NOTE 24. SUBSEQUENT EVENTS

COVID-19 PANDEMIC

In March 2020, the agency of the United Nations, responsible for international public health, declared the outbreak of the COVID-19 Pandemic, which has spread throughout the United States. The spread of the COVID-19 Pandemic has caused significant volatility in the U.S. and international markets and in many industries, business activity has virtually shut-down entirely. There is significant uncertainty around the duration and severity of business disruptions related to the COVID-19 Pandemic, as well as its impact on the U.S. economy and international economies. As such, the Company is not yet able to determine the full impact of the COVID-19 Pandemic on its operations and therefore, the potential that such impact will be material.

The actions taken by federal, state, and local governments to mitigate the spread of the COVID-19 Pandemic by ordering closure of nonessential businesses and ordering residents to generally stay at home has resulted in many of our tenants temporarily closing their businesses, and/or expressing concerns about their ability to pay rent. These economic hardships have adversely impacted our business, and we expect them to have a negative effect on our financial results. We expect such negative effects to be greater during the quarter ending June 30, 2020 than they were during the quarter ended March 31, 2020.

An assessment of the current or identifiable potential financial and operational impact on the Company as a result of the COVID-19 Pandemic is as follows:

Based on April 2020 contractual base rent, of the Company’s portfolio, 62% has remained open since the onset, of the COVID-19 Pandemic, with 27% operating on a limited basis.

The Company was contacted by certain of its tenants who are seeking rent relief through possible deferrals or other potential modifications of lease terms, beginning with the April 2020 rent. The rent payable for April 2020 from the Company’s tenants seeking rent relief represents approximately 37% of April 2020 contractual base rent. We expect that our rent collections will be below our tenants’ contractual rent obligations for so long as governmental orders require non-essential businesses to remain closed and residents to stay at home, which will adversely impact our results of operations. The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted. April collections and rent relief requests to-date may not be indicative of collections or requests in any future period. Depending upon the duration of tenant closures and the overall economic downturn resulting from the COVID-19 Pandemic, we may find deferred rents difficult to collect.

The Company believes certain of the programs available under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) may provide tenants with the ability to obtain proceeds from loans provided by the Federal government which could provide liquidity that would allow the tenant to pay its near-term rent. However, no assurances can be given that the tenants will seek to access or will receive funds from these programs or will be able to use the proceeds to pay their rent in the near-term or otherwise.

Given uncertainty surrounding the depth, duration, and geographic impact of the COVID-19 Pandemic, as a precautionary measure intended to support the Company’s liquidity, the Company, in March 2020, drew $20 million of available capacity on its $200 million Credit Facility. As a result, the Company, as of March 31, 2020, has approximately $19 million in cash on hand with approximately $199 million outstanding on the Credit Facility.

The total borrowing capacity on the Credit Facility, based on the assets currently in the borrowing base, is approximately $200 million, and as such, the Company has the borrowing capacity of approximately $1 million on the Credit Facility. Pursuant to the terms of the Credit Facility, any property in the borrowing base with a tenant that is more than 60 days past due on its contractual rent obligations would be automatically removed from the borrowing base and the Company’s borrowing capacity would be reduced. The Company believes that certain modifications, including a deferral of current rent that is paid later in 2020, do not meet with the past due terms of the Credit Facility and thus, any of the Company’s applicable properties would not be required to be removed from the borrowing base.

As are result of the outbreak of the COVID-19 Pandemic, the federal government and the State of Florida issued orders encouraging everyone to remain in their residence and not go into work. In response to these orders and in the best interest of our employees and directors, we have implemented significant preventative measures to ensure the health and safety of our employees and Board, including: i) conducting all meetings of our Board and Committees of the Board telephonically or via a visual conferencing service, permitting our employees to work from home at their election, enforcement of appropriate social distancing practices in our office, encouraging our employees to wash their hands often and providing hand sanitizer throughout our office, requiring employees who do not feel well in any capacity to stay at home, and requiring all third-party delivery services (e.g. mail, food delivery, etc.) to complete their service outside the front door of our offices. These preventative measures, including the transition to a remote workforce, have not had any material adverse impact on our financial reporting systems, internal controls over financial reporting or disclosure controls and procedures. At this time, we have not laid off, furloughed, or terminated any employee in response to the COVID-19 Pandemic. The Compensation Committee of our Board may reevaluate the performance goals and other aspects of the compensation arrangements of our executive officers later in 2020 as more information about the effects of the COVID-19 Pandemic become known.

A prolonged period of mandated closures or other social-distancing guidelines may adversely impact our tenants’ ability to generate sufficient revenues, and could force tenants to default on their leases, or result in the bankruptcy or insolvency of tenants, which would diminish the rental revenue we receive under our leases. The uncertainty surrounding the pandemic precludes any prediction as to the ultimate adverse impact on the Company. Nevertheless, the COVID-19 Pandemic presents material uncertainty and risk with respect to our performance, business or financial condition, results from operations and cash flows. The extent of the effects of the COVID-19 Pandemic on our business, results of operations, cash flows, and growth prospects is highly uncertain and will ultimately depend on future developments, none of which can be predicted with any certainty. See Part I – Item 1A. Risk Factors of our Annual Report on Form 10-K and in this 10-Q in Part II – Item 1A. Risk Factors. However, we believe the actions we are taking will help minimize interruptions to our operations and will put us in the best position to participate in the recovery when the time comes. Management and the Board will continue to actively monitor the effects of the pandemic, including governmental directives in the jurisdictions in which we operate and the recommendations of public health authorities, and will, as needed, take further measures to adapt our business in the best interests of our shareholders and personnel.

INCOME PROPERTY DISPOSITIONS

On April 24, 2020, the Company sold its CVS ground lease located in downtown Dallas, Texas, for a sales price of approximately $15.2 million, reflecting an exit cap rate of 4.50%. Approximately $10.4 million of the proceeds received from the sale constituted the completion of a Section 1031 like-kind exchange into the recently-purchased Perimeter Place asset in Atlanta, Georgia. The remaining proceeds are expected to be part of a future Section 1031 like-kind exchange. The Company’s estimated gain on the sale is approximately $0.8 million, or $0.13 per share after tax.

On April 30, 2020, the Company sold its Wawa ground lease located in Daytona Beach, Florida, for a sales price of approximately $6.0 million, reflecting an exit cap rate of 4.75%. The property, a former Barnes & Noble, is currently under a 20 year ground lease to Wawa. Wawa is expected to begin construction on the vacant site in early 2021. The proceeds are expected to be part of a future Section 1031 like-kind exchange. The Company’s estimated gain on the sale is approximately $1.8 million, or $0.29 per share after tax.

SHARE REPURCHASES

For the period subsequent to March 31, 2020, through May 7, 2020, the Company has repurchased approximately 5,300 shares of our common stock for approximately $185,000, an average purchase price of $35.20 per share, under the $10 Million Repurchase Program.

2025 NOTES REPURCHASES

On both April 30, 2020 and May 6, 2020, the Company repurchased $2.5 million aggregate principal amount of 2025 Notes at a $475,000 discount, for total 2025 Notes repurchased subsequent to March 31, 2020 of $5.0 million at a $950,000 discount (the “Subsequent Open Market Purchases”). Following the Subsequent Open Market Purchases, $65.0 million aggregate principal amount of the 2025 Notes remains outstanding.

There were no other reportable subsequent events or transactions.