What changed in this filing

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Item 1. Financial Statements

2020-07-27 compared with 2020-04-28 · 208 added, 142 removed, 534 unchanged (40% of the section changed)

3 unchanged sentences

(Dollars in Thousands, Except Share and Per Share Data)

March 31, 2020

June 30, 2020

December 31, 2019

26 unchanged sentences

12,760,000 shares authorized;

and 6,269,555 shares issued and outstanding at March 31, 2020 and December 31, 2019 (3)

and 6,356,119 and 6,269,555 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively (3)

TOTAL MEZZANINE EQUITY

1 unchanged sentence

950,000 shares authorized;

and 783,114 and 806,435 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively (3)

Common stock, par value $0.001 per share, 60,290,000 and 86,290,000 shares authorized and 33,930,020 and 32,593,651 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively (3)

and 776,647 and 806,435 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively (3)

Common stock, par value $0.001 per share, 60,290,000 and 86,290,000 shares authorized and 33,960,707 and 32,593,651 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively (3)

Additional paid in capital

11 unchanged sentences

(Dollars in Thousands, Except Share and Per Share Data)

For the three months ended March 31,

For the three months ended June 30,

For the six months ended June 30,

Operating revenues

8 unchanged sentences

General and administrative

Impairment charge

Total operating expenses

2 unchanged sentences

(Loss) gain on sale of real estate, net

Other (loss) income

Total other expense, net

13 unchanged sentences

Other Comprehensive loss

Comprehensive (loss) income

Comprehensive income

Comprehensive loss (income) attributable (available) to OP Units held by Non-controlling OP Unitholders

Total comprehensive (loss) income (attributable) available to the Company

Total comprehensive income available to the Company

Refer to Note 2 “Related-Party Transactions”

3 unchanged sentences

(Dollars in Thousands)

For the three months ended March 31,

For the six months ended June 30,

Cash flows from operating activities:

1 unchanged sentence

Depreciation and amortization

Impairment charge

Loss (gain) on sale of real estate, net

3 unchanged sentences

Asset retirement obligation expense

Amortization of right-of-use asset from operating leases and operating lease liabilities, net

Operating changes in assets and liabilities

1 unchanged sentence

Increase in deferred rent receivable

Increase (decrease) in accounts payable, accrued expenses, and amount due to Adviser and Administrator

Decrease in right-of-use asset from operating leases

Decrease in operating lease liabilities

Increase (decrease) in other liabilities

Increase in accounts payable, accrued expenses, and amount due to Adviser and Administrator

Increase in other liabilities

Leasing commissions paid

22 unchanged sentences

Distributions paid for common, senior common, preferred stock and Non-controlling OP Unitholders

Net cash provided by (used in) financing activities

Net increase (decrease) in cash, cash equivalents, and restricted cash

Net cash provided by financing activities

Net increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of period

8 unchanged sentences

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows (dollars in thousands):

For the three months ended March 31,

For the six months ended June 30,

Cash and cash equivalents

2 unchanged sentences

Restricted cash consists of security deposits and receipts from tenants for reserves.

These funds will be released to the tenants upon completion of agreed upon tasks, as specified in the lease agreements, mainly consisting of maintenance and repairs on the buildings and upon receipt by us of evidence of insurance and tax payments.

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

17 unchanged sentences

Securities and Exchange Commission on February 12, 2020 .

The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year.

The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year.

Use of Estimates

2 unchanged sentences

Actual results may differ from these estimates under different assumptions or conditions.

Critical Accounting Policies

Significant Accounting Policies

The preparation of our financial statements in accordance with GAAP, requires management to make judgments that are subjective in nature to make certain estimates and assumptions.

4 unchanged sentences

Beginning January 1, 2020, we are recording the property operating expenses and offsetting lease revenues for these triple net leased properties on a gross basis, as we have amended our process whereby we are paying operating expenses on behalf of our tenants and receiving reimbursement, whereas, previously these tenants were paying these expenses directly with limited insight provided to us.

There were no other material changes to our critical accounting policies during the three months ended March 31, 2020 .

There were no other material changes to our critical accounting policies during the three and six months ended June 30, 2020 .

Recently Issued Accounting Pronouncements

4 unchanged sentences

We adopted ASU 2016-13 beginning with the three months ended March 31, 2020.

Adopting ASU 2016-13 has not resulted in a material impact to our consolidated financial statements, as we do not have any loans receivable outstanding, and our receivables are generally incurred from leasing arrangements that are collected monthly.

Adopting ASU 2016-13 has not resulted in a material impact to our consolidated financial statements, as we do not have any loans receivable outstanding.

In March 2020, the FASB issued Accounting Standards Update 2020-04, “Reference Rate Reform (Topic 848)” (“ASU 2020-04”).

3 unchanged sentences

Adopting ASU 2020-04 has not resulted in a material impact to our consolidated statements, as ASU 2020-04 allows for prospective application of any changes in the effective interest rate for our LIBOR based debt, and allows for practical expedients that will allow us to treat our derivative instruments designated as cash flow hedges consistent with how they are currently accounted for.

In April 2020, the FASB issued a staff question-and-answer document, Topic 842 and Topic 840:

Accounting for Lease Concessions related to the Effects of the COVID-19 Pandemic (“COVID-19 Q&A”), to address frequently asked questions pertaining to lease concessions arising from the effects of the COVID-19 pandemic.

Existing lease guidance requires entities to determine if a lease concession was a result of a new arrangement reached with the tenant, which would be addressed under the lease modification accounting framework, or if a lease concession was under the enforceable rights and obligations within the existing lease agreement, which would not fall under the lease modification accounting framework.

The COVID-19 Q&A clarifies that entities may elect to not evaluate whether lease-related relief granted in light of the effects of COVID-19 is a lease modification, as long as the concession does not result in a substantial increase in rights of the lessor or obligations of the lessee.

This election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than the total payments required by the original contract.

At this time, we have granted rent deferrals to three tenants representing approximately 2 % of total portfolio rents.

