14 unchanged sentences
“Risk Factors,” and Item 7.
−Removed: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2019 Annual Report on Form 10-K, as filed with the SEC on February 27, 2020 and in Part II, Item 1A.
−Removed: “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, as filed with the SEC on May 7, 2020.
+Added: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Annual Report on Form 10-K, as filed with the SEC on February 25, 2021.
+Added: The “Risk Factors” of our 2020 Annual Report should not be construed as exhaustive and should be read in conjunction with other cautionary statements included elsewhere in this Quarterly Report on Form 10-Q.
You are cautioned not to place undue reliance on any forward-looking statements included in this Quarterly Report on Form 10-Q.
3 unchanged sentences
Unless the context otherwise requires, the following terms and phrases are used throughout this MD&A as described below:
−Removed: “annualized base rent” or “ABR” means the annualized contractual cash rent due for the last month of the reporting period, excluding the impacts of the short-term rent deferrals and abatements agreed to as a result of tenant requests for rent relief related to the global coronavirus (“COVID-19”) pandemic, and adjusted to remove rent from properties sold during the month and to include a full month of contractual cash rent for properties acquired during the last month.
−Removed: As discussed below, as a result of the COVID-19 pandemic, in the first half 2020 we received requests for rent relief from several tenants and agreed to temporarily defer the receipt of rent, or in limited circumstances to abate rent, for a portion of the remaining lease terms.
−Removed: As a result of these requests, we agreed to partial rent relief requests for 15 tenants related to 93 properties whose total base rents represent approximately 9.8% of our ABR.
−Removed: We have excluded the impact of these deferrals and abatements from the calculation of ABR because they are short term in nature relative to the length of our lease terms and relate to a discrete event, and therefore including them in the calculation would not provide an accurate measure of our relative portfolio composition.
+Added: “annualized base rent” or “ABR” means the annualized contractual cash rent due for the last month of the reporting period, excluding the impacts of short-term rent deferrals, abatements, free rent, or discounted rent periods and adjusted to remove rent from properties sold during the month and to include a full month of contractual cash rent for properties acquired during the last month.
“cash capitalization rate” represents the estimated first year cash yield to be generated on a real estate investment property, which was estimated at the time of investment based on the contractually specified cash base rent for the first full year after the date of the investment, divided by the purchase price for the property;
2 unchanged sentences
Bureau of Labor Statistics, or other similar index which is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services;
−Removed: “gross asset value” means the undeprecia ted book value of an asset, which represents the fair value of the asset as of the date it was acquired, less any subsequent writedowns due to impairment charges;
−Removed: “occupancy” or a specified percentage of our portfolio that is “occupied” means the quotient of (1) the total square footage of our properties minus the square footage of our properties that are vacant and from which we are not receiving any rental payment, and (2) the total square footage of our properties as of a specified date;
+Added: “occupancy” or a specified percentage of our portfolio that is “occupied” means as of a specified date the quotient of (1) the total rentable square footage of our properties minus the square footage of our properties that are vacant and from which we are not receiving any rental payment, and (2) the total square footage of our properties;
“Revolving Credit Facility” means our $900 million unsecured revolving credit facility, dated September 21, 2020, with J.P.
Morgan Chase Bank, N.A.
−Removed: and the other lenders party thereto, which replaced our prior $600 million senior unsecured revolving credit facility, dated June 23, 2017, with Manufacturers and Traders Trust Company and the other lenders party thereto, as amended from time to time.
+Added: and the other lenders party thereto.
We acquire, own, and manage primarily single-tenant commercial real estate properties that are net leased on a long-term basis to a diversified group of tenants.
Since our inception in 2007, we have selectively invested in net leased assets in the industrial, healthcare, restaurant, office, and retail property types.
−Removed: As of September 30, 2020, our portfolio has grown to 627 properties in 41 U.S.
−Removed: states and one property in Canada, with an aggregate gross asset value of approximately $4.0 billion.
−Removed: We focus on investing in real estate that is operated by creditworthy single tenants in industries characterized by positive business drivers and trends, where the properties are an integral part of the tenants’ businesses and there are opportunities to secure long-term net leases.
+Added: As of March 31, 2021, our portfolio has grown to 661 properties, with 660 properties located in 41 U.S.
+Added: states and one property located in British Columbia, Canada.
+Added: We focus on investing in real estate that is operated by creditworthy single tenants in industries characterized by positive business drivers and trends.
+Added: We target properties that are an integral part of the tenants’ businesses and for which there are therefore opportunities to secure long-term net leases.
Through long-term net leases, our tenants are able to retain operational control of their strategically important locations, while allocating their debt and equity capital to fund their core business operations rather than real estate ownership.
Diversified Portfolio .
−Removed: As of September 30, 2020, our portfolio comprised approximately 27.3 million rentable square feet of operational space, and was highly diversified based on property type, geography, tenant, and industry, and is cross-diversified within each ( e.g., property-type diversification within a geographic concentration):
+Added: As of March 31, 2021, our portfolio comprised approximately 28.4 million rentable square feet of operational space, and was highly diversified based on property type, geography, tenant, and industry, and is cross-diversified within each ( e.g., property-type diversification within a geographic concentration):
Property Type :
7 unchanged sentences
Strong In-Place Leases with Significant Remaining Lease Term .
−Removed: As of September 30, 2020, our portfolio was approximately 99.8% leased based on rentable square footage with an ABR weighted average remaining lease term of approximately 10.8 years, excluding renewal options.
+Added: As of March 31, 2021, our portfolio was approximately 99.7% leased based on rentable square footage with an ABR weighted average remaining lease term of approximately 10.6 years, excluding renewal options.
Standard Contractual Base Rent Escalation .
3 unchanged sentences
An additional 7.1% of our ABR is received from tenants who are not required to provide us with specified financial information under the terms of our lease, but whose financial statements are available publicly, either through SEC filings or otherwise.
−Removed: Further information concerning our real estate portfolio is included in Real Estate Portfolio Information below.
−Removed: Recent Developments – Stock Split and Initial Public Offering
−Removed: On September 18, 2020, we effected a four-for-one split on the outstanding shares of our common stock (“Common Stock”).
−Removed: Concurrent with the stock split, the OP effected a four-for-one stock split of its outstanding OP Units.
−Removed: No fractional shares or OP Units were issued as a result of the stock split.
−Removed: All historic share and per share amounts have been adjusted to give retroactive effect to the stock split.
−Removed: On September 21, 2020, we closed an initial public offering (“IPO”) at $17.00 per share, of 33.5 million shares of a new class of common stock, $0.00025 par value per share (“Class A Common Stock”).
−Removed: Shares of the Class A Common Stock are listed on the New York Stock Exchange under the symbol “BNL”.
−Removed: The terms of the Class A Common Stock are ident ical 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 .
−Removed: T he 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 .
−Removed: On October 20, 2020, the underwriters of our IPO partially exercised their option to purchase up to an additional 5.025 million shares of our Class A Common Stock at the IPO price of $17.00.
−Removed: The underwriters ultimately exercised such option by purchasing an additional 3.5 million shares of Class A Common stock.
−Removed: We subsequently received $55.9 million of additional IPO proceeds as a result of the underwriter’s exercise of their option, net of underwriting fees and discounts.
−Removed: COVID-19 Pandemic Update
−Removed: The rapidly evolving circumstances related to the COVID-19 pandemic have resulted in deep economic uncertainty and far-reaching impacts on almost every business and industry, including industries in which our tenants operate.
−Removed: In response to the COVID-19 pandemic, many countries and U.S.
−Removed: states, including the areas in which we operate, adopted certain measures to mitigate the ongoing public health crises.
−Removed: Such measures included “shelter in place” or “stay at home” rules, restrictions on travel, and restrictions on the types of businesses that may continue to operate in many countries and U.S.
−Removed: Although such restrictions have been or were in the process of being lifted in several locations, the recent resurgence of COVID-19 cases has led to a reinstatement or partial reinstatement of restrictions in some locations.
−Removed: We cannot predict whether and to what extent additional states and cities will implement similar restrictions or when restrictions currently in place will expire.
−Removed: Further, the impacts of a potential worsening of economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, and consumer spending, as well as other unanticipated consequences, remain unknown.
−Removed: The sections below summarize the impacts of the COVID-19 pandemic on our results of operations, liquidity and capital resources, during the three and nine months ended September 30, 2020, as well as management’s view of potential impacts on our future results of operations, liquidity and capital resources.
−Removed: For more discussion on the risks associated with the COVID-19 outbreak, see Part II, Item 1A.
−Removed: “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, filed with the SEC on May 7, 2020.
−Removed: Impact to Results of Operations
−Removed: Our results of operations and financial condition are affected by numerous factors, many of which are beyond our control.
−Removed: Key factors that typically impact our results of operations and financial condition, which may be exacerbated by the COVID-19 pandemic, include rental rates and collections, property dispositions, lease renewals and occupancy, acquisition activity, net lease terms, interest expense, general and administrative expenses, tenant bankruptcies, and impairments.
−Removed: Rental Rates and Collections
−Removed: Our financial results depend on our ability to timely collect contractual rents due under our long-term net leases.
−Removed: The COVID-19 pandemic’s impact on us has primarily manifested through tenant requests for rent relief, which we received in late March 2020 and during the second quarter from 59 tenants related to 295 properties.
−Removed: As of June 30, 2020, we had resolved all active outstanding requests for rent relief as of that time, and no further requests were received during the third quarter of 2020.
−Removed: In total, we granted partial rent relief requests to 15 tenants related to 93 properties.
−Removed: We evaluated each request for rent relief as a unique situation, employing a rigorous credit and business analysis focusing on, among other things, industry circumstances, the tenant’s financial performance, liquidity position, lease structure, and geographic location, and regulatory impacts on the tenant’s operations ( e.g.
−Removed: , stay-at-home orders, essential v.
−Removed: nonessential business designations).
−Removed: Based on our analyses, we granted relief on a select basis only to those tenants we determined to be most in need.
−Removed: In cases where we granted rent relief, we focused on negotiating the shortest possible repayment period and, when possible, lease enhancements ( e.g.
−Removed: extensions of term).
−Removed: There were several tenants who requested rent relief that we believed were well positioned to continue making rent payments during the pandemic.
−Removed: Many of those tenants had strong balance sheets and liquidity positions, had applied for or received Paycheck Protection Program loan funding under the CARES Act, or were designated as essential businesses and could continue to operate despite restrictions on other businesses.
−Removed: We declined to agree to any rent relief in those circumstances, and in all such cases the tenants continued to pay all rents due as of September 30, 2020.
