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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 September 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-20210930_g1.jpgafin-20220930_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 October 29, 2021,31, 2022, the registrant had 123,506,474134,224,313 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 September 30, 20212022 and December 31, 20202021 (Unaudited)
3
Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 20212022 and 20202021 (Unaudited)
4
Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 20212022 (Unaudited)
5
Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 202030, 2021 (Unaudited)
6
Consolidated Statements of Cash Flows for the Nine Months Ended September 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)
(Unaudited)
September 30,
2021		December 31,
2020		September 30,
2022		December 31,
2021
ASSETSASSETS ASSETS 
Real estate investments, at cost:Real estate investments, at cost:Real estate investments, at cost:
LandLand$746,355 $723,316 Land$1,009,048 $729,048 
Buildings, fixtures and improvementsBuildings, fixtures and improvements2,943,693 2,830,508 Buildings, fixtures and improvements3,515,775 2,729,719 
Acquired intangible lease assetsAcquired intangible lease assets462,378 454,245 Acquired intangible lease assets654,735 402,673 
Total real estate investments, at costTotal real estate investments, at cost4,152,426 4,008,069 Total real estate investments, at cost5,179,558 3,861,440 
Less: accumulated depreciation and amortizationLess: accumulated depreciation and amortization(723,792)(639,367)Less: accumulated depreciation and amortization(744,265)(654,667)
Total real estate investments, netTotal real estate investments, net3,428,634 3,368,702 Total real estate investments, net4,435,293 3,206,773 
Cash and cash equivalentsCash and cash equivalents98,989 102,860 Cash and cash equivalents41,150 214,853 
Restricted cashRestricted cash15,863 10,537 Restricted cash19,288 21,996 
Deposits for real estate investmentsDeposits for real estate investments752 137 Deposits for real estate investments— 41,928 
Derivative assets, at fair value2,028 — 
Deferred costs, netDeferred costs, net17,216 16,663 Deferred costs, net22,176 25,587 
Straight-line rent receivableStraight-line rent receivable71,370 66,581 Straight-line rent receivable67,953 70,789 
Operating lease right-of-use assetsOperating lease right-of-use assets18,318 18,546 Operating lease right-of-use assets17,964 18,194 
Prepaid expenses and other assets (including $140 and $1,939 due from related parties as of September 30, 2021 and December 31, 2020, respectively)41,998 23,941 
Prepaid expenses and other assetsPrepaid expenses and other assets46,732 26,877 
Assets held for saleAssets held for sale— — Assets held for sale1,525 187,213 
Total assetsTotal assets$3,695,168 $3,607,967 Total assets$4,652,081 $3,814,210 
LIABILITIES AND EQUITYLIABILITIES AND EQUITY  LIABILITIES AND EQUITY  
Mortgage notes payable, netMortgage notes payable, net$1,587,462 $1,490,798 Mortgage notes payable, net$1,807,533 $1,464,930 
Credit facilityCredit facility186,242 280,857 Credit facility478,000 — 
Senior notes, netSenior notes, net491,983 491,015 
Below market lease liabilities, netBelow market lease liabilities, net79,809 78,674 Below market lease liabilities, net140,241 78,073 
Accounts payable and accrued expenses (including $3,404 and $273 due to related parties as of September 30, 2021 and December 31, 2020, respectively)33,256 25,210 
Accounts payable and accrued expenses (including $2,864 and $1,016 due to related parties as of September 30, 2022 and December 31, 2021, respectively)Accounts payable and accrued expenses (including $2,864 and $1,016 due to related parties as of September 30, 2022 and December 31, 2021, respectively)55,506 32,907 
Operating lease liabilitiesOperating lease liabilities19,209 19,237 Operating lease liabilities19,153 19,195 
Derivative liabilities, at fair valueDerivative liabilities, at fair value— 123 Derivative liabilities, at fair value— 2,250 
Deferred rent and other liabilitiesDeferred rent and other liabilities9,976 9,794 Deferred rent and other liabilities7,919 9,524 
Dividends payableDividends payable6,000 3,675 Dividends payable5,837 6,038 
Total liabilitiesTotal liabilities1,921,954 1,908,368 Total liabilities3,006,172 2,103,932 
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 September 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 September 30, 2021 and December 31, 2020, respectively46 35 
Common stock, $0.01 par value per share, 300,000,000 shares authorized, 123,506,474 and 108,837,209 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively1,235 1,088 
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 September 30, 2022 and December 31, 20217.50% 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 September 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 September 30, 2022 and December 31, 2021, respectively7.375% 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 September 30, 2022 and December 31, 2021, respectively46 46 
Common stock, $0.01 par value per share, 300,000,000 shares authorized, 134,244,502 and 123,783,060 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectivelyCommon stock, $0.01 par value per share, 300,000,000 shares authorized, 134,244,502 and 123,783,060 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively1,343 1,238 
Additional paid-in capitalAdditional paid-in capital2,913,276 2,723,678 Additional paid-in capital2,999,273 2,915,926 
Accumulated other comprehensive income (loss)2,028 (123)
Distributions in excess of accumulated earningsDistributions in excess of accumulated earnings(1,150,789)(1,055,680)Distributions in excess of accumulated earnings(1,374,378)(1,217,435)
Total stockholders’ equityTotal stockholders’ equity1,765,875 1,669,077 Total stockholders’ equity1,626,363 1,699,854 
Non-controlling interestsNon-controlling interests7,339 30,522 Non-controlling interests19,546 10,424 
Total equityTotal equity1,773,214 1,699,599 Total equity1,645,909 1,710,278 
Total liabilities and equityTotal liabilities and equity$3,695,168 $3,607,967 Total liabilities and equity$4,652,081 $3,814,210 

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 September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
20212020202120202022202120222021
Revenue from tenantsRevenue from tenants$91,915 $78,489 $252,679 $227,987 Revenue from tenants$116,176 $91,915 $328,048 $252,679 
Operating expenses:Operating expenses:   Operating expenses:   
Asset management fees to related partyAsset management fees to related party9,880 6,918 25,123 20,741 Asset management fees to related party7,939 9,880 24,061 25,123 
Property operating expenseProperty operating expense13,384 14,226 40,152 39,049 Property operating expense28,051 13,384 74,710 40,152 
Impairment of real estate investmentsImpairment of real estate investments4,554 — 4,645 11,502 Impairment of real estate investments30,046 4,554 94,942 4,645 
Acquisition, transaction and other costsAcquisition, transaction and other costs3,426 1,507 3,604 2,680 Acquisition, transaction and other costs210 3,426 695 3,604 
Equity-based compensationEquity-based compensation4,149 3,235 13,779 9,693 Equity-based compensation3,857 4,149 10,878 13,779 
General and administrativeGeneral and administrative5,589 3,312 15,578 15,504 General and administrative8,499 5,589 23,722 15,578 
Depreciation and amortizationDepreciation and amortization32,762 34,951 97,509 104,729 Depreciation and amortization57,494 32,762 141,755 97,509 
Total operating expensesTotal operating expenses73,744 64,149 200,390 203,898 Total operating expenses136,096 73,744 370,763 200,390 
Operating income before gain on sale of real estate investments18,171 14,340 52,289 24,089 
Gain on sale/exchange of real estate investments478 2,178 775 6,456 
Operating income18,649 16,518 53,064 30,545 
Operating (loss) income before gain on sale of real estate investments Operating (loss) income before gain on sale of real estate investments(19,920)18,171 (42,715)52,289 
Gain on sale of real estate investmentsGain on sale of real estate investments1,608 478 68,615 775 
Operating (loss) income Operating (loss) income(18,312)18,649 25,900 53,064 
Other (expense) income:Other (expense) income:Other (expense) income:
Interest expenseInterest expense(19,232)(20,871)(58,927)(58,778)Interest expense(32,402)(19,232)(84,471)(58,927)
Other incomeOther income18 871 62 1,004 Other income25 18 987 62 
Gain on non-designated derivativesGain on non-designated derivatives— — 2,250 — 
Total other expense, netTotal other expense, net(19,214)(20,000)(58,865)(57,774)Total other expense, net(32,377)(19,214)(81,234)(58,865)
Net lossNet loss(565)(3,482)(5,801)(27,229)Net loss(50,689)(565)(55,334)(5,801)
Net (income) loss attributable to non-controlling interests(4)10 4 39 
Net loss (income) attributable to non-controlling interestsNet loss (income) attributable to non-controlling interests60 (4)54 4 
Allocation for preferred stockAllocation for preferred stock(5,837)(3,619)(17,425)(10,857)Allocation for preferred stock(5,837)(5,837)(17,511)(17,425)
Net loss attributable to common stockholdersNet loss attributable to common stockholders(6,406)(7,091)(23,222)(38,047)Net loss attributable to common stockholders(56,466)(6,406)(72,791)(23,222)
Other comprehensive income (loss):Other comprehensive income (loss):Other comprehensive income (loss):
Change in unrealized income on derivativesChange in unrealized income on derivatives98 (546)2,151 (546)Change in unrealized income on derivatives— 98 — 2,151 
Comprehensive loss attributable to common stockholdersComprehensive loss attributable to common stockholders$(6,308)$(7,637)$(21,071)$(38,593)Comprehensive loss attributable to common stockholders$(56,466)$(6,308)$(72,791)$(21,071)
Weighted-average shares outstanding — BasicWeighted-average shares outstanding — Basic133,115,729 118,862,852 131,478,484 112,770,685 
Weighted-average shares outstanding — Basic and Diluted118,862,852 108,429,315 112,770,685 108,393,269 
Weighted-average shares outstanding — DilutedWeighted-average shares outstanding — Diluted133,115,729 118,862,852 131,478,484 112,770,685 
Net loss per share attributable to common stockholders — Basic and DilutedNet loss per share attributable to common stockholders — Basic and Diluted$(0.06)$(0.07)$(0.21)$(0.36)Net loss per share attributable to common stockholders — Basic and Diluted$(0.43)$(0.06)$(0.56)$(0.21)


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)

Nine Months Ended September 30, 2021Nine Months Ended September 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, 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 $1,699,599 
Shares Subject to RepurchaseNumber of
Shares		Par ValueNumber of
Shares		Par ValueNumber of
Shares		Par ValueAdditional Paid-in
Capital		Distributions in excess of accumulated earningsTotal Stockholders’ EquityNon-controlling InterestsTotal Equity
Balance, December 31, 2021Balance, December 31, 2021$— 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, netIssuance of Common Stock, net— — — — 14,456,837 145 125,937 — — 126,082 — 126,082 Issuance of Common Stock, net— — — — — 3,762,559 38 32,450 — 32,488 — 32,488 
Issuance of Shares subject to repurchase, at fair market value upon closingIssuance of Shares subject to repurchase, at fair market value upon closing49,965 — — — — 6,450,107 — — — — — — 
Adjustments to redemption valueAdjustments to redemption value3,423 — — — — — — (3,423)— (3,423)— (3,423)
Reclassification of Shares upon termination of repurchase rightsReclassification of Shares upon termination of repurchase rights(53,388)— — — — — 65 53,323 — 53,388 — 53,388 
Issuance of Series A Preferred Stock, netIssuance of Series A Preferred Stock, net91,703 — — — — — 2,047 — — 2,047 — 2,047 Issuance of Series A Preferred Stock, net— — — — — — — (166)— (166)— (166)
Issuance of Series C Preferred Stock, netIssuance of Series C Preferred Stock, net— — 1,058,798 11 — — 25,492 — — 25,503 — 25,503 Issuance of Series C Preferred Stock, net— — — 677 — — — (149)— (149)— (149)
Equity-based compensation (1)
Equity-based compensation (1)
— — — — 289,449 3 2,075 — — 2,078 11,701 13,779 
Equity-based compensation (1)
— — — — — 287,735 2 1,348 — 1,350 9,528 10,878 
Common stock shares withheld upon vesting of restricted stockCommon stock shares withheld upon vesting of restricted stock— — — — (77,021)(1)(723)— — (724)— (724)Common stock shares withheld upon vesting of restricted stock— — — — — (38,959)— (278)— (278)— (278)
Dividends declared on Common Stock,$0.63 per share— — — — — — — — (71,287)(71,287)— (71,287)
Dividends declared on Common Stock,$0.64 per shareDividends declared on Common Stock,$0.64 per share— — — — — — — — (83,607)(83,607)— (83,607)
Dividends declared on Series A Preferred Stock, $1.41 per shareDividends declared on Series A Preferred Stock, $1.41 per share— — — — — — — — (11,172)(11,172)— (11,172)Dividends declared on Series A Preferred Stock, $1.41 per share— — — — — — — — (11,157)(11,157)— (11,157)
Dividends declared on Series C Preferred Stock, $1.45 per share— — — — — — — — (6,499)(6,499)— (6,499)
Dividends declared on Series C Preferred Stock, $1.38 per shareDividends declared on Series C Preferred Stock, $1.38 per share— — — — — — — — (6,354)(6,354)— (6,354)
Distributions to non-controlling interest holdersDistributions to non-controlling interest holders— — — — — — — — (354)(354)(110)(464)Distributions to non-controlling interest holders— — — — — — — — (545)(545)(110)(655)
Net lossNet loss— — — — — — — — (5,797)(5,797)(4)(5,801)Net loss— — — — — — — — (55,280)(55,280)(54)(55,334)
Other comprehensive loss— — — — — — — 2,151 — 2,151 — 2,151 
Forfeiture of 2018 LTIP Units— — — — — — 34,826 — — 34,826 (34,826)— 
Rebalancing of ownership percentageRebalancing of ownership percentage— — — — — — (56)— — (56)56 — Rebalancing of ownership percentage— — — — — — — 242 — 242 (242)— 
Balance, September 30, 20217,933,711 $79 4,594,498 $46 123,506,474 $1,235 $2,913,276 $2,028 $(1,150,789)$1,765,875 $7,339 $1,773,214 
Balance, September 30, 2022Balance, September 30, 2022$— 7,933,711 $79��4,595,175 $46 134,244,502 $1,343 $2,999,273 $(1,374,378)$1,626,363 $19,546 $1,645,909 
(1)Presented net of forfeitures. During the nine months ended September 30, 2022, 64,205 restricted shares with a fair value of approximately $0.5 million were forfeited.

Three Months Ended September 30, 2021Three Months Ended September 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, 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 
Shares Subject to RepurchaseNumber of
Shares		Par ValueNumber of
Shares		Par ValueNumber of
Shares		Par ValueAdditional Paid-in
Capital		Distributions in excess of accumulated earningsTotal Stockholders’ EquityNon-controlling InterestsTotal Equity
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 
Issuance of Common Stock, netIssuance of Common Stock, net— — — — 5,822,614 59 49,024 — — 49,083 — 49,083 Issuance of Common Stock, net— — — — — 997,230 11 7,850 — 7,861 — 7,861 
Reclassification of Shares upon termination of repurchase rightsReclassification of Shares upon termination of repurchase rights(53,388)— — — — — 65 53,323 — 53,388 — 53,388 
Issuance of Series A Preferred Stock, netIssuance of Series A Preferred Stock, net— — — — — — (109)— — (109)— (109)Issuance of Series A Preferred Stock, net— — — — — — — (44)— (44)— (44)
Issuance of Series C Preferred Stock, netIssuance of Series C Preferred Stock, net— — — — — — (104)— — (104)— (104)Issuance of Series C Preferred Stock, net— — — — — — — (31)— (31)— (31)
Equity-based compensation (1)
Equity-based compensation (1)
— — — — (4,150)— 312 — 154 466 5,773 6,239 
Equity-based compensation (1)
— — — — — 13,926 (1)682 — 681 3,176 3,857 
Common stock shares withheld upon vesting of restricted shares— — — — (18,576)(1)(164)— — (165)— (165)
Common stock shares withheld upon vesting of restricted stockCommon stock shares withheld upon vesting of restricted stock— — — — — (38,959)— (278)— (278)— (278)
Dividends declared on Common Stock,$0.21 per shareDividends declared on Common Stock,$0.21 per share— — — — — — — — (25,190)(25,190)— (25,190)Dividends declared on Common Stock,$0.21 per share— — — — — — — — (28,331)(28,331)— (28,331)
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, $0.46 per shareDividends declared on Series C Preferred Stock, $0.46 per share— — — — — — — — (2,119)(2,119)— (2,119)Dividends 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— — — — — — — — (164)(164)(37)(201)Distributions to non-controlling interest holders— — — — — — — — (181)(181)(37)(218)
Net lossNet loss— — — — — — — — (569)(569)4 (565)Net loss— — — — — — — — (50,629)(50,629)(60)(50,689)
Other comprehensive loss— — — — — — — 98 — 98 — 98 
Forfeiture of 2018 LTIP Units— — — — — — 34,826 — — 34,826 (34,826)— 
Rebalancing of ownership percentageRebalancing of ownership percentage— — — — — — 1 — — 1 (1)— Rebalancing of ownership percentage— — — — — — — 376 — 376 (376)— 
Balance, September 30, 20217,933,711 $79 4,594,498 $46 123,506,474 $1,235 $2,913,276 $2,028 $(1,150,789)$1,765,875 $7,339 $1,773,214 
Balance, September 30, 2022Balance, September 30, 2022$— 7,933,711 $79 4,595,175 $46 134,244,502 $1,343 $2,999,273 $(1,374,378)$1,626,363 $19,546 $1,645,909 
(1)Presented net of forfeitures. During the three months ended September 30, 2022, 63,930 restricted shares with a fair value of approximately $0.5 million were forfeited.


The accompanying notes are an integral part of these consolidated financial statements.

(1) Presented net of forfeitures. 24,025 restricted shares with a fair value of approximately $165,000 were forfeited during the period.
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AMERICAN FINANCE TRUST,THE NECESSITY RETAIL REIT, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share data)
(Unaudited)
Nine Months Ended September 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 $— $(932,912)$1,683,331 $18,899 $1,702,230 
Issuance of Common Stock, net— — — — (184)— — (184)— (184)
Issuance of Preferred Stock, net802,459 8 — — 19,509 — — 19,517 — 19,517 
Equity-based compensation— — 361,943 3 797 — — 800 8,893 9,693 
Dividends declared on Common Stock, $0.70 per share— — — — — — (75,954)(75,954)— (75,954)
Dividends declared on Preferred Stock, $1.41 per share— — — — — — (10,856)(10,856)— (10,856)
Distributions to non-controlling interest holders— — — — — — (315)(315)(120)(435)
Other comprehensive loss— — — — — (546)— (546)— (546)
Net loss— — — — — — (27,190)(27,190)(39)(27,229)
Rebalancing of ownership percentage— — — — 65 — — 65 (65)— 
Balance, September 30, 20207,719,689 $77 108,837,209 $1,088 $2,635,276 $(546)$(1,047,227)$1,588,668 $27,568 $1,616,236 


Three Months Ended September 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, June 30, 20207,719,689 $77 108,527,734 $1,085 $2,635,166 $— $(1,016,977)$1,619,351 $24,678 $1,644,029 
Issuance of Common Stock, net— — — — (94)— — (94)— (94)
Issuance of Preferred Stock, net— — — — (92)— — (92)— (92)
Equity-based compensation— — 309,475 3 269 — — 272 2,963 3,235 
Dividends declared on Common Stock,$0.21 per share— — — — — — (23,065)(23,065)— (23,065)
Dividends declared on Preferred Stock,$0.47 per share— — — — — — (3,618)(3,618)— (3,618)
Distributions to non-controlling interest holders— — — — — — (95)(95)(36)(131)
Other comprehensive loss— — — — — (546)— (546)— (546)
Net loss— — — — — — (3,472)(3,472)(10)(3,482)
Rebalancing of ownership percentage— — — — 27 — — 27 (27)— 
Balance, September 30, 20207,719,689 $77 108,837,209 $1,088 $2,635,276 $(546)$(1,047,227)$1,588,668 $27,568 $1,616,236 
Nine Months Ended September 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— — — — 14,456,837 145 125,937 — — 126,082 — 126,082 
Issuance of Series A Preferred Stock, net91,703 — — — — — 2,047 — — 2,047 — 2,047 
Issuance of Series C Preferred Stock, net— — 1,058,798 11 — — 25,492 — — 25,503 — 25,503 
Equity-based compensation (1)
— — — — 289,449 3 2,075 — — 2,078 11,701 13,779 
Common stock shares withheld
upon vesting of restricted
shares
— — — — (77,021)(1)(723)— — (724)— (724)
Dividends declared on Common Stock, $0.63 per share— — — — — — — — (71,287)(71,287)— (71,287)
Dividends declared on Series A Preferred Stock, $1.41 per share— — — — — — — — (11,172)(11,172)— (11,172)
Dividends declared on Series C Preferred Stock, $1.45 per share— — — — — — — — (6,499)(6,499)— (6,499)
Distributions to non-controlling interest holders— — — — — — — — (354)(354)(110)(464)
Net loss— — — — — — — — (5,797)(5,797)(4)(5,801)
Other comprehensive loss— — — — — — — 2,151 — 2,151 — 2,151 
Forfeiture of 2018 LTIP Units— — — — — — 34,826 — — 34,826 (34,826)— 
Rebalancing of ownership percentage— — — — — — (56)— — (56)56 — 
Balance, September 30, 20217,933,711 $79 4,594,498 $46 123,506,474 $1,235 $2,913,276 $2,028 $(1,150,789)$1,765,875 $7,339 $1,773,214 
(1)Presented net of forfeitures. During the nine months ended September 30, 2021, 24,025 restricted shares with a fair value of approximately $165,000 were forfeited.

Three Months Ended September 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, 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 
Issuance of Common Stock, net— — — — 5,822,614 59 49,024 — — 49,083 — 49,083 
Issuance of Series A Preferred Stock, net— — — — — — (109)— — (109)— (109)
Issuance of Series C Preferred Stock, net— — — — — — (104)— — (104)— (104)
Equity-based compensation (1)
— — — — (4,150)— 312 — 154 466 5,773 6,239 
Common stock shares withheld upon vesting of restricted shares— — — — (18,576)(1)(164)— — (165)— (165)
Dividends declared on Common Stock, $0.21 per share— — — — — — — — (25,190)(25,190)— (25,190)
Dividends declared on Series A Preferred Stock, $0.47 per share— — — — — — — — (3,719)(3,719)— (3,719)
Dividends declared on Series C Preferred Stock, $0.46 per share— — — — — — — — (2,119)(2,119)— (2,119)
Distributions to non-controlling interest holders— — — — — — — — (164)(164)(37)(201)
Net loss— — — — — — — — (569)(569)4 (565)
Other comprehensive loss— — — — — — — 98 — 98 — 98 
Forfeiture of 2018 LTIP Units— — — — — — 34,826 — — 34,826 (34,826)— 
Rebalancing of ownership percentage— — — — — — 1 — — 1 (1)— 
Balance, September 30, 20217,933,711 $79 4,594,498 $46 123,506,474 $1,235 $2,913,276 $2,028 $(1,150,789)$1,765,875 $7,339 $1,773,214 
(1)Presented net of forfeitures. During the three months ended September 30, 2021, 4,150 restricted shares with a fair value of approximately $29,000 were forfeited.

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)
Nine Months Ended September 30,Nine Months Ended September 30,
2021202020222021
Cash flows from operating activities:Cash flows from operating activities:  Cash flows from operating activities:  
Net (loss) income$(5,801)$(27,229)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net lossNet loss$(55,334)$(5,801)
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:
DepreciationDepreciation67,463 66,919 Depreciation80,573 67,463 
Amortization of in-place lease assetsAmortization of in-place lease assets28,429 36,104 Amortization of in-place lease assets59,375 28,429 
Amortization of deferred leasing costsAmortization of deferred leasing costs1,617 1,707 Amortization of deferred leasing costs1,806 1,617 
Amortization (including accelerated write-off) of deferred financing costsAmortization (including accelerated write-off) of deferred financing costs7,991 5,813 Amortization (including accelerated write-off) of deferred financing costs9,603 7,991 
Amortization of mortgage (premiums) and discounts on borrowings, netAmortization of mortgage (premiums) and discounts on borrowings, net(972)(1,670)Amortization of mortgage (premiums) and discounts on borrowings, net615 (972)
Accretion of market lease and other intangibles, netAccretion of market lease and other intangibles, net(3,450)(4,933)Accretion of market lease and other intangibles, net(3,254)(3,450)
Equity-based compensationEquity-based compensation13,779 9,693 Equity-based compensation10,878 13,779 
Gain on sale/exchange of real estate investments(775)(6,456)
Gain on non-designated derivativesGain on non-designated derivatives(2,250)— 
Gain on sale of real estate investmentsGain on sale of real estate investments(68,615)(775)
Impairment of real estate investmentsImpairment of real estate investments4,645 11,502 Impairment of real estate investments94,942 4,645 
Payments of prepayment costs on mortgagesPayments of prepayment costs on mortgages3,327 807 Payments of prepayment costs on mortgages— 3,327 
Changes in assets and liabilities:Changes in assets and liabilities:Changes in assets and liabilities:
Straight-line rent receivableStraight-line rent receivable(5,068)(15,694)Straight-line rent receivable(5,407)(5,068)
Straight-line rent payableStraight-line rent payable190 244 Straight-line rent payable198 190 
Prepaid expenses and other assetsPrepaid expenses and other assets(16,316)(11,017)Prepaid expenses and other assets(6,936)(16,316)
Accounts payable and accrued expensesAccounts payable and accrued expenses5,282 4,963 Accounts payable and accrued expenses17,003 5,282 
Deferred rent and other liabilitiesDeferred rent and other liabilities182 (928)Deferred rent and other liabilities(1,605)182 
Net cash provided by operating activitiesNet cash provided by operating activities100,523 69,825 Net cash provided by operating activities131,592 100,523 
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Capital expendituresCapital expenditures(10,106)(6,901)Capital expenditures(10,905)(10,106)
Investments in real estate and other assetsInvestments in real estate and other assets(153,704)(158,014)Investments in real estate and other assets(996,551)(153,704)
Proceeds from sale of real estate investmentsProceeds from sale of real estate investments4,579 6,707 Proceeds from sale of real estate investments306,123 4,579 
Deposits for real estate investmentsDeposits for real estate investments(615)(1,801)Deposits for real estate investments(103)(615)
Net cash used in investing activitiesNet cash used in investing activities(159,846)(160,009)Net cash used in investing activities(701,436)(159,846)
Cash flows from financing activities:Cash flows from financing activities:  Cash flows from financing activities:  
Proceeds from mortgage notes payableProceeds from mortgage notes payable239,928 840,000 Proceeds from mortgage notes payable— 239,928 
Payments on mortgage notes payablePayments on mortgage notes payable(137,905)(624,240)Payments on mortgage notes payable(11,586)(137,905)
Proceeds from credit facilityProceeds from credit facility30,500 205,000 Proceeds from credit facility513,000 30,500 
Payments on credit facilityPayments on credit facility(125,114)(232,291)Payments on credit facility(35,000)(125,114)
Payments of financing costs and deposits(10,059)(30,192)
Payments of financing costsPayments of financing costs(3,148)(10,059)
Payments of prepayment costs on mortgagesPayments of prepayment costs on mortgages(3,327)(807)Payments of prepayment costs on mortgages— (3,327)
Common stock repurchasesCommon stock repurchases(560)— Common stock repurchases(278)(560)
Distributions on LTIP Units and Class A UnitsDistributions on LTIP Units and Class A Units(320)(436)Distributions on LTIP Units and Class A Units(655)(320)
Dividends paid on Class A common stockDividends paid on Class A common stock(71,287)(75,951)Dividends paid on Class A common stock(83,607)(71,287)
Dividends paid on Series A preferred stockDividends paid on Series A preferred stock(11,129)(10,537)Dividends paid on Series A preferred stock(11,157)(11,129)
Dividends paid on Series C preferred stockDividends paid on Series C preferred stock(4,380)— Dividends paid on Series C preferred stock(6,354)(4,380)
Series A preferred stock offering costsSeries A preferred stock offering costs(159)— 
Series C preferred stock offering costsSeries C preferred stock offering costs(159)— 
Class A common stock offering costsClass A common stock offering costs— (161)Class A common stock offering costs(706)— 
Proceeds from issuance of Series A preferred stock, net Proceeds from issuance of Series A preferred stock, net1,974 19,530  Proceeds from issuance of Series A preferred stock, net— 1,974 
Proceeds from issuance of Series C preferred stock, net Proceeds from issuance of Series C preferred stock, net25,555 —  Proceeds from issuance of Series C preferred stock, net17 25,555 
Proceeds from issuance of Class A common stock, netProceeds from issuance of Class A common stock, net126,902 — Proceeds from issuance of Class A common stock, net33,225 126,902 
Net cash provided by financing activitiesNet cash provided by financing activities60,778 89,915 Net cash provided by financing activities393,433 60,778 
Net change in cash, cash equivalents and restricted cashNet change in cash, cash equivalents and restricted cash1,455 (269)Net change in cash, cash equivalents and restricted cash(176,411)1,455 
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$114,852 $99,571 Cash, cash equivalents and restricted cash end of period$60,438 $114,852 
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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)
Nine Months Ended September 30,Nine Months Ended September 30,
2021202020222021
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$98,989 $86,265 Cash and cash equivalents, end of period$41,150 $98,989 
Restricted cash, end of periodRestricted cash, end of period15,863 13,306 Restricted cash, end of period19,288 15,863 
Cash, cash equivalents and restricted cash end of periodCash, cash equivalents and restricted cash end of period$114,852 $99,571 Cash, cash equivalents and restricted cash end of period$60,438 $114,852 
Supplemental Disclosures:Supplemental Disclosures:Supplemental Disclosures:
Cash paid for interest, net of amounts capitalizedCash paid for interest, net of amounts capitalized$52,887 $54,965 Cash paid for interest, net of amounts capitalized$77,851 $52,887 
Cash paid for income and franchise taxesCash paid for income and franchise taxes1,112 665 Cash paid for income and franchise taxes1,102 1,112 
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$70 $2 Accrued Series A preferred stock offering costs$7 $70 
Accrued Series C preferred stock offering costsAccrued Series C preferred stock offering costs69 — Accrued Series C preferred stock offering costs2 69 
Accrued Class A common stock offering costsAccrued Class A common stock offering costs827 — Accrued Class A common stock offering costs31 827 
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 — Series C preferred stock dividend declared2,118 2,118 
Shares issued in acquisitionShares issued in acquisition49,965 — 
Adjustments to value of sharesAdjustments to value of shares3,423 — 
Proceeds from real estate sales used to pay off related mortgage notes payableProceeds from real estate sales used to pay off related mortgage notes payable1,108 5,586 Proceeds from real estate sales used to pay off related mortgage notes payable940 1,108 
Mortgage notes payable released in connection with disposition of real estateMortgage notes payable released in connection with disposition of real estate(1,108)(5,586)Mortgage notes payable released in connection with disposition of real estate(940)(1,108)
Mortgages assumed in acquisition (including net discounts of $2,301)Mortgages assumed in acquisition (including net discounts of $2,301)350,436 — 
Application of deposits for real estate acquisitionsApplication of deposits for real estate acquisitions40,000 — 
Accrued contingent consideration on acquired properties in the CIM Portfolio AcquisitionAccrued contingent consideration on acquired properties in the CIM Portfolio Acquisition5,236 — 
Accrued capital expendituresAccrued capital expenditures1,583 3,536 Accrued capital expenditures269 1,583 
Assets provided through real estate substitution— (2,202)
Assets received through real estate substitution— 4,380 




