liabilities together with the cash portion of the earnout.

The fair value of the earnout liability at the time of the Internalization was recorded in Earnout liability on the Condensed Consolidated Balance Sheets as part of the purchase price allocation.

Mezzanine Equity

The Company issued common shares and OP Units as base consideration for the Internalization, each of which were subject to a redemption rights agreement, where the common shares (“mezzanine equity common stock”) and OP Units (“mezzanine equity non-controlling interests”) are economically equivalent to the permanent equity classified common shares and OP Units with the exception of certain contingent redemption rights that are not yet exercisable as of June 30, 2020 (see discussion of redemption rights agreement in Note 4).

The Company presents the mezzanine equity common stock and mezzanine equity non-controlling interests as mezzanine equity in the Condensed Consolidated Balance Sheets as they are redeemable outside the Company’s control.

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

The Company subsequently records mezzanine equity non-controlling interests at the greater of (i) carrying amount, increased or decreased for the non-controlling interests’ share of net income or loss, dividends and comprehensive income or loss or (ii) redemption value.

Changes in carrying value of mezzanine equity non-controlling interests are recorded as a component of Additional paid-in capital on the Condensed Consolidated Balance Sheets.

Stock-Based Compensation

On August 4, 2020, the Board of Directors adopted the Broadstone Net Lease, Inc.

2020 Omnibus Equity and Incentive Plan (the “Equity Incentive Plan”) to provide long-term stock-based incentives to employees and non-employee directors of the Company.

Subject to any adjustment as provided in the Equity Incentive Plan, up to 9,000 shares may be issued pursuant to awards granted under the Equity Incentive Plan in the form of stock options, restricted stock, restricted stock units, stock appreciation rights, dividend equivalent rights, share awards and performance-based awards (including performance share units and performance-based restricted stock) and LTIP Units (as defined in the Equity Incentive Plan).

On August 4, 2020, the Company awarded 341 shares of restricted common stock under the Equity Incentive Plan to certain officers and employees.

The Company accounts for stock-based incentives in accordance with ASC 718, Compensation – Stock Compensation , which requires that such compensation be recognized in the financial statements based on the award’s estimated grant date fair value.

The value of such awards is recognized as compensation expense in General and administrative expenses in the Condensed Consolidated Statements of Income and Comprehensive Income (Loss) over the appropriate vesting period on a straight-line basis or at the cumulative amount vested at each balance sheet date, if greater.

The Company records forfeitures during the period in which they occur by reversing all previously recorded stock compensation expense associated with the forfeited shares.

Dividends declared on shares of restricted common stock issued under the

Equity Incentive Plan are recorded as Cumulative distribution in excess of retained earnings on the Condensed Consolidated Balance Sheets.

Accumulated dividends related to forfeited a wards will be reversed through compensation expense in the period the forfeiture occurs.

Earnings per Share

Earnings per common share has been computed pursuant to the guidance in FASB ASC Topic 260, Earnings Per Share, which requires the classification of the Company’s unvested shares of restricted common stock, which contain rights to receive non-forfeitable dividends, as participating securities requiring the two-class method of computing earnings per share.

The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings.

In accordance with the two-class method, the Company’s calculation of earnings per share excludes the income attributable to the unvested shares of restricted common stock from the numerator of the calculation and the weighted average number of such unvested shares from the denominator.

Recently Adopted Accounting Standards

1 unchanged sentence

Financial assets that are measured at amortized cost are required to be presented at the net amount expected to be collected with a provision for credit losses deducted from the amortized cost basis.

The guidance requires an entity to utilize broader information in estimating the expected credit loss, including forecasted information.

The guidance requires an entity to utilize broader information in estimating the expected credit losses, including forecasted information.

In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses which clarified that operating lease receivables recorded by lessors are explicitly excluded from the scope of this guidance.

1 unchanged sentence

The new guidance applies to the Company’s investments in direct financing leases.

Due to the nature of its activities, the Company’s lease portfolio has historically not included a significant number of direct financing leases, and as a result the adoption of ASC 326 did not have a material impact on its

financial statements.

In connection with the adoption of ASC 326, the Company recorded a provision for credit losses of $323 with an offsetting cu mulative-effect adjustment to the opening balance of retained earnings as of January 1, 2020.

In connection with the adoption of ASC 326, the Company recorded a provision for credit losses of $ 323 with an offsetting cumulative-effect adjustment to the opening balance of retained earnings as of January 1, 2020.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.

19 unchanged sentences

Although the original lease modification guidance in ASC 842 remains appropriate to address routine lease modifications, the Lease Modification Q&A established a different framework to account for certain lease concessions granted in response to the COVID-19 pandemic, if certain criteria have been met.

The Lease Modification Q&A allows the Company to make an accounting policy election to account for COVID-19 related lease concessions as either a lease modification or a negative variable adjustment to rental revenue.

Such election is required to be applied consistently to leases with similar characteristics and similar circumstances.

The Lease Modification Q&A allows the Company to make an accounting policy election to account for COVID-19 related lease concessions as either a lease modification or a negative variable

adjustment to rental revenue.

Such election is required to be appl ied consistently to leases with similar characteristics and similar circumstances.

Refer to Note 19, COVID-19 Pandemic regarding information on COVID-19 related concessions and the associated impact on the Company’s results of operations.

Reclassifications

The Company reclassified $305 and $748 of Income taxes from a component of Operating expenses to a component of Other income (expenses), on the Condensed Consolidated Statements of Income and Comprehensive Income (Loss) for the three and six months ended June 30, 2019, respectively, to conform with the current period presentation.

The reclassification is a change from one acceptable presentation to another acceptable presentation.

The Company reclassified $272 of Internalization expenses from General and administrative expenses to a component of Other income (expenses) on the Condensed Consolidated Statements of Income and Comprehensive Income (Loss) for the three and six months ended June 30, 2019, to conform with the current period presentation.

The Company reclassified $ 405 and $ 1,153 of Income taxes from a component of Operating expenses to a component of Other income (expenses), on the Condensed Consolidated Statements of Income and Comprehensive Income (Loss) for the three and nine months ended September 30, 2019, respectively, to conform with the current period presentation.

