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Item 7. Management’s Discussion and Analysis

2025-02-12 compared with 2024-02-14 · 73 added, 76 removed, 440 unchanged (25% of the section changed)

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Historical Investment and Disposition Activity

The following table sets forth select information about our investment activity for the previous eight quarters beginning with the quarter ended March 31, 2022 through December 31, 2023 (dollars in thousands):

The following table sets forth select information about our investment activity for the previous eight quarters beginning with the quarter ended March 31, 2023 through the quarter ended December 31, 2024 (dollars in thousands):

Three Months Ended

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(5) Includes investments in mortgage loans receivable made in support of sale-leaseback transactions.

The following table sets forth select information about our quarterly disposition activity for the quarters ended March 31, 2022 through December 31, 2023 (dollars in thousands):

The following table sets forth select information about our disposition activity for the previous eight quarters beginning with the quarter ended March 31, 2023 through the quarter ended December 31, 2024 (dollars in thousands):

Three Months Ended

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Substantially all of our cash from operations is generated by our investment portfolio.

The liquidity requirements for operating our Company consist primarily of funding our investment activities, servicing our outstanding indebtedness and paying our general and administrative expenses.

The liquidity requirements for operating our Company consist primarily of funding our investment activities, servicing our outstanding indebtedness and paying our general and administrative expenses and dividends as declared by our Board.

The occupancy level of our portfolio is high (99.7% as of December 31, 2024) and, because substantially all of our leases are triple-net (whereby our tenants are generally responsible for all maintenance, costs for operating the property, and insurance and property taxes associated with the leased properties), our liquidity requirements are not significantly impacted by property costs.

When a property becomes vacant, we are required to pay the property costs not paid by a tenant, as well as those property costs accruing during the time it takes to locate a new tenant or to sell the property.

As of December 31, 2023, three of our investment properties were vacant, significantly less than 1% of our portfolio, and all remaining properties were subject to a lease or mortgage loan receivable.

As of December 31, 2024, seven of our investment properties were vacant, significantly less than 1% of our portfolio, and all remaining properties were subject to a lease or mortgage loan receivable.

We expect to incur property costs from time to time in periods during which properties that become vacant are being marketed for lease or sale.

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When we sell properties, we generally reinvest the cash proceeds from our sales in new single-tenant properties.

Our short-term liquidity requirements also include the funding needs associated with 74 properties where we have agreed to reimburse the tenant for certain development, construction, or renovation costs or to provide construction financing in exchange for contractual payments of interest or increased rent that generally increases in proportion with our level of funding.

As of December 31, 2023, we agreed to provide construction financing or reimburse the tenant for certain development, construction and renovation costs in an aggregate amount of $435.2 million, and, as of such date, we have funded

$254.6 million of this commitment.

We expect to fund the remaining commitment totaling $180.6 million by December 31, 2024.

Our short-term liquidity requirements also include the funding needs associated with 104 properties where we have agreed to reimburse the tenant for certain

development, construction, or renovation costs or to provide construction financing in exchange for contractual payments of interest or increased rent that generally increases in proportion with our level of funding.

As of December 31, 2024, we agreed to provide construction financing or reimburse the tenant for certain development, construction and renovation costs in an aggregate amount of $627.3 million, and, as of such date, we have funded $472.5 million of this commitment.

We expect to fund the remaining commitment totaling approximately $154.8 million by December 31, 2025.

Additionally, as of February 7, 2025, we were under contract to acquire 13 properties with an aggregate purchase price of $41.9 million, subject to completion of our due diligence procedures and satisfaction of customary closing conditions.

We expect to meet our short-term liquidity requirements, including our construction financing and tenant reimbursement obligations and potential investment in future single-tenant properties, primarily with our cash and cash equivalents, net cash from operating activities, issuance of common stock subject to outstanding forward purchase commitments, borrowings under the Revolving Credit Facility and potentially through proceeds generated from asset sales and our 2022 ATM Program, under which we may issue common stock with an aggregate gross sales price of up to $278.5 million as of February 9, 2024.

We expect to meet our short-term liquidity requirements, including our construction financing and tenant reimbursement obligations and potential investment in future single-tenant properties, primarily with our cash and cash equivalents, net cash from operating activities, issuance of common stock subject to outstanding forward purchase commitments, borrowings under the Revolving Credit Facility and potentially through proceeds generated from asset sales and our October 2024 ATM Program, under which we may issue common stock with an aggregate gross sales price of up to $671.1 million as of February 7, 2025.

