9 unchanged sentences
We were organized on January 12, 2018 as a Maryland corporation.
−Removed: We have elected to be taxed as a REIT for federal income tax purposes beginning with the year ended December 31, 2018, and we believe that our current organization, operations and intended distributions will allow us to continue to so qualify.
−Removed: We completed our initial public offering in June 2018.
+Added: We elected to be taxed as a REIT for federal income tax purposes beginning with the year ended December 31, 2018, and we believe that our current organization, operations and intended distributions will allow us to continue to so qualify.
Our common stock is listed on the New York Stock Exchange under the symbol “EPRT”.
Our primary business objective is to maximize stockholder value by generating attractive risk-adjusted returns through owning, managing and growing a diversified portfolio of commercially desirable properties.
−Removed: We have grown significantly since commencing our operations and investment activities in June 2016.
As of December 31, 2023, we had a portfolio of 1,873 properties (inclusive of 136 properties which secure our investments in mortgage loans receivable) that was diversified by tenant, industry, concept and geography, had annualized base rent of $364.8 million and was 99.8% occupied.
8 unchanged sentences
We seek to acquire properties owned and operated by middle-market businesses and lease the properties back to the operators pursuant to our standard lease form.
−Removed: For the year ended December 31, 2022, approximately 97.3% of our investments were sale-leaseback transactions.
+Added: During the year ended December 31, 2023, approximately 98.8% of our investments were sale-leaseback transactions.
Significant Use of Master Leases.
9 unchanged sentences
As of December 31, 2023, our portfolio’s weighted average rent coverage ratio was 3.8x, and 98.8% of our leases (based on annualized base rent) obligate the tenant to periodically provide us with specified unit-level financial reporting.
−Removed: Our Competitive Strengths
−Removed: We believe the following competitive strengths distinguish us from our competitors and allow us to compete effectively in the single-tenant, net-lease market:
−Removed: Carefully Constructed Portfolio of Recently Acquired Properties Leased to Service-Oriented or Experience-Based Tenants.
−Removed: We have strategically constructed a portfolio that is diversified by tenant, industry and geography and generally avoids exposure to businesses that we believe are subject to pressure from e-commerce.
−Removed: Our properties are generally subject to long-term net leases that we believe provide us with a stable and predictable base of revenue from which to grow our portfolio.
−Removed: As of December 31, 2022, we had a portfolio of 1,653 properties, with annualized base rent of $297.2 million, which was purposefully selected by our management team in accordance with our focused and disciplined investment strategy.
−Removed: Our portfolio is diversified with 350 tenants operating 538 different concepts across 48 states and in 16 distinct industries.
−Removed: None of our tenants contributed more than 3.4% of our annualized base rent as of December 31, 2022, and our strategy targets a scaled portfolio that, over time, derives no more than 5% of our annualized base rent from any single tenant or more than 1% from any single property.
−Removed: • We focus on investing in properties leased to tenants operating in service-oriented or experience- based businesses such as car washes, restaurants (primarily quick service restaurants), early childhood education, medical and dental services, convenience stores, automotive services, equipment rental, entertainment and health and fitness, which we believe are generally more insulated from e-commerce pressure than many others.
−Removed: As of December 31, 2022, 93.0% of our annualized base rent was attributable to tenants operating service-oriented and experience-based businesses.
−Removed: • We believe that our portfolio’s diversity and our rigorous underwriting decrease the impact on us of an adverse event affecting a specific tenant, industry or region, and our focus on leasing to tenants in industries that we believe are well-positioned to withstand competition from e-commerce businesses increases the stability and predictability of our rental revenue.
−Removed: Differentiated Investment Strategy.
−Removed: We seek to acquire and lease freestanding, single-tenant commercial real estate facilities where a tenant services its customers and conducts activities at the property that are essential to the generation of its sales and profits.
−Removed: We primarily seek to invest in properties leased to unrated middle- market companies that we determine have attractive credit characteristics and stable operating histories.
−Removed: We believe middle-market companies are underserved from a capital perspective and that we can offer them attractive real estate financing solutions while allowing us to enter into lease agreements that provide us with attractive risk-adjusted returns.
−Removed: Furthermore, many net-lease transactions with middle- market companies involve properties that are individually relatively small, which allows us to avoid concentrating a large amount of capital in individual properties.
−Removed: We maintain close relationships with our tenants, which we believe allows us to source additional investments and become the capital provider of choice as our tenants’ businesses grow and their real estate needs increase.
−Removed: Disciplined Underwriting Leading to Strong Portfolio Characteristics.
−Removed: We generally seek to invest in single assets or portfolios of assets through transactions which range in aggregate purchase price from $2 million to $100 million.
−Removed: Our size allows us to focus on investing in a segment of the market that we believe is underserved from a capital perspective and where we can originate or acquire relatively smaller assets on attractive terms that provide meaningful growth to our portfolio.
−Removed: In addition, we seek to invest in commercially desirable properties that are suitable for use by different tenants, offer attractive risk-adjusted returns and possess characteristics that reduce our real estate investment risks.
−Removed: Experienced and Proven Management Team.
−Removed: Our senior management has significant experience in the net-lease industry and a track record of growing net-lease businesses to significant scale.
−Removed: • Our senior management team has been responsible for our focused and disciplined investment strategy and for developing and implementing our investment sourcing, underwriting, closing and asset management infrastructure, which we believe can support significant investment growth without a proportionate increase in our operating expenses.
−Removed: As of December 31, 2022, exclusive of our initial investment in a portfolio of 262 net leased properties, consisting primarily of restaurants, that we acquired on June 16, 2016 as part of the liquidation of General Electric Capital Corporation for an aggregate purchase price of $279.8 million (including transaction costs) (the "Initial Portfolio"), 87.6% of our portfolio’s annualized base rent was attributable to internally originated sale-leaseback transactions and 85.8% was acquired from parties who had previously engaged in one or more transactions that involved a member of our senior management team (including operators and tenants and other participants in the net lease industry, such as brokers, intermediaries and financing sources).
−Removed: The substantial experience, knowledge and relationships of our senior leadership team provide us with an extensive network of contacts that we believe allows us to originate attractive investment opportunities and effectively grow our business.
−Removed: Scalable Platform Allows for Significant Growth.
−Removed: Building on our senior leadership team’s experience in net-lease real estate investing, we have developed leading origination, underwriting, financing and property management capabilities.
−Removed: Our platform is scalable, and we seek to leverage our capabilities to improve our efficiency and processes to continue to seek attractive risk- adjusted growth.
−Removed: While we expect that our general and administrative expenses could increase as our portfolio grows, we expect that such expenses as a percentage of our portfolio and our revenues will decrease over time due to efficiencies and economies of scale.
−Removed: Extensive Tenant Financial Reporting Supports Active Asset Management.
−Removed: We seek to enter into lease agreements that obligate our tenants to periodically provide us with corporate and/or unit-level financial reporting, which we believe enhances our ability to actively monitor our investments, actively evaluate credit risk, negotiate lease renewals and proactively manage our portfolio to protect stockholder value.
−Removed: As of December 31, 2022, leases contributing 98.6% of our annualized base rent required tenants to provide us with specified unit-level financial information, and leases contributing 98.9% of our annualized base rent required tenants to provide us with corporate-level financial reporting.
−Removed: Our Business and Growth Strategies
−Removed: Our primary business objective is to maximize stockholder value by generating attractive risk-adjusted returns through owning, managing and growing a diversified portfolio of commercially desirable properties.
−Removed: We intend to pursue our objective through the following business and growth strategies.
−Removed: Structure and Manage Our Diverse Portfolio with Focused and Disciplined Underwriting and Risk Management.
−Removed: We seek to maintain the stability of our rental revenue and maximize the long-term return on our investments while continuing our growth by using our focused and disciplined underwriting and risk management expertise.
−Removed: When underwriting assets, we emphasize commercially desirable properties, with strong operating performance, healthy rent coverage ratios and tenants with attractive credit characteristics.
−Removed: In general, we seek to enter into leases with (i) relatively long terms (typically with initial terms of 15 years or more and tenant renewal options);
−Removed: (ii) attractive rent escalation provisions;
−Removed: (iii) healthy rent coverage ratios;
−Removed: and (iv) tenant obligations to periodically provide us with financial information, which provides us with information about the operating performance of the leased property and/or tenant and allows us to actively monitor the security of payments under the lease on an ongoing basis.
