UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20172022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-55435
cvmcriilogoa50.jpgcik0001567925-20220630_g1.jpg
CARTER VALIDUS MISSION CRITICAL REIT II,SILA REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
Maryland46-1854011
(State or Other Jurisdiction of
Incorporation or Organization)		(I.R.S. Employer
Identification No.)
Maryland46-1854011
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
4890 West Kennedy Blvd.,1001 Water Street, Suite 650800
Tampa, FL 3360933602
(813) 287-0101-287-0101
(Address of Principal Executive Offices; Zip Code)(Registrant’s Telephone Number)Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
None
Title of each classTrading SymbolName of each exchange on which registered
NoneN/ANoneN/AN/A
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $0.01 per share
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”filer”, “smaller reporting company,” and “emerging"emerging growth company”company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☒ (Do not check if a smaller reporting company)Smaller reporting company☐
Emerging growth company☒☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B)13(a) of the SecuritiesExchange Act. ☒¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ☐    No  ☒
As of November 6, 2017,August 4, 2022, there were approximately 80,239,000168,138,000 shares of Class A common stock, 5,333,00016,645,000 shares of Class I common stock, 32,947,00040,790,000 shares of Class T common stock and 0 shares of Class T2 common stock of Carter Validus Mission Critical REIT II,Sila Realty Trust, Inc. outstanding.


CARTER VALIDUS MISSION CRITICAL REIT II,

SILA REALTY TRUST, INC.
(A Maryland Corporation)
TABLE OF CONTENTS
Page
PART I.
3
Item 1.
3
3
4
5
67
79
Item 2.
3031
Item 3.
4342
Item 4.
4443
PART II.
4544
Item 1.
4544
Item 1A.
4544
Item 2.
5044
Item 3.
5144
Item 4.
5144
Item 5.
5244
Item 6.
5345
55



Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.
CARTER VALIDUS MISSION CRITICAL REIT II,SILA REALTY TRUST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
September 30, 2017		 December 31, 2016(Unaudited)
June 30, 2022		December 31, 2021
ASSETSASSETSASSETS
Real estate:   Real estate:
Land$208,728
 $154,385
Land$166,037 $163,992 
Buildings and improvements, less accumulated depreciation of $37,553 and $18,521, respectively1,066,856
 722,492
Buildings and improvements, less accumulated depreciation of $185,986 and $165,784, respectivelyBuildings and improvements, less accumulated depreciation of $185,986 and $165,784, respectively1,672,831 1,648,685 
Construction in progress43,692
 20,123
Construction in progress— 14,628 
Total real estate, net1,319,276
 897,000
Total real estate, net1,838,868 1,827,305 
Cash and cash equivalents74,488
 50,446
Cash and cash equivalents23,077 32,359 
Acquired intangible assets, less accumulated amortization of $17,620 and $7,995, respectively147,043
 98,053
Acquired intangible assets, less accumulated amortization of $80,049 and $71,067, respectivelyAcquired intangible assets, less accumulated amortization of $80,049 and $71,067, respectively173,127 181,639 
GoodwillGoodwill23,006 23,284 
Right-of-use assets - operating leasesRight-of-use assets - operating leases24,995 21,737 
Right-of-use assets - finance leaseRight-of-use assets - finance lease2,286 2,296 
Other assets, net45,276
 24,539
Other assets, net85,234 66,365 
Assets held for sale, netAssets held for sale, net— 22,570 
Total assets$1,586,083
 $1,070,038
Total assets$2,170,593 $2,177,555 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:   Liabilities:
Notes payable, net of deferred financing costs of $4,038 and $1,945, respectively$409,797
 $151,045
Credit facility, net of deferred financing costs of $676 and $876, respectively219,324
 219,124
Accounts payable due to affiliates14,552
 7,384
Credit facility, net of deferred financing costs of $2,728 and $3,226, respectivelyCredit facility, net of deferred financing costs of $2,728 and $3,226, respectively502,272 496,774 
Accounts payable and other liabilities26,409
 17,184
Accounts payable and other liabilities27,854 39,597 
Intangible lease liabilities, less accumulated amortization of $1,771 and $634, respectively23,006
 6,873
Acquired intangible liabilities, less accumulated amortization of $5,177 and $4,444, respectivelyAcquired intangible liabilities, less accumulated amortization of $5,177 and $4,444, respectively12,692 12,962 
Operating lease liabilitiesOperating lease liabilities27,469 23,758 
Finance lease liabilitiesFinance lease liabilities2,638 2,636 
Liabilities held for sale, netLiabilities held for sale, net— 698 
Total liabilities693,088
 401,610
Total liabilities572,925 576,425 
Stockholders’ equity:   Stockholders’ equity:
Preferred stock, $0.01 par value per share, 100,000,000 shares authorized; none issued and outstanding—
 —
Preferred stock, $0.01 par value per share, 100,000,000 shares authorized; none issued and outstanding— — 
Common stock, $0.01 par value per share, 500,000,000 shares authorized; 113,512,765 and 83,109,025 shares issued, respectively; 112,181,418 and 82,744,288 shares outstanding, respectively1,122
 827
Common stock, $0.01 par value per share, 510,000,000 shares authorized; 239,848,129 and 238,226,119 shares issued, respectively; 225,240,223 and 224,179,939 shares outstanding, respectivelyCommon stock, $0.01 par value per share, 510,000,000 shares authorized; 239,848,129 and 238,226,119 shares issued, respectively; 225,240,223 and 224,179,939 shares outstanding, respectively2,252 2,242 
Additional paid-in capital977,633
 723,859
Additional paid-in capital2,014,252 2,004,404 
Accumulated distributions in excess of earnings(86,883) (57,100)Accumulated distributions in excess of earnings(432,101)(400,669)
Accumulated other comprehensive income1,121
 840
Accumulated other comprehensive income (loss)Accumulated other comprehensive income (loss)13,265 (4,847)
Total stockholders’ equity892,993
 668,426
Total stockholders’ equity1,597,668 1,601,130 
Noncontrolling interests2
 2
Total equity892,995
 668,428
Total liabilities and stockholders’ equity$1,586,083
 $1,070,038
Total liabilities and stockholders’ equity$2,170,593 $2,177,555 
The accompanying notes are an integral part of these condensed consolidated financial statements.

3
CARTER VALIDUS MISSION CRITICAL REIT II,
Table of Contents
SILA REALTY TRUST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except share data and per share amounts)
(Unaudited)
Three Months Ended
September 30,		 Nine Months Ended
September 30,		 Three Months Ended
June 30,		Six Months Ended
June 30,
2017 2016 2017 20162022202120222021
Revenue:       Revenue:
Rental and parking revenue$30,219
 $12,183
 $73,585
 $33,092
Tenant reimbursement revenue5,986
 1,411
 14,244
 4,129
Total revenue36,205
 13,594
 87,829
 37,221
Rental revenueRental revenue$44,918 $43,747 $89,200 $86,169 
Expenses:       Expenses:
Rental and parking expenses8,368
 1,794
 18,594
 5,055
Rental expensesRental expenses3,010 3,275 6,035 6,489 
General and administrative expenses1,062
 836
 3,199
 2,358
General and administrative expenses7,744 6,639 14,600 13,262 
Acquisition related expenses—
 1,821
 —
 5,432
Asset management fees2,698
 1,227
 7,055
 3,240
Depreciation and amortization11,852
 4,782
 28,487
 12,948
Depreciation and amortization17,814 17,615 35,802 35,839 
Impairment loss on real estateImpairment loss on real estate— 6,502 7,109 16,925 
Impairment loss on goodwillImpairment loss on goodwill— 431 278 671 
Total expenses23,980
 10,460
 57,335
 29,033
Total expenses28,568 34,462 63,824 73,186 
Gain on real estate dispositionGain on real estate disposition— — 460 — 
Income from operations12,225
 3,134
 30,494
 8,188
Income from operations16,350 9,285 25,836 12,983 
Interest expense, net6,786
 626
 15,623
 2,237
Interest and other expense, netInterest and other expense, net4,329 9,534 12,444 18,298 
Income (loss) from continuing operationsIncome (loss) from continuing operations12,021 (249)13,392 (5,315)
Income from discontinued operationsIncome from discontinued operations— 16,305 — 24,253 
Net income attributable to common stockholders$5,439
 $2,508
 $14,871
 $5,951
Net income attributable to common stockholders$12,021 $16,056 $13,392 $18,938 
Other comprehensive income:       Other comprehensive income:
Unrealized income (loss) on interest rate swaps, net$219
 $88
 $281
 $(13)
Other comprehensive income (loss) attributable to common stockholders219
 88
 281
 (13)
Unrealized income on interest rate swaps, netUnrealized income on interest rate swaps, net$5,257 $1,775 $18,112 $7,567 
Other comprehensive incomeOther comprehensive income5,257 1,775 18,112 7,567 
Comprehensive income attributable to common stockholders$5,658
 $2,596
 $15,152
 $5,938
Comprehensive income attributable to common stockholders$17,278 $17,831 $31,504 $26,505 
Weighted average number of common shares outstanding:       Weighted average number of common shares outstanding:
Basic105,388,118
 71,852,230
 95,668,433
 63,044,148
Basic225,008,452 223,082,912 224,755,285 222,783,708 
Diluted105,405,297
 71,866,949
 95,687,382
 63,060,086
Diluted226,362,977 223,082,912 226,115,545 222,783,708 
Net income per common share attributable to common stockholders:       Net income per common share attributable to common stockholders:
Basic$0.05
 $0.03
 $0.16
 $0.09
Diluted$0.05
 $0.03
 $0.16
 $0.09
Basic:Basic:
Continuing operationsContinuing operations$0.05 $— $0.06 $(0.02)
Discontinued operationsDiscontinued operations— 0.07 — 0.11 
Net income attributable to common stockholdersNet income attributable to common stockholders$0.05 $0.07 $0.06 $0.09 
Diluted:Diluted:
Continuing operationsContinuing operations$0.05 $— $0.06 $(0.02)
Discontinued operationsDiscontinued operations— 0.07 — 0.11 
Net income attributable to common stockholdersNet income attributable to common stockholders$0.05 $0.07 $0.06 $0.09 
Distributions declared per common share$0.16
 $0.16
 $0.47
 $0.47
Distributions declared per common share$0.10 $0.12 $0.20 $0.24 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4
CARTER VALIDUS MISSION CRITICAL REIT II,
Table of Contents
SILA REALTY TRUST, INC.
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS’STOCKHOLDERS' EQUITY
(in thousands, except forshare data)
(Unaudited)
Common Stock
No. of
Shares		Par
Value		Additional
Paid-in
Capital		Accumulated Distributions in Excess of EarningsAccumulated Other Comprehensive IncomeTotal
Stockholders’
Equity
Balance, March 31, 2022224,616,042 $2,246 $2,008,481 $(421,561)$8,008 $1,597,174 
Issuance of common stock under the distribution reinvestment plan765,065 8 6,270 — — 6,278 
Vesting of restricted stock76,150 — — — — — 
Stock-based compensation— 1 1,277 — — 1,278 
Repurchase of common stock(217,034)(3)(1,776)— — (1,779)
Distributions to common stockholders— — — (22,561)— (22,561)
Other comprehensive income— — — — 5,257 5,257 
Net income— — — 12,021 — 12,021 
Balance, June 30, 2022225,240,223 $2,252 $2,014,252 $(432,101)$13,265 $1,597,668 


Common Stock
No. of
Shares		Par
Value		Additional
Paid-in
Capital		Accumulated Distributions in Excess of EarningsAccumulated Other Comprehensive (Loss) IncomeTotal
Stockholders’
Equity
Balance, December 31, 2021224,179,939 $2,242 $2,004,404 $(400,669)$(4,847)$1,601,130 
Issuance of common stock under the distribution reinvestment plan1,497,873 15 12,275 — — 12,290 
Vesting of restricted stock124,136 — — — — — 
Stock-based compensation— 1 2,173 — — 2,174 
Repurchase of common stock(561,725)(6)(4,600)— — (4,606)
Distributions to common stockholders— — — (44,824)— (44,824)
Other comprehensive income— — — — 18,112 18,112 
Net income— — — 13,392 — 13,392 
Balance, June 30, 2022225,240,223 $2,252 $2,014,252 $(432,101)$13,265 $1,597,668 
The accompanying notes are an integral part of these condensed consolidated financial statements.

5
Table of Contents
SILA REALTY TRUST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
(Unaudited)
Common Stock
No. of
Shares		Par
Value		Additional
Paid-in
Capital		Accumulated Distributions in Excess of EarningsAccumulated Other Comprehensive LossTotal
Stockholders’
Equity
Balance, March 31, 2021222,702,903 $2,227 $1,989,599 $(335,004)$(14,652)$1,642,170 
Issuance of common stock under the distribution reinvestment plan857,926 8 7,451 — — 7,459 
Stock-based compensation— — 563 — — 563 
Distribution and servicing fees— — 74 — — 74 
Repurchase of common stock(275,242)(2)(2,389)— — (2,391)
Distributions to common stockholders— — — (26,993)— (26,993)
Other comprehensive income— — — — 1,775 1,775 
Net income— — — 16,056 — 16,056 
Balance, June 30, 2021223,285,587 $2,233 $1,995,298 $(345,941)$(12,877)$1,638,713 
 Common Stock            
 No. of
Shares		 Par
Value		 Additional
Paid-in
Capital		 Accumulated Distributions in Excess of Earnings Accumulated Other Comprehensive Income Total
Stockholders’
Equity		 Noncontrolling
Interests		 Total
Equity
Balance, December 31, 201682,744,288
 $827
 $723,859
 $(57,100) $840
 $668,426
 $2
 $668,428
Issuance of common stock27,873,206
 279
 268,854
 —
 —
 269,133
 —
 269,133
Issuance of common stock under the distribution reinvestment plan2,523,784
 26
 22,975
 —
 —
 23,001
 —
 23,001
Vesting of restricted common stock6,750
 —
 54
 —
 —
 54
 —
 54
Commissions on sale of common stock and related dealer manager fees—
 —
 (16,323) —
 —
 (16,323) —
 (16,323)
Distribution and servicing fees—
 —
 (7,031) —
 —
 (7,031) —
 (7,031)
Other offering costs—
 —
 (5,998) —
 —
 (5,998) —
 (5,998)
Repurchase of common stock(966,610) (10) (8,757) —
 —
 (8,767) —
 (8,767)
Distributions declared to common stockholders—
 —
 —
 (44,654) —
 (44,654) —
 (44,654)
Other comprehensive income—
 —
 —
 —
 281
 281
 —
 281
Net income—
 —
 —
 14,871
 —
 14,871
 —
 14,871
Balance, September 30, 2017112,181,418
 $1,122
 $977,633
 $(86,883) $1,121
 $892,993
 $2
 $892,995
Common Stock
No. of
Shares		Par
Value		Additional
Paid-in
Capital		Accumulated Distributions in Excess of EarningsAccumulated Other Comprehensive LossTotal
Stockholders’
Equity
Balance, December 31, 2020222,045,522 $2,220 $1,983,361 $(311,264)$(20,444)$1,653,873 
Issuance of common stock under the distribution reinvestment plan1,706,088 17 14,816 — — 14,833 
Vesting of restricted stock3,311 — — — — — 
Stock-based compensation— — 1,119 — — 1,119 
Distribution and servicing fees— — 76 — — 76 
Repurchase of common stock(469,334)(4)(4,074)— — (4,078)
Distributions to common stockholders— — — (53,615)— (53,615)
Other comprehensive income— — — — 7,567 7,567 
Net income— — — 18,938 — 18,938 
Balance, June 30, 2021223,285,587 $2,233 $1,995,298 $(345,941)$(12,877)$1,638,713 
The accompanying notes are an integral part of these condensed consolidated financial statements.

6
CARTER VALIDUS MISSION CRITICAL REIT II,
Table of Contents
SILA REALTY TRUST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 Six Months Ended
June 30,
 20222021
Cash flows from operating activities:
Net income attributable to common stockholders$13,392 $18,938 
Adjustments to reconcile net income attributable to common stockholders to net cash provided by operating activities:
Depreciation and amortization - real estate including intangible assets35,754 47,554 
Depreciation - corporate assets38 — 
Amortization of deferred financing costs854 2,007 
Amortization of above- and below-market leases240 (1,252)
Amortization of origination fee— 138 
Amortization of discount of deferred liability— 109 
Amortization of interest rate swaps995 — 
Amortization of operating leases516 476 
Amortization of finance lease10 9 
Impairment loss on real estate7,109 16,925 
Impairment loss on goodwill278 671 
Gain on real estate disposition from continuing operations(460)— 
Loss on extinguishment of debt3,367 — 
Straight-line rent adjustments(4,941)(9,078)
Stock-based compensation2,174 1,119 
Changes in operating assets and liabilities:
Accounts payable and other liabilities(4,124)3,195 
Other assets1,551 308 
Net cash provided by operating activities56,753 81,119 
Cash flows from investing activities:
Investment in real estate(42,428)(25,048)
Consideration paid for the internalization transaction— (7,500)
Proceeds from real estate disposition22,822 — 
Capital expenditures(6,477)(14,743)
Payments of deal costs(32)— 
Real estate deposits, net(1,134)— 
Collection of notes receivable— 500 
Net cash used in investing activities(27,249)(46,791)
Cash flows from financing activities:
Payments on notes payable— (2,238)
Proceeds from credit facility740,000 15,000 
Payments on credit facility(735,000)— 
Payments for extinguishment of debt(4)(95)
Payments of deferred financing costs(6,936)(92)
Repurchase of common stock(4,606)(4,078)
Offering costs on issuance of common stock(193)(1,232)
Distributions to common stockholders(32,401)(38,955)
Net cash used in financing activities(39,140)(31,690)
Net change in cash, cash equivalents and restricted cash(9,636)2,638 
Cash, cash equivalents and restricted cash - Beginning of period32,880 67,909 
Cash, cash equivalents and restricted cash - End of period$23,244 $70,547 
Supplemental cash flow disclosure:
Interest paid, net of interest capitalized of $44 and $212, respectively$7,918 $24,878 
Supplemental disclosure of non-cash transactions:
Common stock issued through distribution reinvestment plan$12,290 $14,833 
Change in accrued distributions to common stockholders$133 $173 
Change in contingent consideration$182 $— 
Change in accrued capital expenditures$(2,731)$910 
7
Table of Contents
 Nine Months Ended
September 30,
 2017 2016
Cash flows from operating activities:   
Net income$14,871
 $5,951
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization28,487
 12,948
Amortization of deferred financing costs1,870
 703
Amortization of above-market leases174
 27
Amortization of intangible lease liabilities(1,137) (402)
Straight-line rent(7,686) (4,344)
Stock-based compensation54
 41
Ineffectiveness of interest rate swaps(16) (49)
Changes in operating assets and liabilities:   
Accounts payable and other liabilities8,209
 1,042
Accounts payable due to affiliates1,391
 230
Other assets(5,920) (610)
Net cash provided by operating activities40,297
 15,537
Cash flows from investing activities:   
Investment in real estate(458,023) (239,729)
Acquisition costs capitalized subsequent(44) —
Capital expenditures(25,002) (4,380)
Real estate deposits, net(37) (5,287)
Net cash used in investing activities(483,106) (249,396)
Cash flows from financing activities:   
Proceeds from issuance of common stock269,133
 248,251
Proceeds from notes payable260,845
 —
Proceeds from credit facility175,000
 115,000
Payments on credit facility(175,000) (70,000)
Payments of deferred financing costs(2,963) (767)
Repurchases of common stock(8,767) (2,043)
Offering costs on issuance of common stock(23,196) (23,979)
Distributions to stockholders(20,415) (12,285)
Net cash provided by financing activities474,637
 254,177
Net change in cash, cash equivalents and restricted cash31,828
 20,318
Cash, cash equivalents and restricted cash - Beginning of period56,904
 33,189
Cash, cash equivalents and restricted cash - End of period$88,732
 $53,507
Supplemental cash flow disclosure:   
Interest paid, net of interest capitalized of $1,450 and $293, respectively$14,106
 $1,887
Supplemental disclosure of non-cash transactions:   
Issuance of common stock under the distribution reinvestment plan$23,001
 $16,285
Distribution and servicing fees accrued during the period$5,756
 $4,226
Liability assumed at acquisition$815
 $1,236
Accrued capital expenditures$—
 $1,469
Change in accrued acquisition costs$22 $— 
Change in accrued deal costs$57 $— 
Change in accrued deferred financing costs$(19)$53 
Recognition of right-of-use assets - operating leases$3,749 $— 
Recognition of operating lease liabilities$3,749 $— 
The accompanying notes are an integral part of these condensed consolidated financial statements.

8
CARTER VALIDUS MISSION CRITICAL REIT II,
Table of Contents
SILA REALTY TRUST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
SeptemberJune 30, 20172022
Note 1—Organization and Business Operations
Carter Validus Mission Critical REIT II,Sila Realty Trust, Inc., or the Company, is a Maryland corporation that was formed on January 11, 2013. The Company elected, and currently qualifies, to be taxed as a real estate investment trust, or a REIT, under the Internal Revenue Code of 1986, as amended, or the Code, for federal income tax purposes on September 11, 2015.commencing with its taxable year ended December 31, 2014. Substantially all of the Company’s business is conducted through Carter ValidusSila Realty Operating Partnership, II, LP, a Delaware limited partnership, or the Operating Partnership, formed on January 10, 2013. The Company is the sole general partner of the Operating Partnership and Carter Validus Advisors II, LLC, or the Advisor, is the special limited partner of the Operating Partnership.
The Company is offering for sale a maximum of $2,350,000,000 in shares of common stock, or the maximum offering amount, consisting of up to $2,250,000,000 in shares in its primary offering and up to $100,000,000 in shares of common stock to be made available pursuant to the Company’s distribution reinvestment plan, or the DRIP, on a “best efforts” basis, or the Initial Offering, pursuant to a registration statement on Form S-11, or the Registration Statement, filed with the Securities and Exchange Commission, or the SEC, under the Securities Act of 1933, as amended, or the Securities Act, which was declared effective on May 29, 2014. As of September 30, 2017, the Company was offering Class A shares, Class I shares and Class T shares of common stock, in any combination with a dollar value up to the maximum offering amount in the Initial Offering.
On May 1, 2017, the Company filed a registration statement on Form S-11, or Follow-On Registration Statement, under the Securities Act to register a proposed follow-on offering, or the Follow-On Offering. On October 30, 2017, the Company filed a pre-effective amendment to the Follow-On Registration Statement to (i) register a maximum of $1,000,000,000 of shares of Class A, Class I and Class T common stock pursuant to the primary offering of the Follow-On Offering and (ii) remove the DRIP from the Follow-On Registration Statement. Accordingly, pursuant to Rule 415 promulgated under the Securities Act, the Company extended the Initial Offering until the earlier of the SEC effective date of the Follow-On Offering or November 24, 2017. The Company has not issued any shares in connection with the Follow-On Offering as it has not been declared effective by the SEC.
On October 13, 2017, the Company filed a Registration Statement on Form S-3, or the DRIP Registration Statement, under the Securities Act to register up to $100,000,000 of shares of Class A, Class I and Class T common stock to be offered pursuant to the DRIP after the termination of the Initial Offering. The Company intends to continue to offer shares of common stock in the Initial Offering until November 24, 2017; however, it may terminate the Initial Offering prior to November 24, 2017 and commence offering shares of common stock pursuant to the Follow-On Offering and DRIP Registration Statement. The Company's board of directors may revise the termination date of the Initial Offering as necessary in its discretion.
As of September 30, 2017, the Company had issued approximately 113,499,000 shares of Class A, Class I and Class T common stock (including shares of common stock issued pursuant to the DRIP) in the Initial Offering, resulting in receipt of gross proceeds of approximately $1,111,417,000, before selling commissions and dealer manager fees of approximately $85,508,000 and other offering costs of approximately $21,875,000. As of September 30, 2017, the Company had approximately $1,238,583,000 in Class A shares, Class I shares and Class T shares of common stock remaining in the Initial Offering.
Substantially all of the Company’s business is managed by the Advisor. Carter Validus Real Estate Management Services II, LLC, or the Property Manager, an affiliate of the Advisor, serves as the Company’s property manager. The Advisor and the Property Manager have received, and will continue to receive, fees for services related to the acquisition and operational stages. The Advisor will also be eligible to receive fees during the liquidation stage. SC Distributors, LLC, an affiliate of the Advisor, or the Dealer Manager, serves as the dealer manager of the Initial Offering. The Dealer Manager has received, and will continue to receive, fees for services related to the Initial Offering.
The Company was formed to invest primarily in high quality income-producing commercial real estate, with a focus on data centers and healthcare properties, preferably with long-term leases to creditworthy tenants, as well as to make other real estate-related investments that relate toin such property types, which may include equity or debt interests including securities, in other real estate entities.
During the second quarter of 2021, the Company's board of directors, or the Board, made a determination to sell the Company's data center properties. On May 19, 2021, the Company and certain of its wholly-owned subsidiaries entered into a purchase and sale agreement, or the PSA, for the sale of up to 29 data center properties owned by the Company, which constituted the entirety of the Company's data center segment. See Note 4—"Held for Sale and Discontinued Operations" for further discussion. The Company also may originate or invest in real estate-related notes receivable. The Company expects real estate-related notes receivable originationsdecision of the Board to sell the data center properties, as well as the execution of the PSA, represented a strategic shift that had a major effect on the Company's results and investments to be focused on first mortgage loans, but also may include real estate-related bridge loans, mezzanine loans and securitized notes receivable.operations for the periods presented. As of SeptemberDecember 31, 2021, the Company had no assets or liabilities related to the data center properties. The operations of the data center properties have been classified as income from discontinued operations on the condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2017,2021.
On July 22, 2021, the Company completed the sale of all 29 of its data centers, or the Data Center Sale, for an aggregate sale price of $1,320,000,000, and generated net proceeds of approximately $1,295,367,000. Concurrently, the Board declared a special cash distribution of $1.75 per share of Class A, Class I, Class T and Class T2 shares of common stock. The special cash distribution was funded with the proceeds from the Data Center Sale. The special cash distribution was paid on July 30, 2021 to stockholders of record at the close of business on July 26, 2021, in the aggregate amount of approximately $392,685,000.
During the six months ended June 30, 2022, the Company acquired 5 healthcare properties and sold 1 land parcel that formerly contained a healthcare property. See Note 3—"Acquisitions and Dispositions" for more information. As of June 30, 2022, the Company owned 49130 real estate investments, consisting of 66healthcare properties locatedand 2 undeveloped land parcels, in 362 micropolitan statistical areas, or µSA, and 55 metropolitan statistical areas, or MSAs,MSAs.
The Company raised the equity capital for its real estate investments through 2 public offerings, or the Offerings, from May 2014 through November 2018, and one micropolitan statistical area,the Company has offered shares pursuant to its distribution reinvestment plan, or µSA.

the DRIP, pursuant to 2 Registration Statements on Form S-3, or each, a DRIP Offering and together the DRIP Offerings, since November 2017.
Except as the context otherwise requires, “we,” “our,” “us,” and the “Company” referrefers to Carter Validus Mission Critical REIT II,Sila Realty Trust, Inc., the Operating Partnership and all wholly-owned subsidiaries.
Note 2—Summary of Significant Accounting Policies
The summary of significant accounting policies presented below is designed to assist in understanding the Company’s condensed consolidated financial statements. Such condensed consolidated financial statements and the accompanying notes thereto are the representationresponsibility of management. These accounting policies conform to accounting principlesUnited States generally accepted in the United States of America,accounting principles, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of a normal and recurring nature considered for a fair presentation, have been included. Operating results for the three and ninesix months ended SeptemberJune 30, 20172022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2022.
The condensed consolidated balance sheet at December 31, 20162021, has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by GAAP for complete financial statements. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company's Company’s
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audited consolidated financial statements as of and for the year ended December 31, 20162021, and related notes thereto set forth in the Company'sCompany’s Annual Report on Form 10-K, filed with the SEC on March 16, 2017.29, 2022.
Principles of Consolidation and Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of the Company, the Operating Partnership, and all wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the condensed consolidated financial statements and accompanying notes in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. These estimates are made and evaluated on an ongoing basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates.
Concentration of Credit Risk and Significant Leases
As of September 30, 2017, the Company had cash on deposit, including restricted cash, in certain financial institutions that had deposits in excess of current federally insured levels; however, the Company has not experienced any losses in such accounts. The Company limits its cash investments to financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk on its cash deposits. To date, the Company has experienced no loss or lack of access to cash in its accounts.
As of September 30, 2017, the Company owned real estate investments in 36 MSAs, two of which accounted for 10.0% or more of contractual rental revenue. Real estate investments located in the Oklahoma City, Oklahoma MSA and the Atlanta-Sandy Springs-Roswell, Georgia MSA accounted for approximately 10.5% and 10.0%, respectively, of contractual rental revenue for the nine months ended September 30, 2017.
As of September 30, 2017, the Company had no exposure to tenant concentration that accounted for 10.0% or more of rental revenue.
Restricted Cash
Restricted cash consists of restricted cash held in escrow, and restricted bank deposits. Restricted cash held in escrowwhich includes cash held inby escrow accounts for capital improvements for certain properties as well as cash held by lendersagents in escrow accounts for tenant and capital improvements repairs and maintenance and other lender reserves for certain properties, in accordance with the respective lender’s loantenants' lease agreement. Restricted cash held in escrowattributable to continuing operations is reported in other assets, net, in the accompanying condensed consolidated balance sheets. See Note 6—8—"Other Assets, Net". Restricted bank deposits consist of tenant receipts for certain properties which are required to be deposited into lender-controlled accounts in accordance with the respective lender's loan agreement. Restricted bank deposits are reported in other assets, net in the accompanying condensed consolidated balance sheets.
On April 1, 2017, the Company adopted Accounting Standards Update, or ASU, 2016-18, Restricted Cash, or ASU 2016-18. ASU 2016-18 requires that a statement of cash flows explain the change during a reporting period in the total of cash, cash equivalents and restricted cash. This ASU states that transfers between cash, cash equivalents and restricted cash are not part of the Company’s operating, investing and financing activities. Therefore, restricted cash should be included with cash and

cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. As required, the Company retrospectively applied the guidance in ASU 2016-18 to the prior period presented, which resulted in a decrease of $2,490,000 in net cash used in investing activities on the condensed consolidated statements of cash flows for the nine months ended September 30, 2016.Net."
The following table presents a reconciliation of the beginning of period and end of period cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the totals shown in the condensed consolidated statements of cash flows:flows (amounts in thousands):
Six Months Ended
June 30,
20222021
Beginning of period:
Cash and cash equivalents$32,359 $53,174 
Restricted cash521 14,735 (1)
Cash, cash equivalents and restricted cash$32,880 $67,909 
End of period:
Cash and cash equivalents$23,077 $47,921 
Restricted cash167 