The agreements with these tenants include current partial payment in exchange for rent deferrals of varying terms with deferred amounts to be paid by the respective tenant back to us, for the period starting in July 2020 and ending through March 2021.

We have elected to not evaluate these leases under the lease modification accounting framework.

Related-Party Transactions

7 unchanged sentences

Our president, Mr.

Robert Cutlip, is an executive managing director of our Adviser.

Michael LiCalsi, our general counsel and secretary, also serves as our Administrator’s president, general counsel and secretary.

Robert Cutlip, also serves as the executive vice president of commercial & industrial real estate of our Adviser.

Michael LiCalsi, our general counsel and secretary, also serves as our Administrator’s president, general counsel and secretary, as well as executive vice president of administration of our Adviser.

We have entered into an advisory agreement with our Adviser, as amended from time to time (the “Advisory Agreement”), and an administration agreement with our Administrator (the “Administration Agreement”).

The services and fees under the Advisory Agreement and Administration Agreement are described below.

As of March 31, 2020 and December 31, 2019 , $3.2 million and $2.9 million , respectively, were collectively due to our Adviser and Administrator.

As of June 30, 2020 and December 31, 2019 , $ 3.3 million and $ 2.9 million , respectively, were collectively due to our Adviser and Administrator.

Our entrance into the Advisory Agreement and each amendment thereto has been approved unanimously by our Board of Directors.

Our Board of Directors reviews and considers renewing the agreement with our Adviser each July.

During its July 2019 meeting, our Board of Directors reviewed and renewed the Advisory Agreement for an additional year, through August 31, 2020.

Our Board of Directors reviews and considers renewing the agreements with our Adviser and Administrator each July.

During their July 2020 meeting, our Board of Directors reviewed and renewed the Advisory Agreement and Administration Agreement for an additional year, through August 31, 2021.

Base Management Fee

Under the Advisory Agreement, the calculation of the annual base management fee equals 1.5% of our Total Equity, which is our total stockholders’ equity plus total mezzanine equity (before giving effect to the base management fee and incentive fee), adjusted to exclude the effect of any unrealized gains or losses that do not affect realized net income (including impairment charges), adjusted for any one-time events and certain non-cash items (the later to occur for a given quarter only upon the approval of our Compensation Committee), and adjusted to include operating partnership units in the Operating Partnership (“OP Units”) held by holders who do not control the Operating Partnership (“Non-controlling OP Unitholders”).

The fee is calculated and accrued quarterly as 0.375% per quarter of such Total Equity figure.

Under the Advisory Agreement, the calculation of the annual base management fee equaled 1.5 % of our Total Equity prior to the July 14, 2020 amendment, which is our total stockholders’ equity plus total mezzanine equity (before giving effect to the base management fee and incentive fee), adjusted to exclude the effect of any unrealized gains or losses that do not affect realized net income (including impairment charges), adjusted for any one-time events and certain non-cash items (the later to occur for a given quarter only upon the approval of our Compensation Committee), and adjusted to include operating partnership units in the Operating Partnership (“OP Units”) held by holders who do not control the Operating Partnership (“Non-controlling OP Unitholders”).

The fee was calculated and accrued quarterly as 0.375 % per quarter of such Total Equity figure.

Our Adviser does not charge acquisition or disposition fees when we acquire or dispose of properties, as is common in other externally managed REITs;

however, our Adviser may earn fee income from our borrowers, tenants or other sources.

For the three months ended March 31, 2020 and 2019 , we recorded a base management fee of $1.4 million and $1.3 million , respectively.

For the three and six months ended June 30, 2020 , we recorded a base management fee of $ 1.4 million and $ 2.8 million , respectively.

For the three and six months ended June 30, 2019 , we recorded a base management fee of $ 1.3 million and $ 2.6 million , respectively.

On July 14, 2020 , the Company amended and restated the Advisory Agreement by entering into the Sixth Amended and Restated Investment Advisory Agreement between the Company and the Adviser (the “Amended Agreement”).

The Company’s entrance into the Amended Agreement was approved by its board of directors, including, specifically, unanimously by its independent directors.

The Amended Agreement revised and replaced the previous calculation of the Base Management Fee, which was based on Total Equity, with a calculation based on Gross Tangible Real Estate.

The revised Base Management Fee will be payable quarterly in arrears and shall be calculated at an annual rate of 0.425 % ( 0.10625 % per quarter) of the prior calendar quarter’s “Gross Tangible Real Estate,” defined in the Amended Agreement as the current gross value of the Company’s property portfolio (meaning the aggregate of each property’s original acquisition price plus the cost of any subsequent capital improvements thereon).

The calculation of the other fees in the Amended Agreement remain unchanged.

The revised Base Management Fee calculation will begin with the fee calculations for the quarter ending September 30, 2020 .

Incentive Fee

4 unchanged sentences

Core FFO (as defined in the Advisory Agreement) is GAAP net income (loss) available to common stockholders, excluding the incentive fee, depreciation and amortization, any realized and unrealized gains, losses or other non-cash items recorded in net income (loss) available to common stockholders for the period, and one-time events pursuant to changes in GAAP.

For the three months ended March 31, 2020 and 2019 , we recorded an incentive fee of $1.1 million and $0.9 million , respectively.

The Adviser did not waive any portion of the incentive fee for the three months ended March 31, 2020 or 2019 , respectively.

For the three and six months ended June 30, 2020 , we recorded an incentive fee of $ 1.1 million and $ 2.2 million , respectively.

For the three and six months ended June 30, 2019 , we recorded an incentive fee of $ 0.9 million and $ 1.8 million , respectively.

The Adviser did no t waive any portion of the incentive fee for the three and six months ended June 30, 2020 or 2019 , respectively.

Capital Gain Fee

3 unchanged sentences

At the end of the fiscal year, if this number is positive, then the capital gain fee payable for such time period shall equal 15.0 % of such amount.

No capital gain fee was recognized during the three months ended March 31, 2020 or 2019 .

No capital gain fee was recognized during the three and six months ended June 30, 2020 or 2019 .

Termination Fee

4 unchanged sentences

Administration Agreement

Under the terms of the Administration Agreement, we pay separately for our allocable portion of the Administrator’s overhead expenses in performing its obligations to us including, but not limited to, rent and our allocable portion of the salaries and benefits expenses of our Administrator’s employees, including, but not limited to, our chief financial officer, treasurer, chief compliance officer, general counsel and secretary (who also serves as our Administrator’s president, general counsel and secretary), and their respective staffs.

Under the terms of the Administration Agreement, we pay separately for our allocable portion of the Administrator’s overhead expenses in performing its obligations to us including, but not limited to, rent and our allocable portion of the salaries and benefits expenses of our Administrator’s employees, including, but not limited to, our chief financial officer, treasurer, chief compliance officer, general counsel and secretary, Michael LiCalsi (who also serves as our Administrator’s president, general counsel and secretary), and their respective staffs.

Our allocable portion of the Administrator’s expenses are generally derived by multiplying our Administrator’s total expenses by the approximate percentage of time the Administrator’s employees perform services for us in relation to their time spent performing services for all companies serviced by our Administrator under contractual agreements.

We believe this approach helps approximate fees paid by us to actual services performed by the Administrator for us.

For the three months ended March 31, 2020 and 2019 , we recorded an administration fee of $0.4 million and $0.4 million , respectively.

For the three and six months ended June 30, 2020 , we recorded an administration fee of $ 0.4 million and $ 0.8 million , respectively.

For the three and six months ended June 30, 2019 , we recorded an administration fee of $ 0.4 million and $ 0.8 million , respectively.

Gladstone Securities

3 unchanged sentences

Mortgage Financing Arrangement Agreement

We entered into an agreement with Gladstone Securities, effective June 18, 2013, for it to act as our non-exclusive agent to assist us with arranging mortgage financing for properties we own (the “Financing Arrangement Agreement”).

We entered into an agreement with Gladstone Securities, effective June 18, 2013, for it to act as our non-exclusive agent to assist us with arranging mortgage financing for properties we own.

In connection with this engagement, Gladstone Securities will, from time to time, continue to solicit the interest of various commercial real estate lenders or recommend to us third party lenders offering credit products or packages that are responsive to our needs.

2 unchanged sentences

The amount of the financing fees may be reduced or eliminated, as determined by us and Gladstone Securities, after taking into consideration various factors, including, but not limited to, the involvement of any third-party brokers and market conditions.

We paid financing fees to Gladstone Securities of $0.09 million and $0.02 million during the three months ended March 31, 2020 and 2019 , respectively, which are included in mortgage notes payable, net, in the condensed consolidated balance sheets, or 0.25% and 0.15% , respectively, of the mortgage principal secured and/or extended.

Our Board of Directors renewed the Financing Arrangement Agreement for an additional year, through August 31, 2020 , at its July 2019 meeting.

We did not pay financing fees to Gladstone Securities during the three months ended June 30, 2020 , but we paid financing fees to Gladstone Securities of $ 0.09 million during the six months ended June 30, 2020 , which are included in mortgage notes payable, net, in the condensed consolidated balance sheets, or 0.25 % , of the mortgage principal secured and/or extended.

We paid financing fess to Gladstone Securities of $ 0.08 million and $ 0.10 million during the three and six months ended June 30, 2019 , respectively, which are included in mortgage notes payable, net, in the condensed consolidated balance sheets, or 0.21 % and 0.20 % , respectively, of the mortgage principal secured and/or extended.

Our Board of Directors renewed the agreement for an additional year, through August 31, 2021 , at its July 2020 meeting.

Dealer Manager Agreement

6 unchanged sentences

(Loss) Earnings Per Share of Common Stock

The following tables set forth the computation of basic and diluted (loss) earnings per share of common stock for the three months ended March 31, 2020 and 2019 .

The following tables set forth the computation of basic and diluted (loss) earnings per share of common stock for the three and six months ended June 30, 2020 and 2019 .

The OP Units held by Non-controlling OP Unitholders (which may be redeemed for shares of common stock) have been excluded from the diluted (loss) earnings per share calculations, as there would be no effect on the amounts since the Non-controlling OP Unitholders’ share of (loss) income would also be added back to net (loss) income.

Net (loss) income figures are presented net of such non-controlling interests in the (loss) earnings per share calculation.

We computed basic (loss) earnings per share for the three months ended March 31, 2020 and 2019 using the weighted average number of shares outstanding during the respective periods.

Diluted (loss) earnings per share for the three months ended March 31, 2020 and 2019 reflects additional shares of common stock related to our convertible senior common stock (the “Senior Common Stock”), if the effect would be dilutive, that would have been outstanding if dilutive potential shares of common stock had been issued, as well as an adjustment to net (loss) income (attributable) available to common stockholders as applicable to common stockholders that would result from their assumed issuance (dollars in thousands, except per share amounts).

For the three months ended March 31,

We computed basic (loss) earnings per share for the three and six months ended June 30, 2020 and 2019 using the weighted average number of shares outstanding during the respective periods.

Diluted (loss) earnings per share for the three and six months ended June 30, 2020 and 2019 reflects additional shares of common stock related to our convertible senior common stock (the “Senior Common Stock”), if the effect would be dilutive, that would have been outstanding if dilutive potential shares of common stock had been issued, as well as an adjustment to net (loss) income (attributable) available to common stockholders as applicable to common stockholders that would result from their assumed issuance (dollars in thousands, except per share amounts).

For the three months ended June 30,

For the six months ended June 30,

Calculation of basic (loss) earnings per share of common stock:

4 unchanged sentences

Net (loss) income (attributable) available to common stockholders

income impact of assumed conversion of senior common stock (2)

Net (loss) income (attributable) available to common stockholders plus assumed conversions (2)

3 unchanged sentences

Diluted (loss) earnings per share of common stock

The weighted average number of OP Units held by Non-controlling OP Unitholders was 501,233 and 742,937 for the three months ended March 31, 2020 and 2019 , respectively.

We excluded convertible shares of Senior Common Stock of 654,942 and 721,872 from the calculation of diluted (loss) earnings per share for the three months ended March 31, 2020 and 2019 , respectively, because they were anti-dilutive.

The weighted average number of OP Units held by Non-controlling OP Unitholders was 503,033 and 502,133 for the three and six months ended June 30, 2020 , respectively, and 742,937 for both the three and six months ended June 30, 2019 .

We excluded convertible shares of Senior Common Stock of 650,055 and 718,770 from the calculation of diluted (loss) earnings per share for the three and six months ended June 30, 2020 and 2019 , respectively, because they were anti-dilutive.

Real Estate and Intangible Assets

The following table sets forth the components of our investments in real estate as of March 31, 2020 and December 31, 2019 , excluding real estate held for sale as of December 31, 2019 (dollars in thousands):

March 31, 2020

The following table sets forth the components of our investments in real estate as of June 30, 2020 and December 31, 2019 , excluding real estate held for sale as of June 30, 2020 and December 31, 2019 , respectively (dollars in thousands):

June 30, 2020

December 31, 2019

4 unchanged sentences

This amount includes $ 4,436 of land value subject to land lease agreements which we may purchase at our option for a nominal fee.

Real estate depreciation expense on building and tenant improvements was $9.0 million and $8.0 million for the three months ended March 31, 2020 and 2019 , respectively.

We acquired five properties during the three months ended March 31, 2020 , and two properties during the three months ended March 31, 2019 .

Real estate depreciation expense on building and tenant improvements was $ 9.2 million and $ 18.2 million for the three and six months ended June 30, 2020 , respectively.

Real estate depreciation expense on building and tenant improvements was $ 8.1 million and $ 16.1 million for the three and six months ended June 30, 2019 , respectively.

We acquired five properties during the six months ended June 30, 2020 , and six properties during the six months ended June 30, 2019 .

The acquisitions are summarized below (dollars in thousands):

Three Months Ended

Six Months Ended

Aggregate Square Footage

1 unchanged sentence

Aggregate Purchase Price

Acquisition Expenses

Aggregate Annualized GAAP Rent

Capitalized Acquisition Expenses

Aggregate Annualized GAAP Fixed Lease Payments

Aggregate Debt Issued or Assumed

March 31, 2020

March 31, 2019

June 30, 2020

June 30, 2019

On January 8, 2020 , we acquired a 64,800 square foot property in Indianapolis, Indiana for $ 5.3 million .

6 unchanged sentences

We entered into an interest rate swap in connection with our $ 17.5 million of issued debt, resulting in a fixed interest rate of 2.8 % .

The annualized GAAP rent on the 10.5 Years lease is $2.2 million .

The annualized GAAP rent on the 10.5 year lease is $ 2.2 million .

On February 8, 2019 , we acquired a 26,050 square foot property in a suburb of Philadelphia, Pennsylvania, for $ 2.7 million .

2 unchanged sentences

The annualized GAAP rent on the 10.0 year lease is $ 0.3 million .

We accounted for these transactions under ASU 2017-01, “Clarifying the Definition of a Business.” As a result, we treated our acquisitions during the three months ended March 31, 2020 and 2019 as asset acquisitions rather than business combinations.

On April 5, 2019 , we acquired a 207,000 square foot property in Ocala, Florida, for $ 11.9 million .

The annualized GAAP rent on the 20.1 year lease is $ 0.8 million .

On April 5, 2019 , we acquired a 176,000 square foot property in Ocala, Florida, for $ 7.3 million .

The annualized GAAP rent on the 20.1 year lease is $ 0.7 million .

On April 30, 2019 , we acquired a 54,430 square foot property in Columbus, Ohio, for $ 3.2 million .

The annualized GAAP rent on the 7.0 year lease is $ 0.2 million .

On June 18, 2019 , we acquired a 676,031 square foot property in Tifton, Georgia, for $ 17.9 million .

The annualized GAAP rent on the 8.5 year lease is $ 1.6 million .

We issued $ 8.9 million of mortgage debt with a fixed interest rate of 4.35 % in connection with this acquisition.

We treated our acquisitions during the six months ended June 30, 2020 and 2019 as asset acquisitions rather than business combinations.

As a result of this treatment, we capitalized $0.3 million and $0.5 million, respectively, of acquisition costs that would otherwise have been expensed under business combination treatment.

We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the three months ended March 31, 2020 and 2019 as follows (dollars in thousands):

Three months ended March 31, 2020

Three months ended March 31, 2019

We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the six months ended June 30, 2020 and 2019 as follows (dollars in thousands):

Six Months Ended June 30, 2020

Six Months Ended June 30, 2019

Acquired assets and liabilities

10 unchanged sentences

This amount includes $ 2,711 of land value subject to a land lease agreement.

This amount includes $53 of loan receivable included in Other assets on the condensed consolidated balance sheets.

This amount includes $ 53 of loans receivable included in Other assets on the condensed consolidated balance sheets.

This amount includes $ 62 of prepaid rent included in Other liabilities on the condensed consolidated balance sheets.

Significant Real Estate Activity on Existing Assets

During the three months ended March 31, 2020 and 2019 , we executed three and two leases, respectively, which are summarized below (dollars in thousands):

Three Months Ended

During the six months ended June 30, 2020 and 2019 , we executed eight and five leases, respectively, which are summarized below (dollars in thousands):

Six Months Ended

Aggregate Square Footage

Weighted Average Remaining Lease Term

Aggregate Annualized GAAP Rent

Aggregate Annualized GAAP Fixed Lease Payments

Aggregate Tenant Improvement

Aggregate Leasing Commissions

March 31, 2020

March 31, 2019

June 30, 2020

June 30, 2019

Future Lease Payments

Future operating lease payments from tenants under non-cancelable leases, excluding tenant reimbursement of expenses, for the nine months ending December 31, 2020 and each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):

Future operating lease payments from tenants under non-cancelable leases, excluding tenant reimbursement of expenses, for the six months ending December 31, 2020 and each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):

Tenant Lease Payments

Nine Months Ending 2020

Six Months Ending 2020

We account for all of our real estate leasing arrangements as operating leases.

2 unchanged sentences

A small number of tenants have termination options.

Future minimum lease payments from tenants under non-cancelable leases, excluding tenant reimbursement of expenses and real estate held for sale as of December 31, 2019 , for each of the five succeeding fiscal years and thereafter, is as follows (dollars in thousands):

Future minimum lease payments from tenants under non-cancelable leases, excluding tenant reimbursement of expenses as of December 31, 2019 , for each of the five succeeding fiscal years and thereafter, is as follows (dollars in thousands):

Tenant Lease Payments

Lease Revenue Reconciliation

The table below sets forth the allocation of lease revenue between fixed contractual payments and variable lease payments for the three months ended March 31, 2020 and 2019 , respectively (dollars in thousands):

For the three months ended March 31,

(Dollars in Thousands)

The table below sets forth the allocation of lease revenue between fixed contractual payments and variable lease payments for the six months ended June 30, 2020 and 2019 , respectively (dollars in thousands):

For the three months ended June 30,

For the six months ended June 30,

Lease revenue reconciliation

Fixed rental payments

Variable rental payments

Fixed lease payments

Variable lease payments

Intangible Assets

The following table summarizes the carrying value of intangible assets, liabilities and the accumulated amortization for each intangible asset and liability class as of March 31, 2020 and December 31, 2019 , excluding real estate held for sale as of December 31, 2019 (dollars in thousands):

March 31, 2020

The following table summarizes the carrying value of intangible assets, liabilities and the accumulated amortization for each intangible asset and liability class as of June 30, 2020 and December 31, 2019 , excluding real estate held for sale as of June 30, 2020 and December 31, 2019 , respectively (dollars in thousands):

June 30, 2020

December 31, 2019

12 unchanged sentences

Below market leases and deferred revenue

Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $5.1 million and $5.0 million for the three months ended March 31, 2020 and 2019 , respectively, and is included in depreciation and amortization expense in the condensed consolidated statements of operations and comprehensive income.

Total amortization related to above-market lease values was $0.2 million and $0.3 million for the three months ended March 31, 2020 and 2019 , respectively, and is included in lease revenue in the condensed consolidated statements of operations and comprehensive income.

Total amortization related to below-market lease values was $0.7 million and $0.6 million for the three months ended March 31, 2020 and 2019 , respectively, and is included in lease revenue in the condensed consolidated statements of operations and comprehensive income.

The weighted average amortization periods in years for the intangible assets acquired during the three months ended March 31, 2020 and 2019 were as follows:

Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $ 5.0 million and $ 10.1 million for the three and six months ended June 30, 2020 , respectively, and $ 4.5 million and $ 9.5 million for the three and six months ended June 30, 2019 , respectively, and is included in depreciation and amortization expense in the condensed consolidated statements of operations and comprehensive income.

Total amortization related to above-market lease values was $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2020 , respectively, and $ 0.2 million and $ 0.5 million for the three and six months ended June 30, 2019 , respectively, and is included in lease revenue in the condensed consolidated statements of operations and comprehensive income.

Total amortization related to below-market lease values was $ 0.7 million and $ 1.4 million for the three and six months ended June 30, 2020 , respectively, and $ 0.6 million and $ 1.2 million for the three and six months ended June 30, 2019 , respectively, and is included in lease revenue in the condensed consolidated statements of operations and comprehensive income.

The weighted average amortization periods in years for the intangible assets acquired during the six months ended June 30, 2020 and 2019 were as follows:

Intangible Assets & Liabilities

7 unchanged sentences

Real Estate Dispositions

During the three months ended March 31, 2020 , we continued to execute our capital recycling program, whereby we sell properties outside of our core markets and redeploy proceeds to either fund property acquisitions in our target secondary growth markets, or repay outstanding debt.

During the six months ended June 30, 2020 , we continued to execute our capital recycling program, whereby we sell properties outside of our core markets and redeploy proceeds to either fund property acquisitions in our target secondary growth markets, or repay outstanding debt.

We expect to continue to execute our capital recycling plan and sell non-core properties as reasonable disposition opportunities become available.

2 unchanged sentences

Loss on Sale of Real Estate, net

Our disposition during the three months ended March 31, 2020 was not classified as a discontinued operation because it did not represent a strategic shift in operations, nor will it have a major effect on our operations and financial results.

Our disposition during the six months ended June 30, 2020 was not classified as a discontinued operation because it did not represent a strategic shift in operations, nor will it have a major effect on our operations and financial results.

Accordingly, the operating results of this property is included within continuing operations for all periods reported.

The table below summarizes the components of operating income from the real estate and related assets disposed of during the three months ended March 31, 2020 , and 2019 (dollars in thousands):

For the three months ended March 31,

The table below summarizes the components of operating income from the real estate and related assets disposed of during the three and six months ended June 30, 2020 , and 2019 (dollars in thousands):

For the three months ended June 30,

For the six months ended June 30,

Operating revenue

4 unchanged sentences

Real Estate Held for Sale

As of March 31, 2020 , we did not have any properties classified as held for sale.

As of June 30, 2020 , we had two properties classified as held for sale, located in Maple Heights, Ohio and Boston Heights, Ohio.

We consider these assets to be non-core to our long term strategy.

As of June 30, 2020 , our Maple Heights, Ohio property was under contract to sell, and we had an executed letter of intent for our Boston Heights, Ohio property.

At December 31, 2019 , we had one property classified as held for sale, located in Charlotte, North Carolina.

This property was sold during the three months ended March 31, 2020 .

This property was sold during the six months ended June 30, 2020 .

The table below summarizes the components of the assets and liabilities held for sale reflected on the accompanying condensed consolidated balance sheets (dollars in thousands):

June 30, 2020

December 31, 2019

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Total real estate held for sale, net

Lease intangibles, net

Deferred rent receivable, net

Total Assets Held for Sale

3 unchanged sentences

Impairment Charges

We evaluated our portfolio for triggering events to determine if any of our held and used assets were impaired during the three months ended March 31, 2020 and did no t identify any held and used assets which were impaired.

We also did not recognize an impairment charge during the three months ended March 31, 2019 .

We evaluated our portfolio for triggering events to determine if any of our held and used assets were impaired during the six months ended June 30, 2020 and identified one held and used asset, located in Blaine, Minnesota, which was impaired by $ 1.7 million .

In performing our impairment testing, the undiscounted cash flows for this asset were below the carrying value, so we impaired the asset and wrote it down to its fair value, which we determined using third party purchase offers.

We did not recognize an impairment charge during the six months ended June 30, 2019 .

We continue to evaluate our properties on a quarterly basis for changes that could create the need to record impairment.

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Mortgage Notes Payable and Credit Facility

Our mortgage notes payable and Credit Facility as of March 31, 2020 and December 31, 2019 are summarized below (dollars in thousands):

Our mortgage notes payable and Credit Facility as of June 30, 2020 and December 31, 2019 are summarized below (dollars in thousands):

Encumbered properties at

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Scheduled Maturity Dates at

March 31, 2020

June 30, 2020

December 31, 2019

March 31, 2020

June 30, 2020

Mortgage and other secured loans:

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Interest rates on our variable rate mortgage notes payable vary from one month LIBOR + 2.00 % to one month LIBOR + 2.75 % .

As of March 31, 2020 , one month LIBOR was approximately 0.99% .

The weighted average interest rate on the mortgage notes outstanding as of March 31, 2020 was approximately 4.32% .

The weighted average interest rate on all debt outstanding as of March 31, 2020 was approximately 3.86% .

The amount we may draw under our Credit Facility is based on a percentage of the fair value of a combined pool of 47 unencumbered properties as of March 31, 2020 .

As of June 30, 2020 , one month LIBOR was approximately 0.16 % .

The weighted average interest rate on the mortgage notes outstanding as of June 30, 2020 was approximately 4.27 % .

The weighted average interest rate on all debt outstanding as of June 30, 2020 was approximately 3.52 % .

The amount we may draw under our Credit Facility is based on a percentage of the fair value of a combined pool of 51 unencumbered properties as of June 30, 2020 .

N/A - Not Applicable

Mortgage Notes Payable

As of March 31, 2020 , we had 58 mortgage notes payable, collateralized by a total of 74 properties with a net book value of $730.5 million .

As of June 30, 2020 , we had 55 mortgage notes payable, collateralized by a total of 70 properties with a net book value of $ 710.3 million .

We have limited recourse liabilities that could result from any one or more of the following circumstances:

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We will also indemnify lenders against claims resulting from the presence of hazardous substances or activity involving hazardous substances in violation of environmental laws on a property.

During the three months ended March 31, 2020 , we issued four mortgages, collateralized by four properties, which are summarized in the table below (dollars in thousands):

During the six months ended June 30, 2020 , we repaid three mortgages, collateralized by four properties, which are summarized in the table below (dollars in thousands):

Aggregate Fixed Rate Debt Repaid

Interest Rate on Fixed Rate Debt Repaid

Aggregate Variable Rate Debt Repaid

Weighted Average Interest Rate on Variable Rate Debt Repaid

During the six months ended June 30, 2020 , we issued four mortgages, collateralized by four properties, which are summarized in the table below (dollars in thousands):

Aggregate Fixed Rate Debt Issued

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On March 9, 2020 , we issued $ 17.5 million of floating rate debt swapped to fixed rate debt of 2.8 % in connection with the one property acquisition.

We made payments of $0.4 million and $0.3 million for deferred financing costs during the three months ended March 31, 2020 and 2019 , respectively.

Scheduled principal payments of mortgage notes payable for the nine months ending December 31, 2020 , and each of the five succeeding years and thereafter are as follows (dollars in thousands):

We did no t make any payments for deferred financing costs during the three months ended June 30, 2020 and made payments of $ 0.4 million for deferred financing costs during the six months ended June 30, 2020 , and $ 0.4 million and $ 0.7 million for deferred financing costs during the three and six months ended June 30, 2019 , respectively.

Scheduled principal payments of mortgage notes payable for the six months ending December 31, 2020 , and each of the five succeeding years and thereafter are as follows (dollars in thousands):

Scheduled Principal Payments

Nine Months Ending December 31, 2020

Six Months Ending December 31, 2020

This figure does not include $ 0.2 million of premiums and discounts, net, and $ 3.8 million of deferred financing costs, which are reflected in mortgage notes payable, net on the condensed consolidated balance sheets.

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Generally, we will estimate the fair value of our interest rate caps and interest rate swaps, in the absence of observable market data, using estimates of value including estimated remaining life, counterparty credit risk, current market yield and interest rate spreads of similar securities as of the measurement date.

At March 31, 2020 and December 31, 2019 , our interest rate cap agreements and interest rate swaps were valued using Level 2 inputs.

At June 30, 2020 and December 31, 2019 , our interest rate cap agreements and interest rate swaps were valued using Level 2 inputs.

The fair value of the interest rate cap agreements is recorded in other assets on our accompanying condensed consolidated balance sheets.

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If the interest rate cap does not qualify for hedge accounting, or if it is determined the hedge is ineffective, any change in the fair value is recognized in interest expense in our consolidated statements of operations and comprehensive income.

The following table summarizes the interest rate caps at March 31, 2020 and December 31, 2019 (dollars in thousands):

March 31, 2020

The following table summarizes the interest rate caps at June 30, 2020 and December 31, 2019 (dollars in thousands):

June 30, 2020

December 31, 2019

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We record changes in fair value on a quarterly basis, using current market valuations at quarter end.

The following table summarizes our interest rate swaps at March 31, 2020 and December 31, 2019 (dollars in thousands):

March 31, 2020

The following table summarizes our interest rate swaps at June 30, 2020 and December 31, 2019 (dollars in thousands):

June 30, 2020

December 31, 2019

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Amount of loss recognized in Comprehensive Income

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Derivatives in cash flow hedging relationships

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Balance Sheet Location

March 31, 2020

June 30, 2020

December 31, 2019

3 unchanged sentences

Total derivative liabilities, net

The fair value of all mortgage notes payable outstanding as of March 31, 2020 was $501.9 million , as compared to the carrying value stated above of $490.6 million .

The fair value of all mortgage notes payable outstanding as of June 30, 2020 was $ 481.2 million , as compared to the carrying value stated above of $ 469.4 million .

The fair value is calculated based on a discounted cash flow analysis, using management’s estimate of market interest rates on long-term debt with comparable terms and loan to value ratios.

9 unchanged sentences

Bank National Association, The Huntington National Bank, Goldman Sachs Bank USA, and Wells Fargo Bank, National Association.

As of March 31, 2020 , there was $181.6 million outstanding under our Credit Facility, at a weighted average interest rate of approximately 2.60% , and $12.6 million outstanding under letters of credit, at a weighted average interest rate of 1.65% .

As of March 31, 2020 , the maximum additional amount we could draw under the Credit Facility was $17.2 million .

We were in compliance with all covenants under the Credit Facility as of March 31, 2020 .

The amount outstanding under the Credit Facility approximates fair value as of March 31, 2020 .

As of June 30, 2020 , there was $ 203.1 million outstanding under our Credit Facility, at a weighted average interest rate of approximately 1.77 % , and $ 13.5 million outstanding under letters of credit, at a weighted average interest rate of 1.65 % .

As of June 30, 2020 , the maximum additional amount we could draw under the Credit Facility was $ 19.5 million .

We were in compliance with all covenants under the Credit Facility as of June 30, 2020 .

The amount outstanding under the Credit Facility approximates fair value as of June 30, 2020 .

Commitments and Contingencies

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We are obligated as lessee under four ground leases.

Future lease payments due under the terms of these leases as of March 31, 2020 are as follows (dollars in thousands):

Future lease payments due under the terms of these leases as of June 30, 2020 are as follows (dollars in thousands):

Future Lease Payments Due Under Operating Leases

Nine Months Ending December 31, 2020

Six Months Ending December 31, 2020

Total anticipated lease payments

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Present value of lease payments

Rental expense incurred for properties with ground lease obligations during the three months ended March 31, 2020 and 2019 was $0.1 million and $0.1 million , respectively.

Rental expense incurred for properties with ground lease obligations during the three and six months ended June 30, 2020 was $ 0.1 million and $ 0.3 million , respectively, and during the three and six months ended June 30, 2019 was $ 0.1 million and $ 0.3 million , respectively.

Our ground leases are treated as operating leases and rental expenses are reflected in property operating expenses on the condensed consolidated statements of operations and comprehensive income.

Letters of Credit

As of March 31, 2020 , there was $12.6 million outstanding under letters of credit.

As of June 30, 2020 , there was $ 13.5 million outstanding under letters of credit.

These letters of credit are not reflected on our condensed consolidated balance sheets.

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Stockholders’ Equity

The following table summarizes the changes in our equity for the three months ended March 31, 2020 and 2019 (in thousands):

Three Months Ended March 31,

The following table summarizes the changes in our equity for the three and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Series A and B Preferred Stock

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Distributions

We paid the following distributions per share for the three months ended March 31, 2020 and 2019 :

For the three months ended March 31,

We paid the following distributions per share for the three and six months ended June 30, 2020 and 2019 :

For the three months ended June 30,

For the six months ended June 30,

Common Stock and Non-controlling OP Units

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Series E Preferred Stock

Series F Preferred Stock

We fully redeemed all outstanding shares of both Series A Preferred Stock and Series B Preferred Stock on October 28, 2019.

Series F Preferred Stock distributions were declared, but not paid, as there were no Series F Preferred Stock shares outstanding on the applicable dividend record dates.

Recent Activity

Common Stock ATM Program

During the three months ended March 31, 2020 , we sold 1.3 million shares of common stock, raising $27.9 million in net proceeds under our At-the-Market Equity Offering Sales Agreements (the “Common Stock Sales Agreement”), with Robert W.

During the six months ended June 30, 2020 , we sold 1.3 million shares of common stock, raising $ 28.4 million in net proceeds under our At-the-Market Equity Offering Sales Agreements with sales agents Robert W.

Incorporated (“Baird”), Goldman Sachs & Co.

LLC (“Goldman Sachs”), Stifel, Nicolaus & Company, Incorporated (“Stifel”), BTIG, LLC, and Fifth Third Securities, Inc.

(“Fifth Third”) (collectively, the “Common Stock Sales Agents”), pursuant to which we may sell shares of our common stock in an aggregate offering price of up to $250.0 million (the “Common Stock ATM Program”).

As of March 31, 2020 , we had remaining capacity to sell up to $209.2 million of common stock under the Common Stock ATM Program.

(“Fifth Third”), pursuant to which we may sell shares of our common stock in an aggregate offering price of up to $ 250.0 million (the “Common Stock ATM Program”).

As of June 30, 2020 , we had remaining capacity to sell up to $ 208.7 million of common stock under the Common Stock ATM Program.

Mezzanine Equity

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We currently believe the likelihood of a change of control greater than 50%, or a delisting event, is remote.

We have an At-the-Market Equity Offering Sales Agreement (the “Series E Preferred Stock Sales Agreement”) with Baird, Goldman Sachs, Stifel, Fifth Third, and U.S.

Bancorp Investments, Inc.

(the “Series E Preferred Stock Sales Agents”), pursuant to which we may, from time to time, offer to sell shares of our Series E Preferred Stock in an aggregate offering price of up to $100.0 million .

We did not sell any of our Series E Preferred Stock pursuant to the Series E Preferred Stock Sales Agreement during the three months ended March 31, 2020 .

We have an At-the-Market Equity Offering Sales Agreement with sales agents Baird, Goldman Sachs, Stifel, Fifth Third, and U.S.

Bancorp Investments, Inc., pursuant to which we may, from time to time, offer to sell shares of our Series E Preferred Stock in an aggregate offering price of up to $ 100.0 million .

We sold 86,564 shares of our Series E Preferred Stock, raising $ 1.9 million in net proceeds under the agreement during the six months ended June 30, 2020 .

As of June 30, 2020 , we had remaining capacity to sell up to $ 98.0 million of Series E Preferred Stock under the Series E Preferred Stock Sales Agreement.

We do not have an active At-the-Market program for our Series D Preferred Stock.

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The 2019 Universal Shelf allows us to issue up to $ 500.0 million of securities.

As of March 31, 2020 , we had the ability to issue up to $409.7 million under the 2019 Universal Shelf.

As of June 30, 2020 , we had the ability to issue up to $ 407.2 million under the 2019 Universal Shelf.

On January 29, 2020 , we filed an additional universal registration statement on Form S-3, File No.

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Of the $ 800.0 million of available capacity under our 2020 Universal Shelf, approximately $ 636.5 million is reserved for the sale of our Series F Preferred Stock.

As of March 31, 2020 , we had the ability to issue up to $800.0 million of securities under the 2020 universal shelf, as we have not sold any securities under the 2020 Universal Shelf.

As of June 30, 2020 , we had the ability to issue up to $ 800.0 million of securities under the 2020 universal shelf, as we have not sold any securities under the 2020 Universal Shelf.

Series F Preferred Stock

3 unchanged sentences

Amendment to Operating Partnership Agreement

In connection with the authorization of the Series F Preferred Stock, the Operating Partnership controlled by the Company through its ownership of GCLP Business Trust II, the general partner of the Operating Partnership, adopted the Second Amendment to its Second Amended and Restated Agreement of Limited Partnership, including Exhibit SFP thereto (collectively, the “Amendment”), as amended from time to time, establishing the rights, privileges and preferences of 6.00% Series F Cumulative Redeemable Preferred Units, a newly-designated class of limited partnership interests (the “Series F Preferred Units”).

In connection with the authorization of the Series F Preferred Stock in February of 2020, the Operating Partnership controlled by the Company through its ownership of GCLP Business Trust II, the general partner of the Operating Partnership, adopted the Second Amendment to its Second Amended and Restated Agreement of Limited Partnership, including Exhibit SFP thereto (collectively, the “Amendment”), as amended from time to time, establishing the rights, privileges and preferences of 6.00 % Series F Cumulative Redeemable Preferred Units, a newly-designated class of limited partnership interests (the “Series F Preferred Units”).

The Amendment provides for the Operating Partnership’s establishment and issuance of an equal number of Series F Preferred Units as are issued shares of Series F Preferred Stock by the Company in connection with the Offering upon the Company’s contribution to the Operating Partnership of the net proceeds of the Offering.

2 unchanged sentences

Distributions

On April 14, 2020 , our Board of Directors declared the following monthly distributions for the months of April , May and June of 2020 :

On July 14, 2020 , our Board of Directors declared the following monthly distributions for the months of July , August and September of 2020 :

Common Stock and Non-controlling OP Unit Distributions per Share

1 unchanged sentence

Series E Preferred Distributions per Share

April 24, 2020

April 30, 2020

June 19, 2020

June 30, 2020

July 24, 2020

July 31, 2020

August 24, 2020

August 31, 2020

September 23, 2020

September 30, 2020

Senior Common Stock Distributions

1 unchanged sentence

Distribution per Share

August 5, 2020

September 4, 2020

October 5, 2020

Series F Preferred Stock Distributions

Distribution per Share

April 29, 2020

June 25, 2020

Financing Activity

On April 24, 2020, we repaid $5.9 million of fixed rate mortgage debt collateralized by one property with an interest rate of 6.0% , and we repaid $12.1 million of variable rate mortgage debt collateralized by two properties with an interest rate of one month LIBOR + 2.25% .

We repaid these mortgages using cash on hand and borrowings from our Credit Facility.

As of April 28, 2020 , we have collected approximately 98% of all outstanding April cash base rent obligations.

July 29, 2020

August 5, 2020

August 26, 2020

September 4, 2020

September 30, 2020

October 7, 2020

As of July 27, 2020 , we have collected approximately 99 % of all outstanding July cash base rent obligations.

In April 2020, we granted rent deferrals to three tenants representing approximately 2 % of total portfolio rents.

We have received and may receive additional rent modification requests in future periods from our tenants.

We have received and may receive additional rent modification requests in future periods from our tenants, but we have not granted any additional rent deferrals at this time.

We are unable to quantify the economic impact of these potential requests at this time.

Equity Activity

Subsequent to June 30, 2020 and through July 27, 2020 , we raised $ 1.6 million in net proceeds from the sale of 85,000 shares of Common Stock under our Common Stock ATM Program and $ 1.5 million in net proceeds from the sale of 67,249 shares of Series E Preferred Stock under our Series E Preferred ATM Program.

Leasing activity

On July 8, 2020 , the tenant in our Richmond, Virginia property renewed their lease for an additional six years , with a new maturity date of September 30, 2026 .

Sale activity

On July 1, 2020 , we sold our Maple Heights, Ohio property for $ 11.4 million .

We recognized a gain on sale, net, of $ 1.2 million .

Financing activity

On July 1, 2020 , we repaid the $ 4.0 million variable rate debt on our Maple Heights, Ohio property.

The Company’s entrance into the Amended Agreement was approved by its board of directors, including, specifically, unanimously by its independent directors.

The Amended Agreement revised and replaced the previous calculation of the Base Management Fee, which was based on Total Equity, with a calculation based on Gross Tangible Real Estate.

The calculation of the other fees in the Amended Agreement remain unchanged.

The revised Base Management Fee calculation will begin with the fee calculations for the quarter ending September 30, 2020 .

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

What changed 10-Q

Item 1. Financial Statements