−Removed: The rent relief requests we granted included partial deferral of payment of rent with 14 tenants, and a partial abatement of rent with one tenant.
−Removed: The partial rent deferrals ranged in length between two and six months, with a weighted average deferral of 3.4 months.
−Removed: Amounts deferred will be repaid over periods ranging between three months to one year.
−Removed: At September 30, 2020, the deferral periods for all 14 tenants who received partial rent deferrals have expired, and the weighted average repayment period for remaining deferrals was 4.2 months.
−Removed: The partial abatement represents a portion of rents due over a nine-month period, with the minimum required rent payable increasing during the abatement period.
−Removed: In exchange, we negotiated a three-year lease term extension and an upside percentage rent clause during the abatement period, which we expect to provide us with long-term value accretion.
−Removed: In circums tances where we agreed to a rent deferral that is to be repaid over a period of time, and where the terms of the lease and amounts paid under the lease are substantially the same, we will continue to recognize the same amount of GAAP lease revenue each per iod to the extent the amounts are probable of collection.
−Removed: The amounts we agreed to defer will impact our cash flows from operations .
−Removed: The following chart summarizes our third quarter 2020 rent collections to date:
−Removed: 1 Relates to post-petition rents due from one tenant who had filed f or bankruptcy
−Removed: The following tables summarize our third quarter 2020 rent collection, in total and by tenant industry and property type:
−Removed: % Base Rent Collected
−Removed: % Base Rent Not Collected
−Removed: Tenant Industry
−Removed: Home Furnishing Retail
−Removed: Specialty Stores
−Removed: Industrial Machinery
−Removed: Life Sciences Tools & Services
−Removed: Movies & Entertainment 2
−Removed: Industrial tenant.
−Removed: % Base Rent Collected
−Removed: % Base Rent Not Collected
−Removed: Property Type
−Removed: Rent collections have remained strong during the fourth quarter to date.
−Removed: As of the date of this filing, we had collected 98.5% of contractual base rents due for October 2020 as well as 100% of amounts due to be repaid in October 2020 under rent deferral agreements.
−Removed: Despite our continued strong rent collections subsequent to the outbreak of the COVID-19 pandemic, the duration of the pandemic and the potential ongoing impacts of the virus on our tenants’ ability to conduct their business should additional governmental restrictions be implemented, could have a significant negative impact on our ability to continue to collect future rents.
−Removed: Property Dispositions
−Removed: From time to time, we strategically dispose of properties, primarily when we believe the risk profile has changed and become misaligned with our then current risk-adjusted return objectives.
−Removed: The resulting gains or losses on dispositions may materially impact our operating results, and the recognition of a gain or loss on the sale of real estate varies from transaction to transaction based on fluctuations in asset prices and demand in the real estate market at the time a property is listed for sale.
−Removed: As a result of the COVID-19 pandemic, we have seen a slowdown in real estate transactions and weakening market conditions for several property types resulting from an increase in vacant rental space.
−Removed: Although we have been able to dispose of properties during the first nine months of 2020 at advantageous prices, in the short term, the slowdown in market activity may inhibit our ability to further dispose of properties we have identified for disposition, including those leased by tenants that experience significant credit deterioration as a result of the COVID-19 pandemic, and the price at which we are able to sell the properties may be negatively impacted.
−Removed: We will continue to monitor the pandemic’s impact and continue to selectively dispose of properties when advantageous to do so.
−Removed: Lease Renewals and Occupancy
−Removed: As of September 30, 2020, the ABR weighted average remaining term of our portfolio was approximately 10.8 years, excluding renewal options, and approximately 8.2% of our leases (based on ABR) will expire prior to January 1, 2025.
−Removed: The stability of the rental revenue generated by our properties depends principally on our tenants’ ability to pay rent and our ability to collect rents, renew expiring leases or re-lease space upon the expiration or other termination of leases, lease currently vacant properties, and maintain or increase rental rates at our leased properties.
−Removed: To the extent our properties become vacant, we would forego rental income while remaining responsible for the payment of property taxes and maintaining the property until it is re-leased, which could negatively impact our operating results.
−Removed: Our occupancy rates have remained strong during the COVID-19 pandemic, standing at 99.6% as of September 30, 2020 based on rentable square footage.
−Removed: Additionally, when negotiating COVID-19 related rent relief agreements, we have sought to extend lease terms where possible to preserve the continuity of tenants and long-term cash flows derived from our portfolio.
−Removed: While we believe our portfolio’s diversity should allow us to manage the impact the COVID-19 pandemic may have on lease renewals and occupancy, we continue to monitor the pandemic’s effects on several industries in which our tenants operate, such as bankruptcies by large retailers, continued or increased occupancy limits established by local governments on the casual dining industry, as well as the potential long-term effects on the demand for and utilization of office space as companies consider adopting increased work from home models.
−Removed: Acquisition Activity
−Removed: Our historical growth in revenues and earnings has been achieved through rent escalations associated with existing in-place leases, coupled with rental income generated from accretive property acquisitions.
−Removed: Our ability to grow revenue will depend, to a significant degree, on our ability to identify and complete acquisitions that meet our investment criteria.
−Removed: Changes in capitalization rates, interest rates, or other factors may impact our acquisition opportunities in the future.
−Removed: Market conditions may also impact the total returns we can achieve on our investments.
−Removed: Our acquisition volume also depends on our ability to access third-party debt and equity financing.
−Removed: The COVID-19 pandemic caused a slowdown in acquisition volume, and we did not acquire any new properties during the first nine months of 2020.
−Removed: We have continued to monitor the pandemic’s impact on capitalization rates, interest rates, and access and cost of equity and debt capital.
−Removed: We currently have a robust pipeline of potential investment opportunities, including two acquisitions that are currently under executed contract.
−Removed: We are a party to two purchase and sale agreements for an aggregate purchase price of approximately $33 million (excluding transaction costs) for a weighted average initial cash capitalization rate of approximately 7.03%.
−Removed: We expect that these transactions will close during the fourth quarter of 2020.
−Removed: At the time of acquisition, the properties will have an expected weighted average remaining lease term of approximately 18.2 years and weighted average annual rent increases of approximately 1.92%.
−Removed: In connection with these acquisitions, we expect to enter into or assume leases with an initial ABR of approximately $2.3 million.
−Removed: While we regard the completion of these pending acquisitions to be probable, these transactions are subject to customary closing conditions, including the completion of due diligence, and there can be no assurance that these acquisitions will be completed on the terms described above or at all.
−Removed: These acquisitions will be funded using the net proceeds raised pursuant to our initial public offering.
−Removed: Net Lease Terms
−Removed: Substantially all of our leases are net leases pursuant to which our tenant generally is obligated to pay all expenses associated with the leased property including real estate taxes, insurance, maintenance, repairs, and capital costs.
−Removed: A limited number of leases require that we pay some or all of the property expenses such as the cost of environmental liabilities, roof and structure repairs, real estate taxes, insurance, or certain non-structural repairs and maintenance.
−Removed: Additionally, we seek to use master lease structures where it fits market practice in the particular property type, pursuant to which we seek to lease multiple properties to a single tenant on an all or none basis.
−Removed: Master leases strengthen our ability to preserve rental revenue and prevent costs associated with vacancies for underperforming properties.
−Removed: We believe the master lease structure is most prevalent and applicable to leases in our restaurant and retail property types, while less relevant to our other property types, such as healthcare and industrial.
−Removed: As of September 30, 2020, master leases contributed approximately 34.2% of our overall ABR (our largest master lease by ABR related to 24 properties and contributed 2.5% of our ABR, and our smallest master lease by ABR related to two properties and contributed 0.1% of our ABR), 73.4% of our restaurant property ABR (161 of our 240 restaurant properties), and 51.3% of our retail property ABR (78 of our 128 retail properties).
−Removed: In instances in which we granted rent relief, we generally preserved the rights afforded to us pursuant to our leases.
−Removed: The ongoing COVID-19 pandemic presents certain risks of modifications to our lease terms, including certain rights we have under master leases.
−Removed: The ongoing impact of the COVID-19 pandemic could also increase the risk of tenants’ failure to meet their lease obligations, including the risk that the prolonged economic downturn forces tenants into bankruptcy.
−Removed: An increase in the number of leases under which we are responsible for some or all property related expenses could negatively influence our operating results.
−Removed: Interest Expense
−Removed: We anticipate that we will continue to incur debt to fund future acquisition activity, which will increase the amount of interest expense we incur.
−Removed: In addition, although we attempt to limit our total floating-rate debt exposure, changes in the interest rate environment could either increase or decrease our weighted average interest rate in the future.
−Removed: Any changes to our debt structure or debt financing associated with property acquisitions, could materially influence our operating results depending on the terms of any such debt.
−Removed: A downgrade in our credit rating could also increase the amount of interest we pay under our debt agreements.
−Removed: Interest rates have continued to decline as the U.S.
−Removed: federal government attempts to combat the economic impacts of the COVID-19 pandemic.
−Removed: We benefited from this dynamic to the extent our floating rate borrowings were unhedged during the third quarter.
−Removed: Such borrowings bear interest at variable rates equal to LIBOR plus a margin based on our credit rating.
−Removed: The one-month LIBOR rate decreased from 1.76% at December 31, 2019, to 0.15% at September 30, 2020.
−Removed: We repaid $456.3 million of unhedged borrowings with the proceeds of our IPO, and approximately $110 million of our outstanding borrowings at September 30, 2020, remained unhedged.
−Removed: Restrictions in credit markets resulted in increased borrowing spreads across the debt capital markets earlier in the year as compared to the end of 2019, although they have since narrowed.
−Removed: As market conditions evolve and we return to executing against our growth strategy, additional changes in interest rates and our borrowing spreads could influence our operating results.
−Removed: General and Administrative Expenses
−Removed: Our general and administrative expenses primarily consist of compensation and related costs, third party legal, accounting, and consulting costs, travel and entertainment, and general office expenses.
−Removed: Since March 16, 2020, we have been primarily operating under a work from home policy.
−Removed: As of the date of this filing, the policy remains in effect.
−Removed: Given our limited headcount, we have not incurred a material amount of cash outlays on information technology or infrastructure to facilitate our remote workforce, and do not believe we will incur significant costs in the future.
−Removed: We have experienced a significant decrease in travel and entertainment expenses, as social distancing guidelines and restrictions have limited corporate travel.
−Removed: These benefits, however, may be outweighed by incremental third party legal, accounting, and consulting costs if the impacts of the COVID-19 pandemic worsen.
