Nine Months Ended September 30,
2017 2016
Cash flows from operating activities:
Net income (loss) $ 65,470
$ (82,601 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 562,673
610,291
Gain on real estate assets and joint venture, net (54,432 ) (55,921 )
Impairments 30,857
176,214
Equity-based compensation 11,224
7,097
Equity in income of unconsolidated entities (805 ) (488 )
Distributions from unconsolidated entities 2,782
3,007
Gain on investment securities (65 ) —
(Gain) loss on derivative instruments, net (2,710 ) 3,286
(Gain) loss on extinguishment and forgiveness of debt, net (18,691 ) 1,751
Changes in assets and liabilities:
Investment in direct financing leases 1,575
1,861
Rent and tenant receivables and other assets, net (19,463 ) (51,702 )
Due from affiliates, net 4,411
50
Accounts payable and accrued expenses 13,759
(6,726 )
Deferred rent, derivative and other liabilities (27 ) (1,235 )
Due to affiliates (8 ) (230 )
Net cash provided by operating activities 596,550
604,654
Cash flows from investing activities:
Investments in real estate assets (403,886 ) (19,952 )
Capital expenditures and leasing costs (14,081 ) (15,892 )
Real estate developments (10,863 ) (6,288 )
Principal repayments received from borrowers 6,281
4,906
Investments in unconsolidated entities —
(2,500 )
Proceeds from disposition of real estate and joint venture 366,237
615,246
Investment in leasehold improvements and other assets (446 ) (726 )
Deposits for real estate assets (32,946 ) (11,686 )
Uses and refunds of deposits for real estate assets 20,989
9,753
Line of credit advances to affiliates (400 ) (10,300 )
Line of credit repayments from affiliates 10,700
50,000
Change in restricted cash 14,606
(5,674 )
Net cash (used in) provided by investing activities (43,809 ) 606,887
Cash flows from financing activities:
Proceeds from mortgage notes payable 4,283
1,450
Payments on mortgage notes payable and other debt, including debt extinguishment and swap termination costs (389,775 ) (145,802 )
Proceeds from credit facility —
783,000
Payments on credit facility, including swap termination costs (501,107 ) (1,743,000 )
Proceeds from corporate bonds 600,000
1,000,000
Payments on corporate bonds, including extinguishment costs —
(1,311,208 )
Payments of deferred financing costs (9,313 ) (19,056 )
Proceeds from 2016 Term Loan —
300,000
Repayment of 2016 Term Loan —
(300,000 )
Repurchases of common stock under the Share Repurchase Program (518 ) —
Repurchases of common stock to settle tax obligations (1,913 ) (4,148 )
Proceeds from the issuance of Common Stock, net of underwriters’ discount —
702,765
Payments of equity issuance costs —
(274 )
Contributions from non-controlling interest holders —
675

VEREIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)

(In thousands) (Unaudited)


	Nine Months Ended September 30,
	2021		2020
Distributions paid	(318,883)		(418,722)

Net cash used in financing activities	(1,049,822)		(460,231)
Net change in cash and cash equivalents and restricted cash	(520,704)		188,396

Cash and cash equivalents and restricted cash, beginning of period	537,381		33,880



Cash and cash equivalents and restricted cash, end of period	16,677		222,276



Reconciliation of Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents at beginning of period	$	523,539	$	12,921
Restricted cash at beginning of period	13,842		20,959
Cash and cash equivalents and restricted cash at beginning of period	537,381		33,880

Cash and cash equivalents at end of period	5,874		207,321
Restricted cash at end of period	10,803		14,955
Cash and cash equivalents and restricted cash at end of period	$	16,677	$	222,276

Nine Months Ended September 30,
2017 2016
Distributions paid (456,487 ) (428,428 )
Net cash used in financing activities (754,830 ) (1,164,026 )
Net change in cash and cash equivalents (202,089 ) 47,515
Cash and cash equivalents, beginning of period 256,452
69,103
Cash and cash equivalents, end of period $ 54,363
$ 116,618

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for unit data) (Unaudited)


	September 30, 2021		December 31, 2020
ASSETS
Real estate investments, at cost:
Land	$	2,724,709	$	2,699,110
Buildings, fixtures and improvements	9,916,070		10,032,055
Intangible lease assets	1,917,251		1,872,461
Total real estate investments, at cost	14,558,030		14,603,626
Less: accumulated depreciation and amortization	4,002,377		3,833,084
Total real estate investments, net	10,555,653		10,770,542
Operating lease right-of-use assets	185,443		195,518
Investment in unconsolidated entities	80,363		81,639
Cash and cash equivalents	5,874		523,539
Restricted cash	10,803		13,842
Rent and tenant receivables and other assets, net	371,911		366,620
Goodwill	1,337,773		1,337,773

Real estate assets held for sale, net	31,073		65,583
Total assets	$	12,578,893	$	13,355,056

LIABILITIES AND EQUITY
Mortgage notes payable, net	$	987,704	$	1,328,835
Corporate bonds, net	4,590,348		4,584,230

Credit facility	88,000		—
Below-market lease liabilities, net	111,140		120,938
Accounts payable and accrued expenses	137,626		117,015
Deferred rent and other liabilities	58,707		63,204
Distributions payable	105,958		89,514

Operating lease liabilities	196,671		209,104
Total liabilities	6,276,154		6,512,840
Commitments and contingencies (Note 10)	0		0
General Partner's preferred equity, 18,871,246 General Partner Series F Preferred Units issued and outstanding as of December 31, 2020.	—		254,294
General Partner's common equity, 229,152,001 and 228,881,547 General Partner OP Units issued and outstanding as of September 30, 2021 and December 31, 2020, respectively	6,296,943		6,580,752
Limited Partner's preferred equity, 49,766 Limited Partner Series F Preferred Units issued and outstanding as of December 31, 2020.	—		1,787
Limited Partner's common equity, 152,033 Limited Partner OP Units issued and outstanding as of each of September 30, 2021 and December 31, 2020, respectively	4,663		4,209
Total partners’ equity	6,301,606		6,841,042
Non-controlling interests	1,133		1,174
Total equity	6,302,739		6,842,216
Total liabilities and equity	$	12,578,893	$	13,355,056

September 30, 2017 December 31, 2016
ASSETS
Real estate investments, at cost:
Land $ 2,866,305
$ 2,895,625
Buildings, fixtures and improvements 10,585,796
10,644,296
Intangible lease assets 2,027,304
2,044,521
Total real estate investments, at cost 15,479,405

15,584,442
Less: accumulated depreciation and amortization 2,784,481
2,331,643
Total real estate investments, net 12,694,924

13,252,799
Investment in unconsolidated entities 44,101
46,077
Investment in direct financing leases, net 33,402
39,455
Investment securities, at fair value 41,677
47,215
Mortgage notes receivable, net 20,510
22,764
Cash and cash equivalents 54,363
256,452
Restricted cash 27,797
45,018
Intangible assets, net 12,173
24,609
Rent and tenant receivables and other assets, net 336,938
330,705
Goodwill 1,462,585
1,462,203
Due from affiliates, net 6,638
21,349
Real estate assets held for sale, net 1,625
38,928
Total assets $ 14,736,733

$ 15,587,574

LIABILITIES AND EQUITY
Mortgage notes payable and other debt, net $ 2,115,633
$ 2,671,106
Corporate bonds, net 2,820,164
2,226,224
Convertible debt, net 981,490
973,340
Credit facility, net —
496,578
Below-market lease liabilities, net 204,051
224,023
Accounts payable and accrued expenses 152,413
146,137
Deferred rent, derivative and other liabilities 63,876
68,039
Distributions payable 172,129
162,578
Due to affiliates 8
16
Total liabilities 6,509,764

6,968,041
Commitments and contingencies (Note 14)

General Partner's preferred equity, 42,834,138 General Partner Preferred Units issued and outstanding as of each of September 30, 2017 and December 31, 2016 800,010
853,821
General Partner's common equity, 974,245,345 and 974,146,650 General Partner OP Units issued and outstanding as of September 30, 2017 and December 31, 2016, respectively 7,263,264
7,593,540
Limited Partner's preferred equity, 86,874 Limited Partner Preferred Units issued and outstanding as of each of September 30, 2017 and December 31, 2016 3,063
3,171
Limited Partner's common equity, 23,748,347 Limited Partner OP Units issued and outstanding as of each of September 30, 2017 and December 31, 2016, respectively 158,326
166,598
Total partners’ equity 8,224,663

8,617,130
Non-controlling interests 2,306
2,403
Total equity 8,226,969

8,619,533
Total liabilities and equity $ 14,736,733

$ 15,587,574

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per unit data) (Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Revenues:
Rental income $ 282,341
$ 303,383
$ 862,371
$ 928,706
Direct financing lease income 376
494
1,212
1,598
Operating expense reimbursements 23,826
27,969
72,103
77,862
Cole Capital revenue 27,185
31,069
83,001
94,788
Total revenues 333,728

362,915

1,018,687

1,102,954
Operating expenses:
Cole Capital reallowed fees and commissions 2,373
5,897
7,907
20,940
Acquisition-related 909
90
2,282
373
Litigation and other non-routine costs, net of insurance recoveries 9,507
4,630
36,793
2,372
Property operating 30,645
34,820
96,288
107,832
General and administrative 29,796
29,761
88,355
92,255
Depreciation and amortization 176,523
195,173
543,963
596,826
Impairments 6,363
6,872
30,857
176,214
Total operating expenses 256,116

277,243

806,445

996,812
Operating income 77,612

85,672

212,242

106,142
Other (expense) income:
Interest expense (71,708 ) (79,869 ) (219,072 ) (242,763 )
Gain (loss) on extinguishment and forgiveness of debt, net 9,756
(2,003 ) 18,691
(1,751 )
Other income, net 1,907
1,744
4,540
4,022
Equity in income and gain on disposition of unconsolidated entities 374
212
805
10,686
Gain (loss) on derivative instruments, net 1,294
(2,023 ) 2,710
(3,286 )
Total other expenses, net (58,377 )
(81,939 )
(192,326 )
(233,092 )
Income (loss) before taxes and real estate dispositions 19,235

3,733

19,916

(126,950 )
(Loss) gain on disposition of real estate and held for sale assets, net (688 ) 28,111
54,432
45,723
Income (loss) before taxes 18,547

31,844

74,348
(81,227 )
Provision for income taxes (2,053 ) (1,598 ) (8,878 ) (1,374 )
Net income (loss) 16,494

30,246

65,470

(82,601 )
Net (income) loss attributable to non-controlling interests ⁽¹⁾
(9 ) (12 ) 12
23
Net income (loss) attributable to the OP $ 16,485

$ 30,234

$ 65,482

$ (82,578 )

Basic and diluted net (loss) income per unit attributable to common unitholders $ (0.00 ) $ 0.01
$ 0.01
$ (0.15 )
Distributions declared per common unit $ 0.14
$ 0.14
$ 0.41
$ 0.41


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues:
Rental	$	289,671	$	293,692	$	870,547	$	870,854
Fees from managed partnerships	521		1,586		1,721		2,603
Total revenues	290,192		295,278		872,268		873,457
Operating expenses:
Acquisition-related	1,373		1,050		4,155		3,742
Merger, litigation and non-routine costs, net	9,445		105		16,118		(8,577)
Property operating	28,854		31,400		88,633		90,988
General and administrative	12,437		14,774		43,414		45,950
Depreciation and amortization	106,668		108,257		320,582		341,070
Impairments	13,272		16,397		59,250		36,871
Total operating expenses	172,049		171,983		532,152		510,044
Other expense:
Interest expense	(59,768)		(66,935)		(179,795)		(197,244)
(Loss) gain on extinguishment and forgiveness of debt, net	(5)		61		(2,102)		(1,419)
Other income, net	346		73		7,101		1,026

Equity in income of unconsolidated entities	463		663		1,374		2,406
Gain on disposition of real estate and real estate assets held for sale, net	3,369		42,814		96,339		76,858
Total other expense, net	(55,595)		(23,324)		(77,083)		(118,373)
Income before taxes	62,548		99,971		263,033		245,040
Provision for income taxes	(935)		(1,054)		(2,794)		(3,155)
Net income	61,613		98,917		260,239		241,885
Net loss attributable to non-controlling interests (1)	10		14		41		29
Net income attributable to the OP	$	61,623	$	98,931	$	260,280	$	241,914

Basic and diluted net income per unit attributable to common unitholders	$	0.25	$	0.41	$	1.06	$	0.95


~~(1)~~	~~Represents (income) loss attributable to consolidated joint venture partners.~~

(1)Represents net loss attributable to a consolidated joint venture partner.

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands) (Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income (loss) $ 16,494
$ 30,246
$ 65,470
$ (82,601 )
Other comprehensive income (loss):
Unrealized (loss) gain on interest rate derivatives (214 ) 3,178
(17 ) (9,811 )
Reclassification of previous unrealized (gain) loss on interest rate derivatives into net income (loss) (939 ) 4,650
(229 ) 8,668
Unrealized loss on investment securities, net (283 ) (29 ) (547 ) (1,599 )
Total other comprehensive (loss) income (1,436 ) 7,799

(793 )
(2,742 )

Total comprehensive income (loss) 15,058
38,045

64,677

(85,343 )
Comprehensive (income) loss attributable to non-controlling interests ⁽¹⁾
(9 ) (12 ) 12
23
Total comprehensive income (loss) attributable to the OP $ 15,049
$ 38,033

$ 64,689

$ (85,320 )


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	61,613	$	98,917	$	260,239	$	241,885
Total other comprehensive income (loss)
Unrealized gain (loss) on interest rate derivatives	—		3,666		—		(81,383)
Reclassification of previous unrealized loss on interest rate derivatives into net income	99		5,441		295		11,995
Total other comprehensive income (loss)	99		9,107		295		(69,388)

Total comprehensive income	61,712		108,024		260,534		172,497
Comprehensive loss attributable to non-controlling interests (1)	10		14		41		29
Total comprehensive income attributable to the OP	$	61,722	$	108,038	$	260,575	$	172,526


~~(1)~~	~~Represents (income) loss attributable to consolidated joint venture partners.~~

(1)Represents comprehensive loss attributable to a consolidated joint venture partner.

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except for unit data) (Unaudited)


	Preferred Units						Common Units
	General Partner			Limited Partner			General Partner			Limited Partner
	Number of Units	Capital		Number of Units	Capital		Number of Units	Capital		Number of Units	Capital		Total Partners' Capital		Non-Controlling Interests		Total Capital
Balance, January 1, 2021	18,871,246	$	254,294	49,766	$	1,787	228,881,547	$	6,580,752	152,033	$	4,209	$	6,841,042	$	1,174	$	6,842,216
Issuance of common OP Units, net	—	—		—	—		35,710	—		—	—		—		—		—

Redemption of Series F Preferred Units	(4,000,000)	(100,000)		—	—		—	—		—	—		(100,000)		—		(100,000)

Repurchases of common OP Units to settle tax obligation	—	—		—	—		(49,237)	(1,681)		—	—		(1,681)		—		(1,681)
Equity-based compensation, net	—	—		—	—		261,934	2,892		—	—		2,892		—		2,892

Distributions to Common OP Units and non-controlling interests —$0.462 per common unit	—	—		—	—		—	(105,858)		—	(70)		(105,928)		—		(105,928)
Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—	(1,581)		—	—		(1,581)		—		(1,581)
Distributions to Series F Preferred Units	—	(6,506)		—	(19)		—	—		—	—		(6,525)		—		(6,525)
Net income (loss)	—	—		—	—		—	120,647		—	79		120,726		(3)		120,723
Other comprehensive income	—	—		—	—		—	98		—	—		98		—		98
Balance, March 31, 2021	14,871,246	$	147,788	49,766	$	1,768	229,129,954	$	6,595,269	152,033	$	4,218	$	6,749,043	$	1,171	$	6,750,214


Redemption of Series F Preferred Units	—	(41)		—	—		—	—		—	—		(41)		—		(41)

Repurchases of common OP Units to settle tax obligation	—	—		—	—		(18,042)	(100)		—	—		(100)		—		(100)
Equity-based compensation, net	—	—		—	—		37,704	4,137		—	—		4,137		—		4,137

Distributions to Common OP Units and non-controlling interests —$0.462 per common unit	—	—		—	—		—	(105,867)		—	(70)		(105,937)		—		(105,937)
Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—	(20)		—	—		(20)		—		(20)
Distributions to Series F Preferred Units	—	(6,227)		—	(21)		—	—		—	—		(6,248)		—		(6,248)
Net income (loss)	—	—		—	—		—	77,896		—	35		77,931		(28)		77,903
Other comprehensive income	—	—		—	—		—	98		—	—		98		—		98
Balance, June 30, 2021	14,871,246	$	141,520	49,766	$	1,747	229,149,616	$	6,571,413	152,033	$	4,183	$	6,718,863	$	1,143	$	6,720,006


Redemption of Series F Preferred Units	(14,871,246)	(138,407)		(49,766)	(1,736)		—	(233,381)		—	492		(373,032)		—		(373,032)

Repurchases of common OP Units to settle tax obligation	—	—		—	—		(6,356)	(47)		—	—		(47)		—		(47)
Equity-based compensation, net	—	—		—	—		8,741	3,188		—	—		3,188		—		3,188

Distributions to Common OP Units and non-controlling interests —$0.462 per common unit	—	—		—	—		—	(105,868)		—	(70)		(105,938)		—		(105,938)
Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—	(26)		—	—		(26)		—		(26)
Distributions to Series F Preferred Units	—	(3,113)		—	(11)		—	—		—	—		(3,124)		—		(3,124)
Net income (loss)	—	—		—	—		—	61,565		—	58		61,623		(10)		61,613
Other comprehensive income	—	—		—	—		—	99		—	—		99		—		99
Balance, September 30, 2021	—	$	—	—	$	—	229,152,001	$	6,296,943	152,033	$	4,663	$	6,301,606	$	1,133	$	6,302,739

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except for unit data) (Unaudited)

Preferred Units Common Units
General Partner Limited Partner General Partner Limited Partner
Number of Units Capital Number of Units Capital Number of Units Capital Number of Units Capital Total Partners' Capital Non-Controlling Interests Total Capital
Balance, January 1, 2017 42,834,138
$ 853,821
86,874
$ 3,171
974,146,650
$ 7,593,540
23,748,347
$ 166,598
$ 8,617,130
$ 2,403
$ 8,619,533
Repurchases of common OP Units under the Share Repurchase Program —
—
—
—
(68,759 ) (518 ) —
—
(518 ) —
(518 )
Repurchases of common OP Units to settle tax obligation —
—
—
—
(222,923 ) (1,913 ) —
—
(1,913 ) —
(1,913 )
Equity-based compensation, net —
—
—
—
390,377
11,228
—
—
11,228
—
11,228
Distributions to Common OP Units and non-controlling interest holders —
—
—
—
—
(402,239 ) —
(9,795 ) (412,034 ) (85 ) (412,119 )
Distributions to Preferred OP Units —
(53,811 ) —
(108 ) —
—
—
—
(53,919 ) —
(53,919 )
Net income (loss) —
—
—
—
—
63,940
—
1,542
65,482
(12 ) 65,470
Other comprehensive loss —
—
—
—
—
(774 ) —
(19 ) (793 ) —
(793 )
Balance, September 30, 2017 42,834,138

$ 800,010

86,874

$ 3,063

974,245,345

$ 7,263,264

23,748,347

$ 158,326

$ 8,224,663

$ 2,306

$ 8,226,969


	Preferred Units						Common Units
	General Partner			Limited Partner			General Partner			Limited Partner
	Number of Units	Capital		Number of Units	Capital		Number of Units	Capital		Number of Units	Capital		Total Partners' Capital		Non-Controlling Interests		Total Capital
Balance, January 1, 2020	30,871,246	$	460,504	49,766	$	1,869	215,369,197	$	6,402,155	157,343	$	4,433	$	6,868,961	$	1,233	$	6,870,194

Conversion of Limited Partners' Common OP Units to General Partner's Common OP Units	—	—		—	—		910	45		(910)	(45)		—		—		—

Redemption of Series F Preferred Units	—	(27)		—	—		—	—		—	—		(27)		—		(27)

Repurchases of common OP Units to settle tax obligation	—	—		—	—		(48,218)	(2,378)		—	—		(2,378)		—		(2,378)
Equity-based compensation, net	—	—		—	—		234,408	2,855		—	—		2,855		—		2,855

Distributions to Common OP Units and non-controlling interests —$0.6875 per common unit	—	—		—	—		—	(148,194)		—	(105)		(148,299)		—		(148,299)
Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—	(1,628)		—	—		(1,628)		—		(1,628)
Distributions to Series F Preferred Units	—	(12,928)		—	(19)		—	—		—	—		(12,947)		—		(12,947)

Net income (loss)	—	—		—	—		—	86,808		—	62		86,870		(7)		86,863
Other comprehensive loss	—	—		—	—		—	(76,547)		—	(55)		(76,602)		—		(76,602)
Balance, March 31, 2020	30,871,246	$	447,549	49,766	$	1,850	215,556,297	$	6,263,116	156,433	$	4,290	$	6,716,805	$	1,226	$	6,718,031



Redemption of Series F Preferred Units	—	(25)		—	—		—	—		—	—		(25)		—		(25)


Equity-based compensation, net	—	—		—	—		13,415	4,071		—	—		4,071		—		4,071

Distributions to Common OP Units and non-controlling interests —$0.3850 per common unit	—	—		—	—		—	(82,997)		—	(61)		(83,058)		—		(83,058)
Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—	(18)		—	—		(18)		—		(18)
Distributions to Series F Preferred Units	—	(12,928)		—	(20)		—	—		—	—		(12,948)		—		(12,948)
Repurchase of convertible notes	—	—		—	—		—	(204)		—	—		(204)		—		(204)
Net income (loss)	—	—		—	—		—	56,074		—	39		56,113		(8)		56,105
Other comprehensive loss	—	—		—	—		—	(1,892)		—	(1)		(1,893)		—		(1,893)
Balance, June 30, 2020	30,871,246	$	434,596	49,766	$	1,830	215,569,712	$	6,238,150	156,433	$	4,267	$	6,678,843	$	1,218	$	6,680,061
Issuance of common OP Units, net	—	—		—	—		2,659,332	89,279		—	—		89,279		—		89,279

Redemption of Limited Partners' Common OP Units	—	—		—	—		—	—		(4,400)	(149)		(149)		—		(149)

Redemption of Series F Preferred Units	(12,000,000)	(300,052)		—	—		—	—		—	—		(300,052)		—		(300,052)

Repurchases of common OP Units to settle tax obligation	—	—		—	—		(250)	(8)		—	—		(8)		—		(8)
Equity-based compensation, net	—	—		—	—		19,634	3,211		—	—		3,211		—		3,211

Distributions to Common OP Units and non-controlling interests — $0.3850 per common unit	—	—		—	—		—	(84,026)		—	(59)		(84,085)		—		(84,085)
Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—	(24)		—	—		(24)		—		(24)

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except for unit data) (Unaudited)

Preferred Units Common Units
General Partner Limited Partner General Partner Limited Partner
Number of Units Capital Number of Units Capital Number of Units Capital Number of Units Capital Total Partners' Capital Non-Controlling Interests Total Capital
Balance, January 1, 2016
42,834,138
$ 925,569
86,874
$ 3,315
904,884,394
$ 7,598,418
23,763,797
$ 184,800
$ 8,712,102
$ 1,857
$ 8,713,959
Issuance of common units —
—
—
—
69,000,000
702,482
702,482
702,482
Conversion of Limited Partners' Common OP Units to General Partner's Common OP Units —
—
—
—
15,450
159
(15,450 ) (159 ) —
—
Repurchases of common OP Units to settle tax obligation —
—
—
—
(424,726 ) (4,148 ) —
—
(4,148 ) —
(4,148 )
Equity-based compensation, net —
—
—
—
708,701
7,097
—
—
7,097
—
7,097
Contributions from non-controlling interest holders —
—
—
—
—
—
—
—
—
675
675
Distributions to Common OP Units and non-controlling interest holders —
—
—
—
—
(383,219 ) —
(9,803 ) (393,022 ) (86 ) (393,108 )
Distributions to Preferred OP Units —
(53,811 ) —
(108 ) —
—
—
—
(53,919 ) —
(53,919 )
Net loss —
—
—
—
—
(80,445 ) —
(2,133 ) (82,578 ) (23 ) (82,601 )
Other comprehensive loss —
—
—
—
—
(2,662 ) —
(80 ) (2,742 ) —
(2,742 )
Balance, September 30, 2016 42,834,138

$ 871,758

86,874

$ 3,207

974,183,819

$ 7,837,682

23,748,347

$ 172,625

$ 8,885,272

$ 2,423

$ 8,887,695


	Preferred Units						Common Units
	General Partner			Limited Partner			General Partner			Limited Partner
	Number of Units	Capital		Number of Units	Capital		Number of Units	Capital		Number of Units	Capital		Total Partners' Capital		Non-Controlling Interests		Total Capital
Distributions to Series F Preferred Units	—	$	(10,750)	—	$	(21)	—	$	—	—	$	—	$	(10,771)	$	—	$	(10,771)
Repurchase of convertible notes	—	—		—	—		—	(26)		—	—		(26)		—		(26)
Net income (loss)	—	—		—	—		—	98,866		—	65		98,931		(14)		98,917
Other comprehensive income	—	—		—	—		—	9,101		—	6		9,107		—		9,107
Balance, September 30, 2020	18,871,246	$	123,794	49,766	$	1,809	218,248,428	$	6,354,523	152,033	$	4,130	$	6,484,256	$	1,204	$	6,485,460

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)


	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net income	$	260,239	$	241,885
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	334,483		350,600
Gain on real estate assets, net	(100,320)		(77,117)
Impairments	59,250		36,871
Equity-based compensation	10,217		10,137
Equity in income of unconsolidated entities	(1,374)		(2,406)
Distributions from unconsolidated entities	1,122		1,753
(Gain) loss on other investments	(691)		607

Loss on extinguishment and forgiveness of debt, net	2,102		1,419

Changes in assets and liabilities:
Investment in direct financing leases	1,125		1,117
Rent and tenant receivables, operating lease right-of-use and other assets, net	(1,781)		(38,277)
Accounts payable and accrued expenses	11,331		(9,645)
Deferred rent, operating lease and other liabilities	(11,505)		(2,936)
Net cash provided by operating activities	564,198		514,008
Cash flows from investing activities:
Investments in real estate assets	(419,139)		(147,121)
Capital expenditures and leasing costs	(22,722)		(21,102)
Real estate developments	(14,383)		(16,592)

Investments in unconsolidated entities	(2,180)		(21,348)
Return of investment from unconsolidated entities	3,706		1,961
Proceeds from disposition of real estate	420,171		346,675
Investment in leasehold improvements and other assets	(80)		(612)
Investments in mezzanine position	—		(9,959)

Deposits for real estate assets	(8,661)		(1,973)
Uses and refunds of deposits for real estate assets	7,060		4,036
Proceeds from the settlement of property-related insurance claims	1,148		654
Net cash (used in) provided by investing activities	(35,080)		134,619
Cash flows from financing activities:
Proceeds from mortgage notes payable	—		1,032
Payments on mortgage notes payable and other debt, including debt extinguishment costs	(344,459)		(197,382)
Proceeds from credit facility	192,000		902,000
Payments on credit facility, including swap termination payments	(104,000)		(1,052,000)
Proceeds from corporate bonds	—		594,864
Extinguishment costs related to the redemption of corporate bonds	—		(26)

Extinguishment costs related to the repurchases of convertible notes	—		(69,362)
Payments of deferred financing costs	(1,195)		(7,275)
Refunds of deferred financing costs	280		—

Repurchases of Common Stock to settle tax obligations	(1,828)		(2,386)
Proceeds from the issuance of Common Stock, net of underwriters’ discount and offering expenses	1,336		89,279
Redemption of Series F Preferred Units	(473,073)		(300,104)
Redemption of Limited Partners’ Common OP Units	—		(149)


Distributions paid	(318,883)		(418,722)

Net cash used in financing activities	(1,049,822)		(460,231)
Net change in cash and cash equivalents and restricted cash	(520,704)		188,396

Nine Months Ended September 30,
2017 2016
Cash flows from operating activities:
Net income (loss) $ 65,470
$ (82,601 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 562,673
610,291
Gain on real estate assets and joint venture, net (54,432 ) (55,921 )
Impairments 30,857
176,214
Equity-based compensation 11,224
7,097
Equity in income of unconsolidated entities (805 ) (488 )
Distributions from unconsolidated entities 2,782
3,007
Gain on investment securities (65 ) —
(Gain) loss on derivative instruments, net (2,710 ) 3,286
(Gain) loss on extinguishment and forgiveness of debt, net (18,691 ) 1,751
Changes in assets and liabilities:
Investment in direct financing leases 1,575
1,861
Rent and tenant receivables and other assets, net (19,463 ) (51,702 )
Due from affiliates, net 4,411
50
Accounts payable and accrued expenses 13,759
(6,726 )
Deferred rent, derivative and other liabilities (27 ) (1,235 )
Due to affiliates (8 ) (230 )
Net cash provided by operating activities 596,550

604,654
Cash flows from investing activities:
Investments in real estate assets (403,886 ) (19,952 )
Capital expenditures and leasing costs (14,081 ) (15,892 )
Real estate developments (10,863 ) (6,288 )
Principal repayments received from borrowers 6,281
4,906
Investments in unconsolidated entities —
(2,500 )
Proceeds from disposition of real estate and joint venture 366,237
615,246
Investment in leasehold improvements and other assets (446 ) (726 )
Deposits for real estate assets (32,946 ) (11,686 )
Uses and refunds of deposits for real estate assets 20,989
9,753
Line of credit advances to affiliates (400 ) (10,300 )
Line of credit repayments from affiliates 10,700
50,000
Change in restricted cash 14,606
(5,674 )
Net cash (used in) provided by investing activities (43,809 ) 606,887
Cash flows from financing activities:
Proceeds from mortgage notes payable 4,283
1,450
Payments on mortgage notes payable and other debt, including debt extinguishment and swap termination costs (389,775 ) (145,802 )
Proceeds from credit facility —
783,000
Payments on credit facility, including swap termination costs (501,107 ) (1,743,000 )
Proceeds from corporate bonds 600,000
1,000,000
Payments on corporate bonds, including extinguishment costs —
(1,311,208 )
Payments of deferred financing costs (9,313 ) (19,056 )
Proceeds from 2016 Term Loan —
300,000
Repayment of 2016 Term Loan —
(300,000 )
Repurchases of common units under the Share Repurchase Program (518 ) —
Repurchases of common units to settle tax obligations (1,913 ) (4,148 )
Proceeds from the issuance of Common Units, net of underwriters’ discount —
702,765
Payments of equity issuance costs —
(274 )
Contributions from non-controlling interest holders —
675

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)

(In thousands) (Unaudited)


	Nine Months Ended September 30,
	2021		2020

Cash and cash equivalents and restricted cash, beginning of period	$	537,381	$	33,880



Cash and cash equivalents and restricted cash, end of period	16,677		222,276



Reconciliation of Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents at beginning of period	$	523,539	$	12,921
Restricted cash at beginning of period	13,842		20,959
Cash and cash equivalents and restricted cash at beginning of period	537,381		33,880

Cash and cash equivalents at end of period	5,874		207,321
Restricted cash at end of period	10,803		14,955
Cash and cash equivalents and restricted cash at end of period	$	16,677	$	222,276

Nine Months Ended September 30,
2017 2016
Distributions paid (456,487 ) (428,428 )
Net cash used in financing activities (754,830 )
(1,164,026 )
Net change in cash and cash equivalents (202,089 ) 47,515
Cash and cash equivalents, beginning of period 256,452
69,103
Cash and cash equivalents, end of period $ 54,363

$ 116,618

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, ~~2017~~2021 (Unaudited)

Note 1 – Organization

VEREIT^® is a Maryland corporation, incorporated on December 2, 2010, that qualified as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning in the taxable year ended December 31, 2011. The OP is a Delaware limited partnership of which the General Partner is the sole general partner. VEREIT’s common stock, par value $0.01 per share (“Common Stock”)~~, and its 6.70% Series F Cumulative Redeemable Preferred Stock, par value $0.01 per share (“Series F Preferred Stock”) trade~~ trades on the New York Stock Exchange (“NYSE”) under the trading ~~symbols,~~symbol “VER” ~~and “VER PRF,” respectively.~~. As used herein, the terms the “Company,” “we,” “our” and “us” refer to VEREIT, together with its consolidated subsidiaries, including the OP.