−Removed: We strongly prefer to use master lease structures, pursuant to which we lease multiple properties to a single tenant on a unitary (i.e., “all or none”) basis.
−Removed: In addition, in the context of our sale-leaseback investments, we generally seek to establish contract rents that are at or below prevailing market rents, which we believe enhances tenant retention and reduces our releasing risk if a lease is rejected in a bankruptcy proceeding or expires.
−Removed: • Diversification .
−Removed: We monitor and manage the diversification of our portfolio in order to reduce the risks associated with adverse developments affecting a particular tenant, property, industry or region.
−Removed: Our strategy targets a portfolio that, over time, will (1) derive no more than 5% of its annualized base rent from any single tenant or more than 1% of its annualized base rent from any single property, (2) be primarily leased to tenants operating in service-oriented or experience- based businesses and (3) avoid significant
−Removed: geographic concentration.
−Removed: While we consider these criteria when making investments, we may be opportunistic in managing our business and make investments that do not meet one or more of these criteria if we believe the opportunity presents an attractive risk-adjusted return.
−Removed: • Asset Management.
−Removed: We are an active asset manager and regularly review each of our properties to evaluate various factors, including, but not limited to, changes in the business performance at the property, credit of the tenant and local real estate market conditions.
−Removed: Among other things, we use Moody’s Analytics RiskCalc, which is a model for predicting private company defaults based on Moody’s Analytics Credit Research Database, to proactively detect credit deterioration.
−Removed: Additionally, we monitor market rents relative to in-place rents and the amount of tenant capital expenditures in order to refine our tenant retention and alternative use assumptions.
−Removed: Our management team utilizes our internal credit diligence to monitor the credit profile of each of our tenants on an ongoing basis.
−Removed: We believe that this proactive approach enables us to identify and address issues in a timely manner and to determine whether there are properties in our portfolio that are appropriate for disposition.
−Removed: • In addition, as part of our active portfolio management, we may selectively dispose of assets that we conclude do not offer a return commensurate with the investment risk, contribute to unwanted geographic, industry or tenant concentrations, or may be sold at a price we determine is attractive.
−Removed: We believe that our underwriting processes and active asset management enhance the stability of our rental revenue by reducing default losses and increasing the likelihood of lease renewals.
−Removed: Focus on Relationship-Based Sourcing to Grow Our Portfolio by Originating Sale-Leaseback Transactions.
−Removed: We plan to continue our disciplined growth by originating sale-leaseback transactions and opportunistically making acquisitions of properties subject to net leases that contribute to our portfolio’s tenant, industry and geographic diversification.
−Removed: As of December 31, 2022, exclusive of the Initial Portfolio, 87.6% of our portfolio’s annualized base rent was attributable to internally originated sale-leaseback transactions and 85.8% was acquired from parties who had previously engaged in transactions that involved a member of our senior management team (including operators and tenants and other participants in the net lease industry, such as brokers, intermediaries and financing sources).
−Removed: In addition, we seek to leverage our relationships with our tenants to facilitate investment opportunities, including selectively agreeing to reimburse certain of our tenants for development costs at our properties in exchange for contractually specified rent that generally increases proportionally with our funding.
−Removed: As of December 31, 2022, exclusive of the Initial Portfolio, approximately 46.6% of our investments were sourced from operators and tenants who had previously consummated a transaction involving a member of our management team.
−Removed: We believe our senior management team’s reputation, in-depth market knowledge and extensive network of longstanding relationships in the net lease industry provide us access to an ongoing pipeline of attractive investment opportunities.
−Removed: Focus on Middle-Market Companies in Service-Oriented or Experience-Based Businesses.
−Removed: We primarily focus on investing in properties that we lease on a long-term, triple-net basis to middle- market companies that we determine have attractive credit characteristics and stable operating histories.
−Removed: Properties leased to middle-market companies may offer us the opportunity to achieve superior risk-adjusted returns as a result of our extensive and disciplined credit and real estate analysis, lease structuring and portfolio composition.
−Removed: We believe our capital solutions are attractive to middle- market companies, as such companies often have limited financing options as compared to larger, credit rated organizations.
−Removed: We also believe that, in many cases, smaller transactions with middle- market companies will allow us to maintain and grow our portfolio’s diversification.
−Removed: Middle-market companies are often willing to enter into leases with structures and terms that we consider attractive (such as master leases and leases that require ongoing tenant financial reporting) and believe contribute to the stability of our rental revenue.
−Removed: • In addition, we emphasize investments in properties leased to tenants engaged in service-oriented or experience-based businesses, such as car washes, restaurants (primarily quick service restaurants), early childhood education, medical and dental services, convenience stores, automotive services, equipment rental, entertainment and health and fitness, as we believe these businesses are generally more insulated from e-commerce pressure than many others.
−Removed: Internal Growth Through Long-Term Triple-Net Leases That Provide for Periodic Rent Escalations.
−Removed: We seek to enter into long-term (typically with initial terms of 15 years or more and tenant renewal options), triple-net leases that provide for periodic contractual rent escalations.
−Removed: As of December 31, 2022, our leases had a weighted average remaining lease term of 13.9 years (based on annualized base rent), with only 6.1% of our
−Removed: annualized base rent attributable to leases expiring prior to January 1, 2028, and 98.2% of our leases (based on annualized base rent) provided for increases in future base rent at a weighted average of 1.6% per year.
−Removed: Actively Manage Our Balance Sheet to Maximize Capital Efficiency.
−Removed: We seek to maintain a prudent balance between debt and equity financing and to maintain funding sources that lock in long-term investment spreads and limit interest rate sensitivity.
−Removed: We target a level of net debt that, over time, is generally less than six times our annualized adjusted EBITDA re (as defined in "Non-GAAP Financial Measures" below).
−Removed: We have access to multiple sources of debt capital, including the investment grade-rated unsecured bond market and bank debt, through our revolving credit facility and our unsecured term loan facilities.
+Added: "Rent coverage ratio" means, as of a specified date, the ratio of (x) tenant-reported or, when unavailable, management's estimate (based on tenant-reported financial information) of annual earnings before interest, taxes, depreciation, amortization and cash rent attributable to the leased property (or properties, in the case of a master lease) to (y) the annualized base rental obligation.
Historical Investment and Disposition Activity
−Removed: The following table sets forth select information about our quarterly investment activity for the quarters ended March 31, 2021 through December 31, 2022 (dollars in thousands):
+Added: The following table sets forth select information about our investment activity for the previous eight quarters beginning with the quarter ended March 31, 2022 through December 31, 2023 (dollars in thousands):
Three Months Ended
4 unchanged sentences
investment per unit $ 3,401 $ 3,350 $ 2,812 $ 3,008
−Removed: Cash Cap Rates 1
−Removed: 7.0 % 7.0 % 7.1 % 7.5 %
−Removed: GAAP Cap Rates 2
−Removed: 7.8 % 8.0 % 8.2 % 8.8 %
+Added: Cash cap rate 1
+Added: GAAP cap rate 2
Master lease percentage 3,4
−Removed: 83 % 86 % 68 % 90 %
Sale-leaseback percentage 3,5
−Removed: 100 % 100 % 89 % 99 %
Existing relationship percentage 94%
Percentage of financial reporting 3
−Removed: 100 % 100 % 100 % 100 %
−Removed: Rent Coverage Ratio 3.3 x 2.7 x 4.4 x 3.2 x
+Added: Rent coverage ratio 3.3x
Lease term (years) 19.0 19.3 17.6 17.6
5 unchanged sentences
investment per unit $ 2,187 $ 3,870 $ 3,750 $ 2,782
−Removed: Cash Cap Rates 1
−Removed: 7.0 % 7.1 % 7.0 % 6.9 %
−Removed: GAAP Cap Rates 2
−Removed: 7.9 % 7.8 % 7.9 % 7.8 %
+Added: Cash cap rate 1
+Added: GAAP cap rate 2
Master lease percentage 3,4
−Removed: 79 % 83 % 80 % 59 %
Sale-leaseback percentage 3,5
−Removed: 85 % 88 % 84 % 96 %
Existing relationship percentage 83%
Percentage of financial reporting 3
−Removed: 100 % 100 % 100 % 98 %
Rent coverage ratio 3.3x 2.7x 4.4x 3.2x
12 unchanged sentences
Cash cap rate on leased assets 2
−Removed: 7.1 % 6.2 % 6.2 % 6.9 %
Leased properties sold 3
5 unchanged sentences
Cash cap rate on leased assets 2
−Removed: 7.1 % 7.1 % 6.5 % 6.0 %
Leased properties sold 3
4 unchanged sentences
(3) Property count excludes dispositions of undeveloped land parcels or dispositions where only a portion of the owned parcel was sold.
