UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
For the transition period from to
Commission File Number 001-38530
Essential Properties Realty Trust, Inc.
(Exact name of Registrant as specified in its Charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
902 Carnegie Center Blvd., Suite 520
Princeton, New Jersey
(Address of Principal Executive Offices)
82-4005693
(I.R.S. Employer
Identification No.)
8540
(Zip Code)
Registrants telephone number, including area code: (609) 436-0619
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $0.01 par value
Trading Symbol(s)
EPRT
Securities registered pursuant to Section 12(g) of the Act: None
Name of Each Exchange on Which
Registered
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
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 ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company, “and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Emerging growth company
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☐
Accelerated filer
Smaller reporting company
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☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐
As of June 30, 2020 (the last business day of the registrant's most recently completed second fiscal quarter), the aggregate market value of the registrant's shares of common
stock, $0.01 par value, held by non-affiliates of the registrant, was $1.4 billion based on the last reported sale price of $14.84 per share on the New York Stock Exchange on
June 30, 2020.
The number of shares of the registrant's Common Stock outstanding as of February 23, 2021 was 106,934,874.
Documents Incorporated by Reference
Portions the Definitive Proxy Statement for the registrant's 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this report. The registrant expects
to file such proxy statement within 120 days after the end of its fiscal year.
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16
Table of Contents
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
Signatures
Schedules
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F-1
In this Annual Report, we refer to Essential Properties Realty Trust, Inc., a Maryland corporation, together with its consolidated subsidiaries,
including, Essential Properties, L.P., a Delaware limited partnership and its operating partnership (the "Operating Partnership"), as "we," "us," "our"
or "the Company" unless we specifically state otherwise or the context otherwise requires.
PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In particular, statements pertaining to
our business and growth strategies, investment, financing and leasing activities and trends in our business, including trends in the market for long-
term, net leases of freestanding, single-tenant properties, contain forward-looking statements. When used in this report, the words "estimate,"
"anticipate," "expect," "believe," "intend," "may," "will," "should," "seek," "approximately" and "plan," and variations of such words, and similar words
or phrases, that are predictions of future events or trends and that do not relate solely to historical matters, are intended to identify forward-looking
statements. You can also identify forward-looking statements by discussions of strategy, plans, beliefs or intentions of management.
Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance or
achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements; accordingly,
you should not rely on forward-looking statements as predictions of future events. Forward-looking statements depend on assumptions, data or
methods that may be incorrect or imprecise, and may not be realized. We do not guarantee that the transactions and events described will happen
as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially
from those set forth or contemplated in the forward-looking statements:
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the ongoing adverse impact of the COVID-19 pandemic on the Company and its tenants;
general business and economic conditions;
risks inherent in the real estate business, including tenant defaults or bankruptcies, illiquidity of real estate investments, fluctuations in real
estate values and the general economic climate in local markets, competition for tenants in such markets, potential liability relating to
environmental matters and potential damages from natural disasters;
the performance and financial condition of our tenants;
the availability of suitable properties to acquire and our ability to acquire and lease those properties on favorable terms;
our ability to renew leases, lease vacant space or re-lease space as existing leases expire or are terminated;
volatility and uncertainty in the credit markets and broader financial markets, including potential fluctuations in the Consumer Price Index
("CPI");
the degree and nature of our competition;
our failure to generate sufficient cash flows to service our outstanding indebtedness;
our ability to access debt and equity capital on attractive terms;
fluctuating interest rates;
availability of qualified personnel and our ability to retain our key management personnel;
changes in, or the failure or inability to comply with, applicable law or regulation;
our failure to continue to qualify for taxation as a real estate investment trust ("REIT");
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changes in the U.S. tax law and other U.S. laws, whether or not specific to REITs; and
additional factors discussed in the sections entitled "Business," "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in this Annual Report.
You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. While forward-
looking statements reflect our good faith beliefs, they are not guarantees of future events or of our performance. We disclaim any obligation to
publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods,
future events or other changes, except as required by law.
Because we operate in a highly competitive and rapidly changing environment, new risks emerge from time to time, and it is not possible for
management to predict all such risks, nor can management assess the impact of all such risks on our business or the extent to which any risk, or
combination of risks, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual events or results.
Summary Risk Factors
Our business is subject to a number of risks that could materially and adversely impact our financial condition, results of operations, cash
flows and liquidity, prospects, the market price of our common stock and our ability to, among other things, service our debt and to make
distributions to our stockholders. The following risks, which, together with other material risks that are discussed more fully herein under “Risk
Factors,” are the principal factors that make an investment in our company speculative or risky:
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the ongoing adverse impact of the COVID-19 pandemic on us and our tenants;
adverse changes in the U.S., global and local markets and related economic conditions;
the failure of our tenants to successfully operate their businesses, or tenant defaults, bankruptcies or insolvencies;
defaults by borrowers on our mortgage loans receivable;
an inability to identify and complete acquisitions of suitable properties or yield the returns we seek with future acquisitions;
an inability to access debt and equity capital on commercially acceptable terms or at all;
a decline in the fair value of our real estate assets;
geographic, industry and tenant concentrations that reduce the diversity of our portfolio;
a reduction in the willingness or ability of consumers to physically patronize or use their discretionary income in the businesses of our tenants
and potential tenants;
our significant indebtedness, which requires substantial cash flow to service, subjects us to covenants and exposes us to refinancing risk and
the risk of default; and
failure to continue to qualify for taxation as a REIT.
Item 1. Business.
We are an internally managed real estate company that acquires, owns and manages primarily single-tenant properties that are net leased on
a long-term basis to middle-market companies operating service-oriented or experience-based businesses. We have assembled a diversified
portfolio using a disciplined strategy that focuses on properties leased to tenants in businesses such as;
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Car washes,
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Restaurants (primarily quick service restaurants),
Early childhood education,
• Medical and dental services,
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Convenience stores,
Automotive services,
Equipment rental,
Entertainment and
Health and fitness.
We believe that, in general, properties leased to tenants in these businesses and similar businesses are essential to the generation of the
tenants' sales and profits. We also believe that these businesses have favorable growth potential and, because of their nature they are more
insulated from e-commerce pressure than many other businesses.
We completed our initial public offering in June 2018 (our "IPO"), and we qualified to be taxed as a REIT beginning with our taxable year
ended December 31, 2018. As of December 31, 2020, 95.1% of our $184.0 million of annualized base rent was attributable to properties operated
by tenants in service-oriented and experience-based businesses. "Annualized base rent" means annualized contractually specified cash base rent in
effect on December 31, 2020 for all of our leases (including those accounted for as loans or direct financing leases) commenced as of that date and
annualized cash interest on our mortgage loans receivable as of that date.
Our primary business objective is to maximize stockholder value by generating attractive risk-adjusted returns through owning, managing and
growing a diversified portfolio of commercially desirable properties. We have grown significantly since commencing our operations and investment
activities in June 2016. As of December 31, 2020, our portfolio consisted of 1,181 properties, inclusive of two undeveloped land parcels and 115
properties which secure our investments in mortgage loans receivable. Our portfolio was built based on the following core investment attributes:
Diversified Portfolio. As of December 31, 2020, our portfolio was 99.7% occupied by 238 tenants operating 336 different concepts (i.e.,
generally brands), in 17 industries across 43 states, with none of our tenants contributing more than 2.8% of our annualized base rent. Our goal is
that, over time, no more than 5.0% of our annualized base rent will be derived from any single tenant or more than 1% from any single property.
Long Lease Term. As of December 31, 2020, our leases had a weighted average remaining lease term of 14.5 years (based on annualized
base rent), with only 4.8% of our annualized base rent attributable to leases expiring prior to January 1, 2026. Our properties generally are subject
to, long-term net leases that we believe provide us a stable base of revenue from which to grow our portfolio.
Significant Use of Master Leases. As of December 31, 2020, 61.1% of our annualized base rent was attributable to master leases. A
master lease is a single lease pursuant to which multiple properties are leased to a single operator/tenant on a unitary (i.e., “all or none”) basis. The
master lease structure spreads our investment risk across multiple properties, and we believe it reduces our exposure to operating and renewal risk
at any one property, and promotes efficient asset management.
Healthy Rent Coverage Ratio and Tenant Financial Reporting. As of December 31, 2020, our portfolio's weighted average rent coverage
ratio was 2.9x, and 98.2% of our leases (based on annualized base rent) obligate the tenant to periodically provide us with specified unit-level
financial reporting. "Rent coverage ratio" means, as of a specified date, the ratio of (x) tenant-reported or, when unavailable, management's estimate
(based on tenant-reported financial information) of annual earnings before interest, taxes, depreciation, amortization and cash rent attributable to the
leased property (or properties, in the case of a master lease) to (y) the annualized base rental obligation.
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Contractual Base Rent Escalation. As of December 31, 2020, 99.2% of our leases (based on annualized base rent) provided for increases
in future base rent at a weighted average rate of 1.5% per year. Rent escalation provisions provide contractually-specified incremental yield on our
investments and provide a degree of protection from inflation or a rising interest rate environment.
Significant Use of Sale-Leaseback Investments. We seek to acquire properties owned and operated by middle-market businesses and
lease the properties back to the operators pursuant to our standard lease form. For the year ended December 31, 2020, approximately 90% of our
investments were sale-leaseback transactions.
Smaller, Low Basis Single-Tenant Properties. We generally invest in freestanding "small-box" single-tenant properties. As of December 31,
2020 our average investment per property was $2.1 million (which equals our aggregate investment in our properties (including transaction costs,
lease incentives and amounts funded for construction in progress) divided by the number of properties owned at such date), and we believe
investments of similar size should allow us to grow our portfolio without concentrating a large amount of capital in individual properties and should
allow us to limit our exposure to events that may adversely affect a particular property. Additionally, we believe that many of our properties are
fungible and appropriate for multiple commercial uses, which reduces the risk that a particular property may become obsolete and increases their
liquidity.
2020 Financial and Operating Highlights
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During 2020, we completed $602.8 million of investments, including $541.5 million in 208 property acquisitions and $61.3 million in newly
originated loans receivable secured by 25 properties.
As of December 31, 2020, our total gross investment in real estate was $2.5 billion, and we had total debt of $821.2 million.
During 2020, we made distributions totaling $0.93 per share of common stock.
• On January 14, 2020, we completed an underwritten public offering of 7,935,000 shares of our common stock, raising net proceeds of
approximately $191.5 million, and on September 22, 2020, we completed an underwritten public offering of 10,120,000 shares of our common
stock, raising net proceeds of approximately $184.1 million. The net proceeds from these offerings were used to reduce outstanding
indebtedness and for general corporate purposes, including funding investments.
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In February 2020, we voluntarily prepaid, in part, $62.0 million of the Series 2017-1 Class A notes previously issued under our private conduit
program (the "Master Trust Funding program").
In March 2020, we borrowed the remaining $180.0 million available under the November 2019 Term Loan (as defined herein) and used the
proceeds facilitate general corporate purposes, including funding investments.
During 2020, we sold 4,499,057 shares of our common stock under the ATM Program (as defined herein), at a weighted average price per
share of $19.02, raising gross proceeds of approximately $85.6 million.
During the later portion of the first quarter of 2020 through the second quarter of 2020, the COVID-19 pandemic materially and adversely
affected our business and the businesses of many of our tenants, and significantly increased general uncertainty in the business environment.
In response, we emphasized and focused on engaging with our tenants and, among other things, as of December 31, 2020, we had granted
rent deferrals with respect to $18.5 million million of past and future rent, representing 10% of our annualized base rent as of such date. Our
deferrals primarily involved tenants focused on industries that have been directly disrupted by the COVID-19 pandemic and restrictions
intended to prevent its spread, particularly movie theaters, casual and family dining restaurants, entertainment, and health and fitness. During
the earlier portion of the COVID-19 pandemic, we adopted a more defensive business posture and emphasized maintaining our liquidity and
financial flexibility. While the COVID-19 pandemic continues to adversely affect us and our tenants, and considerable uncertainty continues to
exist, more recently we have seen improvements in our operations, particularly our rent collection experience and the broader resumption of
economic activity, allowing us to become less defensive and increase our acquisition activity in targeted industries, such as equipment rental,
quick service restaurants and auto services, and resume our capital recycling activity during the second half of 2020.
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Our Target Market
We are an active investor in single-tenant, net leased real estate. Our target properties are generally freestanding commercial real estate
facilities where a middle-market tenant conducts activities on property that are essential to the generation of its sales and profits. We believe that
this market is underserved from a capital perspective and offers attractive risk-adjusted returns.
Within this market, we emphasize investment in properties leased to tenants engaged in targeted set of service-oriented or experience-based
businesses noted above, because we believe these businesses are generally more insulated from the competitive pressure of e-
commerce businesses than many others.
We focus on properties leased to middle-market companies, which we define as regional and national operators with between 10 and 250
locations and $20 million to $500 million in annual revenue, and we opportunistically invest in properties leased to smaller companies, which we
define as regional operators with fewer than 10 locations and less than $20 million in annual revenue. Although it is not our primary investment
focus, we opportunistically consider investing in properties leased to large companies. While most of our targeted tenants are not rated by a
nationally recognized statistical rating organization, we primarily seek to invest in properties leased to companies that we determine have attractive
credit characteristics and stable operating histories.
Despite the market's size, the market for single-tenant, net leased real estate is highly fragmented. In particular, we believe that there is a
limited number of participants addressing the long-term capital needs of unrated middle-market and small companies. We believe that many publicly
traded REITs that invest in net leased properties concentrate their investment activity in properties leased to investment grade-rated tenants, which
tend to be larger organizations, with the result that unrated, middle-market and small companies are relatively underserved and offer us an
opportunity to make investments with attractive risk-adjusted return potential.
Furthermore, we believe that there is strong demand for our net-lease capital solutions among middle-market and small owner-operators of
commercial real estate, in part, due to the bank regulatory environment, which, since the turmoil in the housing and mortgage industries from 2007-
2009, has generally been characterized by increased scrutiny and regulation. We believe that this environment has made commercial banks less
responsive to the long-term capital needs of unrated middle-market and small companies, many of which have historically depended on commercial
banks for their financing. Accordingly, we see an attractive opportunity to address the capital needs of these companies by offering them an efficient
alternative to financing their real estate with traditional mortgage or bank debt and their own equity.
As a result, while we believe our net-lease financing solutions may be attractive to a wide variety of companies, we believe our most attractive
opportunity is owning properties net leased to middle-market and small companies that are generally unrated and have less access to efficient
sources of long-term capital than larger, rated companies.
Our Competitive Strengths
We believe the following competitive strengths distinguish us from our competitors and allow us to compete effectively in the single-
tenant, net-lease market:
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Carefully Constructed Portfolio of Properties Leased to Service-Oriented or Experience-Based Tenants. We have strategically
constructed a portfolio that is diversified by tenant, industry, concept and geography and generally avoids exposure to businesses that we
believe are subject to pressure from e-commerce businesses. Our properties are generally subject to long-term net leases that we believe
provide us with a stable base of revenue from which to grow our portfolio. As of December 31, 2020, our portfolio consisted of 1,181
properties, with annualized base rent of $184.0 million, which was carefully selected by our management team in accordance with our focused
and disciplined investment strategy. Our portfolio is diversified with 238 tenants operating 336 different concepts across 43 states and 17
industries. None of our tenants contributed more than 2.8% of our annualized base rent as of December 31, 2020, and our strategy targets a
scaled portfolio that, over time, derives no more than 5.0% of its annualized base rent from any single tenant or more than 1.0% from any
single property.
We focus on investing in properties leased to tenants operating in the service-oriented or experience-based businesses noted above. As of
December 31, 2020, 95.1% of our annualized base rent was attributable to tenants operating service-oriented and experience-based
businesses.
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We believe that our portfolio's diversity and rigorous underwriting decrease the impact on us of an adverse event affecting a specific tenant,
industry or region, and our focus on leasing to tenants in industries that we believe are well-positioned to withstand competition from e-
commerce businesses increases the stability and predictability of our rental revenue.
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Experienced and Proven Management Team. Our senior management has significant experience in the net lease industry and a track
record of growing net lease businesses to significant scale.
Our senior management team has been responsible for our focused and disciplined investment strategy and for developing and implementing
our investment sourcing, underwriting, closing and asset management infrastructure, which we believe can support significant investment
growth without a proportionate increase in our operating expenses. As of December 31, 2020, 84.5% of our portfolio's annualized base rent
was attributable to internally originated sale-leaseback transactions and 85.3% was acquired from parties who had previously engaged in one
or more transactions that involved a member of our senior management team (including operators and tenants and other participants in the
net lease industry, such as brokers, intermediaries and financing sources). The substantial experience, knowledge and relationships of our
senior leadership team provide us with an extensive network of contacts that we believe allows us to originate attractive investment
opportunities and effectively grow our business.
• Growth-Oriented Balance Sheet Scalable Infrastructure. We believe our financial position and existing infrastructure support our external
growth strategy. As of December 31, 2020, we had the ability to borrow up to $382.0 million under our senior unsecured revolving credit
facility that matures in April 2023, which allows for up to $400.0 million in principal borrowings and is available for general corporate purposes,
including funding future acquisitions. Additionally, through our Master Trust Funding Program, we have the ability to seek additional debt
capital in the asset-backed securities market. For more information about our indebtedness, see Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Description of certain Debt" and Note 5. Long Term Debt to our consolidated
financial statements included elsewhere in this report. We also maintain an ATM Program, and as of December 31, 2020, we had the ability to
issue additional common stock with an aggregate gross sales price of up to $170.7 million.
As of December 31, 2020, we had $821.2 million of gross debt outstanding, with a weighted average maturity of 3.82 years, and net debt of
$788.2 million. For the three months ended December 31, 2020, our net income was $5.7 million, our Adjusted EBITDAre was $41.5 million,
our Annualized Adjusted EBITDAre was $165.8 million and our ratio of net debt to Annualized Adjusted EBITDAre was 4.8x. Net debt,
Adjusted EBITDAre and Annualized Adjusted EBITDAre are non-GAAP financial measures. For definitions of net debt and Annualized
Adjusted EBITDAre, reconciliations of these measures to total debt and net income, respectively, the most directly comparable financial
measures calculated in accordance with accounting principles generally accepted in the United States ("GAAP"), and a statement of why our
management believes the presentation of these non-GAAP financial measures provide useful information to investors and a discussion of how
management uses these measures, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations'
Non-GAAP Financial Measures."
As of December 31, 2020, we also had 923 unencumbered properties that contributed $154.5 million of annualized base rent.
We seek to manage our balance sheet so that we have access to multiple sources of debt capital in the future, such as term borrowings from
insurance companies, banks and other sources, single-asset mortgage financing and CMBS borrowings, that may offer us the opportunity to
lower our cost of funding and further diversify our sources of debt capital.
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Differentiated Investment Strategy. We seek to acquire and lease freestanding, single-tenant commercial real estate facilities where a
tenant services its customers and conducts activities at the property that are essential to the generation of its sales and profits. We primarily
seek to invest in properties leased to middle-market companies that we determine have attractive credit characteristics and stable operating
histories. We believe middle-market companies are underserved from a capital perspective and that we can offer them attractive real estate
financing solutions while allowing us to enter into leases that provide us with attractive risk-adjusted returns. Furthermore, many net lease
transactions with middle-market companies involve properties that are individually relatively small, which allows us to avoid concentrating a
large amount of capital in individual properties. We maintain close relationships with our tenants, which we believe allows us
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to source additional investments and become the capital provider of choice as our tenants' businesses grow and their real estate needs
increase.
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Asset Base Allows for Significant Growth. Building on our senior leadership team's experience of more than 20 years in net lease real
estate investing, we have developed leading origination, underwriting, financing, and property management capabilities. Our platform is
scalable, and we seek to leverage our capabilities to improve our efficiency and processes to continue to seek attractive risk-adjusted growth.
While we expect that our general and administrative expenses could increase as our portfolio grows, we expect that such expenses as a
percentage of our portfolio and our revenues will decrease over time due to efficiencies and economies of scale. During the years ended
December 31, 2020, 2019 and 2018, we invested in properties with aggregate investment values of $602.8 million, $598.1 million and $504.7
million, respectively. With our smaller asset base relative to other peers that focus on acquiring net leased real estate, we believe that we can
achieve superior growth through manageable acquisition volume.
Disciplined Underwriting Leading to Strong Portfolio Characteristics. We generally seek to execute transactions with an aggregate
purchase price of $3 million to $50 million. Our size allows us to focus on investing in a segment of the market that we believe is underserved
from a capital perspective and where we can originate or acquire relatively smaller assets on attractive terms that provide meaningful growth
to our portfolio. In addition, we seek to invest in commercially desirable properties that are suitable for use by different tenants, offer attractive
risk-adjusted returns and possess characteristics that reduce our real estate investment risks. As of December 31, 2020:
• Our leases had a weighted average remaining lease term (based on annualized base rent) of 14.5 years, with only 4.8% of our annualized
base rent attributable to leases expiring prior to January 1, 2026;
• Master leases contributed 61.1% of our annualized base rent;
• Our portfolio's weighted average rent coverage ratio was 2.9x, with leases contributing 55.9% of our annualized base rent having rent
coverage ratios in excess of 2.0x (excluding leases that do not report unit-level financial information);
• Our portfolio was 99.7% occupied;
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Leases contributing 99.2% of our annualized base rent provided for increases in future annual base rent, ranging from 1.0% to 4.0%
annually, with a weighted average annual escalation equal to 1.5% of base rent; and
Leases contributing 94.1% of annualized base rent were triple-net.
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Extensive Tenant Financial Reporting Supports Active Asset Management. We seek to enter into leases that obligate our tenants to
periodically provide us with corporate and/or unit-level financial reporting, which we believe enhances our ability to actively monitor our
investments, negotiate lease renewals and proactively manage our portfolio to protect stockholder value. As of December 31, 2020, leases
contributing 98.2% of our annualized base rent required tenants to provide us with specified unit-level financial information.
Our Business and Growth Strategies
Our primary business objective is to maximize stockholder value by generating attractive risk-adjusted returns through owning, managing and
growing a diversified portfolio of commercially desirable properties. We intend to pursue our objective through the following business and growth
strategies.
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Structure and Manage Our Diverse Portfolio with Focused and Disciplined Underwriting and Risk Management. We seek to
maintain the stability of our rental revenue and maximize the long-term return on our investments while continuing our growth by using our
focused and disciplined underwriting and risk management expertise. When underwriting assets, we emphasize commercially desirable
properties, with strong operating performance, healthy rent coverage ratios and tenants with attractive credit characteristics.
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Leasing. In general, we seek to enter into leases with (i) relatively long terms (typically with initial terms of 15 years or more and tenant
renewal options); (ii) attractive rent escalation provisions; (iii) healthy rent coverage ratios; and (iv) tenant obligations to periodically provide us
with financial information, which provides us with information about the operating performance of the leased property and/or tenant and allows
us to actively monitor the security of payments under the lease on an ongoing basis. We strongly prefer to use master lease structures,
pursuant to which we lease multiple properties to a single tenant on a unitary (i.e., "all or none") basis. In addition, in the context of our sale-
leaseback investments, we generally seek to establish contract rents that are at or below prevailing market rents, which we believe enhances
tenant retention and reduces our releasing risk if a lease is rejected in a bankruptcy proceeding or expires.
Diversification. We monitor and manage the diversification of our portfolio in order to reduce the risks associated with adverse developments
affecting a particular tenant, property, industry or region. Our strategy targets a scaled portfolio that, over time, will (i) derive no more than 5%
of its annualized base from any single tenant or more than 1% of its annualized base rent from any single property, (ii) be primarily leased to
tenants operating in service-oriented or experience-based businesses and (iii) avoid significant geographic concentration. While we consider
these criteria when making investments, we may be opportunistic in managing our business and make investments that do not meet one or
more of these criteria if we believe the opportunity presents an attractive risk-adjusted return.
Asset Management. We are an active asset manager and regularly review each of our properties to evaluate, various factors, including, but
not limited to, changes in the business performance at the property, credit of the tenant and local real estate market conditions. Among other
things, we use Moody's Analytics RiskCalc ("RiskCalc") to proactively detect credit deterioration. RiskCalc is a model for predicting private
company defaults based on Moody's Analytics Credit Research Database. Additionally, we monitor market rents relative to in-place rents and
the amount of tenant capital expenditures in order to refine our tenant retention and alternative use assumptions. Our management team
utilizes our internal credit diligence to monitor the credit profile of each of our tenants on an ongoing basis. We believe that this proactive
approach enables us to identify and address issues in a timely manner and to determine whether there are properties in our portfolio that are
appropriate for disposition.
In addition, as part of our active portfolio management, we may selectively dispose of assets that we conclude do not offer a return
commensurate with the investment risk, contribute to unwanted geographic, industry or tenant concentrations, or may be sold at a price we
determine is attractive. During the year ended December 31, 2020, we sold 50 properties for net sales proceeds of $81.7 million, including 6
properties that were vacant. We believe that our underwriting processes and active asset management enhance the stability of our rental
revenue by reducing default losses and increasing the likelihood of lease renewals.
Focus on Relationship-Based Sourcing to Grow Our Portfolio by Originating Sale-Leaseback Transactions. We plan to continue our
disciplined growth by originating sale-leaseback transactions and opportunistically making acquisitions of properties subject to net leases that
contribute to our portfolio’s tenant, industry and geographic diversification. As of December 31, 2020, 84.5% of our portfolio’s annualized base
rent was attributable to internally originated sale-leaseback transactions and 85.3% was acquired from parties who had previously engaged in
transactions that involved a member of our senior management team (including operators and tenants and other participants in the net lease
industry, such as brokers, intermediaries and financing sources). In addition, we seek to enhance our relationships with our tenants to
facilitate investment opportunities, including selectively agreeing to reimburse certain of our tenants for development costs at our properties in
exchange for contractually specified rent that generally increases proportionally with our funding. We believe our senior management team’s
reputation, in-depth market knowledge and extensive network of long-standing relationships in the net lease industry provide us access to an
ongoing pipeline of attractive investment opportunities.
As of February 19, 2021, we have entered into purchase and sale agreements for 19 properties with an aggregate purchase price of
$44.7 million.
Focus on Middle-Market Companies in Service-Oriented or Experience-Based Businesses. We primarily focus on investing in
properties that we lease on a long-term, triple-net basis to middle-market companies that we determine have attractive credit characteristics
and stable operating histories. Properties leased to middle-market companies may offer us the opportunity to achieve superior risk-adjusted
returns, as a result of our extensive and disciplined credit and real estate analysis, lease structuring and
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•
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portfolio composition. We believe our capital solutions are attractive to middle-market companies as such companies often have limited
financing options, as compared to larger, credit rated organizations. We also believe that, in many cases, smaller transactions with middle-
market companies will allow us to maintain and grow our portfolio's diversification. Middle-market companies are often willing to enter into
leases with structures and terms that we consider attractive (such as master leases and leases that require ongoing tenant financial reporting)
and believe contribute to the stability of our rental revenue.
•
•
In addition, we emphasize investment in properties leased to tenants engaged in service-oriented or experience-based businesses, such as
car washes, restaurants (primarily quick service restaurants), early childhood education, medical and dental services, convenience stores,
automotive services, equipment rental, entertainment and health and fitness, as we believe these businesses are generally more insulated
from e-commerce pressure than many others.
Internal Growth Through Long-Term Triple-Net Leases That Provide for Periodic Rent Escalations. We seek to enter into long-term
(typically with initial terms of 15 years or more and tenant renewal options), triple-net leases that provide for periodic contractual rent
escalations. As of December 31, 2020, our leases had a weighted average remaining lease term of 14.5 years (based on annualized base
rent), with only 4.8% of our annualized base rent attributable to leases expiring prior to January 1, 2026, and 99.2% of our leases (based on
annualized base rent) provided for increases in future base rent at a weighted average of 1.5% per year.
Actively Manage Our Balance Sheet to Maximize Capital Efficiency. We seek to maintain a prudent balance between debt and equity
financing and to maintain funding sources that lock in long-term investment spreads and limit interest rate sensitivity. As of December 31,
2020, we had $821.2 million of gross debt outstanding and $788.2 million of net debt outstanding. Our net income for the three months ended
December 31, 2020 was $5.7 million, our Adjusted EBITDAre was $41.5 million, our Annualized Adjusted EBITDAre was $165.8 million and
our ratio of net debt to Annualized Adjusted EBITDAre was 4.8x. We target a level of net debt that, over time, is generally less than six times
our Annualized Adjusted EBITDAre. We have access to multiple sources of debt capital, including bank debt, through our revolving credit and
term loan facilities, and the investment grade-rated, asset-backed bond market, through our Master Trust Funding Program. Net debt,
Adjusted EBITDAre and Annualized Adjusted EBITDAre are non-GAAP financial measures. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations' Non-GAAP Financial Measures."
Competition
We face competition for acquisitions of real property from other investors, including traded and non-traded public REITs, private equity
investors and institutional investment funds, some of which have greater economies of scale, lower costs of capital, access to more sources of
capital, a larger base of operating resources and greater name recognition than we do, and the ability to accept more risk. We also believe that
competition for real estate financing comes from middle-market business owners themselves, many of whom have had a historic preference to own,
rather than lease, the real estate they use in their businesses. This competition may increase the demand for the types of properties in which we
typically invest and, therefore, may reduce the number of suitable investment opportunities available to us and increase the prices paid for such
acquisition properties. This competition will increase if investments in real estate become more attractive relative to other forms of investment.
As a landlord, we compete in the multi-billion dollar commercial real estate market with numerous developers and owners of properties, many
of which own properties similar to ours in the same markets in which our properties are located. Some of our competitors have greater economies of
scale, lower costs of capital, access to more sources of capital, a larger base of operating resources and greater name recognition than we do, and
the ability to accept more risk. If our competitors offer space at rental rates below current market rates or below the rental rates we currently charge
our tenants, we may lose our tenants or prospective tenants, and we may be pressured to reduce our rental rates or to offer substantial rent
abatements, tenant improvement allowances, early termination rights or below-market renewal options in order to retain tenants when our leases
expire.
Employees
As of December 31, 2020, we had 33 full-time employees. Our staff is mostly comprised of professionals engaged in originating, underwriting
and closing investments; portfolio asset management; portfolio servicing (e.g.,
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collections, property tax compliance, etc.); and accounting, financial reporting, cash management and capital markets activities. Women comprise
nearly 40% of our employees and hold approximately 36% of our management positions, providing significant leadership at our company. Our
commitment to diversity extends to our board of directors, as three of its seven independent members, or approximately 43%, are women.
Additionally, we have a consistent and strong record of hiring veterans of the U.S. military, including our chief executive officer.
We seek to provide a dynamic work environment that promotes the retention and development of our employees, and is a differentiating factor
in our ability to attract new talent. We strive to offer our employees attractive and equitable compensation, regular opportunities to participate in
professional development activities, outlets for civic engagement and reasonable flexibility to allow a healthy work/life balance.
We value equal opportunity in the workplace and fair employment practices. We have built an inclusive culture that encourages, supports and
celebrates our diverse employee population. We endeavor to maintain a workplace that is free from discrimination or harassment on the basis of
color, race, sex, national origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression, or any other status
protected by applicable law. We conduct annual training in an effort to ensure that all employees remain aware of and help prevent harassment and
discrimination.
Our compensation program is designed to attract and retain talent, and align our employee’s efforts with the interests of all of our
stakeholders. Factors we evaluate in connection with hiring, developing, training, compensating and advancing individuals include, but are not
limited to, qualification, performance, skill and experience. Our employees are fairly compensated based on merit, without regard to color, race, sex,
national origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression, or any other status protected by applicable
law.
Insurance
Our tenants are generally required to maintain liability and property insurance coverage for the properties they lease from us pursuant
to triple-net leases. These leases generally require our tenants to name us (and any of our lenders that have a mortgage on the property leased by
the tenant) as additional insureds on their liability policies and additional named insured and/or loss payee (or mortgagee, in the case of our lenders)
on their property policies. Depending on the location of the property, losses of a catastrophic nature, such as those caused by earthquakes and
floods, may be covered by insurance policies that are held by our tenant with limitations such as large deductibles or co-payments that a tenant may
not be able to meet. In addition, losses of a catastrophic nature, such as those caused by wind/hail, hurricanes, terrorism or acts of war, may be
uninsurable or not economically insurable. If there is damage to our properties that is not covered by insurance and such properties are subject to
recourse indebtedness, we will continue to be liable for the indebtedness, even if these properties are irreparably damaged. See "Item 1A. Risk
Factor-"Risks Related to Our Business and Properties-Insurance on our properties may not adequately cover all losses and uninsured losses could
materially and adversely affect us."
In addition to being a named insured on our tenants' liability policies, we separately maintain commercial general liability and umbrella
coverages. We also maintain full property coverage on all untenanted properties and other property coverage as may be required by our lenders,
which are not required to be carried by our tenants under our leases.
Regulation and Requirements
Our properties are subject to various laws, ordinances and regulations, including those relating to fire and safety requirements, and
affirmative and negative covenants and, in some instances, common area obligations. Compliance with applicable requirements may require
modifications to our properties, and the failure to comply with applicable requirements could result in the imposition of fines or an award of damages
to private litigants, as well as the incurrence of the costs of making modifications to attain compliance. Our tenants have primary responsibility for
compliance with these requirements pursuant to our leases. We believe that each of our properties has the necessary permits and approvals.
Environmental Matters
Federal, state and local environmental laws and regulations regulate, and impose liability for, releases of hazardous or toxic substances into
the environment. Under various of these laws and regulations, a current or
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previous owner, operator or tenant of real estate may be required to investigate and clean up hazardous or toxic substances, hazardous wastes or
petroleum product releases or threats of releases at the property, and may be held liable to a government entity or to third parties for property
damage and for investigation, clean-up and monitoring costs incurred by those parties in connection with the actual or threatened contamination.
These laws may impose clean-up responsibility and liability without regard to fault, or whether or not the owner, operator or tenant knew of or
caused the presence of the contamination. The liability under these laws may be joint and several for the full amount of the investigation, clean-
up and monitoring costs incurred or to be incurred or actions to be undertaken, although a party held jointly and severally liable may seek to obtain
contributions from other identified, solvent, responsible parties of their fair share toward these costs. These costs may be substantial, and can
exceed the value of the property. In addition, some environmental laws may create a lien on the contaminated site in favor of the government for
damages and costs it incurs in connection with the contamination. As the owner or operator of real estate, we also may be liable under common law
to third parties for damages and injuries resulting from environmental contamination emanating from the real estate. The presence of contamination,
or the failure to properly remediate contamination, on a property may adversely affect the ability of the owner, operator or tenant to sell or rent that
property or to borrow using the property as collateral, and may adversely impact our investment in that property.
Some of our properties contain, have contained, or are adjacent to or near other properties that have contained or currently contain storage
tanks for the storage of petroleum products or other hazardous or toxic substances. Similarly, some of our properties were used in the past for
commercial or industrial purposes, or are currently used for commercial purposes, that involve or involved the use of petroleum products or other
hazardous or toxic substances, or are adjacent to or near properties that have been or are used for similar commercial or industrial purposes. These
operations create a potential for the release of petroleum products or other hazardous or toxic substances, and we could potentially be required to
pay to clean up any contamination. In addition, environmental laws regulate a variety of activities that can occur on a property, including the storage
of petroleum products or other hazardous or toxic substances, air emissions, water discharges and exposure to lead-based paint. Such laws may
impose fines or penalties for violations, and may require permits or other governmental approvals to be obtained for the operation of a business
involving such activities. As a result of the foregoing, we could be materially and adversely affected.
Environmental laws also govern the presence, maintenance and removal of asbestos-containing material ("ACM"). Federal regulations require
building owners and those exercising control over a building's management to identify and warn, through signs and labels, of potential hazards
posed by workplace exposure to installed ACM in their building. The regulations also have employee training, record keeping and due diligence
requirements pertaining to ACM. Significant fines can be assessed for violation of these regulations. As a result of these regulations, building
owners and those exercising control over a building's management may be subject to an increased risk of personal injury lawsuits by workers and
others exposed to ACM. The regulations may affect the value of a building containing ACM in which we have invested. Federal, state and local laws
and regulations also govern the removal, encapsulation, disturbance, handling and/or disposal of ACM when those materials are in poor condition or
in the event of construction, remodeling, renovation or demolition of a building. These laws may impose liability for improper handling or a release
into the environment of ACM and may provide for fines to, and for third parties to seek recovery from, owners or operators of real properties for
personal injury or improper work exposure associated with ACM.
When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem
remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Indoor air quality issues can
also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen,
viruses and bacteria. Indoor exposure to airborne toxins or irritants above certain levels can be alleged to cause a variety of adverse health effects
and symptoms, including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our
properties could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants from the
affected property or increase indoor ventilation. In addition, the presence of significant mold or other airborne contaminants could expose us to
liability from our tenants, employees of our tenants or others if property damage or personal injury occurs.
Before completing any property acquisition, we obtain environmental assessments in order to identify potential environmental concerns at the
property. These assessments are carried out in accordance with the Standard Practice for Environmental Site Assessments (ASTM Practice
E 1527-13) as set by ASTM International, formerly known as the American Society for Testing and Materials, and generally include a physical site
inspection,
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a review of relevant federal, state and local environmental and health agency database records, one or more interviews with appropriate site-related
personnel, review of the property's chain of title and review of historical aerial photographs and other information on past uses of the property. These
assessments are limited in scope. If, however, recommended in the initial assessments, we may undertake additional assessments such as soil
and/or groundwater samplings or other limited subsurface investigations and ACM or mold surveys to test for substances of concern. A prior owner
or operator of a property or historic operations at our properties may have created a material environmental condition that is not known to us or the
independent consultants preparing the site assessments. Material environmental conditions may have arisen after the review was completed or may
arise in the future, and future laws, ordinances or regulations may impose material additional environmental liability. If environmental concerns are
not satisfactorily resolved in any initial or additional assessments, we may obtain environmental insurance policies to insure against potential
environmental risk or loss depending on the type of property, the availability and cost of the insurance and various other factors we deem relevant
(i.e., an environmental occurrence affects one of our properties where our lessee may not have the financial capability to honor its indemnification
obligations to us). Our ultimate liability for environmental conditions may exceed the policy limits on any environmental insurance policies we obtain,
if any.
Generally, our leases require the lessee to comply with environmental law and provide that the lessee will indemnify us for any loss or
expense we incur as a result of lessee's violation of environmental law or the presence, use or release of hazardous materials on our property
attributable to the lessee. If our lessees do not comply with environmental law, or we are unable to enforce the indemnification obligations of our
lessees, our results of operations would be adversely affected.
We cannot predict what other environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations
will be administered or interpreted or what environmental conditions may be found to exist on the properties in the future. Compliance with existing
and new laws and regulations may require us or our tenants to spend funds to remedy environmental problems. If we or our tenants were to become
subject to significant environmental liabilities, we could be materially and adversely affected.
About Us and Available Information
We were incorporated under the laws of Maryland on January 12, 2018. Since our June 2018 IPO, shares of our common stock have been
listed on the New York Stock Exchange ("NYSE") under the ticker symbol "EPRT". Our offices are located at 902 Carnegie Center Blvd., Suite 520,
Princeton, New Jersey, 08540. We lease approximately 13,453 square feet of office space from an unaffiliated third party. Our telephone number is
(609) 436-0619 and our website is www.essentialproperties.com. Information contained on or hyperlinked from our website is not incorporated by
reference into and should not be considered part of this Annual Report or our other filings with the Securities and Exchange Commission (the
“SEC”).
We electronically file with the SEC our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K,
pursuant to Section 13(a) of the Exchange Act. You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8-K, and amendments to those reports, on the day of filing with the SEC on our website, or by sending an email message to
info@essentialproperties.com.
Item 1A. Risk Factors.
There are many factors that affect our business and results of operation, some of which are beyond our control. The occurrence of any of the
following risks could materially and adversely impact our financial condition, results of operations, cash flows and liquidity, prospects, the market
price of our common stock, and our ability to, among other things, service our debt and to make distributions to our stockholders. Some statements
in this report including statements in the following risk factors constitute forward-looking statements. See "Special Note Regarding Forward-Looking
Statements."
The COVID-19 pandemic is materially and adversely impacting our business and could further affect our financial condition, results of
operations, cash flows and liquidity, prospects, access to and costs of
Risks Related to Our Business and Properties
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capital, the trading price of our common stock and our ability to service our debt and make distributions to our stockholders.
The impact of the COVID-19 pandemic continues to rapidly evolve, and many states and cities, including many of those where we own
properties, have instituted or may reinstitute lockdowns, quarantines, restrictions on travel, “shelter in place” rules, school closures and/or
restrictions on the types of businesses that may continue to operate or limitations on certain business operations. These actions and the resulting
decline in economic activity and consumer confidence have severely impaired the ability of many of our tenants to operate their businesses and
meet their obligations to us, including rental payment obligations. It is unclear how long these restrictions will remain in place, whether they will be
lifted partially over time or if they will be reinstituted in whole or in part in response to future surges or waves of the pandemic.
Many of our tenants have requested rent deferrals or other concessions due to the pandemic. During the year ended December 31, 2020, we
have granted deferrals with respect to $18.5 million of past and future rent, representing 10% of our annualized base rent as of that date. These rent
deferrals were negotiated on a tenant-by-tenant basis and, in general, allow a tenant to defer all or a portion of its rent for 2020, with all of the
deferred rent to be paid to us pursuant to a schedule that generally extends up to 24 months from the original due date of the deferred rent. It is
possible that the existing deterioration, or further deterioration, in our tenants’ ability to operate their businesses, caused by the COVID-19 pandemic
or otherwise, will cause our tenants to be unable or unwilling to meet their contractual obligations to us, including the payment of rent (including
deferred rent) or to request further rent deferrals or other concessions. This possibility would increase if the COVID-19 pandemic intensifies or
persists for a prolonged period or if there is an economic shut down; if the United States enters into a recessionary period or if reduced consumer
confidence further weakens economic activity; or if ongoing vaccination efforts are unsuccessful or delayed. To the extent the pandemic causes a
secular change in consumer behavior that reduces patronage of service-based and/or experience-based businesses, many of our tenants would be
adversely affected and their ability to meet their obligations to us could be further impaired. The rent deferrals reduce our cash flow from operations,
reduce our cash available for distribution and adversely affect our ability to service our debt and make cash distributions to common stockholders.
Furthermore, if tenants are unable to pay their deferred rent, we will not receive cash in the future in accordance with our expectations. In addition to
COVID-19’s impact on our rental revenues, it has resulted, and may continue to result, in an increase in our general and administrative expenses,
as we have incurred and may continue to incur costs to negotiate rent deferrals, restructure or terminate leases and/or enforce our contractual rights
(including through litigation), as we deem appropriate on a case-by-case basis. Similarly, to the extent the pandemic leads to decreased occupancy,
it would further increase our property-level costs, as we would be responsible for costs that would otherwise be borne by our tenants under triple-net
leases. These factors could also cause the value of our properties to be impaired.
The COVID-19 pandemic has significantly and adversely impacted global, national, regional and local economic activity and has contributed to
significant volatility and negative pressure in the financial markets. The market price of our common stock on the NYSE has experienced significant
volatility since the outbreak of the COVID-19 pandemic. Similarly, the availability and pricing of debt capital has become increasingly volatile.
Accordingly, we could experience difficulty accessing debt and equity capital on attractive terms, or at all, which would adversely affect our ability to
grow our business, conduct our operations or address maturing liabilities. Similarly, the deterioration in access to capital is likely adversely affecting
our tenants’ abilities to finance their businesses and reducing their liquidity, which reduces their ability to meet their obligations to us.
The financial impact of the COVID-19 pandemic could negatively impact our future compliance with some of the financial covenants relating to
our credit facility and term loans, some of which depend, in part, on the net operating income generated by certain of our properties or our EBITDA.
Non-compliance would preclude us from borrowing further under our credit facility and, under certain circumstances, could result in an event of
default and an acceleration of such indebtedness and, possibly, other indebtedness through cross-default provisions. Additionally, to the extent the
COVID-19 pandemic intensifies or persists for a prolonged period of time, it is possible that we will be required to record significant further
impairment charges to the value of our real estate assets.
The ultimate extent to which the COVID-19 pandemic adversely impacts us (and our tenants) will depend on future developments, which are
highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain
the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment and mitigation measures, among
others.
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We are subject to risks related to the ownership of commercial real estate that could adversely impact the value of our properties.
Factors beyond our control can affect the performance and value of our properties. Our performance is subject to risks incident to the
ownership of commercial real estate, including: the possible inability to collect rents from tenants due to financial hardship, including bankruptcy;
changes in local real estate conditions and tenant demand for our properties; changes in consumer trends and preferences that reduce the demand
for products and services offered by our tenants; adverse changes in national, regional and local economic conditions; inability to re-lease or sell
properties upon expiration or termination of leases; environmental risks; the subjectivity and volatility of real estate valuations and the relative
illiquidity of real estate investments compared to most other financial assets, which may limit our ability to modify our portfolio promptly in response
to changes in economic or other conditions; changes in laws and governmental regulations, including those governing real estate usage and zoning;
acts of God, including natural disasters, which may result in uninsured losses; and acts of war or terrorism, including terrorist attacks.
Adverse changes in the U.S., global and local markets and related economic conditions may materially and adversely affect us and the
ability of our tenants to make rental payments to us.
Our results of operations, as well as the results of operations of our tenants, are sensitive to changes in U.S., global and local regions or
markets that impact our tenants’ businesses. Adverse changes or developments in U.S., global or regional economic conditions may impact our
tenants’ financial condition, which may adversely impact their ability to make rental payments to us and may also impact their current or future
leasing practices. During periods of economic slowdown and declining demand for real estate, we may experience a general decline in rents or
increased rates of default under our leases. A lack of demand for rental space could adversely affect our ability to maintain our current tenants and
attract new tenants, which may affect our growth, profitability and ability to pay dividends.
Our business is dependent upon our tenants successfully operating their businesses, and their failure to do so could materially and
adversely affect us.
The success of our investments is materially dependent on the financial stability and operating performance of our tenants. The success of
any one of our tenants is dependent on its individual business and its industry, which could be adversely affected by poor management, economic
conditions in general, changes in consumer trends and preferences that decrease demand for a tenant's products or services or other factors over
which neither they nor we have control.
At any given time, any tenant may experience a downturn in its business that may weaken its operating results or the overall financial
condition of individual properties or its business as whole. As a result, a tenant may delay lease commencement, fail to make rental payments when
due, decline to extend a lease upon its expiration, become insolvent or declare bankruptcy. We depend on our tenants to operate the properties
leased from us in a manner which generates revenues sufficient to allow them to meet their obligations to us, including their obligations to pay rent,
maintain certain insurance coverage, pay real estate taxes and maintain the properties in a manner so as not to jeopardize their operating licenses
or regulatory status. The ability of our tenants to fulfill their obligations under our leases generally depends, to a significant degree, upon the overall
profitability of their operations. Cash flow generated by certain tenant businesses may not be sufficient for a tenant to meet its obligations to us. We
could be materially and adversely affected if a number of our tenants were unable to meet their obligations to us.
Our assessment that certain businesses are more insulated from e-commerce pressure than many others may prove to be incorrect, and
changes in macroeconomic trends may adversely affect our tenants, either of which could impair our tenants' ability to make rental
payments to us and materially and adversely affect us.
Technology and business conditions, particularly in the retail industry, are rapidly changing, and our tenants may be adversely affected by
technological innovation, changing consumer preferences and competition from non-traditional sources. Businesses previously thought to be
internet resistant, such as the retail grocery industry, have proven to be susceptible to competition from e-commerce. To the extent our tenants face
increased competition from non-traditional competitors, such as internet vendors, some of which may have different business models and larger
profit margins, their businesses could suffer. There can be no assurance that our tenants will be successful in
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meeting any new competition, and a deterioration in our tenants’ businesses could impair their ability to meet their lease obligations to us and
materially and adversely affect us.
Properties occupied by a single tenant pursuant to a single-tenant lease subject us to significant risk of tenant default.
Our strategy focuses primarily on investing in single-tenant triple-net leased properties throughout the United States. The financial failure of,
or default in payment by, a single tenant under its lease is likely to cause a significant or complete reduction in our rental revenue from that property
and a reduction in the value of the property. This risk is magnified in situations where we lease multiple properties to a single tenant under a master
lease. The default of a tenant that leases multiple properties from us or its decision not to renew its master lease upon expiration could materially
and adversely affect us.
We may experience a decline in the fair value of our real estate assets which could result in impairments and would impact our financial
condition and results of operations.
A decline in the fair market value of our long-lived assets may require us to recognize an impairment against such assets (as defined by the
Financial Accounting Standards Board (“FASB”)) if certain conditions or circumstances related to an asset were to change and we were to
determine that, with respect to any such asset, the cash flows no longer support the carrying value of the asset. The fair value of our long-lived
assets depends on market conditions, including estimates of future demand for these assets, and the revenues that can be generated from such
assets. If such a determination were to be made, we would recognize the estimated unrealized losses through earnings and write down the
depreciated cost of such assets to a new cost basis, based on the fair value of such assets on the date they are considered to be impaired. Such
impairment charges reflect non-cash losses at the time of recognition, and subsequent dispositions or sales of such assets could further affect our
future losses or gains, as they are based on the difference between the sales price received and the adjusted depreciated cost of such assets at the
time of sale.
Geographic, industry and tenant concentrations reduce the diversity of our portfolio and make us more susceptible to adverse economic
or regulatory developments in those areas or industries.
Geographic, industry and tenant concentrations expose us to greater economic or regulatory risks than if we owned a more diverse portfolio.
Our business includes substantial holdings in the following states as of December 31, 2020 (based on annualized base rent): Texas (14.9%),
Georgia (9.6%), Florida (6.1%), Arkansas (4.8%) and Ohio (4.1%). We are susceptible to adverse developments in the economic or regulatory
environments of the geographic areas in which we concentrate (or in which we may develop a substantial concentration of assets in the future),
such as COVID-19 pandemic surges and measures intended to mitigate its spread, business layoffs or downsizing, industry slowdowns, relocations
of businesses, increases in real estate and other taxes or costs of complying with governmental regulations. As of December 31, 2020, leases
representing approximately 20.0% of our annualized base rent were with tenants in industries that have been particularly adversely affected by the
COVID-19 pandemic, including casual and family dining (7.8% of annualized base rent), health and fitness (5.2% of annualized base rent),
entertainment (3.4% of annualized base rent), movie theaters (2.3% of annualized base rent) and home furnishings (1.3% of annualized base rent).
Accordingly, to the extent the pandemic or measures intended to mitigate its spread continue to adversely affect these industries, our tenants in
these industries could fail to meet their obligations to us, and we could be required to provide further tenant concessions.
As of December 31, 2020, our five largest tenants contributed 12.3% of our annualized base rent, and our ten largest tenants contributed
21.2% of our annualized base rent. If one of these tenants, or another tenant that occupies a significant portion of our properties or whose lease
payments represent a significant portion of our rental revenue, were to experience financial weakness or file for bankruptcy, it could have a material
adverse effect on our business, financial condition, results of operations, cash flows and liquidity, and prospects.
As we continue to acquire properties, our portfolio may become more concentrated by geographic area, industry or tenant. If our portfolio
becomes less diverse, our business will be more sensitive to the general economic downturn in a particular geographic area, to changes in trends
affecting a particular industry and to the financial weakness, bankruptcy or insolvency of fewer tenants.
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The vast majority of our properties are leased to unrated tenants whose credit is evaluated through our internal underwriting and credit
analysis procedures. However, the tools we use to measure credit quality, such as property-level rent coverage ratio, may not be
accurate.
The vast majority of our properties are leased to unrated tenants whose credit is evaluated through our internal underwriting and credit
analysis. Substantially all of our tenants are required to provide corporate-level financial information to us periodically or, in some instances, at our
request. As of December 31, 2020, leases contributing 98.2% of our annualized base rent required tenants to provide us with specified unit-level
financial information and leases contributing 98.3% of our annualized base rent required tenants to provide us with corporate-financial information.
We analyze the creditworthiness of our tenants using Moody’s Analytics RiskCalc, which provides an estimated default frequency (“EDF”) and
a “shadow rating”, and a lease's property-level rent coverage ratio. Our methods may not adequately assess the risk of an investment. An EDF
score and a shadow rating are not the same as, and may not be as indicative of creditworthiness as, a rating published by a nationally recognized
statistical rating organization. Our calculations of EDFs, shadow ratings and rent coverage ratios are unaudited and are based on financial
information provided to us by our tenants and prospective tenants without independent verification on our part, and we assume the appropriateness
of estimates and judgments that were made by the party preparing the financial information. If our assessment of credit quality proves to be
inaccurate, we may be subject to defaults, and our cash flows may be less stable. The ability of an unrated tenant to meet its obligations to us may
be more speculative than that of a rated tenant.
We may be unable to renew expiring leases with the existing tenants or re-lease the spaces to new tenants on favorable terms or at all.
Our results of operations depend on our ability to continue to lease our properties, including renewing expiring leases, leasing vacant space
and re-leasing space in properties where leases are expiring. As of December 31, 2020, our occupancy was 99.7% (excluding two undeveloped
land parcels), and leases representing approximately 0.1% of our annualized base rent as of such date will expire during 2021. Current tenants may
decline to renew leases and we may not be able to find replacement tenants. We cannot guarantee that leases that are renewed or new leases will
have terms that are as economically favorable to us as the expiring leases, or that substantial rent abatements, tenant improvement allowances,
early termination rights or below-market renewal options will not be offered to retain tenants or attract new tenants or that we will be able to lease a
property at all. We may experience significant costs in connection with re-leasing a significant number of our properties, which could materially and
adversely affect us.
The tenants that occupy our properties compete in industries that depend upon discretionary spending by consumers. A reduction in the
willingness or ability of consumers to physically patronize and use their discretionary income in the businesses of our tenants and
potential tenants could adversely impact our tenants’ business and thereby adversely impact our ability to collect rents and reduce the
demand for our properties.
Most of our portfolio is leased to tenants operating service-oriented or experience-based businesses at our properties. The largest industries
in our portfolio are car washes, restaurants (including quick service and casual and family dining), early childhood education, medical services,
convenience stores, automotive services, entertainment (including movie theaters) and health and fitness]. As of December 31, 2020, tenants
operating in those industries represented approximately 87.5% of our annualized base rent. Captain D's, EquipmentShare, Mister Car Wash, Circle
K, AMC, Mavis Discount Tire, Zaxby's, The Malvern School, Vasa Fitness and R-Store represent the largest concepts in our portfolio.These types of
businesses have been severely affected by the COVID-19 pandemic, principally due to store closures or limitations on operations (which may be
government-mandated or voluntary) and reduced economic activity. The success of most of these businesses depends on the willingness of
consumers to physically patronize their businesses and use discretionary income to purchase their products or services. To the extent the COVID-
19 pandemic causes a secular change in consumer behavior that reduces patronage of service-based and/or experience-based businesses, many
of our tenants would be adversely affected and their ability to meet their obligations to us could be further impaired. Additional adverse economic
conditions and other developments that discourage consumer spending, such as high unemployment levels, wage stagnation, interest rates,
inflation, tax rates and fuel and energy costs, may have an impact on the results of operations and financial conditions of our tenants and their ability
to pay rent to us.
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Our ability to realize future rent increases on some of our leases may vary depending on changes in the CPI.
Our leases often provide for periodic contractual rent escalations. As of December 31, 2020, leases contributing 99.2% of our annualized
base rent provided for increases in future annual base rent, generally ranging from 1.0% to 4.0% annually, with a weighted average annual
escalation equal to 1.5% of base rent. Although many of our rent escalators increase rent at a fixed amount on fixed dates, approximately 3.0% of
our rent escalators relate to an increase in the CPI over a specified period. During periods of low inflation or deflation, small increases or decreases
in the CPI will subject us to the risk of receiving lower rental revenue than we otherwise would have been entitled to receive if our rent escalators
were based on higher fixed percentages or amounts.
Inflation may materially and adversely affect us and our tenants.
While our tenants are generally obligated to pay property-level expenses relating to the properties they lease from us (e.g., maintenance,
insurance and property taxes), we incur other expenses, such as general and administrative expense, interest expense relating to our debt (some of
which bears interest at floating rates) and carrying costs for vacant properties. These expenses would increase in an inflationary environment, and
such increases may exceed any increase in revenue we receive under our leases. Additionally, increased inflation may have an adverse impact on
our tenants if increases in their operating expenses exceed increases in their revenue, which may adversely affect the tenants' ability to pay rent
owed to us.
Some of our tenants operate under franchise or license agreements, and, if they are terminated or not renewed prior to the expiration of
their leases with us, that would likely impair their ability to pay us rent.
As of December 31, 2020, tenants contributing 16.1% of our annualized base rent operated under franchise or license agreements. Often, our
tenants’ franchise or license agreements have terms that end prior to the expiration dates of the properties they lease from us. In addition, a tenant's
rights as a franchisee or licensee typically may be terminated and the tenant may be precluded from competing with the franchisor or licensor upon
termination. Usually, we have no notice or cure rights with respect to such a termination and have no rights to assignment of any such franchise
agreement. This may have an adverse effect on our ability to mitigate losses arising from a default on any of our leases. A franchisor's or licensor's
termination or refusal to renew a franchise or license agreement would likely have a material adverse effect on the ability of the tenant to make
payments under its lease, which could materially and adversely affect us.
Certain provisions of our leases may be unenforceable.
Our rights and obligations with respect to our leases are governed by written agreements. A court could determine that one or more provisions
of such an agreement are unenforceable. We could be adversely impacted if this were to happen with respect to a property or group of properties.
The bankruptcy or insolvency of a tenant could result in the termination or modification of such tenant's lease and material losses to us.
The occurrence of a tenant bankruptcy or insolvency could diminish the income we receive from that tenant's lease or leases or force us to
“take back” a property as a result of a default or a rejection of a lease by a tenant in bankruptcy. Bankruptcy risk is more acute in situations where
we lease multiple properties to a tenant pursuant to a master lease. If a tenant becomes bankrupt, the automatic stay created by the bankruptcy will
prohibit us from collecting pre-bankruptcy debts from that tenant, or from its property, or evicting such tenant based solely upon such bankruptcy or
insolvency, unless we obtain an order permitting us to do so from the bankruptcy court. In addition, a bankrupt or insolvent tenant may be authorized
to reject and terminate its lease or leases with us. Any claims against such bankrupt tenant for unpaid future rent would be subject to statutory
limitations that would likely result in our receipt of rental revenues that are substantially less than the contractually specified rent we are owed under
the lease or leases. In addition, any claim we have for unpaid past rent, if any, may not be paid in full. We may also be unable to re-lease a
terminated or rejected space or to re-lease it on comparable or more favorable terms. As a result, a significant number of tenant bankruptcies may
materially and adversely affect us.
Tenants who are considering filing for bankruptcy protection may request that we agree to amendments of their master leases to remove
certain of the properties they lease from us under such master leases. We cannot guarantee that we will be able to sell or re-lease properties that
we agree to release from tenants' leases in the
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future or that lease termination fees, if any, will be sufficient to make up for the rental revenues lost as a result of lease amendments.
