UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
| (Mark One) | ||
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2017
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from _________ to __________
Commission file number: 000-55197
American Finance Trust, 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.) | |
| 405 Park Ave., 4th Floor, New York, New York | 10022 | |
| (Address of principal executive offices) | (Zip Code) | |
| (212) 415-6500 | ||
| (Registrant’s telephone number, including area code) | ||
| Securities registered pursuant to section 12(b) of the Act: None | ||
| Securities registered pursuant to section 12(g) of the Act: Common stock, $0.01 par value per share (Title of class) | ||
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
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 x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o | |
Non-accelerated filer x (Do not check if a smaller reporting company) | Smaller reporting company o | |
Emerging growth company x | ||
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. x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
There is no established public market for the registrant’s shares of common stock.
As of February 28, 2018, the registrant had 105,107,778 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s proxy statement to be delivered to stockholders in connection with the registrant’s 2018 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K. The registrant intends to file its proxy statement within 120 days after its fiscal year end.
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A (“Amendment No. 1”) amends American Finance Trust Inc.’s (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission on March 19, 2018 (the “Original Filing”). This Amendment No. 1 is being filed solely to include a statement inadvertently omitted by KPMG LLP (“KPMG”) from the filed version of KPMG’s report included in the Original Filing that states the Company was not required to have, nor did KPMG audit the Company’s internal control over financial reporting. The change to the filed version of KPMG’s report included in the Original Filing does not affect KPMG’s unqualified opinion on the Company’s consolidated financial statements included in the Original Filing and this Amendment No. 1.
As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, this Amendment No. 1 includes a new consent of KPMG LLP (Exhibit 23.1), new certifications from the Company’s principal executive officer (Exhibit 31.1) and principal financial officer (Exhibit 31.2) and new Section 1350 certifications (Exhibit 32) dated as of the date of filing of this Amendment No. 1.
This Amendment No. 1 amends the Original Filing, making only the amendments described above. No other amendments have been made to the Original Filing and the Company is not amending its consolidated financial statements or any other part of, or otherwise updating any other disclosures made in, the Original Filing. This Amendment No. 1 speaks as of the original filing date of the Original Filing and does not reflect any events that may have occurred subsequent to the original filing date. Accordingly, this Amendment No. 1 should be read in conjunction with our other filings made with the SEC subsequent to the filing of the Original Filing, including any amendments to those filings.
AMERICAN FINANCE TRUST, INC.
FORM 10-K/A
Year Ended December 31, 2017
1
PART II
Item 8. Financial Statements and Supplementary Data.
The information required by this Item 8 is hereby incorporated by reference to our Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K/A.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) Financial Statement Schedules
See the Index to Consolidated Financial Statements at page F-1 of this report.
The following financial statement schedules are included herein beginning at page F-40 of this report:
Schedule III — Real Estate and Accumulated Depreciation — Part I
Schedule III — Real Estate and Accumulated Depreciation — Part II
(b) Exhibits
2
EXHIBIT INDEX
The following exhibits are included, or incorporated by reference, in this Annual Report on Form 10-K/A for the year ended December 31, 2017 (and are numbered in accordance with Item 601 of Regulation S-K):
| Exhibit No. | Description | |
2.1 (4) | Agreement and Plan of Merger, dated as of September 6, 2016, among American Finance Trust, Inc., American Finance Operating Partnership, L.P., Genie Acquisition, LLC, American Realty Capital - Retail Centers of America, Inc. and American Realty Capital Retail Operating Partnership, L.P. | |
3.1 (2) | Articles of Amendment and Restatement | |
3.2 (1) | Third Amended and Restated Bylaws | |
3.3 (7) | Articles Supplementary relating to election to be subject to Section 3-803 of MGCL. | |
4.1 (4) | Amended and Restated Agreement of Limited Partnership of American Finance Operating Partnership, L.P., dated as of September 6, 2016 | |
4.2 (5) | Amendment No. 1 to Amended and Restated Limited Partnership Agreement of American Finance Operating Partnership, L.P., dated as of February 16, 2017 | |
4.3 (9) | Amended and Restated Distribution Reinvestment Plan | |
4.4 (10) | First Amendment to Amended and Restated Distribution Reinvestment Plan | |
10.1 (4) | Third Amended and Restated Advisory Agreement, dated as of September 6, 2016, by and among American Finance Trust, Inc., American Finance Operating Partnership, L.P. and American Finance Advisors, LLC | |
10.2 (4) | Amended and Restated Property Management Agreement, dated as of September 6, 2016, by and among American Finance Trust, Inc. and American Finance Properties, LLC (as assignee of American Realty Capital Retail Advisor, LLC) | |
10.3 (4) | Amended and Restated Leasing Agreement, dated as of September 6, 2016, by and among American Finance Trust, Inc. and American Finance Properties, LLC (as assignee of American Realty Capital Retail Advisor, LLC) | |
10.4 (4) | Amended and Restated Property Management and Leasing Agreement, dated as of September 6, 2016, by and among American Finance Trust, Inc., American Finance Trust Operating Partnership, L.P. and American Finance Properties, LLC | |
10.5 (1) | Amended and Restated Employee and Director Incentive Restricted Share Plan of the Company | |
10.6 (3) | Form of Restricted Stock Unit Award Agreement Pursuant to the Employee and Director Incentive Restricted Share Plan of American Finance Trust, Inc. | |
10.7 (1) | Indemnification Agreement by and among the Company, Peter M. Budko, Robert H. Burns, David Gong, William M. Kahane, Stanley R. Perla, Nicholas Radesca, Nicholas S. Schorsch, Edward M. Weil, Jr., American Realty Capital Advisors V, LLC, AR Capital, LLC and RCS Capital Corporation, dated December 31, 2014 | |
10.8 (1) | Indemnification Agreement by and between the Company and Herbert Vederman, dated May 14, 2015 | |
10.9 (2) | Indemnification Agreement by and between the Company, Donald MacKinnon, Donald R. Ramon and Andrew Winer, dated May 26, 2015 | |
10.10 (2) | Indemnification Agreement by and between the Company and Lisa D. Kabnick, dated August 3, 2015 | |
10.11 (6) | Agreement for Purchase and Sale of Real Property, dated as of October 12, 2016, by and between ARC DB5PROP001, LLC, American Finance Operating Partnership, L.P. and Capital Commercial Investments, Inc. | |
10.12 (6) | First Amendment to Agreement for Purchase and Sale of Real Property, dated as of November 11, 2016, by and between ARC DB5PROP001, LLC, American Finance Operating Partnership, L.P. and Capital Commercial Investments, Inc. | |
10.13 (6) | Second Amendment to Agreement for Purchase and Sale of Real Property, dated as of November 18, 2016, by and between ARC DB5PROP001, LLC, American Finance Operating Partnership, L.P. and Capital Commercial Investments, Inc. | |
10.14 (6) | Third Amendment to Agreement for Purchase and Sale of Real Property, dated as of November 23, 2016, by and between ARC DB5PROP001, LLC, American Finance Operating Partnership, L.P. and Capital Commercial Investments, Inc. | |
10.15 (6) | Reinstatement and Fourth Amendment to Agreement for Purchase and Sale of Real Property, dated as of December 1, 2016, by and between ARC DB5PROP001, LLC, American Finance Operating Partnership, L.P. and Capital Commercial Investments, Inc. | |
10.16 (5) | Second Amendment to Amended and Restated Credit Agreement, Assumption, Joinder and Reaffirmation of Guaranties, dated as of February 16, 2017, among American Finance Operating Partnership, L.P., as successor to American Realty Capital Operating Partnership, L.P., Genie Acquisition, LLC as successor to American Realty Capital - Retail Centers of America, Inc., American Finance Trust, Inc., the guarantors party thereto, the lenders party thereto and BMO Harris Bank N.A. | |
3
| Exhibit No. | Description | |
10.17 (5) | Indemnification Agreement, dated as of February 16, 2017, by and between American Finance Trust, Inc. and Leslie D. Michelson and Edward G. Rendell | |
10.18 (7) | Indemnification Agreement between American Finance Trust, Inc. and Katie P. Kurtz | |
10.19 (11) | Loan Agreement dated as of December 8, 2017 among Societe Generale and UBS AG as Lenders and certain subsidiaries of American Finance Operating Partnership, LP, as Borrowers | |
10.20 (11) | Guaranty of Recourse Obligations dated as of December 8, 2017 by American Finance Trust, Inc. in favor of Societe Generale and UBS AG | |
10.21 (11) | First Amendment to Amended and Restated Property Management Agreement, dated as of December 8, 2017, by and among American Finance Trust, Inc. and American Finance Properties, LLC and certain subsidiaries of American Finance Operating Partnership, LP | |
10.22 (11) | Form of Property Management Agreement by and between American Finance Properties, LLC and certain subsidiaries of American Finance Operating Partnership, LP | |
21.1 (11) | List of Subsidiaries | |
23.1 * | Consent of KPMG LLP | |
31.1 * | Certification of the Principal Executive Officer of American Finance Trust, Inc. pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 * | Certification of the Principal Financial Officer of American Finance Trust, Inc. pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32 * | Written statements of the Principal Executive Officer and Principal Financial Officer of American Finance Trust, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
99.1 (8) | Second Amended and Restated Share Repurchase Program | |
| 101 * | XBRL (eXtensible Business Reporting Language). The following materials from American Finance Trust, Inc.’s Annual Report on Form 10-K/A for the year ended December 31, 2017, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive (Loss) Income, (iii) the Consolidated Statements of Changes in Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements. | |
____________________
* Filed herewith.
| (1) | Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on May 15, 2015. |
| (2) | Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 filed with the SEC on August 11, 2015. |
| (3) | Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 filed with the SEC on August 11, 2016. |
| (4) | Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on September 7, 2016. |
| (5) | Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on February 21, 2017. |
| (6) | Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 13, 2017. |
| (7) | Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 filed with the SEC on November 13, 2017. |
| (8) | Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on June 14, 2017. |
| (9) | Filed as Appendix A to the Company’s Registration Statement on Form S-3 filed with the SEC on April 1, 2016. |
| (10) | Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on June 30, 2016. |
| (11) | Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on March 19, 2018. |
4
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized this 8th day of June, 2018.
| AMERICAN FINANCE TRUST, INC. | ||
| By: | /s/ EDWARD M. WEIL, JR. | |
| EDWARD M. WEIL, JR. | ||
| CHIEF EXECUTIVE OFFICER, PRESIDENT AND CHAIRMAN OF THE BOARD OF DIRECTORS | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Name | Capacity | Date | ||
| /s/ Edward M. Weil, Jr. | Chief Executive Officer, President and Chairman of the Board of Directors (Principal Executive Officer) | June 8, 2018 | ||
| Edward M. Weil, Jr. | ||||
| /s/ Katie P. Kurtz | Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer) | June 8, 2018 | ||
| Katie P. Kurtz | ||||
| /s/ Lisa D. Kabnick | Lead Independent Director | June 8, 2018 | ||
| Lisa D. Kabnick | ||||
| /s/ Stanley Perla | Independent Director | June 8, 2018 | ||
| Stanley Perla | ||||
| /s/ Leslie D. Michelson | Independent Director | June 8, 2018 | ||
| Leslie D. Michelson | ||||
| /s/ Edward G. Rendell | Independent Director | June 8, 2018 | ||
| Edward G. Rendell | ||||
5
| Page | |
| Financial Statement Schedules: | |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
American Finance Trust, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of American Finance Trust, Inc. and subsidiaries (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2017, and the related notes and financial statement schedules titled Schedule III - Real Estate and Accumulated Depreciation - Part I, as of December 31, 2017, and Schedule III - Real Estate and Accumulated Depreciation - Part II, for the three-year period ended December 31, 2017 (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 2015.
New York, New York
March 16, 2018
F-2
AMERICAN FINANCE TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| December 31, | |||||||
| 2017 | 2016 | ||||||
| ASSETS | |||||||
| Real estate investments, at cost: | |||||||
| Land | $ | 607,675 | $ | 328,656 | |||
| Buildings, fixtures and improvements | 2,449,020 | 1,395,602 | |||||
| Acquired intangible lease assets | 454,212 | 300,129 | |||||
| Total real estate investments, at cost | 3,510,907 | 2,024,387 | |||||
| Less: accumulated depreciation and amortization | (408,194 | ) | (287,090 | ) | |||
| Total real estate investments, net | 3,102,713 | 1,737,297 | |||||
| Cash and cash equivalents | 107,666 | 131,215 | |||||
| Restricted cash | 19,588 | 7,890 | |||||
| Commercial mortgage loan, held for investment, net | — | 17,175 | |||||
| Derivative assets, at fair value | 23 | — | |||||
| Deposits for real estate acquisitions | 565 | — | |||||
| Prepaid expenses and other assets | 50,859 | 29,513 | |||||
| Goodwill | 1,605 | — | |||||
| Deferred costs, net | 8,949 | 3,767 | |||||
| Assets held for sale | 4,682 | 137,602 | |||||
| Total assets | $ | 3,296,650 | $ | 2,064,459 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Mortgage notes payable, net | $ | 1,303,433 | $ | 1,032,956 | |||
| Credit facility | 95,000 | — | |||||
| Market lease liabilities, net | 108,772 | 13,915 | |||||
| Accounts payable and accrued expenses (including $3,169 and $910 due to related parties as of December 31, 2017 and 2016, respectively) | 27,355 | 13,553 | |||||
| Deferred rent and other liabilities | 9,421 | 9,970 | |||||
| Distributions payable | 11,613 | 9,199 | |||||
| Total liabilities | 1,555,594 | 1,079,593 | |||||
| Preferred stock, $0.01 par value per share, 50,000,000 shares authorized, none issued and outstanding | — | — | |||||
| Common stock, $0.01 par value per share, 300,000,000 shares authorized, 105,172,185 and 65,805,184 shares issued and outstanding as of December 31, 2017 and 2016, respectively | 1,052 | 658 | |||||
| Additional paid-in capital | 2,393,237 | 1,449,662 | |||||
| Accumulated other comprehensive income | 95 | — | |||||
| Accumulated deficit | (657,874 | ) | (465,454 | ) | |||
| Total stockholders’ equity | 1,736,510 | 984,866 | |||||
| Non-controlling interests | 4,546 | — | |||||
| Total equity | 1,741,056 | 984,866 | |||||
| Total liabilities and stockholders’ equity | $ | 3,296,650 | $ | 2,064,459 | |||
The accompanying notes are an integral part of these audited consolidated financial statements.
F-3
AMERICAN FINANCE TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share data)
| Year Ended December 31, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Revenues: | |||||||||||
| Rental income | $ | 240,264 | $ | 164,386 | $ | 160,865 | |||||
| Operating expense reimbursements | 29,560 | 12,232 | 11,495 | ||||||||
| Interest income from debt investments | 1,086 | 1,050 | 2,138 | ||||||||
| Total revenues | 270,910 | 177,668 | 174,498 | ||||||||
| Operating expenses: | |||||||||||
| Asset management fees to related party | 20,908 | 18,000 | 13,009 | ||||||||
| Property operating | 42,594 | 13,614 | 13,258 | ||||||||
| Impairment charges | 25,049 | 27,299 | — | ||||||||
| Acquisition and transaction related | 9,356 | 7,063 | 2,220 | ||||||||
| General and administrative | 20,614 | 11,168 | 11,314 | ||||||||
| Depreciation and amortization | 154,027 | 101,143 | 101,546 | ||||||||
| Total operating expenses | 272,548 | 178,287 | 141,347 | ||||||||
| Operating income (loss) | (1,638 | ) | (619 | ) | 33,151 | ||||||
| Other (expense) income: | |||||||||||
| Interest expense | (60,305 | ) | (54,253 | ) | (40,891 | ) | |||||
| Loss on extinguishment of debt | — | — | (7,564 | ) | |||||||
| Loss on sale of commercial mortgage-backed securities | — | — | (1,585 | ) | |||||||
| Distribution income from other real estate securities | — | — | 363 | ||||||||
| Gain on sale of other real estate securities, net | — | — | 738 | ||||||||
| Gain on sale of real estate investments | 15,128 | 454 | — | ||||||||
| Loss on commercial mortgage loans held for sale | — | — | (5,476 | ) | |||||||
| Other income | 238 | 163 | 147 | ||||||||
| Total other expense, net | (44,939 | ) | (53,636 | ) | (54,268 | ) | |||||
| Net loss | (46,577 | ) | (54,255 | ) | (21,117 | ) | |||||
| Net loss attributable to non-controlling interests | 83 | — | — | ||||||||
| Net loss attributable to stockholders | (46,494 | ) | (54,255 | ) | (21,117 | ) | |||||
| Other comprehensive gain (loss) income: | |||||||||||
| Change in unrealized gain on derivative | 95 | — | — | ||||||||
| Change in unrealized loss on investment securities | — | — | (463 | ) | |||||||
| Other comprehensive gain (loss) | 95 | — | (463 | ) | |||||||
| Comprehensive loss attributable to stockholders | $ | (46,399 | ) | $ | (54,255 | ) | $ | (21,580 | ) | ||
| Basic and diluted weighted-average shares outstanding | 99,649,471 | 65,450,432 | 66,028,245 | ||||||||
| Basic and diluted net loss per share attributable to stockholders | $ | (0.47 | ) | $ | (0.83 | ) | $ | (0.32 | ) | ||
The accompanying notes are an integral part of these audited consolidated financial statements.
F-4
AMERICAN FINANCE TRUST, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands, except share data)
| Common Stock | ||||||||||||||||||||||||||||||
Number of Shares | Par Value | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Total Stockholders’ Equity | Non-controlling Interests | Total Equity | |||||||||||||||||||||||
| Balance, December 31, 2014 | 65,257,954 | $ | 653 | $ | 1,437,147 | $ | 463 | $ | (173,098 | ) | $ | 1,265,165 | $ | — | $ | 1,265,165 | ||||||||||||||
| Common stock issued through distribution reinvestment plan | 1,469,319 | 15 | 34,791 | — | — | 34,806 | — | 34,806 | ||||||||||||||||||||||
| Common stock repurchases | (1,769,738 | ) | (18 | ) | (42,695 | ) | — | — | (42,713 | ) | — | (42,713 | ) | |||||||||||||||||
| Share-based compensation, net of forfeitures | 3,721 | — | 51 | — | — | 51 | — | 51 | ||||||||||||||||||||||
| Distributions declared | — | — | — | — | (108,980 | ) | (108,980 | ) | — | (108,980 | ) | |||||||||||||||||||
| Net loss | — | — | — | — | (21,117 | ) | (21,117 | ) | — | (21,117 | ) | |||||||||||||||||||
| Other comprehensive loss | — | — | — | (463 | ) | — | (463 | ) | — | (463 | ) | |||||||||||||||||||
| Balance, December 31, 2015 | 64,961,256 | 650 | 1,429,294 | — | (303,195 | ) | 1,126,749 | — | 1,126,749 | |||||||||||||||||||||
| Common stock issued through distribution reinvestment plan | 848,059 | 8 | 20,491 | — | — | 20,499 | — | 20,499 | ||||||||||||||||||||||
| Common stock repurchases | (7,854 | ) | — | (190 | ) | — | — | (190 | ) | — | (190 | ) | ||||||||||||||||||
| Share-based compensation | 3,723 | — | 67 | — | — | 67 | — | 67 | ||||||||||||||||||||||
| Distributions declared | — | — | — | — | (108,004 | ) | (108,004 | ) | — | (108,004 | ) | |||||||||||||||||||
| Net loss | — | — | — | — | (54,255 | ) | (54,255 | ) | — | (54,255 | ) | |||||||||||||||||||
| Balance, December 31, 2016 | 65,805,184 | 658 | 1,449,662 | — | (465,454 | ) | 984,866 | — | 984,866 | |||||||||||||||||||||
| Issuance of common stock | 38,210,213 | 382 | 916,664 | — | — | 917,046 | — | 917,046 | ||||||||||||||||||||||
| Common stock issued through distribution reinvestment plan | 2,373,256 | 24 | 55,829 | — | — | 55,853 | — | 55,853 | ||||||||||||||||||||||
| Common stock repurchases | (1,225,365 | ) | (12 | ) | (29,046 | ) | — | — | (29,058 | ) | — | (29,058 | ) | |||||||||||||||||
| Share-based compensation, net of forfeitures | 8,897 | — | 128 | — | — | 128 | — | 128 | ||||||||||||||||||||||
| Distributions declared | — | — | — | — | (145,926 | ) | (145,926 | ) | — | (145,926 | ) | |||||||||||||||||||
| Issuances of operating partnership units | — | — | — | — | — | — | 4,887 | 4,887 | ||||||||||||||||||||||
| Distributions to non-controlling interest holders | — | — | — | — | — | — | (258 | ) | (258 | ) | ||||||||||||||||||||
| Net loss | — | — | — | — | (46,494 | ) | (46,494 | ) | (83 | ) | (46,577 | ) | ||||||||||||||||||
| Other comprehensive income | — | — | — | 95 | — | 95 | — | 95 | ||||||||||||||||||||||
| Balance, December 31, 2017 | 105,172,185 | $ | 1,052 | $ | 2,393,237 | $ | 95 | $ | (657,874 | ) | $ | 1,736,510 | $ | 4,546 | $ | 1,741,056 | ||||||||||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
F-5
| Year Ended December 31, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | (46,577 | ) | $ | (54,255 | ) | $ | (21,117 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation | 85,175 | 66,831 | 66,946 | ||||||||
| Amortization of in-place lease assets | 68,477 | 34,247 | 34,600 | ||||||||
| Amortization (including accelerated write-off) of deferred costs | 7,068 | 8,716 | 12,663 | ||||||||
| Accretion of mortgage premiums on borrowings | (4,096 | ) | (4,211 | ) | (7,208 | ) | |||||
| Discount accretion and premium amortization on investments, net | (25 | ) | (40 | ) | (96 | ) | |||||
| Amortization (accretion) of market lease intangibles, net | (5,173 | ) | 477 | 1,666 | |||||||
| Share-based compensation | 128 | 67 | 51 | ||||||||
| Gain on sale of real estate investments | (15,128 | ) | (454 | ) | — | ||||||
| Impairment charges | 25,049 | 27,299 | — | ||||||||
| Mark-to-market adjustments | (130 | ) | — | — | |||||||
| Loss on sale of commercial mortgage-backed securities | — | — | 1,585 | ||||||||
| Gain on sale of other real estate securities, net | — | — | (738 | ) | |||||||
| Loss on commercial mortgage loans held for sale | — | — | 5,476 | ||||||||
| Changes in assets and liabilities: | |||||||||||
| Prepaid expenses and other assets | (5,169 | ) | (8,882 | ) | (7,878 | ) | |||||
| Accounts payable and accrued expenses | (7,780 | ) | 3,173 | 1,177 | |||||||
| Deferred rent and other liabilities | (9,355 | ) | 401 | 2,331 | |||||||
| Net cash provided by operating activities | 92,464 | 73,369 | 89,458 | ||||||||
| Cash flows from investing activities: | |||||||||||
| Origination of commercial mortgage loans | — | — | (79,410 | ) | |||||||
| Proceeds from sale of commercial mortgage loans | — | 56,884 | — | ||||||||
| Proceeds from sale of commercial mortgage-backed securities | — | — | 28,624 | ||||||||
| Proceeds from the settlement of CMBS | 17,200 | — | — | ||||||||
| Purchase of commercial mortgage-backed securities | — | — | (30,198 | ) | |||||||
| Capital expenditures | (8,917 | ) | — | — | |||||||
| Investments in real estate and other assets | (149,337 | ) | (34,244 | ) | — | ||||||
| Proceeds from sale of real estate investments | 190,801 | 15,190 | — | ||||||||
| Deposits for real estate acquisitions | (565 | ) | — | — | |||||||
| Proceeds from sale of other real estate securities | — | — | 19,266 | ||||||||
| Cash paid in merger transaction | (94,504 | ) | — | — | |||||||
| Cash acquired in merger transaction | 26,163 | — | — | ||||||||
| Net cash (used in) provided by investing activities | (19,159 | ) | 37,830 | (61,718 | ) | ||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from mortgage notes payable | 267,350 | — | 780,000 | ||||||||
| Payments on mortgage notes payable | (21,841 | ) | (1,014 | ) | (196,431 | ) | |||||
| Proceeds from credit facility | 85,000 | — | — | ||||||||
| Payments on credit facility | (294,000 | ) | — | (423,000 | ) | ||||||
| Payments of financing costs | (4,948 | ) | (5,709 | ) | (18,806 | ) | |||||
| Common stock repurchases | (29,058 | ) | (16,253 | ) | (31,725 | ) | |||||
| Distributions paid | (87,659 | ) | (87,505 | ) | (74,151 | ) | |||||
| Net cash (used in) provided by financing activities | (85,156 | ) | (110,481 | ) | 35,887 | ||||||
| Net change in cash, cash equivalents and restricted cash | (11,851 | ) | 718 | 63,627 | |||||||
| Cash, cash equivalents and restricted cash, beginning of period | 139,105 | 138,387 | 74,760 | ||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 127,254 | $ | 139,105 | $ | 138,387 | |||||
| Supplemental Disclosures: | |||||||||||
| Cash paid for interest | $ | 57,017 | $ | 49,140 | $ | 42,696 | |||||
| Cash paid for income taxes | $ | 827 | $ | 739 | $ | 877 | |||||
| Accrued common stock repurchases | $ | — | $ | — | $ | 16,063 | |||||
F-6
| Year Ended December 31, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Non-Cash Investing and Financing Activities: | |||||||||||
| Equity issued in the merger transaction | $ | 921,930 | $ | — | $ | — | |||||
| Credit facility assumed or used to acquire investments in real estate | $ | 304,000 | $ | — | $ | — | |||||
| Mortgage notes payable released in connection with disposition of real estate | $ | (103,041 | ) | $ | (14,867 | ) | $ | — | |||
| Mortgage notes payable assumed or used to acquire investments in real estate | $ | 127,651 | $ | — | $ | — | |||||
| Premiums on assumed mortgage notes payable | $ | 4,143 | $ | — | $ | — | |||||
| Common stock issued through distribution reinvestment plan | $ | 55,853 | $ | 20,499 | $ | 34,806 | |||||
| Accrued capital expenditures | $ | 933 | $ | — | $ | — | |||||
The accompanying notes are an integral part of these audited consolidated financial statements.
F-7
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 1 — Organization
American Finance Trust, Inc. (the “Company”) is a diversified REIT with a retail focus. The Company owns a diversified portfolio of commercial properties comprised primarily of freestanding single-tenant properties that are net leased to investment grade and other creditworthy tenants and, as a result of the Mergers (as defined below), a portfolio of retail properties consisting primarily of power centers and lifestyle centers. The Company intends to focus its future acquisitions primarily on net leased retail properties. As of December 31, 2017, the Company owned 540 properties, comprised of 19.4 million rentable square feet, which were 95.2% leased, including 505 net leased commercial properties (465 of which are retail properties) and 35 retail properties which were acquired in the Mergers.