−Removed: Tenant Bankruptcies
−Removed: Adverse economic conditions, particularly those that affect the markets in which our properties are located, or downturns in our tenants’ industries could impair our tenants’ ability to meet their lease obligations to us and our ability to renew expiring leases or re-lease space.
−Removed: In particular, the bankruptcy of one or more of our tenants could adversely affect our ability to collect rents from such tenants and maintain our portfolio’s occupancy.
−Removed: We have historically experienced only a limited number of tenant bankruptcies, which have not been material to our financial results.
−Removed: During the nine months ended September 30, 2020, only one of our tenants was subject to bankruptcy proceedings which resulted in vacancies and our assumption of certain landlord responsibilities.
−Removed: The bankruptcy for this tenant concluded during the third quarter, we successfully re-leased the majority of properties, and reached a court approved settlement whereby we received approximately 86.5% of the total post-petition base rent that had been owed by the tenant.
−Removed: We have yet to see the long-term effects of the pandemic and the extent to which it may impact our tenants in the future.
−Removed: A prolonged exposure to the negative economic impacts of the pandemic may result in additional tenant bankruptcies.
−Removed: We review long-lived assets to be held and used for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable.
−Removed: If, and when, such events or changes in circumstances are present, an impairment exists to the extent the carrying value of the asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use of the asset or asset group and its eventual disposition.
−Removed: Such cash flows include expected future operating income, as adjusted for trends and prospects, as well as the effects of demand, competition, and other factors.
−Removed: Significant judgment is made as to if and when impairment should be taken.
−Removed: If our strategy, or one or more of the assumptions described above were to change in the future, an impairment may need to be recognized.
−Removed: Indications of a tenant’s inability to continue as a going concern, changes in our view or strategy relative to a tenant’s business or industry as a result of the COVID-19 pandemic, or changes in our long-term hold strategies, could each be indicative of an impairment triggering event.
−Removed: For the three and nine months ended September 30, 2020, we recognized $14.7 million and $17.4 million, respectively, of impairment charges, mainly resulting from changes in our 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 we have vacant properties being marketed for re-lease or sale.
−Removed: We face the risk of additional impairments depending on the long-term effects of the COVID-19 pandemic and the extent to which it may impact our tenants in the future.
−Removed: Impact to Liquidity and Capital Resources
−Removed: Given the economic uncertainty and evolving circumstances related to the COVID-19 pandemic and the potential for further tenant requests for rent relief, we continue to evaluate all options for strengthening our liquidity position.
−Removed: Most recently, our IPO and upsizing of our Revolving Credit Facility during the third quarter have each bolstered our liquidity, reduced our leverage and allowed us to maintain financial flexibility.
−Removed: Earlier in the year, we temporarily suspended our distributions to shareholders based upon the uncertainties surrounding the COVID-19 pandemic.
−Removed: Our board of directors approved a quarterly distribution of $0.135 per share at its August 4, 2020 meeting.
−Removed: At its November 5, 2020 meeting, the board approved a $0.25 distribution per common share and OP Unit to stockholders and OP Unit holders of record as of December 31, 2020, payable on or before January 15, 2021.
−Removed: In addition to our $109.0 million of cash and restricted cash on hand at September 30, 2020, we also have $900 million of available capacity under our Revolving Credit Facility.
−Removed: Under the terms of our credit agreements, we must maintain ratios of total indebtedness to total market value, and total unsecured indebtedness to total unencumbered eligible property value (together, “leverage covenant ratios”), of less than 60%, measured as of each quarter end.
−Removed: Taking into consideration our leverage covenant ratios, as of September 30, 2020 we had approximately $738 million of available borrowing capacity under our covenants.
−Removed: Management believes we were in compliance with the terms of our covenants as of September 30, 2020.
−Removed: We believe our cash on-hand and available capacity on our credit facilities provides us with the ability to meet all current obligations and to maintain our REIT status.
−Removed: However, the COVID-19 pandemic’s ultimate impact on our tenants is not yet known, and could result in significantly aged delinquencies and tenant defaults, which would have a direct impact on our leverage covenant ratios.
−Removed: See further discussion concerning our liquidity in Liquidity and Capital Resources below.
−Removed: Other Considerations
−Removed: Internal Controls over Financial Reporting and Disclosure Controls
−Removed: We have taken proactive steps to maintain an appropriate internal control environment while migrating our workforce to a work from home dynamic.
−Removed: Our access to technology and online communications has required minimal changes to controls, none of which we deem material.
−Removed: We believe our existing disclosure controls are appropriate to address the reporting complexities presented by the COVID-19 pandemic.
−Removed: Real Estate Portf olio Information
−Removed: To achieve an appropriate risk-adjusted return, we intend to maintain a highly diversified portfolio of primarily single-tenant commercial real estate properties spread across multiple property types, geographic locations, tenants, and industries and that have cross-diversification within each.
−Removed: The following charts summarize our portfolio diversification by property type, tenant, brand, industry and geographic location as of September 30, 2020.
−Removed: The percentages below are calculated based on our ABR of $288.0 million as of September 30, 2020.
+Added: Real Estate Portfolio Information
+Added: The following charts summarize our portfolio diversification by property type, tenant, brand, industry and geographic location as of March 31, 2021.
+Added: The percentages below are calculated based on our ABR of $302.3 million as of March 31, 2021.
Diversification by Property Type
13 unchanged sentences
Restaurant Total
−Removed: Strategic Operations
−Removed: Corporate Headquarters
General Merchandise
Home Furnishings
+Added: Strategic Operations
+Added: Corporate Headquarters
Diversification by Tenant
13 unchanged sentences
Casual Dining
+Added: BluePearl Holdings, LLC *
+Added: Animal Health Services
Krispy Kreme Doughnut Corporation
1 unchanged sentence
Food Processing
−Removed: BluePearl Holdings, LLC *
−Removed: Animal Health Services
Big Tex Trailer Manufacturing, Inc.
6 unchanged sentences
Total Top 10 Tenants
+Added: Arkansas Surgical Hospital
Nationwide Mutual Insurance Company *
Strategic Operations
−Removed: Arkansas Surgical Hospital
American Signature, Inc.
2 unchanged sentences
Manufacturing
−Removed: Fresh Express Incorporated
−Removed: Food Processing
+Added: Tractor Supply Company
+Added: General Merchandise
Aventiv Technologies, LLC
Corporate Headquarters
+Added: Fresh Express Incorporated
+Added: Food Processing
Bob Evans Restaurants, LLC *
Casual Dining
−Removed: Tractor Supply Company
−Removed: General Merchandise
+Added: Zips Car Wash, LLC *
Centene Management Company, LLC
Strategic Operations
−Removed: Zips Car Wash, LLC *
Total Top 20 Tenants
14 unchanged sentences
Quick Service Restaurants
−Removed: Quick Service Restaurants/
−Removed: Food Processing
BluePearl Veterinary Partners *
Animal Health Services
+Added: Quick Service Restaurants/
+Added: Food Processing
Big Tex Trailers *
6 unchanged sentences
Casual Dining
+Added: Arkansas Surgical Hospital
Quick Service Restaurants
1 unchanged sentence
Strategic Operations
−Removed: Arkansas Surgical Hospital
Value City Furniture
2 unchanged sentences
Manufacturing
−Removed: Food Processing
−Removed: Securus Technologies
−Removed: Corporate Headquarters
Tractor Supply Co.
General Merchandise
+Added: Securus Technologies
+Added: Corporate Headquarters
+Added: Food Processing
Total Top 20 Brands
3 unchanged sentences
Diversification by Industry
+Added: ABR as a % of Total Portfolio
+Added: Square Feet ('000s)
ABR as a % of
2 unchanged sentences
Food Distributors
−Removed: Packaged Foods & Meats
Auto Parts & Equipment
−Removed: Metal & Glass Containers
Specialized Consumer Services
+Added: Packaged Foods & Meats
+Added: Metal & Glass Containers
Healthcare Services
1 unchanged sentence
Aerospace & Defense
+Added: Specialty Stores
Electronic Components
Air Freight & Logistics
−Removed: Specialty Stores
Industrial Machinery
−Removed: Top 15 Tenant Industries
Other (40 industries)
+Added: Untenanted properties
Diversification by Geography
−Removed: As of September 30, 2020, approximately 99.8% of our portfolio’s rentable square footage, representing all but six of our properties, was subject to a lease.
−Removed: Because substantially all of our properties are leased under long-term leases, we are not currentl y required to perform significant ongoing leasing activities on our properties.
−Removed: The leases for two of our properties, representing less than 0.1% of our ABR, will expire during 2020, and leases for an additional six properties, representing approximately 0 .5% of our ABR, will expire during 2021 excluding renewal options.
−Removed: During the third quarter of 2020 we extended the terms of leases with two tenants.
−Removed: As of September 30, 2020, the ABR weighted average remaining term of our leases was approximately 10.8 yea rs.
+Added: Lease Expirations
+Added: As of March 31, 2021, the ABR weighted average remaining term of our leases was approximately 10.6 years.
Less than 5% of the properties in our portfolio are subject to leases without at least one renewal option.
−Removed: Approximately 59.1% of our rental revenue was derived from leases that will expire during 2030 and thereafter, and no more than 9.2% of our renta l revenue was derived from leases that expire in any single year prior to 2030.
−Removed: The following chart sets forth our lease expirations based upon the terms of the leases in place as of September 30, 2020.
+Added: Approximately 44.9% of our rental revenue was derived from leases that will expire after 2030, and no more than 9.0% of our rental revenue was derived from leases that expire in any single year prior to 2030.
+Added: The following chart sets forth our lease expirations based upon the terms of the leases in place as of March 31, 2021.
The following table presents certain information based on lease expirations by year.
6 unchanged sentences
Results of Operations
−Removed: As of September 30, 2020, our real estate investment portfolio had a gross asset value of approximately $4.0 billion, consisting of investments in 627 commercial real estate properties with locations in 41 states and one real estate property located in British Columbia, Canada, and leased to tenants in various industries.
−Removed: All but six of our properties were subject to a lease as of September 30, 2020.
+Added: The following discussion includes the results of our operations for the periods presented.
+Added: We have included an analysis of the three months ended March 31, 2021, as compared to the three months ended December 31, 2020 and March 31, 2020.
+Added: We have included the comparison of the immediately preceding quarter given our Internalization and initial public offering’s (“IPO”) significant impact to our results of operations and financial condition, and therefore comparability, of the prior year periods.