The reclassification is a change from one acceptable presentation to another acceptable presentation.

27 unchanged sentences

For the three months ended

For the six months ended

September 30,

For the nine months ended

September 30,

Financial Statement Presentation

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The Internalization was effective February 7, 2020.

There were no unpaid management fees at June 30, 2020 and December 31, 2019.

There were no unpaid management fees at September 30, 2020 and December 31, 2019.

All fees related to the Property Management Agreement and the Asset Management Agreement were paid for in cash within the Company’s normal payment cycle for vendors.

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Earnout Consideration

In connection with the Internalization, the Company incurred a contingent liability that would be payable to certain members of the Company’s Board of Directors and employees who had previously been owners and/or employees of BRE, upon the occurrence of certain events (see Note 4).

The fair value of the earnout liability was $37,975 as of June 30, 2020.

In connection with the Internalization, the Company incurred a contingent obligation that would be payable to certain members of the Company’s Board of Directors and employees who had previously been owners and/or employees of BRE, upon the occurrence of certain events (see Note 4).

The fair value of the earnout consideration amounted to $ 31,613 at September 30, 2020, of which $ 13,177 is recorded as Earnout liability, $ 6,809 is recorded as a component of Additional paid-in capital, and $ 11,627 is recorded as a component of Non-controlling interests on the Condensed Consolidated Balance Sheets (see Note 2).

Related Party Lease

In connection with the Internalization, the Company assumed the lease agreement relating to the Company’s principal executive office with Clinton Asset Holdings Associates, L.P., an affiliated third party, approximately 1.6% of which is indirectly owned by the Company’s Chairman and member of the Board of Directors.

In connection with the Internalization, the Company assumed the lease agreement relating to its principal executive office with Clinton Asset Holdings Associates, L.P., an affiliated third party, approximately 1.6 % of which is indirectly owned by the Company’s Chairman and member of the Board of Directors.

The lease of 24,072 square feet of office space expires on August 31, 2023 , and contains two five-year renewal options.

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

The Company paid base consideration of $ 209,516 at closing and may be required to pay additional earnout consideration of up to $ 75,000 in the future, as described below.

In addition, the Company assumed $ 90,484 of debt in addition to other assets acquired and liabilities assumed, as detailed in the Allocation of Purchase Price discussion elsewhere in this Note 4.

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

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Total consideration

The Company may be required to pay additional earnout consideration of up to $75,000 payable in four tranches of $10,000, $15,000, $25,000, and $25,000 if certain milestones related to either (a) the 40-day VWAP per REIT Share, following the completion of an IPO, or (b) the Company’s AFFO per share, prior to the completion of an IPO, (each, an “Earnout Trigger”) are achieved during the Earnout Periods.

According to the terms of the Merger Agreement, the Company may be required to pay additional earnout consideration of up to $ 75,000 payable in four tranches of $ 10,000 , $ 15,000 , $ 25,000 , and $ 25,000 if certain milestones related to either (a) the 40 -day VWAP per REIT Share, following the completion of an IPO, or (b) the Company’s AFFO per share, prior to the completion of an IPO, (each, an “Earnout Trigger”) are achieved during the Earnout Periods.

The consideration will consist of a combination of cash, shares of the Company’s common stock, and OP Units, based on the same proportions paid in the base consideration.

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

The Company completed its IPO on September 21, 2020.

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

(in thousands, except per share amounts)

If the Company has completed an IPO

If the Company has not completed an IPO

Earnout Tranche (a)

40-Day VWAP of a

Applicable Earnout Period

Earnout Target (a)

Amount of Cash

Applicable Earnout Period

The two-year period beginning on the earlier of (i) the IPO closing date or (ii) December 31, 2020.

The two-year period consisting of the calendar years ended December 31, 2020 and December 31, 2021.

The two-year period beginning on the earlier of (i) the IPO closing date or (ii) December 31, 2020.

The two-year period consisting of the calendar years ended December 31, 2020 and December 31, 2021.

The two-year period beginning on September 21, 2020.

The four-year period beginning on the date that is exactly one year after the earnout period begins for the first and second tranches above.

The four-year period consisting of the calendar years ended December 31, 2021, December 31, 2022, December 31, 2023 and December 31, 2024.

The four-year period beginning on the date that is exactly one year after the earnout period begins for the first and second tranches above.

The four-year period consisting of the calendar years ended December 31, 2021, December 31, 2022, December 31, 2023 and December 31, 2024.

Initial contractual value of applicable earnout tranche based on an $85.00 price per share/unit of common stock and OP Units.

Initial contractual value of applicable earnout tranche based on a $ 21.25 price per share/unit of common stock and OP Units.

Does not take into account the actual per share price of common stock and OP Units at the time an applicable earnout tranche may be earned and paid.

Calculated based on $ 21.25 price per share/unit of common stock and OP Units.

Should all earnout milestones be met, an additional 1,089 shares of common stock and an additional 1,859 OP Units would be issued, in addition to the payment of $ 12,350 in cash.

1 unchanged sentence

The Company will estimate the fair value of the earnout liability at each reporting date during the contingency period and record any changes in estimated fair value in its Condensed Consolidated Statement of Income and Comprehensive Income (Loss).

See Note 2 for further discussion of changes in the fair value of the earnout liability subsequent to the Internalization.

Redemption Rights Agreement

The mezzanine equity common stock and mezzanine equity non-controlling interests issued in connection with the Internalization are economically equivalent to permanent equity common shares and OP Units with the exception of certain contingent redemption rights that are not yet exercisable as of June 30, 2020.

If an IPO does not occur on or before December 31, 2020, then each holder of mezzanine equity common stock and mezzanine equity non-controlling interests shall have the right to require the Company to repurchase any or all of such holder’s shares and OP Units at a price equal to the greater of (i) the initial fair value of $85 of the common shares or OP Units at the date of the Internalization or (ii) the current fair value of such common shares or OP Units, as adjusted for interest and distributions.