~~The Company~~VEREIT is a full-service real estate operating company ~~with investment management capabilities that operates through two reportable segments, its real estate investment (“REI”) segment and its investment management segment, Cole Capital~~^® ~~(“Cole Capital”), as further discussed in~~ ~~Note 3 –Segment Reporting. Through the REI segment, the Company~~which owns and ~~actively~~ manages ~~a diversified portfolio~~one of ~~retail, restaurant, office and industrial real estate~~the largest portfolios of single-tenant commercial properties ~~subject~~in the U.S. VEREIT’s business model provides equity capital to creditworthy corporations in return for long-term ~~net~~ leases ~~with creditworthy tenants.~~on their properties. The Company actively manages its portfolio considering a number of metrics including property type, concentration and key economic factors for appropriate balance and diversity. ~~Through the Cole Capital segment, the Company is responsible for raising capital for and managing the affairs of the Cole REITs~~^® ~~(as defined in~~ ~~Note 3 –Segment Reporting~~) on a day-to-day basis, identifying and making acquisitions and investments on the Cole REITs’ behalf, and recommending to the respective board of directors of each of the Cole REITs an approach for providing investors with liquidity. Cole Capital receives compensation and reimbursement for performing these services. To support both reportable segments, the Company employs a shared services model pursuant to which its personnel are integral in providing, among other things, transactional and operational functions to the Company’s owned portfolio and the Cole REITs.

Substantially all of the ~~REI segment’s~~Company’s operations are conducted through the OP. VEREIT is the sole general partner and holder of ~~97.6%~~99.9% of the common equity interests in the OP as of September 30, 2017 with the remaining 2.4% of the common equity interests owned by unaffiliated investors and certain former directors, officers and employees of ARC Properties Advisors, LLC (the “Former Manager”).2021. Under the limited partnership agreement of the OP, as amended (the “LPA”), after holding common units of limited partner interests in the OP (“OP Units”) for a period of one year and meeting the other requirements in the LPA, unless we otherwise consent to an earlier redemption, ~~is otherwise consented to by VEREIT,~~ holders ~~of OP Units~~ have the right to redeem the ~~OP Units~~units for the cash value of a corresponding number of shares of ~~VEREIT’s~~ Common Stock, as applicable, or, at ~~the~~our option, ~~of VEREIT,~~ a corresponding number of shares of ~~VEREIT’s~~ Common ~~Stock.~~Stock, subject to adjustment pursuant to the terms of the LPA. The remaining rights of the holders of OP Units are limited, however, and do not include the ability to replace the General Partner or to approve the sale, purchase or refinancing of the OP’s assets.

Substantially all of the Cole Capital segment’s operations are conducted through Cole Capital Advisors, Inc. (“CCA”), an Arizona corporation and a wholly owned subsidiary of the OP. CCA is treated as a taxable REIT subsidiary (“TRS”) under Section 856 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

The actions of the OP and its relationship with the General Partner are governed by the LPA. The General Partner does not have any significant assets other than its investment in the OP. Therefore, the assets and liabilities of the General Partner and the OP are the same. Additionally, pursuant to the LPA, all administrative expenses and expenses associated with the formation, continuity, existence and operation of the General Partner incurred by the General Partner on the OP’s behalf shall be treated as expenses of the OP. Further, when the General Partner issues any equity instrument that has been approved by the General Partner’s ~~board~~Board of ~~directors,~~Directors, the LPA requires the OP to issue to the General Partner equity instruments with substantially similar terms, to protect the integrity of the Company’s umbrella partnership REIT structure, pursuant to which each holder of interests in the OP has a proportionate economic interest in the OP reflecting its capital contributions thereto. OP Units issued to the General Partner are referred to as ~~General~~“General Partner OP ~~Units.~~Units”. OP Units issued to parties other than the General Partner are referred to as ~~Limited~~“Limited Partner OP ~~Units.~~Units”. Series F Preferred Units issued to the General Partner were historically referred to as “General Partner Series F Preferred Units”. Series F Preferred Units issued to parties other than the General Partner were historically referred to as “Limited Partner Series F Preferred Units”. The LPA also provides that the OP issue debt with terms and provisions consistent with debt issued by the General Partner. The LPA will be amended to provide for the issuance of any additional class of equivalent equity instruments to the extent the General Partner’s ~~board~~Board of ~~directors~~Directors authorizes the issuance of any new class of equity securities.

Merger with Realty Income Corporation

On April 29, 2021, the Company and the OP entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Realty Income Corporation (“Realty Income”), Rams MD Subsidiary I, Inc., a wholly owned subsidiary of Realty Income (“Merger Sub 1”), and Rams Acquisition Sub II, LLC, a wholly owned subsidiary of Realty Income (“Merger Sub 2”) whereby Merger Sub 2 will be merged with and into the OP (the “Partnership Merger”), with the OP continuing as the surviving entity and, immediately thereafter, VEREIT will be merged with and into Merger Sub 1, with Merger Sub 1 continuing as the surviving corporation (the “Merger” and, together with the Partnership Merger, the “Mergers”).

Pursuant to the terms and subject to the conditions of the Merger Agreement, each VEREIT common stockholder will have the right to receive 0.705 of newly issued shares of Realty Income common stock (the “Realty Income Common Stock”), par value $0.01 per share. In addition, at the effective time of the Partnership Merger (i) each outstanding General Partner OP Unit will remain outstanding as a common unit of partnership interest in the surviving entity, and (ii) certain outstanding Limited Partner OP Units will be converted into 0.705 of a newly issued share of Realty Income Common Stock, subject to adjustment. Holders of the Limited Partner OP Units will receive cash in lieu of fractional shares.

In connection with the Merger, the Company and Realty Income intend to contribute some or all of their office real properties to a newly formed, wholly owned subsidiary ("Orion"), and, following the Merger, Realty Income intends to distribute the outstanding voting shares of common stock in Orion to the shareholders of the combined company on a pro rata basis (the "Spin-Off"). Following the consummation of the Spin-Off, the Company and Realty Income intend for Orion to

Table of Contents

VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, ~~2017~~2021 (Unaudited)– ~~(Continued)~~

operate as a separate, publicly-traded REIT. Subject to the terms and conditions of the Merger Agreement, the Company and Realty Income may also seek to sell some or all of the Orion business in connection with the closing of the Merger.

The Merger Agreement contains customary representations, warranties and covenants by each party. The Merger is subject to certain conditions which are set forth in the Merger Agreement. Stockholders of VEREIT and Realty Income have both approved the Merger. The boards of directors of the Company and Realty Income have also unanimously approved the Merger Agreement. The Merger is expected to close on November 1, 2021 subject to the satisfaction or waiver of other closing conditions specified in the Merger Agreement.

Series F Preferred Stock

On August 15, 2021, the Company redeemed all outstanding shares of Series F Preferred Stock. Concurrently with the redemption of the Series F Preferred Stock, VEREIT OP redeemed all outstanding Series F Preferred Units of VEREIT OP in accordance with the terms of VEREIT OP’s agreement of limited partnership. As a result, the Company’s Series F Preferred Stock was de-listed from the NYSE effective August 16, 2021.

Note 2 –Summary of Significant Accounting Policies

Basis of Accounting

The consolidated financial statements of the Company presented herein include the accounts of the General Partner and its consolidated subsidiaries, including the OP. All intercompany transactions have been eliminated upon consolidation. The financial statements are prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. The results of operations for the three and nine months ended September 30, ~~2017~~2021 are not necessarily indicative of the results for the entire year or any subsequent interim period.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, ~~2016~~2020 of the Company, which are included in the Company’s Annual Report on Form 10-K filed on February 23, 2017. There have been no significant changes to the Company’s significant accounting policies during the nine months ended September 30, 2017, except the Company adopted Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”), as disclosed within the “Acquisition-Related Expenses and Litigation and Other Non-routine Costs” and “Recent Accounting Pronouncements” sections herein.24, 2021. Information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and U.S. GAAP.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company and its consolidated subsidiaries and a consolidated joint ~~venture arrangements.~~venture. The ~~portions~~portion of the consolidated joint venture ~~arrangements~~ not owned by the Company ~~are~~is presented as non-controlling ~~interests~~interest in VEREIT’s and the OP’s consolidated balance sheets, statements of operations, statements of comprehensive income (loss) and statements of changes in equity. In addition, ~~as described in~~ ~~Note 1 – Organization~~, certain third parties ~~have been~~were issued OP Units and Series F Preferred Units. Holders of OP Units are considered to be non-controlling interest holders in the OP and their ownership interest in the limited partner’s share is presented as non-controlling interests in VEREIT’s consolidated balance sheets, statements of operations, statements of comprehensive income (loss) and statements of changes in equity. Further, a portion of the earnings and losses of the OP are allocated to non-controlling interest holders based on their respective ownership percentages. ~~Upon conversion of OP Units to Common Stock, any difference~~Equity is reallocated between ~~the fair value of shares of Common Stock issued~~controlling and ~~the carrying value of~~noncontrolling interests in the OP ~~Units converted is recorded~~upon a change in ownership. At the end of each annual reporting period, noncontrolling interests in the OP are adjusted to reflect their ownership percentage in the OP through a reallocation between controlling and noncontrolling interests in the OP, as ~~a component of equity.~~applicable. As of ~~both~~each of September 30, ~~2017~~2021 and December 31, ~~2016,~~2020, there were approximately ~~23.75~~0.2 million Limited Partner OP Units issued and outstanding, respectively. As of December 31, 2020, there were 49,766 Limited Partner Series F Preferred Units issued and outstanding.

In connection with the redemption of all shares of outstanding Series F Preferred Stock on August 15, 2021 discussed above, the OP redeemed all outstanding Series F Preferred Units.

For legal entities being evaluated for consolidation, the Company must first determine whether the interests that it holds and fees it receives qualify as variable interests in the entity. A variable interest is an investment or other interest that will absorb portions of an entity’s expected losses or receive portions of the entity’s expected residual returns. The Company’s evaluation includes consideration of fees paid to the Company where the Company acts as a decision maker or service provider to the entity being evaluated. If the Company determines that it holds a variable interest in an entity, it evaluates whether that entity is a variable interest entity (“VIE”). VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or where equity investors, as a group, lack one of the following

Table of Contents

VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021 (Unaudited) – (Continued)

characteristics: (a) the power to direct the activities that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of the entity, or (c) the right to receive the expected returns of the entity. The Company consolidates entities that are not VIEs if it has a majority voting interest or other rights that result in effectively controlling the entity.

The Company then qualitatively assesses whether it is (or is not) the primary beneficiary of a VIE, which is generally defined as the party who has a controlling financial interest in the VIE. Consideration of various factors include, but are not limited to, the Company’s ability to direct the activities that most significantly impact the entity’s economic performance and its obligation to absorb losses from or right to receive benefits of the VIE that could potentially be significant to the VIE. The Company consolidates any VIEs when the Company is determined to be the primary beneficiary of the VIE and the difference between consolidating the VIE and accounting for it using the equity method could be material to the Company’s consolidated financial statements. The Company continually evaluates the need to consolidate these VIEs based on standards set forth in U.S. GAAP.

Reverse Stock Split - Impact to Prior Period

The Company effected a one-for-five reverse stock split of Common Stock after markets closed on December 17, 2020, whereby every five shares of VEREIT's issued and outstanding shares of Common Stock, $0.01 par value per share, were converted into one share of Common Stock, $0.01 par value per share. A corresponding reverse split of the outstanding OP Units also took effect on December 17, 2020. Certain prior period amounts have been updated to reflect the reverse stock split including stock/unit and per share/unit amounts, additional paid-in capital, common stock and dividends on the consolidated statements of operations, consolidated balance sheets, consolidated statements of equity and notes to the financial statements. The reverse stock split did not affect the Company’s total stockholder’s equity, the common stock par value per share or the Company’s authorized shares of common stock. No fractional shares of common stock were issued as fractional shares were settled in cash.

Prior Period Correction

Subsequent to the issuance of the Company’s consolidated financial statements for the year ended December 31, 2020, the Company identified an overstatement in amounts recorded to depreciation expense. As a result, the Company revised the accompanying consolidated balance sheets as of December 31, 2020 to reduce accumulated depreciation and amortization and accumulated deficit and increase the General Partner's common equity by $30.6 million. The Company also revised the accompanying consolidated statements of operations to reduce depreciation and amortization by $0.9 million for the three months ended September 30, 2020 and by $2.8 million for the nine months ended September 30, 2020, which impacted total operating expenses, income before taxes, net income and net income attributable to the OP/General Partner. Basic and diluted net income per share attributable to common stockholders/unitholders (adjusted for the one-for-five stock split) for the three months ended September 30, 2020 changed from $0.40 to $0.41 and for the nine months ended September 30, 2020 remained constant at $0.95. The Company also revised the accompanying consolidated statements of changes in equity to reduce the accumulated deficit balances and increase the General Partner’s common equity at January 1, 2021 and 2020 by $30.6 million and $26.9 million, respectively. For the periods in which the Company revised net income, it made corresponding changes to net income in the accompanying consolidated statements of comprehensive income (loss), consolidated statements of changes in equity and consolidated statements of cash flows. There was no impact to net cash provided by operating activities in the accompanying consolidated statements of cash flows due to the revisions. The Company determined that the correction is not material to the previously issued consolidated financial statements.

Revenue Recognition

Rental Revenue

The Company continually reviews receivables related to rent, straight-line rent and property operating expense reimbursements and determines collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. The review includes a binary assessment of whether or not substantially all of the amounts due under a tenant’s lease agreement are probable of collection. For leases that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term and the Company recognizes a general allowance on a portfolio-wide basis. For leases that are deemed not probable of collection, revenue is recorded as cash is received and the Company reduces rental revenue for any straight-line rent receivables. The Company recognizes all changes in the collectability assessment for an operating lease as an adjustment to rental revenue. During the three and nine months ended September 30, 2021, rental revenue

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, ~~2017~~2021 (Unaudited) – (Continued)

~~Acquisition-Related Expenses~~increased by $1.1 million and ~~Litigation and Other Non-routine Costs~~

~~As further disclosed in the “Recent Accounting Pronouncements” section herein, in January 2017,~~$1.9 million, respectively, as the Company ~~elected to early adopt ASU 2017-01~~deemed certain previously reserved receivables as collectible, which ~~clarifies~~exceeded amounts deemed uncollectible during the ~~definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. During the~~three and nine months ended September 30, ~~2017, all real estate acquisitions qualified~~2021.

Rental revenue also includes lease termination income collected from tenants to allow for the tenant to vacate their space prior to their scheduled termination dates, as ~~asset acquisitions,~~well as amortization of above and ~~external acquisition~~below-market leases.

Merger, litigation and non-routine costs, ~~related to these asset acquisitions were capitalized. Prior to January 1, 2017, external~~net

The Company incurred costs related to property acquisitions were expensed as incurred. Internal costs, such as employee salaries, related to activities necessary to complete, or affect, self-originating asset acquisitions or business combinations are classified as acquisition-related expenses in the accompanying consolidated statements of operations. Any costs incurred as a result of a business combination will be classified as acquisition-related expenses or other non-routine transaction related expenses and expensed as incurred.

~~External acquisition-related costs incurred in relation to mergers and litigation resulting therefrom~~for legal, investment banking and other ~~non-routine transactions are included in litigation and other non-routine costs, net of insurance recoveries in~~services associated with the ~~consolidated statements of operations. The Company has also incurred~~Merger, as well as legal fees and ~~other costs~~settlements associated with litigations and investigations resulting from the Audit Committee Investigation (defined below) and ~~the litigations and investigations resulting therefrom,~~other corporate matters which are considered non-routine. ~~The Company has directors’~~

Merger, litigation and ~~officers’ insurance and the insurance carriers have paid certain defense~~non-routine costs, ~~subject to standard reservation of rights under the respective policies.~~

~~Litigation and other non-routine costs~~net include the following costs ~~(amounts in~~and recoveries (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Litigation and other non-routine costs:
Audit Committee Investigation and related matters ⁽¹⁾
$ 9,476
$ 5,221
$ 36,501
$ 13,413
Legal fees and expenses ⁽²⁾
31
59
292
155
Total costs incurred 9,507
5,280
36,793

13,568
Insurance recoveries —
(650 ) —
(11,196 )
Total $ 9,507
$ 4,630
$ 36,793
$ 2,372


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Merger, litigation and non-routine costs, net:





Merger costs	$	9,616	$	—	$	22,289	$	—
Legal fees and settlements (1) (2)	(171)		105		174		(6,106)
Insurance recoveries	—		—		(6,345)		(2,471)

Total	$	9,445	$	105	$	16,118	$	(8,577)

~~(1)~~

~~Includes all fees and costs associated with the previously-announced~~

(1)Includes all fees and litigation settlements associated with various corporate matters and litigations and investigations prompted by the results of the 2014 investigation conducted by the audit committee (the “Audit Committee”) of the Company’s board of directors (the “Audit Committee Investigation”) and various litigations and investigations prompted by the results of the Audit Committee Investigation, including fees and costs incurred pursuant to the Company’s advancement obligations and in connection with related insurance recovery matters.


~~(2)~~	~~Includes legal fees and expenses associated with litigation resulting from prior mergers.~~

~~Recent Accounting Pronouncements~~

In May 2014, the U.S. Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) (Topic 606), which supersedes the revenue recognition requirements in Revenue Recognition, Accounting Standards Codification (“ASC”) (Topic 605) and will require an entity to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For public business entities, the guidance should be applied to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The Company plans to use the modified retrospective approach to adopt ASU 2014-09. In accordance with the Company’s plan for the adoption of ASU 2014-09, the Company’s implementation team has identified the Company’s revenue streams, performed an in-depth review of the Company’s ~~revenue contracts~~Board of Directors (the “Audit Committee Investigation”), net of accrual reversals.

(2)Negative balances are the result of estimated costs accrued in prior periods that exceeded actual expenses incurred.

Equity-based Compensation

The Company had a 2011 equity-based incentive award plan (the “2011 Equity Plan”) for non-executive directors, officers, other employees and ~~identified~~advisors or consultants who provided services to the ~~related performance obligations~~Company, as applicable, and ~~is evaluating the impact on~~a non-executive director restricted share plan, which were accounted for under U.S. GAAP for share-based payments. On June 3, 2021, the Company’s ~~financial statements and internal accounting processes and controls. Once ASU 2016-02 Leases (Topic 842) (“ASU 2016-02”~~stockholders, upon the recommendation of the Board, approved the VEREIT, Inc. 2021 Equity Incentive Plan (the “2021 Plan”), which ~~as discussed below, sets forth principles for~~replaced the ~~recognition, measurement, presentation~~Company’s 2011 Equity Plan and ~~disclosure~~the non-executive director restricted share plan. All officers, employees, non-employee directors and consultants of ~~leases, goes into effect, ASU 2014-09 may apply to non-lease components in the lease agreements. Based upon a preliminary analysis,~~ the Company ~~does not expect that~~and its subsidiaries are eligible to receive awards under the ~~adoption of ASU 2014-09 will have a material impact on its REI segment.~~2021 Plan, which is accounted for under U.S. GAAP for share-based payments. The ~~Company~~expense for equity-based incentive awards is ~~currently evaluating whether~~recognized over the ~~adoption of ASU 2014-09 will have any impact on~~vesting period or when the ~~timing of revenue recognition~~requirements for exercise of the ~~Cole Capital segment.~~award have been met.

As of June 3, 2021, the General Partner had cumulatively awarded under its 2011 Equity Plan approximately 4.0 million shares of Common Stock, which was comprised of 0.8 million restricted share awards (“Restricted Shares”), net of the forfeiture of 0.7 million Restricted Shares through that date, 1.9 million restricted stock units (“Restricted Stock Units”), net of the forfeiture/cancellation of 0.4 million Restricted Stock Units through that date, 0.2 million deferred stock units (“Deferred Stock Units”), and 1.1 million stock options (“Stock Options”), net of forfeiture/cancellation of 0.1 million Stock Options through that date. As of June 3, 2021, the General Partner had cumulatively awarded a total of 9,000 shares under the non-executive director restricted share plan. As of September 30, 2021, the General Partner had cumulatively awarded 1,173 Deferred Stock Units under its 2021 Plan.

As of September 30, 2021, approximately 9.1 million shares, including 0.3 million shares of Common Stock subject to awards granted under the 2011 Plan that may become available for issuance or reissuance, as applicable, under the 2021 Plan if such awards are forfeited, canceled or otherwise terminated (other than by exercise), were available for issuance under the 2021 Plan.

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, ~~2017~~2021 (Unaudited) – (Continued)

The following is a summary of equity-based compensation expense for the three and nine months ended September 30, 2021 (in thousands):

~~In February 2016,~~


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

Time-Based Restricted Stock Units (1)	$	1,537	$	1,412	$	4,480	$	4,195
Long-Term Incentive-Based Restricted Stock Units	1,455		1,416		4,009		3,916
Deferred Stock Units	27		53		1,138		1,071
Stock Options	169		330		590		955
Total	$	3,188	$	3,211	$	10,217	$	10,137

(1)Includes stock compensation expense attributable to awards for which the requisite service period begins prior to the assumed future grant date.

As of September 30, 2021, total unrecognized compensation expense related to these awards was approximately $21.2 million, with an aggregate weighted-average remaining term of 2.3 years.

Recent Accounting Pronouncements

Reference Rate Reform

During the first quarter of 2020, the FASB issued ASU ~~2016-02, which will require~~2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that ~~a lessee recognize assets~~impact debt, leases, derivatives and ~~liabilities~~other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future London Inter-Bank Offer Rate (“LIBOR”)-indexed cash flows to assume that the index applicable to future hedged transactions matched the index on the balance sheet for all leases with a lease term of more than 12 months, with the result being the recognition of a right of use asset and a lease liability and the disclosure of key information about the entity’s leasing arrangements. The lessor accounting model under ASU 2016-02 is similar to current guidance, however it limits the capitalization of initial direct leasing costs, such as internally generated costs. ASU 2016-02 retains a distinction between finance leases (~~i.e.,~~ capital leases under current U.S. GAAP) and operating leases. The classification criteria for distinguishing between finance leases and operating leases will be substantially similar to the classification criteria for distinguishing between capital leases and operating leases under current U.S. GAAP. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. A modified retrospective approach is required for existing leases that have not expired upon adoption and provides for certain practical expedients. The Company’s implementation team has developed an inventory of all leases and is identifying any non-lease components in the lease agreements and is evaluating the impact to the Company, both as lessor and lessee, and its consolidated financial statements. Upon the adoption of ASU 2016-02, the Company will record certain expenses paid directly by a tenant that protect the Company’s interests in its properties, such as insurance and real estate taxes, and the related operating expense reimbursement revenue, with no impact on net income. The Company expects the accounting for leases pursuant to which the Company is the lessee to change and is currently evaluating the impact. Leases pursuant to which the Company is the lessee primarily consist of corporate offices and ground leases.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”). ASU 2016-13 is intended to improve financial reporting by requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology under current U.S. GAAP. ASU 2016-13 is effective for fiscal years, and interim periods within, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within, beginning after December 15, 2018. The Company is currently evaluating the impact this amendment will have on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which is intended to address diversity in practice related to how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted, and requires retrospective adoption unless it is impracticable to apply, in which case it is to be applied prospectively as of the earliest date practicable. The Company plans to adopt ASU 2016-15 duringcorresponding derivatives. During the fourth quarter of ~~fiscal year 2017~~2020, the Company terminated its interest rate swap agreements with an aggregate $900.0 million notional amount and ~~has determined that this standard is relevant to~~terminated its ~~presentation~~forward starting interest rate swaps with a total notional amount of ~~debt prepayment~~$400.0 million, both of which were designated as cash flow hedges, in connection with the early repayment of borrowings under the Credit Facility Term Loan (as defined in Note 6 – Debt), as discussed in Note 7 –Derivatives and debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims and distributions received from equity method investments.Hedging Activities. The Company ~~is currently evaluating~~continues to evaluate the impact of ~~this amendment on distributions received from equity method investments~~the guidance and ~~does not expect the~~may apply other ~~three items to have a material impact on its statement of cash flows.~~

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which provides guidance on the presentation of restricted cash and restricted cash equivalentselections as applicable as additional changes in the ~~statement of cash flows. In accordance with ASU 2016-18, restricted cash~~market occur.

Note 3 – Real Estate Investments and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statements of cash flows. The amendments of ASU 2016-18 are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The Company plans to adopt ASU 2016-18 during the fourth quarter of 2017 and apply the standard retrospectively for all periods presented. The Company does not expect it will have a material impact on its consolidated financial statements.Related Intangibles

In January 2017, the FASB issued ASU 2017-01, which clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods, with early adoption permitted, and is required to be applied prospectively to any transactions occurring within the period of adoption. The Company has elected to early adopt ASU 2017-01 effective January 1, 2017. As the Company expects that a majority of its real estate acquisitions will be considered asset acquisitions, external acquisition costs related to these asset acquisitions will be capitalized. Prior to 2017, all acquisition-related costs were expensed as incurred. The adoption of this pronouncement resulted in capitalization of $1.9 million of external acquisitions-related costs duringProperty Acquisitions

During the nine months ended September 30, ~~2017. Internal costs, such as employee salaries, related to activities necessary to complete, or affect, self-originating asset acquisitions or business combinations are classified as~~2021, the Company acquired controlling financial interests in 134 commercial properties for an aggregate purchase price of $419.2 million (the “2021 Acquisitions”), which includes $4.0 million of external acquisition-related expenses that were capitalized. Additionally, the Company placed in service 1 build-to-suit development project in which the ~~accompanying consolidated statements~~Company invested $45.5 million, including $0.9 million of ~~operations. Upon~~external acquisition-related expenses and interest that were capitalized and the land parcel acquired during the year ended December 31, 2020.

During the nine months ended September 30, 2020, the Company acquired controlling financial interests in 25 commercial properties for an aggregate purchase price of $147.1 million (the “2020 Acquisitions”), which includes the land parcel and capitalized external acquisition-related expenses and interest for the build-to-suit development discussed above.

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, ~~2017~~2021 (Unaudited) – (Continued)

adoption of ASU 2017-01, the Company's real estate dispositions qualify as asset dispositions and as such, no portion of the Company’s REI segment’s goodwill was allocated to the cost basis of these assets in determining the gain or loss on disposition of real estate and held for sale assets. Prior to January 1, 2017, when the Company disposed of a property or classified a property as held for sale, it constituted a business per U.S. GAAP and the Company allocated a portion of the REI segment's goodwill to the cost basis of that property in determining the gain or loss on the disposition of real estate and held for sale assets.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Others (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which simplifies the measurement of goodwill impairment by eliminating Step 2 from the goodwill impairment test (comparing the implied fair value of goodwill with the carrying amount of goodwill). ASU 2017-04 is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The adoption of this standard is applied prospectively and may result in a different impairment charge as compared to the existing standard. The Company is currently evaluating the impact this amendment will have on its consolidated financial statements and whether to early adopt during the 2017 fourth quarter annual impairment test.

In February 2017, the FASB issued ASU 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”), which clarifies the following: 1) nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty; 2) an entity should allocate consideration to each distinct asset by applying the guidance in Topic 606 on allocating the transaction price to performance obligations; and 3) requires entities to derecognize a distinct nonfinancial asset or distinct in substance nonfinancial asset in a partial sale transaction when it (a) does not have (or ceases to have) a controlling financial interest in the legal entity that holds the asset in accordance with Subtopic 810 and (b) transfers control of the asset in accordance with Topic 606. The adoption of this standard will result in higher gains on the sale of partial real estate interests, including contributions of nonfinancial assets to a joint venture or other noncontrolling investee, due to recognizing the full gain when the derecognition criteria are met and recording the retained noncontrolling interest at its fair value. ASU 2017-05 is effective for annual periods, and interim periods therein, beginning after December 15, 2017. Early adoption is permitted.

In May 2017, FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions and classification of the awards are the same immediately before and after the modification. This ASU is effective for fiscal years beginning after December 15, 2017 and interim periods therein, with early adoption permitted. The Company does not expect that the adoption of ASU 2017-09 will have a material impact on its consolidated financial statements.

In August 2017, FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The targeted amendments in this ASU help simplify certain aspects of hedge accounting and result in a more accurate portrayal of the economics of an entity’s risk management activities in its financial statements. This ASU applies to the Company’s interest rate swaps designated as cash flow hedges. Upon adoption of this ASU, all changes in the fair value of highly effective cash flow hedges will be recorded in accumulated other comprehensive income rather than recognized directly in earnings. Under current U.S. GAAP, the ineffective portion of the change in fair value of cash flow hedges is recognized directly in earnings. This eliminates the requirement to separately measure and disclose ineffectiveness for qualifying cash flow hedges. ASU 2017-12 is effective for public entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The ASU is required to be adopted using a modified retrospective approach with early adoption permitted. The Company plans to adopt ASU 2017-12 during the first quarter of fiscal year 2018 and does not expect it will have a material impact on its consolidated financial statements.

~~Note 3 – Segment Reporting~~

~~The Company has organized its operations into two segments for management and internal financial reporting purposes, REI and Cole Capital, as further discussed below.~~

~~REI~~ – Through its REI segment, the Company owns and actively manages a diversified portfolio of retail, restaurant, office and industrial real estate properties subject to long-term net leases with creditworthy tenants. As of September 30, 2017, the Company owned 4,094 properties comprising 92.5 million square feet of retail and commercial space located in 49 states, Puerto Rico and Canada, which includes properties owned through consolidated joint ventures. The rentable space at these properties was 98.7% leased with a weighted-average remaining lease term of 9.5 years. In addition, as of September 30, 2017, the Company owned eight commercial mortgage-backed securities (“CMBS”) and eight mortgage notes receivable.

