Global Net Lease(GNL) - 2020 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents the company's unaudited consolidated financial statements and accompanying notes for the specified periods Consolidated Balance Sheets Total assets and liabilities grew while total equity decreased, driven by real estate investments and borrowings Key Balance Sheet Metrics | Metric | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $3,792,992 | $3,701,605 | | Total Liabilities | $2,181,437 | $1,991,647 | | Total Equity | $1,611,555 | $1,709,958 | - Real estate investments, net, increased from $3,246,141 thousand as of December 31, 2019, to $3,293,349 thousand as of June 30, 2020, reflecting ongoing investment activities[8] - Cash and cash equivalents increased from $270,302 thousand to $316,824 thousand, indicating improved liquidity[8] - Mortgage notes payable, net, and revolving credit facility balances increased, contributing to the rise in total liabilities[8] Consolidated Statements of Operations Net income declined significantly despite revenue growth, driven by higher expenses and losses on dispositions Key Operational Metrics | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue from tenants | $81,109 | $76,119 | $160,351 | $151,587 | | Total expenses | $56,651 | $51,889 | $112,084 | $104,171 | | Operating income | $24,305 | $31,153 | $48,114 | $55,231 | | Net income attributable to common stockholders | $966 | $12,621 | $6,004 | $18,412 | | Basic and diluted net income per share | $0.01 | $0.15 | $0.06 | $0.22 | - Revenue from tenants increased by 6.6% for the three months and 5.8% for the six months ended June 30, 2020, primarily due to property acquisitions[12] - Interest expense increased to $17,529 thousand for the three months and $33,969 thousand for the six months ended June 30, 2020, reflecting higher average borrowings[12] - The company recorded a loss of $153 thousand on dispositions of real estate investments in 2020, contrasting with gains of over $6.9 million in the respective 2019 periods[12] Consolidated Statements of Comprehensive Income (Loss) The company shifted from comprehensive income to a comprehensive loss due to adverse currency and derivative adjustments Comprehensive Income (Loss) Summary | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $5,530 | $15,328 | $15,131 | $23,604 | | Other comprehensive loss | $(5,914) | $(4,196) | $(25,616) | $(10,460) | | Comprehensive income (loss) | $(384) | $11,132 | $(10,485) | $13,144 | | Comprehensive income (loss) attributable to common stockholders | $(4,948) | $8,425 | $(19,612) | $7,952 | - Cumulative translation adjustment resulted in a loss of $15,077 thousand for the six months ended June 30, 2020, indicating adverse foreign currency movements[15] - Fair value adjustments for designated derivatives contributed a loss of $10,539 thousand for the six months ended June 30, 2020[15] Consolidated Statements of Changes in Equity Total equity decreased due to accumulated other comprehensive loss and an increased accumulated deficit Equity Position | Metric (in thousands) | December 31, 2019 | June 30, 2020 | | :------------------------------------ | :---------------- | :------------ | | Total Stockholders' Equity | $1,697,631 | $1,594,511 | | Total Equity | $1,709,958 | $1,611,555 | - Accumulated other comprehensive income shifted from a gain of $20,195 thousand to a loss of $(5,421) thousand[18][19] - Accumulated deficit increased to $(810,923) thousand as of June 30, 2020, from $(733,245) thousand as of December 31, 2019[18][19] - Common stock dividends declared for the six months ended June 30, 2020, totaled $83,448 thousand[18][22] Consolidated Statements of Cash Flows Operating cash flow increased, while investing activities remained a significant use of cash and financing cash flow decreased Cash Flow Summary | Metric (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $89,714 | $71,244 | | Net cash used in investing activities | $(147,051) | $(135,491) | | Net cash provided by financing activities | $103,412 | $153,144 | | Net change in cash, cash equivalents and restricted cash | $46,075 | $88,897 | - Operating cash flow increased by $18.5 million, driven by adjustments to net income for non-cash items[25] - Investment in real estate and related assets was $144,689 thousand for the six months ended June 30, 2020[25] - Borrowings under revolving credit facilities increased to $227,000 thousand in 2020 from $116,000 thousand in 2019[25] Notes to Consolidated Financial Statements The notes detail the company's financial position, operations, and key accounting policies, including COVID-19 impacts Note 1 — Organization The company is a REIT investing