Property vacancies could result in us having to incur significant capital expenditures to re-tenant the properties.
Many of our leases relate to properties that have been designed or physically modified for a particular tenant. If such a lease is terminated or
not renewed, we may be required to renovate the property at substantial costs, decrease the rent we charge or provide other concessions in order to
lease the property to another tenant. In addition, if we determine to sell the property, we may have difficulty selling it to a party other than the tenant
due to the special purpose for which the property may have been designed or modified. This potential illiquidity may limit our ability to quickly modify
our portfolio in response to changes in economic or other conditions, including tenant demand.
Defaults by borrowers on mortgages we hold could lead to losses.
We make mortgage and other loans, which are often unsecured, to extend financing to tenants at our properties. A default by a borrower on
its loan payments to us that would prevent us from earning interest or receiving a return of the principal of our loan could materially and adversely
affect us. In the event of a default, we may also experience delays in enforcing our rights as lender and may incur substantial costs in collecting the
amounts owed to us and in liquidating any collateral. Where collateral is available, foreclosure and other similar proceedings used to enforce
payment of real estate loans are generally subject to principles of equity, which are designed to relieve the indebted party from the legal effect of
that party's default. In the event we have to foreclose on a property, the amount we receive from the foreclosure sale of the property may be
inadequate to fully pay the amounts owed to us by the borrower and our costs incurred to foreclose, repossess and sell the property.
We may be unable to identify and complete acquisitions of suitable properties, which may impede our growth, and our future acquisitions
may not yield the returns we seek.
Our ability to expand through acquisitions requires us to identify, finance and complete acquisitions or investment opportunities that are
compatible with our growth strategy and to successfully integrate newly acquired properties into our portfolio, which may be constrained by the
following significant risks: we face competition from other real estate investors, some of which have greater economies of scale, lowers costs of
capital, access to more financial resources and greater name recognition than we do, a greater ability to borrow funds and the ability to accept more
risk than we can prudently manage, which may significantly reduce our acquisition volume or increase the purchase price for property we acquire,
which could reduce our growth prospects; we may be unable to locate properties that will produce a sufficient spread between our cost of capital
and the lease rate we can obtain from a tenant, in which case our ability to profitably grow our company will decrease; we may fail to have sufficient
capital resources to complete acquisitions or our cost of capital could increase; we may incur significant costs and divert management attention in
connection with evaluating and negotiating potential acquisitions, including ones that we are subsequently unable to complete; we may acquire
properties that are not accretive to our results upon acquisition; our cash flow from an acquired property may be insufficient to meet our required
principal and interest payments with respect to debt used to finance the acquisition of such property; we may discover unexpected items, such as
unknown liabilities, during our due diligence investigation of a potential acquisition or other customary closing conditions may not be satisfied,
causing us to abandon an investment opportunity after incurring expenses related thereto; we may spend more than budgeted amounts to make
necessary improvements or renovations to acquired properties; we may acquire properties subject to liabilities and without any recourse, or with
only limited recourse, with respect to unknown liabilities, such as liabilities for clean-up of undisclosed environmental contamination, claims by
tenants, vendors or other persons dealing with the former owners of the properties, liabilities incurred in the ordinary course of business and claims
for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties; we may obtain only limited
warranties when we acquire a property, including properties purchased in “as is” condition on a “where is” basis and “with all faults,” without
warranties of merchantability or fitness for a particular purpose and pursuant to purchase agreements that contain only limited warranties,
representations and indemnifications that survive for only a limited period after the closing. If any of these risks are realized, we may be materially
and adversely affected.
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Our real estate investments are generally illiquid which could significantly impede our ability to respond to market conditions or adverse
changes in the performance of our tenants or our properties and which would harm our financial condition.
Our investments are relatively difficult to sell quickly. As a result of this illiquidity, our ability to promptly sell one or more properties in our
portfolio in response to changing economic, financial or investment conditions is limited. Return of capital and realization of gains, if any, from an
investment generally will occur upon disposition or refinancing of the underlying property. We may be unable to realize our investment objective by
sale, other disposition or refinancing at attractive prices within any given period of time or may otherwise be unable to complete any exit strategy. In
particular, these risks could arise from weakness in or even the lack of an established market for a property, changes adversely affecting the tenant
of a property, changes adversely affecting the area in which a particular property is located, adverse changes in the financial condition or prospects
of prospective purchasers and changes in local, national or international economic conditions.
In addition, the Internal Revenue Code of 1986, as amended (the “Code”), imposes restrictions on a REIT's ability to dispose of properties that
are not applicable to other types of real estate companies. In particular, the tax laws applicable to REITs effectively require that we hold our
properties for investment, rather than primarily for sale in the ordinary course of business, which may cause us to forgo or defer sales of properties
that otherwise would be in our best interest. Therefore, we may not be able to vary our portfolio in response to economic or other conditions
promptly or on favorable terms.
Our growth depends on third-party sources of capital that are outside of our control and may not be available to us on commercially
reasonable terms or at all.
In order to qualify as a REIT, we are required under the Code, among other things, to distribute annually at least 90% of our REIT taxable
income, determined without regard to the dividends paid deduction and excluding any net capital gain. In addition, we will be subject to income tax
at the corporate rate to the extent that we distribute less than 100% of our REIT taxable income, determined without regard to the dividends paid
deduction and including any net capital gain. Accordingly, we will not be able to fund all of our future capital needs, including any necessary
acquisition financing, from operating cash flow. Consequently, we rely on third-party sources to fund a portion of our capital needs. Our access to
debt and equity capital, and the cost thereof, depends, in part, on general market conditions, the market's perception of our growth potential, our
current debt levels, our current and expected future earnings, our cash flow and cash distributions, and the market price of our common stock. The
COVID-19 pandemic has significantly and adversely impacted global, national, regional and local economic activity and has contributed to significant
volatility and negative pressure in the financial markets.
If we cannot obtain capital from third-party sources, or if our cost of capital increases materially, we may not be able to acquire properties
when strategic opportunities exist, meet the capital and operating needs of our existing properties, satisfy our debt service obligations or make the
cash distributions to our stockholders necessary to qualify as a REIT.
Loss of senior executives with long-standing business relationships could materially impair our ability to operate successfully.
Our continued success and our ability to grow our portfolio and business depend, in large part, upon the efforts of certain of our senior
executives, in particular our President and Chief Executive Officer, Peter M. Mavoides, and Gregg A. Seibert, our Executive Vice President and
Chief Operating Officer, who have extensive market knowledge and relationships and exercise substantial influence over our operational, financing,
acquisition and disposition activity. Many of our executive personnel have extensive experience and strong reputations in the real estate industry
and have been important in setting our strategic direction, operating our business, assembling and growing our portfolio, identifying, recruiting and
training key personnel, and arranging necessary financing. In particular, the extent and nature of the relationships that these individuals have
developed with financial institutions and existing and prospective tenants is important to our growth and the success of our business. The loss of
services of one or more members of our management team, including due to the adverse health effects of the COVID-19 pandemic, or our inability
to attract and retain highly qualified personnel, could adversely affect our business, diminish our investment opportunities and weaken our
relationships with lenders, business partners, existing and prospective tenants and industry personnel, which could materially and adversely affect
us.
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The costs of compliance with or liabilities related to environmental laws may materially and adversely affect us.
Risks Related to Environmental and Compliance Matters and Climate Change
The properties we own or have owned in the past may subject us to known and unknown environmental liabilities. We obtain Phase I
environmental site assessments on all properties we finance or acquire. However, the Phase I environmental site assessments are limited in scope
and therefore may not reveal all environmental conditions affecting a property. Under various federal, state and local laws and regulations relating to
the environment, as a current or former owner or operator of real property, we may be liable for costs and damages resulting from environmental
matters, including the presence or discharge of hazardous or toxic substances, waste or petroleum products at, on, in, under or migrating from such
property, including costs to investigate or clean up such contamination and liability for personal injury, property damage or harm to natural
resources. If environmental contamination exists on our properties, we could be subject to strict, joint and/or several liability for the contamination by
virtue of our ownership interest; we may face liability regardless of our knowledge of the contamination, the timing of the contamination, the cause of
the contamination, or the party responsible for the contamination of the property.
If our environmental liability insurance is inadequate, we may become subject to material losses for environmental liabilities. Although our
leases generally require our tenants to operate in compliance with all applicable laws and to indemnify us against any environmental liabilities arising
from a tenant's activities on the property, we could be subject to strict liability by virtue of our ownership interest. We cannot be sure that our tenants
will, or will be able to, satisfy their indemnification obligations, if any, under our leases. Furthermore, the discovery of environmental liabilities on any
of our properties could lead to significant remediation costs or to other liabilities or obligations attributable to the tenant of that property or could
result in material interference with the ability of our tenants to operate their businesses as currently operated. Noncompliance with environmental
laws or discovery of environmental liabilities could each individually or collectively affect such tenant's ability to make payments to us, including
rental payments and, where applicable, indemnification payments. Additionally the known or potential presence of hazardous substances on a
property may adversely affect our ability to sell, lease or improve the property or to borrow using the property as collateral. Environmental laws may
also create liens on contaminated properties in favor of the government for damages and costs it incurs to address such contamination. Moreover, if
contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which they may be used or businesses
may be operated, and these restrictions may require substantial expenditures.
Insurance on our properties may not adequately cover all losses and uninsured losses could materially and adversely affect us.
Our tenants are required to maintain liability and property insurance coverage for the properties they lease from us pursuant to triple-net
leases. Pursuant to such leases, our tenants are required to name us (and any of our lenders that have a mortgage on the property leased by the
tenant) as additional insureds on their liability policies and additional named insured and/or loss payee (or mortgagee, in the case of our lenders) on
their property policies. All tenants are required to maintain casualty coverage. Depending on the location of the property, losses of a catastrophic
nature, such as those caused by earthquakes and floods, may be covered by insurance policies that are held by our tenant with limitations such as
large deductibles or co-payments that a tenant may not be able to meet. In addition, losses of a catastrophic nature, such as those caused by
wind/hail, hurricanes, terrorism or acts of war, may be uninsurable or not economically insurable. If there is damage to our properties that is not
covered by insurance and such properties are subject to recourse indebtedness, we will continue to be liable for the indebtedness, even if these
properties are irreparably damaged.
Inflation, changes in building codes and ordinances, environmental considerations and other factors, including terrorism or acts of war, may
make any insurance proceeds we receive insufficient to repair or replace a property if it is damaged or destroyed. In that situation, the insurance
proceeds received may not be adequate to restore our economic position with respect to the affected real property. Furthermore, if we experience a
substantial or comprehensive loss of one of our properties, we may not be able to rebuild such property to its existing specifications without
significant capital expenditures which may exceed any amounts received pursuant to insurance policies, as reconstruction or improvement of such a
property would likely require significant upgrades to meet zoning and building code requirements. The loss of our capital investment in or anticipated
future returns from our properties due to material uninsured losses could materially and adversely affect us.
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Compliance with the ADA and fire, safety and other regulations may require us to make unanticipated expenditures.
Our properties are subject to the ADA, fire and safety regulations, building codes and other regulations. Failure to comply with these laws and
regulations could result in imposition of fines by the government or an award of damages to private litigants, or both. While our tenants are obligated
by law to comply with the ADA and typically obligated under our leases to cover costs associated with compliance with the ADA and other property
regulations, if required changes involve greater expenditures than anticipated or if the changes must be made on a more accelerated basis than
anticipated, the ability of our tenants to cover costs could be adversely affected, and we could be required to expend our own funds to comply with
applicable law and regulation.
Our operations and financial condition may be adversely affected by climate change, including possible changes in weather patterns,
weather-related events, government policy, laws, regulations and economic conditions.
In recent years, the assessment of the potential impact of climate change has begun to impact the activities of government authorities, the
pattern of consumer behavior and other areas that impact the business environment in the U.S., including, but not limited to, energy-efficiency
measures, water use measures and land-use practices. The promulgation of policies, laws or regulations relating to climate change by governmental
authorities in the U.S. and the markets in which we own properties may require us to invest additional capital in our properties. In addition, the
impact of climate change on businesses operated by our tenants is not reasonably determinable at this time. While not generally known at this time,
climate change may impact weather patterns or the occurrence of significant weather events which could impact economic activity or the value of
our properties in specific markets. The occurrence of any of these events or conditions may adversely impact our ability to lease our properties,
including our or our tenants’ ability to obtain property insurance on acceptable terms, which would materially and adversely affect us.
Risks Related to Our Indebtedness
As of December 31, 2020, we had $821.2 million of indebtedness outstanding, which requires substantial cash flow to service, subjects us
to covenants and refinancing risk and the risk of default.
As of December 31, 2020, we had $821.2 million of indebtedness outstanding. This indebtedness consisted of $173.2 million aggregate
principal amount of Class A Notes and Class B Notes issued under our Master Trust Funding Program, $18.0 million of borrowings under our
Revolving Credit Facility and $630.0 million of combined borrowings under the April 2019 Term Loan and the November 2019 Term Loan. Payments
of principal and interest on indebtedness may leave us with insufficient cash resources to meet our cash needs, including funding our investment
program, or to make the distributions to our common stockholders currently contemplated or necessary to continue to qualify as a REIT. Our
indebtedness and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following: our
cash flow may be insufficient to make our required principal and interest payments; cash interest expense and financial covenants relating to our
indebtedness may limit or eliminate our ability to make distributions to our common stockholders; we may be unable to borrow additional funds as
needed or on favorable terms, which could, among other things, adversely affect our ability to consummate investment opportunities or meet
operational needs; we may be unable to refinance our indebtedness at maturity, or the refinancing terms may be less favorable than the terms of the
debt being refinanced; because a portion of our debt bears interest at variable rates, increases in interest rates could increase our interest expense;
we may be unable to hedge floating rate debt, counterparties may fail to honor their obligations under our hedge agreements, such agreements may
not effectively hedge interest rate fluctuation risk, and, upon the expiration of our hedge agreements, we will be exposed to then-existing market
rates of interest and future interest rate volatility; we may be forced to dispose of properties, possibly on unfavorable terms or in violation of certain
covenants to which we may be subject; we may default on our obligations, and, with respect to our secured indebtedness, the lenders or
mortgagees may foreclose on our properties or our interests in the entities that own the properties that secure their loans and receive an assignment
of rents and leases; foreclosure on collateral securing indebtedness could create taxable income without accompanying cash proceeds, which could
adversely affect our ability to meet the distribution requirement necessary to maintain our qualification for taxation as a REIT under the Code; we
may be restricted from accessing some of our excess cash flow after debt service if certain of our tenants fail to meet certain financial performance
metric thresholds; we may violate restrictive covenants in our loan documents, which would entitle the lenders to accelerate our debt obligations;
and our default under any loan with cross-default provisions could result in a default on other indebtedness. The occurrence of any of these events
could materially and adversely affect us.
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Our business plan depends on external sources of capital, including debt financings, and market conditions could adversely affect our
ability to refinance existing indebtedness or obtain additional financing for growth on commercially acceptable terms or at all.
Credit markets may experience significant price volatility, displacement and liquidity disruptions, including the bankruptcy, insolvency or
restructuring of certain financial institutions. Such circumstances could materially impact liquidity in the financial markets, making financing terms for
borrowers less attractive, and potentially result in the unavailability of various types of debt financing. As a result, we may be unable to obtain debt
financing on favorable terms or at all or fully refinance maturing indebtedness with new indebtedness. Reductions in our available borrowing
capacity or inability to obtain credit when required or when business conditions warrant could materially and adversely affect us.
If prevailing interest rates or other factors at the time of refinancing result in higher interest rates upon refinancing, then the interest expense
relating to that refinanced indebtedness would increase. Higher interest rates on newly incurred debt may negatively impact us as well. If interest
rates increase, our interest costs and overall costs of capital will increase, which could materially and adversely affect us and our ability to make
distributions to our stockholders.
We have engaged in hedging transactions and may engage in additional hedging transactions in the future; such transactions may
materially and adversely affect our results of operations and cash flows.
We use hedging strategies, in a manner consistent with the REIT qualification requirements, in an effort to reduce our exposure to changes in
interest rates. As of December 31, 2020, we were party to eight interest rate swap agreements with third-party financial institutions having an
aggregate notional amount of $630.0 million that are designated as cash flow hedges and designed to effectively fix the LIBOR component of the
interest rate on the debt outstanding under our term loans. Unanticipated changes in interest rates may result in poorer overall investment
performance than if we had not engaged in any such hedging transactions and may materially and adversely affect our business by increasing our
cost of capital and reducing the net returns we earn on our portfolio.
A significant portion of our assets have been pledged to secure the borrowings of our subsidiaries.
A significant portion of our investment portfolio consists of assets owned by our consolidated, bankruptcy remote, special purpose entity
subsidiaries that have been pledged to secure the long-term borrowings of those subsidiaries. As of December 31, 2020, we had 258 properties
comprising $399.7 million of net investments pledged as collateral under our Master Trust Funding Program. We or our other consolidated
subsidiaries are the equity owners of these special purpose entities, meaning we are entitled to the excess cash flows after debt service and all
other required payments are made on the debt of these entities. If our subsidiaries fail to make the required payments on this indebtedness,
distributions of excess cash flow to us may be reduced or eliminated and the indebtedness may become immediately due and payable. If the
subsidiaries are unable to pay the accelerated indebtedness, the pledged assets could be foreclosed upon and distributions of excess cash flow to
us may be suspended or terminated. In that case, our ability to make distributions to our stockholders could be materially and adversely affected.
Under certain circumstances, the subsidiaries included in our Master Trust Funding Program would be prohibited from distributing
excess cash flow to us, and the assets of such subsidiaries could be foreclosed upon.
Through our Master Trust Funding Program, certain of our Operating Partnership's indirect wholly owned subsidiaries have issued net-lease
mortgage notes payable with an aggregate outstanding principal balance of $173.2 million as of December 31, 2020. As of December 31, 2020, we
had pledged 258 properties, with a net investment amount of $399.7 million, as collateral under this program. As the equity owner of the subsidiaries
included in our Master Trust Funding Program, we are only entitled to the excess cash flows from such subsidiaries after debt service and all other
required payments are made on the notes. If, at any time, the monthly debt service coverage ratio (as defined) generated by the collateral pool is
less than or equal to 1.25x, excess cash flow (as defined) from the subsidiaries included in our Master Trust Funding Program will be deposited into
a reserve account to be used for payments on the net-lease mortgage notes in the event there is a shortfall in cash at such subsidiaries to make
required payments on the notes. Additionally, if at any time the three month average debt service coverage ratio generated by the collateral pool is
less than or equal to 1.15x, excess cash flow from the subsidiaries included in our Master Trust Funding Program will be applied to an early
amortization of the notes. For
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the year ended December 31, 2020, the debt service coverage ratio was approximately 2.27x. If we fail to maintain the required debt service
coverage ratios, the excess cash flows we receive from these subsidiaries would be reduced or eliminated. This could materially and adversely
affect us, including by reducing our ability to pay cash distributions on our common stock and possibly prevent us from maintaining our qualification
for taxation as a REIT. In addition, if the subsidiaries included in our Master Trust Funding Program are unable to repay the notes, including in
connection with any acceleration of maturity, the pledged assets could be foreclosed upon and our equity in such assets eliminated.
Changes to, or the elimination of, LIBOR may adversely affect interest expense related to borrowings under our Revolving Credit Facility,
the April 2019 Term Loan and the November 2019 Term Loan.
The interest rate under our Revolving Credit Facility, our April 2019 Term Loan and our November 2019 Term Loan is calculated using
LIBOR. In July 2017, the Financial Conduct Authority (“FCA”) that regulates LIBOR announced it intends to stop compelling banks to submit rates
for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the
Alternative Reference Rates Committee, which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to USD-LIBOR
in derivatives and other financial contracts. On November 30, 2020, ICE Benchmark Administration, the administrator of LIBOR, announced plans to
consult on ceasing publication of LIBOR on December 31, 2021 for only the one week and two month LIBOR tenors, and on June 30, 2023 for all
other LIBOR tenors. The Federal Reserve Board concurrently issued a statement advising banks to stop new LIBOR issuances by the end of 2021.
The future of LIBOR at this time is uncertain , and weather or not SOFR, or another alternative reference rate, attains market traction as a LIBOR
replacement tool remains in question. The effect of the establishment of alternative reference rates or any other reforms to LIBOR or other reference
rates (including whether LIBOR will continue to be an acceptable market benchmark) cannot be predicted at this time. Factors such as the pace of
the transition to replacement or reformed rates, the specific terms and parameters for and market acceptance of any alternative reference rate,
prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to transition and develop appropriate
systems and analytics for one or more alternative reference rates could materially and adversely affect us.
Our debt financing agreements contain restrictions and covenants which may limit our ability to enter into, or obtain funding for, certain
transactions, operate our business or make distributions to our common stockholders.
Our debt financing agreements contain financial and other covenants with which we are required to comply and that limit our ability to operate
our business. These covenants, as well as any additional covenants to which we may be subject in the future because of additional or replacement
debt financing, could cause us to have to forego investment opportunities, reduce or eliminate distributions to our common stockholders or obtain
financing that is more expensive than financing we could obtain if we were not subject to the covenants. The covenants impose limitations on,
among other things, our ability to pay distributions to our stockholders under certain circumstances, subject to certain exceptions relating to our
qualification as a REIT under the Code. In addition, these agreements have cross-default provisions that generally result in an event of default if we
default under other material indebtedness.
The covenants and other restrictions under our debt agreements may affect, among other things, our ability to: incur indebtedness; create
liens on assets; cause our subsidiaries to distribute cash to us to fund distributions to stockholders or to otherwise use in our business; (see “Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations-Description of Certain Debt”); sell or substitute assets;
modify certain terms of our leases; manage our cash flows; and make distributions to equity holders, including our common stockholders.
Additionally, these restrictions may adversely affect our operating and financial flexibility and may limit our ability to respond to changes in our
business or competitive environment, all of which may materially and adversely affect us.
Mortgage debt obligations expose us to the possibility of foreclosure, which could result in the loss of our investment in any property
subject to mortgage debt.
Future borrowings may be secured by mortgages on our properties. Incurring mortgage and other secured debt obligations increases our risk
of losses because defaults on secured indebtedness may result in foreclosure actions initiated by lenders and ultimately our loss of the properties
securing any loans for which we are in default. If
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we are in default under a cross-defaulted mortgage loan, we could lose multiple properties to foreclosure. For tax purposes, a foreclosure of any of
our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage.
If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on
foreclosure, but would not receive any cash proceeds, which could hinder our ability to meet the REIT distribution requirements. As we execute our
business plan, we may assume or incur new mortgage indebtedness on our properties. Any default under any mortgage debt obligation we incur
may increase the risk of our default on our other indebtedness.
Risks Related to Our Organizational Structure
Our charter and bylaws and Maryland law contain provisions that may delay, defer or prevent a change of control transaction, even if
such a change in control may be in your interest, and as a result may depress the market price of our common stock. Our charter
contains certain restrictions on ownership and transfer of our stock.
Our charter contains various provisions that are intended to, among other things, assist us in maintaining our qualification for taxation as a
REIT and, subject to certain exceptions, authorizes our directors to take such actions as are necessary or appropriate to cause us to continue to
qualify as a REIT. For example, our charter prohibits the actual, beneficial or constructive ownership by any person of more than 9.8% in value or in
number of shares, whichever is more restrictive, of the outstanding shares of our common stock or more than 9.8% in value of the aggregate of the
outstanding shares of all classes and series of our stock.
Our board of directors, in its sole and absolute discretion, may exempt a person, prospectively or retroactively, from these ownership limits if
certain conditions are satisfied. The restrictions on ownership and transfer of our stock may, among other things: discourage a tender offer or other
transactions or a change in management or of control that might involve a premium price for our common stock or that our stockholders otherwise
believe to be in their best interests; or result in the transfer of shares acquired in excess of the restrictions to a trust for the benefit of one or more
charitable beneficiaries and, as a result, the forfeiture by the acquirer of the benefits of owning the additional shares.
We could increase or decrease the number of authorized shares of stock, classify and reclassify unissued stock and issue stock without
stockholder approval.
Our board of directors, without stockholder approval, has the power under our charter to amend our charter to increase or decrease the
aggregate number of shares of stock or the number of shares of stock of any class or series that we are authorized to issue, to authorize us to issue
authorized but unissued shares of our common stock or preferred stock and to classify or reclassify any unissued shares of our common stock or
preferred stock into one or more classes or series of stock and to set the terms of such newly classified or reclassified shares. As a result, we may
issue one or more classes or series of common stock or preferred stock with preferences, conversion or other rights, voting powers or rights,
restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption that are senior to, or otherwise
conflict with, the rights of our common stockholders. Our board of directors could establish a class or series of common stock or preferred stock that
could, depending on the terms of such class or series, delay, defer or prevent a transaction or a change of control that might involve a premium
price for our common stock or otherwise be in the best interest of our stockholders.
Termination of the employment agreements with certain members of our senior management team could be costly and could prevent a
change in control of our company.
The employment agreements with certain members of our senior management team provide that if their employment with us terminates under
certain circumstances (including in connection with a change in control of our company), we may be required to pay them significant amounts of
severance compensation, thereby making it costly to terminate their employment. Furthermore, these provisions could delay or prevent a transaction
or a change in control of our company that might involve a premium paid for shares of our common stock or otherwise be in the best interests of our
stockholders.
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Our board of directors may change our investment and financing policies without stockholder approval, including those with respect to
borrowing, and we may become more highly leveraged, which may increase our risk of default under our debt obligations.
Our investment and financing policies are exclusively determined by our board of directors. Accordingly, our stockholders do not control these
policies. Further, our organizational documents do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur.
Although we are not required by our organizational documents to maintain a particular leverage ratio and may not be able to do so, we generally
intend to target a level of net debt (which includes recourse and non-recourse borrowings and any outstanding preferred stock issuance less
unrestricted cash and cash equivalents) that, over time, is less than six times our Annualized Adjusted EBITDAre. However, from time to time, our
ratio of net debt to our Annualized Adjusted EBITDAre may equal or exceed six times. Our board of directors may alter or eliminate our current
policy on borrowing at any time without stockholder approval. If this policy changed, we could become more highly leveraged, which could result in
an increase in our debt service and the risk of default on our obligations. In addition, a change in our investment policies, including the manner in
which we allocate our resources across our portfolio or the types of assets in which we seek to invest, may increase our exposure to interest rate
risk, real estate market fluctuations and liquidity risk. Changes to our policies with regard to the foregoing could materially and adversely affect us.
Our rights and the rights of our stockholders to take action against our directors and officers are limited.
As permitted by Maryland law, our charter limits the liability of our directors and officers to us and our stockholders for money damages to the
maximum extent permitted by Maryland law. Therefore, our directors and officers are subject to monetary liability resulting only from: actual receipt
of an improper benefit or profit in money, property or services; or active and deliberate dishonesty by the director or officer that was established by a
final judgment as being material to the cause of action adjudicated.
As a result, we and our stockholders have rights against our directors and officers that are more limited than might otherwise exist.
Accordingly, if actions taken by any of our directors or officers impede the performance of our company, your and our ability to recover damages
from such director or officer will be limited. In addition, our charter and our bylaws require us to indemnify our directors and officers for actions taken
by them in those and certain other capacities to the maximum extent permitted by Maryland law.
We are a holding company with no direct operations and rely on funds received from our Operating Partnership to make any distributions
to stockholders and to pay liabilities.
We are a holding company and conduct substantially all of our operations through our Operating Partnership. We do not have any
independent operations, and our only material asset is our interest in our Operating Partnership. As a result, we rely on distributions from our
Operating Partnership to pay any distributions we might declare on shares of our common stock. We also rely on distributions from our Operating
Partnership to meet any of our obligations, including any tax liability on taxable income allocated to us from our Operating Partnership. In addition,
because we are a holding company, claims by our stockholders will be structurally subordinated to all existing and future liabilities and obligations
(whether or not for borrowed money) of our Operating Partnership and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation or
reorganization, our assets and those of our Operating Partnership and its subsidiaries will be able to satisfy the claims of our stockholders only after
all of our and our Operating Partnership's and its subsidiaries' liabilities and obligations have been paid in full.
In connection with our future acquisition of properties or otherwise, we may issue units of our Operating Partnership to third parties. Such
issuances would reduce our ownership in our Operating Partnership. If you do not directly own units of our Operating Partnership, you will not have
any voting rights with respect to any such issuances or other partnership level activities of our Operating Partnership.
Conflicts of interest could arise in the future between the interests of our stockholders and the interests of holders of units in our
Operating Partnership, which may impede business decisions that could benefit our stockholders.
Conflicts of interest could arise in the future as a result of the relationships between us and our stockholders, on the one hand, and our
Operating Partnership and its limited partners, on the other. Under the terms of the partnership agreement of our Operating Partnership, if there is a
conflict between the interests of our stockholders, on one hand, and any limited partners, on the other, we will endeavor in good faith to resolve the
conflict in a
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manner not adverse to either our stockholders or any limited partners; provided, however, that so long as we own a controlling economic interest in
our Operating Partnership, any conflict that cannot be resolved in a manner not adverse to either our stockholders or any limited partners shall be
resolved in favor of our stockholders.
Certain mergers, consolidations and other transactions require the approval of a majority in interest of the outside limited partners in our
Operating Partnership (which excludes us and our subsidiaries), which could prevent certain transactions that may result in our
stockholders receiving a premium for their shares or otherwise be in their best interest.
The partnership agreement requires the general partner or us, as the parent of the general partner, to obtain the approval of a majority in
interest of the outside limited partners in our Operating Partnership (which excludes us and our subsidiaries) in connection with certain mergers,
consolidations or other combinations of us, or a sale of all or substantially all of our assets. This approval right could prevent a transaction that might
be in the best interests of our stockholders.
Risks Related to Our Status as a REIT
Failure to continue to qualify as a REIT would materially and adversely affect us and the value of our common stock, and even if we
continue to qualify as a REIT, we may be subject to certain additional taxes.
We elected to be taxed as a REIT for federal income tax purposes beginning with our taxable year ended December 31, 2018, and we believe
that our current organization and operations have allowed and will continue to allow us to qualify as a REIT. We have not requested and do not plan
to request a ruling from the Internal Revenue Service, or IRS, that we qualify as a REIT, and the statements in this Annual Report are not binding on
the IRS or any court. Therefore, we cannot assure you that we will remain qualified as a REIT in the future. If we lose our REIT status, we will face
significant tax consequences that would substantially reduce our cash available for distribution to you for each of the years involved because: we
would not be allowed a deduction for distributions to stockholders in computing our taxable income and would be subject to federal income tax at the
corporate rate; we also could be subject to increased state and local taxes; and unless we are entitled to relief under applicable statutory provisions,
we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified.
Any such corporate tax liability could be substantial and would reduce our cash available for, among other things, our operations and
distributions to stockholders. In addition, if we fail to remain qualified as a REIT, we will not be required to make distributions to our stockholders. As
a result of all these factors, our failure to remain qualified as a REIT also could impair our ability to expand our business and raise capital and could
materially and adversely affect the trading price of our common stock.
Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and
administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to
continue to qualify as a REIT. In order to continue to qualify as a REIT, we must satisfy a number of requirements, including requirements regarding
the ownership of our stock, requirements regarding the composition of our assets and a requirement that at least 95% of our gross income in any
year must be derived from qualifying sources, such as “rents from real property.” Also, we must make distributions to stockholders aggregating
annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains. In
addition, legislation, new regulations, administrative interpretations or court decisions may materially and adversely affect our investors, our ability to
continue to qualify as a REIT for federal income tax purposes or the desirability of an investment in a REIT relative to other investments.
Even if we continue to qualify as a REIT for federal income tax purposes, we may be subject to some federal, state and local income, property
and excise taxes on our income or property and, in certain cases, a 100% penalty tax, in the event we sell property as a dealer. In addition, any
taxable REIT subsidiaries will be subject to tax as regular corporations in the jurisdictions in which they operate.
If our Operating Partnership fails to qualify as a partnership for federal income tax purposes, we will cease to qualify as a REIT and suffer
other adverse consequences.
We believe that our Operating Partnership will be treated as a partnership for federal income tax purposes and, as a result, will generally not
be subject to federal income tax on its income. Instead, for federal income tax
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purposes each of the partners of the Operating Partnership, including us, will be allocated, and may be required to pay tax with respect to, such
partner's share of its income. Our Operating Partnership will generally be required to determine and pay an imputed underpayment of tax (plus
interest and penalties) resulting from an adjustment of the Operating Partnership's items of income, gain, loss, deduction or credit at the partnership
level. We cannot assure you that the IRS will not challenge the tax classification of our Operating Partnership or any other subsidiary partnership in
which we own an interest, or that a court will not sustain such a challenge. If the IRS were successful in treating our Operating Partnership or any
such other subsidiary partnership as an entity taxable as a corporation for federal income tax purposes, we will fail to meet the gross income tests
and certain of the asset tests applicable to REITs and, accordingly, we will likely cease to qualify as a REIT. Also, the failure of our Operating
Partnership or any subsidiary partnerships to qualify as a disregarded entity or partnership could cause it to become subject to federal and state
corporate income tax, which will reduce significantly the amount of cash available for debt service and for distribution to its partners, including us.
To maintain our REIT status, we may be forced to borrow funds during unfavorable market conditions, and the unavailability of such
capital on favorable terms at the desired times, or at all, may cause us to curtail our investment activities and/or to dispose of assets at
inopportune times, which could materially and adversely affect us and the per share trading price of our common stock.
To continue to qualify as a REIT, we generally must distribute to our stockholders at least 90% of our REIT taxable income each year,
determined without regard to the dividends-paid deduction and excluding any net capital gains, and we will be subject to corporate income tax on
our undistributed taxable income to the extent that we distribute less than 100% of our REIT taxable income, determined without regard to the
dividends-paid deduction and including any net capital gains, each year. In addition, we will be subject to a 4% nondeductible excise tax on the
amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain
net income and 100% of our undistributed income from prior years.
In order to maintain our REIT status and avoid the payment of income and excise taxes, we may need to borrow funds to meet the REIT
distribution requirements even if market conditions are not favorable for these borrowings. We cannot assure you that we will have access to such
capital on favorable terms at the desired times, or at all, which may cause us to curtail our investment activities and/or to dispose of assets at
inopportune times, and could materially and adversely affect us and the per share trading price of our common stock.
Our ability to provide certain services to our tenants may be limited by the REIT rules or may have to be provided through a Taxable REIT
Subsidiary.
As a REIT, we generally cannot provide services to our tenants other than those that are customarily provided by landlords, nor can we derive
income from a third party that provides such services. If we forego providing such services to our tenants, we may be at a disadvantage to
competitors that are not subject to the same restrictions. However, we can provide such non-customary services to our tenants and receive our
share in the revenue from such services if we do so through a taxable REIT subsidiary (“TRS”), though income earned by such TRS will be subject
to U.S. federal corporate income taxation.
The IRS may treat sale-leaseback transactions as loans, which could jeopardize our REIT status or require us to make an unexpected
distribution.
A significant portion of our investments were obtained through sale-leaseback transactions, where we purchase owner-occupied real estate
and lease it back to the seller. We expect that a majority of our future investments will be obtained this way. The IRS may take the position that
specific sale-leaseback transactions that we treat as leases are not true leases for federal income tax purposes but, instead, should be re-
characterized as financing arrangements or loans.
If a sale-leaseback transaction were so re-characterized, we might fail to satisfy the REIT asset tests, the income tests or distribution
requirements and consequently lose our REIT status effective with the year of re-characterization unless we elect to make an additional distribution
to maintain our REIT status. The primary risk relates to our loss of previously incurred depreciation expenses, which could affect the calculation of
our REIT taxable income and could cause us to fail the REIT distribution test that requires a REIT to distribute at least 90% of its REIT taxable
income, determined without regard to the dividends-paid deduction and excluding any net capital gain. In this circumstance, we may elect to
distribute an additional dividend of the increased taxable income so as
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not to fail the REIT distribution test. This distribution would be paid to all stockholders at the time of declaration rather than the stockholders existing
in the taxable year affected by the re-characterization.
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
The maximum tax rate applicable to income from "qualified dividends" payable to U.S. stockholders that are individuals, trusts and estates is
20%. Dividends payable by REITs, however, generally are not eligible for the 20% rate except to the extent the REIT dividends are attributable to
"qualified dividends" received by the REIT itself. However, for non-corporate U.S. stockholders, dividends payable by REITs that are not designated
as capital gain dividends or otherwise treated as "qualified dividends" generally are eligible for a deduction of 20% of the amount of such dividends,
for taxable years beginning before January 1, 2026. More favorable rates will nevertheless continue to apply for regular corporate "qualified
dividends." Although these rules do not adversely affect the taxation of REITs or dividends payable by REITs, if the 20% rate continues to apply to
regular corporate qualified dividends, investors who are individuals, trusts and estates may regard investments in REITs to be relatively less
attractive than investments in the stocks of non-REIT corporations.
The tax imposed on REITs engaging in “prohibited transactions” may limit our ability to engage in transactions which would be treated as
sales for federal income tax purposes.
A REIT's net income from “prohibited transactions” is subject to a 100% penalty tax. In general, prohibited transactions are sales or other
dispositions of property, other than foreclosure property, held primarily for sale to customers in the ordinary course of business. Although we do not
intend to hold any properties that would be characterized as held for sale to customers in the ordinary course of our business, unless a sale or
disposition qualifies under certain statutory safe harbors, no guarantee can be given that the IRS would agree with our characterization of our
properties or that we will always be able to make use of the available safe harbors.
Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.
The REIT provisions of the Code substantially limit our ability to hedge our assets and liabilities. Any income from a hedging transaction that
we enter into to manage the risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets, or
from certain terminations of such hedging positions, does not constitute “gross income” for purposes of the 75% or 95% gross income tests that
apply to REITs, provided that certain identification requirements are met. To the extent that we enter into other types of hedging transactions or fail
to properly identify such transaction as a hedge, the income is likely to be treated as non-qualifying income for purposes of both of the gross income
tests. As a result of these rules, we may be required to limit our use of advantageous hedging techniques or implement those hedges through a
TRS. This could increase the cost of our hedging activities because any TRS in which we own an interest may be subject to tax on gains or expose
us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in any TRS in which we own
an interest will generally not provide any tax benefit, except that such losses could theoretically be carried forward against future taxable income in
such TRS.
Complying with REIT requirements may affect our profitability and may force us to liquidate or forgo otherwise attractive investments.
To qualify as a REIT, we must continually satisfy tests concerning, among other things, the nature and diversification of our assets, the
sources of our income and the amounts we distribute to our stockholders. We may be required to liquidate or forgo otherwise attractive investments
in order to satisfy the asset and income tests or to qualify under certain statutory relief provisions. We also may be required to make distributions to
stockholders at disadvantageous times or when we do not have funds readily available for distribution. As a result, having to comply with the
distribution requirement could cause us to: (i) sell assets in adverse market conditions; (ii) borrow on unfavorable terms; or (iii) distribute amounts
that would otherwise be invested in future acquisitions, capital expenditures or repayment of debt. Accordingly, satisfying the REIT requirements
could materially and adversely affect us. Moreover, if we are compelled to liquidate our investments to meet any of these asset, income or
distribution tests, or to repay obligations to our lenders, we may be unable to comply with one or more of the requirements applicable to REITs or
may be subject to a 100% tax on any resulting gain if such sales are prohibited transactions.
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There is a risk of changes in the tax law applicable to REITs.
Because the IRS, the United States Treasury Department and Congress frequently review federal income tax legislation, we cannot predict
whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted. Any of such legislative actions may
prospectively or retroactively modify our tax treatment and, therefore, may adversely affect taxation of us and/or our investors. For example, the Tax
Cuts and Jobs Act of 2017 (the “TCJA”) has significantly changed the U.S. federal income taxation of U.S. businesses and their owners, including
REITs and their stockholders. You are urged to consult with your tax advisor with respect to the status of legislative, regulatory, judicial or
administrative developments and proposals and their potential effect on an investment in our securities.
Risks Related to the Ownership of Our Common Stock
Changes in market conditions and volatility of stock prices could adversely affect the market price of our common stock.
The market price of our common stock on the NYSE has experienced significant volatility, particularly since the outbreak of the COVID-19
pandemic. The market price of our common stock will fluctuate, and such fluctuations could be significant and frequent; accordingly, our common
stockholders may experience a significant decrease in the value of their shares, including decreases that may be related to technical market factors
and may be unrelated to our operating performance or prospects. Similarly, the trading volume of our common stock may decline, and our common
stockholders could experience a decrease in liquidity. A number of factors could negatively affect the price per share of our common stock,
including: actual or anticipated variations in our quarterly operating results or distributions; changes in our funds from operations (“FFO”), core FFO
(“Core FFO”), adjusted FFO (“AFFO”) or guidance; changes in our net investment activity; difficulties or inability to access equity or debt capital on
attractive terms or extend or refinance existing debt; increases in our leverage; changes in our management or business strategy; failure to comply
with the NYSE listing requirements or other regulatory requirements; and the other factors described in this Risk Factors section. Many of these
factors are beyond our control. These factors may cause the market price of shares of our common stock to decline significantly, regardless of our
financial condition, results of operations, business or our prospects.
Increases in market interest rates may result in a decrease in the value of shares of our common stock.
One of the factors that may influence the price of shares of our common stock is the distribution yield on shares of our common stock (as a
percentage of the price of shares of our common stock) relative to market interest rates. An increase in market interest rates, which are currently at
low levels relative to historical rates, may lead prospective purchasers of shares of our common stock to expect a higher distribution yield.
Additionally, higher interest rates would likely increase our borrowing costs and potentially decrease funds available for distribution. Thus, higher
market interest rates could cause the per share trading price of our common stock to decrease. Higher borrowing costs and a reduced trading price
of our common stock would increase our overall cost of capital and adversely affect our ability to make accretive acquisitions.
We may be unable to continue to make distributions at our current distribution level, and our board may change our distribution policy in
the future.
While we expect to continue to make regular quarterly distributions to the holders of our common stock, if sufficient cash is not available for
distribution from our operations, we may have to fund distributions from working capital or net proceeds from asset sales, borrow to provide funds for
such distributions, or reduce the amount of such distributions. To the extent we borrow to fund distributions, our future interest costs would increase,
thereby reducing our earnings and cash available for distribution from what they otherwise would have been. If cash available for distribution
generated by our assets is less than expected, or if such cash available for distribution decreases in future periods from expected levels, our inability
to make distributions could result in a decrease in the market price of our common stock.
The decision to declare and pay distributions on our common stock, as well as the form, timing and amount of any such future distributions, is
at the sole discretion of our board of directors and depends on upon a number of factors, including our actual and projected results of operations,
FFO, Core FFO, AFFO, liquidity, cash flows and financial condition, the revenue we actually receive from our properties, our operating expenses,
our debt service requirements, our capital expenditures, prohibitions and other limitations under our financing arrangements, our REIT taxable
income, the annual REIT distribution requirements, applicable law and such other factors as our board
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of directors deems relevant. We may not be able to make distributions in the future, and our inability to make distributions, or to make distributions at
expected levels, could have a material adverse effect on the market price of our common stock.
The incurrence of additional debt, which would be senior to shares of our common stock upon liquidation, and/or preferred equity
securities that may be senior to shares of our common stock for purposes of distributions or upon liquidation, may materially and
adversely affect the market price of shares of our common stock.
In the future, we may attempt to increase our capital resources by making additional offerings of debt or preferred equity securities, including
by causing our Operating Partnership or its subsidiaries to issue additional debt securities, or by otherwise incurring additional indebtedness. Upon
liquidation, holders of our debt securities, other lenders and creditors, and any holders of preferred stock with a liquidation preference will receive
distributions of our available assets prior to our stockholders. Additionally, any convertible or exchangeable securities that we issue in the future may
have rights, preferences and privileges more favorable than those of our common stock and may result in dilution to owners of our common stock.
Our stockholders are not entitled to preemptive rights or other protections against dilution. Our preferred stock, if issued, could have a preference on
liquidating distributions or a preference on distribution payments that could limit our right to make distributions to our stockholders. Because our
decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or
estimate the amount, timing or nature of our future offerings. Our stockholders bear the risk of our future offerings reducing per share trading price of
our common stock.
Sales of substantial amounts of our common stock or securities convertible into or exercisable or exchangeable therefor, or the
perception that such sales might occur, could reduce the price of our common stock and may dilute your voting power and your
ownership interest in us.
Sales of substantial amounts of our common stock or securities convertible into or exercisable or exchangeable therefor (such as OP Units),
or the perception that such sales might occur, could adversely affect the market price of our common stock. Additionally, such sales would dilute the
voting power and ownership interest of existing common stockholders. Our charter provides that we may issue up to 500,000,000 shares of common
stock, and a majority of our entire board of directors has the power to amend our charter to increase the aggregate number of shares of stock or the
number of shares of stock of any class or series that we are authorized to issue without stockholder approval. As of December 31, 2020, we had
106,361,524 shares of common stock outstanding and 553,847 OP Units outstanding (excluding OP Units held directly or indirectly by us). The
currently outstanding OP Units are primarily held by members of our management team. OP Units are generally redeemable for cash or, at our
election, shares of common stock on a one-for-one basis, which may result in stockholder dilution. In the future we may acquire properties through
tax deferred contribution transactions in exchange for OP Units. This acquisition structure may have the effect of, among other things, reducing the
amount of tax depreciation we could deduct over the tax life of the acquired properties, and may require that we agree to protect the contributors'
ability to defer recognition of taxable gain through restrictions on our ability to dispose of the acquired properties and/or the allocation of partnership
debt to the contributors to maintain their tax bases. These restrictions could limit our ability to sell an asset at a time, or on terms, that would be
favorable absent such restrictions. As of December 31, 2020, 2119352 shares remain available for issuance under our 2018 Incentive Plan.
General Risk Factors
Any material failure, weakness, interruption or breach in security of our information systems could prevent us from effectively operating
our business.
We rely on information systems across our operations and corporate functions, including finance and accounting, and depend on such
systems to ensure payment of obligations, collection of cash, data warehousing to support analytics, and other various processes and procedures.
Due to the COVID-19 pandemic, many of our business processes are being conducted remotely, which places increased reliance on our information
technology systems. Our ability to efficiently manage our business depends significantly on the reliability and capacity of these systems. The failure
of these systems to operate effectively, maintenance problems, upgrading or transitioning to new platforms or a breach in security of these systems,
such as in the event of cyber-attacks, could adversely affect us. There can be no assurance that our security efforts and measures will be effective
or that attempted security breaches or disruptions would not be successful or damaging. A security breach or other significant disruption involving
our information systems could disrupt the proper functioning of our networks and systems; result in
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misstated financial reports, violations of loan covenants and/or missed reporting deadlines; result in our inability to properly monitor our compliance
with the rules and regulations regarding our qualification as a REIT; result in the unauthorized access to, and destruction, loss, theft,
misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to
compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; require significant management attention and
resources to remedy any damages that result; subject us to claims for breach of contract, damages, credits, penalties or termination of leases or
other agreements; or damage our reputation among our tenants and investors generally.
We are subject to litigation, which could materially and adversely affect us.
From time to time, we are party to various lawsuits, claims and other legal proceedings. These matters may involve significant expense and
may result in judgments or settlements, which may be significant. There can be no assurance that insurance will be available to cover losses related
to legal proceedings or that our tenants will meet any indemnification obligations that they have to us. Litigation may result in significant defense
costs and potentially significant judgments against us, some of which are not, or cannot be, insured against. Resolution of these types of matters
against us may result in our having to pay significant fines, judgments or settlements, which, if uninsured, or if the fines, judgments, and settlements
exceed insured levels, could materially and adversely affect us.
Material weaknesses in or a failure to maintain an effective system of internal control over financial reporting or disclosure controls could
prevent us from accurately and timely reporting our financial results, which could materially and adversely affect us.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports, effectively prevent fraud and
operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would
be harmed. We are required to perform system and process evaluation and testing of our internal control over financial reporting to allow
management to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control over financial
reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002. Designing and implementing an effective system of internal control over
financial reporting and disclosure controls and procedures is a continuous effort that requires significant resources, including the expenditure of a
significant amount of time by senior members of our management team.
In connection with our ongoing monitoring of our internal control over financial reporting or audits of our financial statements, we or our
auditors may identify deficiencies in our internal control over financial reporting that may be significant or rise to the level of material weaknesses.
Any failure to maintain effective internal control over financial reporting or disclosure controls and procedures or to timely effect any necessary
improvements to such controls, including as a result of remote work arrangements due to the COVID-19 pandemic, could harm our operating results
or cause us to fail to meet our reporting obligations (which could affect the listing of our common stock on the NYSE). Additionally, ineffective
internal control over financial reporting or disclosure controls and procedures could also adversely affect our ability to prevent or detect fraud, harm
our reputation and cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading
price of our common stock.
Changes in accounting standards may materially and adversely affect us.
From time to time FASB and the SEC, who create and interpret accounting standards, may change the financial accounting and reporting
standards or their interpretation and application of these standards that will govern the preparation of our financial statements. These changes could
materially and adversely affect our reported financial condition and results of operations, and, under certain circumstances, may cause us to fail to
comply with financial covenants contained in agreements relating to our indebtedness. In some cases, we could be required to apply a new or
revised standard retroactively, resulting in restating prior period financial statements. Similarly, these changes could materially and adversely affect
our tenants’ reported financial condition or results of operations and affect their preferences regarding leasing real estate.
Item 1B. Unresolved Staff Comments.
None.
33
Item 2. Properties.
Our Real Estate Investment Portfolio
As of December 31, 2020, we had a portfolio of 1,181 properties, inclusive of two undeveloped land parcels and 115 properties that secure
our investments in mortgage loans receivable, that was diversified by tenant, industry and geography and had annualized base rent of
$184.0 million. Our 238 tenants operate 336 different concepts in 16 industries across 43 states. None of our tenants represented more than 3.2%
of our annualized base rent at December 31, 2020 and our top ten largest tenants represented 21.2% of our annualized base rent as of that date.
Diversification by Tenant
As of December 31, 2020, our top ten tenants included ten different concepts: Captain D's, Cadence Academy, EquipmentShare, Mister Car
Wash, Circle K, AMC, Mavis Discount Tire, The Malvern School, Zaxby's, and Driver's Edge. Our 1,181 properties are operated by our 238 tenants.
The following table details information about our tenants and the related concepts they operate as of December 31, 2020 (dollars in thousands):
(1)
Tenant
Captain D's, LLC
Cadence Education, LLC
EQUIPMENTSHARE.COM INC
CAR WASH PARTNERS, INC.
Mac's Convenience Stores, LLC
American Multi-Cinema, Inc
Mavis Tire Express Services Corp.
Malvern School Properties, LP
1788 Chicken, LLC
GB Auto Service, Inc.
Top 10 Subtotal
Other
(4)
(3)
Concept
Captain D's
Cadence Academy
EquipmentShare
Mister Car Wash
Circle K
AMC
Mavis Discount Tire
The Malvern School
Zaxby's
Driver's Edge
Total
__________________________________________
(1)
(2)
(3)
(4)
Represents tenant or guarantor.
Excludes two undeveloped land parcels and three vacant properties.
Includes properties leased to a subsidiary of Alimentation Couche Tard Inc.
Includes four properties leased to a subsidiary of AMC Entertainment Holdings, Inc.
Number of
Properties
(2)
Annualized
Base Rent
% of
Annualized
Base Rent
74 $
23
16
13
34
5
19
13
20
14
231
945
1,176
5,094
4,749
4,730
4,310
3,797
3,535
3,395
3,208
3,141
3,111
39,070
144,907
183,977
2.8 %
2.6 %
2.6 %
2.3 %
2.1 %
1.9 %
1.8 %
1.7 %
1.7 %
1.7 %
21.2 %
78.8 %
100.0 %
As of December 31, 2020, our five largest tenants, who contributed 12.3% of our annualized base rent, had a rent coverage ratio of 4.2x, and
our ten largest tenants, who contributed 21.2% of our annualized base rent, had a rent coverage ratio of 3.3x.
As of December 31, 2020, 94.1% of our leases (based on annualized base rent) were triple-net, and the tenant is typically responsible for all
improvements and is contractually obligated to pay all operating expenses, such as maintenance, insurance, utility and tax expense, related to the
leased property. Due to the triple-net structure of our leases, we do not expect to incur significant capital expenditures relating to our triple-
net leased properties, and the potential impact of inflation on our operating expenses is reduced.
34
Diversification by Concept
Our tenants operate their businesses through 336 concepts (i.e., generally brands). The following table provides information about the top ten
concepts in our portfolio as of December 31, 2020 (dollars in thousands):
Concept
Captain D's
EquipmentShare
Mister Car Wash
Circle K
AMC
Mavis Discount Tire
Zaxby's
The Malvern School
Vasa Fitness
R-Store
Top 10 Subtotal
Other
Total
______________________________________
(1)
Excludes two undeveloped land parcels.
Type of
Business
Annualized
Base Rent
% of
Annualized
Base Rent
Number of
Properties (1)
Building
(Sq. Ft.)
Service
Service
Service
Service
Experience
Service
Service
Service
Experience
Service
5,939
4,730
4,310
4,184
3,535
3,395
3,353
3,208
2,948
2,854
38,456
145,521
183,977
$
$
35
3.2 %
2.6 %
2.3 %
2.3 %
1.9 %
1.8 %
1.8 %
1.7 %
1.6 %
1.6 %
20.9 %
79.1 %
100.0 %
83
16
13
36
5
19
21
13
5
25
236
940
1,176
215,022
330,911
54,621
139,799
240,672
165,713
72,986
149,781
258,085
105,703
1,733,293
8,416,250
10,149,543
Diversification by Industry
Our tenants' business concepts are diversified across various industries. The following table summarizes those industries as of December 31,
2020 (dollars in thousands except per sq. ft amounts):
Tenant Industry
Car Washes
Quick Service
Early Childhood Education
Medical / Dental
Convenience Stores
Automotive Service
Casual Dining
Equipment Rental and Sales
Family Dining
Pet Care Services
Other Services
Service Subtotal
Health and Fitness
Entertainment
Movie Theatres
Experience Subtotal
Grocery
Home Furnishings
Retail Subtotal
Building Materials
Total
Type of
Business
Annualized
Base Rent
% of
Annualized
Base Rent
Number of
Properties (1)
Building
(Sq. Ft.)
Rent Per
Sq. Ft. (2)
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Experience
Experience
Experience
Retail
Retail
Other
$
$
28,494
25,536
22,571
19,593
16,615
13,782
8,301
6,136
5,960
4,781
3,114
154,883
9,593
6,280
4,166
20,039
2,833
2,476
5,309
3,746
183,977
15.5 %
13.9 %
12.3 %
10.6 %
9.0 %
7.5 %
4.5 %
3.3 %
3.2 %
2.6 %
1.7 %
84.2 %
5.2 %
3.4 %
2.3 %
10.9 %
1.5 %
1.3 %
2.9 %
2.0 %
100.0 %
118
330
99
118
142
100
55
26
40
35
19
1,082
25
18
6
49
16
6
22
23
1,176
549,914 $
878,649
1,042,979
752,604
576,687
678,715
337,769
500,710
232,723
281,475
198,144
6,030,369
1,004,189
647,483
293,206
1,944,878
609,908
307,371
917,279
1,257,017
10,149,543 $
50.60
29.02
21.25
25.29
28.81
20.31
24.95
12.25
27.34
16.98
15.71
25.49
9.55
10.30
14.21
10.51
4.64
15.79
6.92
2.98
18.33
____________________________________________________
(1)
(2)
Excludes two undeveloped land parcels.
Excludes properties with no annualized base rent and properties under construction.
As of December 31, 2020, our tenants operating service-oriented businesses had a weighted average rent coverage ratio of 2.94x, our
tenants operating experience-based businesses had a weighted average rent coverage ratio of 1.45x, our tenants operating retail businesses had a
weighted average rent coverage ratio of 2.53x and our tenants operating other types of businesses had a weighted average rent coverage ratio of
8.63x.
36
Diversification by Geography
Our 1,181 property locations are spread across 43 states. The following table details the geographical locations of our properties as of
December 31, 2020 (dollars in thousands):
State
Texas
Georgia
Florida
Arkansas
Ohio
Alabama
Michigan
Arizona
Tennessee
Wisconsin
Minnesota
North Carolina
Pennsylvania
New York
Oklahoma
Colorado
Missouri
Illinois
South Carolina
Mississippi
Massachusetts
New Mexico
New Jersey
Indiana
Kentucky
Iowa
Maryland
Louisiana
South Dakota
Kansas
Washington
Connecticut
Virginia
Oregon
Utah
West Virginia
Nebraska
Wyoming
California
Idaho
New Hampshire
Nevada
Alaska
Total
% of Annualized
Base Rent
Number of Properties
Building (Sq. Ft.)
14.9 %
9.6 %
6.1 %
4.8 %
4.1 %
4.0 %
3.8 %
3.6 %
3.4 %
3.4 %
3.0 %
2.7 %
2.6 %
2.3 %
2.3 %
2.3 %
2.2 %
2.1 %
2.0 %
1.8 %
1.8 %
1.6 %
1.6 %
1.6 %
1.6 %
1.5 %
1.0 %
1.0 %
0.9 %
0.9 %
0.8 %
0.7 %
0.6 %
0.6 %
0.5 %
0.5 %
0.3 %
0.2 %
0.2 %
0.2 %
0.2 %
0.1 %
0.1 %
100.0 %
161
116
56
67
59
51
48
33
49
38
33
24
30
37
22
19
30
23
27
30
19
19
17
25
25
19
8
11
7
7
10
7
7
6
2
18
7
2
3
1
5
1
2
1,181
1,252,505
662,580
561,235
359,008
577,622
461,183
806,114
274,159
242,029
258,723
447,526
308,950
249,775
185,923
308,650
208,822
508,585
177,055
253,137
121,250
334,931
113,697
118,613
195,594
148,000
113,101
68,324
80,537
41,472
102,545
77,293
75,988
54,130
124,931
67,659
44,915
17,776
14,001
30,870
35,433
37,786
34,777
6,630
10,163,834
Annualized Base Rent
27,354
$
17,706
11,183
8,822
7,606
7,427
7,079
6,660
6,242
6,341
5,542
4,971
4,811
4,302
4,223
4,147
3,999
3,890
3,763
3,309
3,320
3,027
2,993
2,917
2,885
2,812
1,923
1,903
1,702
1,677
1,530
1,315
1,187
1,093
922
915
596
428
391
383
307
226
150
183,977
$
37
Lease Expirations
As of December 31, 2020, the weighted average remaining term of our leases was 14.5 years (based on annualized base rent), with only
4.8% of our annualized base rent attributable to leases expiring prior to January 1, 2026. The following table sets forth our lease expirations for
leases in place as of December 31, 2020 (dollars in thousands):
Lease Expiration Year (1)
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
Thereafter
Total/Weighted Average
Annualized
Base Rent
% of
Annualized
Base Rent
Number of
Properties (2)
Weighted
Average Rent
Coverage Ratio (3)
$
$
133
490
798
4,759
2,710
2,425
4,466
3,967
5,083
4,154
9,165
10,966
7,149
29,722
19,455
2,341
5,943
13,056
26,154
29,215
1,826
183,977
0.1 %
0.3 %
0.4 %
2.6 %
1.5 %
1.3 %
2.4 %
2.2 %
2.8 %
2.3 %
5.0 %
6.0 %
3.9 %
16.2 %
10.6 %
1.3 %
3.2 %
7.1 %
14.2 %
15.9 %
1.0 %
100.0 %
2
5
9
46
19
15
28
14
71
50
59
55
27
212
129
19
35
83
151
141
6
1,176
2.3x
3.0x
3.4x
4.3x
3.0x
2.2x
3.0x
1.8x
3.9x
3.8x
2.5x
3.6x
1.8x
3.4x
3.1x
1.7x
5.0x
2.4x
2.6x
2.2x
1.4x
2.9x
_______________________________________________________________
(1)
(2)
(3) Weighted by annualized base rent.