The Company, incorporated on January 22, 2013, is a Maryland corporation that elected and qualified to be taxed as a real estate investment trust for U.S. federal income tax purposes (“REIT”) beginning with the taxable year ended December 31, 2013. Substantially all of the Company’s business is conducted through American Finance Operating Partnership, L.P. (the “OP”), a Delaware limited partnership, and its wholly-owned subsidiaries. As of December 31, 2017, the Company had 105.2 million shares of common stock outstanding, including unvested restricted shares of common stock (“restricted shares”) and shares issued pursuant to the Company’s distribution reinvestment plan (the “DRIP”).
The Company has no employees. The Company has retained American Finance Advisors, LLC (the “Advisor”) to manage the Company’s affairs on a day-to-day basis. American Finance Properties, LLC (the “Property Manager”) serves as the Company’s property manager. The Advisor and the Property Manager are wholly owned subsidiaries of AR Global Investments, LLC (the successor business to AR Capital, LLC, “AR Global”), as a result of which, they are related parties of the Company, and each have received or may receive, as applicable, compensation, fees and expense reimbursements for services related to managing the Company’s business.
On August 8, 2017, the Company’s application to list its common stock on The NASDAQ Global Select Market (“NASDAQ”) under the symbol “AFIN” (the “Listing”) was approved by NASDAQ, subject to the Company being in compliance with all applicable listing standards on the date its common stock begins trading on NASDAQ. While the Company intends to list its common stock at a time yet to be determined by its board of directors, there can be no assurance as to when or if the Company’s common stock will commence trading or of the price at which the Company’s common stock may trade.
Note 2 — Merger Transaction
On February 16, 2017, the Company and the OP completed (a) the merger of American Realty Capital — Retail Centers of America, Inc. (“RCA”) with and into a subsidiary of the Company referred to as the “Merger Sub,” with the Merger Sub surviving as a wholly owned subsidiary of the Company (the “Merger”) and (b) the merger of American Realty Capital Retail Operating Partnership, L.P. (the “RCA OP”) with and into the OP, with the OP as the surviving entity (the “Partnership Merger”, and together with the Merger, the “Mergers”). Pursuant to the terms and subject to the conditions set forth in the Agreement and Plan of Merger (the “Merger Agreement”) entered into by the Company and the OP with RCA, the RCA OP and the Merger Sub, at the effective time of the Mergers on February 16, 2017 (the “Effective Time”), each outstanding share of common stock of RCA, $0.01 par value per share (“RCA Common Stock”) (including any restricted shares of RCA Common Stock and fractional shares), was converted into (x) 0.385 shares of the Company’s common stock (the “Stock Consideration”) and (y) cash from the Company, in an amount equal to $0.95 per share (the “Cash Consideration,” and together with the Stock Consideration, the “Merger Consideration”).
In addition, at the Effective Time, (i) each unit of partnership interest of the RCA OP designated as an OP unit issued and outstanding immediately prior to the Effective Time (other than those held by RCA as described in clause (ii) below) was automatically converted into 0.424 validly issued units of limited partnership interest of the OP (the “Partnership Merger Consideration”); (ii) each unit of partnership interest of the RCA OP designated as either an OP unit or a GP unit held by RCA and issued and outstanding immediately prior to the Effective Time was automatically converted into 0.385 validly issued units of limited partnership interest of the OP; (iii) each unit of partnership interest of the RCA OP designated as a Class B Unit held by RCA’s advisor and a sub-advisor issued and outstanding immediately prior to the Effective Time was converted into the Partnership Merger Consideration (the “Class B Consideration,” and together with the Partnership Merger Consideration and the Merger Consideration, the “Total Merger Consideration”), and (iv) the interest of American Realty Capital Retail Advisor, LLC, the special limited partner of the RCA OP (the “RCA Advisor”), in the RCA OP was redeemed for a cash payment, determined in accordance with the existing terms of the RCA OP’s agreement of limited partnership.
F-8
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
In addition, as provided in the Merger Agreement, all outstanding restricted shares of RCA Common Stock previously issued by RCA became fully vested and entitled to receive the Merger Consideration.
The Company issued 38.2 million shares of its common stock as Stock Consideration and paid $94.5 million in Cash Consideration.
Prior to the Mergers, the Company and RCA each were sponsored, directly or indirectly, by AR Global. AR Global and its affiliates provide investment and advisory services to the Company, and previously provided such services to RCA, pursuant to written advisory agreements. In connection with, and subject to the terms and conditions of the Merger Agreement, RCA OP units held by AR Global and its affiliates were exchanged for limited partner interests in the OP designated as OP units (“OP Units”) and certain special limited partner interests in the RCA OP held by AR Global and its affiliates were, consistent with the terms of the RCA OP partnership agreement, redeemed for a cash payment of approximately $2.8 million.
The Advisor informed the Company that the Advisor engaged Lincoln Retail REIT Services, LLC (“Lincoln”) as an independent service provider to provide real estate-related services similar to the services provided by Lincoln to the RCA Advisor prior to the Effective Time. Lincoln will continue to provide, subject to the Advisor’s or its affiliates’ oversight, asset management, property management and leasing services for those multi-tenant properties acquired by the Company from RCA in the Mergers. The Advisor informed the Company that the Advisor agreed to pass through to Lincoln a portion of the fees and/or other expense reimbursements otherwise payable to the Advisor or its affiliates by the Company for services rendered by Lincoln. The Company has no direct obligation to Lincoln.
Accounting Treatment for the Mergers
The Mergers were accounted for under the acquisition method for business combinations pursuant to accounting principles generally accepted in the United States of America (“GAAP”), with the Company as the accounting acquirer of RCA. The consideration transferred by the Company to acquire RCA established a new accounting basis for the assets acquired, liabilities assumed and any non-controlling interests, measured at their respective fair value as of the Effective Time. In determining the fair value of the consideration transferred, including the Stock Consideration and any non-controlling interests, the Company utilized multiple sources including real estate valuations prepared by independent valuation firms and market sales data. The fair value of the Total Merger Consideration that exceeded the fair value of net assets acquired, was recorded as goodwill.
F-9
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
The following table summarizes the estimated fair value of the consideration transferred pursuant to the Mergers and the estimated fair values of the assets acquired and liabilities assumed as of the effective date of the Mergers.
| (In thousands) | RCA | |||
| Total Consideration: | ||||
| Fair value of the Cash Consideration, including redemption of fractional shares, as defined in the Merger Agreement | $ | 94,504 | ||
Fair value of the Stock Consideration (2) | 917,046 | |||
| Fair value of the Partnership Merger Consideration | 2 | |||
| Fair value of the Class B Consideration | 4,882 | |||
| Fair value of the Total Merger Consideration | $ | 1,016,434 | ||
| Assets Acquired at Fair Value | ||||
| Land | $ | 282,063 | ||
| Buildings, fixtures and improvements | 1,079,944 | |||
| Acquired intangible lease assets | 178,634 | |||
| Total real estate investments, at fair value | 1,540,641 | |||
| Cash and cash equivalents | 21,922 | |||
| Restricted cash | 4,241 | |||
Prepaid expenses and other assets (1) | 18,959 | |||
Goodwill (1) | 1,605 | |||
| Total assets acquired at fair value | 1,587,368 | |||
| Liabilities Assumed at Fair Value | ||||
| Mortgage notes payable | 127,651 | |||
| Mortgage premiums | 4,143 | |||
| Credit facility | 304,000 | |||
| Market lease liabilities | 104,840 | |||
| Derivatives | 203 | |||
| Accounts payable and accrued expenses | 21,291 | |||
| Deferred rent and other liabilities | 8,806 | |||
| Total liabilities assumed at fair value | 570,934 | |||
| Net assets acquired | $ | 1,016,434 | ||
_________________________________
| (1) | Prepaid expenses and other assets includes a measurement period adjustment of $0.5 million that was recognized during the third quarter of 2017. As a result, goodwill was increased by $0.5 million. |
| (2) | Valued at $24.00 as of the date of the Merger. |
As a result of the Merger, the Company recorded goodwill of $1.6 million, which is primarily attributable to expected synergies from combining operations of the Company and RCA.
Note 3 — Summary of Significant Accounting Policies
Basis of Accounting
The accompanying consolidated financial statements of the Company are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
F-10
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation, specifically the presentation of mortgage premiums, net, related to mortgage notes payable which is presented as a reduction of the carrying amount of mortgage notes payable.
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All inter-company 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.
Purchase Accounting
The Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired, including those acquired in the Mergers, based on their respective fair values. 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. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Amounts allocated to land, land improvements, buildings and fixtures are based on cost segregation studies performed by independent third parties or on the Company’s analysis of comparable properties in the Company’s portfolio. Identifiable intangible assets include amounts allocated to acquire leases for above- and below-market lease rates and the value of in-place leases as applicable.
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. The capitalized above-market lease values are amortized as a reduction of base rental revenue over the remaining terms of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue 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.
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.
Any excess of purchase price over the fair values of assets acquired and liabilities assumed are recorded as goodwill. Alternatively, if the fair value of net assets acquired exceeds the fair value of consideration paid, the transaction results in a bargain purchase gain that the Company recognizes immediately in earnings.
Reportable Segment
The Company has one reportable segment, income-producing properties, which consists of activities related to investing in real estate.
F-11
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
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.
Real Estate Investments
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.
The Company evaluates the inputs, processes and outputs of each 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.
The fair value of the tangible assets of an acquired property with an in-place operating lease is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to the tangible assets based on the fair value of the tangible assets. The fair value of in-place leases is determined by considering estimates of carrying costs during the expected lease-up periods, current market conditions, as well as costs to execute similar leases. The fair value of above- or below-market leases is recorded based on the present value of the difference between the contractual amount to be paid pursuant to the in-place lease and our estimate of the fair market lease rate for the corresponding in-place lease, measured over the remaining term of the lease, including any below-market fixed rate renewal options for below-market leases.
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 allocating non-controlling interests, amounts are recorded based on the fair value of units issued at the date of acquisition, as determined by the terms of the applicable agreement.
In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including real estate valuations, prepared by independent valuation firms. The Company also considers information and other factors including: market conditions, the industry that the tenant operates in, characteristics of the real estate, i.e.: location, size, demographics, value and comparative rental rates, tenant credit profile, store profitability and the importance of the location of the real estate to the operations of the tenant’s business.
Real estate investments that are intended to be sold are 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. Real estate investments are no longer depreciated when they are classified as held for sale. If the disposal, or intended disposal, of certain real estate investments represents a strategic shift that has had or will have a major effect on the Company’s operations and financial results, the operations of such real estate investments would be presented as discontinued operations in the consolidated statements of operations and comprehensive loss for all applicable periods.
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.
Capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. Capitalized below-market lease values are amortized as an increase to rental income over the remaining terms of the respective leases and expected below-market renewal option periods.
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.
The value of in-place leases, exclusive of the value of above-market and below-market in-place leases, is amortized to expense over the remaining periods of the respective leases.
F-12
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Assumed mortgage premiums or discounts are amortized as an increase or reduction to interest expense over the remaining terms of the respective mortgages.
Impairment of Long-Lived Assets
When circumstances indicate the carrying value of a property may not be recoverable, we review the property for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, 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 the consolidated statement of operations 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.
Goodwill
Goodwill, which is not amortized, represents the difference between the purchase price and the fair value of identifiable net assets acquired in a business combination. We review goodwill for impairment indicators throughout the year and test for impairment annually in the fourth quarter. Impairment indicators may be an event or circumstance that would more likely than not reduce the fair value of a reporting unit below its carrying amount. For 2017, the Company used a qualitative assessment approach to determine whether it is more likely than not that the fair value of the reporting unit, which contains the Company’s goodwill, is less than its carrying value. Based on our assessment we determined that the Company’s goodwill was not impaired as of December 31, 2017, and no further analysis was required.
Derivative Instruments
The Company may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with its borrowings. Certain of the techniques used to hedge exposure to interest rate fluctuations may also be used to protect against declines in the market value of assets that result from general trends in debt markets. The principal objective of such agreements 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 records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.
The accounting for subsequent changes in the fair value of these derivatives depends on whether each has been designated and qualifies for hedge accounting treatment. If the Company elects not to apply hedge accounting treatment, any change in the fair value of these derivative instruments is recognized immediately in gains (losses) on derivative instruments in the accompanying consolidated statement of operations and comprehensive loss. If the derivative is designated and qualifies for hedge accounting treatment, the change in the estimated fair value of the derivative is recorded in other comprehensive income (loss) to the extent that it is effective. Any ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings.
Non-controlling interests
The non-controlling interests represent the portion of the equity in the OP that is not owned by the Company. Non-controlling interests are presented as a separate component of equity on the consolidated balance sheets and presented as net loss attributable to non-controlling interests on the consolidated statements of operations and comprehensive loss. Non-controlling interests are allocated a share of net loss based on their share of equity ownership.
F-13
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Non-controlling interests resulted from the issuance of OP Units in conjunction with the Mergers and were recognized at fair value as of the Effective Time. In determining the fair value of the non-controlling interests, the Company utilized multiple sources including real estate valuations prepared by independent valuation firms and market sales data. Please see Note 2 — Merger Transaction for additional information on the Mergers.
Commercial Mortgage Loans
Commercial mortgage loans held for investment purposes are anticipated to be held until maturity, and accordingly, are carried at cost, net of unamortized acquisition fees and expenses capitalized, discounts or premiums and unfunded commitments. Commercial mortgage loans that are deemed to be impaired will be carried at amortized cost less a specific allowance for loan losses. Interest income is recorded on the accrual basis and related discounts, premiums and capitalized acquisition fees and expenses on investments are amortized over the life of the investment using the effective interest method. Amortization is reflected as an adjustment to interest income from debt investments in the Company’s consolidated statements of operations and comprehensive loss. Guaranteed loan exit fees payable by the borrower upon maturity are accreted over the life of the investment using the effective interest method. The accretion of guaranteed loan exit fees is recognized in interest income from debt investments in the Company’s consolidated statements of operations and comprehensive loss.
Acquisition fees and expenses incurred in connection with the origination and acquisition of commercial mortgage loan investments are evaluated based on the nature of the expense to determine if they should be expensed in the period incurred or capitalized and amortized over the life of the investment.
Cash and Cash Equivalents
Cash and cash equivalents include cash in bank accounts as well as investments in highly-liquid money market funds with original maturities of three months or less and funds in overnight sweeps, in which excess funds over an established threshold are swept daily. The Company deposits cash with high quality financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Company (the “FDIC”) up to an insurance limit. As of December 31, 2017, the Company had cash and cash equivalents of $107.7 million of which $105.9 million were in excess of the amount insured by the FDIC. As of December 31, 2016, the Company had cash and cash equivalents of $131.2 million of which $130.7 million were in excess of the amount insured by the FDIC. Although the Company bears risk to amounts in excess of those insured by the FDIC, it does not anticipate any losses as a result thereof.
Deferred Costs, Net
Deferred costs, net consists of deferred leasing costs, net of accumulated amortization. Deferred leasing costs consist primarily of lease commissions and payments made to execute new leases and are deferred and amortized over the term of the lease.
Revenue Recognition
The Company’s revenues, which are derived primarily from rental income, 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. 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, and include in revenues, 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, 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 is executed. The Company defers the revenue related to lease payments received from tenants in advance of their due dates.
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 year ended December 31, 2017, approximately $0.8 million in contingent rental income is included in rental income on the accompanying consolidated statements of operations and comprehensive loss.
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. In the event that the collectability of a receivable is in doubt, the Company records an increase in the Company’s allowance for uncollectible accounts or records a direct write-off of the receivable in the Company’s consolidated statements of operations and comprehensive loss.
F-14
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Cost recoveries from tenants are included in operating expense reimbursements on the accompanying consolidated statements of operations and comprehensive loss in the period the related costs are incurred, as applicable.
Share-Based Compensation
The Company has a stock-based award plan, which is accounted for under the guidance for share based payments. The expense for such awards is included in general and administrative expenses and is recognized in accordance with the service period required or when the requirements for exercise of the award have been met (See Note 16 — Share-Based Compensation).
Income Taxes
The Company elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the taxable year ended December 31, 2013. The Company believes that, commencing with such taxable year, it has been organized and has operated in a manner so that it qualifies for taxation as a REIT under the Code. The Company intends to continue to operate in such a manner, but no assurance can be given that the Company will operate in a manner so as to remain qualified as a REIT. In order to continue to qualify for taxation as a REIT, the Company must distribute annually at least 90% of its 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. On December 22, 2017, the Tax Cuts and Jobs Act was signed into law by the U.S. President. The Company is not aware of any provision in the final tax reform legislation or any pending tax legislation that would adversely affect its ability to operate as a REIT or to qualify as a REIT for U.S. federal income tax purposes. However, new legislation, as well as new regulations, administrative interpretations, or court decisions may be introduced, enacted, or promulgated from time to time, that could change the tax laws or interpretations of the tax laws regarding qualification as a REIT, or the federal income tax consequences of that qualification, in a manner that is adverse to the Company’s qualification as a REIT. If the Company continues to qualify for taxation as a REIT, it generally will not be subject to federal corporate income tax on that portion of its REIT taxable income that it distributes to its stockholders. Even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and properties, as well as federal income and excise taxes on its undistributed income.
The amount of distributions payable to the Company’s stockholders is determined by the board of directors and is dependent on a number of factors, including funds available for distribution, financial condition, capital expenditure requirements, as applicable, and annual distribution requirements needed to qualify and maintain the Company’s status as a REIT under the Code.
The following table details from a tax perspective, the portion of distributions classified as return of capital and ordinary dividend income, per share per annum, for the years ended December 31, 2017, 2016 and 2015:
| Year Ended December 31, | |||||||||||||||||||||
| 2017 | 2016 | 2015 | |||||||||||||||||||
| Return of capital | 82.7 | % | $ | 1.22 | 76.0 | % | $ | 1.25 | 89.9 | % | $ | 1.48 | |||||||||
| Ordinary dividend income | 17.3 | % | 0.25 | 24.0 | % | 0.40 | 10.1 | % | 0.17 | ||||||||||||
| Total | 100.0 | % | $ | 1.47 | 100.0 | % | $ | 1.65 | 100.0 | % | $ | 1.65 | |||||||||
Per Share Data
Basic net loss per share of common stock is calculated by dividing net loss by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted net loss per share of common stock considers the effect of potentially dilutive instruments outstanding during such period.
Recently Issued Accounting Pronouncements
Adopted as of December 31, 2017:
In October 2016, the Financial Accounting Standards Board (“FASB”) issued accounting standards update (“ASU”) No. 2016-17, Consolidation (Topic 810): Interests Held Through Related Parties That Are Under Common Control, which provides guidance relating to interests held through related parties that are under common control, where a reporting entity will need to evaluate if it should consolidate a VIE. The amendments change the evaluation of whether a reporting entity is the primary beneficiary of a VIE by changing how a single decision maker of a VIE treats indirect interests in the entity held through related parties that are under common control with the reporting entity. The provisions of this guidance became effective on January 1, 2017, and the adoption did not have an impact on the Company’s consolidated financial statements.
F-15
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which provides guidance on the classification of restricted cash in the statement of cash flows. The amendment requires restricted cash to be included in the beginning-of-period and end-of-period total cash amounts. Therefore, transfers between cash and restricted cash will no longer be shown on the statement of cash flows. The amendments are effective for fiscal years beginning after December 15, 2017, with early adoption permitted, including adoption in an interim period. The Company adopted this guidance effective December 31, 2017, using a retrospective transition method. As a result, the Company adjusted it statements of cash flows for the years ended December 31, 2016 and 2015 to include $7.9 million restricted cash, in each of those years, in the beginning and ending cash balances and remove transfers of $3,000 and $7.9 million, respectively, between cash and restricted cash from financing activities.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The amendments in this update modify the concept of impairment from the condition that exists to when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. The revised guidance is effective for reporting periods beginning after December 15, 2019, and the amendments will be applied prospectively. Early application is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company early adopted the new guidance effective January 1, 2017 and the adoption had no impact on the Company’s consolidated financial statements.
Pending Adoption as of December 31, 2017:
In May 2014, the FASB issued ASU No. 2014-09, Revenue From Contracts with Customers (Topic 606), and has since issued several additional amendments thereto (collectively referred to herein as “ASC 606”). ASC 606 establishes a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Under ASC 606, an entity is required to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. A reporting entity may apply the amendments in ASC 606 using either a modified retrospective approach, by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or a full retrospective approach. The Company adopted this guidance effective January 1, 2018 using the modified retrospective approach and it did not have an impact on the Company’s consolidated financial statements.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10), that amends the recognition and measurement of financial instruments. The new guidance revises an entity’s accounting related to equity investments and the presentation of certain fair value changes for financial liabilities measured at fair value. Among other things, it also amends the presentation and disclosure requirements associated with the fair value of financial instruments. The Company adopted this guidance effective January 1, 2018 and there was no impact on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASC 842”). ASC 842 originally stated that companies would be required to bifurcate certain lease revenues between lease and non-lease components, however, the FASB issued an exposure draft in January 2018 (2018 Exposure Draft) which, if adopted as written, would allow lessors a practical expedient by class of underlying assets to account for lease and non-lease components as a single lease component if certain criteria are met. Additionally, only incremental direct leasing costs may be capitalized under this new guidance, which is consistent with the Company’s existing policies. ASU 2016-02 originally required a modified retrospective method of adoption, however, the 2018 Exposure Draft indicates that companies may be permitted to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The pronouncement allows some optional practical expedients. The Company does not expect this guidance to impact its existing lessor revenue recognition pattern.
The Company is a lessee for some properties in which it has ground leases as of December 31, 2017. For these leases, the Company will be required to record a right-of-use asset and lease liability equal to the present value of the remaining lease payments upon adoption of this update. The new standard requires lessees to apply a dual lease classification approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today.
F-16
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
The Company is continuing to evaluate any differences in the timing, measurement, or presentation of lessor revenues as well as the impact of the new lessee accounting model on the Company’s consolidated financial position, results of operations and disclosures.
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 update 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. The amendments become effective for reporting periods beginning after December 15, 2019. The amendments may be adopted early for reporting periods beginning after December 15, 2018. The company is currently evaluating the impact of this new guidance.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance on how certain transactions should be classified and presented in the statement of cash flows as either operating, investing or financing activities. Among other things, the update provides specific guidance on where to classify debt prepayment and extinguishment costs, payments for contingent consideration made after a business combination and distributions received from equity method investments. The Company will apply the new guidance beginning in the first quarter of 2018, with reclassification of prior period amounts where applicable, and it does not expect the provisions to have a material impact on its statement of cash flows.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which revises the definition of a business. This new guidance is applicable when evaluating whether an acquisition should be treated as either a business acquisition or an asset acquisition. Under the revised guidance, when substantially all of the fair value of gross assets acquired is concentrated in a single asset or group of similar assets, the assets acquired would not be considered a business. The Company will adopt this guidance effective January 1, 2018, and the amendments will be applied prospectively. The Company has assessed this revised guidance and expects, based on historical property acquisitions, that in most cases, a future property acquired after adoption would be treated as an asset acquisition rather than a business acquisition, which would result in the capitalization of related transaction costs.
In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The update states that modification accounting should be used unless the fair value of the award, the vesting terms of the award and the classification of the award as either equity or liability, all do not change as a result of the modification. The Company adopted this guidance effective January 1, 2018. The Company expects that any future modifications to its issued share-based awards will be accounted for using modification accounting, unless the modification meets all of the exception criteria noted above. As a result, the modification would be treated as an exchange of the original award for a new award, with any incremental fair value being treated as additional compensation cost.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, to better align cash flow and fair value hedge accounting with the corresponding risk management activities. Among other things, the amendments expand which hedging strategies are eligible for hedge accounting, align the timing of recognition of hedge results with the earnings effect of the hedged item and allow companies to include the change in fair value of the derivative in the same income statement line item as the earnings effect of the hedged item. Additionally, for cash flow hedges that are highly effective, the update allows for all changes in fair value of the derivative to be recorded in other comprehensive income. The revised guidance is effective for reporting periods beginning after December 15, 2018. Early application is permitted. The Company is currently evaluating the impact of this new guidance.
F-17
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 4 — Real Estate Investments
The Company owned 540 properties, which were acquired for investment purposes, as of December 31, 2017. The following table presents the allocation of assets acquired and liabilities assumed during the years ended December 31, 2017 and 2016. No properties were acquired during the year ended December 31, 2015.
| (Dollar amounts in thousands) | Year Ended December 31, 2017 | Year Ended December 31, 2016 | ||||||
| Real estate investments, at cost: | ||||||||
| Land | $ | 313,423 | $ | 1,729 | ||||
| Buildings, fixtures and improvements | 1,176,909 | 29,664 | ||||||
| Total tangible assets | 1,490,332 | 31,393 | ||||||
Acquired intangibles: (1) | ||||||||
| In-place leases | 177,152 | 3,162 | ||||||
| Above-market lease assets | 22,934 | 548 | ||||||
| Below-market ground lease asset | 1,233 | — | ||||||
| Above-market ground lease liability | — | (85 | ) | |||||
| Below-market lease liabilities | (106,513 | ) | (774 | ) | ||||
| Total intangible assets, net | 94,806 | 2,851 | ||||||
| Credit facility assumed in the Merger | (304,000 | ) | — | |||||
| Mortgage notes payable assumed in the Merger | (127,651 | ) | — | |||||
| Premiums on mortgage notes payable assumed in the Merger | (4,143 | ) | — | |||||
| Other assets acquired and (liabilities assumed) in the Merger, net | 16,427 | — | ||||||
| Consideration paid for acquired real estate investments, net of liabilities assumed | $ | 1,165,771 | $ | 34,244 | ||||
| Number of properties purchased | 110 | 4 | ||||||
_____________________________________
(1) Weighted-average remaining amortization periods for in-place leases, above-market lease assets, below-market ground lease asset, and below-market lease liabilities acquired during the year ended December 31, 2017 were 7.5 years, 9.2 years, 38.5 years, and 18.9 years, respectively, as of each property’s respective acquisition date.
Total acquired intangible lease assets and liabilities consist of the following as of the dates presented:
| December 31, 2017 | December 31, 2016 | |||||||||||||||||||||||
| (In thousands) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||
| Intangible assets: | ||||||||||||||||||||||||
| In-place leases | $ | 421,369 | $ | 140,085 | $ | 281,284 | $ | 286,548 | $ | 95,547 | $ | 191,001 | ||||||||||||
| Above-market leases | 31,610 | 11,309 | 20,301 | 13,581 | 8,106 | 5,475 | ||||||||||||||||||
| Below-market ground lease asset | 1,233 | 28 | 1,205 | — | — | — | ||||||||||||||||||
| Total acquired intangible lease assets | $ | 454,212 | $ | 151,422 | $ | 302,790 | $ | 300,129 | $ | 103,653 | $ | 196,476 | ||||||||||||
| Intangible liabilities: | ||||||||||||||||||||||||
| Above-market ground lease liability | $ | 85 | $ | 3 | $ | 82 | $ | 85 | $ | 1 | $ | 84 | ||||||||||||
| Below-market lease liabilities | 119,249 | 10,559 | 108,690 | 18,443 | 4,612 | 13,831 | ||||||||||||||||||
| Total acquired intangible lease liabilities | $ | 119,334 | $ | 10,562 | $ | 108,772 | $ | 18,528 | $ | 4,613 | $ | 13,915 | ||||||||||||
F-18
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
The following table presents amortization expense and adjustments to revenue and property operating expense for intangible assets and liabilities for the years ended December 31, 2017, 2016 and 2015:
| Year Ended December 31, | ||||||||||||
| (In thousands) | 2017 | 2016 | 2015 | |||||||||
| In-place leases | $ | 68,477 | $ | 34,247 | $ | 34,600 | ||||||
| Total added to depreciation and amortization | $ | 68,477 | $ | 34,247 | $ | 34,600 | ||||||
| Above-market leases | $ | (6,007 | ) | $ | (2,943 | ) | $ | (3,006 | ) | |||
| Below-market lease liabilities | 11,212 | 2,465 | 1,340 | |||||||||
| Total deducted from rental income | $ | 5,205 | $ | (478 | ) | $ | (1,666 | ) | ||||
| Below-market ground lease asset | $ | (28 | ) | $ | — | $ | — | |||||
| Above-market ground lease liability | (2 | ) | (1 | ) | — | |||||||
| Total deducted from property operating expense | $ | (30 | ) | $ | (1 | ) | $ | — | ||||
The following table provides the projected amortization expense and adjustments to revenue and property operating expense for intangible assets and liabilities for the next five years:
| (In thousands) | 2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||||||
| In-place leases | $ | 53,958 | $ | 43,803 | $ | 34,779 | $ | 29,792 | $ | 25,665 | ||||||||||
| Total to be added to depreciation and amortization | $ | 53,958 | $ | 43,803 | $ | 34,779 | $ | 29,792 | $ | 25,665 | ||||||||||
| Above-market leases | $ | (4,086 | ) | $ | (3,243 | ) | $ | (2,422 | ) | $ | (2,092 | ) | $ | (1,712 | ) | |||||
| Below-market lease liabilities | 9,005 | 8,308 | 7,587 | 6,876 | 6,466 | |||||||||||||||
| Total to be added to rental income | $ | 4,919 | $ | 5,065 | $ | 5,165 | $ | 4,784 | $ | 4,754 | ||||||||||
| Below-market ground lease asset | $ | 32 | $ | 32 | $ | 32 | $ | 32 | $ | 32 | ||||||||||
| Above-market ground lease liability | (2 | ) | (2 | ) | (2 | ) | (2 | ) | (2 | ) | ||||||||||
| Total to be deducted from property operating expense | $ | 30 | $ | 30 | $ | 30 | $ | 30 | $ | 30 | ||||||||||
The following table presents unaudited pro forma information as if the acquisitions during the year ended December 31, 2017 had been consummated on January 1, 2016:
| Year Ended December 31, | ||||||||
| (In thousands, except per share data) | 2017 (1) | 2016 | ||||||
| Pro forma revenues | $ | 293,768 | $ | 276,972 | ||||
| Pro forma net loss | $ | (38,113 | ) | $ | (11,042 | ) | ||
| Basic and diluted pro forma net loss per share | $ | (0.36 | ) | $ | (0.11 | ) | ||
_____________________
| (1) | For the year ended December 31, 2017, aggregate revenues and net income derived from the Company’s 2017 acquisitions (for the Company’s period of ownership) were $121.3 million and $11.6 million, respectively. |
F-19
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
The following table presents future minimum base rent payments on a cash basis due to the Company over the next five years and thereafter. These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes among other items:
| (In thousands) | Future Minimum Base Rent Payments | |||
| 2018 | $ | 226,031 | ||
| 2019 | 217,134 | |||
| 2020 | 200,437 | |||
| 2021 | 188,135 | |||
| 2022 | 176,879 | |||
| Thereafter | 983,105 | |||
| $ | 1,991,721 | |||
The following table lists the tenants (including, for this purpose, all affiliates of such tenants) from which the Company derives annualized rental income on a straight-line basis constituting 10.0% or more of the Company’s consolidated annualized rental income on a straight-line basis for all portfolio properties as of the dates indicated:
| December 31, | ||||
| Tenant | 2017 | 2016 | ||
| SunTrust Bank | 11.2% | 17.7% | ||
| Sanofi US | * | 11.4% | ||
| C&S Wholesale Grocer | * | 10.2% | ||
_____________________
| * | Tenant’s annualized rental income on a straight-line basis was not greater than or equal to 10.0% of consolidated annualized rental income for all properties as of the date specified. |
The termination, delinquency or non-renewal of leases by one or more of the above tenants may have a material adverse effect on revenues. No other tenant represented 10.0% or greater of consolidated annualized rental income on a straight-line basis as of December 31, 2017 and 2016.
The following table lists the states where the Company has concentrations of properties where annualized rental income on a straight-line basis each represented 10.0% or greater of consolidated annualized rental income on a straight-line basis as of December 31, 2017 and 2016:
| December 31, | ||||
| State | 2017 | 2016 | ||
| New Jersey | * | 20.0% | ||
| Georgia | * | 11.0% | ||
_____________________
| * | State’s annualized rental income on a straight-line basis was not greater than or equal to 10.0% of consolidated annualized rental income for all properties as of the date specified. |
The Company did not own properties in any other state that in total represented 10.0% or greater of consolidated annualized rental income on a straight-line basis as of December 31, 2017 and 2016.
Real Estate Held For Sale
When assets are identified by management as held for sale, the Company stops recognizing depreciation and amortization expense on 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.
F-20
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
As of December 31, 2017 and 2016, there were four and five properties, respectively, classified as held for sale. The disposal of these properties does not represent a strategic shift. Accordingly, the operating results of these properties remain classified within continuing operations for all periods presented.
The following table details the major classes of assets associated with the properties that have been reclassified as held for sale as of December 31, 2017 and 2016.
| (Dollar amounts in thousands) | December 31, 2017 | December 31, 2016 | ||||||
| Real estate investments held for sale, at cost: | ||||||||
| Land | $ | 1,453 | $ | 7,225 | ||||
| Buildings, fixtures and improvements | 4,677 | 142,798 | ||||||
| Acquired intangible lease assets | 1,252 | 18,145 | ||||||
| Total real estate assets held for sale, at cost | 7,382 | 168,168 | ||||||
| Less accumulated depreciation and amortization | (2,666 | ) | (29,213 | ) | ||||
| Total real estate investments held for sale, net | 4,716 | 138,955 | ||||||
| Impairment charges related to properties reclassified as held for sale | (34 | ) | (1,353 | ) | ||||
| Assets held for sale | $ | 4,682 | $ | 137,602 | ||||
Real Estate Sales
During the year ended December 31, 2017, the Company closed on the sale of 25 properties, including 18 properties operated by SunTrust Banks, Inc. (“SunTrust”) (as discussed below), for an aggregate contract price of $291.5 million, exclusive of closing costs. These sales resulted in aggregate gains of $14.9 million, which is reflected in gain on sale of real estate investments on the consolidated statement of operations and comprehensive loss for the year ended December 31, 2017. The Company recorded impairment charges of $4.5 million upon reclassification of properties to assets held for sale to adjust the properties to their fair value less estimated cost of disposal, which are recorded in impairment charges in the Company’s consolidated statement of operations and comprehensive loss.
During the year ended December 31, 2016, the Company closed on the sale of 12 properties operated by SunTrust for an aggregate contract price of $30.2 million, exclusive of closing costs. The sale of these properties resulted in impairment charges of $1.3 million and a gain on sale of real estate investments of $0.5 million.
The disposal of these properties did not represent a strategic shift. Accordingly, the operating results of the properties sold remained classified within continuing operations for all periods presented until the date of disposal.
Impairment of Held for Use Real Estate Investments
As of December 31, 2017 and 2016, the Company owned 41 and 57 held for use single-tenant net lease properties operated by SunTrust, respectively, which had lease terms set to expire between December 31, 2017 and March 31, 2018. As a result, the Company reconsidered its intended holding period for these properties and evaluated 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 primarily used a market approach to estimate the future cash flows expected to be generated. This approach involved evaluating comparable sales of properties in the same geographic region as the SunTrust properties in order to generate an estimated sale price. The Company made certain assumptions in this approach including, among others, that the properties in the comparable sales used in the analysis share similar characteristics to the SunTrust properties, and that market and economic conditions at the time of any potential sales of these SunTrust 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. 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 impairment may be realized in the future.
For some of the held for use SunTrust properties noted above, the Company has executed a non-binding letter of intent (“LOI”) or a definitive purchase and sale agreement (“PSA”) to sell the properties. In those instances, the Company used the sale price from the applicable LOI or PSA to estimate the future cash flows expected to be generated. The Company made certain assumptions in this approach as well, mainly that the sale of these properties would close at the terms specified in the LOI or PSA. There can be no guarantee that the sales of these properties will close under these terms or at all.
F-21
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
As a result of its consideration of impairment its SunTrust and other held for use properties, the Company recognized impairment charges of $20.5 million, which included impairments of $16.2 million on 32 of the 41 held for use SunTrust properties during the year ended December 31, 2017 as their carrying value exceeded their estimated fair values. As of December 31, 2016, the carrying value of 43 of the 57 held for use SunTrust properties noted above exceeded their estimated fair values and recognized an aggregate impairment charge of $24.7 million during the year ended December 31, 2016. No impairment was recognized on properties held for use during the year ended December 31, 2015. These amounts are recorded in impairment charges in the Company’s consolidated statement of operations and comprehensive loss.
Property Damage
During the year ended December 31, 2017, one of the Company’s properties, Southroads Shopping Center, sustained damage from a tornado. The property is covered by insurance for property damage, subject to normal deductibles. Accordingly, damage will be covered by insurance proceeds, and the Company does not expect any significant exposure to loss related to this property. As a result of the damage, the Company wrote off the carrying value of the damages to the property, which was estimated to be $5.6 million, and has received an insurance reimbursement of approximately $4.6 million as of December 31, 2017.
Note 5 — Commercial Mortgage Loans
The following table is a summary of the Company’s commercial loan portfolio as of December 31, 2016. The Company did not own any commercial mortgage loans as of December 31, 2017.
| December 31, 2016 | |||||||||
| Loan Type | Property Type | Par Value | Percentage | ||||||
| (In thousands) | |||||||||
Senior (1) | Student Housing — Multifamily | $ | 17,200 | 100.0 | % | ||||
| $ | 17,200 | 100.0 | % | ||||||
_____________________________________
| (1) | This loan was repaid by the borrower during the year ended December 31, 2017. |
For the years ended December 31, 2017 and 2016, the activity in the Company’s commercial mortgage loans, held for investment, was as follows:
| (In thousands) | Year Ended December 31, 2017 | Year Ended December 31, 2016 | ||||||
| Beginning balance | $ | 17,175 | $ | 17,135 | ||||
Discount accretion and premium amortization (1) | 25 | 40 | ||||||
| Principal repayments | (17,200 | ) | — | |||||
| Ending balance | $ | — | $ | 17,175 | ||||
_____________________________________
| (1) | Includes amortization of capitalized origination fees and expenses. |
Note 6 — Commercial Mortgage-Backed Securities
The following table details the realized loss on commercial mortgage-backed securities (“CMBS”) sold during the year ended December 31, 2015. No CMBS were acquired or sold during the years ended years ended December 31, 2017 and 2016:
| (In thousands) | Amortized Cost | Sale Price | Realized Loss | |||||||||
| Year Ended December 31, 2015 | $ | 30,209 | $ | 28,624 | $ | 1,585 | ||||||
The Company did not have any investments in CMBS as of December 31, 2017 or 2016.
F-22
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 7 — Other Real Estate Securities
The following table details the realized gains on sale of the Company’s other real estate securities, which consisted of redeemable preferred stock, during the year ended December 31, 2015. There were no other real estate securities sold during the years ended December 31, 2017 and 2016:
| (In thousands) | Aggregate Cost Basis | Sale Price | Realized Gain, Net | |||||||||
| Year Ended December 31, 2015 | $ | 18,528 | $ | 19,266 | $ | 738 | ||||||
As of December 31, 2017 and 2016, the Company had no investments in other real estate securities.
Note 8 — Mortgage Notes Payable
The Company’s mortgage notes payable as of December 31, 2017 and 2016 consisted of the following:
| Outstanding Loan Amount as of | Effective Interest Rate as of | ||||||||||||||||||
| December 31, | December 31, | ||||||||||||||||||
| Portfolio | Encumbered Properties | 2017 | 2016 | 2017 | Interest Rate | Maturity | Anticipated Repayment | ||||||||||||
| (In thousands) | (In thousands) | ||||||||||||||||||
| SAAB Sensis I | 1 | $ | 7,470 | $ | 7,841 | 5.93 | % | Fixed | Apr. 2025 | Apr. 2025 | |||||||||
| SunTrust Bank II | 27 | 21,243 | 25,000 | 5.50 | % | Fixed | Jul. 2031 | Jul. 2021 | |||||||||||
C&S Wholesale Grocer I (1) | — | — | 82,313 | — | % | Fixed | Apr. 2037 | Apr. 2017 | |||||||||||
| SunTrust Bank III | 100 | 79,729 | 88,567 | 5.50 | % | Fixed | Jul. 2031 | Jul. 2021 | |||||||||||
| SunTrust Bank IV | 27 | 22,756 | 21,243 | 5.50 | % | Fixed | Jul. 2031 | Jul. 2021 | |||||||||||
| Sanofi US I | 1 | 125,000 | 125,000 | 5.16 | % | Fixed | Jul. 2026 | Jan. 2021 | |||||||||||
| Stop & Shop I | 4 | 37,562 | 38,271 | 5.63 | % | Fixed | Jun. 2041 | Jun. 2021 | |||||||||||
| Mortgage Loan I | 264 | 638,115 | 649,532 | 4.36 | % | Fixed | Sep. 2020 | Sep. 2020 | |||||||||||
| Liberty Crossing | 1 | 11,000 | — | 4.66 | % | Fixed | Jul. 2018 | Jul. 2018 | |||||||||||
| Tiffany Springs MarketCenter | 1 | 33,802 | — | 3.92 | % | Fixed (3) | Oct. 2018 | Oct. 2018 | |||||||||||
| Shops at Shelby Crossing | 1 | 23,002 | — | 4.97 | % | Fixed | Mar. 2024 | Mar. 2024 | |||||||||||
| Patton Creek | 1 | 40,858 | — | 5.76 | % | Fixed | Dec. 2020 | Dec. 2020 | |||||||||||
| Bob Evans I | 23 | 23,950 | — | 4.71 | % | Fixed | Sep. 2037 | Sep. 2027 | |||||||||||
| Mortgage Loan II | 12 | 210,000 | — | 4.25 | % | Fixed | Jan. 2028 | Jan. 2028 | |||||||||||
| Mortgage Loan III | 22 | 33,400 | — | 4.12 | % | Fixed | Jan. 2028 | Jan. 2028 | |||||||||||
| Gross mortgage notes payable | 485 | 1,307,887 | 1,037,767 | 4.62 | % | (2) | |||||||||||||
Deferred financing costs, net of accumulated amortization (4) | (15,182 | ) | (15,492 | ) | |||||||||||||||
| Mortgage premiums, net | 10,728 | 10,681 | |||||||||||||||||
| Mortgage notes payable, net | $ | 1,303,433 | $ | 1,032,956 | |||||||||||||||
_____________________________________
| (1) | The Company paid off the full mortgage balance secured by the C&S Wholesale Grocer properties on April 19, 2017. |
| (2) | Calculated on a weighted-average basis for all mortgages outstanding as of the dates indicated. |
| (3) | Fixed as a result of entering into a swap agreement, which is included in derivatives, at fair value on the consolidated balance sheet as of December 31, 2017. |
| (4) | 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 the financing will not close. |
F-23
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
As of December 31, 2017 and 2016, the Company had pledged $2.5 billion and $1.9 billion, respectively, in real estate investments 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 December 31, 2017, $682.2 million in real estate investments were included in the unencumbered asset pool comprising the borrowing base under the Amended Credit Facility (see Note 9 — Credit Facility for definition). 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 Amended Credit Facility.
On December 8, 2017, the Company paid off the full mortgage balance of $18.0 million secured by the San Pedro Crossing property with the proceeds from the Mortgage Loan II described below. The debt was assumed in connection with the RCA merger on February 16, 2017 with a principal balance of $18.0 million. As of December 31, 2017, there were no amounts outstanding under the San Pedro Crossing loan.
Mortgage Loan I
During August 2015, certain subsidiaries of the Company entered into a $655.0 million mortgage loan agreement (“Mortgage Loan I”) with Barclays Bank PLC, Column Financial Inc. and UBS Real Estate Securities Inc. (together, the “Lenders I”). The Mortgage Loan I has a stated maturity of September 6, 2020 and a stated annual interest rate of 4.30%. As of December 31, 2017, the Mortgage Loan I was secured by mortgage interests in 264 of the Company’s properties. As of December 31, 2017, the outstanding balance under the Mortgage Loan I was $638.1 million.
At the closing of the Mortgage Loan I, the Lenders I placed $42.5 million of the proceeds from the Mortgage Loan I in escrow, to be released to the Company upon certain conditions, including the receipt of ground lease estoppels, performance of certain repairs and receipt of environmental insurance. As of December 31, 2017, the Lenders had released $34.6 million of the amount originally placed in escrow to the Company. As of December 31, 2016, $7.9 million of the proceeds from the Mortgage Loan I remained in escrow and is included in restricted cash on the consolidated balance sheet as of December 31, 2016. There have been no material changes in escrow balances or restricted cash related to the Mortgage Loan I for the year ended December 31, 2017.
Mortgage Loan II
On December 8, 2017, certain subsidiaries of the Company entered into a $210.0 million loan agreement (“Mortgage Loan II”) with Societe Generale and UBS AG (collectively, the “Lenders II”). The Mortgage Loan II has a stated maturity of January 1, 2028 and a stated annual interest rate of 4.19%. The Mortgage Loan II requires monthly interest-only payments, with the principal balance due on the maturity date. As of December 31, 2017, the Mortgage Loan II was secured by mortgage interests in 12 of the Company’s properties in eight states totaling approximately 2.4 million rentable square feet and it had an outstanding balance of $210.0 million.
The Mortgage Loan II permits the Lenders II to securitize the loan or any portion thereof. At the closing of the Mortgage Loan II, the net proceeds after accrued interest and closing costs were used to (i) repay approximately $18 million of mortgage indebtedness secured by one of the Mortgaged Properties, and (ii) fund approximately $2.4 million in deposits required to be made at closing into reserve accounts required under the Loan Agreement with respect to repairs, outstanding leasing costs, real estate taxes and insurance premiums, among other things. The approximate $185.1 million balance available to the Company may be used for general corporate purposes, including to make future acquisitions.
The following table summarizes the scheduled aggregate principal payments on mortgage notes payable based on stated maturity dates for the five years subsequent to December 31, 2017 and thereafter:
| (In thousands) | Future Principal Payments | |||
| 2018 | $ | 47,197 | ||
| 2019 | 2,533 | |||
| 2020 | 679,000 | |||
| 2021 | 284,870 | |||
| 2022 | 1,070 | |||
| Thereafter | 293,217 | |||
| $ | 1,307,887 | |||
The Company’s mortgage notes payable agreements require the compliance of certain property-level financial covenants including debt service coverage ratios. As of December 31, 2017, the Company was in compliance with financial covenants under its mortgage notes payable agreements.
F-24
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 9 — Credit Facility
On February 16, 2017, the Company, the OP, and certain other subsidiaries of the Company acting as guarantors, entered into an amendment, assumption, joinder and reaffirmation of guaranties (the “Second Amendment”) to an unsecured amended and restated credit agreement, dated December 2, 2014 (as amended by the Second Amendment, the “Credit Agreement”), by and among the RCA OP, to which the OP is successor by merger, BMO Harris Bank N.A., as administrative agent, letter of credit issuer, swingline lender and a lender, and the other parties thereto, relating to the Amended Credit Facility. The Second Amendment provides for, among other things, the OP to become the borrower and principal obligor under the Credit Agreement and the Amended Credit Facility, and for the Company to become a guarantor under the Amended Credit Facility. RCA and the RCA OP were parties to the Credit Agreement prior to closing of the Merger.
The Amended Credit Facility provides for aggregate revolving loan borrowings of up to $325.0 million (subject to the value and debt service coverage ratio of the unencumbered asset pool comprising the borrowing base thereunder), a swingline subfacility of $25.0 million and a $20.0 million letter of credit subfacility, subject to certain conditions. Through an uncommitted “accordion feature,” the OP, subject to lender consent and certain other conditions, may increase commitments under the Amended Credit Facility to up to $575.0 million. As of December 31, 2017, the Company’s unused borrowing capacity was $230.0 million, based on the aggregate commitments under the Amended Credit Facility.
The Amended Credit Facility matures on May 1, 2018. Borrowings under the Amended Credit Facility bear interest at either (i) the base rate (which is defined in the Credit Agreement as the greatest of (a) the prime rate in effect on such day, (b) the federal funds effective rate in effect on such day plus 0.50%, and (c) LIBOR for a one month interest period plus 1.00%) plus an applicable spread ranging from 0.35% to 1.00%, depending on the Company’s consolidated leverage ratio, or (ii) LIBOR plus an applicable spread ranging from 1.35% to 2.00%, depending on the Company’s consolidated leverage ratio.
The Amended Credit Facility provides for quarterly interest payments for each base rate loan and periodic interest payments for each LIBOR loan, based upon the applicable interest period (though no longer than three months) with respect to such LIBOR loan, with all principal outstanding being due on the maturity date. The Amended Credit Facility may be prepaid at any time, in whole or in part, without premium or penalty. Upon the occurrence of an event of default, the requisite lenders have the right to terminate their obligations under the Amended Credit Facility and to accelerate the payment on any unpaid principal amount of all outstanding loans. The Company, certain of its subsidiaries and certain subsidiaries of the OP will guarantee the obligations under the Amended Credit Facility.
In connection with the Mergers, the Company assumed the outstanding balance on the Amended Credit Facility of $304.0 million. During the year ended December 31, 2017, the Company paid down $294.0 million, and subsequently drew $85.0 million, leaving an outstanding balance of $95.0 million as of December 31, 2017.
The Amended Credit Facility contains various customary covenants, including but not limited to financial maintenance covenants with respect to maximum consolidated leverage and consolidated secured leverage, minimum fixed charge coverage, a maximum ratio of other recourse debt to total asset value and minimum net worth. As of December 31, 2017, the Company was in compliance with the financial covenants under the Amended Credit Facility.
Note 10 — Fair Value Measurements
GAAP establishes a hierarchy of valuation techniques based on the observability of inputs used in measuring financial instruments 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.
F-25
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
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.
The Company’s derivative instrument is measured at fair value on a recurring basis. Although the Company has determined that the majority of the inputs used to value its derivative 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 December 31, 2017, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative position and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivative. As a result, the Company has determined that its derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.
The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the counterparties.
The Company had impaired real estate investments held for sale, which were carried at fair value on a non-recurring basis on the consolidated balance sheets as of December 31, 2017 and 2016. Impaired real estate investments held for sale were valued using the sale price from the applicable PSA less costs to sell, which is an observable input. As a result, the Company’s impaired real estate investments held for sale are classified in Level 2 of the fair value hierarchy.
The Company also had impaired real estate investments held for use, which were carried at fair value on a non-recurring basis on the consolidated balance sheet as of December 31, 2017 and 2016. The Company recognized an aggregate impairment charge of $24.7 million during 2016 related to real estate investments held for use. During the year ended, December 31, 2017, the Company recognized additional impairment charges of $20.5 million related to real estate investments held for use. See Note 4 — Real Estate Investments for additional information on impairment charges incurred by the Company.
The Company primarily used a market approach to estimate the future cash flows expected to be generated. This approach involved evaluating comparable sales of properties in the same geographic region as the SunTrust properties in order to generate an estimated sale price, which is an unobservable input. As a result, the impaired properties that the Company evaluated using this approach are classified in Level 3 of the fair value hierarchy.
For some of the impaired properties, the Company had an executed LOI or PSA to sell the property. In those instances, the Company used the sale price from the applicable LOI or PSA to estimate the future cash flows expected to be generated, which is an observable input. As a result, the impaired properties that the Company evaluated using this approach are classified in Level 2 of the fair value hierarchy.
F-26
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of December 31, 2017 and 2016, aggregated by the level in the fair value hierarchy within which those instruments fall.
| (In thousands) | Quoted Prices in Active Markets Level 1 | Significant Other Observable Inputs Level 2 | Significant Unobservable Inputs Level 3 | Total | ||||||||||||
| December 31, 2017 | ||||||||||||||||
| Impaired real estate investments held for sale | $ | — | $ | 432 | $ | — | $ | 432 | ||||||||
| Impaired real estate investments held for use | — | 20,434 | 10,330 | 30,764 | ||||||||||||
| Interest rate swaps | — | 23 | — | 23 | ||||||||||||
| Total | $ | — | $ | 20,889 | $ | 10,330 | $ | 31,219 | ||||||||
| December 31, 2016 | ||||||||||||||||
| Impaired real estate investments held for sale | $ | — | $ | 961 | $ | — | $ | 961 | ||||||||
| Impaired real estate Investments held for use | — | 6,525 | 45,032 | 51,557 | ||||||||||||
| Total | $ | — | $ | 7,486 | $ | 45,032 | $ | 52,518 | ||||||||
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 years ended December 31, 2017 and 2016.
The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair 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 distributions payable approximates their carrying value on the consolidated balance sheets due to their short-term nature. The fair values of the Company’s remaining financial instruments that are not reported at fair value on the consolidated balance sheets as of December 31, 2017 and 2016 are reported in the following table:
| December 31, 2017 | December 31, 2016 | |||||||||||||||||
| (In thousands) | Level | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||
| Gross mortgage notes payable | 3 | $ | 1,307,887 | $ | 1,332,240 | $ | 1,048,448 | $ | 1,076,065 | |||||||||
| Credit facility | 3 | $ | 95,000 | $ | 95,000 | $ | — | $ | — | |||||||||
| Commercial mortgage loan, held for investment | 3 | $ | — | $ | — | $ | 17,175 | $ | 17,200 | |||||||||
The fair value of gross mortgage notes payable is based on combinations of independent third party estimates and management’s estimates of market interest rates. Advances under the Amended Credit Facility are considered to be reported at fair value, because its interest rate varies with changes in LIBOR, and there has not been a significant change in the credit risk of the Company or credit markets since assumption. The fair value of the commercial mortgage loan was estimated using a discounted cash flow analysis, based on the Advisor’s experience with similar types of investments.
Note 11 — 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.
F-27
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Non-designated Hedges
Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. A gain of approximately $21,000 is included in interest expense on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2017. There were no gains or losses on non-designated hedging relationships during the years ended December 31, 2016 and 2015.
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and collars 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. Interest rate collars designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates rise above the cap strike rate on the contract and payments of variable-rate amounts if interest rates fall below the floor strike rate on the contract.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.
Amounts reported in accumulated other comprehensive income related to derivatives will be 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 approximately $96,000 will be reclassified from accumulated other comprehensive income as a decrease to interest expense.
