Broadstone Net Lease, Inc. (Form: 10-Q, Received: 11/12/2019 08:18:15)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2019, or

☐	Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 000-55774

BROADSTONE NET LEASE, INC.

(Exact name of registrant as specified in its charter)

Maryland	26-1516177
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

800 Clinton Square

Rochester, New York

14604

(Address of principal executive offices)

(Zip Code)

(585) 287-6500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 25,550,886.642 shares of the Registrant’s common stock, $0.001 par value per share, outstanding as of November 12, 2019.

BROADSTONE NET LEASE, INC.

TABLE OF CONTENTS

		Page
Part I - FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)	2
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	5
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
	Cautionary Note Regarding Forward-Looking Statements	30
	Overview	31
	Liquidity and Capital Resources	43
	Impact of Inflation	47
	Off-Balance Sheet Arrangements	47
	Contractual Obligations	47
	Results of Operations	48
	Net Income and Non-GAAP Measures (FFO and AFFO)	50
	Critical Accounting Policies	52
	Impact of Recent Accounting Pronouncements	52
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	54
Part II - OTHER INFORMATION		55
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibits	60

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

Broadstone Net Lease, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except per share amounts)

	September 30, 2019			December 31, 2018
Assets
Accounted for using the operating method, net of accumulated depreciation	$	3,459,626		$	2,641,746
Accounted for using the direct financing method		41,920			42,000
Investment in rental property, net		3,501,546			2,683,746
Cash and cash equivalents		14,008			18,612
Accrued rental income		81,251			69,247
Tenant and other receivables, net		861			1,026
Prepaid expenses and other assets		34,594			4,316
Interest rate swap, assets		1,120			17,633
Intangible lease assets, net		342,478			286,258
Debt issuance costs – unsecured revolver, net		2,679			2,261
Leasing fees, net		13,251			13,698
Total assets	$	3,991,788		$	3,096,797

Liabilities and equity
Unsecured revolver	$	303,300		$	141,100
Mortgages and notes payable, net		112,562			78,952
Unsecured term notes, net		1,671,511			1,225,773
Interest rate swap, liabilities		37,489			1,820
Accounts payable and other liabilities		34,008			24,394
Due to related parties		433			114
Accrued interest payable		9,482			9,777
Intangible lease liabilities, net		94,503			85,947
Total liabilities		2,263,288			1,567,877

Commitments and contingencies (See Note 16)

Equity
Broadstone Net Lease, Inc. stockholders' equity:
Preferred stock, $0.001 par value; 20,000 shares authorized, no shares issued or outstanding		—			—
Common stock, $0.001 par value; 80,000 shares authorized, 25,482 and 22,014 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		25			22
Additional paid-in capital		1,852,038			1,557,421
Cumulative distributions in excess of retained earnings		(194,790	)		(155,150	)
Accumulated other comprehensive (loss) income		(33,911	)		14,806
Total Broadstone Net Lease, Inc. stockholders’ equity		1,623,362			1,417,099
Non-controlling interests		105,138			111,821
Total equity		1,728,500			1,528,920
Total liabilities and equity	$	3,991,788		$	3,096,797

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

Broadstone Net Lease, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)

(in thousands, except per share amounts)

	For the three months ended September 30,						For the nine months ended September 30,
	2019			2018			2019			2018
Revenues
Lease revenues	$	76,401		$	61,764		$	213,884		$	174,385

Operating expenses
Depreciation and amortization		28,392			21,869			77,989			61,303
Asset management fees		5,610			4,663			16,048			13,119
Property management fees		2,098			1,680			5,918			4,792
Property and operating expense		3,855			2,777			11,497			7,926
General and administrative		1,315			1,664			3,807			4,451
State, franchise and foreign tax		405			58			1,153			811
Provision for impairment of investment in rental properties		2,435			2,061			3,452			2,061
Total operating expenses		44,110			34,772			119,864			94,463

Other income (expenses)
Preferred distribution income		—			65			—			440
Interest income		5			16			6			178
Interest expense		(18,465	)		(14,484	)		(51,025	)		(38,115	)
Cost of debt extinguishment		(455	)		(50	)		(1,176	)		(101	)
Gain on sale of real estate		12,585			2,025			16,772			9,620
Gain on sale of investment in related party		—			8,500			—			8,500
Internalization expenses		(923	)		—			(1,195	)		—
Net income		25,038			23,064			57,402			60,444
Net income attributable to non-controlling interests		(1,650	)		(1,797	)		(3,942	)		(4,631	)
Net income attributable to Broadstone Net Lease, Inc.	$	23,388		$	21,267		$	53,460		$	55,813

Weighted average number of common shares outstanding
Basic		24,642			20,554			23,394			19,850
Diluted		26,379			22,291			25,131			21,496
Net earnings per common share
Basic and diluted	$	0.95		$	1.03		$	2.28		$	2.81

Comprehensive income
Net income	$	25,038		$	23,064		$	57,402		$	60,444
Other comprehensive income
Change in fair value of interest rate swaps		(16,380	)		6,299			(52,182	)		30,296
Realized gain on interest rate swaps		(41	)		(4	)		(163	)		(4	)
Comprehensive income		8,617			29,359			5,057			90,736
Comprehensive income attributable to non-controlling interests		(557	)		(2,288	)		(315	)		(6,931	)
Comprehensive income attributable to Broadstone Net Lease, Inc.	$	8,060		$	27,071		$	4,742		$	83,805

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

Broadstone Net Lease, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands, except per share amounts)

	Common Stock		Additional Paid-in Capital			Subscriptions Receivable			Cumulative Distributions in Excess of Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interests			Total
Balance, January 1, 2019	$	22	$	1,557,421		$	—		$	(155,150	)	$	14,806		$	111,821		$	1,528,920
Net income		—		—			—			13,938			—			1,084			15,022
Issuance of 883 shares of common stock		1		75,099			(225	)		—			—			—			74,875
Other offering costs		—		(300	)		—			—			—			—			(300	)
Distributions declared ($0.43 per share January 2019, $0.44 per share February through March 2019)		—		—			—			(29,635	)		—			(2,348	)		(31,983	)
Change in fair value of interest rate swap agreements		—		—			—			—			(11,713	)		(911	)		(12,624	)
Realized gain on interest rate swap agreements		—		—			—			—			(75	)		(6	)		(81	)
Redemption of 21 shares of common stock		—		(1,803	)		—			—			—			—			(1,803	)
Balance, March 31, 2019	$	23	$	1,630,417		$	(225	)	$	(170,847	)	$	3,018		$	109,640		$	1,572,026
Net income		—		—			—			16,134			—			1,208			17,342
Issuance of 892 shares of common stock		1		76,004			225			—			—			—			76,230
Other offering costs		—		(300	)		—			—			—			—			(300	)
Distributions declared ($0.44 per share April through June 2019)		—		—			—			(30,934	)		—			(2,297	)		(33,231	)
Change in fair value of interest rate swap agreements		—		—			—			—			(21,564	)		(1,614	)		(23,178	)
Realized gain on interest rate swap agreements		—		—			—			—			(38	)		(3	)		(41	)
Redemption of 38 shares of common stock		—		(3,210	)		—			—			—			—			(3,210	)
Balance, June 30, 2019	$	24	$	1,702,911		$	—		$	(185,647	)	$	(18,584	)	$	106,934		$	1,605,638
Net income		—		—			—			23,388			—			1,650			25,038
Issuance of 1,840 shares of common stock		1		157,191			—			—			—			—			157,192
Other offering costs		—		(703	)		—			—			—			—			(703	)
Distributions declared ($0.44 per share July through September 2019)		—		—			—			(32,531	)		—			(2,352	)		(34,883	)
Change in fair value of interest rate swap agreements		—		—			—			—			(15,288	)		(1,092	)		(16,380	)
Realized gain on interest rate swap agreements		—		—			—			—			(39	)		(2	)		(41	)
Redemption of 88 shares of common stock		—		(7,361	)		—			—			—			—			(7,361	)
Balance, September 30, 2019	$	25	$	1,852,038		$	—		$	(194,790	)	$	(33,911	)	$	105,138		$	1,728,500

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

Broadstone Net Lease, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity – (continued)

(Unaudited)

(in thousands, except per share amounts)

	Common Stock		Additional Paid-in Capital			Subscriptions Receivable			Cumulative Distributions in Excess of Retained Earnings			Accumulated Other Comprehensive Income			Non- controlling Interests			Total
Balance, January 1, 2018	$	19	$	1,301,979		$	(15	)	$	(120,280	)	$	5,122		$	97,376		$	1,284,201
Net income		—		—			—			17,573			—			1,422			18,995
Issuance of 710 shares of common stock		1		57,154			(129	)		—			—			—			57,026
Other offering costs		—		(224	)		—			—			—			—			(224	)
Distributions declared ($0.415 per share January 2018, $0.43 per share February through March 2018)		—		—			—			(24,476	)		—			(2,472	)		(26,948	)
Change in fair value of interest rate swap agreements		—		—			—			—			15,685			1,270			16,955
Conversion of eight membership units to eight shares of common stock		—		684			—			—			—			(684	)		—
Redemption of 46 shares of common stock		—		(3,577	)		—			—			—			—			(3,577	)
Cancellation of nine shares of common stock		—		(748	)		—			—			—			—			(748	)
Balance, March 31, 2018	$	20	$	1,355,268		$	(144	)	$	(127,183	)	$	20,807		$	96,912		$	1,345,680
Net income		—		—			—			16,974			—			1,412			18,386
Issuance of 695 shares of common stock		—		56,886			(356	)		—			—			—			56,530
Other offering costs		—		(301	)		—			—			—			—			(301	)
Issuance of 194 membership units		—		—			—			—			—			15,797			15,797
Distributions declared ($0.43 per share April through June 2018)		—		—			—			(25,620	)		—			(2,383	)		(28,003	)
Change in fair value of interest rate swap agreements		—		—			—			—			6,503			539			7,042
Redemption of 28 shares of common stock		—		(2,312	)		—			—			—			—			(2,312	)
Balance, June 30, 2018	$	20	$	1,409,541		$	(500	)	$	(135,829	)	$	27,310		$	112,277		$	1,412,819
Net income		—		—			—			21,267			—			1,797			23,064
Issuance of 870 shares of common stock		1		72,770			(1,190	)		—			—			—			71,581
Other offering costs		—		(297	)		—			—			—			—			(297	)
Distributions declared ($0.43 per share July through September 2018)		—		—			—			(26,555	)		—			(1,861	)		(28,416	)
Change in fair value of interest rate swap agreements		—		—			—			—			5,807			492			6,299
Realized gain on interest rate swap agreements		—		—			—			—			(3	)		(1	)		(4	)
Redemption of 32 shares of common stock		—		(2,675	)		—			—			—			—			(2,675	)
Balance, September 30, 2018	$	21	$	1,479,339		$	(1,690	)	$	(141,117	)	$	33,114		$	112,704		$	1,482,371

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

Broadstone Net Lease, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	For the nine months ended September 30,
	2019			2018
Operating activities
Net income	$	57,402		$	60,444
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
Depreciation and amortization including intangibles associated with investment in rental property		75,661			61,515
Provision for impairment on investment in rental properties		3,452			2,061
Amortization of debt issuance costs charged to interest expense		1,655			1,303
Straight-line rent and financing lease adjustments		(15,882	)		(15,640	)
Cost of debt extinguishment		1,176			101
Gain on sale of real estate		(16,772	)		(9,620	)
Settlement of interest rate swap		—			760
Gain on sale of investment in related party		—			(8,500	)
Leasing fees paid		(747	)		(1,325	)
Other non-cash items		277			468
Changes in assets and liabilities:
Tenant and other receivables		165			(65	)
Prepaid expenses and other assets		(393	)		(799	)
Accounts payable and other liabilities		5,234			(893	)
Accrued interest payable		(295	)		3,707
Net cash provided by operating activities		110,933			93,517

Investing activities
Acquisition of rental property accounted for using the operating method, net of mortgages assumed of $49,782 and $20,845 in 2019 and 2018, respectively		(957,820	)		(329,664	)
Acquisition of rental property accounted for using the direct financing method		—			(430	)
Capital expenditures and improvements		(4,044	)		(4,326	)
Proceeds from sale of investment in related party		—			18,500
Proceeds from disposition of rental property, net		90,137			41,330
Change in deposits on investments in rental property		1,500			—
Net cash used in investing activities		(870,227	)		(274,590	)

Financing activities
Proceeds from issuance of common stock, net		260,475			146,791
Redemptions of common stock		(12,374	)		(8,564	)
Borrowings on mortgages, notes payable and unsecured term notes, net of mortgages assumed of $49,782 and $20,845 in 2019 and 2018, respectively		750,000			415,000
Principal payments on mortgages, notes payable and unsecured term notes		(316,191	)		(33,930	)
Borrowings on unsecured revolver		389,100			189,500
Repayments on unsecured revolver		(226,900	)		(462,500	)
Cash distributions paid to stockholders		(45,219	)		(38,410	)
Cash distributions paid to non-controlling interests		(6,980	)		(6,630	)
Debt issuance and extinguishment costs paid		(7,491	)		(2,255	)
Net cash provided by financing activities		784,420			199,002
Net increase in cash and cash equivalents and restricted cash		25,126			17,929
Cash and cash equivalents and restricted cash at beginning of period		18,989			10,099
Cash and cash equivalents and restricted cash at end of period	$	44,115		$	28,028

Reconciliation of cash and cash equivalents and restricted cash
Cash and cash equivalents at beginning of period	$	18,612		$	9,355
Restricted cash at beginning of period		377			744
Cash and cash equivalents and restricted cash at beginning of period	$	18,989		$	10,099

Cash and cash equivalents at end of period	$	14,008		$	17,301
Restricted cash at end of period		30,107			10,727
Cash and cash equivalents and restricted cash at end of period	$	44,115		$	28,028

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

Broadstone Net Lease, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(in thousands)

1. Business Description

Broadstone Net Lease, Inc. (the “Corporation”) is a Maryland corporation formed on October 18, 2007, that elected to be taxed as a real estate investment trust (“REIT”) commencing with the taxable year ended December 31, 2008. The Corporation focuses on investing in income-producing, net leased commercial properties, primarily in the United States. The Corporation leases properties to retail, healthcare, industrial, office, and other commercial businesses under long-term lease agreements. At September 30, 2019, the Corporation owned a diversified portfolio of 662 individual net leased commercial properties located in 42 states throughout the continental United States and in British Columbia, Canada.

Broadstone Net Lease, LLC (the “Operating Company”), is the entity through which the Corporation conducts its business and owns (either directly or through subsidiaries) all of the Corporation’s properties. The Corporation is the sole managing member of the Operating Company. The remaining interests in the Operating Company, which are referred to as non-controlling interests, are held by members who acquired their interest by contributing property to the Operating Company in exchange for membership units of the Operating Company. As the Corporation conducts substantially all of its operations through the Operating Company, it is structured as what is referred to as an umbrella partnership real estate investment trust (“UPREIT”). The following table summarizes the economic ownership interest in the Operating Company:

Percentage of shares owned by	September 30, 2019			December 31, 2018
Corporation		93.6	%		92.7	%
Non-controlling interests		6.4	%		7.3	%
		100.0	%		100.0	%

The Corporation operates under the direction of its board of directors (the “Board of Directors”), which is responsible for the management and control of the Company’s (as defined below) affairs. The Corporation is currently externally managed and its Board of Directors has retained the Corporation’s sponsor, Broadstone Real Estate, LLC (the “Manager”) and Broadstone Asset Management, LLC (the “Asset Manager”) to manage the Corporation’s day-to-day affairs, to implement the Corporation’s investment strategy, and to provide certain property management services for the Corporation’s properties, subject to the Board of Directors’ direction, oversight, and approval. The Asset Manager is a wholly owned subsidiary of the Manager and all of the Corporation’s officers are employees of the Manager. Accordingly, both the Manager and the Asset Manager are related parties of the Company. Refer to Note 3 for further discussion concerning related parties and related party transactions.

2. Summary of Significant Accounting Policies

Interim Information

The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information (Accounting Standards Codification (“ASC”) 270, Interim Reporting) and Article 10 of the Securities and Exchange Commission’s (“SEC”) Regulation S-X. Accordingly, the Corporation has omitted certain footnote disclosures which would substantially duplicate those contained within the audited consolidated financial statements for the year ended December 31, 2018, included in the Company’s 2018 Annual Report on Form 10-K, filed with the SEC on March 14, 2019. Therefore, the readers of this quarterly report should refer to those audited consolidated financial statements, specifically Note 2, Summary of Significant Accounting Policies, for further discussion of significant accounting policies and estimates. The Corporation believes all adjustments necessary for a fair presentation have been included in these interim Condensed Consolidated Financial Statements (which include only normal recurring adjustments).

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts and operations of the Corporation, the Operating Company and its consolidated subsidiaries, all of which are wholly owned by the Operating Company (collectively, the “Company”). All intercompany balances and transactions have been eliminated in consolidation.

To the extent the Corporation has a variable interest in entities that are not evaluated under the variable interest entity (“VIE”) model, the Corporation evaluates its interests using the voting interest entity model. The Corporation has complete responsibility for the day-to-day management, authority to make decisions, and control of the Operating Company. Based on consolidation guidance, the Corporation has concluded that the Operating Company is a VIE as the members in the Operating Company do not possess kick-out rights or substantive participating rights. Accordingly, the Corporation consolidates its interest in the Operating Company. However, as the Corporation holds the majority voting interest in the Operating Company, it qualifies for the exemption from providing certain disclosure requirements associated with investments in VIEs.

The portion of the Operating Company not owned by the Corporation is presented as non-controlling interests as of and during the periods presented.

Basis of Accounting

The Condensed Consolidated Financial Statements have been prepared in accordance with GAAP.

Use of Estimates

The preparation of Condensed Consolidated Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include, but are not limited to, the allocation of purchase price between investment in rental property and intangible assets acquired and liabilities assumed, the value of long-lived assets, the provision for impairment, the depreciable lives of rental property, the amortizable lives of intangible assets and liabilities, the allowance for doubtful accounts, the fair value of assumed debt and notes payable, the fair value of the Company’s interest rate swap agreements, and the determination of any uncertain tax positions. Accordingly, actual results may differ from those estimates.

Long-lived Asset Impairment

The Company reviews 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. If, and when, such events or changes in circumstances are present, an impairment exists to the extent the carrying value of the asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use of the asset or asset group and its eventual disposition. Such cash flows include expected future operating income, as adjusted for trends and prospects, as well as the effects of demand, competition, and other factors. An impairment loss is measured as the amount by which the carrying amount of the asset or asset group exceeds the fair value of the asset or asset group. A significant judgment is made as to if and when impairment should be taken. If the Company’s strategy, or one or more of the assumptions described above were to change in the future, an impairment may need to be recognized.

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. The main indicator used to establish the classification of the inputs is current market conditions, as derived through the use of published commercial real estate market information. The Company determines the valuation of impaired assets using generally accepted valuation techniques including discounted cash flow analysis, income capitalization, analysis of recent comparable sales transactions, actual sales negotiations, and bona fide purchase offers received from third parties. Management may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of its real estate.

During the three and nine months ended September 30, 2019, the Company recorded impairment charges of $2,435 and $3,452, respectively. During the three and nine months ended September 30, 2018, the Company recorded impairment charges of $2,061. Impairment indicators were identified due to concerns over the tenant’s future viability, property vacancies, and changes to the overall investment strategy for the real estate assets. The amount of the impairment charges were based on management’s consideration of the factors detailed above. In determining the fair value of the impaired assets at September 30, 2019 and March 31, 2019, the measurement dates, the Company utilized a capitalization rate of 14.58%, a weighted average discount rate of 8.00%, and a weighted average price per square foot of $226. In determining the fair value of the impaired assets at September 30, 2018, the measurement date, the Company utilized capitalization rates ranging from 7.50% to 10.00%, and a weighted average discount rate of 8.00%.

Revenue Recognition

The Company commences revenue recognition on its leases based on a number of factors, including the initial determination that the contract is or contains a lease. Generally, all of the Company’s 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. At the time of lease assumption or at the inception of a new lease, including new leases that arise from amendments, the Company assesses the terms and conditions of the lease to determine the proper lease classification.

Certain of the Company’s leases require tenants to pay rent based upon a percentage of the property’s net sales (“percentage rent”) or contain rent escalators indexed to future changes in the Consumer Price Index. Lease income associated with such provisions is considered variable lease income and therefore is not included in the initial measurement of the lease receivable, or in the calculation of straight-line rent revenue. Such amounts are recognized as income when the amounts are determinable.

As described in Recently Adopted Accounting Standards elsewhere in Note 2, the Company adopted the provisions of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) and related ASUs subsequently issued (collectively, “ASC 842”) as of January 1, 2019.

Leases Executed on or After Adoption of ASC 842

A lease is classified as an operating lease if none of the following criteria are met: (i) ownership transfers to the lessee at the end of the lease term, (ii) the lessee has a purchase option that is reasonably expected to be exercised, (iii) the lease term is for a major part of the economic life of the leased property, (iv) the present value of the future lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the leased property, and (v) the leased property is of such a specialized nature that it is expected to have no future alternative use to the Company at the end of the lease term. 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 in accordance with ASC 842.

ASC 842 requires the Company to account for the right to use land as a separate lease component, unless the accounting effect of doing so would be insignificant. Determination of significance requires management judgment. In determining whether the accounting effect of separately reporting the land component from other components for its real estate leases is significant, the Company assesses: (i) whether separating the land component impacts the classification of any lease component, (ii) the value of the land component in the context of the overall contract, and (iii) whether the right to use the land is coterminous with the rights to use the other assets.

Leases Executed Prior to Adoption of ASC 842

A lease arrangement was classified as an operating lease if none of the following criteria were met: (i) ownership transferred to the lessee prior to or shortly after the end of the lease term, (ii) the lessee had a bargain purchase option during or at the end of the lease term, (iii) the lease term was greater than or equal to 75% of the underlying property’s estimated useful life, or (iv) the present value of the future minimum lease payments (excluding executory costs) was greater than or equal to 90% of the fair value of the leased property. If one or more of these criteria were met, and the minimum lease payments were determined to be reasonably predictable and collectible, the lease arrangement was generally accounted for as a direct financing lease. Consistent with ASC 840, Leases, if the fair value of the land component was 25% or more of the total fair value of the leased property, the land was considered separately from the building for purposes of applying the lease term and minimum lease payments criterion in (iii) and (iv) above.

Revenue recognition methods for operating leases, direct financing leases, and sales-type leases are described below:

Rental property accounted for under operating leases – Revenue is recognized as rents are earned on a straight-line basis over the non-cancelable terms of the related leases. For leases that have fixed and measurable rent escalations, the difference between such rental income earned and the cash rent due under the provisions of the lease is recorded as Accrued rental income on the Condensed Consolidated Balance Sheets.

Rental property accounted for under direct financing leases – The Company utilizes the direct finance method of accounting to record direct financing lease income. The net investment in the direct financing lease represents receivables for the sum of future lease payments to be received and the estimated residual value of the leased property, less unamortized unearned income (which represents the difference between undiscounted cash flows and discounted cash flows). Unearned income is deferred and amortized into income over the lease terms so as to produce a constant periodic rate of return on the Company’s net investment in the leases.

Rental property accounted for under sales-type leases – For leases accounted for as sales-type leases, the Company records selling profit arising from the lease at inception, along with the net investment in the lease. The Company leases assets through the assumption of existing leases or through sale-leaseback transactions, and records such assets at their fair value at the time of acquisition, which in most cases coincides with lease inception. As a result, the Company does not generally recognize selling profit on sales-type leases. The net investment in the sales-type lease represents receivables for the sum of future lease payments and the estimated unguaranteed residual value of the leased property, each measured at net present value. Interest income is recorded over the lease terms so as to produce a constant periodic rate of return on the Company’s net investment in the leases.

Certain of the Company’s contracts contain nonlease components (e.g., charges for management fees, common area maintenance, and reimbursement of third-party maintenance expenses) in addition to lease components (i.e., monthly rental charges). Services related to nonlease components are provided over the same period of time as, and billed in the same manner as, monthly rental charges. The Company elected to apply the practical expedient available under ASC 842, for all classes of assets, not to separate the lease components from the nonlease components when accounting for operating leases. Since the lease component is the predominant component under each of these leases, combined revenues from both the lease and nonlease components are reported as Lease revenues in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

Rent Received in Advance

Rent received in advance represents tenant payments received prior to the contractual due date, and is included in Accounts payable and other liabilities on the Condensed Consolidated Balance Sheets. Rent received in advance is as follows:

(in thousands)

September 30,

2019

December 31,

2018

Rent received in advance

10,694

7,832

Allowance for Doubtful Accounts

Prior to the adoption of ASC 842, provisions for doubtful accounts were recorded as bad debt expense and included in General and administrative expenses on the accompanying Condensed Consolidated Statements of Income and Comprehensive Income. Subsequent to the adoption of ASC 842, provisions for doubtful accounts are recorded prospectively as an offset to Lease revenues on the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

The balances of financial instruments measured at fair value on a recurring basis are as follows (see Note 10):

	September 30, 2019
(in thousands)	Total			Level 1		Level 2			Level 3
Interest rate swap, assets	$	1,120		$	—	$	1,120		$	—
Interest rate swap, liabilities		(37,489	)		—		(37,489	)		—
	$	(36,369	)	$	—	$	(36,369	)	$	—

	December 31, 2018
(in thousands)	Total			Level 1		Level 2			Level 3
Interest rate swap, assets	$	17,633		$	—	$	17,633		$	—
Interest rate swap, liabilities		(1,820	)		—		(1,820	)		—
	$	15,813		$	—	$	15,813		$	—

The Company has estimated that the carrying amount reported on the Condensed Consolidated Balance Sheets for Cash and cash equivalents, Prepaid expenses and other assets, Tenant and other receivables, net, and Accounts payable and other liabilities, approximates their fair values due to their short-term nature.

The fair value of the Company’s debt was estimated using Level 2 and Level 3 inputs based on recent financing transactions, estimates of the fair value of the property that serves as collateral for such debt, historical risk premiums for loans of comparable quality, current London Interbank Offered Rate (“LIBOR”), U.S. treasury obligation interest rates, and on the discounted estimated future cash payments to be made on such debt. The discount rates estimated reflect the Company’s judgment as to the approximate current lending rates for loans or groups of loans with similar maturities and assumes that the debt is outstanding through maturity. Market information, as available, or present value techniques were utilized to estimate the amounts required to be disclosed. Since such amounts are estimates that are based on limited available market information for similar transactions and do not acknowledge transfer or other repayment restrictions that may exist on specific loans, it is unlikely that the estimated fair value of any such debt could be realized by immediate settlement of the obligation.

The following table summarizes the carrying amount reported on the Condensed Consolidated Balance Sheets and the Company’s estimate of the fair value of the Mortgages and notes payable, net, Unsecured term notes, net, and Unsecured revolver:

(in thousands)

September 30,

2019

December 31,

2018

Carrying amount

2,096,235

1,450,551

Fair value

2,180,100

1,439,264

As disclosed under Long-lived Asset Impairment elsewhere in Note 2, the Company’s non-recurring fair value measurements consisted of the fair value of impaired real estate assets that were determined using Level 3 inputs.

Right-of-Use Assets and Lease Liabilities

In accordance with ASC 842, the Company records right-of-use assets and lease liabilities associated with leases of land where it is the lessee under non-cancelable operating leases (“ground leases”). The lease liability is equal to the net present value of the future payments to be made under the lease, discounted using estimates based on observable market factors. The right-of-use asset is generally equal to the lease liability plus initial direct costs associated with the leases. The Company includes in the recognition of the right-of-use asset and lease liability those renewal periods that are reasonably certain to be exercised, based on the facts and circumstances that exist at lease inception. Amounts associated with percentage rent provisions are considered variable lease costs and are not included in the initial measurement of the right-of-use asset or lease liability. As allowed under ASC 842, the Company has made an accounting policy election, applicable to all asset types, to not separate lease from nonlease components when allocating contract consideration related to ground leases.

Right-of-use assets and lease liabilities associated with ground leases were included in the accompanying Condensed Consolidated Balance Sheets as follows:

		September 30,
(in thousands)	Financial Statement Presentation	2019
Right-of-use assets	Prepaid expenses and other assets	$	1,654
Lease liabilities	Accounts payable and other liabilities		1,246

Taxes Collected From Tenants and Remitted to Governmental Authorities

A majority of the Company’s properties are leased on a triple-net basis, which provides that the tenants are responsible for the payment of all property operating expenses, including, but not limited to, property taxes, maintenance, insurance, repairs, and capital costs, during the lease term. The Company records such expenses on a net basis. In other situations, the Company may collect property taxes from its tenants and remit those taxes to governmental authorities. Taxes collected from tenants and remitted to governmental authorities are presented on a gross basis, where amounts billed to tenants are included in Lease revenues, and the corresponding expense is included in Property and operating expense, in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

Rental Expense

Rental expense associated with ground leases is recorded on a straight-line basis over the term of each lease, for leases that have fixed and measurable rent escalations. Under the provisions of ASC 842, the difference between rental expense incurred on a straight-line basis and the cash rental payments due under the provisions of the lease is recorded as part of the right-of-use asset in the accompanying September 30, 2019 Condensed Consolidated Balance Sheet. Prior to the adoption of ASC 842, at December 31, 2018, this difference was recorded as a deferred liability and was included as a component of Accounts payable and other liabilities in the accompanying Condensed Consolidated Balance Sheets. Amounts associated with percentage rent provisions based on the achievement of sales targets are recognized as variable rental expense when achievement of the sales targets is considered probable. Rental expense is included in Property and operating expenses on the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

Recently Adopted Accounting Standards

In February 2016, the FASB issued ASU 2016-02, Leases (Topic ASC 842), which superseded the existing guidance for lease accounting, ASC 840. ASC 842 is effective January 1, 2019, with early adoption permitted. The guidance requires lessees to recognize a right-of-use asset and a corresponding lease liability, initially measured at the present value of lease payments, for both operating and financing leases. Under the new pronouncement, lessor accounting is largely unchanged from prior GAAP, however disclosures were expanded. The Company adopted ASC 842 on January 1, 2019 on a modified retrospective basis and elected the following practical expedients:

•

The “Package of Three,” which allows an entity to not reassess (i) whether any expired or existing contracts are, or contain, leases, (ii) the lease classification for any expired or existing leases, and (iii) initial direct costs for existing leases.

•

The optional transition method to initially apply the guidance of ASC 842 at the adoption date and to recognize a cumulative-effect adjustment to the opening balance of retained earnings. As a result of electing this practical expedient, the Company’s reporting for the comparative periods presented will continue to be in accordance with ASC 840, including the required disclosures.

•

The ability to make an accounting policy election, by class of underlying asset, to not separate nonlease components from the associated lease component and to account for those components as a single component if certain conditions are met.

ASC 842 requires all income from leases to be presented as a single line item, rather than the prior presentation where rental income from leases was shown separately from amounts billed and collected as reimbursements from tenants on the Condensed Consolidated Statements of Income and Comprehensive Income. In addition, bad debt expense is required to be recorded as an adjustment to Lease revenues, rather than recorded within Operating expenses on the Condensed Consolidated Statements of Income and Comprehensive Income, as had previously been the case.

The Company is primarily a lessor and therefore adoption of ASC 842 did not have a material impact on its Condensed Consolidated Financial Statements. Upon adoption of ASC 842, it was not necessary for the Company to record a cumulative-effect adjustment to the opening balance of retained earnings, however the Company recognized a right-of-use asset and corresponding lease liability as of January 1, 2019, of $1,687 and $1,261, respectively, related to operating leases where it is the lessee (see Note 16). The right-of-use asset was recorded net of a previously recorded straight-line rent liability of $7 and ground lease intangible asset, net of $432 as of the date of adoption.

In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. Previously under Topic 815, the eligible benchmark interest rates in the United States were the interest rates on direct Treasury obligations of the U.S. government (UST), the LIBOR swap rate, the OIS Rate based on the Fed Funds Effective Rate, and the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate, which was introduced in ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). The amendments in ASU 2018-16 permit the use of the OIS rate based on SOFR as a benchmark interest rate for hedge accounting purposes under Topic 815. The amendments in this update were effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years for public business entities that already adopted the amendments in ASU 2017-12 (which the Company adopted effective January 1, 2018). The Company adopted ASU 2018-16 as of January 1, 2019 on a prospective basis for qualifying new or redesignated hedging relationships entered into on or after the date of adoption. Adoption of this guidance had no impact on the Condensed Consolidated Financial Statements.

Other Recently Issued Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses which changes how entities measure credit losses for most financial assets. Financial assets that are measured at amortized cost will be required to be presented at the net amount expected to be collected with an allowance for credit losses deducted from the amortized cost basis. The guidance requires an entity to utilize broader information in estimating the expected credit loss, including forecasted information. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses which clarified that operating lease receivables recorded by lessors are explicitly excluded from the scope of this guidance. In May 2019, the FASB issued ASU 2019-05, Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief, which provides entities with an option to irrevocably elect the fair value option for eligible instruments upon adoption of Topic 326. ASU 2016-13 is effective January 1, 2020, with early adoption permitted beginning on January 1, 2019, under a modified retrospective application. The Company continues to evaluate the impact this new standard will have on its Condensed Consolidated Financial Statements, including the transition relief provisions, but does not expect such impact will be material based upon the composition of its current lease portfolio.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The amendments under ASU 2018-13 remove, add, and modify certain disclosure requirements on fair value measurements in ASC 820. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact the new standard will have on its Condensed Consolidated Financial Statements and expects to adopt the new disclosures on a prospective basis on January 1, 2020.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments which clarifies and improves guidance within the recently issued standards on credit losses, hedging, and recognition and measurement of financial instruments. The Company will assess the impact of the changes to Topic 326 in connection with its adoption of ASU 2018-13 discussed above. The provisions of ASU 2019-04 relating

to Topics 815 and 825 are effective on January 1, 2020. The Company is currently evaluating the impact of adopting ASU 2019-04, but does not anticipate that it will have a material impact on its financial statements.

Reclassifications

Certain prior-period amounts have been reclassified to conform with the current period’s presentation, including certain items described below which resulted from the adoption of ASC 842.

Components of revenue that were previously reported as Rental income from operating leases, Earned income from direct financing leases, Operating expenses reimbursed from tenants, and Other income from real estate transactions, on the Condensed Consolidated Statements of Income and Comprehensive Income, have been combined and reported as Lease revenues on the Condensed Consolidated Statements of Income and Comprehensive Income as follows:

As originally reported	For the three months ended		For the nine months ended
(in thousands)	September 30, 2018		September 30, 2018
Revenues
Rental income from operating leases	$	58,189	$	163,611
Earned income from direct financing leases		1,017		2,936
Operating expenses reimbursed from tenants		2,529		7,764
Other income from real estate transactions		29		74
Total revenues	$	61,764	$	174,385

As revised	For the three months ended		For the nine months ended
(in thousands)	September 30, 2018		September 30, 2018
Revenues
Lease revenues	$	61,764	$	174,385

In addition, as discussed above, in connection with recording the transition adjustment for the right-of-use asset related to operating leases where the Company is the lessee, amounts reported as ground lease intangible assets, net and ground lease straight-line rent liabilities on the Condensed Consolidated Balance Sheet at December 31, 2018, were reclassified as of January 1, 2019, and are now included as components of the right-of-use asset.

The Company reclassified Restricted cash of $377 and Tenant and capital reserves of $1,136 to Prepaid expenses and other assets on the Condensed Consolidated Balance Sheets at December 31, 2018, to conform with the current period presentation. Additionally, Tenant improvement allowances of $2,125 were reclassified to Accounts payable and other liabilities on the Condensed Consolidated Balance Sheets at December 31, 2018, to conform with the current presentation. The reclassifications are changes from one acceptable presentation to another acceptable presentation.

3. Related-Party Transactions

Property Management Agreement

The Corporation and the Operating Company are a party to a property management agreement (as amended, the “Property Management Agreement”) with the Manager, a related party in which certain directors of the Corporation have either a direct or indirect ownership interest. Under the terms of the Property Management Agreement, the Manager manages and coordinates certain aspects of the leasing of the Corporation’s rental property.

In exchange for services provided under the Property Management Agreement, the Manager receives certain fees and other compensation as follows:

(i)

3% of gross rentals collected each month from the rental property for property management services (other than one property, which calls for 5% of gross rentals under the Property Management Agreement); and

(ii)

Re-leasing fees for existing rental property equal to one month’s rent for a new lease with an existing tenant and two months’ rent for a new lease with a new tenant.

The Property Management Agreement automatically renewed on January 1, 2019 for three years ending December 31, 2021, subject to earlier termination pursuant to the terms of the Property Management Agreement. The Property Management Agreement provides for termination: (i) immediately by the Corporation’s Independent Directors Committee (“IDC”) for Cause, as defined in the Property Management Agreement, (ii) by the IDC, upon 30 days’ written notice to the Manager, in connection with a change in control of the Manager, as defined in the Property Management Agreement, (iii) by the IDC, by providing the Manager with written notice of termination not less than one year prior to the last calendar day of any renewal term, (iv) by the Manager upon written notice to the Company not less than one year prior to the last calendar day of any renewal period, (v) automatically in the event of a Termination Event, as defined in the Property Management Agreement, and (vi) by the IDC upon a Key Person Event, as defined in the Property Management Agreement.

If the Corporation terminates the agreement prior to any renewal term or in any manner described above, other than termination by the Corporation for Cause, the Corporation will be subject to a termination fee equal to three times the Management Fees, as defined in the Property Management Agreement, to which the Manager was entitled during the 12-month period immediately preceding the date of such termination. Although not terminable at September 30, 2019, if the Property Management Agreement had been terminated at September 30, 2019, subject to the conditions noted above, the termination fee would have been $22,965.

Asset Management Agreement

The Corporation and the Operating Company are party to an asset management agreement (as amended, the “Asset Management Agreement”) with the Asset Manager, a single member limited liability company with the Manager as the single member, and therefore a related party in which certain directors of the Corporation have an indirect ownership interest. Under the terms of the Asset Management Agreement, the Asset Manager is responsible for, among other things, the Corporation’s acquisition, initial leasing, and disposition strategies, financing activities, and providing support to the Corporation’s IDC for its valuation functions and other duties. The Asset Manager also nominates two individuals to serve on the Board of Directors of the Corporation.

Under the terms of the Asset Management Agreement, the Asset Manager is compensated as follows:

(i)

a quarterly asset management fee equal to 0.25% of the aggregate value of common stock, based on the per share value as determined by the IDC each quarter, on a fully diluted basis as if all interests in the Operating Company had been converted into shares of the Corporation’s common stock;

(ii)

0.5% of the proceeds from future equity closings as reimbursement for offering, marketing, and brokerage expenses;

(iii)

1% of the gross purchase price paid for each rental property acquired (other than acquisitions described in (iv) below), including any property contributed in exchange for membership interests in the Operating Company;

(iv)

2% of the gross purchase price paid for each rental property acquired in the event that the acquisition of a rental property requires a new lease (as opposed to the assumption of an existing lease), such as a sale-leaseback transaction;

(v)

1% of the gross sale price received for each rental property disposition; and

(vi)

1% of the Aggregate Consideration, as defined in the Asset Management Agreement, received in connection with a Disposition Event. The Asset Management Agreement defines a Disposition Event in the same manner as a Termination Event is defined in the Property Management Agreement discussed above.

The Asset Management Agreement automatically renewed on January 1, 2019 for three years ending December 31, 2021, subject to earlier termination pursuant to the terms of the Asset Management Agreement. The Asset Management Agreement provides for termination: (i) immediately by the IDC for Cause, as defined in the Asset Management Agreement, (ii) by the IDC, upon 30 days’ written notice to the Asset Manager, in connection with a change in control of the Asset Manager, as defined in the Asset Management Agreement, (iii) by the IDC, by providing the Asset Manager with written notice of termination not less than one year prior to the last calendar day of any renewal term, (iv) by the Asset Manager upon written notice to the Company not less than one year prior to the last calendar day of any renewal period, (v) automatically in the event of a Disposition Event, as defined in the Asset Management Agreement, and (vi) by the IDC upon a Key Person Event, as defined in the Asset Management Agreement.

If the Corporation terminates the agreement prior to any renewal term or in any manner described above, other than termination by the Corporation for Cause, the Corporation will be required to pay to the Asset Manager a termination fee equal to three times the Asset Management Fee to which the Asset Manager was entitled during the 12-month period immediately preceding the date of such termination. Although not terminable at September 30, 2019, if the Asset Management Agreement had been terminated at September 30, 2019, subject to the conditions noted above, the termination fee would have been $63,306.

Total fees incurred under the Property Management Agreement and Asset Management Agreement are as follows:

(in thousands)		For the three months ended September 30,				For the nine months ended September 30,
Type of Fee	Financial Statement Presentation	2019		2018		2019		2018
Asset management fee	Asset management fees	$	5,610	$	4,663	$	16,048	$	13,119
Property management fee	Property management fees		2,098		1,680		5,918		4,792
Total management fee expense			7,708		6,343		21,966		17,911

Marketing fee (offering costs)	Additional paid-in capital		703		297		1,303		822
Acquisition fee	Capitalized as a component of assets acquired		7,932		1,105		9,937		3,491
Leasing fee	Leasing fees, net		312		148		747		1,325
Disposition fee	Gain on sale of real estate		596		116		947		439
Total management fees		$	17,251	$	8,009	$	34,900	$	23,988

Included in Due to related parties on the Condensed Consolidated Balance Sheets at September 30, 2019 and December 31, 2018, are $433 and $114 of unpaid management fees, respectively. All fees related to the Property Management Agreement and the Asset Management Agreement are paid for in cash within the Company’s normal payment cycle for vendors.

4. Acquisitions

The Company closed on the following acquisitions during the nine months ended September 30, 2019:

(in thousands, except number of properties)		Number of		Real Estate
Date	Property Type	Properties		Acquisition Price
January 31, 2019	Healthcare		1	$	4,747
March 12, 2019	Industrial		1		10,217
March 15, 2019	Retail		10		13,185
March 19, 2019	Retail		14		19,128
March 26, 2019	Industrial		1		25,801
April 30, 2019	Other		1		76,000	^(a)
May 21, 2019	Retail		2		6,500
May 31, 2019	Retail		1		3,192
June 7, 2019	Other		1		30,589
June 26, 2019	Industrial		2		11,180
July 15, 2019	Retail		1		3,214
July 15, 2019	Industrial		1		11,330
July 31, 2019	Healthcare		5		27,277
August 27, 2019	Industrial		1		4,404
August 29, 2019	Industrial/Office/Other		23		735,740
September 17, 2019	Industrial		1		11,185
			66	$	993,689	^(b)

^(a)	In conjunction with this acquisition, the Company assumed a mortgage with a principal balance of $49,782 with an interest rate of 4.92% and a maturity date of February 2028 (see Note 9).

^(b)	Acquisition price does not include capitalized acquisition costs of $16,647.

The Company closed on the following acquisitions during the nine months ended September 30, 2018:

(in thousands, except number of properties)		Number of		Real Estate
Date	Property Type	Properties		Acquisition Price
March 27, 2018	Industrial		1	$	22,000
March 30, 2018	Industrial/Retail		26		78,530
April 30, 2018	Other		1		16,170
June 6, 2018	Industrial		1		8,500
June 14, 2018	Industrial		1		39,700
June 14, 2018	Retail		6		14,479
June 21, 2018	Retail		1		20,231
June 21, 2018	Industrial		1		38,340	^(c)
June 29, 2018	Industrial		1		10,400
June 29, 2018	Retail		2		6,433
July 12, 2018	Industrial		1		11,212
July 17, 2018	Retail		5		14,845
July 17, 2018	Office		1		34,670
August 6, 2018	Industrial		2		4,802
August 10, 2018	Retail		20		44,977
			70	$	365,289	^(d)

^(c)	In conjunction with this acquisition, the Company assumed a mortgage with a principal balance of $20,845 with an interest rate of 4.36% and a maturity date of August 2025 (see Note 9).

^(d)	Acquisition price does not include capitalized acquisition costs of $8,019.

The Company allocated the purchase price of these properties to the fair value of the assets acquired and liabilities assumed. The following table summarizes the purchase price allocation for completed acquisitions:

	For the nine months ended September 30,
(in thousands)	2019			2018
Land	$	155,434		$	47,930
Land improvements		44,929			20,815
Buildings and other improvements		745,116			271,696
Equipment		—			2,891
Acquired in-place leases^(e)		77,868			36,342
Acquired above-market leases^(f)		2,800			3,347
Acquired below-market leases^(g)		(15,811	)		(10,143	)
Direct financing investments		—			430
Mortgages payable		(49,782	)		(20,845	)
	$	960,554		$	352,463

^(e)	The weighted average amortization period for acquired in-place leases is 13 years and 14 years for acquisitions completed during the nine months ended September 30, 2019 and 2018, respectively.

^(f)	The weighted average amortization period for acquired above-market leases is 18 years and 15 years for acquisitions completed during the nine months ended September 30, 2019 and 2018, respectively.

^(g)	The weighted average amortization period for acquired below-market leases is 10 years and 13 years for acquisitions completed during the nine months ended September 30, 2019 and 2018, respectively.

The above acquisitions were funded using a combination of available cash on hand, borrowings under the Company’s unsecured revolving line of credit and unsecured term loan agreements, and proceeds from equity issuances. All acquisitions closed during the nine months ended September 30, 2019 and 2018, qualified as asset acquisitions and, as such, acquisition costs were capitalized.

Subsequent to September 30, 2019, the Company closed on the following acquisitions (see Note 17):

(in thousands, except number of properties)		Number of		Real Estate
Date	Property Type	Properties		Acquisition Price
October 31, 2019	Retail/Healthcare		3	$	12,922
November 7, 2019	Retail		1		3,142
			4	$	16,064

The Company has not completed the allocation of the acquisition date fair values for the properties acquired subsequent to September 30, 2019; however, it expects the acquisitions to qualify as asset acquisitions and that the purchase price of these properties will primarily be allocated to land, land improvements, building and acquired lease intangibles.

5. Sale of Real Estate

The Company closed on the following sales of real estate, none of which qualified as discontinued operations:

	For the three months ended September 30,						For the nine months ended September 30,
(in thousands, except number of properties)	2019			2018			2019			2018
Number of properties disposed		16			4			25			15
Aggregate sale price	$	59,691		$	11,609		$	94,791		$	43,951
Aggregate carrying value		(43,920	)		(9,016	)		(73,365	)		(31,710	)
Additional sales expenses		(3,186	)		(568	)		(4,654	)		(2,621	)
Gain on sale of real estate	$	12,585		$	2,025		$	16,772		$	9,620

6. Investment in Rental Property and Lease Arrangements

The Company generally leases its investment rental property to established tenants in the retail, healthcare, manufacturing, office and other industries. At September 30, 2019, the Company had 642 real estate properties which were leased under leases that have been classified as operating leases and 16 that have been classified as direct financing leases. Of the 16 leases classified as direct financing leases, four include land portions which are accounted for as operating leases (see Revenue Recognition within Note 2). Substantially all leases have initial terms of 10 to 20 years. The Company’s leases generally provide for limited increases in rent as a result of fixed increases, increases in the Consumer Price Index, or increases in the tenant’s sales volume. Generally, tenants are also required to pay all property taxes and assessments, substantially maintain the interior and exterior of the building, and maintain property and liability insurance coverage. The leases also typically provide for one or more multiple year renewal options subject to generally the same terms and conditions as the initial lease. None of the Company’s leases contain purchase options.

The Company’s leases do not include residual value guarantees. To protect the residual value of its assets under lease, the Company requires tenants to maintain certain levels of property insurance, and in some cases will purchase supplemental policies directly. Management physically inspects each property on a regular basis, to ensure the tenant is maintaining the property so that it will be in a condition at the end of the lease term that is suitable for the Company to lease to a new tenant without the need for significant additional investment. For assets other than land, at lease inception the Company estimates the residual value taking into consideration the original fair value of the asset, less anticipated depreciation over the lease term. In general, at lease inception the Company assumes the value ascribed to land will be fully recoverable at the end of the lease term.

Investment in Rental Property – Accounted for Using the Operating Method

Rental property subject to non-cancelable operating leases with tenants are as follows:

(in thousands)	September 30, 2019			December 31, 2018
Land	$	551,903		$	411,043
Land improvements		279,629			239,701
Buildings and improvements		2,871,761			2,186,499
Equipment		11,492			11,492
		3,714,785			2,848,735
Less accumulated depreciation		(255,159	)		(206,989	)
	$	3,459,626		$	2,641,746

Depreciation expense on investment in rental property was as follows:

For the three months ended

September 30,

For the nine months ended

September 30,

(in thousands)

2019

2018

2019

2018

Depreciation

21,843

17,196

60,128

48,345

Estimated lease payments to be received under non-cancelable operating leases with tenants at September 30, 2019 are as follows:

(in thousands)
Remainder of 2019	$	72,718
2020		294,220
2021		298,899
2022		301,996
2023		304,828
Thereafter		2,562,223
	$	3,834,884

Since lease renewal periods are exercisable at the option of the tenant, the above amounts only include future lease payments due during the initial lease terms. In addition, such amounts exclude any potential variable rent increases that are based on changes in the Consumer Price Index or future variable rents which may be received under the leases based on a percentage of the tenant’s gross sales.

Investment in Rental Property – Direct Financing Leases

The Company’s net investment in direct financing leases is comprised of the following:

(in thousands)	September 30, 2019			December 31, 2018
Undiscounted estimated lease payments to be received	$	73,775		$	76,829
Estimated unguaranteed residual values		20,358			20,358
Unearned income		(52,213	)		(55,187	)
Net investment in direct financing leases	$	41,920		$	42,000

Undiscounted estimated lease payments to be received under non-cancelable direct financing leases with tenants at September 30, 2019 are as follows:

(in thousands)
Remainder of 2019	$	1,022
2020		4,194
2021		4,283
2022		4,369
2023		4,456
Thereafter		55,451
	$	73,775

The above rental receipts do not include future lease payments for renewal periods, potential variable Consumer Price Index rent increases, or variable percentage rent payments that may become due in future periods.

The following table summarizes amounts reported as Lease revenues on the Condensed Consolidated Statements of Income and Comprehensive Income:

	For the three months ended		For the nine months ended
(in thousands)	September 30, 2019		September 30, 2019
Contractual rental amounts billed for operating leases	$	65,579	$	184,292
Adjustment to recognize contractual operating lease billings on a straight-line basis		5,575		16,015
Adjustment to revenue recognized for uncollectible rental amounts billed		—		(440	)
Total operating lease rental revenues		71,154		199,867
Earned income from direct financing leases		1,005		3,014
Operating expenses billed to tenants		3,811		10,572
Other income from real estate transactions		431		431
Total lease revenues	$	76,401	$	213,884

7. Intangible Assets and Liabilities

The following is a summary of intangible assets and liabilities and related accumulated amortization:

(in thousands)	September 30, 2019			December 31, 2018
Lease intangibles:
Acquired above-market leases	$	64,931		$	64,164
Less accumulated amortization		(17,275	)		(14,740	)
Acquired above-market leases, net		47,656			49,424
Acquired in-place leases		351,720			277,659
Less accumulated amortization		(56,898	)		(40,825	)
Acquired in-place leases, net		294,822			236,834
Total intangible lease assets, net	$	342,478		$	286,258
Acquired below-market leases	$	114,316		$	101,602
Less accumulated amortization		(19,813	)		(15,655	)
Intangible lease liabilities, net	$	94,503		$	85,947
Leasing fees	$	17,316		$	17,274
Less accumulated amortization		(4,065	)		(3,576	)
Leasing fees, net	$	13,251		$	13,698

Amortization for intangible lease assets and liabilities is as follows:

(in thousands)		For the three months ended September 30,				For the nine months ended September 30,
Intangible	Financial Statement Presentation	2019		2018		2019		2018
Acquired in-place leases and leasing fees	Depreciation and amortization	$	6,549	$	4,673	$	17,861	$	12,958
Above-market and below-market leases	Increase (decrease) to lease revenues		875		255		2,335		(212	)

Estimated future amortization of intangible assets and liabilities at September 30, 2019 is as follows:

(in thousands)
Remainder of 2019	$	6,113
2020		24,267
2021		23,856
2022		23,241
2023		22,862
Thereafter		160,887
	$	261,226

8. Unsecured Credit Agreements

The following table summarizes the Company’s unsecured credit agreements:

	Outstanding Balance
(in thousands, except interest rates)	September 30, 2019			December 31, 2018			Interest Rate^(d)	Maturity Date
2019 Unsecured Term Loan^(a)	$	—		$	300,000		one-month LIBOR + 1.40%	Feb. 2020^(g)
2020 Unsecured Term Loan^(a)		300,000			—		one-month LIBOR + 1.25%	Aug. 2020^(h)
Unsecured Revolving Credit and Term Loan Agreement^(a)
Revolver^(b)		303,300			141,100		one-month LIBOR + 1.20%^(e)	Jan. 2022
2023 Unsecured Term Loan		265,000			265,000		one-month LIBOR + 1.35%	Jan. 2023
2024 Unsecured Term Loan		190,000			190,000		one-month LIBOR + 1.25%^(f)	Jun. 2024
		758,300			596,100
2026 Unsecured Term Loan^(a)		450,000			—		one-month LIBOR + 1.85%	Feb. 2026
Senior Notes^(a)
Series A		150,000			150,000		4.84%	Apr. 2027
Series B		225,000			225,000		5.09%	Jul. 2028
Series C		100,000			100,000		5.19%	Jul. 2030
		475,000			475,000
Total		1,983,300			1,371,100
Debt issuance costs, net^(c)		(8,489	)		(4,227	)
	$	1,974,811		$	1,366,873

^(a)	The Company believes it was in compliance with all financial covenants for all periods presented.

^(b)	At December 31, 2018, the Company had an outstanding balance of $15,000 on the swingline loan feature of the Revolver, due within five business days. On January 2, 2019, the balance became a part of the Revolver and matures in January 2022.

⁽^c)	Amounts presented include debt issuance costs, net, related to the unsecured term notes and senior notes only.

^(d)	At September 30, 2019 and December 31, 2018, one-month LIBOR was 2.09% and 2.35%, respectively.

^(e)	At December 31, 2018, the swingline loan balance of $15,000 bore interest at 5.45% and the remaining Revolver balance of $126,100 bore interest at one-month LIBOR plus 1.20%.

^(f)	On July 1, 2019, the Company amended the 2024 Unsecured Term Loan agreement to reduce the variable rate margin from a range of 1.50% to 2.45% to a range of 0.85% to 1.65%. Prior to the amendment, at December 31, 2018, the applicable margin on the 2024 Unsecured Term Loan was 1.90%.

^(g)	In January 2019 the Company exercised the first of two extension options, extending the maturity date of the loan from February 2019 to February 2020. The loan was subsequently repaid in full on February 27, 2019 in connection with entering into the 2026 Unsecured Term Loan.

^(h)	The 2020 Unsecured Term Loan allows two six-month extensions, at the Company’s option, subject to payment of a fee equal to 0.05% of the outstanding principal balance at the time of extension.

On February 27, 2019, the Company entered into a $450,000 seven-year unsecured term loan agreement (the “2026 Unsecured Term Loan”) with Capital One, National Association as administrative agent. The 2026 Unsecured Term Loan provides an accordion feature for up to a total of $550,000 borrowing capacity. The 2026 Unsecured Term Loan has an initial maturity date of February 27, 2026. Borrowings under the 2026 Unsecured Term Loan are subject to interest only payments at variable rates equal to LIBOR plus a margin between 1.45% and 2.40% per annum based on the Operating Company’s credit rating. Based on the Operating Company’s current credit rating of Baa3, the applicable margin under the 2026 Unsecured Term Loan is 1.85%. The 2026 Unsecured Term Loan is subject to a fee of 0.25% per annum on the amount of the commitment, reduced by the amount of term loans outstanding. At closing, $300,000 of the commitment was funded and used to repay the 2019 Unsecured Term Loan in full. The remaining $150,000 commitment was drawn on August 27, 2019 and used to fund acquisitions.

On February 28, 2019, the Company amended the Unsecured Revolving Credit and Term Loan Agreement to increase the amount available under the Revolver from $425,000 to $600,000. This increased the total available borrowings under the Unsecured Revolving Credit and Term Loan Agreement to $1,055,000. All other terms and conditions of the Unsecured Revolving Credit and Term Loan Agreement remain the same as those in effect prior to this amendment.

On July 1, 2019, the Company amended the Unsecured Revolving Credit and Term Loan Agreement. Prior to the amendment, the borrowings under the 2024 Unsecured Term Loan were subject to interest at variable rates based on LIBOR plus a margin based on the Operating Company’s credit rating ranging between 1.50% and 2.45% per annum with the applicable margin being 1.90% at December 31, 2018. The amendment reduced the margin to a range between 0.85% and 1.65% per annum and based on the Operating Company’s current credit rating of Baa3, the applicable margin is 1.25% beginning on July 1, 2019. All other terms and conditions of the Unsecured Revolving Credit and Term Loan Agreement remained materially the same as those in effect prior to this amendment.

On August 2, 2019, the Company entered into a $300,000 term loan agreement (the “2020 Unsecured Term Loan”) with JP Morgan Chase Bank, N.A. as administrative agent. The 2020 Unsecured Term Loan was subject to a fee of 0.25% per annum on the amount of the commitment, reduced by the amount of term loans outstanding. The entire amount of $300,000 was funded on August 28, 2019 and used to fund acquisitions. Borrowings under the 2020 Unsecured Term Loan are subject to interest only payments at variable rates equal to LIBOR plus a margin based on the Operating Company’s credit rating between 0.85% and 1.65% per annum. Based on the Operating Company’s current credit rating of Baa3, the applicable margin is 1.25%.

At September 30, 2019, the weighted average interest rate on all outstanding borrowings was 3.89%. In addition, the Revolver is subject to a facility fee of 0.25% per annum.

For the three and nine months ended September 30, 2019, the Company paid $1,281 and $6,510, respectively, in debt issuance costs associated with the 2020 Unsecured Term Loan, the 2026 Unsecured Term Loan and the amended Unsecured Revolving Credit and Term Loan Agreement. For each separate debt instrument, on a lender by lender basis, in accordance with ASC 470-50, Debt Modifications and Extinguishment, the Company performed an assessment of whether the transaction was deemed to be new debt, a modification of existing debt, or an extinguishment of existing debt. Debt issuance costs are either deferred and amortized over the term of the associated debt or expensed as incurred. Based on this assessment, $1,275 and $6,504 of the debt issuance costs incurred in the three and nine months ended September 30, 2019, respectively, were deemed to be related to the issuance of new debt, or the modification of existing debt, and therefore have been deferred and are being amortized over the term of the associated debt. The remaining $6 of the debt issuance costs incurred in the three and nine months ended September 30, 2019, were deemed to be related to the extinguishment of debt and were expensed and included in Cost of debt extinguishment in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income. Additionally, $113 and $328 of unamortized debt issuance costs were expensed in the three and nine months ended September 30, 2019, respectively, and included in Cost of debt extinguishment in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

Debt issuance costs are amortized as a component of interest expense in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income. The following table summarizes debt issuance cost amortization:

For the three months ended

September 30,

For the nine months ended

September 30,

(in thousands)

2019

2018

2019

2018

Debt issuance costs amortization

611

477

1,761

1,410

9. Mortgages and Notes Payable

The Company’s mortgages and notes payable consist of the following:

		Origination	Maturity
(in thousands, except interest rates)		Date	Date	Interest	September 30,			December 31,
Lender		(Month/Year)	(Month/Year)	Rate	2019			2018
(1)	Wilmington Trust National Association	Apr-19	Feb-28	4.92%	$	49,340		$	—		(a) (b) (c) (n)
(2)	Wilmington Trust National Association	Jun-18	Aug-25	4.36%		20,409			20,674		(a) (b) (c) (m)
(3)	PNC Bank	Oct-16	Nov-26	3.62%		17,980			18,260		(b) (c)
(4)	Sun Life	Mar-12	Oct-21	5.13%		10,990			11,288		(b) (g)
(5)	Aegon	Apr-12	Oct-23	6.38%		7,968			8,496		(b) (h)
(6)	M&T Bank	Oct-17	Aug-21	one - month LIBOR+3%		4,949			5,051		(b) (d) (i) (j)
(7)	Note holders	Dec-08	Dec-23	6.25%		750			750		(d)
(8)	Standard Insurance Co.	Jul-10	Aug-30	6.75%		549			563		(b) (c) (d) (f)
(9)	Symetra Financial	Nov-17	Oct-26	3.65%		—			6,467		(a) (b) (k) (l)
(10)	Columbian Mutual Life Insurance Company	Aug-10	Sep-25	7.00%		—			1,459		(b) (c) (d)
(11)	Legg Mason Mortgage Capital Corporation	Aug-10	Aug-22	7.06%		—			4,692		(b) (e)
(12)	Standard Insurance Co.	Apr-09	May-34	6.88%		—			1,751		(b) (c)
						112,935			79,451
	Debt issuance costs, net					(373	)		(499	)
					$	112,562		$	78,952

^(a)	Non-recourse debt includes the indemnification/guaranty of the Corporation and/or Operating Company pertaining to fraud, environmental claims, insolvency and other matters.

^(b)	Debt secured by related rental property and lease rents.

^(c)	Debt secured by guaranty of the Operating Company.

^(d)	Debt secured by guaranty of the Corporation.

^(e)	Debt is guaranteed by a third party.

^(f)

The interest rate represents the initial interest rate on the respective note. The interest rate will be adjusted at Standard Insurance’s discretion (based on prevailing rates) at 119 months from the first payment date, and the monthly installments will be adjusted accordingly. At the time Standard Insurance may adjust the interest rate for the note payable, the Company has the right to prepay the note without penalty.

^(g)	Mortgage was assumed in March 2012 as part of an UPREIT transaction. The debt was recorded at fair value at the time of the assumption.

^(h)	Mortgage was assumed in April 2012 as part of the acquisition of the related property. The debt was recorded at fair value at the time of the assumption.

⁽ⁱ⁾	The Company entered into an interest rate swap agreement in connection with the mortgage note, as further described in Note 10.

^(j)	Mortgage was assumed in October 2017 as part of an UPREIT transaction. The debt was recorded at fair value at the time of the assumption.

^(k)	Mortgage was assumed in November 2017 as part of the acquisition of the related property. The debt was recorded at fair value at the time of the assumption.

^(l)	The interest rate will be adjusted to the holder’s quoted five-year commercial mortgage rate for similar size and quality.

^(m)	Mortgage was assumed in June 2018 as part of the acquisition of the related property. The debt was recorded at fair value at the time of assumption.

⁽ⁿ⁾	Mortgage was assumed in April 2019 as part of the acquisition of the related property. The debt was recorded at fair value at the time of assumption.

At September 30, 2019, investment in rental property of $179,769 is pledged as collateral against the Company’s mortgages and notes payable.

The following table summarizes the mortgages extinguished by the Company:

(in thousands, except number of mortgages)

For the nine months ended

September 30, 2019

For the year ended

December 31, 2018

Number of mortgages

Outstanding balance of mortgages

13,905

6,666

The following table summarizes the cost of mortgage extinguishment:

For the three months ended

September 30,

For the nine months ended

September 30,

(in thousands)

2019

2018

2019

2018

Cost of mortgage extinguishment

336

842

101

Estimated future principal payments to be made under the above mortgage and note payable agreements, and the Company’s unsecured credit agreements (see Note 8) at September 30, 2019 are as follows:

(in thousands)
Remainder of 2019	$	784
2020		303,210
2021		18,028
2022		306,230
2023		273,356
Thereafter		1,194,627
	$	2,096,235

Certain of the Company’s mortgage and note payable agreements provide for prepayment fees and can be terminated under certain events of default as defined under the related agreements. These prepayment fees are not reflected as part of the table above.

10. Interest Rate Swaps

Interest rate swaps were entered into with certain financial institutions in order to mitigate the impact of interest rate variability over the term of the related debt agreements. The interest rate swaps are considered cash flow hedges. In order to reduce counterparty concentration risk, the Company has a diversification policy for institutions that serve as swap counterparties. Under these agreements, the Company receives monthly payments from the counterparties on these interest rate swaps equal to the related variable interest rates multiplied by the outstanding notional amounts. Certain interest rate swaps amortize on a monthly basis. In turn, the Company pays the counterparties each month an amount equal to a fixed rate multiplied by the related outstanding notional amounts. The intended net impact of these transactions is that the Company pays a fixed interest rate on its variable-rate borrowings.

The following is a summary of the Company’s outstanding interest rate swap agreements:

(in thousands, except interest rates)								Fair Value
Counterparty	Maturity Date	Fixed Rate			Variable Rate Index	Notional Amount		September 30, 2019			December 31, 2018
Bank of America, N.A.	November 2023		2.80	%	one-month LIBOR	$	25,000	$	(1,389	)	$	(411	)
Bank of Montreal	July 2024		1.16	%	one-month LIBOR		40,000		421			2,702
Bank of Montreal	January 2025		1.91	%	one-month LIBOR		25,000		(694	)		769
Bank of Montreal	July 2025		2.32	%	one-month LIBOR		25,000		(1,333	)		222
Bank of Montreal	January 2026		1.92	%	one-month LIBOR		25,000		(833	)		915
Bank of Montreal	January 2026		2.05	%	one-month LIBOR		40,000		(1,643	)		1,130
Bank of Montreal	December 2026		2.33	%	one-month LIBOR		10,000		(662	)		132
Bank of Montreal	December 2026		1.99	%	one-month LIBOR		25,000		(1,058	)		—
Bank of Montreal	December 2027		2.37	%	one-month LIBOR		25,000		(1,905	)		355
Bank of Montreal	May 2029		2.09	%	one-month LIBOR		25,000		(1,502	)		—
Capital One, National Association	December 2021		1.05	%	one-month LIBOR		15,000		133			605
Capital One, National Association	December 2024		1.58	%	one-month LIBOR		15,000		(165	)		727
Capital One, National Association	January 2026		2.08	%	one-month LIBOR		35,000		(1,515	)		930
Capital One, National Association	April 2026		2.68	%	one-month LIBOR		15,000		(1,243	)		(189	)
Capital One, National Association	July 2026		1.32	%	one-month LIBOR		35,000		118			2,877
Capital One, National Association	December 2027		2.37	%	one-month LIBOR		25,000		(1,932	)		345
M&T Bank	August 2021		1.02	%	one-month LIBOR		4,948		42			177		^{(a), (b)}
M&T Bank	September 2022		2.83	%	one-month LIBOR		25,000		(1,031	)		(362	)
M&T Bank	November 2023		2.65	%	one-month LIBOR		25,000		(1,284	)		(254	)
Regions Bank	May 2020		2.12	%	one-month LIBOR		50,000		(104	)		271
Regions Bank	December 2023		1.18	%	one-month LIBOR		25,000		199			1,484
Regions Bank	May 2029		2.11	%	one-month LIBOR		25,000		(1,562	)		—
Regions Bank	June 2029		2.03	%	one-month LIBOR		25,000		(1,383	)		—
SunTrust Bank	April 2024		1.99	%	one-month LIBOR		25,000		(745	)		554
SunTrust Bank	April 2025		2.20	%	one-month LIBOR		25,000		(1,181	)		382
SunTrust Bank	July 2025		1.99	%	one-month LIBOR		25,000		(934	)		728
SunTrust Bank	December 2025		2.30	%	one-month LIBOR		25,000		(1,474	)		299
SunTrust Bank	January 2026		1.93	%	one-month LIBOR		25,000		(915	)		903
U.S. Bank National Association	June 2029		2.03	%	one-month LIBOR		25,000		(1,395	)		—
U.S. Bank National Association	August 2029		1.35	%	one-month LIBOR		25,000		207			—
Wells Fargo Bank, N.A.	February 2021		2.39	%	one-month LIBOR		35,000		(385	)		59
Wells Fargo Bank, N.A.	October 2024		2.72	%	one-month LIBOR		15,000		(994	)		(222	)
Wells Fargo Bank, N.A.	April 2027		2.72	%	one-month LIBOR		25,000		(2,427	)		(382	)
Wells Fargo Bank, N.A.	January 2028		2.37	%	one-month LIBOR		75,000		(5,801	)		1,067
								$	(36,369	)	$	15,813

^(a)	Notional amount at December 31, 2018 was $5,051.

^(b)	Interest rate swap was assumed in October 2017 as part of an UPREIT transaction.

The total amounts recognized, and the location in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income, from converting from variable rates to fixed rates under these agreements are as follows:

				Reclassification from				Total Interest Expense
	Amount of (Loss) Gain			Accumulated Other				Presented in the
	Recognized in			Comprehensive (Loss) Income				Consolidated Statements of
(in thousands)	Accumulated Other				Amount of			Income and Comprehensive
For the three months ended September 30,	Comprehensive (Loss) Income			Location	Gain (Loss)			Income
2019	$	(16,380	)	Interest expense	$	387		$	18,465
2018		6,299		Interest expense		(20	)		14,484

				Reclassification from				Total Interest Expense
	Amount of (Loss) Gain			Accumulated Other				Presented in the
	Recognized in			Comprehensive (Loss) Income				Consolidated Statements of
(in thousands)	Accumulated Other				Amount of			Income and Comprehensive
For the nine months ended September 30,	Comprehensive (Loss) Income			Location	Gain (Loss)			Income
2019	$	(52,182	)	Interest expense	$	2,001		$	51,025
2018		30,296		Interest expense		(1,287	)		38,115

Amounts related to the interest rate swaps expected to be reclassified out of Accumulated other comprehensive (loss) income to Interest expense during the next twelve months are estimated to be a loss of $3,688. The Company is exposed to credit risk in the event of non-performance by the counterparties of the swaps. The Company minimizes the risk exposure by limiting counterparties to major banks who meet established credit and capital guidelines.

11. Non-Controlling Interests

Under the Company’s UPREIT structure, entities and individuals can contribute their properties in exchange for membership interests in the Operating Company. Properties contributed as part of UPREIT transactions were valued at $15,797 during the nine months ended September 30, 2018, which represents the estimated fair value of the properties contributed, less any assumed debt. There were no UPREIT transactions during the three and nine months ended September 30, 2019.

12. Credit Risk Concentrations

The Company maintained bank balances that, at times, exceeded the federally insured limit during the nine months ended September 30, 2019. The Company has not experienced losses relating to these deposits and management does not believe that the Company is exposed to any significant credit risk with respect to these amounts.

The Company’s rental property is managed by the Manager and the Asset Manager as described in Note 3. Management fees paid to the Manager and Asset Manager represent 17% and 20% of total operating expenses for the three months ended September 30, 2019 and 2018, respectively, and 18% and 19% of total operating expenses for the nine months ended September 30, 2019 and 2018, respectively. These amounts do not include acquisition fees paid to the Asset Manager that were capitalized (see Note 3). The Company has mortgages and notes payable with three institutions that comprise 62%, 16%, and 10% of total mortgages and notes payable at September 30, 2019. The Company has mortgages and notes payable with four institutions that comprise 26%, 23%, 14%, and 11% of total mortgages and notes payable at December 31, 2018. For the three and nine months ended September 30, 2019 and 2018, the Company had no individual tenants or common franchises that accounted for more than 10% of total revenues.

13. Equity

Share Redemption Program

The following table summarizes redemptions under the Share Redemption Program:

	For the three months ended September 30,				For the nine months ended September 30,
(in thousands, except number of redemptions)	2019		2018		2019		2018
Number of redemptions requested	20		11		49		33
Number of shares	88		32		147		106
Aggregate redemption price	$	7,361	$	2,675	$	12,374	$	8,564

Distribution Reinvestment Plan

The Corporation has adopted a Distribution Reinvestment Plan (“DRIP”), pursuant to which the Corporation’s stockholders and holders of membership units in the Operating Company (other than the Corporation), may elect to have cash distributions reinvested in additional shares of the Corporation’s common stock. Cash distributions will be reinvested in additional shares of common stock pursuant to the DRIP at a per share price equal to 98% of the Determined Share Value as of the applicable distribution date. The Corporation may amend the DRIP at any time upon written notice to each participant at least 10 days prior to the effective date of the amendment. The Corporation may terminate the DRIP upon written notice to each participant at least 30 days prior to the effective date of the termination. At September 30, 2019 and December 31, 2018, a total of 2,797 and 2,233 shares of common stock, respectively, have been issued under the DRIP.

14. Earnings per Share

The following table summarizes the components used in the calculation of basic and diluted earnings per share (“EPS”):

	For the three months ended September 30,				For the nine months ended September 30,
(in thousands, except per share)	2019		2018		2019		2018
Basic earnings:
Net earnings attributable to Broadstone Net Lease, Inc.	$	23,388	$	21,267	$	53,460	$	55,813
Diluted earnings:
Net earnings attributable to Broadstone Net Lease, Inc.	$	23,388	$	21,267	$	53,460	$	55,813
Net earnings attributable to non-controlling interests		1,650		1,797		3,942		4,631
	$	25,038	$	23,064	$	57,402	$	60,444

Basic and diluted weighted average shares outstanding:
Weighted average number of common shares outstanding used in basic earnings per share		24,642		20,554		23,394		19,850
Effects of convertible membership units		1,737		1,737		1,737		1,646
Weighted average number of common shares outstanding used in diluted earnings per share		26,379		22,291		25,131		21,496
Basic and diluted net earnings per common share	$	0.95	$	1.03	$	2.28	$	2.81

In the table above, outstanding membership units are included in the diluted earnings per share calculation. However, because such membership units would also require that the share of the Operating Company income attributable to such membership units (which are currently presented as non-controlling interest) also be added back to net income, there is no effect on EPS.

15. Supplemental Cash Flow Disclosures

Cash paid for interest was $49,828 and $33,108 for the nine months ended September 30, 2019 and 2018, respectively. Cash paid for state income, franchise and foreign taxes was $809 and $307 for the nine months ended September 30, 2019 and 2018, respectively.

The following are non-cash transactions and have been excluded from the accompanying Condensed Consolidated Statements of Cash Flows:

•

During the nine months ended September 30, 2019 and 2018, the Corporation issued 550 and 458 shares, respectively, of common stock with a value of approximately $46,084 and $37,055, respectively, under the terms of the DRIP (see Note 13).

•

During the nine months ended September 30, 2018, the Company issued 194 membership units of the Operating Company in exchange for property contributed in UPREIT transactions valued at $15,797 (see Note 11).

•

During the nine months ended September 30, 2018, the Corporation cancelled nine thousand shares of common stock with a value of $748 that were pledged as collateral by a tenant. The cancellation of the shares was used to settle $748 in outstanding receivables associated with the tenant.

•

At September 30, 2019 and 2018, dividend amounts declared and accrued but not yet paid amounted to $11,932 and $9,722, respectively.

•

Upon adoption of ASC 842 on January 1, 2019, described in Note 2, the Company recorded right-of-use assets of $1,687 and lease liabilities of $1,261 associated with ground leases where it is the lessee. The right-of-use asset was recorded net of a straight-line rent liability of $7 and ground lease intangible asset, net of $432 as of the date of adoption.

•

In connection with real estate transactions conducted during the nine months ended September 30, 2018, the Company settled notes receivable in the amount of $6,527 in exchange for a reduction to the cash paid for the associated real estate assets.

•

In connection with real estate transactions conducted during the nine months ended September 30, 2019, the Company assumed tenant improvement allowances of $2,517 in exchange for a reduction to the cash paid to acquire the associated real estate assets.

16. Commitments and Contingencies

Litigation

From time to time, the Company is a party to various litigation matters incidental to the conduct of the Company’s business. While the resolution of such matters cannot be predicted with certainty, based on currently available information, the Company does not believe that the final outcome of any of these matters will have a material effect on its consolidated financial position, results of operations, or liquidity.

Property and Acquisition Related

In connection with ownership and operation of real estate, the Company may potentially be liable for cost and damages related to environmental matters. The Company is not aware of any non-compliance, liability, claim, or other environmental condition that would have a material effect on its consolidated financial position, results of operations, or liquidity.

As part of acquisitions closed during the nine months ended September 30, 2019, the company assumed three lease agreements that provided for a total of $2,517 in tenant improvement allowances.

Balances associated with tenant improvement allowances are included in Accounts payable and other liabilities on the Condensed Consolidated Balance Sheets as follows:

(in thousands)

September 30,

2019

December 31,

2018

Tenant improvement allowances

3,664

2,125

Obligations Under Operating Leases

The Company leases land at certain properties under non-cancellable operating leases with initial lease terms ranging from 2025 to 2066. These leases contain provisions for fixed monthly payments, subject to rent escalations. One lease requires the Company to make annual rent payments calculated based upon sales generated at the property (“percentage rent”). None of the leases are subject to any sublease agreement.

The following table summarizes the total lease costs associated with these leases, reported as a component of Property and operating expense in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income:

	For the three months ended September 30,				For the nine months ended September 30,
(in thousands)	2019		2018		2019		2018
Operating lease costs	$	35	$	23	$	105	$	26
Variable lease costs		11		11		34		13
Total lease costs	$	46	$	34	$	139	$	39

The following table summarizes payments associated with obligations under operating leases, reported as Cash flows from operating activities on the accompanying Condensed Consolidated Statements of Cash Flows:

For the three months ended

September 30,

For the nine months ended

September 30,

(in thousands)

2019

2018

2019

2018

Operating lease payments

127

Estimated future lease payments required under non-cancelable operating leases at September 30, 2019, and a reconciliation to the lease liabilities, is as follows:

(in thousands)
Remainder of 2019	$	29
2020		120
2021		122
2022		124
2023		125
Thereafter		2,540
Total undiscounted cash flows		3,060
Less imputed interest		(1,814	)
Lease liabilities	$	1,246

The above rental payments include future minimum lease payments due during the initial lease terms. Such amounts exclude any variable lease payments associated with percentage rent or changes in the Consumer Price Index that may become due in future periods.

17. Subsequent Events

Through November 12, 2019, the Company has raised $5,789 equivalent to 69 shares of the Corporation’s common stock through the DRIP. Through November 12, 2019, the Company has paid $11,932 in distributions, including dividend reinvestments.

Subsequent to September 30, 2019, the Company continued to expand its operations through the acquisition of additional rental property and associated intangible assets and liabilities. The Company acquired approximately $16,064 of rental property and associated intangible assets and liabilities. Through November 12, 2019, the Company sold five properties with an aggregate carrying value of $10,922 for total proceeds of $13,731. The Company incurred additional expenses related to the sales of approximately $745, resulting in a gain on sale of real estate of approximately $2,064.

On October 31, 2019, the Board of Directors declared a distribution of $0.44 per share on the Corporation’s common stock and approved a distribution of $0.44 per membership unit of the Operating Company for monthly distributions through January 2020. The distributions are payable on or prior to the 15th day of the following month to stockholders and unit holders of record on the record date, which is generally the next-to-the-last business day of the prior month. In addition, the IDC determined the share value for the Corporation’s common stock to be $85.00 per share for the period from November 1, 2019 through January 31, 2020.

Subsequent to September 30, 2019, the Operating Company paid off borrowings on the Revolver in the aggregate amount of $6,000.

Internalization

On November 11, 2019, the Company entered into a definitive merger agreement (the “Merger Agreement”) with the Manager and other parties providing for the internalization of the external management functions currently performed for the Company by the Manager (the “Internalization”). Upon consummation of the Internalization, the Company’s current management team and corporate staff, who are currently employed by the Manager, will become employed by an indirect subsidiary of the Company, and the Company will become internally managed. Subject to the satisfaction of specified closing conditions, the Internalization is scheduled to close during the first quarter of 2020. The Internalization is not considered a termination event under the Property Management Agreement and the Asset Management Agreement (see Note 3). The Property Management Agreement and Asset Management Agreement, however, will be terminated upon closing of the Internalization, but no fees will be payable under them as a result of that termination. The Internalization will consist of the acquisition of the Manager through a series of mergers pursuant to the Merger Agreement.

The consideration paid pursuant to the Merger Agreement will consist of (i) base consideration of approximately $206 million plus assumption of debt of approximately $94 million, payable upon closing and (ii) additional consideration of up to $75 million payable in four tranches of $10 million, $15 million, $25 million, and $25 million if certain milestones related to either (a) the dollar volume-weighted average price of a share of the Company’s common stock (“VWAP per REIT Share”), following the completion of an initial public offering of the Company’s common stock (“IPO”), or (b) the Company’s adjusted funds from operations (“AFFO”) per share, prior to the completion of an IPO, are achieved during specified periods of time following the closing of the Internalization (the

“Earnout Periods”). The consideration will consist of a combination of cash, shares of the Company’s common stock, and Operating Company membership units, at the election of the owners of the Manager.

The earnout tranches, applicable VWAP of a REIT Share and AFFO per share, and the applicable Earnout Periods are as follows:

	If the Company has completed an IPO		If the Company has not completed an IPO
Earnout Tranche	VWAP of a REIT Share	Applicable Earnout Period	AFFO per Share	Applicable Earnout Period
$10 million	$90.00	The two-year period beginning on the earlier of (i) the IPO closing date or (ii) December 31, 2020.	$5.85	The two-year period consisting of the calendar years ended December 31, 2020 and December 31, 2021.
$15 million	$95.00	The two-year period beginning on the earlier of (i) the IPO closing date or (ii) December 31, 2020.	$5.95	The two-year period consisting of the calendar years ended December 31, 2020 and December 31, 2021.
$25 million	$97.50	The four-year period beginning on the date that is exactly one year after the earnout period begins for the first and second tranches above.	$6.30	The four-year period consisting of the calendar years ended December 31, 2021, December 31, 2022, December 31, 2023 and December 31, 2024.
$25 million	$100.00	The four-year period beginning on the date that is exactly one year after the earnout period begins for the first and second tranches above.	$6.70	The four-year period consisting of the calendar years ended December 31, 2021, December 31, 2022, December 31, 2023 and December 31, 2024.

Upon closing of the Internalization, the Company’s existing management team, who are currently employees of the Manager, including the Company’s current executive officers, will become employees of the Company, providing a seamless transition and clarity as to future senior leadership. Each of Christopher J. Czarnecki, Ryan M. Albano, John D. Moragne, and Sean T. Cutt are expected to terminate their employment with the Manager and enter into employment agreements with the Company or its subsidiary to serve as the Company’s Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, and Chief Investment Officer, respectively.

The Merger Agreement contains customary representations, warranties and covenants. Each party’s obligation to consummate the transactions contemplated by the Merger Agreement is subject to customary closing conditions.

The Merger Agreement does not provide that the completion of an IPO is a condition to the closing of the Internalization. Under the terms of the Merger Agreement, however, if the Company does not complete an IPO by December 31, 2020, then the former owners of the Manager who receive shares of the Company’s common stock and/or membership units of the Operating Company will be granted certain redemption rights as a means to provide additional liquidity in the absence of an IPO.

Prior to closing the Internalization, the Company has agreed to repurchase all of the outstanding shares of Company common stock held by the Manager in exchange for cash at a per share price equal to $85.00, the current Determined Share Value.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Except where the context suggests otherwise, as used in this Form 10-Q, the terms “BNL,” “we,” “us,” “our,” and “our company” refer to Broadstone Net Lease, Inc., a Maryland corporation, and, as required by context, Broadstone Net Lease, LLC, a New York limited liability company, which we refer to as the or our “Operating Company,” and to their respective subsidiaries.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the accompanying Notes to the Condensed Consolidated Financial Statements appearing elsewhere in this Form 10-Q.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), regarding, among other things, our plans, strategies, and prospects, both business and financial. Forward-looking statements include, but are not limited to, statements that represent our beliefs concerning future operations, strategies, financial results, or other developments. We caution that forward-looking statements are not guarantees. Forward-looking statements can be identified by the use of forward-looking terminology such as, but not limited to, “may,” “will,” “should,” “expect,” “intend,” “anticipate,” “estimate,” “would be,” “believe,” or “continue” or the negative or other variations of comparable terminology.

Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic, and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different from those expressed or implied in any forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions, or expectations.

Factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to:

•

our ability to generate cash flows sufficient to pay our dividends to stockholders or meet our debt service obligations;

•

our ability to achieve our investment objectives and growth plans;

•

the risk that the Internalization (as defined below) will not be consummated within the anticipated time period or at all;

•

the occurrence of any event or circumstance that could give rise to the termination of the Merger Agreement (as defined below);

•

risks related to disruption of management’s attention from our ongoing business operations due to the pending Internalization;

•

the effect of the announcement of the Internalization on our operating results and business generally;

•

the outcome of any legal proceedings relating to the Internalization;

•

our ability to effectively and efficiently manage the Internalization, if consummated;

•

the risk that we may not realize the anticipated benefits from the Internalization, if consummated, or that such benefits are less than anticipated as a result of unexpected costs or liabilities that may arise from the Internalization;

•

our dependence upon the financial health and performance of the Manager and the Asset Manager and their ability to retain or hire key personnel;

•

conflicts of interest arising out of our relationship with the Manager and its affiliates;

•

changes in general business and economic conditions, fluctuating interest rates, and volatility and uncertainty in the credit markets and broader financial markets;

•

competition in the acquisition and disposition of properties and in the leasing of our properties, which may impact our ability to acquire, dispose of, or lease properties on advantageous terms;

•

risks inherent in investing in real estate, including tenant, geographic, and industry concentrations with respect to our properties, bankruptcies or insolvencies of tenants or from tenant defaults generally, impairments in the value of our real estate assets, the illiquidity of our real estate investments, potential liability relating to environmental matters and potential damages from natural disasters, acts of terrorism, or war;

•

our access to capital and ability to borrow money in sufficient amounts and on favorable terms;

•

our success in our deleveraging efforts;

•

our continued qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes; and

•

legislative or regulatory changes, including changes to the laws governing the taxation of REITs.

Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and readers are cautioned not to place undue reliance on any forward-looking statements included herein. All forward-looking statements are made as of the date this Form 10-Q is filed with the Securities and Exchange Commission (the “SEC”), and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as required by law, we do not undertake any obligation to update or revise any forward-looking statements contained in this Form 10-Q for any reason. Important factors that could cause actual results to differ materially from the forward-looking statements are disclosed in Item 1A. “Risk Factors” in our Form 10-K for the year ended December 31, 2018, as filed with the SEC on March 14, 2019 (the “Form 10-K”).

Overview

We are currently an externally managed real estate investment trust (“REIT”) formed as a Maryland corporation in 2007 to acquire and hold commercial real estate properties located primarily in the United States, substantially all of which are leased to the properties’ operators under long-term net leases. Under a “net lease,” the tenant occupying the leased property (usually as a single tenant) does so in much the same manner as if the tenant were the owner of the property. There are various forms of net leases, most typically classified as triple-net or double-net. Triple-net leases typically require that the tenant pay all expenses associated with the property (e.g., real estate taxes, insurance, maintenance, repairs, and capital costs). Double-net leases typically require that the tenant pay all operating expenses associated with the property (e.g., real estate taxes, insurance, and maintenance), but exclude some or all major repairs (e.g., roof, structure, and parking lot). Accordingly, the owner receives the rent “net” of these expenses, rendering the cash flow associated with the lease predictable for the term of the lease. Under a net lease, the tenant generally agrees to lease the property for a significant term and agrees that it will either have no ability, or only limited ability, to terminate the lease or abate rent prior to the expiration of the term of the lease as a result of real estate driven events such as casualty, condemnation, or failure by the landlord to fulfill its obligations under the lease.

We focus on real estate that is operated by a single tenant where the real estate is an integral part of the tenant’s business. Our diversified portfolio of real estate includes retail properties (such as quick service and casual dining restaurants), healthcare facilities, industrial manufacturing facilities, warehouse and distribution centers, and corporate offices, among others. We target properties with creditworthy tenants that look to engage in a long-term lease relationship. Through long-term leases, our tenants are able to retain operational control of their mission critical locations, while conserving their debt and equity capital to fund their fundamental business operations.

As of September 30, 2019, we owned a diversified portfolio of 661 individual net leased commercial properties located in 42 U.S. states and one commercial property located in British Columbia, Canada, and comprising approximately 27.5 million rentable square feet of operational space. As of September 30, 2019, all but four of our properties were subject to leases and our properties were 99.7% occupied by 187 different commercial tenants, with no single tenant accounting for more than 2.8% of our contractual rental revenue over the next 12 months (“NTM Rent”).

We operate under the direction of our board of directors, which is responsible for the management and control of our affairs. Our board of directors currently retains Broadstone Real Estate, LLC (the “Manager”) to provide certain property management services for our properties, and Broadstone Asset Management, LLC, a wholly owned subsidiary of the Manager (the “Asset Manager”), to manage our day-to-day affairs and implement our investment strategy, subject to our board of directors’ direction, oversight, and approval.

As we conduct substantially all of our operations through the Operating Company, we are structured as what is referred to as an umbrella partnership real estate investment trust (“UPREIT”). The UPREIT structure allows a property owner to contribute property to the Operating Company in exchange for membership units in the Operating Company and generally defer taxation of a resulting gain until the contributor later disposes of the membership units or the property is sold in a taxable transaction. The membership units of the Operating Company held by members of the Operating Company other than us are referred to herein and in our condensed consolidated financial statements as “non-controlling interests,” “non-controlling membership units,” or “membership units,” and are convertible into shares of our common stock on a one-for-one basis, subject to certain restrictions. We allocate consolidated earnings to holders of our common stock and non-controlling membership units based on the weighted average number of shares of our common stock and non-controlling membership units outstanding during the year.

During each of the periods covered by this Form 10-Q, we closed sales of additional shares of our common stock on a monthly basis, subject to an equity cap and queue program for new and additional investments. The cap does not apply to investments made pursuant to our Distribution Reinvestment Plan (“DRIP”) or equity capital received in connection with UPREIT transactions. There is currently no established equity cap. We anticipate reinstating an equity cap once we are comfortably within the leverage range of the Company’s investment grade credit rating. As a result of a pending transaction, we determined that we would not hold an equity closing as of October 31, 2019. The next equity closing will occur on November 29, 2019.

Shares of our common stock are currently being offered in our ongoing private offering at a price equal to a Determined Share Value (as defined below) of $85.00 per share. For the nine months ended September 30, 2019, we sold 3,609,696 shares of our common stock in our private offering, including 563,864 shares of common stock issued pursuant to our DRIP, for total proceeds of approximately $307.9 million. We intend to use substantially all of the net proceeds from our ongoing private offering, supplemented with additional borrowings, to continue to invest in additional net leased properties and for general corporate purposes. See Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this Form 10-Q for further information.

As of September 30, 2019, there were 25.5 million shares of our common stock issued and outstanding, and 1.7 million non-controlling membership units issued and outstanding.

Our principal executive offices are located at 800 Clinton Square, Rochester, New York, 14604, and our telephone number is (585) 287-6500.

Q3 2019 Highlights

For the three months ended September 30, 2019, we:

•

Increased revenues to $76.4 million, representing growth of 23.7% compared to the three months ended September 30, 2018.

•

Generated net income of $25.0 million, representing an increase of $2.0 million, or 8.6%, compared to the three months ended September 30, 2018. Earnings per diluted share was $0.95 for the three months ended September 30, 2019, representing a decrease of $0.08 per diluted share, or 7.8%, compared to the three months ended September 30, 2018.

•

Generated funds from operations (“FFO”) of $43.3 million, representing a decrease of $1.7 million, or 3.8%, compared to the three months ended September 30, 2018. FFO per diluted share was $1.64 for the three months ended September 30, 2019, representing a decrease of $0.38 per diluted share, or 18.8% the three months ended September 30, 2018.

•

Generated adjusted funds from operations (“AFFO”) of $38.8 million, representing an increase of $7.5 million, or 24.0%, compared to the three months ended September 30, 2018. AFFO per diluted share was $1.47 for the three months ended September 30, 2019, representing an increase of $0.07 per diluted share, or 5.0%, compared to the three months ended September 30, 2018.

•

Closed six real estate acquisitions totaling $793.2 million, excluding capitalized acquisition costs, adding 32 new properties with a weighted average initial cash capitalization rate of 6.4%. At the time of acquisition, the properties had a weighted average remaining lease term of 11.5 years and weighted average annual rent increases of 2.1%. These figures include the acquisition on August 29, 2019, of a portfolio of 23 fully leased industrial (warehouse, distribution, manufacturing and cold storage) and office/flex assets (the “industrial and office portfolio”) for $735.7 million, excluding capitalized acquisition costs. The industrial and office portfolio comprises 6.9 million rentable square feet of operational space and is well diversified with 19 different tenants, and properties located in 14 U.S. states and British Columbia, Canada. The acquisition was funded through a combination of proceeds from our ongoing private offering of shares of our common stock, drawing the remaining $150 million commitment available under our 2026 Unsecured Term Loan (as defined below), $300 million from the 2020 Unsecured Term Loan (as defined below), and proceeds from our senior unsecured revolving credit facility.

•

Sold 16 properties, representing 1.6% of our portfolio value as of December 31, 2018, at a weighted average capitalization rate of 6.8%, for net proceeds of $56.5 million, recognizing a gain of $12.6 million above carrying value.

•

Received $157.1 million in investments from new and existing stockholders, including investments made through our DRIP.

•

Collected greater than 99% of rents due during the quarter and, based on rentable square footage, maintained a 99.8% leased portfolio as of September 30, 2019.

•

Amended our credit and term loan agreement to reduce the margin above LIBOR paid on the 2024 Unsecured Term Loan (as defined below) from 1.90% to 1.25%.

•

Entered into a one-year $300 million unsecured delayed-draw term loan agreement (the “2020 Unsecured Term Loan”) with a syndicate of banks and financial institutions. We fully drew on this facility to partially fund the acquisition of the industrial and office portfolio.

Year-to-Date 2019 Highlights

For the nine months ended September 30, 2019, we:

•

Increased revenues to $213.9 million, representing growth of 22.7% compared to the nine months ended September 30, 2018.

•

Generated net income of $57.4 million, representing a decrease of $3.0 million, or 5.0%, compared to the nine months ended September 30, 2018. Earnings per diluted share was $2.28 for the nine months ended September 30, 2019, representing a decrease of $0.53 per diluted share, or 18.9%, compared to the nine months ended September 30, 2018.

•

Generated FFO of $122.1 million, representing an increase of $7.9 million, or 6.9%, compared to the nine months ended September 30, 2018. FFO per diluted share was $4.86 for the nine months ended September 30, 2019, representing a decrease of $0.45 per diluted share, or 8.5%, compared to the nine months ended September 30, 2018.

•

Generated AFFO of $107.6 million, representing an increase of $16.1 million, or 17.6%, compared to the nine months ended September 30, 2018. AFFO per diluted share was $4.28 for the nine months ended September 30, 2019, representing an increase of $0.02 per diluted share, or 0.5%, compared to the nine months ended September 30, 2018.

•

Closed 16 real estate acquisitions totaling $993.7 million, excluding capitalized acquisition costs, adding 66 new properties with a weighted average initial cash capitalization rate of 6.6%. At the time of acquisition, the properties had a weighted average remaining lease term of 12.3 years and weighted average annual rent increases of 2.1%.

•

Sold 25 properties, representing 2.6% of our portfolio value as of December 31, 2018, at a weighted average capitalization rate of 7.0%, for net proceeds of $90.1 million, recognizing a gain of $16.8 million above carrying value.

•

Received $307.9 million in investments from new and existing stockholders, including investments made through our DRIP.

FFO and AFFO are performance measures that are not calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We present these non-GAAP measures as we believe certain investors and other users of our financial information use them as part of their evaluation of our historical operating performance. See discussion below under the heading Net Income and Non-GAAP Measures (FFO and AFFO), 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.

Internalization

On November 12, 2019, we issued a press release announcing that we had entered into a definitive agreement (the “Merger Agreement”) to internalize the external management functions (the “Internalization”) currently performed by the Manager. Upon consummation of the Internalization, our current management team and corporate staff, who are currently employed by the Manager, will become employed by an indirect subsidiary of ours, and we will become internally managed. Subject to the satisfaction of specified closing conditions, the Internalization is scheduled to close during the first quarter of 2020. The Merger Agreement does not provide that the completion of an initial public offering (“IPO”) is a condition to the closing of the Internalization. Under the terms of the Merger Agreement, however, if we do not complete an IPO by December 31, 2020, then the former owners of the Manager who receive shares of our common stock and/or membership units of the Operating Company will be granted certain redemption rights as a means to provide additional liquidity in the absence of an IPO.

The consideration paid pursuant to the Merger Agreement will consist of (i) base consideration of approximately $206 million plus assumption of debt of approximately $94 million, payable upon closing and (ii) additional consideration of up to $75 million payable in four tranches of $10 million, $15 million, $25 million, and $25 million if certain milestones related to either (a) the dollar volume-weighted average price of a share of the Company’s common stock (“VWAP per REIT Share”), following the completion of an IPO of the Company’s common stock, or (b) the Company’s AFFO per share, prior to the completion of an IPO, are achieved during specified periods of time following the closing of the Internalization (“Earnout Periods”). The consideration will consist of a combination of cash, shares of the Company’s common stock, and Operating Company membership units, at the election of the owners of the Manager.

The earnout tranches, applicable VWAP of a REIT Share and AFFO per share, and the applicable Earnout Periods are as follows:


Earnout Tranche	If BNL has completed an IPO		If BNL has not completed an IPO
Earnout Tranche	VWAP of a REIT Share	Applicable Earnout Period	AFFO per Share	Applicable Earnout Period
$10 million	$90.00	The two-year period beginning on the earlier of (i) the IPO closing date or (ii) December 31, 2020.	$5.85	The two-year period consisting of the calendar years ended December 31, 2020 and December 31, 2021.
$15 million	$95.00	The two-year period beginning on the earlier of (i) the IPO closing date or (ii) December 31, 2020.	$5.95	The two-year period consisting of the calendar years ended December 31, 2020 and December 31, 2021.
$25 million	$97.50	The four-year period beginning on the date that is exactly one year after the earnout period begins for the first and second tranches above.	$6.30	The four-year period consisting of the calendar years ended December 31, 2021, December 31, 2022, December 31, 2023 and December 31, 2024.
$25 million	$100.00	The four-year period beginning on the date that is exactly one year after the earnout period begins for the first and second tranches above.	$6.70	The four-year period consisting of the calendar years ended December 31, 2021, December 31, 2022, December 31, 2023 and December 31, 2024.

Potential benefits of the Internalization include:

•

Immediate Cost Savings; Economies of Scale with Growth – Through elimination of the asset, property, and transaction-based fees currently payable under the management agreements with the Manager, and excluding the one-time costs associated with the Internalization, the proposed transaction is expected to result in immediate cost savings and facilitate increasing economies of scale as our equity and asset base grows.

•

Simplified Structure – The proposed Internalization will simplify our structure through the unification of all of our investment activity, corporate operations, and resources under a single, transparent corporate structure, and provide us with the ability to control key functions that are important to the growth of our business. Internalizing management will also mitigate perceived or actual existing conflicts of interest between us and the Manager resulting from the current external management structure.

•

Continuity of Management Team; Brings Comprehensive Team into the Company – Upon closing of the Internalization, our existing management team, who are currently employees of the Manager, including our current executive officers, will become employees of the Company, providing a seamless transition and clarity as to future senior leadership. Each of Christopher J. Czarnecki, Ryan M. Albano, John D. Moragne, and Sean T. Cutt are expected to terminate their employment with the Manager and enter into employment agreements with us or our subsidiary to serve as our Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, and Chief Investment Officer, respectively.

Additional information is available in the Current Report on Form 8-K that we filed on November 12, 2019, with the U.S. Securities and Exchange Commission, including a detailed description of the merger agreement and the proposed transaction’s terms, conditions, covenants, and agreements.

Our Properties and Investment Objectives

We target acquisitions of fee simple interests in individual properties priced between $5 million and $75 million. Portfolios may be significantly larger, depending on balance sheet capacity and whether the portfolio is diversified or concentrated by tenant, geography, or brand. Our investment policy (“Investment Policy”) has three primary objectives:

•

preserve, protect, and return capital to investors,

•

realize increased cash available for distributions and long-term capital appreciation from growth in the value of our properties, and

•

maximize the level of sustainable cash distributions to our investors.

We acquire freestanding, single-tenant commercial properties primarily located in the United States either directly from our creditworthy tenants in sale-leaseback transactions, where they sell us their properties and simultaneously lease them back through long-term, net leases, or through the purchase of properties already under a net lease (i.e., a lease assumption). Under either scenario, our properties are generally under lease and fully occupied at the time of acquisition. We focus on properties in growth markets with at least ten years of lease term remaining that are expected to achieve financial returns on equity of greater than 9.5%, net of fees, calculated based on the average return recognized across all acquisitions during a calendar year, provided that, with certain exceptions provided for in our Investment Policy, all acquisitions must have a minimum remaining lease term of seven years and a minimum return on equity of 8.5%, net of fees, unless otherwise approved by the Independent Directors Committee. Our criteria for selecting properties are based on the following underwriting principles:

•

fundamental value and characteristics of the underlying real estate,

•

creditworthiness of the tenant, and

•

transaction structure and pricing.

We believe we can achieve an appropriate risk-adjusted return through these underwriting principles and conservatively project a property’s potential to generate targeted returns from current and future cash flows. We believe targeted returns are achieved through a combination of in-place income at the time of acquisition, rent growth, and a property’s potential for appreciation.

To achieve an appropriate risk-adjusted return, we maintain a diversified portfolio of real estate spread across multiple tenants, industries, and geographic locations. The following charts summarize our portfolio diversification by property type, tenant industry, and geographic location as of September 30, 2019. The percentages below are calculated based on our NTM Rent as of September 30, 2019, divided by total NTM Rent. Late payments, non-payments, or other unscheduled payments are not considered in the calculation. NTM Rent includes the impact of contractual rent escalations.

Property Type, by % of NTM Rent

Property Type	% NTM Rent
Retail – other		10.5	%
Retail – quick service restaurants ("QSR")		8.0	%
Retail – casual dining		7.9	%
Total Retail		26.4	%
Industrial – warehouse/distribution		20.6	%
Industrial – manufacturing		11.2	%
Industrial – flex		5.5	%
Industrial – other		3.8	%
Total Industrial		41.1	%
Healthcare – clinical		11.7	%
Healthcare – surgical		3.2	%
Healthcare – other		3.0	%
Total Healthcare		17.9	%
Office		8.5	%
Other		6.1	%
Total		100.0	%

Tenant Industry, by % of NTM Rent

Industry	% NTM Rent
Restaurants		16.1	%
Healthcare Facilities		15.7	%
Packaged Foods & Meats		4.4	%
Food Distributors		4.3	%
Home Furnishing Retail		4.1	%
Specialized Consumer Services		3.7	%
Auto Parts & Equipment		3.4	%
Metal & Glass Containers		3.2	%
Healthcare Services		2.6	%
Air Freight & Logistics		2.6	%
Aerospace & Defense		2.5	%
Distributors		2.3	%
Electronic Components		2.2	%
Industrial Machinery		1.8	%
Home Furnishings		1.7	%
Top 15 Tenant Industries		70.6	%
Other (38 industries)		29.4	%
Total		100.0	%

Geographic Diversification, by % of NTM Rent

At September 30, 2019, 99.8% of our portfolio’s rentable square footage, representing all but four of our properties, is subject to a lease, substantially all of which are net leases. We do not currently engage in the development of real estate, which could cause a delay in timing between the funds used to invest in properties and the corresponding cash inflows from rental receipts. Our cash flows from operations are primarily generated through our real estate investment portfolio and the monthly lease payments under our long-term leases with our tenants.

Due to the fact that 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 three of our properties, representing less than 1% of our annual rental streams (calculated based on NTM Rent), will expire before 2021. As of September 30, 2019, the weighted average remaining term of our leases (calculated based on NTM Rent) was approximately 11.7 years, excluding renewal options, which are exercisable at the option of our tenants upon expiration of their base lease term. Less than 5% of the properties in our portfolio are subject to leases without at least one renewal option. Furthermore, the weighted average remaining lease term on the $993.7 million in properties acquired during the nine months ended September 30, 2019, was 12.3 years at the time of acquisition. More than 59% of our rental revenue is derived from leases that expire during 2030 and thereafter. As of September 30, 2019, no more than 8.9% of our rental revenue is derived from leases that expire in any single year in the next ten years. The following chart sets forth our lease expirations based upon the terms of our leases in place as of September 30, 2019.

Lease Maturity Schedule, by % of NTM Rent

The following table presents the lease expirations by year, including the number of tenants and properties with leases expiring, the square footage covered by the leases expiring, the NTM Rent, and the percentage of NTM Rent for the leases expiring. Late payments, non-payments, or other unscheduled payments are not considered in the NTM Rent amounts. NTM Rent includes the impact of contractual rent escalations. Amounts are in thousands, except the number of tenants and properties. We did not have any significant lease renewals during the nine months ended September 30, 2019.

Year	Number of Tenants		Number of Properties		Square Footage		NTM Rent		Percentage of NTM Rent
2020		4		3		87	$	629		0.2	%
2021		7		11		99		1,931		0.6	%
2022		5		4		124		3,285		1.1	%
2023		12		13		703		6,975		2.3	%
2024		13		14		1,672		13,737		4.6	%
2025		12		21		693		7,713		2.6	%
2026		22		34		1,521		18,551		6.2	%
2027		22		32		2,006		23,043		7.8	%
2028		24		36		2,715		26,555		8.9	%
2029		16		61		2,481		18,527		6.2	%
2030 and thereafter		110		429		15,322		176,196		59.3	%
Untenanted properties		—		4		51		—		—
Total		247		662		27,474	$	297,142		100.0	%

Our top tenants and brands by percentage of NTM Rent at September 30, 2019, are listed in the tables below. The percentages of NTM Rent shown are calculated based on the NTM Rent associated with the tenant or brand divided by total NTM Rent.

Top Ten Tenants, by % of NTM Rent

Tenant	Property Type	% NTM Rent			Properties
Art Van Furniture, LLC	Retail		2.8	%		10
Red Lobster Hospitality & Red Lobster Restaurants LLC	Retail		2.5	%		25
Jack's Family Restaurants LP	Retail		2.0	%		36
Axcelis Technologies, Inc.	Other		1.9	%		1
Hensley & Company	Industrial		1.9	%		3
Outback Steakhouse of Florida LLC ^(a)	Retail		1.9	%		24
Krispy Kreme Doughnut Corporation	Industrial/Retail		1.7	%		27
BluePearl Holdings, LLC	Healthcare		1.7	%		12
Big Tex Trailer Manufacturing, Inc.	Industrial/Retail/Office		1.6	%		17
Siemens Medical Solutions USA, Inc. & Siemens Corporation	Industrial		1.6	%		2
Total Top Ten			19.6	%		157
All Other			80.4	%		505
Total			100.0	%		662

^(a)	Tenant’s properties include 22 Outback Steakhouse restaurants and two Carrabba’s Italian Grill restaurants.

Top Ten Brands, by % of NTM Rent

Brand	Property Type	% NTM Rent			Properties
Art Van Furniture	Retail		2.8	%		10
Bob Evans Farms ^(a)	Industrial/Retail		2.6	%		27
Red Lobster	Retail		2.5	%		25
Wendy's	Retail		2.1	%		41
Jack's Family Restaurants	Retail		2.0	%		36
Axcelis	Other		1.9	%		1
Hensley	Industrial		1.9	%		3
Krispy Kreme	Industrial/Retail		1.7	%		27
BluePearl Veterinary Partners	Healthcare		1.7	%		12
Outback Steakhouse	Retail		1.6	%		22
Total Top Ten			20.8	%		204
All Other			79.2	%		458
Total			100.0	%		662

^(a)	Brand includes two BEF Foods, Inc. properties and 25 Bob Evans Restaurants, LLC properties.

Leverage Policy

Moody’s Investors Service (“Moody’s”) has assigned the Operating Company an investment grade credit rating of Baa3 with a stable outlook, which allows us to take advantage of preferential borrowing margins and provides more attractive access to the debt markets, including the debt private placement market. The Operating Company’s credit rating is based on a number of factors, including an assessment of our financial strength, portfolio size and diversification, credit and operating metrics, corporate governance policies, and sustainability of cash flow and earnings. While Moody’s utilizes other factors outside of our leverage ratio in assigning ratings, we are strongly committed to maintaining a modest leverage profile commensurate with our investment grade rating. Our leverage policy (“Leverage Policy”) is to maintain a leverage ratio in the 35% to 45% range based on the approximate market value of our assets, recognizing that the actual leverage ratio may vary over time and there may be opportunistic reasons to exceed a 45% leverage ratio; provided, however, that we cannot exceed a 50% leverage ratio without the approval of the Independent Directors Committee. The Independent Directors Committee reviews our Leverage Policy at least annually; however, depending on market conditions and other factors, they may change our Leverage Policy from time to time.

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 interest rate hedges have staggered maturities to reduce the exposure to interest rate fluctuations in any one year, and generally extend up to 10 years. The interest rate swaps are applied against a pool of variable-rate debt, which offers flexibility in maintaining our hedge designation concurrent with our ongoing capital markets activity. We attempt to limit our total exposure to floating-rate debt to no more than 5% of the approximate market value of our assets, measured at quarter end.

As of September 30, 2019, our total outstanding indebtedness was $2,096.2 million, and the ratio of our total indebtedness to the approximate market value of our assets was 47.5%.

Determined Share Value

We sell shares of our common stock in our ongoing private offering at a price equal to a determined share value (the “Determined Share Value”), which is established at least quarterly by the Independent Directors Committee based on the net asset value (“NAV”) of our portfolio, input from management and third-party consultants, and such other factors as the Independent Directors Committee may determine. At its October 31, 2019 meeting, the Independent Directors Committee determined that the Determined Share Value would remain at $85.00 per share through January 31, 2020. Shares of our common stock are also sold pursuant to our DRIP, and repurchased by us pursuant to our share redemption program, at a price based upon the Determined Share Value. For additional information regarding our valuation policy and procedures, please see the section titled Determined Share Value in Part II, Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of our Form 10-K. The following table presents the Determined Share Value for each period indicated below, together with the corresponding NAV per diluted share as of the preceding quarter end:

Period	NAV as of	NAV per diluted share		Determined Share Value
November 1, 2019 - January 31, 2020	September 30, 2019	$	84.12	$	85.00
August 1, 2019 - October 31, 2019	June 30, 2019	$	84.68	$	85.00
May 1, 2019 - July 31, 2019	March 31, 2019	$	85.57	$	86.00

The adjustments made to NAV per diluted share in arriving at the Determined Share Value for the periods presented above account for the inherent imprecision in the valuation estimates.

The following table provides a breakdown of the major components of our estimated NAV and NAV per diluted share amounts (in thousands, except per share amounts):

NAV component:	September 30, 2019			June 30, 2019
Investment in rental property	$	4,465,457		$	3,704,911
Debt		(2,180,100	)		(1,529,385	)
Other assets and liabilities, net		4,373			(19,078	)
NAV	$	2,289,730		$	2,156,448
Number of outstanding shares, including noncontrolling interests		27,219			25,467
NAV per diluted share	$	84.12		$	84.68

The following table details the implied market capitalization rates (shown on a weighted average basis) used to value the investment in rental property, by property type, as of September 30, 2019, and June 30, 2019, supporting the Determined Share Value in effect for the period from November 1, 2019 through January 31, 2020, and August 1, 2019 through October 31, 2019, respectively:

Market capitalization rates, as of:

Retail

Industrial

Healthcare

Office

Other

Portfolio

Total

September 30, 2019

6.37

6.65

6.73

6.85

7.39

6.64

June 30, 2019

6.40

6.89

6.73

6.90

7.36

6.72

While we believe our assumptions are reasonable, a change in these assumptions would impact the calculation of the value of our real estate investments. For example, assuming all other factors remain unchanged, an increase in the weighted average implied market capitalization rate used as of September 30, 2019, of 0.25% would result in a decrease in the fair value of our investment in rental property of 3.6%, and our NAV per diluted share would have been $78.18. Conversely, a decrease in the weighted average implied market capitalization rate used as of September 30, 2019, of 0.25% would result in an increase in the fair value of our investment in rental property of 3.9%, and our NAV per diluted share would have been $90.53.

Distributions and Distribution Reinvestment

At its October 31, 2019 meeting, our board of directors declared monthly distributions of $0.44 per share of our common stock and unit of membership interest to be paid to our stockholders and members of the Operating Company (other than us) of record as follows:

Record Date		Payment Date (on or before)
November 27, 2019		December 13, 2019
December 30, 2019		January 15, 2020
January 30, 2020		February 14, 2020

Investors may purchase additional shares of our common stock by electing to reinvest their distributions through our DRIP. Cash distributions will be reinvested in additional shares of common stock at a per share price equal to 98% of the Determined Share Value as of the applicable distribution date. Refer to the section titled Distribution and Distribution Reinvestment in Part II, Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of our Form 10-K for additional discussion of our DRIP.

The following table summarizes distributions paid in cash and pursuant to our DRIP for the nine months ended September 30, 2019 (in thousands).

Month	Year	Cash Distribution - Common Stockholders		Cash Distribution - Membership Units		Distribution Paid Pursuant to DRIP on Common Stock ^(a)		Distribution Paid Pursuant to DRIP on Membership Units ^(a)		Total Amount of Distribution
January	2019	$	4,634	$	617	$	4,730	$	130	$	10,111
February	2019		4,691		617		4,800		130		10,238
March	2019		4,836		632		5,003		132		10,603
April	2019		4,879		631		5,092		132		10,734
May	2019		4,917		632		5,176		133		10,858
June	2019		5,017		632		5,207		133		10,989
July	2019		5,108		632		5,247		133		11,120
August	2019		5,178		632		5,291		133		11,234
September	2019		5,401		631		5,532		132		11,696
Total		$	44,661	$	5,656	$	46,078	$	1,188	$	97,583

^(a)	Distributions are paid in shares of common stock.

The following table summarizes our distributions paid, including the source of distributions and a comparison against FFO (in thousands).

	For the nine months ended
	September 30,
	2019		2018
Distributions:
Paid in cash	$	51,505	$	44,650
Reinvested in shares		46,078		37,055
Total Distributions	$	97,583	$	81,705
Source of Distributions:
Cash flow from operating activities	$	97,583	$	81,705
FFO	$	122,071	$	114,188

For the nine months ended September 30, 2019 and 2018, we paid distributions from our cash flow from operating activities. Refer to Net Income and Non-GAAP Measures (FFO and AFFO) below for further discussion of our FFO.

We intend to fund future distributions from cash generated by operations; however, we may fund distributions from the sale of assets, borrowings, or proceeds from the sale of our securities.

Liquidity and Capital Resources

General

We acquire real estate using a combination of debt and equity capital and with cash from operations that is not otherwise distributed to our stockholders. Our focus is on maximizing the risk-adjusted return to our stockholders through an appropriate balance of debt and equity in our capital structure. Therefore, we attempt to maintain a conservative leverage profile, with total debt equal to 35% to 45% of the approximate market value of our assets. We believe our leverage model has allowed us to take advantage of the lower cost of debt while simultaneously strengthening our balance sheet, as evidenced by our investment grade credit rating. As of September 30, 2019, the leverage ratio was 47.5% of the approximate market value of our assets, compared to 40.2% as of June 30, 2019. The increase was due to incremental borrowings associated with funding the industrial and office portfolio acquisition during the third quarter. We intend to reduce our leverage profile in the near term, to a range within the leverage profile consistent with our investment grade credit rating, using a combination of proceeds from our ongoing private offering of shares of our common stock and increasing disposition activity. As a result of our announcing the industrial and office portfolio acquisition, Moody’s affirmed our investment grade credit rating and stable outlook.

Management and our credit rating agencies also consider our leverage position as a multiple of Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”), a non-GAAP financial measure. EBITDA is a metric we use to measure leverage in the context of our cash flow expectations and projections. Given the significance of our recent growth, however, adding $993.7 million in investments during the nine months ended September 30, 2019, $606.8 million in investments during 2018, and $683.6 million in investments during 2017, coupled with our continued strategic growth initiatives, historical EBITDA may not provide investors with an adequate picture of the contractual cash inflows associated with these investments. Our investments are typically made throughout the year (historically, a significant portion has occurred later in the year), and therefore the full-year, or “normalized,” cash flows will not be realized until subsequent years. Accordingly, we look at contractual, “normalized,” cash flows and EBITDA as an appropriate metric to manage our leverage profile. We utilize this analysis inclusive of our focus on debt-to-market value metrics.

Liquidity

Our primary cash expenditures include the monthly interest payments we make on the debt we use to finance our real estate investment portfolio, asset management and property management fees for servicing our portfolio, acquisition costs related to the growth of our portfolio, and the general and administrative expenses of operating our business. Since substantially all of our leases are net leases, our tenants are generally responsible for the maintenance, insurance, and property taxes associated with the properties they lease from us. In certain circumstances, the terms of the lease require us to pay these expenses, although, in most cases we are reimbursed by the tenants. Accordingly, we do not currently anticipate making significant capital expenditures or incurring other significant property costs on an aggregate basis during the term of the property leases in our current portfolio. To the extent that we have vacant properties, we will incur certain costs to operate and maintain the properties, however, we do not currently expect these costs to be material.

As shown in the table below, net cash provided by operating activities increased by $17.4 million, to $110.9 million for the nine months ended September 30, 2019, from $93.5 million for the nine months ended September 30, 2018. We funded real estate investment activity with a combination of cash from operations, proceeds from our unsecured revolving credit agreements, borrowing under the 2020 and 2026 Unsecured Term Loans, and proceeds from the issuance of common stock. We paid cash dividends to our stockholders and holders of non-controlling membership units of $52.2 million and $45.0 million for the nine months ended September 30, 2019 and 2018, respectively. The increased dividends between periods were primarily funded by cash provided by our operations. Cash and cash equivalents and restricted cash totaled $44.1 million and $28.0 million at September 30, 2019 and 2018, respectively.

	For the nine months ended
	September 30,
(In thousands)	2019			2018
Net cash provided by operating activities	$	110,933		$	93,517
Net cash used in investing activities		(870,227	)		(274,590	)
Net cash provided by financing activities		784,420			199,002
Increase in cash and cash equivalents and restricted cash	$	25,126		$	17,929

Substantially all of our cash from operations is generated by our real estate portfolio. As of September 30, 2019, the historical cost basis of our real estate investment portfolio totaled $3,501.5 million, consisting of investments in 662 properties. During the first nine months of 2019, our portfolio generated average monthly straight-line rent revenues of approximately $22.3 million, and average monthly contractual cash revenues of approximately $20.6 million. During the nine months ended September 30, 2019, we closed 16 real estate acquisitions totaling $993.7 million, excluding capitalized acquisition costs, adding 66 new properties to our portfolio. We currently expect the new properties will generate approximately $6.0 million in monthly straight-line rent revenues and approximately $5.5 million in monthly contractual cash revenues over the next twelve months.

Capital Resources

We intend to continue to grow through additional real estate investments. To accomplish this objective, we must continue to identify acquisitions that are consistent with our investment policy and raise additional debt and equity capital. We have financed our acquisition of properties using a combination of debt and equity capital. We seek to maintain an appropriate balance of debt and equity capital in our overall leverage policy, while maintaining a focus on increasing core value for existing stockholders, which we seek to achieve through earnings growth and share price appreciation. The mix of our financing sources may change over time based on market conditions and our liquidity needs.

Equity Capital Resources

Equity capital for our real estate acquisition activity is provided by the proceeds of our ongoing private offering, including distributions reinvested through our DRIP. During the nine months ended September 30, 2019, we raised approximately $307.9 million in equity capital to be used in our acquisition activities. See Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this Form 10-Q for further information.

Debt Capital Resources

Debt capital is provided through unsecured term notes, revolving debt facilities, and senior unsecured notes. We also, from time to time, obtain or assume non-recourse mortgage financing from banks and insurance companies secured by mortgages on the corresponding specific property. Mortgages, however, are not currently a strategic focus of the active management of our leverage profile. Rather, we enter into mortgages and notes payable as ancillary business transactions on an as-needed basis, most often as the result of lease assumption transactions.

The availability of debt to finance commercial real estate can be impacted by economic and other factors that are beyond our control. 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. As we grow our real estate portfolio, we intend to manage our debt maturities to reduce the risk that a significant amount of debt will mature in any single year in the future. For example, during the first quarter of 2019, we used proceeds from the longer-term 2026 Unsecured Term Loan (as defined below) to repay a shorter-term unsecured term loan that had been due in 2019 (the “2019 Unsecured Term Loan”). Refer to Contractual Obligations below for further details of the maturities on our contractual obligations, including long-term debt maturities.

We achieved our investment grade credit rating of Baa3 based on our conservative leverage profile, diversified real estate investment portfolio, and earnings stability provided by the creditworthiness of our tenants, which we intend to maintain concurrent with our growth objectives. Factors that could negatively impact our credit rating include, but are not limited to: a significant increase in our leverage on a sustained basis, a significant increase in the proportion of secured debt levels, a significant decline in our unencumbered asset base, weakening of our corporate governance structure, and a significant decline in our real estate portfolio diversification. We have aligned our strategic growth priorities with these factors, as we believe the favorable debt pricing and access to multiple sources of debt capital resulting from the investment grade credit rating, provides us with an advantageous cost of capital and risk-adjusted return on investment for our stockholders.

Existing Debt Facilities

2020 Unsecured Term Loan

On August 2, 2019 we entered into the 2020 Unsecured Term Loan, under which we could borrow up to $300 million between August 2, 2019 and November 2, 2019. We drew the entire amount available under the 2020 Unsecured Term Loan on August 28, 2019, to partially fund the industrial and office portfolio acquisition. Borrowings under the 2020 Unsecured Term Loan are payable interest only over the term of the loan, with the principal balance due in full on August 2, 2020, provided that we have two options to extend the maturity date for a six-month period for each extension (for a total possible extension of up to one year), subject to payment of an extension fee. The rate of interest payable on borrowings under the 2020 Unsecured Term Loan, at our option, is equal to LIBOR plus a margin. Based on our investment grade credit rating, the applicable margin is currently 1.25%.

2026 Unsecured Term Loan

On February 27, 2019, we entered into a $450 million seven-year unsecured term loan agreement (the “2026 Unsecured Term Loan”). At closing, we borrowed $300 million under the 2026 Term Loan and used the proceeds to fully repay our 2019 Unsecured Term Loan. On August 27, 2019, we borrowed the remaining $150 million to partially fund the industrial and office portfolio acquisition. The 2026 Unsecured Term Loan includes an accordion feature that can increase the facility size up to a total of $550 million of available capacity. Borrowings under the 2026 Unsecured Term Loan are payable interest only during the term, with the principal

amount due on February 27, 2026. The rate of interest payable on borrowings under the 2026 Unsecured Term Loan, at our option, is equal to LIBOR plus a margin. Based on our investment grade credit rating, the applicable margin is currently 1.85%.

Credit Facility

As of September 30, 2019, we have a $1.055 billion unsecured credit facility and term loan agreement (the “Credit Facility”), which is comprised of (i) a $600 million senior unsecured revolving credit facility (the “Revolver”), (ii) a $265 million senior unsecured delayed draw term loan due in 2023 (the “2023 Unsecured Term Loan”), and (iii) a $190 million senior unsecured delayed draw term loan due in 2024 (the “2024 Unsecured Term Loan”). Borrowings under the Credit Facility are payable interest only during the term of the appropriate loan tranche, with the principal amount due in full on the applicable maturity date. On July 1, 2019, we amended the Credit Facility to reduce the margin above LIBOR paid on the 2024 Unsecured Term Loan from 1.90% to 1.25%.

The following table summarizes the amounts drawn and available to be drawn on the Credit Facility and the 2020 and 2026 Unsecured Term Loans as of September 30, 2019 (in thousands, excluding Loan Tranche and Maturity Date).

Loan Tranche	Amount Drawn		Amount Available		Total Capacity		Maturity Date
Credit Facility:
Revolver	$	303,300	$	296,700	$	600,000	January 21, 2022^(a)
2023 Unsecured Term Loan		265,000		—		265,000	January 23, 2023
2024 Unsecured Term Loan		190,000		—		190,000	June 21, 2024
2020 Unsecured Term Loan		300,000		—		300,000	August 2, 2020^(b)
2026 Unsecured Term Loan		450,000		—		450,000	February 27, 2026

^(a)	The Revolver contains one extension option that would extend the maturity date by five months, to June 21, 2022, subject to certain conditions set forth in the Credit Facility, including payment of an extension fee equal to 0.0625% of the revolving commitments.

^(b)

The 2020 Unsecured Term Loan provides for two options to extend the maturity date of the loan for a six-month period for each extension (for a total possible extension of up to one year), subject to certain conditions, including payment of an extension fee equal to 0.05% of the aggregate principal amount of loan outstanding.

Senior Notes

To mitigate interest rate risk, we have strategically added unsecured, fixed-rate, interest-only senior promissory notes (“Senior Notes”) to our capital structure. At September 30, 2019 and December 31, 2018, we had $475 million of Senior Notes outstanding. The Senior Notes were issued in three series (Series A, B, and C) as described below.

Series A Notes

On April 18, 2017, we issued $150 million of Senior Notes (the “Series A Notes”). The Series A Notes bear interest at a fixed rate of 4.84% per annum, and mature on April 18, 2027.

Series B and Series C Notes

On July 2, 2018, we issued $325 million of Senior Notes in two series: (i) $225 million of 10-year Senior Notes (“Series B Notes”) maturing on July 2, 2028, and (ii) $100 million of 12-year Senior Notes (“Series C Notes”) maturing on July 2, 2030. The Series B and Series C Notes bear interest at fixed rates of 5.09% per annum and 5.19% per annum, respectively.

In addition to funding acquisitions, a portion of the net proceeds from the Series B Notes and Series C Notes was used to repay outstanding borrowings under the Revolver as well as $25 million of the outstanding principal balance of our 2019 Unsecured Term Loan.

Debt Covenants

We are subject to various covenants and financial reporting requirements pursuant to our loan agreements. The table below summarizes the applicable financial covenants, which are substantially the same across each of the agreements. As of September 30, 2019, we were in compliance with all of our covenants. In the event of default, either through default on payments or breach of covenants, we may be restricted from paying dividends to our stockholders above the annual 90% REIT taxable income distribution requirement. For each of the previous three years, our cash flows from operations exceeded the required cash dividend distribution amounts.

Covenants	Required	Actual (as of September 30, 2019)
Leverage Ratio^(a)	≤ 0.60 to 1.00		0.52
Secured Indebtedness Ratio^(b)	≤ 0.40 to 1.00		0.03
Unencumbered Coverage Ratio^(c)	≥ 1.75 to 1.00		3.52
Fixed Charge Coverage Ratio^(d)	≥ 1.50 to 1.00		2.84
Total Unsecured Indebtedness to Total Unencumbered Eligible Property Value^(e)	≤ 0.60 to 1.00		0.54
Dividends and Other Restricted Payments	Only applicable in case of default	Not Applicable

^(a)	The leverage ratio is calculated as the ratio of total indebtedness to total market value.

^(b)	The secured indebtedness ratio is the ratio of secured indebtedness to total market value.

^(c)	The unencumbered coverage ratio is the ratio of unencumbered net operating income (as defined in the agreements) for all eligible properties to unsecured interest expense for the most recent fiscal quarter.

^(d)	The fixed charge coverage ratio is the ratio of adjusted EBITDA to fixed charges for the most recent fiscal quarter.

^(e)	The ratio is calculated as the ratio of total unsecured indebtedness to unencumbered property value.

Capital Strategy

We believe our leverage policy and capital structure provide us with several advantages, including the ability to:

•

create a growing and diversified real estate portfolio with a flexible capital structure that allows for independent investing and financing decisions;

•

capitalize on competitive debt pricing;

•

add value to our stockholders through earnings growth via a growing pool of assets; and

•

issue unsecured debt having relatively limited negative financial covenants and maintain the distributions necessary to retain our REIT status in the event of contractual default, which we believe increases our corporate flexibility.

We intend to exercise the extension provisions of our debt instruments, refinance, or replace the existing borrowings as they become due, including through additional private debt placements, all with the goal of limiting future debt service to interest payments only. As a result, we do not intend to make principal payments on these debt obligations in the foreseeable future. Additionally, we may be required to increase our borrowing capacity to partially fund future acquisitions. We assess market conditions and the availability and pricing of debt on an ongoing basis, which are critical inputs in our strategic planning and decision-making process. While we believe the current market conditions provide our stockholders with an advantageous capitalization structure and risk-adjusted return, we believe our conservative capital structure is appropriate to absorb temporary market fluctuations. Significant adverse market conditions could impact the availability of debt to fund future acquisitions, our ability to recognize growth in earnings and return on investment for stockholders, and our ability to recast the debt facilities at cost-advantageous pricing points. In the event of such conditions, we would plan to revise our capitalization structure and strategic initiatives to maximize return on investment for our investors. To the extent that we are unable to recast our debt facilities, our cash flows from operations will not be adequate to pay the principal amount of debt, and we may be forced to liquidate properties to satisfy our obligations.

We believe that the cash generated by our operations and our ongoing private offering, our cash and cash equivalents at September 30, 2019, our current borrowing capacity under our Credit Facility and accordion feature of the 2026 Unsecured Term Loan, and our access to long-term debt capital, including through the debt private placement market, will be sufficient to fund our operations for the foreseeable future and allow us to acquire real estate to meet our strategic objectives.

Impact of Inflation

The leases in our portfolio are long-term in nature, with a current weighted average remaining lease term of 11.7 years as of September 30, 2019. To mitigate the impact of inflation on our fixed revenue streams, we have implemented limited rent escalation clauses in our leases. As of September 30, 2019, substantially all of our leases had contractual lease escalations, with an annual weighted average of 2.0%. 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. These lease escalations mitigate the risk of fixed revenue streams in the case of an inflationary economic environment, and provide increased return in otherwise stable market conditions. As a majority of our portfolio has fixed lease escalations, there is a risk that inflation could be greater than the contractual rent increases.

Our focus on single-tenant, net leases also shelters us from inflationary fluctuations in the cost of services and maintenance. 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). Inflation and increased costs may have an adverse impact on our tenants and their creditworthiness if the increase in costs is 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.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of September 30, 2019, or December 31, 2018.

Contractual Obligations

The following table provides information with respect to our contractual commitments and obligations as of September 30, 2019 (dollar amounts in thousands).

Year of Maturity	Term Loans^(a)		Revolver^(b)		Senior Notes		Mortgages and Notes Payable		Interest Expense^(c)		Tenant Improvement Allowances^(d)		Operating Leases		Total
Remainder of 2019	$	—	$	—	$	—	$	784	$	21,126	$	—	$	29	$	21,939
2020		300,000		—		—		3,210		79,642		3,664		120		386,636
2021		—		—		—		18,028		73,363		—		122		91,513
2022		—		303,300		—		2,930		61,903		—		124		368,257
2023		265,000		—		—		8,356		52,332		—		125		325,813
Thereafter		640,000		—		475,000		79,627		162,190		—		2,540		1,359,357
Total	$	1,205,000	$	303,300	$	475,000	$	112,935	$	450,556	$	3,664	$	3,060	$	2,553,515

^(a)	We may extend the 2020 Unsecured Term Loan twice, each time for a six-month period, subject to certain conditions, including the payment of an extension fee equal to 0.05% of the aggregate principal amount of loans outstanding.

^(b)	We may extend the Revolver once, for a five-month period, subject to certain conditions, including the payment of an extension fee equal to 0.0625% of the revolving commitments.

^(c)	Interest expense is projected based on the outstanding borrowings and interest rates in effect as of September 30, 2019. This amount includes the impact of interest rate swap agreements.

^(d)	We expect to pay tenant improvement allowances out of cash flows from operations or from additional borrowings.

At September 30, 2019, investment in rental property of $179.8 million is pledged as collateral against our mortgages and notes payable.

Additionally, as of September 30, 2019, we are a party to three separate Tax Protection Agreements (the “Agreements”) with the contributing members (the “Protected Members”) of three distinct UPREIT transactions. The Agreements require us to pay monetary damages in the event of a sale, exchange, transfer, or other disposal of the contributed property in a taxable transaction that would cause a Protected Member to recognize a Protected Gain, as defined in the Agreements, subject to certain exceptions. Based on values as of September 30, 2019, taxable sales of the applicable properties would trigger liability under the Agreements of approximately $12.3 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. Accordingly, we have excluded these commitments from the contractual commitments table above. For a more detailed discussion of the Agreements, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations”, in our Form 10-K.

Results of Operations

Overview

As of September 30, 2019, our real estate investment portfolio had grown to a net book value of $3,501.5 million, consisting of investments in 661 commercial real estate properties with locations in 42 U.S. states and one commercial property located in British Columbia, Canada, and leased to tenants in various industries. All but four of our properties were subject to a lease as of September 30, 2019, and substantially all of our leasing activity related to our real estate acquisitions.

Lease Revenues

	For the three months ended									For the nine months ended
	September 30,				Increase/(Decrease)					September 30,				Increase/(Decrease)
(in thousands)	2019		2018		$		%			2019		2018		$		%
Lease revenues	$	76,401	$	61,764	$	14,637		23.7	%	$	213,884	$	174,385	$	39,499		22.7	%

The increase in revenues for the three and nine months ended September 30, 2019, is primarily attributable to the growth in our real estate portfolio, which was achieved through rent escalations associated with our same property portfolio, coupled with ren tal revenue generated from accretive property acquisitions completed since the third quarter of 2018, and continued strong portfolio operating performance. Since the third quarter of 2018, we have acquired 109 new properties for $1.2 billion, excluding capitalized acquisition costs, including 66 new properties acquired for $993.7 million during the first nine months of 2019. During the year, we experienced greater than 99% rent collection and occupancy (based on rentable square footage), and as of September 30, 2019, the weighted average annual rent increases on our properties was 2.0%.

Operating Expenses

	For the three months ended										For the nine months ended
	September 30,				Increase/(Decrease)						September 30,				Increase/(Decrease)
(in thousands)	2019		2018		$			%			2019		2018		$			%
Operating expenses
Depreciation and amortization	$	28,392	$	21,869	$	6,523			29.8	%	$	77,989	$	61,303	$	16,686			27.2	%
Asset management fees		5,610		4,663		947			20.3	%		16,048		13,119		2,929			22.3	%
Property management fees		2,098		1,680		418			24.9	%		5,918		4,792		1,126			23.5	%
Property and operating expense		3,855		2,777		1,078			38.8	%		11,497		7,926		3,571			45.1	%
General and administrative		1,315		1,664		(349	)		(21.0	)%		3,807		4,451		(644	)		(14.5	)%
State, franchise and foreign tax		405		58		347		>100.0		%		1,153		811		342			42.2	%
Provision for impairment of investment in rental properties		2,435		2,061		374			18.1	%		3,452		2,061		1,391			67.5	%
Total operating expenses	$	44,110	$	34,772	$	9,338			26.9	%	$	119,864	$	94,463	$	25,401			26.9	%

Depreciation and amortization

The increase in Depreciation and amortization expense for the three and nine months ended September 30, 2019, is primarily due to the growth in our real estate portfolio, as discussed above.

Asset management fees

We pay the Asset Manager a quarterly fee equal to 0.25% of the aggregate value of our equity on a fully diluted basis, based on the Determined Share Value. The increase in asset management fees during the three and nine months ended September 30, 2019, is primarily the result of an increase in our total outstanding equity on a fully diluted basis, which resulted from continued equity capital investments. As of September 30, 2019, there were 27.2 million shares of our common stock and non-controlling membership units outstanding, compared to 22.8 million as of September 30, 2018. The increase in equity capital was used to partially fund the continued growth in our real estate portfolio. In addition to the increase in total outstanding equity, the increase in asset management fees reflects higher average Determined Share Values in effect.

Property and operating expense

The increase in property and operating expense in the three and nine months ended September 30, 2019, is mainly attributable to the number of properties we own for which we are responsible for engaging a third-party property manager to manage ongoing property maintenance, along with insurance and real estate taxes associated with those properties. We pay a majority of these expenses and are reimbursed by the tenant under the terms of the respective leases. There was a corresponding increase in operating expenses billed to tenants and included within Lease revenues.

Provision for impairment of investment in rental properties

During the three and nine months ended September 30, 2019, we recognized $2.4 million and $3.5 million, respectively, of impairment on our investments in rental properties. 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. If and when such events or changes in circumstances are present, an impairment exists to the extent the carrying value of the asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use of the asset or asset group and its eventual disposition. The impairments recognized during the nine months ended September 30, 2019, related to four properties whose carrying amounts we determined were not recoverable. In determining the fair value of the assets at the time of measurement, we utilized a capitalization rate of 14.6%, a weighted average discount rate of 8%, and a weighted average price per square foot of $226. During the three and nine months ended September 30, 2018, we recognized $2.1 million of impairment on our investments in rental properties. The impairment related to five properties whose carrying amounts we determined were not recoverable. In determining the fair value of the assets at the time of measurement, we utilized capitalization rates ranging from 7.5% to 10%, and a weighted average discount rate of 8%.

Other income (expenses)

	For the three months ended												For the nine months ended
	September 30,						Increase/(Decrease)						September 30,						Increase/(Decrease)
(in thousands)	2019			2018			$			%			2019			2018			$			%
Other income (expenses)
Preferred distribution income	$	—		$	65		$	(65	)		(100.0	)%	$	—		$	440		$	(440	)		(100.0	)%
Interest income		5			16			(11	)		(68.8	)%		6			178			(172	)		(96.6	)%
Interest expense		(18,465	)		(14,484	)		3,981			27.5	%		(51,025	)		(38,115	)		12,910			33.9	%
Cost of debt extinguishment		(455	)		(50	)		405		>100.0		%		(1,176	)		(101	)		1,075		>100.0		%
Gain on sale of real estate		12,585			2,025			10,560		>100.0		%		16,772			9,620			7,152			74.3	%
Gain on sale of investment in related party		—			8,500			(8,500	)		(100.0	)%		—			8,500			(8,500	)		(100.0	)%
Internalization expenses		(923	)		—			(923	)		>100.0	%		(1,195	)		—			(1,195	)		>100.0	%

Interest expense

The increased interest expense during the three and nine months ended September 30, 2019, resulted primarily from a $785.9 million increase in outstanding borrowings from September 30, 2018, used partially to fund additional real estate investments. We continue to focus on strengthening our investment grade balance sheet by more closely aligning debt maturities and lease terms, accomplished through the refinancing of shorter-term borrowings with longer duration fixed-rate debt. While the benefits of our debt capital markets strategy are partially mitigated by higher-costing instruments, we were able to take advantage of the decreasing interest rates during the third quarter of 2019, as our percentage of floating-rate debt increased concurrently with our funding of the $735.7 million industrial and office portfolio. Our weighted average cost of borrowings, inclusive of interest rate swaps, was 3.94% at September 30, 2019, compared to 4.21% at September 30, 2018. We attempt to limit our total floating-rate debt exposure to no more than 5% of the approximate market value of assets, and expect to reduce our current exposure as we look to refinance or replace the short-term borrowings used to finance the acquisition of the industrial and office portfolio.

Gain on sale of real estate

Our recognition of a gain or loss on the sale of real estate varies from transaction to transaction based on fluctuations in asset prices and demand in the real estate market. During the three months ended September 30, 2019, we recognized gains of $12.6 million on the sale of 16 properties, compared to gains of $2.0 million on the sale of four properties during the three months ended September 30, 2018. During the nine months ended September 30, 2019, we recognized gains of $16.8 million on the sale of 25 properties, compared to gains of $9.6 million on the sale of 15 properties during the nine months ended September 30, 2018.

Gain on sale of investment in related party

During the three months ended September 30, 2018, we sold our investment of 100 non-voting convertible preferred units of our Manager, a related party, to another related party of the Manager, for an aggregate sales price of $18.5 million. The preferred units had a carrying value of $10 million at the time of sale, resulting in a gain of $8.5 million. Prior to the sale, we received preferred distribution income on the preferred units.

Internalization expenses

During the three and nine months ended September 30, 2019, we incurred $0.9 million and $1.2 million, respectively, of third-party fees and consulting expenses associated with the pending Internalization.

Net Income and Non-GAAP Measures (FFO and AFFO)

Our reported results and net earnings per diluted share are presented in accordance with GAAP. We also disclose FFO and AFFO, each of which are non-GAAP measures. We believe the presentation of FFO and AFFO are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs. FFO and AFFO should not be considered alternatives to net income as a performance measure or to cash flows from operations, as reported on our statement of cash flows, or as a liquidity measure, and should be considered in addition to, and not in lieu of, GAAP financial measures.

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. 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. To derive AFFO, we modify the Nareit computation of FFO to include other adjustments to GAAP net income related to certain non-cash revenues and expenses, including straight-line rents, cost of debt extinguishments, amortization of lease intangibles, amortization of debt issuance costs, amortization of net mortgage premiums, (gain) loss on interest rate swaps and other non-cash interest expense, realized gains or losses on foreign currency transactions, internalization expenses, extraordinary items, and other specified non-cash items. We believe that such items are not a result of normal operations and thus we believe excluding such items assists management and investors in distinguishing whether changes in our operations are due to growth or decline of operations at our properties or from other factors.

Our leases include cash rents that increase over the term of the lease to compensate us for anticipated increases in market rentals over time. Our leases do not include significant front-loading or back-loading of payments, or significant rent-free periods. Therefore, we find it useful to evaluate rent on a contractual basis as it allows for comparison of existing rental rates to market rental rates. We further exclude costs or gains recorded on the extinguishment of debt, non-cash interest expense and gains, the amortization of debt issuance costs, net mortgage premiums, and lease intangibles, realized gains and losses on foreign currency transactions, and internalization expenses, as these items are not indicative of ongoing operational results. We use AFFO as a measure of our performance when we formulate corporate goals.

FFO is used by management, investors, and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers, primarily because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. We believe that AFFO is a useful supplemental measure for investors to consider because it will help them to better assess our operating performance without the distortions created by non-cash revenues or expenses. FFO and AFFO may not be comparable to similarly titled measures employed by other REITs, and comparisons of our FFO and AFFO with the same or similar measures disclosed by other REITs may not be meaningful.

Neither the SEC nor any other regulatory body has passed judgment on the acceptability of the adjustments to FFO that we use to calculate AFFO. In 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 AFFO accordingly.

The following table presents our net income and our non-GAAP FFO and AFFO for the three and nine months ended September 30, 2019 and 2018. Our measures of FFO and AFFO are computed on the basis of amounts attributable to both us and non-controlling interests. As the non-controlling interests share in our net income on a one-for-one basis, the basic and diluted per share amounts are the same.

	For the three months ended										For the nine months ended
	September 30,				Increase/(Decrease)						September 30,				Increase/(Decrease)
(in thousands, except per share data)	2019		2018		$			%			2019		2018		$			%
Net income	$	25,038	$	23,064	$	1,974			8.6	%	$	57,402	$	60,444	$	(3,042	)		(5.0	)%
Net earnings per diluted share		0.95		1.03		(0.08	)		(7.8	)%		2.28		2.81		(0.53	)		(18.9	)%
FFO		43,280		44,969		(1,689	)		(3.8	)%		122,071		114,188		7,883			6.9	%
FFO per diluted share		1.64		2.02		(0.38	)		(18.8	)%		4.86		5.31		(0.45	)		(8.5	)%
AFFO		38,819		31,315		7,504			24.0	%		107,625		91,513		16,112			17.6	%
AFFO per diluted share		1.47		1.40		0.07			5.0	%		4.28		4.26		0.02			0.5	%
Diluted WASO⁽^a)		26,379		22,291		4,088			18.3	%		25,131		21,496		3,635			16.9	%

^(a)	Weighted average number of shares of our common stock and membership units outstanding (“WASO”), computed in accordance with GAAP.

Net income

For the three months ended September 30, 2019, growth in net income was primarily attributable to revenue growth as discussed above, combined with a $10.6 million increase in our gain on sale of real estate. These factors were partially offset by a $6.5 million increase in depreciation and amortization expense associated with a larger real estate portfolio, a $4.0 million increase in interest expense associated with incremental borrowings used to fund our real estate acquisitions, and $0.9 million in internalization expenses incurred in 2019. We also recognized an $8.5 million gain on the sale of an investment in a related party during 2018, with no such activity in 2019. In addition to the factors driving net income for the three months ended September 30, 2019, the decrease in net income for the nine months ended September 30, 2019, is attributable to a $1.1 million increase in cost of debt extinguishment primarily associated with our debt refinancing in the first quarter of 2019.

GAAP net income includes items such as gain or loss on sale of real estate and provisions for impairment, among others, which can vary from quarter to quarter and impact period-to-period comparisons. The fluctuations, coupled with our ongoing equity offering, resulted in a $0.08 and $0.53 decrease in net earnings per diluted share for the three and nine months ended September 30, 2019, respectively.

AFFO

The increase in AFFO during the three and nine months ended September 30, 2019, as compared to the same periods in 2018, was primarily driven by revenue growth in our real estate investment portfolio. As discussed above, this resulted from rent escalations associated with our same property portfolio, accretive acquisitions made since the third quarter of 2018, and strong portfolio operating performance.

During the first six months of 2019, our per share results were negatively impacted by funding a larger portion of our acquisitions with equity and proceeds recycled from property dispositions. We re-balanced our funding mix for the year with the closing of our $735.7 million industrial and office portfolio acquisition on August 29, 2019, and increased our leverage ratio to 47.5% as of September 30, 2019. The accretive nature of our acquisitions during the year and increase in leverage in the third quarter resulted in a $0.07 increase in AFFO per diluted share as compared to the third quarter of 2018. We expect these factors to contribute to positive fourth quarter results, and are committed to maintaining an investment grade balance sheet through active management of our leverage profile and overall liquidity position

Reconciliation of Non-GAAP Measures

The following is a reconciliation of net income to FFO and AFFO, which are non-GAAP financial measures. Also presented is information regarding diluted WASO and per diluted share amounts:

	For the three months ended						For the nine months ended
(in thousands, except per share data)	September 30,						September 30,
	2019			2018			2019			2018
Net income	$	25,038		$	23,064		$	57,402		$	60,444
Real property depreciation and amortization		28,392			21,869			77,989			61,303
Gain on sale of real estate		(12,585	)		(2,025	)		(16,772	)		(9,620	)
Provision for impairment on investment in rental properties		2,435			2,061			3,452			2,061
FFO	$	43,280		$	44,969		$	122,071		$	114,188
Capital improvements / reserves		—			(49	)		(97	)		(147	)
Straight-line rent adjustment		(5,499	)		(5,337	)		(15,882	)		(15,640	)
Cost of debt extinguishment		455			50			1,176			101
Gain on sale of investment in related party		—			(8,500	)		—			(8,500	)
Amortization of debt issuance costs		611			477			1,761			1,410
Amortization of net mortgage premiums		(37	)		(36	)		(108	)		(107	)
Gain on interest rate swaps and other non-cash interest expense		(41	)		(4	)		(163	)		(4	)
Amortization of lease intangibles		(873	)		(255	)		(2,328	)		212
Internalization expenses		923			—			1,195			—
AFFO	$	38,819		$	31,315		$	107,625		$	91,513

Diluted WASO		26,379			22,291			25,131			21,496

Net earnings per share, basic and diluted	$	0.95		$	1.03		$	2.28		$	2.81
FFO per diluted share		1.64			2.02			4.86			5.31
AFFO per diluted share		1.47			1.40			4.28			4.26

Critical Accounting Policies

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of our Condensed Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Management bases its estimates on historical experience and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

As discussed in Note 2 in the Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q, during the first quarter of 2019, we adopted the provisions of ASC 842, which resulted in a change to the critical accounting policy with respect to revenue recognition that had been disclosed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2018 Form 10-K. We believe there have been no other significant changes during the nine months ended September 30, 2019, to the items that we disclosed as our critical accounting policies in our 2018 Form 10-K.

Impact of Recent Accounting Pronouncements

For information on the impact of recent accounting pronouncements on our business, see Note 2 of the Notes to the Condensed Consolidated Financial Statements included in this Form 10-Q.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

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 and the floating-rate mortgage bear interest at floating rates based on LIBOR plus an applicable margin. 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 manage a portion of our interest rate risk by entering into interest rate swaps. Our interest rate risk management strategy is intended to stabilize cash flow requirements by maintaining interest rate swaps to convert certain variable-rate debt to a fixed rate. As of September 30, 2019, we had 34 interest rate swaps outstanding, in an aggregate notional amount of $909.9 million. 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. 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. We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes.

The table below summarizes the terms of our interest rate swaps at September 30, 2019.

(in thousands, except interest rates)
Counterparty	Maturity Date	Fixed Rate			Variable Rate Index	Notional Amount		Fair Value
Bank of America, N.A.	November 2023		2.80	%	one-month LIBOR	$	25,000	$	(1,389	)
Bank of Montreal	July 2024		1.16	%	one-month LIBOR		40,000		421
Bank of Montreal	January 2025		1.91	%	one-month LIBOR		25,000		(694	)
Bank of Montreal	July 2025		2.32	%	one-month LIBOR		25,000		(1,333	)
Bank of Montreal	January 2026		1.92	%	one-month LIBOR		25,000		(833	)
Bank of Montreal	January 2026		2.05	%	one-month LIBOR		40,000		(1,643	)
Bank of Montreal	December 2026		2.33	%	one-month LIBOR		10,000		(662	)
Bank of Montreal	December 2026		1.99	%	one-month LIBOR		25,000		(1,058	)
Bank of Montreal	December 2027		2.37	%	one-month LIBOR		25,000		(1,905	)
Bank of Montreal	May 2029		2.09	%	one-month LIBOR		25,000		(1,502	)
Capital One, National Association	December 2021		1.05	%	one-month LIBOR		15,000		133
Capital One, National Association	December 2024		1.58	%	one-month LIBOR		15,000		(165	)
Capital One, National Association	January 2026		2.08	%	one-month LIBOR		35,000		(1,515	)
Capital One, National Association	April 2026		2.68	%	one-month LIBOR		15,000		(1,243	)
Capital One, National Association	July 2026		1.32	%	one-month LIBOR		35,000		118
Capital One, National Association	December 2027		2.37	%	one-month LIBOR		25,000		(1,932	)
M&T Bank	August 2021		1.02	%	one-month LIBOR		4,948		42
M&T Bank	September 2022		2.83	%	one-month LIBOR		25,000		(1,031	)
M&T Bank	November 2023		2.65	%	one-month LIBOR		25,000		(1,284	)
Regions Bank	May 2020		2.12	%	one-month LIBOR		50,000		(104	)
Regions Bank	December 2023		1.18	%	one-month LIBOR		25,000		199
Regions Bank	May 2029		2.11	%	one-month LIBOR		25,000		(1,562	)
Regions Bank	June 2029		2.03	%	one-month LIBOR		25,000		(1,383	)
SunTrust Bank	April 2024		1.99	%	one-month LIBOR		25,000		(745	)
SunTrust Bank	April 2025		2.20	%	one-month LIBOR		25,000		(1,181	)
SunTrust Bank	July 2025		1.99	%	one-month LIBOR		25,000		(934	)
SunTrust Bank	December 2025		2.30	%	one-month LIBOR		25,000		(1,474	)
SunTrust Bank	January 2026		1.93	%	one-month LIBOR		25,000		(915	)
U.S. Bank National Association	June 2029		2.03	%	one-month LIBOR		25,000		(1,395	)
U.S. Bank National Association	August 2029		1.35	%	one-month LIBOR		25,000		207
Wells Fargo Bank, N.A.	February 2021		2.39	%	one-month LIBOR		35,000		(385	)
Wells Fargo Bank, N.A.	October 2024		2.72	%	one-month LIBOR		15,000		(994	)
Wells Fargo Bank, N.A.	April 2027		2.72	%	one-month LIBOR		25,000		(2,427	)
Wells Fargo Bank, N.A.	January 2028		2.37	%	one-month LIBOR		75,000		(5,801	)
						$	909,948	$	(36,369	)

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 September 30, 2019, our financial instruments were not exposed to significant market risk due to foreign currency exchange risk.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of and for the quarter ended September 30, 2019, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and were operating at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting that occurred during the quarter ended September 30, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II – OTHER INFORMATION

Item 1.

Legal Proceedings.

From time to time, we are subject to legal proceedings and claims that arise in the ordinary course of our business. These matters are generally covered by insurance or are subject to our right to be indemnified by our tenants that we include in our leases. Management is not aware of any material pending 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 1A.

Risk Factors.

There have been no material changes from the risk factors set forth in our Form 10-K, other than the following which we have identified as a result of the pending Internalization.

The pendency of the Internalization could adversely affect our business and operations.

Between the date that the Merger Agreement and other documents related to the Internalization were executed and the date that the Internalization is consummated, the attention of our management may be diverted from our day-to-day operations, regardless of whether or not the Internalization is ultimately consummated. The pendency of the Internalization could have an adverse impact on our relationships with other parties, which parties may delay or decline entering into agreements with us as a result of the announcement of our entry into the Merger Agreement. In addition, due to covenants in the Merger Agreement, we may be unable during the pendency of the Internalization to pursue certain transactions or pursue certain other actions that are not in the ordinary course of business, even if such actions would prove beneficial.

There can be no certainty that the Internalization will be consummated and our inability to consummate the Internalization may materially adversely affect our business, financial condition and results of operations.

Consummation of the Internalization is subject to the satisfaction or waiver of a number of conditions. There can be no guarantee that all of these closing conditions will be satisfied or waived and the Internalization consummated. If the Internalization is not consummated, we may be subject to a number of material risks that could materially adversely affect our business, financial condition, and results of operations, including:

●

our strategy of simplifying our business and focusing on maximizing long-term stockholder value could be materially delayed; and

●

we will have incurred substantial costs and expenses related to the Internalization and the satisfaction or attempted satisfaction of the closing conditions related thereto, including legal, accounting and advisory fees, which will be payable by us even if the Internalization is not consummated.

There may be unexpected delays in the consummation of the pending Internalization.

The consummation of the Internalization may be delayed by a variety of events, including those that are not within our control. Events that could delay the consummation of the Internalization include delays and difficulties in satisfying any closing conditions to which the Internalization is subject. The Merger Agreement provides that either we or the Manager may terminate the Merger Agreement if the Internalization has not occurred by March 31, 2020.

We may not manage the Internalization efficiently and effectively or realize its anticipated benefits.

We may not be able to successfully internalize our management in a manner that permits us to realize the anticipated benefits of the Internalization. We may not be able to retain all of the current employees of our Manager that we expect will become our employees as a result of the Internalization. The failure to manage the Internalization efficiently and effectively, including the failure to smoothly transition services or retain employees, could result in the anticipated benefits of the Internalization not being realized in the timeframe currently anticipated or at all.

The Merger Agreement and other agreements entered into in connection with the Internalization were negotiated between a special committee of our Board of Directors composed entirely of independent, disinterested directors (the “Special Committee”) and certain of our officers and directors that are affiliated with our Manager, which may give rise to conflicts of interests.

Certain of our officers and directors are affiliated with the Manager, including Ms. Amy L. Tait and Mr. Christopher J. Czarnecki, each of whom serve as a member of the Manager’s four-person board of managers. Accordingly, those officers and directors may receive economic benefits as a result of the Internalization that may differ from, and conflict with, our interests and the interests of our stockholders. The terms and conditions of the agreements entered into in connection with the Internalization, which were negotiated between the Special Committee and our Manager, may not be as favorable to us as if they had been negotiated with unaffiliated third parties. Moreover, the representations, warranties, covenants, and indemnities in the Merger Agreement and the other agreements related to the Internalization are subject to limitations and qualifiers, which may limit our ability to enforce any remedy under such agreements.

The Internalization may not be financially beneficial to us and our stockholders and our net income, funds from operations (“FFO”), and adjusted funds from operations (“AFFO”) may decrease as a result of the Internalization.

There is no assurance that the Internalization will be financially beneficial to us and our stockholders. If the expenses we assume as a result of the Internalization are higher than the fees that we have historically paid to the Manager or otherwise higher than we anticipate, we may not realize the anticipated cost savings and other benefits from the Internalization and our net income, FFO per share and AFFO per share could decrease, which could have a material adverse effect on our business, financial condition, and results of operations.

The Internalization will be a time-consuming and costly process and the expenses arising from the Internalization could exceed our current estimates. Further, transactions involving the internalization by a REIT of an external manager affiliated with the REIT’s sponsor have, in some cases, been the subject of litigation. If such litigation arose in connection with the Internalization, we could be forced to spend significant amounts of money and management resources defending the claims (even if such claims were without merit), which would reduce the amount of funds available for us to invest in properties or other investments or to pay distributions. Additionally, while we will no longer effectively bear the costs of the various fees and currently paid to the Manager following the Internalization, our expenses following the Internalization will include the compensation and benefits of our executive officers and employees, as well as overhead currently paid by the Manager or its affiliates in managing our business and operations. Furthermore, the individuals who we expect will be our employees following the Internalization will be providing us with services historically provided by the Manager. There are no assurances that, following the Internalization, these employees will be able or incentivized to provide services at the same level or for the same costs as are currently provided to us by the Manager. There may also be other unforeseen costs, expenses and difficulties associated with operating as an internally managed company.

The issuance of shares of our common stock and units of membership interest in the Operating Company in connection with the Internalization would have a dilutive effect on the voting power and relative ownership interest of our current stockholders.

The issuance of shares of our common stock and units of membership interest in the Operating Company in the Internalization will have a dilutive effect on the voting power and relative ownership interest of our current stockholders. In addition, each unit of membership interest in the Operating Company issued in connection with the consummation of the Internalization will be convertible into shares of our common stock, subject to the terms and conditions for such conversions set forth in the limited liability company agreement of the Operating Company. The conversion of such units into shares of our common stock in the future would further dilute the voting power and relative ownership of our current stockholders.

Following the consummation of the Internalization, we may be exposed to risks to which we have not historically been exposed.

The consummation of the Internalization will expose us to risks to which we have not historically been exposed. Pursuant to the Merger Agreement, we will assume certain potential liabilities relating to the assets of the Manager. These liabilities could have a material adverse effect on our business to the extent we have not identified such liabilities or have not accurately estimated the amount of such liabilities. Our overhead will increase as a result of our becoming internally managed following the Internalization. In addition, following the consummation of the Internalization, we will be subject to the potential liabilities commonly faced by employers, including workers disability and compensation claims, potential labor disputes, and other employee-related liabilities and grievances, and we will bear the costs of the establishment and maintenance of health, retirement, and similar benefit plans for our employees. Finally, there may be other unforeseen costs and expenses associated with operating as an internally managed company.

There is no guarantee that our key employees will remain employed by us for any specified period of time and will not engage in competitive activities if they cease to be employed with or engaged by us.

The execution of employment agreements between us and certain key persons currently employed by the Manager or its affiliate, including Christopher J. Czarnecki, Chief Executive Officer and President; Ryan M. Albano, Chief Financial Officer; John D. Moragne, Chief Operating Officer; and Sean T. Cutt, Chief Investment Officer (the “Senior Employees”), is a condition to the consummation of the Internalization. The employment agreements with each Senior Employee will be structured to incentivize the Senior Employees to remain employed by us, will become effective upon the consummation of the Internalization, and will have a four-year term. However, the departure or the loss of the services of any Senior Employee, or other senior personnel, following the Internalization could have a material adverse effect on our business, financial condition, results of operations and ability to effectively operate our business.

Further, the employment agreements with the Senior Employees will contain restrictions on the activities of such Senior Employees, including restrictions on engaging in activities that are deemed competitive to our business. Although we believe these restrictions to be enforceable under current law, there can be no guarantee that if a Senior Employee were to breach the restrictions and engage in competitive activities, we would be successful in fully enforcing the restrictions. If a Senior Employee were to terminate his or her employment with us and engage in competitive activities, such activities could have a material adverse effect on our business, financial condition and results of operations.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

Sales of Common Stock and Issuance of Membership Units

We commenced our ongoing private offering of shares of our common stock in 2007. The first closing of our private offering occurred on December 31, 2007, and we have conducted additional closings at least once every calendar quarter since then. During each of the periods covered by this Form 10-Q, we closed sales of additional shares of our common stock on a monthly basis. In November 2017, we instituted an equity cap and queue program for new and additional investments in our common stock. The cap does not apply to investments made pursuant to our DRIP, or to equity capital received in connection with UPREIT transactions. For the months of February 2019 through June 2019, new and additional investments were capped at $20 million per month. On July 3, 2019, we announced that we were removing the equity cap for the month of July 2019 based on our current leverage profile and pipeline of potential acquisitions. There is currently no established equity cap. We anticipate reinstating the equity cap once we are comfortably within the leverage range of our investment grade credit rating. As a result of a pending transaction, we determined that we would not hold an equity closing as of October 31, 2019. The next equity closing will occur on November 29, 2019.

If the total subscriptions for shares of our common stock exceed the cap for a month, subscriptions will generally be accepted at that month’s closing in the order in which they were submitted. In our or the Asset Manager’s discretion, however, certain subscriptions may be given priority over other subscriptions based on factors other than the order of submission, including the size of the subscription, the size of a stockholder’s existing investment, whether the subscription was sourced through an existing or new intermediary relationship, and such other factors we or the Asset Manager may consider. Any subscription for shares that we do not accept at any closing may be held for two subsequent closings and, if so held, shall be treated as a continuing subscription to purchase any remaining shares at the two subsequent closings (and, if applicable, any additional subsequent closings resulting from the subscriber’s exercise of the renewal option discussed below) at the offering price then in effect. If we do not accept and request payment for all of the shares subscribed for at one of the first three closings after receipt of a subscription, the subscriber will have the option to renew its subscription for three additional closings and maintain its position in any equity subscription queue by providing written notice of the subscriber’s election to exercise such option. The same option will be available to the subscriber for each subsequent three-closing period.

For the nine months ended September 30, 2019, we sold 3.6 million shares of our common stock in our private offering, including 0.6 million shares of common stock issued pursuant to our DRIP, for gross offering proceeds of approximately $307.9 million. We intend to use substantially all of the net proceeds from our private offering, supplemented with additional borrowings, to continue to invest in additional net leased properties, to reduce our outstanding indebtedness, and for general corporate purposes.

The following table provides information regarding the sale of shares of our common stock pursuant to our ongoing private offering during the nine months ended September 30, 2019 (in thousands, except year and Determined Share Value amounts).

Month	Year	Common Shares Sold		Weighted Average Determined Share Value — Common Shares^(a)		Total Proceeds — Common Shares Sold		Common Shares DRIP		Weighted Average Determined Share Value — DRIP^(b)		Total Proceeds — Common Share DRIP^(c)		Total Proceeds
January	2019		233	$	86.00	$	20,000		58	$	84.28	$	4,862	$	24,862
February	2019		235	$	85.00		20,000		58	$	84.28		4,930		24,930
March	2019		235	$	85.00		20,000		62	$	83.30		5,136		25,136
April	2019		235	$	85.00		20,000		63	$	83.30		5,224		25,224
May	2019		233	$	86.00		20,000		64	$	83.30		5,306		25,306
June	2019		233	$	86.00		20,000		63	$	84.28		5,339		25,339
July	2019		990	$	86.00		85,182		64	$	84.28		5,379		90,561
August	2019		466	$	85.00		39,573		64	$	84.28		5,430		45,003
September	2019		186	$	85.00		15,828		68	$	83.30		5,666		21,494
Total			3,046			$	260,583		564			$	47,272	$	307,855

^(a)	Shares of our common stock are sold in our ongoing private offering at a price per share equal to the then-applicable Determined Share Value.

^(b)	DRIP shares are purchased at a discounted price of 98% of the Determined Share Value.

^(c)	For common shares reinvested under our DRIP there is no corresponding cash flow from the transaction. Refer to Note 13 to the Condensed Consolidated Financial Statements included in this Form 10-Q for further discussion.

None of the shares of our common stock set forth in the table above were registered under the Securities Act, and all of the shares were issued in reliance upon the exemption from registration under the Securities Act provided by Rule 506(c) under Regulation D promulgated under the Securities Act. All of the shares of our common stock set forth in the table above were sold to persons who represented to us in writing that they qualified as an “Accredited Investor” as such term is defined by Regulation D promulgated under the Securities Act, and provided us with additional documentation to assist us in verifying such person’s status as an Accredited Investor.

Repurchases of Equity Securities

During the three months ended September 30, 2019, we fulfilled repurchase requests and repurchased shares of our common stock pursuant to our share redemption program as follows.

Period	Total Number of Shares Requested to be Redeemed ^(a)		Total Number of Shares Redeemed		Average Price Paid Per Share ^(b)		Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
July 2019		—		—		—	^(c)
August 2019		—		—		—	^(c)
September 2019		88,150		88,150	$	83.51	^(c)

^(a)

Repurchases of shares of our common stock pursuant to the share redemption program will be made quarterly, at the end of the quarter, upon written request to us delivered at least 10 calendar days prior to the last business day of the applicable calendar quarter, and the redemption price paid for redeemed shares will be paid in cash within three business days of the last business day of the applicable calendar quarter.

^(b)

Shares held for more than 12 months, but less than five years, will be redeemed at a purchase price equal to 95% of the Determined Share Value in effect as of the last business day of the quarter in which the shares are timely tendered for redemption and shares held for five years or more will be redeemed at a purchase price equal to 100% of the Determined Share Value in effect as of the last business day of the quarter in which the shares are timely tendered for redemption, subject to certain exceptions as set forth in the share redemption program.

^(c)

The total number of shares redeemed pursuant to the share redemption program in any quarter may not exceed (i) 1% of the total number of shares outstanding at the beginning of the applicable calendar year, plus (ii) 50% of the total number of any additional shares of our common stock issued during the prior calendar quarter pursuant to our DRIP; provided, however, that the total number of shares redeemed during any calendar year may not exceed 5% of the number of shares outstanding as of the first day of such calendar year.

Item 3.

Defaults Upon Senior Securities.

None.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information.

The other information presented below is being filed as a result of the Company’s adoption of the new accounting guidance for lease accounting (“ASC 842”) on January 1, 2019. As part of that adoption, the Company elected the available practical expedient, for all classes of assets, not to separate lease components in contracts from the nonlease components in those contracts, when recording revenues associated with operating leases where it is the lessor. Since the lease component is the predominant component under the Company’s leases, combined revenues from both the lease and nonlease components are accounted for in accordance with ASC 842 and will be reported in all periods subsequent to the adoption of the new accounting guidance in a single caption, “Lease revenues,” on the Company’s Consolidated Statements of Income and Comprehensive Income. The presentation and disclosure of Lease revenues have been adjusted to reflect these changes for the three and nine months ended September 30, 2019. Refer to Reclassifications in Note 2 of Part I, Item 1. “Financial Statements,” for further details on these updates to significant accounting policies.

This information is intended to assist investors in making comparisons of the Company’s historical financial information with future financial information. The reported financial information below has been revised to conform to the current presentation.

This table below summarizes total revenues as originally reported in the Consolidated Statements of Income and Comprehensive Income included in the Company’s 2018 Annual Report on Form 10-K, as follows (in thousands):

As originally reported

	For the years ended December 31,
	2018		2017		2016
Revenues
Rental income from operating leases	$	222,208	$	170,493	$	133,943
Earned income from direct financing leases		3,941		4,141		4,544
Operating expenses reimbursed from tenants		11,221		6,721		4,173
Other income from real estate transactions		109		208		209
Total revenues	$	237,479	$	181,563	$	142,869

As revised

	For the years ended December 31,
	2018		2017		2016
Revenues
Lease revenues	$	237,479	$	181,563	$	142,869

Item 6.

Exhibits

No.		Description

3.1		Articles of Incorporation of Broadstone Net Lease, Inc. (Incorporated herein by reference to Exhibit 3.1 to the Company’s General Form for Registration of Securities on Form 10, filed on April 24, 2017)

3.2		Amended and Restated Bylaws of Broadstone Net Lease, Inc. (Incorporated herein by reference to Exhibit 3.2 to the Company’s General Form for Registration of Securities on Form 10, filed on April 24, 2017)

4.1		Broadstone Net Lease, Inc. Distribution Reinvestment Plan (Incorporated herein by reference to Exhibit 4.1 to the Company’s General Form for Registration of Securities on Form 10, filed on April 24, 2017)

4.2		Broadstone Net Lease, Inc. Share Redemption Program (Incorporated herein by reference to Exhibit 4.2 to the Company’s Amendment No. 2 to the General Form for Registration of Securities on Form 10, filed on June 29, 2017)

10.1*		First Amendment to Term Loan Agreement, dated February 27, 2019, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, Capital One, National Association, and the other parties thereto

10.2*		Partial Assignment and Assumption of Purchase Agreement, dated July 23, 2019, by and among Broadstone Net Lease, LLC, Broadstone Net Lease, Inc., CF Alpha & Golf Propco LLC, CF Alpha & Golf KS Propco LLC, CF Alpha & Golf MA Propco LLC, and CF Alpha & Golf Property BC ULC

10.3		Second Amendment to Revolving Credit and Term Loan Agreement, dated as of July 1, 2019, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, Manufacturers and Traders Trust Company, and the other parties thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 3, 2019, and incorporated herein by reference)

10.4		Term Loan Agreement, dated August 2, 2019, by and among Broadstone Net Lease, Inc., Broadstone Net Lease, LLC, JP Morgan Chase Bank, N.A., BMO Capital Markets Corp., Capital One, National Association, Regions Bank, Regions Capital Markets and the other lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed August 7, 2019, and incorporated herein by reference)

10.5		Guaranty, dated August 2, 2019, by Broadstone Net Lease, Inc. in favor of JP Morgan Chase Bank, N.A. (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed August 7, 2019, and incorporated herein by reference)

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.1*†		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

32.2*†		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

101.1		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income and Comprehensive Income, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements

*	Filed herewith.

†

In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		BROADSTONE NET LEASE, INC.

Date: November 12, 2019		/s/ Christopher J. Czarnecki
		Christopher J. Czarnecki
		Chief Executive Officer and President

Date: November 12, 2019		/s/ Ryan M. Albano
		Ryan M. Albano
		Executive Vice President and Chief Financial Officer

EXHIBIT 10.1

FIRST AMENDMENT TO TERM LOAN AGREEMENT

THIS FIRST AMENDMENT TO TERM LOAN AGREEMENT (this “Agreement”) dated as of July 1, 2019, is executed by the Lenders (as defined below) party hereto, CAPITAL ONE, NATIONAL ASSOCIATION, as Administrative Agent (the “Administrative Agent”), BROADSTONE NET LEASE, LLC (the “Borrower”) and BROADSTONE NET LEASE, INC. (the “Parent”).

WHEREAS, the Borrower, the Parent, the financial institutions party thereto (the “Lenders”), the Administrative Agent and certain other parties have entered into that certain Term Loan Agreement dated as of February 27, 2019 (as in effect immediately prior to the effectiveness of this Agreement, the “Credit Agreement”);

WHEREAS, the Borrower has requested the Credit Agreement be amended as set forth herein, including for the purpose of amending Sections 10.1.(a) and 10.1.(g) of the Credit Agreement;

WHEREAS, the Lenders party hereto, which constitute the Requisite Lenders, have agreed to provide that certain amendment set forth herein on the terms and conditions contained herein and, as applicable, have consented to this Agreement and the amendments to the Credit Agreement described in Section 1 below.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged by the parties hereto, the parties hereto hereby agree as follows:

Section 1. Amendments.

(a)Upon the effectiveness of this Agreement, and in reliance on the truth and accuracy of the representations set forth in Section 3 below, the Credit Agreement is hereby amended by deleting Section 10.1.(a) thereof in its entirety and replacing such Section with the following:

(a) Leverage Ratio. Except as otherwise provided in this subsection (a) below, the Parent shall not permit the ratio of (i) Total Outstanding Indebtedness of the Parent and its Subsidiaries to (ii) Total Market Value, to exceed 0.60 to 1.00 at any time. Notwithstanding the foregoing, the Parent shall have the option, exercisable two times during the term of this Agreement, to elect that the ratio of (i) Total Outstanding Indebtedness of the Parent and its Subsidiaries to (ii) Total Market Value may exceed 0.60 to 1.00 for any fiscal quarter in which the Borrower completes a Material Acquisition and the immediately subsequent two fiscal quarters so long as (1) the Parent has delivered a written notice to the Administrative Agent that the Parent is exercising its option under this subsection (a) and (2) such ratio does not exceed 0.65 to 1.00 at the end of the fiscal quarter for which such election has been made and the immediately subsequent two fiscal quarters.

(b)Upon the effectiveness of this Agreement, and in reliance on the truth and accuracy of the representations set forth in Section 3 below, the Credit Agreement is hereby further amended by deleting Section 10.1.(g) thereof in its entirety and replacing such Section with the following:

(g)Ratio of Total Unsecured Indebtedness to Total Unencumbered Eligible Property Value. Except as otherwise provided in this subsection (g) below, the Parent shall not permit the ratio of (i) Total Unsecured Indebtedness of the Parent and its Subsidiaries to (ii) Total Unencumbered Eligible Property Value to exceed 0.60 to 1.00 at any time. Notwithstanding the foregoing, the Parent shall have the option, exercisable two times

during the term of this Agreement, to elect that the ratio of (i) Total Unsecured Indebtedness of the Parent and its Subsidiaries to (ii) Total Unencumbered Eligible Property Value may exceed 0.60 to 1.00 for any fiscal quarter in which the Borrower completes a Material Acquisition and the immediately subsequent two fiscal quarters so long as (1) the Parent has delivered a written notice to the Administrative Agent that the Parent is exercising its option under this subsection (g) and (2) such ratio does not exceed 0.65 to 1.00 at the end of the fiscal quarter for which such election has been made and the immediately subsequent two fiscal quarters.

(c)Other than as expressly set forth herein, nothing contained herein shall in any way (i) waive, release, modify or limit the Loan Parties’ respective obligations to otherwise comply with all terms and conditions of any or all of the Credit Agreement and the other Loan Documents, or (ii) waive, release, modify or limit any or all of the Administrative Agent’s and/or the Lenders’ respective rights, remedies and privileges thereunder.

Section 2. Conditions Precedent. The effectiveness of this Agreement, including without limitation, the amendment set forth in Section 1 above, is subject to receipt by the Administrative Agent of each of the following, each in form and substance satisfactory to the Administrative Agent:

(a)a counterpart of this Agreement duly executed by the Borrower, the Parent, the Administrative Agent, and the other consenting Lenders constituting the Requisite Lenders;

(b)evidence that all fees (including the fees set forth in Section 9(a) below), expenses and reimbursement amounts due and payable to the Administrative Agent and each Signing Lender (as defined below) have been paid; and

(c)such other documents, instruments and agreements as the Administrative Agent may reasonably request.

Section 3. Representations of Borrower. The Borrower and the Parent each represents and warrants that:

(a)(i) this Agreement has been duly authorized by all necessary limited liability company action of the Borrower and all corporate action of the Parent, and the Parent has the requisite power and authority to execute and deliver on behalf of itself and the Borrower this Agreement, (ii) each of the Borrower and the Parent has the requisite power and authority to perform this Agreement and the Credit Agreement, as amended by this Agreement, in accordance with their respective terms, (iii) this Agreement has been duly executed and delivered by the Borrower and the Parent and each of this Agreement and the Credit Agreement, as amended by this Agreement, is a legal, valid and binding obligation of the Borrower and the Parent enforceable against the Borrower and the Parent in accordance with their respective terms except as (A) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors rights generally and (B) the availability of equitable remedies for the enforcement of certain obligations (other than the payment of principal) contained herein or therein and as may be limited by equitable principles generally;

(b)the execution and delivery by the Borrower and the Parent of this Agreement and the performance by the Borrower and the Parent of this Agreement and the Credit Agreement, as amended by this Agreement, in accordance with their respective terms, do not and will not, by the passage of time, the giving of notice, or both: (i) require any Governmental Approvals or violate any Applicable Law (including all Environmental Laws) relating to the Parent, the Borrower or any other Loan Party; (ii) conflict with, result in a breach of or constitute a default under (A) the organizational documents of the Parent, the Borrower or any other Loan Party, or (B) any indenture, agreement or other instrument to

which the Parent, the Borrower or any other Loan Party is a party or by which it or any of its respective properties are bound, except under this clause (B) as could not reasonably be expected to have a Material Adverse Effect; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Parent, the Borrower or any other Loan Party other than in favor of the Administrative Agent for its benefit and the benefit of the Lenders.

(c)(i) no Default or Event of Default has occurred and is continuing as of the effective date of this Agreement and immediately after giving effect to the amendment set forth herein and (ii) the representations and warranties made or deemed made by the Borrower or any other Loan Party in any Loan Document to which such Loan Party is a party are true and correct in all material respects (except in the case of a representation or warranty qualified by materiality, in which case such representation or warranty is true and correct in all respects) on the effective date of this Agreement and immediately after giving effect to the amendment set forth herein except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties are true and correct in all material respects (except in the case of a representation or warranty qualified by materiality, in which case such representation or warranty is true and correct in all respects) on and as of such earlier date) and except for changes in factual circumstances specifically and expressly permitted under the Credit Agreement.

Section 4. Reaffirmation. Each Guarantor hereby reaffirms its continuing obligations to the Administrative Agent and the Lenders under the Guaranty dated as of February 27, 2019 (as amended, restated, supplemented or otherwise modified from time to time, the “Guaranty”) and agrees that the transactions contemplated by the Agreement shall not in any way affect the validity and enforceability of the Guaranty, or reduce, impair or discharge the obligations of such Guarantor thereunder.

Section 5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

Section 6. Counterparts. This Agreement may be executed in any number of counterparts each of which, when taken together, shall constitute one and the same agreement. Signatures hereto delivered by facsimile transmission, emailed .pdf file or other similar forms of electronic transmission shall be deemed original signatures, which hereby may be relied upon by all parties and shall be binding on the respective signor.

Section 7. Headings. Section headings have been inserted herein for convenience only and shall not be construed to be a part hereof.

Section 8. Amendments; Waivers. This Agreement may not be amended, changed, waived or modified except by a writing executed by each of the Administrative Agent, the Requisite Lenders and the Borrower.

Section 9. Expenses. The Borrower shall reimburse the Administrative Agent upon demand for all reasonable and documented out-of-pocket costs and expenses (including reasonable attorneys’ fees) incurred by the Administrative Agent in connection with the preparation, negotiation and execution of this Agreement and the other agreements and documents executed and delivered in connection herewith.

Section 10. Benefits. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

Section 11. Effects. On and after the effectiveness of this Agreement, this Agreement shall constitute a Loan Document. Except as expressly herein amended, the terms and conditions of the Credit Agreement and the other Loan Documents remain in full force and effect. The amendments contained herein shall be deemed to have prospective application only from the date this Agreement becomes effective. The Credit Agreement, as herein amended, is hereby ratified and confirmed in all respects.

Section 12. Definitions. Capitalized terms not otherwise defined herein are used herein with the respective meanings given them in the Credit Agreement.

[Signature Pages Follow]

IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to Revolving Credit and Term Loan Agreement to be executed as of the date first above written.

	BROADSTONE NET LEASE, LLC,
	a New York limited liability company

	By:		Broadstone Net Lease, Inc.,
			a Maryland corporation,
			Managing Member


	By:		/s/ Ryan M. Albano
	Name:		Ryan M. Albano
	Title:		Chief Financial Officer

	BROADSTONE NET LEASE, INC.,
	a Maryland corporation


	By:		/s/ Ryan M. Albano
	Name:		Ryan M. Albano
	Title:		Chief Financial Officer

[Signatures Continued on Next Page]

[Signature Page to First Amendment to Term Loan Agreement

for Broadstone Net Lease LLC]

	CAPITAL ONE, NATIONAL ASSOCIATION, as Administrative Agent and as a Lender


	By:		/s/ Peter Ilovic
	Name:		Peter Ilovic
	Title:		Vice President

[Signature Page to First Amendment to Term Loan Agreement

for Broadstone Net Lease LLC]

	ASSOCIATED BANK, NATIONAL ASSOCIATION, as a Lender


	By:		/s/ Mitchell Vega
	Name:		Mitchell Vega
	Title:		Vice-President

[Signature Page to First Amendment to Term Loan Agreement

for Broadstone Net Lease LLC]

	BRANCH BANKING AND TRUST COMPANY, as a Lender


	By:		/s/ Karen M. Cadiente
	Name:		Karen M. Cadiente
	Title:		Assistant Vice President

[Signature Page to First Amendment to Term Loan Agreement

for Broadstone Net Lease LLC]

	BANK OF MONTREAL, as a Lender


	By:		/s/ Aaron Lanski
	Name:		Aaron Lanski
	Title:		Managing Director

[Signature Page to First Amendment to Term Loan Agreement

for Broadstone Net Lease LLC]

	FIRST TENNESSEE BANK, NATIONAL ASSOCIATION, as a Lender


	By:		/s/Tommy C. Owens
	Name:		Tommy C. Owens
	Title:		Senior Vice President

[Signature Page to First Amendment to Term Loan Agreement

for Broadstone Net Lease LLC]

	KEYBANK NATIONAL ASSOCIATION, as a Lender


	By:		/s/ Jason Weaver
	Name:		Jason Weaver
	Title:		Senior Vice President

[Signature Page to First Amendment to Term Loan Agreement

for Broadstone Net Lease LLC]

	RAYMOND JAMES BANK, N.A.,
	as a Lender


	By:		/s/ Matt Stein
	Name:		Matt Stein
	Title:		Senior Vice President

[Signature Page to First Amendment to Term Loan Agreement

for Broadstone Net Lease LLC]

	SUNTRUST BANK, as a Lender


	By:		/s/ Ryan Almond
	Name:		Ryan Almond
	Title:		Director

[Signature Page to First Amendment to Term Loan Agreement

for Broadstone Net Lease LLC]

	SYNOVUS BANK, as a Lender


	By:		/s/ David Bowman
	Name:		David Bowman
	Title:		Director Corporate Banking

[Signature Page to First Amendment to Term Loan Agreement

for Broadstone Net Lease LLC]

	UNITED BANK, as a Lender


	By:		/s/ Frederick H. Denecke
	Name:		Frederick H. Denecke
	Title:		Senior Vice President

[Signature Page to First Amendment to Term Loan Agreement

for Broadstone Net Lease LLC]

	MANUFACTURERS AND TRADERS TRUST COMPANY, as a Lender


	By:		/s/ Lisa Plescia
	Name:		Lisa Plescia
	Title:		Vice President

[Signature Page to First Amendment to Term Loan Agreement

for Broadstone Net Lease LLC]

	REGIONS BANK, as a Lender


	By:		/s/ T. Barrett Vawter
	Name:		T. Barrett Vawter
	Title:		Vice President

[Signature Page to First Amendment to Term Loan Agreement

for Broadstone Net Lease LLC]

Exhibit 10.2

PARTIAL ASSIGNMENT AND ASSUMPTION OF PURCHASE AGREEMENT

This PARTIAL ASSIGNMENT AND ASSUMPTION OF PURCHASE AGREEMENT (this “Agreement”) is made and is effective as of July 23, 2019 (the “Effective Date”), by and between CF Alpha & Golf Propco LLC, a Delaware limited liability company (“US Assignor”), CF Alpha & Golf KS Propco LLC, a Delaware limited liability company (“KS Assignor”), CF Alpha & Golf MA Propco LLC, a Delaware limited liability company (“MA Assignor”), and CF Alpha & Golf Property BC ULC, a British Columbia unlimited liability corporation (“Canadian Assignor” and, together with the US Assignor, KS Assignor and MA Assignor, collectively, “Assignors” and each, an “Assignor”), and those entities listed on Schedule 1 attached hereto and made a part hereof (“Assignee”).

RECITALS

A.(1) US Assignor, as buyer, and the sellers set forth therein (collectively, “US Sellers” and each, a “US Seller”) entered into that certain Agreement of Purchase and Sale, dated as of June 19, 2019 (the “Original US Agreement”), which Original US Agreement was assigned, in part (i) to MA Assignor, pursuant to that certain Partial Assignment and Assumption Agreement, dated as of July 12, 2019, between US Assignor, as assignor, and MA Assignor, as assignee, and (ii) to KS Assignor, pursuant to that certain Partial Assignment and Assumption Agreement, dated as of July 12, 2019, between US Assignor, as assignor, and KS Assignor, as assignee((i) and (ii), collectively, the “US Assignments”), and which Original US Agreement was amended pursuant to that certain First Amendment to Agreements of Purchase and Sale, dated as of July 19, 2019 by and among Assignors and Sellers (the “Amendment to PSAs”, and, together with the Original US Agreement and the US Assignments, collectively, the “US Purchase Agreement”), and (2) Canadian Assignor, as buyer, and AGNL Avionics BC, L.L.C., a Delaware limited company (“Canadian Seller”, and together with US Sellers, collectively “Sellers” and each, a “Seller”), as seller, entered into that certain Agreement of Purchase and Sale, dated as of June 26, 2019 (the “Original Canadian Agreement”), which Original Canadian Agreement was amended pursuant to the Amendment to PSAs (the Original Canadian Agreement, as amended, the “Canadian Purchase Agreement” and, together with the US Purchase Agreement, collectively, the “Purchase Agreements” and each, a “Purchase Agreement”) providing for the purchase of the Properties (as defined in each Purchase Agreement). Each capitalized term used herein and not defined herein shall have the meaning set forth for such term in the applicable Purchase Agreement.

B.The Properties are comprised of, among other things, each of the Real Properties listed on Exhibit A attached hereto and made a part hereof, which Real Properties are more specifically described on Exhibit B attached hereto and made a part hereof, together with all Appurtenances, Improvements, Fixtures, Equipment and Intangible Property relating to such Real Properties under the Purchase Agreements (collectively, the “Broadstone Properties” and each, a “Broadstone Property”).

C.Assignors desire to assign to Assignee all of each such Assignor’s right, title and interest, except as otherwise set forth herein, in and to the Purchase Agreements insofar as the same relates to the Broadstone Properties.

D.Assignee is willing to assume all of the obligations of Assignors under the Purchase Agreements insofar as such obligations relate to the Broadstone Properties, upon and subject to the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the Recitals, the promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

AGREEMENT

1.Assignment and Assumption.

A.Assignors’ Assignment. Effective immediately prior to Closing, Assignors hereby assign to Assignee (a) all of the right, title, benefit, privilege and interest of “Buyer” under or in connection with the Purchase Agreements, solely insofar as the same relate to the Broadstone Properties, including, without limitation, the right to purchase the Broadstone Properties and otherwise enforce (through request to Assignors prior to Closing and directly against Sellers after Closing except as provided in Section 11.7 of the US Purchase Agreement and Section 10.7 in the Canadian Purchase Agreement) for Assignee’s benefit any of the covenants, agreements or undertakings of Seller under the Purchase Agreements; (b) all Tenant Security Deposits for the Broadstone Properties and all other credits, deposits and other sums relating to the Broadstone Properties to which Buyer is entitled under the Purchase Agreements; (c) the right to enter into and accept delivery of Sellers’ Closing Deliveries solely to the extent such Sellers’ Closing Deliveries cover or relate to any of the Broadstone Properties or are reasonably necessary to convey any of the Broadstone Properties to Assignee; and (d) all right, title and interest of Assignors in all “Third Party Reports” (which, as used herein, means the surveys, zoning reports, property condition reports and environmental reports commissioned by any Assignor for any of the Broadstone Properties). On or before Closing, Assignors shall cause each issuer of the Third Party Reports to re-certify or issue reliance letters, as applicable, in favor of Assignee and Assignee’s successors and assigns on documentation reasonably acceptable to Assignee. For clarity, each “Broadstone Property,” as defined herein, shall include any and all real, personal and intangible rights to which the applicable Assignor is entitled under the Purchase Agreements with respect to each such Broadstone Property, even if not specifically set forth in this Agreement.

B. Assignee’s Assumption; Indemnity by Assignors.

(1)Assignee’s Assumption. Subject to the terms and conditions of this Agreement, effective immediately prior to Closing, Assignee hereby assumes (i) all of each Assignor’s obligations under the Purchase Agreements (including, but not limited to, the payment of any sales, transfer or other taxes, recording fees and any other closing costs and prorations which would otherwise be payable by Assignor pursuant to the terms of the applicable Purchase Agreement, each of which shall be paid by Assignee at Closing), but solely to the extent such obligations relate to any of the Broadstone Properties, and (ii) each Assignor’s obligation under the Purchase Agreements to pay to Sellers on the Closing Date the consideration for the Broadstone Properties, which Assignors and Assignee hereby agree, as between Assignors and Assignee, is Seven Hundred Thirty Five Million Seven Hundred Forty Thousand and 00/100 Dollars

Partial Assignment
(Broadstone)

($735,740,000.00) subject to any applicable prorations or adjustments applicable to the Broadstone Properties under the Purchase Agreements (the “Broadstone Consideration”, and clauses (i) and (ii) of this sentence being collectively referred to herein as the “Broadstone Liabilities”). For purposes of this Section 1.B, Assignee’s payment of the Broadstone Consideration shall be deemed to be payment of the Purchase Price applicable to the Broadstone Properties under each Purchase Agreement.

(2)Assignors’ Agreements. Each Assignor (i) represents and warrants to Assignee as provided in Section 9 of this Agreement and (ii) covenants that such Assignor (a) will perform the covenants relating to the Purchase Agreement with respect to any of the Broadstone Properties in accordance with Section 12 of this Agreement, and (b) will conclude, and enforce its rights against Sellers with respect to, the purchase and sale of the transactions contemplated under the applicable Purchase Agreement, absent the failure of a condition to such Assignor’s obligation to conclude the Transaction under the applicable Purchase Agreement.

(3)Assignors’ Indemnity. Subject to Section 1.B.5 below, Assignors agree to indemnify, defend (with counsel reasonably satisfactory to Assignee) and hold harmless Assignee and Assignee’s officers, directors, trustees, managers, members, shareholders, partners, affiliates, employees, agents, attorneys, successors and assigns (the “Assignee Indemnified Parties”) for, from and against all claims, demands, losses, damages, expenses and costs (including, but not limited to, reasonable attorneys’ fees, but excluding special, exemplary, punitive and consequential damages) arising out of or in connection with: (i) the breach or default by any Assignor or Buyer Party of any of its agreements, covenants, representations, warranties, or obligations under the Purchase Agreements, provided that insofar as the same relate to the Broadstone Properties then only to the extent arising prior to Closing; (ii) the breach or default by any Assignor of any of its agreements, covenants, representations, warranties, or obligations under this Agreement which expressly survive Closing (and as such representations or warranties may be modified by any Pre-Closing Disclosure); (iii) the breach by any Seller of any of its representations or warranties under the Purchase Agreements, which expressly survive Closing, and which affect or relate to any of the Broadstone Properties or any Purchase Agreement generally; and (iv) any claim arising as a result of any of the matters disclosed on Schedule 5.1(xiii) of the Canadian Purchase Agreement. Assignors’ indemnification obligations set forth in subsections (iii) and (iv) of this Section 1.B.3 shall be limited (a) to the extent that any Buyer Party has a claim against any Seller under the terms of any Purchase Agreement; provided, however, that Assignors’ indemnification obligations under subsections (iii) and (iv) above shall include: (w) claims waived or released by any Assignor in violation of this Agreement; (x) claims that do not exceed, individually or in the aggregate, the Broadstone Ceiling, as hereinafter defined; (y) claims that any Assignor is unable to assert against any Seller due to such Assignor having knowledge of a matter prior to Closing and Assignors failed to give Assignee written notice thereof prior to Closing; and (z) claims arising out of fraud, intentional misrepresentation, willful misconduct or gross negligence of any Buyer Party. The rights and obligations set forth in this Section 1.B.3 shall survive the assignment contemplated by this Agreement and Closing for a period of five (5) months, but in no event shall such survival period extend beyond December 27, 2019 (other than rights and obligations related to the matters disclosed on Schedule 5.1(xiii) of the Canadian Purchase Agreement, which shall survive for twelve (12) months after the Closing Date).

Partial Assignment
(Broadstone)

As used herein, the term “Broadstone Ceiling” means an amount equal to, with respect to any individual Seller, Two Million Four Hundred Twenty Thousand and 00/100 Dollars ($2,420,000.00), and with respect to two or more Sellers (including the “Seller” under the Canadian Purchase Agreement) in the aggregate, Four Million Eight Hundred Forty Thousand and 00/100 Dollars ($4,840,000.00).

(4)Notice of Claims. If Assignee (a) seeks indemnification hereunder directly from any Assignor or (b) seeks an indemnification hereunder due to a potential claim that Assignee has reason to believe Assignor has against a Seller Party under one or both of the Purchase Agreements, which claim is related to one or more of the Broadstone Properties, then, in each case, Assignee shall give to Assignors a notice (a “Claim Notice”) describing in reasonable detail the facts giving rise to any such claim (or potential claim) for indemnification hereunder and shall include in such Claim Notice (if then known) the amount or the method of computation of the amount of such claim (or potential claim), and a reference to the provision of this Agreement or any other agreement, document or instrument executed hereunder or in connection herewith upon which such claim (or potential claim) is based.

(5)Limitation of Assignor’s Liability. Notwithstanding anything to the contrary contained herein, if the Closing shall have occurred (the parties hereto agreeing that any pre-closing liability shall be governed by Section 5 below) (a) the aggregate liability of Assignors arising pursuant to or in connection with the representations, warranties, indemnifications, covenants or other obligations (whether express or implied) of Assignors under this Agreement (or any document executed or delivered in connection herewith) shall not exceed Twenty Two Million Seventy Two Thousand Two Hundred and 00/100 Dollars ($22,072,200.00) (the “Liability Limitation”), and (b) no claim by Assignee alleging a breach by any Assignor of any representation, warranty, indemnification, covenant or other obligation of any Assignor contained herein (or in any document executed or delivered in connection herewith) may be made, and no Assignor shall be liable for any judgment in any action based upon any such claim, unless and until (i) such claim, either alone or together with any other claims by Assignee alleging a breach by any Assignor of any representation, warranty, indemnification, covenant or other obligation of Assignor contained herein (or in any document executed or delivered in connection herewith), is for an aggregate amount in excess of Twenty Thousand Dollars ($20,000) (the “Floor Amount”), in which event Seller’s liability respecting such claim or claims shall be for the entire amount thereof, subject to the limitation set forth in clause (a) above; and (ii) such claim is made by Assignee prior to the expiration of the survival period set forth in Section 1.B.3 above (the “Limitation Period”). No constituent shareholder, partner or member in or agent of any Assignor, nor any advisor, trustee, director, officer, member, manager, partner, employee, beneficiary, shareholder, participant, representative or agent of any entity that is or becomes a constituent shareholder, partner or member in any Assignor or any agent of Assignor (“Assignors’ Affiliates”) shall have any personal liability, directly or indirectly, under or in connection with this Agreement or any agreement made or entered into under or pursuant to the provisions of this Agreement, or any amendment or amendments to any of the foregoing made at any time or times, heretofore or hereafter, and, except as otherwise set forth herein, Assignee and its successors and assigns, shall look solely to Assignors and Assignors’ assets (and proceeds therefrom) for the payment of any claim or for any performance, and Assignee, on behalf of itself and its successors and assigns, hereby waives any and all such personal liability. Notwithstanding anything to the contrary contained in this Agreement, the limitation of liability set forth in this Section shall not apply to any fraud, intentional misrepresentation or willful misconduct of any Assignor. The provisions of this Section 1.B.5 shall survive Closing.

Partial Assignment
(Broadstone)

C.Payment of Broadstone Deposit to Assignors. No later than one (1) Business Day after the mutual execution of this Agreement and as a condition precedent to this Agreement being binding on Assignors, Assignee shall deliver an earnest money deposit in the amount of Ten Million and 00/100 Dollars ($10,000,000.00) (the “Initial Deposit”) into escrow with the Title Company by wire transfer of immediately available funds. In addition, no later than one (1) Business Day after the expiration of the Broadstone DDP (as hereinafter defined), and provided Assignee has not terminated this Agreement pursuant to Section 6 below, Assignee shall deliver into escrow with the Title Company by wire transfer of immediately available funds the amount of Ten Million and 00/100 Dollars ($10,000,000.00) (the “Additional Deposit” and, together with the Initial Deposit, collectively, the “Broadstone Deposit”). The Broadstone Deposit shall be invested as Assignee so directs in a standard money market interest-bearing account at a federally insured financial institution reasonably acceptable to Assignee and the Title Company. Any and all interest earned on the Broadstone Deposit shall be reported to Assignee’s federal tax identification number. If Assignee notifies Assignors, in writing, prior to the expiration of the Broadstone DDP that Assignee elects to terminate this Agreement, then the Broadstone Deposit shall be returned to Assignee by the Title Company, upon Assignee’s sole direction and the Title Company may disregard any notice or direction from any Assignor to the contrary. In addition, if the transaction contemplated in this Agreement fails to close because of Sellers’ default under either Purchase Agreement or any Assignor’s default under this Agreement, the Broadstone Deposit shall be returned to the Assignee by the Title Company. The parties hereto acknowledge and agree that One Hundred and 00/100 Dollars ($100.00) of the Broadstone Deposit shall be deemed independent consideration paid from Assignee to Assignors for entering into this Agreement and such amount shall be paid to Assignors in the event the parties fail to close on the sale of the Broadstone Properties on the Closing Date or if Assignee terminates this Agreement for any reason at any time. If the transactions contemplated by this Agreement close in accordance with the terms of this Agreement, then the Broadstone Deposit shall be credited against the Broadstone Consideration at Closing. Assignors and Assignee agree that the assignment contemplated by this Agreement shall be conditioned on the imminent consummation of the Closing under the Purchase Agreements as to the Broadstone Properties (meaning that Buyer and Sellers are ready to authorize Closing as to such Properties and that all conditions to Closing in favor of such parties have either been satisfied or waived). In the event Assignors notify Assignee that such conditions are not capable of being satisfied prior to Closing, Assignee may (but is not obligated to) terminate this Agreement by written notice to Assignors, in which event Title Company shall return the Broadstone Deposit to Assignee, and Assignors and Assignee will have no further obligations to each other except those that expressly survive termination of this Agreement; provided, however, if the failure of such condition is the result of a breach or default by Assignors under this Agreement or any Buyer Party under the Purchase Agreements, then Assignors shall also reimburse Assignee for any of its reasonable out of pocket costs, in an amount not to exceed Five Hundred Thousand and 00/100 Dollars ($500,000.00).

D.Payment of the Broadstone Consideration and any Other Broadstone Liabilities. Subject to the terms and conditions of this Agreement and provided that Assignors have given Assignee written notice that the Closing Date has been determined at least five (5) Business Days prior to the then-scheduled Closing Date , Assignee hereby agrees to (i) (a) at least four (4) Business Days prior to the Closing Date, provide notices of borrowing (or such other proof

Partial Assignment
(Broadstone)

reasonably acceptable to Assignors) to Assignors evidencing that Assignee has initiated the borrowing of the Broadstone Closing Funds (as hereinafter defined) to be deposited into escrow before the Closing Date and (b) deposit into escrow with the Title Company no later than 1:00 p.m. New York time one (1) Business Day prior to the Closing Date (the “Deposit Date”), and authorize the Title Company to pay to Sellers on the Closing Date (which will occur no earlier than August 19, 2019 unless Assignee’s prior written consent has been obtained) subject to and in accordance with the Purchase Agreements and this Agreement, the Broadstone Consideration and all other amounts for Closing owed by Assignee under the Purchase Agreements with respect to the Broadstone Properties (plus or minus any applicable prorations calculated pursuant to the Purchase Agreements with respect to the Broadstone Properties) (collectively, the “Broadstone Closing Funds”), and (ii) deliver into escrow with the Title Company, no later than the three (3) Business Days prior to the Closing Date, all of the Buyer’s Closing Deliveries applicable to the Broadstone Properties. The escrow between Assignors and Assignee for the Broadstone Deposit under this Agreement shall be a separate escrow from the escrow under the Purchase Agreements, with funds contained therein to be transferred into the escrow between US Assignor and Sellers on the Closing Date to facilitate the closing of Assignee’s acquisition of the Broadstone Properties. After the expiration of the Broadstone DDP (as hereinafter defined), and assuming Assignee has not previously terminated this Agreement pursuant to the terms hereof, the Broadstone Consideration and any other sums deposited into escrow by or for the benefit of Assignee, including, but not limited to the Broadstone Deposit (except as otherwise expressly set forth herein) shall be refundable to Assignee based on the same provisions under which the applicable Assignor’s Deposit or other funds would be refundable to either Assignor as the buyer under the applicable Purchase Agreement (e.g., in the event a closing condition in favor of such Assignor under such Purchase Agreement is not satisfied and such Assignor has the right to terminate such Purchase Agreement and receive a refund of its Deposit thereunder, then Assignee shall similarly receive a refund of the Broadstone Deposit hereunder). If the Closing Date under both Purchase Agreements is extended after the Deposit Date and after Assignee deposits the Broadstone Consideration into escrow with the Title Company in accordance with the terms of this Agreement, then Assignors shall pay to Assignee, through escrow at Closing, per diem interest on the Broadstone Consideration and all other amounts funded into (and remaining in) escrow by Assignee pursuant to this Agreement, equal to the amount of base rent that Assignors would have received each day for the Broadstone Properties, pursuant to each applicable Lease for each Broadstone Property and each Estoppel delivered in connection therewith, if the Closing Date had not been extended; provided, however, if the Closing Date is likely to be extended by more than two (2) business days, then Assignee may elect to have its funds returned, and if the Closing Date is likely to be extended by more than four (4) business days, then such funds shall promptly be returned to Assignee.

E.No Release of Assignors. Assignors acknowledges that, notwithstanding the foregoing assignments and assumptions, each Assignor shall remain obligated under the applicable Purchase Agreement and, pursuant to the terms thereof, shall not be released therefrom.

Partial Assignment
(Broadstone)

2.Earnest Money. Assignors and Assignee hereby acknowledge and agree that all right, title and interest in and to the Deposit shall remain with Assignors, and the entire Deposit currently held in escrow by the Title Company shall be either returned to each Assignors in the event the transactions contemplated by the Purchase Agreements do not result in a Closing and the Assignor under such Purchase Agreement is entitled to a refund of the same in accordance with the terms of such Purchase Agreement, or shall be credited against the remaining portion of the Purchase Price owed by each Assignor to Sellers on the Closing Date.

3.Right to Pursue Claims Under Purchase Agreements. Assignee covenants and agrees that, notwithstanding anything to the contrary contained herein or in the Purchase Agreements (but without prejudice to Assignors’ indemnification obligations in favor of Assignee set forth in Section 1.B of this Agreement), it shall have no right to, and shall not make any direct claim (1) against any Seller as a result of a breach by any such Seller of a representation or warranty contained in a Purchase Agreement, including, without limitation, delivering any notice to any Seller of any alleged breach by any such Seller of a representation or warranty contained in a Purchase Agreement or (2) to any portion of the Post Closing Escrow or any rights under the Post Closing Escrow Instructions, and in no event shall Assignee have any right, prior to Closing to deliver any notice to any Seller alleging any breach by any such Seller of any of the terms of any Purchase Agreement. Notwithstanding each Assignor’s assignment of its right, title and interest in and to the applicable Purchase Agreements with respect to the Broadstone Properties, each Assignor hereby specifically retains all rights of such Assignor to (i) enforce the representations and warranties (and indemnification obligations made by Sellers in the applicable Purchase Agreements as a result of a breach thereof) and (ii) the Post-Closing Escrow and under the Post-Closing Escrow Instructions. Notwithstanding the foregoing, Assignors’ indemnification obligations and Assignee’s rights and remedies under this Agreement against Assignors are independent and shall not be affected or diminished by this Section 3 or any provision in the Purchase Agreements. The terms of this Section 3 shall survive the Closing.

4.Entity Transfer Option. If Assignors and Assignee agree that it is in the best interest of the parties hereto to acquire any of the Broadstone Properties indirectly through a transfer from the applicable Assignor to Assignee of the buyer entity that will take title to such Broadstone Property at Closing under the terms of the applicable Purchase Agreement, then such Property shall be transferred to Assignee through an assignment of such buyer entity from the applicable Assignor to Assignee (rather than through a direct deed from the applicable Seller to Buyer), without any change in the Broadstone Consideration, which assignment shall be effectuated pursuant to documents reasonably acceptable to Assignors and Assignee.

Partial Assignment
(Broadstone)

5.Remedies.

A.ASSIGNORS’ REMEDIES. AFTER THE EXPIRATION OF THE BROADSTONE DDP (AS HEREINAFTER DEFINED), AND IF ASSIGNEE HAS NOT PREVIOUSLY TERMINATED THIS AGREEMENT PURSUANT TO THE TERMS HEREOF, IN THE EVENT THE SALE OF THE BROADSTONE PROPERTIES TO ASSIGNEE IS NOT CONSUMMATED SOLELY DUE TO A MATERIAL DEFAULT OF ASSIGNEE UNDER THIS AGREEMENT (PROVIDED NO ASSIGNOR IS IN MATERIAL DEFAULT OF THIS AGREEMENT OR ANY PURCHASE AGREEMENT AND NO SELLER IS IN MATERIAL DEFAULT OF EITHER PURCHASE AGREEMENT AT THE TIME OF SUCH ASSIGNEE DEFAULT), THEN THE SOLE AND EXCLUSIVE REMEDY AVAILABLE TO ASSIGNORS FOR SUCH FAILURE IS TO TERMINATE THIS AGREEMENT IN WHOLE AND RETAIN THE BROADSTONE DEPOSIT, IN WHICH EVENT ASSIGNEE SHALL BE OBLIGATED TO REIMBURSE ASSIGNORS FOR ALL ACTUAL, OUT-OF-POCKET COSTS INCURRED BY ASSIGNORS IN CONNECTION WITH THE TRANSACTION COVERED BY THIS AGREEMENT (AND NOT THE PURCHASE AGREEMENTS GENERALLY), IN AN AMOUNT NOT TO EXCEED $250,000 IN THE AGGREGATE FOR ALL SUCH OUT-OF-POCKET COSTS. THE PARTIES HAVE AGREED THAT ASSIGNORS’ ACTUAL DAMAGES, IN THE EVENT THAT THE CLOSING OF THE BROADSTONE PROPERTIES FAILS TO OCCUR IN ACCORDANCE WITH THE TERMS HEREOF (PROVIDED NO ASSIGNOR IS IN MATERIAL DEFAULT OF THIS AGREEMENT OR ANY PURCHASE AGREEMENT AND NO SELLER IS IN MATERIAL DEFAULT OF EITHER PURCHASE AGREEMENT AT THE TIME OF SUCH ASSIGNEE DEFAULT), DUE SOLELY TO A MATERIAL DEFAULT OF ASSIGNEE HEREUNDER, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE, AND AFTER NEGOTIATION AND ADVICE OF COUNSEL, THE PARTIES HAVE AGREED THAT, CONSIDERING ALL THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT, THE TOTAL AMOUNT OF THE BROADSTONE DEPOSIT (PLUS ASSIGNORS’ OUT-OF-POCKET-COSTS) IS A REASONABLE ESTIMATE OF THE DAMAGES THAT ASSIGNORS WOULD INCUR IN SUCH EVENT. THE PARTIES ACKNOWLEDGE THAT THE PAYMENT OF SUCH BROADSTONE DEPOSIT (AND ASSIGNORS’ OUT-OF POCKET-COSTS) IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, IF APPLICABLE, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO ASSIGNORS, PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677, TO THE EXTENT CALIFORNIA LAW IS DEEMED TO APPLY HERETO NOTWITHSTANDING THE CHOICE OF LAW PROVISION SET FORTH IN SECTION 15.I BELOW. NOTHING IN THIS PARAGRAPH SHALL CONSTITUTE A WAIVER OF THE RIGHTS OF EITHER PARTY TO RECOVER REASONABLE ATTORNEYS FEES AND REASONABLE OUT-OF-POCKET COSTS AND EXPENSES INCURRED IN ENFORCING THIS AGREEMENT IF IT IS THE PREVAILING PARTY IN A SUIT REGARDING THE SAME. BY PLACING THEIR INITIALS BELOW, EACH PARTY SPECIFICALLY CONFIRMS THE ACCURACY OF THE STATEMENTS MADE ABOVE AND THE FACT THAT EACH PARTY WAS REPRESENTED BY COUNSEL WHO EXPLAINED, AT THE TIME THIS AGREEMENT WAS MADE, THE CONSEQUENCE OF THIS LIQUIDATED DAMAGES PROVISION.


/s/ JP		/s/ STC
Assignors’ Initials		Assignee’s Initials

Partial Assignment
(Broadstone)

B.Assignee’s Remedies Against Assignors. In the event that (1) Assignors fail to perform in any material respect any of the covenants or agreements contained herein which are to be performed by Assignors, including without limitation, if any Assignor fails to complete the assignment of the Purchase Agreements with respect to the Broadstone Properties to Assignee as provided herein, (2) any Assignor representations and warranties in this Agreement prove to have been untrue as of the Effective Date in any material respect or prove to be untrue as of the Closing Date in any material respect due to the intentional misrepresentation or willful misconduct of any Assignor or Buyer Party, or (3) the assignment contemplated by this Agreement or Closing fails to occur because of an act or omission of any Buyer Party that causes a default under either Purchase Agreement or this Agreement, then, provided that Assignee is not in material default hereunder, Assignee may, at its sole election, proceed with one of the following mutually exclusive alternatives as its sole and exclusive remedy: (i) terminate this Agreement by giving written notice of termination to Assignors whereupon escrow holder will return to Assignee any funds previously deposited with escrow holder by or for the benefit of Assignee, Assignors shall reimburse Assignee for reasonable out-of-pocket costs and attorneys’ fees incurred by Assignee in connection with this Agreement (not to exceed $500,000.00) and both Assignee and Assignors will be relieved of any further obligations or liabilities hereunder, except for those obligations which expressly survive any termination hereof, or (ii) seek specific performance of this Agreement; or (iii) waive such default and proceed with the Closing with no reduction in the Purchase Price payable for the Broadstone Properties. Notwithstanding anything to the contrary herein, if during the term of this Agreement any Assignor sells all or any portion of the Broadstone Properties to a third party in contravention of this Agreement thereby preventing a suit for specific performance by Assignee (a “Third Party Transfer”), then Assignee shall have the right to seek all remedies at law and in equity, including, without limitation, a suit for damages. In addition, If Assignee chooses the remedy in clause (ii) above, then Assignee may recover from Assignors all of Assignee’s out-of-pocket costs incurred in seeking such specific performance.

EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 5.B, ASSIGNEE MAY NOT SEEK ANY OTHER REMEDIES DIRECTLY AGAINST ASSIGNORS IN THE EVENT THIS TRANSACTION FAILS TO CLOSE, AND ASSIGNEE WAIVES ALL RIGHTS TO DAMAGES OF ANY OTHER KIND OR NATURE IN CONNECTION THEREWITH, INCLUDING, WITHOUT LIMITATION, COMPENSATORY, DIRECT, INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES.


/s/ JP		/s/ STC
Assignors’ Initials		Assignee’s Initials

C.Assignee’s Indirect Remedies Against Sellers. In the event that the Closing under the Purchase Agreements fails to occur because of (1) the failure of any condition precedent to any Buyer Party’s obligation close under either Purchase Agreement to be satisfied (and no Buyer default has occurred thereunder) or (2) any Seller materially defaults under the terms of any Purchase Agreement, including, but not limited to, if any Seller challenges the assignment contemplated by this Agreement, then in each case, consistent with Section 1.D above, the Broadstone Deposit shall be refunded to Assignee (together with any other sums deposited into escrow by or for the benefit of Assignee). In addition, provided that Assignee is not in material

Partial Assignment
(Broadstone)

default of this Agreement, (i) if Assignors elect to terminate the Purchase Agreements as a result of any such Sellers’ Default and Assignors have the right to recover all out-of-pocket costs incurred by Assignors as a result of any such Seller’s Default, then Assignors shall deliver to Assignee Assignee’s prorata share of such costs recovered from Sellers based on the percentage of the Purchase Price reflected by the Broadstone Consideration, and (ii) if any such Sellers’ Default is the result of any such Seller selling one or more of the Properties to a third-party, thereby preventing a suit for specific performance by the applicable Assignor, then any amounts recovered as a remedy by Assignors in connection therewith pursuant to the terms of the applicable Purchase Agreement shall be split prorata with Assignee based on the percentage of the Purchase Price reflected by the Broadstone Consideration

D.Limitation on Damages. Without limiting the foregoing, each of each Assignor and Assignee hereby waives, to the fullest extent permitted by applicable law, any right to any consequential, special, indirect or punitive damages against Assignee or such Assignor, respectively, arising out of any claim or in connection with this Agreement, the Purchase Agreements or any of the Broadstone Properties.

6.Access and Due Diligence. Promptly after the Effective Date, Assignors will provide Assignee (to the extent not provided to Buyer prior to the Effective Date) with access to the Broadstone Properties to the extent permissible under (and in accordance with) the applicable Purchase Agreement, and Assignee hereby agrees to be bound by and comply with all of the terms of the Access Agreement relative to Assignee’s inspection of the Broadstone Properties, as if Assignee was the “Potential Purchaser” thereunder with respect to the Broadstone Properties. In no event shall Assignee be permitted to bring any Information (as hereinafter defined) to any of the Broadstone Properties in connection with access by Assignee of any Broadstone Property, and Assignee shall advise each of Assignee’s Representatives who may access any of the Broadstone Properties in accordance with the terms of this Agreement of such restrictions. Assignee shall have until 10:00 pm New York time on July 29, 2019 (the period beginning on the Effective Date and ending at such time being herein referred to as the “Broadstone DDP”) to conduct its due diligence to determine the feasibility of acquiring the Broadstone Properties. Prior to the Effective Date, Assignors have made available to Assignee all Third Party Reports and the due diligence materials received from Sellers related to the Broadstone Properties that are in Assignors’ possession, and in no event shall Assignee commission any additional third party reports be prepared for any of the Broadstone Properties, it being agreed that Assignee shall rely solely on the Third Party Reports to assess whether Assignee wishes to proceed with the transactions set forth in this Agreement. From and after the Effective Date until Closing or the earlier termination of this Agreement, Assignors shall have an ongoing obligation to provide Assignee with any additional materials related to the Broadstone Properties that are delivered to Assignors by Sellers, however, the provision of any new, modified or updated materials or information shall not reset or otherwise change the end date of the Broadstone DDP. Upon Assignors’ request, Assignee shall keep Seller reasonably informed via email of the status of its due diligence activities. If Assignee determines (in its sole discretion) that the Broadstone Properties are unsuitable for its purposes for any reason, then Assignee may terminate this Agreement in whole (but not in part) by written notice to Assignors given at any time prior to the expiration of the Broadstone DDP. If Assignee terminates this Agreement prior to the expiration of the Broadstone DDP, then the Initial Deposit (less the

Partial Assignment
(Broadstone)

Independent Consideration and one half of the reasonable escrow fees due to the Title Company as a result of the separate escrow established for this transaction) shall be returned to Assignee in accordance with Section 1.C above, and neither party shall have any further rights or obligations under this Agreement except those which expressly survive termination of this Agreement. Assignee’s failure to so terminate this Agreement prior to the expiration of the Broadstone DDP shall be deemed a waiver by Assignee of the right to terminate this Agreement as a result of Assignee’s inspections, subject to Assignee’s rights with respect to Lease Request Notices, New Title Matters, and any other Assignee conditions precedent or termination rights expressly provided in this Agreement.

If Assignee does not terminate this Agreement prior to the expiration of the Broadstone DDP, Assignee shall deliver to Title Company by cashier’s check or other immediately available funds the Additional Deposit no later than one (1) business day after the earlier of (a) the expiration of the Broadstone DDP or (b) such earlier date in the event Assignee waives all conditions contained in this Section 6 prior to the expiration of the Broadstone DDP, which Assignee may, but is not obligated, to do in Assignee’s sole discretion.

Assignee’s right of inspection pursuant to this Section 6 (i) is and shall remain subject to the terms of the applicable Purchase Agreement in all respects, and (ii) is and shall remain limited to Assignee or its designated representatives interacting with Assignors’ designated liaison relating to such inspection or other related diligence of the Broadstone Properties. Notwithstanding anything to the contrary contained in this Agreement, Assignee shall indemnify, defend (with counsel reasonably acceptable to Seller) and hold each Assignor and its past or present affiliates, equity holders, employees, directors, officers, managers, agents, representatives, and successors and assigns harmless from and against any and all loss, cost, expense, liability, damage, demand, proceeding, obligation, cause of action or claim (whether known or unknown, absolute or contingent, both at law and in equity, and including, without limitation, actual attorneys’ fees incurred in connection therewith) (each, a “Claim”) to the extent arising out of or resulting from Assignee’s inspection of the Broadstone Properties as provided for in this Section 6 excluding, however, any Claim resulting from any unfavorable test result or the mere discovery (without exacerbation by Assignee, otherwise only to the extent of such exacerbation by Assignee) of any undesirable existing condition on, in, under or about any Broadstone Property, and in no event shall Assignee be liable for any loss resulting from any decrease in the fair market value of any Broadstone Property or the inability to market any Broadstone Property due to any such discovery or unfavorable test result. Such indemnity shall survive the Closing and any termination of this Agreement.

7.Confidentiality. Each Assignor and Assignee hereby agrees to comply with all of the terms set forth in that certain Confidentiality Agreement, dated as of June 19, 2019, between Fortress Investment Group LLC (an affiliate of Assignors) and Assignee, which is incorporated herein by this reference and with all of the terms set forth in Section 11.10 of the Purchase Agreements, and any breach by Assignee of the provisions of this Section 7 shall be deemed a default hereunder.

Partial Assignment
(Broadstone)

8.Brokers. Each Assignor represents and warrants that any and all commissions, finders’ fees and/or other compensation owing to brokers, salespersons, finders or others in connection with the transactions contemplated by the Purchase Agreements and/or this Agreement, including without limitation, the assignment of each Purchase Agreement solely with respect to the Broadstone Properties by Assignors to Assignee, have been or will be paid in full by Sellers, as to commissions payable under the Purchase Agreements, or by Assignors, as to commissions payable hereunder, and no commission shall be payable by Assignee as a result of or in connection with any such transaction. Each Assignor shall indemnify, defend and hold Assignee free and harmless from and against any and all commissions or other claims any broker, salesperson, finder or others, alleging to have represented or assisted any Assignor, may assert in connection with the transactions contemplated by the Purchase Agreements, which obligation shall survive the Closing. Assignors and Assignee shall each indemnify, defend and hold the other party free and harmless from and against any and all commissions or other claims any broker, salesperson, finder or others, alleging to have represented or assisted the indemnifying party, may assert in connection with the transactions contemplated by this Agreement, which obligation shall survive the Closing.

9.Representations and Warranties of Assignors. Assignors represent and warrant to Assignee that as of the Effective Date and the Closing Date:

A.Each Assignor is duly organized, validly existing and in good standing under the laws of its state of formation and has the full right, power and authority to enter into this Agreement, and to perform all of the obligations and liabilities of Assignor required to be performed hereunder.

B.This Agreement has been duly and validly executed and delivered by and on behalf of Assignors and constitutes a valid, binding and enforceable obligation of Assignors enforceable in accordance with its terms.

C.Assignors have delivered to Assignee true, correct and complete copies of the Confidentiality Agreement, Access Agreement and the Purchase Agreements and any and all assignments, supplements, amendments or modifications thereto; provided that the economic terms related to the Properties that are not Broadstone Properties have been redacted. The Purchase Agreements and the Access Agreement and Confidentiality Agreement referred to therein constitute the entire agreement between Buyer Parties and Seller Parties with respect to the Properties. No Assignor has previously assigned the Purchase Agreements or entered into any other agreement with any third party in connection therewith relating to the Broadstone Properties (other than the Confidentiality Agreement and the Access Agreement, as defined in the Purchase Agreements).

D.To the best of Assignors’ knowledge, the Purchase Agreements are in full force and effect and binding on the parties thereto. No Assignor, and, to Assignors’ knowledge, no Seller Party is in default under either Purchase Agreement. The assignment contemplated by this Agreement will not result in a breach or default under either Purchase Agreement.

E.All of the representations and warranties made by Assignors in the Purchase Agreements are true and correct in all material respects. To Assignors’ knowledge, all of the representations and warranties made by Sellers in the Purchase Agreements are true and correct in all material respects.

Partial Assignment
(Broadstone)

F.Assignors have delivered to Assignee true and complete copies of all of the following to the extent received by or otherwise in the possession of any Assignor or other Buyer Party and related to the Broadstone Properties: (1) Due Diligence Materials or other information received or made available by any Seller Party (excluding information relating only to Properties that are not Broadstone Properties); (2) Third Party Reports, together with any revisions thereto; (3) Estoppel Certificates; (4) Third Party Consents; (5) any Lease Request Notices and any notices regarding New Title Matters, Assumed Contracts, casualty and condemnation affecting any Broadstone Property; and (6) any other Leases and Material Subleases in the possession or control of any Buyer Party.

G.With respect to any of the Broadstone Properties (including, without limitation, Buyer’s rights relating thereto) or with respect to any Purchase Agreement generally, no Assignor has (a) granted any approvals or consents permitted to be granted under the Purchase Agreements (nor permitted any approval periods to expire or lapse with the exception of the deemed approval of the title objections that Seller did not agree to cure), or (b) submitted any formal notices, elections, objections or documents to any Seller Party that are required or permitted to be submitted under any Purchase Agreement, except for the title objections and the election to assume the Service Contracts as more specifically set forth in the Objections notice delivered by US Assignor to US Sellers in accordance with the US Purchase Agreement (copies of which Assignors have provided to Assignee prior to the Effective Date, which copies redacted any information not relevant to the Broadstone Properties) or (c) waived any requirements applicable to or defaults by Seller under any Purchase Agreement.

H.Neither the execution and delivery of the Purchase Agreements or this Agreement by any Assignor or Buyer Party, nor the taking of any action contemplated thereby, will conflict with or result in a breach of any of the provisions of, or constitute a default of any obligation under any instrument, contract, judgment, order, award, decree or other agreement or restriction to which any Assignor or Buyer Party is a party or is otherwise bound.

“Assignors’ Knowledge” or any similar phrase shall mean the current actual knowledge, without independent investigation or any implied duty to investigate or make any inquiries of William Turner and/or Ahsan Aijaz (and expressly including, without limitation, any written notice received by such person from any Seller Party). Such individuals shall have no personal liability in any manner whatsoever hereunder or otherwise related to the transactions contemplated hereby. Assignors represent and warrant that such persons have direct responsibility for the Purchase Agreements and otherwise have knowledge of the matters set forth in this Section 9.

10.Representations Remade. As of Closing, Assignors shall be deemed to remake and restate the representations set forth in Section 9, except that the representations shall be updated by delivering written notice to Assignee prior to Closing in order to reflect any fact, matter or circumstance which Assignors have become aware of, other than facts, matters or circumstances that Assignors have been informed of by Assignee or any agent of Assignee, that would make any of Assignors’ representations or warranties contained herein untrue or incorrect in any material respect (any such disclosure being referred to as a “Pre-Closing Disclosure”). If any Pre-Closing Disclosure would cause any representation or warranty contained herein to no longer be true and

Partial Assignment
(Broadstone)

correct in all material respects, Assignee shall have the right to terminate this Agreement by delivering written notice to Assignors thereof prior to the earlier of Closing and three (3) Business Days after such Pre-Closing Disclosure is made to Assignee, in which event the Broadstone Deposit shall be promptly returned to Assignee and the parties shall have no further obligations hereunder except as expressly provided otherwise herein. For purposes of this Section 10 only, “material” means any adverse fact or circumstance, which could reasonably be expected to result in a reduction in the value of the Broadstone Properties (individually or in the aggregate), of at least $250,000 and, if such fact or circumstance is the result of a representation or warranty of any Seller under any Purchase Agreement no longer being true and correct in all material respects, such failure permits Assignors to terminate the Purchase Agreements under the terms thereof (including, without limitation, termination permitted pursuant to Section 9.1(a) of the US Purchase Agreement or Section 8.1(a) of the Canadian Purchase Agreement). Notwithstanding anything to the contrary contained herein, if Assignee proceeds to Closing after receipt of a Pre-Closing Disclosure from Assignors, Assignee shall be deemed to have waived such material inaccuracy to the extent that no Assignor would have a claim against any Seller with respect thereto. Assignee acknowledges that Assignors have not made any express or implied representation, warranty or covenant whatsoever regarding the Broadstone Properties other than as expressly set forth in this Agreement.

11.Representations and Warranties of Assignee. Assignee represents and warrants to Assignors that as of the Effective Date and the Closing Date:

A.Organization. Each Assignee is duly organized and in good standing under the laws of the state of its organization. Each Assignee has full power and authority under its organizational documents to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.

B.Authority. The execution and delivery by each Assignee of this Agreement, and the performance by each Assignee of its obligations hereunder, have been or will be duly and validly authorized. This Agreement has been duly and validly executed and delivered by each Assignee and constitutes legal, valid and binding obligations of such Assignee enforceable against such Assignee in accordance with its terms.

C.No Conflict. The execution and delivery of this Agreement, the consummation of the transactions provided for herein and the fulfillment of the terms hereof will not result in a material breach of any of the terms or provisions of, or constitute a material default under, any provision of (i) any Assignee’s organizational documents, (ii) any instrument or agreement to which any Assignee is a party to, (iii) to each Assignee’s Knowledge, any applicable law, rule or regulation, or (iv) to any Assignee’s Knowledge, any order or decree of any court or Governmental Authority of any nature by which such Assignee is bound.

D.Litigation. There are no actions or proceedings pending or, to each Assignee’s Knowledge, threatened against, relating to or affecting such Assignee or any of its assets that could reasonably be expected to result in the issuance of an order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement.

Partial Assignment
(Broadstone)

E.Brokers. No broker or finder has acted for any Assignee or any of its affiliates in connection with this Agreement or the transactions contemplated hereby and no person is entitled to any brokerage fee, finder’s fee or commission in respect thereof based upon arrangements made by or on behalf of such Assignee for which any Assignor could be reasonably expect to be liable.

F.Sophisticated Assignee. (i) Assignee, together with its affiliates, managers, and advisers, is a sophisticated investor with substantial experience in the acquisition of real estate and the conduct of due diligence related to such acquisition, and (ii) the diligence permitted to take place herein within the time limits provided for herein is sufficient to provide Assignee with the opportunity needed by Assignee to make an informed decision regarding the acquisition of the Broadstone Properties.

G.Assignee Not a Foreign Person. No Assignee is a “foreign person” as defined in the Code.

H.OFAC. Neither Assignee nor any of Buyer's members, owners, officers, or directors is a Specially Designated National or Blocked Person.

“Assignee’s Knowledge” or any similar phrase shall mean the current, actual knowledge, without independent investigation or any implied duty to investigate or make any inquiries of, Sean Cutt and/or Rod Pickney. Such individuals shall have no personal liability in any manner whatsoever hereunder or otherwise related to the transactions contemplated hereby. Assignee represents and warrants that such persons have knowledge of the matters set forth in this Section 11.

12.Covenants of Assignors.

A.Affirmative.

(1)Assignors shall provide Assignee with copies of all formal notices provided to any Seller Party under either Purchase Agreement and affecting or related to any of the Broadstone Properties (including, without limitation, Buyer’s rights relating thereto) or affecting or related to any Purchase Agreement generally, no later than one (1) Business Day after any such notice is provided to any Seller Party (provided that if such notice is given to a Seller Party on the Closing Date, then Assignors shall simultaneously provide a copy thereof to Assignee); and shall promptly (but in any event prior to Closing or two (2) days after receipt thereof, whichever is earlier) forward to Assignee any formal notices received by any Assignor or Buyer Party from any Seller Party under either Purchase Agreement, to the extent affecting or related to any of the Broadstone Properties (including, without limitation, Buyer’s rights relating thereto) or affecting or related to any Purchase Agreement generally.

(2)Assignors shall promptly forward to Assignee any revision, amendment or modification of any Third Party Report or Title Commitment.

Partial Assignment
(Broadstone)

(3)Assignors shall give prompt written notice to Assignee upon acquiring knowledge of (a) any default or providing notice to any Seller of any alleged default under either Purchase Agreement; (b) any fact or circumstance that renders (i) any representation or warranty in either Purchase Agreement untrue or inaccurate in any material respect; or (ii) any representation or warranty of any Assignor in this Agreement untrue or inaccurate in any material respect; or (iii) any of the conditions of this Agreement or either Purchase Agreement being unfulfilled on the date when such condition is required to be fulfilled.

(4)Assignors shall use reasonable efforts to cause Sellers to cooperate with Assignor and Assignee as reasonably required to consummate the assignment contemplated by this Agreement and Assignee’s purchase of the Broadstone Properties at Closing.

(5)Assignors shall perform their obligations under the Purchase Agreements in all material respects and use commercially reasonable efforts to enforce their rights against Sellers under the Purchase Agreements.

(6)On or before Closing, each Assignor shall provide to Assignee a certificate from an authorized officer of such Assignor, certifying to Assignee that such Assignor is duly authorized to enter into the transaction contemplated by this Agreement and empowering the individual(s) signing this Agreement and any other transaction documents to execute the same and bind such Assignor thereto.

B.Negative.

(1)Assignors shall not assign, amend or modify the Purchase Agreements, in whole or in part, or enter into an agreement with any third party relating, in each case, to the Broadstone Properties without, in each case, Assignee’s prior written consent, which consent (i) prior to the expiration of the Broadstone DDP, may be withheld in Assignee’s reasonable good faith discretion and (ii) after the expiration of the Broadstone DDP, may be withheld in Assignee’s sole and absolute discretion.

(2)Assignors shall not (a) grant any approvals or consents permitted to be granted by either Purchase Agreement (nor permit any deemed approval periods to expire or lapse) with respect to the Broadstone Properties (including, without limitation, Buyer’s rights relating thereto) or affecting or related to any Purchase Agreement generally, (b) submit any notices, elections, objections or documents to any Seller Party that are required or permitted to be submitted under either Purchase Agreement with respect to the Broadstone Properties (including, without limitation, Buyer’s rights relating thereto) or affecting or related to any Purchase Agreement generally, or (c) waive any requirements applicable to or defaults by any Seller Party under either Purchase Agreement with respect to the Broadstone Properties (including, without limitation, Buyer’s rights relating thereto) or affecting or related to any Purchase Agreement generally, without, in each instance, Assignee’s prior written consent, which consent (i) prior to the expiration of the Broadstone DDP, may be withheld in Assignee’s reasonable good faith discretion and (ii) after the expiration of the Broadstone DDP, may be withheld in Assignee’s sole and absolute discretion, and which consent (or denial thereof), in either case, shall be delivered by Assignee to Assignors no later than two (2) Business Days after Assignors request therefor.

Partial Assignment
(Broadstone)

(3)Assignors shall not request or consent to any revision, amendment or modification of any Third Party Report or Title Commitment relating to any of the Broadstone Properties (including, without limitation, Buyer’s rights relating thereto) or affecting or related to any Purchase Agreement generally without Assignee’s prior written consent, which consent (i) prior to the expiration of the Broadstone DDP, may be withheld in Assignee’s reasonable good faith discretion and (ii) after the expiration of the Broadstone DDP, may be withheld in Assignee’s sole and absolute discretion, and which consent (or denial thereof), in either case, shall be delivered by Assignee to Assignors no later than two (2) Business Days after Assignors request therefor.

C.After Closing. After Closing, Assignors agree to: (a) reasonably cooperate with Assignee in any action taken by Assignee related to the Purchase Agreements and use reasonable efforts to enforce, for Assignee’s benefit, any of the covenants, agreements or undertakings of Seller under the Purchase Agreements to the extent related to the Broadstone Properties, including without limitation, post-closing payment obligations or reconciliation, obtaining any material outstanding documentation, consents or actions contemplated under the Purchase Agreements related to the Broadstone Properties; (b) provide Assignee with all written notices and other documentation received from any Seller Party related to the Purchase Agreements generally or any third party related to the Broadstone Properties; and (c) take any commercially reasonable actions necessary to ensure that Assignee receives the benefits of Assignors under the Purchase Agreements. Notwithstanding the foregoing, in the event Assignors are requested by Assignee to take legal action against any Seller Party under any Purchase Agreement pursuant to this Section 12.C, then Assignee shall bear the costs of same to the extent related to the Broadstone Properties. After Closing, Assignors shall, at any time and from time to time upon written request therefor, execute and deliver to Assignee, Assignee’s successors, nominees or assigns, such documents as Assignee may reasonably request in order to fully assign and transfer to and vest in Assignee or Assignee’s successors, nominees and assigns, and protect Assignee’s right, title and interest in and to the Broadstone Properties, and the rights of Assignors intended to be transferred and assigned hereby, or to enable Assignee, Assignee’s successors, nominees and assigns to realize upon or to otherwise enjoy such rights under the Purchase Agreements relating to the Broadstone Properties; provided, that Assignors shall not be required to incur any material expense or liability in connection therewith, and this obligation shall only survive Closing for a period of three (3) months.

13.Conditions to Assignee’s Obligations. Unless waived in writing by Assignee, the obligation of Assignee to consummate the assignment, assume the Broadstone Liabilities and purchase the Broadstone Properties, is subject to the fulfillment of all of the following conditions on or prior to the Closing Date, to the extent such conditions affect or relate to any of the Broadstone Properties (including, without limitation, Buyer’s rights relating thereto) or affecting or related to any Purchase Agreement generally:

A.Sellers’ representations and warranties contained in the Purchase Agreements shall be true and correct in all material respects as of the Effective Date and the Closing Date.

B.Assignors’ representations and warranties contained in this Agreement and the Purchase Agreements shall be true and correct in all material respects.

Partial Assignment
(Broadstone)

C.All conditions to close set forth in Section 9.1 of the US Purchase Agreement and Section 8.1 of the Canadian Purchase Agreement have been satisfied or, with Assignee’s prior written consent, waived.

D.Sellers shall have performed and complied in all material respects with all covenants and obligations required by the Purchase Agreements to be performed or complied with by Sellers on or before Closing, unless waived by Assignors with Assignee’s consent in accordance with the terms of this Agreement.

E.Assignors shall have performed and complied in all material respects with all covenants and obligations required by this Agreement and the Purchase Agreements to be performed or complied with by Assignors before Closing, unless, in the case of the Purchase Agreements solely with respect to any Property that is not a Broadstone Property (and not affecting any Purchase Agreement generally), any such failure is waived by Sellers in accordance with the terms of the applicable Purchase Agreements.

F.All Sellers’ Closing Deliveries reflect Assignee as the purchaser of the Broadstone Properties and such Sellers’ Closing Deliveries have been duly executed and delivered by Sellers and Assignee in accordance with the Purchase Agreements.

G.The consummation of the assignment contemplated by this Agreement shall occur on the Closing Date and Closing under the Purchase Agreements will occur concurrently in accordance therewith.

H.Title Company is committed at Closing to issue the Title Policies to Assignee; provided, that Assignee has provided to Title Company such evidence of Assignee’s power and authority to execute this Agreement and related documents as Title Company may reasonably request prior to the Closing Date.

In the event any of the conditions in this Section 13 have not been satisfied (or otherwise waived in writing by Assignee) on or prior to the Closing Date, then Assignee shall have the right to terminate this Agreement by written notice to Assignors, whereupon (i) Title Company shall return the Broadstone Deposit to Assignee; (ii) if the failure of such condition is the result of a breach or default by Assignors under this Agreement or any Buyer Party under the Purchase Agreements (excluding any breach of a representation discovered by Assignors after the Effective Date that was not due to the intentional misrepresentation or willful misconduct of any Assignor or Buyer Party), then Assignors shall reimburse Assignee for any of its reasonable out of pocket costs incurred in connection with the assignment contemplated by this Agreement (not to exceed $500,000.00); and (iii) except for those provisions of this Agreement which by their express terms survive the termination of this Agreement, no party hereto shall have any other or further rights or obligations under this Agreement.

14.Conditions to Assignor’s Obligations. Unless waived in writing by Assignor, the obligation of Assignor to consummate the assignment pursuant to the terms of this Agreement, is subject to the fulfillment of all of the following conditions on or prior to the Closing Date:

Partial Assignment
(Broadstone)

A.Accuracy of Assignee’s Representations and Warranties. Each of Assignees’ representations and warranties set forth in Section 11 above shall be true and correct in all material respects as of the Closing.

B.Assignees’ Performance. No Assignee shall be in default of this Agreement in any material respect.

C.KYC Requirements. Each Assignee (and any assignee of any Assignee) has truthfully and accurately completed and delivered to Assignors the “know your customer” application in the form attached hereto as Exhibit C (the “KYC Application”) no less than seven (7) days prior to the Closing Date, and each Assignee (and any assignee of Assignee) has satisfactorily passed Assignors’ customary Know Your Customer background check (as determined in Assignors’ good faith discretion); provided, however, that if the KYC Application is completed by each Assignee in accordance with the terms of this clause ©, then Assignor agrees to inform each such Assignee whether such assignee passed such Know Your Customer background check no later than seven (7) days after same is completed in accordance with the terms hereof by each such Assignee.

D.Accuracy of Sellers’ Representations and Warranties. Sellers’ representations and warranties contained in the Purchase Agreements shall be true and correct in all material respects as of the Effective Date and the Closing Date.

E.Satisfaction of Conditions to Closing. All conditions to close set forth in Section 9.1 of the US Purchase Agreement and Section 8.1 of the Canadian Purchase Agreement have been satisfied or waived with Assignor’s prior written consent and, if required under the terms of this Agreement, Assignee’s prior written consent; provided, that if any such condition to close relates solely to a Broadstone Property then this Section 14.E shall be deemed satisfied so long as Assignee has consented to the waiver of such condition.

F.Compliance by Sellers under the Purchase Agreements. Sellers shall have performed and complied in all material respects with all covenants and obligations required by the Purchase Agreements to be performed or complied with by Sellers on or before Closing, unless waived by Assignors with Assignee’s prior written consent to the extent Assignee’s prior consent is required under the terms of this Agreement; provided, that if any such condition to close relates solely to a Broadstone Property then this Section 14.F shall be deemed satisfied so long as Assignee has consented to the waiver of such condition.

Partial Assignment
(Broadstone)

15.Miscellaneous.

A.Notices. All notices required hereunder shall be in writing and shall be delivered in the manner specified in the US Purchase Agreement, and (i) if addressed to Assignors, at the addresses set forth therefor in the Purchase Agreements or (ii) if addressed to Assignee, addressed as follows:


If to Assignee:	c/o Broadstone Real Estate, LLC 800 Clinton Square Rochester, NY 14604 Attn: Sean T. Cutt Email: sean.cutt@broadstone.com
with a copy to:	Vaisey Nicholson & Nearpass PLLC 155 Clinton Square Rochester NY 14604 Attn: Jeffrey A. Vaisey, Esq. Email: jvaisey@vnnlaw.com

B.Authority. The parties hereto each represent and warrant to the other that each is qualified and has full power and authority to execute this Agreement, and that the person signing this Agreement on its behalf is authorized to do so.

C.Entire Agreement. This Agreement, and the additional documents and instruments expressly contemplated herein to be executed in connection herewith (including the Broadstone NDA), constitute the entire agreement between the parties pertaining to the subject matter hereof. All prior agreements, confidentiality agreements, letters of intent, term sheets, representations and understandings of the parties, oral or written, relating to the subject matter hereof, are hereby superseded and merged into this Agreement except as expressly stated herein concerning the Broadstone NDA. No change or addition may be made to this Agreement except by a written agreement executed by all of the parties hereto.

D.Incorporation of Exhibits. All exhibits attached to this Agreement are incorporated herein by reference.

E.Severability. This Agreement is intended to be severable, and the invalidity or unenforceability of any provision of this Agreement shall not impair the validity or enforceability of any other provision of this Agreement, but rather such provisions shall be enforced to the greatest extent permitted by law.

F.Interpretation. The captions of this Agreement are for convenience only and shall not govern or influence the interpretation hereof. This Agreement is the result of negotiations between the parties and, accordingly, shall not be construed for or against either party regardless of which party drafted this Agreement or any portion thereof.

Partial Assignment
(Broadstone)

G.Assignability; Successors and Assigns. All of the provisions hereof shall inure to the benefit of and be binding upon the permitted successors and assigns of each party; provided, that, neither Assignee nor any Assignor may assign all or any portion of its interest hereunder without the prior written consent of the other party hereto, and any such assignment without such other party’s prior written consent shall be void; provided, however, that Assignee may assign its interest in this Agreement to one or more subsidiaries of Broadstone Net Lease, Inc. (“BNL”), which are controlled, directly or indirectly by BNL.

H.Survival. Unless expressly provided to the contrary herein, it is agreed that all of the terms, conditions, provisions, obligations and indemnities contained in this Agreement (other than the obligation of Assignee to perform any obligations under any Purchase Agreements) shall survive the termination or expiration of the Purchase Agreements (or any one of the Purchase Agreements) so that all such obligations and indemnities herein shall continue to be binding upon the parties hereto and their respective successors and assigns.

I.Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. VENUE FOR ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ITS SUBSEQUENT PERFORMANCE SHALL BE IN A COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK, AND THE PARTIES HEREBY AGREE TO SUCH JURISDICTION. THE PARTIES HEREBY IRREVOCABLY WAIVE ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT BROUGHT IN ANY FEDERAL OR STATE COURT SITTING IN THE STATE OF NEW YORK AND HEREBY FURTHER IRREVOCABLY WAIVE ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

J.Waiver of Jury Trial EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

K.Waiver. No waiver of any provisions of this Agreement shall be effective unless it is in writing, signed by the party against whom it is asserted, and any such waiver shall only be applicable to the specific instance in which it relates and shall not be deemed to be a continuing or future waiver.

L.Further Assurances. Each party shall, whenever and as often as it shall be requested so to do by the other, cause to be executed, acknowledged or delivered any and all further instruments and documents as may be necessary or proper, in the reasonable opinion of the requesting party, to carry out the intent and purpose of this Agreement (provided the same do not increase the costs to, or liabilities or obligations of, such party in a manner not otherwise provided for herein in any material respect). The terms of this Section shall survive any expiration or termination of this Agreement. If Assignor(s) or Assignee consists of more than one person or entity, the liability of each such person or entity shall be joint and several.

Partial Assignment
(Broadstone)

M.Conflicts. If and to the extent any of the provisions of this Agreement conflict with or are otherwise inconsistent with any provisions of any Purchase Agreement, as between Assignors and Assignee, the provisions of this Agreement shall prevail.

N.Counterparts. This Agreement shall be executed simultaneously or in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. The delivery of an executed counterpart of this Agreement by facsimile or as a .PDF or similar attachment to an email shall constitute effective delivery of such counterpart for all purposes with the same force and effect as the delivery of an original, executed counterpart and shall be admissible as best evidence for the execution of this Agreement by Assignors and Assignee.

O.Exclusivity. From the Effective Date until the Closing or sooner termination of this Agreement, Assignors and Assignee agree that neither shall accept or entertain offers, negotiate, solicit interest or otherwise enter into discussions involving the purchase, sale or disposition involving any of the Broadstone Properties, any portion thereof or any interest therein, occurring contemporaneous with the Closing.

P.Closing Costs. Assignors and Assignee shall each pay for their own attorneys’ fees incurred in connection with this Agreement and the transactions contemplated hereby. If and when Closing occurs, Assignors and Assignee shall each be responsible for fifty percent (50%) of all escrow and transaction fees charged by the Title Company in connection with the escrow and the assignment contemplated hereby; provided, however that after the expiration of the Broadstone DDP, Assignors and Assignee shall each be responsible for fifty percent (50%) of all reasonable escrow fees charged by the Title Company in connection with the separate escrow established in connection with this transaction. Assignors (or the applicable Seller under the Purchase Agreements) shall be responsible for the cost of the standard coverage portion of Assignee’s owner’s policies of the Title Policies. If and when Closing occurs, Assignee shall be responsible for (i) the cost of any extended coverage and any endorsements to the Title Policies and (ii) the cost of the Third Party Reports. Assignee shall be responsible for all other due diligence materials or analyses ordered or performed by Assignee. All other fees and expenses related to the proposed assignment, to the extent not expressly apportioned elsewhere in this Agreement, shall be allocated between Assignors and Assignee in accordance with local market custom, and if there is no clear local market custom, such charges shall be split evenly between the parties.

Q.Security Deposits. If any Tenant Security Deposit related to a Broadstone Property that is to be transferred to any Assignor at Closing under the Purchase Agreements has been transferred, after the expiration of the Broadstone DDP, into the name of any Assignee prior to the Closing Date, but Assignee does not close on the Broadstone Properties in accordance with the terms of this Agreement on the Closing Date, and any such Tenant Security Deposit is not able to be transferred back into the name of the applicable Assignor prior to Closing, then Assignee agrees to use commercially reasonable best efforts to promptly transfer any such Tenant Security Deposit into the name of the applicable Assignor that purchased the applicable Property promptly after Closing. If Assignee’s failure to close on the Broadstone Properties is the result of a material

Partial Assignment
(Broadstone)

default by Assignee under this Agreement (provided no Assignor is in material default of this Agreement or any Purchase Agreement and no Seller is in material default of either Purchase Agreement at the time of such Assignee default), then Assignee shall pay for the cost of such transfer and Assignee shall indemnify Assignors for, from and against all claims, demands, losses, damages, expenses and costs (including, but not limited to, reasonable attorneys’ fees, but excluding special, exemplary, punitive and consequential damages) arising out of Assignee’s failure to comply with the terms of this Section 15.Q. This obligation shall survive Closing and any termination of this Agreement.

16.Escrow Provisions.

A.Assignee’s Funds. Title Company will hold and disburse Assignee’s funds in accordance with the terms of this Agreement, unless otherwise directed by the mutual written direction of the parties hereto.

B.Duties of Title Company. The sole duties of Title Company will be those described herein, and Title Company will be under no obligation to determine whether the parties hereto are complying with any requirements of law or the terms of any other agreements among said parties. Title Company may conclusively rely upon and will be protected in acting upon any notice, consent, order or other document believed by it to be genuine and to have been signed or presented by the proper party or parties, consistent with reasonable due diligence on Title Company’s part. Title Company may consult the advice of counsel with respect to any issue concerning the interpretation of its duties hereunder. Title Company will have no duty or liability to verify any such notice, consent, order or other document, and its sole responsibility will be to act as expressly set forth in this Agreement. Title Company will be under no obligation to institute or defend any action, suit or proceeding in connection with this Agreement. If any dispute arises with respect to the disbursement of any money, Title Company may continue to hold the money, or commence an interpleader action in a court of competent jurisdiction and remit the money to that court.

[Signatures Continue on Next Page]

Partial Assignment
(Broadstone)

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

ASSIGNORS:


CF Alpha & Golf Propco LLC, a Delaware limited liability company

By:	/s/ Joshua Pack
Name:	Joshua Pack
Its:	Vice President

CF Alpha & Golf Propco BC ULC, a British Columbia unlimited liability company

By:	/s/ Joshua Pack
Name:	Joshua Pack
Its:	Vice President

CF Alpha & Golf MA Propco LLC, a Delaware limited liability company

By:	/s/ Joshua Pack
Name:	Joshua Pack
Its:	Vice President

CF Alpha & Golf KS Propco LLC, a Delaware limited liability company

By:	/s/ Joshua Pack
Name:	Joshua Pack
Its:	Vice President

[Signatures Continued on Next Page]

Signature Page

Partial Assignment
(Broadstone)

ASSIGNEE:

Broadstone ALH Texas, LLC

Broadstone HOME Texas, LLC

Broadstone BP Kansas, LLC

Broadstone BJWC Massachusetts, LLC

Broadstone CA Canada, LLC

Broadstone CQ Illinois, LLC

Broadstone CLE Illinois, LLC

Broadstone FSLY Maryland, LLC

Broadstone XELA Texas, LLC

Broadstone HHH Texas, LLC

Broadstone HBC Arizona, LLC

Broadstone HLM Ohio, LLC

Broadstone MNB Nebraska, LLC

Broadstone NVLX Portfolio, LLC

Broadstone PV California, LLC

Broadstone PRGS Portfolio, LLC

Broadstone REV New Jersey, LLC

Broadstone TF Oklahoma, LLC

Broadstone WRK California, LLC


By:	Broadstone Net Lease, LLC, a New York limited liability company, its sole member

By:	Broadstone Net Lease, Inc., a Maryland corporation, its managing member

By:	/s/ Sean T. Cutt
Name:	Sean T. Cutt
Its:	Chief Investment Officer

Signature Page

Partial Assignment
(Broadstone)

JOINDER BY TITLE COMPANY

FIRST AMERICAN TITLE INSURANCE COMPANY is executing this Agreement in its capacity as Title Company only, and by such execution is only agreeing to act strictly in accordance with the terms of this Agreement that govern the duties and obligations of Title Company, including being the designated party to comply with any reporting requirements specified in Section 6045 of the United States Internal Revenue Code (and any related regulations regarding such reporting obligations) in relation to this transaction.


FIRST AMERICAN TITLE INSURANCE COMPANY

By:
Name:
Its:
Date:		, 2019

Signature Page

Partial Assignment
(Broadstone)

SCHEDULE 1

Assignee

Broadstone ALH Texas, LLC

Broadstone HOME Texas, LLC

Broadstone BP Kansas, LLC

Broadstone BJWC Massachusetts, LLC

Broadstone CA Canada, LLC

Broadstone CQ Illinois, LLC

Broadstone CLE Illinois, LLC

Broadstone FSLY Maryland, LLC

Broadstone XELA Texas, LLC

Broadstone HHH Texas, LLC

Broadstone HBC Arizona, LLC

Broadstone HLM Ohio, LLC

Broadstone MNB Nebraska, LLC

Broadstone NVLX Portfolio, LLC

Broadstone PV California, LLC

Broadstone PRGS Portfolio, LLC

Broadstone REV New Jersey, LLC

Broadstone TF Oklahoma, LLC

Broadstone WRK California, LLC

Signature Page

Partial Assignment
(Broadstone)

EXHIBIT A

List of Broadstone Properties


#	Street	City	State
1.	4501 Mountain Creek Parkway	Dallas	TX
2.	1600 E. Plano Parkway	Plano	TX
3.	670 N 1800 Road	Lecompton	KS
4.	25 Research Drive	Westborough	MA
5.	1337 Townline Road	Abbotsford	BC
6.	1109 E. Lake Street	Streamwood	IL
7.	2400 West Central Road	Hoffman Estates	IL
8.	8704 Bollman Place	Savage	MD
9.	2701 East Grauwyler Road	Irving	TX
10.	300 West FM 1417	Sherman	TX
11.	4201 North 45th Avenue	Phoenix	AZ
12.	2555 North Nevada Street	Chandler	AZ
13.	10201 East Valley Road	Prescott	AZ
14.	1700 Carillon Boulevard	Forest Park	OH
15.	11222 I Street	Omaha	NE
16.	8096 East Highway 78	Villa Rica	GA
17.	2976 S. Commerce Way	Ogden	UT
18.	6101 Variel Ave	Woodland Hills	CA
19.	8201 West Elowin Court	Visalia	CA
20.	1411 Pidco Drive	Plymouth	IN
21.	2121 Highway 27	Edison	NJ
22.	5109 E. Willow	Enid	OK
23.	3366 E Muscat Ave	Fresno	CA

Exhibit A

Partial Assignment
(Broadstone)

EXHIBIT B

Legal Descriptions of Broadstone Properties

Exhibit B

Partial Assignment
(Broadstone)

Legal Description

American Leather

Being Lot 2 in block 211/6113 of MOUNTAIN CREEK BUSINESS PARK BUILDING NO. 2 ADDITION, an Addition to the City of Dallas, Dallas County, Texas, according to the Plat thereof recorded in Volume 2003204, Page 152 of the Map Records of Dallas County, Texas.

DESCRIPTION of a 21.214 acre tract of land situated in the John J. Blair Survey, Abstract No. 211, Dallas County, Texas; said tract being part of a tract of land described in a deed to Mountain Creek Business Park Land, L.P. recorded in Volume 2001170, Page 5221, of the Deed Records of Dallas County, Texas; said 21.214 acre tract being more particularly described as follows:

BEGINNING, at a 1/2-inch iron rod with “Pacheco Koch” cap set on the West right-of-way line of Mountain Creek Parkway (100 foot wide right-of-way); said point being the most Easterly Southeast corner of a tract of land described in a deed to Texas Power and Light Company recorded in Volume 1678, Page 256, of the Deed Records of Dallas County, Texas; said point being at the beginning of a curve to the right whose center bears South 89 degrees, 58 minutes, 21 seconds West, a distance of 1150.00 feet from said point;

THENCE, in a Southerly direction, along said curve, and along said West right-of-way line, through a central angle of 14 degrees, 24 minutes, 27 seconds, an arc distance of 289.18 feet, on a chord bearing and distance of South 07 degrees, 10 minutes, 35 seconds West, 288.41 feet to a 1/2-inch iron rod with “Pacheco Koch” cap set at the end of said curve;

THENCE, South 14 degrees, 22 minutes, 48 seconds West, along said West right-of-way line, a distance of 649.55 feet to a 1/2-inch iron rod with “Pacheco - Koch” cap set;

THENCE, North 75 degrees, 37 minutes, 12 seconds West, departing said West right-of-way line, a distance of 21.21 feet to a 1/2-inch iron rod with “Pacheco Koch” cap set for an angle point;

THENCE, North 79 degrees, 18 minutes, 57 seconds West, a distance of 990.27 feet to a 1/2-inch iron rod with “Pacheco Koch” cap set; said point being on the common line of said Texas Power and Light Company tract and said Mountain Creek Business Park Land, L.P. tract;

THENCE, North 10 degrees, 41 minutes, 03 seconds East, along said common line, a distance of 845.59 feet to a 1/2-inch iron rod with “Pacheco Koch” cap set; said point being an ell comer of said Texas Power and Light Company tract;

THENCE, South 84 degrees, 14 minutes, 02 seconds East, along a common line of said Texas Power and Light Company tract and said Mountain Creek Business Park Land, L.P. tract, passing at a distance of 989.26 feet, a 1/2-inch iron rod found, continuing with said common line, a total distance of 1039.48 feet to the POINT OF BEGINNING; CONTAINING 924,089 square feet or 21.214 acres of land, more or less.

Legal Description

At Home – Garden Ridge

Original Parcel:

Lot 1R, Block 1, Mervyn’s Distribution Center Addition, an Addition in the City of Plano, Texas, according to the Plat thereof in Book 2008, Page 82, Official Public Records, Collin County, Texas, and being the same property as described on that certain survey last certified on October 4, 2013, and last revised October 11, 2013, made by Lane’s Southwest Surveying, Inc. as follows:

BEGINNING at a cross found in the South ROW line of East Plano Parkway (a 105’ ROW), being at the most North Northwest corner of said Lot 1R, Block 1 and the Northeast corner of Lot 2R, Block 1, of said Mervyn’s Distribution Center Addition;

THENCE: East, along the South ROW line of East Plano Parkway and the North line of said Lot 1R, Block 1, a distance of 1051.85 feet to a l/2 inch iron rod set at the intersection of the South ROW line of East Plano Parkway with the West ROW line of Stewart Avenue (a 60’ ROW), being at the Northeast corner of said Lot 1R;

THENCE: South 00 degrees 03 minutes 03 seconds West, along the West ROW line of Stewart Avenue and the East line of said Lot 1R, Block 1, a distance of 947.68 feet to a 1/2 inch iron rod at the intersection of the West ROW line of Stewart Avenue with the North line of a 150’ T. P. and L. Right of Way, recorded in Volume 584, Page 423, Deed Records, Collin County, Texas, said iron rod being at the Southeast corner of said Lot 1R, Block 1;

THENCE: North 89 degrees 55 minutes 08 seconds West, along the North line of said 150’ T. P. and L. Right of Way and the South line of said Lot 1R, Block l, a distance of 1444.60 feet to a 5/8 inch iron rod found at the Southwest corner of said Lot 1R and the most Southerly Southeast corner of said Lot 3, Block 1 of said Mervyn’s Distribution Center Addition;

THENCE: North 00 degrees 10 minutes 53 seconds West, along the common line of said Lot 1R, Block 1 and said Lot 3, Block 1, a distance of 397.59 feet to a 5/8 inch iron rod found for corner;

THENCE: East, along said common line, a distance of 37.36 feet to a 5/8 inch iron rod found for corner;

THENCE: North, continuing along said common line, a distance of 17.48 feet to a 5/8 inch iron rod found at the Southwest corner of said Lot 2R, Block 1;

THENCE: East, along the common line of said Lot 1R, Block 1 and said Lot 2R, Block 1, a distance of 357.02 feet to a cross found at the Southeast corner of said Lot 2R;

THENCE: North 00 degrees 03 minutes 03 seconds East, along the common line of said Lot 1R, Block 1 and said Lot 2R, Block 1, a distance of 530.58 feet to the PLACE OF BEGINNING and containing 26.604 acres of land.

Expansion Parcel:

Being a tract of land, situated in the James Beverly Survey, Abstract No. 120, in the City of Plano, Collin County, Texas, same being a part of Lot 3, Block 1, of MERVYN’S DISTRIBUTION CENTER, an addition to the City of Plano, as recorded in Volume 2008, Pages 82-83, of the Map Records, Collin County, Texas (M.R.C.C.T.), said tract being more particularly described as follows:

BEGINNING at a 1/2” iron rod with a plastic cap stamped “EBG” found for the southwesterly corner of said Lot 3, same being in the easterly monumented line of “N” Avenue;

THENCE North 00°00’00” West, along the westerly line of said Lot 3, same being the easterly monumented line of “N” Avenue, a distance of 428.17’ to a point for corner;

THENCE South 90°00’00” East, over and across said Lot 3, a distance of 484.12’ to a point for corner, said corner being in the easterly line of said Lot 3, same being in the westerly line of Lot 2R, Block 1, of MERVYN’S DISTRIBUTION CENTER, as recorded in Volume R, Page 56, M.R.C.C.T.;

THENCE South 00°00’00” West, along the westerly line of said Lot 2R, same being the easterly line of said Lot 3, a distance of 31.22’ to a 5/8” iron rod found for an “ell” corner of said Lot 3, same also being in “ell” corner of Lot 1R, Block 1, of said MERVYN’S DISTRIBUTION CENTER (Vol. 2008, Pg. 82);

THENCE along the common line between said Lot 1R and Lot 3, the following courses and distances:

North 90°00’00” West, a distance of 37.36’ to a 5/8” iron rod found for corner;

South 00°10’53” East, a distance of 397.59’ to a 5/8” iron rod found for the southeasterly corner of said Lot 3, same being the most westerly southwest corner of said Lot 1R;

THENCE North 89°55’08” West, along the southerly line of said Lot 3, a distance of 448.02’ to the POINT OF BEGINNING and containing 4.427 acres of land, more or less.

Legal Description

Berry Plastics

A Leasehold Estate as created by that certain Lease dated September 25, 2012, by and between Douglas County, Kansas, a political subdivision of the State of Kansas, as issuer, and AGNL Plastics, L.L.C., a Delaware limited liability company, as lessee, pursuant to that certain Notice of Lease, dated September 7, 2012, recorded September 27, 2012, at Book 1092, Page 3882-3884, in the Office of the Register of Deeds of Douglas County, Kansas, upon and subject to all the provisions therein contained, in and with regard to the following described land:

Lot 2, Rockwall Farms Addition 2^nd Plat, an addition in Douglas County, Kansas, Per That Certain Recorded Plat of Subdivision recorded on April 8, 2011, at Book 18, Page 483, in the Office of the Register of Deeds of Douglas County, Kansas.

Legal Description

BJ’s Wholesale

A certain parcel of land in the Commonwealth of Massachusetts, County of Worcester, Town of Westborough, situated on the southerly side of Research Drive and being shown as LOT 1 on a plan entitled, “PLAN OF LAND, 25 AND 29 RESEARCH DRIVE, WESTBOROUGH, MA”, prepared by Beals and Thomas, Inc., dated June 21, 2013 and recorded in the Worcester District County Registry of Deeds in Plan Book 905, Plan 15. More particularly bounded and described as follows:

Beginning at a point at the most northeasterly comer of the premises herein described, said point being at an intersection of the common boundary line of Lot 1 and Lot 2 and the southerly sideline of Research Drive, thence running;


S 01° 17’ 19” W	84.47 feet to a point, thence turning and running;
N 69° 14’ 55” E	49.91 feet to a point, thence turning and running;
S 01° 17’ 19” W	885.44 feet to a point, thence turning and running;
S 89° 11’ 05” W	303.63 feet to a point, thence turning and running;
S 00° 48’ 55” E	45.25 feet to a point, thence turning and running;
S 70° 36’ 16” W	304.39 feet to a point, thence turning and running;
S 19° 31’ 42” E	171.19 feet to a point, thence turning and running;
S 70° 11’ 25” W	570.16 feet to a point, thence turning and running;
N 10° 19’ 35” W	958.82 feet to a point, thence turning and running;
N 43° 21’ 32” E	178.90 feet to a point, thence turning and running;
N 00° 48’ 55” W	414.38 feet to a point, said last eleven courses being by the common boundary of Lot 1 and Lot 2, thence turning and running;
N 89° 11’ 34” E	1055.99 feet to a point, thence turning and running;
S 42° 34’ 04” E	61.67 feet to the point of beginning, said last two courses being by the southerly sideline of Research Drive.

Containing 1,416,261 square feet more or less, or 32.512 acres, more or less.

Legal Description

Cascade

Parcel Identifier 024-567-256

Lot 2 Section 12 Township 13

New Westminster District Plan LMP42847

Legal Description

Chiquita – Fresh Express

THAT PART OF THE EAST 1/2 OF THE SOUTHEAST 1/4 OF SECTION 35 AND THAT PART OF THE WEST 1/2 OF THE SOUTHWEST 1/4 OF SECTION 36, THE TOWNSHIP 41 NORTH, RANGE 9 EAST OF THE THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS:

COMMENCING AT THE POINT OF INTERSECTION OF THE EAST LINE OF THE WEST HALF OF SAID SOUTHWEST QUARTER OF SAID SECTION 36 WITH A LINE THAT IS 30 FEET SOUTHERLY OF (MEASURED AT RIGHT ANGLES THERETO) AND PARALLEL WITH THE ORIGINAL CENTER LINE OF U. S. ROUTE 20, WHICH SAID POINT OF INTERSECTION IS 794.78 FEET MORE OR LESS, RECORD (797.48 FEET MEASURED),NORTH OF THE NORTHERLY RIGHT OF WAY LINE OF THE CHICAGO, MILWAUKEE, ST. PAUL AND PACIFIC RAILROAD COMPANY AS MEASURED ON THE EAST LINE OF THE WEST HALF OF SAID SOUTHWEST QUARTER OF SAID SECTION 36; THENCE SOUTH 00 DEGREES 14 MINUTES 25 SECONDS EAST (BEING A BEARING BASED ON ILLINOIS EAST STATE PLANE ZONE 1201) , ALONG THE EAST LINE OF SAID WEST HALF OF THE SOUTHWEST QUARTER OF SECTION 36, A DISTANCE OF 24.83 FEET TO A POINT ON THE SOUTH LINE OF PARCEL 1DV0003 AS CONVEYED TO THE STATE OF ILLINOIS PER WARRANTY DEED RECORDED FEBRUARY 19, 2003 AS DOCUMENT NUMBER 0030235183; THENCE NORTH 53 DEGREES 47 MINUTES 39 SECONDS WEST, ALONG THE SOUTH LINE OF SAID PARCEL, 458.41 FEET; THENCE SOUTH 36 DEGREES 12 MINUTES 21 SECONDS WEST, ALONG THE SOUTHEASTERLY LINE OF SAID PARCEL, 10.00 FEET; THENCE NORTH 53 DEGREES 47 MINUTES 39 SECONDS WEST, ALONG THE SOUTH LINE OF SAID PARCEL, 31.03 FEET, TO A POINT ON A LINE 400 FEET WEST OF AND PARALLEL WITH THE EAST LINE OF SAID WEST HALF OF THE SOUTHWEST QUARTER AS MONUMENTED AND OCCUPIED, SAID POINT ALSO BEING THE POINT OF BEGINNING; THENCE SOUTH 00 DEGREES 18 MINUTES 04 SECONDS EAST, ALONG SAID LINE, 988.98 FEET TO A POINT ON THE NORTHERLY RIGHT OF WAY LINE OF THE CHICAGO, MILWAUKEE, ST. PAUL AND PACIFIC RAILROAD, SAID POINT ALSO BEING 404.09 FEET WEST OF (AS MEASURED ALONG SAID NORTHERLY LINE) THE INTERSECTION OF SAID NORTHERLY LINE AND THE EAST LINE OF SAID WEST HALF; THENCE NORTH 80 DEGREES 47 MINUTES 17 SECONDS WEST, ALONG SAID NORTHERLY RIGHT OF WAY LINE, 720.30 FEET TO A POINT ON THE EAST LINE OF PARCEL NUMBER 16W1002 PER CONDEMNATION CASE NUMBER 95 L 50357, RECORDED JULY 9, 2001 AS DOCUMENT NUMBERS 0010601726 AND 0010601727; THENCE NORTH 25 DEGREES 40 MINUTES 14 SECONDS WEST, ALONG SAID EAST LINE 488.79 FEET, TO A BEND POINT; THENCE NORTH 27 DEGREES 19 MINUTES 12 SECONDS WEST, ALONG SAID EAST LINE 388.26 FEET TO A POINT ON A LINE 1496.44 FEET RECORD (1495.77 MEASURED), WEST OF AND PARALLEL WITH THE EAST LINE OF SAID WEST HALF, SAID LINE ALSO BEING THE EAST LINE OF THE PROPERTY TAKEN FOR THE ELGIN O’HARE EXPRESSWAY; THENCE NORTH 00 DEGREES 14 MINUTES 25 SECONDS WEST, ALONG SAID PARALLEL LINE, 756.25 FEET TO A POINT THAT IS 140 FEET SOUTHWESTERLY OF (MEASURED AT RIGHT ANGLES THERETO) A LINE THAT IS 30 FEET SOUTHERLY OF (MEASURED AT RIGHT ANGLES THERETO) AND PARALLEL WITH THE ORIGINAL CENTER LINE OF U. S. ROUTE 20; THENCE NORTH 36 DEGREES 00 MINUTES 03 SECONDS EAST 109.89 FEET TO A POINT ON THE SOUTH LINE OF THE PROPERTY CONVEYED TO THE STATE OF ILLINOIS PER DEED RECORDED APRIL 8, 1970 AS DOCUMENT NUMBER 21130297; THENCE SOUTH 53 DEGREES 49 MINUTES 21 SECONDS EAST, ALONG SAID

SOUTH LINE, 108.58 FEET TO A BEND POINT; THENCE SOUTH 57 DEGREES 40 MINUTES 17 SECONDS EAST, ALONG SIDE SOUTH LINE, 152.08 FEET TO THE WESTERN MOST CORNER OF PARCEL 1DV0003 AS CONVEYED TO THE STATE OF ILLINOIS PER WARRANTY DEED RECORDED FEBRUARY 19, 2003 AS DOCUMENT NUMBER 0030235183; THENCE SOUTH 53 DEGREES 46 MINUTES 58 SECONDS EAST, ALONG THE SOUTH LINE OF SAID PARCEL, 952.50 FEET; THENCE SOUTH 36 DEGREES 12 MINUTES 21 SECONDS WEST, ALONG A NORTHWESTERLY LINE OF SAID PARCEL, 10.00 FEET; THENCE SOUTH 53 DEGREES 47 MINUTES 39 SECONDS EAST, ALONG THE SOUTH LINE OF SAID PARCEL 68.93 FEET, TO THE POINT OF BEGINNING, ALL IN COOK COUNTY, ILLINOIS.

PREVIOUSLY DESCRIBED AS:

PARCEL 1:

THAT PART OF THE EAST 1/2 OF THE SOUTHEAST 1/4 OF SECTION 35 AND THAT PART OF THE WEST 1/2 OF THE SOUTHWEST 1/4 OF SECTION 36, TOWNSHIP 41 NORTH, RANGE 9 EAST OF THE THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS:

COMMENCING AT THE POINT OF INTERSECTION OF THE EAST LINE OF THE WEST 1/2 OF SAID SOUTHWEST 1/4 OF SAID SECTION 36 WITH A LINE THAT IS 30 FEET SOUTHERLY OF (MEASURED AT RIGHT ANGLES THERETO) AND PARALLEL WITH THE ORIGINAL CENTER LINE OF U. S. ROUTE 20, WHICH SAID POINT OF INTERSECTION IS 794.78 FEET, MORE OR LESS, NORTH OF THE NORTHERLY RIGHT OF WAY LINE OF THE CHICAGO, MILWAUKEE, ST. PAUL AND PACIFIC RAILROAD COMPANY AS MEASURED ON THE EAST LINE OF THE WEST 1/2 OF SAID SOUTHWEST 1/4 OF SAID SECTION 36; THENCE NORTHWESTERLY ALONG SAID LINE THAT IS 30 FEET SOUTHERLY OF (MEASURED AT RIGHT ANGLES THERETO) AND PARALLEL WITH THE ORIGINAL CENTER LINE OF U. S. ROUTE 20 A DISTANCE OF 1,184.69 FEET TO A POINT ON A LINE THAT IS 953.44 FEET WEST OF (MEASURED AT RIGHT ANGLES THERETO) AND PARALLEL WITH THE EAST LINE OF THE WEST 1/2 OF SAID SOUTHWEST 1/4 OF SAID SECTION 36 FOR A POINT OF BEGINNING; THENCE SOUTH ALONG SAID LAST DESCRIBED PARALLEL LINE A DISTANCE OF 1,342.26 FEET TO THE NORTHERLY RIGHT OF WAY LINE OF THE CHICAGO, MILWAUKEE, ST. PAUL AND PACIFIC RAILROAD; THENCE NORTHWESTERLY ALONG SAID NORTHERLY RIGHT OF WAY LINE A DISTANCE OF 550.53 FEET TO A POINT ON A LINE THAT IS 1,496.44 FEET WEST OF (MEASURED AT RIGHT ANGLES THERETO) AND PARALLEL WITH THE EAST LINE OF THE WEST 1/2 OF SAID SOUTHWEST 1/4 OF SAID SECTION 36; THENCE NORTH ALONG SAID LAST DESCRIBED PARALLEL LINE A DISTANCE OF 1,478.19 FEET TO A POINT THAT IS 140 FEET SOUTHWESTERLY OF (MEASURED AT RIGHT ANGLES THERETO) A LINE THAT IS 30 FEET SOUTHERLY OF (MEASURED AT RIGHT ANGLES THERETO) AND PARALLEL WITH THE ORIGINAL CENTER LINE OF U. S. ROUTE 20; THENCE NORTHEASTERLY AT RIGHT ANGLES TO THE LAST DESCRIBED PARALLEL LINE A DISTANCE OF 140 FEET TO SAID LAST DESCRIBED PARALLEL LINE; THENCE SOUTHEASTERLY ALONG SAID LAST DESCRIBED PARALLEL LINE A DISTANCE OF 571.54 FEET TO THE POINT OF BEGINNING;

EXCEPTING FROM THE FOREGOING DESCRIBED PARCEL OF LAND ALL THAT PART, THEREOF CONVEYED TO THE STATE OF ILLINOIS BY DEED DATED NOVEMBER 19, 1969, AND RECORDED APRIL 8, 1970, AS DOCUMENT NUMBER 21130297;

ALSO EXCEPT THAT PART FALLING IN THE WEST HALF OF THE SOUTHWEST QUARTER OF SECTION 36, TOWNSHIP 41 NORTH, RANGE 9 EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE INTERSECTION OF THE EAST LINE OF THE WEST HALF OF THE SOUTHWEST QUARTER OF SECTION 36 WITH THE SOUTHERLY RIGHT OF WAY LINE OF U.S. ROUTE 20 (LAKE STREET); THENCE NORTH 53 DEGREES 46 MINUTES 42 SECONDS WEST ALONG SAID SOUTHERLY RIGHT OF WAY LINE OF U.S. 20 (LAKE STREET) 1,248.00 FEET; THENCE NORTH 59 DEGREES 30 MINUTES 00 SECONDS WEST CONTINUING ALONG SAID SOUTHERLY RIGHT OF WAY LINE 100.39 FEET; THENCE NORTH 57 DEGREES 37 MINUTES 56 SECONDS WEST CONTINUING ALONG SAID SOUTHERLY RIGHT OF WAY LINE 148.67 FEET; THENCE SOUTH 53 DEGREES 46 MINUTES 42 SECONDS 952.55 FEET; THENCE SOUTH 36 DEGREES 33 MINUTES 18 SECONDS WEST 10.00 FEET; THENCE SOUTH 53 DEGREES 46 MINUTES 42 SECONDS EAST 100.00 FEET; THENCE NORTH 36 DEGREES 13 MINUTES 18 SECONDS EAST 10.00 FEET; THENCE SOUTH 53 DEGREES 46 MINUTES 42 SECONDS EAST 458.46 FEET TO A POINT ON THE EAST LINE OF THE WEST HALF OF THE SOUTHWEST QUARTER OF SECTION 36; THENCE NORTH 00 DEGREES 16 MINUTES 34 SECONDS WEST ALONG SAID LINE 24.88 FEET TO THE POINT OF BEGINNING, ALL IN COOK COUNTY, ILLINOIS.

ALSO EXCEPTING THEREFROM ALL THAT PART OF THE LAND TAKEN BY ORDER AND JUDGMENT IN FAVOR OF THE DEPARTMENT OF TRANSPORTATION OF THE STATE OF ILLINOIS BY DOCUMENT RECORDED JULY 7, 2001 AS DOCUMENT NO. 0010601727.

PARCEL 2:

THAT PART OF THE WEST 1/2 OF THE SOUTHWEST 1/4 OF SECTION 36, TOWNSHIP 41 NORTH, RANGE 9 EAST OF THE THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS:

COMMENCING AT THE INTERSECTION OF THE EAST LINE OF THE WEST ½ OF SAID SOUTHWEST 1/4 WITH THE SOUTHERLY RIGHT OF WAY LINE OF U. S. ROUTE 20; THENCE NORTHWESTERLY ALONG SAID SOUTHERLY RIGHT OF WAY LINE A DISTANCE OF 496.95 FEET TO A POINT ON A LINE THAT IS 400 FEET WEST OF (MEASURED AT RIGHT ANGLES THERETO) AND PARALLEL WITH THE EAST LINE OF THE WEST 1/2 OF SAID SOUTHWEST 1/4 FOR THE POINT OF BEGINNING; THENCE SOUTH ALONG SAID PARALLEL LINE A DISTANCE OF 1,022.7 FEET TO THE NORTHERLY RIGHT OF WAY LINE OF THE CHICAGO, MILWAUKEE, ST. PAUL AND PACIFIC RAILROAD; THENCE NORTHWESTERLY ALONG SAID NORTHERLY RIGHT OF WAY LINE, A DISTANCE OF 561.11 FEET TO A POINT ON A LINE THAT IS 953.44 FEET WEST OF (MEASURED AT RIGHT ANGLES THERETO) AND PARALLEL WITH THE EAST LINE OF THE WEST 1/2 OF SAID SOUTHWEST 1/4; THENCE NORTH ALONG SAID PARALLEL LINE, A DISTANCE OF 1,338.54 FEET TO THE SOUTHERLY RIGHT OF WAY LINE OF U.S. ROUTE NO. 20; THENCE SOUTHEASTERLY ALONG SAID SOUTHERLY RIGHT OF WAY LINE, A DISTANCE OF 687.74 FEET TO THE POINT OF BEGINNING;

EXCEPT THAT PART FALLING IN THE WEST HALF OF THE SOUTHWEST QUARTER OF SECTION 36, TOWNSHIP 41 NORTH, RANGE 9 EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS MORE PARTICULARLY DESCRIBED AS FOLLOWS:

Legal Description

Claire’s

THE WEST HALF OF THE SOUTHWEST QUARTER OF SECTION 36, TOWNSHIP 42 NORTH, RANGE 9, EAST OF THE THIRD PRINCIPAL MERIDIAN, EXCEPT THAT PART WITHIN RELOCATED BARRINGTON ROAD AND EXCEPT THAT PART THEREOF DESCRIBED AS: COMMENCING AT THE SOUTHWEST CORNER OF SAID SECTION 36; THENCE NORTHERLY ALONG THE WEST LINE OF SAID SECTION OF 168.32 FEET TO A POINT; THENCE TURNING AN ANGLE RIGHT OF 123 DEGREES 21 MINUTES WITH THE LAST DESCRIBED LINE EXTENDED AND RUNNING SOUTHEASTERLY A DISTANCE OF 306.17 FEET TO A POINT ON THE SOUTH LINE OF SECTION 36; THENCE WESTERLY ALONG THE SOUTH LINE A DISTANCE OF 255.76 FEET TO THE POINT OF BEGINNING, IN COOK COUNTY, ILLINOIS,

AND FURTHER EXCEPTING THEREFROM THE FOLLOWING FOUR PARCELS OF LAND:

EXCEPTION PARCEL 1:

THAT PART OF THE WEST 1/2 OF THE SOUTHWEST 1/4 OF SECTION 36, TOWNSHIP 42 NORTH, RANGE 9, EAST OF THE THIRD PRINCIPAL MERIDIAN, LYING NORTH OF A LINE DRAWN FROM A POINT ON THE WEST LINE THEREOF, A DISTANCE OF 963.50 FEET NORTH OF THE SOUTHWEST CORNER THEREOF TO A POINT ON THE EAST LINE THEREOF, 957.54 FEET NORTH OF THE SOUTHEAST CORNER THEREOF, (EXCEPTING THEREFROM THAT PART THEREOF TAKEN AND USED FOR ORIGINAL BARRINGTON ROAD AND EXCEPTING THAT PART TAKEN FOR RELOCATED BARRINGTON ROAD ACCORDING TO DOCUMENT 11172686), IN COOK COUNTY, ILLINOIS;

EXCEPTION PARCEL 2:

ALL THAT PART OF THE WEST HALF OF THE SOUTHWEST QUARTER OF SECTION 36, TOWNSHIP 42 NORTH, RANGE 9, EAST OF THE THIRD PRINCIPAL MERIDIAN IN COOK COUNTY, ILLINOIS, BOUNDED AND DESCRIBED AS FOLLOWS:

COMMENCING AT THE SOUTHWEST CORNER OF THE SOUTHWEST QUARTER OF SECTION 36, TOWNSHIP 42 NORTH, RANGE 9, EAST OF THE THIRD PRINCIPAL MERIDIAN, COUNTY AND STATE AFORESAID; THENCE EASTERLY ALONG THE SOUTH LINE OF SAID SECTION 36 A DISTANCE OF 255.76 FEET FOR A POINT OF BEGINNING; THENCE-EASTERLY ALONG SAID LINE A DISTANCE OF 300.00 FEET TO A POINT; THENCE NORTHWESTERLY ALONG A LINE FORMING AN ANGLE OF 175 DEGREES 14 MINUTES 30 SECONDS TO THE LEFT WITH THE LAST DESCRIBED LINE EXTENDED A DISTANCE OF 344.62 FEET TO A POINT; THENCE SOUTHEASTERLY ALONG A LINE FORMING AN ANGLE OF 151 DEGREES 24 MINUTES 30 SECONDS TO THE LEFT WITH THE LAST DESCRIBED LINE EXTENDED A DISTANCE OF 52.00 FEET TO THE POINT OF BEGINNING, IN COOK COUNTY, ILLINOIS.

EXCEPTION PARCEL 3:

COMMENCING AT THE SOUTHEAST CORNER OF THE WEST HALF OF THE SOUTHWEST QUARTER OF SAID SECTION 36; THENCE ON AN ASSUMED BEARING OF NORTH 00 DEGREES 11 MINUTES 21 SECONDS EAST ALONG THE EAST LINE OF SAID WEST HALF 52.16 FEET TO THE POINT OF BEGINNING, BEING ALSO A POINT IN THE NORTHERLY LINE OF A PERMANENT EASEMENT GRANTED TO THE ILLINOIS STATE TOLL HIGHWAY AUTHORITY PER CONVEYANCE RECORDED SEPTEMBER 30, 1974 AS DOCUMENT NO. 22862741 IN SAID COUNTY; THENCE NORTH 87 DEGREES 14 MINUTES 21 SECONDS WEST ALONG SAID NORTHERLY, LINE 650.20 FEET; THENCE NORTH 72 DEGREES 56 MINUTES 57 SECONDS WEST ALONG THE NORTHERLY LINE OF A PERPETUAL EASEMENT (GRANTED TO THE ILLINOIS STATE TOLL HIGHWAY COMMISSION PER CONVEYANCE RECORDED FEBRUARY 21, 1957 AS DOCUMENT NO. 16831935 IN SAID COUNTY) A DISTANCE OF 72.36 FEET; THENCE SOUTH 85 DEGREES 49 MINUTES 07 SECONDS EAST 720.65 FEET TO THE POINT OF BEGINNING.

EXCEPTION PARCEL 4:

ALL THAT PART OF THE WEST HALF OF THE SOUTHWEST QUARTER OF SECTION 36, TOWNSHIP 42 NORTH, RANGE 9, EAST OF THE THIRD PRINCIPAL MERIDIAN, DEDICATED FOR PUBLIC STREET AND OTHER PUBLIC PURPOSES ACCORDING TO THE PLAT OF DEDICATION RECORDED MAY 12, 1999 AS DOCUMENT 99459271, IN COOK COUNTY, ILLINOIS.

AND ALSO AS DESCRIBED BY METES AND BOUND DESCRIPTION IN SURVEY DONE BY BOCK & CLARK’S NATIONAL SURVEYOR’S NETWORK DATED NOVEMBER 25, 2009 AND LAST REVISED DECEMBER 9, 2009 AS NETWORK PROJECT NO. 200901306-1:

ALL THAT PART OF THE WEST HALF OF THE SOUTHWEST QUARTER OF SECTION 36, TOWNSHIP 42 NORTH, RANGE 9, EAST OF THE THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTHWEST CORNER OF THE SOUTHWEST QUARTER OF SAID SECTION 36; THENCE NORTH 00 DEGREES 15 MINUTES 24 SECONDS EAST 963.50 FEET ALONG THE WEST LINE OF SAID SECTION; THENCE SOUTH 89 DEGREES 44 MINUTES 38 SECONDS EAST 40.00 FEET FOR A POINT OF BEGINNING; THENCE CONTINUING SOUTH 89 DEGREES 44 MINUTES 38 SECONDS EAST 1244.12 FEET; THENCE SOUTH 00 DEGREES 11 MINUTES 21 SECONDS WEST 903.12 FEET ALONG THE WEST RIGHT OF WAY LINE OF EAGLE WAY, DEDICATED PER DOCUMENT 99459271; THENCE NORTH 85 DEGREES 49 MINUTES 07 SECONDS WEST 687.46 FEET ALONG THE NORTHERLY RIGHT OF WAY LINE OF CENTRAL AVENUE PER DOCUMENT 89-411459; THENCE NORTH 72 DEGREES 44 MINUTES 19 SECONDS WEST 472.28 FEET TO A POINT ON A CURVE; THENCE NORTHERLY ALONG THE ARC OF SAID CURVE 299.84 FEET, HAVING A RADIUS OF 398.00 FEET AND A CHORD BEARING OF NORTH 21 DEGREES 19 MINUTES 32SECONDS WEST; THENCE NORTH 00 DEGREES 15 MINUTES 24 SECONDS EAST 445.67 FEET ALONG THE EAST RIGHT OF WAY LINE OF BARRINGTON ROAD, TO SAID POINT OF BEGINNING, IN COOK COUNTY, ILLINOIS.

Legal Description

Coastal Sunbelt

BEING KNOWN AND DESIGNATED as Parcel ‘A’, as shown on a plat entitled, “Corridor Industrial Park, Section 2, Parcels A thru E”, recorded among the Land Records of Howard County, Maryland as Plat 5068, 5069, 5070.

Tax Parcel No.: 06-464254

Legal Description

Exela – BancTec

Being a 50.871 acre tract of land situated in the William M Moon Survey, Abstract No 878, Dallas County, Texas and being a portion of a tract of land described in deed recorded in Volume 68137, Page 989 of the Official Public Records of Dallas County Texas and a part of Quillian Road having been abandoned by Ordinance No. 1827 and being more particularly described as follows:

Beginning at a 1/2 inch iron rod found for the northerly corner clip at the intersection of the southerly line of John W. Carpenter Freeway (State Highway 183) (a variable width right-of- way) and the easterly line of Maryland Road (a variable width right-of-way);

THENCE along said southerly line of John W. Carpenter Freeway and with a non-tangent curve to the right having a radius of 5729.58 feet an arc length of 1170.39 feet, and a central angle of 11°42’14”, being subtended by a chord of South 81°35’45” East for a distance of 1168.36 feet to a 1/2 inch iron rod found;

THENCE South 01°24’00” West departing said southerly line of John W. Carpenter Freeway for a distance of 256.86 feet to a 1/2 inch iron rod found;

THENCE South 08°02’00’’ West for a distance of 31.66 feet to a 1/2 inch iron rod found;

THENCE South 09°10’00” West for a distance of 96.11 feet to a 1/2 inch iron rod found;

THENCE South 88°36’00” East for a distance of 245.72 feet to a 1/2 inch iron rod found on the westerly right-of-way line of Regal Ridge Parkway (a 55 foot right-of-way);

THENCE South 00 degrees 54 minutes 10 seconds East continuing along said westerly right- of way line of Regal Ridge Parkway passing its intersection with the south line of Recognition Point Drive (a 55 foot right-of-way), said point also being the northwest comer of Las Cruces Park No. 2 as recorded in Volume 85208, Page 4118, Map Records, Dallas County, Texas and continuing along said westerly line of Las Cruces Park No. 2 for a total distance of 969.12 feet to a 1/2 inch iron rod found;

THENCE South 89°59’50” West for a distance of 488.40 feet to a 1/2 inch iron rod found;

THENCE South 00°54’10” East for a distance of 263.94 feet to a 1/2 inch iron rod found on the northeasterly corner of Quillian Road (a 60 foot right-of-way);

THENCE South 89°55’40” West for a distance of 174.01 feet to a 1/2 inch iron rod found;

THENCE South 00°54’10” East for a distance of 200.00 feet to a P-K Nail found on the northerly right-of-way line of Grauwyler Road (a variable width right-of-way);

THENCE North 89°55’40” West along said northerly right-of-way line of Grauwyler Road for a distance of 385.90 feet to a P-K nail found;

THENCE North 00°37’00” East for a distance of 399.66 feet to a 1/2 inch iron rod found;

THENCE North 88°58’00” West for a distance of 413.14 feet to a 1/2 inch iron rod found on the aforesaid easterly right-of-way line of Maryland Road;

THENCE North 01°24’00” East along said easterly right-of-way line of Maryland Road for a distance of 1566.28 feet to a 1/2 inch iron rod found;

THENCE North 46°48’20” East for a distance of 28.52 feet to the POINT OF BEGINNING Said tract having a computed area of 2,215,962 square feet or 50.871 Acres.

SAVE AND EXCEPT that portion of subject property conveyed in that certain Deed to The State of Texas, acting by and through the Texas Transportation Commission, dated November 13, 2015, recorded on May 2, 2016 as Document No. 201600117138 in the Official Public Records of Dallas County, Texas.

Legal Description

Harvest Hill – Sunny Delight


Address:	300 F.M. 1417 West
City/Town:	Sherman
County:	Grayson
State:	Texas

Situated in the City of Sherman, Grayson County, Texas, being a part of the William Martin Survey, Abstract No. 765, and being a part of the same tract of land described as 183.67 acres conveyed by the Folger Coffee Company to Sunny Delight Beverage Co. by deed dated December 15, 2010, recorded in Volume 4895, Page 484, Official Public Records, Grayson County, Texas, and being more particularly described by meets and bounds as follows:

Beginning at and “X” cut in concrete marking the Northeast corner of the said 183.67 acre tract at the intersection of the South right-of-way line of F.M. Highway No. 1417 with the center of a public road to the South locally known as Howe Drive running along or near the East line of the said Martin Survey;

Then South 14 degrees 08 minutes 48 seconds East with said center of Howe Drive a distance of 2433.63 feet to an “X” cut in concrete marking the Southeast corner of the said 183.67 acre tract and the Northeast corner of Sherman Industrial Development Addition to said City of Sherman as shown by plat of record in Volume 11, Pages 67 & 68, Plat Records, Grayson County, Texas;

Thence South 74 degrees 48 minutes 39 seconds West with the South line of the said 183.67 acre tract, at a distance of 39.64 feet passing a 5/8” steel rod found and continuing, at a distance of 40.00 feet passing the Northeast corner of Lot 3 of said Addition and continuing for a total distance of 527.51 feet to a ½” steel rod set marking the Southeast corner of the 119.166 acre tract of land severed from the said 183.67 acre tract as conveyed by said Sunny Delight Beverages Co. to Sherman Economic Development Corporation by deed dated December 16. 2010, recorded in Volume 4895, Page 876, said Official Public Records, said rod being at the intersection of said South line of the said 183.67 acre tract with the East right-of-way line of the easement conveyed by Bessie Kinard to the St. Louis, San Francisco And Texas Railway Company dated November 8, 1961, recorded in Volume 945, Page 490, Deed Records, Grayson County, Texas;

Thence North 59 degrees 06 minutes 38 seconds West with the East line of the said 119.166 acre tract along said East right-of-way line a distance of 331.98 feet to a ½” steel rod set marking beginning of a curve to the right having a radius of 1885.08 feet;

Thence in a Northwesterly direction continuing with said East line and right-of-way line along said curve, (chord bears North 36 degrees 28 minutes 48 seconds West, 1450.72 feet), an arc distance of 1489.13 feet to a ½” steel rod set marking an “L” corner;

Thence, North 76 degrees 09 minutes 02 seconds East a distance of 25.00 feet to a ½” steel rod set marking another “L” corner in said East line and right-of-way line;

Thence in a Northerly direction continuing with said East line and right-of-way line along a curve to the right having a radius of 1860.08 feet, (chord bears North 11 degrees 46 minutes 26 seconds West, 134.73 feet), an arc distance of 134.76 feet to a ½” steel rod set marking the end of said curve;

Thence North 09 degrees 41 minutes 54 seconds West continuing with said East line and right-of-way line of easement a distance of 743.13 feet to a ½” steel rod set marking the Northeast corner of the said 119.166 acre tract at the intersection of said East right- of-way line of Highway No. 1417 and North line of the said 183.67 acre tract;

Thence North 73 degrees 56 minutes 00 seconds East with said South right-of-way line of Highway No. 1417 a distance of 1057.58 feet to a point for angle at the West base of a disturbed concrete monument;

Thence South 87 degrees 28 minutes 00 seconds East continuing with said South right-of-way line a distance of 156.68 feet to a ½” steel rod set at an angle point;

Thence North 73 degrees 56 minutes 00 seconds East continuing with said South right-of-way line a distance of 18.00 feet to the Point of Beginning and containing 2,805,290 square feet or 64.401 acres of land.

Legal Description

Hensley PHOENIX FACILITY

PARCEL 1

LOT 1 OF HENSLEY INDUSTRIAL PARK AMENDED AS RECORDED IN BOOK 1135, PAGE 36, RECORDER OF MARICOPA COUNTY, ARIZONA BEING LOCATED IN THE NORTHEAST QUARTER OF SECTION 21, TOWNSHIP 2 NORTH, RANGE 2 EAST OF THE GILA AND SALT RIVER BASE AND MERIDIAN, MARICOPA COUNTY, ARIZONA MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCING AT THE NORTHEAST CORNER OF SAID LOT 1 BEING A POINT ON THE WEST RIGHT OF WAY LINE OF 44TH AVENUE AND THE TRUE POINT OF BEGINNING OF THE PARCEL OF LAND HEREIN DESCRIBED;

THENCE SOUTH 00 DEGREES 09 MINUTES 43 SECONDS WEST ALONG THE WEST RIGHT OF WAY OF 44TH AVENUE A DISTANCE OF 1,214.07 FEET TO AN ANGLE POINT;

THENCE SOUTH 00 DEGREES 09 MINUTES 26 SECONDS WEST ALONG THE WEST RIGHT OF WAY LINE OF 44TH AVENUE A DISTANCE OF 680.76 FEET TO A POINT OF CURVATURE TO THE RIGHT;

THENCE THROUGH SAID CURVE WITH A RADIUS OF 65.40 FEET, A LENGTH OF 102.50 FEET AND A CENTRAL ANGLE OF 89 DEGREES 47 MINUTES 56 SECONDS TO A POINT OF TANGENCY LOCATED ON THE NORTH RIGHT OF WAY LINE OF MONTEROSA STREET;

THENCE SOUTH 89 DEGREES 57 MINUTES 22 SECONDS WEST ALONG THE NORTH RIGHT OF WAY LINE OF MONTEROSA STREET A DISTANCE OF 366.78 FEET TO A POINT OF CURVATURE TO THE RIGHT;

THENCE THROUGH SAID CURVE WITH A RADIUS OF 25.00 FEET, A LENGTH OF 39.27 FEET AND A CENTRAL ANGLE OF 90 DEGREES 00 MINUTES 00 SECONDS TO A POINT OF TANGENCY LOCATED ON THE EAST RIGHT OF WAY LINE OF 45TH AVENUE;

THENCE NORTH 00 DEGREES 02 MINUTES 38 SECONDS WEST ALONG THE EAST RIGHT OF WAY LINE OF 45TH AVENUE A DISTANCE OF 25.11 FEET TO A POINT OF CURVATURE TO THE LEFT;

THENCE THROUGH SAID CURVE WITH A RADIUS OF 633.00 FEET, A LENGTH OF 315.16 FEET AND A CENTRAL ANGLE OF 28 DEGREES 31 MINUTES 35 SECONDS TO A NON POINT OF TANGENCY;

THENCE NORTH 00 DEGREES 09 MINUTES 43 SECONDS EAST A DISTANCE OF 1,184.39 FEET; THENCE SOUTH 89 DEGREES 49 MINUTES 29 SECONDS EAST A DISTANCE OF 25.00 FEET;

THENCE NORTH 00 DEGREES 09 MINUTES 43 SECONDS EAST A DISTANCE OF 425.08 FEET;

THENCE SOUTH 89 DEGREES 50 MINUTES 34 SECONDS EAST A DISTANCE OF 510.00 FEET TO THE TRUE POINT OF BEGINNING.

PARCEL 2

LOT 2, OF SANTA FE PACIFIC BUSINESS CENTER, ACCORDING TO THE PLAT OF RECORD IN THE OFFICE OF THE COUNTY RECORDER OF MARICOPA COUNTY, ARIZONA, RECORDED IN BOOK 303 OF MAPS PAGE 10 AND AFFIDAVIT OF CORRECTION RECORDED FEBRUARY 10, 1987 IN 87-081730 OF OFFICIAL RECORDS BEING LOCATED IN THE SOUTHEAST QUARTER OF SECTION 21, TOWNSHIP 2 NORTH, RANGE 2 EAST OF THE GILA AND SALT RIVER BASE AND MERIDIAN, MARICOPA COUNTY, ARIZONA MORE PARTICULARLY DESCRIBED AS FOLLOWS:

No. NCS-571622-PHX1 COMMENCING AT THE SOUTHWEST CORNER OF SAID LOT 2 BEING A POINT ON THE EAST RIGHT OF WAY LINE OF 44TH AVENUE AND THE TRUE POINT OF BEGINNING OF THE PARCEL OF LAND HEREIN DESCRIBED;

THENCE NORTH 00 DEGREES 09 MINUTES 26 SECONDS EAST ALONG THE EAST RIGHT OF WAY OF 44TH AVENUE A DISTANCE OF 300.40 FEET TO A POINT OF CURVATURE TO THE RIGHT;

THENCE THROUGH SAID CURVE WITH A RADIUS OF 25.00 FEET, A LENGTH OF 39.27 FEET AND A CENTRAL ANGLE OF 90 DEGREES 00 MINUTES 23 SECONDS TO A POINT OF TANGENCY LOCATED ON THE SOUTH RIGHT OF WAY LINE OF GLENROSA AVENUE;

THENCE SOUTH 89 DEGREES 50 MINUTES 11 SECONDS EAST ALONG THE SOUTH RIGHT OF WAY LINE OF GLENROSA AVENUE A DISTANCE OF 217.07 FEET TO THE NORTHEAST CORNER OF SAID LOT 2;

THENCE SOUTH 00 DEGREES 09 MINUTES 26 SECONDS WEST A DISTANCE OF 234.52 FEET;

THENCE SOUTH 32 DEGREES 28 MINUTES 53 SECONDS WEST A DISTANCE OF 106.74 FEET;

THENCE SOUTH 89 DEGREES 57 MINUTES 22 SECONDS WEST A DISTANCE OF 185.00 FEET TO THE TRUE POINT OF BEGINNING.

EXCEPT ALL RIGHT, TITLE AND INTEREST IN AND TO ALL WATER RIGHTS, COAL, OIL, GAS AND OTHER HYDROCARBONS, GEOTHERMAL RESOURCES, PRECIOUS

METALS ORES, BASE METALS ORES, INDUSTRIAL-GRADE SILICATES AND CARBONATES, FISSIONABLE MINERALS OF EVERY KIND AND CHARACTER, METALLIC OR OTHERWISE, WHETHER OR NOT PRESENTLY KNOWN TO SCIENCE OR INDUSTRY. NOW KNOWN TO EXIST OR HEREAFTER DISCOVERED UPON, WITHIN OR UNDERLYING THE SURFACE OF SAID LAND REGARDLESS OF THE DEPTH BELOW THE SURFACE AT WHICH ANY SUCH SUBSTANCE MAY BE FOUND. AS RESERVED IN DEED RECORDED DECEMBER 31, 1996 IN 96-909065, OF OFFICIAL RECORDS.

Legal Description

Hensley

PRESCOTT VALLEY FACILITY

THAT PART OF SECTION 20, TOWNSHIP 14 NORTH, RANGE 1 EAST OF THE GILA AND SALT RIVER BASE AND MERIDIAN, YAVAPAI COUNTY, ARIZONA, DESCRIBED AS FOLLOWS:

COMMENCING AT THE NORTHWEST CORNER OF SAID SECTION 20 AS RECORDED IN BOOK 2328 OF OFFICIAL RECORDS, PAGES 539-540, YAVAPAI COUNTY RECORDER’S OFFICE, FROM WHICH THE NORTHEAST CORNER OF SAID SECTION 20, MONUMENTED WITH A 2 ½ INCH BRASS CAP STAMPED P.W. RAMEY, L.S. 6177, BEARS SOUTH 89 DEGREES, 20 MINUTES, 12 SECONDS EAST, A DISTANCE OF 5376.61 FEET;

THENCE SOUTH 89 DEGREES 20 MINUTES 12 SECONDS EAST ALONG SAID NORTH SECTION LINE A DISTANCE OF 574.10 FEET; THENCE SOUTH 00 DEGREES, 19 MINUTES, 14 SECONDS WEST (SOUTH 00 DEGREES 19 MINUTES 28 SECONDS WEST RECORD), A DISTANCE OF 668.58 FEET (668.75 FEET RECORD) TO THE TRUE POINT OF BEGINNING, SAID POINT BEING ON THE SOUTH RIGHT OF WAY LINE OF VALLEY ROAD AS SHOWN ON A MAP RECORDED IN BOOK 29 OF MAPS AND PLATS, PAGE 66, YAVAPAI COUNTY RECORDER’S OFFICE, AND SAID POINT ALSO BEING A POINT OF CURVATURE TO THE LEFT, THE CHORD OF WHICH BEARS SOUTH 75 DEGREES, 30 MINUTES, 26 SECONDS EAST, A DISTANCE OF 652.31 FEET;

THENCE ALONG SAID CURVE TO THE LEFT, HAVING A RADIUS OF 959.00 FEET, A CENTRAL ANGLE OF 39 DEGREES, 45 MINUTES, 55 SECONDS, FOR AN ARC LENGTH OF 665.58 FEET;

THENCE NORTH 84 DEGREES, 36 MINUTES, 39 SECONDS, EAST ALONG SAID SOUTH RIGHT OF WAY LINE, A DISTANCE OF 31.66 FEET;

THENCE SOUTH 05 DEGREES, 07 MINUTES, 09 SECONDS EAST, A DISTANCE OF 659.29 FEET;

THENCE NORTH 86 DEGREES, 12 MINUTES, 55 SECONDS WEST, A DISTANCE OF 102.46 FEET;

THENCE NORTH 85 DEGREES, 00 MINUTES, 04 SECONDS WEST, A DISTANCE OF 156.71 FEET;

THENCE SOUTH 73 DEGREES, 08 MINUTES, 50 SECONDS WEST, A DISTANCE OF 67.29 FEET;

THENCE NORTH 77 DEGREES, 00 MINUTES, 35 SECONDS WEST, A DISTANCE OF 104.14 FEET;

THENCE SOUTH 82 DEGREES, 52 MINUTES, 39 SECONDS WEST. A DISTANCE OF 125.86 FEET;

THENCE NORTH 73 DEGREES, 07 MINUTES, 08 SECONDS WEST, A DISTANCE OF 312.98 FEET TO A POINT OF CURVATURE OF A CURVE TO THE RIGHT, THE CHORD OF WHICH BEARS NORTH 03 DEGREES 03 MINUTES 29 SECONDS EAST, DISTANCE OF 598.82 FEET;

THENCE ALONG SAID CURVE TO THE RIGHT, HAVING A RADIUS OF 517.00 FEET, CENTRAL ANGLE OF 70 DEGREES, 46 MINUTES, 44 SECONDS, FOR AN ARC LENGTH OF 638.66 FEET.

THENCE NORTH 38 DEGREES 26 MINUTES 51 SECONDS EAST A DISTANCE OF152.41 FEET TO THE TRUE POINT OF BEGINNING.

Legal Description

Hensley

CHANDLER FACILITY

LOT 1 OF HENSLEY CHANDLER FACILITY ACCORDING TO THE PLAT OF RECORD IN THE OFFICE OF THE COUNTY RECORDER OF MARICOPA COUNTY, ARIZONA RECORDED IN BOOK 939 OF MAPS, PAGE 49 BEING LOCATED IN THE WEST HALF OF SECTION 15, TOWNSHIP 1 SOUTH, RANGE 5 EAST OF THE GILA AND SALT RIVER BASE AND MERIDIAN, MARICOPA COUNTY, ARIZONA THE METES AND BOUNDS DESCRIPTION IS AS FOLLOWS;

COMMENCING AT THE SOUTHWEST CORNER OF SAID LOT 1 SAID POINT BE THE TRUE POINT OF BEGINNING OF THE PARCEL OF LAND HEREIN DESCRIBED;

THENCE NORTH 00 DEGREES 09 MINUTES 59 SECONDS EAST A DISTANCE OF 725.13 FEET TO THE NORTHWEST CORNER OF SAID LOT l;

THENCE NORTH 89 DEGREES 59 MINUTES 25 SECONDS EAST A DISTANCE OF 998.94 FEET TO THE NORTHEAST CORNER OF SAID LOT 1;

THENCE SOUTH 00 DEGREES 00 MINUTES 45 SECONDS EAST A DISTANCE OF 1,326.75 FEET;

THENCE SOUTH 89 DEGREES 59 MINUTES 10 SECONDS WEST A DISTANCE OF 40.00 FEET;

THENCE SOUTH 00 DEGREES 00 MINUTES 45 SECONDS EAST A DISTANCE OF 62.89 FEET TO THE SOUTHEAST CORNER OF SAID LOT 1;

THENCE SOUTH 89 DEGREES 50 MINUTES 22 SECONDS WEST A DISTANCE OF 513.12 FEET TO THE SOUTHWEST CORNER OF SAID LOT 1;

THENCE NORTH 00 DEGREES 09 MINUTES 23 SECONDS WEST A DISTANCE OF 236.97 FEET TO A POINT OF CURVATURE TO THE LEFT;

THENCE THROUGH SAID CURVE WITH A RADIUS OF 430.00 FEET, AN ARC LENGTH OF 674.37 FEET AND A CENTRAL ANGLE OF 89 DEGREES 51 MINUTES 27 SECONDS;

THENCE SOUTH 89 DEGREES 59 MINUTES 10 SECONDS WEST A DISTANCE OF 17.48 FEET TO THE TRUE POINT OF BEGINNING.

Legal Description

Heritage (Novolex)

OGDEN REAL PROPERTY

Lots 89 and 90, OGDEN COMMERCIAL & INDUSTRIAL PARK - PLAT “F”, Ogden City, Weber County, Utah, according to the official plat thereof, filed in Book 31 of Plats, at Page 52 of Official Records of the Weber County Recorder, more particularly described as follows:

Beginning at a point South 0°31’00” West 25.601 feet along the section line and East 1149.805 feet from the West quarter corner of Section 36, Township 6 North, Range 2 West, Salt Lake Base and Meridian; and running thence South 55°59’00” East 350.00 feet to the Westerly right-of-way line of the Denver and Rio Grande Western Railroad; thence South 34°01’00” West 1302.14 feet along the Westerly right-of-way line of said Denver and Rio Grande Western Railroad; thence North 89°52’00” West 395.94 feet; thence North 00°08’00” East 300.00 feet to the Southeasterly right-of-way line of Commerce Way; thence along said right of way line the following two (2) courses: (1) to the left along the arc of a 329.84 foot radius curve a distance of 323.05 feet, chord bears North 62°04’30” East 310.29 feet; (2) North 34°01’00” East 1000.00 feet to the point of beginning.

Tax ID: 15-180-0002, 0003

Legal Description

Heritage (Novolex)

DOUGLASVILLE REAL PROPERTY

RECORD DESCRIPTION

ALL THAT TRACT or parcel of land lying and being in Land Lot 169 of the 2nd District and 5th Section of Douglas County, Georgia, and being more particularly described as follows:

BEGINNING at an iron pin at the intersection of the northeasterly edge of the right of way of Bankhead Highway (80-foot right of way) with the southeasterly edge of the right of way of Richardson Road (60-foot right of way); thence proceed in a northerly direction along the eastern edge of the right of way of Richardson Road, and following a curve to the right an arc distance of 259.87 feet (said arc having a radius of 1,351.16 feet, and being subtended by a chord bearing North 28 degrees 11 minutes 49 seconds East with a length of 259.47 feet); thence continuing along the eastern edge of the right of way of Richardson Road, and following a curve to the right an arc distance of 607.76 feet to a point (said arc having a radius of 10,057.85 feet, and being subtended by a chord bearing North 31 degrees 58 minutes 32 seconds East with a length of 607.67 feet); thence South 83 degrees 24 minutes 58 seconds East 720.55 feet to a fence post corner; thence South 04 degrees 56 minutes 37 seconds West 1,016.80 feet to an iron pin found on the northern edge of the right of way of Bankhead Highway; thence in a northwesterly direction along the right of way of Bankhead Highway, and following a curve to the left an arc distance of 127.56 feet to a point (said arc having a radius of 1,995.65 feet and being subtended by a chord bearing North 70 degrees 13 minutes 52 seconds West and a length of 127.54 feet); thence North 72 degrees 03 minutes 44 seconds West, along the right of way of Bankhead Highway 1,001.21 feet to the point of BEGINNING.

The described premises being shown as Tract “B” upon a survey for Carl F. Allen prepared by Thomas Edward Peay, Jr., Registered Land Surveyor No. 2402, dated November 1, 1994, which plat of survey by reference thereto is incorporated in this description.

TOGETHER WITH ALL THAT TRACT or parcel of land lying and being in Land Lot 169 of the 2nd District and 5th Section of Douglas County, Georgia, and being, more particularly described as follows:

To find the point of BEGINNING, commence at an iron pin found at the intersection of the northeasterly edge of the right of way of Bankhead Highway (80-foot right of way) and the southeasterly edge of the right of way of Richardson Road (60-foot right of way); thence South 72 degrees 03 minutes 44 seconds East along the right of way of Bankhead Highway 1,001.21 feet to a point; thence along the right of way of Bankhead Highway, and following a curve to the right, an arc distance of 127.56 feet to an iron pin found (said arc having a radius of 1,995.65 feet and being subtended by a chord bearing South 70 degrees 13 minutes 52 seconds East a length of 127.54 feet), said iron pin being the True Point of BEGINNING; thence North 04 degrees 56 minutes 37 seconds East 1,016.80 feet to a fence post corner; thence South 83 degrees 24 minutes 58 seconds East 18.10 feet to an iron pin found on the southwestern edge of the right of way of Southern Railroad (200-foot right of way); thence in a southeasterly direction along the right of way of Southern Railroad, and following a curve to the right an arc distance of 256.59 feet to a point (said arc having a radius of 3,970.78 feet and being subtended by a chord bearing South 44 degrees 34 minutes 53 seconds East with a length of 256.54 feet); thence South 42 degrees 43 minutes 48 seconds East along the right of way of Southern Railroad 561.49 feet to a point at the intersection of

the right of way of Southern Railroad with the centerline of a creek; thence in a southerly direction along the centerline of such creek a distance of 822 feet more or less, but specifically to an iron pin set at the intersection of the centerline of such creek with the northern edge of the right of way of Bankhead Highway; thence in a northwesterly direction along the right of way of Bankhead Highway, and following a curve to the left an arc distance of 50.00 feet to a point (said arc having a radius of 1,995.65 feet and being subtended by a chord bearing North 49 degrees 08 minutes 27 seconds West and a length of 50.00 feet); thence in a northwesterly direction along the right of way of Bankhead Highway, and following a curve to the left an arc distance of 645.81 feet to an iron pin found (said arc having a radius of 1,995.65 feet and being subtended by a chord bearing North 59 degrees 07 minutes 45 seconds West with a length of 643.00 feet), said iron pin found being the True Point of BEGINNING.

The described premises being shown as Tract “C” upon a survey for Carl F. Allen prepared by Thomas Edward Peay, Jr., Registered Land Surveyor No. 2402, dated November 1, 1994, which plat of survey by reference thereto is incorporated in this direction.

MEASURED DESCRIPTION

ALL THAT TRACT or parcel of land lying and being in Land Lot 169 of the 2nd District and 5th Section of Douglas County, Georgia, and being more particularly described as follows:

BEGINNING at a point on the easterly right of way of the mitered intersection of Richardson Road (60-foot right of way) with the northerly right of way of Bankhead Highway (AKA U.S. Route 78) (80-foot right of way), said point being the TRUE POINT OF BEGINNING; thence in a northerly direction along the easterly right of way of Richardson Road along a curve to the right an arc distance of 259.85 feet (said arc having a radius of 1351.16 feet, and being subtended by a chord bearing North 24 degrees 38 minutes 47 seconds East a chord distance of 209.65 feet); thence continuing along said right of way along the arc of a curve to the right an arc distance of 607.76 feet (said arc having a radius of 10,057.85 feet, and being subtended by a chord bearing North 27 degrees 21 minutes 52 seconds East a chord distance of 607.67 feet) to a point; thence leaving said right of way, South 88 degrees 01 minutes 38 seconds East a distance of 720.55 feet to a point said property line being bounded by property now or formerly owned by Marion “Uncle Bud” Hawkins; thence continuing along said property line South 88 degrees 01 minutes 38 seconds East a distance of 18.10 feet to a point on the southwesterly right of way of Southern Railroad (200 foot right of way); thence along said Southern Railroad right of way along the arc of a curve of the right an arc distance of 256.58 feet (said arc having a radius of 3970.78 feet and being subtended by a chord bearing South 49 degrees 11 minutes 33 seconds West a chord distance of 256.54 feet) to a point; thence continuing along said Southern Railroad right of way South 47 degrees 20 minutes 28 seconds East a distance of 561.49 feet to a point at the intersection of the right of way of Southern Railroad with the centerline of a creek; thence in a southerly direction along the centerline of such creek an overall distance of 822 feet more or less, said centerline of creek being bounded by property now or formerly owned by Terry McCoy; April Pounds-Brown; James R. Williams and Henry E. Rollins; to an iron pin set at the intersection of such centerline of said creek with the northern right of way of Bankhead Highway (AKA U.S. Route 78) (80 foot right of way); thence along the northerly right of way of Bankhead Highway along an arc of a curve to the left an arc distance of 50.00 feet (said arc having a radius of 1,995.65 feet and being subtended by a chord bearing North 53 degrees 45 minutes 07 seconds West a chord distance of 50.00 feet) to a point; thence continuing along said right of way curve a distance of 645.81 feet (said arc having a radius of 1,995.81 feet and being subtended by a chord bearing North 63 degrees 44 minutes 25 seconds West a chord distance of 643.00 feet) to a point; thence North 76 degrees 40 minutes 24 seconds West a distance of 951.21 feet to an iron pin set along the southeasterly mitered intersection of Bankhead Highway and Richardson Road; thence along said mitered intersection North 28 degrees 46 minutes 07 seconds West a distance of 67.04 feet to the TRUE POINT OF BEGINNING.

Legal Description

Hillman

Situated in the State of Ohio, County of Hamilton, City of Forest Park, Section 36, Township 3, Entire Range 1 and being Lot 2 as shown and delineated upon the Plat of Carillon Business Park, a Subdivision of record in Plat Book 357, Pages 78-80, of the Recorder’s Records of Hamilton County, Ohio.

PPN: 590-0400-0025 & 591-0023-0010

Property Address: 1700 Carillon Blvd., Cincinnati, Ohio

Legal Description

Marianna

Lot One (1), Cosentino Properties, an addition to the City of Omaha, as surveyed, platted and recorded in Douglas County, Nebraska according to the Plat recorded December 30, 2003 as Instrument No. 2003248696.

Together with a non-exclusive easement appurtenant for ingress and egress as established by that certain Warranty Deed dated September 1, 1965 and recorded September 24, 1965 in Book 1265, at Page 685 and by that certain Warranty Deed dated May 18, 1966, recorded June 9, 1966 in Book 1289 at Page 519, of the Deed Records of Douglas County, Nebraska.

Legal Description

Panavision

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

LOTS 7 AND 8 OF TRACT NO. 30615, IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 790, PAGE(S) 98 THROUGH 99 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

APN: 2149-005-045

Legal Description

Pregis

PLYMOUTH REAL PROPERTY

The land described as follows:

Situate in Marshall County, State of Indiana

Address: 1411 Pidco Drive, Plymouth, IN

Parcel I:

A part of the Southwest Quarter of Section 32, Township 34 North, Range 2 East, City of Plymouth, Center Township, Marshall County, Indiana, described as follows: Commencing at the Southwest corner of said Southwest Quarter, thence North 90° 00’ 00” East (assumed bearing) along the South line of said Southwest Quarter (centerline of Harrison Street), 2022.28 feet to the intersection of said South line and the West line of Flora Street extended; thence North 0° 01’ 53” East along the West line of said Flora Street, 330.00 feet to a 1/2 inch iron rod found at the point of beginning; thence continuing North 0° 01’ 53” East, along said West line, 659.16 feet to a 1/2 inch iron rod; thence North 89° 58’ 39” West, 974.80 feet to a 1/2 inch iron rod; thence South 0° 12’ 27” West, parallel with the West line of said Southwest Quarter, 659.57 feet to a 1/2 inch iron rod; thence North 90° 00’ 00” East, parallel with the South line of said Southwest Quarter, 976.82 feet to the point of beginning.

Subject to legal highways.

Parcel II:

All that portion of the railroad siding (30 feet in width) that lies West of the Southerly extension of the East line of the Plymouth Plastics, Inc. parcel as recorded in Deed Record 1985, page 10325, Office of the Marshall County, Recorder, Marshall County, Indiana.

Subject to legal highways.

Parcel III:

A part of Section 32, Township 34 North, Range 2 East, City of Plymouth, Marshall County, Indiana, described as follows: Commencing at the Northeast corner of Lot Number 2, in’ Plymouth Industrial Development Subdivision, City of Plymouth; thence Easterly along the South line of Pidco Drive (70 feet wide) a distance of 150.20; thence Southeasterly along said South line of Pidco Drive a distance of 172.80 feet to the point of beginning of this description; thence South 60° 07’10” East along said South line of Pidco Drive a distance of 145.35 feet; thence North 89° 59’ 10” East along said South line of Pidco Drive a distance of 167.07 feet to a point that is 898.16 feet Easterly from the intersection of said South line of the West line of Flora Street; thence South 00° 16’ 20” East a distance of 515.00 feet; thence South 89° 46’ 14” West a distance of 295.55 feet; thence North 00° 00’ 00” West (record bearing) a distance of 588.55 feet to the point of beginning.

Subject to legal highways.

Parcel IV:

A part of Section 32, Township 34 North, Range 2 East, City of Plymouth, Center. Township, Marshall County, Indiana, described as follows:

Commencing at the Northeast corner of Lot Number 2 of Plymouth Industrial Development Subdivision; thence North 89° 57’ 33” East along the South line of Pidco Drive 150.20 feet to an iron pin and the point of beginning; thence South 0° 00’ 36” East, 674.96 feet; thence North 89° 55’ 24” East, 149.57 feet to an iron pin; thence North 0° 00’ 00” West, 588.55 feet to an iron pin on the South line of said Pidco Drive; thence North 60° 02’ 22” West along said street, 172.66 feet to the point of beginning.

Subject to legal highways.

Parcel V:

A part of the Southwest Quarter (SW 1/4) of Section Thirty-two (32), Township Thirty-four (34) North, Range Two (2) East, Center Township, Marshall County, Indiana, described as follows: Commencing at the Southwest corner of said Southwest Quarter, thence North 00° 00’ 00” East (record bearing) along the West line of said Quarter Section (centerline of Oak Road) a distance of 609.30 feet; thence North 89° 47’ 09” East 984.43 feet to the point of beginning; thence North 0° 00’ 00” West 201.51 feet; thence North 89° 46’ 19” East 60.00 feet to the West line of the Astro-Valcour, Inc. parcel (recorded in Deed Record 1988, page 12631, Office of the Marshall County Recorder); thence South 00° 00’ 00” East along the West line of said Astro-Valcour, Inc. parcel a distance of 201.52 feet; thence south 89° 47’ 09” West 60.00 feet to the point of beginning.

Subject to legal highways.

Parcel VI:

A part of the Section 32, Township 34 North, Range 2 East, Center Township, Marshall County, Indiana, described an follows:

Commencing at the Southwest corner of said Southwest Quarter; thence North 0° 00’ 00” East (record bearing) along the West line of said Quarter-Quarter Section (centerline of Oak Road) a distance of 990.00 feet; thence North 89° 48’ 55” East 717.35 feet to a found iron rod at the Northeast corner of the Pi- Rod, Inc. parcel (recorded in Deed Record 1988, page 6294, Office of the Marshall County Recorder) and the point of beginning of this description; thence continuing North 89° 48’ 55” East 327.22 feet to the Northwest corner of the Astro-Valcour, Inc. parcel (recorded in Deed Record 1988, page 12631, Office of the Marshall County Recorder); thence South 0° 00’ 00” East along the West line of said Astro-Valcour, Inc. parcel a distance of 178.81 feet; thence South 89° 46’ 19” West 327.11 feet to the Southeast corner of said Pi-Rod, Inc. parcel; thence North 0° 02’ 11” East 179.06 feet to the point of beginning.

Subject to legal highways.

Parcel VII:

A part of the South Half of Fractional Section 32, Township 34 North, Range 2 East, City of Plymouth, Marshall County, Indiana, described as follows:

Beginning at a found Iron pipe located 538.90 feet West of the intersection of the West right-of- way line of Flora Street (formerly Beerenbrook Street) and the South right-of-way line of Pidco Drive; thence South parallel with said West right-of-way line of Flora Street a distance of 485.00 feet; thence West parallel with said South right-of-way line of Pidco Drive a distance of 359.26 feet; thence North parallel with said West right-of-way line of Flora Street a distance of 485.00 feet to said South right-of-way line of Pidco Drive; thence East along said South right-of-way line, a distance of 359.26 feet to the point of beginning.

Subject to legal highways.

(THE BOUNDARIES OF THE ABOVE PARCELS ARE HEREBY DESCRIBED AS FOLLOWS) A part of Fractional Section 32, Township 34 North, Range 2 East, City of Plymouth, Marshall County, Indiana, described as follows: Commencing at a 1/2” iron rod at the intersection of the South line of Pidco Drive and the West line of Flora Street in said City of Plymouth; thence South 89° 52’ 49” West along said South line of Pidco Drive a distance of 538.90 feet to a 5/8” iron rod at the Northwest corner of the Ferro Corporation parcel (recorded in Deed Record 1980, page 8452, Office of the Marshall County Recorder) and the point of beginning of this description; thence South 0° 20’ 07’’ East, along the West line of said Ferro Corporation parcel and its Southerly extension a distance of 515.36 foot to a 5/8” iron rod; thence North 89° 47’ 48” East 538.55 feet to a 1/2” iron rod on said West line of Flora Street; thence South 0° 10’ 52” East along said West line of Flora St. a distance or 659.23 feet to a 1/2” iron rod, said point being 2021.83 feet North 89° 46’ 37” East and 331.07 feet North 0o 10’ 52” West of the Southwest corner of said Section 32; thence South 89° 48’ 29” West 976.70 feet to a 5/8” iron rod; thence North 0° 00’ 19” East 279.42 feet to a 1/2” iron rod; thence South 89° 47’ 09” West 60.00 feet to a 1/2” iron rod; thence North 0° 00’ 3” West 201.51 feet to a 1/2” iron rod at the Northeast corner of the Pi-Rod, Inc. parcel (recorded in Deed Record 1992, page 5723, Office of the Marshall County Recorder); thence South 89° 47’ 05” West 267.11 feet to a 5/8” iron rod at Northwest corner of said Pi-Rod, Inc. parcel; thence North 00° 01’ 32” West 179.06 feet to a 1/2” iron rod; thence South 89° 47’ 48” West 41.10 feet to a masonry nail; thence North 0° 03’ 02” West 674.89 feet to said South line of Pidco Drive; thence South 60° 08’ 46” East along said South line of Pidco Drive a distance of 318.15 feet to a 5/8” iron rod; thence North 89° 52’ 49” East 525.99 feet to the point of beginning. Subject to legal highways.

Parcel VIII:

Rights and benefits contained in a Permanent Right-of-way Easement by and between Milton E. Goble and City of Plymouth, dated May 4, 1986 and recorded May 7,1986 as Document No. 1986, page 4177 in the Office of the Recorder of Marshall County.

Parcel IX:

Rights and benefits contained in a permanent Right-of-Way Easement by and between Ernest M. Stiles and Thelma B. Stiles, husband and wife and the City of Plymouth, dated April 2, 1986 and recorded April 9,1986, page 2848 in the Office of the Recorder of Marshall County.

Parcel X:

Rights and benefits contained in an easement as set forth out in an Instrument by and between Everett K. Keiser and May Keiser, husband and wife and Northern Indiana Public Service Company, dated May 6, 1958 and recorded May 9, 1958 in Deed Record 160, page 573 in the Office of the Recorder of Marshall County.


Tax ID Numbers:	50-42-32-303-064.000-019	50-42-32-303-175.000-019
	50-42-32-301-138.000-019	50-42-32-301-141.000-019
	50-42-32-303-158.000-019	50-42-32-303-159.000-019
	50-42-32-301-136.000-019

Address: 1411 Pidco Drive, Plymouth, IN

Legal Description

Pregis

VISALIA REAL PROPERTY

8201 West Elowin Court Visalia, California

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF VISALIA, COUNTY OF TULARE, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

PARCEL 1 AS SHOWN ON LOT LINE ADJUSTMENT NO. 92-13, AS EVIDENCED BY DOCUMENT RECORDED IN THE OFFICIAL RECORDS, COUNTY OF TULARE ON NOVEMBER 5, 1993, AS INSTRUMENT NO. 93-079846, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

All of Parcels 1 and 2 of Lot Line Adjustment No. 91-05, recorded March 29, 1991 as Document No. 18574, Tulare County Records, situated in a portion of the South 1/2 of Section 21, Township 18 South, Range 24 East, Mount Diablo Base and Meridian, in the City of Visalia, County of Tulare, State of California, more particularly described as follows:

Beginning at the Northwest corner of said Parcel 1 at the East end of the street right-of-way; thence along the Northerly, Easterly and Southerly boundary of said Parcel 1, and the Southerly, Westerly and Northerly boundary of said Parcel 2, the following courses:

S. 89° 16’ 07’’ E., 771.00 feet;

S. 13° 42’ 28” W., 85.17 feet;

S. 0° 07’ 40” W., 481.99 feet;

S. 75° 26’ 06” W., 113.71 feet;

N. 89° 16’ 07’’ W., 1271.23 feet;

N. 0° 07’ 40” E., 564.99 feet;

S. 89° 16’ 07’’ E., 469.30 feet, thence S. 78° 34’ 37” E., 103.13 feet along the street right-of-way to the beginning of a tangent curve concave to the Northwest having a radius of 50.00 feet; thence Northeasterly 87.87 feet along said curve and street right-of-way through a central angle of 100° 41’ 27” to the point of beginning.

EXCEPTING THEREFROM one half the oil, gas, minerals and hydrocarbon substances, as set forth in documents of record.

APN: 077-150-031

Legal Description

Revlon

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE COUNTY OF MIDDLESEX, STATE OF NEW JERSEY, AND IS DESCRIBED AS FOLLOWS:

BEING KNOWN AND DESIGNATED AS LOT 21.01 IN BLOCK 124, AS SHOWN ON A CERTAIN FILED MAP ENTITLED “FINAL MAP BLOCK 124, LOT 2-E-5, 21 AND 22” DULY FILED IN THE OFFICE OF THE CLERK/REGISTER OF MIDDLESEX COUNTY ON JANUARY 19, 2012 AS FILED MAP NO. 6612 FILE 989.

BEING MORE PARTICULARLY DESCRIBED IN ACCORDANCE WITH A SURVEY MADE BY DAVID A. STIRES ASSOCIATES, LLC, DATED JULY 7, 2011 REVISED TO JANUARY 27, 2012 AS FOLLOWS:

BEGINNING AT A POINT IN THE NORTHWESTERLY RIGHT OF WAY LINE OF NEW JERSEY STATE HIGHWAY ROUTE NO. 27 (AN 88 FOOT WIDE R.O.W) SAID POINT ALSO MARKING THE INTERSECTION OF THE COMMON LOT LINE BETWEEN NEW LOT 21.01 AND NEW LOT 23.01 IN BLOCK 124 WITH SAID NORTHWESTERLY RIGHT OF WAY LINE OF ROUTE NO. 27; AND FROM SAID POINT RUNNING; THENCE

SOUTH 46 DEGREES 28 MINUTES 02 SECONDS WEST, A DISTANCE OF 721.75 FEET TO A POINT; THENCE

NORTH 43 DEGREES 31 MINUTES 58 SECONDS WEST, A DISTANCE OF 339.06 FEET TO A POINT; THENCE

NORTH 46 DEGREES 28 MINUTES 02 SECONDS EAST, A DISTANCE OF 679.36 FEET TO A POINT; THENCE

NORTH 43 DEGREES 31 MINUTES 58 SECONDS WEST, A DISTANCE OF 157.01 FEET TO A POINT; THENCE

NORTH 46 DEGREES 28 MINUTES 14 SECONDS EAST, A DISTANCE OF 42.83 FEET TO A POINT; THENCE

SOUTH 43 DEGREES 23 MINUTES 38 SECONDS EAST, A DISTANCE OF 182.04 FEET TO THE POINT OR PLACE OF BEGINNING.

BEING KNOWN AND DESIGNATED AS LOT 21.01 IN BLOCK 124, AS SHOWN ON A CERTAIN FILED MAP ENTITLED “MORRIS ROUTE 27 ASSOCIATES, LLC, TOWNSHIP OF EDISON, MIDDLESEX COUNTY, NEW JERSEY”, FILED ON JANUARY 19, 2012 AS MAP NO. 6612, FILE NO. 989 IN THE MIDDLESEX COUNTY CLERK’S OFFICE.

TOGETHER WITH CROSS ACCESS EASEMENT 1 AND 2 SET FORTH IN THAT CERTAIN DECLARATION OF EASEMENTS MADE BY MORRIS ROUTE 27 DEVELOPMENT ASSOCIATES, LLC, IN DEED BOOK 6317, PAGE 621, AND SHOWN ON FILED MAP NO. 6612 FILE 989.

Legal Description

Tyson Foods (AdvancePierre)

PART OF GOV’T LOTS 1 & 2, IN THE NORTHEAST QUARTER, SECTION 2, TOWNSHIP 22 NORTH, RANGE 6 WEST, INDIAN MERIDIAN, GARFIELD COUNTY, OKLAHOMA, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCING AT THE NORTHEAST CORNER OF SAID NORTHEAST QUARTER SECTION 2;

THENCE SOUTH 89° 52’ 36” WEST ALONG THE NORTH LINE OF SAID NORTHEAST QUARTER SECTION 2, FOR A DISTANCE OF 826.60 FEET TO A POINT 1815.00 FEET FROM THE NORTHWEST CORNER OF SAID NORTHEAST QUARTER, BEING THE POINT OF BEGINNING;

THENCE SOUTH 00° 13’ 52” WEST, PARALLEL WITH THE WEST LINE OF THE SAID NORTHEAST QUARTER SECTION 2, FOR A DISTANCE OF 1320.00 FEET;

THENCE SOUTH 89° 52’ 36” WEST, PARALLEL WITH THE NORTH LINE OF SAID NORTHEAST QUARTER SECTION 2 AND ALONG THE NORTH RIGHT OF WAY OF ENTERPRISE BOULEVARD, FOR A DISTANCE OF 301.41 FEET;

THENCE NORTH 00° 04’ 23” WEST FOR A DISTANCE OF 61.18 FEET;

THENCE SOUTH 89° 55’ 37” WEST ALONG THE SOUTH SIDE OF EXISTING BUILDING, FOR A DISTANCE OF 286.32 FEET;

THENCE NORTH 00° 07’ 08” WEST ALONG THE WEST SIDE OF EXISTING BUILDING, FOR A DISTANCE OF 648.22 FEET;

THENCE SOUTH 89° 59’ 30” WEST ALONG THE SOUTH SIDE OF EXISTING BUILDING AND TRANSFORMER PAD, FOR A DISTANCE OF 49.72 FEET;

THENCE NORTH 00° 03’ 53” WEST ALONG THE WEST SIDE OF EXISTING TRANSFORMER AND TANK PAD, FOR A DISTANCE OF 41.50 FEET;

THENCE NORTH 89° 59’ 30” EAST ALONG THE NORTH SIDE OF EXISTING TRANSFORMER AND TANK PAD, FOR A DISTANCE OF 19.20 FEET;

THENCE NORTH 00° 03’ 53” WEST ALONG THE WEST SIDE OF EXISTING BUILDING, FOR A DISTANCE OF 35.37 FEET;

THENCE SOUTH 89° 59’ 28” EAST ALONG THE NORTH SIDE OF EXISTING BUILDING, FOR A DISTANCE OF 30.48 FEET;

THENCE NORTH 00° 07’ 08” WEST ALONG THE WEST SIDE OF EXISTING BUILDING, FOR A DISTANCE OF 309.09 FEET;

THENCE NORTH 89° 48’ 28” WEST ALONG THE SOUTH SIDE OF EXISTING CURB, FOR A DISTANCE OF 6.48 FEET;

THENCE NORTH 00° 00’ 46” WEST ALONG THE WEST SIDE OF EXISTING CURB, FOR A DISTANCE OF 65.53 FEET;

THENCE NORTH 89° 48’ 54” EAST ALONG THE NORTH SIDE OF EXISTING CURB, FOR A DISTANCE OF 316.61 FEET;

THENCE NORTH 00° 29’ 34” WEST ALONG THE WEST SIDE OF EXISTING CONCRETE PAVING, FOR A DISTANCE OF 158.46 FEET;

THENCE NORTH 89° 52’ 36” EAST ALONG THE NORTH LINE OF SAID NORTHEAST QUARTER SECTION 2, FOR A DISTANCE OF 286.51 FEET TO THE POINT OF BEGINNING.

TAX ID: 0000-02-22n-06w-1-155-00

Legal Description

WestRock – RockTenn

That certain real property pursuant to Notice of Merger VM No. 1127, as evidenced by document recorded August 31, 1994 as Instrument No. 94135424 of Official Records, being more particularly described as follows:

PARCEL 1:

All that certain parcel of land situate in the West half of Section 30, Township 14 South, Range 21 East, Mount Diablo Base and Meridian, according to the Official Plat thereof, being a portion of Lots 19, 20, 29 and 30 as said Lots are shown on that certain Record of Survey, entitled “Record of Survey in Lots 3, 14, 19, 30, 35 and portions of 20 and 29, “Malaga Tract”, in the West half of Section 30, Township 14 South, Range 21 East, Mount Diablo Base and Meridian”, and filed for record August 11, 1966 in Book 24 Page 14 of Record of Surveys, Fresno County Records, and described as follows:

BEGINNING at a point in the Southerly line of said Lot 29 distant thereon South 89 ° 59’ 40” West 232.10 feet from the Southeast corner of said Lot 29, said point of beginning being the Southeasterly corner of that certain 37.363 acres parcel of land described in indenture dated March 7, 1963, from Security Title Insurance Company to Anderson Clayton Company; thence North 0° 34’ 00” East, along the Easterly boundary of said 37.363 acre parcel of land, 1261.56 feet to a point in a line parallel with and distant 30.00 feet Southerly measured at right angles, from the Northerly line of said Lot 20; thence North 89° 55’ 20” East, along said parallel line, 226.56 feet to the Westerly line of said Lot 19; thence South 89° 54’ 30” East, parallel with the Northerly line of said Lot 19, a distance of 110.32 feet to a point; thence Easterly, Southeasterly and Southerly, along a curve to the right having a radius of 367.25 feet, through a central angle of 90° 06’ 35”, (tangent to said curve at last-mentioned point is last described course), an arc distance of 577.58 feet to a point in a line parallel with and distant 30.00 feet Westerly, measured at right angles, from the Northerly prolongation of the Westerly line of land described in indenture dated October 25, 1966 from Southern Pacific Company to Mopco Chemical Company, recorded in Book 5370 Page 204, Official Records of said county; thence South 0° 12’ 05” West, along last said parallel line and the Southerly prolongation thereof, 893.03 feet to the Southerly line of said Lot 30; thence South 89° 59’ 40” West, along the Southerly line of said Lots 30 and 29 (being also the Northerly line of Muscat Avenue, 60 feet wide), a distance of 712.89 feet to the point of beginning.

EXCEPTING THEREFROM all minerals and mineral ores of every kind and character now known to exist or hereafter discovered upon, within or underlying said land or that may be produced therefrom, including, without limiting the generally of the foregoing, all petroleum, oil, natural gas and other hydrocarbon substances and products derived therefrom, together with the exclusive and perpetual right of ingress and egress beneath the surface of said land to explore for, extract, mine and remove the same, and to make such use of the said land beneath the surface as is necessary or useful in connection therewith, which may include lateral or slant drilling, boring, digging or sinking of wells, shafts or tunnels, provided, however, that said grantor, its successors and assigns, shall not use the surface of said land in the exercise of any of said rights, and shall not

disturb the surface of said land or any improvements thereon, or interfere with grantor’s operations in any manner whatsoever. Excepting and reserving further unto grantor, its successors and assigns, any acreage allotment, marketing quotas, production limitations or similar type of regulation established by the United States of America, or any department of agency thereof, or by the State of California, or any department, division or agency thereof, limiting the agricultural use or productivity of said property, as reserved by Southern Pacific Company, a corporation, by Deed recorded December 4, 1967 in Book 5507 Page 327 of Official Records, Document No. 83188.

PARCEL 2:

Parcel 1 of Parcel Map No. 7529, in the County of Fresno, according to the map thereof recorded in Book 53, Page 98 of Parcel Maps, Fresno County Records.

EXCEPTING THEREFROM the title and exclusive right to all of the minerals and mineral ores of every kind and character now known to exist or hereafter discovered upon, within or underlying said land or that may be produced therefrom, including, without limiting the generality of the foregoing, all petroleum, oil, natural gas and other hydrocarbon substances and products derived therefrom, together with the exclusive and perpetual of said Grantor, its successors and assigns, of ingress and egress beneath the surface of said land to explore for, extract, mine and remove the same and to make such use of the said land beneath the surface as is necessary or useful in connection therewith, which may include lateral or slant drilling, boring, digging or sinking or wells, shafts or tunnels, provided, however, that said Grantor, its successors and assigns, shall not use the surface of said land in the exercise of any of said rights, and shall not disturb the surface of said land or any improvements thereon, as reserved by Security Title Insurance Company, a Corporation, in Deed recorded March 7, 1963 in Book 4831, Page 741 of Official Records as Document No. 19659.

APN: 331-071-31s

EXHIBIT C

KYC Application Form

Exhibit C

Partial Assignment
(Broadstone)

DUE DILIGENCE INFORMATION

Please complete and return this form as soon as practicable:

I.	Relevant Names.


	Please provide the names of the following (if you need more room, please attach a rider):

	Name of counterparty (“You” or “Your”):



	Your beneficial owners in excess of 25%:





	Names of your officers and directors:





	Your subsidiaries and controlled affiliates (if applicable):

II.	Location and Nature of Operations.


	List the countries in which you (including subsidiaries and controlled affiliates) have operations/offices:

Exhibit C

Partial Assignment
(Broadstone)

Do you (including subsidiaries and controlled affiliates) have operations/offices in any of the following countries or regions:


Crimea	Y / N
Cuba	Y / N
Iran	Y / N
Libya	Y / N
North Korea	Y / N
Sudan	Y / N
Syria	Y / N

Do you (including subsidiaries and controlled affiliates) have business or financial dealings that benefit or involve (directly or indirectly) any of the following countries, regions or governments:


Balkans	Y / N
Belarus	Y / N
Burma	Y / N
Central African Republic	Y / N
Crimea	Y / N
Cote d’Ivoire	Y / N
Cuba	Y / N
Democratic Republic of Congo	Y / N
Iran	Y / N
Lebanon	Y / N
Libya	Y / N
North Korea	Y / N
Somalia	Y / N
South Sudan	Y / N
Sudan	Y / N
Syria	Y / N
Zimbabwe	Y / N

Exhibit C

Partial Assignment
(Broadstone)

III.	Are you (circle one, if applicable):

Licensed or franchised, or controlled by an entity that is licensed or franchised, by a government authority that exercises regulatory oversight in an “Approved Jurisdiction”¹ (e.g., banks or broker-dealers).

A sovereign government, a U.S. governmental authority or a U.S. government-owned entity, including political subdivisions, agencies or departments of any U.S. State.

An entity (or an entity controlled by an entity) listed on an exchange in an Approved Jurisdiction (as defined above) or listed on any of the following exchanges: Bermuda Stock Exchange, Korea Stock Exchange, or Singapore Exchange.

If the answer to the above questions are all “NO”, please provide a copy of the following identity documents.

Type of Counterparty

Required Counterparty

Information

Required Verification

Documentation

Individual

▪ Full Name

▪ Residential Address

▪ Copy of a valid, government-issued photo identification card (such as a driver's license or passport).

Entity

▪ Name

▪ Business Address

▪ Tax ID Number (EIN)

▪ List of persons with 25% or more beneficial ownership of the entity

▪ Copy of a document evidencing the legal existence of the entity (such as articles of association).

▪ A copy of a valid, government-issued photo identification card for at least one of: (i) a director of the entity, (ii) a person with 25% or more beneficial ownership in the entity, (iii) a partner/member of the entity, or (iv) a managing executive of the entity.

1 The term “Approved Jurisdiction,” shall include: Argentina, Australia, Austria, Belgium, Brazil, Canada, Cayman Islands, Channel Islands, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, Isle of Man, Italy, Japan, Luxembourg, Mexico, Kingdom of the Netherlands, New Zealand, Norway, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, the United Kingdom, the United States, and the EU member states.

Exhibit C

Partial Assignment
(Broadstone)

IV.	ERISA Status.

Do you hold, or are you deemed to hold, Plan Assets² or do you act on behalf of an entity that holds, or is deemed to hold, Plan Assets?


Yes:	No:

If No, please skip questions 2 and 3.

If you answered “Yes” in response to question 1, please circle the correct answer for questions 2 and 3 below.

You are relying on one of the following U.S. Department of Labor Prohibited Transaction Class Exemptions (each, a “PTCE”): (a) your assets that will be involved in the contemplated transaction are managed by a “qualified professional asset manager” as such term is defined in PTCE 84-14, and all requirements set forth in PTCE 84-14 are met with respect to the contemplated transaction; (b) your assets that will be involved in the contemplated transaction are managed by an “in-house asset manager” as such term is defined in PTCE 96-23, and all requirements set forth in PTCE 96-23 are met with respect to the contemplated transaction; (c) you are a “bank collective investment fund” as such term is defined in PTCE 91-38, and all requirements set forth in PTCE 91-38 are met with respect to the contemplated transaction; (d) you are an “insurance company pooled separate account” as such term is defined in PTCE 90-1, and all requirements set forth in PTCE 90-1 are met with respect to the contemplated transaction; or (e) you are an “insurance company general account” as such term is defined in PTCE 95-60, and all requirements set forth in PTCE 95-60 are met with respect to the contemplated transaction.


Yes:	No:

A person acting as your fiduciary has determined that all requirements of Section 408(b)(17) of ERISA have been met with respect to the contemplated transaction.


Yes:	No:

The undersigned hereby certifies that the information contained herein and the information provided in connection is true and correct as of the date hereof.


SIGNATURE		DATE

PRINT NAME AND TITLE

2 “Plan Assets” has the meaning given to that term in Section 3(42) of the Employee Retirement Income Security Act of 1974 (and generally includes employee benefit plans subject to Title I of ERISA, “plans’ as defined in Section 4975 of the Internal Revenue Code of 1986 and entities that are deemed to hold the assets of the foregoing). You may be deemed to hold Plan Assets if you are, or if you act on behalf of, a private investment fund that has greater than 25% participation by benefit plan investors.

Exhibit C

Partial Assignment
(Broadstone)

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(Rule 13a-14(a)/15d-14(a) Certification)

I, Christopher J. Czarnecki, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Broadstone Net Lease, Inc. for the quarter ended

September 30, 2019;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2019	/s/ Christopher J. Czarnecki
	Christopher J. Czarnecki
	Chief Executive Officer and President
	(Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(Rule 13a-14(a)/15d-14(a) Certification)

I, Ryan M. Albano, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Broadstone Net Lease, Inc. for the quarter ended

September 30, 2019;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)

(d)

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2019	/s/ Ryan M. Albano
	Ryan M. Albano
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(Section 1350 Certification)

In connection with the Quarterly Report on Form 10-Q of Broadstone Net Lease, Inc. (the “Company”) for the quarter ended September 30, 2019 (the “Third Quarter 10-Q”), and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Christopher J. Czarnecki, Chief Executive Officer and President of the Company, certifies, to the best of his knowledge, that:

1.	The Third Quarter 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and

2.	The information contained in the Third Quarter 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 12, 2019	/s/ Christopher J. Czarnecki
	Christopher J. Czarnecki
	Chief Executive Officer and President

The foregoing certification is being furnished solely to accompany the Quarterly Report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(Section 1350 Certification)

In connection with the Quarterly Report on Form 10-Q of Broadstone Net Lease, Inc. (the “Company”) for the quarter ended September 30, 2019 (the “Third Quarter 10-Q”), and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Ryan M. Albano, Executive Vice President and Chief Financial Officer of the Company, certifies, to the best of his knowledge, that:

1.	The Third Quarter 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and

2.	The information contained in the Third Quarter 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 12, 2019	/s/ Ryan M. Albano
	Ryan M. Albano
	Executive Vice President and Chief Financial Officer