~~Table of Contents~~

~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017 (Unaudited)~~ – ~~(Continued)~~

~~Cole Capital~~ – Through its Cole Capital segment, the Company is responsible for managing the day-to-day affairs of Cole Credit Property Trust IV, Inc. (“CCPT IV”); Cole Real Estate Income Strategy (Daily NAV), Inc. (“INAV”); Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”); Cole Office & Industrial REIT (CCIT III), Inc. (“CCIT III”); Cole Credit Property Trust V, Inc. (“CCPT V”); and other real estate offerings in registration (collectively with CCPT IV, INAV, CCIT II, CCIT III and CCPT V, the “Cole REITs”), raising capital for those Cole REITs still in offering, identifying and making acquisitions and investments on the Cole REITs’ behalf and recommending to the respective board of directors of each of the Cole REITs an approach for providing investors with liquidity. Cole Capital serves as the dealer manager and distributes shares of common stock for certain Cole REITs, advises them regarding offerings, manages relationships with participating broker-dealers and financial advisors, and provides assistance in connection with compliance matters relating to the offerings. Cole Capital receives compensation and reimbursement for services relating to the Cole REITs’ offerings and the investment, management, financing and disposition of their respective assets, as applicable. Cole Capital also develops new REIT offerings and assists in obtaining regulatory approvals from the SEC, the Financial Industry Regulatory Authority, Inc. and various blue sky jurisdictions for such offerings. See ~~Note 17 –~~ ~~Related Party Transactions and Arrangements for further discussion on the Cole REITs.~~

The Company allocates certain operating expenses, such as legal fees, employee related costs and benefits and general overhead expenses between its operating segments. The following tables present a summary of the comparative financial results and total assets for each segment (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
REI segment:
Revenues:
Rental income $ 282,341
$ 303,383
$ 862,371
$ 928,706
Direct financing lease income 376
494
1,212
1,598
Operating expense reimbursements 23,826
27,969
72,103
77,862
Total real estate investment revenues 306,543
331,846
935,686

1,008,166
Operating expenses:
Acquisition-related 909
90
2,246
334
Litigation and other non-routine costs, net of insurance recoveries 9,507
4,630
36,793
2,372
Property operating 30,645
34,820
96,288
107,832
General and administrative 13,075
12,069
39,929
37,998
Depreciation and amortization 171,576
187,897
529,306
574,124
Impairment of real estate 6,363
6,872
30,857
176,214
Total operating expenses 232,075
246,378
735,419

898,874
Operating income 74,468
85,468
200,267

109,292
Other (expense) income:
Interest expense (71,708 ) (79,869 ) (219,072 ) (242,763 )
Gain (loss) on extinguishment and forgiveness of debt, net 9,756
(2,003 ) 18,691
(1,751 )
Other income, net 1,405
1,649
3,834
3,433
Equity in income and gain on disposition of unconsolidated entities 374
212
805
10,686
Gain (loss) on derivative instruments, net 1,294
(2,023 ) 2,710
(3,286 )
Total other expenses, net (58,879 ) (82,034 ) (193,032 )
(233,681 )
Income (loss) before taxes and real estate dispositions 15,589
3,434
7,235

(124,389 )
(Loss) gain on disposition of real estate and held for sale assets, net (688 ) 28,111
54,432
45,723
Income (loss) before taxes 14,901
31,545
61,667

(78,666 )
Provision for income taxes (1,185 ) (1,539 ) (5,439 ) (4,695 )
Net income (loss) $ 13,716
$ 30,006
$ 56,228

$ (83,361 )

~~Table of Contents~~

~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017 (Unaudited)~~ – ~~(Continued)~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Cole Capital segment:
Revenues:
Offering-related fees and reimbursements $ 3,882
$ 9,545
$ 12,721
$ 32,850
Transaction service fees and reimbursements 4,000
3,779
13,159
10,639
Management fees and reimbursements 19,303
17,745
57,121
51,299
Total Cole Capital revenues 27,185
31,069
83,001

94,788
Operating expenses:
Cole Capital reallowed fees and commissions 2,373
5,897
7,907
20,940
Acquisition-related —
—
36
39
General and administrative 16,721
17,692
48,426
54,257
Depreciation and amortization 4,947
7,276
14,657
22,702
Total operating expenses 24,041
30,865
71,026

97,938
Operating income (loss) 3,144
204
11,975

(3,150 )
Total other income, net 502
95
706
589
Income (loss) before taxes 3,646
299
12,681

(2,561 )
(Provision for) benefit from income taxes (868 ) (59 ) (3,439 ) 3,321
Net income $ 2,778
$ 240
$ 9,242

$ 760

Total Company:
Total revenues $ 333,728

$ 362,915

$ 1,018,687

$ 1,102,954
Total operating expenses $ (256,116 )
$ (277,243 )
$ (806,445 )
$ (996,812 )
Total other expense, net $ (58,377 )
$ (81,939 )
$ (192,326 )
$ (233,092 )
Net income (loss) $ 16,494

$ 30,246

$ 65,470

$ (82,601 )

Total Assets
September 30, 2017 December 31, 2016
REI segment $ 14,522,637
$ 15,337,623
Cole Capital segment 214,096
249,951
Total Company $ 14,736,733

$ 15,587,574

~~Note 4 – Goodwill and Other Intangibles~~

~~Goodwill~~

In connection with prior mergers, the Company recorded goodwill as a result of the merger consideration exceeding the net assets acquired. The goodwill recorded as a result of the merger of Cole with and into a wholly owned subsidiary of the Company (the “Cole Merger”) was allocated between the Company’s two segments, the REI segment and the Cole Capital segment. The REI segment and the Cole Capital segment each comprise one reporting unit.

As of each of September 30, 2017 and December 31, 2016, $1.3 billion and $124.8 million of goodwill was allocated to the REI segment and the Cole Capital segment, respectively. During the nine months ended September 30, 2017, one property classified as held for sale as of December 31, 2016 was classified as held and used, resulting in an increase to the goodwill allocated to the REI segment of $0.4 million. During the nine months ended September 30, 2016, the Company allocated $53.8 million of goodwill to dispositions and held for sale assets, which was included in (loss) gain on disposition of real estate and held for sale assets, net in the consolidated statement of operations.

The Company evaluates goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value, by reporting unit, may not be recoverable. The Company’s annual testing date is during the fourth quarter. The Company tests goodwill for impairment by first comparing the carrying value of net assets to the fair value of each reporting unit. If the fair value is determined to be less than the carrying value or if qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the

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~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017 (Unaudited)~~ – ~~(Continued)~~

fair value of goodwill and the carrying value. The Company estimates the fair value of the reporting units using discounted cash flows and relevant competitor multiples. The evaluation of goodwill for potential impairment requires the Company’s management to exercise significant judgment and to make certain assumptions. While the Company believes its assumptions are reasonable, there are no guarantees as to actual results. Changes in assumptions based on actual results may have a material impact on the Company’s financial results.

The fair value of the Cole Capital segment is dependent upon actual results, including, but not limited to, the timing and amount of aggregate capital raised and deployed on behalf of the Cole REITs, which is influenced by the Company’s ability to continue to reinstate certain selling agreements that were suspended as a result of the Audit Committee Investigation and the resulting restatements, as well as regulatory requirements affecting broker-dealers and financial advisors. If the Company is unable to continue to reinstate selling agreements or raise and deploy capital as estimated, the fair values of the Cole Capital segment and intangible assets may be less than the respective carrying value, resulting in an impairment that could have a material effect on the Company’s financial results. In addition, the actual timing of closing an offering or executing a liquidity event on behalf of a Cole REIT or the commencement of operations of newly formed REITs, which are not yet effective, may differ from the Company’s assumptions.

During the nine months ended September 30, 2017 and 2016, management monitored the actual performance of the business segments relative to the fair value assumptions used during the annual goodwill impairment test. For the periods presented, management determined it remained more likely than not that the fair value of each reporting unit was greater than its carrying value.

~~Intangible Assets~~

The intangible assets primarily consisted of management and advisory contracts that the Company has with certain Cole REITs, which are subject to an estimated remaining useful life of approximately two years.

The Company evaluates intangible assets for impairment when an event occurs or circumstances change that indicate the carrying value may not be recoverable. The Company tests intangible assets for impairment by first comparing the carrying value of the asset group to the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying value, the Company will adjust the intangible assets to their respective fair values and recognize an impairment loss.

The Company will estimate the fair value of the intangible assets using a discounted cash flow model specific to the applicable Cole REITs. The evaluation of intangible assets for potential impairment requires the Company’s management to exercise significant judgment and to make certain assumptions. While the Company believes its assumptions are reasonable, there are no guarantees as to actual results. Changes in assumptions based on actual results may have a material impact on the Company’s financial results. There were no events or changes in circumstances that indicated that intangible assets were impaired during the nine months ended September 30, 2017 or 2016.

The Company recorded $4.1 million and $12.4 million of amortization expense related to the intangible assets for the three and nine months ended September 30, 2017 and $6.2 million and $19.9 million of amortization expense related to the intangible assets for the three and nine months ended September 30, 2016, respectively. The estimated amortization expense is expected to be $4.1 million for the remainder of the year ending December 31, 2017, $4.0 million for the year ending December 31, 2018 and $3.8 million for the nine months ending September 30, 2019. The intangible assets were $12.2 million and $24.6 million, net of accumulated amortization of $42.0 million and $29.6 million, respectively, as of September 30, 2017 and December 31, 2016.

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~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017 (Unaudited)~~ – ~~(Continued)~~

~~Intangible Lease Assets and Liabilities~~

~~Intangible lease assets and liabilities of the Company consisted of the following as of September 30, 2017 and December 31, 2016 (amounts in thousands, except weighted-average useful life):~~

Weighted-Average Useful Life September 30, 2017 December 31, 2016
Intangible lease assets:
In-place leases and other intangibles, net of accumulated amortization of $580,588 and $494,131, respectively 15.1 $ 1,100,403
$ 1,192,756
Leasing commissions, net of accumulated amortization of $2,601 and $1,836, respectively 10.5 11,117
10,231
Above-market lease assets and deferred lease incentives, net of accumulated amortization of $83,670 and $69,670, respectively 16.2 248,925
275,897
Total intangible lease assets, net $ 1,360,445
$ 1,478,884

Intangible lease liabilities:
Below-market leases, net of accumulated amortization of $70,070 and $56,891, respectively 18.4 $ 204,051
$ 224,023

The following table provides the projected amortization expense and adjustments to rental income related to the intangible lease assets and liabilities for the next five years as of September 30, 2017 (amounts in thousands):

October 1, 2017 - December 31, 2017 2018 2019 2020 2021
In-place leases and other intangibles:
Total projected to be included in amortization expense $ 36,584
$ 134,741
$ 124,069
$ 116,168
$ 107,582
Leasing commissions:
Total projected to be included in amortization expense 423
1,207
1,192
1,170
1,133
Above-market lease assets and deferred lease incentives:
Total projected to be deducted from rental income 6,054
23,615
21,701
21,265
20,857
Below-market lease liabilities:
Total projected to be included in rental income 6,351
19,283
18,578
17,420
16,093

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~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017 (Unaudited)~~ – ~~(Continued)~~

~~Note 5 – Real Estate Investments~~

During the nine months ended September 30, 2017, the Company acquired controlling financial interests in 65 commercial properties and three land parcels for an aggregate purchase price of $453.9 million (the “2017 Acquisitions”), which includes $1.9 million of external acquisition-related expenses that were capitalized in accordance with ASU 2017-01 and includes 22 properties acquired in a nonmonetary exchange discussed below. Prior to the adoption of ASU 2017-01, costs related to property acquisitions were expensed as incurred. During the nine months ended September 30, 2016, the Company acquired a controlling interest in one commercial property for a purchase price of $20.0 million (the “2016 Acquisitions”).

The following table presents the allocation of the fair values of the assets acquired and liabilities assumed during the periods presented (in thousands):


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2021		2020
Real estate investments, at cost:						Real estate investments, at cost:
Land	$	82,337		$	4,215	Land	$	77,303	$	19,953
Buildings, fixtures and improvements	293,419			14,555		Buildings, fixtures and improvements	249,850		95,728
Total tangible assets	375,756			18,770		Total tangible assets	327,153		115,681
Acquired intangible assets:						Acquired intangible assets:
In-place leases and other intangibles ⁽¹⁾	68,306			1,182		In-place leases and other intangibles (1)	40,056		15,739
Above-market leases⁽²⁾	10,270			—		Above-market leases (2)	54,698		15,701
Assumed intangible liabilities:						Assumed intangible liabilities:
Below-market leases ⁽³⁾	(395		)	—		Below-market leases (3)	(2,726)		—
Total purchase price of assets acquired	$	453,937		$	19,952	Total purchase price of assets acquired	$	419,181	$	147,121


~~(1)~~	~~The weighted average amortization period for acquired in-place leases and other intangibles is 16.7 years and 14.5 years for 2017 Acquisitions and 2016 Acquisitions, respectively.~~


~~(2)~~	~~The weighted average amortization period for acquired above-market leases is 18.1 years for 2017 Acquisitions.~~


~~(3)~~	~~The weighted average amortization period for acquired intangible lease liabilities is 20.0 years for 2017 Acquisitions.~~

~~Future Lease Payments~~

(1)The ~~following table presents future minimum base rent payments due to the Company over the next five~~weighted average amortization period for acquired in-place leases and other intangibles is 15.6 years and ~~thereafter. These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds~~18.1 years for 2021 Acquisitions and ~~increases in annual rent based on exceeding certain economic indexes among other items (in thousands):~~2020 Acquisitions, respectively.

(2)The weighted average amortization period for acquired above-market leases is 18.2 years and 20.1 years for 2021 Acquisitions and 2020 Acquisitions, respectively.

Future Minimum Operating Lease
Base Rent Payments
Future Minimum
Direct Financing Lease Payments ⁽¹⁾
October 1, 2017 - December 31, 2017 $ 265,570
$ 867
2018 1,084,301
3,016
2019 1,050,277
2,397
2020 1,015,625
2,023
2021 975,554
1,899
Thereafter 6,441,525
3,993
Total $ 10,832,852
$ 14,195


~~(1)~~	29 properties are subject to direct financing leases and, therefore, revenue is recognized as direct financing lease income on the discounted cash flows of the lease payments. Amounts reflected are the minimum base rental cash payments due to the Company under the lease agreements on these respective properties.

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~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017 (Unaudited)~~ – ~~(Continued)~~

~~Investment in Direct Financing Leases, Net~~

(3)The ~~components of the Company’s net investment in direct financing~~weighted average amortization period for assumed below-market leases ~~as of~~ ~~September 30, 2017~~ ~~and December 31, 2016 are as follows (in thousands):~~

September 30, 2017 December 31, 2016
Future minimum lease payments receivable $ 14,195
$ 17,147
Unguaranteed residual value of property 23,146
27,450
Unearned income (3,939 ) (5,142 )
Net investment in direct financing leases $ 33,402

$ 39,455
is 19.9 years for 2021 Acquisitions.

Property Dispositions and Real Estate Assets Held for Sale ~~Assets~~

During the nine months ended September 30, ~~2017,~~2021, the Company disposed of ~~112~~83 properties, ~~including six properties transferred to the lender in either a deed-in-lieu of foreclosure or foreclosure sale transaction as discussed in~~ ~~Note 10 –Debt~~ ~~and 15 properties disposed of in connection with the nonmonetary exchange discussed below,~~ for an aggregate ~~gross~~ sales price of ~~$507.5~~$432.7 million. The dispositions resulted in proceeds of $420.2 million after closing costs. The Company recorded a gain of $96.5 million related to the dispositions, which is included in gain on disposition of real estate and real estate assets held for sale, net in the accompanying consolidated statements of operations.

During the nine months ended September 30, 2020, the Company disposed of 63 properties, including the sale of 3 consolidated properties to the office partnership, for an aggregate sales price of $376.2 million, of which our share was ~~$491.0~~$373.4 million after the profit participation payments related to the disposition of 244 Red Lobster properties. The dispositions resulted in proceeds of ~~$366.2~~$346.7 million after ~~a mortgage loan assumption~~closing costs, including proceeds from the contribution of ~~$66.0 million and closing costs. Additionally,~~properties to the ~~Company’s tax provision for the nine months ended September 30, 2017 included $1.7 million of Canadian tax on the gain on sale of certain Canadian properties.~~office partnership. The Company recorded a gain of ~~$54.9~~$77.2 million related to the sales which is included in ~~(loss)~~ gain on disposition of real estate and real estate assets held for sale, ~~assets,~~ net ~~in the accompanying consolidated statements of operations.~~

During the nine months ended September 30, 2016, the Company disposed of 223 properties for an aggregate gross sales price of $672.5 million, of which our share was $646.4 million after the profit participation payment related to the disposition of 47 Red Lobsters. The dispositions resulted in proceeds of $573.0 million after a debt assumption of $55.0 million and closing costs. The Company recorded a gain of $50.7 million, which included $28.8 million of goodwill allocated to the cost basis of such properties, which is included in (loss) gain on disposition of real estate and held for sale assets, net in the accompanying consolidated statements of operations. The Company has no continuing involvement with these properties.

During the nine months ended September 30, 2016, the Company also disposed of one property owned by an unconsolidated joint venture for a gross sales price of $113.5 million, of which our share was $102.1 million based on our ownership interest in the joint venture, resulting in proceeds of $42.3 million after debt repayments of $57.0 million and closing costs. The Company recorded a gain of $10.2 million related to the sale, which is included in equity in income and gain on disposition of unconsolidated entities in the accompanying consolidated statements of operations.

As of September 30, ~~2017,~~2021, there were ~~two~~7 properties classified as held for sale ~~which~~with a carrying value of $31.1 million, included in real estate assets held for sale, net, primarily comprised of land of $6.6 million and building, fixtures and improvements, net of $24.2 million, in the accompanying consolidated balance sheets, and are expected to be sold in the next 12 months as part of the Company’s portfolio management strategy. During the nine months ended September 30, ~~2017,~~2021 and 2020, the Company recorded ~~a loss~~losses of ~~$0.5~~$0.2 million and $0.3 million, respectively, related to held for sale properties. No goodwill was allocated to the cost basis of any additional properties classified as held for sale during the nine months ended September 30, 2017. During the nine months ended September 30, 2016, the Company recorded a loss of $5.0 million related to properties classified as held for sale during the respective period, which included $22.7 million of goodwill allocated to the cost basis of such properties. The loss on properties held for sale is included in (loss) gain on disposition of real estate and held for sale assets, net in the accompanying consolidated statements of operations.

~~Nonmonetary Exchange~~

During the nine months ended September 30, 2017, the Company completed a nonmonetary exchange through the simultaneous acquisition of 22 Bob Evans properties and disposition of 15 Red Lobster properties. Pursuant to Nonmonetary Transactions, ASC (Topic 845), the cost of a nonmonetary asset acquired in exchange for another nonmonetary asset is the fair value of the asset surrendered to obtain the acquired nonmonetary asset, and a gain or loss should be recognized on the exchange. The fair value of the asset received should be used to measure the cost if the fair value of the asset received is more reliable than the fair value of the asset surrendered. The Company estimated the fair value of the Bob Evans and Red Lobster properties using valuation techniques consistent with the income approach and concluded that the fair value was $50.1 million. As the fair value of the assets received exceeded the book value of the assets surrendered, the Company recorded a gain of $7.4 million, which is included in (loss) gain on disposition of real estate and held for sale assets, net in the accompanying consolidated statements of operations.

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, ~~2017~~2021 (Unaudited) – (Continued)

Intangible Lease Assets and Liabilities

~~Impairment~~Intangible lease assets and liabilities of ~~Real Estate Investments~~the Company consisted of the following as of September 30, 2021 and December 31, 2020 (amounts in thousands, except weighted-average useful life):


	Weighted-Average Useful Life	September 30, 2021		December 31, 2020
Intangible lease assets:
In-place leases and other intangibles, net of accumulated amortization of $845,355 and $810,597, respectively	17.4	$	697,879	$	745,026
Leasing commissions, net of accumulated amortization of $9,352 and $7,565, respectively	9.9	17,347		16,042
Above-market lease assets and deferred lease incentives, net of accumulated amortization of $137,033 and $125,455, respectively	23.2	210,285		167,776
Total intangible lease assets, net		$	925,511	$	928,844

Intangible lease liabilities:
Below-market leases, net of accumulated amortization of $113,251 and $106,504, respectively	20.2	$	111,140	$	120,938

The ~~Company performs quarterly impairment review procedures, primarily through continuous monitoring~~aggregate amount of ~~events~~amortization of above-market and ~~changes in circumstances that could indicate the carrying value of its real estate assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited~~below-market leases and deferred lease incentives included as a net decrease to decrease in net operating income, bankruptcy or other credit concerns of a property’s major tenant or tenants, such as history of late payments, a decrease in the expected holding period of a property, as well as significant decreases in a property’s revenues due to lease terminations, vacancies, co-tenancy clauses or reduced lease rates.

When impairment indicators are identified or if a property is considered to have a more likely than not probability of being disposed of within the next 12 to 24 months, the Company assesses the recoverability of the assets by determining whether the carrying value of the assets will be recovered through the undiscounted future cash flows expected from the use of the assetsrental revenue was $4.5 million and their eventual disposition. U.S. GAAP requires us to utilize the Company’s expected holding period of our properties when assessing recoverability. In the event that such expected undiscounted future cash flows do not exceed the carrying value, the Company will adjust the real estate assets to their respective estimated fair values and recognize an impairment loss. Generally, fair value is determined using a discounted cash flow analysis and recent comparable sales transactions.

As part of the Company’s quarterly impairment review procedures and considering the factors mentioned above, real estate assets and an investment in a property subject to a direct financing lease with carrying values totaling $87.9$1.9 million ~~were deemed to be impaired and their carrying values were reduced to their estimated fair values of $57.0 million resulting in impairment charges of $30.9 million during~~for the nine months ended September 30, ~~2017. During 2017, the Company identified additional office properties for potential sale~~2021 and ~~certain restaurant~~2020, respectively. The aggregate amount of in-place leases, leasing commissions and other ~~properties~~lease intangibles amortized and included in depreciation and amortization expense was $84.7 million and $103.5 million for ~~potential sale that management has determined, based on discussions with the current tenants, will not be re-leased. During~~ the nine months ended September 30, ~~2016, management identified certain properties~~2021 and 2020, respectively.

The following table provides the projected amortization expense and adjustments to rental revenue related to the intangible lease assets and liabilities for ~~potential sale~~the next five years as ~~part~~ of its portfolio management strategy to reduce exposure to office properties. Additionally, a tenant of 59 restaurants filed for bankruptcy. As part of the Company’s quarterly impairment review procedures and considering the factors mentioned above, real estate assets with carrying values totaling $655.1 million were deemed to be impaired and their carrying values were reduced to their estimated fair values of $478.9 million, resulting in impairment charges of $176.2 million during the nine months ended September 30, ~~2016.~~2021 (in thousands):


	Remainder of 2021		2022		2023		2024		2025		2026
In-place leases and other intangibles:
Total projected to be included in amortization expense	$	26,485	$	94,760	$	85,369	$	76,406	$	64,463	$	58,180
Leasing commissions:
Total projected to be included in amortization expense	753		2,878		2,441		2,212		1,953		1,736
Above-market lease assets and deferred lease incentives:
Total projected to be deducted from rental revenue	5,446		21,975		21,070		19,718		18,283		16,231
Below-market lease liabilities:
Total projected to be included in rental revenue	3,481		12,924		12,248		10,494		9,290		8,766

Consolidated Joint ~~Ventures~~Venture

The Company had ~~interests~~an interest in ~~two~~1 consolidated joint ~~ventures~~venture that owned ~~two properties~~1 property as ~~of each~~ of September 30, ~~2017~~2021 and December 31, ~~2016 (the “Consolidated Joint Ventures”).~~2020. As of September 30, ~~2017~~2021 and December 31, ~~2016,~~2020, the ~~Consolidated Joint Ventures~~consolidated joint venture had total assets of ~~$65.8~~$30.7 million and ~~$64.8~~$33.0 million, respectively, of which ~~$60.4~~$27.8 million and ~~$58.8~~$29.1 million, respectively, were real estate investments, net of accumulated depreciation and amortization ~~for~~at each of the respective ~~periods. One~~dates. The property is secured by a mortgage note payable, ~~of $15.4 million,~~ which ~~was~~is non-recourse to the ~~Company.~~Company and had a balance of $14.8 million as of December 31, 2020. During the three months ended September 30, 2021, the Company repaid the balance in full and there were no amounts outstanding as of September 30, 2021. The Company has the ability to control operating and ~~financial~~financing policies of the ~~Consolidated Joint Ventures.~~consolidated joint venture. There are restrictions on the use of these assets as the Company ~~would~~is generally be required to obtain the approval of ~~each~~the joint venture partner ~~(the “Partner”)~~ in accordance with the joint venture agreement for any major transactions. The Company and ~~each Partner~~the joint venture partner are subject to the provisions of ~~each~~the joint venture agreement, which includes provisions for when additional contributions may be required to fund certain cash shortfalls.

The Partners’ share of the Consolidated Joint Ventures’ income was $9,000 and $12,000 for the three months ended September 30, 2017 and 2016, respectively. The Partners’ share of the Consolidated Joint Ventures’ loss was $12,000 and $23,000 for the nine months ended September 30, 2017 and 2016, respectively. The Partners’ share of the Consolidated Joint Ventures’ income and loss are included in net (income) loss attributable to non-controlling interests in the consolidated statements of operations.

2527

September 30, 2017 December 31, 2016
Accounts receivable, net⁽¹⁾
$ 38,182
$ 49,148
Straight-line rent receivable, net ⁽²⁾
220,975
201,584
Deferred costs, net ⁽³⁾
8,347
16,154
Prepaid expenses 10,147
6,814
Leasehold improvements, property and equipment, net ⁽⁴⁾
12,982
14,702
Restricted escrow deposits 5,644
5,741
Deferred tax asset and tax receivable 32,753
31,113
Program development costs, net ⁽⁵⁾
3,828
3,161
Interest rate swap assets, at fair value 351
199
Other assets 3,729
2,089
Total $ 336,938

$ 330,705


	September 30, 2021		December 31, 2020
Straight-line rent receivable, net	$	289,312	$	278,831
Accounts receivable, net	49,328		53,051

Deferred costs, net (1)	2,662		5,185
Investment in direct financing leases, net	5,422		6,547
Investment in Retained REITs (2)	7,948		7,255
Prepaid expenses	6,223		3,850
Leasehold improvements, property and equipment, net (3)	3,081		3,991
Other assets, net	7,935		7,910
Total	$	371,911	$	366,620

(1)Amortization expense for deferred costs related to the revolving credit facilities totaled $0.8 million for each of the three months ended September 30, 2021 and 2020, respectively, and $2.5 million and $2.3 million for the nine months ended September 30, 2021 and 2020, respectively. Accumulated amortization for deferred costs related to the revolving credit facilities was $55.4 million and $52.9 million as of September 30, 2021 and December 31, 2020, respectively.


~~(1)~~	~~Allowance for doubtful accounts included in accounts receivable, net was $6.0 million and $5.7 million as of September 30, 2017 and December 31, 2016, respectively.~~


~~(2)~~	~~Allowance for doubtful accounts included in straight-line rent receivable, net was $1.6 million and $0.3 million as of September 30, 2017 and December 31, 2016, respectively.~~

~~(3)~~

Amortization expense for deferred costs related to the revolving credit facility totaled $2.6 million for each of the three months ended September 30, 2017 and 2016 and $7.8 million for each of the nine months ended September 30, 2017 and 2016, respectively. Accumulated amortization for deferred costs related to the revolving credit facility were $37.6 million and $29.8 million as of September 30, 2017 and December 31, 2016, respectively.

~~(4)~~

Amortization expense for leasehold improvements totaled $0.3 million and $0.9 million for the three and nine months ended September 30, 2017 and 2016, respectively. Accumulated amortization was $4.4 million and $3.5 million as of September 30, 2017 and December 31, 2016, respectively. Depreciation expense for property and equipment totaled $0.5 million and $1.3 million for the three and nine months ended September 30, 2017, respectively, and $0.6 million and $1.6 million for the three and nine months ended September 30, 2016, respectively. Accumulated depreciation was $5.2 million and $3.9 million as of September 30, 2017 and December 31, 2016, respectively.


~~(5)~~	~~As of September 30, 2017 and December 31, 2016, the Company had reserves of $5.9 million and $31.7 million, respectively, relating to the program development costs.~~

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021 (Unaudited) – (Continued)

(2)On February 1, 2018, the Company sold certain of its equity investments to CCA Acquisition, LLC, an affiliate of CIM Group, LLC, retaining interests in Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”), Cole Office & Industrial REIT (CCIT III), Inc. (“CCIT III”) and Cole Credit Property Trust V, Inc. (“CCPT V” and, collectively with CCIT II and CCIT III, the “Retained REITs”). On December 21, 2020, CIM Real Estate Finance Trust, Inc. acquired CCIT III and CCPT V. On March 1, 2021, Griffin Capital Essential Asset REIT, Inc. acquired CCIT II. Subsequent to the Company’s sale of Cole Capital, it carries these investments at fair value, as it does not exert significant influence over the Retained REITs, and any changes in the fair value are recognized in other income, net in the accompanying consolidated statement of operations. During the nine months ended September 30, 2021 and 2020, the Company recognized a gain of $0.7 million and a loss of $0.6 million, respectively, related to the change in fair value.

(3)Amortization expense for leasehold improvements totaled $0.1 million and $0.4 million for the three and nine months ended September 30, 2021, respectively, with no related write-offs. Amortization expense for leasehold improvements totaled $0.1 million and $0.4 million for the three and nine months ended September 30, 2020, respectively, with no related write-offs. Accumulated amortization was $3.8 million and $3.4 million as of September 30, 2021 and December 31, 2020, respectively. Depreciation expense for property and equipment totaled $0.2 million and $0.8 million for the three and nine months ended September 30, 2021, respectively, with no related write-offs. Depreciation expense for property and equipment totaled $0.3 million and $0.8 million for the three and nine months ended September 30, 2020, respectively, with no related write-offs. Accumulated depreciation was $7.3 million and $6.5 million as of September 30, 2021 and December 31, 2020, respectively.

Note 95 – Fair Value Measures

The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. U.S. GAAP guidance defines three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3 – Unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. Changes in the type of inputs may result in a reclassification for certain assets. ~~There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the nine months ended September 30, 2017.~~ The Company ~~expects~~does not expect that changes in classifications between levels will be ~~infrequent.~~frequent.

~~Table of Contents~~

~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017 (Unaudited)~~ – ~~(Continued)~~

Items Measured at Fair Value on a Recurring Basis

The ~~following tables present information about the Company’s assets and liabilities measured at~~ fair value ~~on a recurring basis, based on market rates~~ of the ~~Company’s positions~~Investment in Retained REITs was $7.9 million and ~~other observable interest rates as discussed in~~ ~~Note 6 –~~ ~~Investment Securities, at Fair Value andNote 11 –Derivatives and Hedging Activities~~,$7.3 million as of September 30, ~~2017~~2021 and December 31, ~~2016, aggregated~~2020, respectively. The fair values were estimated using the net asset value per share, as most recently disclosed by each applicable REIT. Each of the Retained REIT’s share redemption programs includes restrictions that limit the number of shares redeemed by the ~~level in the fair value hierarchy within which those instruments fall (in thousands):~~

Level 1
Level 2
Level 3
Balance as of September 30, 2017
Assets:

CMBS $ —
$ —
$ 41,677
$ 41,677
Derivative assets
—
351
—

351
Total assets $ —
$ 351
$ 41,677
$ 42,028

Level 1
Level 2
Level 3
Balance as of December 31, 2016
Assets:
CMBS $ —
$ —
$ 47,215
$ 47,215
Derivative assets —
199
—
199
Total assets $ —
$ 199
$ 47,215
$ 47,414
Liabilities:
Derivative liabilities $ —
$ (3,547 ) $ —
$ (3,547 )

~~CMBS~~ – The Company’s CMBS are carried at fair value and are valued using Level 3 inputs. The Company used estimated non-binding quoted market prices from the trading desks of financial institutions that are dealers in such securities for similar CMBS tranches that actively participate in the CMBS market. Broker quotes are only indicative of fair value and may not necessarily represent what the Company would receive in an actual trade for the applicable instrument. Management determines that the prices are representative of fair value through its knowledge of and experience in the market. The significant unobservable input used in valuing the CMBS is the discount rate or market yield used to discount the estimated future cash flows expected to be received from the underlying investment, which include both future principal and interest payments. Significant increases or decreases in the discount rate or market yield would result in a decrease or increase in the fair value measurement. The following risks are included in the consideration and selection of discount rates or market yields: risk of default, rating of the investment and comparable company investments.

~~Derivative Assets and Liabilities~~ –~~The Company’s derivative financial instruments relate to interest rate swaps, discussed in~~ ~~Note 11 –Derivatives and Hedging Activities~~. The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the counterparties.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of September 30, 2017, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, due to affiliates and accounts payable approximate their carrying value in the accompanying consolidated balance sheets due to their short-term nature and are classified as Level 1 under the fair value hierarchy.

~~Table of Contents~~

~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017 (Unaudited)~~ – ~~(Continued)~~

respective Retained REIT.

