Companies: 10,652     total market cap: $141.817 T
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Essential Properties Realty Trust
EPRT
#2771
Rank
$6.27 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$31.60
Share price
-0.47%
Change (1 day)
3.03%
Change (1 year)
๐Ÿ  Real estate๐Ÿ’ฐ Investment ๐Ÿ˜๏ธ REITs
Categories
  1. Essential Properties Realty Trust
  2. Annual Reports (10-K)
  3. Financial Year 2021

Essential Properties Realty Trust - 10-K annual report 2021


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to
Commission File Number 001-38530
Essential Properties Realty Trust, Inc.
(Exact name of Registrant as specified in its Charter)
Maryland82-4005693
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
  
902 Carnegie Center Blvd., Suite 520
Princeton, New Jersey
08540
(Address of Principal Executive Offices)(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 Trading Symbol(s) Name of Each Exchange on Which
Registered
Common Stock, $0.01 par value EPRT New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 
☒
  Accelerated filer 
☐
Non-accelerated filer 
☐
  Smaller reporting company 
☐
Emerging growth company 
☐
    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the 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, 2021 (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 $3.2 billion based on the last reported sale price of $27.04 per share on the New York Stock Exchange on June 30, 2021.
The number of shares of the registrant's Common Stock outstanding as of February 16, 2022 was 125,605,199.
Documents Incorporated by Reference
Portions the Definitive Proxy Statement for the registrant's 2022 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.


Table of Contents
 
  Page
PART I  
Item 1.
4
Item 1A.
17
Item 1B.
38
Item 2.
38
Item 3.
42
Item 4.
43
   
PART II  
Item 5.
44
Item 6.
45
Item 7.
46
Item 7A.
68
Item 8.
70
Item 9.
116
Item 9A.
116
Item 9B.
117
Item 9C.116 
   
PART III  
Item 10.
118
Item 11.
118
Item 12.
118
Item 13.
118
Item 14.
118
   
PART IV  
Item 15.
119
Item 16
121
122
F-1

2

PART I
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.
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:
•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");
•changes in the U.S. tax law and other U.S. laws, whether or not specific to REITs;
3

•any adverse impact of the COVID-19 pandemic on the Company and its tenants; 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:
•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;
•failure to continue to qualify for taxation as a REIT; and
•any adverse impact of the COVID-19 pandemic on us and our tenants.
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;
•Early childhood education,
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•Car washes,
•Restaurants (primarily quick service restaurants and casual dining),
•Medical and dental services,
•Automotive services,
•Convenience stores,
•Entertainment,
•Health and fitness,
•Equipment rental and
•Grocery
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, 2021, 93.1% of our $242.9 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, 2021 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, 2021, our portfolio consisted of 1,451 properties, inclusive of 126 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, 2021, our portfolio was 99.9% occupied by 311 tenants operating 433 different concepts (i.e., generally brands) in 16 industries across 46 states, with none of our tenants contributing more than 3.3% of our annualized base rent. Our goal is that, over time, no more than 5% 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, 2021, our leases had a weighted average remaining lease term of 14.0 years (based on annualized base rent), with only 5.4% of our annualized base rent attributable to leases expiring prior to January 1, 2027. 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, 2021, 61.3% 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. 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, 2021, approximately 89.1% of our investments were sale-leaseback transactions.
Contractual Base Rent Escalation. As of December 31, 2021, 98.6% of our leases (based on annualized base rent) provided for increases in future base rent at a weighted average rate of 1.6% 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.
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Smaller, Low Basis Single-Tenant Properties. We generally invest in freestanding "small-box" single-tenant properties. As of December 31, 2021, our average investment per property was $2.3 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 enhances our ability to sell a property if we choose to do so.
Healthy Rent Coverage Ratio and Tenant Financial Reporting. As of December 31, 2021, our portfolio's weighted average rent coverage ratio was 3.7x, and 98.5% 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.
2021 Financial and Operating Highlights
•During 2021, we completed $974.0 million of investments, including $842.8 million in 297 property acquisitions and $131.1 million in newly originated loans receivable secured by 49 properties.
•As of December 31, 2021, our total gross investment in real estate was $3.4 billion, and we had total debt of $1.2 billion.
•During 2021, we declared distributions totaling $1.00 per share of common stock.
•In April 2021, we completed a follow-on offering of 8,222,500 shares of our common stock, including 1,072,500 shares of common stock purchased by the underwriters pursuant to an option to purchase additional shares raising net proceeds of $185.1 million.
•During 2021, we sold 10,005,890 shares of our common stock under the ATM Program (as defined herein), at a weighted average price per share of $27.58, raising net proceeds of $271.9 million.
•In June 2021, through our Operating Partnership, we completed a public offering of $400.0 million in aggregate principal amount of unsecured 2.950% Senior Notes due 2031 (the "2031 Notes"), raising in net proceeds of $396.6 million.
•In June 2021, we voluntarily prepaid the remaining outstanding principal amount of $171.2 million under our private conduit program (the "Master Trust Funding" program) and paid a make-whole premium of $2.5 million.
Our Target Market
We are an active investor in single-tenant, net leased commercial 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 therefore offers attractive risk-adjusted returns from an investment perspective.
Within this market, we focus our investment activities on properties leased to tenants engaged in a targeted set of 13 service-oriented or experience-based businesses. We believe that operating properties are the essential venues through which these businesses transact with their customers, and therefore that such properties and businesses are generally more insulated from the competitive pressure of e-commerce businesses than many other businesses where significant activity can take place online.
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
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than 10 locations and less than $20 million in annual revenue. Although it is not our primary investment focus, we will opportunistically consider investing in properties leased to larger companies. While the creditworthiness of most of our targeted tenants is not rated by a nationally recognized statistical rating organization, we seek to invest in properties leased to companies in our targeted middle-market that we determine have attractive credit characteristics and stable operating histories.
Despite the size of the overall commercial retail real estate market, the market for single-tenant, net leased commercial 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 smaller companies. We believe that many publicly traded REITs that invest in net leased properties concentrate their investment activity in properties leased to tenants whose creditworthiness has been rated by a nationally recognized statistical rating organization, which tend to be larger and often publicly traded organizations, with the result that unrated, middle-market and smaller 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 smaller owner-operators that own 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 capital needs of these companies by offering them an efficient alternative for financing their real estate versus accessing traditional mortgage or bank debt and/or using 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 smaller companies that are generally unrated and have less access to efficient sources of long-term capital than larger, credit-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:
•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 and predictable base of revenue from which to grow our portfolio. As of December 31, 2021, our portfolio consisted of 1,451 properties, with annualized base rent of $242.9 million, which was purposefully selected by our management team in accordance with our focused and disciplined investment strategy. Our portfolio is diversified with 311 tenants operating 433 different concepts across 46 states and in 16 distinct industries. None of our tenants contributed more than 3.3% of our annualized base rent as of December 31, 2021, and our strategy targets a scaled portfolio that, over time, allows us to derive no more than 5.0% of our 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, 2021, 93.1% of our annualized base rent was attributable to tenants operating service-oriented and experience-based businesses.
We believe that our portfolio's diversity and our rigorous underwriting decrease the impact on us of an adverse event affecting an individual tenant, industry or region, and our focus on leasing to tenants in industries where operating properties are essential to generating their revenues and profits (and that we believe are well-positioned to withstand competition from e-commerce businesses), increases the stability and predictability of our rental revenue.
•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-
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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 to source additional investments and become the capital provider of choice as our tenants' businesses grow and their real estate needs increase.
•Disciplined Underwriting Leading to Strong Portfolio Characteristics.    We generally seek to invest in single assets or portfolios of assets through transactions which range in aggregate purchase price from $2 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, 2021:
•Our leases had a weighted average remaining lease term (based on annualized base rent) of 14.0 years, with only 5.4% of our annualized base rent attributable to leases expiring prior to January 1, 2027;
•Master leases contributed 61.3% of our annualized base rent;
•Our portfolio's weighted average rent coverage ratio was 3.7x, with leases contributing 68.7% 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 99.9% occupied;
•Leases contributing 98.6% 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 1.6% of base rent; and
•Leases contributing 94.5% of annualized base rent were triple-net.
•Growth-Oriented Balance Sheet Scalable Infrastructure.  We believe our financial position and existing infrastructure support our external growth strategy. As of December 31, 2021, we had the ability to borrow up to $256.0 million under our $400.0 million senior unsecured revolving credit facility that matures in April 2023. In February 2022, we amended and restated our revolving credit facility to, among other things, increase the maximum borrowing availability to $600.0 million. 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.
As of December 31, 2021, we had $1.2 billion of gross debt outstanding, with a weighted average maturity of 5.6 years, and net debt of $1.1 billion. For the year ended December 31, 2021, our net income was $96.2 million, our Adjusted EBITDAre was $195.9 million and our Annualized Adjusted EBITDAre was $236.8 million. Our ratio of net debt to Annualized Adjusted EBITDAre was 4.7x as of December 31, 2021. 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."
We also maintain an ATM Program and, as of December 31, 2021, we had the ability to issue additional common stock thereunder with an aggregate gross sales price of up to $161.5 million.
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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, 2021, 85.2% of our portfolio's annualized base rent was attributable to internally originated sale-leaseback transactions and 86.2% 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.
•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, 2021, 2020 and 2019, we invested in properties with aggregate investment values of $974.0 million, $602.8 million and $598.1 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.
•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, actively evaluate credit risk, negotiate lease renewals and proactively manage our portfolio to protect stockholder value. As of December 31, 2021, leases contributing 98.5% 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 net lease properties. We intend to pursue our objective through the following business and growth strategies.
•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.
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
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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, 2021, we sold 38 properties for net sales proceeds of $59.3 million, including two 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, 2021, 85.2% of our portfolio’s annualized base rent was attributable to internally originated sale-leaseback transactions and 86.2% 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.
•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 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, 2021, our leases had a weighted average remaining lease term of 14.0 years (based on annualized base rent), with only 5.4% of our annualized base rent attributable to leases expiring prior to January 1, 2027, and
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98.6% of our leases (based on annualized base rent) provided for increases in future base rent at a weighted average of 1.6% 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, 2021, we had $1.2 billion of gross debt outstanding and $1.1 billion of net debt outstanding. Our net income for the year ended December 31, 2021 was $96.2 million, our Adjusted EBITDAre was $195.9 million, our Annualized Adjusted EBITDAre was $236.8 million and our ratio of net debt to Annualized Adjusted EBITDAre was 4.7x. 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 through our access to unsecured public debt issuances. 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 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. 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 investment 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. 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, 2021, we had 37 full-time employees. Our staff is mostly comprised of professionals engaged in originating, underwriting and closing investments; portfolio asset management; portfolio servicing (e.g., collections, property tax compliance, etc.); and accounting, financial reporting, cash management and capital markets activities. Women comprise nearly 38% of our employees and hold approximately 31% of our management positions, providing significant leadership at our company, and minorities comprise 32% of our employees. Our commitment to diversity also extends to our board of directors, as three of its seven independent members, or approximately 38%, 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.
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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.
Environmental, Social and Governance (ESG)
We are focused on advancing and continuing to develop our sustainability agenda and culture for the benefit of all of our stakeholders and our tenants. We are committed to operating in an environmentally conscious manner and maintaining an engaging and inclusive environment for our employees. We believe that sustainability, a positive corporate culture, that acknowledges the importance of our stockholders, tenants, employees, business associates and good corporate citizenship, and effective corporate governance are critical to our ability to create sustainable long-term value.
Environmental Sustainability
We are committed to environmental stewardship and operating our business in a sustainable manner. We recognize that the properties we lease to tenants can have a substantial impact on the environment and the health and safety of building occupants. Additionally, we have a direct carbon footprint through space occupied by us. Accordingly, our investment, leasing and asset management practices are informed by our commitment to operate in a sustainable manner that we believe will support long-term value.
Our Properties. As a net-lease REIT, we do not control the day-to-day operations and activities at our properties that are leased to tenants. Generally, our tenants have exclusive control over, and the ability to institute energy conservation and environmental management programs at, our properties. While we are not able to mandate the sustainability practices of our tenants, our leases generally require our tenants to fully comply with all applicable environmental laws, rules and regulations, and our asset management department actively monitors our properties in an effort to ensure that tenants are meeting their obligations with respect to environmental matters. Prior to acquiring a property, we obtain a Phase I environmental site assessment to seek to identify any environmental issues and structure the related lease accordingly.
Additionally, as a part of our sustainability strategy, we modified our standard lease terms in 2021 to provide us with the right to implement certain sustainability measures directly at our properties and to require our tenants to periodically provide us, at least annually, with information regarding their resource consumption, such as electricity and water usage. We believe that being aware of and, to the extent that we are able, addressing environmental issues are important aspects of maintaining a business that is successful and sustainable over the long-term. Accordingly, we believe that supporting our tenants’ efforts to implement sustainability initiatives enhances their operations and prospects for success and therefore our own.
Since the second quarter of 2021, we have been developing our initial sustainability loan program, which will offer certain tenants the opportunity to receive loans from us, with loan proceeds required to be used by the tenant/borrower for implementing sustainability initiatives at the property or properties leased from us. Improvements that might be funded through the program include, lighting and lighting control systems, HVAC controls, insulation, water efficiency systems, solar energy systems and electric vehicle charging stations. The primary objective of the program is to offer financing to participating tenants to pursue their sustainability goals, which we believe will provide them with benefits, including the potential to reduce their carbon footprints and certain operating costs, and deploying sustainable features that may promote increased brand identity and customer adoption or loyalty.
We are evaluating additional sustainability programs that we may offer tenants designed to promote operating efficiencies that are supportive of environmental sustainability. As our sustainability strategy evolves, we intend to identify “sustainability partners” that may assist us or our participating tenants in evaluating the costs and benefits of sustainability solutions and procuring and implementing/installing sustainability solutions. Additionally, a sustainability partner may assist participating tenants in identifying, applying for and obtaining payments, grants, credits or similar financial incentives related to sustainability solutions financed by us that may be available from utility companies, governmental authorities or other parties. Generally, we expect that any cash payments, grants, credits or similar financial incentives received by the tenant/borrower will be used to repay amounts outstanding under the related sustainability loan.
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Our Headquarters. In addition to assisting our tenants with their sustainability initiatives, we recognize that our Company has a direct carbon footprint at space occupied by us that we are committed to reducing. We emphasize sustainability at our corporate headquarters, lease space in a building that is certified under the EPA’s Energy Star certification program and implement sustainability measures that seek to reduce our environmental impact and carbon footprint, such as:
•Using energy efficient lighting and automated lighting control systems;
•Minimizing HVAC and heating run times;
•Maintaining an active single-stream recycling program for paper, plastic and cans;
•Purchasing Energy Star certified computers, monitors and printers;
•Using Energy Star power management settings on our computers and monitors;
•Disposing all ink cartridges utilizing the manufacturer’s recycling program; and
•Providing water dispensing machines and eliminating the use of plastic and styrofoam cups and plastic water bottles.
Social Matters: Company Culture
We seek to provide an engaging, inclusive and safe work environment that promotes the development and retention of employees, and is a competitive advantage in attracting new talent. We are committed to providing our employees with a rewarding work experience that allows for meaningful career development. We strive to offer employees attractive and equitable compensation, regular opportunities to participate in professional development activities, outlets for civic engagement and reasonable accommodations to promote a healthy work/life balance.
We value equal opportunity in the workplace and fair employment practices. We believe diversity encourages innovative thinking and aligns us with our tenants and the community around us. We have a talented and diverse group of employees, and we are committed to maintaining an inclusive and rewarding work environment. Among the programs and benefits that we offer employees are:
•Competitive compensation;
•Medical, dental and vision insurance for all employees and their families;
•A 401(k) plan with a matching contribution;
•Access to a free onsite gym;
•Continuing education reimbursement;
•Paid internship program; and
•Paid vacation, holiday and personal days.
Our commitment to maintaining a positive work environment extends beyond offering attractive compensation and opportunities for professional development. We actively promote a dynamic and inclusive work environment by:
•Fostering employee engagement through weekly and quarterly “all-hands” meetings where corporate achievements and objectives are broadly communicated. All employees are encouraged to provide input into the development of our business and raise suggestions or concerns they may have.
•Team building initiatives, including Company-sponsored sports teams, an annual summer outing and a holiday celebration. We believe that actively promoting a collegial work environment develops a cohesive team and a shared sense of mission, and is an important element of driving long-term success.
•Encouraging civic engagement by supporting local organizations. We encourage our employees to volunteer with local organizations that are meaningful to them, and we support organizations that are important to our
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employees and our community, such as The Capital Area YMCA, Better Beginnings Child Development Center (an organization that provides affordable childcare for working parents) and Alex’s Lemonade Stand Foundation (an organization that seeks to cure childhood cancer and support families with children battling cancer).
Governance
Our board of directors has adopted Corporate Governance Guidelines and a Code of Business Conduct and Ethics that applies to all of our officers, directors and employees. These documents are available on our website. We are committed to managing our Company for the benefit of all of our stakeholders and achieving long-term stockholder value. Maintaining effective corporate governance is a critical component of our Company, and key aspects of our governance include:
•Board independence—seven of our eight directors are independent;
•We have an independent non-executive board chairman;
•Each member of the audit, compensation and nominating and corporate governance committees of our board is independent;
•Our independent directors hold regular executive sessions without management;
•We hold annual elections for all our directors;
•We conduct regular assessments of our board and board committees;
•We value periodic board refreshment to promote effective board structure and composition;
•We have implemented a “whistleblower” policy that allows directors, officers and employees to file reports on a confidential and anonymous basis regarding any issue of impropriety, violation of law, violation of corporate or other policies, or unethical business practices;
•Subject to certain exceptions, a majority of our stockholders can amend our bylaws;
•We have adopted a stock ownership policy applicable to our executive officers and directors;
•We have policies that prohibit our officers, directors and employees from hedging our stock, and prohibit our directors and executive officers from pledging or otherwise encumbering our securities as collateral for indebtedness.
One of the key responsibilities of our board of directors is informed oversight of our risk management process. Our board administers this oversight function directly, with support from its three standing committees, the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee, each of which is comprised solely of non-employee, independent directors and addresses risks specific to its respective areas of oversight.
Audit Committee. The principal functions of our Audit Committee include oversight relating to:
•The integrity of our financial statements;
•Our compliance with legal and regulatory requirements;
•The evaluation of the qualifications and independence of our independent registered public accounting firm; and
•The performance of our internal audit function.
The Audit Committee is also responsible for engaging, evaluating, compensating and overseeing an independent registered public accounting firm charged with auditing our financial statements, reviewing with such firm the plans for and results of the audit of our financial statements, approving services that may be provided by the
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independent registered public accounting firm (including audit and non-audit services), reviewing the independence of the independent registered public accounting firm, considering the range of audit and non-audit fees and reviewing the adequacy of our internal accounting controls.
Compensation Committee. The principal functions of our Compensation Committee include:
•Assisting the independent directors in discharging the board’s responsibilities relating to compensation of the Company’s executive officers and directors and approving individual executive officer compensation intended to attract, retain and appropriately reward employees in order to motivate their performance in the achievement of the Company’s business objectives and align their interests with the long-term interests of the Company’s stockholders; and
•Reviewing and recommending to the board compensation plans, policies and programs.
Nominating and Corporate Governance Committee. The principal functions of our Nominating and Corporate Governance Committee include:
•Identifying, evaluating and recommending individuals qualified to become members of the board;
•Selecting, or recommending that the board select, the director nominees to stand for election at each annual meeting of stockholders or to fill vacancies on the board;
•Developing and recommending to the board a set of corporate governance guidelines applicable to the Company;
•Supporting the Company's commitment to environmental stewardship and sustainability, corporate social responsibility and effective corporate governance; and
•Overseeing the annual performance evaluation of the board and its committees and management.
In addition, the Nominating and Corporate Governance Committee monitors our overall risk management process at an enterprise level, and periodically evaluates various risks and the processes in place to monitor and mitigate such risks, including portfolio risks, operational risks, balance sheet risks and human capital risks. As a part of its oversight function, the Nominating and Corporate Governance Committee also reviews quarterly management reports addressing various environmental, corporate social responsibility and governance matters, and our progress in achieving related objectives.
Insurance
Our tenants are generally contractually required to maintain liability and property insurance coverage for the properties they lease from us pursuant to triple-net leases. Our 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, other 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, other 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 and property insurance policies, we separately maintain commercial insurance policies providing general liability and umbrella coverages associated with our portfolio. 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.
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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, hazardous waste or petroleum products into the environment. Under various of these laws and regulations, a current or 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 present at, or 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, the generation and storage of hazardous waste, or that 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, hazardous waste 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, hazardous waste, or other hazardous or toxic substances, air emissions, water discharges, hazardous waste generation, 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. In addition, as an owner or operator of real estate, we can be liable under common law to third parties for damages and injuries resulting from the presence or release of petroleum products, hazardous waste, or other hazardous or toxic substances present at, or emanating from, the real estate. 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 under common law 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
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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, 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.
Item 1A. Risk Factors.
There are many factors that may adversely affect us, 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."
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Risks Related to Our Business and Properties
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 tenant bankruptcies; 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 many 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 and supply chain 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 or supply chain 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 supply chain disruption or 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 the location of the leased property, 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.
Periodically, we have experienced, and we may experience in the future, a decline in the fair value of our real estate assets, resulting in impairment charges that 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. When such a determination is made, we 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, 2021 (based on annualized base rent): Texas (13.6%), Ohio (6.9%), Georgia (6.8%), Florida (6.6%) and Wisconsin (4.6%). We are susceptible to adverse developments in the economic or regulatory environments of the geographic areas in which we own substantial assets (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, 2021, leases representing approximately 20.3% 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 (8.6% of annualized base rent), health and fitness (4.6% of annualized base rent), entertainment (4.5% of annualized base rent), movie theaters (1.7% of annualized base rent) and home furnishings (0.8% of annualized base rent). Accordingly, to the extent the pandemic measures intended to mitigate its spread or changed consumer preferences 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, 2021, our five largest tenants contributed 11.3% of our annualized base rent, and our ten largest tenants contributed 19.7% 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. 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 financial information to us periodically or, in some instances, at our request. As of December 31, 2021, leases contributing 98.5% of our annualized base rent required tenants to provide us with specified unit-level financial information and leases contributing 98.6% of our annualized base rent required tenants to provide us with corporate-level 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 to a significant degree 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 and leasing vacant space. As of December 31, 2021, our occupancy was 99.9% and leases representing approximately 0.2% of our annualized base rent as of such date will expire prior to 2023. 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. As of December 31, 2021, the largest industries in our portfolio were restaurants (including quick service and casual and family dining), early childhood education, medical and dental services, car washes, automotive services, convenience stores, health and fitness and entertainment (including movie theaters) . As of December 31, 2021, tenants operating in those industries represented approximately 84.7% of our annualized base rent. EquipmentShare, Captain D's, Applebee's, WhiteWater Express Car Wash, Mister Car Wash, Spare Time, The Nest Schools, Circle K, Festival Foods and AMC represent the largest concepts in our portfolio. These types of businesses were 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. While restrictions have generally been lifted and many of our tenants' businesses have generally recovered from pandemic-induced declines, it is unclear if restrictions will be reinstituted in the future. 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
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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.
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, 2021, leases contributing 98.6% 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 1.6% of base rent. Although many of our rent escalators increase rent at a fixed amount on fixed dates, approximately 3.7% 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. Conversely, during periods of relatively high inflation, fixed rate rent increases may be lower than the rate of inflation, resulting in a deterioration of the real return on our assets.
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 and meet other lease obligations, such as paying property taxes and insurance and maintenance costs.
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, 2021, tenants contributing 13.3% 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
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unable to re-lease a property whose lease is terminated or rejected in a bankruptcy proceeding on comparable terms (or at all) or to sell any such property. 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 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 loans we hold could lead to losses.
We make mortgage and other loans, which may be unsecured, to extend financing to tenants at certain of 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.
Growth through property acquisitions is a primary element of our strategy. 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 finance and 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, lower 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
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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.
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 external third-party sources to fund a portion of our capital needs. Our access to debt and equity capital, and the cost thereof, depends, on many factors, including general market conditions, interest rates, inflation, the market's perception of our growth potential, our 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 ability to operate our business and grow our portfolio depend, in large part, upon the efforts of our senior executive team. Several of our executives 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, relationships that these individuals have with financial institutions and existing and prospective tenants are important to our growth and the success of our business. The loss of services of one or more members of our senior 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
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weaken our relationships with lenders, business partners, existing and prospective tenants and industry personnel, which could materially and adversely affect us.
The COVID-19 pandemic has materially and adversely impacted our business and could further affect our financial condition, results of operations, cash flows and liquidity, prospects, access to and costs of 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 and its resurgences continue to rapidly evolve, and many states and cities, including many of those where we own properties, have instituted and 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 severely impaired the ability of many of our tenants to operate their businesses and meet their obligations to us, including rental payment obligations. While restrictions have generally been lifted and many of our tenants’ businesses have generally recovered from pandemic-induced declines, it is unclear if restrictions will be reinstituted, in whole or in part, in response to future surges or waves of the pandemic, including the Delta and Omicron variants.
Since the onset of the pandemic, we have granted several of our tenants rent deferrals or other concessions. 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 specified period, 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. Our tenants have generally been performing under their deferral agreements, however, 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 would become more likely if the COVID-19 pandemic intensifies with a new variant, such as Omicron, 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 and equity 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, term loans and notes, 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.
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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.
Risks Related to Environmental and Compliance Matters and Climate Change
The costs of compliance with or liabilities related to environmental laws may materially and adversely affect us.
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
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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.
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. Climate change may impact weather patterns, the occurrence of significant weather events and rising sea levels, 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, 2021, we had $1.2 billion 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, 2021, we had $1.2 billion of indebtedness outstanding. This indebtedness consisted of $144.0 million of borrowings under our Revolving Credit Facility, $630.0 million of combined borrowings under the April 2019 Term Loan and the November 2019 Term Loan and $400.0 million outstanding principal amount of 2031 Notes. 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, 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.
Though we currently do not have any secured debt, we have raised debt through senior unsecured debt securities and secured indebtedness. In the future, we may choose to raise debt through secured or unsecured financings. We have generally used the proceeds from these financings to repay debt and fund real estate acquisitions. No assurance can be given that we will have access to the capital markets in the future at times and on terms that are acceptable to us, whether to refinance existing debt or to raise additional debt capital.
A downgrade in our credit ratings could have a material adverse effect on our business and financial condition.
The credit ratings assigned to us and our debt, which are subject to ongoing evaluation by the rating agencies who have published them, could change based upon, among other things, our historical and projected business, prospects, liquidity, results of operations and financial condition, or the real estate industry generally. If any credit rating agency downgrades or lowers our credit rating, places any such rating on a so-called “watch list” for a possible downgrading or lowering or otherwise publishes a negative outlook for that rating, it could materially adversely affect the market price of our debt securities and possibly our common stock, and generally the cost and availability of our capital.
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, 2021, 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.
LIBOR is being discontinued as a floating rate benchmark; Secured Overnight Financing Rate (“SOFR”) is expected to replace LIBOR as the principal floating rate benchmark; the LIBOR discontinuation has affected and will continue to affect financial markets generally and may also affect our operations specifically.
The LIBOR discontinuation has affected and will continue to affect financial markets generally.
LIBOR is being discontinued as a floating rate benchmark. The date of discontinuation will vary depending on the LIBOR currency and tenor. LIBOR has been the principal floating rate benchmark in the financial markets, and its discontinuation has affected and will continue to affect the financial markets generally and may also affect our operations specifically.
The UK Financial Conduct Authority (the “FCA”), which is the regulator of the LIBOR administrator, has announced that, after specified dates, LIBOR settings will cease to be provided by any administrator or will no longer be representative. Those dates are: (i) June 30, 2023, in the case of the principal U.S. dollar LIBOR tenors
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(overnight and one-, three-, six- and 12-month); and (ii) December 31, 2021, in all other cases (i.e., one week and two month U.S. dollar LIBOR and all tenors of non-U.S. dollar LIBOR).
Accordingly, many existing LIBOR obligations will transition to another benchmark after June 30, 2023 or, in some cases, after December 31, 2021. However, those transition dates may occur earlier (including as a result of the particular contractual terms for a given contract). For some existing LIBOR-based obligations, the contractual consequences of the discontinuation of LIBOR may not be clear.
The FCA and certain U.S. regulators have stated that, despite expected publication of U.S. dollar LIBOR through June 30, 2023, no new contracts using U.S. dollar LIBOR should be entered into after December 31, 2021. Regulators have also stated that, for certain purposes, market participants should transition away from U.S. dollar LIBOR sooner. Regulatory authorities and legislative bodies have taken other actions related to the LIBOR discontinuation and are expected to continue to do so. There is no assurance as to the consequences of any such statements and other actions.
Although the foregoing reflects the likely timing of the LIBOR discontinuation and certain consequences, there is no assurance that LIBOR, of any particular currency or tenor, will continue to be published until any particular date or in any particular form, and there is no assurance regarding the consequences of the LIBOR discontinuation.
SOFR is expected to replace LIBOR as the principal floating rate benchmark in the financial markets.
In the United States, there have been efforts to identify alternative reference interest rates for U.S. dollar LIBOR. The cash markets have generally coalesced around recommendations from the Alternative Reference Rates Committee (the “ARRC”), which was convened by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York (“FRBNY”). The ARRC has recommended that U.S. dollar LIBOR be replaced by rates based on the Secured Overnight Financing Rate (“SOFR”) plus, in the case of existing LIBOR contracts and obligations, a spread adjustment. The derivatives markets are also expected to use SOFR-based rates to replace U.S. dollar LIBOR. For purposes of the following discussion, the term “LIBOR” refers solely to U.S. dollar LIBOR.
SOFR has a limited history.
SOFR has a limited history, having been first published in April 2018. The future performance of SOFR, and SOFR-based reference rates, cannot be predicted based on SOFR’s history or otherwise. Future levels of SOFR may bear little or no relation to historical levels of SOFR, LIBOR or other rates.
There are important differences between SOFR and LIBOR; various SOFR-based rates are expected to develop.
SOFR-based rates will differ from LIBOR, and the differences may be material. SOFR is intended to be a broad measure of the cost of borrowing funds overnight in transactions that are collateralized by U.S. Treasury securities. SOFR is calculated by the FRBNY based on transaction-level repo data collected from various sources. For each trading day, SOFR is calculated as a volume-weighted median rate derived from such data.
Because SOFR is a financing rate based on overnight secured funding transactions, it differs fundamentally from LIBOR. LIBOR is intended to be an unsecured rate that represents interbank funding costs for different short-term tenors. It is a forward-looking rate reflecting expectations regarding interest rates for those tenors. Thus, LIBOR is intended to be sensitive to bank credit risk and to short-term interest rate risk. In contrast, SOFR is a secured overnight rate reflecting the credit of U.S. Treasury securities as collateral. Thus, it is intended to be insensitive to credit risk and to risks related to interest rates other than overnight rates. SOFR has been more volatile than other benchmark or market rates, such as three-month LIBOR, during certain periods.
It is expected that more than one SOFR-based rate will be used in the financial markets. Like LIBOR, some SOFR-based rates will be forward-looking term rates; other SOFR-based rates will be intended to resemble rates for term structures through their use of averaging mechanisms applied to rates from overnight transactions, as in the case of “simple average” or “compounded average” SOFR.
Different kinds of SOFR-based rates will result in different interest rates. Mismatches between SOFR-based rates, and between SOFR-based rates and other rates, may cause economic inefficiencies, particularly if market participants seek to hedge one kind of SOFR-based rate by entering into hedge transactions based on another SOFR-based rate or another rate.
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For these reasons, among others, there is no assurance that SOFR, or rates derived from SOFR, will perform in the same or a similar way as LIBOR would have performed at any time, and there is no assurance that SOFR-based rates will be a suitable substitute for LIBOR.
Various non-SOFR-based rates may also develop, which may create various risks.
There are non-LIBOR forward-looking floating rates that are not based on SOFR and that may be considered by participants in the financial markets as LIBOR alternatives. Unlike forward-looking SOFR-based term rates, such rates reflect a bank credit spread component. It is not clear how such non-SOFR rates, and other non-SOFR rates, will develop and to what extent they will be used. Concerns about market depth and stability could affect the development of non-SOFR-based term rates, and such rates may create various risks, whether or not similar to the risks relating to SOFR.
There is uncertainty as to how floating rate obligations will develop as result of the replacement of LIBOR by other floating rates and as to the effects on us.
Non-LIBOR floating rate obligations, including SOFR-based obligations, may have returns and values that fluctuate more than those of floating rate obligations that are based on LIBOR or other rates. Also, because SOFR and some alternative floating rates are relatively new market indexes, markets for certain non-LIBOR obligations may never develop or may not be liquid. Market terms for non-LIBOR floating rate obligations, such as the spread over the index reflected in interest rate provisions, may evolve over time, and prices of non-LIBOR floating rate obligations may be different depending on when they are issued and changing views about correct spread levels.
Resulting changes in the financial markets may adversely affect financial markets generally and may also adversely affect our operations specifically, particularly as financial markets transition away from LIBOR.
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 incur additional indebtedness, encumber assets and 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 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
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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 transaction 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.
Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees and could discourage lawsuits against us and our directors, officers and employees.
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 Maryland General Corporation Law (“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 other action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine. These choice of forum provisions will not apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act, or any other claim for which federal courts have exclusive jurisdiction.
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These exclusive forum provisions may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors, officers, or employees, which may discourage such lawsuits against us and our directors, officers, and employees. Alternatively, if a court were to find the choice of forum provisions contained in our bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition, and operating results.
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.
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 requires 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
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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 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 our stockholders 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
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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 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.
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.
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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 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.
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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.
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.
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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 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. 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, 2021, we had 124,649,053 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
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to sell an asset at a time, or on terms, that would be favorable absent such restrictions. As of December 31, 2021, 1,692,266 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. 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 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, 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.
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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.
Item 2. Properties.
Our Real Estate Investment Portfolio
As of December 31, 2021, we had a portfolio of 1,451 properties, inclusive of 126 properties that secure our investments in mortgage loans receivable, that was diversified by tenant, industry and geography and had annualized base rent of $242.9 million. Our 311 tenants operate 433 different concepts in 16 industries across 46 states. None of our tenants represented more than 3.3% of our annualized base rent at December 31, 2021 and our top ten largest tenants represented 19.7% of our annualized base rent as of that date.
Diversification by Tenant
As set forth below, as of December 31, 2021, our top ten tenants included ten different concepts. The following table details information about our tenants and the related concepts they operate as of December 31, 2021 (dollars in thousands):
Tenant (1)
Concept
Number of
Properties (2)
Annualized
Base Rent 		% of
Annualized
Base Rent
Equipmentshare.com Inc.EquipmentShare26 $7,898 3.3 %
Captain D's, LLCCaptain D's75 5,269 2.2 %
Whitewater Holding Company, LLCWhiteWater Express Car Wash16 4,892 2.0 %
Cadence Education, LLCVarious23 4,844 2.0 %
Mammoth Holdings, LLCVarious17 4,455 1.8 %
Car Wash Partners, Inc.Mister Car Wash13 4,393 1.8 %
Bowl New England, Inc.Spare Time6 4,367 1.8 %
The Nest Schools, Inc.The Nest Schools17 3,952 1.6 %
GB Auto Service, Inc.Various19 3,862 1.6 %
Mac's Convenience Stores, LLC(3)
Circle K34 3,797 1.6 %
Top 10 Subtotal246 47,729 19.7 %
Other 1,204 195,146 80.3 %
Total1,450 $242,875 100.0 %
 __________________________________________
(1)Represents tenant or guarantor.
(2)Excludes one vacant property.
(3)Includes properties leased to a subsidiary of Alimentation Couche Tard Inc.
As of December 31, 2021, our five largest tenants, who contributed 11.3% of our annualized base rent, had a rent coverage ratio of 6.8x, and our ten largest tenants, who contributed 19.7% of our annualized base rent, had a rent coverage ratio of 5.1x.
As of December 31, 2021, 94.5% 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,
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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.
Diversification by Concept
Our tenants operate their businesses through 433 concepts (i.e., generally brands). The following table provides information about the top ten concepts in our portfolio as of December 31, 2021 (dollars in thousands): 
ConceptType of
Business		Annualized
Base Rent		% of
Annualized
Base Rent
Number of
Properties (1)
Building
(Sq. Ft.) (1)
EquipmentShareService$7,898 3.3 %26 491,658 
Captain D'sService6,371 2.6 %87 225,254 
Applebee'sService5,396 2.2 %37 183,214 
WhiteWater Express Car WashService4,892 2.0 %16 77,746 
Mister Car WashService4,393 1.8 %13 54,621 
Spare TimeExperience4,367 1.8 %6 272,979 
The Nest SchoolsService3,952 1.6 %17 217,282 
Circle KService3,875 1.6 %35 130,975 
Festival FoodsRetail3,671 1.5 %4 310,871 
AMCExperience3,539 1.5 %5 240,672 
Top 10 Subtotal48,354 19.9 %246 2,205,272 
Other194,521 80.1 %1,204 11,264,176 
Total$242,875 100.0 %1,450 13,469,448 
 ______________________________________
(1)Excludes one vacant property.
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Diversification by Industry
Our tenants' business concepts are diversified across various industries. The following table summarizes those industries as of December 31, 2021 (dollars in thousands except per sq. ft amounts):
Tenant IndustryType of
Business		Annualized
Base Rent		% of
Annualized
Base Rent
Number of
Properties (1)
Building
(Sq. Ft.) (1)
Rent Per
Sq. Ft. (2)
Early Childhood EducationService$35,514 14.6 %159 1,681,487 $20.84 
Quick ServiceService30,094 12.4 %362 993,825 30.15 
Medical / DentalService29,008 11.9 %174 1,199,502 24.25 
Car WashesService26,744 11.0 %94 456,057 57.55 
Automotive ServiceService21,457 8.8 %160 1,085,290 19.77 
Convenience StoresService15,580 6.4 %100 578,844 26.92 
Casual DiningService15,310 6.3 %134 524,676 29.18 
Equipment Rental and SalesService9,816 4.0 %41 699,047 13.82 
Family DiningService5,663 2.3 %37 220,106 25.73 
Other ServicesService5,306 2.2 %24 292,129 18.79 
Pet Care ServicesService5,361 2.2 %48 395,905 15.66 
Service Subtotal 199,853 82.3 %1,333 8,126,868 24.64 
Health and FitnessExperience11,225 4.6 %27 1,087,279 10.38 
EntertainmentExperience10,935 4.5 %25 800,922 12.97 
Movie TheatresExperience4,170 1.7 %6 293,206 14.22 
Experience Subtotal26,330 10.8 %58 2,181,407 11.85 
GroceryRetail 8,637 3.6 %27 1,272,431 6.79 
Home FurnishingsRetail 2,048 0.8 %4 217,339 9.42 
Retail Subtotal10,685 4.4 %31 1,489,770 7.17 
Building MaterialsIndustrial3,801 1.6 %23 1,257,017 3.02 
Other IndustrialIndustrial2,206 0.9 %5 414,386 5.32 
Industrial Subtotal6,007 2.5 %28 1,671,403 3.59 
Total/Weighted Average$242,875 100.0 %1,450 13,469,448 $17.99 
 ____________________________________________________
(1)Excludes one vacant property.
(2)Excludes properties with no annualized base rent and properties under construction.
As of December 31, 2021, our tenants operating service-oriented businesses had a weighted average rent coverage ratio of 3.7x, our tenants operating experience-based businesses had a weighted average rent coverage ratio of 1.7x, our tenants operating retail businesses had a weighted average rent coverage ratio of 3.5x and our tenants operating other types of businesses had a weighted average rent coverage ratio of 16.5x.
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Diversification by Geography
Our 1,451 property locations are spread across 46 states. The following table details the geographical locations of our properties as of December 31, 2021 (dollars in thousands):
StateAnnualized Base Rent% of Annualized Base RentNumber of PropertiesBuilding (Sq. Ft.)
Texas$33,048 13.6 %177 1,694,868 
Ohio16,838 6.9 %101 977,158 
Georgia16,590 6.8 %109 629,926 
Florida15,983 6.6 %69 736,151 
Wisconsin11,280 4.6 %49 685,402 
North Carolina9,583 4.0 %52 581,450 
Arkansas8,393 3.5 %60 470,809 
Michigan8,278 3.4 %52 903,768 
Arizona7,551 3.1 %43 384,058 
Alabama7,358 3.0 %50 458,898 
Missouri7,015 2.9 %46 644,295 
Oklahoma6,335 2.6 %42 402,981 
Massachusetts6,132 2.5 %29 406,159 
Minnesota6,109 2.5 %35 464,052 
Illinois5,666 2.3 %33 240,344 
Colorado5,410 2.2 %26 236,068 
Tennessee5,349 2.2 %44 215,332 
South Carolina5,105 2.1 %32 341,855 
Pennsylvania4,760 2.0 %29 241,291 
New York4,578 1.9 %39 185,923 
Mississippi4,260 1.8 %40 150,860 
Iowa4,055 1.7 %25 169,764 
California3,712 1.5 %21 203,658 
Kentucky3,710 1.5 %35 190,330 
New Jersey3,575 1.5 %18 118,613 
New Mexico3,246 1.3 %21 126,699 
Kansas3,098 1.3 %21 154,069 
Connecticut2,978 1.2 %13 217,985 
Indiana2,796 1.2 %23 189,779 
Virginia2,558 1.1 %12 203,636 
Nevada2,409 1.0 %8 80,358 
South Dakota2,379 1.0 %9 124,912 
Maryland1,948 0.8 %8 68,324 
Louisiana1,890 0.8 %11 80,537 
West Virginia1,777 0.7 %25 77,083 
Washington1,673 0.7 %11 87,243 
Oregon1,116 0.5 %6 124,931 
Nebraska958 0.4 %10 32,985 
Utah933 0.4 %2 67,659 
New Hampshire621 0.3 %7 52,972 
Maine500 0.2 %1 32,115 
Wyoming436 0.2 %2 14,001 
Idaho393 0.2 %1 35,433 
Alaska242 0.1 %2 6,630 
Rhode Island163 0.1 %1 5,800 
Vermont88 — %1 2,674 
Total$242,875 100.0 %1,451 13,519,838 
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Lease Expirations
As of December 31, 2021, the weighted average remaining term of our leases was 14.0 years (based on annualized base rent), with only 5.4% of our annualized base rent attributable to leases expiring prior to January 1, 2027. The following table sets forth our lease expirations for leases in place as of December 31, 2021 (dollars in thousands): 
Lease Expiration Year (1)
Annualized
Base Rent		% of
Annualized
Base Rent
Number of
Properties (2)
Weighted
Average Rent
Coverage Ratio (3)
2022$490 0.2 %5 3.0x
20231,489 0.6 %16 2.8x
20244,847 2.0 %47 4.7x
20252,335 1.0 %20 2.0x
20263,914 1.6 %26 2.8x
20274,511 1.9 %28 2.7x
20284,342 1.8 %15 1.7x
20295,698 2.3 %78 4.3x
20304,356 1.8 %48 4.0x
203114,839 6.1 %88 2.8x
20328,935 3.7 %33 5.4x
20338,174 3.4 %27 3.3x
203426,764 11.0 %207 7.1x
203514,101 5.8 %96 3.0x
203639,627 16.3 %186 3.0x
20379,486 3.9 %58 7.8x
203812,743 5.2 %77 2.0x
203922,261 9.2 %121 3.7x
204031,888 13.1 %160 2.7x
204121,032 8.7 %113 2.5x
Thereafter1,043 0.4 %1 3.1x
Total/Weighted Average$242,875 100.0 %1,450 3.7x
 _______________________________________________________________
(1)Expiration year of contracts in place as of December 31, 2021, excluding any tenant option renewal periods that have not been exercised.
(2)Excludes one vacant property.
(3)Weighted by annualized base rent.
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.
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Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
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 11, 2022, there were 158 holders of record of the 125,605,199 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.
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 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 69.4% of the distributions paid for the 2021 tax year represented taxable income and 30.6% represented a return of capital.
Issuer Purchases of Equity Securities
During the year ended December 31, 2021, 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, 2021, 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.
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Essential Properties Realty Trust, Inc.
 eprt-20211231_g1.jpg
 