−Removed: COVID-19 Pandemic Discussion
−Removed: For much of 2020, the COVID-19 pandemic created significant uncertainty and economic disruption that adversely affected the Company and its tenants.
−Removed: The adverse impact of the pandemic moderated during 2021 and significantly diminished during 2022.
−Removed: However, the continuing impact of the COVID-19 pandemic and its duration are unclear, and various factors could erode the progress that has been made against the virus to date.
−Removed: If conditions similar to those experienced in 2020, at the height of the pandemic, were to reoccur, they would adversely impact the Company and its tenants.
−Removed: The Company continues to closely monitor the impact of COVID-19 on all aspects of its business.
Liquidity and Capital Resources
−Removed: As of December 31, 2022, we had $3.8 billion of net investments in our investment portfolio, consisting of investments in 1,653 properties (inclusive of 153 properties which secure our investments in mortgage loans receivable), with annualized base rent of $297.2 million.
+Added: As of December 31, 2023, the net investment value of our income property portfolio totaled $4.5 billion, consisting of investments in 1,873 properties (inclusive of 136 properties which secure our investments in mortgage loans receivable), with annualized base rent of $364.8 million.
Substantially all of our cash from operations is generated by our investment portfolio.
The liquidity requirements for operating our Company consist primarily of funding our investment activities, servicing our outstanding indebtedness and paying our general and administrative expenses.
−Removed: The occupancy level of our portfolio is high (99.9% as of December 31, 2022) and, because substantially all of our leases are triple-net (with our tenants generally responsible for the maintenance, insurance and property taxes associated with the leased properties), our liquidity requirements are not significantly impacted by property costs.
−Removed: When a property becomes vacant because the tenant has vacated the property due to default or at the expiration of the lease term without a renewal or new lease being executed, we incur the property costs not paid by the tenant, as well as those property costs accruing during the time it takes to locate a new tenant or to sell the property.
−Removed: As of December 31, 2022, two of our properties were vacant, significantly less than 1% of our portfolio, and all remaining properties were subject to a lease.
+Added: The occupancy level of our portfolio is high (99.8% as of December 31, 2023) and, because substantially all of our leases are triple-net (whereby our tenants are generally responsible for all maintenance, costs for operating the property, and insurance and property taxes associated with the leased properties), our liquidity requirements are not significantly impacted by property costs.
+Added: When a property becomes vacant, we are required to pay the property costs not paid by a tenant, as well as those property costs accruing during the time it takes to locate a new tenant or to sell the property.
+Added: As of December 31, 2023, three of our investment properties were vacant, significantly less than 1% of our portfolio, and all remaining properties were subject to a lease or mortgage loan receivable.
We expect to incur property costs from time to time in periods during which properties that become vacant are being marketed for lease or sale.
3 unchanged sentences
We intend to continue to grow through additional investments in stand-alone single-tenant properties.
−Removed: To accomplish this objective, we seek to invest in real estate with a combination of debt and equity capital and with
−Removed: cash from operations that we do not distribute to our stockholders.
−Removed: When we sell properties, we generally reinvest the cash proceeds from our sales in new property acquisitions.
−Removed: Our short-term liquidity requirements also include the funding needs associated with 40 properties where we have agreed to provide construction financing or reimburse the tenant for certain development, construction and renovation costs in exchange for contractual payments of interest or increased rent that generally increases in proportion with our level of funding.
−Removed: As of December 31, 2022, we agreed to provide construction financing or reimburse the tenant for certain development, construction and renovation costs in an aggregate amount of $107.6 million, and, as of such date, we funded $73.0 million of this commitment.
−Removed: We expect to fund the remainder of this commitment by December 31, 2023.
+Added: To accomplish this objective, we seek to invest in real estate utilizing a combination of debt and equity capital and with cash from operations that we do not distribute to our stockholders.
+Added: When we sell properties, we generally reinvest the cash proceeds from our sales in new single-tenant properties.
+Added: Our short-term liquidity requirements also include the funding needs associated with 74 properties where we have agreed to reimburse the tenant for certain development, construction, or renovation costs or to provide construction financing in exchange for contractual payments of interest or increased rent that generally increases in proportion with our level of funding.
+Added: As of December 31, 2023, we agreed to provide construction financing or reimburse the tenant for certain development, construction and renovation costs in an aggregate amount of $435.2 million, and, as of such date, we have funded
+Added: $254.6 million of this commitment.
+Added: We expect to fund the remaining commitment totaling $180.6 million by December 31, 2024.
Additionally, as of February 9, 2024, we were under contract to acquire 20 properties with an aggregate purchase price of $59.4 million, subject to completion of our due diligence procedures and satisfaction of customary closing conditions.
−Removed: We expect to meet our short-term liquidity requirements, including our investment in potential future single tenant properties, primarily with our cash and cash equivalents, net cash from operating activities and borrowings under the Revolving Credit Facility, and potentially through proceeds generated from our 2022 ATM Program, which has $403.9 million remaining under the program as of February 10, 2023.
−Removed: Our long-term liquidity requirements consist primarily of funds necessary to acquire additional properties and repay indebtedness.
−Removed: We expect to meet our long-term liquidity requirements through various sources of capital, including net cash from operating activities, borrowings under our Revolving Credit Facility, future debt financings, sales of common stock under our ATM Program, and proceeds from the sale of selected properties in our portfolio.
−Removed: However, at any point in time, there may be a number of factors that could have a material and adverse effect on our ability to access these capital sources, including unfavorable conditions in the overall equity and credit markets, our level of leverage, the portion of our portfolio that is unencumbered, borrowing restrictions imposed by our existing debt agreements, general market conditions for real estate and potentially REITs specifically, our operating performance, our liquidity and general market perceptions about us.
−Removed: The success of our business strategy will depend, to a significant degree, on our ability to access these various capital sources to fund our future investments in single tenant properties and thereby grow our cash flows.
+Added: We expect to meet our short-term liquidity requirements, including our construction financing and tenant reimbursement obligations and potential investment in future single-tenant properties, primarily with our cash and cash equivalents, net cash from operating activities, issuance of common stock subject to outstanding forward purchase commitments, borrowings under the Revolving Credit Facility and potentially through proceeds generated from asset sales and our 2022 ATM Program, under which we may issue common stock with an aggregate gross sales price of up to $278.5 million as of February 9, 2024.
+Added: Our long-term liquidity requirements consist primarily of the funds necessary to make additional investments and repay indebtedness.
+Added: We expect to meet our long-term liquidity requirements through various sources of capital, including net cash from operating activities, borrowings under our Revolving Credit Facility, future debt financings, proceeds from the sale of our common stock and proceeds from the sale of selected properties in our portfolio.
+Added: However, at any point in time, there may be a number of factors that could have a material and adverse effect on our ability to access these capital sources, including unfavorable conditions in the overall equity and credit markets, our level of leverage, the portion of our portfolio that is unencumbered, our credit ratings, borrowing restrictions imposed by our existing debt agreements, general market conditions for real estate and potentially REITs specifically, our operating performance, our liquidity and general market perceptions about us.
+Added: The success of our business strategy will depend, to a significant degree, on our ability to access these various capital sources to fund our future investments and thereby grow our cash flows.
An additional liquidity need is funding the required level of distributions, generally 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding any net capital gain), that are among the requirements for us to continue to qualify for taxation as a REIT.
−Removed: During the year ended December 31, 2022, our Board declared total cash distributions of $1.075 per share of common stock.
Holders of OP Units are entitled to distributions per unit equivalent to those paid by us per share of common stock.
−Removed: During the year ended December 31, 2022, we paid $141.7 million of distributions to common stockholders and OP Unit holders, and as of December 31, 2022, we recorded $39.4 million of distributions payable to common stockholders and OP Unit holders.