The following are reconciliations of the changes in assets and liabilities with Level 3 inputs in the fair value hierarchy for the nine months ended September 30, ~~2017~~2021 and ~~2016~~2020 (in thousands):

CMBS
Balance as of December 31, 2016 $ 47,215
Total gains and losses
Unrealized loss included in other comprehensive income, net (547 )
Purchases, issuance, settlements
Return of principal received (4,077 )
Amortization included in net income, net (914 )
Ending Balance, September 30, 2017 $ 41,677

CMBS
Balance as of December 31, 2015 $ 53,304
Total gains and losses
Unrealized loss included in other comprehensive loss, net (1,599 )
Purchases, issuance, settlements
Return of principal received (3,786 )
Accretion included in net loss, net 179
Ending Balance, September 30, 2016 $ 48,098

~~The fair values of the Company’s financial instruments that are not reported at fair value in the consolidated balance sheets are reported below (dollar amounts in thousands):~~

Level Carrying Amount at September 30, 2017 Fair Value at September 30, 2017 Carrying Amount at December 31, 2016 Fair Value at December 31, 2016
Assets:
Mortgage notes receivable 3 $ 20,510
$ 28,539
$ 22,764
$ 30,460

Liabilities⁽¹⁾:

Mortgage notes payable and other debt, net 2 $ 2,129,461
$ 2,186,955
$ 2,687,739
$ 2,713,155
Corporate bonds, net 2 2,848,591
2,944,615
2,248,063
2,273,850
Convertible debt, net 2 990,922
1,021,580
987,106
1,004,733
Credit facility 2 —
—
500,000
500,000
Total liabilities $ 5,968,974
$ 6,153,150
$ 6,422,908
$ 6,491,738


~~(1)~~	~~Current and prior period liabilities’ carrying and fair values exclude~~	Investment in Retained REITs
Beginning balance, January 1, 2021		$	7,255
Unrealized gain included in other income, net ~~deferred financing costs.~~		693
Ending Balance, September 30, 2021		$	7,948

Beginning balance, January 1, 2020		$	7,552

Unrealized loss included in other income, net		(609)








Ending Balance, September 30, 2020		$	6,943

~~Mortgage notes receivable~~ – The fair value of the Company’s fixed-rate loan portfolio is estimated with a discounted cash flow analysis, utilizing scheduled cash flows and discount rates estimated by management to approximate market interest rates.

~~Debt~~ – The fair value is estimated by an independent third party using a discounted cash flow analysis, based on management’s estimates of observable market interest rates. Corporate bonds and convertible debt are valued using quoted market prices in active markets with limited trading volume when available.

Table of Contents

VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, ~~2017~~2021 (Unaudited) – (Continued)

Items Measured at Fair Value on a Non-Recurring Basis

Certain financial and nonfinancial assets and liabilities are measured at fair value on a ~~nonrecurring~~non-recurring basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.

Real Estate ~~Assets~~and Other Investments –The Company performs quarterly impairment review procedures for real estate investments, leasehold improvements and property and equipment, right of use assets and investments in unconsolidated entities, primarily through continuous monitoring of events and changes in circumstances that could indicate the carrying value of these investments may not be recoverable.

As ~~discussed~~part of the Company’s quarterly impairment review procedures, net real estate assets representing 56 properties were deemed to be impaired resulting in ~~Note 5 –Real Estate Investments~~,impairment charges of $59.3 million during the nine months ended September 30, ~~2017, net real estate assets~~2021 that relate to certain office, retail and ~~an investment in a property subject to a direct financing lease representing 53~~restaurant properties which, during the nine months ended September 30, 2021, were ~~deemed to~~identified by management for potential sale or were determined would not be ~~impaired and their carrying values~~re-leased by the tenant. There were ~~reduced to their estimated fair value of $57.0 million, resulting in~~no impairment charges ~~of $30.9 million.~~ directly attributable to the COVID-19 pandemic during the nine months ended September 30, 2021.

During the nine months ended September 30, ~~2016,~~2020, net real estate assets related to ~~139~~47 properties, were deemed to be impaired ~~and their carrying values totaling $655.1 million were reduced to their estimated fair values of $478.9 million,~~ resulting in impairment charges of ~~$176.2~~$36.9 million. The impairment charges relate to certain retail and restaurant properties whose tenants filed for Chapter 11 bankruptcy during the nine months ended September 30, 2020, were identified by management for potential sale or were determined would not be re-leased by the tenant.

The Company estimates fair values using Level 3 inputs and ~~using~~uses a combined income and market approach, specifically using discounted cash flow analysis and recent comparable sales transactions. The evaluation of real estate assets for potential impairment requires the Company’s management to exercise significant judgment and to make certain key assumptions, including, but not limited to, the following: (1) capitalization rate; (2) discount rates; (3) number of years property will be held; (4) property operating expenses; and (5) re-leasing assumptions including number of months to re-lease, market rental ~~income~~revenue and required tenant improvements. There are inherent uncertainties in making these estimates such as market conditions and performance and sustainability of the Company’s tenants. For the Company’s impairment tests for the real estate assets during the nine months ended September 30, ~~2017,~~2021, the Company used a range of discount rates from ~~7.4%~~7.9% to ~~7.8%~~10.5% with a weighted-average rate of ~~7.5%~~8.6% and capitalization rates from ~~6.9%~~7.4% to 10.0% with a weighted-average rate of ~~8.2%~~8.1%.

Goodwill –The Company evaluates goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. The Company performed the annual qualitative assessment for goodwill during the fourth quarter of 2020, which resulted in no impairments. The Company continues to monitor factors that may impact the fair value of goodwill including, but not limited to, market comparable company multiples, stock price, interest rates, and global economic conditions including the COVID-19 pandemic.

Fair Value of Financial Instruments

The ~~following table presents~~fair value of short-term financial instruments such as cash and cash equivalents, restricted cash and accounts payable approximate their carrying value in the ~~impairment charges by asset class recorded during~~accompanying consolidated balance sheets due to their short-term nature and are classified as Level 1 under the ~~nine months ended September 30, 2017~~fair value hierarchy. The fair values of the Company’s financial instruments are reported below (dollar amounts in thousands):


	Level	Carrying Amount at September 30, 2021		Fair Value at September 30, 2021		Carrying Amount at December 31, 2020		Fair Value at December 31, 2020



Liabilities (1):
Mortgage notes payable and other debt, net	2	$	991,699	$	1,031,324	$	1,334,689	$	1,384,490
Corporate bonds, net	2	4,625,208		5,044,711		4,622,951		5,123,588

Credit facility	2	88,000		88,000		—		—
Total liabilities		$	5,704,907	$	6,164,035	$	5,957,640	$	6,508,078

(1)Current and prior period liabilities’ carrying and fair values exclude net deferred financing costs.

Debt – The fair value is estimated by an independent third party using a discounted cash flow analysis, based on management’s estimates of observable market interest rates. Corporate bonds are valued using quoted market prices in active markets with limited trading volume when available.

Nine Months Ended September 30, 2017
Properties impaired ⁽¹⁾
53

Asset classes impaired:
Investment in real estate assets, net $ 30,327
Investment in direct financing leases, net 553
Below-market lease liabilities, net (23 )
Total impairment loss $ 30,857


~~(1)~~	~~Six of these properties were disposed of during the nine months ended September 30, 2017.~~

Table of Contents

VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, ~~2017~~2021 (Unaudited) – (Continued)

Note 106 – Debt

As of September 30, ~~2017,~~2021, the Company had ~~$5.9~~$5.7 billion of debt outstanding, including net premiums (discounts) and net deferred financing costs, with a weighted-average years to maturity of ~~4.7~~5.5 years and a weighted-average interest rate of ~~4.2%~~3.86%. The following table summarizes the carrying value of debt as of September 30, ~~2017~~2021 and December 31, ~~2016,~~2020, and the debt activity for the nine months ended September 30, ~~2017~~2021 (in thousands):

Nine Months Ended September 30, 2017
Balance as of December 31, 2016 Debt Issuances Repayments, Extinguishment and Assumptions Accretion and Amortization Balance as of September 30, 2017
Mortgage notes payable:
Outstanding balance $ 2,629,949
$ 4,283
$ (545,307 )
$ —
$ 2,088,925
⁽¹⁾

Net premiums ⁽²⁾
36,751
—
(528 ) (9,422 ) 26,801

Deferred costs (16,633 ) —
576
2,229
(13,828 )
Other debt:

Outstanding balance 20,947
—
(7,233 ) —
13,714

Premium ⁽²⁾
92
—
—
(71 ) 21

Mortgages and other debt, net 2,671,106

4,283

(552,492 )
(7,264 )
2,115,633

Corporate bonds:

Outstanding balance 2,250,000
600,000
—
—
2,850,000

Discount ⁽³⁾
(1,937 ) —
—
528
(1,409 )
Deferred costs (21,839 ) (9,497 ) —
2,909
(28,427 )
Corporate bonds, net 2,226,224

590,503

—

3,437

2,820,164

Convertible debt:

Outstanding balance 1,000,000
—
—
—
1,000,000

Discount ⁽³⁾
(12,894 ) —
—
3,816
(9,078 )
Deferred costs (13,766 ) —
—
4,334
(9,432 )
Convertible debt, net 973,340

—

—

8,150

981,490

Credit facility:

Outstanding balance 500,000
—
(500,000 ) —
—

Deferred costs ⁽⁴⁾
(3,422 ) —
2,030
1,392
—

Credit facility, net 496,578

—

(497,970 )
1,392

—

Total debt $ 6,367,248

$ 594,786

$ (1,050,462 )
$ 5,715

$ 5,917,287


			Nine Months Ended September 30, 2021
	Balance as of December 31, 2020		Debt Issuances		Repayments, Extinguishment and Assumptions		Accretion and Amortization		Balance as of September 30, 2021
Mortgage notes payable:
Outstanding balance	$	1,333,195	$	—	$	(341,392)	$	—	$	991,803
Net premiums (discounts) (1)	1,495		—		(1,041)		(558)		(104)
Deferred costs	(5,855)		—		349		1,511		(3,995)
Mortgage notes payable, net	1,328,835		—		(342,084)		953		987,704

Corporate bonds:
Outstanding balance	4,650,000		—		—		—		4,650,000
Discount (2)	(27,049)		—		—		2,257		(24,792)
Deferred costs	(38,721)		—		—		3,861		(34,860)
Corporate bonds, net	4,584,230		—		—		6,118		4,590,348










Credit facility	—		192,000		(104,000)		—		88,000

Total debt	$	5,913,065	$	192,000	$	(446,084)	$	7,071	$	5,666,052


~~(1)~~	~~Includes $16.2 million related to one mortgage note payable in default.~~


~~(2)~~	Net premiums on mortgage notes payable and other debt were recorded upon the assumption of the respective debt instruments in relation to the various mergers and acquisitions. Amortization of these net premiums is recorded as a reduction to interest expense over the remaining term of the respective debt instruments using the effective-interest method.


~~(3)~~	Discounts on the corporate bonds and convertible debt were recorded based upon the fair value of the respective debt instruments as of the respective issuance dates. Amortization of these discounts is recorded as an increase to interest expense over the remaining term of the respective debt instruments using the effective-interest method.


~~(4)~~	~~Deferred costs relate to the term portion of the credit facility.~~

(1)Net premiums (discounts) on mortgage notes payable were recorded upon the assumption of the respective mortgage notes in relation to the various mergers and acquisitions. Amortization of these net premiums is recorded as a reduction to interest expense over the remaining term of the respective mortgage notes using the effective-interest method.

~~Table~~(2)Discounts on the corporate bonds were recorded based upon the fair value of ~~Contents~~the respective debt instruments as of the respective issuance dates. Amortization of these discounts is recorded as an increase to interest expense over the remaining term of the respective debt instruments using the effective-interest method.

~~VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017 (Unaudited)~~ – ~~(Continued)~~

Mortgage Notes Payable

The Company’s mortgage notes payable consisted of the following as of September 30, ~~2017~~2021 (dollar amounts in thousands):

Encumbered Properties
Gross Carrying Value of Collateralized Properties ⁽¹⁾
Outstanding Balance
Weighted-Average
Interest Rate ⁽²⁾
Weighted-Average Years to Maturity
Fixed-rate debt ⁽³⁾
501
$ 4,146,793
$ 2,073,481
4.91 % 4.5
Variable-rate debt 1
32,938
15,444
4.49 % 0.1
Total ⁽⁴⁾
502
$ 4,179,731
$ 2,088,925
4.91 % 4.4


	Encumbered Properties	Net Carrying Value of Collateralized Properties (1)		Outstanding Balance		Weighted-Average Interest Rate (2)		Weighted-Average Years to Maturity (3)
Fixed-rate debt	216	$	1,160,118	$	991,803	4.88	%	1.9


~~(1)~~	~~Gross carrying value is gross real estate assets, including investment in direct financing leases, net of gross real estate liabilities.~~


~~(2)~~	~~Weighted-average interest rate for variable-rate debt represents the interest rate in effect as of September 30, 2017.~~


~~(3)~~	~~Includes $79.2 million of variable-rate debt fixed by way of interest rate swap arrangements.~~


~~(4)~~	The table above does not include the loan amount associated with an Unconsolidated Joint Venture of $20.4 million, none of which is recourse to the Company. The loan represents a secured fixed rate of 5.20% and a maturity of July 2021.

(1)Net carrying value is real estate assets, including investment in direct financing leases, net of real estate liabilities.

(2)Weighted average interest rate is computed using the interest rate in effect until the anticipated repayment date. Should the loan not be repaid at the anticipated repayment date, the applicable interest rate will increase as specified in the respective loan agreement until the extended maturity date.

(3)Weighted average years remaining to maturity is computed using the anticipated repayment date as specified in each loan agreement, where applicable.

The table above does not include mortgage notes associated with unconsolidated joint ventures and preferred equity investments of $673.8 million, which are non-recourse to the Company.

The Company’s mortgage loan agreements generally restrict corporate guarantees and require the maintenance of financial covenants, including maintenance of certain financial ratios (such as ~~specified debt to equity and~~ debt service coverage ~~ratios)~~ratios and minimum net operating income). The mortgage loan agreements contain no dividend restrictions except in the event of default or when a distribution would drive liquidity below the applicable thresholds. AtAs of September 30, ~~2017, except for the loan in default described below,~~2021, the Company believes that it was in compliance with the financial covenants under the mortgage loan agreements and had no restrictions on the payment of dividends.

~~As of September 30, 2017, the Company had $16.2 million related to one outstanding mortgage note payable in default. The Company is engaged with the servicer to determine a method of settlement.~~

On August 31, 2017, the Company entered into a deed-in-lieu of foreclosure agreement with the lender of a mortgage loan secured by one property, with an outstanding balance of $41.6 million on the date of agreement and conveyed its interest in the property to satisfy the mortgage loan. As a result of the deed-in-lieu of foreclosure transaction, the Company recognized a gain on forgiveness of debt of $6.7 million, which is included in gain (loss) on extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations.

On August 29, 2017, the Company completed the foreclosure sale of one property secured by a mortgage loan and was relieved of all obligations on the non-recourse loan. On the date of the foreclosure sale, the mortgage loan had an outstanding balance of $20.5 million. The Company recognized a gain on forgiveness of debt of $4.8 million, which is included in gain (loss) on extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations as a result of the transaction.

On June 27, 2017, the Company entered into a deed-in-lieu of foreclosure agreement with the lender of a mortgage loan, secured by four properties, with an outstanding balance of $38.3 million and conveyed all interests in the properties to satisfy the mortgage loan. As a result of the deed-in-lieu of foreclosure transaction, the Company recognized a gain on forgiveness of debt of $9.0 million, which is included in gain (loss) on extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations.

On December 30, 2016, the Company received a notice of default from the lender of a non-recourse loan secured by 16 properties, which had an outstanding balance of $11.6 million on the notice date, due to the Company's intentional non-repayment of the loan balance at maturity. During the nine months ended September 30, 2017, the Company cured the default by fully repaying the outstanding loan balance.

3331

Table of ~~$0.55 per share.~~Contents

Real Estate Portfolio Metrics

In managing our portfolio, we are committed to diversification by property type, tenant, geography and industry. Below is a summary of our operating property type diversification and our top ten concentrations as of September 30, ~~2017,~~2021, based on annualized rental income of $1.1 ~~billion, omitting the Excluded Properties.~~billion.

Table of Contents

Our financial performance is influenced by the timing of acquisitions and dispositions and the operating performance of our ~~real estate~~operating properties. The following table shows the property ~~statistics~~metrics of our operating properties as of September 30, 2021 and 2020:


	September 30, 2021	September 30, 2020
Portfolio Metrics
Operating properties	3,882	3,820
Rentable square feet (in millions)	88.7	88.9
Economic occupancy rate (1)	97.6%	98.5%
Investment-grade tenants (2)	38.0%	37.7%
Weighted-average lease term (in years)	8.4	8.4
Lease rollover: (3)
Annual average	5.9%	5.9%
Maximum for a single year	10.5%	11.1%

(1)Economic occupancy rate equals the sum of square feet leased (including space subject to month-to-month agreements) divided by rentable square feet.

(2)Based on annualized rental income of our real estate ~~assets, excluding properties owned through our unconsolidated joint ventures~~portfolio as of September 30, ~~2017~~2021 and ~~2016:~~2020, respectively. Investment-grade tenants are those with a credit rating of BBB- or higher by Standard & Poor’s Financial Services LLC or a credit rating of Baa3 or higher by Moody’s Investor Service, Inc. The ratings may reflect those assigned by Standard & Poor’s Financial Services LLC or Moody’s Investor Service, Inc. to the lease guarantor or the parent company, as applicable.

September 30, 2017 (1) September 30, 2016
Portfolio Metrics
Operating properties 4,093 4,213
Rentable square feet (in millions) 92.2 96.9
Economic occupancy rate ⁽²⁾
99.0% 98%
Investment-grade tenants⁽³⁾
40.1% 41.5%


~~(1)~~	~~Omits the impact of the Excluded Properties, if any.~~


~~(2)~~	~~Economic occupancy rate equals the sum of square feet leased (including space subject to month-to-month agreements) divided by total square feet.~~


~~(3)~~	Investment-grade tenants are those with a credit rating of BBB- or higher by Standard & Poor’s Financial Services LLC or a credit rating of Baa3 or higher by Moody’s Investor Service, Inc. The ratings may reflect those assigned by Standard & Poor’s Financial Services LLC or Moody’s Investor Service, Inc. to the lease guarantor or the parent company, as applicable.

~~The following table shows~~(3)Through the ~~economic metrics~~end of ~~our real estate assets, excluding properties owned through our unconsolidated joint ventures,~~the next five years as of ~~September 30, 2017 and 2016:~~

September 30, 2017 ⁽¹⁾
September 30, 2016
Economic Metrics
Weighted-average lease term (in years) ⁽²⁾
9.5 10
Lease rollover ⁽²⁾⁽³⁾:

Annual average 4.6% 4.0%
Maximum for a single year 8.3% 5.5%


~~(1)~~	~~Omits the impact of the Excluded Properties, if any.~~


~~(2)~~	~~Based on annualized rental income of our real estate portfolio as of September 30, 2017.~~


~~(3)~~	~~Through the end of the next five years as of the respective reporting date.~~

the respective reporting date.

Operating Performance

In addition, management uses the following financial metrics ~~of our business segments~~ to assess our operating performance (dollar amounts in thousands, except per share amounts).


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Financial Metrics
Total revenues	$	290,192	$	295,278	$	872,268	$	873,457
Net income	$	61,613	$	98,917	$	260,239	$	241,885
Basic and diluted net income per share attributable to common stockholders	$	0.25	$	0.41	$	1.06	$	0.95
FFO attributable to common stockholders and limited partners (1)	$	176,047	$	171,233	$	530,687	$	508,998
AFFO attributable to common stockholders and limited partners (1)	$	191,554	$	166,547	$	561,197	$	508,604
AFFO attributable to common stockholders and limited partners per diluted share (1)	$	0.83	$	0.77	$	2.44	$	2.35

(1)See the Non-GAAP Measures section below for descriptions of our non-GAAP measures and reconciliations to the most comparable measure in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Financial Metrics
REI Segment
Revenues $ 306,543
$ 331,846
$ 935,686
$ 1,008,166
Operating income $ 74,468
$ 85,468
$ 200,267
$ 109,292
Net income (loss) $ 13,716
$ 30,006
$ 56,228
$ (83,361 )
Funds from operations (“FFO”) attributable to common stockholders and limited partners ⁽¹⁾
$ 174,935
$ 179,232
$ 509,979
$ 559,115
Adjusted funds from operations (“AFFO”) attributable to common stockholders and limited partners ⁽¹⁾
$ 175,256
$ 182,371
$ 526,951
$ 545,498
AFFO attributable to common stockholders and limited partners per diluted share ⁽¹⁾
$ 0.18
$ 0.19
$ 0.53
$ 0.58

Cole Capital Segment
Revenues $ 27,185
$ 31,069
$ 83,001
$ 94,788
Operating income (loss) $ 3,144
$ 204
$ 11,975
$ (3,150 )
Net income $ 2,778
$ 240
$ 9,242
$ 760
FFO attributable to common stockholders and limited partners ⁽¹⁾
$ 2,778
$ 240
$ 9,242
$ 760
AFFO attributable to common stockholders and limited partners ⁽¹⁾
$ 15,604
$ 15,737
$ 32,098
$ 25,392
AFFO attributable to common stockholders and limited partners per diluted share ⁽¹⁾
$ 0.02
$ 0.02
$ 0.03
$ 0.03

Consolidated
Revenues $ 333,728

$ 362,915

$ 1,018,687
$ 1,102,954
Operating income $ 77,612

$ 85,672

$ 212,242
$ 106,142
Net income (loss) $ 16,494

$ 30,246

$ 65,470
$ (82,601 )
FFO attributable to common stockholders and limited partners ⁽¹⁾
$ 177,713

$ 179,472

$ 519,221
$ 559,875
AFFO attributable to common stockholders and limited partners ⁽¹⁾
$ 190,860

$ 198,108

$ 559,049
$ 570,890
Net income (loss) attributable to common stockholders per diluted share ⁽²⁾
$ (0.00 ) $ 0.01
$ 0.01
$ (0.15 )
AFFO attributable to common stockholders and limited partners per diluted share ⁽¹⁾
$ 0.19
$ 0.20
$ 0.56
$ 0.61


~~(1)~~	~~See the “Non-GAAP Measures” section below for descriptions of our non-GAAP measures and reconciliations to the most comparable U.S. GAAP measure.~~


~~(2)~~	~~See “Note 18 – Net Income (Loss) Per Share/Unit” for calculation of net income (loss) per share.~~

~~The following table presents the total assets~~

Table of ~~the Company, by segment (in thousands):~~Contents

Total Assets
September 30, 2017 December 31, 2016
REI segment $ 14,522,637
$ 15,337,623
Cole Capital segment 214,096
249,951
Total $ 14,736,733
$ 15,587,574

Results of Operations

~~Revenues~~Our business was not materially impacted during the three and nine months ended September 30, 2021 and 2020 by the COVID-19 pandemic. During the three months ended September 30, 2021 our rent collection was 99.1% of rental revenue and as of October 20, 2021, we collected $16.8 million of deferred rent, representing approximately 100% of the amounts due from January 1, 2021 through September 30, 2021. The full extent of the future impact of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations remains uncertain.

The table below sets forth, for the periods presented, ~~certain~~ revenue information and the dollar amount change year over year ~~(dollar amounts in~~(in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 vs 2016
Increase/(Decrease) 2017 2016 2017 vs 2016
Increase/(Decrease)
Revenues:
Rental income $ 282,341
$ 303,383
$ (21,042 ) $ 862,371
$ 928,706
$ (66,335 )
Direct financing lease income 376
494
(118 ) 1,212
1,598
(386 )
Operating expense reimbursements 23,826
27,969
(4,143 ) 72,103
77,862
(5,759 )
Cole Capital revenue:

Offering-related fees and reimbursements 3,882
9,545
(5,663 ) 12,721
32,850
(20,129 )
Transaction service fees and reimbursements 4,000
3,779
221
13,159
10,639
2,520
Management fees and reimbursements 19,303
17,745
1,558
57,121
51,299
5,822
Total Cole Capital revenue 27,185

31,069

(3,884 )
83,001
94,788
(11,787 )
Total revenues $ 333,728

$ 362,915

$ (29,187 )
$ 1,018,687
$ 1,102,954
$ (84,267 )


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		2021 vs 2020 Increase/(Decrease)		2021		2020		2021 vs 2020 Increase/(Decrease)
Revenues:
Rental	$	289,671	$	293,692	$	(4,021)	$	870,547	$	870,854	$	(307)
Fees from managed partnerships	521		1,586		(1,065)		1,721		2,603		(882)
Total revenues	$	290,192	$	295,278	$	(5,086)	$	872,268	$	873,457	$	(1,189)

Rental ~~Income~~

The decrease in rental ~~income~~revenue of ~~$21.0~~$4.0 million and ~~$66.3~~$0.3 million during the three and nine months ended September 30, ~~2017,~~2021, respectively, as compared to the same periods in ~~2016~~2020 was primarily due to ~~the disposition of 413 consolidated properties subsequent~~real estate dispositions, partially offset by real estate acquisitions. Subsequent to January 1, ~~2016.~~2020, the Company acquired 185 occupied properties for an aggregate purchase price of $761.7 million and disposed of 160 consolidated properties for an aggregate sales price of $871.1 million.

~~Cole Capital Revenue~~Fees from Managed Partnerships

~~Cole Capital’s results~~Fees from managed partnerships consist of operations are primarily impacted by capital raised on behalf of the Cole REITs in offerings as well as the timing and extent of real estate asset acquisitions, dispositions and assets under management, which are driven by the Cole REITs’ capital raised, cash flows provided by operations and available proceeds from debt financing.

~~Offering-Related Fees and Reimbursements~~

~~Offering-related fees and reimbursementsinclude selling commissions, dealer manager fees and/or distribution and stockholder servicing~~ fees earned ~~from selling securities in~~for providing various services to the Cole REITs. The Company reallows 100% of selling commissions and may reallow all or a portion of our dealer manager and distribution and stockholder servicing fees to participating broker-dealers as a marketing and due diligence expense reimbursement, based on factors such as the volume of shares sold by such participating broker-dealers and the amount of marketing support provided by such participating broker-dealers. The following table represents offering-related fees and reimbursements as well as amounts reallowed during the three and nine months ended September 30, 2017 and 2016 (in thousands).

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 vs 2016
Increase/(Decrease) 2017 2016 2017 vs 2016
Increase/(Decrease)
Offering-related fees and commissions $ 3,094
$ 7,245
$ (4,151 ) $ 10,102
$ 25,404
$ (15,302 )
Offering-related reimbursements 788
2,300
(1,512 ) 2,619
7,446
(4,827 )
Less: reallowed fees and commissions 2,373
5,897
(3,524 ) 7,907
20,940
(13,033 )
Offering-related fees and reimbursements, net of reallowed $ 1,509

$ 3,648

$ (2,139 )
$ 4,814

$ 11,910
$ (7,096 )

Company’s unconsolidated joint venture entities. The decrease ~~in offering-related fees and reimbursements, net~~ of ~~reallowed fees and commissions of $2.1~~$1.1 million and ~~$7.1~~$0.9 million during the three and nine months ended September 30, ~~2017 was a direct result of a $70.0 million and $208.6 million decrease in capital raise,~~2021, respectively, as compared to the same periods in 2016. The decrease in capital raise was primarily due to the closing of the CCIT II offering on September 17, 2016 partially offset by aggregate increases in capital raise on behalf of INAV, CCPT V and CCIT III of $7.2 million and $39.2 million during the three and nine months ended September 30, 2017 as compared to the same periods in 2016.

~~Transaction Service Fees and Reimbursements~~

~~Transaction service fees and reimbursement~~revenue consist primarily of acquisition and disposition fees earned from acquiring and selling properties on behalf of the Cole REITs and other real estate programs. The increase of $0.2 million during the three months ended September 30, 2017 as compared to the same period in ~~2016~~2020 was primarily due to ~~an increase~~a $1.1 million acquisition fee recorded in acquisition fees of $0.5 million, partially offset by a decrease in disposition fees of $0.2 million. The increase of $2.5 million during the nine months ended September 30, 2017 as compared to the same period in 2016 was primarily due to an increase in acquisition fees of $1.7 million as well as an increase in disposition fees of $0.7 million.

~~Management Fees and Reimbursements~~

~~Management fees and reimbursement~~revenue represents advisory, asset and property management fees for operating, leasing and managing the portfolios of the Cole REITs and other real estate programs. The increase of $1.6 million and $5.8 million2020 for the ~~three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016 was primarily due to an increase~~purchase of one property in the average assets under management from $7.1 billion and $6.9 billion for the three and nine months ended September 30, 2016, respectively, to $7.8 billion and $7.6 billion for the three and nine months ended September 30, 2017, respectively, and an increase in reimbursement revenue of $0.2 million and $1.3 million for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016.industrial partnership.

Operating Expenses

The table below sets forth, for the periods presented, certain operating expense information and the dollar amount change year over year ~~(dollar amounts in~~(in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 vs 2016
Increase/(Decrease) 2017 2016 2017 vs 2016
Increase/(Decrease)
Operating expenses:

Cole Capital reallowed fees and commissions $ 2,373
$ 5,897
$ (3,524 ) $ 7,907
$ 20,940
$ (13,033 )
Acquisition-related expenses 909
90
819
2,282
373
1,909
Litigation and other non-routine costs, net of insurance recoveries 9,507
4,630
4,877
36,793
2,372
34,421
Property operating expenses 30,645
34,820
(4,175 ) 96,288
107,832
(11,544 )
General and administrative expenses 29,796
29,761
35
88,355
92,255
(3,900 )
Depreciation and amortization expenses 176,523
195,173
(18,650 ) 543,963
596,826
(52,863 )
Impairments 6,363
6,872
(509 ) 30,857
176,214
(145,357 )
Total operating expenses $ 256,116

$ 277,243

$ (21,127 )
$ 806,445

$ 996,812
$ (190,367 )


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		2021 vs 2020 Increase/(Decrease)		2021		2020		2021 vs 2020 Increase/(Decrease)
Acquisition-related	$	1,373	$	1,050	$	323	$	4,155	$	3,742	$	413
Merger, litigation and non-routine costs, net	9,445		105		9,340		16,118		(8,577)		24,695
Property operating	28,854		31,400		(2,546)		88,633		90,988		(2,355)
General and administrative	12,437		14,774		(2,337)		43,414		45,950		(2,536)
Depreciation and amortization	106,668		108,257		(1,589)		320,582		341,070		(20,488)
Impairments	13,272		16,397		(3,125)		59,250		36,871		22,379
Total operating expenses	$	172,049	$	171,983	$	66	$	532,152	$	510,044	$	22,108

Acquisition-Related Expenses

~~Subsequent to the adoption of ASU 2017-01 as discussed in “Note 2 –~~ ~~Summary of Significant Accounting Policies” to our consolidated financial statements, acquisition-related~~Acquisition-related expenses consist ~~primarily~~ of ~~internal salaries allocated to acquisition-related activities as well as costs incurred for deals that were not consummated.~~

The increase of $0.8 million and $1.9 million in acquisition-related expenses for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016 was primarily due to an increase in allocated internal salaries ~~resulting from~~related to time spent on acquiring commercial properties and costs associated with unconsummated deals. Acquisition-related expenses remained relatively constant during the three and nine months ended September 30, ~~2017. We resumed property acquisitions in the fourth quarter of 2016 and~~ ~~have acquired 72 properties and three land parcels for an aggregate purchase price of $534.1 million subsequent to September 30, 2016.~~

~~Litigation and Other Non-routine Costs, Net of Insurance Recoveries~~

~~The increase of $4.9 million and $34.4 million during the three and nine months ended September 30, 2017~~2021, as compared to the same periods in ~~2016 was due to an increase~~2020.

