Item 1A. Risk Factors
Item 1A. Risk Factors
Except as set forth below, there have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020.
Risks Related to Real Estate Assets
We have paid, and may continue to pay, some of our distributions from sources other than cash flows from operations, including borrowings and proceeds from asset sales, which may reduce the amount of capital we ultimately deploy in our real estate operations and may negatively impact the value of our common stock. Additionally, distributions at any point in time may not reflect the current performance of our properties or our current operating cash flows.
To the extent that cash flows from operations have been or are insufficient to fully cover our distributions to our stockholders, we have paid, and may continue to pay, some of our distributions from sources other than cash flows from operations. Such sources may include borrowings, proceeds from asset sales or the sale of our securities. We have no limits on the amounts we may use to pay distributions from sources other than cash flows from operations. The payment of distributions from sources other than cash provided by operating activities may reduce the amount of proceeds available for acquisitions and operations or cause us to incur additional interest expense as a result of borrowed funds, and may cause subsequent holders of our common stock to experience dilution. This may negatively impact the value of our common stock.
Because the amount we pay in distributions may exceed our earnings and our cash flows from operations, distributions may not reflect the current performance of our properties or our current operating cash flows. To the extent distributions exceed cash flows from operations, distributions may be treated as a return of our stockholders’ investment and could reduce their basis in our common stock. A reduction in a stockholder’s basis in our common stock could result in the stockholder recognizing more gain upon the disposition of his or her shares, which, in turn, could result in greater taxable income to such stockholder.
The following table presents distributions and the source of distributions for the periods indicated below (dollar amounts in thousands):
Three Months Ended
March 31, 2021 Year Ended
December 31, 2020
Amount Percent Amount Percent
Distributions paid in cash $ 32,906 100 % $ 90,655 73 %
Distributions reinvested — — % 34,191 27 %
Total distributions $ 32,906 100 % $ 124,846 100 %
Sources of distributions:
Net cash provided by operating activities (1)
$ 28,747 87 % $ 115,985 (2) 93 %
Proceeds from the issuance of debt (3)
4,159 13 % 553 — %
Proceeds from the issuance of common stock — — % 8,308 (4) 7 %
Total sources $ 32,906 100 % $ 124,846 100 %
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(1) Net cash provided by operating activities for the three months ended March 31, 2021 and the year ended December 31, 2020 was $28.7 million and $106.4 million, respectively.
(2) Our distributions covered by cash flows from operating activities for the year ended December 31, 2020 include cash flows from operating activities in excess of distributions from prior periods of $9.6 million.
(3) Net proceeds on the credit facilities, notes payable and repurchase facilities for the three months ended March 31, 2021 and the year ended December 31, 2020 were $197.0 million and $159.0 million, respectively.
(4) In accordance with GAAP, certain real estate acquisition-related fees and expenses, such as expenses and fees incurred in connection with property acquisitions accounted for as business combinations, are expensed, and therefore reduce net cash flows from operating activities. Therefore, for consistency, proceeds from the issuance of common stock used as a source of distributions for the year ended December 31, 2020 include the amount by which real estate acquisition-related fees and expenses have reduced net cash flows from operating activities in those prior periods.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
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