Such repurchases can occur during the period from January 1, 2021 until the earlier of 12 months thereafter or the date of an IPO;

provided that the period shall not begin on January 1, 2021 if the Company, in connection with an IPO, shall have filed a registration statement with the SEC that has not been withdrawn as of January 1, 2021 (but the period shall begin immediately upon any such withdrawal and then continue until the earlier of 12 months thereafter or until the occurrence of an IPO);

provided, further, that the period shall begin no later than July 1, 2021 (even if such registration statement shall not have been withdrawn as of July 1, 2021) and in such event shall continue until the earlier of twelve (12) months thereafter or the occurrence of an IPO.

The Merger Agreement did not provide that the completion of an IPO is a condition to the closing of the Internalization.

Subsequent to June 30, 2020, such repurchase rights have been irrevocably waived by each of the named executive officers.

If an IPO does not occur on or before the satisfaction of any Earnout Trigger, then each holder of common shares or OP Units issued under the earnout shall have the right to require the Company to repurchase any or all of such holder’s shares or OP Units at a price equal to the greater of (i) the initial fair value of $85 of the common shares at the date of the Internalization or (ii) the current fair value of such common shares, as adjusted for interest and distributions.

Such repurchases can occur during the period from the date of

issuance of such earnout shares until the earlier of 12 months thereafter or the occurrence of an IPO;

provided, further, that such period shall not begin on such date of issuance if t he Company, in connection with an IPO, shall have filed a registration statement with the SEC that has not been withdrawn as of such date of issuance (but such period shall begin immediately upon any such withdrawal and then continue until the earlier of 1 2 months thereafter or the occurrence of an IPO;

provided, further, that such period shall begin no later than six months after such date of issuance (even if such registration statement shall not have been withdrawn as of such date) and in such event shal l continue until the earlier of 12 months thereafter or the occurrence of an IPO.

If an IPO did not occur on or before the satisfaction of any Earnout Trigger, then each holder of common shares or OP Units issued in connection with the Internalization had the right to require the Company to repurchase any or all of such holder’s shares or OP Units.

Such rights terminated effective with the IPO.

Upon occurrence of the IPO, the common stock and non-controlling interests issued as base consideration in connection with the Internalization and originally classified as mezzanine equity, were reclassified as a component of Common Stock, Additional paid-in capital, and Non-controlling interests on the Condensed Consolidated Balance Sheets.

Allocation of Purchase Price

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

The allocation of the purchase price has not been finalized and is based upon preliminary estimates of these fair values, which is the best available information at the current time.

The final determination of the fair values of the assets and liabilities will be based on the actual valuations of the tangible and intangible assets and liabilities that existed as of the date of completion of the acquisition, including the valuation of the earnout liability.

The allocation of the purchase price has not been finalized and is based upon preliminary e stimates of these fair values, which is the best available information at the current time.

The final determination of the fair values of the assets and liabilities will be based on the actual valuations of the tangible and intangible assets and liabilitie s that existed as of the date of completion of the acquisition, including the valuation of the earnout liability.

The Company expects to finalize the valuations during the measurement period, not to exceed one year from the date of the Internalization.

Consequently, amounts preliminarily allocated to identifiable tangible and intangible assets and liabilities could change.

Con sequently, amounts preliminarily allocated to identifiable tangible and intangible assets and liabilities could change.

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

7 unchanged sentences

The Company does not expect that the goodwill will be deductible for tax purposes.

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

The Company incurred $389 and $1,594 in non-recurring costs associated with the Internalization during the three and six months ended June 30, 2020, respectively, and $272 of such costs during the three and six months ended June 30, 2019, which were classified as Internalization expenses in the Condensed Consolidated Statements of Income and Comprehensive Income (Loss).

In connection with the Internalization, the Company assumed $ 90,484 of debt which was subsequently repaid through a combination of revolving credit facility borrowings and entering into a new $ 60,000 term loan agreement (see Note 9).

The Company incurred $ 1,929 and $ 3,523 in non-recurring costs associated with the Internalization during the three and nine months ended September 30, 2020, respectively, and $ 923 and $ 1,195 of such costs during the three and nine months ended September 30, 2019, which were classified as Internalization expenses in the Condensed Consolidated Statements of Income and Comprehensive Income (Loss).

The effect of the Internalization has been reflected in the Company’s operating results beginning on February 7, 2020.

No incremental revenues were recorded as a result of the Internalization.

Subsequent to the Internalization, during the three and six months ended June 30, 2020, the Company incurred $4,572 and $8,234, respectively, in expenses as a result of being internalized.

Subsequent to the Internalization, during the three and nine months ended September 30, 2020, the Company incurred $ 5,528 and $ 13,762 , respectively, in expenses as a result of being internalized.

Such amounts include general and administrative expenses associated with the Company’s performance of functions previously performed by BRE and the Asset Manager (primarily employee related costs), as well as interest expense associated with the borrowings related to the Internalization.

2 unchanged sentences

The following pro forma information summarizes selected financial information from the Company’s combined results of operations, as if the Internalization had occurred on January 1, 2019.

These results contain certain adjustments totaling $389 and $6,137 of income, respectively, for the three and six months ended June 30, 2020 and $ 7,343 and $ 13,973 of income, respectively, for the three and six months ended June 30, 2019.

These results contain certain adjustments totaling $ 1,929 and $ 8,068 of income, respectively, for the three and nine months ended September 30, 2020 and $ 9,437 and $ 23,418 of income, respectively, for the three and nine months ended September 30, 2019.

These pro forma adjustments reflect the elimination of Internalization expenses and asset management, property management, and disposition fees between the Company and BRE and the Asset Manager in historic financial results, and adjustments to reflect incremental interest expense associated with the borrowing related to the Internalization.

This pro forma information is presented for informational purposes only, and may not be indicative of what actual results of operations would have been had the Internalization occurred at the beginning of the period, nor does it purport to represent the results of future operations.

The condensed pro forma financial information is as follo ws for the three and six months ended June 30, 2020 and 2019:

The condensed pro forma financial information is as follows:

For the three months ended

For the six months ended

September 30,

For the nine months ended

September 30,

(in thousands)

Acquisitions of Rental Property

The Company did not complete any acquisitions of rental property during the six months ended June 30, 2020.

