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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 June 30, 2021
2022
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: 001-38597
afin-20210630_g1.jpgafin-20220630_g1.jpg
American Finance Trust,The Necessity Retail REIT, Inc.
(Exact name of registrant as specified in its charter)
Maryland  90-0929989
(State or other jurisdiction of incorporation or organization)  (I.R.S. Employer Identification No.)
650 Fifth Ave., 30th Floor, New York, NY                 10019
____________________________________________________ _________________________________________________
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (212) 415-6500
Former name, former address and former fiscal year, if changed since last report: Not Applicable
Securities registered pursuant to section 12(b) of the Act:
Title of each classTrading SymbolsName of each exchange on which registered
Class A Common Stock, $0.01 par value per shareAFINRTLThe Nasdaq Global Select Market
7.50% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per shareAFINPRTLPPThe Nasdaq Global Select Market
7.375% Series C Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per shareAFINORTLPOThe Nasdaq Global Select Market
Preferred Stock Purchase RightsThe Nasdaq Global Select Market
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 every Interactive Data File required to be submitted 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 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,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒ Accelerated filer☐
Non-accelerated filer☐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 13(a) of the Exchange 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 July 30, 2021,August 1, 2022, the registrant had 117,819,839133,268,193 shares of common stock outstanding.


AMERICAN FINANCE TRUST,THE NECESSITY RETAIL REIT, INC.

TABLE OF CONTENTS

FORM 10-Q
Page
Consolidated Balance Sheets as of JuneJune 30,, 2021 2022 and December 31, 20202021 (Unaudited)
3
Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 20212022 and 20202021 (Unaudited)
4
Consolidated Statements of Changes in Equity for the Three and SixSix Months Ended June 30, 20220221 (Unaudited (Unaudited)
5
Consolidated Statements of Changes in Equity for the Three and SixSix Months Ended June 30, 20202021 (Unaudited)
6
Consolidated Statements of Cash Flows for the Six Months Ended JJune une 30, 20212022 and 20202021 (Unaudited)
7
Notes to Consolidated Financial Statements (Unaudited)
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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERICAN FINANCE TRUST,THE NECESSITY RETAIL REIT, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
June 30,
2021		December 31,
2020
ASSETS(Unaudited) 
Real estate investments, at cost:
Land$735,242 $723,316 
Buildings, fixtures and improvements2,881,710 2,830,508 
Acquired intangible lease assets454,323 454,245 
Total real estate investments, at cost4,071,275 4,008,069 
Less: accumulated depreciation and amortization(695,719)(639,367)
Total real estate investments, net3,375,556 3,368,702 
Cash and cash equivalents137,138 102,860 
Restricted cash14,816 10,537 
Deposits for real estate investments2,983 137 
Derivative assets, at fair value1,930 0 
Deferred costs, net17,487 16,663 
Straight-line rent receivable70,208 66,581 
Operating lease right-of-use assets18,299 18,546 
Prepaid expenses and other assets (including $2,089 and $1,939 due from related parties as of June 30, 2021 and December 31, 2020, respectively)28,070 23,941 
Assets held for sale1,439 0 
Total assets$3,667,926 $3,607,967 
LIABILITIES AND EQUITY  
Mortgage notes payable, net$1,615,054 $1,490,798 
Credit facility155,742 280,857 
Below market lease liabilities, net80,971 78,674 
Accounts payable and accrued expenses (including $1,252 and $273 due to related parties as of June 30, 2021 and December 31, 2020, respectively)31,118 25,210 
Operating lease liabilities19,214 19,237 
Derivative liabilities, at fair value0 123 
Deferred rent and other liabilities10,025 9,794 
Dividends payable5,836 3,675 
Total liabilities1,917,960 1,908,368 
7.50% Series A cumulative redeemable perpetual preferred stock, $0.01 par value, liquidation preference $25.00 per share, 12,796,000 and 8,796,000 shares authorized, 7,933,711 and 7,842,008 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively79 79 
7.375% Series C cumulative redeemable perpetual preferred stock, $0.01 par value, liquidation preference $25.00 per share, 11,536,000 and 3,680,000 shares authorized, 4,594,498 and 3,535,700 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively46 35 
Common stock, $0.01 par value per share, 300,000,000 shares authorized, 117,706,586 and 108,837,209 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively1,177 1,088 
Additional paid-in capital2,829,490 2,723,678 
Accumulated other comprehensive income (loss)1,930 (123)
Distributions in excess of accumulated earnings(1,119,182)(1,055,680)
Total stockholders’ equity1,713,540 1,669,077 
Non-controlling interests36,426 30,522 
Total equity1,749,966 1,699,599 
Total liabilities and equity$3,667,926 $3,607,967 
(Unaudited)
June 30,
2022		December 31,
2021
ASSETS 
Real estate investments, at cost:
Land$1,000,884 $729,048 
Buildings, fixtures and improvements3,450,564 2,729,719 
Acquired intangible lease assets616,870 402,673 
Total real estate investments, at cost5,068,318 3,861,440 
Less: accumulated depreciation and amortization(697,288)(654,667)
Total real estate investments, net4,371,030 3,206,773 
Cash and cash equivalents69,431 214,853 
Restricted cash17,619 21,996 
Deposits for real estate investments16,250 41,928 
Deferred costs, net19,565 25,587 
Straight-line rent receivable65,307 70,789 
Operating lease right-of-use assets17,946 18,194 
Prepaid expenses and other assets33,666 26,877 
Assets held for sale80,779 187,213 
Total assets$4,691,593 $3,814,210 
LIABILITIES, MEZZANINE EQUITY AND EQUITY  
Mortgage notes payable, net$1,768,025 $1,464,930 
Credit facility488,000 — 
Senior notes, net491,651 491,015 
Below market lease liabilities, net132,523 78,073 
Accounts payable and accrued expenses (including $2,394 and $1,016 due to related parties as of June 30, 2022 and December 31, 2021, respectively)58,700 32,907 
Operating lease liabilities19,164 19,195 
Derivative liabilities, at fair value— 2,250 
Deferred rent and other liabilities8,075 9,524 
Dividends payable5,836 6,038 
Total liabilities2,971,974 2,103,932 
Mezzanine Equity:
Shares subject to repurchase53,388 — 
7.50% Series A cumulative redeemable perpetual preferred stock, $0.01 par value, liquidation preference $25.00 per share, 12,796,000 shares authorized, 7,933,711 issued and outstanding as of June 30, 2022 and December 31, 202179 79 
7.375% Series C cumulative redeemable perpetual preferred stock, $0.01 par value, liquidation preference $25.00 per share, 11,536,000 shares authorized, 4,595,175 and 4,594,498 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively46 46 
Common stock, $0.01 par value per share, 300,000,000 shares authorized, 133,272,305(1) and 123,783,060 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
1,268 1,238 
Additional paid-in capital2,937,395 2,915,926 
Distributions in excess of accumulated earnings(1,289,400)(1,217,435)
Total stockholders’ equity1,649,388 1,699,854 
Non-controlling interests16,843 10,424 
Total equity1,666,231 1,710,278 
Total liabilities, mezzanine equity and total equity$4,691,593 $3,814,210 
______
(1)Includes 6,450,107 shares subject to repurchase issued to the Seller of the CIM Portfolio Acquisition.

The accompanying notes are an integral part of these consolidated financial statements.
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AMERICAN FINANCE TRUST,THE NECESSITY RETAIL REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOMELOSS
(In thousands, except per share data)
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30, Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
Revenue from tenantsRevenue from tenants$81,577 $74,934 $160,764 $149,498 Revenue from tenants$116,929 $81,577 $211,872 $160,764 
Operating expenses:Operating expenses:   Operating expenses:   
Asset management fees to related partyAsset management fees to related party7,922 6,918 15,243 13,823 Asset management fees to related party8,296 7,922 16,122 15,243 
Property operating expenseProperty operating expense13,329 12,541 26,768 24,823 Property operating expense27,520 13,329 46,659 26,768 
Impairment of real estate investmentsImpairment of real estate investments91 11,502 91 11,502 Impairment of real estate investments58,954 91 64,896 91 
Acquisition, transaction and other costsAcquisition, transaction and other costs136 721 178 1,173 Acquisition, transaction and other costs206 136 485 178 
Equity-based compensationEquity-based compensation5,283 3,247 9,630 6,458 Equity-based compensation3,523 5,283 7,021 9,630 
General and administrativeGeneral and administrative3,540 6,864 9,989 12,192 General and administrative8,390 3,540 15,223 9,989 
Depreciation and amortizationDepreciation and amortization32,428 35,443 64,747 69,778 Depreciation and amortization46,573 32,428 84,261 64,747 
Total operating expensesTotal operating expenses62,729 77,236 126,646 139,749 Total operating expenses153,462 62,729 234,667 126,646 
Operating income before gain on sale of real estate investments18,848 (2,302)34,118 9,749 
Gain on sale/exchange of real estate investments11 2,838 297 4,278 
Operating income18,859 536 34,415 14,027 
Operating (loss) income before gain on sale of real estate investments Operating (loss) income before gain on sale of real estate investments(36,533)18,848 (22,795)34,118 
Gain on sale of real estate investmentsGain on sale of real estate investments13,438 11 67,007 297 
Operating (loss) income Operating (loss) income(23,095)18,859 44,212 34,415 
Other (expense) income:Other (expense) income:Other (expense) income:
Interest expenseInterest expense(20,361)(18,801)(39,695)(37,907)Interest expense(28,329)(20,361)(52,069)(39,695)
Other incomeOther income20 61 44 133 Other income944 20 962 44 
Gain on non-designated derivativesGain on non-designated derivatives— — 2,250 — 
Total other expense, netTotal other expense, net(20,341)(18,740)(39,651)(37,774)Total other expense, net(27,385)(20,341)(48,857)(39,651)
Net lossNet loss(1,482)(18,204)(5,236)(23,747)Net loss(50,480)(1,482)(4,645)(5,236)
Net loss attributable to non-controlling interests2 20 8 29 
Net loss (income) attributable to non-controlling interestsNet loss (income) attributable to non-controlling interests58 2 (6)8 
Allocation for preferred stockAllocation for preferred stock(5,925)(3,619)(11,588)(7,238)Allocation for preferred stock(5,837)(5,925)(11,674)(11,588)
Net loss attributable to common stockholders(7,405)(21,803)(16,816)(30,956)
Net loss attributable to common stockholders (1)
Net loss attributable to common stockholders (1)
(56,259)(7,405)(16,325)(16,816)
Other comprehensive income (loss):Other comprehensive income (loss):Other comprehensive income (loss):
Change in unrealized income on derivativesChange in unrealized income on derivatives(431)0 2,053 0 Change in unrealized income on derivatives— (431)— 2,053 
Comprehensive loss attributable to common stockholders$(7,836)$(21,803)$(14,763)$(30,956)
Comprehensive loss attributable to common stockholders (1)
Comprehensive loss attributable to common stockholders (1)
$(56,259)$(7,836)$(16,325)$(14,763)
Weighted-average shares outstanding — Basic110,898,056 108,386,013 109,674,113 108,375,048 
Net loss per share attributable to common stockholders — Basic$(0.07)$(0.20)$(0.15)$(0.29)
Weighted-average shares outstanding — Basic and Diluted110,898,056 108,386,013 109,674,113 108,375,048 
Weighted-average shares outstanding — Basic (2)
Weighted-average shares outstanding — Basic (2)
132,629,704 110,898,056 130,646,294 109,674,113 
Weighted-average shares outstanding — Diluted (2)
Weighted-average shares outstanding — Diluted (2)
132,629,704 110,898,056 130,646,294 109,674,113 
Net loss per share attributable to common stockholders — Basic and DilutedNet loss per share attributable to common stockholders — Basic and Diluted$(0.07)$(0.20)$(0.15)$(0.29)Net loss per share attributable to common stockholders — Basic and Diluted$(0.43)$(0.07)$(0.13)$(0.16)
______
(1)Holders of shares subject to repurchase are considered common stockholders.
(2)Includes 6,450,107 shares subject to repurchase issued to the Seller of the CIM Portfolio Acquisition for the three and six months ended June 30, 2022.


The accompanying notes are an integral part of these consolidated financial statements.
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AMERICAN FINANCE TRUST,THE NECESSITY RETAIL REIT, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share data)
(Unaudited)

Six Months Ended June 30, 2021
Series A Preferred StockSeries C Preferred StockCommon Stock
 Number of
Shares		Par ValueNumber of
Shares		Par ValueNumber of
Shares		Par ValueAdditional Paid-in
Capital		Accumulated Other Comprehensive income (loss)Distributions in excess of accumulated earningsTotal Stockholders’ EquityNon-controlling InterestsTotal Equity
Balance, December 31, 20207,842,008 $79 3,535,700 $35 108,837,209 $1,088 $2,723,678 $(123)$(1,055,680)$1,669,077 $30,522 $1,699,599 
Issuance of Common Stock, net— — — — 8,634,223 86 76,913 — — 76,999 — 76,999 
Issuance of Series A Preferred Stock, net91,703 0 — — — — 2,156 — — 2,156 — 2,156 
Issuance of Series C Preferred Stock, net— — 1,058,798 11 — — 25,596 — — 25,607 — 25,607 
Equity-based compensation (1)
— — — — 293,599 3 1,763 — (154)1,612 5,928 7,540 
Common stock shares withheld upon vesting of restricted stock— — — — (58,445)— (559)— — (559)— (559)
Dividends declared on Common Stock,$0.42 per share— — — — — — — — (46,097)(46,097)— (46,097)
Dividends declared on Series A Preferred Stock, $0.94 per share— — — — — — — — (7,453)(7,453)— (7,453)
Dividends declared on Series C Preferred Stock, $0.99 per share— — — — — — — — (4,380)(4,380)— (4,380)
Distributions to non-controlling interest holders— — — — — — — — (190)(190)(73)(263)
Net loss— — — — — — — — (5,228)(5,228)(8)(5,236)
Other comprehensive loss— — — — — — — 2,053 — 2,053 — 2,053 
Rebalancing of ownership percentage— — — — — — (57)— — (57)57 0 
Balance, June 30, 20217,933,711 $79 4,594,498 $46 117,706,586 $1,177 $2,829,490 $1,930 $(1,119,182)$1,713,540 $36,426 $1,749,966 
Six Months Ended June 30, 2022
Mezzanine EquityTotal Equity
Series A Preferred StockSeries C Preferred StockCommon Stock
 Shares Subject to RepurchaseNumber of
Shares		Par ValueNumber of
Shares		Par Value
Number of
Shares (1)
Par ValueAdditional Paid-in
Capital		Distributions in excess of accumulated earningsTotal Stockholders’ EquityNon-controlling InterestsTotal Equity
Balance, December 31, 2021$— 7,933,711 $79 4,594,498 $46 123,783,060 $1,238 $2,915,926 $(1,217,435)$1,699,854 $10,424 $1,710,278 
Issuance of Common Stock, net— — — — — 2,765,329 27 24,600 — 24,627 — 24,627 
Issuance of Shares subject to repurchase, at fair market value upon closing49,965 — — — — 6,450,107 — — — — — — 
Adjustments to redemption value3,423 — — — — — — (3,423)— (3,423)— (3,423)
Issuance of Series A Preferred Stock, net— — — — — — — (122)— (122)— (122)
Issuance of Series C Preferred Stock, net— — — 677 — — — (118)— (118)— (118)
Equity-based compensation (2)
— — — — — 273,809 3 666 — 669 6,352 7,021 
Dividends declared on Common Stock,$0.43 per share— — — — — — — — (55,276)(55,276)— (55,276)
Dividends declared on Series A Preferred Stock, $0.94 per share— — — — — — — — (7,438)(7,438)— (7,438)
Dividends declared on Series C Preferred Stock, $0.92 per share— — — — — — — — (4,236)(4,236)— (4,236)
Distributions to non-controlling interest holders— — — — — — — — (364)(364)(73)(437)
Net income (loss)— — — — — — — — (4,651)(4,651)6 (4,645)
Rebalancing of ownership percentage— — — — — — — (134)— (134)134 — 
Balance, June 30, 2022$53,388 7,933,711 $79 4,595,175 $46 133,272,305 $1,268 $2,937,395 $(1,289,400)$1,649,388 $16,843 $1,666,231 

(1)Includes shares of Class A common stock subject to repurchase.
(1) (2)Presented net of forfeitures. 19,875During the six months ended June 30, 2022, 275 restricted shares with a fair value of approximately $136,000$3,000 were forfeited during the period.forfeited.

Three Months Ended June 30, 2021Three Months Ended June 30, 2022
Series A Preferred StockSeries C Preferred StockCommon StockMezzanine EquityTotal Equity
Number of
Shares		Par ValueNumber of
Shares		Par ValueNumber of
Shares		Par ValueAdditional Paid-in
Capital		Accumulated Other Comprehensive income (loss)Distributions in excess of accumulated earningsTotal Stockholders’ EquityNon-controlling InterestsTotal EquitySeries A Preferred StockSeries C Preferred StockCommon Stock
Balance, March 31, 20217,933,711 $79 4,099,801 $41 108,872,337 $1,089 $2,740,648 $2,361 $(1,088,559)$1,655,659 $33,440 $1,689,099 
Shares Subject to RepurchaseNumber of
Shares		Par ValueNumber of
Shares		Par Value
Number of
Shares (1)
Par ValueAdditional Paid-in
Capital		Distributions in excess of accumulated earningsTotal Stockholders’ EquityNon-controlling InterestsTotal Equity
Balance, March 31, 2022Balance, March 31, 2022$53,388 7,933,711 $79 4,594,498 $46 132,994,603 $1,265 $2,937,262 $(1,204,337)$1,734,315 $13,590 $1,747,905 
Issuance of Common Stock, netIssuance of Common Stock, net— — — — 8,634,223 86 77,002 — — 77,088 — 77,088 Issuance of Common Stock, net— — — — — 3,618 — 133 — 133 — 133 
Issuance of Series A Preferred Stock, netIssuance of Series A Preferred Stock, net0 — — — — — (46)— — (46)— (46)Issuance of Series A Preferred Stock, net— — — — — — — (103)— (103)— (103)
Issuance of Series C Preferred Stock, netIssuance of Series C Preferred Stock, net— — 494,697 5 — — 12,125 — — 12,130 — 12,130 Issuance of Series C Preferred Stock, net— — — 677 — — — (82)— (82)— (82)
Equity-based compensation (1)
— — — — 258,471 2 380 — (68)314 2,964 3,278 
Common stock shares withheld upon vesting of restricted shares— — — — (58,445)— (559)— — (559)— (559)
Equity-based compensationEquity-based compensation— — — — — 274,084 3 356 — 359 3,176 3,535 
Dividends declared on Common Stock,$0.21 per shareDividends declared on Common Stock,$0.21 per share— — — — — — — — (23,054)(23,054)— (23,054)Dividends declared on Common Stock,$0.21 per share— — — — — — — — (28,599)(28,599)— (28,599)
Dividends declared on Series A Preferred Stock, $0.47 per shareDividends declared on Series A Preferred Stock, $0.47 per share— — — — — — — — (3,719)(3,719)— (3,719)Dividends declared on Series A Preferred Stock, $0.47 per share— — — — — — — — (3,719)(3,719)— (3,719)
Dividends declared on Series C Preferred Stock, $0.53 per share— — — — — — — — (2,206)(2,206)— (2,206)
Dividends declared on Series C Preferred Stock, $0.46 per shareDividends declared on Series C Preferred Stock, $0.46 per share— — — — — — — — (2,118)(2,118)— (2,118)
Distributions to non-controlling interest holdersDistributions to non-controlling interest holders— — — — — — — — (96)(96)(36)(132)Distributions to non-controlling interest holders— — — — — — — — (205)(205)(36)(241)
Net lossNet loss— — — — — — — — (1,480)(1,480)(2)(1,482)Net loss— — — — — — — — (50,422)(50,422)(58)(50,480)
Other comprehensive loss— — — — — — — (431)— (431)— (431)
Rebalancing of ownership percentageRebalancing of ownership percentage— — — — — — (60)— — (60)60 0 Rebalancing of ownership percentage— — — — — — — (171)— (171)171 — 
Balance, June 30, 20217,933,711 $79 4,594,498 $46 117,706,586 $1,177 $2,829,490 $1,930 $(1,119,182)$1,713,540 $36,426 $1,749,966 
Balance, June 30, 2022Balance, June 30, 2022$53,388 7,933,711 $79 4,595,175 $46 133,272,305 $1,268 $2,937,395 $(1,289,400)$1,649,388 $16,843 $1,666,231 

(1)Includes shares of Class A common stock subject to repurchase.

The accompanying notes are an integral part of these consolidated financial statements.
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AMERICAN FINANCE TRUST,THE NECESSITY RETAIL REIT, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share data)
(Unaudited)
Six Months Ended June 30, 2020
Preferred StockCommon Stock
 Number of
Shares		Par ValueNumber of
Shares		Par ValueAdditional Paid-in
Capital		Accumulated Other Comprehensive income (loss)Distributions in excess of accumulated earningsTotal Stockholders' EquityNon-controlling InterestsTotal Equity
Balance, December 31, 20196,917,230 $69 108,475,266 $1,085 $2,615,089 $0 $(932,912)$1,683,331 $18,899 $1,702,230 
Issuance of Common Stock, net— — — — (90)— — (90)— (90)
Issuance of Preferred Stock, net802,459 8 — — 19,601 — — 19,609 — 19,609 
Equity-based compensation— — 52,468 0 528 — — 528 5,930 6,458 
Dividends declared on Common Stock, $0.46 per share— — — — — — (52,889)(52,889)— (52,889)
Dividends declared on Preferred Stock, $0.76 per share— — — — — — (7,238)(7,238)— (7,238)
Distributions to non-controlling interest holders— — — — — — (220)(220)(84)(304)
Net loss— — — — — — (23,718)(23,718)(29)(23,747)
Rebalancing of ownership percentage— — — — 38 — — 38 (38)— 
Balance, June 30, 20207,719,689 $77 108,527,734 $1,085 $2,635,166 $0 $(1,016,977)$1,619,351 $24,678 $1,644,029 


Three Months Ended June 30, 2020
Preferred StockCommon Stock
 Number of
Shares		Par ValueNumber of
Shares		Par ValueAdditional Paid-in
Capital		Accumulated Other Comprehensive income (loss)Distributions in excess of accumulated earningsTotal Stockholders' EquityNon-controlling InterestsTotal Equity
Balance, March 31, 20207,719,689 $77 108,475,266 $1,085 $2,634,953 $0 $(972,019)$1,664,096 $21,806 $1,685,902 
Issuance of Common Stock, net— — — — (42)— — (42)— (42)
Issuance of Preferred Stock, net— — — — (64)— — (64)— (64)
Equity-based compensation— — 52,468 — 281 — — 281 2,966 3,247 
Dividends declared on Common Stock,$0.21 per share— — — — — — (23,058)(23,058)— (23,058)
Dividends declared on Preferred Stock,$0.38 per share— — — — — — (3,619)(3,619)— (3,619)
Distributions to non-controlling interest holders— — — — — — (97)(97)(36)(133)
Net loss— — — — — — (18,184)(18,184)(20)(18,204)
Rebalancing of ownership percentage— — — — 38 — — 38 (38)— 
Balance, June 30, 20207,719,689 $77 108,527,734 $1,085 $2,635,166 $0 $(1,016,977)$1,619,351 $24,678 $1,644,029 
Six Months Ended June 30, 2021
Series A Preferred StockSeries C Preferred StockCommon Stock
 Number of
Shares		Par ValueNumber of
Shares		Par ValueNumber of
Shares		Par ValueAdditional Paid-in
Capital		Accumulated Other Comprehensive income (loss)Distributions in excess of accumulated earningsTotal Stockholders’ EquityNon-controlling InterestsTotal Equity
Balance, December 31, 20207,842,008 $79 3,535,700 $35 108,837,209 $1,088 $2,723,678 $(123)$(1,055,680)$1,669,077 $30,522 $1,699,599 
Issuance of Common Stock, net— — — — 8,634,223 86 76,913 — — 76,999 — 76,999 
Issuance of Series A Preferred Stock, net91,703 — — — — — 2,156 — — 2,156 — 2,156 
Issuance of Series C Preferred Stock, net— — 1,058,798 11 — — 25,596 — — 25,607 — 25,607 
Equity-based compensation (1)
— — — — 293,599 3 1,763 — (154)1,612 5,928 7,540 
Common stock shares withheld
upon vesting of restricted
shares
— — — — (58,445)— (559)— — (559)— (559)
Dividends declared on Common Stock, $0.42 per share— — — — — — — — (46,097)(46,097)— (46,097)
Dividends declared on Series A Preferred Stock, $0.94 per share— — — — — — — — (7,453)(7,453)— (7,453)
Dividends declared on Series C Preferred Stock, $0.99 per share— — — — — — — — (4,380)(4,380)— (4,380)
Distributions to non-controlling interest holders— — — — — — — — (190)(190)(73)(263)
Net loss— — — — — — — — (5,228)(5,228)(8)(5,236)
Other comprehensive loss— — — — — — — 2,053 — 2,053 — 2,053 
Rebalancing of ownership percentage— — — — — — (57)— — (57)57 — 
Balance, June 30, 20217,933,711 $79 4,594,498 $46 117,706,586 $1,177 $2,829,490 $1,930 $(1,119,182)$1,713,540 $36,426 $1,749,966 
(1)Presented net of forfeitures. During the six months ended June 30, 2021, 19,875 restricted shares with a fair value of approximately $136,000 were forfeited.

Three Months Ended June 30, 2021
Series A Preferred StockSeries C Preferred StockCommon Stock
 Number of
Shares		Par ValueNumber of
Shares		Par ValueNumber of
Shares		Par ValueAdditional Paid-in
Capital		Accumulated Other Comprehensive income (loss)Distributions in excess of accumulated earningsTotal Stockholders’ EquityNon-controlling InterestsTotal Equity
Balance, March 31, 20217,933,711 $79 4,099,801 $41 108,872,337 $1,089 $2,740,648 $2,361 $(1,088,559)$1,655,659 $33,440 $1,689,099 
Issuance of Common Stock, net— — — — 8,634,223 86 77,002 — — 77,088 — 77,088 
Issuance of Series A Preferred Stock, net— — — — — — (46)— — (46)— (46)
Issuance of Series C Preferred Stock, net— — 494,697 5 — — 12,125 — — 12,130 — 12,130 
Equity-based compensation— — — — 258,471 2 380 — (68)314 2,964 3,278 
Common stock shares withheld
upon vesting of restricted
shares
— — — — — — — — (23,054)(23,054)— (23,054)
Dividends declared on Common Stock, $0.21 per share— — — — (58,445)— (559)— — (559)— (559)
Dividends declared on Series A Preferred Stock, $0.47 per share— — — — — — — — (3,719)(3,719)— (3,719)
Dividends declared on Series C Preferred Stock, $0.53 per share— — — — — — — — (2,206)(2,206)— (2,206)
Distributions to non-controlling interest holders— — — — — — — — (96)(96)(36)(132)
Net loss— — — — — — — — (1,480)(1,480)(2)(1,482)
Other comprehensive loss— — — — — — — (431)— (431)— (431)
Rebalancing of ownership percentage— — — — — — (60)— — (60)60 — 
Balance, June 30, 20217,933,711 $79 4,594,498 $46 117,706,586 $1,177 $2,829,490 $1,930 $(1,119,182)$1,713,540 $36,426 $1,749,966 

The accompanying notes are an integral part of these consolidated financial statements.
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AMERICAN FINANCE TRUST,THE NECESSITY RETAIL REIT, INC.
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,Six Months Ended June 30,
2021202020222021
Cash flows from operating activities:Cash flows from operating activities:  Cash flows from operating activities:  
Net (loss) income$(5,236)$(23,747)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net lossNet loss$(4,645)$(5,236)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:Adjustments to reconcile net income (loss) to net cash provided by operating activities:
DepreciationDepreciation44,511 45,381 Depreciation52,127 44,511 
Amortization of in-place lease assetsAmortization of in-place lease assets19,208 23,337 Amortization of in-place lease assets31,023 19,208 
Amortization of deferred leasing costsAmortization of deferred leasing costs1,028 1,061 Amortization of deferred leasing costs1,111 1,028 
Amortization (including accelerated write-off) of deferred financing costsAmortization (including accelerated write-off) of deferred financing costs5,368 3,178 Amortization (including accelerated write-off) of deferred financing costs6,129 5,368 
Amortization of mortgage discounts (premiums) on borrowings, net(644)(1,149)
Amortization of mortgage (premiums) and discounts on borrowings, netAmortization of mortgage (premiums) and discounts on borrowings, net161 (644)
Accretion of market lease and other intangibles, netAccretion of market lease and other intangibles, net(1,976)(3,281)Accretion of market lease and other intangibles, net(2,680)(1,976)
Equity-based compensationEquity-based compensation9,630 6,458 Equity-based compensation7,021 9,630 
Gain on non-designated derivativesGain on non-designated derivatives(2,250)— 
Gain on sale/exchange of real estate investmentsGain on sale/exchange of real estate investments(297)(4,278)Gain on sale/exchange of real estate investments(67,007)(297)
Impairment charges and goodwill impairment91 11,502 
Impairment of real estate investmentsImpairment of real estate investments64,896 91 
Payments of prepayment costs on mortgagesPayments of prepayment costs on mortgages0 271 Payments of prepayment costs on mortgages— — 
Changes in assets and liabilities:Changes in assets and liabilities:Changes in assets and liabilities:
Straight-line rent receivableStraight-line rent receivable(3,627)(7,872)Straight-line rent receivable(2,758)(3,627)
Straight-line rent payableStraight-line rent payable141 165 Straight-line rent payable135 141 
Prepaid expenses and other assetsPrepaid expenses and other assets(3,753)(4,085)Prepaid expenses and other assets4,354 (3,753)
Accounts payable and accrued expensesAccounts payable and accrued expenses682 3,264 Accounts payable and accrued expenses18,438 682 
Deferred rent and other liabilitiesDeferred rent and other liabilities231 (961)Deferred rent and other liabilities(1,449)231 
Net cash provided by operating activitiesNet cash provided by operating activities65,357 49,244 Net cash provided by operating activities104,606 65,357 
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Capital expendituresCapital expenditures(4,169)(4,047)Capital expenditures(4,848)(4,169)
Investments in real estate and other assetsInvestments in real estate and other assets(65,987)(102,222)Investments in real estate and other assets(954,747)(65,987)
Proceeds from sale of real estate investmentsProceeds from sale of real estate investments2,929 6,785 Proceeds from sale of real estate investments273,345 2,929 
Deposits for real estate investmentsDeposits for real estate investments(2,846)(2,205)Deposits for real estate investments(103)(2,846)
Net cash used in investing activitiesNet cash used in investing activities(70,073)(101,689)Net cash used in investing activities(686,353)(70,073)
Cash flows from financing activities:Cash flows from financing activities:  Cash flows from financing activities:  
Proceeds from mortgage notes payableProceeds from mortgage notes payable239,928 0 Proceeds from mortgage notes payable— 239,928 
Payments on mortgage notes payablePayments on mortgage notes payable(109,582)(1,507)Payments on mortgage notes payable(10,054)(109,582)
Proceeds from credit facilityProceeds from credit facility0 190,000 Proceeds from credit facility513,000 — 
Payments on credit facilityPayments on credit facility(125,114)(20,000)Payments on credit facility(25,000)(125,114)
Payments of financing costs and depositsPayments of financing costs and deposits(10,013)(18,210)Payments of financing costs and deposits(2,896)(10,013)
Payments of prepayment costs on mortgages0 (271)
Common stock repurchasesCommon stock repurchases(560)0 Common stock repurchases— (560)
Distributions on LTIP Units and Class A UnitsDistributions on LTIP Units and Class A Units(263)(304)Distributions on LTIP Units and Class A Units(437)(263)
Dividends paid on Class A common stockDividends paid on Class A common stock(46,250)(52,889)Dividends paid on Class A common stock(55,276)(46,250)
Dividends paid on Series A preferred stockDividends paid on Series A preferred stock(7,410)(6,919)Dividends paid on Series A preferred stock(7,438)(7,410)
Dividends paid on Series C preferred stockDividends paid on Series C preferred stock(2,263)0 Dividends paid on Series C preferred stock(4,236)(2,263)
Series A preferred stock offering costsSeries A preferred stock offering costs(85)— 
Series C preferred stock offering costsSeries C preferred stock offering costs(102)— 
Class A common stock offering costsClass A common stock offering costs0 (73)Class A common stock offering costs(491)— 
Proceeds from issuance of Series A preferred stock, net Proceeds from issuance of Series A preferred stock, net2,215 19,609  Proceeds from issuance of Series A preferred stock, net— 2,215 
Proceeds from issuance of Series C preferred stock, net Proceeds from issuance of Series C preferred stock, net25,605 0  Proceeds from issuance of Series C preferred stock, net17 25,605 
Proceeds from issuance of Class A common stock, netProceeds from issuance of Class A common stock, net76,980 0 Proceeds from issuance of Class A common stock, net24,946 76,980 
Net cash provided by financing activitiesNet cash provided by financing activities43,273 109,436 Net cash provided by financing activities431,948 43,273 
Net change in cash, cash equivalents and restricted cashNet change in cash, cash equivalents and restricted cash38,557 56,991 Net change in cash, cash equivalents and restricted cash(149,799)38,557 
Cash, cash equivalents and restricted cash beginning of periodCash, cash equivalents and restricted cash beginning of period113,397 99,840 Cash, cash equivalents and restricted cash beginning of period236,849 113,397 
Cash, cash equivalents and restricted cash end of periodCash, cash equivalents and restricted cash end of period$151,954 $156,831 Cash, cash equivalents and restricted cash end of period$87,050 $151,954 

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THE NECESSITY RETAIL REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
The accompanying notes are an integral part of these consolidated financial statements.
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AMERICAN FINANCE TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,Six Months Ended June 30,
2021202020222021
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$137,138 $136,699 Cash and cash equivalents, end of period$69,431 $137,138 
Restricted cash, end of periodRestricted cash, end of period14,816 20,132 Restricted cash, end of period17,619 14,816 
Cash, cash equivalents and restricted cash end of periodCash, cash equivalents and restricted cash end of period$151,954 $156,831 Cash, cash equivalents and restricted cash end of period$87,050 $151,954 
Supplemental Disclosures:Supplemental Disclosures:Supplemental Disclosures:
Cash paid for interest, net of amounts capitalizedCash paid for interest, net of amounts capitalized$35,510 $36,355 Cash paid for interest, net of amounts capitalized$43,895 $35,510 
Cash paid for income and franchise taxesCash paid for income and franchise taxes1,063 660 Cash paid for income and franchise taxes1,100 1,063 
Non-Cash Investing and Financing Activities:Non-Cash Investing and Financing Activities:Non-Cash Investing and Financing Activities:
Accrued Series A preferred stock offering costsAccrued Series A preferred stock offering costs$8 $210 Accrued Series A preferred stock offering costs$37 $8 
Accrued Series C preferred stock offering costsAccrued Series C preferred stock offering costs14 0 Accrued Series C preferred stock offering costs33 14 
Accrued Class A common stock offering costsAccrued Class A common stock offering costs8 0 Accrued Class A common stock offering costs38 8 
Series A preferred stock dividend declaredSeries A preferred stock dividend declared3,719 3,619 Series A preferred stock dividend declared3,719 3,719 
Series C preferred stock dividend declaredSeries C preferred stock dividend declared2,118 0 Series C preferred stock dividend declared2,118 2,118 
Shares subject to repurchase issued in acquisitionShares subject to repurchase issued in acquisition49,965 — 
Adjustments to value of shares subject to repurchaseAdjustments to value of shares subject to repurchase3,423 — 
Proceeds from real estate sales used to pay off related mortgage notes payableProceeds from real estate sales used to pay off related mortgage notes payable0 5,586 Proceeds from real estate sales used to pay off related mortgage notes payable940 — 
Mortgage notes payable released in connection with disposition of real estateMortgage notes payable released in connection with disposition of real estate0 (5,586)Mortgage notes payable released in connection with disposition of real estate(940)— 
Mortgages assumed in acquisition (including net discounts of $1,466)Mortgages assumed in acquisition (including net discounts of $1,466)312,246 — 
Application of deposits for real estate acquisitionsApplication of deposits for real estate acquisitions23,750 — 
Increase in accounts payable related to 2021 OPPIncrease in accounts payable related to 2021 OPP1,936 0 Increase in accounts payable related to 2021 OPP— 1,936 
Accrued contingent consideration on acquired properties in the CIM Portfolio AcquisitionAccrued contingent consideration on acquired properties in the CIM Portfolio Acquisition10,840 — 
Accrued capital expendituresAccrued capital expenditures2,642 4,319 Accrued capital expenditures371 2,642 




The accompanying notes are an integral part of these consolidated financial statements.
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AMERICAN FINANCE TRUST,THE NECESSITY RETAIL REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 20212022
(Unaudited)

Note 1 — Organization
American Finance Trust,The Necessity Retail REIT, Inc. (the “Company”), is an externally managed real estate investment trust for U.S. federal income tax purposes (“REIT”) focusing on acquiring and managing a diversified portfolio of primarily service-oriented and traditional retail and distribution-related commercial real estate properties located primarily in the United States. The Company’s assets consist primarily of freestanding single-tenant properties that are net leased to “investment grade” and other creditworthy tenants and a portfolio of multi-tenant retail properties consisting primarily of power centers and lifestyle centers.
The Company intends to focushas historically focused its future acquisitions primarily on net leased, single-tenant service retail properties, defined as properties leased to tenants in the retail banking, restaurant, grocery, pharmacy, gas, convenience, fitness, and auto services sectors.
On December 17, 2021, the Company signed a purchase and sale agreement to acquire 79 multi-tenant retail centers and 2 single-tenant properties for a contract purchase price of $1.3 billion (the “CIM Portfolio Acquisition”). The Company determined that the CIM Portfolio Acquisition was accounted for as an asset acquisition. The acquisition closed in multiple transactions from February 2022 through July, and the consideration included cash (including cash sourced from borrowings under the Credit Facility, as defined below), assumption of existing mortgage debt securing certain of the properties and the issuance of shares of the Company’s Class A common stock.
The Company closed on the properties of the CIM Portfolio Acquisition in multiple stages as follows:
•In the three months ended March 31, 2022, the Company closed on the acquisition of 56 properties of the CIM Portfolio Acquisition for an aggregate contract purchase price of $801.1 million which was funded by $728.4 million in cash, including $378.0 million of borrowings under the Company’s Credit Facility, the assumption of $19.3 million of existing mortgage debt and the issuance of $50.0 million in value at issuance ($53.4 million of value subject to repurchase) of the Company’s Class A common stock to certain subsidiaries of the CIM Real Estate Finance Trust, Inc. (the “Sellers”), at its closing value on the respective closing dates on which the common stock was issued.
•In the three months ended June 30, 2022, the Company closed on 24 additional properties from the CIM Portfolio Acquisition for an aggregate contract purchase price of $452.8 million in 3 closings. The acquisitions were funded with the assumption of $294.5 million of fixed-rate mortgage debt, $128.2 million of $135.0 million of borrowings under the Credit Facility, the application of $23.8 million of the Company’s $40.0 million deposit and the remainder with cash on hand. The assumed mortgages bear stated interest rates between 3.65% and 4.62% and mature between April 2023 and September 2033.
•The Company closed on the 1 remaining property from the CIM Portfolio Acquisition on July 7, 2022 for a contract purchase price of $71.1 million. The acquisition was funded with the assumption of $39.0 million of fixed-rate mortgage debt, the application of the remaining $16.2 million of the Company’s $40.0 million deposit, and the remainder with cash on hand (including $6.8 million of previous borrowings under the Credit Facility). The assumed mortgage bears a stated interest rate of 4.05% and matures in May 2024 (see Note 16 — Subsequent Events).
•The aggregate contract purchase prices above do not include contingent consideration relating to leasing activity at each respective acquired property for a six-month period subsequent to the respective closing dates of each acquired property. The Company paid $10.2 million and $13.3 million for such contingent consideration in the three months ended March 31, 2022 and three months ended June 30, 2022, respectively. As of June 30, 2021,2022, the Company accrued $10.8 million of contingent consideration based on leases executed as of June 30, 2022. The Company paid $16.1 million in July 2022, which includes the accrual for $10.8 million, and additional amounts may be due for leases executed through January 2023 (six months following the acquisition date of the final property of the CIM Portfolio Acquisition).
The CIM Portfolio Acquisition represented a strategic shift away from a primary focus on single-tenant retail properties.
In addition, the Company acquired 8 additional single-tenant properties in the three months ended June 30, 2022 for an aggregate contract purchase price of $17.5 million. The Company acquired 10 additional single-tenant properties and 1 additional multi-tenant retail property in the six months ended June 30, 2022 for an aggregate contract purchase price of $58.4 million.
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
As of June 30, 2022, the Company owned 9391,056 properties, comprised of 19.928.9 million rentable square feet, which were 94.9%90.8% leased, including 906944 single-tenant net leased commercial properties (864(906 of which are retail properties) and 33112 multi-tenant retail properties.
Substantially all of the Company’s business is conducted through American FinanceThe Necessity Retail REIT Operating Partnership, L.P. (the “OP”), a Delaware limited partnership, and its wholly ownedwholly-owned subsidiaries. American FinanceNecessity Retail Advisors, LLC (the “Advisor”) manages the Company’s day-to-day business with the assistance of the Company’s property manager, American FinanceNecessity Retail Properties, LLC, (the “Property Manager”). The Advisor and the Property Manager are under common control with AR Global Investments, LLC (“AR Global”) and these related parties receive compensation and fees for providing services to us. The Company also reimburses these entities for certain expenses they incur in providing these services to the Company.
Note 2 — Summary of Significant Accounting Policies
Basis of Accounting
The accompanying unaudited consolidated financial statements of the Company included herein were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to this Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair statement of results for the interim periods. All intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and six month periods ended June 30, 20212022 and 20202021 are not necessarily indicative of the results for the entire year or any subsequent interim periods.
These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of, and for the year ended December 31, 2020,2021, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on February 25, 2021.24, 2022. Except for those required by new accounting pronouncements discussed below, there have been no significant changes to the Company’s significant accounting policies during the six months ended June 30, 2021.2022.
Principles of Consolidation
The accompanying unaudited consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All inter-companyintercompany accounts and transactions are eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members as well as whether the entity is a variable interest entity (“VIE”) for which the Company is the primary beneficiary. The Company has determined the OP is a VIE of which the Company is the primary beneficiary. Substantially all of the Company’s assets and liabilities are held by the OP. Except for the OP, as of June 30, 20212022 and December 31, 2020,2021, the Company had no interests in entities that were not wholly owned.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue recognition, purchase price allocations to record investments in real estate, and fair value measurements, as applicable.