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
September 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 two single-tenant properties for an aggregate 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 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 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 fair value at issuance ($53.4 million in contractual value) 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 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.
•In the three months ended September 30, 2022, the Company closed on the one remaining property from the CIM Portfolio Acquisition 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.
•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, $13.3 million and $26.1 million for such contingent consideration with cash on hand in the three months ended March 31, 2022, June 30, 2022 and September 30, 2022, respectively, and the Company has accrued for $5.2 million of contingent consideration based on leases executed as of September 30, 2022. 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 one additional single-tenant property in the three months ended September 30, 2022 for a contract purchase price of $5.0 million. The Company acquired 11 additional single-tenant properties and one additional multi-tenant retail property in the nine months ended September 30, 2022 for an aggregate contract purchase price of $63.4 million.
As of September 30, 2021,2022, the Company owned 9681,050 properties, comprised of 20.128.8 million rentable square feet, which were 93.2%92.6% leased, including 935939 single-tenant net leased commercial properties (893(900 of which are retail properties) and 33111 multi-tenant retail properties.
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
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. 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 nine month periods ended September 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 nine months ended September 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 September 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.

Out-of-Period Adjustment

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022, the Company concluded that it had understated amortization by $1.2 million in the three months ended March 31, 2022, and $2.5 million and $3.7 million, respectively, for the three and six month periods ended June 30, 2022, for certain in-place lease intangibles associated with certain leases with below market rents that were acquired as part of the CIM Portfolio Acquisition in the first and second quarters of 2022. The Company has concluded that this adjustment was not material to the financial position or results of operations for the current period or for any prior quarterly periods and, accordingly, the Company recorded the cumulative adjustment to increase depreciation by $3.7 million in the three and nine month periods ended September 30, 2021
(Unaudited)
2022.
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
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
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 September 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 September 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.
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 nine months ended September 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 throughout 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 nine months ended September 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 September 30, 2021,2022, these leases had an average remaining lease term of approximately 8.77.0 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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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 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
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
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.
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 September 30, 2021:2022:
(In thousands)(In thousands)Future  Base Rent Payments(In thousands)Future  Base Rent Payments
2021 (remainder)$69,143 
2022274,645 
2022 (remainder)2022 (remainder)$93,334 
20232023261,254 2023367,716 
20242024245,207 2024340,503 
20252025227,540 2025310,098 
20262026210,747 2026277,855 
20272027235,000 
ThereafterThereafter1,267,169 Thereafter1,241,083 
$2,555,705  $2,865,589 
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 nine months ended September 30, 2021,2022 such amounts were $0.3$0.2 million and $0.9 million, respectively, and for the three and nine months ended September 30, 2020,2021 such amounts were $0.4$0.3 million and $0.7$0.9 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 throughout 2021 and 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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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 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 nine months ended September 30, 2022, uncollectable amounts were $0.6 million and $1.1 million, respectively. During the three months ended September 30, 2021, the Company recorded a net recovery of $0.1 million of uncollectable amounts during the period. During the nine months ended September 30, 2021, uncollectable amounts were $1.3 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 $0.5 million
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
The Company entered into lease termination agreements at two and $5.2 millionsix 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 threetenant, 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 five vacant properties formerly leased to Truist Bank in the nine months ended September 30, 2020, respectively.2022. The Company recorded additional lease revenue of $10.2 million in the nine months ended September 30, 2022, related to these agreements. As of June 30, 2022, the occupancy periods for these amended leases expired and the tenants vacated. Accordingly, no related revenue was recognized on these leases in the three months ended September 30, 2022.
During the third quarter of 2021, the Company entered into a lease termination agreement with a tenant at 12 of its properties. The Company recorded approximately $10.5 million in revenue from tenants in the Company’s consolidated statements of operations for the three and nine months ended September 30, 2021 as a result of all of the accounting impacts of related to this lease termination. This amount consists of a lease termination fee of $10.4 million and a $0.7 million below market lease intangibles write off, (see Note 3 — Real Estate Investments. Net), less $0.6 million in previously recorded straight-line rent receivables accrued on these leases. In addition,
Total lease termination income recorded during the nine months ended September 30, 2021 alsowas $11.2 million, which includes the amounts referenced above as well as $0.8 million in lease termination fees from a tenant in one of the Company’s multi-tenant properties that terminated its lease.
The $10.4 million termination fee is recordedlease earlier in prepaid expenses and other assets on the Company’s consolidated balance sheet as of September 30, 2021. The payment was received by the Company in October 2021.year.
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 September 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 September 30, 2021, no2022, four properties were considered held for sale, and as of December 31, 2020,2021, the Company had no propertiesone 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 nine months ended September 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
September 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 nine month periodsmonths ended September 30, 20212022 and 20202021 were asset acquisitions.
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
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.
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 September 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
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
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.
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
September 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.
Reportable Segments
As of September 30, 2022 and December 31, 2021, the Company has determined that it has two 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 initial remaining periodslease terms 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.

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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
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.
Equity-Based Compensation
The Company has stock-based plans under which its directors, officers, and otheremployees (if the Company ever has employees), employees of the Advisor orand its affiliates, who are involved in providingemployees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, and certain consultants to the Company and the Advisor and its affiliates or to entities that provide services to the Company are eligible to receive awards. Awards granted thereunder are accounted for under the guidance for employee share-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.
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
On May 4, 2021,equity until the Company’s independent directors, acting as a group, authorized the issuance of a new award of LTIP Units 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 priceend 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 $5.2 million of additional expense for equity-based compensation during the nine months ended September 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, the Initial Share Price. As a result, the 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 12— 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 12 — Equity-Based Compensation.
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 sheetsheets and statementstatements of equity.
AccountingOn May 4, 2021, the Company’s independent directors authorized the issuance of an 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 ten-trading day trailing average closing stock price of the Company’s Class A common stock for Leases
Lessor Accounting
As a lessor of real estate,the ten trading days up to and including July 19, 2021. On July 21, 2021, the Company has elected,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 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$8.4419. The LTIP Units issued under the 2021 OPP were reclassified as an operating lease because (a)equity award with the non-lease components havecumulative expense reflected as part of non-controlling interest in the same timingCompany’s consolidated balance sheets 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.equity statements. For additional information, and disclosures related to the Company’s operating leases, see Note 913 — Commitments and ContingenciesEquity-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 13 — Equity-Based Compensation.
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(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
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
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 preserveswould preserve the presentation of the Company’s derivatives, if any, which willwould be consistent with itsthe Company’s past presentation. As of September 30, 2022, the Company did not have any outstanding derivative instruments but has LIBOR-based borrowings under its Credit Facility (see Note 5 — Credit Facility for additional information). 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.
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.
Nine Months Ended September 30,Nine Months Ended September 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$27,168 $33,935 Land$312,399 $27,168 
Buildings, fixtures and improvementsBuildings, fixtures and improvements113,576 105,447 Buildings, fixtures and improvements926,630 113,576 
Total tangible assetsTotal tangible assets140,744 139,382 Total tangible assets1,239,029 140,744 
Acquired intangible assets and liabilities: (1)
Acquired intangible assets and liabilities: (1)
Acquired intangible assets and liabilities: (1)
In-place leasesIn-place leases19,121 18,915 In-place leases247,899 19,121 
Above-market lease assetsAbove-market lease assets— 1,743 Above-market lease assets25,286 — 
Below-market lease liabilitiesBelow-market lease liabilities(70,026)(6,161)
Below-market lease liabilities(6,161)(2,026)
Total intangible assets, netTotal intangible assets, net12,960 18,632 Total intangible assets, net203,159 12,960 
Consideration paid for acquired real estate investments, net of liabilities assumed$153,704 $158,014 
Number of properties purchased56 72 
Assets Reduced, Liabilities Assumed and Equity Issued:Assets Reduced, Liabilities Assumed and Equity Issued:
Mortgage notes payable assumed in acquisitions (including net discounts of $2,301)Mortgage notes payable assumed in acquisitions (including net discounts of $2,301)(350,436)— 
Shares issued in acquisitionsShares issued in acquisitions(49,965)— 
Application of depositApplication of deposit(40,000)— 
Accrued contingent consideration on acquired properties from the CIM Portfolio AcquisitionAccrued contingent consideration on acquired properties from the CIM Portfolio Acquisition(5,236)
Cash paid for real estate investmentsCash paid for real estate investments$996,551 $153,704 
Number of properties purchased from the CIM Portfolio Acquisition (See Note 1 — Organization for additional information)
Number of properties purchased from the CIM Portfolio Acquisition (See Note 1 — Organization for additional information)
81 — 
Number of other properties purchasedNumber of other properties purchased12 56 
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
________
(1)Weighted-average remaining amortization periods for in-place leases, above-market and below-market lease liabilities acquired during the nine months ended September 30, 20212022 were 14.96.4 years, 7.5 years and 19.221.0 years, respectively, as of each property’s respective acquisition date. No above-market lease assets were acquired during the nine months ended September 30, 2021.
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
(2)Includes two acquisitions of parcels 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 September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
(In thousands)(In thousands)2021202020212020(In thousands)2022202120222021
In-place leases, included in depreciation and amortization (1)(2)
In-place leases, included in depreciation and amortization (1)(2)
$9,220 $12,768 $28,429 $36,104 
In-place leases, included in depreciation and amortization (1)(2)
$28,352 $9,220 $59,375 $28,429 
Above-market lease intangiblesAbove-market lease intangibles$(587)$(747)$(1,877)$(2,149)Above-market lease intangibles$(2,037)$(587)$(4,318)$(1,877)
Below-market lease liabilities (2)
Below-market lease liabilities (2)
2,075 2,412 5,371 7,120 
Below-market lease liabilities (2)
2,625 2,075 7,616 5,371 
Total included in revenue from tenantsTotal included in revenue from tenants$1,488 $1,665 $3,494 $4,971 Total included in revenue from tenants$588 $1,488 $3,298 $3,494 
Below-market ground lease asset (3)(1)
Below-market ground lease asset (3)(1)
$8 $8 $24 $24 
Below-market ground lease asset (3)(1)
$8 $8 $24 $24 
Above-market ground lease liability (3)(1)
Above-market ground lease liability (3)(1)
— — — (1)
Above-market ground lease liability (3)(1)
— — — — 
Total included in property operating expensesTotal included in property operating expenses$8 $8 $24 $23 Total included in property operating expenses$8 $8 $24 $24 
______
(1)Includes approximately $3.3 million in accelerated write-offs in the nine months ended September 30, 2020 as a result of tenant lease terminations.
(2)    Includes approximately $0.7 million in accelerated write-offs in the three and nine months ended September 30, 2021 as a result of a tenant’s lease termination for 12 properties.
(3) 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.
(2)Includes $3.7 million of additional in-place lease amortization for the three months ended September 30, 2022 resulting from an out-of-period adjustment related to the six months ended June 30, 2022 (see Note 2 — Summary of Significant Accounting Policies for additional information).
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$8,986 $34,178 $31,793 $29,144 $25,946 In-place leases, to be included in depreciation and amortization$22,303 $75,806 $58,706 $46,892 $37,110 
Above-market lease intangiblesAbove-market lease intangibles$568 $2,069 $1,767 $1,653 $1,290 Above-market lease intangibles$1,644 $6,229 $5,396 $4,555 $3,316 
Below-market lease liabilitiesBelow-market lease liabilities(1,643)(6,363)(6,221)(6,026)(5,800)Below-market lease liabilities(2,696)(10,700)(10,189)(9,804)(9,344)
Total to be included in revenue from tenantsTotal to be included in revenue from tenants$(1,075)$(4,294)$(4,454)$(4,373)$(4,510)Total to be included in revenue from tenants$(1,052)$(4,471)$(4,793)$(5,249)$(6,028)
Deposits for Real Estate Investments
The Company did not have any deposits for future acquisitions of real estate investments as of September 30, 2022. As of December 31, 2021, the Company had $41.9 million in deposits for future acquisitions of real estate investments, of which $40.0 million as of December 31, 2021 related to the deposit on the CIM Portfolio Acquisition.
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.
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
One multi-tenant property with a carrying value of $67.1 million was previously under a purchase and sale agreement for disposal and was classified as held for sale as of June 30, 2022. The sale was not completed, and the purchase and sale agreement was terminated during the three months ended September 30, 2022. The Company reevaluated the property, concluded that it no longer qualified as held for sale, and reclassified it as held for use. Accordingly, the Company recorded depreciation and amortization charges on the property to compensate for its time as held for sale. Subsequent to September 30, 2022, the Company entered into an amended purchase and sale agreement for this property for a contract sales price of $64.8 million. The Company again reevaluated this property, and concluded that the property did not meet the criteria for held for sale as of September 30, 2022. The Company recorded further impairment charges on this property of $2.4 million to reflect the reduced recovery value in the three months ended September 30, 2022.
As of September 30, 2021 no2022, there were four properties were consideredunder contract to be disposed that have been classified as held for sale, and asall of which were vacant single-tenant properties formerly leased to Truist Bank. These properties were disposed in October 2022 (see Note 16 — Subsequent Events for additional information).
As of December 31, 20202021, there were no propertieswas one 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 did not represent a strategic shift in the Company’s operations or strategy. Accordingly, the operating results of these properties remained 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 September 30, 2022 and December 31, 2021:
(In thousands)
September 30, 2022 (1)
December 31, 2021 (2)
Real estate investments held for sale, at cost:
Land$2,593 $16,009 
Buildings, fixtures and improvements7,736 194,288 
Acquired intangible lease assets— 46,980 
Total real estate assets held for sale, at cost10,329 257,277 
Less accumulated depreciation and amortization(1,838)(70,064)
Total real estate investments held for sale, net8,491 187,213 
Impairment charges related to properties reclassified as held for sale(6,966)— 
Assets held for sale$1,525 $187,213 
(1)Consists of four vacant single-tenant properties formerly leased to Truist Bank, all of which were disposed subsequent to September 30, 2022 (see Note 16 — Subsequent Events for additional information).
(2)Consists solely of the Sanofi property.
Real Estate Sales/ExchangesSales
During the three months ended September 30, 2022, the Company sold eight properties for an aggregate contract price of $35.4 million. These dispositions resulted in an aggregate gain of $1.6 million, which is reflected in gain on sale of real estate investments on the consolidated statement of operations for the three months ended September 30, 2022. During the nine months ended September 30, 2022, the Company sold 19 properties, including the Company’s Sanofi property which was held for sale as of December 31, 2021, for an aggregate contract price of $331.0 million. These dispositions resulted in an aggregate gain of $68.6 million, which is reflected in gain on sale of real estate investments on the consolidated statement of operations for the nine months ended September 30, 2022.
During the three months ended September 30, 2021, the Company sold three properties for an aggregate contract price of $3.0 million, resulting in a gain of $0.5 million, which is reflected in gain on sale of real estate investments in the consolidated statement of operations for the three months ended September 30, 2021. During the nine months ended September 30, 2021, the Company sold 8eight properties one of which was leased to Truist Bank, for an aggregate contract price of $6.1 million, resulting in a gain of $0.8 million, which is reflected in gain on sale of real estate investments onin the consolidated statement of operations and comprehensive loss for the nine months ended September 30, 2021.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20212022
(Unaudited)
During the nine months ended September 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 nine months ended September 30, 2020. In addition, the Company recorded a gain on sale of $2.2 million related to a non-monetary exchange of two properties then owned by the Company pursuant to a tenant’s exercise of its right to substitute properties under its lease, resulting in a total gain on sale/exchange of $6.5 million, which is reflected in gain on sale/exchange of real estate investments on the consolidated statement of operations and comprehensive loss for the nine months ended September 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.
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.
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Impairment Charges
The Companyfollowing table details the impairment charges recorded an impairment charge of $4.6 millionby segment for the periods presented:
Three Months Ended September 30,Nine Months Ended September 30,
(In thousands)2022202120222021
Single-tenant properties:
Various vacant single-tenant properties (1)
$2,390 $4,554 $10,421 $4,645 
United Healthcare (2)
— — 3,766 — 
Total single-tenant impairment charges2,390 4,554 14,187 4,645 
Multi-tenant properties:
Blankenbaker Plaza (3) (5)
— — 3,539 — 
Brynwood Square (3) (5)
2,032 — 2,032 — 
The Shoppes at West End (4) (5)
2,395 — 51,955 — 
Shoppes at Wyomissing (5)
23,229 — 23,229 — 
Total multi-tenant impairment charges27,656 — 80,755 — 
Total impairment charges$30,046 $4,554 $94,942 $4,645 
(1)For the three and nine months ended September 30, 2021. Of this amount, $0.1 million related2022, three and ten properties were impaired, respectively, of which two and nine, respectively, were formerly leased to a vacant single-tenant held-for-use property in Brunswick, Georgia, which was recorded to adjustTruist Bank. For the property to its fair value as determined by a purchasethree and sale agreement which was terminated in the second quarter of 2021. An impairment charge of approximately $4.6 million was recorded in the threenine months ended September 30, 2021, related to six vacant held-for-use properties located in various states. Five of theseand seven properties were impaired, respectively, all of which were formerly leased to adjustTruist Bank. All properties in the three and nine months ended September 30, 2022 were impaired to their fair valuevalues as determined by their respective signed purchase and sales agreements (“PSAs”) or non-binding letters of intent (“LOIs”),sale agreements. Six properties in the three and one property was impaired to adjust its fair value as determined by the income approach as described above.
The Company recorded no impairments for the threenine months ended September 30, 20202021 were impaired to their fair values as determined by their respective purchase and $11.5 million of impairment charge forsale agreements, and one property in the nine months ended September 30, 2020 related to one of its multi-tenant held-for-use properties which2021 was recorded to adjust the propertyimpaired to its fair value as determined by the income approach described above.approach. As of September 30, 2022, four impaired properties were classified as held for sale, all of which were disposed subsequent to September 30, 2022 (see Note 16 — Subsequent Events for additional information).
Tenant Improvements Write-Off
During the second quarter of 2020,(2)This property has been vacant since June 30, 2021 when a tenant in the health club business in one of our multi-tenant properties declared bankruptcy and vacateddid not renew its space while in the process of improving the space.lease. 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 by the tenant and the Company additionally accrued approximately $2.3 million to pay liens onpreviously impaired the property by $26.9 million in the tenant’s contractors.three months ended December 31, 2021. This property was impaired to its fair value as determined by the income approach.
(3)These properties were recently acquired in the CIM Portfolio Acquisition (see Note 1 — Organization for additional information).
(4)This property was formerly classified as held for sale as of June 30, 2022 when it was previously under a purchase and sale agreement for disposal. The Companypurchase and sale agreement was terminated in the three months ended September 30, 2022, and a replacement agreement was entered into subsequent to September 30, 2022, resulting in an incremental impairment recorded in the three months ended September 30, 2022 (see Real Estate Held for Sale above).
(5)These properties were impaired to their fair values as determined that certain of the improvements no longer had any value inby their respective purchase and sale agreements.
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AMERICAN FINANCE TRUST,THE NECESSITY RETAIL REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20212022
(Unaudited)
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 for the nine months ended September 30, 2020.
Note 4 — Mortgage Notes Payable, Net
The Company’s mortgage notes payable, net as of September 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 PropertiesSeptember 30,
2021		December 31,
2020		September 30,
2021		Interest RateMaturityAnticipated RepaymentPortfolioEncumbered PropertiesSeptember 30,
2022		December 31,
2021		September 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$118,380 $119,084 3.83 %FixedMay 2049May 20262019 Class A-1 Net Lease Mortgage Notes102$117,770 $118,231 3.83 %FixedMay 2049May 2026
2019 Class A-2 Net Lease Mortgage Notes2019 Class A-2 Net Lease Mortgage Notes106120,796 121,000 4.52 %FixedMay 2049May 20292019 Class A-2 Net Lease Mortgage Notes108120,173 120,644 4.52 %FixedMay 2049May 2029
2021 Class A-1 Net-Lease Mortgage Notes2021 Class A-1 Net-Lease Mortgage Notes3554,707 — 2.24 %FixedMay 2051May 20282021 Class A-1 Net-Lease Mortgage Notes4953,821 54,487 2.24 %FixedMay 2051May 2028
2021 Class A-2 Net-Lease Mortgage Notes2021 Class A-2 Net-Lease Mortgage Notes6194,493 — 2.83 %FixedMay 2051May 20312021 Class A-2 Net-Lease Mortgage Notes4792,964 94,113 2.83 %FixedMay 2051May 2031
2021 Class A-3 Net-Lease Mortgage Notes2021 Class A-3 Net-Lease Mortgage Notes2235,000 — 3.07 %FixedMay 2051May 20282021 Class A-3 Net-Lease Mortgage Notes3334,997 35,000 3.07 %FixedMay 2051May 2028
2021 Class A-4 Net-Lease Mortgage Notes2021 Class A-4 Net-Lease Mortgage Notes3555,000 — 3.65 %FixedMay 2051May 20312021 Class A-4 Net-Lease Mortgage Notes3554,995 55,000 3.65 %FixedMay 2051May 2031
Total Net Lease Mortgage Notes Total Net Lease Mortgage Notes357478,376 240,084  Total Net Lease Mortgage Notes374474,720 477,475 
SAAB Sensis I—— (6)6,217 6.01 %FixedApr. 2025Apr. 2025
Truist Bank II—— (5)9,560 5.50 %FixedJul. 2031Jul. 2021
Truist Bank III—— (5)60,952 5.50 %FixedJul. 2031Jul. 2021
Truist Bank IV—— (5)3,792 5.50 %FixedJul. 2031Jul. 2021
Sanofi US I1125,000 (7)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 Notes364706,197 715,000 3.79 %FixedAug. 2025Aug. 2025
Shops at Shelby Crossing—— (6)21,677 4.97 %FixedMar. 2024Mar. 2024
Patton Creek—— 34,000 4.82 %VariableDec. 2021Dec. 2021
Bob Evans IBob Evans I2222,842 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)
331,010 — 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)
760,840 — 3.70 %FixedSep. 2023Sep. 2023
The Plant (4)
The Plant (4)
1123,000 — 3.87 %FixedMay 2033May 2023
McGowin Park (4)
McGowin Park (4)
139,025 — 4.11 %FixedMay 2024May 2024
Gross mortgage notes payableGross mortgage notes payable7861,629,618 1,528,632 3.75 %
 (1)
Gross mortgage notes payable8231,843,927 1,503,717 3.83 %
 (1)
Deferred financing costs, net of accumulated amortization (2)
Deferred financing costs, net of accumulated amortization (2)
(42,037)(38,760)
Deferred financing costs, net of accumulated amortization (2)
(34,593)(38,672)
Mortgage (discounts) and premiums, net (3)
(119)926 
Mortgage premiums and (discounts), net (3)
Mortgage premiums and (discounts), net (3)
(1,801)(115)
Mortgage notes payable, netMortgage notes payable, net$1,587,462 $1,490,798 Mortgage notes payable, net$1,807,533 $1,464,930 
__________
(1)Calculated on a weighted-average basis for all mortgages outstanding as of September 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%. In October 2021, in connection with the repayment of the mortgage, this interest rate swap agreement was terminated. See Note 14 — Subsequent Events for additional information.
(5) Mortgage was fully repaid with proceeds from the 2021 Net Lease Mortgage Notes discussed below.
(6) Mortgages were fully repaid with proceeds from borrowings under the Credit FacilityCIM Portfolio Acquisition during the third quarter of 2021.
(7) In October 2021, this mortgage was fully repaid with proceeds from the issuance of the Senior Notes (as defined inNote 14 —-Subsequent Events). See Note 14 — 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 nine months ended September 30, 2021, such amounts were $3.32022 with net discounts of $2.3 million. During the three and nine months ended September 30, 2020, such amounts were $0.5 million and $0.8 million, respectively. These prepayment penalties are included in acquisition, transaction, and other costs in the consolidated statement of operations.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
As of September 30, 20212022 and December 31, 2020,2021, the Company had pledged $2.7$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 September 30, 2021 and December 31, 2020, $1.32022, $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 (see Note 5 — Credit Facility for more details). The asset pool comprising the borrowing base under the credit 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.
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
During the third quarter of 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.
In connection with refinancing certain properties, the Company may incur prepayment penalties relating to its prior debt obligations. During the three and nine months ended September 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 September 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)$902 
20223,712 
2022 (remainder)2022 (remainder)$1,593 $— $— $1,593 
202320232,629 2023289,784 — — 289,784 
202420241,646 202465,672 — — 65,672 
20252025841,670 2025707,867 — — 707,867 
20262026116,929 2026116,917 478,000 — 594,917 
2027202721,553 — — 21,553 
ThereafterThereafter662,130 Thereafter640,541 — 500,000 1,140,541 
$1,629,618  $1,843,927 $478,000 $500,000 $2,821,927 
________
(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 two 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 September 30, 2021,2022, the Company was in compliance with all operating and financial covenants under these 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 issued 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 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/ The Class B Notes 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.
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
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 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, theThe Company repaid its prior revolving unsecured corporatehas a credit facility in full and entered into the 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 (the “Credit Facility”).thereto. On October 1, 2021, the Company entered into an amendment and restatement of the Credit Facility with BMO Harris Bank N.A., as administrative agent, and the other lender parties thereto.Facility. Also, upon the closing of the Senior Notes (as defined in Note 14Note 6 — Subsequent EventsSenior 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. Such amounts are available to be reborrowed subject to the Company’s availability. For additional details on the amendment and restatement of the Credit Facility and the issuance of the Senior Notes, see Note 14 — Subsequent Events.
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
The aggregate total commitments prior toafter 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 September 30, 2021,credit and througha $55.0 million sublimit for swingline loans. The Credit Facility includes an uncommitted “accordion feature” would have allowed for increasedpermitting the Company, subject to certain exceptions, to increase the commitments under the Credit Facility ofby up to $375.0 million.an additional $435.0 million, subject to obtaining commitments from new lenders or additional commitments from participating lenders and certain customary conditions. 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 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.
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 wasdepends 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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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 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 nine months ended September 30, 2022, the Company borrowed $513.0 million to fund a portion of the purchase price of the 81 properties acquired from the CIM Portfolio Acquisition, $35.0 million of which the Company repaid during the nine months ended September 30, 2022 using proceeds from its dispositions. As of September 30, 2021, and after giving effect to the amendment and restatement of the Credit Facility,2022, the Company had a total borrowing capacity under the Credit Facility of $494.1517.9 million based on the value of the borrowing base under the Credit Facility, and of this amount, $186.2478.0 million was outstanding under the Credit Facility as of September 30, 20212022 and $307.939.9 million remained available for future borrowings.
The Credit Facility currently requires payments of interest only. Prioronly prior to the amendment and restatement, borrowingsmaturity. Borrowings under the Credit Facility borebear 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. PursuantIn addition, (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 amendment to the Credit Facility in July 2020, from July 24, 2020 until deliverycredit 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 regardless of the Company’s consolidated leverage ratio. The “floor” on LIBOR was 0.25%is 0%.
As of September 30, 2021 and December 31, 2020,2022, the weighted-average interest rate under the Credit Facility was 2.17% and 2.79%, respectively.5.09%. As of December 31, 2021, there were no amounts outstanding under the Credit Facility.
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 June 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. The 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. 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 the Company or the OP loses its investment grade credit rating, or (ii) with respect to any Guarantor subsidiary of the OP, for so long as the subsidiary is the primary obligor under or provides a guaranty to any holder of unsecured indebtedness.
The Credit Facility containedcontains 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 contained(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.
Under the Credit Facility, subject to certain exceptions, the Company is not permitted to pay distributions, including cash dividends on equity securities, (includingincluding 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 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
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
exceeding 105% of MFFOAFFO for any applicable period if, as of the last day of the period, the Company was able to satisfy a maximum leverage ratio after giving effect to the payments and also had a combination of cash, cash equivalents andhas 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 could not pay dividends or other distributions in excess of the amount necessary for the Company to maintain its status as a REIT.
As of September 30, 2021,2022, the Company was in compliance with the operating and financial covenants under the Credit Facility.
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
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 September 30, 2022 and December 31, 2021, the carrying value of the Senior Notes on the Company’s consolidated balance sheets totaled $492.0 million and $491.0 million, respectively, which is net of $8.0 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.
As of September 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.
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 September 30, 20212022 and 2020.2021.
Financial Instruments Measured at Fair Value on a Recurring Basis
Derivative Instruments
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 September 30, 2021,2022, the Company has assesseddoes
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
not have any derivatives, but would assess 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.if it had any.
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 four impaired real estate investments held for sale as of September 30, 2022 and there were no impaired real estate investments held for sale as of September 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
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
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 September 30, 2021 and December 31, 2020,2022, the carrying value of advances to the Company under the Credit Facility were $186.2was $478.0 million, and $280.9 million.as of December 31, 2021, there were no amounts outstanding under the Credit Facility. The fair value of the advances to the Company under the Credit Facility was $186.4 million and $278.8$476.4 million as of September 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 September 30, 20212022 and December 31, 20202021 were $1.6$1.8 billion and $1.5$1.5 billion, respectively, and the fair value was $1.6values 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.
As of September 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 $386.9 million and $504.4 million, respectively.
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 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 in a notional amount of $125.0 million. The interest rate swap became effective on October 13, 2020, and fixed the interest rate on a mortgage loan that was refinanced on
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
September 4, 20202020. The interest rate swap fixed interest on the mortgage at an effective interest rate of 3.26%3.27% and was to expire in July 2026. Subsequent to September 30, 2021, thisThis interest rate swap was terminated in the fourth quarter of 2021 when the mortgage loan was repaid and the Company received $2.1 million as a result of the termination. See Note 14—Subsequent Events for additional information. Additionally, in conjunction withFollowing the refinancing of a mortgage loan in December 2020,termination, the Company entered into anreclassified approximately $2.1 million from AOCI (as defined below) as a reduction to interest rate cap agreementexpense 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 September 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 September 30, 20212022 and December 31, 2020.
(In thousands)Balance Sheet LocationSeptember 30, 2021December 31, 2020
Interest Rate “Pay-fixed” SwapsDerivative assets, at fair value$2,028 $— 
Interest Rate “Pay-fixed” SwapsDerivative liabilities, at fair value$— $123 