The Company closed on the following acquisitions of rental property during the six months ended June 30, 2019:

The Company did no t complete any acquisitions of rental property during the nine months ended September 30, 2020.

The Company closed on the following acquisitions of rental property during the nine months ended September 30, 2019:

(in thousands, except number of properties)

8 unchanged sentences

June 26, 2019

July 15, 2019

July 31, 2019

August 27, 2019

August 29, 2019

Industrial/Office

September 17, 2019

In conjunction with this acquisition, the Company assumed a mortgage with a principal balance of $ 49,782 with an interest rate of 4.92 % and a maturity date of February 2028 (see Note 10).

3 unchanged sentences

(in thousands)

For the six months ended

June 30, 2019

For the nine months ended

September 30, 2019

Land improvements

4 unchanged sentences

Mortgage payable

The weighted average amortization period for acquired in-place leases is 15 years for acquisitions completed during the six months ended June 30, 2019.

The weighted average amortization period for acquired above-market leases is 17 years for acquisitions completed during the six months ended June 30, 2019.

The weighted average amortization period for acquired below-market leases is 12 years for acquisitions completed during the six months ended June 30, 2019.

The above acquisitions were funded using a combination of available cash on hand, borrowings under the Company’s Revolving Credit Facility, and proceeds from equity issuances.

All real estate acquisitions closed during the six months ended June 30, 2019, qualified as asset acquisitions and, as such, acquisition costs have been capitalized.

The weighted average amortization period for acquired in-place leases is 13 years for acquisitions completed during the nine months ended September 30, 2019.

The weighted average amortization period for acquired above-market leases is 18 years for acquisitions completed during the nine months ended September 30, 2019.

The weighted average amortization period for acquired below-market leases is 10 years for acquisitions completed during the nine months ended September 30, 2019.

The above acquisitions were funded using a combination of available cash on hand, revolving credit facility borrowings and the issuance of unsecured term loans, and proceeds from equity issuances.

All real estate acquisitions closed during the nine months ended September 30, 2019, qualified as asset acquisitions and, as such, acquisition costs have been capitalized.

Sale of Real Estate

1 unchanged sentence

For the three months ended

For the six months ended

September 30,

For the nine months ended

September 30,

(in thousands, except number of properties)

6 unchanged sentences

The Company generally leases its investment rental property to established tenants in the industrial, healthcare, restaurant, office, retail, and other industries.

At June 30, 2020, the Company had 615 real estate properties which were leased under leases that have been classified as operating leases and 11 that have been classified as direct financing leases.

At September 30, 2020, the Company had 611 real estate properties which were leased under leases that have been classified as operating leases and 11 that have been classified as direct financing leases.

Of the 11 leases classified as direct financing leases, three include land portions which are accounted for as operating leases (see Revenue Recognition within Note 2).

6 unchanged sentences

(in thousands)

September 30,

Land improvements

3 unchanged sentences

For the three months ended

For the six months ended

September 30,

For the nine months ended

September 30,

(in thousands)

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

Estimated lease payments to be received under non-cancelable operating leases with tenants at September 30, 2020 are as follows:

(in thousands)

2 unchanged sentences

In addition, such amounts exclude any potential variable rent increases that are based on changes in the CPI or future variable rents which may be received under the leases based on a percentage of the tenant’s gross sales.

Investm ent in Rental Property – Direct Financing Leases

Investment in Rental Property – Direct Financing Leases

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

(in thousands)

September 30,

Undiscounted estimated lease payments to be received

3 unchanged sentences

Net investment in direct financing leases

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

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

(in thousands)

3 unchanged sentences

For the three months ended

For the six months ended

September 30,

For the nine months ended

September 30,

(in thousands)

3 unchanged sentences

Variable rental amounts earned

Adjustment to revenue recognized for uncollectible rental amounts

Total operating lease rental revenues

Earned income from direct financing leases

1 unchanged sentence

Other income from real estate transactions

Adjustment to revenue recognized for uncollectible rental amounts

Total Lease revenues, net

2 unchanged sentences

(in thousands)

September 30,

Lease intangibles:

14 unchanged sentences

For the three months ended

For the six months ended

September 30,

For the nine months ended

September 30,

Financial Statement Presentation

3 unchanged sentences

Lease revenues, net

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

Amortization expense for the three and nine months ended September 30, 2020, includes $ 2,459 and $ 14,517 , respectively, of accelerated amortization resulting from early lease terminations, compared to zero in the prior year periods.

Estimated future amortization of intangible assets and liabilities at September 30, 2020 is as follows:

(in thousands)

4 unchanged sentences

(in thousands, except interest rates)

2020 Unsecured Term Loan (a)

September 30,

Revolving credit facilities (a)

one-month LIBOR + 1.20%

Unsecured Revolving Credit and Term

Loan Agreement (a)

Revolving Credit Facility

2020 Unsecured Term Loan (a)

one-month LIBOR + 1.25%

2023 Unsecured Term Loan

2022 Unsecured Term Loan (a)

one-month LIBOR + 1.25%

2024 Unsecured Term Loan

2023 Unsecured Term Loan (a)

one-month LIBOR + 1.35%

7 unchanged sentences

Amounts presented include debt issuance costs, net, related to the unsecured term notes and senior notes only.

At June 30, 2020 and December 31, 2019, one-month LIBOR was 0.16% and 1.76%, respectively.

The 2020 Unsecured Term Loan was originally due in August 2020, and allows two six-month extensions, at the Company’s option, subject to the Company being in compliance with the debt covenants and customary representations and warranties, and payment of a fee equal to 0.05% of the outstanding principal balance at the time of extension.

At September 30, 2020 and December 31, 2019, one-month LIBOR was 0.15 % and 1.76 %, respectively.

On September 4, 2020, the Company replaced its prior $ 600,000 revolving credit facility with a maturity date of January 2022 , with a new $ 900,000 facility with a maturity date of September 2023 .

The 2020 Unsecured Term Loan was originally due in August 2020 , and allows two six-month extensions , at the Company’s option, subject to the Company being in compliance with debt covenants and customary representations and warranties, and payment of a fee equal to 0.05 % of the outstanding principal balance at the time of extension.