+Added: During the year ended December 31, 2023, our Board declared total cash distributions of $1.12 per share of common stock/OP Unit totaling $176.0 million and $47.2 million is payable as of December 31, 2023.
To continue to qualify for taxation as a REIT, we must make distributions to our stockholders aggregating annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain.
4 unchanged sentences
Generally, our short-term debt capital needs are provided through the use of our Revolving Credit Facility.
−Removed: We manage our long-term leverage position through the issuance of long-term fixed-rate debt on a secured or unsecured basis.
−Removed: Generally, we will seek to issue long-term debt on an unsecured basis as we believe this facilitates greater flexibility in the management of our existing portfolio and our ability to retain optionality in our overall financing and growth strategy.
−Removed: By seeking to match the expected cash inflows from our long-term leases with the expected cash outflows for our long-term debt, we seek to "lock in," for as long as is economically feasible, the expected positive spread between our scheduled cash inflows on our leases and the cash outflows on our debt obligations.
+Added: We manage our long-term leverage position through the issuance of long-term fixed-rate debt on an unsecured or secured basis.
+Added: Generally, we will seek to issue long-term debt on an unsecured basis as we believe this facilitates greater flexibility in the management of our portfolio and our ability to retain optionality in our overall financing and growth strategy.
+Added: By seeking to match the expected cash inflows from our long-term income producing investments with the expected cash outflows for our long-term debt, we seek to "lock in," for as long as is economically feasible, the expected positive spread between our scheduled cash inflows from our investments and the cash outflows on our debt obligations.
In this way, we seek to reduce the risk that increases in interest rates would adversely impact our cash flows and results of operations.
1 unchanged sentence
We use various financial instruments designed to mitigate the impact of interest rate fluctuations on our cash flows and earnings, including hedging strategies such as interest rate swaps and caps, depending on our analysis of the interest rate environment and the costs and risks of such strategies.
−Removed: Although we are not required to maintain a particular leverage ratio and may not be able to do so, we generally consider that, over time, a level of net debt (which includes recourse and non-recourse borrowings and
−Removed: any outstanding preferred stock less cash and cash equivalents and restricted cash available for future investment) that is less than six times our annualized adjusted EBITDA re is prudent for a real estate company like ours.
+Added: Although we are not required to maintain a particular leverage ratio and may not be able to do so, we generally consider that, over time, a level of net debt (which includes recourse and non-recourse borrowings and any outstanding preferred stock less cash and cash equivalents and restricted cash available for future investment) that is less than six times our annualized adjusted EBITDA re is prudent for a real estate company like ours.
As of December 31, 2023, all of our long-term debt was fixed-rate debt or was effectively converted to a fixed-rate for the term of the debt though hedging strategies and our weighted average debt maturity was 4.9 years.
−Removed: As we continue to invest in real estate properties and grow our real estate portfolio, we intend to manage our long-term debt maturities to reduce the risk that a significant amount of our debt will mature in any single year in the future.
−Removed: Future sources of debt capital may include public issuances of senior unsecured notes, term borrowings, mortgage financing of a single-asset or a portfolio of assets and CMBS borrowings.
+Added: we continue to invest in real estate properties and grow our real estate portfolio, we intend to manage our long-term debt maturities to reduce the risk that a significant amount of our debt will mature in any single year in the future.
+Added: Future sources of debt capital may include public issuances of senior unsecured notes, term loan borrowings, mortgage financing of a single-asset or a portfolio of assets and CMBS borrowings.
These sources of debt capital may offer us the opportunity to lower our cost of funding and further diversify our sources of debt capital.
1 unchanged sentence
As our outstanding debt matures, we may refinance it as it comes due or choose to repay it using cash and cash equivalents or borrowings under our Revolving Credit Facility.
−Removed: We believe that the cash generated by our operations, together with our cash and cash equivalents at December 31, 2022, our borrowing availability under the Revolving Credit Facility and our potential access to additional sources of capital, will be sufficient to fund our operations for the foreseeable future and allow us to invest in the real estate for which we currently have made commitments.
+Added: We believe that the cash generated by our operations, together with our cash and cash equivalents at December 31, 2023, our borrowing availability under the Revolving Credit Facility, issuance of common stock subject to outstanding forward purchase commitments, and our potential access to additional sources of capital, will be sufficient to fund our operations for the foreseeable future and allow us to invest in the real estate for which we currently have made commitments.
Supplemental Guarantor Information
16 unchanged sentences
2028 Term Loan January 2028 400,000 400,000 4.6% 4.6%
−Removed: Senior unsecured notes July 2031 400,000 400,000 3.1% 3.1%
−Removed: Revolving Credit Facility April 2023 (2)
+Added: 2029 Term Loan February 2029 (2)
450,000 — 4.3% —%
+Added: Senior unsecured notes July 2031 400,000 400,000 3.1% 3.1%
+Added: Revolving Credit Facility February 2026 — — —% —%
Total principal outstanding $ 1,680,000 $ 1,430,000 3.6% 3.3%
1 unchanged sentence
(1) Interest rates are presented after giving effect to our interest rate swap and lock agreements, where applicable.
−Removed: Unsecured Revolving Credit Facility and 2024/2028 Term Loan
−Removed: Through our Operating Partnership, we are party to an Amended and Restated Credit Agreement with a group of lenders, which was amended on July 25, 2022 (the "Credit Agreement") and provides for revolving loans of up to $600.0 million (the "Revolving Credit Facility") and an additional $600.0 million of term loans, consisting of a $200.0 million initial term loan (the "2024 Term Loan") and a $400.0 million second tranche term loan (the “2028 Term Loan” and, together with the 2024 Term Loan, the “2024/2028 Term Loan”).
−Removed: Concurrently with the closing of the July 25, 2022 amendment, $250.0 million of the 2028 Term Loan was drawn and the remaining $150.0 million of the 2028 Term Loan was drawn in October 2022.
−Removed: Such amendment also amended the applicable margin grid such that the applicable pricing is based on the credit rating of the Company’s long-term senior unsecured non-credit enhanced debt for borrowed money (subject to a single step-down in the applicable pricing if the Company achieves a consolidated leverage ratio that is less than 0.35 to 1:00 while maintaining a credit rating of BBB/Baa2 from S&P, Moody's and/or Fitch).
+Added: (2) After giving effect to extension options exercisable at the Operating Partnership's election.
+Added: Revolving Credit Facility and Credit Facility Term Loans
+Added: Through our Operating Partnership, we are party to an Amended and Restated Credit Agreement with a group of lenders, which was amended on August 24, 2023 (the "Credit Agreement") and provides for revolving loans of up to $600.0 million (the "Revolving Credit Facility") and an additional $850.0 million of term loans, consisting of a $400.0 million term loan (the "2028 Term Loan") and a $450.0 million term loan (the “2029 Term Loan” and, together with the 2028 Term Loan, the "CF Term Loans”).
+Added: All principal amounts available under the 2028 Term Loan were drawn in the third and fourth quarters of 2022.
+Added: Concurrently with the closing of the August 24, 2023 amendment, $250.0 million of the 2029 Term Loan was drawn with further draws of $125.0 million made in September 2023 and $75.0 million made in October 2023.
+Added: The $200.0 million previously outstanding under the Company's term loan due in April 2024 (the "2024 Term Loan") was repaid in full with a portion of the Company's initial borrowings under the 2029 Term Loan in August 2023.
The Revolving Credit Facility matures on February 10, 2026, with two extension options of six months each, exercisable by the Operating Partnership subject to the satisfaction of certain conditions.
−Removed: The 2024 Term Loan matures on April 12, 2024 and the 2028 Term Loan matures on January 25, 2028.
−Removed: The loans under each of the Revolving Credit Facility and the 2024/2028 Term Loan initially bear interest at an annual rate of applicable Adjusted Term SOFR (as defined in the Credit Agreement) plus an applicable margin (which applicable margin varies between the Revolving Credit Facility and the 2024/2028 Term Loan).
+Added: The 2028 Term Loan matures on January 25, 2028 and the 2029 Term Loan has an original maturity of three years, plus extension options at the Operating Partnership's election which can extend the maturity to February 24, 2029.
+Added: The loans under each of the Revolving Credit Facility and the CF Term Loans initially bear interest at an annual rate of applicable Adjusted Term SOFR (as defined in the Credit Agreement) plus an applicable margin (which applicable margin varies between the Revolving Credit Facility and the CF Term Loans).
