What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-07-29 compared with 2021-04-29 · 109 added, 79 removed, 310 unchanged (38% of the section changed)

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loan loss reserves or allowances;

our belief that our accruals for environmental and litigation matters including matters related to our former Newark, New Jersey Terminal and the Lower Passaic River, our MTBE multi-district litigation cases in the states of Pennsylvania and Maryland, and our lawsuit with the State of New York pertaining to a property formerly owned by us in Uniondale, New York, were appropriate based on the information then available;

our belief that our accruals for environmental and litigation matters including matters related to our former Newark, New Jersey Terminal and the Lower Passaic River, our MTBE multi-district litigation cases in the states of Pennsylvania and Maryland, and the anticipated settlement of our lawsuit with the State of New York pertaining to a property formerly owned by us in Uniondale, New York, were appropriate based on the information then available;

our claims for reimbursement of monies expended in the defense and settlement of certain MTBE cases under pollution insurance policies;

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Real Estate Investment Trust

We are a REIT specializing in the acquisition, ownership, leasing, redevelopment and financing of convenience store, gasoline station and other automotive-related and retail real estate, including express car washes, instant oil change centers, automotive service centers, automotive parts retailers and select other properties.

As of March 31, 2021, we owned 902 properties and leased 58 properties from third-party landlords.

We are a REIT specializing in the acquisition, financing and development of convenience, automotive and other single tenant retail real estate.

As of June 30, 2021, we owned 951 properties and leased 54 properties from third-party landlords.

As a REIT, we are not subject to federal corporate income tax on the taxable income we distribute to our stockholders.

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Our Triple-Net Leases

Substantially all of our properties are leased on a triple-net basis to convenience store operators, petroleum distributors and other automotive-related and retail tenants.

Our tenants either operate their businesses at our properties directly or sublet our properties and supply fuel to third parties who operate the convenience store and gasoline station businesses.

Substantially all of our properties are leased on a triple-net basis to convenience store operators, petroleum distributors, car wash operators and other automotive-related and retail tenants.

Our tenants either operate their businesses at our properties directly or, in the case of certain convenience stores and gasoline stations, sublet our properties and supply fuel to third parties who operate the businesses.

Our triple-net lease tenants are responsible for the payment of all taxes, maintenance, repairs, insurance and other operating expenses relating to our properties, and are also responsible for environmental contamination occurring during the terms of their leases and in certain cases also for environmental contamination that existed before their leases commenced.

A majority all of our tenants’ financial results depend on convenience store sales, the sale of refined petroleum products and/or rental income from their subtenants.

A majority of our tenants’ financial results depend on convenience store sales, the sale of refined petroleum products and/or rental income from their subtenants.

As a result, our tenants’ financial results are highly dependent on the performance of the petroleum marketing industry, which is highly competitive and subject to volatility.

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Our Properties

As of March 31, 2021, we leased 949 of our properties to tenants under triple-net leases.

As of June 30, 2021, we leased 994 of our properties to tenants under triple-net leases.

Our net lease properties include 833 properties leased under 32 separate unitary or master triple-net leases and 161 properties leased under single unit triple-net leases.

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Redevelopment .

As of March 31, 2021, we were actively redeveloping six of our properties either for new convenience and gasoline use or for alternative single-tenant net lease retail uses.

As of March 31, 2021, five of our properties were vacant.

As of June 30, 2021, we were actively redeveloping six of our properties either for new convenience and gasoline use or for alternative single-tenant net lease retail uses.

As of June 30, 2021, five of our properties were vacant.

We expect that we will either sell or enter into new leases on these properties over time.

Investment Strategy and Activity

As part of our overall growth strategy, we regularly review acquisition and financing opportunities to invest in additional convenience store and gasoline station, and other automotive-related and retail real estate.

As part of our overall growth strategy, we regularly review acquisition and financing opportunities to invest in additional convenience, automotive and other single tenant retail real estate.

We primarily pursue sale-leaseback transactions and other real estate acquisitions that result in us owning fee simple interests in our properties.

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A key element of our investment strategy is to invest in properties that will enhance our geographic and tenant diversification.

During the three months ended March 31, 2021, we acquired fee simple interests in six properties for an aggregate purchase price of $21.9 million.

During the three months ended March 31, 2020, we acquired fee simple interests in 12 properties for an aggregate purchase price of $57.3 million.

During the six months ended June 30, 2021, we acquired fee simple interests in 55 properties for an aggregate purchase price of $63.3 million.

During the six months ended June 30, 2020, we acquired fee simple interests in 15 properties for an aggregate purchase price of $68.7 million.

From time to time, we may originate construction loans for the construction of income-producing properties, which we expect to purchase via sale leaseback transactions at the end of the construction period.