On May 5, 2020, the Company exercised the first of these options, effective on August 2, 2020, extending the maturity date of the 2020 Unsecured Term Loan to February 2, 2021 .

The loan was repaid using proceeds from the Company’s IPO.

On September 4, 2020, the Company entered into an agreement (the “Revolving Credit Agreement”) for a $ 900,000 unsecured revolving credit facility (the “Revolving Credit Facility”), with JPMorgan Chase Bank, N.A., as Administrative Agent.

Closing of the Revolving Credit Agreement was subject to certain customary conditions, as well as the closing of the IPO, with a minimum condition on size, and listing of the Company’s common stock, as set forth in the agreement.

Closing occurred on September 21, 2020, at which time the Revolving Credit Facility replaced the Company’s then existing $ 600,000 unsecured revolving credit facility.

The Revolving Credit Agreement includes an accordion feature to increase the aggregate facility size from $ 900,000 to $ 2,000,000 , subject to the willingness of existing or new lenders to fund such increase and other customary conditions.

The Revolving Credit Agreement matures on September 21, 2023 .

The Company has the option to extend the term of the Revolving Credit Agreement twice for six months per extension , subject to certain conditions, including payment of an extension fee equal to 0.0625 % of the revolving commitments.

Borrowings under the Revolving Credit Agreement are subject to interest only payments at variable rates equal to LIBOR plus a margin based on the Company’s credit rating, ranging from 0.825 % to 1.55 % per annum.

Based on the Company’s current investment grade credit rating of Baa3, the applicable margin was 1.20 % at September 30, 2020.

In addition, the Revolving Credit Facility is subject to a facility fee based on the Company’s credit rating, ranging between 0.125 % and 0.30 % per annum.

Based on the Company’s current credit rating, the facility fee was 0.25 % per annum at September 30, 2020.

The interest rate spreads and facility fee under the Revolving Credit Facility are identical to those of the facility that was replaced.

On February 7, 2020, the Company entered into a $ 60,000 term loan agreement maturing on February 28, 2022 (the “2022 Unsecured Term Loan”) with JP Morgan Chase, N.A.

2 unchanged sentences

Borrowings under the 2022 Unsecured Term Loan are subject to interest only payments at variable rates equal to LIBOR plus a margin based upon the Company’s credit rating, ranging between 0.85 % and 1.65 % per annum.

Based on the Company’s current credit rating the applicable margin was 1.25% as of June 30, 2020.

At June 30, 2020, the weighted average interest rate on all outstanding borrowings was 2.45%, exclusive of interest rate swap agreements.

In addition, the Revolving Credit Facility is subject to a facility fee of 0.25% per annum.

For the six months ended June 30, 2019, the Company paid $5,229 in debt issuance costs associated with the 2026 Unsecured Term Loan and the Unsecured Revolving Credit and Term Loan Agreement.

Based on the Company’s current credit rating the applicable margin was 1.25 % at September 30, 2020.

At September 30, 2020, the weighted average interest rate on all outstanding borrowings was 2.80 %, exclusive of interest rate swap agreements.

For the three and nine months ended September 30, 2020, the Company paid $ 5,918 in debt issuance costs associated with the Revolving Credit Facility.

For the three and nine months ended September 30, 2019, the Company paid $ 1,281 and $ 6,510 , respectively, in debt issuance costs associated with the 2020 Unsecured Term Loan, the 2026 Unsecured Term Loan and its prior unsecured revolving credit agreement.

For each separate debt instrument, on a lender by lender basis, in accordance with ASC 470-50, Debt Modifications and Extinguishment , the Company performed an assessment of whether the transaction was deemed to be new debt, a modification of existing debt, or an extinguishment of existing debt.

Debt issuance costs are either deferred and amortized over the term of the associated debt or expensed as incurred.

Based on this assessment, $5,229 of the debt issuance costs incurred during the six months ended June 30, 2019, were deemed to be related to the issuance of new debt, or the modification of existing debt, and therefore have been deferred and are being amortized over the term of the associated debt.

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

Debt issuance costs are either deferred and amortized over

the term of the associated debt or expensed as incurred.

Based on this assessment, $ 5,918 of the debt issuance costs incurre d during the three and nine months ended September 30, 2020, and $ 1,275 and $ 6,504 of the debt issuance costs incurred during the three and nine months ended September 30, 2019, respectively, were deemed to be related to the issuance of new debt, or the modification of existing debt, and therefore have been deferred and are being amorti zed over the term of the associated debt.

The remaining $ 6 of the debt issuance costs incurred in the three and nine months ended September 30, 2019, were deemed to be related to the extinguishment of debt and were expensed and included in Cost of debt extinguishment in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income (Loss).

Additionally, during the three and nine months ended September 30, 2020, $ 392 of unamortized debt issuance costs were expensed and included in Cost of debt extinguishment in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income (Loss).

Such amounts totaled $ 113 and $ 328 during the three and nine months ended September 30, 2019, respectively.

Debt issuance costs are amortized as a component of interest expense in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income (Loss).

1 unchanged sentence

For the three months ended

For the six months ended

September 30,

For the nine months ended

September 30,

(in thousands)

1 unchanged sentence

The Company is subject to various financial and operational covenants and financial reporting requirements pursuant to its unsecured credit agreements.

These covenants require the Com pany to maintain certain financial ratios, including leverage, fixed charge coverage, and debt service coverage, among others.

As of June 30, 2020, the Company believes it was in compliance with all of its loan covenants.

The Company’s continued compliance with these covenants depends on many factors and could be impacted by current or future economic conditions associated with the COVID-19 pandemic (see Note 18), and thus there are no assurances that the Company will continue to be in compliance with its c ovenants.

These covenants require the Company to maintain certain financial ratios, including leverage, fixed charge coverage, and debt service coverage, among others.

As of September 30, 2020, the Company believes it was in compliance with all of its loan covenants.

The Company’s continued compliance with these covenants depends on many factors and could be impacted by current or future economic conditions associated with the COVID-19 pandemic (see Note 19), and thus there are no assurances that the Company will continue to be in compliance with its covenants.