The Adjusted Term SOFR is a rate with a term equivalent to the interest period applicable to the relevant borrowing.
In addition, the Operating Partnership is required to pay a revolving facility fee throughout the term of the Revolving Credit Facility.
−Removed: The applicable margin and the revolving facility fee rate are a spread and rate, as applicable, set according to the credit ratings provided by S&P, Moody's and/or Fitch.
−Removed: Each of the Revolving Credit Facility and the 2024/2028 Term Loan is freely pre-payable at any time.
+Added: The applicable margin and the revolving facility fee rate are a spread and rate, as applicable, set according to the Company's credit ratings provided by S&P, Moody's and/or Fitch.
+Added: Each of the Revolving Credit Facility and the CF Term Loans is freely pre-payable at any time.
Outstanding credit extensions under the Revolving Credit Facility are mandatorily payable if the amount of such credit extensions exceeds the revolving facility limit.
The Operating Partnership may re-borrow amounts paid down on the Revolving Credit Facility prior to its maturity.
−Removed: Loans repaid under the 2024/2028 Term Loan cannot be reborrowed.
+Added: Loans repaid under the CF Term Loans cannot be reborrowed.
The Credit Agreement has an accordion feature to increase, subject to certain conditions, the maximum availability of credit (either through increased revolving commitments or additional term loans) by up to $600.0 million.
23 unchanged sentences
The 2031 Notes were issued by the Operating Partnership and the obligations of the Operating Partnership under the 2031 Notes are fully and unconditionally guaranteed on a senior basis by the Company.
−Removed: In May 2021, the Company entered into a treasury-lock agreement which was designated as a cash flow hedge associated with the expected public offering of such notes.
−Removed: In June 2021, the agreement was settled in accordance with its terms.
The indenture and supplemental indenture creating the 2031 Notes contain customary restrictive covenants, including limitations on our ability to incur additional secured and unsecured indebtedness.
1 unchanged sentence
Comparison of the years ended December 31, 2023 and 2022
−Removed: As of December 31, 2022, we had $62.3 million of cash and cash equivalents and $9.2 million of restricted cash, as compared to $59.8 million and none, respectively, as of December 31, 2021.
+Added: As of December 31, 2023, we had $39.8 million of cash and cash equivalents and $9.2 million of restricted cash, as compared to $62.3 million of cash and cash equivalents and $9.2 million of restricted cash as of December 31, 2022.
Cash Flows for the year ended December 31, 2023
−Removed: During the year ended December 31, 2022, net cash provided by operating activities was $211.0 million, as compared $167.4 million during 2021, an increase of $43.6 million.
−Removed: Our cash flows from operating activities primarily depend on the occupancy of our portfolio, the rental rates specified in our leases and the collectability of such rent, our property operating expenses and other general and administrative costs.
+Added: During the year ended December 31, 2023, net cash provided by operating activities was $254.6 million and our net income was $191.4 million.
+Added: Our cash flows from operating activities are primarily dependent upon the occupancy of our portfolio, the rental rates specified in our leases, the interest on our loans and direct financing lease receivables, the collectability of rent and interest, and the level of our operating expenses and general and administrative costs.
+Added: Our cash inflows from operating activities reflect adjustments to net income for non-cash items of $68.3 million, including i) depreciation and amortization of tangible, intangible and right-of-use real estate assets, and amortization of deferred financing costs and other non-cash interest expense of $107.6 million, ii) loss on debt extinguishment of $0.1 million, iii) our provision for impairment of real estate of $3.5 million, iv) adjustment to rental revenue for tenant credit of $0.6 million, and v) non-cash equity-based compensation expense of $9.0 million, reduced by i) our $24.2 million gain on dispositions of real estate, net, ii) $28.3 million related to the recognition of straight-line rent receivables, and iii) the subtraction of the change in our provision for credit losses of $0.1 million.
+Added: An additional inflow was our increase in accrued liabilities and other payables of $0.8 million, offset by the outflow caused by the increase in our rent receivables, prepaid expenses and other assets of $6.0 million.
+Added: Net cash used in investing activities during the year ended December 31, 2023 was $857.1 million.
+Added: Our net cash used in investing activities generally reflects our investment in real estate, including capital expenditures, construction in progress and lease incentives, and in mortgage loans receivable, which totaled $1.0 billion in the aggregate for the year ended December 31, 2023.
+Added: These cash outflows were partially offset by $128.6 million of proceeds from sales of investments, net of disposition costs, and $27.9 million of principal collections on our loans and direct financing lease receivables.
+Added: Net cash provided by financing activities of $580.0 million during the year ended December 31, 2023 reflected net cash inflows of $507.3 million from the issuance of common stock, $248.0 million from new borrowings under the 2029 Term Loan and $70.0 million of borrowings under the Revolving Credit Facility.
+Added: These cash inflows were partially offset by the payment of $168.2 million in dividends, $0.9 million of offeing costs paid related to our follow-on offerings and the ATM program, repayment of $70.0 million of borrowings under the Revolving Credit Facility, the payment of deferred financing costs of $2.4 million, and the payment of $3.7 million in taxes related to the net settlement of equity awards.
+Added: Cash Flows for the year ended December 31, 2022
+Added: During the year ended December 31, 2022, net cash provided by operating activities was $211.0 million.
+Added: Our cash flows from operating activities primarily depend on the occupancy of our portfolio, the rental rates specified in our leases, the interest on our loans and direct financing lease receivables, the collectability of rent and interest and the level of our operating expenses and general and administrative costs.
Cash inflows during 2022 related to net income adjusted for non-cash items of $210.5 million (net income of $134.7 million adjusted for non-cash items, including the addition of depreciation and amortization of tangible, intangible and right-of-use real estate assets, amortization of deferred financing costs and other non-cash interest expense, loss on debt extinguishment and provision for impairment of real estate, offset by the subtraction of the change in our provision for credit losses, gain on dispositions of real estate, net, straight-line rent receivable, equity-based compensation expense and adjustment to rental revenue for tenant credit, which in aggregate net to an addition of $75.7 million), a decrease in rent receivables, prepaid expenses and other assets of $4.5 million and a decrease in accrued liabilities and other payables of $3.9 million.
−Removed: The increase in net cash provided by operating activities was primarily driven by the increased size of our investment portfolio during 2022.
−Removed: Net cash used in investing activities during the year ended December 31, 2022 was $706.1 million, as compared to $829.7 million during 2021, a decrease of $123.6 million.
−Removed: Our net cash used in investing activities is generally used to fund our investments in real estate, the development of our construction in progress and investments in loans receivable, offset by cash provided from the disposition of real estate and principal collections on our loans and direct financing lease receivables.
+Added: Net cash used in investing activities during the year ended December 31, 2022 was $706.1 million.
+Added: Our net cash used in investing activities is generally used to fund our investments in real estate, the development of our construction in progress and investments in mortgage loans receivable, offset by cash provided from the disposition of real estate and principal collections on our loans and direct financing lease receivables.
The cash used in investing activities during 2022 primarily included $728.7 million to fund investments in real estate, $115.0 million of investments in loans receivable, $51.9 million to fund construction in progress and $7.5 million paid to tenants as lease incentives.
These cash outflows were partially offset by $126.6 million of proceeds from sales of investments, net of disposition costs, and $70.4 million of principal collections on our loans and direct financing lease receivables.
−Removed: The decrease in net cash used in investing activities was primarily due to our increased level of proceeds from sales of investments during 2022.
−Removed: Net cash provided by financing activities was $506.8 million during the year ended December 31, 2022, as compared to $689.1 million during 2021, a decrease of $182.3 million.
+Added: Net cash provided by financing activities was $506.8 million during the year ended December 31, 2022.
Our net cash provided by financing activities in 2022 related to cash inflows of $403.9 million from the issuance of common stock in a follow-on equity offering and through our ATM Program, and $299.0 million of borrowings under the Revolving Credit Facility.
These cash inflows were partially offset by $443.0 million of repayments on the Revolving Credit Facility, the payment of $141.7 million in dividends, $1.0 million of offering costs paid related to our follow-on offering and the ATM Program, the payment of deferred financing costs of $5.0 million and $2.5 million of payments for taxes related to the net settlement of equity awards.
