ESSENTIAL PROPERTIES REALTY TRUST, INC. 10-K

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes included elsewhere in this report, as well as the "Business" section of this report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategies for our business, includes forward‑looking statements that involve risks and uncertainties. You should read "Item 1A. Risk Factors" and the "Special Note Regarding Forward‑Looking Statements" sections of this report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by these forward‑looking statements. Overview We are an internally managed real estate company that acquires, owns and manages primarily single-tenant properties that are net leased on a long-term basis to middle-market companies operating service-oriented or experience-based businesses. We generally invest in and lease freestanding, single-tenant commercial real estate facilities where a tenant services its customers and conducts activities that are essential to the generation of the tenant’s sales and profits. As of December 31, 2024, 93.2% of our $460.6 million of annualized base rent was attributable to properties operated by tenants in service-oriented and experience-based businesses. "Annualized base rent" means annualized contractually specified cash base rent in effect on December 31, 2024 for all of our leases (including those accounted for as loans or direct financing leases) commenced as of that date and annualized cash interest on our mortgage loans receivable as of that date. We were organized on January 12, 2018 as a Maryland corporation. We elected to be taxed as a REIT for federal income tax purposes beginning with the year ended December 31, 2018, and we believe that our current organization, operations and intended distributions will allow us to continue to so qualify. Our common stock is listed on the New York Stock Exchange under the symbol “EPRT”. Our primary business objective is to maximize stockholder value by generating attractive risk-adjusted returns through owning, managing and growing a diversified portfolio of commercially desirable properties. As of December 31, 2024, we had a portfolio of 2,104 properties (inclusive of 150 properties which secure our investments in mortgage loans receivable) that was diversified by tenant, industry, concept and geography, had annualized base rent of $460.6 million and was 99.7% occupied. Our portfolio is built based on the following core investment attributes: Diversification. As of December 31, 2024, our portfolio was 99.7% occupied by 413 tenants operating 592 different brands, or concepts, in 16 industries across 49 states, with none of our tenants contributing more than 4.2% of our annualized base rent. Our goal is that, over time, no more than 5% of our annualized base rent will be derived from any single-tenant or more than 1% from any single property. Long Lease Term. As of December 31, 2024, our leases had a weighted average remaining lease term of 14.0 years (based on annualized base rent), with 5.8% of our annualized base rent attributable to leases expiring prior to January 1, 2030. Our properties generally are subject to long-term net leases that we believe provide us a stable base of revenue from which to grow our portfolio. Significant Use of Sale-Leaseback Investments. We seek to acquire properties owned and operated by middle-market businesses and lease the properties back to the operators pursuant to our standard lease form. During the year ended December 31, 2024, approximately 97.2% of our investments were sale-leaseback transactions. Significant Use of Master Leases. As of December 31, 2024, 66.1% of our annualized base rent was attributable to master leases. Contractual Base Rent Escalation. As of December 31, 2024, 98.4% of our leases (based on annualized base rent) provided for increases in future base rent at a weighted average rate of 1.7% per year. Smaller, Low Basis Single-Tenant Properties. We generally invest in freestanding “small-box” single- tenant properties. As of December 31, 2024, our average investment per property was $2.9 million (which equals 46 our aggregate investment in our properties (including transaction costs, lease incentives and amounts funded for construction in progress) divided by the number of properties owned at such date), and we believe investments of similar size allow us to grow our portfolio without concentrating a large amount of capital in individual properties and limit our exposure to events that may adversely affect a particular property. Additionally, we believe that many of our properties are generally fungible and appropriate for multiple commercial uses, which reduces the risk that a particular property may become obsolete and enhances our ability to sell a property if we choose to do so. Healthy Rent Coverage Ratio and Tenant Financial Reporting. As of December 31, 2024, our portfolio’s weighted average rent coverage ratio was 3.5x, and 98.9% of our leases (based on annualized base rent) obligate the tenant to periodically provide us with specified unit-level financial reporting. "Rent coverage ratio" means, as of a specified date, the ratio of (x) tenant-reported or, when unavailable, management's estimate (based on tenant-reported financial information) of annual earnings before interest, taxes, depreciation, amortization and cash rent attributable to the leased property (or properties, in the case of a master lease) to (y) the annualized base rental obligation. 