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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
Impacts of the COVID-19 Pandemic
During the first quarter of 2020, the global COVID-19 pandemic that has spread around the world and to every state in the United States commenced. The pandemic has had and could continue to have an adverse impact on economic and market conditions, including a global economic slowdown, recession, or period of slow growth. The continued rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions. The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of June 30, 2021,2022, however uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of June 30, 20212022 inherently less certain than they would be absent the current and potential impacts of COVID-19. Actual results may ultimately differ from those estimates.
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
The financial stability and overall health of tenants is critical to the Company’s business. The negative effects that the global pandemic has had on the economy includes the closure or reduction in activity for many retail operations such as some of those operated by the Company’s tenants (e.g., restaurants). This has impacted the ability of some of the Company’s tenants to pay their monthly rent either temporarily or in the long-term. The Company experienced delays in rent collections in the second, third and fourth quarters of 2020 and the first quarter of 2021. The Company has not experienced any material delays in the receipt of rental payments during the six months ended June 30, 2022. The Company took a proactive approach to achieve mutually agreeable solutions with its tenants and in some cases, in the second, third and fourth quarters of 2020 and the first and second quarters ofthroughout 2021, the Company has executed several types of lease amendments. These agreements includeincluded deferrals and abatements and also may includehave included extensions to the term of the leases. The Company has not executed any COVID-19-related deferrals or abatements in the six months ended June 30, 2022.
For accounting purposes, in accordance with ASC 842: Leases, normally a company would be required to assess a lease modification to determine if the lease modification should be treated as a separate lease and if not, modification accounting would be applied which would require a company to reassess the classification of the lease (including leases for which the prior classification under ASC 840 was retained as part of the election to apply the package of practical expedients allowed upon the adoption of ASC 842, which does not apply to leases subsequently modified). However, in light of the COVID-19 pandemic in which many leases are being modified, the FASBFinancial Accounting Standards Board (“FASB”) and SECthe U.S. Securities and Exchange Commission (“SEC”) provided relief that allowed companies to make a policy election as to whether they treat COVID-19 related lease amendments as a provision included in the pre-concession arrangement, and therefore, not a lease modification, or to treat the lease amendment as a modification. In order to be considered COVID-19 related, cash flows must be substantially the same or less than those prior to the concession. For COVID-19 relief qualified changes, there are two methods to potentially account for such rent deferrals or abatements under the relief, (1) as if the changes were originally contemplated in the lease contract or (2) as if the deferred payments are variable lease payments contained in the lease contract. For all other lease changes that did not qualify for FASB relief, the Company is required to apply modification accounting including assessing classification under ASC 842.
Some, but not all of the Company’s lease modifications qualify for the FASB relief. In accordance with the relief provisions, instead of treating these qualifying leases as modifications, the Company has elected to treat the modifications as if previously contained in the lease and recast rents receivable prospectively (if necessary). Under that accounting, for modifications that were deferrals only, there would be no impact on overall rental revenue and for any abatement amounts that reduced total rent to be received, the impact would be recognized ratably over the remaining life of the lease.
For leases not qualifying for this relief, the Company has applied modification accounting and determined that there were no changes in the current classification of its leases impacted by negotiations with its tenants.
Revenue Recognition
The Company’s revenues, which are derived primarily from lease contracts, include rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the initial term of the lease. As of June 30, 2021,2022, these leases had an average remaining lease term of approximately 8.57.2 years. Because many of the Company’s leases provide for rental increases at specified intervals, straight-line basis accounting requires the Company to record a receivable for, and include in revenue from tenants, unbilled rents receivable that the Company will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. When the Company acquires a property, the acquisition date is considered to be the commencement date for purposes of this calculation. For new leases after acquisition, the commencement date is considered to be the date the tenant takes control of the space. For lease modifications, the commencement date is considered to be the date the lease modification is executed. The Company defers the revenue related to lease payments received from tenants in advance of their due dates. Pursuant to certain of the Company’s lease agreements, tenants are required to reimburse the Company for certain property operating expenses, in addition to paying base rent, whereas under certain other lease agreements, the tenants are directly responsible for all operating costs of the respective properties.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
Under ASC 842, the Company elected to report combined lease and non-lease components in a single line “Revenue from tenants.” For comparative purposes, the Company also elected to reflect prior revenue and reimbursements reported under ASC 842 also on a single line. For expenses paid directly by the tenant, under both ASC 842 and 840, the Company has reflected them on a net basis.
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
The following table presents future base rent payments on a cash basis due to the Company over the next five years and thereafter. These amounts exclude tenant reimbursements and contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes among other items:
As of June 30, 2021:2022:
(In thousands)(In thousands)Future  Base Rent Payments(In thousands)Future  Base Rent Payments
2021 (remainder)$135,529 
2022268,361 
2022 (remainder)2022 (remainder)$183,939 
20232023254,982 2023353,069 
20242024237,982 2024323,368 
20252025219,597 2025293,652 
20262026202,654 2026264,890 
20272027222,655 
ThereafterThereafter1,178,480 Thereafter1,184,148 
$2,497,585  $2,825,721 
The Company owns certain properties with leases that include provisions for the tenant to pay contingent rental income based on a percent of the tenant’s sales upon the achievement of certain sales thresholds or other targets which may be monthly, quarterly or annual targets. As the lessor to the aforementioned leases, the Company defers the recognition of contingent rental income, until the specified target that triggered the contingent rental income is achieved, or until such sales upon which percentage rent is based are known. For the three and six months ended June 30, 2021,2022 such amounts were $0.4$0.3 million and $0.6$0.7 million, respectively, and for the three and six months ended June 30, 2020,2021 such amounts were $0.1$0.4 million and $0.3$0.6 million, respectively.
The Company continually reviews receivables related to rent and unbilled rents receivable and determines collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. Under the leasing standard adopted on January 1, 2019 (see the “Recently Issued Accounting Pronouncements” section below), the Company is required to assess, based on credit risk only, if it is probable that the Company will collect virtually all of the lease payments at lease commencement date and it must continue to reassess collectability periodically thereafter based on new facts and circumstances affecting the credit risk of the tenant. Partial reserves, or the ability to assume partial recovery are not permitted. If the Company determines that it’s probable it will collect virtually all of the lease payments (rent and common area maintenance), the lease will continue to be accounted for on an accrual basis (i.e. straight-line). However, if the Company determines it’s not probable that it will collect virtually all of the lease payments, the lease will be accounted for on a cash basis and a full reserve would be recorded on previously accrued amounts in cases where it was subsequently concluded that collection was not probable. Cost recoveries from tenants are included in operating revenue from tenants beginning on January 1, 2019, in accordance with new accounting rules, on the accompanying consolidated statements of operations and comprehensive income (loss) in the period the related costs are incurred, as applicable. In the second, third and fourth quarters of 2020 and the firstthroughout 2021 and second quarters of 2021,2022, this assessment included consideration of the impacts of the COVID-19 pandemic on the ability of the Company’s tenants to pay rents in accordance with their contracts. The assessment included all of the Company’s tenants with a focus on the Company’s multi-tenant retail properties which have been more negatively impacted by the COVID-19 pandemic than the Company’s single-tenant properties.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
In accordance with the lease accounting rules, the Company records uncollectable amounts as reductions in revenue from tenants. During the three and six months ended June 30, 2022, uncollectable amounts were $0.3 million and $0.5 million, respectively. During the three months ended June 30, 2021 the Company recorded $0.5 million of uncollectable amounts during the period, not including a recovery of $0.8 million relating to a lease settlement fee from a tenant in one of the Company’s multi-tenant properties that terminated its lease. During the six months ended June 30, 2021, uncollectable amounts were $1.4 million, not including a recovery of $0.8 million relating to a lease settlement fee from a tenant in one of the Company’s multi-tenant properties that terminated its lease. Such amounts were $3.5
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
The Company entered into lease termination agreements at 2 and 6 of its single-tenant properties in the first quarter of 2022 and the fourth quarter of 2021, respectively. Since these leases have short-term remaining occupancy periods for the tenant, these lease termination agreements are treated as lease modifications, and their termination fee income is recognized over the remaining occupancy periods of the respective leases on a straight-line basis. In addition, the Company recognized and received $5.0 million in lease termination income from 5 vacant properties formerly leased to Truist Bank in the three months ended June 30, 2022. The Company recorded additional lease revenue of $5.7 million and $4.7$10.2 million forin the three and six months ended June 30, 2020,2022, respectively, related to these agreements. As of June 30, 2022, the occupancy periods for these amended leases have all expired and the tenants have vacated.
During the three and six months ended June 30, 2021, the Company recorded $0.8 million and $1.3 million of lease termination income, respectively.
Investments in Real Estate
Investments in real estate are recorded at cost. Improvements and replacements are capitalized when they extend the useful life of the asset. Costs of repairs and maintenance are expensed as incurred. At the time an asset is acquired, the Company evaluates the inputs, processes and outputs of the asset acquired to determine if the transaction is a business combination or asset acquisition. If an acquisition qualifies as a business combination, the related transaction costs are recorded as an expense in the consolidated statements of operations and comprehensive loss. If an acquisition qualifies as an asset acquisition, the related transaction costs are generally capitalized and subsequently amortized over the useful life of the acquired assets. See the Purchase Price Allocation section in this Note for a discussion of the initial accounting for investments in real estate.
Disposal of real estate investments that represent a strategic shift in operations that will have a major effect on the Company's operations and financial results are required to be presented as discontinued operations in the consolidated statements of operations. No properties were presented as discontinued operations during the quarters ended June 30, 20212022 and 2020.2021. Properties that are intended to be sold are to be designated as “held for sale” on the consolidated balance sheets at the lesser of carrying amount or fair value less estimated selling costs when they meet specific criteria to be presented as held for sale, most significantly that the sale is probable within one year. The Company evaluates the probability of sale based on specific facts including whether a sales agreement is in place and the buyer has made significant non-refundable deposits. Properties are no longer depreciated when they are classified as held for sale. As of June 30, 2021, 1 property located in Ellicott City, Maryland with a carrying value of $1.4 million was2022, 5 properties were considered held for sale, and as of December 31, 2020,2021, the Company had 0 properties1 property classified as held for sale.
In accordance with the lease accounting standard, all of the Company’s leases as lessor prior to adoption of ASC 842 were accounted for as operating leases and the Company continued to account for them as operating leases under the transition guidance. The Company evaluates new leases originated after the adoption date (by the Company or by a predecessor lessor/owner) pursuant to the new guidance where a lease for some or all of a building is classified by a lessor as a sales-type lease if the significant risks and rewards of ownership reside with the tenant. This situation is met if, among other things, there is an automatic transfer of title during the lease, a bargain purchase option, the non-cancelable lease term is for more than major part of remaining economic useful life of the asset (e.g., equal to or greater than 75%), if the present value of the minimum lease payments represents substantially all (e.g., equal to or greater than 90%) of the leased property’s fair value at lease inception, or if the asset so specialized in nature that it provides no alternative use to the lessor (and therefore would not provide any future value to the lessor) after the lease term. Further, such new leases would be evaluated to consider whether they would be failed sale-leaseback transactions and accounted for as financing transactions by the lessor. During the three and six months ended June 30, 2021 or year ended December 31, 2020, the Company had no leases as a lessor that would be considered as sales-type leases or financings under sale-leaseback rules.
The Company is also the lessee under certain land leases which were previously classified prior to adoption of lease accounting and will continue to be classified as operating leases under transition elections unless subsequently modified. These leases are reflected on the balance sheet and the rent expense is reflected on a straight line basis over the lease term.
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
Purchase Price Allocation
In both a business combination and an asset acquisition, the Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets or liabilities based on their respective fair values. Tangible assets may include land, land improvements, buildings, fixtures and tenant improvements on an as ifas-if vacant basis. Intangible assets may include the value of in-place leases and above- and below- market leases and other identifiable assets or liabilities based on lease or property specific characteristics. In addition, any assumed mortgages receivable or payable and any assumed or issued non-controlling interests (in a business combination) are recorded at their estimated fair values. In allocating the fair value to assumed mortgages, amounts are recorded to debt premiums or discounts based on the present value of the estimated cash flows, which is calculated to account for either above or below-market interest rates. In a business combination, the difference between the purchase price and the fair value of identifiable net assets acquired is either recorded as goodwill or as a bargain purchase gain. In an asset acquisition, the difference between the acquisition price (including capitalized transaction costs) and the fair value of identifiable net assets acquired is allocated to the non-current assets. All acquisitions during the three and six month periodsmonths ended June 30, 20212022 and 20202021 were asset acquisitions.
For acquired properties with leases classified as operating leases, the Company allocates the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company also considers information obtained about each property as a result of the Company’s pre-acquisition due diligence in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.
Tangible assets include land, land improvements, buildings, fixtures, and tenant improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. The Company estimates fair value using data from appraisals, comparable sales, discounted cash flow analysis and other methods. Fair value estimates are also made using significant assumptions such as capitalization rates, fair market lease rates, discount rates, and land values per square foot.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
Identifiable intangible assets include amounts allocated to acquired leases for above- and below-market lease rates and the value of in-place leases. Factors considered in the analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at contract rates during the expected lease-up period, which typically ranges from six to 24 months. The Company also estimates costs to execute similar leases including leasing commissions, legal and other related expenses.
Above-market and below-market lease values for acquired properties are initially recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining initial term of the lease for above-market leases and the remaining initial term plus the term of any below-market fixed rate renewal options for below-market leases.
Accounting for Leases
Lessor Accounting
In accordance with the lease accounting standard, all of the Company’s leases as lessor prior to adoption of ASC 842 were accounted for as operating leases and the Company continued to account for them as operating leases under the transition guidance. The Company evaluates new leases originated after the adoption date (by the Company or by a predecessor lessor/owner) pursuant to the new guidance where a lease for some or all of a building is classified by a lessor as a sales-type lease if the significant risks and rewards of ownership reside with the tenant. This situation is met if, among other things, there is an automatic transfer of title during the lease, a bargain purchase option, the non-cancelable lease term is for more than a major part of the remaining economic useful life of the asset (e.g., equal to or greater than 75%), if the present value of the minimum lease payments represents substantially all (e.g., equal to or greater than 90%) of the leased property’s fair value at lease inception, or if the asset is so specialized in nature that it provides no alternative use to the lessor (and therefore would not provide any future value to the lessor) after the lease term. Further, such new leases would be evaluated to consider whether they would be failed sale-leaseback transactions and accounted for as financing transactions by the lessor.
Generally, all the Company’s leases as lessor have qualified as operating leases. The Company has one land lease to a tenant that qualifies as a financing lease which was entered into during the three months ended June 30, 2022. The carrying value of this lease is $2.0 million as of June 30, 2022, and is included in prepaid expenses and other assets on the Company’s consolidated balance sheets. As of December 31, 2021, the Company had no leases as a lessor that were considered as sales-type or financing leases under sales leaseback rules.
As a lessor of real estate, the Company has elected, by class of underlying assets, to account for lease and non-lease components (such as tenant reimbursements of property operating expenses) as a single lease component as an operating lease because (a) the non-lease components have the same timing and pattern of transfer as the associated lease component; and (b) the lease component, if accounted for separately, would be classified as an operating lease. Additionally, only incremental direct leasing costs may be capitalized under the accounting guidance. Indirect leasing costs in connection with new or extended tenant leases, if any, are being expensed.
Lessee Accounting
For lessees, the accounting standard requires the application of a dual lease classification approach, classifying leases as either operating or finance leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. Lease expense for operating leases is recognized on a straight-line basis over the term of the lease, while lease expense for finance leases is recognized based on an effective interest method over the term of the lease. Also, lessees must recognize a right-of-use asset (“ROU”) and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Further, certain transactions where at inception of the lease the buyer-lessor accounted for the transaction as a purchase of real estate and a new lease, may now be required to have symmetrical accounting to the seller-lessee if the transaction was not a qualified sale-leaseback and accounted for as a financing transaction. For additional information and disclosures related to the Company’s operating leases, see Note 10 — Commitments and Contingencies.
The Company is the lessee under certain land leases which were previously classified prior to adoption of lease accounting and will continue to be classified as operating leases under transition elections unless subsequently modified. These leases are reflected on the Company’s consolidated balance sheets and the rent expense is reflected on a straight-line basis over the lease term.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
Gain on Sale/ExchangeSale of Real Estate Investments
Gains on sales of rental real estate are not considered sales to customers and are generally recognized pursuant to the provisions included in ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”).
In accordance with ASC 845-10, Accounting for Non-Monetary Transactions, if a nonmonetary exchange has commercial substance, the cost of a nonmonetary asset acquired in exchange for another nonmonetary asset is the fair value of the asset surrendered to obtain it, and a gain or loss shall be recognized on the exchange.
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
Impairment of Long-Lived Assets
When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the property for impairment. This review is based on an estimate of the future undiscounted cash flows expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If an impairment exists, due to the inability to recover the carrying value of a property, the Company would recognize an impairment loss in theon its consolidated statementstatements of operations and comprehensive loss to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss recorded would equal the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net earnings.
Shares Subject to Repurchase
The Company does not reflect shares subject to repurchase as part of its permanent equity if their repurchase is conditional on events that are outside of the Company’s control. Currently, the shares of Class A common stock issued in connection with the CIM Portfolio Acquisition are reflected as shares subject to repurchase outside of permanent equity. See Note 9 — Stockholder’s Equity for additional information.
Reportable Segments
As of June 30, 2022 and December 31, 2021, the Company has determined that it has 2 reportable segments, with activities related to investing in single-tenant properties and multi-tenant properties.
Depreciation and Amortization
Depreciation is computed using the straight-line method over the estimated useful lives of up to 40 years for buildings, 15 years for land improvements, five years for fixtures and improvements and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests.
The value of in-place leases, exclusive of the value of above-market and below-market in-place leases, is amortized to expense over the remaining periods of the respective leases.
The value of customer relationship intangibles, if any, is amortized to expense over the initial term of the lease and any renewal periods in the respective leases, but in no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. If a tenant terminates its lease, the unamortized portion of the in-place lease value and customer relationship intangibles is charged to expense.
Assumed mortgage premiums or discounts are amortized as an increase or reduction to interest expense over the remaining terms of the respective mortgages.
Above and Below-Market Lease Amortization
Capitalized above-market lease values are amortized as a reduction of revenue from tenants over the remaining terms of the respective leases and the capitalized below-market lease values are amortized as an increase to revenue from tenants over the remaining initial terms plus the terms of any below-market fixed rate renewal options of the respective leases. If a tenant with a below-market rent renewal does not renew, any remaining unamortized amount will be taken into income at that time.
Capitalized above-market ground lease values are amortized as a reduction of property operating expense over the remaining terms of the respective leases. Capitalized below-market ground lease values are amortized as an increase to property operating expense over the remaining terms of the respective leases and expected below-market renewal option periods.
Upon termination of an above or below-market lease, any unamortized amounts would be recognized in the period of termination.
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
Equity-Based Compensation
The Company has stock-based plans under which its directors, officers and other employees of the Advisor or its affiliates who are involved in providing services to the Company are eligible to receive awards. Awards granted thereunder are accounted for under the guidance for employee share basedshare-based payments. The cost of services received in exchange for these stock awards is measured at the grant date fair value of the award and the expense for such an award is included in the equity-based compensation line item of the consolidated statements of operations and is recognized in accordance with the service period (i.e., vesting) required or when the requirements for exercise of the award have been met.
Effective at the listing of the Company’s Class A Common Stock, $0.01 par value per share (“Class A common stock”) on The Nasdaq Global Select Market (“Nasdaq”) on July 19, 2018 (the “Listing Date ”)Date”), the Company entered into a multi-year outperformance agreement with the Advisor (the “2018 OPP”) under which a new class of units of the limited partnership designated as “LTIP Units” (“LTIP Units”) were issued to the Advisor. These awards were market-based awards with a related required service period. In accordance with ASC 718, the LTIP Units were valued at their grant date and that value was reflected as a charge to earnings evenly over the service period. The expense for the LTIP Units was included in the equity-based compensation line item of the consolidated statements of operations. The cumulative expense iswas reflected as part of non-controlling interest in the Company’s balance sheets and statements of equity until the end of the service period. Following the end of the performance period under the 2018 OPP on July 19, 2021, the compensation committee of the board of directors of the Company determined that none of the 4,496,796 of the LTIP Units subject to the 2018 OPP had been earned, and these LTIP Units were thus automatically forfeited. On that date, the Company reclassified amounts reflected in non-controlling interest for these LTIP Units to additional paid in capital on its consolidated balance sheets and statements of equity.
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
On May 4, 2021, the Company’s independent directors acting as a group, authorized the issuance of a new award of LTIP Units effective after the performance period under the 2018 OPP expired on July 19, 2021, with the number of LTIP Units to be issued to the Advisor to be equal to the quotient of $72.0 million divided by the 10-trading day trailing average closing stock price of the Company’s Class A common stock for the 10 trading days up to and including July 19, 2021 (the “Initial Share Price”). This resulted in $1.9 million of additional expense related to equity-based compensation during the three months ended June 30, 2021 and a corresponding liability was accrued as of June 30, 2021. On July 21, 2021, the Company entered into the multi-year outperformance agreement with the Advisor (the “2021 OPP”) pursuant to which the Advisor was granted an award of 8,528,885 LTIP Units, representing the quotient of $72.0 million divided by $8.4419,$8.4419. As a result, the Initial Share Price.LTIP Units issued under the 2021 OPP were reclassified as an equity award with the cumulative expense reflected as part of non-controlling interest in the Company’s consolidated balance sheets and equity statements. For additional information, see Note 13 — Equity-Based Compensation.
In the event of a modification of any of the awards discussed above, any incremental increase in the value of the instrument measured on the date of the modification both before and after the modification, will result in an incremental amount to be reflected prospectively as a charge to earnings over the remaining service period. For additional information on these awards, see Note 1213 — Equity-Based Compensation.
Subsequent to June 30, 2021, (i) following the end of the performance period under the 2018 OPP on July 19, 2021, the compensation committee of the board of directors of the Company determined that none of the 4,496,796 of the LTIP Units subject to the 2018 OPP had been earned, and these LTIP Units were thus automatically forfeited, and (ii) following the compensation committee’s determination with respect to the 2018 OPP, the Company, the OP, and the Advisor entered into the 2021 OPP, pursuant to which the Advisor was granted a total of 8,528,885 LTIP Units pursuant to the 2021 OPP, based on a maximum award value of $72.0 million and the Initial Share Price, which was determinable on July 20, 2021. The award LTIP Units pursuant to the 2021 OPP will be subsequently classified as an equity award with the cumulative expense reflected as part of non-controlling interest in the Company’s consolidated balance sheets and equity statements. For additional information, see Note 14— Subsequent Events.
Accounting for Leases
Lessor Accounting
As a lessor of real estate, the Company has elected, by class of underlying assets, to account for lease and non-lease components (such as tenant reimbursements of property operating expenses) as a single lease component as an operating lease because (a) the non-lease components have the same timing and pattern of transfer as the associated lease component; and (b) the lease component, if accounted for separately, would be classified as an operating lease. Additionally, only incremental direct leasing costs may be capitalized under the accounting guidance. Indirect leasing costs in connection with new or extended tenant leases, if any, are being expensed.
Lessee Accounting
For lessees, the accounting standard requires the application of a dual lease classification approach, classifying leases as either operating or finance leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. Lease expense for operating leases is recognized on a straight-line basis over the term of the lease, while lease expense for finance leases is recognized based on an effective interest method over the term of the lease. Also, lessees must recognize a right-of-use asset (“ROU”) and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Further, certain transactions where at inception of the lease the buyer-lessor accounted for the transaction as a purchase of real estate and a new lease, may now be required to have symmetrical accounting to the seller-lessee if the transaction was not a qualified sale-leaseback and accounted for as a financing transaction. For additional information and disclosures related to the Company’s operating leases, see Note 9 — Commitments and Contingencies.
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
Recently Issued Accounting Pronouncements
Adopted as of January 1, 2020:
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes how entities measure credit losses for financial assets carried at amortized cost. The update eliminates the requirement that a credit loss must be probable before it can be recognized and instead requires an entity to recognize the current estimate of all expected credit losses. Additionally, the amended standard requires credit losses on available-for-sale debt securities to be carried as an allowance rather than as a direct write-down of the asset. On July 25, 2018, the FASB proposed an amendment to ASU 2016-13 to clarify that operating lease receivables recorded by lessors (including unbilled straight-line rent) are explicitly excluded from the scope of ASU 2016-13. The new guidance is effective for the Company beginning on January 1, 2020. The Company adopted the new guidance on January 1, 2020 and determined it did not have a material impact on its consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The objective of ASU 2018-13 is to improve the effectiveness of disclosures in the notes to the financial statements by removing, modifying, and adding certain fair value disclosure requirements to facilitate clear communication of the information required by generally accepted accounting principles. The amended guidance is effective for the Company beginning on January 1, 2020. The Company adopted the new guidance on January 1, 2020 and determined it did not have a material impact on its consolidated financial statements.
Pending Adoption:2021:
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Topic 470) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Topic 815). The new standard reduces the number of accounting models for convertible debt instruments and convertible preferred stock, and amends the guidance for the derivatives scope exception for contracts in an entity's own equity. The standard also amends and makes targeted improvements to the related earnings per share guidance. The Company adopted the new standard is effective for fiscal years beginning after December 15,as required on January 1, 2021 including interim periods within those fiscal years. Earlyand its adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The standard allows for either modified or full retrospective transition methods. The Company is currently evaluating this guidance to determinedid not have a material impact on the impact it may have on its consolidatedCompany’s financial statements.
Pending Adoption:
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). Topic 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in Topic 848 is optional and may be elected over the period from March 12, 2020 through December 31, 2022 as reference rate reform activities occur. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to (i) the assertion that itsour hedged forecasted transactions remain probable and (ii) the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of the Company’sour derivatives, which will be consistent with itsour past presentation. The Company will continue to evaluate the impact of the guidance and may apply other elections, as applicable, as additional changes in the market occur.
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AMERICAN FINANCE TRUST,THE NECESSITY RETAIL REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 20212022
(Unaudited)
Note 3 — Real Estate Investments
Property Acquisitions
The following table presents the allocation of real estate assets acquired and liabilities assumed during the periods presented. All acquisitions in both periods were considered asset acquisitions for accounting purposes.
Six Months Ended March 31,Six Months Ended June 30,
(Dollar amounts in thousands)(Dollar amounts in thousands)
2021 (2)
2020(Dollar amounts in thousands)20222021
Real estate investments, at cost:Real estate investments, at cost:Real estate investments, at cost:
LandLand$13,331 $23,798 Land$302,478 $13,331 
Buildings, fixtures and improvementsBuildings, fixtures and improvements49,968 67,537 Buildings, fixtures and improvements865,992 49,968 
Total tangible assetsTotal tangible assets63,299 91,335 Total tangible assets1,168,470 63,299 
Acquired intangible assets and liabilities: (1)
Acquired intangible assets and liabilities: (1)
Acquired intangible assets and liabilities: (1)
In-place leasesIn-place leases8,281 11,287 In-place leases218,454 8,281 
Above-market lease assetsAbove-market lease assets24,066 — 
Below-market lease liabilitiesBelow-market lease liabilities(59,442)(5,593)
Total intangible assets, netTotal intangible assets, net183,078 2,688 
Assets Reduced, Liabilities Assumed and Mezzanine Equity Issued:Assets Reduced, Liabilities Assumed and Mezzanine Equity Issued:
Mortgage notes payable assumed in acquisitions (including net discounts of $1,466)Mortgage notes payable assumed in acquisitions (including net discounts of $1,466)(312,246)— 
Shares subject to repurchase issued in acquisitionsShares subject to repurchase issued in acquisitions(49,965)— 
Application of depositApplication of deposit(23,750)— 
Accrued contingent consideration on acquired properties from the CIM Portfolio AcquisitionAccrued contingent consideration on acquired properties from the CIM Portfolio Acquisition(10,840)
Cash paid for real estate investmentsCash paid for real estate investments$954,747 $65,987 
Number of properties purchased from the CIM Portfolio AcquisitionNumber of properties purchased from the CIM Portfolio Acquisition80 — 
Number of other properties purchasedNumber of other properties purchased11 24 
Below-market lease liabilities(5,593)(400)
Total intangible assets, net2,688 10,887 
Consideration paid for acquired real estate investments, net of liabilities assumed$65,987 $102,222 
Number of properties purchased24 34 
________
(1)Weighted-average remaining amortization periods for in-place leases, above-market and below-market lease liabilities acquired during the six months ended June 30, 20212022 were 13.110.3 years, 7.6 years and 19.620.2 years, respectively, as of each property’s respective acquisition date. No above-market lease assets were acquired during the six months ended June 30, 2021.
(2)Includes a non-property acquisition of a parcel adjacent to one of the Company’s multi-tenant properties.

The following table presents amortization expense and adjustments to revenue from tenants and property operating expenses for intangible assets and liabilities during the periods presented:
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
(In thousands)(In thousands)2021202020212020(In thousands)2022202120222021
In-place leases, included in depreciation and amortization (1)
In-place leases, included in depreciation and amortization (1)
$9,558 $10,341 $19,208 $23,337 
In-place leases, included in depreciation and amortization (1)
$18,278 $9,558 $31,023 $19,208 
Above-market lease intangiblesAbove-market lease intangibles$(601)$(638)$(1,290)$(1,402)Above-market lease intangibles$(1,374)$(601)$(2,281)$(1,290)
Below-market lease liabilitiesBelow-market lease liabilities1,657 2,940 3,296 4,709 Below-market lease liabilities2,971 1,657 4,991 3,296 
Total included in revenue from tenantsTotal included in revenue from tenants$1,056 $2,302 $2,006 $3,307 Total included in revenue from tenants$1,597 $1,056 $2,710 $2,006 
Below-market ground lease asset (2)(1)
Below-market ground lease asset (2)(1)
$8 $8 $16 $16 
Below-market ground lease asset (2)(1)
$8 $8 $16 $16 
Above-market ground lease liability (2)(1)
Above-market ground lease liability (2)(1)
0 0 0 (1)
Above-market ground lease liability (2)(1)
— — — — 
Total included in property operating expensesTotal included in property operating expenses$8 $8 $16 $15 Total included in property operating expenses$8 $8 $16 $16 
______
17
(1) Table of ContentsIncludes approximately $3.3 million in accelerated write-offs in the six months ended
THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020 as a result of tenant lease terminations.2022
(Unaudited)
(2)    (1)In accordance with lease accounting rules effective January 1, 2019, intangibleIntangible balances related to ground leases are included as part of the operating lease right-of-use assets presented on the consolidated balance sheetsheets and the amortization expense of such balances is included in property operating expenses on the consolidated statementstatements of operations and comprehensive loss.operations.
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
The following table provides the projected amortization expense and adjustments to revenue from tenants for intangible assets and liabilities for the next five years:
(In thousands)(In thousands)2021 (remainder)2022202320242025(In thousands)2022 (remainder)2023202420252026
In-place leases, to be included in depreciation and amortizationIn-place leases, to be included in depreciation and amortization$18,156 $33,779 $31,394 $28,745 $25,547 In-place leases, to be included in depreciation and amortization$38,604 $64,595 $51,476 $41,998 $34,070 
Above-market lease intangiblesAbove-market lease intangibles$1,146 $2,068 $1,765 $1,652 $1,288 Above-market lease intangibles$3,055 $5,790 $4,962 $4,137 $3,243 
Below-market lease liabilitiesBelow-market lease liabilities(3,299)(6,368)(6,226)(6,031)(5,805)Below-market lease liabilities(5,149)(10,165)(9,580)(9,151)(8,692)
Total to be included in revenue from tenantsTotal to be included in revenue from tenants$(2,153)$(4,300)$(4,461)$(4,379)$(4,517)Total to be included in revenue from tenants$(2,094)$(4,375)$(4,618)$(5,014)$(5,449)
Deposits for Real Estate Investments
As of June 30, 2022 and December 31, 2021, the Company had $16.3 million and $41.9 million, respectively, in deposits for future acquisitions of real estate investments of which $16.3 million and $40.0 million as of June 30, 2022 and December 31, 2021 related to the deposit on the CIM Portfolio Acquisition, respectively.
Real Estate Held for Sale
When assets are identified by management as held for sale, the Company ceases depreciation and amortization of the identified assets and estimates the sales price, net of costs to sell, of those assets. If the carrying amount of the assets classified as held for sale exceeds the estimated net sales price, the Company records an impairment charge equal to the amount by which the carrying amount of the assets exceeds the Company’s estimate of the net sales price of the assets. For additional information on impairment charges, see “Impairment Charges” section below.
As of June 30, 2021 1 property in Ellicott City, Maryland was considered2022, there were 5 properties under contract to be disposed that have been classified as held for sale, with a carrying valuewhich included 3 vacant single-tenant properties formerly leased to Truist Bank and 2 multi-tenant properties, 1 of $1.4 million, and aswhich was recently acquired in the CIM Portfolio Acquisition.
As of December 31, 20202021, there were 0 propertieswas 1 property, the Company’s Sanofi property, classified as held for sale. This property was disposed on January 6, 2022.
The sales of these properties and other properties sold during their respective periods do not represent a strategic shift in the Company’s operations or strategy. Accordingly, the operating results of these properties remain classified within continuing operations for all periods presented.
The following table details the major classes of assets associated with the properties that have been reclassified as held for sale as of June 30, 2022 and December 31, 2021:
(In thousands)June 30, 2022December 31, 2021
Real estate investments held for sale, at cost:
Land$17,658 $16,009 
Buildings, fixtures and improvements123,054 194,288 
Acquired intangible lease assets19,619 46,980 
Total real estate assets held for sale, at cost160,331 257,277 
Less accumulated depreciation and amortization(24,951)(70,064)
Total real estate investments held for sale, net135,380 187,213 
Impairment charges related to properties reclassified as held for sale(54,601)— 
Assets held for sale$80,779 $187,213 
Real Estate Sales/ExchangesSales
During the three months ended June 30, 2022, the Company sold 5 properties for an aggregate contract price of $30.4 million. These property sales resulted in an aggregate gain of $13.4 million, which is reflected in gain on sale of real
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
estate investments on the consolidated statement of operations for the three months ended June 30, 2022. During the six months ended June 30, 2022, the Company sold 11 properties, including the Company’s Sanofi property which was held for sale as of December 31, 2021, for an aggregate contract price of $295.6 million. These property sales resulted in an aggregate gain of $67.0 million, which is reflected in gain on sale of real estate investments on the consolidated statement of operations for the six months ended June 30, 2022.
During the three months ended June 30, 2021, the Company sold 3 properties for an aggregate contract price of $2.5 million, resulting in a nominal gain, which is reflected in gain on sale of real estate investments in the consolidated statement of operations for the three months ended June 30, 2021. During the six months ended June 30, 2021, the Company sold 5 properties for an aggregate contract price of $3.1 million, resulting in a gain of $0.3 million, which is reflected in gain on sale of real estate investments onin the consolidated statement of operations and comprehensive loss for the six months ended June 30, 2021.
During the six months ended June 30, 2020, the Company sold 6 properties leased to Truist Bank for an aggregate contract price of $13.3 million, exclusive of closing costs and related mortgage repayments. These sales resulted in aggregate gains of $4.3 million, which are reflected in gain on sale of real estate investments on the consolidated statement of operations and comprehensive loss for the six months ended June 30, 2020.
Real Estate Held for Use
When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the property for impairment. For the Company, the most common triggering events are (i) concerns regarding the tenant (i.e., credit or expirations) in the Company’s single-tenant properties, (ii) significant or sustained vacancy in the Company’s multi-tenant properties and (iii) changes to the Company’s expected holding period as a result of business decisions or non-recourse debt maturities. For all of its held for use properties, the Company had reconsidered the projected cash flows due to various performance indicators and, where appropriate, and the Company evaluated the impact on its ability to recover the carrying value of such properties based on the expected cash flows over the intended holding period. See “Impairment Charges” below for discussion of specific charges taken.
If a triggering event for held for use single-tenant properties is identified, the Company uses either a market approach or an income approach to estimate the future cash flows expected to be generated.
The market approach involves evaluating comparable sales of properties in the same geographic region as the held for use properties in order to determine an estimated sale price. The Company makes certain assumptions including, among others, that the properties in the comparable sales used in the analysis share similar characteristics to the held for use properties, and that market and economic conditions at the time of any potential sales of these properties, such as discount rates; demand for space; competition for tenants; changes in market rental rates; and costs to operate the property, would be similar to those in the comparable sales analyzed.
Under the income approach, the Company evaluates the impact on its ability to recover the carrying value of such properties based on the expected cash flows over its intended holding period. The Company makes certain assumptions in this approach including, among others, the market and economic conditions, expected cash flow projections, intended holding periods and assessments of terminal values.
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
Where more than one possible scenario exists, the Company uses a probability weighted approach. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analysis may not be achieved, and actual losses or additional impairment may be realized in the future.
Impairment Charges
The Company recorded impairment charges of $59.0 million for the three months ended June 30, 2022, $49.6 million of which related to a multi-tenant property located in Minnesota, $5.9 million of which related to five vacant single-tenant properties formerly leased to Truist Bank and $3.5 million of which related to a multi-tenant property acquired in the CIM Portfolio Acquisition. The Company recorded impairment charges of $64.9 million for the six months ended June 30, 2022, $49.6 million of which related to a multi-tenant property located in Minnesota, $8.0 million of which related to seven vacant single-tenant properties formerly leased to Truist Bank, $3.8 million of which related to one vacant single-tenant property formerly leased to United Healthcare and $3.5 million of which related to a multi-tenant property acquired in the CIM Portfolio Acquisition. The United Healthcare property has been vacant since June 30, 2021 when the tenant did not renew its lease. The Company previously impaired the United Healthcare property by $26.9 million during the three months ended December 31, 2021. All of the impaired properties were impaired to adjust the properties’ carrying values to their fair values as determined by their respective purchase and sales agreements if under a contract to be disposed, or their estimated fair values if not under a contract to be disposed. NaN vacant single-tenant properties formerly leased to Truist Bank and 2 multi-tenant properties, one of which was recently acquired in the CIM Portfolio Acquisition, are under contract to be disposed and are classified as assets held for sale on our consolidated balance sheets as of June 30, 2022.
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
The Company recorded an impairment charge of $0.1 million for the three and six months ended June 30, 2021 related to a vacant single-tenant held-for-use property in Brunswick, Georgia,formerly leased to Truist Bank, which was recorded to adjust the property to its fair value as determined by a purchase and sale agreement which was terminated prior to June 30, 2021. The Company recorded an $11.5 million impairment charge for the three and six months ended June 30, 2020 related to one of its multi-tenant held -for-use properties which was recorded to adjust the property to its fair value as determined by the income approach described above.
Tenant Improvements Write-Off
During the second quarter of 2020, a tenant in the health club business in one of our multi-tenant properties declared bankruptcy and vacated its space while in the process of improving the space. The Company had already reimbursed $0.8 million to the tenant for these improvements. As a result of the tenant’s bankruptcy, improvements being made by the tenant were not paid for and the Company additionally accrued approximately $2.3 million to pay liens on the property by the tenant’s contractors. The Company determined that certain of the improvements no longer had any value in connection with any foreseeable replacement tenant and wrote off approximately $3.1 million which is recorded in depreciation and amortization expense in the consolidated statement of operations.
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
Note 4 — Mortgage Notes Payable, Net
The Company’s mortgage notes payable, net as of June 30, 20212022 and December 31, 20202021 consisted of the following:
Outstanding Loan Amount as ofEffective Interest Rate as ofOutstanding Loan Amount as ofEffective Interest Rate as of
PortfolioPortfolioEncumbered PropertiesJune 30,
2021		December 31,
2020		June 30,
2021		Interest RateMaturityAnticipated RepaymentPortfolioEncumbered PropertiesJune 30,
2022		December 31,
2021		June 30,
2022		Interest RateMaturityAnticipated Repayment
(In thousands)(In thousands)(In thousands)(In thousands)
2019 Class A-1 Net Lease Mortgage Notes2019 Class A-1 Net Lease Mortgage Notes98$118,530 $119,084 3.83 %FixedMay 2049May 20262019 Class A-1 Net Lease Mortgage Notes102$117,931 $118,231 3.83 %FixedMay 2049May 2026
2019 Class A-2 Net Lease Mortgage Notes2019 Class A-2 Net Lease Mortgage Notes106120,949 121,000 4.52 %FixedMay 2049May 20292019 Class A-2 Net Lease Mortgage Notes108120,338 120,644 4.52 %FixedMay 2049May 2029
2021 Class A-1 Net-Lease Mortgage Notes2021 Class A-1 Net-Lease Mortgage Notes3554,927 0 2.24 %FixedMay 2051May 20282021 Class A-1 Net-Lease Mortgage Notes4954,047 54,487 2.24 %FixedMay 2051May 2028
2021 Class A-2 Net-Lease Mortgage Notes2021 Class A-2 Net-Lease Mortgage Notes6194,873 0 2.83 %FixedMay 2051May 20312021 Class A-2 Net-Lease Mortgage Notes4793,353 94,113 2.83 %FixedMay 2051May 2031
2021 Class A-3 Net-Lease Mortgage Notes2021 Class A-3 Net-Lease Mortgage Notes2235,000 0 3.07 %FixedMay 2051May 20282021 Class A-3 Net-Lease Mortgage Notes3335,000 35,000 3.07 %FixedMay 2051May 2028
2021 Class A-4 Net-Lease Mortgage Notes2021 Class A-4 Net-Lease Mortgage Notes3555,000 0 3.65 %FixedMay 2051May 20312021 Class A-4 Net-Lease Mortgage Notes3555,000 55,000 3.65 %FixedMay 2051May 2031
Total Net Lease Mortgage Notes Total Net Lease Mortgage Notes357479,279 240,084  Total Net Lease Mortgage Notes374475,669 477,475 
SAAB Sensis I15,986 6,217 6.01 %FixedApr. 2025Apr. 2025
Truist Bank II00 (5)9,560 5.50 %FixedJul. 2031Jul. 2021
Truist Bank III00 (5)60,952 5.50 %FixedJul. 2031Jul. 2021
Truist Bank IV00 (5)3,792 5.50 %FixedJul. 2031Jul. 2021
Sanofi US I1125,000 125,000 3.27 %
Fixed (4)
Sep. 2025Sep. 2025
Stop & ShopStop & Shop445,000 45,000 3.50 %FixedJan. 2030Jan. 2030Stop & Shop445,000 45,000 3.50 %FixedJan. 2030Jan. 2030
Column Financial Mortgage NotesColumn Financial Mortgage Notes368715,000 715,000 3.79 %FixedAug. 2025Aug. 2025Column Financial Mortgage Notes365706,197 715,000 3.79 %FixedAug. 2025Aug. 2025
Shops at Shelby Crossing121,435 21,677 4.97 %FixedMar. 2024Mar. 2024
Patton Creek00 34,000 4.82 %VariableDec. 2021Dec. 2021
Bob Evans IBob Evans I2323,950 23,950 4.71 %FixedSep. 2037Sep. 2027Bob Evans I2222,842 22,842 4.71 %FixedSep. 2037Sep. 2027
Mortgage Loan IIMortgage Loan II12210,000 210,000 4.25 %FixedJan. 2028Jan. 2028Mortgage Loan II12210,000 210,000 4.25 %FixedJan. 2028Jan. 2028
Mortgage Loan IIIMortgage Loan III2233,400 33,400 4.12 %FixedJan. 2028Jan. 2028Mortgage Loan III2233,400 33,400 4.12 %FixedJan. 2028Jan. 2028
Cottonwood Commons (4)
Cottonwood Commons (4)
119,250 — 4.52 %FixedSep. 2023Sep. 2023
The Marquis (4)
The Marquis (4)
18,556 — 3.95 %FixedMay 2023May 2023
Assumed Multi-Tenant Mortgage I (4)
Assumed Multi-Tenant Mortgage I (4)
316,700 — 4.68 %FixedSep. 2033Sep. 2023
Assumed Multi-Tenant Mortgage II (4)
Assumed Multi-Tenant Mortgage II (4)
425,000 — 4.54 %FixedFeb. 2024Feb. 2024
Assumed Multi-Tenant Mortgage III (4)
Assumed Multi-Tenant Mortgage III (4)
331,300 — 3.70 %FixedApr. 2023Apr. 2023
Assumed Multi-Tenant Mortgage IV (4)
Assumed Multi-Tenant Mortgage IV (4)
428,387 — 3.90 %FixedApr. 2023Apr. 2023
Assumed Multi-Tenant Mortgage V (4)
Assumed Multi-Tenant Mortgage V (4)
761,134 — 3.70 %FixedSep. 2023Sep. 2023
The Plant (4)
The Plant (4)
1123,000 — 3.87 %FixedMay 2033May 2023
Gross mortgage notes payableGross mortgage notes payable7891,659,050 1,528,632 3.78 %
 (1)
Gross mortgage notes payable8231,806,435 1,503,717 3.82 %
 (1)
Deferred financing costs, net of accumulated amortization (2)
Deferred financing costs, net of accumulated amortization (2)
(44,205)(38,760)
Deferred financing costs, net of accumulated amortization (2)
(36,990)(38,672)
Mortgage premiums and discounts, net (3)
209 926 
Mortgage premiums and (discounts), net (3)
Mortgage premiums and (discounts), net (3)
(1,419)(115)
Mortgage notes payable, netMortgage notes payable, net$1,615,054 $1,490,798 Mortgage notes payable, net$1,768,026 $1,464,930 
__________
(1)Calculated on a weighted-average basis for all mortgages outstanding as of June 30, 2021.2022.
(2)Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining financing. These costs are amortized to interest expense over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are generally expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that it is probable the financing will not close.
(3)Mortgage premiums or discounts are amortized as an increase or reduction to interest expense over the remaining terms of the respective mortgages.
(4)Mortgage is fixed by an interest rate swap agreement which fixesThe Company assumed this fixed-rate mortgage when it acquired a property in the effective interest rate at 3.27%
(5) Mortgage was fully repaidCIM Portfolio Acquisition during the six months ended June 30, 2022 with proceeds from the 2021 Net Lease Mortgage Notes discussed below.net discounts of $1.5 million.
As of June 30, 20212022 and December 31, 2020,2021, the Company had pledged $2.8$3.0 billion and $2.4 billion in real estate investments, respectively, at cost as collateral for its mortgage notes payable. This real estate is not available to satisfy other debts and obligations unless first satisfying the mortgage notes payable on the properties. In addition, as of June 30, 2021 and December 31, 2020, $1.12022, $2.0 billion in real estate investments, at cost were included in the unencumbered asset pool comprising the borrowing base under the Company’s revolving unsecured corporate credit facility (the “Credit Facility”) (see Note 5 — Credit Facility for more details). Therefore, thisThe asset pool comprising the borrowing base under the Credit Facilitycredit facility is only available to serve as collateral or satisfy other debts and obligations if it is first removed from the borrowing base under the Credit Facility.credit facility.
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AMERICAN FINANCE TRUST,THE NECESSITY RETAIL REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 20212022
(Unaudited)
Subsequent to June 30, 2022, the Company assumed $39.0 million of fixed-rate mortgage debt to partially fund the acquisition of the final property from the CIM Portfolio Acquisition. The mortgage bears stated interest of 4.05% and matures in May 2024. See Note 16 — Subsequent Events for additional information.
In connection with refinancing certain properties, the Company may incur prepayment penalties relating to its prior debt obligations. During the three and six months ended June 30, 2022 and 2021, no such amounts were incurred. These prepayment penalties, when incurred, are included in acquisition, transaction, and other costs in the consolidated statements of operations.
The following table summarizes the scheduled aggregate principal payments on mortgage notes payable based on anticipated maturity dates for the five years subsequent to June 30, 20212022 and thereafter:
Future Principal Payments
(In thousands)(In thousands)Future Principal Payments(In thousands)Mortgage Notes
Credit Facility (1)
Senior Notes (2)
Total
2021 (remainder)$2,089 
20224,711 
2022 (remainder)2022 (remainder)$3,078 $— $— $3,078 
202320233,843 2023289,784 — — 289,784 
2024202422,287 202426,646 — — 26,646 
20252025845,771 2025707,867 — — 707,867 
20262026116,866 2026116,929 488,000 — 604,929 
2027202721,553 — — 21,553 
ThereafterThereafter663,483 Thereafter640,578 — 500,000 1,140,578 
$1,659,050  $1,806,435 $488,000 $500,000 $2,794,435 
________
(1)The Credit Facility matures on April 1, 2026, subject to the Company’s right, subject to customary conditions, to extend the maturity date by up to 2 additional six-month terms. See Note 5 — Credit Facility for additional information.
(2)The Senior Notes will mature on September 30, 2028. See Note 6 — Senior Notes, Net for additional information.
The Company’s mortgage notes payable agreements require compliance with certain property-level financial covenants including debt service coverage ratios. As of June 30, 2021,2022, the Company was in compliance with all operating and financial covenants under its mortgage notes payablethese agreements.
Net Lease Mortgage Notes
On June 3, 2021, certain subsidiaries of the Company (the “2021 Issuers”) completed the issuance of $318.0 million aggregate principal amount of Net Lease Mortgage Notes (the “2021 Net Lease Mortgage Notes”) in a private placement exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). The 2021 Net Lease Mortgage Notes are cross-collateralized with the $242.0 million in aggregate principal amount of Net Lease Mortgage Notes (the “2019 Net Lease Mortgage Notes” and, together with the 2021 Net Lease Mortgage Notes, the “Notes”) issued by certain other subsidiaries of the Company (the “2019 Issuers” and, together with the 2021 Issuers, the “Issuers”). The Notes were issued using a master trust structure, which enables additional series of notes to be issued upon the contribution of additional properties to the collateral pool without the need to structure a new securitization transaction. Any new notes that are so issued will be cross-collateralized with the Notes.
The 2021 Net Lease Mortgage Notes were issued in six classes, Class A-1 (AAA), Class A-2 (AAA), Class A-3 (A), Class A-4 (A), Class B-1 (BBB) and Class B-2 (BBB). The Class A-1 (AAA) Notes were initially rated AAA (sf) by Standard & Poors and are comprised of $55.0 million initial principal amount of 2021 Net Lease Mortgage Notes with an anticipated repayment date in May 2028 and an interest rate of 2.21%. The Class A-2 (AAA) Notes were initially rated AAA (sf) by Standard & Poors and are comprised of $95.0 million initial principal amount of 2021 Net Lease Mortgage Notes with an anticipated repayment date in May 2031 and an interest rate of 2.79%. The Class A-3 (A) Notes were initially rated A (sf) by Standard & Poors and are comprised of $35.0 million initial principal amount of 2021 Net Lease Mortgage Notes with an anticipated repayment date in May 2028 and an interest rate of 3.03%. The Class A-4 (A) Notes were initially rated A (sf) by Standard & Poors and are comprised of $55.0 million initial principal amount of 2021 Net Lease Mortgage Notes with an anticipated repayment date in May 2031 and an interest rate of 3.60%.
The Class B Notes are currently retained by the OP and are eliminated upon consolidation, and therefore not presented in the Company’s consolidated financial statements, but may be sold to unaffiliated third parties in the future. The Class B-1 (BBB) Notes were initially rated BBB (sf) by Standard & Poors and are comprised of $30.0 million initial principal amount of 2021 Net Lease Mortgage Notes with an anticipated repayment date in May 2028 and an interest rate of 4.02%. The Class B-2 (BBB) Notes were initially rated BBB (sf) by Standard & Poors and are comprised of $48.0 million initial principal amount of 2021 Net Lease Mortgage Notes with an anticipated repayment date in May 2031 and an interest rate of 4.58%. The 2021 Net Lease Mortgage Notes have a rated final payment date in May 2051.
The 2019 Net Lease Mortgage Notes were issued in two classes, Class A-1 (AAA) and Class A-2 (A). The Class A-1 (AAA) Notes are rated AAA (sf) by Standard & Poors and are comprised of $121.0 million initial principal amount of 2019 Net Lease Mortgage Notes with an anticipated repayment date in May 2026 and an interest rate of 3.78%. The Class A-2 (a) Notes are rated A (sf) by Standard & Poors and are comprised of $121.0 million initial principal amount of 2019 Net Lease Mortgage Notes with an anticipated repayment date in May 2029 with an interest rate of 4.46%. The 2019 Net Lease Mortgage Notes have a rated final payment date in May 2049.
The Notes may be redeemed at any time prior to their anticipated repayment date subject to payment of a make-whole premium. The 2021 Net Lease Mortgage Notes (excluding the Class B Notes) are collectively amortizing at a rate of
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June 30, 2021
(Unaudited)
approximately 0.86% per annum. The 2019 Net Lease Mortgage Notes are collectively amortizing at a rate of approximately 0.5% per annum. If any class of Notes is not paid in full at its respective anticipated repayment date, additional interest will begin to accrue on those Notes.
The collateral pool for the Notes is comprised of 357 of the Company’s double- and triple-net leased single tenant properties, together with the related leases and certain other rights and interests. 17 of such properties were owned by the 2021 Issuers prior to the issuance of the 2021 Net Lease Mortgage Notes, 136 of such properties were transferred to the 2021 Issuers in connection with the issuance of the 2021 Net Lease Mortgage Notes, and 204 of such properties were already owned by the 2019 Issuers and securing the 2019 Net Lease Mortgage Notes. The net proceeds from the sale of the 2021 Net Lease Mortgage Notes were used to repay $74.6 million in indebtedness secured by mortgages on 101 individual properties and $80.1 million that was outstanding under the Credit Facility. Approximately $75.0 million of the remaining net proceeds were available to the Company for general corporate purposes. A total of 153 properties were added as part of the collateral pool securing the Notes, which are comprised of 108 properties which were removed from the borrowing base under the Credit Facility (reducing availability under the Credit Facility), 41 properties previously secured by mortgages and 4 previously unencumbered properties, 2 of which were recently acquired. The 357 properties that serve as part of the collateral pool for the Notes are diversified by industry as follows: gas and convenience at 28%, commercial banking at 15%, limited-service restaurants at 15%, car washes at 9%, full-service restaurants at 9%, kidney dialysis care at 9%, used car dealers at 6%, all other general merchandise stores at 3%, wholesale trade at 3%, warehouse clubs and supercenters at 2%, child day care services at 1%, pharmacies and drug stores at less than 1% and automotive parts and supply stores at less than 1%, weighted by allocated loan amount.
The Issuers may release or exchange properties from the collateral pool securing the Notes subject to various terms and conditions, including paying any applicable make-whole premium and limiting the total value of properties released or exchanged to not more than 35% of the aggregate collateral value. These conditions, including the make-whole premium, do not apply under certain circumstances, including a prepayment in an aggregate amount of up to 35% of the initial principal balance if the prepayment is funded with proceeds from qualifying deleveraging events, such as a firm commitment underwritten registered public equity offering by the Company that generates at least $75.0 million in net proceeds.
Note 5 — Credit Facility
On April 26, 2018, the Company repaid its prior revolving unsecured corporate credit facility in full and entered into a credit facility (the “Credit Facility”) with BMO Harris Bank, N.A. (“BMO Bank”) as administrative agent, Citizens Bank, N.A. and SunTrust Robinson Humphrey, Inc., as joint lead arrangers, and the other lenders from time to time party thereto. On October 1, 2021, the Company entered into an amendment and restatement of the Credit Facility with the parties thereto. Also, upon the closing of the Senior Notes (as defined in Note 6 — Senior Notes, Net) on October 7, 2021, the Company used a portion of the proceeds to repay all outstanding borrowings under the Credit Facility at the time. The aggregate total commitments underafter the amendment and restatement of the Credit Facility were increased from $540.0 million asto $815.0 million including a $50.0 million sublimit for letters of June 30, 2021.credit and a $55.0 million sublimit for swingline loans. The Credit Facility includes an uncommitted “accordion feature” whereby, uponpermitting the request of the OP, but at the sole discretion of the participating lenders,Company, subject to certain exceptions, to increase the commitments under the Credit Facility may be increased by up to an additional $500.0$435.0 million, subject to obtaining commitments from new lenders or additional commitments from participating lenders and certain customary conditions. AsThe Credit Facility matures on April 1, 2026, subject to the Company’s right, subject to customary conditions, to extend the maturity date by up to 2 additional six-month terms. Borrowings under the Credit Facility may be prepaid at any time, in whole or in part, without premium or penalty, subject to customary LIBOR breakage costs.
The Credit Facility is supported by a pool of eligible unencumbered properties that are owned by the subsidiaries of the OP that serve as Guarantors. The Company may add or remove properties to or from this pool so long as at any time there are at least 15 eligible unencumbered properties with a value of at least $300.0 million, among other things. The amount available for future borrowings under the Credit Facility depends on the amount outstanding thereunder relative to the aggregate commitments; however, the amount the Company may borrow is limited by the financial maintenance covenants described below.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021, the Company had already increased its commitments through this accordion feature by $125.0 million, leaving $375.0 million of potential available commitments remaining.2022
(Unaudited)
The amount available for future borrowings under the Credit Facility is based on the lesser of (i) 60% of the value of the pool of eligible unencumbered real estate assets comprising the borrowing base, and (ii) a maximum amount of total unsecured indebtedness that could be incurredincurred while maintaining a minimum unsecured interest coverage ratio with respect to the borrowing base, in each case, as of the determination date.
During the six months ended June 30, 2022, the Company borrowed $513.0 million to fund a portion of the 80 properties acquired from the CIM Portfolio Acquisition, $25.0 million of which the Company repaid during the six months ended June 30, 2022 using proceeds from its dispositions. As of June 30, 20212022, the Company had a total borrowing capacity under the Credit Facility of $408.3$526.6 million based on the value of the borrowing base under the Credit Facility, and of this amount, $155.7$488.0 million was outstanding under the Credit Facility as of June 30, 20212022 and $252.6$38.6 million remained available for future borrowings. The Company is also restricted from using proceeds from borrowing under the Credit Facility to accumulate or maintain cash or cash equivalents in excess of amounts necessary to meet current working capital requirements, as determined in good faith by the OP.
Under the Credit Facility, in order for the Company to fund share repurchases, the Company would be required to satisfy a maximum leverage ratio after giving effect to the payments and also have a combination of cash, cash equivalents and amounts available for future borrowings under the Credit Facility of not less than $40.0 million.
The Credit Facility currently requires payments of interest only. The maturity dateonly prior to maturity. Following the amendment and restatement of the Credit Facility, is April 26, 2022 and the Company has a one-time right, subject to customary conditions, to extend the maturity date for an additional term of one year to April 26, 2023. Borrowings under the Credit Facilityborrowings bear interest at either (i) the Base Rate (as defined in the Credit Facility) plus an applicable spread ranging from 0.60%0.45% to 1.20%1.05%, depending on the Company’s consolidated leverage ratio, or (ii) LIBOR plus an applicable spread ranging from 1.60%1.45% to 2.20%2.05%, in each case depending on the Company’s consolidated leverage ratio. PursuantThese spreads reflect a reduction from the previously applicable spreads. In addition, pursuant to the amendment to the Credit Facility, in July 2020, from July 24, 2020 until delivery(i) if the Company or the OP achieves an investment grade credit rating, the OP can elect for the spread to be based on the credit rating of the compliance certificate forCompany or the fiscal quarter ended June 30, 2021,OP, and (ii) the margin was 1.5% with respect to the Base Rate and 2.5% with respect to LIBOR
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June 30, 2021
(Unaudited)
regardless of the Company’s consolidated leverage ratio. Theprior “floor” on LIBOR isof 0.25%. was removed.
As of June 30, 20212022 and December 31, 2020,2021, the weighted-average interest rate under the Credit Facility was 2.79%3.43% and 2.79%, respectively.
In July 2017, the Financial Conduct Authority (the authority that 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 (“SOFR”) as its preferred alternative to LIBOR in derivatives and other financial contracts. On March 5, 2021, the Financial Conduct Authority confirmed a partial extension of this deadline, announcing that it will cease the publication of the one-week and two-month USD LIBOR settings immediately following December 31, 2021. The remaining USD LIBOR settings will continue to be published through June 30, 2023. The Company is not able to predict when there will be sufficient liquidity in the SOFR market. The Company is monitoring and evaluating the risks related to changes in LIBOR availability, which include potential changes in interest paid on debt and amounts received and paid on interest rate swaps. In addition, the value of debt or derivative instruments tied to LIBOR will also be impacted as LIBOR is limited and discontinued and contracts must be transitioned to a new alternative rate. While the Company expects LIBOR to be available in substantially its current form until at least the end ofJune 30, 2023, it is possible that LIBOR will become unavailable prior to that time. This could occur, for example, if a sufficient number of banks decline to make submissions to the LIBOR administrator. To transition fromThe Credit Facility contains language governing the establishment of a replacement benchmark index to serve as an alternative to LIBOR, when necessary.
Any subsidiary owning property that is included in the borrowing base is required to guarantee the OP’s obligations under the Credit Facility,Facility. This includes any wholly-owned domestic subsidiary of the OP that directly or indirectly owns or leases a real estate asset added to the pool of eligible unencumbered properties. For any Guarantor subsidiary of the OP, this guarantee will be released if the Company or the OP achieves an investment grade credit rating, but will again be required (i) if either utilize the Base Rate (as defined inCompany or the Credit Facility)OP loses its investment grade credit rating, or an alternative benchmark established by the agent in accordance(ii) with the termsrespect to any Guarantor subsidiary of the Credit Facility, which will be SOFR if availableOP, for so long as the subsidiary is the primary obligor under or an alternate benchmark that is being widely used in the market at that time as selected by the agent.provides a guaranty to any holder of unsecured indebtedness.
The Credit Facility contains various customary operating covenants, including the restricted payments covenant described in more detail below, as well as covenants restricting, among other things, restricted payments (including dividends and share repurchases), the incurrence of liens, the types of investments the Company may make, fundamental changes, agreements with affiliates and changes in nature of business. The amended and restated Credit Facility also contains(i) continues to have financial maintenance covenants with respect to maximum consolidated leverage, maximum consolidated secured leverage, minimum fixed charge coverage, and minimum net worth, (ii) amended the maximum other recourse debt to total asset value covenant to refer instead to secured recourse debt, and minimum(iii) added new financial maintenance covenants with respect to maximum consolidated unsecured leverage and adjusted net worth.operating income for the pool of eligible unencumbered properties required to be maintained under the Credit Facility to debt service paid on unsecured indebtedness.
Pursuant toUnder the Credit Facility, subject to certain exceptions, the Company mayis not permitted to pay distributions, including cash dividends on equity securities (including the Company’s 7.50% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share (“Series A Preferred Stock”) and 7.375% Series C Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share (“Series C Preferred Stock”)) in an aggregate amount exceeding 95% of MFFOAFFO (as defined in the
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
Credit Facility) for any look-back period of four consecutive fiscal quarters without seeking consent from the lenders under the Credit Facility. However, the Credit Facility also permits the Company to pay distributions in an aggregate amount not exceeding 105% of MFFOAFFO for any applicable period if, as of the last day of the period, the Company iswas able to satisfy a maximum leverage ratio after giving effect to the payments and also has a combination of cash, cash equivalents and amounts available for future borrowings under the Credit Facility of not less than $60.0 million. Moreover, if applicable, during the continuance of an event of default under the Credit Facility, the Company maycould not pay dividends or other distributions in excess of the amount necessary for the Company to maintain its status as a REIT.
As of June 30, 2021,2022, the Company was in compliance with the operating and financial covenants under the Credit Facility.
Note 6 — Senior Notes, Net
On October 7, 2021, the Company and the OP issued $500.0 million aggregate principal amount of 4.50% Senior Notes due 2028 (the “Senior Notes”). The Company, the OP and their subsidiaries that guarantee the Senior Notes entered into an indenture with U.S. Bank National Association, as trustee. As of June 30, 2022 and December 31, 2021 the amount of the Senior Notes on the Company’s consolidated balance sheets totaled $491.7 million and $491.0 million, respectively, which is net of $8.3 million and $9.0 million of deferred financing costs, respectively.
The Senior Notes, which were issued at par, will mature on September 30, 2028 and accrue interest at a rate of 4.500% per year. Interest on the Senior Notes, which began to accrue on October 7, 2021, is payable semi-annually in arrears on March 30 and September 30 of each year. The Senior Notes do not require any principal payments prior to maturity. The first semi-annual interest payment was made on March 30, 2022.
As of June 30, 2022, the Company was in compliance with the covenants under the Indenture governing the Senior Notes. Additional information on the terms of the Senior Notes can be found in the Company’s 2021 Annual Report on Form 10-K filed with the SEC on February 24, 2022.
Note 7 — Fair Value Measurements
Fair Value Hierarchy
GAAP establishes a hierarchy of valuation techniques based on the observability of inputs used in measuring assets and liabilities at fair value. GAAP establishes market-based or observable inputs as the preferred sources of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below:
Level 1 — Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.
Level 3 — Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.
A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets and liabilities. The Company’s policy with respect to transfers between levels of the fair value hierarchy is to recognize transfers into and out of each level as of the end of the reporting period. There were no transfers between levels of the fair value hierarchy during the three months ended June 30, 20212022 and 2020.2021.
Financial Instruments Measured at Fair Value on a Recurring Basis
Derivative Instruments
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
The Company’s derivative instruments are measured at fair value on a recurring basis. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with this derivative utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparty. However, as of June 30, 2021,2022, 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 the Company’s derivatives. As a result, the Company has determined that its derivatives valuation in its entirety is classified in Level 2 of the fair value hierarchy.
The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the counterparties.
Real Estate Investments Measured at Fair Value on a Non-Recurring Basis
Real Estate Investments - Held for Sale
The Company has had impaired real estate investments classified as held for sale.sale (see Note 3 — Real Estate Investments for additional information on impairment charges recorded by the Company). There were 4 impaired real estate investments held for sale as of June 30, 2022 and there were no impaired real estate investments held for sale as of June 30, 2021 and December 31, 2020. Carrying2021. The carrying value of impaired real estate investments held for sale on the consolidated balance sheetsheets represents their estimated fair value less cost to sell. Impaired real estate investments held for sale are generally classified in Level 3 of the fair value hierarchy.
Real Estate Investments - Held for Use
The Company has had impaired real estate investments classified as held for use at the time of impairment.impairment (see Note 3 — Real Estate Investments foradditional information on impairment charges recorded by the Company). The carrying value of these held for use impaired real estate investments held for use on the consolidated balance sheetsheets represents their estimated fair value at the time of impairment. The Company primarily uses a market approach to estimate the future cash flows expected to be generated. Impaired real estate investments which are held for use are generally classified in Level 3 of the fair value hierarchy.
Financial Instruments that are not Reported at Fair Value
The carrying value of short-term financial instruments such as cash and cash equivalents, restricted cash, prepaid expenses and other assets, accounts payable and accrued expenses and dividends payable approximates their fair value due to their short-term nature.
As of June 30, 2021 and December 31, 2020,2022, the carrying value of advances to the Company under the Credit Facility was $488.0 million and as of December 31, 2021 there were $155.7 million.no amounts outstanding under the Credit Facility. The fair value of the advances to the Company under the Credit Facility was $155.8 million and $278.8$486.8 million as of June 30, 2021 and December 31, 2020, respectively,2022, due to the widening of the credit spreads during the current period.
The carrying valuevalues of the Company’s mortgage notes payable as of June 30, 20212022 and December 31, 20202021 were $1.7$1.8 billion and $1.5$1.5 billion, respectively, and the fair value wasvalues were $1.7 billion and $1.6$1.5 billion,, respectively. The fair value of gross mortgage notes payable is based on estimates of market interest rates. This approach relies on unobservable inputs and therefore is classified as Level 3 in the fair value hierarchy.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and December 31, 2021, the Company’s Senior Notes had a gross carrying value of $500.0 million in each period and fair values of $395.0 million and $504.4 million, respectively.
(Unaudited)
Note 78 — Derivatives and Hedging Activities
Risk Management Objective of Using Derivatives
The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company and its related parties may also have other financial relationships. The Company does not anticipate that any of the counterparties will fail to meet their obligations.
The Company entered into an interest rate swap on September 1, 2020 forin a notional amount of $125.0 million, whichmillion. The interest rate swap became effective on October 13, 2020, in order to fixand fixed the interest rate on a mortgage loan that was refinanced on September 4, 2020. The interest rate swap fixesfixed interest on the mortgage at an effective interest rate of 3.26%3.27% and expireswas to expire in July 2026. Additionally,This interest rate swap was terminated in conjunction with the refinancingfourth quarter of a2021 when the mortgage loan in December 2020,was repaid and the Company entered into anreceived $2.1 million as a result of the termination. Following the termination, the Company reclassified approximately $2.1 million from AOCI (as defined below) as a reduction to interest rate cap agreement forexpense in the Company’s consolidated statement of operations in the fourth quarter of 2021. As a notional amount of $34.0 million. The fair value of this interest rate cap is insignificant and therefore is not shown onresult, the consolidated balance sheetCompany had no derivative financial instruments outstanding as of June 30, 2021 or December 31, 2020.
The table below presents the fair value of the Company’s derivative financial instrument as well as its classification on the consolidated balance sheet as of June 30, 20212022 and December 31, 2020.
(In thousands)Balance Sheet LocationJune 30, 2021December 31, 2020
Interest Rate “Pay-fixed” SwapsDerivative assets, at fair value$1,930 $0 
Interest Rate “Pay-fixed” SwapsDerivative liabilities, at fair value$0 $123 