During the three months ended March 31, 2021, we funded, and had outstanding as of March 31, 2021, such construction loans in the amount of $8.4 million, including accrued interest .

During the six months ended June 30, 2021, we funded, and had outstanding as of June 30, 2021, such construction loans in the amount of $11.1 million, including accrued interest.

At the end of the construction period, the construction loans will be repaid with the proceeds from the sale of the properties.

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We believe that the redeveloped properties can be leased or sold at higher values than their current use.

During the three months ended March 31, 2020, rent commenced on two completed redevelopment projects that were placed back into service in our net lease portfolio.

During the six months ended June 30, 2021, there were no rent commencements.

For the six months ended June 30, 2020, rent commenced on four completed redevelopment projects that were placed back into service in our net lease portfolio.

Since the inception of our redevelopment program in 2015, we have completed 19 redevelopment projects.

During the three months ended March 31, 2020, we transferred $1.2 million of construction-in-progress to buildings and improvements on our consolidated balance sheets.

As of March 31, 2021, we had six properties under active redevelopment and others in various stages of feasibility planning for potential recapture from our net lease portfolio, including five properties for which we have signed new leases or letters of intent and which will be transferred to redevelopment when the appropriate entitlements, permits and approvals have been secured.

As of June 30, 2021, we had six properties under active redevelopment and others in various stages of feasibility planning for potential recapture from our net lease portfolio, including five properties for which we have signed new leases or letters of intent and which will be transferred to redevelopment when the appropriate entitlements, permits and approvals have been secured.

Asset Impairment

We perform an impairment analysis for the carrying amounts of our properties in accordance with GAAP when indicators of impairment exist.

We reduced the carrying amounts to fair value, and recorded impairment charges aggregating $0.8 million for the three months ended March 31, 2021 and $1.0 million for the three months ended March 31, 2020, where the carrying amounts of the properties exceed the estimated undiscounted cash flows expected to be received during the assumed holding period which includes the estimated sales value expected to be received at disposition.

We reduced the carrying amounts to fair value, and recorded impairment charges aggregating $0.8 million and $1.5 million for the three and six months ended June 30, 2021, and $0.5 million and $1.5 million for the three and six months ended June 30, 2020, where the carrying amounts of the properties exceed the estimated undiscounted cash flows expected to be received during the assumed holding period which includes the estimated sales value expected to be received at disposition.

The impairment charges were attributable to (i) the effect of adding asset retirement costs to certain properties due to changes in estimates associated with our environmental liabilities, which increased the carrying values of these properties in excess of their fair values, (ii) reductions in estimated undiscounted cash flows expected to be received during the assumed holding period for certain of our properties, and (iii) reductions in estimated sales prices from third-party offers based on signed contracts, letters of intent or indicative bids for certain of our properties.

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Three Months Ended

Six Months Ended

Depreciation and amortization of real estate assets

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Three Months Ended

Six Months Ended

Results of Operations

The following discussion describes our results of operations for the three months ended March 31, 2021.

While the COVID-19 pandemic did not have a material adverse effect on our reported results for the three months ended March 31, 2021, we are actively monitoring the impact of COVID-19, which may negatively impact our business and results of operations for subsequent quarters.

Three months ended March 31, 2021, compared to the three months ended March 31, 2020

Revenues from rental properties increased by $2.3 million to $37.0 million for the three months ended March 31, 2021, as compared to $34.7 million for the three months ended March 31, 2020.

The increase in revenues from rental properties was primarily due to revenue from newly acquired properties during the last nine months of 2020 along with contractual rent increases, partially offset by a decrease in Revenue Recognition Adjustments of $0.2 million.

Rental income contractually due from our tenants included in revenues from rental properties was $33.5 million for the three months ended March 31, 2021, as compared to $31.4 million for the three months ended March 31, 2020.

Tenant reimbursements, which are included in revenues from rental properties, and which consist of real estate taxes and other municipal charges paid by us which are reimbursable by our tenants pursuant to the terms of triple-net lease agreements, were $3.8 million and $3.3 million for the three months ended March 31, 2021 and 2020, respectively.

Interest income on notes and mortgages receivable was $0.3 million for the three months ended March 31, 2021, as compared to $0.7 million for the three months ended March 31, 2020.

The following discussion describes our results of operations for the three and six months ended June 30, 2021.

While the COVID-19 pandemic did not have a material adverse effect on our reported results for the three and six months ended June 30, 2021, we are actively monitoring the impact of COVID-19, which may negatively impact our business and results of operations for subsequent quarters.

Three months ended June 30, 2021 , compared to the three months ended June 30, 2020

Revenues from rental properties increased by $2.0 million to $38.3 million for the three months ended June 30, 2021, as compared to $36.3 million for the three months ended June 30, 2020.

The increase in revenues from rental properties was primarily due to revenue from newly acquired properties during the first six months of 2021 and the last six months of 2020, along with contractual rent increases.

Rental income contractually due from our tenants included in revenues from rental properties was $34.4 million for the three months ended June 30, 2021, as compared to $31.8 million for the three months ended June 30, 2020.

Tenant reimbursements, which are included in revenues from rental properties, and which consist of real estate taxes and other municipal charges paid by us which are reimbursable by our tenants pursuant to the terms of triple-net lease agreements, were $4.3 million and $4.6 million for the three months ended June 30, 2021 and 2020, respectively.

Interest income on notes and mortgages receivable was $0.4 million for the three months ended June 30, 2021, as compared to $0.7 million for the six months ended June 30, 2020.

In accordance with GAAP, we recognize revenues from rental properties in amounts which vary from the amount of rent contractually due during the periods presented.

As a result, revenues from rental properties include Revenue Recognition Adjustments comprised of non-cash adjustments recorded for deferred rental revenue due to the recognition of rental income on a straight-line basis

over the current lease term, the net amortization of above-market and below-market leases, recognition of rental income under direct financing leases using the effective interest rate method which produces a constant periodic rate of return on the net investments in the leased properties and the amortization of deferred lease incentives.

As a result, revenues from rental properties include Revenue Recognition Adjustments

comprised of ( i ) non-cash adjustments recorded for deferred rental revenue due to the recognition of rental income on a straight-line basis over the current lease term, (ii) the net amortization of above-market and below-market leases, (iii) recognition of rental income under direct financing leases using the effective interest rate method which produces a constant periodic rate of return on the net investments in the leased properties and (iv) the amortization of deferred lease incentives.

Revenues from rental properties include Revenue Recognition Adjustments which de creased rental revenue by $ 0.

4 million and $ 0.1 million f or the three months ended June 30, 2021 and 2020 , respectively .

Property costs, which are primarily comprised of rent expense, real estate and other state and local taxes, municipal charges, professional fees, maintenance expense and reimbursable tenant expenses, were $5.6 million for the three months ended June 30, 2021, as compared to $6.4 million for the three months ended June 30, 2020.

The decrease in property costs for the three months ended June 30, 2021, was principally due to reductions in real estate taxes, professional fees and maintenance expense related to property redevelopments.

Impairment charges were $0.8 million for the three months ended June 30, 2021, as compared to $0.5 million for the three months ended June 30, 2020.

Impairment charges are recorded when the carrying value of a property is reduced to fair value.

Impairment charges for the three months ended June 30, 2021 and 2020, were attributable to (i) the effect of adding asset retirement costs to certain properties due to changes in estimates associated with our environmental liabilities, which increased the carrying values of these properties in excess of their fair values, (ii) reductions in estimated sales prices from third-party offers based on signed contracts, letters of intent or indicative bids for certain of our properties, and (iii) reductions in estimated undiscounted cash flows expected to be received during the assumed holding period for certain of our properties.

Environmental expenses for the three months ended June 30, 2021 were $0.1 million, as compared to $0.8 million for the three months ended June 30, 2020.

The decrease in environmental expenses for the three months ended June 30, 2021, was principally due to a $0.4 million decrease in environmental legal fees and a $0.3 million decrease in net environmental remediation costs and estimates.

Environmental expenses vary from period to period and, accordingly, undue reliance should not be placed on the magnitude or the direction of changes in reported environmental expenses for one period, as compared to prior periods.

General and administrative expense was $5.1 million for the three months ended June 30, 2021, as compared to $4.5 million for the three months ended June 30, 2020.

The increase in general and administrative expense for the three months ended June 30, 2021, was principally due to $0.1 million of non-recurring expenses attributable to the retirement of personnel and a $0.4 million in other employee-related expenses.

Depreciation and amortization expense was $8.6 million for the three months ended June 30, 2021, as compared to $7.3 million for the three months ended June 30, 2020.

The increase in depreciation and amortization expense for the three months ended June 30, 2021, was primarily due to depreciation and amortization of properties acquired, partially offset by the effect of certain assets becoming fully depreciated and dispositions of real estate.

Gains on dispositions of real estate were $0.3 million for the three months ended June 30, 2021, as compared to $0.2 million for the three months ended June 30, 2020.

The gains were the result of the one partial condemnation during the three months ended June 30, 2021 and one sale and one partial condemnation during the three months ended June 30, 2020, respectively.

Interest expense was $6.2 million for the three months ended June 30, 2021, as compared to $6.7 million for the three months ended June 30, 2020.

The decrease was due to lower average borrowings outstanding and a decrease in average interest rates on borrowings outstanding for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020.

For the three months ended June 30, 2021, FFO was $22.0 million, as compared to $18.6 million for the three months ended June 30, 2020.

For the three months ended June 30, 2021, AFFO increased by $3.5 million to $22.1 million, as compared to $18.6 million for the three months ended June 30, 2020.

FFO for the three months ended June 30, 2021, was impacted by changes in net earnings but excludes a $0.1 million increase in gain on dispositions of real estate, a $1.3 million increase in depreciation and amortization expense and a $0.3 million increase in impairment charges.

The increase in AFFO for the three months ended June 30, 2021, also excludes a $0.3 million decrease in environmental estimates and accretion expense, a $0.3 million increase in Revenue Recognition Adjustments, $0.1 million increase in legal settlements and judgements, a $0.1 million decrease in insurance reimbursements and $0.1 million increase in retirement costs.

Six months ended June 30, 2021, compared to the six months ended June 30, 2020

Revenues from rental properties increased by $4.2 million to $75.2 million for the six months ended June 30, 2021, as compared to $71.0 million for the six months ended June 30, 2020.

Rental income contractually due from our tenants included in revenues from rental properties was $67.9 million for the six months ended June 30, 2021, as compared to $63.2 million for the six months ended June 30, 2020.

Tenant reimbursements, which consist of real estate taxes and other municipal charges paid by us which are reimbursable by our tenants pursuant to the terms of triple-net lease agreements, were $8.0 million for the six months ended June 30, 2021 and 2020.

Interest income on notes and mortgages receivable was $0.7 million and $1.4 million for the six months ended June 30, 2021 and 2020, respectively.

In accordance with GAAP, we recognize revenues from rental properties in amounts which vary from the amount of rent contractually due during the periods presented.

As a result, revenues from rental properties include Revenue Recognition Adjustments

Revenues from rental properties includes Revenue Recognition Adjustments which de creased rental revenue by $0.

3 million and $69 thousand f or the three months ended March 31, 2021 and 2020 , respectively .

Property costs, which are primarily comprised of rent expense, real estate and other state and local taxes, municipal charges, professional fees, maintenance expense and reimbursable tenant expenses, were $5.3 million for the three months ended March 31, 2021, as compared to $4.9 million for the three months ended March 31, 2020.

The increase in property costs for the three months ended March 31, 2021, was principally due to an increase in rent expense, professional fees and maintenance expense related to property redevelopments.

Impairment charges were $0.8 million for the three months ended March 31, 2021, as compared to $1.0 million for the three months ended March 31, 2020.

7 million and $ 0.

2 million for the six months ended June 30, 2021 and 2020 , respectively .

Property costs, which are primarily comprised of rent expense, real estate and other state and local taxes, municipal charges, professional fees, maintenance expense and reimbursable tenant expenses, were $10.8 million for the six months ended June 30, 2021, as compared to $11.3 million for the six months ended June 30, 2020.

The decrease in property costs for the six months ended June 30, 2021, was principally due to reductions in rent expense, non-reimbursable real estate taxes and professional and maintenance fees related to property redevelopments, partially offset by an increase in reimbursable real estate taxes.

Impairment charges were $1.5 million for the six months ended June 30, 2021 and 2020.

Impairment charges are recorded when the carrying value of a property is reduced to fair value.

Impairment charges for the three months ended March 31, 2021 and 2020, were attributable to (i) the effect of adding asset retirement costs to certain properties due to changes in estimates associated with our environmental liabilities, which increased the carrying values of these properties in excess of their fair values, (ii) reductions in estimated sales prices from third-party offers based on signed contracts, letters of intent or indicative bids for certain of our properties, and (iii) reductions in estimated undiscounted cash flows expected to be received during the assumed holding period for certain of our properties.

Environmental expenses for the three months ended March 31, 2021 were $0.5 million, as compared to $0.2 million for the three months ended March 31, 2020.

The increase in environmental expenses for the three months ended March 31, 2021, was principally due to a $0.5 million increase in net environmental remediation costs and estimates, partially offset by a $0.2 million decrease in environmental legal and professional fees.

Impairment charges for the six months ended June 30, 2021 and 2020, were attributable to the effect of adding asset retirement costs due to changes in estimates associated with our environmental liabilities, which increased the carrying values of certain properties in excess of their fair values, reductions in estimated undiscounted cash flows expected to be received during the assumed holding period for certain of our properties, and reductions in estimated sales prices from third-party offers based on signed contracts, letters of intent or indicative bids for certain of our properties.

Environmental expenses for the six months ended June 30, 2021, decreased by $0.5 million to $0.6 million, as compared to $1.1 million for the six months ended June 30, 2020.

The decrease in environmental expenses for the six months ended June 30, 2021, was principally due to a decrease in environmental legal and professional fees .

General and administrative expense was $5.5 million for the three months ended March 31, 2021, as compared to $4.1 million for the three months ended March 31, 2020.

The increase in general and administrative expense for the three months ended March 31, 2021, was principally due to an increase of $0.5 million in non-recurring expenses attributable to retirement costs, $0.4 million in employee-related expenses and $0.3 million in legal and other professional fees.

Depreciation and amortization expense was $8.4 million for the three months ended March 31, 2021, as compared to $7.1 million for the three months ended March 31, 2020.

The increase in depreciation and amortization expense for the three months ended March 31, 2021, was primarily due to depreciation and amortization of properties acquired, partially offset by the effect of certain assets becoming fully depreciated and dispositions of real estate.

Gains on dispositions of real estate were $7.2 million for the three months ended March 31, 2021, as compared to $0.9 million for the three months ended March 31, 2020.

The gains were the result of the sale of five and four properties during the three months ended March 31, 2021 and 2020, respectively.

Other income was $0.1 million for the three months ended March 31, 2021, as compared to $0.5 million for the three months ended March 31, 2020.

For the three months ended March 31, 2020, other income was primarily attributable to $0.4 million received from a legal settlement.

Interest expense was $6.1 million for the three months ended March 31, 2021, as compared to $6.7 million for the three months ended March 31, 2020.

The decrease was due to lower average borrowings outstanding and a decrease in average interest rates on borrowings outstanding for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020.

For the three months ended March 31, 2021, FFO was $19.9 million, as compared to $20.0 million for the three months ended March 31, 2020.

For the three months ended March 31, 2021, AFFO increased by $1.6 million to $20.9 million, as compared to $19.3 million for the three months ended March 31, 2020.

FFO for the three months ended March 31, 2021, was impacted by changes in net earnings but excludes a $6.3 million increase in gain on dispositions of real estate, a $1.3 million increase in depreciation and amortization expense and a $0.2 million decrease in impairment charges.

The increase in AFFO for the three months ended March 31, 2021, also excludes a $0.5 million decrease in environmental estimates and accretion expense, a $0.3 million increase in Revenue Recognition Adjustments, a $29 thousand increase in insurance reimbursements and $0.5 million increase in retirement costs.

General and administrative expense was $10.6 million for the six months ended June 30, 2021, as compared to $8.6 million for the six months ended June 30, 2020.

The increase in general and administrative expense for the six months ended June 30, 2021, was principally due to a $0.8 million increase in employee-related expenses, $0.7 million of non-recurring expenses attributable to the retirement of personnel and a $0.2 million increase in legal and other professional fees.

Depreciation and amortization expense was $17.1 million for the six months ended June 30, 2021, as compared to $14.4 million for the six months ended June 30, 2020.

The increase in depreciation and amortization expense for the six months ended June 30, 2021, was primarily due to depreciation and amortization charges related to properties acquired, partially offset by the effect of certain assets becoming fully depreciated and dispositions of real estate.

Interest expense was $12.3 million for the six months ended June 30, 2021, as compared to $13.4 million for the six months ended June 30, 2020.

The decrease was due to lower average borrowings outstanding and a decrease in average interest rates on borrowings outstanding for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020.

For the six months ended June 30, 2021, FFO increased by $3.4 million to $42.0 million as compared to $38.6 million for the prior period.

For the six months ended June 30, 2021, AFFO increased by $5.2 million to $43.1 million, as compared to $37.9 million for the prior period.

FFO for the six months ended June 30, 2021, was impacted by the changes in net earnings but excludes a $6.4 million increase in gains on dispositions of real estate and a $2.7 million increase in depreciation and amortization expense.

The increase in AFFO for the six months ended June 30, 2021, also excludes a $0.3 million decrease in legal settlements and judgements, and $0.5 million increase in Revenue Recognition Adjustments a $0.1 million increase in environmental estimates and accretion expense and a $0.1 million decrease in insurance reimbursements.

Liquidity and Capital Resources

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We believe that our operating cash needs for the next twelve months can be met by cash flows from operations, borrowings under our Revolving Facility, proceeds from the sale of shares of our common stock under our ATM Program and available cash and cash equivalents.

Our cash flow activities for the three months ended March 31, 2021 and 2020 , are summarized as follows (in thousands):

Three Months Ended

Our cash flow activities for the six months ended June 30, 2021 and 2020, are summarized as follows (in thousands):

Six Months Ended

Net cash flow provided by operating activities

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Operating Activities

Net cash flow from operating activities increased by $1.5 million for the three months ended March 31, 2021, to $19.4 million, as compared to $17.9 million for the three months ended March 31, 2020.

Net cash flow from operating activities increased by $7.2 million for the six months ended June 30, 2021, to $40.0 million, as compared to $32.8 million for the six months ended June 30, 2020.

Net cash provided by operating activities represents cash received primarily from rental and interest income less cash used for property costs, environmental expense, general and administrative expense and interest expense.

The change in net cash flow provided by operating activities for the three months ended March 31, 2021 and 2020, is primarily the result of changes in revenues and expenses as discussed in “Results of Operations” above and the other changes in assets and liabilities on our consolidated statements of cash flows.

The change in net cash flow provided by operating activities for the six months ended June 30, 2021 and 2020 is primarily the result of changes in revenues and expenses as discussed in “Results of Operations” above and the other changes in assets and liabilities on our consolidated statements of cash flows.

Investing Activities

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Because we generally lease our properties on a triple-net basis, we have not historically incurred significant capital expenditures other than those related to investments in real estate and our redevelopment activities.

Net cash flow used in investing activities decreased by $33.3 million for the three months ended March 31, 2021, to a use of $19.8 million, as compared to a use of $53.1 million for the three months ended March 31, 2020.

The decrease in net cash flow used in investing activities for the three months ended March 31, 2021, was primarily due to a decrease of $35.4 million for property acquisitions, an increase of $7.6 million in proceeds from dispositions of real estate and a decrease of $1.0 million in deposits on property acquisitions, partially offset by an increase of $8.4 million in issuance of notes and mortgages receivable and a decrease of $2.2 million in collection of notes and mortgages receivables.

Net cash flow used in investing activities decreased by $2.9 million for the six months ended June 30, 2021, to a use of $62.1 million, as compared to a use of $65.0 million for the six months ended June 30, 2020.

The decrease in net cash flow used in investing activities was primarily due to a decrease of $5.4 million for property acquisitions, an increase of $9.0 million in issuance of notes and mortgages receivable, a decrease of $2.9 million in collection of notes and mortgages receivables partially offset by an increase of $7.6 million in proceeds from dispositions of real estate and an increase of $2.1 million in deposits on property acquisitions for the six months ended June 30, 2021.

Financing Activities

Net cash flow used in financing activities increased by $72.4 million for the three months ended March 31, 2021, to a use of $22.9 million, as compared to funds provided of $49.5 million for the three months ended March 31, 2020.

The increase in net cash flow used in financing activities was primarily due to a decrease in net borrowings under credit agreement of $90.0 million and an increase in dividends paid of $2.1 million, partially offset by an increase in net proceeds under the ATM agreement of $20.3 million.

Net cash flow used in financing activities decreased by $49.7 million for the six months ended June 30, 2021, to a use of $14.1 million, as compared to funds provided of $35.6 million for the six months ended June 30, 2020.

The decrease in net cash flow used in financing activities was primarily due to a decrease in net borrowings under credit agreement of $62.5 million and an increase in dividends paid of $4.2 million, partially offset by an increase in net proceeds under the ATM agreement of $17.7 million.

Credit Agreement

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The First Amendment modifies the Restated Credit Agreement to, among other things:

(i) reflect that we had previously entered into (a) an amended and restated note purchase and guarantee agreement with The Prudential Insurance Company of America (“Prudential”) and certain of its affiliates and (b) a note purchase and guarantee agreement with the Metropolitan Life Insurance Company (“MetLife”)

and certain of its affiliates;

and (ii) permit borrowings under each of the Revolving Facility and the Term Loan at three different interest rates, including a rate based on the LIBOR Daily Floating Rate (as defined in the First Amendment) plus the Applicable Rate (as defined in the First Amendment) for such f acility .

On September 12, 2019, in connection with prepayment of the Term Loan, we entered into a consent and amendment (the “Second Amendment”) of our Restated Credit Agreement.

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In February 2021, we established a new at-the-market equity offering program (the “ATM Program”), pursuant to which we are able to issue and sell shares of our common stock with an aggregate sales price of up to $250.0 million through a consortium of banks acting as agents.

Sales of the shares of common stock may be made, as needed, from time to time in at-the-market offerings as defined in Rule 415 of the Securities Act, including by means of ordinary brokers’ transactions on the New York Stock Exchange or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or as otherwise agreed to with the applicable agent.

During the three months ended March 31, 2021, we issued a total of 743,000 shares of common stock and received net proceeds of $20.3 million under the 2018 ATM Program and the ATM Program.

During the three months ended March 31, 2020, no shares of common stock were issued under the 2018 ATM Program.

Sales of the shares of common stock may be made, as needed, from time to time in at-the-market offerings as defined

in Rule 415 of the Securities Act, including by means of ordinary brokers’ transactions on the New York Stock Exchange or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or as otherwise agreed to with the applicable agent.

During the three and six months ended June 30, 2021, we issued a total of 289,000 and 1,032,000 shares, respectively, of common stock and received net proceeds of $9.3 million and $29.6 million, respectively, under the 2018 ATM Program and the ATM Program.

During the three and six months ended June 30, 2020, we issued a total of 404,000 shares of common stock and received net proceeds of $11.9 million under the 2018 ATM Program.

Future sales, if any, will depend on a variety of factors to be determined by us from time to time, including among others, market conditions, the trading price of our common stock, determinations by us of the appropriate sources of funding for us and potential uses of funding available to us.

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As part of our overall business strategy, we regularly review opportunities to acquire additional properties and we expect to continue to pursue acquisitions that we believe will benefit our financial performance.

During the three months ended March 31, 2021, we acquired fee simple interests in six properties for an aggregate purchase price of $21.9 million.

During the three months ended March 31, 2020, we acquired fee simple interests in 12 properties for an aggregate purchase price of $57.3 million.

During the six months ended June 30, 2021, we acquired fee simple interests in 55 properties for an aggregate purchase price of $63.3 million.

During the six months ended June 30, 2020, we acquired fee simple interests in 15 properties for an aggregate purchase price of $68.7 million.

We accounted for the acquisitions of fee simple interests as asset acquisitions.

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However, our tenants frequently make improvements to the properties leased from us at their expense.

As of March 31, 2021, we have a remaining commitment to fund up to $6.8 million in the aggregate in capital improvements in certain properties previously leased to Marketing and now subject to unitary triple-net leases with other tenants.

As of June 30, 2021, we have a remaining commitment to fund up to $6.7 million in the aggregate in capital improvements in certain properties previously leased to Marketing and now subject to unitary triple-net leases with other tenants.

We elected to be treated as a REIT under the federal income tax laws with the year beginning January 1, 2001.

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In particular, the Restated Credit Agreement and our senior unsecured notes prohibit the payment of dividends during certain events of default.

Regular quarterly dividends paid to our stockholders for the three months ended March 31, 2021, were $17.3 million, or $0.39 per share.

Regular quarterly dividends paid to our stockholders for the six months ended June 30, 2021, were $35.0 million, or $0.78 per share.

There can be no assurance that we will continue to pay dividends at historical rates, if at all.

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We anticipate that a majority of the USTs at properties previously leased to Marketing will be replaced over the next several years because these USTs are either at or near the end of their useful lives.

For long-term, triple-net leases covering sites previously leased to Marketing, our tenants are responsible for the cost of removal and replacement of USTs and for remediation of

contamination found during such UST removal and replacement, unless such contamination was found during the first 10 years of the lease term and also existed prior to commencement of the lease.

For long-term, triple-net leases covering sites previously leased to Marketing, our tenants are responsible for the cost of removal and replacement of USTs and for remediation of contamination found during such UST removal and replacement, unless such contamination was found during the first 10 years of the lease term and also existed prior to commencement of the lease.

In those cases, we are responsible for costs associated with the remediation of such preexisting contamination.

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We adjust our environmental remediation liabilities quarterly to reflect changes in projected expenditures, changes in present value due to the passage of time and reductions in estimated liabilities as a result of actual expenditures incurred during each quarter.

As of March 31, 2021, we had accrued a total of $48.7 million for our prospective environmental remediation obligations.

As of June 30, 2021, we had accrued a total of $47.9 million for our prospective environmental remediation obligations.

This accrual consisted of (a) $11.9 million, which was our estimate of reasonably estimable environmental remediation liability, including obligations to remove USTs for which we are responsible, net of estimated recoveries and (b) $36.0 million for future environmental liabilities related to preexisting unknown contamination.

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This accrual consisted of (a) $11.7 million, which was our estimate of reasonably estimable environmental remediation liability, including obligations to remove USTs for which we are responsible, net of estimated recoveries and (b) $36.4 million for future environmental liabilities related to preexisting unknown contamination.

Environmental liabilities are accreted for the change in present value due to the passage of time and, accordingly, $0.5 million of net accretion expense was recorded for the three months ended March 31, 2021 and 2020, which is included in environmental expenses.

In addition, during the three months ended March 31, 2021 and 2020, we recorded credits to environmental expenses aggregating $0.3 million and $0.8 million, respectively, where decreases in estimated remediation costs exceeded the depreciated carrying value of previously capitalized asset retirement costs.

Environmental liabilities are accreted for the change in present value due to the passage of time and, accordingly, $0.9 million of net accretion expense was recorded for the six months ended June 30, 2021 and 2020, which is included in environmental expenses.

In addition, during the six months ended June 30, 2021 and 2020, we recorded credits to environmental expenses aggregating $1.0 million and $1.2 million, respectively, where decreases in estimated remediation costs exceeded the depreciated carrying value of previously capitalized asset retirement costs.

Environmental expenses also include project management fees, legal fees and environmental litigation accruals.

During the three months ended March 31, 2021 and 2020, we increased the carrying values of certain of our properties by $0.9 million and $0.8 million, respectively, due to changes in estimated environmental remediation costs.

During the six months ended June 30, 2021 and 2020, we increased the carrying values of certain of our properties by $1.2 million and $1.4 million, respectively, due to changes in estimated environmental remediation costs.

The recognition and subsequent changes in estimates in environmental liabilities and the increase or decrease in carrying values of the properties are non-cash transactions which do not appear on our consolidated statements of cash flows.

Capitalized asset retirement costs are being depreciated over the estimated remaining life of each UST, a 10-year period if the increase in carrying value is related to environmental remediation obligations or such shorter period if circumstances warrant, such as the remaining lease term for properties we lease from others.

Depreciation and amortization expense related to capitalized asset retirement costs in our consolidated statements of operations was $1.0 million for each of the three months ended March 31, 2021 and 2020.

Capitalized asset retirement costs were $39.2 million (consisting of $23.4 million of known environmental liabilities and $15.8 million of reserves for future environmental liabilities) as of March 31, 2021, and $39.6 million (consisting of $23.6 million of known environmental liabilities and $16.0 million of reserves for future environmental liabilities) as of December 31, 2020.

We recorded impairment charges aggregating $0.7 million and $0.9 million for the three months ended March 31, 2021 and 2020, respectively, for capitalized asset retirement costs.

Depreciation and amortization expense related to capitalized asset retirement costs in our consolidated statements of operations was $2.0 million for each of the six months ended June 30, 2021 and 2020.

Capitalized asset retirement costs were $39.4 million (consisting of $23.6 million of known environmental liabilities and $15.8 million of reserves for future environmental liabilities) as of June 30, 2021, and $39.6 million (consisting of $23.6 million of known environmental liabilities and $16.0 million of reserves for future environmental liabilities) as of December 31, 2020.

We recorded impairment charges aggregating $1.5 million and $1.4 million for the six months ended June 30, 2021 and 2020, respectively, for capitalized asset retirement costs.

Environmental exposures are difficult to assess and estimate for numerous reasons, including the amount of data available upon initial assessment of contamination, alternative treatment methods that may be applied, location of the property which subjects it to differing local laws and regulations and their interpretations, changes in costs associated with environmental remediation services and equipment, the availability of state UST remediation funds and the possibility of existing legal claims giving rise to allocation of responsibilities to others, as well as the time it takes to remediate contamination and receive regulatory approval.

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In July 2012, we purchased a 10-year pollution legal liability insurance policy covering substantially all of our properties at that time for preexisting unknown environmental liabilities and new environmental events.

The policy has a $50.0 million aggregate limit and is subject to various self-insured retentions and other conditions and limitations.

Our intention in purchasing this policy was to obtain protection predominantly for significant events.

The policy has a $50.0 million aggregate limit

and is subject to various self-insured retentions and other conditions and limitations.

Our intention in purchasing this policy wa s to obtain protection predominantly for significant events.

In addition to the environmental insurance policy purchased by the Company, we also took assignment of certain environmental insurance policies, and rights to reimbursement for claims made thereunder, from Marketing, by order of the U.S.

Bankruptcy Court during Marketing’s bankruptcy proceedings.

Under these assigned policies, we have received and expect to continue to receive reimbursement of certain remediation expenses for covered claims.

Under these assigned polic i es, we have received and expect to continue to receive reimbursement of certain remediation expenses for covered claims.

In light of the uncertainties associated with environmental expenditure contingencies, we are unable to estimate ranges in excess of the amount accrued with any certainty;

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We are involved in various legal proceedings and claims which arise in the ordinary course of our business.

As of March 31, 2021 and December 31, 2020, we had accrued $4.3 million for certain of these matters which we believe were appropriate based on information then currently available.

As of June 30, 2021 and December 31, 2020, we had accrued $4.3 million for certain of these matters which we believe were appropriate based on information then currently available.

It is possible that our assumptions regarding the ultimate allocation method and share of responsibility that we used to allocate environmental liabilities may change, which may result in our providing an accrual, or adjustments to the amounts recorded, for environmental litigation accruals.

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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 2. Management’s Discussion and Analysis