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, 2023 through the quarter ended December 31, 2024 (dollars in thousands): Three Months Ended March 31, 2024 June 30, 2024 September 30, 2024 December 31, 2024 Investment activity $ 248,770 $ 333,910 $ 307,615 $ 333,435 Number of transactions 36 35 37 37 Property count 79 83 57 78 Avg. investment per unit $ 2,767 $ 3,393 $ 4,102 $ 3,281 Cash cap rate 1 8.1% 8.0% 8.1% 8.0% GAAP cap rate 2 9.3% 9.1% 9.1% 9.2% Master lease percentage 3,4 82% 76% 57% 69% Sale-leaseback percentage 3,5 100% 100% 89% 100% Existing relationship percentage 87% 82% 79% 79% Percentage of financial reporting 3 100% 100% 100% 100% Rent coverage ratio 2.7x 3.0x 4.7x 3.4x Lease term (years) 17.2 17.8 17.2 17.7 Three Months Ended March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 Investment activity $ 207,147 $ 277,361 $ 213,327 $ 314,865 Number of transactions 24 29 30 43 Property count 57 78 65 93 Avg. investment per unit $ 3,401 $ 3,350 $ 2,812 $ 3,008 Cash cap rate 1 7.6% 7.4% 7.6% 7.9% GAAP cap rate 2 9.0% 8.7% 8.7% 9.1% Master lease percentage 3,4 86% 57% 60% 72% Sale-leaseback percentage 3,5 100% 99% 100% 97% Existing relationship percentage 94% 66% 86% 96% Percentage of financial reporting 3 100% 100% 100% 100% Rent coverage ratio 3.3x 3.9x 3.3x 3.3x Lease term (years) 19.0 19.3 17.6 17.6 _____________________________________ (1) Cash annualized base rent for the first full month after the investment divided by the gross investment in the property plus transaction costs. 47 (2) GAAP rent and interest income for the first twelve months after the investment divided by the gross investment in the property plus transaction costs. (3) As a percentage of annualized base rent. (4) Includes investments in mortgage loans receivable collateralized by more than one property. (5) Includes investments in mortgage loans receivable made in support of sale-leaseback transactions. 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 March 31, 2024 June 30, 2024 September 30, 2024 December 31, 2024 Disposition volume 1 $ 11,949 $ 4,783 $ 16,973 $ 60,449 Cash cap rate on leased assets 2 6.5% 7.3% 6.8% 7.0% Leased properties sold 3 6 4 7 24 Vacant properties sold 3 1 2 2 — Three Months Ended March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 Disposition volume 1 $ 37,161 $ 41,736 $ 28,496 $ 30,602 Cash cap rate on leased assets 2 6.1% 6.2% 6.5% 6.6% Leased properties sold 3 17 14 9 9 Vacant properties sold 3 — 2 1 — _____________________________________ (1) Net of transaction costs. (2) Annualized base rent at time of sale divided by the gross sale price (excluding transaction costs) for the property. (3) Property count excludes dispositions of undeveloped land parcels or dispositions where only a portion of the owned parcel was sold. Liquidity and Capital Resources As of December 31, 2024, the net investment value of our income property portfolio totaled $5.6 billion, consisting of investments in 2,104 properties (inclusive of 150 properties which secure our investments in mortgage loans receivable), with annualized base rent of $460.6 million. 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 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, 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. In addition, we may recognize an expense for certain property costs, such as real estate taxes billed in arrears, if we believe the tenant is likely to vacate the property before making payment on those obligations. The amount of such property costs can vary quarter-to-quarter based on the timing of property vacancies and the level of underperforming properties; however, we do not expect that such costs will be significant to our operations. We intend to continue to grow through additional investments in stand-alone single-tenant properties. To accomplish this objective, we seek to invest in real estate utilizing a combination of debt and equity capital and with cash from operations that we do not distribute to our stockholders. 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 104 properties where we have agreed to reimburse the tenant for certain 48 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 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. We expect to meet our long-term liquidity requirements through various sources of capital, including net cash from operating activities, borrowings under our Revolving Credit Facility, future debt financings, proceeds from the sale of our common stock and proceeds from the sale of selected properties in our portfolio. However, at any point in time, there may be a number of factors that could have a material and adverse effect on our ability to access these capital sources, including unfavorable conditions in the overall equity and credit markets, our level of leverage, the portion of our portfolio that is unencumbered, our credit ratings, borrowing restrictions imposed by our existing debt agreements, general market conditions for real estate and potentially REITs specifically, our operating performance, our liquidity and general market perceptions about us. The success of our business strategy will depend, to a significant degree, on our ability to access these various capital sources to fund our future investments and thereby grow our cash flows. An additional liquidity need is funding the required level of distributions, generally 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding any net capital gain), that are among the requirements for us to continue to qualify for taxation as a REIT. Holders of OP Units are entitled to distributions per unit equivalent to those paid by us per share of common stock. During the year ended December 31, 2024, our Board declared total cash distributions of $1.16 per share of common stock/OP Unit totaling $208.1 million and $55.6 million is payable as of December 31, 2024. To continue to qualify for taxation as a REIT, we must make distributions to our stockholders aggregating annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain. As a result of this requirement, we cannot