2021
Cash Flow Hedges of Interest Rate Risk
As of June 30, 2022 and December 31, 2021 the Company did not have any derivatives that were designated as cash flow hedges of interest rate risk, however, the Company did have derivative activity (see table below) during the three and six months ended June 30, 2021.
The Company’s objectives in using interest rate derivatives arehave historically been to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, 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 changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive loss (“AOCI”) and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.
Amounts reported in accumulated other comprehensive income related to derivatives will beare reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that $0.2 million will be reclassified from other comprehensive loss as an increase to interest expense.
As of June 30, 2021 and December 31, 2020 the Company had the following derivatives that were designated as cash flow hedges of interest rate risk:
June 30, 2021December 31, 2020
Interest Rate DerivativeNumber of
Instruments		Notional AmountNumber of
Instruments		Notional Amount
Interest Rate “Pay-fixed” Swaps1 $125,000 1 $125,000 
The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the three and six months ended June 30, 20212022 and 2020:2021:
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2022202120222021
Amount of (loss) gain recognized in AOCI on interest rate derivatives$— $(502)$— $1,919 
Amount of (loss) reclassified from AOCI into income as interest expense$— $(71)$— $(134)
Total amount of interest expense presented in the consolidated income statements$28,329 $20,361 $52,069 $39,695 
Non-Designated Derivatives
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and December 31, 2021,
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2021202020212020
Amount of gain (loss) recognized in AOCI on interest rate derivatives$(502)$0 $1,919 $0 
Amount of (loss) reclassified from AOCI into income as interest expense$(71)$0 $(134)$0 
Total amount of interest expense presented in the consolidated income statements$20,361 $18,801 $39,695 $37,907 
Non-Designated Hedges the Company did not have any outstanding derivatives that were not designated as hedges under qualifying hedging relationships.
These derivatives arehave historically been used to manage the Company’s exposure to interest rate movements, but do not meet the strict hedge accounting requirements to be classified as hedging instruments. These derivatives also include other instruments or derivatives that the Company hasdo not elected to treat as hedgesqualify for purposes of administrative ease.hedge accounting. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.
The Company recorded an immaterial loss on non-designated hedging relationships.relationships during the quarterthree and six months ended June 30, 2021. The Company did 0tnot record any gains or losses during the quarterthree and six months ended June 30, 20202022 since the Company did not have any derivatives that were not designated as hedges of in qualifying hedging relationships during those years. As of June 30, 2021 the Company had the following outstanding derivatives that were not designated as hedges under qualifying hedging relationships.
June 30, 2021December 31, 2020
Interest Rate DerivativeNumber of
Instruments		Notional AmountNumber of
Instruments		Notional Amount
Interest Rate Cap1 $34,000 1 $34,000 
Embedded Derivative
Offsetting Derivatives
The table below presents a gross presentation,purchase and sale agreement for the effectsCIM Portfolio Acquisition (see Note 3 — Real Estate Investments for more information) included the planned issuance of offsetting, and a net presentationshares of the Company’s Class A common stock or Class A Units in the OP of
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
$50.0 million in value at issuance ($53.4 million of value subject to repurchase). The Company ultimately issued 6,450,107 shares of Class A common stock to the Seller in the first and second closings of the CIM Portfolio Acquisition during the three months ended March 31, 2022.
The number of shares issued at the applicable closing were based on the value of the shares or units that may be issued at such closing divided by the per-share volume weighted average price of the Company’s Class A common stock measured over a five-day consecutive trading period immediately preceding (but not including) the date on which written notice for the closing was delivered, indicating the seller’s election to receive either shares or units, to the OP (the price of which was to be limited by a 7.5% collar in either direction from the per share volume weighted-average price of the Company’s Class A common stock measured over a ten-day consecutive trading period immediately preceding (but not including) the effective date of the purchase and sale agreement), which was $8.34 per share. The Company had concluded that as of December 31, 2021, this arrangement constituted an embedded derivative which required separate accounting. The initial value of the embedded derivative was an asset upon the signing of the purchase and sale agreement of $1.7 million, and was a liability of $2.3 million as of December 31, 2021. The shares were issued in two closings in the three months ending March 31, 2022 at contract prices within the collar. Accordingly, the value of the embedded derivative was considered to be zero immediately prior to closing. During the three months ended March 31, 2022, the Company reduced the prior liability at December 31, 2021 to zero at closing and recorded a gain on non-designated derivatives of $2.3 million in the consolidated statements of operations.
Note 9 — Mezzanine Equity and Total Equity
Mezzanine Equity
Shares Subject to Repurchase
During the three months ended March 31, 2022, as part of the CIM Portfolio Acquisition, the Company issued a total of 6,450,107 shares of its Class A common stock to the Seller which had a value of $50.0 million, for accounting purposes, using the stock prices at the respective dates of issuance. The Company was required to register the resale of these shares, which it did in April 2022, and is required to subsequently maintain the effectiveness of that resale registration or the Company could be required to repurchase the securities for $53.4 million. If the Seller sells these securities pursuant to the Registration Statement or under Rule 144 under the Securities Act of 1933, as amended, or if the resale of the securities otherwise becomes qualified for exemption from registration under federal securities law, their repurchase rights terminate. If not yet sold by the Seller, the resale of all of these shares will become qualified for exemption from registration under federal securities law on August 25, 2022 (six months from the date of the final purchase) and the repurchase right would then terminate. Accordingly, as of June 30, 2021 and December 31, 2020. The net amounts2022, since the ability to maintain the resale registration is not solely in the Company’s control, the securities are reflected as shares subject to repurchase outside of derivative assets or liabilities can be reconciled topermanent equity until the tabular disclosurerepurchase rights terminate. Upon termination of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented onrepurchase right, the Balance Sheet.
Gross Amounts Not Offset on the Balance Sheet
(In thousands)Gross Amounts of Recognized AssetsGross Amounts of Recognized (Liabilities)Gross Amounts Offset on the Balance SheetNet Amounts of Assets (Liabilities) Presented on the Balance SheetFinancial InstrumentsCash Collateral Received (Posted)Net Amount
June 30, 2021$1,930 $— $— $1,930 $— $— 1,930 
December 31, 2020$— $(123)$— $(123)$— $— (123)
Credit-risk-related Contingent Features
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.
As of June 30, 2021, the fair value of derivatives in a net asset position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $1.9 million. As of June 30, 2021, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions.shares will be reclassified into permanent equity.
Note 8 — Stockholders’Total Equity
Common Stock
As of June 30, 20212022 and December 31, 2020,2021, the Company had 117.7133.3 million and 108.8123.8 million shares (including the shares subject to repurchase discussed above), respectively, of Class A common stock outstanding including restricted shares of Class A common stock (“restricted shares”) and excluding LTIP Units. LTIP Units may ultimately be convertible into shares of Class A common stock in the future if certain conditions are met.
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As more fully discussed in Table of ContentsNote 8
AMERICAN FINANCE TRUST, INC.

 – Derivative Financial Instruments
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
In January, February and March of 2020,, the Company paid dividends on itsissued 6,450,107shares aggregating to $53.4 million in Class A common stock at an annualized rate equal to $1.10 per share, or $0.0916667 per share on a monthly basis. In March 2020, the Company’s board of directors approved a reductionCommon Stock in the Company’s annualized common stock dividend to $0.85 per share, or $0.0708333 per share on a monthly basis, due to the uncertain and rapidly changing environment caused by the COVID-19 pandemic. The new common stock dividend rate became effective beginningconnection with the Company’s April 1, 2020 dividend declaration.
Historically, and through September 30, 2020,CIM Portfolio Acquisition during the Company declared dividends on its common stock based on monthly record dates and generally paid dividends, once declared, on or around the 15th day of each month (or, if not a business day, the next succeeding business day) to Class A common stock holders of record on the applicable record date. On August 27, 2020, the Company’s board of directors approved a change in the Company’s Class A common stock dividend policy. The Company anticipates paying future dividends authorized by its board of directors on shares of Class A common stock on a quarterly basis in arrears on the 15th day of the first month following the end of each fiscal quarter (unless otherwise specified) to Class A common stockholders of record on the record date for such payment. This change affected the frequency of dividend payments only, and did not impact the annualized dividend rate on Class A common stock of $0.85.three months ended March 31, 2022.
Distribution Reinvestment Plan
Effective on the Listing Date, an amendment and restatement of the then effective distribution reinvestment plan approved by the Company’s board of directors became effective (the “DRIP”). The DRIP allows stockholders who have elected to participate in the DRIP to have dividends payable with respect to all or a portion of their shares of Class A common stock reinvested in additional shares of Class A common stock. Shares issued pursuant to the DRIP represent shares that are, at the election of the Company, either (i) acquired directly from the Company, which would issue new shares, at a price based on the average of the high and low sales prices of Class A common stock on Nasdaq on the date of reinvestment, or (ii) acquired through open market purchases by the plan administrator at a price based on the weighted-average of the actual prices paid for all of the shares of Class A common stock purchased by the plan administrator with all participants’ reinvested dividends for the related quarter, less a per share processing fee.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
Shares issued pursuant to the DRIP are recorded within stockholders’ equity in the accompanying consolidated balance sheets in the period dividends are declared. During the three and six months ended June 30, 20212022 and 20202021 all shares acquired by participants pursuant to the DRIP were acquired through open market purchases by the plan administrator and not acquired directly from the Company.
ATM Program — Class A Common Stock
In May 2019, the Company established an “at the market” equity offering program for Class A common stock (the “Class A Common Stock ATM Program”), pursuant to which the Company may from time to time, offer, issue and sell to the public up to $200.0$450.0 million in shares of Class A common stock, through sales agents.
The Company sold 3,618 shares of Class A common stock through its Class A Common Stock ATM Program during the three months ended June 30, 2022, which did not generate material proceeds. The Company sold 2,765,329 shares of Class A common stock through its Class A Common Stock ATM Program during the six months ended June 30, 2022, which generated $24.9 million of gross proceeds, and net proceeds of $24.5 million after commissions, fees and other offering costs incurred of $0.4 million.
The Company sold 8,634,223 shares of Class A common stock through its Class A Common Stock ATM programProgram during the three and six months ended June 30, 2021, which generated $78.3 million of gross proceeds, and net proceeds of $77.0 million after commissions and fees of $1.3 million. The Company did not sell any shares under the Class A Common Stock ATM Program during the three and six months ended June 30, 2020.
Preferred Stock
The Company is authorized to issue up to 50,000,000 shares of preferred stock, of which it has classified and designated 12,796,000 as authorized shares of its Series A Preferred Stock, 120,000 as authorized shares of its Series B Preferred Stock, $0.01 par value per share (“Series B Preferred Stock”) and 11,536,000 as authorized shares of its Series C Preferred Stock as of June 30, 2021 and December 31, 2020. 2022.
•The Company had 7,933,711 and 7,842,008 shares of Series A Preferred Stock issued and outstanding as of June 30, 20212022 and December 31, 2020, respectively. NaN2021.
•No shares of Series B Preferred Stock were issued or outstanding as of June 30, 20212022 or December 31, 2020. 2021.
•The Company had 4,594,4984,595,175 and 3,535,7004,594,498 shares of its Series C Preferred Stock issued and outstanding as of June 30, 20212022 and December 31, 2020,2021, respectively.
ATM Program — Series A Preferred Stock
In May 2019, the Company established an “at the market” equity offering program for its Series A Preferred Stock (the “Series A Preferred Stock ATM Program”) pursuant to which the Company may, from time to time, offer, issue and sell to the public, through sales agents, shares of the Series A Preferred Stock having an aggregate offering price of up to $50.0 million which was subsequently increased to $100.0 million in October 2019 and was then increased again to $200.0 million in January 2021.
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Table•The Company did not sell any shares of Contents
AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Series A Preferred Stock during the three and six months ended June 30, 20212022.
(Unaudited)
•The Company did not sell any shares of Series A Preferred Stock during the three months ended June 30, 2021. During the six months ended June 30, 2021, the Company sold 91,703 shares underof Series A Preferred Stock through the Series A Preferred Stock ATM Program for gross proceeds of $2.3 million and net proceeds of $2.3$2.2 million, after commissions, paidfees, and other costs incurred of approximately $35,000. The Company did not sell any shares of Series A Preferred Stock during the three months ended June 30, 2020. During the six months ended June 30, 2020, the Company sold 802,459 shares of Series A Preferred Stock through the Series A Preferred Stock ATM Program for gross proceeds of $20.3 million and net proceeds of $20.0 million, before commissions paid of approximately $0.3$0.1 million.
ATM Program — Series C Preferred Stock
In January 2021, the Company established an “at the market” equity offering program for its Series C Preferred Stock (the “Series C Preferred Stock ATM Program”) pursuant to which the Company may, from time to time, offer, issue and sell to the public, through sales agents, shares of the Series C Preferred Stock having an aggregate offering price of up to $200.0 million.
•The Company sold 677 shares of Series C Preferred Stock under the Series C Preferred Stock ATM Program during the three and six months ended June 30, 2022, which did not generate material proceeds.
•During the three months ended June 30, 2021, the Company sold 494,697 shares of Series C Preferred Stock under the Series C Preferred Stock ATM Program for gross proceeds of $12.3 million and net proceeds of $11.7 million, after commissions and fees paid of approximately $0.6 million. During the six months ended June 30, 2021, the Company
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
sold 1,058,798 shares of Series C Preferred Stock under the Series C Preferred Stock ATM Program for gross proceeds of $26.5 million and net proceeds of $25.6 million, after commissions and fees paid of approximately $0.9 million.
Stockholder Rights Plan
In April 2020, the Company announced that its board of directors approved a stockholder rights plan (the “Plan”) to protect the long-term interests of the Company. The Company adopted the Plan due to the substantial volatility in the trading of the Company’s Class A common stock that has resulted from the ongoing COVID-19 pandemic. The adoption of the Plan is intended to allow the Company to realize the long-term value of the Company’s assets by protecting the Company from the actions of third parties that the Company’s board of directors determines are not in the best interest of the Company. By adopting the Plan, the Company believes that it has best positioned itself to navigate through this period of volatility brought on by COVID-19. The Company’s Plan is designed to reduce the likelihood that any person or group (including a group of persons that are acting in concert with each other) would gain control of the Company through open market accumulation of stock by imposing significant penalties upon any person or group that acquires 4.9% or more of the outstanding shares of Class A common stock without the approval of the Company’s board of directors. In connection with the adoption of the Plan, the Company’s board of directors authorized a dividend of 1 preferred share purchase right for each outstanding share of Class A common stock to stockholders of record on April 23, 2020 to purchase from the Company one one-thousandth of a share of Series B Preferred Stock for an exercise price of $35.00 per one-thousandth of a share, once the rights become exercisable, subject to adjustment as provided in the related rights agreement. By the terms of the Plan, the rights will initially trade with Class A common stock and will generally only become exercisable on the 10th business day after the Company’s board of directors becomebecomes aware that a person or entity has become the owner of 4.9% or more of the shares of Class A common stock or the commencement of a tender or exchange offer which would result in the offeror becoming an owner of 4.9% or more of the Class A common stock. The Plan was set to expire on April 12, 2021, however, inIn February 2021, the Company amended the rights agreement to extend the expiration date of thethese rights under the plan fromwas extended to April 2021 to April12, 2024 unless earlier exercised, exchanged, amended, redeemed or terminated.
Non-Controlling Interest
Non-controlling interests resulted from the issuance of OP Units in conjunction with the merger with American Realty Capital-Retail Centers of America, Inc. (“RCA”) in February 2017 (the “Merger”) and were recognized at fair value as of the effective time of the Merger on February 16, 2017. In addition, under the 20182021 OPP, the OP issued LTIP Units, which are also reflected as part of non-controlling interest as of June 30, 20212022 and December 31, 2020. The LTIP Units issued pursuant to the 2021 OPP were not reflected as part of non-controlling interest as of June 30, 2021. See Note 1213 — Equity Based Compensation - Multi-Year Outperformance Agreement for more information regarding the LTIP Units and related accounting.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
On May 4, 2021, the Company’s independent directors, acting as a group, authorized the issuance of a new award of LTIP Units pursuant to the 2021 OPP to the Advisor after the performance period under the 2018 OPP expired on July 19, 2021. This resulted in $1.9 million of additional expense related to equity-based compensation during the three months ended June 30, 2021 and a corresponding liability was accrued, which is included in accounts payable and accrued expenses on the consolidated balance sheet as of June 30, 2021. Accordingly, theythese new LTIP Units are not yet reflected in non-controlling interest on the Company’s balance sheet or statement of equity as of June 30, 2021.2022. For additional information, see Note 1413 — Subsequent EventsEquity-Based Compensation relating to the accounting impacts of (i) the end of the performance period under the 2018 OPP and the forfeiture of all LTIP Units awarded thereunder, and (ii) the beginning of the performance period under the 2021 OPP and the grant of an award of LTIP Units thereunder.
As of June 30, 20212022 and December 31, 2020,2021, non-controlling interest iswas comprised of the following components:
(In thousands)(In thousands)June 30, 2021December 31, 2020(In thousands)June 30, 2022December 31, 2021
Non-controlling interest attributable to LTIP UnitsNon-controlling interest attributable to LTIP Units$34,245 $28,317 Non-controlling interest attributable to LTIP Units$14,720 $8,368 
Non-controlling interest attributable to Class A UnitsNon-controlling interest attributable to Class A Units2,181 2,205 Non-controlling interest attributable to Class A Units2,123 2,056 
Total non-controlling interest Total non-controlling interest$36,426 $30,522  Total non-controlling interest$16,843 $10,424 
Following the end of the performance period under the 2018 OPP on July 19, 2021, the compensation committee of the board of directors of the Company determined that none of the 4,496,796 of the LTIP Units subject to the 2018 OPP had been earned, and these LTIP Units were thus automatically forfeited. On that date, the Company reclassified $34.8 million of amounts reflected in non-controlling interest for these LTIP Units to additional paid in capital on its consolidated balance sheet and consolidated statement of changes in equity.
Note 910 — Commitments and Contingencies
Lessee Arrangements - Ground Leases
The Company is a lessee in ground lease agreements for 7 of its properties. The ground leases have lease durations, including assumed renewals, ranging from 16.515.5 years to 34.233.2 years as of June 30, 2021. 2022.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
As of June 30, 2021,2022, the Company’s balance sheet includes operating lease right-of-use assets and operating lease liabilities of $18.3$17.9 million and $19.2 million, respectively. In determining operating ROU assets and lease liabilities for the Company’s existing operating leases upon the initial adoption of the new lease guidance in 2019, as well as for new operating leases entered into after adoption, the Company estimated an appropriate incremental borrowing rate on a fully-collateralized basis for the terms of the leases. Because the terms of the Company’s ground leases are significantly longer than the terms of borrowings available to the Company on a fully-collateralized basis, the Company’s estimate of this rate required significant judgment. The Company did not enter into any additional ground leases during the three and six months ended June 30, 2021.2022.
The Company’s operating ground leases have a weighted-average remaining lease term, including assumed renewals, of 27.526.6 years and a weighted-average discount rate of 7.5% as of June 30, 2021.2022. For the three and six months ended June 30, 2022 and 2021, the Company paid cash of $0.3 million and $0.7 million, respectively, for amounts included in the measurement of lease liabilities and recorded expense of $0.5 million and $0.9 million,, respectively. For the three and six months ended June 30, 2020, the Company paid cash of $0.3 million and $0.7 million recorded expense of $0.5 million and $0.9 million, respectively.
The lease expense is recorded on a straight-line basis in property operating expenses in the consolidated statements of operations and comprehensive loss.
The following table reflects the base cash rental payments due from the Company as of June 30, 2021:2022:
(In thousands)Future Base Rent Payments
2021 (remainder)$827 
20221,532 
20231,549 
20241,560 
20251,598 
Thereafter44,358 
Total lease payments51,424 
Less: Effects of discounting(32,210)
Total present value of lease payments$19,214 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
(In thousands)Future Base Rent Payments
2022 (remainder)$837 
20231,549 
20241,560 
20251,598 
20261,628 
Thereafter42,730 
Total lease payments49,902 
Less: Effects of discounting(30,738)
Total present value of lease payments$19,164 
Litigation and Regulatory Matters
On February 8, 2018, Carolyn St. Clair-Hibbard, a purported stockholder of the Company, filed a putative class action complaint in the United States District Court for the Southern District of New York against the Company, AR Global, the Advisor, and both individuals who previously served as the Company’s chief executive officer and chair of the board of directors (the “Former Chairmen”). On February 23, 2018, the complaint was amended to, among other things, assert some claims on the plaintiff’s own behalf and other claims on behalf of herself and other similarly situated shareholdersstockholders of the Company as a class. On April 26, 2018, defendants moved to dismiss the amended complaint. On May 25, 2018, the plaintiff filed a second amended complaint. The second amended complaint allegesalleged that the proxy materials used to solicit stockholder approval of the Merger at the Company’s 2017 annual meeting were materially incomplete and misleading. The complaint assertsasserted violations of Section 14(a) of the Exchange Act against the Company, as well as control person liability against the Advisor, AR Global, and the Former Chairmen under 20(a). It also assertsasserted state law claims for breach of fiduciary duty against the Advisor, and claims for aiding and abetting such breaches, of fiduciary duty against the Advisor, AR Global and the Former Chairmen. The complaint seekssought unspecified damages, rescission of the Company’s advisory agreement with the Advisor (the “Advisory Agreement”) (or severable portions thereof) which became effective when the Merger became effective, and a declaratory judgment that certain provisions of the Advisory Agreement arewere void. The Company believesbelieved the second amended complaint iswas without merit and intends to defenddefended it vigorously. On June 22, 2018, the defendants moved to dismiss the second amended complaint. On August 1, 2018, the plaintiff filed an opposition to the defendants’ motions to dismiss. DefendantsThe defendants filed reply papers on August 22, 2018, and oral argument was held on September 26, 2018. On September 23, 2019, the Court granted defendants’ motions and dismissed the complaint with prejudice, and the plaintiff appealed. On May 5, 2020, the United States Court of Appeals for the Second Circuit affirmed the lower court’s dismissal of the complaint.
On October 26, 2018, Terry Hibbard, a purported stockholder of the Company, filed a putative class action complaint in New York State Supreme Court, New York County, against the Company, AR Global, the Advisor, the Former Chairmen, the Company’s chief financial officer at the time of the Merger and each of the Company’s directors immediately prior to the
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
Merger. All of the directors immediately prior to the Merger, except for David Gong, currently serve as directors of the Company. The complaint alleged that the registration statement pursuant to which RCA shareholders acquired shares of the Company during the Merger contained materially incomplete and misleading information. The complaint asserted violations of Section 11 of the Securities Act of 1933, as amended (the “Securities Act”) against the Company’s chief financial officer at the time of the Merger and each of the Company’s directors immediately prior to the Merger, violations of Section 12(a)(2) of the Securities Act against the Company and the Company’s current chief executive officer, president and chair of the board of directors, and control person liability against the Advisor, AR Global and the Former Chairmen—Chairmen under Section 15 of the Securities Act. The complaint sought unspecified damages and rescission of the Company’s sale of stock pursuant to the registration statement.
On March 6, 2019, Susan Bracken, Michael P. Miller and Jamie Beckett, purported stockholders of the Company, filed a putative class action complaint in New York State Supreme Court, New York County, on behalf of themselves and others who purchased shares of common stock through the Company’s then effective distribution reinvestment plan, against the Company, AR Global, the Advisor, the Former Chairmen, the Company’s chief financial officer at the time of the Merger and each of the Company’s directors immediately prior to the Merger. The complaint alleged that the April and December 2016 registration statements pursuant to which class members purchased shares contained materially incomplete and misleading information. The complaint asserted violations of Section 11 of the Securities Act against the Company, the Company’s chief financial officer at the time of the Merger and each of the Company’s directors immediately prior to the Merger, violations of Section 12(a)(2) of the Securities Act against the Company and the Company’s current chief executive officer, president and chair of the board of directors, and control person liability against the Advisor, AR Global and the Former Chairmen under Section 15 of the Securities Act. The complaint sought unspecified damages and either rescission of the Company’s sale of stock or rescissory damages.
On April 30, 2019, Lynda Callaway, a purported stockholder of the Company, filed a putative class action complaint in New York State Supreme Court, New York County, against the Company, AR Global, the Advisor, the Former Chairmen, the Company’s chief financial officer at the time of the Merger and each of the Company’s directors immediately prior to the Merger. The complaint alleged that the registration statement pursuant to which the plaintiff and other class members acquired shares of the Company during the Merger contained materially incomplete and misleading information. The complaint asserted violations of Section 11 of the Securities Act against the Company, the Company’s chief financial officer at the time of the Merger and each of the Company’s directors immediately prior to the Merger, violations of Section 12(a)(2) of the Securities Act against the Company and the Company’s current chief executive officer, president and chair of the board of directors, and
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
control person liability under Section 15 of the Securities Act against the Advisor, AR Global, and the Former Chairmen. The complaint sought unspecified damages and rescission of the Company’s sale of stock pursuant to the registration statement.
On July 11, 2019, the New York State Supreme Court issued an order consolidating the three above-mentioned cases: Terry Hibbard, Bracken, and Callaway (the “Consolidated Cases”). The Court also stayed the Consolidated Cases pending a decision on the motions to dismiss in the St. Clair-Hibbard litigation pending in the United States District Court for the Southern District of New York. Following the federal court’s decision on the St. Clair-Hibbard the motions to dismiss, on October 31, 2019 the plaintiffs filed an amended consolidated class action complaint in the Consolidated Cases seeking substantially similar remedies from the same defendants. The Company moved to dismiss the amended consolidated complaint on December 16, 2019. After the parties completed briefing on this motion, the United States Court of Appeals for the Second Circuit issued its decision affirming dismissal of the St. Clair-Hibbard action. PlaintiffsThe plaintiffs moved to amend their complaint, purportedly to limit it to claims still viable in spite of the results of the federal action. The proposed second amended complaint no longer contains direct claims against the Company. Instead, the plaintiffs seek to pursue state law claims derivatively against the Advisor, AR Global, the Company’s initial chief executive officer and chair of the board of directors, the Company’s current directors and David Gong, a former director, with the Company as a nominal defendant. Plaintiffs’On December 20, 2021, the Court denied the plaintiffs’ motion to amend has been fully briefed, and oral argument was held in November 2020. The parties are now awaitingdismissed the litigation. On January 26, 2022, the plaintiffs filed a decisionnotice of appeal from the Court. The Company believes that the proposed second amended complaintCourt’s decision. That appeal is without merit and intends to defend against it vigorously. Due to the early stage of the litigation, no estimate of a probable loss or any reasonably possible losses are determinable at this time.pending.
There are no other material legal or regulatory proceedings pending or known to be contemplated against the Company.
During the three and six months ended June 30, 2021 and 2020,2022 the Company incurred legaldid not incur any litigation costs related to the above litigation of approximately $4,000matters. During the three and $0.3 million, respectively, and for the six months ended June 30, 2021, and 2020, the Company incurred legallitigation costs related to the above litigation of approximately $30,000$4,000 and $0.5 million,$30,000, respectively. A portion of these litigation costs arewere subject to a claim for reimbursement under the insurance policies maintained by the Company (the “Policies”), and. There were no such reimbursements recorded during the three and six months ended March 31, 2020, reimbursements of $9,000June 30, 2022 or 2021. The Policies were received and recorded in other income in the consolidated statements of operations and comprehensive loss. There were 0 such reimbursements recorded thereafter. The Company may receive additional reimbursements in the future. However, the Policies are subject to other claims that havehad priority over the Company’s claim for reimbursement, and the Company therefore does not believe it is likely to recover any additional reimbursements.have been exhausted.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
Environmental Matters
In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. The Company maintains environmental insurance for its properties that provides coverage for potential environmental liabilities, subject to the policy’s coverage conditions and limitations. The Company has not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on its financial position or results of operations.
Note 1011 — Related Party Transactions and Arrangements
Fees and Participations Incurred in Connection with the Operations of the Company
Summary of Advisory Agreement
The initial term of the Advisory Agreement expires on April 29, 2035. This term is automatically renewed for successive 20-year terms upon expiration unless the Advisory Agreement is terminated (1) in accordance with an Internalization (as defined below), (2) by the Company or the Advisor with cause, without penalty, with 60 days’ notice, (3) by the Advisor for (a) a failure to obtain a satisfactory agreement for any successor to the Company to assume and agree to perform obligations under the Advisory Agreement or (b) any material breach of the Advisory Agreement of any nature whatsoever by the Company, or (4) by the Advisor in connection with a change of control of the Company. Upon the termination of the Advisory Agreement, the Advisor will be entitled to receive from the Company all amounts due to the Advisor, as well as the then-present fair market value of the Advisor’s interest in the Company.
The Advisory Agreement grants the Company the right to internalize the services provided under the Advisory Agreement (“Internalization”) and to terminate the Advisory Agreement pursuant to a notice received by the Advisor as long as (i) more than 67% of the Company’s independent directors have approved the Internalization; and (ii) the Company pays the Advisor an Internalization fee equal to (1) $15.0 million plus (2) either (x) if the Internalization occurs on or before December 31, 2028, the Subject Fees (defined(as defined below) multiplied by 4.5 or (y) if the Internalization occurs on or after January 1, 2029, the Subject Fees multiplied by 3.5 plus (3) 1.0% multiplied by (x) the purchase price of properties or other investments acquired after the end of
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June 30, 2021
(Unaudited)
the fiscal quarter in which the notice of Internalization is received by the Advisor and prior to the Internalization and (y) without duplication, the cumulative net proceeds of any equity raised by the Company during the period following the end of the fiscal quarter in which notice is received and the Internalization. The “Subject Fees” are equal to (i) the product of 4 multiplied by the sum of (A) the actual base management fee (including both the fixed and variable portion thereof) plus (B) the actual variable management fee, in each of clauses (A) and (B), payable for the fiscal quarter in which the notice of Internalization is received by the Advisor, plus, (ii) without duplication, the annual increase in the base management fee resulting from the cumulative net proceeds of any equity raised in respect of the fiscal quarter in which the notice of Internalization is received by the Advisor. Up to 10% of the Internalization fee may be payable in shares of Class A common stock subject to certain conditions.
2019 Advisory Agreement Amendment
On March 18, 2019, the Company entered into Amendment No.2 to the Advisory Agreement, by and among the OP and the Advisor. Amendment No.2 revised the section of the Advisory Agreement specifically related to reimbursable administrative service expenses, including reasonable salaries and wages, benefits and overhead of all employees of the Advisor or its affiliates, including those of certain executive officers of the Company. See the “Professional Fees and Other Reimbursements” section below for details.
2020 Advisory Agreement Amendment
On March 30, 2020, the Company entered into Amendment No.3No. 3 to the Advisory Agreement, by and among the OP and the Advisor. Amendment No.3No. 3 revised the section of the Advisory Agreement to temporarily lower the quarterly thresholds of Core Earnings Per Adjusted Share (as defined in the Advisory Agreement) the Company must reach on a quarterly basis for the Advisor to receive the Variable Management Fee (as defined in the Advisory Agreement). For additional information, see the “Asset Management Fees and Variable Management/Incentive Fees” section below.
2021 Advisory Agreement Amendment
On January 13, 2021, the Company entered into Amendment No. 4 to the Advisory Agreement, withby and among the OP and the Advisor, to extend the expiration of the modified quarterly thresholds established by Amendment No. 3 to the Advisory Agreement. The Company musthad to reach these thresholds on a quarterly basis for the Advisor to receive the variable management fee from the end of the fiscal quarter ended December 31, 2020 to the end of the fiscal quarter endingended December 31, 2021. For additional information, see the “Asset Management Fees and Variable Management/Incentive Fees” section below.
In-Sourced Expenses
The Advisor has been and may continue to beis reimbursed for costs it incurs in providing investment-related services, or “insourced“in-sourced expenses.” These insourcedin-sourced expenses may not exceed 0.5% of the contract purchase price of each acquired property or 0.5% of the amount advanced for a loan or other investment. Additionally, the Company has paid and may continue to pay third party acquisition expenses. The aggregate amount of acquisition expenses, including insourcedin-sourced expenses, may not exceed 4.5% of the contract
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June 30, 2022
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purchase price of the Company’s portfolio or 4.5% of the amount advanced for all loans or other investments and this threshold has not been exceeded through December 31, 2020.June 30, 2022.
The Company incurred $5,000$0.2 million and $19,000$0.4 million of acquisition expenses and related cost reimbursements for the three and six months ended June 30, 2021,2022, respectively, and $23,000$5,000 and $0.1 million$19,000 for the three and six months ended June 30, 2020,2021, respectively.
Asset Management Fees and Incentive Variable Management Fees
The Company pays the Advisor a base management fee, which includes a fixed and variable portion, and, if certain performance thresholds are met, an incentive variable management fee. Under the Advisory Agreement, the fixed portion of the base management fee is $24.0 million annually. If the Company acquires (whether by merger, consolidation or otherwise) any other REIT, that is advised by an entity that is wholly-owned, directly or indirectly, by AR Global, other than any joint venture, (a “Specified Transaction”), the fixed portion of the base management fee will be increased by an amount equal to the consideration paid for the acquired company’s equity multiplied by 0.0031 for the first year following the Specified Transaction, 0.0047 for the second year and 0.0062 thereafter. The variable portion of the base management fee is a monthly fee equal to one-twelfth of 1.25% of the cumulative net proceeds of any equity raised by the Company and its subsidiaries from and after the initial effective date of the Advisory Agreement on February 16, 2017. Base management fees, including the variable portion, are included in asset management fees to related party on the consolidated statementstatements of operations and comprehensive loss.operations. The Company incurred $8.3 million and $16.1 million during the three and six months ended June 30, 2022, respectively, and $7.9 million and $15.2 million during the three and six months ended June 30,
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June 30, 2021,
(Unaudited)
2021, respectively, and $6.9 million $13.8 million for the three and six months ended June 30, 2020, respectively, in base management fees (including both the fixed and variable portion). and incentive management fees.
In addition, under the Advisory Agreement, the Company is required to pay the Advisor an incentive variable management fee. For the quarter ended March 31, 2020, the amount that was required to be paid wasfee equal to the product of (1) the fully diluted shares of common stock outstanding multiplied by (2) (x) 15.0% of the applicable quarter’s Core Earnings (as defined below) per share in excess of $0.275 per share plus (y) 10.0% of the applicable quarter’s Core Earnings per share in excess of $0.3125 per share, in each case as adjusted for changes in the number of shares of common stock outstanding. The definition of Adjusted Outstanding Shares (as defined in the Advisory Agreement), which is used to calculate Core Earnings per share, is based on the Company’s reported diluted weighted-average shares outstanding. In accordance with Amendment No. 3 to the Advisory Agreement, for the quarters ending June 30, 2020, September 30, 2020 and December 31, 2020, the low and high thresholds were reduced from $0.275 and $0.3125, respectively, to $0.23 and $0.27, respectively. On January 13, 2021, the Company entered into Amendment No. 4 to the Advisory Agreement to extend the expiration of these thresholds from the end of the fiscal quarter ended December 31, 2020 to the end of the fiscal quarter endingended December 31, 2021 in light of the continued economic impact of the COVID-19 pandemic.
Core Earnings is defined as, for the applicable period, net income or loss computed in accordance with GAAP excluding non-cash equity compensation expense, the variableincentive management fee, acquisition and transaction related fees and expenses, financing related fees and expenses, depreciation and amortization, realized gains and losses on the sale of assets, any unrealized gains or losses or other non-cash items recorded in net income or loss for the applicable period, regardless of whether such items are included in other comprehensive loss, or in net income, one-time events pursuant to changes in GAAP and certain non-cash charges, impairment losses on real estate related investments and other than temporary impairments of securities, amortization of deferred financing costs, amortization of tenant inducements, amortization of straight-line rent, amortization of market lease intangibles, provision for loss loans, and other non-recurring revenue and expenses (in each case after discussions between the Advisor and the independent directors and the approval of a majority of the independent directors). The variableincentive management fee is payable to the Advisor or its assignees in cash or shares, or a combination of both, the form of payment to be determined in the sole discretion of the Advisor and the value of any share to be determined by the Advisor acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. The Company incurred $0.4 million of incentive variable management fees of $0.6 millionfor the three and $0.7 million duringsix months ended June 30, 2022. During the three and six months ended June 30, 2021, respectively. NaNthe Company incurred $0.6 million and $0.7 million of incentive variable management fees, were incurred during the three and six months ended June 30, 2020.respectively.
Property Management Fees
The Company has a property management agreement (the “Multi-Tenant Property Management Agreement”), a leasing agreement (the “Multi-Tenant Leasing Agreement”) and a net lease property management and leasing agreement (the “Net Lease Property Management Agreement”) with the Property Manager. The Multi-Tenant Property Management Agreement, the Multi-Tenant Leasing Agreement and the Net Lease Property Management Agreement each became effective on February 16, 2017. In connection with the Net Lease Mortgage Notes, the Issuers have entered into the Property Management and Servicing
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
Agreement (as amended from time to time, the “ABS Property Management Agreement”), with the Property Manager, KeyBank National Association (“KeyBank”), as back-up property manager, and Citibank, N.A. as indenture trustee. See Note 4— Mortgage Notes Payable, Net for additional information regarding the Notes.
The Multi-Tenant Property Management Agreement provides that, unless a property is subject to a separate property management agreement with the Property Manager, the Property Manager is the sole and exclusive property manager for the Company’s multi-tenant properties, which are generally anchored, retail properties, such as power centers and lifestyle centers. In December 2017, in connection with a $210.0 million mortgage loan secured by 12 of the Company’s retail properties, the Company entered into 12 identical property management agreements with the Property Manager, the substantive terms of which are substantially identical to the terms of the Multi-Tenant Property Management Agreement, except they do not provide for the transition fees described below.
The Multi-Tenant Property Management Agreement entitles the Property Manager to a management fee equal to 4.0% of the gross rental receipts from the multi-tenant properties, including common area maintenance reimbursements, tax and insurance reimbursements, percentage rental payments, utility reimbursements, late fees, vending machine collections, service charges, rental interruption insurance, and a 15.0% administrative charge for common area expenses.
In addition, the Property Manager is entitled to a one-time transition fee of up to $2,500 for each multi-tenant property managed, a construction fee equal to 6.0% of construction costs incurred, if any, and reimbursement of all expenses specifically
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(Unaudited)
related to the operation of a multi-tenant property, including compensation and benefits of property management, accounting, lease administration, executive and supervisory personnel of the Property Manager, and excluding expenses of the Property Manager’s corporate and general management office and excluding compensation and other expenses applicable to time spent on matters other than the multi-tenant properties.
Pursuant to the Multi-Tenant Leasing Agreement, the Company may, under certain circumstances and subject to certain conditions, pay the Property Manager a leasing fee for services in leasing multi-tenant properties to third parties.
The Company’s double- and triple-net leased single- tenantsingle-tenant properties are managed by the Property Manager pursuant to the Net Lease Property Management Agreement, unless they are subject to a separate agreement with the Property Manager. The Net Lease Property Management Agreement permits the Property Manager to subcontract its duties to third parties and provides that the Company is responsible for all costs and expenses of managing the properties, except for general overhead and administrative expenses of the Property Manager. In December 2019, in connection with a loan secured by four properties leased to Stop & Shop, the Company entered into a property management and leasing agreement with the Property Manager with respect to the 4 properties, the substantive terms of which are substantially identical to the terms of the Net Lease Property Management Agreement, except that it limits the fees payable to the Property Manager and any subcontractor to 3.0% of operating income in the event that the Property Manager subcontracts its duties under the agreement.
In July 2020, in connection with the loan agreement with Column Financial, Inc., all but one of the Company’s borrower subsidiaries entered into a new property management and leasing agreement with the Property Manager with respect to all but one of the mortgaged properties, all of which are double- and triple-net leased single-tenant properties. The Company’s other double- and triple-net leased single-tenant properties, including the one mortgaged property excluded from the new property management and leasing agreement, are managed by the Property Manager pursuant to the Net Lease Property Management Agreement. The new property management and leasing agreement is identical to the Net Lease Property Management Agreement, except that the new property management and leasing agreement does not permit the Property Manager to subcontract its duties to third parties.
The currentinitial term of the Net Lease Property Management Agreement endsended on October 1, 2021, and ishas been and will be automatically renewed for successive one-year terms unless terminated 60 days prior to the end of a term or terminated for cause. On November 4, 2020, in light of the investment to be made by the Property Manager and its affiliates in property management infrastructure for the benefit of the Company and its subsidiaries, the Company amended each of the Multi-Tenant Property Management Agreement and the Multi-Tenant Leasing Agreement to reflect that each agreement will expire on the later of (i) November 4, 2025 and (ii) the termination date of the Advisory Agreement. These agreements with the Property Manager may only be terminated for cause prior to the end of the term. Prior to the amendments, the term of these agreements would have ended on October 1, 2021, with automatic renewals for successive one-year terms unless terminated 60 days prior to the end of a term or terminated for cause.
Additionally, during the six months ended June 30, 2022, certain subsidiaries of the OP each entered into a property management agreement with the Property Manager in connection with debt assumptions related to the acquisition of the properties of the CIM Portfolio Acquisition. Each property management agreement entitles the Property Manager to a
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
management fee equal to 4.0% of the gross rental receipts from the properties, including common area maintenance reimbursements, tax and insurance reimbursements, percentage rental payments, utility reimbursements, late fees, vending machine collections, service charges, rental interruption insurance, and a 15.0% administrative charge for common area expenses. In addition, under these property management agreements, the Property Manager is entitled to a construction fee equal to 6.0% of construction costs incurred, if any, and reimbursement of all expenses specifically related to the operation of a multi-tenant property, including compensation and benefits of property management, accounting, lease administration, executive and supervisory personnel of the Property Manager, and excluding expenses of the Property Manager’s corporate and general management office and excluding compensation and other expenses applicable to time spent on matters other than the properties.
Property Management and Services Agreement - Net Lease Mortgage Notes
Under the ABS Property Management Agreement, the Property Manager is responsible for servicing and administering the properties and leases securing the Net Lease Mortgage Notes under ordinary and special circumstances, and KeyBank, as the back-up property manager, is responsible for, among other things, maintaining current servicing records and systems for the assets securing the Net Lease Mortgage Notes in order to enable it to assume the responsibilities of the Property Manager in the event the Property Manager is no longer the property manager and special servicer. Pursuant to the ABS Property Management Agreement, the Property Manager may also be required to advance principal and interest payments on the Net Lease Mortgage Notes to preserve and protect the value of the applicable assets. The Issuers are required to reimburse any of these payments or advances.
Pursuant to the ABS Property Management Agreement, as amended and restated in connection with the issuance of the 2021 Net Lease Mortgage Notes in June 2021, for all properties that are not specially serviced, the Issuers are required to pay the Property Manager a monthly fee equal to the product of (i) one-twelfth of 0.25% and (ii) the lower of (a) the aggregate allocated loan amounts and (b) the aggregate collateral value of the properties that are a part of the collateral pool. Prior to the amendment and restatement of the ABS Property Management Agreement, for all properties that were not specially serviced, the Issuers were required to pay the Property Manager a monthly fee equal to the product of (i) one-twelfth of 0.25%, and (ii) the aggregate allocated loan amounts of all the properties that serve as part of the collateral for the Net Lease Mortgage Notes. With respect to the specially serviced properties, the Property Manager is entitled to receive a workout fee or liquidation fee under certain circumstances based on 0.50% of applicable amounts recovered, as well as a monthly fee equal to the product of (i) one-twelfth of 0.75% and (ii) the lower of (a) the aggregate allocated loan amounts and (b) the aggregate collateral value of all the specially
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June 30, 2021
(Unaudited)
serviced properties that are part of the collateral pool. Prior to the amendment and restatement of the ABS Property Management Agreement, the monthly fee for specially serviced properties was equal to the product of (i) one-twelfth of 0.75%, and (ii) the aggregate allocated loan amounts of all the specially serviced properties that serve as part of the collateral pool for the Net Lease Mortgage Notes. The Property Manager has retained KeyBank as a sub-manager pursuant to a separate sub-management agreement pursuant to which KeyBank provides certain services that the Property Manager is required to provide as property manager under the ABS Property Management Agreement. Under the ABS Property Management Agreement, the Property Manager has agreed to waive (i) the portion of the monthly fee related to the properties that are not specially serviced that is in excess of the amount to be paid to KeyBank as sub-manager pursuant to the sub-management agreement, (ii) the workout fee, (iii) the liquidation fee and (iv) the monthly fee related to the properties that are specially serviced, although the Property Manager retains the right to revoke these waivers at any time. The Property Manager is also entitled to receive additional servicing compensation related to certain fees and penalties under the leases it is responsible for under the ABS Property Management Agreement.
The services provided by the Property Manager with respect to the double- and triple-net leased single-tenant properties in the collateral pool and related property management fees are separate and independent from the property management services the Property Manager has provided and will continue to provide with respect to those properties pursuant to the Net Lease Property Management Agreement.
Professional Fees and Other Reimbursements
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
The Company reimburses the Advisor’s costs of providing administrative services, including among other things, reasonable allocation of salaries and wages, benefits and overhead of employees of the Advisor or its affiliates, except for costs to the extent that the employees perform services for which the Advisor receives a separate fee. The reimbursement includes reasonable overhead expenses, including the reimbursement of an allocated portion of rent expense at certain properties that are both occupied by employees of the Advisor or its affiliates and owned by affiliates of the Advisor. These reimbursements are exclusive of fees and other expense reimbursements incurred from and due to the Advisor that were passed through and ultimately paid to Lincoln Retail REIT Services, LLC (“Lincoln”) as a result of the Advisor’s prior arrangements with Lincoln to provide services to the Advisor in connection with the Company’s multi-tenant retail properties that are not net leased. The Advisor’s agreement with Lincoln expired in February 2021 and was not renewed. The expiration of the agreement with Lincoln did not affect the responsibilities and obligations of the Advisor or the Property Manager to the Company under the Company’s agreements with them.
These reimbursements are included inas part of Professional fees and other reimbursements in the table below and in general and administrative expense on the consolidated statementstatements of operations and comprehensive loss.operations. During the three and six months ended June 30, 2021,2022, the Company incurred $3.9 million and $6.7 million, respectively, and $1.9 million and $4.2 million respectively, of reimbursement expenses from to the Advisor providing administrative services and $2.2 million and $4.6 million of these expenses during the three and six months ended June 30, 2020, respectively.2021, respectively, of reimbursement expenses to the Advisor for providing administrative services.
Prior to Amendment No. 2,Under the agreement, the Company had not reimbursed the Advisor or its affiliates, including the Property Manager, for salaries, wages, or benefits paid to the Company’s executive officers. Starting in 2019, under Amendment No. 2, the Company beganis required to reimburse the Advisor for a portion of the salary, wages, and benefits paid to the Company’s chief financial officer as part of the aggregate reimbursement for salaries, wages and benefits of employees of the Advisor or its affiliates, excluding any executive officer who is also a partner, member or equity owner of AR Global and subject to a limit on certain limitations.
Beginning in 2019, under Amendment No. 2 to the Advisory Agreement, theThe aggregate amount that may be reimbursed in each fiscal year for salaries, wages and benefits (excluding overhead) of employees of the Advisor or its affiliates (the “Capped Reimbursement Amount”) for each fiscal year is subject to a limit that is equal to the greater of: (a) a fixed component (the “Fixed Component”); and (b) a (b) variable component (the “Variable Component”).
Both the Fixed Component and the Variable Component increase by an annual cost of living adjustment equal to the greater of (x) 3.0% and (y) the CPI, as defined in the amendment for the prior year ended December 31. Initially, for the year ended December 31, 2019: (a) the Fixed Component was equal to $7.0 million; and (b) the Variable Component was equal to: (i) the sum of the total real estate investments, at cost as recorded on the balance sheet dated as of the last day of each fiscal quarter (the “Real Estate Cost”) in the year divided by 4, which amount is then (ii) multiplied by 0.20%. As of June 30, 2022 and December 31, 2021, the Fixed Component was $7.7 million and $7.4 million, respectively.
If the Company sells real estate investments aggregating an amount equal to or more than 25% of Real Estate Cost in one or a series of related dispositions in which the proceeds of the disposition(s) are not reinvested in Investments (as defined in the Advisory Agreement), then within 12 months following the disposition(s), the Advisory Agreement requires the Advisor and
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June 30, 2021
(Unaudited)
the Company to negotiate in good faith to reset the Fixed Component; provided that if the proceeds of the disposition(s) are paid to shareholdersstockholders of the Company as a special distribution or used to repay loans with no intent of subsequently refinancing and reinvesting the proceeds thereof in Investments, the Advisory Agreement requires these negotiations within 90 days thereof, in each case taking into account reasonable projections of reimbursable costs in light of the reduced assets of the Company.
As part of this reimbursement, the Company paid approximately $2.7 million in 2019 to the Advisor or its affiliates as reimbursement for bonuses of employees of the Advisor or its affiliates who provided administrative services during such calendar year, prorated for the time spent working on matters relating to the Company. The Company does not reimburse the Advisor or its affiliates for any bonus amounts relating to time dedicated to the Company by Edward M. Weil, Jr., the Company’s Chief Executive Officer. The Advisor formally awarded 2019 bonuses to employees of the Advisor or its affiliates in September 2020 (the “2019 Bonus Awards”), which were comprised of cash and restricted shares (for additional information on the restricted shares issued to these employees, see Note 12 — Equity-Based Compensation). The original $2.7 million estimate for bonuses recorded and paid to the Advisor in 2019 exceeded the cash portion of the 2019 Bonus Awards to be paid to employees of the Advisor or its affiliates by $1.4 million and to be reimbursed by the Company. As a result, during the three months ended September 30, 2020, the Company recorded a receivable from the Advisor of $1.4 million in prepaid expenses and other assets on the consolidated balance sheet and a corresponding reduction in general and administrative expenses. Pursuant to authorization by the independent members of the Company’s board of directors, the $1.4 million receivable is payable to the Company over a 10-month period from January 2021 through October 2021. During the three and six months ended June 30, 2021, approximately $0.4 million and $0.8 million, respectively, of this amount was received.
During the three months ended June 30, 2021, the Advisor finalized the amounts and form of the 2020 bonuses previously estimated (the “2020 Bonus Awards”) to be paid to the employees of the Advisor or its affiliates who provided administrative services during such calendar year, prorated for the time spent working on matters relating to the Company.Company (the “2020 Bonus Awards”). The 2020 Bonus Awards arewere paid by the Advisor over an eleven-month period from June 2021 to April 2022. The final amounts awarded exceeded the amounts previously paid by the Company to the Advisor for estimated 2020 bonuses by approximately $1.4 million for the following reasons (i) forfeitures of bonuses related to employees of the Advisor or its affiliates who were terminated or resigned prior to payment (including the Company’s former chief financial officer), (ii) payment of a portion of bonuses in the form of restricted shares (which is recorded as equity-based compensation expense) and (iii) a general reduction in final bonuses for remaining personnel of the Advisor or its affiliates due to on-going negative impacts of the COVID-19 pandemic. As a result, during the three months ended June 30, 2021, the Company recorded a receivable from the Advisor of $1.4 million, which iswas recorded in prepaid expenses and other assets on the consolidated balance sheet and a corresponding reduction in general and administrative expenses. The Advisor paid the $1.4 million receivable to the Company in August 2021.
Reimbursements for the cash portion of 20202021 and 2022 bonuses to employees of the Advisor or its affiliates were expensed and reimbursed on a monthly basis during 2020, and 2021 bonuses continue to be expensed and reimbursed on a monthly basis during 2021 and 2022 in accordance with the
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
cash bonus estimates provided by the Advisor. Generally, prior to the 20192020 Bonus Awards, employee bonuses havehad been formally awarded to employees of the Advisor or its affiliates in March as an all-cash award and paid out by the Advisor in the year subsequent to the year in which services were rendered to the Company.
Summary of Fees, Expenses and Related Payables
The following table details amounts incurred and payable to related parties in connection with the operations-related services described above as of and for the periods presented. Amounts below are inclusive of fees and other expense reimbursements incurred from and due to the Advisor that arewere passed through and ultimately paid to Lincoln as a result of the Advisor’s former arrangements with Lincoln:
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June 30, 2021
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,Payable (Receivable) as ofThree Months Ended June 30,Six Months Ended June 30,Payable (Receivable) as of
(In thousands)(In thousands)2021202020212020June 30,
2021		December 31,
2020		(In thousands)2022202120222021June 30,
2022		December 31,
2021
Non-recurring fees and reimbursements:Non-recurring fees and reimbursements:Non-recurring fees and reimbursements:
Acquisition cost reimbursements (1)
Acquisition cost reimbursements (1)
$5 $23 $19 $87 $5 $96 
Acquisition cost reimbursements (1)
$167 $5 $371 $19 $97 $32 
Ongoing fees:Ongoing fees:Ongoing fees:
Asset management fees to related partyAsset management fees to related party7,918 6,918 15,243 13,823 620 177 Asset management fees to related party8,296 7,918 16,122 15,243 367 — 
Property management and leasing fees (2)
Property management and leasing fees (2)
1,631 1,230 6,075 2,700 627 0 
Property management and leasing fees (2)
2,942 1,631 4,924 6,075 874 901 
Professional fees and other reimbursements (3)
Professional fees and other reimbursements (3)
2,302 2,649 3,723 5,353 (86)

