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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
 
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission file number: 001-38597
https://cdn.kscope.io/5a89e564272ea246f16a28d95dadf2af-arct5logocolornotickera11.jpg
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.)

650 Fifth Ave.30th Floor, New YorkNY                 10019
____________________________________________________________________________ ___________________________________________________________________________
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (212) 415-6500
Securities registered pursuant to section 12(b) of the Act:
Title of each class
 
Trading Symbols
 
Name of each exchange on which registered
Class A Common Stock, $0.01 par value
 
AFIN
 
The Nasdaq Global Select Market
7.50% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value
 
AFINP
 
The Nasdaq Global Select Market
Preferred Stock Purchase Rights
 
 
 
The Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer

 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes No
As of August 3, 2020, the registrant had 108,527,734 shares of common stock outstanding.



AMERICAN FINANCE TRUST, INC.

TABLE OF CONTENTS

FORM 10-Q

 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2


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,
2020
 
December 31,
2019
ASSETS
(Unaudited)
 
 
Real estate investments, at cost:
 
 
 
Land
$
705,115

 
$
685,889

Buildings, fixtures and improvements
2,739,863

 
2,681,485

Acquired intangible lease assets
445,771

 
448,175

Total real estate investments, at cost
3,890,749

 
3,815,549

Less: accumulated depreciation and amortization
(582,668
)
 
(529,052
)
Total real estate investments, net
3,308,081

 
3,286,497

Cash and cash equivalents
136,699

 
81,898

Restricted cash
20,132

 
17,942

Deposits for real estate investments
2,290

 
85

Deferred costs, net
16,096

 
17,467

Straight-line rent receivable
54,655

 
46,976

Operating lease right-of-use assets
18,718

 
18,959

Prepaid expenses and other assets (including $457 and $503 due from related parties as of June 30, 2020 and December 31, 2019, respectively)
39,846

 
19,188

Assets held for sale

 
1,176

Total assets
$
3,596,517

 
$
3,490,188

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Mortgage notes payable, net
$
1,305,104

 
$
1,310,943

Credit facility
503,147

 
333,147

Below market lease liabilities, net
79,549

 
84,041

Accounts payable and accrued expenses (including $599 and $1,153 due to related parties as of June 30, 2020 and December 31, 2019, respectively)
32,333

 
26,817

Operating lease liabilities
19,307

 
19,318

Deferred rent and other liabilities
9,431

 
10,392

Dividends payable
3,617

 
3,300

Total liabilities
1,952,488

 
1,787,958

 
 
 
 
7.50% Series A cumulative redeemable perpetual preferred stock, $0.01 par value, liquidation preference $25.00 per share, 8,796,000 shares authorized, 7,719,689 and 6,917,230 issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
77

 
69

Common stock, $0.01 par value per share, 300,000,000 shares authorized, 108,527,734 and 108,475,266 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
1,085

 
1,085

Additional paid-in capital
2,635,166

 
2,615,089

Distributions in excess of accumulated earnings
(1,016,977
)
 
(932,912
)
Total stockholders’ equity
1,619,351

 
1,683,331

Non-controlling interests
24,678

 
18,899

Total equity
1,644,029

 
1,702,230

Total liabilities and equity
$
3,596,517

 
$
3,490,188

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

3

AMERICAN FINANCE TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(In thousands, except per share data)
(Unaudited)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
Revenue from tenants
$
74,934

 
$
79,109

 
$
149,498

 
$
150,650

 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Asset management fees to related party
6,918

 
6,335

 
13,823

 
12,373

Property operating expense
12,541

 
13,137

 
24,823

 
25,973

Impairment of real estate investments
11,502

 
4

 
11,502

 
827

Acquisition, transaction and other costs
721

 
1,892

 
1,173

 
2,746

Equity-based compensation
3,247

 
3,268

 
6,458

 
6,289

General and administrative
6,864

 
6,441

 
12,192

 
12,502

Depreciation and amortization
35,443

 
30,924

 
69,778

 
63,010

Goodwill impairment

 
1,605

 

 
1,605

Total operating expenses
77,236

 
63,606

 
139,749

 
125,325

          Operating income before gain on sale of real estate investments
(2,302
)
 
15,503

 
9,749

 
25,325

Gain on sale of real estate investments
2,838

 
14,365

 
4,278

 
17,238

   Operating income
536

 
29,868

 
14,027

 
42,563

Other (expense) income:
 
 
 
 
 
 
 
Interest expense
(18,801
)
 
(21,995
)
 
(37,907
)
 
(40,435
)
Other income
61

 
667

 
133

 
3,212

Total other expense, net
(18,740
)
 
(21,328
)
 
(37,774
)
 
(37,223
)
Net (loss) income
(18,204
)
 
8,540

 
(23,747
)
 
5,340

Net loss (income) attributable to non-controlling interests
20

 
(14
)
 
29

 
(11
)
Preferred stock dividends
(3,619
)
 
(642
)
 
(7,238
)
 
(672
)
Net (loss) income attributable to common stockholders
(21,803
)
 
7,884

 
(30,956
)
 
4,657

 
 
 
 
 
 
 
 
Other comprehensive loss:
 
 
 
 
 
 
 
Change in unrealized loss on derivatives

 
1,004

 

 
531

Comprehensive (loss) income attributable to common stockholders
$
(21,803
)
 
$
8,888

 
$
(30,956
)
 
$
5,188

 
 
 
 
 
 
 
 
Weighted-average shares outstanding — Basic
108,386,013

 
106,075,741

 
108,375,048

 
106,076,162

Net (loss) income per share attributable to common stockholders — Basic
$
(0.20
)
 
$
0.07

 
$
(0.29
)
 
$
0.04

Weighted-average shares outstanding — Diluted
108,386,013

 
106,394,277

 
108,375,048

 
106,389,912

Net (loss) income per share attributable to common stockholders — Diluted
$
(0.20
)
 
$
0.07

 
$
(0.29
)
 
$
0.04

 

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

4

AMERICAN FINANCE TRUST, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share data)
(Unaudited)

 
Six Months Ended June 30, 2020
 
Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of
Shares
 
Par Value
 
Number of
Shares
 
Par Value
 
Additional Paid-in
Capital
 
Accumulated Other Comprehensive income (loss)
 
Distributions in excess of accumulated earnings
 
Total Stockholders’ Equity
 
Non-controlling Interests
 
Total Equity
Balance, December 31, 2019
6,917,230

 
$
69

 
108,475,266

 
$
1,085

 
$
2,615,089

 
$

 
$
(932,912
)
 
$
1,683,331

 
$
18,899

 
$
1,702,230

Issuance of Common Stock, net

 

 

 

 
(90
)
 

 

 
(90
)
 

 
(90
)
Issuance of Preferred Stock, net
802,459

 
8

 

 

 
19,601

 

 

 
19,609

 

 
19,609

Equity-based compensation

 

 
52,468

 

 
528

 

 

 
528

 
5,930

 
6,458

Dividends declared on Common Stock, $0.25 per share

 

 

 

 

 

 
(52,889
)
 
(52,889
)
 

 
(52,889
)
Dividends declared on Preferred Stock, $0.38 per share

 

 

 

 

 

 
(7,238
)
 
(7,238
)
 

 
(7,238
)
Distributions to non-controlling interest holders

 

 

 

 

 

 
(220
)
 
(220
)
 
(84
)
 
(304
)
Net loss

 

 

 

 

 

 
(23,718
)
 
(23,718
)
 
(29
)
 
(23,747
)
Rebalancing of ownership percentage

 

 

 

 
38

 

 

 
38

 
(38
)
 

Balance, June 30, 2020
7,719,689

 
$
77

 
108,527,734

 
$
1,085

 
$
2,635,166

 
$

 
$
(1,016,977
)
 
$
1,619,351

 
$
24,678

 
$
1,644,029


 
Three Months Ended June 30, 2020
 
Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of
Shares
 
Par Value
 
Number of
Shares
 
Par Value
 
Additional Paid-in
Capital
 
Accumulated Other Comprehensive income (loss)
 
Distributions in excess of accumulated earnings
 
Total Stockholders’ Equity
 
Non-controlling Interests
 
Total Equity
Balance, March 31, 2020
7,719,689

 
$
77

 
108,475,266

 
$
1,085

 
$
2,634,953

 
$

 
$
(972,019
)
 
$
1,664,096

 
$
21,806

 
$
1,685,902

Issuance of Common Stock, net

 

 

 

 
(42
)
 

 

 
(42
)
 

 
(42
)
Issuance of Preferred Stock, net

 

 

 

 
(64
)
 

 

 
(64
)
 

 
(64
)
Equity-based compensation

 

 
52,468

 

 
281

 

 

 
281

 
2,966

 
3,247

Dividends declared on Common Stock, $0.21 per share

 

 

 

 

 

 
(23,058
)
 
(23,058
)
 

 
(23,058
)
Dividends declared on Preferred Stock, $0.38 per share

 

 

 

 

 

 
(3,619
)
 
(3,619
)
 

 
(3,619
)
Distributions to non-controlling interest holders

 

 

 

 

 

 
(97
)
 
(97
)
 
(36
)
 
(133
)
Net loss

 

 

 

 

 

 
(18,184
)
 
(18,184
)
 
(20
)
 
(18,204
)
Rebalancing of ownership percentage

 

 

 

 
38

 

 

 
38

 
(38
)
 

Balance, June 30, 2020
7,719,689

 
$
77

 
108,527,734

 
$
1,085

 
$
2,635,166

 
$

 
$
(1,016,977
)
 
$
1,619,351

 
$
24,678

 
$
1,644,029


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

5

AMERICAN FINANCE TRUST, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share data)
(Unaudited)

 
Six Months Ended June 30, 2019
 
Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of
Shares
 
Par Value
 
Number of
Shares
 
Par Value
 
Additional Paid-in
Capital
 
Accumulated Other Comprehensive income (loss)
 
Distributions in excess of accumulated earnings
 
Total Stockholders' Equity
 
Non-controlling Interests
 
Total Equity
Balance, December 31, 2018

 
$

 
106,230,901

 
$
1,063

 
$
2,412,915

 
$
(531
)
 
$
(812,047
)
 
$
1,601,400

 
$
8,335

 
$
1,609,735

Impact of adoption of new accounting pronouncement for leases (Note 2)

 

 

 

 

 

 
(170
)
 
(170
)
 

 
(170
)
Issuance of Preferred Stock, net
1,652,600

 
17

 

 

 
39,757

 

 

 
39,774

 

 
39,774

Common stock repurchases

 

 
(19,870
)
 
(1
)
 
(273
)
 

 

 
(274
)
 

 
(274
)
Equity-based compensation

 

 
34,588

 
1

 
572

 

 

 
573

 
5,717

 
6,290

 Dividends declared on Common Stock, $0.28 per share

 

 

 

 

 

 
(58,420
)
 
(58,420
)
 

 
(58,420
)
Dividends declared on Preferred Stock, $0.38 per share

 

 

 

 

 

 
(672
)
 
(672
)
 

 
(672
)
Distributions to non-controlling interest holders

 

 

 

 

 

 
(246
)
 
(246
)
 
(38
)
 
(284
)
Net income

 

 

 

 

 

 
5,329

 
5,329

 
11

 
5,340

Other comprehensive loss

 

 

 

 

 
531

 

 
531

 

 
531

Rebalancing of ownership percentage

 

 

 

 
843

 

 

 
843

 
(843
)
 

Balance, June 30, 2019
1,652,600

 
$
17

 
106,245,619

 
$
1,063

 
$
2,453,814

 
$

 
$
(866,226
)
 
$
1,588,668

 
$
13,182

 
$
1,601,850


 
Three Months Ended June 30, 2019
 
Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of
Shares
 
Par Value
 
Number of
Shares
 
Par Value
 
Additional Paid-in
Capital
 
Accumulated Other Comprehensive income (loss)
 