rely on retained earnings to fund our business needs to the same extent as other entities that are not REITs. If we do not have sufficient funds available to us from our operations to fund our business needs, we will need to find alternative ways to fund those needs. Such alternatives may include, among other things, selling properties (whether or not the sales price is optimal or otherwise meets our strategic long-term objectives), incurring additional indebtedness or issuing equity securities in public or private transactions. The availability and attractiveness of the terms of these potential sources of financing cannot be assured. Generally, our short-term debt capital needs are provided through the use of our Revolving Credit Facility. We manage our long-term leverage position through the issuance of long-term fixed-rate debt on an unsecured or secured basis. Generally, we will seek to issue long-term debt on an unsecured basis as we believe this facilitates greater flexibility in the management of our portfolio and our ability to retain optionality in our overall financing and growth strategy. By seeking to match the expected cash inflows from our long-term income producing investments with the expected cash outflows for our long-term debt, we seek to "lock in," for as long as is economically feasible, the expected positive spread between our scheduled cash inflows from our investments and the cash outflows on our debt obligations. In this way, we seek to reduce the risk that increases in interest rates would adversely impact our cash flows and results of operations. Our ability to execute leases that contain annual rent escalations also contributes to our ability to manage the risk of a rising interest rate environment. 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 49 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. 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. These sources of debt capital may offer us the opportunity to lower our cost of funding and further diversify our sources of debt capital. Over time, we may choose to issue preferred equity as a part of our overall strategy for funding our business. 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, 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 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. At December 31, 2024, the Operating Partnership had issued and outstanding $400.0 million of senior notes. The obligations of the Operating Partnership under the senior notes are guaranteed on a senior basis by the Company. The guarantee is full and unconditional, and the Operating Partnership is a consolidated subsidiary of the Company. 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. Furthermore, as permitted under Rule 13-01(a)(4)(vi), the Company has excluded the summarized financial information for the Operating Partnership as the assets, liabilities and results of operations of the Company and the Operating Partnership are not materially different than the corresponding amounts presented in the consolidated financial statements of the Company, and management believes such summarized financial information would be repetitive and not provide incremental value to investors. 50 Description of Certain Debt The following table summarizes our outstanding indebtedness as of December 31, 2024 and 2023: Principal Outstanding Weighted Average Interest Rate (1) (in thousands) Maturity Date December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 Unsecured term loans: 2027 Term Loan February 2027 $ 430,000 $ 430,000 2.5% 2.4% 2028 Term Loan January 2028 400,000 400,000 4.7% 4.6% 2029 Term Loan February 2029 (2) 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% Revolving Credit Facility February 2026 — — —% —% Total principal outstanding $ 2,130,000 $ 1,680,000 4.1% 3.6% _______________________________________________________________ (1) Interest rates are presented after giving effect to our interest rate swap and lock agreements, where applicable. (2) After giving effect to extension options exercisable at the Operating Partnership's election. 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 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). The Adjusted Term SOFR is a rate with a term equivalent to the interest period applicable to the relevant borrowing. 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 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. Outstanding credit extensions under the Revolving Credit Facility are mandatorily payable if the amount of such credit extensions exceeds the revolving facility limit. The Operating Partnership may re-borrow amounts paid down on the Revolving Credit Facility prior to its maturity. 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 $1.0 billion. 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. Under the terms of the Credit Agreement, we are subject to customary restrictive financial and nonfinancial covenants which, among other things, require us to maintain certain leverage ratios, cash flow and debt service coverage ratios and secured borrowing ratios. As of December 31, 2024, we were in compliance with these covenants. 