Table of ~~$4.3 million~~Contents

Merger, Litigation and ~~$23.1 million, respectively, in legal fees incurred related to the Audit Committee Investigation and related~~Non-Routine Costs, Net

Merger, litigation and ~~investigations~~non-routine costs, net increased $9.3 million during the three ~~and nine~~ months ended September 30, ~~2017~~2021, as compared to the same ~~periods~~period in ~~2016. Additionally, the Company recognized $11.2~~2020, primarily due to $9.6 million of ~~insurance recoveries~~costs incurred related to the Merger, offset by legal fees and settlements of $0.2 million during the three months ended September 30, 2021, with no comparable expenses during the same period in 2020.

Merger, litigation and non-routine costs, net increased $24.7 million during the nine months ended September 30, ~~2016. No insurance recoveries were recognized~~2021, as compared to the same period in 2020 primarily due to $22.3 million of costs incurred related to the Merger during the nine months ended September 30, ~~2017.~~

2021, offset by insurance recoveries of $6.3 million. In addition, during the nine months ended September 30, 2020, the Company reversed $6.8 million of prior period estimated costs recorded in 2019 that exceeded actual expenses incurred.

Property Operating Expenses ~~and Operating Expense Reimbursement~~

The table below sets forth, for the periods presented, the property operating expenses, net of operating expense reimbursements, and the dollar amount change year over year (dollar amounts in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 vs 2016
Increase/(Decrease) 2017 2016 2017 vs 2016
Increase/(Decrease)
Property operating expenses $ 30,645
$ 34,820
$ (4,175 ) $ 96,288
$ 107,832
$ (11,544 )
Less: Operating expense reimbursements 23,826
27,969
(4,143 ) 72,103
77,862
(5,759 )
Property operating expenses, net of operating expense reimbursements $ 6,819

$ 6,851

$ (32 )
$ 24,185

$ 29,970
$ (5,785 )

Property operating expenses such as taxes, insurance, ground rent and maintenance include both reimbursable and non-reimbursable property expenses. Operating expense reimbursement revenue represents reimbursements for such costs that are reimbursable by the tenants per their respective leases. There was no significant change in net property operating expensesThe decrease of $2.5 million and $2.4 million during the three and nine months ended September 30, ~~2017~~2021, respectively, as compared to the same ~~period~~periods in ~~2016. The decrease in net property operating expenses of $5.8 million during the nine months ended September 30, 2017 as compared to the same period in 2016~~2020 was primarily due to the ~~disposition~~impact of vacant properties and certain properties subject to double-net or modified gross leases. In addition, the Company recognized bad debt expense of $0.9 million related to Ovation Brands, Inc., which filed for Chapter 11 bankruptcy on March 7, 2016.property dispositions.

General and Administrative Expenses

~~There was no significant change in general and administrative expenses during the three months ended September 30, 2017 as compared to the same period in 2016.~~

The decrease of $3.9 million during the nine months ended September 30, 2017 as compared to the same period in 2016 was primarily due to a decrease in office expenses of $3.3 million, which related to higher expenses in 2016 for third party IT support services, rent and Cole REITs’ regulatory filings and printing, and a $3.2 million program development cost write-off in 2016, as compared to $0.1 million in 2017, offset by an increase in compensation and benefits of $1.9 million, primarily related to equity-based compensation.

~~Depreciation and Amortization Expenses~~

~~The decrease of $18.7~~$2.3 million and ~~$52.9~~$2.5 million during the three and nine months ended September 30, ~~2017,~~2021, respectively, as compared to the same periods in ~~2016~~2020 was primarily due to decreased compensation expense.

Depreciation and Amortization Expenses

The decrease in depreciation and amortization expenses of $1.6 million and $20.5 million during the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020 was primarily due to the ~~disposition~~write off of ~~413 consolidated~~intangible lease assets related to certain properties ~~subsequent to January 1, 2016. The Company also recorded $212.6 million of impairment charges on~~whose tenants filed for Chapter 11 bankruptcy during 2020 and real estate ~~investments, excluding impairment of a property subject to a direct financing lease, subsequent to January 1, 2016, which reduced the carrying value being depreciated and amortized.~~dispositions.

Impairments

~~The Company~~Impairments of $13.3 million and $16.4 million were recorded ~~impairment charges of $6.4 million related to 16 properties~~ during the three months ended September 30, ~~2017. There was no significant change as compared to the same period in 2016.~~

~~The decrease in impairments~~2021 and 2020, respectively. Impairments of ~~$145.4~~$59.3 million and $36.9 million were recorded during the nine months ended September 30, ~~2017 as compared to~~2021 and 2020, respectively. During the ~~same period in 2016 was primarily due to a decrease in the number of properties impaired from 139 during the~~three and nine months ended September 30, ~~2016~~2021, the impairment charges primarily related to 53certain office, retail and restaurant properties ~~during the nine months ended September 30, 2017. In addition, the decrease was also due to~~which were identified by management ~~identifying certain properties~~ for potential sale ~~as part of its portfolio management strategy to reduce exposure to office properties during~~or were determined would not be re-leased by the ~~first quarter of 2016, as well as a tenant of 59 restaurant properties filing for bankruptcy during that quarter.~~

tenant.

Other (Expense) Income and Provision for Income ~~Tax Provision~~Taxes

The table below sets forth, for the periods presented, certain financial information and the dollar amount change year over year ~~(dollar amounts in~~(in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		2021 vs 2020 Increase/(Decrease)		2021		2020		2021 vs 2020 Increase/(Decrease)
Interest expense	$	(59,768)	$	(66,935)	$	(7,167)	$	(179,795)	$	(197,244)	$	(17,449)
(Loss) gain on extinguishment and forgiveness of debt, net	$	(5)	$	61	$	(66)	$	(2,102)	$	(1,419)	$	683
Other income, net	$	346	$	73	$	273	$	7,101	$	1,026	$	6,075
Equity in income of unconsolidated entities	$	463	$	663	$	(200)	$	1,374	$	2,406	$	(1,032)

Gain on disposition of real estate and real estate assets held for sale, net	$	3,369	$	42,814	$	(39,445)	$	96,339	$	76,858	$	19,481
Provision for income taxes	$	(935)	$	(1,054)	$	(119)	$	(2,794)	$	(3,155)	$	(361)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 vs 2016
Increase/(Decrease) 2017 2016 2017 vs 2016
Increase/(Decrease)
Other expense and tax provision:

Interest expense $ (71,708 ) $ (79,869 ) $ (8,161 ) $ (219,072 ) $ (242,763 ) $ (23,691 )
Gain (loss) on extinguishment and forgiveness of debt, net 9,756
(2,003 ) 11,759
18,691
(1,751 ) 20,442
Other income, net 1,907
1,744
163
4,540
4,022
518
Equity in income and gain on disposition of unconsolidated entities 374
212
162
805
10,686
(9,881 )
Gain (loss) on derivative instruments, net 1,294
(2,023 ) 3,317
2,710
(3,286 ) 5,996
(Loss) gain on disposition of real estate and held for sale assets, net (688 ) 28,111
(28,799 ) 54,432
45,723
8,709
Provision for income taxes (2,053 ) (1,598 ) 455
(8,878 ) (1,374 ) 7,504

Table of Contents

Interest Expense

The decrease in interest expense of ~~$8.2~~$7.2 million and ~~$23.7~~$17.4 million during the three and nine months ended September 30, ~~2017~~2021, respectively, as compared to the same periods in ~~2016~~2020 was primarily ~~a result of~~due to a decrease in ~~the total~~average debt outstanding ~~debt balance from $8.5 billion as of June 30, 2016 to $6.0 billion as of~~and weighted average interest rates. At September 30, ~~2017, largely due to~~2021, the ~~repayment of all outstanding borrowings under the Credit Facility, redemption of $1.3~~Company had $5.7 billion of ~~corporate bonds, and reduction~~debt outstanding with a weighted average interest rate of ~~secured~~3.86%, as compared to $5.9 billion of debt outstanding with ~~proceeds from the public equity offering in August 2016 and property dispositions, partially offset by the issuance~~a weighted average interest rate of ~~the 2027 Senior Notes.~~4.19% at September 30, 2020.

~~Gain (Loss)~~Loss on Extinguishment and Forgiveness of Debt, Net

The increase of $11.8 million during the three months ended September 30, 2017 as compared to the same period in 2016 was primarily a result of two mortgage loans, each secured by one property, settled by foreclosure or deed-in-lieu of foreclosure for which the Company recognized a(Loss) gain on extinguishment and forgiveness of debt, ~~of $11.5 million, with no comparable gains during the same period in 2016.~~

The increase of $20.4 million during the nine months ended September 30, 2017 as compared to the same period in 2016 was primarily a result of the transactions above as well as a deed-in-lieu of foreclosure transaction with the lender of a loan secured by four properties during the three months ended June 30, 2017 for which the Company recognized a gain on forgiveness of debt of $9.0 million, with no comparable gains during the same period in 2016.

~~Other Income, Net~~

~~There was no significant change in other income,~~ net during the three months ended September 30, 2017 as compared to the same period in 2016. The increase of $0.5 million during the nine months ended September 30, 2017 as compared to the same period in 2016 was primarily due to post-closing adjustments recorded during the nine months ended September 30, 2016 related to a multi-tenant asset portfolio sale completed in 2014.

~~Equity in Income and Gain on Disposition of Unconsolidated Entities~~

There was no significant change in equity in income and gain on disposition of unconsolidated entities during the three months ended September 30, 2017 as compared to the same period in 2016. The decrease of $9.9 million during the nine months ended September 30, 2017 as compared to the same period in 2016 was primarily the result of a gain of $10.2 million recognized on the disposition of one unconsolidated joint venture owning one property in 2016, with no comparable gain in 2017.

~~Gain (Loss) on Derivative Instruments, Net~~

~~The change from a loss of $2.0 million and $3.3 million~~remained relatively constant during the three and nine months ended September 30, ~~2016, respectively,~~2021, as compared to ~~a gain~~the same periods in 2020.

Other Income, Net

Other income, net remained relatively constant during the three months ended September 30, 2021, as compared to the same period in 2020. The increase of ~~$1.3~~$6.1 million in other income, net during the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to gains of $4.0 million recorded during the nine months ended September 30, 2021, related to real estate investments received associated with site improvements performed by the tenant, with no comparable activity during the same periods in 2020.

Equity in Income of Unconsolidated Entities

The decrease of $0.2 million and ~~$2.7~~$1.0 million in equity in income during the three and nine months ended September 30, ~~2017,~~2021, respectively, as compared to the same periods in 2020 was primarily ~~a result~~due to the Company’s purchase of the ~~termination of six~~remaining interest ~~rate swaps~~ in ~~connection with the early repayment of the outstanding borrowings under our Credit Facility Term Loan~~one unconsolidated joint venture during the ~~three months ended September 30, 2017, as discussed~~fourth quarter of 2020.

Gain on Disposition of Real Estate and Real Estate Assets Held for Sale, Net

The decrease in ~~Note 11 –Derivatives~~gain on disposition of real estate and ~~Hedging Activities~~ ~~to our consolidated financial statements, which resulted in a gain~~real estate assets held for sale, net of ~~$1.1 million. The Company also recorded a loss of $3.3~~$39.4 million during the three months ended September 30, ~~2016~~2021, as compared to the same period in 2020 was due to the ~~termination of two interest rate swaps.~~

~~(Loss) Gain on Disposition of Real Estate and Held For Sale Assets, Net~~

~~The change in (loss) gain on~~Company’s disposition of ~~real estate and held~~31 properties for ~~sale assets, net from~~an aggregate sales price of $62.8 million which resulted in a gain of ~~$28.1 million to a loss of $0.7~~$3.4 million during the three months ended September 30, ~~2017~~2021, as compared to the ~~same period in 2016, was due to the Company’s~~ disposition of 23 properties, excluding two properties transferred to the lender in either a deed-in-lieu of foreclosure or foreclosure sale transaction, for an aggregate sales price of $65.4 million which resulted in a loss of $0.7 million during the three months ended September 30, 2017, as compared to the disposal of 7816 properties for an aggregate sales price of ~~$291.2~~$157.0 million during the same period in ~~2016 for~~2020, which resulted in a gain of ~~$28.5~~$42.9 million. During the three months ended September 30, 2016, the Company also recognized a loss of $0.4 million related to assets classified as held for sale, with no comparable loss during the same period in 2017.

The increase in gain on disposition of real estate and real estate assets held for sale, ~~assets,~~ net of ~~$8.7~~$19.5 million during the nine months ended September 30, ~~2017~~2021, as compared to the same period in ~~2016,~~2020 was due to the Company’s disposition of ~~106~~83 properties ~~excluding six properties transferred to the lender in either a deed-in-lieu of foreclosure or foreclosure sale transaction,~~ for an aggregate sales price of ~~$507.5~~$432.7 million which resulted in a gain of ~~$54.9~~$96.5 million during the nine months ended September 30, ~~2017,~~2021, as compared to the ~~disposal~~disposition of ~~223~~63 properties for an aggregate sales price of ~~$672.5~~$376.2 million during the same period in ~~2016 for~~2020, which resulted in a gain of $50.7 million, which included $28.8 million of goodwill allocation related to the sales. During the nine months ended September 30, 2017, the Company also recognized a loss of $0.5 million related to assets classified as held for sale, as compared to a loss of $5.0 million during the same period in 2016.$77.2 million.

Provision for Income Taxes

The ~~consolidated~~ provision for income taxes consists of ~~$2.1 million~~certain state and ~~$8.9 million~~local income and franchise taxes. The provision for the three and nine months ended September 30, 2017 as compared to a provision of $1.6 million and $1.4 million for the same periods in 2016 reflects an overall increase in expense primarily related to an increase in net income ~~in the TRS of the Cole Capital segment~~taxes remained relatively constant during the three and nine months ended September 30, ~~2017~~2021, as compared to the same periods in ~~2016. During the nine months ended September 30, 2017, the Company also recognized $1.7 million~~2020.

Table of ~~Canadian tax on the gain on the sale of certain Canadian properties.~~Contents

~~Non-GAAP Measures~~Share Repurchase Program

~~Our results are presented~~The Company has a share repurchase program (the “Share Repurchase Program”), that permits the Company to repurchase up to $200.0 million of its outstanding Common Stock through May 6, 2022. Under the Share Repurchase Program,

Table of Contents

VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021 (Unaudited) – (Continued)

repurchases can be made through open market purchases, privately negotiated transactions, structured or derivative transactions, including accelerated stock repurchase transactions, or other methods of acquiring shares in accordance with ~~U.S. GAAP. We also disclose certain non-GAAP measures, as discussed further below.~~ M~~anagement uses these non-GAAP financial measures~~applicable securities laws and other legal requirements. The Share Repurchase Program does not obligate the Company to make any repurchases at a specific time or in ~~our internal analysis~~a specific situation and repurchases are influenced by prevailing market conditions, the trading price of ~~results and believes these measures are useful to investors for~~ the ~~reasons explained below. These non-GAAP financial measures should not be considered as substitutes for any measures derived in accordance with U.S. GAAP.~~

~~Funds from Operations and Adjusted Funds from Operations~~

~~Due to certain unique operating characteristics of real estate companies, as discussed below,~~Common Stock, the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"), an industry trade group, has promulgated a supplemental performance measure known as FFO, which we believe to be an appropriate supplemental performance measure to reflect the operating performance of a REIT. FFO is not equivalent to our net income or loss as determined under U.S. GAAP.

NAREIT defines FFO as net income or loss computed in accordance with U.S. GAAP, excluding gains or losses from disposition of property, depreciation and amortization of real estate assets and impairment write-downs on depreciable real estate including the pro rata share of adjustments for unconsolidated partnerships and joint ventures. We calculated FFO in accordance with NAREIT's definition described above.

~~In addition to FFO, we use AFFO as a non-GAAP supplemental~~Company’s financial performance ~~measure to evaluate the operating performance~~and other conditions. Shares of ~~the Company. AFFO, as defined~~Common Stock repurchased by the Company ~~excludes from FFO non-routine items such as acquisition-related expenses, litigation and other non-routine costs, net~~under the Share Repurchase Program, if any, will be returned to the status of ~~insurance recoveries, gains or losses on sale~~authorized but unissued shares of ~~investment securities or mortgage notes receivable and legal settlements and insurance recoveries not in~~Common Stock. As of September 30, 2021, there were no share repurchases under the ordinary course of business. We also exclude certain non-cash items such as impairments of goodwill and intangible assets, straight-line rental revenue, gains or losses on derivatives, reserves for loan loss, gains or losses on the extinguishment or forgiveness of debt, non-current portionShare Repurchase Program.

Note 13 – Net Income (Loss) Per Share/Unit

Net Income (Loss) Per Share

The following is a summary of the ~~tax benefit or expense, equity-based compensation~~basic and amortization of intangible assets, deferred financing costs, premiums and discounts on debt and investments, above-market lease assets and below-market lease liabilities. Effective January 1, 2017, we determined to omit the impact of the Excluded Properties and related non-recourse mortgage notes from FFO to calculate AFFO. Management believes that excluding these costs from FFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance of our portfolio over time. AFFO allows for a comparison of the performance of our operations with other publicly-traded REITs, as AFFO, or an equivalent measure, is routinely reported by publicly-traded REITs, and we believe often used by analysts and investors for comparison purposes.

~~For all of these reasons, we believe FFO and AFFO, in addition to~~diluted net income ~~(loss), as defined by U.S. GAAP, are helpful supplemental performance measures and useful in understanding~~per share computation for the various ways in which our management evaluates the performance of the Company over time. However, not all REITs calculate FFO and AFFO the same way, so comparisons with other REITs may not be meaningful. FFO and AFFO should not be considered as alternatives to net income (loss) and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs. Neither the SEC, NAREIT, nor any other regulatory body has evaluated the acceptability of the exclusions used to adjust FFO in order to calculate AFFO and its use as a non-GAAP financial performance measure.

~~The table below presents FFO and AFFO~~General Partner for the three and nine months ended September 30, ~~2017~~2021 and ~~2016 (in thousands, except share and per share data).~~2020 (dollar amounts in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	61,613	$	98,917	$	260,239	$	241,885
Net income attributable to non-controlling interests	(48)		(51)		(131)		(137)
Net income attributable to the General Partner	61,565		98,866		260,108		241,748
Dividends to preferred shares and units	(3,124)		(10,771)		(15,897)		(36,667)
Net income available to common stockholders used in basic net income per share	58,441		88,095		244,211		205,081
Income attributable to limited partners	58		65		172		166
Net income used in diluted net income per share	$	58,499	$	88,160	$	244,383	$	205,247

Weighted average number of Common Stock outstanding - basic	229,271,106		216,737,561		229,227,755		216,002,172
Effect of Limited Partner OP Units and dilutive securities	908,334		290,114		661,115		285,993
Weighted average number of common shares - diluted	230,179,440		217,027,675		229,888,870		216,288,165

Basic and diluted net income per share attributable to common stockholders	$	0.25	$	0.41	$	1.06	$	0.95

Three Months Ended September 30, Nine Months Ended September 30,
Consolidated 2017 2016 2017 2016
Net income (loss) $ 16,494
$ 30,246
$ 65,470
$ (82,601 )
Dividends on non-convertible preferred stock (17,973 ) (17,973 ) (53,919 ) (53,919 )
Loss (gain) on disposition of real estate assets, net 688
(28,111 ) (54,432 ) (55,921 )
Depreciation and amortization of real estate assets 171,576
187,898
529,304
574,125
Impairment of real estate 6,363
6,872
30,857
176,214
Proportionate share of adjustments for unconsolidated entities 565
540
1,941
1,977
FFO attributable to common stockholders and limited partners 177,713
179,472
519,221
559,875

Acquisition-related expenses 909
90
2,282
373
Litigation and other non-routine costs, net of insurance recoveries 9,507
4,630
36,793
2,372
Gain on investment securities —
—
(65 ) —
(Gain) loss on derivative instruments, net (1,294 ) 2,023
(2,710 ) 3,286
Amortization of premiums and discounts on debt and investments, net (1,442 ) (3,553 ) (3,989 ) (12,009 )
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities 1,210
1,632
4,218
4,176
Net direct financing lease adjustments 491
571
1,576
1,720
Amortization and write-off of deferred financing costs 6,028
6,878
18,702
21,646
Amortization of management contracts 4,146
6,240
12,438
19,931
Deferred tax expense (benefit) ⁽¹⁾
6,277
6,941
3,608
(933 )
(Gain) loss on extinguishment and forgiveness of debt, net (9,756 ) 2,003
(18,691 ) 1,751
Straight-line rent, net of bad debt expense related to straight-line rent (9,955 ) (12,319 ) (33,622 ) (41,027 )
Equity-based compensation expense 3,664
2,588
11,223
7,097
Other amortization and non-cash charges 739
929
2,000
2,423
Proportionate share of adjustments for unconsolidated entities (2 ) (17 ) 101
209
Adjustments for Excluded Properties 2,625
—
5,964
—
AFFO attributable to common stockholders and limited partners $ 190,860
$ 198,108
$ 559,049
$ 570,890

Weighted-average shares of common stock outstanding - basic 974,167,088
943,480,170
974,060,160
917,233,898
Limited Partner OP Units and effect of dilutive securities ⁽²⁾
24,258,683
25,206,373
24,109,327
24,663,667
Weighted-average shares of common stock outstanding - diluted ⁽³⁾
998,425,771
968,686,543
998,169,487

941,897,565

AFFO attributable to common stockholders and limited partners per diluted share
$ 0.19
$ 0.20
$ 0.56
$ 0.61


~~(1)~~	This adjustment represents the non-current portion of the provision for or benefit from income taxes in order to show only the current portion of the provision for or benefit from income taxes as an impact to AFFO.


~~(2)~~	~~Dilutive securities include unvested restricted shares of common stock and unvested restricted stock units.~~


~~(3)~~	~~Weighted-average shares for all periods presented exclude the effect of the convertible debt as the Company would expect to settle the debt with cash.~~

Net Income (Loss) Per Unit

The ~~table below presents FFO~~following is a summary of the basic and ~~AFFO for the REI segment~~diluted net income per unit attributable to common unitholders, which includes all common General Partner unitholders and limited partner unitholders, for the three and nine months ended September 30, ~~2017~~2021 and ~~2016 (in~~2020 (dollar amounts in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	61,613	$	98,917	$	260,239	$	241,885
Net loss attributable to non-controlling interests	10		14		41		29
Net income attributable to the Operating Partnership	61,623		98,931		260,280		241,914
Dividends to preferred shares and units	(3,124)		(10,771)		(15,897)		(36,667)
Net income used in basic and diluted net income per unit	$	58,499	$	88,160	$	244,383	$	205,247

Weighted average number of common units outstanding - basic	229,423,140		216,891,891		229,379,789		216,157,976
Effect of dilutive securities	756,300		135,784		509,081		130,189
Weighted average number of common units - diluted	230,179,440		217,027,675		229,888,870		216,288,165

Basic and diluted net income per unit attributable to common unitholders	$	0.25	$	0.41	$	1.06	$	0.95

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021 (Unaudited) – (Continued)

Note 14 – Subsequent Events

Common Stock Dividend

On October 14, 2021, the Company’s Board of Directors declared a monthly cash dividend of $0.154 per share of Common Stock for the month of October, which represents one-third of its prior quarterly dividend. The dividend will be payable on November 15, 2021 to shareholders of record on November 2, 2021, only if the Merger has not closed prior to that date.

Unsecured Notes Exchange Offers

On October 8, 2021, Realty Income commenced offers to exchange all validly tendered and accepted notes of each of the series of notes issued by VEREIT Operating Partnership listed in the table in Note 6 – Debt, for notes to be issued by Realty Income (collectively, the “Realty Notes”). A Registration Statement on Form S-4 (File No. 333-260165) (the "Registration Statement") relating to the issuance of the Realty Notes was filed with the SEC on October 8, 2021 and was declared effective by the SEC on October 22, 2021. On October 25, 2021 Realty Income announced that as of October 22, 2021, more than 95% of the aggregate principal amount of each of the series of outstanding Senior Notes were validly tendered and not validly withdrawn in connection with the previously announced exchange offers. The exchange offers will expire on November 5, 2021, and are conditioned upon, among other things, the consummation of the Merger.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. We make statements in this section that are forward-looking statements. Certain risks may cause our actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a complete discussion of such risk factors, see "Risk Factors" in Part I, Item 1A. of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Capitalized terms used herein, but not otherwise defined, shall have the meaning ascribed to those terms in the “Part I – Financial Information,” including the notes to the consolidated financial statements contained therein.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements” which reflect our expectations and projections regarding future events and plans, future financial condition, results of operations, liquidity and business, including leasing and occupancy, acquisitions, dispositions, rent receipts, rent relief requests, rent relief granted, the payment of future dividends, the impact of the coronavirus (COVID-19) on our business, the Merger, and the Spin-Off. Generally, the words “anticipates,” “assumes,” “believes,” “continues,” “could,” “estimates,” “expects,” “goals,” “intends,” “may,” “plans,” “projects,” “seeks,” “should,” “targets,” “will,” and variations of such words and similar expressions identify forward-looking statements. These forward-looking statements are based on information currently available to us and involve a number of known and unknown assumptions and risks, uncertainties and other factors, which may be difficult to predict and beyond the Company’s control, that could cause actual events and plans or could cause our business, financial condition, liquidity and results of operations to differ materially from those expressed or implied in the forward-looking statements. These factors include, among other things, those discussed below. Information regarding historical rent collections should not serve as an indication of future rent collection. We disclaim any obligation to publicly update or revise any forward-looking statements, whether as a result of changes in underlying assumptions or factors, new information, future events or otherwise, except as may be required by law.

The following are some, but not all, of the assumptions, risks, uncertainties and other factors that could cause our actual results to differ materially from those presented in our forward-looking statements:

•Our ability to consummate the proposed Merger and the timing of the closing of the proposed Merger.

•The potential impact of the announcement of the proposed transactions or consummation of the proposed transactions on business relationships, including with tenants, clients, employees, customers and competitors.

•Litigation associated with the Merger.

•Costs, fees, expenses and charges related to the proposed transactions.

•We may be subject to risks as a result of restrictions imposed by operating covenants contained in the Merger Agreement restricting us generally from issuing equity, incurring or pre-paying debt and limitations on the use of our Revolving Credit Facility.

•The uncertain duration and extent of the impact of COVID-19 on our business and the businesses of our tenants (including their ability to timely make rental payments) and the economy generally.

•Federal, state or local legislation or regulation that could impact the timely payment of rent by tenants in light of COVID-19.

•We may be unable to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all.

•We are subject to risks associated with tenant, geographic and industry concentrations with respect to our properties.

•We may be subject to risks accompanying the management of our industrial and office partnerships, in each of which we hold a non-controlling ownership interest.

•Our properties may be subject to impairment charges.

•We could be subject to unexpected costs or liabilities that may arise from potential dispositions, including related to limited partnership, tenant-in-common and Delaware statutory trust real estate programs and our management of such programs.

•We are subject to competition in the acquisition and disposition of properties and in the leasing of our properties including that we may be unable to acquire, dispose of, or lease properties on advantageous terms or at all.

•We are subject to risks associated with bankruptcies or insolvencies of tenants, from tenant defaults generally or from the unpredictability of the business plans and financial condition of our tenants, which are heightened as a result of the COVID-19 pandemic.

•We have substantial indebtedness, which may affect our ability to pay dividends, and expose us to interest rate fluctuation risk and the risk of default under our debt obligations.

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•We may be subject to increases in our borrowing costs as a result of changes in interest rates and other factors, including the phasing out of the London Inter-Bank Offered Rate (“LIBOR”) starting in 2021.

•Our overall borrowing and operating flexibility may be adversely affected by the terms and restrictions within the indenture governing the senior unsecured notes (the “Senior Notes”), and the Credit Agreement governing the terms of the Credit Facility (as both terms are defined in Liquidity and Capital Resources), and compliance with such covenants and/or our ability to access capital markets (including on attractive terms) may be more difficult as a result of the impact of COVID-19.

•Our access to capital and terms of future financings may be affected by adverse changes to our credit rating.

•We may not generate cash flows sufficient to pay our dividends to stockholders or meet our debt service obligations.

•We may be affected by risks resulting from losses in excess of insured limits.

•We may fail to remain qualified as a real estate investment trust (“REIT”) for U.S. federal income tax purposes.

•Compliance with the REIT annual distribution requirements may limit our operating flexibility.

•We may be unable to retain or hire key personnel.

•We may be impacted by the continuation or deterioration of current market conditions.

All forward-looking statements should be read in light of the risks identified in Part I, Item 1A. Risk Factors within our Annual Report on Form 10-K for the year ended December 31, 2020 and Part II, Item 1A. Risk Factors within this Quarterly Report on Form 10-Q.

We use certain defined terms throughout this Quarterly Report on Form 10-Q that have the following meanings:

When we refer to “annualized rental income,” we mean the rental revenue under our leases on operating properties on a straight-line basis, which includes the effect of rent escalations and any tenant concessions, such as free rent, and our pro rata share of such revenues from properties owned by unconsolidated joint ventures. Annualized rental income excludes any adjustments to rental income due to changes in the collectability assessment, contingent rent, such as percentage rent, and operating expense reimbursements. Management uses annualized rental income as a basis for tenant, industry and geographic concentrations and other metrics within the portfolio. Annualized rental income is not indicative of future performance.

When we refer to a “creditworthy tenant,” we mean a tenant that has entered into a lease that we determine is creditworthy and may include tenants with an investment grade or below investment grade credit rating, as determined by major credit rating agencies, or unrated tenants. To the extent we determine that a tenant is a “creditworthy tenant” even though it does not have an investment grade credit rating, we do so based on our management’s determination that a tenant should have the financial wherewithal to honor its obligations under its lease with us. As explained further below, this determination is based on our management’s substantial experience performing credit analysis and is made after evaluating a tenant’s due diligence materials that are made available to us, including financial statements and operating data.

When we refer to a “direct financing lease,” we mean a lease that requires specific treatment due to the significance of the lease payments from the inception of the lease compared to the fair value of the property, term of the lease, a transfer of ownership, or a bargain purchase option. These leases are recorded as a net asset on the balance sheet. The amount recorded is calculated as the fair value of the remaining lease payments on the leases and the estimated fair value of any expected residual property value at the end of the lease term.

When we refer to properties that are net leased on a “long term basis,” we mean properties with remaining primary lease terms of generally seven to 10 years or longer on average, depending on property type.

Under a “net lease,” the tenant occupying the leased property (usually as a single tenant) does so in much the same manner as if the tenant were the owner of the property. There are various forms of net leases, most typically classified as triple net or double net. Triple net leases typically require that the tenant pay all expenses associated with the property (e.g., real estate taxes, insurance, maintenance and repairs). Double net leases typically require that the tenant pay all operating expenses associated with the property (e.g., real estate taxes, insurance and maintenance), but excludes some or all major repairs (e.g., roof, structure and parking lot). Accordingly, the owner receives the rent “net” of these expenses, rendering the cash flow associated with the lease predictable for the term of the lease. Under a net lease, the tenant generally agrees to lease the property for a significant term and agrees that it will either have no ability or only limited ability to terminate the lease or abate rent prior to the expiration of the term of the lease as a result of real estate driven events such as casualty, condemnation or failure by the landlord to fulfill its obligations under the lease.

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The real estate portfolio and economic metrics of our operating properties includes the Company's pro rata share of square feet and annualized rental income from the Company's unconsolidated joint ventures, based upon the Company's legal ownership percentage, which may, at times, not equal the Company's economic interest because of various provisions in certain joint venture agreements regarding distributions of cash flow based on capital account balances, allocations of profits and losses and payments of preferred returns.

Overview

VEREIT is a full-service real estate operating company which owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S. As of September 30, 2021, our portfolio, including the pro rata share of square feet and annualized rental income from the Company’s unconsolidated joint ventures, was comprised of 3,882 retail, restaurant, office and industrial real estate properties with an aggregate 88.7 million square feet, of which 97.6% was leased, with a weighted-average remaining lease term of 8.4 years.

Merger with Realty Income Corporation

On April 29, 2021, the Company and the OP entered into a Merger Agreement with Realty Income, Merger Sub 1, and Merger Sub 2 whereby Merger Sub 2 will be merged with and into the OP, with the OP continuing as the surviving entity and, immediately thereafter, VEREIT will be merged with and into Merger Sub 1, with Merger Sub 1 continuing as the surviving corporation. Pursuant to the terms and subject to the conditions of the Merger Agreement, each share of Common Stock and Limited Partner OP Unit will be converted into 0.705 of a newly issued share of Realty Income Common Stock. The Merger Agreement contains customary representations, warranties and covenants by each party. The Merger is subject to certain conditions which are set forth in the Merger Agreement. Stockholders of VEREIT and Realty Income have both approved the Merger. The boards of directors of the Company and Realty Income have also unanimously approved the Merger Agreement. The Merger is expected to close on November 1, 2021 subject to the satisfaction or waiver of other closing conditions specified in the Merger Agreement.

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Operating Highlights and Key Performance Indicators

Activity through September 30, 2021

Operations

•Acquired controlling financial interests in 134 commercial properties for an aggregate purchase price of $419.2 million, which includes $4.0 million of external acquisition-related expenses that were capitalized.

•Disposed of 83 properties, for an aggregate sales price of $432.7 million. The Company recorded a gain of $96.5 million related to the sales.

Debt

•As of September 30, 2021, $88.0 million was outstanding under the Revolving Credit Facility.

•Total secured debt decreased by$341.4 million, from $1.3 billion to $1.0 billion, which includes prepayment of $247.1 million of mortgage notes.

Equity

•Issued an aggregate of 35,710 shares under the Prior ATM Program (as defined in Liquidity and Capital Resources), at a weighted average price per share of $37.90, for gross proceeds of $1.4 million. The weighted average price per share, net of commissions, was $37.42, for net proceeds of $1.3 million.

•Redeemed all outstanding shares of Series F Preferred Stock. The shares of Series F Preferred Stock were redeemed at a redemption price of $25.00 per share.

•Declared a quarterly dividend of $0.462 per share of Common Stock for each of the three quarters of 2021.

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Real Estate Portfolio Metrics

In managing our portfolio, we are committed to diversification by property type, tenant, geography and industry. Below is a summary of our operating property type diversification and our top ten concentrations as of September 30, 2021, based on annualized rental income of $1.1 billion.

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Our financial performance is influenced by the timing of acquisitions and dispositions and the operating performance of our operating properties. The following table shows the property metrics of our operating properties as of September 30, 2021 and 2020:


	September 30, 2021	September 30, 2020
Portfolio Metrics
Operating properties	3,882	3,820
Rentable square feet (in millions)	88.7	88.9
Economic occupancy rate (1)	97.6%	98.5%
Investment-grade tenants (2)	38.0%	37.7%
Weighted-average lease term (in years)	8.4	8.4
Lease rollover: (3)
Annual average	5.9%	5.9%
Maximum for a single year	10.5%	11.1%

(1)Economic occupancy rate equals the sum of square feet leased (including space subject to month-to-month agreements) divided by rentable square feet.

(2)Based on annualized rental income of our real estate portfolio as of September 30, 2021 and 2020, respectively. Investment-grade tenants are those with a credit rating of BBB- or higher by Standard & Poor’s Financial Services LLC or a credit rating of Baa3 or higher by Moody’s Investor Service, Inc. The ratings may reflect those assigned by Standard & Poor’s Financial Services LLC or Moody’s Investor Service, Inc. to the lease guarantor or the parent company, as applicable.

(3)Through the end of the next five years as of the respective reporting date.

Operating Performance

In addition, management uses the following financial metrics to assess our operating performance (dollar amounts in thousands, except ~~share and~~ per share ~~data)~~amounts).


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Financial Metrics
Total revenues	$	290,192	$	295,278	$	872,268	$	873,457
Net income	$	61,613	$	98,917	$	260,239	$	241,885
Basic and diluted net income per share attributable to common stockholders	$	0.25	$	0.41	$	1.06	$	0.95
FFO attributable to common stockholders and limited partners (1)	$	176,047	$	171,233	$	530,687	$	508,998
AFFO attributable to common stockholders and limited partners (1)	$	191,554	$	166,547	$	561,197	$	508,604
AFFO attributable to common stockholders and limited partners per diluted share (1)	$	0.83	$	0.77	$	2.44	$	2.35

Three Months Ended September 30, Nine Months Ended September 30,
REI segment: 2017 2016 2017 2016
Net income (loss) $ 13,716
$ 30,006
$ 56,228
$ (83,361 )
Dividends on non-convertible preferred stock (17,973 ) (17,973 ) (53,919 ) (53,919 )
Loss (gain) on disposition of real estate assets, net 688
(28,111 ) (54,432 ) (55,921 )
Depreciation and amortization of real estate assets 171,576
187,898
529,304
574,125
Impairment of real estate 6,363
6,872
30,857
176,214
Proportionate share of adjustments for unconsolidated entities 565
540
1,941
1,977
FFO attributable to common stockholders and limited partners
174,935
179,232
509,979

559,115

Acquisition-related expenses 909
90
2,246
334
Litigation and other non-routine costs, net of insurance recoveries 9,507
4,630
36,793
2,372
Gain on investment securities —
—
(65 ) —
(Gain) loss on derivative instruments, net (1,294 ) 2,023
(2,710 ) 3,286
Amortization of premiums and discounts on debt and investments, net (1,442 ) (3,553 ) (3,989 ) (12,009 )
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities 1,210
1,632
4,218
4,176
Net direct financing lease adjustments 491
571
1,576
1,720
Amortization and write-off of deferred financing costs 6,028
6,878
18,702
21,646
(Gain) loss on extinguishment and forgiveness of debt, net (9,756 ) 2,003
(18,691 ) 1,751
Straight-line rent, net of bad debt expense related to straight-line rent (9,955 ) (12,319 ) (33,622 ) (41,027 )
Equity-based compensation expense 2,000
1,201
6,447
3,925
Other amortization and non-cash charges —
—
2
—
Proportionate share of adjustments for unconsolidated entities (2 ) (17 ) 101
209
Adjustments for Excluded Properties 2,625
—
5,964
—
AFFO attributable to common stockholders and limited partners
$ 175,256
$ 182,371
$ 526,951

$ 545,498

Weighted-average shares of common stock outstanding - basic 974,167,088
943,480,170
974,060,160
917,233,898
Limited Partner OP Units and effect of dilutive securities ⁽¹⁾
24,258,683
25,206,373
24,109,327
24,663,667
Weighted-average shares of common stock outstanding - diluted ⁽²⁾

998,425,771
968,686,543
998,169,487

941,897,565

AFFO attributable to common stockholders and limited partners per diluted share
$ 0.18
$ 0.19
$ 0.53

$ 0.58


~~(1)~~	~~Dilutive securities include unvested restricted shares of common stock and unvested restricted stock units.~~


~~(2)~~	~~Weighted-average shares for all periods presented exclude the effect of the convertible debt as the Company would expect to settle the debt with cash.~~

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~~The table below presents FFO and AFFO for the Cole Capital segment for~~Results of Operations

Our business was not materially impacted during the three and nine months ended September 30, ~~2017~~2021 and ~~2016 (in thousands, except share~~2020 by the COVID-19 pandemic. During the three months ended September 30, 2021 our rent collection was 99.1% of rental revenue and ~~per share data).~~as of October 20, 2021, we collected $16.8 million of deferred rent, representing approximately 100% of the amounts due from January 1, 2021 through September 30, 2021. The full extent of the future impact of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations remains uncertain.

Three Months Ended September 30, Nine Months Ended September 30,
Cole Capital segment: 2017 2016 2017 2016
Net income $ 2,778
$ 240
9,242
$ 760
FFO attributable to common stockholders and limited partners
2,778
240
9,242

760

Acquisition-related expenses —
—
36
39
Amortization of Management Contracts 4,146
6,240
12,438
19,931
Deferred tax benefit (expense) ⁽¹⁾
6,277
6,941
3,608
(933 )
Equity-based compensation expense 1,664
1,387
4,776
3,172
Other amortization and non-cash charges 739
929
1,998
2,423
AFFO attributable to common stockholders and limited partners
$ 15,604
$ 15,737
$ 32,098

$ 25,392

Weighted-average shares of common stock outstanding - basic 974,167,088
943,480,170
974,060,160
917,233,898
Limited Partner OP Units and effect of dilutive securities ⁽²⁾
24,258,683
25,206,373
24,109,327
24,663,667
Weighted-average shares of common stock outstanding - diluted ⁽³⁾

998,425,771
968,686,543
998,169,487

941,897,565

AFFO attributable to common stockholders and limited partners per diluted share
$ 0.02
$ 0.02
$ 0.03

$ 0.03


~~(1)~~	This adjustment represents the non-current portion of the provision for or benefit from income taxes in order to show only the current portion of the provision for or benefit from income taxes as an impact to AFFO.


~~(2)~~	~~Dilutive securities include unvested restricted shares of common stock and unvested restricted stock units.~~


~~(3)~~	~~Weighted-average shares for all periods presented exclude the effect of the convertible debt as the Company would expect to settle the debt with cash.~~

~~Liquidity and Capital Resources~~

~~General~~

~~Our principal liquidity needs~~The table below sets forth, for the ~~next twelve~~periods presented, revenue information and the dollar amount change year over year (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		2021 vs 2020 Increase/(Decrease)		2021		2020		2021 vs 2020 Increase/(Decrease)
Revenues:
Rental	$	289,671	$	293,692	$	(4,021)	$	870,547	$	870,854	$	(307)
Fees from managed partnerships	521		1,586		(1,065)		1,721		2,603		(882)
Total revenues	$	290,192	$	295,278	$	(5,086)	$	872,268	$	873,457	$	(1,189)

Rental

The decrease in rental revenue of $4.0 million and $0.3 million during the three and nine months ~~and beyond are to:~~

~~fund normal recurring expenses;~~

~~fund capital expenditures, tenant improvements and leasing costs;~~

~~meet debt service and principal repayment obligations, including balloon payments on maturing debt;~~

~~pay dividends;~~

~~pay litigation costs; and~~

~~fund property acquisitions.~~

~~We expect~~ended September 30, 2021, respectively, as compared to ~~be able~~the same periods in 2020 was primarily due to ~~satisfy these obligations using one or more of the following sources:~~

~~cash flow from operations;~~

~~proceeds from~~ real estate ~~dispositions;~~

~~utilization of existing line of credit;~~

~~cash and cash equivalents balance; and~~

~~issuance of debt and equity securities.~~

~~2017 Bond Offering~~

~~On August 11, 2017,~~dispositions, partially offset by real estate acquisitions. Subsequent to January 1, 2020, the Company ~~closed a senior note offering, consisting of $600.0 million aggregate principal amount of the Operating Partnership’s 3.950% Senior Notes due 2027. As discussed in~~ ~~Note 10 –Debt~~, the Company subsequently used the proceeds from the 2017 Bond Offering to repay borrowings, including swap termination costs and accrued and unpaid interest under its $500.0 million Credit Facility Term Loan on August 11, 2017. The Company used the remaining proceeds to pay down secured debt.

~~Continuous Equity Offering Program~~

On September 19, 2016, the Company registered the Program pursuant to which the Company can offer and sell, from time to time through September 19, 2019 in “at-the-market” offerings or certain other transactions, shares of common stock withacquired 185 occupied properties for an aggregate ~~gross~~purchase price of $761.7 million and disposed of 160 consolidated properties for an aggregate sales price of up$871.1 million.

Fees from Managed Partnerships

Fees from managed partnerships consist of fees earned for providing various services to ~~$750.0~~the Company’s unconsolidated joint venture entities. The decrease of $1.1 million ~~through its sales agents. The Company intends to use~~and $0.9 million during the ~~proceeds from any sale of shares for general corporate purposes, which may include funding potential acquisitions~~three and ~~repurchasing or repaying outstanding indebtedness. As of~~nine months ended September 30, ~~2017, no shares of common stock have been issued pursuant~~2021, respectively, as compared to the ~~Program.~~same period in 2020 was primarily due to a $1.1 million acquisition fee recorded in 2020 for the purchase of one property in the industrial partnership.

Operating Expenses

The table below sets forth, for the periods presented, certain operating expense information and the dollar amount change year over year (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		2021 vs 2020 Increase/(Decrease)		2021		2020		2021 vs 2020 Increase/(Decrease)
Acquisition-related	$	1,373	$	1,050	$	323	$	4,155	$	3,742	$	413
Merger, litigation and non-routine costs, net	9,445		105		9,340		16,118		(8,577)		24,695
Property operating	28,854		31,400		(2,546)		88,633		90,988		(2,355)
General and administrative	12,437		14,774		(2,337)		43,414		45,950		(2,536)
Depreciation and amortization	106,668		108,257		(1,589)		320,582		341,070		(20,488)
Impairments	13,272		16,397		(3,125)		59,250		36,871		22,379
Total operating expenses	$	172,049	$	171,983	$	66	$	532,152	$	510,044	$	22,108

Acquisition-Related Expenses

Acquisition-related expenses consist of allocated internal salaries related to time spent on acquiring commercial properties and costs associated with unconsummated deals. Acquisition-related expenses remained relatively constant during the three and nine months ended September 30, 2021, as compared to the same periods in 2020.

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Merger, Litigation and Non-Routine Costs, Net

Merger, litigation and non-routine costs, net increased $9.3 million during the three months ended September 30, 2021, as compared to the same period in 2020, primarily due to $9.6 million of costs incurred related to the Merger, offset by legal fees and settlements of $0.2 million during the three months ended September 30, 2021, with no comparable expenses during the same period in 2020.

Merger, litigation and non-routine costs, net increased $24.7 million during the nine months ended September 30, 2021, as compared to the same period in 2020 primarily due to $22.3 million of costs incurred related to the Merger during the nine months ended September 30, 2021, offset by insurance recoveries of $6.3 million. In addition, during the nine months ended September 30, 2020, the Company reversed $6.8 million of prior period estimated costs recorded in 2019 that exceeded actual expenses incurred.

Property Operating Expenses

Property operating expenses such as taxes, insurance, ground rent and maintenance include both reimbursable and non-reimbursable property expenses. The decrease of $2.5 million and $2.4 million during the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020 was primarily due to the impact of property dispositions.

General and Administrative Expenses

The decrease of $2.3 million and $2.5 million during the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020 was primarily due to decreased compensation expense.

Depreciation and Amortization Expenses

The decrease in depreciation and amortization expenses of $1.6 million and $20.5 million during the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020 was primarily due to the write off of intangible lease assets related to certain properties whose tenants filed for Chapter 11 bankruptcy during 2020 and real estate dispositions.

Impairments

Impairments of $13.3 million and $16.4 million were recorded during the three months ended September 30, 2021 and 2020, respectively. Impairments of $59.3 million and $36.9 million were recorded during the nine months ended September 30, 2021 and 2020, respectively. During the three and nine months ended September 30, 2021, the impairment charges primarily related to certain office, retail and restaurant properties which were identified by management for potential sale or were determined would not be re-leased by the tenant.

Other (Expense) Income and Provision for Income Taxes

The table below sets forth, for the periods presented, certain financial information and the dollar amount change year over year (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		2021 vs 2020 Increase/(Decrease)		2021		2020		2021 vs 2020 Increase/(Decrease)
Interest expense	$	(59,768)	$	(66,935)	$	(7,167)	$	(179,795)	$	(197,244)	$	(17,449)
(Loss) gain on extinguishment and forgiveness of debt, net	$	(5)	$	61	$	(66)	$	(2,102)	$	(1,419)	$	683
Other income, net	$	346	$	73	$	273	$	7,101	$	1,026	$	6,075
Equity in income of unconsolidated entities	$	463	$	663	$	(200)	$	1,374	$	2,406	$	(1,032)

Gain on disposition of real estate and real estate assets held for sale, net	$	3,369	$	42,814	$	(39,445)	$	96,339	$	76,858	$	19,481
Provision for income taxes	$	(935)	$	(1,054)	$	(119)	$	(2,794)	$	(3,155)	$	(361)

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Interest Expense

The decrease in interest expense of $7.2 million and $17.4 million during the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020 was primarily due to a decrease in average debt outstanding and weighted average interest rates. At September 30, 2021, the Company had $5.7 billion of debt outstanding with a weighted average interest rate of 3.86%, as compared to $5.9 billion of debt outstanding with a weighted average interest rate of 4.19% at September 30, 2020.

Loss on Extinguishment and Forgiveness of Debt, Net

(Loss) gain on extinguishment and forgiveness of debt, net remained relatively constant during the three and nine months ended September 30, 2021, as compared to the same periods in 2020.

Other Income, Net

Other income, net remained relatively constant during the three months ended September 30, 2021, as compared to the same period in 2020. The increase of $6.1 million in other income, net during the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to gains of $4.0 million recorded during the nine months ended September 30, 2021, related to real estate investments received associated with site improvements performed by the tenant, with no comparable activity during the same periods in 2020.

Equity in Income of Unconsolidated Entities

The decrease of $0.2 million and $1.0 million in equity in income during the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020 was primarily due to the Company’s purchase of the remaining interest in one unconsolidated joint venture during the fourth quarter of 2020.

Gain on Disposition of Real Estate and Real Estate Assets Held for Sale, Net

The decrease in gain on disposition of real estate and real estate assets held for sale, net of $39.4 million during the three months ended September 30, 2021, as compared to the same period in 2020 was due to the Company’s disposition of 31 properties for an aggregate sales price of $62.8 million which resulted in a gain of $3.4 million during the three months ended September 30, 2021, as compared to the disposition of 16 properties for an aggregate sales price of $157.0 million during the same period in 2020, which resulted in a gain of $42.9 million.

The increase in gain on disposition of real estate and real estate assets held for sale, net of $19.5 million during the nine months ended September 30, 2021, as compared to the same period in 2020 was due to the Company’s disposition of 83 properties for an aggregate sales price of $432.7 million which resulted in a gain of $96.5 million during the nine months ended September 30, 2021, as compared to the disposition of 63 properties for an aggregate sales price of $376.2 million during the same period in 2020, which resulted in a gain of $77.2 million.

Provision for Income Taxes

The provision for income taxes consists of certain state and local income and franchise taxes. The provision for income taxes remained relatively constant during the three and nine months ended September 30, 2021, as compared to the same periods in 2020.

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Share Repurchase Program

~~On May 12, 2017,~~The Company has a share repurchase program (the “Share Repurchase Program”), that permits the ~~Company’s board of directors authorized the~~Company to repurchase of up to $200.0 million of its outstanding Common Stock through May 6, 2022. Under the Share Repurchase Program,

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021 (Unaudited) – (Continued)

repurchases can be made through open market purchases, privately negotiated transactions, structured or derivative transactions, including accelerated stock repurchase transactions, or other methods of acquiring shares in accordance with applicable securities laws and other legal requirements. The Share Repurchase Program does not obligate the Company to make any repurchases at a specific time or in a specific situation and repurchases are influenced by prevailing market conditions, the trading price of the Common Stock, the Company’s financial performance and other conditions. Shares of Common Stock repurchased by the Company under the Share Repurchase Program, if any, will be returned to the status of authorized but unissued shares of Common Stock. As of September 30, 2021, there were no share repurchases under the Share Repurchase Program.

Note 13 – Net Income (Loss) Per Share/Unit

Net Income (Loss) Per Share

The following is a summary of the basic and diluted net income per share computation for the General Partner for the three and nine months ended September 30, 2021 and 2020 (dollar amounts in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	61,613	$	98,917	$	260,239	$	241,885
Net income attributable to non-controlling interests	(48)		(51)		(131)		(137)
Net income attributable to the General Partner	61,565		98,866		260,108		241,748
Dividends to preferred shares and units	(3,124)		(10,771)		(15,897)		(36,667)
Net income available to common stockholders used in basic net income per share	58,441		88,095		244,211		205,081
Income attributable to limited partners	58		65		172		166
Net income used in diluted net income per share	$	58,499	$	88,160	$	244,383	$	205,247

Weighted average number of Common Stock outstanding - basic	229,271,106		216,737,561		229,227,755		216,002,172
Effect of Limited Partner OP Units and dilutive securities	908,334		290,114		661,115		285,993
Weighted average number of common shares - diluted	230,179,440		217,027,675		229,888,870		216,288,165

Basic and diluted net income per share attributable to common stockholders	$	0.25	$	0.41	$	1.06	$	0.95

Net Income (Loss) Per Unit

The following is a summary of the basic and diluted net income per unit attributable to common unitholders, which includes all common General Partner unitholders and limited partner unitholders, for the three and nine months ended September 30, 2021 and 2020 (dollar amounts in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	61,613	$	98,917	$	260,239	$	241,885
Net loss attributable to non-controlling interests	10		14		41		29
Net income attributable to the Operating Partnership	61,623		98,931		260,280		241,914
Dividends to preferred shares and units	(3,124)		(10,771)		(15,897)		(36,667)
Net income used in basic and diluted net income per unit	$	58,499	$	88,160	$	244,383	$	205,247

Weighted average number of common units outstanding - basic	229,423,140		216,891,891		229,379,789		216,157,976
Effect of dilutive securities	756,300		135,784		509,081		130,189
Weighted average number of common units - diluted	230,179,440		217,027,675		229,888,870		216,288,165

Basic and diluted net income per unit attributable to common unitholders	$	0.25	$	0.41	$	1.06	$	0.95

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VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021 (Unaudited) – (Continued)

Note 14 – Subsequent Events

Common Stock Dividend

Unsecured Notes Exchange Offers

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. We make statements in this section that are forward-looking statements. Certain risks may cause our actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a complete discussion of such risk factors, see "Risk Factors" in Part I, Item 1A. of the Company’s ~~outstanding~~Annual Report on Form 10-K for the year ended December 31, 2020. Capitalized terms used herein, but not otherwise defined, shall have the meaning ascribed to those terms in the “Part I – Financial Information,” including the notes to the consolidated financial statements contained therein.

Forward-Looking Statements

•Our ability to consummate the proposed Merger and the timing of the closing of the proposed Merger.

•Litigation associated with the Merger.

•Costs, fees, expenses and charges related to the proposed transactions.

•The uncertain duration and extent of the impact of COVID-19 on our business and the businesses of our tenants (including their ability to timely make rental payments) and the economy generally.

•Federal, state or local legislation or regulation that could impact the timely payment of rent by tenants in light of COVID-19.

•We may be unable to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all.

•We are subject to risks associated with tenant, geographic and industry concentrations with respect to our properties.

•We may be subject to risks accompanying the management of our industrial and office partnerships, in each of which we hold a non-controlling ownership interest.

•Our properties may be subject to impairment charges.

•We have substantial indebtedness, which may affect our ability to pay dividends, and expose us to interest rate fluctuation risk and the risk of default under our debt obligations.

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•Our access to capital and terms of future financings may be affected by adverse changes to our credit rating.

•We may not generate cash flows sufficient to pay our dividends to stockholders or meet our debt service obligations.

•We may be affected by risks resulting from losses in excess of insured limits.

•We may fail to remain qualified as a real estate investment trust (“REIT”) for U.S. federal income tax purposes.

•Compliance with the REIT annual distribution requirements may limit our operating flexibility.

•We may be unable to retain or hire key personnel.

•We may be impacted by the continuation or deterioration of current market conditions.

We use certain defined terms throughout this Quarterly Report on Form 10-Q that have the following meanings:

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Overview

Merger with Realty Income Corporation

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Operating Highlights and Key Performance Indicators

Activity through September 30, 2021

Operations

•Disposed of 83 properties, for an aggregate sales price of $432.7 million. The Company recorded a gain of $96.5 million related to the sales.

Debt

•As of September 30, 2021, $88.0 million was outstanding under the Revolving Credit Facility.

•Total secured debt decreased by$341.4 million, from $1.3 billion to $1.0 billion, which includes prepayment of $247.1 million of mortgage notes.

Equity

•Redeemed all outstanding shares of Series F Preferred Stock. The shares of Series F Preferred Stock were redeemed at a redemption price of $25.00 per share.

•Declared a quarterly dividend of $0.462 per share of Common Stock for each of the three quarters of 2021.

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Real Estate Portfolio Metrics

In managing our portfolio, we are committed to diversification by property type, tenant, geography and industry. Below is a summary of our operating property type diversification and our top ten concentrations as of September 30, 2021, based on annualized rental income of $1.1 billion.

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	September 30, 2021	September 30, 2020
Portfolio Metrics
Operating properties	3,882	3,820
Rentable square feet (in millions)	88.7	88.9
Economic occupancy rate (1)	97.6%	98.5%
Investment-grade tenants (2)	38.0%	37.7%
Weighted-average lease term (in years)	8.4	8.4
Lease rollover: (3)
Annual average	5.9%	5.9%
Maximum for a single year	10.5%	11.1%

(1)Economic occupancy rate equals the sum of square feet leased (including space subject to month-to-month agreements) divided by rentable square feet.

(3)Through the end of the next five years as of the respective reporting date.

Operating Performance

In addition, management uses the following financial metrics to assess our operating performance (dollar amounts in thousands, except per share amounts).


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Financial Metrics
Total revenues	$	290,192	$	295,278	$	872,268	$	873,457
Net income	$	61,613	$	98,917	$	260,239	$	241,885
Basic and diluted net income per share attributable to common stockholders	$	0.25	$	0.41	$	1.06	$	0.95
FFO attributable to common stockholders and limited partners (1)	$	176,047	$	171,233	$	530,687	$	508,998
AFFO attributable to common stockholders and limited partners (1)	$	191,554	$	166,547	$	561,197	$	508,604
AFFO attributable to common stockholders and limited partners per diluted share (1)	$	0.83	$	0.77	$	2.44	$	2.35

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Results of Operations

Our business was not materially impacted during the three and nine months ended September 30, 2021 and 2020 by the COVID-19 pandemic. During the three months ended September 30, 2021 our rent collection was 99.1% of rental revenue and as of October 20, 2021, we collected $16.8 million of deferred rent, representing approximately 100% of the amounts due from January 1, 2021 through September 30, 2021. The full extent of the future impact of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations remains uncertain.

The table below sets forth, for the periods presented, revenue information and the dollar amount change year over year (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		2021 vs 2020 Increase/(Decrease)		2021		2020		2021 vs 2020 Increase/(Decrease)
Revenues:
Rental	$	289,671	$	293,692	$	(4,021)	$	870,547	$	870,854	$	(307)
Fees from managed partnerships	521		1,586		(1,065)		1,721		2,603		(882)
Total revenues	$	290,192	$	295,278	$	(5,086)	$	872,268	$	873,457	$	(1,189)

Rental

The decrease in rental revenue of $4.0 million and $0.3 million during the ~~subsequent 12~~three and nine months ended September 30, 2021, respectively, as ~~market conditions warrant. During~~compared to the same periods in 2020 was primarily due to real estate dispositions, partially offset by real estate acquisitions. Subsequent to January 1, 2020, the Company acquired 185 occupied properties for an aggregate purchase price of $761.7 million and disposed of 160 consolidated properties for an aggregate sales price of $871.1 million.

Fees from Managed Partnerships

Fees from managed partnerships consist of fees earned for providing various services to the Company’s unconsolidated joint venture entities. The decrease of $1.1 million and $0.9 million during the three and nine months ended September 30, 2021, respectively, as compared to the same period in 2020 was primarily due to a $1.1 million acquisition fee recorded in 2020 for the purchase of one property in the industrial partnership.

Operating Expenses

The table below sets forth, for the periods presented, certain operating expense information and the dollar amount change year over year (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		2021 vs 2020 Increase/(Decrease)		2021		2020		2021 vs 2020 Increase/(Decrease)
Acquisition-related	$	1,373	$	1,050	$	323	$	4,155	$	3,742	$	413
Merger, litigation and non-routine costs, net	9,445		105		9,340		16,118		(8,577)		24,695
Property operating	28,854		31,400		(2,546)		88,633		90,988		(2,355)
General and administrative	12,437		14,774		(2,337)		43,414		45,950		(2,536)
Depreciation and amortization	106,668		108,257		(1,589)		320,582		341,070		(20,488)
Impairments	13,272		16,397		(3,125)		59,250		36,871		22,379
Total operating expenses	$	172,049	$	171,983	$	66	$	532,152	$	510,044	$	22,108

Acquisition-Related Expenses

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Merger, Litigation and Non-Routine Costs, Net

Merger, litigation and non-routine costs, net increased $24.7 million during the nine months ended September 30, ~~2017,~~2021, as compared to the same period in 2020 primarily due to $22.3 million of costs incurred related to the Merger during the nine months ended September 30, 2021, offset by insurance recoveries of $6.3 million. In addition, during the nine months ended September 30, 2020, the Company ~~repurchased 68,759 shares~~reversed $6.8 million of ~~Common Stock~~prior period estimated costs recorded in ~~multiple open market transactions~~2019 that exceeded actual expenses incurred.

Property Operating Expenses

General and Administrative Expenses

Depreciation and Amortization Expenses

The decrease in depreciation and amortization expenses of $1.6 million and $20.5 million during the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020 was primarily due to the write off of intangible lease assets related to certain properties whose tenants filed for ~~$0.5~~Chapter 11 bankruptcy during 2020 and real estate dispositions.

Impairments

Other (Expense) Income and Provision for Income Taxes

The table below sets forth, for the periods presented, certain financial information and the dollar amount change year over year (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		2021 vs 2020 Increase/(Decrease)		2021		2020		2021 vs 2020 Increase/(Decrease)
Interest expense	$	(59,768)	$	(66,935)	$	(7,167)	$	(179,795)	$	(197,244)	$	(17,449)
(Loss) gain on extinguishment and forgiveness of debt, net	$	(5)	$	61	$	(66)	$	(2,102)	$	(1,419)	$	683
Other income, net	$	346	$	73	$	273	$	7,101	$	1,026	$	6,075
Equity in income of unconsolidated entities	$	463	$	663	$	(200)	$	1,374	$	2,406	$	(1,032)

Gain on disposition of real estate and real estate assets held for sale, net	$	3,369	$	42,814	$	(39,445)	$	96,339	$	76,858	$	19,481
Provision for income taxes	$	(935)	$	(1,054)	$	(119)	$	(2,794)	$	(3,155)	$	(361)

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Interest Expense

The decrease in interest expense of $7.2 million and $17.4 million during the three and nine months ended September 30, 2021, respectively, as ~~part~~compared to the same periods in 2020 was primarily due to a decrease in average debt outstanding and weighted average interest rates. At September 30, 2021, the Company had $5.7 billion of debt outstanding with a weighted average interest rate of 3.86%, as compared to $5.9 billion of debt outstanding with a weighted average interest rate of 4.19% at September 30, 2020.

Loss on Extinguishment and Forgiveness of Debt, Net

(Loss) gain on extinguishment and forgiveness of debt, net remained relatively constant during the three and nine months ended September 30, 2021, as compared to the same periods in 2020.

Other Income, Net

Equity in Income of Unconsolidated Entities

The decrease of $0.2 million and $1.0 million in equity in income during the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020 was primarily due to the Company’s purchase of the ~~Share Repurchase Program.~~remaining interest in one unconsolidated joint venture during the fourth quarter of 2020.

Gain on Disposition of Real Estate and Real Estate Assets Held for Sale, Net

Provision for Income Taxes

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Non-GAAP Measures

Our results are presented in accordance with U.S. GAAP. We also disclose certain non-GAAP measures, as discussed further below. Management uses these non-GAAP financial measures in our internal analysis of results and believes these measures are useful to investors for the reasons explained below. These non-GAAP financial measures should not be considered as substitutes for any measures derived in accordance with U.S. GAAP.

Funds from Operations and Adjusted Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, Inc. (“Nareit”), an industry trade group, has promulgated a supplemental performance measure known as funds from operations (“FFO”), which we believe to be an appropriate supplemental performance measure to reflect the operating performance of a REIT. FFO is not equivalent to our net income or loss as determined under U.S. GAAP.

Nareit defines FFO as net income or loss computed in accordance with U.S. GAAP adjusted for gains or losses from disposition of property, depreciation and amortization of real estate assets, impairment write-downs on real estate, and our pro rata share of FFO adjustments related to unconsolidated partnerships and joint ventures. We calculate FFO in accordance with Nareit’s definition described above.

In addition to FFO, we use adjusted funds from operations (“AFFO”) as a non-GAAP supplemental financial performance measure to evaluate the operating performance of the Company. AFFO, as defined by the Company, excludes from FFO non-routine items such as acquisition-related expenses, merger, litigation and non-routine costs, net and gains or losses on sale of investment securities or mortgage notes receivable. We also exclude certain non-cash items such as impairments of goodwill, intangible and right of use assets, straight-line rent, net direct financing lease adjustments, gains or losses on derivatives, gains or losses on the extinguishment or forgiveness of debt, equity-based compensation and amortization of intangible assets, deferred financing costs, premiums and discounts on debt and investments, above-market lease assets and below-market lease liabilities. Management believes that excluding these items from FFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance of our portfolio over time. AFFO allows for a comparison of the performance of our operations with other publicly-traded REITs, as AFFO, or an equivalent measure, is routinely reported by publicly-traded REITs, and we believe often used by analysts and investors for comparison purposes.

For all of these reasons, we believe FFO and AFFO, in addition to net income (loss), as defined by U.S. GAAP, are helpful supplemental performance measures and useful in understanding the various ways in which our management evaluates the performance of the Company over time. However, not all REITs calculate FFO and AFFO the same way, so comparisons with other REITs may not be meaningful. FFO and AFFO should not be considered as alternatives to net income (loss) and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs. Neither the U.S. Securities and Exchange Commission (the “SEC”), Nareit, nor any other regulatory body has evaluated the acceptability of the exclusions used to adjust FFO in order to calculate AFFO and its use as a non-GAAP financial performance measure.

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The table below presents FFO and AFFO for the three and nine months ended September 30, 2021 and 2020 (in thousands, except share and per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	61,613	$	98,917	$	260,239	$	241,885
Dividends on Series F Preferred Stock	(3,124)		(10,771)		(15,897)		(36,667)
Gain on disposition of real estate assets and interests in unconsolidated joint ventures, net	(3,369)		(42,814)		(96,339)		(76,858)
Depreciation and amortization of real estate assets	106,290		107,869		319,430		339,855
Impairment of real estate	13,272		16,397		59,250		36,871
Proportionate share of adjustments for unconsolidated entities	1,365		1,635		4,004		3,912
FFO attributable to common stockholders and limited partners	176,047		171,233		530,687		508,998
Acquisition-related expenses	1,373		1,050		4,155		3,742
Merger, litigation and non-routine costs, net	9,445		105		16,118		(8,577)

(Gain) loss on investments	(19)		(76)		(692)		607

Amortization of premiums (discounts) on debt and investments, net	837		(201)		1,479		(1,252)
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities	1,164		393		4,541		1,929
Net direct financing lease adjustments	384		381		1,124		1,118
Amortization and write-off of deferred financing costs	2,677		3,114		7,881		8,853
Loss (gain) on extinguishment and forgiveness of debt, net	5		(61)		2,102		1,419
Straight-line rent	(3,560)		(12,595)		(12,392)		(18,053)
Equity-based compensation	2,941		2,991		9,513		9,450
Other adjustments, net	415		379		(2,884)		1,048
Proportionate share of adjustments for unconsolidated entities	(155)		(166)		(435)		(678)
AFFO attributable to common stockholders and limited partners	$	191,554	$	166,547	$	561,197	$	508,604

Weighted-average shares of Common Stock outstanding - basic	229,271,106		216,737,561		229,227,755		216,002,172
Effect of weighted-average Limited Partner OP Units and dilutive securities (1)	908,334		290,114		661,115		285,993
Weighted-average shares of Common Stock outstanding - diluted (2)	230,179,440		217,027,675		229,888,870		216,288,165

AFFO attributable to common stockholders and limited partners per diluted share	$	0.83	$	0.77	$	2.44	$	2.35

(1)Dilutive securities include unvested restricted stock units (“Restricted Stock Units”) and stock options (“Stock Options”).

(2)Weighted-average shares for all periods presented exclude the effect of the convertible debt, which was fully repaid in cash as of December 31, 2020 and the underlying Restricted Stock Units that would not have met the vesting criteria based on certain performance targets as of the end of the respective reporting period.

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Liquidity and Capital Resources

General

Our principal liquidity needs for the next twelve months and beyond are to:

•fund normal operating expenses;

•fund potential capital expenditures, tenant improvements and leasing costs;

•meet debt service and principal repayment obligations, including balloon payments on maturing debt and debt prepayments;

•pay dividends;

•pay merger costs and expenses; and

•fund property acquisitions.

We expect to be able to satisfy these obligations using one or more of the following sources:

•cash flow from operations;

•proceeds from real estate dispositions;

•utilization of the existing Revolving Credit Facility; and

•cash and cash equivalents balance.

COVID-19

We do not currently expect liquidity constraints. However, COVID-19 and related impacts on our financial performance and the financial performance of our tenants could still have a material and adverse effect on our results of operations, liquidity and cash flows, in particular due to the potential inability of our tenants to satisfy their rent obligations and inability of the Company to renew leases, lease vacant space or re-let space as leases expire on favorable terms, or at all. Impacts related to COVID-19 may also negatively impact our future compliance with financial covenants in our Credit Facility, indentures governing our Senior Notes and other debt agreements and result in a default and acceleration of indebtedness which could negatively impact our ability to make additional borrowings under our Credit Facility. The financial impact of COVID-19 could also negatively affect our ability to pay dividends or fund acquisitions in the future.

Disposition Activity

As part of our effort to optimize our real estate portfolio by focusing on holding core assets, during the nine months ended September 30, ~~2017, we~~2021, the Company disposed of ~~112~~83 properties ~~including six properties transferred to the lender in either a deed-in-lieu of foreclosure or foreclosure sale transaction,~~ for an aggregate sales price of ~~$507.5 million, of which our share was $491.0 million, resulting in consolidated proceeds of $366.2 million after a mortgage loan assumption and closing costs.~~$432.7 million. We expect to continue to explore opportunities to sell additional properties to provide us further financial flexibility, ~~and fund property acquisitions.~~however, due to current economic circumstances, we may not be able to dispose of properties on advantageous terms or at all.

Credit Facility

Summary and Obligations

~~We,~~On May 23, 2018, the General Partner, as guarantor, and the ~~Operating Partnership,~~OP, as borrower, ~~are parties to the Credit Facility~~entered into a credit agreement with Wells Fargo Bank, National Association as administrative agent and ~~the~~ other lenders party ~~thereto.~~thereto (the “Credit Agreement”). The Credit Agreement provided for maximum borrowings of $2.9 billion, originally consisting of a $2.0 billion unsecured revolving credit facility (the “Revolving Credit Facility”) and a $900.0 million unsecured term loan facility (the “Credit Facility Term Loan,” together with the Revolving Credit Facility, the “Credit Facility”). Effective December 27, 2019, the Company reduced the amount available under its Revolving Credit Facility from $2.0 billion to $1.5 billion. On May 27, 2020, the Operating Partnership and the Company, entered into Amendment No. 1 to the Credit Agreement (the “Amendment”) which, among other things, modified the measurement period for certain financial covenants (and relevant associated definitions) from either the prior quarterly period annualized or the prior six month period to the four consecutive fiscal quarter period most recently ending. During the fourth quarter of 2020, the Company repaid the outstanding balance of $900.0 million on the Credit Facility Term Loan in connection with the termination of the related interest rate swap agreements discussed in Note 7 – Derivatives and Hedging Activities.

As of September 30, ~~2017,~~2021, $88.0 million was outstanding under the Revolving Credit ~~Facility had no outstanding balance and allowed for maximum borrowings of $2.3 billion under its revolving credit facility, subject to borrowing availability.~~Facility. The maximum aggregate dollar amount of letters of credit that may be outstanding at any one time under the Credit Facility is ~~$25.0~~$50.0 million. ~~The Operating Partnership used a portion~~As of ~~the proceeds from the 2017 Bond Offering discussed above to repay all~~September 30, 2021, there were $1.3 million of ~~the outstanding borrowings, including swap termination costs and accrued and unpaid interest, under the Credit Facility’s $0.5 billion Credit Facility Term Loan on August 11, 2017~~letters of credit outstanding.

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The ~~revolving credit facility~~Revolving Credit Facility generally bears interest at an annual rate of ~~London Inter-Bank Offer Rate (“LIBOR”)~~LIBOR plus ~~1.00%~~0.775% to ~~1.80%~~1.55% or Base Rate plus 0.00% to ~~0.80%~~0.55% (based upon ~~our~~the General Partner’s then current credit rating). “Base Rate” is defined as the highest of the prime rate, the federal funds rate plus 0.50% or a floating rate based on one month LIBOR plus 1.0%, determined on a daily basis. The Credit Facility Term Loan generally ~~bears~~bore interest at an annual rate of LIBOR plus ~~1.15%~~0.85% to ~~2.05%~~1.75%, or Base Rate plus ~~0.15%~~0.00% to ~~1.05%~~0.75% (based upon ~~our~~the General Partner’s then current credit rating). In addition, the Credit Agreement provides the flexibility for interest rate auctions, pursuant to which, at the Company’s election, the Company may request that lenders make competitive bids to provide revolving loans, which competitive bids may be at pricing levels that differ from the foregoing interest rates.

The Credit Agreement provides for monthly interest payments under the Credit Facility. In the event of default, at the election of a majority of the lenders (or automatically upon a bankruptcy event of default with respect to the OP or the General Partner), the commitments of the lenders under the Credit Facility will mature, and payment of any unpaid amounts in respect of the Credit Facility will be accelerated. The Credit Facility terminates on June 30, 2018, unless extended in accordance with the terms of the Credit Agreement. The Credit Agreement provides for a one-year extension option, exercisable at the Company’s election and subject to certain customary conditions, as well as certain customary “amend and extend” provisions. At any time, upon timely notice by the OP and subject to any breakage fees, the OP may prepay borrowings under the Credit Facility (subject to certain limitations applicable to the prepayment of any loans obtained through an interest rate auction, as described above). The OP incurs a fee equal to 0.15% to 0.25% per annum (based upon the General Partner’s then current credit rating) multiplied by the commitments (whether or not utilized) in respect of the revolving credit facility. In addition, the OP incurs customary administrative agent, letter of credit issuance, letter of credit fronting, extension and other fees.

Credit Facility Covenants

The Credit Facility requires restrictions on corporate guarantees, as well as the maintenance of certain financial covenants. The key financial covenants in the Credit Facility, as defined and calculated per the terms of the Credit Agreement include maintaining the following:

Unsecured Credit Facility Key Covenants

Required

~~Minimum tangible net worth~~

~~≥ $5.5 B~~

Ratio of total indebtedness to total asset value

≤ 60%

Ratio of adjusted EBITDA to fixed charges

≥ 1.5x

Ratio of secured indebtedness to total asset value

≤ 45%

Ratio of unsecured indebtedness to unencumbered asset value

≤ 60%

Ratio of unencumbered adjusted NOI to unsecured interest expense

≥ 1.75x

~~Minimum unencumbered asset value~~

~~≥ $8.0 B~~

~~For the purposes of determining unencumbered asset value, the Company is permitted to include restaurant properties representing up to 30% of its unencumbered asset value in such calculation.~~

The Company believes that it was in compliance with the financial covenants pursuant to the Credit Agreement and is not restricted from accessing any borrowing availability under the Credit Facility as of September 30, ~~2017.~~2021.

Corporate Bonds

Summary and Obligations

As of September 30, ~~2017,~~2021, the OPOperating Partnership had ~~$2.85~~$4.65 billion aggregate principal amount of Senior ~~Notes.~~Notes outstanding. The indenture governing the Senior Notes requires that the Company be in compliance with certain key financial covenants, including maintaining the following:

Corporate Bond Key Covenants

Required

Limitation on incurrence of total debt

≤ 65%

Limitation on incurrence of secured debt

≤ 40%

Debt service coverage ratio

≥ 1.5x

Maintenance of total unencumbered assets

≥ 150%

There were no changes to the financial covenants of our existing Senior Notes during the nine months ended September 30, 2017. The covenants of our new Senior Notes are the same as our existing Senior Notes. As of September 30, ~~2017,~~2021, the Company believes that it was in compliance with ~~the~~these financial covenants ~~pursuant to~~based on the ~~indenture governing~~covenant limits and calculations in place at that time.

On October 8, 2021, Realty Income announced the ~~Senior Notes.~~commencement of exchange offers and consent solicitations for all of the outstanding series of unsecured notes issued by the OP and guaranteed by the General Partner. The exchange offers and consent solicitations are being conducted in connection with, and are conditioned upon, the completion of the Merger.

~~Convertible Debt~~Mortgage Notes Payable

Summary and Obligations

As of September 30, ~~2017,~~2021, the Company had $1.0 billion ~~aggregate principal amount~~ of ~~Convertible Notes. The OP has issued corresponding identical convertible~~mortgage notes to the General Partner. There were no changes to the terms of the Convertible Notes and the Company believes it was in compliance with the financial covenants pursuant to the indenture governing the Convertible Notes as of September 30, 2017.

~~Mortgage Notes Payable and Other Debt~~

~~Summary and Obligations~~

~~As of September 30, 2017, we had non-recourse mortgage indebtedness of $2.1 billion,~~payable, which was collateralized by ~~502~~216 properties, reflecting a ~~net~~ decrease from December 31, ~~2016~~2020 of ~~$541.0~~$341.4 million ~~primarily resulting from our disposition activity~~ during the nine months ended September 30, ~~2017.~~2021, primarily related to prepayments of mortgage notes payable. Our mortgage indebtedness bore interest at the weighted-average rate of ~~4.91%~~4.88% per annum and had a weighted-average maturity of ~~4.4~~1.9 years. We may in the future incur additional mortgage debt on the properties we currently own or use long-term non-recourse financing to acquire additional properties.

The payment terms of our loan obligations vary. In general, only interest amounts are payable monthly with all unpaid principal and interest due at maturity. Some of our loan agreements require that we comply with specific reporting and financial covenants mainly related to debt coverage ratios and loan-to-value ratios. Each loan that has these requirements has specific ratio thresholds that must be met.

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Restrictions on Loan Covenants

Our mortgage loan obligations generally restrict corporate guarantees and require the maintenance of financial covenants, including maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios), as well as the maintenance of a minimum net worth. The mortgage loan agreements contain no dividend restrictions except in the event of default or when a distribution would drive liquidity below the applicable thresholds. ~~At September 30, 2017, the~~The Company believes that it was in compliance with the financial covenants under the mortgage loan ~~agreements.~~

~~Other Debt~~

Asagreements and had no restrictions on the payment of dividends as of September 30, 2017, the Company had a secured term loan from KBC Bank, N.V. with an outstanding principal balance of $13.7 million and remaining unamortized premium of $21,000 (the “KBC Loan”). At September 30, 2017, the interest coupon on the KBC Loan was fixed at 5.81%. Subsequent to September 30, 2017, the Company repaid the remaining outstanding principal balance of the KBC Loan. The KBC Loan provided for monthly payments of both principal and interest.2021.

Dividends

On August ~~2, 2017,~~4, 2021, the Company’s ~~board~~Board of ~~directors~~Directors declared a quarterly cash dividend ~~of $0.1375 per share of common stock (equaling an annualized dividend rate of $0.55 per share)~~ for the third quarter of ~~2017~~2021 of $0.462 per share of Common Stock to stockholders of record as of September ~~29, 2017,~~30, 2021, which was paid on October ~~16, 2017.~~15, 2021. An equivalent distribution by the Operating Partnership is applicable per OP ~~unit.~~Unit.

~~Our~~On October 14, 2021, the Company’s Board of Directors declared a monthly cash dividend of $0.154 per share of Common Stock for the month of October, which represents one-third of its prior quarterly dividend. The dividend will be payable on November 15, 2021 to shareholders of record on November 2, 2021, only if the Merger has not closed prior to that date.

Redemptions of Series F Preferred Stock ~~as discussed~~and Series F Preferred OP Units

On August 15, 2021, the Company redeemed all outstanding shares of Series F Preferred Stock. Concurrently with the redemption of the Series F Preferred Stock, VEREIT OP redeemed all outstanding Series F Preferred Units of VEREIT OP in “~~Note 15 – Equity” to our consolidated financial statements, will pay cumulative cash dividends at~~accordance with the ~~rate~~terms of ~~6.70% per annum on their liquidation preference~~VEREIT OP’s agreement of ~~$25.00 per share (equivalent to $1.675 per share on an annual basis). As of September 30, 2017, there were approximately 42.8 million~~limited partnership. The shares of Series F Preferred Stock ~~(and approximately 42.8~~were redeemed at a redemption price of $25.00 per share.

Common Stock Continuous Offering Program

On February 25, 2021, the Company established a new continuous equity offering program pursuant to which the Company can sell shares of Common Stock having an aggregate offering price of up to $1.5 billion in “at-the-market” offerings or certain other transactions (the “New ATM Program”). Under the New ATM Program, the Company may also enter into one or more forward transactions under separate master forward sale confirmations and related supplemental confirmations for the sale of shares of its common stock on a forward basis.

The New ATM Program replaced the Company’s prior continuous equity offering program, which was effective April 15, 2019 (the “Prior ATM Program” and collectively with the New ATM Program, the “ATM Program”). The proceeds from any sale of shares under the ATM Program have been and will be used for general corporate purposes, which may include funding potential acquisitions and repurchasing or repaying outstanding indebtedness.

During the nine months ended September 30, 2021, the Company issued an aggregate of 35,710 shares under the Prior ATM Program, at a weighted average price per share of $37.90, for gross proceeds of $1.4 million. The weighted average price per share, net of commissions, was $37.42, for net proceeds of $1.3 million. As of September 30, 2021, the Company sold an aggregate of $572.2 million ~~corresponding Series F Preferred Units that~~under the Prior ATM Program, which had an initial capacity of $750.0 million. No shares were issued during the three months ended September 30, 2021. No shares have been issued under the New ATM Program as of September 30, 2021.

Share Repurchase Program

The Company has a share repurchase program (the “Share Repurchase Program”) that permits the Company to repurchase up to $200.0 million of its outstanding Common Stock through May 6, 2022. Under the Share Repurchase Program, repurchases can be made through open market purchases, privately negotiated transactions, structured or derivative transactions, including accelerated stock repurchase transactions, or other methods of acquiring shares in accordance with applicable securities laws and other legal requirements. The Share Repurchase Program does not obligate the Company to make any repurchases at a specific time or in a specific situation and repurchases are influenced by prevailing market conditions, the trading price of the Common Stock, the Company’s financial performance and other conditions. Shares of Common Stock repurchased by the Company under the Share Repurchase Program, if any, will be returned to the ~~General Partner) and 86,874 Limited Partner Series F Preferred Units that~~status of authorized but unissued shares of Common Stock. As of September 30, 2021, there were ~~issued and outstanding.~~no share repurchases under the Share Repurchase Program.

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Contractual Obligations

The following is a summary of our contractual obligations as of September 30, ~~2017~~2021 (in thousands):


														Payments due by period
	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years			Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Principal payments - mortgage notes and other debt	$	2,102,639	$	69,639	$	471,560	$	650,620	$	910,820
Interest payments - mortgage notes and other debt ^{(1) (2)}	449,228		100,938		183,146		118,855		46,289
Principal payments - mortgage notes											Principal payments - mortgage notes	$	991,803	$	399	$	984,439	$	2,216	$	4,749
Interest payments - mortgage notes											Interest payments - mortgage notes	89,600		12,351		76,122		640		487
Principal payments - Credit Facility	—		—		—		—		—		Principal payments - Credit Facility	88,000		—		88,000		—		—
Interest payments - Credit Facility ^{(1) (2)}	—		—		—		—		—
Interest payments - Credit Facility (1)											Interest payments - Credit Facility (1)	956		372		584		—		—
Principal payments - corporate bonds	2,850,000		—		750,000		400,000		1,700,000		Principal payments - corporate bonds	4,650,000		—		500,000		1,150,000		3,000,000
Interest payments - corporate bonds	724,018		114,631		192,713		162,900		253,774		Interest payments - corporate bonds	1,011,993		42,834		493,250		249,936		225,973
Principal payments - convertible debt	1,000,000		597,500		—		402,500		—
Interest payments - convertible debt	63,231		29,940		30,188		3,103		—

Operating and ground lease commitments	319,315		4,906		37,609		36,635		240,165		Operating and ground lease commitments	292,501		5,649		61,582		37,891		187,379
Other commitments (2)											Other commitments (2)	1,293		1,293		—		—		—
Total	$	7,508,431	$	917,554	$	1,665,216	$	1,774,613	$	3,151,048	Total	$	7,126,146	$	62,898	$	2,203,977	$	1,440,683	$	3,418,588

(1)Interest payments due in future periods on the $88.0 million of variable rate debt were calculated using a forward LIBOR curve.


~~(1)~~	As of September 30, 2017, we had $79.2 million of variable rate mortgage notes effectively fixed through the use of interest rate swap agreements. We used the effective interest rates fixed under our swap agreements to calculate the debt payment obligations in future periods.


~~(2)~~	~~Interest payments due in future periods on the $15.4 million of variable rate debt payment obligations were calculated using a forward LIBOR curve.~~

(2)Represents letters of credit outstanding.

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Cash Flow Analysis for the nine months ended September 30, 2021

Operating Activities –During the nine months ended September 30, ~~2017,~~2021, net cash provided by operating activities ~~decreased $8.1~~increased $50.2 million to ~~$596.6~~$564.2 million from ~~$604.7~~$514.0 million during the same period in ~~2016.~~2020. The ~~decrease~~increase was primarily due to a decrease of $19.4 million in ~~rental receipts related to the disposition~~tenant receivables, net of ~~413 consolidated properties subsequent to January 1, 2016 and~~reserves, an increase in ~~costs incurred~~accounts payable and accrued expenses of $21.0 million and a decrease in ~~relation to the Audit Committee Investigation and related matters, net~~cash interest payments of ~~insurance recoveries, of $34.4 million. These decreases were partially~~$11.3 million, offset by ~~lower interest payments~~an increase in merger costs of $22.3 million. In addition, the Company had $17.7 million of rent abatements during the nine months ended September 30, ~~2017 as compared to~~2020, with no comparable activity during the same period in 2016 as a result of a $634.2 million reduction in debt outstanding subsequent to September 30, 2016 and an increase in rental receipts related to the acquisition of 73 consolidated properties subsequent to January 1, 2016.2021.

Investing Activities –Net cash used in investing activities ~~of $43.8 million~~ for the nine months ended September 30, ~~2017 changed $650.7~~2021 increased $169.7 million to $35.1 million from $134.6 million net cash provided by investing activities ~~of $606.9 million~~ during the same period in ~~2016.~~2020. The ~~change~~increase was primarily ~~due~~related to ~~a decrease~~an increase in cash used for investments in real estate assets of $272.0 million, offset by an increase in cash proceeds from dispositions of real estate and a joint ~~venture~~ventures of ~~$249.0~~$73.5 million ~~an increase in investments in real estate assets of $383.9 million,~~and a decrease in cash ~~receipts from affiliate line~~used for investments in unconsolidated entities of ~~credit repayments, net of advances of $29.4~~$19.2 million and ~~an increase in deposits, net of uses and refunds for real estate assets~~mezzanine position of $10.0 million.

Financing Activities –Net cash used in financing activities ~~of $754.8 million decreased $409.2 million during~~for the nine months ended September 30, ~~2017~~2021 increased $589.6 million to $1.0 billion from ~~$1.2 billion~~$460.2 million during the same period in ~~2016. The decrease was primarily related to~~2020. During the ~~repayment~~nine months ended September 30, 2021, the Company redeemed $473.1 million of ~~corporate bonds, including extinguishment costs~~Series F Preferred Stock, repaid $344.5 million of ~~$1.3 billion during 2016 with no comparable repayments during the same period in 2017~~mortgage notes payable, paid $318.9 million of distributions and ~~a $1.2 billion decrease in repayments,~~had net borrowings of ~~debt and swap extinguishment costs~~$88.0 million on the Credit Facility. ~~These decreases in~~During the nine months ended September 30, 2020, the Company had net ~~cash used in financing activities were partially offset by a $783.0~~proceeds of $594.9 million ~~decrease in proceeds~~ from ~~borrowing~~corporate bond offerings, paid $418.7 million of distributions, redeemed $300.1 million of Series F Preferred Stock, repaid $197.4 million of mortgage notes payable, had net repayments of $150.0 million on the ~~revolving credit facility, a decrease in~~Credit Facility, received $89.3 million of net proceeds from the issuance of Common Stock, and repurchased $69.4 million of $702.8 million during the nine months ended September 30, 2016, with no comparable proceeds during the same period in 2017, a $400.0 million decrease in proceeds from corporate bond issuances, an increase in payments on mortgage notes payable and other debt, including extinguishment costs of $244.0 million and an increase in distributions paid as a result of the issuances of Common Stock on August 10, 2016.convertible debt.

Election as a REIT

The General Partner elected to be taxed as a REIT for U.S. federal income tax purposes under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2011. As a REIT, except as discussed below, the General Partner generally is not subject to federal income tax on taxable income that it distributes to its stockholders so long as it distributes at least 90% of its annual taxable income (computed without regard to the deduction for dividends paid and excluding net capital gains). REITs are subject to a number of other organizational and operational requirements. Even if the General Partner maintains its qualification for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, federal income taxes on certain income and excise taxes on its undistributed income. We believe we are organized and operating in such a manner as to qualify to be taxed as a REIT for the taxable year ~~ended~~ending December 31, ~~2017.~~2021.

The Operating Partnership is classified as a partnership for U.S. federal income tax purposes. As a partnership, the Operating Partnership is not a taxable entity for U.S. federal income tax purposes. Instead, each partner in the Operating Partnership is

required to take into account its allocable share of the Operating Partnership’s income, gains, losses, deductions and credits for each taxable year. However, the Operating Partnership may be subject to certain state and local taxes on its income and property. Under the ~~LPA,~~limited partnership agreement of the OP, as amended (the “LPA”), the Operating Partnership is required to conduct business in such a manner as to permit the General Partner at all times to qualify as a REIT.

The Company conducts substantially all of its Cole Capital segment business activities through a TRS. A TRS is a subsidiary of a REIT that is subject to corporate federal, state and local income taxes, as applicable. The Company’s use of a TRS enables it to engage in certain business activities while complying with the REIT qualification requirements and to retain any income generated by these businesses for reinvestment without the requirement to distribute those earnings. The Company conducts all of its business in the United States and ~~Canada~~Puerto Rico and, as a result, it files income tax returns in the U.S. federal jurisdiction, ~~the Canadian federal jurisdiction~~Puerto Rico, and various state and local jurisdictions. Certain of the Company’s inter-company transactions that have been eliminated in consolidation for financial accounting purposes are also subject to taxation.

Inflation

We may be adversely impacted by inflation on any leases that do not contain indexed escalation provisions. However, net leases that require the tenant to pay its allocable share of operating expenses, including common area maintenance costs, real estate taxes and insurance, may reduce our exposure to increases in costs and operating expenses resulting from inflation.

~~Related Party Transactions and Agreements~~

~~There have been no related party transactions to report during the nine months ended September 30, 2017 aside from those with the Cole REITs, as further described below.~~

We are contractually responsible for managing the Cole REITs’ affairs on a day-to-day basis, identifying and making acquisitions and investments on the Cole REITs’ behalf, and recommending to each of the Cole REIT’s respective board of directors an approach for providing investors with liquidity. In addition, we distribute the shares of common stock for certain of the Cole REITs and advise them regarding offerings, manage relationships with participating broker-dealers and financial advisors, and provide assistance in connection with compliance matters relating to the offerings. We receive compensation and reimbursement for services relating to the Cole REITs’ offerings and the investment, management and disposition of their respective assets, as applicable. See “~~Note 17 –Related Party Transactions and Arrangements” to our consolidated financial statements in this report for a further explanation of the various related party transactions, agreements and fees.~~

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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Critical Accounting Policies and Significant Accounting Estimates

Our accounting policies have been established to conform with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires us to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Management believes that we have made these estimates and assumptions in an appropriate manner and in a way that accurately reflects our financial condition. We continually test and evaluate these estimates and assumptions using our historical knowledge of the business, as well as other factors, to ensure that they are reasonable for reporting purposes. However, actual results may differ from these estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to the various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different assumptions or estimates that may impact comparability of our results of operations to those of companies in similar businesses. We believe the following critical accounting policies govern the significant judgments and estimates used in the preparation of our financial statements, which should be read in conjunction with the more complete discussion of our accounting policies and procedures included in our Annual Report on Form 10-K for the year ended December 31, ~~2016:~~2020:

•Goodwill Impairment;

•~~Intangible Asset Impairment;~~

•Real Estate Investment Impairment; and

•~~Mortgage Note Receivables Impairment;~~

•~~Program Development Costs;~~

•~~Consolidation of Equity Investments;~~

•Allocation of Purchase Price of ~~Business Combinations including Acquired Properties; and~~Real Estate Assets

•~~Income Taxes.~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market Risk

The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our market risk arises primarily from interest rate risk relating to variable-rate borrowings. To meet our short and long-term liquidity requirements, we borrow funds at a combination of fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes inon earnings and cash flows and to manage our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, caps, collars, treasury locks, options and ~~treasury lock agreements~~forwards in order to mitigate our interest rate risk with respect to various debt instruments. We would not hold or issue these derivative contracts for trading or speculative purposes. ~~We have limited operations in Canada and thus, are not exposed to material foreign currency fluctuations.~~

Interest Rate Risk

As of September 30, ~~2017,~~2021, our debt included fixed-rate debt, ~~including debt that has interest rates that are fixed with the use of derivative instruments,~~ with a fair value and carrying value ~~excluding deferred financing costs,~~ of $6.1 billion and ~~$6.0~~$5.6 billion, respectively. Changes in market interest rates on our fixed rate debt impact the fair value of the debt, but they have no impact on interest incurred or cash flow. For instance, if interest rates rise 100 basis points, and the fixed rate debt balance remains constant, we expect the fair value of our debt to decrease, the same way the price of a bond declines as interest rates rise. The sensitivity analysis related to our fixed-rate debt assumes an immediate 100 basis point move in interest rates from their September 30, ~~2017~~2021 levels, with all other variables held constant. A 100 basis point increase in market interest rates would result in a decrease in the fair value of our fixed rate debt of ~~$240.3~~$291.5 million. A 100 basis point decrease in market interest rates would result in an increase in the fair value of our fixed-rate debt of ~~$256.4~~$314.9 million.

As of September 30, ~~2017,~~2021, our debt included variable-rate debt with a fair value and carrying value ~~each~~ of ~~$15.4~~$88.0 million. The sensitivity analysis related to our variable-rate debt assumes an immediate 100 basis point move in interest rates from their September 30, ~~2017~~2021 levels, with all other variables held constant. A 100 basis point increase or decrease in variable interest rates on our variable-rate ~~notes payable~~debt would increase or decrease our interest expense by ~~$0.2~~$0.9 million annually. See “Note 106 –Debt” to our consolidated financial statements.

~~As of September 30, 2017, our interest rate swaps had a fair value that resulted in an asset of $0.4 million and no related liability. See “Note 11 –Derivatives and Hedging Activities” to our consolidated financial statements for further discussion.~~

As the information presented above includes only those exposures that existed as of September 30, ~~2017,~~2021, it does not consider exposures or positions arising after that date. The information presented herein has limited predictive value. Future actual realized gains or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations.

These amounts were determined by considering the impact of hypothetical interest rate changes on our borrowing costs and assume no other changes in our capital structure.

In July 2017, the Financial Conduct Authority (“FCA”) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. In November 2020, the Federal Reserve Board announced that banks must stop writing new U.S. dollar LIBOR contracts by the end of 2021 and that, no later than June 30, 2023, when U.S. dollar LIBOR will no longer be published, market participants should amend legacy contracts to use the Secured Overnight Financing Rate ("SOFR"), or another alternative reference rate. The Company is not able to predict when LIBOR will cease to be available or when there will be sufficient liquidity in the SOFR markets. The Company has contracts that are indexed to LIBOR and is monitoring and evaluating the related risks, which include interest amounts on our variable rate debt as discussed in Note 6 – Debt. See Item 1A. Risk Factors included in the Company’s Annual Report on Form 10-K for further discussion on risks related to changes in LIBOR reporting practices, the method in which LIBOR is determined, or the use of alternative reference rates.

Credit Risk

Concentrations of credit risk arise when a number of tenants are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. The Company is subject to tenant, geographic and industry concentrations. Any downturn of the economic conditions in one or more of these tenants, geographies or industries could result in a material reduction of our cash flows or material losses to us.

The factors considered in determining the credit risk of our tenants include, but are not limited to: payment history; credit status and change in status (credit ratings for public companies are used as a primary metric); change in tenant space needs (i.e., expansion/downsize); tenant financial performance; economic conditions in a specific geographic region; and industry specific credit considerations. We believe that the credit risk of our portfolio is reduced by the high quality and diversity of our existing tenant base, reviews of prospective tenants’ risk profiles prior to lease execution and consistent monitoring of our portfolio to identify potential problem ~~tenants and mitigation options.~~tenants. However, we continue to monitor the credit risk of our portfolio.

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Item 4. Controls and Procedures.

I. Discussion of Controls and Procedures of the General Partner

~~For purposes of the discussion in this Part I of Item 4, the “Company” refers to the General Partner.~~

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the ~~Securities~~ Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance thatinformation required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the ~~Securities and Exchange Commission’s~~SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that no controls and procedures, no matter how well designed and operated, can provide absolute assurance of achieving the desired control objectives.

In accordance with Rules 13a-15(b) and 15d-15(b) of the Exchange Act, management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, ~~2017~~2021 and determined that the disclosure controls and procedures were effective at a reasonable assurance level as of that date.

Changes in Internal Control ~~over~~Over Financial Reporting

~~There were no changes to~~No change occurred in our internal control over financial reporting ~~that occurred~~(as defined in Rules 13a-15(f) and 15d -15(f) of the Exchange Act) during the three months ended September 30, ~~2017~~2021 that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

II. Discussion of Controls and Procedures of the Operating Partnership

~~In the information incorporated by reference into this Part II of Item 4, the term “Company” refers to the Operating Partnership, except as the context otherwise requires.~~

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) that are designed to provide reasonable assurance thatinformation required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the ~~Securities and Exchange Commission’s~~SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that no controls and procedures, no matter how well designed and operated, can provide absolute assurance of achieving the desired control objectives.

Changes in Internal Control ~~over~~Over Financial Reporting

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

The information contained under the heading “Litigation” in “Note 1410 –Commitments and Contingencies” to our consolidated financial statements is incorporated by reference into this Part II, Item 1. Except as set forth therein, as of the end of the period covered by this Quarterly Report on Form 10-Q, we are not a party to, and none of our properties are subject to, any material pending legal proceedings.

Item 1A. Risk ~~Factors.~~Factors

There have been no material changes ~~from~~to the risk factors ~~set forth~~previously disclosed in Part I, Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020 and in Part II, Item 1A. “Risk Factors” of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Repurchases of Equity Securities

Period
Total Number of Shares/ Units Purchased⁽¹⁾

Average Price Paid Per Share/Unit ⁽²⁾

July 1, 2017 - July 31, 2017 —
$ —

August 1, 2017 - August 31, 2017 —
—

September 1, 2017 - September 30, 2017 552
8.53

Total 552
$ 8.53


Period	Total Number of Shares/ Units Redeemed (1)	Redemption Price Per Share/Unit
July 1, 2021 - July 31, 2021	—	$	—
August 1, 2021 - August 31, 2021	14,871,246	25.00
September 1, 2021 - September 30, 2021	—	—
Total	14,871,246	$	25.00

~~(1)~~

(1) During the three months ended September 30, 2021, the Company redeemed all outstanding shares of its Series F Preferred Stock.

We are authorized to repurchase shares of the General Partner’s common stock to satisfy employee withholding tax obligations related to stock-based compensation. During the third quarter of 2017, the General Partner and the Operating Partnership repurchased the noted shares of common stock and corresponding OP Units that were issued to the General Partner, respectively, in order to satisfy the minimum tax withholding obligation for state and federal payroll taxes on employee stock awards.


~~(2)~~	~~With respect to these shares/units, the price paid per share/unit is based on the weighted average closing price on the respective vesting date.~~

~~On May 12, 2017, the Company’s board of directors authorized the repurchase of up to $200.0 million~~ of the General Partner’s outstanding shares of common stock over the subsequent 12 months as market conditions warrant. Repurchases may be made through open market purchases, privately negotiated transactions, structured or derivative transactions, including accelerated stock repurchase transactions, or other methods of acquiring shares, or pursuantCommon Stock to ~~Rule 10b5-1 under the Exchange Act, from time~~satisfy employee withholding tax obligations related to ~~time as permitted by securities laws and other legal requirements.~~stock-based compensation. During the ~~nine months ended September 30, 2017, the Company~~third quarter of 2021, there were no repurchased ~~68,759~~ shares of Common Stock or corresponding OP Units made in ~~multiple open market transactions~~order to satisfy the minimum tax withholding obligation for ~~$0.5 million as part of the Share Repurchase Program, which are currently deemed to be authorized but unissued shares of Common Stock. None of the~~state and federal payroll taxes. There were also no share repurchases under the Share Repurchase Program ~~occurred~~ during the ~~third~~second quarter of ~~2017.~~2021. See Note 12 – Equity for further discussion.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits

~~The exhibits listed below are included in, or incorporated by reference into, this Quarterly Report on Form 10-Q.~~

~~Exhibit Index~~

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2017~~2021 (and are numbered in accordance with Item 601 of Regulation S-K):


Exhibit No.	Description


~~Exhibit~~2.1	Agreement and Plan of Merger, dated April 29, 2021, by and among VEREIT, Inc., VEREIT Operating Partnership, L.P., Realty Income Corporation, Rams MD Subsidiary I, Inc., and Rams Acquisitions Sub II, LLC (Incorporated by reference to the Company’s Current Report on Form 8-K (File No.	~~Description~~ 001-35263), filed with the SEC on April 30, 2021).
~~3.1~~2.2	Amendment No. 1 to Agreement and Plan of Merger, dated June 25, 2021, by and among VEREIT, Inc., VEREIT Operating Partnership, L.P., Realty Income Corporation, Rams MD Subsidiary I, Inc., and Rams Acquisition Sub II, LLC (Incorporated by reference to the Company’s Report on Form 8-K (File No. 001-35263), filed with the SEC on June 25, 2021).









3.1	Articles of Amendment and Restatement of VEREIT, Inc. (Incorporated by reference to the Company’s Pre-Effective Amendment No. 5 to Form S-11 (Registration No. 333-172205), filed with the SEC on July 5, 2011).
3.2	Articles Supplementary Relating to the Series A Convertible Preferred Stock of VEREIT, Inc., dated May 10, 2012 (Incorporated by reference to the Company’s Form 8-K (File No. 001-35263), filed with the SEC on May 15, 2012).
3.3	Articles Supplementary Relating to the Series B Convertible Preferred Stock of VEREIT, Inc., dated July 24, 2012 (Incorporated by reference to the Company’s Form 8-K (File No. 001-35263), filed with the SEC on July 30, 2012).
3.4	Articles Supplementary for the Series C Convertible Preferred Stock of VEREIT, Inc., dated June 6, 2013 (Incorporated by reference to the Company’s Form 8-K (File No. 001-35263), filed with the SEC on June 12, 2013).
3.5	Articles of Amendment to Articles of Amendment and Restatement of VEREIT, Inc., effective July 2, 2013 (Incorporated by reference to the Company’s Form 8-K (File No. 001-35263), filed with the SEC on July 9, 2013).
3.6	Articles Supplementary for the Series D Cumulative Convertible Preferred Stock of VEREIT, Inc., filed November 8, 2013 (Incorporated by reference to the Company’s Form 8-K (File No. 001-35263), filed with the SEC on November 15, 2013).
3.7	Articles of Amendment to Articles of Amendment and Restatement of VEREIT, Inc., effective December 9, 2013 (Incorporated by reference to the Company’s Amended Current Report on Form 8-K/A (File No. 001-35263), filed with the SEC on December 20, 2013).
3.8	Articles Supplementary Relating to the 6.70% Series F Cumulative Redeemable Preferred Stock of VEREIT, Inc., dated January 2, 2014 (Incorporated by reference to the Company’s Registration Statement on Form 8-A (File No. 333-190056), filed with the SEC on January 3, 2014).
3.9	Articles of Amendment to Articles of Amendment and Restatement of VEREIT, Inc., dated July 28, 2015 (Incorporated by reference to the Company’s Form 8-K (File No. 001-35263), filed with the SEC on July 28, 2015).
3.10	Articles Supplementary to Articles of Amendment and Restatement of VEREIT, Inc., dated August 5, 2015 (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (File No. 001-35263), for the quarter ended June 30, 2015 filed with the SEC on August 6, 2015).
3.11	Articles of Amendment to the Articles of Amendment and Restatement of VEREIT, Inc., dated December 11, 2020 and effective December 17, 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on December 17, 2020).
3.12	Articles of Amendment to the Articles of Amendment and Restatement of VEREIT, Inc., dated December 11, 2020 and effective December 17, 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on December 17, 2020).
3.13	Articles of Amendment to the Articles of Amendment and Restatement of VEREIT, Inc., dated June 4, 2021 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on June 7, 2021).
3.14	Amended and Restated Bylaws of VEREIT, Inc., effective ~~as of January 1, 2016~~June 4, 2021 (Incorporated by reference to the Company’s ~~Quarterly~~Current Report on Form ~~10-Q~~8-K (File No. 001-35263), ~~for the quarter ended September 30, 2015~~ filed with the SEC on ~~November 5, 2015)~~June 7, 2021).
~~3.12~~






3.15	Certificate of Limited Partnership of VEREIT Operating Partnership, L.P. (Incorporated by reference to the Company’s Registration Statement on Form S-4 (Registration No. 333-197780-01), filed with the SEC on August 1, 2014).
~~3.13~~3.16	Amendment to Certificate of Limited Partnership of VEREIT Operating Partnership, L.P., effective July 28, 2015 (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (File No. 001-35263), for the quarter ended June 30, 2015 filed with the SEC on August 6, 2015).
4.1	Third Amended and Restated Agreement of Limited Partnership of VEREIT Operating Partnership, L.P., effective January 3, 2014 (Incorporated by reference to the Company’s Amendment No. 2 to its Annual Report on Form 10-K/A (File No. 001-35263), for the year ended December 31, 2013 filed with the SEC on March 2, 2015).
4.2	First Amendment to Third Amended and Restated Agreement of Limited Partnership of VEREIT Operating Partnership, L.P., dated January 26, 2015 (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (File No. 001-35263), for the quarter ended June 30, 2015 filed with the SEC on August 6, 2015).
4.3	Second Amendment to Third Amended and Restated Agreement of Limited Partnership of VEREIT Operating Partnership, L.P., dated July 28, 2015 (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (File No. 001-35263), for the quarter ended June 30, 2015 filed with the SEC on August 6, 2015).

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Exhibit No.		Description
4.4		Third Amendment to the Third Amended and Restated Agreement of Limited Partnership of VEREIT Operating Partnership, L.P., dated December 17, 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on December 17, 2020).
~~4.4~~4.5		Indenture, dated as of July 29, 2013, between American Realty Capital Properties, Inc. and U.S. Bank National Association, as trustee (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on July 29, 2013).
~~4.5~~		First Supplemental Indenture, dated as of July 29, 2013, between American Realty Capital Properties, Inc. and U.S. Bank National Association, as trustee (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on July 29, 2013).
~~4.6~~		~~Form of 3.00% Convertible Senior Notes due 2018 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on December 11, 2013).~~
~~4.7~~		Second Supplemental Indenture, dated as of December 10, 2013, between American Realty Capital Properties, Inc. and U.S. Bank National Association, as trustee (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on December 11, 2013).
~~4.8~~4.6		~~Form of 3.75% Convertible Senior Notes due 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on December 11, 2013).~~
~~4.9~~	Indenture, dated as of February 6, 2014, among ARC Properties Operating Partnership, L.P., Clark Acquisition, LLC, the guarantors named therein and U.S. Bank National Association, as trustee (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on February 7, 2014).


4.7
~~Exhibit No.~~	~~Description~~
~~4.10~~	Officers’ Certificate, dated as of February 6, 2014 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on February 7, 2014).
~~4.11~~		Registration Rights Agreement, dated as of February 6, 2014, among ARC Properties Operating Partnership, L.P., Clark Acquisition, LLC, the guarantors named therein, Barclays Capital Inc. and Citigroup Global Markets Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on February 7, 2014).
~~4.12~~4.8		First Supplemental Indenture, dated as of February 9, 2015, by and among ARC Properties Operating Partnership, L.P., American Realty Capital Properties, Inc. and U.S. Bank National Association (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on February 13, 2015).
~~4.13~~4.9		Officer’s Certificate, dated as of June 2, 2016 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on June 3, 2016).
~~4.14~~		~~Form of 4.125% Senior Notes due 2021 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on June 3, 2016).~~
~~4.15~~4.10		Form of 4.875% Senior Notes due 2026 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on June 3, 2016).
~~4.16~~4.11		Officers’ Certificate, dated as of August 11, 2017 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on August 11, 2017).
~~4.17~~4.12		Form of 3.950% ~~Convertible~~ Senior Notes due 2027 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on August 11, 2017).
12.1*4.13		~~VEREIT Inc. and VEREIT Operating Partnership, L.P. Consolidated Ratio~~Officer’s Certificate, dated as of ~~Earnings~~October 16, 2018 (Incorporated by reference to ~~Fixed Charges~~the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on October 16, 2018).
31.1*4.14		Form of 4.625% Senior Notes due 2025 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on October 16, 2018).
4.15		Officer’s Certificate, dated as of December 4, 2019 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on December 4, 2019).
4.16		Form of 3.10% Senior Notes due 2029 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on December 4, 2019).
4.17		Officer’s Certificate, dated as of June 29, 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on June 29, 2020).
4.18		Form of 3.400% Senior Notes due 2028 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on June 29, 2020).
4.19		Officer’s Certificate, dated as of November 17, 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on November 17, 2020).
4.20		Form of 2.200% Senior Notes due 2028 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on November 17, 2020).
4.21		Form of 2.850% Senior Notes due 2032 (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-35263), filed with the SEC on November 17, 2020).









31.1*		Certification of the Chief Executive Officer of VEREIT, Inc. pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of the Chief Financial Officer of VEREIT, Inc. pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3*		Certification of the Chief Executive Officer of VEREIT, Inc., the sole general partner of VEREIT Operating Partnership, L.P., pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.4*		Certification of the Chief Financial Officer of VEREIT, Inc., the sole general partner of VEREIT Operating Partnership, L.P., pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Written statements of the Chief Executive Officer of VEREIT, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Written statements of the Chief Financial Officer of VEREIT, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.3**		Written statements of the Chief Executive Officer of VEREIT, Inc., the sole general partner of VEREIT Operating Partnership, L.P., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.4**		Written statements of the Chief Financial Officer of VEREIT, Inc., the sole general partner of VEREIT Operating Partnership, L.P., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		~~XBRL Instance Document.~~
101.SCH*		Inline XBRL Taxonomy Extension Schema Document.
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

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101.DEF*Exhibit No.						Description
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*						Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*).

_____________________________


*	~~Filed herewith~~

In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

* Filed herewith

** In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the federal securities laws, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

† Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, each registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.



			VEREIT, INC.
			By:			/s/ Michael J. Bartolotta
			Michael J. Bartolotta
			Executive Vice President and Chief Financial Officer (Principal Financial Officer)



			VEREIT OPERATING PARTNERSHIP, L.P.
			By: VEREIT, Inc., its sole general partner
			By:			/s/ Michael J. Bartolotta
			Michael J. Bartolotta
			Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Dated: ~~November 7, 2017~~

October 29, 2021


		OR
☐		OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from _________ to __________



		Page
PART I
~~PART I~~Item 1. Unaudited Financial Statements		4
~~Item 1. Financial Statements~~		2
Consolidated Balance Sheets of VEREIT, Inc. as of September 30, ~~2017~~2021 and December 31, ~~2016~~2020	24
Consolidated Statements of Operations of VEREIT, Inc. for the Three and Nine Months Ended September 30, ~~2017~~2021 and ~~2016~~2020		35
Consolidated Statements of Comprehensive Income (Loss) of VEREIT, Inc. for the Three and Nine Months Ended September 30, ~~2017~~2021 and ~~2016~~2020		46
Consolidated Statements of Changes in Equity of VEREIT, Inc. for the Three and Nine Months Ended September 30, ~~2017~~2021 and ~~2016~~2020		57
Consolidated Statements of Cash Flows of VEREIT, Inc. for the Nine Months Ended September 30, ~~2017~~2021 and ~~2016~~2020		611
Consolidated Balance Sheets of VEREIT Operating Partnership, L.P. as of September 30, ~~2017~~2021 and December 31, ~~2016~~2020		813
Consolidated Statements of Operations of VEREIT Operating Partnership, L.P. for the Three and Nine Months Ended September 30, ~~2017~~2021 and ~~2016~~2020		914
Consolidated Statements of Comprehensive Income (Loss) of VEREIT Operating Partnership, L.P. for the Three and Nine Months Ended September 30, ~~2017~~2021 and ~~2016~~2020		1015
Consolidated Statements of Changes in Equity of VEREIT Operating Partnership, L.P. for the Three and Nine Months Ended September 30, ~~2017~~2021 and ~~2016~~2020		1116
Consolidated Statements of Cash Flows of VEREIT Operating Partnership, L.P. for the Nine Months Ended September 30, ~~2017~~2021 and ~~2016~~2020		1219
Notes to Consolidated Financial Statements		1421
Item 2. ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations		5341
Item 3. Quantitative and Qualitative Disclosures About Market Risk		7357
Item 4. Controls and Procedures		7458
PART II
Item 1. Legal Proceedings		7559
Item 1A. Risk Factors		7559
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		7559
Item 3. Defaults Upon Senior Securities		7559
Item 4. Mine Safety Disclosures		7559
Item 5. Other Information		7559
Item 6. Exhibits		7560
Signatures		7863



			Carrying Amount of Investment ⁽²⁾
Name of Joint Venture	Partner	Ownership % ⁽¹⁾	September 30, 2017		December 31, 2016
Cole/Mosaic JV South Elgin IL, LLC	Affiliate of Mosaic Properties and Development, LLC	50%	$	5,621	$	5,891
Cole/Faison JV Bethlehem GA, LLC	Faison-Winder Investors, LLC	90%	34,690		35,438
			$	40,311	$	41,329



	September 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
CMBS	$	43,306	$	1,086	$	(2,715	)	$	41,677



x☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


VEREIT, Inc.
~~VEREIT, Inc.~~
VEREIT Operating Partnership, L.P.
(Exact name of registrant as specified in its charter)



(800)			606-3610
(Registrant’s telephone number, including area code)


~~(1)~~	~~Represents comprehensive (income) loss attributable to limited partners and consolidated joint venture partners.~~


	Preferred Stock			Common Stock
	Number of Shares	Par Value		Number of Shares	Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stock-holders’ Equity		Non-Controlling Interests		Total Equity
Balance, January 1, 2021	18,871,246	$	189	228,881,547	$	2,289	$	13,449,412	$	536	$	(6,617,380)	$	6,835,046	$	7,170	$	6,842,216
Issuance of Common Stock, net	—	—		35,710	—		—		—		—		—		—		—

Redemption of Series F Preferred Stock	(4,000,000)	(40)		—	—		(99,960)		—		—		(100,000)		—		(100,000)

Repurchases of Common Stock to settle tax obligation	—	—		(49,237)	—		(1,681)		—		—		(1,681)		—		(1,681)
Equity-based compensation, net	—	—		261,934	2		2,890		—		—		2,892		—		2,892

Distributions declared on Common Stock — $0.462 per common share	—	—		—	—		—		—		(105,858)		(105,858)		—		(105,858)
Distributions to non-controlling interest holders	—	—		—	—		—		—		—		—		(70)		(70)
Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—		—		(1,581)		(1,581)		—		(1,581)
Distributions to preferred shareholders and unitholders	—	—		—	—		—		—		(6,506)		(6,506)		(19)		(6,525)
Net income	—	—		—	—		—		—		120,647		120,647		76		120,723
Other comprehensive income	—	—		—	—		—		98		—		98		—		98
Balance, March 31, 2021	14,871,246	$	149	229,129,954	$	2,291	$	13,350,661	$	634	$	(6,610,678)	$	6,743,057	$	7,157	$	6,750,214



Redemption of Series F Preferred Stock	—	—		—	—		(41)		—		—		(41)		—		(41)

Repurchases of Common Stock to settle tax obligation	—	—		(18,042)	—		(100)		—		—		(100)		—		(100)
Equity-based compensation, net	—	—		37,704	—		4,137		—		—		4,137		—		4,137

Distributions declared on Common Stock — $0.462 per common share	—	—		—	—		—		—		(105,867)		(105,867)		—		(105,867)
Distributions to non-controlling interest holders	—	—		—	—		—		—		—		—		(70)		(70)
Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—		—		(20)		(20)		—		(20)
Distributions to preferred shareholders and unitholders	—	—		—	—		—		—		(6,227)		(6,227)		(21)		(6,248)

Net income	—	—		—	—		—		—		77,896		77,896		7		77,903
Other comprehensive income	—	—		—	—		—		98		—		98		—		98
Balance, June 30, 2021	14,871,246	$	149	229,149,616	$	2,291	$	13,354,657	$	732	$	(6,644,896)	$	6,712,933	$	7,073	$	6,720,006


Redemption of Series F Preferred Stock	(14,871,246)	(149)		—	—		(372,883)		—		—		(373,032)		—		(373,032)

Repurchases of Common Stock to settle tax obligation	—	—		(6,356)	—		(47)		—		—		(47)		—		(47)
Equity-based compensation, net	—	—		8,741	1		3,187		—		—		3,188		—		3,188

Distributions declared on Common Stock — $0.462 per common share	—	—		—	—		—		—		(105,868)		(105,868)		—		(105,868)
Distributions to non-controlling interest holders	—	—		—	—		—		—		—		—		(70)		(70)
Dividend equivalents on awards granted under the Equity Plan	—	—		—	—		—		—		(26)		(26)		—		(26)
Distributions to preferred shareholders and unitholders	—	—		—	—		—		—		(3,113)		(3,113)		(11)		(3,124)


~~(1)~~	~~The Company’s Share Repurchase Program (as defined in~~ ~~Note 15 – Equity), which was authorized by the board of directors on May 12, 2017, allows for the repurchase of up to $200.0 million of the Company’s outstanding shares of Common Stock over the next 12 months.~~



	October 1, 2017 - December 31, 2017		2018		2019		2020		2021
In-place leases and other intangibles:
Total projected to be included in amortization expense	$	36,584	$	134,741	$	124,069	$	116,168	$	107,582
Leasing commissions:
Total projected to be included in amortization expense	423		1,207		1,192		1,170		1,133
Above-market lease assets and deferred lease incentives:
Total projected to be deducted from rental income	6,054		23,615		21,701		21,265		20,857
Below-market lease liabilities:
Total projected to be included in rental income	6,351		19,283		18,578		17,420		16,093



	Future Minimum Operating Lease Base Rent Payments		Future Minimum Direct Financing Lease Payments ⁽¹⁾
October 1, 2017 - December 31, 2017	$	265,570	$	867
2018	1,084,301		3,016
2019	1,050,277		2,397
2020	1,015,625		2,023
2021	975,554		1,899
Thereafter	6,441,525		3,993
Total	$	10,832,852	$	14,195



	September 30, 2017			December 31, 2016
Future minimum lease payments receivable	$	14,195		$	17,147
Unguaranteed residual value of property	23,146			27,450
Unearned income	(3,939		)	(5,142		)
Net investment in direct financing leases	$	33,402		$	39,455


	Ownership % (1)	Number of Properties	Carrying Amount of Investment				Equity in Income
							Nine Months Ended
Investment	September 30, 2021		September 30, 2021		December 31, 2020		September 30, 2021		September 30, 2020
Industrial Partnership	20%	7	$	42,949	$	45,378	$	753	$	584
Office Partnership (2)	20%	5	14,588		13,435		621		380
Faison JV Bethlehem GA (3)	—%	—	—		—		—		1,442
Total unconsolidated joint ventures			$	57,537	$	58,813	$	1,374	$	2,406
Preferred equity (4)			22,826		22,826		—		—
Total investment in unconsolidated entities			$	80,363	$	81,639	$	1,374	$	2,406



Outstanding Balance		Carrying Value		Interest Rate Range				Maturity Date Range
$	22,700	$	20,510	5.9	%	–	6.8%	December 2026	–	January 2033



	Outstanding Balance
Due within one year	$	915
Due after one year through five years	4,341
Due after five years through 10 years	7,071
Due after 10 years⁽¹⁾	14,175
Total	$	26,502


~~(1)~~	~~Includes additional $3.8 million of interest that will be capitalized into the outstanding balance of the mortgage note receivable subsequent to September 30, 2017.~~



	September 30, 2017		December 31, 2016
Accounts receivable, net⁽¹⁾	$	38,182	$	49,148
Straight-line rent receivable, net ⁽²⁾	220,975		201,584
Deferred costs, net ⁽³⁾	8,347		16,154
Prepaid expenses	10,147		6,814
Leasehold improvements, property and equipment, net ⁽⁴⁾	12,982		14,702
Restricted escrow deposits	5,644		5,741
Deferred tax asset and tax receivable	32,753		31,113
Program development costs, net ⁽⁵⁾	3,828		3,161
Interest rate swap assets, at fair value	351		199
Other assets	3,729		2,089
Total	$	336,938	$	330,705



	Level 1		Level 2			Level 3		Balance as of September 30, 2017
Assets:
CMBS	$	—	$	—		$	41,677	$	41,677
Derivative assets	—		351			—		351
Total assets	$	—	$	351		$	41,677	$	42,028

	Level 1		Level 2			Level 3		Balance as of December 31, 2016
Assets:
CMBS	$	—	$	—		$	47,215	$	47,215
Derivative assets	—		199			—		199
Total assets	$	—	$	199		$	47,215	$	47,414
Liabilities:
Derivative liabilities	$	—	$	(3,547	)	$	—	$	(3,547	)



	CMBS
Balance as of December 31, 2015	$	53,304
Total gains and losses
Unrealized loss included in other comprehensive loss, net	(1,599		)
Purchases, issuance, settlements
Return of principal received	(3,786		)
Accretion included in net loss, net	179
Ending Balance, September 30, 2016	$	48,098



	Level	Carrying Amount at September 30, 2017		Fair Value at September 30, 2017		Carrying Amount at December 31, 2016		Fair Value at December 31, 2016
Assets:
Mortgage notes receivable	3	$	20,510	$	28,539	$	22,764	$	30,460

Liabilities⁽¹⁾:
Mortgage notes payable and other debt, net	2	$	2,129,461	$	2,186,955	$	2,687,739	$	2,713,155
Corporate bonds, net	2	2,848,591		2,944,615		2,248,063		2,273,850
Convertible debt, net	2	990,922		1,021,580		987,106		1,004,733
Credit facility	2	—		—		500,000		500,000
Total liabilities		$	5,968,974	$	6,153,150	$	6,422,908	$	6,491,738



	Nine Months Ended September 30, 2017
Properties impaired ⁽¹⁾	53

Asset classes impaired:
Investment in real estate assets, net	$	30,327
Investment in direct financing leases, net	553
Below-market lease liabilities, net	(23		)
Total impairment loss	$	30,857



	Encumbered Properties	Gross Carrying Value of Collateralized Properties ⁽¹⁾		Outstanding Balance		Weighted-Average Interest Rate ⁽²⁾		Weighted-Average Years to Maturity
Fixed-rate debt ⁽³⁾	501	$	4,146,793	$	2,073,481	4.91	%	4.5
Variable-rate debt	1	32,938		15,444		4.49	%	0.1
Total ⁽⁴⁾	502	$	4,179,731	$	2,088,925	4.91	%	4.4



	Total
October 1, 2017 - December 31, 2017 ⁽¹⁾	$	33,981
2018	67,603
2019	223,171
2020	265,582
2021	353,274
Thereafter	1,145,314
Total	$	2,088,925


	Total
October 1, 2021 - December 31, 2021	$	399
2022	239,201
2023	124,217
2024	621,021
2025	1,078
2026	1,138
Thereafter	4,749
Total	$	991,803


~~(1)~~	~~Includes $16.2 million, excluding accrued interest, related to one mortgage note payable in default.~~



	Outstanding Balance		Collateral Carrying Value
Mortgage notes receivable	$	4,945	$	18,400
CMBS	8,769		30,204
Total	$	13,714	$	48,604



	Outstanding Balance September 30, 2017			Interest Rate			Maturity Date
2019 Senior Notes	750,000			3.000	%		February 6, 2019
2021 Senior Notes	400,000			4.125	%		June 1, 2021
2024 Senior Notes	500,000			4.600	%		February 6, 2024
2026 Senior Notes	600,000			4.875	%		June 1, 2026
2027 Senior Notes	600,000		—	3.950	%	—	August 15, 2027
Total balance and weighted-average interest rate	$	2,850,000		4.033	%


	Outstanding Balance September 30, 2021		Interest Rate		Maturity Date




Senior Notes due 2024	$	500,000	4.600	%	February 6, 2024
Senior Notes due 2025	550,000		4.625	%	November 1, 2025
Senior Notes due 2026	600,000		4.875	%	June 1, 2026
Senior Notes due 2027	600,000		3.950	%	August 15, 2027
Senior Notes due January, 2028	600,000		3.400	%	January 15, 2028
Senior Notes due June, 2028	500,000		2.200	%	June 15, 2028
Senior Notes due 2029	600,000		3.100	%	December 15, 2029

Senior Notes due 2032	700,000		2.850	%	December 15, 2032
Total balance and weighted-average interest rate	$	4,650,000	3.685	%



	Outstanding Balance ⁽¹⁾		Interest Rate		Conversion Rate ⁽²⁾	Maturity Date
2018 Convertible Notes	$	597,500	3.00	%	60.5997	August 1, 2018
2020 Convertible Notes	402,500		3.75	%	66.7249	December 15, 2020
Total balance and weighted-average interest rate	$	1,000,000	3.30	%


~~(1)~~	Excludes the carrying value of the conversion options recorded within additional paid-in capital of $28.6 million and the unamortized discount of $9.1 million as of September 30, 2017. The discount will be amortized over the remaining weighted average term of 1.8 years.


~~(2)~~	Conversion rate represents the amount of the General Partner OP Units per $1,000 principal amount of Convertible Notes converted as of September 30, 2017, as adjusted in accordance with the applicable indentures as a result of cash dividend payments.



Interest Rate Swaps	September 30, 2017		December 31, 2016
Number of Instruments	—		14
Notional Amount	$	—	$	690,816



Derivatives Designated as Hedging Instruments	Balance Sheet Location	September 30, 2017		December 31, 2016
Interest rate swaps	Rent and tenant receivables and other assets, net	$	—	$	3
Interest rate swaps	Deferred rent, derivative and other liabilities	$	—	$	(3,547	)