2021.
Cash Flow Hedges of Interest Rate Risk
As of September 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 nine months ended September 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
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 $2.0 million will be reclassified from other comprehensive income as a decrease to interest expense as the interest rate “pay-fixed” swap agreement was terminated and the Company received $2.1 million after settlement. See Note 14—Subsequent Events for additional information.
As of September 30, 2021 and December 31, 2020 the Company had the following derivatives that were designated as cash flow hedges of interest rate risk:
September 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 nine months ended September 30, 20212022 and 2020:2021:
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
(In thousands)(In thousands)2021202020212020(In thousands)2022202120222021
Amount of gain (loss) recognized in AOCI on interest rate derivatives$24 $(546)$1,943 $(546)
Amount of gain recognized in AOCI on interest rate derivativesAmount of gain recognized in AOCI on interest rate derivatives$— $24 $— $1,943 
Amount of (loss) reclassified from AOCI into income as interest expenseAmount of (loss) reclassified from AOCI into income as interest expense$(74)$— $(208)$— Amount of (loss) reclassified from AOCI into income as interest expense$— $(74)$— $(208)
Total amount of interest expense presented in the consolidated income statementsTotal amount of interest expense presented in the consolidated income statements$19,232 $20,871 $58,927 $58,778 Total amount of interest expense presented in the consolidated income statements$32,402 $19,232 $84,471 $58,927 
Non-Designated HedgesDerivatives
As of September 30, 2022 and December 31, 2021, 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 three and nine months ended September 30, 2021. The Company did not record any gains or losses during the three and nine months ended September 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 September 30, 2021, the Company had the following outstanding derivatives that were not designated as hedges under qualifying hedging relationships.
September 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 derivatives asClass A common stock or Class A Units in the OP of September 30, 2021 and December 31, 2020.$50.0 million in fair value at issuance ($53.4 million in contractual value). The net amountsCompany ultimately issued 6,450,107 shares of derivative assets or liabilities can be reconciledClass A common stock to the tabular disclosureSeller in the first and second closings of fair value. the CIM Portfolio Acquisition during the three months ended March 31, 2022.
The tabular disclosurenumber of fair value providesshares issued at the location that derivative assets and liabilities are presentedapplicable closing were based on the Balance Sheet.value of the shares or units that were issuable 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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20212022
(Unaudited)
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
September 30, 2021$2,028 $— $— $2,028 $— $— 2,028 
December 31, 2020$— $(123)$— $(123)$— $— (123)
Credit-risk-related Contingent Features
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 has agreements with eachhad 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 Formerly 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 derivative counterpartiesClass 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 was required to subsequently maintain the effectiveness of that contain a provision where ifresale registration through the Company either defaults or is capabletermination of being declared in default on any of its indebtedness, thenthe repurchase right. Otherwise, the Company could also be declared in defaulthave been required to repurchase the securities for $53.4 million. The Seller’s repurchase right terminated on its derivative obligations.
AsAugust 25, 2022 (six months following the date of the final issuance). Accordingly, during the three months ended September 30, 2021, the fair value of derivatives in a net asset position including accrued interest but excluding any adjustment for nonperformance risk related2022, these securities were reclassified from mezzanine equity to these agreements was $2.0 million. As of September 30, 2021, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions.permanent equity.
Note 8 — Stockholders’Total Equity
Common Stock
As of September 30, 20212022 and December 31, 2020,2021, the Company had 123.5134.2 million and 108.8123.8 million shares, 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.
In January, February and March of 2020,As more fully discussed in Note 8 – Derivative Financial Instruments, 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. 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 stockholders 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.
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 nine months ended September 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.

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
ATM Program — Class A Common Stock
In May 2019, the Company established an “at the market” equity offering program for its Class A common stock (the “Class A Common Stock ATM Program”), which was last updated in August 2022, 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.
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
The Company sold 997,230 shares of Class A common stock through its Class A Common Stock ATM Program during the three months ended September 30, 2022, which generated $8.0 million of gross proceeds, and net proceeds of $7.9 million after commissions, fees and other offering costs incurred of $0.1 million. The Company sold 3,762,559 shares of Class A common stock through its Class A Common Stock ATM Program during the nine months ended September 30, 2022, which generated $33.0 million of gross proceeds, and net proceeds of $32.5 million after commissions, fees and other offering costs incurred of $0.5 million.
The Company sold 5,822,614 shares of Class A common stock through its Class A Common Stock ATM programProgram during the three months ended September 30, 2021, which generated $49.9 million of gross proceeds, and net proceeds of $49.1 million after commissions and fees of $0.8 million. The Company sold 14,456,837 shares of Class A common stock through its Class A Common Stock ATM program during the nine months ended September 30, 2021, which generated $128.2 million of gross proceeds, and net proceeds of $126.1 million after commissions and fees of $2.1 million. The Company did not sell any shares under the Class A Common Stock ATM Program during the three and nine months ended September 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 September 30, 2021. 2022.
•The Company had 7,933,711 and 7,842,008 shares of its Series A Preferred Stock issued and outstanding as of September 30, 20212022 and December 31, 2020, respectively. 2021.
•No shares of Series B Preferred Stock were issued or outstanding as of September 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 September 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”), which was last updated in August 2021, 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.million.
•The Company did not sell any shares of its Series A Preferred Stock during the three and nine months ended September 30, 2022.
•The Company did not sell any shares of its Series A Preferred Stock during the three months ended September 30, 2021. During the nine months ended September 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 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 September 30, 2020. During the nine months ended September 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 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”), which was last updated in August 2021, 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 did not sell any shares of Series C Preferred Stock under the Series C Preferred Stock ATM Program during the three months ended September 30, 2022. The Company sold 677 shares of Series C Preferred Stock under the Series C Preferred Stock ATM Program during the nine months ended September 30, 2022, which did not generate material proceeds.
•The Company did not sell any shares of Series C Preferred Stock during the three months ended September 30, 2021. During the nine months ended September 30, 2021, the Company 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
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
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
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
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 1one 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 2021 OPP, the OP issued LTIP Units, which are also reflected as part of non-controlling interest as of September 30, 20212022 and December 31, 2020.2021. See Note 1213 — Equity Based Compensation - Multi-Year Outperformance Agreement for more information regarding the LTIP Units and related accounting.
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. Accordingly, these new LTIPsLTIP Units are reflected in non-controlling interest on the Company’s balance sheet or statement of equity as of September 30, 2021.2022. For additional information, see Note 1213 — Equity-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 September 30, 20212022 and December 31, 2020,2021, non-controlling interest iswas comprised of the following components:
(In thousands)(In thousands)September 30, 2021December 31, 2020(In thousands)September 30, 2022December 31, 2021
Non-controlling interest attributable to LTIP UnitsNon-controlling interest attributable to LTIP Units$5,191 $28,317 Non-controlling interest attributable to LTIP Units$17,896 $8,368 
Non-controlling interest attributable to Class A UnitsNon-controlling interest attributable to Class A Units2,148 2,205 Non-controlling interest attributable to Class A Units1,650 2,056 
Total non-controlling interest Total non-controlling interest$7,339 $30,522  Total non-controlling interest$19,546 $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.

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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Note 910 — Commitments and Contingencies
Lessee Arrangements - Ground Leases
The Company is a lessee in ground lease agreements for 7seven of its properties. The ground leases have lease durations, including assumed renewals, ranging from 16.315.3 years to 33.932.9 years as of September 30, 2021. 2022.
As of September 30, 2021,2022, the Company’s balance sheet includes operating lease right-of-use assets and operating lease liabilities of $18.3$18.0 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 nine months ended September 30, 2021.2022.
The Company’s operating ground leases have a weighted-average remaining lease term, including assumed renewals, of 27.226.3 years and a weighted-average discount rate of 7.5% as of September 30, 2021.2022. For the three and nine months ended September 30, 2022 and 2021, the Company paid cash of $0.5 million and $1.2 million, respectively, for amounts included in the
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
measurement of lease liabilities and recorded expense of $0.5 million and $1.4 million,, respectively. For the three and nine months ended September 30, 2020, the Company paid cash of $0.5 million and $1.2 million recorded expense of $0.5 million and $1.4 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 September 30, 2021:2022:
(In thousands)(In thousands)Future Base Rent Payments(In thousands)Future Base Rent Payments
2021 (remainder)$347 
20221,532 
2022 (remainder)2022 (remainder)$352 
202320231,549 20231,549 
202420241,560 20241,560 
202520251,598 20251,598 
202620261,628 
ThereafterThereafter44,358 Thereafter42,730 
Total lease paymentsTotal lease payments50,944 Total lease payments49,417 
Less: Effects of discountingLess: Effects of discounting(31,735)Less: Effects of discounting(30,264)
Total present value of lease paymentsTotal present value of lease payments$19,209 Total present value of lease payments$19,153 
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 Section 20(a). of the Exchange Act. 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
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
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 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.
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
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 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 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.Court’s decision. The Company believesplaintiffs filed the record and opening brief on that the proposed second amended complaint is without merit and intends to defend against it vigorously. Due to the early stageappeal on October 26, 2022.
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
There are no other material legal or regulatory proceedings pending or known to be contemplated against the Company.
TheDuring the three and nine months ended September 30, 2022, the Company did not incur any legallitigation costs related to the above litigation inmatters. During the three months ended September 30, 2021, and in the three months ended September 30, 2020, the Company incurred legaldid not incur any litigation costs of approximately $0.2 million. Forrelated to the above litigation and during the nine months ended September 30, 2021, and 2020, the Company incurred legallitigation costs related to the above litigation of approximately $30,000 and $0.7 million, respectively.$30,000. A portion of these litigation costs arewere subject to a claim for reimbursement under the insurance policies maintained by the Company (the “Policies”), and during the three months ended March 31, 2020, reimbursements of $9,000 were received and recorded in other income in the consolidated statements of operations and comprehensive loss.. There were no such reimbursements recorded thereafter.during the three and nine months ended September 30, 2022 or 2021. The Company may receive additional reimbursements in the future. However, the Policies arewere 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
September 30, 2021
(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 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 4four 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 Incentive Variable Management/IncentiveManagement 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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(Unaudited)
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
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(Unaudited)
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 Incentive Variable Management/IncentiveManagement 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 “in-sourced expenses.” These in-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 in-sourced expenses, may not exceed 4.5% of the contract 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.September 30, 2022.
The Company incurred $23,000$7,000 and $42,000$0.4 million of acquisition expenses and related cost reimbursements for the three and nine months ended September 30, 2021,2022, respectively, and $48,000$23,000 and $0.1 million$42,000 for the three and nine months ended September 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 $7.9 million and $24.1 million during the three and nine months ended September 30, 2022, respectively, and $9.9 million and $25.1 million during the three and nine months ended September 30, 2021, respectively, and $6.9 million $20.7 million for the three and nine months ended September 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 incurreddid not incur any incentive variable management fees of $2.3 million and $3.0 million duringfor the three months ended September 30, 2022, and
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20212022
(Unaudited)
incurred $0.4 million of incentive management fees for the nine months ended September 30, 2021, respectively. No incentive variable management fees were incurred during2022. During the three and nine months ended September 30, 2020.2021, the Company incurred $2.3 million and $3.0 million of incentive management fees, 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 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 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 4four 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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
cause. On November 4, 2020, in light of the investment to be made by the Property Manager and its affiliates in property management
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
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 nine months ended September 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 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 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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
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
September 30, 2021
(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 nine months ended September 30, 2021,2022, the Company incurred $3.9 million and $10.6 million, respectively, and $2.0 million and $6.2 million respectively, of reimbursement expenses from to the Advisor providing administrative services and $1.9 million and $6.5 million of these expenses during the three and nine months ended September 30, 2020, respectively.
Prior2021, respectively, of reimbursement expenses to Amendment No. 2,the Advisor for providing administrative services. In September 2022, the Advisor terminated certain of its employees who provided services to the Company had notand for which the Company reimbursed the Advisor or its affiliates, including the Property Manager, for salaries wages, or benefits paid toand benefits. In connection with the Company’s executive officers. Starting in 2019, under Amendment No. 2,termination, the Company beganrecognized a compensation charge, net of adjustments for previously accrued bonuses, of $0.4 million in the three and nine months ended September 30, 2022.
Under the agreement, the Company is 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,four, which amount is then (ii) multiplied by 0.20%. As of September 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 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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
payable to the Company over a 10-month period from January 2021 through October 2021. During the three and nine months ended September 30, 2021, approximately $0.4 million and $1.3 million, respectively, of this amount was received.
During the second quarter of 2021, the Advisor finalized the amounts and form of the 2020 bonuses previously estimated 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 (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 reasonsreasons: (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
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September 30, 2022
(Unaudited)
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-goingthe negative impacts of the COVID-19 pandemic. As a result, during the second quarter ofnine months ended September 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 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 offor the nine months ended September 30, 2021 include 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:
Three Months Ended September 30,Nine Months Ended September 30,Payable (Receivable) as ofThree Months Ended September 30,Nine Months Ended September 30,Payable (Receivable) as of
(In thousands)(In thousands)2021202020212020September 30,
2021		December 31,
2020		(In thousands)2022202120222021September 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)
$23 $48 $42 $135 $23 $96 
Acquisition cost reimbursements (1)
$7 $23 $378 $42 $7 $32 
Ongoing fees:Ongoing fees:Ongoing fees:
Asset management fees to related partyAsset management fees to related party9,880 6,918 25,123 20,740 2,346 177 Asset management fees to related party7,939 9,880 24,061 25,123 — — 
Property management and leasing fees (2)
Property management and leasing fees (2)
2,172 2,056 7,023 4,756 853 — 
Property management and leasing fees (2)
4,729 2,172 9,685 7,023 1,969 901 
Professional fees and other reimbursements (3)
Professional fees and other reimbursements (3)
2,471 2,385 7,638 7,739 182 

(77)
Professional fees and other reimbursements (3)
4,466 2,471 12,128 7,638 888 

83 
Professional fee credit due from Advisor— (1,396)(1,444)(1,396)(140)(4)(1,862)(4)
Professional fee credit due from Advisor and its affiliatesProfessional fee credit due from Advisor and its affiliates— — — (1,444)— — 
Total related party operating fees and reimbursementsTotal related party operating fees and reimbursements$14,546 $10,011 $38,382 $31,974 $3,264 $(1,666)Total related party operating fees and reimbursements$17,141 $14,546 $46,252 $38,382 $2,864 $1,016 
______
(1)Amounts for the three and nine months ended September 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 nine months ended September 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 million and $2.8 million of leasing fees incurred in the three and nine months ended September 30, 2022, respectively, and $1.1 million and $2.8 million incurred in the three and nine months ended September 30, 2021, respectively, which were capitalized and are included in deferred costs, net in the consolidated balance sheet. A portion of leasing fees are ultimately paid to a third party.
(3)Amounts for the three and nine months ended September 30, 20212022 and 20202021 are included in general and administrative expense in the consolidated statements of operations and comprehensive loss. Includes amounts for directors’ and officers’ 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. During the three and nine months ended September 30, 2021, approximately $0.4 million and $1.3 million, respectively, was received from the Advisor 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. As a result, a receivable of approximately $0.1 million related to the 2019 Bonus Awards remained as of September 30, 2021. This amount was fully received in October 2021. In addition, the Company was reimbursed for the $1.4 million related to the 2020 Bonus Awards in August 2021.
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
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
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
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.
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 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 nine months ended September 30, 2022, 309,068 restricted shares were granted to employees of the Advisor or its affiliates and certain consultants to the Company and the Advisor or its affiliates, and 42,872 restricted shares were issued to the Company’s directors. 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 1one year to 5five 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
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 threenine months ended September 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(266,427)9.27 
Forfeited(24,025)6.86 
Unvested, September 30, 2021423,894 7.94 
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________THE NECESSITY RETAIL REIT, INC.
(1) Includes restricted shares granted to the Company’s former chief financial officer in February 2021 (see below for additional information).NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
 Number of Shares of Common StockWeighted-Average Grant Price
Unvested, December 31, 2021422,869 $8.26 
Granted351,940 7.53 
Vested(197,771)8.03 
Forfeited(64,205)7.96 
Unvested, September 30, 2022512,833 7.90 
As of September 30, 2021,2022, the Company had $3.3$3.2 million of unrecognized compensation cost related to unvested restricted share awards granted, which is expected to be recognized over a weighted-average period of 3.12.9 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 $0.7 million and $1.3 million for the three and nine months ended September 30, 2022, respectively. Compensation expense related to restricted shares was approximately $0.3 million and $2.1 million for the three and nine months ended September 30, 2021, respectively.
In September 2022, the Advisor terminated certain of its employees who provided services to the Company and $0.3 millionfor which the Company reimbursed the Advisor for salaries and $0.8 million forbenefits. In connection with the termination, previous unvested restricted share grants issued to these employees of the Advisor were forfeited upon termination and the board approved 59,368 replacement restricted shares which vested immediately. As a result, in the three and nine months ended September 30, 2020. The higher expense recorded2022, the Company recognized a net compensation charge of approximately $0.3 million representing the value of the new replacement grants net of the reversal of $0.1 million in previously recognized compensation on the first nine months of 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).forfeited grants.
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 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 nine months ended September 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 nine months ended September 30, 20212022 or 2020.2021.
Multi-Year Outperformance Agreements
2021 OPP
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
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).
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
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 determined 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.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 additional 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 was reclassified as an equity award on July 20, 2021, with any change in value and cumulative effect thereof, reflected in income and equity statements on that 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”), 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 10ten 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 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 was 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 potentially 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 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 nine months ended September 30, 2022, the Company recorded equity-based compensation expense related to the LTIP Units of $3.2 million and $9.5 million, respectively, and during the three and nine months ended September 30, 2021, the Company recorded equity-based compensation expense related to the LTIP Units of $3.8 million and $11.7 million, respectively, which includes $3.2 million and $5.2 million of additional expense, respectively, relating to the 2021 OPP. During the three and nine months ended September 30, 2020, the Company recorded equity-based compensation expense related to the LTIP Units of $3.0 million and $8.9 million, respectively. These expenses are recorded in equity-based compensation in the unaudited consolidated statements of operations and
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
comprehensive loss. As of September 30, 2021,2022, the Company had no unrecognized compensation expense related to the LTIP Units awarded under the 2018 OPP and $35.6$22.9 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 2.81.8 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
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
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-one basis for, at the Company’s election, a share of Class A common stock or the cash equivalent thereof.
The Company paid distributions on LTIP Units of $20,000 for the three months ended September 30, 2021,$0.5 million and the Company paid distributions on the LTIP Units of $0.3$0.2 million for the nine months ended September 30, 2021. For the three2022 and nine months ended September 30, 2020, the Company paid distributions on the LTIP Units of $0.1 million and $0.3 million,2021, respectively. These amounts are recorded in the Company’s consolidated statements 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.
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:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
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.
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
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.

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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
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 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 $10,000.
Other Equity-Based Compensation
The Company may issue common stock in lieu of cash to pay fees earned by the Company’s directors at each director’s election. If the Company did so, there would be no restrictions on the shares issued since these payments in lieu of cash relate to fees earned for services performed. There were no shares of common stock issued to directors in lieu of cash compensation during the nine months ended September 30, 20212022 and 2020.2021.
Note 1314 — Net LossIncome Per Share
The following table sets forth the basic and diluted net loss per share computations:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
(In thousands, except share and per share amounts)(In thousands, except share and per share amounts)2021202020212020(In thousands, except share and per share amounts)2022202120222021
Net loss attributable to common stockholdersNet loss attributable to common stockholders$(6,406)$(7,091)$(23,222)$(38,047)Net loss attributable to common stockholders$(56,466)$(6,406)$(72,791)$(23,222)
Adjustments to net income (loss) for common share equivalents(165)(155)(582)(517)
Adjustments to net loss for common share equivalentsAdjustments to net loss for common share equivalents(350)(165)(967)(582)
Adjusted net loss attributable to common stockholdersAdjusted net loss attributable to common stockholders$(6,571)$(7,246)$(23,804)$(38,564)Adjusted net loss attributable to common stockholders$(56,816)$(6,571)$(73,758)$(23,804)
Weighted-average shares outstanding — Basic and Diluted118,862,852 108,429,315 112,770,685 108,393,269 
Weighted-average shares outstanding — BasicWeighted-average shares outstanding — Basic133,115,729 118,862,852 131,478,484 112,770,685 
Weighted-average shares outstanding — DilutedWeighted-average shares outstanding — Diluted133,115,729 118,862,852 131,478,484 112,770,685 
Net loss per share attributable to common stockholders — Basic and DilutedNet loss per share attributable to common stockholders — Basic and Diluted$(0.06)$(0.07)$(0.21)$(0.36)Net loss per share attributable to common stockholders — Basic and Diluted$(0.43)$(0.06)$(0.56)$(0.21)
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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Diluted net income per share assumes the conversion of all Common Stock share equivalents into an equivalent number of shares of Common Stock, unless the effect is anti-dilutive.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 September 30,Nine Months Ended September 30,
2021202020212020
Unvested restricted shares (1)
475,341 152,229 424,199 131,653 
Class A Units (2)
172,921 172,921 172,921 172,921 
2018 LTIP Units (3)
928,686 4,496,796 3,294,356 4,496,796 
2021 LTIP Units (3)
6,767,485 — 2,280,618 — 
Total8,344,433 4,821,946 6,172,094 4,801,370 
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Unvested restricted shares (1)
616,362 475,341 537,252 424,199 
Class A Units (2)
172,921 172,921 172,921 172,921 
2018 LTIP Units (3)
— 928,686 — 3,294,356 
2021 LTIP Units (3)
8,528,885 6,767,485 8,528,885 2,280,618 
Total9,318,168 8,344,433 9,239,058 6,172,094 
_______
(1)Weighted-average number of shares of unvested restricted shares outstanding for the periods presented. There were 423,895512,833 and 400,869423,894 unvested restricted shares outstanding as of September 30, 20212022 and 2020,2021, respectively.
(2)Weighted-average number of Class A Units outstanding for the periods presented. There were 172,921 Class A Units outstanding as of September 30, 20212022 and 2020.2021.
(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 September 30, 20212022 and 4,496,796 2018 LTIP Units outstanding as of September 30, 2020.2021. For more information see Note 1213— Multi-Year Outperformance Agreements.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 EPSearnings per share on a weighted-average basis for the three and nine months ended September 30, 20212022 and 20202021 based on shares that would be issued if the applicable balance sheet date was the end of the measurement period.
No LTIP Unit share equivalents were included in the computation for the three and nine months ended September 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 September 30, 2022 and 2021 and 2020.or (ii) the Company recorded a net loss to common stockholders for the period, thus any shares conditionally issuable under the LTIP Units would be antidilutive.
Note 1415 - Segment Reporting
As of September 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 two 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 two 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 one segment. Upon concluding that a change in its reporting segments had 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.
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 financial 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 the 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 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 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
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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
(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 nine months ended September 30, 2022 and 2021:
Three Months Ended September 30, 2022Three Months Ended September 30, 2021
(In thousands)Single-Tenant PropertiesMulti-Tenant PropertiesConsolidatedSingle-Tenant PropertiesMulti-Tenant PropertiesConsolidated
Revenue from tenants$48,474 $67,702 $116,176 $63,296 $28,619 $91,915 
Property operating expense3,927 24,124 28,051 2,800 10,584 13,384 
NOI$44,547 $43,578 88,125 $60,496 $18,035 78,531 
Asset management fees to related party(7,939)(9,880)
Impairment of real estate investments(30,046)(4,554)
Acquisition, transaction and other costs(210)(3,426)
Equity-based compensation(3,857)(4,149)
General and administrative(8,499)(5,589)
Depreciation and amortization(57,494)(32,762)
Gain on sale of real estate investments1,608 478 
Interest expense(32,402)(19,232)
Other income25 18 
Net loss (income) attributable to non-controlling interests60 (4)
Allocation for preferred stock(5,837)(5,837)
Net loss attributable to common stockholders$(56,466)$(6,406)

Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021
(In thousands)Single-Tenant PropertiesMulti-Tenant PropertiesConsolidatedSingle-Tenant PropertiesMulti-Tenant PropertiesConsolidated
Revenue from tenants$157,643 $170,405 $328,048 $165,605 $87,074 $252,679 
Property operating expense11,901 62,809 74,710 7,915 32,237 40,152 
NOI$145,742 $107,596 253,338 $157,690 $54,837 212,527 
Asset management fees to related party(24,061)(25,123)
Impairment of real estate investments(94,942)(4,645)
Acquisition, transaction and other costs(695)(3,604)
Equity-based compensation(10,878)(13,779)
General and administrative(23,722)(15,578)
Depreciation and amortization(141,755)(97,509)
Gain on sale of real estate investments68,615 775 
Interest expense(84,471)(58,927)
Other income987 62 
Gain on non-designated derivatives2,250 — 
Net loss attributable to non-controlling interests54 4 
Allocation for preferred stock(17,511)(17,425)
Net loss attributable to common stockholders$(72,791)$(23,222)

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THE NECESSITY RETAIL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
The following table reconciles the segment activity to consolidated total assets as of the periods presented:

(In thousands)September 30, 2022December 31, 2021
ASSETS
Investments in real estate, net:
Single-tenant properties$1,909,373 $1,973,743 
Multi-tenant properties2,525,920 1,233,030 
Total investments in real estate, net4,435,293 3,206,773 
Cash and cash equivalents41,150 214,853 
Restricted cash19,288 21,996 
Deposits for real estate investments— 41,928 
Deferred costs, net22,176 25,587 
Straight-line rent receivable67,953 70,789 
Operating lease right-of-use assets17,964 18,194 
Prepaid expenses and other assets46,732 26,877 
Assets held for sale1,525 187,213 
Total assets$4,652,081 $3,814,210 
The following table reconciles capital expenditures by reportable business segment, excluding corporate non-real estate expenditures, for the periods presented:
Three Months Ended September 30,Nine Months Ended September 30,
(In thousands)2022202120222021
Single-tenant properties$503 $332 $1,178 $2,213 
Multi-tenant properties5,452 4,546 9,996 9,476 
Total capital expenditures$5,955 $4,878 $11,174 $11,689 
Note 16 — 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:
AcquisitionsDispositions Subsequent to September 30, 20212022
Subsequent to September 30, 2021,2022, the Company acquired 1 property at adisposed of four properties for an aggregate contract purchasesales price of $6.1$1.6 million. This acquisition was funded with cash on hand.
Amended and Restated Credit Facility
On October 1, 2021, the Company, entered into an amendment and restatement of the Credit Facility with BMO Harris Bank N.A.,These properties were classified as administrative agent, and the other lender party thereto. The aggregate total commitments under the Credit Facility were increased from $540.0 million to $815.0 million, including a $50.0 million sublimitassets held for letters of credit and a $55.0 million sublimit for swingline loans. The Credit Facility includes an uncommitted “accordion feature” permitting the Company, subject to certain exceptions, to increase the commitments under the Credit Facility by up to an additional $435.0 million, subject to obtaining commitments from new lenders or additional commitments from participating lenders and certain customary conditions. As of the closing of the issuance of the Senior Notes on October 7, 2021, after considering the borrowing availability terms of the amended and restated Credit Facility, the Company’s borrowing availability under the Credit Facility was $132.5 million.
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
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
commitments; however, the amount the Company may borrow is limited by the financial maintenance covenants described below. At the execution of the amendment and restatement of the Credit Facility, $186.2 million was outstanding under the Credit Facility. This amount was subsequently repaid with a portion of the net proceeds of the Senior Notes.
The Credit Facility requires the Company to pay interest only prior to maturity. Following the amendment and restatement of the Credit Facility, borrowings will bear interest at either (i) the Base Rate (as defined in the Credit Facility) plus an applicable spread ranging from 0.45% to 1.05%, or (ii) LIBOR plus an applicable spread ranging from 1.45% to 2.05%, in each case dependingsale on the Company’s consolidated leverage ratio. These spreads reflect a reduction from the previously applicable spreads. In addition, pursuant to the Credit Facility, (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 Company or the OP, and (ii) the “floor” on LIBOR was removed.
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. 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.
Any subsidiary owning property that is included in the borrowing base is required to guarantee the OP’s obligations under the Credit 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 the Company or the OP loses its investment grade credit rating, or (ii) with respect to any Guarantor subsidiary of the OP, for so long as the subsidiary is the primary obligor under or provides a guaranty to any holder of unsecured indebtedness.
The Credit Facility contains various customary operating covenants, including 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 (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 recourse debt to total asset value covenant to refer instead to secured recourse debt, and (iii) added new financial maintenance covenants with respect to maximum consolidated unsecured leverage and adjusted net operating income for the pool of eligible unencumbered properties required to be maintained under the Credit Facility to debt service paid on unsecured indebtedness.
Issuance of Senior Notes
On October 7, 2021, the Company and the OP, (together the “Issuers”), issued $500.0 million aggregate principal amount of 4.500% Senior Notes due 2028 (the “Senior Notes”). The Issuers and the subsidiaries of the Issuers that guarantee the Senior Notes (the “Guarantors”) entered into an Indenture (the “Indenture”) with U.S. Bank National Association, as trustee (the “Trustee”). At closing, the Issuers used a portion of the net proceeds from the issuance of the Senior Notes, after deducting the initial purchasers’ discounts and offering fees and expenses, to repay amounts outstanding at the time under the Credit Facility of approximately $186.2 million and to repay a $125.0 million mortgage note. The Issuers may use the remaining proceeds to fund future property acquisitions and for other general corporate purposes.
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, beginning on March 30, 2022.
The Senior Notes are fully and unconditionally guaranteed (the “Senior Note Guarantees”) on a joint and several basis by the subsidiaries of each Issuer that are guarantors under the Credit Facility. Subject to certain exceptions, each future subsidiary of each Issuer that subsequently guarantees indebtedness under the Credit Facility, any other syndicated loan facility or any capital markets indebtedness, in each case, of the Issuers or a Guarantor will be required to execute a Senior Note Guarantee. Under certain circumstances, the Guarantors may be automatically released from their Senior Note Guarantees without the consent of the holders of Senior Notes.
The Senior Notes and the Senior Note Guarantees are senior unsecured obligations of the Issuers and each Guarantor and are equal in right of payment with all of the other existing and future senior unsecured indebtedness of the Issuers and each Guarantor, including their obligations under the Credit Facility, senior in right of payment to any indebtedness that by its terms is expressly subordinated to the Senior Notes and the Senior Note Guarantees, effectively subordinated to all of the existing and future secured indebtedness of the Issuers and each Guarantor to the extent of the value of the collateral securing such debt and
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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, of any subsidiary of the Issuers that do not guarantee the Senior Notes.
The Senior Notes are redeemable at the option of the Issuers, in whole at any time or in part from time to time, in each case prior to June 30, 2028, for cash, at a redemption price equal to the greater of (i) 101% of the principal amount of the Senior Notes to be redeemed or (ii) an amount equal to the sum of the present values of the remaining scheduled payments of principal and interest on the Senior Notes to be redeemed that would be due if the Senior Notes matured on June 30, 2028 (exclusive of unpaid interest accrued to, but not including, the date of redemption) discounted to the date of redemption on a semi-annual basis at the treasury rate plus 50 basis points, plus, in each case, unpaid interest, if any, accrued to, but not including, the date of redemption. In addition, at any time on or after June 30, 2028, the Senior Notes will be redeemable, at the option of the Issuers, in whole at any time or in part from time to time, for cash, at a redemption price equal to 100% of the principal amount of the Senior Notes to be redeemed plus unpaid interest, if any, accrued to, but not including, the date of redemption.
If a Change of Control Triggering Event (as defined in the Indenture) occurs, the Issuers will be required to make an offer to purchase the Senior Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the purchase date.
If the Issuers or any of their restricted subsidiaries sell assets, under certain circumstances the Issuers will be required to make an offer to purchase the Senior Notes at a price equal to 100% of the principal amount, plus accrued interest and unpaid interest, if any, up to, but excluding, the purchase date.
The Indenture contains covenants that, among other things, limit the ability of the Issuers and their restricted subsidiaries to (1) incur additional indebtedness, (2) pay dividends and make distributions on the capital stock of the Company and each Issuer’s restricted subsidiaries, (3) make investments or other restricted payments, (4) create liens on their assets, (5) enter into transactions with affiliates, (6) merge or consolidate or sell all or substantially all of their assets, (7) sell assets and (8) create restrictions on the ability of their restricted subsidiaries to pay dividends or other amounts to them. These covenants are subject to important exceptions and qualifications. In addition, if the Senior Notes are rated investment grade by any two of Moody’s Investors Service, Inc., Fitch Ratings Inc. and Standard & Poor’s Ratings Services, and at such time no default or event of default under the Indenture has occurred and is continuing, many of the covenants in the Indenture will be suspended or become more lenient and may not go back into effect.
The Indenture contains customary events of default which could, subject to certain conditions, cause the Senior Notes to become immediately due and payable.
Interest Rate Swap Termination
On October 7, 2021, upon the repayment of the $125.0 million mortgage note described above, the Company terminated its pay-fixed interest rate swap agreement with a notional amount of $125.0 million. The fair value of the pay-fixed interest rate swap agreement was $2.0 millionbalance sheet as of September 30, 2021 and is presented as an asset in2022.
Borrowings Subsequent to September 30, 2022
Subsequent to September 30, 2022, the Company’s consolidated balance sheet. The Company received $2.1borrowed $10.0 million on October 19, 2021 after settlement.its Credit Facility.
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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 an aggregate contract purchase price of $1.3 billion (the “CIM Portfolio Acquisition”). The CIM Portfolio Acquisition was accounted for as an asset acquisition. The acquisition closed in multiple transactions from February 2022 through July 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 fair value at issuance ($53.4 million in contractual value) of our 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 Acquisition 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 our $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.
•In the three months ended September 30, 2022, we closed on the one remaining property from the CIM Portfolio Acquisition 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.
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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, $13.3 million and $26.1 million for such contingent consideration with cash on hand in the three months ended March 31, 2022, June 30, 2022 and September 30, 2022 respectively, and we have accrued for $5.2 million of contingent consideration based on leases executed as of September 30, 2022. 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 one additional single-tenant property in the three months ended September 30, 2022 for a contract purchase price of $5.0 million. We acquired 11 additional single-tenant properties and one additional multi-tenant retail property in the nine months ended September 30, 2022 for an aggregate contract purchase price of $63.4 million.
As of September 30, 2021,2022, we owned 9681,050 properties, comprised of 20.128.8 million rentable square feet, which were 93.2%92.6% leased, including 935939 single-tenant net leasednet-leased commercial properties (893(900 of which are retail properties) and 33111 multi-tenant retail properties. Based on annualized rental income on a straight-line basis as of September 30, 2021,2022, the total single-tenant properties comprised 70%47% of our total portfolio and were 61%67% leased to service retail tenants, and the total multi-tenant properties comprised 30%53% of our portfolio, and were 50%43% leased to experiential retail tenants, defined as tenants in the restaurant, discount retail, entertainment, salon/beauty and grocery store sectors, among others. 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 September 30, 2021,2022, approximately 58.2%54.3% of the tenants in our single-tenant portfolio were considered “investment grade” consisting of 46.4%39.9% with actual investment grade ratings and 11.8%14.4% with implied investment grade ratings, and approximately 31.0%40.4% of the anchor tenants in our multi-tenant portfolio were considered “investment grade” consisting of 21.6%30.9% with actual investment grade ratings and 9.4%9.5% with implied investment grade ratings.
Management Update on the Impacts of the COVID-19 Pandemic
The COVID-19 global pandemic has created several risks and uncertainties, thatmany of which have lessened in severity since its onset, but which still 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 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.
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We have takentook several steps to mitigate the impact of the pandemic on our business. We have beenwere in direct contact with our tenants sincewhen the crisis began, cultivatingcultivated open dialogue and deepeningdeepened 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 thisthroughout the pandemic. We have collected 99%98% of the original cash rent due for the third quarter 2021of 2022 across our entire portfolio, including nearly 100% from our top 20 tenants (based on the total of third quarter original2022 cash rent)rent due across our portfolio). This was consistent with the quarterly collections during the first and second quarters of 20212022 and an improvement from the fourth quarter of 2020year 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 97%98% of original cash rent collections for the third quarter of 2021.2022.
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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 approximately 3%1% of original cash rent due for the year. During the three and nine months ended September 30, 2021 we deferred an additional $0.2 million of rents. AllNearly all amounts deferred are or were scheduled for repayment during various times through the end of 2021 or in 2022. During the third quarterthree and nine months ended September 30, 2022, we did not defer any additional rents. As of 2021,October 31, 2022, we have collected approximately 20%nearly all of the total $7.2$7.4 million rents we previously deferred that were due during the third quarter of 2021. We collected 50% of the total $7.2 million duringdeferred.
During the nine months ended September 30, 2021. During the third quarter of 2021,2022, we granteddid not grant any rent deferrals for less than 1% of original cash rent due during the period, and we granted rent abatements for 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 third quarter of 2021 uses2022 include cash receipts as ofcollected through October 31, 2021.2022. Cash receipts received in October are not, however, included in cash and cash equivalents on our September 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 amounts 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, 2021 and 2021.2022:
Total CollectionsWithout Deferred Rents
PeriodPeriod
Single-Tenant (1)
Multi-Tenant (2)
Total Portfolio (3)
PeriodSingle-TenantMulti-TenantTotal PortfolioSingle-TenantMulti-TenantTotal Portfolio
First Quarter 2020First Quarter 202098 %100 %99 %First Quarter 202098 %100 %99 %98 %100 %99 %
Second Quarter 2020Second Quarter 202096 %72 %88 %Second Quarter 202096 %72 %88 %96 %72 %88 %
Third Quarter 2020Third Quarter 202098 %85 %94 %Third Quarter 202098 %85 %94 %98 %85 %94 %
Fourth Quarter 2020Fourth Quarter 2020100 %91 %97 %Fourth Quarter 2020100 %91 %97 %100 %91 %97 %
First Quarter 2021First Quarter 2021100 %99 %100 %First Quarter 2021100 %99 %100 %99 %95 %98 %
Second Quarter 2021Second Quarter 2021100 %100 %100 %Second Quarter 2021100 %100 %100 %99 %97 %99 %
Third Quarter 2021Third Quarter 202198 %100 %99 %Third Quarter 202198 %100 %99 %98 %96 %97 %
Fourth Quarter 2021Fourth Quarter 202199 %100 %100 %99 %97 %98 %
First Quarter 2022First Quarter 202298 %100 %99 %97 %98 %98 %
Second Quarter 2022Second Quarter 202298 %99 %99 %98 %97 %98 %
Third Quarter 2022Third Quarter 202298 %98 %98 %98 %98 %98 %
____________
(1) Eliminating the impact of deferred rent paid, single-tenant collections were 99%, 99% and 98% of original cash rent due for the first, second and third quarters of 2021, respectively. Deferred rent received was either not present or less than 1% of rent collected before the first quarter of 2021.
(2) Eliminating the impact of deferred rent paid, multi-tenant collections were 95%, 97% and 96% of original cash rent due for the first, second and third quarters of 2021, respectively. 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%, 99% and 97% of original cash rent due for the first, second and third quarters of 2021, respectively. 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 September 30, 2021, was $0.1 million and $0.4 million for the three and nine months ended September 30, 2021, respectively.