(77)
Professional fees and other reimbursements (3)
4,367 2,302 7,662 5,167 1,056 

83 
Professional fee credit due from Advisor(1,444)0 (1,444)0 (2,003)(4)(1,862)(4)
Professional fee credit due from Advisor and its affiliatesProfessional fee credit due from Advisor and its affiliates— (1,444)— (1,444)— — 
Total related party operating fees and reimbursementsTotal related party operating fees and reimbursements$10,412 $10,820 $23,616 $21,963 $(837)$(1,666)Total related party operating fees and reimbursements$15,772 $10,412 $29,079 $25,060 $2,394 $1,016 
______
(1)Amounts for the three and six months ended June 30, 2022 and 2021 and 2020are included in acquisition and transaction related expenses in the consolidated statements of operations and comprehensive loss.
(2)Amounts for the three and six months ended June 30, 20212022 and 20202021 are included in property operating expenses in the consolidated statements of operations and comprehensive loss with the exception of approximately $2.0$0.4 million and $0.8 million of leasing fees incurred in the three and six months ended June 30, 2022, respectively, and $0.3 million and $1.7 million incurred in the three and six months ended June 30, 2021, respectively, which were capitalized and are included in prepaid expenses and other assetsdeferred costs, net in the consolidated balance sheet. LeasingA portion of leasing fees are ultimately paid to a third party.
(3)Amounts for the three and six months ended June 30, 20212022 and 20202021 are included in general and administrative expense in the consolidated statements of operations and comprehensive loss. Includes amounts for directorsdirectors’ and officersofficers’ insurance.
(4) Included in this receivable from the Advisor as of December 31, 2020 is $1.4 million that relates to overpayment of the 2019 Bonus Awards and $1.4 million that relates to overpayment of the 2020 Bonus Awards. As of June 30, 2021, approximately $0.6 million related to the 2019 Bonus Awards remained to be received over the 10-month repayment period from January 2021 to October 2021 and approximately $1.4 million related to the 2020 Bonus Awards was received in August 2021. During the three and six months ended June 30, 2021, approximately $0.4 million and $0.8 million, respectively, was received relating to the overpayment of the 2019 Bonus Awards and the $0.5 million receivable relating to the overpayment of invoices for a shared service was received.
Note 1112 — Economic Dependency
Under various agreements, the Company has engaged or will engage the Advisor, its affiliates and entities under common control with the Advisor to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, as well as other administrative responsibilities for the Company including accounting and legal services, human resources and information technology.
As a result of these relationships, the Company is dependent upon the Advisor and its affiliates. In the event that these companies are unable to provide the Company with the respective services, the Company will be required to find alternative providers of these services.
Note 1213 — Equity-Based Compensation
Equity Plans
2018 Equity Plan
Effective at the Listing, the Company’s board of directors adopted an equity plan for the Advisor (the “Advisor Plan”) and an equity plan for individuals (the “Individual Plan” and together with the Advisor Plan, the “2018 Equity Plan”). The Advisor Plan is substantially similar to the Individual Plan, except with respect to the eligible participants. Under the Individual Plan, the Company may only make awards to its directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, certain consultants to the Company and the Advisor and its affiliates or to entities that provide services to the Company. By contrast, under the Advisor Plan the Company may only make awards to the Advisor.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
The 2018 Equity Plan succeeded and replaced the existing employee and director restricted share plan (the “RSP”). Following the effectiveness of the 2018 Equity Plan at the Listing, no further awards will be issued under the RSP; provided, however, that any outstanding awards under the RSP, such as unvested restricted shares held by the Company’s independent directors, remained outstanding in accordance with their terms and the terms of the RSP until all those awards are vested, forfeited, canceled, expired or otherwise terminated in accordance with their terms. The Company accounts for forfeitures when they occur. The 2018 Equity Plan permits awards of restricted shares, restricted stock units (“RSUs”), options, stock
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(Unaudited)
appreciation rights, stock awards, LTIP Units and other equity awards. The 2018 Equity Plan has a term of 10 years, expiring on July 19, 2028. Identical to the RSP, the number of shares of the Company’s capital stock available for awards under the 2018 Equity Plan, in the aggregate, is equal to 10.0% of the Company’s outstanding shares of common stock on a fully diluted basis at any time. Shares subject to awards under the Individual Plan reduce the number of shares available for awards under the Advisor Plan on a one-for-one basis and vice versa. If any awards granted under the 2018 Equity Plan are forfeited for any reason, the number of forfeited shares is again available for purposes of granting awards under the 2018 Equity Plan.
Restricted Shares
Restricted shares are shares of common stock awarded under terms that provide for vesting over a specified period of time. Holders of restricted shares may receive non-forfeitable cash dividends prior to the time that the restrictions on the restricted shares have lapsed. Any dividends to holders of restricted shares payable in shares of common stock are subject to the same restrictions as the underlying restricted shares. Restricted shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested.
Prior to June 30, 2020, the Company only granted restricted shares to the Company’s directors. However, during the third quarter ofyears ended December 31, 2021 and 2020, and the first and second quarters of 2021, the Company granted 309,475, 52,778278,278 and 225,500309,475 restricted shares, respectively, to employees of the Advisor or its affiliates who are involved in providing services to the Company, including the Company’s chief financial officer. In the six months ended June 30, 2022, 249,700 restricted shares were granted to employees of the Advisor or its affiliates. No awards may be made to anyone who is also a partner, member or equity owner of the parent of the Advisor.
The restricted shares granted to the Company’s directors vest on a straight-line basis over periods of 1 year to 5 years from the date of grant and provide for accelerated vesting of the portion of the unvested restricted shares scheduled to vest in the year of the recipient’s termination of his or her position as a director of the Company due to a voluntary resignation or failure to be re-elected to the Company’s board of directors following nomination therefor. All unvested restricted shares held by the Company’s directors also vest in the event of a Change of Control (as defined in the RSP or the Individual Plan) or a termination of a directorship without cause or as a result of death or disability.
The restricted shares granted to employees of the Advisor or its affiliates vest in 25% increments on each of the first four anniversaries of the grant date. Except in connection with a change in control (as defined in the award agreement) of the Company, any unvested restricted shares will be forfeited if the holder’s employment with the Advisor terminates for any reason. Upon a change in control of the Company, 50% of the unvested restricted shares will immediately vest and the remaining unvested restricted shares will be forfeited.

The following table reflects the activity of restricted shares for the threesix months ended June 30, 2021:2022:
 Number of Shares of Common StockWeighted-Average Grant Price
Unvested, December 31, 2020400,872 $7.62 
Granted (1)
313,474 9.40 
Vested(177,138)8.32 
Forfeited(19,875)6.86 
Unvested, June 30, 2021517,333 8.49 
________
(1) Includes restricted shares granted to the Company’s former chief financial officer in February 2021 (see below for additional information).
 Number of Shares of Common StockWeighted-Average Grant Price
Unvested, December 31, 2021422,869 $8.26 
Granted292,572 7.86 
Vested(92,770)9.78 
Forfeited(275)9.48 
Unvested, June 30, 2022622,396 7.84 
As of June 30, 2021,2022, the Company had $3.6$4.3 million of unrecognized compensation cost related to unvested restricted share awards granted, which is expected to be recognized over a weighted-average period of 3.43.1 years.
The fair value of the restricted shares is being expensed in accordance with the service period required. Compensation expense related to restricted shares is included in equity-based compensation on the accompanying consolidated statements of operations and comprehensive loss. Compensation expense related to restricted shares was approximately $0.4 million and $0.7 million for the three and six months ended June 30, 2022, respectively. Compensation expense related to restricted shares
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
was approximately $0.4 million and $1.8 million for the three and six months ended June 30, 2021, and $0.3 million for the three months ended June 30, 2020.respectively. The higher expense recorded in the first quarter ofsix months ended June 30, 2021 was due to the accelerated vesting of restricted shares previously awarded to the Company’s former chief financial officer, as well as expense from an additional grant of restricted shares awarded to the Company’s former chief financial officer in February 2021 (see additional discussion below).
On February 26, 2021, the Company’s board of directors approved an amendment to the award agreement for 69,875 restricted shares previously awarded to the Company’s former chief financial officer. These restricted shares had been
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
scheduled to vest in 25% increments on each of the first four anniversaries of the grant date (September 15, 2020), however, in accordance with the amendment, these shares fully vested upon the effectiveness of the resignation of the Company’s former chief financial officer on April 9, 2021. This was treated as a modification of the award of these restricted shares and, in addition to accelerating the original expense, the Company was also required to calculate the excess of the new value of those awards on the date of modification over the fair value of the awards immediately prior to the amendment and record such excess as expense through April 9, 2021. In addition, also on February 26, 2021, the Company’s board of directors granted the Company’s former chief financial officer an additional award of 52,778 restricted shares that also fully vested on upon the effectiveness of her resignation on April 9, 2021. The acceleration of vesting of the prior grant and the new grant resulted in approximately $1.1 million of increased equity-based compensation expense recorded during the six months ended June 30, 2021.
Restricted Stock Units
RSUs represent a contingent right to receive shares of common stock at a future settlement date, subject to satisfaction of applicable vesting conditions and other restrictions, as set forth in the RSP and an award agreement evidencing the grant of RSUs. RSUs may not, in general, be sold or otherwise transferred until restrictions are removed and the rights to the shares of common stock have vested. Holders of RSUs do not have or receive any voting rights with respect to the RSUs or any shares underlying any award of RSUs, but such holders are generally credited with dividend or other distribution equivalents which are subject to the same vesting conditions and other restrictions as the underlying RSUs and only paid at the time such RSUs are settled in shares of common stock. The Company has not granted any RSUs, and no unvested RSUs were outstanding for the three and six months ended June 30, 20212022 or 2020.2021.
Multi-Year Outperformance Agreements
2021 OPP
On May 4, 2021, the Company’s independent directors acting as a group, authorized an award of LTIP Units under the 2021 OPP after the performance period under the 2018 OPP expired on July 19, 2021, and, on July 21, 2021, the Company, the OP and the Advisor entered into the 2021 OPP (see below for additional information on the 2018 OPP, including information on the LTIP Units granted and earned thereunder).
On July 21, 2021, the Company and the Advisor entered into the 2021 OPP. Based on a maximum award value of $72.0 million and the Initial Share Price of $8.4419, which was determinabledetermined on July 20, 2021, the Advisor was granted a total of 8,528,885 LTIP Units pursuant to the 2021 OPP. These LTIP Units may be earned and become vested based on the Company’s total shareholder return (“TSR”), including both share price appreciation and reinvestment of Class A common stock dividends, compared to the Initial Share Price over a performance period commencing on July 20, 2021 and ending on the earliest of (i) July 20, 2024, (ii) the effective date of any Change of Control (as defined in the Advisor Plan) and (iii) the effective date of any termination of the Advisor’s services as the Company’s advisor.
The amortization of the fair value of the LTIP Units that were granted will be recorded evenly over the requisite service period which is approximately 38.5 months from May 4, 2021, the date that the Company’s independent board of directors approved the award of LTIP Units under the 2021 OPP, through July 20, 2024, the end of the performance period.
As of June 30, 2021, the number of LTIP Units to be granted under the 2021 OPP was not yet determined because the Initial Share Price was not determinable until July 20, 2021.Accordingly, as of June 30, 2021 the award of LTIP Units under the 2021 OPP was classified as a liability award and a liability of approximatelyThe Company recorded $1.9 million was reflected in equity basedadditional equity-based compensation expense and accounts payable as of that date representingduring the year ended December 31, 2021 which represented the pro rata share of the June 30, 2021 estimated value accrued over theOPP’s service period from May 4, 2021 (date(the date of the grant) to July 20, 2024 (end(the end of the performance period).As of July 20, 2021, the Initial Share Price and the number of LTIP Units to be granted under the 2021 OPP became known and the fair value of the award as of July 20, 2021 was determined to be $40.8 million. As a result, the award of LTIP Units under the 2021 OPP will bewas reclassified as an equity award on July 20, 2021, with any change in value and cumulative effect thereof, reflected in income and equity statements aton that time.date.
2018 OPP
On the Listing Date, the Company granted a performance-based equity award to the Advisor in the form of a Master LTIP Unit pursuant to the 2018 OPP. The Master LTIP Unit was automatically converted on August 30, 2018 (the “Effective Date”),
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
the 30th trading day following the Listing Date, into 4,496,796 LTIP Units equal to the quotient of $72.0 million divided by $16.0114, the ten-day trailing average closing price of the Company’s Class A common stock on Nasdaq over the 10 consecutive trading days immediately prior to the Effective Date. The Effective Date was the grant date for accounting purposes. In accordance with accounting rules, the total fair value of the LTIP Units of $32.0 million was calculated and fixed as of the grant date, and was recorded over the requisite service period of three years. In March 2019, the Company entered into
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June 30, 2021
(Unaudited)
an amendment to the 2018 OPP to reflect a change in the peer group resulting from the merger of one member of the peer group, Select Income REIT, with Government Properties Income Trust, with the entity surviving the merger renamed as Office Properties Income Trust. Under the accounting rules, the Company was required to calculate any excess of the new value of LTIP Units in accordance with the provisions of the amendment ($10.9 million) over the fair value immediately prior to the amendment ($8.1 million). This excess of approximately $2.8 million is beingwas expensed over the period from March 4, 2019, the date the Company’s compensation committee approved the amendment, through July 19, 2021.
The LTIP Units issued pursuant to the 2018 OPP could bepotentially have been earned by the Advisor based on the Company’s achievement of threshold, target and maximum performance goals based on the Company’s absolute and relative TSR over a three-year performance period that ended on July 19, 2021. Prior to the issuance of LTIP Units pursuant to the 2021 OPP, the compensation committee of the board of directors of the Company determined that none of the 4,496,796 of the LTIP Units subject to the 2018 OPP had been earned.earned under either the absolute or relative thresholds. These LTIP Units were thus automatically forfeited effective as of July 19, 2021, without the payment of any consideration by the Company or the OP. On that date, the Company reclassified amounts reflected in non-controlling interest for these LTIP Units to additional paid in capital on its consolidated balance sheet and consolidated statement of equity.
Compensation Expense - 2021 OPP and 2018 OPP
During the three and six months ended June 30, 2022, the Company recorded equity-based compensation expense related to the LTIP Units of $3.2 million and $6.4 million, respectively, and during the three and six months ended June 30, 2021 the Company recorded equity-based compensation expense related to the LTIP Units of $4.9 million and $7.9 million, respectively, which includes $1.9 million of additional expense relating to the 2021 OPP. As LTIP Units awarded under the 2021 OPP had not been issued as of June 30, 2021, a liability has been recorded until their issuance, which is included in accounts payable and accrued expenses in the unaudited consolidated balance sheet.respectively. These expenses are recorded in equity-based compensation in the unaudited consolidated statements of operations and comprehensive loss. As of June 30, 2021,2022, the Company had $0.6 million of unrecognized compensation expense related to the LTIP Units awarded under the 2018 OPP which is expected to be recognized over a period of 0.1 years, and $37.2$26.1 million of unrecognized compensation expense related to the LTIP Units awarded under the 2021 OPP which is expected to be recognized over a period of 3.12.1 years.
LTIP Units Distributions/Redemptions
The rights of the Advisor as the holder of the LTIP Units are governed by the terms of the LTIP Units set forth in the agreement of limited partnership of the OP. Holders of LTIP Units are entitled to distributions on the LTIP Units equal to 10% of the distributions made per Class A Unit (other than distributions of sale proceeds) until the LTIP Units are earned. Distributions paid on a Class A Unit are equal to dividends paid on a share of Class A common stock. Distributions paid on LTIP Units are not subject to forfeiture, even if the LTIP Units are ultimately forfeited. The Master LTIP Unit was entitled, on the Effective Date, to receive a distribution equal to the product of 10% of the distributions made per Class A Unit during the period from the Listing Date to the Effective Date multiplied by the number of LTIP Units. The Advisor is entitled to a priority catch-up distribution on each earned LTIP Unit equal to 90% of the aggregate distributions paid on Class A Units during the applicable performance period. Any LTIP Units that are earned become entitled to receive the same distributions paid on Class A Units. If and when the Advisor’s capital account with respect to an earned LTIP Unit is equal to the capital account balance of a Class A Unit, the Advisor, as the holder of the earned LTIP Unit, in its sole discretion, is entitled to convert the LTIP Unit into a Class A Unit, which may in turn be redeemed on a one-for-one1-for-one basis for, at the Company’s election, a share of Class A common stock or the cash equivalent thereof.
ForThe Company paid distributions on LTIP Units of $0.4 million and $0.2 million for the threesix months ended June 30, 2022 and 2021, and 2020, the Company paid distributions on the LTIP Units of $0.1 million and $0.1 million, respectively, which isrespectively. These amounts are recorded in the unauditedCompany’s consolidated statementstatements of changes in equity.
Performance Measures
As indicated above, on July 19, 2021, at the end of the performance period, the compensation committee of the Company’s board of directors determined that none of the 4,496,796 LTIP Units under the 2018 OPP had been earned. These LTIP Units were thus automatically forfeited effective as of July 19, 2021, without the payment of any consideration by the Company or the OP.
With respect to one-half of the LTIP Units granted under the 2021 OPP, the number of LTIP Units that become earned (if any) will be determined as of the last day of the performance period based on the Company’s achievement of absolute TSR levels as shown in the table below.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 20212022
(Unaudited)
Performance Level   Absolute TSR  Percentage of LTIP Units EarnedNumber of LTIP Units Earned
Below Threshold Less than18 %0 %0
Threshold18 %25 %1,066,110.625 
Target24 %50 %2,132,221.250 
Maximum36 %or higher100 %4,264,442.500 
If the Company’s absolute TSR is more than 18% but less than 24%, or more than 24% but less than 36%, the number of LTIP Units that become earned is determined using linear interpolation as between those tiers, respectively.
With respect to the remaining one-half of the LTIP Units granted under the 2021 OPP, the number of LTIP Units that become earned (if any) will be determined as of the last day of the performance period based on the difference (expressed in terms of basis points, whether positive or negative, as shown in the table below) between the Company’s absolute TSR on the last day of the performance period relative to the average TSR of a peer group(consistinggroup (consisting of Broadstone Net Lease, Inc., Office Properties Income Trust, RPT Realty and Spirit Realty Capital, Inc.) as of the last day of the performance period as follows:
Performance Level   Relative TSR Excess  Percentage of LTIP Units EarnedNumber of LTIP Units Earned
Below Threshold Less than-600 Basis points0 %0
Threshold-600 Basis points25 %1,066,110.625 
Target0 Basis points50 %2,132,221.250 
Maximum+600 Basis points100 %4,264,442.500 
If the relative TSR excess is more than -600 basis points but less than zero basis points, or more than zero basis points but less than +600 basis points, the number of LTIP Units that become earned is determined using linear interpolation as between those tiers, respectively.
Other Terms
In the case of a Change of Control or a termination of the Advisor without Cause (as defined in the Advisory Agreement), the number of LTIP Units that become earned will be calculated based on actual performance through the last trading day prior to the effective date of the Change of Control or termination (as applicable), with the hurdles for calculating absolute TSR prorated to reflect a performance period of less than three years but without prorating the number of LTIP Units that may become earned to reflect the shortened performance period.
In the case of a termination of the Advisor for Cause, the number of LTIP Units that become earned will be calculated based on actual performance through the last trading day prior to the effective date of the termination, with the hurdles for calculating absolute TSR and the number of LTIP Units that may become earned each prorated to reflect a performance period of less than three years.
Pursuant to the terms of the Advisor Plan, the LTIP Units will be administered by the Company’s board or a committee thereof, defined as the “Committee” in the Advisor Plan. Promptly following the performance period, the Committee will, except in certain circumstances, determine the number of LTIP Units earned (if any) based on calculations prepared by an independent consultant engaged by the Committee and as approved by the Committee in its reasonable and good faith discretion. The Committee also must approve the transfer of any LTIP Units or any Class A Units into which LTIP Units may be converted in accordance with the terms of the agreement of limited partnership of the OP. Any LTIP Units that are not earned will automatically be forfeited effective as of the end of the performance period and neither the Company nor the OP will be required to pay any future consideration in respect thereof.
Director Compensation
Under the current director compensation program, on a regular basis, each independent director receives an annual cash retainer of $60,000 and, in connection with each of the Company’s annual meetings of stockholders, a grant of $85,000 in restricted shares, vesting on the one-year anniversary of the annual meeting.
The lead independent director receives an additional annual cash retainer of $100,000, the chair of the audit committee of the Company’s board of directors receives an additional annual cash retainer of $30,000, each other member of the audit
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June 30, 20212022
(Unaudited)
committee receives an additional annual cash retainer of $15,000, the chair of each of the compensation committee and the nominating and corporate governance committee of the Company’s board of directors receives an additional annual cash retainer of $15,000, and each other member of each of the compensation committee and the nominating and corporate governance committee will receivereceives an additional annual cash retainer of $10,000.
Other Equity-Based Compensation
The Company may issue common stock in lieu of cash to pay fees earned by the Company’s directors at each director’s election. If the Company did so, there would be no restrictions on the shares issued since these payments in lieu of cash relate to fees earned for services performed. There were 0no shares of common stock issued to directors in lieu of cash compensation during the six months ended June 30, 20212022 and 2020.2021.
Note 1314 — Net LossIncome Per Share
The following table sets forth the basic and diluted net loss per share computations:
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
(In thousands, except share and per share amounts)(In thousands, except share and per share amounts)2021202020212020(In thousands, except share and per share amounts)2022202120222021
Net loss attributable to common stockholders — Basic and Diluted$(7,405)$(21,803)$(16,816)$(30,956)
Net loss attributable to common stockholdersNet loss attributable to common stockholders$(56,259)$(7,405)$(16,325)$(16,816)
Adjustments to net loss for common share equivalentsAdjustments to net loss for common share equivalents(309)(200)(617)(417)
Adjusted net loss attributable to common stockholdersAdjusted net loss attributable to common stockholders$(56,568)$(7,605)$(16,942)$(17,233)
Weighted-average shares outstanding — Basic and Diluted110,898,056 108,386,013 109,674,113 108,375,048 
Weighted-average shares outstanding — BasicWeighted-average shares outstanding — Basic132,629,704 110,898,056 130,646,294 109,674,113 
Weighted-average shares outstanding — DilutedWeighted-average shares outstanding — Diluted132,629,704 110,898,056 130,646,294 109,674,113 
Net loss per share attributable to common stockholders — Basic and DilutedNet loss per share attributable to common stockholders — Basic and Diluted$(0.07)$(0.20)$(0.15)$(0.29)Net loss per share attributable to common stockholders — Basic and Diluted$(0.43)$(0.07)$(0.13)$(0.16)
Under current authoritative guidance for determining earnings per share, all unvested share-based payment awards that contain non-forfeitable rights to distributions are considered to be participating securities and therefore are included in the computation of earnings per share under the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common shares and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. The Company’s unvested restricted shares, Class A Units and unearned LTIP Units contain rights to receive distributions considered to be non-forfeitable, except in certain limited circumstances, and therefore the Company applies the two-class method of computing earnings per share. The calculation of earnings per share above excludes the distributions to the unvested restricted shares, Class A Units and the unearned LTIP Units that were issued under the 2021 OPP from the numerator.
Diluted net lossincome per share assumes the vesting or conversion of restricted shares and Class A Unitsall Common Stock share equivalents into an equivalent number of unrestricted shares of Class A common stock,Common Stock, unless the effect is antidilutive. The Company considers unvested restricted shares, Class A Units and unvested LTIP Units to be common share equivalents. The following table shows common share equivalents on a weighted average basis that were excluded from the calculation of diluted earnings per share as their effect would have been antidilutive for the periods presented:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Unvested restricted shares (1)
579,965 403,999 501,450 402,354 
Class A Units (2)
172,921 172,921 172,921 172,921 
2018 LTIP Units (3)
— 4,496,796 — 4,496,796 
2021 LTIP Units (3)
8,528,885 — 8,528,885 — 
Total9,281,771 5,073,716 9,203,256 5,072,071 
_______
(1)Weighted-average number of shares of unvested restricted shares outstanding for the periods presented. There were 622,396 and 517,334 unvested restricted shares outstanding as of June 30, 2022 and 2021, respectively.
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June 30, 2022
(Unaudited)
(2)Weighted-average number of Class A Units outstanding for the periods presented. There were 172,921 Class A Units outstanding as of June 30, 2022 and 2021.
(3)Weighted-average number of 2018 and 2021 LTIP Units outstanding for the periods presented. There were 8,528,885 2021 LTIP Units outstanding as of June 30, 2022 and 4,496,796 2018 LTIP Units outstanding as of June 30, 2021. For more information see Note 13 — Equity-Based Compensation.
If dilutive, conditionally issuable shares relating to the 2021 OPP award and 2018 OPP award (see Note 12 — Equity-Based Compensation for additional information) would be included, as applicable, in the computation of fully diluted EPS on a weighted-average basis for the three and six months ended June 30, 20212022 and 20202021 based on shares that would be issued if the applicable balance sheet date werewas the end of the measurement period.
No LTIP Unit share equivalents were included in the computation for the three and six months ended June 30, 2022 and 2021 and 2020 because (i) no LTIP Units would have been earned based on the trading price of Class A common stock including any cumulative dividends paid (since inception of the 2021 OPP and 2018 OPP) at June 30, 2022 and 2021 and 2020.
If dilutive,or (ii) the Company recorded a net loss to common stockholders for the period, thus any shares conditionally issuable shares relatingunder the LTIP Units would be antidilutive.
Note 15 - Segment Reporting
As of June 30, 2022 and December 31, 2021, as a result of the CIM Portfolio Acquisition and the related strategic shift in the Company’s operations, the Company concluded it operates in 2 reportable segments consistent with its current management internal financial reporting purposes: single-tenant properties and multi-tenant properties. The Company will evaluate performance and make resource allocations based on its 2 business segments.
Previously, before the CIM Portfolio Acquisition (for which the purchase and sale agreement was signed on December 17, 2021), the Company concluded it was operating in 1 segment. Upon concluding that a change in its reporting segments has occurred, the Company retroactively restated the historical segment reporting presentation for the three years ended December 31, 2021 as presented in its Annual Report on Form 10-K for the year ended December 31, 2021. Below, the Company has restated the prior period to conform to its current segment reporting structure for comparative purposes. Hereafter, the Company will restate other prior quarterly periods for 2021 OPP award (see Note 12 — Equity-Based Compensationwhen they are subsequently reported in later filings for additional information) would becomparative purposes.
Net Operating Income
The Company evaluates the performance of the combined properties in each segment based on net operating income (“NOI”). NOI is defined as total revenues from tenants, less property operating and maintenance expense. NOI excludes all other items of expense and income included in the computationfinancial statements in calculating net income (loss). The Company uses NOI to assess and compare property level performance and to make decisions concerning the operation of fully diluted EPSthe properties. The Company believes that NOI is useful as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating expenses and acquisition activity on an unleveraged basis, providing perspective not immediately apparent from net income (loss).
NOI excludes certain components from net income (loss) in order to provide results that are more closely related to a weighted-average basisproperty’s results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. NOI presented by the Company may not be comparable to NOI reported by other REITs that define NOI differently. The Company believes that in order to facilitate a clear understanding of the Company’s operating results, NOI should be compared with net income (loss) prepared in accordance with GAAP and as presented in the Company’s consolidated financial statements. NOI should not be considered as an alternative to net income (loss) as an indication of the Company’s performance or to cash flows as a measure of the Company’s liquidity or ability to pay distributions.
The following tables reconcile the segment activity to consolidated net loss for the three and six months ended June 30, 2021 based on shares that would be issued if the balance sheet date were the end of the measurement period. The number of LTIP Units to be granted under the 2021 OPP was as yet undetermined as of June 30, 2021 since the Initial Share Price2022 and number of LTIP Units to be granted under the 2021 OPP were not determinable until July 20, 2021. The number of LTIP Units to be granted under the 2021 OPP was not estimated since conditionally issuable shares relating to the 2021 OPP award are excluded from EPS because the Company is operating at a loss and inclusion would be anti-dilutive.2021:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 20212022
(Unaudited)
Three Months Ended June 30, 2022Three Months Ended June 30, 2021
(In thousands)Single-Tenant PropertiesMulti-Tenant PropertiesConsolidatedSingle-Tenant PropertiesMulti-Tenant PropertiesConsolidated
Revenue from tenants$55,886 $61,043 $116,929 $51,653 $29,924 $81,577 
Property operating expense4,049 23,471 27,520 2,522 10,807 13,329 
NOI$51,837 $37,572 89,409 $49,131 $19,117 68,248 
Asset management fees to related party(8,296)(7,922)
Impairment of real estate investments(58,954)(91)
Acquisition, transaction and other costs(206)(136)
Equity-based compensation(3,523)(5,283)
General and administrative(8,390)(3,540)
Depreciation and amortization(46,573)(32,428)
Gain on sale of real estate investments13,438 11 
Interest expense(28,329)(20,361)
Other income944 20 
Net loss attributable to non-controlling interests58 2 
Allocation for preferred stock(5,837)(5,925)
Net loss attributable to common stockholders$(56,259)$(7,405)