in a diversified portfolio of commercial properties in the U.S., Canada, and Europe - Global Net Lease, Inc. is a Maryland corporation that elected REIT status for U.S. federal income tax purposes starting December 31, 2013[31] - The company's common and preferred stocks are listed on the NYSE under symbols GNL, GNL PR A, and GNL PR B[31] Portfolio Overview | Metric | Value as of June 30, 2020 | | :------------------------------------ | :------------------------ | | Number of properties | 296 | | Rentable square feet | 34.6 million | | Occupancy rate | 99.6% | | Weighted-average remaining lease term | 8.9 years | | Geographic concentration (annualized rental income): | | | U.S. and Canada | 65% | | Europe | 35% | Note 2 — Summary of Significant Accounting Policies This note outlines key accounting principles, including the impact of COVID-19 on lease accounting - The company prepares its unaudited consolidated financial statements in accordance with GAAP for interim financial information[34] - Revenue from tenants is recognized on a straight-line basis over the initial lease term[39] - The company evaluated goodwill for impairment due to COVID-19 and determined no impairment as of March 31, 2020[59] - The company elected to use FASB/SEC relief for COVID-19 related lease amendments, treating them as pre-concession arrangements[77][81] - ASU 2020-04 (Reference Rate Reform) was adopted in Q1 2020 to apply hedge accounting expedients for LIBOR-indexed cash flows[85] Note 3 — Real Estate Investments, Net The company acquired 18 properties in the first half of 2020 and had no dispositions during the period Acquisition Activity | Metric (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Cash paid for acquired real estate investments | $144,689 | $210,991 | | Number of properties purchased | 18 | 11 | - During the three and six months ended June 30, 2020, the company did not sell any properties[91] - For the six months ended June 30, 2019, the company sold 64 properties for $92.8 million, resulting in a gain of $7.8 million[93] - No tenants represented 10.0% or greater of consolidated annualized rental income, indicating tenant diversification[97] Geographic Concentration | Geographic Concentration | June 30, 2020 | December 31, 2019 | | :----------------------- | :------------ | :---------------- | | United States | 63.4% | 63.0% | | Michigan | 14.2% | 14.6% | | United Kingdom | 16.6% | 18.2% | Note 4 —Mortgage Notes Payable, Net Mortgage notes payable increased to $1.303 billion due to new financings, with a stable interest rate Mortgage Debt Summary | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :------------------------------------ | :------------ | :---------------- | | Gross mortgage notes payable | $1,319,173 | $1,287,448 | | Mortgage notes payable, net | $1,303,161 | $1,272,154 | | Weighted-average interest rate | 3.4% | 3.4% | - On May 14, 2020, the company secured a new €70.0 million ($75.6 million) loan in France, maturing May 14, 2025[110] - The French refinancing proceeds were used to repay outstanding indebtedness and reduce the Revolving Credit Facility[110] - The company was in compliance with all financial covenants under its mortgage notes payable agreements as of June 30, 2020[108] Future Principal Payments | Future Principal Payments (in thousands) | Amount | | :--------------------------------------- | :----- | | 2020 (remainder) | $2,609 | | 2021 | $12,772 | | 2022 | $19,779 | | 2023 | $316,985 | | 2024 | $217,842 | | Thereafter | $749,186 | | Total | $1,319,173 | Note 5 — Credit Facilities Total outstanding balances under the Credit Facility increased to $743.5 million as of June 30, 2020 Credit Facility Balances | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :------------------------------------ | :------------ | :---------------- | | Revolving Credit Facility | $344,592 | $199,071 | | Term Loan, Net | $398,955 | $397,893 | | Total Credit Facility | $743,547 | $596,964 | - The Credit Facility's total commitments increased to $1.235 billion, with potential for an additional $515.0 million[121] - The Revolving Credit Facility matures on August 1, 2023, and the Term Loan matures on August 1, 2024[122] - As of June 30, 2020, approximately $14.2 million was available for future borrowings under the Revolving Credit Facility[125] - The Credit Facility imposes financial covenants, including restrictions on distributions to 100% of Adjusted FFO[127][129] Note 6 — Fair Value of Financial Instruments Derivatives are classified as Level 2, while the fair value of mortgage notes payable is classified as Level 3 - The company uses a three-level fair value hierarchy to classify inputs used in fair value