Item 1.01. Entry into
a Definitive Agreement.
On
December 17, 2021, American Finance Trust, Inc., a Maryland corporation (the “Company”) and its subsidiary,
American Finance Operating Partnership, a Delaware limited partnership (the “Operating Partnership”), entered into
a definitive purchase and sale agreement (the “PSA”) to acquire, in the aggregate, 81 properties (the “Properties”),
from certain subsidiaries of CIM Real Estate Finance Trust, Inc. (the “Sellers”) for approximately $1.3 billion
(the “Purchase Price”). The Purchase Price is subject to adjustment if certain of the existing tenants that have rights
of first refusal to purchase an underlying Property exercise those rights, if the Operating Partnership exercises limited rights to exclude
certain Properties not exceeding $200 million in value from those being acquired or if earn out amounts associated with certain leases
are satisfied. The acquisition of the Properties is referred to herein as the “Transaction” or the “Transactions.”
The Properties consist of 79 power centers and grocery-anchored multi-tenant retail centers, two single-tenant retail properties and a
detention pond parcel, located across 27 states and aggregating approximately 9.5 million square feet. The 79 power or grocery-anchored
centers are leased primarily to “necessity-based” retail tenants. Upon the closing of the Transactions, which may occur in
phases, the Operating Partnership will acquire all of the right, title and interest in each of the acquired Properties owned by the applicable
Sellers.
Pursuant
to the PSA, the Operating Partnership deposited $40 million (the “Deposit Amount”) with a designated escrow agent following
the signing of the PSA. The Operating Partnership was permitted to perform due diligence prior to entering into the PSA and has limited
rights to exclude Properties to be acquired. The Deposit Amount will be applied and released from escrow to the Sellers at the last closing,
except that, if following any prior closing, the total Deposit Amount exceeds 25% of the aggregate allocated Purchase Price for all remaining
Properties that have not yet closed, the excess over 25% will be applied at the prior closing. If the Operating Partnership defaults under
the PSA and, as a result of the default, the Sellers terminate the PSA in accordance with its terms, the Operating Partnership will be
required to forfeit the Deposit Amount.
The Company expects to fund the Purchase Price through a combination,
to be determined at each closing, of cash on the balance sheet, including net proceeds from the approximately $261 million sale of the
Sanofi asset described below, borrowings under the Company’s credit facility, as well as debt currently encumbering certain of the
properties that the Operating Partnership will seek to assume, and the issuance of up to $53.4 million in value of the Company’s
Class A common stock, par value $0.01 (the “Class A Common Stock”) or Class A units in the Operating Partnership (the
“OP Units”) to the Sellers. The number of shares or units to be issued at the applicable closing (limited to 4.9% of
the Company’s outstanding Class A Common Stock at the time on a fully diluted basis) will be based on the value of the shares or
units that may be issued at such closing divided by the per share volume weighted average price of the Company’s Class A Common
Stock measured over a five consecutive trading day period immediately preceding (but not including) the date on which the written notice
indicating the Sellers’ election to receive shares or units is delivered to the Operating Partnership (the price to be limited by
a 7.5% collar in either direction from the per share volume weighted average price of the Company’s Class A Common Stock measured
over the ten consecutive trading day period immediately preceding (but not including) the effective date of the PSA). Further, the number
of shares of the Class A Common Stock or OP Units, as applicable, that may be issued at the first closing will not exceed approximately
$26.7 million in value, with the remainder to be issued in a form to be determined by the Sellers at the second closing. The Company has
agreed, as part of the PSA, to register the resale of the shares and make a resale prospectus available for sales by the Sellers subject
to certain limits described more fully in the PSA. If the Sellers select OP Units, the OP Units may be redeemed by the Sellers for, at
the Operating Partnership’s option, cash or shares of the Company’s Class A Common Stock. If shares of Class A Common Stock
are issued, the Company is required to register the resale of the shares and make a resale prospectus available for sales by the Sellers,
subject to the limits described in the PSA. In both cases, the filing of a registration statement and resale prospectus and the registration
of the shares are not conditions to the closings but rather post-closing obligations of the Company. If the Company restricts the Sellers
from using the resale prospectus for periods longer than permitted under the PSA, the Company may be required to redeem the shares of
Class A Common Stock and pay, as liquidated damages, an amount equal to the original issuance price of the shares of Class A Common Stock
or the OP Units, as applicable, with respect to the shares that remain subject to the resale prospectus. The Operating Partnership is
required to fund all costs associated with assuming any of the existing debt but may receive a credit from the Sellers for 50% of the
costs from amounts due at a particular closing as well as a further credit for prepayment penalties that are avoided by virtue of the
loan assumption. To the extent that the Operating Partnership is not able to assume any or all of the existing debt, or complete the sale
of the Sanofi property described below in a timely fashion, it will need to arrange for either new indebtedness or draw additional funds
on the Company’s credit facility. The Transactions are expected to close in phases during the first quarter of 2022.
Under
the PSA, the parties have made certain representations, warranties and covenants including those related to the operation of the Properties
between the signing of the PSA and the closings. The PSA includes closing conditions, including, among other things: (i) the accuracy
of each party’s representations and warranties giving effect to any qualifications; and (ii) material compliance by the parties
with their respective covenants and obligations under the PSA. The PSA contains indemnification provisions, including those in favor of
the Operating Partnership pursuant to which the Sellers, subject to limitations set forth in the PSA (including a cap on liability in
the amount of $25 million, subject to certain specified carve-outs), will indemnify the Operating Partnership and their respective affiliates
from losses arising from, among other things, breaches of representations and warranties of the Sellers contained in the PSA and breaches
or non-performance of the Sellers’ covenants pursuant to the PSA. There is no assurance that the Company and the Operating Partnership
will complete the Transactions.
The
foregoing description of the PSA and the Transactions contemplated thereby, is only a summary, does not purport to be complete, and is
qualified in its entirety by reference to, the full text of the PSA, which is filed as Exhibit 10.1 to this Current Report on Form 8-K
and incorporated herein by reference.