Failure to comply with the covenants would result in a default which, if the Company were unable to cure or obtain a waiver from the lenders, could accelerate the repayment of the obligations.

4 unchanged sentences

(in thousands, except interest rates)

September 30,

Wilmington Trust National Association

23 unchanged sentences

The debt was recorded at fair value at the time of assumption.

At June 30, 2020, investment in rental property of $175,714 was pledged as collateral against the Company’s mortgages and notes payable.

Notes were repaid in full on October 9, 2020, in connection with the sale of the property.

At September 30, 2020, investment in rental property of $ 174,623 was pledged as collateral against the Company’s mortgages and notes payable.

The following table summarizes the mortgages extinguished by the Company:

(in thousands, except number of mortgages)

For the six months ended

June 30, 2020

For the nine months ended

September 30, 2020

For the year ended

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For the three months ended

For the six months ended

September 30,

For the nine months ended

September 30,

(in thousands)

Cost of mortgage extinguishment

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

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

(in thousands)

14 unchanged sentences

Variable Rate Index

September 30,

Bank of America, N.A.

76 unchanged sentences

Total Interest Expense

Amount of Loss

Amount of Gain (Loss)

Accumulated Other

6 unchanged sentences

Income and Comprehensive

For the three months ended June 30,

For the three months ended September 30,

Comprehensive Loss

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Income and Comprehensive

For the six months ended June 30,

For the nine months ended September 30,

Comprehensive Loss

6 unchanged sentences

Credit Risk Concentrations

The Company maintained bank balances that, at times, exceeded the federally insured limit during the six months ended June 30, 2020.

The Company maintained bank balances that, at times, exceeded the federally insured limit during the nine months ended September 30, 2020.

The Company has not experienced losses relating to these deposits and management does not believe that the Company is exposed to any significant credit risk with respect to these amounts.

Prior to the Internalization on February 7, 2020, the Company’s rental property was managed by BRE and the Asset Manager as described in Note 3.

Management fees paid to BRE and Asset Manager represented 0% and 4% of total operating expenses for the three and six months ended June 30, 2020, respectively, and 19% of total operating expenses for the three and six months ended June 30, 2019, respectively.

Management fees paid to BRE and the Asset Manager represented 0 % and 2 % of total operating expenses for the three and nine months ended September 30, 2020, respectively, and 17 % and 18 % of total operating expenses for the three and nine months ended September 30, 2019, respectively.

These amounts do not include acquisition fees paid to the Asset Manager that were capitalized (see Note 3).

The Company has mortgages and notes payable with three institutions that comprised 62%, 16%, and 10% of total mortgages and notes payable at June 30, 2020 and December 31, 2019.

For the three and six months ended June 30, 2020 and 2019, the Company had no individual tenants or common franchises that accounted for more than 10% of total revenues.

The Company has mortgages and notes payable with three institutions that comprised 63 %, 16 %, and 10 % of total mortgages and notes payable at September 30, 2020.

The Company has mortgages and notes payable with three institutions that comprised 62 %, 16 %, and 10 % of total mortgages and notes payable at December 31, 2019.

For the three and nine months ended September 30, 2020 and 2019, the Company had no individual tenants or common franchises that accounted for more than 10% of total revenues.

On September 21, 2020, the Corporation completed the IPO and issued 33,500 shares of Class A Common Stock at an initial public offering price of $ 17.00 per share.

As part of the IPO, the underwriters of the IPO were granted an option, exercisable within 30 days from September 21, 2020, to purchase up to an additional 5,025 shares of Class A Common Stock at the IPO price, less underwriting discounts and commissions.

The net proceeds from the IPO, after deducting underwriting discounts and commissions of $ 34,170 and $ 3,010 of other expenses (including $ 1,656 of expenses that were recorded in Accounts payable and other liabilities at September 30, 2020), were $ 532,320 through September 30, 2020.

The Company used the net proceeds to repay the remaining $ 216,488 principal and accrued interest due under the Company’s then existing revolving credit facility and the remaining $ 240,225 principal and accrued interest due under its 2020 Unsecured Term Loan.

The remaining net proceeds will be used for general business purposes, including acquisitions.

On October 20, 2020, the underwriters partially exercised their option.

Share Redemption Program

The Company’s Share Redemption Program was terminated effective February 10, 2020, and as a result there were no redemptions during the six months ended June 30, 2020.

The Company’s Share Redemption Program was terminated effective February 10, 2020, and as a result there were no redemptions during the nine months ended September 30, 2020.

The following table summarizes redemptions under the Company’s Share Redemption Program:

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For the three months ended

June 30, 2019

For the six months ended

June 30, 2019

September 30, 2019

For the nine months ended

September 30, 2019

Number of redemptions requested

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The DRIP was terminated effective February 10, 2020.

At June 30, 2020 and December 31, 2019, a total of 3,075 and 3,005 shares of common stock, respectively, have been issued under the DRIP.

At September 30, 2020 and December 31, 2019, a total of 12,301 and 12,019 shares of common stock, respectively, have been issued under the DRIP.

Stock-Based Compensation

On August 4, 2020, the Company awarded 341 shares of restricted common stock under the Equity Incentive Plan to certain officers and employees.

The holder of a restricted stock award is generally entitled at all times on and after the date of issuance of the restricted common shares to exercise the rights of a stockholder of the Company, including the right to vote the shares and the right to receive dividends on the shares.

The restricted stock awards vest over a three or four year period from the date of the Internalization, subject to the employee’s continued service through the applicable vesting dates and in accordance with the terms of the individual award agreements.

No ne of the shares of restricted stock were vested at September 30, 2020.

The following table presents information about the Company’s restricted stock awards:

(in thousands)

For the three months ended

September 30, 2020

For the nine months ended

September 30, 2020

Compensation cost

Dividends declared on unvested restricted stock

The following table presents information about the Company’s restricted stock awards at September 30, 2020:

(in thousands, except recognition period)

Unamortized value of restricted stock awards

Weighted average amortization period (in years)

The following table presents information about the Company’s restricted stock activity during the nine months ended September 30, 2020:

(in thousands, except per share amounts)

Number of Shares

Weighted Average Grant

Date Fair Value per Share

Unvested at beginning of period

Unvested at end of period

The August 4, 2020 grant date fair value per share of $ 20.50 was based on the determined share value established by the Board of Directors (“Determined Share Value”).