measurements[132][134] - The fair value of the company's mortgage notes payable was $1.4 billion as of June 30, 2020, classified as Level 3[139] - Credit valuation adjustments for derivatives are not significant, leading to an overall Level 2 classification for derivative valuations[134] Derivative Fair Values | Derivative Type (in thousands) | June 30, 2020 (Level 2) | December 31, 2019 (Level 2) | | :----------------------------- | :---------------------- | :-------------------------- | | Foreign currency forwards, net | $3,485 | $2,726 | | Interest rate swaps, net | $(16,987) | $(6,082) | Note 7 — Derivatives and Hedging Activities The company uses derivatives to manage interest rate and foreign exchange risks, with a net liability position - The company uses interest rate swaps to hedge variable-rate debt and foreign currency derivatives to manage GBP-USD and EUR-USD exposure[140] - For the three and six months ended June 30, 2020, the company recorded a loss of $0.3 million and a gain of $2.8 million, respectively, on non-designated derivatives[155] - The company terminated two interest rate swaps with an aggregate notional amount of €14.5 million in Q2 2020[147] - An estimated $6.7 million will be reclassified from AOCI as an increase to interest expense over the next 12 months[145] Derivative Positions | Derivative Type (in thousands) | June 30, 2020 | December 31, 2019 | | :------------------------------------ | :------------ | :---------------- | | Derivatives designated as hedging instruments (net) | $(16,987) | $(6,008) | | Derivatives not designated as hedging instruments (net) | $3,485 | $2,652 | Note 8 — Stockholders' Equity The company reduced its common stock dividend and adopted a short-term stockholder rights plan Shares Outstanding | Stock Type | Shares Outstanding (June 30, 2020) | | :------------------------------------ | :--------------------------------- | | Common Stock | 89,482,576 | | 7.25% Series A Preferred Stock | 6,799,467 | | 6.875% Series B Preferred Stock | 3,450,000 | - The company did not sell any shares through its ATM Programs during the first half of 2020[163][166] - Common stock dividends were reduced from an annualized rate of $2.13 per share to $1.60 per share, effective Q2 2020[167][169] - A short-term stockholder rights plan was adopted in April 2020 to deter hostile takeovers by entities acquiring 4.9% or more of common stock[173] Note 9 — Commitments and Contingencies Commitments primarily consist of ground leases, with no material legal or environmental claims reported - The company leases land under ground leases for eight properties, with lease durations ranging from 16 to 85 years[174] - No material legal or regulatory proceedings are pending or contemplated against the company[180] Operating Lease Metrics | Metric (in thousands) | June 30, 2020 | | :------------------------------------ | :------------ | | Operating lease right-of-use asset | $49,450 | | Operating lease liability | $23,649 | | Weighted-average remaining lease term | 32.5 years | | Weighted-average discount rate | 4.33% | Future Lease Payments | Future Base Rent Payments (in thousands) | Amount | | :--------------------------------------- | :----- | | 2020 (remainder) | $680 | | 2021 | $1,359 | | 2022 | $1,359 | | 2023 | $1,359 | | 2024 | $1,364 | | Thereafter | $39,451 | | Total minimum lease payments | $45,572 | | Total present value of lease payments | $23,649 | Note 10 — Related Party Transactions The company has significant transactions with its Advisor and Property Manager, both affiliates of AR Global - The Advisor and Property Manager are under common control with AR Global and receive compensation for services[32] - The Advisory Agreement was amended in May 2020 to temporarily lower Core AFFO Per Share thresholds for Incentive Compensation due to COVID-19[188][190] - No Incentive Compensation was earned for the quarters or six months ended June 30, 2020 or 2019[190][204] Related Party Fees | Fee Type (in thousands) | Three Months Ended June 30, 2020 (Incurred) | Three Months Ended June 30, 2019 (Incurred) | Six Months Ended June 30, 2020 (Incurred) | Six Months Ended June 30, 2019 (Incurred) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Asset management fees | $7,376 | $6,694 | $14,753 | $13,365 | | Property management fees | $1,498 | $1,468 | $2,915 | $2,840 | | Incentive compensation | $0 | $0 | $0 | $0 | | Total related party operational fees and reimbursements | $8,874 | $8,162 | $17,668 | $16,205 | Note 11 — Economic Dependency The company is economically dependent on its Advisor and its affiliates for essential management and administrative services - The company relies on the Advisor and