Expiration year of contracts in place as of December 31, 2020, excluding any tenant option renewal periods that have not been exercised.
Excludes two undeveloped land parcels.
Item 3. Legal Proceedings.
We are subject to various lawsuits, claims and other legal proceedings. Management does not believe that the resolution of any of these
matters either individually or in the aggregate will have a material adverse effect on our business, financial condition, results of operations or
liquidity. Further, from time to time, we are party to various lawsuits, claims and other legal proceedings for which third parties, such as our tenants,
are contractually obligated to indemnify, defend and hold us harmless. In some of these matters, the indemnitors have insurance for the potential
damages. In other matters, we are being defended by tenants who may not have sufficient insurance, assets, income or resources to satisfy their
defense and indemnification obligations to us. The unfavorable resolution of such legal proceedings could, individually or in the aggregate, materially
adversely affect the indemnitors' ability to satisfy their respective obligations to us, which, in turn, could have a material adverse effect on our
business, financial condition, results of operations or liquidity. It is management's opinion that there are currently no such legal proceedings pending
that will, individually or in the aggregate, have such a material adverse effect. Despite management's view of the ultimate resolution of these legal
proceedings, we may have significant legal expenses and costs associated with the defense of such matters. Further, management cannot predict
the outcome of these legal proceedings and if management's expectation regarding such matters is not correct, such proceedings could have a
material adverse effect on our business, financial condition, results of operations or liquidity.
38
Item 4. Mine Safety Disclosures.
Not applicable.
39
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is listed on the NYSE under the symbol "EPRT". As of February 19, 2021, there were 157 holders of record of the
106,934,874 outstanding shares of our common stock. Because many of our shares of common stock are held by brokers and other institutions on
behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
PART II
Distributions
We have made and intend to continue to make quarterly cash distributions to our common stockholders. In particular, in order to maintain our
qualification for taxation as a REIT, we intend to make annual distributions to our stockholders of at least 90% of our REIT taxable income,
determined without regard to the deduction for dividends paid and excluding any net capital gain. However, any future distributions will be at the sole
discretion of our board of directors, and their form, timing and amount, if any, will depend upon a number of factors, including our actual and
projected results of operations, FFO, Core FFO, AFFO, liquidity, cash flows and financial condition, the revenue we actually receive from our
properties, our operating expenses, our debt service requirements, our capital expenditures, prohibitions and other limitations under our financing
arrangements, our REIT taxable income, the annual REIT distribution requirements, applicable law and such other factors as our board of directors
deems relevant. To the extent that our cash available for distribution is less than 90% of our REIT taxable income, we may consider various means
to cover any such shortfall, including borrowing under the Revolving Credit Facility or other loans, selling certain of our assets, or using a portion of
the net proceeds we receive from offerings of equity, equity-related or debt securities or declaring taxable share dividends. Agreements relating to
our indebtedness, including our Master Trust Funding Program and our revolving and term loan credit facilities, limit and, under certain
circumstances, could eliminate our ability to make distributions. See "Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations-Description of Certain Debt."
We have determined that, for federal income tax purposes, approximately 59.0% of the distributions paid for the 2020 tax year represented
taxable income and 41.0% represented a return of capital.
Issuer Purchases of Equity Securities
During the year ended December 31, 2020, the Company did not repurchase any of its equity securities.
Stock Performance Graph
The following performance graph and related table compare, for the period from June 21, 2018 (the first day our common stock was traded on
the NYSE) through December 31, 2020, the cumulative total stockholder return on our common stock with that of the Standard & Poor's 500
Composite Stock Index ("S&P 500") and the FTSE NAREIT All Equity REITs index ("FNER"). The graph and related table assume $100.00 was
invested on June 21, 2018 and assumes the reinvestment of all dividends. The historical stock price performance reflected in the graph and related
table is not necessarily indicative of future stock price performance.
40
Essential Properties Realty Trust, Inc.
Ticker / Index
EPRT
S&P 500
FNER
6/21/2018
100.00
100.00
100.00
6/30/2018
99.27
98.86
101.35
12/31/2018
103.16
92.65
94.04
6/30/2019
153.26
112.12
110.07
12/31/2019
193.63
126.83
116.57
6/30/2020
119.31
121.72
97.92
12/31/2020
175.07
147.49
105.02
The performance graph and the related table are being furnished solely to accompany this Annual Report on Form 10-K pursuant to Item
201(e) of Regulation S-K, and are not being filed for purposes of Section 18 of the Exchange Act and are not to be incorporated by reference into
any filing of ours, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Equity Compensation Plan Information
The information concerning our Equity Compensation Plan will be included in the Proxy Statement to be filed relating to our 2021 Annual
Meeting of Stockholders and is incorporated herein by reference.
Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 6. Selected Financial Data.
The following tables set forth selected consolidated financial and other information of the Company as of and for the years ended
December 31, 2020, 2019, 2018 and 2017 and for the period from March 30, 2016 (Commencement of Operations) to December 31, 2016. The
tables should be read in conjunction with our consolidated financial statements and the notes thereto and "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in this Annual Report on Form 10-K.
41
Operating Data:
(In thousands, except per share data)
Revenues:
Rental revenue
Interest on loans and direct financing lease
receivables
Other revenue
Total revenues
Expenses:
General and administrative
Property expenses
Depreciation and amortization
Provision for impairment of real estate
Provision for loan losses
Total expenses
Other operating income:
Gain on dispositions of real estate, net
Income from operations
Other (loss)/income:
Loss on repayment and repurchase of
secured borrowings
Interest expense
Interest income
Income before income tax expense
Income tax expense
Net income
Net income attributable to non-controlling
interests
Net income attributable to stockholders and
members
Basic net income per share
Diluted net income per share
Cash dividends declared per share
Period from
March 30, 2016
(Commencement of
Operations) to
December 31, 2016
15,271
161
88
15,520
4,321
533
5,428
1,298
—
11,580
871
4,811
—
(987)
3
3,827
77
3,750
—
3,750
2020
Year ended December 31,
2018
2019
2017
$
155,792 $
135,670 $
94,944 $
53,373 $
8,136
81
164,009
24,444
3,881
59,446
8,399
830
97,000
5,821
72,830
(924)
(29,651)
485
42,740
212
42,528
(255)
3,024
663
139,357
21,745
3,070
42,745
2,918
—
70,478
10,932
79,811
(5,240)
(27,037)
794
48,328
303
48,025
(6,181)
656
623
96,223
13,762
1,980
31,352
4,503
—
51,597
5,445
50,071
—
(30,192)
930
20,809
195
20,614
(5,001)
293
783
54,449
8,775
1,547
19,516
2,377
—
32,215
6,748
28,982
—
(22,574)
49
6,457
161
6,296
—
42,273 $
41,844 $
15,613 $
6,296 $
Year ended December 31,
2019
2020
0.44 $
0.44
0.93
Period from
June 25, 2018 to
December 31, 2018
0.26
0.26
0.43
0.65 $
0.63
0.88
42
$
$
Consolidated Balance Sheet Data:
(In thousands)
Total real estate investments, at cost
Total real estate investments, net
Net investments
Cash and cash equivalents
Restricted cash
Total assets
Secured borrowings, net of deferred financing costs
Unsecured term loans, net of deferred financing costs
Notes payable to related party
Revolving credit facility
Intangible lease liabilities, net
Total liabilities
Total stockholders'/members' equity
Non-controlling interests
Other Data:
(1)
(1)
(In thousands)
FFO
Core FFO
AFFO
EBITDA
EBITDAre
(1)
(1)
(1)
$
2020
2,359,395 $
2,223,298
2,392,576
26,602
6,388
2,488,802
171,007
626,272
—
18,000
10,168
906,854
1,574,758
7,190
2019
1,908,919 $
1,818,848
1,912,243
8,304
13,015
1,975,447
235,336
445,586
—
46,000
9,564
773,334
1,194,450
7,663
December 31,
2018
1,377,044 $
1,325,189
1,342,694
4,236
12,003
1,380,900
506,116
—
—
34,000
11,616
569,859
562,179
248,862
2017
2016
932,174 $
907,349
914,247
7,250
12,180
942,220
511,646
—
230,000
—
12,321
760,818
181,402
—
455,008
448,887
452,546
1,825
10,097
466,288
272,823
—
—
—
16,385
291,638
174,650
—
$
2020
104,415 $
106,688
106,995
131,352
133,931
Year ended December 31,
2018
2019
2017
Period from March 30, 2016
(Commencement of
Operations) to
December 31, 2016
82,660 $
90,648
86,251
117,316
109,302
51,007 $
51,007
48,442
81,423
80,481
21,438 $
21,438
20,337
48,498
44,127
9,605
9,605
8,579
10,239
10,666
(2)
(Dollar amounts in thousands)
Net debt
Number of investment property locations
Occupancy
2020
2019
December 31,
2018
$
821,193
1,181
$
99.7 %
$
713,784
1,000
100.0 %
$
532,881
677
100.0 %
2017
2016
$
733,511
508
98.8 %
278,609
344
96.8 %
__________________________________________________________
(1)
FFO, Core FFO, AFFO, EBITDA and EBITDAre are non-GAAP financial measures. For definitions of these measures and reconciliations of
these measures to net income, the most directly comparable GAAP financial measure, and a statement of why our management believes the
presentation of these measures provides useful information to investors and any additional purposes for which management uses these
measures, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial
Measures."
Net debt is a non-GAAP financial measure. For a definition of this measure and a reconciliation of this measure to total debt, the most directly
comparable GAAP financial measure, and a statement of why our management believes the presentation of this measure provides useful
information to investors and any additional purposes for which management uses this measure, see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures."
(2)
43
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated
financial statements and the related notes included elsewhere in this report, as well as the "Selected Financial Data" and "Business" sections of this
report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to
our plans and strategies for our business, includes forward‑looking statements that involve risks and uncertainties. You should read "Item 1A. Risk
Factors" and the "Special Note Regarding Forward‑Looking Statements" sections of this report for a discussion of important factors that could cause
actual results to differ materially from the results described in or implied by these forward‑looking statements.
Overview
We are an internally managed real estate company that acquires, owns and manages primarily single-tenant properties that are net leased on
a long-term basis to middle-market companies operating service-oriented or experience-based businesses. We generally acquire and lease
freestanding, single-tenant commercial real estate facilities where a tenant services its customers and conducts activities that are essential to the
generation of the tenant's sales and profits. As of December 31, 2020, 95.1% of our $184.0 million of annualized base rent was attributable to
properties operated by tenants in service-oriented and experience-based businesses. "Annualized base rent" means annualized contractually
specified cash base rent in effect on December 31, 2020 for all of our leases (including those accounted for as loans or direct financing leases)
commenced as of that date and annualized cash interest on our mortgage loans receivable as of that date.
We have assembled a diversified portfolio using a disciplined strategy that focuses on properties leased to tenants in businesses such as:
•
•
•
Car washes,
Restaurants (primarily quick service restaurants),
Early childhood education
• Medical and dental services,
•
•
•
•
•
Convenience stores,
Automotive services,
Equipment rental,
Entertainment and
Health and fitness
We believe that, in general, properties leased to tenants in these businesses and similar businesses are essential to the generation of the
tenants' sales and profits. We also believe that these business have favorable growth potential and, because of their nature they are more insulated
from e-commerce pressure than many other businesses.
We were organized on January 12, 2018 as a Maryland corporation. We have elected to be taxed as a real estate investment trust ("REIT")
for federal income tax purposes beginning with the year ended December 31, 2018, and we believe that our current organization, operations and
intended distributions will allow us to continue to so qualify.
We completed our IPO in June 2018. Our common stock is listed on the New York Stock Exchange under the symbol "EPRT".
Our primary business objective is to maximize stockholder value by generating attractive risk-adjusted returns through owning, managing and
growing a diversified portfolio of commercially desirable properties. We have grown
44
significantly since commencing our operations and investment activities in June 2016. As of December 31, 2020, we had a portfolio of 1,181
properties (inclusive of two undeveloped land parcels and 115 properties which secure our investments in mortgage loans receivable) that was
diversified by tenant, industry, concept and geography, had annualized base rent of $184.0 million and was 99.7% occupied. Our portfolio was built
based on the following core investment attributes:
•
•
•
•
•
•
•
Diversified Portfolio
Long Lease Term
Significant use of Master Leases
Healthy Rent Coverage Ratio and Tenant Financial Reporting
Contractual Base Rent Escalations
Significant use of Sale-Leaseback Investments
Smaller, Low Basis Single-Tenant Properties
We generally lease each of our properties to a single tenant on a triple-net, long-term basis, and we generate our cash from operations
primarily through the monthly lease payments, or base rent we receive from the tenants that occupy our properties.
Substantially all our leases provide for periodic contractual rent escalations. As of December 31, 2020, leases contributing 99.2% of our
annualized base rent provided for increases in future annual base rent, generally ranging from 1% to 4%, with a weighted average annual escalation
equal to 1.5% of base rent. As of December 31, 2020, leases contributing 94.1% of annualized base rent were triple-net, which means that our
tenant is responsible for all operating expenses, such as maintenance, insurance, utility and tax, related to the leased property (including any
increases in those costs that may occur as a result of inflation). Our remaining leases were "double net," where the tenant is responsible for certain
expenses, such as taxes and insurance, but we retain responsibility for other expenses, generally related to maintenance and structural component
replacement that may be required at such leased properties. Also, we incur property-level expenses associated with our vacant properties and we
occasionally incur nominal property-level expenses that are not paid by our tenants, such as the costs of periodically making site inspections of our
properties. We do not currently anticipate incurring significant capital expenditures or property costs. Since our properties are predominantly single-
tenant properties, which are generally subject to long-term leases, it is not necessary for us to perform significant ongoing leasing activities with
respect to our properties. As of December 31, 2020, the weighted average remaining term of our leases was 14.5 years (based on annualized base
rent), excluding renewal options that have not been exercised, with 4.8% of our annualized base rent attributable to leases expiring prior to January
1, 2026. Renewal options are exercisable at the option of our tenants upon expiration of their base lease term. Our leases providing for tenant
renewal options generally provide for periodic contractual rent escalations during any renewed term that are similar to those applicable during the
initial term of the lease.
As of December 31, 2020, 61.1% of our annualized base rent was attributable to master leases, where we have leased multiple properties to
a tenant under a master lease. Since properties are generally leased under a master lease on an "all or none" basis, the structure prevents a tenant
from "cherry picking" locations, where it unilaterally gives up underperforming properties while maintaining its leasehold interest in well-performing
properties.
COVID-19 Pandemic Update
COVID-19 has created significant uncertainty and economic disruption, which is likely to persist, or increase, for a period of unknown duration.
The pandemic has adversely affected us and our tenants, and the full extent to which it will adversely affect our financial condition, liquidity, and
results of operations is difficult to predict and depends on evolving factors, including the duration and scope of the pandemic, and governmental and
social responses thereto. We continue to closely monitor the impact of COVID-19 on all aspects of our business, including our portfolio and the
creditworthiness of our tenants. As the pandemic intensified at the end of the first quarter of 2020, we adopted a more cautious investment strategy,
as we placed an increased emphasis on liquidity, prudent
45
balance sheet management and financial flexibility. In March 2020, we initiated steps to safeguard the health and safety of our employees, and
transitioned all of our employees to a remote work environment. We successfully executed our business continuity plan, with all of our core financial,
operational and telecommunication systems operating from a cloud-based environment with no disruption. More recently, our employees have been
able to work in our headquarters, located in Princeton, New Jersey, on a schedule designed to promote appropriate social distancing and health and
safety.
The impact of the pandemic is rapidly evolving. It continues to adversely impact commercial activity and cause uncertainty and volatility in
financial markets. The pandemic has adversely affected our tenants’ ability to meet their financial obligations to us (including the payment of rent
and deferred rent), exposed us to increased risk of tenant default or bankruptcy, and impaired the value of certain of our properties. The pandemic
has caused a large number of our tenants, to suspend or reduce their operations, which has adversely affected their ability to pay rent to us. As of
December 31, 2020, we granted tenant-requested rent deferrals relating to approximately $18.5 million of rent, representing 10% of our annualized
base rent as of December 31, 2020. During the year ended December 31, 2020, we collected substantially all of the $2.6 million in deferred rent we
were owed from tenants where repayment was anticipated.
The adverse impacts of the pandemic and the responses designed to mitigate its effects (such as local, state, regional or national lockdowns
or other limitations on business activities) have varied, and likely will continue to vary, by geography. It is possible that our properties and tenants
located in certain areas will be more adversely affected than our properties and tenants located in other areas. While our properties are diversified
by geography, our business includes substantial holdings in the following states as of December 31, 2020 (based on annualized base rent): Texas
(14.9%), Georgia (9.6%), Florida (6.1%), Arkansas (4.8%) and Ohio (4.1%). If the pandemic surges in these states or other areas from which we
derive significant revenue, the adverse impact of the pandemic on us and our tenants would likely increase.
Similarly, as of December 31, 2020, leases representing approximately 20.0% of our annualized base rent were with tenants in industries that
have been particularly adversely affected by the COVID-19 pandemic, including casual and family dining (7.8% of annualized base rent), health and
fitness (5.2% of annualized base rent), entertainment (3.4% of annualized base rent), movie theaters (2.3% of annualized base rent) and home
furnishings (1.3% of annualized base rent).See “Our Real Estate Investment Portfolio—Diversification by Industry” and “—Diversification by
Geography,” below for additional information about our exposure to various states and industries.
The pandemic could cause our occupancy to decrease, which would lead to increased property-level expenses, as we would be obligated to
pay costs (e.g., real estate taxes, maintenance costs and insurance) that would otherwise be paid by a tenant at a property subject to a triple-net
lease. Additionally, while we recently have begun to accelerate our investment program, the pandemic has caused us to adopt a more cautious
investment strategy, as we emphasize liquidity and financial flexibility, that has slowed our pace of external growth. Conditions in the bank lending
and capital markets have been volatile and may deteriorate as a result of the pandemic, and our ability, and that of our tenants, to access capital
may become constrained or eliminated, or the terms on which capital may be accessed may deteriorate significantly.
One of our main operating functions is our proactive asset management approach. Accordingly, we continue to actively engage in discussions
with our tenants regarding the impact of COVID-19 on their business operations, liquidity, and financial position, and, where appropriate, negotiate
rent deferrals or other concessions. As noted above, as of December 31, 2020, we granted tenant-requested rent deferrals relating to approximately
$18.5 million of rent, which represents 10% of our annualized base rent as of December 31, 2020. These rent deferrals were negotiated on a tenant-
by-tenant basis and, in general, allow a tenant to defer all or a portion of its rent for 2020, with all of the deferred rent to be paid to us pursuant to a
schedule that generally extends up to 24 months from the original due date of the deferred rent.
It is possible that the existing deterioration, or further deterioration, in our tenants’ ability to operate their businesses caused by COVID-19 or
otherwise, will cause our tenants to be unable or unwilling to meet their contractual obligations to us, including the payment of rent (including
deferred rent) or to request further rent deferrals or other forms of rent relief, such as rent reductions. Given the significant uncertainty around the
duration and severity of the impact of COVID-19, we are unable to predict the impact it will have on our tenants’ continued ability to pay rent
(including deferred rent). Therefore, information provided regarding October rent collections should not serve as an indication of expected future rent
collections.
46
The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain and cannot be
predicted with confidence, including the duration of the outbreak, geographic and industry variations in COVID-19’s impact and actions taken to
contain COVID-19. The impact of COVID-19 on our tenants and properties will likely have a continuing adverse impact on us, particularly if tenants
are unable to meet their rental payment obligations to us (including the payment of deferred rent), our vacancy rate increases or if we choose to
grant further rent deferrals or other concessions.
Liquidity and Capital Resources
As of December 31, 2020, we had $2.4 billion of net investments in our investment portfolio, consisting of investments in 1,181 properties
(inclusive of two undeveloped land parcels and 115 properties which secure our investments in mortgage loans receivable), with annualized base
rent of $184.0 million. Substantially all of our cash from operations is generated by our investment portfolio.
Our liquidity requirements for operating our Company consist primarily of the funds necessary to pay principal and interest payments on our
outstanding indebtedness, and the general and administrative expenses of operating our business and managing our portfolio. The occupancy level
of our portfolio is high, just below 100% and because of substantially all of our leases are triple-net, our tenants are generally responsible for the
maintenance, insurance and property taxes associated with our properties. When a property becomes vacant because the existing tenant has
vacated the property due to default or at the expiration of the lease term the existing tenant did not renew their lease and we had not re-leased the
property, we incur the property costs not paid by the tenant, as well as those property costs accruing during the time it takes to locate a substitute
tenant or to sell the property. As of December 31, 2020, only three properties were vacant, less than 1% of our portfolio, and all remaining properties
were subject to a lease (excluding two undeveloped land parcels), which represents a 99.7% occupancy rate. We expect to incur some property
costs from time to time in periods during which properties that become vacant are being marketed for lease or sale. In addition, we may recognize
an expense for certain property costs, such as real estate taxes billed in arrears, if we believe the tenant is likely to vacate the property before
making payment on those obligations. The amount of such property costs can vary quarter-to-quarter based on the timing of property vacancies and
the level of underperforming properties; however, we do not expect that such costs will be significant to our operations.
We intend to continue to grow through additional investments in stand-alone single tenant properties. To accomplish this objective, we seek to
acquire real estate with a combination of debt and equity capital and with cash from operations that we do not distribute to our stockholders. When
we sell properties, we generally reinvest the cash proceeds from our sales in new property acquisitions. Our short-term liquidity requirements also
include the funding needs associated with nine properties where we have agreed to provide construction financing or reimburse the tenant for
certain development, construction and renovation costs in exchange for specified contractually payments of interest or increased rent that generally
increases in proportion with our level of funding. As of December 31, 2020, we had agreed to provide construction financing or reimburse the tenant
for certain development, construction and renovation costs in an aggregate amount of $61.9 million, and, as of such date, we had funded $45.6
million of this commitment. We expect to fund the balance of such commitment by December 31, 2021.
Additionally, as of February 19, 2021, we were under contract to acquire 21 properties with an aggregate purchase price of $51.9 million,
subject to completion of our due diligence procedures and satisfaction of customary closing conditions. We expect to meet our short-term liquidity
requirements, including our investment in potential future single tenant properties, primarily with our cash and cash equivalents, net cash from
operating activities and borrowings under the Revolving Credit Facility, and potentially through proceeds generated from our ATM program which
has approximately $170.7 million remaining.
Our long-term liquidity requirements consist primarily of funds necessary to acquire additional properties and repay indebtedness. We expect
to meet our long-term liquidity requirements through various sources of capital, including net cash from operating activities, borrowings under our
revolving credit and term loan facilities, future financings, sale of common stock under our ATM Program, proceeds from the sale of the properties in
our portfolio and other secured and unsecured borrowings (including potential issuances under the Master Trust Funding Program). However, at any
point in time, there may be a number of factors that could have a material and adverse effect on our ability to access these capital sources, including
unfavorable conditions in the overall equity and credit markets, our level of leverage, the portion of our portfolio that is unencumbered, borrowing
restrictions imposed by our existing debt agreements, general market conditions for real estate and potentially REITs specifically, our
47
operating performance, our liquidity and general market perceptions about us. The success of our business strategy will depend, to a significant
degree, on our ability to access these various capital sources to fund our investment in single tenant properties and thereby grow our cash flows.
An additional liquidity need is funding the required level of distributions that are among the requirements for us to continue to qualify for
taxation as a REIT. During the year ended December 31, 2020, our board of directors declared total cash distributions of $0.93 per share of
common stock. Holders of OP Units are entitled to distributions per unit equivalent to those paid by us per share of common stock. During the year
ended December 31, 2020, we paid $86.5 million of distributions to common stockholders and OP Unit holders, and as of December 31, 2020, we
recorded $25.7 million of distributions payable to common stockholders and OP Unit holders. To continue to qualify for taxation as a REIT, we must
make distributions to our stockholders aggregating annually at least 90% of our REIT taxable income, determined without regard to the dividends
paid deduction and excluding any net capital gain. As a result of this requirement, we cannot rely on retained earnings to fund our business needs to
the same extent as other entities that are not REITs. If we do not have sufficient funds available to us from our operations to fund our business
needs, we will need to find alternative ways to fund those needs. Such alternatives may include, among other things, selling properties (whether or
not the sales price is optimal or otherwise meets our strategic long-term objectives), incurring additional indebtedness or issuing equity securities in
public or private transactions. The availability and attractiveness of the terms of these potential sources of financing cannot be assured.
Generally, our short-term debt capital is provided through our use of our Revolving Credit Facility. We manage our long-term leverage position
through the issuance of long-term fixed-rate debt on a secured or unsecured basis. Generally, we will seek to issue long-term debt on an unsecured
basis as we believe this facilitates greater flexibility in our management of our existing portfolio and our ability to retain optionality in our overall
financing and growth strategy. By seeking to match the expected cash inflows from our long-term leases with the expected cash outflows necessary
to service for our long-term debt, we seek to "lock in," for as long as is economically feasible, the expected positive difference between our
scheduled cash inflows on our leases and the cash outflows on our debt obligations. In this way, we seek to reduce the risk that increases in interest
rates would adversely impact our results of operations. Our ability to execute leases that contain annual rent escalations also contributes to our
ability to manage the risk of a rising interest rate environment. We use various financial instruments designed to mitigate the impact of interest rate
fluctuations on our cash flows and earnings, including hedging strategies such as interest rate swaps and caps, depending on our analysis of the
interest rate environment and the costs and risks of such strategies. Although we are not required to maintain a particular leverage ratio and may not
be able to do so, we generally consider that, over time, a level of net debt (which includes recourse and non-recourse borrowings and any
outstanding preferred stock less unrestricted cash and cash held for the benefit of lenders) that is less than six times our annualized adjusted
EBITDAre is prudent for the real estate company like ours.
As of December 31, 2020, all of our long-term debt was fixed-rate debt or was effectively converted to a fixed-rate for the term of the debt
though hedging strategies and our weighted average debt maturity was 4.7 years. As we continue to invest in real estate properties and grow our
real estate portfolio, we intend to manage our long-term debt maturities to reduce the risk that a significant amount of our debt will mature in any
single year in the future.
Over time, we may access additional long-term debt capital with future debt issuances through our Master Trust Funding Program, although
we have no plans to currently do so. Future sources of debt capital may also include term borrowings from insurance companies, banks and other
sources, mortgage financing of a single-asset or portfolio of assets and CMBS borrowings. These sources of debt capital may offer us the
opportunity to lower our cost of funding and further diversify our sources of debt capital. Over time, we may choose to issue preferred equity as a
part of our overall strategy for funding our investment objectives and growth goals. As our outstanding debt matures, we may refinance it as it comes
due or choose to repay it using cash and cash equivalents or borrowings under the Revolving Credit Facility. Management believes that the cash
generated by our operations, together with our cash and cash equivalents at December 31, 2020, our borrowing availability under the Revolving
Credit Facility and our potential access to additional sources of capital, will be sufficient to fund our operations for the foreseeable future and allow
us to acquire the real estate for which we currently have made commitments.
48
Description of Certain Debt
The following table summarizes our outstanding indebtedness as of December 31, 2020 and 2019:
(in thousands)
Unsecured term loans:
April 2019 Term Loan
November 2019 Term Loan
Revolving Credit Facility
Secured borrowings:
Series 2017-1 Notes
Total principal outstanding
Maturity Date
December 31, 2020
December 31,
2019
December 31, 2020
December 31,
2019
Principal Outstanding
Weighted Average Interest Rate
(1)
April 2024
November 2026
April 2023
June 2047
$
$
200,000 $
430,000
18,000
173,193
821,193 $
200,000
250,000
46,000
239,102
735,102
3.3%
3.0%
1.4%
4.2%
3.3%
3.3%
3.1%
3.1%
4.2%
3.5%
_______________________________________________________________
(1)
Interest rates are presented after giving effect to our interest rate swap agreements, where applicable.
Unsecured Revolving Credit Facility and April 2019 Term Loan
Through our Operating Partnership, we are party to an Amended Credit Agreement with a group of lenders, which provides for revolving loans
of up to $400.0 million (the "Revolving Credit Facility") and up to an additional $200.0 million in term loans (the "April 2019 Term Loan").
The Revolving Credit Facility matures on April 12, 2023, with an extension option of up to one year exercisable by the Operating Partnership,
subject to certain conditions, and the April 2019 Term Loan matures on April 12, 2024. The loans under each of the Revolving Credit Facility and the
April 2019 Term Loan initially bear interest at an annual rate of applicable LIBOR plus the applicable margin (which applicable margin varies
between the Revolving Credit Facility and the April 2019 Term Loan). The applicable LIBOR is the rate with a term equivalent to the interest period
applicable to the relevant borrowing. The applicable margin initially is a spread set according to a leverage-based pricing grid. At the Operating
Partnership's election, on and after receipt of an investment grade corporate credit rating from S&P or Moody's, the applicable margin will be a
spread set according to the credit ratings provided by S&P and/or Moody's. Each of the Revolving Credit Facility and the April 2019 Term Loan is
freely pre-payable at any time and is mandatorily payable if borrowings exceed the borrowing base or the revolving facility limit. The Operating
Partnership may re-borrow amounts paid down on the Revolving Credit Facility but not on the April 2019 Term Loan. The Operating Partnership is
required to pay revolving credit fees throughout the term of the Revolving Credit Agreement based upon its usage of the Revolving Credit Facility, at
a rate which depends on its usage of such facility during the period before we receive an investment grade corporate credit rating from S&P or
Moody's, and which rate shall be based on the corporate credit rating from S&P and/or Moody's after the time, if applicable, we receive such a
rating. The Amended Credit Agreement has an accordion feature to increase, subject to certain conditions, the maximum availability of credit (either
through increased revolving commitments or additional term loans) by up to $200.0 million.
The Operating Partnership is the borrower under the Amended Credit Agreement, and we and each of the subsidiaries of the Operating
Partnership that owns a direct or indirect interest in an eligible real property asset are guarantors under the Amended Credit Agreement.
Under the terms of the Amended Credit Agreement, we are subject to various restrictive financial and nonfinancial covenants which, among
other things, require us to maintain certain leverage ratios, cash flow and debt service coverage ratios, secured borrowing ratios and a minimum
level of tangible net worth.
The Amended Credit Agreement restricts our ability to pay distributions to our stockholders under certain circumstances. However, we may
make distributions to the extent necessary to maintain our qualification as a REIT under the Code. The Amended Credit Agreement contains certain
additional covenants that, subject to exceptions, limit or restrict our incurrence of indebtedness and liens, disposition of assets, transactions with
affiliates, mergers and fundamental changes, modification of organizational documents, changes to fiscal periods, making of investments, negative
pledge clauses and lines of business and REIT qualification.
49
November 2019 Term Loan
On November 26, 2019, we, through our Operating Partnership, entered into a $430.0 million term loan credit facility (the "November 2019
Term Loan") with a group of lenders. The November 2019 Term Loan provides for term loans to be drawn up to an aggregate amount of $430.0
million with a maturity of November 26, 2026. The loans under the November 2019 Term Loan are available to be drawn in up to three draws during
the six-month period beginning on November 26, 2019. In December 2019, we made an initial borrowing of $250.0 million available under the
November 2019 Term Loan and in March 2020 we borrowed the remaining $180.0 million available under the November 2019 Term Loan.
Borrowings under the November 2019 Term Loan bear interest at an annual rate of applicable LIBOR plus the applicable margin. The
applicable LIBOR will be the rate with a term equivalent to the interest period applicable to the relevant borrowing. The applicable margin will initially
be a spread set according to a leverage-based pricing grid. At the Operating Partnership's irrevocable election, on and after receipt of an investment
grade corporate credit rating from S&P or Moody's, the applicable margin will be a spread set according to our corporate credit ratings provided by
S&P and/or Moody's. The November 2019 Term Loan is pre-payable at any time by the Operating Partnership, provided, that if the loans under the
November 2019 Term Loan are repaid on or before November 26, 2021, they are subject to a one percent prepayment premium. After November
26, 2021 the loans may be repaid without penalty. The November 2019 Term Loan has an accordion feature to increase, subject to certain
conditions, the maximum availability of the facility up to an aggregate of $500 million.
The Operating Partnership is the borrower under the November 2019 Term Loan, and our Company and each of its subsidiaries that owns a
direct or indirect interest in an eligible real property asset are guarantors under the facility. Under the terms of the November 2019 Term Loan, we
are subject to various restrictive financial and nonfinancial covenants which, among other things, require us to maintain certain leverage ratios, cash
flow and debt service coverage ratios, secured borrowing ratios and a minimum level of tangible net worth.
The November 2019 Term Loan restricts our ability to pay distributions to our stockholders under certain circumstances. However, we may
make distributions to the extent necessary to maintain our qualification as a REIT under the Code. The November 2019 Term Loan contains certain
additional covenants that, subject to exceptions, limit or restrict our incurrence of indebtedness and liens, disposition of assets, transactions with
affiliates, mergers and fundamental changes, modification of organizational documents, changes to fiscal periods, making of investments, negative
pledge clauses and lines of business and REIT qualification.
Master Trust Funding Program
SCF RC Funding I LLC, SCF RC Funding II LLC and SCF RC Funding III LLC (collectively, the "Master Trust Issuers"), all of which are
indirect wholly-owned subsidiaries of the Operating Partnership, have issued net-lease mortgage notes payable (the "Notes") with an aggregate
outstanding gross principal balance of $173.2 million as of December 31, 2020. The Notes are secured by all assets owned by the Master Trust
Issuers. We provide property management services with respect to the mortgaged properties owned by the Master Trust Issuers and service the
related leases pursuant to an amended and restated property management and servicing agreement, dated as of July 11, 2017, among the Master
Trust Issuers, the Operating Partnership (as property manager and as special servicer), Midland Loan Services, a division of PNC Bank, National
Association, (as back-up manager) and Citibank, N.A. (as indenture trustee).
Beginning in 2016, two series of Notes, each comprised of two classes, were issued under the program: (i) Notes originally issued by SCF RC
Funding I LLC and SCF RC Funding II LLC (the "Series 2016-1 Notes"), which were repaid in full in November 2019 and (ii) Notes originally issued
by SCF RC Funding I LLC, SCF RC Funding II LLC and SCF RC Funding III LLC (the "Series 2017-1 Notes"), with an aggregate outstanding
principal balance of $173.2 million as of December 31, 2020. The Notes are the joint obligations of all Master Trust Issuers.
Notes issued under our Master Trust Funding Program are secured by a lien on all of the property owned by the Master Trust Issuers and the
related leases. A substantial portion of our real estate investment portfolio serves as collateral for borrowings outstanding under our Master Trust
Funding Program. As of December 31, 2020, we had pledged 258 properties, with a net investment amount of $399.7 million, under the Master
Trust Funding Program. The agreement governing our Master Trust Funding Program permits substitution of real estate collateral from time to time,
subject to certain conditions.
50
Absent a plan to issue additional long-term debt through the Master Trust Funding Program, we are not required to add assets to, or
substitute collateral in, the existing collateral pool. We can voluntarily elect to substitute assets in the collateral pool, subject to meeting prescribed
conditions that are designed to protect the collateral pool by requiring the substitute assets to be of equal or greater measure in attributes such as:
the asset's fair value, monthly rent payments, remaining lease term and weighted average coverage ratios. In addition, we can sell underperforming
assets and reinvest the proceeds in new properties. Any substitutions and sales are subject to an overall limitation of 35% of the collateral pool
which is typically reset at each new issuance unless the substitution or sale is credit- or risk-based, in which case there are no limitations.
A significant portion of our cash flows are generated by the special purpose entities comprising our Master Trust Funding Program. For the
three months ended December 31, 2020, excess cash flow from the Master Trust Funding Program, after payment of debt service and servicing and
trustee expenses, totaled $5.1 million on cash collections of $8.5 million, which represents a debt service coverage ratio (as defined in the program
documents) of 2.27x. If at any time the monthly debt service coverage ratio (as defined in the program documents) generated by the collateral pool
is less than or equal to 1.25x, excess cash flow from the Master Trust Funding Program entities will be deposited into a reserve account to be used
for payments to be made on the Notes, to the extent there is a shortfall; if at any time the three month average debt service coverage ratio
generated by the collateral pool is less than or equal to 1.15x, excess cash flow from the Master Trust Funding Program entities will be applied to an
early amortization of the Notes. If cash generated by our properties held in the Master Trust Funding Program is required to be held in a reserve
account or applied to an early amortization of the Notes, it would reduce the amount of cash available to us and could limit or eliminate our ability to
make distributions to our common stockholders.
The Notes require monthly payments of principal and interest. The payment of principal and interest on any Class B Notes is subordinate to
the payment of principal and interest on any Class A Notes. The Series 2017-1 Notes mature in June 2047 and have a weighted average interest
rate of 4.19% as of December 31, 2020. However, the anticipated repayment date for the Series 2017-1 Notes is June 2024, and if the notes are not
repaid in full on or before such anticipated repayment date, additional interest will begin to accrue on the notes.
The Series 2017-1 Notes may be voluntarily prepaid, in whole or in part, at any time on or after the date that is 31 months prior to the
anticipated repayment date in June 2024 without the payment of a make whole amount. Voluntary prepayments may be made before 31 months
prior to the anticipated repayment date but will be subject to the payment of a make whole amount.
An event of default will occur under the Master Trust Funding Program if, among other things, the Master Trust Issuers fail to pay interest or
principal on the Notes when due, materially default in complying with the material covenants contained in the documents evidencing the Notes or the
mortgages on the mortgaged property collateral or if a bankruptcy or other insolvency event occurs. Under the master trust indenture, we have a
number of Master Trust Issuer covenants including requirements to pay any taxes and other charges levied or imposed upon the Master Trust
Issuers and to comply with specified insurance requirements. We are also required to ensure that all uses and operations on or of our properties
comply in all material respects with all applicable environmental laws. As of December 31, 2020, we were in material compliance with all such
covenants.
As of December 31, 2020, scheduled principal repayments on the Notes issued under the Master Trust Funding Program during 2021 were
$4.1 million. We expect to meet these repayment requirements primarily through our net cash from operating activities.
Cash Flows
Comparison of the years ended December 31, 2020 and 2019
As of December 31, 2020, we had $26.6 million of cash and cash equivalents and $6.4 million of restricted cash as compared to $8.3 million
and $13.0 million, respectively, as of December 31, 2019.
Cash Flows for the year ended December 31, 2020
During the year ended December 31, 2020, net cash provided by operating activities was $99.4 million as compared $88.6 million during the
same period in 2019, an increase of approximately $10.8 million. Our cash flows from operating activities primarily depend on the occupancy of our
portfolio, the rental rates specified in our leases, and the collectability of such rent and our operating expenses and other general and administrative
costs. Cash
51
inflows during 2020 related to net income adjusted for non-cash items of $107.2 million (net income of $42.5 million adjusted for non-cash items,
including adding back depreciation and amortization of tangible, intangible and right-of-use real estate assets, amortization of deferred financing
costs and other assets, loss on repayment of secured borrowings, provision for impairment of real estate, and subtracting gains on dispositions of
real estate, net, straight-line rent receivable, equity-based compensation expense and adjustment to rental revenue for tenant credit, which in
aggregate net to an addition of $64.7 million) and an increase in accrued liabilities and other payables of $4.2 million. These net cash inflows were
offset by an outflow related to the increase in rent receivables, prepaid expenses and other assets of $12.1 million. The increase in net cash
provided by operating activities was primarily by the increased size of our investment portfolio.
Net cash used in investing activities during the year ended December 31, 2020 was $545.5 million as compared to $607.8 million in the same
period in 2019, a decrease of approximately $62.3 million. Our net cash used in investing activities is generally used to fund our investments in real
estate, including capital expenditures, the development of our construction in progress and investments in loans receivable, offset by cash provided
from the disposition of real estate and principal collections on our loans and direct financing lease receivables. The cash used in investing activities
during 2020 included $541.3 million to fund investments in real estate, including capital expenditures, $14.4 million to fund construction in progress,
$60.5 million of investments in loans receivable and $12.9 million paid to tenants as lease incentives. These cash outflows were partially offset by
$82.9 million of proceeds from sales of investments, net of disposition costs and $0.3 million of principal collections on our loans and direct financing
lease receivables. The increase in net cash used in investing was primarily due to our increased level of investments in real estate and loans
receivables offset by increased asset sales.
Net cash provided by financing activities was $457.8 million during the year ended December 31, 2020 as compared to $524.4 million in the
same period in 2019, a decrease of approximately $66.6 million. Our net cash provided by financing activities in 2020 related to cash inflows of
$461.0 million from the issuance of common stock in follow-on equity offerings and through our ATM Program, $87.0 million of borrowings under the
Revolving Credit Facility and $180.0 million of borrowings under the November 2019 Term Loan. These cash inflows were partially offset by a
$65.9 million outflow related to principal payments on our Master Trust Funding notes, $115.0 million of repayments on the Revolving Credit Facility,
the payment of $86.5 million in dividends, $2.8 million of offering costs paid related to our follow-on offerings and the ATM Program and the payment
of deferred financing costs of approximately $25,000. The decrease in net cash provided by financing activities was due to our net borrowings being
reduced during the year by nearly $100 million and increased dividends of approximately $22.6 million, offset by our increase proceeds from the
issuance of stock of approximately $50 million.
Cash Flows for the year ended December 31, 2019
During the year ended December 31, 2019, net cash provided by operating activities was $88.6 million. Our cash flows from operating
activities primarily depend on the occupancy of our portfolio, the rental rates specified in our leases, and the collectability of such rent and our
operating expenses and other general and administrative costs. Cash inflows related to net income adjusted for non-cash items of $86.1 million (net
income of $48.0 million adjusted for non-cash items, including depreciation and amortization of tangible, intangible and right-of-use real estate
assets, amortization of deferred financing costs and other assets, loss on repurchase of secured borrowings, provision for impairment of real estate,
gains on dispositions of real estate, net, straight-line rent receivable, equity-based compensation expense and adjustment to rental revenue for
tenant credit, of $38.1 million), an increase in accrued liabilities and other payables of $1.2 million and a decrease in rent receivables, prepaid
expenses and other assets of $1.2 million.
Net cash used in investing activities during the year ended December 31, 2019 was $607.8 million. Our net cash used in investing activities is
generally used to fund our investments in real estate, including capital expenditures, the development of our construction in progress and
investments in loans receivable, offset by cash provided from the disposition of real estate and principal collections on our loans and direct financing
lease receivables. The cash used in investing activities included $570.0 million to fund investments in real estate, including capital expenditures,
$17.9 million to fund construction in progress, $94.6 million of investments in loans receivable and $2.1 million paid to tenants as lease incentives.
These cash outflows were partially offset by $66.8 million of proceeds from sales of investments, net of disposition costs and $9.5 million of principal
collections on our direct financing lease receivables.
Net cash provided by financing activities of $524.4 million million during the year ended December 31, 2019 related to cash inflows of
$411.6 million from the issuance of common stock in our follow-on offering and through
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our ATM program, $459.0 million of borrowings under the Revolving Credit Facility, $450.0 million of combined borrowings under the April 2019
Term Loan and November 2019 Term Loan and $1.7 million of principal collected on repurchased Master Trust Funding Notes. These cash inflows
were partially offset by a net $277.4 million outflow related to principal payments and the repurchase and subsequent repayment of Master Trust
Funding notes, payment of deferred financing costs of $6.1 million related to the Amended Credit Agreement, $447.0 million of repayments on the
Revolving Credit Facility, the payment of $63.9 million in dividends and $1.8 million of offering costs related to our follow-on offering and the ATM
Program.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements as of December 31, 2020.
Contractual Obligations
The following table provides information with respect to our commitments as of December 31, 2020:
(1)
(in thousands)
Secured Borrowings—Principal
Secured Borrowings—Fixed Interest
Unsecured Term Loans
Revolving Credit Facility
Tenant Construction Financing and Reimbursement
Obligations
Operating Lease Obligations
Total
(2)
(3)
Total
2021
Payment due by period
2022-2023
2024-2025
Thereafter
$
$
173,193 $
24,372
630,000
18,000
16,264
20,539
882,368 $
4,083 $
7,183
—
—
16,264
1,471
29,002 $
8,804 $
13,844
—
18,000
—
2,621
43,269 $
160,305 $
3,345
200,000
—
—
1,885
365,535 $
—
—
430,000
—
—
14,562
444,562
_________________________________________________________
(1)
Includes interest payments on outstanding indebtedness issued under our Master Trust Funding Program through the anticipated repayment
dates.
Includes obligations to reimburse certain of our tenants for construction costs that they incur in connection with construction at our properties
in exchange for contractually-specified rent that generally increases proportionally with our funding.
Includes of $17.5 million rental payments due under ground lease arrangements where our tenants are directly responsible for payment.
(2)
(3)
Additionally, we may enter into commitments to purchase goods and services in connection with the operation of our business. These
commitments generally have terms of one-year or less and reflect expenditure levels comparable to our historical expenditures, as adjusted for our
growth.
We have made an election to be taxed as a REIT for federal income tax purposes beginning with our taxable year ended December 31, 2018;
accordingly, we generally will not be subject to federal income tax for the year ended December 31, 2020, if we distribute all of our REIT taxable
income, determined without regard to the dividends paid deduction, to our stockholders.
Critical Accounting Policies and Estimates
Our accounting policies are determined in accordance with GAAP. The preparation of our financial statements requires us to make estimates
and assumptions that are subjective in nature and, as a result, our actual results could differ materially from our estimates. Estimates and
assumptions include, among other things, subjective judgments regarding the fair values and useful lives of our properties for depreciation and lease
classification purposes, the collectability of receivables and asset impairment analysis. Set forth below are the more critical accounting policies that
require management judgment and estimates in the preparation of our consolidated financial statements.
Real Estate Investments
Investments in real estate are carried at cost less accumulated depreciation and impairment losses, if any. The cost of investments in real
estate reflects their purchase price or development cost. We evaluate each
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acquisition transaction to determine whether the acquired asset meets the definition of a business. Under Accounting Standards Update ("ASU")
2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, an acquisition does not qualify as a business when there is no
substantive process acquired or substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets or
the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without
significant cost, effort or delay. Transaction costs related to acquisitions that are asset acquisitions are capitalized as part of the cost basis of the
acquired assets, while transaction costs for acquisitions that are deemed to be acquisitions of a business are expensed as incurred. Improvements
and replacements are capitalized when they extend the useful life or improve the productive capacity of the asset. Costs of repairs and maintenance
are expensed as incurred.
We allocate the purchase price of acquired properties accounted for as asset acquisitions to tangible and identifiable intangible assets or
liabilities based on their relative fair values. Tangible assets may include land, site improvements and buildings. Intangible assets may include the
value of in-place leases and above- and below-market leases and other identifiable intangible assets or liabilities based on lease or property specific
characteristics.
We incur various costs in the leasing and development of our properties. Amounts paid to tenants that incentivize them to extend or otherwise
amend an existing lease or to sign a new lease agreement are capitalized to lease incentive on our consolidated balance sheets. Tenant
improvements are capitalized to building and improvements within our consolidated balance sheets. Costs incurred which are directly related to
properties under development, which include pre-construction costs essential to the development of the property, development costs, construction
costs, interest costs and real estate taxes and insurance, are capitalized during the period of development as construction in progress. After the
determination is made to capitalize a cost, it is allocated to the specific component of a project that benefited. Determination of when a development
project commences and capitalization begins, and when a development project has reached substantial completion and is available for occupancy
and capitalization must cease, involves a degree of judgment. We do not engage in speculative real estate development. We do, however,
opportunistically agree to reimburse certain of our tenants for development costs at our properties in exchange for contractually specified rent that
generally increases proportionally with our funding.
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 based on the specific characteristics of each tenant's lease. We estimate the cost to execute leases with terms similar to the
remaining lease terms of the in-place leases, including leasing commissions, legal and other related expenses. Factors we consider in this analysis
include an estimate of the carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar
leases. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses, and estimates of lost rentals at market
rates during the expected lease-up periods, which primarily range from six to 12 months. The fair value of above- or below-market leases is
recorded based on the net present value (using a discount rate that reflects the risks associated with the leases acquired) 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 non-cancelable term of the lease including any below-market fixed rate renewal options for below-market leases.
In making estimates of fair values for purposes of allocating purchase price, we use a number of sources, including real estate valuations
prepared by independent valuation firms. We also consider information and other factors including market conditions, the industry that the tenant
operates in, characteristics of the real estate, e.g., location, size, demographics, value and comparative rental rates, tenant credit profile and the
importance of the location of the real estate to the operations of the tenant's business. Additionally, we consider information obtained about each
property as a result of our pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible
assets acquired. We use the information obtained as a result of our pre-acquisition due diligence as part of our consideration of the accounting
standard governing asset retirement obligations and, when necessary, will record an asset retirement obligation as part of the purchase price
allocation.
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 and fair value less estimated selling costs. Real estate investments
54
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 our operations and financial results, the operations of such real estate
investments would be presented as discontinued operations in the consolidated statements of operations for all applicable periods.
Allowance for Loan Losses
Prior to the adoption of ASC Topic 326, Financial Instruments - Credit Losses (“ASC 326”), we periodically evaluated the collectability of our
loans receivable, including accrued interest, by analyzing the underlying property level economics and trends, collateral value and quality and other
relevant factors in determining the adequacy of its allowance for loan losses. A loan was determined to be impaired when, in management’s
judgment based on current information and events, it was probable that we would be unable to collect all amounts due according to the contractual
terms of the loan agreement. Specific allowances for loan losses were provided for impaired loans on an individual loan basis in the amount by
which the carrying value exceeded the estimated fair value of the underlying collateral less disposition costs. As of December 31, 2019, we had no
allowance for loan losses recorded in our consolidated financial statements.
On January 1, 2020, we adopted ASC 326 on a prospective basis. ASC 326 changed how we account for credit losses for all of our loans
receivable and direct financing lease receivables. ASC 326 replaces the current “incurred loss” model with an “expected loss” model that requires
consideration of a broader range of information than used under the incurred losses model. Upon adoption of ASC 326, we recorded an initial
allowance for loan losses of $0.2 million as of January 1, 2020, netted against loans and direct financing receivables on our consolidated balance
sheet. Under ASC 326, we are required to re-evaluate the expected loss of our loans and direct financing lease receivable portfolio at each balance
sheet date. As of December 31, 2020, we recorded an allowance for loan losses of $1.0 million. Changes in our allowance for loan losses are
presented within provision for loan losses in our consolidated statements of operations.
In connection with our adoption of ASC 326 on January 1, 2020, we implemented a new process including the use of loan loss forecasting
models. We have used the loan loss forecasting model for estimating expected lifetime credit losses, at the individual asset level, for our loans and
direct financing lease receivable portfolio. The forecasting model used is the probability weighted expected cash flow method, depending on the type
of loan and global assumptions.
We use a real estate loss estimate model (“RELEM”) which estimates losses on our loans and direct financing lease receivable portfolio, for
purposes of calculating allowances for loan losses. The RELEM allows us to refine (on an ongoing basis) the expected loss estimate by
incorporating loan specific assumptions as necessary, such as anticipated funding, interest payments, estimated extensions and estimated loan
repayment/refinancing at maturity to estimate cash flows over the life of the loan. The model also incorporates assumptions related to underlying
collateral values, various loss scenarios, and predicted losses to estimate expected losses. Our specific loan-level inputs include loan-to-stabilized-
value “LTV” and debt service coverage ratio metrics, as well as principal balances, property type, location, coupon, origination year, term,
subordination, expected repayment dates and future funding’s. We categorize the results by LTV range, which we consider the most significant
indicator of credit quality for our loans and direct financing lease receivables. A lower LTV ratio typically indicates a lower credit loss risk.
Real estate lending has several risks that need to be considered. There is the potential for changes in local real estate conditions and
subjectivity of real estate valuations. In addition, overall economic conditions may impact the borrowers’ financial condition. Adverse economic
conditions such as high unemployment levels, interest rates, tax rates and fuel and energy costs may have an impact on the results of operations
and financial conditions of borrowers.
We also evaluate each loan and direct financing lease receivable measured at amortized cost for credit deterioration at least quarterly. Credit
deterioration occurs when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan or
direct financing lease receivables.
Our allowance for loan losses is adjusted to reflect our estimation of the current and future economic conditions that impact the performance
of the real estate assets securing our loans. These estimations include various macroeconomic factors impacting the likelihood and magnitude of
potential credit losses for our loans and direct financing leases during their anticipated term.
55
Impairment of Long-Lived Assets
If circumstances indicate that the carrying value of a property may not be recoverable, we review the asset 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 impairment exists due to the inability to recover the carrying value of a
property, an impairment loss is recorded 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 is the adjustment to fair value less estimated cost to dispose of the asset.
Impairment assessments have a direct impact on the consolidated statements of operations, because recording an impairment loss results in an
immediate negative adjustment to the consolidated statements of operations.
Adjustment to Rental Revenue for Tenant Credit/Allowance for Doubtful Accounts
We continually review receivables related to rent and unbilled rent receivables 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. Prior to January 1, 2019, if the collectability of a receivable was in doubt, the accounts
receivable and straight-line rent receivable balances were reduced by an allowance for doubtful accounts on the consolidated balance sheets or a
direct write-off of the receivable was recorded in the consolidated statements of operations. The provision for doubtful accounts was included in
property expenses in our consolidated statements of operations. If the accounts receivable balance or straight-line rent receivable balance was
subsequently deemed to be uncollectible, such receivable amounts were written-off to the allowance for doubtful accounts.
As of January 1, 2019, if the assessment of the collectability of substantially all payments due under a lease changes from probable to not
probable, any difference between the rental revenue recognized to date and the lease payments that have been collected is recognized as a current
period adjustment to rental revenue in the consolidated statements of operations.
Derivative Instruments
In the normal course of business, we use derivative financial instruments, which may include interest rate swaps, caps, options, floors and
other interest rate derivative contracts, to protect us against adverse fluctuations in interest rates by reducing our exposure to variability in cash
flows on a portion of our floating-rate debt. Instruments that meet these hedging criteria are formally designated as hedges at the inception of the
derivative contract. We record all derivatives on the consolidated balance sheets at fair value. The accounting for changes in the fair value of
derivatives depends on the intended use of the derivative, whether we have 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 variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow
hedges. 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. We may also enter into derivative contracts that are intended to
economically hedge certain risk, even though hedge accounting does not apply or we elect not to apply hedge accounting.
The accounting for subsequent changes in the fair value of these derivatives depends on whether each has been designed and qualifies for
hedge accounting treatment. If a derivative is designated and qualifies for cash flow hedge accounting treatment, the change in the estimated fair
value of the derivative is recorded in other comprehensive income (loss) in the consolidated statements of comprehensive income to the extent that
it is effective. Any ineffective portion of a change in derivative fair value is immediately recorded in earnings. If we elect not to apply hedge
accounting treatment (or for derivatives that do not qualify as hedges), any change in the fair value of these derivative instruments is recognized
immediately in gains (losses) on derivative instruments in the consolidated statements of operations. We do not intend to use derivative instruments
for trading or speculative purposes.
56
Revenue Recognition
Our rental revenue is primarily related to rent received from tenants. Rent from tenants is recorded in accordance with the terms of each lease
on a straight-line basis over the non-cancellable initial term of the lease from the later of the date of the commencement of the lease and the date of
acquisition of the property subject to the lease. Rental revenue recognition begins when the tenant controls the space and continues through the
term of the related lease. Because substantially all of the leases provide for rental increases at specified intervals, we record a straight-line rent
receivable and recognize revenue on a straight-line basis through the expiration of the non-cancellable term of the lease. We take into account
whether the collectability of rents is reasonably assured in determining the amount of straight-line rent to record.
We defer rental revenue related to lease payments received from tenants in advance of their due dates. These amounts are presented within
accrued liabilities and other payables on our consolidated balance sheets.
Certain of our properties are subject to leases that provide for contingent rent based on a percentage of the tenant's gross sales. For these
leases, we recognize contingent rental revenue when the threshold upon which the contingent lease payment is based is actually reached.
Equity-Based Compensation
From time to time, we grant shares of restricted common stock and restricted share units ("RSUs") to our directors, executive officers and
other employees that vest over multiple periods, subject to the recipient's continued service. Additionally, we also granted performance-based RSUs
to our executive officers, the final number of which is determined based on market and subjective performance conditions and which vest over a
multi-year period, subject to the recipient's continued service. We account for the restricted common stock and RSUs in accordance with ASC 718,
Compensation - Stock Compensation, which requires that such compensation be recognized in the financial statements based on their estimated
grant-date fair value. The value of such awards is recognized as compensation expense in general and administrative expenses in the
accompanying consolidated statements of operations over the requisite service periods. We recognize compensation expense for equity-based
compensation using the straight-line method based on the terms of the individual grant. Forfeitures of equity-based compensation awards, if any,
are recognized as they occur.
Variable Interest Entities
The FASB provides guidance for determining whether an entity is a variable interest entity (a "VIE"). VIEs are defined as entities in which
equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support. A VIE is required to be consolidated by its primary beneficiary, which is the party that
(i) has the power to control the activities that most significantly impact the VIE's economic performance and (ii) has the obligation to absorb losses,
or the right to receive benefits, of the VIE that could potentially be significant to the VIE.
Following the completion of the Formation Transactions, we concluded that the Operating Partnership is a VIE of which we are the primary
beneficiary, as we have the power to direct the activities that most significantly impact the economic performance of the Operating Partnership.