22,626 (2)
Cash, cash equivalents and restricted cash$23,244 $70,547 
(1)Of this amount, $13,499,000 is attributable to continuing operations and $1,236,000 is attributable to discontinued operations.
(2)Of this amount, $21,390,000 is attributable to continuing operations and $1,236,000 is attributable to discontinued operations.
Held for Sale and Discontinued Operations
The Company classifies a real estate property as held for sale upon satisfaction of all of the following criteria: (i) management commits to a plan to sell a property; (ii) the property is available for immediate sale in its present condition, subject only to terms that are usual and customary for sales of such properties; (iii) there is an active program to locate a buyer; (iv) the sale of the property is probable and transfer of the asset is expected to be completed within one year; (v) the property is being actively marketed for sale; and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
Upon the determination to classify a property as held for sale, the Company ceases depreciation and amortization on the real estate property held for sale, as well as the amortization of acquired in-place leases and right-of-use assets. The real estate property held for sale and associated liabilities are classified separately on the condensed consolidated balance sheets. Such properties are recorded at the lesser of the carrying value or estimated fair value less estimated costs to sell.
As of December 31, 2021, the Company classified 1 land parcel that formerly contained a healthcare property as held for sale, or the 2021 Land Held for Sale. The Company recorded the 2021 Land Held for Sale at its carrying value at December 31, 2021. See Note 4—"Held for Sale and Discontinued Operations" for further discussion. On February 10, 2022, the
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  Nine Months Ended
September 30,
Beginning of period: 2017 2016
Cash and cash equivalents $50,446
 $31,262
Restricted cash 6,458
 1,927
Cash, cash equivalents and restricted cash $56,904
 $33,189
     
End of period:    
Cash and cash equivalents $74,488
 $49,090
Restricted cash 14,244
 4,417
Cash, cash equivalents and restricted cash $88,732
 $53,507
Company sold the 2021 Land Held for Sale, for an aggregate sale price of $24,000,000, and generated net proceeds of approximately $22,701,000. See Note 3—"Acquisitions and Dispositions" for additional information.
The Company classified assets and liabilities of the 29-property data center properties as discontinued operations for all the periods presented because they represented a strategic shift that had a major effect on the Company's results and operations. As of December 31, 2021, the Company had no assets or liabilities related to the data center properties. The operations of the data center properties are classified on the condensed consolidated statements of comprehensive income as income from discontinued operations for the three and six months ended June 30, 2021. On July 22, 2021, the Company completed the Data Center Sale, for an aggregate sale price of $1,320,000,000, and generated net proceeds of approximately $1,295,367,000. See Note 3—"Acquisitions and Dispositions" for additional information.
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate assets may not be recoverable, the Company assesses the recoverability of the asset group by estimating whether the Company will recover the carrying value of the asset group through its undiscounted future cash flows and their eventual disposition. Based on this analysis, if the Company does not believe that it will be able to recover the carrying value of the asset group, the Company will record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the asset group.
When developing estimates of expected future cash flows, the Company makes certain assumptions regarding future market rental rates subsequent to the expiration of current lease arrangements, property operating expenses, terminal capitalization and discount rates, probability weighting of the potential re-lease of the property versus sales scenarios, sale prices of comparable properties, required tenant improvements and the number of years the property will be held for investment. The use of alternative assumptions in the future cash flow analysis could result in a different determination of the property’s future cash flows and a different conclusion regarding the existence of an impairment, the extent of such loss, if any, as well as the carrying value of the real estate assets.
In addition, the Company estimates the fair value of the assets by applying a market approach using comparable sales for certain properties. The use of alternative assumptions in the market approach analysis could result in a different determination of the property’s estimated fair value and a different conclusion regarding the existence of an impairment, the extent of such loss, if any, as well as the carrying value of the real estate assets.
Impairment of Real Estate
The Company determined that, during the three months ended March 31, 2022, real estate assets related to 1 healthcare property, or the First Quarter 2022 Impaired Property, were determined to be impaired. A healthcare tenant that occupies 90% of the property, leases its space for administrative use and has historically been using the space as its central business office. As a result of pandemic related events, the tenant permanently modified its business operations to accommodate a reduction in on-site staff, significantly reducing its need for administrative space going forward. The tenant has continued to pay its rent in accordance with the lease agreement, however indicated it would not expect to renew the lease upon expiration. The Company entered into a signed letter of intent with a prospective buyer that is a county-owned, tax-exempt entity, and requires ownership (vs. leasing) of the property to conduct its intended business operations at the property. In addition to the signed letter of intent with the prospective buyer, the Company signed a letter of intent with the tenant for the payment of an early lease termination fee. The early lease termination is effective only upon consummating a sale of the property to the prospective buyer. The inclusion of this potential sale scenario in the Company’s step one impairment analysis resulted in the expected future cash flows from the property falling below its current carrying value. As a result, the carrying value of the property was reduced to its estimated fair value of $14,639,000, resulting in an impairment charge of $7,109,000.
The Company had no real estate impairment during the three months ended June 30, 2022.
During the three months ended March 31, 2021, real estate assets related to 1 healthcare property, or the First Quarter 2021 Impaired Property, were determined to be impaired. A tenant of the property that was experiencing financial difficulty vacated its space on June 19, 2020. During the fourth quarter of 2020, the Company entered into lease negotiations with a prospective tenant for the property, but the Company did not reach an agreement with the tenant. As such, the Company evaluated other strategic options, including a possible sale, and in April 2021, the Company received a letter of intent from a prospective buyer. The inclusion of a potential sale scenario in the Company’s step one impairment analysis resulted in the expected future cash flows from the property to fall below its current carrying value. As a result, the carrying value of the property was reduced to its estimated fair value of $17,145,000, resulting in an impairment charge of $10,423,000. The property was subsequently sold in the fourth quarter of 2021.
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During the three months ended June 30, 2021, real estate assets related to one healthcare property, or the Second Quarter 2021 Impaired Property One, were determined to be impaired. The tenant of the property was experiencing financial difficulty and vacated the space in March 2021. Subsequently, during the second quarter, the Company received a letter of intent from a prospective buyer. The inclusion of this new potential sale scenario in the Company's step one impairment analysis resulted in the expected future cash flows from the property falling below its current carrying value. The Company utilized a market approach, using comparable properties, to estimate the fair value of the property. As a result, the carrying value of the property was reduced to its estimated fair value of $5,957,000, resulting in an impairment charge of $2,894,000.
Additionally, during the three months ended June 30, 2021, real estate assets related to the 2021 Land Held for Sale, or the Second Quarter 2021 Impaired Property Two, were determined to be impaired. The last of the three tenants that occupied the building terminated its lease agreement and vacated the space on July 12, 2021. Subsequently, the Company received a letter of intent from a prospective buyer. The inclusion of this new potential sale scenario in the Company's step one impairment analysis resulted in the expected future cash flows from the property to fall below its current carrying value. As a result, the carrying value of the property was reduced to its estimated the fair value of $22,311,000, resulting in an impairment charge of $3,608,000.
Impairment charges are recorded as impairment loss on real estate in the condensed consolidated statements of comprehensive income.
During the three months ended June 30, 2021, the Company accelerated depreciation of equipment at the Second Quarter 2021 Impaired Property Two based on its anticipated sale. As a result, the Company accelerated the depreciation of the equipment in the amount of $296,000 in depreciation and amortization expense in the condensed consolidated statements of comprehensive income.
Impairment of Acquired Intangible Assets and Acquired Intangible Liabilities
During the three months ended June 30, 2022 and 2021, the Company did not record impairment of acquired intangible assets.
During the six months ended June 30, 2022, the Company recognized an impairment of 1 in-place lease intangible asset, or the First Quarter 2022 Impaired In-Place Lease, in the amount of approximately $380,000, by accelerating the amortization of the acquired intangible asset related to a tenant of the First Quarter 2022 Impaired Property.
During the six months ended June 30, 2021, the Company recognized an impairment of 1 in-place lease intangible asset, or the First Quarter 2021 Impaired In-Place Lease, in the amount of approximately $1,120,000, by accelerating the amortization of the acquired intangible asset related to 1 healthcare tenant of the Second Quarter 2021 Impaired Property One that was experiencing financial difficulties and vacated the property in March 2021. On April 5, 2021, the Company terminated its lease agreement and the tenant paid a lease termination fee of $400,000, which was recorded in rental revenue in the condensed consolidated statements of comprehensive income.
During the three and six months ended June 30, 2022 and 2021, the Company did not record impairment of acquired intangible liabilities.
Impairment of Goodwill
Goodwill represents the excess of the amount paid over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination and is allocated to an entity's reporting units. Goodwill has an indefinite life and is not amortized. On July 28, 2020, the Company and the Operating Partnership entered into a Membership Interest Purchase Agreement to provide for the internalization of the external management functions previously performed for the Company and the Operating Partnership by its former advisor and its affiliates, or the Internalization Transaction. On September 30, 2020, the Company closed the Internalization Transaction. On September 30, 2020, the Company recorded $39,529,000 of goodwill related to the transaction, of which $15,574,000 was allocated to the data center properties and written off as a result of the Data Center Sale on July 22, 2021. The remaining $23,955,000 of goodwill was allocated to the healthcare segment.
The Company evaluates goodwill for impairment when an event occurs or circumstances change that indicate the carrying value may not be recoverable, and at least annually. Unless circumstances otherwise dictate, the annual impairment test is performed as of the last day of each year. The Company evaluates potential triggering events that may affect the estimated fair value of the Company’s reporting units to assess whether any goodwill impairment exists. Deteriorating or adverse market conditions for certain reporting units may have a significant impact on the estimated fair value of these reporting units and could result in future impairments of goodwill. If the carrying value of a reporting unit exceeds its estimated fair value, then an impairment charge is recorded in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
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The Company has the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. Under a qualitative assessment, the impairment analysis for goodwill represents an evaluation of whether it is more-likely-than-not the reporting unit's fair value is less than its carrying value, including goodwill. If a qualitative analysis indicates that it is more-likely-than-not that the estimated carrying value of a reporting unit, including goodwill, exceeds its fair value, the Company performs the quantitative analysis as described below.
During the three months ended March 31, 2022, the Company recognized $278,000 of goodwill impairment. Impairment loss on the First Quarter 2022 Impaired Property recorded during such period (as discussed in the "Impairment of Real Estate" section above) triggered an evaluation of the reporting unit's fair value for goodwill impairment. The Company's reporting unit represents each individual operating real estate property. The carrying value of long-lived assets within the reporting unit with indicators of impairment was first tested for recoverability and resulted in recognition of impairment during such period. As a result, the fair value of the reporting unit was determined to be lower than its carrying value, including goodwill. Therefore, the Company recognized an impairment loss on goodwill in the amount of $278,000 for the amount that the carrying value of the reporting unit, including goodwill, exceeded its fair value, limited to the total amount of goodwill allocated to the reporting unit and was recorded in impairment loss on goodwill in the condensed consolidated statements of comprehensive income. Fair value of the reporting unit was determined based on a market valuation approach. As of March 31, 2022, the Company did not have any goodwill associated with the reporting unit.
The Company had no goodwill impairment during the three months ended June 30, 2022.
During the three months ended March 31, 2021, the Company recognized $240,000 of goodwill impairment. Impairment loss on the First Quarter 2021 Impaired Property recorded during such period (as discussed in the "Impairment of Real Estate" section above) triggered an evaluation of the reporting unit's fair value for goodwill impairment. As a result, the fair value of the reporting unit compared to its carrying value, including goodwill, was determined to be lower than its carrying value. Therefore, the Company recognized an impairment loss on goodwill in the amount of $240,000 for the amount that the carrying value of the reporting unit, including goodwill, exceeded its fair value, limited to the total amount of goodwill allocated to the reporting unit and was recorded in impairment loss on goodwill in the condensed consolidated statements of comprehensive income. Fair value of the reporting unit was determined based on a market valuation approach, using comparable sales to estimate the fair value. As of March 31, 2021, the Company did not have any goodwill associated with the reporting unit.
During the three months ended June 30, 2021, the Company recognized $431,000 of goodwill impairment. Impairment losses on the Second Quarter 2021 Impaired Property One and Second Quarter 2021 Impaired Property Two recorded during such period (as discussed in the "Impairment of Real Estate" section above) triggered evaluation of each reporting unit's fair value for goodwill impairment. As a result, the fair value of each reporting unit compared to its carrying value, including goodwill, was determined to be lower than its carrying value. Therefore, the Company recognized an impairment loss on goodwill for each of the 2 reporting units in the amounts of $112,000 and $319,000, respectively, for the amount that the carrying value of each reporting unit, including goodwill, exceeded its fair value, limited to the total amount of goodwill allocated to each reporting unit and was recorded in impairment loss on goodwill in the condensed consolidated statements of comprehensive income. Fair value of each reporting unit was determined based on a market approach model. As of June 30, 2021, the Company did not have any goodwill associated with these healthcare reporting units.
The following table summarizes the rollforward of goodwill for the six months ended June 30, 2022 (amounts in thousands):
Goodwill
Balance as of December 31, 2021$23,284 
Impairment losses(278)
Balance as of June 30, 2022$23,006 
Revenue Recognition, Tenant Receivables and Allowance for Uncollectible Accounts
The majority of the Company's revenue is derived from rental revenue, which is accounted for in accordance with ASC 842, Leases, or ASC 842. In accordance with ASC 842, rental revenue is recognized on a straight-line basis over the term of the related lease (including rent holidays). For lease arrangements when it is not probable that the Company will collect all or substantially all of the remaining lease payments under the term of the lease, rental revenue is limited to the lesser of the rental revenue that would be recognized on a straight-line basis or the lease payments that have been collected from the lessee. Differences between rental revenue recognized and amounts contractually due under the lease agreements are credited or charged to straight-line rent receivable or straight-line rent liability, as applicable. Tenant reimbursements, which are comprised of additional amounts recoverable from tenants for common area maintenance expenses and certain other recoverable expenses, are recognized when the services are provided and the performance obligations are satisfied.
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The Company recognizes non-rental related revenue in accordance with Accounting Standards Codification, or ASC, 606, Revenue from Contracts with Customers, or ASC 606. The Company has identified its revenue streams as rental income from leasing arrangements and tenant reimbursements, which are outside the scope of ASC 606. The core principle of ASC 606 is that an entity should recognize revenue to depict 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. Non-rental revenue, subject to ASC 606, is immaterial to the Company's condensed consolidated financial statements.
On April 22, 2021, the Company entered into a settlement agreement with a data center property tenant that was experiencing financial difficulty due to deteriorating economic conditions driven by the impact of the COVID-19 pandemic and accelerating its modification of work strategy to a remote environment due to the pandemic. The tenant stopped paying rent in October 2020. Pursuant to the settlement agreement, the lease was terminated, effective immediately. The tenant surrendered the space on June 20, 2021. Additionally, in connection with the lease termination, the tenant paid the Company a $7,000,000 termination fee on April 23, 2021, which was recorded in income from discontinued operations in the accompanying condensed consolidated statements of comprehensive income during the second quarter of 2021.
Concentration of Credit Risk and Significant Leases
As of June 30, 2022, the Company had cash on deposit, including restricted cash, in certain financial institutions that had deposits in excess of current federally insured levels. The Company limits its cash investments to financial institutions with high credit standings; therefore, the Company believes it is not exposed to any significant credit risk on its cash deposits. To date, the Company has not experienced a loss or lack of access to cash in its accounts.
As of June 30, 2022, the Company owned real estate investments in 2 µSAs and 55 MSAs, 1 MSA of which accounted for greater than 10.0% of rental revenue from continuing operations for the six months ended June 30, 2022. Real estate investments located in the Houston-The Woodlands-Sugar Land, Texas MSA accounted for 11.1% of rental revenue from continuing operations for the six months ended June 30, 2022.
As of June 30, 2022, the Company had 1 exposure to tenant concentration that accounted for greater than 10.0% of rental revenue from continuing operations for the six months ended June 30, 2022. The leases with tenants at healthcare properties under common control of Post Acute Medical, LLC and its affiliates accounted for 15.3% of rental revenue from continuing operations for the six months ended June 30, 2022.
Share Repurchase Program
The Company’s share repurchase programAmended and Restated Share Repurchase Program, or SRP, allows for repurchases of shares of the Company’s common stock whenupon meeting certain criteria are met.criteria. The share repurchase programSRP provides that all repurchases during any calendar year, including those redeemable upon death or a Qualifying Disability"Qualifying Disability" (as defined in the Company's SRP) of a stockholder, arebe limited to those that can be funded with equivalent proceeds raised from the DRIP Offering during the prior calendar year and other operating funds, if any, as the board of directors,Board, in its sole discretion, may reserve for this purpose.
Repurchases of shares of the Company’s common stock are at the sole discretion of the Company’s board of directors. TheBoard, provided, however, that the Company will limitlimits the number of shares repurchased pursuant to the share repurchase program as follows: during any calendar year the Company will not repurchase in excess ofto 5.0% of the total number of shares of common stock outstanding onas of December 31st of the previous calendar year. The SRP is subject to terms and limitations, including, but not limited to, quarterly share limitations, an annual 5.0% share limitation and DRIP funding limitations and any amendments to the plan, as more fully described below. In addition, the Company’s board of directors,Board, in its sole discretion, may suspend (in whole or in part) the SRP at any time, and may amend, suspend, reduce, terminate or otherwise change the share repurchase programSRP upon 30 days' prior notice to the Company’s stockholders for any reason it deems appropriate.
The Company will currently only repurchase shares due to death and involuntary exigent circumstances in accordance with the SRP, subject in each case to the terms and limitations of the SRP, including, but not limited to, quarterly share limitations, an annual 5.0% share limitation, and DRIP funding limitations. Under the SRP, the Company may waive certain of the terms and requirements of the SRP in the event of the death of a stockholder who is a natural person, including shares held through an Individual Retirement Account or other retirement or profit-sharing plan, and certain trusts meeting the requirements of the SRP. The Company may also waive certain of the terms and requirements of the SRP in the event of an involuntary exigent circumstance, as determined by the Company or any of the executive officers thereof, in its or their sole discretion. See Part II, Item 2. "Unregistered Sales of Equity Securities" for more information on the Company's SRP.
During the ninesix months ended SeptemberJune 30, 2017,2022, the Company received valid repurchase requests related to 966,610repurchased 561,725 Class A shares, Class I shares and Class T shares of common stock (915,269(476,551 Class A shares, 20,611 Class I shares and 51,34164,563 Class T shares), all of which were repurchased in full for an aggregate purchase price of approximately $8,767,000$4,606,000 (an average of $9.07$8.20 per share). During the ninesix months ended SeptemberJune 30, 2016,2021, the Company received valid repurchase requests related to 214,666repurchased 469,334 Class A shares, Class I shares and Class T shares of common stock all of which were repurchased in full(443,434 Class A shares, 2,504 Class I shares and 23,396 Class T shares), for an aggregate purchase price of approximately $2,043,000$4,078,000 (an average of $9.52$8.69 per share). No shares
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Table of Class T common stock were requestedContents
Stock-based Compensation
On March 6, 2020, the Board approved the Amended and Restated 2014 Restricted Share Plan, or the A&R Incentive Plan, pursuant to be, or were, repurchased during the nine months ended September 30, 2016. No shares of Class I common stock were requested to be, or were, repurchased during the nine months ended September 30, 2017 and 2016.
Fair Value
ASC 820, Fair Value Measurements and Disclosures, or ASC 820, defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosures about fair value measurements. ASC 820 emphasizes that fair value is intended to be a market-based measurement, as opposed to a transaction-specific measurement.
Fair value is defined by ASC 820 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Assets and liabilities are measured using inputs from three levels of the fair value hierarchy, as follows:
Level 1—Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities thatwhich the Company has the abilityauthority and power to accessgrant awards of restricted shares of its Class A common stock to its directors, officers and employees. The Company accounts for its stock awards in accordance with ASC 718-10, Compensation—Stock Compensation. ASC 718-10 requires that compensation cost for all stock awards be calculated and amortized over the service period (generally equal to the vesting period). For performance-based awards, compensation costs are recognized over the service period if it is probable that the performance condition will be satisfied, with changes of the assessment at each reporting period and recording the measurement date. An active market is definedeffect of the change in the compensation cost as a market in which transactionscumulative catch-up adjustment. The compensation costs for the assets or liabilities occur with sufficient frequency and volume to provide pricing informationrestricted stock are recognized based on an ongoing basis.
Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are

observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs).
Level 3—Unobservable inputs, only used to the extent that observable inputs are not available, reflect the Company’s assumptions about the pricing of an asset or liability.
The following describes the methods the Company used to estimate the fair value of the Company’s financial assetsrestricted stock awards at grant date less forfeitures (if applicable). Forfeitures are accounted for as they occur.
On January 3, 2022, the Company granted time-based awards to its executive officers, consisting of 217,988 in restricted shares of Class A common stock, or the Time-Based 2022 Awards. The Time-Based 2022 Awards will vest ratably over four years following the grant date, subject to each executive's employment through the applicable vesting dates, with certain exceptions.
In addition, on January 3, 2022, the Company's compensation committee approved performance-based deferred stock unit awards, or Performance DSUs, to be granted for performance-based awards, or the Performance-Based 2022 Awards. The Performance-Based 2022 Awards will be measured based on Company performance over a three-year performance period ending on December 31, 2024. The Performance-Based 2022 Awards vest after the last day of the performance period and liabilities:are subject to continued employment through the applicable vesting date.
CashThe Time-Based 2022 Awards and cash equivalents, restricted cash, tenant receivables, real estate escrow deposits, prepaidthe Performance-Based 2022 Awards, or collectively, the 2022 Awards, were granted under and other assets, accounts payableare subject to the terms of the A&R Incentive Plan and accrued liabilities—award agreements.
Stock-based compensation expense for the 2022 Awards for the three and six months ended June 30, 2022, was approximately $343,000 and $604,000, respectively, which is reported in general and administrative expenses in the accompanying condensed consolidated statements of comprehensive income. The Company consideredrecognized accelerated stock-based compensation expense of $326,000 during the carrying valuesthree and six months ended June 30, 2022, of these financial instruments, assets and liabilities, to approximate fair value because of the short period of time between origination of the instruments and their expected realization.
Notes payable—Fixed Rate—The fair value is estimated by discounting the expected cash flows on notes payable at current rates at which management believes similar loans would be made considering the terms and conditions of the loan and prevailing market interest rates.
Notes payable—Variable Rate—The carrying value of variable rate notes payable approximates fair value because the interest rate adjusts with current market.
Secured credit facility—Fixed Rate—The fair value is estimated by discounting the expected cash flows on the fixed rate secured credit facility at current rates at which management believes similar borrowings would be made considering the terms and conditions of the borrowings and prevailing market interest rates.
Secured credit facility—Variable Rate—The carrying value of the variable rate secured credit facility approximates fair value as the interest is calculated at the London Interbank Offered Rate, plus an applicable margin. The interest rate resets to market on a monthly basis. The fair value of the Company's variable rate secured credit facility is estimated based on the interest rates currently offered$92,000 related to the Company by financial institutions.
Derivative instruments—The Company’s derivative instruments consist2022 Awards, due to the termination of interest rate swaps. These swaps are carried at fair value to comply with the provisions of ASC 820. The fair value of these instruments is determined using interest rate market pricing models.its former chief accounting officer on May 12, 2022. The Company incorporated credit valuation adjustments to appropriately reflectrecognized total stock-based compensation expense of approximately $1,278,000 and $563,000, respectively, for the Company’s nonperformance riskthree months ended June 30, 2022 and 2021, and $2,174,000 and $1,119,000, respectively, for the respective counterparty’s nonperformance risksix months ended June 30, 2022 and 2021, which is reported in general and administrative expenses in the fair value measurements. Considerable judgment is necessary to develop estimated fair valuesaccompanying condensed consolidated statements of financial assets and liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize, or be liable for on disposition of the financial assets and liabilities.comprehensive income.
Earnings Per Share
The Company calculates basic earnings per share by dividing net income attributable to common stockholders for the period by the weighted average shares of its common stock outstanding for that period. Diluted earnings per share areis computed based on the weighted average number of shares outstanding and all potentially dilutive securities. Shares of non-vested restricted common stock and Performance DSUs give rise to potentially dilutive shares of common stock. For the three and six months ended SeptemberJune 30, 2017 and 2016,2022, diluted earnings per share reflected the effect of approximately 17,0001,355,000 and 15,000,1,360,000, respectively, of non-vested shares of restricted common stock and Performance DSUs that were outstanding as of such period.outstanding. For the ninethree and six months ended SeptemberJune 30, 2017 and 2016,2021, diluted earnings per share reflectedwas computed the effectsame as basic earnings per share, because the Company recorded a loss from continuing operations, which would make potentially dilutive shares of approximately 19,000964,000 and 16,000,952,000, respectively, ofrelated to non-vested shares of restricted common stock that were outstanding asand Performance DSUs, anti-dilutive.
Reportable Segments
ASC 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an entity’s reportable segments. As of such period.
Recently Issued Accounting Pronouncements
On May 28, 2014, the Financial Accounting Standards Board, or the FASB, issued ASU 2014-09, Revenue from Contracts with Customers, or ASU 2014-09. The objective of ASU 2014-09 is to clarify the principles for recognizing revenueJune 30, 2022 and to develop a common revenue standard for GAAP. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods and 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. ASU 2014-09 defines a five-step process to achieve this core principle, which may require more judgment and estimates within the revenue recognition process than are required under existing GAAP. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date, or ASU 2015-14. ASU 2015-14 defers the effective date of ASU 2014-09 by one year to fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted as of the original effective date, which was annual reporting periods beginning after December 15, 2016, and the interim periods within that year. On March 17, 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers Principal versus Agent Considerations (Reporting Revenue Gross versus Net), or ASU 2016-08, which clarifies the implementation guidance on principal versus agent considerations in the new revenue recognition standard. ASU 2016-08 clarifies that an entity is a principal when it controls the specified good or service before that good or service is transferred to the customer, and is an agent when it does not control the

specified good or service before it is transferred to the customer. The effective date and transition of this update is the same as the effective date and transition of ASU 2015-14.
As the majority31, 2021, 100% of the Company's revenue is derivedconsolidated revenues from continuing operations were generated from real estate lease contracts,investments in healthcare properties. The Company’s chief operating decision maker evaluates operating performance of healthcare properties on an individual property level, which are aggregated into 1 reportable segment due to their similar economic characteristics.
Derivative Instruments and Hedging Activities
As required by ASC 815, Derivatives and Hedging, or ASC 815, the Company records all derivative instruments at fair value as discussedassets and liabilities on its condensed consolidated balance sheets. The accounting for changes in relation tothe fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation.
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In accordance with the fair value measurement guidance Accounting Standards Update, or ASU, 2016-02, Leases2011-04, Fair Value Measurement, the Company does not expect thatmade an accounting policy election to measure the adoptioncredit risk of ASU 2014-09 or related amendments and modifications will have a material impact on the condensed consolidated financial statements. The Company has preliminarily determined the revenue stream that could be most significantly impacted by this ASU relates to parking revenue. The Company expects that the revenue recognition from parking revenue will be generally consistent with current recognition methods, and therefore does not expect material changes to the condensed consolidated financial statements as a result of adoption. For the three and nine months ended September 30, 2017, parking revenue was less than 10% of consolidated revenue. Recoveries from tenants to be impacted by ASU 2014-09 will not be addressed until the Company's adoption of ASU 2016-02, Leases, considering its revisions to accounting for common area maintenance described below. The Company also continues to evaluate the scope of revenue-related disclosures it expects to provide pursuant to the new requirements. The Company expects to adopt the standard using the modified retrospective approach, which requires cumulative adjustments as of the date of adoption. The Company will adopt the standard on its effective date beginning with the first quarter of 2018.
On February 25, 2016, the FASB issued ASU 2016-02, Leases, or ASU 2016-02. ASU 2016-02 establishes the principles to increase the transparency about the assets and liabilities arising from leases. ASU 2016-02 results in a more faithful representation of the rights and obligations arising from leases by requiring lessees to recognize the lease assets and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions and aligns lessor accounting and sale leaseback transactions guidance more closely to comparable guidance in Topic 606, Revenue from Contractswith Customers, and Topic 610, Other Income. Under ASU 2016-02, a lessee is required to record a right of use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. The Company is a lessee on a limited number of ground leases, which will result in the recognition of a right of use asset and lease liability upon the adoption of ASU 2016-02. Lessor accounting remains largely unchanged, apart from the narrower scope of initial direct costs that can be capitalized. The new standard will result in certain costs, such as legal costs related to lease negotiations, being expensed rather than capitalized. In addition, ASU 2016-02 requires lessors to identify the lease and non-lease components, such as the reimbursement of common area maintenance, contained within each lease. The non-lease components would have to be evaluated under the revenue recognition guidance of ASU 2014-09. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is in process of evaluating the impact ASU 2016-02 will have on the Company's condensed consolidated financial statements.
On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses, or ASU 2016-13. ASU 2016-13 requires more timely recording of credit losses on loans and otherderivative financial instruments that are not accounted for at fair value throughsubject to master netting agreements on a 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 in current 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. basis by counterparty portfolio.
The Company is exposed to variability in expected future cash flows that are attributable to interest rate changes in the processnormal course of evaluating the impact ASU 2016-13 will have on thebusiness. The Company’s condensed consolidated financial statements.primary strategy in entering into derivative contracts is to add stability to future cash flows by managing its exposure to interest rate movements. The Company believes that certain financial statements' accounts will be impacted by the adoptionutilizes derivative instruments, including interest rate swaps, to effectively convert some of ASU 2016-13, including allowances for doubtful accounts with respectits variable rate debt to accounts receivable and straight-line rents receivable. 
On February 23, 2017, the FASB issued ASU 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, or ASU 2017-05. ASU 2017-05 clarifies the scope of asset derecognition guidance and accounting for partial sales of nonfinancial assets. Partial sales of nonfinancial assets are common in the real estate industry and include transactions in which the seller retains an equity interest in the entity that owns the assets or has an equity interest in the buyer. ASU 2017-05 is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within those fiscal years. Early adoption is permitted. The Company is in process of evaluating the impact ASU 2017-05 will have on the Company’s condensed consolidated financial statements.fixed rate debt. The Company does not expectenter into derivative instruments for speculative purposes.
In accordance with ASC 815, the Company designates interest rate swap contracts as cash flow hedges of floating-rate borrowings. For derivative instruments that are designated and qualify as cash flow hedges, the adoptiongains or losses on the derivative instruments are reported as a component of ASU 2017-05 will have a material impact onother comprehensive income in the condensed consolidated financial statements.statements of comprehensive income and are reclassified into earnings in the same line item associated with the forecasted transaction in the same period during which the hedged transactions affect earnings. See additional discussion in Note 12—"Derivative Instruments and Hedging Activities."
On August 28, 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, or ASU 2017-12. The objectives of ASU 2017-12 are to (i) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (ii) reduce the complexity of and simplify the application of hedge accounting by preparers. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018,