Our long-term liquidity requirements consist primarily of the funds necessary to make additional investments and repay indebtedness.

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We use various financial instruments designed to mitigate the impact of interest rate fluctuations on our cash flows and earnings, including hedging strategies such as interest rate swaps and caps, depending on our analysis of the interest rate environment and the costs and risks of such strategies.

Although we are not required to maintain a particular leverage ratio and may not be able to do so, we generally consider that, over time, a level of net debt (which includes recourse and non-recourse borrowings and any outstanding preferred stock less cash and cash equivalents and restricted cash available for future investment) that is less than six times our annualized adjusted EBITDA re is prudent for a real estate company like ours.

available for future investment) that is less than six times our annualized adjusted EBITDA re is prudent for a real estate company like ours.

As of December 31, 2024, all of our long-term debt was fixed-rate debt or was effectively converted to a fixed-rate for the term of the debt though hedging strategies and our weighted average debt maturity was 4.2 years.

we continue to invest in real estate properties and grow our real estate portfolio, we intend to manage our long-term debt maturities to reduce the risk that a significant amount of our debt will mature in any single year in the future.

As we continue to invest in real estate properties and grow our real estate portfolio, we intend to manage our long-term debt maturities to reduce the risk that a significant amount of our debt will mature in any single year in the future.

Future sources of debt capital may include public issuances of senior unsecured notes, term loan borrowings, mortgage financing of a single-asset or a portfolio of assets and CMBS borrowings.

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As our outstanding debt matures, we may refinance it as it comes due or choose to repay it using cash and cash equivalents or borrowings under our Revolving Credit Facility.

We believe that the cash generated by our operations, together with our cash and cash equivalents at December 31, 2023, our borrowing availability under the Revolving Credit Facility, issuance of common stock subject to outstanding forward purchase commitments, and our potential access to additional sources of capital, will be sufficient to fund our operations for the foreseeable future and allow us to invest in the real estate for which we currently have made commitments.

We believe that the cash generated by our operations, together with our cash and cash equivalents at December 31, 2024, our borrowing availability under the Revolving Credit Facility, issuance of common stock subject to outstanding forward purchase commitments, and our potential access to additional sources of capital, will be sufficient to fund our operations for the next 12 months, including investing in the real estate for which we currently have commitments, and the longer term period thereafter.

Supplemental Guarantor Information

In March 2020, the SEC adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01 to simplify disclosure requirements related to certain registered securities.

The rule became effective January 4, 2021.

The Company and the Operating Partnership have filed a registration statement on Form S-3 with the SEC registering, among other securities, debt securities of the Operating Partnership, which, unless otherwise specified, will be fully and unconditionally guaranteed by the Company.

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The guarantee is full and unconditional, and the Operating Partnership is a consolidated subsidiary of the Company.

As a result of the amendments to Rule 3-10 of Regulation S-X, subsidiary issuers of obligations guaranteed by the parent are not required to provide separate financial statements, provided that the subsidiary obligor is consolidated into the parent company’s consolidated financial statements, the parent guarantee is “full and unconditional” and, subject to certain exceptions as set forth below, the alternative disclosure required by Rule 13-01 is provided, which includes narrative disclosure and summarized financial information.

Pursuant to Rule 3-10 of Regulation S-X, subsidiary issuers of obligations guaranteed by the parent are not required to provide separate financial statements, provided that the subsidiary obligor is consolidated into the parent company’s consolidated financial statements, the parent guarantee is “full and unconditional” and, subject to certain exceptions as set forth below, the alternative disclosure required by Rule 13-01 is provided, which includes narrative disclosure and summarized financial information.

Accordingly, separate consolidated financial statements of the Operating Partnership have not been presented.

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Unsecured term loans:

2024 Term Loan April 2024 $ — $ 200,000 —% 2.9%

2027 Term Loan February 2027 $ 430,000 $ 430,000 2.5% 2.4%

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450,000 450,000 5.4% 4.3%

2030 Term Loan January 2030 (2)

450,000 — 4.9% —%

Senior unsecured notes July 2031 400,000 400,000 3.1% 3.1%

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Revolving Credit Facility and Credit Facility Term Loans

Through our Operating Partnership, we are party to an Amended and Restated Credit Agreement with a group of lenders, which was amended on August 24, 2023 (the "Credit Agreement") and provides for revolving loans of up to $600.0 million (the "Revolving Credit Facility") and an additional $850.0 million of term loans, consisting of a $400.0 million term loan (the "2028 Term Loan") and a $450.0 million term loan (the “2029 Term Loan” and, together with the 2028 Term Loan, the "CF Term Loans”).