Six Months Ended June 30, 2022Six Months Ended June 30, 2021
(In thousands)Single-Tenant PropertiesMulti-Tenant PropertiesConsolidatedSingle-Tenant PropertiesMulti-Tenant PropertiesConsolidated
Revenue from tenants$109,169 $102,703 $211,872 $102,309 $58,455 $160,764 
Property operating expense7,974 38,685 46,659 5,115 21,653 26,768 
NOI$101,195 $64,018 165,213 $97,194 $36,802 133,996 
Asset management fees to related party(16,122)(15,243)
Impairment of real estate investments(64,896)(91)
Acquisition, transaction and other costs(485)(178)
Equity-based compensation(7,021)(9,630)
General and administrative(15,223)(9,989)
Depreciation and amortization(84,261)(64,747)
Gain on sale of real estate investments67,007 297 
Interest expense(52,069)(39,695)
Other income962 44 
Gain on non-designated derivatives2,250 — 
Net (income) loss attributable to non-controlling interests(6)8 
Allocation for preferred stock(11,674)(11,588)
Net loss attributable to common stockholders$(16,325)$(16,816)




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
The Company hadfollowing table reconciles the segment activity to consolidated total assets as of the periods presented:

(In thousands)June 30, 2022December 31, 2021
ASSETS
Investments in real estate, net:
Single-tenant properties$1,942,458 $1,973,743 
Multi-tenant properties2,428,572 1,233,030 
Total investments in real estate, net4,371,030 3,206,773 
Cash and cash equivalents69,431 214,853 
Restricted cash17,619 21,996 
Deposits for real estate investments16,250 41,928 
Deferred costs, net19,565 25,587 
Straight-line rent receivable65,307 70,789 
Operating lease right-of-use assets17,946 18,194 
Prepaid expenses and other assets33,666 26,877 
Assets held for sale80,779 187,213 
Total assets$4,691,593 $3,814,210 

The following restricted shares, Class A Units, and LTIP Units on a weighted-average basis that were excluded from the calculation of diluted net loss per share as their effect would have been antidilutivetable reconciles capital expenditures by reportable business segment, excluding corporate non-real estate expenditures, for the periods presented:
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Unvested restricted shares (1)
403,999 131,331 402,354 121,252 
Class A Units (2)
172,921 172,921 172,921 172,921 
LTIP Units (3)
4,496,796 4,496,796 4,496,796 4,496,796 
Total5,073,716 4,801,048 5,072,071 4,790,969 
_______
(1)Weighted-average number of shares of unvested restricted shares outstanding for the periods presented. There were 517,334 and 127,032 unvested restricted shares outstanding as of June 30, 2021 and 2020, respectively.
(2)Weighted-average number of Class A Units outstanding for the periods presented. There were 172,921 Class A Units outstanding as of June 30, 2021 and 2020.
(3)Weighted-average number of LTIP Units outstanding for the periods presented. There were 4,496,796 LTIP Units outstanding as of June 30, 2021 and 2020. Does not include 8,528,885 LTIP Units issued to the Advisor pursuant to the 2021 OPP on July 21, 2021. For more information see Note 12— Multi-Year Outperformance Agreements— 2021 LTIP Unit Award. Prior to the issuance of LTIP Units pursuant to the 2021 OPP, the compensation committee of the board of directors of the Company determined that none of the 4,496,796 of the LTIP Units subject to the 2018 OPP had been earned.
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2022202120222021
Single-tenant properties$467 $14 $675 $1,881 
Multi-tenant properties1,295 4,378 4,544 4,930 
Total capital expenditures$1,762 $4,392 $5,219 $6,811 
Note 1416 — Subsequent Events
The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there were not any material events that have occurred that would require adjustments to, or disclosures in, the consolidated financial statements except those stated below:
Acquisitions Subsequent to June 30, 2021CIM Portfolio Acquisition
Subsequent to June 30, 2021,On July 7, 2022, the Company acquired 13 properties atclosed on the 1 remaining property of the CIM Portfolio Acquisition for an aggregate contract purchase price of $56.5$71.1 million. These acquisitions wereThe acquisition was funded with net proceeds from our equity ATM programs.
2018 LTIP Award
Upon the endassumption of $39.0 million of fixed rate mortgage debt, the application of the measurement period on July 19, 2021, the compensation committeeremaining $16.2 million of the boardCompany’s $40 million deposit, and the remainder with cash on hand (including $6.8 million of directorsprevious borrowings under the Credit Facility). The assumed mortgage bears stated interest of 4.05% and matures in May 2024. The contract purchase price does not include contingent consideration relating to leasing activity at the property subsequent to the closing date of the acquired properties. The Company determined that nonepaid $16.1 million of the 4,496,796additional contingent consideration in July 2022 ($10.8 million of the LTIP Units subject to the 2018 LTIP Award Agreement had been earned under either the absolute or relative thresholds. These LTIP Units were thus automatically forfeited effectivewhich was accrued as of July 19, 2021, without the payment of any consideration by the Company.On that date, the Company reclassified amounts reflected in non-controlling interest for these LTIP Units to additional paid in capital on its balance sheet and statement of equity.
2021 LTIP Award
On July 21, 2021, the Company and the Advisor entered into the 2021 OPP. Based on a maximum award value of $72.0 million and the Initial Share Price of $8.4419, which was determinable on July 20, 2021, the Advisor was granted a total of 8,528,885 LTIP Units pursuant to the 2021 OPP. On July 20, 2021, the award of LTIP Units under the 2021 OPP was reclassified from a liability award to an equity award. The fair value of the award as of July 20, 2021 was determined to be $40.8 million.
2020 Bonus Award
The Company received its $1.4 million receivable from the AdvisorJune 30, 2022) relating to the overpaymentfinal property and previously acquired properties.
Dispositions Subsequent to June 30, 2022
Subsequent to June 30, 2022, the Company disposed of 2020 Bonus Awards in August, 2021.3 properties for an aggregate contract sales price of $3.9 million. These properties were classified as assets held for sale on the Company’s consolidated balance sheets as of June 30, 2022.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of American Finance Trust,The Necessity Retail REIT, Inc. and the notes thereto. As used herein, the terms “Company,” “we,” “our” and “us” refer to American Finance Trust,The Necessity Retail REIT, Inc., a Maryland corporation, including, as required by context, American FinanceThe Necessity Retail REIT Operating Partnership, L.P., a Delaware limited partnership, which we refer to as the “OP,” and its subsidiaries. We are externally managed by American FinanceThe Necessity Retail Advisors, LLC (our “Advisor”), a Delaware limited liability company.
Forward-Looking Statements
Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements, including statements regarding the intent, belief or current expectations of us, our Advisor and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.
These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. Some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements are set forth under “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2020.2021 as well as under Item 1A. Risk Factors below.
Overview
We are an externally managed real estate investment trust for U.S. federal income tax purposes (“REIT”) focusing on acquiring and managing a diversified portfolio of primarily service-oriented and traditional retail and distribution-related commercial real estate properties located primarily in the United States. Our assets consist primarily of freestanding single-tenant properties that are net leased to “investment grade” and other creditworthy tenants and a portfolio of multi-tenant retail properties consisting primarily of power centers and lifestyle centers. We intend to focushistorically focused our future acquisitions primarily on net leased, single-tenant service retail properties, defined as properties leased to tenants in the retail banking, restaurant, grocery, pharmacy, gas, convenience, fitness, and auto services sectors.
On December 17, 2021, we signed a purchase and sale agreement to acquire 79 multi-tenant retail centers and two single-tenant properties for $1.3 billion (the “CIM Portfolio Acquisition”). The CIM Portfolio Acquisition was accounted for as an asset acquisition. The acquisition closed in multiple transactions in 2022 and the consideration included cash (including cash sourced from borrowings under the Credit Facility, as defined below), assumption of existing mortgage debt securing certain of the properties and the issuance of shares of our Class A common stock.
We closed on the properties of the CIM Portfolio Acquisition in multiple stages as follows:
•In the three months ended March 31, 2022, we closed on the acquisition of 56 properties of the CIM Portfolio Acquisition for an aggregate contract purchase price of $801.1 million which was funded by $728.4 million in cash, including $378.0 million of borrowings under our Credit Facility, the assumption of $19.3 million of existing mortgage debt and the issuance of $50.0 million in value at issuance ($53.4 million of value subject to repurchase) of the Company’s Class A common stock to certain subsidiaries of the CIM Real Estate Finance Trust, Inc. (the “Sellers”), at its closing value on the respective closing dates on which the common stock was issued.
•In the three months ended June 30, 2022, we closed on 24 additional properties from the CIM Portfolio for an aggregate contract purchase price of $452.8 million in three closings. The acquisitions were funded with the assumption of $294.5 million of fixed-rate mortgage debt, $128.2 million of $135.0 million of borrowings under the Credit Facility, the application of $23.8 million of the Company’s $40.0 million deposit and the remainder with cash on hand. The assumed mortgages bear stated interest rates between 3.65% and 4.62% and mature between April 2023 and September 2033.
•We closed on the one remaining property from the CIM Portfolio Acquisition on July 7, 2022 for a contract purchase price of $71.1 million. The acquisition was funded with the assumption of $39.0 million of fixed-rate mortgage debt, the application of the remaining $16.2 million of our $40.0 million deposit, and the remainder with cash on hand (including $6.8 million of previous borrowings under the Credit Facility). The assumed mortgage bears a stated interest rate of 4.05% and matures in May 2024 (see Note 16 — Subsequent Events).
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•The aggregate contract purchase prices above do not include contingent consideration relating to leasing activity at each respective acquired property for a six-month period subsequent to the respective closing dates of each acquired property. We paid $10.2 million and $13.3 million for such contingent consideration in the three months ended March 31, 2022 and three months ended June 30, 2022, respectively. As of June 30, 2021,2022, we accrued for $10.8 million of contingent consideration based on leases executed as of June 30, 2022. We paid $16.1 million in July 2022, which includes the accrual $10.8 million, and additional amounts may be due for leases executed through January 2023 (six months following the acquisition date of the final property of the CIM Portfolio Acquisition).
For additional information on the closing of the CIM Portfolio Acquisition, including funding details, see “Liquidity and Capital Resources” herein and see Note 3 — Real Estate Investments to our consolidated financial statements included in this Quarterly Report on Form 10-Q for more information.
In addition, we acquired eight additional single-tenant properties in the three months ended June 30, 2022 for an aggregate contract purchase price of $17.5 million. We acquired 10 additional single-tenant properties and one additional multi-tenant retail property in the six months ended June 30, 2022 for an aggregate contract purchase price of $58.4 million.
As of June 30, 2022, we owned 9391,056 properties, comprised of 19.928.9 million rentable square feet, which were 94.9%90.8% leased, including 906944 single-tenant net leasednet-leased commercial properties (864(906 of which are retail properties) and 33112 multi-tenant retail properties. Based on annualized rental income on a straight-line basis as of June 30, 2021,2022, the total single-tenant properties comprised 71%48% of our total portfolio and were 59%66% leased to service retail tenants, and the total multi-tenant properties comprised 29%52% of our portfolio, and were 50%44% leased to experiential retail tenants, defined as tenants in the restaurant, discount retail, entertainment, salon/beauty and grocery store sectors, among others. On July 1, 2021, our lease with United Healthcare Services, Inc. (“United Healthcare”) expired and was not renewed, representing 400,000 square feet and $5.3 million of annualized straight-line rent. Giving effect to this lease expiration, total portfolio occupancy would have been 92.9%. Substantially all of our business is conducted through the OP and its wholly ownedwholly-owned subsidiaries. The Advisor manages our day-to-day business with the assistance of our property manager, American FinanceNecessity Retail Properties, LLC (the “Property Manager”). The Advisor and the Property Manager are under common control with AR Global Investments, LLC (“AR Global”) and these related parties receive compensation and fees for providing services to us. We also reimburse these entities for certain expenses they incur in providing these services to us.
For our purposes, “investment grade” includes both tenants (or lease guarantors) with actual investment grade ratings or tenants with “implied” investment grade ratings. Implied investment grade may include the actual rating of a tenant’s parent or the guarantor of the parent (regardless of whether the parent has guaranteed the tenant’s obligation under the lease) or tenants that are identified as investment grade by using a proprietary Moody’s analytical tool which generates an implied rating by measuring an entity’s probability of default. Based on annualized rental income on a straight-line basis as of June 30, 2021,2022, approximately 60.9%52.2% of the tenants in our single-tenant portfolio were considered “investment grade” consisting of 49.6%39.6% with actual investment grade ratings and 11.3%12.6% with implied investment grade ratings, and approximately 31.2%41.1% of the anchor tenants in our multi-tenant portfolio were considered “investment grade” consisting of 20.5%30.7% with actual investment grade ratings and 10.7%10.4% with implied investment grade ratings. Giving effect to the United Healthcare lease expiration on July 1, 2021, single-tenant portfolio tenants would have been 47% actual investment grade rated and 11% implied investment grade rated, and top 20 tenants would have been 58% actual investment grade rated and 9% implied investment grade rated.
Management Update on the Impacts of the COVID-19 Pandemic
The COVID-19 global pandemic has created several risks and uncertainties that may impact our business, including our future results of operations and our liquidity. The ultimate impact on our results of operations, our liquidity and the ability of our tenants to continue to pay us rent will depend on numerous factors including the overall length and severity of the
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COVID-19 pandemic. For a further discussion of the risks and uncertainties associated with the impact of the COVID-19 pandemic on us, see Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
We have taken several steps to mitigate the impact of the pandemic on our business. We have been in direct contact with our tenants since the crisis began, cultivating open dialogue and deepening the fundamental relationships that we have carefully developed through prior transactions and historic operations. Based on this approach and the overall financial strength and creditworthiness of our tenants, we believe that we have had positive results in our cash rent collections during this pandemic. We have collected nearly 100%99% of the original cash rent due for the second quarter 2021of 2022 across our entire portfolio, including nearly 100% from our top 20 tenants (based on the total of second quarter original2022 cash rent)rent due across our portfolio). This was an improvement fromconsistent with the fourthquarterly collections during the first quarter of 20202021 and the year ended December 31, 2021 and reflects the expiration of rent deferral agreements where tenants have resumed paying full rent as well as collections of deferred rent paid during the period.
“Original cash rent” refers to contractual rents on a cash basis due from tenants as stipulated in their originally executed lease agreement at inception or as amended, prior to any rent deferral agreement. We calculate “original cash rent collections” by comparing the total amount of rent collected during the period to the original cash rent due. Total rent collected during the period includes both original cash rent due and payments made by tenants pursuant to rent deferral agreements. Eliminating the impact of deferred rent paid, we collected 99%98% of original cash rent collections for the second quarter of 2021.2022.
A deferral agreement is an executed or approved amendment to an existing lease to defer a certain portion of cash rent due to a future period. During the year ended December 31, 2020,2021, we granted rent deferrals for an aggregate of $7.0$0.4 million or
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approximately 3%1% of original cash rent due for the year. Nearly all amounts deferred are scheduled for repayment during various times through the end of 2022. During the three and six months ended June 30, 20212022, we deferred an insignificant amountdid not defer any additional rents. As of rent. All amounts deferred are or were scheduled for repayment during 2020, 2021 or 2022. During the second quarter of 2021,July 31, 2022, we have collected approximately 16%97% of the total $7.0$7.4 million rents we previously deferred that were due during the second quarter of 2021, and we collected 31% of the total $7.0 million during the six months ended June 30, 2021. deferred.
During the first and second quarterquarters of 2021,2022, we granteddid not grant any rent deferrals with respect to less than 1% of original cash rent due during the period, and we granted rent abatements with respect to less than 1% of original cash rent due during the period.abatements. The most common arrangements granted provide deferral of some or all of the rent due for the period in which the arrangement was granted with such amounts to be paid in 2021 or early 2022. The terms of these lease amendments providing for rent deferrals and abatements differ by tenant in terms of length and amount of the deferral or abatement, although the deferrals and abatements are generally coupled with an extension of the lease.
The cash rent collections for the second quarter of 2021 uses2022 includes cash receipts as ofcollected through July 31, 2021 and therefore is inclusive of cash2022. Cash receipts received in July for rent due in the second quarter of 2021. Such cash receipts are not, however, included in cash and cash equivalents on our June 30, 20212022 consolidated balance sheet. The below cash rent status may not be indicative of any future period and remains subject to changes based on ongoing collection efforts and negotiation of additional agreements. Moreover, there is no assurance that we will be able to collect the cash rent that is due in future months including the deferred 2020 rent amounts due during 2021 or 2022 under deferral agreements we have entered into with our tenants.previously deferred. The impact of the COVID-19 pandemic on our tenants and thus our ability to collect rents in future periods cannot be determined at present.
The table below shows the percentage of original cash rent for our single-tenant portfolio, our multi-tenant portfolio, and our total portfolio we collected in each fiscal quarter of 2020, and 2021.
Period
Single-Tenant (1)
Multi-Tenant (2)
Total Portfolio (3)
First Quarter 202098 %100 %99 %
Second Quarter 202096 %72 %88 %
Third Quarter 202098 %85 %94 %
Fourth Quarter 2020100 %91 %97 %
First Quarter 2021100 %99 %100 %
Second Quarter 2021100 %100 %100 %
____________
(1) Eliminating the impact of deferred rent paid, single-tenant collections were 99% of original cash rent due for the first quarter of 2021 and 99% of original cash rent due for the second quarter of 2021. Deferred rent received was either not present or less than 1% of rent collected before the first quarter of 2021.2022:
(2) Eliminating the impact of deferred rent paid, multi-tenant collections were 95% of original cash rent due for the first quarter of 2021 and 97% of original cash rent due for the second quarter of 2021 . Deferred rent received was either not present or less than 1% of rent collected before the first quarter of 2021.
(3) Eliminating the impact of deferred rent paid, total portfolio collections were 98% of original cash rent due for the first quarter of 2021 and 99% of original cash rent due for the second quarter of 2021. Deferred rent received was either not present or less than 1% of rent collected before the first quarter of 2021.
The total amounts of abated rent, for abatement agreements entered into through June 30, 2021, was $0.1 million and $0.3 million for the three and six months ended June 30, 2021, respectively.
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Total CollectionsWithout Deferred Rents
PeriodSingle-TenantMulti-TenantTotal PortfolioSingle-TenantMulti-TenantTotal Portfolio
First Quarter 202098 %100 %99 %98 %100 %99 %
Second Quarter 202096 %72 %88 %96 %72 %88 %
Third Quarter 202098 %85 %94 %98 %85 %94 %
Fourth Quarter 2020100 %91 %97 %100 %91 %97 %
First Quarter 2021100 %99 %100 %99 %95 %98 %
Second Quarter 2021100 %100 %100 %99 %97 %99 %
Third Quarter 202198 %100 %99 %98 %96 %97 %
Fourth Quarter 202199 %100 %100 %99 %97 %98 %
First Quarter 202298 %100 %99 %97 %98 %98 %
Second Quarter 202298 %99 %99 %98 %97 %98 %
Significant Accounting Estimates and Critical Accounting Policies
For a discussion about our significant accounting estimates and critical accounting policies, see the “Significant Accounting Estimates and Critical Accounting Policies” section of our 20202021 Annual Report on Form 10-K. Except for those required by new accounting pronouncements discussed below, there have been no material changes from these significant accounting estimates and critical accounting policies.
Recently Issued Accounting Pronouncements
Please see Note 2 — Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements to our consolidated financial statements in this Quarterly Report on Form 10-Q for further discussion.
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Properties
The following table represents certain additional information about the properties we own at June 30, 2021:2022:
PortfolioAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
Dollar General IApr 2013; May 20132186.8100.0%
Walgreens IJul 201311016.3100.0%
Dollar General IIJul 20132186.9100.0%
AutoZone IJul 2013186.1100.0%
Dollar General IIIJul 20135466.9100.0%
BSFS IJul 2013192.6100.0%
Dollar General IVJul 20132184.7100.0%
Tractor Supply IAug 20131196.4100.0%
Dollar General VAug 20131126.6100.0%
Mattress Firm IAug 2013; Nov 2013; Feb 2014; Mar 2014; Apr 20145245.5100.0%
Family Dollar IAug 201318—100.0%
Lowe's IAug 201356718.0100.0%
O'Reilly Auto Parts IAug 20131119.0100.0%
Food Lion IAug 20131458.3100.0%
Family Dollar IIAug 2013182.0100.0%
Walgreens IIAug 201311411.8100.0%
Dollar General VIAug 2013194.7100.0%
Dollar General VIIAug 2013196.8100.0%
Family Dollar IIIAug 2013181.3100.0%
Chili's IAug 20132134.4100.0%
CVS IAug 20131104.6100.0%
Joe's Crab Shack IAug 2013185.8100.0%
Dollar General VIIISep 2013197.1100.0%
Tire Kingdom ISep 2013173.8100.0%
AutoZone IISep 2013171.9100.0%
Family Dollar IVSep 2013182.0100.0%
Fresenius ISep 2013164.0100.0%
Dollar General IXSep 2013193.8100.0%
Advance Auto ISep 20131112.0100.0%
Walgreens IIISep 20131154.8100.0%
Walgreens IVSep 20131143.3100.0%
CVS IISep 201311615.6100.0%
Arby's ISep 2013137.0100.0%
Dollar General XSep 2013196.8100.0%
AmeriCold ISep 201391,4076.2100.0%
Home Depot ISep 201321,3155.6100.0%
New Breed Logistics ISep 201313904.8100.0%
Truist Bank ISep 201319966.9100.0%
National Tire & Battery ISep 20131112.4100.0%
Circle K ISep 201319557.3100.0%
Walgreens VSep 20131146.2100.0%
Walgreens VISep 20131157.8100.0%
FedEx Ground ISep 20131221.9100.0%
Walgreens VIISep 201381138.0100.0%
O'Charley's ISep 20132013510.3100.0%
Krystal ISep 20135118.2100.0%
1st Constitution Bancorp ISep 2013132.6100.0%
American Tire Distributors ISep 201311252.6100.0%
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PortfolioAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
Tractor Supply IIOct 20131232.3100.0%
United Healthcare I (4)
Oct 20131400—100.0%
National Tire & Battery IIOct 20131710.9100.0%
Tractor Supply IIIOct 20131196.8100.0%
Verizon WirelessOct 2013148.3100.0%
Dollar General XIOct 2013195.8100.0%
Talecris Plasma Resources IOct 20131221.8100.0%
Amazon IOct 20131792.1100.0%
Fresenius IIOct 20132166.1100.0%
Dollar General XIINov 2013; Jan 20142187.5100.0%
Dollar General XIIINov 2013194.8100.0%
Advance Auto IINov 20132141.9100.0%
FedEx Ground IINov 20131492.1100.0%
Burger King INov 20134116916.3100.0%
Dollar General XIVNov 20133276.9100.0%
Dollar General XVNov 2013197.3100.0%
FedEx Ground IIINov 20131242.2100.0%
Dollar General XVINov 2013194.4100.0%
Family Dollar VNov 2013181.8100.0%
CVS IIIDec 20131112.6100.0%
Mattress Firm IIIDec 2013157.0100.0%
Arby's IIDec 2013146.8100.0%
Family Dollar VIDec 20132172.6100.0%
SAAB Sensis IDec 20131913.8100.0%
Citizens Bank IDec 20139312.5100.0%
Truist Bank IIJan 201415797.6100.0%
Mattress Firm IVJan 2014153.2100.0%
FedEx Ground IVJan 20141592.0100.0%
Mattress Firm VJan 2014162.3100.0%
Family Dollar VIIFeb 2014183.0100.0%
Aaron's IFeb 2014182.2100.0%
AutoZone IIIFeb 2014171.8100.0%
C&S Wholesale Grocer IFeb 201413601.0100.0%
Advance Auto IIIFeb 2014163.2100.0%
Family Dollar VIIIMar 20143252.1100.0%
Dollar General XVIIMar 2014; May 20143276.8100.0%
Truist Bank III [2]
Mar 2014703478.598.7%
Truist Bank IVMar 20146338.5100.0%
First Horizon BankMar 20148407.8100.0%
Draper Aden AssociatesMar 20141789.5100.0%
Church of Jesus ChristMar 2014132.3100.0%
Dollar General XVIIIMar 2014196.8100.0%
Sanofi US IMar 2014173711.5100.0%
Family Dollar IXApr 2014182.8100.0%
Stop & Shop IMay 201474925.5100.0%
Bi-Lo IMay 20141564.5100.0%
Dollar General XIXMay 20141127.2100.0%
Dollar General XXMay 20145495.8100.0%
Dollar General XXIMay 2014197.2100.0%
Dollar General XXIIMay 20141115.8100.0%
FedEx Ground VFeb 20161464.1100.0%
FedEx Ground VIFeb 201611214.2100.0%
PortfolioSegmentAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
Dollar General ISingle-TenantApr 2013; May 20132185.8100.0%
Walgreens ISingle-TenantJul 201311015.3100.0%
Dollar General IISingle-TenantJul 20132185.9100.0%
AutoZone ISingle-TenantJul 2013185.1100.0%
Dollar General IIISingle-TenantJul 20135465.9100.0%
BSFS ISingle-TenantJul 2013191.6100.0%
Dollar General IVSingle-TenantJul 20132186.6100.0%
Tractor Supply ISingle-TenantAug 20131195.4100.0%
Dollar General VSingle-TenantAug 20131125.6100.0%
Mattress Firm ISingle-TenantAug 2013; Nov 2013; Feb 2014; Mar 2014; Apr 20145244.5100.0%
Family Dollar ISingle-TenantAug 201318—100.0%
Lowe's ISingle-TenantAug 201356717.0100.0%
O'Reilly Auto Parts ISingle-TenantAug 20131118.0100.0%
Food Lion ISingle-TenantAug 20131457.3100.0%
Family Dollar IISingle-TenantAug 2013181.0100.0%
Walgreens IISingle-TenantAug 201311410.8100.0%
Dollar General VISingle-TenantAug 2013193.7100.0%
Dollar General VIISingle-TenantAug 2013195.8100.0%
Family Dollar IIISingle-TenantAug 2013180.3100.0%
Chili's ISingle-TenantAug 20132133.4100.0%
CVS ISingle-TenantAug 20131103.6100.0%
Joe's Crab Shack ISingle-TenantAug 2013184.8100.0%
Dollar General VIIISingle-TenantSep 2013196.1100.0%
Tire Kingdom ISingle-TenantSep 2013172.8100.0%
AutoZone IISingle-TenantSep 2013170.9100.0%
Family Dollar IVSingle-TenantSep 2013181.0100.0%
Fresenius ISingle-TenantSep 2013163.0100.0%
Dollar General IXSingle-TenantSep 2013192.8100.0%
Advance Auto ISingle-TenantSep 20131119.1100.0%
Walgreens IIISingle-TenantSep 20131153.8100.0%
Walgreens IVSingle-TenantSep 20131142.3100.0%
CVS IISingle-TenantSep 201311614.6100.0%
Arby's ISingle-TenantSep 2013136.0100.0%
Dollar General XSingle-TenantSep 2013195.8100.0%
AmeriCold ISingle-TenantSep 201391,4075.2100.0%
Home Depot ISingle-TenantSep 201321,3154.6100.0%
New Breed Logistics ISingle-TenantSep 201313903.8100.0%
Truist Bank I (2)
Single-TenantSep 201317905.993.4%
National Tire & Battery ISingle-TenantSep 20131111.4100.0%
Circle K ISingle-TenantSep 201319556.3100.0%
Walgreens VSingle-TenantSep 20131145.2100.0%
Walgreens VISingle-TenantSep 20131156.8100.0%
FedEx Ground ISingle-TenantSep 20131220.9100.0%
Walgreens VIISingle-TenantSep 201381137.0100.0%
O'Charley's ISingle-TenantSep 2013201359.3100.0%
Krystal ISingle-TenantSep 20135117.2100.0%
1st Constitution Bancorp ISingle-TenantSep 2013131.6100.0%
Tractor Supply IISingle-TenantOct 20131231.3100.0%
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PortfolioAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
FedEx Ground VIIFeb 20161424.3100.0%
FedEx Ground VIIIFeb 20161794.3100.0%
Liberty Crossing (3)
Feb 201711063.682.7%
San Pedro Crossing (3)
Feb 201712074.087.8%
Tiffany Springs MarketCenter (3)
Feb 201712654.485.9%
The Streets of West Chester (3)
Feb 201712379.385.3%
Prairie Towne Center (3)
Feb 201712648.880.9%
Southway Shopping Center(3)
Feb 201711824.587.5%
Stirling Slidell Centre (3)
Feb 201711402.145.8%
Northwoods Marketplace (3)
Feb 201712364.098.3%
Centennial Plaza (3)
Feb 201712342.399.5%
Northlake Commons (3)
Feb 201711093.987.6%
Shops at Shelby Crossing (3)
Feb 201712363.080.3%
Shoppes of West Melbourne (3)
Feb 201711443.182.1%
The Centrum (3)
Feb 201712749.677.7%
Shoppes at Wyomissing (3)
Feb 201711033.064.0%
Southroads Shopping Center (3)
Feb 201714094.086.8%
Parkside Shopping Center (3)
Feb 201711833.780.5%
Colonial Landing (3)
Feb 201712644.793.6%
The Shops at West End (3)
Feb 201713826.669.9%
Township Marketplace (3)
Feb 201712993.085.5%
Cross Pointe Centre (3)
Feb 201712268.1100.0%
Towne Centre Plaza (3)
Feb 20171941.8100.0%
Village at Quail Springs (3)
Feb 201711005.9100.0%
Pine Ridge Plaza (3)
Feb 201712392.995.8%
Bison Hollow (3)
Feb 201711353.4100.0%
Jefferson Commons (3)
Feb 201712065.897.9%
Northpark Center (3)
Feb 201713184.895.0%
Anderson Station (3)
Feb 201712444.1100.0%
Patton Creek (3)
Feb 201714913.573.3%
North Lakeland Plaza (3)
Feb 201711714.198.0%
Riverbend Marketplace (3)
Feb 201711433.485.0%
Montecito Crossing (3)
Feb 201711804.586.2%
Best on the Boulevard (3)
Feb 201712053.390.8%
Shops at RiverGate South (3)
Feb 201711414.693.2%
Dollar General XXIIIMar 2017; May 2017; Jun 20178718.1100.0%
Jo-Ann Fabrics IApr 20171183.6100.0%
Bob Evans IApr 20172311715.895.2%
FedEx Ground IXMay 20171544.9100.0%
Chili's IIMay 2017166.3100.0%
Sonic Drive In IJun 20172311.0100.0%
Bridgestone HOSEPower IJun 20172418.1100.0%
Bridgestone HOSEPower IIJul 20171258.3100.0%
FedEx Ground XJul 201711426.0100.0%
Chili's IIIAug 2017166.3100.0%
FedEx Ground XISep 20171296.0100.0%
Hardee's ISep 201727——%
Tractor Supply IVOct 20172515.4100.0%
Circle K IINov 201762016.0100.0%
Sonic Drive In IINov 2017203116.4100.0%
Bridgestone HOSEPower IIIDec 20171219.0100.0%
PortfolioSegmentAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
United Healthcare I (5)
Single-TenantOct 20131400——%
National Tire & Battery IISingle-TenantOct 2013179.9100.0%
Tractor Supply IIISingle-TenantOct 20131195.8100.0%
Verizon WirelessSingle-TenantOct 2013147.3100.0%
Dollar General XISingle-TenantOct 2013194.8100.0%
Talecris Plasma Resources ISingle-TenantOct 20131220.8100.0%
Amazon ISingle-TenantOct 20131791.1100.0%
Fresenius IISingle-TenantOct 20132165.1100.0%
Dollar General XIISingle-TenantNov 2013; Jan 20142186.5100.0%
Dollar General XIIISingle-TenantNov 2013199.4100.0%
Advance Auto IISingle-TenantNov 20132149.1100.0%
FedEx Ground IISingle-TenantNov 20131491.1100.0%
Burger King ISingle-TenantNov 20134116915.3100.0%
Dollar General XIVSingle-TenantNov 20133275.9100.0%
Dollar General XVSingle-TenantNov 2013196.3100.0%
FedEx Ground IIISingle-TenantNov 20131241.2100.0%
Dollar General XVISingle-TenantNov 2013193.4100.0%
Family Dollar VSingle-TenantNov 2013180.8100.0%
CVS IIISingle-TenantDec 20131111.6100.0%
Mattress Firm IIISingle-TenantDec 2013156.0100.0%
Arby's IISingle-TenantDec 2013145.8100.0%
Family Dollar VISingle-TenantDec 20132171.6100.0%
SAAB Sensis ISingle-TenantDec 20131912.8100.0%
Citizens Bank ISingle-TenantDec 20139318.9100.0%
Truist Bank II (2)
Single-TenantJan 201413746.766.4%
Mattress Firm IVSingle-TenantJan 2014152.2100.0%
FedEx Ground IVSingle-TenantJan 20141596.0100.0%
Mattress Firm VSingle-TenantJan 2014161.3100.0%
Family Dollar VIISingle-TenantFeb 2014182.0100.0%
Aaron's ISingle-TenantFeb 2014181.2100.0%
AutoZone IIISingle-TenantFeb 2014170.8100.0%
C&S Wholesale Grocer I (6)
Single-TenantFeb 20141360—100.0%
Advance Auto IIISingle-TenantFeb 2014169.5100.0%
Family Dollar VIIISingle-TenantMar 20143251.1100.0%
Dollar General XVIISingle-TenantMar 2014; May 20143275.8100.0%
Truist Bank III (2)
Single-TenantMar 2014602947.389.7%
Truist Bank IVSingle-TenantMar 20146337.5100.0%
First Horizon BankSingle-TenantMar 20148406.8100.0%
Draper Aden AssociatesSingle-TenantMar 20141788.5100.0%
Church of Jesus ChristSingle-TenantMar 2014131.3100.0%
Dollar General XVIIISingle-TenantMar 2014195.8100.0%
Family Dollar IXSingle-TenantApr 2014181.8100.0%
Stop & Shop ISingle-TenantMay 201474924.5100.0%
Bi-Lo ISingle-TenantMay 2014156——%
Dollar General XIXSingle-TenantMay 20141126.2100.0%
Dollar General XXSingle-TenantMay 20145494.8100.0%
Dollar General XXISingle-TenantMay 2014196.2100.0%
Dollar General XXIISingle-TenantMay 20141114.8100.0%
FedEx Ground VSingle-TenantFeb 20161463.1100.0%
FedEx Ground VISingle-TenantFeb 201611213.2100.0%
FedEx Ground VIISingle-TenantFeb 20161423.3100.0%
FedEx Ground VIIISingle-TenantFeb 20161793.3100.0%
49
Table of Contents
PortfolioAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
Sonny's BBQ IJan 201831912.6100.0%
Mountain Express IJan 201893016.5100.0%
Kum & Go IFeb 2018156.9100.0%
DaVita IFeb 20182134.7100.0%
Imperial IMar 201892219.4100.0%
Mountain Express IIJun 2018155916.8100.0%
Dialysis IJul 20187656.9100.0%
Children of America IAug 201823312.279.7%
Burger King IIAug 20181312.2100.0%
Imperial IIAug 201891819.4100.0%
Bob Evans IIAug 20182211215.8100.0%
Mountain Express IIISep 2018144717.1100.0%
Taco John'sSep 201871512.3100.0%
HIFZA TradingOct 20181419.5100.0%
DaVita IIOct 20181106.2100.0%
Pizza Hut IOct 201892312.3100.0%
Little Caesars IDec 2018111917.5100.0%
Caliber Collision IDec 201834810.8100.0%
Tractor Supply VDec 2018; Mar 201959710.2100.0%
Fresenius IIIJan 20196445.9100.0%
Pizza Hut IIJan 2019319017.6100.0%
Mountain Express IVFeb 201982817.6100.0%
Mountain Express VFeb 2019; Mar 2019; Apr 2019189617.7100.0%
Fresenius IVMar 20191910.4100.0%
Mountain Express VIJun 20191317.6100.0%
IMTAAMay 2019; Jan 2020124018.0100.0%
Pizza Hut IIIMay 2019; Jun 2019134717.9100.0%
Fresenius VJun 201921910.9100.0%
Fresenius VIJun 20191105.5100.0%
Fresenius VIIJun 20193599.250.1%
Caliber Collision IIAug 20191197.8100.0%
Dollar General XXVSep 20195449.5100.0%
Dollar General XXIVSep 2019; Oct 201998213.1100.0%
Mister Carwash ISep 201931318.3100.0%
Checkers ISep 20191118.2100.0%
DaVita IIISep 2019; Mar 20202208.1100.0%
Dialysis IISep 2019504267.3100.0%
Mister Carwash IINov 20192818.4100.0%
Advance Auto IVDec 2019; Jan 202014968.0100.0%
Advance Auto VDec 201911737.5100.0%
Dollar General XXVIDec 20191211410.9100.0%
Pizza Hut IVDec 2019; Mar 2020165018.5100.0%
American Car Center IMar 20201617818.8100.0%
BJ's Wholesale ClubMar 202011109.3100.0%
Mammoth Car WashMar 202095618.8100.0%
Mammoth Car WashApr 202011818.8100.0%
Mammoth Car WashApr 20201418.8100.0%
DaVita IVApr 202011010.0100.0%
GPMJul. 20203011214.9100.0%
IMTAA IIAug 2020; Dec 2020105414.2100.0%
Fresenius IXNov 20206469.7100.0%
PortfolioSegmentAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
Liberty CrossingMulti-TenantFeb 201711063.491.6%
San Pedro CrossingMulti-TenantFeb 201712074.087.8%
Tiffany Springs MarketCenterMulti-TenantFeb 201712653.486.5%
The Streets of West ChesterMulti-TenantFeb 201712378.487.0%
Prairie Towne CenterMulti-TenantFeb 201712648.378.6%
Southway Shopping CenterMulti-TenantFeb 201711824.7100.0%
Stirling Slidell Centre
Multi-TenantFeb 201712081.163.5%
Northwoods MarketplaceMulti-TenantFeb 201712363.198.3%
Centennial PlazaMulti-TenantFeb 201712341.499.5%
Northlake CommonsMulti-TenantFeb 201711094.290.3%
Shops at Shelby CrossingMulti-TenantFeb 201712364.295.1%
Shoppes of West MelbourneMulti-TenantFeb 201711446.396.3%
The CentrumMulti-TenantFeb 201712749.682.0%
Shoppes at WyomissingMulti-TenantFeb 201711033.058.7%
Southroads Shopping CenterMulti-TenantFeb 201714093.882.6%
Parkside Shopping CenterMulti-TenantFeb 201711833.679.6%
Colonial LandingMulti-TenantFeb 201712646.893.3%
The Shops at West End (3)
Multi-TenantFeb 201713826.680.6%
Township MarketplaceMulti-TenantFeb 201712994.585.1%
Cross Pointe CentreMulti-TenantFeb 201712269.098.6%
Towne Centre PlazaMulti-TenantFeb 20171943.7100.0%
Village at Quail SpringsMulti-TenantFeb 201711005.0100.0%
Pine Ridge PlazaMulti-TenantFeb 201712392.795.8%
Bison HollowMulti-TenantFeb 201711352.4100.0%
Jefferson CommonsMulti-TenantFeb 201712064.997.0%
Northpark CenterMulti-TenantFeb 201713184.397.2%
Anderson StationMulti-TenantFeb 201712444.8100.0%
Patton CreekMulti-TenantFeb 201714913.073.7%
North Lakeland PlazaMulti-TenantFeb 201711713.198.0%
Riverbend MarketplaceMulti-TenantFeb 201711433.189.5%
Montecito CrossingMulti-TenantFeb 201711803.983.8%
Best on the BoulevardMulti-TenantFeb 201712053.493.3%
Shops at RiverGate SouthMulti-TenantFeb 201711454.193.4%
Dollar General XXIIISingle-TenantMar 2017; May 2017; Jun 20178717.1100.0%
Jo-Ann Fabrics ISingle-TenantApr 20171182.6100.0%
Bob Evans ISingle-TenantApr 20172211114.8100.0%
FedEx Ground IXSingle-TenantMay 20171543.9100.0%
Chili's IISingle-TenantMay 2017165.3100.0%
Sonic Drive In ISingle-TenantJun 20172310.0100.0%
Bridgestone HOSEPower ISingle-TenantJun 20172417.1100.0%
Bridgestone HOSEPower IISingle-TenantJul 20171257.3100.0%
FedEx Ground XSingle-TenantJul 201711425.0100.0%
Chili's IIISingle-TenantAug 2017165.3100.0%
FedEx Ground XISingle-TenantSep 20171295.0100.0%
Hardee's ISingle-TenantSep 201714——%
Tractor Supply IVSingle-TenantOct 20172514.4100.0%
Circle K IISingle-TenantNov 201762015.0100.0%
Sonic Drive In IISingle-TenantNov 2017203115.4100.0%
Bridgestone HOSEPower IIISingle-TenantDec 20171218.0100.0%
Sonny's BBQ ISingle-TenantJan 201831911.6100.0%
Mountain Express ISingle-TenantJan 201893015.5100.0%
Kum & Go ISingle-TenantFeb 2018155.9100.0%
50
Table of Contents
PortfolioPortfolioAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage LeasedPortfolioSegmentAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
DaVita IDaVita ISingle-TenantFeb 20182133.7100.0%
Imperial IImperial ISingle-TenantMar 201892218.4100.0%
Mountain Express IIMountain Express IISingle-TenantJun 2018155915.8100.0%
Dialysis IDialysis ISingle-TenantJul 20187655.8100.0%
Children of America IChildren of America ISingle-TenantAug 201823311.279.7%
Burger King IIBurger King IISingle-TenantAug 20181311.2100.0%
Imperial IIImperial IISingle-TenantAug 201891818.4100.0%
Bob Evans IIBob Evans IISingle-TenantAug 20182211214.8100.0%
Mountain Express IIIMountain Express IIISingle-TenantSep 2018144716.1100.0%
Taco John'sTaco John'sSingle-TenantSep 201871511.3100.0%
HIFZA TradingHIFZA TradingSingle-TenantOct 20181418.5100.0%
DaVita IIDaVita IISingle-TenantOct 20181105.2100.0%
Pizza Hut IPizza Hut ISingle-TenantOct 201892311.3100.0%
Little Caesars ILittle Caesars ISingle-TenantDec 2018111916.5100.0%
Caliber Collision ICaliber Collision ISingle-TenantDec 20183489.8100.0%
Tractor Supply VTractor Supply VSingle-TenantDec 2018; Mar 20195979.2100.0%
Fresenius IIIFresenius IIISingle-TenantJan 20196445.5100.0%
Pizza Hut IIPizza Hut IISingle-TenantJan 2019308616.6100.0%
Mountain Express IVMountain Express IVSingle-TenantFeb 201982816.6100.0%
Mountain Express VMountain Express VSingle-TenantFeb 2019; Mar 2019; Apr 2019189616.7100.0%
Fresenius IVFresenius IVSingle-TenantMar 2019199.4100.0%
Mountain Express VIMountain Express VISingle-TenantJun 20191316.6100.0%
IMTAAIMTAASingle-TenantMay 2019; Jan 2020124017.0100.0%
Pizza Hut IIIPizza Hut IIISingle-TenantMay 2019; Jun 2019134716.9100.0%
Fresenius VFresenius VSingle-TenantJun 20192199.9100.0%
Fresenius VIFresenius VISingle-TenantJun 20191104.5100.0%
Fresenius VIIFresenius VIISingle-TenantJun 20193598.250.1%
Caliber Collision IICaliber Collision IISingle-TenantAug 20191196.8100.0%
Dollar General XXVDollar General XXVSingle-TenantSep 20195448.5100.0%
Dollar General XXIVDollar General XXIVSingle-TenantSep 2019; Oct 201998212.1100.0%
Mister Carwash IMister Carwash ISingle-TenantSep 201931317.3100.0%
Checkers ICheckers ISingle-TenantSep 20191117.2100.0%
DaVita IIIDaVita IIISingle-TenantSep 2019; Mar 20202207.1100.0%
Dialysis IIDialysis IISingle-TenantSep 2019504266.6100.0%
Mister Carwash IIMister Carwash IISingle-TenantNov 20192817.4100.0%
Advance Auto IVAdvance Auto IVSingle-TenantDec 2019; Jan 202014967.0100.0%
Advance Auto VAdvance Auto VSingle-TenantDec 201911737.9100.0%
Dollar General XXVIDollar General XXVISingle-TenantDec 2019121149.9100.0%
Pizza Hut IVPizza Hut IVSingle-TenantDec 2019; Mar 2020165017.5100.0%
American Car Center IAmerican Car Center ISingle-TenantMar 20201617817.8100.0%
BJ's Wholesale ClubBJ's Wholesale ClubSingle-TenantMar 202011108.3100.0%
Mammoth Car WashMammoth Car WashSingle-TenantMar 202095617.8100.0%
Mammoth Car WashMammoth Car WashSingle-TenantApr 202011817.8100.0%
Mammoth Car WashMammoth Car WashSingle-TenantApr 20201417.8100.0%
DaVita IVDaVita IVSingle-TenantApr 20201109.0100.0%
GPMGPMSingle-TenantJul. 20203011213.9100.0%
IMTAA IIIMTAA IISingle-TenantAug 2020; Dec 2020105413.2100.0%
Fresenius IXFresenius IXSingle-TenantNov 20206468.7100.0%
Kalma KaurKalma KaurDec 2020103719.5100.0%Kalma KaurSingle-TenantDec 2020103718.5100.0%
Dialysis IIIDialysis IIIDec 2020151284.3100.0%Dialysis IIISingle-TenantDec 2020161394.0100.0%
National Convenience DistributorsNational Convenience DistributorsMar. 2021538519.8100.0%National Convenience DistributorsSingle-TenantMar 2021538518.8100.0%
Advance Auto VIAdvance Auto VIMar. 20212146.0100.0%Advance Auto VISingle-TenantMar 20212145.0100.0%
Dollar General XXVIIMay 2021161526.6100.0%
Pick N'SaveJun 20211617.5100.0%
93919,8628.594.9%
51
Table of Contents
PortfolioSegmentAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
Dollar General XXVIISingle-TenantMay 2021; Sept 2021171625.6100.0%
Pick N'SaveSingle-TenantJun 20211616.5100.0%
Tidal Wave ISingle-TenantJul 2021145419.0100.0%
Imperial RelianceSingle-TenantJul 20212419.1100.0%
Aaron's IISingle-TenantAug 2021161395.0100.0%
Heritage ISingle-TenantDec 2021; Jan 202265119.5100.0%
Fidelity ISingle-TenantDec 202165519.5100.0%
BJ's Wholesale Club IISingle-TenantJan 20221686.3100.0%
McCain PlazaMulti-TenantJan 202213084.396.6%
Ventura Place (4)
Multi-TenantFeb. 20221675.692.5%
Market at Clifty Crossing (4)
Multi-TenantFeb. 202211982.377.1%
Crosspoint Shopping Center (4)
Multi-TenantFeb. 202211704.788.7%
Melody Mountain (4)
Multi-TenantFeb. 20221661.5100.0%
Owensboro Town Center (4)
Multi-TenantFeb. 202211652.991.8%
Plainfield Marketplace (4)
Multi-TenantFeb. 202211251.185.0%
Pecanland Plaza (4)
Multi-TenantFeb. 202211123.593.6%
Mattress Firm & Aspen Dental (4)
Multi-TenantFeb. 20221102.134.9%
Mattress Firm & Five Guys (4)
Multi-TenantFeb. 2022185.5100.0%
Shoppes at Stroud (4)
Multi-TenantFeb. 202211414.694.3%
FreshThyme & DSW (4)
Multi-TenantFeb. 20221491.9100.0%
Carlisle Crossing (4)
Multi-TenantFeb. 202211522.976.2%
Shippensburg Marketplace (4)
Multi-TenantFeb. 20221605.784.3%
Shouthwest Plaza (4)
Multi-TenantFeb. 202213683.568.5%
Lord Salisbury Center (4)
Multi-TenantFeb. 202211143.981.2%
Derby Marketplace (4)
Multi-TenantFeb. 202211006.0100.0%
Fairlane Green (4)
Multi-TenantFeb. 20221955.1100.0%
Shoe Carnival & Buffalo Wild Wings (4)
Multi-TenantFeb. 20221155.3100.0%
Tellico Village (4)
Multi-TenantFeb. 20221415.7100.0%
Triangle Town Place (4)
Multi-TenantFeb. 202211494.393.9%
Mattress Firm & Panera Bread (4)
Multi-TenantFeb. 2022195.6100.0%
Enid Crossing (4)
Multi-TenantFeb. 20221483.5100.0%
Dick's PetSmart Center (4)
Multi-TenantFeb. 20221523.6100.0%
Rolling Acres (4)
Multi-TenantFeb. 202211893.789.3%
Mattress Firm & Kay Jewelers (4)
Multi-TenantFeb. 2022173.4100.0%
Fountain Square (4)
Multi-TenantFeb. 202211663.477.2%
Shops at Abilene (4)
Multi-TenantFeb. 202211763.397.3%
Shoppes of Gary Farms (4)
Multi-TenantFeb. 202211001.695.5%
Brynwood Square (4)
Multi-TenantFeb. 202211211.918.3%
PetSmart & Old Navy (4)
Multi-TenantFeb. 20221297.9100.0%
Crossroads Annex (4)
Multi-TenantFeb. 20221412.1100.0%
Crossroads Commons (4)
Multi-TenantFeb. 20221473.0100.0%
Sutters Creek (4)
Multi-TenantFeb. 20221806.7100.0%
Darien Towne Center (4)
Multi-TenantFeb. 202211772.593.1%
Westover Market (4)
Multi-TenantFeb. 20221616.0100.0%
Summerfield Crossing (4)
Multi-TenantFeb. 202211146.5100.0%
University Marketplace (4)
Multi-TenantFeb. 20221864.3100.0%
The Market at Polaris (4)
Multi-TenantFeb. 202211115.364.8%
Beaver Creek Shopping Center (4)
Multi-TenantFeb. 202212844.288.0%
Wallace Commons (4)
Multi-TenantFeb. 202211114.6100.0%
Plaza San Mateo (4)
Multi-TenantFeb. 20221632.698.1%
Turfway Crossing (4)
Multi-TenantFeb. 202211000.995.0%
Nordstrom Rack (4)
Multi-TenantFeb. 20221458.597.7%
52
Table of Contents
PortfolioSegmentAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
Evergreen Marketplace (4)
Multi-TenantFeb. 20221502.5100.0%
Lawton Marketplace (4)
Multi-TenantFeb. 202211886.183.8%
Blankenbaker Plaza (3) (4)
Multi-TenantFeb. 20221883.981.6%
Cottonwood Commons (4)
Multi-TenantFeb. 202211925.886.5%
Houma Crossing (4)
Multi-TenantFeb. 202211815.556.3%
Target Center (4)
Multi-TenantFeb. 20221840.9100.0%
The Center at Hobbs Brook (4)
Multi-TenantFeb. 202212314.189.5%
Fourth Creek Landing (4)
Multi-TenantFeb. 20221684.0100.0%
Lafayette Pavillion (4)
Multi-TenantFeb. 202213825.771.7%
North Lake Square (4)
Multi-TenantFeb. 202211406.6100.0%
Western Crossing (4)
Multi-TenantFeb. 20221686.9100.0%
Almeda Crossing (4)
Multi-TenantMar. 202212233.579.9%
Boston Commons (4)
Multi-TenantMar. 202211035.995.5%
Wallace Commons (4)
Single-TenantApr. 20221994.8100.0%
Academy Sports (4)
Single-TenantApr. 20221728.6100.0%
Walgreens (4)
Multi-TenantApr. 20221153.9100.0%
Parkway Centre South (4)
Multi-TenantApr. 202211324.285.0%
The Marquis (4)
Multi-TenantApr. 202211355.666.6%
HEB Center (4)
Multi-TenantApr. 202211154.695.8%
Bed Bath & Beyond/Golfsmith (4)
Multi-TenantApr. 202211012.5100.0%
Walgreens & KeyBank (4)
Multi-TenantApr. 202211811.6100.0%
Terrell Mill Village (4)
Multi-TenantApr. 20221756.392.7%
Fresh Market Center (4)
Multi-TenantApr. 20221323.588.8%
Decatur Commons (4)
Multi-TenantApr. 202211263.265.7%
Stoneridge Village (4)
Multi-TenantApr. 20221723.5100.0%
Albany Square (4)
Multi-TenantApr. 202211182.194.8%
Coventry Crossing (4)
Multi-TenantApr. 20221219.594.9%
Springfield Commons (4)
Multi-TenantApr. 202212076.395.3%
Waterford Park South (4)
Multi-TenantApr. 20221925.487.5%
The Ridge at Turtle Creek (4)
Multi-TenantApr. 20221999.894.4%
Tire Kingdom & Starbucks (4)
Multi-TenantApr. 2022177.7100.0%
Walmart Neighborhood Market (4)
Multi-TenantApr. 20221519.6100.0%
Harbor Town Center (4)
Multi-TenantApr. 202211394.7100.0%
East West Commons (4)
Multi-TenantApr. 202211734.677.3%
Morganton Heights (4)
Multi-TenantApr. 202212852.796.2%
Poplar Springs (4)
Multi-TenantApr. 20221641.296.7%
The Plant (4)
Multi-TenantMay 202215096.373.7%
Imperial Reliance IISingle-TenantMay 202283219.9100.0%
1,05628,9077.290.8%
________
(1)Remaining lease term in years as of June 30, 2021.2022. If the portfolio has multiple properties with varying lease expirations, remaining lease term is calculated on a weighted-average basis.
(2)Includes one propertynine properties leased to Truist Bank (one, four and four in Truist I, II, and III, respectively) which waswere unoccupied as of June 30, 20212022 and wasare being marketed for sale.sale, three of which are under contract to be disposed and are included in assets held for sale on the consolidated balance sheets. Please see Note 3 — Real Estate Investments to our consolidated financial statements in this Quarterly Report on Form 10-Q for further details.
(3)Multi-tenant properties. All otherThese properties are single-tenant.under contract to be disposed and are included in assets held for sale on the on the consolidated balance sheets. Please see Note 3 — Real Estate Investments to our consolidated financial statements in this Quarterly Report on Form 10-Q for further details.
(4)Acquired in the CIM Portfolio Acquisition. See Note 1 — Organization to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information.
(5)The tenant’s lease at this property expired effective July 1, 2021,2021.
(6)The tenant’s lease at this property expired effective July 1, 2022, which reduced the portfolio’s occupancy to 92.9%89.6%.
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The following table details the classification of our properties by segment:
SegmentNumber of PropertiesRentable Square Feet
Remaining Lease Term (1)
Percentage Leased
(In thousands)
Single-Tenant (2)
94412,354 9.9 95.5 %
Multi-Tenant11216,553 4.6 87.4 %
      Total1,056 28,907 7.2 90.8 %
___________
(1)Remaining lease term in years as of June 30, 2022. If the portfolio has multiple properties with varying lease expirations, remaining lease term is calculated as a weighted-average based on annualized rental income on a straight-line basis.
(2)After giving effect to the C&S Grocery lease expiration on July 1, 2022 representing approximately 360,000 square feet, the single-tenant segment would be 92.5% occupied.
Leasing Activity
The following tables summarize our leasing activity by segment during the periods indicated:
Three Months Ended June 30, 2022
(In thousands)
Single-Tenant PropertiesNumber of LeasesRentable Square Feet
Annualized SLR (1) prior to Lease Execution/Renewal
Annualized SLR (1) after Lease Execution/Renewal
Costs to execute leaseCosts to execute lease per square foot
New leases (2)
— — $— $— $— $— 
Lease renewals/amendments (2)
13 116,269 $2,814 $2,824 $— $— 
Lease terminations (3)
— — $— $— $— $— 
______
(1)Annualized rental income on a straight-line basis as of June 30, 2022. Represents the GAAP basis annualized straight-line rent that is recognized over the term on the respective leases, which includes free rent, periodic rent increases, and excludes recoveries.
(2)New leases reflect leases in which a new tenant took possession of the space during the three months ended June 30, 2022, excluding new property acquisitions. Lease renewals/amendments reflect leases in which an existing tenant executed terms to extend the term or change the rental terms of the lease during the three months ended June 30, 2022. This excludes leases modifications for deferrals/abatements in response to COVID-19 negotiations which qualify for FASB relief. For more information — see Management Update on the Impacts of the COVID-19 Pandemic.
(3)Represents leases that were terminated prior to their contractual lease expiration dates.

Three Months Ended June 30, 2022
(In thousands)
Multi-Tenant PropertiesNumber of LeasesRentable Square Feet
Annualized SLR (1) prior to Lease Execution/Renewal
Annualized SLR (1) after Lease Execution/Renewal
Costs to execute leaseCosts to execute lease per square foot
New leases (2)
22 197,495 $— $2,025 $1,154 $5.84 
Lease renewals/amendments (2)
38 420,402 $5,066 $5,410 $708 $1.68 
Lease terminations (3)
3 70,001 $439 $— $— $— 
______
(1)Annualized rental income on a straight-line basis as of June 30, 2022. Represents the GAAP basis annualized straight-line rent that is recognized over the term on the respective leases, which includes free rent, periodic rent increases, and excludes recoveries.
(2)New leases reflect leases in which a new tenant took possession of the space during the three months ended June 30, 2022, excluding new property acquisitions. Lease renewals/amendments reflect leases in which an existing tenant executed terms to extend the term or change the rental terms of the lease during the three months ended June 30, 2022. This excludes leases modifications for deferrals/abatements in response to COVID-19 negotiations which qualify for FASB relief. For more information — see Management Update on the Impacts of the COVID-19 Pandemic.
(3)Represents leases that were terminated prior to their contractual lease expiration dates.

Six Months Ended June 30, 2022
(In thousands)
Single-Tenant PropertiesNumber of LeasesRentable Square Feet
Annualized SLR (1) prior to Lease Execution/Renewal
Annualized SLR (1) after Lease Execution/Renewal
Costs to execute leaseCosts to execute lease per square foot
New leases (2)
— — $— $— $— $— 
Lease renewals/amendments (2)
15 134,538 $2,978 $2,982 $45 $0.33 
Lease terminations (3)
7 87,947 $1,799 $— $— $— 
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______
(1)Annualized rental income on a straight-line basis as of June 30, 2022. Represents the GAAP basis annualized straight-line rent that is recognized over the term on the respective leases, which includes free rent, periodic rent increases, and excludes recoveries.
(2)New leases reflect leases in which a new tenant took possession of the space during the six months ended June 30, 2022, excluding new property acquisitions. Lease renewals/amendments reflect leases in which an existing tenant executed terms to extend the term or change the rental terms of the lease during the six months ended June 30, 2022. This excludes leases modifications for deferrals/abatements in response to COVID-19 negotiations which qualify for FASB relief. For more information — see Management Update on the Impacts of the COVID-19 Pandemic.
(3)Represents leases that were terminated prior to their contractual lease expiration dates.

Six Months Ended June 30, 2022
(In thousands)
Multi-Tenant PropertiesNumber of LeasesRentable Square Feet
Annualized SLR (1) prior to Lease Execution/Renewal
Annualized SLR (1) after Lease Execution/Renewal
Costs to execute leaseCosts to execute lease per square foot
New leases (2)
29 257,126 $— $3,059 $1,461 $5.68 
Lease renewals/amendments (2)
56 599,322 $7,681 $8,166 $1,109 $1.85 
Lease terminations (3)
3 70,001 $439 $— $— $— 
______
(1)Annualized rental income on a straight-line basis as of June 30, 2022. Represents the GAAP basis annualized straight-line rent that is recognized over the term on the respective leases, which includes free rent, periodic rent increases, and excludes recoveries.
(2)New leases reflect leases in which a new tenant took possession of the space during the six months ended June 30, 2022, excluding new property acquisitions. Lease renewals/amendments reflect leases in which an existing tenant executed terms to extend the term or change the rental terms of the lease during the six months ended June 30, 2022. This excludes leases modifications for deferrals/abatements in response to COVID-19 negotiations which qualify for FASB relief. For more information — see Management Update on the Impacts of the COVID-19 Pandemic.
(3)Represents leases that were terminated prior to their contractual lease expiration dates.

Results of Operations
In December 2021, we signed a purchase and sale agreement to acquire 79 multi-tenant retail centers and two single-tenant properties (the “CIM Portfolio Acquisition”), representing a strategic shift away from a sole focus on single-tenant retail properties. Accordingly, as of December 31, 2021, we began operating in two reportable business segments for management and internal financial reporting purposes. In our single-tenant operating segment, we own, manage and lease single-tenant properties where tenants are required to pay for property operating expenses, which may be subject to expense exclusions and floors, in addition to base rent. In our multi-tenant operating segment, we own, manage and lease multi-tenant properties where we generally pay for the property operating expenses for those properties and most of our tenants are required to pay their pro rata share of property operating expenses.
In addition to the comparative quarter-over-quarterperiod-over-period discussion below, please see the “Overview — Management Update on the Impacts of the COVID-19 Pandemic” section above for additional information on the risks and uncertainties associated with the COVID-19 pandemic and management’s actions taken to mitigate those risks and uncertainties.

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Comparison of the Three Months Ended June 30, 20212022 and 2020
We owned 841 properties for the entirety of both the three months ended June 30, 2021 and 2020 (our “Three Month Same Store”) that were 94.6% leased as of June 30, 2021, and would be 92.5% leased giving effect to the United Healthcare lease expiration on July 1, 2021 representing approximately 400,000 square feet. From April 1, 2020 through June 30, 2021, we acquired 98 properties (our “Acquisitions Since April 1, 2020”) that were 100.0% leased as of June 30, 2021. From April 1, 2020 through June 30, 2021, we sold nine properties (our “Disposals Since April 1, 2020”).
The following table summarizes our leasing activity during the three months ended June 30, 2021:
Three Months Ended June 30, 2021
(In thousands)
Number of LeasesRentable Square Feet
Annualized SLR (1) prior to Lease Execution/Renewal/Termination
Annualized SLR (1) after Lease Execution/Renewal
Costs to execute leaseCosts to execute lease per square foot
New leases (2)
9 92,066 $— $313 $134 $1.46 
Lease renewals/amendments (2)
27 136,871 $2,161 $2,090 $14 $0.10 
Lease terminations (3)
9 65,797 $1,167 $— $— $— 
______
(1)
 Three Months Ended June 30,Increase (Decrease)
20222021$
Revenue from tenants$116,929 $81,577 $35,352 
Operating expenses: 
Asset management fees to related party8,296 7,922 374 
Property operating expense27,520 13,329 14,191 
Impairment of real estate investments58,954 91 58,863 
Acquisition, transaction and other costs206 136 70 
Equity-based compensation3,523 5,283 (1,760)
General and administrative8,390 3,540 4,850 
Depreciation and amortization46,573 32,428 14,145 
Total operating expenses153,462 62,729 90,733 
          Operating (loss) income before gain on sale of real estate investments(36,533)18,848 (55,381)
Gain on sale of real estate investments13,438 11 13,427 
   Operating (loss) income(23,095)18,859 (41,954)
Other (expense) income:
Interest expense(28,329)(20,361)(7,968)
Other income944 20 924 
Total other expense, net(27,385)(20,341)(7,044)
Net loss(50,480)(1,482)(48,998)
Net loss attributable to non-controlling interests58 2 56 
Allocation for preferred stock(5,837)(5,925)88 
Net loss attributable to common stockholders$(56,259)$(7,405)$(48,854)
Annualized rental income on a straight-line basis as
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Table of June 30, 2021. Represents the GAAP basis annualized straight-line rent that is recognized over the term on the respective leases, which includes free rent, periodic rent increases, and excludes recoveries.Contents
(2)New leases reflect leases in which a new tenant took possession of the space during the three months ended June 30, 2021, excluding new property acquisitions. Lease renewals/amendments reflect leases in which an existing tenant executed terms to extend the term or change the rental terms of the lease during the three months ended June 30, 2021. This excludes leases modifications for deferrals/abatements in response to COVID-19 negotiations which qualify for FASB relief. For more information — see Management update on Impacts of the COVID-19 Pandemic - Management’s Actions.
(3)Represents leases that were terminated prior to their contractual lease expiration dates.
Net Loss Attributable to Common Stockholders
Net loss attributable to common stockholders was $56.3 million for the three months ended June 30, 2022, as compared to a loss of $7.4 million for the three months ended June 30, 2021, as compared to $21.8 million for the three months ended June 30, 2020.2021. The change in net loss attributable to common stockholders is
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discussed in detail for each line item of the consolidated statements of operations and comprehensive loss in the sections that follow.
Property ResultsSame Store Properties
Information based on Same Store, Acquisitions and Dispositions (as each are defined below) allows us to evaluate the performance of Operationsour portfolio based on a consistent population of properties owned for the entire period of time covered. As of June 30, 2022, we owned 1,056 properties. There were 903 properties owned for the entire three months ended June 30, 2022 and 2021 (our “Three Month Same Store Properties”) which were 92.6% leased as of June 30, 2022, and 90.7% leased after giving effect to the C&S Grocery lease expiration on July 1, 2022 representing approximately 360,000 square feet. Since April 1, 2021 and through June 30, 2022, we acquired 153 properties (our “Acquisitions Since April 1, 2021”) which were 87.5% leased as of June 30, 2022, and disposed of 22 properties (our “Dispositions Since April 1, 2021”).
Same StoreAcquisitionsDisposalsTotal
Three Months Ended June 30,Increase (Decrease)Three Months Ended June 30,Increase (Decrease)Three Months Ended June 30,Increase (Decrease)Three Months Ended June 30,Increase (Decrease)
20212020$20212020$20212020$20212020$
Revenue from tenants$77,766 $74,693 $3,073 $3,811 $223 $3,588 $— $18 $(18)$81,577 $74,934 $6,643 
Less: Property operating13,276 12,539 737 47 1 46 6 1 5 13,329 12,541 788 
NOI$64,490 $62,154 $2,336 $3,764 $222 $3,542 $(6)$17 $(23)$68,248 $62,393 $5,855 
Single-Tenant PropertiesMulti-Tenant PropertiesTotal Properties
Number of properties, March 31, 202189233925
Acquisition activity during the nine months ended December 31, 202162—62
Disposition activity during the nine months ended December 31, 2021(11)—(11)
Number of properties, December 31, 202194333976
Acquisition activity during the six months ended June 30, 2022127991
Disposition activity during the six months ended June 30, 2022(11)—(11)
Number of properties, June 30, 20229441121,056
Number of Same Store Properties87033903
Net Operating Income
Net operating income (“NOI”) is a non-GAAP financial measure used by us to evaluate the operating performance of our real estate portfolio. NOI is equal to revenue from tenants less property operating expense. NOI excludes all other financial statement amounts included in net loss attributable to common stockholders. We believe NOI provides useful and relevant information because it reflects only those income and expense items that are incurred at the property level and presents such items on an unlevered basis. See “Non-GAAP Financial Measures” included elsewhere in this Quarterly Report on Form 10-Q for additional disclosure and a reconciliation to our net loss attributable to common stockholders.
Segment Results — Single-Tenant Properties
The following table presents the components of NOI and the period change within the single-tenant segment for the three months ended June 30, 2022 and 2021:
Same Store (1)
Acquisitions (2)
Disposals (3)
Segment Total (4)
Three Months Ended June 30,Increase (Decrease)Three Months Ended June 30,Increase (Decrease)Three Months Ended June 30,Increase (Decrease)Three Months Ended June 30,Increase (Decrease)
20222021$20222021$20222021$20222021$
Revenue from tenants$50,911 $46,321 $4,590 $3,582 $150 $3,432 $1,393 $5,182 $(3,789)$55,886 $51,653 $4,233 
Less: Property operating3,705 2,433 1,272 334 2 332 10 87 (77)4,049 2,522 1,527 
NOI$47,206 $43,888 $3,318 $3,248 $148 $3,100 $1,383 $5,095 $(3,712)$51,837 $49,131 $2,706 
______
(1)Our single-tenant segment included 870 Three Month Same Store Properties.
(2)Our single-tenant segment included 74 Acquisitions Since April 1, 2021.
(3)Our single-tenant segment included 22 Dispositions Since April 1, 2021.
(4)Our single-tenant segment included 944 total properties.
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Revenue from Tenants
Revenue from tenants increased $6.6$4.2 million to $81.6$55.9 million for the three months ended June 30, 2021,2022, compared to $74.9$51.7 million for the three months ended June 30, 2020.2021. This increase in revenue from tenants was due to incremental revenue from our Acquisitions Since April 1, 20202021 of approximately $3.6$3.4 million, and byfrom an increase in our Three Month Same Store Properties revenue of approximately $3.1 million.$4.6 million, partially offset by a decrease of $3.8 million from our Dispositions Since April 1, 2021.
The increase in our Three Month Same Store Properties revenue includes bad debt expense of $0.5 million, not including a recovery of $0.8 million relatingwas mainly due to a lease settlement fee from a tenant in one of our multi-tenant properties that terminated its lease, as compared to bad debt expense of $3.5 million for the three months ended June 30, 2020, and also reflects higher occupancy levels in our multi-tenant properties of 87% as of June 30, 2021 as compared to 86% as of June 30, 2020. The increase in Three Month Same Store also includes $0.8 million in lease termination fees from a tenant in one of our multi-tenant properties that terminated its lease. These increases were partially offset by $1.2an additional $4.6 million of below market lease intangible liability write-offstenant revenue recognized under termination agreements signed since December 2021 (some of which occurred in the three months ended June 30, 2020, which was recorded as an addition to revenue from tenants, as well as an increase in rental abatementshad occupancy periods that expired during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. For additional information on our revenue recognition policy and details on the factors included in our assessment of receivables,2022, see Note 2 — Summary of Significant Accounting Policies – Revenue Recognition for additional information), an increase of $1.2 million of operating expense reimbursement revenue and a decrease of $0.5 million of bad debt expense, which is recorded as a reduction to revenue.
These increases were partially offset by $1.4 million of lower revenue from our United Healthcare property, which had annual rents of $5.4 million prior to its tenant vacating effective on June 30, 2021, as well as $0.5 million of lower revenue from other properties which were vacant in the consolidated financial statements includedthree months ended June 30, 2022 but which were occupied in this Form 10-Q.the three months ended June 30, 2021.
Property Operating Expenses
Property operating expenses primarily consist of the costs associated with maintaining our properties including real estate taxes, utilities, and repairs and maintenance. Property operating expenses increased $0.8$1.5 million to $13.3$4.0 million for the three months ended June 30, 20212022 compared to $12.5$2.5 million for the three months ended June 30, 2020.2021. This increase was driven by an increase of $46,000approximately $1.3 million in our Three Month Same Store Properties and by an increase of $0.3 million from our Acquisitions Since April 1, 20202021.
Segment Results — Multi-Tenant Properties
The following table presents the components of NOI and the period change within the multi-tenant segment for the three months ended June 30, 2022 and 2021:
Same Store (1)
Acquisitions (2)
Disposals (3)
Total (4)
Three Months Ended June 30,Increase (Decrease)Three Months Ended June 30,Increase (Decrease)Three Months Ended June 30,Increase (Decrease)Three Months Ended June 30,Increase (Decrease)
20222021$20222021$20222021$20222021$
Revenue from tenants$28,054 $29,924 $(1,870)$32,989 $— $32,989 $— $— $— $61,043 $29,924 $31,119 
Less: Property operating11,513 10,807 706 11,958 — 11,958 — — — 23,471 10,807 12,664 
NOI$16,541 $19,117 $(2,576)$21,031 $— $21,031 $— $— $— $37,572 $19,117 $18,455 
______
(1)Our multi-tenant segment included 33 Three Month Same Store Properties.
(2)Our multi-tenant segment included 79 Acquisitions Since April 1, 2021.
(3)Our multi-tenant segment included 0 Dispositions Since April 1, 2021.
(4)Our multi-tenant segment included 112 total properties.
Revenue from Tenants
Revenue from tenants increased $31.1 million to $61.0 million for the three months ended June 30, 2022, compared to $29.9 million for the three months ended June 30, 2021. This increase in revenue from tenants was due to incremental revenue from our Acquisitions Since April 1, 2021 of approximately $33.0 million, $32.7 million of which was attributable to the CIM Portfolio Acquisition, partially offset by a decrease in our Three Month Same Store Properties revenue of approximately $1.9 million. Please see Note 1 — Organization to our consolidated financial statements in this Quarterly Report on Form 10-Q for further details on the CIM Portfolio Acquisition.
The decrease in our Three Month Same Store Properties revenue was mainly due to a decrease of $0.8 million of termination fee income, a recovery of $0.8 million relating to a lease settlement fee from a tenant which was recorded in the three months ended June 30, 2021, $0.1 million of less contingent rental income and $0.1 million of less amortization of below market lease intangibles in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.
Property Operating Expenses
Property operating expenses primarily consist of the costs associated with maintaining our properties including real estate taxes, utilities, and repairs and maintenance. Property operating expenses increased $12.7 million to $23.5 million for the three months ended June 30, 2022 compared to $10.8 million for the three months ended June 30, 2021. This increase was driven by an increase of approximately $0.7 million in our Three Month Same Store propertiesProperties, and by an increase of $12.0 million from
The increase in the Three Month Same Store property operating expenses is primarily
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our Acquisitions Since April 1, 2021, $11.7 million of which was attributable to real estate tax reassessments which were paidthe CIM Portfolio Acquisition. Please see Note 1 — Organization to our consolidated financial statements in 2019 and credited in 2020, which lowered expenses duringthis Quarterly Report on Form 10-Q for further details on the three months ended June 30, 2020. Such credits did not recur in the three months ended June 30, 2021.CIM Portfolio Acquisition.
Other Results of Operations
Asset Management Fees to Related Party
We pay asset management fees to the Advisor for managing our day-to-day operations. These fees include a base management fee, which has a fixed and variable portion and an incentive variable management fee. Asset management fees paid to the Advisor increased $1.0$0.4 million to $8.3 million for the three months ended June 30, 2022, compared to $7.9 million for the three months ended June 30, 2021, compared to $6.9 million for the three months ended June 30, 2020, primarily due to an increase of $0.4$0.6 million in the variable portion of the base management fee due to our increased equity issuances duringin 2022 over the comparable period from June 30, 2020 to June 30,in 2021, and the $0.6partially offset by a decrease of $0.2 million of incentive variable management feefees incurred in the current period, which was not earned inthree months ended June 30, 2022 as compared to the prior year period.three months ended June 30, 2021.
The variable portion of the base management fee is calculated on a monthly basis and is equal to one-twelfth of 1.25% of the cumulative net proceeds of any equity raised by us (including, among other things, common stock, including shares subject to repurchase, preferred stock and
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certain convertible debt but excluding among other things, equity basedequity-based compensation) from and after February 16, 2017.. The variable portion of the base management fee will increase in connection with future issuances of equity securities.
In light of the unprecedented market disruption resulting from the COVID-19 pandemic, in March 2020, we agreed with the Advisor to amend the advisory agreement to temporarily lower the quarterly thresholds we must reach on a quarterly basis for the Advisor to receive the variable incentive management fee through the end of 2020, and in January 2021, we agreed with the Advisor to further amend the advisory agreement to extend the expiration of these thresholds through the end of 2021. We incurred an incentive variable management fee of $0.6 million during the three months ended June 30, 2021. No incentive variable management fee2021, at which point it was incurred during the three months ended June 30, 2020.not renewed. Please see Note 1011 — Related Party Transactions and Arrangements to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding fees incurred from the Advisor.
Impairment Charges
We recorded impairment charges of $59.0 million for the three months ended June 30, 2022, $49.6 million of which related to a multi-tenant property located in Minnesota, $5.9 million of which related to five vacant single-tenant properties formerly leased to Truist Bank and $3.5 million of which related to a multi-tenant property acquired in the CIM Portfolio Acquisition. All of the impaired properties were impaired to adjust the properties’ carrying values to their fair values as determined by their respective purchase and sales agreements if under a contract to be disposed, or their estimated fair values if not under a contract to be disposed.
We recorded $0.1 million of impairment charges for the three months ended June 30, 2021 related to a vacant single-tenant held-for-use property which was recorded to adjust the property to its fair value as determined by the income approach.
We recorded an $11.5 million impairment charge for the three months ended June 30, 2020 related to one of our multi-tenant held-for-use properties, as it was determined that the carrying value of the long-lived assets associated with this property were greater than our estimate of their fair value based on the property’s anticipated discounted cash flows.
Acquisition, Transaction and Other Costs
Acquisition, transaction and other costs decreased $0.6increased by $0.1 million to $0.2 million for the three months ended June 30, 2022, compared to $0.1 million for the three months ended June 30, 2021, compared2021. The increase was primarily due to $0.7 million forincreased acquisition activity in the three months ended June 30, 2020. The decrease was primarily due to less acquisition activity during the three months ended June 30, 2021,2022 as compared to the prior year quarter and the lack of any prepayment penalties. The prepayment penalties related to mortgages during the three months ended June 30, 2020 were approximately $0.2 million. We did not incur any prepayment penalties during the three months ended June 30, 2021.
Equity-Based Compensation
Equity-based compensation increaseddecreased by $2.1$1.8 million to $3.5 million during the three months ended June 30, 2022 compared to $5.3 million during the three months ended June 30, 2021. Equity-based compensation expenses relate to restricted shares of Class A common stock (“restricted shares”) granted to our board of directors and employees of the Advisor or its affiliates who are involved in providing services to us and the LTIP Units (as defined below) that were granted to our Advisor in 2021 comparedpursuant to $3.2 million duringthe 2021 OPP (as defined below) or granted in 2018 pursuant to the 2018 OPP (as defined below).
The higher expense recorded in the three months ended June 30, 2020. This increase2021 was primarily due to $1.9 million of additional non-cash equity-based compensation expense from a newthe 2021 multi-year outperformance agreement with the Advisor (the “2021 OPP”) as our independent directors, acting as a group, authorizedin the issuanceform of a new award of units of limited partnership in the OP designated as “LTIP Units” (“LTIP Units”) authorized by our independent directors on May 4, 2021 to be issued to the Advisor under the 2021 OPP after the performance period under our then effectiveof the multi-year outperformance agreement previously entered into with the Advisor in 2018 (the “2018 OPP”) expired on July 19, 2021. The three months ended June 30, 2021 includes expenses for both the 2018 OPP and the 2021 OPP (see Note 1213— Equity-Based CompensationCompensation)). The performance period for the 2018 OPP ended on July 19, 2021 and therefore no further expense will be recorded for the 2018 OPP after the third quarter of 2021.
General and Administrative Expense
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General and administrative expense decreased $3.3increased $4.9 million to $8.4 million for the three months ended June 30, 2022, compared to $3.5 million for the three months ended June 30, 2021, compared to $6.9 million for the three months ended June 30, 2020. This decrease2021. The increase was primarily due to a change in estimate reflected$2.1 million of increased professional expense reimbursements, as well as a reduction in previously recorded expenses related to 2020 bonus awards made by the Advisor to employees of the Advisor or its affiliates of $1.4 million (see Note 10—Related Party Transactions and Arrangements professional fee credit in our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information), $1.3 million of decreased legal fees, $0.2 million of decreased audit fees, and $0.4 million of decreased miscellaneous general and administrative expenses incurred during the three months ended June 30, 2021 as compared to the same period last year. The decreasewhich did not occur in legal fees primarily relates to increased costs incurred during the three months ended June 30, 2020 relating2022. The increased professional expense reimbursements are due to discussions with tenants duringadditional staffing needed by the onsetAdvisor as a result of the COVID-19 pandemic. Such costs have declined significantlyCIM Portfolio Acquisition. Additionally, legal expenses increased $0.6 million, accounting fees increased $0.6 million and miscellaneous fees increased $0.2 million in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.
Depreciation and Amortization Expense
Depreciation and amortization expense decreased $3.0increased $14.1 million to $46.6 million for the three months ended June 30, 2022, compared to $32.4 million for the three months ended June 30, 2021, compared to $35.4 million for the three months ended June 30, 2020.2021. Depreciation and amortization expense was impacted by a decrease of $4.5 million from our Three Month Same Store properties partially offset by an increase of $1.5$17.5 million related to our Acquisitions Since April 1, 2020.
The2021 (including, most notably, the CIM Portfolio Acquisition), partially offset by a decrease inof $0.9 million from our Three Month Same Store properties’ depreciation and amortization expense is mainly attributable toProperties as well as by a write-offdecrease of tenant improvements which occurred during the second quarter of 2020. A tenant in the health club business in one of$2.5 million from our properties declared bankruptcy and vacated its space. We were in the process of funding improvements that were being made to the space for the tenant. In addition, improvements being made by the tenant were not paid for and we accrued approximately $2.3 million to pay liens on the property by the tenant’s contractors. We determined that certain of the improvements no longer had any value in connection with any foreseeable replacement tenant and wrote off approximately $3.1 million which is
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recorded in depreciation and amortization expense in the consolidated statement of operations. The remaining difference related to certain improvements becoming wholly depreciated.Dispositions Since April 1, 2021.
Gain on Sale/ExchangeSale of Real Estate Investments
During the three months ended June 30, 2022 we sold five properties. These properties sold for an aggregate contract price of $30.4 million, resulting in aggregate gains on sale of $13.4 million. During the three months ended June 30, 2021 we sold three properties. These properties sold for an aggregate contract price of $2.5 million, resulting in aggregate gains on sale of $11,000. During
Interest Expense
Interest expense increased $8.0 million to $28.3 million for the three months ended June 30, 2020, we sold four properties which resulted in gains on sale. These properties sold for an aggregate contract price of $9.4 million, resulting in aggregate gains on sale of $2.8 million.
Interest Expense
Interest expense increased $1.6 million2022, compared to $20.4 million for the three months ended June 30, 2021, compared to $18.8 million for the three months ended June 30, 2020. The2021. This increase was mainly attributabledue to accelerated amortization from write-offsinterest expense of deferred financing costs, totaling approximately $0.4$5.6 million during the three months ended June 30,on our $500.0 million of 4.50% per annum Senior Notes issued in 2021, as well an additional $0.8 millionas higher average balances on our mortgage and Credit Facility debt (resulting largely from the assumption of amortization from deferred financing costs from mortgage notes payable which were not present during the three months ended June 30, 2020. The remaining increase was also due to higher combined average mortgage notes payabledebt and borrowings under theour Credit Facility duringto finance the three months ended June 30, 2021 when compared to the combined average balances for the three months ended June 30, 2020. These increases wereCIM Portfolio Acquisition), partially offset by lower average interest rates. Please see Note 1 — Organization to our consolidated financial statements in this Quarterly Report on Form 10-Q for further details on the CIM Portfolio Acquisition.
During the three months ended June 30, 20212022 and 2020,2021, the average outstanding balances on our mortgage notes payable were $1.6$1.8 billion and $1.3$1.6 billion, respectively, and our average outstanding balance under our revolving, unsecured corporate credit facility (the “Credit Facility”) was $255.7$464.4 million and $503.1$255.7 million, respectively. For the three months ended June 30, 20212022 and 2020,2021, the weighted-average interest rates on our mortgage notes payable were 3.94%3.82% and 4.55%3.94%, respectively, and the weighted-average interest rates on our Credit Facility were 2.79%2.69% and 2.52%2.79%, respectively. The reduction of the weighted-average interest rate on our Credit Facility during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 is primarily due to lower credit spreads to LIBOR on our Credit Facility after the amendment which occurred on October 1, 2021.
We anticipate that the interest rate on our Credit Facility will increase throughout 2022 as a result of, among other things, recent actions taken by the Federal Reserve Board to increase interest rates and its intention to reduce the amount of assets on its balance sheet. See Item 1.A Risk Factors for additional information.
Other Income
Other income was $20,000 and $61,000 for the three months ended June 30, 2021 and 2020.
Loss on Non-Designated Derivative
The loss on non-designated derivative instruments was immaterial for the three months ended June 30, 2021 and relates to an interest rate cap on a mortgage note payable entered into in the fourth quarter of 2020 that is designed to protect us from adverse interest rate changes. For additional information , see Note 7 — Derivatives and Hedging Activities to our consolidated financial statements included in this Quarterly Report on Form 10-Q.
Comparison of the Six Months Ended June 30, 2021 and 2020
We owned 810 properties for the entirety of both the six months ended June 30, 2021 and 2020 (our “Six Month Same Store”), that were 94.5% leased as of June 30, 2021, and would be 92.4% leased giving effect to the United Healthcare lease expiration on July 1, 2021, representing approximately 400,000 square feet. From January 1, 2020 to June 30, 2021, we acquired 129 properties (our “Acquisitions Since January 1, 2020”), that were 100.0% leased as of June 30, 2021. From January 1, 2020 through June 30, 2021, we sold 11 properties (our “Disposals Since January 1, 2020”).
The following table summarizes our leasing activity during the six months ended June 30, 2021:
Six Months Ended June 30, 2021
(In thousands)
Number of LeasesRentable Square Feet
Annualized SLR (1) prior to Lease Execution/Renewal/Termination
Annualized SLR (1) after Lease Execution/Renewal
Costs to execute leaseCosts to execute lease per square foot
New leases (2)
20 284,018 $— $2,433 $1,525 $5.37 
Lease renewals/amendments (2)
80 627,738 8,986 8,489 263 0.42 
Lease terminations (3)
9 65,797 1,167 — — — 
________
(1)Annualized rental income on a straight-line basis as of June 30, 2021. Represents the GAAP basis annualized straight-line rent that is recognized over the term on the respective leases, which includes free rent, periodic rent increases, and excludes recoveries.
(2)New leases reflect leases in which a new tenant took possession of the space during the six months ended June 30, 2021, excluding new property acquisitions. Lease renewals/amendments reflect leases in which an existing tenant executed terms to extend the term or change the rental terms of the lease during the six months ended June 30, 2021. This excludes leases modifications for deferrals/abatements in response to COVID-19 negotiations which qualify for FASB relief. For more information— see Management update on Impacts of the COVID-19 Pandemic - Management’s Actions.
(3)Represents leases that were terminated prior to their contractual lease expiration dates.
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Net (Loss) Income Attributable to Common Stockholders
Net (loss) income attributable to stockholders was $16.8 million for the six months ended June 30, 2021, as compared to net income of $31.0 million for the six months ended June 30, 2020. The change in net (loss) income attributable to common stockholders is discussed in detail for each line item of the consolidated statements of operations and comprehensive loss in the sections that follow.
Property Results of Operations
Same StoreAcquisitionsDisposalsTotal
Six Months Ended June 30,Increase (Decrease)Six Months Ended June 30,Increase (Decrease)Six Months Ended June 30,Increase (Decrease)Six Months Ended June 30,Increase (Decrease)
20212020$20212020$20212020$20212020$
Revenue from tenants$149,886 $146,871 $3,015 $10,621 $2,499 $8,122 $257 $128 $129 $160,764 $149,498 $11,266 
Less: Property operating26,582 24,816 1,766 180 6 174 6 1 5 26,768 24,823 1,945 
NOI$123,304 $122,055 $1,249 $10,441 $2,493 $7,948 $251 $127 $124 $133,996 $124,675 $9,321 
NOI is a non-GAAP financial measure used by us to evaluate the operating performance of our real estate portfolio. NOI is equal to revenue from tenants less property operating expense. NOI excludes all other financial statement amounts included in net income (loss) attributable to common stockholders. We believe NOI provides useful and relevant information because it reflects only those income and expense items that are incurred at the property level and presents such items on an unlevered basis. See “Non-GAAP Financial Measures” included elsewhere in this Quarterly Report on Form 10-Q for additional disclosure and a reconciliation to our net income (loss) attributable to common stockholders.
Revenue from Tenants
Revenue from tenants increased $11.3 million to $160.8 million for the six months ended June 30, 2021, compared to $149.5 million for the six months ended June 30, 2020. The increase was primarily due incremental income from our Acquisitions Since January 1, 2020 of approximately $8.1 million, partially offset by a decrease in our Six Month Same Store revenue of approximately $3.0 million and a decrease in revenue from our Disposals Since January 1, 2020 of $0.1 million, when compared to the same quarter last year.
The increase in Six Month Same Store revenue includes a decline in bad debt expense recorded, to $1.4 million during the six months ended June 30, 2021, not including a recovery of $0.8 million relating to a lease settlement fee from a tenant in one of our multi-tenant properties that terminated its lease, from $4.7 million during the six months ended June 30, 2020. The increase in Six Month Same Store also includes $0.8 million in lease termination fees from a tenant in one of our multi-tenant properties that terminated its lease. The remaining increase is attributable to higher operating expense reimbursement revenue. These increases were partially offset by $1.2 million of below market lease intangible liability write-offs which occurred in the six months ended June 30, 2020, which was recorded as an addition to revenue from tenants, as well as an increase in rental abatements during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. For additional information on our revenue recognition policy and details on the factors included in our assessment of receivables, see Note 2 — Summary of Significant Accounting Policies to the consolidated financial statements included in this Form 10-Q.
Property Operating Expenses
Property operating expense increased $1.9 million to $26.8 million for the six months ended June 30, 2021, compared to $24.8 million for the six months ended June 30, 2020. This increase was primarily driven by an increase of $0.2 million from our Acquisitions since January 1, 2020, partially offset by decreases from our Six Month Same Store properties of $1.8 million.
The increase in the Three Month Same Store property operating expenses is primarily attributable to real estate tax reassessments which were paid in 2019 and credited in 2020, which lowered expenses during the six months ended June 30, 2020. Such credits did not recur in the six months ended June 30, 2021.
Other Results of Operations
Asset Management Fees to Related Party
Asset management fees paid to the Advisor increased $1.4 million to $15.2 million for the six months ended June 30, 2021, compared to $13.8 million for the six months ended June 30, 2020 primarily due to an increase of $0.7 million in the variable portion of the base management fee due to our equity issuances during the period from June 30, 2020 to June 30, 2021 and the $0.7 million incentive variable management fee incurred in the current period, which was not earned in the prior year period.
The variable portion of the base management fee is calculated on a monthly basis and is equal to one-twelfth of 1.25% of the cumulative net proceeds of any equity raised by us (including, among other things, common stock, preferred stock and
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certain convertible debt but excluding among other things, equity based compensation) from and after February 16, 2017. The variable portion of the base management fee will increase in connection with future issuances of equity securities.
In light of the unprecedented market disruption resulting from the COVID-19 pandemic, in March 2020, we agreed with the Advisor to amend the advisory agreement to temporarily lower the quarterly thresholds we must reach on a quarterly basis for the Advisor to receive the variable incentive management fee through the end of 2020, and in January 2021, we agreed with the Advisor to further amend the advisory agreement to extend the expiration of these thresholds through the end of 2021. We incurred an incentive variable management fee of $0.7 million during the six months ended June 30, 2021. No incentive variable management fee was incurred during the six months ended June 30, 2020. Please see Note 10 — Related Party Transactions and Arrangements to our consolidated financial statements included in this Quarterly Report on Form 10-Q for more information on fees incurred from the Advisor.
Impairment Charges
We recorded $0.1 million of impairment charges for the six months ended June 30, 2021 related to a vacant single-tenant held-for-use property which was recorded to adjust the property to its fair value as determined by the income approach.
We recorded am impairment charge of $11.5 million during the six months ended June 30, 2020, of which $0.6 million related to one property which had been classified as held for use as of June 30, 2020, as the carrying amount of the long-lived assets associated with this property was greater than our estimate of its fair value. The remaining $0.2 million of impairment charges were recorded upon classification of properties as assets held for sale during the six months ended June 30, 2021, to adjust the properties to their fair value less estimated cost of disposal. Please see Note 3 — Real Estate Investments to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding impairment charges.
Acquisition, Transaction and Other Costs
Acquisition, transaction and other costs decreased $1.0 million to $0.2 million for the six months ended June 30, 2021, compared to $1.2 million for the six months ended June 30, 2020. The decrease was due to the lack of prepayment penalties related to mortgages related to our dispositions and refinancing during the six months ended June 30, 2021, as compared to the prior year quarter, as well as costs associated with our Credit Facility amendment and dead deals, totaling $0.7 million, which occurred in the six months ended June 30, 2020 which did not occur in the six months ended June 30, 2021. The prepayment penalties related to mortgages were $0.3 million during the six month period ended June 30, 2020.
Equity-Based Compensation
Equity-based compensation increased by approximately $3.1 million to $9.6 million for the six months ended June 30, 2021 compared to $6.5 million for the six months ended June 30, 2020. This increase was primarily due to $1.9 million of additional non-cash equity-based compensation expense from the 2021 OPP as our independent directors, acting as a group, authorized the issuance of a new award of LTIP Units on May 4, 2021 to be issued to the Advisor under the 2021 OPP after the performance period under the 2018 OPP expired on July 19, 2021. The six months ended June 30, 2021 includes expenses for both the 2018 OPP and the 2021 OPP (see Note 12— Equity-Based Compensation). The performance period for the 2018 OPP ended on July 19, 2021 and therefore no further expense will be recorded for the 2018 OPP after the third quarter of 2021.
In addition, there were higher equity-based compensation expenses for restricted shares recorded in the first six months of 2021 which was due to new grants as well as an amendment to the original award agreement on February 26, 2021 for restricted shares previously issued to our former chief financial officer which accelerated the vesting of those restricted shares on April 9, 2021 upon the effectiveness of her resignation. These restricted shares were scheduled to vest in 25% increments on each of the first four anniversaries of the grant date (September 15, 2020). Also, we recorded additional expense for the excess of the new value of those awards on the date of modification over the fair value of the awards immediately prior to the amendment.In addition, we granted our former chief financial officer an additional award of restricted shares that also fully vested upon the effectiveness of her resignation April 9, 2021, contributing to the increase to equity-based compensation expense recorded during the six months ended June 30, 2021. The acceleration of vesting of the prior grant and the new grant resulted in approximately $1.1 million of increased equity-based compensation expense recorded during the six months ended June 30, 2021.
General and Administrative Expense
General and administrative expense decreased $2.2 million to $10.0 million for the six months ended June 30, 2021, compared to $12.2 million for the six months ended June 30, 2020. This decrease was due to a change in estimate reflected as a reduction of expense related to 2020 bonus awards made by the Advisor to employees of the Advisor or its affiliates of $1.4 million (see Note 10—Related Party Transactions and Arrangements in our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information), $0.5 million of decreased legal fees and $0.3 million of decreased miscellaneous general and administrative expenses incurred during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The decrease in legal fees primarily relates to increased costs incurred during the three
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months ended June 30, 2020 relating to discussions with tenants during the onset of the COVID-19 pandemic. Such costs have declined significantly in 2021.
Depreciation and Amortization Expense
Depreciation and amortization expense decreased $5.0 million to $64.7 million for the six months ended June 30, 2021, compared to $69.8 million for the six months ended June 30, 2020. Depreciation and amortization expense was impacted by a decrease $8.3 million from our Six Month Same Store properties and a decrease of $0.1 million from our Disposals Since January 1, 2020, partially offset by an increase of $3.2 million related to our Acquisitions Since January 1, 2020.
The decrease in our Six Month Same Store depreciation was primarily due to the write-off of tenant improvements at one of our properties. During the second quarter of 2020, a tenant in the health club business in one of our properties declared bankruptcy and vacated its space. We were in the process of funding improvements that were being made to the space for the tenant. In addition, improvements being made by the tenant were not paid for and we accrued approximately $2.3 million to pay liens on the property by the tenant’s contractors. We determined that certain of the improvements no longer had any value in connection with any foreseeable replacement tenant and wrote off approximately $3.1 million which is recorded in depreciation and amortization expense in the consolidated statement of operations. Additionally, in the six months ended June 30, 2020, we incurred $3.3 million of amortization expense related to $2.1 million of lease terminations in the single-tenant portfolio and $1.2 million in the multi-tenant portfolio. The remaining difference related to certain improvements becoming wholly depreciated in the current and prior periods.
Gain on Sale/Exchange of Real Estate Investments
During the six months ended June 30, 2021, we sold five properties for an aggregate contract price of $3.1 million, resulting in aggregate gains on sale of $0.3 million. During the six months ended June 30, 2020, we sold six properties which resulted in gains on sale. These properties sold for an aggregate contract price of $13.3 million, resulting in aggregate gains on sale of $4.3 million.
Interest Expense
Interest expense increased $1.8 million to $39.7 million for the six months ended June 30, 2021, compared to $37.9 million for the six months ended June 30, 2020. This increase was mainly attributable to accelerated amortization from write-offs of deferred financing costs, totaling approximately $0.4 million during the three months ended June 30, 2021, as well an additional $1.6 million of amortization from deferred financing costs from mortgage notes payable which were not present during the three months ended June 30, 2020. Additionally, the increase was attributable to higher combined average mortgage notes payable and borrowings under the Credit Facility during the six months ended June 30, 2021. These increases were partially offset by lower average interest rates.
During the six months ended June 30, 2021 and 2020, the average outstanding balances on our mortgage notes payable were $1.5 billion and $1.3 billion, respectively, and our average outstanding balance under our Credit Facility was $268.2 million and $436.5 million, respectively. For the six months ended June 30, 2021 and 2020, the weighted-average interest rates on our mortgage notes payable were 3.98% and 4.55% and the weighted-average interest rates on our Credit Facility were 2.79% and 3.13%, respectively.
Other Income
Other income was $0.9 million and $20,000 for the three months ended June 30, 2022 and 2021, respectively. The increase in other income during the three months ended June 30, 2022 was primarily due to the settlement of $0.9 million of liens incurred on our Prairie Towne property in the three months ended June 30, 2020 as a result of a settlement with the lien holder during the three months ended June 30, 2022.
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Comparison of the Six Months Ended June 30, 2022 and 2021
 Six Months Ended June 30,Increase (Decrease)
20222021$
Revenue from tenants$211,872 $160,764 $51,108 
Operating expenses: 
Asset management fees to related party16,122 15,243 879 
Property operating expense46,659 26,768 19,891 
Impairment of real estate investments64,896 91 64,805 
Acquisition, transaction and other costs485 178 307 
Equity-based compensation7,021 9,630 (2,609)
General and administrative15,223 9,989 5,234 
Depreciation and amortization84,261 64,747 19,514 
Total operating expenses234,667 126,646 108,021 
          Operating (loss) income before gain on sale of real estate investments(22,795)34,118 (56,913)
Gain on sale of real estate investments67,007 297 66,710 
   Operating income44,212 34,415 9,797 
Other (expense) income:
Interest expense(52,069)(39,695)(12,374)
Other income962 44 918 
Gain on non-designated derivatives2,250 — 2,250 
Total other expense, net(48,857)(39,651)(9,206)
Net loss(4,645)(5,236)591 
Net (income) loss attributable to non-controlling interests(6)8 (14)
Allocation for preferred stock(11,674)(11,588)(86)
Net loss attributable to common stockholders$(16,325)$(16,816)$491 
Net Loss Attributable to Common Stockholders
Net loss attributable to common stockholders was $16.3 million for the six months ended June 30, 2022, as compared to net loss attributable to common stockholders of $16.8 million for the six months ended June 30, 2021. The change in net loss attributable to common stockholders is discussed in detail for each line item of the consolidated statements of operations and comprehensive loss in the sections that follow.
Same Store Properties
Information based on Same Store, Acquisitions and Dispositions (as each are defined below) allows us to evaluate the performance of our portfolio based on a consistent population of properties owned for the entire period of time covered. As of June 30, 2022, we owned 1,056 properties. There were 896 properties owned for the entire six months ended June 30, 2022 and 2021 (our “Six Month Same Store Properties”) which were 92.6% leased as of June 30, 2022, and 90.5% leased after giving effect to the C&S Grocery lease expiration on July 1, 2022 representing approximately 360,000 square feet. Since January 1, 2021 and through June 30, 2022, we acquired 160 properties (our “Acquisitions Since January 1, 2021”) which were 87.5% leased as of June 30, 2022, and disposed of 24 properties (our “Dispositions Since January 1, 2021”).
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Single-Tenant PropertiesMulti-Tenant PropertiesTotal Properties
Number of properties, December 31, 202088733920
Acquisition activity during the year ended December 31, 202169—69
Disposition activity during the year ended December 31, 2021(13)—(13)
Number of properties, December 31, 202194333976
Acquisition activity during the six months ended June 30, 2022127991
Disposition activity during the six months ended June 30, 2022(11)—(11)
Number of properties, June 30, 20229441121,056
Number of Same Store Properties86333896
Net Operating Income
Net operating income (“NOI”) is a non-GAAP financial measure used by us to evaluate the operating performance of our real estate portfolio. NOI is equal to revenue from tenants less property operating expense. NOI excludes all other financial statement amounts included in net loss attributable to common stockholders. We believe NOI provides useful and relevant information because it reflects only those income and expense items that are incurred at the property level and presents such items on an unlevered basis. See “Non-GAAP Financial Measures” included elsewhere in this Quarterly Report on Form 10-Q for additional disclosure and a reconciliation to our net loss attributable to common stockholders.
Segment Results — Single-Tenant Properties
The following table presents the components of NOI and the period change within the single-tenant segment for the six months ended June 30, 2022 and 2021:
Same Store (1)
Acquisitions (2)
Disposals (3)
Total (4)
Six Months Ended June 30,Increase (Decrease)Six Months Ended June 30,Increase (Decrease)Six Months Ended June 30,Increase (Decrease)Six Months Ended June 30,Increase (Decrease)
20222021$20222021$20222021$20222021$
Revenue from tenants$98,506 $90,711 $7,795 $8,396 $978 $7,418 $2,267 $10,620 $(8,353)$109,169 $102,309 $6,860 
Less: Property operating7,170 4,935 2,235 705 11 694 99 169 (70)7,974 5,115 2,859 
NOI$91,336 $85,776 $5,560 $7,691 $967 $6,724 $2,168 $10,451 $(8,283)$101,195 $97,194 $4,001 
______
(1)Our single-tenant segment included 863 Six Month Same Store Properties.
(2)Our single-tenant segment included 81 Acquisitions Since January 1, 2021.
(3)Our single-tenant segment included 24 Dispositions Since January 1, 2021.
(4)Our single-tenant segment included 944 total properties.
Revenue from Tenants
Revenue from tenants increased $6.9 million to $109.2 million for the six months ended June 30, 2022, compared to $102.3 million for the six months ended June 30, 2021. The increase was primarily due to incremental income from our Acquisitions Since January 1, 2021 of approximately $7.4 million, and an increase in our Six Month Same Store Properties revenue of approximately $7.8 million, partially offset by a decrease in revenue from our Dispositions Since January 1, 2021 of $8.4 million, most significantly from the disposition of our Sanofi property on January 6, 2022, which had annual rents of approximately $17.2 million.
The increase in our Six Month Same Store Properties revenue was mainly due to an additional $8.8 million of tenant revenue recognized under termination agreements signed since December 2021 (some of which had occupancy periods that expired during the six months ended June 30, 2022, see Note 2 — Summary of Significant Accounting Policies – Revenue Recognition for additional information) recorded in the six months ended June 30, 2022, an increase of $2.3 million of operating expense reimbursement revenue and a decrease of $0.6 million of bad debt expense, which is recorded as a reduction to revenue.
These increases were partially offset by $2.7 million of lower revenue from our United Healthcare property, which had annual rents of $5.4 million prior to its vacancy on June 30, 2021, as well as by $1.4 million of lower revenue from other properties which were vacant in the six months ended June 30, 2022 but which were occupied in the six months ended June 30, 2021.
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Property Operating Expenses
Property operating expense increased $2.9 million to $8.0 million for the six months ended June 30, 2022, compared to $5.1 million for the six months ended June 30, 2021. This increase was primarily driven by an increase of $0.7 million from our Acquisitions Since January 1, 2021, and by an increase from our Six Month Same Store Properties of $2.2 million.
Segment Results — Multi-Tenant Properties
The following table presents the components of NOI and the period change within the multi-tenant segment for the six months ended June 30, 2022 and 2021:
Same Store (1)
Acquisitions (2)
Disposals (3)
Total (4)
Six Months Ended June 30,Increase (Decrease)Six Months Ended June 30,Increase (Decrease)Six Months Ended June 30,Increase (Decrease)Six Months Ended June 30,Increase (Decrease)
20222021$20222021$20222021$20222021$
Revenue from tenants$57,201 $58,455 $(1,254)$45,502 $— $45,502 $— $— $— $102,703 $58,455 $44,248 
Less: Property operating22,505 21,653 852 16,180 — 16,180 — — — 38,685 21,653 17,032 
NOI$34,696 $36,802 $(2,106)$29,322 $— $29,322 $— $— $— $64,018 $36,802 $27,216 
______
(1)Our multi-tenant segment included 33 Six Month Same Store Properties.
(2)Our multi-tenant segment included 79 Acquisitions Since January 1, 2021.
(3)Our multi-tenant segment included 0 Dispositions Since January 1, 2021.
(4)Our multi-tenant segment included 112 total properties.
Revenue from Tenants
Revenue from tenants increased $44.2 million to $102.7 million for the six months ended June 30, 2022, compared to $58.5 million for the six months ended June 30, 2021. This increase in revenue from tenants was due to incremental revenue from our Acquisitions Since January 1, 2021 of approximately $45.5 million ($44.1 million of which was attributable to the CIM Portfolio Acquisition), partially offset by a decrease in our Six Month Same Store Properties revenue of approximately $1.3 million. Please see Note 1 — Organization to our consolidated financial statements in this Quarterly Report on Form 10-Q for further details on the CIM Portfolio Acquisition.
The decrease in our Six Month Same Store Properties revenue was primarily due to $0.9 million of decreased termination fee income, $0.8 million of decreased operating expense reimbursement revenue and a recovery of $0.8 million relating to a lease settlement fee from a tenant which was recorded in the six months ended June 30, 2021. These decreases were partially offset by an increase of $0.7 million due to marginally higher occupancy in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 and by $0.5 million of decreased bad debt expense, which is recorded as a reduction to revenue.
Property Operating Expenses
Property operating expenses primarily consist of the costs associated with maintaining our properties including real estate taxes, utilities, and repairs and maintenance. Property operating expenses increased $17.0 million to $38.7 million for the six months ended June 30, 2022, compared to $21.7 million for the six months ended June 30, 2021. This increase was driven by an increase of approximately $0.9 million in our Six Month Same Store Properties, and by an increase of $16.2 million from our Acquisitions Since January 1, 2021 ($15.7 million of which was attributable to the CIM Portfolio Acquisition). Please see Note 1 — Organization to our consolidated financial statements in this Quarterly Report on Form 10-Q for further details on the CIM Portfolio Acquisition.
Other Results of Operations
Asset Management Fees to Related Party
Asset management fees paid to the Advisor increased $0.9 million to $16.1 million for the six months ended June 30, 2022, compared to $15.2 million for the six months ended June 30, 2021, primarily due to an increase of $1.2 million in the variable portion of the base management fee during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 due to our increased equity issuances in 2022 over the comparable period in 2021, partially offset by a decrease of $0.3 million of incentive variable management fees.
The variable portion of the base management fee is calculated on a monthly basis and is equal to one-twelfth of 1.25% of the cumulative net proceeds of any equity raised by us (including, among other things, common stock, including shares subject to repurchase, preferred stock and certain convertible debt but excluding among other things, equity-based compensation). The variable portion of the base management fee will increase in connection with future issuances of equity securities.
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In light of the unprecedented market disruption resulting from the COVID-19 pandemic, in March 2020, we agreed with the Advisor to amend the advisory agreement to temporarily lower the quarterly thresholds we must reach on a quarterly basis for the Advisor to receive the variable incentive management fee through the end of 2020, and in January 2021, we agreed with the Advisor to further amend the advisory agreement to extend the expiration of these thresholds through the end of 2021, at which point it was not renewed. Please see Note 11 — Related Party Transactions and Arrangements to our consolidated financial statements included in this Quarterly Report on Form 10-Q for more information on fees incurred from the Advisor.
Impairment Charges
We recorded impairment charges of $64.9 million for the six months ended June 30, 2022, $49.6 million of which related to a multi-tenant property located in Minnesota, $8.0 million of which related to seven vacant single-tenant properties formerly leased to Truist Bank, $3.8 million of which related to one vacant single-tenant property formerly leased to United Healthcare and $3.5 million of which related to a multi-tenant property acquired in the CIM Portfolio Acquisition. The United Healthcare property has been vacant since June 30, 2021 when the tenant did not renew its lease. We previously impaired the United Healthcare property by $26.9 million during the three months ended December 31, 2021. All of the impaired properties were impaired to adjust the properties’ carrying values to their fair values as determined by their respective purchase and sales agreements if under a contract to be disposed, or their estimated fair values if not under a contract to be disposed.
We recorded impairment charges of $0.1 million during the six months ended June 30, 2021 related to a vacant single-tenant held-for-use property which was recorded to adjust the property to its fair value as determined by the income approach. Please see Note 3 — Real Estate Investments to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding impairment charges.
Acquisition, Transaction and Other Costs
Acquisition, transaction and other costs increased $0.3 million to $0.5 million for the six months ended June 30, 2022, compared to $0.2 million for the six months ended June 30, 2021. The increase was primarily due to increased acquisition activity in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.
Equity-Based Compensation
Equity-based compensation decreased by approximately $2.6 million to $7.0 million for the six months ended June 30, 2022 compared to $9.6 million for the six months ended June 30, 2021. This decrease was primarily due to additional non-cash equity-based compensation expense from the 2021 OPP and additional non-cash equity-based compensation expense from a new grant of restricted shares in the second quarter of 2021 as well as an amendment to the original award agreement on February 26, 2021 for restricted shares previously issued to our former chief financial officer (see additional details below).
Our independent directors, acting as a group, authorized the issuance of a new award of LTIP Units on May 4, 2021 which was subsequently issued to the Advisor under the 2021 OPP after the performance period under the 2018 OPP expired on July 19, 2021. The six months ended June 30, 2021 includes expenses for both the 2018 OPP and the 2021 OPP (see Note 13— Equity-Based Compensation). The performance period for the 2018 OPP ended on July 19, 2021 and therefore no further expense has been recorded for the 2018 OPP after the third quarter of 2021.
In addition, there were higher equity-based compensation expenses for restricted shares recorded in the first six months of 2021 which was due to new grants as well as an amendment to the original award agreement on February 26, 2021 for restricted shares previously issued to our former chief financial officer which accelerated the vesting of those restricted shares on April 9, 2021 upon the effectiveness of her resignation. These restricted shares were scheduled to vest in 25% increments on each of the first four anniversaries of the grant date (September 15, 2020). Also, we recorded additional expense for the excess of the new value of those awards on the date of modification over the fair value of the awards immediately prior to the amendment.In addition, we granted our former chief financial officer an additional award of restricted shares that also fully vested upon the effectiveness of her resignation on April 9, 2021, contributing to the increase to equity-based compensation expense recorded during the six months ended June 30, 2021. The acceleration of vesting of the prior grant and the new grant resulted in approximately $1.1 million of increased equity-based compensation expense recorded during the six months ended June 30, 2021.
General and Administrative Expense
General and administrative expense increased $5.2 million to $15.2 million for the six months ended June 30, 2022, compared to $10.0 million for the six months ended June 30, 2021. The increase was primarily due to $2.5 million of increased professional expense reimbursements, as well as a $1.4 million professional fee credit in the six months ended June 30, 2021 which did not occur in the six months ended June 30, 2022. The increased professional expense reimbursements are due to additional staffing needed by the Advisor as a result of the CIM Portfolio Acquisition. Additionally, accounting fees increased $0.4 million, legal fees increased $0.2 million and miscellaneous fees increased $0.8 million in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.
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Depreciation and Amortization Expense
Depreciation and amortization expense increased $19.5 million to $84.3 million for the six months ended June 30, 2022, compared to $64.7 million for the six months ended June 30, 2021. Depreciation and amortization expense was impacted by an increase of $26.5 million related to our Acquisitions Since January 1, 2021 (including, most notably, the CIM Portfolio Acquisition), partially offset by a decrease of $1.8 million from our Six Month Same Store Properties and a decrease of $5.2 million from our Dispositions Since January 1, 2021.
Gain on Sale of Real Estate Investments
During the six months ended June 30, 2022, we sold 11 properties for an aggregate contract price of $295.6 million, resulting in aggregate gains on sale of $67.0 million. During the six months ended June 30, 2021, we sold five properties for an aggregate contract price of $3.1 million, resulting in aggregate gains on sale of $0.3 million.
Interest Expense
Interest expense increased $12.4 million to $52.1 million for the six months ended June 30, 2022, compared to $39.7 million for the six months ended June 30, 2021. This increase was mainly due to interest of $11.3 million on our $500.0 million of 4.50% per annum Senior Notes which were issued in 2021, as well as higher average balances on our mortgage and Credit Facility debt (resulting largely from the assumption of mortgage debt and borrowings under our Credit Facility to finance the CIM Portfolio Acquisition), partially offset by lower average interest rates. Please see Note 1 — Organization to our consolidated financial statements in this Quarterly Report on Form 10-Q for further details on the CIM Portfolio Acquisition.
During the six months ended June 30, 2022 and 2021, the average outstanding balances on our mortgage notes payable were $1.6 billion and $1.5 billion, respectively, and our average outstanding balance under our Credit Facility was $315.9 million and $268.2 million, respectively. For the six months ended June 30, 2022 and 2021, the weighted-average interest rates on our mortgage notes payable were 3.81% and 3.98%, respectively, and the weighted-average interest rates on our Credit Facility were 2.51% and 2.79%, respectively. The reduction of the weighted-average interest rate on our Credit Facility during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 is primarily due to lower credit spreads to LIBOR on our Credit Facility after the amendment which occurred on October 1, 2021.
We anticipate that the interest rate on our Credit Facility will increase throughout 2022 as a result of, among other things, recent actions taken by the Federal Reserve Board to increase interest rates and its intention to reduce the amount of assets on its balance sheet. See Item 1.A Risk Factors for additional information.
Other Income
Other income was $1.0 million for the six months ended June 30, 2022, compared to $44,000 for the six months ended June 30, 2021, compared2021. The increase in other income during the six months ended June 30, 2022 was primarily due to $0.1the settlement of $0.9 million of liens incurred on our Prairie Towne property in the three months ended June 30, 2020 as a result of a settlement with the lien holder during the six months ended June 30, 2022.
Gain on Non-Designated Derivative
Gain on non-designated derivatives for the six months ended June 30, 2020.
Loss2022 was $2.3 million, and was related to an embedded derivative on Non-Designated Derivative
the common stock issued in connection with the CIM Portfolio Acquisition. The lossstock was issued in the three months ended March 31, 2022. No gain on non-designated derivative instrumentsderivatives was immaterial forrecorded in the six months ended June 30, 2021 and relates to an interest rate cap on a mortgage note payable entered into in the fourth quarter of 2020 that is designed to protect us from adverse interest rate changes.2021. For additional information, see Note 78 — Derivatives and Hedging Activities to our consolidated financial statements included in this Quarterly Report on Form 10-Q.
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Cash Flows from Operating Activities
Our cash flows provided by or used in operating activities is affected by the rental income generated from leasing activity, including leasing activity due to acquisitions and dispositions, restricted cash we are required to maintain, the timing of interest payments, the receipt of scheduled rent payments and the level of property operating expenses. Our cash flows from operating activities waswere $104.6 million during the six months ended June 30, 2022 and consisted of net loss of $4.6 million, adjusted for non-cash items of $90.5 million, including depreciation and amortization of tangible and intangible real estate assets, amortization of deferred financing costs, amortization of mortgage premiums on borrowings, share-based compensation, gain on non-designated derivatives, gain on sale of real estate investments and impairment charges. In addition, cash flows from operating activities were impacted by a decrease in the straight-line rent receivable of $2.6 million, a decrease in deferred rent of $1.4 million, an increase in accounts payable and accrued expenses of $18.4 million and a decrease in prepaid expenses and other assets of $4.4 million.
Our cash flows from operating activities were $65.4 million during the six months ended June 30, 2021 and consisted of net loss of $5.2 million, adjusted for non-cash items of $76.9 million, including depreciation and amortization of tangible and intangible real estate assets, amortization of deferred financing costs, amortization of mortgage premiums on borrowings, share-basedshare-
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based compensation, gain on sale of real estate investments and impairment charges. In addition, cash flows from operating activities were impacted by an increase in the straight-line rent receivable of $3.5 million, a decrease in deferred rent of $0.2 million, an increase in accounts payable and accrued expenses of $0.7 million and an increase in prepaid expenses and other assets of $3.8 million.
OurCash Flows from Investing Activities
The net cash flows from operatingused in investing activities was $49.2 million during the six months ended June 30, 2020 and2022 of $686.4 million consisted primarily of net loss of $23.7 million, adjusted for non-cash items of $82.2 million, including depreciation and amortization of tangible and intangibleinvestments in real estate and other assets amortization of deferred financing costs, amortization$954.7 million (including, most notably, the CIM Portfolio Acquisition), capital expenditures of mortgage premiums on borrowings, share-based compensation, gain on$4.8 million and deposits for real estate acquisitions of $0.1 million, partially offset by cash received from the sale of real estate investments and impairment charges. In addition, cash flows from operating activities were impacted by an increase in the straight-line rent receivable of $7.7 million, an increase in deferred rent of $1.0 million, an increase in accounts payable and accrued expenses of $3.3 million and an increase in prepaid expenses and other assets of $4.1$273.3 million.
Cash Flows from Investing Activities
The net cash used in investing activities during the six months ended June 30, 2021 of $70.1 million consisted primarily of cash paid for investments in real estate and other assets of $66.0 million, capital expenditures of $4.2 million and deposits for real estate acquisitions of $2.8 million, partially offset by cash received from the sale of real estate investments of $2.9 million.
The net cash used in investing activities during the six months ended June 30, 2020 of $101.7 million consisted primarily of cash paid for investments in real estate and other assets of $102.2 million, capital expenditures of $4.0 million and deposits for real estate acquisitions of $2.2 million, partially offset by cash received from the sale of real estate investments, (net of mortgage loans repaid) of $6.8 million.
Cash Flows from Financing Activities
The net cash provided by financing activities of $431.9 million during the six months ended June 30, 2022 consisted primarily of proceeds from our Credit Facility of $513.0 million and net proceeds from the issuance of Class A common stock of $24.9 million. These cash inflows were partially offset by cash dividends paid to holders of our Class A common stock of $55.3 million, payments on our Credit Facility of $25.0 million, payments on our mortgages of $10.1 million, cash dividends paid to holders of our Series A Preferred Stock (as defined below) of $7.4 million, cash dividends paid to holders of our Series C Preferred Stock (as defined below) of $4.2 million and payments of deferred financing costs of $2.9 million.
The net cash provided by financing activities was $43.3 million during the six months ended June 30, 2021. Cash inflows consisted primarily of net proceeds from mortgage notes payable, primarily resulting from the issuance of net lease mortgage notes and related mortgage payoffs, of $130.3 million, net proceeds from the issuance of Class A common stock of $77.0 million, net proceeds from the issuance of 7.50% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share (“Series A Preferred Stock”) of $2.2 million and net proceeds from the issuance of 7.375% Series C Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share (“Series C Preferred Stock”) of $25.6 million. These cash inflows were partially offset by cash dividends paid to payments on our Credit Facility of $125.1 million, cash dividends paid to holders of our Class A common stock of $46.3 million, cash dividends paid to holders of our Series A Preferred Stock of $7.4 million and cash dividends paid to holders of our Series C Preferred Stock of $2.3 million.
The net
Liquidity and Capital Resources
Our principal demands for cash provided by financing activities of $109.4 million during the six months ended June 30, 2020 consisted primarily of net borrowingsare to fund operating and administrative expenses, debt service obligations, dividends on our Credit Facility of $170.0 million and net proceeds received from the issuance of Series A Preferred Stock of $19.6 million, partially offset by cash dividends paid to holders of Class A common stock of $52.9 million, cash(including our shares subject to repurchase), dividends paid to holders ofon our Series A Preferred Stock, dividends on our Series C Preferred Stock, distributions on our LTIP Units and distributions for limited partnership units that correspond to shares of $6.9 millionour Class A common stock, and paymentscapital expenditures. In addition, our demand for cash includes the purchase of financing costsadditional properties.
CIM Portfolio Acquisition
In December 2021, we signed a purchase and depositssale agreement for the CIM Portfolio Acquisition, which consists of $18.2 million.
Liquidity79 multi-tenant retail centers and Capital Resources
The negative impactstwo single-tenant properties, for a contract purchase price of $1.3 billion. We closed on the properties of the COVID-19 pandemic have causedCIM Portfolio Acquisition in multiple stages as follows:
•In the three months ended March 31, 2022, we closed on the acquisition of 56 of these properties for an aggregate contract purchase price of $801.1 million. We funded the closing of these properties with cash of $728.4 million, including $378.0 million of borrowings under our Credit Facility, the assumption of $19.3 million of existing mortgage debt and may continue to cause certainthe issuance of 6,450,107 shares of our tenantsClass A common stock, representing consideration of $50.0 million, for accounting purposes, in value at issuance ($53.4 million of value subject to be unablerepurchase), which were issued at a weighted-average price of $7.75 per share in value at issuance ($8.28 per share of value subject to make rent payments to us timely, or at all, which has had, and could continue to have,repurchase).
•In the three months ended June 30, 2022, we closed on 24 additional properties from the CIM Portfolio Acquisition for an adverse effect onaggregate contract purchase price of $452.8 million in three closings. The acquisitions were funded with the amountassumption of cash we receive from our operations. We have taken proactive steps with regard to rent collections to mitigate$294.5 million of fixed-rate mortgage debt, $128.2 million of $135.0 million of borrowings under the impact on our business and liquidity. The ultimate impact on our resultsCredit Facility, the application of operations, our liquidity$23.8 million of the Company’s $40.0 million deposit and the ability of our tenants to continue to pay us rent will dependremainder with cash on numerous factors including the overall lengthhand. The assumed mortgages bear stated interest rates between 3.65% and severity of the COVID-19 pandemic. Management is unable to predict the nature4.62% and scope of any of these factors. Because substantially all of our income is derived from rentals of commercial real property, our business, income, cash flow, results of operations, financial condition, liquidity, prospectsmature between April 2023 and ability to service our debt obligations, our ability to consummate future property acquisitions and our ability to pay dividends to our stockholders would be adversely affected if a significant number of tenants are unable to meet their obligations to us. In addition to the discussion below, please see the “Overview —Management Update on the Impacts of the COVID-19 Pandemic” section above for additional information on the risks and uncertainties associated with the COVID-19 pandemic and management’s actions taken in response.September 2033.
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•We closed on the one remaining property from the CIM Portfolio Acquisition on July 7, 2022 for a contract purchase price of $71.1 million. The acquisition was funded with the assumption of $39.0 million of fixed-rate mortgage debt, the application of the remaining $16.2 million of our $40.0 million deposit, and the remainder with cash on hand (including $6.8 million of previous borrowings under the Credit Facility). The assumed mortgage bears a stated interest rate of 4.05% and matures in May 2024 (see Note 16 — Subsequent Events).
•The aggregate contract purchase prices above do not include contingent consideration relating to leasing activity at each respective acquired property for a six-month period subsequent to the respective closing dates of each acquired property. We paid $10.2 million and $13.3 million for such contingent consideration in the three months ended March 31, 2022 and three months ended June 30, 2022, respectively. As of June 30, 2022, we accrued $10.8 million of contingent consideration based on leases executed as of June 30, 2022. We paid $16.1 million in July 2022, which includes the accrual for $10.8 million, and additional amounts may be due for leases executed through January 2023 (six months following the acquisition date of the final property of the CIM Portfolio Acquisition).
The cash used in the CIM Portfolio Acquisition, including the one closing subsequent to June 30, 2022, consisted of $420.5 million, which included net proceeds from the approximately $260.7 million sale of our Sanofi property, the remaining proceeds from our Senior Notes offering, and $513.0 million from borrowings under our Credit Facility. In addition, we acquired 10 additional single-tenant properties and one additional multi-tenant property in the six months ended June 30, 2022 for an aggregate contract purchase price of $58.4 million, which was funded entirely with cash on hand. Of the 91 properties acquired in the six months ended June 30, 2022, 60 properties were added to the borrowing base of the Credit Facility.
Short-Term Material Cash Requirements
As of June 30, 2022 and December 31, 2021, we had cash and cash equivalents of $69.4 million and $214.9 million, respectively.
We expect to fund our future short-term operating liquiditymaterial cash requirements over the next year through a combination of cash on hand, net cash provided by our property operations and proceeds fromborrowings under our Credit Facility. Pursuant to our Credit Facility, we are restricted from using proceeds from borrowings under the Credit Facility to accumulate or maintain cash or cash equivalents in excess of amounts necessary to meet current working capital requirements. We may also generate additional liquidity through property dispositions and, to the extent available, secured or unsecured borrowings including the issuance of additional Senior Notes or similar securities, issuances under our “at the market” equity offering program for Class A common stock (the “Class A Common Stock ATM Program”), our “at the market” equity offering program for Series A Preferred Stock (the “Series A Preferred Stock ATM Program”), our “at the market” equity offering program for Series C Preferred Stock (the “Series C Preferred Stock ATM Program”), oras well as other offerings of debt or equity securities.
As of June 30, 2021 and December 31, 2020, we had cash and cash equivalents of $137.1 million and $102.9 million, respectively, and availability for future borrowings under our Credit Facility was $252.6 million and $126.0 million, respectively.
Mortgage Notes Payable and Credit FacilityDeleveraging Initiative
In May 2021, we began a deleveraging initiative to reduce our net debt relative to our earnings. We hope to driveachieve this initiative by:
•reducing outstanding debt;debt over time;
•funding acquisitions through cash on hand rather than proceeds from debt, or at lower debt-to-equity ratios;
•raising equity to fund acquisitions and pay down debt; and
•increasing revenues through external and internal growth factors such as property acquisitions and multi-tenant leasing activity.
The CIM Portfolio Acquisition has increased our leverage in the six months ended June 30, 2022 as compared to prior periods. We expect that our leverage will further increase in the third quarter of 2022 as a result of assuming an additional mortgage to finance the remainder of the CIM Portfolio Acquisition. We plan to continue with our deleveraging strategy now that the CIM Portfolio Acquisition is complete. We may, however, issue additional Senior Notes or similar securities in the future particularly as we revise our capital structure following the CIM Portfolio Acquisition in a similar fashion as we may add or refinance existing mortgage debt or indebtedness under our Credit Facility. We have additionally identified certain assets acquired in the CIM Portfolio Acquisition, and other properties in our portfolio, that we intend to market for sale, the net proceeds of which, after taxes and selling costs, will be used to repay debt. We have entered into an agreement to dispose of one such multi-tenant property acquired in the CIM Portfolio Acquisition for a contract sales price of $10.4 million. During the three months ended June 30, 2022, we recorded $3.5 million of impairment charges on this property. There is no assurance that we will be able to enter into further agreements to sell other assets on acceptable terms and conditions, or at all.
Mortgage Notes Payable, Credit Facility and Senior Notes — June 30, 2022
As of June 30, 2021,2022, we had $1.7$1.8 billion of gross mortgage notes payable outstanding, $500.0 million of gross Senior Notes outstanding and $155.7$488.0 million outstanding under our Credit Facility. Of our total gross debt, 91.4%82.5% is fixed-rate (including by swap agreement), and 8.6%17.5% is variable-rate.
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As of June 30, 2021,2022, our net debt to gross asset value ratio was 38.4%50.6%. We define net debt as the principal amount of our outstanding debt (excluding the effect of deferred financing costs, net and mortgage premiums and discounts, net) less cash and cash equivalents. Gross asset value is defined as total assets plus accumulated depreciation and amortization. As of June 30, 2021,2022, the weighted-average effective interest rates on the mortgage notes payable, and Credit Facility and Senior Notes were 3.78%3.82%, 3.43% and 2.79%4.50%, respectively.
We assumed $313.8 million in fixed rate mortgage debt in the six months ended June 30, 2022 related to the closing of 80 properties of the CIM Portfolio Acquisition, which bear interest at stated rates between 3.65% and 4.62%, maturing between April 2023 and September 2033. In addition, we assumed $39.0 million of mortgage debt secured by the final property of the CIM Portfolio Acquisition on July 7, 2022.
Based on debt outstanding as of June 30, 2021,2022, future anticipated principal payments on our mortgage notes payable for the remainder of 20212022 and the year ended December 31, 20222023 are $2.1$3.1 million and $4.7$289.8 million, respectively. We do not anticipate the need to make any significant additional principal payments for the remainder of 2022, but for the year ended December 31, 2023, we anticipate the need to repay or refinance $288.3 million of the total $352.8 million we have assumed from the CIM Portfolio Acquisition in 2022 (including the additional $39.0 million fixed-rate mortgage assumed subsequent to June 30, 2022, see Note 16 — Subsequent Events for additional information). In light of the current direction of interest rates, the rates we pay on debt which we refinance may be higher than the rates on debt we assume.
As of June 30, 2021,2022, we had $4.1$5.1 billion in gross real estate assets, at cost, and we had pledged approximately $2.8$3.0 billion in gross real estate assets, at cost, as collateral for our mortgage notes payable. In addition, approximately $1.1$2.0 billion of these gross real estate investments, at cost, were included in the unencumbered asset pool comprising the borrowing base under the Credit Facility.Facility which had a total borrowing capacity thereunder of $526.6 million. Therefore, this real estate is only available to serve as collateral or satisfy other debts and obligations if it is first removed from the borrowing base under the Credit Facility, which would reduce the amount available to us on the Credit Facility.
Net Lease Mortgage Notes
On June 3, 2021, certainthrough subsidiaries, of ours (the “2021 Issuers”) completed the issuance ofwe issued $318.0 million aggregate principal amount of Net Lease Mortgage Notes (the “2021 Net Lease Mortgage Notes”) in a private placement exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). The 2021 Net Lease Mortgage Notes are cross-collateralized with the $ 242.0$242.0 million in aggregate principal amount of Net Lease Mortgage Notes issued through subsidiaries in 2019 (the “2019 Net Lease Mortgage Notes” and, together with the 2021 Net Lease Mortgage Notes, the “Notes”) issued by certain other subsidiaries of ours (the “2019 Issuers” and, together with the 2021 Issuers, the “Issuers”). The Notes were issued using a master trust structure, which enables additional series of notes to be issued upon the contribution of additional properties to the collateral pool without the need to structure a new securitization transaction. Any new notes that are so issued will be cross-collateralized with the Notes.
The 2021 Net Lease Mortgage Notes were issued in six classes: Class A-1 (AAA), Class A-2 (AAA), Class A-3 (A), Class A-4 (A), Class B-1 (BBB) and Class B-2 (BBB). The Class A-1 (AAA) Notes are rated AAA (sf) by Standard & Poors and are comprised of $55.0 million initial principal amount of 2021 Net Lease Mortgage Notes with an anticipated repayment date in May 2028 and an interest rate of 2.21%. The Class A-2 (AAA) Notes are rated AAA (sf) by Standard & Poors and are comprised of $95.0 million initial principal amount of 2021 Net Lease Mortgage Notes with an anticipated repayment date in May 2031 and an interest rate of 2.79%. The Class A-3 (A) Notes are rated A (sf) by Standard & Poors and are comprised of $35.0 million initial principal amount of 2021 Net Lease Mortgage Notes with an anticipated repayment date in May 2028 and an interest rate of 3.03%. The Class A-4 (A) Notes are rated A (sf) by Standard & Poors and are comprised of $55.0 million initial principal amount of 2021 Net Lease Mortgage Notes with an anticipated repayment date in May 2031 and an interest rate of 3.60%.
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The Class B Notes are currently retained by the OP and are eliminated upon consolidation, and are therefore not presented in our consolidated financial statements, butstatements. The Class B Notes may be sold to unaffiliated third parties in the future. The Class B-1 (BBB) Notes are rated BBB (sf) by Standard & Poors and are comprised of $30.0 million initial principal amount of 2021 Net Lease Mortgage Notes with an anticipated repayment date in May 2028 and an interest rate of 4.02%. The Class B-2 (BBB) Notes are rated BBB (sf) by Standard & Poors and are comprised of $48.0 million initial principal amount of 2021 Net Lease Mortgage Notes with an anticipated repayment date in May 2031 and an interest rate of 4.58%. The 2021 Net Lease Mortgage Notes have a rated final payment date in May 2051.
The 2019 Net Lease Mortgage Notes were issued in two classes, Class A-1 (AAA) and Class A-2 (A). The Class A-1 (AAA) Notes are rated AAA (sf) by Standard & Poors and are comprised of $121.0 million initial principal amount of 2019 Net Lease Mortgage Notes with an anticipated repayment date in May 2026 and an interest rate of 3.78%. The Class A-2 (A) Notes are rated A (sf) by Standard & Poors and are comprised of $121.0 million initial principal amount of 2019 Net Lease Mortgage Notes with an anticipated repayment date in May 2029 withand an interest rate of 4.46%. The 2019 Net Lease Mortgage Notes have a rated final payment date in May 2049.
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The Notes may be redeemed at any time prior to their anticipated repayment date subject to payment of a make-whole premium. If any class of Notes is not paid in full at its respective anticipated repayment date, additional interest will begin to accrue on those Notes.
Senior Notes
The collateral pool for theSenior Notes is comprised of 357 of our double-were issued on October 7, 2021 and triple-net leased single tenant properties, together with the related leasesare fully and certain other rightsunconditionally guaranteed (the “Senior Note Guarantees”) on a joint and interests. 17 of such properties were ownedseveral basis by the 2021 Issuers prior to the issuancesubsidiaries of the 2021 Net Lease Mortgage Notes, 136Company and the OP that are guarantors under the Credit Facility. Subject to certain exceptions, each future subsidiary of such propertiesthese entities that subsequently guarantees indebtedness under the Credit Facility, any other syndicated loan facility or certain capital markets indebtedness, in each case, will be required to execute a Senior Note Guarantee.
As of June 30, 2022, we were transferred toin compliance with all the 2021 Issuers in connection withoperating and financial covenants under the issuance of the 2021 Net Lease MortgageSenior Notes and 204 mortgages.
Credit Facility — Terms and Capacity
As of such properties were already owned by the 2019 Issuers and securing the 2019 Net Lease Mortgage Notes. The net proceeds from the sale of the 2021 Net Lease Mortgage Notes were used to repay $74.6June 30, 2022 we had $488.0 million in indebtedness secured by mortgages on 101 individual properties and $80.1 million that was outstanding under the Credit Facility. Approximately $75.0 million of the remaining net proceeds were available to us for general corporate purposes. A total of 153 properties were added as part of the collateral pool securing the Notes, which are comprised of 108 properties which were removed from the borrowing baseWe did not have any amounts outstanding under the Credit Facility (reducing availabilityas of December 31, 2021.
On October 1, 2021, we entered into an amendment and restatement of the Credit Facility with BMO Harris Bank N.A., as administrative agent, and the other lenders party thereto. The aggregate total commitments under the Credit Facility), 41 properties previously secured by mortgagesFacility were increased to $815.0 million, including a $50.0 million sublimit for letters of credit and four previously unencumbered properties, two of which were recently acquired.
Patton Creek Mortgage
On June 28, 2021, we repaid the mortgage loan secured by our Patton Creek property in full using a portion of the proceeds from the issuance of the 2021 Net Lease Mortgage Notes.$55.0 million sublimit for swingline loans. The mortgage loan had a principal balance of $34.0 million and bore interest at a floating interest rate of one-month LIBOR plus 4.25% and matured on December 6, 2021.
Credit Facility - Terms and Capacity
As of June 30, 2021 and December 31, 2020, we had $155.7 million outstanding under our Credit Facility. Our Credit Facility provides for commitments for aggregate revolving loan borrowings and includes an uncommitted “accordion feature” whereby, upon the request of the OP, but at the sole discretion of the participating lenders,permitting us to increase the commitments under the Credit Facility may be increased by up to an additional $500.0$435.0 million, subject to obtaining commitments from new lenders or additional commitments from participating lenders and certain customary conditions. As
The Credit Facility is supported by a pool of June 30, 2021, we had increased our commitments througheligible unencumbered properties that are owned by the subsidiaries of the OP that serve as Guarantors. We may add or remove properties to or from this accordion feature by $125.0pool so long as at any time there are at least 15 eligible unencumbered properties with a value of at least $300.0 million, bringing total aggregate commitments to $540.0 million, and leaving $375.0 million of potential available commitments remaining.
among other things. The amount available for future borrowings under the Credit Facility is baseddepends on the lesser of (1) a percentage of the value of the pool of eligible unencumbered real estate assets comprising the borrowing base, and (2) a maximum amount permitted to maintain a minimum debt service coverage ratio with respectoutstanding thereunder relative to the borrowing base, in each case, as ofaggregate commitments; however, the determination date. As of June 30, 2021,amount we had a total borrowing capacitymay borrow under the Credit Facility of $408.3 million based onwill be limited by financial maintenance covenants. At the valueexecution of the borrowing base underamendment and restatement of the Credit Facility. Of this amount, $155.7Facility, $186.2 million was outstanding under the Credit Facility as of June 30, 2021 and $252.6 million remained available for future borrowings.
As described above, we used $80.1 millionFacility. This amount was subsequently repaid with a portion of the net proceeds from the 2021 Net Lease Mortgage Notes when the 2021 Net Lease Mortgage Notes were issued in early June 2021 to repay amounts outstanding under the Credit Facility, and later in June 2021, we used $40.0 million of the remaining proceeds from the issuance of the 2021 Net Lease Mortgage Notes as well as cash on hand to repay $45.0 million of outstanding borrowings under the Credit Facility.Senior Notes.
OurThe Credit Facility requires payments of interest only prior to maturity. At the execution of the amendment and matures on April 26, 2022. We also have a one-time right, subject to customary conditions, to extendrestatement of the maturity date for an additional term of one year to April 26, 2023. Borrowings under our Credit Facility the interest rate was LIBOR plus 1.90% per annum. Following the amendment of the Credit Facility, borrowings bear interest at either (i) the Base Rate (as defined in the Credit Facility) plus an applicable spread ranging from 0.60%0.45% to 1.20% depending on our consolidated leverage ratio1.05%, or (ii) LIBOR plus an applicable marginspread ranging from 1.60%1.45% to 2.20%2.05%, in each case depending on our consolidated leverage ratio. From July 24, 2020 until delivery ofThese spreads reflect a reduction from the compliance
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certificatepreviously applicable spreads. In addition, pursuant to the amendment to the Credit Facility, (i) if either we or the OP achieves an investment grade credit rating, the OP can elect for the fiscal quarter ended June 30, 2021,spread to be based on the margin was 1.50% with respect tocredit rating of ours or the Base RateOP, and 2.50% with respect to LIBOR regardless of our consolidated leverage ratio. The(ii) the “floor” on LIBOR iswas decreased from 0.25% to 0%. The Credit Facility includes provisions related to the anticipated transition from LIBOR to an alternative benchmark rate. As of June 30, 20212022, we have elected to use the LIBOR rate for all our borrowings under the Credit Facility.
The Credit Facility matures on April 1, 2026, subject to our right, subject to customary conditions, to extend the maturity date by up to two additional six-month terms. Borrowings under the Credit Facility may be prepaid at any time, in whole or in part, without premium or penalty, subject to customary LIBOR breakage costs.
As of June 30, 2022 we were in compliance with the operating and financial covenants under the Credit Facility.
Of the 91 properties acquired in the six months ended June 30, 2022, 60 properties were added to the borrowing base of the Credit Facility. As of June 30, 2022 we had $38.6 million available for future borrowings.
See Note 5 — Credit Facility to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding our Credit Facility.
LIBOR Exposure
In July 2017, the Financial Conduct Authority (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 (“SOFR”) as its preferred alternative to LIBOR in derivatives and other financial contracts. On November 30, 2020, the Financial Conduct Authority announced a partial extension of this deadline, indicating its intention to cease the publication of the one-week and two-month USD LIBOR settings immediately following December 31, 2021, and the remaining USD LIBOR settings immediately following the LIBOR publication on June 30, 2023.
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While we expect LIBOR to be available in substantially its current form until at least the end of June 2023, it is possible that LIBOR will become unavailable prior to that time. To transition from LIBOR under the Credit Facility, we will either utilize the Base Rate (as defined in the Credit Facility) or an alternative benchmark established by the agent in accordance with the terms of the Credit Facility, which will be SOFR if available or an alternate benchmark that is being widely used in the market at that time as selected by the agent.
Acquisitions and Dispositions — Three and Six Months Ended June 30, 20212022
One of our primary uses of cash during the three and six months ended June 30, 20212022 was for acquisitions of properties.
During the three months ended June 30, 2021,2022 we acqacquired 32 uired 17 properties for an aggregate purchase price of $28.9$495.7 million, including capitalized acquisition costs. The acquisitions during the three months ended June 30, 20212022 include 24 properties from the CIM Portfolio Acquisition. The acquisition of the 24 properties from the CIM Portfolio Acquisition were funded with the assumption of $294.5 million of fixed-rate mortgage debt, $128.2 million of $135.0 million of borrowings under the Credit Facility, the application of $23.8 million of our $40 million deposit, $10.8 million of contingent consideration to be paid in the second half of 2022 and the remainder with cash on hand, comprising a combination of proceeds fromhand. The remaining eight properties acquired in the issuance and sale of Class A common stock (discussed below) and Series C Preferred Stock (discussed below).three months ended June 30, 2022 were funded entirely with cash on hand.
During the six months ended June 30, 2021,2022, we acquired 2491 properties for an aggregate purchase price of $66.0 million,$1.4 billion, including capitalized acquisition costs. The acquisitions during the six months ended June 30, 2021 were2022 include 80 properties from the CIM Portfolio Acquisition. The acquisition of the 80 properties from the CIM Portfolio Acquisition was funded with cash on hand, comprising a combinationthe assumption of proceeds from$313.7 million of existing mortgage debt, $513.0 million of borrowings under the Credit Facility, the application of $23.8 million of our $40 million deposit, the issuance and sale of 6,450,107 shares of our Class A common stock, (discussed below)representing consideration of $50.0 million in value at issuance ($53.4 million of value subject to repurchase), Series A Preferred Stock (discussed below)which were issued at a weighted-average price of $7.75 per share in value at issuance ($8.28 per share of value subject to repurchase), $10.8 million of contingent consideration to be paid in the second half of 2022 and Series C Preferred Stock (discussed below) and proceeds from dispositions ofthe remainder with cash on hand. The remaining 11 properties (discussed below).acquired in the six months ended June 30, 2022 were funded entirely with cash on hand.
During the three months ended June 30, 2021, we sold three properties, for an aggregate contract price of $2.5 million, excluding disposition related costs. There was no mortgage debt on these properties.
During the six months ended June 30, 2021,2022, we sold five properties, for an aggregate contract sales price of $3.1$30.4 million, excluding disposition related costs. ThereOf the five properties sold in the three months ended June 30, 2022, two were formerly encumbered under the 2021 Net Lease Mortgage Notes and two were formerly part of the unencumbered asset pool comprising the Credit Facility. The proceeds from these dispositions were used to fund the repayment of $25.0 million of amounts outstanding under our Credit Facility.
During the six months ended June 30, 2022, we sold 11 properties for an aggregate contract sales price of $295.6 millionexcluding disposition related costs. These dispositions included the sale of three office buildings leased to Sanofi S.A. for a contract purchase price of $260.7 million (the “Sanofi Sale”). The net proceeds of $254.5 million from the Sanofi Sale were used to partially fund the closing of the first tranche of the CIM Portfolio Acquisition as discussed above. Of the 10 other properties sold in the six months ended June 30, 2022, one was noformerly encumbered under the CMBS 2020 mortgage, debt ontwo were formerly encumbered under the 2021 Net Lease Mortgage Notes and four were formerly part of the unencumbered asset pool comprising the Credit Facility. The proceeds from these properties.dispositions were used to fund the repayment of $25.0 million of amounts outstanding under our Credit Facility.
Acquisitions and Dispositions — Subsequent to June 30, 20212022
Subsequent to June 30, 20212022 we acquired 13 propertiesthe final property of the CIM Portfolio Acquisition, with an aggregatea contract purchase price of $56.5$71.1 million, excluding acquisition costs. We have entered into a definitive purchase and sale agreements (“PSAs”)agreement to acquire an additional 26 propertiessingle-tenant property for an aggregatea contract purchase price of approximately $76.9$0.3 million. The PSAs arepurchase and sale agreement is subject to conditions, and there can be no assurance we will complete any of these acquisitionsthis acquisition on theirits contemplated terms, or at all. We anticipate primarily using cash on hand, which we expect willmay include proceeds from our ATM Programs, proceeds from future dispositions of properties and, if necessary, proceeds from borrowings under our Credit Facility, to fund the consideration required to complete these acquisitions.this acquisition.
With respectSubsequent to our pending acquisitions, in lightJune 30, 2022, we disposed of the disruptions caused by the COVID-19 pandemic, we are taking a prudent stance with our acquisition pipeline and are carefully determining appropriate risk adjusted capitalization rate targetsthree properties for potential new acquisitions going forward.
an aggregate contract sales price of $3.9 million. We have entered into a PSAsix purchase and sale agreements to dispose of one propertysix properties for aan aggregate contract purchasesales price of $2.3$97.8 million. We have also entered into four non-binding letters of intent to dispose of four properties for an aggregate contract sales price of $1.7 million. The property is encumbered by a mortgage loan. The PSA ispurchase and sales agreements and non-binding letters of intent are subject to conditions, and there can be no assurance we will complete any of these dispositions on their contemplated terms, or at all. Two of the purchase and sale agreements relate to properties acquired in the CIM Portfolio Acquisition, one of which was impaired in the three months ended June 30, 2022 for $3.5 million.
ATM Programs
During the three and six months ended June 30, 2021 weWe sold 8,634,2233,618 shares of Class A common stock under thethrough our Class A Common Stock ATM Program for gross proceeds of $78.3 million and net proceeds of $77.0 million after commissions and fees paid of approximately $1.3 million.
Duringduring the three months ended June 30, 2021,2022, which did not generate material proceeds. We sold 2,765,329 shares of Class A common stock
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through our Class A Common Stock ATM Program during the six months ended June 30, 2022, which generated $24.9 million of gross proceeds, and net proceeds of $24.6 million after commissions, fees and other offering costs incurred of $0.4 million.
During the six months ended June 30, 2022, we did not sell any shares of Series A Preferred Stock under the Series A Preferred Stock Program.
During the six months ended June 30, 2021,2022, we sold 91,703 shares under the Series A Preferred Stock
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ATM Program for gross proceeds of $2.3 million and net proceeds of $2.3 million, after commissions paid of approximately $35,000.
During the three months ended June 30, 2021, we sold 494,697677 shares of Series C Preferred Stock under the Series C Preferred Stock ATM Program for gross proceeds of $12.3 million and net proceeds of $11.7 million, after commissions and fees paid of approximately $0.6 million. During the six months ended June 30, 2021, we sold 1,058,798 shares under the Series C Preferred Stock ATM Program for gross proceeds of $26.5 million and net proceeds of $25.6 million, after commissions paid of approximately $0.9 million.Program.
Distribution Reinvestment Plan
Our distribution reinvestment plan (“DRIP”) allows stockholders who have elected to participate in the DRIP to have dividends payable with respect to all or a portion of their shares of Class A common stock reinvested in additional shares of Class A common stock. Shares issued pursuant to the DRIP are, at our election, either (i) acquired directly from us, by issuing new shares, at a price based on the average of the high and low sales prices of Class A common stock on Nasdaq on the date of reinvestment, or (ii) acquired through open market purchases by the plan administrator at a price based on the weighted-average of the actual prices paid for all of the shares of Class A common stock purchased by the plan administrator with all participants’ reinvested dividends for the related quarter, less a per share processing fee. During the threesix months ended June 30, 20212022 and the year ended December 31, 20202021, all shares acquired by participants pursuant to the DRIP were acquired through open market purchases by the plan administrator and not issued directly to stockholders by us.
Capital Expenditures and Construction in Progress
We invest in capital expenditures to enhance and maintain the value of our properties. The recent economic uncertainty created by the COVID-19 global pandemic could impact our decisions on the amount and timing of future capital expenditures. We define revenue enhancing capital expenditures as improvements to our properties that we believe will result in higher income generation over time. Capital expenditures for maintenance are generally necessary, non-revenue generating improvements that extend the useful life of the property and are less frequent in nature. By providing this metric, we believe we are presenting useful information for investors that can help them assess the components of our capital expenditures that are expected to either grow or maintain our current revenue. Detail related to our capital expenditures during the threesix months ended June 30, 20212022 is as follows:
(In thousands)Six Months Ended June 30, 2021
Capital Expenditures
   Revenue enhancing$6,672 
   Maintenance139 
Total Capital Expenditures6,811 
   Leasing commissions2,640 
Total$9,451 
Six Months Ended June 30, 2022
(In thousands)Single-Tenant PropertiesMulti-Tenant PropertiesTotal
Capital Expenditures
   Revenue enhancing$136 $3,424 $3,560 
   Maintenance539 1,120 1,659 
Total Capital Expenditures675 4,544 5,219 
   Leasing commissions7 367 374 
Total$682 $4,911 $5,593 
Also, as of June 30, 20212022 and December 31, 2020,2021, we had $2.4$2.2 million and $31,000,$1.5 million, respectively, of construction in progress which is included in the prepaid expenses and other assets on the consolidated balance sheets.

Non-GAAP Financial Measures
This section discusses the non-GAAP financial measures we use to evaluate our performance, including Funds from Operations (“FFO”), Adjusted Funds from Operations (“AFFO”) and NOI. While NOI is a property-level measure, AFFO is based on our total performance and therefore reflects the impact of other items not specifically associated with NOI such as interest expense, general and administrative expenses and operating fees to related parties. Additionally, NOI as defined herein, does not reflect an adjustment for straight-line rent but AFFO does.does include this adjustment. A description of these non-GAAP measures and reconciliations to the most directly comparable GAAP measure, which is net income (loss), is provided below. Adjustments for unconsolidated partnerships and joint ventures are calculated to exclude the proportionate share of the non-controlling interest to arrive at FFO, AFFO and NOI attributable to stockholders.
Funds from Operations and Adjusted Funds from Operations
Funds from Operations
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Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts (“NAREIT”), an industry trade group, has promulgated a performance measure known as FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. FFO is not equivalent to net income or loss as determined under GAAP.
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We calculate FFO, a non-GAAP measure, consistent with the standards established over time by the Board of Governors of NAREIT, as restated in a White Paper and approved by the Board of Governors of NAREIT effective in December 2018 (the “White Paper”). The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding depreciation and amortization related to real estate, gains and losses from sales of certain real estate assets, gain and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. Adjustments for consolidated partially-owned entities (including our OP) and equity in earnings of unconsolidated affiliates are made to arrive at our proportionate share of FFO attributable to our stockholders. Our FFO calculation complies with NAREIT’s definition.
The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, and straight-line amortization of intangibles, which implies that the value of a real estate asset diminishes predictably over time. We believe that, because real estate values historically rise and fall with market conditions, including inflation, interest rates, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation and certain other items may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, among other things, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.
Adjusted Funds from Operations
In calculating AFFO, we start with FFO, then we exclude certain income or expense items from AFFO that we consider to be more reflective of investing activities, such as non-cash income and expense items and the income and expense effects of other activities that are not a fundamental attribute of our day to day operating business plan, such as amounts related to litigation arising out of the merger with American Realty Capital-Retail Centers of America, Inc. in February 2017 (the “Merger”“RCA Merger”). These amounts include legal costs incurred as a result of the litigation, portions of which have been and may in the future be reimbursed under insurance policies maintained by us. Insurance reimbursements are deducted from AFFO in the period of reimbursement. We believe that excluding the litigation costs and subsequent insurance reimbursements related to litigation arising out of the RCA Merger helps to provide a better understanding of the operating performance of our business. Other income and expense items also include early extinguishment of debt and unrealized gains and losses, which may not ultimately be realized, such as gains or losses on derivative instruments and gains and losses on investments. In addition, by excluding non-cash income and expense items such as amortization of above-market and below-market leases intangibles, amortization of deferred financing costs, straight-line rent, and share-based compensation related to restricted shares, and the 2018 OPP and 2021 OPP from AFFO, we believe we provide useful information regarding those income and expense items which have a direct impact on our ongoing operating performance.
In calculating AFFO, we exclude certain expenses which under GAAP are characterized as operating expenses in determining operating net income (loss). All paid and accrued merger, acquisition and transaction related fees and certain other expenses negatively impact our operating performance during the period in which expenses are incurred or properties are acquired and will also have negative effects on returns to investors, but are not reflective of our on-going performance. In addition, legal fees and expense associated with COVID-19-related lease disputes involving certain tenants negatively impact our operating performance but are not reflective of our on-going performance. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income (loss). In addition, as discussed above, we view gains and losses from fair value adjustments as items which are unrealized and may not ultimately be realized and not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance. Excluding income and expense items detailed above from our calculation of AFFO provides information consistent with management’s analysis of our operating performance. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market 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 changes that may reflect anticipated and unrealized gains or losses, we believe AFFO provides useful supplemental information. By providing AFFO, we believe we are presenting useful information that can be used, among other things, to better assess the sustainability of our ongoing operating performance without the impact of transactions or other items that are not related to the ongoing performance of our portfolio of properties. AFFO presented by us may not be comparable to AFFO reported by other REITs that define AFFO differently. Furthermore, we believe that in order to facilitate a clear understanding
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of our operating results, AFFO should be examined in conjunction with net income (loss) as presented in our consolidated financial statements. AFFO should not be considered as an alternative to net income (loss) as an indication of our performance or to cash flows as a measure of our liquidity or ability to pay dividends. FFO and AFFO may include income from lease termination fees, which is recorded in revenue from tenants in the consolidated statements of operations.

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Accounting Treatment of Rent Deferrals/Abatements
The majority of the concessions granted to our tenants as a result of the COVID-19 pandemic arehave been rent deferrals or temporary rent abatements with the original lease term unchanged and collection of deferred rent deemed probable (see the “Overview - Management Update on the Impacts of the COVID-19 Pandemic” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information). As a result of relief granted by the FASB and SEC related to lease modification accounting, rental revenue used to calculate Net Income and NAREIT FFO has not been, and we do not expect it to be, significantly impacted by these types of deferrals. In addition, since we currently believe that these deferral amounts are collectable, we have excluded from the increase in straight-line rent for AFFO purposes the amounts recognized under GAAP relating to these types of rent deferrals. Conversely, for abatements where contractual rent has been reduced, the reduction in revenue is reflected over the remaining lease term for accounting purposes but represents a permanent reduction in revenue and we have, accordingly, reduced our AFFO. For a detailed discussion of our revenue recognition policy, including details related to the relief granted by the FASB and SEC, see Note 2 — Significant Accounting Polices to our consolidated financial statements included in thethis Quarterly Report on Form 10-Q.
The table below reflects the items deducted from or added to net income or loss in our calculation of FFO and AFFO for the periods presented:
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
(In thousands)(In thousands)2021202020212020(In thousands)2022202120222021
Net loss attributable to common stockholders (in accordance with GAAP)Net loss attributable to common stockholders (in accordance with GAAP)$(7,405)$(21,803)$(16,816)$(30,956)Net loss attributable to common stockholders (in accordance with GAAP)$(56,259)$(7,405)$(16,325)$(16,816)
Impairment of real estate investmentsImpairment of real estate investments91 11,502 91 11,502 Impairment of real estate investments58,954 91 64,896 91 
Depreciation and amortizationDepreciation and amortization32,428 35,443 64,747 69,778 Depreciation and amortization46,573 32,428 84,261 64,747 
Gain on sale/exchange of real estate investments(11)(2,838)(297)(4,278)
Gain on sale of real estate investmentsGain on sale of real estate investments(13,438)(11)(67,007)(297)
Proportionate share of adjustments for non-controlling interests to arrive at FFOProportionate share of adjustments for non-controlling interests to arrive at FFO(50)(71)(101)(123)Proportionate share of adjustments for non-controlling interests to arrive at FFO(113)(50)(100)(101)
FFO (as defined by NAREIT) attributable to common stockholders(1)FFO (as defined by NAREIT) attributable to common stockholders(1)25,053 22,233 47,624 45,923 FFO (as defined by NAREIT) attributable to common stockholders(1)35,717 25,053 65,725 47,624 
Acquisition, transaction and other costs (1)(2)
Acquisition, transaction and other costs (1)(2)
136 721 178 1,173 
Acquisition, transaction and other costs (1)(2)
206 136 485 178 
Litigation cost reimbursements related to the Merger (2)
— — — (9)
Legal fees and expenses — COVID-19 lease disputes (3)
Legal fees and expenses — COVID-19 lease disputes (3)
109 242 178 242 
Legal fees and expenses — COVID-19 lease disputes (3)
58 109 50 178 
Accretion of market lease and other intangibles, netAccretion of market lease and other intangibles, net(1,041)(2,289)(1,976)(3,281)Accretion of market lease and other intangibles, net(1,582)(1,041)(2,680)(1,976)
Straight-line rentStraight-line rent(1,759)(5,442)(3,486)(7,707)Straight-line rent(1,509)(1,759)(2,623)(3,486)
Straight-line rent (rent deferral agreements) (4)
Straight-line rent (rent deferral agreements) (4)
(1,124)2,082 (2,099)2,082 
Straight-line rent (rent deferral agreements) (4)
(446)(1,124)(888)(2,099)
Amortization of mortgage discounts (premiums) on borrowings, net(323)(589)(644)(1,149)
Loss on non-designated derivatives— — — — 
Amortization of mortgage (premiums) and discounts on borrowings, netAmortization of mortgage (premiums) and discounts on borrowings, net174 (323)161 (644)
Gain on non-designated derivatives (5)
Gain on non-designated derivatives (5)
— — (2,250)— 
Equity-based compensation(6)Equity-based compensation(6)5,283 3,247 9,630 6,458 Equity-based compensation(6)3,523 5,283 7,021 9,630 
Amortization of deferred financing costs, net and change in accrued interest2,361 990 4,830 2,702 
Amortization of deferred financing costs, net (7)
Amortization of deferred financing costs, net (7)
3,236 2,896 6,129 5,370 
Gain on settlement of Prairie Towne liens (8)
Gain on settlement of Prairie Towne liens (8)
(887)— (887)— 
Proportionate share of adjustments for non-controlling interests to arrive at AFFOProportionate share of adjustments for non-controlling interests to arrive at AFFO(6)(1)(11)(3)Proportionate share of adjustments for non-controlling interests to arrive at AFFO(5)(6)(7)(11)
AFFO attributable to common stockholders
$28,689 $21,194 $54,224 $46,431 
AFFO attributable to common stockholders (1)
AFFO attributable to common stockholders (1)
$38,485 $29,224 $70,236 $54,764 
___________
(1)FFO and AFFO for the three and six months ended June 30, 2022 includes income from lease modification/termination revenue of $5.7 million and $10.2 million, respectively, and the three and six months ended June 30, 2021 includes income from lease modification/termination revenue of $0.8 million and $1.3 million, respectively, which is recorded in revenue from tenants in the consolidated statements of operations. See Note 2 — Summary of Significant Accounting Policies – Revenue Recognition to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.
(2)Includes primarily prepayment costs incurred in connection with early debt extinguishment as well as litigation costs related to the RCA Merger.
(2)Included in “Other income” in our consolidated statement of operations and comprehensive loss.
(3)Reflects legal costs incurred during the year ended December 31, 2020 related to disputes with tenants due to store closures or other challenges resulting from COVID-19. The tenants involved in these disputes had not recently defaulted on their rent and, prior to the second and third quarters of 2020, had recently exhibited a pattern of regular payment. Based on the tenants involved in these matters, their history of rent payments, and the impact of the pandemic on current economic conditions, we view these costs as COVID-19-related and separable from our ordinary general and administrative expenses related to tenant defaults. We engaged counsel in connection with these issues separate and distinct from counsel we typically engage for tenant defaults. The amount reflects what we believe to be only those incremental legal costs above what we typically incur for tenant-related dispute issues. We may continue to incur these COVID-19 related legal costs in the future.
(4)Represents amounts related to deferred rent pursuant to lease negotiations which qualify for FASB relief for which rent was deferred but not reduced. These amounts are included in the straight-line rent receivable on our consolidated balance sheet but are considered to be earned revenue attributed to the current period for which rent was deferred for purposes of AFFO as they are expected to be collected. Accordingly, when the deferred amounts are
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collected, the amounts reduce AFFO. For rent abatements (including those qualified for FASB relief), where contractual rent has been reduced, the reduction in revenue is reflected over the remaining lease term for accounting purposes but represents a permanent reduction in revenue and we have, accordingly reduced our AFFO.
(5)In the six months ended June 30, 2022, we recognized a gain of $2.3 million related to the change in fair value of an embedded derivative within the purchase and sale agreement of the CIM Portfolio Acquisition. We do not consider non-cash gains or losses for embedded derivative fair value
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adjustments to be capital in nature, nor do we consider them a part of recurring operations. Accordingly, such amounts are excluded for AFFO purposes. See Note 8 — Derivatives and Hedging Activities to our consolidated financial statements included in this Quarterly Report on Form 10-Q for more information.
(6)Includes expense related to the amortization of our restricted common shares and LTIP Units related to our multi-year outperformance agreements for all periods presented.
(7)We issued $500.0 million in Senior Notes in October 2021. The Senior Notes pay semiannual interest which we accrue interest over time for GAAP purposes. Accordingly, to better reflect our operating performance, beginning with the year ended December 31, 2021 and for all periods thereafter, we have elected to remove the impact of the change in accrued interest from the calculation of AFFO, which was previously included in this line item. The impact to AFFO for the removal of the change in accrued interest included in this line for the three and six months ended June 30, 2021 was an increase to AFFO of $535,000 and $540,000, respectively.
(8)Included in other income for the three and six months ended June 30, 2022 was a gain of $0.9 million on prior liens incurred on our Prairie Towne property as a result of a settlement with the lien holder during the three months ended June 30, 2022. Management does not consider this gain to be part of our normal operating performance and has, accordingly, reduced our AFFO for this amount.
Net Operating Income
NOI is a non-GAAP financial measure used by us to evaluate the operating performance of our real estate. NOI is equal to total revenues, excluding contingent purchase price consideration, less property operating and maintenance expense. NOI excludes all other items of expense and income included in the financial statements in calculating net income (loss). We believe NOI provides useful and relevant information because it reflects only those income and expense items that are incurred at the property level and presents such items on an unleveraged basis. We use NOI to assess and compare property level performance and to make decisions concerning the operation of the properties. Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating expenses and acquisition activity on an unleveraged basis, providing perspective not immediately apparent from net income (loss).
NOI excludes certain items included in calculating net income (loss) in order to provide results that are more closely related to a property’s results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently. We believe that in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income (loss) as presented in our consolidated financial statements. NOI should not be considered as an alternative to net income (loss) as an indication of our performance or to cash flows as a measure of our liquidity or ability to pay dividends.
The following table reflects the items deducted from or added to net loss attributable to common stockholders in our calculation of NOI for the three months ended June 30, 2022:
Same StoreAcquisitionsDisposalsNon-Property SpecificTotal
(In thousands)Single-TenantMulti-TenantSingle-TenantMulti-TenantSingle-TenantMulti-Tenant
Net income (loss) attributable to common stockholders (in accordance with GAAP)$6,337 $(44,854)$1,704 $456 $14,743 $— $(34,645)$(56,259)
Asset management fees to related party— — — — — — 8,296 8,296 
Impairment of real estate investments5,856 49,559 — 3,539 — — — 58,954 
Acquisition, transaction and other costs17 — — — — — 189 206 
Equity-based compensation— — — — — — 3,523 3,523 
General and administrative86 240 — 84 — — 7,980 8,390 
Depreciation and amortization17,938 10,976 1,544 16,040 75 — — 46,573 
Interest expense16,992 1,547 — 912 — — 8,878 28,329 
Gain on sale of real estate investments(3)— — — (13,435)— — (13,438)
Other income(17)(927)— — — — — (944)
Allocation for preferred stock— — — — — — 5,837 5,837 
Net loss attributable to non-controlling interests— — — — — — (58)(58)
NOI$47,206 $16,541 $3,248 $21,031 $1,383 $— $— $89,409 


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The following table reflects the items deducted from or added to net loss attributable to common stockholders in our calculation of NOI for the three months ended June 30, 2021:
Same StoreAcquisitionsDisposalsNon-Property SpecificTotal
(In thousands)(In thousands)Same StoreAcquisitionsDisposalsNon-Property SpecificTotal(In thousands)Single-TenantMulti-TenantSingle-TenantMulti-TenantSingle-TenantMulti-Tenant
Net income (loss) attributable to common stockholders (in accordance with GAAP)Net income (loss) attributable to common stockholders (in accordance with GAAP)$14,803 $2,203 $— $(24,411)$(7,405)Net income (loss) attributable to common stockholders (in accordance with GAAP)$7,196 $7,313 $90 $— $2,408 $— $(24,412)$(7,405)
Asset management fees to related partyAsset management fees to related party— — — 7,922 7,922 Asset management fees to related party— — — — — — 7,922 7,922 
Impairment of real estate investmentsImpairment of real estate investments91 — — — 91 Impairment of real estate investments— — — — 91 — — 91 
Acquisition, transaction and other costsAcquisition, transaction and other costs27 — — 109 136 Acquisition, transaction and other costs27 — — — — — 109 136 
Equity-based compensationEquity-based compensation— — — 5,283 5,283 Equity-based compensation— — — — — — 5,283 5,283 
General and administrativeGeneral and administrative409 9 — 3,122 3,540 General and administrative134 279 — — 4 — 3,123 3,540 
Depreciation and amortizationDepreciation and amortization30,871 1,552 5 — 32,428 Depreciation and amortization18,484 11,283 58 — 2,603 — — 32,428 
Interest expenseInterest expense18,309 — — 2,052 20,361 Interest expense18,067 242 — — — — 2,052 20,361 
Gain on sale of real estate investmentsGain on sale of real estate investments— — (11)— (11)Gain on sale of real estate investments— — — — (11)— — (11)
Other incomeOther income(20)— — — (20)Other income(20)— — — — — — (20)
Allocation for preferred stockAllocation for preferred stock— — — 5,925 5,925 Allocation for preferred stock— — — — — — 5,925 5,925 
Net loss attributable to non-controlling interestsNet loss attributable to non-controlling interests— — — (2)(2)Net loss attributable to non-controlling interests— — — — — — (2)(2)
NOINOI$64,490 $3,764 $(6)$— $68,248 NOI$43,888 $19,117 $148 $— $5,095 $— $— $68,248 

The following table reflects the items deducted from or added to net loss attributable to stockholders in our calculation of NOI for the three months ended June 30, 2020:
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(In thousands)Same StoreAcquisitionsDisposalsNon-Property SpecificTotal
Net income (loss) attributable to common stockholders (in accordance with GAAP)$(900)$137 $2,849 $(23,889)$(21,803)
Asset management fees to related party— — — 6,918 6,918 
Impairment of real estate investments11,502 — — — 11,502 
Acquisition, transaction and other costs259 — — 462 721 
Equity-based compensation— — — 3,247 3,247 
General and administrative559 — — 6,305 6,864 
Depreciation and amortization35,352 85 6 — 35,443 
Interest expense15,390 — 3,411 18,801 
Gain on sale of real estate investments— — (2,838)— (2,838)
Other income(8)— — (53)(61)
Allocation for preferred stock— — — 3,619 3,619 
Net loss attributable to non-controlling interests— — — (20)(20)
NOI$62,154 $222 $17 $— $62,393 
The following table reflects the items deducted from or added to net income (loss) attributable tocommon stockholders in our calculation of NOI for the six months ended June 30, 2021:2022:
(In thousands)Same StoreAcquisitionsDisposalsNon-Property SpecificTotal
Net (loss) income attributable to stockholders (in accordance with GAAP)$26,747 $6,351 $432 $(50,346)$(16,816)
Asset management fees to related party— — — 15,243 15,243 
Impairment charges91 — — — 91 
Acquisition and transaction related27 — — 151 178 
Equity-based compensation— — — 9,630 9,630 
General and administrative717 13 — 9,259 9,989 
Depreciation and amortization60,554 4,077 116 — 64,747 
Interest expense35,206 — — 4,489 39,695 
Gain on sale of real estate investments— — (297)— (297)
Other income(38)— — (6)(44)
Preferred Stock dividends— — — 11,588 11,588 
Net income attributable to non-controlling interests— — — (8)(8)
NOI [1]
$123,304 $10,441 $251 $— $133,996 

Same StoreAcquisitionsDisposalsNon-Property SpecificTotal
(In thousands)Single-TenantMulti-TenantSingle-TenantMulti-TenantSingle-TenantMulti-Tenant
Net income (loss) attributable to common stockholders (in accordance with GAAP)$11,185 $(38,140)$4,240 $1,383 $68,094 $— $(63,087)$(16,325)
Asset management fees to related party— — — — — — 16,122 16,122 
Impairment of real estate investments10,884 49,559 — 3,539 914 — — 64,896 
Acquisition, transaction and other costs77 — — — — — 408 485 
Equity-based compensation— — — — — — 7,021 7,021 
General and administrative143 515 — 84 5 — 14,476 15,223 
Depreciation and amortization35,182 22,142 3,451 23,324 162 — — 84,261 
Interest expense33,899 1,548 — 992 — — 15,630 52,069 
Gain on sale of real estate investments— — — — (67,007)— — (67,007)
Other income(34)(928)— — — — — (962)
Gain on non-designated derivatives— — — — — — (2,250)(2,250)
Allocation for preferred stock— — — — — — 11,674 11,674 
Net income attributable to non-controlling interests— — — — — — 6 6 
NOI$91,336 $34,696 $7,691 $29,322 $2,168 $— $— $165,213 

The following table reflects the items deducted from or added to net income (loss)loss attributable to common stockholders in our calculation of NOI for the six months ended June 30, 2020:2021:
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Same StoreAcquisitionsDisposalsNon-Property SpecificTotal
(In thousands)(In thousands)Same StoreAcquisitionsDisposalsNon-Property SpecificTotal(In thousands)Single-TenantMulti-TenantSingle-TenantMulti-TenantSingle-TenantMulti-Tenant
Net income (loss) attributable to stockholders (in accordance with GAAP)$9,538 $1,630 $4,371 $(46,495)$(30,956)
Net income (loss) attributable to common stockholders (in accordance with GAAP)Net income (loss) attributable to common stockholders (in accordance with GAAP)$14,443 $13,114 $647 $— $5,327 $— $(50,347)$(16,816)
Asset management fees to related partyAsset management fees to related party— — — 13,823 13,823 Asset management fees to related party— — — — — — 15,243 15,243 
Impairment charges11,502 — — — 11,502 
Acquisition and transaction related356 — — 817 1,173 
Impairment of real estate investmentsImpairment of real estate investments— — — — 91 — — 91 
Acquisition, transaction and other costsAcquisition, transaction and other costs27 — — — — — 151 178 
Equity-based compensationEquity-based compensation— — — 6,458 6,458 Equity-based compensation— — — — — — 9,630 9,630 
General and administrativeGeneral and administrative994 3 2 11,193 12,192 General and administrative185 539 — — 6 — 9,259 9,989 
Depreciation and amortizationDepreciation and amortization68,886 860 32 — 69,778 Depreciation and amortization36,433 22,670 320 — 5,324 — — 64,747 
Interest expenseInterest expense30,839 — — 7,068 37,907 Interest expense34,723 482 — — — — 4,490 39,695 
Gain on sale of real estate investmentsGain on sale of real estate investments— — (4,278)— (4,278)Gain on sale of real estate investments— — — — (297)— — (297)
Other incomeOther income(60)— — (73)(133)Other income(35)(3)— — — — (6)(44)
Preferred stock dividends— — — 7,238 7,238 
Net income attributable to non-controlling interests— — — (29)(29)
Allocation for preferred stockAllocation for preferred stock— — — — — — 11,588 11,588 
Net loss attributable to non-controlling interestsNet loss attributable to non-controlling interests— — — — — — (8)(8)
NOINOI$122,055 $2,493 $127 $— $124,675 NOI$85,776 $36,802 $967 $— $10,451 $— $— $133,996 
Dividends and Distributions
From the listing of our Class A common stock on Nasdaq in July 2018 through March 31, 2020, we paidWe pay dividends on our Class A common stock, at an annualized rate equal to $1.10 per share, or $0.0916667 per share on a monthly basis. In March 2020, our board of directors approved a reduction in our annualized dividend to $0.85 per share, or $0.0708333 per share on a monthly basis, due to the uncertain and rapidly changing environment caused by the COVID-19 pandemic. The new dividend rate became effective beginning with our April 1, 2020 dividend declaration. Historically, and through September 30, 2020, we declared dividends based on monthly record dates and generally paid dividends, once declared, on or around the 15th day of each month (or, if not a business day, the next succeeding business day) to Class A common stock holders of record on the applicable record date. On August 27, 2020, our board of directors approved a change in our Class A common stock dividend policy. Subsequent dividends authorized by our board of directors on shares of our Class A common stock have been, and we anticipate will continue to be, paid on a quarterly basis, in arrears on the 15th day of the first month following the end of each fiscal quarter (unless otherwise specified) to Class A common stockholders of record on the record date for such payment. This change affected the frequency of dividend payments only, and did not impact the annualized dividendat an annual rate on Class A common stock of $0.85. The amount of dividends payable on our Class A common stock to our common stock holders is determined by our board of directors and is dependent on a number of factors, including funds available for dividends, our financial condition, provisions in our Credit Facility or other agreements that may restrict our ability to pay dividends, capital expenditure requirements, as applicable, requirements of Maryland law and annual distribution requirements needed to maintain our status as a REIT. We anticipate dividends will continue to be paid on a quarterly basis in arrears on the 15th day of the first month following the end of each fiscal quarter (unless otherwise specified) to Class A common stockholders of record on the record date for such payment.
Dividends on our Series A Preferred Stock accrue in an amount equal to $1.875 per share each year, which is equivalent to the rate of 7.50% of the $25.00 liquidation preference per share per annum. Dividends on the Series A Preferred Stock are payable quarterly in arrears on the 15th day of each of January, April, July and October of each year (or, if not a business day, the next succeeding business day) to holders of record on the applicable record date.
Dividends on our Series C Preferred Stock accrue in an amount equal to $1.844 per share each year, which is equivalent to the rate of 7.375% of the $25.00 liquidation preference per share per annum. Dividends on the Series C Preferred Stock are payable quarterly in arrears on the 15th day of each of January, April, July and October of each year (or, if not a business day, the next succeeding business day) to holders of record on the applicable record date. The first dividend for the Series C Preferred Stock was paid on April 15, 2021 and represented an accrual for more than a full quarter, covering the period from December 18, 2020 to March 31, 2021.
Our Credit Facility contains provisions restricting our ability to pay distributions, including paying cash dividends on equity securities (including the Series A Preferred Stock and Series C Preferred Stock). We are generally permitted to pay dividends on the Series CA Preferred Stock, Series AC Preferred Stock, and Class A common stock and other distributions for any fiscal quarter in an aggregate amount of up to 105% of annualized MFFOModified Funds from Operations (“MFFO”, as defined in the Credit Facility) for a look-back period of four consecutive fiscal quarters but only if, as of the last day of the period, after giving effect to the payment of those dividends and distributions, we are able to satisfy a maximum leverage ratio and maintain a combination of cash, cash equivalents and amounts available for future borrowings under the Credit Facility of not less than $60 million. If these conditions are not satisfied, the applicable
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threshold percentage of MFFO will be 95% instead of 105%. If applicable, during the continuance of an event of default under the Credit Facility, we may not pay dividends or other distributions in excess of the amount necessary for us to maintain our status as a REIT.
We may repurchase shares if we satisfy a maximum leverage ratio after giving effect to the repurchase and also have a combination of cash, cash equivalents and amounts available for future borrowings under the Credit Facility of not less than $40.0 million.
Notwithstanding the previous amendments, there is no assurance that the lenders will consent to any additional amendments to the Credit Facility that may become necessary to maintain compliance with the Credit Facility.
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During the quarterthree and six months ended June 30, 2021,2022, cash used to pay dividends on our Class A common stock, dividends on our Series A Preferred Stock, dividends on our Series C Preferred Stock, distributions on our LTIP Units and distributions for our limited partnership units designated as “Class A Units” (“that correspond to shares of our Class A Units”)common stock was generated from cash flows provided by operations. We have, in prior periods, funded dividends from other sources. If we need to identify financing sources other than operating cash flows to fund dividends at their current level, there can be no assurance that other sources will be available on favorable terms, or at all.
Complying with the restriction on the payment of dividends and other distributions in our Credit Facility may limit our ability to incur additional indebtedness and use cash that would otherwise be available to us. Funding dividends from borrowings restricts the amount we can borrow for property acquisitions and investments. Using proceeds from the sale of assets or the issuance of our Class A common stock, Series A Preferred Stock, Series C Preferred Stock or other equity securities to fund dividends rather than invest in assets will likewise reduce the amount available to invest. Funding dividends from the sale of additional securities could also dilute our stockholders.
The following table shows the sources for the payment of dividends to common stockholders, including dividends on unvested restricted shares and other dividends and distributions for the periods indicated:
Three Months EndedSix Months Ended June 30, 2021Three Months EndedSix Months Ended June 30, 2022
March 31, 2021June 30, 2021March 31, 2022June 30, 2022Six Months Ended June 30, 2022
(In thousands)(In thousands)AmountPercentage of DividendsAmountPercentage of DividendsAmountPercentage of Dividends(In thousands)AmountPercentage of DividendsAmountPercentage of DividendsAmountPercentage of Dividends
Dividends and other cash distributions:Dividends and other cash distributions:Dividends and other cash distributions:
Cash dividends paid to common stockholdersCash dividends paid to common stockholders$23,128 85.8 %$23,122 79.1 %$46,250 82.3 %Cash dividends paid to common stockholders$26,677 81.5 %$28,599 82.5 %$55,276 82.0 %
Cash dividends paid to Series A preferred stockholdersCash dividends paid to Series A preferred stockholders3,691 13.7 %3,719 12.7 %7,410 13.2 %Cash dividends paid to Series A preferred stockholders3,719 11.4 %3,719 10.7 %7,438 11.0 %
Cash dividends paid to Series C preferred stockholdersCash dividends paid to Series C preferred stockholders— — %2,263 7.7 %2,263 4.0 %Cash dividends paid to Series C preferred stockholders2,118 6.5 %2,118 6.1 %4,236 6.3 %
Cash distributions on LTIP UnitsCash distributions on LTIP Units94 0.3 %96 0.3 %190 0.3 %Cash distributions on LTIP Units182 0.6 %182 0.5 %364 0.5 %
Cash distributions on Class A UnitsCash distributions on Class A Units37 0.1 %36 0.1 %73 0.1 %Cash distributions on Class A Units37 0.1 %36 0.1 %73 0.1 %
Total dividends and other cash distributions paidTotal dividends and other cash distributions paid$26,950 100.0 %$29,236 100.0 %$56,186 100.0 %Total dividends and other cash distributions paid$32,733 100.0 %$34,654 100.0 %$67,387 100.0 %
Source of dividend and other cash distributions coverage:Source of dividend and other cash distributions coverage:Source of dividend and other cash distributions coverage:
Cash flows provided by operationsCash flows provided by operations$26,950 100.0 %$29,236 100.0 %$56,186 100.0 %Cash flows provided by operations$32,733 100.0 %$34,654 100.0 %$67,387 100.0 %
Available cash on hand
Available cash on hand
— — %— — %— — %
Available cash on hand
— — %— — %— — %
Total sources of dividend and other cash distributions coverageTotal sources of dividend and other cash distributions coverage$26,950 100.0 %$29,236 100.0 %$56,186 100.0 %Total sources of dividend and other cash distributions coverage$32,733 100.0 %$34,654 100.0 %$67,387 100.0 %
Cash flows provided by operations (GAAP basis)Cash flows provided by operations (GAAP basis)$34,422 $30,935 $65,357 Cash flows provided by operations (GAAP basis)$45,103 $59,503 $104,606 
Net loss attributable to common stockholders (in accordance with GAAP)$(9,411)$(7,405)$(16,816)
Net income (loss) (in accordance with GAAP)Net income (loss) (in accordance with GAAP)$45,835 $(50,480)$(4,645)
Loan Obligations
The payment terms of certain of our mortgage loan obligations require principal and interest payments monthly, with all unpaid principal and interest due at maturity. Our loan agreements stipulate that we comply with specific reporting covenants. As of June 30, 2021,2022, we were in compliance with the debt covenants under our loan agreements, including our Senior Notes and Credit Facility.
Contractual Obligations
Except as disclosed in this Quarterly Report on Form 10-Q, there were no material changes in our contractual obligations at June 30, 2021, as compared to those reported in our Annual Report on Form 10-K for the year ended December 31, 2020.
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Election as a REIT
We elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), effective for our taxable year ended December 31, 2013. We believe that, commencing with such taxable year, we have been organized and have operated in a manner so that we qualify for taxation as a REIT under the Code. We intend to continue to operate in such a manner, but can provide no assurances that we will operate in a manner so as to remain qualified as a REIT. To continue to qualify for taxation as a REIT, we must distribute annually at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard for the deduction for dividends paid and excluding net capital gains, and must comply with a number of other organizational and operational requirements. If we continue to qualify for taxation as a REIT, we generally will not be subject to federal corporate income tax on the portion of our REIT taxable income that we distribute to our stockholders. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and properties, as well as federal income and excise taxes on our undistributed income.
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Inflation
SomeWe may be adversely impacted by inflation on the leases that do not contain indexed escalation provisions, or those leases which have escalations at rates which do not exceed or approximate current inflation rates. As of June 30, 2022, the increase to the 12-month CPI for all items, as published by the Bureau of Labor Statistics, was 9.1%. To help mitigate the adverse impact of inflation, approximately 61.6% of our leases with our tenants contain rent escalation provisions designed to mitigatewhich increase the adverse impactcash that is due under these leases over time by an average of inflation.1.0% per year. These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures). We may be adversely impacted by inflationApproximately 59.3% are fixed-rate, 2.3% are based on the leases thatConsumer Price Index and 38.4% do not contain indexedany escalation provisions.
In addition, we may be required to pay costs for maintenance and operation of properties which may adversely impact our results of operations due to potential increases in costs and operating expenses resulting from inflation. However, our net leases require the tenant to pay its allocable share of operating expenses, which may include common area maintenance costs, real estate taxes and insurance. This may reduce our exposure to increases in costs and operating expenses resulting from inflation. As the costs of general goods and services continue to rise, we may be adversely impacted by increases in general and administrative costs due to overall inflation.
Related-Party Transactions and Agreements
Please see Note 1011 — Related Party Transactions and Arrangements to our consolidated financial statements in this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have10-Q for a current or future effect on our financial condition, changes in financial condition, revenues or expenses, resultsdiscussion of operations, liquidity, capital expenditures or capital resources that are material to investors.the various related party transactions, agreements and fees.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There has been no material change in our exposure to market risk during the three months ended June 30, 2021.2022. For a discussion of our exposure to market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.2021.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and determined that our disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
No change occurred in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months ended June 30, 20212022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
Refer to “Litigation and Regulatory Matters” in Part 1I - Item 1 - Note 9, “Commitments10 - Commitments and Contingencies,” in our accompanying Consolidated Financial Statements.
Item 1A. Risk Factors.
There have been no material changes to the risk factors disclosed in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020,2021, and we direct your attention to those risk factors.factors, other than those disclosed below:
Actual or threatened terrorist attacks and other acts of violence, civilian unrest or war may affect the markets in which we operate our business and our profitability.
We own properties in major metropolitan areas as well as densely populated sub-markets that are susceptible to terrorist attack or damage. Because many of our properties are open to the public, they are exposed to a number of incidents that may take place within or around their premises and that are beyond our control or ability to prevent. If an act of terror, a mass shooting or other violence were to occur, we may lose tenants or be forced to close one or more of our properties for some time. If any of these incidents were to occur, the relevant property could face material damage to its image and the revenues generated therefrom. In addition, we may be exposed to civil liability and be required to indemnify the victims, and our insurance premiums could rise in a material amount.
On February 24, 2022, Russian troops invaded Ukraine starting a military conflict, the length and breadth of which is highly unpredictable. Coupled with existing supply disruptions and changes in Federal Reserve policies on interest rates, this war has exacerbated, and may continue to exacerbate, inflation and significant volatility in commodity prices, credit and capital markets, as well as supply chain disruptions.
Additionally, the U.S., the European Union, and other countries, as well as other public and private actors and companies have imposed sanctions and other penalties on Russia including removing Russian-based financial institutions from the Society for Worldwide Interbank Financial Telecommunication payment system and restricted imports of Russian oil, liquefied natural gas and coal. The sanctions have caused supply disruptions in the oil and gas markets and could continue to cause significant increases in energy prices, which could have a material effect on inflation and may trigger a recession in the U.S. and Europe, among other areas.
These and other sanctions that may be imposed as well as the ongoing conflict could further adversely affect the global economy and financial markets and cause further instability negatively impacting liquidity in the capital markets and potentially making it more difficult for us to access additional debt or equity financing on attractive terms in the future.
The United States government has warned of the potential risk of Russian cyberattacks, which may create market volatility and economic uncertainty particularly if these attacks occur and spread to a broad array of countries and networks.
In addition, any actual or threatened terrorist activity or violent criminal acts, including terrorist acts against public institutions or buildings or modes of public transportation (including airlines, trains or buses) could have a negative effect on our business, the value of our properties and our results of operations. More generally, any terrorist attack, other act of violence or war, including armed conflicts, could result in increased volatility in, or damage to, the worldwide financial markets and economy, including demand for properties and availability of financing. Increased economic volatility could adversely affect our tenants’ abilities to conduct their operations profitably or our ability to access capital markets.
Certain provisions in our bylaws and agreements may deter, delay or prevent a change in our control
Provisions contained in our bylaws may deter, delay or prevent a change in control of our board of directors, including, for example, provisions requiring qualifications for an individual to serve as a director and a requirement that certain of our directors be “Managing Directors” and other directors be “Independent Directors”, as defined in our governing documents. As changes occur in the marketplace for corporate governance policies, the provisions may change, be removed or new ones may be added.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sale of Unregistered Equity Securities
There were no unregistered sales of ourunregistered equity securities by the Company and affiliated purchasers during the three months ended June 30, 2021.2022.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We do not have a publicly announced repurchase plan or program in effect. The table below summarizes other repurchasesThere were no purchases of our Class A common stock madeequity securities by the Company and affiliated purchasers during the quarterthree months ended June 30, 2021.2022.
Number of Shares RepurchasedAverage Price Per ShareTotal Number of Shares Purchased as Part of Publically Announced Plans or ProgramsMaximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs
April 1 through April 3058,445 $9.57 — — 
May 1 through May 31— $— — — 
June 1 through June 30— $— — — 
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Repurchases represent shares withheld to pay taxes on the vesting of restricted shares granted to employees of our Advisor or its affiliates under our 2018 Omnibus Incentive Compensation Plan. The value of the shares withheld is the closing price of our Class A common stock on the date the vesting occurred (or, if not a trading day, the immediately preceding trading day).

Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
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EXHIBITS INDEX
The following exhibits listed on the Exhibit Index (following the signatures section of this report) are included, or incorporated by reference, in this Quarterly Report on Form 10-Q.10-Q for the quarter ended June 30, 2022 (and are numbered in accordance with Item 601 of Regulation S-K).
Exhibit No.Description
3.1(1)
Articles of Restatement
3.2(2)
Articles Supplementary relating to reclassification of common stock, classification of additional shares of 7.375% Series C Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share, and classification of additional shares of 7.50% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share, filed on January 13, 2021.
3.3(4)
Fifth Amended and Restated Bylaws
3.4(6)
Amendment to Fifth Amended and Restated Bylaws
3.5(3)
Articles of Amendment to the Articles of Restatement of American Finance Trust, Inc. as filed with the State Department of Assessments and Taxation of Maryland on February 10, 2022
10.1(5)
Form of Property Management Agreement by and between Necessity Retail Properties, LLC and certain subsidiaries of The Necessity Retail REIT Operating Partnership, L.P.
10.2 *
Eighth Amendment to Agreement of Purchase and Sale, dated March 9, 2022, by and between the Sellers identified therein and The Necessity Retail REIT Operating Partnership
10.3 *
Ninth Amendment to Agreement of Purchase and Sale, dated July 26, 2022, by and between the Sellers identified therein and The Necessity Retail REIT Operating Partnership
31.1 *
Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 *
Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32 *
Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS *Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH *Inline XBRL Taxonomy Extension Schema Document.
101.CAL *Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF *Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB *Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE *Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 *Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
_________
*    Filed herewith.
(1)Filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021 and incorporated herein by reference.
(2)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on January 13, 2021 and incorporated herein by reference.
(3)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on February 14, 2022 and incorporated herein by reference.
(4)Filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 24, 2022 and incorporated herein by reference.
(5)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on April 25, 2022 and incorporated herein by reference.
(6)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on July 19, 2022 and incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements 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.
 American Finance Trust,The Necessity Retail REIT, Inc.
 By:/s/ Edward M. Weil, Jr.
  Edward M. Weil, Jr.
  Chief Executive Officer and President
(Principal Executive Officer)
By:/s/ Jason F. Doyle
 Jason F. Doyle
 Chief Financial Officer, Treasurer and Secretary
(Principal Financial Officer and Principal Accounting Officer)
Dated: August 5, 20214, 2022
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Table of Contents
EXHIBITS INDEX
The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 (and are numbered in accordance with Item 601 of Regulation S-K).
Exhibit No.Description
3.1(1)
Articles of Restatement
3.2(2)
Fourth Amended and Restated Bylaws
3.3(3)
Amendment to Fourth Amended and Restated Bylaws of American Finance Trust, Inc.
3.4(4)
Articles Supplementary relating to reclassification of common stock, classification of additional shares of 7.375% Series C Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share, and classification of additional shares of 7.50% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share, filed on January 13, 2021.
4.1(5)
Eighth Amendment dated July 21, 2021, to the Second Amended and Restated Agreement of Limited Partnership of American Finance Operating Partnership, L.P., dated July 19, 2018.
4.2(6)
Master Indenture, dated as of May 30, 2019, as amended by that certain Amendment No. 1 dated as of June 3, 2021, by and among AFN ABSPROP001, LLC, AFN ABSPROP001-A, LLC, AFN ABSPROP001-B, LLC, AFN ABSPROP002, LLC, AFN ABSPROP002-A, LLC, AFN ABSPROP002-B, LLC, AFN ABSPROP002-C, LLC and Citibank, N.A., as indenture trustee.
4.3(6)
Series 2021-1 Indenture Supplement, dated as of June 3, 2021, by and among AFN ABSPROP001, LLC, AFN ABSPROP001-A, LLC, AFN ABSPROP001-B, LLC, AFN ABSPROP002, LLC, AFN ABSPROP002-A, LLC, AFN ABSPROP002-B, LLC, AFN ABSPROP002-C, LLC and Citibank, N.A., as indenture trustee.
10.1(7)
Form of Amendment No. 1 to Restricted Share Award Agreement dated as of October 7, 2020, between American Finance Trust, Inc., and Katie P. Kurtz.
10.2(5)
Advisor Multi-Year Outperformance Award Agreement, dated as of July 21, 2021, by and among American Finance Trust, Inc., American Finance Operating Partnership, L.P. and American Finance Advisors, LLC.
10.3(6)
Amended and Restated Guaranty, dated as of June 3, 2021, by American Finance Operating Partnership, L.P. for the benefit of Citibank N.A., as indenture trustee.
10.4(6)
Amended and Restated Property Management and Servicing Agreement, dated as of June 3, 2021, by and among AFN ABSPROP001, LLC, AFN ABSPROP001-A, LLC, AFN ABSPROP001-B, LLC, AFN ABSPROP002, LLC, AFN ABSPROP002-A, LLC, AFN ABSPROP002-B, LLC, AFN ABSPROP002-C, LLC, American Finance Properties, LLC, as property manager and special servicer, KeyBank National Association, as back-up manager, and Citibank N.A., as indenture trustee.
31.1 *
Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 *
Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32 *
Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS *Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH *Inline XBRL Taxonomy Extension Schema Document.
101.CAL *Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF *Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB *Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE *Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 *Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
_________
*    Filed herewith.
(1) Filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021.
(2) Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on July 19, 2018.
(3) Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on April 13, 2020.
(4) Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on January 13, 2021.
(5) Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on July 21, 2021.
(6) Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on June 4, 2021.
(7) Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on February 26, 2021.

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