−Removed: Cash Flows for the year ended December 31, 2021
−Removed: During the year ended December 31, 2021, net cash provided by operating activities was $167.4 million, as compared to $99.4 million during 2020, an increase of $68.0 million.
−Removed: Our cash flows from operating activities primarily depend on the occupancy of our portfolio, the rental rates specified in our leases and the collectability of such rent, our property operating expenses and other general and administrative costs.
−Removed: Cash inflows during 2021 related to net income adjusted for non-cash items of $155.6 million (net income of $96.2 million adjusted for non-cash items, including the addition of depreciation and amortization of tangible, intangible and right-of-use real estate assets, amortization of deferred financing costs and other non-cash interest expense, loss on repayment and repurchase of secured borrowings and provision for impairment of real estate, offset by the subtraction of the change in our provision for credit losses, gain on dispositions of real estate, net, straight-line rent receivable, equity-based compensation expense and adjustment to rental revenue for tenant credit, which in aggregate net to an addition of $59.4 million), a decrease in rent receivables, prepaid expenses and other assets of $2.2 million and an increase in accrued liabilities and other payables of $14.4 million.
−Removed: These net cash inflows were partially offset by payments made in settlement of cash flow hedges of $4.8 million.
−Removed: The increase in net cash provided by operating activities was primarily driven by the increased size of our investment portfolio during 2021.
−Removed: Net cash used in investing activities during the year ended December 31, 2021 was $829.7 million, as compared to $545.5 million in the same period in 2020, an increase of $284.2 million.
−Removed: Our net cash used in investing activities is generally used to fund our investments in real estate, the development of our construction in progress and investments in loans receivable, offset by cash provided from the disposition of real estate and principal collections on our loans and direct financing lease receivables.
−Removed: The cash used in investing activities during 2021 primarily included $840.0 million to fund investments in real estate, $136.4 million of investments in loans receivable, $9.3 million to fund construction in progress and $2.2 million paid to tenants as lease incentives.
−Removed: These cash outflows were partially offset by $100.5 million of principal collections on our loans and direct financing lease receivables and $58.4 million of proceeds from sales of investments, net of disposition costs.
−Removed: The increase in net cash used in investing activities was primarily due to our increased level of investments in real estate and loans receivables during 2021.
−Removed: Net cash provided by financing activities was $689.1 million during the year ended December 31, 2021, as compared to $457.8 million in the same period in 2020, an increase of $231.3 million.
−Removed: Our net cash provided by financing activities in 2021 related to cash inflows of $458.3 million from the issuance of common stock in follow-on equity offerings and through our ATM Program, $396.6 million in net proceeds from the issuance of the 2031 Notes and $393.0 million of borrowings under the Revolving Credit Facility.
−Removed: These cash inflows were partially offset by $267.0 million of repayments on the Revolving Credit Facility, $175.8 million of repayments of secured borrowing principal, the payment of $112.3 million in dividends, $1.2 million of offering costs paid related to our follow-on offerings and the ATM Program, the payment of deferred financing costs of $2.1 million and $0.4 million of payments for taxes related to the net settlement of equity awards.
Off-Balance Sheet Arrangements
1 unchanged sentence
Contractual Obligations
−Removed: The following table provides information with respect to our commitments as of December 31, 2022:
+Added: The following table provides information with respect to our contractual obligations as of December 31, 2023:
Payment due by period
9 unchanged sentences
_____________________________________
−Removed: (1) Includes obligations to reimburse certain of our tenants for construction costs that they incur in connection with construction at our properties in exchange for contractually-specified rent that generally increases proportionally with our funding.
+Added: (1) Includes obligations to reimburse certain of our tenants for development, construction and renovation costs that they incur related to properties leased from the Company in exchange for contractual payments of interest or increased rent that generally increases proportionally with our funding.
(2) Includes $22.2 million of rental payments due under ground lease arrangements where our tenants are directly responsible for payment.
Additionally, we may enter into commitments to purchase goods and services in connection with the operation of our business.
−Removed: These commitments generally have terms of one-year or less and reflect expenditure levels comparable to our historical expenditures, as adjusted for our growth.
−Removed: We have made an election to be taxed as a REIT for federal income tax purposes beginning with our taxable year ended December 31, 2018;
−Removed: accordingly, we generally will not be subject to federal income tax for the year ended December 31, 2022, if we distribute all of our REIT taxable income, determined without regard to the dividends paid deduction, to our stockholders.
+Added: These commitments generally have terms of one-year or less and reflect expenditure levels comparable to our historical expenditures, as adjusted for growth.
Critical Accounting Estimates
14 unchanged sentences
In estimating carrying costs, we include real estate taxes, insurance and other operating expenses, and estimates of lost rentals at market rates during the expected lease-up periods, which primarily range from six to 12 months.
−Removed: The fair value of above- or below-market leases is recorded based on the net present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between the contractual amount to be paid pursuant to the in-place lease and our estimate of the fair market lease rate for the corresponding in-place lease, measured over the remaining non-cancelable term of the lease including any below-market fixed rate renewal options for below-market leases.
+Added: The fair value of above- or below-market leases is recorded based on the net present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between the contractual amount to be paid pursuant to the in-place lease and our estimate of the fair market lease rate for the corresponding in-place lease, measured over the
+Added: remaining non-cancelable term of the lease including any below-market fixed rate renewal options for below-market leases.
In making estimates of fair values for purposes of allocating purchase price, we use a number of sources, including real estate valuations prepared by independent valuation firms.
3 unchanged sentences
Allowance for Credit Losses
−Removed: On January 1, 2020, we adopted ASC Topic 326, Financial Instruments - Credit Losses (“ASC 326”) on a prospective basis.
−Removed: ASC 326 changed how we account for credit losses for all of our loans and direct financing lease receivables.
−Removed: ASC 326 replaced the previous “incurred loss” model with an “expected loss” model that requires consideration of a broader range of information than used under the incurred losses model.
−Removed: Upon adoption of ASC 326, we recorded an initial allowance for credit losses of $0.2 million as of January 1, 2020, netted against loans and direct financing receivables on our consolidated balance sheet.
−Removed: Under ASC 326, we are required to re-evaluate the expected loss of our loans and direct financing lease receivable portfolio at each balance sheet date.
−Removed: As of December 31, 2022 and 2021, we recorded an allowance for credit losses of $0.8 million.
−Removed: Changes in our allowance
−Removed: for credit losses are presented within change in provision for credit losses in our consolidated statements of operations.
−Removed: In connection with our adoption of ASC 326 on January 1, 2020, we implemented a new process including the use of a credit loss forecasting model.
−Removed: We have used this credit loss forecasting model for estimating expected lifetime credit losses, at the individual asset level, for our loans and direct financing lease receivable portfolio.
−Removed: The forecasting model used is the probability weighted expected cash flow method, depending on the type of loan or direct financing lease receivable and global assumptions.
−Removed: We use a real estate loss estimate model (“RELEM”) which estimates losses on our loans and direct financing lease receivable portfolio, for purposes of calculating allowances for credit losses.
−Removed: The RELEM allows us to refine (on an ongoing basis) the expected loss estimate by incorporating loan specific assumptions as necessary, such as anticipated funding, interest payments, estimated extensions and estimated loan repayment/refinancing at maturity, to estimate cash flows over the life of the loan.
+Added: Under ASC Topic 326, Financial Instruments - Credit Losses, we use a real estate loss estimate model (“RELEM”) which estimates losses on our loans and direct financing lease receivable portfolio, for purposes of calculating allowances for credit losses.
+Added: The RELEM allows us to refine (on an ongoing basis) the expected loss estimate by incorporating asset-specific assumptions as necessary, such as anticipated funding, interest payments, estimated extensions and estimated loan repayment/refinancing at maturity to estimate cash flows over the life of the loan or direct financing lease receivable.
The model also incorporates assumptions related to underlying collateral values, various loss scenarios, and predicted losses to estimate expected losses.
−Removed: Our specific loan-level inputs include loan-to-stabilized-value (“LTV”), principal balance, property type, location, coupon, origination year, term, subordination, expected repayment date and future funding.
+Added: Our specific asset-level inputs include loan-to-stabilized-value (“LTV”), principal balance, property type, location, coupon, origination year, term, subordination, expected repayment date and future funding.
We categorize the results by LTV range, which we consider the most significant indicator of credit quality for our loans and direct financing lease receivables.