All principal amounts available under the 2028 Term Loan were drawn in the third and fourth quarters of 2022.

Concurrently with the closing of the August 24, 2023 amendment, $250.0 million of the 2029 Term Loan was drawn with further draws of $125.0 million made in September 2023 and $75.0 million made in October 2023.

The $200.0 million previously outstanding under the Company's term loan due in April 2024 (the "2024 Term Loan") was repaid in full with a portion of the Company's initial borrowings under the 2029 Term Loan in August 2023.

The Revolving Credit Facility matures on February 10, 2026, with two extension options of six months each, exercisable by the Operating Partnership subject to the satisfaction of certain conditions.

The 2028 Term Loan matures on January 25, 2028 and the 2029 Term Loan has an original maturity of three years, plus extension options at the Operating Partnership's election which can extend the maturity to February 24, 2029.

Through our Operating Partnership, we are party to an Amended and Restated Credit Agreement with a group of lenders, which was most recently amended on February 6, 2025 (the "Credit Agreement") and provides for revolving loans of up to $1.0 billion (the "Revolving Credit Facility") and an additional $1.3 billion of term loans, consisting of a $400.0 million term loan (the "2028 Term Loan"), a $450.0 million term loan (the “2029 Term Loan”) and a $450.0 million term loan (the "2030 Term Loan" and, together with the 2028 Term Loan and 2029 Term Loan, the “CF Term Loans”).

All principal amounts available under the CF Term Loans were drawn prior to December 31, 2024.

The Revolving Credit Facility has a fully-extended maturity date of February 6, 2030, after giving effect to two extension options of six months each, exercisable by the Operating Partnership, subject to the satisfaction of certain conditions.

The 2028 Term Loan matures on January 25, 2028, the 2029 Term Loan has an original maturity of three years, plus extension options at the Operating Partnership's election, which can extend the maturity to February 24, 2029 and the 2030 Term Loan has an original maturity of three years, plus extension options at the Operating Partnership's election, which can extend the maturity to January 11, 2030.

The loans under each of the Revolving Credit Facility and the CF Term Loans initially bear interest at an annual rate of applicable Adjusted Term SOFR (as defined in the Credit Agreement) plus an applicable margin (which applicable margin varies between the Revolving Credit Facility and the CF Term Loans).

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In addition, the Operating Partnership is required to pay a revolving facility fee throughout the term of the Revolving Credit Facility.

The applicable margin and the revolving facility fee rate are a spread and rate, as applicable, set according to the Company's credit ratings provided by S&P, Moody's and/or Fitch.

The applicable margin and the revolving facility fee rate are a spread and rate, as applicable, set according to the credit ratings provided by S&P, Moody's and/or Fitch.

Each of the Revolving Credit Facility and the CF Term Loans is freely pre-payable at any time.

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Loans repaid under the CF Term Loans cannot be reborrowed.

The Credit Agreement has an accordion feature to increase, subject to certain conditions, the maximum availability of credit (either through increased revolving commitments or additional term loans) by up to $600.0 million.

The Operating Partnership is the borrower under the Credit Agreement, and we and certain of the subsidiaries of the Operating Partnership that own a direct or indirect interest in an eligible real property asset are guarantors under the Credit Agreement.

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Our cash flows from operating activities are primarily dependent upon the occupancy of our portfolio, the rental rates specified in our leases, the interest on our loans and direct financing lease receivables, the collectability of rent and interest, and the level of our operating expenses and general and administrative costs.

Our cash inflows from operating activities reflect adjustments to net income for non-cash items of $68.3 million, including i) depreciation and amortization of tangible, intangible and right-of-use real estate assets, and amortization of deferred financing costs and other non-cash interest expense of $107.6 million, ii) loss on debt extinguishment of $0.1 million, iii) our provision for impairment of real estate of $3.5 million, iv) adjustment to rental revenue for tenant credit of $0.6 million, and v) non-cash equity-based compensation expense of $9.0 million, reduced by i) our $24.2 million gain on dispositions of real estate, net, ii) $28.3 million related to the recognition of straight-line rent receivables, and iii) the subtraction of the change in our provision for credit losses of $0.1 million.