Prior to the IPO, the Company sold shares of common stock in a private offering at a price equal to the Determined Share Value, which was established at least quarterly by the Board of Directors based on the net asset value (“NAV”) of the Company’s portfolio, input from management and third-party consultants, and such other factors as the Board of Directors determined.

The Company’s NAV was calculated using its established valuation process, starting with an estimate of the fair value of the properties in the portfolio as of that date based upon, among other factors, the implied market price for each asset based upon a review of market capitalization rates.

Earnings per Share

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For the three months ended

For the six months ended

(in thousands, except per share)

September 30,

For the nine months ended

September 30,

(in thousands, except per share amounts)

Basic earnings:

Net earnings attributable to Broadstone Net Lease, Inc.

earnings allocated to unvested restricted shares

Net earnings used to compute basic earnings per common share

Diluted earnings:

Net earnings attributable to Broadstone Net Lease, Inc.

Net earnings used to compute basic earnings per share

Net earnings attributable to non-controlling interests

Basic and diluted weighted average shares outstanding:

Weighted average number of common shares outstanding

used in basic earnings per share

Effects of convertible membership units

Net earnings used to compute diluted earnings per common share

Weighted average number of common shares outstanding:

used in diluted earnings per share

Basic and diluted net earnings per common share

In the table above, outstanding OP Units are included in the diluted earnings per share calculation.

However, because such OP Units would also require that the share of the OP income attributable to such OP Units also be added back to net income, there is no effect on EPS.

weighted average unvested restricted shares (a)

Weighted average number of common shares outstanding used in

basic earnings per common share

Effects of convertible membership units (b)

Weighted average number of common shares outstanding used in

diluted earnings per common share

Basic earnings per share

Diluted earnings per share

Represents the weighted average effects of 341 unvested restricted shares of common stock as of September 30, 2020, which will be excluded from the computation of earnings per share until they vest.

The shares of restricted common stock were not included in the calculation of diluted earnings per share, as the effect of doing so would have been anti-dilutive.

Represents the weighted average effects of 12,226 and 6,948 OP Units outstanding at September 30, 2020 and September 30, 2019, respectively.

OP Units are included in the diluted earnings per share calculation.

However, because such OP Units would also require that the share of the OP income attributable to such OP units also be added back to net income, there is no effect to EPS.

Supplemental Cash Flow Disclosures

Cash paid for interest was $38,400 and $38,802 for the six months ended June 30, 2020 and 2019, respectively.

Cash paid for income taxes was $945 and $422 for the six months ended June 30, 2020 and 2019, respectively.

Cash paid for interest was $ 50,853 and $ 49,828 for the nine months ended September 30, 2020 and 2019, respectively.

Cash paid for income taxes was $ 1,385 and $ 809 for the nine months ended September 30, 2020 and 2019, respectively.

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

During the six months ended June 30, 2020 and 2019, the Corporation issued 69 and 358 shares, respectively, of common stock with a value of approximately $5,733 and $30,008, respectively, under the terms of the DRIP (see Note 13).

During the six months ended June 30, 2020, the Company issued shares of common stock and OP Units, with a total value of approximately $178,535, and earnout consideration with a fair value of $40,119 as consideration for the Internalization and assumed $90,484 of debt (see Note 4).

During the six months ended June 30, 2020, the Company adjusted the carrying value of mezzanine equity non-controlling interests by $2,513, with an offset to additional paid-in capital (see Note 2).

At June 30, 2019, dividend amounts declared and accrued but not yet paid amounted to $11,119.

During the six months ended June 30, 2020, the Company executed lease modifications that resulted in the lease classification changing from direct financing lease to operating lease for four properties.

During the nine months ended September 30, 2020 and 2019, the Corporation issued 275 and 2,199 shares, respectively, of Common Stock with a value of approximately $ 5,733 and $ 46,084 , respectively, under the terms of the DRIP (see Note 13).

During the nine months ended September 30, 2020, the Company issued shares of Common Stock and OP Units, with a total value of approximately $ 178,535 , and earnout consideration with a fair value of $ 40,119 as consideration for the Internalization and assumed $ 90,484 of debt (see Note 4).

During the nine months ended September 30, 2020, the Company adjusted the carrying value of mezzanine equity non-controlling interests by $ 2,513 , with an offset to Additional paid-in capital.

During the nine months ended September 30, 2020, the Company reclassified $ 112,698 of mezzanine equity non-controlling interests to Non-controlling interests.

During the nine months ended September 30, 2020, the Company reclassified $ 66,376 of mezzanine equity common stock, with an offset of $ 66,375 to Additional paid-in capital and $ 1 to Common stock.

During the nine months ended September 30, 2020, the Company reclassified $ 18,436 of the carrying value of the earnout liability, with an offset of $ 11,627 as a component of Non- controlling interests and $ 6,809 as a component of Additional paid-in capital (see Note 2).

During the nine months ended September 30, 2020, $ 1,656 of incurred but unpaid expenses associated with the IPO were recorded as an offset to Additional paid-in capital (see Note 13).

At September 30, 2020 and 2019, dividend amounts declared and accrued but not yet paid amounted to $ 20,722 and $ 11,932 , respectively .

During the nine months ended September 30, 2020, the Company executed lease modifications that resulted in the lease classification changing from direct financing lease to operating lease for four properties.

At the modification date, the net investment in the original lease, and therefore the carrying value of the assets recognized, amounted to $ 9,055 .

In connection with real estate transactions conducted during the six months ended June 30, 2019, the Company accepted tenant improvement allowances of $1,727 in exchange for a reduction to the cash paid for the associated real estate assets.

In connection with real estate transactions conducted during the nine months ended September 30, 2019, the Company accepted tenant improvement allowances of $ 2,517 in exchange for a reduction to the cash paid for the associated real estate assets .