Ticker / Index6/21/20186/30/201812/31/20186/30/201912/31/20196/30/202012/31/20206/30/202112/31/2021
EPRT100.0099.27103.16153.26193.63119.31175.07228.11245.86
S&P 500100.0098.8692.65112.12126.83121.72147.49168.77187.69
FNER100.00101.3594.04110.07116.5797.92105.02127.84146.21
 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. Reserved.
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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 invest in 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, 2021, 93.1% of our $242.9 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, 2021 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 were organized on January 12, 2018 as a Maryland corporation. We have elected to be taxed as a 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 initial public offering 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 significantly since commencing our operations and investment activities in June 2016. As of December 31, 2021, we had a portfolio of 1,451 properties (inclusive of 126 properties which secure our investments in mortgage loans receivable) that was diversified by tenant, industry, concept and geography, had annualized base rent of $242.9 million and was 99.9% occupied. Our portfolio is built based on the following core investment attributes:
Diversification. As of December 31, 2021, our portfolio was 99.9% occupied by 311 tenants operating 433 different brands, or concepts, in 16 industries across 46 states, with none of our tenants contributing more than 3.3% of our annualized base rent. Our goal is that, over time, no more than 5% 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, 2021, our leases had a weighted average remaining lease term of 14.0 years (based on annualized base rent), with 5.4% of our annualized base rent attributable to leases expiring prior to January 1, 2027. 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 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, 2021, approximately 89.1% of our investments were sale-leaseback transactions.
Significant Use of Master Leases. As of December 31, 2021, 61.3% of our annualized base rent was attributable to master leases.
Contractual Base Rent Escalation. As of December 31, 2021, 98.6% of our leases (based on annualized base rent) provided for increases in future base rent at a weighted average rate of 1.6% per year.
Smaller, Low Basis Single-Tenant Properties. We generally invest in freestanding “small-box” single- tenant properties. As of December 31, 2021, our average investment per property was $2.3 million (which equals
46

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 allow us to grow our portfolio without concentrating a large amount of capital in individual properties and limit our exposure to events that may adversely affect a particular property. Additionally, we believe that many of our properties are generally fungible and appropriate for multiple commercial uses, which reduces the risk that a particular property may become obsolete and enhances our ability to sell a property if we choose to do so.
Healthy Rent Coverage Ratio and Tenant Financial Reporting. As of December 31, 2021, our portfolio’s weighted average rent coverage ratio was 3.7x, and 98.5% of our leases (based on annualized base rent) obligate the tenant to periodically provide us with specified unit-level financial reporting.
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:
Carefully Constructed Portfolio of Recently Acquired Properties Leased to Service-Oriented or Experience-Based Tenants. We have strategically constructed a portfolio that is diversified by tenant, industry 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 and predictable base of revenue from which to grow our portfolio. As of December 31, 2021, we had a portfolio of 1,451 properties, with annualized base rent of $242.9 million, which was purposefully selected by our management team in accordance with our focused and disciplined investment strategy. Our portfolio is diversified with 311 tenants operating 433 different concepts across 46 states and in 16 distinct industries. None of our tenants contributed more than 3.3% of our annualized base rent as of December 31, 2021, and our strategy targets a scaled portfolio that, over time, derives no more than 5% of our annualized base rent from any single tenant or more than 1% from any single property.
•We focus on investing in properties leased to tenants operating 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, which we believe are generally more insulated from e-commerce pressure than many others. As of December 31, 2021, 93.1% of our annualized base rent was attributable to tenants operating service-oriented and experience-based businesses.
•We believe that our portfolio’s diversity and our 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.
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 unrated 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 lease agreements 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 to source additional investments and become the capital provider of choice as our tenants’ businesses grow and their real estate needs increase.
Disciplined Underwriting Leading to Strong Portfolio Characteristics. We generally seek to invest in single assets or portfolios of assets through transactions which range in aggregate purchase price from $2 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.
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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, 2021, exclusive of our initial investment in a portfolio of 262 net leased properties, consisting primarily of restaurants, that we acquired on June 16, 2016 as part of the liquidation of General Electric Capital Corporation for an aggregate purchase price of $279.8 million (including transaction costs) (the "Initial Portfolio"), 85.2% of our portfolio’s annualized base rent was attributable to internally originated sale-leaseback transactions and 86.2% 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.
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. 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.
Extensive Tenant Financial Reporting Supports Active Asset Management. We seek to enter into lease agreements 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, actively evaluate credit risk, negotiate lease renewals and proactively manage our portfolio to protect stockholder value. As of December 31, 2021, leases contributing 98.5% of our annualized base rent required tenants to provide us with specified unit-level financial information, and leases contributing 98.6% of our annualized base rent required tenants to provide us with corporate-level financial reporting.
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.
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.
•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 (1) derive no more than 5% of its annualized base rent
48

from any single tenant or more than 1% of its annualized base rent from any single property, (2) be primarily leased to tenants operating in service-oriented or experience- based businesses and (3) 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, which is a model for predicting private company defaults based on Moody’s Analytics Credit Research Database, to proactively detect credit deterioration. 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. 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, 2021, exclusive of the Initial Portfolio, 85.2% of our portfolio’s annualized base rent was attributable to internally originated sale- leaseback transactions and 86.2% 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 leverage 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. As of December 31, 2021, exclusive of the Initial Portfolio, approximately 41.5% of our investments were sourced from operators and tenants who had previously consummated a transaction involving a member of our management team. We believe our senior management team’s reputation, in-depth market knowledge and extensive network of longstanding relationships in the net lease industry provide us access to an ongoing pipeline of attractive investment opportunities.
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 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 investments 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-
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net leases that provide for periodic contractual rent escalations. As of December 31, 2021, our leases had a weighted average remaining lease term of 14.0 years (based on annualized base rent), with only 5.4% of our annualized base rent attributable to leases expiring prior to January 1, 2027, and 98.6% of our leases (based on annualized base rent) provided for increases in future base rent at a weighted average of 1.6% 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. We target a level of net debt that, over time, is generally less than six times our annualized adjusted EBITDAre (as defined in "Non-GAAP Financial Measures" below). We have access to multiple sources of debt capital, including the investment grade-rated, asset-backed bond market, through our Master Trust Funding Program, the investment grade-rated unsecured bond market and bank debt, through our revolving credit facility and our unsecured term loan facilities.
Historical Investment and Disposition Activity
The following table sets forth select information about our quarterly investment activity for the quarters ended March 31, 2020 through December 31, 2021 (dollars in thousands):
Three Months Ended
March 31, 2021June 30, 2021September 30, 2021December 31, 2021
Investment volume$197,816 $223,186 $230,755 $322,203 
Number of transactions 22343155
Property count 74948596
Avg. investment per unit$2,650 $2,354 $2,676 $3,230 
Cash cap rates 1
7.0%
7.1%
7.0%
6.9%
GAAP cap rates 2
7.9%
7.8%
7.9%
7.8%
Master lease percentage 3,4
79%
83%
80%
59%
Sale-leaseback percentage 3,5
85%
88%
84%
96%
Percentage of financial reporting 3
100%
100%
100%
98%
Rent coverage ratio3.0x2.7x2.8x3.0x
Lease term (in years)16.113.516.416.3
Three Months Ended
March 31, 2020June 30, 2020September 30, 2020December 31, 2020
Investment volume$167,490 $42,369 $148,877 $244,078 
Number of transactions 32111933
Property count 631350108
Avg. investment per unit$2,551 $2,870 $2,866 $2,218 
Cash cap rates 1
7.1%
7.4%
7.1%
7.1%
GAAP cap rates 2
8.0%
8.1%
7.9%
7.7%
Master lease percentage 3,4
54%
68%
79%
89%
Sale-leaseback percentage 3,5
88%
100%
92%
88%
Percentage of financial reporting 3
100%
100%
100%
100%
Rent coverage ratio
2.7x
4.3x2.8x3.6x
Lease term (in years)
16.1
16.717.616.3
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(1)    Cash annualized base rent for the first full month after the investment divided by the gross investment in the property plus transaction costs.
(2)    GAAP rent and interest income for the first twelve months after the investment divided by the gross investment in the property plus transaction costs.
(3)    As a percentage of annualized base rent.
(4)    Includes investments in mortgage loans receivable collateralized by more than one property.
(5)    Includes investments in mortgage loans receivable made in support of sale-leaseback transactions.
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The following table sets forth select information about our quarterly disposition activity for the quarters ended December 31, 2021 through March 31, 2020 (dollars in thousands):
Three Months Ended
March 31, 2021June 30, 2021September 30, 2021December 31, 2021
Disposition volume1
$25,197 $19,578 $10,089 $4,466 
Cash cap rate on leased assets 2
7.1%
7.1 %6.5 %6.0 %
Leased properties sold 3
15 6 11 2 
Vacant properties sold 3
1 1 — — 
Three Months Ended
March 31, 2020June 30, 2020September 30, 2020December 31, 2020
Disposition volume1
$19,571 $3,420 $19,595 $39,042 
Cash cap rate on leased assets 2
7.1%
6.8 %7.0 %7.4 %
Leased properties sold 3
10 3 11 21 
Vacant properties sold 3
— — 3 2 
_____________________________________
(1)     Net of transaction costs.
(2)     Annualized base rent at time of sale divided by the gross sale price (excluding transaction costs) for the property.
(3)     Property count excludes dispositions of undeveloped land parcels or dispositions where only a portion of the owned parcel was sold.
COVID-19 Pandemic Discussion
On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus (“COVID-19”) a pandemic. For much of 2020, the global spread of COVID-19 created significant uncertainty and economic disruption, which has appears to have subsided over the course of 2021, primarily due to the widespread availability of multiple vaccines. However, the continuing impact of the COVID-19 pandemic and its duration are unclear, and variants of the virus, such as Delta and Omicron, and vaccine hesitancy in certain areas could erode the progress that has been made against the virus, or exacerbate or prolong the impact of the pandemic. Conditions similar to those experienced in 2020, at the height of the pandemic, could return should the vaccinations prove ineffective against future variants of the virus. Should the impact of a variant of the virus cause conditions to occur that are similar to those experienced in 2020, uncertainty, disruption and instability in the macro-economic environment could occur and government restrictions could force our tenants' businesses to shut-down or limit their operations, which would adversely impact our operations, our financial condition, our liquidity and our prospects. Further, the extent and duration of any such conditions cannot be predicted with any reasonable certainty.
We continue to monitor the ongoing developments surrounding COVID-19 on all aspects of our business, including our portfolio and the creditworthiness of our tenants. In 2020, we entered into deferral agreements with certain of our tenants and recognized contractual base rent related to these agreements as a component of rental revenue in our consolidated statements of operations for 2020. These rent deferrals were negotiated on a tenant-by-tenant basis, and, in general, allowed a tenant to defer all or a portion of their rent for a portion of 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. While our tenants' businesses and operations have largely returned to pre-pandemic levels, any new developments that cause a deterioration, or further deterioration, in our tenants’ ability to operate their businesses, or delays in the supply of products or services to our tenants from vendors required to operate their businesses, could 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. The likelihood of this would increase if variants of COVID-19, such as Delta and Omicron, intensify or persist for a prolonged period. Additionally, whether the pandemic has caused a material secular change in consumer behavior is not yet determinable or evident as it pertains to the patronage of service-based and/or experience-based businesses, but should changes occur that are material, many of our tenants would be adversely affected and their ability to meet their obligations to us could be further impaired. During the deferral period, the deferral agreements reduced our cash flow from operations, reduced our cash available for distribution and adversely affected our ability to make cash distributions to common stockholders. If tenants are unable to repay their deferred rent, we will not receive cash in the future in accordance with our expectations.
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Liquidity and Capital Resources
As of December 31, 2021, we had $3.2 billion of net investments in our investment portfolio, consisting of investments in 1,451 properties (inclusive of 126 properties which secure our investments in mortgage loans receivable), with annualized base rent of $242.9 million. Substantially all of our cash from operations is generated by our investment portfolio.
The liquidity requirements for operating our Company consist primarily of funding our investment activities, servicing our outstanding indebtedness and paying our general and administrative expenses. The occupancy level of our portfolio is high (99.9% as of December 31, 2021) and, because substantially all of our leases are triple-net (with our tenants generally responsible for the maintenance, insurance and property taxes associated with the leased properties), our liquidity requirements are not significantly impacted by property costs. When a property becomes vacant because the tenant has vacated the property due to default or at the expiration of the lease term without a renewal or new lease being executed, 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 new tenant or to sell the property. As of December 31, 2021, only one of our properties was vacant, significantly less than 1% of our portfolio, and all remaining properties were subject to a lease. 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 invest in 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 40 properties where we have agreed to provide construction financing or reimburse the tenant for certain development, construction and renovation costs in exchange for contractual payments of interest or increased rent that generally increases in proportion with our level of funding. As of December 31, 2021, we agreed to provide construction financing or reimburse the tenant for certain development, construction and renovation costs in an aggregate amount of $116.9 million, and, as of such date, we funded $52.4 million of this commitment. We expect to fund the remainder of this commitment by December 31, 2022.
Additionally, as of February 11, 2022, we were under contract to acquire 8 properties with an aggregate purchase price of $15.0 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 2021 ATM Program, which has $161.5 million remaining under the program.
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 Facility, future debt financings, sales of common stock under our ATM Program, and proceeds from the sale of selected properties in our portfolio. 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 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 future investments in single tenant properties and thereby grow our cash flows.
An additional liquidity need is funding the required level of distributions, generally 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding any net capital gain), that are among the requirements for us to continue to qualify for taxation as a REIT. During the year ended December 31, 2021, our board of directors declared total cash distributions of $1.00 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, 2021, we paid $112.3 million of distributions to common stockholders and OP Unit holders,
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and as of December 31, 2021, we recorded $32.6 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 needs are 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 for our long-term debt, we seek to "lock in," for as long as is economically feasible, the expected positive spread 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 cash flows and 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 cash and cash equivalents and restricted cash available for future investment) that is less than six times our annualized adjusted EBITDAre is prudent for a real estate company like ours.
As of December 31, 2021, 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 5.6 years. In February 2022, we amended our revolving credit facility to, among other things, extend its term. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Description of Certain Debt." 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.  
Future sources of debt capital may include issuances of notes in the public market, 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 our Revolving Credit Facility. We believe that the cash generated by our operations, together with our cash and cash equivalents at December 31, 2021, 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.
Supplemental Guarantor Information
In March 2020, the SEC adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01 to simplify disclosure requirements related to certain registered securities. The rule became effective January 4, 2021. The Company and the Operating Partnership have filed a registration statement on Form S-3 with the SEC registering, among other securities, debt securities of the Operating Partnership, which, unless otherwise specified, will be fully and unconditionally guaranteed by the Company. At December 31, 2021, the Operating Partnership had issued and outstanding $400.0 million of 2031 Notes. The obligations of the Operating Partnership under the 2031 Notes are guaranteed on a senior basis by the Company. The guarantee is full and unconditional, and the Operating Partnership is a consolidated subsidiary of the Company.
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As a result of the amendments to Rule 3-10 of Regulation S-X, subsidiary issuers of obligations guaranteed by the parent are not required to provide separate financial statements, provided that the subsidiary obligor is consolidated into the parent company’s consolidated financial statements, the parent guarantee is “full and unconditional” and, subject to certain exceptions as set forth below, the alternative disclosure required by Rule 13-01 is provided, which includes narrative disclosure and summarized financial information. Accordingly, separate consolidated financial statements of the Operating Partnership have not been presented. Furthermore, as permitted under Rule 13-01(a)(4)(vi), the Company has excluded the summarized financial information for the Operating Partnership as the assets, liabilities and results of operations of the Company and the Operating Partnership are not materially different than the corresponding amounts presented in the consolidated financial statements of the Company, and management believes such summarized financial information would be repetitive and not provide incremental value to investors.
Description of Certain Debt
The following table summarizes our outstanding indebtedness as of December 31, 2021 and 2020:
Principal Outstanding
Weighted Average Interest Rate (1)
(in thousands)Maturity DateDecember 31, 2021December 31, 2020December 31, 2021December 31, 2020
Unsecured term loans:
April 2019 Term Loan April 2024$200,000 $200,000 3.3%3.3%
November 2019 Term Loan November 2026430,000 430,000 3.0%3.0%
Senior unsecured notesJuly 2031400,000 — 3.1%—%
Revolving Credit Facility
April 2023 (2)
144,000 18,000 1.3%1.4%
Secured borrowings:
Series 2017-1 Notes —— 173,193 —%4.2%
Total principal outstanding $1,174,000 $821,193 2.9%3.3%
 _______________________________________________________________
(1)Interest rates are presented after giving effect to our interest rate swap and lock agreements, where applicable.
(2)As described below, in February 2022 we extended the maturity date of the Revolving Credit Facility to Februrary 2026.

Unsecured Revolving Credit Facility and April 2019 Term Loan
Through our Operating Partnership, we are party to an Amended and Restated Credit Agreement with a group of lenders, which was amended on February 10, 2022 (the "Credit Agreement"), and which, as amended, provides for revolving loans of up to $600.0 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 is scheduled to mature on February 10, 2026, with two extension options of six-month periods each, exercisable by the Operating Partnership subject to the satisfaction of certain conditions. 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 Adjusted Term SOFR (as defined in the Credit Agreement) plus an applicable margin (which applicable margin varies between the Revolving Credit Facility and the April 2019 Term Loan). The Adjusted Term SOFR is a rate with a term equivalent to the interest period applicable to the relevant borrowing. In addition, the Operating Partnership is required to pay a revolving facility fee throughout the term of the Revolving Credit Facility. The applicable margin and the revolving facility fee rate are initially a spread and rate, as applicable, 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, Moody's or Fitch, the applicable margin and the revolving facility fee rate will be a spread and rate, as applicable, set according to the credit ratings provided by S&P, Moody's and/or Fitch. Each of the Revolving Credit Facility and the April 2019 Term Loan is freely pre-payable at any time. Outstanding credit extensions under the Revolving Credit Facility are mandatorily payable if the amount of such credit extensions the revolving facility limit. The Operating Partnership may re-borrow amounts paid down on the Revolving Credit Facility prior to its maturity. Loans repaid under the April 2019 Term Loan cannot be reborrowed. The 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 $600.0 million.
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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 Credit Agreement. Under the terms of the Credit Agreement, we are subject to various restrictive financial and nonfinancial covenants which, among other things, require us to maintain certain secured and unsecured leverage ratios and fixed charge and debt service coverage ratios.
The 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 Credit Agreement contains customary affirmative and negative covenants that, among other things and subject to exceptions, limit or restrict our ability to incur indebtedness and liens, consummate mergers or other fundamental changes, dispose of assets, make certain restricted payments, make certain investments, modify our organizational documents, transact with affiliates, change our fiscal periods, provide negative pledge clauses, make subsidiary distributions, enter into certain new lines of business or engage in certain activities, and fail to meet the requirements for taxation as a REIT.
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.
Senior Unsecured Notes
On June 22, 2021, the Operating Partnership issued $400.0 million aggregate principal amount of 2031 Notes, resulting in net proceeds of $396.6 million. The 2031 Notes were issued by the Operating Partnership and the obligations of the Operating Partnership under the 2031 Notes are fully and unconditionally guaranteed on a senior basis by the Company. In June 2021, the Company entered into a treasury-lock agreement which was designated as a cash flow hedge associated with the expected public offering of such notes. In June 2021, the agreement was settled in accordance with its terms.
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The indenture and supplemental indenture creating the 2031 Notes contain various restrictive covenants, including limitations on our ability to incur additional secured and unsecured indebtedness. As of December 31, 2021, we were in compliance with these covenants.
Cash Flows
Comparison of the years ended December 31, 2021 and 2020
As of December 31, 2021, we had $59.8 million of cash and cash equivalents and no restricted cash as compared to $26.6 million and $6.4 million, respectively, as of December 31, 2020.
Cash Flows for the year ended December 31, 2021
During the year ended December 31, 2021, net cash provided by operating activities was $167.4 million as compared $99.4 million during the same period in 2020, an increase of $68.0 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, our property operating expenses and other general and administrative costs. Cash inflows during 2021 related to net income adjusted for non-cash items of $155.6 million (net income of $96.2 million adjusted for non-cash items, including the addition of depreciation and amortization of tangible, intangible and right-of-use real estate assets, amortization of deferred financing costs and other non-cash interest expense, loss on repayment and repurchase of secured borrowings and provision for impairment of real estate, offset by the subtraction of the change in our provision for loan losses, gain 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 $59.4 million), a decrease in rent receivables, prepaid expenses and other assets of $2.2 million and an increase in accrued liabilities and other payables of $14.4 million. These net cash inflows were partially offset by by payments made in settlement of cash flow hedges of $4.8 million. The increase in net cash provided by operating activities was primarily driven by the increased size of our investment portfolio during 2021.
Net cash used in investing activities during the year ended December 31, 2021 was $829.7 million as compared to $545.5 million in the same period in 2020, an increase of $284.2 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 2021 primarily included $840.0 million to fund investments in real estate, including capital expenditures, $136.4 million of investments in loans receivable, $9.3 million to fund construction in progress and $2.2 million paid to tenants as lease incentives. These cash outflows were partially offset by $100.5 million of principal collections on our loans and direct financing lease receivables and $58.4 million of proceeds from sales of investments, net of disposition costs. The increase in net cash used in investing activities was primarily due to our increased level of investments in real estate and loans receivables during 2021.
Net cash provided by financing activities was $689.1 million during the year ended December 31, 2021 as compared to $457.8 million in the same period in 2020, an increase of $231.3 million. Our net cash provided by financing activities in 2021 related to cash inflows of $458.3 million from the issuance of common stock in follow-on equity offerings and through our ATM Program, $396.6 million in net proceeds from the issuance of the 2031 Notes and $393.0 million of borrowings under the Revolving Credit Facility. These cash inflows were partially offset by $267.0 million of repayments on the Revolving Credit Facility, $175.8 million of repayments of secured borrowing principal, the payment of $112.3 million in dividends, $1.2 million of offering costs paid related to our follow-on offerings and the ATM Program, the payment of deferred financing costs of $2.1 million and $0.4 million of payments for taxes related to the net settlement of equity awards..
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 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
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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.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements as of December 31, 2021.
Contractual Obligations
The following table provides information with respect to our commitments as of December 31, 2021: 
 Payment due by period
(in thousands)Total20222023-20242025-2026Thereafter
Unsecured Term Loans$630,000 $— $200,000 $430,000 $— 
Senior unsecured notes400,000 — — — 400,000 
Revolving Credit Facility144,000 — 144,000 — — 
Tenant Construction Financing and Reimbursement Obligations (1)
64,496 64,496 — — — 
Operating Lease Obligations (2)
19,072 1,484 2,132 1,250 14,206 
Total$1,257,568 $65,980 $346,132 $431,250 $414,206 
_____________________________________ 
(1)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.
(2)Includes of $16.7 million rental payments due under ground lease arrangements where our tenants are directly responsible for payment.
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.
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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, 2021, if we distribute all of our REIT taxable income, determined without regard to the dividends paid deduction, to our stockholders.
Critical Accounting 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 and, in the case of asset acquisitions, transaction costs related to the acquisition.
We allocate the purchase price (plus transaction costs) 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 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.
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
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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, 2021, we recorded an allowance for loan losses of $0.8 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.
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
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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
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.
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
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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.
Results of Operations
The following discusses our results of operations for the year ended December 31, 2021, as compared to our results of operations for the year ended December 31, 2020. A discussion of the changes in 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 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, 2020 and 2019" in our annual report for the year ended December 31, 2020.
Comparison of the years ended December 31, 2021 and 2020 
 Year ended December 31,  
(dollar amounts in thousands)20212020Change%
Revenues:  
Rental revenue$213,327 $155,792 $57,535 36.9 %
Interest income on loans and direct financing lease receivables15,710 8,136 7,574 93.1 %
Other revenue, net1,197 81 1,116 1,377.8 %
Total revenues230,234 164,009 66,225 40.4 %
Expenses:  
General and administrative24,329 24,444 (115)(0.5)%
Property expenses5,762 3,881 1,881 48.5 %
Depreciation and amortization69,146 59,446 9,700 16.3 %
Provision for impairment of real estate6,120 8,399 (2,279)(27.1)%
Change in provision for loan losses(204)830 (1,034)(124.6)%
Total expenses105,153 97,000 8,153 8.4 %
Other operating income:  
Gain on dispositions of real estate, net9,338 5,821 3,517 60.4 %
Income from operations134,419 72,830 61,589 84.6 %
Other (expense)/income: 
Loss on repayment and repurchase of secured borrowings(4,461)(924)(3,537)382.8 %
Interest expense(33,614)(29,651)(3,963)13.4 %
Interest income94 485 (391)(80.6)%
Income before income tax expense96,438 42,740 53,698 125.6 %
Income tax expense227 212 15 7.1 %
Net income96,211 42,528 53,683 126.2 %
Net income attributable to non-controlling interests(486)(255)(231)90.6 %
Net income attributable to stockholders$95,725 $42,273 $53,452 126.4 %
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Revenues:
Rental revenue. Rental revenue increased by $57.5 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. 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 1,181 properties, representing $2.4 billion in net investments in real estate, as of December 31, 2020 to 1,451 properties, representing $3.2 billion in net investments in real estate, as of December 31, 2021. 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 2021 on acquisitions that were made during 2020 and 2021. A smaller component of the increase in revenues between periods is related to rent escalations recognized on our leases.
Interest on loans and direct financing lease receivables. Interest on loans and direct financing lease receivables increased by $7.6 million during the year ended December 31, 2021, as compared to the year ended December 31, 2020, primarily due to the growth of our mortgage loans receivable portfolio during 2020 and continuing during 2021, which led to a higher average daily balance of loans receivable outstanding during the year ended December 31, 2021.
Other revenue. Other revenue for the year ended December 31, 2021 increased by $1.1 million, as compared to the year ended December 31, 2020, primarily due to the receipt of $1.0 million in loan prepayment fees during the year ended December 31, 2021. No such loan prepayment fee revenue was recorded during the year ended December 31, 2020.
Expenses:
General and administrative. General and administrative expense decreased $0.1 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. This decrease in general and administrative expense was primarily due to a decrease in third-party property servicing and audit expense, offset by an increase in our equity based compensation expense.  
Property expenses. Property expenses increased by $1.9 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. The increase in property expenses was primarily due to increased reimbursable costs and property insurance expenses during the year ended December 31, 2021.
Depreciation and amortization. Depreciation and amortization expense increased by $9.7 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. Depreciation and amortization expense increased in proportion to the general increase in the size of our real estate investment portfolio.    
Provision for impairment of real estate. Impairment charges on real estate investments were $6.1 million and $8.4 million for the years ended December 31, 2021 and 2020, respectively. During the years ended December 31, 2021 and 2020, we recorded a provision for impairment of real estate on 18 and 17 of our real estate investments, respectively, with the average size of our impairments being smaller in 2021. 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.
Change in provision for loan losses. During the year ended December 31, 2021, our provision for loan losses decreased by $0.2 million, as compared to an increase of $0.8 million during the year ended December 31, 2020. Under ASC 326, we are required to re-evaluate the expected loss on our portfolio of loans and direct financing lease receivables at each balance sheet date. Changes in our provision for loan losses are driven by revisions to global and loan-specific assumptions in our loan loss model and by changes in the size of our loan and direct financing lease portfolio.
Other operating income:
Gain on dispositions of real estate, net. Gain on dispositions of real estate, net, increased by $3.5 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. We disposed of 38 real
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estate properties during the year ended December 31, 2021, compared to 49 real estate properties during the year ended December 31, 2020. Overall, our 2021 dispositions had a higher sales price in relation to their basis as compared to our 2020 dispositions, specifically driven by our sale of six vacant properties during 2020 compared to the sale of only two vacant properties during 2021.
Other (expense)/income:
Loss on repayment and repurchase of secured borrowings. Loss on repayment and repurchase of secured borrowings of $4.5 million during the year ended December 31, 2021 relates to the payment of a make-whole premium and the write-off of deferred financing costs upon our repayment of the remaining $171.2 million of principal on our Series 2017-1 Notes in June 2021. During the year ended December 31, 2020, we recorded a loss on repayment and repurchase of secured borrowings of $0.9 million related to the write-off of deferred financing costs upon our repayment, at par, of $62.3 million of principal on our Series 2017-1 Notes in February 2020.
Interest expense. Interest expense increased by $4.0 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. This increase in interest expense was primarily due to an increase to our outstanding debt balance during the year ended December 31, 2021 compared to the year ended December 31, 2020.
Interest income. Interest income decreased by $0.4 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. The decrease in interest income was primarily due to lower average daily cash balances in our interest-bearing bank accounts compared to the year ended December 31, 2020.
Income tax expense. Income tax expense increased by approximately $15,000 for the year ended December 31, 2021, as compared to the year ended December 31, 2020. 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.
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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.
The following table reconciles net income (which is the most comparable GAAP measure) to FFO, Core FFO and AFFO attributable to stockholders and non-controlling interests:
Year ended December 31,
(in thousands)202120202019
Net income$96,211 $42,528 $48,025 
Depreciation and amortization of real estate69,043 59,309 42,649 
Provision for impairment of real estate6,120 8,399 2,918 
Gain on dispositions of real estate, net (9,338)(5,821)(10,932)
FFO attributable to stockholders and non-controlling interests162,036 104,415 82,660 
Other non-recurring expenses (1)(2)(3)
4,461 2,273 7,988 
Core FFO attributable to stockholders and non-controlling interests166,497 106,688 90,648 
Adjustments:
Straight-line rental revenue, net(19,116)(11,905)(12,215)
Non-cash interest 2,554 2,040 2,738 
Non-cash compensation expense5,683 5,427 4,546 
Other amortization expense2,675 3,854 815 
Other non-cash charges(212)829 9 
Capitalized interest expense(81)(228)(290)
Transaction costs— 291 — 
AFFO attributable to stockholders and non-controlling interests$158,000 $106,995 $86,251 
_____________________________________
(1)Includes non-recurring expenses of $4.5 million of loss on repayment of secured borrowings during the year ended December 31, 2021.
(2)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.
(3)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.
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
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(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.
The following table reconciles net income (which is the most comparable GAAP measure) to EBITDA and EBITDAre attributable to stockholders and non-controlling interests:
Year ended December 31,
(in thousands)202120202019
Net income$96,211 $42,528 $48,025 
Depreciation and amortization69,146 59,446 42,745 
Interest expense33,614 29,651 27,037 
Interest income(94)(485)(794)
Income tax expense227 212 303 
EBITDA attributable to stockholders and non-controlling interests199,104 131,352 117,316 
Provision for impairment of real estate6,120 8,399 2,918 
Gain on dispositions of real estate, net(9,338)(5,821)(10,932)
EBITDAre attributable to stockholders and non-controlling interests
$195,886 $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.
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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, 2021:
(in thousands)Three months ended December 31, 2021
Net income$29,790 
Depreciation and amortization18,961 
Interest expense9,170 
Interest income(20)
Income tax expense55 
EBITDA attributable to stockholders and non-controlling interests57,956 
Provision for impairment of real estate— 
Gain on dispositions of real estate, net (497)
EBITDAre attributable to stockholders and non-controlling interests
57,459 
Adjustment for current quarter re-leasing, acquisition and disposition activity (1)
2,865 
Adjustment to exclude other non-recurring activity (2)
(92)
Adjustment to exclude termination/prepayment fees and certain percentage rent (3)
(1,028)
Adjusted EBITDAre attributable to stockholders and non-controlling interests
$59,204 
Annualized Adjusted EBITDAre attributable to stockholders and non-controlling interests
$236,816 
_____________________________________
(1)Adjustment assumes all re-leasing activity, investments in and dispositions of real estate and loan repayments made during the three months ended December 31, 2021 had occurred on October 1, 2021.
(2)Adjustment is made to exclude non-core expenses added back to compute Core FFO, our provision for loan losses and the write-off of receivables.
(3)Adjustment excludes contingent rent (based on a percentage of the tenant's gross sales at the leased property) where payment is subject to exceeding a sales threshold specified in the lease and lease termination or loan prepayment fees.
We calculate our net debt as our gross debt (defined as total debt plus net deferred financing costs on our borrowings) less cash and cash equivalents and restricted cash deposits held for the benefit of lenders. We believe excluding cash and cash equivalents and restricted cash deposits held for the benefit of lenders from gross debt, all of which could be used to repay debt, provides an estimate of the net contractual amount of borrowed capital to be repaid, which we believe is a beneficial disclosure to investors and analysts.
The following table reconciles total debt (which is the most comparable GAAP measure) to net debt: 
December 31,
(in thousands)20212020
Secured borrowings, net of deferred financing costs$— $171,007 
Unsecured term loan, net of deferred financing costs626,983 626,272 
Revolving credit facility144,000 18,000 
Senior unsecured notes394,723 — 
Total debt 1,165,706 815,279 
Deferred financing costs and original issue discount, net8,294 5,914 
Gross debt 1,174,000 821,193 
Cash and cash equivalents(59,758)(26,602)
Restricted cash available for future investment— (6,388)
Net debt $1,114,242 $788,203 
 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
66

