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What changed in Broadstone Net Lease, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Broadstone Net Lease, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+342 added−421 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

Top changes in Broadstone Net Lease, Inc.'s 2023 10-K

342 paragraphs added · 421 removed · 278 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

49 edited+9 added−21 removed57 unchanged
Biggest changeDiversification by Industry Industry # Properties ABR ($000s) ABR as a % of Total Portfolio Square Feet (‘000s) SF as a % of Total Portfolio Restaurants 251 $ 53,151 13.7 % 1,220 3.1 % Healthcare Facilities 103 52,306 13.4 % 2,044 5.2 % Packaged Foods & Meats 29 37,998 9.8 % 4,713 12.0 % Distributors 27 15,922 4.1 % 2,695 6.9 % Auto Parts & Equipment 43 15,348 3.9 % 2,668 6.8 % Food Distributors 8 14,699 3.8 % 1,786 4.6 % Specialty Stores 31 13,805 3.5 % 1,338 3.4 % Specialized Consumer Services 49 12,725 3.3 % 728 1.9 % Home Furnishing Retail 18 12,684 3.3 % 1,858 4.7 % Metal & Glass Containers 8 10,010 2.6 % 2,206 5.6 % General Merchandise Stores 96 9,634 2.5 % 880 2.2 % Industrial Machinery 20 9,317 2.4 % 1,949 5.0 % Healthcare Services 18 9,231 2.4 % 515 1.3 % Forest Products 9 8,995 2.3 % 2,014 5.1 % Aerospace & Defense 6 7,419 1.9 % 776 2.0 % Other (40 industries) 85 105,850 27.1 % 11,530 29.6 % Untenanted properties 3 — — 219 0.6 % Total 804 $ 389,094 100.0 % 39,139 100.0 % 10 Diversification by Geography 11 State # Properties ABR ($000s) ABR as a % of Total Portfolio Square Feet (000s) SF as a % of Total Portfolio State # Properties ABR ($000s) ABR as a % of Total Portfolio Square Feet (000s) SF as a % of Total Portfolio TX 72 $ 37,883 9.7 % 3,621 9.3 % LA 4 3,400 0.9 % 194 0.5 % MI 55 32,545 8.4 % 3,811 9.7 % MS 11 3,320 0.9 % 430 1.1 % IL 32 24,148 6.2 % 2,424 6.2 % NE 6 3,173 0.8 % 509 1.3 % WI 35 21,087 5.4 % 2,163 5.5 % MD 4 3,002 0.8 % 293 0.7 % CA 13 18,773 4.8 % 1,718 4.4 % IA 4 2,768 0.7 % 622 1.6 % OH 47 18,667 4.8 % 1,728 4.4 % NM 9 2,733 0.7 % 107 0.3 % FL 42 16,197 4.2 % 844 2.2 % SC 13 2,556 0.7 % 308 0.8 % IN 32 15,552 4.0 % 1,906 4.9 % CO 4 2,501 0.6 % 126 0.3 % MN 21 15,341 3.9 % 2,500 6.4 % WV 16 2,490 0.6 % 109 0.3 % TN 50 15,117 3.9 % 1,103 2.8 % UT 3 2,432 0.6 % 280 0.7 % NC 37 13,935 3.6 % 1,435 3.7 % CT 2 1,767 0.5 % 55 0.1 % AL 53 12,151 3.1 % 873 2.2 % MT 7 1,563 0.4 % 43 0.1 % GA 33 11,473 2.9 % 1,576 4.0 % NV 2 1,361 0.3 % 81 0.2 % AZ 9 10,759 2.8 % 909 2.3 % DE 4 1,167 0.3 % 133 0.3 % MA 5 10,461 2.7 % 1,026 2.6 % ND 2 954 0.2 % 28 0.1 % PA 22 9,595 2.5 % 1,836 4.7 % VT 2 420 0.1 % 24 0.1 % KY 26 9,424 2.4 % 1,148 2.9 % WY 1 307 0.1 % 21 0.1 % NY 26 9,265 2.4 % 680 1.7 % OR 1 136 0.0 % 9 0.0 % AR 12 8,891 2.3 % 544 1.4 % SD 1 81 0.0 % 9 0.0 % OK 21 7,633 2.0 % 977 2.5 % Total U.S. 797 $ 381,436 98.0 % 38,709 98.9 % MO 12 6,119 1.6 % 1,138 2.9 % BC 2 4,408 1.1 % 253 0.6 % KS 11 5,590 1.4 % 648 1.7 % ON 3 1,984 0.5 % 101 0.3 % VA 17 5,479 1.4 % 204 0.5 % AB 1 933 0.2 % 51 0.1 % NJ 3 4,909 1.3 % 366 0.9 % MB 1 333 0.2 % 25 0.1 % WA 15 4,311 1.1 % 150 0.4 % Total Canada 7 $ 7,658 2.0 % 430 1.1 % Grand Total 804 $ 389,094 100.0 % 39,139 100.0 % 12 Our Leases We typically lease our properties pursuant to long-term net leases with initial terms of 10 years or more that often have renewal options.
Biggest changeDiversification by Industry Tenant Industry # Properties ABR (’000s) ABR as a % of Total Portfolio Square Feet (’000s) SF as a % of Total Portfolio Healthcare Facilities 104 $ 54,973 14.0 % 2,062 5.4 % Restaurants 251 53,973 13.8 % 1,207 3.2 % Packaged Foods & Meats 29 41,046 10.5 % 4,713 12.3 % Distributors 27 17,477 4.5 % 2,757 7.2 % Auto Parts & Equipment 44 15,599 4.0 % 2,710 7.1 % Specialty Stores 31 14,362 3.7 % 1,338 3.5 % Food Distributors 8 14,206 3.6 % 1,712 4.5 % Home Furnishing Retail 18 12,914 3.3 % 1,858 4.9 % Specialized Consumer Services 45 11,842 3.0 % 709 1.9 % Metal & Glass Containers 8 10,229 2.6 % 2,206 5.8 % General Merchandise Stores 96 9,716 2.5 % 880 2.3 % Industrial Machinery 20 9,654 2.5 % 1,949 5.1 % Forest Products 8 9,378 2.4 % 2,284 6.0 % Healthcare Services 18 9,371 2.4 % 515 1.3 % Internet & Direct Marketing Retail 3 7,057 1.8 % 447 1.2 % Other (38 industries) 84 100,404 25.4 % 10,700 27.7 % Untenanted properties 2 — — 224 0.6 % Total 796 $ 392,201 100.0 % 38,271 100.0 % 8 Diversification by Geographic Location State # Properties ABR (’000s) ABR as a % of Total Portfolio Square Feet (’000s) SF as a % of Total Portfolio State # Properties ABR (’000s) ABR as a % of Total Portfolio Square Feet (’000s) SF as a % of Total Portfolio TX 69 $ 38,110 9.7 % 3,603 9.4 % WA 15 $ 4,384 1.1 % 150 0.4 % MI 55 33,060 8.4 % 3,810 10.0 % LA 4 3,407 0.9 % 194 0.5 % IL 32 24,383 6.2 % 2,424 6.3 % MS 11 3,370 0.9 % 430 1.1 % WI 35 23,096 5.9 % 2,163 5.7 % NE 6 3,286 0.8 % 509 1.3 % CA 13 19,617 5.0 % 1,718 4.5 % SC 13 2,986 0.8 % 308 0.8 % FL 42 16,319 4.2 % 840 2.2 % IA 4 2,819 0.7 % 622 1.6 % OH 47 16,308 4.2 % 1,582 4.1 % NM 9 2,779 0.7 % 107 0.3 % IN 32 16,240 4.1 % 1,906 5.0 % CO 4 2,545 0.6 % 126 0.3 % MN 21 15,668 4.0 % 2,500 6.5 % UT 3 2,492 0.6 % 280 0.7 % TN 49 15,225 3.9 % 1,093 2.9 % MD 3 2,174 0.6 % 205 0.5 % NC 36 12,491 3.2 % 1,135 3.0 % CT 2 1,837 0.5 % 55 0.1 % AL 53 12,418 3.2 % 873 2.3 % ND 3 1,726 0.4 % 48 0.1 % AZ 9 11,929 3.0 % 909 2.4 % MT 7 1,582 0.4 % 43 0.1 % GA 33 11,894 3.0 % 1,576 4.1 % DE 4 1,180 0.3 % 133 0.3 % KY 24 9,832 2.5 % 962 2.5 % VT 2 426 0.1 % 20 0.1 % PA 22 9,807 2.5 % 1,836 4.8 % WY 1 307 0.1 % 25 0.1 % NY 26 9,467 2.4 % 680 1.8 % NV 1 272 0.1 % 6 0.0 % OK 24 8,415 2.1 % 990 2.6 % OR 1 136 0.0 % 9 0.0 % AR 11 7,855 2.0 % 283 0.7 % SD 1 81 0.0 % 9 0.0 % MA 3 6,548 1.7 % 444 1.2 % Total U.S. 789 $ 383,657 97.8 % 37,841 98.8 % MO 12 6,231 1.6 % 1,138 3.0 % BC 2 4,992 1.2 % 253 0.7 % VA 17 5,550 1.4 % 204 0.5 % ON 3 2,168 0.6 % 101 0.3 % KS 10 5,495 1.4 % 643 1.7 % AB 1 1,027 0.3 % 55 0.1 % WV 17 4,997 1.3 % 884 2.3 % MB 1 357 0.1 % 21 0.1 % NJ 3 4,913 1.3 % 366 1.0 % Total Canada 7 $ 8,544 2.2 % 430 1.2 % Grand Total 796 $ 392,201 100.0 % 38,271 100.0 % 9 Our Leases We typically lease our properties pursuant to long-term net leases with initial terms of 10 years or more that often have renewal options.
We underwrite restaurant properties primarily based on the fundamental value of the underlying real estate, site level performance, corporate owned location or experienced multi-unit franchise operators, and whether the property is subject to a master lease with multiple operating locations. • Retail.
We underwrite restaurant properties primarily based on the fundamental value of the underlying real estate, site level performance, corporate owned location or experienced multi-unit franchise operators, and whether the property is subject to a master lease with multiple operating locations. 12 • Retail.
When evaluating whether a property acquisition would contribute to our overall portfolio’s diversification, we expect to take into account the percentage a single property, tenant, or brand would represent in our overall portfolio, as well as geographic concentrations, both by the metropolitan statistical area and by state.
When evaluating whether a property acquisition would contribute to our overall portfolio’s diversification, we take into account the percentage a single property, tenant, or brand would represent in our overall portfolio, as well as geographic concentrations, both by the metropolitan statistical area and by state.
Amendments to, and waivers granted to our directors and executive officers under our Code of Ethics and Business Conduct Policy, if any, will be posted in this area of our website. Copies of these materials are available in print to any stockholder who requests 19 them.
Amendments to, and waivers granted to our directors and executive officers under our Code of Ethics and Business Conduct Policy, if any, will be posted in this area of our website. Copies of these materials are available in print to any stockholder who requests them.
These laws may impose liability for improper handling or a release into the environment of ACM and may provide for fines to, and for third parties to seek recovery from, owners or operators of real properties for personal injury or improper work exposure associated with ACM. 18 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.
These laws may impose liability for improper handling or a release into the environment of ACM and may provide for fines to, and for third parties to seek recovery from, owners or operators of real properties for personal injury or improper work exposure associated with ACM. 15 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.
As of December 31, 2022, leases contributing 97.3% of our ABR provided for increases in future annual base rent, generally ranging from 1.5% to 2.5% annually, with an ABR weighted average annual minimum increase equal to 2.0% of base rent. Generally, our rent escalators increase rent on specified dates by a fixed percentage.
As of December 31, 2023, leases contributing 97.3% of our ABR provided for increases in future ABR, generally ranging from 1.5% to 3.0% annually, with an ABR weighted average annual minimum increase equal to 2.0% of base rent. Generally, our rent escalators increase rent on specified dates by a fixed percentage.
Depending on the location of the property, certain 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.
Depending on the location of the property, certain 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, co-payments, or sub-limits that a tenant may not be able to meet.
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. 17 Government Regulation General Our investments are subject to various laws, ordinances, and regulations, including, among other things, fire and safety requirements, zoning regulations, land use controls, and environmental controls relating to air and water quality, noise pollution, and indirect environmental impacts.
We also maintain 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. 14 Government Regulation General Our investments are subject to various laws, ordinances, and regulations, including, among other things, fire and safety requirements, zoning regulations, land use controls, and environmental controls relating to air and water quality, noise pollution, and indirect environmental impacts.
While we consider these criteria when evaluating acquisition opportunities, we may also pursue opportunistic investments that do not meet one or more of these factors if we assess that a transaction presents compelling risk-adjusted returns. We intend to primarily acquire portfolios and assets over time that will generally not result in any one tenant representing more than 5% of ABR.
While we consider these criteria when evaluating investment opportunities, we may also pursue opportunistic investments that do not meet one or more of these factors if we assess that a transaction presents compelling risk-adjusted returns. We intend to primarily acquire portfolios and assets over time that will not result in any one tenant representing more than 5% of ABR.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K under the heading Non-GAAP Measures , which includes discussion of the definition, purpose, and use of these non-GAAP measures as well as a reconciliation of each to the most comparable GAAP measure. 6 Our Real Estate Investment Portfolio The following charts summarize our portfolio diversification by property type, tenant, brand, industry, and geographic location as of December 31, 2022.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K under the heading Non-GAAP Measures , which includes discussion of the definition, purpose, and use of these non-GAAP measures as well as a reconciliation of each to the most comparable GAAP measure. 5 Our Real Estate Investment Portfolio The following charts summarize our portfolio diversification by property type, tenant, brand, industry, and geographic location as of December 31, 2023.
Lease Escalation Frequency % of ABR Weighted Average Annual Minimum Increase (1) Annually 79.2 % 2.2 % Every 2 years 0.1 % 1.8 % Every 3 years 2.6 % 3.0 % Every 4 years 1.0 % 2.4 % Every 5 years 7.9 % 1.8 % Other escalation frequencies 6.5 % 1.6 % Flat 2.7 % — Total/ABR Weighted Average 100.0 % 2.0 % (1) Represents the ABR weighted average annual minimum increase of the entire portfolio as if all escalations occurred annually.
Lease Escalation Frequency % of ABR Weighted Average Annual Minimum Increase (1) Annually 80.0 % 2.1 % Every 2 years 0.1 % 1.8 % Every 3 years 2.3 % 3.0 % Every 4 years 1.1 % 2.4 % Every 5 years 7.2 % 1.7 % Every 6 years 0.1 % 1.7 % Other escalation frequencies 6.5 % 1.6 % Flat (2) 2.7 % — Total/ABR Weighted Average 100.0 % 2.0 % (1) Represents the ABR weighted average annual minimum increase of the entire portfolio as if all escalations occurred annually.
We seek to create and cultivate an inclusive and engaging work environment for our employees, which allows us to attract, retain, and develop top talent to manage our business.
We seek to create and cultivate an inclusive and engaging work environment for our employees, which allows us to attract, engage, and develop top talent to manage our business.
As of December 31, 2022, our portfolio was approximately 99.4% leased with an ABR weighted average remaining lease term of approximately 10.9 years, excluding renewal options. • Standard Contractual Base Rent Escalation . Approximately 97.3% of our leases have contractual rent escalations, with an ABR weighted average minimum increase of 2.0%. • Extensive Tenant Financial Reporting .
As of December 31, 2023, our portfolio was approximately 99.4% leased with an ABR weighted average remaining lease term of approximately 10.5 years, excluding renewal options. • Standard Contractual Base Rent Escalation . Approximately 97.3% of our leases have contractual rent escalations, with an ABR weighted average minimum increase of 2.0%. • Extensive Tenant Financial Reporting .
Our escalations provide us with a source of organic growth and a measure of inflation protection. Additional information on lease escalation frequency and weighted average annual escalation rates as of December 31, 2022 is displayed below.
Our escalations provide us with a source of organic revenue growth and a measure of inflation protection. Additional information on lease escalation frequency and weighted average annual escalation rates as of December 31, 2023 is displayed below.
We underwrite retail properties primarily based on the fundamental value of the underlying real estate, site level performance, corporate owned location or experienced multi-unit franchise operators, and whether the property is subject to a master lease with multiple operating locations. • Office .
We underwrite retail properties primarily based on the fundamental value of the underlying real estate, site level performance, corporate owned location or experienced multi-unit franchise operators, and whether the property is subject to a master lease with multiple operating locations. • Consumer-Centric Healthcare .
We also seek to maintain our portfolio’s diversification by property type, geography, tenant, and industry in an effort to reduce fluctuations in income caused by under-performing individual real estate assets or adverse economic conditions affecting an entire industry or geographic region.
For all investments, we seek to maintain our portfolio’s diversification by property type, geography, tenant, and industry in an effort to reduce fluctuations in income caused by under-performing individual real estate assets or adverse economic conditions affecting an entire industry or geographic region.
Human Capital As of December 31, 2022, we employed 73 full-time employees, comprised of professional employees engaged in origination, underwriting, closing, accounting and financial reporting, portfolio and asset management, capital markets, and other corporate activities essential to our business.
Human Capital As of December 31, 2023, we employed 74 full-time employees, comprised of professional employees engaged in origination, underwriting, closing, accounting and financial reporting, portfolio and asset management, capital markets, and other corporate activities essential to our business.
As of December 31, 2022, leases contributing 7.5% of our ABR provide for rent increases equal to the lesser of a stated fixed percentage or the change in CPI.
As of December 31, 2023, leases contributing 5.2% of our ABR provide for rent increases equal to the lesser of a stated fixed percentage or the change in CPI.
Investment Guidelines We seek to acquire primarily freestanding, single-tenant commercial real estate properties located in the United States that are under lease and fully occupied at the time of acquisition.
Investment Guidelines We seek to acquire, finance, and develop primarily freestanding, single-tenant commercial real estate properties located in the United States that are under lease and fully occupied at the time of acquisition or development completion.
Within these sectors, we have meaningful concentrations in manufacturing, distribution and warehouse, food processing, casual dining, clinical, quick service restaurants, general merchandise, and flex/research and development. • Geographic Diversification : Our properties are located in 44 U.S. states and four Canadian provinces, with no single geographic concentration exceeding 9.7% of our ABR. • Tenant and Industry Diversification : Our properties are occupied by 221 different commercial tenants who operate 211 different brands that are diversified across 55 different industries, with no single tenant accounting for more than 4.0% of our ABR. • Strong In-Place Leases with Significant Remaining Lease Term .
Within these sectors, we have meaningful concentrations in manufacturing, distribution and warehouse, food processing, casual dining, clinical, quick service restaurants, and general merchandise. • Geographic Diversification : Our properties are located in 44 U.S. states and four Canadian provinces, with no single geographic concentration exceeding 9.7% of our ABR. • Tenant and Industry Diversification : Our properties are occupied by approximately 220 different commercial tenants who operate 208 different brands that are diversified across 53 differing industries, with no single tenant accounting for more than 4.1% of our ABR. • Strong In-Place Leases with Significant Remaining Lease Term .