Our cash inflows from operating activities reflect adjustments to net income for non-cash items of $111.0 million, including i) depreciation and amortization of tangible, intangible and right-of-use real estate assets, and amortization of deferred financing costs and other non-cash interest expense of $129.3 million, ii) our provision for impairment of real estate of $14.8 million, iii) the change in our provision for credit losses of $0.2 million, iv) non-cash equity-based compensation expense of $10.8 million and v) adjustment to rental revenue for tenant credit of $0.6 million, reduced by i) our $6.0 million gain on dispositions of real estate, net and ii) $38.9 million related to the recognition of straight-line rent receivables.

An additional inflow was our increase in accrued liabilities and other payables of $1.1 million, offset by the outflow caused by the increase in our rent receivables, prepaid expenses and other assets of $7.3 million.

Net cash used in investing activities during the year ended December 31, 2023 was $857.1 million.

Net cash used in investing activities during the year ended December 31, 2024 was $1.1 billion.

Our net cash used in investing activities generally reflects our investment in real estate, including capital expenditures, construction in progress and lease incentives, and in mortgage loans receivable, which totaled $1.2 billion in the aggregate for the year ended December 31, 2024.

These cash outflows were partially offset by $96.9 million of proceeds from sales of investments, net of disposition costs, and $10.0 million of principal collections on our loans and direct financing lease receivables.

Net cash provided by financing activities of $580.0 million during the year ended December 31, 2023 reflected net cash inflows of $507.3 million from the issuance of common stock, $248.0 million from new borrowings under the 2029 Term Loan and $70.0 million of borrowings under the Revolving Credit Facility.

These cash inflows were partially offset by the payment of $168.2 million in dividends, $0.9 million of offeing costs paid related to our follow-on offerings and the ATM program, repayment of $70.0 million of borrowings under the Revolving Credit Facility, the payment of deferred financing costs of $2.4 million, and the payment of $3.7 million in taxes related to the net settlement of equity awards.

Net cash provided by financing activities of $810.7 million during the year ended December 31, 2024 reflected net cash inflows of $570.2 million from the issuance of common stock, $174.6 million of borrowings under the 2030 Term Loan and $490.0 million of borrowings under the Revolving Credit Facility.

These cash inflows were partially offset by the payment of $199.7 million in dividends, $1.0 million of offering costs paid related to our follow-on offerings and our ATM Program, repayment of $220.0 million of borrowings under the Revolving Credit Facility, the payment of deferred financing costs of $0.1 million, and the payment of $3.3 million in taxes related to the net settlement of equity awards.

Cash Flows for the year ended December 31, 2023

During the year ended December 31, 2022, net cash provided by operating activities was $211.0 million.

Our cash flows from operating activities primarily depend on the occupancy of our portfolio, the rental rates specified in our leases, the interest on our loans and direct financing lease receivables, the collectability of rent and interest and the level of our operating expenses and general and administrative costs.

Cash inflows during 2022 related to net income adjusted for non-cash items of $210.5 million (net income of $134.7 million adjusted for non-cash items, including the addition of depreciation and amortization of tangible, intangible and right-of-use real estate assets, amortization of deferred financing costs and other non-cash interest expense, loss on debt extinguishment and provision for impairment of real estate, offset by the subtraction of the change in our provision for credit losses, gain on dispositions of real estate, net, straight-line rent receivable, equity-based compensation expense and adjustment to rental revenue for tenant credit, which in aggregate net to an addition of $75.7 million), a decrease in rent receivables, prepaid expenses and other assets of $4.5 million and a decrease in accrued liabilities and other payables of $3.9 million.

During the year ended December 31, 2023, net cash provided by operating activities was $254.6 million and our net income was $191.4 million.

An additional inflow was our increase in accrued liabilities and other payables of $0.8 million, offset by the outflow caused by the increase in our rent receivables, prepaid expenses and other assets of $6.0 million.

Net cash used in investing activities during the year ended December 31, 2023 was $857.1 million.

Our net cash used in investing activities is generally used to fund our investments in real estate, the development of our construction in progress and investments in mortgage loans receivable, offset by cash provided from the disposition of real estate and principal collections on our loans and direct financing lease receivables.

The cash used in investing activities during 2022 primarily included $728.7 million to fund investments in real estate, $115.0 million of investments in loans receivable, $51.9 million to fund construction in progress and $7.5 million paid to tenants as lease incentives.