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 non-controlling interests: 
Year ended December 31,
(in thousands)202120202019
Net income$96,211 $42,528 $48,025 
General and administrative expense24,329 24,444 21,745 
Depreciation and amortization69,146 59,446 42,745 
Provision for impairment of real estate6,120 8,399 2,918 
Change in provision for loan losses(204)830 — 
Gain on dispositions of real estate, net (9,338)(5,821)(10,932)
Loss on repayment and repurchase of secured borrowings4,461 924 5,240 
Interest expense33,614 29,651 27,037 
Interest income(94)(485)(794)
Income tax expense227 212 303 
NOI attributable to stockholders and non-controlling interests224,472 160,128 136,287 
Straight-line rental revenue, net(19,116)(11,905)(12,215)
Other amortization and non-cash charges2,675 3,854 815 
Cash NOI attributable to stockholders and non-controlling interests$208,031 $152,077 $124,887 
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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 the issuance of senior unsecured notes or 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.
Principal Outstanding
Weighted Average Interest Rate (1)
(in thousands)Maturity DateDecember 31, 2021December 31, 2020December 31, 2021December 31, 2020
Unsecured term loans:
April 2019 Term Loan April 2024$200,000 $200,000 3.3%3.3%
November 2019 Term Loan November 2026430,000 430,000 3.0%3.0%
Senior unsecured notesJuly 2031400,000 — 3.1%—%
Revolving Credit Facility
April 2023 (2)
144,000 18,000 1.3%1.4%
Secured borrowings:
Series 2017-1 Notes — 173,193 —%4.2%
Total principal outstanding $1,174,000 $821,193 2.9%3.3%
 _______________________________________________________________
(1)Interest rates are presented after giving effect to our interest rate swap and lock agreements, where applicable.
(2)In February 2022 we extended the maturity date of the Revolving Credit Facility to Februrary 2026. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Description of Certain Debt" for additional details.
We have fixed the interest rates on our term loan facilities' variable-rates through the use of interest rate swap agreements. At December 31, 2021, our aggregate liability in the event of the early termination of our swaps was $11.9 million.
At December 31, 2021, a 100-basis point increase of the interest rate on our unsecured term loan borrowings would increase our related interest costs by $6.3 million per year and a 100-basis point decrease of the interest rate would decrease our related interest costs by $6.3 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 $1.4 million as of December 31, 2021.
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.
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.
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Fair Value of Fixed-Rate Indebtedness
The estimated fair value of our fixed-rate indebtedness under our senior unsecured notes is calculated based on quoted prices in active markets for identical assets. The following table discloses fair value information related to our fixed-rate indebtedness as of December 31, 2021:
(in thousands)
Carrying Value (1)
Estimated Fair Value
Senior unsecured notes$400,000 $400,640 
_____________________________________
(1)Excludes net deferred financing costs of $4.5 million and net discount of $0.8 million.
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Item 8. Financial Statements and Supplementary Data.
Index to Consolidated Financial Statements
Financial Statements and Supplemental Data
Reports of Independent Registered Public Accounting Firm (PCAOB ID: Number 248)
73
Report of Independent Registered Public Accounting Firm (PCAOB ID: Number 42)
76
Consolidated Balance Sheets as of December 31, 2021 and 2020
77
Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020, and 2019
78
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2021, 2020, and 2019
79
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2021, 2020, and 2019
80
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020, and 2019
81
Notes to Consolidated Financial Statements
83
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Essential Properties Realty Trust, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheet of Essential Properties Realty Trust, Inc. (a Maryland corporation) and subsidiaries (the “Company”) as of December 31, 2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the year then ended, and the related notes and financial statement schedules included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
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, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 16, 2022 expressed an unqualified opinion.
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 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 the financial statements are free of material misstatement, whether due to error or fraud. Our audit 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 audit 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 audit provides 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 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.
Evaluation of the measurement of the fair values used in the purchase price allocation of real estate acquisitions
As described further in Notes 2 and 3 to the financial statements, the acquisition of property for investment purposes is typically accounted for as an asset acquisition in which the Company allocates the purchase price of acquired properties to land, buildings and identified intangible assets and liabilities, based in each case on their relative estimated fair values and without giving rise to goodwill. The Company acquired approximately $841.1 million of real estate investments during the year ended December 31, 2021. We identified the measurement of the fair values used in the purchase price allocation of real estate acquisitions as a critical audit matter.
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The principal consideration for our determination of the measurement of the fair values used in the purchase price allocation of acquired real estate acquisitions as a critical audit matter is the higher risk of estimation uncertainty in determining estimates of fair value. Specifically, fair value measurements were sensitive to establishing a range of market assumptions for land values, building replacement values, and rental rates. Establishing the market assumptions for land, building and rent included identifying the relevant properties in the established range most comparable to the acquired property. There was a high degree of subjective and complex auditor judgment in evaluating these key inputs and assumptions.
Our audit procedures related to the measurement of the fair values used in the purchase price allocation of real estate acquisitions included the following, among others:
We obtained an understanding and evaluated the design and tested the operating effectiveness of relevant controls relating to the process to allocate the purchase price of real estate acquisitions, including internal controls over the selection and review of the inputs and assumptions to estimate fair value, including those used by third party valuation professionals.
For a selection of real estate acquisitions, we involved our real estate valuation professionals with specialized skills and knowledge who assisted in evaluating the valuation techniques and assumptions to the fair value measurements used in the purchase price allocations. We read the purchase agreements and tested the completeness and accuracy of underlying data used that was contractual in nature, including rental data. The evaluation included comparison of the Company’s assumptions to independently developed ranges using market data from industry transaction databases and published industry reports. We analyzed where the Company's market rental rates fell compared to our valuation professionals' independently developed ranges to evaluate if management bias was present. Our overall assessment of these assumptions and the amounts reported and disclosed in the consolidated financial statements included consideration of whether such information was consistent with evidence obtained in other areas of the audit.
Evaluation of the provision for impairment of real estate investments
As described in Note 2 to the consolidated financial statements, the Company reviews its real estate investments for potential impairment when certain events or changes in circumstances indicate that the carrying amount may not be recoverable through operations plus estimated disposition proceeds. Those events and circumstances include, but are not limited to, significant changes in real estate market conditions, estimated residual values, and an expectation to sell assets before the end of the previously estimated life. For real estate investments that show an indication of impairment, management determines whether an impairment has occurred by comparing the estimated undiscounted future cash flows, including the residual value of the real estate, with the carrying amount of the individual asset. Forecasting the estimated future cash flows requires management to make estimates and assumptions about significant variables, such as the probabilities of outcomes and estimated holding periods, direct and terminal capitalization rates, and potential disposal proceeds to be received upon a sale. We identified the evaluation of the provision for impairment of real estate investments as a critical audit matter.
The principal consideration for our determination of the evaluation of impairment of investments in real estate was a critical audit matter was the higher risk of estimation uncertainty due to sensitivity of management judgments, not only regarding indicators of impairment, but also regarding estimates and assumptions utilized in forecasting cash flows for cost recoverability and determining fair value measurements. Specifically, forecasted cash flows for recoverability and estimates of fair value were sensitive to changes in the probability of outcomes, anticipated sale values, and capitalization rates. There was a high degree of subjective and complex auditor judgment in evaluating these key inputs and assumptions.
Our audit procedures related to the evaluation of the provision for impairment of investments in real estate included the following, among others:
We obtained an understanding and evaluated the design and tested the operating effectiveness of relevant controls over the evaluation of potential real estate investment impairments, such as internal controls over the Company’s monitoring of the real estate investment portfolio, the Company’s assessments of recoverability, and the Company’s estimates of fair value.
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We evaluated the completeness of the population of investments in real estate requiring further analysis as compared to the criteria established in management’s accounting policies over impairment.
We tested the Company’s undiscounted cash flow analyses and estimates of fair value for real estate investments with indicators of impairment, including evaluating the reasonableness of the methods and significant inputs and assumptions used.
We compared the probability of outcomes with historical performance of the impacted real estate investment and considered any relevant prospective data, including property specific industry information.
We compared anticipated sale values and capitalization rates with comparable observable market data, which involved the use of our valuation specialists.
Our assessment included sensitivity analyses over these significant inputs and assumptions, and we considered whether such assumptions were consistent with evidence obtained in other areas of the audit.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2021.
Jacksonville, Florida
February 16, 2022
73

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Essential Properties Realty Trust, Inc.
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Essential Properties Realty Trust, Inc. (a Maryland corporation) and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2021, and our report dated February 16, 2022 expressed an unqualified opinion on those financial statements.
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/ GRANT THORNTON LLP
Jacksonville, Florida
February 16, 2022
74

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 sheet of Essential Properties Realty Trust, Inc. as of December 31, 2020, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows, for each of the two years in the period ended December 31, 2020 of Essential Properties Realty Trust, Inc. (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 the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
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.
/s/ Ernst & Young LLP
We served as the Company’s auditor from 2017 to 2021.
New York, New York
February 23, 2021
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ESSENTIAL PROPERTIES REALTY TRUST, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets
 December 31,
(In thousands, except share and per share data)20212020
ASSETS  
Investments:  
Real estate investments, at cost:  
Land and improvements$1,004,154 $741,254 
Building and improvements2,035,919 1,519,665 
Lease incentives13,950 14,297 
Construction in progress8,858 3,908 
Intangible lease assets87,959 80,271 
Total real estate investments, at cost3,150,840 2,359,395 
Less: accumulated depreciation and amortization(200,152)(136,097)
Total real estate investments, net2,950,688 2,223,298 
Loans and direct financing lease receivables, net189,287 152,220 
Real estate investments held for sale, net15,434 17,058 
Net investments3,155,409 2,392,576 
Cash and cash equivalents59,758 26,602 
Restricted cash— 6,388 
Straight-line rent receivable, net57,990 37,830 
Rent receivables, prepaid expenses and other assets, net25,638 25,406 
Total assets (1)
$3,298,795 $2,488,802 
LIABILITIES AND EQUITY
Secured borrowings, net of deferred financing costs$— $171,007 
Unsecured term loans, net of deferred financing costs626,983 626,272 
Senior unsecured notes, net394,723 — 
Revolving credit facility144,000 18,000 
Intangible lease liabilities, net12,693 10,168 
Dividend payable32,610 25,703 
Derivative liabilities11,838 38,912 
Accrued liabilities and other payables32,145 16,792 
Total liabilities (1)
1,254,992 906,854 
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, 2021 and 2020
— — 
Common stock, $0.01 par value; 500,000,000 authorized; 124,649,053 and 106,361,524 issued and outstanding as of December 31, 2021 and 2020, respectively
1,246 1,064 
Additional paid-in capital2,151,088 1,688,540 
Distributions in excess of cumulative earnings(100,982)(77,665)
Accumulated other comprehensive loss(14,786)(37,181)
Total stockholders' equity2,036,566 1,574,758 
Non-controlling interests7,237 7,190 
Total equity2,043,803 1,581,948 
Total liabilities and equity$3,298,795 $2,488,802 
 _____________________________________
(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, 2021 and 2020, all of the assets and liabilities of the Company were held by its operating partnership, a consolidated VIE, with the exception of $32.5 million and $25.6 million, respectively, of dividends payable.
The accompanying notes are an integral part of these consolidated financial statements.
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ESSENTIAL PROPERTIES REALTY TRUST, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Operations
 
 Year ended December 31,
(In thousands, except share and per share data)202120202019
Revenues:   
Rental revenue$213,327 $155,792 $135,670 
Interest on loans and direct financing lease receivables15,710 8,136 3,024 
Other revenue, net1,197 81 663 
Total revenues230,234 164,009 139,357 
Expenses:   
General and administrative24,329 24,444 21,745 
Property expenses5,762 3,881 3,070 
Depreciation and amortization69,146 59,446 42,745 
Provision for impairment of real estate6,120 8,399 2,918 
Change in provision for loan losses(204)830 — 
Total expenses105,153 97,000 70,478 
Other operating income:   
Gain on dispositions of real estate, net9,338 5,821 10,932 
Income from operations134,419 72,830 79,811 
Other (expense)/income:   
Loss on repayment and repurchase of secured borrowings(4,461)(924)(5,240)
Interest expense(33,614)(29,651)(27,037)
Interest income94 485 794 
Income before income tax expense96,438 42,740 48,328 
Income tax expense227 212 303 
Net income96,211 42,528 48,025 
Net income attributable to non-controlling interests(486)(255)(6,181)
Net income attributable to stockholders$95,725 $42,273 $41,844 
Basic weighted average shares outstanding116,358,059 95,311,035 64,104,058 
Basic net income per share$0.82 $0.44 $0.65 
Diluted weighted average shares outstanding117,466,338 96,197,705 75,309,896 
Diluted net income per share$0.82 $0.44 $0.63 
 

 
The accompanying notes are an integral part of these consolidated financial statements.
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ESSENTIAL PROPERTIES REALTY TRUST, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Comprehensive Income
 
 Year ended December 31,
(In thousands)202120202019
Net income$96,211 $42,528 $48,025 
Other comprehensive income (loss):
Deferred loss on cash flow hedges(4,824)— — 
Unrealized income (loss) on cash flow hedges17,273 (42,121)(2,799)
Cash flow hedge losses (gains) reclassified to interest expense10,059 6,676 (106)
Total other comprehensive income (loss)22,508 (35,445)(2,905)
Comprehensive income118,719 7,083 45,120 
Net income attributable to non-controlling interests(486)(255)(6,181)
Adjustment for other comprehensive income (loss) attributable to non-controlling interests(113)213 956 
Comprehensive income attributable to stockholders$118,120 $7,041 $39,895 
 
The accompanying notes are an integral part of these consolidated financial statements.
78

ESSENTIAL PROPERTIES REALTY TRUST, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Stockholders' Equity 
 Common Stock      
(In thousands, except share data)Number of
Shares		Par
Value		Additional
Paid-In
Capital		Distributions in Excess of Cumulative
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total Stockholders' EquityNon-
Controlling
Interests		Total
Equity
Balance at December 31, 201843,749,092 $431 $569,407 $(7,659)$— $562,179 $248,862 $811,041 
Common stock issuance21,462,986 215 423,472 — — 423,687 — 423,687 
Costs related to issuance of common stock— — (13,901)— — (13,901)— (13,901)
Conversion of equity in Secondary Offering18,502,705 185 237,795 — — 237,980 (237,980)— 
Other comprehensive loss— — — — (1,949)(1,949)(956)(2,905)
Share-based compensation expense46,368 7 4,108 — — 4,115 — 4,115 
Unit-based compensation expense— — 2,162 — — 2,162 — 2,162 
Dividends declared on common stock and OP Units— — — (61,667)— (61,667)(8,444)(70,111)
Net income— — — 41,844 — 41,844 6,181 48,025 
Balance at December 31, 201983,761,151 838 1,223,043 (27,482)(1,949)1,194,450 7,663 1,202,113 
Cumulative adjustment upon adoption of ASC 326— — — (187)— (187)(1)(188)
Common stock issuance22,554,057 225 477,574 — — 477,799 — 477,799 
Costs related to issuance of common stock— — (18,154)— — (18,154)— (18,154)
Other comprehensive loss— — — — (35,232)(35,232)(213)(35,445)
Share-based compensation expense46,316 1 6,077 — — 6,078 — 6,078 
Dividends declared on common stock and OP Units— — — (92,269)— (92,269)(514)(92,783)
Net income— — — 42,273 — 42,273 255 42,528 
Balance at December 31, 2020106,361,524 1,064 1,688,540 (77,665)(37,181)1,574,758 7,190 1,581,948 
Common stock issuance18,230,721 182 469,018 — — 469,200 — 469,200 
Common stock withheld related to net share settlement of equity awards— — — (353)— (353)— (353)
Costs related to issuance of common stock— — (12,153)— — (12,153)— (12,153)
Other comprehensive income— — — — 22,395 22,395 113 22,508 
Share-based compensation expense56,808 — 5,683 — — 5,683 — 5,683 
Dividends declared on common stock and OP Units— — — (118,689)— (118,689)(552)(119,241)
Net income— — — 95,725 — 95,725 486 96,211 
Balance at December 31, 2021124,649,053 $1,246 $2,151,088 $(100,982)$(14,786)$2,036,566 $7,237 $2,043,803 
 
 The accompanying notes are an integral part of these consolidated financial statements.
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ESSENTIAL PROPERTIES REALTY TRUST, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows
 Year ended December 31,
(In thousands)202120202019
Cash flows from operating activities:   
Net income$96,211 $42,528 $48,025 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization69,146 59,406 42,745 
Amortization of lease incentive3,074 3,847 282 
Amortization of above/below market leases and right of use assets, net749 9 534 
Amortization of deferred financing costs and other non-cash interest expense2,738 2,532 2,815 
Loss on repayment and repurchase of secured borrowings4,461 924 5,240 
Provision for impairment of real estate6,120 8,399 2,918 
Change in provision for loan losses(204)830 — 
Gain on dispositions of real estate, net(9,338)(5,821)(10,932)
Straight-line rent receivable(20,160)(15,137)(12,322)
Equity based compensation expense5,683 6,085 6,238 
Adjustment to rental revenue for tenant credit(2,900)3,601 593 
Payments made in settlement of cash flow hedges(4,836)— — 
Changes in other assets and liabilities:
Rent receivables, prepaid expenses and other assets2,216 (12,058)1,242 
Accrued liabilities and other payables14,433 4,243 1,190 
Net cash provided by operating activities167,393 99,388 88,568 
Cash flows from investing activities:
Proceeds from sales of investments, net58,381 82,889 66,765 
Principal collections on loans and direct financing lease receivables100,488 286 9,519 
Investments in loans receivable(136,391)(60,480)(94,637)
Deposits for prospective real estate investments(590)475 530 
Investment in real estate, including capital expenditures(840,027)(541,307)(570,025)
Investment in construction in progress(9,348)(14,423)(17,858)
Lease incentives paid(2,197)(12,949)(2,133)
Net cash used in investing activities(829,684)(545,509)(607,839)
Cash flows from financing activities:
Repayment of secured borrowings(175,781)(65,909)(279,123)
Principal received on repurchased secured borrowings— — 1,707 
Borrowings under term loan facilities— 180,000 450,000 
Borrowings under revolving credit facility393,000 87,000 459,000 
Repayments under revolving credit facility(267,000)(115,000)(447,000)
Proceeds from issuance of senior unsecured notes396,600 — — 
Payments for taxes related to net settlement of equity awards(353)— — 
Deferred financing costs(2,120)(25)(6,128)
Proceeds from issuance of common stock, net458,267 461,006 411,635 
Offering costs(1,220)(2,805)(1,837)
Dividends paid (112,334)(86,475)(63,903)
Net cash provided by financing activities689,059 457,792 524,351 
Net increase in cash and cash equivalents and restricted cash26,768 11,671 5,080 
Cash and cash equivalents and restricted cash, beginning of period32,990 21,319 16,239 
Cash and cash equivalents and restricted cash, end of period$59,758 $32,990 $21,319 
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents$59,758 $26,602 $8,304 
Restricted cash— 6,388 13,015 
Cash and cash equivalents and restricted cash, end of period$59,758 $32,990 $21,319 
The accompanying notes are an integral part of these consolidated financial statements.
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ESSENTIAL PROPERTIES REALTY TRUST, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows (continued)
 
 Year ended December 31,
(In thousands)202120202019
Supplemental disclosure of cash flow information:   
Cash paid for interest, net of amounts capitalized$24,162 $27,071 $29,485 
Cash paid for income taxes637 546 60 
Non-cash investing and financing activities:
Adjustment upon adoption of ASC 326$— $188 $— 
Reclassification from construction in progress upon project completion4,478 22,643 7,055 
Net settlement of proceeds on the sale of investments(960)860 4,960 
Non-cash investment activity1,227 (860)10,439 
Lease liabilities arising from the recognition of right of use assets— — 8,355 
Unrealized (gains) losses on cash flow hedges(27,890)44,920 2,905 
Conversion of equity in Secondary Offering— — 237,795 
Payable and accrued offering costs— — 66 
Discounts and fees on capital raised through issuance of common stock10,933 16,674 12,048 
Discounts and fees on issuance of senior unsecured notes3,400 — — 
Payable and accrued deferred financing costs— — 126 
Dividends declared32,610 25,703 19,395 
The accompanying notes are an integral part of these consolidated financial statements.
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Notes to Consolidated Financial Statements
December 31, 2021
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”.
COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus (“COVID-19”) a pandemic. For much of 2020, the global spread of COVID-19 created significant uncertainty and economic disruption, which has appears to have subsided over the course of 2021, primarily due to the widespread availability of multiple vaccines. However, the continuing impact of the COVID-19 pandemic and its duration are unclear, and variants of the virus, such as Delta and Omicron, and vaccine hesitancy in certain areas could erode the progress that has been made against the virus, or exacerbate or prolong the impact of the pandemic. Conditions similar to those experienced in 2020, at the height of the pandemic, could return should the vaccines prove ineffective against future variants of the virus. Should the impact of a variant of the virus cause conditions to occur that are similar to those experienced in 2020, uncertainty and instability in the macro-economic environment could occur and government restrictions could force the Company’s tenants' businesses to shut-down or limit their operations, which would adversely impact the Company’s operations, its financial condition, liquidity, and prospects. Further, the extent and duration of any such conditions cannot be predicted with any reasonable certainty.
The Company continues to closely monitor the ongoing developments surrounding COVID-19 on all aspects of its business, including its portfolio and the creditworthiness of its tenants. In 2020, the Company entered into deferral agreements with certain of its tenants and recognized contractual base rent related to these agreements as a component of rental revenue in its consolidated statements of operations for 2020. These rent deferrals were negotiated on a tenant-by-tenant basis, and, in general, allowed a tenant to defer all or a portion of their 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. While the Company’s tenants' businesses and operations have largely returned to pre-pandemic levels, any new developments that cause a 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 required to operate their businesses, may 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 variants of COVID-19, such as the Delta variant, intensify or persist for a prolonged period. Additionally, the Company does not yet know whether COVID-19 has caused a material secular change in consumer behavior that may reduce patronage of service-based and/or experience-based businesses, but should changes occur that are material, many of the Company's tenants would be adversely affected and their ability to meet their obligations to the Company could be further impaired. During the deferral period, these agreements reduced the Company's cash flow from operations, reduced its cash available for distribution and adversely affected its ability to make cash distributions to common stockholders. Furthermore, if tenants are unable to repay 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 unaudited 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 U.S. Securities and Exchange Commission (the “SEC”).
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, 2021 and 2020, the Company, directly and indirectly, held a 99.6% and 99.5% ownership interest in the Operating Partnership, respectively, 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.
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 or real estate that secures the Company's investment in loans and direct financing lease receivables. Therefore, the Company aggregates these investments for reporting purposes and operates in one reportable segment.
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
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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. 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:
Year ended December 31,
(in thousands)202120202019
Depreciation on real estate investments$61,171 $51,736 $36,354 
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 intangibles 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
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intangibles are 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.
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”) in January 2019, the Company's existing direct financing lease receivables have been accounted for in the same manner, unless the underlying contracts have been 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 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 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, 2021 and 2020, 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 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
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impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. Impairment losses, if any, are recorded directly within our consolidated statement of operations.
The Company recorded the following provisions for impairment of long lived assets during the periods presented:
Year ended December 31,
(in thousands)202120202019
Provision for impairment of real estate$6,120 $8,399 $2,918 
Cash and Cash Equivalents
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, 2021 and 2020, the Company had deposits of $59.8 million and $26.6 million, respectively, of which $59.5 million and $26.4 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 proceeds from the sale of assets held by a qualified intermediary to facilitate tax-deferred exchange transactions under Section 1031 of the Internal Revenue Code.
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, the November 2019 Term Loan and the 2031 Notes (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 outstanding 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.
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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 the 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.
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.
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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:
Year ended December 31,
(in thousands)202120202019
Contingent rent$721 $444 $855 
Adjustment to Rental Revenue for Tenant Credit
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.
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 increases to or reductions of rental revenue for tenant credit during the periods presented:
Year ended December 31,
(in thousands)202120202019
Adjustment to rental revenue for tenant credit$2,900 $(7,149)$(593)
Offering Costs
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, 2021 and 2020, the Company capitalized a total of $79.3 million and $67.2 million, respectively, of such costs, which are presented as a reduction of additional paid-in capital in the Company's consolidated balance sheets.
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 (the "Code"), 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 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.
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As of December 31, 2021 and 2020, 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, 2021, 2020 and 2019, 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, 2021 or 2020. The 2020, 2019 and 2018 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 when 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, 2021 and 2020.
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 support. The following table presents information about the Company’s mortgage loan-related VIEs as of the dates presented:
December 31,
(Dollars in thousands)20212020
Number of VIEs2311
Aggregate carrying value$140,851 $117,578 
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, 2021 and 2020. 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, 2021 and 2020.
Recent Accounting Developments
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
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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.
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. 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 revenue 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 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 adopted this guidance on January 1, 2021 and the adoption of ASU 2020-06 did not have a material impact on the Company's consolidated financial statements.
In July 2021, the FASB issued ASU 2021-05, Lease (Topic 842): Lessors - Certain Leases with Variable Lease Payments ("ASU 2021-05"). The guidance in ASU 2021-05 amends the lease classification requirements for the lessors under certain leases containing variable payments to align with practice under ASC 840. The lessor should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: 1) the lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in ASC 842-10-25-2 through 25-3; and 2) the lessor would have otherwise recognized a day-one loss. The amendments in ASU 2021-05 are effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The adoption of ASU 2020-05 is not expected to have a material impact on the Company's consolidated financial statements.
3. Investments
The following table presents information about the number of properties or investments in the Company's real estate investment portfolio as of each date presented:
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December 31,
20212020
Owned properties (1)
1,3151,056
Properties securing investments in mortgage loans (2)
126115
Ground lease interests (3)
1010
Total number of investments1,4511,181
_____________________________________
(1)Includes 11 properties which are subject to leases accounted for as direct financing leases or loans as of December 31, 2021 and 2020.
(2)Properties secure 17 and eight mortgage loans receivable as of December 31, 2021 and 2020, respectively.
(3)Includes one building which is subject to a lease accounted for as a direct financing lease as of December 31, 2021 and 2020.
The following table presents information about the gross investment value of the Company's real estate investment portfolio as of each date presented:
December 31,
(in thousands)20212020
Real estate investments, at cost$3,150,840 $2,359,395 
Loans and direct financing lease receivables, net189,287 152,220 
Real estate investments held for sale, net15,434 17,058 
Total gross investments$3,355,561 $2,528,673 
As of December 31, 2020, 258 of these investments, comprising $399.7 million 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. No such assets were pledged as collateral following the repayment of all outstanding balances under our Master Trust Funding Program in June 2021. (See Note 5—Long Term Debt.)
Acquisitions in 2021 and 2020
The following table presents information about the Company’s acquisition activity during the years ended December 31, 2021 and 2020:
Year ended December 31,
(Dollars in thousands)20212020
Ownership typeFee Simple(1)
Number of properties297208
Purchase price allocation:
Land and improvements$279,501 $181,297 
Building and improvements544,604323,542
Construction in progress (2)
9,34815,825
Intangible lease assets11,0107,737
Total purchase price844,463 528,401 
Intangible lease liabilities(3,320)(2,125)
Purchase price (including acquisition costs)$841,143 $526,276 
_____________________________________
(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.
(2)Represents amounts incurred at and subsequent to acquisition and includes $0.1 million and $0.2 million, respectively, of capitalized interest expense during the years ended December 31, 2021 and 2020.
During the years ended December 31, 2021 and 2020, the Company did not have any investments that individually represented more than 5% of the Company’s total investment activity.
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Gross Investment Activity
During the years ended December 31, 2021, 2020 and 2019, the Company had the following gross investment activity: 
(Dollar amounts in thousands)Number of
Investment
Locations		Dollar
Amount of
Investments
Gross investments, December 31, 2018677 $1,394,549 
Acquisitions of and additions to real estate investments281 603,677 
Sales of investments in real estate(37)(65,571)
Relinquishment of properties at end of ground lease term(3)(700)
Provisions for impairment of real estate (1)
— (2,918)
Investments in loans receivable95 94,637 
Principal collections on and settlements of loans and direct financing lease receivables(13)(19,958)
Other— (1,402)
Gross investments, December 31, 20191,000 2,002,314 
Acquisitions of and additions to real estate investments208 568,204 
Sales of investments in real estate(49)(81,312)
Relinquishment of properties at end of ground lease term(3)(1,931)
Provisions for impairment of real estate (2)
— (8,399)
Investments in loans receivable25 61,339 
Principal collections on and settlements of loans and direct financing lease receivables— (286)
Other— (11,256)
Gross investments, December 31, 20201,181 2,528,673 
Acquisitions of and additions to real estate investments297 853,798 
Sales of investments in real estate(38)(57,154)
Provisions for impairment of real estate (3)
— (6,120)
Investments in loans receivable (4)
49 137,351 
Principal collections on and settlements of loans and direct financing lease receivables(38)(100,488)
Other— (499)
Gross investments, December 31, 20211,451 3,355,561 
Less: Accumulated depreciation and amortization (5)
— (200,152)
Net investments, December 31, 20211,451 $3,155,409 
_____________________________________________ 
(1)During the year ended December 31, 2019, the Company identified and recorded provisions for impairment at 1 vacant and 7 tenanted properties.
(2)During the year ended December 31, 2020, the Company identified and recorded provisions for impairment at 7 vacant and 10 tenanted properties.
(3)During the year ended December 31, 2021, the Company identified and recorded provisions for impairment at 2 vacant and 16 tenanted properties.
(4)During the year ended December 31, 2021, the Company invested in 49 properties that secured 12 of its loans receivable for an aggregate investment of $131.1 million.
(5)Includes $169.1 million of accumulated depreciation as of December 31, 2021.
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, 2021 and 2020, the Company had 22 and 13 loans receivable outstanding, with an aggregate carrying amount of $187.8 million and $150.8 million, respectively. The maximum amount of loss due to credit risk is the Company's current principal balance of $187.8 million as of December 31, 2021.  
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The Company's loans receivable portfolio as of December 31, 2021 and 2020 is summarized below (dollars in thousands): 
Loan Type
Monthly Payment (1)
Number of Secured PropertiesEffective Interest RateStated Interest RateMaturity DateDecember 31,
20212020
Mortgage (2)(3)
I/O28.80%8.10%2039$12,000 $12,000 
Mortgage (2)
P+I28.10%8.10%20596,096 6,114 
Mortgage (2)
I/O28.53%7.80%20397,300 7,300 
Mortgage (2)
I/O698.16%7.70%203428,000 28,000 
Mortgage (2)
I/O188.05%7.50%2034— 37,105 
Mortgage (2)
I/O18.42%7.70%20405,300 5,300 
Mortgage (2)
I/O17.00%7.00%2021— 860 
Mortgage (2)
I/O38.30%8.25%20222,324 2,324 
Mortgage (2)
I/O197.30%6.80%2035— 46,000 
Mortgage (2)
I/O17.00%7.00%2023600 — 
Mortgage (2)
I/O76.89%6.75%202614,165 — 
Mortgage (2)
I/O38.30%8.25%20233,146 — 
Mortgage (2)
I/O26.87%6.40%20362,520 — 
Mortgage (2)
I/O187.51%7.00%203630,806 — 
Mortgage (2)
I/O57.51%7.00%20369,679 — 
Mortgage (2)
I/O27.85%7.50%203113,000 — 
Mortgage (2)
I/O28.29%8.25%20232,389 — 
Mortgage (2)
I/O15.72%8.00%20526,864 — 
Mortgage (2)
I/O27.44%7.10%20369,808 — 
Mortgage (2)
I/O57.30%6.80%203625,714 — 
Mortgage (2)
I/O17.73%7.20%20362,470 — 
Leasehold interestP+I210.69%
(4)
20391,435 1,435 
Leasehold interestP+I12.25%
(5)
20341,055 1,109 
Leasehold interestP+I12.41%
(5)
20341,560 1,645 
Leasehold interestP+I14.97%
(5)
20381,562 1,605 
Net investment    $187,793 $150,797 
________________________________________________
(1)I/O: Interest Only; P+I: Principal and Interest
(2)Loan requires monthly payments of interest only with a balloon payment due at maturity.
(3)Loan allows for prepayments in whole or in part without penalty.
(4)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.
(5)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.
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Scheduled principal payments due to be received under the Company's loans receivable as of December 31, 2021 were as follows:
(in thousands)Loans Receivable
2022$2,545 
20236,371 
2024251 
2025267 
202614,449 
Thereafter163,910 
Total$187,793 
As of December 31, 2021 and 2020, the Company had $2.3 million and $2.4 million, respectively, of net investments accounted for as direct financing lease receivables. The components of the investments accounted for as direct financing lease receivables were as follows:
 December 31,
(in thousands)20212020
Minimum lease payments receivable$3,189 $3,529 
Estimated unguaranteed residual value of leased assets270 270 
Unearned income from leased assets(1,150)(1,357)
Net investment$2,309 $2,442 
Scheduled future minimum non-cancelable base rental payments due to be received under the direct financing lease receivables as of December 31, 2021 were as follows:
(in thousands)Future Minimum Base Rental Payments
2022$345 
2023347 
2024289 
2025254 
2026243 
Thereafter1,711 
Total$3,189 
Allowance for Loan Losses
The Company utilizes a real estate estimate model (i.e. 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, 2021 and 2020, the Company recorded an allowance for loan losses of $0.8 million and $1.0 million, respectively. Changes in the Company’s allowance for loan losses are presented within provision for loan losses in the Company’s consolidated statements of operations.
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For the year ended December 31, 2021 and 2020, the changes to the Company's allowance for loan losses were as follows:
(in thousands)Loans and Direct Financing Lease Receivables
Balance at December 31, 2019$— 
Cumulative-effect adjustment upon adoption of ASC 326188 
Current period provision for expected credit losses (1)
830 
Write-offs charged— 
Recoveries— 
Balance at December 31, 20201,018 
Current period provision for expected credit losses (2)
(204)
Write-offs charged—
Recoveries—
Balance at December 31, 2021$814 
_____________________________________
(1)The increase in expected credit losses was due to the changes in assumptions regarding then-current macroeconomic factors related to COVID-19.
(2)The decrease in expected credit losses is due to assumptions regarding current macroeconomic factors returning to pre-pandemic values due to the reduction of the adverse impact of the COVID-19 pandemic.
The Company considers the ratio of loan to value ("LTV") to be a significant credit quality indicator for its loans and direct financing lease portfolio. The following table presents information about the LTV of the Company's loans and direct financing lease receivables measured at amortized cost as of as of December 31, 2021:
Amortized Cost Basis by Origination YearTotal Amortized Costs Basis
(in thousands)2021202020192018Prior to 2018
LTV <60%$7,224 $— $28,000 $— $709 $35,933 
LTV 60%-70%52,879 — — — 955 53,834 
LTV >70%61,059 10,748 27,884 — 644 100,335 
$121,162 $10,748 $55,884 $— $2,308 $190,102 
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, 2021 and 2020: 
(Dollar amounts in thousands)Number of
Properties		Real Estate
Investments		Intangible Lease
Liabilities		Net Carrying
Value
Held for sale balance, December 31, 20191 $1,211 $— $1,211 
Transfers to held for sale classification8 17,058 — 17,058 
Sales(1)(1,211)— (1,211)
Transfers to held and used classification— — — — 
Held for sale balance, December 31, 20208 17,058 — 17,058 
Transfers to held for sale classification20 25,767 — 25,767 
Sales(15)(13,501)— (13,501)
Transfers to held and used classification(4)(13,890)— (13,890)
Held for sale balance, December 31, 20219 $15,434 $— $15,434 
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Significant Concentrations
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, 2021, 2020 or 2019 represented 10% or more of total rental revenue in the Company's consolidated statements of operations.
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:
 Year ended December 31,
State202120202019
Texas13.1%14.9%12.4%
Georgia**10.8%
_____________________________________
*    State's rental revenue was not greater than 10% of total rental revenue during the period specified.
Intangible Assets and Liabilities
Intangible assets and liabilities consisted of the following as of the dates presented:
 December 31, 2021December 31, 2020
(in thousands)Gross
Carrying
Amount		Accumulated
Amortization		Net
Carrying
Amount		Gross
Carrying
Amount		Accumulated
Amortization		Net
Carrying
Amount
Intangible assets:      
In-place leases$76,255 $24,540 $51,715 $67,986 $18,767 $49,219 
Intangible market lease assets11,704 4,409 7,295 12,285 4,059 8,226 
Total intangible assets$87,959 $28,949 $59,010 $80,271 $22,826 $57,445 
Intangible market lease liabilities$15,948 $3,255 $12,693 $12,772 $2,604 $10,168 
 The remaining weighted average amortization period for the Company's intangible assets and liabilities as of December 31, 2021, by category and in total, were as follows:
 Years Remaining
In-place leases9.2
Intangible market lease assets12.2
Total intangible assets9.6
 