and interim periods therein. Early adoption is permitted. The Company is in process of evaluating the impact of ASU 2017-12 will have on the Company’s condensed consolidated financial statements.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the Company’s condensed consolidated financial position or results of operations.
Note 3—Acquisitions and Dispositions
2022 Real Estate InvestmentsProperty Acquisition
During the ninesix months ended SeptemberJune 30, 2017,2022, the Company purchased 155 real estate properties, all ofor the 2022 Acquisitions, which were determined to be asset acquisitions. Upon the acquisitioncompletion of the real estate properties determined to be asset acquisitions,2022 Acquisitions, the Company allocatesallocated the purchase price of such properties to acquired tangible assets, consisting of land, building and buildingsimprovements and tenant improvements, and acquired intangible assets, consisting of in-place leases and above-market leases, and acquired intangible liabilities, consisting of below-market leases, based on athe relative fair value method of allocating all accumulated costs.
The following table summarizes the consideration transferred for the properties acquired2022 Acquisitions during the ninesix months ended SeptemberJune 30, 2017:2022:
Property DescriptionDate AcquiredOwnership PercentagePurchase Price
(amount in thousands)
Yukon Healthcare Facility03/10/2022100%$19,554 
Pleasant Hills Healthcare Facility05/12/2022100%14,303 
Prosser Healthcare Facilities (1)
05/20/2022100%8,593 
Total$42,450 
Property DescriptionDate
Acquired		 Ownership
Percentage		 Purchase Price
(amounts in thousands)
Tempe Data Center01/26/2017 100% $16,224
Norwalk Data Center03/30/2017 100% 58,835
Aurora Healthcare Facility03/30/2017 100% 11,531
Texas Rehab - Austin03/31/2017 100% 36,945
Texas Rehab - Allen03/31/2017 100% 23,691
Texas Rehab - Beaumont03/31/2017 100% 9,649
Charlotte Data Center II05/15/2017 100% 16,646
250 Williams Atlanta Data Center06/15/2017 100% 168,588
Sunnyvale Data Center06/28/2017 100% 38,105
Texas Rehab - San Antonio06/29/2017 100% 14,853
Cincinnati Data Center06/30/2017 100% 10,503
Silverdale Healthcare Facility08/25/2017 100% 9,856
Silverdale Healthcare Facility II09/20/2017 100% 7,144
King of Prussia Data Center09/28/2017 100% 19,885
Tempe Data Center II09/29/2017 100% 15,568
Total    $458,023
(1)     The Prosser Healthcare Facilities consist of 3 healthcare properties.
The following table summarizes management'sthe Company's purchase price allocation of the acquisitions2022 Acquisitions during the ninesix months ended SeptemberJune 30, 2017, based on a relative fair value method allocating all accumulated costs2022 (amounts in thousands):
 Total
Land$54,267
Buildings and improvements363,970
In-place leases56,423
Above market leases1,448
Total assets acquired476,108
Below market leases(17,270)
Liabilities assumed at acquisitions(815)
Total liabilities acquired(18,085)
Net assets acquired$458,023
Total
Land$2,646 
Building and improvements35,021 
Tenant improvements2,040 
In-place leases2,752 
Above-market leases454 
Total assets acquired42,913 
Below-market leases(463)
Total liabilities acquired(463)
Net assets acquired$42,450 
Acquisition fees and costs associated with transactions determined to be asset acquisitions are capitalized. The Company capitalized acquisition fees and costs of approximately $1,503,000 and $0$454,000 related to properties acquired during the three months ended September 30, 2017 and 2016, respectively, and $11,619,000 and $2,037,000 during2022 Acquisitions, which are included in the nine months ended September 30, 2017 and 2016, respectively. The Company expensed acquisition fees and expensesCompany's allocation of approximately of

approximately $1,684,000 and $5,052,000, respectively, for the three and nine months ended September 30, 2016 in connection with the acquisition of properties determined to be business combinations.real estate acquisitions presented above. The total amount of all acquisition fees and costs is limited to 6.0% of the contract purchase price of a property.property, unless the Board determines a higher transaction fee to be commercially competitive, fair and reasonable to the Company. The contract purchase price is the amount actually paid or allocated in respect of the purchase,
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development, construction or improvement of a property exclusive of acquisition fees and costs. ForDuring the three and ninesix months ended SeptemberJune 30, 2017 and 2016,2022, acquisition fees and costs did not exceed 6.0% of the contract purchase price of the Company's acquisitions2022 Acquisitions during such periods.period.
2022 Real Estate Property Disposition
The Company sold 1 land parcel that formerly contained a healthcare property, or the 2022 Disposition, during the six months ended June 30, 2022, for an aggregate sale price of $24,000,000 and generated net proceeds of $22,701,000. For the six months ended June 30, 2022, the Company recognized an aggregate gain on sale of $460,000 in gain on real estate disposition in the condensed consolidated statements of comprehensive income.
The following table summarizes the 2022 Disposition:
Property DescriptionDisposition DateSale Price
(amounts in thousands)		Net Proceeds
(amounts in thousands)
Houston Healthcare Facility II02/10/2022$24,000 

$22,701 
Note 4—Held for Sale and Discontinued Operations
As of December 31, 2021, the Company had no assets or liabilities related to the data center properties. The operations of the data center properties have been classified as income from discontinued operations on the condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2021.
On August 30, 2021, the Company entered into a purchase and sale agreement for the sale of the 2021 Land Held for Sale. The purchase and sale agreement required that the structures on the healthcare property be demolished prior to the sale. The structures on the property were demolished and the property consisted solely of land as of December 31, 2021. The Company classified the land as held for sale as of December 31, 2021, because the land met the held for sale criteria as outlined in Note 2—"Summary of Significant Accounting Policies -Held for Sale and Discontinued Operations." The Company sold the 2021 Land Held for Sale on February 10, 2022. See Note 3—"Acquisitions and Dispositions" for additional information.
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The following table presents the major classes of assets and liabilities of the 2021 Land Held for Sale, classified as assets and liabilities held for sale, net, presented separately in the condensed consolidated balance sheet as of December 31, 2021 (amounts in thousands):
December 31, 2021
Assets:
Real estate:
Land$22,241 
Total real estate, net22,241 
Other assets, net329 
Assets held for sale, net$22,570 
Liabilities:
Accounts payable and other liabilities698 
Liabilities held for sale, net$698 
The operations reflected in income from discontinued operations on the condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2021, were as follows (amounts in thousands):
Three Months Ended
June 30,		Six Months Ended
June 30,
20212021
Revenue:
Rental revenue$26,250 $51,723 
Lease termination revenue7,000 7,000 
Total revenue33,250 58,723 
Expenses:
Rental expenses9,576 15,992 
Depreciation and amortization3,981 11,724 
Total expenses13,557 27,716 
Interest and other expense, net (1)
3,388 6,754 
Income from discontinued operations16,305 24,253 
Net income from discontinued operations attributable to common stockholders$16,305 $24,253 
(1)    Interest expense attributable to discontinued operations for the three and six months ended June 30, 2021 was $3,402,000 and $6,771,000, respectively, which related to notes payable on certain data center properties. On July 22, 2021, in connection with the Data Center Sale, the Company paid off all data center and healthcare related notes payable, with an outstanding principal balance of $450,806,000 at the time of repayment.
Capital expenditures on a cash basis for the six months ended June 30, 2021, were $2,017,000, related to properties classified within discontinued operations.
The Company had no discontinued operations for the six months ended June 30, 2022 and therefore had no significant non-cash operating or investing activities for the properties classified within discontinued operations. There were no significant non-cash operating or investing activities for the properties classified within discontinued operations for the six months ended June 30, 2021.
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Note 5—Acquired Intangible Assets, Net
Acquired intangible assets, net, consisted of the following as of SeptemberJune 30, 20172022 and December 31, 20162021 (amounts in thousands, except weighted average remaining life amounts):
 September 30, 2017 December 31, 2016
In-place leases, net of accumulated amortization of $17,369 and $7,918, respectively (with a weighted average remaining life of 10.9 years and 12.8 years, respectively)$144,948
 $97,232
Above-market leases, net of accumulated amortization of $225 and $58, respectively (with a weighted average remaining life of 3.1 years and 7.4 years, respectively)1,477
 196
Ground lease interest, net of accumulated amortization of $26 and $19, respectively (with a weighted average remaining life of 66.0 years and 66.8 years, respectively)618
 625
 $147,043
 $98,053
 June 30, 2022December 31, 2021
In-place leases, net of accumulated amortization of $74,588 and $66,579, respectively (with a weighted average remaining life of 9.1 years and 9.5 years, respectively)$160,019 $168,012 
Above-market leases, net of accumulated amortization of $5,461 and $4,488, respectively (with a weighted average remaining life of 8.4 years and 8.8 years, respectively)13,108 13,627 
$173,127 $181,639 
The aggregate weighted average remaining life of the acquired intangible assets was 11.09.1 years and 13.19.5 years as of SeptemberJune 30, 20172022 and December 31, 2016,2021, respectively.
Amortization of the acquired intangible assets was $5,676,000 and $5,499,000 for the three months ended SeptemberJune 30, 20172022 and 2016 was $4,422,000 and $1,496,000,2021, respectively, and $11,718,000 and $12,117,000 for the ninesix months ended SeptemberJune 30, 20172022 and 20162021, respectively. Of the $11,718,000 recorded for the six months ended June 30, 2022, $380,000 was $9,625,000 and $3,995,000, respectively.attributable to accelerated amortization due to the First Quarter 2022 Impaired In-Place Lease. Of the $12,117,000 recorded for the six months ended June 30, 2021, $1,120,000 was attributable to accelerated amortization due to the First Quarter 2021 Impaired In-Place Lease. Amortization of the above-market leases is recorded as an adjustment to rental and parking revenue, amortization expense for the in-place leases is included in depreciation and amortization, and amortization expense for the ground lease interestof above-market leases is included inrecorded as an adjustment to rental and parking expensesrevenue in the accompanying condensed consolidated statements of comprehensive income.
Note 5—6—Acquired Intangible Lease Liabilities, Net
Intangible leaseAcquired intangible liabilities, net, consisted of the following as of SeptemberJune 30, 20172022 and December 31, 20162021 (amounts in thousands, except weighted average remaining life amounts):
 September 30, 2017 December 31, 2016
Below-market leases, net of accumulated amortization of $1,771 and $634, respectively (with a weighted average remaining life of 9.1 years and 13.6 years, respectively)$23,006
 $6,873

$23,006
 $6,873
June 30, 2022December 31, 2021
Below-market leases, net of accumulated amortization of $5,177 and $4,444, respectively (with a weighted average remaining life of 8.9 years and 9.3 years, respectively)$12,692 $12,962 
Amortization of the below-market leases was $369,000 and $333,000 for the three months ended SeptemberJune 30, 20172022 and 2016 was $751,000 and $134,000,2021, respectively, and $733,000 and $641,000 for the ninesix months ended SeptemberJune 30, 20172022 and 2016 was $1,137,000 and $402,000,2021, respectively. Amortization of below-market leases is recorded as an adjustment to rental and parking revenue in the accompanying condensed consolidated statements of comprehensive income.

Note 6—Other Assets, Net
Other assets, net consisted of the following as of September 30, 2017 and December 31, 2016 (amounts in thousands):
19
 September 30, 2017 December 31, 2016
Deferred financing costs, related to the revolver portion of the secured credit facility, net of accumulated amortization of $2,984 and $1,789, respectively$2,269
 $3,071
Real estate escrow deposits327
 290
Restricted cash14,244
 6,458
Tenant receivable4,719
 3,126
Straight-line rent receivable16,411
 8,725
Prepaid and other assets5,412
 1,087
Derivative assets1,894
 1,782
 $45,276
 $24,539
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Note 7—Accounts Payable and Other LiabilitiesLeases
Accounts payable and other liabilities as of September 30, 2017 and December 31, 2016, were comprised of the following (amounts in thousands):
 September 30, 2017 December 31, 2016
Accounts payable and accrued expenses$10,387
 $7,657
Accrued interest expense2,193
 945
Accrued property taxes4,152
 1,164
Distributions payable to stockholders5,574
 4,336
Tenant deposits822
 1,551
Deferred rental income2,668
 733
Derivative liabilities613
 798
 $26,409
 $17,184
Note 8—Notes Payable and Secured Credit Facility
The Company's debt outstanding as of September 30, 2017 and December 31, 2016 consisted of the following (amounts in thousands):
 September 30, 2017 December 31, 2016
Notes payable:   
Fixed rate notes payable$214,700
 $51,000
Variable rate notes payable fixed through interest rate swaps186,590
 71,540
Variable rate notes payable12,545
 30,450
Total notes payable, principal amount outstanding413,835
 152,990
Unamortized deferred financing costs related to notes payable(4,038) (1,945)
Total notes payable, net of deferred financing costs409,797
 151,045
Secured credit facility:   
Revolving line of credit120,000
 120,000
Term loan100,000
 100,000
Total secured credit facility, principal amount outstanding220,000
 220,000
Unamortized deferred financing costs related to the term loan of the secured credit facility(676) (876)
Total secured credit facility, net of deferred financing costs219,324
 219,124
Total debt outstanding$629,121
 $370,169

Significant debt activity since December 31, 2016, excluding scheduled principal payments, includes:
During the nine months ended September 30, 2017, the Company drew $175,000,000 and repaid $175,000,000 on its secured credit facility.
During the nine months ended September 30, 2017, the Company increased the borrowing base availability under the secured credit facility by $106,531,000 by adding 11 properties to the aggregate pool availability and removed a property from the collateralized pool, which decreased the aggregate pool availability by $18,645,000. This resulted in the net increase of the borrowing base availability of $87,886,000.
As of September 30, 2017, the Company had an aggregate pool availability under the secured credit facility of $384,419,000 and an aggregate outstanding principal balance of $220,000,000. As of September 30, 2017, $164,419,000 remained to be drawn on the secured credit facility.
During the nine months ended September 30, 2017, the Company entered into six notes payable collateralized by real estate assets in the principal amount of $260,845,000 at initiation of the respective loans.
During the nine months ended September 30, 2017, the Company entered into four interest rate swap agreements to effectively fix the London Interbank Offered Rate, or LIBOR, on $75,000,000 of the term loan of the secured credit facility and two interest rate swap agreements of variable rate notes payable in the aggregate amount of $84,600,000.
The principal payments due on the notes payable and secured credit facility for the three months ending December 31, 2017 and for each of the next four years ending December 31 and thereafter, are as follows (amounts in thousands):
Year Total Amount
Three months ending December 31, 2017 $65
2018 120,314
2019 101,880
2020 4,542
2021 154,971
Thereafter 252,063
  $633,835

Note 9—Related-Party Transactions and Arrangements
The Company reimburses the Advisor and its affiliates for organization and offering expenses it incurs on the Company’s behalf, but only to the extent the reimbursement would not cause the selling commissions, dealer manager fees, distribution and servicing fees and other organization and offering expenses to exceed 15% of the gross proceeds of the Initial Offering. The Company expects that organization and offering expenses associated with the Initial Offering (other than selling commissions, dealer manager fees and distribution and servicing fees) will be approximately 1.90% of the gross proceeds. As of September 30, 2017, since inception, the Advisor and its affiliates incurred approximately $16,896,000 on the Company’s behalf in offering costs, the majority of which was incurred by the Dealer Manager. Of this amount, approximately $566,000 of other organization and offering costs remained accrued as of September 30, 2017. As of September 30, 2017, since inception, the Advisor paid approximately $188,000 to an affiliate of the Dealer Manager in other offering costs on the Company's behalf. Other organization expenses are expensed as incurred and offering costs are charged to stockholders’ equity as incurred.
The Company pays to the Advisor 2.0% of the contract purchase price of each property or asset acquired. For the three months ended September 30, 2017 and 2016, the Company incurred approximately $1,019,000 and $1,590,000, respectively, and for the nine months ended September 30, 2017 and 2016, the Company incurred $8,975,000 and $5,760,000, respectively, in acquisition fees to the Advisor or its affiliates. In addition, the Company reimburses the Advisor for acquisition expenses incurred in connection with the selection and acquisition of properties or real estate-related investments (including expenses relating to potential investments that the Company does not close), such as legal fees and expenses, costs of real estate due diligence, appraisals, non-refundable option payments on properties not acquired, travel and communications expenses, accounting fees and expenses and title insurance premiums, whether or not the property was acquired. The Company expects these expenses will be approximately 0.75% of the purchase price of each property or real estate-related investment.
The Company pays to the Advisor an asset management fee calculated on a monthly basis in an amount equal to 1/12th of 0.75% of gross assets (including amounts borrowed), which is payable monthly in arrears. For the three months ended September 30, 2017 and 2016, the Company incurred approximately $2,698,000 and $1,227,000, respectively, and for the nine months ended September 30, 2017 and 2016, the Company incurred approximately $7,055,000 and $3,240,000, respectively, in asset management fees.
In connection with the rental, leasing, operation and management of the Company’s properties, the Company pays the Property Manager and its affiliates aggregate fees equal to 3.0% of gross revenues from the properties managed, or property management fees. The Company will reimburse the Property Manager and its affiliates for property-level expenses that any of them pay or incur on the Company’s behalf, including salaries, bonuses and benefits of persons employed by the Property Manager and its affiliates except for the salaries, bonuses and benefits of persons who also serve as one of its executive officers. The Property Manager and its affiliates may subcontract the performance of their duties to third parties and pay all or a portion of the property management fee to the third parties with whom they contract for these services. If the Company contracts directly with third parties for such services, it will pay them customary market fees and may pay the Property Manager an oversight fee equal to 1.0% of the gross revenues of the properties managed. In no event will the Company pay the Property Manager or any affiliate both a property management fee and an oversight fee with respect to any particular property. The Company also will pay the Property Manager a separate fee for the one-time initial rent-up, leasing-up of newly constructed properties or re-leasing to existing tenants. For the three months ended September 30, 2017 and 2016, the Company incurred approximately $913,000 and $353,000, respectively, and for the nine months ended September 30, 2017 and 2016, the Company incurred approximately $2,322,000 and $964,000, respectively, in property management fees to the Property Manager, which are recorded in rental and parking expenses in the accompanying condensed consolidated statements of comprehensive income. For the three and nine months ended September 30, 2017, the Company incurred $884,000 and $907,000, respectively, in leasing commissions to the Property Manager. As of September 30, 2016, the Company had not incurred any leasing commissions to the Property Manager. Leasing commission fees are capitalized in other assets, net in the accompanying condensed consolidated balance sheets.
For acting as general contractor and/or construction manager to supervise or coordinate projects or to provide major repairs or rehabilitation on our properties, the Company may pay the Property Manager up to 5.0% of the cost of the projects, repairs and/or rehabilitation, as applicable, or construction management fees. For the three months ended September 30, 2017 and 2016, the Company incurred approximately $172,000 and $265,000, respectively, and for the nine months ended September 30, 2017 and 2016, the Company incurred approximately $575,000 and $265,000, respectively, in construction management fees to the Property Manager. Construction management fees are capitalized in real estate, net in the accompanying condensed consolidated balance sheets.
The Company reimburses the Advisor for all expenses it paid or incurred in connection with the services provided to the Company, subject to certain limitations. Expenses in excess of the operating expenses in the four immediately preceding quarters that exceeds the greater of (a) 2.0% of average invested assets or (b) 25% of net income, subject to certain adjustments, will not be reimbursed unless the independent directors determine such excess expenses are justified. The Company will not reimburse the Advisor for personnel costs in connection with services for which the Advisor receives an

acquisition fee or a disposition fee. For the three months ended September 30, 2017 and 2016, the Advisor allocated approximately $381,000 and $337,000, respectively, and for the nine months ended September 30, 2017 and 2016, the Advisor allocated $1,228,000 and $935,000 respectively, in operating expenses to the Company, which are recorded in general and administrative expenses in the accompanying condensed consolidated statements of comprehensive income.
On May 15, 2017 the Advisor employed Gael Ragone, who is the daughter of John E. Carter, our chief executive officer and chairman of our board of directors, as Vice President of Product Management of Carter Validus Advisors II, LLC. The Company directly reimburses the Advisor any amounts of Gael's salary that are allocated to the Company. For the three and nine months ended September 30, 2017, the Advisor allocated approximately $41,000 and $58,000, respectively, which are included in general and administrative expenses in the Company's condensed consolidated statements of comprehensive income.
The Company will pay its Advisor or its affiliates, if it provides a substantial amount of services (as determined by a majority of the Company’s independent directors) in connection with the sale of properties, a disposition fee equal to up to the lesser of 1.0% of the contract sales price and one-half of the total brokerage commission paid if a third party broker is also involved, without exceeding the lesser of 6.0% of the contract sales price or a reasonable, customary and competitive real estate commission. As of September 30, 2017, the Company has not incurred any disposition fees to the Advisor or its affiliates.
Upon the sale of the Company, the Advisor will receive 15% of the remaining net sale proceeds after return of capital contributions plus payment to investors of a 6.0% annual cumulative, non-compounded return on the capital contributed by investors, or the subordinated participation in net sale proceeds. As of September 30, 2017, the Company has not incurred any subordinated participation in net sale proceeds to the Advisor or its affiliates.
Upon the listing of the Company’s shares on a national securities exchange, the Advisor will receive 15.0% of the amount by which the sum of the Company’s adjusted market value plus distributions exceeds the sum of the aggregate capital contributed by investors plus an amount equal to a 6.0% annual cumulative, non-compounded return to investors, or the subordinated incentive listing fee. As of September 30, 2017, the Company has not incurred any subordinated incentive listing fees to the Advisor or its affiliates.
Upon termination or non-renewal of the advisory agreement, with or without cause, the Advisor will be entitled to receive subordinated termination fees from the Operating Partnership equal to 15% of the amount by which the sum of the Company’s adjusted market value plus distributions exceeds the sum of the aggregate capital contributed by investors plus an amount equal to an annual 6.0% cumulative, non-compounded return to investors. In addition, the Advisor may elect to defer its right to receive a subordinated termination fee upon termination until either shares of the Company’s common stock are listed and traded on a national securities exchange or another liquidity event occurs. As of September 30, 2017, the Company has not incurred any subordinated termination fees to the Advisor or its affiliates.
The Company pays the Dealer Manager selling commissions of up to 7.0% of the gross offering proceeds per Class A share and up to 3.0% of gross offering proceeds per Class T share. All selling commissions are expected to be re-allowed to participating broker-dealers. The Company does not pay selling commissions with respect to Class I shares and shares of any class sold pursuant to the DRIP. In addition, the Company pays the Dealer Manager a dealer manager fee of up to 3.0% of gross offering proceeds from the sale of Class A and Class T shares. The Dealer Manager may receive up to 2.0% of the gross offering proceeds from the sale of Class I shares as a dealer manager fee, of which 1.0% will be funded by our Advisor without reimbursement from us. The 1.0% of the dealer manager fee paid from offering proceeds will be waived in the event an investor purchases Class I shares through a registered investment advisor that is not affiliated with a broker dealer. The dealer manager fee may be partially re-allowed to participating broker-dealers. No dealer manager fees will be paid in connection with purchases of shares of any class made pursuant to the DRIP. For the three months ended September 30, 2017 and 2016, the Company incurred approximately $6,065,000 and $4,994,000, respectively, and for the nine months ended September 30, 2017 and 2016, the Company incurred approximately $16,323,000 and $19,938,000, respectively, for selling commissions and dealer manager fees in connection with the Initial Offering to the Dealer Manager.
The Company pays the Dealer Manager a distribution and servicing fee with respect to its Class T shares that are sold in the primary offering of the Initial Offering that accrues daily in an amount equal to 1/365th of 1.0% of the most recent offering price per Class T share sold in the primary offering on a continuous basis from year to year; provided, however, that upon the termination of the primary offering of the Initial Offering, the distribution and servicing fee will accrue daily in an amount equal to 1/365th of 1.0% of the most recent estimated NAV per Class T share on a continuous basis from year to year. The Dealer Manager will reallow all of the distribution and servicing fees with respect to Class T shares sold in the primary offering of the Initial Offering to participating broker-dealers; provided, however, effective June 1, 2017, a participating broker-dealer may give written notice to the Dealer Manager that it waives all or a portion of the reallowance of the distribution and servicing fee, which waiver shall be irrevocable and will not retroactively apply to Class T shares that were previously sold through such participating broker-dealer. Termination of such payment will commence on the earliest to occur of the following: (i) a listing of the Class T shares on a national securities exchange; (ii) following the completion of the Initial Offering, the date on which

total underwriting compensation in the Initial Offering equals (a) 10% of the gross proceeds from our primary offering of the Initial Offering less (b) the total amount of distribution and servicing fees waived by participating broker-dealers; (iii) the date on which there are no longer any Class T shares outstanding; (iv) the fourth anniversary of the last day of the fiscal quarter in which the Company's primary offering of the Initial Offering terminates; (v) with respect to a Class T share sold in the primary offering of the Initial Offering, the date on which a participating broker-dealer receives (a) total underwriting compensation equal to 10% of the gross offering proceeds of such Class T share less (b) the amount of any waived distribution and servicing fees by such participating broker-dealer; or (vi) the date on which the holder of such Class T share or its agent notifies the Company or its agent that he or she is represented by a new participating broker-dealer; provided that the Company will continue paying the distribution and servicing fee, which shall be re-allowed to the new participating broker-dealer, if the new participating broker-dealer enters into a participating broker-dealer agreement with the Dealer Manager or otherwise agrees to provide the services set forth in the dealer manager agreement.
The distribution and servicing fee is paid monthly in arrears. The distribution and servicing fee will not be payable with respect to Class T shares issued under the DRIP or in connection with Class A shares and Class I shares. For the three months ended September 30, 2017 and 2016, the Company incurred approximately $2,572,000 and $1,420,000, respectively, and for the nine months ended September 30, 2017 and 2016, the Company incurred approximately $7,031,000 and $1,420,000, respectively, in distribution and servicing fees to the Dealer Manager in connection with the Initial Offering.
Accounts Payable Due to Affiliates
The following amounts were due to affiliates as of September 30, 2017 and December 31, 2016 (amounts in thousands):
Entity Fee September 30, 2017 December 31, 2016
Carter Validus Advisors II, LLC and its affiliates Asset management fees $928
 $627
Carter Validus Real Estate Management Services II, LLC Property management fees 439
 252
Carter Validus Real Estate Management Services II, LLC Construction management fees 67
 323
Carter Validus Advisors II, LLC and its affiliates General and administrative costs 156
 138
Carter Validus Advisors II, LLC and its affiliates Offering costs 566
 289
SC Distributors, LLC Distribution and servicing fees 11,506
 5,750
Carter Validus Advisors II, LLC and its affiliates Acquisition expenses and fees 7
 5
Carter Validus Real Estate Management Services II, LLC Leasing commissions 883
 —

   $14,552
 $7,384
Note 10—Segment Reporting
Management reviews the performance of individual properties and aggregates individual properties based on operating criteria into two reportable segments—commercial real estate investments in data centers and healthcare, and makes operating decisions based on these two reportable segments. The Company’s commercial real estate investments in data centers and healthcare are based on certain underwriting assumptions and operating criteria, which are different for data centers and healthcare. There were no intersegment sales or transfers during the nine months ended September 30, 2017 and 2016.
The Company evaluates performance based on net operating income of the individual properties in each segment. Net operating income, a non-GAAP financial measure, is defined as total revenues, less rental and parking expenses, which excludes depreciation and amortization, general and administrative expenses, acquisition related expenses, asset management fees and interest expense, net. The Company believes that segment net operating income serves as a useful supplement to net income because it allows investors and management to measure unlevered property-level operating results and to compare operating results to the operating results of other real estate companies between periods on a consistent basis. Segment net operating income should not be considered as an alternative to net income determined in accordance with GAAP as an indicator of financial performance, and accordingly, the Company believes that in order to facilitate a clear understanding of the consolidated historical operating results, segment net operating income should be examined in conjunction with net income as presented in the accompanying condensed consolidated financial statements and data included elsewhere in this Quarterly Report on Form 10-Q.
General and administrative expenses, acquisition related expenses, asset management fees, depreciation and amortization and interest expense, net are not allocated to individual segments for purposes of assessing segment performance.

Non-segment assets primarily consist of corporate assets, including cash and cash equivalents, real estate and escrow deposits, deferred financing costs attributable to the revolving line of credit portion of the Company's secured credit facility and other assets not attributable to individual properties.

Summary information for the reportable segments during the three and nine months ended September 30, 2017 and 2016, is as follows (amounts in thousands):
 Data Center Healthcare Three Months Ended
September 30, 2017
Revenue:     
Rental, parking and tenant reimbursement revenue$19,882
 $16,323
 $36,205
Expenses:     
Rental and parking expenses(6,092) (2,276) (8,368)
Segment net operating income$13,790
 $14,047
 27,837
      
Expenses:     
General and administrative expenses    (1,062)
Asset management fees    (2,698)
Depreciation and amortization    (11,852)
Income from operations    12,225
Interest expense, net    (6,786)
Net income attributable to common stockholders    $5,439
 Data Center Healthcare Three Months Ended
September 30, 2016
Revenue:     
Rental, parking and tenant reimbursement revenue$2,497
 $11,097
 $13,594
Expenses:     
Rental and parking expenses(440) (1,354) (1,794)
Segment net operating income$2,057
 $9,743
 11,800
      
Expenses:     
General and administrative expenses    (836)
Acquisition related expenses    (1,821)
Asset management fees    (1,227)
Depreciation and amortization    (4,782)
Income from operations    3,134
Interest expense, net    (626)
Net income attributable to common stockholders    $2,508

 Data Centers Healthcare Nine Months Ended
September 30, 2017
Revenue:     
Rental, parking and tenant reimbursement revenue$41,347
 $46,482
 $87,829
Expenses:     
Rental and parking expenses(11,779) (6,815) (18,594)
Segment net operating income$29,568
 $39,667
 69,235
      
Expenses:     
General and administrative expenses    (3,199)
Asset management fees    (7,055)
Depreciation and amortization    (28,487)
Income from operations    30,494
Interest expense, net    (15,623)
Net income attributable to common stockholders    $14,871
 Data Centers Healthcare Nine Months Ended
September 30, 2016
Revenue:     
Rental, parking and tenant reimbursement revenue$6,211
 $31,010
 $37,221
Expenses:     
Rental and parking expenses(1,011) (4,044) (5,055)
Segment net operating income$5,200
 $26,966
 32,166

     
Expenses:     
General and administrative expenses    (2,358)
Acquisition related expenses    (5,432)
Asset management fees    (3,240)
Depreciation and amortization    (12,948)
Income from operations    8,188
Interest expense, net    (2,237)
Net income attributable to common stockholders    $5,951

Assets by each reportable segment as of September 30, 2017 and December 31, 2016 are as follows (amounts in thousands):
 September 30, 2017 December 31, 2016
Assets by segment:   
Data centers$739,055
 $362,969
Healthcare786,952
 653,416
All other60,076
 53,653
Total assets$1,586,083
 $1,070,038
Capital additions and acquisitions by reportable segments for the nine months ended September 30, 2017 and 2016 are as follows (amounts in thousands):
 Nine Months Ended
September 30,
 2017 2016
Capital additions and acquisitions by segment:   
Data centers$344,458
 $134,831
Healthcare138,611
 109,278
Total capital additions and acquisitions$483,069
 $244,109
Note 11—Future Minimum RentLessor
Rental IncomeRevenue
The Company’s real estate assetsproperties are leased to tenants under operating leases with varying terms. TheTypically, the leases frequently have provisions to extend the terms of the lease agreements. The Company retains substantially all of the risks and benefits of ownership of the real estate assetsproperties leased to tenants.
The future minimumFuture rent to be received from the Company’s investmentCompany's investments in real estate assets under non-cancelablethe terms of non-cancellable operating leases in effect as of June 30, 2022, for the threesix months ending December 31, 20172022, and for each of the next four years ending December 31 and thereafter, are as follows (amounts in thousands):
YearAmount
Six months ending December 31, 2022$81,419 
2023166,498 
2024167,743 
2025163,655 
2026156,685 
Thereafter1,016,890 
Total$1,752,890 
Year Amount
Three months ending December 31, 2017 $26,926
2018 108,666
2019 109,635
2020 109,043
2021 110,560
Thereafter 866,506
  $1,331,336

Rental ExpenseLessee
The Company is subject to various non-cancellable operating and finance lease agreements, inclusive of 16 ground operating leases, 1 corporate-related operating lease, 1 ground finance lease and 1 office operating lease related to the Company’s principal executive office in Tampa, Florida, or the Corporate Office Lease. Of the 16 ground operating leases, 4 do not have corresponding operating lease liabilities, because the Company did not have future payment obligations at the acquisition of these leases.
The Company has 1 non-cancellable lease agreement that is classified as a finance lease, as defined in ASC 842, Leases, related to a ground lease obligationsof a healthcare property. Ground lease expenses for finance lease payments are recognized as amortization expense of the right-of-use asset - finance lease and interest expense on the finance lease liability over the lease term.
The Company's operating leases and the finance lease do not provide an implicit interest rate. In order to calculate the present value of the remaining operating and finance lease payments, the Company used incremental borrowing rates, or IBRs, adjusted for a number of factors. The determination of an appropriate IBR involves multiple inputs and judgments. The Company determined its IBRs considering the general economic environment, the Company's credit rating and various financing and asset specific adjustments to ensure the IBRs are appropriate for the intended use of the underlying operating or finance leases.
On January 22, 2022, the Company's rent obligation for its new principal executive office in Tampa, Florida commenced. Pursuant to the office operating lease agreement, the aggregate present value of future rent payments is $3,440,000, which was recorded in right-of-use assets - operating leases on the condensed consolidated balance sheets.
On March 1, 2022, the Company's rent commenced on a ground operating lease agreement for a development property that generally require fixed annual rentalwas placed in service during the three months ended March 31, 2022, for an aggregate present value of future rent payments of $309,000, which was recorded in right-of-use assets - operating leases on the condensed consolidated balance sheets.
As of June 30, 2022, the Company's IBRs for its operating leases were between 2.5% and may also include escalation clauses6.4%, with a weighted average IBR of 5.1%. The weighted average remaining lease term for the Company's operating leases attributable to continuing operations was 33.9 years and renewal options.36.1 years as of June 30, 2022 and December 31, 2021, respectively.
As of June 30, 2022, the Company's IBR for its finance lease was 5.3%. The remaining lease term for the Company's finance lease was 41.9 years and 42.4 years as of June 30, 2022 and December 31, 2021, respectively.
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The future minimum rent obligationspayments, discounted by the Company's IBRs, under non-cancelable groundnon-cancellable leases in effect as of June 30, 2022, for the threesix months ending December 31, 20172022, and for each of the next four years ending December 31 and thereafter, are as follows (amounts in thousands):
YearOperatingFinance
Six months ending December 31, 2022$923 $68 
20231,863 136 
20241,930 141 
20251,950 143 
20261,897 143 
Thereafter68,842 6,441 
Total undiscounted rental payments77,405 7,072 
Less imputed interest(49,936)(4,434)
Total lease liabilities$27,469 $2,638 
The following table provides details of the Company's total lease costs and reimbursements for the three and six months ended June 30, 2022 and 2021 (amounts in thousands):
Three Months Ended
June 30,		Six Months Ended
June 30,
Location in Condensed Consolidated Statements of Comprehensive Income2022202120222021
Operating lease costs:
Ground lease costsRental expenses$435 $422 $867 $844 
Ground lease reimbursements (1)
Rental revenue304 298 608 596 
Ground lease costs (2)
Income from discontinued operations— 169 — 389 
Ground lease reimbursements (1),(2)
Income from discontinued operations— 103 — 206 
Corporate Office Lease costsGeneral and administrative expenses139 264 306 528 
Corporate-related operating lease costsGeneral and administrative expenses33 — 71 — 
Finance lease costs:
Amortization of right-of-use assetDepreciation and amortization$5 $4 $10 $9 
Interest on lease liabilityInterest and other expense, net35 29 70 67 
(1)The Company is reimbursed by tenants who sublease the ground leases.
(2)Amounts relate to lease costs and reimbursements attributable to 2 operating ground leases related to data center properties disposed of in the Data Center Sale on July 22, 2021.
Note 8—Other Assets, Net
Other assets, net, consisted of the following as of June 30, 2022 and other assets, net, excluding assets held for sale, net, consisted of the following as of December 31, 2021 (amounts in thousands):
 June 30, 2022December 31, 2021
Deferred financing costs, related to the revolver portion of the credit facility, net of accumulated amortization of $381 and $8,332, respectively$3,686 $482 
Leasing commissions, net of accumulated amortization of $135 and $121, respectively808 780 
Restricted cash167 521 
Tenant receivables1,290 1,851 
Straight-line rent receivable60,666 55,725 
Real estate deposits1,134 — 
Prepaid and other assets3,809 4,835 
Derivative assets13,674 2,171 
$85,234 $66,365 
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Year Amount
Three months ending December 31, 2017 $9
2018 38
2019 38
2020 38
2021 38
Thereafter 2,481
  $2,642
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Note 9—Accounts Payable and Other Liabilities
Accounts payable and other liabilities consisted of the following as of June 30, 2022 and accounts payable and other liabilities, excluding liabilities held for sale, net, consisted of the following as of December 31, 2021 (amounts in thousands):
 June 30, 2022December 31, 2021
Accounts payable and accrued expenses$4,620 $8,431 
Accrued interest expense1,233 1,626 
Accrued property taxes2,515 2,913 
Accrued personnel costs2,471 4,198 
Distribution and servicing fees— 182 
Distributions payable to stockholders7,435 7,355 
Performance DSUs distributions payable447 394 
Tenant deposits875 802 
Deferred rental income7,095 7,100 
Contingent consideration1,160 978 
Derivative liabilities3 5,618 
$27,854 $39,597 
Note 12—10—Credit Facility
The Company's outstanding credit facility as of June 30, 2022 and December 31, 2021 consisted of the following (amounts in thousands):
June 30, 2022December 31, 2021
Variable rate term loans fixed through interest rate swaps485,000 400,000 
Variable rate term loans20,000 100,000 
Total credit facility, principal amount outstanding505,000 500,000 
Unamortized deferred financing costs related to the term loan credit facility(2,728)(3,226)
Total credit facility, net of deferred financing costs$502,272 $496,774 
Significant activities regarding the credit facility during the six months ended June 30, 2022, and subsequent, include:
•On February 15, 2022, the Company, the Operating Partnership and certain of the Company's subsidiaries, entered into a senior unsecured revolving credit agreement, or the Revolving Credit Agreement, with Truist Bank, as Administrative Agent for the lenders, for aggregate commitments available of up to $500,000,000, which may be increased, subject to lender approval, through incremental term loans and/or revolving loan commitments in an aggregate amount not to exceed $1,000,000,000. The maturity date for the Revolving Credit Agreement is February 15, 2026, which, at the Company's election, may be extended for a period of six-months on no more than two occasions, subject to certain conditions, including the payment of an extension fee. The Revolving Credit Agreement was entered into to replace the Company's prior $500,000,000 revolving line of credit, which had a maturity date of April 27, 2022, with the option to extend for one twelve-month period. The Company did not exercise the option to extend. Upon closing of the Revolving Credit Agreement, the Company extinguished all commitments associated with the prior revolving line of credit. Simultaneously with the Revolving Credit Agreement’s execution, on February 15, 2022, the Company, the Operating Partnership, and certain of the Company's subsidiaries, entered into the senior unsecured term loan agreement, or the 2024 Term Loan Agreement, with Truist Bank, as Administrative Agent for the lenders. The 2024 Term Loan Agreement was fully funded at closing, and is made up of aggregate commitments of $300,000,000, which may be increased, subject to lender approval, to an aggregate amount not to exceed $600,000,000. The 2024 Term Loan Agreement has a maturity date of December 31, 2024, and, at the Company's election, may be extended for a period of six-months on no more than two occasions, subject to the satisfaction of certain conditions, including the payment of an extension fee. The 2024 Term Loan Agreement was entered into to replace the Company's prior term loan, which was paid off in its entirety upon closing of the Revolving Credit Agreement and the 2024 Term Loan Agreement.
•In connection with the repayment of our prior credit facility, the Company recognized a loss on extinguishment of debt of $3,367,000 during the three months ended March 31, 2022, which included loan costs in the amount of $4,000 and
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accelerated unamortized debt issuance costs of $3,363,000. The loss on extinguishment of debt was recognized in interest and other expense, net, in the accompanying condensed consolidated statements of comprehensive income.
•On February 28, 2022, the Company repaid $30,000,000 on its Revolving Credit Agreement primarily with proceeds from the 2022 Disposition.
•On March 10, 2022, the Company drew $15,000,000 on its Revolving Credit Agreement related to the 2022 Acquisitions.
•On April 8, 2022, the Company entered into 5 interest rate swap agreements, 2 of which have an effective date of May 2, 2022 and an aggregate notional amount of $85,000,000, and 3 of which have an effective date of May 1, 2023 and an aggregate notional amount of $150,000,000.
•On May 12, 2022, the Company drew $20,000,000 on its Revolving Credit Agreement related to the 2022 Acquisitions.
•On May 17, 2022, the Company, the Operating Partnership and certain of the Company’s subsidiaries, entered into a new senior unsecured term loan agreement, or the 2028 Term Loan Agreement, with Truist Bank, as Administrative Agent for the lenders, for aggregate commitments of up to $275,000,000, of which $205,000,000 was drawn at closing to pay down the Company’s Revolving Credit Agreement in its entirety. The remainder of the commitments were available for three months following the closing date, or the Availability Period, and were available in no more than three subsequent draws with a minimum of $20,000,000 per draw, or the remaining commitments available. After the Availability Period, the undrawn portion was no longer available. If the committed amount was not fully drawn within 60 days of closing, the Company was required to pay a fee to the lenders, calculated as 0.25% per annum on the average daily amount of the undrawn portion, payable quarterly in arrears, until the earlier of (i) the date when the commitments have been funded in full, or (ii) August 17, 2022. The 2028 Term Loan Agreement may be increased, subject to lender approval, to an aggregate amount not to exceed $500,000,000 and has a maturity date of January 31, 2028. The 2028 Term Loan Agreement is pari passu with the Company’s Revolving Credit Agreement and 2024 Term Loan Agreement. The Company refers to the 2028 Term Loan Agreement, the Revolving Credit Agreement and the 2024 Term Loan Agreement, collectively, as the “Unsecured Credit Facility,” which has aggregate commitments available of $1,075,000,000. At the Company’s election, loans under the Unsecured Credit Facility may be made as Base Rate Loans or Secured Overnight Financing Rate, or SOFR, Loans. The applicable margin for loans that are Base Rate Loans is adjustable based on a total leverage ratio, ranging from 0.25% to 0.90%. The applicable margin for loans that are SOFR Loans is adjustable based on a total leverage ratio, ranging from 1.25% to 1.90%. In addition to interest, the Company is required to pay a fee on the unused portion of the lenders’ commitments under the Revolving Credit Agreement at a rate per annum equal to 0.20% if the average daily amount outstanding under the Revolving Credit Agreement is less than 50% of the aggregate commitments, or 0.15% if the average daily amount outstanding under the Revolving Credit Agreement is equal to or greater than 50% of the aggregate commitments. The unused fee is payable quarterly in arrears.
•On July 12, 2022 and July 20, 2022, the Company drew $50,000,000 and $20,000,000, respectively, on the 2028 Term Loan Agreement, to fund two acquisitions in July 2022. See Note 15—"Subsequent Events" for additional information. As of July 20, 2022, the 2028 Term Loan Agreement commitments were fully funded.
The principal payments due on the Unsecured Credit Facility as of June 30, 2022, for the six months ending December 31, 2022, and for each of the next four years ending December 31 and thereafter, are as follows (amounts in thousands):
YearAmount
Six months ending December 31, 2022$— 
2023— 
2024300,000 
2025— 
2026— 
Thereafter205,000 
$505,000 
Note 11—Fair Value
Notes payable—Fixed RateCredit facility—The estimated fair value of notes payable—fixed rate measured using quoted prices and observable inputs from similar liabilitiesthe credit facility (Level 2) was approximately $206,102,000$474,402,000 and $49,930,000$492,360,000 as of SeptemberJune 30, 20172022 and December 31, 2016,2021, respectively, as compared to the outstanding principal of $214,700,000$505,000,000 and $51,000,000$500,000,000 as of SeptemberJune 30, 20172022 and December 31, 2016,2021, respectively. The estimated fair value of notes payable—variable rate fixed through interest rate swap agreements (Level 2) was approximately $181,890,000 and $69,247,000 as of September 30, 2017 and December 31, 2016, respectively, as compared to the outstanding principal of $186,590,000 and $71,540,000 as of September 30, 2017 and December 31, 2016, respectively.
Notes payable—Variable—The outstanding principal of the notes payable—variable was $12,545,000 and $30,450,000 as of September 30, 2017 and December 31, 2016, respectively, which approximated its fair value. The fair value of the Company's variable rate notes payable is estimated based on the interest rates currently offered to the Company by financial institutions.
Secured credit facility—The outstanding principal of the secured credit facility—variable was $120,000,000 and $195,000,000, which approximated its fair value as of September 30, 2017 and December 31, 2016, respectively. The fair value of the Company's variable rate secured credit facility is estimated based on the interest rates currently offered to the Company by its financial institutions. The estimated fair value
23
Table of the secured credit facility—variable rate fixed through interest rate swap agreements (Level 2) was approximately $96,208,000 and $24,195,000 as of September 30, 2017 and December 31, 2016, respectively, as compared to the outstanding principal of $100,000,000 and $25,000,000 as of September 30, 2017 and December 31, 2016, respectively.Contents
Derivative instruments—Considerable judgment is necessary to develop estimated fair values of financial instruments. Accordingly, the estimates presented herein are not necessarily indicative of the amount the Company could realize, or be liable for, on disposition of the financial instruments. The Company has determined that the majority of the inputs used to value its interest rate swaps fall within Level 2 of the fair value hierarchy. The credit valuation adjustments associated with these instruments utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and the respective counterparty. However, as of SeptemberJune 30, 2017,2022, 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 its interest rate swaps. As a result, the Company determined that its interest rate swaps valuation in its entirety is classified in Level 2 of the fair value hierarchy.

See Note 12—"Derivative Instruments and Hedging Activities" for further discussion of the Company's derivative instruments.
The following table showstables show the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis as of SeptemberJune 30, 20172022 and December 31, 20162021 (amounts in thousands):
 June 30, 2022
 Fair Value Hierarchy 
 Quoted Prices in Active
Markets for Identical
Assets (Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs (Level 3)		Total Fair
Value
Assets:
Derivative assets$— $13,674 $— $13,674 
Total assets at fair value$— $13,674 $— $13,674 
Liabilities:
Derivative liabilities$— $3 $— $3 
Total liabilities at fair value$— $3 $— $3 
 December 31, 2021
 Fair Value Hierarchy 
 Quoted Prices in Active
Markets for Identical
Assets (Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs (Level 3)		Total Fair
Value
Assets:
Derivative assets$— $2,171 $— $2,171 
Total assets at fair value$— $2,171 $— $2,171 
Liabilities:
Derivative liabilities$— $5,618 $— $5,618 
Total liabilities at fair value$— $5,618 $— $5,618 
Derivative assets and liabilities are reported in the condensed consolidated balance sheets as other assets, net, and accounts payable and other liabilities, respectively.
Real estate assets—As discussed in Note 2—"Summary of Significant Accounting Policies," during the first quarter of 2022, real estate assets related to the First Quarter 2022 Impaired Property were determined to be impaired. The carrying value of the property was reduced to its estimated fair value of $14,639,000, resulting in an impairment charge of $7,109,000. The fair value of the First Quarter 2022 Impaired Property was determined based on a market approach model using a signed letter of intent to estimate the fair value and classified within Level 2 of the fair value hierarchy.
During the first quarter of 2021, real estate assets related to the First Quarter 2021 Impaired Property were determined to be impaired. The carrying value of the property was reduced to its estimated fair value of $17,145,000, resulting in an impairment charge of $10,423,000. The property was subsequently sold in the fourth quarter of 2021.
During the second quarter of 2021, real estate assets related to the Second Quarter 2021 Impaired Property One were determined to be impaired. The tenant of the property was experiencing financial difficulty and vacated the space in March 2021. Subsequently, during the second quarter the Company received a letter of intent from a prospective buyer. The inclusion of this new potential sale scenario in the Company's step one impairment analysis resulted in the expected future cash flows from the property falling below its current carrying value. As a result, the carrying value of the property was reduced to its estimated fair value of $5,957,000, resulting in an impairment charge of $2,894,000.
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 September 30, 2017
 Fair Value Hierarchy  
 Quoted Prices in Active
Markets for Identical
Assets (Level 1)		 Significant Other
Observable Inputs
(Level 2)		 Significant
Unobservable
Inputs (Level 3)		 Total Fair
Value
Assets:       
Derivative assets$—
 $1,894
 $—
 $1,894
Total assets at fair value$—
 $1,894
 $—
 $1,894
Liabilities:       
Derivative liabilities$—
 $613
 $—
 $613
Total liabilities at fair value$—
 $613
 $—
 $613
Additionally, during the second quarter of 2021, real estate assets related to Second Quarter 2021 Impaired Property Two were determined to be impaired. The last of the three tenants that occupied the building terminated its lease agreement and vacated the space on July 12, 2021. Subsequently, the Company received a letter of intent from a prospective buyer. The inclusion of this new potential sale scenario in the Company's step one impairment analysis resulted in the expected future cash flows from the property to fall below its current carrying value. As a result, the carrying value of the property was reduced to its estimated fair value of $22,311,000, resulting in an impairment charge of $3,608,000.
The fair value of the First Quarter 2021 Impaired Property, Second Quarter 2021 Impaired Property One and Second Quarter 2021 Impaired Property Two were determined based on a market approach model using comparable properties adjusted for differences in characteristics to estimate the fair value and classified within Level 2 of the fair value hierarchy.
Impairment charges are recorded as impairment loss on real estate in the condensed consolidated statements of comprehensive income.
The following table shows the fair value of the Company's real estate assets measured at fair value on a non-recurring basis as of March 31, 2022 (amounts in thousands):
March 31, 2022
Fair Value Hierarchy
Quoted Prices in Active
Markets for Identical
Assets (Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs (Level 3)		Total Fair
Value		Total Losses
Real estate assets$— $14,639 $— $14,639 $7,109 
Goodwill—As discussed in Note 2—"Summary of Significant Accounting Policies," during the first quarter of 2022, the Company recorded $278,000 of goodwill impairment related to the First Quarter 2022 Impaired Property. Impairment loss on goodwill represented the carrying value of the reporting unit, including goodwill, that exceeded its fair value, limited to the total amount of goodwill allocated to that reporting unit and was recorded in impairment loss on goodwill in the condensed consolidated statements of comprehensive income. Fair value of the reporting unit was determined based on a market valuation approach. The Company determined that its valuation using a market approach model was classified within Level 2 of the fair value hierarchy. As of March 31, 2022, the Company did not have any goodwill associated with this healthcare reporting unit.
During the first quarter of 2021, the Company recorded $240,000 of goodwill impairment related to the First Quarter 2021 Impaired Property. Impairment loss on goodwill represented the carrying value of the reporting unit, including goodwill, that exceeded its fair value, limited to the total amount of goodwill allocated to that reporting unit and was recorded in impairment loss on goodwill in the condensed consolidated statements of comprehensive income. Fair value of the reporting unit was determined based on a market valuation approach, using comparable sales. The Company determined that its valuation using a market approach model was classified within Level 2 of the fair value hierarchy. As of March 31, 2021, the Company did not have any goodwill associated with this healthcare reporting unit.
During the second quarter of 2021, the Company recorded an aggregate amount of $431,000 of goodwill impairment related to the Second Quarter 2021 Impaired Property One and the Second Quarter 2021 Impaired Property Two. Impairment loss on goodwill represented the carrying value of each reporting unit, including goodwill, that exceeded its fair value, limited to the total amount of goodwill allocated to each reporting unit and is recorded in impairment loss on goodwill in the condensed consolidated statements of comprehensive income. Fair value of each reporting unit was determined based on a market approach model. The Company determined that its valuation using a market approach model is classified within Level 2 of the fair value hierarchy. As of June 30, 2021, the Company did not have any goodwill associated with these healthcare reporting units.
 December 31, 2016
 Fair Value Hierarchy  
 Quoted Prices in Active
Markets for Identical
Assets (Level 1)		 Significant Other
Observable Inputs
(Level 2)		 Significant
Unobservable
Inputs (Level 3)		 Total Fair
Value
Assets:       
Derivative assets$—
 $1,782
 $—
 $1,782
Total assets at fair value$—
 $1,782
 $—
 $1,782
Liabilities:       
Derivative liabilities$—
 $798
 $—
 $798
Total liabilities at fair value$—
 $798
 $—
 $798
Note 13—12—Derivative Instruments and Hedging Activities
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for the Company making fixed rate payments over the life of the agreements without exchange of the underlying notional amount.
The effective portion of changesChanges in the fair value of derivatives designated, and that qualify, as cash flow hedges isare recorded in accumulated other comprehensive income (loss) in the accompanying condensed consolidated statementstatements of stockholders' equity and isare subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.
During
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In connection with the nine months ended September 30, 2017,Data Center Sale on July 22, 2021, the Company's derivative instruments were usedCompany terminated 8 interest rate swap agreements related to hedgemortgage notes fixed through interest rate swaps. Prior to the variable cash flows associated with variable rate debt. The ineffective portion of changes in fair valuetermination of the derivatives are recognized directly in earnings.8 interest rate swaps, the Company de-designated and then formally re-designated these hedged transactions. During the three and six months ended SeptemberJune 30, 2017 and 2016,2022, as the hedged forecasted transactions affected earnings, the Company recognized a gain of $14,000reclassified approximately $357,000 and $71,000,$995,000, respectively, from accumulated other comprehensive income (loss) to interest and during the nine months ended September 30, 2017 and 2016, the Company recognized a gain of $16,000 and $49,000, respectively, due to ineffectiveness of its hedges of interest rate risk, which were recorded in interestother expense, net, related to the swap terminations, in the accompanying condensed consolidated statements of comprehensive income.
Amounts reported in accumulated other comprehensive income (loss) related to the derivativederivatives will be reclassified to interest and other expense, net, as interest payments are made on the Company’s variable rate debt. During the next twelve months, the Company estimates that an additional $614,000$6,055,000 will be reclassified from accumulated other comprehensive income (loss) as an increase to interest expense, net.earnings.
See Note 12—11—"Fair Value" for a further discussion of the fair value of the Company’s derivative instruments.

The following table summarizes the notional amount and fair value of the Company’s derivative instruments (amounts in thousands):
Derivatives
Designated as
Hedging
Instruments		Balance
Sheet
Location
Effective
Dates (2), (3)
Maturity
Dates (2)
June 30, 2022December 31, 2021
Outstanding
Notional
Amount (2)
Fair Value ofOutstanding
Notional
Amount		Fair Value of
Assets(Liabilities)Assets(Liabilities)
Interest rate swaps(1)05/01/2022 to
05/01/2023		04/27/2023 to
01/31/2028		$485,000 $13,674 $(3)$400,000 $2,171 $(5,618)
Derivatives
Designated as
Hedging
Instruments		 Balance
Sheet
Location		 Effective
Dates		 Maturity
Dates		 September 30, 2017 December 31, 2016
Outstanding
Notional
Amount		 Fair Value of Outstanding
Notional
Amount		 Fair Value of
Asset (Liability) Asset (Liability)
 
Interest rate swaps Other assets, net/Accounts
payable and other
liabilities		 07/01/2016 to
07/01/2017		 12/22/2020 to
04/20/2022		 $286,590
 $1,894
 $(613) $96,540
 $1,782
 $(798)
(1)     Derivative assets and liabilities are reported in the condensed consolidated balance sheets as other assets, net, and accounts payable and other liabilities, respectively.
(2)    On April 8, 2022, the Company entered into 3 interest rate swap agreements with an aggregate notional amount of $150,000,000, that have an effective date of May 1, 2023, to replace 2 interest rate swaps with an aggregate notional amount of $150,000,000 that have a maturity date of April 27, 2023.
(3)    In May 2022, the Company entered into bilateral agreements with its swap counterparties to transition all of its interest rate swap agreements to SOFR. As of June 30, 2022, all of the Company's interest rate swap agreements were indexed to SOFR.
The notional amount under the agreements is an indication of the extent of the Company’s involvement in the instrumentseach instrument at the time, but does not represent exposure to credit, interest rate or market risks.
Accounting for changes in the fair value of a derivative instrument depends on the intended use and designation of the derivative instrument. The Company designated the interest rate swaps as cash flow hedges to hedge the variability of the anticipated cash flows on its variable rate secured credit facility and notes payable.facility. The change in fair value of the effective portion of the derivative instruments that are designated as hedges isare recorded in other comprehensive income or OCI, in the accompanying condensed consolidated statements of comprehensive income.
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The table below summarizes the amount of income and losslosses recognized on the interest rate derivatives designated as cash flow hedging relationshipshedges for the three and ninesix months ended SeptemberJune 30, 20172022 and 20162021 (amounts in thousands):
Derivatives in Cash Flow Hedging Relationships Amount of Income (Loss) Recognized
in OCI on Derivative
(Effective Portion)		 Location of Income (Loss)
Reclassified From
Accumulated Other
Comprehensive Income to
Net Income
(Effective Portion)		 Amount of Loss
Reclassified From
Accumulated Other
Comprehensive Income to
Net Income
(Effective Portion)
Three Months Ended September 30, 2017      
Interest rate swaps $(108) Interest expense, net $(327)
Total $(108)   $(327)
Three Months Ended September 30, 2016      
Interest rate swaps $62
 Interest expense, net $(26)
Total $62
   $(26)
Nine Months Ended September 30, 2017      
Interest rate swaps $(743) Interest expense, net $(1,024)
Total $(743)   $(1,024)
Nine Months Ended September 30, 2016      
Interest rate swaps $(39) Interest expense, net $(26)
Total $(39)   $(26)
Derivatives in Cash Flow
Hedging Relationships		Amount of Income (Loss) Recognized
in Other Comprehensive Income on Derivatives		Location of Loss
Reclassified From
Accumulated Other
Comprehensive Income (Loss) to
Net Income		Amount of Loss
Reclassified From
Accumulated Other
Comprehensive Income (Loss) to
Net Income		Total Amount of Line Item in Condensed Consolidated Statements of Comprehensive Income
Three Months Ended June 30, 2022
Interest rate swaps - continuing operations$3,973 Interest and other expense, net$(1,284)$4,329 
Total$3,973 $(1,284)
Three Months Ended June 30, 2021
Interest rate swaps - continuing operations$(572)Interest and other expense, net$(1,836)$9,534 
Interest rate swaps - discontinued operations(47)Income from discontinued operations(558)16,305 
Total$(619)$(2,394)
Six Months Ended June 30, 2022
Interest rate swaps - continuing operations$14,821 Interest and other expense, net$(3,291)$12,444 
Total$14,821 $(3,291)

Six Months Ended June 30, 2021
Interest rate swaps - continuing operations$2,808 Interest and other expense, net$(3,691)$18,298 
Interest rate swaps - discontinued operations(37)Income from discontinued operations(1,105)24,253 
Total$2,771 $(4,796)
Credit Risk-Related Contingent Features
The Company has agreements with each of its derivative counterparties that contain cross-default provisions, whereby if the Company defaults on certain of its indebtedness, then the Company could also be declared in default on its derivative obligation, resulting in an acceleration of payment thereunder.
In addition, the Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations. The Company records credit risk valuation adjustments on its interest rate swaps based on the respective credit quality of the Company and the counterparty. The Company believes it mitigates its credit risk by entering into agreements with creditworthy counterparties. As of SeptemberJune 30, 2017,2022, the fair value of derivatives in a net liability position includingwas $16,000, inclusive of accrued interest but excluding any adjustment for nonperformance risk related to the agreement, was $740,000.agreement. As of SeptemberJune 30, 2017,2022, there were no termination events or events of default related to the interest rate swaps.

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Tabular Disclosure Offsetting Derivatives
The Company has elected not to offset derivative positions in its condensed consolidated financial statements. The following tables present the effect on the Company’s financial position had the Company made the election to offset its derivative positions as of SeptemberJune 30, 20172022 and December 31, 20162021 (amounts in thousands):
Offsetting of Derivative Assets    
    Gross Amounts Not Offset in the Balance Sheet 
 Gross
Amounts of
Recognized
Assets		Gross Amounts
Offset in the
Balance Sheet		Net Amounts of
Assets Presented in
the Balance Sheet		Financial Instruments
Collateral		Cash CollateralNet
Amount
June 30, 2022$13,674 $— $13,674 $— $— $13,674 
December 31, 2021$2,171 $— $2,171 $(1,023)$— $1,148 
Offsetting of Derivative Assets        
        Gross Amounts Not Offset in the Balance Sheet  
  Gross
Amounts of
Recognized
Assets		 Gross Amounts
Offset in the
Balance Sheet		 Net Amounts of
Assets Presented in
the Balance Sheet		 Financial Instruments
Collateral		 Cash Collateral Net
Amount
September 30, 2017 $1,894
 $—
 $1,894
 $—
 $—
 $1,894
December 31, 2016 $1,782
 $—
 $1,782
 $—
 $—
 $1,782
Offsetting of Derivative Liabilities        
        Gross Amounts Not Offset in the Balance Sheet  
  Gross
Amounts of
Recognized
Liabilities		 Gross Amounts
Offset in the
Balance Sheet		 Net Amounts of
Liabilities
Presented in the
Balance Sheet		 Financial Instruments
Collateral		 Cash Collateral Net
Amount
September 30, 2017 $613
 $—
 $613
 $—
 $—
 $613
December 31, 2016 $798
 $—
 $798
 $—
 $—
 $798
Offsetting of Derivative Liabilities    
    Gross Amounts Not Offset in the Balance Sheet 
 Gross
Amounts of
Recognized
Liabilities		Gross Amounts
Offset in the
Balance Sheet		Net Amounts of
Liabilities
Presented in the
Balance Sheet		Financial Instruments
Collateral		Cash CollateralNet
Amount
June 30, 2022$3 $— $3 $— $— $3 
December 31, 2021$5,618 $— $5,618 $(1,023)$— $4,595 
The Company reports derivativesderivative assets and liabilities in the accompanying condensed consolidated balance sheets as other assets, net, and accounts payable and other liabilities.liabilities, respectively.
Note 14—13—Accumulated Other Comprehensive Income (Loss)
The following table presents a rollforward of amounts recognized in accumulated other comprehensive income (loss) by component for the ninesix months ended SeptemberJune 30, 20172022 and 20162021 (amounts in thousands):
Unrealized Income
on Derivative
Instruments
Balance as of December 31, 2021$(4,847)
Other comprehensive income before reclassification14,821 
Amount of loss reclassified from accumulated other comprehensive income (loss) to net income3,291 
Other comprehensive income18,112 
Balance as of June 30, 2022$13,265 
  Unrealized Income on Derivative
Instruments		 Accumulated Other
Comprehensive Income
Balance as of December 31, 2016 $840
 $840
Other comprehensive loss before reclassification (743) (743)
Amount of loss reclassified from accumulated other comprehensive income to net income (effective portion) 1,024
 1,024
Other comprehensive income 281
 281
Balance as of September 30, 2017 $1,121
 $1,121

Unrealized Income
 on Derivative
Instruments
Balance as of December 31, 2020$(20,444)
Other comprehensive income before reclassification2,771 
Amount of loss reclassified from accumulated other comprehensive loss to net income4,796 
Other comprehensive income7,567 
Balance as of June 30, 2021$(12,877)
28
  Unrealized Loss on Derivative
Instruments		 Accumulated Other
Comprehensive Loss
Balance as of December 31, 2015 $—
 $—
Other comprehensive loss before reclassification (39) (39)
Amount of loss reclassified from accumulated other comprehensive loss to net income (effective portion) 26
 26
Other comprehensive loss (13) (13)
Balance as of September 30, 2016 $(13) $(13)
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The following table presents reclassifications out of accumulated other comprehensive income (loss) for the ninesix months ended SeptemberJune 30, 20172022 and 20162021 (amounts in thousands):
Details about Accumulated Other
Comprehensive Income (Loss) Components		Loss Amounts Reclassified from
Accumulated Other Comprehensive Income (Loss) to Net Income		Affected Line Items in the Condensed Consolidated Statements of Comprehensive Income
Six Months Ended
June 30,
20222021
Interest rate swap contracts - continuing operations$3,291 $3,691 Interest and other expense, net
Interest rate swap contracts - discontinued operations— 1,105 Income from discontinued operations
Interest rate swap contracts$3,291 

$4,796 
Details about Accumulated Other
Comprehensive Income Components		 Amounts Reclassified from
Accumulated Other Comprehensive Income to Net
Income		 Affected Line Items in the Consolidated Statements of Comprehensive Income
  Nine Months Ended
September 30,		  
  2017 2016  
Interest rate swap contracts $1,024
 $26
 Interest expense, net
Note 15—14—Commitments and Contingencies
LitigationLegal Proceedings
In the ordinary course of business, the Company may become subject to litigation or claims. As of SeptemberJune 30, 2017,2022, there were, and currently there are, no material pending legal proceedings to which the Company is a party. While the resolution of a lawsuit or proceeding may have an impact to the Company's financial results for the period in which it is resolved, the Company believes that the final resolution of the lawsuits or proceedings in which it is currently involved, either individually or in the aggregate, will not have a material adverse effect on its financial position, results of operations or liquidity.
Contingent Consideration
Note 16—Economic Dependency
During the fourth quarter of 2020, the Company acquired a development property subject to an earnout provision, obligating the Company to pay additional consideration to the developer contingent upon the future leasing and occupancy of vacant space at the property. The developer will have 18 months from completion of the development property to earn the additional consideration. During the 18-month earnout agreement, the developer will be responsible for the pro-rata share of operating expenses associated with the unoccupied space. As of June 30, 2022, the Company recorded a contingent consideration accrual related to the earnout provision in the amount of $1,160,000, which is reported in accounts payable and other liabilities in the accompanying condensed consolidated balance sheets. The Company is dependentused a probability-weighted future cash flows approach to estimate contingent consideration. Changes in assumptions could have an impact on the Advisor and its affiliates for certain services that are essential to the Company, including the salepayout of the Company’s sharescontingent consideration with a maximum payout of common and preferred stock available for issuance; the identification, evaluation, negotiation, purchase and disposition of real estate investments and other investments; the management of the daily operations of the Company’s real estate portfolio; and other general and administrative responsibilities. In the event that the Advisor and its affiliates are unable to provide the respective services, the Company will be required to obtain such services from other sources.
Note 17—Subsequent Events
Distributions to Stockholders Paid
On October 2, 2017, the Company paid aggregate distributions of approximately $4,164,000 to Class A stockholders ($2,081,000$1,701,000 in cash and $2,083,000 in sharesa minimum payout of $742,000. During the Company’s Class A common stock pursuantthree months ended June 30, 2022, the contingent consideration accrual decreased by $373,000, due to the DRIP), which relateddeveloper completing the buildout and the tenant taking occupancy of a unit at the property. The amount accrued was capitalized to building and improvements in the accompanying condensed consolidated balance sheets, as the original purchase was accounted for as an asset acquisition.
Note 15—Subsequent Events
Distributions Paid to Stockholders
The following table summarizes the Company's distributions declaredpaid to stockholders on July 8, 2022, for each day in the period from SeptemberJune 1, 20172022 through SeptemberJune 30, 2017. On November 1, 2017,2022 (amounts in thousands):
Payment DateCommon StockCashDRIPTotal Distribution
July 8, 2022Class A$4,352 $1,201 $5,553 
July 8, 2022Class I321 224 545 
July 8, 2022Class T711 626 1,337 
$5,384 $2,051 $7,435 
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The following table summarizes the CompanyCompany's distributions paid aggregate distributions of approximately $4,406,000 to Class A stockholders ($2,201,000 in cash and $2,205,000 in shares of the Company’s Class A common stock pursuant to the DRIP), which related to distributions declaredon August 4, 2022, for each day in the period from OctoberJuly 1, 20172022 through OctoberJuly 31, 2017.2022 (amounts in thousands):
On October 2, 2017, the Company paid aggregate distributions of approximately $183,000 to Class I stockholders ($99,000 in cash and $84,000 in shares of the Company's Class I common stock pursuant to the DRIP), which related to distributions declared for each day in the period from September 1, 2017 through September 30, 2017. On November 1, 2017, the Company paid aggregate distributions of approximately $259,000 to Class I stockholders ($137,000 in cash and $122,000 in shares of the Company's Class I common stock pursuant to the DRIP), which related to distributions declared for each day in the period from October 1, 2017 through October 31, 2017.
On October 2, 2017, the Company paid aggregate distributions of approximately $1,227,000 to Class T stockholders ($506,000 in cash and $721,000 in shares of the Company's Class T common stock pursuant to the DRIP), which related to distributions declared for each day in the period from September 1, 2017 through September 30, 2017. On November 1, 2017, the Company paid aggregate distributions of approximately $1,431,000 to Class T stockholders ($589,000 in cash and

$842,000 in shares of the Company's Class T common stock pursuant to the DRIP), which related to distributions declared for each day in the period from October 1, 2017 through October 31, 2017.
Payment DateCommon StockCashDRIPTotal Distribution
August 4, 2022Class A$4,497 $1,248 $5,745 
August 4, 2022Class I333 232 565 
August 4, 2022Class T736 647 1,383 
$5,566 $2,127 $7,693 
Distributions Declared
Class A SharesAuthorized
The Company's board of directorsfollowing tables summarize the daily distributions approved and authorized an additional daily distributionby the Board subsequent to our Class AJune 30, 2022:
Authorization Date (1)
Common Stock
Daily Distribution Rate (1)
Annualized Distribution Per Share
July 22, 2022Class A$0.00109589 $0.40 
July 22, 2022Class I$0.00109589 $0.40 
July 22, 2022Class T$0.00109589 $0.40 
Authorization Date (2)
Common Stock
Daily Distribution Rate (2)
Annualized Distribution Per Share
August 4, 2022Class A$0.00109589 $0.40 
August 4, 2022Class I$0.00109589 $0.40 
August 4, 2022Class T$0.00109589 $0.40 
(1)Distributions approved and authorized to stockholders of record as of the close of business on each day of the period commencing on OctoberAugust 1, 20172022 and ending on November 30, 2017August 31, 2022. The distributions are calculated based on 365 days in the amount of $0.000021392 per share. This additional distribution amount and the daily distribution of $0.001767101 previously authorized and declared by the board of directors will equal an annualized rate of 6.40%, based on the revised primary offering purchase price of $10.200 per Class A share.calendar year. The distributions declared for each record date in October 2017 and November 2017August 2022 will be paid in November 2017 and December 2017, respectively.September 2022. The distributions will beare payable to stockholders from legally available funds therefor.
On November 2, 2017, the board of directors of the Company(2)Distributions approved and declared a distributionauthorized to the Company’s Class A stockholders of record as of the close of business on each day of the period commencing on DecemberSeptember 1, 20172022 and ending on February 28, 2018.September 30, 2022. The distributions will be calculated based on 365 days in the calendar year and will be equal to $0.001788493 per share of Class A common stock, which will be equal to an annualized distribution rate of 6.40%, assuming a purchase price of $10.200 per share of Class A common stock.year. The distributions declared for each record date in December 2017, January 2018 and February 2018September 2022 will be paid in January 2018, February 2018 and March 2018, respectively.October 2022. The distributions will be payable to stockholders from legally available funds therefor.
Class I SharesSubsequent Acquisitions
The Company's board of directors approvedfollowing table summarizes the property acquired subsequent to June 30, 2022 and authorized an additional daily distributionthrough August 9, 2022:
PropertyDate Acquired
Contract Purchase Price (2)
Ownership
Tampa Healthcare Facility II (1)
07/20/2022$51,181,000 100%
Escondido Healthcare Facility (1)
07/21/2022$63,400,000 100%
(1)The property is leased to our Class I stockholders of record as of the close of business on each day of the period commencing on October 1, 2017 and ending November 30, 2017 in the amount of $0.000021392 per share. This additional distribution amount and the daily distribution of $0.001767101 previously authorized and declared by the board of directors will equal an annualized rate of 7.04%, baseda single tenant.
(2)The Company drew $105,000,000 on the revised primary offering purchase priceUnsecured Credit Facility to fund the acquisitions.
30
Table of $9.273 per Class I share. The distributions for each record date in October 2017 and November 2017 will be paid in November 2017 and December 2017, respectively. The distributions will be payable to stockholders from legally available funds therefor.Contents
On November 2, 2017, the board of directors of the Company approved and declared a daily distribution to the Company’s Class I stockholders of record as of the close of business on each day of the period commencing on December 1, 2017 and ending on February 28, 2018. The distribution will be calculated based on 365 days in the calendar year and will be equal to $0.001788493 per share of Class I common stock, which will be equal to an annualized distribution rate of 7.04%, assuming a purchase price of $9.273 per share. The distributions declared for each record date in December 2017, January 2018 and February 2018 will be paid in January 2018, February 2018 and March 2018, respectively. The distributions will be payable to stockholders from legally available funds therefor.
Class T Shares
The Company's board of directors approved and authorized an additional daily distribution to our Class T stockholders of record as of the close of business on each day of the period commencing on October 1, 2017 and ending November 30, 2017 in the amount of $0.000018207 per share. This additional distribution amount and the daily distribution of $0.001501543 previously authorized and declared by the board of directors will equal an annualized rate of 5.68%, based on the revised primary offering purchase price of $9.766 per Class T share. The distributions for each record date in October 2017 and November 2017 will be paid in November 2017 and December 2017, respectively. The distributions will be payable to stockholders from legally available funds therefor.
On November 2, 2017, the board of directors of the Company approved and declared a daily distribution to the Company’s Class T stockholders of record as of the close of business on each day of the period commencing on December 1, 2017 and ending on February 28, 2017. The distribution will be calculated based on 365 days in the calendar year and will be equal to $0.001519750 per share of Class T common stock, which will be equal to an annualized distribution rate of 5.68%, assuming a purchase price of $9.766 per share. The distributions declared for each record date in December 2017, January 2018 and February 2018 will be paid in January 2018, February 2018 and March 2018, respectively. The distributions will be payable to stockholders from legally available funds therefor.
Status of the Initial Offering
As of November 6, 2017, the Company had accepted investors’ subscriptions for and issued approximately 81,920,000 shares of Class A common stock, 5,333,000 shares of Class I common stock and 33,011,000 shares of Class T common stock in the Initial Offering, resulting in receipt of gross proceeds of approximately $811,273,000, $48,613,000 and $316,971,000, respectively, including shares of its common stock issued pursuant to its DRIP, for total gross proceeds raised of

$1,176,857,000. As of November 6, 2017, the Company had approximately $1,173,143,000 in Class A shares, Class I shares and Class T shares of common stock remaining in the Initial Offering.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the notes thereto and the other unaudited financial information appearing elsewhere in this Quarterly Report on Form 10-Q.
The following discussion should also be read in conjunction with our audited consolidated financial statements, and the notes thereto, and Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2016,2021, as filed with the U.S. Securities and Exchange Commission, or the SEC, on March 16, 2017,29, 2022, or the 20162021 Annual Report on Form 10-K.
The terms “we,” “our,” "us," and the “Company” refer to Carter Validus Mission Critical REIT II,Sila Realty Trust, Inc., Carter ValidusSila Realty Operating Partnership, II, LP, or our Operating Partnership, and all wholly-owned subsidiaries.
Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q, other than historical facts, include forward-looking statements that reflect our expectations and projections about our future results, performance, prospects and opportunities. Such statements include, in particular, statements about our liquidity and capital resources, capital expenditures, material cash requirements, debt service requirements, term loan requirements, plans, leases, dividends, distributions, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Forward-looking statements are subject to various risks and uncertainties, and factors that could cause actual results to differ materially from our expectations, and investors should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect our results of operations, financial condition, cash flows, performance or future achievements or events.
Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our management’s view only as of the date this Quarterly Report on Form 10-Q is filed with the SEC. We make no representation or warranty (express or implied) about the accuracy of any such forward-looking statements contained in this Quarterly Report on Form 10-Q, and we do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. See Part I, Item 1A. “Risk Factors” of our 20162021 Annual Report on Form 10-K, for a discussion of some, although not all, of the risks and uncertainties that could cause actual results to differ materially from those presented in our forward-looking statements.
Management’s discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles, in the United States, or GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. OnWe evaluate these estimates on a regular basis, we evaluate these estimates.basis. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
Overview
We were formed on January 11, 2013, under the laws of Maryland to acquire and operate a diversified portfolio of income-producing commercial real estate properties, with a focus on data centers and healthcare properties, preferablygenerally with long-term net leases to creditworthy tenants, as well as to make real estate-related investments that relate to such property types. We are offering
On July 28, 2020, we and our Operating Partnership entered into a Membership Interest Purchase Agreement to provide for sale a maximumthe internalization of $2,350,000,000 in shares of common stock,the external management functions previously performed for us and our Operating Partnership by our former advisor and its affiliates, or the maximum offering amount, consistingInternalization Transaction.
During the three months ended June 30, 2021, our board of directors, or the Board made a determination to sell our data center properties. On May 19, 2021, we and certain of our wholly-owned subsidiaries entered into a Purchase and Sale Agreement, or the PSA for the sale of up to $2,250,000,000 in shares29 data center properties owned by us. See Note 4—"Held for Sale and Discontinued Operations" within this Quarterly Report on Form 10-Q for further discussion. The Board's determination to sell the data center properties, as well as the execution of common stock inthe PSA, represented a strategic shift that had a major effect on our primary offeringresults and up to $100,000,000 in sharesoperations for the periods presented. On July 22, 2021, we completed the sale of common stock pursuant toall 29 of our distribution reinvestment plan,data center properties, or the DRIP, on a “best efforts” basis pursuant to a registration statement on Form S-11, or the Registration Statement, filed with the SEC under the Securities Act, or the Initial Offering.Data Center Sale, comprised of approximately 3,298,000 rentable square feet, for an aggregate sale price of $1,320,000,000, and generated net proceeds of approximately $1,295,367,000. As of September 30, 2017,December 31, 2021, we were offering Class A shares, Class I shares and Class T shares of common stock, in any combination with a dollar value uphad no assets or liabilities related to the maximum offering amount indata center properties. The operations of the Initial Offering. The offering pricedata center properties have been classified as income from discontinued
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operations on the condensed consolidated statements of comprehensive income for the common sharesthree and six months ended June 30, 2021.
As of June 30, 2022, we owned 130 real estate healthcare properties and two undeveloped land parcels in two µSAs and 55 MSAs.
On July 20, 2021, the primary offering was $10.078 per Class A share, $9.162 per Class I share, and $9.649 per Class T share andBoard, at the offering price for shares inrecommendation of our audit committee, approved the DRIP was $9.07 per Class A share, $9.07 per Class I share and $9.07 per Class T share, which is equal to the most recent estimated per share net asset value, or Estimated Per Share NAV, calculated as of eachMay 31, 2021, of our Class A common stock, Class I common stock and Class T common stock, as determined by our board$9.95. Upon the declaration of directors on September 29, 2016.
On May 1, 2017, we filed a registration statement on Form S-11 under the Securities Act to register a proposed follow-on offering, or the Follow-On Offering. On October 30, 2017, we registered a maximumspecial cash distribution of $1,000,000,000 of shares of Class A, Class I and Class T common stock pursuant to the primary offering of the Follow-On Offering and removed the DRIP from the Follow-On Offering. Accordingly, pursuant to Rule 415 promulgated under the Securities Act, we extended the Initial Offering until the earlier of the SEC effective date of the Follow-On Offering Registration Statement or November 24, 2017. We have not issued any shares in connection with the Follow-On Offering as it has not been declared effective by the SEC.
On October 13, 2017, we filed a Registration Statement on Form S-3, or the DRIP Registration Statement, under the Securities Act to register up to $100,000,000 of shares of Class A, Class I and Class T common stock to be offered pursuant to

our DRIP after the termination of the Initial Offering. We intend to continue to offer shares of common stock in the Initial Offering until November 24, 2017; however, we may terminate this Offering prior to November 24, 2017 and commence offering shares of common stock pursuant to the Follow-On Offering and DRIP Registration Statement. Our board of directors may revise the offering termination date as necessary in its discretion.
On June 2, 2017, we filed Articles Supplementary to the Second Articles of Amendment and Restatement with the State Department of Assessments and Taxation of Maryland reclassifying a portion of our Class A shares, Class I shares and Class T shares as Class T2 shares. We currently are not offering Class T2 shares.
On September 28, 2017, our board of directors, at the recommendation of the audit committee, which is comprised solely of independent directors, unanimously approved and established an estimated$1.75 per share net asset value, or NAV,to stockholders of $9.18 of each of our Class A common stock, Class I common stock and Class T common stock, orrecord on July 26, 2021, the Estimated Per Share NAV as of June 30, 2017,is $8.20. We intend to publish an updated Estimated Per Share NAV on an annual basis.
The Estimated Per Share NAV was calculated for purposes of assisting broker-dealers participating in public offerings in meeting their customer account statement reporting obligations under the National Association of Securities Dealers Conduct Rule 2340, as required by the Financial Industry Regulatory Authority, or FINRA. In connection with the2340. The Estimated Per Share NAV our board of directors unanimously approved the increased primary offering price of $10.200 per Class A share, which reflects the $9.18 Estimated Per Share NAV, a 7.0% selling commission and a 3.0% dealer manager fee, and the increased primary offering price of $9.766 per Class T share, which reflects the $9.18 Estimated Per Share NAV, a 3.0% selling commission and a 3.0% dealer manager fee, commencing on October 1, 2017. With respect to Class I shares, the dealer manager may receive up to 2.0% of the gross offering proceeds from the sale of Class I shares as a dealer manager fee, of which 1.0% will be fundedwas declared by Carter Validus Advisors II, LLC, or our Advisor, without reimbursement from us, in which case, commencing on October 1, 2017, the primary offering price per Class I share will be $9.273, with reflects the $9.18 Estimated Per Share NAV and a 1.0% dealer manager fee. However, the 1.0% of the dealer manager fee paid from offering proceeds will be waived in the event an investor purchases Class I shares through a registered investment advisor that is not affiliated with a broker dealer, and in such instances, commencing on October 1, 2017, the price per Class I share would be $9.18. Further, the Board approved $9.18 as the per share purchase price of Class A shares pursuant to the DRIP, $9.18 as the per share purchase price of Class I shares pursuant to the DRIPafter consultation with management and $9.18 as the per share purchase price of Class T shares pursuant to the DRIP, effective October 1, 2017.an independent third-party valuation firm. The Estimated Per Share NAV is not subject to audit by our independent registered public accounting firm.
We intendraised the equity capital for our real estate investments through two public offerings, or our Offerings, from May 2014 through November 2018, and we have offered shares pursuant to publish an updated estimated NAV per shareour distribution reinvestment plan, or the DRIP, pursuant to two Registration Statements on at least an annual basis.
Form S-3, or each, a DRIP Offering and together the DRIP Offerings, since November 2017. As of SeptemberJune 30, 2017,2022, we had accepted investors’ subscriptions for and issued approximately 113,499,000155,980,000 shares of Class A, Class I, Class T and Class TT2 common stock (including shares of common stock issued pursuant to the DRIP) in our Offering,Offerings, resulting in receipt of gross proceeds of approximately $1,111,417,000,$1,507,542,000, before share repurchases of approximately $131,090,000, selling commissions and dealer manager fees of approximately $85,508,000$96,734,000 and other offering costs of approximately $21,875,000. As of September 30, 2017, we had approximately $1,238,583,000 in Class A shares, Class I shares and Class T shares of common stock remaining in our Offering.
Substantially all of our operations are conducted through Carter Validus Operating Partnership II, LP, or our Operating Partnership. We are externally advised by our Advisor which is our affiliate, pursuant to an advisory agreement between us and our Advisor. Our Advisor supervises and manages our day-to-day operations and selects the properties and real estate-related investments we acquire, subject to the oversight and approval of our board of directors. Our Advisor also provides marketing, sales and client services related to real estate on our behalf. Our Advisor engages affiliated entities to provide various services to us. Our Advisor is managed by, and is a subsidiary of, our sponsor, Carter Validus REIT Management Company II, LLC, or our Sponsor. We have no paid employees and we rely on our Advisor to provide substantially all of our services.
Carter Validus Real Estate Management Services II, LLC, or our Property Manager, a wholly-owned subsidiary of our Sponsor, serves as our property manager. Our Advisor and our Property Manager received, and will continue to receive, fees during the acquisition and operational stages and our Advisor may be eligible to receive fees during the liquidation stage of the Company. SC Distributors, LLC, an affiliate of the Advisor, or the Dealer Manager, serves as the dealer manager of the Initial Offering. The Dealer Manager has received, and will continue to receive, fees for services related to our Initial Offering. The Dealer Manager will serve as the dealer manager of the Follow-On Offering, when effective.
We currently operate through two reportable segments – commercial real estate investments in data centers and healthcare. As of September 30, 2017, we had purchased 49 real estate investments, consisting of 66 properties and comprising approximately 4,784,000 of gross rental square feet, for an aggregate purchase price of approximately $1,458,970,000.$27,627,000.
Critical Accounting PoliciesEstimates
Our critical accounting policiesestimates were disclosed in our 20162021 Annual Report on Form 10-K. There have been no material changes to our critical accounting policiesestimates as disclosed therein.
Interim Unaudited Financial Data

Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, our accompanying condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. Our accompanying condensed consolidated financial statements reflect all adjustments, which are, in our view, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim period. Interim results of operations are not necessarily indicative of the results to be expected for the full year; such full year results may be less favorable. Our accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our 20162021 Annual Report on Form 10-K.
Qualification as a REIT
We qualifiedelected, and electedqualify, to be taxed as a REIT for federal income tax purposes and we intend to continue to be taxed as a REIT. To maintain our qualification as a REIT, we must continue to meet certain organizational and operational requirements, including a requirement to currently distribute at least 90.0% of our REIT taxable income to our stockholders. As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders.
If we fail to maintain our qualification as a REIT in any taxable year, we would then be subject to federal income taxes on our taxable income at regular corporate rates and would not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could have a material adverse effect on our net income and net cash available for distribution to our stockholders.
Recently Issued Accounting Pronouncements
For a discussion of recently issued accounting pronouncements, see Note 2—“Summary of Significant Accounting Policies—Recently IssuedAdopted Accounting Pronouncements” to our condensed consolidated financial statements that are a part of this Quarterly Report on Form 10-Q.
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Segment Reporting
We report our financial performance based on two reporting segments—commercial real estate investments in data centers and healthcare. See Note 10—2—"Segment Reporting"Summary of Significant Accounting Policies" to our condensed consolidated financial statements that are a part of this Quarterly Report on Form 10-Q for additional information about our healthcare reporting segment. We report our financial performance based on one reporting segment—commercial real estate investments in healthcare. As of June 30, 2022 and December 31, 2021, 100% of our two reporting segments.consolidated revenues from continuing operations were generated from real estate investments in healthcare properties. Our chief operating decision maker evaluates operating performance of healthcare properties on an individual property level, which are aggregated into one reportable segment due to their similar economic characteristics.
Factors thatThat May Influence Results of Operations
We are not aware at this time of any material trends andor uncertainties, other than national economic conditions and those discussed below, affecting our real estate generally,properties, that may reasonably be reasonably expected to have a material impact, favorable or unfavorable, on revenues or incomesincome from the acquisition, management and operation of our properties other than those set forth in our 2021 Annual Report on Form 10-K for10-K.
Rental Revenue
The amount of rental revenue generated by our healthcare properties depends principally on our ability to maintain the year ended December 31, 2016occupancy rates of leased space and to lease available space at the then-existing rental rates. Negative trends in Part II, Item 1A. "Risk Factors"one or more of this Quarterly Report on Form 10-Q.these factors could adversely affect our rental revenue in future periods. As of June 30, 2022, our operating healthcare real estate properties were 99.4% leased.
Results of Operations
The results of operations discussed below reflect the data centers segment presented as discontinued operations.
Our results of operations are influenced by the timing of acquisitions and the operating performance of our operating healthcare real estate properties. The following table shows the property statistics of our operating healthcare real estate properties as of SeptemberJune 30, 20172022 and 2016:2021:
 June 30,
 20222021
Number of operating real estate properties (1)
130 124 
Leased square feet5,359,000 5,095,000 
Weighted average percentage of rentable square feet leased99.4 %96.2 %
 September 30,
 2017 2016
Number of commercial operating real estate properties (1)
64

41
Leased rentable square feet4,655,000
 2,298,000
Weighted average percentage of rentable square feet leased97.3% 99.9%
(1)As of September 30, 2017, we owned 66 real estate properties, two of which were under construction. As of September 30, 2016, we owned 43 real estate properties, two of which were under construction.

(1)As of June 30, 2022, we owned 130 operating healthcare real estate properties and two undeveloped land parcels. As of June 30, 2021, we owned 125 healthcare real estate properties, one of which was under construction.
The following table summarizes our healthcare real estate acquisition activity for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016:2021:
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2022202120222021
Operating real estate properties acquired4 1 5 1 
Operating real estate properties disposed— — — (2)— 
Operating real estate properties placed into service— — 1 1 
Aggregate purchase price of operating real estate properties acquired (1)
$22,896,000 $25,048,000 $42,450,000 $25,048,000 
Aggregate cost of operating real estate properties placed into service$— $— $15,713,000 $22,140,000 
Net book value of operating real estate properties disposed$— $— $— (2)$— 
Leased square feet of operating real estate property additions54,000 54,000 140,000 115,000 
Leased square feet of operating real estate property dispositions— — — (2)— 
 Three Months Ended September 30, Nine Months Ended September 30, 
 2017 2016 2017 2016 
Commercial operating real estate properties acquired4
 1
 15
 13
(1) 
Approximate aggregate purchase price of acquired real estate properties$52,454,000
 $79,500,000
 $458,838,000
 $227,364,000
(1) 
Leased rentable square feet154,000
 288,000
 1,683,000
 769,000
 
(1)
During the nine months ended September 30, 2016, we acquired 15 real estate properties, two of which were under construction. The properties under construction were purchased for $13,601,000.
The following discussion is based on our condensed consolidated financial statements(1)Includes capitalized acquisition costs associated with transactions determined to be asset acquisitions.
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(2)As of December 31, 2021, one land parcel that formerly contained a healthcare property, or the 2021 Land Held for Sale, had a net book value of $22,241,000. On August 30, 2021, we entered into a purchase and sale agreement for the threesale of the property. The purchase and nine months September 30, 2017sale agreement required that the structures located on the property be demolished prior to the sale. The structures located on the property were demolished and 2016.it consisted solely of land as of December 31, 2021. The land attributable to the property was sold on February 10, 2022.
This section describes and compares our results of operations for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016.2021. We generate almostsubstantially all of our net operating incomerevenue from property operations. In order to evaluate our overall portfolio, management analyzes the net operating income of same store properties. We define "same store properties" as operating properties that were owned and operated for the entirety of both calendar periods being compared and exclude properties under development.development and properties or land classified as held for sale.
By evaluating the property net operating incomerevenue and expenses of our same store properties, management is able to monitor the operations of our existing properties for comparable periods to measure the performance of our current portfolio and determine the expected effects of our new acquisitions and dispositions on net income.
Three Months Ended SeptemberJune 30, 20172022 Compared to the Three Months Ended SeptemberJune 30, 20162021
Changes in our revenues are summarized in theThe following table represents the breakdown of total rental revenue for the three months ended June 30, 2022 compared to the comparable periods in 2021 (amounts in thousands):.
Three Months Ended
June 30,
20222021$ Change% Change
Same store rental revenue$40,207 $40,235 $(28)(0.1)%
Same store tenant reimbursements2,380 2,426 (46)(1.9)%
Non-same store rental revenue2,076 929 1,147 123.5 %
Non-same store tenant reimbursements254 155 99 63.9 %
Other operating income1 2 (1)(50.0)%
Total rental revenue$44,918 $43,747 $1,171 2.7 %
 Three Months Ended September 30,  
 2017 2016 Change
Same store rental and parking revenue$12,113
 $12,119
 $(6)
Non-same store rental and parking revenue18,103
 63
 18,040
Same store tenant reimbursement revenue1,484
 1,404
 80
Non-same store tenant reimbursement revenue4,502
 7
 4,495
Other operating income3
 1
 2
Total revenue$36,205
 $13,594
 $22,611
There was an increase in contractual rental revenue resulting from average annual rent escalations of 1.90% at our same store properties, which was offset entirely by straight-line rental revenue.
•Non-same store rental and parking revenue increased due to the acquisition of 24 operating properties since July 1, 2016.
Non-same store tenant reimbursement revenue increased due to the acquisition of 24nine operating properties and the placement of one development property in service since April 1, 2021, partially offset by a decrease in non-same store rental and tenant reimbursement revenue due to the sale of three operating properties since JulyApril 1, 2016.2021.
Changes in our expenses are summarized in the following table (amounts in thousands):
Three Months Ended
June 30,
20222021$ Change% Change
Same store rental expenses$2,748 $2,799 $(51)(1.8)%
Non-same store rental expenses262 476 (214)(45.0)%
General and administrative expenses7,744 6,639 1,105 16.6 %
Depreciation and amortization17,814 17,615 199 1.1 %
Impairment loss on real estate— 6,502 (6,502)(100.0)%
Impairment loss on goodwill— 431 (431)(100.0)%
Total expenses$28,568 $34,462 $(5,894)(17.1)%
 Three Months Ended September 30,  
 2017 2016 Change
Same store rental and parking expenses$1,789
 $1,787
 $2
Non-same store rental and parking expenses6,579
 7
 6,572
General and administrative expenses1,062
 836
 226
Acquisition related expenses—
 1,821
 (1,821)
Asset management fees2,698
 1,227
 1,471
Depreciation and amortization11,852
 4,782
 7,070
Total expenses$23,980
 $10,460
 $13,520

•Non-same store rental and parking expenses certain of which are subject to reimbursement by our tenants, increased primarilydecreased due to the acquisitionsale of 24three operating properties since JulyApril 1, 2016.2021, partially offset by the acquisition of nine operating properties and the placement of one development property in service since April 1, 2021.
•General and administrative expenses increased primarily due to a severance payment to our former chief accounting officer and an increase in professional and legal fees, personnel costs and other administrative costs, in connection with our Company's growth.
Acquisition related expenses decreased due tostock-based compensation, partially offset by a decrease in corporate legal and transfer agent expenses.
•Impairment loss on real estate and impairment loss on goodwill were recorded in the amounts of $6,502,000 and $431,000, respectively, related to two healthcare properties, determined to be business combinations due toor the adoption of ASU 2017-01, Business Combinations. Acquisition fees and expenses associated with transactions determined to be business combinations are expensed as incurred. During the three months ended September 30, 2017, we did not acquire any real estate properties determined to be business combinations as compared to one real estate property determined to be a business combinationSecond Quarter 2021 Impaired Properties, during the three months ended SeptemberJune 30, 2016.
Asset management fees increased due to an increase in the weighted average operating assets held to $1,226.5 million for2021. There were no impairments recorded during the three months ended SeptemberJune 30, 2017, as compared to $631.3 million for the three months ended September 30, 2016.2022.
Depreciation and amortization increased due to an increase in the weighted average depreciable basis
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Changes in interest and other expense, net, are summarized in the following table (amounts in thousands):
Three Months Ended
June 30,
20222021$ Change% Change
Interest and other expense, net:
Interest on notes payable$— $1,836 $(1,836)(100.0)%
Interest on credit facility4,078 7,250 (3,172)(43.8)%
Other expense251 448 (197)(44.0)%
Total interest and other expense, net$4,329 $9,534 $(5,205)(54.6)%
Income from discontinued operations$— $16,305 $(16,305)(100.0)%
 Three Months Ended September 30,  
 2017 2016 Change
Interest expense, net:     
Interest on notes payable$(4,492) $—
 $(4,492)
Interest on secured credit facility(2,275) (590) (1,685)
Amortization of deferred financing costs(685) (256) (429)
Cash deposits interest51
 28
 23
Capitalized interest615
 192
 423
Total interest expense, net(6,786) (626) (6,160)
•Interest on notes payable increaseddecreased due to an increasethe pay-off of all our notes payable on July 22, 2021, in connection with the Data Center Sale.
•Interest on credit facility decreased due to a decrease in the outstanding principal balance on notes payable to $413.8 million as of September 30, 2017, as compared to $0 as of September 30, 2016.
Interest on securedour credit facility increased due to an increasethe pay-down in connection with the weighted average outstanding principal balance onData Center Sale and lower interest rates as a result of entering into the secured credit facility. The weighted average outstanding principal balance of the secured credit facilityUnsecured Credit Facility (as defined below).
•There was $241.1 million for the three months ended September 30, 2017, as compared to $84.5 million for the three months ended September 30, 2016.
Capitalized interest increased due to an increase in the average accumulated expenditures on development properties to $44.5 million for the three months ended September 30, 2017, as compared to $15.2 millionno income from discontinued operations during the three months ended SeptemberJune 30, 2016.2022, due to the Data Center Sale in July 2021.

NineSix Months Ended SeptemberJune 30, 20172022 Compared to the NineSix Months Ended SeptemberJune 30, 20162021
Changes in our revenues are summarized in theThe following table represents the breakdown of total rental revenue for the six months ended June 30, 2022 compared to the comparable periods in 2021 (amounts in thousands):.
Six Months Ended
June 30,
20222021$ Change% Change
Same store rental revenue$79,236 $79,235 $1 — %
Same store tenant reimbursements4,612 4,385 227 5.2 %
Non-same store rental revenue4,795 1,961 2,834 144.5 %
Non-same store tenant reimbursements555 586 (31)(5.3)%
Other operating income2 2 — — %
Total rental revenue$89,200 $86,169 $3,031 3.5 %
 Nine Months Ended September 30,  
 2017 2016 Change
      
Same store rental and parking revenue$28,113
 $28,083
 $30
Non-same store rental and parking revenue45,458
 5,007
 40,451
Same store tenant reimbursement revenue4,420
 3,790
 630
Non-same store tenant reimbursement revenue9,824
 339
 9,485
Other operating income14
 2
 12
Total revenue$87,829
 $37,221
 $50,608
There was an increase in contractual rental revenue resulting from average annual rent escalations of 2.21% at our same store properties, which was offset entirely by straight-line rental revenue.
•Non-same store rental and parking revenue increased due to the acquisition of 36nine operating properties and the placement of two development properties in service since January 1, 2021, partially offset by a decrease in non-same store rental revenue due to the sale of three operating properties since January 1, 2016.
Same store tenant reimbursement revenue increased primarily due to an increase in real estate tax reimbursements at certain same store properties.
Non-same store tenant reimbursement revenue primarily increased due to the acquisition of 36 operating properties since January 1, 2016.2021.
Changes in our expenses are summarized in the following table (amounts in thousands):
Six Months Ended
June 30,
20222021$ Change% Change
Same store rental expenses$5,292 $5,180 $112 2.2 %
Non-same store rental expenses743 1,309 (566)(43.2)%
General and administrative expenses14,600 13,262 1,338 10.1 %
Depreciation and amortization35,802 35,839 (37)(0.1)%
Impairment loss on real estate7,109 16,925 (9,816)(58.0)%
Impairment loss on goodwill278 671 (393)(58.6)%
Total expenses$63,824 $73,186 $(9,362)(12.8)%
Gain on real estate dispositions$460 $— $460 100.0 %
 Nine Months Ended September 30,  
 2017 2016 Change
      
Same store rental and parking expenses$5,293
 $4,550
 $743
Non-same store rental and parking expenses13,301
 505
 12,796
General and administrative expenses3,199
 2,358
 841
Acquisition related expenses—
 5,432
 (5,432)
Asset management fees7,055
 3,240
 3,815
Depreciation and amortization28,487
 12,948
 15,539
Total expenses$57,335
 $29,033
 $28,302
Same store rental and parking expenses, certain of which are subject to reimbursement by our tenants, increased primarily due to an increase in real estate taxes at certain same store properties.
•Non-same store rental and parking expenses certain of which are subject to reimbursement by our tenants, increased primarilydecreased due to the acquisitionsale of 36three operating properties since January 1, 2016.2021, partially offset by the acquisition of nine operating properties and the placement of two development properties in service since January 1, 2021.
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•General and administrative expenses increased primarily due to a severance payment to our former chief accounting officer and an increase in stock-based compensation, partially offset by a decrease in corporate legal and transfer agent expenses.
•Depreciation and amortization decreased primarily due to an increaseimpairment of one in-place lease intangible asset during the six months ended June 30, 2021, or the First Quarter 2021 Impaired In-Place Lease, in professionalthe amount of approximately $1,120,000, by accelerating the amortization of the acquired intangible asset related to one of our healthcare tenants that was experiencing financial difficulties and legal fees, personnel costs and other administrative costs,vacated the property in connection with our Company's growth.
AcquisitionMarch 2021. During the six months ended June 30, 2022, we recognized an impairment of one in-place lease intangible asset, or the First Quarter 2022 Impaired In-Place Lease, in the amount of approximately $380,000, by accelerating the amortization of the acquired intangible asset related expenses decreased due to a decrease intenant of the First Quarter 2022 Impaired Property (as defined below).
•Impairment loss on real estate properties determinedand impairment loss on goodwill were recorded in the amounts of $7,109,000 and $278,000, respectively, related to be business combinations due toone healthcare property, or the adoption of ASU 2017-01, Business Combinations. Acquisition fees and expenses associated with transactions determined to be business combinations are expensed as incurred. DuringFirst Quarter 2022 Impaired Property, during the ninethree months ended September 30, 2017, we did not acquire anyMarch 31, 2022. Impairment loss on real estate properties determinedand impairment loss on goodwill were recorded in the amounts of $16,925,000 and $671,000, respectively, related to be business combinations as compared to 12 real estate properties determined to be business combinationsone healthcare property, or the First Quarter 2021 Impaired Property, during the ninethree months ended September 30, 2016.
Asset management fees increased due to an increase inMarch 31, 2021 and the weighted average operating assets held to $1,226.0 million for the nine months ended September 30, 2017, as compared to $563.6 million for the nine months ended September 30, 2016.

Depreciation and amortization increased due to an increase in the weighted average depreciable basis of operating real estate investments.Second Quarter 2021 Impaired Properties.
Changes in interest and other expense, net, are summarized in the following table (amounts in thousands):
Six Months Ended
June 30,
20222021$ Change% Change
Interest and other expense, net:
Interest on notes payable$— $3,655 $(3,655)(100.0)%
Interest on credit facility8,418 14,454 (6,036)(41.8)%
Other expense4,026 189 3,837 2,030.2 %
Total interest and other expense, net$12,444 $18,298 $(5,854)(32.0)%
Income from discontinued operations$— $24,253 $(24,253)(100.0)%
 Nine Months Ended September 30,  
 2017 2016 Change
Interest expense, net:     
Interest on notes payable$(9,183) $—
 $(9,183)
Interest on secured credit facility(6,162) (1,907) (4,255)
Amortization of deferred financing costs(1,870) (703) (1,167)
Cash deposits interest142
 80
 62
Capitalized interest1,450
 293
 1,157
Total interest expense, net(15,623) (2,237) (13,386)
•Interest on notes payable increaseddecreased due to an increasethe pay-off of all our notes payable on July 22, 2021, in connection with the Data Center Sale.
•Interest on credit facility decreased due to a decrease in the outstanding principal balance on notes payable to $413.8 million as of September 30, 2017, as compared to $0 as of September 30, 2016.
Interest on securedour credit facility increased due to an increase in the weighted average outstanding principal balance on the secured credit facility. The weighted average outstanding principal balance of the secured credit facility was $232.6 million for the nine months ended September 30, 2017, as compared to $88.7 million for the nine months ended September 30, 2016.
Capitalized interest increased due to an increase in the average accumulated expenditures on development properties to $35.6 million for the nine months ended September 30, 2017, as compared to $8.0 million during the nine months ended September 30, 2016.
Organization and Offering Costs
We reimburse our Advisor or its affiliates for organization and offering costs it incurs on our behalf, but only to the extent the reimbursement would not cause the selling commissions, dealer manager fees, distribution and servicing fees and other organization and offering costs incurred by us to exceed 15% of gross offering proceeds from the Initial Offering as of the date of the reimbursement. We expect that other offering costs associated with the Initial Offering (other than selling commissions, dealer manager fees and distribution and servicing fees) will be approximately 1.90% of the gross offering proceeds. Since inception, our Advisor and its affiliates incurred other organization and offering costs on our behalf of approximately $16,896,000 as of September 30, 2017. As of September 30, 2017, we reimbursed our Advisor or its affiliates approximately $15,926,000 in other offering costs. In addition, we paid our Advisor or its affiliates $404,000 in other offering costs related to subscription agreements. As of September 30, 2017, we accrued approximately $566,000 of other offering costs to our Advisor and its affiliates. As of September 30, 2017, we incurred approximately $85,508,000 in selling commissions and dealer manager fees and $13,244,000 in distribution and servicing fees to our Dealer Manager. As of September 30, 2017, we incurred other offering costs (other than selling commissions, dealer manager fees and distribution and servicing fees) of approximately $21,875,000.
When incurred, organization costs are expensed and offering costs, including selling commissions, dealer manager fees, distribution and servicing fees and other offering costs are charged to stockholders’ equity. For a further discussion of other organization and offering costs, see Note 9—"Related-Party Transactions and Arrangements" to the condensed consolidated financial statements that are a part of this Quarterly Report on Form 10-Q.
Inflation
We are exposed to inflation risk as income from long-term leases is the primary source of our cash flows from operations. There are provisions in certain of our leases with tenants that are intended to protect us from, and mitigate the risk of, the impact of inflation. These provisions include scheduled increases in contractual base rent receipts, reimbursement billings for operating expenses, pass-through charges and real estate tax and insurance reimbursements. However, due to the long-term naturepay-down in connection with the Data Center Sale and lower interest rates as a result of entering into the Unsecured Credit Facility (as defined below).
•Other expense increased primarily due to loss on debt extinguishment related to the repayment of our leases, among other factors,prior credit facility and consisted of loan costs of $4,000 and accelerated unamortized debt issuance costs of $3,363,000.
•There was no income from discontinued operations during the leases may not reset frequently enoughsix months ended June 30, 2022, due to adequately offset the effects of inflation.Data Center Sale in July 2021.
Liquidity and Capital Resources
Our principal demands foruses of funds are for acquisitions of real estate and real estate-related investments, to paycapital expenditures, operating expenses, distributions to and share repurchases from stockholders and principal and interest on any current and future indebtedness. Generally, cash for these items is generated from operations of our current and future indebtedness and to pay distributions to our stockholders.investments. Our sources of funds

are primarily the net proceeds of our Offering,operating cash flows, funds equal to amounts reinvested in the DRIP, operating cash flows, the securedour credit facility and other borrowings. In addition, we require resources to make certain payments to our Advisor and our Dealer Manager, which, during our Offering, include payments to our Advisor and its affiliates for reimbursement of other organization and offering expenses and other costs incurred on our behalf, and payments to our Dealer Manager and its affiliates for selling commissions, dealer manager fees, distribution and servicing fees, and offering expenses.
Generally, cash needs for items other than acquisitions of real estate and real estate-related investments are met from operations, borrowings, and the net proceeds of our Offering. However, there may be a delay between the sale of shares of our common stock and our investments in real estate, which could result in a delay in the benefits to our stockholders, if any, of returns generated from our investment operations.
Our Advisor evaluates potential additional investments and engages in negotiations with real estate sellers, developers, brokers, investment managers, lenders and others on our behalf. Until we invest all of the proceeds of our Offering in properties and real estate-related investments, we may invest in short-term, highly liquid or other authorized investments. Such short-term investments will not earn significant returns, and we cannot predict how long it will take to fully invest the proceeds in properties and real estate-related investments. The number of properties we acquire and other investments we make will depend upon the number of shares sold in our Offering and the resulting amount of net proceeds available for investment.borrowings.
When we acquire a property, our Advisor prepareswe prepare a capital plan that contemplates the estimated capital needs of that investment. In addition to operating expenses, capital needs may also include, by way of example, costs of refurbishment, tenant improvements or other major capital expenditures. The capital plan also sets forth the anticipated sources of the necessary capital, which may include a line of credit, or other loans established with respect to the investment, operating cash generated by the investment, additional equity investments from us, or joint venture partners or,and when necessary, capital reserves. Any capital reserves would be established from the net proceeds of our Offering, proceeds from sales of other investments, operating cash generated by other investments or other cash on hand. In some cases, a lender may require us to establish capital reserves for a particular investment. The capital plan for each investment will be adjusted through ongoing, regular reviews of our portfolio or, as necessary, to respond to unanticipated additional capital needs.
Short-term Liquidity and Capital Resources
On a short-term basis,For at least the next twelve months, we expect our principal demands for funds will be for operating expenses, including our general and administrative expenses, as well as the acquisition of real estate and real estate-related notes and investments and paymentsfunding of capital improvements and tenant improvements, acquisition related costs, operating expenses, distributions to and repurchases from stockholders, and interest and principal payments on current and future debt financings.
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our credit facility. We expect to meet our short-term liquidity requirements through net cash flows provided by operations, net proceeds from our Offering,funds equal to amounts reinvested in the DRIP and borrowings on the securedour credit facility as well as secured and unsecured borrowings from bankspotential other borrowings.
We believe we will have sufficient liquidity available to meet our obligations in a timely manner, under both normal and other lenders to finance our expected future acquisitions.stressed conditions, for the next twelve months.
Long-term Liquidity and Capital Resources
On a long-term basis,Beyond the next twelve months, we expect our principal demands for funds will be for the acquisition ofcosts to acquire additional real estate and real estate-related notes and investments and payments of tenant improvements, acquisition related costs, operating expenses, distributions to and repurchases from stockholders, andproperties, interest and principal payments on currentour credit facility, long-term capital investment demands for our real estate properties and future indebtedness. our distributions necessary to maintain our REIT status.
We currently expect to meet our long-term liquidity requirements through proceeds from cash flow from operations, borrowings on the secured credit facility, proceeds from secured or unsecured borrowings from banks or other lenders, proceeds from our Offering and funds equal to amounts reinvested in the DRIP.
We expect that substantially all cash flows from operations will be usedand borrowings on our credit facility and potential other borrowings.
We expect to pay distributions to our stockholders after certain capital expenditures;from cash flows from operations; however, we have used, and may continue to use, other sources to fund distributions, as necessary, such as proceeds from our Offering,funds equal to amounts reinvested in the DRIP and borrowings on the securedour credit facility and/or future borrowings on unencumbered assets.facility. To the extent cash flows from operations are lower due to fewer properties being acquired or lower-than-expectedless-than-expected returns on the properties held or the disposition of properties, distributions paid to stockholders may be lower. We currently expect that substantially all net cash flows from our Offering or debt financingsoperations will be used to fund acquisitions, certain capital expenditures identified at acquisition, repayments ofongoing capital expenditures, interest and principal on outstanding debt orand distributions to our stockholders in excess of cash flows from operations.stockholders.
Capital ExpendituresMaterial Cash Requirements
We willexpect to require approximately $21.3 million$23,755,000 in expenditures for capital improvementscash over the next 12 months.twelve months, of which $14,900,000 will be required for the payment of estimated interest on our outstanding debt, $742,000 related to contingent consideration from Note 14—"Commitments and Contingencies" that resulted from an earn-out arrangement, $1,988,000 related to our various lease obligations and approximately $6,125,000 will be required to fund capital improvement expenditures on our healthcare properties. We cannot provide assurances, however, that actual expenditures will not exceed these estimated expenditure levels. estimates.
As of SeptemberJune 30, 2017, we had $8.2 million of restricted cash in escrow reserve accounts for such capital expenditures. In addition, as of September 30, 2017,2022, we had approximately $74.5 million$23,077,000 in cash and cash equivalents. For the ninesix months ended SeptemberJune 30, 2017,2022, we hadpaid capital expenditures of $25.0 million$6,477,000 that primarily related to two healthcarethe completion of one development property, which was placed into service, and re-developing another operating real estate investments.property.

As of June 30, 2022, we had material obligations beyond 12 months in the amount of approximately $642,156,000, inclusive of $546,601,000 related to principal and estimated interest on our outstanding debt, $12,648,000 related to capital improvement expenditures on our healthcare properties, $418,000 related to contingent consideration from Note 14—"Commitments and Contingencies" that resulted from an earn-out arrangement and $82,489,000 related to our various lease obligations.
One of our principal liquidity needs is the payment of principal and interest on outstanding indebtedness. As of June 30, 2022, we had $505,000,000 of principal outstanding under our Unsecured Credit Facility (as defined below). We are required by the terms of certain loan documents to meet certain covenants, such as financial ratios and reporting requirements. As of June 30, 2022, we were in compliance with all such covenants and requirements on our Unsecured Credit Facility (as defined below).
As of June 30, 2022, the aggregate notional amount under our derivative instruments was $485,000,000. We have agreements with each derivative counterparty that contain cross-default provisions; if we default on our indebtedness, then we could also be declared in default on our derivative obligations, resulting in an acceleration of payment. As of June 30, 2022, we were in compliance with all such cross-default provisions.
Debt Service Requirements
Credit Facility
As of SeptemberJune 30, 2017,2022, the maximum commitments available under the secured credit facility were $425,000,000, consisting of a $325,000,000our senior unsecured revolving line of credit with Truist Bank, as Administrative Agent for the lenders, or the Revolving Credit Agreement, were $500,000,000, which may be increased, subject to lender approval, through incremental term loans and/or revolving loan commitments in an aggregate amount not to exceed $1,000,000,000. The maturity date for the Revolving Credit Agreement is February 15, 2026, which, at our election, may be extended for a period of six-months on no more than two occasions, subject to certain conditions, including the payment of an extension fee. The Revolving Credit Agreement was entered into on February 15, 2022, to replace our prior $500,000,000 revolving line of credit, which had a maturity date of April 27, 2022, with the option to extend for one twelve-month period. We did not exercise the option to extend. Upon closing of the Revolving Credit Agreement, we extinguished all commitments associated with the prior revolving line of credit.
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As of June 30, 2022, the maximum commitments available under our senior unsecured term loan with Truist Bank, as Administrative Agent for the lenders, or the 2024 Term Loan Agreement, were $300,000,000, which may be increased, subject to lender approval, to an aggregate amount not to exceed $600,000,000. The 2024 Term Loan Agreement has a maturity date of December 22, 2018,31, 2024, and, at our election, may be extended for a period of six-months on no more than two occasions, subject to the satisfaction of certain conditions, including the payment of an extension fee. The 2024 Term Loan Agreement was entered into simultaneously with the Revolving Credit Agreement’s execution, on February 15, 2022, to replace our Operating Partnership's right to two, 12-month extension periods, and a $100,000,000prior term loan, which was paid off in its entirety upon closing of the Revolving Credit Agreement and the 2024 Term Loan Agreement.
As of June 30, 2022, the maximum commitments available under our senior unsecured term loan with Truist Bank, as Administrative Agent for the lenders, or the 2028 Term Loan Agreement, were $275,000,000, of which $205,000,000 was drawn at closing to pay down our Revolving Credit Agreement in its entirety. The remainder of the commitments were available for three months following the closing date, or the Availability Period, and were available in no more than three subsequent draws with a minimum of $20,000,000 per draw, or the remaining commitments available. After the Availability Period, the undrawn portion was no longer available. If the committed amount was not fully drawn within 60 days of closing, we were required to pay a fee to the lenders, calculated as 0.25% per annum on the average daily amount of the undrawn portion, payable quarterly in arrears, until the earlier of (i) the date when the commitments have been funded in full, or (ii) August 17, 2022. The 2028 Term Loan Agreement may be increased, subject to lender approval, to an aggregate amount not to exceed $500,000,000 and has a maturity date of December 22, 2019, subject toJanuary 31, 2028. The 2028 Term Loan Agreement is pari passu with our Operating Partnership's right to one, 12-month extension.Revolving Credit Agreement and 2024 Term Loan Agreement. On July 12, 2022 and July 20, 2022, we drew $50,000,000 and $20,000,000, respectively, on the 2028 Term Loan Agreement. As of July 20, 2022, the 2028 Term Loan Agreement commitments were fully funded.
On October 6, 2017, the secured credit facility agreement was modified by accelerating the effectiveness date of one of the covenants from December 31, 2017 to October 6, 2017, whereby our Operating Partnership will not pay distributionsWe refer to the partners, members or other owners2028 Term Loan Agreement, the Revolving Credit Agreement and the 2024 Term Loan Agreement, collectively, as the “Unsecured Credit Facility,” which has aggregate commitments available of our Operating Partnership, and we will not pay distributions to our partners, members or other owners, if such distributions by our Operating Partnership, when added to$1,075,000,000, as of June 30, 2022. Generally, the amount of all other distributions paid in any period of four consecutive calendar quarters, are in excess of 95% of funds from operations, as defined in the credit facility agreement, for such period.
The proceeds of loans made under the secured credit facilityour Unsecured Credit Facility may be used to financefor the acquisition of real estate investments, for tenant improvements and leasing commissions with respect to real estate, for repayment of indebtedness, for capital expenditures with respect to real estate, and for general corporate and working capital purposes. The secured credit facility can be increased
During the six months ended June 30, 2022, we drew $35,000,000 on the Revolving Credit Agreement related to $550,000,000, subject to certain conditions. See Note 8—"Notes Payablefive property acquisitions, or the 2022 Acquisitions, we repaid $30,000,000 on the Revolving Credit Agreement, primarily with proceeds from one property disposition, or the 2022 Disposition, and Securedrepaid $205,000,000 on the Revolving Credit Facility" toAgreement in its entirety with the condensed consolidated financial statements that are partproceeds drawn at closing of this Quarterly Report on Form 10-Q.the 2028 Term Loan Agreement.
As of SeptemberJune 30, 2017,2022, we had a total pool availability under the secured credit facilityour Unsecured Credit Facility of $384,419,000$1,075,000,000 and an aggregate outstanding principal balance of $220,000,000. As of September 30, 2017, $164,419,000 remained$505,000,000; therefore, $570,000,000 was available to be drawn on the secured credit facility.under our Unsecured Credit Facility. We were in compliance with all financial covenant requirements as of June 30, 2022.
Cash Flows
NineSix Months Ended SeptemberJune 30, 20172022 Compared to the NineSix Months Ended SeptemberJune 30, 20162021
Nine Months Ended
September 30,		  Six Months Ended
June 30,
(in thousands)2017 2016 Change(in thousands)20222021Change% Change
Net cash provided by operating activities$40,297
 $15,537
 $24,760
Net cash provided by operating activities$56,753 $81,119 $(24,366)(30.0)%
Net cash used in investing activities$(483,106) $(249,396) $(233,710)Net cash used in investing activities$(27,249)$(46,791)$19,542 (41.8)%
Net cash provided by financing activities$474,637
 $254,177
 $220,460
Net cash used in financing activitiesNet cash used in financing activities$(39,140)$(31,690)$(7,450)23.5 %
Operating Activities
•Net cash provided by operating activities increaseddecreased primarily due to the acquisitionCompany owning a smaller portfolio of our new operating properties subsequent to the Data Center Sale on July 22, 2021, partially offset by increasedan increase in rental revenues resulting from the acquisition of nine operating expenses.properties and placement of two development properties in service since January 1, 2021 and a decrease in interest paid as a result of entering into the Unsecured Credit Facility and the pay-off of all our notes payable on July 22, 2021, in connection with the Data Center Sale.
Investing Activities
•Net cash used in investing activities increased primarilydecreased due to an increasethe proceeds from the 2022 Disposition, no consideration paid in investments in real estate of $218.4 million2022 for the Internalization Transaction and an increasea decrease in capital expenditures, of $20.6 million,partially offset by a decrease in real estate deposits, netthe 2022 Acquisitions.
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Table of $5.3 million.Contents
Financing Activities
•Net cash provided byused in financing activities increased primarily due to an increase in proceeds from notes payablepayments of $260.8 million, an increase in proceeds fromdeferred financing costs as a result of entering into the issuance of common stock of $20.9 million2024 Term Loan Agreement and a decrease in offering costs related toRevolving Credit Agreement on February 15, 2022 and the issuance of common stock of $0.8 million, offset by a net decrease in proceeds from the secured credit facility of $45.0 million, an increase in distributions to our stockholders of $8.1 million,2028 Term Loan Agreement on May 17, 2022, and an increase in repurchases of our common stock under our share repurchase program, partially offset by a decrease in distributions to our common stockholders, a decrease in proceeds from our credit facility, a decrease in payment of $6.7 millionoffering costs on issuance of common stock and an increasea decrease in deferred financing costspayments on notes payable due to the pay-off of $2.2 million.
all our notes payable on July 22, 2021.
Distributions to Stockholders
The amount of distributions payable to our stockholders is determined by our board of directorsthe Board and is dependent on a number of factors, including our funds available for distribution, financial condition, lenders' restrictions and limitations, capital expenditure requirements, corporate law restrictions and the annual distribution requirements needed to maintain our status as a REIT under the Code. Our boardInternal Revenue Code of directors1986, as amended. The Board must authorize each distribution and may, in the future, authorize lower amounts of distributions or not authorize additional distributions and, therefore, distribution payments are not guaranteed. Our Advisor may also defer, suspend and/or waive fees and expense reimbursements if we have not generated sufficient cash flow from our operations and other sources to fund distributions. Additionally, our organizational documents permit us to pay distributions from unlimited amounts of any source, and we may use sources other than operating cash flows to fund distributions, including proceeds from our Offering,funds equal to amounts reinvested in the DRIP, which may reduce the amount of capital we ultimately invest in properties or other permitted investments.

We have funded distributions with operating cash flows from our properties proceeds raisedand funds equal to amounts reinvested in our Offering and reinvestments pursuant to the DRIP. To the extent that we do not have taxable income, distributions paid will be considered a return of capital to stockholders.
The following table shows the sources of distributions paid during the ninesix months ended SeptemberJune 30, 20172022 and 20162021 (amounts in thousands):
Six Months Ended June 30,
20222021
Distributions paid in cash - common stockholders$32,401 $38,955 
Distributions reinvested (shares issued)12,290 14,833 
Total distributions$44,691 $53,788 
Source of distributions:
Cash flows provided by operations (1)
$32,401 73 %$38,955 72 %
Offering proceeds from issuance of common stock pursuant to the DRIP (1)
12,290 27 %14,833 28 %
Total sources$44,691 100 %$53,788 100 %
 Nine Months Ended September 30,
 2017 2016
Distributions paid in cash - common stockholders$20,415
   $12,285
  
Distributions reinvested23,001
   16,285
  
Total distributions$43,416
   $28,570
  
Source of distributions:       
Cash flows provided by operations (1)
$20,415
 47% $12,285
 43%
Offering proceeds from issuance of common stock pursuant to the DRIP (1)
23,001
 53% 16,285
 57%
Total sources$43,416
 100% $28,570
 100%
(1)Percentages were calculated by dividing the respective source amount by the total sources of distributions.
(1)Percentages were calculated by dividing the respective source amount by the total sources of distributions.
Total distributions declared but not paid on Class A shares, Class I shares and Class T shares as of SeptemberJune 30, 20172022, were approximately $5.6 million$7,435,000 for common stockholders. These distributions were paid on October 2, 2017.July 8, 2022.
For the ninesix months ended SeptemberJune 30, 2017,2022, we declared and paid distributions of approximately $43.4 million$44,691,000 to Class A stockholders, Class I stockholders, and Class T stockholders and Class T2 stockholders, collectively, including shares issued pursuant to the DRIP, as compared to FFO (asand AFFO (which are Non-GAAP measures defined below)and reconciled below under "Non-GAAP Financial Measures") for the ninesix months ended SeptemberJune 30, 20172022, of approximately $43.4 million, which covered 100% of our distributions paid during such period. The payment of distributions from sources other than FFO may reduce the amount of proceeds available for investment$55,795,000 and operations or cause us to incur additional interest expense as a result of borrowed funds.$58,293,000, respectively.
For a discussion of distributions paid subsequent to SeptemberJune 30, 2017,2022, see Note 17—15—"Subsequent Events" to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Contractual Obligations
AsNon-GAAP Financial Measures
In the real estate industry, analysts and investors employ certain non-GAAP supplemental financial measures in order to facilitate meaningful comparisons between periods and among peer companies. Additionally, in the formulation of September 30, 2017,our goals and in the evaluation of the effectiveness of our strategies, we had approximately $633.8 millionuse funds from operations, or FFO, and adjusted funds from operations, or AFFO, which are non-GAAP measures defined by management. We believe that these measures are useful to investors to consider because they may assist them to better understand and measure the performance of principal debt outstanding,our business over time and against similar companies.
A description of which $413.8 million related to notes payableFFO and $220.0 million relatedAFFO and reconciliations of these non-GAAP measures to the secured credit facility. See Note 8—"Notes Payable and Secured Credit Facility" to the condensed consolidated financial statements thatmost directly comparable GAAP measures, are a partprovided below.
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Table of this Quarterly Report on Form 10-Q for certain terms of the debt outstanding.Contents
Our contractual obligations as of September 30, 2017 were as follows (amounts in thousands):
 Less than
1 Year		 1-3 Years 3-5 Years More than
5 Years		 Total
Principal payments—fixed rate debt$—
 $1,453
 $76,748
 $136,499
 $214,700
Interest payments—fixed rate debt9,273
 18,529
 15,963
 23,417
 67,182
Principal payments—variable rate debt fixed through interest rate swap (1)
—
 103,302
 183,288
 —
 286,590
Interest payments—variable rate debt fixed through interest rate swap (2)
11,894
 20,068
 11,527
 —
 43,489
Principal payments—variable rate debt261
 120,562
 11,722
 —
 132,545
Interest payments—variable rate debt (3)
4,993
 2,299
 1,172
 —
 8,464
Capital expenditures21,299
 —
 —
 —
 21,299
Ground lease payments521
 1,089
 1,089
 5,343
 8,042
Total$48,241
 $267,302
 $301,509
 $165,259
 $782,311
(1)As of September 30, 2017, we had $286.6 million outstanding principal on notes payable and borrowings under the secured credit facility that were fixed through the use of interest rate swap agreements.
(2)We used the fixed rates under our interest rate swap agreements as of September 30, 2017 to calculate the debt payment obligations in future periods.

(3)We used LIBOR plus the applicable margin under our variable rate debt agreement as of September 30, 2017 to calculate the debt payment obligations in future periods.
Off-Balance Sheet Arrangements
As of September 30, 2017, we had no off-balance sheet arrangements.
Related-Party Transactions and Arrangements
We have entered into agreements with our Advisor and its affiliates whereby we agree to pay certain fees to, or reimburse certain expenses of, our Advisor or its affiliates for acquisition fees and expenses, organization and offering expenses, asset and property management fees and reimbursement of operating costs. Refer to Note 9—"Related-Party Transactions and Arrangements" to our condensed consolidated financial statements that are a part of this Quarterly Report on Form 10-Q for a detailed discussion of the various related-party transactions and agreements.
Funds from Operations and ModifiedAdjusted Funds from Operations
One of our objectives is to provide cash distributions to our stockholders from cash flows generated by our operations. The purchase of real estate assets and real estate-related investments, and the corresponding expenses associated with that process, is a key operational feature of our business plan in order to generate cash flows from operations. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a measure known as funds from operations, or FFO, which we believe is an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income as determined under GAAP.
We define FFO, consistent with NAREIT’s definition, as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property and asset impairment write-downs, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnershippartnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis. To date, we have not had any unconsolidated partnerships or joint ventures.
We, along with others in the real estate industry, consider FFO to be an appropriate supplemental measure of a REIT’s operating performance, because it is based on a net income (loss) analysis of property portfolio performance that excludes non-cash items such as depreciation and amortization and asset impairment write-downs, which we believe provides a more complete understanding of our performance to investors and to our management, and when compared year over year, FFO reflects the impact on our operations from trends in occupancy.
Historical accounting convention (in accordance with GAAP) for real estate assets requires companies to report their investment in real estate at its carrying value, which consists of capitalizing the cost of acquisitions, development, construction, improvements and significant replacements, less depreciation and amortization and asset impairment write-downs, if any, which is not necessarily equivalent to the fair market value of their investment in real estate assets.
The historical accounting convention requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, which could be the case if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that, since the fair value of real estate assets historically rises and falls with market conditions including, but not limited to, inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation could be less informative.
In addition, we believe it is appropriate to disregard asset impairment write-downs as they are a non-cash adjustmentadjustments to recognize losses on prospective sales of real estate assets. Since losses from sales of real estate assets are excluded from FFO, we believe it is appropriate that asset impairment write-downs in advancementadvance of realization of losses should be excluded. Impairment write-downs are based on negative market fluctuations and underlying assessments of general market conditions, which are independent of our operating performance, including, but not limited to, a significant adverse change in the financial condition of our tenants, changes in supply and demand for similar or competing properties, and changes in tax, real estate, environmental and zoning law,laws, which can change over time. When indicators of potential impairment suggest that the carrying value of real estate and related assets may not be recoverable, we assess the recoverability by estimating whether we will recover the carrying value of the asset through undiscounted future cash flows and eventual disposition (including, but not limited to, net rental and lease revenues, net proceeds on the sale of property and any other ancillary cash flows at a property or group level under GAAP). If based on this analysis, we do not believe that we will be able to recover the carrying value of the real estate asset, we will record an impairment write-down to the extent that the carrying value exceeds the estimated fair value of the real estate asset. Testing for indicators of impairment is a continuous process and is analyzed on a quarterly basis.

basis or when indicators of impairment exist. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that identifying impairments areis based on estimated future undiscounted cash flows, and that we intend to have a relatively limited term of our operations, it could be difficult to recover any impairment charges through the eventual sale of the property. No impairment losses have been recorded to date.
In developing estimates of expected future cash flow, we make certain assumptions regarding future market rental income amounts subsequent to the expiration of current lease arrangements, property operating expenses, terminal capitalization and discount rates, the expected number of months it takes to re-lease the property, required tenant improvements and the number of years the property will be held for investment. The use of alternative assumptions in the future cash flow analysis could result in a different determination of the property’s future cash flows and a different conclusion regarding the existence of an asset impairment, the extent of such loss, if any, as well as the carrying value of the real estate asset.
Publicly registered, non-listed REITs, such as us, typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operations. While other start up entities may also experience significant acquisition activity during their initial years, we believe that publicly registered, non-listed REITs are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after the acquisition activity ceases. We will use the proceeds raised in our offering to acquire real estate assets and real estate-related investments, and we intend to begin the process of achieving a liquidity event (i.e., listing of our shares of common stock on a national securities exchange, a merger or sale, the sale of all or substantially all of our assets, or another similar transaction) within five to seven years after the completion of our offering stage, which is generally comparable to other publicly registered, non-listed REITs. Thus, we do not intend to continuously purchase real estate assets and intend to have a limited life. Due to these factors and other unique features of publicly registered, non-listed REITS, the Investment Program Association, or the IPA, an industry trade group, has standardized a measure known as modified funds from operations, or MFFO, which we believe to be another appropriate supplemental measure to reflect the operating performance of a publicly registered, non-listed REIT. MFFO is a metric used by management to evaluate sustainable performance and dividend policy. MFFO is not equivalent to our net income as determined under GAAP.
We define MFFO,calculate AFFO, a non-GAAP measure, consistent with the IPA’s definition:by further adjusting FFO further adjusted for the following items included in the determination of GAAP net income; acquisition fees and expenses; amounts related to straight-line rental income andincome: amortization of above and below intangible lease assets and liabilities; accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, adjustments related to contingent purchase price obligations where such adjustments have been included in the derivation of GAAP net income, and after adjustments for a consolidated and unconsolidated partnership and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. Our MFFO calculation complies with the IPA’s Practice Guideline, described above. In calculating MFFO, we exclude paid and accrued acquisition fees and expenses that are reported in our condensed consolidated statements of comprehensive income, amortization of aboveabove- and below-market leases, amounts related toalong with the amortization of operating leases and the finance lease, resulting from above-and below-market leases, straight-line rents (which are adjusted in order to reflect such payments from a GAAP accrual basis to closer to an expected to be received cash basis of disclosing the rent and lease payments) and ineffectiveness of interest rate swaps. The other adjustments, included in the IPA’s guidelines are not applicable to us.
Since MFFO excludes acquisition fees and expenses, it should not be construed as a historic performance measure. Acquisition fees and expenses are paid in cash by us, and we have not set aside or put into escrow any specific amount of proceeds from our offerings to be used to fund acquisition fees and expenses. Acquisition fees and expenses include payments to our Advisor or its affiliates and third parties. Such fees and expenses will not be reimbursed by our Advisor or its affiliates and third parties, and therefore if there are no further proceeds from the sale of shares of our common stock to fund future acquisition fees and expenses, such fees and expenses will need to be paid from either additional debt, operational earnings or cash flows, net proceeds from the sale of properties, or from ancillary cash flows. As a result, the amount of proceeds available for investment and operations would be reduced, or we may incur additional interest expense as a result of borrowed funds. Nevertheless, our Advisor or its affiliates will not accrue any claim on our assets if acquisition fees and expenses are not paid from the proceeds of our offerings. Under GAAP, acquisition fees and expensesdiscount amortization related to the acquisitiondeferred liability in connection with the Internalization Transaction, impairment loss on goodwill, (gain) loss on extinguishment of properties determined to be business combinations are expensed as incurred, including investment transactions that are no longer under consideration,debt, amortization of deferred financing costs and are included in acquisition related expenses in the accompanying condensed consolidated statements of comprehensive income and acquisition fees and expenses associated with transactions determined to be an asset purchase are capitalized.

All paid and accrued acquisition fees and expenses have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the real estate asset, these fees and expenses and other costs related to such property. In addition, MFFO may not be an indicator of our operating performance, especially during periods in which properties are being acquired.
In addition, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flows from operations in accordance with GAAP.
We use MFFO and the adjustments used to calculate it in order to evaluate our performance against other publicly registered, non-listed REITs, which intend to have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate it allow us to present our performance in a manner that reflects certain characteristics that are unique to publicly registered, non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence the use of such measures may be useful to investors. For example, acquisition fees and expenses are intended to be funded from the proceeds of our offering and other financing sources and not from operations. By excluding acquisition fees and expenses, the use of MFFO provides information consistent with management’s analysis of the operating performance of its real estate assets.stock-based compensation. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market
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conditions but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such charges that may reflect anticipated and unrealized gains or losses, we believe MFFOAFFO provides useful supplemental information.
AFFO is a metric used by management to evaluate our dividend policy. Additionally, we consider AFFO to be an appropriate supplemental measure of our operating performance because it provides to investors a more complete understanding of our sustainable performance.
Presentation of this information is intended to assist management and investors in comparing the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and MFFOAFFO the same way, so comparisons with other REITs may not be meaningful. Furthermore, FFO and MFFOAFFO are not necessarily indicative of cash flowflows available to fund cash needs and should not be considered as an alternative to net income as an indication of our performance, as an indication of our liquidity, or indicative of funds available for our cash needs, including our ability to make distributions to our stockholders. FFO and MFFOAFFO should be reviewed in conjunction with other measurements as an indication of our performance. MFFO hasFFO and AFFO have limitations as a performance measure.measures. However, itFFO and AFFO may be useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods,periods. FFO and in particular, after the offering and acquisition stagesAFFO are complete and net asset value is disclosed. MFFO is not a useful measuremeasures in evaluating net asset value since impairment write-downs are taken into account in determining net asset value but not in determining MFFO.FFO and AFFO.
FFO and MFFO,AFFO, as described above, should not be construedconsidered to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operational performance. The method used to evaluate the value and performance of real estate under GAAP should be construedconsidered as a more relevant measure of operating performance and considered more prominentlyprominent than the non-GAAP FFO and MFFOAFFO measures and the adjustments to GAAP in calculating FFO and MFFO. MFFO has not been scrutinized to the levelAFFO.
Reconciliation of other similar non-GAAP performance measures by the SEC or any other regulatory body.

FFO and AFFO
The following is a reconciliation of net income attributable to common stockholders, which is the most directly comparable GAAP financial measure, to FFO and MFFOAFFO for the three and ninesix months ended SeptemberJune 30, 20172022 and 20162021 (amounts in thousands, except share data and per share amounts)thousands):
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Net income attributable to common stockholders$5,439
 $2,508
 $14,871
 $5,951
Adjustments:
 
    
Depreciation and amortization11,852
 4,782
 28,487
 12,948
FFO attributable to common stockholders$17,291
 $7,290
 $43,358
 $18,899
Adjustments:
 
    
Acquisition related expenses (1)
$—
 $1,821
 $—
 $5,432
Amortization of intangible assets and liabilities (2)
(616) (126) (963) (375)
Straight-line rent (3)
(2,844) (1,645) (7,686) (4,344)
Ineffectiveness of interest rate swaps(14) (71) (16) (49)
MFFO attributable to common stockholders$13,817
 $7,269
 $34,693
 $19,563
Weighted average common shares outstanding - basic105,388,118
 71,852,230
 95,668,433
 63,044,148
Weighted average common shares outstanding - diluted105,405,297
 71,866,949
 95,687,382
 63,060,086
Net income per common share - basic$0.05
 $0.03
 $0.16
 $0.09
Net income per common share - diluted$0.05
 $0.03
 $0.16
 $0.09
FFO per common share - basic$0.16
 $0.10
 $0.45
 $0.30
FFO per common share - diluted$0.16
 $0.10
 $0.45
 $0.30
 Three Months Ended
June 30,		Six Months Ended
June 30,
2022202120222021
Net income attributable to common stockholders$12,021 $16,056 $13,392 $18,938 
Adjustments:
Depreciation and amortization (1)
17,788 21,592 35,754 47,554 
Gain on real estate disposition from continuing operations— — (460)— 
Impairment loss on real estate— 6,502 7,109 16,925 
FFO attributable to common stockholders$29,809 $44,150 $55,795 $83,417 
Adjustments:
Amortization of intangible assets and liabilities (2)
121 (639)240 (1,252)
Amortization of operating leases and finance lease272 216 526 485 
Straight-line rent adjustments (3)
(2,431)(4,452)(4,941)(9,078)
Amortization of discount of deferred liability— 55 — 109 
Impairment loss on goodwill (4)
— 431 278 671 
Loss on extinguishment of debt— — 3,367 — 
Amortization of deferred financing costs364 1,011 854 2,007 
Stock-based compensation1,278 563 2,174 1,119 
AFFO attributable to common stockholders$29,413 $41,335 $58,293 $77,478 
(1)In evaluating investments in real estate assets, management differentiates the costs to acquire the investment from the operations derived from the investment. Such information would be comparable only for publicly registered, non-listed REITs that have completed their acquisitions activities and have other similar operating characteristics. By excluding expensed acquisition related expenses, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments in cash to our Advisor and third parties. Acquisition fees and expenses incurred in a business combination, under GAAP, are considered operating expenses and as expenses are included in the determination of net income, which is a performance measure under GAAP. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property.
(2)Under GAAP, certain intangibles are accounted for at cost and reviewed at least annually for impairment, and certain intangibles are assumed to diminish predictably in value over time and are amortized, similar to depreciation and amortization of real estate-related assets that are excluded from FFO. However, because real estate values and market lease rates historically rise or fall with market conditions, management believes that by excluding charges related to amortization of these intangibles, MFFO provides useful supplemental information on the performance of the real estate.
(3)Under GAAP, rental revenue is recognized on a straight-line basis over the terms of the related lease (including rent holidays if applicable). This may result in income recognition that is significantly different than the underlying contract terms. By adjusting for the change in deferred rent receivables, MFFO may provide useful supplemental information on the realized economic impact of lease terms, providing insight on the expected contractual cash flows of such lease terms, and aligns with our analysis of operating performance.
(1)During the six months ended June 30, 2022 and 2021, we accelerated the amortization of certain in-place lease intangible assets in the amounts of approximately $380,000 and $1,120,000, respectively.
(2)Represents the amortization of above-and below-market leases.
(3)Under GAAP, rental revenue is recognized on a straight-line basis over the terms of the related lease (including rent holidays, if applicable). This may result in income recognition that is different than the underlying contractual terms. By adjusting for the change in straight-line rent receivable, AFFO may provide useful supplemental information on the
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realized economic impact of lease terms, providing insight on the expected contractual cash flows of such lease terms, which aligns with our analysis of operating performance.
(4)During the six months ended June 30, 2022, we wrote off goodwill related to one reporting unit in the amount of approximately $278,000. During the three months ended June 30, 2021, we wrote off goodwill related to two reporting units in the amount of approximately $431,000 and during the six months ended June 30, 2021, we wrote off goodwill related to three reporting units in the amount of approximately $671,000. The goodwill was originally recognized as a part of the Internalization Transaction on September 30, 2020. We believe that adjusting for such non-recurring items provides useful supplemental information because such adjustments may not be reflective of ongoing operations and aligns with our analysis of operating performance.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business plan, the primary market risk to which we are exposed is interest rate risk.

We have obtained variable rate debt financing to fund certain property acquisitions, and we arewere exposed to changes in the one-month LIBOR.LIBOR and, effective February 15, 2022, we are now exposed to such changes in the one-month Term SOFR (as defined below). Our objectives in managing interest rate risk are to seek to limit the impact of interest rate changes on operations and cash flows, and to lower overall borrowing costs. To achieve these objectives, we will borrow primarily at interest rates with the lowest margins available and, in some cases, with the ability to convert variable interest rates to fixed rates.
In July 2017, the Financial Conduct Authority, or FCA, which regulates LIBOR, announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee which identified the Secured Overnight Financing Rate, or SOFR, as its preferred alternative to USD-LIBOR in derivatives and other financial contracts. Subsequently, on March 5, 2021, the FCA announced that USD-LIBOR will no longer be published after June 30, 2023. Effective February 15, 2022, we have no LIBOR-rate debt. Loans under the Unsecured Credit Facility may be made as Base Rate Loans or SOFR Loans, at our election. On May 2, 2022, we entered into bilateral agreements with our swap counterparties to transition all of our swap agreements to SOFR. As of June 30, 2022, all of our interest rate swap agreements were indexed to SOFR.
As of June 30, 2022, we had 12 interest rate swap agreements outstanding, which mature on various dates from April 2023 to January 2028, with an aggregate notional amount under the swap agreements of $485,000,000. Of the 12 interest rate swap agreements outstanding, three interest rate swap agreements with an aggregate notional amount of $150,000,000 have an effective date of May 1, 2023, and will replace two interest rate swaps with an aggregate notional amount of $150,000,000 that have a maturity date of April 27, 2023. As of June 30, 2022, the aggregate settlement asset value was $13,454,000. The settlement value of these interest rate swap agreements is dependent upon existing market interest rates and swap spreads. As of June 30, 2022, an increase of 50 basis points in the market rates of interest would have resulted in an increase to the settlement asset value of these interest rate swaps to a value of $22,029,000. These interest rate swap agreements were designated as hedging instruments.
On April 8, 2022, we entered into two interest rate swap agreements, which have an effective date of May 2, 2022 and an aggregate notional amount of $85,000,000.
As of June 30, 2022, of the $505,000,000 total principal debt outstanding, $20,000,000 was subject to variable interest rates, indexed to Term SOFR, with an interest rate of 2.4% per annum. As of June 30, 2022, an increase of 50 basis points in the market rates of interest would have resulted in an increase in interest expense of approximately $100,000 per year.
We have entered, and may continue to enter, into additional derivative financial instruments, such as interest rate swaps, in order to mitigate our interest rate risk on a given variable rate financial instrument. To the extent we do, we are exposed to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, it does not possess credit risk. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. We manage the market risk associated with interest rate contracts by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes. We may also enter into rate-lock arrangements to lock interest rates on future borrowings.
In addition to changes in interest rates, the value of our future investments will be subject to fluctuations based on changes in local and regional economic conditions and changes in the creditworthiness of tenants, which may affect our ability to refinance our debt, if necessary.
The following table summarizes our principal debt outstanding as
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Table of September 30, 2017 (amounts in thousands):Contents
 September 30, 2017
Notes payable: 
Fixed rate notes payable$214,700
Variable rate notes payable fixed through interest rate swaps186,590
Variable rate notes payable12,545
Total notes payable413,835
Secured credit facility:
Variable rate secured credit facility fixed through interest rate swaps100,000
Variable rate secured credit facility120,000
Total secured credit facility220,000
Total principal debt outstanding (1)
$633,835
(1)As of September 30, 2017, the weighted average interest rate on our total debt outstanding was 3.91%.
As of September 30, 2017, $132.5 million of the $633.8 million total principal debt outstanding was subject to variable interest rates with a weighted average interest rate of 3.72% per annum. As of September 30, 2017, an increase of 50 basis points in the market rates of interest would have resulted in a change in interest expense of approximately $0.7 million per year.
As of September 30, 2017, we had 11 interest rate swap agreements outstanding, which mature on various dates from December 2020 to April 2022. As of September 30, 2017, the aggregate settlement asset value was $1.1 million. The settlement value of these interest rate swap agreements are dependent upon existing market interest rates and swap spreads. As of September 30, 2017, an increase of 50 basis points in the market rates of interest would have resulted in a settlement asset value of the interest rate swaps of $6.3 million.
We do not have any foreign operations and thus we are not exposed to foreign currency fluctuations.
The following table summarizes our principal debt outstanding related to our credit facility as of June 30, 2022 (amounts in thousands):
June 30, 2022
Variable rate term loans fixed through interest rate swaps485,000 
Variable rate term loans20,000 
Total principal debt outstanding (1)
$505,000 
(1)As of June 30, 2022, the weighted average interest rate on our total debt outstanding was 2.9%.
Item 4. Controls and Procedures.
(a) Evaluation of disclosure controls and procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports pursuant to the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, 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 any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily were required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, we conducted an evaluation as of SeptemberJune 30, 20172022, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures, as of SeptemberJune 30, 2017,2022, were effective at a reasonable assurance level.
(b) Changes in internal control over financial reporting. There have been no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the three months ended SeptemberJune 30, 2017,2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Table of Contents


PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
We are not aware of any material pending legal proceedings to which we are a party or to which our properties are the subject. See Note 14—"Commitments and Contingencies" to the condensed consolidated financial statements that are a part of this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
There have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2016,2021, as filed with the SEC on March 16, 2017, except as noted below.29, 2022.
Distributions paid from sources other than our cash flows from operations, including from the proceeds of this Offering, will result in us having fewer funds available for the acquisition of properties and real estate-related investments, which may adversely affect our ability to fund future distributions with cash flows from operations and may adversely affect your overall return.
We have paid, and may continue to pay, distributions from sources other than from our cash flows from operations. For the nine months ended September 30, 2017, our cash flows provided by operations of approximately $40.3 million was a shortfall of approximately $3.1 million, or 7.1%, of our distributions (total distributions were approximately $43.4 million, of which $20.4 million was cash and $23.0 million was reinvested in shares of our common stock pursuant to our DRIP) during such period and such shortfall was paid from proceeds from our DRIP Offering. For the year ended December 31, 2016, our cash flows provided by operations of approximately $25.0 million was a shortfall of approximately $15.6 million, or 38.4%, of our distributions (total distributions were approximately $40.6 million, of which $17.7 million was cash and $22.9 million was reinvested in shares of our common stock pursuant to our DRIP) during such period and such shortfall was paid from proceeds from our DRIP Offering. Until we acquire additional properties or real estate-related investments, we may not generate sufficient cash flows from operations to pay distributions. Our inability to acquire additional properties or real estate-related investments may result in a lower return on your investment than you expect.
We may pay, and have no limits on the amounts we may pay, distributions from any source, such as from borrowings, the sale of assets, the sale of additional securities, advances from our Advisor, our Advisor’s deferral, suspension and/or waiver of its fees and expense reimbursements and Offering proceeds. Funding distributions from borrowings could restrict the amount we can borrow for investments, which may affect our profitability. Funding distributions with the sale of assets may affect our ability to generate cash flows. Funding distributions from the sale of additional securities could dilute your interest in us if we sell shares of our common stock to third party investors. Funding distributions from the proceeds of our Offering will result in us having less funds available for acquiring properties or real estate-related investments. Our inability to acquire additional properties or real estate-related investments may have a negative effect on our ability to generate sufficient cash flow from operations from which to pay distributions. As a result, the return investors may realize on their investment may be reduced and investors who invest in us before we generate significant cash flow may realize a lower rate of return than later investors. Payment of distributions from any of the aforementioned sources could restrict our ability to generate sufficient cash flow from operations, affect our profitability and/or affect the distributions payable upon a liquidity event, any or all of which may have an adverse effect on an investment in us.

A high concentration of our properties in a particular geographic area, or of tenants in a similar industry, would magnify the effects of downturns in that geographic area or industry.
As of September 30, 2017, we owned 49 real estate investments, located in 36 metropolitan statistical areas, or MSAs, and one micropolitan statistical area, two of which accounted for 10.0% or more of our contractual rental revenue. Real estate investments located in the Oklahoma City, Oklahoma MSA and the Atlanta-Sandy Springs-Roswell, Georgia MSA accounted for approximately 10.5% and 10.0%, respectively, of our contractual rental revenue for the nine months ended September 30, 2017. In the event that we have a concentration of properties in any particular geographic area, any adverse situation that disproportionately effects that geographic area would have a magnified adverse effect on our portfolio. Similarly, if tenants of our properties become concentrated in a certain industry or industries, any adverse effect to that industry generally would have a disproportionately adverse effect on our portfolio.
Our investments in properties where the underlying tenant has a below investment grade credit rating, as determined by major credit rating agencies, or unrated tenants, may have a greater risk of default and therefore may have an adverse impact on our returns on that asset and our operating results.
As of September 30, 2017, approximately 11.9% of our tenants had an investment grade credit rating from a major ratings agency, 19.3% of our tenants were rated but did not have an investment grade credit rating from a major ratings agency and 68.8% of our tenants are not rated.  Approximately 17.3% of our non-rated tenants were affiliates of companies having an investment grade credit rating. Our investments with tenants that do not have an investment grade credit rating from a major ratings agency or were not rated and are not affiliated with companies having an investment grade credit rating may have a greater risk of default and bankruptcy than investments in properties leased exclusively to investment grade tenants. When we invest in properties where the tenant does not have a publicly available credit rating, we use certain credit assessment tools as well as rely on our own estimates of the tenant’s credit rating which includes reviewing the tenant’s financial information (i.e., financial ratios, net worth, revenue, cash flows, leverage and liquidity). If our lender or a credit rating agency disagrees with our ratings estimates, or our ratings estimates are otherwise inaccurate, we may not be able to obtain our desired level of leverage or our financing costs may exceed those that we projected. This outcome could have an adverse impact on our returns on that asset and hence our operating results.
Reductions in reimbursement from third party payors, including Medicare and Medicaid, could adversely affect the profitability of our tenants and hinder their ability to make rental payments to us.
Sources of revenue for our tenants may include the federal Medicare program, state Medicaid programs, private insurance carriers and health maintenance organizations, among others. Efforts by such payors to reduce healthcare costs will likely continue, which may result in reductions or slower growth in reimbursement for certain services provided by some of our tenants. In addition, the healthcare billing rules and regulations are complex, and the failure of any of our tenants to comply with various laws and regulations could jeopardize their ability to continue participating in Medicare, Medicaid and other government sponsored payment programs. Moreover, the state and federal governmental healthcare programs are subject to reductions by state and federal legislative actions. The American Taxpayer Relief Act of 2012 prevented the reduction in physician reimbursement of Medicare from being implemented in 2013. The Protecting Access to Medicare Act of 2014 prevented the reduction of 24.4% in the physician fee schedule by replacing the scheduled reduction with a 0.5% increase to the physician fee schedule through December 31, 2014, and a 0% increase for January 1, 2015 through March 31, 2015. The potential 21.0% cut in reimbursement that was to be effective April 1, 2015 was removed by the Medicare Access & CHIP Reauthorization Act of 2015 (MACRA) and replaced with two new methodologies that will focus upon payment based upon quality outcomes. The first model is the Merit-Based Incentive Payment System, or MIPS, which combines the Physician Quality Reporting System, or PQRS, and Meaningful Use program with the Value Based Modifier program to provide for one payment model based upon (i) quality, (ii) resource use, (iii) clinical practice improvement and (iv) advancing care information through the use of certified Electronic Health Record, or EHR, technology. The second model is the Advanced Alternative Payment Models, or APM, which requires the physician to participate in a risk share arrangement for reimbursement related to his or her patients while utilizing a certified health record and reporting on specific quality metrics. There are a number of physicians that will not qualify for the APM payment method. Therefore, this change in reimbursement models may impact our tenants’ payments and create uncertainty in the tenants’ financial condition.
The healthcare industry continues to face various challenges, including increased government and private payor pressure on healthcare providers to control or reduce costs. It is possible that our tenants will continue to experience a shift in payor mix away from fee-for-service payors, resulting in an increase in the percentage of revenues attributable to reimbursement based upon value based principles and quality driven managed care programs, and general industry trends that include pressures to control healthcare costs. The federal government's goal is to move approximately ninety percent (90%) of its reimbursement for providers to be based upon quality outcome models. Pressures to control healthcare costs and a shift away from traditional health insurance reimbursement to payment based upon quality outcomes have increased the uncertainty of payments.

In 2014, state insurance exchanges were implemented, which provide a new mechanism for individuals to obtain insurance. At this time, the number of payers that are participating in the state insurance exchanges varies, and in some regions there are very limited insurance plans available for individuals to choose from when purchasing insurance. In addition, not all healthcare providers will maintain participation agreements with the payers that are participating in the state health insurance exchange. Therefore, it is possible that our tenants may incur a change in their reimbursement if the tenant does not have a participation agreement with the state insurance exchange payers and a large number of individuals elect to purchase insurance from the state insurance exchange. Further, the rates of reimbursement from the state insurance exchange payers to healthcare providers will vary greatly. The rates of reimbursement will be subject to negotiation between the healthcare provider and the payer, which may vary based upon the market, the healthcare provider’s quality metrics, the number of providers participating in the area and the patient population, among other factors. Therefore, it is uncertain whether healthcare providers will incur a decrease in reimbursement from the state insurance exchange, which may impact a tenant’s ability to pay rent.
The insurance plans that participated on the health insurance exchanges created by the Patient Protection and Affordable Care Act of 2010 (“Healthcare Reform Act”) were expecting to receive risk corridor payments to address the high risk claims that it paid through the exchange product. However, the federal government currently owes the insurance companies approximately $8.3 billion under the risk corridor payment program that is currently disputed by the federal government. The federal government is currently defending several lawsuits from the insurance plans that participate on the health insurance exchange. If the insurance companies do not receive the payments, the insurance companies may cease to participate on the insurance exchange which limits insurance options for patients. If patients do not have access to insurance coverage it may adversely impact the tenant’s revenues and the tenant’s ability to pay rent.
In addition, the healthcare legislation passed in 2010 included new payment models with new shared savings programs and demonstration programs that include bundled payment models and payments contingent upon reporting on satisfaction of quality benchmarks. The new payment models will likely change how physicians are paid for services. These changes could have a material adverse effect on the financial condition of some or all of our tenants. The financial impact on our tenants could restrict their ability to make rent payments to us, which would have a material adverse effect on our business, financial condition and results of operations and our ability to pay distributions to stockholders.
Furthermore, beginning in 2016, the Centers for Medicare and Medicaid Services has applied a negative payment adjustment to individual eligible professionals, Comprehensive Primary Care practice sites, and group practices participating in the Physician Quality Reporting System, or PQRS, group practice reporting option (including Accountable Care Organizations) that do not satisfactorily report PQRS in 2014. Program participation during a calendar year will affect payments after two years, such that individuals and groups that receive the 2016 negative payment adjustment will not receive a 2014 PQRS incentive payment. Providers can appeal the determination, but if the provider is not successful, the provider’s reimbursement may be adversely impacted, which could adversely impact a tenant’s ability to make rent payments to us.
Moreover, President Trump signed an Executive Order on January 20, 2017 to “ease the burden of Obamacare”.
On May 4, 2017, members of the House of Representatives approved legislation to repeal portions of the Healthcare Reform Act, which legislation was submitted to the Senate for approval. On July 25, 2017, the Senate rejected a complete repeal and, further, on July 27, 2017, the Senate rejected a repeal on the Healthcare Reform Act’s individual and employer mandates and a temporary repeal on the medical device tax. Furthermore, on October 12, 2017, President Trump signed an Executive Order the purpose of which was to, among other things, (i) cut healthcare cost-sharing reduction subsidies, (ii) allow more small businesses to join together to purchase insurance coverage, (iii) extend short-term coverage policies, and (iv) expand employers’ ability to provide workers cash to buy coverage elsewhere. The Executive Order required the government agencies to draft regulations for consideration related to Associated Health Plans ("AHP"), short term limited duration insurance ("STLDI") and health reimbursement arrangements ("HRA"). At this time the proposed legislation has not been drafted. The Trump Administration also ceased to provide the cost-share subsidies to the insurance companies that offered the silver plan benefits on the Health Information Exchange. The termination of the cost-share subsidies would impact the subsidy payments due in 2017 and will likely adversely impact the insurance companies, causing an increase in the premium payments for the individual beneficiaries in 2018. Nineteen State Attorney Generals filed suit to force the Trump Administration to reinstate the cost shares subsidy payments. On October 25, 2017, a California Judge ruled in favor of the Trump Administration and found that the federal government was not required to immediately reinstate payment for the cost shares subsidy. The injunction sought by the Attorney Generals’ lawsuit was denied. Therefore, our tenants will likely see an increase in individuals who are self-pay or have a lower health benefit plan due to the increase in the premium payments. Our tenants’ collections and revenues may be adversely impacted by the change in the payor mix of their patients and it may adversely impact the tenants’ ability to make rent payments.
On October 17, 2017, Senate health committee leaders proposed a bill to address funding for the cost-sharing subsidies and the Healthcare Reform Act’s outreach funding. At this time, it is uncertain whether any healthcare reform legislation will ultimately become law. If our tenants’ patients do not have insurance, it could adversely impact the tenants’ ability to pay rent and operate a practice.

In addition, the current Administration has commented on the possibility that it may seek to cease the additional subsidies to the qualified health plans that provide coverage for beneficiaries on the health insurance exchange.  There are also multiple lawsuits in several judicial districts brought by qualified health plans to recover the prior risk corridor payments that were anticipated to be paid as part of the health insurance exchange program.  The multiple lawsuits are moving through the judicial process.  Further, there is a current lawsuit, United States House of Representatives vs. Price, which alleges that the Executive Branch of the United States of America exceeded its authority in implementing the risk corridor payments under the HealthCare Reform and therefore the payments should not be made. At this time, the case is pending. If the Administration or the court system determines that risk corridor or risk share payments are not required to be paid to the qualified health plans offering insurance coverage on the health insurance exchange program, the insurance companies may cease offering the Health Insurance Exchange product to the current beneficiaries. Therefore, our tenants may have an increase of self-pay patients and collections may decline, adversely impacting the tenants’ ability to pay rent.
The Estimated Per Share NAV of each of our Class A common stock, Class I common stock and Class T common stock are estimates as of a given point in time and likely will not represent the amount of net proceeds that would result if we were liquidated or dissolved or completed a merger or other sale of the company.
The offering prices per Class A share, Class I share and Class T share are based on our Estimated Per Share NAV of each of our Class A common stock, Class I common stock and Class T common stock as of June 30, 2017, as determined by our board of directors on September 28, 2017, which we refer to collectively as our Estimated Per Share NAV, and any applicable per share upfront selling commissions and dealer manager fees.
The price at which stockholders purchase shares and any subsequent values are likely to differ from the price at which a stockholder could resell such shares because: (1) there is no public trading market for our shares at this time; (2) the price does not reflect, and will not reflect, the fair value of our assets as we acquire them, nor does it represent the amount of net proceeds that would result from an immediate liquidation of our assets or sale of the company, because the amount of proceeds available for investment from our Offering is net of selling commissions, dealer manager fees, other organization and offering expense reimbursements and acquisition fees and expenses; (3) the estimated value does not take into account how market fluctuations affect the value of our investments, including how the current conditions in the financial and real estate markets may affect the value of our investments; (4) the estimated value does not take into account how developments related to individual assets may increase or decrease the value of our portfolio; and (5) the estimated value does not take into account any portfolio premium or premiums to value that may be achieved in a liquidation of our assets or sale of our portfolio. Further, the value of our shares will fluctuate over time as a result of, among other things, developments related to individual assets and responses to the real estate and capital markets. The Estimated Per Share NAV does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The Estimated Per Share NAV also does not take into account estimated disposition costs and fees for real estate properties that are not held for sale. There are currently no SEC, federal and state rules that establish requirements specifying the methodology to employ in determining an estimated value per share; provided, however, that pursuant to FINRA rules, the determination of the estimated value per share must be conducted by, or with the material assistance or confirmation of, a third-party valuation expert and must be derived from a methodology that conforms to standard industry practice. Subsequent estimates of our Estimated Per Share NAV will be done at least annually. Our Estimated Per Share NAV is an estimate as of a given point in time and likely does not represent the amount of net proceeds that would result from an immediate sale of our assets.
The purchase prices you pay for shares of our Class A common stock, Class I common stock and Class T common stock are based on the Estimated Per Share NAV of each of our Class A common stock, Class I common stock and Class T common stock at a given point in time, and any applicable per share upfront selling commissions and dealer manager fees. Our Estimated Per Share NAV is based upon a number of estimates, assumptions, judgments and opinions that may not be, or may later prove not to be, accurate or complete, which could make the estimated valuations incorrect. As a result, our Estimated Per Share NAV may not reflect the amount that you might receive for your shares in a market transaction, and the purchase price you pay may be higher than the value of our assets per share of common stock at the time of your purchase.
The per share price for Class A shares, Class I shares and Class T shares in our primary offering and pursuant to our DRIP are based on our most recent Estimated Per Share NAV of each of our Class A common stock, Class I common stock and Class T common stock and applicable upfront commissions and fees. Currently, there are no SEC, federal or state rules that establish requirements specifying the methodology to employ in determining an Estimated Per Share NAV. The audit committee of our board of directors, pursuant to authority delegated by our board of directors, was responsible for the oversight of the valuation process, including the review and approval of the valuation process and methodology used to determine our Estimated Per Share NAV, the consistency of the valuation and appraisal methodologies with real estate industry standards and practices and the reasonableness of the assumptions used in the valuations and appraisals. Pursuant to the prior approval of the audit committee of our board of directors, which is solely comprised of our independent directors, in accordance with the valuation policies previously adopted by our board of directors, we engaged Robert A. Stanger & Co., Inc., or Stanger, an independent

third-party valuation firm, to assist with determining the Estimated Per Share NAV. Our Estimated Per Share NAV was determined after consultation with our advisor and Stanger. Stanger prepared an appraisal report summarizing key information and assumptions and providing a value on 49 of our 62 properties in our portfolio as of June 30, 2017. In addition, Stanger relied upon the appraisal reports prepared by third parties other than Stanger on 11 properties acquired in the six months preceding June 30, 2017 and the book value of two properties, which were under development as of June 30, 2017. Stanger also prepared a net asset value report, which estimates the per share NAV of each of our Class A, Class I and Class T common stock as of June 30, 2017. The valuation was based upon the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding on an adjusted fully diluted basis, calculated as of June 30, 2017, and was performed in accordance with the valuation guidelines established by the Investment Program Association Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs. The Estimated Per Share NAV was determined by our board of directors. Subsequent estimates of our per share NAV for each of our Class A common stock, Class I common stock and Class T common stock will be prepared at least annually. Our Estimated Per Share NAV is an estimate as of a given point in time and likely does not represent the amount of net proceeds that would result from an immediate sale of our assets. The Estimated Per Share NAV is not intended to be related to any values at which individual assets may be carried on financial statements under applicable accounting standards. While the determination of our most recent Estimated Per Share NAV was conducted with the material assistance of a third-party valuation expert, with respect to asset valuations, we are not required to obtain asset-by-asset appraisals prepared by certified independent appraisers, nor must any appraisals conform to formats or standards promulgated by any trade organization. Other than the information included in our Current Report on Form 8-K filed on September 28, 2017 regarding the Estimated Per Share NAV, we do not intend to release individual property value estimates or any of the data supporting the Estimated Per Share NAV.
The U.S. Department of Labor has issued a final regulation revising the definition of “fiduciary” and the scope of “investment advice” under ERISA, which may have a negative impact on our ability to raise capital.
On April 8, 2016, the U.S. Department of Labor issued a final regulation that substantially expands the range of activities that would be considered to be fiduciary investment advice under ERISA and the Internal Revenue Code, which may make it more difficult to qualify for a prohibited transaction exemption. This new regulation could have negative implications on our ability to raise capital from potential investors, including those investing through IRAs or other arrangements. Prior to the issuance of the new regulation, ERISA and the Internal Revenue Code broadly defined fiduciaries to include persons who give investment advice for a fee, regardless of whether that fee is paid directly by the customer or by a third party. However, prior law required that advice must be given on a “regular basis” before a fiduciary standard would apply, and that a mutual agreement or understanding between the customer and the adviser that the advice would serve as a primary basis for the investment decision would also be required. Under the new regulation, a person is a fiduciary if the person receives compensation for providing advice (a “recommendation” or “communication that would reasonably be viewed as a suggestion that the recipient engage in or refrain from taking a particular course of action”) with the understanding it is based on the particular needs of the person being advised or that it is directed to a specific plan sponsor, plan participant, or IRA owner. Such decisions can include, but are not limited to, what assets to purchase or sell and (unlike under prior law) whether to rollover from an employment-based plan to an IRA. The fiduciary can be a broker, registered investment adviser or other type of adviser, some of which are subject to federal securities laws and some of which are not. The final regulation and the related exemptions were expected to become applicable for investment transactions on and after April 10, 2017. However, on February 3, 2017, the President asked for additional review of this regulation, the results of such review are unknown. In response, on March 2, 2017, the U.S. Department of Labor published a notice seeking public comments on, among other things, a proposal to adopt a 60-day delay of the April 10 applicability date of the final regulation. On April 7, 2017, the U.S. Department of Labor published a final rule extending for 60 days the applicability date of the final regulation, to June 9, 2017. However, certain requirements and exemptions under the regulation are implemented through a phased-in approach. Therefore, certain requirements and exemptions will not take effect until January 1, 2018 and other key requirements and exemptions will not take effect until July 1, 2019.
The final regulation and the accompanying exemptions are complex, and plan fiduciaries and the beneficial owners of IRAs are urged to consult with their own advisors regarding this development. The final regulation could have negative implications on our ability to raise capital from potential investors, including those investing through IRAs.
If our leases are not respected as true leases for U.S. federal income tax purposes, we would fail to qualify as a REIT.
To qualify as a REIT, we must satisfy two gross income tests, under which specified percentages of our gross income must be derived from certain sources, such as “rents from real property.” In order for rent paid to us to qualify as “rents from real property” for purposes of the REIT gross income tests, the leases must be respected as true leases for U.S. federal income tax purposes and not be treated as service contracts, joint ventures, or some other type of arrangement. If our leases are not respected as true leases for U.S. federal income tax purposes, we would fail to qualify as a REIT, which would materially adversely impact the value of an investment in our securities and in our ability to pay dividends to our stockholders.
The lease of our properties to a TRS is subject to special requirements.

Under the provisions of the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”), we may lease certain “qualified health care properties” to a TRS (or a limited liability company of which a TRS is a member). The TRS in turn would contract with a third party operator to manage the health care operations at these properties. The rents paid by a TRS in this structure would be treated as qualifying rents from real property for purposes of the REIT requirements only if (i) they are paid pursuant to an arm’s-length lease of a qualified health care property and (ii) the operator qualifies as an “eligible independent contractor” with respect to the property. An operator will qualify as an eligible independent contractor if it meets certain ownership tests with respect to us, and if, at the time the operator enters into the property management agreement, the operator is actively engaged in the trade or business of operating qualified health care properties for any person who is not a related person to us or the TRS. If any of the above conditions were not satisfied, then the rents would not be considered income from a qualifying source for purposes of the REIT rules, which could cause us to incur penalty taxes or to fail to qualify as a REIT.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
On AugustMarch 18, 2017,2022, the Board appointed Z. Jamie Behar and Verett Mims as directors, effective June 1, 2022. On June 1, 2022, we granted an aggregate of 9,000 shares ofMs. Behar and Ms. Mims each approximately 702 restricted Class A common stock under our 2014 Restricted Share Plan to our three independent directors in connection with such independent directors’ re-election to our board of directors. Each independent director received 3,000 shares of restricted Class A common stock. The shares were not registered under the Securities Act and were issued in reliance on Section 4(a)(2) of the Securities Act. There were no other sales of unregistered securities during the three months ended September 30, 2017.
Use of Public Offering Proceeds
On May 29, 2014, our Registration Statement on Form S-11 (File No. 333-191706), covering a public offering of up to $2,350,000,000 in shares of our common stock, was declared effective under the Securities Act. We are offering for sale a maximum of $2,250,000,000 in shares of common stock (exclusive of $100,000,000 in shares of common stock to be made available pursuant to our DRIP) in our primary offering on a “best efforts” basis. As of September 30, 2017, we were offering shares of Class A common stock sharesthat vests over a one-year period from the date of Class I common stockgrant. The awards were granted under and shares of Class T common stock, in any combination with a dollar value upsubject to the maximum offering amount. The offering price for the shares in the primary offering was $10.078 per Class A share, $9.162 per Class I share, and $9.649 per Class T share and the offering price for shares in the DRIP was $9.07 per Class A share, $9.07 per Class I share and $9.07 per Class T share, which is equal to the most recent Estimated Per Share NAV of eachterms of our Class A common stock, Class I common stockAmended and Class T common stock as determined byRestated 2014 Restricted Share Plan and award agreements.
On June 16, 2022, our board of directors on September 29, 2016.
As of September 30, 2017, we hadformer chief accounting officer was issued approximately 113.5 million5,387 shares of common stock in our Offering for gross proceeds of approximately $1,111.4 million, out of which we paid approximately $85.5 million in selling commissions and dealer manager fees, approximately $21.9 million in organization and offering costs and approximately $29.8 million in acquisition fees to our Advisor or its affiliates. We have excluded the distribution and servicing fee from the above information, as we pay the distribution and servicing fee from cash flows from operations or, if our cash flows from operations are not sufficient to pay the distribution and servicing fee, from borrowings in anticipation of future cash flow.
With the net offering proceeds and associated borrowings, we acquired $1.5 billion in total real estate investments as of September 30, 2017. In addition, we invested $34.5 million in expenditures for capital improvements related to certain real estate investments.
As of September 30, 2017, approximately $0.6 million remained payable to our Dealer Manager and our Advisor or its affiliates for costs related to our Offering, excluding distribution and servicing fees.
Share Repurchase Program
Our share repurchase program permits stockholders to sell their shares back to us after they have held them for at least one year, subject to certain conditions and limitations. We will limit the number of shares repurchased during any calendar year to 5.0% of the number of shares of our common stock outstanding on December 31st of the previous calendar year. In addition, the share repurchase program provides that all repurchases during any calendar year, including those upon death or a qualifying disability of a stockholder, are limited to those that can be funded with proceeds raised from the DRIP Offering during the prior calendar year and other operating funds, if any, as the board of directors, in its sole discretion, may reserve for this purpose. Our board of directors has the right, in its sole discretion, to waive the one-year holding period requirement in the event of the death or qualifying disability of a stockholder, or other involuntary exigent circumstances, such as bankruptcy, or a mandatory distribution requirement under a stockholder's IRA.
Pursuant to our share repurchase program, the purchase price for shares repurchased under our share repurchase program is 100.0% of the most recent estimated value of the Class A common stock Class I common stock, or Class T common stock, as applicable (in each case, as adjusted for any stock dividends, combinations, splits, recapitalizationsin connection with the pro-rated and the likeimmediate vesting of his performance-based equity incentive awards, consistent with respectour Severance Plan.

to our common stock). Our board of directors reserves the right, in its sole discretion, at any time and from time to time, to waive the one-year holding period requirement in the event of the death or Qualifying Disability of a stockholder, other involuntary exigent circumstances such as bankruptcy, or a mandatory distribution requirement under a stockholder’s IRA.
During the three months ended SeptemberJune 30, 2017,2022, we fulfilled the following repurchase requests pursuant to our share repurchase program:
Period Total Number of
Shares Repurchased		 Average
Price Paid per
Share		 Total Numbers of Shares
Purchased as Part of Publicly
Announced Plans and Programs		 Approximate Dollar Value
of Shares Available that may yet
be Repurchased under the
Program
07/01/2017 - 07/31/2017 196,259
 $9.07
 196,259
 $—
08/01/2017 - 08/31/2017 101,509
 $9.07
 101,509
 $—
09/01/2017 - 09/30/2017 136,243
 $9.07
 136,243
 $—
Total 434,011
   434,011
  
Share Repurchase Program:
PeriodTotal Number of
Shares Repurchased		Average
Price Paid per
Share		Total Number of Shares
Purchased as Part of Publicly
Announced Plans and Programs		Approximate Dollar Value
of Shares Available that may yet
be Repurchased under the
Program
April 2022182,237 $8.20 — $— 
May 2022— $— — $— 
June 202234,797 $8.20 — $— 
Total217,034 — 
During the three months ended SeptemberJune 30, 2017,2022, we repurchased approximately $3,594,000$1,779,000 of Class A shares, of common stockClass I shares and $343,000 of Class T shares of common stock, which represented all repurchase requests received in good order and eligible for repurchase through the September 30, 2017 repurchase date. During the three months ended September 30, 2016, we repurchased approximately $908,000 of Class A shares of common stock, which represented all repurchase requests received in good order and eligible for repurchase through the September 30, 2016 repurchase date. No shares of Class T common stock were requested to be, or were, repurchased during the three months ended September 30, 2016. No shares of Class I common stock were requested to be, or were, repurchased during the three months ended September 30, 2017 and 2016.stock.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.

Item 5. Other Information.

None.
Seventh Amendment to Dealer Manager Agreement
44
On November 8, 2017, the Company entered into the Seventh Amendment to the Dealer Manager Agreement with the Advisor and Dealer Manager, dated June 10, 2014 (as amended, the “Dealer Manager Agreement”). The purpose
Table of the Seventh Amendment, which is filed as Exhibit 10.8, is (1) to engage the Dealer Manager with respect to the Company’s Follow-on Offering and DRIP Offering and (2) to clarify certain terms of the distribution and servicing fee payable in connection with shares of Class T common stock ("Class T Shares") sold in the primary portion (the “Primary Offering”) of the Initial Offering and the Follow-On Offering.Contents
The Dealer Manager serves as the exclusive dealer manager for the Initial Offering and will serve as the exclusive dealer manager for the Follow-On Offering and DRIP Registration Statement.
Further, pursuant to the terms of the Seventh Amendment, with respect to Class T Shares sold in the Primary Offering of the Initial Offering and in the Follow-on Offering only, the Company will pay the Dealer Manager a distribution and servicing fee that accrues daily in an amount equal to 1/365th of up to 1.0% of the most recent offering price per Class T Share on a continuous basis from year to year, payable, on a monthly basis in arrears, out of amounts that otherwise would be distributed to holders of Class T Shares; provided, however, that upon the termination of the Primary Offering of the Initial Offering, the distribution and servicing fee shall be an amount that accrues daily equal to 1/365th of up to 1.0% of the most recent Estimated Per Share NAV per Class T Share on a continuous basis from year to year. The Dealer Manager will reallow all of the distribution and servicing fees with respect to Class T Shares sold in the Primary Offering of the Initial Offering or in the Follow-on Offering to participating broker-dealers; provided, however, effective June 1, 2017, a participating broker-dealer may give written notice to the Dealer Manager that it waives all or a portion of the reallowance of the distribution and servicing fee, which waiver shall be irrevocable and will not retroactively apply to Class T Shares that were previously sold through such participating broker-dealer.
The Company will cease paying the distribution and servicing fee to the Dealer Manager on the earliest to occur of the following: (i) a listing of the Class T Shares on a national securities exchange; (ii) following the completion of the Initial Offering or the Follow-on Offering, as applicable, on the date on which total underwriting compensation in such offering equals (a) 10% of the gross proceeds from the Initial Offering or Follow-on Offering, as applicable, less (b) the total amount of distribution and servicing fees waived by participating broker-dealers; (iii) the date on which there are no longer any Class T Shares outstanding; (iv) December 31, 2021, which is the fourth anniversary of the last day of the fiscal quarter in which the Primary Offering of the Initial Offering terminates; (v) with respect to a Class T Share sold in the Primary Offering of the Initial Offering or the Follow-on Offering, the date on which a participating broker-dealer receives (a) total underwriting compensation equal to 10% of the gross offering proceeds of such Class T Share less (b) the amount of any waived distribution and servicing fees by such participating broker-dealer; or (vi) the date on which the holder of such Class T Share or its agent notifies the Company or its agent that he or she is represented by a new participating broker-dealer; provided that the Company will continue paying the distribution and servicing fee, which shall be reallowed to the new participating broker-dealer, if the new participating broker-dealer enters into a participating broker-dealer agreement with the Dealer Manager or otherwise agrees to provide the services set forth in the dealer manager agreement.
The foregoing description of the Seventh Amendment does not purport to be complete and is qualified in its entirety by reference to the full Seventh Amendment, a copy of which is filed as Exhibit 10.8.


Item 6. Exhibits.
Effective September 30, 2020, Carter Validus Mission Critical REIT II, Inc., Carter Validus Operating Partnership II, LP, CVMC REIT II, LLC, CVOP Partner, LLC, Carter/Validus Operating Partnership, LP and CV Manager, LLC changed their names to Sila Realty Trust, Inc., Sila Realty Operating Partnership, LP, Sila REIT, LLC, Sila Partner, LLC, Sila Operating Partnership, LP and Sila Realty Management Company, LLC, respectively. With respect to documents executed prior to the name change, the following Exhibit List refers to the entity names used prior to the name changes in order to accurately reflect the names of the entities that appear on such documents.

Exhibit

No:
3.1
3.1
3.2
3.2
3.3
3.3
3.4
3.4
3.5
3.5
4.1
3.6
3.7
3.8
4.1
4.2
4.2
4.3
4.3
Automatic Purchase Program Enrollment Form (included as Appendix D to the prospectus attached to Post-Effective Amendment No. 6 to the Registrant’s Registration Statement on Form S-11 (File No. 333-191706) filed October 13, 2015, and incorporated herein by reference).
4.4
4.4
4.6
4.5
4.6
10.1
4.7

Table of Contents
10.1
10.2
10.2
Amendment to Collateral AssignmentGuaranty Agreement, dated as of Interests, dated August 25, 2017,May 17, 2022, by and between Carter Validusamong Sila Realty Operating Partnership, II, LP, Sila Operating Partnership, LP, and Sila REIT, LLC, each a Required Guarantor, and collectively, the Required Guarantors, and each of the subsidiaries of Sila Realty Trust, Inc., as Assignor,Borrower, that are signatories to the agreement and KeyBank National Association,each additional guarantor that may become a party to the Guaranty Agreement, individually and collectively, jointly and severally, the Guarantors, to and for the benefit of Truist Bank, as Administrative Agent, for itself and the other lenders from time to time a party tolisted in the KeyBank Credit FacilityGuaranty Agreement Runners (included as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 000-55435) filed on August 29, 2017,May 18, 2022, and incorporated herein by reference).
10.3
10.3
10.4
10.4
10.5
Joinder Agreement, dated September 29, 2017, by DCII-2005 EAST TECHNOLOGY CIRCLE, LLC to KeyBank National Association, as Agent (included as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 000-55435) filed on October 3, 2017, and incorporated herein by reference).
10.6
Amendment to Collateral Assignment of Interests, dated September 29, 2017, by and between Carter Validus Operating Partnership II, LP, as Assignor, and KeyBank National Association, as Agent for itself and the other lenders from time to time a party to the KeyBank Credit Facility Agreement (included as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 000-55435) filed on October 3, 2017, and incorporated herein by reference).

10.731.1*
10.8*
Seventh Amendment to Amended and Restated Dealer Manager Agreement, by and among Carter Validus Mission Critical REIT II, Inc., Carter Validus Advisors II, LLC and SC Distributors, LLC, dated November 8, 2017.
31.1*
Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
31.2*
32.1**
32.2**
99.1
Consent of Robert A. Stanger & Co., Inc. (included as Exhibit 99.1 to the Registrant's Annual Report on Form 10-K (File No. 000-55435) filed on March 16, 2017 and incorporated by reference herein).
101.INS*XBRL Instance Document
101.SCH*
101.SCH*Inline XBRL Taxonomy Extension Schema Document
101.CAL*
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).
*Filed herewith.
**Furnished 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, except to the extent that the registrant specifically incorporates it by reference.
* Filed herewith.

** Furnished 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, except to the extent that the registrant specifically incorporates it by reference.


SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SILA REALTY TRUST, INC.
CARTER VALIDUS MISSION CRITICAL REIT II, INC.(Registrant)
(Registrant)
Date: August 9, 2022By:/s/    MICHAEL A. SETON
Date: November 9, 2017By:
/s/    JOHN E. CARTER
Michael A. Seton
John E. Carter
Chief Executive Officer
(Principal Executive Officer)
Date: NovemberAugust 9, 20172022By:
/s/    TODD M. SAKOW
KAY C. NEELY
Todd M. SakowKay C. Neely
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)