These cash outflows were partially offset by $126.6 million of proceeds from sales of investments, net of disposition costs, and $70.4 million of principal collections on our loans and direct financing lease receivables.

Net cash provided by financing activities was $506.8 million during the year ended December 31, 2022.

Our net cash provided by financing activities in 2022 related to cash inflows of $403.9 million from the issuance of common stock in a follow-on equity offering and through our ATM Program, and $299.0 million of borrowings under the Revolving Credit Facility.

These cash inflows were partially offset by $443.0 million of repayments on the Revolving Credit Facility, the payment of $141.7 million in dividends, $1.0 million of offering costs paid related to our follow-on offering and the ATM Program, the payment of deferred financing costs of $5.0 million and $2.5 million of payments for taxes related to the net settlement of equity awards.

Our net cash used in investing activities generally reflects our investment in real estate, including capital expenditures, construction in progress and lease incentives, and in mortgage loans receivable, which totaled $1.0 billion in the aggregate for the year ended December 31, 2023.

These cash outflows were partially offset by $128.6 million of

proceeds from sales of investments, net of disposition costs, and $27.9 million of principal collections on our loans and direct financing lease receivables.

These cash inflows were partially offset by the payment of $168.2 million in dividends, $0.9 million of offering costs paid related to our follow-on offerings and the ATM program, repayment of $70.0 million of borrowings under the Revolving Credit Facility, the payment of deferred financing costs of $2.4 million, and the payment of $3.7 million in taxes related to the net settlement of equity awards.

Off-Balance Sheet Arrangements

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We allocate the purchase price (plus transaction costs) of acquired properties accounted for as asset acquisitions to tangible and identifiable intangible assets or liabilities based on their relative fair values.

Tangible assets may include land, site improvements and buildings.

assets may include land, site improvements and buildings.

Intangible assets may include the value of in-place leases and above- and below-market leases and other identifiable intangible assets or liabilities based on lease or property specific characteristics.

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In estimating carrying costs, we include real estate taxes, insurance and other operating expenses, and estimates of lost rentals at market rates during the expected lease-up periods, which primarily range from six to 12 months.

The fair value of above- or below-market leases is recorded based on the net present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between the contractual amount to be paid pursuant to the in-place lease and our estimate of the fair market lease rate for the corresponding in-place lease, measured over the

remaining non-cancelable term of the lease including any below-market fixed rate renewal options for below-market leases.

In making estimates of fair values for purposes of allocating purchase price, we use a number of sources, including real estate valuations prepared by independent valuation firms.

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This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property's use and eventual disposition.

These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors.

These estimates consider factors such

as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors.

If impairment exists due to the inability to recover the carrying value of a property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used.

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We continually review receivables related to rent and unbilled rent receivables and determine collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.

that have been collected is recognized as a current period reduction of rental revenue in our consolidated statements of operations.

If the assessment of the collectability of substantially all payments due under a lease changes from probable to not probable, any difference between the rental revenue recognized to date and the lease payments that have been collected is recognized as a current period reduction of rental revenue in our consolidated statements of operations.

Derivative Instruments

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Results of Operations

The following discussion includes the results of our operations for the periods presented.

The following discusses our results of operations for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

A discussion of our results of operations for the year ended December 31, 2023, as compared to the year ended December 31, 2022, has been omitted from this Annual Report but may be found in "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Comparison of the years ended December 31, 2023 and 2022" in our Annual Report on Form 10-K for the year ended December 31, 2022.

Comparison of the years ended December 31, 2024 and 2023

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Rental revenue $ 425,749 $ 339,897 $ 85,852 25.3 %

Interest on loans and direct financing lease receivables 18,128 15,499 2,629 17.0 %

Interest income on loans and direct financing lease receivables 23,409 18,128 5,281 29.1 %

Other revenue, net 452 1,570 (1,118) (71.2) %

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Interest income 3,069 2,011 1,058 52.6 %

Other income 1,548 — 1,548 100.0 %

Income before income tax expense 204,266 192,051 12,215

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The increase in rental revenue was driven primarily by the growth in our real estate investment portfolio which grew by 217 rental properties, or 12%, since December 31, 2023.

Our real estate investments were acquired throughout the periods presented and were not all owned by us for the entirety of the applicable periods;

A portion of our real estate investments were acquired throughout the periods presented and were not all owned by us for the entirety of the applicable periods;

accordingly, a significant portion of the increase in rental revenue between periods is related to recognizing revenue in 2024 from acquisitions that were made during 2023 and 2024.