+Added: We believe the quarter-over-quarter analysis is beneficial to investors as it compares the results of operations on a more comparable basis, and aligns with our strategic growth priorities under a different leverage and liquidity profile going forward.
+Added: Three Months Ended March 31, 2021 Compared to Three Months Ended December 31, 2020
Lease Revenues, net
For the Three Months Ended
−Removed: For the nine months ended
−Removed: September 30,
Increase/(Decrease)
−Removed: September 30,
−Removed: Increase/(Decrease)
(in thousands)
−Removed: Contractual rental amounts billed for
−Removed: operating leases
−Removed: Adjustment to recognize contractual
−Removed: operating lease billings on a
−Removed: straight-line basis
+Added: Contractual rental amounts billed for operating leases
+Added: Adjustment to recognize contractual operating lease
+Added: billings on a straight-line basis
Variable rental amounts earned
Earned income from direct financing leases
+Added: Earned income from sales-type leases
Operating expenses billed to tenants
Other income from real estate transactions
−Removed: Adjustment to revenue recognized for
−Removed: uncollectible rental amounts billed
+Added: Adjustment to revenue recognized for uncollectible
+Added: rental amounts billed
Total Lease revenues, net
−Removed: The increase in Lease revenues, net for the three and nine months ended September 30, 2020, was primarily attributable to growth in our real estate portfolio through accretive property acquisitions during 2019.
−Removed: In 2019, we significantly increased the size of our portfolio, adding 74 new properties at an aggregate cost of approximately $1.0 billion, excluding capitalized acquisition costs.
−Removed: Our acquisitions were largely weighted towards the second half of the year, with the closing of a $735.7 million industrial and office portfolio in August.
−Removed: As of September 30, 2020, our portfolio was 99.8% occupied (based on rentable square footage), with ABR weighted average annual rent increases of 2.1%.
+Added: The increase in Lease revenues, net was primarily attributable to growth in our real estate portfolio through accretive property acquisitions during the fourth quarter of 2020.
+Added: During the fourth quarter of 2020, we invested $100.3 million, excluding capitalized acquisition costs, in 19 properties at a weighted average initial cash cap rate of 6.9%.
+Added: Most of these acquisitions closed during the month of December, and therefore did not materially contribute to Lease revenues, net for the three months ended December 31, 2020.
Operating Expenses
For the Three Months Ended
−Removed: For the nine months ended
−Removed: September 30,
Increase/(Decrease)
−Removed: September 30,
+Added: (in thousands)
+Added: Operating expenses
+Added: Depreciation and amortization
+Added: Property and operating expense
+Added: General and administrative
+Added: Provision for impairment of investment in rental properties
+Added: Total operating expenses
+Added: General and administrative
+Added: The increase in general and administrative expenses mainly reflects increased severance associated with the departure of an executive officer during the three months ended March 31, 2021.
+Added: Provision for impairment of investment in rental properties
+Added: During the three months ended March 31, 2021, we recognized $2.0 million of impairment on our investments in rental properties, compared to $1.7 million during the three months ended December 31, 2020.
+Added: The following table presents the impairment charges for their respective period:
+Added: For the Three Months Ended
+Added: (in thousands, except number of properties)
+Added: Number of properties
+Added: Carrying value prior to impairment charge
+Added: Impairment charge
+Added: The timing and amount of impairment fluctuates from period to period depending on the specific facts and circumstances.
+Added: Other income (expenses)
+Added: For the Three Months Ended
Increase/(Decrease)
(in thousands)
+Added: Other income (expenses)
+Added: Interest income
+Added: Interest expense
+Added: Cost of debt extinguishment
+Added: Gain on sale of real estate
+Added: Internalization expenses
+Added: Change in fair value of earnout liability
+Added: Other income (expenses)
+Added: Interest expense
+Added: The decrease in interest expense reflects a decrease in our weighted average cost of borrowings combined with decreased average outstanding borrowings in the comparable period.
+Added: In January 2021, we received an initial credit rating of BBB with a stable outlook from S&P Global Ratings (“S&P”), which had the effect of lowering the applicable margin on our then existing $965 million of bank loans by 25 basis points beginning in February 2021, as well as a 20 basis point decrease in the applicable margin on Revolving Credit Facility borrowings.
+Added: We also repriced our 2026 Unsecured Term Loan in March 2021, reducing the applicable margin by an additional 60 basis points, and simultaneously repaid $50 million.
+Added: Change in fair value of earnout liability
+Added: As part of the Internalization, we may be required to pay additional earnout consideration if certain milestones are achieved during the Earnout Periods.
+Added: We record the fair value of this contingent consideration in the Condensed Consolidated Balance Sheets, and update the fair value at the end of each reporting period.
+Added: To the extent the change in fair value relates to a portion of the earnout consideration that is classified as a liability, we record the change through earnings.
+Added: We estimate the fair value of the earnout liability by considering weighted-average probabilities of likely outcomes, and using a Monte Carlo simulation and discounted cash flow analysis to estimate fair value.
+Added: These estimates require us to make various assumptions about future share prices, and other items that are unobservable and are considered Level 3 inputs in the fair value hierarchy.
+Added: The change in the fair value of the earnout liability during the three months ended March 31, 2021, reflects a decrease in our share price as compared to December 31, 2020.
+Added: Net income and Net earnings per diluted share
+Added: For the Three Months Ended
+Added: Increase/(Decrease)
+Added: (in thousands, except per share data)
+Added: Net earnings per diluted share
+Added: The increase in net income is primarily due to a $7.8 million increase in income from the change in fair value of our earnout liability and a $1.0 million decrease in interest expense.
+Added: These factors were partially offset by a $1.4 million increase in general and administrative expenses.
+Added: GAAP net income includes items such as gain or loss on sale of real estate and provisions for impairment, among others, which can vary from quarter to quarter and impact period-over-period comparisons.
+Added: Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020
+Added: Lease Revenues, net
+Added: For the Three Months Ended
+Added: Increase/(Decrease)
+Added: (in thousands)
+Added: Contractual rental amounts billed for operating leases
+Added: Adjustment to recognize contractual operating lease
+Added: billings on a straight-line basis
+Added: Variable rental amounts earned
+Added: Earned income from direct financing leases
+Added: Earned income from sales-type leases
+Added: Operating expenses billed to tenants
+Added: Other income from real estate transactions
+Added: Adjustment to revenue recognized for uncollectible
+Added: rental amounts billed
+Added: Total Lease revenues, net
+Added: The increase in Lease revenues, net, was primarily attributable to growth in our real estate portfolio through accretive property acquisitions during 2020.
+Added: During the fourth quarter of 2020, we invested $100.3 million, excluding capitalized acquisition costs, in 19 properties at a weighted average initial cash cap rate of 6.9%.
+Added: Most of these acquisitions closed during the month of December, and therefore did not contribute to Lease revenues, net for the three months ended March 31, 2020.
Operating Expenses
+Added: For the Three Months Ended
+Added: Increase/(Decrease)
+Added: (in thousands)
+Added: Operating expenses
Depreciation and amortization
3 unchanged sentences
General and administrative
−Removed: Provision for impairment of investment
−Removed: in rental properties
+Added: Provision for impairment of investment in rental properties
Total operating expenses
−Removed: Depreciation and amortization
−Removed: The increase in depreciation and amortization expense for the three and nine months ended September 30, 2020, is primarily due to the growth in our real estate portfolio.
Asset management fees and Property management fees
−Removed: Prior to the Internalization on February 7, 2020, we paid our third-party manager a quarterly fee equal to 0.25% of the aggregate value of our equity on a fully diluted basis, based on the Determined Share Value established by our board of directors.
−Removed: Additionally, we paid our third-party manager a monthly fee equal to 3% of gross rentals collected from our real estate portfolio as compensation for its property management services.
−Removed: Upon completion of the Internalization, the agreements with the third-party manager were terminated, resulting in a decrease in these expenses as compared to the prior year period.
−Removed: Our management fees were replaced by compensation and related costs associated with an internalized management structure, and corresponding general and administrative expenses.
+Added: The decrease in asset management fees and property management fees was due to the completion of the Internalization in February 2020, which terminated the associated agreements with our third-party manager.
General and administrative
The increase in general and administrative expenses mainly reflects the impact of the Internalization associated with our newly acquired employee base.
−Removed: Following the Internalization, our asset and property management fees were replaced with compensation and related expenses, which totaled $4.6 million and $11.3 million during the three and nine months ended September 30, 2020, respectively, along with associated general and administrative expenses.
−Removed: We are achieving costs savings from our internalized structure, as the increase in general and administrative expenses is less than the combined decrease in asset management, property management, and disposition fees incurred during the three and nine months ended September 30, 2020 under our prior externally managed structure.
+Added: Following the Internalization, our asset and property management fees were replaced with compensation and related expenses, along with associated general and administrative expenses for the three months ended March 31, 2020.
Provision for impairment of investment in rental properties
−Removed: During the three and nine months ended September 30, 2020, we recognized $14.7 million and $17.4 million, respectively, of impairment on our investments in rental properties, compared to $2.4 million and $3.5 million during the three and nine months ended September 30, 2019, respectively.
+Added: During the three months ended March 31, 2021, we recognized $2.0 million of impairment on our investments in rental properties, compared to $2.1 million during the three months ended March 31, 2020.
The following table presents the impairment charges for their respective periods:
For the Three Months Ended
−Removed: For the nine months ended
−Removed: September 30,
−Removed: September 30,
(in thousands, except number of properties)
5 unchanged sentences
For the Three Months Ended
−Removed: For the nine months ended
−Removed: September 30,
Increase/(Decrease)
−Removed: September 30,
−Removed: Increase/(Decrease)
(in thousands)
6 unchanged sentences
Change in fair value of earnout liability
−Removed: Other gains (losses)
+Added: Other income (expenses)
Interest expense
−Removed: Increased interest expense during the three and nine months ended September 30, 2020, as compared to the three and nine months ended September 30, 2019, reflects increased average outstanding borrowings in the comparable periods.
−Removed: We incurred incremental revolver and term loan borrowings in August 2019 to fund a significant acquisition and in February 2020 in connection with the Internalization.
−Removed: These borrowings were unhedged and bore interest at a variable rate based on LIBOR, which decreased from 1.76% at December 31, 2019 to 0.15% at September 30, 2020.
−Removed: As a result, we benefited from declining interest rates during the period of time they were outstanding.
−Removed: The borrowings were fully repaid in September 2020 with proceeds from our IPO.
−Removed: As of September 30, 2020, approximately $110.0 million of our borrowings remain unhedged.