1 unchanged sentence
We also evaluate each loan and direct financing lease receivable measured at amortized cost for credit deterioration at least quarterly.
−Removed: Credit deterioration occurs when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan or direct financing lease receivables.
+Added: Credit deterioration occurs when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan or direct financing lease receivable.
Our allowance for credit losses is adjusted to reflect our estimation of the current and future economic conditions that impact the performance of the real estate assets securing our loans.
−Removed: These estimations include various macroeconomic factors impacting the likelihood and magnitude of potential credit losses for our loans and direct financing leases during their anticipated term.
+Added: These estimations include various macroeconomic factors impacting the likelihood and magnitude of potential credit losses for our loans and direct financing lease receivables during their anticipated term.
+Added: Changes in our allowance for credit losses are presented within change in provision for credit losses in the accompanying statements of operations.
Impairment of Long-Lived Assets
6 unchanged sentences
Adjustment to Rental Revenue for Tenant Credit
−Removed: We continually review receivables related to rent and unbilled rent receivables and determines collectability by taking into consideration the tenant's payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.
−Removed: Prior to January 1, 2019, if the collectability of a receivable was in doubt, the accounts receivable and straight-line rent receivable balances were reduced by an allowance for doubtful accounts on the consolidated balance sheets or a direct write-off of the receivable was recorded in the consolidated statements of operations.
−Removed: The provision for doubtful accounts was included in property expenses in our consolidated statements of operations.
−Removed: If the accounts receivable balance or straight-line rent receivable balance was subsequently deemed to be uncollectible, such receivable amounts were written-off to the allowance for doubtful accounts.
−Removed: As of January 1, 2019, if the assessment of the collectability of substantially all payments due under a lease changes from probable to not probable, any difference between the rental revenue recognized to date and the lease payments that have been collected is recognized as a current period adjustment to rental revenue in the consolidated statements of operations.
+Added: We continually review receivables related to rent and unbilled rent receivables and determine collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.
+Added: If the assessment of the collectability of substantially all payments due under a lease changes from probable to not probable, any difference between the rental revenue recognized to date and the lease payments
+Added: that have been collected is recognized as a current period reduction of rental revenue in our consolidated statements of operations.
Derivative Instruments
6 unchanged sentences
We may also enter into derivative contracts that are intended to economically hedge certain risk, even though hedge accounting does not apply or we elect not to apply hedge accounting.
−Removed: The accounting for subsequent changes in the fair value of these derivatives depends on whether each has been designed and qualifies for hedge accounting treatment.
+Added: The accounting for subsequent changes in the fair value of these derivatives depends on whether each has been designated and qualifies for hedge accounting treatment.
If a derivative is designated and qualifies for cash flow hedge accounting treatment, the change in the estimated fair value of the derivative is recorded in other comprehensive income (loss) in the consolidated statements of comprehensive income to the extent that it is effective.
3 unchanged sentences
Equity-Based Compensation
−Removed: From time to time, we grant shares of restricted common stock and restricted share units ("RSUs") to our directors, executive officers and other employees that vest over multiple periods, subject to the recipient's continued service.
−Removed: Additionally, we also granted performance-based RSUs to our executive officers, the final number of which is determined based on market and subjective performance conditions and which vest over a multi-year period, subject to the recipient's continued service.
−Removed: We account for the restricted common stock and RSUs in accordance with ASC 718, Compensation - Stock Compensation, which requires that such compensation be recognized in the financial statements based on their estimated grant-date fair value.
−Removed: The value of such awards is recognized as compensation expense in general and administrative expenses in the accompanying consolidated statements of operations over the requisite service periods.
−Removed: We recognize compensation expense for equity-based compensation using the straight-line method based on the terms of the individual grant.
−Removed: Forfeitures of equity-based compensation awards, if any, are recognized as they occur.
+Added: We grant shares of restricted common stock ("RSAs") and restricted stock units ("RSUs") to our directors, executive officers and other employees that vest over multiple periods, subject to the recipient's continued service.
+Added: We also grant performance-based RSUs to our executive officers, the final number of which is determined based on objective and subjective performance conditions and which vest over a multi-year period, subject to the recipient's continued service.
+Added: We account for RSAs and RSUs in accordance with ASC 718, Compensation – Stock Compensation, which requires that such compensation be recognized in the financial statements based on its estimated grant-date fair value.
+Added: The value of such awards is recognized as compensation expense in general and administrative expenses in the accompanying consolidated statements of operations over the applicable service periods.
+Added: We recognize compensation expense for equity-based compensation using the straight-line method based on the fair value of the award on the grant date.
+Added: Forfeitures of equity-based compensation awards, if any, are recognized when they occur.
Results of Operations
−Removed: The following discusses our results of operations for the year ended December 31, 2022, as compared to our results of operations for the year ended December 31, 2021.
−Removed: A discussion of the changes in our results of operations for the year ended December 31, 2021, as compared to our results of operations for the year ended December 31, 2020, has been omitted from this Annual Report but may be found in "Item 7.
−Removed: Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Comparison of the years ended December 31, 2021 and 2020" in our Annual Report on Form 10-K for the year ended December 31, 2021.
+Added: The following discussion includes the results of our operations for the periods presented.
Comparison of the years ended December 31, 2023 and 2022
2 unchanged sentences
Rental revenue $ 339,897 $ 269,827 $ 70,070 26.0 %
−Removed: Interest income on loans and direct financing lease receivables 15,499 15,710 (211) (1.3) %
+Added: Interest on loans and direct financing lease receivables 18,128 15,499 2,629 17.0 %
Other revenue, net 1,570 1,180 390 33.1 %
20 unchanged sentences
Rental revenue increased by $70.1 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
−Removed: The increase in revenues was driven primarily by the growth in the size of our real estate investment portfolio, which generated additional rental revenues.
−Removed: Our real estate investment portfolio grew from 1,451 properties, representing $3.2 billion in net investments in real estate, as of December 31, 2021 to 1,653 properties, representing $3.8 billion in net investments in real estate, as of December 31, 2022.
−Removed: Our real estate investments were acquired throughout the periods presented and were not all owned by us for the entirety of the periods;
−Removed: accordingly, a significant portion of the increase in rental revenue between periods is related to recognizing revenue in 2022 on acquisitions that were made during 2021 and 2022.
−Removed: A smaller component of the increase in revenues between periods is related to rent escalations recognized on our leases.
+Added: The increase in rental revenue was driven primarily by the growth in our real estate investment portfolio, which grew by 220 rental properties, or 13% since December 31, 2022.
+Added: Our real estate investments were acquired throughout the periods presented and were not all owned by us for the entirety of the applicable periods;
+Added: accordingly, a significant portion of the increase in rental revenue between periods is related to recognizing revenue in 2023 from acquisitions that were made during 2022 and 2023.
+Added: Another component of the increase in revenues between periods relates to rent escalations recognized on our leases.
Interest on loans and direct financing lease receivables .
−Removed: Interest on loans and direct financing lease receivables decreased by $0.2 million during the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to the repayment of mortgage loans receivable during the fourth quarter of 2021 and throughout 2022, partially offset by the growth of our mortgage loans receivable portfolio during the second half of 2022.
−Removed: Repayment and lending activity led to a lower average daily balance of loans receivable outstanding during the year ended December 31, 2022 as compared to the year ended December 31, 2021.
−Removed: Other revenue .
−Removed: Other revenue for the year ended December 31, 2022 increased by approximately $17,000, as compared to the year ended December 31, 2021, primarily due to the receipt of mortgage loan prepayment fees during the fourth quarter of 2021.
+Added: Interest on loans and direct financing lease receivables increased by $2.6 million during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to a higher average daily balance of mortgage loans receivable outstanding during 2023 along with increased interest rates earned during the year ended December 31, 2023.
+Added: Other revenue, net .
+Added: Other revenue for the year ended December 31, 2023 increased by $0.4 million, as compared to the year ended December 31, 2022, primarily due to the receipt of insurance claim proceeds offset by a decrease in mortgage loan prepayment income fees received during the year ended December 31, 2023.
General and administrative.
General and administrative expense increased by $1.2 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
−Removed: This increase in general and administrative expense was primarily due to an increase in non-cash share-based compensation of $3.8 million, salary expense and professional fees.