Intangible market lease liabilities9.1
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:
 Year ended December 31,
(in thousands)202120202019
Amortization of in-place leases (1)
$7,544 $7,067 $6,272 
Amortization (accretion) of market lease intangibles, net (2)
(47)9 866 
Amortization (accretion) of above- and below-market ground lease intangibles, net (3)
(353)(395)(333)
 ______________________________________________________
(1)Reflected within depreciation and amortization expense.
(2)Reflected within rental revenue.
(3)Reflected within property expenses.
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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)In-Place Lease Assets
2022$6,793 
20236,372 
20245,692 
20254,442 
20264,105 
Thereafter24,311 
Total$51,715 
The following table provides the estimated net amortization of above- and below-market lease intangibles to be recognized as a component of rental revenue for the next five years and thereafter:
(in thousands)Above Market Lease AssetBelow Market Lease LiabilitiesNet Adjustment to Rental Revenue
2022$(744)$748 $4 
2023(712)717 5 
2024(679)714 35 
2025(671)716 45 
2026(661)720 59 
Thereafter(3,828)9,078 5,250 
Total$(7,295)$12,693 $5,398 
4. Leases
As Lessor
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.
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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, 2021 were as follows:
(in thousands)Future Minimum Base
Rental Receipts
2022$244,716 
2023248,477 
2024249,880 
2025248,808 
2026249,053 
Thereafter2,617,157 
Total$3,858,091 
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, 2021, 2020, and 2019 were as follows:
Year ended December 31,
(in thousands)202120202019
Fixed lease revenues $210,441 $165,171 $134,879 
Variable lease revenues (1)
1,708 1,341 2,282 
Total lease revenues (2)
$212,149 $166,512 $137,161 
_____________________________________
(1)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.
(2)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.
As Lessee
The Company has a number of ground leases, an office lease and other equipment leases which are classified as operating leases. As of December 31, 2021, the Company's ROU assets and lease liabilities were $7.4 million and $9.4 million, respectively. As of December 31, 2020, the Company's ROU assets and lease liabilities were $6.4 million and $8.8 million, respectively. These amounts are included in rent receivables, prepaid expenses and other assets, net and accrued liabilities and other payables on the Company's consolidated balance sheets.
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.
The following table sets forth information related to the measurement of the Company's lease liabilities as of the dates presented:
 December 31, 2021December 31, 2020
Weighted average remaining lease term (in years)21.522.4
Weighted average discount rate6.08%6.41%
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Upon adoption of ASC 842 (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, 2021, 2020, and 2019.
The following table sets forth the details of rent expense for the years ended December 31, 2021, 2020 and 2019:
Year ended December 31,
(in thousands)202120202019
Fixed rent expense - Ground Rent$957 $905 $911 
Fixed rent expense - Office Rent510 512 514 
Variable rent expense— — — 
Total rent expense$1,467 $1,418 $1,425 
As of December 31, 2021, 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)Office and Equipment LeasesGround Leases
to be Paid by
the Company 		Ground Leases
to be Paid
Directly by the
Company’s
Tenants 		Total Future
Minimum
Base Rental
Payments
2022$518 $155 $811 $1,484 
2023525 131 485 1,141 
2024531 24 436 991 
2025538 — 356 894 
2026— — 356 356 
Thereafter— — 14,206 14,206 
Total$2,112 $310 $16,650 19,072 
Present value discount(9,637)
Lease liabilities$9,435 
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.
5. Long Term Debt
The following table summarizes the Company's outstanding indebtedness as of December 31, 2021 and 2020:
Principal Outstanding
Weighted Average Interest Rate (1)
(in thousands)Maturity DateDecember 31, 2021December 31, 2020December 31, 2021December 31, 2020
Unsecured term loans:
April 2019 Term LoanApril 2024$200,000 $200,000 1.3%1.4%
November 2019 Term LoanNovember 2026430,000 430,000 1.6%1.7%
Senior unsecured notesJuly 2031400,000 — 3.0%—%
Revolving Credit FacilityApril 2023144,000 18,000 1.3%1.4%
Secured borrowings:
Series 2017-1 Notes—— 173,193 —%4.2%
Total principal outstanding $1,174,000 $821,193 2.0%2.1%
______________________________________________________
(1)Interest rates are presented as stated in debt agreements and do not reflect the impact of the Company's interest rate swap and lock agreements, where applicable (see Note 6—Derivative and Hedging Activities).
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The following table summarizes the scheduled principal payments on the Company’s outstanding indebtedness as of December 31, 2021:
(in thousands)April 2019 Term LoanNovember 2019 Term LoanRevolving Credit FacilitySenior Unsecured NotesTotal
2022$— $— $— $— $— 
2023— — 144,000 — 144,000 
2024200,000 — — — 200,000 
2025— — — — — 
2026— 430,000 — — 430,000 
Thereafter— — — 400,000 400,000 
Total$200,000 $430,000 $144,000 $400,000 $1,174,000 
The Company was not in default of any provisions under any of its outstanding indebtedness as of December 31, 2021 or 2020.
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.
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 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.
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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 Code. 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 was in compliance with all financial covenants and was not in default on any provisions under the Amended Credit Facility as of December 31, 2021 and 2020.
The following table presents information about the Revolving Credit Facility for the years ended December 31, 2021, 2020 and 2019:
(in thousands)202120202019
Balance on Balance on January 1,$18,000 $46,000 $34,000 
Borrowings393,000 87,000 459,000 
Repayments(267,000)(115,000)(447,000)
Balance on December 31,$144,000 $18,000 $46,000 
The following table presents information about interest expense related to the Revolving Credit Facility for the periods presented:
Year ended December 31,
(in thousands)202120202019
Interest expense$1,552 $1,367 $3,416 
Amortization of deferred financing costs1,165 1,165 1,094 
Total$2,717 $2,532 $4,510 
Total deferred financing costs, net, of $1.4 million and $2.5 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, 2021 and 2020, respectively.
As of December 31, 2021 and 2020, the Company had $256.0 million and $382.0 million, respectively, of unused borrowing capacity under 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. 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.
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.
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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 Code. 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 provisions under the November 2019 Term Loan as of December 31, 2021 and 2020.
The following table presents information about aggregate interest expense related to the April 2019 and November 2019 Term Loan Facilities:
Year ended December 31,
(in thousands)202120202019
Interest expense$9,819 $11,685 $4,868 
Amortization of deferred financing costs736 711 187 
Total$10,555 $12,396 $5,055 
Total deferred financing costs, net, of $3.0 million and $3.7 million as of December 31, 2021 and 2020, 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.
Senior Unsecured Notes
In June 2021, through its Operating Partnership, the Company completed a public offering of $400.0 million aggregate principal amount of 2.950% Senior Notes due 2031 (the "2031 Notes"), resulting in net proceeds of $396.6 million. The 2031 Notes were issued by the Operating Partnership, and the obligations of the Operating Partnership under the 2031 Notes are fully and unconditionally guaranteed on a senior basis by the Company. The 2031 Notes were issued at 99.8% of their principal amount. In connection with the June 2021 offering, the Operating Partnership incurred $4.7 million in deferred financing costs and an offering discount of $0.8 million.
The following is a summary of the senior unsecured notes outstanding as of December 31, 2021:
(dollars in thousands)
Maturity Date
Interest Payment Dates
Stated Interest Rate
Principal Outstanding
2031 Notes
July 15, 2031January 15 and July 152.95 %$400,000 
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The Company's senior unsecured notes are redeemable in whole at any time or in part from time to time, at the Operating Partnership's option, at a redemption price equal to the sum of:
•100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest, if any, up to, but not including, the redemption date; and
•a make-whole premium calculated in accordance with the indenture governing the notes.
The following table presents information about interest expense related to the Company's senior unsecured notes:
(in thousands)
Year ended December, 2021
Interest expense$5,952 
Amortization of deferred financing costs and original issue discount295 
Total$6,247 
Total deferred financing costs, net, of $4.5 million related to the Company's senior unsecured notes were included within senior unsecured notes, net on the Company's consolidated balance sheet as of December 31, 2021.
The Company was in compliance with all financial covenants and was not in default of any provisions under the 2031 Notes as of December 31, 2021.
Secured Borrowings
In the normal course of business, the Company has transferred financial assets in various transactions with Special Purpose Entities (“SPE”) determined to be VIEs, which primarily consisted of securitization trusts established for a limited purpose (the “Master Trust Funding Program”). These SPEs were formed for the purpose of securitization transactions in which the Company transferred assets to an SPE, which then issued to investors various forms of debt obligations supported by those assets. In these securitization transactions, the Company typically received cash from the SPE as proceeds for the transferred assets and retained the rights and obligations to service the transferred assets in accordance with servicing guidelines. All debt obligations issued from the SPEs were non-recourse to the Company.
In accordance with the accounting guidance for asset transfers, the Company considered any ongoing involvement with transferred assets in determining whether the assets can be derecognized from the balance sheets. For transactions that did not meet the requirements for derecognition and remained on the consolidated balance sheets, the transferred assets could not be pledged or exchanged by the Company.
The Company evaluated its interest in certain entities to determine if these entities met the definition of a VIE and whether the Company was 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 determined that the SPEs created in connection with its Master Trust Funding Program should be consolidated as the Company was the primary beneficiary of each of these entities. Tenant rentals received on assets transferred to SPEs under the Master Trust Funding Program were 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
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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.
The Company recorded a $5.2 million loss on the repurchase and repayment 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.
Series 2017-1 Notes
In July 2017, the Company issued a 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.
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. In addition, the company recorded a $0.9 million loss on 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.
In June 2021, the Company voluntarily prepaid the remaining $171.2 million of principal outstanding on the Series 2017-1 Notes and paid a make-whole premium of $2.5 million pursuant to the terms of the agreements related to such securities. The Company accounted for this prepayment as a debt extinguishment and recorded a $4.4 million loss on repayment of secured borrowings related to the make-whole premium payment, legal fees and amortization of deferred financing costs during the year ended December 31, 2021.
The following table presents information about interest expense related to the Master Trust Funding Program:
Year ended December 31,
(in thousands)202120202019
Interest expense$3,551 $7,619 $16,328 
Amortization of deferred financing costs312 656 1,538 
Total$3,863 $8,275 $17,866 
Total deferred financing costs, net, of $2.2 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.
The Company recorded a $4.5 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, 2021.
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
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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 $8.2 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, 2021 and 2020, there were no events of default related to the Company's derivative financial instruments.
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, 2021 and 2020 (dollar amounts in thousands):
Fair Value of Asset/(Liability)
Derivatives
Designated as
Hedging Instruments (1)
Fixed Rate Paid by
Company		Effective DateMaturity Date
Notional Value (2)
December 31, 2021December 31, 2020
Interest Rate Swap2.06%5/14/20194/12/2024$100,000 $(2,747)$(6,176)
Interest Rate Swap2.06%5/14/20194/12/202450,000 (1,374)(3,089)
Interest Rate Swap2.07%5/14/20194/12/202450,000 (1,377)(3,094)
Interest Rate Swap1.61%12/9/201911/26/2026175,000 (3,444)(11,838)
Interest Rate Swap1.61%12/9/201911/26/202650,000 (996)(3,396)
Interest Rate Swap1.60%12/9/201911/26/202625,000 (481)(1,675)
Interest Rate Swap1.36%7/9/202011/26/2026100,000 (790)(5,353)
Interest Rate Swap1.36%7/9/202011/26/202680,000 (629)(4,291)
$630,000 $(11,838)$(38,912)
 _____________________________________
(1)All interest rate swaps have a 1 month LIBOR variable rate paid by the bank.
(2)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.
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.
In May 2021, the Company entered into a treasury rate lock agreement which was designated as a cash flow hedge associated with $330.0 million of the Company's public offering of the 2031 Notes. In June 2021, the agreement was settled in accordance with its terms. The Company recorded a deferred loss of $4.8 million from the settlement of this treasury rate lock agreement, which was recognized as a component of other comprehensive income (loss) on the Consolidated Statements of Comprehensive Income/(Loss).
The following table presents amounts recorded to accumulated other comprehensive income/loss related to derivative and hedging activities for the periods presented:
Year ended December 31,
(in thousands) 202120202019
Accumulated other comprehensive income (loss)$22,508 $(35,445)$(2,905)
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As of December 31, 2021, 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 $11.9 million. 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, 2021 and 2020, there were no derivatives in a net asset position.
During the years ended December 31, 2021, 2020 and 2019, the Company recorded a loss on the change in fair value of its cash flow hedges of $10.3 million, $6.7 million and $0.1 million, respectively, which was included in interest expense in the Company's consolidated statements of operations.
As of December 31, 2021 and December 31, 2020, 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 $11.9 million and $40.2 million as of December 31, 2021 and 2020, respectively.
7. Equity
Stockholders' Equity
In March 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.
In July 2019, EPRT Holdings LLC ("EPRT Holdings") and Security Benefit Life Insurance Company (together, the “Selling Stockholders”), affiliates of Eldridge Industries, LLC ("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 units of limited partner interest in the Operating Partnership ("OP Units") for a like number of shares of the Company’s common stock. The Company did not receive any proceeds from this transaction.
In January 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.
In September 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.
In April 2021, the Company completed a follow-on offering of 8,222,500 shares of its common stock, including 1,072,500 shares of common stock purchased by the underwriters pursuant to an option to purchase additional shares, at a public offering price of $23.50 per share. Net proceeds from this follow-on offering, after deducting underwriting discounts and commissions and other expenses, were $185.1 million.
At the Market Program
In July 2021, 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 $350 million (the “2021 ATM Program”). In connection with establishing the 2021 ATM Program, the Company terminated its prior at the market program, which it established in June 2020 (the “2020 ATM Program”), and no additional stock can be issued thereunder. Pursuant to the 2020 ATM Program, the Company could publicly offer and sell shares of its common stock with an aggregate gross sales price of up to $250 million and, prior to its termination, the Company issued common stock with an aggregate gross sales price of $166.8 million thereunder. The Company's initial ATM program was established in August 2019 (the “2019 ATM Program”) and was terminated
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in June 2020. 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, 2021, the Company issued common stock with an aggregate gross sales price of $188.5 million under the 2021 ATM Program and could issue additional common stock with an aggregate gross sales price of up to $161.5 million under the 2021 ATM Program. As the context requires, the 2021 ATM Program, 2020 ATM Program and 2019 ATM Program are referred to herein as the “ATM Program."
The following table details information related to activity under the ATM Program for each period presented:
Year ended December 31,
(in thousands, except share and per share data)202120202019
Shares of common stock sold10,005,890 4,499,057 7,432,986 
Weighted average sale price per share$27.58 $19.02 $23.97 
Gross proceeds$275,972 $85,559 $178,161 
Net proceeds$271,949 $84,104 $175,147 
Dividends on Common Stock
During the years ended December 31, 2021, 2020 and 2019, the Company's board of directors declared the following quarterly cash dividends on common stock: 
Date DeclaredRecord DateDate PaidDividend per Share of
Common Stock		Total Dividend (dollars in thousands)
December 3, 2021December 31, 2021January 13, 2022$0.26 $32,466 
September 2, 2021September 30, 2021October 14, 2021$0.25 $30,397 
May 27, 2021June 30, 2021July 15, 2021$0.25 $29,559 
March 5, 2021March 31, 2021April 15, 2021$0.24 $26,265 
December 3, 2020December 31, 2020January 15, 2021$0.24 $25,570 
September 4, 2020September 30, 2020October 15, 2020$0.23 $24,115 
June 11, 2020June 30, 2020July 15, 2020$0.23 $21,419 
March 18, 2020March 31, 2020April 15, 2020$0.23 $21,168 
December 6, 2019December 31, 2019January 15, 2020$0.23 $19,268 
September 6, 2019September 30, 2019October 15, 2019$0.22 $17,531 
June 5, 2019June 28, 2019July 15, 2019$0.22 $12,725 
March 7, 2019March 29, 2019April 16, 2019$0.21 $12,143 
The Company has determined that, during the years ended December 31, 2021, 2020 and 2019, approximately 69.4%, 59.0% and 58.8%, respectively, of the distributions it paid represented taxable income and 30.6%, 41.0% and 41.2%, respectively, of the distributions it paid represented return of capital for federal income tax purposes.
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 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.
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As of December 31, 2021, the Company held 124,649,053 OP Units, representing a 99.6% 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 0.4% limited partner interest in the Operating Partnership. 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. 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, 2021, 2020 and 2019:
Restricted Stock Awards
Restricted Stock UnitsClass B UnitsClass D Units
SharesWtd. Avg. Grant Date Fair ValueUnitsWtd. Avg. Grant Date Fair Value
Unvested, January 1, 2019691,290 $13.68 — $— 5,230 1,800 
Granted46,368 14.12 100,814 22.80 — — 
Vested(244,957)13.69 — — (5,230)(1,800)
Forfeited— — — — — — 
Unvested, December 31, 2019492,701 $13.72 100,814 $22.80 — — 
Unvested, January 1, 2020492,701 $13.72 100,814 $22.80 — — 
Granted3,658 15.68 269,017 24.99 — — 
Vested(255,761)13.73 (42,658)21.00 — — 
Forfeited— — (5,571)— — — 
Unvested, December 31, 2020240,598 $13.73 321,602 $25.27 — — 
Unvested, January 1, 2021240,598 $13.73 321,602 $25.27 — — 
Granted— — 213,686 31.78 — — 
Vested(221,694)13.70 (72,879)18.83 — — 
Forfeited— — (7,717)23.52 — — 
Unvested, December 31, 202118,904 $14.12 454,692 $29.39 — — 
Restricted Stock Awards
On June 25, 2018, an aggregate of 691,290 shares of RSAs were issued to the Company's directors, executive officers and other employees under the Equity Incentive Plan. These RSAs vested over periods ranging
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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, RSAs relating to an aggregate of 46,368 shares of unvested restricted common stock were granted 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, additional RSAs relating to an aggregate of 3,658 shares of unvested restricted common stock were granted 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: 
Year ended December 31,
(in thousands)202120202019
Compensation cost recognized in general and administrative expense$1,548 $3,405 $3,394 
Dividends declared on unvested RSAs and charged directly to distributions in excess of cumulative earnings70 279 486 
Fair value of shares vested during the period3,037 3,512 3,354 
The following table presents information about the Company's RSAs as of the dates presented: 
December 31,
(Dollars in thousands)20212020
Total unrecognized compensation cost$130 $1,678 
Weighted average period over which compensation cost will be recognized (in years)1.00.7
Restricted Stock Units
In January 2019 and 2020 and February 2021, the Company issued target grants of 119,085, 84,684, and 126,353 performance-based RSUs, respectively, to certain of the Company's employees 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), December 31, 2022 (for the 2020 grants) or December 31, 2023 (for the 2021 grants), divided by the average closing price for the 20-trading day period ended January 1, 2019 (for the 2019 grants), January 1, 2020 (for the 2020 grants) or January 1, 2021 (for the 2021 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:
Grant Year
202120202019
Volatility
55%
20%
18%
Risk free rate
0.20%
1.61%
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. As of December 31, 2021, the Compensation Committee had not identified specific performance targets relating to the 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
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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, 2021, 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 vested 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, 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.
During the year ended 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.
During the year ended December 31, 2021, the Company issued an aggregate 118,921 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.
A portion of the RSUs that vested in 2021 were net share settled such that the Company withheld shares with a value equal to the relevant employee's income and employment tax obligations with respect to the vesting and remitted a cash payment to the appropriate taxing authorities.
The following table presents information about the Company's RSUs for the periods presented:
Year ended December 31,
(in thousands)202120202019
Compensation cost recognized in general and administrative expense$4,135 $2,672 $714 
Dividend equivalents declared and charged directly to distributions in excess of cumulative earnings241 125 8 
Fair value of units vested during the period1,372 896 — 
The following table presents information about the Company's RSUs as of the dates presented:
December 31,
(Dollars in thousands)20212020
Total unrecognized compensation cost$7,735 $5,261 
Weighted average period over which compensation cost will be recognized (in years)2.32.4
Unit-Based Compensation
In 2017, the Company's predecessor approved and issued unvested Class B and Class D units equity interests to members of the Company's management team, the predecessor's board of managers and external unitholders. Following the completion of formation transactions prior to the Company's IPO, the Class B and Class D unit holders continued to hold vested and unvested interests in EPRT Holdings and, indirectly, the OP Units held by EPRT Holdings.
On July 22, 2019, in conjunction with the completion of the Secondary Offering, 3,520 previously unvested Class B units and 1,200 previously unvested Class D units in EPRT Holdings automatically vested in accordance with the terms of the grant agreements, which represented all of the remaining outstanding unvested Class B and Class D units. Due to this accelerated vesting, the Company recorded all remaining unrecognized compensation cost on the Class B and Class D units to general and administrative expenses in its consolidated statements of operations during the year ended December 31, 2019.
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The following table presents information about the Class B and Class D units for the periods presented: 
 Year ended December 31,
(in thousands)202120202019
Compensation cost recognized in general and administrative expense$— $— $2,162 
Fair value of units vested during the period— — 2,283 
10. Net Income Per Share
The Company computes net income per share pursuant to the guidance in FASB ASC Topic 260, Earnings Per Share. The guidance requires the classification of the Company’s unvested restricted 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):
Year ended December 31,
(dollar amounts in thousands)202120202019
Numerator for basic and diluted earnings per share:
Net income$96,211 $42,528 $48,025 
Less: net income attributable to non-controlling interests(486)(255)(6,181)
Less: net income allocated to unvested restricted common stock and RSUs(311)(404)(493)
Net income available for common stockholders: basic95,414 41,869 41,351 
Net income attributable to non-controlling interests486 255 6,181 
Net income available for common stockholders: diluted$95,900 $42,124 $47,532 
Denominator for basic and diluted earnings per share:
Weighted average common shares outstanding116,479,322 95,664,071 64,714,087 
Less: weighted average number of shares of unvested restricted common stock(121,263)(353,036)(610,029)
Weighted average shares outstanding used in basic net income per share116,358,059 95,311,035 64,104,058 
Effects of dilutive securities: (1)
OP Units553,847 553,847 10,793,700 
Unvested restricted common stock and RSUs554,432 332,823 412,138 
Weighted average shares outstanding used in diluted net income per share117,466,338 96,197,705 75,309,896 
_____________________________________
(1)For the year ended December 31, 2020, excludes the impact of 124,295 unvested restricted stock units, respectively, as the effect would have been antidilutive.
11. Commitments and Contingencies
As of December 31, 2021, the Company had remaining future commitments, under mortgage notes, reimbursement obligations or similar arrangements, to fund $64.5 million to its tenants for development, construction and renovation costs related to properties leased from the Company.
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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, 2021, 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.
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.
The following table presents the matching contributions made by the Company for the years ended December 31, 2021, 2020 and 2019:
Year ended December 31,
(in thousands)202120202019
401(k) matching contributions$205 $165 $150 
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, 2021 and 2020. These estimates require management's judgment and may not be indicative of the future fair values of the assets and liabilities.
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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, 2021 and 2020.
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, 2021 and 2020 approximate fair value.
The estimated fair value of the Company's indebtedness under its senior unsecured notes has been based primarily on quoted prices in active markets that the Company has the ability to access at the measurement date. The measurement is classified as Level 1 within the fair value hierarchy. As of December 31, 2021, the Company's senior unsecured notes had an aggregate carrying value of $400.0 million (excluding the net deferred financing cost of $4.5 million and net discount of $0.8 million) and an estimated fair value of $400.6 million.
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 Level 3 within the fair value hierarchy. As of December 31, 2021, the Company's had no secured borrowings. 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.
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, 2021 and 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, 2021 and 2020, the Company estimated the fair value of its interest rate swap contracts to be an $11.8 million liability and $38.9 million liability, respectively.
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The Company measures its real estate investments at fair value on a nonrecurring basis. The fair values of these real estate investments were determined using the following input levels as of the dates presented: 
 Net
Carrying		 Fair Value Measurements Using Fair
Value Hierarchy
(in thousands)ValueFair ValueLevel 1Level 2Level 3
December 31, 2021     
Non-financial assets:     
Long-lived assets$— $— $— $— $— 
December 31, 2020
Non-financial assets:
Long-lived assets$4,754 $4,754 $— $— $4,754 
13. Related-Party Transactions
During the year ended December 31, 2019, 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 year ended December 31, 2019, which is included in general and administrative expense in the Company’s consolidated statements of operations. No such services were provided to the Company during the years ended December 31, 2021 and 2020.
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. Subsequent Events
The Company has evaluated all events and transactions that occurred after December 31, 2021 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.
Employment Agreement
In January 2022, the Company entered into an amended and restated employment agreement (the “Amended and Restated Employment Agreement”) with its President and Chief Executive Officer (the "Executive Officer"), effective as of January 1, 2022.
The Amended and Restated Employment Agreement provides for an initial term of five years (through December 31, 2026) with automatic one-year extension periods absent prior written notice electing not to extend the agreement. Among other things, the Amended and Restated Employment Agreement provides for an annual base salary, annual performance bonus to be paid by the Company to the Executive Officer and the Executive Officer will continue to be eligible to participate in the Company’s annual long-term incentive program. In addition, the Amended and Restated Employment Agreement provides for a one-time retention equity award to be issued to the Executive Officer. See the Equity Awards section below for further details.
Equity Awards
In connection with the Amended and Restated Employment Agreement, in January 2022 the Company issued: (i) 34,686 shares of unvested RSUs to the Executive Officer under the Equity Incentive Plan which vest in 50% increments on each of the four-year and five-year anniversary of the grant date, subject to the Executive Officer's continued service through the applicable vesting date and (ii) 69,372 performance-based RSUs (at target) to the Executive Officer under the Equity Incentive Plan, with vesting based on the Company’s adjusted funds from operations performance over a four-year performance period, and the opportunity to earn up to 200% payout of the target award based on such performance. To the extent the performance goals are achieved, these performance-based RSUs will vest in 50% increments on each of the four-year and five-year anniversary of the grant date, subject to the Executive Officer's continued service through the applicable vesting date.
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In January and February 2022, the Company issued an aggregate of 70,889 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.
In February 2022, the Company issued an aggregate of 66,333 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 December 31, 2021, divided by the average closing price for the 20-trading day period ending December 31, 2024.
Credit Facility Amendment
In February 2022, the Company entered into an amendment to the Amended Credit Agreement, dated April 12, 2019, and, pursuant to such amendment, among other things, the availability of extensions of credit under the Revolving Credit Facility was increased to $600.0 million, the accordion feature was increased to $600.0 million, the borrowing base limitation on borrowings thereunder was removed, the applicable margin with respect to borrowings under the Revolving Credit Facility was reduced and the LIBOR reference rate was replaced with reference to the Adjusted Term SOFR rate, consistent with market practice.
Subsequent Acquisition and Disposition Activity
Subsequent to December 31, 2021, the Company acquired 29 real estate properties with an aggregate investment (including acquisition costs) of $128.3 million and invested $4.3 million in new and ongoing construction in progress and reimbursements to tenants for development, construction and renovation costs. In addition, the Company invested $4.0 million in mortgage loans receivable subsequent to December 31, 2021.
Subsequent to December 31, 2021, the Company sold or transferred its investment in 4 real estate properties for an aggregate gross sales price of $7.0 million and incurred approximately $20,000 of disposition costs related to these transactions.
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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, 2021 has been audited by Grant Thornton 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.
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Item 9B. Other Information.
On February 10, 2022, through our Operating Partnership, we entered into an amendment to our Amended and Restated Credit Agreement with Wells Fargo Bank, National Association, as Administrative Agent, Barclays Bank PLC, as Existing Agent, and the lenders party thereto, relating to our Revolving Credit Facility and our April 2019 Term Loan. Among other things, the amendment provides for revolving loans of up to $600.0 million, with a scheduled maturity of the Revolving Credit Facility of February 10, 2026. The $200.0 million April 2019 Term Loan matures on April 12, 2024. The Revolving Credit Facility and the April 2019 Term Loan initially bear interest at an annual rate of applicable Adjusted Term SOFR plus an applicable margin. For more information about this amendment, see “ "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Description of Certain Debt.”
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
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.
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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)
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019
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).
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Exhibit
Number		Description
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)
Description of the Company's Common Stock, $0.01 par value (Incorporated by reference to Exhibit 4.4 to the Company’s Annual Report on Form 10-K filed on February 23, 2021)
Indenture, dated as of June 28, 2021, among Essential Properties, L.P., Essential Properties Realty Trust, Inc. and U.S. Bank National Association, as trustee, including the form of the Guarantee (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 28, 2021).
First Supplemental Indenture, dated as of June 28, 2021, among Essential Properties, L.P., Essential Properties Realty Trust, Inc. and U.S. Bank National Association, as trustee, including the form of the Notes (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on June 28, 2021)
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)
Second Amendment to Amended and Restated Credit Agreement, dated February 10, 2022, among the Company, the Operating Partnership, Wells Fargo Bank, National Association, as administrative agent, Barclays Bank PLC, as existing agent, and the lenders party thereto
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)
Employment Agreement, effective as of January 1, 2022, by and between Essential Properties Realty Trust, Inc. and Peter M. Mavoides (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 6, 2022)
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)
120

Exhibit
Number		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)
Letter from Ernst & Young LLP (Incorporated by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K filed on March 30, 2021).
Subsidiaries of the Company
List of Guarantors and Subsidiary Issuers of Guaranteed Securities
Consent of Grant Thornton LLP
Consent of Ernst & Young LLP
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
101.INS*XBRL Instance Document
101.SCH*XBRL Taxonomy Extension Schema Document
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*XBRL Taxonomy Extension Label Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document
104*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
121

SIGNATURES
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.
 
  ESSENTIAL PROPERTIES REALTY TRUST, INC.
       
Date:February 16, 2022By:/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.
 