Upon adoption of ASC 326 on January 1, 2020, described in Note 2, the Company recorded a transition adjustment to record a provision for credit losses associated with its net investment in direct financing leases of $ 323 , with an equal amount recorded as a reduction in retained earnings.

10 unchanged sentences

(in thousands)

September 30,

Tenant improvement allowances

1 unchanged sentence

The tax protection agreements require the Company to indemnify the beneficiaries in the event of a sale, exchange, transfer, or other disposal of the contributed property, or in the case of the Founding Owners’ Tax Protection Agreement, the entire Company, in a taxable transaction that would cause such beneficiaries to recognize a gain that is protected under the agreements, subject to certain exceptions.

Based on values as of June 30, 2020, taxable sales of the applicable properties would trigger liability under the Agreements of approximately $22,300.

Based on values as of September 30, 2020, taxable sales of the applicable properties would trigger liability under the Agreements of approximately $ 22,300 .

Based on information available, the Company does not believe that the events resulting in damages as detailed above have occurred or are likely to occur in the foreseeable future.

10 unchanged sentences

For the three months ended

For the six months ended

September 30,

For the nine months ended

September 30,

(in thousands)

11 unchanged sentences

For the three months ended

For the six months ended

September 30,

For the nine months ended

September 30,

(in thousands)

Operating lease payments

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

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

(in thousands)

6 unchanged sentences

Subsequent Events

On August 4, 2020, the Board of Directors voted to reinstate the Company’s distribution, announcing that the Company would transition to quarterly distribution payments.

A quarterly distribution of $0.54 per share of the Company’s common stock and OP Unit for the third quarter of 2020 will be payable on or before October 15, 2020, to stockholders and unit holders of record as of September 30, 2020.

On August 4, 2020, the Board of Directors determined the share value for the Corporation’s common stock to be $82.00 per share for the period August 1, 2020 through October 31, 2020.

However, on January 10, 2020, the Company suspended its private offering of shares of its common stock until further notice.

On August 4, 2020, the Board of Directors adopted the Broadstone Net Lease, Inc.

2020 Omnibus Equity and Incentive Plan (the “Equity and Incentive Plan”), under which equity awards may be made in respect of 2,250 shares of our common stock.

On August 4, 2020, the Company awarded 85 shares of restricted stock under the Equity and Incentive Plan with a grant date fair value of $6,990 which will vest over a three or four year period in accordance with the terms of the individual award agreements.

On October 15, 2020, the Company paid distributions totaling $ 20,722 .

On October 20, 2020, the underwriters of the Company’s IPO partially exercised their option to purchase up to an additional 5,025 shares of the Company’s Class A Common Stock at the IPO price of $ 17.00 .

The underwriters ultimately exercised the option by purchasing an additional 3,500 shares of Class A Common stock.

The Company subsequently received $ 55,930 of additional IPO proceeds as a result of the underwriter’s exercise of their option, net of underwriting fees and discounts.

On November 5, 2020 , the Board of Directors declared a quarterly distribution of $ 0.25 per share on the Company’s common stock and OP Units for the fourth quarter of 2020, which will be payable on or before January 15, 2021 to stockholders and unit holders of record as of December 31, 2020 .

Through November 5, 2020 the Company sold two properties with an aggregate carrying value of approximately $ 5,019 for total proceeds of $ 8,615 .

The Company incurred additional expenses related to the sales of approximately $ 402 , resulting in a gain on sale of real estate of approximately $ 3,194 .

Subsequent to September 30, 2020, the Company repaid in full the $ 591 outstanding balance of notes payable (see Note 10).

COVID-19 Pandemic

3 unchanged sentences

Many of the Company’s tenants, in particular those who operate in the retail and restaurant industries, depend on in-person interactions with customers to generate unit-level profitability, and have been negatively impacted by the pandemic, as have businesses who supply products and services to these industries.

As a result, the Company received a number of requests for rent relief and ultimately granted relief to 15 tenants whose total contractual base rents represented approximately 9.7% of the Company’s annualized contractual base rent revenues as of June 30, 2020.

All rent relief requests received through June 30, 2020 have been resolved.

As a result, during the second quarter of 2020, the Company received a number of requests for rent relief and ultimately granted relief to 15 tenants.

For all but one of the 15 tenants granted relief, the Company granted relief in the form of a partial rent deferral.

For the remaining tenant, the Company agreed to a partial abatement of rent over a nine-month period with the minimum required rent payable increasing during the period, in exchange for a three-year lease term extension and an upside percentage rent clause during the abatement period.

Partial rent deferrals and the abatement represented 3.0% and 1.1% of total contractual base rents due for the three months ended June 30, 2020, respectively.

Partial rent deferrals and the abatement represented 0.6 % and 1.4 % of total contractual base rents due for the three months ended September 30, 2020, respectively.

The partial rent deferrals ranged between two and six months of rent, with a weighted average deferral period of 3.4 months.

Repayment periods range from three months to one year , with a weighted average payback period of 5.6 months beginning in July 2020.

At September 30, 2020, the weighted average remaining payback period for these deferrals was 4.2 months.

The Company has collected 100 % of deferred rent that was required to be repaid during the three months ended September 30, 2020 and the balance of rent deferrals remains probable of collection.

For partial rent deferrals expected to be repaid within a short period of time where the deferral of payments made no substantive changes to the total consideration in the original lease agreement, the amount of straight-line lease revenue recognized in the financial statements was not impacted.

3 unchanged sentences

The Company also accounted for the partial abatement under the lease modification framework of ASC 842.

As of and for the six months ended June 30, 2020, the impact of the COVID-19 pandemic on the Company’s financial condition, and results of operations has been limited to effects of the grants of rent relief discussed above.

As of and for the nine months ended September 30, 2020, the impact of the COVID-19 pandemic on the Company’s financial condition, and results of operations has been limited to effects of the grants of rent relief discussed above.

The full extent of the pandemic on the Company’s future financial conditions, results of operations, liquidity, and ability to pay distributions will ultimately depend on certain developments, including the duration and spread of the outbreak and its impact on the Company’s tenants, all of which are uncertain and cannot be predicted.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements