What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-28 compared with 2021-10-28 · 135 added, 193 removed, 250 unchanged (57% of the section changed)

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(All capitalized and undefined terms used in this section shall have the same meanings hereafter defined in this Quarterly Report on Form 10-Q.)

Examples of forward-looking statements included in this Quarterly Report on Form 10-Q include, but are not limited to, our statements regarding our network of convenience store and gasoline station properties;

substantial compliance of our properties with federal, state and local provisions enacted or adopted pertaining to environmental matters;

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the impact of our redevelopment efforts related to certain of our properties;

the origination of certain construction loans for the construction of income-producing properties;

the amount of revenue we expect to realize from our properties;

our belief that our owned and leased properties are adequately covered by casualty and liability insurance;

AFFO as a measure that best represents our core operating performance and its utility in comparing the sustainability of our core operating performance with the sustainability of the core operating performance of other REITs;

our workplace demographics, recruiting efforts, and employee compensation program;

FFO and AFFO as measures that represent our core operating performance and its utility in comparing our core operating performance between periods;

the reasonableness of our estimates, judgments, projections and assumptions used regarding our accounting policies and methods;

the proceeds from the sale of shares of our common stock through the ATM Program;

our critical accounting policies;

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our investment strategy and its impact on our financial performance;

the adequacy of our current and anticipated cash flows from operations, borrowings under our Restated Credit Agreement and available cash and cash equivalents;

our continued compliance with the covenants in our Restated Credit Agreement and our senior unsecured notes;

the adequacy of our current and anticipated cash flows from operations, borrowings under our Second Restated Credit Agreement and available cash and cash equivalents;

our continued compliance with the covenants in our Second Restated Credit Agreement and our senior unsecured notes;

our belief that certain environmental liabilities can be allocated to others under various agreements;

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our beliefs regarding our properties, including their alternative uses and our ability to sell or lease our vacant properties over time;

our expectation that future property acquisitions will benefit our financial performance;

and our ability to maintain our federal tax status as a REIT .

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

As of September 30, 2021, our portfolio included 1,021 properties of which we owned 972 properties and leased 49 properties from third-party landlords.

As of March 31, 2022, our portfolio included 1,014 properties of which we owned 968 properties and leased 46 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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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 tenants either operate their businesses at our properties directly or, in the case of certain convenience stores and gasoline and repair 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 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.

During the terms of our leases, we monitor the credit quality of our triple-net lease tenants by reviewing their published credit rating, if available, reviewing publicly available financial statements, or reviewing financial or other operating statements which are delivered to us pursuant to applicable lease agreements, monitoring news reports regarding our tenants and their respective businesses, and monitoring the timeliness of lease payments and the performance of other financial covenants under their leases.

A significant portion of our tenants’ financial results depend on convenience store sales, the sale of refined petroleum products and/or the sale of automotive services and parts.

As a result, our tenants’ financial results can be dependent on the performance of the convenience retail, petroleum marketing, and automobile maintenance industries, each of which are highly competitive and can be subject to variability.

For additional information regarding our real estate business, our properties, and environmental matters, see “Item 1.

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Our Properties

As of September 30, 2021, we leased 1,011 of our properties to tenants under triple-net leases.

As of March 31, 2022, we leased 1,003 of our properties to tenants under triple-net leases.

Our net lease properties include 835 properties leased under 35 separate unitary or master triple-net leases and 168 properties leased under single unit triple-net leases.

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Redevelopment .

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

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

As of March 31, 2022, we were actively redeveloping five of our properties either for new convenience and gasoline use or for alternative single-tenant net lease retail uses.

As of March 31, 2022, six 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, 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.

Our investment activities may also include purchase money financing with respect to properties we sell, real property loans relating to our leasehold portfolios and construction loans.

As part of our strategy to grow and diversify our portfolio, 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 with existing and prospective tenants and will pursue other transactions, including forward commitments to acquire new-to-industry construction and the acquisition of assets with in-place leases, that result in us owning fee simple interests in our properties.

Our investment activities may also include purchase money financing with respect to properties we sell, real property loans relating to our leasehold properties and construction loans.

Our investment strategy seeks to generate current income and benefit from long-term appreciation in the underlying value of our real estate.

To achieve that goal, we seek to invest in high quality individual properties and real estate portfolios that are in strong primary markets that serve high density population centers.

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

During the nine months ended September 30, 2021, we acquired fee simple interests in 77 properties for an aggregate purchase price of $126.6 million.

During the nine months ended September 30, 2020, we acquired fee simple interests in 24 properties for an aggregate purchase price of $104.8 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 nine months ended September 30, 2021, we funded $12.3 million and, as of September 30, 2021, had outstanding $8.9 million of such construction loans, including accrued interest.

To achieve that goal, we seek to invest in well-located, freestanding properties that support automobility and provide convenience and service to consumers in major markets across the country.

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

During the three months ended March 31, 2022, we acquired fee simple interests in two properties for an aggregate purchase price of $7.0 million.

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.

We also 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, 2022, we funded $1.7 million, including accrued interest, and, as of March 31, 2022, had outstanding $7.5 million of such construction loans, 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.

During the three months ended September 30, 2021, we acquired one property for $4.5 million for which we had previously funded construction loans in the amount of $3.4 million and the loans were repaid in full.

Redevelopment Strategy and Activity

We believe that certain of our properties are well-suited for either new convenience store use or for alternative single-tenant net lease retail uses, such as automotive parts and service, quick service restaurants, specialty retail stores and bank branches.

We believe that certain of our properties, primarily those currently occupied by gas and repair businesses, are well-suited to be redeveloped as new convenience stores or other single tenant retail uses, such as automotive parts, quick service restaurants, bank branches and specialty retail.

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

During the nine months ended September 30, 2021, rent commenced on three completed redevelopment projects that were placed back into service in our net lease portfolio.

During the nine months ended September 30, 2020, rent commencements on five 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 24 redevelopment projects.

As of September 30, 2021 , we had five properties under active redevelopment and other s in various stages of feasibility planning for potential recapture from our net lease portfolio, including three 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 March 31, 2022, we had five properties under active redevelopment and others in various stages of feasibility planning for potential recapture from our net lease portfolio, including two 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 $1.2 million and $2.7 million for the three and nine months ended September 30, 2021, and $1.3 million and $2.9 million for the three and nine months ended September 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.

We reduced the carrying amounts to fair value, and recorded impairment charges aggregating $1.0 million for the three months ended March 31, 2022, and $0.8 million for the three months ended March 31, 2021, 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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We manage our business to enhance the value of our real estate portfolio and, as a REIT, place particular emphasis on minimizing risk, to the extent feasible, and generating cash sufficient to make required distributions to stockholders of at least 90% of our ordinary taxable income each year.

In addition to measurements defined by GAAP, we also focus on Funds From Operations (“FFO”) and Adjusted Funds From Operations (“AFFO”) to measure our performance.

In addition to measurements defined by accounting principles generally accepted in the United States of America (“GAAP”), we also focus on Funds From Operations (“FFO”) and Adjusted Funds From Operations (“AFFO”) to measure our performance.

As previously disclosed, beginning with its results for the quarter and year ended December 31, 2021, we updated our definition of AFFO to include adjustments for stock-based compensation and amortization of debt issuance costs.

We believe that conforming to this market practice for calculating AFFO improves the comparability of this measure of performance to other net lease REITs

FFO and AFFO are generally considered by analysts and investors to be appropriate supplemental non-GAAP measures of the performance of REITs.

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These measures should only be used to evaluate our performance in conjunction with corresponding GAAP measures.

FFO is defined by the National Association of Real Estate Investment Trusts as GAAP net earnings before depreciation and amortization of real estate assets, gains or losses on dispositions of real estate, impairment charges and cumulative effect of accounting changes.

Our definition of AFFO is defined as FFO less (i) certain revenue recognition adjustments (defined below), (ii) changes in environmental estimates, (iii) accretion expense, (iv) environmental litigation accruals, (v) insurance reimbursements, (vi) legal settlements and judgments, (vii) acquisition costs expensed and (viii) other unusual items that are not reflective of our core operating performance.

Other REITs may use definitions of FFO and/or AFFO that are different from ours and, accordingly, may not be comparable.

We believe that FFO and AFFO are helpful to analysts and investors in measuring our performance because both FFO and AFFO exclude various items included in GAAP net earnings that do not relate to, or are not indicative of, our core operating performance.

FFO excludes various items such as depreciation and amortization of real estate assets, gains or losses on dispositions of real estate, and impairment charges.

However, GAAP net earnings and FFO typically include certain other items that we exclude from AFFO, including the impact of revenue recognition adjustments comprised of deferred rental revenue (straight-line rental revenue), the net amortization of above-market and below-market leases, adjustments recorded for the recognition of rental income from direct financing leases and the amortization of deferred lease incentives (collectively, “Revenue Recognition Adjustments”) that do not impact our recurring cash flow and which are not indicative of our core operating performance.

Deferred rental revenue results primarily from fixed rental increases scheduled under certain leases with our tenants.

In accordance with GAAP, the aggregate minimum rent due over the current term of these leases is recognized on a straight-line basis rather than when payment is contractually due.

The present value of the difference between the fair market rent and the contractual rent for in-place leases at the time properties are acquired is amortized into revenues from rental properties over the remaining lives of the in-place leases.

Income from direct financing leases is recognized over the lease terms using the effective interest method, which produces a constant periodic rate of return on the net investments in the leased properties.

The amortization of deferred lease incentives represents our funding commitment in certain leases, which deferred expense is recognized on a straight-line basis as a reduction of rental revenue.

GAAP net earnings and FFO also include non-cash and/or unusual items such as changes in environmental estimates, environmental accretion expense, allowances for credit loss on notes and mortgages receivable and direct finance leases, environmental litigation accruals, insurance reimbursements, legal settlements and judgments, property acquisition costs expensed and loss on extinguishment of debt, that do not impact our recurring cash flow and which are not indicative of our core operating performance.

We pay particular attention to AFFO, as we believe it best represents our core operating performance.

In our view, AFFO provides a more accurate depiction than FFO of our core operating performance.

By providing AFFO, we believe that we are presenting useful information that assists analysts

and investors to better assess our core operating performance.

Further, we believe that AFFO is useful in comparing the sustainability of our core operating performance with the sustainability of the core operating performance of other real estate companies.

FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as GAAP net earnings before (i) depreciation and amortization of real estate assets, (ii) gains or losses on dispositions of real estate assets, (iii) impairment charges, and (iv) the cumulative effect of accounting changes.

We define AFFO as FFO excluding (i) certain revenue recognition adjustments (defined below), (ii) certain environmental adjustments (defined below), (iii) stock-based compensation, (iv) amortization of debt issuance costs and (v) other non-cash and/or unusual items that are not reflective of our core operating performance.

Other REITs may use definitions of FFO and/or AFFO that are different than ours and, accordingly, may not be comparable.

Specifically, FFO excludes items such as depreciation and amortization of real estate assets, gains or losses on dispositions of real estate assets, and impairment charges.

With respect to AFFO, we further exclude the impact of (i) deferred rental revenue (straight-line rent), the net amortization of above-market and below-market leases, adjustments recorded for the recognition of rental income from direct financing leases, and the amortization of deferred lease incentives (collectively, “Revenue Recognition Adjustments”), (ii) environmental accretion expenses, environmental litigation accruals, insurance reimbursements, legal settlements and judgments, and changes in environmental remediation estimates (collectively, “Environmental Adjustments”), (iii) stock-based compensation expense, (iv) amortization of debt issuance costs and (v) other items, which may include allowances for credit losses on notes and mortgages receivable and direct financing leases, losses on extinguishment of debt, retirement and severance costs, and other items that do not impact our recurring cash flow and which are not indicative of our core operating performance.

We pay particular attention to AFFO which it believes provides the most useful depiction of the core operating performance of our portfolio.

By providing AFFO, we believe we are presenting information that assists analysts and investors in their assessment of our core operating performance, as well as the sustainability of our core operating performance with the sustainability of the core operating performance of other real estate companies.

A reconciliation of net earnings to FFO and AFFO is as follows (in thousands, except per share amounts):

Three Months Ended

September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Depreciation and amortization of real estate assets

Gain on dispositions of real estate

Funds from operations

Funds from operations (FFO)

Revenue recognition adjustments

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Accretion expense

Environmental litigation accruals

Insurance reimbursements

Legal settlements and judgments

Retirement costs

Adjusted funds from operations

Retirement and severance costs

Stock-based compensation expense

Amortization of debt issuance costs

Adjusted funds from operations (AFFO)

Basic per share amounts:

Earnings per share

Funds from operations per share (1)

Adjusted funds from operations per share (1)

Diluted per share amounts:

Earnings per share

Funds from operations per share (1)

Adjusted funds from operations per share (1)

Weighted average common shares outstanding:

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The following amounts were deducted:

Three Months Ended

September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Results of Operations

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

While the COVID-19 pandemic did not have a material adverse effect on our reported results for the three and nine months ended September 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 September 30, 2021 , compared to the three months ended September 30, 2020

Revenues from rental properties increased by $2.5 million to $39.7 million for the three months ended September 30, 2021, as compared to $37.2 million for the three months ended September 30, 2020.

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

Rental income contractually due from our tenants included in revenues from rental properties was $34.9 million for the three months ended September 30, 2021, as compared to $32.0 million for the three months ended September 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 $5.4 million and $5.3 million for the three months ended September 30, 2021 and 2020, respectively.

Interest income on notes and

mortgages receivable was $0.

4 million for the three months ended September 30, 2021 , as compared to $0.7 million for the three months ended September 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 (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 decreased rental revenue by $0.6 million and $0.1 million for the three months ended September 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 $6.5 million for the three months ended September 30, 2021, as compared to $6.6 million for the three months ended September 30, 2020.

The decrease in property costs for the three months ended September 30, 2021 was principally due to reductions in rent expense.

Impairment charges were $1.2 million for the three months ended September 30, 2021, as compared to $1.3 million for the three months ended September 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 September 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 September 30, 2021 were $0.8 million, as compared to $18 thousand for the three months ended September 30, 2020.

The increase in environmental expenses for the three months ended September 30, 2021 was principally due to a $0.2 million increase in environmental legal fees and a $0.7 million increase 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 $4.7 million for the three months ended September 30, 2021, as compared to $4.2 million for the three months ended September 30, 2020.

The increase in general and administrative expense for the three months ended September 30, 2021 was principally due to $0.4 million in employee-related expenses.

Depreciation and amortization expense was $8.9 million for the three months ended September 30, 2021, as compared to $7.6 million for the three months ended September 30, 2020.

The increase in depreciation and amortization expense for the three months ended September 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 $2.1 million for the three months ended September 30, 2021, as compared to $0.1 million for the three months ended September 30, 2020.

The gains were the result of one sale partially offset by three lease terminations during the three months ended September 30, 2021 and one sale during the three months ended September 30, 2020, respectively.

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

For the three months ended September 30, 2021, FFO was $22.0 million, as compared to $20.8 million for the three months ended September 30, 2020.

For the three months ended September 30, 2021, AFFO increased by $2.7 million to $22.9 million, as compared to $20.2 million for the three months ended September 30, 2020.

FFO for the three months ended September 30, 2021 was impacted by changes in net earnings but excludes a $2.0 million increase in gains on dispositions of real estate, a $1.3 million increase in depreciation and amortization expense and a $0.1 million decrease in impairment charges.

The increase in AFFO for the three months ended September 30, 2021 also excludes a $0.6 million decrease in environmental estimates and accretion expense, a $0.4 million increase in Revenue Recognition Adjustments and $0.4 million decrease in legal settlements and judgements.

Nine months ended September 30, 2021, compared to the nine months ended September 30, 2020

Revenues from rental properties increased by $6.7 million to $114.9 million for the nine months ended September 30, 2021, as compared to $108.2 million for the nine months ended September 30, 2020.

Rental income contractually due from our tenants included in revenues from rental properties was $102.8 million for the nine months ended September 30, 2021, as compared to $95.2 million for the nine months ended September 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 $13.4 million for the nine months ended September 30, 2021 and

$13.3 million for the nine months ended September 30, 2020 .

Interest income on notes and mortgages receivable was $ 1.2 million and $ 2.1 million for the nine months ended September 30, 2021 and 2020 , respectively .

The following discussion describes our results of operations for the three and nine months ended March 31, 2022.

While the COVID-19 pandemic did not have a material adverse effect on our reported results for the three months ended March 31, 2022, 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, 2022 , compared to the three months ended March 31, 2021

Revenues from rental properties increased by $2.0 million to $39.0 million for the three months ended March 31, 2022, as compared to $37.0 million for the three months ended March 31, 2021.

The increase in revenues from rental properties was primarily due to revenue from newly acquired properties during the last twelve months, along with contractual rent increases, partially offset by property dispositions.

Rental income contractually due from our tenants included in revenues from rental properties was $36.4 million for the three months ended March 31, 2022, as compared to $33.5 million for the three months ended March 31, 2021.

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 $3.1 million and $3.8 million for the three months ended March 31, 2022 and 2021, respectively.

Interest income on notes and mortgages receivable was $0.3 million for the three months ended March 31, 2022, and 2021.

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.

Revenues from rental properties includes Revenue Recognition Adjustments which decreased rental revenue by $1.3 million and $0.3 million for the nine months ended September 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 $17.4 million for the nine months ended September 30, 2021, as compared to $18.0 million for the nine months ended September 30, 2020.

The decrease in property costs for the nine months ended September 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 $2.7 million for the nine months ended September 30, 2021 as compared to $2.9 million for the nine months ended September 30, 2020.

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.

6 million and $ 0.

3 million f or the three months ended March 31, 2022 and 2021 , 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 $4.6 million for the three months ended March 31, 2022, as compared to $5.3 million for the three months ended March 31, 2021.

The decrease in property costs for the three months ended March 31, 2022 was principally due to reductions in rent expense and reimbursable and non-reimbursable real estate taxes.

Impairment charges were $1.0 million for the three months ended March 31, 2022, as compared to $0.8 million for the three months ended March 31, 2021.

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

Impairment charges for the nine months ended September 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 nine months ended September 30, 2021, increased by $0.2 million to $1.3 million, as compared to $1.1 million for the nine months ended September 30, 2020.

The increase in environmental expenses for the nine months ended September 30, 2021 was principally due to a $0.7 million increase in net environmental remediation costs and estimates partially offset by a $0.4 million decrease in environmental legal and professional fees.

Impairment charges for the three months ended March 31, 2022 and 2021 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, and (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.

Environmental expenses for the three months ended March 31, 2022 was a credit of $0.1 million, as compared to an expense of $0.5 million for the three months ended March 31, 2021.

The decrease in environmental expenses for the three months ended March 31, 2022 was principally due to reduction in environmental legal fees and net environmental remediation costs and estimates.

General and administrative expense was $15.3 million for the nine months ended September 30, 2021, as compared to $12.8 million for the nine months ended September 30, 2020.

The increase in general and administrative expense for the nine months ended September 30, 2021 was principally due to a $1.2 million increase in employee-related expenses, $0.7 million of non-recurring expenses attributable to the retirement of personnel and a $0.3 million increase corporate rent expense.

Depreciation and amortization expense was $26.0 million for the nine months ended September 30, 2021, as compared to $22.1 million for the nine months ended September 30, 2020.

The increase in depreciation and amortization expense for the nine months ended September 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 $18.5 million for the nine months ended September 30, 2021, as compared to $20.1 million for the nine months ended September 30, 2020.

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

For the nine months ended September 30, 2021, FFO increased by $4.7 million to $64.0 million as compared to $59.3 million for the prior period.

For the nine months ended September 30, 2021, AFFO increased by $7.9 million to $66.0 million, as compared to $58.1 million for the prior period.

FFO for the nine months ended September 30, 2021 was impacted by the changes in net earnings but excludes a $8.5 million increase in gains on dispositions of real estate and a $3.9 million increase in depreciation and amortization expense.

The increase in AFFO for the nine months ended September 30, 2021 also excludes a $0.7 million decrease in legal settlements and judgements, a $1.0 million increase in Revenue Recognition Adjustments, a $0.8 million increase in environmental estimates and accretion expense and $0.7 million increase in non-recurring expenses attributable to the retirement of personnel.

General and administrative expense was $5.1 million for the three months ended March 31, 2022, as compared to $5.5 million for the three months ended March 31, 2021.

The decrease in general and administrative expense for the three months ended March 31, 2022 was principally due to $0.5 million of non-recurring severance and retirement costs incurred during the three months ended March 31, 2021, partially offset by increased personnel costs.

Depreciation and amortization expense was $9.6 million for the three months ended March 31, 2022, as compared to $8.4 million for the three months ended March 31, 2021.

The increase in depreciation and amortization expense for the three months ended March 31, 2022 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 $6.2 million for the three months ended March 31, 2022, as compared to $7.2 million for the three months ended March 31, 2021.

The gains were the result of the disposition of 15 properties and one partial condemnation during the three months ended March 31, 2022 and the sale of five properties during the three months ended March 31, 2021, respectively.

Interest expense was $6.5 million for the three months ended March 31, 2022, as compared to $6.1 million for the three months ended March 31, 2021.

The increase was due to higher average borrowings outstanding partially offset by a decrease in average interest rates on borrowings outstanding for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.

Liquidity and Capital Resources

Our principal sources of liquidity are the cash flows from our operations, funds available under our Revolving Facility (which is scheduled to mature in March 2022), proceeds from the sale of shares of our common stock through offerings from time to time under our ATM Program, and available cash and cash equivalents.

Our principal sources of liquidity are the cash flows from our operations, funds available under our Revolving Facility (which is scheduled to mature in October 2025), proceeds from the sale of shares of our common stock through offerings from time to time under our ATM Program, and available cash and cash equivalents.

Our business operations and liquidity are dependent on our ability to generate cash flow from our properties.

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We believe that our operating cash needs for the next twelve months and our long-term liquidity requirements, 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 nine months ended September 30, 2021 and 2020, are summarized as follows (in thousands):

Nine Months Ended September 30,

Our cash flow activities for the three months ended March 31, 2022 and 2021, are summarized as follows (in thousands):

Three Months Ended March 31,

Net cash flow provided by operating activities

Net cash flow used in investing activities

Net cash flow provided by financing activities

Net cash flow provided by (used in) financing activities

Operating Activities

Net cash flow from operating activities increased by $5.1 million for the nine months ended September 30, 2021, to $58.7 million, as compared to $53.6 million for the nine months ended September 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 nine months ended September 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.

Net cash flow from operating activities increased by $1.4 million for the three months ended March 31, 2022, to $20.8 million, as compared to $19.4 million for the three months ended March 31, 2021.

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, 2022 and 2021 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 increased by $21.5 million for the nine months ended September 30, 2021, to a $119.7 million, as compared to $98.2 million for the nine months ended September 30, 2020.

The increase in net cash flow used in investing activities was primarily due to an increase of $21.8 million for property acquisitions, an increase of $9.4 million in issuance of notes and mortgages receivable, a decrease of $2.2 million in collection of notes and mortgages receivables partially offset by an increase of $9.7 million in proceeds from dispositions of real estate and an increase of $2.4 million in deposits on property acquisitions for the nine months ended September 30, 2021.

Net cash flow used in investing activities decreased by $11.9 million for the three months ended March 31, 2022, to $7.9 million, as compared to $19.8 million for the three months ended March 31, 2021.

The decrease in net cash flow used in investing activities was primarily due to an decrease of $14.9 million for property acquisitions, a decrease of $6.7 million in issuance of notes and mortgages receivable and an increase of $1.9 million in proceeds from dispositions of real estate, partially offset by an increase of $11.9 million in deposits on property acquisitions for the three months ended March 31, 2022.

Financing Activities

Net cash flow provided by financing activities decreased by $68.3 million for the nine months ended September 30, 2021, to $13.0 million, as compared to $81.3 million for the nine months ended September 30, 2020.

The decrease in net cash flow provided by financing activities was primarily due to a decrease in net borrowings under credit agreement of $72.5 million and an increase in dividends paid of $6.2 million, partially offset by an increase in net proceeds under the ATM agreement of $10.5 million.

Net cash flow provided by financing activities increased by $42.2 million for the three months ended March 31, 2022, to $19.3 million, as compared to a use of $22.9 million for the three months ended March 31, 2021.

The increase in net cash flow provided by financing activities was primarily due to an increase in borrowings under senior unsecured notes of $100.0 million, partially offset by a decrease in net proceeds under the ATM agreement of $20.2 million, an increase in net repayments under the credit agreement of $35.0 million, an increase in dividends paid of $2.2 million, and an increase in debt issuance costs of $0.6 million.

Credit Agreement

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Pursuant to the Restated Credit Agreement, we (a) increased the borrowing capacity under the Revolving Facility from $175.0 million to $250.0 million, (b) extended the maturity date of the Revolving Facility from June 2018 to March 2022, (c) extended the maturity date of the Term Loan from June 2020 to March 2023 and (d) amended certain financial covenants and provisions.

Subject to the terms of the Restated Credit Agreement and our continued compliance with its provisions, we have the option to (a) extend the term of the Revolving Facility for one additional year to March 2023 and (b) request that the lenders approve an increase of up to $300.0 million in the amount of the Revolving Facility to $600.0 million in the aggregate.

The Restated Credit Agreement incurs interest and fees at various rates based on our total indebtedness to total asset value ratio at the end of each quarterly reporting period.

The Revolving Facility permits borrowings at an interest rate equal to the sum of a base

rate plus a margin of 0.50 % to 1.30 % or a LIBOR rate plus a margin of 1.50 % to 2.30 %.

The annual commitment fee on the undrawn funds under the Revolving Facility is 0.15 % to 0.25 %.

The Term Loan , prior to its repayment pursuant to a subsequent amendment to the Restated Credit Agreement, bore interest equal to the sum of a base rate plus a margin of 0.45% to 1.25% or a LIBOR rate plus a margin of 1.45% to 2.25%.

On September 19, 2018, we entered into an amendment (the “First Amendment”) of our Restated Credit Agreement.

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

The First Amendment modified 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;

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The Second Amendment modifies the Restated Credit Agreement to, among other things, (a) increase our borrowing capacity under the Revolving Facility from $250.0 million to $300.0 million and (b) decrease lender commitments under the Term Loan to $0.0 million.

On December 14, 2020, we used a portion of the net proceeds from the Series I Notes, Series J Notes and Series K Notes (each as described below) to repay $75.0 million of borrowings outstanding under our Restated Credit Agreement.

On October 27, 2021, we entered into a second amended and restated credit agreement (as amended, the “Second Restated Credit Agreement”) amending and restating our Restated Credit Agreement.

Pursuant to the Second Restated Credit Agreement, we (i) extended the maturity date of the Revolving Facility from March 2022 to October 2025, (ii) reduced the interest rate for borrowings under the Revolving Facility and (iii) amended certain financial covenants and other provisions.

The Second Restated Credit Agreement provides for the Revolving Facility in an aggregate principal amount of $300.0 and includes an accordion feature to increase the revolving commitments or add one or more tranches of term loans up to an additional aggregate amount not to exceed $300.0 million, subject to certain conditions, including one or more new or existing lenders agreeing to provide commitments for such increased amount and that no default or event of default shall have occurred and be continuing under the terms of the Revolving Facility.

The Revolving Facility matures October 27, 2025, subject to two six-month extensions (for a total of 12 months) exercisable at our option.

Our exercise of an extension option is subject to the absence of any default under the Second Restated Credit Agreement and our compliance with certain conditions, including the payment of extension fees to the Lenders under the Revolving Facility and that no default or event of default shall have occurred and be continuing under the terms of the Revolving Facility.

The Second Restated Credit Agreement reflects reductions in the interest rates for borrowings under the Revolving Facility and permits borrowings at an interest rate equal to the sum of a base rate plus a margin of 0.30% to 0.90% or a LIBOR rate plus a margin

of 1.30% to 1.90% based on our consolidated total indebtedness to total asset value ratio at the end of each quarterly reporting period.

The Revolving Facility includes customary LIBOR transition language that addresses the succession of LIBOR at a future date.

The per annum rate of the unused line fee on the undrawn funds under the Revolving Facility is 0.15% to 0.25% based on our daily unused portion of the available Revolving Facility.

The Second Restated Credit Agreement contains customary financial covenants, including covenants with respect to total leverage, secured leverage and unsecured leverage ratios, fixed charge and interest coverage ratios, and minimum tangible net worth, as well as limitations on restricted payments, which may limit our ability to incur additional debt or pay dividends.

The Second Restated Credit Agreement contains customary events of default, including cross default provisions with respect to our existing senior unsecured notes.

Any event of default, if not cured or waived in a timely manner, could result in the acceleration of our indebtedness under the Second Restated Credit Agreement and could also give rise to an event of default and the acceleration of our existing senior unsecured notes.

Senior Unsecured Notes

On December 4, 2020, we entered into a fifth amended and restated note purchase and guarantee agreement (the “Fifth Amended and Restated Prudential Agreement”) with Prudential and certain of its affiliates amending and restating our existing fourth amended and restated note purchase agreement.

Pursuant to the Fifth Amended and Restated Prudential Agreement, we agreed that our (a) 6.0% Series A Guaranteed Senior Notes due February 25, 2021, in the original aggregate principal amount of $100.0 million (the “Series A Notes”), (b) 5.35% Series B Guaranteed Senior Notes due June 2, 2023, in the original aggregate principal amount of $75.0 million (the “Series B Notes”), (c) 4.75% Series C Guaranteed Senior Notes due February 25, 2025, in the aggregate principal amount of $50.0 million (the “Series C Notes”) and (d) 5.47% Series D Guaranteed Senior Notes due June 21, 2028, in the aggregate principal amount of $50.0 million (the “Series D Notes”) and (e) 3.52% Series F Guaranteed Senior Notes due September 12, 2029, in the aggregate principal amount of $50.0 million (the “Series F Notes”) that were outstanding under the existing fourth restated prudential note purchase agreement would continue to remain outstanding under the Fifth Amended and Restated Prudential Agreement and we authorized and issued our 3.43% Series I Guaranteed Senior Notes due November 25, 2030, in the aggregate principal amount of $100.0 million (the “Series I Notes” and, together with the Series A Notes, Series B Notes, Series C Notes, Series D Notes and Series F Notes, the “Notes”) to Prudential.

On December 4, 2020, we completed the early redemption of our 6.0% Series A Notes due February 25, 2021, in the original aggregate principal amount of $100.0 million.

As a result of the early redemption, we recognized a $1.2 million loss on extinguishment of debt on our consolidated statement of operations for the year ended December 31, 2020.

The Fifth Amended and Restated Prudential Agreement does not provide for scheduled reductions in the principal balance of the Series I Notes, or any of our previously issued Series B Notes, Series C Notes, Series D Notes, or Series F Notes prior to their respective maturities.

On June 21, 2018, we entered into a note purchase and guarantee agreement (the “MetLife Note Purchase Agreement”) with MetLife and certain of its affiliates.

Pursuant to the MetLife Note Purchase Agreement, we authorized and issued our 5.47% Series E Guaranteed Senior Notes due June 21, 2028, in the aggregate principal amount of $50.0 million (the “Series E Notes”).

The MetLife Note Purchase Agreement does not provide for scheduled reductions in the principal balance of the Series E Notes prior to their maturity.

On December 4, 2020, we entered into a first amendment to note purchase and guarantee agreement (the “First Amended and Restated AIG Agreement”) with American General Life Insurance Company amending and restating our existing note purchase and guarantee agreement.

Pursuant to the First Amended and Restated AIG Agreement, we agreed that our 3.52% Series G Guaranteed Senior Notes due September 12, 2029, in the aggregate principal amount of $50.0 million (the “Series G Notes”) that were outstanding under the existing note purchase and guarantee agreement would continue to remain outstanding under the First Amended and Restated AIG Agreement and we authorized and issued our $50.0 million of 3.43% Series J Guaranteed Senior Notes due November 25, 2030 (the “Series J Notes”) to AIG.

The First Amended and Restated AIG Agreement does not provide for scheduled reductions in the principal balance of the Series J Notes or any of our previously issued Series G Notes prior to their respective maturities.

On December 4, 2020, we entered into a first amended and restated note purchase and guarantee agreement (the “First Amended and Restated MassMutual Agreement”) amending and restating our existing note purchase and guarantee agreement.

Pursuant to the First Amended and Restated MassMutual Agreement, we agreed that our 3.52% Series H Guaranteed Senior Notes due September 12, 2029, in the aggregate principal amount of $25.0 million (the “Series H Notes”) that were outstanding under the existing note purchase and guarantee agreement would continue to remain outstanding under the First Amended and Restated MassMutual Agreement and we authorized and issued our $25.0 million of 3.43% Series K Guaranteed Senior Notes due November 25, 2030 (the “Series K

Notes”) to MassMutual.

The First Amended and Restated MassMutual Agreement does not provide for scheduled reductions in the principal balance of the Series K or any of our previously issued Series H Notes prior to their respective maturities.

We used the net proceeds from the issuance of the Series I Notes, Series J Notes and Series K Notes to prepay in full our Series A Notes due February 25, 2021, and repay $75.0 million of borrowings outstanding under our Restated Credit Agreement.

The Notes, the Series E Notes, the Series G Notes, the Series H Notes, the Series I Notes, the Series J Notes and, the Series K Notes, respectively issued thereunder, are collectively referred to as the “senior unsecured notes.”

On February 22, 2022, we entered into a sixth amended and restated note purchase and guarantee agreement (the “Sixth Amended and Restated Prudential Agreement”) with Prudential and certain of its affiliates amending and restating our existing fifth amended and restated note purchase and guarantee agreement with Prudential (the “Fifth Amended and Restated Prudential Agreement”).

Pursuant to the Sixth Amended and Restated Prudential Agreement, we will issue $80.0 million of 3.65% Series Q Guaranteed Senior Notes due January 20, 2033 (the “Series Q Notes”) to Prudential on January 20, 2023 and use a portion of the proceeds to repay in full the $75.0 million of 5.35% Series B Guaranteed Senior Notes due June 2, 2023 (the “Series B Notes”) outstanding under the Fifth Amended and Restated Prudential Agreement .

The other senior unsecured notes outstanding under the Fifth Amended and Restated Prudential Agreement, including (i) $50.0 million of 4.75% Series C Guaranteed Senior Notes due February 25, 2025 (the “Series C Notes”), (ii) $50.0 million of 5.47% Series D Guaranteed Senior Notes due June 21, 2028 (the “Series D Notes”), (iii) $50.0 million of 3.52% Series F Guaranteed Senior Notes due September 12, 2029 (the “Series F Notes”) and (iv) $100.0 million of 3.43% Series I Guaranteed Senior Notes due November 25, 2030 (the “Series I Notes”), remain outstanding under the Sixth Amended and Restated Prudential Agreement.

On February 22, 2022, we entered into a second amended and restated note purchase and guarantee agreement (the “Second Amended and Restated AIG Agreement”) with American General Life Insurance Company (“AIG”) and certain of its affiliates amending and restating our existing first amended and restated note purchase and guarantee agreement with AIG (the “First Amended and Restated AIG Agreement”).

Pursuant to the Second Amended and Restated AIG Agreement, we issued $55.0 million of 3.45% Series L Guaranteed Senior Notes due February 22, 2032 (the “Series L Notes”) to AIG.

The other senior unsecured notes outstanding under the First Amended and Restated AIG Agreement, including (i) $50.0 million of 3.52% Series G Guaranteed Senior Notes due September 12, 2029 (the “Series G Notes”) and (ii) $50.0 million of 3.43% Series J Guaranteed Senior Notes due November 25, 2030 (the “Series J Notes”), remain outstanding under the Second Amended and Restated AIG Agreement.

On February 22, 2022, we entered into a second amended and restated note purchase and guarantee agreement (the “Second Amended and Restated MassMutual Agreement”) with Massachusetts Mutual Life Insurance Company (“MassMutual”) and certain of its affiliates amending and restating our existing first amended and restated note purchase and guarantee agreement with MassMutual (the “First Amended and Restated MassMutual Agreement”).

Pursuant to the Second Amended and Restated MassMutual Agreement, we issued $20.0 million of 3.45% Series M Guaranteed Senior Notes due February 22, 2032 (the “Series M Notes”) to MassMutual and will issue $20.0 million of 3.65% Series O Guaranteed Senior Notes due January 20, 2033 (the “Series O Notes”) to MassMutual on January 20, 2023.

The other senior unsecured notes outstanding under the First Amended and Restated MassMutual Agreement, including (i) $25.0 million of 3.52% Series H Guaranteed Senior Notes due September 12, 2029 (the “Series H Notes”) and (ii) $25.0 million of 3.43% Series K Guaranteed Senior Notes due November 25, 2030 (the “Series K Notes”), remain outstanding under the Second Amended and Restated MassMutual Agreement.

On February 22, 2022, we entered into a note purchase and guarantee agreement (the “New York Life Agreement”) with New York Life Insurance Company (“New York Life”) and certain of its affiliates .

Pursuant to the New York Life Agreement, we issued $25.0 million of 3.45% Series N Guaranteed Senior Notes due February 22, 2032 (the “Series N Notes”) to New York Life and will issue $25.0 million of 3.65% Series P Guaranteed Senior Notes due January 20, 2033 (the “Series P Notes”) to New York Life on January 20, 2023.

On June 21, 2018, we entered into a note purchase and guarantee agreement (the “MetLife Agreement”) with MetLife and certain of its affiliates.

Pursuant to the MetLife Agreement, we issued $50.0 million of 5.47% Series E Guaranteed Senior Notes due June 21, 2028 (the “Series E Notes).

The funded and outstanding Series B Notes, Series C Notes, Series D Notes, Series E Notes, Series F Note, Series G Notes, Series H Notes, Series I Notes, Series J Notes, Series K Notes, Series L Notes, Series M Notes and Series N Notes are collectively referred to as the “senior unsecured notes.

In March 2018, we established an at-the-market equity offering program (the “2018 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 $125.0 million through a consortium of banks acting as agents.

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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 nine months ended September 30, 2021, we issued a total of 636,000 and 1,668,000 shares, respectively, of common stock and received net proceeds of $19.4 million and $49.0 million, respectively, under the 2018 ATM Program and the ATM Program.

During the three and nine months ended September 30, 2020, we issued a total of 922,000 and 1,326,000 shares, respectively of common stock and received net proceeds of $26.6 million and $38.5 million, respectively under the 2018 ATM Program.

During the three months ended March 31, 2022, no shares of common stock were issued under the ATM Program.

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.

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.

Property Acquisitions and Capital Expenditures

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 nine months ended September 30, 2021, we acquired fee simple interests in 77 properties for an aggregate purchase price of $126.6 million.

During the nine months ended September 30, 2020, we acquired fee simple interests in 24 properties for an aggregate purchase price of $104.8 million.

As part of our overall business strategy, we regularly review acquisition and financing opportunities to invest in additional convenience, automotive and other single tenant retail real estate, and we expect to continue to pursue acquisitions that we believe will benefit our financial performance.

During the three months ended March 31, 2022, we acquired fee simple interests in two properties for an aggregate purchase price of $7.0 million.

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.

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

For additional information regarding our property acquisitions, see Note 11.

We are reviewing select opportunities for capital expenditures, redevelopment and alternative uses for certain of our properties.

We are also seeking to recapture select properties from our net lease portfolio to redevelop such properties either for a new convenience and gasoline use or for alternative single-tenant net lease retail uses.

We also seek opportunities to recapture select properties from our net lease portfolio and redevelop such properties as new convenience stores or other single tenant retail uses.

Since the inception of our redevelopment program in 2015, we have completed 24 redevelopment projects.

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

As of September 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.

As of March 31, 2022, we have a remaining commitment to fund up to $6.6 million in the aggregate of capital improvements at 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 nine months ended September 30, 2021 were $52.8 million, or $1.17 per share.

Regular quarterly dividends paid to our stockholders for the three months ended March 31, 2022 were $19.5 million, or $0.41 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 assess whether to accrue for environmental liabilities based upon relevant factors including our tenants’ histories of paying for such obligations, our assessment of their financial capability, and their intent to pay for such obligations.

However, there can be no assurance that our assessments are correct or that our tenants who have

paid their obligations in the past will continue to do so .

However, there can be no assurance that our assessments are correct or that our tenants who have paid their obligations in the past will continue to do so.

We may ultimately be responsible to pay for environmental liabilities as the property owner if our tenant fails to pay them.

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Under substantially all of our other triple-net leases, responsibility for remediation of all environmental contamination discovered during the term of the lease (including known and unknown contamination that existed prior to commencement of the lease) is the responsibility of our tenant.

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.

We anticipate that USTs at a number of properties we currently own and which were previously leased to Marketing will be replaced in the years ahead as these USTs 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.

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 September 30, 2021, we had accrued a total of $47.8 million for our prospective environmental remediation obligations.

As of March 31, 2022, we had accrued a total of $47.0 million for our prospective environmental remediation obligations.

This accrual consisted of (a) $11.2 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) $35.8 million for future environmental liabilities related to preexisting unknown contamination.

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This accrual consisted of (a) $11.4 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) $36.2 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, $1.3 million and $1.4 million of net accretion expense was recorded for the nine months ended September 30, 2021 and 2020, respectively, which is included in environmental expenses.

In addition, during the nine months ended September 30, 2021 and 2020, we recorded credits to environmental expenses aggregating $1.2 million and $2.1 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, $0.4 million and $0.5 million of net accretion expense was recorded for the three months ended March 31, 2022 and 2021, respectively, which is included in environmental expenses.

In addition, during the three months ended March 31, 2022 and 2021, we recorded credits to environmental expenses aggregating $0.8 million and $0.3 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 nine months ended September 30, 2021 and 2020 , we increased the carrying values of certain of our properties by $ 2.1 million and $ 2.3 million , respectively, due to changes in estimated environmental remediation costs.

During the three months ended March 31, 2022 and 2021, we increased the carrying values of certain of our properties by $0.5 million and $0.9 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 $3.0 million for each of the nine months ended September 30, 2021 and 2020.

Capitalized asset retirement costs were $39.4 million (consisting of $23.7 million of known environmental liabilities and $15.7 million of reserves for future environmental liabilities) as of September 30, 2021, and $40.0 million (consisting of $23.6 million of known environmental liabilities and $16.4 million of reserves for future environmental liabilities) as of December 31, 2020.

We recorded impairment charges aggregating $2.3 million and $2.1 million for the nine months ended September 30, 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 $1.0 million for each of the three months ended March 31, 2022 and 2021.

Capitalized asset retirement costs were $39.3 million (consisting of $24.5 million of known environmental liabilities and $14.8 million of reserves for future environmental liabilities related to preexisting unknown contamination) as of March 31, 2022, and $39.7 million (consisting of $24.1 million of known environmental liabilities and $15.6 million of reserves for future environmental liabilities related to preexisting unknown contamination) as of December 31, 2021.

We recorded impairment charges aggregating $0.3 million and $0.7 million for the three months ended March 31, 2022 and 2021, 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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Our intention in purchasing this policy was 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.

In addition, 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.

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

As of September 30, 2021 and December 31, 2020, we had accrued $0.1 million and $4.3 million, respectively for certain of these matters which we believe were appropriate based on information then currently available.

As of March 31, 2022 and December 31, 2021, we had accrued $1.9 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.

Matters related to our former Newark, New Jersey Terminal and the Lower Passaic River, our MTBE litigations in the states of Pennsylvania and Maryland, in particular, could cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.

Matters related to our former Newark, New Jersey Terminal and the Lower Passaic River, and our MTBE litigations in the states of Pennsylvania and Maryland, in particular, could cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.

For additional information with respect to these and other pending environmental lawsuits and claims, see “Item 3.

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QUANTITATIVE AND QUALITA TIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to interest rate risk, primarily as a result of our $300.0 million senior unsecured credit agreement entered into on March 23, 2018, and amended on September 19, 2018 and September 12, 2019 (as amended, the “Restated Credit Agreement”), with a group of commercial banks led by Bank of America, N.A.

The Restated Credit Agreement currently consists of a $300.0 million unsecured revolving facility (the “Revolving Facility”), which is scheduled to mature in March 2022.

The Restated Credit Agreement incurs interest and fees at various rates based on our total indebtedness to total asset value ratio at the end of each quarterly reporting period.

The Revolving Facility permits borrowings at an interest rate equal to the sum of a base rate plus a margin of 0.50% to 1.30% or a LIBOR rate plus a margin of 1.50% to 2.30%.

The annual commitment fee on the undrawn funds under the Revolving Facility is 0.15% to 0.25%.

We use borrowings under the Restated Credit Agreement to finance acquisitions and for general corporate purposes.

Based on our outstanding borrowings under the Restated Credit Agreement of $42.5 million as of September 30, 2021 an increase in market interest rates of 1.0% for 2021 would decrease our 2021 net income and cash flows by $0.1 million.

This amount was determined by calculating the effect of a hypothetical interest rate change on our borrowings floating at market rates, and assumes that the $42.5 million outstanding borrowings under the Restated Credit Agreement is indicative of our future average floating interest rate borrowings for 2021 before considering additional borrowings required for future acquisitions or repayment of outstanding borrowings from proceeds of future equity offerings.

The calculation also assumes that there are no other changes in our financial structure or the terms of our borrowings.

Our exposure to fluctuations in interest rates will increase or decrease in the future with increases or decreases in the outstanding amount under our Restated Credit Agreement and with increases.

We are exposed to interest rate risk, primarily as a result of the Second Restated Credit Agreement which provides for the Revolving Facility in an aggregate principal amount of $300.0 million.

The Second Restated Credit Agreement permits borrowings at an interest rate equal to the sum of a base rate plus a margin of 0.30% to 0.90% or a LIBOR rate plus a margin of 1.30% to 1.90% based on our consolidated total indebtedness to total asset value ratio at the end of each quarterly reporting period.

The Revolving Facility includes customary LIBOR transition language that addresses the succession of LIBOR at a future date.

We use borrowings under the Second Restated Credit Agreement to finance acquisitions and for general corporate purposes.

There were no borrowings outstanding at variable interest rates under the Restated Credit Agreement as of March 31, 2022.

In order to minimize our exposure to credit risk associated with financial instruments, we place our temporary cash investments, if any, with high credit quality institutions.

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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