Another component of the increase in revenues between periods relates to rent escalations recognized on our leases.

Interest on loans and direct financing lease receivables .

Interest on loans and direct financing lease receivables increased by $2.6 million during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to a higher average daily balance of mortgage loans receivable outstanding during 2023 along with increased interest rates earned during the year ended December 31, 2023.

Interest on loans and direct financing lease receivables increased by $5.3 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to the increase in our mortgage loans receivable portfolio during 2024, which led to a higher average daily balance of loans receivable outstanding during the year ended December 31, 2024.

Other revenue, net .

Other revenue for the year ended December 31, 2023 increased by $0.4 million, as compared to the year ended December 31, 2022, primarily due to the receipt of insurance claim proceeds offset by a decrease in mortgage loan prepayment income fees received during the year ended December 31, 2023.

Other revenue for the year ended December 31, 2024 decreased by $1.1 million, as compared to the year ended December 31, 2023, primarily due to the receipt of insurance claim proceeds and higher loan prepayment fees received during the year ended December 31, 2023.

General and administrative.

General and administrative expense increased by $1.2 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.

This increase in general and administrative expense was primarily due to an increase in salary expense, severance costs, and professional fees during the year ended December 31, 2023.

General and administrative expense increased by $4.5 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to an increase in non-cash share-based compensation, salary expense and professional fees during the year ended December 31, 2024.

Property expenses .

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Depreciation and amortization expense increased by $19.9 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023.

Depreciation and amortization expense increased in proportion to the general increase in the size of our real estate investment portfolio.

Depreciation and amortization expense increased in proportion to the general increase in the size of our real estate investment portfolio during the year ended December 31, 2024.

Provision for impairment of real estate .

Impairment charges on real estate investments were $3.5 million and $20.2 million for the years ended December 31, 2023 and 2022, respectively, a decrease of $16.6 million.

During the years ended December 31, 2023 and 2022, we recorded a provision for impairment of real estate on 8 and 13 of our real estate investments, respectively, with the average size of our impairments being smaller in 2023.

We strategically seek to identify non-performing properties that we may re-lease or dispose of in an effort to improve our returns and manage risk exposure.

An increase in vacancy associated with our disposition or re-leasing strategies may trigger impairment charges when the expected future cash flows from the properties from sale or re-lease are less than their net book value.

Impairment charges on real estate investments were $14.8 million and $3.5 million for the years ended December 31, 2024 and 2023, respectively.

During the years ended December 31, 2024 and 2023, we recorded a provision for impairment of real estate on 22 and eight of our real estate investments, respectively.

Change in provision for credit losses.

During the year ended December 31, 2023, our provision for credit losses decreased by $0.1 million, compared to a $0.1 million increase in our provision for credit losses during the year ended December 31, 2022.

During the year ended December 31, 2024, our provision for credit losses increased by $0.2 million, compared to a $0.1 million decrease in our provision for credit losses during the year ended December 31, 2023.

Under ASC 326, we are required to re-evaluate the expected loss on our portfolio of loans and direct financing lease receivables at each balance sheet date.

Changes in our provision for credit losses are driven by revisions to global and loan-specific assumptions in our credit loss model and by changes in the size of our loan and direct financing lease portfolio.

Changes in our provision for credit losses are driven by revisions to global and asset-specific assumptions in our credit loss model and by changes in the size of our loan and direct financing lease portfolio.

Other operating income:

Gain on dispositions of real estate, net.

Gain on dispositions of real estate, net, decreased by $6.5 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.

G ain on dispositions of real estate, net, decreased by $18.2 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023.

We disposed of 46 real estate properties during the year ended December 31, 2024, compared to 52 real estate properties during the year ended December 31, 2023.

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The loss on debt extinguishment of $0.1 million during the year ended December 31, 2023 relates to the write-off of deferred financing costs in conjunction with the full repayment of our 2024 Term Loan in August 2023.

During the year ended December 31, 2022, we recorded a loss on debt extinguishment of $2.1 million related to the write-off of deferred financing costs and the payment of fees in conjunction with amendments to our term loans and revolving credit facility.

Interest expense .

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Interest income .

Interest income decreased by $0.8 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.

The decrease in interest income was primarily due to lower average daily cash balances in our interest-bearing bank accounts and a decrease in investments in commercial paper during the year ended December 31, 2023.