Distributions in excess of accumulated earnings
 
Total Stockholders' Equity
 
Non-controlling Interests
 
Total Equity
Balance, March 31, 2019
1,200,000

 
$
12

 
106,211,031

 
$
1,062

 
$
2,441,495

 
$
(1,004
)
 
$
(844,773
)
 
$
1,596,792

 
$
11,037

 
$
1,607,829

Issuance of Preferred Stock, net
452,600

 
5

 

 

 
11,173

 

 

 
11,178

 

 
11,178

Equity-based compensation

 

 
34,588

 
1

 
303

 

 

 
304

 
2,965

 
3,269

 Dividends declared on Common Stock, $0.28 per share

 

 

 

 

 

 
(29,213
)
 
(29,213
)
 

 
(29,213
)
Dividends declared on Preferred Stock, $0.38 per share

 

 

 

 

 

 
(642
)
 
(642
)
 

 
(642
)
Distributions to non-controlling interest holders

 

 

 

 

 

 
(124
)
 
(124
)
 
9

 
(115
)
Net income

 

 

 

 

 

 
8,526

 
8,526

 
14

 
8,540

Other comprehensive loss

 

 

 

 

 
1,004

 

 
1,004

 

 
1,004

Rebalancing of ownership percentage

 

 

 

 
843

 

 

 
843

 
(843
)
 

Balance, June 30, 2019
1,652,600

 
$
17

 
106,245,619

 
$
1,063

 
$
2,453,814

 
$

 
$
(866,226
)
 
$
1,588,668

 
$
13,182

 
$
1,601,850


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

6

AMERICAN FINANCE TRUST, INC.
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
Six Months Ended June 30,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net (loss) income
$
(23,747
)
 
$
5,340

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
Depreciation
45,381

 
38,637

Amortization of in-place lease assets
23,337

 
23,660

Amortization of deferred leasing costs
1,061

 
713

Amortization (including accelerated write-off) of deferred financing costs
3,178

 
4,360

Amortization of mortgage discounts (premiums) on borrowings, net
(1,149
)
 
(1,633
)
Accretion of market lease and other intangibles, net
(3,281
)
 
(3,572
)
Equity-based compensation
6,458

 
6,289

Gain on sale of real estate investments
(4,278
)
 
(17,238
)
Impairment charges and goodwill impairment
11,502

 
2,432

Payments of prepayment costs on mortgages
271

 
1,977

Changes in assets and liabilities:
 
 
 
Straight-line rent receivable
(7,872
)
 
(3,793
)
Straight-line rent payable
165

 
1,031

Prepaid expenses and other assets
(4,085
)
 
272

Accounts payable and accrued expenses
3,264

 
(1,585
)
Deferred rent and other liabilities
(961
)
 
(5,303
)
Net cash provided by operating activities
49,244

 
51,587

Cash flows from investing activities:
 
 
 
Capital expenditures
(4,047
)
 
(5,816
)
Investments in real estate and other assets
(102,222
)
 
(184,427
)
Proceeds from sale of real estate investments
6,785

 
22,572

Deposits
(2,205
)
 
2,956

Net cash used in investing activities
(101,689
)
 
(164,715
)
Cash flows from financing activities:
 
 
 

Proceeds from mortgage notes payable

 
241,930

Payments on mortgage notes payable
(1,507
)
 
(31,265
)
Proceeds from credit facility
190,000

 
108,000

Payments on credit facility
(20,000
)
 
(175,000
)
Payments of financing costs and deposits
(18,210
)
 
(9,836
)
Payments of prepayment costs on mortgages
(271
)
 
(1,977
)
Common stock repurchases

 
(274
)
Distributions on LTIP Units and Class A Units
(304
)
 
(340
)
Dividends paid on common stock
(52,889
)
 
(58,455
)
Dividends paid on preferred stock
(6,919
)
 

Common stock offering costs
(73
)
 

   Proceeds from issuance of preferred stock, net
19,609

 
40,231

Net cash provided by financing activities
109,436

 
113,014

Net change in cash, cash equivalents and restricted cash
56,991

 
(114
)
Cash, cash equivalents and restricted cash beginning of period
99,840

 
109,631