As of December 31, 2017, the Company had the following derivatives that were designated as cash flow hedges of interest rate risk. The Company had no derivatives outstanding as of December 31, 2016:
| December 31, 2017 | ||||||
| Interest Rate Derivative | Number of Instruments | Notional Amount | ||||
| (In thousands) | ||||||
| Interest Rate Swap | 1 | $ | 34,098 | |||
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the accompanying consolidated balance sheet as of December 31, 2017. The Company had no derivatives outstanding as of December 31, 2016:
| (In thousands) | Balance Sheet Location | December 31, 2017 | ||||
| Derivatives designated as hedging instruments: | ||||||
| Interest Rate Swap | Derivatives, at fair value | $ | 23 | |||
The table below details the location in the consolidated financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the year ended December 31, 2017. There was no gain or loss recognized on interest rate derivatives during the year ended December 31, 2016:
| (In thousands) | Year Ended December 31, 2017 | |||
| Amount of gain (loss) recognized in accumulated other comprehensive income on interest rate derivatives (effective portion) | $ | 56 | ||
| Amount of gain (loss) reclassified from accumulated other comprehensive income into income as interest expense | $ | (39 | ) | |
| Amount of gain (loss) recognized in income on derivative (ineffective portion, reclassifications of missed forecasted transactions and amounts excluded from effectiveness testing) | $ | — | ||
Credit-risk-related Contingent Features
The Company has an agreement with its derivative counterparty that contains a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.
As of December 31, 2017, the Company had no derivatives in a net liability position. As a result, there is no termination value associated with the settlement of the company’s obligations under the agreement, and the Company has not posted any collateral related to the agreement.
F-28
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 12 — Common Stock
As of December 31, 2017 and 2016, the Company had 105.2 million and 65.8 million shares of common stock outstanding, respectively, including unvested restricted shares and shares issued pursuant to the DRIP.
In April 2013, the Company’s board of directors authorized a monthly distribution equivalent to $1.65 per annum, per share of common stock. Effective July 1, 2017, the Company’s board of directors authorized a decrease in the daily accrual of distributions to an annualized rate of $1.30 per annum, per share of common stock. Distributions are payable by the fifth day following each month end to stockholders of record at the close of business each day during the prior month. Distribution payments are dependent on the availability of funds. The board of directors may reduce the amount of distributions paid or suspend distribution payments at any time and therefore distributions payments are not assured.
On March 17, 2017, the Company’s board of directors approved an estimated net asset value per share of the Company’s common stock (“Estimated Per-Share NAV”) as of December 31, 2016, which was published on March 20, 2017. The Company intends to publish subsequent valuations of Estimated Per-Share NAV periodically at the discretion of the Company’s board of directors, provided that such valuations will be made at least once annually. The Estimated Per-Share NAV does not represent: (1) the price at which the Company’s common stock would trade on a national securities exchange or the per-share price a third party would pay to acquire the Company, (2) the amount a stockholder would obtain if he or she tried to sell his or her shares or (3) the amount stockholders would receive if the Company liquidated its assets and distributed the proceeds after paying all of its expenses and liabilities. In addition, the Estimated Per-Share NAV does not reflect events subsequent to December 31, 2016 that would have affected the Company’s net asset value.
On February 15, 2018, in response to an unsolicited offer to the Company’s stockholders to purchase 1,000,000 shares of the Company’s common stock at a price of $13.66 per share, the Company commenced a tender offer for up to 1,000,000 shares at a price of $14.35 per share. See Note 19 - Subsequent Events for further discussion.
Share Repurchase Program
The Company’s board of directors has authorized the Company to repurchase shares pursuant to its share repurchase program (as amended and restated, the “SRP”), which permits investors to sell their shares back to the Company after they have held them for at least one year, subject to certain conditions and limitations. The Company may repurchase shares on a semiannual basis, in its sole discretion, at each six-month period ending June 30 and December 31.
On June 14, 2017, the Company announced that its board of directors had adopted an amendment and restatement of the SRP that superseded and replaced the existing SRP effective as of July 14, 2017. Under the amended and restated SRP, subject to certain conditions, only repurchase requests made following the death or qualifying disability of stockholders that purchased shares of the Company’s common stock or received their shares from the Company (directly or indirectly) through one or more non-cash transactions would be considered for repurchase. Other terms and provisions of the amended and restated SRP remained consistent with the existing SRP.
Under the SRP, prior to the amendment and restatement, the repurchase price per share for requests other than for death or disability was as follows:
| • | after one year from the purchase date — 92.5% of the then-current Estimated Per-Share NAV; |
| • | after two years from the purchase date — 95.0% of the then-current Estimated Per-Share NAV; |
| • | after three years from the purchase date — 97.5% of the then-current Estimated Per-Share NAV; and |
| • | after four years from the purchase date — 100.0% of the then-current Estimated Per-Share NAV. |
In the case of requests for death or disability, the repurchase price per share is equal to the Estimated Per-Share NAV applicable on the last day of the semiannual period, as described below.
Under the SRP, repurchases at each semiannual period are limited to a maximum of 2.5% of the weighted average number of shares of common stock outstanding during the previous fiscal year, with a maximum for any fiscal year of 5.0% of the weighted average number of shares of common stock outstanding during the previous fiscal year. Repurchases pursuant to the SRP for any given semiannual period are funded from proceeds received during that same semiannual period through the issuance of common stock pursuant to the DRIP, as well as any funds reserved by the Company in the sole discretion of the board of directors. Repurchases are made at a price based on Estimated Per-Share NAV applicable on the last day of the semiannual period, as described above.
F-29
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
The Company’s board of directors reserves the right, in its sole discretion, at any time and from time to time, to reject any request for repurchase, change the purchase price for repurchases or otherwise amend the terms of, suspend or terminate the SRP pursuant to any applicable notice requirements under the SRP. Due to these limitations, the Company cannot guarantee that it will be able to accommodate all repurchase requests.
When a stockholder requests repurchases and the repurchases are approved, the Company reclassifies such an obligation from equity to a liability based on the settlement value of the obligation. Shares repurchased have the status of authorized but unissued shares.
The following table summarizes the repurchases of shares under the SRP cumulatively through December 31, 2017:
| Number of Shares | Weighted-Average Price per Share | ||||||
| Cumulative repurchases as of December 31, 2014 | 303,907 | $ | 24.01 | ||||
| Year ended December 31, 2015 | 1,769,738 | 24.13 | |||||
| Year ended December 31, 2016 | 7,854 | 24.17 | |||||
| Year ended December 31, 2017 | 1,225,365 | (1) | 23.71 | ||||
| Cumulative repurchases as of December 31, 2017 | 3,306,864 | $ | 23.97 | ||||
___________________________________
| (1) | Excludes unapproved repurchase requests received during 2016 with respect to 5.9 million shares for $140.1 million at a weighted-average price per share of $23.65. During the year ended December 31, 2017, following the effectiveness of the amendment and restatement of the SRP, the Company’s board of directors approved 100% of the repurchase requests made following the death or qualifying disability of stockholders. No repurchases have been or will be made with respect to requests received during 2017 that are not valid requests in accordance with the amended and restated SRP. |
On February 15, 2018, in connection with the commencement of the tender offers described above to purchase 1,000,000 shares of the Company’s common stock, the Company’s board of directors suspended the SRP and will not accept repurchase requests under the SRP during the pendency of the Company’s tender offer. See Note 19 - Subsequent Events for further discussion.
Distribution Reinvestment Plan
Pursuant to the DRIP, the Company’s stockholders may elect to reinvest distributions by purchasing shares of common stock. The DRIP was suspended following the payment of the Company’s June 2015 distribution on July 1, 2015. On April 1, 2016, the Company reinstated the DRIP and registered an additional 7.7 million shares of common stock, offered at the then-current Estimated Per-Share NAV, for use under the DRIP pursuant to a registration statement on Form S-3 (File No. 333-210532). On August 30, 2016, in consideration of the Merger, the Company’s board of directors determined to suspend the DRIP effective immediately. Following the effectiveness of the joint proxy statement/prospectus relating to the Mergers on December 16, 2016, the Company reinstated the DRIP.
No dealer manager fees or selling commissions were paid with respect to shares purchased pursuant to the DRIP. Shares issued pursuant to the DRIP are recorded within equity in the accompanying consolidated balance sheets in the period distributions are declared. During the year ended December 31, 2017, approximately 2.4 million shares of common stock were issued pursuant to the DRIP.
F-30
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 13 — Commitments and Contingencies
Future Minimum Ground Lease Payments
The Company entered into ground lease agreements related to certain acquisitions under leasehold interest arrangements. The following table reflects the minimum base cash rental payments due from the Company over the next five years and thereafter:
| (In thousands) | Future Minimum Base Rent Payments | |||
| 2018 | $ | 1,427 | ||
| 2019 | 1,437 | |||
| 2020 | 1,219 | |||
| 2021 | 901 | |||
| 2022 | 918 | |||
| Thereafter | 12,531 | |||
| $ | 18,433 | |||
Litigation and Regulatory Matters
On January 13, 2017, four affiliated stockholders of RCA filed in the United States District Court for the District of Maryland a putative class action lawsuit against the Company, Edward M. Weil, Jr., Leslie D. Michelson, Edward G. Rendell (Weil, Michelson and Rendell, the “Director Defendants”), and AR Global, alleging violations of Sections 14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) by RCA and the Director Defendants, violations of Section 20(a) of the Exchange Act by AR Global and the Director Defendants, breaches of fiduciary duty by the Director Defendants, and aiding and abetting breaches of fiduciary duty by AR Global and the Company in connection with the negotiation of and proxy solicitation for a shareholder vote on the proposed merger of the Company and RCA and an amendment to RCA’s charter. The complaint sought on behalf of the putative class rescission of the merger transaction, which was voted on and approved by stockholders on February 13, 2017, and closed on February 16, 2017, together with unspecified rescissory damages, unspecified actual damages, and costs and disbursements of the action. On April 26, 2017, the Court appointed a lead plaintiff. Lead plaintiff, along with other stockholders of RCA, filed an amended complaint on June 19, 2017. The Amended Complaint named additional individuals and entities as defendants (David Gong, Stanley Perla, Lisa Kabnick (“Additional Director Defendants”), Nicholas Radesca and American Realty Capital Retail Advisor, LLC), added counts under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 in connection with the Registration Statement for the proposed merger, under Section 13(e) of the Exchange Act, and counts for breach of contract and unjust enrichment. The Company, the Director Defendants, the Additional Director Defendants and Nicholas Radesca deny wrongdoing and liability and intend to vigorously defend the action. On August 14, 2017, defendants moved to dismiss the amended complaint, which motions are pending. Due to the early stage of the litigation, no estimate of a probable loss or any reasonable possible losses are determinable at this time. No provisions for such losses have been recorded in the accompanying consolidated financial statements for the year ended December 31, 2017.
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, Nicholas S. Schorsch and William D. Kahane. 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 shareholders of the Company as a class. The complaint, as amended, alleges 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 alleges violations of Sections 14(a), 20(a) and 20(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) by the Company, as well as the Advisor, AR Global and Messrs. Schorsch and Kahane as control persons, and breaches of fiduciary duty by the Advisor, aided and abetted by AR Global and Messrs. Schorsch and Kahane. The complaint seeks unspecified damages, rescission of the Company’s advisory agreement which became effective when the Merger became effective, and a declaratory judgment that certain provisions of the Company’s advisory agreement are void. The Company believes the complaint is without merit and intends to defend vigorously. Due to the early stage of the litigation, no estimate of a probable loss or any reasonably possible losses are determinable at this time.
There are no other material legal or regulatory proceedings pending or known to be contemplated against the Company.
F-31
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
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 14 — Related Party Transactions and Arrangements
As of December 31, 2017 and 2016, American Finance Special Limited Partner, LLC (the “Special Limited Partner”), an entity controlled by AR Global, owned 8,888 shares of the Company’s outstanding common stock and owned 90 units of limited partner interests in the OP (“OP Units”). After holding the OP Units for a period of one year, or upon liquidation of the OP or sale of substantially all of the assets of the OP, holders of OP Units have the right to convert OP Units for the cash value of a corresponding number of shares of the Company’s common stock or, at the option of the OP, a corresponding number of shares of the Company’s common stock, in accordance with the limited partnership agreement of the OP. The remaining rights of the limited partner interests are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP’s assets.
Realty Capital Securities, LLC (the “Former Dealer Manager”) served as the dealer manager of the IPO. American National Stock Transfer, LLC (“ANST”), a subsidiary of the parent company of the Former Dealer Manager, provided other general professional services through January 2016. RCS Capital Corporation (“RCAP”), the parent company of the Former Dealer Manager and certain of its affiliates that provided services to the Company, filed for Chapter 11 bankruptcy protection in January 2016, prior to which it was under common control with AR Global. In May 2016, RCAP and its affiliated debtors emerged from bankruptcy under the new name, Aretec Group, Inc. On March 8, 2017, the creditor trust established in connection with the RCAP bankruptcy filed suit against AR Global, the Advisor, advisors of other entities sponsored by AR Global, and AR Global’s principals (including Edward M. Weil, Jr.). The suit alleges, among other things, certain breaches of duties to RCAP. The Company is not named in the suit, nor are there any allegations related to the services the Advisor provides to the Company. On May 26, 2017, the defendants moved to dismiss. The Advisor has informed the Company that it believes that the suit is without merit and intends to defend against it vigorously.
Fees and Participations Incurred in Connection With the Operations of the Company
On April 29, 2015, the independent directors of the board of directors unanimously approved certain amendments to the Amended and Restated Advisory Agreement, as amended (the “Original A&R Advisory Agreement”), by and among the Company, the OP and the Advisor (the “Second A&R Advisory Agreement”). The Second A&R Advisory Agreement, which superseded the Original A&R Advisory Agreement, took effect on July 20, 2015, the date on which the Company filed certain changes to the Company’s charter, which were approved by the Company’s stockholders on June 23, 2015. The initial term of the Second A&R Advisory Agreement of 20 years began on April 29, 2015, and is automatically renewable for another 20-year term upon each 20-year anniversary unless terminated by the board of directors for cause.
On September 6, 2016, the date of the Merger Agreement, the Company entered into an amendment and restatement of the Second A&R Advisory Agreement (the “Third A&R Advisory Agreement”), which became effective upon the Effective Time of the Mergers. Under the Third A&R Advisory Agreement, the Company has the right to internalize the services and terminate the Advisory Agreement, referred to as an “internalization,” after January 1, 2018 as long as (1) more than 67% of the Company’s independent directors approve the internalization; (2) the Company provides written notice to the Advisor; and (3) the Company pays the Advisor a fee equal to (a) $15.0 million plus (b) either (x) if the internalization occurs on or before December 31, 2028, the Subject Fees (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 (c)(x) 1% of the purchase price (excluding the portion of the purchase price funded with equity proceeds raised prior to the end of the fiscal quarter in which the notice of election occurs) of each acquisition or merger that occurs between the end of the fiscal quarter in which notice is given and the internalization and (y) without duplication, 1% of the amount of new equity raised by the Company between the end of the fiscal quarter in which notice is given and the internalization. Subject Fees means (I) (A) all amounts payable pursuant to the Advisory Agreement and the property management and leasing agreement (the “Property Management Agreement”) with the Property Manager for the fiscal quarter in which notice occurs multiplied by (B) four plus (II) without duplication, the annual increase in the base management fee resulting from the amount of new equity raised by the Company within the fiscal quarter in which notice occurs, as described above. The initial term of the Third A&R Advisory Agreement, which commenced upon the Effective Time, extends to April 29, 2035, and is automatically renewable for another 20-year term upon each 20-year anniversary.
F-32
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
On September 6, 2016, the date of the Merger Agreement, the Company entered into an amendment and restatement of the agreement of limited partnership of the OP (the “A&R OP Agreement”), which became effective upon the Effective Time. The A&R OP Agreement makes certain changes to the provisions of the partnership agreement relating to (a) distributions of net sales proceeds and the Termination Note (as defined in the A&R OP Agreement) issuable on termination of the Third A&R Advisory Agreement to address the issuance of shares of the Company’s common stock pursuant to the Merger and in future transactions; (b) internalization of the Advisor’s services after the Effective Time pursuant to the conditions in the Third A&R Advisory Agreement; and (c) certain matters related to changes in the Third A&R Advisory Agreement.
Prior to January 16, 2016, the Advisor was paid an acquisition fee equal to 1.0% of the contract purchase price of each acquired property and 1.0% of the amount advanced for a loan or other investment. The Advisor also has been and may continue to be reimbursed for costs it incurs in providing investment-related services, or “insourced expenses.” These insourced expenses may not exceed, 0.5% of the contract purchase price of each acquired property and 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 fees and financing coordination fees (as described below) were not to exceed 1.5% of the contract purchase price and the amount advanced for a loan or other investment for all the assets acquired. The Second A&R Advisory Agreement terminated the acquisition fee and financing coordination fee (both as defined in the Second A&R Advisory Agreement) effective January 16, 2016. As of January 16, 2016, aggregate acquisition fees and financing coordination fees did not exceed the 1.5% threshold. Further, the total of all acquisition fees, acquisition expenses and any financing coordination fees payable was not to exceed 4.5% of the Company’s total portfolio contract purchase price or 4.5% of the amount advanced for the Company’s total portfolio of loans or other investments. As of January 16, 2016, the total of all cumulative acquisition fees, acquisition expenses and financing coordination fees did not exceed the 4.5% threshold.
Additionally, prior to January 16, 2016, if the Advisor provided services in connection with the origination or refinancing of any debt that the Company obtained and used to acquire properties or to make other permitted investments, or that was assumed, directly or indirectly, in connection with the acquisition of properties, the Company paid the Advisor a financing coordination fee equal to 0.75% of the amount available and/or outstanding under such financing, subject to certain limitations.
Prior to April 15, 2015, in connection with asset management services provided by the Advisor, the Company issued to the Advisor an asset management subordinated participation by causing the OP to issue (subject to periodic approval by the board of directors) to the Advisor performance-based restricted, forfeitable partnership units of the OP designated as “Class B Units.” The Class B Units were intended to be profit interests that would vest, and no longer be subject to forfeiture, at such time as: (a) the value of the OP’s assets plus all distributions made by the Company equals or exceeds the total amount of capital contributed by investors plus a 6.0% cumulative, pretax, non-compounded annual return thereon (the “economic hurdle”); (b) any one of the following events occurs concurrently with or subsequently to the achievement of the economic hurdle described above: (i) a listing; (ii) a transaction to which the Company or the OP is a party, as a result of which OP Units or the Company’s common stock are exchanged for, or converted into, the right, or the holders of such securities are otherwise entitled, to receive cash, securities or other property or any combination thereof; or (iii) the termination of the advisory agreement without cause; and (c) the Advisor pursuant to the advisory agreement is providing services to the Company immediately prior to the occurrence of an event of the type described in clause (b) above, unless the failure to provide such services is attributable to the termination without cause of the advisory agreement by an affirmative vote of a majority of the Company’s independent directors after the economic hurdle described above has been met. Unvested Class B Units will be forfeited immediately if: (x) the advisory agreement is terminated for any reason other than a termination without cause; or (y) the advisory agreement is terminated without cause by an affirmative vote of a majority of the board of directors before the economic hurdle described above has been met.
As of December 31, 2017, in aggregate, the Company’s board of directors had approved and the Company had issued 1,052,420 Class B Units to the Advisor in connection with the arrangement described above. As of December 31, 2017, the Company could not determine the probability of achieving the performance condition, as such, no expense was recognized in connection with this arrangement during the years ended December 31, 2017, 2016 and 2015. The Advisor receives distributions on unvested Class B Units equal to the distribution amount received on the same number of shares of the Company’s common stock. Such distributions on issued Class B Units are included in general and administrative expenses in the consolidated statements of operations and comprehensive loss. Pursuant to an Amendment (the “Amendment”) to the Original A&R Advisory Agreement entered into in April 2015, the OP will not issue any further Class B Units. The changes made pursuant to the Amendment were incorporated into the Agreement of Limited Partnership of the OP (the “OP Agreement”) through a Third Amendment to the OP Agreement, which was approved by the board of directors and entered into on April 29, 2015.
F-33
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Under the Second A&R Advisory Agreement, the Company was required to pay a fixed base management fee of $18.0 million annually. Under the Third A&R Advisory Agreement, the fixed portion of the base management fee increased from $18.0 million annually to (i) $21.0 million annually for the first year following the Effective Time; (ii) $22.5 million annually for the second year following the Effective Time; and (iii) $24.0 million annually for the remainder of the term. If the Company acquires (whether by merger, consolidation or otherwise) any REIT, other than RCA, that is advised by an entity that is wholly-owned, directly or indirectly, by AR Global, other than any joint ventures, (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, 0.0047 and 0.0062 for years one, two and three and thereafter, respectively, following the Specified Transaction. The variable portion of the base management fee changed from a quarterly fee equal to 0.375% of the cumulative net proceeds of any equity raised after the Company lists its common stock on a national securities exchange to a monthly fee equal to one-twelfth of 1.25% of the cumulative net proceeds of any equity raised by the Company or its subsidiaries from and after the Effective Time. Base management fees are included in asset management fees to related party on the consolidated statements of operations and comprehensive loss for the years ended December 31, 2017, 2016 and 2015.
In addition, under the Third A&R Advisory Agreement, the Company is required to pay the Advisor a variable management fee equal to (x) 15.0% of the applicable quarter’s Core Earnings (as defined below) per share in excess of $0.375 per share plus (y) 10.0% of the applicable quarter’s Core Earnings per share in excess of $0.50 per share, in each case as adjusted for changes in the number of shares of common stock outstanding. Core Earnings are defined as, for the applicable period, GAAP net income or loss excluding non-cash equity compensation expense, the variable 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, losses or other non-cash items recorded in net loss for the period, regardless of whether such items are included in other comprehensive income or 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 impairment 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. The Company did not incur a variable management fee during the years ended December 31, 2017, 2016 and 2015.
On September 6, 2016, the RCA Advisor, as RCA’s former property manager and leasing agent, assigned RCA’s existing property management agreement (the “Target Property Management Agreement”) and existing leasing agreement (the “Target Leasing Agreement”) to the Property Manager, in respect of (1) the properties owned by RCA prior to the Merger, and (2) any existing anchored, retail properties, such as power centers and lifestyle centers, acquired by the Company after the Effective Time and during the term of the Target Property Management Agreement and the Target Leasing Agreement, (collectively, the “Target Properties”). The Target Property Management Agreement and the Target Leasing Agreement became effective at the Effective Time.
In connection with the Merger Agreement, the Target Property Management Agreement and the Target Leasing Agreement, the Company has entered into an amended and restated the Property Management Agreement in respect of (1) the properties owned by the Company prior to the Merger and (2) any double- and triple-net leased single tenant properties acquired by the Company after the Effective Time and during the term of the Property Management Agreement (collectively, the “Company Properties” and together with the Target Properties, the “Properties”). The Property Management Agreement became effective at the Effective Time.
The Target Property Management Agreement provides that the Property Manager is entitled to a management fee equal to 4% of the gross rental receipts from the Target 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% administrative charge for common area expenses.
In addition, the Property Manager is entitled to transition fees of up to $2,500 for each Target Property managed, a construction fee equal to 6% of construction costs incurred, if any, and reimbursement of all expenses specifically related to the operation of a Target 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 Target Properties.
The Target Property Management Agreement, the Target Leasing Agreement and the Property Management Agreement each have an initial term ending October 1, 2018, with automatic renewal for successive one-year terms unless terminated 60 days prior to the end of a term or terminated for cause due to material breach of the agreement, fraud, criminal conduct or willful misconduct, insolvency or bankruptcy of the Property Manager.
F-34
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
The Company reimburses the Advisor’s costs of providing administrative services. During the years ended December 31, 2017, 2016 and 2015, the Company incurred $7.8 million, $2.9 million and $1.2 million, respectively, of reimbursement expenses from the Advisor for providing administrative services. These reimbursements are included in general and administrative expense on the consolidated statements of operations and comprehensive loss.
In order to improve operating cash flows and the ability to pay distributions from operating cash flows, the Advisor may elect to forgive certain fees. Because the Advisor may forgive certain fees, cash flows from operations that would have been paid to the Advisor may be available to pay distributions to stockholders. The fees that are forgiven are not deferrals and, accordingly, will not be paid to the Advisor. In certain instances, to improve the Company’s working capital, the Advisor may elect to absorb a portion of the Company’s general and administrative costs or property operating costs. No such fees were forgiven or costs were absorbed by the Advisor during the years ended December 31, 2017, 2016 and 2015.
The following table details amounts incurred and payable to related parties in connection with the operations-related services described above as of and for the periods presented. Amounts below are inclusive of fees and other expense reimbursements incurred from and due to the Advisor that are passed through and ultimately paid to Lincoln as a result of the Advisor’s exclusive service agreement with Lincoln:
| Year Ended December 31, | Payable as of December 31, | |||||||||||||||||||
| (In thousands) | 2017 | 2016 | 2015 | 2017 | 2016 | |||||||||||||||
| One-time fees and reimbursements: | ||||||||||||||||||||
Acquisition fees and related cost reimbursements (1) | $ | 180 | $ | — | $ | 1,330 | $ | 9 | $ | — | ||||||||||
| Financing coordination fees | — | — | 5,850 | — | — | |||||||||||||||
| Ongoing fees: | ||||||||||||||||||||
| Asset management fees | 20,908 | 18,000 | 13,009 | 408 | — | |||||||||||||||
| Property management and leasing fees | 7,167 | — | — | 1,114 | — | |||||||||||||||
Professional fees and other reimbursements (2) | 8,540 | 3,104 | 4,020 | 1,522 | 763 | |||||||||||||||
Distributions on Class B Units (2) | 1,551 | 1,736 | 1,573 | 116 | 147 | |||||||||||||||
| Total related party operation fees and reimbursements | $ | 38,346 | $ | 22,840 | $ | 25,782 | $ | 3,169 | $ | 910 | ||||||||||
_________________________________
| (1) | Acquisition fees and expenses from related parties of $0.9 million and $0.2 million were recognized in acquisition and transaction related expense on the consolidated statement of operations and comprehensive loss for the years ended December 31, 2015 and December 31, 2017, respectively. In addition, for the years ended December 31, 2015, the Company capitalized $0.4 million of acquisition expenses to the Company’s consolidated balance sheet, which are amortized over the life of each investment using the effective interest method. No acquisition expenses were capitalized during the years ended December 31, 2017 and 2016. |
| (2) | These costs are included in general and administrative expense on the consolidated statements of operations and comprehensive loss. |
The predecessor to AR Global was party to a services agreement with RCS Advisory Services, LLC (“RCS Advisory”), a subsidiary of RCAP, pursuant to which RCS Advisory and its affiliates provided the Company and certain other companies sponsored by AR Global with services (including, without limitation, transaction management, compliance, due diligence, event coordination and marketing services, among others) on a time and expenses incurred basis or at a flat rate based on services performed. The predecessor to AR Global instructed RCS Advisory to stop providing such services in November 2015 and no services have since been provided by RCS Advisory.
The Company was also party to a transfer agency agreement with ANST, a subsidiary of RCAP, pursuant to which ANST provided the Company with transfer agency services (including broker and stockholder servicing, transaction processing, year-end IRS reporting and other services), and supervisory services overseeing the transfer agency services performed by DST Systems, Inc. (“DST”), a third-party transfer agent. AR Global received written notice from ANST on February 10, 2016 that it would wind down operations by the end of the month and would withdraw as the transfer agent effective February 29, 2016. On February 26, 2016, the Company entered into a definitive agreement with DST to provide the Company directly with transfer agency services (including broker and stockholder servicing, transaction processing, year-end IRS reporting and other services).
F-35
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Fees Incurred in Connection with the Liquidation or Listing of the Company’s Real Estate Assets
In connection with the Listing, the Company, as the general partner of the OP, would cause the OP to issue a note (the “Listing Note”) to the Special Limited Partner to evidence the OP’s obligation to distribute to the Special Limited Partner an aggregate amount (the “Listing Amount”) equal to 15.0% of the difference (to the extent the result is a positive number) between:
| • | the sum of (i) the “market value” (as defined in the Listing Note) of the Company’s common stock plus (ii) the sum of all distributions or dividends (from any source) paid by the Company to its stockholders prior to the Listing; and |
| • | the sum of (i) the gross proceeds (“Gross Proceeds”) of all public and private offerings, including issuance of the Company’s common stock pursuant to a merger or business combination (an “Offering”) plus (ii) the total amount of cash that, if distributed to those stockholders who purchased shares of common stock in an Offering, would have provided those stockholders a 6.0% cumulative, non-compounded, pre-tax annual return (based on a 365-day year) on the Gross Proceeds. |
The “market value” used to calculate the Listing Amount will not be determinable until the end of a measurement period, the period of 30 consecutive trading days, commencing on the 180th day following the Listing, unless another liquidity event, such as a merger, occurs prior to the end of the measurement period. If another liquidity event occurs prior to the end of the measurement period, the Listing Note provides for appropriate adjustment to the calculation of the Listing Amount.
The Special Limited Partner will have the right to receive distributions of “Net Sales Proceeds,” as defined in the Listing Note, until the Listing Note is paid in full; provided that, the Special Limited Partner has the right, but not the obligation, to convert the entire Special Limited Partner interest into OP Units. OP Units are convertible into shares of the Company’s common stock in accordance with the terms governing conversion of OP Units into shares of common stock and contained in the Second Amended and Restated Agreement of Limited Partnership of the OP by the Company, as general partner of its OP, with the limited partners party thereto (the “Second A&R OP Agreement”), which will be entered into at Listing.
On April 29, 2015, the board of directors authorized the execution, in conjunction with the potential Listing, the Second A&R OP Agreement to conform more closely with agreements of limited partnership of other operating partnerships controlled by real estate investment trusts whose securities are publicly traded and listed, and to add long term incentive plan units (“LTIP Units”) as a new class of units of limited partnership in the OP to the existing common units (“OP Units”). The Company may at any time cause the OP to issue LTIP Units pursuant to an outperformance agreement. On April 29, 2015, the board of directors approved the general terms of a Multi-Year Outperformance Agreement to be entered into with the Company, the OP and the Advisor in connection with the Listing.
Under the Original A&R Advisory Agreement, the Advisor was paid a brokerage commission on the sale of property, not to exceed the lesser of 2.0% of the contract sale price of the property and one-half of the total brokerage commission paid, if a third party broker was also involved; provided, however, that in no event could the real estate commissions paid to the Advisor, its affiliates and unaffiliated third parties exceed the lesser of 6.0% of the contract sales price and a reasonable, customary and competitive real estate commission, in each case, payable to the Advisor if the Advisor or its affiliates, as determined by a majority of the independent directors, provided a substantial amount of services in connection with the sale. During the year ended December 31, 2016, the Company incurred $0.6 million of real estate commissions from the Advisor for its services in connection with the sale of real estate investments. The impact of the real estate commissions is included in gain on sale of real estate investments on the consolidated statement of operations and comprehensive loss for the year ended December 31, 2016. No such commissions were incurred during the years ended December 31, 2017 and 2015. The Second A&R Advisory Agreement terminated the brokerage commission to the Advisor.
Note 15 — 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.
F-36
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 16 — Share-Based Compensation
Restricted Share Plan
The Company had an employee and director incentive restricted share plan (the “Original RSP”), which provided for the automatic grant of 1,333 restricted shares of common stock to each of the independent directors, without any further action by the Company’s board of directors or the stockholders, on the date of initial election to the board of directors and on the date of each annual stockholders’ meeting. Restricted shares issued to independent directors vest over a five-year period following the date of grant in increments of 20.0% per annum. The Original RSP provided the Company with the ability to grant awards of restricted shares to the Company’s 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 other entities that provide services to the Company. The total number of shares of common stock granted under the Original RSP could not exceed 5.0% of the Company’s shares of common stock on a fully diluted basis at any time, and in any event could not exceed 3.4 million shares (as such number may be adjusted for stock splits, stock dividends, combinations and similar events).
Restricted share awards entitle the recipient to receive shares of common stock from the Company under terms that provide for vesting over a specified period of time. For restricted share awards granted prior to 2015, such awards would typically be forfeited with respect to the unvested shares upon the termination of the recipient’s employment or other relationship with the Company. Restricted share awards granted during or after 2015 provide for accelerated vesting of the portion of the unvested shares scheduled to vest in the year of the recipient’s voluntary termination or the failure to be re-elected to the board. The Company accounts for forfeitures when they occur. Restricted shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested. Holders of restricted shares may receive cash distributions prior to the time that the restrictions on the restricted shares have lapsed. Any distributions payable in shares of common stock are subject to the same restrictions as the underlying restricted shares.
In April 2015, the board of directors adopted an Amended and Restated RSP (the “A&R RSP”) that replaces in its entirety the Original RSP. The A&R RSP amends the terms of the Original RSP as follows:
| • | it increased the number of shares of Company capital stock, par value $0.01 per share (the “Capital Stock”), available for awards thereunder from 5.0% of the Company’s outstanding shares of Capital Stock on a fully diluted basis at any time, not to exceed 3.4 million shares of Capital Stock, to 10.0% of the Company’s outstanding shares of Capital Stock on a fully diluted basis at any time; |
| • | it removed the fixed amount of shares that were automatically granted to the Company’s independent directors; and |
| • | it added restricted stock units (including dividend equivalent rights thereon) as a permitted form of award. |
The following table reflects restricted share award activity for the years ended December 31, 2017, 2016 and 2015:
| Number of Shares of Common Stock | Weighted-Average Issue Price | |||||
| Unvested, December 31, 2014 | 4,799 | $ | 22.50 | |||
| Granted | 6,240 | 24.04 | ||||
| Vested | (1,067 | ) | 22.50 | |||
| Forfeited | (2,517 | ) | 23.83 | |||
| Unvested, December 31, 2015 | 7,455 | 23.34 | ||||
| Granted | 3,723 | 24.17 | ||||
| Vested | (1,811 | ) | 23.19 | |||
| Unvested, December 31, 2016 | 9,367 | 23.70 | ||||
| Granted | 8,897 | 23.59 | ||||
| Vested | (2,556 | ) | 23.47 | |||
| Unvested, December 31, 2017 | 15,708 | $ | 23.67 | |||
As of December 31, 2017, the Company had $0.2 million of unrecognized compensation cost related to unvested restricted stock awards granted. That cost is expected to be recognized over a weighted-average period of 2.8 years.
F-37
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
The fair value of the restricted shares is being expensed in accordance with the service period required. Compensation expense related to restricted shares was approximately $128,000, $67,000 and $51,000 for the years ended December 31, 2017, 2016 and 2015, respectively. Compensation expense related to restricted stock is included in general and administrative expense on the accompanying consolidated statements of operations and comprehensive loss.
Other Share-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. There are 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 years ended December 31, 2017, 2016 and 2015.
Note 17 — Net Loss Per Share
The following table sets forth the basic and diluted net loss per share computations for the years ended December 31, 2017, 2016 and 2015:
| Year Ended December 31, | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
Basic and diluted net loss attributable to stockholders (in thousands) | $ | (46,494 | ) | $ | (54,255 | ) | $ | (21,117 | ) | |||
| Basic and diluted weighted-average shares outstanding | 99,649,471 | 65,450,432 | 66,028,245 | |||||||||
| Basic and diluted net loss per share | $ | (0.47 | ) | $ | (0.83 | ) | $ | (0.32 | ) | |||
Diluted net loss per share assumes the conversion of all common stock equivalents into an equivalent number of common shares, unless the effect is antidilutive. The Company considers unvested restricted stock, OP Units and Class B Units to be common share equivalents. The Company had the following common share equivalents on a weighted-average basis that were excluded from the calculation of diluted net loss per share as their effect would have been antidilutive for the periods presented:
| December 31, | |||||||||
| 2017 | 2016 | 2015 | |||||||
Unvested restricted stock (1) | 12,957 | 7,985 | 6,349 | ||||||
OP Units (2) | 177,962 | 90 | 90 | ||||||
| Class B Units | 1,052,420 | 1,052,420 | 953,086 | ||||||
| Total weighted-average antidilutive common stock equivalents | 1,243,339 | 1,060,495 | 959,525 | ||||||
_____________________
| (1) | Weighted-average number of shares of unvested restricted stock outstanding for the periods presented. There were 15,708 9,367 and 7,455 shares of unvested restricted stock outstanding as of December 31, 2017, 2016 and 2015, respectively. |
| (2) | Weighted-average number of shares of OP Units outstanding for the periods presented. There were 203,612, 90 and 90 OP Units outstanding as of December 31, 2017, 2016 and 2015, respectively. |
Note 18 – Quarterly Results (Unaudited)
Presented below is a summary of the unaudited quarterly financial information for the years ended December 31, 2017 and 2016:
| Quarters Ended | ||||||||||||||||
| (In thousands, except share and per share amounts) | March 31, 2017 | June 30, 2017 | September 30, 2017 | December 31, 2017 | ||||||||||||
| Total revenues | $ | 57,220 | $ | 71,607 | $ | 69,729 | $ | 72,354 | ||||||||
| Basic and diluted net loss | $ | (10,730 | ) | $ | (1,023 | ) | $ | (15,397 | ) | $ | (19,427 | ) | ||||
| Basic and diluted weighted-average shares outstanding | 84,652,179 | 104,140,631 | 104,545,591 | 104,982,273 | ||||||||||||
| Basic and diluted net loss per share | $ | (0.13 | ) | $ | (0.01 | ) | $ | (0.15 | ) | $ | (0.18 | ) | ||||
F-38
AMERICAN FINANCE TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
| Quarters Ended | ||||||||||||||||
| (In thousands, except share and per share amounts) | March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | ||||||||||||
| Total revenues | $ | 43,786 | $ | 44,277 | $ | 44,758 | $ | 44,847 | ||||||||
| Basic and diluted net loss | (5,854 | ) | (4,077 | ) | (8,729 | ) | $ | (35,595 | ) | |||||||
| Basic and diluted weighted average shares outstanding | 64,955,420 | 65,301,764 | 65,741,735 | 65,795,812 | ||||||||||||
| Basic and diluted net loss per share | $ | (0.09 | ) | $ | (0.06 | ) | $ | (0.13 | ) | $ | (0.54 | ) | ||||
Note 19 — Subsequent Events
The Company has evaluated subsequent events through the filing of this Annual Report on Form 10-K, and determined that there have not been any events that have occurred that would require adjustments to, or disclosures in, the consolidated financial statements except for the following disclosures:
Commencement of Tender Offers
On February 15, 2018, the Company commenced a tender offer (the “Offer”) for up to 1,000,000 shares of the Company’s common stock at a price of $14.35 per share. The Company made the Offer in order to deter an unsolicited bidder and other potential future bidders that may try to exploit the illiquidity of the Company’s common stock and acquire it from stockholders at prices substantially below the current Estimated Per-Share NAV. Unless extended or withdrawn, the Offer will expire at 11:59 p.m., Eastern time, on March 27, 2018. The Company’s board of directors has suspended the SRP. The Company will not accept any repurchase requests under the SRP during the pendency of the Offer.
Share Repurchases
During January 2018, the Company repurchased 412,939 shares for approximately $9.7 million at a price of $23.37 per share.
Acquisitions
From January 1, 2018 to March 16, 2018, the Company acquired 24 properties with an aggregate base purchase price of $43.7 million, excluding acquisition related costs.
Dispositions
From January 1, 2018 to March 16, 2018, the Company sold 6 properties with an aggregate contract sale price of $62.8 million.
F-39
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
| (In thousands) | Initial Costs | Subsequent to Acquisition | Gross Amount Carried at December 31, 2017 (12) (13) | ||||||||||||||||||||||||||
| Property | Property Type | City | State | Acquisition Date | Encumbrances at December 31, 2017 | Land | Building and Improvements | Land (11) | Building and Improvements(11) | Accumulated Depreciation (14) (15) | |||||||||||||||||||
| Dollar General I | Retail | Mission | TX | 4/29/2013 | — | (1) | 142 | 807 | — | — | 949 | 212 | |||||||||||||||||
| Dollar General I | Retail | Sullivan | MO | 5/3/2013 | — | (1) | 146 | 825 | — | — | 971 | 216 | |||||||||||||||||
| Walgreens I | Retail | Pine Bluff | AR | 7/8/2013 | — | (1) | 159 | 3,016 | — | — | 3,175 | 814 | |||||||||||||||||
| Dollar General II | Retail | Bogalusa | LA | 7/12/2013 | — | (1) | 107 | 965 | — | — | 1,072 | 244 | |||||||||||||||||
| Dollar General II | Retail | Donaldsonville | LA | 7/12/2013 | — | (1) | 97 | 871 | — | — | 968 | 220 | |||||||||||||||||
| AutoZone I | Retail | Cut Off | LA | 7/16/2013 | — | (1) | 67 | 1,282 | — | — | 1,349 | 318 | |||||||||||||||||
| Dollar General III | Retail | Athens | MI | 7/16/2013 | — | (1) | 48 | 907 | — | — | 955 | 225 | |||||||||||||||||
| Dollar General III | Retail | Fowler | MI | 7/16/2013 | — | (1) | 49 | 940 | — | — | 989 | 233 | |||||||||||||||||
| Dollar General III | Retail | Hudson | MI | 7/16/2013 | — | (1) | 102 | 922 | — | — | 1,024 | 229 | |||||||||||||||||
| Dollar General III | Retail | Muskegon | MI | 7/16/2013 | — | (1) | 49 | 939 | — | — | 988 | 233 | |||||||||||||||||
| Dollar General III | Retail | Reese | MI | 7/16/2013 | — | (1) | 150 | 848 | — | — | 998 | 210 | |||||||||||||||||
| BSFS I | Retail | Fort Myers | FL | 7/18/2013 | — | (1) | 1,215 | 1,822 | — | — | 3,037 | 467 | |||||||||||||||||
| Dollar General IV | Retail | Bainbridge | GA | 7/29/2013 | — | (1) | 233 | 700 | — | — | 933 | 174 | |||||||||||||||||
| Dollar General IV | Retail | Vanleer | TN | 7/29/2013 | — | (1) | 78 | 705 | — | — | 783 | 175 | |||||||||||||||||
| Tractor Supply I | Retail | Vernon | CT | 8/1/2013 | — | (1) | 358 | 3,220 | — | — | 3,578 | 678 | |||||||||||||||||
| Dollar General V | Retail | Meraux | LA | 8/2/2013 | — | (1) | 708 | 1,315 | — | — | 2,023 | 326 | |||||||||||||||||
| Mattress Firm I | Retail | Tallahassee | FL | 8/7/2013 | — | (1) | 1,015 | 1,241 | — | — | 2,256 | 308 | |||||||||||||||||
| Family Dollar I | Retail | Butler | KY | 8/12/2013 | — | (1) | 126 | 711 | — | — | 837 | 176 | |||||||||||||||||
| Lowe's I | Retail | Macon | GA | 8/19/2013 | — | (1) | — | 8,420 | — | — | 8,420 | 1,717 | |||||||||||||||||
| Lowe's I | Retail | Fayetteville | NC | 8/19/2013 | — | — | 6,422 | — | — | 6,422 | 1,312 | ||||||||||||||||||
| Lowe's I | Retail | New Bern | NC | 8/19/2013 | — | (1) | 1,812 | 10,269 | — | — | 12,081 | 2,098 | |||||||||||||||||
| Lowe's I | Retail | Rocky Mount | NC | 8/19/2013 | — | (1) | 1,931 | 10,940 | — | — | 12,871 | 2,235 | |||||||||||||||||
| O'Reilly Auto Parts I | Retail | Manitowoc | WI | 8/19/2013 | — | (1) | 85 | 761 | — | — | 846 | 185 | |||||||||||||||||
| Food Lion I | Retail | Charlotte | NC | 8/19/2013 | — | (1) | 3,132 | 4,697 | — | — | 7,829 | 1,003 | |||||||||||||||||
| Lowe's I | Retail | Aiken | SC | 8/21/2013 | — | (1) | 1,764 | 7,056 | — | — | 8,820 | 1,440 | |||||||||||||||||
| Family Dollar II | Retail | Danville | AR | 8/22/2013 | — | (1) | 170 | 679 | — | — | 849 | 165 | |||||||||||||||||
| Walgreens II | Retail | Tucker | GA | 8/23/2013 | — | (1) | — | 2,524 | — | — | 2,524 | 656 | |||||||||||||||||
| Dollar General VI | Retail | Natalbany | LA | 8/23/2013 | — | (1) | 379 | 883 | — | — | 1,262 | 215 | |||||||||||||||||
| Dollar General VII | Retail | Gasburg | VA | 8/23/2013 | — | (1) | 52 | 993 | — | — | 1,045 | 242 | |||||||||||||||||
| Family Dollar III | Retail | Challis | ID | 8/27/2013 | — | (1) | 44 | 828 | — | — | 872 | 201 | |||||||||||||||||
| Chili's I | Retail | Lake Jackson | TX | 8/30/2013 | — | (1) | 746 | 1,741 | — | — | 2,487 | 531 | |||||||||||||||||
| Chili's I | Retail | Victoria | TX | 8/30/2013 | — | (1) | 813 | 1,897 | — | — | 2,710 | 579 | |||||||||||||||||
| CVS I | Retail | Anniston | AL | 8/30/2013 | — | (1) | 472 | 1,887 | — | — | 2,359 | 491 | |||||||||||||||||
| Joe's Crab Shack I | Retail | Westminster | CO | 8/30/2013 | — | (1) | 1,136 | 2,650 | — | — | 3,786 | 809 | |||||||||||||||||
| Joe's Crab Shack I | Retail | Houston | TX | 8/30/2013 | — | (1) | 1,169 | 2,171 | (578 | ) | (745 | ) | 2,017 | 662 | |||||||||||||||
F-40
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
| (In thousands) | Initial Costs | Subsequent to Acquisition | Gross Amount Carried at December 31, 2017 (12) (13) | ||||||||||||||||||||||||||
| Property | Property Type | City | State | Acquisition Date | Encumbrances at December 31, 2017 | Land | Building and Improvements | Land (11) | Building and Improvements(11) | Accumulated Depreciation (14) (15) | |||||||||||||||||||
| Tire Kingdom I | Retail | Lake Wales | FL | 9/4/2013 | — | (1) | 556 | 1,296 | — | — | 1,852 | 326 | |||||||||||||||||
| Dollar General VIII | Retail | Stanleytown | VA | 9/6/2013 | — | (1) | 185 | 1,049 | — | — | 1,234 | 255 | |||||||||||||||||
| AutoZone II | Retail | Temple | GA | 9/6/2013 | — | (1) | 569 | 854 | — | — | 1,423 | 208 | |||||||||||||||||
| Family Dollar IV | Retail | Oil City | LA | 9/9/2013 | — | (1) | 76 | 685 | — | — | 761 | 167 | |||||||||||||||||
| Fresenius I | Office | Montevallo | AL | 9/12/2013 | — | (1) | 300 | 1,699 | — | — | 1,999 | 346 | |||||||||||||||||
| Dollar General IX | Retail | Mabelvale | AR | 9/13/2013 | — | (1) | 38 | 723 | — | — | 761 | 176 | |||||||||||||||||
| Advance Auto I | Retail | Angola | IN | 9/19/2013 | — | (1) | 35 | 671 | — | — | 706 | 160 | |||||||||||||||||
| Walgreens III | Retail | Lansing | MI | 9/19/2013 | — | (1) | 216 | 4,099 | — | — | 4,315 | 1,045 | |||||||||||||||||
| CVS II | Retail | Holyoke | MA | 9/19/2013 | — | (1) | — | 2,258 | — | — | 2,258 | 576 | |||||||||||||||||
| Arby's I | Retail | Hernando | MS | 9/19/2013 | — | (1) | 624 | 1,455 | — | — | 2,079 | 435 | |||||||||||||||||
| Walgreens IV | Retail | Beaumont | TX | 9/20/2013 | — | (1) | 499 | 1,995 | — | — | 2,494 | 509 | |||||||||||||||||
| Dollar General X | Retail | Greenwell Springs | LA | 9/24/2013 | — | (1) | 114 | 1,029 | — | — | 1,143 | 246 | |||||||||||||||||
| National Tire & Battery I | Retail | San Antonio | TX | 9/24/2013 | — | (1) | 577 | 577 | — | — | 1,154 | 142 | |||||||||||||||||
| American Express Travel Related Services I | Office | Greensboro | NC | 9/24/2013 | — | (1) | 1,620 | 41,401 | — | — | 43,021 | 12,777 | |||||||||||||||||
| American Express Travel Related Services I | Office | Salt Lake City | UT | 9/24/2013 | — | (1) | 4,150 | 32,789 | — | — | 36,939 | 10,921 | |||||||||||||||||
| AmeriCold I | Distribution | Belvidere | IL | 9/24/2013 | — | (1) | 2,170 | 17,843 | — | — | 20,013 | 4,626 | |||||||||||||||||
| AmeriCold I | Distribution | Brooklyn Park | MN | 9/24/2013 | — | (1) | 1,590 | 11,940 | — | — | 13,530 | 3,095 | |||||||||||||||||
| AmeriCold I | Distribution | Cartersville | GA | 9/24/2013 | — | (1) | 1,640 | 14,533 | — | — | 16,173 | 3,768 | |||||||||||||||||
| AmeriCold I | Distribution | Douglas | GA | 9/24/2013 | — | (1) | 750 | 7,076 | — | — | 7,826 | 1,834 | |||||||||||||||||
| AmeriCold I | Distribution | Gaffney | SC | 9/24/2013 | — | (1) | 1,360 | 5,666 | — | — | 7,026 | 1,469 | |||||||||||||||||
| AmeriCold I | Distribution | Gainesville | GA | 9/24/2013 | — | (1) | 1,580 | 13,838 | — | — | 15,418 | 3,587 | |||||||||||||||||
| AmeriCold I | Distribution | Pendergrass | GA | 9/24/2013 | — | (1) | 2,810 | 26,572 | — | — | 29,382 | 6,889 | |||||||||||||||||
| AmeriCold I | Distribution | Piedmont | SC | 9/24/2013 | — | (1) | 3,030 | 24,067 | — | — | 27,097 | 6,239 | |||||||||||||||||
| AmeriCold I | Distribution | Zumbrota | MN | 9/24/2013 | — | (1) | 2,440 | 18,152 | — | — | 20,592 | 4,706 | |||||||||||||||||
| Home Depot I | Distribution | Valdosta | GA | 9/24/2013 | — | (1) | 2,930 | 30,538 | — | — | 33,468 | 6,111 | |||||||||||||||||
| Home Depot I | Distribution | Birmingham | AL | 9/24/2013 | — | (1) | 3,660 | 33,667 | — | — | 37,327 | 6,737 | |||||||||||||||||
| L.A. Fitness I | Retail | Houston | TX | 9/24/2013 | — | (1) | 2,540 | 8,379 | — | — | 10,919 | 1,778 | |||||||||||||||||
| New Breed Logistics I | Distribution | Hanahan | SC | 9/24/2013 | — | (1) | 2,940 | 19,171 | — | — | 22,111 | 4,970 | |||||||||||||||||
| SunTrust Bank I | Retail | Washington | DC | 9/24/2013 | — | (1) | 590 | 2,366 | — | — | 2,956 | 539 | |||||||||||||||||
| SunTrust Bank I | Retail | Brooksville | FL | 9/24/2013 | — | (1) | 360 | 127 | (198 | ) | (56 | ) | 233 | 26 | |||||||||||||||
| SunTrust Bank I | Retail | Fort Pierce | FL | 9/24/2013 | — | (1) | 720 | 1,434 | (161 | ) | (248 | ) | 1,745 | 327 | |||||||||||||||
| SunTrust Bank I | Retail | New Smyrna Beach | FL | 9/24/2013 | — | (1) | 740 | 2,859 | — | — | 3,599 | 651 | |||||||||||||||||
| SunTrust Bank I | Retail | Orlando | FL | 9/24/2013 | — | (1) | 540 | 3,069 | — | — | 3,609 | 699 | |||||||||||||||||
| SunTrust Bank I | Retail | Orlando | FL | 9/24/2013 | — | (1) | 410 | 2,078 | — | — | 2,488 | 473 | |||||||||||||||||
F-41
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
| (In thousands) | Initial Costs | Subsequent to Acquisition | Gross Amount Carried at December 31, 2017 (12) (13) | ||||||||||||||||||||||||||
| Property | Property Type | City | State | Acquisition Date | Encumbrances at December 31, 2017 | Land | Building and Improvements | Land (11) | Building and Improvements(11) | Accumulated Depreciation (14) (15) | |||||||||||||||||||
| SunTrust Bank I | Retail | Athens | GA | 9/24/2013 | — | (1) | 610 | 1,662 | (144 | ) | (322 | ) | 1,806 | 359 | |||||||||||||||
| SunTrust Bank I | Retail | Atlanta | GA | 9/24/2013 | — | (1) | 570 | 1,152 | — | — | 1,722 | 262 | |||||||||||||||||
| SunTrust Bank I | Retail | Brunswick | GA | 9/24/2013 | — | (1) | 80 | 249 | (8 | ) | (19 | ) | 302 | 57 | |||||||||||||||
| SunTrust Bank I | Retail | Dunwoody | GA | 9/24/2013 | — | (1) | 460 | 2,714 | (163 | ) | (768 | ) | 2,243 | 591 | |||||||||||||||
| SunTrust Bank I | Retail | Thomson | GA | 9/24/2013 | — | (1) | 480 | 1,015 | — | — | 1,495 | 231 | |||||||||||||||||
| SunTrust Bank I | Retail | Waycross | GA | 9/24/2013 | — | (1) | 300 | 1,425 | — | — | 1,725 | 324 | |||||||||||||||||
| SunTrust Bank I | Retail | Burlington | NC | 9/24/2013 | — | (1) | 200 | 497 | (95 | ) | (187 | ) | 415 | 108 | |||||||||||||||
| SunTrust Bank I | Retail | Cary | NC | 9/24/2013 | — | (1) | 370 | 841 | — | — | 1,211 | 191 | |||||||||||||||||
| SunTrust Bank I | Retail | Spencer | NC | 9/24/2013 | — | (1) | 280 | 717 | (67 | ) | (141 | ) | 789 | 154 | |||||||||||||||
| SunTrust Bank I | Retail | Stokesdale | NC | 9/24/2013 | — | (1) | 230 | 581 | — | — | 811 | 132 | |||||||||||||||||
| SunTrust Bank I | Retail | Summerfield | NC | 9/24/2013 | — | (1) | 210 | 605 | — | — | 815 | 138 | |||||||||||||||||
| SunTrust Bank I | Retail | Waynesville | NC | 9/24/2013 | — | (1) | 200 | 874 | — | — | 1,074 | 199 | |||||||||||||||||
| SunTrust Bank I | Retail | Fountain Inn | SC | 9/24/2013 | — | (1) | 290 | 1,086 | (244 | ) | (737 | ) | 395 | 216 | |||||||||||||||
| SunTrust Bank I | Retail | Chattanooga | TN | 9/24/2013 | — | (1) | 220 | 781 | — | — | 1,001 | 178 | |||||||||||||||||
| SunTrust Bank I | Retail | Cleveland | TN | 9/24/2013 | — | (1) | 170 | 461 | (21 | ) | (47 | ) | 563 | 102 | |||||||||||||||
| SunTrust Bank I | Retail | Nashville | TN | 9/24/2013 | — | (1) | 190 | 666 | — | — | 856 | 152 | |||||||||||||||||
| SunTrust Bank I | Retail | Oak Ridge | TN | 9/24/2013 | — | (1) | 500 | 1,277 | — | — | 1,777 | 291 | |||||||||||||||||
| SunTrust Bank I | Retail | Savannah | TN | 9/24/2013 | — | (1) | 390 | 1,179 | — | — | 1,569 | 269 | |||||||||||||||||
| SunTrust Bank I | Retail | Doswell | VA | 9/24/2013 | — | (1) | 190 | 510 | — | — | 700 | 116 | |||||||||||||||||
| SunTrust Bank I | Retail | Nassawadox | VA | 9/24/2013 | — | (1) | 70 | 484 | (8 | ) | (47 | ) | 499 | 107 | |||||||||||||||
| SunTrust Bank I | Retail | New Market | VA | 9/24/2013 | — | (1) | 330 | 948 | — | — | 1,278 | 216 | |||||||||||||||||
| SunTrust Bank I | Retail | Vinton | VA | 9/24/2013 | — | (1) | 120 | 366 | — | — | 486 | 83 | |||||||||||||||||
| Circle K I | Retail | Burlington | IA | 9/25/2013 | — | (1) | 224 | 523 | — | — | 747 | 125 | |||||||||||||||||
| Circle K I | Retail | Clinton | IA | 9/25/2013 | — | (1) | 334 | 779 | — | — | 1,113 | 186 | |||||||||||||||||
| Circle K I | Retail | Muscatine | IA | 9/25/2013 | — | (1) | 274 | 821 | — | — | 1,095 | 196 | |||||||||||||||||
| Circle K I | Retail | Aledo | IL | 9/25/2013 | — | (1) | 427 | 1,709 | — | — | 2,136 | 408 | |||||||||||||||||
| Circle K I | Retail | Bloomington | IL | 9/25/2013 | — | (1) | 316 | 586 | — | — | 902 | 140 | |||||||||||||||||
| Circle K I | Retail | Bloomington | IL | 9/25/2013 | — | (1) | 395 | 592 | — | — | 987 | 141 | |||||||||||||||||
| Circle K I | Retail | Champaign | IL | 9/25/2013 | — | (1) | 412 | 504 | — | — | 916 | 120 | |||||||||||||||||
| Circle K I | Retail | Galesburg | IL | 9/25/2013 | — | (1) | 355 | 829 | — | — | 1,184 | 198 | |||||||||||||||||
| Circle K I | Retail | Jacksonville | IL | 9/25/2013 | — | (1) | 351 | 818 | — | — | 1,169 | 195 | |||||||||||||||||
| Circle K I | Retail | Jacksonville | IL | 9/25/2013 | — | (1) | 316 | 474 | — | — | 790 | 113 | |||||||||||||||||
| Circle K I | Retail | Mattoon | IL | 9/25/2013 | — | (1) | 608 | 1,129 | — | — | 1,737 | 270 | |||||||||||||||||
| Circle K I | Retail | Morton | IL | 9/25/2013 | — | (1) | 350 | 525 | — | — | 875 | 125 | |||||||||||||||||
| Circle K I | Retail | Paris | IL | 9/25/2013 | — | (1) | 429 | 797 | — | — | 1,226 | 190 | |||||||||||||||||
F-42
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
| (In thousands) | Initial Costs | Subsequent to Acquisition | Gross Amount Carried at December 31, 2017 (12) (13) | ||||||||||||||||||||||||||
| Property | Property Type | City | State | Acquisition Date | Encumbrances at December 31, 2017 | Land | Building and Improvements | Land (11) | Building and Improvements(11) | Accumulated Depreciation (14) (15) | |||||||||||||||||||
| Circle K I | Retail | Staunton | IL | 9/25/2013 | — | (1) | 467 | 1,867 | — | — | 2,334 | 446 | |||||||||||||||||
| Circle K I | Retail | Vandalia | IL | 9/25/2013 | — | (1) | 529 | 983 | — | — | 1,512 | 235 | |||||||||||||||||
| Circle K I | Retail | Virden | IL | 9/25/2013 | — | (1) | 302 | 1,208 | — | — | 1,510 | 288 | |||||||||||||||||
| Circle K I | Retail | Lafayette | IN | 9/25/2013 | — | (1) | 401 | 746 | — | — | 1,147 | 178 | |||||||||||||||||
| Circle K I | Retail | Bedford | OH | 9/25/2013 | — | (1) | 702 | 702 | — | — | 1,404 | 168 | |||||||||||||||||
| Circle K I | Retail | Streetsboro | OH | 9/25/2013 | — | (1) | 540 | 540 | — | — | 1,080 | 129 | |||||||||||||||||
| Walgreens V | Retail | Oklahoma City | OK | 9/27/2013 | — | (1) | 1,295 | 3,884 | — | — | 5,179 | 990 | |||||||||||||||||
| Walgreens VI | Retail | Gillette | WY | 9/27/2013 | — | (1) | 1,198 | 2,796 | — | — | 3,994 | 713 | |||||||||||||||||
| FedEx Ground I | Distribution | Watertown | SD | 9/30/2013 | — | (1) | 136 | 2,581 | — | — | 2,717 | 669 | |||||||||||||||||
| American Tire Distributors I | Distribution | Chattanooga | TN | 9/30/2013 | — | (1) | 401 | 7,626 | — | — | 8,027 | 1,977 | |||||||||||||||||
| Krystal I | Retail | Jacksonville | FL | 9/30/2013 | — | (1) | 533 | 799 | — | — | 1,332 | 239 | |||||||||||||||||
| Krystal I | Retail | Columbus | GA | 9/30/2013 | — | (1) | 143 | 1,288 | — | — | 1,431 | 386 | |||||||||||||||||
| Krystal I | Retail | Ft. Oglethorpe | GA | 9/30/2013 | — | (1) | 181 | 1,024 | — | — | 1,205 | 307 | |||||||||||||||||
| Krystal I | Retail | Chattanooga | TN | 9/30/2013 | — | (1) | 285 | 855 | — | — | 1,140 | 256 | |||||||||||||||||
| Krystal I | Retail | Cleveland | TN | 9/30/2013 | — | (1) | 207 | 1,172 | — | — | 1,379 | 351 | |||||||||||||||||
| Krystal I | Retail | Madison | TN | 9/30/2013 | — | (1) | 416 | 624 | — | — | 1,040 | 187 | |||||||||||||||||
| O'Charley's I | Retail | Lexington | KY | 9/30/2013 | — | (1) | 409 | 955 | — | — | 1,364 | 286 | |||||||||||||||||
| O'Charley's I | Retail | Conyers | GA | 9/30/2013 | — | (1) | 373 | 2,113 | — | — | 2,486 | 632 | |||||||||||||||||
| O'Charley's I | Retail | Southaven | MS | 9/30/2013 | — | (1) | 836 | 1,553 | — | — | 2,389 | 465 | |||||||||||||||||
| O'Charley's I | Retail | Daphne | AL | 9/30/2013 | — | (1) | 142 | 1,275 | — | — | 1,417 | 382 | |||||||||||||||||
| O'Charley's I | Retail | Kennesaw | GA | 9/30/2013 | — | (1) | 142 | 1,280 | — | — | 1,422 | 383 | |||||||||||||||||
| O'Charley's I | Retail | Springfield | OH | 9/30/2013 | — | (1) | 262 | 1,484 | — | — | 1,746 | 444 | |||||||||||||||||
| O'Charley's I | Retail | Murfreesboro | TN | 9/30/2013 | — | (1) | 597 | 1,109 | — | — | 1,706 | 332 | |||||||||||||||||
| O'Charley's I | Retail | Mcdonough | GA | 9/30/2013 | — | (1) | 335 | 1,899 | — | — | 2,234 | 568 | |||||||||||||||||
| O'Charley's I | Retail | Simpsonville | SC | 9/30/2013 | — | (1) | 349 | 1,395 | — | — | 1,744 | 417 | |||||||||||||||||
| O'Charley's I | Retail | Grove City | OH | 9/30/2013 | — | (1) | 387 | 1,546 | — | — | 1,933 | 463 | |||||||||||||||||
| O'Charley's I | Retail | Clarksville | TN | 9/30/2013 | — | (1) | 917 | 1,376 | — | — | 2,293 | 412 | |||||||||||||||||
| O'Charley's I | Retail | Champaign | IL | 9/30/2013 | — | (1) | 256 | 1,449 | — | — | 1,705 | 434 | |||||||||||||||||
| O'Charley's I | Retail | Columbus | OH | 9/30/2013 | — | (1) | 271 | 1,533 | — | — | 1,804 | 459 | |||||||||||||||||
| O'Charley's I | Retail | Foley | AL | 9/30/2013 | — | (1) | 264 | 1,495 | — | — | 1,759 | 447 | |||||||||||||||||
| O'Charley's I | Retail | Corydon | IN | 9/30/2013 | — | (1) | 260 | 1,473 | — | — | 1,733 | 441 | |||||||||||||||||
| O'Charley's I | Retail | Salisbury | NC | 9/30/2013 | — | (1) | 439 | 1,024 | — | — | 1,463 | 307 | |||||||||||||||||
| O'Charley's I | Retail | Carrollton | GA | 9/30/2013 | — | (1) | 457 | 1,067 | — | — | 1,524 | 319 | |||||||||||||||||
| O'Charley's I | Retail | Lake Charles | LA | 9/30/2013 | — | (1) | 1,118 | 1,367 | — | — | 2,485 | 409 | |||||||||||||||||
F-43
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
| (In thousands) | Initial Costs | Subsequent to Acquisition | Gross Amount Carried at December 31, 2017 (12) (13) | ||||||||||||||||||||||||||
| Property | Property Type | City | State | Acquisition Date | Encumbrances at December 31, 2017 | Land | Building and Improvements | Land (11) | Building and Improvements(11) | Accumulated Depreciation (14) (15) | |||||||||||||||||||
| O'Charley's I | Retail | Hattiesburg | MS | 9/30/2013 | — | (1) | 413 | 1,651 | — | — | 2,064 | 494 | |||||||||||||||||
| O'Charley's I | Retail | Greenfield | IN | 9/30/2013 | — | (1) | 507 | 1,184 | — | — | 1,691 | 354 | |||||||||||||||||
| Walgreens VII | Retail | Monroe | MI | 9/30/2013 | — | (1) | 1,149 | 2,680 | — | — | 3,829 | 683 | |||||||||||||||||
| Walgreens VII | Retail | St Louis | MO | 9/30/2013 | — | (1) | 903 | 2,107 | — | — | 3,010 | 537 | |||||||||||||||||
| Walgreens VII | Retail | Rockledge | FL | 9/30/2013 | — | (1) | 1,040 | 1,931 | — | — | 2,971 | 492 | |||||||||||||||||
| Walgreens VII | Retail | Florissant | MO | 9/30/2013 | — | (1) | 474 | 1,422 | — | — | 1,896 | 363 | |||||||||||||||||
| Walgreens VII | Retail | Florissant | MO | 9/30/2013 | — | (1) | 561 | 1,309 | — | — | 1,870 | 334 | |||||||||||||||||
| Walgreens VII | Retail | Alton | IL | 9/30/2013 | — | (1) | 1,158 | 3,474 | — | — | 4,632 | 886 | |||||||||||||||||
| Walgreens VII | Retail | Springfield | IL | 9/30/2013 | — | (1) | 1,319 | 3,078 | — | — | 4,397 | 785 | |||||||||||||||||
| Walgreens VII | Retail | Washington | IL | 9/30/2013 | — | (1) | 964 | 2,893 | — | — | 3,857 | 738 | |||||||||||||||||
| Walgreens VII | Retail | Bloomington | IL | 9/30/2013 | — | (1) | 1,568 | 3,659 | — | — | 5,227 | 933 | |||||||||||||||||
| Walgreens VII | Retail | Mahomet | IL | 9/30/2013 | — | (1) | 1,432 | 2,659 | — | — | 4,091 | 678 | |||||||||||||||||
| 1st Constitution Bancorp I | Retail | Hightstown | NJ | 9/30/2013 | — | (1) | 260 | 1,471 | — | — | 1,731 | 335 | |||||||||||||||||
| Tractor Supply II | Retail | Houghton | MI | 10/3/2013 | — | (1) | 204 | 1,158 | — | — | 1,362 | 235 | |||||||||||||||||
| National Tire & Battery II | Retail | Mundelein | IL | 10/4/2013 | — | (1) | — | 1,742 | — | — | 1,742 | 429 | |||||||||||||||||
| United Healthcare I | Office | Howard (Green Bay) | WI | 10/7/2013 | — | (1) | 3,805 | 47,565 | — | — | 51,370 | 5,385 | |||||||||||||||||
| Tractor Supply III | Retail | Harlan | KY | 10/16/2013 | — | (1) | 248 | 2,232 | — | — | 2,480 | 443 | |||||||||||||||||
| Mattress Firm II | Retail | Knoxville | TN | 10/18/2013 | — | (1) | 189 | 754 | — | — | 943 | 177 | |||||||||||||||||
| Dollar General XI | Retail | Greenville | MS | 10/23/2013 | — | (1) | 192 | 769 | — | — | 961 | 180 | |||||||||||||||||
| Academy Sports I | Retail | Cape Girardeau | MO | 10/29/2013 | — | (1) | 384 | 7,292 | — | — | 7,676 | 1,461 | |||||||||||||||||
| Talecris Plasma Resources I | Office | Eagle Pass | TX | 10/29/2013 | — | (1) | 286 | 2,577 | — | — | 2,863 | 505 | |||||||||||||||||
| Amazon I | Office | Winchester | KY | 10/30/2013 | — | (1) | 362 | 8,070 | — | — | 8,432 | 1,719 | |||||||||||||||||
| Fresenius II | Office | Montclair | NJ | 10/31/2013 | — | (1) | 1,214 | 2,255 | — | — | 3,469 | 442 | |||||||||||||||||
| Fresenius II | Office | Sharon Hill | PA | 10/31/2013 | — | (1) | 345 | 1,956 | — | — | 2,301 | 383 | |||||||||||||||||
| Dollar General XII | Retail | Le Center | MN | 11/1/2013 | — | (1) | 47 | 886 | — | — | 933 | 207 | |||||||||||||||||
| Dollar General XIII | Retail | Vidor | TX | 11/7/2013 | — | (1) | 46 | 875 | — | — | 921 | 205 | |||||||||||||||||
| Advance Auto II | Retail | Bunnell | FL | 11/7/2013 | — | (1) | 92 | 1,741 | — | — | 1,833 | 407 | |||||||||||||||||
| Advance Auto II | Retail | Washington | GA | 11/7/2013 | — | (1) | 55 | 1,042 | — | — | 1,097 | 244 | |||||||||||||||||
| FedEx Ground II | Distribution | Leland | MS | 11/12/2013 | — | (1) | 220 | 4,186 | — | — | 4,406 | 1,064 | |||||||||||||||||
| Burger King I | Retail | Algonquin | IL | 11/14/2013 | — | (1) | 798 | 798 | — | — | 1,596 | 184 | |||||||||||||||||
| Burger King I | Retail | Antioch | IL | 11/14/2013 | — | (1) | 706 | 471 | — | — | 1,177 | 109 | |||||||||||||||||
| Burger King I | Retail | Crystal Lake | IL | 11/14/2013 | — | (1) | 541 | 232 | — | — | 773 | 54 | |||||||||||||||||
F-44
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
| (In thousands) | Initial Costs | Subsequent to Acquisition | Gross Amount Carried at December 31, 2017 (12) (13) | ||||||||||||||||||||||||||
| Property | Property Type | City | State | Acquisition Date | Encumbrances at December 31, 2017 | Land | Building and Improvements | Land (11) | Building and Improvements(11) | Accumulated Depreciation (14) (15) | |||||||||||||||||||
| Burger King I | Retail | Grayslake | IL | 11/14/2013 | — | (1) | 582 | 476 | — | — | 1,058 | 110 | |||||||||||||||||
| Burger King I | Retail | Gurnee | IL | 11/14/2013 | — | (1) | 931 | 931 | — | — | 1,862 | 215 | |||||||||||||||||
| Burger King I | Retail | McHenry | IL | 11/14/2013 | — | (1) | 742 | 318 | — | — | 1,060 | 73 | |||||||||||||||||
| Burger King I | Retail | Round Lake Beach | IL | 11/14/2013 | — | (1) | 1,273 | 1,042 | — | — | 2,315 | 241 | |||||||||||||||||
| Burger King I | Retail | Waukegan | IL | 11/14/2013 | — | (1) | 611 | 611 | — | — | 1,222 | 141 | |||||||||||||||||
| Burger King I | Retail | Woodstock | IL | 11/14/2013 | — | (1) | 869 | 290 | — | — | 1,159 | 67 | |||||||||||||||||
| Burger King I | Retail | Austintown | OH | 11/14/2013 | — | (1) | 221 | 1,251 | — | — | 1,472 | 289 | |||||||||||||||||
| Burger King I | Retail | Beavercreek | OH | 11/14/2013 | — | (1) | 410 | 761 | — | — | 1,171 | 176 | |||||||||||||||||
| Burger King I | Retail | Celina | OH | 11/14/2013 | — | (1) | 233 | 932 | — | — | 1,165 | 215 | |||||||||||||||||
| Burger King I | Retail | Chardon | OH | 11/14/2013 | — | (1) | 332 | 497 | — | — | 829 | 115 | |||||||||||||||||
| Burger King I | Retail | Chesterland | OH | 11/14/2013 | — | (1) | 320 | 747 | — | — | 1,067 | 173 | |||||||||||||||||
| Burger King I | Retail | Cortland | OH | 11/14/2013 | — | (1) | 118 | 1,063 | — | — | 1,181 | 246 | |||||||||||||||||
| Burger King I | Retail | Dayton | OH | 11/14/2013 | — | (1) | 464 | 862 | — | — | 1,326 | 199 | |||||||||||||||||
| Burger King I | Retail | Fairborn | OH | 11/14/2013 | — | (1) | 421 | 982 | — | — | 1,403 | 227 | |||||||||||||||||
| Burger King I | Retail | Girard | OH | 11/14/2013 | — | (1) | 421 | 1,264 | — | — | 1,685 | 292 | |||||||||||||||||
| Burger King I | Retail | Greenville | OH | 11/14/2013 | — | (1) | 248 | 993 | — | — | 1,241 | 229 | |||||||||||||||||
| Burger King I | Retail | Madison | OH | 11/14/2013 | — | (1) | 282 | 845 | — | — | 1,127 | 195 | |||||||||||||||||
| Burger King I | Retail | Mentor | OH | 11/14/2013 | — | (1) | 196 | 786 | — | — | 982 | 181 | |||||||||||||||||
| Burger King I | Retail | Niles | OH | 11/14/2013 | — | (1) | 304 | 1,214 | — | — | 1,518 | 280 | |||||||||||||||||
| Burger King I | Retail | North Royalton | OH | 11/14/2013 | — | (1) | 156 | 886 | — | — | 1,042 | 205 | |||||||||||||||||
| Burger King I | Retail | Painesville | OH | 11/14/2013 | — | (1) | 170 | 965 | — | — | 1,135 | 223 | |||||||||||||||||
| Burger King I | Retail | Poland | OH | 11/14/2013 | — | (1) | 212 | 847 | — | — | 1,059 | 196 | |||||||||||||||||
| Burger King I | Retail | Ravenna | OH | 11/14/2013 | — | (1) | 391 | 1,172 | — | — | 1,563 | 271 | |||||||||||||||||
| Burger King I | Retail | Salem | OH | 11/14/2013 | — | (1) | 352 | 1,408 | — | — | 1,760 | 325 | |||||||||||||||||
| Burger King I | Retail | Trotwood | OH | 11/14/2013 | — | (1) | 266 | 798 | — | — | 1,064 | 184 | |||||||||||||||||
| Burger King I | Retail | Twinsburg | OH | 11/14/2013 | — | (1) | 458 | 850 | — | — | 1,308 | 196 | |||||||||||||||||
| Burger King I | Retail | Vandalia | OH | 11/14/2013 | — | (1) | 182 | 728 | — | — | 910 | 168 | |||||||||||||||||
| Burger King I | Retail | Warren | OH | 11/14/2013 | — | (1) | 176 | 997 | — | — | 1,173 | 230 | |||||||||||||||||
| Burger King I | Retail | Warren | OH | 11/14/2013 | — | (1) | 168 | 1,516 | — | — | 1,684 | 350 | |||||||||||||||||
| Burger King I | Retail | Willoughby | OH | 11/14/2013 | — | (1) | 394 | 920 | — | — | 1,314 | 212 | |||||||||||||||||
| Burger King I | Retail | Youngstown | OH | 11/14/2013 | — | (1) | 300 | 901 | — | — | 1,201 | 208 | |||||||||||||||||
| Burger King I | Retail | Youngstown | OH | 11/14/2013 | — | (1) | 186 | 1,675 | — | — | 1,861 | 387 | |||||||||||||||||
F-45
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
| (In thousands) | Initial Costs | Subsequent to Acquisition | Gross Amount Carried at December 31, 2017 (12) (13) | ||||||||||||||||||||||||||
| Property | Property Type | City | State | Acquisition Date | Encumbrances at December 31, 2017 | Land | Building and Improvements | Land (11) | Building and Improvements(11) | Accumulated Depreciation (14) (15) | |||||||||||||||||||
| Burger King I | Retail | Youngstown | OH | 11/14/2013 | — | (1) | 147 | 1,324 | — | — | 1,471 | 306 | |||||||||||||||||
| Burger King I | Retail | Youngstown | OH | 11/14/2013 | — | (1) | 370 | 1,481 | — | — | 1,851 | 342 | |||||||||||||||||
| Burger King I | Retail | Bethel Park | PA | 11/14/2013 | — | (1) | 342 | 634 | — | — | 976 | 147 | |||||||||||||||||
| Burger King I | Retail | North Fayette | PA | 11/14/2013 | — | (1) | 463 | 1,388 | — | — | 1,851 | 321 | |||||||||||||||||
| Burger King I | Retail | North Versailles | PA | 11/14/2013 | — | (1) | 553 | 1,659 | — | — | 2,212 | 383 | |||||||||||||||||
| Burger King I | Retail | Columbiana | OH | 11/14/2013 | — | (1) | 581 | 871 | — | — | 1,452 | 201 | |||||||||||||||||
| Dollar General XIV | Retail | Fort Smith | AR | 11/20/2013 | — | (1) | 184 | 1,042 | — | — | 1,226 | 239 | |||||||||||||||||
| Dollar General XIV | Retail | Hot Springs | AR | 11/20/2013 | — | (1) | 287 | 862 | — | — | 1,149 | 198 | |||||||||||||||||
| Dollar General XIV | Retail | Royal | AR | 11/20/2013 | — | (1) | 137 | 777 | — | — | 914 | 178 | |||||||||||||||||
| Dollar General XV | Retail | Wilson | NY | 11/20/2013 | — | (1) | 172 | 972 | — | — | 1,144 | 223 | |||||||||||||||||
| Mattress Firm I | Retail | McDonough | GA | 11/22/2013 | — | (1) | 185 | 1,663 | — | — | 1,848 | 381 | |||||||||||||||||
| FedEx Ground III | Distribution | Bismarck | ND | 11/25/2013 | — | (1) | 554 | 3,139 | — | — | 3,693 | 782 | |||||||||||||||||
| Dollar General XVI | Retail | LaFollette | TN | 11/27/2013 | — | (1) | 43 | 824 | — | — | 867 | 189 | |||||||||||||||||
| Family Dollar V | Retail | Carrollton | MO | 11/27/2013 | — | (1) | 37 | 713 | — | — | 750 | 164 | |||||||||||||||||
| Walgreens VIII | Retail | Bettendorf | IA | 12/6/2013 | — | (1) | 1,398 | 3,261 | — | — | 4,659 | 799 | |||||||||||||||||
| CVS III | Retail | Detroit | MI | 12/10/2013 | — | (1) | 447 | 2,533 | — | — | 2,980 | 621 | |||||||||||||||||
| Family Dollar VI | Retail | Walden | CO | 12/10/2013 | — | (1) | 100 | 568 | — | — | 668 | 130 | |||||||||||||||||
| Mattress Firm III | Retail | Valdosta | GA | 12/17/2013 | — | (1) | 169 | 1,522 | — | — | 1,691 | 342 | |||||||||||||||||
| Arby's II | Retail | Virginia | MN | 12/23/2013 | — | (1) | 117 | 1,056 | — | — | 1,173 | 234 | |||||||||||||||||
| Family Dollar VI | Retail | Kremmling | CO | 12/23/2013 | — | (1) | 194 | 778 | — | — | 972 | 175 | |||||||||||||||||
| SAAB Sensis I | Office | Syracuse | NY | 12/23/2013 | 7,470 | 2,516 | 12,570 | — | — | 15,086 | 1,428 | ||||||||||||||||||
| Citizens Bank I | Retail | Doylestown | PA | 12/27/2013 | — | (1) | 588 | 1,373 | — | — | 1,961 | 294 | |||||||||||||||||
| Citizens Bank I | Retail | Lansdale | PA | 12/27/2013 | — | (1) | 531 | 1,238 | — | — | 1,769 | 265 | |||||||||||||||||
| Citizens Bank I | Retail | Lima | PA | 12/27/2013 | — | (1) | 1,376 | 1,682 | — | — | 3,058 | 361 | |||||||||||||||||
| Citizens Bank I | Retail | Philadelphia | PA | 12/27/2013 | — | (1) | 473 | 2,680 | — | — | 3,153 | 574 | |||||||||||||||||
| Citizens Bank I | Retail | Philadelphia | PA | 12/27/2013 | — | (1) | 412 | 2,337 | — | — | 2,749 | 501 | |||||||||||||||||
| Citizens Bank I | Retail | Philadelphia | PA | 12/27/2013 | — | (1) | 321 | 2,889 | — | — | 3,210 | 619 | |||||||||||||||||
| Citizens Bank I | Retail | Philadelphia | PA | 12/27/2013 | — | (1) | 388 | 1,551 | — | — | 1,939 | 332 | |||||||||||||||||
| Citizens Bank I | Retail | Richboro | PA | 12/27/2013 | — | (1) | 642 | 1,193 | — | — | 1,835 | 256 | |||||||||||||||||
| Citizens Bank I | Retail | Wayne | PA | 12/27/2013 | — | (1) | 1,923 | 1,923 | — | — | 3,846 | 412 | |||||||||||||||||
| Walgreens IX | Retail | Waterford | MI | 1/3/2014 | — | (1) | 514 | 4,531 | (194 | ) | (1,527 | ) | 3,324 | 479 | |||||||||||||||
| SunTrust Bank II | Retail | Lakeland | FL | 1/8/2014 | — | (2) | 590 | 705 | — | — | 1,295 | 96 | |||||||||||||||||
F-46
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
| (In thousands) | Initial Costs | Subsequent to Acquisition | Gross Amount Carried at December 31, 2017 (12) (13) | ||||||||||||||||||||||||||
| Property | Property Type | City | State | Acquisition Date | Encumbrances at December 31, 2017 | Land | Building and Improvements | Land (11) | Building and Improvements(11) | Accumulated Depreciation (14) (15) | |||||||||||||||||||
| SunTrust Bank II | Retail | Pensacola | FL | 1/8/2014 | — | (2) | 513 | 297 | (74 | ) | (39 | ) | 697 | 40 | |||||||||||||||
| SunTrust Bank II | Retail | Plant City | FL | 1/8/2014 | — | (2) | 499 | 1,139 | — | — | 1,638 | 141 | |||||||||||||||||
| SunTrust Bank II | Retail | Vero Beach | FL | 1/8/2014 | — | (2) | 825 | 2,682 | — | — | 3,507 | 299 | |||||||||||||||||
| SunTrust Bank II | Retail | Panama City | FL | 1/8/2014 | — | (2) | 484 | 1,075 | — | — | 1,559 | 131 | |||||||||||||||||
| SunTrust Bank II | Retail | Miami | FL | 1/8/2014 | — | (2) | 3,187 | 3,224 | — | — | 6,411 | 363 | |||||||||||||||||
| SunTrust Bank II | Retail | Winter Park | FL | 1/8/2014 | — | (2) | 2,264 | 1,079 | — | — | 3,343 | 135 | |||||||||||||||||
| SunTrust Bank II | Retail | Seminole | FL | 1/8/2014 | — | (2) | 1,329 | 3,486 | — | — | 4,815 | 381 | |||||||||||||||||
| SunTrust Bank II | Retail | Okeechobee | FL | 1/8/2014 | — | (2) | 339 | 1,569 | — | — | 1,908 | 227 | |||||||||||||||||
| SunTrust Bank II | Retail | Douglasville | GA | 1/8/2014 | — | (2) | 410 | 749 | — | — | 1,159 | 89 | |||||||||||||||||
| SunTrust Bank II | Retail | Duluth | GA | 1/8/2014 | — | (2) | 1,081 | 2,111 | — | — | 3,192 | 238 | |||||||||||||||||
| SunTrust Bank II | Retail | Atlanta | GA | 1/8/2014 | — | (2) | 1,071 | 2,293 | — | — | 3,364 | 262 | |||||||||||||||||
| SunTrust Bank II | Retail | Cockeysville | MD | 1/8/2014 | — | (2) | 2,184 | 479 | — | — | 2,663 | 55 | |||||||||||||||||
| SunTrust Bank II | Retail | Apex | NC | 1/8/2014 | — | (2) | 296 | 1,240 | — | — | 1,536 | 136 | |||||||||||||||||
| SunTrust Bank II | Retail | Arden | NC | 1/8/2014 | — | (2) | 374 | 216 | — | — | 590 | 30 | |||||||||||||||||
| SunTrust Bank II | Retail | Greensboro | NC | 1/8/2014 | — | (2) | 326 | 633 | — | — | 959 | 74 | |||||||||||||||||
| SunTrust Bank II | Retail | Salisbury | NC | 1/8/2014 | — | (2) | 264 | 293 | — | — | 557 | 45 | |||||||||||||||||
| SunTrust Bank II | Retail | Mauldin | SC | 1/8/2014 | — | (2) | 542 | 704 | — | — | 1,246 | 93 | |||||||||||||||||
| SunTrust Bank II | Retail | Nashville | TN | 1/8/2014 | — | (2) | 890 | 504 | — | — | 1,394 | 71 | |||||||||||||||||
| SunTrust Bank II | Retail | Chattanooga | TN | 1/8/2014 | — | (2) | 358 | 564 | — | — | 922 | 67 | |||||||||||||||||
| SunTrust Bank II | Retail | East Ridge | TN | 1/8/2014 | — | (2) | 276 | 475 | — | — | 751 | 63 | |||||||||||||||||
| SunTrust Bank II | Retail | Fredericksburg | VA | 1/8/2014 | — | (2) | 1,623 | 446 | — | — | 2,069 | 62 | |||||||||||||||||
| SunTrust Bank II | Retail | Lynchburg | VA | 1/8/2014 | — | (2) | 584 | 1,255 | — | — | 1,839 | 148 | |||||||||||||||||
| SunTrust Bank II | Retail | Chesapeake | VA | 1/8/2014 | — | (2) | 490 | 695 | — | — | 1,185 | 85 | |||||||||||||||||
| SunTrust Bank II | Retail | Bushnell | FL | 1/8/2014 | — | (2) | 385 | 1,216 | — | — | 1,601 | 129 | |||||||||||||||||
| Mattress Firm IV | Retail | Meridian | ID | 1/9/2014 | — | (1) | 691 | 1,193 | — | — | 1,884 | 142 | |||||||||||||||||
| Dollar General XII | Retail | Sunrise Beach | MO | 1/15/2014 | — | (1) | 105 | 795 | — | — | 900 | 133 | |||||||||||||||||
| FedEx Ground IV | Distribution | Council Bluffs | IA | 1/24/2014 | — | (1) | 768 | 3,908 | — | — | 4,676 | 491 | |||||||||||||||||
| Mattress Firm V | Retail | Florence | AL | 1/28/2014 | — | (1) | 299 | 1,478 | — | — | 1,777 | 172 | |||||||||||||||||
| Mattress Firm I | Retail | Aiken | SC | 2/5/2014 | — | (1) | 426 | 1,029 | — | — | 1,455 | 139 | |||||||||||||||||
| Family Dollar VII | Retail | Bernice | LA | 2/7/2014 | — | (1) | 51 | 527 | — | — | 578 | 64 | |||||||||||||||||
| Aaron's I | Retail | Erie | PA | 2/10/2014 | — | (1) | 126 | 708 | — | — | 834 | 78 | |||||||||||||||||
| AutoZone III | Retail | Caro | MI | 2/13/2014 | — | (1) | 135 | 855 | — | — | 990 | 97 | |||||||||||||||||
F-47
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
| (In thousands) | Initial Costs | Subsequent to Acquisition | Gross Amount Carried at December 31, 2017 (12) (13) | |||||||||||||||||||||||||||||||||
| Property | Property Type | City | State | Acquisition Date | Encumbrances at December 31, 2017 | Land | Building and Improvements | Land (11) | Building and Improvements(11) | Accumulated Depreciation (14) (15) | ||||||||||||||||||||||||||
| C&S Wholesale Grocer I | Distribution | Hatfield (South) | MA | 2/21/2014 | 1,420 | 14,169 | — | — | 15,589 | 1,416 | ||||||||||||||||||||||||||
| C&S Wholesale Grocer I | Distribution | Birmingham | AL | 2/21/2014 | — | 4,951 | 36,894 | — | — | 41,845 | 3,633 | |||||||||||||||||||||||||
| Advance Auto III | Retail | Taunton | MA | 2/25/2014 | — | (1) | 404 | 1,148 | — | — | 1,552 | 119 | ||||||||||||||||||||||||
| Family Dollar VIII | Retail | Dexter | NM | 3/3/2014 | — | (1) | 79 | 745 | — | — | 824 | 100 | ||||||||||||||||||||||||
| Family Dollar VIII | Retail | Hale Center | TX | 3/3/2014 | — | (1) | 111 | 624 | — | — | 735 | 84 | ||||||||||||||||||||||||
| Family Dollar VIII | Retail | Plains | TX | 3/3/2014 | — | (1) | 100 | 624 | — | — | 724 | 83 | ||||||||||||||||||||||||
| Dollar General XVII | Retail | Tullos | LA | 3/5/2014 | — | (1) | 114 | 736 | — | — | 850 | 85 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Muscle Shoals | AL | 3/10/2014 | — | (3) | 242 | 1,480 | (139 | ) | (752 | ) | 831 | 173 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Sarasota | FL | 3/10/2014 | — | (3) | 741 | 852 | — | — | 1,593 | 104 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Fort Meade | FL | 3/10/2014 | — | (3) | 175 | 2,375 | (101 | ) | (1,251 | ) | 1,198 | 226 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Port St. Lucie | FL | 3/10/2014 | — | (3) | 913 | 1,772 | — | — | 2,685 | 207 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Mulberry | FL | 3/10/2014 | — | (3) | 406 | 753 | — | — | 1,159 | 90 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Gainesville | FL | 3/10/2014 | — | (3) | 458 | 2,139 | — | — | 2,597 | 229 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Gainesville | FL | 3/10/2014 | — | (3) | 457 | 816 | — | — | 1,273 | 99 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Gulf Breeze | FL | 3/10/2014 | — | (3) | 1,092 | 1,569 | — | — | 2,661 | 181 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Sarasota | FL | 3/10/2014 | — | (3) | 955 | 1,329 | — | — | 2,284 | 152 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Hobe Sound | FL | 3/10/2014 | — | (3) | 442 | 1,521 | (297 | ) | (927 | ) | 739 | 150 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Port St. Lucie | FL | 3/10/2014 | — | (3) | 996 | 872 | (741 | ) | (584 | ) | 543 | 92 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Mount Dora | FL | 3/10/2014 | — | (3) | 570 | 1,933 | — | — | 2,503 | 206 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Daytona Beach | FL | 3/10/2014 | — | (3) | 376 | 1,379 | (231 | ) | (769 | ) | 755 | 139 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Lutz | FL | 3/10/2014 | — | (3) | 438 | 1,477 | — | — | 1,915 | 158 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Jacksonville | FL | 3/10/2014 | — | (3) | 871 | 372 | — | — | 1,243 | 50 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Jacksonville | FL | 3/10/2014 | — | (3) | 366 | 1,136 | — | — | 1,502 | 128 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Tamarac | FL | 3/10/2014 | — | (3) | 997 | 1,241 | — | — | 2,238 | 142 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Pompano Beach | FL | 3/10/2014 | — | (3) | 886 | 2,024 | — | — | 2,910 | 215 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | St. Cloud | FL | 3/10/2014 | — | (3) | 1,046 | 1,887 | — | — | 2,933 | 210 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Ormond Beach | FL | 3/10/2014 | — | (3) | 1,047 | 1,566 | — | — | 2,613 | 186 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Daytona Beach | FL | 3/10/2014 | — | (3) | 443 | 1,586 | — | — | 2,029 | 186 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Ormond Beach | FL | 3/10/2014 | — | (3) | 854 | 1,385 | — | — | 2,239 | 159 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Ormond Beach | FL | 3/10/2014 | — | (3) | 873 | 2,235 | — | — | 3,108 | 240 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Brooksville | FL | 3/10/2014 | — | (3) | 460 | 954 | (266 | ) | (498 | ) | 650 | 102 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Inverness | FL | 3/10/2014 | — | (3) | 867 | 2,559 | — | — | 3,426 | 284 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Indian Harbour Beach | FL | 3/10/2014 | — | (3) | 914 | 1,181 | — | — | 2,095 | 186 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Melbourne | FL | 3/10/2014 | — | (3) | 772 | 1,927 | — | — | 2,699 | 214 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Orlando | FL | 3/10/2014 | — | (3) | 1,234 | 1,125 | — | — | 2,359 | 131 | ||||||||||||||||||||||||
F-48
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
| (In thousands) | Initial Costs | Subsequent to Acquisition | Gross Amount Carried at December 31, 2017 (12) (13) | |||||||||||||||||||||||||||||||||
| Property | Property Type | City | State | Acquisition Date | Encumbrances at December 31, 2017 | Land | Building and Improvements | Land (11) | Building and Improvements(11) | Accumulated Depreciation (14) (15) | ||||||||||||||||||||||||||
| SunTrust Bank III | Retail | Orlando | FL | 3/10/2014 | — | (3) | 874 | 1,922 | — | — | 2,796 | 209 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | St. Petersburg | FL | 3/10/2014 | — | (3) | 803 | 1,043 | — | — | 1,846 | 116 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Casselberry | FL | 3/10/2014 | — | (3) | 609 | 2,443 | — | — | 3,052 | 263 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Rockledge | FL | 3/10/2014 | — | (3) | 742 | 1,126 | — | — | 1,868 | 127 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | New Port Richey | FL | 3/10/2014 | — | (3) | 602 | 1,104 | (356 | ) | (598 | ) | 752 | 107 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Tampa | FL | 3/10/2014 | — | (3) | 356 | 1,042 | (210 | ) | (549 | ) | 639 | 123 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Lakeland | FL | 3/10/2014 | — | (3) | 927 | 1,594 | — | — | 2,521 | 210 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Ocala | FL | 3/10/2014 | — | (3) | 347 | 1,336 | — | — | 1,683 | 205 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Atlanta | GA | 3/10/2014 | — | (3) | 3,027 | 4,873 | — | — | 7,900 | 496 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Atlanta | GA | 3/10/2014 | — | (3) | 4,422 | 1,559 | — | — | 5,981 | 175 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Stone Mountain | GA | 3/10/2014 | — | (3) | 605 | 522 | — | — | 1,127 | 58 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Lithonia | GA | 3/10/2014 | — | (3) | 212 | 770 | — | — | 982 | 87 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Union City | GA | 3/10/2014 | — | (3) | 400 | 542 | — | — | 942 | 65 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Peachtree City | GA | 3/10/2014 | — | (3) | 887 | 2,242 | — | — | 3,129 | 254 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Stockbridge | GA | 3/10/2014 | — | (3) | 358 | 760 | — | — | 1,118 | 89 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Conyers | GA | 3/10/2014 | — | (3) | 205 | 1,334 | — | — | 1,539 | 143 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Morrow | GA | 3/10/2014 | — | (3) | 400 | 1,759 | (147 | ) | (588 | ) | 1,424 | 179 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Marietta | GA | 3/10/2014 | — | (3) | 2,168 | 1,169 | — | — | 3,337 | 140 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Marietta | GA | 3/10/2014 | — | (3) | 1,087 | 2,056 | — | — | 3,143 | 215 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Thomson | GA | 3/10/2014 | — | (3) | 91 | 719 | (8 | ) | (58 | ) | 744 | 90 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Savannah | GA | 3/10/2014 | — | (3) | 224 | 1,116 | — | — | 1,340 | 123 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Savannah | GA | 3/10/2014 | — | (3) | 458 | 936 | — | — | 1,394 | 124 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Macon | GA | 3/10/2014 | — | (3) | 214 | 771 | — | — | 985 | 97 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Albany | GA | 3/10/2014 | — | (3) | 260 | 531 | (25 | ) | (45 | ) | 721 | 81 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Sylvester | GA | 3/10/2014 | — | (3) | 242 | 845 | — | — | 1,087 | 98 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Brunswick | GA | 3/10/2014 | — | (3) | 384 | 888 | (109 | ) | (225 | ) | 938 | 102 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Athens | GA | 3/10/2014 | — | (3) | 427 | 472 | — | — | 899 | 81 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Cartersville | GA | 3/10/2014 | — | (3) | 658 | 1,734 | (239 | ) | (568 | ) | 1,585 | 181 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Cambridge | MD | 3/10/2014 | — | (3) | 1,130 | 1,265 | (1,053 | ) | (1,068 | ) | 274 | 119 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Avondale | MD | 3/10/2014 | — | (3) | 1,760 | 485 | — | — | 2,245 | 56 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Asheboro | NC | 3/10/2014 | — | (3) | 458 | 774 | — | — | 1,232 | 92 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Bessemer City | NC | 3/10/2014 | — | (3) | 212 | 588 | (47 | ) | (119 | ) | 634 | 62 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Charlotte | NC | 3/10/2014 | — | (3) | 529 | 650 | (388 | ) | (430 | ) | 361 | 65 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Charlotte | NC | 3/10/2014 | — | (3) | 563 | 750 | — | — | 1,313 | 91 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Dunn | NC | 3/10/2014 | — | (3) | 384 | 616 | — | — | 1,000 | 77 | ||||||||||||||||||||||||
F-49
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
| (In thousands) | Initial Costs | Subsequent to Acquisition | Gross Amount Carried at December 31, 2017 (12) (13) | |||||||||||||||||||||||||||||||||
| Property | Property Type | City | State | Acquisition Date | Encumbrances at December 31, 2017 | Land | Building and Improvements | Land (11) | Building and Improvements(11) | Accumulated Depreciation (14) (15) | ||||||||||||||||||||||||||
| SunTrust Bank III | Retail | Durham | NC | 3/10/2014 | — | (3) | 488 | 742 | — | — | 1,230 | 81 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Durham | NC | 3/10/2014 | — | (3) | 284 | 506 | — | — | 790 | 70 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Greensboro | NC | 3/10/2014 | — | (3) | 488 | 794 | (273 | ) | (393 | ) | 616 | 93 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Hendersonville | NC | 3/10/2014 | — | (3) | 468 | 945 | — | — | 1,413 | 107 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Lenoir | NC | 3/10/2014 | — | (3) | 1,021 | 3,980 | — | — | 5,001 | 409 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Mebane | NC | 3/10/2014 | — | (3) | 500 | 887 | — | — | 1,387 | 96 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Oxford | NC | 3/10/2014 | — | (3) | 530 | 1,727 | — | — | 2,257 | 180 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Winston-Salem | NC | 3/10/2014 | — | (3) | 362 | 513 | — | — | 875 | 60 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Yadkinville | NC | 3/10/2014 | — | (3) | 438 | 765 | — | — | 1,203 | 83 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Greenville | SC | 3/10/2014 | — | (3) | 377 | 871 | — | — | 1,248 | 98 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Greenville | SC | 3/10/2014 | — | (3) | 264 | 684 | — | — | 948 | 79 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Greenville | SC | 3/10/2014 | — | (3) | 590 | 1,007 | — | — | 1,597 | 121 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Greenville | SC | 3/10/2014 | — | (3) | 449 | 1,640 | — | — | 2,089 | 227 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Nashville | TN | 3/10/2014 | — | (3) | 204 | 740 | — | — | 944 | 77 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Nashville | TN | 3/10/2014 | — | (3) | 1,776 | 1,601 | — | — | 3,377 | 201 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Brentwood | TN | 3/10/2014 | — | (3) | 885 | 1,987 | — | — | 2,872 | 216 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Brentwood | TN | 3/10/2014 | — | (3) | 996 | 1,536 | — | — | 2,532 | 170 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Smyrna | TN | 3/10/2014 | — | (3) | 501 | 767 | — | — | 1,268 | 96 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Murfreesboro | TN | 3/10/2014 | — | (3) | 451 | 847 | — | — | 1,298 | 88 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Soddy Daisy | TN | 3/10/2014 | — | (3) | 338 | 624 | — | — | 962 | 66 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Signal Mountain | TN | 3/10/2014 | — | (3) | 296 | 697 | — | — | 993 | 77 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Chattanooga | TN | 3/10/2014 | — | (3) | 419 | 811 | — | — | 1,230 | 87 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Chattanooga | TN | 3/10/2014 | — | (3) | 191 | 335 | — | — | 526 | 37 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Morristown | TN | 3/10/2014 | — | (3) | 214 | 444 | — | — | 658 | 69 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Richmond | VA | 3/10/2014 | — | (3) | 153 | 313 | — | — | 466 | 41 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Richmond | VA | 3/10/2014 | — | (3) | 233 | 214 | — | — | 447 | 29 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Fairfax | VA | 3/10/2014 | — | (3) | 2,835 | 1,081 | — | — | 3,916 | 117 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Lexington | VA | 3/10/2014 | — | (3) | 122 | 385 | — | — | 507 | 48 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Roanoke | VA | 3/10/2014 | — | (3) | 316 | 734 | — | — | 1,050 | 82 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Williamsburg | VA | 3/10/2014 | — | (3) | 447 | 585 | — | — | 1,032 | 74 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Onancock | VA | 3/10/2014 | — | (3) | 829 | 1,300 | — | — | 2,129 | 134 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Accomac | VA | 3/10/2014 | — | (3) | 149 | 128 | — | — | 277 | 14 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Painter | VA | 3/10/2014 | — | (3) | 89 | 259 | (14 | ) | (37 | ) | 297 | 31 | ||||||||||||||||||||||
| SunTrust Bank III | Retail | Stafford | VA | 3/10/2014 | — | (3) | 2,130 | 1,714 | — | — | 3,844 | 187 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Roanoke | VA | 3/10/2014 | — | (3) | 753 | 1,165 | — | — | 1,918 | 134 | ||||||||||||||||||||||||
F-50
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
| (In thousands) | Initial Costs | Subsequent to Acquisition | Gross Amount Carried at December 31, 2017 (12) (13) | |||||||||||||||||||||||||||||||||
| Property | Property Type | City | State | Acquisition Date | Encumbrances at December 31, 2017 | Land | Building and Improvements | Land (11) | Building and Improvements(11) | Accumulated Depreciation (14) (15) | ||||||||||||||||||||||||||
| SunTrust Bank III | Retail | Melbourne | FL | 3/10/2014 | — | (3) | 788 | 1,888 | — | — | 2,676 | 202 | ||||||||||||||||||||||||
| SunTrust Bank III | Retail | Richmond | VA | 3/10/2014 | — | (3) | 3,141 | 7,441 | (804 | ) | (1,722 | ) | 8,056 | 879 | ||||||||||||||||||||||
| SunTrust Bank IV | Retail | Lake Mary | FL | 3/10/2014 | — | (4) | 1,911 | 2,849 | — | — | 4,760 | 306 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Bayonet Point | FL | 3/10/2014 | — | (4) | 528 | 1,172 | (344 | ) | (695 | ) | 661 | 115 | ||||||||||||||||||||||
| SunTrust Bank IV | Retail | St. Augustine | FL | 3/10/2014 | — | (4) | 489 | 2,129 | — | — | 2,618 | 227 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Deltona | FL | 3/10/2014 | — | (4) | 631 | 1,512 | (398 | ) | (862 | ) | 883 | 157 | ||||||||||||||||||||||
| SunTrust Bank IV | Retail | Spring Hill | FL | 3/10/2014 | — | (4) | 673 | 2,550 | — | — | 3,223 | 267 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Pembroke Pines | FL | 3/10/2014 | — | (4) | 1,688 | 548 | — | — | 2,236 | 75 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Palm Coast | FL | 3/10/2014 | — | (4) | 447 | 1,548 | (218 | ) | (691 | ) | 1,086 | 154 | ||||||||||||||||||||||
| SunTrust Bank IV | Retail | Clearwater | FL | 3/10/2014 | — | (4) | 783 | 1,936 | — | — | 2,719 | 202 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Ocala | FL | 3/10/2014 | — | (4) | 581 | 1,091 | — | — | 1,672 | 140 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Ocala | FL | 3/10/2014 | — | (4) | 559 | 750 | — | — | 1,309 | 108 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Chamblee | GA | 3/10/2014 | — | (4) | 1,029 | 813 | — | — | 1,842 | 97 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Stone Mountain | GA | 3/10/2014 | — | (4) | 461 | 475 | — | — | 936 | 55 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Columbus | GA | 3/10/2014 | — | (4) | 417 | 1,395 | — | — | 1,812 | 155 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Madison | GA | 3/10/2014 | — | (4) | 304 | 612 | — | — | 916 | 63 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Prince Frederick | MD | 3/10/2014 | — | (4) | 2,431 | 940 | — | — | 3,371 | 113 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Charlotte | NC | 3/10/2014 | — | (4) | 651 | 444 | — | — | 1,095 | 62 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Creedmoor | NC | 3/10/2014 | — | (4) | 306 | 789 | (128 | ) | (300 | ) | 667 | 83 | ||||||||||||||||||||||
| SunTrust Bank IV | Retail | Greensboro | NC | 3/10/2014 | — | (4) | 619 | 742 | — | — | 1,361 | 105 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Pittsboro | NC | 3/10/2014 | — | (4) | 61 | 510 | — | — | 571 | 50 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Roxboro | NC | 3/10/2014 | — | (4) | 234 | 1,100 | (67 | ) | (282 | ) | 985 | 113 | ||||||||||||||||||||||
| SunTrust Bank IV | Retail | Nashville | TN | 3/10/2014 | — | (4) | 1,035 | 745 | — | — | 1,780 | 81 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Johnson City | TN | 3/10/2014 | — | (4) | 174 | 293 | — | — | 467 | 43 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Gloucester | VA | 3/10/2014 | — | (4) | 154 | 2,281 | (105 | ) | (1,389 | ) | 941 | 240 | ||||||||||||||||||||||
| SunTrust Bank IV | Retail | Collinsville | VA | 3/10/2014 | — | (4) | 215 | 555 | — | — | 770 | 63 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Stuart | VA | 3/10/2014 | — | (4) | 374 | 1,532 | — | — | 1,906 | 165 | ||||||||||||||||||||||||
| SunTrust Bank IV | Retail | Douglas | GA | 3/10/2014 | — | (4) | 73 | 1,248 | — | — | 1,321 | 131 | ||||||||||||||||||||||||
| Mattress Firm I | Retail | Holland | MI | 3/19/2014 | — | (1) | 507 | 1,014 | — | — | 1,521 | 127 | ||||||||||||||||||||||||
| Dollar General XVIII | Retail | Deville | LA | 3/19/2014 | — | (1) | 93 | 741 | — | — | 834 | 84 | ||||||||||||||||||||||||
| Sanofi US I | Office | Bridgewater | NJ | 3/20/2014 | 125,000 | 16,009 | 194,287 | — | — | 210,296 | 19,520 | |||||||||||||||||||||||||
| Dollar General XVII | Retail | Hornbeck | LA | 3/25/2014 | — | (1) | 82 | 780 | — | — | 862 | 87 | ||||||||||||||||||||||||
| Mattress Firm I | Retail | Saginaw | MI | 4/8/2014 | — | (1) | 337 | 1,140 | — | — | 1,477 | 136 | ||||||||||||||||||||||||
| Family Dollar IX | Retail | Fannettsburg | PA | 4/8/2014 | — | (1) | 165 | 803 | — | — | 968 | 88 | ||||||||||||||||||||||||
| Stop & Shop I | Retail | Cumberland | RI | 5/8/2014 | — | (1) | 3,295 | 13,693 | — | — | 16,988 | 1,435 | ||||||||||||||||||||||||
F-51
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
| (In thousands) | Initial Costs | Subsequent to Acquisition | Gross Amount Carried at December 31, 2017 (12) (13) | |||||||||||||||||||||||||||||||||
| Property | Property Type | City | State | Acquisition Date | Encumbrances at December 31, 2017 | Land | Building and Improvements | Land (11) | Building and Improvements(11) | Accumulated Depreciation (14) (15) | ||||||||||||||||||||||||||
| Stop & Shop I | Retail | Malden | MA | 5/8/2014 | (5) | 4,418 | 15,195 | — | — | 19,613 | 1,441 | |||||||||||||||||||||||||
| Stop & Shop I | Retail | Swampscott | MA | 5/8/2014 | (5) | 3,644 | 12,982 | — | — | 16,626 | 1,229 | |||||||||||||||||||||||||
| Stop & Shop I | Retail | Southington | CT | 5/8/2014 | (1) | 3,238 | 13,169 | — | — | 16,407 | 1,319 | |||||||||||||||||||||||||
| Stop & Shop I | Retail | Framingham | MA | 5/8/2014 | (5) | 3,971 | 12,289 | — | — | 16,260 | 1,170 | |||||||||||||||||||||||||
| Stop & Shop I | Retail | Bristol | RI | 5/8/2014 | (5) | 2,860 | 10,010 | — | — | 12,870 | 1,022 | |||||||||||||||||||||||||
| Stop & Shop I | Retail | Sicklerville | NJ | 5/8/2014 | (1) | 2,367 | 9,873 | — | — | 12,240 | 977 | |||||||||||||||||||||||||
| Bi-Lo I | Retail | Greenville | SC | 5/8/2014 | — | (1) | 1,504 | 4,770 | — | — | 6,274 | 500 | ||||||||||||||||||||||||
| Dollar General XVII | Retail | Forest Hill | LA | 5/12/2014 | — | (1) | 83 | 728 | — | — | 811 | 81 | ||||||||||||||||||||||||
| Dollar General XIX | Retail | Chelsea | OK | 5/13/2014 | — | (1) | 231 | 919 | — | — | 1,150 | 112 | ||||||||||||||||||||||||
| Dollar General XX | Retail | Brookhaven | MS | 5/14/2014 | — | (1) | 186 | 616 | — | — | 802 | 67 | ||||||||||||||||||||||||
| Dollar General XX | Retail | Columbus | MS | 5/14/2014 | — | (1) | 370 | 491 | — | — | 861 | 61 | ||||||||||||||||||||||||
| Dollar General XX | Retail | Forest | MS | 5/14/2014 | — | (1) | 72 | 856 | — | — | 928 | 88 | ||||||||||||||||||||||||
| Dollar General XX | Retail | Rolling Fork | MS | 5/14/2014 | — | (1) | 244 | 929 | — | — | 1,173 | 98 | ||||||||||||||||||||||||
| Dollar General XX | Retail | West Point | MS | 5/14/2014 | — | (1) | 318 | 506 | — | — | 824 | 66 | ||||||||||||||||||||||||
| Dollar General XXI | Retail | Huntington | WV | 5/29/2014 | — | (1) | 101 | 1,101 | — | — | 1,202 | 127 | ||||||||||||||||||||||||
| Dollar General XXII | Retail | Warren | IN | 5/30/2014 | — | (1) | 88 | 962 | — | — | 1,050 | 93 | ||||||||||||||||||||||||
| FedEx Ground V | Distribution | Sioux City | IA | 2/17/2016 | — | 199 | 5,639 | — | — | 5,838 | 301 | |||||||||||||||||||||||||
| FedEx Ground VI | Distribution | Grand Forks | ND | 2/19/2016 | — | 1,287 | 8,988 | — | — | 10,275 | 544 | |||||||||||||||||||||||||
| FedEx Ground VII | Distribution | Eagle River | WI | 2/19/2016 | — | 40 | 6,022 | — | — | 6,062 | 345 | |||||||||||||||||||||||||
| FedEx Ground VIII | Distribution | Wausau | WI | 2/23/2016 | — | 202 | 9,017 | — | — | 9,219 | 550 | |||||||||||||||||||||||||
| Liberty Crossing | (10) | Power Center | Rowlett | TX | 2/16/2017 | 11,000 | 6,285 | 20,700 | — | — | 26,985 | 535 | ||||||||||||||||||||||||
| San Pedro Crossing | (10) | Power Center | San Antonio | TX | 2/16/2017 | (7) | 10,118 | 38,655 | — | 667 | 49,440 | 958 | ||||||||||||||||||||||||
| Tiffany Springs MarketCenter | (10) | Power Center | Kansas City | MO | 2/16/2017 | 33,802 | 10,154 | 50,832 | — | 2,164 | 63,150 | 1,308 | ||||||||||||||||||||||||
| The Streets of West Chester | (10) | Lifestyle Center | West Chester | OH | 2/16/2017 | (9) | 11,313 | 34,305 | — | — | 45,618 | 871 | ||||||||||||||||||||||||
| Prairie Towne Center | (10) | Power Center | Schaumburg | IL | 2/16/2017 | (9) | 11,070 | 19,528 | — | — | 30,598 | 512 | ||||||||||||||||||||||||
| Southway Shopping Center | (10) | Power Center | Houston | TX | 2/16/2017 | (9) | 10,260 | 24,440 | — | 9 | 34,709 | 590 | ||||||||||||||||||||||||
| Stirling Slidell Centre | (10) | Power Center | Slidell | LA | 2/16/2017 | (9) | 3,495 | 18,113 | — | 12 | 21,620 | 465 | ||||||||||||||||||||||||
| Northwoods Marketplace | (10) | Power Center | North Charleston | SC | 2/16/2017 | (9) | 13,474 | 28,362 | — | — | 41,836 | 706 | ||||||||||||||||||||||||
| Centennial Plaza | (10) | Power Center | Oklahoma City | OK | 2/16/2017 | (7) | 3,488 | 30,054 | — | — | 33,542 | 724 | ||||||||||||||||||||||||
| Northlake Commons | (10) | Lifestyle Center | Charlotte | NC | 2/16/2017 | (9) | 17,539 | 16,342 | — | 106 | 33,987 | 467 | ||||||||||||||||||||||||
| Shops at Shelby Crossing | (10) | Power Center | Sebring | FL | 2/16/2017 | 23,002 | 4,478 | 32,316 | — | — | 36,794 | 944 | ||||||||||||||||||||||||
| Shoppes of West Melbourne | (10) | Power Center | West Melbourne | FL | 2/16/2017 | (7) | 4,258 | 19,138 | — | 748 | 24,144 | 472 | ||||||||||||||||||||||||
| The Centrum | (10) | Power Center | Pineville | NC | 2/16/2017 | (9) | 12,013 | 26,242 | — | — | 38,255 | 662 | ||||||||||||||||||||||||
| Shoppes at Wyomissing | (10) | Lifestyle Center | Wyomissing | PA | 2/16/2017 | (9) | 4,108 | 32,446 | — | — | 36,554 | 806 | ||||||||||||||||||||||||
| Southroads Shopping Center | (10) | Power Center | Tulsa | OK | 2/16/2017 | (9) | 6,663 | 60,720 | 32 | (5,716 | ) | 61,699 | 1,240 | |||||||||||||||||||||||
F-52
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
| (In thousands) | Initial Costs | Subsequent to Acquisition | Gross Amount Carried at December 31, 2017 (12) (13) | |||||||||||||||||||||||||||||||||
| Property | Property Type | City | State | Acquisition Date | Encumbrances at December 31, 2017 | Land | Building and Improvements | Land (11) | Building and Improvements(11) | Accumulated Depreciation (14) (15) | ||||||||||||||||||||||||||
| Parkside Shopping Center | (10) | Power Center | Frankfort | KY | 2/16/2017 | (9) | 9,978 | 29,996 | — | 167 | 40,141 | 824 | ||||||||||||||||||||||||
| West Lake Crossing | (10) | Power Center | Humble | TX | 2/16/2017 | (9) | 2,105 | 16,266 | — | 222 | 18,593 | 418 | ||||||||||||||||||||||||
| Colonial Landing | (10) | Power Center | Orlando | FL | 2/16/2017 | (9) | — | 44,255 | — | — | 44,255 | 1,041 | ||||||||||||||||||||||||
| The Shops at West End | (10) | Lifestyle Center | St. Louis Park | MN | 2/16/2017 | (9) | 12,831 | 107,806 | — | 18 | 120,655 | 2,423 | ||||||||||||||||||||||||
| Township Marketplace | (10) | Power Center | Monaca | PA | 2/16/2017 | (9) | 8,146 | 39,267 | — | — | 47,413 | 942 | ||||||||||||||||||||||||
| Cross Pointe Centre | (10) | Power Center | Fayetteville | NC | 2/16/2017 | (7) | 8,075 | 19,717 | — | — | 27,792 | 485 | ||||||||||||||||||||||||
| Towne Centre Plaza | (10) | Power Center | Mesquite | TX | 2/16/2017 | 3,553 | 11,992 | — | — | 15,545 | 311 | |||||||||||||||||||||||||
| Harlingen Corners | (10) | Power Center | Harlingen | TX | 2/16/2017 | (9) | 12,702 | 19,012 | — | 50 | 31,764 | 476 | ||||||||||||||||||||||||
| Village at Quail Springs | (10) | Power Center | Oklahoma City | OK | 2/16/2017 | 2,307 | 9,983 | — | — | 12,290 | 251 | |||||||||||||||||||||||||
| Pine Ridge Plaza | (10) | Power Center | Lawrence | KS | 2/16/2017 | 14,008 | 20,935 | — | 490 | 35,433 | 576 | |||||||||||||||||||||||||
| Bison Hollow | (10) | Power Center | Traverse City | MI | 2/16/2017 | 4,346 | 15,944 | — | — | 20,290 | 388 | |||||||||||||||||||||||||
| Jefferson Commons | (10) | Power Center | Louisville | KY | 2/16/2017 | (7) | 5,110 | 29,432 | — | 211 | 34,753 | 734 | ||||||||||||||||||||||||
| Northpark Center | (10) | Power Center | Huber Heights | OH | 2/16/2017 | (7) | 8,975 | 28,552 | — | — | 37,527 | 708 | ||||||||||||||||||||||||
| Anderson Station | (10) | Power Center | Anderson | SC | 2/16/2017 | (7) | 5,201 | 27,100 | — | 181 | 32,482 | 717 | ||||||||||||||||||||||||
| Patton Creek | (10) | Power Center | Hoover | AL | 2/16/2017 | 40,858 | 15,799 | 79,150 | — | 151 | 95,100 | 1,912 | ||||||||||||||||||||||||
| North Lakeland Plaza | (10) | Power Center | Lakeland | FL | 2/16/2017 | (7) | 2,599 | 12,652 | — | — | 15,251 | 322 | ||||||||||||||||||||||||
| Riverbend Marketplace | (10) | Power Center | Asheville | NC | 2/16/2017 | (7) | 4,949 | 18,213 | — | — | 23,162 | 461 | ||||||||||||||||||||||||
| Montecito Crossing | (10) | Power Center | Las Vegas | NV | 2/16/2017 | (7) | 16,204 | 36,476 | — | — | 52,680 | 944 | ||||||||||||||||||||||||
| Best on the Boulevard | (10) | Power Center | Las Vegas | NV | 2/16/2017 | (7) | 10,046 | 32,705 | — | — | 42,751 | 803 | ||||||||||||||||||||||||
| Shops at RiverGate South | (10) | Power Center | Charlotte | NC | 2/16/2017 | (7) | 5,202 | 28,378 | — | — | 33,580 | 705 | ||||||||||||||||||||||||
| Parkside Shopping Center - Excess Land | (10) | Land - Unimproved | Frankfort | KY | 2/16/2017 | 695 | — | — | — | 695 | — | |||||||||||||||||||||||||
| The Streets of West Chester - Excess Land | (10) | Land - Unimproved | West Chester | OH | 2/16/2017 | 517 | — | — | — | 517 | — | |||||||||||||||||||||||||
| Dollar General XXIII | Retail | Dewitt | NY | 3/31/2017 | (8) | 233 | 1,044 | — | — | 1,277 | 25 | |||||||||||||||||||||||||
| Dollar General XXIII | Retail | Farmington | NY | 3/31/2017 | (8) | 374 | 1,037 | — | — | 1,411 | 25 | |||||||||||||||||||||||||
| Dollar General XXIII | Retail | Geddes | NY | 3/31/2017 | (8) | 191 | 1,018 | — | — | 1,209 | 25 | |||||||||||||||||||||||||
| Dollar General XXIII | Retail | Otego | NY | 3/31/2017 | (8) | 285 | 1,070 | — | — | 1,355 | 26 | |||||||||||||||||||||||||
| Dollar General XXIII | Retail | Parish | NY | 3/31/2017 | (8) | 164 | 1,071 | — | — | 1,235 | 27 | |||||||||||||||||||||||||
| Dollar General XXIII | Retail | Utica | NY | 3/31/2017 | (8) | 301 | 1,034 | — | — | 1,335 | 27 | |||||||||||||||||||||||||
| Jo-Ann Fabrics I | Retail | Freeport | IL | 4/17/2017 | (8) | 119 | 1,663 | — | — | 1,782 | 33 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Kettering | OH | 4/28/2017 | (6) | 264 | 1,493 | — | — | 1,757 | 31 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Miamisburg | OH | 4/28/2017 | (6) | 339 | 1,791 | — | — | 2,130 | 35 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Elyria | OH | 4/28/2017 | (6) | 540 | 1,003 | — | — | 1,543 | 22 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Taylor | MI | 4/28/2017 | (6) | 542 | 1,210 | — | — | 1,752 | 26 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Lansing | MI | 4/28/2017 | (6) | 817 | 1,093 | — | — | 1,910 | 26 | |||||||||||||||||||||||||
F-53
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
| (In thousands) | Initial Costs | Subsequent to Acquisition | Gross Amount Carried at December 31, 2017 (12) (13) | |||||||||||||||||||||||||||||||||
| Property | Property Type | City | State | Acquisition Date | Encumbrances at December 31, 2017 | Land | Building and Improvements | Land (11) | Building and Improvements(11) | Accumulated Depreciation (14) (15) | ||||||||||||||||||||||||||
| Bob Evans I | Retail | Marietta | OH | 4/28/2017 | (6) | 631 | 1,890 | — | — | 2,521 | 38 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Roseville | MI | 4/28/2017 | (6) | 861 | 854 | — | — | 1,715 | 22 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Steubenville | OH | 4/28/2017 | (6) | 641 | 1,638 | — | — | 2,279 | 37 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Franklin | OH | 4/28/2017 | (6) | 620 | 1,581 | — | — | 2,201 | 32 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Ashland | KY | 4/28/2017 | (6) | 446 | 1,771 | — | — | 2,217 | 34 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Bloomington | IN | 4/28/2017 | (6) | 405 | 1,351 | — | — | 1,756 | 26 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Dublin | OH | 4/28/2017 | (6) | 701 | 645 | — | — | 1,346 | 16 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Streetsboro | OH | 4/28/2017 | (6) | 1,078 | 780 | — | — | 1,858 | 19 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Lewes | DE | 4/28/2017 | (6) | 660 | 1,016 | — | — | 1,676 | 22 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Lebanon | OH | 4/28/2017 | (6) | 628 | 1,328 | — | — | 1,956 | 29 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Ellicott City | MD | 4/28/2017 | (6) | 507 | 1,083 | — | — | 1,590 | 25 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Paducah | KY | 4/28/2017 | (6) | 296 | 697 | — | — | 993 | 16 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Uniontown | PA | 4/28/2017 | (6) | 494 | 1,104 | — | — | 1,598 | 26 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Weirton | WV | 4/28/2017 | (6) | 305 | 900 | — | — | 1,205 | 22 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Coshocton | OH | 4/28/2017 | (6) | 386 | 1,326 | — | — | 1,712 | 29 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Bucyrus | OH | 4/28/2017 | (6) | 224 | 1,450 | — | — | 1,674 | 29 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Columbia City | IN | 4/28/2017 | (6) | 333 | 594 | — | — | 927 | 14 | |||||||||||||||||||||||||
| Bob Evans I | Retail | Plymouth | IN | 4/28/2017 | (6) | 172 | 1,023 | — | — | 1,195 | 21 | |||||||||||||||||||||||||
| FedEx Ground IX | Distribution | Brainerd | MN | 5/3/2017 | (8) | 587 | 3,415 | — | — | 4,002 | 82 | |||||||||||||||||||||||||
| Dollar General XXIII | Retail | Kingston | NY | 5/10/2017 | (8) | 432 | 1,027 | — | — | 1,459 | 24 | |||||||||||||||||||||||||
| Chili's II | Retail | McHenry | IL | 5/10/2017 | (8) | 973 | 2,557 | — | — | 3,530 | 50 | |||||||||||||||||||||||||
| Sonic Drive In I | Retail | Robertsdale | AL | 6/2/2017 | (8) | 358 | 1,043 | — | — | 1,401 | 19 | |||||||||||||||||||||||||
| Sonic Drive In I | Retail | Tuscaloosa | AL | 6/2/2017 | (8) | 1,808 | 841 | — | — | 2,649 | 16 | |||||||||||||||||||||||||
| Bridgestone HOSEpower I | Distribution | Columbia | SC | 6/9/2017 | (8) | 307 | 1,973 | — | — | 2,280 | 35 | |||||||||||||||||||||||||
| Bridgestone HOSEpower I | Distribution | Elko | NV | 6/9/2017 | (8) | 358 | 1,642 | — | — | 2,000 | 31 | |||||||||||||||||||||||||
| Dollar General XXIII | Retail | Kerhonskon | NY | 6/16/2017 | (8) | 247 | 953 | — | — | 1,200 | 16 | |||||||||||||||||||||||||
| Bridgestone HOSEpower II | Distribution | Jacksonville | FL | 7/3/2017 | (8) | 236 | 1,762 | — | — | 1,998 | 26 | |||||||||||||||||||||||||
| FedEx Ground X | Distribution | Rolla | MO | 7/14/2017 | (8) | 469 | 9,653 | — | — | 10,122 | 172 | |||||||||||||||||||||||||
| Chili's III | Retail | Machesney Park | IL | 8/6/2017 | (8) | 1,254 | 2,922 | — | — | 4,176 | 36 | |||||||||||||||||||||||||
| FedEx Ground XI | Distribution | Casper | WY | 9/15/2017 | (8) | 386 | 3,469 | — | — | 3,855 | 35 | |||||||||||||||||||||||||
| Hardee's I | Retail | Ashland | AL | 9/26/2017 | 170 | 827 | — | — | 997 | 7 | ||||||||||||||||||||||||||
| Hardee's I | Retail | Jasper | AL | 9/26/2017 | 171 | 527 | — | — | 698 | 4 | ||||||||||||||||||||||||||
| Hardee's I | Retail | Jesup | GA | 9/26/2017 | 231 | 1,236 | — | — | 1,467 | 9 | ||||||||||||||||||||||||||
| Hardee's I | Retail | Waycross | GA | 9/26/2017 | 261 | 1,217 | — | — | 1,478 | 10 | ||||||||||||||||||||||||||
| Tractor Supply IV | Retail | Flandreau | SD | 10/30/2017 | (8) | 194 | 1,110 | — | — | 1,304 | 5 | |||||||||||||||||||||||||
F-54
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
| (In thousands) | Initial Costs | Subsequent to Acquisition | Gross Amount Carried at December 31, 2017 (12) (13) | |||||||||||||||||||||||||||||||||
| Property | Property Type | City | State | Acquisition Date | Encumbrances at December 31, 2017 | Land | Building and Improvements | Land (11) | Building and Improvements(11) | Accumulated Depreciation (14) (15) | ||||||||||||||||||||||||||
| Tractor Supply IV | Retail | Hazen | ND | 10/30/2017 | (8) | 242 | 1,290 | — | — | 1,532 | 7 | |||||||||||||||||||||||||
| Circle K II | Retail | Harlingen | TX | 11/2/2017 | 575 | 945 | — | — | 1,520 | 5 | ||||||||||||||||||||||||||
| Circle K II | Retail | Laredo | TX | 11/2/2017 | 734 | 1,294 | — | — | 2,028 | 7 | ||||||||||||||||||||||||||
| Circle K II | Retail | Laredo | TX | 11/2/2017 | 226 | 443 | — | — | 669 | 2 | ||||||||||||||||||||||||||
| Circle K II | Retail | Laredo | TX | 11/2/2017 | 675 | 1,250 | — | — | 1,925 | 7 | ||||||||||||||||||||||||||
| Circle K II | Retail | Rio Grande City | TX | 11/2/2017 | 625 | 1,257 | — | — | 1,882 | 6 | ||||||||||||||||||||||||||
| Circle K II | Retail | Weslaco | TX | 11/2/2017 | 547 | 1,183 | — | — | 1,730 | 6 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Lithia | FL | 11/3/2017 | 352 | 478 | — | — | 830 | 3 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Plant City | FL | 11/3/2017 | 250 | 525 | — | — | 775 | 4 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Riverview | FL | 11/3/2017 | 392 | 679 | — | — | 1,071 | 4 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Riverview | FL | 11/3/2017 | 267 | 502 | — | — | 769 | 3 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Wauchula | FL | 11/3/2017 | 191 | 346 | — | — | 537 | 2 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Biloxi | MS | 11/3/2017 | 397 | 621 | — | — | 1,018 | 3 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Collins | MS | 11/3/2017 | 272 | 992 | — | — | 1,264 | 5 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Ellisville | MS | 11/3/2017 | 251 | 1,114 | — | — | 1,365 | 5 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Gulfport | MS | 11/3/2017 | 199 | 660 | — | — | 859 | 3 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Gulfport | MS | 11/3/2017 | 232 | 746 | — | — | 978 | 4 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Gulfport | MS | 11/3/2017 | 100 | 930 | — | — | 1,030 | 5 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Hattiesburg | MS | 11/3/2017 | 351 | 788 | — | — | 1,139 | 4 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Long Beach | MS | 11/3/2017 | 210 | 840 | — | — | 1,050 | 5 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Magee | MS | 11/3/2017 | 300 | 740 | — | — | 1,040 | 4 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Petal | MS | 11/3/2017 | 100 | 1,053 | — | — | 1,153 | 5 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Purvis | MS | 11/3/2017 | 129 | 896 | — | — | 1,025 | 4 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Tylertown | MS | 11/3/2017 | 191 | 1,197 | — | — | 1,388 | 6 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Waveland | MS | 11/3/2017 | 322 | 594 | — | — | 916 | 3 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Waynesboro | MS | 11/3/2017 | 188 | 517 | — | — | 705 | 3 | ||||||||||||||||||||||||||
| Sonic Drive In II | Retail | Woodville | MS | 11/3/2017 | 160 | 1,179 | — | — | 1,339 | 6 | ||||||||||||||||||||||||||
| Bridgestone HOSEPower III | Distribution | Sulphur | LA | 12/20/2017 | (8) | 882 | 2,175 | — | — | 3,057 | — | |||||||||||||||||||||||||
| Encumbrances allocated based on notes below | 1,066,755 | |||||||||||||||||||||||||||||||||||
| Total | $ | 1,307,887 | $ | 616,306 | $ | 2,469,823 | $ | (8,631 | ) | $ | (20,803 | ) | $ | 3,056,695 | $ | 256,771 | ||||||||||||||||||||
F-55
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part I
December 31, 2017
___________________________________
| (1) | These properties collateralize the Mortgage Loan I, which had $638.1 million outstanding as of December 31, 2017. |
| (2) | These properties collateralize the SunTrust Bank II mortgage note payable of $21.2 million as of December 31, 2017. |
| (3) | These properties collateralize the SunTrust Bank III mortgage note payable of $79.7 million as of December 31, 2017. |
| (4) | These properties collateralize the SunTrust Bank IV mortgage note payable of $22.8 million as of December 31, 2017. |
| (5) | These properties collateralize the Stop & Shop I mortgage note payable of $37.6 million as of December 31, 2017. |
| (6) | These properties collateralize the Bob Evans I mortgage note payable of $24.0 million as of December 31, 2017. |
| (7) | These properties collateralize the Mortgage Loan II, which had $210.0 million outstanding as of December 31, 2017. |
| (8) | These properties collateralize the Mortgage Loan III, which had $33.4 million outstanding as of December 31, 2017. |
| (9) | These properties are encumbered by the Credit Facility borrowings in the amount of $95.0 million as of December 31, 2017 and such amount of borrowings is excluded from the table above. |
| (10) | These properties were acquired as part of the Merger Transaction with American Realty Capital — Retail Centers of America, Inc. (RCA) on February 16, 2017. |
| (11) | During the year ended December 31, 2017, the Company determined that the carrying value of 30 properties exceeded their estimated fair values and recognized an impairment charge of $14.8 million. The remaining balance pertains to 2016 impairment charges and partial dispositions of assets. |
| (12) | Acquired intangible lease assets allocated to individual properties in the amount of $454.2 million are not reflected in the table above. |
| (13) | The tax basis of aggregate land, buildings and improvements as of December 31, 2017 is $2.9 billion. |
| (14) | The accumulated depreciation column excludes $151.4 million of accumulated amortization associated with acquired intangible lease assets. |
| (15) | 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 and five years for fixtures. |
F-56
AMERICAN FINANCE TRUST, INC.
Real Estate and Accumulated Depreciation
Schedule III — Part II
December 31, 2017
The following is a summary of activity for real estate and accumulated depreciation for the years ended December 31, 2017, 2016 and 2015:
| Year Ended December 31, | ||||||||||||
| (In thousands) | 2017 | 2016 | 2015 | |||||||||
| Real estate investments, at cost: | ||||||||||||
| Balance at beginning of year | $ | 1,724,258 | $ | 1,899,099 | $ | 1,899,099 | ||||||
| Additions - acquisitions | 1,490,332 | 31,392 | — | |||||||||
| Disposals | (131,185 | ) | (31,547 | ) | — | |||||||
| Impairment charges | (20,580 | ) | (24,661 | ) | — | |||||||
| Reclassified to assets held for sale | (6,130 | ) | (150,025 | ) | — | |||||||
| Balance at end of the year | $ | 3,056,695 | $ | 1,724,258 | $ | 1,899,099 | ||||||
| Accumulated depreciation: | ||||||||||||
| Balance at beginning of year | $ | 183,437 | $ | 141,594 | $ | 74,648 | ||||||
| Depreciation expense | 85,175 | 66,831 | 66,946 | |||||||||
| Disposals | (10,415 | ) | (1,018 | ) | — | |||||||
| Reclassified to assets held for sale | (1,426 | ) | (23,970 | ) | — | |||||||
| Balance at end of the year | $ | 256,771 | $ | 183,437 | $ | 141,594 | ||||||
F-57