its affiliates for critical services such as asset management, property management, and asset acquisition[207] - This dependency means the company would need to find alternative providers if the Advisor were unable to continue providing these services[208] Note 12 — Equity-Based Compensation This note details equity compensation plans, including RSUs for directors and a performance agreement with the Advisor - No stock options were issued under the Stock Option Plan as of June 30, 2020[212] - The RSP allows for grants of Restricted Shares and RSUs, with independent director retainers payable 50% in cash and 50% in RSUs[213][214] - The 2018 OPP, with a total fair value of $18.8 million, is expensed over a 2.8-year service period[221] RSU Activity | RSU Activity | Number of RSUs (June 30, 2020) | Weighted-Average Issue Price (June 30, 2020) | | :------------------------------------ | :----------------------------- | :------------------------------------------- | | Unvested, December 31, 2019 | 40,541 | $20.47 | | Vested | (23,824) | $21.71 | | Granted | 28,232 | $13.37 | | Unvested, June 30, 2020 | 44,949 | $15.35 | Compensation Expense | Compensation Expense (in thousands) | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :---------------------------------- | :------------------------------- | :----------------------------- | | 2018 OPP | $2,400 | $4,700 | | RSUs | $200 | $300 | Note 13 — Earnings Per Share Net income per share decreased significantly, calculated using the two-class method for participating securities EPS Calculation | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income attributable to common stockholders | $966 | $12,621 | $6,004 | $18,412 | | Basic and diluted net income per share | $0.01 | $0.15 | $0.06 | $0.22 | | Weighted average common shares outstanding (Basic) | 89,470,114 | 83,847,120 | 89,464,433 | 82,667,421 | | Weighted average common shares outstanding (Diluted) | 90,102,709 | 85,165,549 | 90,097,029 | 83,985,850 | - The two-class method is applied because unvested RSUs and unearned LTIP Units contain non-forfeitable rights to distributions[236] Excluded Common Share Equivalents | Common Share Equivalents Excluded from EPS Calculation | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :----------------------------------------------------- | :------------------------------- | :----------------------------- | | LTIP Units | 1,967,296 | 1,967,296 | Note 14 — Subsequent Events Subsequent to quarter-end, the company secured a new $88.0 million loan to repay its Revolving Credit Facility - On July 10, 2020, the company borrowed $88.0 million through a new loan agreement, secured by six industrial properties[241] - Approximately $84.0 million of the new loan proceeds were used to repay amounts outstanding under the Revolving Credit Facility[241] - The new loan bears interest at a floating rate of one-month LIBOR plus 2.9%, fixed at 3.45% by a swap agreement, and matures on July 10, 2027[241] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial performance, liquidity, and the impacts of the COVID-19 pandemic Overview The company is an externally managed REIT focused on a diversified portfolio of single-tenant net-leased commercial properties - The company invests in commercial properties with an emphasis on sale-leaseback transactions and mission-critical single tenant net-leased properties[250] Portfolio Summary | Metric | Value as of June 30, 2020 | | :------------------------------------ | :------------------------ | | Number of properties | 296 | | Rentable square feet | 34.6 million | | Occupancy rate | 99.6% | | Weighted-average remaining lease term | 8.9 years | | Geographic concentration (annualized rental income): | | | U.S. and Canada | 65% | | Europe | 35% | | Portfolio composition: | | | Industrial/distribution | 47% | | Office | 48% | | Retail | 5% | Management Update on the Impacts of the COVID-19 Pandemic Management took proactive steps to mitigate pandemic risks, achieving high rent collection and enhancing liquidity - The COVID-19 pandemic poses risks to rent payments, real estate demand, capital markets, and debt covenant compliance[252][254] - Management engaged directly with tenants, achieving approximately 98% cash rent collection for Q2 2020 across the portfolio[256] - A dividend reduction, effective Q2 2020, is expected to reduce cash needed for dividend payments by approximately $48.0 million per year[261] Rent Collection Status | Second Quarter 2020 Cash Rent Status | United States (1) | United Kingdom | Europe | Total Portfolio | | :----------------------------------- | :---------------- | :------------- | :----- | :-------------- | | Cash rent paid | 96% | 99% | 100% | 98% | | Approved deferral agreement | 2% | 1% | —% | 2% | | Deferral in negotiation | 1% | —% | —% | —% | | Other | 1% | —% | —% | —% | Properties The company's portfolio comprises 296 commercial properties with a weighted-average remaining lease term of 8.9 years - The company's portfolio includes 296 properties with a total of 34,558 thousand square feet and a weighted-average remaining lease term of 8.9 years[270] - Recent acquisitions in 2019 and 2020 include properties leased to Whirlpool, FedEx, and NSA Industries[270] Results of Operations Net income decreased significantly due to higher expenses and a loss on dispositions, despite revenue growth from acquisitions Comparison of the Three Months Ended June 30, 2020 and 2019 Net income attributable to common stockholders fell to $1.0 million from $12.6 million in the prior-year period Quarterly Performance Summary | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Change (YoY) | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------- | | Net income attributable to common stockholders | $966 | $12,621 | $(11,655) | | Revenue from tenants | $81,109 | $76,119 | $4,990 | | Gain (loss) on dispositions of real estate investments | $(153) | $6,923 | $(7,076) | | Interest expense | $(17,529) | $(15,689) | $(1,840) | | (Loss) gain on derivative instruments | $(317) | $1,390 | $(1,707) | - The increase in revenue was primarily due to property acquisitions, partially offset by adverse foreign exchange rate impacts[275] - Average borrowings increased, leading to higher interest expense, with total debt outstanding rising from $1.8 billion to $2.0 billion[284] Comparison of the Six Months Ended June 30, 2020 and 2019 Net income attributable to common stockholders fell to $6.0 million from $18.4 million in the prior-year period Semi-Annual Performance Summary | Metric (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | Change (YoY) | | :------------------------------------ | :----------------------------- | :----------------------------- | :----------- | | Net income attributable to common stockholders | $6,004 | $18,412 | $(12,408) | | Revenue from tenants | $160,351 | $151,587 | $8,764 | | Gain (loss) on dispositions of real estate investments | $(153) | $7,815 | $(7,968) | | Interest expense | $(33,969) | $(30,851) | $(3,118) | | (Loss) gain on derivative instruments | $2,826 | $1,630 | $1,196 | - Revenue growth was primarily due to property acquisitions, partially offset by adverse foreign exchange rate impacts[292] - The weighted-average effective interest rate on total debt increased from 3.0% to 3.2%[302] Liquidity and Capital Resources The company maintained liquidity through cash from operations and borrowings, ending the period with $316.8 million in cash - Cash and cash equivalents were $316.8 million as of June 30, 2020, up from $270.3 million at December 31, 2019[317] - The company acquired 18 properties for $144.7 million during the six months ended June 30, 2020[320] - Total debt outstanding was $2.1 billion as of June 30, 2020, with 86.6% of debt being fixed-rate or swapped to fixed-rate[327] - Subsequent to June 30, 2020, an $88.0 million loan was secured, primarily used to repay the Revolving Credit Facility[331] - The company was in compliance with all covenants under its Credit Facility and mortgage notes payable agreements as of June 30, 2020[340] Non-GAAP Financial Measures This section defines and reconciles non-GAAP measures like FFO and AFFO to evaluate operating performance - FFO, Core FFO, and AFFO are non-GAAP measures used to assess operating performance, excluding items like real estate depreciation[341][343][346] - Core FFO excludes acquisition, transaction, and other non-core costs, as well as debt extinguishment costs[348] - AFFO further excludes unrealized gains/losses and non-cash items like straight-line rent and equity-based compensation[349] - Rent deferrals due to COVID-19 have not significantly impacted rental revenue for GAAP Net Income and NAREIT FFO calculations[351] Non-GAAP Reconciliation Summary | Metric (in thousands) | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :------------------------------------ | :------------------------------- | :----------------------------- | | FFO attributable to common stockholders | $35,103 | $73,674 | | Core FFO attributable to common stockholders | $35,445 | $74,296 | | AFFO attributable to common stockholders | $39,777 | $79,599 | Dividends The company reduced its common stock dividend effective Q2 2020, subject to restrictions under its Credit Facility - Common stock dividends were reduced to an annualized rate of $1.60 per share ($0.40 quarterly), effective Q2 2020[356] - Series