Substantially all of our assets and liabilities are held by the Operating Partnership. The assets and liabilities of the Operating Partnership are
consolidated and reported as assets and liabilities on our consolidated balance sheet as of December 31, 2020.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) establishing ASC
326, as amended by subsequent ASUs on the topic. ASU 2016-13 is effective for interim and annual reporting periods in fiscal years beginning after
December 15, 2019. We adopted this guidance on January 1, 2020 and recorded estimates of expected loss on its loans receivable portfolio
beginning on that date.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging
Activities (“ASU 2017-12”), which amends and simplifies existing guidance in order to allow companies to more accurately present the economic
effects of risk management activities in the financial statements. We adopted ASU 2017-12 while accounting for our interest rate swaps. As we did
not have other derivatives outstanding at time of adoption, no prior period adjustments were required. Pursuant to the provisions of
57
ASU 2017-12, we are no longer required to separately measure and recognize hedge ineffectiveness. Instead, we recognize the entire change in
the fair value of cash flow hedges included in the assessment of hedge effectiveness in other comprehensive (loss) income. The amounts recorded
in other comprehensive (loss) income will subsequently be reclassified to earnings when the hedged item affects earnings. The adoption of ASU
2017-12 did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Changes to the Disclosure Requirements for Fair Value
Measurement (“ASU 2018-13”), which changes the disclosure requirements for fair value measurements by removing, adding and modifying certain
disclosures. ASU 2018-13 is effective for annual periods beginning after December 15, 2019, with early adoption permitted. We adopted this
guidance on January 1, 2020 and the adoption of ASU 2018-13 did not have a material impact on our related disclosures.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical
expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is
optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company has elected to apply
the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that
the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients
preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other
elections as applicable as additional changes in the market occur.
In April 2020, the Financial Accounting Standards Board ("FASB”) staff issued a question and answer document (the “Lease Modification
Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Under
existing lease guidance, the entity would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement
reached with the tenant, which would be accounted for under the lease modification framework, or if a lease concession was under the enforceable
rights and obligations that existed in the original lease, which would be accounted for outside the lease modification framework. The Lease
Modification Q&A provides entities with the option to elect to account for lease concessions as though the enforceable rights and obligations existed
in the original lease. This election is only available when total cash flows resulting from the modified lease are substantially similar to the cash flows
in the original lease. We made this election and account for rent deferrals by increasing our rent receivables as receivables accrue and continuing to
recognize income during the deferral period, resulting in $12.4 million of deferrals being recognized in rental revenues for the year ended
December 31, 2020 . Lease concessions or amendments other than rent deferrals are evaluated to determine if a substantive change to the
consideration in the original lease contract has occurred and should be accounted for as a lease modification. We continue to evaluate any amounts
recognized for collectability, regardless of whether accounted for as a lease modification or not, and record an adjustment to rental income for tenant
credit for amounts that are not probable of collection. For lease concessions granted in conjunction with the COVID-19 pandemic, we reviewed all
amounts recognized on a tenant-by-tenant basis for collectability.
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic
470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in
an Entity’s Own Equity” (“ASU 2020-06”). The guidance in ASU 2020-06 simplifies the accounting for convertible debt and convertible preferred
stock by removing the requirements to separately present certain conversion features in equity. In addition, the amendments in the ASU 2020-06
also simplify the guidance in ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must
be satisfied in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded
derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the
if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that
may be settled in cash or other assets. The amendments in ASU 2020-06 are effective for the Company for fiscal years beginning after December
15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The guidance must be adopted as of the
beginning of the fiscal year of adoption. The Company is currently evaluating the impact of this new guidance.
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Results of Operations
The following discusses our results of operations for the year ended December 31, 2020, as compared to our results of operations for the year
ended December 31, 2019. A discussion of the changes in our results of operations for the year ended December 31, 2019, as compared to our
results of operations for the year ended December 31, 2018 has been omitted from this Annual Report but may be found in "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Comparison of the years ended December 31,
2019 and 2018 in our annual report for the year ended December 31, 2019.
Comparison of the years ended December 31, 2020 and 2019
(dollar amounts in thousands)
Revenues:
Rental revenue
Interest income on loans and direct financing lease receivables
Other revenue, net
$
Total revenues
Expenses:
General and administrative
Property expenses
Depreciation and amortization
Provision for impairment of real estate
Provision for loan losses
Total expenses
Other operating income:
Gain on dispositions of real estate, net
Income from operations
Other (expense)/income:
Loss on repayment and repurchase of secured borrowings
Interest expense
Interest income
Income before income tax expense
Income tax expense
Net income
Net income attributable to non-controlling interests
Net income attributable to stockholders and members
$
Revenues:
Year ended December 31,
2019
2020
Change
%
155,792 $
8,136
81
164,009
135,670 $
3,024
663
139,357
24,444
3,881
59,446
8,399
830
97,000
5,821
72,830
(924)
(29,651)
485
42,740
212
42,528
(255)
42,273 $
21,745
3,070
42,745
2,918
—
70,478
10,932
79,811
(5,240)
(27,037)
794
48,328
303
48,025
(6,181)
41,844 $
20,122
5,112
(582)
24,652
2,699
811
16,701
5,481
830
25,692
(5,111)
(6,981)
4,316
(2,614)
(309)
(5,588)
(91)
(5,497)
5,926
429
14.8 %
169.0 %
(87.8)%
17.7 %
12.4 %
26.4 %
39.1 %
187.8 %
100.0 %
36.5 %
(46.8)%
(8.7)%
(82.4)%
9.7 %
(38.9)%
(11.6)%
(30.0)%
(11.4)%
(95.9)%
1.0 %
Rental revenue. Rental revenue increased by $20.1 million for the year ended December 31, 2020, as compared to the year ended
December 31, 2019. The increase in revenues was driven primarily by the growth in the size of our real estate investment portfolio, which generated
additional rental revenues. Our real estate investment portfolio grew from 1,000 properties, representing $1.9 billion in net investments in real estate,
as of December 31, 2019 to 1,181 properties, representing $2.4 billion in net investments in real estate, as of December 31, 2020. Our real estate
investments were acquired throughout the periods presented and were not all owned by us for the entirety of the periods; accordingly, a significant
portion of the increase in rental revenue between periods is related to recognizing revenue in 2020 on acquisitions that were made during 2019 and
2020. A smaller component of the increase in revenues between periods is related to rent escalations recognized on our leases.
59
Interest on loans and direct financing lease receivables. Interest on loans and direct financing lease receivables increased by $5.1 million
during the year ended December 31, 2020, as compared to the year ended December 31, 2019, primarily due to our investments in loans receivable
beginning in 2019 and additional investments in loans receivable during 2020, which led to a higher average daily balance of loans receivable
outstanding during year ended December 31, 2020.
Other revenue. Other revenue for the year ended December 31, 2020, decreased by approximately $0.6 million, as compared to the year
ended December 31, 2019, primarily due to the receipt of lease termination fees from former tenants during the year ended December 31, 2019. No
lease termination income was recorded during the year ended December 31, 2020.
Expenses:
General and administrative expenses. General and administrative expenses increased $2.7 million for the year ended December 31, 2020, as
compared to the year ended December 31, 2019. This increase in general and administrative expenses was primarily due to the increase of
personnel due to operating our larger real estate portfolio, including increased equity-based compensation expense, legal fees and directors' fees.
Property expenses. Property expenses increased by $0.8 million for the year ended December 31, 2020, as compared to the year ended
December 31, 2019. The increase in property expenses was primarily due to increased reimbursable costs, insurance expenses and operational
costs during the year ended December 31, 2020.
Depreciation and amortization expense. Depreciation and amortization expense increased by $16.7 million for the year ended December 31,
2020 as compared to the year ended December 31, 2019. Depreciation and amortization expense increased in proportion to the general increase in
the size of our real estate portfolio.
Provision for impairment of real estate. Impairment charges on real estate investments were $8.4 million and $2.9 million, for the years ended
December 31, 2020 and 2019, respectively. During the years ended December 31, 2020 and 2019, we recorded a provision for impairment of real
estate at 17 and 8 of our real estate investments, respectively. We strategically seek to identify non-performing properties that we may re-lease or
dispose of in an effort to improve our returns and manage risk exposure. An increase in vacancy associated with our disposition or re-leasing
strategies may trigger impairment charges when the expected future cash flows from the properties from sale or re-lease are less than their net book
value.
Other operating income:
Gain on dispositions of real estate, net. Gain on dispositions of real estate, net, decreased by $5.1 million for the year ended December 31,
2020, as compared to the year ended December 31, 2019. We disposed of 49 real estate properties during the year ended December 31, 2020,
compared to 37 real estate properties during the year ended December 31, 2019.
Other (expense)/income:
Loss on repayment and repurchase of secured borrowings. Loss on repayment and repurchase of secured borrowings of $0.9 million during
the year ended December 31, 2020 relates to the write-off of deferred financing costs upon our repayment of Class A Series 2017-1 Notes at par
value. During the year ended December 31, 2019, we recorded a loss on repurchase Series 2016-1 Notes of $5.2 million, which includes the
premium paid on the repurchase, the write-off of deferred financing costs and other associated legal expenses. Furthermore, the repurchased notes
were subsequently canceled and the Series 2016-1 Notes that remained outstanding were fully repaid in November 2019. This repayment and
repurchase were accounted for as debt extinguishments.
Interest expense. Interest expense increased by $2.6 million for the year ended December 31, 2020, as compared to the year ended
December 31, 2019. This increase in interest expense was primarily due to an increase to debt held during the year ended December 31, 2020
compared to the year ended December 31, 2019. In March 2020, the Company borrowed the remaining amount of $180.0 million available under its
November 2019 Term Loan and used the proceeds to acquire new investments and general corporate purposes.
60
Interest income. Interest income decreased by $0.3 million for the year ended December 31, 2020, as compared to the year ended
December 31, 2019. The decrease in interest income was primarily due lower daily cash balances and interest rates compared to the year ended
December 31, 2019.
Income tax expense. Income tax expense decreased by $0.1 million for the year ended December 31, 2020, as compared to the year ended
December 31, 2019. We are organized and operate as a REIT and are generally not subject to U.S. federal taxation. However, the Operating
Partnership is subject to taxation in certain state and local jurisdictions that impose income taxes on a partnership. The changes in income tax
expense are primarily due to changes in the proportion of our real estate portfolio located in jurisdictions where we are subject to taxation.
Non-GAAP Financial Measures
Our reported results are presented in accordance with GAAP. We also disclose the following non-GAAP financial measures: funds from
operations ("FFO"), core funds from operations ("Core FFO"), adjusted funds from operations ("AFFO"), earnings before interest, taxes, depreciation
and amortization ("EBITDA"), EBITDA further adjusted to exclude gains (or losses) on sales of depreciable property and real estate impairment
losses ("EBITDAre"), adjusted EBITDAre, annualized adjusted EBITDAre, net debt, net operating income ("NOI") and cash NOI ("Cash NOI"). We
believe these non-GAAP financial measures are industry measures used by analysts and investors to compare the operating performance of REITs.
We compute FFO in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment
Trusts ("NAREIT"). NAREIT defines FFO as GAAP net income or loss adjusted to exclude extraordinary items (as defined by GAAP), net gain or
loss from sales of depreciable real estate assets, impairment write-downs associated with depreciable real estate assets and real estate-related
depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), including the pro rata
share of such adjustments of unconsolidated subsidiaries. FFO is used by management, and may be useful to investors and analysts, to facilitate
meaningful comparisons of operating performance between periods and among our peers primarily because it excludes the effect of real estate
depreciation and amortization and net gains and losses on sales (which are dependent on historical costs and implicitly assume that the value of
real estate diminishes predictably over time, rather than fluctuating based on existing market conditions).
We compute Core FFO by adjusting FFO, as defined by NAREIT, to exclude certain GAAP income and expense amounts that we believe are
infrequent and unusual in nature and/or not related to our core real estate operations. Exclusion of these items from similar FFO-type metrics is
common within the equity REIT industry, and management believes that presentation of Core FFO provides investors with a metric to assist in their
evaluation of our operating performance across multiple periods and in comparison to the operating performance of our peers, because it removes
the effect of unusual items that are not expected to impact our operating performance on an ongoing basis. Core FFO is used by management in
evaluating the performance of our core business operations. Items included in calculating FFO that may be excluded in calculating Core FFO
include certain transaction related gains, losses, income or expense or other non-core amounts as they occur.
To derive AFFO, we modify our computation of Core FFO to include other adjustments to GAAP net income related to certain items that we
believe are not indicative of our operating performance, including straight-line rental revenue, non-cash interest expense, non-cash compensation
expense, other amortization and non-cash charges, capitalized interest expense and transaction costs. Such items may cause short-term
fluctuations in net income but have no impact on operating cash flows or long-term operating performance. We believe that AFFO is an additional
useful supplemental measure for investors to consider when assessing our operating performance without the distortions created by non-cash items
and certain other revenues and expenses.
FFO, Core FFO and AFFO do not include all items of revenue and expense included in net income, they do not represent cash generated
from operating activities and they are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be
considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in
addition to, and not in lieu of, GAAP financial measures. Additionally, our computation of FFO, Core FFO and AFFO may differ from the
methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported
by other equity REITs.
61
The following table reconciles net income (which is the most comparable GAAP measure) to FFO, Core FFO and AFFO attributable to
stockholders and members and non-controlling interests:
(in thousands)
Net income
Depreciation and amortization of real estate
Provision for impairment of real estate
Gain on dispositions of real estate, net
FFO attributable to stockholders and members and non-controlling interests
Other non-recurring expenses
(1)(2)
Core FFO attributable to stockholders and members and non-controlling
interests
Adjustments:
Straight-line rental revenue, net
Non-cash interest
Non-cash compensation expense
Other amortization expense
Other non-cash charges
Capitalized interest expense
Transaction costs
2020
Year ended December 31,
2019
2018
$
42,528 $
59,309
8,399
(5,821)
104,415
2,273
48,025 $
42,649
2,918
(10,932)
82,660
7,988
106,688
90,648
(11,905)
2,040
5,427
3,854
829
(228)
291
(12,215)
2,738
4,546
815
9
(290)
—
20,614
31,335
4,503
(5,445)
51,007
—
51,007
(8,214)
2,798
2,440
495
84
(225)
57
AFFO attributable to stockholders and members and non-controlling
interests
$
106,995 $
86,251 $
48,442
_____________________________________
(1)
Includes non-recurring expenses of approximately $39,000 related to reimbursement of executive relocation costs, $1.1 million for severance
payments and acceleration of non-cash compensation expense in connection with the termination of one of our executive officers, $0.2 million
of non-recurring recruiting costs, and our $0.9 million loss on repayment of secured borrowings during the year ended December 31, 2020.
Includes non-recurring expenses of $2.4 million for costs and charges incurred in connection with the Eldridge secondary offering, $5.2 million
loss on repayment and repurchase of secured borrowings and $0.3 million for a provision for settlement of litigation during the year ended
December 31, 2019.
(2)
We compute EBITDA as earnings before interest, income taxes and depreciation and amortization. In 2017, NAREIT issued a white paper
recommending that companies that report EBITDA also report EBITDAre. We compute EBITDAre in accordance with the definition adopted by
NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and real
estate impairment losses. We present EBITDA and EBITDAre as they are measures commonly used in our industry. We believe that these
measures are useful to investors and analysts because they provide supplemental information concerning our operating performance, exclusive of
certain non-cash items and other costs. We use EBITDA and EBITDAre as measures of our operating performance and not as measures of liquidity.
EBITDA and EBITDAre do not include all items of revenue and expense included in net income, they do not represent cash generated from
operating activities and they are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered
alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to,
and not in lieu of, GAAP financial measures. Additionally, our computation of EBITDA and EBITDAre may differ from the methodology for calculating
these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.
62
The following table reconciles net income (which is the most comparable GAAP measure) to EBITDA and EBITDAre attributable to
stockholders and members and non-controlling interests:
(in thousands)
Net income
Depreciation and amortization
Interest expense
Interest income
Income tax expense
EBITDA attributable to stockholders and members and non-controlling
interests
Provision for impairment of real estate
Gain on dispositions of real estate, net
2020
Year ended December 31,
2019
2018
$
42,528 $
59,446
29,651
(485)
212
131,352
8,399
(5,821)
48,025 $
42,745
27,037
(794)
303
117,316
2,918
(10,932)
20,614
31,352
30,192
(930)
195
81,423
4,503
(5,445)
80,481
EBITDAre attributable to stockholders and members and non-controlling
interests
$
133,931 $
109,302 $
We further adjust EBITDAre for the most recently completed quarter i) based on an estimate calculated as if all re-leasing, investment and
disposition activity that took place during the quarter had been made on the first day of the quarter, ii) to exclude certain GAAP income and expense
amounts that we believe are infrequent and unusual in nature and iii) to eliminate the impact of lease termination fees and contingent rental revenue
from certain of our tenants, which is subject to sales thresholds specified in the applicable leases ("Adjusted EBITDAre"). We then annualize
quarterly Adjusted EBITDAre by multiplying it by four ("Annualized Adjusted EBITDAre"), which we believe provides a meaningful estimate of our
current run rate for all of our investments as of the end of the most recently completed quarter. You should not unduly rely on this measure, as it is
based on assumptions and estimates that may prove to be inaccurate. Our actual reported EBITDAre for future periods may be significantly less
than our current Annualized Adjusted EBITDAre.
The following table reconciles net income (which is the most comparable GAAP measure) to Annualized Adjusted EBITDAre attributable to
stockholders and non-controlling interests for the three months ended December 31, 2020:
(in thousands)
Net income
Depreciation and amortization
Interest expense
Interest income
Income tax expense
EBITDA attributable to stockholders and members and non-controlling interests
Provision for impairment of real estate
Gain on dispositions of real estate, net
EBITDAre attributable to stockholders and members and non-controlling interests
Adjustment for current quarter re-leasing, acquisition and disposition activity (1)
Adjustment to exclude other non-recurring expenses
Adjustment to exclude lease termination fees and certain percentage rent (2)
Adjusted EBITDAre attributable to stockholders and members and non-controlling interests
Annualized Adjusted EBITDAre attributable to stockholders and members and non-controlling interests
Three months ended
December 31, 2020
5,705
19,004
7,764
(52)
56
32,475
3,319
(1,850)
33,944
4,681
2,826
—
41,451
165,805
$
$
$
_____________________________________
(1)
Adjustment assumes all re-leasing activity, investments and dispositions of real estate investments made during the three months ended
December 31, 2020 had occurred on October 1, 2020.
Adjustment is made to exclude non-core expenses added back to compute Core FFO, our provision for loan losses and the write-off of
receivables.
(2)
63
We calculate our net debt as our gross debt (defined as total debt plus net deferred financing costs on our secured borrowings) less cash and
cash equivalents and restricted cash deposits held for the benefit of lenders. We believe excluding cash and cash equivalents and restricted cash
deposits held for the benefit of lenders from gross debt, all of which could be used to repay debt, provides an estimate of the net contractual amount
of borrowed capital to be repaid, which we believe is a beneficial disclosure to investors and analysts.
The following table reconciles total debt (which is the most comparable GAAP measure) to net debt:
(in thousands)
Secured borrowings, net of deferred financing costs
Unsecured term loan, net of deferred financing costs
Revolving credit facility
Total debt
Deferred financing costs, net
Gross debt
Cash and cash equivalents
Restricted cash deposits held for the benefit of lenders
Net debt
December 31,
2020
2019
171,007 $
626,272
18,000
815,279
5,914
821,193
(26,602)
(6,388)
788,203 $
235,336
445,586
46,000
726,922
8,181
735,103
(8,304)
(13,015)
713,784
$
$
We compute NOI as total revenues less property expenses. NOI excludes all other items of expense and income included in the financial
statements in calculating net income or loss in accordance with GAAP. Cash NOI further excludes non-cash items included in total revenues and
property expenses, such as straight-line rental revenue and other amortization and non-cash charges. We believe NOI and Cash NOI provide useful
and relevant information because they reflect only those revenue and expense items that are incurred at the property level and present such items
on an unlevered basis.
NOI and Cash NOI are not measures of financial performance under GAAP. You should not consider our NOI and Cash NOI as alternatives to
net income or cash flows from operating activities determined in accordance with GAAP. Additionally, our computation of NOI and Cash NOI may
differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled
measures reported by other equity REITs.
The following table reconciles net income (which is the most comparable GAAP measure) to NOI and Cash NOI attributable to stockholders
and members and non-controlling interests:
2020
Year ended December 31,
2019
2018
(in thousands)
Net income
General and administrative expense
Depreciation and amortization
Provision for impairment of real estate
Provision for loan losses
Gain on dispositions of real estate, net
Loss on repayment and repurchase of secured borrowings
Interest expense
Interest income
Income tax expense
NOI attributable to stockholders and members and non-controlling interests
Straight-line rental revenue, net
Other amortization and non-cash charges
$
42,528 $
24,444
59,446
8,399
830
(5,821)
924
29,651
(485)
212
160,128
(11,905)
3,854
48,025 $
21,745
42,745
2,918
—
(10,932)
5,240
27,037
(794)
303
136,287
(12,215)
815
Cash NOI attributable to stockholders and members and non-controlling
interests
$
152,077 $
124,887 $
64
20,614
13,762
31,352
4,503
—
(5,445)
—
30,192
(930)
195
94,243
(8,214)
495
86,524
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Over time, we generally seek to match the expected cash inflows from our long-term leases with the expected cash outflows for our long-term
debt. To achieve this objective, we borrow on a fixed-rate basis through longer-term debt issuances under our Master Trust Funding Program.
Additionally, we incur debt that bears interest at floating rates under the Revolving Credit Facility, which we use in connection with our operations,
including for funding investments, the April 2019 Term Loan and the November 2019 Term Loan. We have fixed the floating rates on borrowings
under our term loan facilities by entering into interest rate swap agreements where we pay a fixed interest rate and receive a floating interest rate
equal to the rate we pay on the respective term loan.
(in thousands)
Unsecured term loans:
April 2019 Term Loan
November 2019 Term Loan
Revolving Credit Facility
Secured borrowings:
Series 2017-1 Notes
Total principal outstanding
Maturity Date
December 31, 2020
December 31,
2019
December 31, 2020
December 31,
2019
Principal Outstanding
Weighted Average Interest Rate
(1)
April 2024
November 2026
April 2023
June 2047
$
$
200,000 $
430,000
18,000
173,193
821,193 $
200,000
250,000
46,000
239,102
735,102
3.3%
3.0%
1.4%
4.2%
3.3%
3.3%
3.1%
3.1%
4.2%
3.5%
_______________________________________________________________
(1)
Interest rates are presented after giving effect to our interest rate swap agreements, where applicable.
We have fixed the interest rates on the term loan facilities' variable-rates through the use of interest rate swap agreements. At December 31,
2020, our aggregate liability in the event of the early termination of our swaps was $40.2 million. At December 31, 2020, a 100-basis point increase
of the interest rate on this facility would increase our related interest costs by approximately $4.0 million per year and a 100-basis point decrease of
the interest rate would decrease our related interest costs by approximately $4.0 million per year.
Additionally, our borrowings under the Revolving Credit Facility bear interest at an annual rate equal to LIBOR plus a leverage-based credit
spread. Therefore, an increase or decrease in interest rates would result in an increase or decrease to our interest expense related to the Revolving
Credit Facility. We monitor our market interest rate risk exposures using a sensitivity analysis. Our sensitivity analysis estimates the exposure to
market risk sensitive instruments assuming a hypothetical adverse change in interest rates. Based on the results of a sensitivity analysis, which
assumes a 100-basis point adverse change in interest rates, the estimated market risk exposure for our variable‑rate borrowings under the
Revolving Credit Facility was $0.2 million as of December 31, 2020.
We are exposed to interest rate risk between the time we enter into a sale-leaseback transaction or acquire a leased property and the time we
finance the related real estate with long-term fixed-rate debt. In addition, when our long-term debt matures, we may have to refinance the debt at a
higher interest rate. Market interest rates are sensitive to many factors that are beyond our control. Our interest rate risk management objective is to
limit the impact of future interest rate changes on our earnings and cash flows. Additionally, our long-term debt under our Master Trust Funding
Program generally provides for some amortization of the principal balance over the term of the debt, which serves to reduce the amount of
refinancing risk at debt maturity.
In addition to amounts that we borrow under the Revolving Credit Facility, we may incur variable-rate debt in the future that we do not choose
to hedge. Additionally, decreases in interest rates may lead to increased competition for the acquisition of real estate due to a reduction in desirable
alternative income-producing investments. Increased competition for the acquisition of real estate may lead to a decrease in the yields on real estate
we have targeted for acquisition. In such circumstances, if we are not able to offset the decrease in yields by obtaining lower interest costs on our
borrowings, our results of operations will be adversely affected. Significant increases in interest rates may also have an adverse impact on our
earnings if we are unable to acquire real estate with rental rates high enough to offset the increase in interest rates on our borrowings.
Fair Value of Fixed-Rate Indebtedness
The estimated fair value of our fixed-rate indebtedness under the Master Trust Funding Program is calculated based primarily on
unobservable market inputs such as interest rates and discounted cash flow analyses using
65
estimates of the amount and timing of future cash flows, market rates and credit spreads. The following table discloses fair value information related
to our fixed-rate indebtedness as of December 31, 2020:
(in thousands)
Secured borrowings under Master Trust Funding Program
_______________________________________________________________
(1)
Excludes net deferred financing costs of $2.2 million.
66
Carrying
Value
(1)
Estimated
Fair Value
$
173,193 $
176,382
Item 8. Financial Statements and Supplementary Data.
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Essential Properties Realty Trust, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Essential Properties Realty Trust, Inc. as of December 31, 2020 and 2019, the
related consolidated statements of operations, comprehensive income, stockholders’/members’ equity and cash flows, for each of the three years in
the period ended December 31, 2020 of Essential Properties Realty Trust, Inc. and Essential Properties Realty Trust, Inc. Predecessor (the
“Company”), and the related notes and financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 23, 2021,
expressed an unqualified opinion thereon.
Adoption of ASU No. 2016-02
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2020 and 2019 due to
the adoption of ASU No. 2016-02, Leases.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the 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 financial statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements
and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way
our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing
separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
67
Description of the Matter
How We Addressed the Matter in Our Audit
Impairment of Long-Lived Assets
At December 31, 2020, the Company’s real estate investments totaled approximately $2.2
billion. As described in Note 2 to the consolidated financial statements, investments in real
estate are reviewed for impairment when circumstances indicate that the carrying value of
a property may not be recoverable. For the year ended December 31, 2020, the Company
recognized a $8.4 million provision for impairment of real estate.
Auditing the Company’s accounting for impairment of real estate investments was
especially challenging and involved a high degree of subjectivity as a result of the
assumptions and estimates inherent in the determination of estimated future cash flows
expected to result from the property’s use and eventual disposition and the estimated fair
value of the property. In particular, management’s assumptions and estimates included
projected rental rates during the holding period, property capitalization rates, and if
applicable, discount rates, which were sensitive to expectations about future operations,
market or economic conditions, demand and competition.
We obtained an understanding, evaluated the design, and tested the operating
effectiveness of controls over the Company’s real estate investment impairment process.
This included testing of controls over management's review of the significant assumptions
and data inputs utilized in the estimation of expected future cash flows and the
determination of fair value.
To test the Company’s accounting for impairment of real estate investments, we
performed audit procedures that included, among others, evaluating the methodologies
applied and testing the significant assumptions discussed above and the underlying data
used by the Company in its impairment analyses. In certain cases, we involved our
valuation specialists to assist in performing these procedures. We compared the
significant assumptions used by management to historical data and observable market-
specific data. We assessed the precision of management’s process to develop certain
assumptions by comparing current assumptions to historical trends. We also performed
sensitivity analyses of significant assumptions to evaluate the changes in estimated future
cash flows that would result from changes in the assumptions. In addition, we assessed
information and events subsequent to the balance sheet date to corroborate certain of the
key assumptions utilized by management.
68
Description of the Matter
How We Addressed the Matter in Our Audit
Purchase Price Allocation for Acquired Real Estate Investments
During 2020, the Company acquired 208 properties for an aggregate purchase price of
$526.3 million. As described in Notes 2 and 3 to the consolidated financial statements, the
Company allocates the purchase price of acquired properties to tangible and identifiable
intangible assets and liabilities based on their relative fair values.
Auditing the Company’s accounting for these acquisitions was especially challenging and
involved a high degree of subjectivity as a result of the assumptions and estimates
inherent in determining the fair values of the acquired tangible and identifiable intangible
assets and liabilities. In particular, management’s significant assumptions and estimates
included land prices per square foot, building and site improvements per square foot,
terminal capitalization rates, market-based rents and discount rates, which were sensitive
to individual market and economic conditions at the date of acquisition.
We obtained an understanding, evaluated the design, and tested the operating
effectiveness of controls over management’s processes to determine the fair value of the
assets and liabilities acquired for purposes of allocating the purchase price. This included
testing of controls over management’s review of the significant assumptions and data
inputs utilized in the underlying fair value determinations.
To test the Company’s allocation of purchase price for real estate investments, we
involved our real estate valuation specialists and performed audit procedures that
included, among others, evaluating the valuation methodologies employed and the
significant assumptions utilized to determine the fair value of the acquired tangible and
identified intangible assets and liabilities. We compared significant assumptions to third
party evidence or other support. In addition, with the support of our valuation specialist, we
independently calculated the fair values of certain acquired tangible and identified
intangible assets and liabilities and compared the independently calculated values to the
fair values developed by the Company. We also tested the completeness and accuracy of
the underlying data utilized in the purchase price allocations.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2017.
New York, New York
February 23, 2021
69
To the Stockholders and the Board of Directors of Essential Properties Realty Trust, Inc.
Opinion on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
We have audited Essential Properties Realty Trust, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) (the COSO criteria). In our opinion, Essential Properties Realty Trust, Inc. (the “Company”) maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations,
comprehensive income, stockholders’/members’ equity and cash flows for each of the three years in the period ended December 31, 2020 of the
Company and Essential Properties Realty Trust, Inc. Predecessor, and the related notes and financial statement schedules listed in the Index at
Item 15(a) and our report dated February 23, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public
accounting firm registered with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
New York, New York
February 23, 2021
70
ESSENTIAL PROPERTIES REALTY TRUST, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets
(In thousands, except share and per share data)
ASSETS
Investments:
Real estate investments, at cost:
Land and improvements
Building and improvements
Lease incentives
Construction in progress
Intangible lease assets
Total real estate investments, at cost
Less: accumulated depreciation and amortization
Total real estate investments, net
Loans and direct financing lease receivables, net
Real estate investments held for sale, net
Net investments
Cash and cash equivalents
Restricted cash
Straight-line rent receivable, net
Rent receivables, prepaid expenses and other assets, net
(1)
Total assets
LIABILITIES AND EQUITY
Secured borrowings, net of deferred financing costs
Unsecured term loans, net of deferred financing costs
Revolving credit facility
Intangible lease liabilities, net
Dividend payable
Derivative liabilities
Accrued liabilities and other payables
Total liabilities
(1)
Commitments and contingencies (see Note 11)
Stockholders' equity:
Preferred stock, $0.01 par value; 150,000,000 authorized; none issued and outstanding as of December 31,
2020 and 2019
Common stock, $0.01 par value; 500,000,000 authorized; 106,361,524 and 83,761,151 issued and outstanding
as of December 31, 2020 and 2019, respectively
Additional paid-in capital
Distributions in excess of cumulative earnings
Accumulated other comprehensive loss
Total stockholders' equity
Non-controlling interests
Total equity
Total liabilities and equity
December 31,
2020
2019
741,254 $
1,519,665
14,297
3,908
80,271
2,359,395
(136,097)
2,223,298
152,220
17,058
2,392,576
26,602
6,388
37,830
25,406
2,488,802 $
171,007 $
626,272
18,000
10,168
25,703
38,912
16,792
906,854
—
588,279
1,224,682
4,908
12,128
78,922
1,908,919
(90,071)
1,818,848
92,184
1,211
1,912,243
8,304
13,015
25,926
15,959
1,975,447
235,336
445,586
46,000
9,564
19,395
4,082
13,371
773,334
—
—
—
1,064
1,688,540
(77,665)
(37,181)
1,574,758
7,190
1,581,948
2,488,802 $
838
1,223,043
(27,482)
(1,949)
1,194,450
7,663
1,202,113
1,975,447
$
$
$
$
_____________________________________
(1)
The Company's consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs"). See Note 2—Summary of
Significant Accounting Policies. As of December 31, 2020 and 2019, all of the assets and liabilities of the Company were held by its operating
partnership, a consolidated VIE, with the exception of $25.6 million and $19.3 million, respectively, of dividends payable.
The accompanying notes are an integral part of these consolidated financial statements.
71
ESSENTIAL PROPERTIES REALTY TRUST, INC. AND ESSENTIAL PROPERTIES REALTY TRUST, INC. PREDECESSOR
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Operations
(In thousands, except share and per share data)
Revenues:
Rental revenue
Interest on loans and direct financing lease receivables
Other revenue, net
Total revenues
Expenses:
General and administrative
Property expenses
Depreciation and amortization
Provision for impairment of real estate
Provision for loan losses
Total expenses
Other operating income:
Gain on dispositions of real estate, net
Income from operations
Other (expense)/income:
Loss on repayment and repurchase of secured borrowings
Interest expense (including $4,603 to related parties during the year ended
December 31, 2018 )
Interest income
Income before income tax expense
Income tax expense
Net income
Net income attributable to non-controlling interests
Net income attributable to stockholders and members
$
$
2020
Year ended December 31,
2019
2018
155,792 $
8,136
81
164,009
24,444
3,881
59,446
8,399
830
97,000
5,821
72,830
(924)
(29,651)
485
42,740
212
42,528
(255)
42,273 $
135,670 $
3,024
663
139,357
21,745
3,070
42,745
2,918
—
70,478
10,932
79,811
(5,240)
(27,037)
794
48,328
303
48,025
(6,181)
41,844 $
94,944
656
623
96,223
13,762
1,980
31,352
4,503
—
51,597
5,445
50,071
—
(30,192)
930
20,809
195
20,614
(5,001)
15,613
Basic weighted average shares outstanding
Basic net income per share
Diluted weighted average shares outstanding
Diluted net income per share
Year ended December 31,
2020
2019
Period from
June 25, 2018 to
December 31, 2018
$
$
95,311,035
64,104,058
0.44 $
0.65 $
96,197,705
75,309,896
0.44 $
0.63 $
42,634,678
0.26
61,765,957
0.26
The accompanying notes are an integral part of these consolidated financial statements.
72
ESSENTIAL PROPERTIES REALTY TRUST, INC. AND ESSENTIAL PROPERTIES REALTY TRUST, INC. PREDECESSOR
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Comprehensive Income
(In thousands)
Net income
Other comprehensive loss:
Unrealized loss on cash flow hedges
Cash flow hedge losses (gains) reclassified to interest expense
Total other comprehensive loss
Comprehensive income
Net income attributable to non-controlling interests
Adjustment for cash flow hedge losses (gains) attributable to non-controlling interests
Comprehensive income attributable to stockholders and members
2020
Year ended December 31,
2019
42,528 $
48,025 $
2018
(42,121)
6,676
(35,445)
7,083
(255)
213
7,041 $
(2,799)
(106)
(2,905)
45,120
(6,181)
956
39,895 $
20,614
—
—
—
20,614
(5,001)
—
15,613
$
$
The accompanying notes are an integral part of these consolidated financial statements.
73
ESSENTIAL PROPERTIES REALTY TRUST, INC. AND ESSENTIAL PROPERTIES REALTY TRUST, INC. PREDECESSOR
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Stockholders'/Members' Equity
(In thousands, except share data)
Balance at December 31, 2017
Contributions
Unit compensation expense
Net income
Balance at June 24, 2018
Contribution of Predecessor equity in
exchange for OP Units
Initial public offering
Concurrent private placement of
common stock
Concurrent private placement of OP
Units
Costs related to initial public offering
Share-based compensation expense
Unit-based compensation expense
Dividends declared on common stock
and OP Units
Net income
Balance at December 31, 2018
Common stock issuance
Costs related to issuance of common
stock
Conversion of equity in Secondary
Offering
Unrealized losses on cash flow hedges
Cash flow hedge gains reclassified to
interest expense
Share-based compensation expense
Unit-based compensation expense
Dividends declared on common stock
and OP Units
Net income
Balance at December 31, 2019
Cumulative adjustment upon adoption
of ASC 326
Common stock issuance
Costs related to issuance of common
stock
Unrealized losses on cash flow hedges
Cash flow hedge losses reclassified to
interest expense
Share-based compensation expense
Dividends declared on common stock
and OP Units
Net income
Balance at December 31, 2020
Common Stock
Number of
Shares
Par
Value
Additional
Paid-In
Capital
Distributions
in Excess of
Cumulative
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Class A
Units
Class B
Units
Class C
Units
Class D
Units
Total
Stockholders'
/Members'
Equity
Non-
Controlling
Interests
Total
Equity
— $ — $
—
—
—
—
—
—
—
—
35,272,191
7,785,611
—
—
691,290
—
—
—
43,749,092
21,462,986
—
—
—
353
78
—
—
—
—
—
—
431
215
—
— $
—
—
—
—
—
493,458
108,921
—
(35,107)
1,692
443
—
—
569,407
423,472
(13,901)
18,502,705
185
237,795
—
—
46,368
—
—
—
83,761,151
—
22,554,057
—
—
—
46,316
—
—
—
—
7
—
—
—
838
—
225
—
—
—
1
—
—
—
—
4,108
2,162
—
—
1,223,043
—
477,574
(18,154)
—
—
6,077
—
—
— $
—
—
—
—
—
—
—
—
—
—
—
(18,987)
11,328
(7,659)
—
—
—
—
—
—
—
(61,667)
41,844
(27,482)
(187)
—
—
—
—
—
(92,269)
42,273
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,868)
(81)
—
—
—
—
(1,949)
—
—
—
(41,868)
6,636
—
—
—
$ 86,668 $
50,000
—
2,414
139,082
(139,082)
574
—
373
—
947
(947)
$ 94,064 $
—
—
1,871
$
96
—
70
—
95,935
(95,935)
166
(166)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
181,402
50,000
443
4,285
236,130
(236,130)
493,811
108,999
$
— $ 181,402
50,000
—
443
—
4,285
—
—
236,130
—
—
236,130
—
493,811
108,999
—
16,001
16,001
(35,107)
1,692
443
(18,987)
11,328
562,179
423,687
(13,901)
—
—
—
(8,270)
5,001
248,862
—
—
(35,107)
1,692
443
(27,257)
16,329
811,041
423,687
(13,901)
237,980
(237,980)
—
(1,868)
(81)
4,115
2,162
(61,667)
41,844
1,194,450
(187)
477,799
(18,154)
(41,868)
6,636
(931)
(25)
—
—
(8,444)
6,181
7,663
(1)
—
—
(253)
40
(2,799)
(106)
4,115
2,162
(70,111)
48,025
1,202,113
(188)
477,799
(18,154)
(42,121)
6,676
6,078
—
6,078
(92,269)
42,273
(514)
255
(92,783)
42,528
106,361,524 $ 1,064 $ 1,688,540 $
(77,665)
$
(37,181)
$
— $ — $
— $ — $
1,574,758
$
7,190
$ 1,581,948
The accompanying notes are an integral part of these consolidated financial statements.
74
ESSENTIAL PROPERTIES REALTY TRUST, INC. AND ESSENTIAL PROPERTIES REALTY TRUST, INC. PREDECESSOR
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Amortization of lease incentive
Amortization of above/below market leases and right of use assets, net
Amortization of deferred financing costs and other assets
Loss on repurchase and retirement of secured borrowings
Provision for impairment of real estate
Provision for loan losses
Gain on dispositions of investments, net
Straight-line rent receivable
Equity-based compensation expense
Adjustment to rental revenue for tenant credit/allowance for doubtful accounts
Changes in other assets and liabilities:
Rent receivables, prepaid expenses and other assets
Accrued liabilities and other payables
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from sales of investments, net
Principal collections on loans and direct financing lease receivables
Investments in loans receivable
Deposits for prospective real estate investments
Investment in real estate, including capital expenditures
Investment in construction in progress
Lease incentives paid
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of notes payable to related parties
Payments of principal on notes payable to related parties
Repurchase and repayment of secured borrowings
Principal received on repurchased secured borrowings
Borrowings under term loan facilities
Borrowings under revolving credit facility
Repayments under revolving credit facility
Deferred financing costs
Capital contributions by members in Predecessor
Proceeds from issuance of common stock, net
Offering costs
Proceeds from concurrent private placement of OP Units
Proceeds from concurrent private placement of common stock
Dividends paid
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash, beginning of period
Cash and cash equivalents and restricted cash, end of period
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents
Restricted cash
Cash and cash equivalents and restricted cash, end of period
2020
Year ended December 31,
2019
2018
$
42,528 $
48,025 $
20,614
59,406
3,847
9
2,532
924
8,399
830
(5,821)
(15,137)
6,085
3,601
(12,058)
4,243
99,388
82,889
286
(60,480)
475
(541,307)
(14,423)
(12,949)
(545,509)
—
—
(65,909)
—
180,000
87,000
(115,000)
(25)
—
461,006
(2,805)
—
—
(86,475)
457,792
11,671
21,319
32,990 $
26,602 $
6,388
32,990 $
42,745
282
534
2,815
5,240
2,918
—
(10,932)
(12,322)
6,238
593
1,242
1,190
88,568
66,765
9,519
(94,637)
530
(570,025)
(17,858)
(2,133)
(607,839)
—
—
(279,123)
1,707
450,000
459,000
(447,000)
(6,128)
—
411,635
(1,837)
—
—
(63,903)
524,351
5,080
16,239
21,319 $
8,304 $
13,015
21,319 $
31,352
159
336
2,798
—
4,503
—
(5,445)
(8,812)
2,440
385
(767)
(1,646)
45,917
60,446
74
(14,854)
(1,712)
(490,040)
(15,258)
(519)
(461,863)
154,000
(384,000)
(7,816)
—
—
34,000
—
(3,065)
50,000
464,182
(5,478)
16,001
108,999
(14,068)
412,755
(3,191)
19,430
16,239
4,236
12,003
16,239
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
75
ESSENTIAL PROPERTIES REALTY TRUST, INC. AND ESSENTIAL PROPERTIES REALTY TRUST, INC. PREDECESSOR
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows (continued)
(In thousands)
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized
Cash paid for income taxes
Non-cash investing and financing activities:
Adjustment upon adoption of ASC 326
Reclassification from construction in progress upon project completion
Net settlement of proceeds on the sale of investments
Non-cash investments in loan receivable activity
Lease liabilities arising from the recognition of right of use assets
Unrealized losses on cash flow hedges
Contribution of Predecessor equity in exchange for OP Units
Conversion of equity in Secondary Offering
Payable and accrued offering costs
Discounts and fees on capital raised through issuance of common stock
Payable and accrued deferred financing costs
Dividends declared
2020
Year ended December 31,
2019
2018
$
$
27,071 $
546
29,485 $
60
188 $
— $
22,643
860
(860)
—
44,920
—
—
—
16,674
—
25,703
7,055
4,960
10,439
8,355
2,905
—
237,795
66
12,048
126
19,395
27,901
55
—
18,009
—
—
—
—
236,130
—
—
29,629
—
13,189
The accompanying notes are an integral part of these consolidated financial statements.
76
Notes to Consolidated Financial Statements
December 31, 2020
1. Organization
Description of Business
Essential Properties Realty Trust, Inc. (the “Company”) is an internally managed real estate company that acquires, owns and manages
primarily single-tenant properties that are net leased on a long-term basis to middle-market companies operating service-oriented or experience-
based businesses. The Company generally invests in and leases freestanding, single-tenant commercial real estate facilities where a tenant
services its customers and conducts activities that are essential to the generation of the tenant’s sales and profits.
The Company was organized on January 12, 2018 as a Maryland corporation. It elected to be taxed as a real estate investment trust (“REIT”)
for federal income tax purposes beginning with the year ended December 31, 2018, and it believes that its current organizational and operational
status and intended distributions will allow it to continue to so qualify. Substantially all of the Company’s business is conducted directly and indirectly
through its operating partnership, Essential Properties, L.P. (the “Operating Partnership”).
On June 25, 2018, the Company completed the initial public offering (“IPO”) of its common stock. The common stock of the Company is listed
on the New York Stock Exchange under the ticker symbol “EPRT”. See Note 7—Equity for additional information.
COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus (“COVID-19”) a pandemic. The global
spread of COVID-19 has created significant uncertainty and economic disruption, which is likely to persist, or increase, for a period of unknown
duration. The pandemic has adversely affected the Company and its tenants, and the full extent to which it will adversely affect the Company’s
financial condition, liquidity, and results of operations is impossible to predict and depends on evolving factors, including the duration and scope of
the pandemic, and governmental and social responses thereto.
The Company is closely monitoring the impact of COVID-19 on all aspects of its business, including its portfolio and the creditworthiness of its
tenants. As the pandemic intensified at the end of the first quarter of 2020, the Company adopted a more cautious investment strategy, as it placed
an increased emphasis on liquidity, prudent balance sheet management and financial flexibility.
The Company has entered into deferral agreements with certain of its tenants, and during the year ended December 31, 2020, recognized
$12.4 million of contractual base rent related to these agreements as a component of rental revenue in its consolidated statement of operations.
These rent deferrals were negotiated on a tenant-by-tenant basis, and, in general, allow a tenant to defer all or a portion of its rent for a portion of
2020, with all of the deferred rent to be paid to the Company pursuant to a schedule that generally extends up to 24 months from the original due
date of the deferred rent. It is possible that the existing deterioration, or further deterioration, in the Company's tenants’ ability to operate their
businesses, or delays in the supply of products or services to the Company's tenants from vendors that they need to operate their businesses,
caused by COVID-19 or otherwise, will cause the Company's tenants to be unable or unwilling to meet their contractual obligations to the Company,
including the payment of rent (including deferred rent), or to request further rent deferrals or other concessions. The likelihood of this would increase
if COVID-19 intensifies or persists for a prolonged period. To the extent COVID-19 causes a secular change in consumer behavior that reduces
patronage of service-based and/or experience-based businesses, many of the Company's tenants would be adversely affected and their ability to
meet their obligations to us could be further impaired. These deferrals reduce the Company's cash flow from operations, reduce its cash available
for distribution and adversely affect its ability to make cash distributions to common stockholders. Furthermore, if tenants are unable to pay their
deferred rent, the Company will not receive cash in the future in accordance with its expectations.
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2. Summary of Significant Accounting Policies
Basis of Accounting
The accompanying consolidated financial statements of the Company are prepared in accordance with accounting principles generally
accepted in the United States (“GAAP”) and with the rules and regulations of the SEC.
Reclassification
Certain amounts previously reported in the consolidated balance sheets and statements of operations have been reclassified to conform with
the current period by presenting derivative liabilities separate from accrued liabilities and other payables and by presenting interest expense as a
component of other expense/income.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and subsidiaries in which the Company has a
controlling financial interest. All intercompany accounts and transactions have been eliminated in consolidation. As of December 31, 2020 and 2019,
the Company, directly or indirectly, held a 99.5% and 99.3% ownership interest in the Operating Partnership and the consolidated financial
statements include the financial statements of the Operating Partnership as of these dates. See Note 7—Equity for changes in the ownership
interest in the Operating Partnership.
Use of Estimates
The preparation of the consolidated 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 consolidated financial
statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Real Estate Investments
Investments in real estate are carried at cost less accumulated depreciation and impairment losses. The cost of investments in real estate
reflects their purchase price or development cost. The Company evaluates each acquisition transaction to determine whether the acquired asset
meets the definition of a business. Under Accounting Standards Update ("ASU") 2017-1, Business Combinations (Topic 805): Clarifying the
Definition of a Business, an acquisition does not qualify as a business when there is no substantive process acquired or substantially all of the fair
value is concentrated in a single identifiable asset or group of similar identifiable assets or the acquisition does not include a substantive process in
the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay. Transaction costs related
to acquisitions that are asset acquisitions are capitalized as part of the cost basis of the acquired assets, while transaction costs for acquisitions that
are deemed to be acquisitions of a business are expensed as incurred. Improvements and replacements are capitalized when they extend the
useful life or improve the productive capacity of the asset. Costs of repairs and maintenance are expensed as incurred.
The Company allocates the purchase price of acquired properties accounted for as asset acquisitions to tangible and identifiable intangible
assets or liabilities based on their relative fair values. Tangible assets may include land, site improvements and buildings. Intangible assets may
include the value of in-place leases and above- and below-market leases and other identifiable intangible assets or liabilities based on lease or
property specific characteristics.
The Company incurs various costs in the leasing and development of its properties. Amounts paid to tenants that incentivize them to extend
or otherwise amend an existing lease or to sign a new lease agreement are capitalized to lease incentives on the Company's consolidated balance
sheets. Tenant improvements are capitalized to building and improvements within the Company's consolidated balance sheets. Costs incurred
which are directly related to properties under development, which include pre-construction costs essential to the development of the property,
development costs, construction costs, interest costs and real estate taxes and insurance, are capitalized during the period of development as
construction in progress. After the determination is made to capitalize a cost, it is allocated to the specific component of a project that benefited.
Determination of when a development project
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commences, and capitalization begins, and when a development project has reached substantial completion, and is available for occupancy and
capitalization must cease, involves a degree of judgment. The Company does not engage in speculative real estate development. The Company
does, however, opportunistically agree to reimburse certain of its tenants for development costs at its properties in exchange for contractually-
specified rent that generally increases proportionally with its funding.
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 based on the specific characteristics of each tenant's lease. The Company estimates the cost to execute leases with terms
similar to the remaining lease terms of the in-place leases, including leasing commissions, legal and other related expenses. Factors the Company
considers in this analysis include an estimate of the carrying costs during the expected lease-up periods considering 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 market rates during the expected lease-up periods, which primarily range from six to 12 months. The fair value of above-
or below-market leases is recorded based on the net present value (using a discount rate that reflects the risks associated with the leases acquired)
of the difference between the contractual amount to be paid pursuant to the in-place lease and the Company's estimate of the fair market lease rate
for the corresponding in-place lease, measured over the remaining non-cancelable term of the lease including any below-market fixed rate renewal
options for below-market leases.
In making estimates of fair values for purposes of allocating purchase price, the Company uses 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 (e.g., location, size, demographics, value and comparative rental rates), tenant
credit profile and the importance of the location of the real estate to the operations of the tenant's business. Additionally, the Company considers
information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value
of the tangible and intangible assets acquired. The Company uses the information obtained as a result of its pre-acquisition due diligence as part of
its consideration of the accounting standard governing asset retirement obligations and, when necessary, will record an asset retirement obligation
as part of the purchase price allocation.
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 and fair value less estimated selling costs. 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 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 and 15 years for site
improvements. The Company recorded the following amounts of depreciation expense on its real estate investments during the periods presented:
(in thousands)
Depreciation on real estate investments
2020
Year ended December 31,
2019
2018
$
51,736 $
36,354 $
24,849
Lease incentives are amortized on a straight-line basis as a reduction of rental income over the remaining non-cancellable terms of the
respective leases. If a tenant terminates its lease, the unamortized portion of the lease incentive is charged to rental revenue. Construction in
progress is not depreciated until the development has reached substantial completion. Tenant improvements are depreciated over the non-
cancellable term of the related lease or their estimated useful life, whichever is shorter.
Capitalized above-market lease values are amortized on a straight-line basis as a reduction of rental revenue over the remaining non-
cancellable terms of the respective leases. Capitalized below-market lease values are
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accreted on a straight-line basis as an increase to rental revenue over the remaining non-cancellable terms of the respective leases including any
below-market fixed rate renewal option periods.
Capitalized above-market ground lease values are accreted as a reduction of property expenses over the remaining terms of the respective
leases. Capitalized below-market ground lease values are amortized as an increase to property expenses over the remaining terms of the
respective leases and any expected below-market renewal option periods where renewal is considered probable.
The value of in-place leases, exclusive of the value of above-market and below-market lease intangibles, is amortized to depreciation and
amortization expense on a straight-line basis over the remaining periods of the respective leases.
If a tenant terminates its lease, the unamortized portion of each intangible, including in-place lease values, is charged to depreciation and
amortization expense, while above- and below-market lease adjustments are recorded within rental revenue in the consolidated statements of
operations.
Loans Receivable
The Company holds its loans receivable for long-term investment. Loans receivable are carried at amortized cost, including related
unamortized discounts or premiums, if any, less the Company's estimated allowance for loan losses. The Company recognizes interest income on
loans receivable using the effective-interest method applied on a loan-by-loan basis. Direct costs associated with originating loans are offset against
any related fees received and the balance, along with any premium or discount, is deferred and amortized as an adjustment to interest income over
the term of the related loan receivable using the effective-interest method. As of December 31, 2020, the Company had five leases which were
accounted for as loans receivable and eight mortgage loans held for long-term investment. As of December 31, 2019, the Company had two leases
which were accounted for as loans receivable and five loans receivable for long-term investment.
Direct Financing Lease Receivables
Certain of the Company's real estate investment transactions are accounted for as direct financing leases. The Company records the direct
financing lease receivables at their net investment, determined as the aggregate minimum lease payments and the estimated non-guaranteed
residual value of the leased property less unearned income. The unearned income is recognized over the term of the related lease so as to produce
a constant rate of return on the net investment in the asset. The Company's investment in direct financing lease receivables is reduced over the
applicable lease term to its non-guaranteed residual value by the portion of rent allocated to the direct financing lease receivables. Subsequent to
the adoption of ASC 842, Leases ("ASC 842"), existing direct financing lease receivables will continue to be accounted for in the same manner,
unless the underlying contracts are modified.
If and when an investment in direct financing lease receivables is identified for impairment evaluation, the Company will apply the guidance in
both ASC 310, Receivables ("ASC 310") and ASC 840, Leases ("ASC 840") (prior to January 1, 2019) and ASC 842. Under ASC 310, the lease
receivable portion of the net investment in a direct financing lease receivable is evaluated for impairment when it becomes probable the Company,
as the lessor, will be unable to collect all rental payments associated with the Company's investment in the direct financing lease receivable. Under
ASC 840 and ASC 842, the Company reviews the estimated non-guaranteed residual value of a leased property at least annually. If the review
results in a lower estimate than had been previously established, the Company determines whether the decline in estimated non-guaranteed
residual value is other than temporary. If a decline is judged to be other than temporary, the accounting for the transaction is revised using the
changed estimate and the resulting reduction in the net investment in direct financing lease receivables is recognized by the Company as a loss in
the period in which the estimate is changed. As of December 31, 2020 and 2019, the Company determined that none of its direct financing lease
receivables were impaired.
Impairment of Long-Lived Assets
If circumstances indicate that the carrying value of a property may not be recoverable, the Company reviews the property for impairment. This
review is based on an estimate of the future undiscounted cash flows, 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
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the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a property, an
impairment loss is recorded 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 is the adjustment to fair value less estimated cost to dispose of the asset. Impairment assessments
have a direct impact on the consolidated statements of operations because recording an impairment loss results in an immediate negative
adjustment to the consolidated statement of operations.
The Company recorded the following provisions for impairment of long lived assets during the periods presented:
(in thousands)
Provision for impairment of real estate
Cash and Cash Equivalents
2020
Year ended December 31,
2019
2018
$
8,399 $
2,918 $
4,503
Cash and cash equivalents includes cash in the Company’s bank accounts. The Company considers all cash balances and highly liquid
investments with original maturities of three months or less to be cash and cash equivalents. The Company deposits cash with high quality financial
institutions. These deposits are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to an insurance limit.
As of December 31, 2020 and 2019, the Company had deposits of $26.6 million and $8.3 million, respectively, of which $26.4 million and
$8.1 million, respectively, were in excess of the amount insured by the FDIC. Although the Company bears risk with respect to amounts in excess of
those insured by the FDIC, it does not anticipate any losses as a result.
Restricted Cash
Restricted cash primarily consists of cash held with the trustee for the Company’s Master Trust Funding Program (as defined in Note 5—Long
Term Debt). This restricted cash is used to make principal and interest payments on the Company’s secured borrowings, to pay trust expenses and
to invest in future real estate investments which will be pledged as collateral under the Master Trust Funding Program. See Note 5—Long Term
Debt for further discussion.
Adjustment to Rental Revenue/Allowance for Doubtful Accounts
The Company continually reviews receivables related to rent and unbilled rent receivables 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. Prior to January 1, 2019, if the collectability of a receivable was in doubt, the
accounts receivable and straight-line rent receivable balances were reduced by an allowance for doubtful accounts on the consolidated balance
sheets or a direct write-off of the receivable was recorded in the consolidated statements of operations. The provision for doubtful accounts was
included in property expenses in the Company’s consolidated statements of operations. If the accounts receivable balance or straight-line rent
receivable balance was subsequently deemed to be uncollectible, such receivable amounts were written-off to the allowance for doubtful accounts.
Subsequent to January 1, 2019, if the assessment of the collectability of substantially all payments due under a lease changes from probable
to not probable, any difference between the rental revenue recognized to date and the lease payments that have been collected is recognized as a
current period reduction of rental revenue in the consolidated statements of operations.
The Company recorded the following amounts as adjustments to rental revenue or allowance for doubtful accounts during the periods
presented:
(in thousands)
Adjustment to rental revenue/allowance for doubtful accounts
2020
Year ended December 31,
2019
2018
$
7,149 $
593 $
235
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Deferred Financing Costs
Financing costs related to establishing the Company’s 2018 Credit Facility and Revolving Credit Facility (as defined below) were deferred and
are being amortized as an increase to interest expense in the consolidated statements of operations over the term of the facility and are reported as
a component of rent receivables, prepaid expenses and other assets, net on the consolidated balance sheets.
Financing costs related to the issuance of the Company’s secured borrowings under the Master Trust Funding Program, the April 2019 Term
Loan and the November 2019 Term Loan (each as defined below) were deferred and are being amortized as an increase to interest expense in the
consolidated statements of operations over the term of the related debt instrument and are reported as a reduction of the related debt balance on
the consolidated balance sheets.
Derivative Instruments
In the normal course of business, the Company uses derivative financial instruments, which may include interest rate swaps, caps, options,
floors and other interest rate derivative contracts, to protect the Company against adverse fluctuations in interest rates by reducing its exposure to
variability in cash flows on a portion of the Company’s floating-rate debt. Instruments that meet these hedging criteria are formally designated as
hedges at the inception of the derivative contract. The Company records all derivatives on the consolidated balance sheets 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 variability in expected future cash flows, or other types of
forecasted transactions, are considered cash flow hedges. 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 also enter
into derivative contracts that are intended to economically hedge certain 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 designed and qualifies for
hedge accounting treatment. If a derivative is designated and qualifies for cash flow hedge accounting treatment, the change in the estimated fair
value of the derivative is recorded in other comprehensive income (loss) in the consolidated statements of comprehensive income to the extent that
it is effective. Any ineffective portion of a change in derivative fair value is immediately recorded in earnings. If the Company elects not to apply
hedge accounting treatment (or for derivatives that do not qualify as hedges), any change in the fair value of such derivative instruments would be
recognized immediately as a gain or loss on derivative instruments in the consolidated statements of operations.
Fair Value Measurement
The Company estimates fair value of financial and non-financial assets and liabilities based on the framework established in fair value
accounting guidance. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date (an exit price). The hierarchy described below prioritizes inputs to the valuation techniques
used in measuring the fair value of assets and liabilities. This hierarchy maximizes the use of observable inputs and minimizes the use of
unobservable inputs by requiring the most observable inputs to be used when available. The hierarchy is broken down into three levels based on the
reliability of inputs as follows:
Level 1—Quoted prices in active markets for identical assets and liabilities that the Company 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.