+Added: The decrease in interest expense primarily reflects a decrease in our average outstanding borrowings, combined with a decrease in our weighted average cost of borrowings.
+Added: In September 2020, we used the proceeds of our IPO to repay $456.7 million of outstanding borrowings, including accrued interest, significantly reducing our leverage profile.
+Added: In January 2021, we received an initial credit rating of BBB with a stable outlook from S&P, which had the effect of lowering the applicable margin on our then existing $965 million of bank loans by 25 basis points beginning in February 2021.
+Added: We also repriced and partially repaid our 2026 Unsecured Term Loan in March 2021, reducing the applicable margin and principal balance by an additional 60 basis points and $50 million, respectively.
Gain on sale of real estate
Our recognition of a gain or loss on the sale of real estate varies from transaction to transaction based on fluctuations in asset prices and demand in the real estate market.
−Removed: During the three months ended September 30, 2020, we recognized gains of $1.1 million on the sale of five properties, compared to gains of $12.6 million on the sale of 16 properties during the three months ended September 30, 2019.
−Removed: During the nine months ended September 30, 2020, we recognized gains of $9.7 million on the sale of 18 properties, compared to gains of $16.8 million on the sale of 25 properties during the nine months ended September 30, 2019.
+Added: During the three months ended March 31, 2021, we recognized gains of $4.7 million on the sale of eight properties, compared to gains of $7.6 million on the sale of 10 properties during the three months ended March 31, 2020.
Internalization expenses
−Removed: During the three and nine months ended September 30, 2020, we incurred $1.9 million and $3.5 million, respectively, of third-party fees and consulting expenses associated with the Internalization, compared to $0.9 million and $1.2 million of such expenses during three and nine months ended September 30, 2019, respectively.
−Removed: We expect any incremental internalization expenses in the future to be limited to third party legal and accounting fees related to residual work in connection with the transaction.
+Added: During the three months ended March 31, 2020, we incurred $1.2 million of third-party fees and consulting expenses associated with the Internalization that closed on February 7, 2020.
+Added: We did not incur these expenses during the three months ended March 31, 2021.
Change in fair value of earnout liability
−Removed: As part of the Internalization we may be required to pay additional earnout consideration if certain milestones are achieved during the Earnout Periods.
−Removed: We record the fair value of this contingent consideration in the Condensed Consolidated Balance Sheets, and update the fair value at the end of each reporting period.
−Removed: To the extent the change in fair value relates to a portion of the earnout consideration that is classified as a liability, we record the change through earnings.
−Removed: We estimate the fair value of the earnout liability by considering weighted-average probabilities of likely outcomes, and using a Monte Carlo simulation and discounted cash flow analysis to estimate fair value.
−Removed: These estimates require the Company to make various assumptions about future share prices, and other items that are unobservable and are considered Level 3 inputs in the fair value hierarchy.
−Removed: The change in the fair value of the earnout liability during the three and nine months ended September 30, 2020, reflects the IPO stock price and changes in the peer stock price volatility assumption, which is attributable to changes in economic circumstances impacting global equity markets.
+Added: The change in the fair value of the earnout liability during the three months ended March 31, 2021, reflects a decrease in our period end share price.
Net income and Net earnings per diluted share
For the Three Months Ended
−Removed: For the nine months ended
−Removed: September 30,
Increase/(Decrease)
−Removed: September 30,
−Removed: Increase/(Decrease)
(in thousands, except per share data)
Net earnings per diluted share
−Removed: The decrease in net income for the three months ended September 30, 2020, as compared to the three months ended September 30, 2019, is primarily due to a $12.3 million increase in impairment charges, an $11.5 million decrease in gains on sale of real estate, and a $3.0 million increase in depreciation and amortization expense associated with a larger real estate portfolio.
−Removed: These factors were partially offset by revenue growth of $4.3 million and a $6.4 million decrease in the fair value of our earnout liability in 2020 with no comparable adjustment in the prior year.
−Removed: In addition, as a result of the Internalization, increased general and administrative expenses of $5.9 million were offset by $7.7 million lower asset management and property management fees.
−Removed: The decrease in net income for the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019, is primarily due to a $24.5 million increase in depreciation and amortization expense, a $13.9 million increase in impairment charges, an $8.0 million increase in interest expense, a $7.0 million decrease in gains on sale of real estate, and a $2.3 million increase in internalization expenses.
−Removed: These factors were partially offset by revenue growth of $25.5 million and a $8.5 million decrease in the fair value of our earnout liability in 2020 with no comparable adjustment in the prior year.
−Removed: In addition, as a result of the Internalization, increased general and administrative expenses of $14.9 million were offset by $18.2 million lower asset management and property management fees.
+Added: The increase in net income, is primarily due to a $5.3 million increase in income from the change in fair value of our earnout liability, a $4.9 million decrease in interest expense, revenue growth of $4.5 million, and a $1.2 million decrease in internalization expenses.
+Added: These factors were partially offset by a $2.9 million decrease in the gain on sale of real estate.
GAAP net income includes items such as gain or loss on sale of real estate and provisions for impairment, among others, which can vary from quarter to quarter and impact period-over-period comparisons.
−Removed: These fluctuations, combined with the increase in our weighted average shares outstanding resulting from continued equity raises associated with our deleveraging plans subsequent to a significant acquisition in the third quarter of 2019 and the common shares and OP Units issued in conjunction with the IPO and Internalization, contributed to the $0.16 decrease in net earnings per diluted share for the three months ended September 30, 2020 and the $0.25 decrease in net earnings per diluted share for the nine months ended September 30, 2020.
Liquidity and Capital Resources
1 unchanged sentence
Our focus is on maximizing the risk-adjusted return to our stockholders through an appropriate balance of debt and equity in our capital structure.
−Removed: We are committed to maintaining an investment grade balance sheet through active management of our
−Removed: leverage profile and overall liquidity position.
−Removed: We believe our leverage model has allowed us to take advantag e of the lower cost of debt while simultaneously strengthening our balance sheet, as evidenced by our investment grade credit rating of Baa3 from Moody’s Investors Service (“Moody’s”), which was reaffirmed in July 2020.
−Removed: We manage our leverage profil e using a ratio of Net Debt to Annualized Adjusted EBITDAre, a non-GAAP financial measure, which we believe is a useful measure of our ability to repay debt and a relative measure of leverage, and is used in communications with rating agencies regarding ou r credit rating.
+Added: We are committed to maintaining an investment grade balance sheet through active management of our leverage profile and overall liquidity position.
+Added: We believe our leverage strategy has allowed us to take advantage of the lower cost of debt while simultaneously strengthening our balance sheet, as evidenced by our investment grade credit ratings of BBB from S&P and Baa3 from Moody’s Investors Service (“Moody’s”).
+Added: We manage our leverage profile using a ratio of Net Debt to Annualized Adjusted EBITDAre, a non-GAAP financial measure, which we believe is a useful measure of our ability to repay debt and a relative measure of leverage, and is used in communications with lenders and with rating agencies regarding our credit rating.
We seek to maintain on a sustained basis a Net Debt to Annualized Adjusted EBITDAre ratio that is generally less than 6.0x.
−Removed: As of September 30, 2020, we had total debt outstanding of $1,549.1 million and a Net Debt to Annualized Adjusted E BITDAre ratio of approximately 5.20x.
+Added: As of March 31, 2021, we had total debt outstanding of $1.5 billion, Net Debt of $1.5 billion, and a Net Debt to Annualized Adjusted EBITDAre ratio of approximately 5.25x.
Net Debt and Annualized Adjusted EBITDAre are non-GAAP financial measures, and Annualized Adjusted EBITDAre is calculated based upon EBITDA, EBITDAre, and Adjusted EBITDAre, each of which is also a non-GAAP financial measure.
9 unchanged sentences
We expect to meet our short-term liquidity requirements primarily from cash and cash equivalents balances and net cash provided by operating activities, supplemented by borrowings under our Revolving Credit Facility.
+Added: As detailed in the contractual obligations table below, we have approximately $61.7 million of expected obligations due to be paid throughout the remainder of 2021, primarily consisting of $17.2 million of mortgage maturities, and $43.1 million of interest expense due, including the impact of our interest rate swaps.
+Added: We expect our cash provided by operating activities, as discussed below, will be sufficient to pay for our current obligations including interest expense on our borrowings.
+Added: We expect to either repay the maturing mortgages with available cash on hand generated from our results of operations or borrowings under our Revolving Credit Facility, or refinance with property-level borrowings.
Long-term Liquidity Requirements
Our long-term liquidity requirements consist primarily of funds necessary to repay debt and invest in additional revenue generating properties.
−Removed: Debt capital is provided through unsecured term notes, revolving debt facilities, and senior unsecured notes.
−Removed: Further, we anticipate access to the public unsecured bond market, which was historically largely unavailable to us, following our IPO.
+Added: Debt capital is provided through unsecured term notes, revolving credit facilities, and senior unsecured notes.
+Added: Further, we anticipate having the ability to access the public unsecured bond market, which was historically largely unavailable to us prior to our IPO.
The source and mix of our debt capital in the future will be impacted by market conditions as well as our continued focus on lengthening our debt maturity profile to better align with our portfolio’s lease terms, staggering debt maturities to reduce the risk that a significant amount of debt will mature in any single year in the future, and managing our exposure to interest rate risk.
+Added: Our $60 million 2022 Unsecured Term Loan has a short-term maturity date of February 2022.
+Added: We expect to either repay the 2022 Unsecured Term Loan with available cash on hand, or with borrowings under our Revolving Credit Facility.
+Added: With outstanding borrowings of $15 million at March 31, 2021, we have $885 million of available capacity under our Revolving Credit Facility.
We expect to meet our long-term liquidity requirements primarily from borrowings under our Revolving Credit Facility, future debt and equity financings, and proceeds from limited sales of our properties.
4 unchanged sentences
We also, from time to time, obtain or assume non-recourse mortgage financing from banks and insurance companies secured by mortgages on the corresponding specific property.
−Removed: Mortgages, however, are not currently a strategic focus of the active management of our leverage profile.
+Added: Mortgages, however, are not currently a strategic focus of the active management of our capital structure.
Equity Capital Resources
−Removed: On September 21, 2020, we completed our IPO and issued 33.5 million shares of stock for net proceeds of $532.3 million.
+Added: On September 21, 2020, we completed our IPO and issued 37 million shares of stock for net proceeds of $588.3 million, including shares issued subsequently pursuant to the underwriters’ partial exercise of their over-allotment option.