51 The Credit Agreement also restricts our ability to pay distributions to our stockholders under certain circumstances. However, we may make distributions to the extent necessary to maintain our qualification as a REIT under the Code. In addition to the financial covenants described above, the Credit Agreement contains customary affirmative and negative covenants that, among other things and subject to exceptions, limit or restrict our ability to incur indebtedness and liens, consummate mergers or other fundamental changes, dispose of assets, make certain restricted payments, make certain investments, modify our organizational documents, transact with affiliates, change our fiscal periods, provide negative pledge clauses, make subsidiary distributions, enter into certain new lines of business or engage in certain activities, and fail to meet the requirements for taxation as a REIT. 2027 Term Loan On February 18, 2022, we, through our Operating Partnership, amended our existing $430.0 million term loan credit facility (the "2027 Term Loan") to, among other things, reduce the Applicable Margin, extend the maturity date to February 18, 2027 and make certain other changes consistent with market terms and conditions. In August 2022, the 2027 Term Loan was further amended to revise the applicable margin grid such that the applicable pricing is based on the credit rating of the Company’s long-term senior unsecured non-credit enhanced debt for borrowed money (subject to a single step-down in the applicable pricing if the Company achieves a consolidated leverage ratio that is less than 0.35 to 1:00 while maintaining a credit rating of BBB/Baa2 provided by S&P, Moody's and/or Fitch). The borrowings under the 2027 Term Loan, as amended, bear interest at an annual rate of applicable Adjusted Term SOFR (as defined in the Credit Agreement) plus an applicable margin. The Adjusted Term SOFR is a rate with a term equivalent to the interest period applicable to the relevant borrowing. The applicable margin was initially a spread set according to a leverage-based pricing grid. In May 2022, the Operating Partnership made an irrevocable election to have the applicable margin be a spread set according to the Company’s corporate credit ratings provided by S&P, Moody’s and/or Fitch. The 2027 Term Loan is pre-payable at any time by the Operating Partnership without penalty. The 2027 Term Loan has an accordion feature to increase, subject to certain conditions, the maximum availability of the facility up to an aggregate of $500.0 million. The Operating Partnership is the borrower under the 2027 Term Loan, 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 facility. Under the terms of the 2027 Term Loan, we are subject to customary restrictive financial and nonfinancial covenants which, among other things, require us to maintain certain leverage ratios, cash flow and debt service coverage ratios, and secured borrowing ratios. As of December 31, 2024, we were in compliance with these covenants. The 2027 Term Loan restricts our ability to pay distributions to our stockholders under certain circumstances. However, we may make distributions to the extent necessary to maintain our qualification as a REIT under the Code. The 2027 Term Loan contains certain additional covenants that, subject to exceptions, limit or restrict our incurrence of indebtedness and liens, disposition of assets, transactions with affiliates, mergers and fundamental changes, modification of organizational documents, changes to fiscal periods, making of investments, negative pledge clauses and lines of business and REIT qualification. Senior Unsecured Notes On June 22, 2021, the Operating Partnership issued $400.0 million aggregate principal amount of 2.950% Senior Notes due 2031 (the "2031 Notes"), resulting in net proceeds of $396.6 million. The 2031 Notes were issued by the Operating Partnership and the obligations of the Operating Partnership under the 2031 Notes are fully and unconditionally guaranteed on a senior basis by the Company. The indenture and supplemental indenture creating the 2031 Notes contain customary restrictive covenants, including limitations on our ability to incur additional secured and unsecured indebtedness. As of December 31, 2024, we were in compliance with these covenants. 52 Cash Flows Comparison of the years ended December 31, 2024 and 2023 As of December 31, 2024, we had $40.7 million of cash and cash equivalents and $4.3 million of restricted cash, as compared to $39.8 million of cash and cash equivalents and $9.2 million of restricted cash as of December 31, 2023. Cash Flows for the year ended December 31, 2024 During the year ended December 31, 2024, net cash provided by operating activities was $308.5 million and our net income was $203.6 million. 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 $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, 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 $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, 2023, net cash provided by operating activities was $254.6 million and our net income was $191.4 million. 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. 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 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 53 proceeds from sales of investments, net of disposition costs, and $27.9 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 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 We had no off-balance sheet arrangements as of December 31, 2024. Contractual Obligations The following table provides information with respect to our contractual obligations as of December 31, 2024: Payment due by period (in thousands) Total 2025 2026-2027 2028-2029 Thereafter Unsecured Term Loans $ 1,730,000 $ — $ 430,000 $ 850,000 $ 450,000 Senior unsecured notes 400,000 — — — 400,000 Revolving Credit Facility — — — — — Tenant Construction Financing and Reimbursement Obligations (1) 154,809 154,809 — — — Operating Lease Obligations (2) 22,434 1,420 1,821 1,736 17,457 Total $ 2,307,243 $ 156,229 $ 431,821 $ 851,736 $ 867,457 _____________________________________ (1) Includes obligations to reimburse certain of our tenants for development, construction and renovation costs that they incur related to properties leased from the Company in exchange for contractual payments of interest or increased rent that generally increases proportionally with our funding. (2) Includes $21.0 million of rental payments due under ground lease arrangements where our tenants are directly responsible for payment. Additionally, we may enter into commitments to purchase goods and services in connection with the operation of our business. These commitments generally have terms of one-year or less and reflect expenditure levels comparable to our historical expenditures, as adjusted for growth. Critical Accounting Estimates Our accounting policies are determined in accordance with GAAP. The preparation of our financial statements requires us to make estimates and assumptions that are subjective in nature and, as a result, our actual results could differ materially from our estimates. Estimates and assumptions include, among other things, subjective judgments regarding the fair values and useful lives of our properties for depreciation and lease classification purposes, the collectability of receivables and asset impairment analysis. Set forth below are the more critical accounting policies that require management judgment and estimates in the preparation of our consolidated financial statements. Real Estate Investments Investments in real estate are carried at cost less accumulated depreciation and impairment losses, if any. The cost of investments in real estate reflects their purchase price or development cost and, in the case of asset acquisitions, transaction costs related to the acquisition. 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 54 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. The fair value of the tangible assets of an acquired property with an in-place operating lease is determined by valuing the property as if it were vacant, and the "as-if-vacant" value is then allocated to the tangible assets based on the fair value of the tangible assets. The fair value of in-place leases is determined by considering estimates of carrying costs during the expected lease-up periods, current market conditions, as well as costs to execute similar leases based on the specific characteristics of each tenant's lease. We estimate the cost to execute leases with terms similar to the remaining lease terms of the in-place leases, including leasing commissions, legal and other related expenses. Factors we consider in this analysis include an estimate of the carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. 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. We also consider information and other factors including market conditions, the industry that the tenant operates in, characteristics of the real estate, e.g., location, size, demographics, value and comparative rental rates, tenant credit profile and the importance of the location of the real estate to the operations of the tenant's business. Additionally, we consider information obtained about each property as a result of our pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. We use the information obtained as a result of our pre-acquisition due diligence as part of our consideration of the accounting standard governing asset retirement obligations and, when necessary, will record an asset retirement obligation as part of the purchase price allocation. Allowance for Credit Losses Under ASC Topic 326, Financial Instruments - Credit Losses, we use a real estate loss estimate model (“RELEM”) which estimates losses on our loans and direct financing lease receivable portfolio, for purposes of calculating allowances for credit losses. The RELEM allows us to refine (on an ongoing basis) the expected loss estimate by incorporating asset-specific assumptions as necessary, such as anticipated funding, interest payments, estimated extensions and estimated loan repayment/refinancing at maturity to estimate cash flows over the life of the loan or direct financing lease receivable. The model also incorporates assumptions related to underlying collateral values, various loss scenarios, and predicted losses to estimate expected losses. Our specific asset-level inputs include loan-to-stabilized-value (“LTV”), principal balance, property type, location, coupon, origination year, term, subordination, expected repayment date and future funding. We categorize the results by LTV range, which we consider the most significant indicator of credit quality for our loans and direct financing lease receivables. A lower LTV ratio typically indicates a lower credit loss risk. We also evaluate each loan and direct financing lease receivable measured at amortized cost for credit deterioration at least quarterly. Credit deterioration occurs when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan or direct financing lease receivable. Our allowance for credit losses is adjusted to reflect our estimation of the current and future economic conditions that impact the performance of the real estate assets securing our loans. These estimations include various macroeconomic factors impacting the likelihood and magnitude of potential credit losses for our loans and direct financing lease receivables during their anticipated term. Changes in our allowance for credit losses are presented within change in provision for credit losses in the accompanying statements of operations. Impairment of Long-Lived Assets If circumstances indicate that the carrying value of a property may not be recoverable, we review the asset for impairment. 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 55 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. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. Impairment assessments have a direct impact on the consolidated statements of operations, because recording an impairment loss results in an immediate negative adjustment to the consolidated statements of operations. Adjustment to Rental Revenue for Tenant Credit 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. 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 In the normal course of business, we use derivative financial instruments, which may include interest rate swaps, caps, options, floors and other interest rate derivative contracts, to protect us against adverse fluctuations in interest rates by reducing our exposure to variability in cash flows on a portion of our floating-rate debt. Instruments that meet these hedging criteria are formally designated as hedges at the inception of the derivative contract. We record all derivatives on the consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may also enter into derivative contracts that are intended to economically hedge certain risk, even though hedge accounting does not apply or we elect not to apply hedge accounting. The accounting for subsequent changes in the fair value of these derivatives depends on whether each has been designated and qualifies for hedge accounting treatment. If a derivative is designated and qualifies for cash flow hedge accounting treatment, the change in the estimated fair value of the derivative is recorded in other comprehensive income (loss) in the consolidated statements of comprehensive income to the extent that it is effective. Any ineffective portion of a change in derivative fair value is immediately recorded in earnings. If we elect not to apply hedge accounting treatment (or for derivatives that do not qualify as hedges), any change in the fair value of these derivative instruments is recognized immediately in gains (losses) on derivative instruments in the consolidated statements of operations. We do not intend to use derivative instruments for trading or speculative purposes. Equity-Based Compensation We grant shares of restricted common stock ("RSAs") and restricted stock units ("RSUs") to our directors, executive officers and other employees that vest over multiple periods, subject to the recipient's continued service. We also grant performance-based RSUs to our executive officers, the final number of which is determined based on objective and subjective performance conditions and which vest over a multi-year period, subject to the recipient's continued service. We account for RSAs and RSUs in accordance with ASC 718, Compensation – Stock Compensation, which requires that such compensation be recognized in the financial statements based on its estimated grant-date fair value. The value of such awards is recognized as compensation expense in general and administrative expenses in the accompanying consolidated statements of operations over the applicable service periods. 56 We recognize compensation expense for equity-based compensation using the straight-line method based on the fair value of the award on the grant date. Forfeitures of equity-based compensation awards, if any, are recognized when they occur. Results of Operations 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 Year ended December 31, (dollar amounts in thousands) 2024 2023 Change % Revenues: Rental revenue $ 425,749 $ 339,897 $ 85,852 25.3 % 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) % Total revenues 449,610 359,595 90,015 Expenses: General and administrative 35,161 30,678 4,483 14.6 % Property expenses 4,997 4,663 334 7.2 % Depreciation and amortization 122,161 102,219 19,942 19.5 % Provision for impairment of real estate 14,845 3,548 11,297 318.4 % Change in provision for credit losses 230 (99) 329 332.3 % Total expenses 177,394 141,009 36,385 Other operating income: Gain on dispositions of real estate, net 5,977 24,167 (18,190) (75.3) % Income from operations 278,193 242,753 35,440 Other (expense)/income: Loss on debt extinguishment — (116) 116 100.0 % Interest expense (78,544) (52,597) (25,947) 49.3 % 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 Income tax expense 628 636 (8) (1.3) % Net income 203,638 191,415 12,223 Net income attributable to non-controlling interests (634) (708) 74 10.5 % Net income attributable to stockholders $ 203,004 $ 190,707 $ 12,297 Revenues: Rental revenue . Rental revenue increased by $85.9 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023. 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. 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. 57 Interest on loans and direct financing lease receivables . 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, 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. Expenses: General and administrative. 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 . Property expenses increased by $0.3 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase in property expenses was primarily due to increased reimbursable property taxes and property-related operational costs during the year ended December 31, 2024. Depreciation and amortization . 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 during the year ended December 31, 2024. Provision for impairment of real estate . 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, 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 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. 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. Overall, our 2024 dispositions had a lower sales price in relation to their net book value as compared to our 2023 dispositions. Other (expense)/income: Loss on debt extinguishment. 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. Interest expense . Interest expense increased by $25.9 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023. This increase in interest expense was primarily due to an increase in our outstanding debt balance and increased interest rates during the year ended December 31, 2024 compared to the year ended December 31, 2023. Interest income . 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 58 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 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 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. Non-GAAP Financial Measures Our reported results are presented in accordance with GAAP. We also disclose the following non-GAAP financial measures: funds from operations ("FFO"), core funds from operations ("Core FFO"), adjusted funds from operations ("AFFO"), earnings before interest, taxes, depreciation and amortization ("EBITDA"), EBITDA further adjusted to exclude gains (or losses) on sales of depreciable property and real estate impairment losses ("EBITDA re" ), adjusted EBITDA re , annualized adjusted EBITDA re , net debt, net operating income ("NOI") and cash NOI ("Cash NOI"). We believe these non-GAAP financial measures are industry measures used by analysts and investors to compare the operating performance of REITs. We compute FFO in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). NAREIT defines FFO as GAAP net income or loss adjusted to exclude extraordinary items (as defined by GAAP), net gain or loss from sales of depreciable real estate assets, impairment write-downs associated with depreciable real estate assets and real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), including the pro rata share of such adjustments of unconsolidated subsidiaries. FFO is used by management, and may be useful to investors and analysts, to facilitate meaningful comparisons of operating performance between periods and among our peers primarily because it excludes the effect of real estate depreciation and amortization and net gains and losses on sales (which are dependent on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions). We compute Core FFO by adjusting FFO, as defined by NAREIT, to exclude certain GAAP income and expense amounts that we believe are infrequent and unusual in nature and/or not related to our core real estate operations. Exclusion of these items from similar FFO-type metrics is common within the equity REIT industry, and management believes that presentation of Core FFO provides investors with a metric to assist in their evaluation of our operating performance across multiple periods and in comparison to the operating performance of our peers, because it removes the effect of unusual items that are not expected to impact our operating performance on an ongoing basis. Core FFO is used by management in evaluating the performance of our core business operations. Items included in calculating FFO that may be excluded in calculating Core FFO include certain transaction related gains, losses, income or expenses or other non-core amounts as they occur. To derive AFFO, we modify our computation of Core FFO to include other adjustments to GAAP net income related to certain items that we believe are not indicative of our operating performance, including straight-line rental revenue, non-cash interest expense, non-cash compensation expense, other amortization expense, other non-cash charges and capitalized interest expense. Such items may cause short-term fluctuations in net income but have no impact on operating cash flows or long-term operating performance. We believe that AFFO is an additional useful supplemental measure for investors to consider when assessing our operating performance without the distortions created by non-cash items and certain other revenues and expenses. FFO, Core FFO and AFFO do not include all items of revenue and expense included in net income, they do not represent cash generated from operating activities and they are not necessarily indicative of cash available to fund cash requirements; 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 59 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: Year ended December 31, (in thousands) 2024 2023 2022 Net income $ 203,638 $ 191,415 $ 134,742 Depreciation and amortization of real estate 121,997 102,103 88,459 Provision for impairment of real estate 14,845 3,548 20,164 Gain on dispositions of real estate, net (5,977) (24,167) (30,647) FFO attributable to stockholders and non-controlling interests 334,503 272,899 212,718 Non-core (income) expense (1)(2) — (510) 2,388 Core FFO attributable to stockholders and non-controlling interests 334,503 272,389 215,106 Adjustments: Straight-line rental revenue, net (38,661) (30,375) (20,615) Non-cash interest 4,086 3,187 2,616 Non-cash compensation expense 10,827 9,192 9,489 Other amortization expense 1,802 1,507 2,912 Other non-cash adjustments 1,075 (73) 74 Capitalized interest expense (5,760) (2,430) (757) AFFO attributable to stockholders and non-controlling interests $ 307,872 $ 253,397 $ 208,825 _____________________________________ (1) Includes $0.1 million loss on debt extinguishment, $0.9 million of insurance recovery income and $0.4 million of cash and non-cash separation costs with the departures of a junior executive and a Board member during the year ended December 31, 2023. (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. We compute EBITDA as earnings before interest, income taxes and depreciation and amortization. In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDA re . We compute EBITDA re in accordance with the definition adopted by NAREIT. NAREIT defines EBITDA re as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and real estate impairment losses. We present EBITDA and EBITDA re as they are measures commonly used in our industry. We believe that these measures are useful to investors and analysts because they provide supplemental information concerning our operating performance, exclusive of certain non-cash items and other costs. We use EBITDA and EBITDA re as measures of our operating performance and not as measures of liquidity. EBITDA and EBITDA re do not include all items of revenue and expense included in net income, they do not represent cash generated from operating activities and they are not necessarily indicative of cash available to fund cash requirements; 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 EBITDA and EBITDA re 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. 60 The following table reconciles net income (which is the most comparable GAAP measure) to EBITDA and EBITDA re attributable to stockholders and non-controlling interests: Year ended December 31, (in thousands) 2024 2023 2022 Net income $ 203,638 $ 191,415 $ 134,742 Depreciation and amortization 122,161 102,219 88,562 Interest expense 78,544 52,597 40,370 Interest income (3,069) (2,011) (2,825) Income tax expense 628 636 998 EBITDA attributable to stockholders and non-controlling interests 401,902 344,856 261,847 Provision for impairment of real estate 14,845 3,548 20,164 Gain on dispositions of real estate, net (5,977) (24,167) (30,647) EBITDA re attributable to stockholders and non-controlling interests $ 410,770 $ 324,237 $ 251,364 We further adjust EBITDA re for the most recently completed quarter i) based on an estimate calculated as if all re-leasing, investment and disposition activity that took place during the quarter had been made on the first day of the quarter, ii) to exclude certain GAAP income and expense amounts that we believe are infrequent and unusual in nature and iii) to eliminate the impact of lease termination fees and contingent rental revenue from certain of our tenants, which is subject to sales thresholds specified in the applicable leases ("Adjusted EBITDA re" ). We then annualize quarterly Adjusted EBITDA re by multiplying it by four ("Annualized Adjusted EBITDA re" ), which we believe provides a meaningful estimate of our current run rate for all of our investments as of the end of the most recently completed quarter. You should not unduly rely on this measure, as it is based on assumptions and estimates that may prove to be inaccurate. Our actual reported EBITDA re for future periods may be significantly less than our current Annualized Adjusted EBITDA re . 61 The following table reconciles net income (which is the most comparable GAAP measure) to Annualized Adjusted EBITDA re attributable to stockholders and non-controlling interests for the three months ended December 31, 2024: (in thousands) Three months ended December 31, 2024 Net income $ 55,548 Depreciation and amortization 32,829 Interest expense 23,958 Interest income (559) Income tax expense 157 EBITDA attributable to stockholders and non-controlling interests 111,933 Provision for impairment of real estate 2,587 Gain on dispositions of real estate, net (4,575) EBITDA re attributable to stockholders and non-controlling interests 109,945 Adjustment for current quarter re-leasing, acquisition and disposition activity (1) 3,856 Adjustment to exclude other non-core or non-recurring activity (2) (784) Adjustment to exclude termination/prepayment fees and certain percentage rent (3) (93) Adjusted EBITDA re attributable to stockholders and non-controlling interests $ 112,924 Annualized Adjusted EBITDA re attributable to stockholders and non-controlling interests $ 451,696 _____________________________________ (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 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. We calculate our net debt as our gross debt (defined as total debt plus net deferred financing costs on our secured borrowings) less cash and cash equivalents and restricted cash available for future investment. We believe excluding cash and cash equivalents and restricted cash available for future investment from gross debt, all of which could be used to repay debt, provides an estimate of the net contractual amount of borrowed capital to be repaid, which we believe is a beneficial disclosure to investors and analysts. The following table reconciles total debt (which is the most comparable GAAP measure) to net debt: December 31, (in thousands) 2024 2023 Unsecured term loan, net of deferred financing costs $ 1,721,114 $ 1,272,772 Revolving credit facility — — Senior unsecured notes 396,403 395,846 Total debt 2,117,517 1,668,618 Deferred financing costs and original issue discount, net 12,483 11,382 Gross debt 2,130,000 1,680,000 Cash and cash equivalents (40,713) (39,807) Restricted cash available for future investment (4,265) (9,156) Net debt $ 2,085,022 $ 1,631,037 We compute NOI as total revenues less property expenses. 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 62 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. You should not consider our NOI and Cash NOI as alternatives to net income or cash flows from operating activities determined in accordance with GAAP. Additionally, our computation of NOI and Cash NOI 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 NOI and Cash NOI attributable to stockholders and non-controlling interests: Year ended December 31, (in thousands) 2024 2023 2022 Net income $ 203,638 $ 191,415 $ 134,742 General and administrative expense 35,161 30,678 29,464 Depreciation and amortization 122,161 102,219 88,562 Provision for impairment of real estate 14,845 3,548 20,164 Change in provision for credit losses 230 (99) 88 Gain on dispositions of real estate, net (5,977) (24,167) (30,647) Loss on debt extinguishment — 116 2,138 Interest expense 78,544 52,597 40,370 Interest income (3,069) (2,011) (2,825) Other income (1,548) — — Income tax expense 628 636 998 NOI attributable to stockholders and non-controlling interests 444,613 354,932 283,054 Straight-line rental revenue, net (38,661) (30,375) (20,615) 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 63