Interest income increased by $1.1 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023.

The increase in interest income was primarily due to an increase

in interest rates on our short-term investments during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Other income .

During the year ended December 31, 2024, we recorded $1.5 million of other income related to the settlement of litigation with a former tenant.

Substantially all of this amount relates to proceeds received to recoup legal fees and other related expenses previously incurred associated with enforcing our rights under the leases with the former tenant.

Income tax expense.

Income tax expense decreased by $0.4 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.

The decrease was primarily due to the accrual of income taxes

for a transaction consummated in 2022 through our taxable REIT subsidiary.

Income tax expense decreased by approximately $8,000 for the year ended December 31, 2024, as compared to the year ended December 31, 2023.

We are organized and operate as a REIT and are generally not subject to U.S.

federal taxation.

federal corporate income taxes on our REIT taxable income that is currently distributed to our stockholders.

However, the Operating Partnership is subject to taxation in certain state and local jurisdictions that impose income taxes on a partnership.

Changes in income tax expense are also due to changes in the proportion of our real estate portfolio located in jurisdictions where the Operating Partnership is subject to taxation.

Non-GAAP Financial Measures

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accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures.

Additionally, our computation of FFO, Core FFO and AFFO may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.

Additionally, our computation of FFO, Core FFO and AFFO may differ from the

methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.

The following table reconciles net income (which is the most comparable GAAP measure) to FFO, Core FFO and AFFO attributable to stockholders and non-controlling interests:

6 unchanged sentences

FFO attributable to stockholders and non-controlling interests 334,503 272,899 212,718

Non-core expense (income) (1)(2)(3)

Non-core (income) expense (1)(2)

— (510) 2,388

4 unchanged sentences

Other amortization expense 1,802 1,507 2,912

Other non-cash charges (73) 74 (212)

Other non-cash adjustments 1,075 (73) 74

Capitalized interest expense (5,760) (2,430) (757)

3 unchanged sentences

(2) Includes $0.2 million of fees incurred in conjunction with the August 2022 amendment to our 2027 Term Loan and our $2.1 million loss on debt extinguishment during the year ended December 31, 2022.

(3) Includes our $4.5 million loss on debt extinguishment during the year ended December 31, 2021.

We compute EBITDA as earnings before interest, income taxes and depreciation and amortization.

43 unchanged sentences

(1) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate and loan repayments completed during the three months ended December 31, 2024 had occurred on October 1, 2024.

(2) Adjustment is made to i) exclude non-core income and expense adjustments made in computing Core FFO, ii) exclude changes in our provision for credit losses and iii) eliminate the impact of seasonal fluctuation in certain non-cash compensation expense recorded in the period.

(2) Adjustment is made to i) exclude non-core adjustments made in computing Core FFO, ii) exclude changes in our provision for credit losses and iii) eliminate the impact of seasonal fluctuation in certain non-cash compensation expense recorded in the period.

(3) Adjustment excludes lease termination or loan prepayment fees and contingent rent (based on a percentage of the tenant's gross sales at the leased property) where payment is subject to exceeding a sales threshold specified in the lease, if any.

14 unchanged sentences

NOI excludes all other items of expense and income included in the financial statements in calculating net income or loss in accordance with GAAP.

Cash NOI further excludes non-cash items included in total revenues and property expenses, such as straight-line rental revenue and other amortization and non-cash charges.

We believe NOI and Cash NOI provide useful and relevant

information because they reflect only those revenue and expense items that are incurred at the property level and present such items on an unlevered basis.

Cash NOI further excludes non-cash items included in total revenues and property expenses, such as straight-line rental

revenue and other amortization and non-cash charges.

We believe NOI and Cash NOI provide useful and relevant information because they reflect only those revenue and expense items that are incurred at the property level and present such items on an unlevered basis.

NOI and Cash NOI are not measures of financial performance under GAAP.

13 unchanged sentences

Interest income (3,069) (2,011) (2,825)

Other income (1,548) — —

Income tax expense 628 636 998

1 unchanged sentence

Straight-line rental revenue, net (38,661) (30,375) (20,615)

Other amortization and non-cash charges 1,507 2,912 2,675

Other amortization and non-cash adjustments 2,877 1,507 2,912

Cash NOI attributable to stockholders and non-controlling interests $ 408,829 $ 326,064 $ 265,351

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis