American Finance Trust, Inc (Form: 10-Q, Received: 08/11/2015 17:32:07)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015



	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission file number: 000-55197

American Finance Trust, Inc.

(Exact name of registrant as specified in its charter)



Maryland		90-0929989
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
405 Park Ave., 14th Floor, New York, New York		10022
(Address of principal executive offices)		(Zip Code)
(212) 415-6500
(Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web Site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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



Large accelerated filer o		Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company x

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

As of July 31, 2015 , the registrant had 66,455,212 shares of common stock outstanding.

AMERICAN FINANCE TRUST, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



	Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Consolidated Balance Sheets as of June 30, 2015 (Unaudited) and December 31, 2014	3
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2015 and 2014 (Unaudited)	4
Consolidated Statement of Changes in Stockholders' Equity for the Six Months Ended June 30, 2015 (Unaudited)	5
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014 (Unaudited)	6
Notes to Consolidated Financial Statements (Unaudited)	7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.	26

Item 3. Quantitative and Qualitative Disclosures About Market Risk.	44

Item 4. Controls and Procedures.	44

PART II - OTHER INFORMATION	46

Item 1. Legal Proceedings.	46

Item 1A. Risk Factors.	46

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	48

Item 3. Defaults Upon Senior Securities.	49

Item 4. Mine Safety Disclosures.	49

Item 5. Other Information.	49

Item 6. Exhibits.	49

Signatures	50

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERICAN FINANCE TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)



	June 30, 2015			December 31, 2014
	(Unaudited)
ASSETS
Real estate investments, at cost:
Land	$	358,278		$	358,278
Buildings, fixtures and improvements	1,540,821			1,540,821
Acquired intangible lease assets	319,028			319,028
Total real estate investments, at cost	2,218,127			2,218,127
Less: accumulated depreciation and amortization	(163,151		)	(110,875		)
Total real estate investments, net	2,054,976			2,107,252
Cash and cash equivalents	95,733			74,760
Investment securities, at fair value	10,100			18,991
Prepaid expenses and other assets	18,224			14,104
Deferred costs, net	13,315			13,923
Total assets	$	2,192,348		$	2,229,030

LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable	$	469,601		$	470,079
Mortgage premiums, net	18,366			22,100
Credit facility	423,000			423,000
Below-market lease liabilities, net	18,803			19,473
Accounts payable and accrued expenses (including $504 and $1,753 due to affiliates as of June 30, 2015 and December 31, 2014, respectively)	8,839			12,799
Deferred rent and other liabilities	7,060			7,238
Distributions payable	8,987			9,176
Total liabilities	954,656			963,865
Preferred stock, $0.01 par value per share, 50,000,000 shares authorized, none issued and outstanding	—			—
Common stock, $0.01 par value per share, 300,000,000 shares authorized, 66,251,118 and 65,257,954 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively	662			653
Additional paid-in capital	1,460,480			1,437,147
Accumulated other comprehensive income	279			463
Accumulated deficit	(223,729		)	(173,098		)
Total stockholders' equity	1,237,692			1,265,165
Total liabilities and stockholders' equity	$	2,192,348		$	2,229,030

The accompanying notes are an integral part of these statements.

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AMERICAN FINANCE TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Revenues:
Rental income	$	40,216		$	39,002		$	80,431		$	65,728
Operating expense reimbursements	3,053			3,074			5,704			6,472
Total revenues	43,269			42,076			86,135			72,200

Operating expenses:
Asset management fees to affiliate	4,096			—			4,096			—
Property operating	3,439			3,432			6,526			6,959
Acquisition and transaction related	377			4,087			506			18,619
General and administrative	3,552			1,659			5,499			2,753
Depreciation and amortization	25,386			24,921			50,773			42,809
Total operating expenses	36,850			34,099			67,400			71,140
Operating income	6,419			7,977			18,735			1,060
Other (expense) income:
Interest expense	(8,239		)	(7,723		)	(16,399		)	(11,167		)
Income from investment securities	169			606			338			1,561
Gain (Loss) on sale of investment securities	—			109			546			(57		)
Other income	27			158			57			161
Total other expense, net	(8,043		)	(6,850		)	(15,458		)	(9,502		)
Net income (loss)	$	(1,624	)	$	1,127		$	3,277		$	(8,442	)

Other comprehensive income (loss):
Change in unrealized income on investment securities	(7		)	2,073			(184		)	7,304
Comprehensive income (loss)	$	(1,631	)	$	3,200		$	3,093		$	(1,138	)

Basic net income (loss) per share	$	(0.02	)	$	0.02		$	0.05		$	(0.13	)
Diluted net income (loss) per share	$	(0.02	)	$	0.02		$	0.05		$	(0.13	)

The accompanying notes are an integral part of these statements.

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AMERICAN FINANCE TRUST, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

For the Six Months Ended June 30, 2015

(In thousands, except share data)

(Unaudited)



	Common Stock
	Number of Shares		Par Value			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders' Equity
Balance, December 31, 2014	65,257,954		$	653		$	1,437,147		$	463		$	(173,098	)	$	1,265,165
Common stock issued through distribution reinvestment plan	1,266,452		12			29,890			—			—			29,902
Common stock repurchases	(274,564	)	(3		)	(6,571		)	—			—			(6,574		)
Share-based compensation	1,276		—			14			—			—			14
Distributions declared	—		—			—			—			(53,908		)	(53,908		)
Net income	—		—			—			—			3,277			3,277
Other comprehensive loss	—		—			—			(184		)	—			(184		)
Balance, June 30, 2015	66,251,118		$	662		$	1,460,480		$	279		$	(223,729	)	$	1,237,692

The accompanying notes are an integral part of this statement.

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AMERICAN FINANCE TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Six Months Ended June 30,
	2015			2014
Cash flows from operating activities:
Net income (loss)	$	3,277		$	(8,442	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	33,473			29,540
Amortization of in-place lease assets	17,300			13,269
Amortization of deferred financing costs	2,608			1,972
Amortization of mortgage premiums	(3,734		)	(2,311		)
Amortization of above-market lease assets and accretion of below-market lease liabilities, net	833			593
Share-based compensation	14			11
(Gain) Loss on sale of investment securities	(546		)	57
Changes in assets and liabilities:
Prepaid expenses and other assets	(4,120		)	2,613
Accounts payable and accrued expenses	1,115			929
Deferred rent and other liabilities	(178		)	4,400
Net cash provided by operating activities	50,042			42,631
Cash flows from investing activities:
Investments in real estate and other assets	—			(538,130		)
Proceeds from the sale of investment securities	9,253			29,829
Net cash provided by (used in) investing activities	9,253			(508,301		)
Cash flows from financing activities:
Payments of mortgage notes payable	(478		)	(387		)
Proceeds from credit facility	—			423,000
Payments of deferred financing costs	(2,000		)	(10,599		)
Proceeds from issuances of common stock	—			127
Payments of offering costs and fees related to stock issuances, net	—			(31		)
Common stock repurchases	(11,649		)	(337		)
Distributions paid	(24,195		)	(22,103		)
Restricted cash	—			(167		)
Net cash (used in) provided by financing activities	(38,322		)	389,503
Net change in cash and cash equivalents	20,973			(76,167		)
Cash and cash equivalents, beginning of period	74,760			101,176
Cash and cash equivalents, end of period	$	95,733		$	25,009

Supplemental Disclosures:
Cash paid for interest	$	17,137		$	9,024
Cash paid for income taxes	$	787		$	361

Non-Cash Investing and Financing Activities:
Mortgage notes payable assumed or used to acquire investments in real estate	$	—		$	462,238
Premiums on assumed mortgage notes payable	$	—		$	27,862
Common stock issued through distribution reinvestment plan	$	29,902		$	30,127

The accompanying notes are an integral part of these statements.

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

Note 1 — Organization

American Finance Trust, Inc. (the “Company”), formerly known as American Realty Capital Trust V, Inc., has acquired a diversified portfolio of commercial properties comprised primarily of freestanding single-tenant properties that are net leased to investment grade and other creditworthy tenants. On April 15, 2015, upon recommendation by the Company’s advisor, American Finance Advisors, LLC (the "Advisor") and approval by the Company’s board of directors, the Company adopted new Investment Objectives and Acquisition and Investment Policies (the “New Strategy”). Under the New Strategy, the Company manages and optimizes its investments in its existing portfolio of net leased commercial real estate properties (the “Net Lease Portfolio”) and selectively invests in additional net lease properties. In addition, the Company invests in commercial real estate mortgage loans and other commercial real estate-related debt investments (such investments collectively, “CRE Debt Investments”). The Company intends to finance its CRE Debt Investments primarily through mortgage financing secured by its Net Lease Portfolio as well as mortgage specific repurchase agreement facilities and collateralized debt obligations.

On April 4, 2013, the Company commenced its initial public offering (the "IPO") on a "reasonable best efforts" basis of up to 68.0 million shares of common stock, $0.01 par value per share, at a price of $25.00 per share, subject to certain volume and other discounts, pursuant to a registration statement on Form S-11, as amended (File No. 333-187092 ) (the "Registration Statement"), filed with the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended. The Registration Statement also covered up to 14.7 million shares of common stock at an initial price of $23.75 per share, which was 95.0% of the initial offering price of shares of common stock in the IPO, available pursuant to a distribution reinvestment plan (the "DRIP"), under which the Company's common stockholders could elect to have their distributions reinvested in additional shares of the Company's common stock. The IPO closed in October 2013.

On November 19, 2014 , the Company's board of directors approved an estimated net asset value per share of the Company's common stock (" Estimated Per-Share NAV ") of $23.50 , calculated by the Advisor in accordance with the Company's valuation guidelines, as of September 30, 2014. Beginning with November 14, 2014 (the "Initial NAV Pricing Date") and ending with the suspension of the DRIP and the termination of the Company’s share repurchase plan (the “SRP”), the price per share for shares of common stock purchased under the DRIP and the price per share for shares of common stock repurchased by the Company pursuant to the SRP were each equal to the Estimated Per-Share NAV of the Company's common stock. On May 14, 2015, the board of directors approved an Estimated Per-Share NAV of the Company’s common stock equal to $24.17 per share as of March 31, 2015, calculated by the Advisor in accordance with the Company’s valuation guidelines, used in connection with the purchases of common stock under the DRIP following May 18, 2015 through the suspension of the DRIP, which became effective following the payment of the Company’s distribution on July 1, 2015. Following the suspension of the DRIP, the Company no longer publishes its Estimated Per-Share NAV .

The Company has applied to list its common stock on the New York Stock Exchange ("NYSE") under the symbol "AFIN" (the "Listing"). Completion of the Listing is subject to final approval by the NYSE. There can be no assurance that the Company’s shares of common stock will be listed on the NYSE.

The Company, incorporated on January 22, 2013 , is a Maryland corporation that elected and qualified to be taxed as a real estate investment trust for U.S. federal income tax purposes ("REIT") beginning with the taxable year ended December 31, 2013. Substantially all of the Company's business is conducted through American Finance Operating Partnership, L.P. (the "OP"), a Delaware limited partnership and its wholly-owned subsidiaries. The Company has no direct employees. The Company has retained the Advisor to manage the Company's affairs on a day-to-day basis. American Finance Properties, LLC (the "Property Manager") serves as the Company's property manager. Realty Capital Securities, LLC (the "Dealer Manager") served as the dealer manager of the IPO and continues to provide the Company with various strategic investment banking services. The Advisor and the Property Manager are wholly owned subsidiaries of, and the Dealer Manager is under common control with, AR Capital, LLC (the "Sponsor"), as a result of which, they are related parties of the Company. Each has received or may receive, as applicable, compensation, fees and other expense reimbursements for services related to the IPO and for the investment and management of the Company's assets. Such entities have received or may receive, as applicable, fees during the offering, acquisition, operational and liquidation stages. During the second quarter of 2014, the Company announced that it engaged J.P. Morgan Securities LLC and RCS Capital, the investment banking division of the Dealer Manager, as financial advisors to assist the Company in evaluating potential strategic alternatives. In connection with the Listing, the Company has also engaged UBS Securities LLC as a financial advisor.

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

Note 2 — Summary of Significant Accounting Policies

The accompanying consolidated financial statements of the Company included herein were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. All intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the results for the entire year or any subsequent interim periods.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of, and for the year ended December 31, 2014 , which are included in the Company's Annual Report on Form 10-K filed with the SEC on May 15, 2015 . The Consolidated Statements of Operations and Comprehensive Income (Loss) and Cash Flows for the three and six months ended June 30, 2014 , include adjustments, as previously disclosed in the Company’s Form 10-K, to reflect certain adjustments and final purchase price allocations to previously reported information associated with acquisitions completed during 2014. As a result, amortization and accretion of above-market lease assets and below-market lease liabilities decreased total revenue by $0.5 million and $0.6 million , depreciation and amortization expense decreased by $3.5 million and $4.6 million and net loss decreased $3.0 million and $4.0 million for the three and six months ended June 30, 2014 , respectively. In addition, real estate investments, net increased $23.2 million , below market lease liabilities, net increased $19.2 million and total stockholders’ equity increased $4.0 million as of June 30, 2014 . There have been no significant changes to the Company's significant accounting policies during the six months ended June 30, 2015 , other than the updates described below.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued revised guidance relating to revenue recognition. Under the revised guidance, an entity is required to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revised guidance was to become effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption was not permitted under GAAP. The revised guidance allows entities to apply the full retrospective or modified retrospective transition method upon adoption. In July 2015, the FASB deferred the effective date of the revised guidance by one year to annual reporting periods beginning after December 15, 2017, although entities will be allowed to early adopt the guidance as of the original effective date. The Company has not yet selected a transition method and is currently evaluating the impact of the new guidance.

In January 2015, the FASB issued updated guidance that eliminates from GAAP the concept of an event or transaction that is unusual in nature and occurs infrequently being treated as an extraordinary item. The revised guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Any amendments may be applied either prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company has adopted the provisions of this guidance for the fiscal year ending December 31, 2015 and determined that there is no impact to its financial position, results of operations and cash flows.

In February 2015, the FASB amended the accounting for consolidation of certain legal entities. The amendments modify the evaluation of whether certain legal entities are variable interest entities ("VIEs") or voting interest entities, eliminate the presumption that a general partner should consolidate a limited partnership and affect the consolidation analysis of reporting entities that are involved with VIEs (particularly those that have fee arrangements and related party relationships). The revised guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. If the Company decides to early adopt the revised guidance in an interim period, any adjustments will be reflected as of the beginning of the fiscal year that includes the interim period. The Company is currently evaluating the impact of the new guidance.

In April 2015, the FASB amended the presentation of debt issuance costs on the balance sheet. The amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The revised guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted for financial statements that have not previously been issued. If the Company decides to early adopt the revised guidance in an interim period, any adjustments will be reflected as of the beginning of the fiscal year that includes the interim period. The Company is currently evaluating the impact of the new guidance.

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

Note 3 — Real Estate Investments

The Company owned 463 properties as of June 30, 2015 . The rentable square feet or annualized rental income on a straight-line basis of the four properties summarized below each represent 5.0% or more of the Company's total portfolio's rentable square feet or annualized rental income on a straight-line basis as of June 30, 2015 .

Home Depot - Birmingham, AL

On September 24, 2013, the Company, through an indirect wholly-owned subsidiary of the OP, closed its acquisition of Home Depot, a freestanding, single-tenant distribution facility located in Birmingham, Alabama ("Home Depot Birmingham"). The seller had no preexisting relationship with the Company. The purchase price of Home Depot Birmingham was $41.4 million , exclusive of closing costs. The acquisition of Home Depot Birmingham was funded with proceeds from the Company's IPO. The Company accounted for the purchase of Home Depot Birmingham as a business combination and incurred acquisition related costs of $0.5 million at the time of acquisition.

Home Depot - Valdosta, GA

On September 24, 2013, the Company, through an indirect wholly-owned subsidiary of the OP, closed its acquisition of Home Depot, a freestanding, single-tenant distribution facility located in Valdosta, Georgia ("Home Depot Valdosta"). The sellers had no preexisting relationship with the Company. The purchase price of Home Depot Valdosta was $37.6 million , exclusive of closing costs. The acquisition of Home Depot Valdosta was funded with proceeds from the Company's IPO. The Company accounted for the purchase of Home Depot Valdosta as a business combination and incurred acquisition related costs of $0.4 million at the time of acquisition.

C&S Wholesale Grocers - Birmingham, AL

On February 21, 2014, the Company, through an indirect wholly-owned subsidiary of the OP, closed its acquisition of C&S Wholesale Grocers, a freestanding, single-tenant distribution facility located in Birmingham, Alabama ("C&S Wholesale Grocers"). The seller had no preexisting relationship with the Company. The purchase price of C&S Wholesale Grocers was $54.4 million , exclusive of closing costs. The acquisition of C&S Wholesale Grocers was funded with proceeds from the Company's IPO and the assumption of existing mortgage debt secured by the property. The Company accounted for the purchase of C&S Wholesale Grocers as a business combination and incurred acquisition related costs of $0.8 million , which are reflected in the acquisition and transaction related line item of the consolidated statements of operations and comprehensive loss.

Sanofi US - Bridgewater, NJ

On March 21, 2014, the Company, through an indirect wholly-owned subsidiary of the OP, closed its acquisition of Sanofi US, a freestanding, single-tenant office facility located in Bridgewater, New Jersey ("Sanofi"). The seller had no preexisting relationship with the Company. The purchase price of Sanofi was $251.1 million , exclusive of closing costs. The acquisition of Sanofi was funded with proceeds from the Company's IPO and the assumption of existing mortgage debt secured by the property. The Company accounted for the purchase of Sanofi as a business combination and incurred acquisition related costs of $5.8 million , which are reflected in the acquisition and transaction related line item of the consolidated statements of operations and comprehensive loss.

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

There were no real estate assets acquired or liabilities assumed during the six months ended June 30, 2015 . The following table presents the allocation of real estate assets acquired and liabilities assumed during the six months ended June 30, 2014 :



	Six Months Ended
(Dollar amounts in thousands)	June 30, 2014
Real estate investments, at cost:
Land	$	210,379
Buildings, fixtures and improvements	672,121
Total tangible assets	882,500
Acquired intangibles:
In-place leases	175,152
Above-market lease assets	13,403
Below-market lease liabilities	(19,692		)
Total assets acquired	1,051,363
Mortgage notes payable assumed	(462,238		)
Premiums on mortgage notes payable assumed	(27,862		)
Deposits paid in prior periods	(33,035		)
Cash paid for acquired real estate investments, at cost	$	528,228		⁽¹⁾
Number of properties purchased	224

_____________________________________


(1)	Excludes cash paid for real estate investments financed through accounts payable in prior periods of $9.9 million .

The following table presents future minimum base rent payments on a cash basis due to the Company over the next five years and thereafter. These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes among other items:



(In thousands)	Future Minimum Base Rent Payments
July 1, 2015 to December 31, 2015	$	77,234
2016	157,026
2017	159,425
2018	130,992
2019	132,713
Thereafter	836,249
	$	1,493,639

The following table lists the tenants (including, for this purpose, all affiliates of such tenants) from which the Company derives annualized rental income on a straight-line basis constituting 10.0% or more of the Company’s consolidated annualized rental income on a straight-line basis for all portfolio properties as of the dates indicated:



	June 30,
Tenant	2015	2014
SunTrust Bank	17.9%	17.9%
Sanofi US	11.6%	11.6%
C&S Wholesale Grocer	10.4%	10.4%

The termination, delinquency or non-renewal of leases by one or more of the above tenants may have a material adverse effect on revenues. No other tenant represented 10.0% or greater of consolidated annualized rental income on a straight-line basis as of June 30, 2015 and 2014 .

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

The following table lists the states where the Company has concentrations of properties where annualized rental income on a straight-line basis represented 10.0% or greater of consolidated annualized rental income on a straight-line basis as of June 30, 2015 and 2014 :



	June 30,
State	2015	2014
New Jersey	20.3%	20.3%
Georgia	11.2%	11.2%

The Company did not own properties in any other state that in total represented 10.0% or greater of consolidated annualized rental income on a straight-line basis as of June 30, 2015 and 2014 .

Note 4 — Investment Securities

As of June 30, 2015 and December 31, 2014 , the Company had investments in debt securities consisting of redeemable preferred stock with an aggregate fair value of $10.1 million and $19.0 million respectively. These investments are considered available-for-sale securities and therefore increases or decreases in the fair value of these investments are recorded in accumulated other comprehensive income as a component of stockholders' equity on the consolidated balance sheets, unless the securities are considered to be other-than-temporarily impaired, at which time the losses would be reclassified to expense.

The following table details the unrealized gains and losses on investment securities as of June 30, 2015 and December 31, 2014 :



(In thousands)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2015
Debt securities	$	9,821	$	283	$	(4	)	$	10,100

December 31, 2014
Debt securities	$	18,528	$	463	$	—		$	18,991

Unrealized losses as of June 30, 2015 were considered temporary and therefore no impairment was recorded during the three and six months ended June 30, 2015 and 2014 .

During the six months ended June 30, 2015 , the Company sold investments in redeemable preferred stock with an aggregate cost basis of $8.7 million for $9.2 million , resulting in a realized gain on sale of investment securities of $0.5 million . During three months ended June 30, 2014 , the Company sold investments in redeemable preferred stock with an aggregate cost basis of $20.1 million for $20.2 million , resulting in a realized gain on sale of investment securities of $0.1 million . During the six months ended June 30, 2014 , the Company sold investments in redeemable preferred stock and senior notes with an aggregate cost basis of $29.9 million for $29.8 million , resulting in a realized loss on sale of investment securities of $0.1 million . The Company had no sales of investments during the three months ended June 30, 2015 .

The Company's preferred stock investments are redeemable at the respective issuer's option after five years from issuance.

Note 5 — Credit Facility

On September 23, 2013 , the Company, through the OP, entered into a credit agreement (the "Credit Agreement") relating to a credit facility (the "Credit Facility") that provides for aggregate revolving loan borrowings of up to $200.0 million (subject to borrowing base availability), with a $25.0 million swingline subfacility and a $20.0 million letter of credit subfacility. Through amendments to the Credit Agreement, the OP increased commitments under the Credit Facility to $750.0 million as of June 30, 2015 . As of June 30, 2015 and December 31, 2014 , the outstanding balance under the Credit Facility was $423.0 million . The Company's unused borrowing capacity was $239.6 million and $234.6 million as of June 30, 2015 and December 31, 2014 , respectively, based on the assets assigned to the Credit Facility. Availability of borrowings is based on a pool of eligible unencumbered real estate assets.

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

Borrowings under the Credit Facility bear interest, at the OP's election, at either (i) the base rate (which is defined in the Credit Agreement as the greatest of (a) the prime rate in effect on such day, (b) the federal funds effective rate in effect on such day plus 0.50% , and (c) LIBOR for a one month interest period plus 1.0% ) plus an applicable spread ranging from 0.60% to 1.20% , depending on the Company's consolidated leverage ratio, or (ii) LIBOR plus an applicable spread ranging from 1.60% to 2.20% , depending on the Company's consolidated leverage ratio. The Credit Facility requires an unused fee per annum of 0.25% and 0.15% , if the unused balance of the Credit Facility exceeds, or is equal to or less than, 50.0% of the available facility, respectively.

The Credit Facility provides for monthly interest payments for each base rate loan and periodic interest payments for each LIBOR loan, based upon the applicable interest period with respect to such LIBOR loan, with all principal outstanding being due on the maturity date. The Credit Facility will mature on September 23, 2017 , provided that the OP, subject to certain conditions, may elect to extend the maturity date one year to September 23, 2018 . The Credit Facility may be prepaid at any time, in whole or in part, without premium or penalty. In the event of a default, the lenders have the right to terminate their obligations under the Credit Facility and to accelerate the payment on any unpaid principal amount of all outstanding loans. Certain of the Company's subsidiaries and certain subsidiaries of the OP guarantee, and the equity of certain subsidiaries of the OP have been pledged as collateral for, the obligations under the Credit Facility.

The Credit Facility requires the Company to meet certain financial covenants, including the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) as well as the maintenance of a minimum net worth. As of June 30, 2015 , the Company was in compliance with the financial covenants under the Credit Agreement.

In August 2015, the Company paid down in full the outstanding balance on the Credit Facility and concurrently terminated the Credit Facility in connection with the Loan Agreement described in Note 15 — Subsequent Events .

Note 6 — Mortgage Notes Payable

The Company's mortgage notes payable as of June 30, 2015 and December 31, 2014 consist of the following:



		Outstanding Loan Amount as of				Effective Interest Rate as of
Portfolio	Encumbered Properties	June 30, 2015		December 31, 2014		June 30, 2015			December 31, 2014			Interest Rate	Maturity
		(In thousands)		(In thousands)
SAAB Sensis I	1	$	8,357	$	8,519	6.01	%		6.01	%		Fixed	Apr. 2025
SunTrust Bank II	30	25,000		25,000		5.50	%		5.50	%		Fixed	Jul. 2021
C&S Wholesale Grocer I	4	82,313		82,313		5.56	%		5.56	%		Fixed	Apr. 2017
SunTrust Bank III	121	99,677		99,677		5.50	%		5.50	%		Fixed	Jul. 2021
SunTrust Bank IV	30	25,000		25,000		5.50	%		5.50	%		Fixed	Jul. 2021
Sanofi US I	1	190,000		190,000		5.83	%		5.83	%		Fixed	Dec. 2015
Stop & Shop I	4	39,254		39,570		5.63	%		5.63	%		Fixed	Jun. 2021
Total	191	$	469,601	$	470,079	5.66	%	⁽¹⁾	5.66	%	⁽¹⁾

_____________________________________


(1)	Calculated on a weighted-average basis for all mortgages outstanding as of the dates indicated.

The following table summarizes the scheduled aggregate principal payments on mortgage notes payable for the five years subsequent to June 30, 2015 :



(In thousands)	Future Principal Payments
July 1, 2015 to December 31, 2015	$	190,486
2016	1,014
2017	83,393
2018	1,143
2019	1,211
Thereafter	192,354
	$	469,601

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

The Company's mortgage notes payable agreements require the compliance of certain property-level financial covenants including debt service coverage ratios. As of June 30, 2015 , the Company was in compliance with financial covenants under its mortgage notes payable agreements.

Note 7 — Fair Value of Financial Instruments

The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. The guidance defines three levels of inputs that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3 — Unobservable inputs that reflect the entity's own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.

The Company has investments in redeemable preferred stock that are traded in active markets and therefore, due to the availability of quoted prices in active markets, classified these investments as Level 1 in the fair value hierarchy.

The following table presents information about the Company's assets and liabilities measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014 , aggregated by the level in the fair value hierarchy within which those instruments fall:



(In thousands)	Quoted Prices in Active Markets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
June 30, 2015
Investment securities	$	10,100	$	—	$	—	$	10,100
December 31, 2014
Investment securities	$	18,991	$	—	$	—	$	18,991

A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets and liabilities. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the six months ended June 30, 2015 .

The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair value of short-term financial instruments such as cash and cash equivalents, prepaid expenses and other assets, accounts payable and accrued expenses and distributions payable approximates their carrying value on the consolidated balance sheets due to their short-term nature. The fair values of the Company's remaining financial instruments that are not reported at fair value on the consolidated balance sheets as of June 30, 2015 and December 31, 2014 are reported in the following table:



		Carrying Amount at		Fair Value at		Carrying Amount at		Fair Value at
(In thousands)	Level	June 30, 2015		June 30, 2015		December 31, 2014		December 31, 2014
Mortgage notes payable and premiums, net	3	$	487,967	$	495,426	$	492,179	$	505,629
Credit facility	3	$	423,000	$	423,000	$	423,000	$	423,000

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

The fair value of mortgage notes payable is estimated by an independent third party using a discounted cash flow analysis, based on management’s estimates of market interest rates. Advances under the Credit Facility are considered to be reported at fair value, because its interest rate varies with changes in LIBOR.

Note 8 — Common Stock

As of June 30, 2015 and December 31, 2014 , the Company had 66.3 million and 65.3 million shares of common stock outstanding, respectively, including unvested restricted shares and shares issued pursuant to the DRIP.

On April 9, 2013, the Company's board of directors authorized, and the Company declared a distribution payable to stockholders of record each day equal to $0.00452054795 per day, which is equivalent to $1.65 per annum, per share of common stock. Distributions began to accrue on May 13, 2013, 15 days following the Company's initial property acquisition. Distributions are payable by the fifth day following each month end to stockholders of record at the close of business each day during the prior month. Following the Listing, the Company expects to pay distributions on the 15th day of each month to stockholders of record as of close of business on the eighth day of such month. Distribution payments are dependent on the availability of funds. The board of directors may reduce the amount of distributions paid or suspend distribution payments at any time and therefore distributions payments are not assured.

Share Repurchase Program

The Company's board of directors previously adopted the SRP that enabled stockholders to sell their shares to the Company under limited circumstances. The SRP permitted stockholders to sell their shares back to the Company, subject to the significant conditions and limitations described below. In connection with the potential Listing, pursuant to the requirements of applicable tender offer rules, on April 15, 2015 , the board of directors approved the termination of the SRP. The Company has processed all of the requests received under the SRP for the first and second quarters of 2015 and will not process further requests.

Only those stockholders who purchased their shares from the Company or received their shares from the Company (directly or indirectly) through one or more non-cash transactions were able to participate in the SRP. The repurchase of shares occurred on the last business day prior to the filing of each quarterly financial filing (and in all events on a date other than a dividend payment date).

Effective November 14, 2014 through the termination of the SRP, the repurchase price for shares under the SRP was based on the estimated net asset value ("NAV") per share of the Company's common stock (" Estimated Per-Share NAV ") as determined by the Company's board of directors. Purchases under the SRP were limited in any calendar quarter to 1.25% of the Company's NAV as of the last day of the previous calendar quarter, or approximately 5.0% of the Company's NAV in any 12 month period.

Effective November 14, 2014 through the termination of the SRP, there was no minimum holding period for shares of the Company's common stock and stockholders could submit their shares for repurchase at any time through the SRP. Shares repurchased in connection with the death or disability of a stockholder were repurchased at a purchase price equal to the greater of the price paid for such shares and the then-current NAV (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to the Company's common stock).

Subject to limited exceptions, stockholders who requested the repurchase of shares of the Company's common stock within the first four months from the date of purchase were subject to a short-term trading fee of 2.0% .

When a stockholder requested repurchases and the repurchases were approved, the Company reclassified such obligation from equity to a liability based on the settlement value of the obligation. Shares purchased under the SRP have the status of authorized but unissued shares. The following table summarizes the repurchases of shares under the SRP cumulatively through June 30, 2015 :



	Number of Requests	Number of Shares	Weighted-Average Price per Share
Cumulative repurchases as of December 31, 2014	158	303,907	$	24.01
Six months ended June 30, 2015	93	274,564	23.83
Cumulative repurchases as of June 30, 2015	251	578,471	$	23.98

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

Distribution Reinvestment Plan

Pursuant to the DRIP, stockholders could elect to reinvest distributions by purchasing shares of common stock. In connection with the potential Listing, pursuant to the terms of the DRIP, on April 15, 2015 , the Company's board of directors approved an amendment to the DRIP (the "DRIP Amendment") that enables the Company to suspend the DRIP. Subsequently, pursuant to the DRIP as amended by the DRIP Amendment, the Company's board of directors approved the suspension of the DRIP, effective immediately following the payment of the Company’s June 2015 monthly distribution. Accordingly, the final issuance of shares of common stock pursuant to the DRIP occurred in connection with the Company’s June 2015 distribution, paid on July 1, 2015. No dealer manager fees or selling commissions were paid with respect to shares purchased pursuant to the DRIP. Shares issued pursuant to the DRIP are recorded within stockholders' equity in the accompanying consolidated balance sheets in the period distributions were declared. Until November 14, 2014 , the Company offered shares pursuant to the DRIP at $23.75 , which was 95.0% of the initial offering price of shares of common stock in the IPO. Effective November 14, 2014 through the suspension of the DRIP, the Company offered shares pursuant to the DRIP at Estimated Per-Share NAV . During the six months ended June 30, 2015 and the year ended December 31, 2014 , the Company issued 1.3 million and 2.6 million shares of common stock with a value of $29.9 million and $61.0 million , respectively, and a par value per share of $0.01 , pursuant to the DRIP.

Note 9 — Commitments and Contingencies

Future Minimum Ground Lease Payments

The Company entered into ground lease agreements related to certain acquisitions under leasehold interest arrangements. The following table reflects the minimum base cash rental payments due from the Company over the next five years and thereafter:



(In thousands)	Future Minimum Base Rent Payments
July 1, 2015 to December 31, 2015	$	445
2016	895
2017	900
2018	882
2019	882
Thereafter	5,517
	$	9,521

Litigation and Regulatory Matters

In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. There are no material legal or regulatory proceedings pending or known to be contemplated against the Company.

Environmental Matters

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. The Company maintains environmental insurance for its properties that provides coverage for potential environmental liabilities, subject to the policy's coverage conditions and limitations. The Company has not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on its financial position or results of operations.

Note 10 — Related Party Transactions and Arrangements

As of June 30, 2015 and December 31, 2014 , American Finance Special Limited Partner, LLC (the “Special Limited Partner”), an entity controlled by the Sponsor, owned 8,888 shares of the Company's outstanding common stock and 90 OP Units.

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

Fees Incurred in Connection with the IPO

The Dealer Manager was entitled to receive fees and compensation in connection with the sale of the Company's common stock in the IPO. The Dealer Manager received selling commissions of up to 7.0% of gross offering proceeds before reallowance of commissions earned by participating broker-dealers. In addition, the Dealer Manager received up to 3.0% of the gross proceeds from the sale of shares of common stock, before reallowance to participating broker-dealers, as a dealer manager fee. The Dealer Manager was permitted to reallow its dealer manager fee to such participating broker-dealers, based on such factors as the volume of shares sold by respective participating broker-dealers and marketing support incurred as compared to those of other participating broker-dealers. The following table details total selling commissions and dealer manager fees incurred from and due to the Dealer Manager as of and for the periods presented:



	Three Months Ended June 30,				Six Months Ended June 30,						Payable as of
(In thousands)	2015		2014		2015		2014				June 30, 2015		December 31, 2014
Total commissions and fees from the Dealer Manager	$	—	$	—	$	—	$	(3	)	⁽¹⁾	$	—	$	(13	)

_________________________________


(1)	During the three months ended June 30, 2014 , the Company was reimbursed for selling commissions and dealer manager fees as a result of share purchase cancellations related to common stock sales prior to the close of the IPO.

The Advisor and its affiliates received fees and expense reimbursements for services relating to the IPO. The Company utilizes transfer agent services provided by an affiliate of the Dealer Manager. All offering costs related to the IPO incurred by the Company or its affiliated entities on behalf of the Company were charged to additional paid-in capital on the accompanying consolidated balance sheets. The following table details offering costs and reimbursements incurred from and due to the Advisor and Dealer Manager as of and for the periods presented:



	Three Months Ended June 30,				Six Months Ended June 30,					Payable as of
(In thousands)	2015		2014		2015		2014			June 30, 2015		December 31, 2014
Fees and expense reimbursements from the Advisor and Dealer Manager	$	—	$	—	$	—	$	(253	)	$	—	$	—

Fees and Participations Incurred in Connection With the Operations of the Company

The Advisor is paid an acquisition fee equal to 1.0% of the contract purchase price of each acquired property and 1.0% of the amount advanced for a loan or other investment. The Advisor is reimbursed for costs it incurs in providing services, or “insourced expenses.” Such insourced expenses may not exceed, 0.5% of the contract purchase price and 0.5% of the amount advanced for a loan or other investment. Additionally, the Company pays third party acquisition expenses. The aggregate amount of acquisition fees and financing coordination fees (as described below) may not exceed 1.5% of the contract purchase price and the amount advanced for a loan or other investment for all the assets acquired. As of June 30, 2015 , aggregate acquisition fees and financing fees did not exceed the 1.5% threshold. In no event will the total of all acquisition fees, acquisition expenses and any financing coordination fees payable with respect to a particular investment or reinvestment exceed 4.5% of the contract purchase price to be measured at the close of the acquisition phase or 4.5% of the amount advanced for a loan or other investment. As of June 30, 2015 , the total of all acquisition fees, acquisition expenses and any financing coordination fees did not exceed the 4.5% threshold.

If the Advisor provides services in connection with the origination or refinancing of any debt that the Company obtains and uses to acquire properties or to make other permitted investments, or that is assumed, directly or indirectly, in connection with the acquisition of properties, the Company will pay the Advisor a financing coordination fee equal to 0.75% of the amount available and/or outstanding under such financing, subject to certain limitations.

On April 29, 2015 , the independent directors of the board of directors unanimously approved certain amendments to the Amended and Restated Advisory Agreement, as amended (the “Advisory Agreement”), by and among the Company, the OP and the Advisor (the “Second A&R Advisory Agreement”). The Second A&R Advisory Agreement took effect on July 20, 2015 , the date the Company filed certain changes to the Company’s Articles of Amendment and Restatement, which were approved by the Company’s stockholders on June 23, 2015 . The initial term of the Second A&R Advisory Agreement is 20 years beginning on April 29, 2015 , and automatically renewable for another 20 -year term upon each 20 -year anniversary unless terminated by the board of directors for cause.

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

In connection with asset management services provided by the Advisor, the Company issued to the Advisor an asset management subordinated participation by causing the OP to issue (subject to periodic approval by the board of directors) to the Advisor performance-based restricted, forfeitable partnership units of the OP designated as "Class B Units." The Class B Units are intended to be profit interests and will vest, and no longer be subject to forfeiture, at such time as: (a) the value of the OP's assets plus all distributions made equals or exceeds the total amount of capital contributed by investors plus a 6.0% cumulative, pretax, non-compounded annual return thereon (the "economic hurdle"); (b) any one of the following events occurs concurrently with or subsequently to the achievement of the economic hurdle described above: (i) a listing; (ii) a transaction to which the Company or the OP, shall be a party, as a result of which OP Units or the Company's common stock shall be exchanged for, or converted into, the right, or the holders of such securities shall otherwise be entitled, to receive cash, securities or other property or any combination thereof; or (iii) the termination of the advisory agreement without cause; and (c) the Advisor pursuant to the advisory agreement is providing services to the Company immediately prior to the occurrence of an event of the type described in clause (b) above, unless the failure to provide such services is attributable to the termination without cause of the advisory agreement by an affirmative vote of a majority of the Company's independent directors after the economic hurdle described above has been met. Unvested Class B Units will be forfeited immediately if: (x) the advisory agreement is terminated for any reason other than a termination without cause; or (y) the advisory agreement is terminated without cause by an affirmative vote of a majority of the board of directors before the economic hurdle described above has been met.

The Class B Units were issued to the Advisor quarterly in arrears pursuant to the terms of the limited partnership agreement of the OP. The number of Class B Units issued in any quarter was equal to the cost of the Company's assets multiplied by 0.1875% , divided by the value of one share of common stock as of the last day of such calendar quarter, which was initially equal to $22.50 (the initial offering price in the IPO minus selling commissions and dealer manager fees) and, as of the Initial NAV Pricing Date, to Estimated Per-Share NAV . On April 15, 2015 , the Company's board of directors approved an amendment (the "Amendment") to the Advisory Agreement, which, among other things, provides that, effective as of the date thereof:


(i)	for any period commencing on or after April 1, 2015, the Company pays the Advisor or its assignees as compensation for services rendered in connection with the management of the Company’s assets an Asset Management Fee (as defined in the Advisory Agreement) equal to 0.75% per annum of the Cost of Assets (as defined in the Advisory Agreement);


(ii)	such Asset Management Fee is payable monthly in arrears in cash, in shares of common stock, or a combination of both, the form of payment to be determined in the sole discretion of the Advisor; and


(iii)	the Company shall not cause the OP to issue any Class B Units in respect of periods subsequent to March 31, 2015.

As of June 30, 2015 , in aggregate, the Company's board of directors had approved the issuance of 1,052,420 Class B Units to the Advisor in connection with this arrangement. As of June 30, 2015 , the Company could not determine the probability of achieving the performance condition, as such, no expense was recognized in connection with this arrangement during the three and six months ended June 30, 2015 and 2014 . The Advisor receives distributions on unvested Class B Units equal to the distribution amount received on the same number of shares of the Company's common stock. Such distributions on issued Class B Units are included in general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). As stated above, pursuant to the Advisory Agreement, the OP will not issue any further Class B Units. The changes made pursuant to the Amendment were incorporated into the OP Agreement through a Third Amendment to the OP Agreement, which was approved by the board of directors and entered into on April 29, 2015 .

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

The Second A&R Advisory Agreement provides that the acquisition fee and financing coordination fee (both as defined in the Advisory Agreement) will terminate 180 days after July 20, 2015 (the “Fee Termination Date”), except for acquisition fees with respect to properties under contract, letter of intent, or under negotiation as of the Fee Termination Date. Such acquisition fees shall be paid quarterly in arrears. The Second A&R Advisory Agreement provides for a base management fee equal to $4.5 million per quarter plus 0.375% of the cumulative net proceeds of any equity raised subsequent to the Listing paid quarterly in arrears by the Company to the Advisor. In addition, the Second A&R Advisory Agreement provides for a variable management fee equal to (x) 15.0% of the applicable quarter’s Core Earnings per share in excess of $0.375 per share plus (y) 10.0% of the applicable quarter’s Core Earnings (as defined below) per share in excess of $0.50 per share, in each case as adjusted for changes in the number of shares of common stock outstanding. Core Earnings are defined as, for the applicable period, GAAP net income (loss) excluding non-cash equity compensation expense, the variable management fee, acquisition and transaction related fees and expenses, financing related fees and expenses, depreciation and amortization, realized gains and losses on the sale of assets, any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income, one-time events pursuant to changes in GAAP and certain non-cash charges, impairment losses on real estate related investments and other than temporary impairment of securities, amortization of deferred financing costs, amortization of tenant inducements, amortization of straight-line rent, amortization of market lease intangibles, provision for loss loans, and other non-recurring revenue and expenses.

In connection with providing strategic advisory services related to certain portfolio acquisitions, the Company has entered into arrangements in which the investment banking division of the Dealer Manager receives a transaction fee of 0.25% of the Transaction Value for certain portfolio acquisition transactions. Pursuant to such arrangements to date, "Transaction Value" has been defined as (i) the value of the consideration paid or to be paid for all the equity securities or assets in connection with the sale transaction or acquisition transaction (including consideration payable with respect to convertible or exchangeable securities and option, warrants or other exercisable securities and including dividends or distributions and equity security repurchases made in anticipation of or in connection with the sale transaction or acquisition transaction), or the implied value for all the equity securities or assets of the Company or acquisition target, as applicable, if a partial sale or purchase is undertaken, plus (ii) the aggregate value of any debt, capital lease and preferred equity security obligations (whether consolidated, off-balance sheet or otherwise) of the Company or acquisition target, as applicable, outstanding at the closing of the sale transaction or acquisition transaction), plus (iii) the amount of any fees, expenses and promote paid by the buyer(s) on behalf of the Company or the acquisition target, as applicable. Should the Dealer Manager provide strategic advisory services related to additional portfolio acquisition transactions, the Company will enter into new arrangements with the Dealer Manager on such terms as may be agreed upon between the two parties.

The following table details amounts incurred, forgiven and payable to related parties in connection with the operations-related services described above as of and for the periods presented:



	Three Months Ended June 30,								Six Months Ended June 30,								Payable as of
	2015				2014				2015				2014				Payable as of
(In thousands)	Incurred		Forgiven		Incurred		Forgiven		Incurred		Forgiven		Incurred		Forgiven		June 30, 2015		December 31, 2014
One-time fees and reimbursements:
Acquisition fees and related cost reimbursements	$	—	$	—	$	1,754	$	—	$	—	$	—	$	10,578	$	—	$	—	$	—
Financing coordination fees	—		—		900		—		—		—		5,678		—		—		—
Ongoing fees:
Asset management fees	4,096		—		—		—		4,096		—		—		—		—		—
Transfer agent and other professional services	913		—		763		—		1,548		—		1,253		—		504		753
Distributions on Class B Units	411		—		109		—		697		—		152		—		—		—
Total related party operation fees and reimbursements	$	5,420	$	—	$	3,526	$	—	$	6,341	$	—	$	17,661	$	—	$	504	$	753

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

The Company reimburses the Advisor's costs of providing administrative services, subject to the limitation that the Company will not reimburse the Advisor for any amount by which the Company's operating expenses at the end of the four preceding fiscal quarters exceeds the greater of (a) 2.0% of average invested assets and (b) 25.0% of net income other than any additions to reserves for depreciation, bad debt or other similar non-cash expenses and excluding any gain from the sale of assets for that period, unless the Company's independent directors determine that such excess was justified based on unusual and nonrecurring factors which they deem sufficient, in which case the excess amount may be reimbursed to the Advisor in subsequent periods. The Company may not reimburse the Advisor for personnel costs in connection with services for which the Advisor receives acquisition fees, acquisition expenses or real estate commissions. No reimbursements were incurred from the Advisor for providing administrative services during the three and six months ended June 30, 2015 and 2014 .

In order to improve operating cash flows and the ability to pay distributions from operating cash flows, the Advisor may elect to waive certain fees. Because the Advisor may waive certain fees, cash flows from operations that would have been paid to the Advisor may be available to pay distributions to stockholders. The fees that are forgiven are not deferrals and, accordingly, will not be paid to the Advisor. In certain instances, to improve the Company's working capital, the Advisor may elect to absorb a portion of the Company's general and administrative costs or property operating costs. No such fees were waived or costs were absorbed by the Advisor during the three and six months ended June 30, 2015 and 2014 .

Fees and Participations Incurred in Connection With Liquidation or Listing

In May 2014, the Company entered into a transaction management agreement with RCS Advisory Services, LLC, an entity under common control with the Dealer Manager, to provide strategic alternatives transaction management services through the occurrence of a liquidity event and a-la-carte services thereafter. The Company agreed to pay and has paid $3.0 million pursuant to this agreement. The Company did not incur expenses for services provided pursuant to this agreement during the three and six months ended June 30, 2015 . During the three and six months ended June 30, 2014 , the Company incurred an aggregate of $1.0 million of expenses for services provided pursuant to this agreement.

In May 2014, the Company entered into an information agent and advisory services agreement with the Dealer Manager and American National Stock Transfer, LLC, an entity under common control with the Dealer Manager, to provide in connection with a liquidity event, advisory services, educational services to external and internal wholesalers, communication support as well as proxy, tender offer or redemption and solicitation services. The Company agreed to pay $1.9 million in the aggregate pursuant to this agreement. The Company did not incur expenses for services provided pursuant to this agreement during the three and six months ended June 30, 2015 . The Company incurred an aggregate of $0.6 million of expenses for services provided pursuant to this agreement during the three and six months ended June 30, 2014 . During the three and six months ended June 30, 2015 , the Company prepaid $0.3 million related to this agreement. As of June 30, 2015 , $0.7 million of prepayments related to this agreement are included in prepaid expenses and other assets on the accompanying consolidated balance sheet.

The investment banking and capital markets division of the Dealer Manager provides the Company with strategic and financial advice and assistance in connection with (i) a possible sale transaction involving the Company (ii) the possible listing of the Company's securities on a national securities exchange, and (iii) a possible acquisition transaction involving the Company. The Dealer Manager will receive a listing advisory fee equal to the greatest of (i) an amount equal to 0.25% of Transaction Value (as defined above), (ii) $1.0 million and (iii) the highest fee payable to any co-bookrunner (or comparable person) in connection with the listing. If one of the above events does not occur, the Dealer Manager will receive a base advisory services fee of $1.0 million on the earlier of (a) the date the Dealer Manager resigns or is terminated for cause and (b) 18 months from the date of any other termination of this agreement by the Company. The Company did not incur expenses for services provided pursuant to this agreement during the three and six months ended June 30, 2015 and 2014 .

The Company is required to pay the Advisor a subordinated performance fee calculated on the basis of the Company's total return to stockholders, payable annually in arrears, such that for any year in which the Company's total return on stockholders' capital exceeds 6.0% per annum, the Advisor will be entitled to 15.0% of the excess total return, provided that the annual subordinated performance fee paid to the Advisor does not exceed 10.0% of the aggregate total return for such year. This fee will be payable only upon the sale of assets, distributions or other event which results in the return on stockholders' capital exceeding 6.0% per annum. No subordinated performance fees were incurred during the three and six months ended June 30, 2015 and 2014 . Effective July 20, 2015 , the Second A&R Advisory Agreement eliminated the subordinated performance fee.

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

In connection with the Listing, the Company, as the general partner of the OP, will cause the OP to issue a note (the “Listing Note”) to the Special Limited Partner to evidence the OP’s obligation to distribute to the Special Limited Partner an aggregate amount (the “Listing Amount”) equal to 15.0% of the difference (to the extent the result is a positive number) between:


•	the sum of (i) the “market value” (as defined in the Listing Note) of the Company’s Common Stock plus (ii) the sum of all distributions or dividends (from any source) paid by the Company to its stockholders prior to the Listing; and

•

the sum of (i) the total raised in the Company’s initial public offering (“IPO”) and under the Company’s distribution reinvestment plan (“DRIP”) prior to the Listing (“Gross Proceeds”) plus (ii) the total amount of cash that, if distributed to those stockholders who purchased shares of Common Stock in the IPO and under the DRIP, would have provided those stockholders a 6.0% cumulative, non-compounded, pre-tax annual return (based on a 365-day year) on the Gross Proceeds.

The “market value” used to calculate the Listing Amount will not be determinable until the end of a measurement period, the period of 30 consecutive trading days, commencing on the 180th calendar day following the Listing, unless another liquidity event, such as a merger, occurs prior to the end of the measurement period. If another liquidity event occurs prior to the end of the measurement period, the Listing Note provides for appropriate adjustment to the calculation of the Listing Amount.

The Listing Note evidences the Special Limited Partner’s right to receive distributions of “Net Sales Proceeds,” as defined in the Listing Note, until the Listing Note is paid in full; provided that, the Special Limited Partner has the right, but not the obligation, to convert the entire Listing Amount into OP Units. OP Units are convertible into shares of the Company’s Common Stock in accordance with the terms governing conversion of OP Units into shares of Common Stock and contained in the Second Amended and Restated Agreement of Limited Partnership of the OP (the “OP Agreement”), which will be entered into at Listing.

On April 29, 2015 , the board of directors authorized the execution, in conjunction with the Listing, of an Amended and Restated Agreement of Limited Partnership of the OP (the “A&R OP Agreement”) by the Company, as general partner of its OP, with the limited partners party thereto to conform more closely with agreements of limited partnership of other operating partnerships controlled by real estate investment trusts whose securities are publicly traded and listed, and to add long term incentive plan units (“LTIP Units”) as a new class of units of limited partnership in the OP to the existing common units (“OP Units”). The Company may at any time cause the OP to issue LTIP Units pursuant to an outperformance agreement. On April 29, 2015 , the board of directors approved the general terms of a Multi-Year Outperformance Agreement to be entered into with the Company, the OP and the Advisor in connection with the Listing. See Note 12 — Share-Based Compensation — Multi-Year Outperformance Agreement.

If the Company is not listed on a national securities exchange, the Company is required to pay a subordinated participation to the Special Limited Partner in the net sales proceeds of the sale of real estate assets of 15.0% of remaining net sales proceeds after return of capital contributions to investors plus payment to investors of an annual 6.0% cumulative, pre-tax, non-compounded annual return on the capital contributed by investors. There can be no assurance that the Company will provide this 6.0% annual return and the Special Limited Partner will not be entitled to the subordinated participation in net sale proceeds unless the Company's investors have received an annual 6.0% cumulative, pre-tax, non-compounded annual return on their capital contributions. No such participation in net sales proceeds became due and payable during the three and six months ended June 30, 2015 and 2014 .

Upon termination or non-renewal of the advisory agreement, the Special Limited Partner will be entitled to receive distributions of net sales proceeds from the OP equal to 15.0% of the amount by which the sum of the Company's market value plus distributions exceeds the sum of the aggregate capital contributed by investors plus an amount equal to a 6.0% annual cumulative, pre-tax, non-compounded annual return to investors. The Special Limited Partner may elect to defer its right to receive a subordinated distribution upon termination until either a listing on a national securities exchange or other liquidity event occurs.

Until 180 days after July 20, 2015 , the Company will pay the Advisor a brokerage commission on any sale of property, not to exceed the lesser of 2.0% of the contract sale price of the property and one-half of the total brokerage commission paid, if a third party broker is also involved; provided, however, that in no event may the real estate commissions paid to the Advisor, its affiliates and unaffiliated third parties exceed the lesser of 6.0% of the contract sales price and a reasonable, customary and competitive real estate commission, in each case, payable to the Advisor if the Advisor or its affiliates, as determined by a majority of the independent directors, provided a substantial amount of services in connection with the sale. No such fees were incurred during the three and six months ended June 30, 2015 and 2014 .

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

Note 11 — Economic Dependency

Under various agreements, the Company has engaged or will engage the Advisor, its affiliates and entities under common control with the Advisor to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, the sale of shares of the Company's common stock available for issue, transfer agency services, as well as other administrative responsibilities for the Company including accounting services, transaction management services and investor relations.

As a result of these relationships, the Company is dependent upon the Advisor and its affiliates. In the event that these companies are unable to provide the Company with the respective services, the Company will be required to find alternative providers of these services.

Note 12 — Share-Based Compensation

Restricted Share Plan

The Company has an employee and director incentive restricted share plan (the "Original RSP"), which provides for the automatic grant of 1,333 restricted shares of common stock to each of the independent directors, without any further action by the Company's board of directors or the stockholders, on the date of initial election to the board of directors and on the date of each annual stockholders' meeting. Restricted stock issued to independent directors will vest over a five -year period following the date of grant in increments of 20.0% per annum. The Original RSP provides the Company with the ability to grant awards of restricted shares to the Company's directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, certain consultants to the Company and the Advisor and its affiliates or to other entities that provide services to the Company. The total number of shares of common stock granted under the Original RSP may not exceed 5.0% of the Company's shares of common stock on a fully diluted basis at any time, and in any event will not exceed 3.4 million shares (as such number may be adjusted for stock splits, stock dividends, combinations and similar events).

Restricted share awards entitle the recipient to receive shares of common stock from the Company under terms that provide for vesting over a specified period of time. Such awards would typically be forfeited with respect to the unvested shares upon the termination of the recipient's employment or other relationship with the Company. Restricted shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested. Holders of restricted shares may receive cash distributions prior to the time that the restrictions on the restricted shares have lapsed. Any distributions payable in shares of common stock shall be subject to the same restrictions as the underlying restricted shares.

The following table reflects restricted share award activity for the six months ended June 30, 2015 :



	Number of Shares of Common Stock		Weighted-Average Issue Price
Unvested, December 31, 2014	4,799		$	22.50
Granted	1,276		23.50
Vested	(1,067	)	22.50
Unvested, June 30, 2015	5,008		$	22.75

The fair value of the restricted shares is being expensed on a straight-line basis over the service period of five years. Compensation expense related to restricted stock was approximately $7,000 and $6,000 for the three months ended June 30, 2015 and 2014 , respectively. Compensation expense related to restricted stock was approximately $14,000 and $11,000 for the six months ended June 30, 2015 and 2014 , respectively.

As of June 30, 2015 , the Company had $0.1 million of unrecognized compensation cost related to unvested restricted share awards granted under the Company's Original RSP. That cost is expected to be recognized over a weighted-average period of 3.8 years .

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

On April 29, 2015 , the board of directors adopted an Amended and Restated RSP (the “A&R RSP”) that replaces in its entirety the Original RSP. The A&R RSP amends the terms of the Original RSP as follows:


•	it increases the number of shares of Company capital stock, par value $0.01 per share (the “Capital Stock”), available for awards thereunder from 5.0% of the Company’s outstanding shares of Capital Stock on a fully diluted basis at any time, not exceed 3.4 million shares of Capital Stock, to 10.0% of the Company’s outstanding shares of Capital Stock on a fully diluted basis at any time;


•	it removes the fixed amount of shares that were automatically granted to the Company’s independent directors; and


•	it adds restricted stock units (including dividend equivalent rights thereon) as a permitted form of award.

Multi-Year Outperformance Plan Agreement

On April 29, 2015 , the board of directors approved the general terms of a Multi-Year Outperformance Agreement (the “OPP”) to be entered into with the Company, the OP and the Advisor, in connection with the Listing.

Under the OPP, the Advisor will be issued LTIP Units in the OP with a maximum award value equal to 5.0% of the Company’s market capitalization (the “OPP Cap”) on the date of Listing (the “Effective Date”). The LTIP Units will be structured as profits interest in the OP. The Advisor will be eligible to earn a number of LTIP Units with a value up to the OPP Cap based on the Company’s achieving certain levels of total return to its stockholders (“Total Return”) on both an absolute basis and a relative basis measured against a peer group of companies, as set forth below, for a three-year period commencing on the Effective Date (the “Performance Period”). In addition, Advisor may “lock-in” a portion of the OPP Cap based on the attainment of pro-rata performance hurdles, as set forth below, during each 12 -month period in the Performance Period (each such period, an “One-Year Period”) and during the initial 24 -month period of the Performance Period (the “Two-Year Period”). Each of the relevant performance periods will be evaluated separately based on performance through the end of the relevant performance period.



			Three-Year Period	Each One-Year Period	Two-Year Period
Absolute Component: 4% of any excess Total Return attained above an absolute total stockholder return hurdle measured from the beginning of such period as follows:			21%	7%	14%
Relative Component: 4% of any excess Total Return attained above the Total Return for the performance period of the Peer Group*, subject to a ratable sliding scale factor as follows based on achieving cumulative Total Return measured from the beginning of the period:
	•	100% of the Relative Component will be earned if cumulative Total Return achieved is at least:	18%	6%	12%
	•	50% of the Relative Component will be earned if cumulative Total Return achieved is:	—%	—%	—%
	•	0% of the Relative Component will be earned if cumulative Total Return achieved is less than:	—%	—%	—%
	•	a percentage from 50% to 100% of the Relative Component calculated by linear interpolation will be earned if the cumulative Total Return achieved is between:	0% - 18%	0% - 6%	0%- 12%

______________________


*	The “Peer Group” is comprised of Arbor Realty Trust, Inc., Ares Commercial Real Estate Corp., Colony Financial, Inc., and Starwood Property Trust, Inc.

The maximum “lock-in” amount for any given One-Year Period is 25.0% of the OPP Cap. The maximum “lock-in” amount for the Two-Year Period is 60.0% of the OPP Cap. Accordingly, any “lock-in” amount for the Two-Year Period may supersede and negate any awards for the first two One-Year Periods. Any LTIP Units that are unearned at the end of the Performance Period will be forfeited.

Subject to Advisor’s continued service through each vesting date, one third of any earned LTIP Units will vest on each of the third, fourth and fifth anniversaries of the Effective Date. Any earned and vested LTIP Units may be converted into OP Units of the OP in accordance with the terms and conditions of the partnership agreement of the OP (as described above).

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

The OPP provides for early calculation of LTIP Units earned and for the accelerated vesting of any earned LTIP Units in the event Advisor is terminated by the Company or in the event the Company incurs a change in control, in either case prior to the end of the Performance Period. The OPP also provides for accelerated vesting of earned LTIP Units in the event Advisor is terminated or in the event of a change in control of the Company on or following the end of the Performance Period.

Other Share-Based Compensation

The Company may issue common stock in lieu of cash to pay fees earned by the Company's directors at each director's election. There are no restrictions on the shares issued since these payments in lieu of cash relate to fees earned for services performed. There were no shares of common stock issued to directors in lieu of cash compensation during the three and six months ended June 30, 2015 and 2014 .

Note 13 — Accumulated Other Comprehensive Income

The following tables illustrate the changes in accumulated other comprehensive income for the period presented below:



(In thousands)	Unrealized Gains on Available-for-sale Securities
Balance, January 1, 2015	$	463
Other comprehensive loss, before reclassifications	(730		)
Amounts reclassified from accumulated other comprehensive income	546			⁽¹⁾
Balance, June 30, 2015	$	279

_________________________________


(1)	Amounts were reclassified to gain (loss) on sale of investment securities on the consolidated statements of operations and comprehensive income (loss).

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

Note 14 — Net Income (Loss) Per Share

The following table sets forth the basic and diluted net income (loss) per share computations for the three and six months ended June 30, 2015 and 2014 :



	Three Months Ended June 30,							Six Months Ended June 30,
(In thousands, except share and per share amounts)	2015			2014				2015				2014
Computation of Basic Net Income (Loss) Per Share:
Basic net income (loss)	$	(1,624	)	$	1,127			$	3,277			$	(8,442	)
Basic weighted-average shares outstanding	66,045,785			64,018,318				65,859,933				63,359,596
Basic net income (loss) per share	$	(0.02	)	$	0.02			$	0.05			$	(0.13	)

Computation of Diluted Net Income (Loss) Per Share:
Basic net income (loss)	$	(1,624	)	$	1,127			$	3,277			$	(8,442	)
Adjustments to net income (loss) for common share equivalents	—			(156		)		(108		)		—
Diluted net income (loss)	$	(1,624	)	$	971			$	3,169			$	(8,442	)

Basic weighted-average shares outstanding	66,045,785			64,018,318				65,859,933				63,359,596
Shares of unvested restricted stock	—			5,354			⁽¹⁾	5,293			⁽¹⁾	—
OP Units	—			90				90				—
Diluted weighted-average shares outstanding	66,045,785			64,023,762				65,865,316				63,359,596
Diluted net income (loss) per share	$	(0.02	)	$	0.02			$	0.05			$	(0.13	)

_____________________________________


(1)	Weighted-average number of shares of unvested restricted stock outstanding for the periods presented. There were 5,008 and 7,199 shares of unvested restricted stock outstanding as of June 30, 2015 and 2014 , respectively.

Diluted net income (loss) per share assumes the conversion of all common share equivalents into an equivalent number of common shares, unless the effect is antidilutive. The Company considers unvested restricted stock, OP Units and Class B Units to be common share equivalents. The Company had the following weighted-average common share equivalents that were excluded from the calculation of diluted net loss per share as their effect would have been antidilutive for the periods presented:



	Three Months Ended June 30,		Six Months Ended June 30,
	2015		2014
Shares of unvested restricted stock	5,485	⁽¹⁾	4,681	⁽¹⁾
OP Units	90		90
Class B Units	998,786	⁽²⁾	185,116	⁽²⁾
Total weighted-average common share equivalents	1,004,361		189,887

_____________________________________


(1)	Weighted-average number of shares of unvested restricted stock outstanding for the periods presented. There were 5,008 and 7,199 shares of unvested restricted stock outstanding as of June 30, 2015 and 2014 , respectively.


(2)	Weighted-average number of issued and unvested Class B Units outstanding for the periods presented. The Company's board of directors had approved the issuance 1,052,420 and 339,678 Class B Units as of June 30, 2015 and 2014 , respectively.

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AMERICAN FINANCE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

Note 15 — Subsequent Events

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have not been any events that have occurred that would require adjustments to, or disclosures in, the consolidated financial statements except for the following disclosures:

Sponsor Transactions

On August 6, 2015, the Sponsor entered into a Transaction Agreement (the “Transaction Agreement”) with AMH Holdings (Cayman), L.P., a Cayman Islands exempted limited partnership (“AMH”), and an affiliate of Apollo Global Management, LLC (NYSE: APO) (together with its consolidated subsidiaries, “Apollo”), and a newly formed entity, AR Global Investments, LLC, a Delaware limited liability company (“AR Global”). The Transaction Agreement provides that the Sponsor will transfer to AR Global substantially all of the assets of its ongoing asset management business (including equity interests in its subsidiaries). AMH will contribute money and other assets to AR Global. Following the consummation of the transaction contemplated by the Transaction Agreement, AMH will hold a 60% interest in AR Global and the Sponsor will hold a 40% interest in AR Global. The business and affairs of AR Global will be overseen by a board of managers comprised of ten members, six of which will be appointed by AMH and four of which will be appointed by the Sponsor. The Advisor and the Property Manager are currently owned indirectly by the Sponsor and following the transaction will be owned indirectly by AR Global.

Also on August 6, 2015, RCS Capital Corporation (“RCS Capital”), the parent of the Dealer Manager and a company under common control with the Sponsor, announced that it has entered into an agreement with an affiliate of Apollo to sell RCS Capital’s Wholesale Distribution division, including the Dealer Manager, and certain related entities (collectively, the “Transactions”). Upon completion of the transaction, the Dealer Manager will continue to operate as a stand-alone entity within AR Global. The current management team of the Dealer Manager, which is led by William E. Dwyer III, will continue to operate the day-to-day functions of the business.

The Transactions are subject to customary closing conditions and are expected to close in 2015. Upon consummation of the Transactions, the Sponsor, Advisor and Property Manager are expected to continue to serve in their respective capacities to the Company. The Company’s independent directors unanimously endorsed the Transactions.

Term Loan Agreement

On August 7, 2015 , certain subsidiaries of the Company entered into a $655.0 million term loan agreement (“Loan Agreement”) with Barclays Bank PLC, Column Financial Inc. and UBS Real Estate Securities Inc. The Loan Agreement has a stated maturity date of September 6, 2020 and a stated annual interest rate of 4.29625% ; increasing up to 0.50% if, prior to the earlier of November 5, 2015 or full syndication or securitization of the loan, news or events regarding the Company, its sponsor, VEREIT, Inc. or their respective officers, directors, employees or affiliates becomes known or occurs which adversely affects the syndication or securitization of the loan. The loan is secured by mortgage interests in certain of the Company’s properties. In connection with the Loan Agreement, the Company entered into a Limited Recourse Guaranty, dated August 7, 2015 , pursuant to which the Company has guaranteed payment of certain recourse obligations for which the borrowers may be personally liable.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of American Finance Trust, Inc. and the notes thereto. As used herein, the terms "Company," "we," "our" and "us" refer to American Finance Trust, Inc. , a Maryland corporation, including, as required by context, American Finance Operating Partnership, L.P., a Delaware limited partnership, which we refer to as the "OP," and its subsidiaries. The Company is externally managed by American Finance Advisors, LLC (our "Advisor"), a Delaware limited liability company. Capitalized terms used herein but not otherwise defined have the meaning ascribed to those terms in "Part I — Financial Information" included in the notes to the consolidated financial statements contained herein.

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of American Finance Trust, Inc. (the "Company," "we" "our" or "us"), our Advisor and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as "may," "will," "seeks," "anticipates," "believes," "estimates," "expects," "plans," "intends," "should" or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:

•

All of our executive officers are also officers, managers or holders of a direct or indirect controlling interest in American Finance Advisors, LLC (our "Advisor"), our dealer manager, Realty Capital Securities, LLC (the "Dealer Manager") or other entities under common control with AR Capital, LLC (our "Sponsor"). As a result, our executive officers, our Advisor and its affiliates face conflicts of interest, including significant conflicts created by our Advisor's compensation arrangements with us and other investment programs advised by American Realty Capital affiliates and conflicts in allocating time among these entities and us, which could negatively impact our operating results.


•	Although we intend to list our shares of common stock on the New York Stock Exchange ("NYSE"), there can be no assurance that our shares of common stock will be listed. No public market currently exists, or may ever exist, for shares of our common stock and our shares are, and may continue to be, illiquid.


•	We depend on tenants for our rental revenue and, accordingly, our rental revenue is dependent upon the success and economic viability of our tenants.


•	Our tenants may not achieve our rental rate incentives and our expenses could be greater, which may impact our results of operations.


•	Increases in interest rates could increase the amount of our debt payments and limit our ability to pay distributions to our stockholders.


•	We may not generate cash flows sufficient to pay distributions to our stockholders, as such, we may be forced to borrow at unfavorable rates or depend on our Advisor to waive reimbursement of certain expenses and fees to fund our operations. There is no assurance that our Advisor will waive reimbursement of expenses or fees.


•	We may be unable to pay or maintain cash distributions or increase distributions over time.

•

We are obligated to pay fees, which may be substantial, to our Advisor and its affiliates, including fees upon the sale of properties. Our Advisor and its affiliates receive fees in connection with transactions involving the purchase, financing, management and sale of our investments, and, because our Advisor does not maintain a significant equity interest in us and is entitled to receive substantial minimum compensation regardless of performance, our Advisor’s interest are not wholly aligned with those of our stockholders.


•	We are subject to risks associated with any dislocation or liquidity disruptions that may exist or occur in the credit markets of the United States of America from time to time.


•	We may fail to continue to qualify to be treated as a real estate investment trust for U.S. federal income tax purposes ("REIT"), which would result in higher taxes, may adversely affect our operations and would reduce the value of an investment in our common stock and our cash available for distributions.


•	We may be deemed to be an investment company under the Investment Company Act of 1940, as amended (the "Investment Company Act"), and thus subject to regulation under the Investment Company Act.

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•	Changes in general economic, business and political conditions, including the possibility of intensified international hostilities, acts of terrorism, and changes in conditions of United States or international lending, capital and financing markets.

Overview

We have acquired a diversified portfolio of commercial properties comprised primarily of freestanding single-tenant properties that are net leased to investment grade and other creditworthy tenants. On April 15, 2015, upon recommendation by our advisor, American Finance Advisors, LLC (the "Advisor") and approval by our board of directors, we adopted new Investment Objectives and Acquisition and Investment Policies (the “New Strategy”). Under the New Strategy, we manage and optimize our investments in our existing portfolio of net leased commercial real estate properties (the “Net Lease Portfolio”) and selectively invest in additional net lease properties. In addition, we invest in commercial real estate mortgage loans and other commercial real estate-related debt investments (such investments collectively, “CRE Debt Investments”). We intend to finance our CRE Debt Investments primarily through mortgage financing secured by our Net Lease Portfolio as well as mortgage specific repurchase agreement facilities and collateralized debt obligations.

On April 4, 2013, we commenced our initial public offering (the "IPO") on a "reasonable best efforts" basis of up to 68.0 million shares of common stock, $0.01 par value per share, at a price of $25.00 per share, subject to certain volume and other discounts, pursuant to a registration statement on Form S-11, as amended (File No. 333-187092 ) (the "Registration Statement"), filed with the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Securities Act"). The Registration Statement also covered up to 14.7 million shares of common stock at an initial price of $23.75 per share, which was 95.0% of the initial offering price of shares of common stock in the IPO, available pursuant to the DRIP, under which our common stockholders could elect to have their distributions reinvested in additional shares of our common stock. The IPO closed in October 2013.

On November 19, 2014 , our board of directors approved an estimated net asset value per share of our common stock (" Estimated Per-Share NAV ") of $23.50 , calculated by our Advisor in accordance with our valuation guidelines, as of September 30, 2014. Beginning with November 14, 2014 (the "Initial NAV Pricing Date") and ending with the suspension of the DRIP and the termination of our share repurchase plan (the “SRP”), the price per share for shares of common stock purchased under the DRIP and the price per share for shares of common stock repurchased by us pursuant to our SRP were each equal to the Estimated Per-Share NAV of our common stock. On May 14, 2015, our board of directors approved an Estimated Per-Share NAV of our common stock equal to $24.17 per share as of March 31, 2015, calculated by our Advisor in accordance with our valuation guidelines, used in connection with the purchases of common stock under the DRIP following May 18, 2015 through the suspension of the DRIP, which became effective following the payment of our distribution on July 1, 2015. Following the suspension of the DRIP, we no longer publishes its Estimated Per-Share NAV .

We have applied to list our common stock on the NYSE under the symbol "AFIN" (the "Listing"). Completion of the Listing is subject to final approval by the NYSE. There can be no assurance that our shares of common stock will be listed on the NYSE.

Incorporated on January 22, 2013 , we are a Maryland corporation that elected and qualified to be taxed as a REIT beginning with the taxable year ended December 31, 2013. Substantially all of our business is conducted through American Finance Operating Partnership, L.P. (the “OP”), a Delaware limited partnership and its wholly-owned subsidiaries. We have no direct employees. We have retained the Advisor to manage our affairs on a day-to-day basis. American Finance Properties, LLC (the "Property Manager") serves as our property manager. The Dealer Manager served as the dealer manager of the IPO and continues to provide us with various strategic investment banking services. The Advisor and the Property Manager are wholly owned subsidiaries of, and the Dealer Manager is under common control with, the Sponsor, as a result of which, they are related parties of ours. Each has received or may receive, as applicable, compensation, fees and other expense reimbursements for services related to the IPO and for the investment and management of our assets. Such entities have received or may receive, as applicable, fees during the offering, acquisition, operational and liquidation stages. During the second quarter of 2014, we announced that we engaged J.P. Morgan Securities LLC and RCS Capital, the investment banking division of the Dealer Manager, as financial advisors to assist us in evaluating potential strategic alternatives. In connection with the Listing, we have also engaged UBS Securities LLC as a financial advisor.

Significant Accounting Estimates and Critical Accounting Policies

Set forth below is a summary of the significant accounting estimates and critical accounting policies that management believes are important to the preparation of our financial statements. Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by our management. As a result, these estimates are subject to a degree of uncertainty. These significant accounting estimates and critical accounting policies include:

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Offering and Related Costs

Offering and related costs include all expenses incurred in connection with our IPO. Offering costs (other than selling commissions and the dealer manager fee) include costs that may be paid by the Advisor, the Dealer Manager or their affiliates on our behalf. These costs include but are not limited to (i) legal, accounting, printing, mailing, and filing fees; (ii) escrow related fees; (iii) reimbursement of the Dealer Manager for amounts it may pay to reimburse itemized and detailed due diligence expenses of broker-dealers; and (iv) reimbursement to the Advisor for the salaries of its employees and other costs in connection with preparing supplemental sales materials and related offering activities. We are obligated to reimburse the Advisor or its affiliates, as applicable, for organization and offering costs paid by them on our behalf, provided that the Advisor is obligated to reimburse us to the extent organization and offering costs (excluding selling commissions and the dealer manager fee) incurred by us in its offering exceed 2.0% of gross offering proceeds from the IPO. As a result, these costs are only our liability to the extent selling commissions, the dealer manager fees and other organization and offering costs do not exceed 12.0% of the gross proceeds determined at the end of the IPO. As of the end of our IPO, offering costs were less than 12.0% of the gross proceeds received in the IPO.

Revenue Recognition

Our revenues, which are derived primarily from rental income, include rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the initial term of the lease. Since many of our leases provide for rental increases at specified intervals, straight-line basis accounting requires us to record a receivable, and include in revenues, unbilled rents receivable that we will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. When we acquire a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. We defer the revenue related to lease payments received from tenants in advance of their due dates.

We own certain properties with leases that include provisions for the tenant to pay contingent rental income based on a percent of the tenant's sales upon the achievement of certain sales thresholds or other targets which may be monthly, quarterly or annual targets. As the lessor to the aforementioned leases, we defer the recognition of contingent rental income, until the specified target that triggered the contingent rental income is achieved, or until such sales upon which percentage rent is based are known. Contingent rental income is included in rental income on the consolidated statements of operations and comprehensive income (loss).

We continually review receivables related to rent and unbilled rents receivable and determine collectability by taking into consideration the tenant's payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. If a receivable is deemed uncollectible, we record an increase in our allowance for uncollectible accounts or record a direct write-off of the receivable in our consolidated statements of operations and comprehensive income (loss).

Cost recoveries from tenants are included in operating expense reimbursements in our consolidated statements of operations and comprehensive income (loss) in the period the related costs are incurred, as applicable.

Real Estate Investments

Investments in real estate are recorded at cost. Improvements and replacements are capitalized when they extend the useful life of the asset. Costs of repairs and maintenance are expensed as incurred.

We evaluate the inputs, processes and outputs of each asset acquired to determine if the transaction is a business combination or asset acquisition. If an acquisition qualifies as a business combination, the related transaction costs are recorded as an expense in the consolidated statements of operations and comprehensive income (loss). If an acquisition qualifies as an asset acquisition, the related transaction costs are generally capitalized and subsequently amortized over the useful life of the acquired assets.

In business combinations, we allocate the purchase price of acquired properties to tangible and identifiable intangible assets or liabilities based on their respective fair values. Tangible assets may include land, land improvements, buildings, fixtures and tenant improvements. Intangible assets may include the value of in-place leases and above- and below- market leases. In addition, any assumed mortgages receivable or payable and any assumed or issued noncontrolling interests are recorded at their estimated fair values.

The fair value of the tangible assets of an acquired property with an in-place operating lease is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to the tangible assets based on the fair value of the tangible assets. The fair value of in-place leases is determined by considering estimates of carrying costs during the expected lease-up periods, current market conditions, as well as costs to execute similar leases. The fair value of above- or below-market leases is recorded based on the present value of the difference between the contractual amount to be paid pursuant to the in-place lease and our estimate of the fair market lease rate for the corresponding in-place lease, measured over the remaining term of the lease, including any below-market fixed rate renewal options for below-market leases.

In allocating the fair value to assumed mortgages, amounts are recorded to debt premiums or discounts based on the present value of the estimated cash flows, which is calculated to account for either above or below-market interest rates.

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In allocating non-controlling interests, amounts are recorded based on the fair value of units issued at the date of acquisition, as determined by the terms of the applicable agreement.

In making estimates of fair values for purposes of allocating purchase price, we utilize a number of sources, including real estate valuations, prepared by independent valuation firms. We also consider information and other factors including: market conditions, the industry that the tenant operates in, characteristics of the real estate, i.e.: location, size, demographics, value and comparative rental rates, tenant credit profile, store profitability and the importance of the location of the real estate to the operations of the tenant’s business.

We are required to present the operations related to properties that have been sold or properties that are intended to be sold as discontinued operations in the consolidated statements of operations and comprehensive income (loss) at the lesser of carrying amount or fair value less estimated selling costs for all periods presented to the extent the disposal of a component represents a strategic shift that has or will have a major effect on our operations and financial results. Properties that are intended to be sold are to be designated as "held for sale" on the consolidated balance sheets when they meet specific criteria to be presented as held for sale. Properties are no longer depreciated when they are classified as held for sale.

Depreciation and Amortization

We are required to make subjective assessments as to the useful lives of the components of our real estate investments for purposes of determining the amount of depreciation to record on an annual basis. These assessments have a direct impact on our net income because if we were to shorten the expected useful lives of our real estate investments, we would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis.

Depreciation is computed using the straight-line method over the estimated useful lives of up to 40 years for buildings, 15 years for land improvements, five years for fixtures and improvements and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests.

Capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. Capitalized below-market lease values are amortized as an increase to rental income over the remaining terms of the respective leases and expected below-market renewal option periods.

Capitalized above-market ground lease values are amortized as a reduction of property operating expense over the remaining terms of the respective leases. Capitalized below-market ground lease values are amortized as an increase to property operating expense over the remaining terms of the respective leases and expected below-market renewal option periods.

The value of in-place leases, exclusive of the value of above-market and below-market in-place leases, is amortized to expense over the remaining periods of the respective leases.

Assumed mortgage premiums or discounts are amortized as an increase or reduction to interest expense over the remaining terms of the respective mortgages.

Impairment of Long-Lived Assets

When circumstances indicate the carrying value of a property may not be recoverable, we review the property for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property's use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If impairment exists, due to the inability to recover the carrying value of a property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued revised guidance relating to revenue recognition. Under the revised guidance, an entity is required to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revised guidance was to become effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption was not permitted under GAAP. The revised guidance allows entities to apply the full retrospective or modified retrospective transition method upon adoption. In July 2015, the FASB deferred the effective date of the revised guidance by one year to annual reporting periods beginning after December 15, 2017, although entities will be allowed to early adopt the guidance as of the original effective date. We have not yet selected a transition method and is currently evaluating the impact of the new guidance.

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In January 2015, the FASB issued updated guidance that eliminates from GAAP the concept of an event or transaction that is unusual in nature and occurs infrequently being treated as an extraordinary item. The revised guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Any amendments may be applied either prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. We have adopted the provisions of this guidance for the fiscal year ending December 31, 2015 and determined that there is no impact to our financial position, results of operations and cash flows.

In February 2015, the FASB amended the accounting for consolidation of certain legal entities. The amendments modify the evaluation of whether certain legal entities are variable interest entities ("VIEs") or voting interest entities, eliminate the presumption that a general partner should consolidate a limited partnership and affect the consolidation analysis of reporting entities that are involved with VIEs (particularly those that have fee arrangements and related party relationships). The revised guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. If we decide to early adopt the revised guidance in an interim period, any adjustments will be reflected as of the beginning of the fiscal year that includes the interim period. We are currently evaluating the impact of the new guidance.

In April 2015, the FASB amended the presentation of debt issuance costs on the balance sheet. The amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The revised guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted for financial statements that have not previously been issued. If we decide to early adopt the revised guidance in an interim period, any adjustments will be reflected as of the beginning of the fiscal year that includes the interim period. We are currently evaluating the impact of the new guidance.

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Properties

As of June 30, 2015 , we owned 463 properties located in 37 states. All of these properties are freestanding, single-tenant properties, 100.0% leased with a weighted-average remaining lease term of 9.1 years as of June 30, 2015 . In the aggregate, these properties represent 13.1 million rentable square feet.

The following table represents certain additional information about the properties we own at June 30, 2015 :



Portfolio	Acquisition Date	Number of Properties	Rentable Square Feet	Remaining Lease Term ⁽¹⁾
Dollar General I	Apr. & May 2013	2	18,126	12.8
Walgreens I	Jul. 2013	1	10,500	22.3
Dollar General II	Jul. 2013	2	18,052	12.9
Auto Zone I	Jul. 2013	1	7,370	12.1
Dollar General III	Jul. 2013	5	45,989	12.9
BSFS I	Jul. 2013	1	8,934	8.6
Dollar General IV	Jul. 2013	2	18,126	10.7
Tractor Supply I	Aug. 2013	1	19,097	12.4
Dollar General V	Aug. 2013	1	12,480	12.6
Mattress Firm I	Aug. & Nov. 2013; Feb., Mar. & Apr. 2014	5	23,612	10.2
Family Dollar I	Aug. 2013	1	8,050	6.0
Lowe's I	Aug. 2013	5	671,313	14.0
O'Reilly Auto Parts I	Aug. 2013	1	10,692	15.0
Food Lion I	Aug. 2013	1	44,549	14.3
Family Dollar II	Aug. 2013	1	8,028	8.0
Walgreens II	Aug. 2013	1	14,490	17.8
Dollar General VI	Aug. 2013	1	9,014	10.7
Dollar General VII	Aug. 2013	1	9,100	12.8
Family Dollar III	Aug. 2013	1	8,000	7.3
Chili's I	Aug. 2013	2	12,700	10.4
CVS I	Aug. 2013	1	10,055	10.6
Joe's Crab Shack I	Aug. 2013	2	16,012	11.8
Dollar General VIII	Sep. 2013	1	9,100	13.1
Tire Kingdom I	Sep. 2013	1	6,635	9.8
Auto Zone II	Sep. 2013	1	7,370	7.9
Family Dollar IV	Sep. 2013	1	8,320	8.0
Fresenius I	Sep. 2013	1	5,800	10.0
Dollar General IX	Sep. 2013	1	9,014	9.8
Advance Auto I	Sep. 2013	1	10,500	8.0
Walgreens III	Sep. 2013	1	15,120	10.8
Walgreens IV	Sep. 2013	1	13,500	9.3
CVS II	Sep. 2013	1	13,905	21.6
Arby's I	Sep. 2013	1	3,000	13.0
Dollar General X	Sep. 2013	1	9,100	12.8
AmeriCold I	Sep. 2013	9	1,407,166	12.3
Home Depot I	Sep. 2013	2	1,315,200	11.6
New Breed Logistics I	Sep. 2013	1	390,486	6.4
American Express Travel Related Services I	Sep. 2013	2	785,164	4.6
L.A. Fitness I	Sep. 2013	1	45,000	8.7
SunTrust Bank I	Sep. 2013	32	182,400	2.5
National Tire & Battery I	Sep. 2013	1	10,795	8.4
Circle K I	Sep. 2013	19	54,521	13.4
Walgreens V	Sep. 2013	1	14,490	12.2
Walgreens VI	Sep. 2013	1	14,560	13.8
FedEx Ground I	Sep. 2013	1	21,662	7.9

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Portfolio	Acquisition Date	Number of Properties	Rentable Square Feet	Remaining Lease Term ⁽¹⁾
Walgreens VII	Sep. 2013	10	142,140	14.3
O'Charley's I	Sep. 2013	20	135,973	16.4
Krystal Burgers Corporation I	Sep. 2013	6	12,730	14.2
Merrill Lynch I	Sep. 2013	3	553,841	9.4
1st Constitution Bancorp I	Sep. 2013	1	4,500	8.6
American Tire Distributors I	Sep. 2013	1	125,060	8.6
Tractor Supply II	Oct. 2013	1	23,500	8.3
United Healthcare I	Oct. 2013	1	400,000	6.0
National Tire & Battery II	Oct. 2013	1	7,368	16.9
Tractor Supply III	Oct. 2013	1	19,097	12.8
Mattress Firm II	Oct. 2013	1	4,304	8.2
Dollar General XI	Oct. 2013	1	9,026	11.8
Academy Sports I	Oct. 2013	1	71,640	13.0
Talecris Plasma Resources I	Oct. 2013	1	22,262	7.8
Amazon I	Oct. 2013	1	79,105	8.1
Fresenius II	Oct. 2013	2	16,047	12.1
Dollar General XII	Nov. 2013 & Jan. 2014	2	18,126	13.5
Dollar General XIII	Nov. 2013	1	9,169	10.8
Advance Auto II	Nov. 2013	2	13,887	7.9
FedEx Ground II	Nov. 2013	1	48,897	8.1
Burger King I	Nov. 2013	41	168,192	18.4
Dollar General XIV	Nov. 2013	3	27,078	12.9
Dollar General XV	Nov. 2013	1	9,026	13.4
FedEx Ground III	Nov. 2013	1	24,310	8.2
Dollar General XVI	Nov. 2013	1	9,014	10.4
Family Dollar V	Nov. 2013	1	8,400	7.8
Walgreens VIII	Dec. 2013	1	14,490	8.5
CVS III	Dec. 2013	1	10,880	8.6
Mattress Firm III	Dec. 2013	1	5,057	8.0
Arby's II	Dec. 2013	1	3,494	12.8
Family Dollar VI	Dec. 2013	2	17,484	8.6
SAAB Sensis I	Dec. 2013	1	90,822	9.8
Citizens Bank I	Dec. 2013	9	34,777	8.5
Walgreens IX	Jan. 2014	1	14,490	7.6
SunTrust Bank II	Jan. 2014	30	148,233	2.5
Mattress Firm IV	Jan. 2014	1	5,040	9.2
FedEx Ground IV	Jan. 2014	1	59,167	8.0
Mattress Firm V	Jan. 2014	1	5,548	8.3
Family Dollar VII	Feb. 2014	1	8,320	9.0
Aaron's I	Feb. 2014	1	7,964	8.2
Auto Zone III	Feb. 2014	1	6,786	7.8
C&S Wholesale Grocer I	Feb. 2014	5	3,044,685	7.3
Advance Auto III	Feb. 2014	1	6,124	9.2
Family Dollar VIII	Mar. 2014	3	24,960	8.1
Dollar General XVII	Mar. & May 2014	3	27,078	12.8
SunTrust Bank III	Mar. 2014	121	646,535	2.5
SunTrust Bank IV	Mar. 2014	30	171,209	2.5
Dollar General XVIII	Mar. 2014	1	9,026	12.8
Sanofi US I	Mar. 2014	1	736,572	11.0
Family Dollar IX	Apr. 2014	1	8,320	8.8
Stop & Shop I	May 2014	8	544,112	11.4
Bi-Lo I	May 2014	1	55,718	10.5

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Portfolio	Acquisition Date	Number of Properties	Rentable Square Feet	Remaining Lease Term ⁽¹⁾
Dollar General XIX	May 2014	1	12,480	13.2
Dollar General XX	May 2014	5	48,584	11.8
Dollar General XXI	May 2014	1	9,238	13.2
Dollar General XXII	May 2014	1	10,566	11.8
		463	13,107,548	9.1

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(1)	Remaining lease term in years as of June 30, 2015 . If the portfolio has multiple properties with varying lease expirations, remaining lease term is calculated on a weighted-average basis.

Results of Operations

We were incorporated on January 22, 2013 and purchased our first property and commenced active operations on April 29, 2013 . As of June 30, 2015 and 2014 , we owned 463 properties with an aggregate base purchase price of $2.2 billion , comprised of 13.1 million rentable square feet that were 100.0% leased on a weighted-average basis.

Comparison of the Three Months Ended June 30, 2015 to the Three Months Ended June 30, 2014

As of April 1, 2014 , we owned 443 properties (our "Same Store") with an aggregate base purchase price of $2.0 billion , comprised of 12.4 million rentable square feet that were 100.0% leased on a weighted-average basis. We have acquired 20 properties since April 1, 2014 for an aggregate base purchase price of $168.0 million , comprised of 0.7 million rentable square feet that were 100.0% leased on a weighted-average basis as of June 30, 2015 (our "Three Month Acquisitions").

Rental Income

Rental income increased $1.2 million to $40.2 million for the three months ended June 30, 2015 , compared to $39.0 million for the three months ended June 30, 2014 . This increase in rental income was primarily due to our Three Month Acquisitions.

Operating Expense Reimbursements

Operating expense reimbursement revenue remained constant at $3.1 million for the three months ended June 30, 2015 and 2014 . We operated 463 properties as of June 30, 2015 and 2014 . Pursuant to certain of our lease agreements, tenants are required to reimburse us for certain property operating expenses, in addition to paying base rent, whereas under certain other lease agreements, the tenants are directly responsible for all operating costs of the respective properties.

Asset Management Fees to Affiliate

Asset management fees to affiliate for the three months ended June 30, 2015 of $4.1 million were related to services that we received from our Advisor in connection with the management of our assets. From March 31, 2015 through July 20, 2015, we paid this fee to our Advisor on a monthly basis, pursuant to the Advisory Agreement. Subsequent to July 20, 2015, pursuant to the Second A&R Advisory Agreement, we will no longer pay an asset management fee. Please see Note 10 — Related Party Transactions and Arrangements for more information on fees payable to our Advisor pursuant to the Second A&R Advisory Agreement. There were no asset management fees to affiliate incurred during the three months ended June 30, 2014 .

Property Operating Expense

Property operating expense remained constant at $3.4 million for the three months ended June 30, 2015 and 2014 . These costs primarily related to ground lease rent, real estate taxes, insurance and other property operating costs on our properties. We operated 463 properties as of June 30, 2015 and 2014 .

Acquisition and Transaction Related Expense

Acquisition and transaction related expense decreased $3.7 million to $0.4 million for the three months ended June 30, 2015 , compared to $4.1 million for the three months ended June 30, 2014 . We did not acquire any properties during the three months ended June 30, 2015 ; the $0.4 million of acquisition and transaction related expense primarily related to third party appraisal costs incurred in connection with our purchase price allocation procedures. For the three months ended June 30, 2014 , acquisition and transaction related expense related to acquisition fees, legal fees, strategic advisory fees and other closing costs associated with our Three Month Acquisitions.

General and Administrative Expense

General and administrative expense increased $1.9 million to $3.6 million for the three months ended June 30, 2015 , compared to $1.7 million for the three months ended June 30, 2014 . The increase in general and administrative expense for the three months ended June 30, 2015 was primarily due to increases in professional fees relating to stockholder services, legal fees and distributions on Class B Units. At the time the IPO closed in October 2013, we began to expense, as incurred, professional fees relating to stockholder services, because these costs no longer related to fulfilling subscriptions and offering costs.

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Depreciation and Amortization Expense

Depreciation and amortization expense increased $0.5 million to $25.4 million for the three months ended June 30, 2015 , compared to $24.9 million for the three months ended June 30, 2014 . The purchase price of acquired properties is allocated to tangible and identifiable intangible assets and depreciated or amortized over their estimated useful lives.

Interest Expense

Interest expense increased $0.5 million to $8.2 million for the three months ended June 30, 2015 , compared to approximately $7.7 million for the three months ended June 30, 2014 . This increase is primarily related to interest, unused fees and amortization of deferred financing costs associated with our credit facility and mortgage notes payable, partially offset by amortization of mortgage premiums. The following table presents the weighted-average balances of our mortgage notes payable and credit facility borrowings outstanding, associated interest expense and corresponding weighted-average interest rates for the three months ended June 30, 2015 and 2014 , as well as the amortization of deferred financing costs and mortgage premiums for such periods:



	Three Months Ended June 30,
	2015							2014
	Weighted-Average Carrying Value		Interest Expense			Weighted-Average Interest Rate		Weighted-Average Carrying Value		Interest Expense			Weighted-Average Interest Rate
Mortgage Notes Payable	$	469,719	$	6,614		5.66	%	$	450,849	$	6,401		5.66	%
Credit Facility	$	423,000	2,194			1.94	%	$	381,750	1,931			2.22	%
Amortization of deferred financing costs			1,306							1,217
Amortization of mortgage premiums			(1,875		)					(1,826		)
Interest Expense			$	8,239						$	7,723

Income from Investment Securities

Income from investment securities decreased $0.4 million to $0.2 million for the three months ended June 30, 2015 , compared to $0.6 million for the three months ended June 30, 2014 . This decrease resulted primarily from the sale of several investment securities between June 30, 2014 and June 30, 2015 . We held investment securities, at fair value, of $10.1 million as of June 30, 2015 , compared to $36.0 million as of June 30, 2014 .

Gain on Sale of Investment Securities

Gain on sale of investment securities of $0.1 million for the three months ended June 30, 2014 resulted from the sale of investments in redeemable preferred stock with an aggregate cost basis of $20.1 million for $20.2 million. There were no sales of investment securities, and thus no gains on sale of investment securities, during the three months ended June 30, 2015 .

Comparison of the Six Months Ended June 30, 2015 to the Six Months Ended June 30, 2014

As of January 1, 2014 , we owned 239 properties (our "Same Store") with an aggregate base purchase price of $1.1 billion , comprised of 7.5 million rentable square feet that were 100.0% leased on a weighted-average basis. We have acquired 224 properties since January 1, 2014 for an aggregate base purchase price of $1.0 billion , comprised of 5.6 million rentable square feet that were 100.0% leased on a weighted-average basis as of June 30, 2015 (our "Six Month Acquisitions").

Rental Income

Rental income increased $14.7 million to $80.4 million for the six months ended June 30, 2015 , compared to $65.7 million for the six months ended June 30, 2014 . This increase in rental income was due to our Six Month Acquisitions.

Operating Expense Reimbursements

Operating expense reimbursement revenue decreased $0.8 million to $5.7 million for the six months ended June 30, 2015 , compared to $6.5 million for the six months ended June 30, 2014 . Pursuant to certain of our lease agreements, tenants are required to reimburse us for certain property operating expenses, in addition to paying base rent, whereas under certain other lease agreements, the tenants are directly responsible for all operating costs of the respective properties. This decrease in operating expense reimbursements was due to decreased reimbursement of common area maintenance expenses at our Merrill Lynch properties as a result of revisions to the properties’ operating budget.

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Asset Management Fees to Affiliate

Asset management fees to affiliate for the six months ended June 30, 2015 of $4.1 million were related to services that we received from our Advisor in connection with the management of our assets. From March 31, 2015 through July 20, 2015, we paid this fee to our Advisor on a monthly basis, pursuant to the Advisory Agreement. Subsequent to July 20, 2015, pursuant to the Second A&R Advisory Agreement, we will no longer pay an asset management fee. Please see Note 10 — Related Party Transactions and Arrangements for more information on fees payable to our Advisor pursuant to the Second A&R Advisory Agreement. There were no asset management fees to affiliate incurred during the six months ended June 30, 2014 .

Property Operating Expense

Property operating expense decreased $0.5 million to $6.5 million for the six months ended June 30, 2015 , compared to $7.0 million for the six months ended June 30, 2014 . These costs primarily related to ground lease rent, real estate taxes, insurance and other property operating costs on our properties. The decrease in property operating expense was due to decreased common area maintenance expenses at our Merrill Lynch properties as a result of a revisions to the properties’ operating budget.

Acquisition and Transaction Related Expense

Acquisition and transaction related expense decreased $18.1 million to $0.5 million for the six months ended June 30, 2015 , compared to $18.6 million for the six months ended June 30, 2014 . We did not acquire any properties during the six months ended June 30, 2015 ; the $0.5 million of acquisition and transaction related expense primarily related to third party appraisal costs incurred in connection with our purchase price allocation procedures. For the six months ended June 30, 2014 , acquisition and transaction related expense related to acquisition fees, legal fees and other closing costs associated with our Six Month Acquisitions.

General and Administrative Expense

General and administrative expense increased $2.7 million to $5.5 million for the six months ended June 30, 2015 , compared to $2.8 million for six months ended June 30, 2014 . This increase is primarily due to higher professional fees, legal fees, local income taxes and distributions on Class B Units compared to the six months ended June 30, 2014 .

Depreciation and Amortization Expense

Depreciation and amortization expense increased $8.0 million to $50.8 million for the six months ended June 30, 2015 , compared to $42.8 million for the six months ended June 30, 2014 . The purchase price of acquired properties is allocated to tangible and identifiable intangible assets and depreciated or amortized over their estimated useful lives.

Interest Expense

Interest expense increased $5.2 million to $16.4 million for the six months ended June 30, 2015 , compared to $11.2 million for the six months ended June 30, 2014 . This increase is due primarily to an increase in interest, unused fees and amortization of deferred financing costs associated with our mortgage notes payable and credit facility, partially offset by amortization of mortgage premiums. The following table presents the weighted-average balances of our mortgage notes payable and credit facility borrowings outstanding, associated interest expense and corresponding weighted-average interest rates for the six months ended June 30, 2015 and 2014 , as well as the amortization of deferred financing costs and mortgage premiums for such periods:



	Six Months Ended June 30,
	2015							2014
	Weighted-Average Carrying Value		Interest Expense			Weighted-Average Interest Rate		Weighted-Average Carrying Value		Interest Expense			Weighted-Average Interest Rate
Mortgage Notes Payable	$	469,841	$	13,172		5.66	%	$	280,303	$	8,093		5.66	%
Credit Facility	$	423,000	4,352			1.93	%	$	265,714	3,414			2.51	%
Amortization of deferred financing costs			2,608							1,971
Amortization of mortgage premiums			(3,733		)					(2,311		)
Interest Expense			$	16,399						$	11,167

Income from Investment Securities

Income from investment securities decreased $1.3 million to $0.3 million for the six months ended June 30, 2015 , compared to $1.6 million for the six months ended June 30, 2014 . This decrease resulted primarily from our sale of several investment securities between June 30, 2014 and June 30, 2015 . We held investment securities, at fair value, of $10.1 million as of June 30, 2015 , compared to $36.0 million as of June 30, 2014 .

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Gain on Sale of Investment Securities

Gain on sale of investment securities of $0.5 million for the six months ended June 30, 2015 resulted from the sale of investments in redeemable preferred stock with an aggregate cost basis of $8.7 million for $9.2 million . Loss on sale of investment securities of $0.1 million for the six months ended June 30, 2014 resulted from the sale of investments in redeemable preferred stock and senior notes with an aggregate cost basis of $29.9 million for $29.8 million.

Cash Flows for the Six Months Ended June 30, 2015

During the six months ended June 30, 2015 , we had cash flows provided by operating activities of $50.0 million . The level of cash flows used in or provided by operating activities is affected by, among other things, receipt of rental revenue and the amount of acquisition and transaction related costs incurred. Cash flows from operating activities during the six months ended June 30, 2015 include $0.5 million of acquisition and transaction related costs. Cash inflows during the six months ended June 30, 2015 included a net income adjusted for non-cash items of $53.2 million (net income of $3.3 million adjusted for non-cash items, including depreciation and amortization of tangible and intangible real estate assets, amortization of deferred financing costs and share-based compensation, partially offset by a gain on sale of investments and amortization of mortgage premiums, of $49.9 million ) and an increase in accounts payable and accrued expenses of $1.1 million . These cash inflows were partially offset by an increase in prepaid expenses and other assets of $4.1 million and a decrease in deferred rent and other liabilities of $0.2 million .

The net cash provided by investing activities during the six months ended June 30, 2015 of $9.3 million related to proceeds from the sale of investment securities.

The net cash used in financing activities of $38.3 million during the six months ended June 30, 2015 consisted primarily of cash distributions of $24.2 million , common stock repurchases of $11.6 million , payments of deferred financing costs of $2.0 million and payments of mortgage notes payable of $0.5 million .

Cash Flows for the Six Months Ended June 30, 2014

During the six months ended June 30, 2014, we had cash flows provided by operating activities of $42.6 million. The level of cash flows used in or provided by operating activities is affected by the amount of acquisition and transaction related costs incurred, as well as the receipt of scheduled rent payments. Cash flows provided by operating activities during the six months ended June 30, 2014 include $18.6 million of acquisition and transaction related costs. Cash inflows during the six months ended June 30, 2014 included a net loss adjusted for non-cash items of $34.7 million (net loss of $8.4 million adjusted for non-cash items, including depreciation and amortization of tangible and intangible real estate assets, amortization of deferred financing costs, share-based compensation and loss on sale of investments, partially offset by amortization of mortgage premiums, of $43.1 million). Cash inflows also included an increase in deferred rent and other liabilities of $4.4 million, a decrease in prepaid expenses and other assets of $2.6 million primarily due to a decrease in accounts receivable based on the timing of receipt of payments and an increase in accounts payable and accrued expenses of $0.9 million.

The net cash used in investing activities during the six months ended June 30, 2014 of $508.3 million related to our investments in real estate and other assets of $538.1 million, partially offset by proceeds from the sale of investment securities of $29.8 million.

The net cash provided by financing activities of $389.5 million during the six months ended June 30, 2014 consisted primarily of proceeds from our credit facility of $423.0 million and proceeds from issuances of common stock of $0.1 million. These cash inflows were partially offset by cash distributions of $22.1 million, payments of deferred financing costs of $10.6 million, payments of mortgage notes payable of $0.4 million, common stock repurchases of $0.3 million and an increase in our restricted cash balance of $0.2 million.

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Liquidity and Capital Resources

On April 25, 2013 , we received and accepted aggregate subscriptions in excess of the minimum of $2.0 million in shares of common stock, broke escrow and issued shares of common stock to our initial investors who were admitted as stockholders. As permitted under our Registration Statement, we reallocated the remaining 14.5 million DRIP shares available under the Registration Statement to the primary offering. Concurrent with such reallo cation, we registered an additional 14.7 million shares to be issued under the DRIP pursuant to a registration statement on Form S-11, as amended (File No. 333-191255), which became effective on October 5, 2013. Our IPO closed on October 31, 2013 . As of June 30, 2015 , we had 66.3 million shares of common stock outstanding, including unvested restricted shares and shares issued pursuant to the DRIP, and had received total gross proceeds from the IPO and the DRIP of $1.6 billion . On November 19, 2014 , our board of directors approved an Estimated Per-Share NAV of $23.50 , calculated by the Advisor in accordance with our valuation guidelines, as of September 30, 2014. Beginning with the Initial NAV Pricing Date and ending with the suspension of the DRIP and the termination of our SRP, the price per share for shares of common stock purchased under the DRIP and the price per share for shares of common stock repurchased by us pursuant to our SRP were each equal to our Estimated Per-Share NAV . On May 14, 2015, our board of directors approved an Estimated Per-Share NAV of our common stock equal to $24.17 per share, calculated by the Advisor in accordance with our valuation guidelines, as of March 31, 2015, used in connection with the purchases of common stock under the DRIP following May 18, 2015 through the suspension of the DRIP, which became effective following the payment of our distribution on July 1, 2015. Following the suspension of the DRIP, we no longer publish our Estimated Per-Share NAV .

As of June 30, 2015 , we had cash and cash equivalents of $95.7 million . Our principal demands for funds are for payment of our operating and administrative expenses, debt service obligations and cash distributions to our stockholders.

We expect to fund our future short-term operating liquidity requirements through net cash provided by our current property operations. Management expects that our properties will continue to generate sufficient cash flow to fund operating expenses and the payment of our monthly distributions. Other potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders, proceeds from private offerings and undistributed funds from operations.

We have used debt financing as a source of capital. Prior to filing an amended and restated charter on July 20, 2015, our previous charter did not permit the maximum amount of our total indebtedness to exceed 300% of our total "net assets" (as defined by such charter), as of the date of any borrowing. As of June 30, 2015 , we had $469.6 million of mortgage notes payable outstanding and the outstanding balance under our Credit Facility (as described below) was $423.0 million . Our amended and restated charter does not have such a restriction.

On September 23, 2013 , we, through the OP, entered into a credit agreement (the "Credit Agreement") relating to a credit facility (the "Credit Facility") that provides for aggregate revolving loan borrowings of up to $200.0 million (subject to borrowing base availability), with a $25.0 million swingline subfacility and a $20.0 million letter of credit subfacility. Through amendments to the Credit Agreement, the OP increased commitments under our Credit Facility to $750.0 million as of June 30, 2015 . During the six months ended June 30, 2015 , we drew $423.0 million on our Credit Facility to partially fund acquisition activity. As of June 30, 2015 , the outstanding balance under our Credit Facility was $423.0 million and our unused borrowing capacity was $239.6 million , based on the assets assigned to the Credit Facility.

The Credit Facility provides for monthly interest payments for each base rate loan and periodic interest payments for each LIBOR loan, based upon the applicable interest period with respect to such LIBOR loan, with all principal outstanding being due on the maturity date. The Credit Facility will mature on September 23, 2017 , provided that the OP, subject to certain conditions, may elect to extend the maturity date one year to September 23, 2018 . The Credit Facility may be prepaid at any time, in whole or in part, without premium or penalty. In the event of a default, the lenders have the right to terminate their obligations under the Credit Facility and to accelerate the payment on any unpaid principal amount of all outstanding loans. Certain of our subsidiaries and certain subsidiaries of the OP guarantee, and the equity of certain subsidiaries of the OP have been pledged as collateral for, the obligations under the Credit Facility.

In August 2015, we paid down in full the outstanding balance on the Credit Facility and concurrently terminated the Credit Facility in connection with the Loan Agreement described below.

On August 7, 2015 , certain subsidiaries of ours entered into a $655.0 million term loan agreement (“Loan Agreement”) with Barclays Bank PLC, Column Financial Inc. and UBS Real Estate Securities Inc. The Loan Agreement has a stated maturity date of September 6, 2020 and a stated annual interest rate of 4.29625% . The loan is secured by mortgage interests in certain of our properties. In connection with the Loan Agreement, we entered into a Limited Recourse Guaranty, dated August 7, 2015 , pursuant to which we have guaranteed payment of certain recourse obligations for which the borrowers may be personally liable.

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Our board of directors adopted our SRP that enabled our stockholders to sell their shares to us under limited circumstances. At the time a stockholder requested a repurchase, we, subject to certain conditions, repurchased the shares presented for repurchase for cash to the extent we had sufficient funds available to fund such repurchase. There were limits on the number of shares we were permitted to repurchase under this program during any 12-month period. Further, we were only authorized to repurchase shares using the proceeds received from the DRIP in any given quarter. Our board of directors terminated our SRP on April 15, 2015.

The following table summarizes the repurchases of shares under the SRP cumulatively through June 30, 2015 :



	Number of Requests	Number of Shares	Weighted-Average Price per Share
Cumulative repurchases as of December 31, 2014	158	303,907	$	24.01
Six months ended June 30, 2015	93	274,564	23.83
Cumulative repurchases as of June 30, 2015	251	578,471	$	23.98

In connection with the potential Listing, on April 15, 2015 , the board of directors approved the termination of the SRP. We have processed all of the requests received under the SRP for the first and second quarters of 2015 and will not process further requests.

Further, in connection with the potential Listing, pursuant to the terms of the DRIP, on April 15, 2015 , our board of directors approved an amendment to the DRIP (the "DRIP Amendment") that enables us to suspend the DRIP. Subsequently, pursuant to the DRIP as amended by the DRIP Amendment, our board of directors approved the suspension of the DRIP, effective immediately following the payment of our June 2015 monthly distribution. Accordingly, the final issuance of shares of common stock pursuant to the DRIP occurred in connection with our June 2015 distribution, paid on July 1, 2015.

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has promulgated a measure known as funds from operations ("FFO"), which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to net income or loss as determined under GAAP.

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004 (the "White Paper"). The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property and asset impairment writedowns, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO. Our FFO calculation complies with NAREIT's policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or is requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may not be fully informative. Additionally, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indicators exist and if the carrying, or book, value exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, because impairments are based on estimated undiscounted future cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges.

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Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization and impairments, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO and modified funds from operations ("MFFO"), as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

There have been changes in the accounting and reporting promulgations under GAAP that were put into effect in 2009 subsequent to the establishment of NAREIT's definition of FFO, such as the change to expense as incurred rather than capitalize and depreciate acquisition fees and expenses incurred for business combinations. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation, but have a limited and defined acquisition period. We are using the proceeds raised in our offering to, among other things, acquire properties. We intend to begin the process of achieving a liquidity event (i.e., listing of our common stock on a national stock exchange, a merger or sale or another similar transaction) within three to five years of the completion of the offering. Thus, unless we raise, or recycle, a significant amount of capital after we complete our offering, we will not be continuing to purchase assets at the same rate as during our offering. Due to the above factors and other unique features of publicly registered, non-listed REITs, the Investment Program Association ("IPA"), an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registered non-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we continue to purchase a significant amount of new assets after we complete our offering. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and other non-operating items included in FFO and also excludes acquisition fees and expenses that affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is stabilized. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our IPO has been completed and our portfolio has been stabilized. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry.

We define MFFO, a non-GAAP measure, consistent with the IPA's Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations (the "Practice Guideline") issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition and transaction-related fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized.

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Our MFFO calculation complies with the IPA's Practice Guideline described above. In calculating MFFO, we exclude acquisition and transaction-related expenses, amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to non-controlling interests. Under GAAP, acquisition and transaction-related fees and expenses are characterized as operating expenses in determining operating net income during the period in which the asset is acquired. These expenses are paid in cash by us, and therefore such funds will not be available to invest in other assets, pay operating expenses or fund distributions. MFFO that excludes such costs and expenses would only be comparable to that of non-listed REITs that have completed their acquisition activities and have similar operating characteristics as us. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives as items which are unrealized. We view both gains and losses from dispositions of assets and fair value adjustments of derivatives as items which are not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance. While we are responsible for managing interest rate, hedge and foreign exchange risk, we will retain an outside consultant to review all our hedging agreements. Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude such gains and losses in calculating MFFO, as such gains and losses are not reflective of ongoing operations. The purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of our business plan to generate operational income and cash flows in order to make distributions to our investors.

We believe that our use of MFFO and the adjustments used to calculate it allow us to present our performance in a manner that reflects certain characteristics that are unique to non-listed REITs, which have defined acquisition periods and targeted exit strategies, and allow us to evaluate our performance against other non-listed REITs. By excluding expensed acquisition and transaction-related costs, the use of MFFO provides information consistent with management's analysis of the operating performance of the properties.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and MFFO the same way. Accordingly, comparisons with other REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO has limitations as a performance measure while an offering is ongoing such as our IPO where the price of a share of common stock is a stated value and there is no NAV determination during the offering stage and for a period thereafter.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the non-listed REIT industry and we would have to adjust our calculation and characterization of FFO or MFFO.

The table below reflects the items deducted or added to net loss in our calculation of FFO and MFFO for the periods indicated:



	Three Months Ended						Six Months Ended June 30, 2015
(In thousands)	March 31, 2015			June 30, 2015			Six Months Ended June 30, 2015
Net income (loss) (in accordance with GAAP)	$	4,901		$	(1,624	)	$	3,277
Depreciation and amortization	25,387			25,386			50,773
FFO	30,288			23,762			54,050
Acquisition fees and expenses	129			377			506
Amortization of above-market lease assets and accretion of below-market lease liabilities, net	416			417			833
Straight-line rent	(2,088		)	(2,067		)	(4,155		)
Amortization of mortgage premiums	(1,859		)	(1,875		)	(3,734		)
Gain on sale of investments	(546		)	—			(546		)
MFFO	$	26,340		$	20,614		$	46,954

Distributions

On April 9, 2013, our board of directors authorized, and we declared, distributions which are payable based on stockholders of record each day during the applicable period equal to $0.00452054795 per day, which is equivalent to $1.65 per annum, per share of common stock. Distributions are payable by the 5th day following each month end to stockholders of record at the close of business each day during the prior month. Following the Listing, we expect to pay distributions on the 15th day of each month to stockholders of record as of close of business on the eighth day of such month.

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The amount of distributions payable to our stockholders is determined by our board of directors and is dependent on a number of factors, including funds available for distribution, our financial condition, capital expenditure requirements, as applicable, requirements of Maryland law and annual distribution requirements needed to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"). Distribution payments are dependent on the availability of funds. Our board of directors may reduce the amount of distributions paid or suspend distribution payments at any time and therefore distribution payments are not assured.

Distributions began to accrue on May 13, 2013, 15 days following our initial property acquisition. The first distribution was paid in June 2013. During the six months ended June 30, 2015 , distributions paid to common stockholders totaled $54.1 million , inclusive of $29.9 million of distributions for shares of common stock that were reinvested in shares issued pursuant the DRIP. During the six months ended June 30, 2015 , cash used to pay distributions was generated from cash flows provided by operations and proceeds received from common stock issued under the DRIP.

The following table shows the sources for the payment of distributions to common stockholders, including distributions on unvested restricted stock, for the periods indicated:



	Three Months Ended									Six Months Ended June 30, 2015
	March 31, 2015				June 30, 2015					Six Months Ended June 30, 2015
(In thousands)			Percentage of Distributions					Percentage of Distributions				Percentage of Distributions
Distributions to stockholders	$	26,663			$	27,434				$	54,097

Source of distribution coverage:
Cash flows provided by operations ⁽¹⁾	$	16,946	63.6	%	$	18,898		68.9	%	$	35,844	66.3	%
Offering proceeds from issuances of common stock	—		—	%	—			—	%	—		—	%
Proceeds received from common stock issued under the DRIP	9,717		36.4	%	8,536			31.1	%	18,253		33.7	%
Proceeds from financings	—		—	%	—			—	%	—		—	%
Total source of distribution coverage	$	26,663	100.0	%	$	27,434		100.0	%	$	54,097	100.0	%

Cash flows provided by operations (GAAP basis) ⁽¹⁾	$	27,807			$	22,235				$	50,042
Net income (in accordance with GAAP)	$	4,901			$	(1,624	)			$	3,277

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(1)	Cash flows provided by operations for the three months ended March 31, 2015 and June 30, 2015 and for the six months ended June 30, 2015 include acquisition and transaction related expenses of $0.1 million, $0.4 million and $0.5 million , respectively.

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The following table compares cumulative distributions paid to cumulative net loss and cumulative cash flows provided by operations (in accordance with GAAP) and our cumulative FFO for the period from January 22, 2013 (date of inception) to June 30, 2015 :



(In thousands)	Period from January 22, 2013 (date of inception) to June 30, 2015
Total distributions paid	$	195,225

Reconciliation of net loss:
Revenues	$	268,804
Asset management fees	4,096
Acquisition and transaction related expenses	(50,035		)
Depreciation and amortization	(159,099		)
Other operating expenses	(40,848		)
Other non-operating income, net	(38,339		)
Net loss (in accordance with GAAP) ⁽¹⁾	$	(15,421	)

Cash flows provided by operations	$	136,236

FFO	$	139,582

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(1)	Net loss as defined by GAAP includes the non-cash impact of depreciation and amortization expense as well as costs incurred relating to acquisitions and related transactions.

For the six months ended June 30, 2015 , cash flows provided by operations were $50.0 million . As shown in the table above, we funded distributions with cash flows provided by operations as well as proceeds from our IPO which were reinvested in common stock issued under our DRIP. To the extent we pay distributions in excess of cash flows provided by operations, your investment may be adversely impacted. Since inception, our cumulative distributions have exceeded our cumulative FFO. See “Risk Factors - Distributions paid from sources other than our cash flows from operations, particularly from proceeds of our IPO, will result in us having fewer funds available for the acquisition of properties and other real estate-related investments and may dilute our stockholders' interests in us, which may adversely affect our ability to fund future distributions with cash flows from operations and may adversely affect our stockholders' overall return.” under Item 1A in this Quarterly Report on Form 10-Q .

Loan Obligations

The payment terms of certain of our mortgage loan obligations require principal and interest payments monthly, with all unpaid principal and interest due at maturity. Our loan agreements stipulate that we comply with specific reporting covenants. As of June 30, 2015 , we were in compliance with the debt covenants under our loan agreements.

As of June 30, 2015 , our secured debt leverage ratio (total secured debt divided by the base purchase price of acquired real estate investments) and leverage ratio (total debt divided by total assets) approximated 21.6% and 40.7% , respectively.

Contractual Obligations

The following table reflects contractual debt obligations under our mortgage notes payable and Credit Facility as well as minimum base rental cash payments due for leasehold interests over the next five years and thereafter as of June 30, 2015 . These minimum base rental cash payments due for leasehold interests amounts exclude contingent rent payments, as applicable, that may be payable based on provisions related to increases in annual rent based on exceeding certain economic indexes among other items:



			July 1, 2015 to December 31, 2015		Years Ended December 31,
(In thousands)	Total		July 1, 2015 to December 31, 2015		2016-2017		2018-2019		Thereafter
Principal on mortgage notes payable	$	469,601	$	190,486	$	84,407	$	2,354	$	192,354
Interest on mortgage notes payable	80,177		13,279		27,734		21,437		17,727
Credit Facility	423,000		—		423,000		—		—
Interest on Credit Facility	20,173		4,905		15,268		—		—
Ground lease rental payments due	9,521		445		1,795		1,764		5,517
	$	1,002,472	$	209,115	$	552,204	$	25,555	$	215,598

Election as a REIT

We elected and qualified to be taxed as a REIT under Sections 856 through 860 of the Code, effective for our taxable year ended December 31, 2013. We believe that, commencing with such taxable year, we are organized and operate in such a manner as to qualify for taxation as a REIT under the Code. We intend to continue to operate in such a manner to qualify for taxation as a REIT, but no assurance can be given that we will operate in a manner so as to qualify or remain qualified for taxation as a REIT. In order to qualify and continue to qualify for taxation as a REIT, we must, among other things, distribute annually at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP) determined without regard to the deduction for dividends paid and excluding net capital gains, and must comply with a number of other organizational and operational acquirements. If we continue to qualify for taxation as a REIT, we generally will not be subject to federal corporate income tax on that portion of our REIT taxable income that we distribute to our stockholders. Even if we continue to qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and properties, as well as federal income and excise taxes on our undistributed income.

Inflation

Some of our leases with our tenants contain provisions designed to mitigate the adverse impact of inflation. These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures). We may be adversely impacted by inflation on the leases that do not contain indexed escalation provisions. However, our net leases require the tenant to pay its allocable share of operating expenses, which may include common area maintenance costs, real estate taxes and insurance. This may reduce our exposure to increases in costs and operating expenses resulting from inflation.

Related-Party Transactions and Agreements

We have entered into agreements with entities under common control with our Sponsor, under which we have paid or may in the future pay certain fees or reimbursements to our Advisor, its affiliates and entities under common control with our Advisor in connection with items such as acquisition and financing activities, sales and maintenance of common stock under our IPO, transfer agency services, asset and property management services and reimbursement of operating and offering related costs. In addition, during the second quarter of 2014, we announced that we engaged RCS Capital, the investment banking division of our Dealer Manager, as a financial advisor to assist us in evaluating potential strategic alternatives. See Note 10 — Related Party Transactions and Arrangements to our consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of the various related party transactions, agreements and fees.

In addition, the limited partnership agreement of the OP provides for a special allocation, solely for tax purposes, of excess depreciation deductions of up to $10.0 million to our Advisor, a limited partner of the OP. In connection with this special allocation, our Advisor has agreed to restore a deficit balance in its capital account in the event of a liquidation of the OP and has agreed to provide a guaranty or indemnity of indebtedness of the OP. Our Advisor is directly or indirectly controlled by certain of our officers and directors.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our long-term debt, which consists of secured financings and our Credit Facility, bears interest at fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We would not hold or issue these derivative contracts for trading or speculative purposes. We do not have any foreign operations and thus are not exposed to foreign currency fluctuations.

As of June 30, 2015 , our debt consisted of both fixed- and variable-rate debt. As of June 30, 2015 , we had fixed-rate secured mortgage financings with a carrying value of $488.0 million and a fair value of $495.4 million . Changes in market interest rates on our fixed-rate debt impact the fair value of the debt, but it has no impact on interest expense incurred or cash flow. For instance, if interest rates rise 100 basis points and our fixed-rate debt balance remains constant, we expect the fair value of our obligation to decrease, the same way the price of a bond declines as interest rates rise. The sensitivity analysis related to our fixed–rate debt assumes an immediate 100 basis point move in interest rates from their June 30, 2015 levels, with all other variables held constant. A 100 basis point increase in market interest rates would result in a decrease in the fair value of our fixed-rate debt by $13.1 million . A 100 basis point decrease in market interest rates would result in an increase in the fair value of our fixed-rate debt by $12.2 million .

As of June 30, 2015 our variable-rate Credit Facility had a carrying and fair value of $423.0 million . Interest rate volatility associated with this variable-rate Credit Facility affects interest expense incurred and cash flow. The sensitivity analysis related to our variable-rate debt assumes an immediate 100 basis point move in interest rates from their June 30, 2015 levels, with all other variables held constant. A 100 basis point increase or decrease in variable interest rates on our variable-rate Credit Facility would increase or decrease our interest expense by $4.2 million annually.

These amounts were determined by considering the impact of hypothetical interest rate changes on our borrowing costs, and, assuming no other changes in our capital structure. The information presented above includes only those exposures that existed as of June 30, 2015 and does not consider exposures or positions arising after that date. The information represented herein has limited predictive value. Future actual realized gains or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 promulgated under the Exchange Act, we are required to establish and maintain disclosure controls and procedures as defined in subparagraph (e) of that rule. We are required to evaluate, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of each fiscal quarter. Management previously concluded that our disclosure controls and procedures were not effective as of December 31, 2014 or March 31, 2015 due to the material weakness in internal control over financial reporting described in our Annual Report on Form 10-K filed with the SEC on May 15, 2015 . As described below, a remediation plan has been implemented and, as of June 30, 2015 , management deems the material weaknesses previously identified to be remediated and our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

During our most recent fiscal quarter, we executed our remediation plan, as further described below. In connection with the evaluation required by Rule 13a-15(d), we identified the execution of this remediation plan as having materially affected, or reasonably likely to materially affect, our internal control over financial reporting. Other than the execution of the remediation plan, there were no other changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Remediation of Material Weaknesses

We, with the concurrence and oversight of the Audit Committee of our Board of Directors, executed our remediation plan described in our Annual Report on Form 10-K filed with the SEC on May 15, 2015 , during the quarter ended June 30, 2015 . As part of the remediation plan, management:


•	Enhanced information technology system access controls supporting the general ledger and accounts payable system applications to address appropriate segregation of duties and to restrict IT and financial users’ access to the underlying entities and IT functions and data commensurate with their job responsibilities;


•	Implemented appropriate end-user controls over the use of significant Excel spreadsheets supporting the financial reporting process;


•	Implemented appropriate controls over the authorization of manual journal entries made to the general ledger; and


•	Implemented controls over the review of results provided by valuation experts related to the allocation of the purchase price for acquisitions in accordance with ASC 805 - Business Combinations.

Management verified that the aforementioned controls were appropriately designed and implemented as of June 30, 2015 , and will continue to monitor and test, as applicable, the ongoing operating effectiveness of its’ new and enhanced controls.

Our internal control over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. We recognize that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

We are not a party to, and none of our properties are subject to, any material pending legal proceedings.

Item 1A. Risk Factors.

There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014, except as set forth below:

Distributions paid from sources other than our cash flows from operations, particularly from proceeds of our IPO, will result in us having fewer funds available for the acquisition of properties and other real estate-related investments and may dilute your interests in us, which may adversely affect our ability to fund future distributions with cash flows from operations and may adversely affect your overall return.

Our cash flows provided by operations were $50.0 million for the six months ended June 30, 2015 . During the six months ended June 30, 2015 , we paid distributions of $54.1 million , of which $35.8 million , or 66.3% , was funded from cash flows from operations and $18.3 million , or 33.7% , was from proceeds received from common stock issued under the DRIP.

We may not continue to generate sufficient cash flows from operations to pay future distributions. If we do not generate sufficient cash flows from our operations we may have to reduce our distribution rate or fund distributions from other sources, such as from borrowings, the sale of additional securities, advances from our Advisor, and our Advisor's deferral, suspension or waiver of its fees and expense reimbursements. Funding distributions from borrowings could restrict the amount we can borrow for investments. Funding distributions with the sale of assets or the proceeds from sales of common stock may affect our ability to generate additional operating cash flows. Funding distributions from the sale of additional securities could dilute each stockholder's interest in us if we sell shares of our common stock or securities that are convertible or exercisable into shares of our common stock to third-party investors. Payment of distributions from the mentioned sources could restrict our ability to generate sufficient cash flows from operations, affect our profitability or affect the distributions payable to stockholders upon a liquidity event, any or all of which may have an adverse effect on an investment in our shares.

We rely significantly on six major tenants (including, for this purpose, all affiliates of such tenants) and therefore, are subject to tenant credit concentrations that make us more susceptible to adverse events with respect to those tenants.

As of June 30, 2015 , the following six major tenants had annualized rental income on a straight-line basis, which represented 5.0% or more of our consolidated annualized rental income on a straight-line basis including, for this purpose, all affiliates of such tenants:



Tenant		June 30, 2015
SunTrust Bank		17.9%
Sanofi US		11.6%
C&S Wholesale Grocer		10.4%
AmeriCold		7.8%
Merrill Lynch		7.8%
Stop & Shop		6.1%

Therefore, the financial failure of any of these tenants could have a material adverse effect on our results of operations and our financial condition. In addition, the value of our investment is historically driven by the credit quality of the underlying tenant, and an adverse change in either the tenant's financial condition or a decline in the credit rating of such tenant may result in a decline in the value of our investments.

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We are subject to geographic concentrations that make us more susceptible to adverse events with respect to certain geographic areas.

As of June 30, 2015 , the following states had concentrations of properties where annualized rental income on a straight-line basis represented 5.0% or greater of our consolidated annualized rental income on a straight-line basis:



State		June 30, 2015
New Jersey		20.3%
Georgia		11.2%
Massachusetts		8.2%
Florida		7.4%
North Carolina		6.7%
Alabama		5.5%

As of June 30, 2015 , our tenants operated in 37 states. Any adverse situation that disproportionately affects the states listed above may have a magnified adverse effect on our portfolio. Factors that may negatively affect economic conditions in these states include:


•	business layoffs or downsizing;


•	industry slowdowns;


•	relocations of businesses;


•	changing demographics;


•	increased telecommuting and use of alternative work places;


•	infrastructure quality;


•	any oversupply of, or reduced demand for, real estate;


•	concessions or reduced rental rates under new leases for properties where tenants defaulted; and


•	increased insurance premiums.

We may be unable to terminate our advisory agreement, even for poor performance by our Advisor.

On April 29, 2015, we entered into a Second Amended and Restated Advisory Agreement with our advisor. The agreement has a twenty year term, which is automatically extended for successive 20 year terms, and may only be terminated under limited circumstances. This will make it difficult for us to renegotiate the terms of our advisory agreement or replace our advisor even if the terms of our agreement are no longer consistent with the terms offered to other REITs as the market for advisory services changes in the future.

The conflicts of interest inherent in the incentive fee structure of our arrangements with our Advisor and its affiliates could result in actions that are not necessarily in the long-term best interests of our stockholders.

Under our advisory agreement and the limited partnership agreement of our operating partnership, or the partnership agreement, the special limited partner and its affiliates will be entitled to fees, distributions and other amounts that are structured in a manner intended to provide incentives to our Advisor to perform in our best interests. However, because our Advisor does not maintain a significant equity interest in us and is entitled to receive substantial minimum compensation regardless of performance, its interests may not be wholly aligned with those of our stockholders. In addition, the advisory agreement provides for payment of incentive compensation based on exceeding certain Core Earnings thresholds in any period. Losses in one period do not this affect incentive compensation in subsequent periods. As a result, our Advisor could be motivated to recommend riskier or more speculative investments in order to increase Core Earnings and thus its fees. In addition, the special limited partner and its affiliates’ entitlement to fees and distributions upon the sale of our assets and to participate in sale proceeds could result in our Advisor recommending sales of our investments at the earliest possible time at which sales of investments would produce the level of return that would entitle our Advisor and its affiliates, including the special limited partner, to compensation relating to such sales, even if continued ownership of those investments might be in our best long-term interest.

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Moreover, the partnership agreement requires our operating partnership to pay a performance-based termination distribution to the special limited partner or its assignees if we terminate the advisory agreement, even for poor performance by our Advisor, prior to the listing of our shares for trading on an exchange or, absent such listing, in respect of its participation in net sales proceeds. To avoid paying this distribution, our independent directors may decide against terminating the advisory agreement prior to our listing of our shares or disposition of our investments even if, but for the termination distribution, termination of the advisory agreement would be in our best interest. Similarly, because this distribution would still be due even if we terminate the advisory agreement for poor performance, our Advisor may be incentivized to focus its resources and attention on other matters or otherwise fail to use its best efforts on our behalf. Upon Listing, we expect to enter into the Listing Note, which will provide for a distribution to the Special Limited Partner calculated based on the market price of common stock during a 30-day trading period 180 days after Listing, which may incentivize the Advisor to pursue short-term goals that may not be beneficial to us in the long term.

In addition, the requirement to pay the distribution to the special limited partner or its assignees at termination could cause us to make different investment or disposition decisions than we would otherwise make, in order to satisfy our obligation to pay the distribution to the special limited partner or its assignees. Moreover, our Advisor will have the right to terminate the advisory agreement upon a change of control of our company and thereby trigger the payment of the termination distribution, which could have the effect of delaying, deferring or preventing the change of control. Further, pursuant to our Outperformance Plan Agreement, our Advisor will be issued LTIP Units which will be eligible to be earned based on the achievement of certain total stockholder return thresholds, which could encourage our Advisor to recommend riskier or more speculative investments.

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

Recent Sale of Unregistered Equity Securities

On March 11, 2015, we issued 1,276 shares of restricted stock that vest over a period of five years to one of our independent directors, pursuant to our employee and director incentive restricted share plan. No selling commissions or other consideration will be paid in connection with such issuances, which were made without registration under the Securities Act in reliance upon the exemption from registration in Section 4(a)(2) of the Securities Act as transactions not involving any public offering.

Use of Proceeds from Sales of Registered Securities

We used substantially all of the net proceeds from our IPO, net of cumulative offering costs of $173.7 million , to acquire a diversified portfolio of income producing real estate properties, focusing primarily on acquiring freestanding, single-tenant retail properties net leased to investment grade and other creditworthy tenants. As of June 30, 2015 , we have used the net proceeds from our IPO, secured debt financing and the Credit Facility to purchase 463 properties with an aggregate base purchase price of $2.2 billion .

Issuer Purchases of Equity Securities

Although we have announced our intent to list on NYSE, our common stock is currently not listed on a national securities exchange. In order to provide stockholders with interim liquidity, our board of directors adopted the SRP, which enabled our stockholders to sell their shares back to us, subject to significant conditions and limitations.

Effective November 14, 2014 , the repurchase price for shares under the SRP was based on the Estimated Per-Share NAV as determined by our board of directors. Only those stockholders who purchased their shares from us or received their shares from us (directly or indirectly) through one or more non-cash transactions were able to participate in the SRP. The repurchase of shares occurred on the last business day prior to the filing of each quarterly financial filing (and in all events on a date other than a dividend payment date). Purchases under the SRP were limited during any 12-month period to approximately 5.0% of the Company's NAV in any 12 month period.

Effective November 14, 2014 , there was no minimum holding period for shares of the Company's common stock and stockholders could have submitted their shares for repurchase at any time through the SRP. Shares repurchased in connection with the death or disability of a stockholder would have been repurchased at a purchase price equal to the greater of the price paid for such shares and the then-current NAV (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to the Company's common stock).

Subject to limited exceptions, stockholders who requested the repurchase of shares of our common stock within the first four months from the date of purchase were subject to a short-term trading fee of 2.0% .

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When a stockholder requested redemption and the redemption was approved, we reclassified such obligation from equity to a liability based on the settlement value of the obligation. Funding for the SRP was derived from proceeds we maintain from the sale of shares pursuant to the DRIP. Shares purchased under the SRP have the status of authorized but unissued shares. The following table summarizes the repurchases of shares under the SRP cumulatively through June 30, 2015 :



	Number of Requests	Number of Shares	Weighted-Average Price per Share
Cumulative repurchases as of December 31, 2014	158	303,907	$	24.01
Six months ended June 30, 2015	93	274,564	23.83
Cumulative repurchases as of June 30, 2015	251	578,471	$	23.98

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

The description of the Loan Agreement and the Limited Recourse Guaranty in this Quarterly Report on Form 10-Q is a summary and is qualified in its entirety by the terms of the Loan Agreement attached as Exhibit 10.32 and the Limited Recourse Guaranty attached as Exhibit 10.33 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

Item 6. Exhibits.

The exhibits listed on the Exhibit Index (following the signatures section of this report) are included, or incorporated by reference, in this Quarterly Report on Form 10-Q.

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SIGNATURES

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



	AMERICAN FINANCE TRUST, INC.
	By:	/s/ Donald MacKinnon
		Donald MacKinnon
		Chief Executive Officer and President (Principal Executive Officer)

	By:	/s/ Donald M. Ramon
		Donald M. Ramon
		Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer)

Dated: August 11, 2015

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EXHIBITS INDEX

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (and are numbered in accordance with Item 601 of Regulation S-K).



Exhibit No.		Description
3.1 *		Articles of Amendment and Restatement for American Finance Trust, Inc.
3.2 ⁽¹⁾		Third Amended and Restated Bylaws
4.1 ⁽¹⁾		Second Amendment to Agreement of Limited Partnership of American Realty Capital Operating Partnership V, L.P., dated as of April 15, 2015
4.2 ⁽¹⁾		Third Amendment to Agreement of Limited Partnership of American Realty Capital Operating Partnership V, L.P., dated as of April 29, 2015
10.4 ⁽¹⁾		Amended and Restated Employee and Director Incentive Restricted Share Plan of the Company
10.25 ⁽¹⁾		First Amendment to the Amended and Restated Advisory Agreement, dated as of April 15, 2015 by and among the Company, American Realty Capital Operating Partnership V, L.P. and American Realty Capital Advisors V, LLC
10.26 ⁽¹⁾		First Amendment to the Distribution Reinvestment Plan of the Company, dated as of April 15, 2015
10.28 *		Second Amended and Restated Advisory Agreement, dated as of April 29, 2015 by and among the Company, American Realty Capital Operating Partnership V, L.P. and American Realty Capital Advisors V, LLC
10.29 ⁽¹⁾		Indemnification Agreement by and between the Company and Herbert Vederman, dated May 14, 2015
10.30 *		Indemnification Agreement by and between the Company, Donald MacKinnon, Donald R. Ramon and Andrew Winer, dated May 26, 2015
10.31 *		Indemnification Agreement by and between the Company and Lisa D. Kabnick, dated August 3, 2015
10.32 *		Loan Agreement dated as of August 7, 2015 among Barclays Bank PLC, Column Financial, Inc. and UBS Real Estate Securities, Inc. as Lenders and certain subsidiaries of American Finance Operating Partnership, LP, as Borrowers
10.33 *		Limited Recourse Guaranty dated as of August 7, 2015 by American Finance Trust, Inc. in favor of Barclays Bank PLC, Column Financial, Inc. and UBS Real Estate Securities, Inc.
31.1 *		Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 *		Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32 *		Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 *		XBRL (eXtensible Business Reporting Language). The following materials from American Finance Trust, Inc.'s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2015, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Loss, (iii) the Consolidated Statement of Changes in Stockholders' Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements.

____________________

* Filed herewith.


(1)	Filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on May 15, 2015.

Exhibit 3.1

ARTICLES OF AMENDMENT AND

RESTATEMENT FOR

AMERICAN FINANCE TRUST, INC.

a Maryland corporation

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		PAGE
ARTICLE I. NAME		1
ARTICLE II. PURPOSES AND POWERS		1
ARTICLE III. RESIDENT AGENT AND PRINCIPAL OFFICE		1
ARTICLE IV. DEFINITIONS		1
ARTICLE V. STOCK		3

SECTION 5.1	AUTHORIZED SHARES	3
SECTION 5.2	COMMON SHARES	3
SECTION 5.3	PREFERRED SHARES	4
SECTION 5.4	CLASSIFIED OR RECLASSIFIED SHARES	4
SECTION 5.5	STOCKHOLDERS’ CONSENT IN LIEU OF MEETING	4
SECTION 5.6	CHARTER AND BYLAWS	4
SECTION 5.7	RESTRICTIONS ON OWNERSHIP AND TRANSFER	5
SECTION 5.8	SETTLEMENTS	13
SECTION 5.9	SEVERABILITY	13
SECTION 5.10	ENFORCEMENT	13
SECTION 5.11	NON-WAIVER	13
SECTION 5.12	PREEMPTIVE AND APPRAISAL RIGHTS	13

ARTICLE VI. BOARD OF DIRECTORS		14
SECTION 6.1	NUMBER OF DIRECTORS	14
SECTION 6.2	RESIGNATION, REMOVAL OR DEATH	14

ARTICLE VII. POWERS OF THE BOARD OF DIRECTORS		15

SECTION 7.1	GENERAL	15
SECTION 7.2	AUTHORIZATION BY BOARD OF STOCK ISSUANCE	15
SECTION 7.3	FINANCINGS	15
SECTION 7.4	REIT QUALIFICATION	15
SECTION 7.5	DETERMINATIONS BY BOARD	15

ARTICLE VIII. EXTRAORDINARY ACTIONS		16
ARTICLE IX. LIABILITY OF STOCKHOLDERS, DIRECTORS, AND OFFICERS		16

SECTION 9.1	LIMITATION OF STOCKHOLDER LIABILITY	16
SECTION 9.2	LIMITATION OF DIRECTOR AND OFFICER LIABILITY; INDEMNIFICATION	16
SECTION 9.3	EXPRESS EXCULPATORY CLAUSES IN INSTRUMENTS	17

ARTICLE X. AMENDMENTS		17

AMERICAN FINANCE TRUST, INC.

ARTICLES OF AMENDMENT AND RESTATEMENT

FIRST: American Finance Trust, Inc., a Maryland corporation (the “Company”), desires to amend and restate its charter as currently in effect and as hereinafter amended.

SECOND: The following provisions are all the provisions of the charter currently in effect and as hereinafter amended:

ARTICLE I.

NAME

The name of the corporation is American Finance Trust, Inc. (the “Company”). So far as may be practicable, the business of the Company shall be conducted and transacted under that name. Under circumstances in which the Board determines that the use of the name “American Finance Trust, Inc.” is not practicable, it may use any other designation or name for the Company.

ARTICLE II.

PURPOSES AND POWERS

The purposes for which the Company is formed are to engage in any lawful act or activity (including, without limitation or obligation, qualifying and engaging in business as a real estate investment trust under Sections 856 through 860, or any successor sections, of the Internal Revenue Code of 1986, as amended, or any successor statute (the “Code”)), for which corporations may be organized under the MGCL and the general laws of the State of Maryland as now or hereafter in force.

ARTICLE III.

RESIDENT AGENT AND PRINCIPAL OFFICE

The name and address of the resident agent for service of process of the Company in the State of Maryland is CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 820, Baltimore, Maryland 21202. The address of the Company’s principal office in the State of Maryland is c/o CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 820, Baltimore, Maryland 21202. The Company may have such other offices and places of business within or outside the State of Maryland as the Board may from time to time determine.

ARTICLE IV.

DEFINITIONS

As used in the Charter, the following terms shall have the following meanings unless the context otherwise requires:

“BOARD” means the Board of Directors of the Company.

“BYLAWS” means the Bylaws of the Company, as amended from time to time.

“CHARTER” means the charter of the Company.

“CODE” shall have the meaning as provided in Article II herein.

“COMMENCEMENT OF THE INITIAL PUBLIC OFFERING” shall mean the date that the Securities and Exchange Commission declares effective the registration statement filed under the Securities Act for the Initial Public Offering.

“COMMON SHARES” shall have the meaning as provided in Section 5.1 herein.

“COMPANY” shall have the meaning as provided in Article I herein.

“DIRECTOR” means a director of the Company.

“DISTRIBUTIONS” means any distributions, as such term is defined in Section 2-301 of the MGCL.

“MGCL” means the Maryland General Corporation Law, as in effect from time to time.

“PERSON” means an individual, corporation, partnership, estate, trust (including a trust qualified under Sections 401(a) or 501(c)(17) of the Code), portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other legal entity and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, and a group to which an Excepted Holder Limit (as defined in Section 5.7(i) hereof) applies.

“PREFERRED SHARES” shall have the meaning as provided in Section 5.1 herein.

“REIT PROVISIONS OF THE CODE” means Sections 856 through 860 of the Code and any successor or other provisions of the Code relating to real estate investment trusts (including provisions as to the attribution of ownership of beneficial interests therein) and the regulations promulgated thereunder.

“SECURITIES” means any of the following issued by the Company, as the text requires: Shares, any other stock, shares or other evidences of equity or beneficial or other interests, voting trust certificates, bonds, debentures, notes or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in, temporary or interim certificates for, receipts for, guarantees of, or warrants, options or rights to subscribe to, purchase or acquire, any of the foregoing.

“SHARES” means shares of stock of the Company of any class or series, including Common Shares and Preferred Shares.

“STOCKHOLDERS” means the holders of record of the Shares as maintained in the books and records of the Company or its transfer agent.

ARTICLE IV.

STOCK

SECTION 5.1 AUTHORIZED SHARES . The total number of Shares that the Company shall have authority to issue is 350,000,000 Shares, of which (i) 300,000,000 shall be designated as common stock, $0.01 par value per Share (the “Common Shares”); and (ii) 50,000,000 shall be designated as preferred

stock, $0.01 par value per Share (the “Preferred Shares”). The aggregate par value of all authorized Shares having par value is $3,500,000. If Shares of one class of stock are classified or reclassified into Shares of another class of stock pursuant to Section 5.2(ii) or Section 5.3 of this Article V, the number of authorized Shares of the former class shall be automatically decreased and the number of Shares of the latter class shall be automatically increased, in each case by the number of Shares so classified or reclassified, as the case may be, so that the aggregate number of Shares of all classes that the Company has authority to issue shall not be more than the total number of Shares set forth in the first sentence of this Section 5.1. The Board, with the approval of a majority of the entire Board and without any action by the Stockholders, may amend the Charter from time to time to increase or decrease the aggregate number of Shares or the number of Shares of any class or series that the Company has authority to issue.

SECTION 5.2 COMMON SHARES

(i) COMMON SHARES SUBJECT TO TERMS OF PREFERRED SHARES . The Common Shares shall be subject to the express terms of any series of Preferred Shares.

(ii) DESCRIPTION . Subject to Section 5.7 hereof and except as may otherwise be specified in the Charter, each Common Share shall entitle the holder thereof to one vote. The Board may classify or reclassify any unissued Common Shares from time to time into one or more classes or series of stock.

(iii) DISTRIBUTION RIGHTS . The Board from time to time may authorize the Company to declare and pay to Stockholders such dividends or other Distributions in cash or other assets of the Company, or in securities of the Company, including Shares of one class payable to holders of Shares of another class, or from any other source as the Board in its discretion shall determine. The Board shall endeavor to authorize the Company to declare and pay such dividends and other Distributions as shall be necessary for the Company to qualify as a REIT under the REIT Provisions of the Code unless the Board has determined, in its sole discretion, that qualification as a REIT is not in the best interests of the Company; provided, however, Stockholders shall have no right to any dividend or other Distribution unless and until authorized by the Board and declared by the Company. The exercise of the powers and rights of the Board pursuant to this section shall be subject to the provisions of any class or series of Shares at the time outstanding. The receipt by any Person in whose name any Shares are registered on the records of the Company or by his or her duly authorized agent shall be a sufficient discharge for all dividends or other Distributions payable or deliverable in respect of such Shares and from all liability to see to the application thereof.

(iv) RIGHTS UPON LIQUIDATION . In the event of any voluntary or involuntary liquidation, dissolution or winding up, or any distribution of the assets of the Company, the aggregate assets available for distribution to holders of the Common Shares shall be determined in accordance with applicable law. Each holder of Common Shares of a particular class shall be entitled to receive, ratably with each other holder of Common Shares of such class, that portion of such aggregate assets available for distribution as the number of outstanding Common Shares of such class held by such holder bears to the total number of outstanding Common Shares of such class then outstanding.

(v) VOTING RIGHTS . Except as may be provided otherwise in the Charter, and subject to the express terms of any class or series of Preferred Shares, the holders of the Common Shares shall have the exclusive right to vote on all matters (as to which a common Stockholder shall be entitled to vote pursuant to applicable law) at all meetings of the Stockholders.

SECTION 5.3 PREFERRED SHARES . The Board may classify any unissued Preferred Shares and reclassify any previously classified but unissued Preferred Shares of any series from time to time, into one or more classes or series of Shares.

SECTION 5.4 CLASSIFIED OR RECLASSIFIED SHARES . Prior to issuance of classified or reclassified Shares of any class or series, the Board by resolution shall: (a) designate that class or series to distinguish it from all other classes and series of Shares; (b) specify the number of Shares to be included in the class or series; (c) set or change, subject to the provisions of Section 5.7 and subject to the express terms of any class or series of Shares outstanding at the time, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other Distributions, qualifications and terms and conditions of redemption for each class or series; and (d) cause the Company to file articles supplementary with the State Department of Assessments and Taxation of Maryland. Any of the terms of any class or series of Shares set or changed pursuant to clause (c) of this Section 5.4 may be made dependent upon facts or events ascertainable outside the Charter (including determinations by the Board or other facts or events within the control of the Company) and may vary among holders thereof, provided that the manner in which such facts, events or variations shall operate upon the terms of such class or series of Shares is clearly and expressly set forth in the articles supplementary or other Charter document.

SECTION 5.5 STOCKHOLDERS’ CONSENT IN LIEU OF MEETING . Any action required or permitted to be taken at any meeting of the Stockholders may be taken without a meeting by consent, in writing or by electronic transmission, in any manner and by the vote permitted by the MGCL and set forth in the Bylaws.

SECTION 5.6 CHARTER AND BYLAWS . The rights of all Stockholders and the terms of all Shares are subject to the provisions of the Charter and the Bylaws.

SECTION 5.7 RESTRICTIONS ON OWNERSHIP AND TRANSFER .

(i) DEFINITIONS . For purposes of this Section 5.7, the following terms shall have the following meanings:

“AGGREGATE SHARE OWNERSHIP LIMIT” means 9.8% in value of the aggregate of the outstanding Shares and 9.8% (in value or in number of shares, whichever is more restrictive) of any class or series of Shares, or such other percentage determined by the Board in accordance with Section 5.7(ii)(h) hereof.

“BENEFICIAL OWNERSHIP” means ownership of Shares by a Person, whether the interest in the Shares is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms “Beneficial Owner,” “Beneficially Owns” and “Beneficially Owned” shall have the correlative meanings.

“BUSINESS DAY” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York City are authorized or required by law, regulation or executive order to close.

“CHARITABLE BENEFICIARY” means one or more beneficiaries of the Trust as determined pursuant to Section 5.7(iii)(f), provided that each such organization must be described in Section 501(c)(3)

of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.

“CONSTRUCTIVE OWNERSHIP” means ownership of Shares by a Person, whether the interest in the Shares is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code. The terms “Constructive Owner,” “Constructively Owns,” “Constructively Owning” and “Constructively Owned” shall have the correlative meanings.

“EXCEPTED HOLDER” means a Stockholder for whom an Excepted Holder Limit is created by the Board pursuant to Section 5.7(ii)(g).

“EXCEPTED HOLDER LIMIT” means, provided that the affected Excepted Holder agrees to comply with the requirements established by the Board pursuant to Section 5.7(ii)(g), and subject to adjustment pursuant to Section 5.7(ii)(h), the percentage limit established by the Board pursuant to Section 5.7(ii)(g).

“MARKET PRICE” on any date means, with respect to any class or series of outstanding Shares, the Closing Price for such Shares on such date. The “Closing Price” on any date shall mean the last sale price for such Shares, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for such Shares, in either case as reported on the principal national securities exchange on which such Shares are listed or admitted to trading or, if such Shares are not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the principal automated quotation system that may then be in use or, if such Shares are not quoted by any such system, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such Shares selected by the Board or, in the event that no trading price is available for such Shares, the fair market value of the Shares, as determined by the Board.

“PROHIBITED OWNER” means, with respect to any purported Transfer, any Person who, but for the provisions of Section 5.7, would Beneficially Own or Constructively Own Shares in violation of Section 5.7(ii)(a), and if appropriate in the context, shall also mean any Person who would have been the record owner of the Shares that the Prohibited Owner would have so owned.

“RESTRICTION TERMINATION DATE” means the first day on which the Board determines pursuant to Section 7.4 hereof that it is no longer in the best interests of the Company to attempt to, or continue to, qualify as a REIT or that compliance with the restrictions and limitations on Beneficial Ownership, Constructive Ownership and Transfers of Shares set forth herein is no longer required in order for the Company to qualify as a REIT.

“TRANSFER” means any issuance, sale, transfer, gift, assignment, devise or other disposition, as well as any other event that causes any Person to acquire Beneficial Ownership or Constructive Ownership of Shares or the right to vote or receive dividends on Shares, or any agreement to take any such actions or cause any such events, including (a) the granting or exercise of any option (or any disposition of any option), (b) any disposition of any securities or rights convertible into or exchangeable for Shares or any interest in Shares or any exercise of any such conversion or exchange right and (c) Transfers of interests in other entities that result in changes in Beneficial or Constructive Ownership of Shares; in each case, whether voluntary or involuntary, whether owned of record, Constructively Owned or Beneficially Owned and whether by operation of law or otherwise. The terms “Transferring” and “Transferred” shall have the correlative meanings.

“TRUST” means any trust provided for in Section 5.7(iii)(a).

“TRUSTEE” means the Person unaffiliated with the Company and a Prohibited Owner, that is appointed by the Company to serve as trustee of the Trust.

(ii) SHARES .

(a) OWNERSHIP LIMITATIONS . Prior to the Restriction Termination Date, but subject to Section 5.8:

(I) BASIC RESTRICTIONS .

(A) (1) Except as set forth in any articles supplementary creating any class or series of Shares, no Person, other than an Excepted Holder, shall Beneficially Own or Constructively Own Shares in excess of the Aggregate Share Ownership Limit and (2) no Excepted Holder shall Beneficially Own or Constructively Own Shares in excess of the Excepted Holder Limit for such Excepted Holder.

(B) No Person shall Beneficially or Constructively Own Shares to the extent that such Beneficial or Constructive Ownership of Shares would result in the Company being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year), or otherwise failing to qualify as a REIT (including, but not limited to, Beneficial or Constructive Ownership that would result in the Company owning (actually or Constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Company from such tenant would cause the Company to fail to satisfy any of the gross income requirements of Section 856(c) of the Code).

(C) Any Transfer of Shares that, if effective, would result in the Shares being beneficially owned by fewer than 100 Persons (as determined under the principles of Section 856(a)(5) of the Code) shall be void ab initio, and the intended transferee shall acquire no rights in such Shares.

(II) TRANSFER IN TRUST. If any Transfer of Shares occurs which, if effective, would result in any Person Beneficially Owning or Constructively Owning Shares in violation of Section 5.7(ii)(a)(I)(A) or (B),

(A) then that number of Shares the Beneficial Ownership or Constructive Ownership of which otherwise would cause such Person to violate Section 5.7(ii)(a)(I)(A) or (B) (rounded up to the nearest whole share) shall be automatically transferred to a Trust for the benefit of a Charitable Beneficiary, as described in Section 5.7(iii), effective as of the close of business on the Business Day prior to the date of such Transfer, and such Person shall acquire no rights in such Shares; or

(B) if the transfer to the Trust described in clause (A) of this sentence would not be effective for any reason to prevent the violation of Section 5.7(ii)(a)(I)(A) or (B) then the Transfer of that number of Shares that otherwise would cause any Person to violate Section 5.7(ii)(a)(I)(A) or (B) shall be void ab initio, and the intended transferee shall acquire no rights in such Shares.

(III) To the extent that, upon a transfer of Shares pursuant to this Section 5.7(ii)(a)(II), a violation of any provision of this Section 5.7 would nonetheless be continuing (for example where the ownership of Shares by a single Trust would violate the 100 stockholder requirement applicable to REITs), then Shares shall be transferred to the number of Trusts, each having a distinct Trustee and one or more Charitable Beneficiaries that are distinct from those of each other Trust, such that there is no violation of any provision of this Section 5.7.

(b) REMEDIES FOR BREACH . If the Board shall at any time determine that a Transfer or other event has taken place that results in a violation of Section 5.7(ii)(a) or that a Person intends to acquire or has attempted to acquire Beneficial or Constructive Ownership of any Shares in violation of Section 5.7(ii)(a) (whether or not such violation is intended), the Board shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, without limitation, causing the Company to redeem Shares, refusing to give effect to such Transfer on the books of the Company or instituting proceedings to enjoin such Transfer or other event; provided, however, that any Transfer or attempted Transfer or other event in violation of Section 5.7(ii)(a) shall automatically result in the transfer to the Trust described above, and, where applicable, such Transfer (or other event) shall be void ab initio as provided above irrespective of any action (or non-action) by the Board thereof.

(c) NOTICE OF RESTRICTED TRANSFER . Any Person who acquires or attempts or intends to acquire Beneficial Ownership or Constructive Ownership of Shares that will or may violate Section 5.7(ii)(a)(I)(A) or (B) or any Person who would have owned Shares that resulted in a transfer to the Trust pursuant to the provisions of Section 5.7(ii)(a)(II) shall immediately give written notice to the Company of such event, or in the case of such a proposed or attempted transaction, give at least 15 days prior written notice to the Company, and shall provide to the Company such other information as the Company may request in order to determine the effect, if any, of such Transfer on the Company’s status as a REIT.

(d) OWNERS REQUIRED TO PROVIDE INFORMATION . Prior to the Restriction Termination Date:

(I) every owner of more than five percent (or such lower percentage as required by the Code or the Treasury Regulations promulgated thereunder) of the outstanding Shares, within 30 days after the end of each taxable year, shall give written notice to the Company stating the name and address of such owner, the number of Shares Beneficially Owned and a description of the manner in which such Shares are held. Each such owner shall provide to the Company such additional information as the Company may request in order to determine the effect, if any, of such Beneficial Ownership on the Company’s status as a REIT and to ensure compliance with the Aggregate Share Ownership Limit; and

(II) each Person who is a Beneficial or Constructive Owner of Shares and each Person (including the stockholder of record) who is holding Shares for a Beneficial Owner or a Constructive Owner shall provide to the Company such information as the Company may request, in good faith, in order to determine the Company’s status as a REIT and to comply with requirements of any taxing authority or governmental authority or to determine such compliance.

(e) REMEDIES NOT LIMITED . Subject to Section 7.4 hereof, nothing contained in this Section 5.7(ii)(e) shall limit the authority of the Board to take such other action as it deems

necessary or advisable to protect the Company and the interests of its stockholders in preserving the Company’s status as a REIT.

(f) AMBIGUITY . In the case of an ambiguity in the application of any of the provisions of this Section 5.7(ii), Section 5.7(iii), or any definition contained in Section 5.7(i), the Board shall have the power to determine the application of the provisions of this Section 5.7(ii) or Section 5.7(iii) or any such definition with respect to any situation based on the facts known to it. In the event Section 5.7(ii) or (iii) requires an action by the Board and the Charter fails to provide specific guidance with respect to such action, the Board shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of Section 5.7. Absent a decision to the contrary by the Board (which the Board may make in its sole and absolute discretion), if a Person would have (but for the remedies set forth in Section 5.7(ii)(b)) acquired Beneficial Ownership or Constructive Ownership of Shares in violation of Section 5.7(ii)(a), such remedies (as applicable) shall apply first to the Shares which, but for such remedies, would have been Beneficially Owned or Constructively Owned (but not actually owned) by such Person, pro rata among the Persons who actually own such Shares based upon the relative number of the Shares held by each such Person.

(g) EXCEPTIONS .

(I) Subject to Section 5.7(ii)(a)(I)(B), the Board, in its sole discretion, may (prospectively or retroactively) exempt a Person from the Aggregate Share Ownership Limit and may establish or increase an Excepted Holder Limit for such Person if:

(A) the Board obtains such representations and undertakings from such Person as are reasonably necessary to ascertain that no individual’s Beneficial Ownership or Constructive Ownership of such Shares will violate Section 5.7(ii)(a)(I)(B);

(B) such Person does not, and represents that it will not, actually own or Constructively Own an interest in a tenant of the Company (or a tenant of any entity owned or controlled by the Company) that would cause the Company to actually own or Constructively Own more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant and the Board obtains such representations and undertakings from such Person as are reasonably necessary to ascertain this fact (for this purpose, a tenant from whom the Company (or an entity owned or controlled by the Company) derives (and is expected to continue to derive) a sufficiently small amount of revenue such that, in the opinion of the Board, rent from such tenant would not adversely affect the Company’s ability to qualify as a REIT, shall not be treated as a tenant of the Company); and

(C) such Person agrees that any violation or attempted violation of such representations or undertakings (or other action which is contrary to the restrictions contained in Section 5.7(ii)(a) through Section 5.7(ii)(f) will result in such Shares being automatically transferred to a Trust in accordance with Section 5.7(ii)(a)(II) and Section 5.7(iii).

(II) Prior to granting any exception pursuant to Section 5.7(ii)(g)(I), the Board may require a ruling from the Internal Revenue Service, or an opinion of counsel, in either case in form and substance satisfactory to the Board in its sole discretion, as it may deem necessary or advisable in order to determine or ensure the Company’s status as a REIT. Notwithstanding the receipt of any ruling or

opinion, the Board may impose such conditions or restrictions as it deems appropriate in connection with granting such exception.

(III) Subject to Section 5.7(ii)(a)(I)(B), an underwriter which participates in an Offering or a private placement of Shares (or Securities convertible into or exchangeable for shares of Capital Stock) may Beneficially Own or Constructively Own Shares (or Securities convertible into or exchangeable for Shares) in excess of the Aggregate Share Ownership Limit but only to the extent necessary to facilitate such Offering or private placement.

(IV) The Board may only reduce the Excepted Holder Limit for an Excepted Holder: (1) with the written consent of such Excepted Holder at any time, or (2) pursuant to the terms and conditions of the agreements and undertakings entered into with such Excepted Holder in connection with the establishment of the Excepted Holder Limit for that Excepted Holder. No Excepted Holder Limit shall be reduced to a percentage that is less than the Aggregate Share Ownership Limit.

(h) INCREASE OR DECREASE IN AGGREGATE SHARE OWNERSHIP LIMIT . Subject to Section 5.7(ii)(a)(I)(B), the Board may from time to time increase the Aggregate Share Ownership Limit for one or more Persons and decrease the Aggregate Share Ownership Limit for all other Persons; provided, however, that the decreased Aggregate Share Ownership Limit will not be effective for any Person whose percentage ownership of Shares is in excess of such decreased Aggregate Share Ownership Limit until such time as such Person’s percentage of Shares equals or falls below the decreased Aggregate Share Ownership Limit, but any further acquisition of Shares in excess of such percentage ownership of Shares will be in violation of the Aggregate Share Ownership Limit and, provided further, that the new Aggregate Share Ownership Limit would not allow five or fewer Persons to Beneficially Own or Constructively Own more than 49.9% in value of the outstanding Shares.

(i) NOTICE TO STOCKHOLDERS UPON ISSUANCE OR TRANSFER . Upon issuance or Transfer of Shares prior to the Restriction Termination Date, the Company shall provide the recipient with a notice containing information about the Shares purchased or otherwise Transferred, in lieu of issuance of a share certificate, in a form substantially similar to the following:

The securities of American Finance Trust, Inc. (the “Company”) are subject to restrictions on Beneficial and Constructive Ownership and Transfer for the purpose, among others, of the Company’s maintenance of its status as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the “Code”). Subject to certain further restrictions and except as expressly provided in the Company’s charter, (i) no Person may Beneficially or Constructively Own Shares in excess of 9.8% of the value of the total outstanding Shares or 9.8% (in value or in number of Shares, whichever is more restrictive) of any class or series of Shares unless such Person is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (ii) no Person may Beneficially or Constructively Own Shares that would result in the Company being “closely held” under Section 856(h) of the Code or otherwise cause the Company to fail to qualify as a REIT; and (iii) any Transfer of Shares that, if effective, would result in the Shares being beneficially owned by fewer than 100 Persons (as determined under the principles of Section 856(a)(5) of the Code) shall be void ab initio and the intended transferee shall acquire no rights in such shares. Any Person who Beneficially or Constructively Owns or attempts to Beneficially or Constructively Own Shares which causes or will cause a Person to Beneficially or Constructively Own Shares in excess or in violation of the above limitations must immediately notify the Company in writing (or, in the case of

an attempted transaction, give at least 15 days prior written notice) to the Company. If any of the restrictions on Transfer or ownership as set forth in (i) and (ii) above are violated, the Shares in excess or in violation of the above limitations will be automatically transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries. In addition, the Company may redeem Shares upon the terms and conditions specified by the Board in its sole discretion if the Board determines that ownership or a Transfer or other event may violate the restrictions described above. Furthermore, upon the occurrence of certain events, attempted Transfers in violation of the restrictions described above may be void ab initio. All capitalized terms in this notice have the meanings defined in the Company’s charter, as the same may be amended from time to time, a copy of which, including the restrictions on Transfer and ownership, will be furnished to each holder of Shares on request and without charge. Requests for such a copy may be directed to the Secretary of the Company at its principal office.

(vi) TRANSFER OF SHARES IN TRUST .

(a) OWNERSHIP IN TRUST . Upon any purported Transfer or other event described in Section 5.7(ii)(a)(III) that would result in a transfer of Shares to a Trust, such Shares shall be transferred to the Trustee as trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be effective as of the close of business on the Business Day prior to the purported Transfer or other event that results in the transfer to the Trust pursuant to Section 5.7(ii)(a)(III). The Trustee shall be appointed by the Company and shall be a Person unaffiliated with the Company and any Prohibited Owner. Each Charitable Beneficiary shall be designated by the Company as provided in Section 5.7(iii)(f).

(b) STATUS OF SHARES HELD BY THE TRUSTEE . Shares held by the Trustee shall be issued and outstanding Shares. The Prohibited Owner shall have no rights in the shares held by the Trustee. The Prohibited Owner shall not benefit economically from ownership of any Shares held in trust by the Trustee, shall have no rights to dividends or other Distributions and shall not possess any rights to vote or other rights attributable to the Shares held in the Trust.

(c) DIVIDEND AND VOTING RIGHTS . The Trustee shall have all voting rights and rights to dividends or other Distributions with respect to Shares held in the Trust, which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary. Any dividend or other Distribution paid prior to the discovery by the Company that the Shares have been transferred to the Trustee shall be paid by the recipient of such dividend or other Distribution to the Trustee upon demand and any dividend or other Distribution authorized but unpaid shall be paid when due to the Trustee. Any dividend or other Distribution so paid to the Trustee shall be held in trust for the Charitable Beneficiary. The Prohibited Owner shall have no voting rights with respect to Shares held in the Trust and, subject to Maryland law, effective as of the date that the Shares have been transferred to the Trustee, the Trustee shall have the authority (at the Trustee’s sole discretion) (i) to rescind as void any vote cast by a Prohibited Owner prior to the discovery by the Company that the Shares have been transferred to the Trustee and (ii) to recast such vote in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary; provided, however, that if the Company has already taken irreversible corporate action, then the Trustee shall not have the authority to rescind and recast such vote. Notwithstanding the provisions of this Section 5.7, until the Company has received notification that Shares have been transferred into a Trust, the Company shall be entitled to rely on its stock transfer and other stockholder records for purposes of preparing lists of Stockholders

entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of Stockholders.

(d) SALE OF SHARES BY TRUSTEE . Within twenty (20) days of receiving notice from the Company that Shares have been transferred to the Trust, the Trustee shall sell the Shares held in the Trust to a Person, designated by the Trustee, whose ownership of the Shares will not violate the ownership limitations set forth in Section 5.7(ii)(a)(I) or (II). Upon such sale, the interest of the Charitable Beneficiary in the Shares sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and to the Charitable Beneficiary as provided in this Section 5.7(iii)(d). The Prohibited Owner shall receive the lesser of (1) the price paid by the Prohibited Owner for the Shares or, if the Prohibited Owner did not give value for the Shares in connection with the event causing the Shares to be held in the Trust (e.g., in the case of a gift, devise or other such transaction), the Market Price of the Shares on the day of the event causing the Shares to be held in the Trust and (2) the price per Share received by the Trustee from the sale or other disposition of the shares held in the Trust. The Trustee may reduce the amount payable to the Prohibited Owner by the amount of dividends and other Distributions which have been paid to the Prohibited Owner and are owed by the Prohibited Owner to the Trustee pursuant to Section 5.7(iii)(c). Any net sales proceeds in excess of the amount payable to the Prohibited Owner shall be immediately paid to the Charitable Beneficiary. If, prior to the discovery by the Company that Shares have been Transferred to the Trustee, such Shares are sold by a Prohibited Owner, then (i) such Shares shall be deemed to have been sold on behalf of the Trust and (ii) to the extent that the Prohibited Owner received an amount for such Shares that exceeds the amount that such Prohibited Owner was entitled to receive pursuant to this Section 5.7, such excess shall be paid to the Trustee upon demand.

(e) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE . Shares transferred to the Trustee shall be deemed to have been offered for sale to the Company, or its designee, at a price per Share equal to the lesser of (i) the price per Share in the transaction that resulted in such transfer to the Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Company, or its designee, accepts such offer. The Company may reduce the amount payable to the Prohibited Owner by the amount of dividends and other Distributions which has been paid to the Prohibited Owner and is owed by the Prohibited Owner to the Trustee pursuant to Section 5.7(iii)(c). The Company may pay the amount of such reduction to the Trustee for the benefit of the Charitable Beneficiary. The Company shall have the right to accept such offer until the Trustee has sold the Shares held in the Trust pursuant to Section 5.7(iii)(d). Upon such a sale to the Company, the interest of the Charitable Beneficiary in the Shares sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Prohibited Owner.

(f) DESIGNATION OF CHARITABLE BENEFICIARIES . By written notice to the Trustee, the Company shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust such that (i) the Shares held in the Trust would not violate the restrictions set forth in Section 5.7(ii)(a)(I) or (II) in the hands of such Charitable Beneficiary and (ii) each such organization must be described in Section 501(c)(3) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1) (A), 2055 and 2522 of the Code.

SECTION 5.8 SETTLEMENTS . Nothing in Section 5.7 shall preclude the settlement of any transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system. The fact that the settlement of any transaction occurs shall not

negate the effect of any provision of Sections 5.7, and any transfer in such a transaction shall be subject to all of the provisions and limitations set forth in Section 5.7.

SECTION 5.9 SEVERABILITY . If any provision of Section 5.7 or any application of any such provision is determined to be void, invalid or unenforceable by any court having jurisdiction over the issue, the validity and enforceability of the remaining provisions of Section 5.7 shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court.

SECTION 5.10 ENFORCEMENT . The Company is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of Section 5.7.

SECTION 5.11 NON-WAIVER . No delay or failure on the part of the Company or the Board in exercising any right hereunder shall operate as a waiver of any right of the Company or the Board, as the case may be, except to the extent specifically waived in writing.

SECTION 5.12 PREEMPTIVE AND APPRAISAL RIGHTS . Except as may be provided by the Board in setting the terms of classified or reclassified Shares pursuant to Section 5.4 or as may otherwise be provided by contract approved by the Board, no holder of Shares shall, as such holder, have any preemptive right to purchase or subscribe for any additional Shares or any other Security which it may issue or sell. Holders of Shares shall not be entitled to exercise any rights of an objecting stockholder provided for under Title 3, Subtitle 2 of the MGCL or any successor statute unless the Board, upon the affirmative vote of a majority of the Board, shall determine that such rights apply, with respect to all or any classes or series of Shares, to one or more transactions occurring after the date of such determination in connection with which holders of such Shares would otherwise be entitled to exercise such rights.

ARTICLE VI.

BOARD OF DIRECTORS

SECTION 6.1 NUMBER OF DIRECTORS . The business and affairs of the Company shall be managed under the direction of the Board of Directors. The number of Directors of the Company shall be four, which number may be increased or decreased from time to time pursuant to the Bylaws; but shall never be less than the minimum required by the MGCL. The Company elects that, except as may be provided by the Board in setting the terms of any class or series of Preferred Shares, any and all vacancies on the Board, may be filled only by the affirmative vote of a majority of the remaining Directors in office, even if the remaining Directors do not constitute a quorum, and any Director elected to fill a vacancy shall serve for the remainder of the full term of the directorship in which such vacancy occurred. No reduction in the number of Directors shall cause the removal of any Director from office prior to the expiration of his term. For the purposes of voting for Directors, each Share may be voted for as many individuals as there are Directors to be elected and for whose election the Share is entitled to be voted. Cumulative voting for Directors is prohibited.

The names of the Directors who shall serve on the Board until the next annual meeting of the Stockholders and until their successors are duly elected and qualify, are:

William M. Kahane

David Gong

Stanley R. Perla

Herbert T. Vederman

SECTION 6.2 RESIGNATION OR REMOVAL . Any Director may resign by delivering his notice to the Board, the Chairman of the Board, the chief executive officer or the Secretary. Any notice of resignation shall take effect upon receipt by the Board, the Chairman of the Board, the chief executive officer or the Secretary of such notice or upon any future date specified in the notice. Subject to the rights of holders of one or more classes or series of Preferred Shares, any Director or the entire Board may be removed from office at any time, but only for cause, and then only by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast generally in the election of Directors. For the purpose of this paragraph, “cause” shall mean, with respect to any particular Director, conviction of a felony or a final judgment of a court of competent jurisdiction holding that such director caused demonstrable, material harm to the Company through bad faith or active and deliberate dishonesty.

ARTICLE VII.

POWERS OF THE BOARD OF DIRECTORS

SECTION 7.1 GENERAL . The business and affairs of the Company shall be managed under the direction of the Board. In accordance with the policies on investments and borrowing set forth in this Article VII hereof, the Board shall monitor the administrative procedures, investment operations and performance of the Company and the Advisor to assure that such policies are carried out. The Board may take any action that, in its sole judgment and discretion, is necessary or desirable to conduct the business of the Company. The Charter shall be construed with a presumption in favor of the grant of power and authority to the Board. Any construction of the Charter or determination made by the Board concerning its powers and authority hereunder shall be conclusive. The enumeration and definition of particular powers of the Board included in this Article VII shall in no way be limited or restricted by reference to or inference from the terms of this or any other provision of the Charter or construed or deemed by inference or otherwise in any manner to exclude or limit the powers conferred upon the Board under the general laws of the State of Maryland as now or hereafter in force.

SECTION 7.2 AUTHORIZATION BY BOARD OF STOCK ISSUANCE . The Board may authorize the issuance from time to time of Shares of any class or series, whether now or hereafter authorized, or securities or rights convertible into Shares of any class or series, whether now or hereafter authorized, for such consideration as the Board may deem advisable (or without consideration in the case of a stock split or stock dividend), subject to such restrictions or limitations, if any, as may be set forth in the Charter or the Bylaws.

SECTION 7.3 FINANCINGS . The Board shall have the power and authority to cause the Company to borrow or, in any other manner, raise money for the purposes and on the terms it determines, which terms may (i) include evidencing the same by issuance of Securities and (ii) have such provisions as the Board may determine (a) to reacquire such Securities; (b) to enter into other contracts or obligations on behalf of the Company; (c) to guarantee, indemnify or act as surety with respect to payment or performance of obligations of any Person; and (d) to mortgage, pledge, assign, grant security interests in or otherwise encumber the Company’s assets to secure any such Securities, contracts or obligations (including guarantees, indemnifications and suretyships); and to renew, modify, release, compromise, extend, consolidate or cancel, in whole or in part, any obligation to or of the Company or participate in any reorganization of obligors to the Company.

SECTION 7.4 REIT QUALIFICATION . The Board shall use its reasonable best efforts to take such actions as are necessary or appropriate to preserve the status of the Company as a REIT; provided, however, if the Board determines that it is no longer in the best interests of the Company to continue to be qualified as a REIT, the Board may revoke or otherwise terminate the Company’s REIT election pursuant to Section 856(g) of the Code. The Board also may determine that compliance with any restriction or limitation on stock ownership and transfers set forth in Section 5.7 hereof is no longer required for REIT qualification.

SECTION 7.5 DETERMINATIONS BY BOARD . The determination as to any of the following matters, made pursuant to the direction of the Board, shall be final and conclusive and shall be binding upon the Company and every Stockholder: the amount of the net income of the Company for any period and the amount of assets at any time legally available for the payment of dividends, redemption of Shares or the payment of other Distributions on Shares; the amount of paid-in surplus, net assets, other surplus, annual or other cash flow, funds from operations, adjusted or modified funds from operations, net profit, net assets in excess of capital, undivided profits or excess of profits over losses on sales of assets; the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any obligation or liability for which such reserves or charges shall have been created shall have been paid or discharged); any interpretation or resolution of any ambiguity with respect to any provision of the Charter (including the terms, preferences, conversion or other rights, voting powers or rights, restrictions, limitations as to dividends or other Distributions, qualifications or terms or conditions of redemption of any class or series of Shares) or Bylaws; the fair value, or any sale, bid or asked price to be applied in determining the fair value, of any asset owned or held by the Company or any Shares; the number of Shares of any class of the Company; any matter relating to the acquisition, holding and disposition of any assets by the Company; the application of any provision of the Charter in the case of any ambiguity; any interpretation of the terms and conditions of one or more of the agreements with any Person; or any other matter relating to the business and affairs of the Company or required or permitted by applicable law, the Charter or Bylaws or otherwise to be determined by the Board; provided, however, that any determination by the Board as to any of the preceding matters shall not render invalid or improper any action taken or omitted prior to such determination and no Director shall be liable for making or failing to make such a determination.

ARTICLE VIII.

EXTRAORDINARY ACTIONS

Except as specifically provided in Section 6.2 hereof (relating to removal of Directors) and in the last sentence of Article X, notwithstanding any provision of law permitting or requiring any action to be taken or approved by the affirmative vote of the holders of Shares entitled to cast a greater number of votes, any such action shall be effective and valid if declared advisable by the Board and taken or approved by the affirmative vote of holders of Shares entitled to cast a majority of all the votes entitled to be cast on the matter.

ARTICLE IX.

LIABILITY OF STOCKHOLDERS, DIRECTORS, AND OFFICERS

SECTION 9.1 LIMITATION OF STOCKHOLDER LIABILITY . No Stockholder shall be liable for any debt, claim, demand, judgment or obligation of any kind of, against or with respect to the Company by reason of being a Stockholder, nor shall any Stockholder be subject to any personal liability whatsoever, in tort, contract or otherwise, to any Person in connection with the Company’s assets or the affairs of the Company by reason of being a Stockholder.

SECTION 9.2 LIMITATION OF DIRECTOR AND OFFICER LIABILITY; INDEMNIFICATION.

(a) To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of directors and officers of a corporation, no present or former Director or officer of the Company shall be liable to the Company or its Stockholders for money damages. Neither the amendment nor repeal of this Section 9.2(a), nor the adoption or amendment of any other provision of the Charter or Bylaws inconsistent with this Section 9.2(a), shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.

(b) The Company shall have the power, to the maximum extent permitted by Maryland law in effect from time to time, to obligate itself to indemnify, and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (i) any individual who is a present or former Director or officer of the Company or, (ii) any individual who, while a Director or officer of the Company and at the request of the Company, serves or has served as a director, officer, partner, member, manager or trustee of another corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or any other enterprise from and against any claim or liability to which such person may become subject or which such person may incur by reason of his or her service in that capacity. The Company shall have the power, with the approval of the Board, to provide such indemnification and advancement of expenses to a person who served a predecessor of the Company in any of the capacities described in (i) or (ii) above and to any employee or agent of the Company or a predecessor of the Company.

SECTION 9.3 EXPRESS EXCULPATORY CLAUSES IN INSTRUMENTS . Neither the Stockholders nor the Directors, officers, employees or agents of the Company shall be liable under any written instrument creating an obligation of the Company by reason of their being Stockholders, Directors, officers, employees or agents of the Company, and all Persons shall look solely to the Company’s assets for the payment of any claim under or for the performance of that instrument. The omission of the foregoing exculpatory language from any instrument shall not affect the validity or enforceability of such instrument and shall not render any Stockholder, Director, officer, employee or agent of the Company liable thereunder to any third party, nor shall the Directors or any officer, employee or agent of the Company be liable to anyone as a result of such omission.

ARTICLE X.

AMENDMENTS

The Company reserves the right from time to time to make any amendment to the Charter, now or hereafter authorized by law, including any amendment altering the terms or contract rights, as expressly set forth in the Charter, of any outstanding Shares. All rights and powers conferred by the Charter on Stockholders, Directors and officers are granted subject to this reservation. Except as otherwise provided in the next sentence and except for those amendments permitted to be made without Stockholder approval under Maryland law or by specific provision in the Charter, any amendment to the Charter shall be valid only if declared advisable by the Board and approved by the affirmative vote of stockholders entitled to cast a majority of all the votes entitled to be cast on the matter. However, any amendment to the second sentence of Section 6.2 hereof or to this sentence of the Charter shall be valid only if declared advisable by the Board and approved by the affirmative vote of stockholders entitled to cast at least two-thirds of all votes entitled to be cast on the matter.

THIRD : The amendment and restatement of the charter as herein set forth have been duly advised by the Board of Directors and approved by the stockholders of the Company as required by law.

FOURTH : The current address of the principal office of the Company is as set forth in Article III of the foregoing amendment and restatement of the charter.

FIFTH : The name and address of the Company’s current resident agent are as set forth in Article III of the foregoing amendment and restatement of the charter.

SIXTH : The number of directors of the Company and the names of the directors currently in office are as set forth in Section 6.1 of Article VI of the foregoing amendment and restatement of the charter.

SEVENTH : The undersigned acknowledges these Articles of Amendment and Restatement to be the corporate act of the Company and, as to all matters or facts required to be verified under oath, the undersigned acknowledges that, to the best of his or her knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

[SIGNATURES ON FOLLOWING PAGE]

IN WITNESS WHEREOF, American Finance Trust, Inc. has caused these Articles of Amendment and Restatement to be signed in its name and on its behalf by its Chief Executive Officer, and attested by its Secretary, on this 17 ^th day of July, 2015.



ATTEST:
By: /s/ Donald R. Ramon Name: Donald R. Ramon Title: Secretary	By: /s/ Donald MacKinnon Name: Donald MacKinnon Title: Chief Executive Officer

Exhibit 10.28

SECOND AMENDED AND RESTATED

ADVISORY AGREEMENT

BY AND AMONG

AMERICAN REALTY CAPITAL TRUST V, INC.,

AMERICAN REALTY CAPITAL OPERATING PARTNERSHIP V, L.P.,

AND

AMERICAN REALTY CAPITAL ADVISORS V, LLC

Dated as of April 29, 2015

TABLE OF CONTENTS



		Page
1.	DEFINITIONS	1

2.	APPOINTMENT	7

3.	DUTIES OF THE ADVISOR	7

4.	AUTHORITY OF ADVISOR	9

5.	FIDUCIARY RELATIONSHIP	9

6.	NO PARTNERSHIP OR JOINT VENTURE	9

7.	BANK ACCOUNTS	9

8.	RECORDS; ACCESS	10

9.	LIMITATIONS ON ACTIVITIES	10

10.	FEES	10

11.	EXPENSES	12

12.	OTHER SERVICES	14

13.	REIMBURSEMENT TO THE ADVISOR	14

14.	OTHER ACTIVITIES OF THE ADVISOR	14

15.	THE AMERICAN REALTY CAPITAL NAME	15

16.	TERM OF AGREEMENT	15

17.	TERMINATION BY THE PARTIES	15

18.	ASSIGNMENT	15

19.	PAYMENTS TO AND DUTIES OF ADVISOR UPON TERMINATION	15

20.	INCORPORATION OF THE ARTICLES OF INCORPORATION AND THE OPERATING PARTNERSHIP AGREEMENT	16

21.	INDEMNIFICATION BY THE COMPANY AND THE OPERATING PARTNERSHIP	16

22.	INDEMNIFICATION BY ADVISOR	17




23.	NOTICES	17

24.	MODIFICATION	18

25.	SEVERABILITY	18

26.	GOVERNING LAW	18

27.	ENTIRE AGREEMENT	18

28.	NO WAIVER	18

29.	PRONOUNS AND PLURALS	19

30.	HEADINGS	19

31.	EXECUTION IN COUNTERPARTS	19

ADVISORY AGREEMENT

THIS SECOND AMENDED AND RESTATED ADVISORY AGREEMENT (this “ Agreement ”) dated as of April 29, 2015, is entered into among American Realty Capital Trust V, Inc., a Maryland corporation (the “ Company ”), American Realty Capital Operating Partnership V, L.P., a Delaware limited partnership (the “ Operating Partnership ”), and American Realty Capital Advisors V, LLC, a Delaware limited liability company. This Agreement shall take effect on the date (the “ Effective Date ”) that is the date on which sections 8.1 and 8.5 of the Company’s Articles of Amendment and Restatement dated April 3, 2013, shall no longer be in effect.

WITNESSETH

WHEREAS, the Company is a Maryland corporation created in accordance with Maryland General Corporation Law;

WHEREAS, the Company is the general partner of the Operating Partnership;

WHEREAS, the Company and the Operating Partnership desire to avail themselves of the experience, sources of information, advice, assistance and certain facilities of the Advisor and to have the Advisor undertake the duties and responsibilities hereinafter set forth, on behalf of, and subject to the supervision of the Board of Directors of the Company, all as provided herein;

WHEREAS, the Advisor is willing to render such services, subject to the supervision of the Board of Directors of the Company, on the terms and subject to the conditions hereinafter set forth;

WHEREAS, the Company, the Operating Partnership and the Advisor (i) entered into that certain Advisory Agreement, dated as of April 4, 2013 (the “ Original Agreement ”) and (ii) amended and restated the Original Agreement on June 5, 2013 and as amended April 15, 2015 (the “ Amended and Restated Advisory Agreement ”); and

WHEREAS, the Company, the Operating Partnership and the Advisor desire to amend and restate the Amended and Restated Advisory Agreement with effect as of the Effective Date;

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto, intending to be legally bound as of the Effective Date, hereby agree as follows:

1. DEFINITIONS. As used in this Agreement, the following terms have the definitions set forth below:

“ Acquisition Expenses” means any and all expenses, exclusive of Acquisition Fees, incurred by the Company, the Operating Partnership, the Advisor or any of their Affiliates in connection with the selection, evaluation, acquisition, origination, making or development of any Investments, whether or not acquired, including, without limitation, legal fees and expenses, travel and communications expenses, brokerage fees, costs of appraisals, nonrefundable option payments on property not acquired, accounting fees and expenses, title insurance premiums and the costs of performing due diligence.

“ Acquisition Fee ” means the fee payable to the Advisor or its Affiliates pursuant to Section 10(a) .

“ Adjusted Outstanding Shares ” means, for the applicable period, the number of shares of Common Stock, OP Units and other equity-based awards, excluding restricted stock units or any other equity based awards that are subject to performance metrics that are not currently achieved, outstanding on a daily weighted average basis during such period, adjusted as necessary to exclude the effect of dividends or distributions paid in shares of Common Stock, subdivision of outstanding shares of Common Stock into a greater number of shares, combination of outstanding shares of Common Stock into a smaller number of shares, any reclassification of shares of Common Stock, repurchases by the Company of shares of Common Stock and redemptions of shares of Common Stock.

“ Advisor ” means American Realty Capital Advisors V, LLC, a Delaware limited liability company, any successor advisor to the Company and the Operating Partnership, or any Person to which American Realty Capital Advisors V, LLC or any successor advisor subcontracts substantially all its functions. Notwithstanding the foregoing, a Person hired or retained by American Realty Capital Advisors V, LLC to perform property management and related services for the Company or the Operating Partnership that is not hired or retained to perform substantially all the functions of American Realty Capital Advisors V, LLC with respect to the Company and the Operating Partnership as a whole shall not be deemed to be an Advisor.

“ Affiliate ” or “ Affiliated ” means with respect to any Person, (i) any other Person directly or indirectly owning, controlling or holding, with the power to vote, ten percent (10%) or more of the outstanding voting securities of such Person; (ii) any other Person ten percent (10%) or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by such Person; (iii) any other Person directly or indirectly controlling, controlled by or under common control with such Person; (iv) any executive officer, director, trustee or general partner of such Person; and (v) any legal entity for which such Person acts as an executive officer, director, trustee or general partner. For purposes of this definition, the terms “controls,” “is controlled by,” or “is under common control with” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an entity, whether through ownership or voting rights, by contract or otherwise.

“ Agreement ” has the meaning set forth in the preamble, and such term shall include any amendment or supplement hereto from time to time.

“ Amended and Restated Advisory Agreement ” has the meaning set forth in the recitals.

“ Anniversary Date ” means each one year anniversary date of the date of this Agreement.

“ Articles of Incorporation ” means the charter of the Company, as the same may be amended from time to time.

“ Base Management Fee ” means the fees payable to the Advisor or its assignees pursuant to Section 10(g) .

“ Board of Directors ” or “Board” means the Board of Directors of the Company.

“ By-laws ” means the by-laws of the Company, as amended and as the same are in effect from time to time.

“ Cause” means (i) fraud, criminal conduct, willful misconduct or illegal or negligent breach of fiduciary duty by the Advisor, or (ii) if any of the following events occur: (A) the Advisor shall breach any material provision of this Agreement, and after written notice of such breach, shall not cure such default within thirty (30) days or have begun action within thirty (30) days to cure the default which shall be completed with reasonable diligence; (B) the Advisor shall be adjudged bankrupt or insolvent by a court of competent jurisdiction, or an order shall be made by a court of competent jurisdiction for the appointment of a receiver, liquidator, or trustee of the Advisor, for all or substantially all its property by reason of the foregoing, or if a court of competent jurisdiction approves any petition filed against the Advisor for reorganization, and such adjudication or order shall remain in force or unstayed for a period of thirty (30) days; or (C) the Advisor shall institute proceedings for voluntary bankruptcy or shall file a petition seeking reorganization under the federal bankruptcy laws, or for relief under any law for relief of debtors, or shall consent to the appointment of a receiver for itself or for all or substantially all its property, or shall make a general assignment for the benefit of its creditors, or shall admit in writing its inability to pay its debts, generally, as they become due.

“ Change of Control ” means a change of control of the Company of a nature that would be required to be reported in response to the disclosure requirements of Schedule 14A of Regulation 14A promulgated under the Exchange Act, as enacted and in force on the date hereof, whether or not the Company is then subject to such reporting requirements; provided, however , that, without limitation, a Change of Control shall be deemed to have occurred if: (i) any “person” (within the meaning of Section 13(d) of the Exchange Act, as enacted and in force on the date hereof) is or becomes the “beneficial owner” (as that term is defined in Rule 13d-3, as enacted and in force on the date hereof, under the Exchange Act) of securities of the Company representing 9.8% or more of the combined voting power of the Company’s securities then outstanding; (ii) there occurs a merger, consolidation or other reorganization of the Company which is not approved by the Board of Directors; (iii) there occurs a sale, exchange, transfer or other disposition of substantially all the assets of the Company to another Person, which disposition is not approved by the Board of Directors; or (iv) there occurs a contested proxy solicitation of the Stockholders that results in the contesting party electing candidates to a majority of the Board of Directors’ positions next up for election.

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

“ Common Stock ” means the shares of the Company’s common stock, par value $0.01 per share.

“ Company ” has the meaning set forth in the preamble.

“ Competitive Real Estate Commission ” means a real estate or brokerage commission for the purchase or sale of an asset which is reasonable, customary and competitive in light of the size, type and location of the asset.

“ Contract Purchase Price ” has the meaning set forth in the Articles of Incorporation.

“ Contract Sales Price ” means the total consideration received by the Company for the sale of an Investment.

“ Core Earnings ” means the net income (loss), computed in accordance with GAAP, excluding (i) non-cash equity compensation expense, (ii) the Variable Management Fee, (iii) acquisition and transaction related fees and expenses, (iv) financing related fees and expenses, (v) depreciation and amortization, (vi) realized gains and losses on the sale of assets, (vii) any unrealized gains or losses or other non-cash items that are included in net income (loss) for the applicable reporting period, regardless of whether such items are included in other comprehensive income or loss, or in net income, (viii) one-time events pursuant to changes in GAAP and certain non-cash charges, (ix) impairment losses on real estate related investments and other than temporary impairment of securities, (x) amortization of deferred financing costs, (xi) amortization of tenant inducements, (xii) amortization of straight-line rent, (xiii) amortization of market lease intangibles, (xiv) provision for loan losses and (xv) other non-recurring revenue and expenses, in each case after discussions between the Advisor and the Independent Directors and approved by a majority of the Independent Directors.

“ Core Earnings Per Adjusted Share ” means, for the applicable period, Core Earnings divided by the Adjusted Outstanding Shares for such period.

“ Dealer Manager ” means Realty Capital Securities, LLC, or such other Person selected by the Board of Directors to act as the dealer manager for the Offering.

“ Dealer Manager Fee ” means the fee from the sale of Shares in a Primary Offering, payable to the Dealer Manager for serving as the dealer manager of such Primary Offering.

“ Director ” means a director of the Company.

“ Distributions ” means any distributions of money or other property by the Company to Stockholders, including distributions that may constitute a return of capital for U.S. federal income tax purposes.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute thereto. Reference to any provision of the Exchange Act shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

“ Fee Termination Date ” means the date that is 180 calendar days following the Effective Date.

“ Financing Coordination Fee ” means the fee payable to the Advisor or its Affiliates pursuant to Section 10(d) .

“ FINRA ” means the Financial Industry Regulatory Authority, Inc.

“ GAAP ” means United States generally accepted accounting principles, consistently applied.

“ Good Reason ” means: (i) any failure to obtain a satisfactory agreement from any successor to the Company or the Operating Partnership to assume and agree to perform obligations under this Agreement; or (ii) any material breach of this Agreement of any nature whatsoever by the Company or the Operating Partnership.

“ Gross Proceeds ” means the aggregate purchase price of all Shares sold for the account of the Company through an Offering, without deduction for Selling Commissions, volume discounts, any marketing support and due diligence expense reimbursement or Organization and Offering Expenses. For the purpose of computing Gross Proceeds, the purchase price of any Share for which reduced Selling Commissions are paid to the Dealer Manager or a Soliciting Dealer (where net proceeds to the Company are not reduced) shall be deemed to be the full amount of the offering price per Share pursuant to the Prospectus for such Offering without reduction.

“ Indemnitee ” has the meaning set forth in Section 20 .

“ Independent Director ” has the meaning set forth in the Articles of Incorporation.

“ Insourced Acquisition Expenses” means Acquisition Expenses incurred in connection with services performed by the Advisor or any of its Affiliates, including legal advisory expenses, due diligence expenses, personnel expenses, acquisition-related administrative and advisory expenses, survey, property, contract review expenses, travel and communications expenses and other closing costs.

“ Investments ” means any investments by the Company or the Operating Partnership, directly or indirectly, in Real Estate Assets, Real Estate Related Loans or any other asset.

“ Joint Ventures ” means the joint venture or partnership or other similar arrangements (other than between the Company and the Operating Partnership) in which the Company or the Operating Partnership or any of their subsidiaries is a co-venturer, limited liability company member, limited partner or general partner, which are established to acquire or hold Investments.

“ Listing ” means the listing of the Common Stock on a national securities exchange, or the inclusion of the Common Stock for trading in the over-the-counter-market.

“ Loans ” means any indebtedness or obligations in respect of borrowed money or evidenced by bonds, notes, debentures, deeds of trust, letters of credit or similar instruments, including mortgages and mezzanine loans.

“ Management Agreement” means the Property Management and Leasing Agreement, dated as of April 4, 2013, among the Company, the Operating Partnership and American Realty Capital Properties V, LLC, as the same may be amended from time to time.

“ Market Check ” means an analysis comparing (a) the amount of Insourced Acquisition Expenses paid in the previous calendar year to the Advisor or any of its Affiliates with (b) the projected amount of Acquisition Expenses for the following calendar year assuming that a Person other than the Advisor or its Affiliates performs substantially similar services for a substantially similar amount of Investments.

“ Notice ” has the meaning set forth in Section 22 .

“ Offering ” means any public offering and sale of Shares pursuant to an effective registration statement filed under the Securities Act.

“ Operating Partnership ” has the meaning set forth in the preamble.

“ Operating Partnership Agreement ” means the Agreement of Limited Partnership of the Operating Partnership, dated as of April 4, 2013, among the Company, American Realty Capital Trust V Special Limited Partner, LLC, and the Advisor, as the same may be amended from time to time.

“ OP Units ” means units of limited partnership interest in the Operating Partnership.

“ Organization and Offering Expenses ” means all expenses (other than the Selling Commission and the Dealer Manager Fee) to be paid by the Company in connection with an Offering, including legal, accounting, printing, mailing and filing fees, charges of the escrow holder and transfer agent, charges of the Advisor for administrative services related to the issuance of Shares in an Offering, reimbursement of the Advisor for costs in connection with preparing supplemental sales materials, the cost of bona fide training and education meetings held by the Company (primarily the travel, meal and lodging costs of the registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement for employees of the Company’s Affiliates to attend retail seminars conducted by broker-dealers and, in special cases, reimbursement to soliciting broker-dealers for technology costs associated with an Offering, costs and expenses related to such technology costs, and costs and expenses associated with facilitation of the marketing of the Shares and the ownership of Shares by such broker-dealer’s customers.

“ Original Advisory Agreement ” has the meaning set forth in the recitals.

“ Person ” has the meaning set forth in the Articles of Incorporation.

“ Primary Offering ” means the portion of an Offering other than the Shares offered pursuant to the Company’s distribution reinvestment plan.

“ Prospectus ” means a final prospectus of the Company filed pursuant to Rule 424(b) of the Securities Act, as the same may be amended or supplemented from time to time.

“ Real Estate Assets ” means any investment by the Company or the Operating Partnership in unimproved and improved Real Property (including fee or leasehold interests, options and leases), directly, through one or more subsidiaries or through a Joint Venture.

“ Real Estate Commission ” means the fees payable to the Advisor pursuant to Section 10(c) .

“ Real Estate Related Loans ” means any investments in mortgage loans and other types of real estate related debt financing, including, mezzanine loans, bridge loans, convertible mortgages, wraparound mortgage loans, construction mortgage loans, loans on leasehold interests and participations in such loans, by the Company or the Operating Partnership, directly, through one or more subsidiaries or through a Joint Venture.

“ Real Property ” means (i) land, (ii) rights in land (including leasehold interests), and (iii) any buildings, structures, improvements, furnishings, fixtures and equipment located on or used in connection with land and rights or interests in land.

“ Registration Statement ” means the Company’s registration statement on Form S-11 (File No. 333-180274) and the prospectus contained therein.

“ REIT ” means a corporation, trust, association or other legal entity (other than a real estate syndication) that is engaged primarily in investing in equity interests in real estate (including fee ownership and leasehold interests) or in loans secured by real estate or both, as defined pursuant to Sections 856 through 860 of the Code and any successor or other provisions of the Code relating to real estate investment trusts (including provisions as to the attribution of ownership of beneficial interests therein) and the regulations promulgated thereunder.

“ Sale ” or “ Sales ” means any transaction or series of transactions whereby: (i) the Company or the Operating Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, transfers, conveys, or relinquishes its direct or indirect ownership of any Real Estate Assets, Loan or other Investment or portion thereof, including the lease of any Real Estate Assets consisting of a building only, and including any event with respect to any Real Estate Assets that gives rise to a significant amount of insurance proceeds or condemnation awards; (ii) the Company or the Operating Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all the direct or indirect interest of the Company or the Operating Partnership in any Joint Venture in which it is a co-venturer, member or partner; (iii) any Joint Venture directly or indirectly (except as described in other subsections of this definition) in which the Company or the Operating Partnership as a co-venturer, member or partner sells, grants, transfers, conveys, or relinquishes its direct or indirect ownership of any Real Estate Assets or portion thereof, including any event with respect to any Real Estate Assets which gives rise to insurance claims or condemnation awards; or (iv) the Company or the Operating Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, conveys or relinquishes its direct or indirect interest in any Real Estate Related Loans or portion thereof (including with respect to any Real Estate Related Loan, all payments thereunder or in satisfaction thereof other than regularly scheduled interest payments) and any event which gives rise to a significant amount of insurance proceeds or similar awards; or (v) the Company or the Operating Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, transfers, conveys, or relinquishes its direct or indirect ownership of any other asset not previously described in this definition or any portion thereof, but not including any transaction or series of transactions specified in clauses (i) through (v) above in which the proceeds of such transaction or series of transactions are reinvested by the Company in one or more assets within 180 days thereafter.

“ Securities Act ” means the Securities Act of 1933, as amended from time to time, or any successor statute thereto. Reference to any provision of the Securities Act shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

“ Selling Commission ” means the fee payable to the Dealer Manager and reallowable to Soliciting Dealers with respect to Shares sold by them in a Primary Offering.

“ Shares ” means the shares of beneficial interest or of common stock of the Company of any class or series, including Common Stock, that has the right to elect the Directors of the Company.

“ Soliciting Dealers ” means broker-dealers that are members of FINRA, or that are exempt from broker-dealer registration, and that, in either case, have executed soliciting dealer or other agreements with the Dealer Manager to sell Shares.

“ Sponsor ” means AR Capital, LLC, a Delaware limited liability company.

“ Stockholders ” means the holders of record of the Shares as maintained on the books and records of the Company or its transfer agent.

“ Termination Date ” means the date of termination of this Agreement.

“ Trading Day ” means a day on which the principal national securities exchange on which a security is listed or admitted to trading is open for the transaction of business or, if a security is not listed or admitted to trading on any national securities exchange, shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

“ Valuation Guidelines ” means the valuation guidelines adopted by the Board, as may be amended from time to time.

“ Value ” means, with respect to any security, the average of the daily market price of such security for the ten consecutive Trading Days immediately preceding the date of such valuation. The market price for each such Trading Day shall be: (i) if the security is listed or admitted to trading on the NYSE or any national securities exchange, the last reported sale price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices, regular way, on such day, (ii) if the security is not listed or admitted to trading on the NYSE or any national securities exchange, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the Advisor, or (iii) if the security is not listed or admitted to trading on the NYSE or any national securities exchange and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the Advisor, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten days prior to the date in question) for which prices have been so reported; provided , that if there are no bid and asked prices reported during the ten days prior to the date in question, the value of the security shall be determined by the Advisor acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. In the event the security includes any additional rights, then the value of such rights shall be determined by the Advisor acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.

“ Variable Management Fee ” means the fees payable to the Advisor or its assignees pursuant to Section 10(f) .

2. APPOINTMENT. The Company and the Operating Partnership hereby appoint the Advisor to serve as their advisor to perform the services set forth herein on the terms and subject to the conditions set forth in this Agreement and subject to the supervision of the Board, and the Advisor hereby accepts such appointment.

3. DUTIES OF THE ADVISOR. The Advisor will use its reasonable best efforts to present to the Company and the Operating Partnership potential investment opportunities and to provide a continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board. In performance of this undertaking, subject to the supervision of the Board and consistent with the provisions of the Articles of Incorporation, By-laws and the Operating Partnership Agreement, the Advisor, directly or indirectly, will:

(a) serve as the Company’s and the Operating Partnership’s investment and financial advisor;

(b) provide the daily management for the Company and the Operating Partnership and perform and supervise the various administrative functions necessary for the day-to-day management of the operations of the Company and the Operating Partnership;

(c) investigate, select and, on behalf of the Company and the Operating Partnership, engage and conduct business with and supervise the performance of such Persons as the Advisor deems necessary to the proper performance of its obligations hereunder (including consultants, accountants, correspondents, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, banks, builders, developers, property owners, property managers, real estate management companies, real estate operating companies, securities investment advisors, mortgagors, the registrar and the transfer agent and any and all agents for any of the

foregoing), including Affiliates of the Advisor and Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services (including entering into contracts in the name of the Company and the Operating Partnership with any of the foregoing);

(d) consult with the officers and Directors of the Company and assist the Directors in the formulation and implementation of the Company’s financial policies, and, as necessary, furnish the Board with advice and recommendations with respect to the making of investments consistent with the investment objectives and policies of the Company and in connection with any borrowings proposed to be undertaken by the Company or the Operating Partnership;

(e) subject to the provisions of Section 4 , (i) participate in formulating an investment strategy and asset allocation framework; (ii) locate, analyze and select potential Investments; (iii) structure and negotiate the terms and conditions of transactions pursuant to which acquisitions and dispositions of Investments will be made; (iv) research, identify, review and recommend acquisitions and dispositions of Investments to the Board and make Investments on behalf of the Company and the Operating Partnership in compliance with the investment objectives and policies of the Company; (v) arrange for financing and refinancing and make other changes in the asset or capital structure of, and dispose of, reinvest the proceeds from the sale of, or otherwise deal with, Investments; (vi) enter into leases and service contracts for Real Estate Assets and, to the extent necessary, perform all other operational functions for the maintenance and administration of such Real Estate Assets; (vii) actively oversee and manage Investments for purposes of meeting the Company’s investment objectives and reviewing and analyzing financial information for each of the Investments and the overall portfolio; (viii) select Joint Venture partners, structure corresponding agreements and oversee and monitor these relationships; (ix) oversee, supervise and evaluate Affiliated and non-Affiliated property managers who perform services for the Company or the Operating Partnership; (x) oversee Affiliated and non-Affiliated Persons with whom the Advisor contracts to perform certain of the services required to be performed under this Agreement; (xi) manage accounting and other record-keeping functions for the Company and the Operating Partnership, including reviewing and analyzing the capital and operating budgets for the Real Estate Assets and generating an annual budget for the Company; (xii) recommend various liquidity events to the Board when appropriate; and (xiii) source and structure Real Estate Related Loans;

(f) upon request, provide the Board with periodic reports regarding prospective investments;

(g) make investments in, and dispositions of, Investments within the discretionary limits and authority as granted by the Board;

(h) negotiate on behalf of the Company and the Operating Partnership with banks or other lenders for Loans to be made to the Company, the Operating Partnership or any of their subsidiaries, and negotiate with investment banking firms and broker-dealers on behalf of the Company, the Operating Partnership or any of their subsidiaries, or negotiate private sales of Shares or obtain Loans for the Company, the Operating Partnership or any of their subsidiaries, but in no event in such a manner so that the Advisor shall be acting as broker-dealer or underwriter; provided , however , that any fees and costs payable to third parties incurred by the Advisor in connection with the foregoing shall be the responsibility of the Company, the Operating Partnership or any of their subsidiaries;

(i) obtain reports (which may, but are not required to, be prepared by the Advisor or its Affiliates), where appropriate, concerning the value of Investments or contemplated investments of the Company and the Operating Partnership;

(j) from time to time, or at any time reasonably requested by the Board, make reports to the Board of its performance of services to the Company and the Operating Partnership under this Agreement, including reports with respect to potential conflicts of interest involving the Advisor or any of its Affiliates;

(k) provide the Company and the Operating Partnership with all necessary cash management services;

(l) deliver to, or maintain on behalf of, the Company copies of all appraisals obtained in connection with the investments in any Real Estate Assets as may be required to be obtained by the Board;

(m) notify the Board of all proposed material transactions before they are completed;

(n) effect any private placement of OP Units, tenancy-in-common (TIC) or other interests in Investments as may be approved by the Board;

(o) perform investor-relations and Stockholder communications functions for the Company;

(p) render such services as may be reasonably determined by the Board of Directors consistent with the terms and conditions herein;

(q) maintain the Company’s accounting and other records and assist the Company in filing all reports required to be filed by it with the Securities and Exchange Commission, the Internal Revenue Service and other regulatory agencies;

(r) do all things reasonably necessary to assure its ability to render the services described in this Agreement;

Notwithstanding the foregoing or anything else that may be to the contrary in this Agreement, the Advisor may delegate any of the foregoing duties to any Person so long as the Advisor or its Affiliate remains responsible for the performance of the duties set forth in this Section 3 .

4. AUTHORITY OF ADVISOR.

(a) Pursuant to the terms of this Agreement (including the restrictions included in this Section 4 and in Section 9 ), and subject to the continuing and exclusive authority of the Board over the supervision of the Company, the Company, acting on the authority of the Board of Directors, hereby delegates to the Advisor the authority to perform the services described in Section 3 .

(b) Notwithstanding anything herein to the contrary, all Investments will require the prior approval of the Board, any particular Directors specified by the Board or any committee of the Board specified by the Board, as the case may be.

(c) If a transaction requires approval by the Independent Directors, the Advisor will deliver to the Independent Directors all documents and other information reasonably required by them to evaluate properly the proposed transaction.

(d) The Board may, at any time upon the giving of Notice to the Advisor, modify or revoke the authority set forth in this Section 4 ; provided, however , that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed the Company or the Operating Partnership prior to the date of receipt by the Advisor of such notification.

5. FIDUCIARY RELATIONSHIP. The Advisor, as a result of its relationship with the Company and the Operating Partnership pursuant to this Agreement, has a fiduciary responsibility and duty to the Company, the Stockholders and the partners in the Operating Partnership.

6. NO PARTNERSHIP OR JOINT VENTURE. Except as provided in Section 10(i) , the parties to this Agreement are not partners or joint venturers with each other and nothing herein shall be construed to make them partners or joint venturers or impose any liability as such on either of them.

7. BANK ACCOUNTS. The Advisor may establish and maintain one or more bank accounts in the name of the Company or the Operating Partnership and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company or the Operating Partnership, under such terms and conditions as the Board may approve; provided , that no funds shall be commingled with the funds of the Advisor; and, upon request, the Advisor shall render appropriate accountings of such collections and payments to the Board and to the auditors of the Company.

8. RECORDS; ACCESS. The Advisor shall maintain appropriate records of all its activities hereunder and make such records available for inspection by the Directors and by counsel, auditors and authorized agents of the Company, at any time and from time to time. The Advisor shall at all reasonable times have access to the books and records of the Company and the Operating Partnership.

9. LIMITATIONS ON ACTIVITIES Notwithstanding anything herein to the contrary, the Advisor shall refrain from taking any action which, in its sole judgment, or in the sole judgment of the Company, made in good faith, would (a) adversely affect the status of the Company as a REIT, unless the Board has determined that REIT qualification is not in the best interests of the Company and its Stockholders, (b) subject the Company to regulation under the Investment Company Act of 1940, as amended, or (c) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, the Operating Partnership or the Shares, or otherwise not be permitted by the Articles of Incorporation or By-laws, except if such action shall be ordered by the Board, in which case the Advisor shall notify promptly the Board of the Advisor’s judgment of the potential impact of such action and shall refrain from taking such action until it

receives further clarification or instructions from the Board. In such event, the Advisor shall have no liability for acting in accordance with the specific instructions of the Board so given.

10. FEES .

(a) Acquisition Fee . Subject to Section 10(e) and Section 10(b) , the Company shall pay an Acquisition Fee to the Advisor or its Affiliates as compensation for services rendered in connection with the investigation, selection and acquisition (by purchase, investment or exchange) of Investments. If the Advisor is terminated without Cause pursuant to Section 16(a) , the Advisor or its Affiliates shall be entitled to an Acquisition Fee for any Investments acquired after the Termination Date for which a contract to acquire any such Investment had been entered into at or prior to the Termination Date. The total Acquisition Fee payable to the Advisor or its Affiliates shall equal one percent (1.0%) of the Contract Purchase Price of each Investment. The purchase price allocable for an Investment held through a Joint Venture shall equal the product of (i) the Contract Purchase Price of the Investment and (ii) the direct or indirect ownership percentage in the Joint Venture held directly or indirectly by the Company or the Operating Partnership. For purposes of this Section 10(a) , “ownership percentage” shall be the percentage of capital stock, membership interests, partnership interests or other equity interests held by the Company or the Operating Partnership, without regard to classification of such equity interests. The Company shall pay to the Advisor or its Affiliates the Acquisition Fee promptly upon the closing of the Investment and shall cover services rendered by the Advisor or its Affiliates until such time as a letter of intent to purchase such Investment has been submitted to the seller by the Advisor and the Advisor has presented a detailed investment memorandum to the Board of Directors for approval. In addition, if during the period ending two years after the close of the initial Offering, the Company sells an Investment and then reinvests in other Investments, the Company will pay to the Advisor or its Affiliates one percent (1.0%) of the purchase price of Real Estate Assets and one percent (1.0%) of the amount advanced for Real Estate Related Loans or other Investments (other than Real Estate Assets), along with reimbursement of acquisition expenses. Notwithstanding the above, the Company shall not pay, and the Advisor and its affiliates shall have no right to receive, any Acquisition Fees associated with Investments that are completed after the Fee Termination Date; provided that the Company shall pay, and the Advisor and its affiliates shall be entitled to receive Acquisition Fees with respect to Investments that are completed after the Fee Termination Date and which were either under negotiation, under contract, or were the subject of a signed letter of intent (regardless of whether the letter was binding) on a date prior to the Fee Termination Date.

(b) Limitation on Total Acquisition Fees, Financing Coordination Fees and Acquisition Expenses .

(i) The total of all “Acquisition Fees” (as defined in the Articles of Incorporation), Financing Coordination Fees and Acquisition Expenses payable in connection with the Company’s total portfolio of Investments and reinvestments, if any, shall be reasonable and shall not exceed an amount equal to four and one-half percent (4.5%) of the Contract Purchase Price of the Company’s total portfolio of Investments or four and one-half percent (4.5%) of the amount advanced for the Company’s total portfolio of Investments; provided, however, that once all the proceeds from the initial Offering have been fully invested, the total of all Acquisition Fees and Financing Coordination Fees shall not exceed one and one-half percent (1.5%) of the Contract Purchase Price of all the Investments acquired.

(ii) In accordance with the Articles of Incorporation, the total of all Acquisition Fees, Financing Coordination Fees and Acquisition Expenses payable in connection with any Investment or any reinvestment shall be reasonable and shall not exceed an amount equal to four and one-half percent (4.5%) of the Contract Purchase Price of the Investment or four and one-half percent (4.5%) of the amount advanced for any Investment; provided , further , however , that a majority of the Directors (including a majority of the Independent Directors) not otherwise interested in the transaction may approve fees and expenses in excess of these limits if they determine the transaction to be commercially competitive, fair and reasonable to the Company.

(iii) The “Acquisition Fees” (as defined in the Articles of Incorporation) and Financing Coordination Fees shall terminate on the Fee Termination Date; provided, however, that “Acquisition Fees” (as defined in the Articles of Incorporation) and Financing Coordination Fees shall remain payable with respect to the review and evaluation of potential investments in Assets and which were either under negotiation, under contract, or were the subject of a signed letter of intent (regardless of whether the letter was binding) on a date prior to the Fee Termination Date.

(c) Real Estate Commission . In connection with a Sale of a Real Estate Asset in which the Advisor or any Affiliate of the Advisor provides a substantial amount of services, as determined by the Independent Directors, the Company shall pay to the Advisor or its assignees a Real Estate Commission up to the lesser of (i) two percent (2.0%) of the Contract Sales Price of such Real Estate Asset or (ii) one-half of the Competitive Real Estate Commission paid if a non-Affiliate broker

is also involved; provided, however , that in no event may the Real Estate Commission paid to the Advisor, its Affiliates and non-Affiliates, exceed the lesser of six percent (6.0%) of the Contract Sales Price and a Competitive Real Estate Commission.

(d) Financing Coordination Fee . Until the Fee Termination Date, the Company shall pay a Financing Coordination Fee to the Advisor or its assignees in connection with the financing of any Investment, assumption of any Loans with respect to any Investment or refinancing of any Loan in an amount equal to 0.75% of the amount made available and/or outstanding under any such Loan, including any assumed Loan. The Advisor may reallow some of or all this Financing Coordination Fee to reimburse third parties with whom it may subcontract to procure any such Loan. The Company shall pay the Advisor the Financing Coordination Fee with respect to services provided in connection with the origination or refinancing of Loans the Company obtains, that are completed after the Fee Termination Date and which were under negotiation, under contract or were the subject of a signed letter of intent (regardless of whether the letter was binding) on a date prior to the Fee Termination Date.

(e) Fee Termination Date . The fees described in Sections 10(a) through 10(d) above shall be payable only in respect of acquisitions pursuant to which the Company has completed, entered into an agreement in relation to or entered into a letter of intent or otherwise initiated during the 180 period following the Effective Date (the “ Fee Termination Date ”). Following the Fee Termination Date, no fees shall accrue pursuant to Sections 10(a) through 10(d) above.

(f) Variable Management Fee . The Company shall pay the Advisor a Variable Management Fee, payable quarterly in arrears, in an amount equal to (i) the product of (A) the Adjusted Outstanding Shares for the calendar quarter multiplied by (B) 15% multiplied by (C) the excess of Core Earnings Per Adjusted Share for the previous 3-month period over $0.375, plus (ii) the product of (X) the Adjusted Outstanding Shares for the calendar quarter multiplied by (Y) 10% multiplied by (Z) the excess of Core Earnings Per Adjusted Share for the previous 3-month period over $0.50.

(g) Base Management Fee . The Company shall pay the Advisor a Base Management Fee, payable quarterly in arrears, equal to $4.5 million per quarter, plus 0.375% of the cumulative net proceeds of all common and preferred equity issued by the Company and its subsidiaries after a Listing, including: (i) any equity issued in exchange or conversion of exchangeable notes based on the stock price at the date of issuance; (ii) any other issuances of equity, including but not limited to units in the Operating Partnership (excluding equity based compensation but including issuances related to an acquisition, investment, joint-venture or partnership); and (iii) any cumulative Core Earnings in excess of cumulative distributions paid on common stock.

(h) Payment of Fees .

(i) In connection with the Acquisition Fee, Real Estate Commission, Variable Management Fee and Financing Coordination Fee, the Company shall pay such fees to the Advisor or its assignees in cash, in Shares, or a combination of both, the form of payment to be determined in the sole discretion of the Advisor.

(ii) Commencing with the date of this Agreement, the Base Management Fee shall be payable in the form determined, at the discretion of the Advisor, in cash, OP Units, Shares, or any combination thereof. Each OP Unit or Share shall be valued at the Value of a Share.

(i) Exclusion of Certain Transactions .

(i) If the Company or the Operating Partnership shall propose to enter into any transaction in which the Advisor, any Affiliate of the Advisor or any of the Advisor’s directors or officers has a direct or indirect interest, then such transaction shall be approved by a majority of the Board not otherwise interested in such transaction, including a majority of the Independent Directors.

(ii) Neither the Company nor the Operating Partnership shall make Loans to the Advisor or any Affiliate thereof or certain of the Stockholders except Mortgages (as defined in the Articles of Incorporation) pursuant to Section 9.3(iii) of the Articles of Incorporation (or any successor provision) or loans to wholly owned subsidiaries of the Company. None of the Advisor nor any Affiliate thereof, or certain of the Stockholders shall make loans to the Company or the Operating Partnership, or to Joint Ventures, unless approved by a majority of the Directors (including a majority of the Independent Directors) not otherwise interested in such transaction as fair, competitive, and commercially reasonable, and no less favorable to the Company or Operating Partnership, as applicable, than comparable loans between unaffiliated parties.

(iii) The Company and the Operating Partnership may enter into Joint Ventures with the Advisor or its Affiliates provided that (a) a majority of Directors (including a majority of Independent Directors) not otherwise interested in

the transaction approves the transaction as being fair and reasonable to the Company or Operating Partnership, as applicable, and (b) the investment by the Company or Operating Partnership, as applicable, is on substantially the same terms as those received by other joint venturers.

(j) Limitation on Insourced Acquisition Expenses .

(i) The total of all Insourced Acquisition Expenses with respect to any Investment shall initially be fixed at, and shall not exceed, 0.50% of the Contract Purchase Price of the Investment or 0.50% of the amount advanced for an Investment, which the Company shall pay to the Advisor or its Affiliate at the closing of each Investment. For the avoidance of doubt, no payment in respect of Insourced Acquisition Expenses shall be made unless the Advisor or its Affiliates shall have performed services related to selecting, evaluating and acquiring an Investment, regardless of whether such Investment is ultimately acquired.

(ii) The total of all Insourced Acquisition Expenses for any calendar year shall initially be fixed at, and shall not exceed, 0.50% of the Contract Purchase Price of the Investments acquired during such period or 0.50% of the amounts advanced for the Investments made during such period (to be prorated for any partial calendar year); provided , however , within a reasonable period of time following the end of each such calendar year, the Company shall perform a Market Check and provide the results thereof to the Advisor within a reasonable period of time and, if the result of the Market Check is that the projected amount of Acquisition Expenses that would be incurred if substantially similar services with respect to a substantially similar amount of properties were to be provided by a Person other than the Advisor or any of its Affiliates during the subsequent calendar year is lower than the amount of Insourced Acquisition Expenses paid to the Advisor or its Affiliates during the previous calendar year, either (A) the Advisor shall agree to reduce the cap on the Insourced Acquisition Expenses until the next Market Check such that the cap on Insourced Acquisition Expenses does not exceed the projected amount of Acquisition Expenses that would be incurred if substantially similar services with respect to a substantially similar amount of properties were to be provided by a Person other than the Advisor or any of its Affiliates during the subsequent calendar year or (B) the Company may outsource to a Person other than the Advisor or its Affiliate certain services previously provided by the Advisor or its Affiliates until the next Market Check.

11. EXPENSES.

(a) In addition to the compensation paid to the Advisor pursuant to Section 10 , the Company or the Operating Partnership shall pay directly or reimburse the Advisor, quarterly and in arrears, for all the expenses paid or incurred by the Advisor or its Affiliates in connection with the services it provides to the Company and the Operating Partnership pursuant to this Agreement, including, the following:

(i) Organization and Offering Expenses, including third-party due diligence fees related to the Primary Offering, as set forth in detailed and itemized invoices; provided, however , that the Company shall not reimburse the Advisor to the extent such reimbursement would cause the total amount of Organization and Offering Expenses paid by the Company and the Operating Partnership to exceed two percent (2.0%) of the Gross Proceeds raised in all Primary Offerings;

(ii) Acquisition Expenses, subject to the limitations set forth in Section 10(b) , and Insourced Acquisition Expenses, subject to the limitations set forth in Section 10(i) ;

(iii) the actual cost of goods and services used by the Company and obtained from entities not Affiliated with the Advisor;

(iv) interest and other costs for Loans, including discounts, points and other similar fees;

(v) taxes and assessments on income of the Company or Investments;

(vi) costs associated with insurance required in connection with the business of the Company or by the Board;

(vii) expenses of managing and operating Investments owned by the Company, whether payable to an Affiliate of the Company or a non-affiliated Person;

(viii) all expenses in connection with payments to the Directors for attending meetings of the Board and Stockholders;

(ix) expenses associated with a Listing, if applicable, or with the issuance and distribution of Shares, such as selling commissions and fees, advertising expenses, taxes, legal and accounting fees, listing and registration fees;

(x) expenses connected with payments of Distributions;

(xi) expenses of organizing, revising, amending, converting, modifying or terminating the Company, the Operating Partnership or any subsidiary thereof or the Articles of Incorporation, By-laws or governing documents of the Operating Partnership or any subsidiary of the Company or the Operating Partnership;

(xii) expenses of maintaining communications with Stockholders, including the cost of preparation, printing, and mailing annual reports and other Stockholder reports, proxy statements and other reports required by governmental entities;

(xiii) administrative service expenses, including all costs and expenses incurred by the Advisor or its Affiliates in fulfilling its duties hereunder, including reasonable salaries and wages, benefits and overhead of all employees directly involved in the performance of such services; provided , however , that no reimbursement shall be made for costs of such employees of the Advisor or its Affiliates to the extent that such employees perform services for which the Advisor receives a separate fee; and

(xiv) audit, accounting and legal fees.

(b) Commencing upon the earlier to occur of (i) the fifth fiscal quarter after the Company makes its first Investment and (ii) six (6) months after the commencement of the initial Offering, expenses incurred by the Advisor on behalf of the Company and the Operating Partnership or in connection with the services provided by the Advisor hereunder and payable pursuant to this Section 11 shall be reimbursed (excluding Insourced Acquisition Expenses which shall be paid as described in Section 10(j)(i) of this Agreement), no less than monthly, to the Advisor.

12. OTHER SERVICES. Should the Board request that the Advisor or any director, officer or employee thereof render services for the Company and the Operating Partnership other than set forth in Section 3 , such services shall be separately compensated at such customary rates and in such customary amounts as are agreed upon by the Advisor and the Board, including a majority of the Independent Directors, subject to the limitations contained in the Articles of Incorporation, and shall not be deemed to be services pursuant to the terms of this Agreement.

13. OTHER ACTIVITIES OF THE ADVISOR. Except as set forth in this Section 13 , nothing herein contained shall prevent the Advisor or any of its Affiliates from engaging in or earning fees from other activities, including the rendering of advice to other Persons (including other REITs) and the management of other programs advised, sponsored or organized by the Sponsor or its Affiliates; nor shall this Agreement limit or restrict the right of any director, officer, member, partner, employee or stockholder of the Advisor or any of its Affiliates to engage in or earn fees from any other business or to render services of any kind to any other Person and earn fees for rendering such services; provided, however , that the Advisor must devote sufficient resources to the Company’s business to discharge its obligations to the Company under this Agreement. The Advisor may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein, and earn fees for rendering such advice and service. Specifically, it is contemplated that the Company may enter into Joint Ventures or other similar co-investment arrangements with certain Persons, and pursuant to the agreements governing such Joint Ventures or arrangements, the Advisor may be engaged to provide advice and service to such Persons, in which case the Advisor will earn fees for rendering such advice and service.

The Advisor shall report to the Board the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, which creates or could create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other Person. If the Advisor, Director or Affiliates thereof have sponsored other investment programs with similar investment objectives which have investment funds available at the same time as the Company, the Advisor shall inform the Board of the method to be applied by the Advisor in allocating investment opportunities among the Company and competing investment entities and shall provide regular updates to the Board of the investment opportunities provided by the Advisor to competing programs in order for the Board (including the Independent Directors) to fulfill its duty to ensure that the Advisor and its Affiliates use their reasonable best efforts to apply such method fairly to the Company.

14. THE AMERICAN REALTY CAPITAL NAME. The Advisor and its Affiliates have or may have a proprietary interest in the names “American Realty Capital,” “ARC” and “AR Capital.” The Advisor hereby grants to the Company, to the extent of any proprietary interest the Advisor may have in any of the names “American Realty Capital,”

“ARC” and “AR Capital,” a non-transferable, non-assignable, non-exclusive, royalty-free right and license to use the names “American Realty Capital,” “ARC” and “AR Capital” during the term of this Agreement. The Company agrees that the Advisor and its Affiliates will have the right to approve of any use by the Company of the names “American Realty Capital,” “ARC” and “AR Capital,” such approval not to be unreasonably withheld or delayed. Accordingly, and in recognition of this right, if at any time the Company ceases to retain the Advisor or one of its Affiliates to perform advisory services for the Company, the Company will, promptly after receipt of written request from the Advisor, cease to conduct business under or use the names “American Realty Capital,” “ARC” and “AR Capital” or any derivative thereof and the Company shall change its name and the names of any of its subsidiaries to a name that does not contain the names “American Realty Capital,” “ARC” and “AR Capital” or any other word or words that might, in the reasonable discretion of the Advisor, be susceptible of indication of some form of relationship between the Company and the Advisor or any its Affiliates. At such time, the Company will also make any changes to any trademarks, servicemarks or other marks necessary to remove any references to the words “American Realty Capital,” “ARC” and “AR Capital.” Consistent with the foregoing, it is specifically recognized that the Advisor or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service organizations having any of the names “American Realty Capital,” “ARC” and “AR Capital” as a part of their name, all without the need for any consent (and without the right to object thereto) by the Company. Neither the Advisor nor any of its Affiliates makes any representation or warranty, express or implied, with respect to the names “American Realty Capital,” “ARC” and “AR Capital” licensed hereunder or the use thereof (including without limitation as to whether the use of the names “American Realty Capital,” “ARC” and “AR Capital” will be free from infringement of the intellectual property rights of third parties. Notwithstanding the preceding, the Advisor represents and warrants that it is not aware of any pending claims or litigation or of any claims threatened in writing regarding the use or ownership of the names “American Realty Capital,” “ARC” and “AR Capital.”

15. TERM OF AGREEMENT. This Agreement shall be in effect from the date hereof through the twentieth anniversary of the date hereof and shall be automatically renewed for an additional twenty-year term on each anniversary of such twentieth anniversary date.

16. TERMINATION BY THE PARTIES. This Agreement may be terminated upon sixty (60) days’ prior written notice (a) by the Independent Directors of the Company or by the Advisor with Cause without penalty, (b) by the Advisor for Good Reason, or (c) by the Advisor upon a Change of Control; provided , that termination of this Agreement with Cause shall be upon forty-five (45) days’ prior written notice. The provisions of Sections 14 and 18 through 30 (inclusive) of this Agreement shall survive any expiration or earlier termination of this Agreement.

17. ASSIGNMENT. This Agreement may be assigned by the Advisor (a) to an Affiliate of the Advisor, or (b) to any party with expertise in commercial real estate and, together with its Affiliates, over $100 million of assets under management. The Advisor may assign any rights to receive fees or other payments under this Agreement to any Person. This Agreement shall not be assigned by the Company or the Operating Partnership without the consent of the Advisor, except in the case of an assignment by the Company or the Operating Partnership to a Person which is a successor to all the assets, rights and obligations of the Company or the Operating Partnership, in which case such successor Person shall be bound hereunder and by the terms of said assignment in the same manner as the Company or the Operating Partnership, as applicable, is bound by this Agreement.

18. PAYMENTS TO AND DUTIES OF ADVISOR UPON TERMINATION.

(a) Amounts Owed . After the Termination Date, the Advisor shall be entitled to receive from the Company or the Operating Partnership within thirty (30) days after the effective date of such termination all amounts then accrued and owing to the Advisor, including all its interest in the Company’s income, losses, distributions and capital by payment of an amount equal to the then-present fair market value of the Advisor’s interest.

(b) Advisor’s Duties . The Advisor shall promptly upon termination of this Agreement:

(i) pay over to the Company and the Operating Partnership all money collected and held for the account of the Company and the Operating Partnership pursuant to this Agreement, after deducting any accrued compensation and reimbursement for its expenses to which it is then entitled;

(ii) deliver to the Board a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board;

(iii) deliver to the Board all assets, including all Investments, and documents of the Company and the Operating Partnership then in the custody of the Advisor; and

(iv) cooperate with the Company and the Operating Partnership to provide an orderly management transition.

19. INCORPORATION OF THE ARTICLES OF INCORPORATION AND THE OPERATING PARTNERSHIP AGREEMENT. To the extent that the Articles of Incorporation or the Operating Partnership Agreement as in effect on the date hereof impose obligations or restrictions on the Advisor or grant the Advisor certain rights which are not set forth in this Agreement, the Advisor shall abide by such obligations or restrictions and such rights shall inure to the benefit of the Advisor with the same force and effect as if they were set forth herein.

20. INDEMNIFICATION BY THE COMPANY AND THE OPERATING PARTNERSHIP.

(a) The Company and the Operating Partnership, jointly and severally, shall indemnify and hold harmless the Advisor and its Affiliates, as well as their respective officers, directors, equity holders, members, partners, stockholders, other equity holders and employees (collectively, the “ Indemnitees ,” and each, an “ Indemnitee ”), from and against all losses, claims, damages, losses, joint or several, expenses (including reasonable attorneys’ fees and other legal fees and expenses), judgments, fines, settlements, and other amounts (collectively, “ Losses ,” and each, a “ Loss ”) arising in the performance of their duties hereunder, including reasonable attorneys’ fees, to the extent such Losses are not fully reimbursed by insurance, and to the extent that such indemnification would not be inconsistent with the laws of the State of New York, the Articles of Incorporation. Notwithstanding the foregoing, the Company and the Operating Partnership shall not provide for indemnification of an Indemnitee for any Loss suffered by such Indemnitee, nor shall they provide that an Indemnitee be held harmless for any Loss suffered by the Company and the Operating Partnership, unless all the following conditions are met:

(i) the Indemnitee has determined, in good faith, that the course of conduct that caused the loss or liability was in the best interest of the Company and the Operating Partnership;

(ii) the Indemnitee was acting on behalf of, or performing services for, the Company or the Operating Partnership;

(iii) such Loss was not the result of negligence or willful misconduct by the Indemnitee; and

(iv) such indemnification or agreement to hold harmless is recoverable only out of the Company’s net assets and not from the Stockholders.

(b) Notwithstanding the foregoing, an Indemnitee shall not be indemnified by the Company and the Operating Partnership for any Losses arising from or out of an alleged violation of federal or state securities laws by such Indemnitee unless one or more of the following conditions are met:

(i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the Indemnitee;

(ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the Indemnitee; or

(iii) a court of competent jurisdiction approves a settlement of the claims against the Indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the Securities and Exchange Commission and of the published position of any state securities regulatory authority in which securities of the Company or the Operating Partnership were offered or sold as to indemnification for violation of securities laws.

(c) In addition, the advancement of the Company’s or the Operating Partnership’s funds to an Indemnitee for legal expenses and other costs incurred as a result of any legal action for which indemnification is being sought is permissible only if all the following conditions are satisfied:

(i) the legal action relates to acts or omissions with respect to the performance of duties or services on behalf of the Company or the Operating Partnership;

(ii) the legal action is initiated by a third party who is not a Stockholder or the legal action is initiated by a Stockholder acting in such Stockholder’s capacity as such and a court of competent jurisdiction specifically approves such advancement; and

(iii) the Indemnitee undertakes to repay the advanced funds to the Company or the Operating Partnership, together with the applicable legal rate of interest thereon, in cases in which such Indemnitee is found not to be entitled to indemnification.

21. INDEMNIFICATION BY ADVISOR. The Advisor shall indemnify and hold harmless the Company and the Operating Partnership from Losses, including reasonable attorneys’ fees to the extent that such Losses are not fully reimbursed by insurance and are incurred by reason of the Advisor’s bad faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard of its duties; provided, however , that the Advisor shall not be held responsible for any action of the Board in following or declining to follow any advice or recommendation given by the Advisor.

22. NOTICES. Any notice, report or other communication (each a “ Notice ”) required or permitted to be given hereunder shall be in writing unless some other method of giving such Notice is required by the Articles of Incorporation, the By-laws, and shall be given by being delivered by hand, by courier or overnight carrier or by registered or certified mail to the addresses set forth below:


To the Company:	American Realty Capital Trust V, Inc.

405 Park Avenue

New York, New York 10022

Attention: Edward M. Weil, Jr.

President

with a copy to:

Proskauer Rose LLP

Eleven Times Square

New York, New York 10036

Attention: Peter M. Fass, Esq.

Attention: James P. Gerkis, Esq.


To the Operating Partnership:	American Realty Capital Operating Partnership V, L.P.

405 Park Avenue

New York, New York 10022

Attention: Edward M. Weil, Jr.

with a copy to:

Proskauer Rose LLP

Eleven Times Square

New York, New York 10036

Attention: Peter M. Fass, Esq.


To the Advisor:	American Realty Capital Advisors V, LLC

405 Park Avenue

New York, New York 10022

Attention: Edward M. Weil, Jr.

with a copy to:

Proskauer Rose LLP

Eleven Times Square

New York, New York 10036

Attention: Peter M. Fass, Esq.

Any party may at any time give Notice in writing to the other parties of a change in its address for the purposes of this Section 22 .

23. MODIFICATION. This Agreement shall not be amended, supplemented, terminated, or discharged, in whole or in part, except by an instrument in writing signed by the parties hereto, or their respective successors or assignees.

24. SEVERABILITY. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

25. GOVERNING LAW . The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of New York as at the time in effect, without regard to the principles of conflicts of laws thereof.

26. ENTIRE AGREEMENT. This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof.

27. NO WAIVER. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

28. PRONOUNS AND PLURALS. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

29. HEADINGS. The titles of sections and subsections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.

30. EXECUTION IN COUNTERPARTS. This Agreement may be executed (including by facsimile transmission) with counterpart signature pages or in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument.

[Remainder of page intentionally left blank]

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



	AMERICAN REALTY CAPITAL TRUST V, INC.

	By:	/s/ William M. Kahane
		Name: William M. Kahane
		Title: Chief Executive Officer

	AMERICAN REALTY CAPITAL OPERATING PARTNERSHIP V, L.P.

	By:	American Realty Capital Trust V, Inc.

		its General Partner

	By:	/s/ William M. Kahane
		Name: William M. Kahane
		Title: Chief Executive Officer

	AMERICAN REALTY CAPITAL ADVISORS V, LLC

	By:	American Realty Capital Trust V Special Limited Partner, LLC

		its sole member

	By:	AR Capital, LLC

		its sole member

	By:	/s/ William M. Kahane
		Name: William M. Kahane
		Title: Manager

Exhibit 10.30

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (“Agreement”) is made and entered into as of the 26 ^th day of May, 2015, by and between American Realty Capital Trust V, Inc., a Maryland corporation (the “Company”), and Donald MacKinnon, Donald R. Ramon and Andrew Winer (each, an “Indemnitee”).

WHEREAS, at the request of the Company, Indemnitee currently serves as a director, officer or service provider of the Company and may, therefore, be subjected to claims, suits or proceedings arising as a result of his or her service; and

WHEREAS, as an inducement to Indemnitee to continue to serve as such director, officer or service provider, the Company has agreed to indemnify and to advance expenses and costs incurred by Indemnitee in connection with any such claims, suits or proceedings; and

WHEREAS, the parties by this Agreement desire to set forth their agreement regarding indemnification and advance of expenses;

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

Section 1. Definitions . For purposes of this Agreement:

(a) “Applicable Legal Rate” means a fixed rate of interest equal to the applicable federal rate for mid-term debt instruments as of the day that it is determined that Indemnitee must repay any advanced expenses.

(b) “Change in Control” means a change in control of the Company occurring after the Effective Date of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Company is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have occurred if, after the Effective Date (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of all of the Company’s then-outstanding securities entitled to vote generally in the election of directors without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person’s attaining such percentage interest; (ii) the Company is a party to a merger, consolidation, sale of assets, plan of liquidation or other reorganization not approved by at least two-thirds of the members of the Board of Directors then in office, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter; or (iii) at any time, a majority of the members of the Board of Directors are not individuals (A) who were directors as of the Effective Date or (B) whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by the affirmative vote of at least two-thirds of the directors then in office who were directors as of the Effective Date or whose election for nomination for election was previously so approved.

(c) “Corporate Status” means the status of a person as a present or former director, officer, employee or agent of the Company or as a director, trustee, officer, partner, manager, managing

member, fiduciary, employee or agent of any other foreign or domestic corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving in such capacity at the request of the Company. As a clarification and without limiting the circumstances in which Indemnitee may be serving at the request of the Company, service by Indemnitee shall be deemed to be at the request of the Company if Indemnitee serves or served as a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise (i) of which a majority of the voting power or equity interest is owned directly or indirectly by the Company or (ii) the management of which is controlled directly or indirectly by the Company.

(d) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification and/or advance of Expenses is sought by Indemnitee.

(e) “Effective Date” means the date set forth in the first paragraph of this Agreement.

(f) “Expenses” means any and all reasonable and out-of-pocket attorneys’ fees and costs, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties and any other disbursements or expenses incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in or otherwise participating in a Proceeding. Expenses shall also include Expenses incurred in connection with any appeal resulting from any Proceeding including, without limitation, the premium for, security for and other costs relating to any cost bond supersedeas bond or other appeal bond or its equivalent.

(g) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement or of other indemnitees under similar indemnification agreements), or (ii) any other party to or participant or witness in the Proceeding giving rise to a claim for indemnification or advance of Expenses hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

(h) “Proceeding” means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other proceeding, whether brought by or in the right of the Company or otherwise and whether of a civil (including intentional or unintentional tort claims), criminal, administrative or investigative (formal or informal) nature, including any appeal therefrom, except one pending or completed on or before the Effective Date, unless otherwise specifically agreed in writing by the Company and Indemnitee. If Indemnitee reasonably believes that a given situation may lead to or culminate in the institution of a Proceeding, such situation shall also be considered a Proceeding.

Section 2. Services by Indemnitee . Indemnitee will serve as a director, officer or service provider of the Company. However, this Agreement shall not impose any independent obligation on

Indemnitee or the Company to continue Indemnitee’s service to the Company. This Agreement shall not be deemed an employment contract between the Company (or any other entity) and Indemnitee.

Section 3. General . Subject to the limitations in Section 5, the Company shall indemnify, and advance Expenses to, Indemnitee (a) as provided in this Agreement and (b) as otherwise permitted by Maryland law in effect on the Effective Date and as amended from time to time; provided, however, that no change in Maryland law shall have the effect of reducing the benefits available to Indemnitee hereunder based on Maryland law as in effect on the Effective Date. Subject to the limitations in Section 5, the rights of Indemnitee provided in this Section 3 shall include, without limitation, the rights set forth in the other sections of this Agreement, including any additional indemnification permitted by Section 2-418(g) of the Maryland General Corporation Law (the “MGCL”).

Section 4. Standard for Indemnification . Subject to the limitations in Section 5, if, by reason of Indemnitee’s Corporate Status, Indemnitee is, or is threatened to be, made a party to any Proceeding, the Company shall indemnify Indemnitee against all judgments, penalties, fines and amounts paid in settlement and all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with any such Proceeding unless it is established by clear and convincing evidence that (a) the act or omission of Indemnitee was material to the matter giving rise to the Proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty, (b) Indemnitee actually received an improper personal benefit in money, property or services or (c) in the case of any criminal Proceeding, Indemnitee had reasonable cause to believe that his or her conduct was unlawful.

Section 5. Certain Limits on Indemnification . Notwithstanding any other provision of this Agreement (other than Section 6), Indemnitee shall not be entitled to:

(a) indemnification for any loss or liability unless all of the following conditions are met: (i) Indemnitee has determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Company; (ii) Indemnitee was acting on behalf of or performing services for the Company; (iii) such loss or liability was not the result of (A) gross negligence or willful misconduct, in the case that the Indemnitee is an independent director of the Company or (B) negligence or misconduct, in the case that the Indemnitee is not an independent director of the Company; and (iv) such indemnification is recoverable only out of the Company’s net assets and not from the Company’s stockholders;

(b) indemnification for any loss or liability arising from an alleged violation of federal or state securities laws unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged material securities law violations as to Indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to Indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims against Indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the Securities and Exchange Commission and of the published position of any state securities regulatory authority in which securities of the Company were offered or sold as to indemnification for violations of securities laws;

(c) indemnification hereunder if the Proceeding was one by or in the right of the Company and Indemnitee is adjudged to be liable to the Company;

(d) indemnification hereunder if Indemnitee is adjudged to be liable on the basis that personal benefit was improperly received in any Proceeding charging improper personal benefit to Indemnitee, whether or not involving action in the Indemnitee’s Corporate Status; or

(e) indemnification or advance of Expenses hereunder if the Proceeding was brought by Indemnitee, unless: (i) the Proceeding was brought to enforce indemnification under this Agreement, and then only to the extent in accordance with and as authorized by Section 12 of this Agreement, or (ii) the Company’s charter or Bylaws, a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors or an agreement approved by the Board of Directors to which the Company is a party expressly provide otherwise.

Section 6. Court-Ordered Indemnification . Subject to the limitations in Section 5(a) and (b), a court of appropriate jurisdiction, upon application of Indemnitee and such notice as the court shall require, may order indemnification of Indemnitee by the Company in the following circumstances:

(a) if such determines that Indemnitee is entitled to reimbursement under Section 2-418(d)(1) of the MGCL, the court shall order indemnification, in which case Indemnitee shall be entitled to recover the Expenses of securing such reimbursement; or

(b) if such court determines that Indemnitee is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not Indemnitee (i) has met the standards of conduct set forth in Section 2-418(b) of the MGCL or (ii) has been adjudged liable for receipt of an improper personal benefit under Section 2-418(c) of the MGCL, the court may order such indemnification as the court shall deem proper. However, indemnification with respect to any Proceeding by or in the right of the Company or in which liability shall have been adjudged in the circumstances described in Section 2-418(c) of the MGCL shall be limited to Expenses.

Section 7. Indemnification for Expenses of an Indemnitee Who is Wholly or Partly Successful . Subject to the limitations in Section 5, to the extent that Indemnitee was or is, by reason of his or her Corporate Status, made a party to (or otherwise becomes a participant in) any Proceeding and is successful, on the merits or otherwise, in the defense of such Proceeding, Indemnitee shall be indemnified for all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee under this Section 7 for all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each such claim, issue or matter, allocated on a reasonable and proportionate basis. For purposes of this Section 7, and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Section 8. Advance of Expenses for an Indemnitee . If, by reason of Indemnitee’s Corporate Status, Indemnitee is, or is threatened to be, made a party to any Proceeding, the Company shall, without requiring a preliminary determination of Indemnitee’s ultimate entitlement to indemnification hereunder, advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with (a) such Proceeding which is initiated by a third party who is not a stockholder of the Company, or (b) such Proceeding which is initiated by a stockholder of the Company acting in his or her capacity as such and for which a court of competent jurisdiction specifically approves such advancement, and which relates to acts or omissions with respect to the performance of duties or services on behalf of the Company, within ten days after the receipt by the Company of a statement or statements requesting such advance or

advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by a written affirmation by Indemnitee of Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Company as authorized by law and by this Agreement has been met and a written undertaking by or on behalf of Indemnitee, in substantially the form attached hereto as Exhibit A or in such form as may be required under applicable law as in effect at the time of the execution thereof, to reimburse the portion of any Expenses advanced to Indemnitee, together with the Applicable Legal Rate of interest thereon, relating to claims, issues or matters in the Proceeding as to which it shall ultimately be established, by clear and convincing evidence, that the standard of conduct has not been met by Indemnitee and which have not been successfully resolved as described in Section 7 of this Agreement. To the extent that Expenses advanced to Indemnitee do not relate to a specific claim, issue or matter in the Proceeding, such Expenses shall be allocated on a reasonable and proportionate basis. The undertaking required by this Section 8 shall be an unlimited general obligation by or on behalf of Indemnitee and shall be accepted without reference to Indemnitee’s financial ability to repay such advanced Expenses and without any requirement to post security therefor.

Section 9. Indemnification and Advance of Expenses as a Witness or Other Participant . Subject to the limitations in Section 5, to the extent that Indemnitee is or may be, by reason of Indemnitee’s Corporate Status, made a witness or otherwise asked to participate in any Proceeding, whether instituted by the Company or any other party, and to which Indemnitee is not a party, Indemnitee shall be advanced all reasonable Expenses and indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith within ten days after the receipt by the Company of a statement or statements requesting any such advance or indemnification from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee.

Section 10. Procedure for Determination of Entitlement to Indemnification .

(a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. Indemnitee may submit one or more such requests from time to time and at such time(s) as Indemnitee deems appropriate in Indemnitee’s sole discretion. The officer of the Company receiving any such request from Indemnitee shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification.

(b) Upon written request by Indemnitee for indemnification pursuant to Section 10(a) above, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall promptly be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel, in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee, which Independent Counsel shall be selected by Indemnitee and approved by the Board of Directors in accordance with Section 2-418(e)(2)(ii) of the MGCL, which approval shall not be unreasonably withheld; or (ii) if a Change in Control shall not have occurred, (A) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors or, if such a quorum cannot be obtained, then by a majority vote of a duly authorized committee of the Board of Directors consisting solely of one or more Disinterested Directors, (B) if Independent Counsel has been selected by the Board of Directors in accordance with Section 2-418(e)(2)(ii) of the MGCL and approved by Indemnitee, which approval shall not be unreasonably withheld, by Independent Counsel, in a written opinion to the Board of

Directors, a copy of which shall be delivered to Indemnitee or (C) if so directed by a majority of the members of the Board of Directors, by the stockholders of the Company. If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination in the discretion of the Board of Directors or Independent Counsel if retained pursuant to clause (ii)(B) of this Section 10(b). Any Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company shall indemnify and hold Indemnitee harmless therefrom.

Section 11. Presumptions and Effect of Certain Proceedings .

(a) In making any determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 10(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making of any determination contrary to that presumption.

(b) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, upon a plea of nolo contendere or its equivalent, or entry of an order of probation prior to judgment, does not create a presumption that Indemnitee did not meet the requisite standard of conduct described herein for indemnification.

(c) The knowledge and/or actions, or failure to act, of any other director, officer, employee or agent of the Company or any other director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any other foreign or domestic corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise shall not be imputed to Indemnitee for purposes of determining any other right to indemnification under this Agreement.

Section 12. Remedies of Indemnitee .

(a) If (i) a determination is made pursuant to Section 10(b) of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advance of Expenses is not timely made pursuant to Sections 8 or 9 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 10(b) of this Agreement within 60 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Sections 7 or 9 of this Agreement within ten days after receipt by the Company of a written request therefor, or (v) payment of indemnification pursuant to any other section of this Agreement or the charter or Bylaws of the Company is not made within ten days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication in an appropriate court located in the State of Maryland, or in any other court of competent jurisdiction, of Indemnitee’s entitlement to such indemnification or advance of Expenses. Alternatively, Indemnitee, at Indemnitee’s

option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence a proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided, however, that the foregoing clause shall not apply to a proceeding brought by Indemnitee to enforce his or her rights under Section 7 of this Agreement. Except as set forth herein, the provisions of Maryland law (without regard to its conflicts of laws rules) shall apply to any such arbitration. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b) In any judicial proceeding or arbitration commenced pursuant to this Section 12, Indemnitee shall be presumed to be entitled to indemnification or advance of Expenses, as the case may be, under this Agreement and the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advance of Expenses, as the case may be. If Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 12, Indemnitee shall not be required to reimburse the Company for any advances pursuant to Section 8 of this Agreement until a final determination is made with respect to Indemnitee’s entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed). The Company shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all of the provisions of this Agreement.

(c) If a determination shall have been made pursuant to Section 10(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12, absent a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification.

(d) In the event that Indemnitee is successful in seeking, pursuant to this Section 12, a judicial adjudication of or an award in arbitration to enforce Indemnitee’s rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company for, any and all Expenses actually and reasonably incurred by him or her in such judicial adjudication or arbitration. If it shall be determined in such judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advance of Expenses sought, the Expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated.

(e) Interest shall be paid by the Company to Indemnitee at the maximum rate allowed to be charged for judgments under the Courts and Judicial Proceedings Article of the Annotated Code of Maryland for amounts which the Company pays or is obligated to pay for the period (i) commencing with either the tenth day after the date on which the Company was requested to advance Expenses in accordance with Sections 8 or 9 of this Agreement or the 60 ^th day after the date on which the Company was requested to make the determination of entitlement to indemnification under Section 10(b) of this Agreement, as applicable, and (ii) and ending on the date such payment is made to Indemnitee by the Company.

Section 13. Defense of the Underlying Proceeding .

(a) Indemnitee shall notify the Company promptly in writing upon being served with any summons, citation, subpoena, complaint, indictment, request or other document relating to any Proceeding which may result in the right to indemnification or the advance of Expenses hereunder and shall include with such notice a description of the nature of the Proceeding and a summary of the facts underlying the Proceeding. The failure to give any such notice shall not disqualify Indemnitee from the right, or otherwise affect in any manner any right of Indemnitee, to indemnification or the advance of Expenses under this Agreement unless the Company’s ability to defend in such Proceeding or to obtain proceeds under any insurance policy is materially and adversely prejudiced thereby, and then only to the extent the Company is thereby actually so prejudiced.

(b) Subject to the provisions of the last sentence of this Section 13(b) and of Section 13(c) below, the Company shall have the right to defend Indemnitee in any Proceeding which may give rise to indemnification hereunder; provided, however, that the Company shall notify Indemnitee of any such decision to defend within 15 calendar days following receipt of notice of any such Proceeding under Section 13(a) above. The Company shall not, without the prior written consent of Indemnitee, which shall not be unreasonably withheld or delayed, consent to the entry of any judgment against Indemnitee or enter into any settlement or compromise which (i) includes an admission of fault of Indemnitee, (ii) does not include, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee, or (iii) would impose any Expense, judgment, fine, penalty or limitation on Indemnitee. This Section 13(b) shall not apply to a Proceeding brought by Indemnitee under Section 12 of this Agreement.

(c) Notwithstanding the provisions of Section 13(b) above, if in a Proceeding to which Indemnitee is a party by reason of Indemnitee’s Corporate Status, (i) Indemnitee reasonably concludes, based upon an opinion of counsel approved by the Company, which approval shall not be unreasonably withheld, that Indemnitee may have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with other defendants in such Proceeding, (ii) Indemnitee reasonably concludes, based upon an opinion of counsel approved by the Company, which approval shall not be unreasonably withheld, that an actual or apparent conflict of interest or potential conflict of interest exists between Indemnitee and the Company, or (iii) if the Company fails to assume the defense of such Proceeding in a timely manner, Indemnitee shall be entitled to be represented by separate legal counsel of Indemnitee’s choice, subject to the prior approval of the Company, which approval shall not be unreasonably withheld, at the expense of the Company. In addition, if the Company fails to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any Proceeding to deny or to recover from Indemnitee the benefits intended to be provided to Indemnitee hereunder, Indemnitee shall have the right to retain counsel of Indemnitee’s choice, subject to the prior approval of the Company, which approval shall not be unreasonably withheld, at the expense of the Company (subject to Section 12(d) of this Agreement), to represent Indemnitee in connection with any such matter.

Section 14. Non-Exclusivity; Survival of Rights; Subrogation .

(a) The rights of indemnification and advance of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the charter or Bylaws of the Company, any agreement or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors, or otherwise. Unless consented to in writing by Indemnitee, no amendment, alteration or repeal of this

Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her Corporate Status prior to such amendment, alteration or repeal, regardless of whether a claim with respect to such action or inaction is raised prior or subsequent to such amendment, alteration or repeal. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right or remedy shall be cumulative and in addition to every other right or remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion of any right or remedy hereunder, or otherwise, shall not prohibit the concurrent assertion or employment of any other right or remedy.

(b) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

Section 15. Insurance . The Company will use its reasonable best efforts to acquire directors and officers liability insurance, on terms and conditions deemed appropriate by the Board of Directors, with the advice of counsel, covering Indemnitee or any claim made against Indemnitee by reason of his or her Corporate Status and covering the Company for any indemnification or advance of Expenses made by the Company to Indemnitee for any claims made against Indemnitee by reason of his or her Corporate Status. Without in any way limiting any other obligation under this Agreement, the Company shall indemnify Indemnitee for any payment by Indemnitee arising out of the amount of any deductible or retention and the amount of any excess of the aggregate of all judgments, penalties, fines, settlements and Expenses incurred by Indemnitee in connection with a Proceeding over the coverage of any insurance referred to in the previous sentence. The purchase, establishment and maintenance of any such insurance shall not in any way limit or affect the rights or obligations of the Company or Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and Indemnitee shall not in any way limit or affect the rights or obligations of the Company under any such insurance policies. If, at the time the Company receives notice from any source of a Proceeding to which Indemnitee is a party or a participant (as a witness or otherwise), the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies.

Section 16. Coordination of Payments . The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable or payable or reimbursable as Expenses hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

Section 17. Reports to Stockholders . To the extent required by the MGCL, the Company shall report in writing to its stockholders the payment of any amounts for indemnification of, or advance of Expenses to, Indemnitee under this Agreement arising out of a Proceeding by or in the right of the Company with the notice of the meeting of stockholders of the Company next following the date of the payment of any such indemnification or advance of Expenses or prior to such meeting.

Section 18. Duration of Agreement; Binding Effect .

(a) This Agreement shall continue until and terminate on the later of (i) the date that Indemnitee shall have ceased to serve as a director, officer, employee or agent of the Company or as a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any other foreign or domestic corporation, real estate investment trust, partnership, limited liability company, joint

venture, trust, employee benefit plan or other enterprise that such person is or was serving in such capacity at the request of the Company and (ii) the date that Indemnitee is no longer subject to any actual or possible Proceeding (including any rights of appeal thereto and any Proceeding commenced by Indemnitee pursuant to Section 12 of this Agreement).

(b) The indemnification and advance of Expenses provided by, or granted pursuant to, this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any other foreign or domestic corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving in such capacity at the request of the Company, and shall inure to the benefit of Indemnitee and Indemnitee’s spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

(c) The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

(d) The Company and Indemnitee agree that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which Indemnitee may be entitled. Indemnitee shall further be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertakings in connection therewith. The Company acknowledges that, in the absence of a waiver, a bond or undertaking may be required of Indemnitee by a court, and the Company hereby waives any such requirement of such a bond or undertaking.

Section 19. Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

Section 20. Identical Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together

shall constitute one and the same Agreement. One such counterpart signed by the party against whom enforceability is sought shall be sufficient to evidence the existence of this Agreement.

Section 21. Headings . The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

Section 22. Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

Section 23. Notices . All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, on the day of such delivery, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

(a) If to Indemnitee, to the address set forth on the signature page hereto.

(b) If to the Company, to:

American Realty Capital Trust, V, Inc.

405 Park Avenue, 14th Floor

New York, NY 10022

Attn: General Counsel

or to such other address as may have been furnished in writing to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

Section 24. Governing Law . This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without regard to its conflicts of laws rules.

[SIGNATURE PAGE FOLLOWS]

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

American Realty Capital Trust V, Inc.

By: /s/ Donald MacKinnon

Name: Donald MacKinnon

Title: Chief Executive Officer and President

INDEMNITEE

By: /s/ Donald MacKinnon

Name: Donald MacKinnon

INDEMNITEE

By: /s/ Donald R. Ramon

Name: Donald R. Ramon

INDEMNITEE

By: /s/ Andrew Winer

Name: Andrew Winer

EXHIBIT A

AFFIRMATION AND UNDERTAKING TO REPAY EXPENSES ADVANCED

To: The Board of Directors of American Realty Capital Trust V, Inc.

Re: Affirmation and Undertaking

Ladies and Gentlemen:

This Affirmation and Undertaking is being provided pursuant to that certain Indemnification Agreement, dated the 26th day of May, 2015, by and between American Realty Capital Trust V, Inc., a Maryland corporation (the “Company”), and the undersigned Indemnitee (the “Indemnification Agreement”), pursuant to which I am entitled to advance of Expenses in connection with [Description of Proceeding] (the “Proceeding”).

Terms used herein and not otherwise defined shall have the meanings specified in the Indemnification Agreement.

I am subject to the Proceeding by reason of my Corporate Status or by reason of alleged actions or omissions by me in such capacity. I hereby affirm my good faith belief that at all times, insofar as I was involved as a director of the Company, in any of the facts or events giving rise to the Proceeding, I (1) did not act with bad faith or active or deliberate dishonesty, (2) did not receive any improper personal benefit in money, property or services and (3) in the case of any criminal proceeding, had no reasonable cause to believe that any act or omission by me was unlawful.

In consideration of the advance of Expenses by the Company for reasonable attorneys’ fees and related Expenses incurred by me in connection with the Proceeding (the “Advanced Expenses”), I hereby agree that if, in connection with the Proceeding, it is established that (1) an act or omission by me was material to the matter giving rise to the Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty or (2) I actually received an improper personal benefit in money, property or services or (3) in the case of any criminal proceeding, I had reasonable cause to believe that the act or omission was unlawful, then I shall promptly reimburse the portion of the Advanced Expenses, together with the Applicable Legal Rate of interest thereon, relating to the claims, issues or matters in the Proceeding as to which the foregoing findings have been established.

IN WITNESS WHEREOF, I have executed this Affirmation and Undertaking on this _____ day of _______________, 20____.

_____________________________

Name:

Exhibit 10.31

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (“Agreement”) is made and entered into as of the 3rd day of August, 2015, by and between American Finance Trust, Inc. (f/k/a American Realty Capital Trust V, Inc.), a Maryland corporation (the “Company”), and Lisa D. Kabnick (the “Indemnitee”).