Item 1. B usiness The Company We are an internally-managed real estate investment trust (“REIT”) that invests in, owns, and manages primarily single-tenant commercial real estate properties that are net leased on a long-term basis to a diversified group of tenants.
Item 1. B usiness The Company We are an industrial-focused, diversified net lease real estate investment trust (“REIT”) that invests in primarily single-tenant commercial real estate properties that are net leased on a long-term basis to a diversified group of tenants.
Our community engagement efforts are led by our employees through a dedicated committee that is responsible for engaging with community organizations, planning and organizing various opportunities for employees to make a difference through volunteer giving and service, and civic involvement with non-profit organizations, and corporate donations.
Our community engagement efforts are led by our employees through a dedicated committee that is responsible for engaging with community organizations, planning and organizing various opportunities for employees to make a difference through volunteer giving and service, and facilitating corporate donation and fundraising drives.
Because substantially all of our properties are leased under long-term leases, we are not currently required to perform significant ongoing leasing activities on our properties. The leases for six properties, representing approximately 1.2% of our ABR, will expire during 2023. As of December 31, 2022, the ABR weighted average remaining term of our leases was approximately 10.9 years.
Because substantially all of our properties are leased under long-term leases, we are not currently required to perform significant ongoing leasing activities on our properties. As of December 31, 2023, the ABR weighted average remaining term of our leases was approximately 10.5 years.
Company Information Our filings with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as well as our proxy statements, are accessible free of charge at http://investors.bnl.broadstone.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Additionally, if we were to lose REIT status we would face significant tax consequences that would substantially reduce our cash available for distribution to our stockholders. 16 Company Information Our filings with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as well as our proxy statements, are accessible free of charge at http://investors.bnl.broadstone.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We offer numerous opportunities for our employees to engage in personal and professional development, including educational support and opportunities for tuition assistance and reimbursement, participation in industry conferences and networking events, individual leadership and management training, access to an online learning library and professional book club providing an extensive collection of learning and development opportunities, lunch and learn meetings with our CEO and senior management team, group trainings (e.g., underwriting, real estate fundamentals, cyber security, computer skills, safety, ethics, harassment prevention, and DE&I related content), peer mentorship opportunities, and reimbursement for continuing education. • Employee Wellness – Our employees are our most valuable asset, and their individual and group contributions drive our performance and success.
We offer numerous opportunities for our employees to engage in personal and professional development, including educational support and opportunities for tuition assistance and reimbursement, participation in industry conferences and networking events, individual leadership and management training, access to an online learning library, in-office library with a curated collection of personal and professional development books, , town hall meetings with our CEO and senior leadership team, group trainings (e.g., underwriting, real estate fundamentals, cyber security, computer skills, safety, ethics, harassment prevention, and DE&I related content), and peer mentorship opportunities.
Through long-term net leases, our tenants are able to retain operational control of their strategically important locations, while allocating their debt and equity capital to fund core business operations rather than real estate ownership. • Diversified Portfolio .
We target properties that are an integral part of the tenants’ businesses and are therefore opportunities to secure long-term net leases through which our tenants are able to retain operational control of their strategically important locations, while allocating their debt and equity capital to fund core business operations rather than real estate ownership. • Diversified Portfolio .
As of December 31, 2022, our portfolio comprised approximately 39.1 million rentable square feet of operational space and was highly diversified based on property type, geography, tenant, and industry, and is cross-diversified within each ( e.g., property-type diversification within a geographic concentration): • Property Type : We are focused primarily on industrial, healthcare, restaurant, retail, and office property types based on our extensive experience in and conviction around these sectors.
As of December 31, 2023, our portfolio comprised approximately 38.3 million rentable square feet of operational space, was highly diversified based on property type, geography, tenant, and industry, and was cross-diversified within each ( e.g., property-type diversification within a geographic concentration): • Property Type : We are diversified across industrial, healthcare, restaurant, retail, and office property types.
We believe that diverse backgrounds and experiences help drive our performance and are important assets for our company. To that end, we value and advance the diversity, equity, and inclusion of the people with whom we work.
We believe that diverse backgrounds and experiences help drive our performance and contribute to our company’s growth. To that end, we value and advance diversity, equity, and inclusion in our workplace and of the people with whom we work.
The percentages below are calculated based on our ABR of $389.1 million as of December 31, 2022.
The percentages below are calculated based on our ABR of $392.2 million as of December 31, 2023.
We compete based on a number of factors that include location, rental rates, security, suitability of the property’s design to prospective tenants’ needs, and the manner in which the property is operated and marketed.
We compete for tenants to occupy our properties in all of our markets with other owners and operators of commercial real estate. We compete based on a number of factors that include location, rental rates, security, suitability of the property’s design to prospective tenants’ needs, and the manner in which the property is operated and marketed.
We are focused primarily on investing in the industrial, healthcare, restaurant, and retail property types, and consider certain office properties acquired in connection with a portfolio of other assets. Within each property type, we target specific acquisition opportunities in a highly selective manner. • Industrial .
We are currently focused primarily on investing in the industrial, restaurant, retail, and consumer-centric healthcare and veterinary property types, and target specific acquisition opportunities within each property type in a highly selective manner. • Industrial .
Our cross-functional DE&I committee spearheads our ongoing efforts to deepen our commitment to this important initiative and drive our education, including diversity trainings on topics such as unconscious bias, and inclusive leadership and culture. The committee also focuses on employee engagement, policy reviews, recruitment, and monetary donations to external DE&I focused programs and organizations and sponsorship of employee groups.
Our cross-functional DE&I committee spearheads our ongoing efforts to deepen our commitment to this important initiative and drive our diversity-related education, including trainings on topics such as inclusive culture and leadership, unconscious bias, and inclusive hiring.
Generally, as we reimburse the tenant for property expansion or improvement costs, the rent will increase proportionally with our funding, which typically allows us to achieve a consistent cash yield on our funding throughout improvement.
In exchange for such reimbursement, we generally receive contractually specified rent that increases proportionally with our funding. Generally, the rent will increase proportionally with our funding, which typically allows us to achieve a consistent cash yield on our funding throughout improvement.
As of December 31, 2022, master leases contributed to 67.7% of the ABR associated with multi-site tenants (418 of our 489 properties), and 40.8% of our overall ABR (489 of our 804 properties). As of December 31, 2022, approximately 99.4% of our portfolio, representing all but three of our properties, were subject to a lease.
As of December 31, 2023, master leases contributed 69.0% of the ABR associated with multi-site tenants (406 of 675 properties), and 41.5% of our overall ABR (406 of our 796 properties). As of December 31, 2023, approximately 99.4% of our portfolio, representing all but two of our properties, was subject to a lease.
The number of competing properties in a particular market could have a material effect on our occupancy levels, rental rates, and the operating expenses of certain of our properties. In addition, we compete with other entities engaged in real estate investment activities to locate suitable properties to acquire and purchasers to buy our properties.
The number of competing properties in a particular market could have a material effect on our occupancy levels, rental rates, and the operating expenses of certain of our properties.
As any future increase in CPI is unknowable at this time, we have not included an increase in the rent pursuant to these leases in the weighted average annual minimum increase presented. 14 The escalation provisions of our leases (by percentage of ABR) as of December 31, 2022, are displayed in the following chart: If requested by a tenant, we may, subject to the tenant’s history, creditworthiness, and other relevant considerations, agree to reimburse the tenant for property expansion or improvement costs that it incurs in connection with improvements at a property, 100% of which it leases from us.
(2) Generally associated with investment grade tenants. 11 The escalation provisions of our leases (by percentage of ABR) as of December 31, 2023, are displayed in the following chart: If requested by a tenant, we may, subject to the tenant’s history, creditworthiness, and other relevant considerations, agree to reimburse the tenant for property expansion or improvement costs, 100% of which it leases from us.
DE&I is a critical business imperative that requires ongoing focus and commitment; therefore, our efforts to promote greater diversity, equity, and inclusion within and beyond our workplace have been instituted as a regular reporting item for our employees and our Board of Directors. • Career Development – We strive to create an engaging work experience that allows for career development and related opportunities.
DE&I is a critical business imperative that requires ongoing focus and commitment; therefore, our efforts to promote greater diversity, equity, and inclusion within and beyond our workplace have been instituted as a regular reporting item for our employees and our Board of Directors. • Community Engagement – We believe in our responsibility to help and be a force for social good in the communities we call home and do so through various corporate giving and philanthropic endeavors.
We look for industrial properties that are located in close proximity to major transportation thoroughfares such as airports, ports, railways, major freeways or interstate highways. • Healthcare .
We look for industrial properties that are located in close proximity to major transportation thoroughfares such as airports, ports, railways, major freeways or interstate highways. • Restaurant . We focus our restaurant investments primarily in single-tenant quick service restaurant and casual dining properties, with an emphasis on restaurants that are located in strong retail markets.
Ryerson & Son, Inc Distribution & Warehouse 11 6,491 1.7 % 1,537 3.9 % Red Lobster Hospitality & Red Lobster Restaurants LLC* Casual Dining 19 6,178 1.6 % 158 0.4 % J. Alexander’s, LLC * Casual Dining 16 6,115 1.6 % 131 0.4 % Axcelis Technologies, Inc.
Ryerson & Son, Inc Distribution & Warehouse 11 7,780 2.0 % 1,599 4.2 % Jack’s Family Restaurants LP* Quick Service Restaurants 43 7,456 1.9 % 147 0.3 % J. Alexander’s, LLC * Casual Dining 16 6,207 1.6 % 131 0.3 % Axcelis Technologies, Inc.
Insurance Our tenants are generally required to maintain liability and property insurance coverage for the properties they lease from us pursuant to net leases.
Principal Executive Offices Our principal executive offices are located at 207 High Point Drive, Suite 300, Victor, New York 14564, and our telephone number is (585) 287-6500. Insurance Our tenants are generally required to maintain liability and property insurance coverage for the properties they lease from us pursuant to net leases.
We seek to provide a collaborative, creative workplace where people with unique talents can flourish, where their opinions are valued, and where their contributions are rewarded. 16 As part of our commitment to our employees, we are focused on the following: • Diversity, Equity, and Inclusion (“DE&I”) – We are committed to providing equal opportunity in all aspects of employment and cultivating a diverse, equitable, and inclusive workplace.
We seek to provide a collaborative, creative workplace where people with unique talents can flourish, where their opinions are valued, and where their contributions are rewarded. 13 As part of our commitment to our employees, we are focused on the following: • Employee Total Rewards and Wellness – Our employees are our most valuable assets, and their individual and group contributions drive our performance and success.
We employ numerous strategies and initiatives to nurture and nourish our employees’ physical, mental, and emotional well-being, including, among other things, competitive employee benefits (with 100% employer-paid healthcare options), generous paid time off programs, fringe benefits to make both the Broadstone and home office environments more comfortable, transparent and open communication and dialogue between our senior executives and our employee base, events and opportunities for social connectedness and fun family-friendly corporate events, wellness and fitness events, on-site flu vaccinations administered by a third-party health-services provider, flexibility in work location and schedules to meet specific employee needs, and access to an employee assistance program and other health and wellness resources. • Community Engagement – We believe in our responsibility to help the communities around us by providing support to charitable organizations and encourage living philanthropically.
We employ numerous strategies and initiatives to nurture and nourish our employees and their dependents physical, mental, and emotional well-being, including, among other things, competitive compensation programs including performance-based bonuses and equity programs for all, employee benefits (with 100% employer-paid healthcare options), 401(k) with employer match and immediate vesting, generous paid time off programs with an annual corporate shutdown week, paid caregiver leave, on-site flu vaccinations, employer-paid legal services, access to an employee assistance program, fringe benefits to make both the Broadstone and home office environments more comfortable including flexibility in work locations and schedules, and access to other health and wellness events and resources. • Employee Development and Engagement – We strive to create an engaging work experience that allows for career development and related opportunities.
Flex and R&D 1 5,991 1.5 % 417 1.1 % Dollar General Corporation General Merchandise 60 5,956 1.5 % 562 1.4 % Hensley & Company* Distribution & Warehouse 3 5,871 1.5 % 577 1.5 % BluePearl Holdings, LLC** Animal Health Services 13 5,543 1.4 % 165 0.4 % Total Top 10 Tenants 182 74,055 19.0 % 7,958 20.3 % Outback Steakhouse of Florida LLC* 1 Casual Dining 22 5,365 1.4 % 140 0.4 % Tractor Supply Company General Merchandise 21 5,349 1.4 % 417 1.1 % Krispy Kreme Doughnut Corporation Quick Service Restaurants/ Food Processing 27 5,034 1.3 % 156 0.4 % Siemens Medical Solutions USA, Inc. & Siemens Corporation Manufacturing/Flex and R&D 2 5,012 1.2 % 545 1.4 % Big Tex Trailer Manufacturing, Inc.* Automotive/Distribution & Warehouse/Manufacturing/ Corporate Headquarters 17 4,957 1.2 % 1,302 3.3 % Nestle’ Dreyer’s Ice Cream Company Cold Storage 1 4,543 1.2 % 309 0.8 % Carvana, LLC* Industrial Services 2 4,509 1.2 % 230 0.6 % Klosterman Bakery * Food Processing 11 4,500 1.2 % 549 1.4 % Arkansas Surgical Hospital Surgical 1 4,475 1.2 % 129 0.3 % American Signature, Inc.
Flex and R&D 1 6,126 1.6 % 417 1.1 % Salm Partners, LLC* Food Processing 2 6,062 1.5 % 368 1.0 % Red Lobster Hospitality & Red Lobster Restaurants LLC* Casual Dining 18 6,060 1.5 % 147 0.4 % Hensley & Company* Distribution & Warehouse 3 5,989 1.5 % 577 1.5 % Dollar General Corporation General Merchandise 60 5,977 1.5 % 562 1.5 % Total Top 10 Tenants 169 76,952 19.6 % 8,482 22.2 % BluePearl Holdings, LLC** Animal Health Services 13 5,693 1.4 % 165 0.4 % Krispy Kreme Doughnut Corporation Quick Service Restaurants/ Food Processing 27 5,538 1.4 % 156 0.4 % Outback Steakhouse of Florida LLC* 1 Casual Dining 22 5,454 1.4 % 140 0.4 % Tractor Supply Company General Merchandise 21 5,360 1.4 % 417 1.1 % Big Tex Trailer Manufacturing, Inc.* Automotive/ Distribution & Warehouse/ Manufacturing/ Corporate Headquarters 17 5,056 1.3 % 1,302 3.4 % Nestle’ Dreyer’s Ice Cream Company 2 Cold Storage 1 4,611 1.2 % 309 0.8 % Carvana, LLC* Industrial Services 2 4,590 1.2 % 230 0.6 % Arkansas Surgical Hospital Surgical 1 4,588 1.2 % 129 0.3 % Klosterman Bakery* Food Processing 11 4,568 1.1 % 549 1.4 % Chiquita Holdings Limited Food Processing 1 4,420 1.1 % 335 0.9 % Total Top 20 Tenants 285 $ 126,830 32.3 % 12,214 31.9 % 1 Tenant’s properties include 20 Outback Steakhouse restaurants and two Carrabba’s Italian Grill restaurants. 2 Nestle’s ABR excludes $1.6 million of rent paid under a sub-lease for an additional property, which will convert to a prime lease no later than August 2024. * Subject to a master lease. ** Includes properties leased by multiple tenants, some, not all, of which are subject to master leases.
Stockholders should direct such requests in writing to Investor Relations Department, Broadstone Net Lease, Inc., 800 Clinton Square, Rochester, New York 14604. Stockholders may also call (585) 287-6500. The information about our website and its content is for your convenience only.
Stockholders should direct such requests in writing to Investor Relations Department, Broadstone Net Lease, Inc., 207 High Point Drive, Suite 300, Victor, New York 14564. Investors may also call (585) 287-6500. 17
The following chart sets forth our lease expirations based upon the terms of the leases in place as of December 31, 2022.
Approximately 3% of the properties in our portfolio are subject to leases without at least one renewal option. The following chart sets forth our lease expirations based upon the terms of the leases in place as of December 31, 2023. 10 The following table presents certain information based on lease expirations by year.
Diversification by Property Type 7 Property Type # Properties ABR ($000s) ABR as a % of Total Portfolio Square Feet (000s) SF as a % of Total Portfolio Industrial Manufacturing 80 $ 63,406 16.3 % 11,873 30.3 % Distribution & Warehouse 47 51,406 13.2 % 9,459 24.2 % Food Processing 34 44,427 11.4 % 5,516 14.1 % Flex and R&D 7 17,498 4.5 % 1,457 3.7 % Cold Storage 4 12,810 3.3 % 933 2.4 % Services 22 10,851 2.8 % 587 1.5 % Untenanted 1 — 0.0 % 122 0.3 % Industrial Total 195 200,398 51.5 % 29,947 76.5 % Healthcare Clinical 52 27,020 6.9 % 1,091 2.8 % Healthcare Services 29 10,679 2.7 % 478 1.2 % Animal Health Services 27 10,549 2.7 % 405 1.0 % Surgical 12 10,463 2.7 % 329 0.9 % Life Science 9 7,867 2.1 % 549 1.4 % Untenanted 1 — 0.0 % 18 0.0 % Healthcare Total 130 66,578 17.1 % 2,870 7.3 % Restaurant Casual Dining 102 27,387 7.0 % 678 1.7 % Quick Service Restaurants 146 24,993 6.5 % 499 1.3 % Restaurant Total 248 52,380 13.5 % 1,177 3.0 % Retail General Merchandise 132 24,435 6.3 % 1,865 4.8 % Automotive 68 12,667 3.3 % 776 2.0 % Home Furnishings 13 7,147 1.8 % 797 2.0 % Child Care 1 375 0.1 % 10 0.0 % Retail Total 214 44,624 11.5 % 3,448 8.8 % Office Corporate Headquarters 8 10,761 2.8 % 691 1.8 % Strategic Operations 5 9,875 2.5 % 615 1.6 % Call Center 3 4,478 1.1 % 345 0.9 % Untenanted 1 — 0.0 % 46 0.1 % Office Total 17 25,114 6.4 % 1,697 4.4 % Total 804 $ 389,094 100.0 % 39,139 100.0 % 8 Diversification by Tenant Tenant Property Type # Properties ABR ($’000s) ABR as a % of Total Portfolio Square Feet (‘000s) SF as a % of Total Portfolio Roskam Baking Company * Food Processing 7 $ 15,605 4.0 % 2,250 5.7 % AHF, LLC * Distribution & Warehouse/Manufacturing 9 8,995 2.3 % 2,014 5.1 % Jack’s Family Restaurants * Quick Service Restaurants 43 7,310 1.9 % 147 0.4 % Joseph T.