A and Series B Preferred Stock dividends accrue at 7.25% and 6.875% annually, respectively[358] - The Credit Facility restricts distributions to 100% of Adjusted FFO (105% for one fiscal quarter per year)[359] Dividend Coverage | Source of Dividend Coverage (in thousands) | Six Months Ended June 30, 2020 | | :----------------------------------------- | :----------------------------- | | Total dividends and distributions | $91,878 | | Cash flows provided by operations | $89,714 (97.6%) | | Available cash on hand | $2,164 (2.4%) | Foreign Currency Translation The company manages foreign currency risk through currency matching and the use of derivative instruments - The company's reporting currency is USD, while foreign investments use local functional currencies[363] - Foreign currency exchange rate fluctuations impact property investments, rental income, expenses, and debt instruments[363] - Risk is managed by matching debt service obligations to tenant rental obligations and using foreign currency derivatives[363] Contractual Obligations There were no material changes to the company's contractual obligations compared to the 2019 Annual Report - No material changes in contractual obligations were reported as of June 30, 2020, compared to the 2019 Annual Report on Form 10-K[364] Election as a REIT The company intends to maintain its REIT status, which requires distributing at least 90% of its taxable income - The company elected REIT taxation status effective December 31, 2013, and aims to maintain it[365] - REIT qualification requires annual distribution of at least 90% of REIT taxable income[365] - While generally exempt from federal corporate income tax, the company may be subject to state, local, and foreign taxes[365][368] Inflation Inflation may adversely impact results, particularly for leases without indexed escalation provisions - Inflation may adversely impact the company, especially for leases lacking indexed escalation provisions[369] - Rising maintenance and operating costs due to inflation could negatively affect results of operations[369] Related-Party Transactions and Agreements Details on related party transactions with the company's Advisor and affiliates are provided in Note 10 - Details on related party transactions, agreements, and fees are provided in Note 10 to the consolidated financial statements[370] Off-Balance Sheet Arrangements The company has no material off-balance sheet arrangements - The company has no material off-balance sheet arrangements[371] Item 3. Quantitative and Qualitative Disclosures About Market Risk There has been no material change in the company's market risk exposure during the first half of 2020 - No material change in market risk exposure occurred during the six months ended June 30, 2020[372] Item 4. Controls and Procedures Disclosure controls and procedures were deemed effective, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2020[373] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2020[374] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company reported no legal proceedings - No legal proceedings are pending[376] Item 1A. Risk Factors The primary material change to risk factors is the significant and evolving impact of the global COVID-19 pandemic - The COVID-19 pandemic has caused severe disruptions in the global economy and financial markets, leading to adverse effects on the company and its tenants[377] - Risks include tenants' inability to pay rent, potential decline in demand for office space, capital market volatility, and challenges in refinancing debt[378][386] - The company collected approximately 98% of Q2 2020 cash rent, but future collection is uncertain[382] - Operational risks include difficulty accessing capital, potential asset value decreases, and challenges in complying with REIT requirements[386] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds of Registered Securities There were no unregistered sales or issuer repurchases of equity securities - No unregistered sales of securities occurred[389] - No repurchases of equity securities by the issuer were made[390] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities were reported[391] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable[392] Item 5. Other Information The company reported no other information - No other information was reported[393] Item 6. Exhibits This section lists all exhibits included or incorporated by reference in the quarterly report - The report includes various exhibits, such as Articles of Restatement, Bylaws, and Rights Agreement[401] - Certifications from the Principal Executive Officer and Principal Financial Officer are also included[401]