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Level 3—Unobservable inputs that reflect the Company's own 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.
Revenue Recognition
The Company’s rental revenue is primarily rent received from tenants. Rent from tenants is recorded in accordance with the terms of each
lease on a straight-line basis over the non-cancellable initial term of the lease from the later of the date of the commencement of the lease and the
date of acquisition of the property subject to the lease. Rental revenue recognition begins when the tenant controls the space and continues through
the term of the related lease. Because substantially all of the leases provide for rental increases at specified intervals, the Company records a
straight-line rent receivable and recognizes revenue on a straight-line basis through the expiration of the non-cancelable term of the lease. The
Company considers whether the collectability of rents is reasonably assured in determining the amount of straight-line rent to record.
Generally, the Company’s leases provide the tenant with one or more multi-year renewal options, subject to generally the same terms and
conditions provided under the initial lease term, including rent increases. If economic incentives make it reasonably certain that an option period to
extend the lease will be exercised, the Company will include these options in determining the non-cancelable term of the lease.
The Company defers rental revenue related to lease payments received from tenants in advance of their due dates. These amounts are
presented within accrued liabilities and other payables on the Company’s consolidated balance sheets.
Certain properties in the Company’s investment portfolio are subject to leases that provide for contingent rent based on a percentage of the
tenant’s gross sales. For these leases, the Company recognizes contingent rental revenue when the threshold upon which the contingent lease
payment is based is actually reached.
The Company recorded the following amounts as contingent rent, which are included as a component of rental revenue in the Company's
consolidated statements of operations, during the periods presented:
(in thousands)
Contingent rent
Offering Costs
2020
Year ended December 31,
2019
2018
$
444 $
855 $
1,083
In connection with the completion of equity offerings, the Company incurs legal, accounting and other offering-related costs. Such costs are
deducted from the gross proceeds of each equity offering when the offering is completed. As of December 31, 2020 and 2019, the Company had
capitalized a total of $67.2 million and $49.0 million, respectively, of such costs in the Company’s consolidated balance sheets. These costs are
presented as a reduction of additional paid-in capital as of December 31, 2020 and 2019.
Legal, accounting and other offering-related costs incurred in connection with the Secondary Offering (as defined below) were expensed when
incurred and were recorded within general and administrative expense in the Company’s consolidated statements of operations.
Income Taxes
The Company elected and qualified to be taxed as a REIT under sections 856 through 860 of the Internal Revenue Code of 1986, as
amended, commencing with its taxable year ended December 31, 2018. REITs are subject to a number of organizational and operational
requirements, including a requirement that 90% of ordinary “REIT taxable income” (as determined without regard to the dividends paid deduction or
net capital gains) be distributed. As a REIT, the Company will generally not be subject to U.S. federal income tax to the extent that it meets the
organizational and operational requirements and its distributions equal or exceed REIT taxable income. For the period subsequent to the effective
date of its REIT election, the Company continues to meet the organizational and operational requirements and expects distributions to exceed REIT
taxable income. Accordingly, no provision has been made for U.S. federal income taxes. Even though the Company has elected and qualifies for
taxation as a REIT, it may be subject to state and local income and franchise taxes, and to federal income and
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excise tax on its undistributed income. Franchise taxes and federal excise taxes on the Company’s undistributed income, if any, are included in
general and administrative expenses on the accompanying consolidated statements of operations. Additionally, taxable income from non-REIT
activities managed through the Company's taxable REIT subsidiary is subject to federal, state, and local taxes.
The Company analyzes its tax filing positions in all of the U.S. federal, state and local tax jurisdictions where it is required to file income tax
returns, as well as for all open tax years in such jurisdictions. The Company follows a two-step process to evaluate uncertain tax positions. Step
one, recognition, occurs when an entity concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained
upon examination. Step two, measurement, determines the amount of benefit that is more-likely-than-not to be realized upon settlement.
Derecognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no
longer meets the more-likely-than-not threshold of being sustained. The use of a valuation allowance as a substitute for derecognition of tax
positions is prohibited.
As of December 31, 2020 and 2019, the Company had no accruals recorded for uncertain tax positions. The Company’s policy is to classify
interest expense and penalties relating to taxes in general and administrative expense in the consolidated statements of operations. During the
years ended December 31, 2020, 2019 and 2018, the Company recorded de minimis interest or penalties relating to taxes, and there were no
interest or penalties with respect to taxes accrued as of December 31, 2020 or 2019. The 2019, 2018, 2017 and 2016 taxable years remain open to
examination by federal and/or state taxing jurisdictions to which the Company is subject.
Equity-Based Compensation
The Company grants shares of restricted common stock and restricted share units (“RSUs”) to its directors, executive officers and other
employees that vest over specified time periods, subject to the recipient’s continued service. The Company also grants performance-based RSUs to
its executive officers, the final number of which is determined based on objective and subjective performance conditions and which vest over a multi-
year period, subject to the recipient’s continued service. The Company accounts for the restricted common stock and RSUs in accordance with ASC
718, Compensation – Stock Compensation, which requires that such compensation be recognized in the financial statements based on its estimated
grant-date fair value. The value of such awards is recognized as compensation expense in general and administrative expenses in the
accompanying consolidated statements of operations over the applicable service periods.
The Company recognizes compensation expense for equity-based compensation using the straight-line method based on the terms of the
individual grant. Forfeitures of equity-based compensation awards, if any, are recognized as they occur.
Variable Interest Entities
The Financial Accounting Standards Board (“FASB”) provides guidance for determining whether an entity is a variable interest entity (a “VIE”).
VIEs are defined as entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity
at risk for the entity to finance its activities without additional subordinated financial support. A VIE is required to be consolidated by its primary
beneficiary, which is the party that (i) has the power to control the activities that most significantly impact the VIE’s economic performance and
(ii) has the obligation to absorb losses, or the right to receive benefits, of the VIE that could potentially be significant to the VIE.
The Company has concluded that the Operating Partnership is a VIE of which the Company is the primary beneficiary, as the Company has
the power to direct the activities that most significantly impact the economic performance of the Operating Partnership. Substantially all of the
Company’s assets and liabilities are held by the Operating Partnership. The assets and liabilities of the Operating Partnership are consolidated and
reported as assets and liabilities on the Company’s consolidated balance sheets as of December 31, 2020 and 2019.
Additionally, the Company has concluded that certain entities to which it has provided mortgage loans are VIEs because the entities' equity
was not sufficient to finance their activities without additional subordinated financial
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support. The following table presents information about the Company’s mortgage loan-related VIEs as of the dates presented:
(Dollars in thousands)
Number of VIEs
Aggregate carrying value
2020
11
December 31,
2019
7
2018
9
$
117,578 $
60,500 $
5,700
The Company was not the primary beneficiary of any of these entities, because the Company did not have the power to direct the activities
that most significantly impact the entities’ economic performance as of December 31, 2020. and 2019. The Company’s maximum exposure to loss in
these entities is limited to the carrying amount of its investment. The Company had no liabilities associated with these VIEs as of December 31,
2020 and 2019.
Reportable Segments
ASC Topic 280, Segment Reporting, establishes standards for the manner in which enterprises report information about operating segments.
Substantially all of the Company's investments, at acquisition, are comprised of real estate owned that is leased to tenants on a long-term basis.
Therefore, the Company aggregates these investments for reporting purposes and operates in one reportable segment.
Recent Accounting Developments
In February 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) establishing ASC
326, as amended by subsequent ASUs on the topic. ASU 2016-13 is effective for interim and annual reporting periods in fiscal years beginning after
December 15, 2019. The Company adopted this guidance on January 1, 2020 and recorded estimates of expected loss on its loans and direct
financing lease receivable portfolio beginning on that date, as discussed above.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging
Activities (“ASU 2017-12”), which amends and simplifies existing guidance in order to allow companies to more accurately present the economic
effects of risk management activities in the financial statements. The Company adopted ASU 2017-12 while accounting for its initial interest rate
swaps in 2019 (see Note 6—Derivative and Hedging Activities). As the Company did not have other derivatives outstanding at time of adoption, no
prior period adjustments were required. Pursuant to the provisions of ASU 2017-12, the Company is no longer required to separately measure and
recognize hedge ineffectiveness. Instead, the Company recognizes the entire change in the fair value of cash flow hedges included in the
assessment of hedge effectiveness in other comprehensive (loss) income. The amounts recorded in other comprehensive (loss) income will
subsequently be reclassified to earnings when the hedged item affects earnings. The adoption of ASU 2017-12 did not have a material impact on
the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Changes to the Disclosure Requirements for Fair Value
Measurement (“ASU 2018-13”), which changes the disclosure requirements for fair value measurements by removing, adding and modifying certain
disclosures. ASU 2018-13 is effective for annual periods beginning after December 15, 2019, with early adoption permitted. The Company adopted
this guidance on January 1, 2020 and the adoption of ASU 2018-13 did not have a material impact on the Company’s related disclosures.
In March 2020, the FASB issued ASU 2020-4, Reference Rate Reform (Topic 848) (“ASU 2020-4”). ASU 2020-4 contains practical expedients
for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-4 is optional and may
be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting
expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which
future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the
presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other
elections as applicable as additional changes in the market occur.
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In April 2020, the FASB staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease
accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Under existing lease guidance, the entity would have to
determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant, which would be accounted
for under the lease modification framework, or if a lease concession was under the enforceable rights and obligations that existed in the original
lease, which would be accounted for outside the lease modification framework. The Lease Modification Q&A provides entities with the option to elect
to account for lease concessions as though the enforceable rights and obligations existed in the original lease. This election is only available when
total cash flows resulting from the modified lease are substantially similar to or less than the cash flows in the original lease. The Company made
this election and accounts for rent deferrals by increasing its rent receivables as receivables accrue and continuing to recognize income during the
deferral period, resulting in $12.4 million of deferrals being recognized in rental revenues for the year ended December 31, 2020. Lease
concessions or amendments other than rent deferrals are evaluated to determine if a substantive change to the consideration in the original lease
contract has occurred and should be accounted for as a lease modification. The Company continues to evaluate any amounts recognized for
collectability, regardless of whether accounted for as a lease modification or not, and records an adjustment to rental income for tenant credit for
amounts that are not probable of collection. For lease concessions granted in conjunction with the COVID-19 pandemic, the Company reviewed all
amounts recognized on a tenant-by-tenant basis for collectability.
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic
470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in
an Entity’s Own Equity” (“ASU 2020-06”). The guidance in ASU 2020-06 simplifies the accounting for convertible debt and convertible preferred
stock by removing the requirements to separately present certain conversion features in equity. In addition, the amendments in the ASU 2020-06
also simplify the guidance in ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must
be satisfied in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded
derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the
if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that
may be settled in cash or other assets. The amendments in ASU 2020-06 are effective for the Company for fiscal years beginning after December
15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The guidance must be adopted as of the
beginning of the fiscal year of adoption. The Company is currently evaluating the impact of this new guidance.
3. Investments
The following table presents information about the Company’s real estate investment portfolio as of each date presented:
(1)
Owned properties
Properties securing investments in mortgage loans
Ground lease interests
(3)
(2)
Total number of investments
December 31,
2020
1,056
115
10
1,181
2019
897
91
12
1,000
_____________________________________
(1)
Includes 11 and 8 properties which are subject to leases accounted for as direct financing leases or loans as of December 31, 2020 and 2019,
respectively.
Properties secure 8 and 6 mortgage loans receivable as of December 31, 2020 and 2019, respectively.
Includes one building which is subject to a lease accounted for as a direct financing lease as of December 31, 2020 and 2019.
(2)
(3)
86
The following table presents information about the Company’s gross investment portfolio as of each date presented:
(in thousands)
Gross investment portfolio:
Real estate investments, at cost
Loans and direct financing lease receivables, net
Real estate investments held for sale, net
Total gross investments
December 31,
2020
2019
2,359,395
152,220
17,058
2,528,673 $
1,908,919
92,184
1,211
2,002,314
$
As of December 31, 2020 and 2019, 258 and 355 of these investments, comprising $399.7 million and $601.3 million, respectively, of gross
investments, were assets of consolidated special purpose entity subsidiaries and were pledged as collateral under the non-recourse obligations of
the Company’s Master Trust Funding Program. (See Note 5—Long Term Debt.)
Acquisitions in 2020 and 2019
The following table presents information about the Company’s acquisition activity during the years ended December 31, 2020 and 2019:
(Dollars in thousands)
Ownership type
Number of properties
Purchase price allocation:
Land and improvements
Building and improvements
(3)
Construction in progress
Intangible lease assets
Total purchase price
Intangible lease liabilities
Purchase price (including acquisition costs)
Year ended December 31,
2020
(1)
208
2019
(2)
281
$
$
181,297 $
323,542
15,825
7,737
528,401
(2,125)
526,276 $
191,311
370,312
17,858
18,802
598,283
(188)
598,095
_____________________________________
(1)
During the year ended December 31, 2020, the Company acquired the fee interest in 206 properties and acquired two properties subject to
ground lease arrangements.
During the year ended December 31, 2019, the Company acquired the fee interest in 279 properties and acquired two properties subject to
ground lease arrangements.
Represents amounts incurred at and subsequent to acquisition and includes $0.2 million and $0.3 million, respectively, of capitalized interest
expense as of December 31, 2020 and 2019.
(2)
(3)
During the years ended December 31, 2020 and 2019, the Company did not have any investments that individually represented more than 5%
of the Company’s total investment activity.
87
Gross Investment Activity
During the years ended December 31, 2020, 2019 and 2018, the Company had the following gross investment activity:
(Dollar amounts in thousands)
Gross investments, December 31, 2017
Acquisitions of and additions to real estate investments
Sales of investments in real estate
Relinquishment of properties at end of ground lease term
Provisions for impairment of real estate
Investments in loans receivable
Principal collections on and settlements of loans and direct financing lease receivables
Other
(2)(3)
(1)
Gross investments, December 31, 2018
Acquisitions of and additions to real estate investments
Sales of investments in real estate
Relinquishment of properties at end of ground lease term
Provisions for impairment of real estate
Investments in loans receivable
Principal collections on and settlements of loans and direct financing lease receivables
Other
(4)
Gross investments, December 31, 2019
Acquisitions of and additions to real estate investments
Sales of investments in real estate
Relinquishment of properties at end of ground lease term
Provisions for impairment of real estate
Investments in loans receivable
Principal collections on and settlements of loans and direct financing lease receivables
Other
(6)
(5)
Gross investments, December 31, 2020
Less: Accumulated depreciation and amortization
(7)
Net investments, December 31, 2020
Number of
Investment
Locations
Dollar
Amount of
Investments
508 $
204
(45)
(2)
—
12
—
—
677
281
(37)
(3)
—
95
(13)
—
1,000
208
(49)
(3)
—
25
—
—
1,181
—
1,181 $
939,072
506,949
(58,084)
(853)
(4,543)
14,854
(74)
(2,772)
1,394,549
603,677
(65,571)
(700)
(2,918)
94,637
(19,958)
(1,402)
2,002,314
568,204
(81,312)
(1,931)
(8,399)
61,339
(286)
(11,256)
2,528,673
(136,097)
2,392,576
_____________________________________________
(1)
During the year ended December 31, 2018, the Company identified and recorded provisions for impairment at 7 vacant and 14 tenanted
properties. The amount in the table above excludes $40,000 related to intangible lease liabilities for these assets.
Includes a $3.5 million of loan receivable made to the purchaser of one real estate property as of December 31, 2018.
Excludes improvements at one property securing a $3.2 million development construction loan as the land at this location is included in
acquisitions of and additions to real estate investments for 2018.
During the year ended December 31, 2019, the Company identified and recorded provisions for impairment at 1 vacant and 7 tenanted
properties.
During the year ended December 31, 2020, the Company identified and recorded provisions for impairment at 7 vacant and 10 tenanted
properties.
During the year ended December 31, 2020, the Company invested in 25 properties that secured five of its loans receivable for an aggregate
investment of $57.0 million.
Includes $112.1 million of accumulated depreciation as of December 31, 2020.
(2)
(3)
(4)
(5)
(6)
(7)
88
Real Estate Investments
The Company's investment properties are leased to tenants under long-term operating leases that typically include one or more renewal
options. See Note 4—Leases for more information about the Company's leases.
Loans and Direct Financing Lease Receivables
As of December 31, 2020 and 2019, the Company had 13 and seven loans receivable outstanding, with an aggregate carrying amount of
$150.8 million and $89.6 million, respectively. The maximum amount of loss due to credit risk is the Company's current principal balance of $150.8
million as of December 31, 2020.
The Company's loans receivable principal portfolio as of December 31, 2020 and 2019 are summarized below (dollars in thousands):
Loan Type
(2)(3)
(2)
(2)
(2)
(2)
(3)
(2)
Mortgage
Mortgage
Mortgage
Mortgage
Mortgage
Mortgage
Mortgage
Mortgage
Mortgage
Leasehold interest
Leasehold interest
Leasehold interest
Leasehold interest
Net investment
(2)
(2)
Monthly
Payment
I/O
P+I
I/O
I/O
I/O
I/O
I/O
I/O
I/O
P+I
P+I
P+I
P+I
Number of Secured
Properties
2
2
2
69
18
1
1
3
19
2
1
1
1
Effective Interest
Rate
8.80%
8.10%
8.53%
8.16%
8.05%
8.42%
7.00%
8.30%
7.30%
10.69%
2.25%
2.41%
4.97%
Stated Interest
Rate
8.10%
8.10%
7.80%
7.70%
7.50%
7.70%
7.00%
8.25%
6.80%
(4)
(5)
(5)
(5)
Maturity Date
2039
2059
2039
2034
2034
2040
2021
2022
2035
2039
2034
2034
2038
December 31,
2020
2019
$
$
12,000 $
6,114
7,300
28,000
37,105
5,300
860
2,324
46,000
1,435
1,109
1,645
1,605
150,797 $
12,000
5,125
7,300
28,000
34,604
—
—
—
—
1,435
1,164
—
—
89,628
________________________________________________
(1)
(2)
(3)
(4)
I/O: Interest Only; P+I: Principal and Interest
Loan requires monthly payments of interest only with a balloon payment due at maturity.
Loan allows for prepayments in whole or in part without penalty.
This leasehold interest is accounted for as a loan receivable, as the lease for two land parcels contains an option for the lessee to repurchase
the leased parcels in 2024 or 2025.
These leasehold interests are accounted for as loans receivable, as the leases for each property contain an option for the relevant lessee to
repurchase the leased property in the future.
(5)
89
Scheduled principal payments due to be received under the Company's loans receivable as of December 31, 2020 are as follows:
(in thousands)
2021
2022
2023
2024
2025
Thereafter
Total
Loans Receivable
1,068
2,545
236
252
268
146,428
150,797
$
$
As of December 31, 2020 and 2019, the Company had $2.4 million and $2.6 million of net investments accounted for as direct financing lease
receivables, respectively. The components of the investments accounted for as direct financing lease receivables were as follows:
(in thousands)
Minimum lease payments receivable
Estimated unguaranteed residual value of leased assets
Unearned income from leased assets
Net investment
December 31,
2020
2019
3,529 $
270
(1,357)
2,442 $
3,866
270
(1,581)
2,555
$
$
Scheduled future minimum non-cancelable base rental payments due to be received under the direct financing lease receivables as of
December 31, 2020 were as follows:
(in thousands)
2021
2022
2023
2024
2025
Thereafter
Total
Future Minimum Base
Rental Payments
340
345
347
289
254
1,954
3,529
$
$
Allowance for Loan Losses
As discussed in Note 2—Summary of Significant Accounting Policies, the Company utilizes a RELEM model which estimates losses on loans
and direct financing lease receivables for purposes of calculating an allowance for loan losses. As of December 31, 2020, the Company recorded an
allowance for loan losses of $1.0 million. Changes in the Company’s allowance for loan losses are presented within provision for loan losses in the
Company’s consolidated statements of operations.
90
For the year ended December 31, 2020, the changes to allowance for loan losses were as follows:
(in thousands)
Balance at December 31, 2019
Cumulative-effect adjustment upon adoption of ASC 326
Current period provision for expected credit losses
Write-offs charged
Recoveries
Balance at December 31, 2020
(1)
Loans and Direct
Financing Lease
Receivables
—
188
830
—
—
1,018
$
$
_____________________________________
(1)
The increase in expected credit losses is due to the changes in assumptions regarding current macroeconomic factors related to COVID and
our investment in new loans receivable during the period.
The significant credit quality indicators for the Company’s loans and direct financing lease receivables measured at amortized cost, were as
follows as of December 31, 2020:
(in thousands)
Credit Quality Indicator:
LTV <60%
LTV 60%-70%
LTV >70%
Amortized Cost Basis by Origination Year
2020
2019
2018
2017
2016
Total Amortized
Costs Basis
$
$
860 $
—
56,874
57,734 $
28,000
—
65,063
93,063
$
$
— $
—
—
— $
— $
—
—
— $
747
988
706
2,441
$
$
29,607
988
122,643
153,238
Real Estate Investments Held for Sale
The Company continually evaluates its portfolio of real estate investments and may elect to dispose of investments considering criteria
including, but not limited to, tenant concentration, tenant credit quality, tenant operation type (e.g., industry, sector or concept), unit-level financial
performance, local market conditions and lease rates, associated indebtedness and asset location. Real estate investments held for sale are
expected to be sold within twelve months.
The following table shows the activity in real estate investments held for sale and intangible lease liabilities held for sale during the years
ended December 31, 2020 and 2019:
(Dollar amounts in thousands)
Held for sale balance, December 31, 2018
Transfers to held for sale classification
Sales
Transfers to held and used classification
Held for sale balance, December 31, 2019
Transfers to held for sale classification
Sales
Transfers to held and used classification
Held for sale balance, December 31, 2020
Significant Concentrations
Number of
Properties
Real Estate
Investments
Intangible Lease
Liabilities
Net Carrying
Value
—
5
(4)
—
1
8
(1)
—
8
$
$
— $
7,450
(6,239)
—
1,211
17,058
(1,211)
—
17,058 $
—
—
—
—
—
—
—
—
—
$
$
—
7,450
(6,239)
—
1,211
17,058
(1,211)
—
17,058
The Company did not have any tenants (including for this purpose, all affiliates of such tenants) whose rental revenue for the years ended
December 31, 2020, 2019 or 2018 represented 10% or more of total rental revenue in the Company's consolidated statements of operations.
91
The following table lists the states where the rental revenue from the properties in that state during the periods presented represented 10% or
more of total rental revenue in the Company's consolidated statements of operations:
State
Texas
Georgia
2020
14.9%
9.6%
Year ended December 31,
2019
12.4%
10.8%
2018
12.5%
11.5%
Intangible Assets and Liabilities
Intangible assets and liabilities consisted of the following as of the dates presented:
(in thousands)
Intangible assets:
In-place leases
Intangible market lease assets
Total intangible assets
Intangible market lease liabilities
December 31, 2020
December 31, 2019
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
$
$
$
67,986 $
12,285
80,271 $
18,767 $
4,059
22,826 $
49,219 $
8,226
57,445 $
64,828 $
14,094
78,922 $
14,195 $
4,228
18,423 $
50,633
9,866
60,499
12,772 $
2,604 $
10,168 $
12,054 $
2,490 $
9,564
The remaining weighted average amortization period for the Company's intangible assets and liabilities as of December 31, 2020, by
category and in total, were as follows:
In-place leases
Intangible market lease assets
Total intangible assets
Intangible market lease liabilities
Years Remaining
9.8
17.6
10.4
6.4
The following table discloses amounts recognized within the consolidated statements of operations related to amortization of in-place leases,
amortization and accretion of above- and below-market lease assets and liabilities, net and the amortization and accretion of above- and below-
market ground leases for the periods presented:
(in thousands)
Amortization of in-place leases
Amortization (accretion) of market lease intangibles, net
Amortization (accretion) of above- and below-market ground lease intangibles, net
(1)
(2)
2020
Year ended December 31,
2019
2018
$
(3)
7,067 $
9
(395)
6,272 $
866
(333)
6,465
780
(443)
______________________________________________________
(1)
(2)
(3)
Reflected within depreciation and amortization expense.
Reflected within rental revenue.
Reflected within property expenses.
92
The following table provides the estimated amortization of in-place lease assets to be recognized as a component of depreciation and
amortization expense for the next five years and thereafter:
(in thousands)
2021
2022
2023
2024
2025
Thereafter
Total
In-Place Lease
Assets
5,998
5,839
5,418
4,739
3,685
23,540
49,219
$
$
The following table provides the estimated net amortization of above- and below-market lease intangibles to be recognized as a component of
rental revenue for the next five years and thereafter:
(in thousands)
2021
2022
2023
2024
2025
Thereafter
Total
4. Leases
As Lessor
Above Market
Lease Asset
Below Market
Lease Liabilities
Net Adjustment to
Rental Revenue
$
$
(732) $
(731)
(700)
(669)
(662)
(4,732)
(8,226) $
528 $
587
502
570
608
7,373
10,168 $
(204)
(144)
(198)
(99)
(54)
2,641
1,942
The Company’s investment properties are leased to tenants under long-term operating leases that typically include one or more tenant
renewal options. The Company’s leases provide for annual base rental payments (generally payable in monthly installments), and generally provide
for increases in rent based on fixed contractual terms or as a result of increases in the Consumer Price Index.
Substantially all of the leases are triple-net, which means that the lessees are responsible for paying all property operating expenses,
including maintenance, insurance, utilities, property taxes and, if applicable, ground rent expense; therefore, the Company is generally not
responsible for repairs or other capital expenditures related to the properties while the triple-net leases are in effect and, at the end of the lease
term, the lessees are responsible for returning the property to the Company in a substantially similar condition as when they took possession. Some
of the Company’s leases provide that in the event the Company wishes to sell the property subject to that lease, it first must offer the lessee the right
to purchase the property on the same terms and conditions as any offer which it intends to accept for the sale of the property.
93
Scheduled future minimum base rental payments due to be received under the remaining non-cancelable term of the operating leases in place
as of December 31, 2020 were as follows:
(in thousands)
2021
2022
2023
2024
2025
Thereafter
Total
Future Minimum Base
Rental Receipts
186,271
189,346
192,210
193,275
191,848
2,092,267
3,045,217
$
$
Since lease renewal periods are exercisable at the option of the lessee, the preceding table presents future minimum base rental payments to
be received during the initial non-cancelable lease term only. In addition, the future minimum lease payments exclude contingent rent payments, as
applicable, that may be collected from certain tenants based on provisions related to performance thresholds and exclude increases in annual rent
based on future changes in the Consumer Price Index, among other items.
The fixed and variable components of lease revenues for the years ended December 31, 2020, 2019, and 2018 were as follows:
2020
Year ended December 31,
2019
2018
$
$
165,171 $
1,341
166,512 $
134,879 $
2,282
137,161 $
94,770
1,671
96,441
(in thousands)
Fixed lease revenues
Variable lease revenues
(1)
Total lease revenues
_____________________________________
(1)
(2)
Includes contingent rent based on a percentage of the tenant’s gross sales and costs paid by the Company for which it is reimbursed by its
tenants.
Excludes the amortization and accretion of above- and below-market lease intangible assets and liabilities and lease incentives and the
adjustment to rental revenue for tenant credit.
(2)
As Lessee
The Company has a number of ground leases, an office lease and other equipment leases which are classified as operating leases. On
January 1, 2019, the Company recorded $4.8 million of right of use ("ROU") assets and lease liabilities related to these operating leases. The
Company's ROU assets were reduced by $0.1 million of accrued rent expense reclassified from accrued liabilities and other payables and $1.2
million of acquired above-market lease liabilities, net, reclassified from intangible lease liabilities, net and increased by $0.1 million of acquired
below-market lease assets, net, reclassified from intangible lease assets, net of accumulated depreciation and amortization and $0.2 million of
prepaid lease payments. As of December 31, 2020, the Company's ROU assets and lease liabilities were $6.4 million and $8.8 million, respectively.
As of December 31, 2019, the Company's ROU assets and lease liabilities were $4.8 million and $7.5 million, respectively.
The discount rate applied to measure each ROU asset and lease liability is based on the Company's incremental borrowing rate ("IBR"). The
Company considers the general economic environment and its historical borrowing activity and factors in various financing and asset specific
adjustments to ensure the IBR is appropriate to the intended use of the underlying lease. As the Company did not elect to apply hindsight, lease
term assumptions determined under ASC 840 were carried forward and applied in calculating the lease liabilities recorded under ASC 842. Certain
of the Company's ground leases offer renewal options which it assesses against relevant economic factors to determine whether it is reasonably
certain of exercising or not exercising the option. Lease payments associated with renewal periods that the Company is reasonably certain will be
exercised, if any, are included in the measurement of the corresponding lease liability and ROU asset.
94
The following table sets forth information related to the measurement of the Company's lease liabilities as of the dates presented:
Weighted average remaining lease term (in years)
Weighted average discount rate
December 31, 2020
22.4
6.41%
December 31, 2019
21.9
7.00%
The Company recognizes rent expense on its ground leases as a component of property expenses and rent expense on its office lease and
other equipment leases as a component of general and administrative expense on its consolidated statements of operations. At certain of these
ground leased properties, the Company’s lease as lessor of the building directly obligates the building lessee to pay rents due under the ground
lease to the ground lessor; under ASC 840, such ground lease rents are presented on a net basis in the Company’s consolidated statements of
operations for the years ended December 31, 2018. Upon adoption of ASC 842 on January 1, 2019 (see Note 2—Summary of Significant
Accounting Policies), ground lease rents are no longer presented on a net basis and instead are reflected on a gross basis in the Company’s
consolidated statements of operations for the years ended December 31, 2020 and 2019.
The following table sets forth the details of rent expense for the years ended December 31, 2020, 2019 and 2018:
(in thousands)
Fixed rent expense - Ground Rent
Fixed rent expense - Office Rent
Variable rent expense
Total rent expense
2020
Year ended December 31,
2019
2018
$
$
905 $
512
—
1,418 $
911 $
514
—
1,425 $
1,010
273
—
1,284
As of December 31, 2020, under ASC 842, future lease payments due from the Company under the ground, office and equipment operating
leases where the Company is directly responsible for payment and the future lease payments due under the ground operating leases where the
Company's tenants are directly responsible for payment over the next five years and thereafter were as follows:
(in thousands)
2021
2022
2023
2024
2025
Thereafter
Total
Present value discount
Lease liabilities
Office and Equipment
Leases
Ground Leases
to be Paid by
the Company
Ground Leases
to be Paid
Directly by the
Company’s
Tenants
Total Future
Minimum
Base Rental
Payments
$
$
511 $
518
525
531
538
—
2,623 $
151 $
151
131
24
—
—
457 $
809 $
811
485
436
356
14,562
17,459
$
1,471
1,480
1,141
991
894
14,562
20,539
(11,703)
8,836
The Company has adopted the short-term lease policy election and accordingly, the table above excludes future minimum base cash rental
payments by the Company or its tenants on leases that have a term of less than 12 months at lease inception. The total of such future obligations is
not material.
95
5. Long Term Debt
The following table summarizes the Company's outstanding indebtedness as of December 31, 2020 and 2019:
(in thousands)
Unsecured term loans:
April 2019 Term Loan
November 2019 Term Loan
Revolving Credit Facility
Secured borrowings:
Series 2017-1 Notes
Total principal outstanding
Maturity Date
December 31,
2020
December 31, 2019
December 31, 2020
December 31, 2019
Principal Outstanding
Weighted Average Interest Rate
April 2024
November 2026
April 2023
June 2047
$
$
200,000 $
430,000
18,000
173,193
821,193 $
200,000
250,000
46,000
239,102
735,102
1.4%
1.7%
1.4%
4.2%
2.1%
3.0%
3.2%
3.1%
4.2%
3.5%
The following table summarizes the scheduled principal payments on the Company’s outstanding indebtedness as of December 31, 2020:
(in thousands)
2021
2022
2023
2024
2025
Thereafter
Total
April 2019 Term
Loan
November 2019
Term Loan
Revolving Credit
Facility
Secured Borrowings
Total
$
$
— $
—
—
200,000
—
—
200,000 $
— $
—
—
—
—
430,000
430,000 $
— $
—
18,000
—
—
—
18,000 $
4,084 $
4,292
4,512
160,305
—
—
173,193 $
4,084
4,292
22,512
360,305
—
430,000
821,193
The Company was not in default of any provisions under any of its outstanding indebtedness as of December 31, 2020 or 2019.
Revolving Credit Facility and April 2019 Term Loan
On April 12, 2019, the Company, through the Operating Partnership, entered into an amended and restated credit agreement (the “Amended
Credit Agreement”) with its group of lenders, amending and restating the terms of the Company’s previous $300.0 million revolving credit facility (the
“2018 Credit Facility”) to increase the maximum aggregate initial original principal amount of the revolving loans available thereunder up to
$400.0 million (the “Revolving Credit Facility”) and to permit the incurrence of an additional $200.0 million in term loans thereunder (the “April 2019
Term Loan”).
The Revolving Credit Facility has a term of four years from April 12, 2019, with an extension option of up to one year exercisable by the
Operating Partnership, subject to certain conditions, and the April 2019 Term Loan has a term of five years from the effective date of the amended
agreement. The loans under each of the Revolving Credit Facility and the April 2019 Term Loan initially bear interest at an annual rate of applicable
LIBOR plus the applicable margin (which applicable margin varies between the Revolving Credit Facility and the April 2019 Term Loan).
The applicable LIBOR is the rate with a term equivalent to the interest period applicable to the relevant borrowing. The applicable margin
initially is a spread set according to a leverage-based pricing grid. At the Operating Partnership’s election, on and after receipt of an investment
grade corporate credit rating from Standard & Poor’s (“S&P”) or Moody’s Investors Services, Inc. (“Moody’s”), the applicable margin will be a spread
set according to the Company’s corporate credit ratings provided by S&P and/or Moody’s. The Revolving Credit Facility and the April 2019 Term
Loan are freely pre-payable at any time and the Revolving Credit Facility is mandatorily payable if borrowings exceed the borrowing base or the
facility limit. The Operating Partnership may re-borrow amounts paid down on the Revolving Credit Facility but not on the April 2019 Term Loan.
96
The Operating Partnership is required to pay revolving credit fees throughout the term of the Revolving Credit Agreement based upon its
usage of the Revolving Credit Facility, at a rate which depends on its usage of such facility during the period before the Company receives an
investment grade corporate credit rating from S&P or Moody’s, and which rate shall be based on the corporate credit rating from S&P and/or
Moody’s after the time, if applicable, the Company receives such a rating. The Operating Partnership was required to pay a ticking fee on the April
2019 Term Loan for the period from April 12, 2019 through May 14, 2019, the date the term loan was fully drawn. The Amended Credit Agreement
has an accordion feature to increase, subject to certain conditions, the maximum availability of credit (either through increased revolving
commitments or additional term loans) by up to $200 million.
Additionally, on November 22, 2019, the Company further amended the Amended Credit Agreement to update certain terms to be consistent
with those as described under, and to acknowledge, where applicable, the November 2019 Term Loan (as defined below) and to make certain other
changes to the Amended Credit Agreement consistent with market practice on future replacement of the LIBOR rate and qualified financial
contracts.
The Operating Partnership is the borrower under the Amended Credit Agreement, and the Company and each of its subsidiaries that owns a
direct or indirect interest in an eligible real property asset are guarantors under the Amended Credit Agreement.
Under the terms of the Amended Credit Agreement, the Company is subject to various restrictive financial and nonfinancial covenants which,
among other things, require the Company to maintain certain leverage ratios, cash flow and debt service coverage ratios, secured borrowing ratios
and a minimum level of tangible net worth.
The Amended Credit Agreement restricts the Company’s ability to pay distributions to its stockholders under certain circumstances. However,
the Company may make distributions to the extent necessary to maintain its qualification as a REIT under the Internal Revenue Code of 1986, as
amended. The Amended Credit Agreement contains certain additional covenants that, subject to exceptions, limit or restrict the Company’s
incurrence of indebtedness and liens, disposition of assets, transactions with affiliates, mergers and fundamental changes, modification of
organizational documents, changes to fiscal periods, making of investments, negative pledge clauses and lines of business and REIT qualification.
In May 2019, the Company borrowed the entire $200.0 million available under the April 2019 Term Loan and used the proceeds to
repurchase, in part, notes previously issued under its Master Trust Funding Program. The Company borrowed the entire $430.0 million available
under the November 2019 Term Loan in separate draws in December 2019 and March 2020 and used the proceeds to voluntarily prepay notes
previously issued under its Master Trust Funding Program at par, to repay amounts outstanding under the Revolving Credit Facility and for general
working capital purposes.
The Company was in compliance with all financial covenants and was not in default of any other provisions under the Amended Credit Facility
as of December 31, 2020 and 2019.
The following table presents information about the Revolving Credit Facility and the 2018 Credit Facility in effect for the years ended
December 31, 2020, 2019 and 2018:
(in thousands)
Balance on Balance on January 1,
Borrowings
Repayments
Balance on December 31,
2020
2019
2018
$
$
46,000 $
87,000
(115,000)
18,000 $
34,000 $
459,000
(447,000)
46,000 $
The following table presents information about interest expense related to the Revolving Credit Facility and the 2018 Credit Facility:
(in thousands)
Interest expense
Amortization of deferred financing costs
Total
2020
Year ended December 31,
2019
2018
1,367 $
1,165
2,532 $
3,416 $
1,094
4,510 $
$
$
97
—
34,000
—
34,000
442
494
936
Total deferred financing costs, net, of $2.5 million and $3.5 million related to the Revolving Credit Facility were included within rent
receivables, prepaid expenses and other assets, net on the Company’s consolidated balance sheets as of December 31, 2020 and 2019,
respectively.
As of December 31, 2020 and 2019, the Company had $382.0 million and $354.0 million, respectively, of unused borrowing capacity related
to the Revolving Credit Facility.
November 2019 Term Loan
On November 26, 2019, the Company, through the Operating Partnership, entered into a new $430 million term loan credit facility (the
“November 2019 Term Loan”) with a group of lenders. The November 2019 Term Loan provides for term loans to be drawn up to an aggregate
amount of $430 million with a maturity of November 26, 2026.
Borrowings under the November 2019 Term Loan bear interest at an annual rate of applicable LIBOR plus the applicable margin. The
applicable LIBOR will be the rate with a term equivalent to the interest period applicable to the relevant borrowing. The applicable margin will initially
be a spread set according to a leverage-based pricing grid. At the Operating Partnership’s irrevocable election, on and after receipt of an investment
grade corporate credit rating from S&P or Moody’s, the applicable margin will be a spread set according to the Company’s corporate credit ratings
provided by S&P and/or Moody’s.
The November 2019 Term Loan is pre-payable at any time by the Operating Partnership (as borrower), provided, that if the loans under the
November 2019 Term Loan are repaid on or before November 26, 2020, they are subject to a two percent prepayment premium, and if repaid
thereafter but on or before November 26, 2021, they are subject to a one percent prepayment premium. After November 26, 2021, the loans may be
repaid without penalty. The Operating Partnership may not re-borrow amounts paid down on the November 2019 Term Loan. The Operating
Partnership was required to pay a ticking fee on any undrawn portion of the November 2019 Term Loan for the period from November 26, 2019
through March 26, 2020, the date that the November 2019 Term Loan was fully drawn. The November 2019 Term Loan has an accordion feature to
increase, subject to certain conditions, the maximum availability of the facility up to an aggregate of $500 million.
The Operating Partnership is the borrower under the November 2019 Term Loan, and the Company and each of its subsidiaries that owns a
direct or indirect interest in an eligible real property asset are guarantors under the facility. Under the terms of the November 2019 Term Loan, the
Company is subject to various restrictive financial and nonfinancial covenants which, among other things, require the Company to maintain certain
leverage ratios, cash flow and debt service coverage ratios, secured borrowing ratios and a minimum level of tangible net worth.
Additionally, the November 2019 Term Loan restricts the Company’s ability to pay distributions to its stockholders under certain
circumstances. However, the Company may make distributions to the extent necessary to maintain its qualification as a REIT under the Internal
Revenue Code of 1986, as amended. The facility contains certain covenants that, subject to exceptions, limit or restrict the Company’s incurrence of
indebtedness and liens, disposition of assets, transactions with affiliates, mergers and fundamental changes, modification of organizational
documents, changes to fiscal periods, making of investments, negative pledge clauses and lines of business and REIT qualification.
The Company was in compliance with all financial covenants and was not in default of any other provisions under the November 2019 Term
Loan as of December 31, 2020 and 2019.
The following table presents information about aggregate interest expense related to the April 2019 and November 2019 Term Loan Facilities:
(in thousands)
Interest expense
Amortization of deferred financing costs
Total
Year ended December 31,
2020
2019
$
$
11,685 $
711
12,396 $
4,868
187
5,055
98
Total deferred financing costs, net, of $3.7 million and $4.4 million as of December 31, 2020 and 2019, respectively, related to the Term Loan
Facilities are included as a component of unsecured term loans, net of deferred financing costs on the Company’s consolidated balance sheets.
The Company fixed the interest rates on its term loan facilities’ variable-rate debt through the use of interest rate swap agreements. See Note
6—Derivative and Hedging Activities for additional information.
Secured Borrowings
In the normal course of business, the Company transfers financial assets in various transactions with Special Purpose Entities (“SPE”)
determined to be VIEs, which primarily consist of securitization trusts established for a limited purpose (the “Master Trust Funding Program”). These
SPEs are formed for the purpose of securitization transactions in which the Company transfers assets to an SPE, which then issues to investors
various forms of debt obligations supported by those assets. In these securitization transactions, the Company typically receives cash from the SPE
as proceeds for the transferred assets and retains the rights and obligations to service the transferred assets in accordance with servicing
guidelines. All debt obligations issued from the SPEs are non-recourse to the Company.
In accordance with the accounting guidance for asset transfers, the Company considers any ongoing involvement with transferred assets in
determining whether the assets can be derecognized from the balance sheets. For transactions that do not meet the requirements for derecognition
and remain on the consolidated balance sheets, the transferred assets may not be pledged or exchanged by the Company.
The Company evaluates its interest in certain entities to determine if these entities meet the definition of a VIE and whether the Company is
the primary beneficiary and, therefore, should consolidate the entity based on the variable interests it held both at inception and when there was a
change in circumstances that required a reconsideration. The Company has determined that the SPEs created in connection with its Master Trust
Funding Program should be consolidated as the Company is the primary beneficiary of each of these entities. Tenant rentals received on assets
transferred to SPEs under the Master Trust Funding Program are sent to the trustee and used to pay monthly principal and interest payments.
Series 2016-1 Notes
In December 2016, the Company issued its first series of notes under the Master Trust Funding Program, consisting of $263.5 million of
Class A Notes and $17.3 million of Class B Notes (together, the “Series 2016-1 Notes”). These notes were issued to an affiliate of Eldridge
Industries, LLC (“Eldridge”) through underwriting agents. The Series 2016-1 Notes were issued by two SPEs formed to hold assets and issue the
secured borrowings associated with the securitization.
The Series 2016-1 Notes were scheduled to mature in November 2046, but the terms of the Class A Notes required principal to be paid
monthly through November 2021, with a balloon repayment at that time, and the terms of the Class B Notes required no monthly principal payments
but required the full principal balance to be paid in November 2021.
In May 2019, the Company repurchased a portion of its Class A Series 2016-1 Notes with a face value of $200 million for $201.4 million from
an affiliate of Eldridge. On November 12, 2019, the Company cancelled all $200 million of these repurchased Class A Series 2016-1 Notes.
In November 2019, the Company prepaid all $70.4 million of the then outstanding Series 2016-1 Notes (consisting of the remaining
$53.2 million Class A Series 2016-1 Notes and $17.2 million Class B Series 2016-1 Notes) at par plus accrued interest pursuant to the terms of the
agreements related to such securities.
Series 2017-1 Notes
In July 2017, the Company issued its second series of notes under the Master Trust Funding Program, consisting of $232.4 million of Class A
Notes and $15.7 million of Class B Notes (together, the “Series 2017-1 Notes”). The Series 2017-1 Notes were issued by three SPEs formed to hold
assets and issue the secured borrowings associated with the securitization.
99
The Series 2017-1 Notes mature in June 2047 and have a weighted average interest rate of 4.19% as of December 31, 2020. If the notes are
not repaid in full on or before such anticipated repayment date, additional interest will begin to accrue on the notes. The anticipated repayment date
for the Series 2017-1 Notes is June 2024.
The Series 2017-1 Notes may be voluntarily prepaid, in whole or in part, beginning in November 2021 without the payment of a make whole
amount. Voluntary prepayments may be made before 31 months prior to the anticipated repayment date.
In February 2020, the Company voluntarily prepaid $62.3 million of the Class A Series 2017-1 Notes at par plus accrued interest pursuant to
the terms of the agreements related to such securities. The Company was not subject to the payment of a make whole amount in connection with
this prepayment. The Company accounted for this prepayment as a debt extinguishment.
The following table presents information about interest expense related to the Master Trust Funding Program:
(in thousands)
Interest expense
Amortization of deferred financing costs
Total
2020
Year ended December 31,
2019
2018
$
$
7,619 $
656
8,275 $
16,328 $
1,538
17,866 $
22,574
2,304
24,878
Total deferred financing costs, net, of $2.2 million and $3.8 million related to the Master Trust Funding Program were included within secured
borrowings, net of deferred financing costs on the Company’s consolidated balance sheets as of December 31, 2020 and 2019, respectively.
The Company recorded a $0.9 million loss on repurchase and repayment of secured borrowings related to the amortization of deferred
financing costs on the $62.3 million voluntary prepayment of the Class A Series 2017-1 Notes during the year ended December 31, 2020. The
Company recorded a $5.2 million loss on the repurchase of a portion of the Class A Series 2016-1 during the year end December 31, 2019, which
includes the write-off of unamortized deferred financing charges and the amount paid above par to repurchase these notes.
Notes Payable to Related Parties
Until the completion of the IPO, the Company had a secured warehouse line of credit with an affiliate of Eldridge through which it issued short-
term notes (the “Warehouse Notes”) and used the proceeds to acquire investments in real estate. During the year ended December 31, 2018, the
Company issued 20 Warehouse Notes for a combined $154.0 million. On January 31, 2018, the Company made principal payments on the
Warehouse Notes of $50.0 million, repaying three of the Warehouse Notes in full and one of the Warehouse Notes in part, prior to maturity. On June
25, 2018, the Company used a portion of the net proceeds from the IPO and the Concurrent Private Placement (as defined in Note 7—Equity below)
to repay all 36 of the then outstanding Warehouse Notes, with an aggregate outstanding principal amount of $334.0 million, in full, prior to maturity,
and had no amounts outstanding related to the Warehouse Notes as of December 31, 2020, 2019 and 2018.
The following table presents the activity related to the Company’s notes payable to related parties for the year ended December 31, 2018:
(in thousands)
Outstanding, January 1, 2018
Borrowings
Repayments
Outstanding, December 31, 2018
Warehouse
Notes
230,000
154,000
(384,000)
—
$
$
During the year ended December 31, 2018, the Company incurred $4.6 million of interest expense related to these notes payable to related
parties. No interest expense from notes payable related parties was incurred during the years ended December 31, 2020 and 2019.
100
6. Derivative and Hedging Activities
The Company does not enter into derivative financial instruments for speculative or trading purposes. The Company's objectives in using
interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these
objectives, the Company uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow
hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of
the agreements without exchange of the underlying notional amount.
These derivatives are considered cash flow hedges and are recorded on a gross basis at fair value. Subsequent to the adoption of ASU 2017-
12, assessments of hedge effectiveness are performed quarterly using either a qualitative or quantitative approach. The Company recognizes the
entire change in the fair value in accumulated other comprehensive income (loss) and the change is reflected as derivative changes in fair value in
the supplemental disclosures of non-cash financing activities in the consolidated statements of cash flows. The amounts recorded in accumulated
other comprehensive income (loss) will subsequently be reclassified to interest expense as interest payments are made on the Company's
borrowings under its variable-rate term loan facilities. During the next twelve months, the Company estimates that $9.8 million will be reclassified
from accumulated other comprehensive loss as an increase to interest expense. The Company does not have netting arrangements related to its
derivatives.
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 affiliates may also have other financial relationships. The
Company does not anticipate that any of the counterparties will fail to meet their obligations. As of December 31, 2020 and 2019, there were no
events of default related to the interest rate swaps.
The following table summarizes the notional amount at inception and fair value of these instruments on the Company's balance sheet as of
December 31, 2020 and 2019 (dollar amounts in thousands):
Fair Value of Asset/(Liability)
Derivatives
Designated as
Hedging Instruments
(1)
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
Fixed Rate Paid by
Company
2.06%
2.06%
2.07%
1.61%
1.61%
1.60%
1.36%
1.36%
Effective Date
5/14/2019
5/14/2019
5/14/2019
12/9/2019
12/9/2019
12/9/2019
7/9/2020
7/9/2020
Maturity Date
4/12/2024
4/12/2024
4/12/2024
11/26/2026
11/26/2026
11/26/2026
11/26/2026
11/26/2026
Notional Value December 31, 2020
(3)
(2)
$
$
100,000 $
50,000
50,000
175,000
50,000
25,000
100,000
80,000
630,000 $
(6,176) $
(3,089)
(3,094)
(11,838)
(3,396)
(1,675)
(5,353)
(4,291)
(38,912) $
December 31,
2019
(3)(4)
(1,996)
(999)
(1,005)
758
210
127
—
—
(2,905)
_____________________________________
(1)
(2)
All interest rate swaps have a 1 month LIBOR variable rate paid by the bank.
Notional value indicates the extent of the Company’s involvement in these instruments, but does not represent exposure to credit, interest rate
or market risks.
Derivatives in a liability position are included within derivative liabilities in the Company’s consolidated balance sheets totaling to $38.9 million
and $4.0 million at December 31, 2020 and December 31, 2019, respectively.
Derivatives in a net asset position are included within rent receivables, prepaid expenses and other assets, net in the Company’s consolidated
balance sheets totaling to $1.1 million at December 31, 2019.
(3)
(4)
The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is
capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.
101
The following table presents amounts recorded to accumulated other comprehensive loss related to derivative and hedging activities for the
periods presented:
(in thousands)
Accumulated other comprehensive loss
Year ended December 31,
2019
2020
$
(35,445) $
(2,905)
As of December 31, 2020, the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for
nonperformance risk related to these agreements was $38.9 million. As of December 31, 2019, the fair value of derivatives in a net liability position
including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $4.1 million. As of December 31,
2020, there were no derivatives in a net asset position. As of December 31, 2019, the fair value of derivatives in a net asset position including
accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $1.0 million.
During the year ended December 31, 2020 and 2019, the Company recorded a loss on the change in fair value of its interest rate swaps of
$6.7 million and $0.1 million, respectively, which included in interest expense in the Company's consolidated statements of operations.
As of December 31, 2020 and December 31, 2019, the Company had not posted any collateral related to these agreements and was not in
breach of any provisions of such agreements. If the Company had breached any of these provisions, it could have been required to settle its
obligations under the agreements at their aggregate termination value of $40.2 million and $3.1 million as of December 31, 2020 and
December 31, 2019, respectively.
7. Equity
Stockholders' Equity
On June 25, 2018, the Company completed its IPO and issued 32,500,000 shares of its common stock at an initial public offering price of
$14.00 per share, pursuant to a registration statement on Form S-11 (File No. 333-225215), filed with the U.S. Securities and Exchange
Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”).
Prior to the completion of the IPO, a number of formation transactions (the “Formation Transactions”) took place that were designed to
facilitate the completion of the IPO. Among other things, on June 20, 2018, Essential Properties Realty Trust LLC (“EPRT LLC”) converted from a
Delaware limited liability company into a Delaware limited partnership, changed its name to Essential Properties, L.P. and became the subsidiary
through which the Company holds substantially all of its assets and conducts its operations. Prior to the completion of the Formation Transactions,
EPRT LLC was a wholly owned subsidiary of EPRT Holdings LLC (“EPRT Holdings” and, together with EPRT LLC, the “Predecessor”), and EPRT
Holdings received 17,913,592 units of limited partnership interest in the Operating Partnership (“OP Units”) in connection with EPRT LLC’s
conversion into a Delaware limited partnership. Essential Properties OP G.P., LLC, a wholly owned subsidiary of the Company, became the sole
general partner of the Operating Partnership. The Formation Transactions were accounted for as a reorganization of entities under common control
in the consolidated financial statements and the assets and liabilities of the Predecessor were recorded by the Company at their historical carrying
amounts.
Concurrently with the completion of the IPO, the Company received an additional $125.0 million investment from an affiliate of Eldridge
Industries, LLC (“Eldridge”) in private placements (the “Concurrent Private Placement”) of 7,785,611 shares of its common stock and 1,142,960 OP
Units at a price per share/unit of $14.00. The issuance and sale of the shares and OP Units in the Concurrent Private Placement were made
pursuant to private placement purchase agreements and there were no underwriting discounts or commissions associated with the sales.
As part of the IPO, the underwriters of the IPO were granted an option to purchase up to an additional 4,875,000 shares of the Company’s
common stock at the IPO price of $14.00 per share, less underwriting discounts and commissions. On July 20, 2018, the underwriters of the IPO
exercised this option in part, and on July 24, 2018, the Company issued an additional 2,772,191 shares of common stock. The net proceeds to the
Company from the IPO (including the purchase of additional shares pursuant to the underwriters’ option) and the Concurrent Private Placement,
after deducting underwriting discounts and commissions and other expenses, were $583.7 million.
102
On June 25, 2018, the Company issued 691,290 shares of restricted common stock to certain of its directors, executive officers and other
employees under the Equity Incentive Plan. See Note 9—Equity Based Compensation for additional information.
On March 18, 2019, the Company completed a follow-on offering of 14,030,000 shares of its common stock, including 1,830,000 shares of
common stock purchased by the underwriters pursuant to an option to purchase additional shares, at an offering price of $17.50 per share, pursuant
to a registration statement on Form S-11 (File Nos. 333-230188 and 333-230252) filed with the SEC under the Securities Act of 1933, as amended
(the “Securities Act”). Net proceeds from this follow-on offering, after deducting underwriting discounts and commissions and other expenses, were
$234.6 million.
On July 22, 2019, EPRT Holdings and Security Benefit Life Insurance Company (together, the “Selling Stockholders”), affiliates of Eldridge,
completed a secondary public offering (the “Secondary Offering”) of 26,288,316 shares of the Company’s common stock, including 3,428,910
shares of common stock purchased by underwriters pursuant to an option to purchase additional shares. Prior to completion of the Secondary
Offering, the Selling Stockholders exchanged 18,502,705 OP Units of the Operating Partnership for a like number of shares of the Company’s
common stock. The Company did not receive any proceeds from this transaction.
On January 14, 2020, the Company completed a follow-on offering of 7,935,000 shares its common stock, including 1,035,000 shares of
common stock purchased by the underwriters pursuant to an option to purchase additional shares, at an offering price of $25.20 per share. Net
proceeds from this follow-on offering, after deducting underwriting discounts and commissions and other expenses, were $191.5 million.
On September 22, 2020, the Company completed a follow-on offering of 10,120,000 shares its common stock, including 1,320,000 shares of
common stock purchased by the underwriters pursuant to an option to purchase additional shares, at an offering price of $19.00 per share. Net
proceeds from this follow-on offering, after deducting underwriting discounts and commissions and other expenses, were $184.1 million.
At the Market Program
In June 2020, the Company established a new at the market common equity offering program, pursuant to which it can publicly offer and sell,
from time to time, shares of its common stock with an aggregate gross sales price of up to $250 million (the “2020 ATM Program”). In connection
with establishing the 2020 ATM Program, the Company terminated its prior at the market program, which it established in August 2019 (the “2019
ATM Program”). and no additional stock can be issued thereunder. Pursuant to the 2019 ATM Program, the Company could publicly offer and sell
shares of its common stock with an aggregate gross sales price of up to $200 million and, prior to its termination, the Company issued common
stock with an aggregate gross sales price of $184.4 million thereunder. As of December 31, 2020, the Company issued common stock with an
aggregate gross sales price of $79.3 million under the 2020 ATM Program and could issue additional common stock with an aggregate gross sales
price of up to $170.7 million under the 2020 ATM Program. As the context requires, the 2020 ATM Program and the 2019 ATM Program are referred
to herein as the “ATM Program."
103
The following table details information related to activity under the ATM Program for each period presented:
(in thousands, except share and per share data)
Shares of common stock sold
Weighted average sale price per share
Gross proceeds
Net proceeds
Dividends on Common Stock
Year ended December 31,
2020
4,499,057
19.02 $
85,559 $
84,104 $
2019
7,432,986
23.97
178,161
175,147
$
$
$
During the years ended December 31, 2020 and 2019 and the period from June 25, 2018 to December 31, 2018, the Company's board of
directors declared the following quarterly cash dividends on common stock:
Date Declared
Record Date
Date Paid
December 3, 2020
September 4, 2020
June 11, 2020
March 18, 2020
December 6, 2019
September 6, 2019
June 5, 2019
March 7, 2019
December 7, 2018
August 29, 2018
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
December 31, 2019
September 30, 2019
June 28, 2019
March 29, 2019
December 31, 2018
September 28, 2018
January 15, 2021
October 15, 2020
July 15, 2020
April 15, 2020
January 15, 2020
October 15, 2019
July 15, 2019
April 16, 2019
January 14, 2019
October 12, 2018
Dividend per Share
of
Common Stock
Total Dividend
(dollars in
thousands)
$
$
$
$
$
$
$
$
$
$
0.24 $
0.23 $
0.23 $
0.23 $
0.23 $
0.22 $
0.22 $
0.21 $
0.21 $
0.224 $
25,570
24,115
21,419
21,168
19,268
17,531
12,725
12,143
9,187
9,800
The Company has determined that, during the years ended December 31, 2020 and 2019 and the period from June 25, 2018 to December
31, 2018, approximately 59.0%, 58.8%, and 58.9%, respectively, of the distributions it paid represented taxable income and 41.0%, 41.2% and
41.1%, respectively, of the distributions it paid represented return of capital for federal income tax purposes.
Members' Equity
EPRT LLC was initially capitalized in 2017 by SCF Funding LLC, Stonebriar Holdings LLC and certain members of EPRT LLC's management
and board of managers through direct and indirect capital contributions.
On December 31, 2017, EPRT LLC reorganized (the "EPRT LLC Reorganization") and the holders of interests in EPRT LLC contributed all of
their interests in EPRT Holdings, in exchange for interests in EPRT Holdings with the same rights as the interests they held in EPRT LLC. As of
such date, EPRT LLC became a wholly owned subsidiary of EPRT Holdings.
On January 31, 2018, Stonebriar Holdings LLC made a $50.0 million direct equity contribution to EPRT Holdings. EPRT Holdings used these
proceeds to repay $50.0 million of outstanding principal on the Warehouse Notes.
8. Non-controlling Interests
Essential Properties OP G.P., LLC, a wholly owned subsidiary of the Company, is the sole general partner of the Operating Partnership and
holds a 1.0% general partner interest in the Operating Partnership. The Company contributes the net proceeds from issuing shares of common
stock to the Operating Partnership in exchange for a number of OP Units equal to the number of shares of common stock issued.
Prior to completion of the Secondary Offering, the Selling Stockholders exchanged 18,502,705 OP Units of the Operating Partnership for a
like number of shares of the Company's common stock. Concurrently, EPRT Holdings, one of the Selling Stockholders, distributed the remaining
553,847 OP Units it held to former members of EPRT Holdings (the "Non-controlling OP Unit Holders"). The Selling Stockholders thereafter sold all
of the shares of
104
common stock that they owned through the Secondary Offering and accordingly no longer owned shares of the Company's common stock or held
OP Units following the completion of the Secondary Offering.
As of December 31, 2020, the Company held 106,361,524 OP Units, representing a 99.5% limited partner interest in the Operating
Partnership. As of the same date, the Non-controlling OP Unit Holders held 553,847 OP Units in the aggregate, representing a 0.5% limited partner
interest in the Operating Partnership. As of December 31, 2019, the Company held 83,761,151 OP Units, representing a 98.3% limited partner
interest in the Operating Partnership. As of the same date, the Non-controlling OP Unit Holders held 553,847 OP Units in the aggregate,
representing a 0.7% limited partner interest in the Operating Partnership. The OP Units held by EPRT Holdings and Eldridge prior to the completion
of the Secondary Offering and the OP Units held by the Non-controlling OP Unit Holders are presented as non-controlling interests in the Company's
consolidated financial statements.
A holder of OP Units has the right to distributions per unit equal to dividends per share paid on the Company's common stock and has the
right to redeem OP Units for cash or, at the Company's election, shares of the Company's common stock on a one-for-one basis, provided,
however, that such OP Units must have been outstanding for at least one year. Distributions to OP Unit holders are declared and paid concurrently
with the Company's cash dividends to common stockholders. See Note 7—Equity for details.
9. Equity Based Compensation
Equity Incentive Plan
In 2018, the Company adopted an equity incentive plan (the “Equity Incentive Plan”), which provides for the grant of incentive stock options,
nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock awards, performance awards and LTIP units.
Officers, employees, non-employee directors, consultants, independent contractors and agents who provide services to the Company or to any
subsidiary of the Company are eligible to receive such awards. A maximum of 3,550,000 shares may be issued under the Equity Incentive Plan,
subject to certain conditions.
The following table presents information about the Company's restricted stock awards ("RSAs"), restricted stock units ("RSUs"), Class B Units
and Class D Units during the years ended December 31, 2020, 2019 and 2018:
Restricted Stock Awards
Restricted Stock Units
Unvested, January 1, 2018
Granted
Vested
Forfeited
Unvested, December 31, 2018
Unvested, January 1, 2019
Granted
Vested
Forfeited
Unvested, December 31, 2019
Unvested, January 1, 2020
Granted
Vested
Forfeited
Unvested, December 31, 2020
Units
Wtd. Avg. Grant
Date Fair Value
—
—
—
—
—
— $
—
—
—
— $
Class B Units
6,940
—
(1,710)
—
5,230
Class D Units
2,400
—
(600)
—
1,800
— $
100,814
—
—
100,814 $
100,814 $
269,017
(42,658)
(5,571)
321,602 $
—
22.80
—
—
22.80
22.80
24.99
21.00
—
25.27
5,230
—
(5,230)
—
—
—
—
—
—
—
1,800
—
(1,800)
—
—
—
—
—
—
—
Shares
Wtd. Avg. Grant
Date Fair Value
—
13.68
—
—
13.68
— $
691,290
—
—
691,290 $
691,290 $
46,368
(244,957)
—
492,701 $
492,701 $
3,658
(255,761)
—
240,598 $
13.68
14.12
13.69
—
13.72
13.72
15.68
13.73
—
13.73
105
Restricted Stock Awards
On June 25, 2018, an aggregate of 691,290 shares of unvested restricted common stock awards ("RSAs") were issued to the Company's
directors, executive officers and other employees under the Equity Incentive Plan. These RSAs vest over periods ranging from one year to three
years from the date of grant, subject to the individual recipient's continued provision of service to the Company through the applicable vesting dates.
In January 2019, an aggregate of 46,368 shares of unvested RSAs were issued to the Company's executive officers, other employees and an
external consultant under the Equity Incentive Plan. These RSAs vest over periods ranging from one year to four years from the date of grant,
subject to the individual recipient's continued provision of service to the Company through the applicable vesting dates. In June 2020, an additional
3,658 RSAs were issued to certain members of the Company's board of directors which vested immediately upon grant. The Company estimates
the grant date fair value of RSAs granted under the Equity Incentive Plan using the average market price of the Company's common stock on the
date of grant.
The following table presents information about the Company's RSAs for the periods presented:
(in thousands)
Compensation cost recognized in general and administrative expense
Dividends declared on unvested RSAs and charged directly to distributions in excess
of cumulative earnings
Fair value of shares vested during the period
2020
Year ended December 31,
2019
2018
$
3,405 $
3,394 $
1,692
279
3,512
486
3,354
300
—
The following table presents information about the Company's RSAs as of the dates presented:
(Dollars in thousands)
Total unrecognized compensation cost
Weighted average period over which compensation cost will be recognized (in years)
December 31,
2020
2019
$
1,678 $
0.7
5,026
1.6
Restricted Stock Units
In January 2019 and 2020, the Company issued target grants of 119,085 and 84,684 performance-based RSUs, respectively, to the
Company's executive officers under the Equity Incentive Plan. Of these awards, 75% are non-vested RSUs for which vesting percentages and the
ultimate number of units vesting will be calculated based on the total shareholder return ("TSR") of the Company's common stock as compared to
the TSR of peer companies identified in the grant agreements. The payout schedule can produce vesting percentages ranging from 0% to 250%.
TSR will be calculated based upon the average closing price for the 20-trading day period ending December 31, 2021 (for the 2019 grants) or
December 31, 2022 (for the 2020 grants), divided by the average closing price for the 20-trading day period ended January 1, 2019 (for the 2019
grants) or January 1, 2020 (for the 2020 grants). The target number of units is based on achieving a TSR equal to the 50th percentile of the peer
group. The Company recorded expense on these TSR RSUs based on achieving the target.
The grant date fair value of the TSR RSUs was measured using a Monte Carlo simulation model based on the following assumptions:
Volatility
Risk free rate
January
2020
2019
20 %
1.61 %
18 %
2.57 %
The remaining 25% of these performance-based RSUs vest based on the Compensation Committee's subjective evaluation of the individual
recipient's achievement of certain strategic objectives. In May 2020, the Compensation Committee evaluated and subjectively awarded 7,596 of
these RSUs to a former executive officer of the Company, which vested immediately. During the year ended December 31, 2020, the Company
recorded $0.1 million of compensation expense related to the subjective RSUs awarded to this former executive. As of December 31, 2020, the
Compensation Committee had not identified specific performance targets relating to the
106
individual recipients' achievement of strategic objectives for the remainder of the subjective awards. As such, these awards do not have either a
service inception or a grant date for GAAP accounting purposes and the Company recorded no compensation cost with respect to this portion of the
performance-based RSUs during the years ended December 31, 2020 and 2019.
In June 2019 and 2020, the Company issued 11,500 and 26,817 RSUs, respectively, to the Company's independent directors. These awards
vest in full on the earlier of one year from the grant date or the first annual meeting of stockholders that occurs after the grant date, subject to the
individual recipient's continued provision of service to the Company through the applicable vesting date. The Company estimated the grant date fair
value of these RSUs using the average market price of the Company's common stock on the date of grant.
Additionally, during the year ended December 31, 2020, the Company issued an aggregate 157,943 RSUs to the Company’s executive
officers, other employees and directors under the Equity Incentive Plan. These awards vest over a period of up to four years from the date of grant,
subject to the individual recipient’s continued provision of service to the Company through the applicable vesting dates.
The following table presents information about the Company's RSUs for the periods presented:
(in thousands)
Compensation cost recognized in general and administrative expense
Dividend equivalents declared and charged directly to distributions in excess of cumulative earnings
Fair value of units vested during the period
The following table presents information about the Company's RSUs as of the date presented:
(Dollars in thousands)
Total unrecognized compensation cost
Weighted average period over which compensation cost will be recognized (in years)
Unit-Based Compensation
$
$
Year ended December 31,
2020
2019
2,672 $
125
896
714
8
—
December 31,
2020
2019
5,261 $
2.4
1,584
2.4
In 2017, the Company's predecessor approved and issued unvested Class B and Class D units equity interests to members of EPRT
Management, the predecessor's board of managers and external unitholders. Following the completion of the Formation Transactions, the Class B
and Class D unit holders continued to hold vested and unvested interests in EPRT Holdings and, indirectly, the OP Units held by EPRT Holdings.
On July 22, 2019, in conjunction with the completion of the Secondary Offering, 3,520 previously unvested Class B units and 1,200 previously
unvested Class D units in EPRT Holdings automatically vested in accordance with the terms of the grant agreements, which represented all of the
remaining outstanding unvested Class B and Class D units. Due to this accelerated vesting, the Company recorded all remaining unrecognized
compensation cost on the Class B and Class D units to general and administrative expenses in its consolidated statements of operations during the
year ended December 31, 2019.
The following table presents information about the Class B and Class D units for the periods presented:
(in thousands)
Compensation cost recognized in general and administrative expense
Fair value of units vested during the period
2020
$
Year ended December 31,
2019
2018
— $
—
2,162 $
2,283
747
718
10. Net Income Per Share
The Company computes net income per share pursuant to the guidance in the FASB ASC Topic 260, Earnings Per Share. The guidance
requires the classification of the Company’s unvested restricted
107
common stock and units, which contain rights to receive non-forfeitable dividends or dividend equivalents, as participating securities requiring the
two-class method of computing net income per share. Diluted net income per share of common stock further considers the effect of potentially
dilutive shares of common stock outstanding during the period, including the assumed vesting of restricted share units with a market-based or
service-based vesting condition, where dilutive. The OP Units held by non-controlling interests represent potentially dilutive securities as the OP
Units may be redeemed for cash or, at the Company’s election, exchanged for shares of the Company’s common stock on a one-for-one basis.
The following is a reconciliation of the numerator and denominator used in the computation of basic and diluted net income per share (dollars
in thousands):
(dollar amounts in thousands)
Numerator for basic and diluted earnings per share:
Net income
Less: net income attributable to non-controlling interests
Less: net income allocated to unvested restricted common stock and RSUs
Net income available for common stockholders: basic
Net income attributable to non-controlling interests
Net income available for common stockholders: diluted
Denominator for basic and diluted earnings per share:
Weighted average common shares outstanding
Less: weighted average number of shares of unvested restricted common
stock
Weighted average shares outstanding used in basic net income per share
Effects of dilutive securities: (1)
OP Units
Unvested restricted common stock and RSUs
Weighted average shares outstanding used in diluted net income per share
Year ended December 31,
2020
2019
Period from
June 25, 2018 to
December 31, 2018
$
$
42,528 $
(255)
(404)
41,869
255
42,124 $
48,025 $
(6,181)
(493)
41,351
6,181
47,532 $
16,329
(5,001)
(300)
11,028
5,001
16,029
95,664,071
64,714,087
43,325,968
(353,036)
95,311,035
553,847
332,823
96,197,705
(610,029)
64,104,058
10,793,700
412,138
75,309,896
(691,290)
42,634,678
19,056,552
74,727
61,765,957
_____________________________________
(1)
For the year ended December 31, 2020, excludes the impact of 124,295 unvested restricted stock units as the effect would have been
antidilutive.
11. Commitments and Contingencies
As of December 31, 2020, the Company had remaining future commitments, under mortgage notes, reimbursement obligations or similar
arrangements, to fund $16.3 million to its tenants for development, construction and renovation costs related to properties leased from the
Company.
Litigation and Regulatory Matters
In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. There are no material legal
or regulatory proceedings pending or known to be contemplated against the Company or its properties.
Environmental Matters
In connection with the ownership of real estate, the Company may be liable for costs and damages related to environmental matters. As of
December 31, 2020, the Company had 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 the Company's business, financial condition,
results of operations or liquidity.
108
Defined Contribution Retirement Plan
The Company has a defined contribution retirement savings plan qualified under Section 401(a) of the Code (the "401(k) Plan"). The 401(k)
Plan is available to all of the Company's full-time employees. The Company provides a matching contribution in cash equal to 100% of the first 5%
of eligible compensation contributed by participants which vests immediately. During the years ended December 31, 2020, 2019 and 2018, the
Company made matching contributions of $0.2 million, $0.2 million and $0.1 million, respectively.
Employment Agreements
The Company has employment agreements with its executive officers. These employment agreements have an initial term of four years, with
automatic one-year extensions unless notice of non-renewal is provided by either party. These agreements provide for initial annual base salaries
and an annual performance bonus. If an executive officer's employment terminates under certain circumstances, the Company would be liable for
any annual performance bonus awarded for the year prior to termination, to the extent unpaid, continued payments equal to 12 months of base
salary, monthly reimbursement for 12 months of COBRA premiums, and under certain situations, a pro rata bonus for the year of termination.
12. 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 source of values, followed by valuation models using management
assumptions in the absence of market inputs.
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 regularly and, depending on various factors, it is possible that
an asset or liability may be classified differently from period to period. However, the Company expects that changes in classifications between levels
will be rare.
In addition to the disclosures for assets and liabilities required to be measured at fair value at the balance sheet date, companies are required
to disclose the estimated fair values of all financial instruments, even if they are not presented at their fair value on the consolidated balance sheet.
The fair values of financial instruments are estimates based upon market conditions and perceived risks at December 31, 2020 and 2019. These
estimates require management's judgment and may not be indicative of the future fair values of the assets and liabilities.
Financial assets and liabilities for which the carrying values approximate their fair values include cash and cash equivalents, restricted cash,
accounts receivable included within prepaid expenses and other assets, dividends payable and accrued liabilities and other payables. Generally,
these assets and liabilities are short term in duration and their carrying value approximates fair value on the consolidated balance sheets.
The estimated fair values of the Company's fixed‑rate loans receivable have been derived based on primarily unobservable market inputs
such as interest rates and discounted cash flow analyses using estimates of the amount and timing of future cash flows, market rates and credit
spreads. These measurements are classified as Level 3 within the fair value hierarchy. The Company believes the carrying value of its fixed-rate
loans receivable approximates fair value as of December 31, 2020 and 2019.
The estimated fair values of the Company's borrowings under the Revolving Credit Facility, the April 2019 Term Loan and the November 2019
Term Loan have been derived based on primarily unobservable market inputs such as interest rates and discounted cash flow analyses using
estimates of the amount and timing of future cash flows, market rates and credit spreads. These measurements are classified as Level 3 within the
fair value hierarchy. The Company believes the carrying value of its borrowings under the Revolving Credit Facility, the April 2019 Term Loan and
the November 2019 Term Loan as of December 31, 2020 and 2019 approximate fair value.
The estimated fair values of the Company's secured borrowings have been derived based on primarily unobservable market inputs such as
interest rates and discounted cash flow analyses using estimates of the amount and timing of future cash flows, market rates and credit spreads.
These measurements are classified as
109
Level 3 within the fair value hierarchy. As of December 31, 2020, the Company's secured borrowings had an aggregate carrying value of $173.2
million (excluding net deferred financing costs of $2.2 million) and an estimated fair value of $176.4 million. As of December 31, 2019, the
Company's secured borrowings had an aggregate carrying value of $239.1 million (excluding net deferred financing costs of $3.8 million) and an
estimated fair value of 247.1 million.
The Company measures its derivative financial instruments at fair value on a recurring basis. The fair values of the Company's derivative
financial instruments were determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash
flows of the derivative financial instrument. This analysis reflected the contractual terms of the derivative, including the period to maturity, and used
observable market-based inputs, including interest rate market data and implied volatilities in such interest rates. While it was determined that the
majority of the inputs used to value the derivatives fall within Level 2 of the fair value hierarchy under authoritative accounting guidance, the credit
valuation adjustments associated with the derivatives also utilized Level 3 inputs, such as estimates of current credit spreads to evaluate the
likelihood of default. However, as of December 31, 2020, the significance of the impact of the credit valuation adjustments on the overall valuation of
the derivative financial instruments was assessed and it was determined that these adjustments were not significant to the overall valuation of the
derivative financial instruments. As a result, it was determined that the derivative financial instruments in their entirety should be classified in Level 2
of the fair value hierarchy. As of December 31, 2020 and 2019, the Company estimated the fair value of its interest rate swap contracts to be a
$38.9 million and $2.9 million, respectively.
The Company measures its real estate investments at fair value on a nonrecurring basis. The fair values of these real estate investments
were determined using the following input levels as of the dates presented:
(in thousands)
December 31, 2020
Non-financial assets:
Long-lived assets
December 31, 2019
Non-financial assets:
Long-lived assets
Long-Lived Assets
$
$
Net
Carrying
Value
Fair Value
Fair Value Measurements Using Fair
Value Hierarchy
Level 2
Level 3
Level 1
4,754 $
4,754 $
— $
— $
4,754
3,864 $
3,864 $
— $
— $
3,864
The Company reviews its investments in real estate when events or circumstances change indicating that the carrying amount of an asset
may not be recoverable. In the evaluation of an investment in real estate for impairment, many factors are considered, including estimated current
and expected operating cash flows from the asset during the projected holding period, costs necessary to extend the life or improve the asset,
expected capitalization rates, projected stabilized net operating income, selling costs, and the ability to hold and dispose of the asset in the ordinary
course of business.
Quantitative information about Level 3 fair value measurements as of December 31, 2020 is as follows:
(dollar amounts in thousands)
Non-financial assets:
Long-lived assets:
Fair Value
Valuation Techniques
Significant Unobservable
Inputs
Restaurant - Family Dining - Inverness, FL
$
598
Restaurant - Family Dining - Nashville, GA
Restaurant - Family Dining - Barnesville, GA
Vacant - Augusta, GA
Pet Care Services - Arvada, CO
598
300
25
3,233
Sales comparison
approach
Sales comparison
approach
Sales comparison
approach
Sales comparison
approach
Sales comparison
approach
110
Binding sales contract
$
598
Binding sales contract
Non-binding sales contract
Non-binding sales contract
598
300
25
Comparable sales prices
3,233
The fair values of impaired real estate were determined by using the following information, depending on availability, in order of preference: i)
signed purchase and sale agreements or letters of intent; ii) recently quoted bid or ask prices; iii) estimates of future cash flows, which consider,
among other things, contractual and forecasted rental revenues, leasing assumptions, terminal capitalization rates, discount rates and expenses
based upon market conditions; or iv) expectations for the use of the real estate. Based on these inputs, the Company determined that its valuation of
the impaired real estate falls within Level 3 of the fair value hierarchy.
13. Related-Party Transactions
During the years ended December 31, 2019 and 2018, an affiliate of Eldridge provided certain treasury and information technology services to
the Company. The Company incurred a de minimis amount of expense for these services during the years ended December 31, 2019 and 2018,
which is included in general and administrative expense in the Company’s consolidated statements of operations. No services were provided to the
Company by Eldridge during the year ended December 31, 2020.
During the year ended December 31, 2018, the Company issued and repaid short-term notes to affiliates of Eldridge. See Note 5—Long Term
Debt for additional information.
In May 2019, the Company repurchased a portion of its Class A Series 2016-1 Notes with a face value of $200 million for $201.4 million from
an affiliate of Eldridge. See Note 5—Long Term Debt for additional information.
14. Quarterly Results (Unaudited)
Presented below is a summary of unaudited quarterly financial information for the years ended December 31, 2020 and 2019. All adjustments
(consisting of only normal recurring accruals) necessary for a fair presentation of the interim periods presented are included. The calculation of basic
and diluted per share amounts for each quarter is based on the weighted average shares outstanding for that period; consequently, the sum of the
quarters may not necessarily be equal to the full year basic and diluted net income per share.
(in thousands, except per share data)
2020:
Total revenues
Net income
Net income attributable to non-controlling interests
Net income per share of common stock—basic and diluted
Dividends declared per common share
2019:
Total revenues
Net income
Net income attributable to non-controlling interests
Net income per share of common stock—basic and diluted
Dividends declared per common share
15. Subsequent Events
March 31
June 30
September 30
December 31
Three months ended
$
$
$
$
41,487
14,043
84
0.15
0.23
31,107
8,722
2,595
0.13
0.21
$
$
38,503
10,444
63
0.11
0.23
32,755
10,571
2,620
0.14
0.22
$
$
42,908
12,334
74
0.13
0.23
36,291
14,106
861
0.18
0.22
41,111
5,707
34
0.05
0.24
39,204
14,626
105
0.18
0.23
The Company has evaluated all events and transactions that occurred after December 31, 2020 through the filing of this Annual Report on
Form 10-K and determined that there have been no events that have occurred that would require adjustment to disclosures in the consolidated
financial statements except as disclosed below.
In January and February 2021, the Company issued an aggregate of 102,156 shares of unvested RSUs to the Company’s executive officers
and other employees under the Equity Incentive Plan. These awards vest over a period of up to four years from the date of grant, subject to the
individual recipient’s continued provision of service to the Company through the applicable vesting dates.
111
In February 2021, the Company issued an aggregate of 126,353 performance-based RSUs to the Company's executive officers under the
Equity Incentive Plan. These are non-vested share awards and 75% of the award shall vest based on the Company's TSR as compared to the TSR
of 10 peer companies and 25% of the award shall vest based on the compensation committee's subjective evaluation of the achievement of
strategic objectives deemed relevant by the committee. The performance schedule can produce vesting percentages ranging from 0% to 250%.
TSR will be calculated based upon the average closing price for the 20-trading day period ending January 1, 2021, divided by the average closing
price for the 20-trading day period ending December 31, 2023.
Subsequent to December 31, 2020, the Company acquired 21 real estate properties with an aggregate investment (including acquisition
costs) of $51.9 million and invested $1.4 million in new and ongoing construction in progress and reimbursements to tenants for development,
construction and renovation costs.
Subsequent to December 31, 2020, the Company sold or transferred its investment in 11 real estate properties for an aggregate gross sales
price of $14.1 million and incurred $0.7 million of disposition costs related to these transactions.
112
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information we are required to disclose
in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in
the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.
As of the end of the period covered by this Annual Report on Form 10-K, our management evaluated, under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that, as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were effective in
providing reasonable assurance of compliance.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control system was designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting
principles in the United States. Due to inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness of the internal control over financial reporting to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate. Our
management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness
of our internal control over financial reporting as of the end of the period covered by this Annual Report on Form 10-K based on the framework in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations (2013 Framework) (COSO). Based on such
evaluation, our management concluded that our internal control over financial reporting was effective as of the end of the period covered by this
Annual Report on Form 10-K.
The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by Ernst & Young LLP, an
independent registered public accounting firm, as stated in their report which is presented in this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during our most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Item 9B. Other Information.
None.
113
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information concerning our directors and executive officers required by Item 10 will be included in the Proxy Statement to be filed relating
to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 11. Executive Compensation.
The information concerning our executive compensation required by Item 11 will be included in the Proxy Statement to be filed relating to our
2021 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information concerning our security ownership of certain beneficial owners and management and related stockholder matters (including
equity compensation plan information) required by Item 12 will be included in the Proxy Statement to be filed relating to our 2021 Annual Meeting of
Stockholders and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information concerning certain relationships, related transactions and director independence required by Item 13 will be included in the
Proxy Statement to be filed relating to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
The information concerning our principal accounting fees and services required by Item 14 will be included in the Proxy Statement to be filed
relating to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference.
114
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)
(1) and (2) The following financial statements and financial statement schedules are filed as part of this Annual Report on Form 10-K.
Financial Statements. (see Item 8)
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Stockholders'/Members' Equity for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements
Financial Statement Schedules. (see schedules beginning on page F-1)
Schedule III - Real Estate and Accumulated Depreciation
Schedule IV - Mortgage Loans on Real Estate
All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission
of the schedule, or because the information required is included in the consolidated financial statements and notes thereto.
(b)
Exhibits. The following exhibits are included or incorporated by reference in this Annual Report on Form 10-K (and are numbered in
accordance with Item 601 of Regulation S-K).
115
Exhibit
Number
Description
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3
4.4*
10.1
10.2
10.3
10.4
10.5
10.6†
10.7†
10.8†
10.9†
Articles of Amendment and Restatement of Essential Properties Realty Trust, Inc., dated as of June 19, 2018 (Incorporated by
reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K filed on February 28, 2019)
Certificate of Correction to the Articles of Amendment and Restatement of Essential Properties Realty Trust, Inc., dated as of
February 27, 2019 (Incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K filed on February 28,
2019)
Certificate of Notice, dated August 8, 2019 (Incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-
K filed on August 8, 2019)
Certificate of Notice, dated February 28, 2020 (Incorporated by reference to Exhibit 3.4 to the Company's Annual Report on Form
10-K filed on March 2, 2020
Amended and Restated Bylaws of Essential Properties Realty Trust, Inc. (Incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K filed on November 16, 2020)
Form of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-
11 filed on May 25, 2018)
Amended and Restated Master Indenture dated as of July 11, 2017, among SCF RC Funding I LLC, SCF RC Funding II LLC and
SCF RC Funding III LLC, each a Delaware limited liability company, collectively as issuers, and Citibank, N.A., as indenture
trustee, relating to Net-Lease Mortgage Notes (Incorporated by reference to Exhibit 4.2 to the Company's Registration Statement
on Form S-11 filed on May 25, 2018)
Series 2017-1 Indenture Supplement dated as of July 11, 2017, among SCF RC Funding I LLC, SCF RC Funding II LLC, SCF RC
Funding III LLC and Citibank, N.A., as indenture trustee (Incorporated by reference to Exhibit 4.4 to the Company's Registration
Statement on Form S-11 filed on May 25, 2018)
Description of the Company's Common Stock, $0.01 par value
Agreement of Limited Partnership of Essential Properties, L.P. (Incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed on June 26, 2018)
Amended and Restated Credit Agreement, dated as of April 12, 2019, among the Company, the Operating Partnership, the
several lenders from time to time parties thereto, Barclays Bank PLC, as administrative agent, and Citigroup Global Markets Inc.
and Bank of America, N.A., as co-syndication agents (Incorporated by reference to Exhibit 10.1 to the Company's Current Report
on Form 8-K filed on April 18, 2019)
First Amendment to Amended and Restated Credit Agreement, dated November 22, 2019, among the Company, the Operating
Partnership, Barclays Bank PLC, as administrative agent, and the lenders party thereto (Incorporated by reference to Exhibit 10.2
to the Company's Current Report on Form 8-K filed on November 27, 2019)
Credit Agreement, dated as of November 26, 2019, among the Company, the Operating Partnership, the several lenders from
time to time parties thereto, Capital One, National Association, as administrative agent, Suntrust Robinson Humphrey, Inc. and
Mizuho Bank Ltd., as co-syndication agents, and Chemical Bank, a division of TCF National Bank, as documentation agent
(Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on November 27, 2019)
Amended and Restated Property Management and Servicing Agreement dated as of July 11, 2017, among SCF RC Funding I
LLC, SCF RC Funding II LLC and SCF RC Funding III LLC, each a Delaware limited liability company, collectively as issuers,
SCF Realty Capital LLC, a Delaware limited liability company, as property manager and special servicer, and Midland Loan
Services, a division of PNC Bank, National Association, as back-up manager and Citibank, N.A., as indenture trustee
(Incorporated by reference to Exhibit 10.14 to the Company's Registration Statement on Form S-11 filed on May 25, 2018)
Employment Agreement between Essential Properties Realty Trust, Inc. and Peter M. Mavoides, effective as of June 25, 2018
(Incorporated by reference to Exhibit 10.15 to the Company's Current Report on Form 8-K filed on June 26, 2018)
Employment Agreement between Essential Properties Realty Trust, Inc. and Gregg A. Seibert, effective as of June 25, 2018
(Incorporated by reference to Exhibit 10.16 to the Company's Current Report on Form 8-K filed on June 26, 2018)
Essential Properties Realty Trust, Inc. 2018 Incentive Award Plan, effective as of June 19, 2018 (Incorporated by reference to
Exhibit 10.18 to the Company’s Current Report on Form 8-K filed on June 26, 2018)
Employment Agreement between Essential Properties Realty Trust, Inc. and Mark E. Patten, effective as of August 10, 2020
(Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 7, 2020)
116
Exhibit
Number
10.10
21.1*
23.1*
24.1*
31.1*
31.2*
32.1**
32.2**
101.INS*
101.SCH*
101.CAL*
101.DEF*
101.LAB*
101.PRE*
104*
Description
Form of Indemnification Agreement between Essential Properties Realty Trust, Inc. and each of its directors and executive
officers (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 7, 2020)
Subsidiaries of the Company
Consent of Independent Registered Public Accounting Firm.
Power of Attorney (set forth on the signature page to this Annual Report on Form 10-K)
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934,
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934,
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (embedded within the Inline XBRL document)
*
**
†
Filed herewith.
Furnished herewith.
Indicates management contract or compensatory plan.
Item 16. Form 10-K Summary
None
117
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
SIGNATURES
ESSENTIAL PROPERTIES REALTY TRUST, INC.
Date:
February 23, 2021
By:
/s/ Peter M. Mavoides
Peter M. Mavoides
President and Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below does hereby constitute and appoint Peter
M. Mavoides and Mark E. Patten, and each of them singly, his or her true and lawful attorneys with full power to them, and each of them singly, to
sign for each of the undersigned and in his or her name in the capacities indicated below, any and all amendments to this Annual Report on Form
10-K, and generally to do all such things in our names and in our capacities as officers and directors to enable Essential Properties Realty Trust, Inc.
to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange
Commission in connection therewith.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
118
Name
/s/ Peter M. Mavoides
Peter M. Mavoides
/s/ Mark E. Patten
Mark E. Patten
/s/ Timothy J. Earnshaw
Timothy J. Earnshaw
/s/ Paul T. Bossidy
Paul T. Bossidy
/s/ Joyce DeLucca
Joyce DeLucca
/s/ Scott A. Estes
Scott A. Estes
/s/ Lawrence J. Minich
Lawrence J. Minich
/s/ Heather Leed Neary
Heather Leed Neary
/s/ Stephen D. Sautel
Stephen D. Sautel
/s/ Janaki Sivanesan
Janaki Sivanesan
Title
Date
Director, President and Chief Executive Officer
February 23, 2021
(Principal Executive Officer)
Chief Financial Officer, Treasurer and Executive Vice President
February 23, 2021
(Principal Financial Officer)
Chief Accounting Officer and Senior Vice President
February 23, 2021
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
119
February 23, 2021
February 23, 2021
February 23, 2021
February 23, 2021
February 23, 2021
February 23, 2021
February 23, 2021
ESSENTIAL PROPERTIES REALTY TRUST, INC. AND ESSENTIAL PROPERTIES REALTY TRUST, INC. PREDECESSOR
Schedule III - Real Estate and Accumulated Depreciation
As of December 31, 2020
(Dollar amounts in thousands)
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
$
184
$
242
$ 426 $
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Other Services
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Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Family Dining
Restaurants -
Family Dining
Restaurants -
Family Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Quick Service
Other Services
Restaurants -
Family Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Family Dining
Restaurants -
Family Dining
Restaurants -
Family Dining
Restaurants -
Casual Dining
Restaurants -
Family Dining
Restaurants -
Family Dining
Restaurants -
Family Dining
Restaurants -
Family Dining
Restaurants -
Family Dining
Restaurants -
Family Dining
Restaurants -
Family Dining
Restaurants -
Family Dining
Restaurants -
Quick Service
Restaurants -
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Restaurants -
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Restaurants -
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Restaurants -
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Alexander City
AL
Zanesville
Belleville
Grand Rapids
Petaluma
Clarkesville
Philadelphia
Nashville
Ruskin
Brownsville
Waco
Palantine
LaGrange
OH
IL
MI
CA
GA
PA
TN
FL
TX
TX
IL
IL
Jacksonville
FL
Corpus Christi
TX
Centennial
Redford
Landrum
Virginia Beach
Thomasville
Grapevine
Plano
CO
MI
SC
VA
GA
TX
TX
Coon Rapids
MN
Mankato
Omaha
Merrillville
Green Bay
Appleton
St. Joseph
Gladstone
Brainerd
MN
NE
IN
WI
WI
MO
MO
MN
Cedar Rapids
IA
Brooklyn Park
MN
Pontiac
Troy
Clay
Buna
Carthage
MI
MI
NY
TX
TX
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
$
184
$
242
$
397
314
177
467
178
485
332
641
561
633
926
446
1,086
1,160
277
369
346
533
—
626
106
—
474
382
354
851
957
—
1,593
3,400
567
87
192
233
977
424
856
585
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(39)
(g)
(21)
(g)
—
—
—
682
(620)
(g)
(536)
(g)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
600
—
—
—
—
1,184
(203)
(g)
(498)
(g)
—
—
—
—
—
—
—
—
—
—
—
—
—
322
373
590
371
783
547
563
693
423
—
413
138
239
—
—
—
—
—
—
—
—
—
—
1,654
—
—
F-1
468
214
90
903
1,385
207
635
700
465
797
549
441
559
479
761
804
725
316
674
129
152
111
626
1,111
109
1980
6/16/2016
397
314
177
467
178
485
332
641
561
594
926
446
466
277
674
369
683
346
523
533
1,000
—
178
106
—
438
641
474
1,035
361
955
354
1,280
1,533
1,979
421
887
1,160
—
1,160
1,593
3,400
4,993
468
214
90
903
567
1,035
87
192
301
282
833
1,736
1,385
977
2,362
207
635
700
262
797
549
441
559
479
761
804
725
316
674
424
631
856
1,491
585
1,285
686
948
322
1,119
373
922
590
1,031
371
930
783
1,262
547
1,308
563
1,367
693
1,418
423
739
—
674
Year
Constructed
Date
Acquired
1987
6/16/2016
1988
6/16/2016
1988
6/16/2016
1989
6/16/2016
1992
6/16/2016
6/16/2016
44
43
61
59
90
—
35
—
85
63
81
125
210
—
428
94
24
150
109
168
320
145
125
146
53
89
113
81
127
104
103
131
79
—
1992
1993
6/16/2016
6/16/2016
1995
6/16/2016
1991
6/16/2016
1990
6/16/2016
1990
6/16/2016
1997
6/16/2016
2015
6/16/2016
1993
6/16/2016
1998
6/16/2016
1992
1997
6/16/2016
6/16/2016
1999
6/16/2016
1999
6/16/2016
1998
6/16/2016
1991
6/16/2016
1992
6/16/2016
1979
6/16/2016
1977
6/16/2016
1977
6/16/2016
1977
6/16/2016
1978
6/16/2016
1979
6/16/2016
1990
6/16/2016
1994
6/16/2016
1997
6/16/2016
2003
6/16/2016
6/16/2016
1,783
413
2,196
504
1991
6/16/2016
152
111
138
290
239
350
27
41
1976
6/16/2016
1975
6/16/2016
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
$
195
$
174
$
—
$
—
$
195
$
174
$ 369 $
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Automotive
Service
Restaurants -
Family Dining
Restaurants -
Family Dining
Restaurants -
Casual Dining
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Restaurants -
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Dayton
Diboll
Huntington
Huntsville
Jasper
Kountze
Rusk
Sour Lake
Vernon
Battle Creek
Mt Clemens
Clio
Charlotte
St. Johns
Burnsville
Albert Lea
Crystal
West Monroe
Greenfield
Redford
Bridgeport
Birmingham
Oneonta
Union City
Marietta
Vicksburg
Riverdale
Snellville
Trussville
Forest Park
Decatur
Monroe
Decatur
Columbia
Decatur
Conyers
Stockbridge
Lawrenceville
Lithonia
Tucker
Covington
Columbus
Tupelo
New Albany
Parkersburg
TX
TX
TX
TX
TX
TX
TX
TX
CT
MI
MI
MI
MI
MI
MN
MN
MN
LA
WI
MI
MI
AL
AL
GA
GA
MS
GA
GA
AL
GA
GA
GA
GA
SC
GA
GA
GA
GA
GA
GA
GA
GA
MS
MS
WV
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
92
120
120
111
120
129
204
155
114
—
350
190
218
734
337
821
343
556
479
309
261
220
416
214
203
309
242
243
233
239
302
292
241
302
330
396
306
290
339
379
174
731
295
185
177
180
290
209
290
142
114
208
690
—
889
722
403
309
463
178
94
789
—
619
780
485
746
618
627
584
484
480
341
714
733
463
461
721
767
771
550
606
586
722
442
329
346
570
—
—
—
—
—
—
—
—
—
—
—
—
—
180
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
92
120
120
111
120
129
204
155
114
—
350
190
218
914
337
821
343
556
479
309
261
220
416
214
203
309
242
243
233
239
302
292
241
302
330
396
306
290
339
379
174
731
295
185
—
—
—
—
—
—
—
—
—
—
—
—
25
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
177
269
180
300
290
410
209
320
290
410
142
271
114
318
208
363
690
804
—
—
889
1,239
722
912
403
621
334
1,248
463
800
178
999
94
437
789
1,345
—
479
619
928
780
1,041
485
705
746
1,162
618
832
627
830
584
893
484
726
480
723
341
574
714
953
733
1,035
463
755
461
702
721
1,023
767
1,097
771
1,167
550
856
606
896
586
925
31
31
40
44
35
44
30
27
70
98
135
101
77
80
95
56
25
126
—
113
111
72
110
87
88
86
75
72
50
101
106
64
75
105
113
107
88
86
87
1969
6/16/2016
1990
6/16/2016
1980
6/16/2016
1985
6/16/2016
1992
6/16/2016
1995
6/16/2016
1989
6/16/2016
1978
6/16/2016
1983
6/16/2016
1969
6/16/2016
1989
6/16/2016
1991
6/16/2016
1991
6/16/2016
1991
6/16/2016
1973
6/16/2016
1975
6/16/2016
1975
6/16/2016
1988
6/16/2016
1983
6/16/2016
6/16/2016
1989
6/16/2016
2000
6/16/2016
1993
6/16/2016
1976
6/16/2016
1979
6/16/2016
1979
6/16/2016
1978
6/16/2016
1981
6/16/2016
1996
6/16/2016
1988
6/16/2016
1982
6/16/2016
1985
6/16/2016
1983
6/16/2016
1981
6/16/2016
1986
6/16/2016
1982
6/16/2016
1975
6/16/2016
1988
6/16/2016
1979
6/16/2016
1976
6/16/2016
722
1,101
108
1979
6/16/2016
442
616
329
1,060
346
641
570
755
65
60
54
85
1987
6/16/2016
2000
6/16/2016
1993
6/16/2016
1976
6/16/2016
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Ashland
Huntington
KY
WV
{f}
{f}
279
223
858
539
—
—
279
223
858
1,137
539
762
129
81
1979
6/16/2016
1979
6/16/2016
—
—
F-2
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
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Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
North Little Rock
AR
Jackson
Madison
Little Rock
Hurricane
Parkersburg
Chattanooga
Knoxville
Jacksonville
Knoxville
Forestdale
Louisville
Festus
Jacksonville
Jacksonville
Winter Garden
Sanford
Lebanon
Prattville
Calhoun
Mableton
Brunswick
Summerville
Thomaston
Smyrna
Smyrna
Tullahoma
Shelbyville
Dallas
MS
TN
AR
WV
WV
TN
TN
NC
TN
AL
KY
MO
FL
FL
FL
FL
TN
AL
GA
GA
GA
SC
GA
GA
TN
TN
TN
GA
North Charleston
SC
LaGrange
Cullman
Batesville
Phenix City
Montgomery
Starke
Madisonville
Marietta
Hueytown
Gallipolis
Valdosta
Douglas
Fayetteville
Troy
Wetumpka
GA
AL
MS
AL
AL
FL
KY
OH
AL
OH
GA
GA
GA
AL
AL
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
$
190
$
450
$
—
$
—
$
190
$
450
$ 640
400
281
169
238
261
407
352
284
394
241
319
195
330
220
326
350
311
551
346
152
532
215
193
392
221
226
323
260
121
207
260
125
273
333
240
302
175
133
247
236
243
300
183
273
348
458
48
485
513
465
347
152
271
613
238
802
542
701
383
375
736
524
673
366
137
720
364
311
556
701
456
832
459
562
723
551
665
349
468
426
506
711
722
545
557
506
520
416
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
15
—
—
—
—
932
—
—
815
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
400
281
169
238
261
407
352
284
394
241
319
195
330
220
326
350
311
551
346
152
532
215
193
392
221
226
323
260
121
207
260
125
273
333
240
302
175
133
247
236
243
300
183
273
348
748
458
739
63
232
485
723
513
774
465
872
347
699
1,084
1,368
271
665
613
854
1,053
1,372
802
997
542
872
701
921
383
709
375
725
736
1,047
524
1,075
673
1,019
366
518
137
669
720
935
364
557
311
703
556
777
701
927
456
779
832
1,092
459
580
562
769
723
983
551
676
665
938
349
682
468
708
426
728
506
681
711
844
722
969
545
781
557
800
506
806
520
703
416
689
74
56
66
21
72
81
72
54
32
45
90
44
114
85
108
63
69
127
82
102
59
30
109
62
53
82
110
72
132
69
86
114
83
110
59
78
69
75
106
113
81
83
78
79
68
1978
6/16/2016
1981
6/16/2016
1988
6/16/2016
1979
6/16/2016
1981
6/16/2016
1982
6/16/2016
1983
6/16/2016
1981
6/16/2016
1986
6/16/2016
1982
6/16/2016
1975
6/16/2016
1988
6/16/2016
1979
6/16/2016
1976
6/16/2016
1979
6/16/2016
1987
6/16/2016
1986
6/16/2016
1974
6/16/2016
1978
6/16/2016
1979
6/16/2016
1977
6/16/2016
1995
6/16/2016
1978
6/16/2016
1987
6/16/2016
1981
6/16/2016
1982
6/16/2016
1975
6/16/2016
1976
6/16/2016
1985
6/16/2016
1990
6/16/2016
1985
6/16/2016
1999
6/16/2016
1992
6/16/2016
1979
6/16/2016
1986
6/16/2016
1980
6/16/2016
1976
6/16/2016
1979
6/16/2016
1979
6/16/2016
1979
6/16/2016
1980
6/16/2016
1979
6/16/2016
1984
6/16/2016
1985
6/16/2016
1986
6/16/2016
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
St. Albans
Huntington
Newburgh
Erie
Dickson
South Daytona
Milford
WV
WV
NY
PA
TN
FL
NH
{f}
{f}
{f}
{f}
{f}
{f}
{f}
154
233
913
444
292
416
409
491
540
738
562
79
668
355
—
—
—
—
29
—
—
154
233
913
444
292
416
409
491
645
540
773
738
1,651
562
1,006
108
400
668
1,084
355
764
73
81
155
114
23
110
69
1975
6/16/2016
1992
6/16/2016
1975
6/16/2016
1977
6/16/2016
1977
6/16/2016
1984
6/16/2016
1993
6/16/2016
—
—
—
—
—
—
—
F-3
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
—
$
252
$
131
$ 383 $
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Medical / Dental
Restaurants -
Quick Service
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Family Dining
N/A
Restaurants -
Quick Service
Restaurants -
Quick Service
Automotive
Service
Home Furnishings
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Restaurants -
Family Dining
Other Services
Early Childhood
Education
Portland
Superior
Fond du Lac
Alexandria
Hurst
Jacksonville
Fleming Island
Port St. Lucie
Waycross
Kingsland
Jacksonville
North Fort
Myers
Cape Coral
Panama City
Beach
Dothan
Albany
Panama City
Valdosta
Gainesville
Panama City
Leesburg
San Antonio
Augusta
OR
CO
WI
LA
TX
FL
FL
FL
GA
GA
FL
FL
FL
FL
AL
GA
FL
GA
FL
FL
FL
TX
GA
Warner Robins
GA
Spring
Frisco
Binghamton
Windsor
Greene
Afton
Lansing
Freeville
Marathon
New Hartford
Chadwicks
Liberty
Earlville
Vestal
Delhi
Franklin
Endicott
Davenport
Salem
Anniston
Cumming
TX
TX
NY
NY
NY
NY
NY
NY
NY
NY
NY
NY
NY
NY
NY
NY
NY
NY
NH
AL
GA
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
$
252
$
370
521
837
1,462
872
586
930
861
602
821
131
434
1,197
889
1,493
354
355
1,510
1,700
1,256
1,215
1,060
1,817
741
750
577
731
539
626
193
673
808
105
272
130
805
2,224
273
272
557
348
861
524
520
301
213
219
258
324
275
423
188
324
131
312
876
1,692
959
1,144
1,249
1,389
957
1,930
1,044
720
—
26
174
1,577
4,779
1,008
1,101
1,974
1,303
3,034
1,457
2,127
863
784
811
985
1,285
1,066
774
576
1,194
232
176
2,357
—
—
(222)
(g)
(459)
(g)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
50
—
—
—
300
—
—
—
—
—
30
—
—
—
—
—
—
—
—
—
—
—
(221)
(g)
(26)
(g)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
443
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
370
299
837
1,462
872
586
930
861
602
821
434
804
739
1,037
889
1,793
1,726
3,255
354
1,226
355
941
1,510
2,440
1,700
2,561
1,256
1,858
1,245
2,066
1,060
1,817
2,877
741
750
577
731
539
626
193
723
808
105
51
130
1,692
2,433
959
1,709
1,144
1,721
1,249
1,980
1,389
1,928
957
1,583
1,930
2,123
1,044
1,767
720
—
1,528
105
—
51
617
747
805
2,224
1,577
4,779
2,382
7,003
273
272
557
348
861
524
520
301
213
219
258
324
275
423
188
324
131
312
876
1,008
1,281
1,101
1,373
1,974
2,531
1,303
1,651
3,034
3,895
1,457
1,981
2,127
2,647
863
1,164
784
997
811
1,030
985
1,243
1,285
1,609
1,066
1,341
774
1,197
576
764
1,194
1,518
232
176
363
488
2,357
3,233
29
72
135
189
267
57
54
243
253
199
212
262
251
157
175
184
191
157
241
211
168
—
27
37
234
568
174
190
340
224
523
251
366
149
135
140
170
222
184
133
99
206
196
44
316
2015
6/16/2016
2002
6/16/2016
1996
6/16/2016
1994
1997
6/16/2016
6/16/2016
2006
6/16/2016
2006
6/16/2016
1988
6/16/2016
1994
6/16/2016
1995
6/16/2016
1995
6/16/2016
1994
6/16/2016
1996
6/16/2016
1999
6/16/2016
1993
6/16/2016
1991
6/16/2016
1991
6/16/2016
1994
6/16/2016
1994
6/16/2016
1999
6/16/2016
2007
6/16/2016
6/16/2016
6/16/2016
1975
6/16/2016
2013
2006
8/4/2016
8/19/2016
1970
8/22/2016
1980
8/22/2016
1989
8/22/2016
1994
8/22/2016
2010
8/22/2016
1994
8/22/2016
1995
8/22/2016
1995
8/22/2016
1987
8/22/2016
2004
8/22/2016
1997
8/22/2016
1996
8/22/2016
1992
8/22/2016
1998
8/22/2016
1995
8/22/2016
1993
8/22/2016
1998
1992
9/16/2016
9/16/2016
2001
9/30/2016
F-4
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Nebraska City
Dunkirk
Amherst
Red Oak
Waterloo
Suwanee
Plattsmouth
Williamsville
Lackawanna
Fort Madison
Niagara Falls
Cedar Rapids
Cheektowaga
Tucson
Burlington
Fort Worth
Acworth
Douglasville
Hiram
Marietta
Early Childhood
Education
Medical / Dental
Car Washes
Car Washes
Car Washes
Car Washes
Medical / Dental Port Charlotte
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Car Washes
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Movie Theatres
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Medical / Dental Stevenson
Medical / Dental
Medical / Dental Miami
Medical / Dental Sarasota
Medical / Dental Sarasota
Medical / Dental Dalton
Medical / Dental Alton
Medical / Dental Quincy
Medical / Dental Clarksville
Medical / Dental
Medical / Dental Brewster
Medical / Dental Kansas City
Medical / Dental
Medical / Dental Picayune
Medical / Dental Rochester
Medical / Dental Canandaigua
Medical / Dental Anderson
Medical / Dental Camden
Medical / Dental Columbia
Medical / Dental Austin
Medical / Dental Richmond
Terrell Hills
Medical / Dental
West Valley
Health and
Fitness
City
Medical / Dental Rock Springs
Florence
Gardendale
Terre Haute
Homewood
Tucson
Jasper
Laurel
GA
TX
GA
GA
GA
GA
FL
NY
NY
NY
NY
NY
NY
AZ
IA
IA
IA
IA
NE
NE
IA
AL
AL
AL
AL
AL
AZ
FL
FL
FL
GA
IL
IL
IN
IN
MA
MO
MS
MS
NH
NY
SC
SC
SC
TX
TX
TX
UT
WY
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
$
922
$
2,108
$
—
$
—
$
922
$
2,108
$ 3,030 $
1,617
1,346
1,974
1,376
1,302
1,820
231
367
410
615
419
255
1,048
444
436
304
344
363
304
254
1,519
589
468
808
191
323
485
323
485
323
252
272
657
292
60
333
100
70
181
70
211
211
211
242
495
282
1,936
620
—
2,615
2,882
2,947
2,136
2,072
232
509
606
1,025
1,302
187
2,190
1,171
1,179
1,284
846
748
1,302
1,010
6,294
1,984
2,144
1,233
466
780
982
557
446
406
568
608
1,033
325
578
568
1,033
517
426
527
487
537
426
375
446
588
4,210
2,550
4,187
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
99
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
117
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-5
1,716
1,346
1,974
1,376
1,302
1,820
231
367
410
615
419
255
4,187
2,615
2,882
2,947
2,136
2,072
232
5,903
3,961
4,856
4,323
3,438
3,892
463
509
876
606
1,016
1,025
1,640
1,302
1,721
187
442
1,048
444
2,190
1,171
3,238
1,615
436
304
344
363
304
254
1,179
1,615
1,284
1,588
846
1,190
748
1,111
1,302
1,606
1,010
1,264
1,636
589
6,294
1,984
7,930
2,573
468
808
191
323
485
323
485
323
252
272
657
292
60
333
100
70
181
70
211
211
211
242
495
282
1,936
620
2,144
2,612
1,233
2,041
466
780
982
557
446
406
568
608
1,033
325
578
568
1,033
517
426
527
487
537
426
375
446
588
4,210
2,550
657
1,103
1,467
880
931
729
820
880
1,690
617
638
901
1,133
587
607
597
698
748
637
617
941
870
6,146
3,170
283
361
340
374
383
277
299
33
71
85
144
182
26
279
174
176
191
126
111
194
150
834
250
254
167
68
86
104
69
64
73
87
91
144
54
61
84
114
60
56
58
57
73
56
57
77
70
482
299
Year
Constructed
Date
Acquired
2009
9/30/2016
2017
2006
2006
2004
2002
2000
1987
10/12/2016
10/17/2016
10/17/2016
10/17/2016
10/17/2016
10/20/2016
10/28/2016
1978
10/28/2016
1998
10/28/2016
1985
10/28/2016
1988
10/28/2016
1980
10/28/2016
2010
1976
11/9/2016
11/15/2016
1991
11/15/2016
1987
11/15/2016
1982
11/15/2016
2014
11/15/2016
1999
11/15/2016
2000
11/15/2016
2015
2005
12/19/2016
12/29/2016
2005
12/29/2016
1976
12/29/2016
1990
1967
1981
1973
2001
1960
2001
2001
1994
1998
1986
1979
1970
1977
1958
2009
1948
1985
1986
1970
1982
2002
1984
2001
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
12/30/2016
1/17/2017
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
$
—
$
$
1,136
824
4,332
3,759
$ 5,468 $
4,583
Car Washes
Car Washes
Conyers
Covington
North Myrtle
Beach
Bridgeton
Lexington
Islip Terrace
Alpharetta
Westland
Ann Arbor
Muskegon
Battle Creek
Grapevine
Southlake
Cedartown
Frisco
Prosper
Movie Theatres
Medical / Dental
Medical / Dental Mokena
Medical / Dental
Medical / Dental
Early Childhood
Education
Home
Furnishings
Home
Furnishings
Home
Furnishings
Home
Furnishings
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Convenience
Stores
Automotive
Service
Car Washes
Automotive
Service
Convenience
Stores
Early Childhood
Education
Medical / Dental
Medical / Dental
Medical / Dental
Car Washes
Car Washes
Restaurants -
Quick Service
Topeka
Forsyth
Tyler
San Antonio
Payson
Brownsville
Baytown
Las Cruces
Las Cruces
Inverness
Columbia
Station
Building Materials
Building Materials Maumee
Building Materials Troy
Building Materials Jackson
Building Materials Lancaster
Building Materials Portsmouth
Building Materials Radcliff
Building Materials Gainesville
Building Materials Cartersville
Building Materials Douglasville
Building Materials El Paso
Building Materials Garland
New Freedom
Huntingtown
Gambrills
GA
GA
SC
MO
IL
KY
NY
GA
MI
MI
MI
MI
TX
TX
TX
TX
GA
GA
KS
PA
MD
MD
TX
TX
AZ
TX
TX
NM
NM
FL
OH
OH
OH
OH
OH
OH
KY
FL
GA
GA
TX
TX
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
$
$
1,136
824
$
4,332
3,759
1,465
199
237
199
313
7,081
578
303
474
436
1,595
4,177
1,858
14,560
2,096
13,399
1,113
6,436
1,212
7,904
1,279
1,314
1,244
1,396
1,161
2,534
657
258
464
603
904
984
997
812
808
1,584
872
1,857
2,461
6,139
404
1,433
928
548
1,626
286
510
570
3,312
1,944
—
1,790
2,290
2,187
—
—
1,078
733
403
288
376
133
414
934
1,313
1,026
901
1,250
1,437
1,238
693
211
833
160
200
638
1,743
2,421
177
2,283
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
982
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,125
1,625
125
125
—
—
—
—
—
—
—
—
—
—
—
—
—
7,743
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-6
1,465
199
237
199
313
7,081
578
303
474
436
8,546
777
540
673
749
1,595
4,177
5,772
551
495
733
68
61
63
54
519
2013
2011
2006
1982
2008
2014
1986
1/24/2017
1/24/2017
1/31/2017
2/9/2017
2/9/2017
2/9/2017
2/9/2017
2016
2/28/2017
1,858
15,685
17,543
1,525
1987
3/1/2017
2,096
15,024
17,120
1,371
1992
3/1/2017
1,113
6,561
7,674
1,212
8,029
9,241
1,279
1,314
2,593
1,244
1,396
2,640
1,161
2,534
3,695
657
258
464
603
904
984
997
1,654
812
1,070
808
1,272
1,584
2,187
872
1,857
1,776
2,841
2,461
6,139
8,600
404
1,433
1,837
928
548
2,608
286
510
570
3,312
1,944
7,743
1,790
2,290
2,187
4,240
2,492
10,351
2,076
2,800
2,757
—
—
—
1,078
733
403
288
376
133
414
934
1,313
1,026
901
1,250
1,437
1,238
693
211
833
160
200
638
1,743
2,421
177
2,283
2,515
1,971
1,096
499
1,209
293
614
1,572
3,056
3,447
1,078
3,533
675
852
177
188
303
126
97
96
241
122
227
636
214
350
201
584
176
256
244
183
157
88
27
106
21
26
81
221
307
23
290
1987
3/1/2017
1996
3/1/2017
2003
3/8/2017
2001
3/8/2017
2010
3/8/2017
2002
3/8/2017
1987
3/9/2017
1989
3/9/2017
2008
3/10/2017
1997
1998
3/28/2017
3/28/2017
2009
3/28/2017
1980
3/30/2017
2016
1988
2018
2008
2008
2010
4/25/2017
4/28/2017
5/5/2017
5/18/2017
5/24/2017
5/24/2017
2003
5/30/2017
1961
1963
1991
1995
1995
1996
1984
2003
2003
2004
1984
2001
6/1/2017
6/1/2017
6/1/2017
6/1/2017
6/1/2017
6/1/2017
6/1/2017
6/1/2017
6/1/2017
6/1/2017
6/1/2017
6/1/2017
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
Nashville
Conroe
Amarillo
Grand Junction
Mt. Pleasant
Irondale
Bessemer
Farmington
Farmington
Pueblo
Soperton
Kenosha
Visalia
Building Materials
Building Materials
Building Materials
Building Materials
Building Materials
Building Materials
Car Washes
Car Washes
Car Washes
Restaurants -
Quick Service
Restaurants -
Quick Service
Movie Theatres
Entertainment
Automotive Service Knoxville
Automotive Service Forest Park
Automotive Service Martinez
Automotive Service Clarksville
Automotive Service Ocala
Automotive Service Orlando
Medical / Dental
Restaurants -
Quick Service
Car Washes
Early Childhood
Education
Automotive Service Garden City
Automotive Service Troy
Automotive Service Burton
Arvada
Pet Care Services
Round Rock
Medical / Dental
Little Rock
Car Washes
Car Washes
Bryant
Automotive Service Longwood
Anderson
Car Washes
Cornelia
Car Washes
South
Car Washes
Commerce
Seneca
Algona
Buford
Montgomery
Orlando
Grantsburg
East Bethel
Isanti
Braham
Car Washes
Restaurants -
Quick Service
Restaurants -
Quick Service
Convenience
Stores
Restaurants -
Quick Service
Health and Fitness Hobbs
Health and Fitness
Florence
Automotive Service Magnolia
Early Childhood
Education
Car Washes
Car Washes
Car Washes
Convenience
Stores
Convenience
Stores
Convenience
Stores
Jacksonville
Daingerfield
Jacksonville
Winter Garden
Springdale
Rogers
Shreveport
TX
TX
CO
SC
AL
AL
NM
NM
CO
GA
GA
WI
CA
TN
GA
GA
TN
FL
FL
AL
IA
GA
FL
MI
MI
MI
CO
TX
AR
AR
FL
SC
GA
GA
SC
MN
MN
MN
WI
NM
KY
TX
FL
AR
AR
LA
TX
TX
TX
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
$
$
2,150
927
760
1,097
546
1,514
634
746
898
$
631
655
403
171
227
3,413
4,945
2,795
5,103
—
—
312
3,159
1,320
518
498
612
498
518
456
477
150
1,353
1,175
366
794
188
1,342
713
685
489
887
793
470
607
255
764
443
3,755
2,320
695
850
570
633
715
664
2,976
528
3,693
4,362
961
1,389
1,180
2,808
6,821
3,361
2,790
1,263
4,031
2,670
3,072
2,994
1,353
1,167
1,859
289
1,043
640
938
868
1,402
1,169
597
763
460
587
269
368
1,673
1,503
2,186
2,480
4,603
1,908
2,663
2,615
1,357
1,135
916
$
$
2,150
927
760
1,097
546
1,514
634
746
898
631
655
403
171
227
3,413
4,945
2,795
5,103
$ 2,781 $
1,582
1,163
1,268
773
4,927
5,579
3,541
6,001
—
—
—
312
3,275
1,320
518
498
612
498
518
456
477
150
1,353
1,175
366
794
188
778
713
685
489
887
793
470
607
255
764
443
3,755
2,320
695
850
570
633
715
664
2,976
528
3,693
4,362
961
1,389
1,180
2,750
6,821
3,361
2,790
1,263
4,031
2,670
3,072
2,994
755
7,030
3,640
1,213
1,348
1,182
1,131
1,233
1,120
3,453
678
5,046
5,537
1,327
2,183
1,368
3,528
7,534
4,046
3,279
2,150
4,824
3,140
3,679
3,249
1,353
2,117
1,167
1,859
3,026
289
1,043
1,332
640
938
868
1,402
1,169
597
763
460
587
269
368
1,673
1,503
2,186
2,480
4,603
1,908
2,663
2,615
2,313
2,441
3,054
3,882
5,772
2,505
3,426
3,075
1,357
1,944
1,933
2,202
1,723
2,091
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(58)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
798
807
(g)
$
(g)
—
—
—
—
—
—
—
—
—
—
—
116
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(564)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-7
80
83
51
22
29
433
552
312
569
—
71
500
283
102
113
96
90
106
88
285
63
426
416
106
153
120
300
608
309
250
164
385
256
299
269
236
270
125
239
180
227
311
457
198
261
255
188
125
126
2002
2002
1983
1983
1975
2002
2005
2013
2008
6/1/2017
6/1/2017
6/1/2017
6/1/2017
6/1/2017
6/1/2017
6/6/2017
6/6/2017
6/6/2017
1991
6/6/2017
1992
1997
1984
2008
1992
1992
1998
1989
1989
2001
1993
2010
2010
1984
1974
1955
1982
2016
1976
1997
2000
2008
2001
2016
2005
6/6/2017
6/8/2017
6/30/2017
7/21/2017
7/21/2017
7/21/2017
7/21/2017
7/21/2017
7/21/2017
8/7/2017
8/10/2017
8/15/2017
8/25/2017
8/29/2017
8/29/2017
8/29/2017
9/5/2017
9/12/2017
9/12/2017
9/20/2017
9/25/2017
9/26/2017
9/26/2017
9/26/2017
9/26/2017
1996
9/27/2017
1989
9/27/2017
1986
9/27/2017
2005
2016
1994
2017
2015
2009
2005
2017
9/27/2017
9/28/2017
9/28/2017
9/29/2017
9/29/2017
9/29/2017
9/29/2017
9/29/2017
2012
9/29/2017
1979
9/29/2017
1996
9/29/2017
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
4,242
—
2,290
112
Entertainment
Medical / Dental
Medical / Dental West
Orlando
North Lima
Lafayette
Salem
Toledo
Pittsburgh
Youngstown
Youngstown
Penn Yan
Kent
Sandersville
Barnesville
Farmington
Farmington
Farmington
Farmington
Farmington
Farmington
Farmington
Farmington
Gray
Aztec
Ignacio
Kirtland
Tyler
Hoover
Medical / Dental
Medical / Dental
Medical / Dental
Medical / Dental
Medical / Dental Madison
Medical / Dental
Medical / Dental
Medical / Dental
Convenience
Stores
Entertainment
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Convenience
Stores
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Health and
Fitness
Restaurants -
Quick Service
Medical / Dental
Medical / Dental
Convenience
Stores
Pet Care
Services
Pet Care
Services
Pet Care
Services
Pet Care
Services
Early Childhood
Education
Early Childhood
Education
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Movie Theatres
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Augusta
Dublin
Daleville
Franklin
Greeley
Roanoke
Jasper
Alexander
City
Headland
Tallassee
Talladega
Enterprise
Fayetteville
Greenwood
Indianapolis
Lansdowne
Overland
Park
Bossier City
Hutchinson
Tyler
Lindale
Farmington
FL
OH
IN
OH
OH
PA
OH
OH
OH
NY
OH
TX
AL
NM
NM
NM
NM
NM
NM
NM
CO
NM
NM
NM
GA
GA
GA
CO
KS
TX
TX
NM
IN
AR
IN
IN
VA
KS
LA
GA
OH
AL
AL
AL
AL
AL
AL
AL
AL
{f}
{f}
2,290
112
122
92
448
—
275
387
366
132
173
706
1,403
332
342
372
322
282
503
735
272
332
453
332
293
283
243
4,377
926
397
468
1,750
—
702
488
1,394
651
610
511
2,939
302
604
886
685
1,077
815
352
1,047
775
1,027
906
374
515
414
1,484
4,491
194
985
394
554
395
905
312
52
777
5,675
1,429
785
2,319
1,456
593
416
2,167
2,982
1,189
4,062
{f}
976
2,347
1,663
2,126
1,909
10,097
127
224
370
263
273
195
88
166
409
526
331
506
370
302
273
380
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
10,909
1,038
519
560
2,198
—
977
875
1,760
783
783
2,167
4,342
634
946
8,619
926
397
468
1,750
—
702
488
1,394
651
610
1,461
2,939
302
604
886
1,258
685
1,007
1,077
1,359
815
1,318
352
1,087
1,047
1,319
775
1,107
1,027
1,480
906
1,238
374
515
222
667
798
352
122
92
448
—
275
387
366
132
173
706
1,403
332
342
372
322
282
503
735
272
332
453
332
293
283
130
—
—
—
—
—
—
—
—
—
950
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(113)
(g)
(192)
(g)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,484
4,491
5,975
194
985
394
554
395
905
312
52
777
5,675
1,429
971
6,660
1,823
785
1,339
2,319
2,714
1,456
2,361
593
416
905
468
2,167
2,982
5,149
1,189
4,062
5,251
976
2,347
3,323
1,663
2,126
1,909
10,097
3,572
12,223
127
224
370
263
273
195
88
166
409
526
331
506
370
302
273
380
536
750
701
769
643
497
361
546
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
428
82
39
45
156
—
75
53
142
66
61
124
307
41
69
111
80
124
101
54
115
96
137
106
47
60
52
421
81
519
153
119
215
153
59
37
298
388
241
187
882
41
57
49
58
57
39
30
42
2007
1976
1976
1985
1995
1983
1971
1950
1995
1986
1970
1996
2017
9/29/2017
10/5/2017
10/5/2017
10/5/2017
10/5/2017
10/5/2017
10/5/2017
10/5/2017
10/5/2017
10/5/2017
10/5/2017
10/16/2017
10/13/2017
1966
11/8/2017
1972
11/8/2017
2013
11/8/2017
1982
11/8/2017
1980
11/8/2017
1980
11/8/2017
1982
11/8/2017
1983
11/8/2017
1985
11/8/2017
1990
11/8/2017
1980
11/8/2017
1992
11/10/2017
1989
11/10/2017
1996
11/10/2017
1989
11/16/2017
1971
1999
2013
11/16/2017
11/17/2017
11/17/2017
1998
11/21/2017
2007
12/1/2017
1979
12/1/2017
1952
12/1/2017
1954
12/1/2017
2006
12/4/2017
2017
12/8/2017
1993
12/15/2017
1982
1994
12/15/2017
12/15/2017
1983
12/19/2017
1990
12/19/2017
2005
12/19/2017
2004
12/19/2017
2007
12/19/2017
2008
12/19/2017
1999
12/19/2017
1974
12/19/2017
F-8
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
{f}
{f}
{f}
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Quick Service
Automotive
Service
Car Washes
Health and
Fitness
Health and
Fitness
Early Childhood
Education
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Health and
Fitness
Convenience
Stores
Early Childhood
Education
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Automotive
Service
Automotive
Service
Grocery
Health and
Fitness
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Movie Theatres
Health and
Fitness
Automotive
Service
Early Childhood
Education
Pet Care
Services
Valley
Selma
Linthcum
Pocomoke
City
D'Iberville
Clarksville
Scranton
Alexander
City
Columbia
Palm City
AL
AL
MD
MD
MS
TN
PA
AL
SC
FL
St Robert
MO
Jasper
Spring
Bentonville
Auburn
Columbus
Southaven
Saginaw
Grand Rapids
Grand Rapids
Wichita
Bloomfield
Trumbull
Davenport
Bettendorf
Kewanee
Davenport
Davenport
Roseville
Woodbury
Burlington
Aiken
Burlington
Canton
Farmington
Dublin
Shelby
Tulsa
Elk River
San Antonio
Cave Creek
IN
TX
AR
AL
GA
MS
MI
MI
MI
KS
NM
CT
IA
IA
IL
IA
IA
MN
MN
NC
SC
CT
CT
CT
OH
NC
OK
MN
TX
AZ
185
175
302
409
1,691
1,124
653
927
861
785
511
785
672
644
226
721
—
849
623
736
755
802
500
727
755
931
932
—
1,104
2,411
2,175
2,540
1,060
1,496
528
299
349
2,594
221
864
57
402
115
459
153
489
978
762
1,086
1,205
1,166
—
784
—
479
1,050
432
1,304
1,268
1,602
2,049
1,300
1,063
3,787
432
730
278
740
1,826
2,856
433
482
1,408
761
1,459
2,934
2,798
—
898
1,496
1,789
2,540
755
1,540
114
1995
12/21/2017
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(338)
(g)
(208)
(g)
(59)
—
—
—
—
—
—
—
—
—
—
326
—
206
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(61)
—
—
300
—
—
—
124
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
185
175
302
487
409
584
1,691
1,124
2,815
653
927
861
785
511
447
613
644
226
721
—
1,104
2,175
1,060
528
299
349
849
1,502
623
1,550
736
1,597
802
1,313
292
739
666
1,279
755
1,399
931
1,157
1,232
—
1,953
—
2,411
3,515
2,540
4,715
1,620
2,680
1,086
1,614
1,205
1,504
1,166
1,515
57
402
115
459
153
489
978
762
479
536
1,050
1,452
432
547
1,304
1,763
1,268
1,421
1,602
2,091
2,049
1,300
3,027
2,062
1,063
3,787
4,850
432
730
278
740
1,826
2,964
433
482
1,408
1,840
761
1,491
1,459
1,737
2,934
2,798
3,674
4,624
4,329
7,293
898
1,331
1,496
1,978
108
4,329
—
—
—
F-9
1,405
1,789
3,945
5,734
4,812
2,920
4,812
7,732
—
221
784
1,005
3,392
1,070
3,392
4,462
37
45
147
123
79
86
2004
12/19/2017
1996
12/19/2017
2004
12/21/2017
2005
12/21/2017
2004
12/21/2017
2003
12/21/2017
93
67
86
82
91
153
—
259
298
158
118
121
106
346
77
140
39
92
41
118
104
141
187
128
322
137
95
129
256
274
253
83
124
227
2007
12/21/2017
2003
12/21/2017
2003
12/21/2017
2001
12/21/2017
1998
12/22/2017
2017
2017
12/27/2017
12/28/2017
2007
12/29/2017
2005
12/29/2017
2002
12/29/2017
2012
1/4/2018
2016
1/4/2018
2013
1/4/2018
2018
1/19/2018
1980
1/24/2018
2018
1/31/2018
1955
2/8/2018
1975
2/8/2018
1993
2/8/2018
1990
2/8/2018
1952
2/8/2018
1971
2/16/2018
2000
1992
2/16/2018
2/16/2018
1998
3/1/2018
2004
3/9/2018
1979
3/9/2018
1985
3/9/2018
2008
2004
3/13/2018
3/22/2018
2018
3/22/2018
1996
3/29/2018
2007
3/29/2018
2008
4/5/2018
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Pet Care Services
Early Childhood
Education
Medical / Dental
Car Washes
Automotive Service
Automotive Service
Automotive Service
Movie Theatres
Automotive Service
Automotive Service
Maricopa
Byron Center
Russellville
Bel Air
Apex
Holly Springs
Fuquay Varina
Decatur
North Canton
Clinton
Township
Baltimore
Sartell
St. Augusta
Pine City
Automotive Service
Convenience Stores
Convenience Stores
Convenience Stores Rice
Convenience Stores
Convenience Stores Cambridge
Early Childhood
Education
Pet Care Services
Acworth
Lakewood
Ranch
Bluff City
Erwin
Sparta
Kingsport
Cleveland
Cleveland
Castlewood
Covington
Harlem
London
Elizabethton
Elizabethton
Mountain City
Other Services
Other Services
Other Services
Other Services
Other Services
Other Services
Other Services
Other Services
Other Services
Other Services
Other Services
Other Services
Other Services
Convenience Stores Mosinee
Convenience Stores Wausau
Convenience Stores Wausau
Convenience Stores Wausau
Convenience Stores Wausau
Convenience Stores
Prentice
Convenience Stores Rothschild
Phillips
Convenience Stores
Convenience Stores
Pound
Convenience Stores Gillett
Convenience Stores
Convenience Stores
Convenience Stores Merrill
Convenience Stores
Convenience Stores Marathon
Convenience Stores
Edgar
Plover
Convenience Stores
Convenience Stores Hatley
Tigerton
Stevens Point
Tomahawk
AZ
MI
AR
MD
NC
NC
NC
AL
OH
MI
MD
MN
MN
MN
MN
MN
GA
FL
TN
TN
NC
TN
TN
TN
VA
GA
GA
KY
TN
TN
TN
WI
WI
WI
WI
WI
WI
WI
WI
WI
WI
WI
WI
WI
WI
WI
WI
WI
WI
$
1,057
$
1,057
$
—
$
1,520
$
1,057
$
2,577
$ 3,634 $
{f}
{f}
{f}
{f}
{f}
513
710
321
229
308
487
1,491
481
1,179
206
988
473
782
792
1,008
1,591
1,297
3,120
428
1,283
318
4,350
982
688
1,709
607
1,111
1,461
1,173
2,161
{f}
637
1,365
442
146
713
713
1,220
673
615
1,259
849
703
937
254
488
78
260
311
402
502
412
1,164
703
191
321
241
954
1,054
1,857
683
261
502
1,275
783
—
1,347
1,484
1,942
3,143
1,083
2,938
1,786
3,309
1,610
2,391
517
849
176
509
372
1,470
361
445
753
760
722
478
591
1,014
522
1,305
1,008
1,244
949
883
851
—
—
—
—
—
—
—
—
—
—
—
—
14
—
—
—
1,054
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-10
—
—
—
—
—
—
—
—
—
—
—
—
104
—
—
—
2,677
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
513
710
321
229
308
487
1,491
481
1,179
206
988
473
796
792
1,008
1,591
1,297
3,120
428
1,283
318
4,350
982
688
1,709
607
1,111
1,565
1,173
2,161
2,104
2,007
3,441
657
1,591
805
5,841
1,463
1,867
1,915
1,595
1,584
2,361
1,965
3,169
637
1,365
2,002
1,496
146
713
713
1,220
673
615
1,259
849
703
937
254
488
78
260
311
402
502
412
1,164
703
191
321
241
954
1,054
1,857
683
261
502
1,275
783
2,677
1,347
1,484
1,942
3,143
1,083
2,938
1,786
3,309
1,610
2,391
517
849
176
509
372
1,470
361
445
753
760
722
478
591
1,014
522
1,305
1,008
1,244
949
883
851
4,173
1,493
2,197
2,655
4,363
1,756
3,553
3,045
4,158
2,313
3,328
771
1,337
254
769
683
1,872
863
857
1,917
1,463
913
799
832
1,968
1,576
3,162
1,691
1,505
1,451
2,158
1,634
104
159
110
266
41
105
43
405
86
121
119
112
124
194
163
257
141
194
94
125
181
302
95
209
181
283
138
220
59
74
15
63
57
131
79
70
230
113
73
81
75
204
134
311
166
113
127
154
149
Year
Constructed
Date
Acquired
2008
4/5/2018
2012
2015
2016
2000
2003
2008
2013
1960
1983
1952
2013
1978
2005
1967
2007
4/9/2018
4/20/2018
4/26/2018
5/1/2018
5/1/2018
5/1/2018
5/10/2018
5/17/2018
5/17/2018
5/17/2018
5/17/2018
5/17/2018
5/17/2018
5/17/2018
5/17/2018
2000
5/18/2018
2019
1949
1981
1973
1979
1975
1964
1991
1991
1895
1999
2010
1996
1936
1994
1995
1995
1989
1991
1989
1985
1970
1983
1990
1998
1993
1996
1992
1987
1984
2006
1997
5/24/2018
6/1/2018
6/1/2018
6/1/2018
6/1/2018
6/1/2018
6/1/2018
6/1/2018
6/1/2018
6/1/2018
6/1/2018
6/1/2018
6/1/2018
6/1/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
Erial
Exton
Frazer
Malvern
Voorhees
Glen Mills
Royersford
Collegeville
Phoenixville
Downingtown
West Norriton
King of Prussia
Surprise
Fayetteville
Convenience Stores Minoqua
Convenience Stores Wittenberg
Convenience Stores Rudolph
Convenience Stores Mountain
Convenience Stores Park Falls
Convenience Stores Weston
Early Childhood
Education
Car Washes
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Medical / Dental
Medical / Dental
Medical / Dental
Medical / Dental
Medical / Dental
Medical / Dental
Health and Fitness
Health and Fitness
Health and Fitness
Health and Fitness
Medical / Dental
Pet Care Services
Pet Care Services
Pet Care Services
Restaurants - Quick
Service
Car Washes
Car Washes
Car Washes
Car Washes
Car Washes
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Service
Automotive Service Oklahoma City
Blue Bell
Mountain Grove
Harrison
Jonesboro
El Dorado
Berryville
Batesville
Salisbury
Peabody
Methuen
Moncks Corner
Brownsville
Mesa
Chandler
Green Valley
Brownsville
Athen
Winder
Decatur
Decatur
Duluth
Fort Oglethorpe
Chattanooga
Chattanooga
Chattanooga
Soddy Daisy
Ooltewah
Ringgold
Dayton
WI
WI
WI
WI
WI
WI
AZ
AR
PA
PA
PA
NJ
PA
NJ
PA
PA
PA
PA
PA
PA
PA
MO
AR
AR
AR
AR
AR
MA
MA
MA
SC
TX
AZ
AZ
AZ
KY
GA
GA
GA
GA
GA
GA
GA
TN
TN
TN
TN
TN
TN
OK
$
$
371
1,405
412
371
392
622
1,546
—
701
730
$
412
1,305
840
663
1,164
843
1,736
—
2,084
2,276
3,938
3,246
740
442
509
259
557
490
605
423
1,546
2,007
1,892
1,892
1,998
2,171
2,219
1,940
1,431
4,466
788
113
144
329
93
62
237
1,169
3,497
4,544
978
172
1,329
1,775
913
297
1,011
683
703
828
1,261
3,218
527
835
1,021
228
120
1,139
14,584
6,523
5,179
1,439
1,683
1,531
3,033
2,454
1,024
2,536
2,027
3,031
2,029
2,187
1,283
1,045
387
438
876
1,406
1,061
1,255
1,497
1,161
468
1,283
1,079
1,262
825
152
992
596
$
$
371
1,405
412
371
392
622
1,546
—
701
730
412
1,305
840
663
1,164
843
1,757
—
$ 783 $
2,710
1,252
1,034
1,556
1,465
3,303
—
2,084
2,785
2,276
3,006
3,938
3,246
7,184
740
442
509
259
557
490
605
423
1,546
2,286
2,007
2,449
1,892
2,401
1,892
2,151
1,998
2,555
2,171
2,661
2,219
2,824
1,940
2,363
1,431
4,466
5,897
788
113
144
329
93
62
237
2,500
3,497
4,544
978
172
1,329
1,775
913
297
1,011
683
703
828
1,261
3,218
527
835
1,021
228
120
1,139
17,427
6,523
5,179
1,439
1,683
1,586
3,088
2,509
1,024
3,136
2,027
3,031
2,029
2,187
4,006
640
979
1,350
321
182
1,376
19,927
10,020
9,723
2,417
1,855
2,915
4,863
3,422
1,321
4,147
2,710
3,734
2,857
3,448
1,283
1,045
2,328
387
438
876
1,406
1,793
1,061
1,499
1,255
2,131
1,497
1,161
2,658
468
1,283
1,751
1,079
1,262
2,341
825
152
992
596
1,817
748
—
—
—
—
—
—
21
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,843
—
—
—
—
55
55
55
—
600
—
—
—
—
—
—
—
—
—
—
—
—
—
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,331
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-11
73
283
106
98
131
120
148
—
182
191
375
123
155
154
139
157
160
173
147
366
238
45
63
80
18
13
94
959
466
446
146
116
123
242
186
87
250
180
233
183
187
85
118
87
107
93
111
99
95
48
1984
1999
1992
1998
1984
1993
2008
2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/15/2018
6/21/2018
6/21/2018
2006
6/28/2018
1998
6/28/2018
1992
6/28/2018
2000
6/28/2018
2000
6/28/2018
2002
6/28/2018
2002
6/28/2018
2003
6/28/2018
2004
6/28/2018
2007
6/28/2018
2008
6/28/2018
2010
6/28/2018
1967
2012
2006
2005
2000
2000
2017
2004
2009
2002
2002
2008
1990
2002
2015
1990
2006
2008
1967
2007
2006
6/28/2018
6/28/2018
6/28/2018
6/28/2018
6/28/2018
6/28/2018
6/28/2018
6/29/2018
6/29/2018
6/29/2018
6/29/2018
7/13/2018
7/13/2018
7/13/2018
7/13/2018
7/18/2018
7/26/2018
7/26/2018
7/26/2018
7/26/2018
7/26/2018
2001
8/8/2018
2015
8/8/2018
2009
8/8/2018
2004
8/8/2018
2012
8/8/2018
2016
8/8/2018
2003
8/8/2018
2006
1980
8/8/2018
8/9/2018
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
Eden Prairie
Midwest City
Del City
Midwest City
San Antonio
Macon
Macon
Augusta
Montrose
Fairbanks
Colleyville
Blytheville
Paragould
Marion
Metairie
San Angelo
Springfield
Eugene
Automotive Service
Automotive Service
Automotive Service
Early Childhood
Education
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Van Buren
Service
Seguin
Convenience Stores
Convenience Stores
Burleson
Convenience Stores Winfield
Automotive Service
Pontiac
Restaurants - Quick
Service
Health and Fitness
Health and Fitness
Early Childhood
Education
Early Childhood
Education
Restaurants - Quick
Service
Entertainment
Restaurants - Quick
Service
Restaurants - Family
Dining
Restaurants - Family
Dining
Restaurants - Family
Dining
Restaurants - Quick
Service
Restaurants - Quick
Service
Medical / Dental
Automotive Service
Car Washes
Restaurants - Quick
Service
Medical / Dental
Early Childhood
Education
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Service
Early Childhood
Education
Restaurants - Quick
Service
Health and Fitness
Restaurants - Quick
Service
Medical / Dental
Early Childhood
McDonough
Education
Tucson
Convenience Stores
Convenience Stores
Phoenix
Convenience Stores Centralia
Medical / Dental
Medical / Dental
Convenience Stores Duncanville
Early Childhood
Education
Restaurants - Quick
Service
Medical / Dental
Medical / Dental
Medical / Dental
Medical / Dental
Early Childhood
Education
Pembroke
Fort Worth
Arlington
Burleson
Dallas
Fairbanks
Abilene
Bremen
Springdale
Countryside
Midland
Hot Springs
Tucson
Andalusia
Forrest City
Grapevine
Canton
Montgomery
Prattville
St Augustine
Olive Branch
Ashburn
North Richard
Hills
Fleming Island
OK
OK
OK
MN
AR
AR
AR
TX
TX
TX
MI
TX
OR
OR
TX
TX
AR
LA
CO
GA
GA
GA
AK
AK
TX
IN
AR
AL
AR
VA
TX
TX
FL
FL
AR
AZ
IL
TX
GA
AZ
AZ
WA
AL
AL
TX
GA
NY
TX
TX
TX
TX
MS
$
$
253
364
172
$
495
384
526
{f}
1,264
1,651
{f}
{f}
{f}
{f}
{f}
{f}
785
744
642
435
823
908
445
161
2,024
1,046
617
695
459
1,323
698
825
648
923
438
687
336
221
—
384
143
898
875
775
917
872
240
4,227
727
298
604
977
1,037
568
454
237
469
736
784
946
995
1,660
2,474
1,077
806
2,468
2,986
2,258
1,022
920
2,143
1,036
894
992
972
1,524
1,633
1,959
1,284
—
727
608
671
1,113
904
1,964
2,523
899
—
1,302
1,760
2,065
827
429
509
1,528
857
538
504
2,079
577
466
546
61
1,813
898
845
649
1,091
3,606
1,027
1,050
$
$
253
364
172
495
384
526
$ 748 $
748
698
1,264
1,651
2,915
785
744
642
435
823
908
445
161
2,024
1,046
617
695
459
1,323
698
825
648
923
438
692
336
221
—
384
143
898
875
775
917
872
240
4,367
727
298
604
977
1,037
568
454
237
469
736
1,521
784
1,528
946
995
1,660
2,474
1,077
806
2,468
2,986
1,588
1,430
2,483
3,382
1,522
967
4,492
4,032
2,258
2,875
1,022
1,717
920
2,143
1,379
3,466
1,036
1,734
894
1,719
992
1,640
972
1,895
1,524
1,962
1,810
1,959
1,284
—
2,502
2,295
1,505
—
727
608
1,111
751
671
1,569
1,113
1,988
904
1,679
1,964
2,881
2,523
3,395
899
4,264
1,139
8,631
1,302
1,760
2,029
2,058
2,065
827
429
509
1,528
857
538
2,669
1,804
1,466
1,077
1,982
1,094
1,007
504
2,079
2,583
577
466
546
61
1,813
898
845
649
1,091
3,606
1,475
1,311
1,195
1,152
5,419
1,027
1,050
2,077
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
177
—
—
—
—
—
—
—
—
—
—
—
140
—
4,264
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-12
50
48
43
146
70
67
79
85
159
240
95
61
232
196
166
85
80
174
89
68
77
90
125
137
132
86
—
61
47
56
105
87
146
164
63
123
94
106
146
107
47
62
107
59
57
146
90
62
55
57
212
108
1995
1985
1980
8/9/2018
8/9/2018
8/9/2018
1995
8/10/2018
2007
8/22/2018
2008
8/22/2018
2008
1974
1985
1979
1978
1978
1999
1980
8/22/2018
9/4/2018
9/4/2018
9/4/2018
9/7/2018
9/12/2018
9/13/2018
9/13/2018
2008
9/14/2018
1997
9/18/2018
2007
2016
9/21/2018
9/21/2018
2000
9/25/2018
1968
9/25/2018
1983
9/25/2018
1972
9/25/2018
1971
9/27/2018
2006
2006
1970
2018
1988
2007
9/27/2018
9/27/2018
9/28/2018
9/28/2018
9/28/2018
9/28/2018
2001
9/28/2018
2017
9/28/2018
2016
9/28/2018
2010
9/28/2018
2006
9/28/2018
1979
2019
2013
1993
2002
1985
1987
1976
2004
2012
1980
10/4/2018
10/10/2018
10/26/2018
10/31/2018
11/2/2018
11/7/2018
11/7/2018
11/7/2018
11/7/2018
11/7/2018
11/8/2018
2006
11/9/2018
2017
1997
1999
1942
1979
11/28/2018
11/30/2018
11/30/2018
11/30/2018
11/30/2018
2009
12/5/2018
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
Manchester
Macon
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Entertainment
Entertainment
Macon
Andover
Rochester
South St.
Paul
Mounds View
St. Paul Park
Oakdale
Monticello
St. Paul
Ramsey
Winston
Salem
Entertainment
Entertainment
Entertainment
Entertainment
Entertainment
Entertainment
Entertainment
Health and
Fitness
Automotive
Denton
Service
Dubuque
Car Washes
Davenport
Car Washes
Car Washes
Rock Island
Pet Care Services Georgetown
Pet Care Services Middleburg
Early Childhood
Education
Home Furnishings Kansas City
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Car Washes
Entertainment
Alexandria
Arlington
Leesville
Saginaw
Flint
Griffin
Springdale
Nampa
West
Memphis
Medical / Dental
Early Childhood
Education
Pet Care Services
Medical / Dental
Medical / Dental
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Early Childhood
Education
Restaurants -
Casual Dining
Medical / Dental
Health and
Fitness
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Health and
Fitness
Automotive
Service
Gilbert
Denham
Springs
Little Rock
Bryant
Ruston
El Dorado
Percival
Garner
Wilder
Meridian
Abilene
St. Augustine
St. Augustine
St. Augustine
Las Vegas
St. Augusta
CT
GA
GA
MN
MN
MN
MN
MN
MN
MN
MN
MN
NC
TX
IA
IA
IL
TX
FL
TX
MO
MI
MI
LA
LA
GA
AR
ID
AR
AZ
LA
AR
AR
LA
AR
IA
NC
KY
MS
TX
FL
FL
FL
NV
MN
{f}
{f}
{f}
{f}
{f}
{f}
{f}
{f}
$
915
$
939
$
—
$
1,805
$
915
$
2,744
$ 3,659 $
128
1977
12/7/2018
538
508
898
379
1,008
1,986
529
2,136
1,527
1,218
609
1,067
1,067
1,208
968
928
3,264
1,058
5,699
3,414
1,407
749
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
538
508
898
379
1,008
1,986
529
2,136
1,527
1,218
609
1,067
1,605
1,067
1,208
968
928
3,264
1,058
5,699
3,414
1,407
749
1,575
2,106
1,347
1,936
5,250
1,587
7,835
4,941
2,625
1,358
986
1,205
(75)
(g)
(90)
(g)
911
1,115
2,026
1,278
990
757
1,030
753
803
1,296
273
619
335
271
140
923
1,032
886
247
1,074
485
770
460
544
661
578
378
317
886
1,582
2,121
2,394
2,949
—
—
3,239
4,683
274
294
953
812
1,103
2,325
2,768
543
—
701
1,562
1,519
1,399
1,448
1,252
1,962
1,169
5,947
1,326
2,478
183
611
1,436
2,149
1,385
2,108
491
518
2,543
1,057
—
—
—
—
790
1,842
—
—
—
—
—
—
—
(1,032)
—
—
632
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,473
2,384
—
—
—
—
—
—
—
(2,325)
—
—
1,278
990
757
1,030
1,543
2,645
1,296
273
619
335
271
140
923
—
886
247
1,582
2,121
2,394
2,949
3,473
2,384
3,239
4,683
2,860
3,111
3,151
3,979
5,016
5,029
4,535
4,956
274
893
294
629
953
1,224
812
952
1,103
—
2,768
2,026
—
3,654
543
790
3,641
1,706
3,641
5,347
—
—
—
—
—
—
—
—
—
485
770
460
544
661
578
378
317
886
701
1,562
1,519
1,186
2,332
1,979
1,399
1,943
1,448
2,109
1,252
1,830
1,962
2,340
1,169
5,947
1,486
6,833
144
1,326
2,622
3,948
—
—
—
—
—
183
611
1,436
1,619
2,149
2,760
1,385
2,108
3,493
491
518
2,543
3,034
1,057
1,575
88
78
91
60
78
233
79
371
278
99
81
62
130
146
158
195
47
167
207
256
38
34
63
53
77
—
157
40
100
50
93
87
95
103
94
108
64
300
168
77
122
145
135
80
2007
12/14/2018
2008
2005
1958
1978
1967
1959
2009
2007
1955
1988
12/14/2018
12/12/2018
12/12/2018
12/12/2018
12/12/2018
12/12/2018
12/12/2018
12/12/2018
12/12/2018
12/12/2018
1972
12/19/2018
1982
1992
1990
1996
2020
2020
1989
2007
12/20/2018
12/20/2018
12/20/2018
12/20/2018
12/21/2018
12/21/2018
12/27/2018
12/28/2018
1975
1/2/2019
1967
1/2/2019
1985
1/10/2019
1983
1/10/2019
1983
2018
2008
1/10/2019
1/10/2019
1/17/2019
2007
1/22/2019
2020
1/29/2019
2007
2004
2014
1/31/2019
1/31/2019
1/31/2019
2016
2/14/2019
2017
2/14/2019
2004
2/15/2019
2007
2/28/2019
2010
2006
2/28/2019
3/8/2019
1974
3/8/2019
2016
3/8/2019
2006
3/8/2019
1981
3/8/2019
1970
3/13/2019
1991
3/13/2019
F-13
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
Woodstock
Duluth
Indianapolis
Fort Wayne
Commerce
Norman
Alpena
Gassville
Stockbridge
Huntersville
Greensboro
Tuscaloosa
Carbondale
Energy
Crete
Ballwin
Pea Ridge
Norman
Martinsville
Carbondale
Nashville
Monroeville
Pet Care Services
Pet Care Services
Pet Care Services
Pet Care Services
Pet Care Services
Pet Care Services
Pet Care Services
Pet Care Services
Pet Care Services
Entertainment
Early Childhood
Education
Entertainment
Entertainment
Medical / Dental
Early Childhood
Education
Medical / Dental
Medical / Dental
Restaurants - Quick
Service
Restaurants - Quick
Service
Health and Fitness
Convenience Stores
Convenience Stores
Convenience Stores Mountain Home
Early Childhood
Education
Early Childhood
Education
Medical / Dental
Medical / Dental
Medical / Dental
Medical / Dental
Pet Care Services
Entertainment
Early Childhood
Education
Convenience Stores
Convenience Stores Waterford
Creston
Convenience Stores
Alexandria
Convenience Stores
Richmond
Convenience Stores
Convenience Stores
Canton
Convenience Stores Wooster
Louisville
Convenience Stores
Fairfield
Convenience Stores
Nicholasville
Convenience Stores
Louisville
Convenience Stores
Paris
Convenience Stores
Fairborn
Convenience Stores
Eastlake
Convenience Stores
Convenience Stores
Beavercreek
Convenience Stores Milford
Convenience Stores
Louisville
Convenience Stores Wauseon
Johns Creek
Tyler
Groesbeck
Greenville
Marshall
Prescott
Trussville
Coral Springs
New Lexington
Alpharetta
IL
IL
NE
MO
AR
OK
IN
IL
IN
PA
GA
NC
NC
AL
GA
IN
IN
GA
GA
OK
AR
AR
AR
GA
GA
TX
TX
TX
TX
AZ
AL
FL
OH
PA
OH
KY
KY
OH
OH
KY
OH
KY
KY
KY
OH
OH
OH
OH
KY
OH
$
{f}
{f}
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
150
—
2,694
—
—
559
—
—
—
400
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
605
313
381
537
518
225
88
557
146
823
645
4,087
2,593
262
843
509
4,403
435
435
730
151
181
242
835
1,137
365
142
172
487
223
4,403
1,939
595
467
596
425
1,132
782
516
571
426
864
634
965
553
804
1,066
675
883
722
713
254
332
752
654
283
664
537
703
2,028
1,345
9,719
8,381
1,682
2,689
3,504
2,694
$ 1,318 $
567
713
1,289
1,172
508
752
1,094
849
2,851
1,990
13,806
10,974
1,944
3,532
4,013
7,097
932
1,367
851
3,496
667
688
747
1,286
4,226
818
869
989
1,265
2,100
744
477
406
609
1,167
1,277
5,693
2,639
832
383
630
502
357
392
862
395
305
264
772
538
386
861
574
738
402
381
1,881
842
548
781
1,654
1,500
10,096
4,578
1,427
850
1,226
927
1,489
1,174
1,378
966
731
1,128
1,406
1,503
939
1,665
1,640
1,413
1,285
1,103
61
19
38
47
46
32
33
55
39
140
78
502
446
82
134
168
38
52
47
181
34
32
44
55
57
24
21
32
55
58
303
146
67
49
46
51
55
58
70
46
40
39
60
56
45
84
81
73
53
53
$
605
313
381
537
518
225
88
557
146
823
645
4,087
2,593
262
843
509
4,006
435
435
730
151
181
242
835
1,137
365
142
172
487
223
4,403
1,939
595
467
596
425
1,132
782
516
571
426
864
634
965
553
804
1,066
675
883
722
$
713
254
332
752
654
283
664
537
703
2,028
1,345
9,719
8,381
1,682
2,539
3,504
—
932
851
2,937
667
688
747
865
744
477
406
609
1,167
1,277
5,693
2,639
832
383
630
502
357
392
862
395
305
264
772
538
386
861
574
738
402
381
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
397
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-14
1986
1995
1967
1986
1996
1993
1989
1976
1970
2016
2004
1996
1988
1991
1994
2016
2020
3/29/2019
3/29/2019
3/29/2019
3/29/2019
3/29/2019
3/29/2019
3/29/2019
3/29/2019
3/29/2019
3/29/2019
3/29/2019
3/29/2019
3/29/2019
3/29/2019
3/29/2019
3/29/2019
3/29/2019
1990
4/5/2019
1990
2018
1970
1995
1977
4/5/2019
4/17/2019
4/19/2019
4/19/2019
4/19/2019
1999
4/30/2019
2004
1940
2005
1985
1969
1990
2002
2004
1997
1996
1997
1998
1998
1998
1998
1998
1999
1999
1998
1998
1998
1998
1999
1998
1998
1998
4/30/2019
5/15/2019
5/15/2019
5/15/2019
5/15/2019
5/24/2019
5/30/2019
5/31/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
Detroit
Livonia
Warren
Danville
Wooster
Dearborn
Farmington Hills
Albion
Huntsville
Longview
Convenience Stores Milan
Convenience Stores Canton
Convenience Stores Mount Sterling
Convenience Stores Lorain
Convenience Stores Fairdale
Convenience Stores South Bloomfield
Convenience Stores Newtown
Convenience Stores Hudson
Convenience Stores Seymour
Convenience Stores Powell
Convenience Stores Avon
Convenience Stores Columbus
Convenience Stores Louisville
Convenience Stores Bedford
Convenience Stores Elizabethtown
Convenience Stores Parma
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants - Quick
Service
Medical / Dental
Medical / Dental
Convenience Stores Deming
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Restaurants -
Casual Dining
Restaurants -
Casual Dining
Medical / Dental
Restaurants -
Family Dining
Restaurants -
Family Dining
Restaurants -
Family Dining
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Service
Pet Care Services
Convenience Stores Yuma
Car Washes
Car Washes
Car Washes
Car Washes
Medical / Dental
Sioux Falls
Sioux Falls
Sioux Falls
Sioux Falls
Amarillo
Centerville
Lancaster
Alden
Highland
Klamath Falls
Port Orchard
Gig Harbor
Milwaukee
Tumwater
Knoxville
Sisseton
Olympia
Olympia
Olympia
Tacoma
Cadillac
Bristol
Kelso
New Philadelphia
OH
OH
KY
OH
KY
OH
OH
OH
IN
OH
OH
OH
KY
OH
KY
OH
MI
MI
MI
MI
MI
NY
TX
TX
NM
IL
OH
OH
VA
WA
WA
OR
WA
WA
WA
WA
MI
MI
AR
WA
WA
WI
SD
IA
IA
SC
CO
SD
SD
SD
SD
TX
$
$
585
565
721
696
683
1,381
373
1,270
840
841
561
644
1,119
655
1,446
884
983
572
702
883
943
600
277
257
384
553
955
$
770
767
383
854
711
894
346
670
838
503
392
702
450
619
856
903
1,685
923
2,397
2,337
1,725
1,089
503
452
676
1,619
1,720
1,116
2,001
1,136
1,991
377
665
447
546
477
427
218
41
102
182
804
983
1,569
1,003
1,202
665
566
1,410
506
1,627
671
1,060
1,846
2,015
1,526
2,365
70
199
259
554
430
757
627
1,225
1,484
396
259
528
538
1,017
990
2,519
1,852
2,678
2,768
2,588
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-15
{f}
{f}
{f}
{f}
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
$
585
565
721
696
683
1,381
373
1,270
840
841
561
644
1,119
655
1,446
884
983
572
702
883
943
600
277
257
384
553
955
770
767
383
854
711
894
346
670
838
503
392
702
450
619
856
903
$ 1,355 $
1,332
1,104
1,550
1,394
2,275
719
1,940
1,678
1,344
953
1,346
1,569
1,274
2,302
1,787
1,685
2,668
923
1,495
2,397
3,099
2,337
3,220
1,725
2,668
1,089
503
452
676
1,689
780
709
1,060
1,619
2,172
1,720
2,675
76
65
37
88
71
144
34
99
92
60
37
74
64
60
102
78
105
52
108
122
99
61
28
20
43
85
86
1999
1999
1998
1999
1999
1999
1999
1999
1999
1996
1999
1999
1999
1999
1999
2001
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
6/6/2019
1969
6/7/2019
1948
6/7/2019
1992
6/7/2019
1964
6/7/2019
1974
6/7/2019
1968
2003
1998
1990
6/12/2019
6/13/2019
6/13/2019
6/21/2019
1991
6/26/2019
1995
6/26/2019
1,116
2,001
3,117
100
1991
6/26/2019
1,136
1,991
3,127
377
665
447
546
477
427
218
41
102
182
804
983
1,569
1,946
1,003
1,668
1,202
1,649
665
1,211
566
1,043
1,410
1,837
506
724
1,627
1,668
671
1,060
773
1,242
1,846
2,650
2,015
2,998
1,526
2,365
3,891
70
199
259
554
430
757
627
1,225
1,484
396
259
329
528
727
538
1,017
990
2,519
1,852
2,678
2,768
2,588
797
1,571
1,420
3,276
2,479
3,903
4,252
2,984
97
75
46
59
33
33
69
28
61
29
52
99
111
137
15
32
34
55
54
114
92
127
128
107
2005
6/26/2019
2002
6/27/2019
1997
6/27/2019
2010
6/27/2019
1990
6/27/2019
1984
6/27/2019
1987
6/27/2019
1924
6/27/2019
1906
6/27/2019
1952
2008
6/27/2019
6/27/2019
1982
6/27/2019
1999
6/27/2019
2018
6/28/2019
1984
6/28/2019
1972
6/28/2019
1975
1994
1977
2006
2015
2017
2017
1994
6/28/2019
6/28/2019
6/28/2019
6/28/2019
6/28/2019
6/28/2019
6/28/2019
6/28/2019
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
Cabot
Searcy
Owosso
Nashville
Cloverdale
Port Huron
Bull Shoals
Stevensville
Schaumburg
Conway
Amarillo
Myrtle Beach
Champaign
Flippin
Early Childhood
Education
Early Childhood
Education
Health and Fitness
Convenience Stores
Convenience Stores Mountain Home
Convenience Stores Milan
Convenience Stores Wynne
Convenience Stores Montain View
Convenience Stores
Convenience Stores Marshall
Convenience Stores Mountain Home
Convenience Stores Midway
Convenience Stores West Plains
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Service
Medical / Dental
Restaurants - Quick
Service
Restaurants - Quick
Service
Early Childhood
Education
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Service
Health and Fitness
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Quick
Service
Pet Care Services
Convenience Stores Gassville
Convenience Stores West Plains
Convenience Stores
Convenience Stores Willow Springs
Convenience Stores Mountain Home
Convenience Stores Calico Rock
Convenience Stores
Convenience Stores Russellville
Convenience Stores Russellville
Convenience Stores Harrisburg
Convenience Stores Horseshoe Bend
Convenience Stores
Health and Fitness
Health and Fitness
Health and Fitness
Car Washes
Car Washes
Koshkonong
Greenville
Anderson
Spartanburg
Denver
Aurora
Cedar Springs
Gainesville
Essex
Kittrell
Philadelphia
Bald Knob
Louisville
Quitman
Ruleville
Prentiss
Macon
Atkins
Aston
TN
SC
IL
AR
AR
TN
AR
AR
AR
AR
AR
AR
MO
AR
AR
AR
TX
MI
MI
IL
IN
MI
MI
FL
MS
MS
MS
MS
MS
MS
PA
MD
NC
AR
MO
AR
MO
AR
AR
AR
AR
AR
AR
AR
MO
SC
SC
SC
CO
CO
{f}
$
1,326
$
1,945
$
—
$
—
$
1,326
$
1,945
$ 3,271 $
386
2,150
113
—
—
—
—
—
—
45
—
—
—
—
—
—
—
—
—
420
—
—
2,398
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
319
1,133
518
229
358
378
438
319
856
368
388
159
479
359
528
1,309
693
655
866
226
784
918
4,376
382
348
279
219
2,678
259
2,011
423
488
368
1,237
5,509
900
577
637
597
3,116
578
2,867
791
876
527
1,189
1,668
1,150
1,509
1,045
6,791
1,573
8,100
732
1,425
712
1,367
—
866
708
934
746
1,530
671
1,312
1,369
4,886
2,040
6,198
155
330
196
309
330
350
440
338
303
1,178
663
1,258
663
852
475
525
426
525
446
376
604
732
691
1,052
1,594
703
680
835
340
670
422
618
237
546
371
701
350
700
522
962
624
394
673
327
743
1,327
396
327
376
455
396
842
327
743
1,361
1,402
1,474
1,484
1,504
962
697
1,851
990
2,001
1,990
1,248
802
901
881
921
1,288
703
1,347
2,093
2,093
2,526
3,078
2,207
319
1,133
518
229
358
378
438
319
856
368
388
159
479
359
528
1,309
693
655
866
226
784
532
2,226
269
348
279
219
2,678
259
2,011
378
488
368
1,189
1,150
1,045
6,791
732
712
—
288
746
671
1,312
1,369
2,488
155
330
196
309
330
350
440
338
303
1,178
663
1,258
663
852
475
525
426
525
446
376
604
732
691
1,052
1,594
703
680
340
422
237
371
350
522
624
394
673
327
743
1,327
396
327
376
455
396
842
327
743
1,361
1,402
1,474
1,484
1,504
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-16
136
34
165
39
24
29
31
120
26
111
35
42
23
59
54
50
270
39
36
—
49
38
54
154
30
20
25
19
29
24
31
31
27
91
53
115
90
61
44
38
46
43
55
33
62
51
55
60
71
63
1996
7/5/2019
1999
1986
2004
1960
2003
1992
1999
1999
2012
1999
1995
2000
7/5/2019
7/11/2019
7/16/2019
7/16/2019
7/16/2019
7/16/2019
7/16/2019
7/16/2019
7/16/2019
7/16/2019
7/16/2019
7/16/2019
2008
7/31/2019
2008
7/31/2019
2009
1994
7/31/2019
7/31/2019
1998
8/15/2019
1981
8/15/2019
8/30/2019
1996
9/3/2019
1973
9/5/2019
2000
1983
9/5/2019
9/6/2019
2018
9/13/2019
1992
9/13/2019
2017
9/13/2019
1978
9/13/2019
2003
9/13/2019
1978
9/13/2019
1963
9/13/2019
2002
2014
1999
1999
2006
2003
1999
1979
1990
1991
2000
2007
1999
1997
1993
1997
2010
2012
2008
9/13/2019
9/19/2019
9/20/2019
9/20/2019
9/20/2019
9/20/2019
9/20/2019
9/20/2019
9/20/2019
9/20/2019
9/20/2019
9/20/2019
9/20/2019
9/20/2019
9/25/2019
9/25/2019
9/25/2019
9/26/2019
9/26/2019
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
West Chester
Bryant
Cheyenne
Jonesboro
Frankfort
Onalaska
Denver
Fort Collins
Thornton
Car Washes
Car Washes
Car Washes
Restaurants - Family
Dining
Early Childhood
Education
Pet Care Services
Restaurants - Quick
Service
Restaurants - Quick
Service
Restaurants - Casual
Dining
Early Childhood
Leawood
Education
Claremore
Grocery
Little Rock
Other Services
Conyers
Other Services
LaVergne
Other Services
Seattle
Other Services
Albany
Automotive Service
Bainridge
Automotive Service
Hinesville
Automotive Service
Macon
Automotive Service
Perry
Automotive Service
Valdosta
Automotive Service
Pratville
Automotive Service
Montgomery
Automotive Service
Medford
Pet Care Services
Horizon City
Medical / Dental
Medical / Dental
El Paso
Convenience Stores Houston
Convenience Stores
Early Childhood
Education
Convenience Stores
Car Washes
Car Washes
Medical / Dental
Other Services
Early Childhood
Education
Pet Care Services
Pet Care Services
Pet Care Services
Pet Care Services
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Brandon
Griffin
Indianapolis
Wildwood
Tucson
Avon
Davenport
Moline
West Helena
Springfield
Charlotte
Pasadena
Conway
Tucson
Tucson
Tucson
Tucson
Tucson
Tucson
Tucson
Tempe
CO
CO
CO
WY
KY
WI
AR
AR
OH
KS
OK
AR
GA
TN
WA
GA
GA
GA
GA
GA
GA
AL
AL
OR
TX
TX
TX
TX
SC
MN
IA
IL
AR
MO
NC
FL
GA
IN
FL
AZ
AZ
AZ
AZ
AZ
AZ
AZ
AZ
AZ
{f}
{f}
{f}
{f}
$
$
1,103
491
582
739
387
403
$
1,805
1,093
1,795
1,569
1,224
598
1,213
1,108
622
878
867
246
1,492
1,821
2,790
2,905
410
339
298
154
133
215
451
318
192
3,587
121
631
869
201
673
1,038
1,120
155
1,313
860
134
196
165
350
586
339
463
494
401
411
422
444
370
885
1,088
851
3,330
1,037
6,235
2,302
3,287
421
288
310
287
447
274
636
246
324
11,550
11,529
662
2,152
—
1,204
1,705
1,572
1,052
1,663
1,657
876
495
453
1,165
885
730
1,440
586
453
411
576
566
288
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-17
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
$
1,103
491
582
1,805
1,093
1,795
$ 2,908 $
1,584
2,377
739
387
403
1,569
2,308
1,224
598
1,611
1,001
1,213
1,108
2,321
622
878
867
246
1,492
1,821
2,790
2,905
410
339
298
154
133
215
451
318
192
3,587
121
631
869
201
673
1,038
1,120
155
1,313
860
134
196
165
350
586
339
463
494
401
411
422
444
370
885
1,507
1,088
1,966
851
3,330
1,037
6,235
2,302
3,287
421
288
310
287
447
274
636
246
324
11,550
11,529
662
2,152
—
1,204
1,705
1,572
1,052
1,663
1,657
876
495
453
1,165
1,718
3,576
2,529
8,056
5,092
6,192
831
627
608
441
580
489
1,087
564
516
15,137
11,650
1,293
3,021
201
1,877
2,743
2,692
1,207
2,976
2,517
1,010
691
618
1,515
885
1,471
730
1,069
1,440
1,903
586
1,080
453
854
411
822
576
998
566
1,010
288
658
78
47
77
65
50
29
50
37
54
50
116
30
178
63
81
19
13
13
12
17
13
24
12
14
425
371
34
101
—
73
83
73
37
44
59
29
19
19
46
36
26
51
24
19
17
19
21
12
2014
2002
2018
9/26/2019
9/26/2019
9/26/2019
1982
9/27/2019
2002
2011
9/27/2019
9/27/2019
2006
9/30/2019
2008
9/30/2019
2004
9/30/2019
2007
1989
1982
1999
2018
1977
1994
1999
1998
2000
1996
1996
2003
1991
1990
2017
2019
2009
2016
2004
2001
1998
2003
2007
1996
2003
1979
1967
2005
9/30/2019
9/30/2019
9/30/2019
9/30/2019
9/30/2019
9/30/2019
10/1/2019
10/1/2019
10/1/2019
10/1/2019
10/1/2019
10/1/2019
10/1/2019
10/1/2019
10/4/2019
10/10/2019
10/10/2019
10/11/2019
10/11/2019
10/17/2019
10/17/2019
10/24/2019
10/24/2019
10/28/2019
10/31/2019
11/1/2019
11/1/2019
11/1/2019
11/1/2019
11/1/2019
1965
11/5/2019
1975
11/5/2019
1985
11/5/2019
1971
11/5/2019
1971
11/5/2019
1932
11/5/2019
1986
11/5/2019
1958
11/5/2019
1976
11/5/2019
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
Columbia City
Salt Lake City
Sanford
Mosinee
Boulder
Odessa
Odessa
Houston
Houston
Vicksburg
Lewisburg
Hazlehurst
Prairie View
North
Manchester
Winona
Ocala
Hampstead
Conyers
Covington
Convenience
Stores
Convenience
Stores
Convenience
Stores
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Other Services
Other Services
Convenience
Stores
Car Washes
Car Washes
Medical / Dental
Medical / Dental
Automotive Service Fayetteville
Early Childhood
Education
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Car Washes
Car Washes
Car Washes
Car Washes
Automotive Service Crystal Lake
Car Washes
Medical / Dental
Convenience
Stores
Medical / Dental
Medical / Dental
Medical / Dental
Medical / Dental
Jonesboro
Grand Blanc
Roscoe
Bloomington
Shelbyville
Blytheville
Whiteland
Somerset
Memphis
Wynne
Salem
Ashland City
Arnold
Allen
Flower Mound
Plano
Cheektowaga
Sioux Falls
Sioux Falls
Sioux City
South Sioux City
TX
TX
TX
TN
TX
TX
UT
FL
WI
FL
NC
GA
GA
GA
CO
IN
IN
MS
MS
MS
AR
AR
IN
TN
KY
IN
IN
NY
TN
KY
SD
SD
IA
NE
IL
AR
MI
IL
MO
TX
TX
TX
{f}
{f}
{f}
{f}
{f}
{f}
$
211
$
1,414
$
—
$
—
$
211
$
1,414
$ 1,625 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
515
504
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,478
2,157
—
—
—
—
—
—
—
221
241
461
601
1,031
1,731
1,498
351
1,383
1,129
393
373
347
742
312
363
522
522
553
849
665
532
614
911
389
225
1,402
1,623
1,178
1,419
676
1,137
1,353
1,954
1,353
3,542
1,859
812
2,644
2,644
2,078
1,816
746
2,384
5,273
3,357
1,163
4,027
3,773
2,471
2,189
1,093
801
1,543
686
998
776
1,139
1,126
1,648
1,269
1,791
1,238
1,791
1,126
1,975
931
1,596
1,013
1,545
1,044
1,658
972
1,883
839
1,228
665
890
1,381
1,903
3,284
880
921
1,801
798
1,075
723
992
551
265
1,217
748
656
417
397
427
376
1,105
3,384
2,882
2,478
2,157
1,103
4,776
1,537
832
823
2,230
905
1,698
1,903
4,459
3,605
3,469
2,708
1,368
5,993
2,285
1,488
1,240
2,627
1,332
2,074
221
241
461
601
1,031
1,731
1,498
351
1,383
1,129
393
373
347
742
312
363
522
522
553
849
665
532
614
911
389
225
1,402
1,178
676
1,353
1,353
3,542
1,859
812
2,644
2,644
2,078
1,816
746
801
171
272
1,126
1,269
1,238
1,126
931
1,013
1,044
972
839
665
1,381
1,903
880
921
798
1,075
723
707
303
265
1,217
748
656
417
397
427
376
1,105
3,384
2,882
—
—
1,103
4,776
1,537
832
823
2,230
905
1,698
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
285
248
—
—
—
—
—
—
—
—
F-18
49
54
49
39
60
61
108
66
41
95
93
72
65
32
23
19
23
43
50
47
49
44
47
43
44
35
26
74
44
49
100
50
48
6
37
129
48
50
33
39
30
50
1975
11/14/2019
1965
11/14/2019
1984
11/14/2019
2016
11/18/2019
2019
11/21/2019
2019
1973
1964
1975
2019
2019
1996
2004
2006
11/21/2019
11/27/2019
11/27/2019
12/2/2019
12/10/2019
12/10/2019
12/12/2019
12/12/2019
12/13/2019
1988
12/13/2019
1973
12/17/2019
1987
12/17/2019
2019
12/19/2019
2019
12/19/2019
2019
12/19/2019
2019
12/19/2019
2019
12/19/2019
2019
12/19/2019
2019
12/19/2019
2018
12/19/2019
2003
12/19/2019
2018
12/23/2019
2000
12/23/2019
2019
12/23/2019
2019
1992
1987
2020
2020
1974
2019
2007
1999
2015
1983
1999
1998
12/23/2019
12/19/2019
12/19/2019
12/19/2019
12/19/2019
12/20/2019
12/20/2019
12/23/2019
12/27/2019
12/30/2019
12/31/2019
12/31/2019
12/31/2019
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
Loudon
Weston
Sudbury
Plainville
Memphis
Memphis
Fall River
St. Mary's
Worcester
Worcester
Stoughton
Dyersburg
Dorchester
Leominster
Manor
Charlotte
Tulsa
Tulsa
Fall River
Automotive Service Houston
Automotive Service Pasadena
Early Childhood
Education
Grocery
Grocery
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Car Washes
Early Childhood
Education
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Car Washes
Car Washes
Car Washes
Restaurants -
Casual Dining
Early Childhood
Education
Early Childhood
Education
Medical / Dental
Early Childhood
Education
Restaurants -
Casual Dining
Medical / Dental
Medical / Dental
Other Services
Early Childhood
Education
Medical / Dental
Automotive Service King
Automotive Service Elkin
Automotive Service Yadkinville
Automotive Service Lancaster
Automotive Service Lenoir
Automotive Service Hickory
Automotive Service St. Albans
Automotive Service Hurricane
Automotive Service South Boston
Flagstaff
Portland
Watsontown
Concord
Arvada
Golden
Sioux City
Fort Wayne
Tyler
Franklin
Northbrook
Senatobia
Naperville
Memphis
Memphis
Jackson
DeLand
Grand Rapids
TX
TX
MA
OK
OK
MA
MA
MA
MA
MA
MA
MA
MA
MA
TX
NC
TN
PA
TN
TN
TN
TN
TN
MS
MS
CO
CO
IA
IN
IL
IL
TX
TN
MI
AZ
OR
PA
NC
FL
NC
NC
NC
SC
NC
NC
WV
WV
VA
$
$
292
252
$
513
705
3,200
713
670
2,423
2,098
3,298
592
532
602
552
612
402
512
743
744
905
548
615
550
811
461
313
703
1,074
182
3,270
1,021
1,198
668
1,091
{f}
878
1,080
675
959
1,358
1,283
828
1,131
801
1,198
984
1,202
886
1,120
178
566
1,031
886
1,542
100
2,374
1,566
1,855
—
1,564
4,638
1,080
463
5,347
3,250
{f}
617
1,025
1,055
1,446
1,457
751
1,283
909
408
337
235
388
326
398
235
398
224
1,754
1,856
1,230
1,678
2,419
4,404
153
286
347
286
235
132
459
388
734
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-19
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
240
—
400
500
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
$
292
252
513
705
$ 805 $
957
3,200
713
670
2,423
2,098
3,298
5,623
2,811
3,968
592
532
602
552
612
402
512
743
744
1,336
905
1,437
548
1,150
615
1,167
550
1,162
811
1,213
461
973
313
1,056
20
23
74
70
93
30
29
23
24
26
29
17
15
703
1,074
182
3,270
885
4,344
12
115
1,021
1,198
2,219
668
878
675
1,091
1,759
1,080
1,958
959
1,634
1,358
1,283
2,641
828
801
984
886
178
566
1,031
886
1,542
1,131
1,959
1,198
1,999
1,202
2,186
1,120
2,006
340
2,374
1,966
2,355
518
2,940
2,997
3,241
—
1,542
1,564
4,638
6,202
1,080
463
5,347
3,250
6,427
3,713
617
1,025
1,642
1,055
1,446
1,457
751
1,283
909
408
337
235
388
326
398
235
398
224
1,754
1,856
1,230
1,678
2,419
4,404
153
286
347
286
235
132
459
388
734
2,809
3,302
2,687
2,429
3,702
5,313
561
623
582
674
561
530
694
786
958
14
42
38
33
41
36
40
40
37
30
74
56
33
—
126
141
101
13
59
51
42
67
33
118
7
12
11
11
10
7
14
14
21
1986
1971
1990
1991
1993
1/30/2020
1/30/2020
2/7/2020
3/24/2020
3/24/2020
1984
1/15/2020
1965
1/15/2020
1984
1/15/2020
1983
1/15/2020
1987
1/15/2020
1965
1/15/2020
1980
1/15/2020
1984
1/15/2020
1983
2019
1/15/2020
1/21/2020
1987
8/17/2020
2020
2/26/2020
2020
4/3/2020
2007
1/30/2020
2011
1/30/2020
2011
1/30/2020
2000
1/30/2020
1994
1/30/2020
2013
1/30/2020
1985
2008
2005
2020
1/29/2020
1/24/2020
1/24/2020
8/13/2020
1999
1/7/2020
2009
2/21/2020
2014
2015
2/24/2020
1/17/2020
1996
9/4/2020
2003
1980
1981
1987
2003
2004
1985
1997
2001
2007
1991
1988
1987
1989
1996
1/29/2020
2/27/2020
2/27/2020
2/13/2020
8/17/2020
3/9/2020
3/10/2020
3/10/2020
3/10/2020
3/10/2020
3/10/2020
3/10/2020
3/10/2020
3/10/2020
3/10/2020
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
$
520
$
183
$
—
$
—
$
520
$
183
$ 703 $
West Dundee
Catonsville
Hartland
Menomonee
Falls
Menomonee
Falls
Oconomowoc
Lake City
Tucson
Casa Grande
Charleston
Waukesha
Orange
Marietta
Waterford
Greenville
Alpharetta
Automotive Service Pittsboro
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Early Childhood
Education
Medical / Dental
Early Childhood
Education
Early Childhood
Education
Car Washes
Early Childhood
Education
Early Childhood
Education
Automotive Service Arlington
Medical / Dental
Automotive Service Little Elm
Automotive Service McKinney
Restaurants -
Quick Service
Pet Care Services
Restaurants -
Family Dining
Restaurants -
Family Dining
Automotive Service Gilbert
Restaurants -
Quick Service
Other Services
Other Services
Other Services
Other Services
Automotive Service Tempe
Restaurants -
Quick Service
Restaurants -
Quick Service
Car Washes
Car Washes
Car Washes
Car Washes
Car Washes
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Grocery
Grocery
Grocery
Grocery
Grocery
Big Spring
Flagstaff
Phoenix
Sun City
Scottsdale
Yuma
Newnan
Newnan
Sparta
Byram
Lawrenceville
Dexter
Kennett
Park Hills
Piggott
Potosi
Yazoo City
Richmond Hill
Centennial
Joplin
Kansas City
NC
WI
WI
WI
WI
WI
FL
MI
AZ
AZ
GA
GA
TX
TX
TX
TX
IL
MD
SC
SC
AZ
MS
GA
CO
MO
MO
AZ
MS
TX
AZ
AZ
AZ
AZ
AZ
TN
TN
GA
GA
GA
MO
MO
MO
AR
MO
{f}
{f}
{f}
{f}
{f}
{f}
{f}
Year
Constructed
Date
Acquired
2006
3/10/2020
2000
3/6/2020
1978
3/6/2020
2000
3/6/2020
1996
3/6/2020
2007
1974
3/6/2020
3/4/2020
1997
9/18/2020
2008
2020
3/6/2020
2/6/2020
1997
3/6/2020
1995
2015
2015
2007
2010
2020
1998
3/6/2020
2/14/2020
2/21/2020
3/6/2020
3/6/2020
3/6/2020
5/4/2020
1972
3/19/2020
1978
2019
1975
2019
2005
1997
2015
1987
3/19/2020
4/30/2020
5/7/2020
6/8/2020
6/8/2020
6/8/2020
6/8/2020
5/28/2020
2003
6/8/2020
2020
2018
2018
1988
1994
2001
6/25/2020
7/24/2020
7/24/2020
7/24/2020
7/24/2020
7/24/2020
1997
6/25/2020
2017
7/16/2020
1987
8/19/2020
2005
8/19/2020
2005
1998
2013
1970
1986
1970
8/19/2020
9/30/2020
9/30/2020
9/30/2020
9/30/2020
9/30/2020
9
83
84
107
83
113
64
9
29
30
78
76
104
88
27
28
22
35
35
32
45
15
33
113
21
53
66
15
1
56
47
37
45
33
27
14
26
19
22
16
21
26
15
19
462
976
3,390
3,852
3,464
4,440
1,354
4,314
5,668
577
3,485
4,062
882
1,046
419
956
821
4,734
2,450
5,616
3,496
783
1,202
906
1,970
1,862
2,791
1,799
3,234
5,033
1,621
833
337
647
1,016
523
602
626
1,303
370
249
2,502
3,008
991
1,531
915
3,148
3,603
3,293
1,006
807
1,310
1,915
4,769
4,436
3,630
1,653
1,823
1,833
2,517
1,091
1,717
1,020
2,108
753
761
3,993
941
1,391
3,304
2,323
2,478
1,002
3,263
7,000
1,932
2,922
4,219
150
775
734
1,509
1,030
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
287
1,873
2,204
1,613
3,666
280
733
911
1,030
3,456
2,634
2,134
2,093
1,883
1,317
5,329
4,838
3,747
5,759
2,163
1,383
2,116
569
1,480
1,413
1,494
2,907
724
1,189
1,913
1,122
813
427
653
614
371
1,363
697
1,688
1,819
789
1,569
2,485
1,510
2,115
2,472
1,403
1,940
462
3,390
976
3,464
1,354
4,314
577
3,485
882
1,046
419
956
504
4,734
2,450
783
906
—
1,799
3,234
1,621
833
337
647
1,016
523
586
626
1,303
370
249
2,502
3,003
991
1,531
915
3,148
3,603
3,293
1,006
807
539
1,881
1,091
1,020
2,108
753
761
2,972
941
1,391
3,304
775
584
—
3,456
2,634
2,134
2,093
1,883
1,383
287
1,873
2,204
1,613
3,666
280
733
711
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
317
—
1,970
—
—
—
—
—
—
771
34
—
—
—
—
—
1,021
—
—
—
—
—
—
—
—
—
—
16
—
—
—
—
—
5
—
—
—
—
—
—
—
—
—
—
—
1,413
1,494
724
1,189
1,122
813
427
653
614
371
1,363
697
1,688
1,819
789
1,569
—
—
—
—
—
—
—
—
F-20
McMinnville
569
200
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
Grocery
Grocery
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Restaurants -
Quick Service
Car Washes
Car Washes
Car Washes
Car Washes
Restaurants -
Quick Service
Medical / Dental
Other Services
Other Services
Other Services
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Medical / Dental
Medical / Dental
Medical / Dental
Car Washes
Medical / Dental
Early Childhood
Education
Early Childhood
Education
Medical / Dental
Medical / Dental
Grocery
Grocery
Equipment Rental
and Sales
Malden
Mayflower
East Brunswick
Washington
Princeton
Lawrenceville
Madison
Chester
Manville
North Caldwell
Kerhonkson
Bethlehem
Langhorne
Quakertown
Hattiesburg
Fort Worth
Westminster
Palatka
Greenwood
Flint
Alabaster
Albuquerque
Shreveport
Skiatook
Bartlesville
Owasso
Bartlesville
Broken Arrow
Tulsa
Bartlesville
Taunton
Plymouth
Middleborough
Phenix City
Pine Bluff
Jackson
Jackson
Valdosta
Valdosta
Jackson
Marble Hill
Chatham
MO
AR
NJ
NJ
NJ
NJ
NJ
NJ
NJ
NJ
NY
PA
PA
PA
MS
TX
CO
FL
SC
TX
AL
NM
LA
OK
OK
OK
OK
OK
OK
OK
MA
MA
MA
AL
AR
MI
MI
GA
GA
MO
MO
NY
{f}
$
$
265
1,460
$
1,873
3,042
1,173
1,540
388
1,969
1,448
1,918
632
1,999
1,714
1,306
1,295
1,550
867
561
938
602
898
989
663
2,805
1,642
1,550
1,652
1,295
882
1,475
842
914
1,526
273
428
690
1,686
1,006
324
118
275
932
847
2,747
1,174
2,490
2,490
652
879
207
286
227
2,695
2,853
6,094
4,587
1,060
3,425
1,226
1,374
177
201
296
296
1,111
65
379
170
262
214
458
504
987
599
1,289
444
475
2,722
552
1,046
614
1,726
1,351
1,719
2,052
1,317
{f}
{f}
{f}
{f}
{f}
$
$
265
1,460
1,873
3,042
$ 2,138 $
4,502
1,173
1,540
2,713
388
1,969
2,357
1,448
1,918
3,366
632
1,999
2,631
1,714
1,306
3,020
1,295
1,550
2,845
867
561
938
602
898
989
1,856
663
1,224
2,805
3,743
1,642
2,244
1,550
2,448
1,652
1,295
2,947
882
1,475
842
914
1,526
273
428
702
1,711
1,022
324
118
275
932
847
2,747
1,174
2,490
2,490
652
879
1,054
2,148
1,391
1,729
4,222
2,016
3,404
4,016
925
1,307
1,756
3,859
2,412
2,695
3,019
2,853
2,971
6,094
6,369
4,587
5,519
1,060
3,425
4,485
1,226
1,374
2,600
177
201
296
296
1,111
65
379
170
262
214
458
504
987
599
1,289
444
475
2,722
647
776
1,490
740
771
3,833
712
1,046
1,425
614
1,726
1,351
1,719
2,052
784
1,988
1,565
2,177
2,556
1,317
2,304
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
847
1,862
1,164
—
—
—
—
—
—
—
—
—
—
—
95
—
—
—
—
—
—
—
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12
25
16
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-21
19
45
19
20
22
24
14
20
12
11
31
16
23
19
13
41
13
26
30
8
11
10
22
18
26
25
54
49
33
18
7
9
5
4
22
5
10
5
14
11
15
18
15
1978
2020
9/30/2020
9/30/2020
1960
9/18/2020
1969
9/18/2020
1947
9/18/2020
1960
9/18/2020
1950
9/18/2020
1995
9/18/2020
1977
9/18/2020
1968
9/18/2020
1982
9/18/2020
1968
9/18/2020
1999
9/18/2020
2012
9/18/2020
2000
2020
2003
2020
2020
2014
2008
2003
1970
2012
9/11/2020
8/31/2020
9/24/2020
9/30/2020
9/30/2020
9/24/2020
9/24/2020
9/29/2020
9/29/2020
9/29/2020
2005
9/30/2020
1967
9/30/2020
2007
9/30/2020
2003
9/30/2020
2014
9/30/2020
2019
9/30/2020
1980
1972
2005
1925
2020
1983
9/30/2020
10/1/2020
10/1/2020
10/1/2020
10/5/2020
10/9/2020
1990
10/14/2020
1987
1996
1990
1995
1999
10/14/2020
10/15/2020
10/15/2020
10/22/2020
10/22/2020
1974
10/22/2020
Description(a)
Initial Cost to Company
Cost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
Fords
Byram
Jackson
Westfield
Lancaster
East Windsor
West Berlin
Zeeland
Wyoming
Waterford
Elkhart
Mishawaka
Equipment
Rental and Sales Clifton Park
Equipment
Rental and Sales Goshen
Equipment
Rental and Sales Fultonville
Equipment
Rental and Sales
Equipment
Rental and Sales Greenfield
Equipment
Rental and Sales Farmington
Equipment
Rental and Sales Pembroke
Farmington
Grocery
Grocery
Fredericktown
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Automotive
Service
Other Services
Other Services
Other Services
Other Services
Other Services
Restaurants -
Quick Service
Car Washes
Automotive
Service
Pet Care
Services
Pet Care
Services
Grocery
Automotive
Service
Automotive
Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Alpharetta
Fayetteville
Franklin
Princeton
Grand Prairie
Douglasville
Richardson
Carrollton
Mesquite
Arlington
Fairmont
Fairmont
Owasso
Norman
Rowlett
Moore
Dallas
Waco
Point Pleasant
Oklahoma City
Oklahoma City
NY
NY
NY
MA
MA
CT
NH
MO
MO
NJ
NJ
NJ
NJ
NJ
NJ
MI
MI
MI
IN
IN
IN
TX
NJ
GA
GA
AR
WV
WV
TX
TX
OK
OK
OK
OK
TX
TX
TX
TX
TX
TX
OK
{f}
{f}
$551
732
1,775
1,285
304
411
318
789
682
1,193
1,904
1,599
1,300
1,464
1,061
2,086
1,066
1,286
544
527
670
1,030
1,763
640
766
423
232
291
501
949
553
605
303
929
553
605
553
855
814
845
542
$717
1,191
858
2,089
815
1,410
785
1,990
1,523
1,182
1,606
1,634
1,180
1,100
1,298
5,386
1,795
1,243
1,061
558
1,609
2,986
1,166
748
822
1,410
539
860
682
86
1,032
1,152
709
935
548
547
665
621
73
286
985
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-22
—
$
551
$
717
$ 1,268 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
732
1,191
1,923
1,775
858
2,633
1,285
2,089
3,374
304
411
318
789
682
815
1,119
1,410
1,821
785
1,990
1,523
1,103
2,779
2,205
1,193
1,182
2,375
1,904
1,606
3,510
1,599
1,634
3,233
1,300
1,180
2,480
1,464
1,100
2,564
1,061
2,086
1,066
1,286
544
527
670
1,030
1,298
5,386
1,795
1,243
1,061
558
1,609
2,986
2,359
7,472
2,861
2,529
1,605
1,085
2,279
4,016
1,763
1,166
2,929
640
766
423
232
291
501
949
553
605
303
929
553
605
553
855
814
845
542
748
1,388
822
1,410
1,588
1,833
539
771
860
1,151
682
1,183
86
1,035
1,032
1,585
1,152
1,757
709
1,012
935
1,864
548
1,101
547
1,152
665
1,218
621
1,476
73
887
286
1,131
985
1,527
6
11
12
17
8
12
6
21
19
13
15
15
12
11
13
39
15
13
8
7
9
17
8
5
5
6
2
3
3
1
4
4
3
3
2
3
3
3
1
2
4
2000
10/22/2020
1974
10/22/2020
1980
10/22/2020
2012
10/22/2020
1971
10/22/2020
2005
10/22/2020
1978
2006
2001
10/22/2020
10/29/2020
10/29/2020
1992
10/29/2020
1970
10/29/2020
1965
10/29/2020
1974
10/29/2020
1995
10/29/2020
1995
1973
2020
1995
1989
1979
2017
2020
10/29/2020
11/2/2020
11/2/2020
11/2/2020
11/2/2020
11/2/2020
11/12/2020
11/16/2020
1977
11/19/2020
1989
11/24/2020
2007
1990
11/24/2020
12/1/2020
1997
12/2/2020
1999
12/2/2020
1979
12/15/2020
1979
12/15/2020
1979
12/15/2020
1983
12/15/2020
1992
12/15/2020
1986
12/15/2020
1987
12/15/2020
1992
12/15/2020
1999
12/15/2020
1999
12/15/2020
1999
12/15/2020
1977
12/15/2020
2010
12/15/2020
Description(a)
Initial Cost to Company
Cost Capitalized
Subsequent
to Acquisition
Gross Amount at
December 31, 2020(b)(c)
Tenant Industry
City
State
Encumbrances
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Land &
Improvements
Building &
Improvements
Total
Accumulated
Depreciation
(d)(e)
Year
Constructed
Date
Acquired
Restaurants -
Quick Service
Car Washes
Car Washes
Car Washes
Car Washes
Car Washes
Car Washes
Car Washes
Medical / Dental
Automotive
Service
Automotive
Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Restaurants -
Quick Service
Car Washes
Car Washes
Car Washes
Medical / Dental
Medical / Dental
Medical / Dental
Medical / Dental
Medical / Dental
Medical / Dental
Car Washes
Other Services
Medical / Dental
Medical / Dental
Medical / Dental
Equipment Rental
and Sales
Equipment Rental
and Sales
Equipment Rental
and Sales
Kilgore
Fort Worth
Hudson Oaks
Garland
Fort Worth
Crowley
Flower Mound
Fort Worth
Naperville
Washington
Court House
Cincinnati
Dothan
Philadelphia
Ashford
Newton
Slidell
Gulfport
Carbondale
Arlington
Austin
Florissant
Temple
Norcross
Carrolton
Jacksonville
Pensacola
Amarillo
Amarillo
Amarillo
Milford
Beaumon
Cibilo
TX
TX
TX
TX
TX
TX
TX
TX
IL
OH
OH
AL
MS
AL
MS
LA
MS
IL
TX
TX
MO
TX
GA
TX
NC
FL
TX
TX
TX
NH
TX
TX
$
449
1,590
1,824
1,303
1,907
1,571
1,623
1,655
315
550
448
459
373
410
471
962
666
1,674
176
581
454
145
652
1,534
915
1,187
221
369
468
$
710 $
2,724
2,745
2,287
3,129
2,873
2,730
2,129
786
1,061
911
1,431
1,540
1,338
1,316
2,919
973
3,227
329
346
920
854
981
1,073
1,436
3,344
990
2,186
848
709
407
1,314
2,728
1,231
3,334
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
11
—
—
449
1,590
1,824
1,303
1,907
1,571
1,623
1,655
315
550
448
459
373
410
471
962
666
1,674
176
581
454
145
652
1,534
915
1,187
221
369
468
$
710 $
2,724
2,745
2,287
3,129
2,873
2,730
2,129
786
1,159 $
4,314
4,569
3,590
5,036
4,444
4,353
3,784
1,101
1,061
1,611
911
1,359
1,431
1,890
1,540
1,913
1,338
1,748
1,316
2,919
973
3,227
329
346
920
854
981
1,073
1,436
3,344
990
2,186
848
1,787
3,881
1,639
4,901
505
927
1,374
999
1,633
2,607
2,351
4,531
1,211
2,555
1,316
709
418
1,127
1,314
2,728
4,042
1,231
3,334
4,565
3
9
7
6
10
9
9
8
2
4
3
5
5
4
5
9
4
10
1
1
3
2
3
3
6
8
3
5
3
2
9
9
1979
1942
1948
2012
2013
2016
2018
2018
1998
12/15/2020
12/18/2020
12/18/2020
12/18/2020
12/18/2020
12/18/2020
12/18/2020
12/18/2020
12/21/2020
2004
12/21/2020
1991
12/21/2020
2019
12/22/2020
2020
12/22/2020
2020
12/22/2020
2020
2012
2008
2018
1983
1968
1987
2015
1975
1983
2003
1970
2018
1978
2015
12/22/2020
12/23/2020
12/23/2020
12/23/2020
12/23/2020
12/23/2020
12/23/2020
12/23/2020
12/23/2020
12/23/2020
12/29/2020
12/29/2020
12/29/2020
12/29/2020
12/29/2020
1982
12/30/2020
1991
12/31/2020
1980
12/31/2020
$ 733,562
$ 1,435,310 $
7,680
$
84,367
$ 741,242
$ 1,519,677 $ 2,260,919 $
112,144
(a)
(b)
As of December 31, 2020, the Company had investments in 1,181 single-tenant real estate property locations including 1,056 owned
properties and 10 ground lease interests. All or a portion of 6 of the Company’s owned properties and 1 property subject to ground lease
interests are subject to leases accounted for as direct financing leases and the portions relating to the direct financing leases are excluded
from the table above. The Company owns 5 properties which are accounted for as a loan receivable, as the leases contain purchase options.
Initial costs exclude intangible lease assets totaling $68.0 million.
The aggregate cost for federal income tax purposes is $2.3 billion.
F-23
(c)
The following is a reconciliation of carrying value for land and improvements and building and improvements for the periods presented:
(in thousands)
Balance, beginning of period
Additions
Acquisitions
Improvements
Deductions
Provisions for impairment of real estate
Real estate investments held for sale
Cost of real estate sold
Balance, end of period
$
$
Year ended December 31, 2020
Year ended December 31, 2019
Year ended December 31, 2018
1,812,961 $
1,306,504 $
527,482
28,889
(8,399)
(17,058)
(82,956)
2,260,919 $
568,680
3,283
(1,527)
(1,211)
(62,768)
1,812,961 $
866,762
495,265
1,689
(1,997)
—
(55,215)
1,306,504
(d)
The following is a reconciliation of accumulated depreciation for the periods presented:
(in thousands)
Balance, beginning of period
Additions
Depreciation expense
Deductions
Accumulated depreciation associated with real
estate sold
Balance, end of period
$
$
Year ended December 31, 2020
Year ended December 31, 2019
Year ended December 31, 2018
71,445 $
51,736
(11,037)
112,144 $
37,904 $
36,354
(2,813)
71,445 $
15,356
24,854
(2,306)
37,904
(e)
(f)
(g)
Depreciation is calculated using the straight-line method over the estimated useful lives of the properties, which is up to 40 years for buildings
and improvements and 15 years for land improvements.
Property is collateral for non-recourse debt obligations totaling $399.7 million issued under the Company’s Master Trust Funding Program.
Amounts shown as reductions to cost capitalized subsequent to acquisition represent provisions recorded for impairment of real estate.
See accompanying report of independent registered public accounting firm.
F-24
ESSENTIAL PROPERTIES REALTY TRUST, INC. AND ESSENTIAL PROPERTIES REALTY TRUST, INC. PREDECESSOR
Schedule IV - Mortgage Loans on Real Estate
As of December 31, 2020
(Dollar amounts in thousands)
Description
First mortgage loans:
Two Early Childhood Education
Centers located in Florida
Two Early Childhood Education
Centers located in Florida
Two Family Dining Restaurants
located in Texas
Sixty-nine Quick Service
Restaurants located in fifteen
states
Eighteen Car Washes located
in six states
One Early Childhood Education
Centers located in Florida
One Medical/Dental Center
located in Texas
Three Convenience Stores
located in Minnesota
Eight Car Washes located in
three states
Eleven Car Washes located in
six states
Interest
rate
Final
Maturity
Date
Periodic
Payment
Terms
Final
Payment
Terms
Prior
Liens
Face
Amount of
Mortgages
Carrying
Amount of
Mortgages
Principal Amount
of Loans Subject
to Delinquent
Principal or Interest
8.80%
5/8/2039
Interest only Balloon - $12,000 None
$ 12,000 $ 11,782
8.53%
7/15/2039
8.10%
6/30/2059
Interest only
Principal +
Interest
Balloon - $7,300
None
7,300
7,160
Fully amortizing
None
6,114
6,009
8.16%
8/31/2034
Interest only Balloon - $28,000 None
28,000
27,997
8.05%
12/31/2034
Interest only Balloon - $37,105 None
37,105
37,027
8.42%
2/29/2040
Interest only
Balloon - $5,300
7.00%
4/21/2021
Interest only
Balloon - $860
8.30%
12/10/2022
Interest only
Balloon - $2,323
7.30%
12/31/2035
Interest only Balloon - $18,638
None
None
None
None
7.30%
12/31/2035
Interest only Balloon - $27,362 None
5,300
5,207
860
860
2,323
2,199
18,638
18,575
27,362
27,231
$ 145,002 $ 144,048
None
None
None
None
None
None
None
None
None
None
The following shows changes in carrying amounts of mortgage loans receivable during the years ended December 31, 2020, 2019 and 2018
(in thousands):
Balance, beginning of period
Additions:
New mortgage loans
Subsequent funding on existing mortgage loans
Deductions:
Collections of principal
Provision for loan losses
Balance, end of period
2020
Year ended December 31,
2019
2018
87,029 $
14,854 $
—
54,484
3,500
(11)
(954)
144,048 $
92,036
—
(19,861)
—
87,029 $
14,854
—
—
—
14,854
$
$
See accompanying report of independent registered public accounting firm.
F-25
DESCRIPTION OF REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
Exhibit 4.4
Essential Properties Realty Trust, Inc. has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”): its common stock, par value $0.01 per share (the “common stock”). For purposes of this exhibit, unless the context
otherwise requires, the words “we,” “our,” “us” and “our company” refer to Essential Properties Realty Trust, Inc., a Maryland corporation.
General
DESCRIPTION OF COMMON STOCK
The following summary sets forth some of the general terms of our common stock. Because this is a summary, it does not contain all of the
information that may be important to you. For a more detailed description of our common stock, you should read our charter and bylaws, each of
which is an exhibit to our Annual Report on Form 10-K to which this summary is also an exhibit, and the applicable provisions of the Maryland
General Corporation Law (the “MGCL”).
Our charter authorizes us to issue up to 500,000,000 shares of common stock, $0.01 par value per share, and 150,000,000 shares of
preferred stock, $0.01 par value per share. A majority of our entire board of directors has the power, without common stockholder approval, to
amend our charter to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we
are authorized to issue.
Under Maryland law, our stockholders generally are not liable for our debts or obligations solely as a result of stockholders’ status as
stockholders.
Terms
Our outstanding shares of common stock are duly authorized, fully paid and nonassessable. Holders of our common stock are entitled to
receive distributions when authorized by our board of directors and declared by us out of assets legally available for the payment of dividends.
Holders of our common stock are also entitled to share ratably in our assets legally available for distribution to our stockholders in the event of our
liquidation, dissolution or winding up, after payment of, or adequate provision for, all of our known debts and liabilities. These rights are subject to
the preferential rights of any other class or series of our stock, including any shares of preferred stock we may issue, ranking senior to our common
stock and to the provisions of our charter regarding restrictions on ownership and transfer of our stock.
Subject to our charter restrictions on ownership and transfer of our stock and the terms of any other class or series of our stock, each
outstanding share of our common stock entitles the holder thereof to one vote on all matters submitted to a vote of stockholders, including the
election of directors. Cumulative voting in the election of directors is not permitted. Directors are elected by a plurality of the votes cast at the
meeting at which directors are being elected and at which a quorum is present. This means that the holders of a majority of the outstanding shares
of our common stock can effectively elect all of the directors then standing for election, and the holders of the remaining shares will not be able to
elect any directors.
Our common stockholders have no preference, conversion, exchange, sinking fund or redemption rights and have no preemptive rights to
subscribe for any of our capital stock. Our charter provides that our stockholders generally have no appraisal rights unless our board of directors
determines that appraisal rights will apply to one or more transactions in which our common stockholders would otherwise
be entitled to exercise such rights. Subject to our charter restrictions on ownership and transfer of our stock, holders of shares of our common stock
will initially have equal dividend, liquidation and other rights.
Under Maryland law, a Maryland corporation generally cannot dissolve, amend its charter, merge, sell all or substantially all of its assets,
convert into another form of entity, engage in a statutory share exchange or engage in a similar transaction unless such transaction is declared
advisable by the board of directors and approved by the affirmative vote of stockholders entitled to cast at least two-thirds of all of the votes entitled
to be cast on the matter, unless a lesser percentage (but not less than a majority of the votes entitled to be cast on the matter) is set forth in the
corporation’s charter. Our charter provides for approval of these matters by the affirmative vote of stockholders entitled to cast a majority of all the
votes entitled to be cast on such matter, except that the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be
cast on such matter is required to amend the provisions of our charter relating to the removal of directors or the vote required to amend the removal
provisions. Maryland law also permits a corporation to transfer all or substantially all of its assets without the approval of its stockholders to an entity,
all of the equity interests of which are owned, directly or indirectly, by the corporation. Because our operating assets are held by our operating
partnership, Essential Properties, L.P., or its wholly owned subsidiaries, these subsidiaries may be able to merge or transfer all or substantially all of
their assets without the approval of our stockholders.
Power to Reclassify Unissued Shares of Common Stock and Issue Additional Shares of Common Stock
Our charter authorizes our board of directors to reclassify any unissued shares of our common stock into other classes or series of stock,
including classes or series of preferred stock, and to establish the designation and number of shares of each such class or series and to set, subject
to the provisions of our charter regarding the restrictions on ownership and transfer of our stock and the terms of any other class or series of our
stock, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms
or conditions of redemption of each such class or series. Thus, our board of directors could authorize the issuance of shares of common stock or
preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or a change in control that
might involve a premium price for our common stock or that our common stockholders otherwise believe to be in their best interests.
Transfer Agent and Registrar
The registrar and transfer agent for our common stock is Computershare Trust Company, N.A.
Listing
Our common stock is listed on the NYSE under the symbol “EPRT.”
Restrictions on Ownership and Transfer
In order for us to maintain our qualification for taxation as a REIT under Internal Revenue Code of 1986, as amended (the “Code”), our stock
must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which an
election to be a REIT has been made) or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the
outstanding shares of stock (after taking into account options to acquire shares of stock) may be owned, directly or through certain constructive
ownership rules, by five or fewer individuals (as defined in the Code to include certain entities such as private foundations) at any time during the
last half of a taxable year (other than the first year for which an election to be a REIT has been made).
Our charter contains restrictions on the ownership and transfer of our stock that are intended to assist us in complying with these
requirements and maintaining our qualification as a REIT, among other
reasons. The relevant sections of our charter provide that no person or entity may actually or beneficially own, or be deemed to own by virtue of the
applicable constructive ownership provisions of the Code, more than 9.8% (in value or in number of shares, whichever is more restrictive) of the
aggregate of the outstanding shares of our common stock or 9.8% in value of the aggregate of the outstanding shares of all classes and series of
our stock, in each case excluding any shares of our stock that are not treated as outstanding for federal income tax purposes. We refer to each of
these restrictions as an “ownership limit” and collectively as the “ownership limits.” A person or entity that would have acquired actual, beneficial or
constructive ownership of our stock but for the application of the ownership limits or any of the other restrictions on ownership and transfer of our
stock discussed below is referred to as a “prohibited owner.”
The constructive ownership rules under the Code are complex and may cause stock owned actually or constructively by a group of related
individuals and/or entities to be owned constructively by one individual or entity. As a result, the acquisition of less than 9.8% of our common stock
(or the acquisition of an interest in an entity that owns, actually or constructively, our common stock) by an individual or entity could, nevertheless,
cause that individual or entity, or another individual or entity, to own constructively in excess of 9.8% (in value or in number of shares, whichever is
more restrictive) of the outstanding shares of our common stock and thereby violate the applicable ownership limit.
In addition, certain entities that are defined as designated investment entities in our charter, which generally includes pension funds, mutual
funds and certain investment management companies, are permitted to own up to 9.8% (in value or in number of shares, whichever is more
restrictive) or our outstanding common stock, or 9.8% (in value or in number of shares, whichever is more restrictive) of the aggregate of the
outstanding shares of all classes and series of stock, so long as each beneficial owner of the shares owned by such designated investment entity
would satisfy the ownership limits if those beneficial owners owned directly their pro-rata share of our stock owned by the designated investment
entity.
Our charter provides that our board of directors, subject to certain limits, upon receipt of a request that complies with the requirements of our
charter and any policy adopted by our board of directors, may retroactively or prospectively exempt a person from either or both of the ownership
limits or the designated investment entity limit and establish a different limit on ownership for such person.
Our board of directors may increase or decrease one or both of the ownership limits or the designated investment entity limit for one or more
persons, except that a decreased ownership limit will not be effective for any person whose actual, beneficial or constructive ownership of our stock
exceeds the decreased ownership limit or decreased investment entity limit at the time of the decrease until the person’s actual, beneficial or
constructive ownership of our stock equals or falls below the decreased ownership limit or decreased investment entity limit, although any further
acquisition of our stock (other than by a previously exempted person) will violate the decreased ownership limit or decreased investment entity limit,
as applicable. Our board of directors may not increase or decrease any ownership limit or the designated investment entity limit if the new ownership
limit or the designated investment entity limit would allow five or fewer persons to actually or beneficially own more than 49.9% in value of our
outstanding stock or could cause us to be “closely held” under Section 856(h) of the Code (without regard to whether the ownership interest is held
during the last half of a taxable year) or otherwise cause us to fail to continue to qualify as a REIT.
Our charter further prohibits:
• any person from actually, beneficially or constructively owning shares of our stock that could result in us being “closely held” under
Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise cause us to
fail to continue to qualify as a REIT (including, but not limited to, actual, beneficial or constructive ownership of shares of our stock that could result
in us owning (actually or constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income we derive from
such tenant, taking into account our
other income that would not qualify under the gross income requirements of Section 856(c) of the Code, would cause us to fail to satisfy any the
gross income requirements imposed on REITs); and
• any person from transferring shares of our stock if such transfer would result in shares of our stock being beneficially owned by fewer
than 100 persons (determined under the principles of Section 856(a)(5) of the Code).
Any person who acquires or attempts or intends to acquire actual, beneficial or constructive ownership of shares of our stock that will or may
violate the ownership limits, the designated investment entity limit or any of the other restrictions on ownership and transfer of our stock described
above must give written notice immediately to us or, in the case of a proposed or attempted transaction, provide us at least 15 days prior written
notice, and provide us with such other information as we may request in order to determine the effect, if any, of such transfer on our status as a
REIT.
The ownership limits, the designated investment entity limit and other restrictions on ownership and transfer of our stock described above will
not apply if our board of directors determines that it is no longer in our best interests to continue to qualify or attempt to qualify as a REIT or that
compliance with any such restriction is no longer required in order for us to continue to qualify as a REIT.
Pursuant to our charter, if any purported transfer of our stock or any other event would otherwise result in any person violating the ownership
limits, the designated investment entity limit or such other limit established by our board of directors, would result in us being “closely held” within the
meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise
failing to continue to qualify as a REIT, then the number of shares causing the violation (rounded up to the nearest whole share) will be automatically
transferred to, and held by, a trust for the exclusive benefit of one or more charitable beneficiaries selected by us. The prohibited owner will have no
rights in shares of our stock held by the trustee. The automatic transfer will be effective as of the close of business on the business day prior to the
date of the violative transfer or other event that results in the transfer to the trust. Any dividend or other distribution paid to the prohibited owner prior
to our discovery that the shares had been automatically transferred to a trust as described above must be repaid to the trustee upon demand. If the
transfer to the trust as described above is not automatically effective, for any reason, to prevent violation of the applicable restriction on ownership
and transfer of our stock, then the transfer of the number of shares that otherwise would cause any person to violate the above restrictions will be
void and of no force or effect, regardless of any action or inaction by the board of directors, and the intended transferee will acquire no rights in the
shares. If any transfer of our stock would result in shares of our stock being beneficially owned by fewer than 100 persons (determined under the
principles of Section 856(a)(5) of the Code), then any such purported transfer will be void and of no force or effect and the intended transferee will
acquire no rights in the shares.
Shares of our stock transferred to the trustee are deemed offered for sale to us, or our designee, at a price per share equal to the lesser of
(1) the price per share in the transaction that resulted in the transfer of the shares to the trust (or, in the event of a gift, devise or other such
transaction, the last sale price reported on the NYSE on the day of the transfer or other event that resulted in the transfer of such shares to the trust)
and (2) the last sale price reported on the NYSE on the date we accept, or our designee accepts, such offer. We must reduce the amount payable to
the trustee by the amount of dividends and distributions paid to the prohibited owner and owed by the prohibited owner to the trustee and may pay
the amount of such reduction to the trustee for the benefit of the charitable beneficiary. We have the right to accept such offer until the trustee has
sold the shares of our stock held in the trust. Upon a sale to us, the interest of the charitable beneficiary in the shares sold terminates and the
trustee must distribute the net proceeds of the sale to the prohibited owner and any dividends or other distributions held by the trustee with respect
to such stock will be paid to the charitable beneficiary.
Within 20 days of receiving notice from us of the transfer of shares to the trust, the trustee must sell the shares to a person or persons
designated by the trustee who can own the shares without violating the ownership limits, the designated investment entity limit or the other
restrictions on ownership and
transfer of our stock. Upon such sale, the interest of the charitable beneficiary will terminate and the trustee must distribute to the prohibited owner
an amount equal to the lesser of (1) the price paid by the prohibited owner for the shares (or, if the prohibited owner did not give value in connection
with the transfer or other event that resulted in the transfer to the trust (e.g., a gift, devise or other such transaction), the last sale price reported on
the NYSE on the day of the transfer or other event that resulted in the transfer of such shares to the trust) and (2) the sales proceeds (net of
commissions and other expenses of sale) received by the trustee for the shares. The trustee must reduce the amount payable to the prohibited
owner by the amount of dividends and other distributions paid to the prohibited owner and owed by the prohibited owner to the trustee. Any net
sales proceeds in excess of the amount payable to the prohibited owner will be immediately paid to the charitable beneficiary, together with any
dividends or other distributions thereon. In addition, if prior to discovery by us that shares of our stock have been transferred to the trustee, such
shares of stock are sold by a prohibited owner, then such shares shall be deemed to have been sold on behalf of the trust and, to the extent that the
prohibited owner received an amount for or in respect of such shares that exceeds the amount that such prohibited owner was entitled to receive,
such excess amount must be paid to the trustee upon demand.
The trustee will be designated by us and will be unaffiliated with us and with any prohibited owner. Prior to the sale of any shares by the trust,
the trustee will receive, in trust for the beneficiary, all dividends and other distributions paid by us with respect to such shares, and may exercise all
voting rights with respect to such shares for the exclusive benefit of the charitable beneficiary.
Subject to Maryland law, effective as of the date that the shares have been transferred to the trust, the trustee may, at the trustee’s sole and
absolute discretion:
• rescind as void any vote cast by a prohibited owner prior to our discovery that the shares have been transferred to the trust; and
• recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary.
However, if we have already taken irreversible corporate action, then the trustee may not rescind and recast the vote.
If our board of directors determines that a proposed transfer or other event has taken place that violates the restrictions on ownership and
transfer of our stock set forth in our charter, our board of directors may take such action as it deems advisable to refuse to give effect to or to
prevent such transfer, including, but not limited to, causing us to redeem shares of stock, refusing to give effect to the transfer on our books or
instituting proceedings to enjoin the transfer.
Every owner of 5% or more (or such lower percentage as required by the Code or the Treasury Regulations promulgated thereunder) of the
outstanding shares of our stock, within 30 days after the end of each taxable year, must give written notice to us stating the name and address of
such owner, the number of shares of each class and series of our stock that the owner actually or beneficially owns and a description of the manner
in which the shares are held. Each such owner also must provide to us in writing any additional information that we may request in order to
determine the effect, if any, of the person’s actual or beneficial ownership on our status as a REIT and to ensure compliance with the ownership
limits, the designated investment entity limit and the other restrictions on ownership and transfer of our stock set forth in our charter. In addition, any
person that is an actual, beneficial owner or constructive owner of shares of our stock and any person (including the stockholder of record) who is
holding shares of our stock for an actual, beneficial owner or constructive owner must disclose to us in writing such information as we may request
in order to determine our status as a REIT and comply with requirements of any taxing authority or governmental authority or to determine such
compliance.
Any certificates representing shares of our stock will bear a legend referring to the restrictions on ownership and transfer of our stock
described above. However, in lieu of a legend, the certificate may
state that we will furnish a full statement regarding the applicable restrictions on ownership and transfer to the stockholder on request and without
charge.
These restrictions on ownership and transfer could delay, defer or prevent a transaction or a change of control of our company that might
involve a premium price for our common stock that our stockholders believe to be in their best interest.
Our Board of Directors
Under our charter and bylaws, the number of directors of our company may be established, increased or decreased only by a majority of our
entire board of directors but may not be fewer than the minimum number required under the MGCL (which is one) nor, unless our bylaws are
amended, more than 15.
Removal of Directors
Our charter provides that, subject to the rights of holders of one or more classes or series of preferred stock to elect or remove one or more
directors, a director may be removed only for cause (as defined in our charter), and then only by the affirmative vote of at least two-thirds of the
votes entitled to be cast generally in the election of directors.
Business Combinations
Under the MGCL, certain “business combinations” (including a merger, consolidation, statutory share exchange or, in certain circumstances
specified under the statute, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and any interested
stockholder, or an affiliate of such an interested stockholder, are prohibited for five years after the most recent date on which the interested
stockholder becomes an interested stockholder. Maryland law defines an interested stockholder as:
• any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation’s outstanding voting stock; or
• an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner
of 10% or more of the voting power of the then outstanding voting stock of the corporation.
A person is not an interested stockholder under the MGCL if the board of directors approved in advance the transaction by which the person
otherwise would have become an interested stockholder. In approving a transaction, the board of directors may provide that its approval is subject to
compliance, at or after the time of the approval, with any terms and conditions determined by it.
After such five-year period, any such business combination must be recommended by the board of directors of the corporation and approved
by the affirmative vote of at least:
• 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation, voting together as a single voting
group; and
• two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder
with whom (or with whose affiliate) the business combination is to be effected or held by an affiliate or associate of the interested stockholder, voting
together as a single voting group.
These supermajority approval requirements do not apply if, among other conditions, the corporation’s common stockholders receive a
minimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form as previously paid by the
interested stockholder for its shares.
These provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by a corporation’s board of
directors prior to the time that the interested stockholder becomes an interested stockholder. As permitted by the MGCL, our board of directors has
adopted a resolution exempting any business combination between us and any other person from the provisions of this statute. Consequently, the
five-year prohibition and the supermajority vote requirements will not apply to business combinations involving us. As a result, any person will be
able to enter into business combinations with us that may not be in the best interests of our stockholders, without compliance with the supermajority
vote requirements and other provisions of the statute. Our bylaws provide that this resolution or any other resolution of our board of directors
exempting any business combination from the business combination provisions of the MGCL may only be revoked, altered or amended, and our
board of directors may only adopt an inconsistent resolution, if approved by the affirmative vote of a majority of the votes cast on the matter by
stockholders entitled to vote generally in the election of directors.
Control Share Acquisitions
The MGCL provides that a holder of “control shares” of a Maryland corporation acquired in a “control share acquisition” has no voting rights
with respect to those shares except to the extent approved by the affirmative vote of at least two-thirds of the votes entitled to be cast by
stockholders entitled to exercise or direct the exercise of voting power in the election of directors generally but excluding: (1) the person who has
made or proposes to make the control share acquisition; (2) any officer of the corporation; or (3) any employee of the corporation who is also a
director of the corporation. “Control shares” are voting shares of stock that, if aggregated with all other such shares of stock previously acquired by
the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable
proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges:
• one-tenth or more but less than one-third;
• one-third or more but less than a majority; or
• a majority or more of all voting power.
Control shares do not include shares that the acquiring person is then entitled to vote as a result of having previously obtained stockholder
approval. A “control share acquisition” means the acquisition, directly or indirectly, of ownership of, or the power to direct the exercise of voting
power with respect to, issued and outstanding control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions (including an undertaking to
pay expenses and making an “acquiring person statement” as described in the MGCL), may compel the board of directors of the Maryland
corporation to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the control shares. If no
request for a special meeting is made, the corporation may itself present the question at any stockholders meeting.
If voting rights of control shares are not approved at the meeting or if the acquiring person does not deliver an “acquiring person statement”
as required by the statute, then, subject to certain conditions and limitations, the corporation may redeem any or all of the control shares (except
those for which voting rights have previously been approved) for fair value determined, without regard to the absence of voting rights for the control
shares, as of the date of the last control share acquisition by the acquirer or, if a meeting of stockholders is held at which the voting rights of such
shares are considered and not approved, as of the date of such meeting. If voting rights for control shares are approved at a stockholders meeting
and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair
value of the shares as determined for purposes of such appraisal rights may not be less than the highest price per share paid by the acquirer in the
control share acquisition.
The control share acquisition statute does not apply (1) to shares acquired in a merger, consolidation or statutory share exchange if the
corporation is a party to the transaction or (2) to acquisitions approved or exempted by the charter or bylaws of the corporation.
Our bylaws contain a provision exempting from the control share acquisition statute any and all control share acquisitions by any person of
shares of our stock, and this provision of our bylaws cannot be amended without the affirmative vote of a majority of the votes cast on the matter by
stockholders entitled to vote generally in the election of directors.
Subtitle 8
Subtitle 8 of Title 3 of the MGCL permits a Maryland corporation with a class of equity securities registered under the Exchange Act and at
least three independent directors to elect, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any
contrary provision in the charter or bylaws, to be subject to any or all of the following five provisions:
• a classified board;
• a two-thirds vote requirement for removing a director;
• a requirement that the number of directors be fixed only by vote of the directors;
• a requirement that a vacancy on the board be filled only by a vote of the remaining directors (whether or not they constitute a quorum) and
for the remainder of the full term of the class of directors in which the vacancy occurred and until a successor is elected and qualifies; or
• a majority requirement for the calling of a special meeting of stockholders.
We have elected to be subject to the provision of Subtitle 8 providing that vacancies on our board of directors may be filled only by the
remaining directors (whether or not they constitute a quorum) and that a director elected by the board of directors to fill a vacancy will serve for the
remainder of the full term of the directorship. We have not elected to be subject to any of the other provisions of Subtitle 8, including the provisions
that would permit us to classify our board of directors without stockholder approval. Moreover, our charter provides that, without the affirmative vote
of a majority of the votes cast on the matter by stockholders entitled to vote generally in the election of directors, we may not elect to be subject to
any of these additional provisions of Subtitle 8. Through provisions in our charter and bylaws unrelated to Subtitle 8, we (1) vest in our board of
directors the exclusive power to fix the number of directors, (2) require, unless called by our chairman, our chief executive officer, our president or
our board of directors, the request of stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting to call a special
meeting of stockholders and (3) provide that a director may be removed only for cause and by the affirmative vote of two-thirds of the votes entitled
to be cast generally in the election of directors.
Amendments to Our Charter and Bylaws
Except as described herein and as provided in the MGCL, amendments to our charter must be advised by our board of directors and
approved by the affirmative vote of our stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter. Any amendment to
the provisions of our charter relating to the removal of directors or amendments to such provisions will require the affirmative vote of at least two-
thirds of the votes entitled to be cast on the matter. Our board of directors has the power to amend our bylaws, provided that amendments to the
provisions of our bylaws prohibiting our board of directors from revoking, altering or amending its resolution exempting any business combination
from the “business combination” provisions of the MGCL or exempting any acquisition of our stock from the “control share” provisions of the MGCL
without the approval of our stockholders must be approved by the affirmative vote of a majority of the votes cast on the matter by our stockholders
entitled to vote generally in the election of directors. In addition, our stockholders may amend our bylaws, to the extent permitted by law, if any such
amendment is approved by the affirmative vote of a majority of the votes entitled to be cast on the matter.
Meetings of Stockholders
Under our bylaws and pursuant to Maryland law, annual meetings of stockholders will be held each year at a date and at the time and place
determined by our board of directors. Special meetings of stockholders may be called by our board of directors, the chairman of our board of
directors, our president or our chief executive officer. Additionally, subject to the provisions of our bylaws, special meetings of the stockholders to act
on any matter must be called by our secretary upon the written request of stockholders entitled to cast a majority of all the votes entitled to be cast
on such matter at such meeting who have requested the special meeting in accordance with the procedures set forth in, and provided the
information and certifications required by, our bylaws. Only matters set forth in the notice of the special meeting may be considered and acted upon
at such a meeting. Our secretary will inform the requesting stockholders of the reasonably estimated cost of preparing and delivering the notice of
meeting (including our proxy materials), and the requesting stockholder must pay such estimated cost before our secretary may prepare and deliver
the notice of the special meeting.
Corporate Opportunities
Our charter provides that, to the maximum extent permitted by Maryland law, each of Eldridge Industries, LLC (“Eldridge”), its affiliates, each
of their representatives, and each of our directors or officers that is an employee, affiliate or designee for nomination as a director of Eldridge or its
affiliates has the right to, and has no duty not to, (x) directly or indirectly engage in the same or similar business activities or lines of business as us,
including those deemed to be competing with us, or (y) directly or indirectly do business with any of our clients, customers or suppliers. In the event
that Eldridge or any of its affiliates or employees, or any of their representatives or designees, acquires knowledge of a potential transaction or
matter that may be a corporate opportunity for us, Eldridge, its affiliates and employees and any of their representatives or designees, to the
maximum extent permitted by Maryland law, have no duty to communicate or present such corporate opportunity to us or any of our affiliates and
shall not be liable to us or any of our affiliates, subsidiaries, stockholders or other equity holders for breach of any duty by reason of the fact that
Eldridge or any of its affiliates or employees, or any of their representatives or designees, directly or indirectly, pursues or acquires such opportunity
for themselves, directs such opportunity to another person or does not present such opportunity to us or any of our affiliates; provided, however, that
such corporate opportunity is not presented to such person in his or her capacity as a director or officer of us. As of the date of filing, no affiliates of
Eldridge currently serve as directors or officers of us.
Advance Notice of Director Nominations and New Business
Our bylaws provide that, with respect to an annual meeting of stockholders, nominations of individuals for election to our board of directors
and the proposal of business to be considered by stockholders at the annual meeting may be made only:
• pursuant to our notice of the meeting;
• by or at the direction of our board of directors; or
• by a stockholder who was a stockholder of record at the record date set by the board of directors for the meeting, at the time of giving of the
notice of the meeting and at the time of the annual meeting (and any postponement or adjustment thereof), who is entitled to vote at the meeting in
the election of each individual so nominated or on such other business and who has complied with the advance notice procedures set forth in, and
provided the information and certifications required by, our bylaws.
With respect to special meetings of stockholders, our bylaws provide that only the business specified in our company’s notice of meeting may
be brought before the special meeting of stockholders, and nominations of individuals for election to our board of directors may be made only:
• by or at the direction of our board of directors; or
• provided that the meeting has been called in accordance with our bylaws for the purpose of electing directors, by a stockholder who is a
stockholder of record at the record date set by the board of directors for the meeting, at the time of giving of the notice required by our bylaws and at
the time of the meeting (and any postponement or adjustment thereof), who is entitled to vote at the meeting in the election of each individual so
nominated and who has complied with the advance notice provisions set forth in, and provided the information and certifications required by, our
bylaws.
Requiring stockholders to give advance notice of nominations and other proposals affords our board of directors and our stockholders the
opportunity to consider the qualifications of the proposed nominees or the advisability of the other proposals and, to the extent considered
necessary by our board of directors, to inform stockholders and make recommendations regarding the nominations or other proposals. Although our
bylaws do not give our board of directors the power to disapprove timely stockholder nominations and proposals, our bylaws may have the effect of
precluding a contest for the election of directors or proposals for other action if the proper procedures are not followed, and of discouraging or
deterring a third party from conducting a solicitation of proxies to elect its own slate of directors to our board of directors or to approve its own
proposal.
Anti-Takeover Effect of Certain Provisions of Maryland Law and of Our Charter and Bylaws
The restrictions on ownership and transfer of our stock, the supermajority vote required to remove directors, our election to be subject to the
provision of Subtitle 8 vesting in our board of directors the exclusive power to fill vacancies on our board of directors and the advance notice
provisions of our bylaws could delay, defer or prevent a transaction or a change of control of our company.
Further, a majority of our entire board of directors has the power, without common stockholder action, to increase or decrease the aggregate
number of authorized shares of stock or the number of shares of any class or series of stock that we are authorized to issue, to classify and
reclassify any unissued shares of our stock into other classes or series of stock, and to authorize us to issue the newly classified shares, and could
authorize the issuance of shares of common stock or another class or series of stock, including a class or series of preferred stock, that could have
the effect of delaying, deferring or preventing a change in control of us. These actions may be taken without stockholder approval unless such
approval is required by applicable law, the terms of any other class or series of our stock or the rules of any stock exchange or automated quotation
system on which any of our stock is listed or traded. We believe that the power of our board of directors to increase or decrease the number of
authorized shares of stock and to classify or reclassify unissued shares of our common stock or preferred stock and thereafter to cause us to issue
such shares of stock will provide us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs
which might arise.
Our charter and bylaws also provide that the number of directors may be established only by our board of directors, which prevents our
stockholders from increasing the number of our directors and filling any vacancies created by such increase with their own nominees. The provisions
of our bylaws discussed under the captions “Meetings of Stockholders” and “Advance Notice of Director Nominations and New Business” require
stockholders seeking to call a special meeting, nominate an individual for election as a director or propose other business at an annual or special
meeting to comply with certain notice and information requirements. We believe that these provisions will help to assure the continuity and stability
of our business strategies and policies as determined by our board of directors and promote good corporate governance by providing us with clear
procedures for calling special meetings, information about a stockholder proponent’s interest in us and adequate time to consider stockholder
nominees and other business proposals. However, these provisions, alone or in combination, could make it more difficult for our stockholders to
remove incumbent directors or fill vacancies on our board of directors with their own nominees and could delay, defer or prevent a change in control,
including a proxy contest or tender offer that might involve a premium price for our common stockholders or otherwise be in the best interest of our
stockholders.
Exclusive Forum
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland,
or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division, will be the sole and
exclusive forum for (a) any Internal Corporate Claim, as such term is defined in the MGCL, (b) any derivative action or proceeding brought on our
behalf, (c) any action asserting a claim of breach of any duty owed by any of our directors, officers or other employees to us or to our stockholders,
(d) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the MGCL or our
charter or bylaws or (e) any action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal
affairs doctrine.
Limitation of Liability and Indemnification of Directors and Officers
Maryland law permits a Maryland corporation to include in its charter a provision eliminating the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability resulting from actual receipt of an improper benefit or profit in money,
property or services or active and deliberate dishonesty that is established by a final judgment and is material to the cause of action. Our charter
contains such a provision that eliminates such liability to the maximum extent permitted by Maryland law.
The MGCL requires a Maryland corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or
officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made or threatened to be made
a party by reason of his or her service in that capacity. The MGCL permits a Maryland corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any
proceeding to or in which they may be made or are threatened to be made a party or witness by reason of their service in those or other capacities
unless it is established that:
• the act or omission of the director or officer was material to the matter giving rise to the proceeding and the action was committed in bad
faith or was the result of active and deliberate dishonesty;
• the director or officer actually received an improper personal benefit in money, property or services; or
• in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.
In addition, under the MGCL, a Maryland corporation may not indemnify a director or officer for an adverse judgment in a suit by or on behalf
of the corporation or if the director or officer was adjudged liable on the basis that personal benefit was improperly received, unless, in either case, a
court orders indemnification and then only for expenses. A court may order indemnification for expenses if it determines that the director or officer is
fairly and reasonably entitled to indemnification, even though the director or officer did not meet the prescribed standard of conduct or was adjudged
liable on the basis that personal benefit was improperly received.
In addition, the MGCL permits a Maryland corporation to advance reasonable expenses to a director or officer upon the corporation’s receipt
of:
• a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for
indemnification by the corporation; and
• a written undertaking, which may be unsecured, by the director or officer or on his or her behalf to repay the amount paid if it shall ultimately
be determined that the standard of conduct was not met.
Our charter obligates us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding without requiring a preliminary determination of the director’s or officer’s
ultimate entitlement to indemnification to:
• any present or former director or officer who is made or threatened to be made a party to, or witness in, a proceeding by reason of his or her
service in that capacity; or
• any individual who, while a director or officer of us and at our request, serves or has served as a director, officer, partner, member, manager,
trustee, employee or agent of another corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee
benefit plan or any other enterprise and who is made or threatened to be made a party to, or witness in, the proceeding by reason of his or her
service in that capacity.
Our charter also permits us, with the approval of our board of directors, to indemnify and advance expenses to any person who served a
predecessor of ours in any of the capacities described above and to any employee or agent of our company or a predecessor of our company.
REIT Qualification
Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without approval of our stockholders if
it determines that it is no longer in our best interest to attempt to continue to qualify as a REIT.
List of Subsidiaries
Exhibit 21.1
Name of Subsidiary
Essential Properties, L.P.
Essential Properties OP G.P., LLC
SCF TRS LLC
SCFRC-HW LLC
SCFRC-HW-V LLC
SCFRC-HW-G LLC
SCF RC Funding I LLC
SCF RC Funding II LLC
SCF RC Funding III LLC
SCF RC Funding IV LLC
SCF Realty Capital Trust LLC
SCF Realty IFH LLC
SCF Realty Funding LLC
SCF Realty Servicing Company LLC
SCFRC-HW-528 South Broadway-Salem LLC
SCF RC Funding Canal LLC
LB Funding I LLC
State of Incorporation
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
a. Registration Statement (Form S-3 No. 333-232490) of Essential Properties Realty Trust, Inc., and
a. Registration Statement (Form S-8 No. 333-225837) pertaining to the 2018 Incentive Plan of Essential Properties Realty Trust, Inc.
of our reports dated February 23, 2021, with respect to the consolidated financial statements of Essential Properties Realty Trust, Inc. and the
effectiveness of internal control over financial reporting of Essential Properties Realty Trust, Inc. included in this Annual Report (Form 10-K) of
Essential Properties Realty Trust, Inc. for the year ended December 31, 2020.
Exhibit 23.1
/s/ Ernst & Young LLP
New York, New York
February 23, 2021
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Peter M. Mavoides, certify that:
(1)
(2)
(3)
(4)
I have reviewed this Annual Report on Form 10-K of Essential Properties Realty Trust, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(5)
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Date:
February 23, 2021
By:
/s/ Peter M. Mavoides
Peter M. Mavoides
President and Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Mark E. Patten, certify that:
(1)
(2)
(3)
(4)
I have reviewed this Annual Report on Form 10-K of Essential Properties Realty Trust, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(5)
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Date:
February 23, 2021
By:
/s/ Mark E. Patten
Mark E. Patten
Chief Financial Officer, Treasurer and Executive Vice President
(Principal Financial Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report on Form 10-K of Essential Properties Realty Trust, Inc. (the “Company”) for the year ended
December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Peter M. Mavoides, Chief Executive
Officer of the Company, hereby certify as of the date hereof, solely for the purposes of Title 18, Chapter 63, Section 1350 of the United States Code,
that to the best of my knowledge:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934;
and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Company at the dates and for the periods indicated.
Date:
February 23, 2021
By:
/s/ Peter M. Mavoides
Peter M. Mavoides
President and Chief Executive Officer
(Principal Executive Officer)
The foregoing certification is being furnished with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020
pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and it is not
to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general
incorporation language in such filing.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company
and furnished to the Securities and Exchange Commission or its staff upon request.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report on Form 10-K of Essential Properties Realty Trust, Inc. (the “Company”) for the year ended
December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark E. Patten, Chief Financial
Officer of the Company, hereby certify as of the date hereof, solely for the purposes of Title 18, Chapter 63, Section 1350 of the United States Code,
that to the best of my knowledge:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934;
and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Company at the dates and for the periods indicated.
Date:
February 23, 2021
By:
/s/ Mark E. Patten
Mark E. Patten
Chief Financial Officer, Treasurer and Executive Vice President
(Principal Financial Officer)
The foregoing certification is being furnished with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020
pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and it is not
to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general
incorporation language in such filing.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company
and furnished to the Securities and Exchange Commission or its staff upon request.