122

Name Title Date
     
/s/ Peter M. Mavoides Director, President and Chief Executive Officer February 16, 2022
Peter M. Mavoides (Principal Executive Officer)  
     
/s/ Mark E. Patten 
Executive Vice President, Treasurer and Chief Financial Officer
 February 16, 2022
Mark E. Patten (Principal Financial Officer)  
     
/s/ Timothy J. Earnshaw  Senior Vice President and Chief Accounting Officer February 16, 2022
Timothy J. Earnshaw (Principal Accounting Officer)  
     
/s/ Paul T. Bossidy Director February 16, 2022
Paul T. Bossidy    
     
/s/ Joyce DeLucca Director February 16, 2022
Joyce DeLucca    
     
/s/ Scott A. Estes Director February 16, 2022
Scott A. Estes    
     
/s/ Lawrence J. Minich Director February 16, 2022
Lawrence J. Minich    
     
/s/ Heather Leed Neary Director February 16, 2022
Heather Leed Neary    
     
/s/ Stephen D. Sautel Director February 16, 2022
Stephen D. Sautel    
     
/s/ Janaki Sivanesan Director February 16, 2022
Janaki Sivanesan    

123

ESSENTIAL PROPERTIES REALTY TRUST, INC. AND ESSENTIAL PROPERTIES REALTY TRUST, INC. PREDECESSOR
Schedule III - Real Estate and Accumulated Depreciation
As of December 31, 2021
(Dollar amounts in thousands)
Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition		 
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year ConstructedDate Acquired
Tenant IndustryCityStateLand & ImprovementsBuilding & ImprovementsLand & Improvements Building & Improvements Land & ImprovementsBuilding & ImprovementsTotal
Restaurants - Quick ServiceAlexander CityAL$184 $242 $—  $—  $184 $242 $426 $54 19876/16/2016
Restaurants - Quick ServiceZanesvilleOH397 277 —  —  397 277 674 53 19886/16/2016
Restaurants - Quick ServiceBellevilleIL314 369 —  —  314 369 683 75 19886/16/2016
Restaurants - Quick ServiceGrand RapidsMI177 346 —  —  177 346 523 72 19896/16/2016
Restaurants - Quick ServicePetalumaCA467 533 —  —  467 533 1,000 109 19926/16/2016
Restaurants - Quick ServiceClarkesvilleGA178 — —  —  178 — 178 — 19926/16/2016
Restaurants - Quick ServicePhiladelphiaPA485 626 —  —  485 626 1,111 133 19806/16/2016
Other ServicesNashvilleTN332 106 —  —  332 106 438 43 19926/16/2016
Restaurants - Quick ServiceRuskinFL641 — —  —  641 — 641 — 19936/16/2016
Restaurants - Quick ServiceBrownsvilleTX561 474 —  —  561 474 1,035 104 19956/16/2016
Restaurants - Family DiningPalantineIL926 354 — —  926 354 1,280 99 19906/16/2016
Restaurants - Family DiningLaGrangeIL446 851 — 751  446 1,602 2,048 167 19906/16/2016
Restaurants - Family DiningJacksonvilleFL1,086 957 (620)(f)(386)(f)466 571 1,037 257 19976/16/2016
Restaurants - Casual DiningCorpus ChristiTX1,160 — —  —  1,160 — 1,160 — 20156/16/2016
Restaurants - Casual DiningCentennialCO1,593 3,400 —  —  1,593 3,400 4,993 523 19936/16/2016
Restaurants - Quick ServiceRedfordMI468 567 —  —  468 567 1,035 115 19986/16/2016
Other ServicesLandrumSC214 87 —  —  214 87 301 29 19926/16/2016
Restaurants - Family DiningVirginia BeachVA90 192 —  —  90 192 282 220 19976/16/2016
Restaurants - Casual DiningThomasvilleGA903 233 —  600  903 833 1,736 166 19996/16/2016
Restaurants - Casual DiningGrapevineTX1,385 977 —  —  1,385 977 2,362 205 19996/16/2016
Restaurants - Family DiningPlanoTX207 424 —  —  207 424 631 466 19986/16/2016
Restaurants - Family DiningCoon RapidsMN635 856 —  —  635 856 1,491 177 19916/16/2016
Restaurants - Family DiningMankatoMN700 585 —  —  700 585 1,285 152 19926/16/2016
Restaurants - Casual DiningOmahaNE465 1,184 (203)(f)(498)(f)262 686 948 166 19796/16/2016
Restaurants - Family DiningMerrillvilleIN797 322 —  125  797 447 1,244 68 19776/16/2016
Restaurants - Family DiningAppletonWI441 590 —  —  441 590 1,031 138 19776/16/2016
Restaurants - Family DiningSt. JosephMO559 371 —  —  559 371 930 99 19786/16/2016
Restaurants - Family DiningGladstoneMO479 783 —  —  479 783 1,262 155 19796/16/2016
Restaurants - Family DiningBrainerdMN761 547 —  —  761 547 1,308 127 19906/16/2016
Restaurants - Family DiningCedar RapidsIA804 563 —  —  804 563 1,367 126 19946/16/2016
Restaurants - Family DiningBrooklyn ParkMN725 693 —  —  725 693 1,418 160 19976/16/2016
Restaurants - Quick ServicePontiacMI316 423 —  —  316 423 739 96 20036/16/2016
Restaurants - Quick ServiceTroyMI674 — —  —  674 — 674 — 19846/16/2016
Restaurants - Quick ServiceClayNY129 413 1,654  —  1,783 413 2,196 542 19916/16/2016
Restaurants - Quick ServiceBunaTX152 138 —  —  152 138 290 33 19766/16/2016
Restaurants - Quick ServiceCarthageTX111 239 —  —  111 239 350 50 19756/16/2016
Restaurants - Quick ServiceDaytonTX195 174 — — 195 174 369 38 19696/16/2016
Restaurants - Quick ServiceDibollTX92 177 — 92 177 269 38 19906/16/2016
Restaurants - Quick ServiceHuntingtonTX120 180 — — 120 180 300 49 19806/16/2016
Restaurants - Quick ServiceHuntsvilleTX120 290 — — 120 290 410 54 19856/16/2016
Restaurants - Quick ServiceJasperTX111 209 — — 111 209 320 43 19926/16/2016
Restaurants - Quick ServiceKountzeTX120 290 — — 120 290 410 54 19956/16/2016
Restaurants - Quick ServiceRuskTX129 142 — — 129 142 271 37 19896/16/2016
Restaurants - Quick ServiceSour LakeTX204 114 — — 204 114 318 33 19786/16/2016
Restaurants - Quick ServiceVernonCT155 208 — — 155 208 363 86 19836/16/2016
Restaurants - Quick ServiceBattle CreekMI114 690 — — 114 690 804 120 19696/16/2016
Restaurants - Quick ServiceClioMI350 889 — — 350 889 1,239 164 19916/16/2016
Restaurants - Quick ServiceCharlotteMI190 722 — — 190 722 912 124 19916/16/2016
F-1

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year ConstructedDate Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Restaurants - Quick ServiceSt. JohnsMI$218 $403 $— $— $218 $403 $621 $94 19916/16/2016
Automotive ServiceBurnsvilleMN734 309 180 25 914 334 1,248 111 19736/16/2016
Restaurants - Family DiningAlbert LeaMN337 463 — — 337 463 800 115 19756/16/2016
Restaurants - Family DiningCrystalMN821 178 — — 821 178 999 69 19756/16/2016
Restaurants - Casual DiningWest MonroeLA343 94 — — 343 94 437 31 19886/16/2016
Restaurants - Quick ServiceGreenfieldWI556 789 — — 556 789 1,345 154 19836/16/2016
Restaurants - Quick ServiceRedfordMI479 — — — 479 — 479 — 19816/16/2016
Restaurants - Quick ServiceBridgeportMI309 619 — — 309 619 928 139 19896/16/2016
Restaurants - Quick ServiceBirminghamAL261 780 — — 261 780 1,041 136 20006/16/2016
Restaurants - Quick ServiceOneontaAL220 485 — — 220 485 705 88 19936/16/2016
Restaurants - Quick ServiceUnion CityGA416 746 — — 416 746 1,162 135 19766/16/2016
Restaurants - Quick ServiceMariettaGA214 618 — — 214 618 832 107 19796/16/2016
Restaurants - Quick ServiceVicksburgMS203 627 — — 203 627 830 108 19796/16/2016
Restaurants - Quick ServiceRiverdaleGA309 584 — — 309 584 893 105 19786/16/2016
Restaurants - Quick ServiceSnellvilleGA242 484 — — 242 484 726 92 19816/16/2016
Restaurants - Quick ServiceTrussvilleAL243 480 — — 243 480 723 88 19966/16/2016
Restaurants - Quick ServiceForest ParkGA233 341 — — 233 341 574 61 19886/16/2016
Restaurants - Quick ServiceDecaturGA239 714 — — 239 714 953 123 19826/16/2016
Restaurants - Quick ServiceMonroeGA302 733 — — 302 733 1,035 130 19856/16/2016
Restaurants - Quick ServiceDecaturGA292 463 — — 292 463 755 78 19836/16/2016
Restaurants - Quick ServiceColumbiaSC241 461 — — 241 461 702 92 19816/16/2016
Restaurants - Quick ServiceDecaturGA302 721 — — 302 721 1,023 128 19866/16/2016
Restaurants - Quick ServiceConyersGA330 767 — — 330 767 1,097 138 19826/16/2016
Restaurants - Quick ServiceStockbridgeGA396 771 — — 396 771 1,167 131 19756/16/2016
Restaurants - Quick ServiceLawrencevilleGA306 550 — — 306 550 856 107 19886/16/2016
Restaurants - Quick ServiceLithoniaGA290 606 — — 290 606 896 105 19796/16/2016
Restaurants - Quick ServiceTuckerGA339 586 — — 339 586 925 106 19766/16/2016
Restaurants - Quick ServiceCovingtonGA379 722 — — 379 722 1,101 132 19796/16/2016
Restaurants - Quick ServiceColumbusGA174 442 — — 174 442 616 79 19876/16/2016
Restaurants - Quick ServiceTupeloMS731 329 — — 731 329 1,060 73 20006/16/2016
Restaurants - Quick ServiceNew AlbanyMS295 346 — — 295 346 641 65 19936/16/2016
Restaurants - Quick ServiceParkersburgWV185 570 — — 185 570 755 104 19766/16/2016
Restaurants - Quick ServiceAshlandKY279 858 — — 279 858 1,137 157 19796/16/2016
Restaurants - Quick ServiceHuntingtonWV223 539 — — 223 539 762 99 19796/16/2016
Restaurants - Quick ServiceNorth Little RockAR190 450 — — 190 450 640 90 19786/16/2016
Restaurants - Quick ServiceJacksonMS400 348 — — 400 348 748 69 19816/16/2016
Restaurants - Quick ServiceMadisonTN281 458 — — 281 458 739 81 19886/16/2016
Restaurants - Quick ServiceLittle RockAR169 48 — 15 169 63 232 27 19796/16/2016
Restaurants - Quick ServiceHurricaneWV238 485 — — 238 485 723 88 19816/16/2016
Restaurants - Quick ServiceParkersburgWV261 513 — — 261 513 774 99 19826/16/2016
Restaurants - Quick ServiceChattanoogaTN407 465 — — 407 465 872 89 19836/16/2016
Restaurants - Quick ServiceKnoxvilleTN352 347 — — 352 347 699 66 19816/16/2016
Restaurants - Quick ServiceJacksonvilleNC284 152 — 948 284 1,100 1,384 39 19866/16/2016
Restaurants - Quick ServiceKnoxvilleTN394 271 — — 394 271 665 55 19826/16/2016
Restaurants - Quick ServiceForestdaleAL241 613 — — 241 613 854 109 19756/16/2016
Restaurants - Quick ServiceLouisvilleKY319 238 — 815 319 1,053 1,372 54 19886/16/2016
Restaurants - Quick ServiceFestusMO195 802 — — 195 802 997 139 19796/16/2016
Restaurants - Quick ServiceJacksonvilleFL330 542 — — 330 542 872 103 19766/16/2016
Restaurants - Quick ServiceJacksonvilleFL220 701 — — 220 701 921 132 19796/16/2016
Restaurants - Quick ServiceWinter GardenFL326 383 — — 326 383 709 77 19876/16/2016
Restaurants - Quick ServiceSanfordFL350 375 — — 350 375 725 84 19866/16/2016
Restaurants - Quick ServiceLebanonTN311 736 — — 311 736 1,047 155 19746/16/2016
Restaurants - Quick ServicePrattvilleAL551 524 — — 551 524 1,075 101 19786/16/2016
Restaurants - Quick ServiceCalhounGA346 673 — — 346 673 1,019 125 19796/16/2016
F-2

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year ConstructedDate
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Restaurants - Quick ServiceMabletonGA$152 $366 $— $— $152 $366 $518 $72 19776/16/2016
Restaurants - Quick ServiceBrunswickGA532 137 (55)(f)— 477 137 614 37 19956/16/2016
Restaurants - Quick ServiceSummervilleSC215 720 — — 215 720 935 134 19786/16/2016
Restaurants - Quick ServiceThomastonGA193 364 — — 193 364 557 75 19876/16/2016
Restaurants - Quick ServiceSmyrnaGA392 311 — — 392 311 703 64 19816/16/2016
Restaurants - Quick ServiceSmyrnaTN221 556 — — 221 556 777 101 19826/16/2016
Restaurants - Quick ServiceTullahomaTN226 701 — — 226 701 927 135 19756/16/2016
Restaurants - Quick ServiceShelbyvilleTN323 456 — — 323 456 779 87 19766/16/2016
Restaurants - Quick ServiceDallasGA260 832 — — 260 832 1,092 161 19856/16/2016
Restaurants - Quick ServiceNorth CharlestonSC121 459 — — 121 459 580 84 19906/16/2016
Restaurants - Quick ServiceLaGrangeGA207 562 — — 207 562 769 105 19856/16/2016
Restaurants - Quick ServiceCullmanAL260 723 — — 260 723 983 139 19996/16/2016
Restaurants - Quick ServiceBatesvilleMS125 551 — — 125 551 676 101 19926/16/2016
Restaurants - Quick ServicePhenix CityAL273 665 — — 273 665 938 135 19796/16/2016
Restaurants - Quick ServiceMontgomeryAL333 349 — — 333 349 682 72 19866/16/2016
Restaurants - Quick ServiceStarkeFL240 468 — — 240 468 708 95 19806/16/2016
Restaurants - Quick ServiceMadisonvilleKY302 426 — — 302 426 728 84 19766/16/2016
Restaurants - Quick ServiceMariettaOH175 506 — — 175 506 681 91 19796/16/2016
Restaurants - Quick ServiceHueytownAL133 711 — — 133 711 844 130 19796/16/2016
Restaurants - Quick ServiceGallipolisOH247 722 — — 247 722 969 138 19796/16/2016
Restaurants - Quick ServiceValdostaGA236 545 — — 236 545 781 100 19806/16/2016
Restaurants - Quick ServiceDouglasGA243 557 — — 243 557 800 102 19796/16/2016
Restaurants - Quick ServiceFayettevilleGA300 506 — — 300 506 806 95 19846/16/2016
Restaurants - Quick ServiceTroyAL183 520 — — 183 520 703 97 19856/16/2016
Restaurants - Quick ServiceWetumpkaAL273 416 — — 273 416 689 83 19866/16/2016
Restaurants - Quick ServiceSt. AlbansWV154 491 — — 154 491 645 89 19756/16/2016
Restaurants - Quick ServiceHuntingtonWV233 540 — — 233 540 773 99 19926/16/2016
Restaurants - Quick ServiceNewburghNY913 738 — — 913 738 1,651 190 19756/16/2016
Restaurants - Quick ServiceEriePA444 562 — — 444 562 1,006 139 19776/16/2016
Restaurants - Quick ServiceDicksonTN292 79 — 29 292 108 400 31 19776/16/2016
Restaurants - Quick ServiceSouth DaytonaFL416 668 — — 416 668 1,084 135 19846/16/2016
Restaurants - Quick ServiceMilfordNH409 355 — — 409 355 764 84 19936/16/2016
Restaurants - Quick ServicePortlandOR252 131 — — 252 131 383 35 20156/16/2016
Restaurants - Quick ServiceSuperiorCO370 434 — 370 434 804 88 20026/16/2016
Restaurants - Casual DiningFond du LacWI521 1,197 (222)(f)(425)(f)299 772 1,071 152 19966/16/2016
Restaurants - Casual DiningAlexandriaLA837 889 — — 837 889 1,726 231 19946/16/2016
Medical / DentalHurstTX1,462 1,493 — 300 1,462 1,793 3,255 338 19976/16/2016
Restaurants - Quick ServiceJacksonvilleFL872 354 — — 872 354 1,226 70 20066/16/2016
Restaurants - Casual DiningFleming IslandFL586 355 — — 586 355 941 66 20066/16/2016
Restaurants - Casual DiningPort St. LucieFL930 1,510 — — 930 1,510 2,440 297 19886/16/2016
Restaurants - Casual DiningWaycrossGA861 1,700 — — 861 1,700 2,561 309 19946/16/2016
Restaurants - Casual DiningKingslandGA602 1,256 — — 602 1,256 1,858 243 19956/16/2016
Restaurants - Casual DiningJacksonvilleFL821 1,215 — (524)(f)821 691 1,512 256 19956/16/2016
Restaurants - Casual DiningNorth Fort MyersFL1,060 1,817 — — 1,060 1,817 2,877 320 19946/16/2016
Restaurants - Casual DiningCape CoralFL741 1,692 — — 741 1,692 2,433 307 19966/16/2016
Restaurants - Casual DiningPanama City BeachFL750 959 — — 750 959 1,709 192 19996/16/2016
Restaurants - Casual DiningDothanAL577 1,144 — — 577 1,144 1,721 214 19936/16/2016
Restaurants - Casual DiningAlbanyGA731 1,249 — — 731 1,249 1,980 225 19916/16/2016
Restaurants - Casual DiningPanama CityFL539 1,389 — — 539 1,389 1,928 234 19916/16/2016
Restaurants - Casual DiningValdostaGA626 957 — — 626 957 1,583 192 19946/16/2016
Restaurants - Casual DiningGainesvilleFL193 1,930 — — 193 1,930 2,123 294 19946/16/2016
Restaurants - Casual DiningPanama CityFL673 1,044 50 — 723 1,044 1,767 260 19996/16/2016
Restaurants - Quick ServiceWarner RobinsGA130 174 — 908 130 1,082 1,212 45 19756/16/2016

F-3

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year ConstructedDate Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Automotive ServiceSpringTX$805 $1,577 $— $— $805 $1,577 $2,382 $287 20138/4/2016
Home FurnishingsFriscoTX2,224 4,779 — — 2,224 4,779 7,003 699 20068/19/2016
Convenience StoresBinghamtonNY273 1,008 — — 273 1,008 1,281 214 19708/22/2016
Convenience StoresWindsorNY272 1,101 — — 272 1,101 1,373 234 19808/22/2016
Convenience StoresGreeneNY557 1,974 — — 557 1,974 2,531 419 19898/22/2016
Convenience StoresAftonNY348 1,303 — — 348 1,303 1,651 276 19948/22/2016
Convenience StoresLansingNY861 3,034 — — 861 3,034 3,895 643 20108/22/2016
Convenience StoresFreevilleNY524 1,457 — — 524 1,457 1,981 309 19948/22/2016
Convenience StoresMarathonNY520 2,127 — — 520 2,127 2,647 451 19958/22/2016
Convenience StoresNew HartfordNY301 863 — — 301 863 1,164 183 19958/22/2016
Convenience StoresChadwicksNY213 784 — — 213 784 997 166 19878/22/2016
Convenience StoresLibertyNY219 811 — — 219 811 1,030 172 20048/22/2016
Convenience StoresEarlvilleNY258 985 — — 258 985 1,243 209 19978/22/2016
Convenience StoresVestalNY324 1,285 — — 324 1,285 1,609 273 19968/22/2016
Convenience StoresDelhiNY275 1,066 — — 275 1,066 1,341 226 19928/22/2016
Convenience StoresFranklinNY423 774 — — 423 774 1,197 164 19988/22/2016
Convenience StoresEndicottNY188 576 — — 188 576 764 122 19958/22/2016
Convenience StoresDavenportNY324 1,194 — — 324 1,194 1,518 254 19938/22/2016
Restaurants - Family DiningSalemNH131 232 — — 131 232 363 289 19989/16/2016
Other ServicesAnnistonAL312 176 — — 312 176 488 55 19929/16/2016
Early Childhood EducationCummingGA876 2,357 — — 876 2,357 3,233 390 20019/30/2016
Early Childhood EducationSuwaneeGA922 2,108 — — 922 2,108 3,030 349 20099/30/2016
Medical / DentalFort WorthTX1,617 — 99 4,187 1,716 4,187 5,903 478 201710/12/2016
Car WashesAcworthGA1,346 2,615 — — 1,346 2,615 3,961 421 200610/17/2016
Car WashesDouglasvilleGA1,974 2,882 — — 1,974 2,882 4,856 464 200610/17/2016
Car WashesHiramGA1,376 2,947 — — 1,376 2,947 4,323 475 200410/17/2016
Car WashesMariettaGA1,302 2,136 — — 1,302 2,136 3,438 344 200210/17/2016
Medical / DentalPort CharlotteFL1,820 2,072 — — 1,820 2,072 3,892 370 200010/20/2016
Automotive ServiceLackawannaNY231 232 — — 231 232 463 40 198710/28/2016
Automotive ServiceCheektowagaNY367 509 — — 367 509 876 88 197810/28/2016
Automotive ServiceAmherstNY410 606 — — 410 606 1,016 105 199810/28/2016
Automotive ServiceNiagara FallsNY615 1,025 — — 615 1,025 1,640 178 198510/28/2016
Automotive ServiceWilliamsvilleNY419 1,302 — — 419 1,302 1,721 226 198810/28/2016
Automotive ServiceDunkirkNY255 187 — — 255 187 442 33 198010/28/2016
Car WashesTucsonAZ1,048 2,190 — — 1,048 2,190 3,238 347 201011/9/2016
Restaurants - Quick ServiceBurlingtonIA444 1,171 — — 444 1,171 1,615 217 197611/15/2016
Restaurants - Quick ServiceCedar RapidsIA436 1,179 — — 436 1,179 1,615 219 199111/15/2016
Restaurants - Quick ServiceFort MadisonIA304 1,284 — — 304 1,284 1,588 238 198711/15/2016
Restaurants - Quick ServiceWaterlooIA344 846 — — 344 846 1,190 157 198211/15/2016
Restaurants - Quick ServiceNebraska CityNE363 748 — — 363 748 1,111 139 201411/15/2016
Restaurants - Quick ServicePlattsmouthNE304 1,302 — — 304 1,302 1,606 241 199911/15/2016
Restaurants - Quick ServiceRed OakIA254 1,010 — — 254 1,010 1,264 187 200011/15/2016
Movie TheatresFlorenceAL1,519 6,294 117 — 1,636 6,294 7,930 1,048 201512/19/2016
Restaurants - Casual DiningGardendaleAL589 1,984 — — 589 1,984 2,573 313 200512/29/2016
Restaurants - Casual DiningJasperAL468 2,144 — — 468 2,144 2,612 318 200512/29/2016
Restaurants - Casual DiningHomewoodAL808 1,233 — — 808 1,233 2,041 209 197612/29/2016
Medical / DentalStevensonAL191 466 — — 191 466 657 85 199012/30/2016
Medical / DentalTucsonAZ323 780 —  —  323 780 1,103 108 196712/30/2016
Medical / DentalMiamiFL485 982 —  —  485 982 1,467 130 198112/30/2016
Medical / DentalSarasotaFL323 557 —  —  323 557 880 87 197312/30/2016
Medical / DentalSarasotaFL485 446 —  —  485 446 931 80 200112/30/2016
Medical / DentalDaltonGA323 406 —  —  323 406 729 91 196012/30/2016
Medical / DentalAltonIL252 568 —  —  252 568 820 108 200112/30/2016
Medical / DentalQuincyIL272 608 —  —  272 608 880 113 200112/30/2016
F-4

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition		 
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year ConstructedDate Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		 Building &
Improvements		 Land &
Improvements		Building &
Improvements		Total
Medical / DentalClarksvilleIN$657 $1,033 $—  $—  $657 $1,033 $1,690 $180 199412/30/2016
Medical / DentalTerre HauteIN292 325 —  —  292 325 617 68 199812/30/2016
Medical / DentalBrewsterMA60 578 —  —  60 578 638 76 198612/30/2016
Medical / DentalKansas CityMO333 568 —  —  333 568 901 105 197912/30/2016
Medical / DentalLaurelMS100 1,033 —  —  100 1,033 1,133 143 197012/30/2016
Medical / DentalPicayuneMS70 517 —  —  70 517 587 75 197712/30/2016
Medical / DentalRochesterNH181 426 —  —  181 426 607 70 195812/30/2016
Medical / DentalCanandaiguaNY70 527 —  —  70 527 597 73 200912/30/2016
Medical / DentalAndersonSC211 487 —  —  211 487 698 71 194812/30/2016
Medical / DentalCamdenSC211 537 —  —  211 537 748 91 198512/30/2016
Medical / DentalColumbiaSC211 426 —  —  211 426 637 70 198612/30/2016
Medical / DentalAustinTX242 375 —  —  242 375 617 71 197012/30/2016
Medical / DentalRichmondTX495 446 —  —  495 446 941 96 198212/30/2016
Medical / DentalTerrell HillsTX282 588 —  —  282 588 870 87 200212/30/2016
Health and FitnessWest Valley CityUT1,936 4,210 —  —  1,936 4,210 6,146 603 198412/30/2016
Medical / DentalRock SpringsWY620 2,550 —  —  620 2,550 3,170 375 20011/17/2017
Car WashesConyersGA1,136 4,332 — — 1,136 4,332 5,468 691 20131/24/2017
Car WashesCovingtonGA824 3,759 — — 824 3,759 4,583 621 20111/24/2017
Movie TheatresNorth Myrtle BeachSC1,465 7,081 — — 1,465 7,081 8,546 921 20061/31/2017
Medical / DentalBridgetonMO199 578 — — 199 578 777 85 19822/9/2017
Medical / DentalMokenaIL237 303 — — 237 303 540 77 20082/9/2017
Medical / DentalLexingtonKY199 474 — — 199 474 673 79 20142/9/2017
Medical / DentalIslip TerraceNY313 436 — — 313 436 749 68 19862/9/2017
Early Childhood EducationAlpharettaGA1,595 4,177 — — 1,595 4,177 5,772 655 20162/28/2017
Home FurnishingsWestlandMI1,858 14,560 43 1,543 1,901 16,103 18,004 1,923 19873/1/2017
Home FurnishingsAnn ArborMI2,096 13,399 25 2,035 2,121 15,434 17,555 1,728 19923/1/2017
Equipment Rental and SalesMuskegonMI1,113 6,436 — 825 1,113 7,261 8,374 861 19873/1/2017
Home FurnishingsBattle CreekMI1,212 7,904 (519)(f)(3,244)(f)693 4,660 5,353 998 19963/1/2017
Automotive ServiceProsperTX1,161 2,534 — — 1,161 2,534 3,695 382 20103/8/2017
Restaurants - Quick ServiceCedartownGA258 812 — — 258 812 1,070 122 19873/9/2017
Restaurants - Quick ServiceForsythGA464 808 — — 464 808 1,272 121 19893/9/2017
Automotive ServiceNew FreedomPA904 872 — — 904 872 1,776 155 19973/28/2017
Car WashesHuntingtownMD984 1,857 — — 984 1,857 2,841 288 19983/28/2017
Automotive ServiceGambrillsMD2,461 6,139 — — 2,461 6,139 8,600 806 20093/28/2017
Convenience StoresTylerTX404 1,433 — — 404 1,433 1,837 271 19803/30/2017
Early Childhood EducationSan AntonioTX928 3,312 — — 928 3,312 4,240 445 20164/25/2017
Medical / DentalPaysonAZ548 1,944 — — 548 1,944 2,492 256 19884/28/2017
Medical / DentalBrownsvilleTX1,626 — 982 7,743 2,608 7,743 10,351 843 20185/5/2017
Medical / DentalBaytownTX286 1,790 — — 286 1,790 2,076 225 20085/18/2017
Car WashesLas CrucesNM510 2,290 — — 510 2,290 2,800 327 20085/24/2017
Car WashesLas CrucesNM570 2,187 — — 570 2,187 2,757 312 20105/24/2017
Building MaterialsColumbia StationOH1,078 1,437 —  —  1,078 1,437 2,515 233 19616/1/2017
Building MaterialsMaumeeOH733 1,238 —  —  733 1,238 1,971 201 19636/1/2017
Building MaterialsTroyOH403 693 —  —  403 693 1,096 113 19916/1/2017
Building MaterialsJacksonOH288 211 —  —  288 211 499 35 19956/1/2017
Building MaterialsLancasterOH376 833 —  —  376 833 1,209 136 19956/1/2017
Building MaterialsPortsmouthOH133 160 —  —  133 160 293 26 19966/1/2017
Building MaterialsRadcliffKY414 200 —  —  414 200 614 33 19846/1/2017
Building MaterialsGainesvilleFL934 638 —  —  934 638 1,572 104 20036/1/2017
Building MaterialsCartersvilleGA1,313 1,743 —  —  1,313 1,743 3,056 283 20036/1/2017
Building MaterialsDouglasvilleGA1,026 2,421 —  —  1,026 2,421 3,447 393 20046/1/2017
Building MaterialsEl PasoTX901 177 —  —  901 177 1,078 29 19846/1/2017
Building MaterialsGarlandTX1,250 2,283 —  —  1,250 2,283 3,533 371 20016/1/2017
Building MaterialsConroeTX2,150 631 — — 2,150 631 2,781 103 20026/1/2017
F-5

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition		 
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		 Building &
Improvements		 Land &
Improvements		Building &
Improvements		Total
Building MaterialsAmarilloTX$927 $655 $— $— $927 $655 $1,582 $107 20026/1/2017
Building MaterialsGrand JunctionCO760 403 — — 760 403 1,163 66 19836/1/2017
Building MaterialsMt. PleasantSC1,097 171 — — 1,097 171 1,268 28 19836/1/2017
Building MaterialsIrondaleAL546 227 — — 546 227 773 37 19756/1/2017
Building MaterialsBessemerAL1,514 3,413 — — 1,514 3,413 4,927 554 20026/1/2017
Car WashesFarmingtonNM634 4,945 — — 634 4,945 5,579 706 20056/6/2017
Car WashesFarmingtonNM746 2,795 — — 746 2,795 3,541 399 20136/6/2017
Car WashesPuebloCO898 5,103 — — 898 5,103 6,001 728 20086/6/2017
Restaurants - Quick ServiceSopertonGA312 443 (56)(f)(55)(f)256 388 644 88 19926/6/2017
Movie TheatresKenoshaWI3,159 3,755 116 — 3,275 3,755 7,030 646 19976/8/2017
EntertainmentVisaliaCA1,320 2,320 — — 1,320 2,320 3,640 364 19846/30/2017
Automotive ServiceKnoxvilleTN518 695 — — 518 695 1,213 132 20087/21/2017
Automotive ServiceForest ParkGA498 850 — — 498 850 1,348 146 19927/21/2017
Automotive ServiceMartinezGA612 570 — — 612 570 1,182 124 19927/21/2017
Automotive ServiceClarksvilleTN498 633 — — 498 633 1,131 116 19987/21/2017
Automotive ServiceOcalaFL518 715 — 168 518 883 1,401 137 19897/21/2017
Automotive ServiceOrlandoFL456 664 — 178 456 842 1,298 113 19897/21/2017
Medical / DentalMontgomeryAL477 2,976 — — 477 2,976 3,453 369 20018/7/2017
Restaurants - Quick ServiceAlgonaIA150 528 — — 150 528 678 82 19938/10/2017
Car WashesBufordGA1,353 3,693 — — 1,353 3,693 5,046 553 20108/15/2017
Early Childhood EducationOrlandoFL1,175 4,362 — — 1,175 4,362 5,537 541 20108/25/2017
Automotive ServiceGarden CityMI366 961 — — 366 961 1,327 138 19848/29/2017
Automotive ServiceTroyMI794 1,389 — — 794 1,389 2,183 199 19748/29/2017
Automotive ServiceBurtonMI188 1,180 — — 188 1,180 1,368 155 19558/29/2017
Medical / DentalRound RockTX713 6,821 — — 713 6,821 7,534 790 20169/12/2017
Car WashesLittle RockAR685 3,361 — — 685 3,361 4,046 401 19769/12/2017
Car WashesBryantAR489 2,790 — — 489 2,790 3,279 328 19979/20/2017
Automotive ServiceLongwoodFL887 1,263 — 177 887 1,440 2,327 215 20009/25/2017
Car WashesAndersonSC793 4,031 — — 793 4,031 4,824 504 20089/26/2017
Car WashesCorneliaGA470 2,670 — — 470 2,670 3,140 334 20019/26/2017
Car WashesSouth CommerceGA607 3,072 — — 607 3,072 3,679 391 20169/26/2017
Car WashesSenecaSC255 2,994 — — 255 2,994 3,249 352 20059/26/2017
Restaurants - Quick ServiceEast BethelMN764 1,353 — — 764 1,353 2,117 308 19969/27/2017
Restaurants - Quick ServiceIsantiMN1,167 1,859 — — 1,167 1,859 3,026 353 19899/27/2017
Convenience StoresBrahamMN289 1,043 — — 289 1,043 1,332 164 19869/27/2017
Restaurants - Quick ServiceGrantsburgWI640 1,673 — — 640 1,673 2,313 313 20059/27/2017
Health and FitnessHobbsNM938 1,503 — — 938 1,503 2,441 235 20169/28/2017
Health and FitnessFlorenceKY868 2,186 — — 868 2,186 3,054 297 19949/28/2017
Automotive ServiceMagnoliaTX1,402 2,480 — — 1,402 2,480 3,882 406 20179/29/2017
Early Childhood EducationWinter GardenFL1,169 4,603 — — 1,169 4,603 5,772 597 20159/29/2017
Car WashesRogersAR763 2,663 — — 763 2,663 3,426 342 20059/29/2017
Car WashesShreveportLA460 2,615 — — 460 2,615 3,075 334 20179/29/2017
EntertainmentOrlandoFL2,290 4,377 — 4,500 2,290 8,877 11,167 672 20079/29/2017
Medical / DentalNorth LimaOH112 926 — — 112 926 1,038 107 197610/5/2017
Medical / DentalWest LafayetteIN122 397 — — 122 397 519 51 197610/5/2017
Medical / DentalSalemOH92 468 — — 92 468 560 59 198510/5/2017
Medical / DentalToledoOH448 1,750 — — 448 1,750 2,198 203 199510/5/2017
Medical / DentalYoungstownOH275 702 — — 275 702 977 98 197110/5/2017
Medical / DentalMadisonOH387 488 — — 387 488 875 69 195010/5/2017
Medical / DentalYoungstownOH366 1,394 — — 366 1,394 1,760 186 199510/5/2017
Medical / DentalPenn YanNY132 651 — — 132 651 783 87 198610/5/2017
Medical / DentalKentOH173 610 — — 173 610 783 80 197010/5/2017
Convenience StoresTylerTX706 511 — 950 706 1,461 2,167 198 199610/16/2017
EntertainmentHooverAL1,403 2,939 — — 1,403 2,939 4,342 401 201710/13/2017
F-6