+Added: This increase in general and administrative expense was primarily due to an increase in salary expense, severance costs, and professional fees during the year ended December 31, 2023.
Property expenses .
−Removed: Property expenses decreased by $2.3 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021.
−Removed: The decrease in property expenses was primarily due to decreased insurance expenses, property taxes and property-related operational costs during the year ended December 31, 2022 related to fewer vacant properties and moving tenants accounted for on a non-accrual basis back to accrual.
+Added: Property expenses increased by $1.2 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
+Added: The increase in property expenses was primarily due to increased reimbursable property taxes and property-related operational costs during the year ended December 31, 2023.
Depreciation and amortization .
2 unchanged sentences
Provision for impairment of real estate .
−Removed: Impairment charges on real estate investments were $20.2 million and $6.1 million for the years ended December 31, 2022 and 2021, respectively, an increase of $14.0 million.
+Added: Impairment charges on real estate investments were $3.5 million and $20.2 million for the years ended December 31, 2023 and 2022, respectively, a decrease of $16.6 million.
During the years ended December 31, 2023 and 2022, we recorded a provision for impairment of real estate on 8 and 13 of our real estate investments, respectively, with the average size of our impairments being smaller in 2023.
2 unchanged sentences
Change in provision for credit losses.
−Removed: During the year ended December 31, 2022, our provision for credit losses increased by $0.1 million, as compared to a decrease of $0.2 million during the year ended December 31, 2021.
+Added: During the year ended December 31, 2023, our provision for credit losses decreased by $0.1 million, compared to a $0.1 million increase in our provision for credit losses during the year ended December 31, 2022.
Under ASC 326, we are required to re-evaluate the expected loss on our portfolio of loans and direct financing lease receivables at each balance sheet date.
2 unchanged sentences
Gain on dispositions of real estate, net.
−Removed: Gain on dispositions of real estate, net, increased by $21.3 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021.
+Added: Gain on dispositions of real estate, net, decreased by $6.5 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
We disposed of 52 real estate properties during the year ended December 31, 2023, compared to 54 real estate properties during the year ended December 31, 2022.
−Removed: Overall, our 2022 dispositions had a higher sales price in relation to their net book value as compared to our 2021 dispositions.
+Added: Overall, our 2023 dispositions had a lower sales price in relation to their net book value as compared to our 2022 dispositions.
Other (expense)/income:
Loss on debt extinguishment.
−Removed: Loss on debt extinguishment of $2.1 million during the year ended December 31, 2022 relates to the write-off of deferred financing costs and the payment of fees in conjunction with amendments to our term loans and revolving credit facility.
−Removed: During the year ended December 31, 2021, we recorded a loss on debt extinguishment of $4.5 million related to the payment of a make-whole premium and the write-off of deferred financing costs upon our repayment of the remaining $171.2 million of principal on our Series 2017-1 Notes in June 2021.
+Added: The loss on debt extinguishment of $0.1 million during the year ended December 31, 2023 relates to the write-off of deferred financing costs in conjunction with the full repayment of our 2024 Term Loan in August 2023.
+Added: During the year ended December 31, 2022, we recorded a loss on debt extinguishment of $2.1 million related to the write-off of deferred financing costs and the payment of fees in conjunction with amendments to our term loans and revolving credit facility.
Interest expense .
2 unchanged sentences
Interest income .
−Removed: Interest income increased by $2.7 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021.
−Removed: The increase in interest income was primarily due to higher interest rates, higher average daily cash balances in our interest-bearing bank accounts and our investments in commercial paper during the year ended December 31, 2022.
+Added: Interest income decreased by $0.8 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
+Added: The decrease in interest income was primarily due to lower average daily cash balances in our interest-bearing bank accounts and a decrease in investments in commercial paper during the year ended December 31, 2023.
Income tax expense.
−Removed: Income tax expense increased by $0.8 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021.
−Removed: The increase was primarily due to the accrual of income taxes for a transaction consummated in 2022 through our taxable REIT subsidiary.
+Added: Income tax expense decreased by $0.4 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
+Added: The decrease was primarily due to the accrual of income taxes
+Added: for a transaction consummated in 2022 through our taxable REIT subsidiary.
We are organized and operate as a REIT and are generally not subject to U.S.
13 unchanged sentences
Core FFO is used by management in evaluating the performance of our core business operations.
−Removed: Items included in calculating FFO that may be excluded in calculating Core FFO include certain transaction related gains, losses, income or expense or other non-core amounts as they occur.
−Removed: To derive AFFO, we modify our computation of Core FFO to include other adjustments to GAAP net income related to certain items that we believe are not indicative of our operating performance, including straight-line rental revenue, non-cash interest expense, non-cash compensation expense, other amortization and non-cash charges, capitalized interest expense and transaction costs.
+Added: Items included in calculating FFO that may be excluded in calculating Core FFO include certain transaction related gains, losses, income or expenses or other non-core amounts as they occur.
+Added: To derive AFFO, we modify our computation of Core FFO to include other adjustments to GAAP net income related to certain items that we believe are not indicative of our operating performance, including straight-line rental revenue, non-cash interest expense, non-cash compensation expense, other amortization expense, other non-cash charges and capitalized interest expense.
Such items may cause short-term fluctuations in net income but have no impact on operating cash flows or long-term operating performance.
11 unchanged sentences
FFO attributable to stockholders and non-controlling interests 272,899 212,718 162,036
−Removed: Non-core expenses (1)(2)(3)
+Added: Non-core expense (income) (1)(2)(3)
(510) 2,388 4,461
6 unchanged sentences
Capitalized interest expense (2,430) (757) (81)
−Removed: Transaction costs — — 291
AFFO attributable to stockholders and non-controlling interests $ 253,397 $ 208,825 $ 158,000
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+Added: (1) Includes $0.1 million loss on debt extinguishment, $0.9 million of insurance recovery income and $0.4 million of cash and non-cash separation costs with the departures of a junior executive and a Board member during the year ended December 31, 2023.
(2) Includes $0.2 million of fees incurred in conjunction with the August 2022 amendment to our 2027 Term Loan and our $2.1 million loss on debt extinguishment during the year ended December 31, 2022.
(3) Includes our $4.5 million loss on debt extinguishment during the year ended December 31, 2021.
−Removed: (3) Includes non-recurring expenses of approximately $39,000 related to reimbursement of executive relocation costs, $1.1 million for severance payments and acceleration of non-cash compensation expense in connection with the termination of one of our executive officers, $0.2 million of non-recurring recruiting costs and our $0.9 million loss on debt extinguishment during the year ended December 31, 2020.
We compute EBITDA as earnings before interest, income taxes and depreciation and amortization.
37 unchanged sentences
Adjustment for current quarter re-leasing, acquisition and disposition activity (1)
−Removed: Adjustment to exclude other non-recurring activity (2)
+Added: Adjustment to exclude other non-core or non-recurring activity (2)
Adjustment to exclude termination/prepayment fees and certain percentage rent (3)
3 unchanged sentences
(1) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate and loan repayments completed during the three months ended December 31, 2023 had occurred on October 1, 2023.
−Removed: (2) Adjustment is made to exclude non-core expenses added back to compute Core FFO, to exclude changes in our provision for credit losses and to eliminate the impact of seasonal fluctuation in certain non-cash compensation expense recorded in the period.
+Added: (2) Adjustment is made to i) exclude non-core income and expense adjustments made in computing Core FFO, ii) exclude changes in our provision for credit losses and iii) eliminate the impact of seasonal fluctuation in certain non-cash compensation expense recorded in the period.
(3) Adjustment excludes lease termination or loan prepayment fees and contingent rent (based on a percentage of the tenant's gross sales at the leased property) where payment is subject to exceeding a sales threshold specified in the lease, if any.
−Removed: We calculate our net debt as our gross debt (defined as total debt plus net deferred financing costs and original issue discount on our borrowings) less cash and cash equivalents and restricted cash deposits available for future investment.
+Added: We calculate our net debt as our gross debt (defined as total debt plus net deferred financing costs on our secured borrowings) less cash and cash equivalents and restricted cash available for future investment.
We believe excluding cash and cash equivalents and restricted cash available for future investment from gross debt, all of which could be used to repay debt, provides an estimate of the net contractual amount of borrowed capital to be repaid, which we believe is a beneficial disclosure to investors and analysts.
36 unchanged sentences
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.