Diversification by Property Type 6 Property Type # Properties ABR (’000s) ABR as a % of Total Portfolio Square Feet (’000s) SF as a % of Total Portfolio Industrial Manufacturing 80 $ 65,675 16.8 % 12,178 31.8 % Distribution & Warehouse 45 51,859 13.2 % 9,212 24.1 % Food Processing 33 46,630 11.9 % 5,442 14.2 % Flex and R&D 6 16,061 4.1 % 1,157 3.0 % Industrial Services 23 11,877 3.0 % 607 1.6 % Cold Storage 4 9,978 2.5 % 724 1.9 % Untenanted 1 — 0.0 % 122 0.3 % Industrial Total 192 202,080 51.5 % 29,442 76.9 % Healthcare Clinical 52 27,570 7.0 % 1,090 2.9 % Healthcare Services 29 11,853 3.0 % 478 1.2 % Animal Health Services 27 11,054 2.8 % 405 1.1 % Surgical 12 10,675 2.7 % 329 0.9 % Life Science 9 8,011 2.1 % 550 1.4 % Healthcare Total 129 69,163 17.6 % 2,852 7.5 % Restaurant Casual Dining 100 27,167 7.0 % 662 1.7 % Quick Service Restaurants 148 25,966 6.6 % 502 1.3 % Restaurant Total 248 53,133 13.6 % 1,164 3.0 % Retail General Merchandise 132 25,018 6.4 % 1,865 4.9 % Automotive 64 11,790 3.0 % 757 1.9 % Home Furnishings 13 7,265 1.9 % 797 2.1 % Child Care 2 726 0.1 % 20 0.1 % Retail Total 211 44,799 11.4 % 3,439 9.0 % Office Strategic Operations 6 10,450 2.7 % 632 1.7 % Corporate Headquarters 7 8,527 2.2 % 409 1.1 % Call Center 2 4,049 1.0 % 287 0.7 % Untenanted 1 — 0.0 % 46 0.1 % Office Total 16 23,026 5.9 % 1,374 3.6 % Total 796 $ 392,201 100.0 % 38,271 100.0 % 7 Diversification by Tenant Tenant Property Type # Properties ABR (’000s) ABR as a % of Total Portfolio Square Feet (’000s) SF as a % of Total Portfolio Roskam Baking Company * Food Processing 7 $ 15,917 4.1 % 2,250 5.9 % AHF, LLC * Distribution & Warehouse/ Manufacturing 8 9,378 2.4 % 2,284 6.0 % Joseph T.
Year # Properties ABR ($000s) ABR as a % of Total Portfolio Square Feet (000s) SF as a % of Total Portfolio 2023 6 $ 4,865 1.2 % 559 1.4 % 2024 11 14,224 3.7 % 1,689 4.3 % 2025 19 6,904 1.8 % 385 1.0 % 2026 35 19,317 5.0 % 1,413 3.6 % 2027 29 23,974 6.2 % 2,079 5.3 % 2028 35 23,742 6.1 % 2,248 5.7 % 2029 72 22,356 5.7 % 2,724 7.0 % 2030 101 54,280 14.0 % 5,110 13.1 % 2031 33 8,622 2.2 % 804 2.1 % 2032 62 31,420 8.1 % 3,469 8.9 % 2033 49 18,479 4.7 % 1,575 4.0 % 2034 33 6,295 1.6 % 409 1.0 % 2035 17 12,774 3.3 % 1,927 4.9 % 2036 87 26,414 6.8 % 2,931 7.5 % 2037 23 16,892 4.3 % 1,124 2.9 % 2038 35 7,962 2.0 % 437 1.1 % 2039 11 6,940 1.8 % 803 2.1 % 2040 31 5,744 1.5 % 312 0.8 % 2041 42 20,534 5.3 % 1,737 4.4 % 2042 59 43,460 11.2 % 4,813 12.3 % Thereafter 11 13,896 3.5 % 2,372 6.0 % Untenanted properties 3 — 0.0 % 219 0.6 % Total 804 $ 389,094 100.0 % 39,139 100.0 % Substantially all of our leases provide for periodic contractual rent escalations.
Year # Properties # Leases ABR (’000s) ABR as a % of Total Portfolio Square Feet (’000s) SF as a % of Total Portfolio 2024 5 5 $ 4,817 1.2 % 482 1.3 % 2025 19 21 7,105 1.8 % 394 1.0 % 2026 34 36 17,843 4.5 % 1,153 3.0 % 2027 29 30 24,903 6.3 % 2,079 5.4 % 2028 36 37 23,144 5.9 % 1,930 5.0 % 2029 73 74 23,921 6.1 % 2,754 7.2 % 2030 93 93 53,364 13.6 % 4,985 13.0 % 2031 33 33 8,724 2.2 % 805 2.1 % 2032 62 63 32,285 8.2 % 3,469 9.1 % 2033 50 50 19,398 4.9 % 1,593 4.2 % 2034 35 35 8,916 2.3 % 780 2.0 % 2035 19 19 13,947 3.6 % 2,021 5.3 % 2036 87 87 27,227 6.9 % 2,781 7.3 % 2037 20 20 16,284 4.2 % 1,110 2.9 % 2038 39 39 13,868 3.5 % 1,226 3.2 % 2039 11 11 8,125 2.1 % 928 2.4 % 2040 31 31 5,877 1.5 % 312 0.8 % 2041 38 38 16,507 4.2 % 1,363 3.6 % 2042 58 58 44,324 11.3 % 4,803 12.5 % 2043 12 12 12,107 3.1 % 795 2.1 % Thereafter 10 10 9,515 2.6 % 2,284 6.0 % Untenanted properties 2 — — — 224 0.6 % Total 796 802 $ 392,201 100.0 % 38,271 100.0 % Substantially all of our leases provide for periodic contractual rent escalations.
As of December 31, 2022, we owned approximately 94.8% of the issued and outstanding membership units of the OP (“OP Units”), with the remaining 5.2% held by persons who were issued OP Units in exchange for their interests in properties acquired by the OP, as well as OP Units issued pursuant to the Internalization. 5 2022 Highlights Operating Highlights • Invested $907.2 million at a weighted average initial cash capitalization rate of 6.4%, including the acquisition of 86 properties located across 24 U.S. states and four Canadian provinces with a weighted average remaining lease term of 20.3 years and minimum annual rent increases of 2.0%. • Sold eight properties, at a weighted average cash capitalization rate of 5.6%, for net proceeds of $57.9 million, recognizing a $9.6 million gain over original purchase price. • Ended the year with occupancy of 99.4%. • Collected more than 99.9% of base rents due during the year. • Generated net income of $129.5 million or $0.72 per diluted share. • Generated funds from operations (“FFO”) of $273.7 million or $1.52 per diluted share. • Generated core funds from operations (“Core FFO”) of $267.3 million or $1.48 per diluted share. • Generated adjusted funds from operations (“AFFO”) of $252.2 million or $1.40 per diluted share. • Ended the year with total outstanding debt and Net Debt of $2.0 billion and a Net Debt to Annualized Adjusted EBITDAre ratio of 5.2x. • Amended and restated our Revolving Credit Facility to upsize the capacity to $1.0 billion, extend the maturity date to March 2026, and reduce the applicable margin 15 basis points to 0.85% based on our current investment grade credit ratings. • Entered into a $200 million, five-year unsecured term loan and a $300 million, seven-year unsecured term loan, the proceeds of which were used to repay in full our $190 million term loan set to mature in 2024 and a portion of the outstanding borrowings on our Revolving Credit Facility.
Approximately 93.8% of our tenants, based on ABR, provide financial reporting, of which 86.0% are required to provide us with specified financial information on a periodic basis, and an additional 7.8% of our tenants report financial statements publicly, either through SEC filings or otherwise. 4 2023 Highlights Operating Highlights • Invested $165.6 million, including $97.2 million in three development funding opportunities, and $68.4 million in four property acquisitions and revenue generating capital expenditures in eight existing properties at a weighted average initial cash capitalization rate of 7.2%, with a weighted average remaining lease term of 15.5 years and minimum annual rent increases of 1.8%. • Sold 14 properties at a weighted average cash capitalization rate of 6.0%, for gross proceeds of $200.1 million, recognizing a $35.0 million gain over original purchase price. • Maintained strong occupancy throughout the year, ending with 99.4%. • Collected 99.8% of base rents due during the year. • Generated net income of $163.3 million or $0.83 per diluted share. • Generated funds from operations (“FFO”) of $298.6 million or $1.52 per diluted share. • Generated core funds from operations (“Core FFO”) of $298.9 million or $1.52 per diluted share. • Generated adjusted funds from operations (“AFFO”) of $277.7 million or $1.41 per diluted share. • Ended the year with total outstanding debt and Net Debt of $1.9 billion and a Net Debt to Annualized Adjusted EBITDAre ratio (“Leverage Ratio”) of 5.0x.
We focus on investing in real estate that is operated by creditworthy single tenants in industries characterized by positive business drivers and trends. We target properties that are an integral part of the tenants’ businesses and are therefore opportunities to secure long-term net leases.
As of December 31, 2023, our portfolio includes 796 properties, with 789 properties located in 44 U.S. states and seven properties located in four Canadian provinces. We focus on investing in real estate that is operated by creditworthy single tenants in industries characterized by positive business drivers and trends.
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Since our inception in 2007, we have selectively invested in net leased assets in the industrial, healthcare, restaurant, retail, and office property types. As of December 31, 2022, our portfolio has grown to 804 properties, with 797 properties located in 44 U.S. states and seven properties located in four Canadian provinces.
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As any future increase in CPI is unknowable at this time, we have not included an increase in the rent pursuant to these leases in the weighted average annual minimum increase presented.
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Approximately 94.3% of our tenants, based on ABR, provide financial reporting, of which 85.8% are required to provide us with specified financial information on a periodic basis, and an additional 8.5% of our tenants report financial statements publicly, either through SEC filings or otherwise.
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We also invest in our properties with existing tenants through revenue generating capital expenditures, whereby we agree to fund certain capital expenditures in exchange for increased rents that often include rent escalations and terms consistent with that of the underlying lease.
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We conduct substantially all of our activities through, and all of our properties are held directly or indirectly by, the OP, which is commonly referred to as an umbrella partnership real estate investment trust (“UPREIT”). We are the sole managing member of the OP.
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We focus on consumer-centric healthcare real estate such as pet supplies and services, dialysis, dental care, and eye care. We primarily focus on properties with multiple alternative retail uses located in densely populated areas that are easily accessible to consumers.
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In addition, we entered into interest rate swaps with a total notional value of $260 million to fix the Secured Overnight Financing Rate (“SOFR”) component of the borrowing rate at a weighted average fixed interest rate of 2.59% until August 1, 2029. • Sold 10,470,785 shares of common stock for net proceeds of $222.9 million under our at-the-market common equity offering (“ATM Program”). • Completed a forward equity offering of 13,000,000 shares, which fully settled on December 28, 2022 for net proceeds of $273.2 million after deducting underwriting discounts.
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The services typically offered at these properties are not significantly affected by economic conditions or the regulatory environment and are often recession resilient.
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Home Furnishings 6 4,309 1.1 % 474 1.2 % Total Top 20 Tenants 292 $ 122,108 31.4 % 12,209 31.2 % 1 Tenant’s properties include 20 Outback Steakhouse restaurants and two Carrabba’s Italian Grill restaurants. * Subject to a master lease. ** Includes properties leased by multiple tenants, some, not all, of which are subject to master leases. 9 Diversification by Brand Brand Property Type # Properties ABR ($’000s) ABR as a % of Total Portfolio Square Feet (‘000s) SF as a % of Total Portfolio Roskam Baking Company* Food Processing 7 $ 15,605 4.0 % 2,250 5.7 % AHF, LLC * Distribution & Warehouse/Manufacturing 9 8,995 2.3 % 2,014 5.1 % Jack’s Family Restaurants * Quick Service Restaurants 43 7,309 1.9 % 147 0.4 % Ryerson Distribution & Warehouse 11 6,491 1.7 % 1,537 3.9 % Red Lobster* Casual Dining 19 6,178 1.6 % 157 0.4 % Axcelis Flex and R&D 1 5,991 1.5 % 417 1.1 % Dollar General Corporation General Merchandise 60 5,956 1.5 % 562 1.4 % Hensley * Distribution & Warehouse 3 5,871 1.5 % 577 1.5 % BluePearl Veterinary Partners ** Animal Health Services 13 5,543 1.4 % 165 0.4 % Bob Evans Farms *1 Casual Dining/Food Processing 21 5,391 1.4 % 281 0.8 % Total Top 10 Brands 187 73,330 18.8 % 8,107 20.7 % Tractor Supply Co.
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We underwrite consumer-centric healthcare properties based on the underlying real estate fundamentals, site level performance with an emphasis on market presence, corporate owned location or experienced multi-unit franchise operators, and whether the property is subject to a master lease with multiple operating locations. Competition The commercial real estate market is highly competitive.
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General Merchandise 21 5,349 1.4 % 417 1.1 % Krispy Kreme Quick Service Restaurants/ Food Processing 27 5,034 1.3 % 156 0.4 % Siemens Manufacturing/Flex and R&D 2 5,012 1.2 % 545 1.4 % Big Tex Trailers * Automotive/Distribution & Warehouse/Manufacturing/ Corporate Headquarters 17 4,957 1.2 % 1,302 3.3 % Outback Steakhouse * Casual Dining 20 4,641 1.2 % 126 0.3 % Nestle’ Cold Storage 1 4,543 1.2 % 310 0.8 % Carvana, LLC* Industrial Services 2 4,509 1.2 % 230 0.6 % Klosterman Bakery * Food Processing 11 4,500 1.2 % 549 1.4 % Arkansas Surgical Hospital Surgical 1 4,476 1.2 % 129 0.3 % Wendy’s ** Quick Service Restaurants 29 4,319 1.1 % 84 0.2 % Total Top 20 Brands 318 $ 120,670 31.0 % 11,955 30.5 % 1 Brand includes one BEF Foods, Inc. property and 20 Bob Evans Restaurants, LLC properties. * Subject to a master lease. ** Includes properties leased by multiple tenants, some, not all, of which are subject to master leases.
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In addition, we compete with other entities engaged in real estate investment activities to locate suitable properties to acquire, lenders to finance real estate transactions such as developments and revenue generating capital expenditures, and purchasers to buy our properties.
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Less than 4% of the properties in our portfolio are subject to leases without at least one renewal option. Approximately 56.4% of our ABR was derived from leases that will expire after 2030, and no more than 6.2% of our ABR was derived from leases that expire in any single year prior to 2030.
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We strive to foster transparent and open communication and dialogue between our senior leaders and our employee base and develop opportunities for social connectedness through fun family friendly gatherings and various employee appreciation events. • Diversity, Equity, and Inclusion (“DE&I”) – We are committed to providing equal opportunity in all aspects of employment.
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Expiration Year 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042+ Number of properties 6 11 19 35 29 35 72 101 33 62 49 33 17 87 23 35 11 31 42 70 Number of leases 9 11 22 35 31 35 73 101 33 63 49 33 17 87 23 35 11 31 42 70 13 The following table presents certain information based on lease expirations by year.
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The committee also focuses on employee engagement, policy reviews, enhanced recruitment and onboarding initiatives, monetary donations to external DE&I focused organizations and programs, and sponsorship of employees through a resource group.
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Amounts are in thousands, except for number of properties.
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These efforts allow us to offer numerous opportunities for employees to prioritize community involvement and is further encouraged by providing employees with dedicated time off per year to focus on community service and volunteering for causes of personal interest. We believe that the initiatives described above help us attract, hire, engage, and retain employees.
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In exchange for such reimbursement, we generally receive contractually specified rent that increases proportionally with our funding. For example, we may agree to reimburse a tenant, up to a specified amount, for property expansion or improvement costs that it incurs in improving a commercial facility on its property.
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We focus on single-tenant medical office buildings, large regional physician practices, and off-campus clinics affiliated with major health systems, as well as laboratories, ambulatory surgical centers, service-type locations such as dental and dialysis centers, and animal health service clinics.
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We primarily focus on healthcare properties that have substantial tenant 15 investments like special regulatory permits and buildouts that would make relocation difficult or costly.
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We look for healthcare properties that are mission critical to tenant operations, generally located adjacent to or near hospital campuses or other medical facilities, and where the tenant has a strong credit profile and is not easily displaced by regulatory changes. In certain instances, we will seek additional credit enhancements to augment the credit of the tenant.
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In states where a certificate of need statute exists, we ensure that our sites carry this designation to maintain long-term viability. • Restaurant . We focus our restaurant investments primarily in single-tenant quick service restaurant and casual dining properties, with an emphasis on restaurants that are located in strong retail markets.
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Our portfolio includes single-tenant corporate headquarters, mission-critical business operations, and call centers with creditworthy tenants where the property is strategically located or important to the tenant’s business.
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While not a strategic priority of ours, key considerations for us when making office investments as part of a broader portfolio acquisition include a strong tenant credit profile, tenant’s previous investment in the property, occupancy costs relative to the market, divisibility of the space, cost associated with repositioning the space upon lease expiration and whether the property is subject to a master lease with multiple operating locations in a different property type.
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Competition The commercial real estate market is highly competitive. We compete for tenants to occupy our properties in all of our markets with other owners and operators of commercial real estate.
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We offer regular volunteer and giving opportunities throughout the year that provide our employees with meaningful civic involvement. Since our inception, we have facilitated opportunities for our employees to contribute time and resources to benefit local nonprofit organizations.
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We believe that the initiatives described above will help us attract, hire, and retain employees. Principal Executive Offices Our principal executive offices are located at 800 Clinton Square, Rochester, New York, 14604, and our telephone number is (585) 287-6500.
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Additionally, if we were to lose REIT status we would face significant tax consequences that would substantially reduce our cash available for distribution to our stockholders.
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The content of our website is not deemed to be incorporated by reference in this report or filed with the SEC. 20

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRis k Factors Summary Risk Factors You should carefully consider the matters discussed in the “Risk Factors” section beginning on page 21 of this Annual Report on Form 10-K for factors you should consider before investing in our Common Stock: • Single-tenant leases involve significant risks of tenant default and tenant vacancies, which could materially and adversely affect us. • We have limited opportunities to increase rents under our long-term leases with tenants, which could impede our growth and materially and adversely affect us. • We may not be able to achieve growth through acquisitions at a rate that is comparable to our historical results, which could materially and adversely affect us. • We may not be able to effectively manage our growth and any failure to do so could materially and adversely affect us. • The departure of any of our key personnel with long-standing business relationships could materially and adversely affect us. • Our portfolio is concentrated in certain states, and any adverse developments and economic downturns in these geographic markets could materially and adversely affect us. • Our portfolio is concentrated in certain property types and any adverse developments relating to one or more of these property types could materially and adversely affect us. • We may be unable to renew leases, re-lease properties as leases expire, or lease vacant spaces on favorable terms or at all, which, in each case, could materially and adversely affect us. • We could face potential material adverse effects from the bankruptcies or insolvencies of our tenants. • Global and U.S. financial markets and economic conditions may materially and adversely affect us and the ability of our tenants to make rental payments to us pursuant to our leases. • Inflation may materially and adversely affect us and our tenants. • As of December 31, 2022, we had approximately $2.0 billion principal balance of indebtedness outstanding, which may expose us to the risk of default under our debt obligations. • Market conditions could adversely affect our ability to refinance existing indebtedness on acceptable terms or at all, which could materially and adversely affect us. • Our Revolving Credit Facility and term loan agreements contain various covenants which, if not complied with, could accelerate our repayment obligations, thereby materially and adversely affecting us. • We are a holding company with no direct operations and rely on funds received from the OP to pay liabilities. • Failure to qualify as a REIT would materially and adversely affect us and the value of our Common Stock. • The market price and trading volume of shares of our Common Stock may be volatile. • We may not be able to make distributions to our stockholders at the times or in the amounts we expect, or at all. 21 Risk Factors The following are some of the risks and uncertainties that could cause our actual results to differ materially from those presented in our forward-looking statements.
Biggest changeRis k Factors Summary Risk Factors You should carefully consider the matters discussed in the “Risk Factors” section beginning on page 18 of this Annual Report on Form 10-K for factors you should consider before investing in our common stock: • Single-tenant leases involve significant risks of tenant default and tenant vacancies, which could materially and adversely affect us. • We have limited opportunities to increase rents under our long-term leases with tenants, which could impede our growth and materially and adversely affect us. • Our growth depends upon future acquisitions of properties, and we may be unable to identify or complete suitable acquisitions of properties, which may impede our growth, and our future acquisitions may not yield the returns we seek. • An increase in market interest rates could increase our interest costs on existing and future debt and could adversely affect our stock price, and a decrease in market interest rates could lead to additional competition for the acquisition of real estate, which could adversely affect our results of operations. • We may not be able to effectively manage our growth and any failure to do so could materially and adversely affect us. • Our portfolio is concentrated in certain states, and any adverse developments and economic downturns in these geographic markets could materially and adversely affect us. • Our portfolio is concentrated in certain property types and any adverse developments relating to one or more of these property types could materially and adversely affect us. • We may be unable to renew leases, re-lease properties as leases expire, or lease vacant spaces on favorable terms or at all, which, in each case, could materially and adversely affect us. • We could face potential material adverse effects from the bankruptcies or insolvencies of our tenants. • Global and U.S. financial markets and economic conditions such as inflation may materially and adversely affect us and the ability of our tenants to make rental payments to us pursuant to our leases. • As of December 31, 2023, we had approximately $1.9 billion principal balance of indebtedness outstanding, which may expose us to the risk of default under our debt obligations. • Market conditions could adversely affect our ability to refinance existing indebtedness on acceptable terms or at all, which could materially and adversely affect us. • Our Revolving Credit Facility and term loan agreements contain various covenants which, if not complied with, could accelerate our repayment obligations, thereby materially and adversely affecting us. • We are a holding company with no direct operations and rely on funds received from the OP to pay liabilities. • Failure to qualify as a REIT would materially and adversely affect us and the value of our common stock. • The market price and trading volume of shares of our common stock may be volatile. • We may not be able to make distributions to our stockholders at the times or in the amounts we expect, or at all. 18 Risk Factors The following are some of the risks and uncertainties that could cause our actual results to differ materially from those presented in our forward-looking statements.
We can provide no assurance that any of our markets will grow, will not experience adverse developments, or that underlying real estate fundamentals will be favorable to owners and operators of industrial, healthcare, restaurant, office, and retail properties.
We can provide no assurance that any of our markets will grow, will not experience adverse developments, or that underlying real estate fundamentals will be favorable to owners and operators of industrial, healthcare, restaurant, retail, and office properties.
Our level of debt 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 meet our required principal and interest payments; • cash interest expense and financial covenants relating to our indebtedness, including a covenant in our Revolving Credit Facility that restricts us from paying distributions if an event of default exists, other than distributions required to maintain our REIT status, may limit or eliminate our ability to make distributions to our common stockholders; • we may be forced to dispose of properties, possibly on unfavorable terms or in violation of certain covenants to which we may be subject; • we may default on our obligations and the lenders or mortgagees may foreclose on our properties or our interests in the entities that own the properties that secure their loans and receive an assignment of rents and leases; • we may be restricted from accessing some of our excess cash flow after debt service if certain of our tenants fail to meet certain financial performance metric thresholds; and • our default under any loan with cross default provisions could result in a default on other indebtedness.
Our level of debt 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 meet our required principal and interest payments; • cash interest expense and financial covenants relating to our indebtedness, including a covenant in our Revolving Credit Facility that restricts us from paying distributions if an event of default exists, other than distributions required to maintain our REIT status, may limit or eliminate our ability to make distributions to our common stockholders; • we may be forced to dispose of properties, possibly on unfavorable terms or in violation of certain covenants to which we may be subject; • we may default on our obligations and the lenders or mortgagees may foreclose on our properties or our interests in the entities that own the properties that secure their loans and receive an assignment of rents and leases; 28 • we may be restricted from accessing some of our excess cash flow after debt service if certain of our tenants fail to meet certain financial performance metric thresholds; and • our default under any loan with cross default provisions could result in a default on other indebtedness.
In addition, any distributions will be authorized at the sole discretion of our board of directors, and the form, timing, and amount, if any, will depend upon a number of factors, including our actual and projected results of operations, FFO, AFFO, 42 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.
In addition, any distributions will be authorized at the sole discretion of our Board of Directors, and the form, timing, and amount, if any, will depend upon a number of factors, including our actual and projected results of operations, 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.
Some of the factors that could negatively affect our share price or result in fluctuations in the market price or trading volume of shares of our Common Stock include: • actual or anticipated declines in our quarterly operating results or distributions; • actual or anticipated tenant defaults, bankruptcies, or vacancies, or speculation in the press or investment community about actual or anticipated tenant defaults, bankruptcies, or vacancies; • changes in government regulations; • changes in laws affecting REITs and related tax matters; • the announcement of new contracts by us or our competitors; • reductions in our FFO, AFFO, or earnings estimates; • publication of research reports about us or the real estate industry; • increases in market interest rates that lead purchasers of shares of our Common Stock to demand a higher yield; • future equity issuances, or the perception that they may occur, including issuances of Common Stock upon exercise or vesting of equity awards or redemption of OP Units; • changes in market valuations of similar companies; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of key management personnel; • actions by institutional stockholders; • differences between our actual financial and operating results and those expected by investors and analysts; • changes in analysts’ recommendations or projections; • speculation in the press or investment community; and • the realization of any of the other risk factors presented herein.
Some of the factors that could negatively affect our share price or result in fluctuations in the market price or trading volume of shares of our common stock include: • actual or anticipated declines in our quarterly operating results or distributions; • actual or anticipated tenant defaults, bankruptcies, or vacancies, or speculation in the press or investment community about actual or anticipated tenant defaults, bankruptcies, or vacancies; • changes in government regulations; • changes in laws affecting REITs and related tax matters; • the announcement of new contracts by us or our competitors; • reductions in our FFO, Core FFO, AFFO, or earnings estimates; 35 • publication of research reports about us or the real estate industry; • increases in market interest rates that lead purchasers of shares of our common stock to demand a higher yield; • future equity issuances, or the perception that they may occur, including issuances of common stock upon exercise or vesting of equity awards or redemption of OP Units; • changes in market valuations of similar companies; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of key management personnel; • actions by institutional stockholders; • differences between our actual financial and operating results and those expected by investors and analysts; • changes in analysts’ recommendations or projections; • speculation in the press or investment community; and • the realization of any of the other risk factors presented herein.
(the “Blocker Corps”) were taxable as a non-REIT C corporation and we acquired their appreciated assets in connection with the Internalization in transactions (the “Blocker Corp Mergers”) in which the adjusted tax basis of the assets in our hands was determined by reference to the adjusted tax basis of the assets in the hands of each of the Blocker Corps prior to the Blocker Corp Mergers, we will be subject to corporate income tax on the “built-in gain” with respect to the Blocker Corps’ assets at the time of the Blocker Corp Mergers if we dispose of those assets in a taxable transaction within five years following the Blocker Corp Mergers.
(the “Blocker Corps”) were taxable as a non-REIT C corporation and we acquired their appreciated assets in connection with the Company’s internalization in transactions (the “Blocker Corp Mergers”) in which the adjusted tax basis of the assets in our hands was determined by reference to the adjusted tax basis of the assets in the hands of each of the Blocker Corps prior to the Blocker Corp Mergers, we will be subject to corporate income tax on the “built-in gain” with respect to the Blocker Corps’ assets at the time of the Blocker Corp Mergers if we dispose of those assets in a taxable transaction within five years following the Blocker Corp Mergers.
The inability to dispose of a property at an acceptable price or at all, as well as the combination of variable revenue and relatively fixed expenditures may result, under certain market conditions, in reduced earnings and could have an adverse effect on our financial condition. 30 We face risks associated with climate change, which could materially and adversely impact us.
The inability to dispose of a property at an acceptable price or at all, as well as the combination of variable revenue and relatively fixed expenditures may result, under certain market conditions, in reduced earnings and could have an adverse effect on our financial condition. We face risks associated with climate change, which could materially and adversely impact us.
This potential illiquidity may limit our ability to modify quickly our portfolio in response to changes in economic or other conditions, including tenant demand. Such occurrences could materially and adversely affect us. We may experience a higher number of tenant defaults because we lease most of our properties to tenants who do not have an investment grade credit rating.
This potential illiquidity may limit our ability to modify quickly our portfolio in response to changes in economic or other conditions, including tenant demand. Such occurrences could materially and adversely affect us. 22 We may experience a higher number of tenant defaults because we lease most of our properties to tenants who do not have an investment grade credit rating.
Accordingly, decreases in the demand for restaurant, retail, and/or office properties may have a greater adverse effect on us than if we had fewer investments in these industries. It also may be 25 difficult and expensive to re-tenant a property designed for a particular property type with a new tenant that operates in an industry requiring a different property type.
Accordingly, decreases in the demand for restaurant, retail, and/or office properties may have a greater adverse effect on us than if we had fewer investments in these industries. It also may be difficult and expensive to re-tenant a property designed for a particular property type with a new tenant that operates in an industry requiring a different property type.
A bankruptcy proceeding could hinder or delay our efforts to collect past due balances and ultimately preclude collection of these sums, resulting in a decrease or cessation of rental payments, which could materially and adversely affect us. Our properties may be subject to impairment charges. We routinely evaluate our real estate investments for impairment indicators.
A bankruptcy proceeding could hinder or delay our efforts to collect past due balances and ultimately preclude collection of these sums, resulting in a decrease or cessation of rental payments, which could materially and adversely affect us. 23 Our properties may be subject to impairment charges. We routinely evaluate our real estate investments for impairment indicators.
Additionally, pursuant to the Americans with Disabilities Act (“ADA”), all 31 public accommodations must meet federal requirements related to access and use by disabled persons. Compliance with ADA requirements could require property-level expenditures and non-compliance could result in imposition of fines by the U.S. government or an award of damages to private litigants, or both.
Additionally, pursuant to the Americans with Disabilities Act (“ADA”), all public accommodations must meet federal requirements related to access and use by disabled persons. Compliance with ADA requirements could require property-level expenditures and non-compliance could result in imposition of fines by the U.S. government or an award of damages to private litigants, or both.
If any of our properties are foreclosed upon due to a default, we could be materially and adversely affected. Risks Related to Our Organizational Structure Our Charter contains provisions, including ownership and transfer restrictions, that may delay, discourage, or prevent a takeover or change of control transaction that could otherwise result in a premium price to our stockholders.
If any of our properties are foreclosed upon due to a default, we could be materially and adversely affected. 30 Risks Related to Our Organizational Structure Our Charter contains provisions, including ownership and transfer restrictions, that may delay, discourage, or prevent a takeover or change of control transaction that could otherwise result in a premium price to our stockholders.
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. Security breaches and other technology disruptions could compromise our information systems and expose us to liability, which could materially and adversely affect us.
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. 20 Security breaches and other technology disruptions could compromise our information systems and expose us to liability, which could materially and adversely affect us.
Our underwriting and risk management procedures that we use to evaluate a tenant’s credit risk may not be sufficient to identify tenant problems in a timely manner or at all. To evaluate tenant credit risk, we utilize a third-party model, S&P Capital IQ, to help us 26 determine a tenant’s implied credit rating when a public rating is not available.
Our underwriting and risk management procedures that we use to evaluate a tenant’s credit risk may not be sufficient to identify tenant problems in a timely manner or at all. To evaluate tenant credit risk, we utilize a third-party model, S&P Capital IQ, to help us determine a tenant’s implied credit rating when a public rating is not available.
Under the provisions of a limited number of our existing leases and leases that we may enter into in the future, however, we may be required to pay some or all of the expenses of the property, such as the costs of environmental liabilities, roof and structural repairs, real estate taxes, 28 insurance, certain non-structural repairs, and maintenance.
Under the provisions of a limited number of our existing leases and leases that we may enter into in the future, however, we may be required to pay some or all of the expenses of the property, such as the costs of environmental liabilities, roof and structural repairs, real estate taxes, insurance, certain non-structural repairs, and maintenance.
Moreover, compliance with new federal and state-level laws or regulations related to climate change, including climate change disclosures, compliance with “green” building codes or other laws or regulations relating to reduction of carbon footprints and/or greenhouse gas emissions, may require us to make significant cash expenditures both at the property and corporate level.
Compliance with new federal and state-level laws or regulations related to climate change, including climate change disclosures, compliance with “green” building codes or other laws or regulations relating to reduction of carbon footprints and/or greenhouse gas emissions, may require us to make significant cash expenditures both at the property and corporate level.
In addition to the foregoing, as a result of the Blocker Corp Mergers, we inherited any liability with respect to unpaid taxes of each of the Blocker Corps for any periods prior to the Blocker Corp Mergers. 40 Changes to the U.S. federal income tax laws could have a material and adverse effect on us.
In addition to the foregoing, as a result of the Blocker Corp Mergers, we inherited any liability with respect to unpaid taxes of each of the Blocker Corps for any periods prior to the Blocker Corp Mergers. Changes to the U.S. federal income tax laws could have a material and adverse effect on us.
Our fiduciary duties and obligations, as the managing member of the OP, and its members may come into conflict with the duties of our directors and officers to our Company. 35 While we intend to avoid situations involving conflicts of interest, there may be situations in which the interests of the OP may conflict with our interests.
Our fiduciary duties and obligations, as the managing member of the OP, and its members may come into conflict with the duties of our directors and officers to our Company. While we intend to avoid situations involving conflicts of interest, there may be situations in which the interests of the OP may conflict with our interests.
Compliance with these limitations, particularly given the goodwill that we acquired in the Internalization, may hinder our ability to make, and, in certain cases, maintain ownership of certain attractive investments that might not qualify for the 75% asset test.
Compliance with these limitations, particularly given the goodwill that we acquired in the Company’s internalization, may hinder our ability to make, and, in certain cases, maintain ownership of certain attractive investments that might not qualify for the 75% asset test.
In addition, decreases in interest rates may lead to additional 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 23 yields on real estate we have targeted for acquisition.
In addition, decreases in interest rates may lead to additional 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.
A lack of demand for rental space could adversely affect our ability to maintain our current tenants and gain new tenants, which may affect our growth and results of operations. Accordingly, a decline in economic conditions could materially and adversely affect us. Inflation may materially and adversely affect us and our tenants.
A lack of demand for rental space could adversely affect our ability to maintain our current tenants and gain new tenants, which may affect our growth and results of operations. Accordingly, a decline in economic conditions could materially and adversely affect us.
There can be no assurances as to what alternative interest rates may be and whether such interest rates will be more or less favorable than LIBOR or CDOR and any other unforeseen impacts of the potential discontinuation of LIBOR or CDOR.
There can be no assurances as to what alternative interest rates may be and whether such interest rates will be more or less favorable than CDOR and any other unforeseen impacts of the potential discontinuation of CDOR.
In the past, securities class action litigation has often been instituted against companies following periods of volatility in the price of their common stock.
In the past, securities class action litigation has been instituted against companies following periods of volatility in the price of their common stock.
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.
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, co-payments, or sub-limits that a tenant may not be able to meet.
The departure of any member of our senior management team, or our inability to attract and retain highly qualified personnel, could adversely affect our business, diminish our investment opportunities, and weaken our relationships with lenders, business partners, existing and prospective tenants, and industry personnel, which could materially and adversely affect us.
The departure of any member of our executive management team, or our inability to attract and retain highly qualified personnel, could adversely affect our business, diminish our investment opportunities, and weaken our relationships with lenders, business partners, existing and prospective tenants, and industry personnel, which could materially and adversely affect us.
An additional 8.5% of our ABR is received from tenants who are not required to provide us with specified financial information under the terms of our lease, but whose financial statements are available publicly, either through SEC filings or otherwise.
An additional 7.8% of our ABR is received from tenants who are not required to provide us with specified financial information under the terms of our lease, but whose financial statements are available publicly, either through SEC filings or otherwise.
Many of our other key executive personnel, particularly our senior management team, also have extensive experience and strong reputations in the real estate industry and have been instrumental in setting our strategic direction, operating our business, identifying, recruiting, and training key personnel, and arranging necessary financing.
Many of our executive personnel, particularly our senior management team, have extensive experience and strong reputations in the real estate industry and have been instrumental in setting our strategic direction, operating our business, identifying, recruiting, and training key personnel, and arranging necessary financing.
This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on our cash flows, our ability to execute our business strategy, and our ability to make distributions to our stockholder.
This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on our cash flows, our ability to execute our business strategy, and our ability to make distributions to our stockholders.
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.
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, asbestos-containing building materials, 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.
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 constitute prohibited transactions.
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 REIT Requirements or may be subject to a 100% tax on any resulting gain if such sales constitute prohibited transactions.
In connection with certain UPREIT transactions, we have entered or will enter into tax protection agreements under which we have agreed to indemnify members of the OP against adverse tax consequences if we were to sell, convey, transfer, or otherwise dispose of our assets in taxable transactions, with specific 39 exceptions and limitations.
In connection with certain UPREIT transactions and the Company’s internalization, we have entered or will enter into tax protection agreements under which we have agreed to indemnify members of the OP against adverse tax consequences if we were to sell, convey, transfer, or otherwise dispose of our assets in taxable transactions, with specific exceptions and limitations.
As of December 31, 2022, we were party to tax protection agreements covering three properties. Based on values as of December 31, 2022, taxable sales of the applicable properties would trigger liability under the agreements of approximately $10.4 million. In addition, in connection with the Internalization, we entered into a tax protection agreement with Amy L.
As of December 31, 2023, we were party to tax protection agreements covering three properties. Based on values as of December 31, 2023, taxable sales of the applicable properties would trigger liability under the agreements of approximately $10.4 million. In addition, in connection with the Company’s internalization, we entered into a tax protection agreement with Amy L.
Any changes in LIBOR or CDOR reporting practices, the methods by which LIBOR or CDOR are determined, or the use of alternative reference rates may adversely affect us. We may incur mortgage debt on a particular property, which may subject us to certain risks, and the occurrence of any such risk could materially and adversely affect us.
Any changes in CDOR reporting practices, the methods by which CDOR is determined, or the use of alternative reference rates may adversely affect us. We may incur mortgage debt on a particular property, which may subject us to certain risks, and the occurrence of any such risk could materially and adversely affect us.
Certain uses of some properties may have a heightened risk of environmental liability because of the hazardous materials used in performing services on those properties, such as industrial properties or auto parts and auto service businesses using petroleum products, paint, machine solvents, and other hazardous materials.
Certain uses of some properties may have a heightened risk of environmental liability because of the hazardous materials used in performing services on those properties, such as industrial properties or businesses using petroleum products, paint, machine solvents, and other hazardous materials.
We depend on the ability of our tenants to meet their obligations to pay rent to us due under our lease for substantially all of our revenue. As of December 31, 2022, only approximately 15.4% of our ABR came from tenants who had an investment grade credit rating. A substantial majority of our properties are leased to unrated tenants.
We depend on the ability of our tenants to meet their obligations to pay rent to us due under our lease for substantially all of our revenue. As of December 31, 2023, only approximately 15.3% of our ABR came from tenants who had an investment grade credit rating. A substantial majority of our properties are leased to unrated tenants.
We may experience significant costs in connection with re-leasing a significant number of our properties, which could materially and adversely affect us. As of December 31, 2022, three of our properties, representing approximately 0.6% of our portfolio, were unoccupied. We may experience difficulties in leasing this vacant space on favorable terms or 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. As of December 31, 2023, two of our properties, representing approximately 0.6% of our portfolio, were unoccupied. We may experience difficulties in leasing this vacant space on favorable terms or at all.
We generally intend to vigorously defend ourselves. However, we cannot be certain of the ultimate outcomes of any claims that may arise in the future.
We generally intend to vigorously defend ourselves. However, we cannot be certain of the ultimate outcome of any claims that may arise in the future.
Our results of operations depend on our ability to continue to successfully lease our properties, including renewing expiring leases, re-leasing properties as leases expire, leasing vacant space, optimizing our tenant mix, or leasing properties on more economically favorable terms. As of December 31, 2022, six leases representing approximately 1.2% of our ABR will expire during 2023.
Our results of operations depend on our ability to continue to successfully lease our properties, including renewing expiring leases, re-leasing properties as leases expire, leasing vacant space, optimizing our tenant mix, or leasing properties on more economically favorable terms. As of December 31, 2023, five leases representing approximately 1.2% of our ABR will expire during 2024.
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 U.S. federal income tax at the corporate rate; • we could be subject to increased state and local income taxes; • unless we are entitled to relief under applicable statutory provisions of the Code, we could not elect to be taxed as a REIT for four taxable years following the year during which qualification was lost; and 36 • for the five years following re-election of REIT status, upon a taxable disposition of an asset owned as of such re-election, we would be subject to corporate level tax with respect to any built-in gain inherent in such asset at the time of re-election.
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, we would be subject to U.S. federal income tax at the corporate rate, and we could be subject to increased state and local income taxes; • unless we are entitled to relief under applicable statutory provisions of the Code, we (and our successor) could not elect to be taxed as a REIT for four taxable years following the year during which qualification was lost; and • for the five years following re-election of REIT status, upon a taxable disposition of an asset owned as of such re-election, we would be subject to corporate level tax with respect to any built-in gain inherent in such asset at the time of re-election. 32 Any such corporate tax liability could be substantial and would reduce our cash available for, among other things, our operations and distributions to stockholders.
As a result, any adverse developments in one or more of our concentrated property types could materially and adversely affect us. If one or more of our top 10 tenants, which together represented approximately 19.0% of our ABR as of December 31, 2022, suffers a downturn in their business, it could materially and adversely affect us.
As a result, any adverse developments in one or more of our concentrated property types could materially and adversely affect us. If one or more of our top 10 tenants, which together represented approximately 19.6% of our ABR as of December 31, 2023, suffers a downturn in their business, it could materially and adversely affect us.
Our portfolio is also concentrated in certain property types and any adverse developments relating to one or more of these property types could materially and adversely affect us. As of December 31, 2022, approximately 51.5% of our ABR came from industrial properties, 17.1% from healthcare properties, 13.5% from restaurant properties, 11.5% from retail properties, and 6.5% from office properties.
Our portfolio is also concentrated in certain property types and any adverse developments relating to one or more of these property types could materially and adversely affect us. As of December 31, 2023, approximately 51.5% of our ABR came from industrial properties, 17.6% from healthcare properties, 13.6% from restaurant properties, 11.4% from retail properties, and 5.9% from office properties.
We typically lease our properties pursuant to long-term net leases with initial terms of 10 years or more that often have renewal options. As of December 31, 2022, the ABR weighted average remaining term of our leases was approximately 10.9 years, excluding renewal options.
We typically lease our properties pursuant to long-term net leases with initial terms of 10 years or more that often have renewal options. As of December 31, 2023, the ABR weighted average remaining term of our leases was approximately 10.5 years, excluding renewal options.
These covenants require us to, among other things, maintain certain financial ratios, including leverage, fixed charge coverage, and debt service coverage, among others. As of December 31, 2022, we believe we were in compthrliance with all of our loan covenants.
These covenants require us to, among other things, maintain certain financial ratios, including leverage, fixed charge coverage, and debt service coverage, among others. As of December 31, 2023, we believe we were in compliance with all of our loan covenants.
From 2015 to 2022, we have acquired an average of $500.0 million of new properties per year, with a low of $100.0 million and a high of $1.0 billion. Our ability to continue to grow requires us to identify and complete acquisitions that meet our investment criteria and depends on general market and economic conditions.
From 2015 to 2023, we acquired an average of $580.0 million of new properties per year, with a low of $100.0 million and a high of $1.0 billion. Our ability to continue to grow requires us to identify and complete acquisitions that meet our investment criteria and depends on general market and economic conditions.
If we are unable to adequately recognize and effectively respond to such developments and governmental, societal, investor, and consumer expectations relating to our ESG practices, we may miss corporate opportunities, become subject to additional scrutiny, incur unexpected and significant costs, or experience damage to our reputation.
If we are unable to adequately recognize and effectively respond to such developments and governmental, societal, investor, and consumer expectations relating to our corporate responsibility and sustainability efforts, we may miss corporate opportunities, become subject to additional scrutiny, incur unexpected and significant costs, or experience damage to our reputation.
As of December 31, 2022, our top 10 tenants together represented 19.0% of our ABR. Our largest tenant is Roskam Baking Company, which leases seven properties that in the aggregate represent approximately 4.0% of our ABR.
As of December 31, 2023, our top 10 tenants together represented 19.6% of our ABR. Our largest tenant is Roskam Baking Company, which leases seven properties that in the aggregate represent approximately 4.1% of our ABR.
The issuance of shares of preferred stock or a separate class or series of Common Stock could provide the holders thereof with specified dividend payments and payments upon liquidation prior or senior to those of the Common Stock, and could also have the effect of delaying, discouraging, or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer, or sale of all or substantially all of our assets) that might provide a premium price for holders of our Common Stock. 34 Termination of the Employment Agreements with certain members of our senior management team could be costly.
The issuance of shares of preferred stock or a separate class or series of common stock could provide the holders thereof with specified dividend payments and payments upon liquidation prior or senior to those of the common stock, and could also have the effect of delaying, discouraging, or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer, or sale of all or substantially all of our assets) that might provide a premium price for holders of our common stock.
CARR also recommended that by June 30, 2023, all new securities use the Canadian Overnight Repo Rate Average (“CORRA”), subject to certain limited exceptions. On May 16, 2022, Refinitiv announced the cessation of the calculation and publication of CDOR after June 28, 2024.
CARR also recommended that by June 30, 2023, all new securities use the Canadian Overnight Repo Rate Average (“CORRA”), subject to certain limited exceptions. On May 16, 2022, Refinitiv announced the cessation of the calculation and publication of CDOR after June 28, 2024. On January 11, 2023, CARR announced development of a new Term CORRA benchmark.
We rely on information from our tenants to determine a potential tenant’s credit risk as well as for on-going risk management. As of December 31, 2022, approximately 85.8% of our ABR is received from tenants that are required to provide us with specified financial information on a periodic basis.
We also rely on information from our tenants to determine a potential tenant’s credit risk as well as for on-going risk management. As of December 31, 2023, approximately 86.0% of our ABR is received from tenants that are required to provide us with specified financial information on a periodic basis.
In addition, the counterparties to any hedging arrangements we enter into may not honor their obligations. Failure to hedge effectively against changes in interest rates relating to the interest expense of our future floating-rate borrowings may materially and adversely affect us.
These arrangements involve risks and may not be effective in reducing our exposure to interest rate changes. In addition, the counterparties to any hedging arrangements we enter into may not honor their obligations. Failure to hedge effectively against changes in interest rates relating to the interest expense of our future floating-rate borrowings may materially and adversely affect us.
Certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could materially and adversely impact us, expose us to increased risks that would be uninsured, and materially and adversely impact our ability to attract directors and officers.
Certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could materially and adversely impact us, expose us to increased risks that would be uninsured, and materially and adversely impact our ability to attract directors and officers. 24 A failure to maintain effective internal controls could materially and adversely affect us.
Risks Related to Debt Financing As of December 31, 2022, we had approximately $2.0 billion principal balance of indebtedness outstanding, which may expose us to the risk of default under our debt obligations. As of December 31, 2022, we had approximately $2.0 billion principal balance of indebtedness outstanding.
Risks Related to Debt Financing As of December 31, 2023, we had approximately $1.9 billion principal balance of indebtedness outstanding, which may expose us to the risk of default under our debt obligations. As of December 31, 2023, we had approximately $1.9 billion principal balance of indebtedness outstanding.
To satisfy the REIT distribution requirements, we may be forced to take certain actions to raise funds if we have insufficient cash flow which could materially and adversely affect us and the trading price of our Common Stock.
Any of these taxes would decrease cash available for distribution to our stockholders. To satisfy the REIT distribution requirements, we may be forced to take certain actions to raise funds if we have insufficient cash flow which could materially and adversely affect us and the trading price of our common stock.
As a general matter, notwithstanding that we qualify to be taxed as a REIT for U.S. federal income tax purposes, if we acquire appreciated assets from a non-REIT C corporation in a transaction in which the adjusted tax basis of the assets in its hands is determined by reference to the adjusted tax basis of the assets in the hands of the C corporation, we will be subject to entity-level tax on any gain recognized in connection with a disposition (such as a taxable sale) of any such assets during the 5-year period following such acquisition.
For example, if we acquire appreciated assets from a non-REIT C corporation in a transaction in which the adjusted tax basis of the assets in its hands is determined by reference to the adjusted tax basis of the assets in the hands of the C corporation, we will be subject to entity-level tax on any gain recognized in connection with a disposition (such as a taxable sale) of any such assets during the 5-year period following such acquisition.
Disruptions in the financial markets and deteriorating economic conditions could adversely affect our ability to obtain debt financing on commercially reasonable terms and adversely impact our ability to implement our investment strategy and achieve our investment objectives.
Disruptions in the financial markets and deteriorating economic conditions could adversely affect our ability to obtain debt financing on commercially reasonable terms, refinance existing indebtedness on acceptable terms or at all, and adversely impact our ability to implement our investment strategy and achieve our investment objectives.
We may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Compliance with the REIT Requirements may hinder our ability to operate solely on the basis of maximizing profits.
Further, we may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in our business. Compliance with the REIT distribution requirements may hinder our ability to operate solely on the basis of maximizing profits.
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.
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.
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.
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. 31 As a result, we and our stockholders have rights against our directors and officers that are more limited than might otherwise exist.
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 the per share trading price of our Common Stock.
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.
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.
Termination of the employment agreements with certain members of our executive management team could be costly. The employment agreements with certain members of our executive management team provide that if their employment with us terminates under certain circumstances, we may be required to pay them significant amounts of severance compensation, thereby making it costly to terminate their employment.
From time to time the Financial Accounting Standards Board (“FASB”), and the SEC, which create and interpret appropriate accounting standards, may change the financial accounting and reporting standards or their interpretation and application of these standards 27 that will govern the preparation of our financial statements.
From time to time the Financial Accounting Standards Board (“FASB”), and the SEC, which create and interpret appropriate 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.
Uncertainty in the credit markets could also negatively impact our ability to make acquisitions, make it more difficult or impossible for us to sell properties, or adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of debt financing or difficulties in obtaining debt financing. 32 Market conditions could adversely affect our ability to refinance existing indebtedness on acceptable terms or at all, which could materially and adversely affect us.
Uncertainty in the credit markets could also negatively impact our ability to make acquisitions, make it more difficult or impossible for us to sell properties, or adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of debt financing or difficulties in obtaining debt financing.
In addition, in order to qualify as a REIT, we must not have, at the end of any taxable year, any earnings and profits accumulated in a non-REIT year. Because each of Trident BRE Holdings I, Inc. and Trident BRE Holdings II, Inc.
In addition, in order to qualify as a REIT, we must not have, at the end of any taxable year, any earnings and profits accumulated in a non-REIT year.
Furthermore, in the event we experience a substantial or comprehensive loss of one of our properties, we may not be able to rebuild such property to its existing specifications without significant capital expenditures which may exceed any amounts received pursuant to insurance policies, as reconstruction or improvement of such a property would likely require significant upgrades to meet zoning and building code requirements.
Furthermore, in the event we experience a substantial or comprehensive loss of one of our properties, we may not be able to rebuild such property to its existing specifications without significant capital expenditures which may exceed any amounts received pursuant to insurance policies.
We may be adversely affected by changes in LIBOR or CDOR reporting practices, the methods by which LIBOR or CDOR are determined, or the use of alternative reference rates. As of December 31, 2022, we had approximately $400 million of debt outstanding for which the interest rate was tied to London Interbank Offered Rate (“LIBOR”).
We may be adversely affected by changes in CDOR reporting practices, the methods by which CDOR is determined, or the use of alternative reference rates. As of December 31, 2023, we had approximately C$100 million of debt outstanding for which the interest rate was tied to the Canadian Dollar Offered Rate (“CDOR”).
Additionally, as of December 31, 2022, we had entered into interest rate swaps totaling $640 million and C$60 million that fix the LIBOR and CDOR components of our debt, respectively, through various tenors.
Additionally, as of December 31, 2023, we had entered into interest rate swaps totaling C$100 million that fix the CDOR component of our debt through various tenors.
Our inability to make distributions, or to make distributions at expected levels, could result in a decrease in trading price of our Common Stock. We may change the dividend policy for our Common Stock in the future.
Our inability to make distributions, or to make distributions at expected levels, could result in a decrease in trading price of our common stock.
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.
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.
We may be unable to sell a property at the time we desire on favorable terms or at all, which could limit our ability to access capital through dispositions and could adversely affect our cash flow, financial condition and results of operations. Real estate investments generally cannot be sold quickly.
If we are unable to achieve growth through acquisitions, it could materially and adversely affect us. 19 We may be unable to sell a property at the time we desire on favorable terms or at all, which could limit our ability to access capital through dispositions and could adversely affect our cash flow, financial condition, and results of operations.
As a result, we and our stockholders have rights against our directors and officers that are more limited than might otherwise exist. Accordingly, in the event that 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.
Accordingly, in the event that 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.
We elected to be taxed as a REIT under Sections 856 through 860 of the Code and the applicable U.S. Treasury regulations, which contain the requirements for qualifying as a REIT, which we refer to in this Form 10-K as the “REIT Requirements,” beginning with our taxable year ended December 31, 2008.
Treasury regulations, which contain the requirements for qualifying as a REIT, which we refer to in this Form 10-K as the “REIT Requirements,” beginning with our taxable year ended December 31, 2008.
We cannot provide any assurance that we will be able to effectively manage our growth, which could materially and adversely affect us. As we continue to acquire properties pursuant to our growth strategy, our portfolio may become less diversified, which could materially and adversely affect us.
As we continue to acquire properties pursuant to our growth strategy, our portfolio may become less diversified, which could materially and adversely affect us. In pursuing our growth strategy, we may acquire properties that cause our portfolio to become less diversified.
As a result, if any such risks of a less diversified portfolio are realized, we could be materially and adversely affected. We face significant competition for acquiring properties from both publicly traded REITs and private investors that have greater resources than we do, which could materially and adversely affect us.
We face significant competition for acquiring properties from both publicly traded REITs and private investors that have greater resources than we do, which could materially and adversely affect us.
In addition, any changes may undermine our ability to prepare timely and accurate financial statements, which could result in a lack of investor confidence and could materially and adversely affect us.
In some cases, we could be required to apply a new or revised standard retroactively, resulting in restating prior period financial statements. In addition, any changes may undermine our ability to prepare timely and accurate financial statements, which could result in a lack of investor confidence and could materially and adversely affect us.
To reduce our exposure to variable-rate debt, we enter into interest rate swap agreements to fix the rate of interest as a hedge against interest rate fluctuations on floating-rate debt. These arrangements involve risks and may not be effective in reducing our exposure to interest rate changes.
Failure to hedge effectively against interest rate changes may materially and adversely affect us. To reduce our exposure to variable-rate debt, we enter into interest rate swap agreements to fix the rate of interest as a hedge against interest rate fluctuations on floating-rate debt.
Sales of substantial amounts of our capital stock in the public markets may dilute your voting power and your ownership interest in us. Our Charter provides that we may issue up to 500,000,000 shares of Common Stock, $0.00025 par value, and 20,000,000 shares of preferred stock, $0.001 par value per share.
Our Charter provides that we may issue up to 500,000,000 shares of common stock, $0.00025 par value, and 20,000,000 shares of preferred stock, $0.001 par value per share.
If this occurs, we may need to borrow funds or liquidate some of our properties in order to pay any applicable taxes.
In addition, if we fail to qualify as a REIT, we will not be required to make distributions to our stockholders. If this occurs, we may need to borrow funds or liquidate some of our properties in order to pay any applicable taxes.
On January 11, 2023, CARR announced development of a new Term CORRA benchmark that is expected to be available for use by the third quarter of 2023. We are monitoring and evaluating the related risks which arise in connection with transitioning our Canadian dollar-denominated debt to a new alternative rate, including any resulting value transfer that may occur.
We are monitoring and evaluating the related risks which arise in connection with transitioning our Canadian dollar-denominated debt to a new alternative rate, including any resulting value transfer that may occur.
We use external financing to refinance indebtedness as it matures and to partially fund our acquisitions. Credit markets may experience significant price volatility, displacement, and liquidity disruptions, including the bankruptcy, insolvency, or restructuring of certain financial institutions. As a result, we may be unable to fully refinance maturing indebtedness with new indebtedness, which could materially and adversely affect us.
We use external financing to refinance indebtedness as it matures and to partially fund our acquisitions. Credit markets may experience significant price volatility, displacement, and liquidity disruptions, including the bankruptcy, insolvency, or restructuring of certain financial institutions. Our access to financing depends on, among other things, conditions in the financial markets.
Although it may be in our stockholders’ best interest that we sell a property, it may be economically disadvantageous for us to do so because of these obligations. In order to limit our exposure to a tax obligation, our use of proceeds from any sales or dispositions of certain properties will be limited.
Although it may be in our stockholders’ best interest that we sell a property, it may be economically disadvantageous for us to do so because of these obligations.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not aware of any material legal proceedings to which we or any of our subsidiaries are a party or to which any of our property is subject, nor are we aware of any such legal proceedings contemplated by government agencies. Item 4. Mine Saf ety Disclosures. Not applicable. 44 Part II.
Biggest changeWe are not aware of any material legal proceedings to which we or any of our subsidiaries are a party or to which any of our property is subject, nor are we aware of any such legal proceedings contemplated by government agencies. Item 4. Mine Saf ety Disclosures. Not applicable. 39 Part II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWhile funds used in this benchmark typically target institutional investors and have characteristics that differ from us (including differing fees), we feel that the MCSI US REIT Index is an appropriate and accepted index for the purpose of evaluating returns on investments in direct real estate funds. 45 December 31, 2017 2018 2019 2020 2021 2022 Broadstone Net Lease 100.00 113.10 119.00 114.40 151.70 105.10 Russell 2000 100.00 89.00 111.70 134.00 153.90 122.40 MSCI US REIT Index 100.00 95.40 120.10 111.00 158.80 119.90 Prior to our IPO in September 2020 and the listing of our common stock on the NYSE, we sold shares of common stock in a private offering at a share price established by the committee of our board of directors comprised of our independent directors (“Independent Directors Committee”) based on the net asset value of our portfolio, input from management and third-party consultants, and such other factors the Independent Directors Committee deemed necessary.
Biggest changeWhile funds used in this benchmark typically target institutional investors and have characteristics that differ from us (including differing fees), we feel that the MCSI US REIT Index is an appropriate and accepted index for the purpose of evaluating returns on investments in direct real estate funds. 40 December 31, 2018 2019 2020 2021 2022 2023 Broadstone Net Lease 100.00 105.25 101.16 134.21 92.93 105.94 S&P 500 100.00 131.49 155.68 200.37 164.08 207.21 MSCI US REIT Index 100.00 125.84 116.31 166.39 125.61 142.87 Prior to our IPO in September 2020 and the listing of our common stock on the NYSE, we sold shares of common stock in a private offering at a share price established by the committee of our Board of Directors comprised of our independent directors (“Independent Directors Committee”) based on the net asset value of our portfolio, input from management and third-party consultants, and such other factors the Independent Directors Committee deemed necessary.
Equity Compensation Plan Information The information concerning our Equity Compensation Plan will be included in the Proxy Statement to be filed relating to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.
Equity Compensation Plan Information The information concerning our Equity Compensation Plan will be included in the Proxy Statement to be filed relating to our 2024 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities Market Information Our Common Stock is traded on the New York Stock Exchange under the ticker symbol “BNL.” Stockholders As of February 17, 2023, there were approximately 527 holders of record of our Common Stock.
Item 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the New York Stock Exchange under the ticker symbol “BNL.” Stockholders As of February 20, 2024, there were approximately 502 holders of record of our common stock.
The graph assumes that $100 was invested on December 31, 2016, in each of shares of our common stock, the Russell 2000 and the MCSI US REIT Index, and that all dividends were reinvested. There can be no assurance that the performance of our shares will continue in line with the same or similar trends depicted in the graph below.
The graph assumes that $100 was invested on December 31, 2018, in each of shares of our common stock, the S&P 500 and the MCSI US REIT Index, and that all dividends were reinvested. There can be no assurance that the performance of our shares will continue in line with the same or similar trends depicted in the graph below.
Performance Graph The following graph is a comparison of the cumulative total return of shares of our common stock, the Russell 2000, and the MCSI US REIT Index.
Performance Graph The following graph is a comparison of the cumulative total return of shares of our common stock, the S&P 500, and the MCSI US REIT Index.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table reconciles net income (which is the most comparable GAAP measure) to FFO, Core FFO and AFFO: For the Year Ended December 31, (in thousands, except per share data) 2022 2021 2020 Net income $ 129,475 $ 109,528 $ 56,276 Real property depreciation and amortization 154,673 131,999 132,613 Gain on sale of real estate (15,953 ) (13,523 ) (14,985 ) Provision for impairment on investment in rental properties 5,535 28,208 19,077 FFO $ 273,730 $ 256,212 $ 192,981 Write-off of accrued rental income 1,326 1,938 4,235 Lease termination fee (2,469 ) (35,000 ) — Gain on insurance recoveries (341 ) — — Cost of debt extinguishment 308 368 417 Severance 401 1,304 94 Change in fair value of earnout liability — 5,539 (1,800 ) Other (income) expenses (5,690 ) (a) 62 7 Core FFO $ 267,265 $ 230,423 $ 195,934 Straight-line rent adjustment (21,900 ) (20,304 ) (24,066 ) Adjustment to provision for credit losses (5 ) (38 ) (148 ) Amortization of debt issuance costs 3,692 3,854 3,445 Amortization of net mortgage premiums (104 ) (132 ) (142 ) Loss (gain) on interest rate swaps and other non-cash interest expense 2,514 698 (166 ) Amortization of lease intangibles (4,809 ) (3,208 ) (1,118 ) Stock-based compensation 5,316 4,669 1,989 Deferred taxes 204 — — Internalization expenses — — 3,705 Capital improvements/reserves — — 1,662 AFFO $ 252,173 $ 215,962 $ 181,095 (a) Amount includes $5.6 million of unrealized foreign exchange loss, primarily associated with our CAD denominated revolving borrowings.
Biggest changeIn the future, the SEC, Nareit or another regulatory body may decide to standardize the allowable adjustments across the REIT industry and in response to such standardization we may have to adjust our calculation and characterization of Core FFO and AFFO accordingly. 51 The following table reconciles net income (which is the most comparable GAAP measure) to FFO, Core FFO and AFFO: For the Year Ended December 31, (in thousands, except per share data) 2023 2022 2021 Net income $ 163,312 $ 129,475 $ 109,528 Real property depreciation and amortization 158,346 154,673 131,999 Gain on sale of real estate (54,310 ) (15,953 ) (13,523 ) Provision for impairment on investment in rental properties 31,274 5,535 28,208 FFO $ 298,622 $ 273,730 $ 256,212 Net write-offs of accrued rental income 4,458 1,326 1,938 Lease termination fees (7,500 ) (2,469 ) (35,000 ) Gain on insurance recoveries — (341 ) — Cost of debt extinguishment 3 308 368 Severance and executive transition costs 1,622 401 1,304 Change in fair value of earnout liability — — 5,539 Other expenses (income) (a) 1,678 (5,690 ) 62 Core FFO $ 298,883 $ 267,265 $ 230,423 Straight-line rent adjustment (26,736 ) (21,900 ) (20,304 ) Adjustment to provision for credit losses (10 ) (5 ) (38 ) Amortization of debt issuance costs 3,938 3,692 3,854 Amortization of net mortgage premiums (78 ) (104 ) (132 ) Loss on interest rate swaps and other non-cash interest expense 1,884 2,514 698 Amortization of lease intangibles (5,846 ) (4,809 ) (3,208 ) Stock-based compensation 5,972 5,316 4,669 Deferred taxes (282 ) 204 — AFFO $ 277,725 $ 252,173 $ 215,962 (a) Amount includes $1.7 million, ($5.6) million, and ($0.1) million of unrealized foreign exchange loss (gain) for the years ended December 31, 2023, 2022, and 2021, respectively, primarily associated with our Canadian dollar denominated Revolver Credit Facility borrowings.
A majority of our leases have fixed annual rent increases or periodic escalations over the term of the lease ( e.g. , a 10% increase every five years), and the remaining portion has annual lease escalations based on increases in the CPI.
A majority of our leases have fixed annual rent increases or periodic escalations over the term of the lease ( e.g. , a 10% increase every five years), and the remaining portion has annual rent escalations based on increases in the CPI.
We funded a significant portion of our Canadian investments through Canadian dollar borrowings under our Revolving Credit Facility, which is intended to act as a natural hedge against our Canadian dollar investments. The Canadian dollar revolving borrowings are remeasured each reporting period, with the unrealized foreign currency gains and losses flowing through earnings.
We funded a significant portion of our Canadian investments through Canadian dollar borrowings under our Revolving Credit Facility, which is intended to act as a natural hedge against our Canadian dollar investments. The Canadian dollar Revolving Credit Facility borrowings are remeasured each reporting period, with the unrealized foreign currency gains and losses flowing through earnings.
If, and when, such events or changes in circumstances are present, an impairment exists to the extent the carrying value of the long-lived asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use of the long-lived asset or asset group and its eventual disposition.
If, and when, such events or changes in circumstances are present, an impairment exists to the extent the carrying value of the long-lived asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use of the long-lived asset or asset group and its eventual disposition.
For a portion of our portfolio, we have leases that are not fully triple-net, and, therefore, we bear certain responsibilities for the maintenance and structural component replacements ( e.g., roof, structure, or parking lot) that may be required in the future, although the tenants are still required to pay all operating expenses associated with the property ( e.g. , real estate taxes, insurance, and maintenance).
For a portion of our portfolio, we have leases that are not fully net, and, therefore, we bear certain responsibilities for the maintenance and structural component replacements ( e.g., roof, structure, or parking lot) that may be required in the future, although the tenants are still required to pay all operating expenses associated with the property ( e.g. , real estate taxes, insurance, and maintenance).
Our acquisition growth 52 strategy significantly depends on our ability to obtain acquisition financing on favorable terms. We seek to reduce the risk that long-term debt capital may be unavailable to us by strengthening our balance sheet by investing in real estate with creditworthy tenants and lease guarantors, and by maintaining an appropriate mix of debt and equity capitalization.
Our acquisition growth strategy significantly depends on our ability to obtain acquisition financing on favorable terms. We seek to reduce the risk that long-term debt capital may be unavailable to us by strengthening our balance sheet by investing in real estate with creditworthy tenants and lease guarantors, and by maintaining an appropriate mix of debt and equity capitalization.
The tax protection agreements require us to indemnify the beneficiaries in the event of a sale, exchange, transfer, or other disposal of the contributed property, and in the case of the tax protection agreement entered into in connection with the Internalization, the entire Company, in a taxable transaction that would cause such beneficiaries to recognize a gain that is protected under the agreements, subject to certain exceptions.
The tax protection agreements require us to indemnify the beneficiaries in the event of a sale, exchange, transfer, or other disposal of the contributed property, and in the case of the tax protection agreement entered into in connection with the Company’s internalization, the entire Company, in a taxable transaction that would cause such beneficiaries to recognize a gain that is protected under the agreements, subject to certain exceptions.
Inflation and increased costs may have an adverse impact to our tenants and their creditworthiness if the increase in costs are greater than their increase in revenue. Where we cannot implement a triple-net lease, we attempt to limit our exposure to inflation through the use of warranties and other remedies that reduce the likelihood of a significant capital outlay.
Inflation and increased costs may have an adverse impact to our tenants and their creditworthiness if the increase in costs are greater than their increase in revenue. Where we cannot implement a net lease, we attempt to limit our exposure to inflation through the use of warranties and other remedies that reduce the likelihood of a significant capital outlay.
If one or more of these criteria are met, the lease will generally be classified as a sales-type lease, unless the lease contains a residual value guarantee from a third party other than the lessee, in which case it would be classified as a direct financing lease under certain circumstances.
If one or 55 more of these criteria are met, the lease will generally be classified as a sales-type lease, unless the lease contains a residual value guarantee from a third party other than the lessee, in which case it would be classified as a direct financing lease under certain circumstances.
Borrowings under the amended credit facility are subject to interest only payments at variable rates equal to the applicable reference rate plus a margin of 0.85% based on our 53 current credit ratings of ‘BBB’ and ‘Baa2’ from S&P and Moody’s, respectively.
Borrowings under the amended credit facility are subject to interest only payments at variable rates equal to the applicable reference rate plus a margin of 0.85% based on our current credit ratings of ‘BBB’ and ‘Baa2’ from S&P and Moody’s, respectively.
Generally, all of our property related contracts are or 60 contain leases, and therefore revenue is recognized when the lessee takes possession of or controls the physical use of the leased assets. In most instances this occurs on the lease commencement date.
Generally, all of our property related contracts are or contain leases, and therefore revenue is recognized when the lessee takes possession of or controls the physical use of the leased assets. In most instances this occurs on the lease commencement date.
The increase in net cash provided by (used in) financing activities during the year ended December 31, 2022 as compared to the year ended December 31, 2021, mainly reflects an increase in net proceeds from equity and debt offerings in 2022 to fund growth in our real estate portfolio.
The increase in net cash provided by financing activities during the year ended December 31, 2022 as compared to the year ended December 31, 2021, mainly reflects an increase in net proceeds from equity and debt offerings in 2022 to fund growth in our real estate portfolio.
Assumed mortgages are initially recorded at their estimated fair value as of the assumption date, and the 59 difference between such estimated fair value and the notes’ outstanding principal balance is amortized to interest expense over the remaining term of the debt.
Assumed mortgages are initially recorded at their estimated fair value as of the assumption date, and the difference between such estimated fair value and the notes’ outstanding principal balance is amortized to interest expense over the remaining term of the debt.
To the extent our properties become vacant and are not subject to a lease, we would forego rental income while remaining responsible for the payment of property taxes and maintaining the property until it is re-leased, which could negatively impact our operating results. Our portfolio was 99.4% occupied as of December 31, 2022.
To the extent our properties become vacant and are not subject to a lease, we would forego rental income while remaining responsible for the payment of property taxes and maintaining the property until it is re-leased, which could negatively impact our operating results. Our portfolio was 99.4% occupied as of December 31, 2023.
Significant judgment is made to determine if and when impairment should be taken. Management’s assessment of impairment as of December 31, 2022 was based on the most current information available to management. Certain of our properties may have fair values less than their carrying amounts.
Significant judgment is made to determine if and when impairment should be taken. Management’s assessment of impairment as of December 31, 2023 was based on the most current information available to management. Certain of our properties may have fair values less than their carrying amounts.
While we believe the assumptions used to estimate the fair value of our reporting unit are reasonable, changes in these assumptions may have a material impact on our financial results. Based on the results of our annual goodwill impairment test on November 30, 2022, our annual goodwill impairment test date, we concluded that goodwill was not impaired.
While we believe the assumptions used to estimate the fair value of our reporting unit are reasonable, changes in these assumptions may have a material impact on our financial results. Based on the results of our annual goodwill impairment test on November 30, 2023, our annual goodwill impairment test date, we concluded that goodwill was not impaired.
In addition, the amended credit facility is subject to a facility fee on the amount of the revolving commitments, based on our credit rating.
In addition, the Revolving Credit Facility is subject to a facility fee on the amount of the revolving commitments, based on our credit rating.
As a REIT, we are required to distribute to our stockholders at least 90% of our REIT taxable income determined without regard to the dividends paid deduction and excluding net capital gain, on an annual basis.
As a REIT, we are required to distribute to our stockholders at least 90% of our REIT taxable income determined without regard to the dividends paid deduction and excluding net capital gains, on an annual basis.
Debt Covenants We are subject to various covenants and financial reporting requirements pursuant to our debt facilities, which are summarized below. As of December 31, 2022, we believe we were in compliance with all of our covenants on all outstanding borrowings.
Debt Covenants We are subject to various covenants and financial reporting requirements pursuant to our debt facilities, which are summarized below. As of December 31, 2023, we believe we were in compliance with all of our covenants on all outstanding borrowings.
Additionally, EBITDAre for the quarter includes amounts generated by properties that have been sold during the quarter. Accordingly, the variability in EBITDAre caused by the timing of our acquisitions and dispositions can temporarily distort our leverage ratios.
Additionally, EBITDAre for the quarter includes amounts generated by properties that have been sold during the quarter. Accordingly, the variability in EBITDAre caused by the timing of our investments and dispositions can temporarily distort our leverage ratios.
Based on values as of December 31, 2022, taxable sales of the applicable properties would trigger liability under the three agreements of approximately $20.4 million. Based on information available, we do not believe that the events resulting in damages as detailed above have occurred or are likely to occur in the foreseeable future.
Based on values as of December 31, 2023, taxable sales of the applicable properties would trigger liability under the three agreements of approximately $20.4 million. Based on information available, we do not believe that the events resulting in liability as detailed above have occurred or are likely to occur in the foreseeable future.
Approximately 11.6% of our rent escalators are based on an increase in the CPI over a specified period and 2.7% of our leases are flat leases, meaning they do not provide for rent increases during their terms. 47 Property Dispositions From time to time, we strategically dispose of properties, primarily when we believe the risk profile has changed and become misaligned with our then current risk-adjusted return objectives.
Approximately 11.8% of our rent escalators are based on an increase in the CPI over a specified period and 2.7% of our leases are flat leases, meaning they do not provide for rent increases during their terms. 42 Property Dispositions From time to time, we strategically dispose of properties, primarily when we believe the risk profile has changed and become misaligned with our then current risk-adjusted return objectives.
Unsecured Indebtedness and Capital Markets Activities as of and for the Year Ended December 31, 2022 The following table sets forth our outstanding Revolving Credit Facility, unsecured term loans and senior unsecured notes at December 31, 2022.
Unsecured Indebtedness and Capital Markets Activities as of and for the Year Ended December 31, 2023 The following table sets forth our outstanding Revolving Credit Facility, unsecured term loans and senior unsecured notes at December 31, 2023.
Results of Operations Discussion of our Results of Operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 was previously filed in our Annual Report on Form 10-K for the year ended December 31, 2021. See Item 7.
Results of Operations Discussion of our Results of Operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 was previously filed in our Annual Report on Form 10-K for the year ended December 31, 2022. See Item 7.
At December 31, 2022 and 2021, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation.
At December 31, 2023 and 2022, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation.
As we fund new acquisitions using our unsecured Revolving Credit Facility, our leverage profile and Net Debt will be immediately impacted by current quarter acquisitions. However, the full benefit of EBITDAre from newly acquired properties will not be received in the same quarter in which the properties are acquired.
As we fund new investments using our unsecured Revolving Credit Facility, our leverage profile and Net Debt will be immediately impacted by current quarter investments. However, the full benefit of EBITDAre from new investments will not be received in the same quarter in which the properties are acquired.
As a result, it is unlikely that we will be able to retain substantial cash balances to meet our long-term liquidity needs, including repayment of debt and the acquisition of additional properties, from our annual taxable income. Instead, we expect to meet our long-term liquidity needs primarily by relying upon external sources of capital.
As a result, it is unlikely that we will be able to retain substantial cash balances to meet our long-term liquidity needs, including repayment of debt and the acquisition of additional properties, from our annual taxable income. Instead, we expect to meet our long-term liquidity needs primarily by relying upon external sources of capital and proceeds from selective property dispositions.
As of December 31, 2022, our portfolio was approximately 99.4% leased with an ABR weighted average remaining lease term of approximately 10.9 years, excluding renewal options. • Standard Contractual Base Rent Escalation . Approximately 97.3% of our leases have contractual rent escalations, with an ABR weighted average minimum increase of 2.0%. • Extensive Tenant Financial Reporting .
As of December 31, 2023, our portfolio was approximately 99.4% leased with an ABR weighted average remaining lease term of approximately 10.5 years, excluding renewal options. • Standard Contractual Base Rent Escalation . Approximately 97.3% of our leases have contractual rent escalations, with an ABR weighted average minimum increase of 2.0%. • Extensive Tenant Financial Reporting .
Nareit defines FFO as GAAP net income or loss adjusted to exclude net gains (losses) from sales of certain depreciated real estate assets, depreciation and amortization expense from real estate assets, gains and losses from change in control, and impairment charges related to certain previously depreciated real estate assets.
Nareit defines FFO as GAAP net income or loss adjusted to exclude net gains (losses) from sales of certain depreciated real estate assets, depreciation and amortization expense from real estate assets, and impairment charges related to certain previously depreciated real estate assets.
We are focused on a disciplined and targeted acquisition strategy, together with active asset management that includes selective sales of properties.
We are focused on a disciplined and targeted investment strategy, together with active asset management that includes selective sales of properties.
Non-GAAP Measures FFO, Core FFO, and AFFO We compute FFO in accordance with the standards established by the Board of Governors of Nareit, the worldwide representative voice for REITs and publicly traded real estate companies with an interest in the U.S. real estate and capital markets.
Non-GAAP Measures FFO, Core FFO, and AFFO We compute Funds From Operations (“FFO”) in accordance with the standards established by the Board of Governors of Nareit, the worldwide representative voice for REITs and publicly traded real estate companies with an interest in the U.S. real estate and capital markets.
We adjust EBITDAre (“Adjusted EBITDAre”) for the most recently completed quarter (i) to recalculate as if all acquisitions and dispositions had occurred at the beginning of the quarter, 57 (ii) to exclude certain GAAP income and expense amounts that are either non-cash, such as cost of debt extinguishments, realized or unrealized gains and losses on foreign currency transactions, or the change in fair value of our earnout liability, or that we believe are one time, or unusual in nature because they relate to unique circumstances or transactions that had not previously occurred and which we do not anticipate occurring in the future, and (iii) to eliminate the impact of lease termination fees and other items that are not a result of normal operations.
We adjust EBITDAre (“Adjusted EBITDAre”) for the most recently completed quarter (i) to recalculate as if all investments and dispositions had occurred at the beginning of the quarter, (ii) to exclude certain GAAP income and expense amounts that are either non-cash, such as cost of debt extinguishments, realized or unrealized gains and losses on foreign currency transactions, or gains on insurance recoveries, or that we believe are one time, or unusual in nature because they relate to unique circumstances or transactions that had not previously occurred and which we do not anticipate occurring in the future, and (iii) to eliminate the impact of lease termination fees and other items that are not a result of normal operations.
General and Administrative Expenses Our general and administrative expenses primarily consist of employee compensation and related costs, third party legal, accounting, and consulting expenses, travel and entertainment, and general office expenses. 48 Impact of Inflation Our leases with tenants of our properties are long-term in nature, with a current weighted average remaining lease term of 10.9 years as of December 31, 2022.
General and Administrative Expenses Our general and administrative expenses primarily consist of employee compensation and related costs, third party legal, accounting, and consulting expenses, travel and entertainment, and general office expenses. 43 Impact of Inflation Our leases with tenants of our properties are long-term in nature, with a current weighted average remaining lease term of 10.5 years as of December 31, 2023.
We compute Core FFO by adjusting FFO, as defined by Nareit, to exclude certain GAAP income and expense amounts that we believe are infrequently recurring, unusual in nature, or not related to its core real estate operations, including write-offs or recoveries of accrued rental income, lease termination fees, non-cash gains on insurance recoveries, the change in fair value of our earnout liability, cost of debt extinguishments, unrealized and realized gains or losses on foreign currency transactions, severance, and other extraordinary items.
We compute Core Funds From Operations (“Core FFO”) by adjusting FFO, as defined by Nareit, to exclude certain GAAP income and expense amounts that we believe are infrequently recurring, unusual in nature, or not related to its core real estate operations, including write-offs or recoveries of accrued rental income, lease termination fees, gain on insurance recoveries, the change in fair value of our earnout liability, cost of debt extinguishments, unrealized and realized gains or losses on foreign currency transactions, severance and executive transition costs, and other extraordinary items.
“Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. 62
“Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. 56
Within these sectors, we have meaningful concentrations in manufacturing, distribution and warehouse, food processing, casual dining, clinical, quick service restaurants, general merchandise, and flex/research and development. • Geographic Diversification : Our properties are located in 44 U.S. states and four Canadian provinces, with no single geographic concentration exceeding 9.7% of our ABR. • Tenant and Industry Diversification : Our properties are occupied by 221 different commercial tenants who operate 211 different brands that are diversified across 55 different industries, with no single tenant accounting for more than 4.0% of our ABR. • Strong In-Place Leases with Significant Remaining Lease Term .
Within these sectors, we have meaningful concentrations in manufacturing, distribution and warehouse, food processing, casual dining, clinical, quick service restaurants, and general merchandise. • Geographic Diversification : Our properties are located in 44 U.S. states and four Canadian provinces, with no single geographic concentration exceeding 9.7% of our ABR. • Tenant and Industry Diversification : Our properties are occupied by approximately 220 different commercial tenants who operate 208 different brands that are diversified across 53 differing industries, with no single tenant accounting for more than 4.1% of our ABR. • Strong In-Place Leases with Significant Remaining Lease Term .
Our Canadian investments are recorded at their historical exchange rates, and therefore are not impacted by changes in the value of the Canadian dollar. 55 Cash Flows Cash and cash equivalents and restricted cash totaled $60.0 million, $27.8 million, and $110.7 million at December 31, 2022, 2021, and 2020, respectively.
Our Canadian investments are recorded at their historical exchange rates, and therefore are not impacted by changes in the value of the Canadian dollar. 50 Cash Flows Cash and cash equivalents and restricted cash totaled $20.6 million, $60.0 million, and $27.8 million at December 31, 2023, 2022, and 2021, respectively.
Short-term Liquidity Requirements Our short-term liquidity requirements consist primarily of funds necessary to pay for our operating expenses, including our general and administrative expenses as well as interest payments on our outstanding debt, to pay distributions, and to fund our acquisitions that are under control or expected to close within a short time period.
Short-term Liquidity Requirements Our short-term liquidity requirements consist primarily of funds necessary to pay for our operating expenses, including our general and administrative expenses as well as interest payments on our outstanding debt, to pay distributions, to fund our acquisitions that are under control or expected to close within a short time period, and to pay for commitments to fund development opportunities, tenant improvements, and revenue generating capital expenditures.
Approximately 94.3% of our tenants, based on ABR, provide financial reporting, of which 85.8% are required to provide us with specified financial information on a periodic basis and an additional 8.5% of our tenants report financial statements publicly, either through SEC filings or otherwise.
Approximately 93.8% of our tenants, based on ABR, provide financial reporting, of which 86.0% are required to provide us with specified financial information on a periodic basis and an additional 7.8% of our tenants report financial statements publicly, either through SEC filings or otherwise.
To mitigate the impact of inflation on our fixed revenue streams, we have implemented limited escalation clauses in our leases. As of December 31, 2022, substantially all of our leases had contractual lease escalations, with an annual weighted average of 2.0%.
To mitigate the impact of inflation on our fixed revenue streams, we have implemented limited escalation clauses in our leases. As of December 31, 2023, substantially all of our leases had contractual rent escalations, with an ABR weighted average minimum increase of 2.0%.
As of December 31, 2022, our portfolio has grown to 804 properties, with 797 properties located in 44 U.S. states and seven properties located in four Canadian provinces. We focus on investing in real estate that is operated by creditworthy single tenants in industries characterized by positive business drivers and trends.
As of December 31, 2023, our portfolio includes 796 properties, with 789 properties located in 44 U.S. states and seven properties located in four Canadian provinces. We focus on investing in real estate that is operated by creditworthy single tenants in industries characterized by positive business drivers and trends.
We do not currently anticipate making significant capital expenditures or incurring other significant property costs, including as a result of inflationary pressures in the current economic environment, because of the strong occupancy levels across our portfolio and the net lease nature of our leases.
Under leases where we are required to bear the cost of structural repairs and replacements, we do not currently anticipate making significant capital expenditures or incurring other significant property costs, including as a result of inflationary pressures in the current economic environment, because of the strong occupancy levels across our portfolio and the net lease nature of our leases.
We use cash on hand and borrowings under our Revolving Credit Facility to initially fund acquisitions, which are subsequently repaid or replaced with proceeds from our equity and debt capital markets activities and cash flows in excess of distributions.
We use cash on hand and borrowings under our Revolving Credit Facility to initially fund acquisitions, which are subsequently repaid or replaced with proceeds from our equity and debt capital markets activities as well as proceeds from dispositions.
For the year ended December 31, 2022, we recognized $5.5 million of impairment due to a change in our long-term hold strategy for three properties.
For the year ended December 31, 2023, we recognized $31.3 million of impairment due to a change in our long-term hold strategy for four properties.
We then annualize quarterly Adjusted EBITDAre by multiplying it by four (“Annualized Adjusted EBITDAre”). 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 different from our Annualized Adjusted EBITDAre.
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 different from our Annualized Adjusted EBITDAre.
The following table presents the impairment charges for their respective periods: Year Ended December 31, (in thousands, except number of properties) 2022 2021 Number of properties 3 7 Carrying value prior to impairment charge $ 12,721 $ 48,604 Fair value 7,186 20,396 Impairment charge $ 5,535 $ 28,208 The timing and amount of impairment fluctuates from period to period depending on the specific facts and circumstances.
The following table presents the impairment charges for their respective periods: Year Ended December 31, (in thousands, except number of properties) 2023 2022 Number of properties 4 3 Carrying value prior to impairment charge $ 62,720 $ 12,721 Fair value 31,446 7,186 Impairment charge $ 31,274 $ 5,535 The timing and amount of impairment fluctuates from period to period depending on the specific facts and circumstances.
Additionally, we are a party to two separate tax protection agreements with the contributing members of two distinct UPREIT transactions and a tax protection agreement in connection with the Internalization.
Additionally, we are a party to two separate tax protection agreements with the contributing members of two distinct UPREIT transactions and a third tax protection agreement entered into in connection with the internalization of our management in February 2020.
Our focus on single-tenant, net leases also shelters us from fluctuations in the cost of services and maintenance as a result of inflation.
Our focus on single-tenant, net leases also mitigates the potential impact of fluctuations in the cost of services and maintenance as a result of inflation.
Other income (expenses) The change in other income during the year ended December 31, 2022 was primarily $5.6 million of unrealized foreign exchange gain recognized on the remeasurement of our $100 million CAD revolver borrowings, compared to a $0.2 million unrealized foreign exchange loss recognized during the year ended December 31, 2021.
Other income (expenses) The change in other income during the year ended December 31, 2023 was primarily $1.7 million of unrealized foreign exchange loss recognized on the remeasurement of our $100 million CAD Revolving Credit Facility borrowings, compared to a $5.6 million unrealized foreign exchange gain recognized during the year ended December 31, 2022.
Approximately 56.4% of our ABR was derived from leases that will expire after 2030, and no more than 6.2% of our ABR was derived from leases that expire in any single year prior to 2030.
Approximately 60.6% of our ABR was derived from leases that will expire after 2030, and no more than 13.6% of our ABR was derived from leases that expire in any single year up to 2030.
During the year ended December 31, 2022, we recognized gains of $16.0 million on the sale of eight properties, compared to gains of $13.5 million on the sale of 31 properties during the year ended December 31, 2021.
During the year ended December 31, 2023, we recognized gains of $54.3 million on the sale of 14 properties, compared to gains of $16.0 million on the sale of eight properties during the year ended December 31, 2022.
The table below shows information concerning cash flows for the years ended December 31, 2022, 2021, and 2020: For the Year Ended December 31, (in thousands) 2022 2021 2020 Net cash provided by operating activities $ 255,914 $ 244,937 $ 179,028 Net cash used in investing activities (859,643 ) (582,304 ) (60,236 ) Net cash provided by (used in) financing activities 636,000 254,408 (28,375 ) Increase (decrease) in cash and cash equivalents and restricted cash $ 32,271 $ (82,959 ) $ 90,417 The increase in net cash provided by operating activities during the years ended December 31, 2022 and 2021 was mainly due to growth in our real estate portfolio.
The table below shows information concerning cash flows for the years ended December 31, 2023, 2022, and 2021: For the Year Ended December 31, (in thousands) 2023 2022 2021 Net cash provided by operating activities $ 271,074 $ 255,914 $ 244,937 Net cash provided by (used in) investing activities 24,338 (859,643 ) (582,304 ) Net cash (used in) provided by financing activities (334,820 ) 636,000 254,408 (Decrease) increase in cash and cash equivalents and restricted cash $ (39,408 ) $ 32,271 $ (82,959 ) The increase in net cash provided by operating activities during the years ended December 31, 2023 and 2022 was mainly due to growth in our real estate portfolio and associated incremental net lease revenues.
Lease Renewals and Occupancy As of December 31, 2022, the ABR weighted average remaining term of our portfolio was approximately 10.9 years, excluding renewal options, and leases for six properties will expire during 2023. Less than 4% of the properties in our portfolio are subject to leases without at least one renewal option.
Lease Renewals and Occupancy As of December 31, 2023, the ABR weighted average remaining term of our portfolio was approximately 10.5 years, excluding tenant renewal options, and leases for five properties, or 1.2% of ABR, will expire during 2024. Approximately 3% of the properties in our portfolio are subject to tenant leases without at least one renewal option.
We expect to meet our short-term liquidity requirements primarily from cash and cash equivalents balances, net cash provided by operating activities, borrowings under our Revolving Credit Facility and capital recycled through selective property dispositions. We intend to match fund our acquisitions with an appropriate mix of debt and equity capital.
We expect to meet our short-term liquidity requirements primarily from cash and cash equivalents balances and net cash provided by operating activities, supplemented by borrowings under our Revolving Credit Facility and capital recycled through selective property dispositions.
We believe our leverage strategy has allowed us to take advantage of the lower cost of debt while simultaneously strengthening our balance sheet, as evidenced by our current investment grade credit ratings of ‘BBB’ from S&P and ‘Baa2’ from Moody’s.
We believe our leverage strategy has allowed us to take advantage of the lower cost of debt while simultaneously strengthening our balance sheet, as evidenced by our current investment grade credit ratings of ‘BBB’ from S&P and ‘Baa2’ from Moody’s. We seek to maintain on a sustained basis a Leverage Ratio that is generally less than 6.0x.
Liquidity/REIT Requirements Liquidity is a measure of our ability to meet potential cash requirements, including our ongoing commitments to repay debt, fund our operations, acquire properties, make distributions to our stockholders, and other general business needs.
Refer to Non-GAAP Measures below for further details concerning our calculation of non-GAAP measures and reconciliations to the comparable GAAP measure. Liquidity/REIT Requirements Liquidity is a measure of our ability to meet potential cash requirements, including our ongoing commitments to repay debt, fund our operations, acquire properties, make distributions to our stockholders, and other general business needs.
Information is also presented with respect to Annualized EBITDAre and Annualized Adjusted EBITDAre: For the Three Months Ended December 31, (in thousands) 2022 2021 2020 Net income $ 36,773 $ 32,226 $ 17,619 Depreciation and amortization 45,606 33,476 30,182 Interest expense 23,773 16,997 17,123 Income taxes 105 457 (141 ) EBITDA $ 106,257 $ 83,156 $ 64,783 Provision for impairment of investment in rental properties — 207 1,678 Gain on sale of real estate (10,625 ) (3,732 ) (5,260 ) EBITDAre $ 95,632 $ 79,631 $ 61,201 Adjustment for current quarter acquisition activity (1) 1,283 2,002 1,703 Adjustment for current quarter disposition activity (2) (440 ) (180 ) (318 ) Adjustment to exclude non-recurring expenses (income) (3) — — 182 Adjustment to exclude change in fair value of earnout liability — — 6,706 Adjustment to exclude write-off of accrued rental income — — 242 Adjustment to exclude gain on insurance recoveries (341 ) — — Adjustment to exclude realized/unrealized foreign exchange loss 796 — — Adjustment to exclude cost of debt extinguishments 77 — — Adjustment to exclude lease termination fees (1,678 ) — — Adjusted EBITDAre $ 95,329 $ 81,453 $ 69,716 Annualized EBITDAre $ 382,528 $ 318,526 $ 244,805 Annualized Adjusted EBITDAre $ 381,316 $ 325,812 $ 278,867 (1) Reflects an adjustment to give effect to all acquisitions during the quarter as if they had been acquired as of the beginning of the quarter.
Information is also presented with respect to Annualized EBITDAre and Annualized Adjusted EBITDAre: For the Three Months Ended December 31, (in thousands) 2023 2022 2021 Net income $ 6,797 $ 36,773 $ 32,226 Depreciation and amortization 39,278 45,606 33,476 Interest expense 18,972 23,773 16,997 Income taxes (268 ) 105 457 EBITDA $ 64,779 $ 106,257 $ 83,156 Provision for impairment of investment in rental properties 29,801 — 207 Gain on sale of real estate (6,270 ) (10,625 ) (3,732 ) EBITDAre $ 88,310 $ 95,632 $ 79,631 Adjustment for current quarter acquisition activity (a) 153 1,283 2,002 Adjustment for current quarter disposition activity (b) (156 ) (440 ) (180 ) Adjustment to exclude non-recurring expenses (income) (c) 128 — — Adjustment to exclude net write-offs of accrued rental income 4,161 — — Adjustment to exclude gain on insurance recoveries — (341 ) — Adjustment to exclude realized/unrealized foreign exchange loss 1,453 796 — Adjustment to exclude cost of debt extinguishments — 77 — Adjustment to exclude lease termination fees — (1,678 ) — Adjusted EBITDAre $ 94,049 $ 95,329 $ 81,453 Annualized EBITDAre $ 353,240 $ 382,528 $ 318,526 Annualized Adjusted EBITDAre $ 376,196 $ 381,316 $ 325,812 (a) Reflects an adjustment to give effect to all investments during the quarter as if they had been made as of the beginning of the quarter.
As of December 31, 2022, our portfolio comprised approximately 39.1 million rentable square feet of operational space, and was highly diversified based on property type, geography, tenant, and industry, and is cross-diversified within each ( e.g., property-type diversification within a geographic concentration): • Property Type : We are focused primarily on industrial, healthcare, restaurant, retail, and office property types based on our extensive experience in and conviction around these sectors.
As of December 31, 2023, our portfolio comprised approximately 38.3 million rentable square feet of operational space, was highly diversified based on property type, geography, tenant, and industry, and was cross-diversified within each ( e.g., property-type diversification within a geographic concentration): • Property Type : We are diversified across industrial, healthcare, restaurant, and retail property types.
The following table reconciles total debt (which is the most comparable GAAP measure) to Net Debt, and presents the ratio of Net Debt to Annualized EBITDAre and Net Debt to Annualized Adjusted EBITDAre, respectively: 58 As of December 31, (in thousands) 2022 2021 Debt Unsecured revolving credit facility $ 197,322 $ 102,000 Unsecured term loans, net 894,692 646,671 Senior unsecured notes, net 844,555 843,801 Mortgages, net 86,602 96,846 Debt issuance costs 10,905 9,842 Gross Debt 2,034,076 1,699,160 Cash and cash equivalents (21,789 ) (21,669 ) Restricted cash (38,251 ) (6,100 ) Net Debt $ 1,974,036 $ 1,671,391 Net Debt to Annualized EBITDAre 5.2x 5.3x Net Debt to Annualized Adjusted EBITDAre 5.2x 5.1x Critical Accounting Policies and Estimates The preparation of our consolidated financial statements in conformance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses as well as other disclosures in the financial statements.
The following table reconciles total debt (which is the most comparable GAAP measure) to Net Debt, and presents the ratio of Net Debt to Annualized EBITDAre and Net Debt to Annualized Adjusted EBITDAre, respectively: As of December 31, (in thousands) 2023 2022 Debt Revolving Credit Facility $ 90,434 $ 197,322 Unsecured term loans, net 895,947 894,692 Senior unsecured notes, net 845,309 844,555 Mortgages, net 79,068 86,602 Debt issuance costs 8,848 10,905 Gross Debt 1,919,606 2,034,076 Cash and cash equivalents (19,494 ) (21,789 ) Restricted cash (1,138 ) (38,251 ) Net Debt $ 1,898,974 $ 1,974,036 Net Debt to Annualized EBITDAre 5.4x 5.2x Net Debt to Annualized Adjusted EBITDAre 5.0x 5.2x 53 Critical Accounting Policies and Estimates The preparation of our consolidated financial statements in conformance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses as well as other disclosures in the financial statements.
Derivative Instruments and Hedging Activities We are exposed to interest rate risk arising from changes in interest rates on the floating-rate borrowings under our unsecured credit facilities and a certain mortgage. Borrowings pursuant to our unsecured credit facilities bear interest at floating rates based on the applicable reference rate plus an applicable margin.
Accordingly, we have excluded these commitments from the contractual commitments table above. Derivative Instruments and Hedging Activities We are exposed to interest rate risk arising from changes in interest rates on the floating-rate borrowings under our unsecured credit facilities. Borrowings pursuant to our unsecured credit facilities bear interest at floating rates based on SOFR or CDOR plus an applicable margin.
As of December 31, 2022, master leases contributed 67.7% of the ABR associated with multi-site tenants (418 of our 489 properties), and 40.8% of our overall ABR (489 of our 804 properties). Interest Expense We anticipate that we will continue to incur debt to fund future investment activity, which will increase the amount of interest expense we incur.
As of December 31, 2023, master leases contributed 69.0% of the ABR associated with multi-site tenants (406 of 675 properties), and 41.5% of our overall ABR (406 of our 796 properties). Interest Expense We anticipate that we will continue to incur debt to fund future investment activity, which will increase the amount of interest expense we incur.
We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes. In addition, we own investments in Canada, and as a result are subject to risk from the effects of exchange rate movements in the Canadian dollar, which may affect future costs and cash flows.
In addition, we own investments in Canada, and as a result are subject to risk from the effects of exchange rate movements in the Canadian dollar, which may affect future costs and cash flows.
We compute AFFO, by adjusting Core FFO for certain non-cash revenues and expenses, including straight-line rents, amortization of lease intangibles, amortization of debt issuance costs, amortization of net mortgage premiums, loss (gain) on interest rate swaps and other non-cash interest expense, realized gains or losses on foreign currency transactions, stock-based compensation, severance, extraordinary items, and other specified non-cash items.
We compute Adjusted Funds From Operations (“AFFO”), by adjusting Core FFO for certain non-cash revenues and expenses, including straight-line rents, amortization of lease intangibles, adjustment to provision for credit losses, amortization of debt issuance costs, amortization of net mortgage premiums, (gain) loss on interest rate swaps and other non-cash interest expense, deferred taxes, stock-based compensation, and other specified non-cash items.
The increase in net cash used in investing activities during the years ended December 31, 2022 and 2021 was mainly due to increased acquisition volume. The increase in 2021 as compared to 2020 was also driven by a decrease in cash paid in connection with the Internalization.
The increase in net cash provided by investing activities during the years ended December 31, 2023 and 2022 was mainly due to increased disposition volume. The increase in net cash used in investing activities in 2022 as compared to 2021 was driven by an increase in investing activities.
As we continue to invest in accretive real estate properties, we expect to balance our debt and equity capitalization, while maintaining a Net Debt to Annualized Adjusted EBITDAre ratio below 6.0x on a sustained basis, through the anticipated use of follow-on equity offerings and the ATM Program.
As we continue to invest in accretive real estate properties, we expect to balance our debt and equity capitalization, while maintaining a Leverage Ratio below 6.0x on a sustained basis.
The ATM Program provides for forward sale agreements, enabling us to set the price of shares upon pricing the offering while delaying the issuance of shares and the receipt of the net proceeds. As of December 31, 2022, we have $145.4 million of available capacity under our ATM Program.
The ATM Program provides for forward sale agreements, enabling us to set the price of shares upon pricing the offering while delaying the issuance of shares and the receipt of the net proceeds.
Consistent with GAAP lease revenues, the short-term deferrals associated with COVID-19, and the corresponding payments, did not impact our AFFO. 56 FFO, Core FFO, and AFFO may not be comparable to similarly titled measures employed by other REITs, and comparisons of our FFO, Core FFO, and AFFO with the same or similar measures disclosed by other REITs may not be meaningful.
FFO, Core FFO, and AFFO may not be comparable to similarly titled measures employed by other REITs, and comparisons of our FFO, Core FFO, and AFFO with the same or similar measures disclosed by other REITs may not be meaningful.
Our current investment grade credit ratings are ‘BBB’ from S&P Global Ratings (“S&P”) and ‘Baa2’ from Moody’s Investors Service (“Moody’s”), which allow us to take advantage of the lower cost of debt.
Any changes to our debt structure or debt financing associated with property investments, could materially influence our operating results depending on the terms of any such debt. Our current investment grade credit ratings are ‘BBB’ from S&P Global Ratings (“S&P”) and ‘Baa2’ from Moody’s Investors Service (“Moody’s”), which allow us to take advantage of the lower cost of debt.
The intended net impact of these transactions is that we pay a fixed interest rate on our variable-rate borrowings. The interest rate swaps have been designated by us as cash flow hedges for accounting purposes and are reported at fair value. We assess, both at inception and on an ongoing basis, the effectiveness of our qualifying cash flow hedges.
The interest rate swaps have been designated by us as cash flow hedges for accounting purposes and are reported at fair value. We assess, both at inception and on an ongoing basis, the effectiveness of our qualifying cash flow hedges. We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes.
Inputs used in establishing fair value for real estate assets generally fall within Level 3 of the fair value hierarchy, which are characterized as requiring significant judgment as little or no current market activity may be available for validation.
If the operating conditions mentioned above deteriorate or if our expected holding period for assets changes, subsequent tests for impairments could result in additional impairment charges in the future. 54 Inputs used in establishing fair value for real estate assets generally fall within Level 3 of the fair value hierarchy, which are characterized as requiring significant judgment as little or no current market activity may be available for validation.
As a result, the Company has determined that its interest rate swap valuations in their entirety are appropriately classified within Level 2 of the fair value hierarchy. 61 When an existing cash flow hedge is terminated, we determine the accounting treatment for the accumulated gain or loss recognized in Accumulated other comprehensive income (loss), based on the probability of the hedged forecasted transaction occurring within the period the cash flow hedge was anticipated to affect earnings.
When an existing cash flow hedge is terminated, we determine the accounting treatment for the accumulated gain or loss recognized in Accumulated other comprehensive income (loss), based on the probability of the hedged forecasted transaction occurring within the period the cash flow hedge was anticipated to affect earnings.
Accordingly, fluctuations in market interest rates may increase or decrease our interest expense, which will in turn, increase or decrease our net income and cash flow. We attempt to manage our interest rate risk by entering into interest rate swaps. As of December 31, 2022, we had 32 interest rate swaps outstanding in an aggregate notional amount of $973.8 million.
Accordingly, fluctuations in market interest rates may increase or decrease our interest expense, which will in turn, increase or decrease our net income and cash flow. We attempt to manage the interest rate risk on variable rate borrowings by entering into interest rate swaps.
For each of the previous three years, we paid dividends out of our cash flows from operations in excess of the distribution amounts required to maintain our REIT qualification.
For each of the previous three years, we paid dividends out of our cash flows from operations in excess of the distribution amounts required to maintain our REIT qualification. 49 Contractual Obligations The following table provides information with respect to our contractual commitments and obligations as of December 31, 2023 (in thousands).
The following table presents information about our ATM Program activity: For the Year Ended December 31, (in thousands, except per share amounts) 2022 2021 Number of common shares issued 10,471 1,072 Weighted average sale price per share $ 21.66 $ 26.26 Net proceeds $ 222,895 $ 27,300 Gross proceeds 226,483 28,100 In August 2022, we completed a public offering to sell an aggregate of 13,000,000 shares of common stock at a price of $21.35 per share, subject to certain adjustments, in connection with a forward sale agreement.
The following table presents information about our ATM Program activity: For the Year Ended December 31, (in thousands, except per share amounts) 2023 2022 2021 Number of common shares issued — 10,471 1,072 Weighted average sale price per share $ — $ 21.66 $ 26.26 Net proceeds $ — $ 222,895 $ 27,300 Gross proceeds $ — $ 226,483 $ 28,100 Our public offerings have been used to repay debt, fund acquisitions, and for other general corporate purposes.
Impairments We review long-lived assets to be held and used for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable.
In particular, the bankruptcy of one or more of our tenants could adversely affect our ability to collect rents from such tenants and maintain our portfolio’s occupancy. Impairments We review long-lived assets to be held and used for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable.
Long-term Liquidity Requirements Our long-term liquidity requirements consist primarily of funds necessary to repay debt and invest in additional revenue generating properties. We expect to source debt capital from unsecured term loans from commercial banks, revolving credit facilities, private placement senior unsecured notes, and public bond offerings.
We expect to source debt capital from unsecured term loans from commercial banks, revolving credit facilities, private placement senior unsecured notes, and public bond offerings.
(in thousands, except interest rates) Outstanding Balance Interest Rate Maturity Date Unsecured revolving credit facility $ 197,322 Applicable reference rate + 0.85% Mar. 2026 Unsecured term loans: 2026 Unsecured Term Loan 400,000 one-month LIBOR + 1.00% Feb. 2026 2027 Unsecured Term Loan 200,000 one-month adjusted SOFR + 0.95% Aug. 2027 2029 Unsecured Term Loan 300,000 one-month adjusted SOFR + 1.25% Aug. 2029 Total unsecured term loans 900,000 Senior unsecured notes: 2027 Senior Unsecured Notes - Series A 150,000 4.84% Apr. 2027 2028 Senior Unsecured Notes - Series B 225,000 5.09% Jul. 2028 2030 Senior Unsecured Notes - Series C 100,000 5.19% Jul. 2030 2031 Senior Unsecured Public Notes 375,000 2.60% Sep. 2031 Total senior unsecured notes 850,000 Total unsecured debt $ 1,947,322 Revolving Credit Facility On January 28, 2022, we amended and restated the Revolving Credit Facility, upsizing the capacity to $1 billion and extending its maturity date to March 2026.
(in thousands, except interest rates) Outstanding Balance Interest Rate Maturity Date Revolving Credit Facility $ 90,434 Applicable reference rate + 0.85% (a) Mar. 2026 (d) Unsecured term loans: 2026 Unsecured Term Loan 400,000 one-month adjusted SOFR + 1.00% (b)(c) Feb. 2026 2027 Unsecured Term Loan 200,000 one-month adjusted SOFR + 0.95% (c) Aug. 2027 2029 Unsecured Term Loan 300,000 one-month adjusted SOFR + 1.25% (c) Aug. 2029 Total unsecured term loans 900,000 Unamortized debt issuance costs, net (4,053 ) Total unsecured term loans, net 895,947 Senior unsecured notes: 2027 Senior Unsecured Notes - Series A 150,000 4.84% Apr. 2027 2028 Senior Unsecured Notes - Series B 225,000 5.09% Jul. 2028 2030 Senior Unsecured Notes - Series C 100,000 5.19% Jul. 2030 2031 Senior Unsecured Public Notes 375,000 2.60% Sep. 2031 Total senior unsecured notes 850,000 Unamortized debt issuance costs and original issuance discount, net (4,691 ) Total senior unsecured notes, net 845,309 Total unsecured debt $ 1,831,690 (a) At December 31, 2023, the balance includes $100 million CAD borrowings remeasured to $75.4 million USD, and was subject to the one-month Canadian Dollar Offered Rate of 5.46%.
Under these agreements, we receive monthly payments from the counterparties equal to the related variable interest rates multiplied by the outstanding notional amounts. In turn, we pay the counterparties each month an amount equal to a fixed interest rate multiplied by the related outstanding notional amounts.
In turn, we pay the counterparties each month an amount equal to a fixed interest rate multiplied by the related outstanding notional amounts. The intended net impact of these transactions is that we pay a fixed interest rate on our variable-rate borrowings.
We are committed to maintaining an investment grade balance sheet through active management of our leverage profile and overall liquidity position.
Our focus is on maximizing the risk-adjusted return to our stockholders through an appropriate balance of debt and equity in our capital structure. We are committed to maintaining an investment grade balance sheet through active management of our leverage profile and overall liquidity position.
At December 31, 2022, the applicable margin was 0.95% and 1.25% for the 2027 Unsecured Term Loan and 2029 Unsecured Term Loan, respectively. 2027 Senior Unsecured Notes - Series A The 2027 Senior Unsecured Notes - Series A are payable interest only semiannually during their term, bear interest at a fixed rate of 4.84% per annum, and mature in April 2027. 2028 Senior Unsecured Notes - Series B and 2030 Senior Unsecured Notes - Series C The 2028 Senior Unsecured Notes - Series B and 2030 Senior Unsecured Notes - Series C are payable interest only semiannually during their term, and bear interest at fixed rates of 5.09% per annum and 5.19% per annum, respectively.
The applicable facility fee is 0.20% per annum. 2026 Unsecured Term Loan Borrowings under the 2026 Unsecured Term Loan are subject to interest at variable rates based on one-month adjusted SOFR plus a margin based on our credit rating ranging between 0.85% and 1.65% based on our credit rating. 2027 Unsecured Term Loan and 2029 Unsecured Term Loan Borrowings under the 2027 Unsecured Term Loan and 2029 Unsecured Term Loan bear interest at variable rates based on one-month adjusted SOFR plus a margin based on our credit rating ranging between 0.80% and 1.60% per annum for the 2027 Unsecured Term Loan, and 1.15% and 2.20% per annum for the 2029 Unsecured Term Loan. 2027 Senior Unsecured Notes - Series A The 2027 Senior Unsecured Notes - Series A are payable interest only semiannually during their term, bear interest at a fixed rate of 4.84% per annum, and mature in April 2027. 2028 Senior Unsecured Notes - Series B and 2030 Senior Unsecured Notes - Series C The 2028 Senior Unsecured Notes - Series B and 2030 Senior Unsecured Notes - Series C are payable interest only semiannually during their term, and bear interest at fixed rates of 5.09% per annum and 5.19% per annum, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTaking into account the effect of our interest rate swaps, a 1% increase in interest rates would have a corresponding $1.2 million increase in interest expense annually, while a 1% decrease in interest rates would have a corresponding $1.2 million decrease in interest expense annually.
Biggest changeTaking into account the effect of our interest rate swaps, a 1% increase or decrease in interest rates would have a corresponding $0.2 million increase or decrease in interest expense annually. With the exception of our interest rate swap transactions, we have not engaged in transactions in derivative financial instruments or derivative commodity instruments.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk We are exposed to certain market risks, one of the most predominant of which is a change in interest rates. Increases in interest rates can result in increased interest expense under our Revolving Credit Facility and other variable-rate debt.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk Interest Rate Risk We are exposed to certain market risks, one of the most predominant of which is a change in interest rates. Increases in interest rates can result in increased interest expense under our Revolving Credit Facility and other variable-rate debt.
For instance, if interest rates were to increase 1%, and the fixed-rate debt balance were to remain constant, we would expect the fair value of our debt to decrease, similar to how the price of a bond decreases as interest rates rise.
For instance, if interest rates were to increase and the fixed-rate debt balance were to remain constant, we would expect the fair value of our debt to decrease, similar to how the price of a bond decreases as interest rates rise.
The interest rate swaps have been designated by us as cash flow hedges for accounting purposes and are reported at fair value. We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes.
We have designated the interest rate swaps as cash flow hedges for accounting purposes and they are reported at fair value. We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes.
Our fixed-rate debt and outstanding interest rate swaps had carrying values and fair values of approximately $1.9 billion and $1.7 billion, respectively, as of December 31, 2022. Changes in market interest rates impact the fair value of our fixed-rate debt and interest rate swaps, but they have no impact on interest incurred or on cash flows.
Our fixed-rate debt had a carrying value and fair value of approximately $1.9 billion and $1.7 billion, respectively, as of December 31, 2023. Changes in market interest rates impact the fair value of our fixed-rate debt and interest rate swaps, but they have no impact on interest incurred or on cash flows.
Borrowings pursuant to our Revolving Credit Facility and other variable-rate debt bear interest at rates based on applicable reference rate plus an applicable margin, and totaled $1.1 billion as of December 31, 2022, of which $973.8 million was swapped to a fixed rate by our use of interest rate swaps.
Borrowings pursuant to our Revolving Credit Facility and other variable-rate debt bear interest at rates based on the applicable reference rate plus an applicable margin, and totaled $1.0 billion as of December 31, 2023, of which $975.4 million was swapped to a fixed rate by our use of interest rate swaps.
Increases in interest rates can also result in increased interest expense when our fixed rate debt matures and needs to be refinanced. We attempt to manage interest rate risk by entering into long-term fixed rate debt or by entering into interest rate swaps to convert certain variable-rate debt to a fixed rate.
Increases in interest rates can also result in increased interest expense when our fixed rate debt and interest rate swaps mature. We attempt to manage interest rate risk by entering into long-term fixed rate debt, entering into interest rate swaps to convert certain variable-rate debt to a fixed rate, and staggering our debt maturities.
A 1% increase in market interest rates would have resulted in a decrease in the fair value of our fixed-rate debt and interest rate swaps of approximately $75.8 million as of December 31, 2022.
A 1% increase in market interest rates would have resulted in a decrease in the fair value of our fixed-rate debt as of approximately $65.9 million as of December 31, 2023.
Removed
With the exception of our interest rate swap transactions, we have not engaged in transactions in derivative financial instruments or derivative commodity instruments. As of December 31, 2022, our financial instruments were not exposed to significant market risk due to foreign currency exchange risk. 63
Added
Foreign Currency Exchange Rate Risk We own investments in Canada, and as a result are subject to risk from the effects of exchange rate movements in the Canadian dollar, which may affect future costs and cash flows.
Added
We funded a significant portion of our Canadian investments through Canadian dollar borrowings under our Revolving Credit Facility, which is intended to act as a natural hedge against our Canadian dollar investments. The Canadian dollar Revolving Credit Facility borrowings are remeasured each reporting period, with the unrealized foreign currency gains and losses flowing through earnings.
Added
A 10% increase or decrease in the exchange rate between the Canadian dollar and USD would have a corresponding $7.5 million increase or decrease in unrealized foreign currency gain or loss.
Added
These unrealized foreign currency gains and losses do not impact our cash flows from operations until settled, and are expected to directly offset the changes in the value of our net investments as a result of changes in the Canadian dollar.
Added
Our Canadian investments are recorded at their historical exchange rates, and therefore are not impacted by changes in the value of the Canadian dollar. 57

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