We used $216.5 million of the net proceeds to fully repay the outstanding borrowings and accrued interest under our then existing revolving credit agreement and $240.2 million of the proceeds to fully repay the outstanding principal and accrued interest associated with an unsecured term loan.
−Removed: Subsequent to quarter end, on October 20, 2020, we received an additional $55.9 million in net proceeds as a result of the exercise in part by the underwriters of the IPO of their option to purchase additional shares at the IPO price of $17.00 per share.
−Removed: Prior to the IPO, equity capital for our real estate acquisition activity was provided by proceeds from our private offering, including distributions reinvested through our DRIP.
−Removed: We suspended our private offering on January 10, 2020.
−Removed: Accordingly, we did not rai se any equity through our private offering during the first nine months of 2020.
−Removed: During the nine months ended September 30, 2020, we raised approximately $5.9 million in equity capital through our DRIP.
−Removed: We announced on January 10, 2020 that we were termina ting our DRIP, effective February 10, 2020.
−Removed: Existing Credit Facilities
−Removed: The following table sets forth our outstanding Revolving Credit Facility, unsecured term loans and Senior Notes at September 30, 2020.
+Added: As we continue to invest in accretive real estate properties, we expect to balance our debt and equity capitalization, while maintaining a Net Debt to Annualized Adjusted EBITDAre ratio below 6.0x on a sustained basis, through the anticipated use of follow-on equity offerings and an at-the-market (“ATM”) program.
+Added: As of March 31, 2021, we have successfully deployed the remaining proceeds from our IPO.
+Added: Unsecured Indebtedness and Capital Markets Activities as of and for the Three Months Ended March 31, 2021
+Added: The following table sets forth our outstanding Revolving Credit Facility, unsecured term loans and Senior Notes at March 31, 2021.
(in thousands, except interest rates)
Revolving Credit Facility
−Removed: one-month LIBOR + 1.20%
+Added: daily LIBOR + 1.00%
2022 Unsecured Term Loan
6 unchanged sentences
one-month LIBOR + 1.00%
−Removed: Debt issuance costs, net
−Removed: Revolving Credit Facility
−Removed: In connection with the IPO, in September 2020 we replaced our prior $600.0 million revolving credit facility with the $900.0 million Revolving Credit Facility that includes $20.0 million available for issuance of letters of credit.
−Removed: The Revolving Credit Facility has an initial maturity date of September 2023 and provides for two six-month extensions, at our election, subject to certain conditions set forth in the agreement and payment of a 0.0625% fee on the revolving commitments.
−Removed: The Revolving Credit Facility contains an applicable facility fee ranging between 0.125% and 0.30% per annum, based on our credit rating.
−Removed: Based on our current credit rating of Baa3, the facility fee is 0.25% per annum as of September 30, 2020.
−Removed: Borrowings on the Revolving Credit Facility bear interest at variable rates based on LIBOR plus a margin based on our credit rating ranging between 0.825% and 1.55% per annum.
−Removed: Based on our current credit rating, the applicable margin is 1.20% as of September 30, 2020.
−Removed: 2022 Unsecured Term Loan
−Removed: We entered into the 2022 Unsecured Term Loan to partially repay BRE debt that we assumed as part of the Internalization.
−Removed: Borrowings under the 2022 Unsecured Term Loan are subject to interest only payments at variable rates equal to LIBOR plus a margin based on our credit rating, ranging between 0.85% and 1.65% per annum.
−Removed: Based on our current credit rating, the applicable margin is 1.25% as of September 30, 2020.
−Removed: 2023 Unsecured Term Loan
−Removed: The 2023 Unsecured Term loan has an initial maturity date of January 2023.
−Removed: Borrowings under the 2023 Unsecured Term Loan bear interest at variable rates based on LIBOR plus a margin based on our credit rating ranging between 0.90% and 1.75% per annum.
−Removed: Based on our current credit rating, the applicable margin is 1.35% as of September 30, 2020.
−Removed: 2024 Unsecured Term Loan
−Removed: The 2024 Unsecured Term Loan has an initial maturity date of June 2024.
−Removed: Borrowings under the 2024 Unsecured Term Loan are subject to interest at variable rates based on LIBOR plus a margin based on our credit rating ranging between 0.85% and 1.65% per annum.
−Removed: Based on our current credit rating, the applicable margin is 1.25% as of September 30, 2020.
−Removed: 2026 Unsecured Term Loan
−Removed: The 2026 Unsecured Term Loan includes an accordion feature that provides for an increase in the facility size up to a total of $550 million of available capacity.
−Removed: Borrowings under the 2026 Unsecured Term Loan are payable interest only on a monthly basis during the term of the loan, with the principal amount due in February 2026.
−Removed: Borrowings under the 2026 Unsecured Term loan bear interest equal to LIBOR plus a margin based on our credit rating ranging between 1.45% and 2.40% per annum.
−Removed: Based on our current credit rating, the applicable margin is 1.85% as of September 30, 2020.
−Removed: To mitigate interest rate risk and extend the tenor of a portion of our debt, we have strategically added unsecured, fixed-rate, interest-only senior promissory notes (“Senior Notes”) to our capital structure.
−Removed: The Senior Notes were issued in three series (Series A, B, and C) as described below.
−Removed: Series A Notes
−Removed: The Series A Notes are payable interest only semiannually during their term, bear interest at a fixed rate of 4.84% per annum, and mature on April 18, 2027.
−Removed: Series B and Series C Notes
−Removed: The Series B and Series C Notes are payable interest only semiannually during their term, and bear interest at fixed rates of 5.09% per annum and 5.19% per annum, respectively.
−Removed: The Series B Notes mature on July 2, 2028, and the Series C Notes mature on July 2, 2030.
+Added: As announced on January 21, 2021, S&P assigned the Company an initial credit rating of 'BBB' with a stable outlook.
+Added: As a result of this credit rating, the margin of our existing bank loans was reduced by 25 basis points beginning in February 2021, the applicable margin on borrowings under our Revolving Credit Facility was reduced by 20 basis points, and our access to a diverse set of advantageous funding sources should expand.
+Added: During the quarter, Moody’s reaffirmed our ‘Baa3’ credit rating and updated their outlook from ‘stable’ to ‘positive.
+Added: On March 12, 2021, we amended our $450 million 2026 Unsecured Term Loan, reducing the applicable margin an additional 60 basis points based on our current credit rating.
+Added: In connection with the amendment, we repaid in full the outstanding commitments for two lenders and elected to repay an additional $10 million in outstanding principal, bringing the outstanding balance to $400 million as of March 31 , 2021.
+Added: On March 31, 2021, we drew $15 million on our Revolving Credit Facility to fund an acquisition.
+Added: We have $885 million of remaining capacity on our Revolving Credit Facility as of March 31, 2021.
Debt Covenants
We are subject to various covenants and financial reporting requirements pursuant to our debt facilities, which are summarized below.
−Removed: As of September 30, 2020, we believe we were in compliance with all of our covenants on all outstanding borrowings.
+Added: As of March 31, 2021, we believe we were in compliance with all of our covenants on all outstanding borrowings.
In the event of default, either through default on payments or breach of covenants, we may be restricted from paying dividends to our stockholders in excess of dividends required to maintain our REIT qualification.
For each of the previous three years, we paid dividends out of our cash flows from operations in excess of the distribution amounts required to maintain our REIT qualification.
−Removed: Refer to Recent Developments – COVID-19 Pandemic for additional discussion of the pandemic’s impact on our ability to satisfy our financial covenants.
Leverage Ratio
10 unchanged sentences
Only applicable in case of default
−Removed: Cash and cash equivalents and restricted cash totaled $109.0 million and $44.1 million at September 30, 2020 and 2019, respectively.
−Removed: The table below shows information concerning cash flows for the nine months ended September 30, 2020 and 2019:
−Removed: For the nine months ended
−Removed: September 30,
+Added: Derivative Instruments and Hedging Activities
+Added: We are exposed to interest rate risk arising from changes in interest rates on the floating-rate borrowings under our unsecured credit facilities and a certain mortgage.
+Added: Borrowings pursuant to our unsecured credit facilities and the mortgage bear interest at floating rates based on LIBOR plus an applicable margin.
+Added: Accordingly, fluctuations in market interest rates may increase or decrease our interest expense, which will in turn, increase or decrease our net income and cash flow.
+Added: We attempt to manage our interest rate risk by entering into interest rate swaps.
+Added: As of March 31, 2021, we had 32 interest rate swaps outstanding in an aggregate notional amount of $824.7 million.
+Added: Under these agreements, we receive monthly payments from the counterparties equal to the related variable interest rates multiplied by the outstanding notional amounts.
+Added: In turn, we pay the counterparties each month an amount equal to a fixed interest rate multiplied by the related outstanding notional amounts.
+Added: The intended net impact of these transactions is that we pay a fixed interest rate on our variable-rate borrowings.
+Added: The interest rate swaps have been designated by us as cash flow hedges for accounting purposes and are reported at fair value.
+Added: We assess, both at inception and on an ongoing basis, the effectiveness of our qualifying cash flow hedges.
+Added: We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes.
+Added: Cash and cash equivalents and restricted cash totaled $18.4 million, $110.7 million, and $96.7 million at March 31, 2021, December 31, 2020 and March 31, 2020, respectively.
+Added: The table below shows information concerning cash flows for the three months ended March 31, 2021, December 31, 2020, and March 31, 2020:
+Added: For the Three Months Ended
(In thousands)
Net cash provided by operating activities
−Removed: Net cash provided by (used in) investing activities
+Added: Net cash (used in) provided by investing activities
Net cash (used in) provided by financing activities
Increase in cash and cash equivalents and restricted cash
−Removed: The increase in net cash provided by operating activities during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019, was mainly due to growth in our real estate portfolio and cost savings associated with the Internalization.
−Removed: The change in net cash provided by (used in) investing activities during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019, was mainly due to decreased acquisition volume, offset by cash paid in connection with the Internalization and decreased proceeds from the disposal of properties in 2020.
−Removed: The change in net cash (used in) provided by financing activities during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019, mainly reflects a net repayment of debt in 2020, compared to net borrowings in 2019, partially offset by increased proceeds from the sale of common stock.
−Removed: Distributions and Distribution Reinvestment
−Removed: In light of the economic uncertainty and rapidly evolving circumstances related to the COVID-19 pandemic and then-current tenant rent relief requests, to preserve cash, strengthen our liquidity position, and manage our overall leverage profile, in May 2020 our board of directors determined that we would temporarily suspend our monthly distribution.
−Removed: At its August 4, 2020 meeting, based on our strong collection results and second quarter operating performance, the board voted to reinstate a distribution, announcing that the Company would transition to quarterly distribution payments beginning with the quarter ended September 30, 2020.
−Removed: The board set a $0.135 distribution per common share and OP Unit to stockholders and OP Unit holders of record as of September 30, 2020, which was paid on October 15, 2020.
−Removed: At its November 5, 2020 meeting, the board set a $0.25 distribution per common share and OP Unit to stockholders and OP Unit holders of record as of December 31, 2020, payable on or before January 15, 2021.
−Removed: We terminated our DRIP and share redemption program, effective February 10, 2020.
−Removed: Prior to its termination, pursuant to the terms of our DRIP, stockholders and OP Unit holders (other than us) could elect to have cash distributions reinvested in additional shares of our common stock.
−Removed: Shares of our common stock acquired through our DRIP have the same rights and are subject to the same restrictions on transferability as all other shares of our common stock.
−Removed: The following table summarizes distributions paid in cash and pursuant to our DRIP for the nine months ended September 30, 2020 (in thousands).
−Removed: Distribution −
−Removed: Distribution −
−Removed: September (b)
−Removed: Distributions were paid in shares of common stock.
−Removed: Dividends totaling $20,722 declared for the third quarter of 2020 and payable to stockholders and OP Unit holders of record as of September 30, 2020, were paid on October 15, 2020.
−Removed: The following table summarizes our distributions paid, including the source of distributions and a comparison against Funds From Operations (“FFO”) (in thousands).
−Removed: Refer to Non-GAAP Measures for further discussion of our FFO.
−Removed: For the nine months ended
−Removed: September 30,
−Removed: Distributions:
−Removed: Reinvested in shares
−Removed: Total Distributions
−Removed: Source of Distributions:
−Removed: Cash flow from operating activities
−Removed: We intend to fund future distributions from cash generated by operations;
−Removed: however, we may fund distributions from the sale of assets, borrowings, or proceeds from the sale of our securities.
−Removed: Impact of Inflation
−Removed: The leases in our portfolio are long-term in nature, with a current ABR weighted average remaining lease term of 10.8 years as of September 30, 2020.
−Removed: Our rental revenues may be impacted by inflation.
−Removed: Substantially all of our leases have contractual lease escalations, with an ABR weighted average of 2.1% as of September 30, 2020.
−Removed: Many of our leases contain rent escalators that increase rent at a fixed amount and may not be sufficient during periods of high inflation.
−Removed: Leases that contributed approximately 15.8% of our ABR as of September 30, 2020, contained rent escalators based on increases in CPI and the associated increases in rental revenue may be limited during periods of low inflation.
−Removed: The impact of inflation on our property and operating expenses is limited since substantially all of our leases are net leases, and property-level expenses are generally paid by our tenants.
−Removed: To the extent we bear the cost of such expense, we attempt to limit our exposure to inflation through the use of warranties and other remedies that reduce the likelihood of a significant capital outlay.
−Removed: Inflation and increased costs may also have an adverse impact to our tenants and their creditworthiness if the increase in property-level expenses is greater than their increase in revenues.
−Removed: Off-Balance Sheet Arrangements
−Removed: We had no off-balance sheet arrangements as of September 30, 2020, or December 31, 2019.
+Added: The increase in net cash provided by operating activities during the three months ended March 31, 2021 as compared to the three months ended December 31, 2020 and March 31, 2020, was mainly due to growth in our real estate portfolio and cost savings associated with the Internalization.
+Added: The change in net cash (used in) provided by investing activities during the three months ended March 31, 2021 as compared to the three months ended December 31, 2020, was mainly due to decreased acquisition volume quarter-over-quarter.
+Added: The change in net cash (used in) provided by investing activities during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020, was mainly due to increased acquisition volume and decreased proceeds from disposal of properties in 2021 offset by decrease in cash paid in connection with the Internalization.
+Added: The change in net cash (used in) provided by financing activities during the three months ended March 31, 2021 as compared to the three months ended December 31, 2020 mainly reflects a net repayment of debt in 2021 as compared to net proceeds from our IPO in 2020.
+Added: During the three months ended March 31, 2021, we made a $50 million paydown on our 2026 Unsecured Term Loan using cash on hand and remaining proceeds from our IPO in 2020.
+Added: During the three months ended December 31, 2020 our underwriters partially exercised their overallotment option, resulting in the issuance of an additional 3.5 million shares for net proceeds of approximately $55.9 million.
+Added: The change in net cash (used in) provided by financing activities during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020, mainly reflects a net repayment of debt in 2021, compared to net borrowings during the three months ended March 31, 2020.
Contractual Obligations
−Removed: The following table provides information with respect to our contractual commitments and obligations as of September 30, 2020 (in thousands).
+Added: The following table provides information with respect to our contractual commitments and obligations as of March 31, 2021 (in thousands).
+Added: Refer to the discussion in the Liquidity and Capital Resources section above for further discussion over our short and long-term obligations.
Revolving Credit Facility (a)
2 unchanged sentences
We may extend the Revolving Credit Facility twice, each for a six-month period, subject to certain conditions, including the payment of an extension fee equal to 0.0625% of the revolving commitments.
−Removed: Interest expense is projected based on the outstanding borrowings and interest rates in effect as of September 30, 2020.
+Added: Interest expense is projected based on the outstanding borrowings and interest rates in effect as of March 31, 2021.
This amount includes the impact of interest rate swap agreements.
We expect to pay tenant improvement allowances out of cash flows from operations or from additional borrowings.
−Removed: At September 30, 2020 and December 31, 2019, investment in rental property of $174.6 million and $178.7 million, respectively, was pledged as collateral against our mortgages and notes payable.
−Removed: Additionally , we are a party to three separate tax protection agreements with the contributing members of three distinct UPREIT transactions and we entered into the Founding Owners’ Tax Protection Agreement with ou r founding owners in connection with the Internalization.
−Removed: The tax protection agreements require us to indemnify the beneficiaries in the event of a sale, exchange, transfer, or other disposal of the contributed property, or in the case of the Founding Owne rs’ 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.
−Removed: Based on values as of September 30, 2020, taxable sale s of the applicable properties would trigger liability under the four agreements of approximately $22.3 million.
−Removed: Based on information available, we do not believe that the events resulting in damages as detailed above have occurred or are likely to occur i n the foreseeable future.
+Added: At March 31, 2021 and December 31, 2020, investment in rental property of $172.4 million and $173.5 million, respectively, was pledged as collateral against our mortgages.
+Added: Additionally, we are a party to three separate tax protection agreements with the contributing members of three distinct UPREIT transactions and we entered into the Founding Owners’ Tax Protection Agreement in connection with the Internalization.
+Added: The tax protection agreements require us to indemnify the beneficiaries in the event of a sale, exchange, transfer, or other disposal of the contributed property, and 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.
+Added: Based on values as of March 31, 2021, taxable sales of the applicable properties would trigger liability under the four agreements of approximately $22.3 million.
+Added: Based on information available, we do not believe that the events resulting in damages as detailed above have occurred or are likely to occur in the foreseeable future.
Accordingly, we have excluded these commitments from the contractual commitments table above.
3 unchanged sentences
Nareit defines FFO as GAAP net income or loss adjusted to exclude net gains (losses) from sales of certain depreciated real estate assets, depreciation and amortization expense from real estate assets, gains and losses from change in control, and impairment charges related to certain previously depreciated real estate assets.
−Removed: To derive Adjusted Funds From Operations (“AFFO”), we modify the Nareit computation of FFO to include other adjustments to GAAP net income related to certain non-cash and non-recurring revenues and expenses, including straight-line rents, cost of debt extinguishments, amortization of lease intangibles, amortization of debt issuance costs, amortization of net mortgage premiums, (gain) loss on interest rate swaps and other non-cash interest expense, realized gains or losses on foreign currency transactions, internalization expenses, stock-based compensation expense, severance, extraordinary items, and other specified non-cash items.
−Removed: We believe that such items are not a result of normal operations and thus we believe excluding such items assists management and investors in distinguishing whether changes in our operations are due to growth or decline of operations at our properties or from other factors.
+Added: To derive Adjusted Funds From Operations (“AFFO”), we modify the Nareit computation of FFO to include other adjustments to GAAP net income related to certain non-cash and non-recurring revenues and expenses, including straight-line rents, the change in fair value of our earnout liability, cost of debt extinguishments, amortization of lease intangibles, amortization of debt issuance costs, amortization of net mortgage premiums, (gain) loss on interest rate swaps and other non-cash interest expense, realized gains or losses on foreign currency transactions, internalization expenses, stock-based compensation, severance, extraordinary items, and other specified non-cash items.
+Added: We believe that excluding such items assists
+Added: management and investors in distinguishing whether changes in our operations are due to growth or decline of operations at our properties or from other factors.
Our leases include cash rents that increase over the term of the lease to compensate us for anticipated increases in market rentals over time.
1 unchanged sentence
Therefore, we find it useful to evaluate rent on a contractual basis as it allows for comparison of existing rental rates to market rental rates.
−Removed: In situations where we have granted short-term rent deferrals as a result of the COVID-19 pandemic, and such deferrals are probable of collection and expected to be repaid within a short term, we will continue to recognize the same amount of GAAP lease revenues each period.
−Removed: The amounts temporarily deferred are recorded in tenant receivables until they are repaid.
−Removed: Consistent with GAAP lease revenues, the short-term deferrals associated with COVID-19 will not impact our AFFO.
−Removed: We further exclude contingent consideration expense (income), costs or gains recorded on the extinguishment of debt, non-cash interest expense and gains, the amortization of debt issuance costs, net mortgage premiums, and lease intangibles, realized gains and losses on foreign currency transactions, internalization expenses, stock-based compensation expense and severance, as these items are not indicative of ongoing operational results.
+Added: In situations where we granted short-term rent deferrals as a result of the COVID-19 pandemic, and such deferrals were probable of collection and expected to be repaid within a short term, we continued to recognize the same amount of GAAP lease revenues each period.
+Added: Consistent with GAAP lease revenues, the short-term deferrals associated with COVID-19 did not impact our AFFO.
+Added: We further exclude the change in fair value of our earnout liability, costs or gains recorded on the extinguishment of debt, non-cash interest expense and gains, the amortization of debt issuance costs, net mortgage premiums, and lease intangibles, realized gains and losses on foreign currency transactions, internalization expenses, stock-based compensation and severance, as these items are not indicative of ongoing operational results.
We use AFFO as a measure of our performance when we formulate corporate goals.
4 unchanged sentences
In the future, the SEC, Nareit, or another regulatory body may decide to standardize the allowable adjustments across the REIT industry and in response to such standardization we may have to adjust our calculation and characterization of AFFO accordingly.
−Removed: The following table reconciles net in come (which is the most comparable GAAP measure) to FFO and AFFO:
+Added: The following table reconciles net income (which is the most comparable GAAP measure) to FFO and AFFO:
For the Three Months Ended
−Removed: For the nine months ended
−Removed: September 30,
−Removed: September 30,
(in thousands, except per share data)
2 unchanged sentences
Provision for impairment on investment in rental properties
−Removed: Capital improvements / reserves
Straight-line rent adjustment
8 unchanged sentences
Change in fair value of earnout liability
+Added: Other expenses
EBITDA, EBITDAre, Adjusted EBITDAre and Annualized Adjusted EBITDAre
4 unchanged sentences
We believe EBITDA and EBITDAre are useful to investors and analysts because they provide important supplemental information about our operating performance exclusive of certain non-cash and other costs.
−Removed: EBITDA and EBITDAre are not measures of financial performance under GAAP, and our EBITDA and EBITDAre may not be comparable to similarly titled measures of other companies.
+Added: EBITDA and EBITDAre are not measures of financial
+Added: performance under GAAP, and our EBITDA and EBITDAre may not be comparable to similarly titled measures of other companies.
You should not consider our EBITDA and EBITDAre as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.
−Removed: As we fund new acquisitions initially using our unsecured Revolving Credit Facility, our leverage profile and Net Debt (defined below) are immediately impacted by current quarter acquisitions.
−Removed: However, the full benefit of EBITDAre from newly acquired properties is not received in the same quarter in which the properties are acquired.
+Added: We are focused on a disciplined and targeted acquisition strategy, together with active asset management that includes selective sales of properties.
+Added: We manage our leverage profile using a ratio of Net Debt to Annualized Adjusted EBITDAre, each discussed further below, which we believe is a useful measure of our ability to repay debt and a relative measure of leverage, and is used in communications with our lenders and rating agencies regarding our credit rating.
+Added: As we fund new acquisitions using our unsecured Revolving Credit Facility, our leverage profile and Net Debt will be immediately impacted by current quarter acquisitions.
+Added: However, the full benefit of EBITDAre from newly acquired properties will not be received in the same quarter in which the properties are acquired.
Additionally, EBITDAre for the quarter includes amounts generated by properties that have been sold during the quarter.
Accordingly, the variability in EBITDAre caused by the timing of our acquisitions and dispositions can temporarily distort our leverage ratios.
−Removed: We adjust EBITDAre (“Adjusted EBITDAre”) for the most recently completed quarter (i) to recalculate as if all acquisitions and dispositions had occurred at the beginning of the quarter, (ii) to exclude certain GAAP income and expense amounts that are either non-cash, such as cost of debt extinguishments or the change in fair value of our earnout liability, or that we believe are one time, or unusual in nature because they relate to unique circumstances or transactions that had not previously occurred and which we do not anticipate occurring in the future, and (iii) to eliminate the impact of lease termination fees, which are not a result of normal operations.
+Added: We adjust EBITDAre (“Adjusted EBITDAre”) for the most recently completed quarter (i) to recalculate as if all acquisitions and dispositions had occurred at the beginning of the quarter, (ii) to exclude certain GAAP income and expense amounts that are either non-cash, such as cost of debt extinguishments or the change in fair value of our earnout liability, or that we believe are one time, or unusual in nature because they relate to unique circumstances or transactions that had not previously occurred and which we do not anticipate occurring in the future, and (iii) to eliminate the impact of lease termination fees and other items that are not a result of normal operations.
We then annualize quarterly Adjusted EBITDAre by multiplying it by four (“Annualized Adjusted EBITDAre”).
3 unchanged sentences
You should not consider our Adjusted EBITDAre and Annualized Adjusted EBITDAre as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.
−Removed: The following table reconciles net income (which is the most comparable GAAP measure) t o EBITDA and EBITDAre:
+Added: The following table reconciles net income (which is the most comparable GAAP measure) to EBITDA and EBITDAre:
For the Three Months Ended
−Removed: September 30,
−Removed: For the nine months ended
−Removed: September 30,
(in thousands)
6 unchanged sentences
Information is also presented with respect to Annualized EBITDAre and Annualized Adjusted EBITDAre:
−Removed: For the three months ended September 30,
+Added: For the Three Months Ended
(in thousands)
−Removed: Adjustment for current quarter investment activity (a)
+Added: Adjustment for current quarter acquisition activity (a)
Adjustment for current quarter disposition activity (b)
−Removed: Adjustment to exclude non-recurring expenses (income) (c)
+Added: Adjustment to exclude non-recurring and other expenses (c)
Adjustment to exclude change in fair value of earnout liability
+Added: Adjustment exclude write-off of accrued rental income
Adjustment to exclude cost of debt extinguishments
−Removed: Adjustment to exclude lease termination fees
Adjusted EBITDAre
3 unchanged sentences
Reflects an adjustment to give effect to all dispositions during the quarter as if they had been sold as of the beginning of the quarter.
−Removed: Amounts represent expense directly associated with the Internalization.
−Removed: Net Debt to Annualized EBITDAre and Annualized Adjusted EBITDAre
−Removed: We define Net Debt as our gross debt (total reported debt plus deferred financing costs) less cash and cash equivalents and restricted cash.
−Removed: We believe that the presentation of Net Debt to Annualized EBITDAre and Net Debt to Annualized Adjusted EBITDAre is useful to investors and analysts because these ratios provide information about gross debt less cash and cash equivalents, which could be useful to repay debt, compared to our performance as measured using EBITDAre.
+Added: Amounts include $1.2 million of severance and $0.9 million of accelerated stock-based compensation associated with the departure of executive officers in 2021, and expense directly associated with the Internalization in 2020.
+Added: Net Debt , Net Debt to Annualized EBITDAre and Net Debt to Annualized Adjusted EBITDAre
+Added: We define Net Debt as gross debt (total reported debt plus deferred financing costs) less cash and cash equivalents and restricted cash.
+Added: We believe that the presentation of Net Debt to Annualized EBITDAre and Net Debt to Annualized Adjusted EBITDAre is useful to investors and analysts because these ratios provide information about gross debt less cash and cash equivalents, which could be used to repay debt, compared to our performance as measured using EBITDAre, and is used in communications with lenders and rating agencies regarding our credit rating.
The following table reconciles total debt (which is the most comparable GAAP measure) to Net Debt, and presents the ratio of Net Debt to Annualized EBITDAre and Net Debt to Annualized Adjusted EBITDAre, respectively:
(in thousands)
−Removed: September 30, 2020
−Removed: September 30, 2019
−Removed: Mortgages and notes payable, net
−Removed: Unsecured term notes, net
Revolving Credit Facility
+Added: Unsecured term notes, net
+Added: Mortgages and notes payable, net
Debt issuance costs
3 unchanged sentences
Net Debt to Annualized Adjusted EBITDAre
−Removed: Critical Accoun ting Policies
+Added: Critical Accounting Policies
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP.
3 unchanged sentences
A summary of our significant accounting policies and procedures are included in Note 2, “Summary of Significant Accounting Policies,” in the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
−Removed: We believe there have been no significant changes during the nine months ended September 30, 2020, to the items that we disclosed as our critical accounting policies in our 2019 Annual Report on Form 10-K.
+Added: We believe there have been no significant changes during the three months ended March 31, 2021, to the items that we disclosed as our critical accounting policies in our 2020 Annual Report on Form 10-K.
Impact of Recent Accounting Pronouncements
For information on the impact of recent accounting pronouncements on our business, see Note 2 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
−Removed: Quantitative and Qualitat ive Disclosures About Market Risk
−Removed: We are exposed to certain market risks, one of the most predominant of which is a change in interest rates.
−Removed: Increases in interest rates can result in increased interest expense under our Revolving Credit Facility and other variable-rate debt.
−Removed: Increases in interest rates can also result in increased interest expense when our fixed rate debt matures and needs to be refinanced.
−Removed: We attempt to manage interest rate risk by entering into long-term fixed rate debt or by entering into interest rate swaps to convert certain variable-rate debt to a fixed rate.
−Removed: The interest rate swaps have been designated by us as cash flow hedges for accounting purposes and are reported at fair value.
−Removed: We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes.
−Removed: Further information concerning our interest rate swaps can be found in Note 11 in our Condensed Consolidated Financial Statements contained elsewhere in this Quarterly Report on Form 10-Q.
−Removed: Our fixed-rate debt includes our Senior Notes, mortgages, and variable-rate debt converted to a fixed rate with the use of interest rate swaps.
−Removed: Our fixed-rate debt and outstanding interest rate swaps had carrying values and fair values of approximately $1.4 billion and $1.6 billion, respectively, as of September 30, 2020.
−Removed: Changes in market interest rates impact the fair value of our fixed-rate debt and interest rate swaps, but they have no impact on interest incurred or on cash flows.
−Removed: For instance, if interest rates were to increase 1%, and the fixed-rate debt balance were to remain constant, we would expect the fair value of our debt to decrease, similar to how the price of a bond decreases as interest rates rise.
−Removed: A 1% increase in market interest rates would have resulted in a decrease in the fair value of our fixed-rate debt and interest rate swaps of approximately $82.6 million as of September 30, 2020.
−Removed: Borrowings pursuant to our Revolving Credit Facility and other variable-rate debt bear interest at rates based on LIBOR plus an applicable margin, and totaled $969.8 million as of September 30, 2020, of which $859.8 million was swapped to a fixed rate by our use of interest rate swaps.
−Removed: Taking into account the effect of our interest rate swaps, interest expense would have increased by approximately $4.5 million in the nine months ended September 30, 2020, if the applicable LIBOR rate had been 1% higher.
−Removed: With the exception of our interest rate swap transactions, we have not engaged in transactions in derivative financial instruments or derivative commodity instruments.
−Removed: As of September 30, 2020, our financial instruments were not exposed to significant market risk due to foreign currency exchange risk.
−Removed: Control s and Procedures
−Removed: Evaluation of Disclosure Controls and Procedures
−Removed: We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
−Removed: As of and for the quarter ended September 30, 2020, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer.
−Removed: Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and were operating at a reasonable assurance level.
−Removed: Changes in Internal Control over Financial Reporting
−Removed: There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
−Removed: Part II – OTHER INFORMATION
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.