47
Table of Contents
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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Table of Contents
Properties
The following table represents certain additional information about the properties we own at September 30, 2021:2022:
PortfolioAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
Dollar General IApr 2013; May 20132186.6100.0%
Walgreens IJul 201311016.0100.0%
Dollar General IIJul 20132186.7100.0%
AutoZone IJul 2013185.8100.0%
Dollar General IIIJul 20135466.6100.0%
BSFS IJul 2013192.3100.0%
Dollar General IVJul 20132184.4100.0%
Tractor Supply IAug 20131196.2100.0%
Dollar General VAug 20131126.3100.0%
Mattress Firm IAug 2013; Nov 2013; Feb 2014; Mar 2014; Apr 20145245.2100.0%
Family Dollar IAug 201318—100.0%
Lowe's IAug 201356717.7100.0%
O'Reilly Auto Parts IAug 20131118.8100.0%
Food Lion IAug 20131458.1100.0%
Family Dollar IIAug 2013181.7100.0%
Walgreens IIAug 201311411.5100.0%
Dollar General VIAug 2013194.4100.0%
Dollar General VIIAug 2013196.5100.0%
Family Dollar IIIAug 2013181.0100.0%
Chili's IAug 20132134.2100.0%
CVS IAug 20131104.3100.0%
Joe's Crab Shack IAug 2013185.5100.0%
Dollar General VIIISep 2013196.8100.0%
Tire Kingdom ISep 2013173.5100.0%
AutoZone IISep 2013171.7100.0%
Family Dollar IVSep 2013181.7100.0%
Fresenius ISep 2013163.8100.0%
Dollar General IXSep 2013193.6100.0%
Advance Auto ISep 20131119.8100.0%
Walgreens IIISep 20131154.5100.0%
Walgreens IVSep 20131143.0100.0%
CVS IISep 201311615.3100.0%
Arby's ISep 2013136.8100.0%
Dollar General XSep 2013196.5100.0%
AmeriCold ISep 201391,4076.0100.0%
Home Depot ISep 201321,3155.3100.0%
New Breed Logistics ISep 201313904.6100.0%
Truist Bank I (2)
Sep 201319966.789.9%
National Tire & Battery ISep 20131112.2100.0%
Circle K ISep 201319557.1100.0%
Walgreens VSep 20131145.9100.0%
Walgreens VISep 20131157.6100.0%
FedEx Ground ISep 20131221.7100.0%
Walgreens VIISep 201381137.8100.0%
O'Charley's ISep 20132013510.1100.0%
Krystal ISep 20135118.0100.0%
1st Constitution Bancorp ISep 2013132.3100.0%
American Tire Distributors ISep 201311252.3100.0%
49
Table of Contents
PortfolioAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
Tractor Supply IIOct 20131232.0100.0%
United Healthcare I (4)
Oct 20131400——%
National Tire & Battery IIOct 20131710.7100.0%
Tractor Supply IIIOct 20131196.6100.0%
Verizon WirelessOct 2013148.0100.0%
Dollar General XIOct 2013195.6100.0%
Talecris Plasma Resources IOct 20131221.5100.0%
Amazon IOct 20131791.8100.0%
Fresenius IIOct 20132165.9100.0%
Dollar General XIINov 2013; Jan 20142187.2100.0%
Dollar General XIIINov 2013194.5100.0%
Advance Auto IINov 20132149.8100.0%
FedEx Ground IINov 20131491.8100.0%
Burger King INov 20134116916.0100.0%
Dollar General XIVNov 20133276.7100.0%
Dollar General XVNov 2013197.1100.0%
FedEx Ground IIINov 20131241.9100.0%
Dollar General XVINov 2013194.2100.0%
Family Dollar VNov 2013181.5100.0%
CVS IIIDec 20131112.3100.0%
Mattress Firm IIIDec 2013156.8100.0%
Arby's IIDec 2013146.6100.0%
Family Dollar VIDec 20132172.3100.0%
SAAB Sensis IDec 20131913.5100.0%
Citizens Bank IDec 20139312.3100.0%
Truist Bank II (2)
Jan 201415797.380.1%
Mattress Firm IVJan 2014152.9100.0%
FedEx Ground IVJan 20141591.7100.0%
Mattress Firm VJan 2014162.1100.0%
Family Dollar VIIFeb 2014182.8100.0%
Aaron's IFeb 2014181.9100.0%
AutoZone IIIFeb 2014171.5100.0%
C&S Wholesale Grocer IFeb 201413600.7100.0%
Advance Auto IIIFeb 20141610.3100.0%
Family Dollar VIIIMar 20143251.8100.0%
Dollar General XVIIMar 2014; May 20143276.5100.0%
Truist Bank III [2]
Mar 2014693438.394.0%
Truist Bank IVMar 20146338.3100.0%
First Horizon BankMar 20148407.5100.0%
Draper Aden AssociatesMar 20141789.2100.0%
Church of Jesus ChristMar 2014132.0100.0%
Dollar General XVIIIMar 2014196.5100.0%
Sanofi US IMar 2014173711.3100.0%
Family Dollar IXApr 2014182.5100.0%
Stop & Shop IMay 201474925.3100.0%
Bi-Lo IMay 20141564.3100.0%
Dollar General XIXMay 20141126.9100.0%
Dollar General XXMay 20145495.6100.0%
Dollar General XXIMay 2014196.9100.0%
Dollar General XXIIMay 20141115.6100.0%
FedEx Ground VFeb 20161463.8100.0%
FedEx Ground VIFeb 201611213.9100.0%
50
Table of Contents
PortfolioAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
FedEx Ground VIIFeb 20161424.0100.0%
FedEx Ground VIIIFeb 20161794.1100.0%
Liberty Crossing (3)
Feb 201711063.583.5%
San Pedro Crossing (3)
Feb 201712073.694.3%
Tiffany Springs MarketCenter (3)
Feb 201712654.285.9%
The Streets of West Chester (3)
Feb 201712379.185.3%
Prairie Towne Center (3)
Feb 201712648.879.8%
Southway Shopping Center(3)
Feb 201711825.298.8%
Stirling Slidell Centre (3)
Feb 201711401.745.8%
Northwoods Marketplace (3)
Feb 201712363.898.3%
Centennial Plaza (3)
Feb 201712342.199.5%
Northlake Commons (3)
Feb 201711093.787.6%
Shops at Shelby Crossing (3)
Feb 201712363.490.9%
Shoppes of West Melbourne (3)
Feb 201711442.782.1%
The Centrum (3)
Feb 201712749.878.3%
Shoppes at Wyomissing (3)
Feb 201711033.058.7%
Southroads Shopping Center (3)
Feb 201714094.086.1%
Parkside Shopping Center (3)
Feb 201711833.580.5%
Colonial Landing (3)
Feb 201712645.793.6%
The Shops at West End (3)
Feb 201713826.571.3%
Township Marketplace (3)
Feb 201712992.992.9%
Cross Pointe Centre (3)
Feb 201712269.698.6%
Towne Centre Plaza (3)
Feb 20171941.6100.0%
Village at Quail Springs (3)
Feb 201711005.7100.0%
Pine Ridge Plaza (3)
Feb 201712392.795.8%
Bison Hollow (3)
Feb 201711353.2100.0%
Jefferson Commons (3)
Feb 201712065.597.9%
Northpark Center (3)
Feb 201713184.695.0%
Anderson Station (3)
Feb 201712445.1100.0%
Patton Creek (3)
Feb 201714913.473.0%
North Lakeland Plaza (3)
Feb 201711713.898.0%
Riverbend Marketplace (3)
Feb 201711433.188.0%
Montecito Crossing (3)
Feb 201711804.292.2%
Best on the Boulevard (3)
Feb 201712054.190.8%
Shops at RiverGate South (3)
Feb 201711414.896.1%
Dollar General XXIIIMar 2017; May 2017; Jun 20178717.9100.0%
Jo-Ann Fabrics IApr 20171183.3100.0%
Bob Evans IApr 20172211115.6100.0%
FedEx Ground IXMay 20171544.7100.0%
Chili's IIMay 2017166.1100.0%
Sonic Drive In IJun 20172310.8100.0%
Bridgestone HOSEPower IJun 20172417.9100.0%
Bridgestone HOSEPower IIJul 20171258.1100.0%
FedEx Ground XJul 201711425.8100.0%
Chili's IIIAug 2017166.1100.0%
FedEx Ground XISep 20171295.8100.0%
Hardee's ISep 201727——%
Tractor Supply IVOct 20172515.1100.0%
Circle K IINov 201762015.8100.0%
Sonic Drive In IINov 2017203116.2100.0%
Bridgestone HOSEPower IIIDec 20171218.8100.0%
PortfolioSegmentAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
Dollar General ISingle-TenantApr 2013; May 20132185.6100.0%
Walgreens ISingle-TenantJul 201311015.0100.0%
Dollar General IISingle-TenantJul 20132185.7100.0%
AutoZone ISingle-TenantJul 2013184.8100.0%
Dollar General IIISingle-TenantJul 20135465.6100.0%
BSFS ISingle-TenantJul 2013191.3100.0%
Dollar General IVSingle-TenantJul 20132186.4100.0%
Tractor Supply ISingle-TenantAug 20131195.2100.0%
Dollar General VSingle-TenantAug 20131125.3100.0%
Mattress Firm ISingle-TenantAug 2013; Nov 2013; Feb 2014; Mar 2014; Apr 20145244.2100.0%
Family Dollar ISingle-TenantAug 201318—100.0%
Lowe's ISingle-TenantAug 201356716.7100.0%
O'Reilly Auto Parts ISingle-TenantAug 20131117.8100.0%
Food Lion ISingle-TenantAug 20131457.1100.0%
Family Dollar IISingle-TenantAug 2013180.7100.0%
Walgreens IISingle-TenantAug 201311410.5100.0%
Dollar General VISingle-TenantAug 2013193.4100.0%
Dollar General VIISingle-TenantAug 2013195.5100.0%
Family Dollar IIISingle-TenantAug 201318—100.0%
Chili's ISingle-TenantAug 20132133.2100.0%
CVS ISingle-TenantAug 20131103.3100.0%
Joe's Crab Shack ISingle-TenantAug 2013184.5100.0%
Dollar General VIIISingle-TenantSep 2013195.8100.0%
Tire Kingdom ISingle-TenantSep 2013172.5100.0%
AutoZone IISingle-TenantSep 2013170.7100.0%
Family Dollar IVSingle-TenantSep 2013180.7100.0%
Fresenius ISingle-TenantSep 2013162.8100.0%
Dollar General IXSingle-TenantSep 2013192.6100.0%
Advance Auto ISingle-TenantSep 20131118.8100.0%
Walgreens IIISingle-TenantSep 20131153.5100.0%
Walgreens IVSingle-TenantSep 20131142.0100.0%
CVS IISingle-TenantSep 201311614.3100.0%
Arby's ISingle-TenantSep 2013135.8100.0%
Dollar General XSingle-TenantSep 2013195.5100.0%
AmeriCold ISingle-TenantSep 201391,4075.0100.0%
Home Depot ISingle-TenantSep 201321,3154.3100.0%
New Breed Logistics ISingle-TenantSep 201313903.6100.0%
Truist Bank I (2)
Single-TenantSep 201316865.797.2%
National Tire & Battery ISingle-TenantSep 20131111.2100.0%
Circle K ISingle-TenantSep 201319556.1100.0%
Walgreens VSingle-TenantSep 20131144.9100.0%
Walgreens VISingle-TenantSep 20131156.6100.0%
FedEx Ground ISingle-TenantSep 20131220.7100.0%
Walgreens VIISingle-TenantSep 201381136.8100.0%
O'Charley's ISingle-TenantSep 2013201359.1100.0%
Krystal ISingle-TenantSep 20135117.0100.0%
1st Constitution Bancorp ISingle-TenantSep 2013131.3100.0%
Tractor Supply IISingle-TenantOct 20131231.0100.0%
51
Table of Contents
PortfolioAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
Sonny's BBQ IJan 201831912.3100.0%
Mountain Express IJan 201893016.3100.0%
Kum & Go IFeb 2018156.7100.0%
DaVita IFeb 20182134.4100.0%
Imperial IMar 201892219.1100.0%
Mountain Express IIJun 2018155916.6100.0%
Dialysis IJul 20187656.6100.0%
Children of America IAug 201823311.979.7%
Burger King IIAug 20181311.9100.0%
Imperial IIAug 201891819.1100.0%
Bob Evans IIAug 20182211215.6100.0%
Mountain Express IIISep 2018144716.8100.0%
Taco John'sSep 201871512.1100.0%
HIFZA TradingOct 20181419.3100.0%
DaVita IIOct 20181106.0100.0%
Pizza Hut IOct 201892312.1100.0%
Little Caesars IDec 2018111917.3100.0%
Caliber Collision IDec 201834810.5100.0%
Tractor Supply VDec 2018; Mar 20195979.9100.0%
Fresenius IIIJan 20196445.7100.0%
Pizza Hut IIJan 2019308617.3100.0%
Mountain Express IVFeb 201982817.3100.0%
Mountain Express VFeb 2019; Mar 2019; Apr 2019189617.4100.0%
Fresenius IVMar 20191910.2100.0%
Mountain Express VIJun 20191317.3100.0%
IMTAAMay 2019; Jan 2020124017.8100.0%
Pizza Hut IIIMay 2019; Jun 2019134717.7100.0%
Fresenius VJun 201921910.6100.0%
Fresenius VIJun 20191105.3100.0%
Fresenius VIIJun 20193599.050.1%
Caliber Collision IIAug 20191197.5100.0%
Dollar General XXVSep 20195449.2100.0%
Dollar General XXIVSep 2019; Oct 201998212.9100.0%
Mister Carwash ISep 201931318.0100.0%
Checkers ISep 20191117.9100.0%
DaVita IIISep 2019; Mar 20202207.9100.0%
Dialysis IISep 2019504267.2100.0%
Mister Carwash IINov 20192818.2100.0%
Advance Auto IVDec 2019; Jan 202014967.8100.0%
Advance Auto VDec 201911738.7100.0%
Dollar General XXVIDec 20191211410.6100.0%
Pizza Hut IVDec 2019; Mar 2020165018.3100.0%
American Car Center IMar 20201617818.5100.0%
BJ's Wholesale ClubMar 202011109.1100.0%
Mammoth Car WashMar 202095618.5100.0%
Mammoth Car WashApr 202011818.5100.0%
Mammoth Car WashApr 20201418.6100.0%
DaVita IVApr 20201109.8100.0%
GPMJul. 20203011214.7100.0%
IMTAA IIAug 2020; Dec 2020105413.9100.0%
Fresenius IXNov 20206469.4100.0%
PortfolioSegmentAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
United Healthcare I (4)
Single-TenantOct 20131400——%
National Tire & Battery IISingle-TenantOct 2013179.7100.0%
Tractor Supply IIISingle-TenantOct 20131195.6100.0%
Verizon WirelessSingle-TenantOct 2013147.0100.0%
Dollar General XISingle-TenantOct 2013194.6100.0%
Talecris Plasma Resources ISingle-TenantOct 20131220.5100.0%
Amazon ISingle-TenantOct 20131790.8100.0%
Fresenius IISingle-TenantOct 20132164.9100.0%
Dollar General XIISingle-TenantNov 2013; Jan 20142186.2100.0%
Dollar General XIIISingle-TenantNov 2013199.2100.0%
Advance Auto IISingle-TenantNov 20132148.8100.0%
FedEx Ground IISingle-TenantNov 20131490.8100.0%
Burger King ISingle-TenantNov 20134116915.0100.0%
Dollar General XIVSingle-TenantNov 20133275.7100.0%
Dollar General XVSingle-TenantNov 2013196.1100.0%
FedEx Ground IIISingle-TenantNov 20131240.9100.0%
Dollar General XVISingle-TenantNov 2013193.2100.0%
Family Dollar VSingle-TenantNov 2013180.5100.0%
CVS IIISingle-TenantDec 20131111.3100.0%
Mattress Firm IIISingle-TenantDec 2013155.8100.0%
Arby's IISingle-TenantDec 2013145.6100.0%
Family Dollar VISingle-TenantDec 20132171.3100.0%
SAAB Sensis ISingle-TenantDec 20131912.5100.0%
Citizens Bank ISingle-TenantDec 20139318.7100.0%
Truist Bank II (2)
Single-TenantJan 201410596.583.2%
Mattress Firm IVSingle-TenantJan 2014151.9100.0%
FedEx Ground IVSingle-TenantJan 20141595.8100.0%
Mattress Firm VSingle-TenantJan 2014161.1100.0%
Family Dollar VIISingle-TenantFeb 2014181.8100.0%
Aaron's ISingle-TenantFeb 2014180.9100.0%
AutoZone IIISingle-TenantFeb 2014170.5100.0%
Advance Auto IIISingle-TenantFeb 2014169.3100.0%
Family Dollar VIIISingle-TenantMar 20143250.8100.0%
Dollar General XVIISingle-TenantMar 2014; May 20143275.5100.0%
Truist Bank III (2)
Single-TenantMar 2014592917.190.9%
Truist Bank IVSingle-TenantMar 20146337.3100.0%
First Horizon BankSingle-TenantMar 20148406.5100.0%
Draper Aden AssociatesSingle-TenantMar 20141788.2100.0%
Church of Jesus ChristSingle-TenantMar 2014131.0100.0%
Dollar General XVIIISingle-TenantMar 2014195.5100.0%
Family Dollar IXSingle-TenantApr 2014181.5100.0%
Stop & Shop ISingle-TenantMay 201474924.3100.0%
Bi-Lo ISingle-TenantMay 20141562.03.2%
Dollar General XIXSingle-TenantMay 20141125.9100.0%
Dollar General XXSingle-TenantMay 20145494.6100.0%
Dollar General XXISingle-TenantMay 2014195.9100.0%
Dollar General XXIISingle-TenantMay 20141114.6100.0%
FedEx Ground VSingle-TenantFeb 20161462.8100.0%
FedEx Ground VISingle-TenantFeb 201611212.9100.0%
FedEx Ground VIISingle-TenantFeb 20161423.0100.0%
FedEx Ground VIIISingle-TenantFeb 20161793.1100.0%
Liberty CrossingMulti-TenantFeb 201711063.291.6%
52
Table of Contents
PortfolioAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
Kalma KaurDec 2020103719.3100.0%
Dialysis IIIDec 2020151283.9100.0%
National Convenience DistributorsMar 2021538519.5100.0%
Advance Auto VIMar 20212145.7100.0%
Dollar General XXVIIMay 2021; Sept 2021171626.3100.0%
Pick N'SaveJun 20211617.3100.0%
Tidal Wave IJul 2021135019.8100.0%
Imperial RelianceJul 20212419.8100.0%
Aaron's IIAug 2021161395.7100.0%
96820,0518.793.2%
PortfolioSegmentAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
San Pedro CrossingMulti-TenantFeb 201712077.186.0%
Tiffany Springs MarketCenterMulti-TenantFeb 201712653.189.4%
The Streets of West ChesterMulti-TenantFeb 201712378.187.0%
Prairie Towne CenterMulti-TenantFeb 201712648.179.0%
Southway Shopping CenterMulti-TenantFeb 201711824.4100.0%
Stirling Slidell Centre
Multi-TenantFeb 201712081.063.5%
Northwoods MarketplaceMulti-TenantFeb 201712363.797.1%
Centennial PlazaMulti-TenantFeb 201712341.299.5%
Northlake CommonsMulti-TenantFeb 201711094.394.9%
Shops at Shelby CrossingMulti-TenantFeb 201712364.797.6%
Shoppes of West MelbourneMulti-TenantFeb 201711446.296.4%
The CentrumMulti-TenantFeb 201712749.486.4%
Shoppes at WyomissingMulti-TenantFeb 201711032.164.4%
Southroads Shopping CenterMulti-TenantFeb 201714094.192.0%
Parkside Shopping CenterMulti-TenantFeb 201711833.285.3%
Colonial LandingMulti-TenantFeb 201712646.693.3%
The Shops at West EndMulti-TenantFeb 201713826.386.1%
Township MarketplaceMulti-TenantFeb 201712994.393.4%
Cross Pointe CentreMulti-TenantFeb 201712264.198.6%
Towne Centre PlazaMulti-TenantFeb 20171943.5100.0%
Village at Quail SpringsMulti-TenantFeb 201711004.7100.0%
Pine Ridge PlazaMulti-TenantFeb 201712392.495.8%
Bison HollowMulti-TenantFeb 201711352.2100.0%
Jefferson CommonsMulti-TenantFeb 201712064.797.9%
Northpark CenterMulti-TenantFeb 201713184.097.2%
Anderson StationMulti-TenantFeb 201712444.5100.0%
Patton CreekMulti-TenantFeb 201714912.876.0%
North Lakeland PlazaMulti-TenantFeb 201711712.997.1%
Riverbend MarketplaceMulti-TenantFeb 201711432.792.5%
Montecito CrossingMulti-TenantFeb 201711803.992.8%
Best on the BoulevardMulti-TenantFeb 201712053.495.6%
Shops at RiverGate SouthMulti-TenantFeb 201711453.699.9%
Dollar General XXIIISingle-TenantMar 2017; May 2017; Jun 20178716.9100.0%
Jo-Ann Fabrics ISingle-TenantApr 20171182.3100.0%
Bob Evans ISingle-TenantApr 20172211114.6100.0%
FedEx Ground IXSingle-TenantMay 20171543.7100.0%
Chili's IISingle-TenantMay 2017165.1100.0%
Sonic Drive In ISingle-TenantJun 2017239.8100.0%
Bridgestone HOSEPower ISingle-TenantJun 20172416.9100.0%
Bridgestone HOSEPower IISingle-TenantJul 20171257.1100.0%
FedEx Ground XSingle-TenantJul 201711424.8100.0%
Chili's IIISingle-TenantAug 2017165.1100.0%
FedEx Ground XISingle-TenantSep 20171294.8100.0%
Hardee's ISingle-TenantSep 201714——%
Tractor Supply IVSingle-TenantOct 20172514.1100.0%
Circle K IISingle-TenantNov 201762014.8100.0%
Sonic Drive In IISingle-TenantNov 2017203115.2100.0%
Bridgestone HOSEPower IIISingle-TenantDec 20171217.8100.0%
Sonny's BBQ ISingle-TenantJan 201831911.3100.0%
Mountain Express ISingle-TenantJan 201893015.3100.0%
Kum & Go ISingle-TenantFeb 2018155.7100.0%
DaVita ISingle-TenantFeb 20182133.4100.0%
53
Table of Contents
PortfolioSegmentAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
Imperial ISingle-TenantMar 201892218.1100.0%
Mountain Express IISingle-TenantJun 2018155915.6100.0%
Dialysis ISingle-TenantJul 20187656.3100.0%
Children of America ISingle-TenantAug 201823310.979.7%
Burger King IISingle-TenantAug 20181310.9100.0%
Imperial IISingle-TenantAug 201891818.1100.0%
Bob Evans IISingle-TenantAug 20182211214.6100.0%
Mountain Express IIISingle-TenantSep 2018144715.8100.0%
Taco John'sSingle-TenantSep 201871511.1100.0%
HIFZA TradingSingle-TenantOct 20181418.3100.0%
DaVita IISingle-TenantOct 20181105.0100.0%
Pizza Hut ISingle-TenantOct 201892311.1100.0%
Little Caesars ISingle-TenantDec 2018111916.3100.0%
Caliber Collision ISingle-TenantDec 20183489.5100.0%
Tractor Supply VSingle-TenantDec 2018; Mar 20195978.9100.0%
Fresenius IIISingle-TenantJan 20196445.2100.0%
Pizza Hut IISingle-TenantJan 2019308616.3100.0%
Mountain Express IVSingle-TenantFeb 201982816.3100.0%
Mountain Express VSingle-TenantFeb 2019; Mar 2019; Apr 2019189616.4100.0%
Fresenius IVSingle-TenantMar 2019199.2100.0%
Mountain Express VISingle-TenantJun 20191316.3100.0%
IMTAASingle-TenantMay 2019; Jan 2020124016.8100.0%
Pizza Hut IIISingle-TenantMay 2019; Jun 2019134716.7100.0%
Fresenius VSingle-TenantJun 20192199.6100.0%
Fresenius VISingle-TenantJun 20191104.3100.0%
Fresenius VIISingle-TenantJun 20193598.050.1%
Caliber Collision IISingle-TenantAug 20191196.5100.0%
Dollar General XXVSingle-TenantSep 20195448.2100.0%
Dollar General XXIVSingle-TenantSep 2019; Oct 201998211.9100.0%
Mister Carwash ISingle-TenantSep 201931317.0100.0%
Checkers ISingle-TenantSep 20191116.9100.0%
DaVita IIISingle-TenantSep 2019; Mar 20202206.9100.0%
Dialysis IISingle-TenantSep 2019504266.5100.0%
Mister Carwash IISingle-TenantNov 20192817.2100.0%
Advance Auto IVSingle-TenantDec 2019; Jan 202014966.8100.0%
Advance Auto VSingle-TenantDec 201911737.7100.0%
Dollar General XXVISingle-TenantDec 2019121149.6100.0%
Pizza Hut IVSingle-TenantDec 2019; Mar 2020165017.3100.0%
American Car Center ISingle-TenantMar 20201617817.5100.0%
BJ's Wholesale ClubSingle-TenantMar 202011108.1100.0%
Mammoth Car WashSingle-TenantMar 202095617.5100.0%
Mammoth Car WashSingle-TenantApr 202011817.5100.0%
Mammoth Car WashSingle-TenantApr 20201417.6100.0%
DaVita IVSingle-TenantApr 20201108.8100.0%
GPMSingle-TenantJul. 20203011213.7100.0%
IMTAA IISingle-TenantAug 2020; Dec 2020105412.9100.0%
Fresenius IXSingle-TenantNov 20206468.4100.0%
Kalma KaurSingle-TenantDec 2020103718.3100.0%
Dialysis IIISingle-TenantDec 2020161393.7100.0%
National Convenience DistributorsSingle-TenantMar 2021538518.5100.0%
Advance Auto VISingle-TenantMar 20212144.7100.0%
Dollar General XXVIISingle-TenantMay 2021; Sept 2021171625.3100.0%
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PortfolioSegmentAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
Pick N'SaveSingle-TenantJun 20211616.3100.0%
Tidal Wave ISingle-TenantJul 2021145418.8100.0%
Imperial RelianceSingle-TenantJul 20212418.8100.0%
Aaron's IISingle-TenantAug 2021161394.6100.0%
Heritage ISingle-TenantDec 2021; Jan 202265119.3100.0%
Fidelity ISingle-TenantDec 2021; Sept 202278220.0100.0%
BJ's Wholesale Club IISingle-TenantJan 20221686.0100.0%
McCain PlazaMulti-TenantJan 202213084.096.6%
Ventura Place (3)
Multi-TenantFeb. 20221675.592.5%
Market at Clifty Crossing (3)
Multi-TenantFeb. 202211982.277.1%
Crosspoint Shopping Center (3)
Multi-TenantFeb. 202211704.791.6%
Melody Mountain (3)
Multi-TenantFeb. 20221661.3100.0%
Owensboro Town Center (3)
Multi-TenantFeb. 202211652.691.8%
Plainfield Marketplace (3)
Multi-TenantFeb. 202211254.598.6%
Pecanland Plaza (3)
Multi-TenantFeb. 202211123.293.6%
Mattress Firm & Aspen Dental (3)
Multi-TenantFeb. 20221101.834.9%
Mattress Firm & Five Guys (3)
Multi-TenantFeb. 2022185.3100.0%
Shoppes at Stroud (3)
Multi-TenantFeb. 202211415.394.3%
FreshThyme & DSW (3)
Multi-TenantFeb. 20221491.6100.0%
Carlisle Crossing (3)
Multi-TenantFeb. 202211523.485.8%
Shippensburg Marketplace (3)
Multi-TenantFeb. 20221605.484.3%
Shouthwest Plaza (3)
Multi-TenantFeb. 202213684.477.4%
Lord Salisbury Center (3)
Multi-TenantFeb. 202211144.8100.0%
Derby Marketplace (3)
Multi-TenantFeb. 202211005.8100.0%
Fairlane Green (3)
Multi-TenantFeb. 20221954.8100.0%
Shoe Carnival & Buffalo Wild Wings (3)
Multi-TenantFeb. 20221155.1100.0%
Tellico Village (3)
Multi-TenantFeb. 20221415.5100.0%
Triangle Town Place (3)
Multi-TenantFeb. 202211494.093.9%
Mattress Firm & Panera Bread (3)
Multi-TenantFeb. 2022195.3100.0%
Enid Crossing (3)
Multi-TenantFeb. 20221483.3100.0%
Dick's PetSmart Center (3)
Multi-TenantFeb. 20221523.4100.0%
Rolling Acres (3)
Multi-TenantFeb. 202211893.589.3%
Mattress Firm & Kay Jewelers (3)
Multi-TenantFeb. 2022173.1100.0%
Fountain Square (3)
Multi-TenantFeb. 202211662.9100.0%
Shops at Abilene (3)
Multi-TenantFeb. 202211763.097.3%
Shoppes of Gary Farms (3)
Multi-TenantFeb. 202211001.495.5%
Brynwood Square (3)
Multi-TenantFeb. 202211212.610.8%
PetSmart & Old Navy (3)
Multi-TenantFeb. 20221297.7100.0%
Crossroads Annex (3)
Multi-TenantFeb. 20221411.8100.0%
Crossroads Commons (3)
Multi-TenantFeb. 20221472.8100.0%
Sutters Creek (3)
Multi-TenantFeb. 20221806.5100.0%
Darien Towne Center (3)
Multi-TenantFeb. 202211772.393.1%
Summerfield Crossing (3)
Multi-TenantFeb. 202211146.376.1%
University Marketplace (3)
Multi-TenantFeb. 20221865.2100.0%
The Market at Polaris (3)
Multi-TenantFeb. 202211114.693.7%
Beaver Creek Shopping Center (3)
Multi-TenantFeb. 202212844.098.8%
Wallace Commons (3)
Multi-TenantFeb. 202211114.4100.0%
Plaza San Mateo (3)
Multi-TenantFeb. 20221632.396.2%
Turfway Crossing (3)
Multi-TenantFeb. 202211004.995.0%
Nordstrom Rack (3)
Multi-TenantFeb. 20221458.297.7%
Evergreen Marketplace (3)
Multi-TenantFeb. 20221502.3100.0%
Lawton Marketplace (3)
Multi-TenantFeb. 202211885.983.8%
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PortfolioSegmentAcquisition DateNumber of
Properties
Rentable Square Feet
(In thousands)
Remaining Lease Term (1)
Percentage Leased
Cottonwood Commons (3)
Multi-TenantFeb. 202211925.687.7%
Houma Crossing (3)
Multi-TenantFeb. 202211816.192.5%
Target Center (3)
Multi-TenantFeb. 20221841.9100.0%
The Center at Hobbs Brook (3)
Multi-TenantFeb. 202212314.5100.0%
Fourth Creek Landing (3)
Multi-TenantFeb. 20221683.8100.0%
Lafayette Pavillion (3)
Multi-TenantFeb. 202213825.471.7%
North Lake Square (3)
Multi-TenantFeb. 202211406.599.0%
Western Crossing (3)
Multi-TenantFeb. 20221686.6100.0%
Almeda Crossing (3)
Multi-TenantMar. 202212233.185.0%
Boston Commons (3)
Multi-TenantMar. 202211035.695.5%
Wallace Commons (3)
Single-TenantApr. 20221995.1100.0%
Academy Sports (3)
Single-TenantApr. 20221728.3100.0%
Walgreens (3)
Multi-TenantApr. 20221153.7100.0%
Parkway Centre South (3)
Multi-TenantApr. 202211324.4100.0%
The Marquis (3)
Multi-TenantApr. 202211355.366.6%
HEB Center (3)
Multi-TenantApr. 202211154.495.8%
Bed Bath & Beyond/Golfsmith (3)
Multi-TenantApr. 202211012.2100.0%
Walgreens & KeyBank (3)
Multi-TenantApr. 202211811.4100.0%
Terrell Mill Village (3)
Multi-TenantApr. 20221756.092.7%
Fresh Market Center (3)
Multi-TenantApr. 20221323.388.8%
Decatur Commons (3)
Multi-TenantApr. 202211263.691.8%
Stoneridge Village (3)
Multi-TenantApr. 20221723.3100.0%
Albany Square (3)
Multi-TenantApr. 202211183.175.9%
Coventry Crossing (3)
Multi-TenantApr. 20221219.294.9%
Springfield Commons (3)
Multi-TenantApr. 202212075.6100.0%
Waterford Park South (3)
Multi-TenantApr. 20221925.487.5%
The Ridge at Turtle Creek (3)
Multi-TenantApr. 20221999.895.8%
Tire Kingdom & Starbucks (3)
Multi-TenantApr. 2022177.5100.0%
Walmart Neighborhood Market (3)
Multi-TenantApr. 20221519.4100.0%
Harbor Town Center (3)
Multi-TenantApr. 202211394.597.8%
East West Commons (3)
Multi-TenantApr. 202211734.579.4%
Morganton Heights (3)
Multi-TenantApr. 202212852.595.6%
Poplar Springs (3)
Multi-TenantApr. 20221641.096.7%
The Plant (3)
Multi-TenantMay 202215096.779.8%
Imperial Reliance IISingle-TenantMay 202283219.7100.0%
McGowin Park (3)
Multi-TenantJuly 202213753.798.2%
1,05028,7787.092.6%
________
(1)Remaining lease term in years as of September 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 12eight properties leased to Truist Bank (one, two and five in Truist I, II, and III, respectively) which were unoccupied as of September 30, 20212022 and are being marketed for sale.sale, four 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 other properties are single-tenant.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.
(4)The tenant’s lease at this property expired effective July 1, 2021.
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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-Tenant93911,913 9.8 95.5 %
Multi-Tenant11116,865 4.6 90.6 %
      Total1,050 28,778 7.0 92.6 %
___________
(1)Remaining lease term in years as of September 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.
Leasing Activity
The following tables summarize our leasing activity by segment during the periods indicated:
Three Months Ended September 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)
3 22,032 $436 $453 $52 $2.36 
Lease terminations (3)
— — $— $— $— $— 
______
(1)Annualized rental income on a straight-line basis as of September 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 September 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 September 30, 2022. This excludes lease 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 September 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)
41 512,130 $— $3,531 $1,472 $2.87 
Lease renewals/amendments (2)
42 571,739 $7,778 $8,377 $1,294 $2.26 
Lease terminations (3)
— — $— $— $— $— 
______
(1)Annualized rental income on a straight-line basis as of September 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 September 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 September 30, 2022. This excludes lease 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.

Nine Months Ended September 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)
18 156,570 $3,414 $3,435 $98 $0.63 
Lease terminations (3)
7 87,947 $1,799 $— $— $— 
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______
(1)Annualized rental income on a straight-line basis as of September 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 nine months ended September 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 nine months ended September 30, 2022. This excludes lease 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.

Nine Months Ended September 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)
70 769,256 $— $6,590 $2,932 $3.81 
Lease renewals/amendments (2)
98 1,167,061 $15,371 $16,455 $2,392 $2.05 
Lease terminations (3)
3 70,001 $439 $— $— $— 
______
(1)Annualized rental income on a straight-line basis as of September 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 nine months ended September 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 nine months ended September 30, 2022. This excludes lease 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 the purchase and sale agreement for 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.uncertainties, and please see the Inflation and Part II — Item 1A. Risk Factors sections below (as well as Part 1, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021) for additional information on the risks and uncertainties associated with inflation, rising interest rates and labor shortages and costs.

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Comparison of the Three Months Ended September 30, 20212022 and 2020
We owned 841 properties for the entirety of both the three months ended September 30, 2021 and 2020 (our “Three Month Same Store”) that were 92.8% leased as of September 30, 2021. From July 1, 2020 through September 30, 2021, we acquired 127 properties (our “Acquisitions Since July 1, 2020”) that were 100.0% leased as of September 30, 2021. From July 1, 2020 through September 30, 2021, we sold eight properties (our “Disposals Since July 1, 2020”).
The following table summarizes our leasing activity during the three months ended September 30, 2021:
Three Months Ended September 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)
7 13,775 $— $291 $121 $8.78 
Lease renewals/amendments (2)
33 337,000 $4,489 $4,454 $529 $1.57 
Lease terminations (3)
15 52,768 $1,808 $— $— $— 
______
(1)
 Three Months Ended September 30,Increase (Decrease)
20222021$
Revenue from tenants$116,176 $91,915 $24,261 
Operating expenses: 
Asset management fees to related party7,939 9,880 (1,941)
Property operating expense28,051 13,384 14,667 
Impairment of real estate investments30,046 4,554 25,492 
Acquisition, transaction and other costs210 3,426 (3,216)
Equity-based compensation3,857 4,149 (292)
General and administrative8,499 5,589 2,910 
Depreciation and amortization57,494 32,762 24,732 
Total operating expenses136,096 73,744 62,352 
          Operating (loss) income before gain on sale of real estate investments(19,920)18,171 (38,091)
Gain on sale of real estate investments1,608 478 1,130 
   Operating (loss) income(18,312)18,649 (36,961)
Other (expense) income:
Interest expense(32,402)(19,232)(13,170)
Other income25 18 7 
Total other expense, net(32,377)(19,214)(13,163)
Net loss(50,689)(565)(50,124)
Net loss attributable to non-controlling interests60 (4)64 
Allocation for preferred stock(5,837)(5,837)— 
Net loss attributable to common stockholders$(56,466)$(6,406)$(50,060)
Annualized rental income on a straight-line basis as
59
Table of September 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 September 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 September 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 $56.5 million for the three months ended September 30, 2022, as compared to a loss of $6.4 million for the three months ended September 30, 2021, as compared to $7.1 million for the three months ended September 30, 2020.2021. The change in net loss attributable to common
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stockholders is 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 September 30, 2022, we owned 1,050 properties. There were 914 properties owned for the entire three months ended September 30, 2022 and 2021 (our “Three Month Same Store Properties”) which were 93.6% leased as of September 30, 2022. Since July 1, 2021 and through September 30, 2022, we acquired 136 properties (our “Acquisitions Since July 1, 2021”) which were 90.9% leased as of September 30, 2022, and disposed of 27 properties (our “Dispositions Since July 1, 2021”).
Same StoreAcquisitionsDisposalsTotal
Three Months Ended September 30,Increase (Decrease)Three Months Ended September 30,Increase (Decrease)Three Months Ended September 30,Increase (Decrease)Three Months Ended September 30,Increase (Decrease)
20212020$20212020$20212020$20212020$
Revenue from tenants$86,121 $77,814 $8,307 $5,367 $654 $4,713 $427 $21 $406 $91,915 $78,489 $13,426 
Less: Property operating13,184 14,172 (988)196 5 191 4 49 (45)13,384 14,226 (842)
NOI$72,937 $63,642 $9,295 $5,171 $649 $4,522 $423 $(28)$451 $78,531 $64,263 $14,268 
Single-Tenant PropertiesMulti-Tenant PropertiesTotal Properties
Number of properties, June 30, 202190633939
Acquisition activity during the six months ended December 31, 202145—45
Disposition activity during the six months ended December 31, 2021(8)—(8)
Number of properties, December 31, 202194333976
Acquisition activity during the nine months ended September 30, 2022138093
Disposition activity during the nine months ended September 30, 2022(17)(2)(19)
Number of properties, September 30, 20229391111,050
Number of Same Store Properties88133914
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 September 30, 2022 and 2021:
Same Store (1)
Acquisitions (2)
Disposals (3)
Segment Total (4)
Three Months Ended September 30,Increase (Decrease)Three Months Ended September 30,Increase (Decrease)Three Months Ended September 30,Increase (Decrease)Three Months Ended September 30,Increase (Decrease)
20222021$20222021$20222021$20222021$
Revenue from tenants$45,360 $46,188 $(828)$3,105 $1,297 $1,808 $9 $15,811 $(15,802)$48,474 $63,296 $(14,822)
Less: Property operating3,804 2,696 1,108 33 12 21 90 92 (2)3,927 2,800 1,127 
NOI$41,556 $43,492 $(1,936)$3,072 $1,285 $1,787 $(81)$15,719 $(15,800)$44,547 $60,496 $(15,949)
______
(1)Our single-tenant segment included 881 Three Month Same Store Properties.
(2)Our single-tenant segment included 58 Acquisitions Since July 1, 2021.
(3)Our single-tenant segment included 25 Dispositions Since July 1, 2021.
(4)Our single-tenant segment included 939 total properties.
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Revenue from Tenants
Revenue from tenants increased $13.4decreased $14.8 million to $91.9$48.5 million for the three months ended September 30, 2022, compared to $63.3 million for the three months ended September 30, 2021. This decrease in revenue from tenants was due to a decrease of $15.8 million from our Dispositions Since July 1, 2021 and a decrease in our Three Month Same Store Properties revenue of approximately $0.8 million, partially offset by incremental revenue from our Acquisitions Since July 1, 2021 of approximately $1.8 million.
Total revenue from tenants for the three months ended September 30, 2021 includes a $10.4 million lease termination fee in connection with a termination agreement which was entered into in the three months ended September 30, 2021 with a tenant at 12 of our properties (the “Third Quarter 2021 Termination Fee”), of which $9.6 million relates to our Dispositions Since July 1, 2021 and $0.8 million relates to our Three Month Same Store Properties. The full amount of the Third Quarter 2021 Termination Fee was received in October 2021.
The decrease in our Three Month Same Store Properties revenue was primarily due to $0.8 million of the Third Quarter 2021 Termination Fee described above, which relates to one property which was subsequently disposed in October 2022, and lower revenue of $0.5 million from other properties which were vacant in the three months ended September 30, 2022 but which were occupied in the three months ended September 30, 2021. These decreases were partially offset by an increase of $0.6 million of operating expense reimbursement revenue.
The decrease in our revenue from Dispositions Since July 1, 2021 was primarily due to (i) $9.6 million of the Third Quarter 2021 Termination Fee described above, (ii) the disposition of our Sanofi property in January 2022, which had annual rents of $17.2 million, or rents of $4.3 million for the three months ended September 30, 2021 compared to $78.5 million for the three months ended September 30, 2020. This increase in revenue from tenants was due to incremental revenue from our Acquisitions Since July 1, 2020 of approximately $4.7 million, and by an increase in our Three Month Same Store(iii) lower revenue of approximately $8.3 million.
The increase in Three Month Same Store revenue was impacted by the recording of a termination fee, as a result of us entering into a termination agreement with a tenant at 12 of our$1.9 million from other disposed properties. The termination agreement required the tenant to pay us a termination fee of approximately $10.4 million, which we received in October 2021. As a result, after considering previously recorded straight-line rent on these leases and the write-off of below market lease intangibles, we recorded net termination fee income of $10.5 million in revenue from tenants during the three months ended September 30, 2021. Additionally, revenue in our Three Month Same Store properties increased as a result of $0.6 million less bad debt expense incurred in the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.
These revenue increases were partially offset by $1.3 million in lower revenue due to the expiration of our United Healthcare lease, which was not renewed on July 1, 2021 and had annual rents of $5.4 million prior to its expiration, and by $0.7 million in below market lease intangible write-offs which occurred in the three months ended September 30, 2020.
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 decreased $0.8increased $1.1 million to $13.4$3.9 million for the three months ended September 30, 20212022 compared to $14.2$2.8 million for the three months ended September 30, 2020.2021. This decreaseincrease was driven by a decreasean increase in property operating expenses of approximately $1.0$1.1 million in our Three Month Same Store Properties.
Segment Results — Multi-Tenant Properties partially offset
The following table presents the components of NOI and the period change within the multi-tenant segment for the three months ended September 30, 2022 and 2021:
Same Store (1)
Acquisitions (2)
Disposals (3)
Total (4)
Three Months Ended September 30,Increase (Decrease)Three Months Ended September 30,Increase (Decrease)Three Months Ended September 30,Increase (Decrease)Three Months Ended September 30,Increase (Decrease)
20222021$20222021$20222021$20222021$
Revenue from tenants$28,539 $28,619 $(80)$39,024 $— $39,024 $139 $— $139 $67,702 $28,619 $39,083 
Less: Property operating10,955 10,584 371 13,041 — 13,041 128 — 128 24,124 10,584 13,540 
NOI$17,584 $18,035 $(451)$25,983 $— $25,983 $11 $— $11 $43,578 $18,035 $25,543 
______
(1)Our multi-tenant segment included 33 Three Month Same Store Properties.
(2)Our multi-tenant segment included 78 Acquisitions Since July 1, 2021, excluding two properties recently acquired in the CIM Portfolio Acquisition that were disposed in the three months ended September 30, 2022.
(3)Our multi-tenant segment included two Dispositions Since July 1, 2021, including two properties recently acquired in the CIM Portfolio Acquisition that were disposed in the three months ended September 30, 2022.
(4)Our multi-tenant segment included 111 total properties.
Revenue from Tenants
Revenue from tenants increased $39.1 million to $67.7 million for the three months ended September 30, 2022, compared to $28.6 million for the three months ended September 30, 2021. This increase in revenue from tenants was primarily due to incremental revenue from our Acquisitions Since July 1, 2021 of approximately $39.0 million. The increase in revenue from tenants was also affected by an increase in our Three Month Same Store Properties revenue of $0.2approximately $0.1 million and finally by an increase in our Dispositions Since July 1, 2021 of $0.1 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 increase in our Three Month Same Store Properties revenue was mainly due to an increase in occupancy and rental rates in the three months ended September 30, 2022 as compared to the three months ended September 30, 2021.
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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 $13.5 million to $24.1 million for the three months ended September 30, 2022 compared to $10.6 million for the three months ended September 30, 2021. This increase was primarily due to an increase in property operating expenses of $13.0 million from our Acquisitions Since July 1, 2020.2021. This increase was also due to an increase in property operating expenses of $0.4 million from our Three Month Same Store Properties, and by an increase in property operating expenses of $0.1 million from our Dispositions Since July 1, 2021. 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
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 $3.0decreased $1.9 million to $7.9 million for the three months ended September 30, 2022, compared to $9.9 million for the three months ended September 30, 2021, comparedprimarily due to $6.9the occurrence of a $2.3 million forincentive variable management fee incurred in the three months ended September 30, 2020, primarily due to2021 for which no amounts were incurred in the three months ended September 30, 2022, partially offset by an increase of $0.7$0.4 million in the variable portion of the base management fee due to our equity issuances during the period from September 30, 2020 to September 30, 2021in 2022 and the $2.3 million incentive variable management fee incurred in the current period, which was not incurred in the prior year period.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 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
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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 $2.3 million during the three months ended September 30, 2021. No incentive variable management fee2021, at which point it was incurred during the three months ended September 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 $30.0 million for the three months ended September 30, 2022, of which $27.7 million related to three multi-tenant properties (one of which was recently acquired from the CIM Portfolio Acquisition and was impaired by $2.0 million), and $2.4 million related to three vacant single-tenant properties (two of which were formerly leased to Truist Bank). All of the impaired properties were impaired to adjust the properties’ carrying values to their fair values as determined by their respective purchase and sale agreements. These impairment charges include an incremental impairment charge of $2.4 million recorded on one multi-tenant property, which was impaired in the three months ended June 30, 2022 for $49.6 million, to reflect a subsequent change in its purchase and sale agreement with the potential buyer as a result of deteriorating market conditions and rising interest rates.
We recorded $4.6 million of impairment charges for the three months ended September 30, 2021 related to six vacant held-for-use properties located in various states (including certain of the properties for which we terminated leases in the period). Five of these properties were impaired to adjust their carrying values to their fair values as determined by the sales price in their respective signed purchase and salessale agreements (“PSAs”) or non-binding letters of intent, (“LOIs”), and one property was impaired to adjust its carrying value to its fair value as determined by the income approach.
We did not record anyPlease 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 during the three months ended September 30, 2020.charges.
Acquisition, Transaction and Other Costs
Acquisition, transaction and other costs increased $1.9decreased by $3.2 million to $0.2 million for the three months ended September 30, 2022, compared to $3.4 million for the three months ended September 30, 2021, compared to $1.5 million for the three months ended September 30, 2020.2021. The increasedecrease was primarily due to prepayment penalties on two mortgage notes which were fully repaid in the three months ended September 30, 2021 totalingwhich totaled $3.3 million. The prepayment penalties related
Equity-Based Compensation
Equity-based compensation decreased by $0.3 million to mortgages$3.9 million during the three months ended September 30, 2020 were approximately $0.6 million. This increase was partially offset by $0.2 million in litigation costs which were incurred in the three months ended September 30, 2020 which did not occur in 2021, and less acquisition activity during the three months ended September 30, 2021, as2022, compared to the prior year quarter.
Equity-Based Compensation
Equity-based compensation increased by $0.9 million to $4.1 million during the three months ended September 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
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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 September 30, 2020. This increase2021 was primarily due to $0.6 million of additional non-cash equity-based compensation expense from a newthe 2021 multi-year outperformance agreement with the Advisor (the “2021 OPP”) and additional non-cash equity based compensation expense from a new grant of restricted shares in the second quarter of 2021.
Our independent directors, acting as a group, authorized 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 which were subsequentlyto 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 September 30, 2021 includes expenses for both the 2018 OPP and the 2021 OPP (seeOPP. The higher expense recorded in the three months ended September 30, 2021 was partially offset by $0.3 million of net equity-based compensation expense representing the value of new replacement grants net of a reversal of $0.1 million in previously recognized compensation on forfeited grants. See Note 1213— 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.additional information.
General and Administrative Expense
General and administrative expense increased $2.3$2.9 million to $8.5 million for the three months ended September 30, 2022, compared to $5.6 million for the three months ended September 30, 2021, compared2021. The increase was primarily due to $3.3$1.6 million forof increased professional expense reimbursements. The increased professional expense reimbursements are due to additional staffing needed by the Advisor as a result of the CIM Portfolio Acquisition. Additionally, legal expenses increased $0.3 million, accounting fees increased $0.2 million and miscellaneous fees increased $0.5 million in the three months ended September 30, 2020. The increase was due2022 as compared to the non-recurrence of a $1.4 million reduction in expense recorded in the third quarter of 2020 related to 2019 bonus awards made by the Advisor to employees of the Advisor or its affiliates, and $0.7 million of increased professional services and miscellaneous general and administrative expenses incurred during the three months ended September 30, 2021 as compared to the same period last year.2021.
Depreciation and Amortization Expense
Depreciation and amortization expense decreased $2.2increased $24.7 million to $57.5 million for the three months ended September 30, 2022, compared to $32.8 million for the three months ended September 30, 2021, compared to $35.0 million for the three months ended September 30, 2020.2021. Depreciation and amortization expense was impacted by a decrease of $4.3 million from our Three Month Same Store properties partially offset by an increase of $2.0$27.3 million related to our Acquisitions Since July 1, 2020.
The2021 (including, most notably, the CIM Portfolio Acquisition), partially offset by a decrease inof $0.3 million from our Three Month Same Store depreciation was primarily due to activity during the third quarterProperties as well as by a decrease of 2020, which included leasing intangible write-offs related to a tenant’s lease termination at 19 of$2.8 million from our properties totaling $3.0 million, partially offset by the non-recurrence of depreciationDispositions Since July 1, 2021.
Depreciation and amortization expense for the three months ended September 30, 2022 was impacted by an out-of-period adjustment of assets written off$3.7 million for certain in-place lease intangibles associated with certain leases with below market rents that were acquired as part of $1.3 millionthe CIM Portfolio Acquisition in the prior period.
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first and second quarters of 2022. See Table of ContentsNote 2
— Significant Accounting Policies for additional information.
Gain on Sale/ExchangeSale of Real Estate Investments
During the three months ended September 30, 2022, we sold eight properties (including six single-tenant and two multi-tenant properties). These properties sold for an aggregate contract price of $35.4 million, resulting in aggregate gains on sale of $1.6 million. During the three months ended September 30, 2021, we sold three properties. Thesesingle-tenant properties sold for an aggregate contract price of $3.0 million, resulting in aggregate gains on sale of $0.5 million. During
Interest Expense
Interest expense increased $13.2 million to $32.4 million for the three months ended September 30, 2020 we did not sell any properties, however, we recorded a $2.2 million gain related to a non-monetary exchange of two properties then owned by us for two different properties not then owned by us pursuant to a tenant’s exercise of its right to substitute properties under its lease.
Interest Expense
Interest expense decreased $1.6 million2022, compared to $19.2 million for the three months ended September 30, 2021, compared to $20.9 million for the three months ended September 30, 2020. The decrease2021. This increase was mainly attributabledue to lower average(i) interest ratesexpense of $5.6 million and deferred financing cost amortization of $0.3 million on our mortgages$500.0 million of 4.50% per annum Senior Notes issued in October 2021, (ii) increased interest expense of $2.1 million and a lower average balanceincreased deferred financing cost and discount/premium amortization of $1.1 million on our mortgage debt and (iii) increased interest expense of $4.1 million on our Credit Facility. This decrease was partially offset by higher combined average balancesFacility borrowings. The increases to interest expense on our mortgages duringmortgage debt and borrowings under our Credit Facility largely result from the three months ended September 30, 2021 as comparedassumption of mortgage debt and borrowings under our Credit Facility to September 30, 2020.finance 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.
During the three months ended September 30, 20212022 and 2020,2021, the average outstanding balances on our mortgage notes payable were $1.6$1.8 billion and $1.5$1.6 billion, respectively, and ourthe average outstanding balancebalances under our revolving, unsecured corporate credit facility (the “Credit Facility”) was $158.1were $483.2 million and $349.1$158.1 million, respectively. For the three months ended September 30, 20212022 and 2020,2021, the weighted-average interest rates on our mortgage notes payable were 3.77%3.83% and 4.15%3.77%, respectively, and the weighted-average interest rates on our Credit Facility were 2.49%4.22% and 2.54%2.49%, respectively. The increase in the weighted-average interest rate on our Credit Facility during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 is primarily due to increases in one-month LIBOR rates during 2022.
The interest rate on our Credit Facility has increased throughout 2022, and we anticipate that the interest rate on our Credit Facility will further increase, which could have an adverse impact on our acquisition and investment activity. See “Item 1.A Risk Factors” and “Liquidity and Capital Resources” for additional information.
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Other Income
Other income was $18,000 and $0.9 million for the three months ended September 30, 2021 and 2020. Other income for the three months ended September 30, 2020 includes the receipt of approximately $0.8 million of funds disbursed to us for permitting the early release of a pre-acquisition tenant improvement escrow account, which had not been previously funded by us, in connection with the release of a mortgage loan encumbering a property as part of refinancing the mortgage loan on September 4, 2020.
Loss on Non-Designated Derivative
The loss on non-designated derivative instruments was immaterial for the three months ended September 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 Nine Months Ended September 30, 2021 and 2020
We owned 807 properties for the entirety of both the nine months ended September 30, 2021 and 2020 (our “Nine Month Same Store”), that were 92.7% leased as of September 30, 2021. From January 1, 2020 to September 30, 2021, we acquired 161 properties (our “Acquisitions Since January 1, 2020”), that were 100.0% leased as of September 30, 2021. From January 1, 2020 through September 30, 2021, we sold 14 properties (our “Disposals Since January 1, 2020”).
The following table summarizes our leasing activity during the nine months ended September 30, 2021:
Nine Months Ended September 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)
27 297,793 $— $2,274 $1,646 $5.53 
Lease renewals/amendments (2)
113 964,738 13,474 12,943 792 0.82 
Lease terminations (3)
24 118,565 2,975 — — — 
________
(1)Annualized rental income on a straight-line basis as of September 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 nine months ended September 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 nine months ended September 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 Attributable to Common Stockholders
Net loss attributable to stockholders was $23.2 million for the nine months ended September 30, 2021, as compared to net loss attributable to common stockholders of $38.0 million for the nine months ended September 30, 2020. 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.
Property Results of Operations
Same StoreAcquisitionsDisposalsTotal
Nine Months Ended September 30,Increase (Decrease)Nine Months Ended September 30,Increase (Decrease)Nine Months Ended September 30,Increase (Decrease)Nine Months Ended September 30,Increase (Decrease)
20212020$20212020$20212020$20212020$
Revenue from tenants$233,740 $222,580 $11,160 $18,227 $5,335 $12,892 $712 $72 $640 $252,679 $227,987 $24,692 
Less: Property operating39,659 38,951 708 457 30 427 36 68 (32)40,152 39,049 1,103 
NOI$194,081 $183,629 $10,452 $17,770 $5,305 $12,465 $676 $4 $672 $212,527 $188,938 $23,589 
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 $24.7 million to $252.7 million for the nine months ended September 30, 2021, compared to $228.0 million for the nine months ended September 30, 2020. The increase was primarily due to incremental income from our Acquisitions Since January 1, 2020 of approximately $12.9 million, and by an increase in our Nine Month Same Store revenue of approximately $11.2 million, as well as an increase in revenue from our Disposals Since January 1, 2020 of $0.6 million, when compared to the same quarter last year.
The increase in Nine Month Same Store revenue was impacted by the recording of two termination fees, one of which was a result of us entering into a termination agreement with a tenant at 12 of our properties, and another as a result of a tenant in one of our multi-tenant properties who terminated their lease. The first termination agreement required the tenant to pay us a termination fee of approximately $10.4 million, which we received in October 2021. As a result, after considering the previously recorded straight-line rent on these leases and the write-off of below market lease intangibles, we recorded net termination fee income of $10.5 million in revenue from tenants during the nine months ended September 30, 2021 related to this agreement. The second termination agreement resulted in $0.8 million in lease termination fees from the tenant, which brought total, net termination fees to $11.3 million for the nine months ended September 30, 2021. Additionally, revenue in our Nine Month Same Store properties increased as a result of $3.1 million less bad debt expense incurred when comparing the nine months ended September 30, 2021 to the nine months ended September 30, 2020.
These increases were partially offset by $1.3 million in lower revenue due to the expiration of our United Healthcare lease, which was not renewed on July 1, 2021 and had annual rents of $5.4 million prior to its expiration, and by $1.9 million of below market lease intangible liability write-offs which occurred in the nine months ended September 30, 2020, which was recorded as an addition to revenue from tenants.
Property Operating Expenses
Property operating expense increased $1.1 million to $40.2 million for the nine months ended September 30, 2021, compared to $39.0 million for the nine months ended September 30, 2020. This increase was primarily driven by an increase of $0.4 million from our Acquisitions Since January 1, 2020, and by an increase from our Nine Month Same Store properties of $0.7 million.
The increase in the Nine 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 nine months ended September 30, 2020. Such credits did not recur in the nine months ended September 30, 2021.
Other Results of Operations
Asset Management Fees to Related Party
Asset management fees paid to the Advisor increased $4.4 million to $25.1 million for the nine months ended September 30, 2021, compared to $20.7 million for the nine months ended September 30, 2020 primarily due to an increase of
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$1.4 million in the variable portion of the base management fee due to our equity issuances during the period from September 30, 2020 to September 30, 2021 and the $3.0 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 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 $3.0 million during the nine months ended September 30, 2021. No incentive variable management fee was incurred during the nine months ended September 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 $4.6 million of impairment charges for the nine months ended September 30, 2021 related to seven vacant single-tenant held-for-use properties (including certain of the properties for which we terminated leases in the period). Five of these properties were impaired to adjust their carrying values to their fair values as determined by the sales price in their respective signed purchase and sales agreements (“PSAs”) or non-binding letters of intent (“LOIs”), and two properties were impaired to adjust their carrying value to fair value as determined by the income approach.
We recorded impairment charges of $11.5 million during the nine months ended September 30, 2020 related to one of our multi-tenant held-for-use properties. 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 $0.9 million to $3.6 million for the nine months ended September 30, 2021, compared to $2.7 million for the nine months ended September 30, 2020. The increase was primarily due to prepayment penalties on two mortgage notes which were fully repaid in the nine months ended September 30, 2021 totaling $3.3 million. The prepayment penalties related to mortgages were $0.8 million during the nine month period ended September 30, 2020. This increase was partially offset by transaction costs associated with our Credit Facility Amendment and dead deals which totaled $0.7 million in the nine months ended September 30, 2020 which did not occur in the nine months ended September 30, 2021, as well as decreased litigation costs of $0.7 million.
Equity-Based Compensation
Equity-based compensation increased by approximately $4.1 million to $13.8 million for the nine months ended September 30, 2021 compared to $9.7 million for the nine months ended September 30, 2020. This increase 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 nine months ended September 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 nine 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 nine months ended September 30, 2021. The acceleration of vesting of the prior grant and the new grant resulted in
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approximately $1.1 million of increased equity-based compensation expense recorded during the nine months ended September 30, 2021.
General and Administrative Expense
General and administrative expense decreased $0.1 million to $15.6 million for the nine months ended September 30, 2021, compared to $15.5 million for the nine months ended September 30, 2020. This decrease was due to $0.3 million of decreased legal fees and $0.5 million of decreased taxes and insurance incurred during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. These decreases were partially offset by increased professional service and miscellaneous general and administrative fees of $0.8 million. The decrease in legal fees primarily relates to increased costs incurred during the nine months ended September 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 $7.2 million to $97.5 million for the nine months ended September 30, 2021, compared to $104.7 million for the nine months ended September 30, 2020. Depreciation and amortization expense was impacted by a decrease $11.8 million from our Nine Month Same Store properties and a decrease of $0.7 million from our Disposals Since January 1, 2020, partially offset by an increase of $5.3 million related to our Acquisitions Since January 1, 2020.
The decrease in our Nine Month Same Store depreciation was primarily due to the write-off of tenant improvements at one of our properties which occurred in the prior year period. 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 nine months ended September 30, 2020, we incurred $3.3 million of accelerated 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 nine months ended September 30, 2021, we sold eight properties for an aggregate contract price of $6.1 million, resulting in aggregate gains on sale of $0.8 million. During the nine months ended September 30, 2020, we sold six properties for an aggregate contract price of $13.3 million, resulting in aggregate gains on sale of $4.3 million. In addition, we recorded a $2.2 million gain related to a non-monetary exchange of two properties then owned by us for two different properties not then owned by us pursuant to a tenant’s exercise of its right to substitute properties under its lease, resulting in a total gain on sale of $6.5 million recorded in our consolidated statements of operations and comprehensive (loss) income.
Interest Expense
Interest expense increased $0.1 million to $58.9 million for the nine months ended September 30, 2021, compared to $58.8 million for the nine months ended September 30, 2020. The increase was attributable to higher combined average mortgage notes payable during the nine months ended September 30, 2021. These increases were partially offset by lower average interest rates.
During the nine months ended September 30, 2021 and 2020, the average outstanding balances on our mortgage notes payable were $1.6 billion and $1.4 billion, respectively, and our average outstanding balance under our Credit Facility was $231.1 million and $400.5 million, respectively. For the nine months ended September 30, 2021 and 2020, the weighted-average interest rates on our mortgage notes payable were 3.98% and 4.38% and the weighted-average interest rates on our Credit Facility were 2.72% and 2.88%, respectively.
Other Income
Other income was $62,000$25,000 and $18,000 for the three months ended September 30, 2022 and 2021, respectively.
Comparison of the Nine Months Ended September 30, 2022 and 2021
 Nine Months Ended September 30,Increase (Decrease)
20222021$
Revenue from tenants$328,048 $252,679 $75,369 
Operating expenses: 
Asset management fees to related party24,061 25,123 (1,062)
Property operating expense74,710 40,152 34,558 
Impairment of real estate investments94,942 4,645 90,297 
Acquisition, transaction and other costs695 3,604 (2,909)
Equity-based compensation10,878 13,779 (2,901)
General and administrative23,722 15,578 8,144 
Depreciation and amortization141,755 97,509 44,246 
Total operating expenses370,763 200,390 170,373 
          Operating (loss) income before gain on sale of real estate investments(42,715)52,289 (95,004)
Gain on sale of real estate investments68,615 775 67,840 
   Operating income25,900 53,064 (27,164)
Other (expense) income:
Interest expense(84,471)(58,927)(25,544)
Other income987 62 925 
Gain on non-designated derivatives2,250 — 2,250 
Total other expense, net(81,234)(58,865)(22,369)
Net loss(55,334)(5,801)(49,533)
Net (income) loss attributable to non-controlling interests54 4 50 
Allocation for preferred stock(17,511)(17,425)(86)
Net loss attributable to common stockholders$(72,791)$(23,222)$(49,569)
Net Loss Attributable to Common Stockholders
Net loss attributable to common stockholders was $72.8 million for the nine months ended September 30, 2022, as compared to net loss attributable to common stockholders of $23.2 million for the nine months ended September 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 September 30, 2022, we owned 1,050 properties. There were 890 properties owned for the entire nine months ended September 30, 2022 and 2021 (our “Nine Month Same Store Properties”) which were 93.6% leased as of September 30, 2022. Since January 1, 2021 and through September 30, 2022, we acquired 160 properties (our “Acquisitions Since January 1, 2021”) which were 90.9% leased as of September 30, 2022, and disposed of 32 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 nine months ended September 30, 2022138093
Disposition activity during the nine months ended September 30, 2022(17)(2)(19)
Number of properties, September 30, 20229391111,050
Number of Same Store Properties85733890
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 nine months ended September 30, 2022 and 2021:
Same Store (1)
Acquisitions (2)
Disposals (3)
Total (4)
Nine Months Ended September 30,Increase (Decrease)Nine Months Ended September 30,Increase (Decrease)Nine Months Ended September 30,Increase (Decrease)Nine Months Ended September 30,Increase (Decrease)
20222021$20222021$20222021$20222021$
Revenue from tenants$139,510 $134,256 $5,254 $12,869 $3,735 $9,134 $5,264 $27,614 $(22,350)$157,643 $165,605 $(7,962)
Less: Property operating10,874 7,489 3,385 820 160 660 207 266 (59)11,901 7,915 3,986 
NOI$128,636 $126,767 $1,869 $12,049 $3,575 $8,474 $5,057 $27,348 $(22,291)$145,742 $157,690 $(11,948)
______
(1)Our single-tenant segment included 857 Nine Month Same Store Properties.
(2)Our single-tenant segment included 82 Acquisitions Since January 1, 2021.
(3)Our single-tenant segment included 30 Dispositions Since January 1, 2021.
(4)Our single-tenant segment included 939 total properties.
Revenue from Tenants
Revenue from tenants decreased $8.0 million to $157.6 million for the nine months ended September 30, 2022, compared to $165.6 million for the nine months ended September 30, 2021. The decrease was primarily due to a decrease in revenue from our Dispositions Since January 1, 2021 of $22.4 million. This decrease was partially offset by incremental income from our Acquisitions Since January 1, 2021 of approximately $9.1 million, and an increase in our Nine Month Same Store Properties revenue of approximately $5.3 million.
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Total revenue from tenants for the nine months ended September 30, 2021 includes the Third Quarter 2021 Termination Fee of which $9.6 million relates to our Dispositions Since January 1, 2021 and $0.8 million relates to our Nine Month Same Store Properties. The full amount of the 2021 Termination Fee was received in October 2021. See Comparison of the Three Months Ended September 30, 2022 and 2021 for additional information.
Total revenue from tenants for the nine months ended September 30, 2022 includes $10.1 million of termination fee income which relates to termination agreements entered into during the three months ended December 31, 2021 and the six months ended June 30, 2022 (the “Termination Fees Since December 2021”). The full amount of the Termination Fees Since December 2021 was recognized over the remaining occupancy periods of the related properties, all of which expired during the nine months ended September 30, 2022 (see Note 2 — Summary of Significant Accounting Policies – Revenue Recognition for additional information). Of the total $10.1 million from the Termination Fees Since December 2021 recognized in the nine months ended September 30, 2022, $6.8 million related to our Nine Month Same Store Properties and $3.3 million related to our Dispositions Since January 1, 2021.
The increase in our Nine Month Same Store Properties revenue was mainly due to: (i) the Termination Fees Since December 2021, of which $6.8 million related to our Nine Month Same Store Properties, (ii) increased operating expense reimbursement revenue of $3.0 million and (iii) a decrease of $0.5 million of bad debt expense, which is recorded as a reduction to revenue. These increases were partially offset by (i) lower revenue from our United Healthcare property of $2.7 million which had annual rents of $5.4 million prior to its vacancy on June 30, 2021, (ii) the Third Quarter 2021 Termination Fee, of which $0.8 million related to our Nine Month Same Store Properties and (iii) lower revenue of $1.5 million from other properties which were vacant in the nine months ended September 30, 2022 but which were occupied in the nine months ended September 30, 2021.
The decrease in our revenue from Dispositions Since January 1, 2021 was primarily due to: (i) the Third Quarter 2021 Termination Fee, of which $9.6 million related to our Dispositions Since January 1, 2021, (ii) the disposition of our Sanofi property in January 2022, which had annual rents of $17.2 million, or rents of $12.9 million for the nine months ended September 30, 2021 and (iii) lower revenue from other disposed properties of $3.2 million. These decreases were partially offset by the Termination Fees Since December 2021, of which $3.3 million related to our Dispositions Since January 1, 2021.
Property Operating Expenses
Property operating expenses increased $4.0 million to $11.9 million for the nine months ended September 30, 2022, compared to $7.9 million for the nine months ended September 30, 2021. This increase was primarily driven by an increase in property operating expenses of $0.7 million from our Acquisitions Since January 1, 2021, and by an increase in property operating expenses from our Nine Month Same Store Properties of $3.4 million, partially offset by a decrease in property operating expenses from our Dispositions Since January 1, 2021 of $0.1 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 nine months ended September 30, 2022 and 2021:
Same Store (1)
Acquisitions (2)
Disposals (3)
Total (4)
Nine Months Ended September 30,Increase (Decrease)Nine Months Ended September 30,Increase (Decrease)Nine Months Ended September 30,Increase (Decrease)Nine Months Ended September 30,Increase (Decrease)
20222021$20222021$20222021$20222021$
Revenue from tenants$87,204 $87,074 $130 $82,419 $— $82,419 $782 $— $782 $170,405 $87,074 $83,331 
Less: Property operating33,480 32,237 1,243 28,922 — 28,922 407 — 407 62,809 32,237 30,572 
NOI$53,724 $54,837 $(1,113)$53,497 $— $53,497 $375 $— $375 $107,596 $54,837 $52,759 
______
(1)Our multi-tenant segment included 33 Nine Month Same Store Properties.
(2)Our multi-tenant segment included 78 Acquisitions Since January 1, 2021, excluding two properties recently acquired in the CIM Portfolio Acquisition that were disposed in the nine months ended September 30, 2022.
(3)Our multi-tenant segment included two Dispositions Since January 1, 2021, including two properties recently acquired in the CIM Portfolio Acquisition that were disposed in the nine months ended September 30, 2022.
(4)Our multi-tenant segment included 111 total properties.
Revenue from Tenants
Revenue from tenants increased $83.3 million to $170.4 million for the nine months ended September 30, 2022, compared to $87.1 million for the nine months ended September 30, 2021. This increase in revenue from tenants was due to incremental revenue from our Acquisitions Since January 1, 2021 of $82.4 million ($81.6 million of which was attributable to the CIM Portfolio Acquisition), an increase of $0.8 million from our Dispositions Since January 1, 2021 and an increase in our Nine
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Month Same Store Properties revenue of $0.1 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 increase in our Nine Month Same Store Properties revenue was primarily due to $1.0 million of increased operating expense reimbursement revenue and $1.0 million from marginally higher occupancy and higher rental rates, partially offset by $1.1 million of decreased termination fee income and a recovery of $0.8 million relating to a lease settlement fee from a tenant which was recorded in the nine months ended September 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 $30.6 million to $62.8 million for the nine months ended September 30, 2022, compared to $32.2 million for the nine months ended September 30, 2021. This increase was driven by an increase in property operating expenses of approximately $1.2 million in our Nine Month Same Store Properties, by an increase in property operating expenses of $28.9 million from our Acquisitions Since January 1, 2021 ($28.9 million of which was attributable to the CIM Portfolio Acquisition) and by an increase in property operating expenses of $0.4 million from our Dispositions Since January 1, 2021. 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 decreased $1.1 million to $24.1 million for the nine months ended September 30, 2022, compared to $25.1 million for the nine months ended September 30, 2021, primarily due to a decrease of $2.6 million of incentive variable management fees, partially offset by an increase of $1.6 million in the variable portion of the base management fee during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 due to our equity issuances in 2022 and in 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 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.
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 $94.9 million for the nine months ended September 30, 2022, of which (i) $80.8 million related to four multi-tenant properties (two of which were recently acquired in the CIM Portfolio Acquisition and were impaired by $5.6 million), (ii) $10.4 million related to 10 vacant single-tenant properties (nine of which were formerly leased to Truist Bank) and (iii) $3.8 million related to one vacant single-tenant property formerly leased to United Healthcare. 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 sale agreements if under a contract to be disposed, or their estimated fair values if not under a contract to be disposed. These impairment charges include an incremental impairment charge of $2.4 million recorded on one multi-tenant property, which was impaired in the three months ended June 30, 2022 for $49.6 million, to reflect a subsequent change in its purchase and sale agreement with the potential buyer as a result of deteriorating market conditions and rising interest rates.
We recorded impairment charges of $4.6 million during the nine months ended September 30, 2021 related to seven vacant single-tenant held-for-use properties (including certain of the properties for which we terminated leases in the period). Five of these properties were impaired to adjust their carrying values to their fair values as determined by the sales price in their respective signed purchase and sale agreements or non-binding letters of intent, and two properties were impaired to adjust their carrying value to their 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.
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Acquisition, Transaction and Other Costs
Acquisition, transaction and other costs decreased $2.9 million to $0.7 million for the nine months ended September 30, 2022, compared to $3.6 million for the nine months ended September 30, 2021. The decrease was primarily due to prepayment penalties on two mortgage notes which were fully repaid in the nine months ended September 30, 2021 which totaled $3.3 million, partially offset by $0.4 million from increased acquisition activity in the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021.
Equity-Based Compensation
Equity-based compensation decreased by approximately $2.9 million to $10.9 million for the nine months ended September 30, 2022, compared to $13.8 million for the nine months ended September 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 nine months ended September 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 nine 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 higher equity-based compensation expense recorded during the nine months ended September 30, 2021. The acceleration of vesting of the prior grant and the new grant resulted in approximately $1.1 million of higher equity-based compensation expense recorded during the nine months ended September 30, 2021. These higher equity-based compensation expenses were partially offset by $0.3 million of net equity-based compensation expense representing the value of new replacement grants net of a reversal of $0.1 million in previously recognized compensation on forfeited grants which was recorded in the nine months ended September 30, 2022. See Note 13 — Equity-Based Compensation for additional information.
General and Administrative Expense
General and administrative expense increased $8.1 million to $23.7 million for the nine months ended September 30, 2022, compared to $15.6 million for the nine months ended September 30, 2021. The increase was primarily due to $4.5 million of increased professional expense reimbursements, and was also impacted by a $1.4 million professional fee credit in the nine months ended September 30, 2021 which did not occur in the nine months ended September 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 $0.5 million, legal fees increased $0.4 million and miscellaneous fees increased $1.3 million in the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021.
Depreciation and Amortization Expense
Depreciation and amortization expense increased $44.2 million to $141.8 million for the nine months ended September 30, 2022, compared to $97.5 million for the nine months ended September 30, 2021. Depreciation and amortization expense was impacted by an increase of $53.5 million related to our Acquisitions Since January 1, 2021 (including, most notably, the CIM Portfolio Acquisition), partially offset by a decrease of $1.5 million from our Nine Month Same Store Properties and a decrease of $7.7 million from our Dispositions Since January 1, 2021.
Gain on Sale of Real Estate Investments
During the nine months ended September 30, 2022, we sold 19 properties for an aggregate contract price of $331.0 million, resulting in aggregate gains on sale of $68.6 million. During the nine months ended September 30, 2021, we sold eight properties for an aggregate contract price of $6.1 million, resulting in aggregate gains on sale of $0.8 million.
Interest Expense
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Interest expense increased $25.5 million to $84.5 million for the nine months ended September 30, 2022, compared to $58.9 million for the nine months ended September 30, 2021. This increase was mainly due to (i) interest expense of $16.9 million and deferred financing cost amortization of $1.0 million on our $500.0 million of 4.50% per annum Senior Notes which were issued in October 2021, (ii) increased interest expense of $1.6 million and increased deferred financing cost and discount/premium amortization of $1.6 million on our mortgage debt and (iii) increased interest expense of $4.4 million on our borrowings under the Credit Facility. The increases to interest expense on our mortgage debt and borrowings under our Credit Facility largely result from the assumption of mortgage debt and borrowings under our Credit Facility to finance 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.
During the nine months ended September 30, 2022 and 2021, the average outstanding balances on our mortgage notes payable were $1.7 billion and $1.6 billion, respectively, and the average outstanding balances under our Credit Facility were $372.3 million and $231.1 million, respectively. For the nine months ended September 30, 2022 and 2021, the weighted-average interest rates on our mortgage notes payable were 3.82% and 3.98%, respectively, and the weighted-average interest rates on our Credit Facility were 3.26% and 2.72%, respectively. The increase in the weighted-average interest rate on our Credit Facility during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 is primarily due to increases in one-month LIBOR rates during 2022.
The interest rate on our Credit Facility has increased throughout 2022, and we anticipate that the interest rate on our Credit Facility will further increase, which could have an adverse impact on our acquisition and investment activity. See “Item 1.A Risk Factors” and “Liquidity and Capital Resources” for additional information.
Other Income
Other income was $1.0 million for the nine months ended September 30, 2020. Other income2022, compared to $62,000 for the nine months ended September 30, 2020 includes2021. The increase in other income was primarily due to the receiptsettlement of approximately $0.8$0.9 million of funds disbursed to us for permittingliens incurred on our Prairie Towne property in the early releasethree months ended June 30, 2020 as a result of a pre-acquisition tenant improvement escrow account, which had not been previously funded by us, in connectionsettlement with the release of a mortgage loan encumbering a property as part of refinancinglien holder during the mortgage loan onnine months ended September 4, 2020.30, 2022.
LossGain on Non-Designated Derivative
The lossGain on non-designated derivative instruments was immaterialderivatives for the nine months ended September 30, 20212022 was $2.3 million, and 2020 relateswas related to an interest rate capembedded derivative on a mortgage note payable entered intothe common stock issued in connection with the CIM Portfolio Acquisition. The stock was issued in the fourth quarter of 2020 that is designed to protect us
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from adverse interest rate changes.three months ended March 31, 2022. No gain on non-designated derivatives was recorded in the nine months ended September 30, 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.
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 $131.6 million during the nine months ended September 30, 2022 and consisted of net loss of $55.3 million, adjusted for non-cash items of $183.7 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 an increase in the straight-line rent receivable of $5.2 million, a decrease in deferred rent of $1.6 million, an increase in accounts payable and accrued expenses of $17.0 million and an increase in prepaid expenses and other assets of $6.9 million.
Our cash flows from operating activities were $100.5 million during the nine months ended September 30, 2021 and consisted of net loss of $5.8 million, adjusted for non-cash items of $118.7 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 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 $4.9 million, aan increase in deferred rent of $0.2 million, an increase in accounts payable and accrued expenses of $5.3 million and an increase in prepaid expenses and other assets of $16.3 million.
OurCash Flows from Investing Activities
The net cash flows from operatingused in investing activities was $69.8 million during the nine months ended September 30, 2020 and2022 of $701.4 million consisted primarily of net loss of $27.2 million, adjusted for non-cash items of $118.7 million, including depreciation and amortization of tangible and intangibleinvestments in real estate and other assets amortization of deferred financing costs, amortization$996.6 million (including, most notably, the CIM Portfolio Acquisition), capital expenditures of mortgage premiums on borrowings, share-based compensation, gain on$10.9 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 $15.5 million, a decrease in deferred rent of $0.9 million, an increase in accounts payable and accrued expenses of $5.0 million and an increase in prepaid expenses and other assets of $11.0$306.1 million.
Cash Flows from Investing Activities
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The net cash used in investing activities during the nine months ended September 30, 2021 of $159.8 million consisted primarily of cash paid for investments in real estate and other assets of $153.7 million, capital expenditures of $10.1 million and deposits for real estate acquisitions of $0.6 million, partially offset by cash received from the sale of real estate investments of $4.6 million.
Cash Flows from Financing Activities
The net cash used in investingprovided by financing activities of $393.4 million during the nine months ended September 30, 2020 of $160.0 million2022 consisted primarily of cash paid for investments in real estate and other assetsproceeds from our Credit Facility of $158.0 million, capital expenditures of $6.9$513.0 million and deposits for real estate acquisitionsnet proceeds from the issuance of $1.8 million,Class A common stock of $33.2 million. These cash inflows were partially offset by cash received from the saledividends paid to holders of real estate investments, (netour Class A common stock of mortgage loans repaid)$83.6 million, payments on our Credit Facility of $6.7$35.0 million, payments on our mortgages of $11.6 million, cash dividends paid to holders of our Series A Preferred Stock (as defined below) of $11.2 million, cash dividends paid to holders of our Series C Preferred Stock (as defined below) of $6.4 million and payments of deferred financing costs of $3.1 million.
Cash Flows from Financing Activities
The net cash provided by financing activities of $60.8 million during the nine months ended September 30, 2021 consisted primarily of net proceeds from mortgage notes payable, primarily resulting from the issuance of net lease mortgage notes and related mortgage payoffs, of $102.0 million, net proceeds from the issuance of Class A common stock of $126.9 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 $2.0 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 net payments on our Credit Facility of $94.6 million, cash dividends paid to holders of Class A common stock of $71.3 million, cash dividends paid to holders of our Series A Preferred Stock of $11.1 million and cash dividends paid to holders of Series C Preferred Stock of $4.4 million.
The net
Liquidity and Capital Resources
Our principal demands for cash provided by financing activities of $89.9 million during the nine months ended September 30, 2020 consisted primarily of net borrowingsare to fund operating and administrative expenses, debt service obligations, dividends on our Credit Facility of $27.3 million and net proceeds received from the issuance of Series A Preferred Stock of $19.5 million, partially offset by cash dividends paid to holders of Class A common stock, of $76.0 million, cash 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 $10.5our Class A common stock, and capital expenditures. In addition, we may also use cash to purchase additional properties.
CIM Portfolio Acquisition
In December 2021, we signed a purchase and sale agreement for the CIM Portfolio Acquisition, which consists of 79 multi-tenant retail centers and two single-tenant properties, for an aggregate contract purchase price of $1.3 billion. 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 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 the issuance of 6,450,107 shares of our Class A common stock, representing consideration of $50.0 million in fair value at issuance ($53.4 million in contractual value), which were issued at a weighted-average price of $7.75 per share in fair value at issuance ($8.28 per share in contractual value).
•In the three months ended June 30, 2022, we closed on 24 additional properties from the CIM Portfolio Acquisition 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 our $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.
•In the three months ended September 30, 2022, we closed on the one remaining property from the CIM Portfolio Acquisition 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.
•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, $13.3 million and payments$26.1 million for such contingent consideration with cash on hand in the three months ended March 31, 2022, June 30, 2022 and September 30, 2022, respectively, and we have accrued for $5.2 million of financing costs and depositscontingent consideration based on leases executed as of $30.2 million.September 30, 2022. 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).
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LiquidityThe cash used in the CIM Portfolio Acquisition 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 Capital Resources
The negative impacts$513.0 million from borrowings under our Credit Facility. In addition, we acquired 11 additional single-tenant properties and one additional multi-tenant property in the nine months ended September 30, 2022 for an aggregate contract purchase price of $63.4 million, which was funded entirely with cash on hand. Of the 93 properties acquired in the nine months ended September 30, 2022, 61 properties were added to the borrowing base of the COVID-19 pandemic have causedCredit Facility.
Short-Term Material Cash Requirements
As of September 30, 2022 and may continue to cause certainDecember 31, 2021, we had cash and cash equivalents of our tenants to be unable to make rent payments to us timely, or at all, which has had,$41.2 million and could continue to have, an adverse effect on the amount of cash we receive from our operations. We have taken proactive steps with regard to rent collections to mitigate the impact on our business and 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 COVID-19 pandemic. Management is unable to predict the nature 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, prospects 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.$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 September 30, 2021 and December 31, 2020, we had cash and cash equivalents of $99.0 million and $102.9 million, respectively. On October 1, 2021, Company entered into an amendment and restatement of the Credit Facility with BMO Harris Bank N.A., as administrative agent, and the other lender parties thereto. Upon the closing of the Senior Notes (as defined below) on October 7, 2021, we repaid the outstanding balance of $186.2 million under the Credit Facility. As of September 30, 2021, and after giving effect to the amendment and restatement of the Credit Facility, $307.9 million remained available for future borrowings. As of the closing of the issuance of the Senior Notes on October 7, 2021, after considering the borrowing availability terms of the amended and restated Credit Facility, our borrowing availability under the Credit Facility was $132.5 million.
See the Credit Facility and Issuance of Senior Notes sections below for additional information on these subsequent events.Deleveraging 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 nine months ended September 30, 2022 as compared to prior periods. 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. In the three months ended September 30, 2022, we disposed of two properties from the CIM Portfolio Acquisition for an aggregate contract sales price of $13.7 million, and we recorded an aggregate loss on sale of $0.6 million for these properties. We had previously recorded impairment charges of $3.5 million for one of these properties in the nine months ended September 30, 2022. The funds received from these dispositions were used to repay $10.0 million of amounts outstanding under our Credit Facility in the three months ended September 30, 2022.
Additionally, we have entered into an agreement to dispose of one other multi-tenant property acquired in the CIM Portfolio Acquisition for a contract sales price of $2.8 million. During the three months ended September 30, 2022, we recorded $2.0 million of impairment charges on this property. We have also entered into one non-binding letter of intent to dispose of one multi-tenant property acquired in the CIM Portfolio Acquisition for a contract sales price of $180.0 million, which is encumbered by a mortgage with a principal balance of $123.0 million as of September 30, 2022. 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, and Credit Facility and Senior Notes — September 30, 20212022
As of September 30, 2021,2022, we had $1.6$1.8 billion of gross mortgage notes payable outstanding, $500.0 million of gross Senior Notes outstanding and $186.2$478.0 million outstanding under our Credit Facility. Of our total gross debt, 89.7%83.1% is fixed-rate (including by swap agreement), and 10.3%16.9% is variable-rate.
As of September 30, 2021,2022, our net debt to gross asset value ratio was 38.9%51.5%. 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 September 30, 2021,2022, the weighted-average effective interest rates on the mortgage notes payable, and Credit Facility and Senior Notes were 3.75%3.83%, 5.09% and 2.17%4.50%, respectively.
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We assumed $352.8 million in fixed rate mortgage debt in the nine months ended September 30, 2022 related to the closing of 81 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. As of September 30, 2022, the assumed debt from the CIM Portfolio Acquisition had an aggregate principal balance of $351.8 million.
Based on debt outstanding as of September 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 $0.9$1.6 million and $3.7$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 will need to repay or refinance $287.7 million (which bears a weighted-average effective interest rate of 3.91%) of the total $351.8 million, as of September 30, 2022, that we assumed from the CIM Portfolio Acquisition. 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 assumed.
As of September 30, 2021,2022, we had $4.2$5.2 billion in gross real estate assets, at cost, and we had pledged approximately $2.7$3.0 billion in gross real estate assets, at cost, as collateral for our mortgage notes payable. In addition, approximately $1.3$2.0 billion of these gross real estate investments,assets, 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 $517.9 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.
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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%.
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. 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.
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.
The collateral pool for theSenior Notes is comprised of 357 of our 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 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 base under the Credit Facility (reducing availability under the Credit Facility), 41 properties previously secured by mortgages and four previously unencumbered properties, two of which were recently acquired.
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.
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. 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 was scheduled to mature on December 6, 2021.
SAAB Sensis and Shops at Shelby Crossing Mortgages
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On September 23,The $500.0 million aggregate principal amount of 4.50% Senior Notes due 2028 (the “Senior Notes”) were issued on October 7, 2021 we repaidand are fully and unconditionally guaranteed (the “Senior Note Guarantees”) on a joint and several basis by the mortgage loan secured by our SAAB Sensissubsidiaries of the Company and Shops at Shelby Crossing properties using proceeds from borrowingsthe OP that are guarantors under the Credit Facility. The mortgage loan on the SAAB Sensis property had a principal balanceSubject to certain exceptions, each future subsidiary of $5.9 million, bore interest at 6.01% and was scheduled to mature in April 2025. The mortgage loan on the Shops at Shelby Crossing property had a principal balance of $21.3 million, bore interest at 4.97% and was scheduled to mature in March 2024.
Prepayment Penalties
In connection with the repayment of the mortgages described above, we incurred prepayment penalties aggregating $3.3 million during the nine months ended September 30, 2021.
Credit Facility
On October 1, 2021, we entered into an amendment and restatement ofthese 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 September 30, 2022, we were in compliance with BMO Harris Bank N.A.,all the operating and financial covenants under the Senior Notes and mortgages.
Credit Facility — Terms and Capacity
As of September 30, 2022 we had $478.0 million outstanding under the Credit Facility. We did not have any amounts outstanding under the Credit Facility as administrative agent, and the other lender party thereto. of December 31, 2021.
The aggregate total commitments under the Credit Facility were increased toare $815.0 million, including a $50.0 million sublimit for letters of credit and a $55.0 million sublimit for swingline loans. The Credit Facility includes an uncommitted “accordion feature” permitting us to increase the commitments under the Credit Facility by up to an additional $435.0 million, subject to obtaining commitments from new lenders or additional commitments from participating lenders and certain customary conditions. The aggregate total commitments prior to the amendment and restatement of the Credit Facility were $540.0 million as of September 30, 2021, and through an uncommitted “accordion feature” would have allowed for increased commitments under the Credit Facility of up to $375.0 million.
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. We 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 we may borrow under the Credit Facility will be limited by financial maintenance covenants. At the execution of the amendment and restatement of the Credit Facility, $186.2 million was outstanding under the Credit Facility. This amount was subsequently repaid with a portion of the net proceeds of the Senior Notes.
The Credit Facility requires payments of interest only prior to maturity. At the execution of the amendment and restatement of theThe Credit Facility thebears interest at a rate was LIBOR plus 1.90% per annum. Following the amendment and restatement of the Credit Facility, borrowings bear interest atequal to either (i) the Base Rate (as defined in the Credit Facility) plus an applicable spread ranging from 0.45% to 1.05%, or (ii) LIBOR plus an applicable spread ranging from 1.45% to 2.05%, in each case depending on the our consolidated leverage ratio. These spreads reflect a reduction from the previously applicable spreads. In addition, pursuant to the Credit Facility, (i) if either we or the OP achieves an investment grade credit rating, the OP can elect for the spread to be based on ourthe credit rating of ours or the OP, and (ii) the “floor” on LIBOR was decreased from 0.25% tois 0%. The Credit Facility includes provisions related to the anticipated transition from LIBOR to an alternative benchmark rate.
Through As of September 30, 2021, prior to the closing of the amendment and restatement of the Credit Facility on October 1, 2021, borrowings under our Credit Facility bore interest at either (i) the Base Rate (as defined in the Credit Facility) plus an applicable spread ranging from 0.60% to 1.20% depending on our consolidated leverage ratio or (ii) LIBOR plus an applicable margin ranging from 1.60% to 2.20%, depending on our consolidated leverage ratio. From July 24, 2020 until delivery of the compliance certificate for the fiscal quarter ended June 30, 2021, the margin was 1.50% with respect to the Base Rate and 2.50% with respect to LIBOR regardless of our consolidated leverage ratio. The “floor” on LIBOR was 0.25%. As of September 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 6-monthsix-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 September 30, 2022, we were in compliance with the operating and financial covenants under the Credit Facility.
Of the 93 properties acquired in the nine months ended September 30, 2022, 61 properties were added to the borrowing base of the Credit Facility. As of September 30, 2022, we had $39.9 million available for future borrowings.
See Note 5 — Credit Facility and Note 14—Subsequent Events for additional information regarding our Credit Facility and the amendment and restatement thereof, which was effective as of October 1, 2021.
Issuance of Senior Notes
On October 7, 2021, we and the OP issued $500.0 million aggregate principal amount of 4.500% Senior Notes due 2028 (the “Senior Notes”). At closing, the Issuers used a portion of the net proceeds from the issuance of the Senior Notes, after deducting the initial purchasers’ discounts and offering fees and expenses, to repay amounts outstanding at the time under the Credit Facility of approximately $186.2 million and to repay a $125.0 million variable rate mortgage note secured by our property leased to Sanofi. The Issuers may use the remaining proceeds to fund future property acquisitions and for other general corporate purposes. The Senior Notes were issued in transactions exempt from registration under the Securities Act of 1933, as amended. See Note 14 — Subsequent Events to our consolidated financial statements included in this Quarterly Report on Form 10-Q further discussion on the Senior Notes and related covenants.for additional information regarding our Credit Facility.
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Interest Rate Swap Termination
On October 7, 2021, upon the repayment of the $125.0 million mortgage note described above, we terminated our pay-fixed interest rate swap agreement with a notional amount of $125.0 million. The fair value of the pay-fixed interest rate swap agreement was $2.0 million as of September 30, 2021 and is presented as an asset in our consolidated balance sheet. The Company received $2.1 million on October 19, 2021 after settlement.
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.
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 Nine Months Ended September 30, 20212022
One of our primary uses of cash during the three and nine months ended September 30, 20212022 was for acquisitionsto acquire properties.
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During the three months ended September 30, 2021,2022, we acqacquired uired 32 twoproperties for an aggregate purchase price of $87.7$90.6 million, including capitalized acquisition costs. The acquisitions during the three months ended September 30, 2021 were2022 include one property from the CIM Portfolio Acquisition. The acquisition of the one property from the CIM Portfolio 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 comprising a combination(including $6.8 million of proceeds fromprevious borrowings under the issuance and sale of Class A common stock (discussed below) and Series C Preferred Stock (discussed below)Credit Facility). The remaining property acquired in the three months ended September 30, 2022 was funded entirely with cash on hand.
During the nine months ended September 30, 2021,2022, we acquired 5693 properties for an aggregate purchase price of $153.7 million,$1.4 billion, including capitalized acquisition costs. The acquisitions during the nine months ended September 30, 2021 were2022 include 81 properties from the CIM Portfolio Acquisition. The acquisition of the 81 properties from the CIM Portfolio Acquisition was funded with cash on hand, comprising a combinationthe assumption of proceeds from$352.8 million of existing mortgage debt, $513.0 million of borrowings under the Credit Facility, the application 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 fair value at issuance ($53.4 million in contractual value), Series A Preferred Stock (discussed below)which were issued at a weighted-average price of $7.75 per share in fair value at issuance ($8.28 per share in contractual value), $5.2 million of contingent consideration to be paid in fourth quarter of 2022 and Series C Preferred Stock (discussed below) and proceeds from dispositions ofthe remainder with cash on hand. The remaining 12 properties (discussed below).acquired in the nine months ended September 30, 2022 were funded entirely with cash on hand.
During the three months ended September 30, 2021, we sold three properties, for an aggregate contract price of $3.0 million, excluding disposition related costs. One of these properties was encumbered under a mortgage note for which $1.1 million was repaid in connection with the disposition.
During the nine months ended September 30, 2021,2022, we sold eight properties for an aggregate contract sales price of $6.1$35.4 million, excluding disposition related costs. One of theseOf the eight properties sold in the three months ended September 30, 2022, one was formerly encumbered under the loan agreement with Column Financial, Inc. (the “Column Financial Mortgage Notes”) and two were formerly part of the unencumbered asset pool comprising the Credit Facility. The proceeds from these dispositions were used to repay $10.0 million of amounts outstanding under our Credit Facility in the three months ended September 30, 2022.
During the nine months ended September 30, 2022, we sold 19 properties for an aggregate contract sales price of $331.0 millionexcluding disposition related costs. These dispositions included the sale of three office buildings leased to Sanofi S.A. for a mortgage note for which $1.1contract purchase price of $260.7 million was repaid(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 18 other properties sold in connection with the disposition.nine months ended September 30, 2022, two were formerly encumbered under the Column Financial Mortgage Notes, two were formerly encumbered under the 2021 Net Lease Mortgage Notes and six were formerly part of the unencumbered asset pool comprising the Credit Facility. The proceeds from these dispositions were used to repay $35.0 million of amounts outstanding under our Credit Facility in the nine months ended September 30, 2022.
Acquisitions and Dispositions — Subsequent to September 30, 20212022
Subsequent to September 30, 20212022, we acquired one property withdid not acquire any properties. We have entered into a non-binding letter of intent to acquire two additional single-tenant properties for a contract purchase price of $6.1 million, excluding acquisition costs. We have entered into definitive purchase and sale agreements (“PSAs”) to acquire an additional three properties for an aggregate contract purchase price of approximately $16.2$3.0 million. We have entered into three non-binding letters of intent (“LOIs”) to acquire 14 properties at an aggregate contract purchase price of $53.1 million. The PSAs and LOIs are subject to conditions, and thereThere 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 lightSeptember 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 targetsfour properties for potential new acquisitions going forward.
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$1.6 million. We have entered into eight PSAssix purchase and sale agreements to dispose of eightsix properties for aan aggregate contract purchasesales price of $16.0 million and we$77.7 million. We have also entered into threetwo non-binding letters of intent (“LOI”) to dispose of threetwo properties for aan aggregate contract purchasesales price of $2.2$181.3 million. FourThe purchase and sale agreements and non-binding letters of these properties are encumbered under our mortgage loans and two of these properties are pledged to our Credit Facility. The PSAs and LOIsintent are subject to conditions, and there can be no assurance we will complete any of these dispositions on their contemplated terms, or at all. One of the purchase and sale agreements relates to a property acquired in the CIM Portfolio Acquisition, which was impaired in the three months ended September 30, 2022 for $2.0 million. One of the non-binding letters of intent relates to a property acquired in the CIM Portfolio Acquisition which is encumbered by a mortgage with a principal balance of $123.0 million as of September 30, 2022.
ATM Programs
We sold 5,822,614997,230 shares of Class A common stock under thethrough our Class A Common Stock ATM programProgram during the three months ended September 30, 2021,2022, which generated $49.9$8.0 million of gross proceeds, and net proceeds of $49.1$7.9 million after commissions, fees and feesother offering costs incurred of $0.8$0.1 million. We sold 14,456,8373,762,559 shares of Class A common stock under thethrough our Class A Common Stock ATM programProgram during the nine months ended September 30, 2021,2022, which generated $128.2$33.0 million of gross proceeds, and net proceeds of $126.1$32.5 million after commissions, fees and feesother offering costs incurred of $2.1$0.5 million.
During the threenine months ended September 30, 2021,2022, we did not sell any shares of Series A Preferred Stock under the Series A Preferred Stock Program. During the nine months ended September 30, 2021, we sold 91,703 shares under the Series A Preferred Stock ATM Program for gross proceedsProgram.
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Table of $2.3 million and net proceeds of $2.3 million, after commissions paid of approximately $35,000.Contents
During the three months ended September 30, 2021, weWe did not sell any shares of Series C Preferred Stock under the Series C Preferred Stock Program.ATM Program in the three months ended September 30, 2022. During the nine months ended September 30, 2021,2022, we sold 1,058,798677 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.which did not generate material proceeds.
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 for each participant 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 threenine months ended September 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 threenine months ended September 30, 20212022 is as follows:
(In thousands)Nine Months Ended September 30, 2021
Capital Expenditures
   Revenue enhancing$11,066 
   Maintenance623 
Total Capital Expenditures11,689 
   Leasing commissions3,260 
Total$14,949 
Nine Months Ended September 30, 2022
(In thousands)Single-Tenant PropertiesMulti-Tenant PropertiesTotal
Capital Expenditures
   Revenue enhancing$136 $7,438 $7,574 
   Maintenance1,042 2,558 3,600 
Total Capital Expenditures1,178 9,996 11,174 
   Leasing commissions658 2,564 3,222 
Total$1,836 $12,560 $14,396 
Also, as of September 30, 20212022 and December 31, 2020,2021, we had $4.7$4.1 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.

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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
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.
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, gaingains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the
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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 leaseslease intangibles, amortization of deferred financing costs, straight-line rent, and share-based compensation related to restricted shares, the 2018 OPP and the 20182021 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-
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cashnon-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 assess our performance without the impact of transactions or other items that are not related to 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 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 for the three and nine months ended September 30, 2021 includesmay include income from a lease termination fee of $10.4 million,fees, which is recorded in Revenuerevenue from tenants in the consolidated statements of operations. While such termination payments occur infrequently, they represent cash income for accounting and tax purposes and as such management believes they should be included in both FFO and AFFO. The income from this termination fee was earned and recorded during the three months ended September 30, 2021, however, we did not receive the cash payment until October, 2021.Therefore, the cash payment is not part of our cash flows from operations for the period ended September 30, 2021.
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,
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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:
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Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 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)$(6,406)$(7,091)$(23,222)$(38,047)Net loss attributable to common stockholders (in accordance with GAAP)$(56,466)$(6,406)$(72,791)$(23,222)
Impairment of real estate investmentsImpairment of real estate investments4,554 — 4,645 11,502 Impairment of real estate investments30,046 4,554 94,942 4,645 
Depreciation and amortizationDepreciation and amortization32,762 34,951 97,509 104,729 Depreciation and amortization57,494 32,762 141,755 97,509 
Gain on sale/exchange of real estate investments(478)(2,178)(775)(6,456)
Gain on sale of real estate investmentsGain on sale of real estate investments(1,608)(478)(68,615)(775)
Proportionate share of adjustments for non-controlling interests to arrive at FFOProportionate share of adjustments for non-controlling interests to arrive at FFO(150)(51)(251)(174)Proportionate share of adjustments for non-controlling interests to arrive at FFO(115)(150)(215)(251)
FFO (as defined by NAREIT) attributable to common stockholders (1)
FFO (as defined by NAREIT) attributable to common stockholders (1)
30,282 25,631 77,906 71,554 
FFO (as defined by NAREIT) attributable to common stockholders (1)
29,351 30,282 95,076 77,906 
Acquisition, transaction and other costs (2)
Acquisition, transaction and other costs (2)
3,426 1,507 3,604 2,680 
Acquisition, transaction and other costs (2)
210 3,426 695 3,604 
Litigation cost reimbursements related to the Merger (3)
— — — (9)
Legal fees and expenses — COVID-19 lease disputes (4)(3)
Legal fees and expenses — COVID-19 lease disputes (4)(3)
44 16 222 258 
Legal fees and expenses — COVID-19 lease disputes (4)(3)
7 44 57 222 
Accretion of market lease and other intangibles, netAccretion of market lease and other intangibles, net(1,474)(1,652)(3,450)(4,933)Accretion of market lease and other intangibles, net(574)(1,474)(3,254)(3,450)
Straight-line rentStraight-line rent(1,392)(7,743)(4,878)(15,450)Straight-line rent(2,586)(1,392)(5,209)(4,878)
Straight-line rent (rent deferral agreements) (5)(4)
Straight-line rent (rent deferral agreements) (5)(4)
(876)2,209 (2,975)4,291 
Straight-line rent (rent deferral agreements) (5)(4)
(27)(876)(915)(2,975)
Amortization of mortgage (premiums) and discounts on borrowings, netAmortization of mortgage (premiums) and discounts on borrowings, net(328)(521)(972)(1,670)Amortization of mortgage (premiums) and discounts on borrowings, net454 (328)615 (972)
Loss on non-designated derivatives— — — — 
Gain on non-designated derivatives (5)
Gain on non-designated derivatives (5)
— — (2,250)— 
Equity-based compensation(6)Equity-based compensation(6)4,149 3,235 13,779 9,693 Equity-based compensation(6)3,857 4,149 10,878 13,779 
Amortization of deferred financing costs, net and change in accrued interest2,192 2,782 7,022 5,484 
Amortization of deferred financing costs, net (7)
Amortization of deferred financing costs, net (7)
3,474 2,620 9,603 7,990 
Gain on settlement of Prairie Towne liens (8)
Gain on settlement of Prairie Towne liens (8)
— — (887)— 
Proportionate share of adjustments for non-controlling interests to arrive at AFFOProportionate share of adjustments for non-controlling interests to arrive at AFFO(18)1 (29)(2)Proportionate share of adjustments for non-controlling interests to arrive at AFFO(6)(18)(13)(29)
AFFO attributable to common stockholders (1)
AFFO attributable to common stockholders (1)
$36,005 $25,465 $90,229 $71,896 
AFFO attributable to common stockholders (1)
$34,160 $36,433 $104,396 $91,197 
___________
(1)FFO and AFFO for the nine months ended September 30, 2022 include income from lease modification/termination revenue of $10.2 million, and the three and nine months ended September 30, 2021 includesinclude income from a lease modification/termination feerevenue of $10.4 million and $11.2 million, respectively, which is recorded in Revenuerevenue from tenants in the consolidated statements of operations. While such termination payments occur infrequently, they represent cash income for accounting and tax purposes and as such management believes they should beSee Note 2 — Summary of Significant Accounting Policies – Revenue Recognition to our consolidated financial statements included in both FFO and AFFO. The income from this termination fee was earned and recorded during the three months ended September 30, 2021, however, we did not receive the cash payment until October, 2021. Therefore, the cash payment is not part of our cash flows from operationsQuarterly Report on Form 10-Q for the periods ended September 30, 2021.additional information.
(2)Includes primarily prepayment costs incurred in connection with early debt extinguishment as well as litigation costs related to the RCA Merger.
(3)Included in “Other income” in our consolidated statement of operations and comprehensive loss.
(4)Reflects legal costs incurred 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.
(5)(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 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 nine months ended September 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 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
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impact to AFFO for the removal of the change in accrued interest included in this line item for the three and nine months ended September 30, 2021 was an increase to AFFO of $428,000 and $968,000, respectively.
(8)Included in other income for the nine months ended September 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
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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 September 30, 2021:2022:
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)$15,859 $2,888 $785 $(25,938)$(6,406)Net income (loss) attributable to common stockholders (in accordance with GAAP)$3,367 $(21,666)$1,686 $(5,015)$1,927 $(587)$(36,178)$(56,466)
Asset management fees to related partyAsset management fees to related party— — — 9,880 9,880 Asset management fees to related party— — — — — — 7,939 7,939 
Impairment of real estate investmentsImpairment of real estate investments4,554 — — — 4,554 Impairment of real estate investments2,390 25,624 — 2,032 — — — 30,046 
Acquisition, transaction and other costsAcquisition, transaction and other costs3,415 — — 11 3,426 Acquisition, transaction and other costs13 44 — 42 — — 111 210 
Equity-based compensationEquity-based compensation— — — 4,149 4,149 Equity-based compensation— — — — — — 3,857 3,857 
General and administrativeGeneral and administrative326 — — 5,263 5,589 General and administrative81 712 — 98 — 3 7,605 8,499 
Depreciation and amortizationDepreciation and amortization30,363 2,283 116 — 32,762 Depreciation and amortization18,623 10,823 1,386 26,501 103 58 — 57,494 
Interest expenseInterest expense18,438 — — 794 19,232 Interest expense17,133 2,055 — 2,325 — — 10,889 32,402 
Gain on sale of real estate investmentsGain on sale of real estate investments— — (478)— (478)Gain on sale of real estate investments(34)— — — (2,111)537 — (1,608)
Other incomeOther income(18)— — — (18)Other income(17)(8)— — — — — (25)
Allocation for preferred stockAllocation for preferred stock— — — 5,837 5,837 Allocation for preferred stock— — — — — — 5,837 5,837 
Net loss attributable to non-controlling interestsNet loss attributable to non-controlling interests— — — 4 4 Net loss attributable to non-controlling interests— — — — — — (60)(60)
NOINOI$72,937 $5,171 $423 $— $78,531 NOI$41,556 $17,584 $3,072 $25,983 $(81)$11 $— $88,125 


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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 September 30, 2020:2021:
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)$12,237 $405 $(59)$(19,674)$(7,091)Net income (loss) attributable to common stockholders (in accordance with GAAP)$5,475 $4,399 $690 $— $8,967 $— $(25,938)$(6,407)
Asset management fees to related partyAsset management fees to related party— — — 6,918 6,918 Asset management fees to related party— — — — — — 9,880 9,880 
Impairment of real estate investmentsImpairment of real estate investments320 — — — 4,233 — — 4,553 
Acquisition, transaction and other costsAcquisition, transaction and other costs666 — — 841 1,507 Acquisition, transaction and other costs1,203 2,212 — — — — 11 3,426 
Equity-based compensationEquity-based compensation— — — 3,235 3,235 Equity-based compensation— — — — — — 4,149 4,149 
General and administrativeGeneral and administrative108 — — 3,204 3,312 General and administrative57 269 — — — — 5,263 5,589 
Depreciation and amortizationDepreciation and amortization34,663 244 44 — 34,951 Depreciation and amortization18,045 11,125 595 — 2,997 — — 32,762 
Interest expenseInterest expense18,169 — 2,702 20,871 Interest expense18,405 33 — — — — 794 19,232 
Gain on sale of real estate investmentsGain on sale of real estate investments(2,178)— — — (2,178)Gain on sale of real estate investments— — — — (478)— — (478)
Other incomeOther income(23)— (13)(835)(871)Other income(15)(3)— — — — — (18)
Allocation for preferred stockAllocation for preferred stock— — — 3,619 3,619 Allocation for preferred stock— — — — — — 5,837 5,837 
Net loss attributable to non-controlling interestsNet loss attributable to non-controlling interests— — — (10)(10)Net loss attributable to non-controlling interests— — — — — — 4 4 
NOINOI$63,642 $649 $(28)$— $64,263 NOI$43,490 $18,035 $1,285 $— $15,719 $— $— $78,529 

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 nine months ended September 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)$13,090 $(57,878)$6,656 $(2,103)$70,755 $(4,045)$(99,266)$(72,791)
Asset management fees to related party— — — — — — 24,061 24,061 
Impairment of real estate investments11,550 75,184 — 2,032 2,637 3,539 — 94,942 
Acquisition, transaction and other costs89 — — 86 — — 520 695 
Equity-based compensation— — — — — — 10,878 10,878 
General and administrative224 786 — 616 5 10 22,081 23,722 
Depreciation and amortization52,739 32,965 5,393 49,549 775 334 — 141,755 
Interest expense51,032 3,603 — 3,317 — — 26,519 84,471 
Gain on sale of real estate investments(37)— — — (69,115)537 — (68,615)
Other income(51)(936)— — — — — (987)
Gain on non-designated derivatives— — — — — — (2,250)(2,250)
Allocation for preferred stock— — — — — — 17,511 17,511 
Net income attributable to non-controlling interests— — — — — — (54)(54)
NOI$128,636 $53,724 $12,049 $53,497 $5,057 $375 $— $253,338 

The following table reflects the items deducted from or added to net loss attributable to common stockholders in our calculation of NOI for the nine months ended September 30, 2021:
(In thousands)Same StoreAcquisitionsDisposalsNon-Property SpecificTotal
Net (loss) income attributable to stockholders (in accordance with GAAP)$41,327 $10,652 $1,083 $(76,284)$(23,222)
Asset management fees to related party— — — 25,123 25,123 
Impairment charges4,554 — 91 — 4,645 
Acquisition and transaction related3,442 — — 162 3,604 
Equity-based compensation— — — 13,779 13,779 
General and administrative1,042 13 — 14,523 15,578 
Depreciation and amortization90,127 7,105 277 — 97,509 
Interest expense53,644 — — 5,283 58,927 
Gain on sale of real estate investments— — (775)— (775)
Other income(55)— — (7)(62)
Preferred Stock dividends— — — 17,425 17,425 
Net income attributable to non-controlling interests— — — (4)(4)
NOI [1]
$194,081 $17,770 $676 $— $212,527 



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The following table reflects the items deducted from or added to net income (loss) attributable to stockholders in our calculation of NOI for the nine months ended September 30, 2020:
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)$21,407 $3,447 $3,268 $(66,169)$(38,047)
Net income (loss) attributable to common stockholders (in accordance with GAAP)Net income (loss) attributable to common stockholders (in accordance with GAAP)$18,470 $17,513 $2,104 $— $14,974 $— $(76,283)$(23,222)
Asset management fees to related partyAsset management fees to related party— — — 20,741 20,741 Asset management fees to related party— — — — — — 25,123 25,123 
Impairment charges11,502 — — — 11,502 
Acquisition and transaction related1,062 3 — 1,615 2,680 
Impairment of real estate investmentsImpairment of real estate investments321 — — — 4,324 — — 4,645 
Acquisition, transaction and other costsAcquisition, transaction and other costs1,230 2,212 — — — — 162 3,604 
Equity-based compensationEquity-based compensation— — — 9,693 9,693 Equity-based compensation— — — — — — 13,779 13,779 
General and administrativeGeneral and administrative1,060 3 2 14,439 15,504 General and administrative242 808 — — 6 — 14,522 15,578 
Depreciation and amortizationDepreciation and amortization101,885 1,852 992 — 104,729 Depreciation and amortization53,423 33,795 1,471 — 8,820 — — 97,509 
Interest expenseInterest expense49,007 — — 9,771 58,778 Interest expense53,129 515 — — — — 5,283 58,927 
Gain on sale of real estate investmentsGain on sale of real estate investments(2,212)— (4,244)— (6,456)Gain on sale of real estate investments— — — — (775)— — (775)
Other incomeOther income(82)— (14)(908)(1,004)Other income(48)(6)— — (1)— (7)(62)
Preferred stock dividends— — — 10,857 10,857 
Net income attributable to non-controlling interests— — — (39)(39)
Allocation for preferred stockAllocation for preferred stock— — — — — — 17,425 17,425 
Net loss attributable to non-controlling interestsNet loss attributable to non-controlling interests— — — — — — (4)(4)
NOINOI$183,629 $5,305 $4 $— $188,938 NOI$126,767 $54,837 $3,575 $— $27,348 $— $— $212,527 
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
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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 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 nine months ended September 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 EndedNine Months Ended September 30, 2021
March 31, 2021June 30, 2021September 30, 2021
(In thousands)AmountPercentage of DividendsAmountPercentage of DividendsAmountPercentage of DividendsAmountPercentage of Dividends
Dividends and other cash distributions:
Cash dividends paid to common stockholders$23,128 85.8 %$23,122 79.1 %$25,037 85.6 %$71,287 81.8 %
Cash dividends paid to Series A preferred stockholders3,691 13.7 %3,719 12.7 %$3,719 12.7 %11,129 12.8 %
Cash dividends paid to Series C preferred stockholders— — %2,263 7.7 %$2,117 7.2 %4,380 5.0 %
Cash distributions on LTIP Units94 0.3 %96 0.3 %$— — %190 0.2 %
Cash distributions on Class A Units37 0.1 %36 0.1 %$57 0.2 %130 0.1 %
Total dividends and other cash distributions paid$26,950 100.0 %$29,236 100.0 %$30,930 100.0 %$87,116 100.0 %
Source of dividend and other cash distributions coverage:
Cash flows provided by operations$26,950 100.0 %$29,236 100.0 %$30,930 100.0 %$87,116 100.0 %
Available cash on hand
— — %— — %— — %— — %
Total sources of dividend and other cash distributions coverage$26,950 100.0 %$29,236 100.0 %$30,930 100.0 %$87,116 100.0 %
Cash flows provided by operations (GAAP basis)$34,422 $30,935 $35,166 $100,523 
Net loss attributable to common stockholders (in accordance with GAAP)$(9,411)$(7,405)$(6,406)$(23,222)
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Three Months EndedNine Months Ended September 30, 2022
March 31, 2022June 30, 2022September 30, 2022
(In thousands)AmountPercentage of DividendsAmountPercentage of DividendsAmountPercentage of DividendsAmountPercentage of Dividends
Dividends and other cash distributions:
Cash dividends paid to common stockholders$26,677 81.5 %$28,599 82.5 %$28,331 81.8 %$83,607 82.2 %
Cash dividends paid to Series A preferred stockholders3,719 11.4 %3,719 10.7 %$3,719 10.7 %11,157 11.0 %
Cash dividends paid to Series C preferred stockholders2,118 6.5 %2,118 6.1 %$2,118 6.1 %6,354 6.2 %
Cash distributions on LTIP Units182 0.6 %182 0.5 %$181 0.5 %545 0.5 %
Cash distributions on Class A Units37 0.1 %36 0.1 %$37 0.1 %110 0.1 %
Total dividends and other cash distributions paid$32,733 100.0 %$34,654 100.0 %$34,386 100.0 %$101,773 100.0 %
Source of dividend and other cash distributions coverage:
Cash flows provided by operations (1)
$32,733 100.0 %$34,654 100.0 %$26,986 78.5 %$101,773 100.0 %
Available cash on hand
— — %— — %7,400 21.5 %— — %
Total sources of dividend and other cash distributions coverage$32,733 100.0 %$34,654 100.0 %$34,386 100.0 %$101,773 100.0 %
Cash flows provided by operations (GAAP basis)$45,103 $59,503 $26,986 $131,592 
Net income (loss) (in accordance with GAAP)$45,835 $(50,480)$(50,689)$(55,334)
Net loss(1)Year-to-date totals do not equal the sum of the quarters. Each quarter and year-to-date period is evaluated separately for the three and nine months ended September 30, 2021 includes income from a lease termination feepurposes of $10.4 million, which is recorded in Revenue from tenants in the consolidated statements of operations. While such termination payments occur infrequently, they represent cash income for accounting and tax purposes and as such management believes they should be included in net loss. The income from this termination fee was earned and recorded during the three months ended September 30, 2021, however, we did not receive the cash payment until October, 2021.Therefore, the cash payment is not part of our cash flows from operations for the period ended September 30, 2021. It will be reflected in cash flows from operations in the fourth quarter of 2021.table.
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 September 30, 2021,2022, we were in compliance with the debt covenants under our loan agreements, including our Senior Notes and Credit Facility.
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Contractual Obligations
Except as disclosed in this Quarterly Report on Form 10-Q, there were no material changes in our contractual obligations at September 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.
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 September 30, 2022, the increase to the 12-month CPI for all items, as published by the Bureau of Labor Statistics, was 8.2%. To help mitigate the adverse impact of inflation, approximately 63.9% 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.0.9% 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 61.6% are fixed-rate, 2.3% are based on the leases thatConsumer Price Index and 36.1% 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 September 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.
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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 September 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, 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 indenture governingsanctions have caused supply disruptions in the Senior Notes contains restrictive covenantsoil 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 limitmay 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 pay distributionsaccess capital markets.
Certain provisions in our bylaws and otherwise limit our operating flexibility.
The indenture governing the Senior Notes could limit our operating flexibility and ability to use cash that would otherwise be available to us although we are permitted to incur additional debt in certain circumstances, the amount of which could be substantial. Failure to comply with financial covenants and other obligations under the indenture,agreements may cause defaults under the indenturedeter, delay or the Credit facility, among other things, which could have adverse consequences for us. There can be assurance that the holders of the notes would consent to any amendment necessary to maintain compliance with the indenture.
We may not have the funds necessary to finance the repurchase of the Senior Notes in connection withprevent a change of control offer required by the indenture governing the Senior Notes.in our control.
Upon the occurrence of a “Change of Control Triggering Event” definedProvisions contained in the indenture governing the Senior Notes, we are required to make an offer to repurchase all outstanding Senior Notes at 101% of the principal amount thereof, plus accrued and unpaid interest on the Senior Notes, if any, but not including, the date of repurchase. However, it is possible that we will not have sufficient funds,our bylaws may deter, delay or the ability to raise sufficient funds, at the time we are required to make this offer. In addition, restrictions under future debt we may incur, may not allow us to repurchase the Senior Notes upon a Change of Control Triggering Event, and we expect thatprevent a change in control will result in an event of default under the Credit Facility, which could result in such debt becoming immediately due and payable and the commitments thereunder terminated. If we could not refinance such senior debt or otherwise obtain a waiver from the holders of such debt, we would be prohibited from repurchasing the Senior Notes, which would constitute an event of default under the indenture governing the Senior Notes, which in turn would constitute a default under our Credit Facility. In addition, certain important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, would not constituteboard of directors, including, for example, provisions requiring qualifications for an individual to serve as a “Changedirector and a requirement that certain of Control” underour directors be “Managing Directors” and other directors be “Independent Directors”, as defined in our governing documents. As changes occur in the indenture governingmarketplace for corporate governance policies, the Senior Notes although these types of transactions could affect our capital structureprovisions may change, be removed or credit ratings and the holders of the Senior Notes. Further, courts interpreting change of control provisions under New York law (which is the governing law of the indenture governing the Senior Notes) have not provided clear and consistent meanings of change of control provisions which leads to subjective judicial interpretation of whatnew ones may constitute a “Change of Control.”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 September 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 September 30, 2021.
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
July 1 through July 31— $— — — 
August 1 through August 31— $— — — 
September 1 through September 3018,576 $8.70 — — 
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).2022.
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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 are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarter ended September 30, 20212022 (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.
4.13.3 (8)(4)
Indenture, dated asFifth Amended and Restated Bylaws
3.4(6)
Amendment to Fifth Amended and Restated Bylaws
3.5(3)
Articles of October 7, 2021, amongAmendment to the Articles of Restatement of American Finance Trust, Inc., American Finance Operating
        Partnership, L.P., as filed with the Guarantors party theretoState Department of Assessments and U.S. Bank National Association, as trustee (including the formTaxation of Notes).
Maryland on February 10, 2022
10.1 (5)
Eighth Amendment dated July 21, 2021, to the Second AmendedForm of Property Management Agreement by and Restated Agreementbetween Necessity Retail Properties, LLC and certain subsidiaries of Limited Partnership of American FinanceThe Necessity Retail REIT Operating Partnership, L.P., dated July 19, 2018.
10.2 (5)(7)
Advisor Multi-Year Outperformance AwardNinth Amendment to Agreement of Purchase and Sale, dated as of July 21, 2021,26, 2022, by and among American Finance Trust, Inc., American Financebetween the Sellers identified therein and The Necessity Retail REIT Operating Partnership L.P. and American Finance Advisors, LLC.
10.3 (6)(8)
Amended and Restated Guaranty,Amendment No. 3, dated as of June 3, 2021,August 8, 2022, by American Financeand among The Necessity Retail REIT, Inc., The Necessity Retail REIT Operating Partnership, L.P. for the benefit of Citibank N.A.and BMO Capital Markets Corp., 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,B. Riley Securities, Inc., Capital One Securities, Inc., Comerica Securities, Inc., Credit Suisse Securities (USA) LLC, AFN ABSPROP001-A,JMP Securities LLC, AFN ABSPROP001-B,KeyBanc Capital Markets Inc., Ladenburg Thalmann & Co. Inc., SG Americas Securities, 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.
10.5(7)
Amended and Restated Credit Agreement, dated as of October 1, 2021, by and among American Finance
Operating Partnership, L.P., American Finance Trust,Synovus Securities, Inc. and the other guarantors party thereto, BMO Harris Bank N.A., as administrative agent, and the other lender parties thereto.
Truist Securities, Inc. (Class A Common Stock)
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 July 19, 2018 and incorporated herein by reference.
(3) Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on April 13, 2020 and incorporated herein by reference.
(4) 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 21, 202119, 2022 and incorporated herein by reference.
(6) (7)Filed as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 filed with the SEC on August 4, 2022 and incorporated herein by reference.
(8)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on June 4, 2021August 8, 2022 and incorporated herein by reference.
(7) Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on October 4, 2021 and incorporated herein by reference.
(8) Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on October 8, 2021 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: November 4, 20213, 2022
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