UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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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. ¨
Item 1.01. Entry into a Material Definitive Agreement.
Advisory Amendment
On March 30, 2020, American Finance Trust, Inc. (the “Company”) entered into an amendment (the “Amendment”) to its advisory agreement (the “Advisory Agreement”) with American Finance Advisors, LLC (the “Advisor”). In light of the unprecedented market disruption resulting from the coronavirus pandemic, the Company and the Advisor have agreed to amend the Advisory Agreement to temporarily lower the quarterly thresholds of Core Earnings Per Adjusted Share (as defined in the Advisory Agreement) the Company must reach on a quarterly basis for the Advisor to receive the Variable Management Fee (as defined in the Advisory Agreement). For the quarters ending June 30, 2020, September 30, 2020 and December 31, 2020, the lower threshold will be reduced from $0.275 to $0.23 and the higher threshold will be reduced from $0.3125 to $0.27. The Company believes that the revised thresholds provide an appropriate incentive to the Advisor as the Company works to minimize the adverse impact on its business resulting from the coronavirus pandemic. The Advisor and the independent directors on the Company’s board of directors have agreed to reassess the threshold levels for 2021 after 2020 and potentially further amend the Advisory Agreement, after taking into account the economic impact of the coronavirus pandemic on the Company.
The foregoing summary of the material terms of the Amendment does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Amendment, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Forward-Looking Statements
The statements in this Current Report on Form 8-K that are not historical facts may be forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results or events to be materially different. Forward-looking statements may include, but are not limited to, statements regarding stockholder liquidity and investment value and returns. The words “anticipates,” “believes,” “expects,” “estimates,” “projects,” “plans,” “intends,” “may,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Company’s control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. These risks and uncertainties include the potential adverse effects of the ongoing global coronavirus pandemic, including actions taken to contain or treat the coronavirus, on the Company, the Company’s tenants and the global economy and financial markets, as well as those set forth in the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed on February 27, 2020 and all other filings with the SEC after that date, as such risks, uncertainties and other important factors may be updated from time to time in the Company’s subsequent reports. Further, forward looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise any forward-looking statement to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results, unless required to do so by law.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No | Description | |
| 10.1 | Third Amendment, dated as of March 30, 2020, to the Third Amended and Restated Advisory Agreement, by and among American Finance Trust, Inc., American Finance Operating Partnership, L.P. and American Finance Advisors, LLC | |
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
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/ Edward M. Weil, Jr. | |
| Edward M. Weil, Jr. | ||
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Chief Executive Officer and President (Principal Executive Officer) | ||
Dated: March 30, 2020
Exhibit 10.1
THIRD AMENDMENT TO
THIRD AMENDED AND RESTATED ADVISORY AGREEMENT
This THIRD AMENDMENT TO THIRD AMENDED AND RESTATED ADVISORY AGREEMENT is entered into as of March 30, 2020, by and among American Finance Trust, Inc. (the “Company”), American Finance Operating Partnership, L.P. (the “Operating Partnership”) and American Finance Advisors, LLC (the “Advisor”).
RECITALS
WHEREAS, the Company, the Operating Partnership and the Advisor entered into that certain Third Amended and Restated Advisory Agreement, dated as of September 6, 2016, as amended on July 19, 2018 and March 18, 2019 (as so amended, the “Advisory Agreement”); and
WHEREAS, in light of the unprecedented market disruption resulting from the coronavirus pandemic, the Company, the Operating Partnership and the Advisor desire to amend certain provisions of the Advisory Agreement.
NOW, THEREFORE, in consideration of the premises made hereunder, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
| 1. | Amendment to Section 1 of the Advisory Agreement. Section 1 of the Advisory Agreement is hereby amended to include following defined terms: |
“Variable Management Fee Lower Threshold” means (i) for the fiscal quarters ending June 30, 2020, September 30, 2020 and December 31, 2020, $0.23, and (ii) for any other fiscal quarter, $0.275.
“Variable Management Fee Upper Threshold” means (i) for the fiscal quarters ending June 30, 2020, September 30, 2020 and December 31, 2020, $0.27, and (ii) for any other fiscal quarter, $0.3125.”
| 2. | Amendment to Section 10(f) of the Advisory Agreement. Section 10(f) of the Advisory Agreement is hereby replaced in its entirety with the following: |
“(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 just completed fiscal quarter multiplied by (B) 15% multiplied by (C) the excess of Core Earnings Per Adjusted Share for the just completed fiscal quarter over the Variable Management Fee Lower Threshold for that fiscal quarter, plus (ii) the product of (X) the Adjusted Outstanding Shares for the just completed fiscal quarter multiplied by (Y) 10% multiplied by (Z) the excess of Core Earnings Per Adjusted Share for the just completed fiscal quarter over the Variable Management Fee Upper Threshold for that fiscal quarter.”
| 3. | Miscellaneous. Except as expressly modified by this amendment, the remaining terms, covenants and conditions of the Advisory Agreement shall remain in full force and effect. Capitalized terms used herein but not defined herein shall have the respective meanings ascribed to such terms in the Advisory Agreement. Signatures on this amendment which are transmitted electronically shall be valid for all purposes. |
[Signature page follows.]
1
IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have duly executed this amendment as of the date first set forth above.
| AMERICAN FINANCE TRUST, INC. | ||
| By: | /s/ Edward M. Weil, Jr. | |
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Name: Edward M. Weil, Jr. Title: Chief Executive Officer & President | ||
| AMERICAN FINANCE OPERATING PARTNERSHIP, L.P. | ||
| By: |
American Finance Trust, Inc., its General Partner | |
| By: | /s/ Edward M. Weil, Jr. | |
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Name: Edward M. Weil, Jr. Title: Chief Executive Officer & President |
| AMERICAN FINANCE ADVISORS, LLC | ||
| By: |
American Finance Special Limited Partner, LLC, its sole member | |
| By: |
AR Global Investments, LLC, its managing member |
| By: | /s/ Michael Anderson | |
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Name: Michael Anderson Title: Authorized Signatory |