We have a $200 million revolving, unsecured acquisition credit facility that expires in December 2002, and a $25 million revolving, unsecured credit facility that expires in February 2003. As of March 1, 2001, the outstanding balance on the $200 million credit facility was $142.9 million with an effective interest rate of approximately 7.4%. At March 1, 2001, the outstanding balance on the $25 million credit facility was $14.4 million with an effective interest rate of approximately 7.6%. A commitment fee of 0.225% per annum accrues on the total credit commitment of each credit facility. The credit facilities have been and are expected to be used to acquire additional retail properties leased to regional and national retail chains under long term net lease agreements. The credit facilities have also been used to make capital contributions to subsidiaries for the purpose of funding the acquisition of properties.

We use our credit facilities as a vehicle for the short-term financing of the acquisition of new properties. When outstanding borrowings under the $200 million credit facility reach a certain level (generally in the range of $75 to $175 million) and capital is available on acceptable terms, we generally seek to refinance those borrowings with the net proceeds of long-term or permanent financing, which may include the issuance of common stock, preferred stock, convertible preferred stock, debt securities or convertible debt securities. We cannot assure you, however, that we will be able to obtain any such refinancing or that market conditions prevailing at the time of refinancing will enable us to issue equity or debt securities upon acceptable terms. We intend to pay off borrowings on our $25 million credit facility with proceeds from the sale of properties acquired by us or our subsidiaries.

We received investment grade credit ratings from Fitch IBCA Duff & Phelps; Moody's Investor Service, Inc.; and Standard & Poor's Rating Group in December 1996. Currently, Fitch IBCA Duff & Phelps has assigned a rating of BBB, Moody's has assigned a rating of Baa3, and Standard & Poor's has assigned a rating of BBB- to our senior unsecured debt. These ratings could change based upon, among other things, our results of operations and financial condition.

We have also received credit ratings from the same rating agencies on our preferred stock. Fitch IBCA Duff & Phelps has assigned a rating of BBB-, Moody's Investor Service, Inc. has assigned a rating of Ba1, and Standard & Poor's Rating Group has assigned a rating of BB+. These ratings could change based upon, among other things, our results of operations and financial condition.

Historically, we have met our long-term capital needs through the issuance of common stock, preferred stock and investment grade long-term unsecured debt. We believe the majority of our future securities issuances should be in the form of common stock. We will issue common stock when we believe that the share price of our common stock is at a level that allows for the proceeds of any offering to be invested on an accretive basis into additional properties or to pay down any short-term borrowings on our credit facilities. In addition, we seek to maintain a conservative debt level on our balance sheet, which should result in conservative interest and fixed charge coverage ratios. We do not anticipate issuing significant amounts of additional debt until additional equity can also be issued to offset the increase in debt. If the share price levels do not increase and we do not issue additional equity or debt, we will reduce our level of property acquisitions. Under these circumstances, we intend to achieve our growth objectives by investing excess cash flow in additional retail properties or purchases of our outstanding securities. In addition, we intend to strategically sell properties when we believe the investment of the sale proceeds will generate higher returns or enhance the credit quality of our property portfolio.

COMPETITIVE STRATEGY We believe that, to utilize our investment philosophy and strategy most successfully, we must seek to maintain the following competitive advantages:

• SIZE AND TYPE OF INVESTMENT PROPERTIES: We believe that smaller ($500,000 to $10,000,000) retail net-leased properties represent an attractive investment opportunity in today's real estate environment. Due to the complexities of acquiring and managing a large portfolio of relatively small assets, we believe that these types of properties have not experienced significant institutional participation or the corresponding yield reduction experienced by larger income producing properties. We believe the less intensive day to day property management required by net-lease agreements, coupled with the active management of a large portfolio of smaller properties, is an effective investment strategy. The tenants of our freestanding retail properties generally provide goods and services which satisfy basic consumer needs. In order to grow and expand, they generally need capital. Since the acquisition of real estate is typically the single largest capital expenditure of many of these retailers, our method of purchasing the property and then leasing it back under a net-lease arrangement allows the retail chain to free up capital.
• INVESTMENT IN THE NEW RETAIL INDUSTRIES: Though we specialize in single-tenant properties, we will seek to further diversify our portfolio among a variety of retail industries. We believe that diversification will allow us to invest in retail industries that are currently growing and have characteristics we find attractive. These characteristics include, but are not limited to, retail industries dominated by local operators where regional and national chain operators can gain market share and dominance through more efficient operations, as well as industries taking advantage of major demographic shifts in the population base. As of December 31, 2000, the properties in our portfolio were leased to retail tenants operating in 23 industries.
• DIVERSIFICATION: Diversification of the portfolio by retail industry type, tenant and geographic location is key to our objective of providing predictable investment results for our stockholders. We continuously seek to further diversify our portfolio. As of December 31, 2000, the properties in our portfolio were leased to 72 retail chains. These retail chains operate 957 of our properties located in 46 states.
• MANAGEMENT SPECIALIZATION: We believe that our management's specialization in single-tenant retail properties operated under net-lease agreements is important to meeting our objectives. We plan to maintain this specialization and will seek to employ and train high-quality professionals in this specialized area of real estate ownership, finance and management.
• TECHNOLOGY: We intend to stay at the forefront of technology in our efforts to efficiently and economically carry out our operations. We maintain a sophisticated information system that allows us to analyze our portfolio's performance and actively manage our investments. We believe that technology and information-based systems will play an increasingly important role in our competitiveness as an investment manager and source of capital to a variety of industries and tenants.