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Convenience StoresFarmingtonNM$332 $302 $— $— $332 $302 $634 $54 196611/8/2017
Convenience StoresFarmingtonNM342 604 — — 342 604 946 91 197211/8/2017
Convenience StoresFarmingtonNM372 886 — — 372 886 1,258 146 201311/8/2017
Convenience StoresAztecNM322 685 — — 322 685 1,007 105 198211/8/2017
Convenience StoresFarmingtonNM282 1,077 — — 282 1,077 1,359 163 198011/8/2017
Convenience StoresFarmingtonNM503 815 — — 503 815 1,318 133 198011/8/2017
Convenience StoresFarmingtonNM735 352 — — 735 352 1,087 71 198211/8/2017
Convenience StoresIgnacioCO272 1,047 — — 272 1,047 1,319 151 198311/8/2017
Convenience StoresFarmingtonNM332 775 — — 332 775 1,107 126 198511/8/2017
Convenience StoresFarmingtonNM453 1,027 — — 453 1,027 1,480 180 199011/8/2017
Convenience StoresKirtlandNM332 906 — — 332 906 1,238 139 198011/8/2017
Restaurants - Quick ServiceGrayGA293 374 (55)(f)(43)(f)238 331 569 59 199211/10/2017
Restaurants - Quick ServiceSandersvilleGA283 515 (53)(f)(69)(f)230 446 676 76 198911/10/2017
Restaurants - Quick ServiceBarnesvilleGA243 414 (135)(f)(205)(f)108 209 317 59 199611/10/2017
Health and FitnessGreeleyCO1,484 4,491 — — 1,484 4,491 5,975 558 198911/16/2017
Restaurants - Quick ServiceHutchinsonKS194 777 — — 194 777 971 108 197111/16/2017
Medical / DentalTylerTX985 5,675 — — 985 5,675 6,660 688 199911/17/2017
Medical / DentalLindaleTX394 1,429 — — 394 1,429 1,823 203 201311/17/2017
Convenience StoresFarmingtonNM554 785 — — 554 785 1,339 157 199811/21/2017
Pet Care ServicesFranklinIN395 2,319 — — 395 2,319 2,714 285 200712/1/2017
Pet Care ServicesFayettevilleAR905 1,456 — — 905 1,456 2,361 203 197912/1/2017
Pet Care ServicesGreenwoodIN312 593 — — 312 593 905 78 195212/1/2017
Pet Care ServicesIndianapolisIN52 416 — — 52 416 468 48 195412/1/2017
Early Childhood EducationLansdowneVA2,167 2,982 — — 2,167 2,982 5,149 395 200612/4/2017
Early Childhood EducationOverland ParkKS1,189 4,062 — — 1,189 4,062 5,251 514 201712/8/2017
Restaurants - Casual DiningBossier CityLA976 2,347 — — 976 2,347 3,323 319 199312/15/2017
Restaurants - Casual DiningAugustaGA1,663 1,909 — — 1,663 1,909 3,572 248 198212/15/2017
Movie TheatresDublinOH2,126 10,097 — — 2,126 10,097 12,223 1,168 199412/15/2017
Restaurants - Quick ServiceDalevilleAL127 409 — — 127 409 536 54 198312/19/2017
Restaurants - Quick ServiceRoanokeAL224 526 — — 224 526 750 76 199012/19/2017
Restaurants - Quick ServiceJasperAL370 331 — — 370 331 701 65 200512/19/2017
Restaurants - Quick ServiceAlexander CityAL263 506 — — 263 506 769 77 200412/19/2017
Restaurants - Quick ServiceHeadlandAL273 370 — — 273 370 643 76 200712/19/2017
Restaurants - Quick ServiceTallasseeAL195 302 — — 195 302 497 51 200812/19/2017
Restaurants - Quick ServiceTalladegaAL88 273 — — 88 273 361 41 199912/19/2017
Restaurants - Quick ServiceEnterpriseAL166 380 — — 166 380 546 56 197412/19/2017
Restaurants - Quick ServiceValleyAL185 302 — — 185 302 487 49 200412/19/2017
Restaurants - Quick ServiceSelmaAL175 409 — 150 175 559 734 59 199612/19/2017
Restaurants - Casual DiningLinthicumMD1,691 1,124 — — 1,691 1,124 2,815 196 200412/21/2017
Restaurants - Casual DiningPocomoke CityMD653 849 — — 653 849 1,502 164 200512/21/2017
Restaurants - Casual DiningD'IbervilleMS927 623 — — 927 623 1,550 106 200412/21/2017
Restaurants - Casual DiningClarksvilleTN861 736 — — 861 736 1,597 114 200312/21/2017
Restaurants - Casual DiningScrantonPA785 755 6 — 791 755 1,546 152 199512/21/2017
Restaurants - Casual DiningAlexander CityAL511 802 — — 511 802 1,313 124 200712/21/2017
Restaurants - Casual DiningColumbiaSC785 500 (338)(f)(179)(f)447 321 768 80 200312/21/2017
Restaurants - Casual DiningPalm CityFL672 727 (53)(f)(32)(f)619 695 1,314 113 200312/21/2017
Restaurants - Casual DiningSt RobertMO644 755 — — 644 755 1,399 109 200112/21/2017
Automotive ServiceSpringTX721 932 — 300 721 1,232 1,953 218 201712/27/2017
Car WashesBentonvilleAR1,306 2,437 — — 1,306 2,437 3,743 332 201712/28/2017
Health and FitnessAuburnAL1,104 2,411 — — 1,104 2,411 3,515 345 200712/29/2017
Health and FitnessColumbusGA2,175 2,540 — — 2,175 2,540 4,715 398 200512/29/2017
Early Childhood EducationSouthavenMS1,060 1,496 — 124 1,060 1,620 2,680 218 200212/29/2017
Restaurants - Quick ServiceSaginawMI528 1,086 — — 528 1,086 1,614 157 20121/4/2018
Restaurants - Quick ServiceGrand RapidsMI299 1,205 — — 299 1,205 1,504 161 20161/4/2018
F-7

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year ConstructedDate Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Restaurants - Quick ServiceGrand RapidsMI$349 $1,166 $— $— $349 $1,166 $1,515 $141 20131/4/2018
Health and FitnessWichitaKS2,594 — 326 4,812 2,920 4,812 7,732 491 20181/19/2018
Convenience StoresBloomfieldNM221 784 — — 221 784 1,005 103 19801/24/2018
Early Childhood EducationTrumbullCT864 — 206 3,392 1,070 3,392 4,462 238 20181/31/2018
Restaurants - Casual DiningDavenportIA57 479 — — 57 479 536 52 19552/8/2018
Restaurants - Casual DiningBettendorfIA402 1,050 — — 402 1,050 1,452 123 19752/8/2018
Restaurants - Casual DiningKewaneeIL115 432 — — 115 432 547 55 19932/8/2018
Restaurants - Casual DiningDavenportIA459 1,304 — — 459 1,304 1,763 158 19902/8/2018
Restaurants - Casual DiningDavenportIA153 1,268 — — 153 1,268 1,421 139 19522/8/2018
Automotive ServiceRosevilleMN489 1,602 — — 489 1,602 2,091 191 19712/16/2018
Automotive ServiceWoodburyMN978 2,049 — — 978 2,049 3,027 253 20002/16/2018
GroceryBurlingtonNC762 1,300 — — 762 1,300 2,062 174 19922/16/2018
Health and FitnessAikenSC1,063 3,787 — — 1,063 3,787 4,850 436 19983/1/2018
Early Childhood EducationBurlingtonCT432 1,408 — — 432 1,408 1,840 185 20043/9/2018
Early Childhood EducationCantonCT730 761 — — 730 761 1,491 128 19793/9/2018
Early Childhood EducationFarmingtonCT278 1,459 — — 278 1,459 1,737 174 19853/9/2018
Early Childhood EducationDublinOH740 2,934 — — 740 2,934 3,674 349 20083/13/2018
Movie TheatresShelbyNC1,826 2,798 — — 1,826 2,798 4,624 374 20043/22/2018
Health and FitnessTulsaOK2,856 — 88 4,329 2,944 4,329 7,273 370 20183/22/2018
Automotive ServiceElk RiverMN433 898 — — 433 898 1,331 114 19963/29/2018
Early Childhood EducationSan AntonioTX482 1,496 — — 482 1,496 1,978 169 20073/29/2018
Pet Care ServicesCave CreekAZ1,789 2,540 — 1,405 1,789 3,945 5,734 310 20084/5/2018
Pet Care ServicesMaricopaAZ1,057 1,057 — 1,520 1,057 2,577 3,634 141 20084/5/2018
Early Childhood EducationByron CenterMI513 1,591 — — 513 1,591 2,104 216 20124/9/2018
Medical / DentalRussellvilleAR710 1,297 — — 710 1,297 2,007 152 20154/20/2018
Car WashesBel AirMD321 3,120 — — 321 3,120 3,441 365 20164/26/2018
Automotive ServiceApexNC229 428 — — 229 428 657 57 20005/1/2018
Automotive ServiceHolly SpringsNC308 1,283 — — 308 1,283 1,591 145 20035/1/2018
Automotive ServiceFuquay VarinaNC487 318 — — 487 318 805 59 20085/1/2018
Movie TheatresDecaturAL1,491 4,350 — — 1,491 4,350 5,841 556 20135/10/2018
Automotive ServiceNorth CantonOH481 982 — — 481 982 1,463 119 19605/17/2018
Automotive ServiceClinton TownshipMI1,179 688 — — 1,179 688 1,867 168 19835/17/2018
Automotive ServiceBaltimoreMD206 1,709 — — 206 1,709 1,915 165 19525/17/2018
Convenience StoresSartellMN988 607 — — 988 607 1,595 156 20135/17/2018
Convenience StoresSt. AugustaMN473 1,111 — — 473 1,111 1,584 171 19785/17/2018
Convenience StoresRiceMN782 1,461 14 104 796 1,565 2,361 275 20055/17/2018
Convenience StoresPine CityMN792 1,173 — — 792 1,173 1,965 226 19675/17/2018
Convenience StoresCambridgeMN1,008 2,161 — — 1,008 2,161 3,169 357 20075/17/2018
Pet Care ServicesLakewood RanchFL442 — 1,054 2,677 1,496 2,677 4,173 331 20195/24/2018
Other ServicesErwinTN713 1,484 — — 713 1,484 2,197 173 19816/1/2018
Other ServicesSpartaNC713 1,942 — — 713 1,942 2,655 251 19736/1/2018
Other ServicesKingsportTN1,220 3,143 — — 1,220 3,143 4,363 419 19796/1/2018
Other ServicesClevelandTN673 1,083 — — 673 1,083 1,756 132 19756/1/2018
Other ServicesClevelandTN615 2,938 — — 615 2,938 3,553 289 19646/1/2018
Other ServicesCastlewoodVA1,259 1,786 — — 1,259 1,786 3,045 251 19916/1/2018
Other ServicesCovingtonGA849 3,309 — — 849 3,309 4,158 392 19916/1/2018
Other ServicesHarlemGA703 1,610 — — 703 1,610 2,313 191 18956/1/2018
Other ServicesLondonKY937 2,391 — — 937 2,391 3,328 305 19996/1/2018
Other ServicesElizabethtonTN254 517 — — 254 517 771 82 20106/1/2018
Other ServicesElizabethtonTN488 849 — — 488 849 1,337 102 19966/1/2018
Other ServicesMountain CityTN78 176 — — 78 176 254 21 19366/1/2018
Convenience StoresMosineeWI260 509 — — 260 509 769 87 19946/15/2018
Convenience StoresWausauWI311 372 — — 311 372 683 79 19956/15/2018
Convenience StoresWausauWI402 1,470 — — 402 1,470 1,872 182 19956/15/2018
F-8

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Convenience StoresWausauWI$502 $361 $— $— $502 $361 $863 $109 19896/15/2018
Convenience StoresWausauWI412 445 — — 412 445 857 98 19916/15/2018
Convenience StoresPrenticeWI1,164 753 — — 1,164 753 1,917 319 19896/15/2018
Convenience StoresRothschildWI703 760 — — 703 760 1,463 157 19856/15/2018
Convenience StoresPhillipsWI191 722 — — 191 722 913 101 19706/15/2018
Convenience StoresPoundWI321 478 — — 321 478 799 113 19836/15/2018
Convenience StoresGillettWI241 591 — — 241 591 832 104 19906/15/2018
Convenience StoresTigertonWI954 1,014 — — 954 1,014 1,968 283 19986/15/2018
Convenience StoresStevens PointWI1,054 522 — — 1,054 522 1,576 186 19936/15/2018
Convenience StoresMerrillWI1,857 1,305 — — 1,857 1,305 3,162 431 19966/15/2018
Convenience StoresTomahawkWI683 1,008 — — 683 1,008 1,691 229 19926/15/2018
Convenience StoresMarathonWI261 1,244 — — 261 1,244 1,505 157 19876/15/2018
Convenience StoresEdgarWI502 949 — — 502 949 1,451 176 19846/15/2018
Convenience StoresPloverWI1,275 883 — — 1,275 883 2,158 214 20066/15/2018
Convenience StoresHatleyWI783 851 — — 783 851 1,634 206 19976/15/2018
Convenience StoresMinoquaWI371 412 — — 371 412 783 102 19846/15/2018
Convenience StoresWittenbergWI1,405 1,305 — — 1,405 1,305 2,710 393 19996/15/2018
Convenience StoresRudolphWI412 840 — — 412 840 1,252 147 19926/15/2018
Convenience StoresMountainWI371 663 — — 371 663 1,034 136 19986/15/2018
Convenience StoresPark FallsWI392 1,164 — — 392 1,164 1,556 181 19846/15/2018
Convenience StoresWestonWI622 843 — — 622 843 1,465 167 19936/15/2018
Early Childhood EducationSurpriseAZ1,546 1,736 — 21 1,546 1,757 3,303 207 20086/21/2018
Car WashesFayettevilleAR676 2,404 — — 676 2,404 3,080 259 20186/21/2018
Early Childhood EducationMalvernPA701 2,084 — — 701 2,084 2,785 255 20066/28/2018
Early Childhood EducationFrazerPA730 2,276 — — 730 2,276 3,006 267 19986/28/2018
Early Childhood EducationGlen MillsPA3,938 3,246 — — 3,938 3,246 7,184 525 19926/28/2018
Early Childhood EducationErialNJ740 1,546 — — 740 1,546 2,286 172 20006/28/2018
Early Childhood EducationExtonPA442 2,007 — — 442 2,007 2,449 217 20006/28/2018
Early Childhood EducationVoorheesNJ509 1,892 — — 509 1,892 2,401 215 20026/28/2018
Early Childhood EducationRoyersfordPA259 1,892 — — 259 1,892 2,151 195 20026/28/2018
Early Childhood EducationWest NorritonPA557 1,998 — — 557 1,998 2,555 220 20036/28/2018
Early Childhood EducationKing of PrussiaPA490 2,171 — — 490 2,171 2,661 224 20046/28/2018
Early Childhood EducationDowningtownPA605 2,219 — — 605 2,219 2,824 242 20076/28/2018
Early Childhood EducationCollegevillePA423 1,940 — — 423 1,940 2,363 206 20086/28/2018
Early Childhood EducationPhoenixvillePA1,431 4,466 — — 1,431 4,466 5,897 513 20106/28/2018
Early Childhood EducationBlue BellPA788 3,218 — — 788 3,218 4,006 334 19676/28/2018
Medical / DentalMountain GroveMO113 527 — — 113 527 640 63 20126/28/2018
Medical / DentalHarrisonAR144 835 — — 144 835 979 88 20066/28/2018
Medical / DentalJonesboroAR329 1,021 — — 329 1,021 1,350 111 20056/28/2018
Medical / DentalEl DoradoAR93 228 — — 93 228 321 25 20006/28/2018
Medical / DentalBerryvilleAR62 120 — — 62 120 182 18 20006/28/2018
Medical / DentalBatesvilleAR237 1,139 — — 237 1,139 1,376 131 20176/28/2018
Health and FitnessSalisburyMA1,169 14,584 1,331 2,846 2,500 17,430 19,930 1,422 20046/29/2018
Health and FitnessPeabodyMA3,497 6,523 — 90 3,497 6,613 10,110 653 20096/29/2018
Health and FitnessMethuenMA4,544 5,179 — — 4,544 5,179 9,723 624 20026/29/2018
Health and FitnessMoncks CornerSC978 1,439 — — 978 1,439 2,417 205 20026/29/2018
Medical / DentalBrownsvilleTX172 1,683 — — 172 1,683 1,855 162 20087/13/2018
Pet Care ServicesMesaAZ1,329 1,531 — 55 1,329 1,586 2,915 172 19907/13/2018
Pet Care ServicesChandlerAZ1,775 3,033 — 55 1,775 3,088 4,863 339 20027/13/2018
Pet Care ServicesGreen ValleyAZ913 2,454 — 55 913 2,509 3,422 260 20157/13/2018
Restaurants - Quick ServiceBrownsvilleKY297 1,024 — — 297 1,024 1,321 123 19907/18/2018
Car WashesAthenGA1,011 2,536 — 600 1,011 3,136 4,147 371 20067/26/2018
Car WashesWinderGA683 2,027 — — 683 2,027 2,710 255 20087/26/2018
Car WashesDecaturGA703 3,031 — — 703 3,031 3,734 330 19677/26/2018
F-9

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Car WashesDecaturGA$828 $2,029 $— $— $828 $2,029 $2,857 $259 20077/26/2018
Car WashesDuluthGA1,261 2,187 — — 1,261 2,187 3,448 264 20067/26/2018
Restaurants - Quick ServiceFort OglethorpeGA1,283 1,045 — — 1,283 1,045 2,328 120 20018/8/2018
Restaurants - Quick ServiceRinggoldGA387 1,406 — — 387 1,406 1,793 167 20158/8/2018
Restaurants - Quick ServiceChattanoogaTN— — — — — — — — 20098/8/2018
Restaurants - Quick ServiceChattanoogaTN— — — — — — — — 20048/8/2018
Restaurants - Quick ServiceChattanoogaTN1,497 1,161 — — 1,497 1,161 2,658 132 20128/8/2018
Restaurants - Quick ServiceDaytonTN468 1,283 — — 468 1,283 1,751 156 20168/8/2018
Restaurants - Quick ServiceOoltewahTN1,079 1,262 — — 1,079 1,262 2,341 141 20038/8/2018
Restaurants - Quick ServiceSoddy DaisyTN— — — — — — — — 20068/8/2018
Automotive ServiceOklahoma CityOK152 596 — — 152 596 748 67 19808/9/2018
Automotive ServiceMidwest CityOK253 495 — — 253 495 748 70 19958/9/2018
Automotive ServiceDel CityOK364 384 — — 364 384 748 68 19858/9/2018
Automotive ServiceMidwest CityOK172 526 — — 172 526 698 61 19808/9/2018
Early Childhood EducationEden PrairieMN1,264 1,651 — — 1,264 1,651 2,915 226 19958/10/2018
Restaurants - Quick ServiceBlythevilleAR— — — — — — — — 20078/22/2018
Restaurants - Quick ServiceParagouldAR744 784 — — 744 784 1,528 95 20088/22/2018
Restaurants - Quick ServiceVan BurenAR642 946 — — 642 946 1,588 113 20088/22/2018
Convenience StoresSeguinTX— — — — — — — — 19749/4/2018
Convenience StoresBurlesonTX— — — — — — — — 19859/4/2018
Convenience StoresWinfieldTX— — — — — — — — 19799/4/2018
Automotive ServicePontiacMI445 1,077 — — 445 1,077 1,522 136 19789/7/2018
Restaurants - Quick ServiceSan AngeloTX161 806 — — 161 806 967 88 19789/12/2018
Health and FitnessSpringfieldOR2,024 2,468 — — 2,024 2,468 4,492 331 19999/13/2018
Health and FitnessEugeneOR1,046 2,986 — — 1,046 2,986 4,032 290 19809/13/2018
Early Childhood EducationSan AntonioTX617 2,258 — — 617 2,258 2,875 237 20089/14/2018
Early Childhood EducationColleyvilleTX695 1,022 — 423 695 1,445 2,140 122 19979/18/2018
Restaurants - Quick ServiceMarionAR— — — — — — — — 20079/21/2018
EntertainmentMetairieLA1,323 2,143 — — 1,323 2,143 3,466 252 20169/21/2018
Restaurants - Quick ServiceMontroseCO698 1,036 — — 698 1,036 1,734 128 20009/25/2018
Restaurants - Family DiningAugustaGA825 894 — — 825 894 1,719 99 19689/25/2018
Restaurants - Family DiningMaconGA648 992 — — 648 992 1,640 111 19839/25/2018
Restaurants - Family DiningMaconGA923 972 — — 923 972 1,895 131 19729/25/2018
Restaurants - Quick ServiceFairbanksAK438 1,524 — — 438 1,524 1,962 180 19719/27/2018
Restaurants - Quick ServiceFairbanksAK687 1,633 5 177 692 1,810 2,502 201 20069/27/2018
Medical / DentalAbileneTX336 1,959 — — 336 1,959 2,295 203 20069/27/2018
Automotive ServiceBremenIN221 1,284 — — 221 1,284 1,505 124 19709/28/2018
Car WashesSpringdaleAR1,405 3,139 — — 1,405 3,139 4,544 342 20189/28/2018
Restaurants - Quick ServiceAndalusiaAL384 727 — — 384 727 1,111 89 19889/28/2018
Medical / DentalForrest CityAR143 608 — — 143 608 751 68 20079/28/2018
Early Childhood EducationAshburnVA898 671 — — 898 671 1,569 81 20019/28/2018
Restaurants - Quick ServiceNorth Richard HillsTX875 1,113 — — 875 1,113 1,988 151 20179/28/2018
Restaurants - Quick ServiceGrapevineTX775 904 — — 775 904 1,679 126 20169/28/2018
Restaurants - Quick ServiceSt AugustineFL917 1,964 — — 917 1,964 2,881 210 20109/28/2018
Early Childhood EducationFleming IslandFL872 2,523 — — 872 2,523 3,395 237 20069/28/2018
Restaurants - Quick ServiceHot SpringsAR240 899 — — 240 899 1,139 91 197910/4/2018
Health and FitnessTucsonAZ4,227 — 140 4,264 4,367 4,264 8,631 239 201910/10/2018
Restaurants - Quick ServiceCountrysideIL727 1,302 — — 727 1,302 2,029 138 201310/26/2018
Medical / DentalMidlandTX298 1,760 — — 298 1,760 2,058 155 199310/31/2018
Convenience StoresTucsonAZ977 827 — — 977 827 1,804 156 198511/7/2018
Convenience StoresPhoenixAZ1,037 429 — — 1,037 429 1,466 68 198711/7/2018
Convenience StoresCentraliaWA568 509 — — 568 509 1,077 91 197611/7/2018
Medical / DentalMontgomeryAL454 1,528 — — 454 1,528 1,982 156 200411/7/2018
Medical / DentalPrattvilleAL237 857 — — 237 857 1,094 86 201211/7/2018
F-10

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Convenience StoresDuncanvilleTX$— $— $— $— $— $— $— $— 198011/8/2018
Restaurants - Quick ServicePembrokeNY577 898 — — 577 898 1,475 133 201711/28/2018
Medical / DentalFort WorthTX466 845 — — 466 845 1,311 92 199711/30/2018
Medical / DentalArlingtonTX546 649 — — 546 649 1,195 81 199911/30/2018
Medical / DentalBurlesonTX61 1,091 — — 61 1,091 1,152 85 194211/30/2018
Medical / DentalDallasTX1,813 3,606 — — 1,813 3,606 5,419 314 197911/30/2018
Early Childhood EducationOlive BranchMS1,027 1,050 — — 1,027 1,050 2,077 160 200912/5/2018
Early Childhood EducationManchesterCT915 939 — 1,805 915 2,744 3,659 341 197712/7/2018
Early Childhood EducationMaconGA538 1,067 — — 538 1,067 1,605 130 200712/14/2018
Early Childhood EducationMaconGA508 1,067 — — 508 1,067 1,575 115 200812/14/2018
EntertainmentAndoverMN898 1,208 — — 898 1,208 2,106 134 200512/12/2018
EntertainmentRochesterMN379 968 — — 379 968 1,347 89 195812/12/2018
EntertainmentSouth St. PaulMN1,008 928 — — 1,008 928 1,936 115 197812/12/2018
EntertainmentMounds ViewMN1,986 3,264 — — 1,986 3,264 5,250 344 196712/12/2018
EntertainmentSt. Paul ParkMN529 1,058 — — 529 1,058 1,587 117 195912/12/2018
EntertainmentOakdaleMN2,136 5,699 — — 2,136 5,699 7,835 548 200912/12/2018
EntertainmentMonticelloMN1,527 3,414 — — 1,527 3,414 4,941 411 200712/12/2018
EntertainmentSt. PaulMN1,218 1,407 — — 1,218 1,407 2,625 146 195512/12/2018
EntertainmentRamseyMN609 749 — — 609 749 1,358 119 198812/12/2018
Health and FitnessWinston SalemNC986 1,205 688 (f)(90)(f)1,674 1,115 2,789 96 197212/19/2018
Automotive ServiceDentonTX1,278 1,582 — — 1,278 1,582 2,860 194 198212/20/2018
Car WashesDubuqueIA990 2,121 — — 990 2,121 3,111 218 199212/20/2018
Car WashesDavenportIA757 2,394 — — 757 2,394 3,151 237 199012/20/2018
Car WashesRock IslandIL1,030 2,949 — — 1,030 2,949 3,979 293 199612/20/2018
Pet Care ServicesGeorgetownTX753 — 826 3,630 1,579 3,630 5,209 195 202012/21/2018
Pet Care ServicesMiddleburgFL803 — 1,842 2,384 2,645 2,384 5,029 350 202012/21/2018
Early Childhood EducationArlingtonTX1,296 3,239 — — 1,296 3,239 4,535 310 198912/27/2018
Home FurnishingsKansas CityMO273 4,683 — — 273 4,683 4,956 384 200712/28/2018
Restaurants - Casual DiningFlintMI619 274 — — 619 274 893 57 19751/2/2019
Restaurants - Casual DiningSaginawMI335 294 — — 335 294 629 51 19671/2/2019
Restaurants - Quick ServiceAlexandriaLA271 953 — — 271 953 1,224 94 19851/10/2019
Restaurants - Quick ServiceLeesvilleLA140 812 — — 140 812 952 79 19831/10/2019
Restaurants - Quick ServiceGriffinGA923 1,103 — — 923 1,103 2,026 115 19831/10/2019
Car WashesSpringdaleAR1,032 2,325 — — 1,032 2,325 3,357 246 20181/10/2019
EntertainmentNampaID886 2,768 — — 886 2,768 3,654 239 20081/17/2019
Medical / DentalWest MemphisAR247 543 — — 247 543 790 61 20071/22/2019
Early Childhood EducationGilbertAZ1,074 — 632 3,641 1,706 3,641 5,347 233 20201/29/2019
Pet Care ServicesDenham SpringsLA485 701 — — 485 701 1,186 76 20071/31/2019
Medical / DentalLittle RockAR770 1,562 — — 770 1,562 2,332 141 20041/31/2019
Medical / DentalBryantAR460 1,519 — — 460 1,519 1,979 132 20141/31/2019
Restaurants - Quick ServiceRustonLA544 1,399 — — 544 1,399 1,943 144 20162/14/2019
Restaurants - Quick ServiceEl DoradoAR661 1,448 — — 661 1,448 2,109 157 20172/14/2019
Restaurants - Quick ServicePercivalIA578 1,252 — — 578 1,252 1,830 143 20042/15/2019
Early Childhood EducationGarnerNC378 1,962 — — 378 1,962 2,340 166 20072/28/2019
Restaurants - Casual DiningWilderKY317 1,169 — — 317 1,169 1,486 98 20102/28/2019
Medical / DentalMeridianMS886 5,947 — — 886 5,947 6,833 464 20063/8/2019
Health and FitnessAbileneTX1,326 2,478 — 144 1,326 2,622 3,948 264 19743/8/2019
Early Childhood EducationSt. AugustineFL183 1,436 — — 183 1,436 1,619 119 20163/8/2019
Early Childhood EducationSt. AugustineFL611 2,149 — — 611 2,149 2,760 189 20063/8/2019
Early Childhood EducationSt. AugustineFL1,385 2,108 — — 1,385 2,108 3,493 225 19813/8/2019
Health and FitnessLas VegasNV491 2,543 — — 491 2,543 3,034 208 19703/13/2019
Automotive ServiceSt. AugustaMN518 1,057 — — 518 1,057 1,575 123 19913/13/2019
Pet Care ServicesCarbondaleIL605 713 — — 605 713 1,318 96 19863/29/2019
Pet Care ServicesEnergyIL313 254 — — 313 254 567 30 19953/29/2019
F-11

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Pet Care ServicesCreteNE$381 $332 $— $— $381 $332 $713 $59 19673/29/2019
Pet Care ServicesBallwinMO537 752 — — 537 752 1,289 74 19863/29/2019
Pet Care ServicesPea RidgeAR518 654 — — 518 654 1,172 72 19963/29/2019
Pet Care ServicesNormanOK225 283 — — 225 283 508 50 19933/29/2019
Pet Care ServicesMartinsvilleIN88 664 — — 88 664 752 51 19893/29/2019
Pet Care ServicesCarbondaleIL557 537 — — 557 537 1,094 86 19763/29/2019
Pet Care ServicesNashvilleIN146 703 — — 146 703 849 61 19703/29/2019
EntertainmentMonroevillePA823 2,028 — — 823 2,028 2,851 219 20163/29/2019
Early Childhood EducationStockbridgeGA645 1,345 — — 645 1,345 1,990 122 20043/29/2019
EntertainmentHuntersvilleNC4,087 9,719 — — 4,087 9,719 13,806 789 19963/29/2019
EntertainmentGreensboroNC2,593 8,381 — — 2,593 8,381 10,974 701 19883/29/2019
Medical / DentalTuscaloosaAL262 1,682 — — 262 1,682 1,944 129 19913/29/2019
Early Childhood EducationDuluthGA843 2,538 — 150 843 2,688 3,531 217 19943/29/2019
Medical / DentalIndianapolisIN509 3,504 — — 509 3,504 4,013 264 20163/29/2019
Medical / DentalFort WayneIN4,006 — 397 2,694 4,403 2,694 7,097 133 20203/29/2019
Restaurants - Quick ServiceWoodstockGA435 932 — — 435 932 1,367 81 19904/5/2019
Restaurants - Quick ServiceCommerceGA435 851 — — 435 851 1,286 74 19904/5/2019
Health and FitnessNormanOK730 2,937 — 559 730 3,496 4,226 305 20184/17/2019
Early Childhood EducationAlpharettaGA835 865 — 400 835 1,265 2,100 88 19994/30/2019
Early Childhood EducationJohns CreekGA1,137 744 — — 1,137 744 1,881 91 20044/30/2019
Medical / DentalTylerTX365 477 — — 365 477 842 37 19405/15/2019
Medical / DentalGroesbeckTX142 406 — — 142 406 548 33 20055/15/2019
Medical / DentalGreenvilleTX172 609 — — 172 609 781 52 19855/15/2019
Medical / DentalMarshallTX487 1,167 — — 487 1,167 1,654 87 19695/15/2019
Pet Care ServicesPrescottAZ223 1,277 — — 223 1,277 1,500 95 19905/24/2019
EntertainmentTrussvilleAL4,403 5,693 — — 4,403 5,693 10,096 494 20025/30/2019
Early Childhood EducationCoral SpringsFL1,939 2,639 — — 1,939 2,639 4,578 237 20045/31/2019
Convenience StoresNew LexingtonOH595 832 — — 595 832 1,427 110 19976/6/2019
Convenience StoresWaterfordPA467 383 — — 467 383 850 80 19966/6/2019
Convenience StoresCrestonOH596 630 — — 596 630 1,226 75 19976/6/2019
Convenience StoresAlexandriaKY425 502 — — 425 502 927 84 19986/6/2019
Convenience StoresRichmondKY1,132 357 — — 1,132 357 1,489 90 19986/6/2019
Convenience StoresCantonOH782 392 — — 782 392 1,174 94 19986/6/2019
Convenience StoresWoosterOH516 862 — — 516 862 1,378 114 19986/6/2019
Convenience StoresLouisvilleKY571 395 — — 571 395 966 75 19986/6/2019
Convenience StoresFairfieldOH426 305 — — 426 305 731 64 19996/6/2019
Convenience StoresNicholasvilleKY864 264 — — 864 264 1,128 63 19996/6/2019
Convenience StoresLouisvilleKY634 772 — — 634 772 1,406 98 19986/6/2019
Convenience StoresParisKY965 538 — — 965 538 1,503 91 19986/6/2019
Convenience StoresFairbornOH553 386 — — 553 386 939 73 19986/6/2019
Convenience StoresEastlakeOH804 861 — — 804 861 1,665 136 19986/6/2019
Convenience StoresBeavercreekOH1,066 574 — — 1,066 574 1,640 132 19996/6/2019
Convenience StoresMilfordOH675 738 — — 675 738 1,413 120 19986/6/2019
Convenience StoresLouisvilleKY883 402 — — 883 402 1,285 86 19986/6/2019
Convenience StoresWauseonOH722 381 — — 722 381 1,103 86 19986/6/2019
Convenience StoresMilanOH585 770 — — 585 770 1,355 123 19996/6/2019
Convenience StoresCantonOH565 767 — — 565 767 1,332 106 19996/6/2019
Convenience StoresMount SterlingKY721 383 — — 721 383 1,104 61 19986/6/2019
Convenience StoresLorainOH696 854 — — 696 854 1,550 143 19996/6/2019
Convenience StoresFairdaleKY683 711 — — 683 711 1,394 116 19996/6/2019
Convenience StoresSouth BloomfieldOH1,381 894 — — 1,381 894 2,275 234 19996/6/2019
Convenience StoresNewtownOH373 346 — — 373 346 719 55 19996/6/2019
Convenience StoresHudsonOH1,270 670 — — 1,270 670 1,940 161 19996/6/2019
Convenience StoresSeymourIN840 838 — — 840 838 1,678 149 19996/6/2019
F-12

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Convenience StoresPowellOH$841 $503 $— $— $841 $503 $1,344 $97 19966/6/2019
Convenience StoresAvonOH561 392 — — 561 392 953 59 19996/6/2019
Convenience StoresColumbusOH644 702 — — 644 702 1,346 121 19996/6/2019
Convenience StoresLouisvilleKY1,119 450 — — 1,119 450 1,569 104 19996/6/2019
Convenience StoresBedfordOH655 619 — — 655 619 1,274 98 19996/6/2019
Convenience StoresElizabethtownKY1,446 856 — — 1,446 856 2,302 166 19996/6/2019
Convenience StoresParmaOH884 903 — — 884 903 1,787 127 20016/6/2019
Restaurants - Casual DiningWarrenMI983 1,685 — — 983 1,685 2,668 171 19696/7/2019
Restaurants - Casual DiningDetroitMI572 923 — — 572 923 1,495 84 19486/7/2019
Restaurants - Casual DiningDearbornMI702 2,397 — — 702 2,397 3,099 176 19926/7/2019
Restaurants - Casual DiningFarmington HillsMI883 2,337 — — 883 2,337 3,220 200 19646/7/2019
Restaurants - Casual DiningLivoniaMI943 1,725 — — 943 1,725 2,668 162 19746/7/2019
Restaurants - Quick ServiceAlbionNY600 1,089 — — 600 1,089 1,689 99 19686/12/2019
Medical / DentalHuntsvilleTX277 503 — — 277 503 780 45 20036/13/2019
Medical / DentalLongviewTX257 452 — — 257 452 709 33 19986/13/2019
Convenience StoresDemingNM384 676 (177)(f)(315)(f)207 361 568 61 19906/21/2019
Restaurants - Casual DiningDanvilleIL553 1,619 — — 553 1,619 2,172 142 19916/26/2019
Restaurants - Casual DiningNew PhiladelphiaOH1,116 2,001 — — 1,116 2,001 3,117 166 19916/26/2019
Restaurants - Casual DiningBristolVA1,136 1,991 — — 1,136 1,991 3,127 162 20056/26/2019
Early Childhood EducationOlympiaWA377 1,569 — — 377 1,569 1,946 125 20026/27/2019
Early Childhood EducationTumwaterWA665 1,003 — — 665 1,003 1,668 76 19976/27/2019
Early Childhood EducationKlamath FallsOR447 1,202 — — 447 1,202 1,649 99 20106/27/2019
Early Childhood EducationGig HarborWA546 665 — — 546 665 1,211 55 19906/27/2019
Early Childhood EducationOlympiaWA477 566 — — 477 566 1,043 56 19846/27/2019
Early Childhood EducationTacomaWA427 1,410 — — 427 1,410 1,837 115 19876/27/2019
Early Childhood EducationOlympiaWA218 506 — — 218 506 724 47 19246/27/2019
Restaurants - Casual DiningCadillacMI41 1,627 — — 41 1,627 1,668 102 19066/27/2019
Restaurants - Casual DiningAldenMI102 671 — — 102 671 773 47 19526/27/2019
Medical / DentalHighlandAR182 1,060 — — 182 1,060 1,242 87 20086/27/2019
Restaurants - Family DiningKelsoWA804 1,846 — — 804 1,846 2,650 166 19826/27/2019
Restaurants - Family DiningPort OrchardWA983 2,015 — — 983 2,015 2,998 184 19996/27/2019
Restaurants - Family DiningMilwaukeeWI1,526 2,365 — — 1,526 2,365 3,891 229 20186/28/2019
Restaurants - Quick ServiceSissetonSD70 259 — — 70 259 329 25 19846/28/2019
Restaurants - Quick ServiceKnoxvilleIA199 528 — — 199 528 727 53 19726/28/2019
Restaurants - Quick ServiceCentervilleIA259 538 — — 259 538 797 57 19756/28/2019
Pet Care ServicesLancasterSC554 1,017 — — 554 1,017 1,571 91 19946/28/2019
Convenience StoresYumaCO430 990 — — 430 990 1,420 91 19776/28/2019
Car WashesSioux FallsSD757 2,519 — — 757 2,519 3,276 190 20066/28/2019
Car WashesSioux FallsSD627 1,852 — — 627 1,852 2,479 153 20156/28/2019
Car WashesSioux FallsSD1,225 2,678 — — 1,225 2,678 3,903 211 20176/28/2019
Car WashesSioux FallsSD1,484 2,768 — — 1,484 2,768 4,252 213 20176/28/2019
Medical / DentalAmarilloTX396 2,588 — — 396 2,588 2,984 178 19946/28/2019
Early Childhood EducationNashvilleTN1,326 1,945 — — 1,326 1,945 3,271 226 19967/5/2019
Early Childhood EducationMyrtle BeachSC319 532 — 635 319 1,167 1,486 56 19997/5/2019
Health and FitnessChampaignIL1,133 2,226 — 2,150 1,133 4,376 5,509 292 19867/11/2019
Convenience StoresMountain ViewAR438 2,678 — — 438 2,678 3,116 204 19997/16/2019
Convenience StoresMarshallAR856 2,011 — — 856 2,011 2,867 190 20127/16/2019
Restaurants - Quick ServiceCabotAR479 1,189 — — 479 1,189 1,668 101 20087/31/2019
Restaurants - Quick ServiceSearcyAR359 1,150 — — 359 1,150 1,509 92 20087/31/2019
Restaurants - Quick ServiceConwayAR528 1,045 — — 528 1,045 1,573 84 20097/31/2019
Medical / DentalAmarilloTX1,309 6,791 — — 1,309 6,791 8,100 461 19947/31/2019
Restaurants - Quick ServiceOwossoMI693 732 — — 693 732 1,425 66 19988/15/2019
Restaurants - Quick ServiceStevensvilleMI655 712 (145)(f)(154)(f)510 558 1,068 58 19818/15/2019
Early Childhood EducationSchaumburgIL866 — 590 3,394 1,456 3,394 4,850 52 20228/30/2019
F-13

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Restaurants - Quick ServiceCloverdaleIN$226 $288 $— $420 $226 $708 $934 $93 19969/3/2019
Restaurants - Quick ServicePort HuronMI784 746 — — 784 746 1,530 66 19739/5/2019
Restaurants - Quick ServiceCedar SpringsMI671 1,369 — — 671 1,369 2,040 95 20009/5/2019
Health and FitnessGainesvilleFL1,312 2,488 — 2,398 1,312 4,886 6,198 289 19839/6/2019
Restaurants - Quick ServiceLouisvilleMS155 680 — — 155 680 835 53 20189/13/2019
Restaurants - Quick ServiceMaconMS330 340 — — 330 340 670 35 19929/13/2019
Restaurants - Quick ServiceRulevilleMS196 422 — — 196 422 618 44 20179/13/2019
Restaurants - Quick ServiceQuitmanMS309 237 — — 309 237 546 33 19789/13/2019
Restaurants - Quick ServicePhiladelphiaMS330 371 — — 330 371 701 51 20039/13/2019
Restaurants - Quick ServicePrentissMS350 350 — — 350 350 700 42 19789/13/2019
Restaurants - Quick ServiceAstonPA440 522 — — 440 522 962 55 19639/13/2019
Restaurants - Quick ServiceEssexMD338 624 — — 338 624 962 54 20029/13/2019
Pet Care ServicesKittrellNC303 394 — — 303 394 697 48 20149/19/2019
Convenience StoresGassvilleAR1,178 673 — — 1,178 673 1,851 163 19999/20/2019
Convenience StoresWest PlainsMO663 327 — — 663 327 990 96 19999/20/2019
Convenience StoresBald KnobAR1,258 743 — — 1,258 743 2,001 207 20069/20/2019
Convenience StoresWillow SpringsMO663 1,327 — — 663 1,327 1,990 161 20039/20/2019
Convenience StoresMountain HomeAR852 396 — — 852 396 1,248 109 19999/20/2019
Convenience StoresCalico RockAR475 327 — — 475 327 802 78 19799/20/2019
Convenience StoresAtkinsAR525 376 — — 525 376 901 68 19909/20/2019
Convenience StoresRussellvilleAR426 455 — — 426 455 881 82 19919/20/2019
Convenience StoresRussellvilleAR525 396 — — 525 396 921 78 20009/20/2019
Convenience StoresHorseshoe BendAR376 327 — — 376 327 703 59 19999/20/2019
Convenience StoresKoshkonongMO604 743 — — 604 743 1,347 112 19979/20/2019
Health and FitnessGreenvilleSC732 1,361 — — 732 1,361 2,093 91 19939/25/2019
Health and FitnessAndersonSC691 1,402 — — 691 1,402 2,093 99 19979/25/2019
Health and FitnessSpartanburgSC1,052 1,474 — — 1,052 1,474 2,526 108 20109/25/2019
Car WashesDenverCO1,594 1,484 — — 1,594 1,484 3,078 128 20129/26/2019
Car WashesAuroraCO703 1,504 — — 703 1,504 2,207 114 20089/26/2019
Car WashesDenverCO1,103 1,805 — — 1,103 1,805 2,908 140 20149/26/2019
Car WashesFort CollinsCO491 1,093 — — 491 1,093 1,584 84 20029/26/2019
Car WashesThorntonCO582 1,795 — — 582 1,795 2,377 139 20189/26/2019
Restaurants - Family DiningCheyenneWY739 1,569 — — 739 1,569 2,308 118 19829/27/2019
Early Childhood EducationFrankfortKY387 1,224 — — 387 1,224 1,611 89 20029/27/2019
Pet Care ServicesOnalaskaWI403 598 — — 403 598 1,001 52 20119/27/2019
Restaurants - Quick ServiceJonesboroAR1,213 1,108 — — 1,213 1,108 2,321 89 20069/30/2019
Restaurants - Quick ServiceBryantAR622 885 — — 622 885 1,507 66 20089/30/2019
Restaurants - Casual DiningWest ChesterOH878 1,088 — — 878 1,088 1,966 98 20049/30/2019
Early Childhood EducationLeawoodKS867 851 — — 867 851 1,718 90 20079/30/2019
GroceryClaremoreOK246 3,330 — — 246 3,330 3,576 208 19899/30/2019
Other ServicesLittle RockAR1,492 1,037 — — 1,492 1,037 2,529 54 19829/30/2019
Other ServicesConyersGA1,821 6,235 — — 1,821 6,235 8,056 321 19999/30/2019
Other ServicesLaVergneTN2,790 2,302 (51)(f)— 2,739 2,302 5,041 113 20189/30/2019
Other ServicesSeattleWA2,905 3,287 — — 2,905 3,287 6,192 145 19779/30/2019
Automotive ServiceAlbanyGA410 421 — — 410 421 831 33 199410/1/2019
Automotive ServiceBainridgeGA339 288 — — 339 288 627 23 199910/1/2019
Automotive ServiceHinesvilleGA298 310 — — 298 310 608 24 199810/1/2019
Automotive ServiceMaconGA154 287 — — 154 287 441 21 200010/1/2019
Automotive ServicePerryGA133 447 — — 133 447 580 30 199610/1/2019
Automotive ServiceValdostaGA215 274 — — 215 274 489 23 199610/1/2019
Automotive ServicePratvilleAL451 636 — — 451 636 1,087 44 200310/1/2019
Automotive ServiceMontgomeryAL318 246 — — 318 246 564 22 199110/1/2019
Pet Care ServicesMedfordOR192 324 — — 192 324 516 25 199010/4/2019
Medical / DentalHorizon CityTX3,587 11,550 (632)(f)— 2,955 11,550 14,505 765 201710/10/2019
F-14

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Medical / DentalEl PasoTX$121 $11,529 $— $— $121 $11,529 $11,650 $667 201910/10/2019
Convenience StoresHoustonTX631 662 — 81 631 743 1,374 61 200910/11/2019
Convenience StoresPasadenaTX869 2,152 — 81 869 2,233 3,102 182 201610/11/2019
Early Childhood EducationConwaySC201 — — — 201 — 201 — 10/17/2019
Convenience StoresAvonMN673 1,204 — — 673 1,204 1,877 135 200410/17/2019
Car WashesDavenportIA1,038 1,705 — — 1,038 1,705 2,743 154 200110/24/2019
Car WashesMolineIL1,120 1,572 — — 1,120 1,572 2,692 135 199810/24/2019
Medical / DentalWest HelenaAR155 1,052 — — 155 1,052 1,207 68 200310/28/2019
Other ServicesSpringfieldMO1,313 1,663 — — 1,313 1,663 2,976 81 200710/31/2019
Early Childhood EducationCharlotteNC860 1,657 — — 860 1,657 2,517 111 199611/1/2019
Pet Care ServicesBrandonFL134 876 — — 134 876 1,010 54 200311/1/2019
Pet Care ServicesGriffinGA196 495 — — 196 495 691 35 197911/1/2019
Pet Care ServicesIndianapolisIN165 453 — — 165 453 618 35 196711/1/2019
Pet Care ServicesWildwoodFL350 1,165 — — 350 1,165 1,515 86 200511/1/2019
Early Childhood EducationTucsonAZ586 885 — — 586 885 1,471 66 196511/5/2019
Early Childhood EducationTucsonAZ339 730 — — 339 730 1,069 47 197511/5/2019
Early Childhood EducationTucsonAZ463 1,440 — — 463 1,440 1,903 95 198511/5/2019
Early Childhood EducationTempeAZ494 586 — — 494 586 1,080 44 197111/5/2019
Early Childhood EducationTucsonAZ401 453 — — 401 453 854 35 197111/5/2019
Early Childhood EducationTucsonAZ411 411 — — 411 411 822 31 193211/5/2019
Early Childhood EducationTucsonAZ422 576 — — 422 576 998 36 198611/5/2019
Early Childhood EducationTucsonAZ444 566 — — 444 566 1,010 38 195811/5/2019
Early Childhood EducationTucsonAZ370 288 — — 370 288 658 22 197611/5/2019
Convenience StoresHoustonTX211 1,414 — 81 211 1,495 1,706 90 197511/14/2019
Convenience StoresHoustonTX221 1,402 — 81 221 1,483 1,704 99 196511/14/2019
Convenience StoresPrairie ViewTX241 1,178 — 81 241 1,259 1,500 90 198411/14/2019
Restaurants - Quick ServiceLewisburgTN461 676 — — 461 676 1,137 75 201611/18/2019
Restaurants - Quick ServiceOdessaTX601 1,353 — — 601 1,353 1,954 114 201911/21/2019
Restaurants - Quick ServiceOdessaTX1,031 1,353 — — 1,031 1,353 2,384 117 201911/21/2019
Other ServicesSalt Lake CityUT1,731 3,542 — — 1,731 3,542 5,273 207 197311/27/2019
Other ServicesSanfordFL1,498 1,859 — — 1,498 1,859 3,357 127 196411/27/2019
Convenience StoresMosineeWI351 812 — — 351 812 1,163 79 197512/2/2019
Car WashesOcalaFL1,383 2,644 — — 1,383 2,644 4,027 182 201912/10/2019
Car WashesHampsteadNC1,129 2,644 — — 1,129 2,644 3,773 179 201912/10/2019
Medical / DentalConyersGA393 2,078 — — 393 2,078 2,471 138 199612/12/2019
Medical / DentalCovingtonGA373 1,816 — — 373 1,816 2,189 124 200412/12/2019
Automotive ServiceFayettevilleGA347 746 — — 347 746 1,093 62 200612/13/2019
Early Childhood EducationBoulderCO742 801 — — 742 801 1,543 44 198812/13/2019
Restaurants - Quick ServiceNorth ManchesterIN363 272 — 504 363 776 1,139 46 198712/17/2019
Restaurants - Quick ServiceWinonaMS522 1,126 — — 522 1,126 1,648 82 201912/19/2019
Restaurants - Quick ServiceHazlehurstMS522 1,269 — — 522 1,269 1,791 96 201912/19/2019
Restaurants - Quick ServiceVicksburgMS553 1,238 — — 553 1,238 1,791 90 201912/19/2019
Restaurants - Quick ServiceBlythevilleAR849 1,126 — — 849 1,126 1,975 94 201912/19/2019
Restaurants - Quick ServiceWynneAR665 931 — — 665 931 1,596 84 201912/19/2019
Restaurants - Quick ServiceSalemIN532 1,013 — — 532 1,013 1,545 90 201912/19/2019
Restaurants - Quick ServiceAshland CityTN614 1,044 — — 614 1,044 1,658 82 201912/19/2019
Restaurants - Quick ServiceShelbyvilleKY911 972 — — 911 972 1,883 85 201812/19/2019
Restaurants - Quick ServiceWhitelandIN389 839 — — 389 839 1,228 67 200312/19/2019
Restaurants - Quick ServiceBloomingtonIN225 665 — — 225 665 890 51 201812/23/2019
Restaurants - Quick ServiceCheektowagaNY1,381 1,903 — — 1,381 1,903 3,284 142 200012/23/2019
Restaurants - Quick ServiceMemphisTN880 921 — — 880 921 1,801 84 201912/23/2019
Restaurants - Quick ServiceSomersetKY798 1,105 — — 798 1,105 1,903 93 201912/23/2019
Car WashesSioux FallsSD1,075 3,384 — — 1,075 3,384 4,459 199 199212/19/2019
Car WashesSioux FallsSD723 2,882 — — 723 2,882 3,605 101 198712/19/2019
F-15

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Car WashesSioux CityIA$707 $— $285 $2,478 $992 $2,478 $3,470 $133 202012/19/2019
Car WashesSouth Sioux CityNE303 — 294 2,569 597 2,569 3,166 91 202012/19/2019
Automotive ServiceCrystal LakeIL265 1,103 — — 265 1,103 1,368 74 197412/20/2019
Car WashesJonesboroAR1,217 4,776 — — 1,217 4,776 5,993 258 201912/20/2019
Medical / DentalGrand BlancMI748 1,537 — — 748 1,537 2,285 95 200712/23/2019
Convenience StoresRoscoeIL656 832 — — 656 832 1,488 99 199912/27/2019
Medical / DentalArnoldMO417 823 — — 417 823 1,240 66 201512/30/2019
Medical / DentalAllenTX397 2,230 — 397 2,230 2,627 74 198312/31/2019
Medical / DentalFlower MoundTX427 905 — — 427 905 1,332 57 199912/31/2019
Medical / DentalPlanoTX376 1,698 — — 376 1,698 2,074 96 199812/31/2019
Automotive ServiceHoustonTX292 513 — — 292 513 805 39 19861/30/2020
Automotive ServicePasadenaTX252 705 — — 252 705 957 46 19711/30/2020
Early Childhood EducationWestonMA3,200 2,423 — — 3,200 2,423 5,623 155 19902/7/2020
GroceryTulsaOK713 2,098 — — 713 2,098 2,811 154 19913/24/2020
GroceryTulsaOK670 3,298 — — 670 3,298 3,968 205 19933/24/2020
Restaurants - Quick ServiceFall RiverMA592 744 — — 592 744 1,336 59 19841/15/2020
Restaurants - Quick ServiceWorcesterMA532 905 — — 532 905 1,437 58 19651/15/2020
Restaurants - Quick ServicePlainvilleMA602 548 — — 602 548 1,150 46 19841/15/2020
Restaurants - Quick ServiceStoughtonMA552 615 — — 552 615 1,167 47 19831/15/2020
Restaurants - Quick ServiceFall RiverMA612 550 — — 612 550 1,162 52 19871/15/2020
Restaurants - Quick ServiceWorcesterMA402 811 — — 402 811 1,213 57 19651/15/2020
Restaurants - Quick ServiceLeominsterMA512 461 — — 512 461 973 34 19801/15/2020
Restaurants - Quick ServiceDorchesterMA743 313 — — 743 313 1,056 31 19841/15/2020
Restaurants - Quick ServiceSudburyMA703 182 — — 703 182 885 23 19831/15/2020
Car WashesManorTX1,074 3,270 — — 1,074 3,270 4,344 229 20191/21/2020
Early Childhood EducationCharlotteNC1,0211,198 — — 1,021 1,198 2,219 49 19878/17/2020
Restaurants - Quick ServiceLoudonTN668 1,091 — — 668 1,091 1,759 87 20202/26/2020
Restaurants - Quick ServiceSt. Mary'sPA8781,080 — — 878 1,080 1,958 88 20204/3/2020
Restaurants - Quick ServiceDyersburgTN675 959 — — 675 959 1,634 66 20071/30/2020
Restaurants - Quick ServiceMemphisTN1,3581,283 — — 1,358 1,283 2,641 82 20111/30/2020
Restaurants - Quick ServiceMemphisTN828 1,131 — — 828 1,131 1,959 71 20111/30/2020
Restaurants - Quick ServiceMemphisTN8011,198 — — 801 1,198 1,999 80 20001/30/2020
Restaurants - Quick ServiceMemphisTN984 1,202 — — 984 1,202 2,186 79 19941/30/2020
Restaurants - Quick ServiceSenatobiaMS8861,120 — — 886 1,120 2,006 73 20131/30/2020
Restaurants - Quick ServiceJacksonMS178 100 — 240 178 340 518 60 19851/29/2020
Car WashesArvadaCO5662,374 — — 566 2,374 2,940 147 20081/24/2020
Car WashesGoldenCO1,031 1,566 — 400 1,031 1,966 2,997 112 20051/24/2020
Car WashesSioux CityIA8861,855 — 500 886 2,355 3,241 129 20208/13/2020
Restaurants - Casual DiningFort WayneIN1,542 — — — 1,542 — 1,542 — 19991/7/2020
Early Childhood EducationNapervilleIL1,5644,638 — — 1,564 4,638 6,202 264 20092/21/2020
Early Childhood EducationNorthbrookIL1,080 5,347 — — 1,080 5,347 6,427 294 20142/24/2020
Medical / Dental TylerTX4633,250 — — 463 3,250 3,713 202 20151/17/2020
Early Childhood EducationFranklinTN617 1,025 — — 617 1,025 1,642 51 19969/4/2020
Restaurants - Casual DiningGrand RapidsMI1,0551,754 — — 1,055 1,754 2,809 118 20031/29/2020
Medical / Dental FlagstaffAZ1,446 1,856 — 1,913 1,446 3,769 5,215 107 19802/27/2020
Medical / Dental PortlandOR1,4571,230 — — 1,457 1,230 2,687 87 19812/27/2020
Other ServicesWatsontownPA751 1,678 — — 751 1,678 2,429 139 19872/13/2020
Early Childhood EducationConcordNC1,2832,419 — — 1,283 2,419 3,702 111 20038/17/2020
Medical / Dental DeLandFL909 4,404 — — 909 4,404 5,313 259 20043/9/2020
Automotive ServiceKingNC408153 — — 408 153 561 16 19853/10/2020
Automotive ServiceElkinNC337 286 — — 337 286 623 27 19973/10/2020
Automotive ServiceYadkinvilleNC235347 — — 235 347 58224 20013/10/2020
Automotive ServiceLancasterSC388 286 — — 388 286 674 23 20073/10/2020
Automotive ServiceLenoirNC326235 — — 326 235 56121 19913/10/2020
F-16

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Automotive ServiceHickoryNC$398 $132 $— $— $398 $132 $530 $15 19883/10/2020
Automotive ServiceSt. AlbansWV235459 — — 235 459 69431 19873/10/2020
Automotive ServiceHurricaneWV398 388 — — 398 388 786 31 19893/10/2020
Automotive ServiceSouth BostonVA224734 — — 224 734 95846 19963/10/2020
Automotive ServicePittsboroNC520 183 — — 520 183 703 19 20063/10/2020
Early Childhood EducationHartlandWI4623,390 — — 462 3,390 3,852 181 20003/6/2020
Early Childhood EducationMenomonee FallsWI976 3,464 — — 976 3,464 4,440 183 19783/6/2020
Early Childhood EducationMenomonee FallsWI1,3544,314 — — 1,354 4,314 5,668 235 20003/6/2020
Early Childhood EducationWaukeshaWI577 3,485 — — 577 3,485 4,062 183 19963/6/2020
Early Childhood EducationOconomowocWI8824,734 — — 882 4,734 5,616 248 20073/6/2020
Medical / Dental Lake CityFL1,046 2,450 — — 1,046 2,450 3,496 140 19743/4/2020
Early Childhood EducationWaterfordMI419783 — — 419 783 1,202 37 19979/18/2020
Early Childhood EducationTucsonAZ956 906 — — 956 906 1,862 64 20083/6/2020
Car WashesCasa GrandeAZ504 — 345 2,146 849 2,146 2,995 109 20202/6/2020
Early Childhood EducationMariettaGA1,799 3,234 — — 1,799 3,234 5,033 171 19973/6/2020
Early Childhood EducationAlpharettaGA1,621 3,148 — — 1,621 3,148 4,769 167 19953/6/2020
Automotive ServiceArlingtonTX833 3,603 — — 833 3,603 4,436 218 20152/14/2020
Medical / Dental OrangeTX337 3,293 — — 337 3,293 3,630 183 20152/21/2020
Automotive ServiceLittle ElmTX647 1,006 — — 647 1,006 1,653 60 20073/6/2020
Automotive ServiceMcKinneyTX1,016 807 — — 1,016 807 1,823 62 20103/6/2020
Restaurants - Quick ServiceWest DundeeIL523 539 — 1,100 523 1,639 2,162 63 20203/6/2020
Pet Care ServicesCatonsvilleMD586 1,881 16 34 602 1,915 2,517 87 19985/4/2020
Restaurants - Family DiningGreenvilleSC626 1,091 — — 626 1,091 1,717 77 19723/19/2020
Restaurants - Family DiningCharlestonSC1,303 1,020 — — 1,303 1,020 2,323 69 19783/19/2020
Automotive ServiceGilbertAZ370 2,108 — — 370 2,108 2,478 105 20194/30/2020
Restaurants - Quick ServiceYazoo CityMS249 753 — — 249 753 1,002 38 19755/7/2020
Other ServicesRichmond HillGA2,502 761 — — 2,502 761 3,263 88 20196/8/2020
Other ServicesCentennialCO3,003 2,972 5 1,021 3,008 3,993 7,001 305 20056/8/2020
Other ServicesJoplinMO991 941 — — 991 941 1,932 57 19976/8/2020
Other ServicesKansas CityMO1,531 1,391 — — 1,531 1,391 2,922 144 20156/8/2020
Automotive ServiceTempeAZ915 3,304 — — 915 3,304 4,219 165 19875/28/2020
Restaurants - Quick ServiceByramMS775 584 — 150 775 734 1,509 47 20036/8/2020
Restaurants - Quick ServiceBig SpringTX287 — — 1,500 287 1,500 1,787 44 20206/25/2020
Car WashesFlagstaffAZ1,873 3,456 — — 1,873 3,456 5,329 173 20187/24/2020
Car WashesPhoenixAZ2,204 2,634 — — 2,204 2,634 4,838 141 20187/24/2020
Car WashesSun CityAZ1,613 2,134 — — 1,613 2,134 3,747 110 19887/24/2020
Car WashesScottsdaleAZ3,666 2,093 — — 3,666 2,093 5,759 136 19947/24/2020
Car WashesYumaAZ280 1,883 — — 280 1,883 2,163 99 20017/24/2020
Restaurants - Quick ServiceSpartaTN733 1,383 — — 733 1,383 2,116 72 19976/25/2020
Restaurants - Quick ServiceNewnanGA1,413 1,494 — — 1,413 1,494 2,907 87 19878/19/2020
Restaurants - Quick ServiceNewnanGA724 1,189 — — 724 1,189 1,913 65 20058/19/2020
Restaurants - Quick ServiceLawrencevilleGA1,122 1,363 — — 1,122 1,363 2,485 75 20058/19/2020
GroceryDexterMO813 697 — — 813 697 1,510 64 19989/30/2020
GroceryKennettMO427 1,688 — — 427 1,688 2,115 81 20139/30/2020
GroceryPark HillsMO653 1,819 — — 653 1,819 2,472 103 19709/30/2020
GroceryPiggottAR614 789 — — 614 789 1,403 60 19869/30/2020
GroceryPotosiMO371 1,569 — — 371 1,569 1,940 76 19709/30/2020
GroceryMaldenMO265 1,873 — — 265 1,873 2,138 77 19789/30/2020
GroceryMayflowerAR1,460 3,042 — — 1,460 3,042 4,502 179 20209/30/2020
Automotive ServiceEast BrunswickNJ1,173 1,540 — — 1,173 1,540 2,713 74 19609/18/2020
Automotive ServiceWashingtonNJ388 1,969 — — 388 1,969 2,357 79 19699/18/2020
Automotive ServicePrincetonNJ1,448 1,918 — — 1,448 1,918 3,366 87 19479/18/2020
Automotive ServiceLawrencevilleNJ632 1,999 — — 632 1,999 2,631 94 19609/18/2020
Automotive ServiceMadisonNJ1,714 1,306 — — 1,714 1,306 3,020 54 19509/18/2020
F-17

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Automotive ServiceChesterNJ$1,295 $1,550 $— $— $1,295 $1,550 $2,845 $77 19959/18/2020
Automotive ServiceManvilleNJ867 989 — — 867 989 1,856 46 19779/18/2020
Automotive ServiceNorth CaldwellNJ561 663 — — 561 663 1,224 43 19689/18/2020
Automotive ServiceKerhonksonNY938 2,805 — — 938 2,805 3,743 125 19829/18/2020
Automotive ServiceBethlehemPA602 1,642 — — 602 1,642 2,244 63 19689/18/2020
Automotive ServiceLanghornePA898 1,550 — — 898 1,550 2,448 91 19999/18/2020
Automotive ServiceQuakertownPA1,652 1,295 — — 1,652 1,295 2,947 74 20129/18/2020
Restaurants - Quick ServiceHattiesburgMS882 847 — — 882 847 1,729 50 20009/11/2020
Car WashesFort WorthTX1,475 2,747 — — 1,475 2,747 4,222 138 20208/31/2020
Car WashesWestminsterCO842 1,174 — — 842 1,174 2,016 50 20039/24/2020
Car WashesPalatkaFL914 2,490 — — 914 2,490 3,404 105 20209/30/2020
Car WashesFort Walton BeachFL1,526 2,490 — — 1,526 2,490 4,016 121 20209/30/2020
Restaurants - Quick ServiceGreenwoodSC273 652 — — 273 652 925 33 20149/24/2020
Medical / Dental FlintTX428 879 — — 428 879 1,307 44 20089/24/2020
Other ServicesAlabasterAL690 207 12 847 702 1,054 1,756 39 20039/29/2020
Other ServicesAlbuquerqueNM1,686 286 25 1,862 1,711 2,148 3,859 87 19709/29/2020
Other ServicesShreveportLA1,006 227 16 1,164 1,022 1,391 2,413 70 20129/29/2020
Automotive ServiceSkiatookOK324 2,695 — — 324 2,695 3,019 105 20059/30/2020
Automotive ServiceBartlesvilleOK118 2,853 — — 118 2,853 2,971 100 19679/30/2020
Automotive ServiceOwassoOK275 6,094 — — 275 6,094 6,369 215 20079/30/2020
Automotive ServiceBartlesvilleOK932 4,587 — — 932 4,587 5,519 195 20039/30/2020
Automotive ServiceBroken ArrowOK1,060 3,425 — — 1,060 3,425 4,485 132 20149/30/2020
Automotive ServiceTulsaOK1,226 1,374 — — 1,226 1,374 2,600 70 20199/30/2020
Automotive ServiceBartlesvilleOK177 599 — — 177 599 776 26 19809/30/2020
Medical / Dental TauntonMA201 1,289 — — 201 1,289 1,490 42 197210/1/2020
Medical / Dental PlymouthMA296 444 — — 296 444 740 23 200510/1/2020
Medical / Dental MiddleboroughMA296 475 — — 296 475 771 21 192510/1/2020
Car WashesPhenix CityAL1,111 2,722 — — 1,111 2,722 3,833 109 202010/5/2020
Medical / Dental Pine BluffAR65 552 — 95 65 647 712 23 198310/9/2020
Early Childhood EducationJacksonMI379 1,046 — — 379 1,046 1,425 47 199010/14/2020
Early Childhood EducationJacksonMI170 614 — — 170 614 784 26 198710/14/2020
Medical / Dental ValdostaGA262 1,726 — — 262 1,726 1,988 69 199610/15/2020
Medical / Dental ValdostaGA214 1,351 — — 214 1,351 1,565 54 199010/15/2020
GroceryJacksonMO458 1,719 — — 458 1,719 2,177 75 199510/22/2020
GroceryMarble HillMO504 2,052 — — 504 2,052 2,556 90 199910/22/2020
Equipment Rental and SalesChathamNY987 1,317 — — 987 1,317 2,304 75 197410/22/2020
Equipment Rental and SalesClifton ParkNY551717— — 551 717 1,268 28 200010/22/2020
Equipment Rental and SalesGoshenNY732 1,191 — — 732 1,191 1,923 56 197410/22/2020
Equipment Rental and SalesFultonvilleNY1,775 858 — — 1,775 858 2,633 60 198010/22/2020
Equipment Rental and SalesLancasterMA1,285 2,089 — — 1,285 2,089 3,374 86 201210/22/2020
Equipment Rental and SalesGreenfieldMA304 815 167 — 471 815 1,286 39 197110/22/2020
Equipment Rental and SalesFarmingtonCT411 1,410 — — 411 1,410 1,821 57 200510/22/2020
Equipment Rental and SalesPembrokeNH318 785 — — 318 785 1,103 31 197810/22/2020
GroceryFarmingtonMO789 1,990 — — 789 1,990 2,779 104 200610/29/2020
GroceryFredericktownMO682 1,523 — — 682 1,523 2,205 92 200110/29/2020
Automotive ServiceByramNJ1,193 1,182 — — 1,193 1,182 2,375 61 199210/29/2020
Automotive ServiceWestfield NJ 1,904 1,606 — — 1,904 1,606 3,510 73 197010/29/2020
Automotive ServiceEast WindsorNJ1,599 1,634 — — 1,599 1,634 3,233 71 196510/29/2020
Automotive ServiceFordsNJ1,300 1,180 — — 1,300 1,180 2,480 57 197410/29/2020
Automotive ServiceJacksonNJ1,464 1,100 — — 1,464 1,100 2,564 56 199510/29/2020
Automotive ServiceWest BerlinNJ1,061 1,298 — — 1,061 1,298 2,359 64 199510/29/2020
Other ServicesZeelandMI2,086 5,386 — — 2,086 5,386 7,472 269 197311/2/2020
Other ServicesWyomingMI1,066 1,795 — — 1,066 1,795 2,861 101 202011/2/2020
Other ServicesWaterford MI1,286 1,243 — — 1,286 1,243 2,529 89 199511/2/2020
F-18

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Other ServicesElkhartIN$544 $1,061 $— $— $544 $1,061 $1,605 $52 198911/2/2020
Other ServicesMishawakaIN527 558 — — 527 558 1,085 47 197911/2/2020
Restaurants - Quick ServiceFranklinIN670 1,609 — — 670 1,609 2,279 63 201711/12/2020
Car WashesPrincetonTX1,030 2,986 — — 1,030 2,986 4,016 118 202011/16/2020
Automotive ServicePoint PleasantNJ1,763 1,166 — — 1,763 1,166 2,929 52 197711/19/2020
Pet Care ServicesDouglasvilleGA640 748 — — 640 748 1,388 34 198911/24/2020
Pet Care ServicesAlpharettaGA766 822 — — 766 822 1,588 33 200711/24/2020
GroceryFayettevilleAR423 1,410 — — 423 1,410 1,833 69 199012/1/2020
Automotive ServiceFairmontWV232 539 — — 232 539 771 23 199712/2/2020
Automotive ServiceFairmontWV291 860 — — 291 860 1,151 33 199912/2/2020
Restaurants - Quick ServiceRichardsonTX501 682 — — 501 682 1,183 35 197912/15/2020
Restaurants - Quick ServiceArlingtonTX949 86 — — 949 86 1,035 10 197912/15/2020
Restaurants - Quick ServiceOklahoma CityOK553 1,032 — — 553 1,032 1,585 45 197912/15/2020
Restaurants - Quick ServiceMooreOK605 1,152 — — 605 1,152 1,757 47 198312/15/2020
Restaurants - Quick ServiceNormanOK303 709 — — 303 709 1,012 31 199212/15/2020
Restaurants - Quick ServiceOwassoOK929 935 — — 929 935 1,864 41 198612/15/2020
Restaurants - Quick ServiceWacoTX553 548 — — 553 548 1,101 27 198712/15/2020
Restaurants - Quick ServiceCarrolltonTX605 547 — — 605 547 1,152 32 199212/15/2020
Restaurants - Quick ServiceRowlettTX553 665 — — 553 665 1,218 36 199912/15/2020
Restaurants - Quick ServiceMesquiteTX855 621 — — 855 621 1,476 40 199912/15/2020
Restaurants - Quick ServiceGrand PrairieTX814 73 — — 814 73 887 15 199912/15/2020
Restaurants - Quick ServiceDallasTX845 286 — — 845 286 1,131 23 197712/15/2020
Restaurants - Quick ServiceOklahoma CityOK542 985 — — 542 985 1,527 45 201012/15/2020
Restaurants - Quick ServiceKilgoreTX449 710 — — 449 710 1,159 32 197912/15/2020
Car WashesFort Worth TX1,590 2,724 — — 1,590 2,724 4,314 114 194212/18/2020
Car WashesHudson OaksTX1,824 2,745 — — 1,824 2,745 4,569 92 194812/18/2020
Car WashesGarland TX1,303 2,287 — — 1,303 2,287 3,590 80 201212/18/2020
Car WashesFort WorthTX1,907 3,129 — — 1,907 3,129 5,036 130 201312/18/2020
Car WashesCrowleyTX1,571 2,873 — — 1,571 2,873 4,444 108 201612/18/2020
Car WashesFlower MoundTX1,623 2,730 — — 1,623 2,730 4,353 114 201812/18/2020
Car WashesFort WorthTX1,655 2,129 — — 1,655 2,129 3,784 94 201812/18/2020
Medical / Dental NapervilleIL315 786 202 505 517 1,291 1,808 46 199812/21/2020
Automotive ServiceWashington Court House OH550 1,061 — — 550 1,061 1,611 44 200412/21/2020
Automotive ServiceCincinnatiOH448 911 — — 448 911 1,359 33 199112/21/2020
Restaurants - Quick ServiceDothanAL459 1,431 — — 459 1,431 1,890 61 201912/22/2020
Restaurants - Quick ServicePhiladelphiaMS373 1,540 — — 373 1,540 1,913 62 202012/22/2020
Restaurants - Quick ServiceAshfordAL410 1,338 — — 410 1,338 1,748 52 202012/22/2020
Restaurants - Quick ServiceNewtonMS471 1,316 — — 471 1,316 1,787 59 202012/22/2020
Car WashesSlidellLA962 2,919 — — 962 2,919 3,881 120 201212/23/2020
Car WashesGulfportMS666 973 — — 666 973 1,639 54 200812/23/2020
Car WashesCarbondale IL1,674 3,227 — — 1,674 3,227 4,901 132 201812/23/2020
Medical / Dental ArlingtonTX176 329 — — 176 329 505 12 198312/23/2020
Medical / Dental Austin TX581 346 — — 581 346 927 11 196812/23/2020
Medical / Dental FlorissantMO454 920 — 377 454 1,297 1,751 31 198712/23/2020
Medical / Dental TempleTX145 854 — — 145 854 999 27 201512/23/2020
Medical / Dental NorcrossGA652 981 — — 652 981 1,633 29 197512/23/2020
Medical / Dental CarroltonTX1,534 1,073 — — 1,534 1,073 2,607 38 198312/23/2020
Car WashesJacksonvilleNC915 1,436 — — 915 1,436 2,351 73 200312/29/2020
Other ServicesPensacolaFL1,187 3,344 — — 1,187 3,344 4,531 107 197012/29/2020
Medical / Dental Amarillo TX221 990 — — 221 990 1,211 33 201812/29/2020
Medical / Dental Amarillo TX369 2,186 — — 369 2,186 2,555 67 197812/29/2020
Medical / Dental Amarillo TX468 848 — — 468 848 1,316 36 201512/29/2020
F-19

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Equipment Rental and SalesMilfordNH$709 $407 $— $692 $709 $1,099 $1,808 $34 198212/30/2020
Equipment Rental and SalesBeaumonTX1,314 2,728 — — 1,314 2,728 4,042 117 199112/31/2020
Equipment Rental and SalesCibiloTX1,231 3,334 — — 1,231 3,334 4,565 112 198012/31/2020
Restaurants - Casual DiningSaginawMI1,047 744 — — 1,047 744 1,791 45 19961/8/2021
Medical / Dental PickensSC678 3,123 — — 678 3,123 3,801 94 19781/14/2021
Medical / Dental SimpsonvilleSC1,447 2,383 — — 1,447 2,383 3,830 90 19931/14/2021
Medical / Dental GreenvilleSC1,073 1,570 — — 1,073 1,570 2,643 55 19681/14/2021
Early Childhood EducationLitchfield ParkAZ392 1,139 — — 392 1,139 1,531 39 20051/15/2021
Medical / Dental ChannahonIL601 3,178 — — 601 3,178 3,779 91 20061/21/2021
Medical / Dental Franklin ParkIL408 1,037 — — 408 1,037 1,445 33 19821/21/2021
Medical / Dental LockportIL468 950 — — 468 950 1,418 33 20011/21/2021
Medical / Dental WilmingtonIL127 987 — — 127 987 1,114 29 19681/21/2021
Medical / Dental AuroraIL526 2,040 — — 526 2,040 2,566 61 19741/21/2021
Medical / Dental Franklin ParkIL41 194 — — 41 194 235 5 19671/21/2021
GroceryDoniphanMO698 2,006 — — 698 2,006 2,704 82 20051/22/2021
Restaurants - Quick ServiceBremenGA553 616 — — 553 616 1,169 21 20072/1/2021
Medical / Dental HarrahOK67 760 — — 67 760 827 20 19642/4/2021
Medical / Dental ShattuckOK143 1,087 — — 143 1,087 1,230 31 19822/4/2021
Medical / Dental NobleOK553 1,872 — — 553 1,872 2,425 57 20112/4/2021
Medical / Dental EdmondOK107 697 — — 107 697 804 18 20052/4/2021
Medical / Dental SapulpaOK294 436 — — 294 436 730 22 20082/4/2021
Pet Care ServicesColumbiaSC331 643 — — 331 643 974 17 20182/5/2021
Medical / Dental ClermontFL1,415 12,340 — — 1,415 12,340 13,755 301 20192/18/2021
Restaurants - Quick ServicePaducahKY1,215 1,255 — — 1,215 1,255 2,470 43 20202/18/2021
Early Childhood EducationLorainOH681 861 2 463 683 1,324 2,007 34 20063/12/2021
Early Childhood EducationAvonOH730 1,358 2 427 732 1,785 2,517 48 20063/12/2021
Early Childhood EducationBath Township, AkronOH1,357 2,965 4 477 1,361 3,442 4,803 86 19893/12/2021
Early Childhood EducationBrecksvilleOH1,352 1,357 5 416 1,357 1,773 3,130 71 20043/12/2021
Early Childhood EducationHudsonOH969 1,466 3 410 972 1,876 2,848 58 20033/12/2021
Early Childhood EducationIndependenceOH1,683 1,910 5 424 1,688 2,334 4,022 91 20043/12/2021
Early Childhood EducationRocky RiverOH486 2,263 1 357 487 2,620 3,107 63 20013/12/2021
Early Childhood EducationShaker HeightsOH642 3,450 2 421 644 3,871 4,515 92 20173/12/2021
Early Childhood EducationSolonOH466 3,115 2 256 468 3,371 3,839 80 20093/12/2021
Early Childhood EducationStrongsvilleOH1,386 1,875 4 581 1,390 2,456 3,846 58 20003/12/2021
Early Childhood EducationWestlakeOH446 2,478 1 573 447 3,051 3,498 64 19923/12/2021
Car WashesLongmontCO965 1,304 — 595 965 1,899 2,864 43 20063/18/2021
Early Childhood EducationNorth Las VegasNV1,311 1,724 — — 1,311 1,724 3,035 51 20063/19/2021
Early Childhood EducationNorth Las VegasNV1,169 1,726 — — 1,169 1,726 2,895 48 19983/19/2021
Restaurants - Quick ServiceWarrenOH636 2,136 — — 636 2,136 2,772 59 19643/19/2021
Restaurants - Quick ServiceEast LiverpoolOH300 1,683 — — 300 1,683 1,983 42 19783/19/2021
Restaurants - Quick ServiceGirardOH635 2,499 — — 635 2,499 3,134 65 19933/19/2021
Automotive ServiceOxnardCA1,021 2,750 — — 1,021 2,750 3,771 64 19603/24/2021
Automotive ServiceSanta MariaCA1,282 2,615 — — 1,282 2,615 3,897 63 19733/24/2021
Automotive ServiceAtascaderoaCA1,247 1,350 — — 1,247 1,350 2,597 32 19913/24/2021
Automotive ServiceGlendaleAZ2,152 1,717 — — 2,152 1,717 3,869 40 19803/26/2021
Early Childhood EducationFrankfortKY329 1,276 — — 329 1,276 1,605 37 20033/31/2021
Automotive ServiceParkerCO1,030 2,107 — — 1,030 2,107 3,137 57 20083/31/2021
Automotive ServiceThorntonCO1,171 2,002 — — 1,171 2,002 3,173 57 20033/31/2021
Automotive ServiceMariettaGA1,675 1,461 — — 1,675 1,461 3,136 42 19973/31/2021
Automotive ServiceKnoxvilleTN650 1,422 — — 650 1,422 2,072 37 20163/31/2021
Automotive ServicePhoenixAZ1,035 1,992 — — 1,035 1,992 3,027 53 20173/31/2021
Automotive ServiceScottsdaleAZ1,661 1,716 — — 1,661 1,716 3,377 46 19983/31/2021
Automotive ServicePhoenixAZ553 1,085 — — 553 1,085 1,638 25 19623/31/2021
Medical / Dental BrentwoodCA388 933 — — 388 933 1,321 27 20053/31/2021
F-20

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Medical / Dental Chino HillsCA$752 $1,358 $— $— $752 $1,358 $2,110 $37 20073/31/2021
Medical / Dental Thousand OaksCA1,085 1,743 — — 1,085 1,743 2,828 53 20043/31/2021
Medical / Dental FairfieldCT1,263 1,274 — — 1,263 1,274 2,537 51 20093/31/2021
Medical / Dental McLeanVA947 2,045 — — 947 2,045 2,992 49 20013/31/2021
Medical / Dental CypressTX1,655 1,629 — — 1,655 1,629 3,284 69 20143/31/2021
Medical / Dental Fairfax StationVA546 755 — — 546 755 1,301 29 20093/31/2021
Medical / Dental Granite BayCA772 1,264 — — 772 1,264 2,036 38 19893/31/2021
Medical / Dental BrentwoodCA1,059 801 — — 1,059 801 1,860 25 20053/31/2021
Medical / Dental StamfordCT626 401 — — 626 401 1,027 20 18403/31/2021
Medical / Dental Dripping SpringsTX779 1,111 — — 779 1,111 1,890 37 20033/31/2021
Medical / Dental San JacintoCA394 1,600 — — 394 1,600 1,994 46 19893/31/2021
Medical / Dental EnumclawWA627 868 — — 627 868 1,495 46 19813/31/2021
Restaurants - Quick ServicePensacolaFL208 750 — — 208 750 958 17 19824/2/2021
Restaurants - Quick ServicePensacolaFL291 1,024 — — 291 1,024 1,315 26 19794/2/2021
Automotive ServiceYumaAZ491 965 — — 491 965 1,456 31 19754/9/2021
Automotive ServiceSpringfieldMO463 769 — — 463 769 1,232 23 20024/9/2021
Automotive ServiceSpringfieldMO303 790 — — 303 790 1,093 20 20034/9/2021
Restaurants - Quick ServiceMcAllenTX1,931 1,358 — — 1,931 1,358 3,289 36 19994/9/2021
Restaurants - Quick ServiceLaredoTX1,544 841 — — 1,544 841 2,385 28 19934/9/2021
Restaurants - Quick ServiceLaredoTX1,145 971 — — 1,145 971 2,116 26 20064/9/2021
Restaurants - Quick ServiceLaredoTX2,061 2,193 — — 2,061 2,193 4,254 54 20084/9/2021
Restaurants - Quick ServiceMcAllenTX1,190 1,030 — — 1,190 1,030 2,220 25 19954/9/2021
Restaurants - Quick ServiceMcAllenTX1,998 2,051 — — 1,998 2,051 4,049 47 19924/9/2021
Restaurants - Quick ServiceLaredoTX2,483 2,140 — — 2,483 2,140 4,623 54 19894/9/2021
Medical / Dental RussellvilleAR144 571 — 70 144 641 785 14 20004/13/2021
GroceryConwayAR1,000 4,717 — — 1,000 4,717 5,717 113 20104/28/2021
Restaurants - Quick ServiceCotullaTX1,693 973 — — 1,693 973 2,666 36 20084/29/2021
Restaurants - Quick ServiceMissionTX1,739 1,831 — — 1,739 1,831 3,570 43 20104/29/2021
Medical / Dental RollaMO180 338 — 100 180 438 618 10 19904/30/2021
Medical / Dental CantonTX167 958 — — 167 958 1,125 22 20114/30/2021
Restaurants - Quick ServiceNatchezMS270 445 — — 270 445 715 16 19814/30/2021
Car WashesTulsaOK1,421 2,077 — — 1,421 2,077 3,498 60 20165/5/2021
Medical / Dental PasadenaTX1,583 2,972 — — 1,583 2,972 4,555 67 19785/11/2021
Medical / Dental FayettevilleNC443 1,367 — — 443 1,367 1,810 29 20175/20/2021
Medical / Dental FayettevilleNC374 1,182 — — 374 1,182 1,556 23 19995/20/2021
Medical / Dental FayettevilleNC173 774 — — 173 774 947 16 20045/20/2021
Medical / Dental SpringlakeNC529 1,962 — — 529 1,962 2,491 40 20195/20/2021
Medical / Dental CameronNC605 916 — — 605 916 1,521 24 20165/20/2021
Medical / Dental PinehurstNC135 419 — — 135 419 554 8 19995/20/2021
Medical / Dental JacksonvilleNC267 301 — — 267 301 568 8 19965/20/2021
Restaurants - Casual DiningToledoOH2,337 — — — 2,337 — 2,337 — 19885/20/2021
Automotive ServiceLincolnNE1,177 479 — — 1,177 479 1,656 15 19955/24/2021
GroceryConwayAR1,134 1,353 — — 1,134 1,353 2,487 35 19895/25/2021
GroceryRussellvilleAR1,072 1,629 — — 1,072 1,629 2,701 43 19895/25/2021
GroceryWaterfordWI1,443 3,234 — — 1,443 3,234 4,677 76 19965/25/2021
Early Childhood EducationWarrenvilleIL1,418 3,702 — — 1,418 3,702 5,120 65 20056/17/2021
Pet Care ServicesColliervilleTN418 609 — — 418 609 1,027 16 20186/17/2021
Automotive ServiceEdmondOK486 539 — — 486 539 1,025 13 20036/23/2021
Automotive ServiceOklahoma CityOK428 599 — — 428 599 1,027 16 20036/23/2021
Medical / Dental ToledoOH328 2,000 — — 328 2,000 2,328 33 20056/25/2021
Medical / Dental ToledoOH261 1,491 — — 261 1,491 1,752 25 19736/25/2021
Medical / Dental RossfordOH220 1,207 — — 220 1,207 1,427 21 19846/25/2021
Medical / Dental ToledoOH439 1,715 — — 439 1,715 2,154 32 19776/25/2021
Medical / Dental WatervilleOH1,831 2,481 — — 1,831 2,481 4,312 56 20176/25/2021
F-21

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Medical / Dental ToledoOH$566 $1,573 $— $— $566 $1,573 $2,139 $32 19936/25/2021
GroceryMarinetteWI729 1,938 — — 729 1,938 2,667 45 19876/29/2021
GroceryMenomineeMI1,224 6,189 — — 1,224 6,189 7,413 126 19696/29/2021
Medical / Dental El DoradoAR83 385 — 235 83 620 703 6 19506/30/2021
EntertainmentWindsor LocksCT887 7,538 — — 887 7,538 8,425 123 19606/30/2021
EntertainmentPortlandME2,052 4,924 — — 2,052 4,924 6,976 79 19896/30/2021
Early Childhood EducationRiverviewFL766 2,267 — — 766 2,267 3,033 40 20126/30/2021
Early Childhood EducationRiverviewFL1,563 1,457 — — 1,563 1,457 3,020 47 20156/30/2021
Restaurants - Quick ServiceCharlestonMS319 228 — — 319 228 547 11 19966/30/2021
Restaurants - Quick ServiceMarksMS305 147 — — 305 147 452 11 19806/30/2021
Restaurants - Quick ServiceLaurelMS451 141 — — 451 141 592 12 19756/30/2021
Restaurants - Quick ServiceVicksburgMS521 219 — — 521 219 740 18 19996/30/2021
Restaurants - Quick ServiceBelzoniMS512 235 — — 512 235 747 20 20176/30/2021
Early Childhood EducationFairlawnOH798 3,638 — — 798 3,638 4,436 67 20126/30/2021
Early Childhood EducationStowOH836 2,328 — — 836 2,328 3,164 53 19946/30/2021
Early Childhood EducationHartvilleOH272 3,148 — — 272 3,148 3,420 51 19566/30/2021
Early Childhood EducationGreenOH389 2,244 — — 389 2,244 2,633 42 20006/30/2021
Early Childhood EducationMedinaOH603 2,520 — — 603 2,520 3,123 49 19966/30/2021
Early Childhood EducationWadsworthOH735 3,673 — — 735 3,673 4,408 72 20166/30/2021
Early Childhood EducationNorth LibertyIA636 2,199 — — 636 2,199 2,835 40 20056/30/2021
Restaurants - Quick ServiceAltusOK798 932 — — 798 932 1,730 20 20177/1/2021
Restaurants - Quick ServiceElk CityOK738 902 — — 738 902 1,640 17 20187/1/2021
Restaurants - Quick ServiceWeatherfordOK799 902 — — 799 902 1,701 16 20187/1/2021
Health and FitnessSan AngeloTX2,135 — — — 2,135 — 2,135 — 19987/8/2021
EntertainmentVernonCT1,629 6,400 — — 1,629 6,400 8,029 88 20097/16/2021
Restaurants - Casual DiningWeymouthMA870 1,998 — — 870 1,998 2,868 39 20087/19/2021
Restaurants - Casual DiningCranstonRI830 1,171 — — 830 1,171 2,001 24 19967/19/2021
Restaurants - Casual DiningTauntonMA1,265 2,373 — — 1,265 2,373 3,638 42 19977/19/2021
Restaurants - Casual DiningLynnfieldMA1,630 848 — — 1,630 848 2,478 24 19997/19/2021
Restaurants - Casual DiningHaverhillMA1,245 1,703 — — 1,245 1,703 2,948 28 19857/19/2021
Restaurants - Casual DiningSalemNH1,978 2,127 — — 1,978 2,127 4,105 30 19747/19/2021
Restaurants - Casual DiningSalemMA939 898 — — 939 898 1,837 17 19957/19/2021
Restaurants - Casual DiningFitchburgMA1,060 2,211 — — 1,060 2,211 3,271 39 20007/19/2021
Restaurants - Casual DiningMashpeeMA1,352 1,501 — — 1,352 1,501 2,853 30 19967/19/2021
Restaurants - Casual DiningYarmouthMA1,494 1,543 — — 1,494 1,543 3,037 32 19977/19/2021
Restaurants - Casual DiningBillericaMA1,262 258 — — 1,262 258 1,520 8 19967/19/2021
Restaurants - Casual DiningAuburnMA1,867 1,612 — — 1,867 1,612 3,479 41 19927/19/2021
Equipment Rental and SalesEastonNY440 — — — 440 — 440 — 7/21/2021
Equipment Rental and SalesEast WindsorCT674 — — — 674 — 674 — 7/21/2021
Pet Care ServicesChicagoIL877 1,424 — — 877 1,424 2,301 19 19767/21/2021
Pet Care ServicesMariettaGA943 574 — — 943 574 1,517 11 19977/29/2021
Pet Care ServicesMissouri CityTX511 1,057 — — 511 1,057 1,568 15 20058/3/2021
Early Childhood EducationShakopeeMN740 3,081 — — 740 3,081 3,821 38 20178/4/2021
Automotive ServiceGlendaleAZ1,847 1,974 — — 1,847 1,974 3,821 30 20208/10/2021
Restaurants - Quick ServiceWinchesterKY390 401 — — 390 401 791 8 19838/13/2021
Restaurants - Quick ServiceRadcliffKY235 412 — — 235 412 647 7 19878/13/2021
Restaurants - Quick ServiceMaysvilleKY254 410 — — 254 410 664 8 19858/13/2021
Restaurants - Quick ServicePortsmouthOH255 450 — — 255 450 705 8 19788/13/2021
Restaurants - Quick ServiceHillsboroOH327 670 — — 327 670 997 12 19848/13/2021
Restaurants - Quick ServiceLondonKY184 683 — — 184 683 867 9 19888/13/2021
Restaurants - Quick ServiceBareaKY313 320 — — 313 320 633 7 19698/13/2021
Early Childhood EducationNew BernNC455 1,317 — — 455 1,317 1,772 18 20068/18/2021
Early Childhood EducationWilmingtonNC1,439 1,608 — — 1,439 1,608 3,047 23 20008/18/2021
Early Childhood EducationJacksonvilleNC834 2,066 — — 834 2,066 2,900 26 19898/18/2021
F-22

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Early Childhood EducationMorehead CityNC$321 $1,512 $— $— $321 $1,512 $1,833 $18 19918/18/2021
Early Childhood EducationLelandNC1,487 1,811 — — 1,487 1,811 3,298 27 20068/18/2021
Early Childhood EducationNew BernNC2,046 2,865 — — 2,046 2,865 4,911 43 20188/18/2021
Early Childhood EducationJacksonvilleNC1,390 1,654 — — 1,390 1,654 3,044 23 20028/18/2021
Early Childhood EducationSwansboroNC1,184 1,918 — — 1,184 1,918 3,102 28 20098/18/2021
Early Childhood EducationMorehead CityNC342 764 — — 342 764 1,106 11 19858/18/2021
Early Childhood EducationHavelockNC283 1,058 — — 283 1,058 1,341 14 19868/18/2021
Early Childhood EducationJacksonvilleNC1,108 2,069 — — 1,108 2,069 3,177 31 20098/18/2021
Early Childhood EducationJacksonvilleNC1,144 2,423 — — 1,144 2,423 3,567 31 19908/18/2021
Early Childhood EducationBurgawNC373 1,417 — — 373 1,417 1,790 18 20058/18/2021
Automotive ServiceWichitaKS366 621 — — 366 621 987 8 19898/19/2021
Automotive ServiceWichitaKS520 581 — — 520 581 1,101 9 19958/19/2021
Automotive ServiceWichitaKS165 461 — — 165 461 626 6 20188/19/2021
Automotive ServiceWichitaKS495 537 — — 495 537 1,032 9 20188/19/2021
Automotive ServiceWichitaKS314 978 — — 314 978 1,292 12 20188/19/2021
Automotive ServiceWichitaKS412 648 — — 412 648 1,060 9 20188/19/2021
Automotive ServiceWichitaKS736 540 — — 736 540 1,276 8 19818/19/2021
Automotive ServiceEnidOK721 482 — — 721 482 1,203 10 19938/19/2021
Automotive ServiceNormanOK445 478 — — 445 478 923 8 19958/19/2021
Automotive ServiceWarr AcresOK425 584 — — 425 584 1,009 9 19868/19/2021
Automotive ServiceNormanOK446 559 — — 446 559 1,005 8 19858/19/2021
Restaurants - Casual DiningSt. Peter'sMO2,435 — — — 2,435 — 2,435 — 8/20/2021
Equipment Rental and SalesCliftonNY2,049 — — — 2,049 — 2,049 — 8/31/2021
Health and FitnessTallahasseeFL3,597 — — — 3,597 — 3,597 — 20009/1/2021
Car WashesFort CollinsCO928 2,103 — — 928 2,103 3,031 21 20049/3/2021
Equipment Rental and SalesPlainfieldCT1,618 — — — 1,618 — 1,618 — 20059/3/2021
Early Childhood EducationFranklinTN828 728 — 200 828 928 1,756 10 19849/3/2021
Medical / Dental TexarkanaAR190 200 — 96 190 296 486 3 19809/8/2021
Equipment Rental and SalesBaytownTX1,195 3,062 — — 1,195 3,062 4,257 34 20209/10/2021
Equipment Rental and SalesGrove CityOH1,303 2,194 — — 1,303 2,194 3,497 33 19969/10/2021
Equipment Rental and SalesArdmoreOK1,820 1,505 — — 1,820 1,505 3,325 30 19979/10/2021
Equipment Rental and SalesTheodoreAL1,999 1,072 — — 1,999 1,072 3,071 35 20089/10/2021
Other ServicesTylerTX2,281 1,409 — — 2,281 1,409 3,690 37 20179/11/2021
Other ServicesColbertOK2,257 2,073 — — 2,257 2,073 4,330 37 20069/11/2021
Other ServicesDonnaTX4,739 4,071 — — 4,739 4,071 8,810 61 20199/11/2021
Other ServicesNacogdochesTX1,334 1,780 — — 1,334 1,780 3,114 31 20089/11/2021
Other ServicesLorenaTX1,773 3,381 — — 1,773 3,381 5,154 57 20219/11/2021
Restaurants - Casual DiningLee's SummitMO2,618 — — — 2,618 — 2,618 — 9/14/2021
GrocerySuamicoWI2,869 10,331 — — 2,869 10,331 13,200 100 20069/15/2021
GrocerySheboyganWI2,665 9,466 — — 2,665 9,466 12,131 88 20119/15/2021
Pet Care ServicesAustinTX1,027 — — — 1,027 — 1,027 — 9/24/2021
Medical / Dental BrandonFL64 700 — — 64 700 764 6 20179/24/2021
Medical / Dental TampaFL323 675 — — 323 675 998 7 19349/24/2021
Other ServicesCollege StationTX4,134 5,525 — — 4,134 5,525 9,659 71 20169/24/2021
Automotive ServiceSangerTX483 1,446 — — 483 1,446 1,929 15 20059/27/2021
Early Childhood EducationWestervilleOH884 1,282 — 792 884 2,074 2,958 17 20069/28/2021
Early Childhood EducationWestervilleOH888 701 — 671 888 1,372 2,260 11 19809/28/2021
Early Childhood EducationColumbusOH323 838 — 367 323 1,205 1,528 8 19809/28/2021
Early Childhood EducationPowellOH788 1,883 — 1,385 788 3,268 4,056 21 19909/28/2021
Early Childhood EducationDublinOH1,494 2,005 — — 1,494 2,005 3,499 25 19859/28/2021
Early Childhood EducationMesaAZ442 93 — — 442 93 535 2 198010/1/2021
Restaurants - Quick ServiceGreenvilleAL383 904 — — 383 904 1,287 8 198710/1/2021
Automotive ServiceQueen Creek AZ927 1,031 — — 927 1,031 1,958 9 201910/4/2021
IndustrialMartinsvilleVA679 3,839 — — 679 3,839 4,518 32 196410/7/2021
F-23

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Equipment Rental and SalesOssipeeNH$415 $— $— $— $415 $— $415 $— 199610/7/2021
Early Childhood EducationLee's SummitMO389 738 — — 389 738 1,127 7 200110/8/2021
Automotive ServiceBolivarMO210 821 — — 210 821 1,031 8 199710/12/2021
Automotive ServiceMesaAZ969 3,182 — — 969 3,182 4,151 27 200110/14/2021
Medical / Dental MassillonOH260 1,028 — — 260 1,028 1,288 9 197310/14/2021
Medical / Dental Cuyahoga FallsOH369 1,980 — — 369 1,980 2,349 15 196210/14/2021
Medical / Dental BucyrusOH45 633 — — 45 633 678 4 194410/14/2021
Automotive ServiceLawtonOK414 571 — — 414 571 985 6 199810/15/2021
Automotive ServiceLawtonOK312 286 — — 312 286 598 3 198410/15/2021
Automotive ServiceAdaOK281 195 — — 281 195 476 3 199910/15/2021
Medical / Dental CambridgeOH703 1,535 — — 703 1,535 2,238 15 199410/15/2021
Medical / Dental Manchester CenterVT357 916 — — 357 916 1,273 8 198010/18/2021
Restaurants - Quick ServiceRoanoke RapidsNC496 — — — 496 — 496 — 10/21/2021
Medical / Dental DarlingtonSC1,001 2,041 — — 1,001 2,041 3,042 17 199810/21/2021
Pet Care ServicesHooverAL1,138 — — — 1,138 — 1,138 — 10/26/2021
Restaurants - Casual DiningSioux FallsSD1,922 2,475 — — 1,922 2,475 4,397 21 200010/29/2021
Restaurants - Casual DiningKansas CityMO1,634 1,526 — — 1,634 1,526 3,160 14 200510/29/2021
Medical / Dental SouthavenMS244 5,942 — — 244 5,942 6,186 38 199910/29/2021
Car WashesLimaOH897 4,035 — — 897 4,035 4,932 23 201311/2/2021
Car WashesLimaOH1,202 3,621 — — 1,202 3,621 4,823 24 201511/2/2021
Car WashesMiddletownOH1,003 3,856 — — 1,003 3,856 4,859 23 199011/2/2021
Car WashesFindlayOH1,520 3,368 — — 1,520 3,368 4,888 21 201511/2/2021
Car WashesBowling GreenOH1,238 3,610 — — 1,238 3,610 4,848 23 201711/2/2021
GroceryMenasha WI2,148 16,344 — — 2,148 16,344 18,492 82 201611/4/2021
Pet Care ServicesAtlantaGA 791 728 — — 791 728 1,519 4 196811/4/2021
Pet Care ServicesGreensboro NC315 2,628 — — 315 2,628 2,943 13 201611/4/2021
Pet Care ServicesWinston-SalemNC636 1,399 — — 636 1,399 2,035 9 201111/4/2021
Pet Care ServicesCaryNC942 2,887 — — 942 2,887 3,829 19 200211/4/2021
Automotive ServiceEl PasoTX1,128 2,137 — — 1,128 2,137 3,265 11 198111/5/2021
Automotive ServiceEl PasoTX513 1,750 — — 513 1,750 2,263 8 201211/5/2021
Automotive ServiceEl PasoTX256 1,818 — — 256 1,818 2,074 8 197811/5/2021
Automotive ServiceEl PasoTX349 1,823 — — 349 1,823 2,172 9 198711/5/2021
Automotive ServiceAlamogordoNM175 641 — — 175 641 816 4 198911/5/2021
Automotive ServiceLas CrucesNM368 1,751 — — 368 1,751 2,119 9 199411/5/2021
Automotive ServiceEl PasoTX646 1,918 — — 646 1,918 2,564 9 200111/5/2021
Automotive ServiceEau ClaireWI267 1,849 — — 267 1,849 2,116 9 201711/10/2021
Automotive ServiceEau ClaireWI306 108 — — 306 108 414 2 198711/10/2021
Early Childhood EducationCiboloTX764 2,422 — — 764 2,422 3,186 13 201911/12/2021
Pet Care ServicesWinston-SalemNC150 1,477 — — 150 1,477 1,627 7 197011/17/2021
Restaurants - Quick ServiceBurbank IL 498 682 — — 498 682 1,180 4 200011/17/2021
EntertainmentW. Des MoinesIA2,560 6,120 — — 2,560 6,120 8,680 36 201811/18/2021
Early Childhood EducationPurcellvilleVA1,632 3,403 — — 1,632 3,403 5,035 16 201811/18/2021
Early Childhood EducationMidlothian TX633 1,376 — 46 633 1,422 2,055 9 200911/23/2021
Early Childhood EducationMidlothian TX840 1,169 — 60 840 1,229 2,069 9 201711/23/2021
GroceryKenoshaWI3,663 13,806 — — 3,663 13,806 17,469 74 201611/30/2021
Automotive ServiceIngleside IL781 2,145 — — 781 2,145 2,926 7 199012/1/2021
Early Childhood EducationGarnerNC619 1,612 — — 619 1,612 2,231 4 200612/3/2021
Early Childhood EducationApexNC750 1,068 — — 750 1,068 1,818 4 200112/10/2021
Early Childhood EducationWilmingtonNC766 2,192 — — 766 2,192 2,958 6 199812/10/2021
Restaurants - Casual DiningOverland ParkKS2,441 325 — — 2,441 325 2,766 3 199112/15/2021
Early Childhood EducationExcelsior SpringsMO190 1,171 — — 190 1,171 1,361 3 198612/15/2021
Early Childhood EducationKearneyMO700 2,503 — — 700 2,503 3,203 6 200612/15/2021
Early Childhood EducationKansas CityMO385 1,254 — — 385 1,254 1,639 3 200912/15/2021
F-24

Description(a)EncumbrancesInitial Cost to CompanyCost Capitalized Subsequent
to Acquisition
Gross Amount at
December 31, 2021(b)(c)
Accumulated Depreciation
(d)(e)		Year
Constructed		Date
Acquired
Tenant IndustryCityStateLand &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Land &
Improvements		Building &
Improvements		Total
Early Childhood EducationParkvilleMO$507 $1,354 $— $— $507 $1,354 $1,861 $4 200412/15/2021
Early Childhood EducationPlatte CityMO194 929 — — 194 929 1,123 2 200512/15/2021
Early Childhood EducationVandalia OH 784 809 — — 784 809 1,593 4 199412/15/2021
Automotive ServiceClevelandMS313 664 — — 313 664 977 2 199012/17/2021
Automotive ServiceGreensvilleMS132 206 — — 132 206 338 1 199512/17/2021
Automotive ServiceGreensvilleMS209 111 — — 209 111 320 1 199012/17/2021
Automotive ServiceKosciuskoMS293 203 — — 293 203 496 1  N/A 12/17/2021
Automotive ServiceNatchezMS982 1,931 — — 982 1,931 2,913 8 199012/17/2021
Early Childhood EducationGreensboroNC767 872 — 100 767 972 1,739 2 197412/17/2021
Pet Care ServicesRockledgeFL952 — — — 952 — 952 — 12/17/2021
Pet Care ServicesMissouri CityTX665 2,645 — — 665 2,645 3,310 7 200612/20/2021
Equipment Rental and SalesFort Myers FL1,459 435 — 865 1,459 1,300 2,759 4 197312/20/2021
Equipment Rental and SalesHialeah GardensFL5,406 4,302 — 1,057 5,406 5,359 10,765 11 198312/20/2021
Equipment Rental and SalesJacksonvilleFL959 336 — 733 959 1,069 2,028 3 199712/20/2021
Equipment Rental and SalesOrlandoFL4,313 872 — 1,370 4,313 2,242 6,555 9 197112/20/2021
Equipment Rental and SalesTampaFL1,612 3,784 — 1,070 1,612 4,854 6,466 11 197912/20/2021
IndustrialHuronSD1,250 2,950 — — 1,250 2,950 4,200 8 199212/21/2021
Medical / Dental MidlandTX607 3,356 — — 607 3,356 3,963 8 201512/28/2021
IndustrialMcGregorTX5,350 6,679 — — 5,350 6,679 12,029 46 200812/28/2021
Early Childhood EducationDe PereWI609 2,527 — — 609 2,527 3,136 6 200612/29/2021
Early Childhood EducationHowardWI539 2,481 — — 539 2,481 3,020 6 199212/29/2021
Automotive ServiceNorthglennCO1,110 1,676 — — 1,110 1,676 2,786 6 201412/30/2021
Automotive ServiceNorthglennCO784 2,067 — — 784 2,067 2,851 6 201612/30/2021
Medical / Dental Kansas CityMO696 1,165 — 75 696 1,240 1,936 3 201212/30/2021
Medical / Dental RaymoreMO446 1,128 — 100 446 1,228 1,674 3 200412/30/2021
Automotive ServiceAuroraCO384 918 — — 384 918 1,302 2 198212/30/2021
Automotive ServiceAuroraCO802 1,816 — — 802 1,816 2,618 5 198412/30/2021
Medical / Dental Garden CityMI563 2,640 — — 563 2,640 3,203 6 197712/30/2021
Medical / Dental SouthfieldMI579 2,616 — — 579 2,616 3,195 6 196612/30/2021
Medical / Dental SouthgateMI514 2,646 — — 514 2,646 3,160 6 195312/30/2021
Automotive ServiceMahtomediMN1,026 1,994 — — 1,026 1,994 3,020 6 200012/31/2021
$994,659 $1,928,219 $9,495 $107,700 $1,004,154 $2,035,919 $3,040,073 $169,126 

(a)As of December 31, 2021, the Company had investments in 1,451 single-tenant real estate property locations including 1,315 owned properties and 10 ground lease interests. All or a portion of six of the Company’s owned properties and one 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 five properties which are accounted for as a loan receivable, as the leases contain purchase options. Initial costs exclude intangible lease assets totaling $76.3 million.
(b)The aggregate cost for federal income tax purposes is $2.7 billion.
F-25

(c)The following is a reconciliation of carrying value for land and improvements and building and improvements for the periods presented:
(in thousands) Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Balance, beginning of period$2,260,919 $1,812,961 $1,306,504 
Additions
Acquisitions831,795 527,482 568,680 
Improvements9,459 28,889 3,283 
Deductions
Provisions for impairment of real estate(6,120)(8,399)(1,527)
Real estate investments held for sale(15,434)(17,058)(1,211)
Cost of real estate sold(40,546)(82,956)(62,768)
Balance, end of period$3,040,073 $2,260,919 $1,812,961 
(d)The following is a reconciliation of accumulated depreciation for the periods presented:
(in thousands) Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Balance, beginning of period$112,144 $71,445 $37,904 
Additions
Depreciation expense61,172 51,736 36,354 
Deductions
Accumulated depreciation associated with real estate sold(4,190)(11,037)(2,813)
Balance, end of period$169,126 $112,144 $71,445 
(e)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.
(f)Amounts shown as reductions to cost capitalized subsequent to acquisition represent provisions recorded for impairment of real estate or partial land dispositions.

See accompanying report of independent registered public accounting firm.


F-26

ESSENTIAL PROPERTIES REALTY TRUST, INC. AND ESSENTIAL PROPERTIES REALTY TRUST, INC. PREDECESSOR
Schedule IV - Mortgage Loans on Real Estate
As of December 31, 2021
(Dollar amounts in thousands)
DescriptionInterest
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
First mortgage loans:        
Two Early Childhood Education Centers located in Florida8.80%5/8/2039Interest only
Balloon - $12,000
None$12,000 $11,893 None
Two Early Childhood Education Centers located in Florida8.53%7/15/2039Interest only
Balloon - $7,300
None7,300 7,231 None
Two Family Dining Restaurants located in Texas8.10%6/30/2059Principal + InterestFully amortizingNone6,096 6,046 None
Sixty-nine Quick Service Restaurants located in fifteen states8.16%8/31/2034Interest only
Balloon - $28,000
None28,000 27,997 None
One Early Childhood Education Center located in Florida8.42%2/29/2040Interest only
Balloon - $5,300
None5,300 5,255 None
Three Convenience Stores located in Minnesota8.30%12/10/2022Interest only
Balloon - $2,324
None2,324 2,317 None
One Family Dining Restaurant located in Georgia7.00%1/25/2023Interest only
Balloon - $600
None600 597 None
Seven Automotive Service Centers located in California6.89%3/31/2026Interest only
Balloon - $14,165
None14,165 14,163 None
Three Convenience Stores located in Minnesota, Iowa, and Wisconsin 8.30%5/11/2023Interest only
Balloon - $3,146
None3,146 3,069 None
Two Casual Dining Restaurants located in Kentucky and Ohio6.87%5/31/2036Interest only
Balloon - $2,520
None2,520 2,520 None
Eighteen Casual Dining Restaurants located in 6 States7.51%5/31/2036Interest only
Balloon - $30,806
None30,806 30,635 None
Five Casual Dining Restaurants located in Kansas, Kentucky, and West Virginia 7.51%5/31/2036Interest only
Balloon - $9,679
None9,679 9,547 None
Two Entertainment Centers located in Missouri7.85%6/30/2031Interest only
Balloon - $13,000
None13,000 12,999 None
Two Convenience Stores located in Iowa8.29%6/1/2023Interest only
Balloon - $2,389
None2,389 2,328 None
One Entertainment Center located in New Jersey5.94%9/30/2051Principal + InterestFully amortizing None6,864 6,863 None
Two Indsutrial facilities located in California7.44%11/4/2036Interest only
Balloon - $9,808
None9,808 9,787 None
Five Car Washes located in Nevada 7.30%12/31/2036Interest only
Balloon - $25,714
None25,714 25,712 None
One Car Wash located in Florida7.73%12/29/2036Interest only
Balloon - $2,470
None2,470 2,463 None
      $182,181 $181,419  
F-27

The following shows changes in carrying amounts of mortgage loans receivable during the years ended December 31, 2021, 2020 and 2019 (in thousands):
 Year ended December 31,
 202120202019
Balance, beginning of period$144,048 $87,029 $14,854 
Additions:
New mortgage loans137,356 54,484 92,036 
Subsequent funding on existing mortgage loans— 3,500— 
Deductions:
Collections of principal(100,179)(11)(19,861)
Provision for loan losses194 (954)— 
Balance, end of period$181,419 $144,048 $87,029 
 
See accompanying report of independent registered public accounting firm.
F-28

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